FOR IMMEDIATE RELEASE
July 15, 2009
Cintas Corporation Announces Fiscal 2009 Results
CINCINNATI, July 15, 2009 -- Cintas Corporation (Nasdaq:CTAS) today reported revenue for its fiscal year ended May 31, 2009, of $3.8 billion, a 4 percent decrease from the prior fiscal year. Net income for the year was $226 million and earnings per diluted share were $1.48. For the fourth quarter ended May 31, 2009, revenue was $879 million, a 13 percent decrease from prior year fourth quarter revenue. Fourth quarter net income was $4 million and earnings per diluted share were $0.03.
The Company announced on May 29, 2009, that, in response to economic conditions, current year results would include a restructuring, fixed asset impairment and inventory valuation charge. The $54 million after-tax charge was recorded in the fourth quarter. Excluding this charge, earnings per diluted share were $1.83 for the year and $0.38 for the fourth quarter.
Scott D. Farmer, Chief Executive Officer, stated, "As we mentioned in May, the U.S. economy continues to lose employment at a rapid rate, directly impacting our customers and prospects. According to the US Department of Labor, the largest calendar year job loss on record was over 60 years ago when in 1945 the U.S. economy lost 2.75 million jobs. Over the last twelve months, the U.S. economy has lost approximately 5.5 million jobs, or twice that historical high. During May and June alone, over 800,000 U.S. jobs were lost."
Mr. Farmer continued, "The severity of these job losses resulted in the need for us to take significant cost reduction measures. We have continued to right-size our workforce and reduced our operating capacity to reflect current revenue levels. Over the last year we have also implemented stringent controls over discretionary spending."
Mr. Farmer emphasized, "While market conditions and related job loss are negatively impacting our business, when conditions improve and jobs are added, we expect to see improvement in our results. Cintas is a market leader in its businesses, has the most modern infrastructure, remains profitable, continues to generate significant cash flow and has a strong balance sheet."
Despite lower net income, free cash flow for Fiscal 2009 increased $11 million over Fiscal 2008. Using this strong cash flow, the Company was able to pay off all of its outstanding commercial paper as of May 31, 2009, increase its annual dividend payment to shareholders and increase its total cash position by over $60 million. In addition, the Company further strengthened its sound balance sheet, improving its current ratio to over four to one and improving its total debt to total capitalization ratio to 25%.
In closing, Mr. Farmer stated, "Our strong financial position and our commitment to continue to deliver exceptional quality and service to our customers will provide enhanced opportunities when economic conditions improve."
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, safety, fire protection products and 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.
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 words, terms and 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. You should not place undue reliance on any forward-looking statement. We cannot guarantee that any forward-looking statement will be realized. These statements are subject to various risks, uncertainties, potentially inaccurate assumptions and other factors that could cause actual results to differ from those set forth in or implied by this Press 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, investigations or other proceedings, higher assumed sourcing or distribution costs of products, the disruption of operations from catastrophic or extraordinary events, changes in federal and state tax and labor laws and the reactions of competitors in terms of price and service. Cintas undertakes no obligation to publicly release any revisions to any forward-looking statements or to otherwise update any forward-looking statements whether as a result of new information or to reflect events, circumstances or any other unanticipated developments arising after the date on which such statements are made. A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the year ended May 31, 2008 and in our reports on Forms 10-Q and 8-K. The risks and uncertainties described herein are not the only ones we may face. Additional risks and uncertainties presently not known to us or that we currently believe to be immaterial may also harm our business.
For additional information, contact:
William C. Gale, Sr. 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(Unaudited)(In thousands except per share data)
| | | Three Months Ended | | | Twelve Months Ended | |
| | | May 31, 2009 | | | May 31, 2008 | | | % Chng. | | | May 31, 2009 | | | May 31, 2008 | | | % Chng. | |
| Revenue: | | | | | | | | | | | | | | | | | | |
Rental uniforms and ancillary products | | $ | 647,487 | | | $ | 711,728 | | | | -9.0 | | | $ | 2,755,015 | | | $ | 2,834,568 | | | | -2.8 | |
Other services | | | 231,196 | | | | 297,227 | | | | -22.2 | | | | 1,019,670 | | | | 1,103,332 | | | | -7.6 | |
Total revenue | | $ | 878,683 | | | $ | 1,008,955 | | | | -12.9 | | | $ | 3,774,685 | | | $ | 3,937,900 | | | | -4.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Costs and expenses (income): | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of rental uniforms and ancillary products | | $ | 373,860 | | | $ | 399,599 | | | | -6.4 | | | $ | 1,562,230 | | | $ | 1,581,618 | | | | -1.2 | |
Cost of other services | | | 170,472 | | | | 176,921 | | | | -3.6 | | | | 661,584 | | | | 674,682 | | | | -1.9 | |
Selling and administrative expenses | | | 253,677 | | | | 279,116 | | | | -9.1 | | | | 1,082,709 | | | | 1,104,145 | | | | -1.9 | |
Restructuring Charges | | | 10,209 | | | | - | | | | N/A | | | | 10,209 | | | | - | | | | N/A | |
Impairment of Long-Lived Assets | | | 48,888 | | | | - | | | | N/A | | | | 48,888 | | | | - | | | | N/A | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating income | | $ | 21,577 | | | $ | 153,319 | | | | -85.9 | | | $ | 409,065 | | | $ | 577,455 | | | | -29.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Interest income | | | (329 | ) | | | (1,304 | ) | | | -74.8 | | | | (2,764 | ) | | | (6,072 | ) | | | -54.5 | |
Interest expense | | | 12,030 | | | | 13,371 | | | | -10.0 | | | | 50,236 | | | | 52,823 | | | | -4.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Income before income taxes | | $ | 9,876 | | | $ | 141,252 | | | | -93.0 | | | $ | 361,593 | | | $ | 530,704 | | | | -31.9 | |
| Income taxes | | | 5,804 | | | | 51,591 | | | | -88.7 | | | | 135,236 | | | | 195,299 | | | | -30.8 | |
| Net income | | $ | 4,072 | | | $ | 89,661 | | | | -95.5 | | | $ | 226,357 | | | $ | 335,405 | | | | -32.5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Per share data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.03 | | | $ | 0.58 | | | | -94.8 | | | $ | 1.48 | | | $ | 2.15 | | | | -31.2 | |
| Diluted earnings per share | | $ | 0.03 | | | $ | 0.58 | | | | -94.8 | | | $ | 1.48 | | | $ | 2.15 | | | | -31.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted average number of shares outstanding | | | 152,790 | | | | 153,686 | | | | | | | | 152,942 | | | | 155,678 | | | | | |
| Diluted average number of shares outstanding | | | 153,199 | | | | 153,854 | | | | | | | | 153,366 | | | | 155,930 | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| CINTAS CORPORATION SUPPLEMENTAL DATA | May 31, 2009 | | | May 31, 2008 | | | % Chng. | | | May 31, 2009 | | | May 31, 2008 | | | % Chng. | |
| Rental uniforms and ancillary products gross margin | | | 42.3% | | | | 43.9% | | | | | | | 43.3% | | | | 44.2% | | | | |
| Other services gross margin | | | 26.3% | | | | 40.5% | | | | | | | 35.1% | | | | 38.9% | | | | |
| Total gross margin | | | 38.1% | | | | 42.9% | | | | | | | 41.1% | | | | 42.7% | | | | |
| Net margin | | | 0.5% | | | | 8.9% | | | | | | | 6.0% | | | | 8.5% | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Depreciation and amortization | | $ | 49,964 | | | $ | 49,456 | | | | 1.0 | | | $ | 200,106 | | | $ | 191,903 | | | | 4.3 | |
| Capital expenditures | | $ | 27,309 | | | $ | 45,485 | | | | -40.0 | | | $ | 160,092 | | | $ | 190,333 | | | | -15.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Debt to total capitalization | | | 24.9% | | | | 29.5% | | | | | | | | 24.9% | | | | 29.5% | | | | | |
| SUPPLEMENTAL SEGMENT DATA | | Rental Uniforms and Ancillary Products | | | Uniform Direct Sales | | | First Aid, Safety and Fire Protection | | | Document Management | | | Corporate | | | Total | |
| For the three months ended May 31, 2009 | | | | | | | | | | | | | | | | |
| Revenue | | $ | 647,487 | | | $ | 93,841 | | | $ | 83,038 | | | $ | 54,317 | | | $ | - | | | $ | 878,683 | |
| Gross margin | | $ | 273,627 | | | $ | 7,900 | | | $ | 26,505 | | | $ | 26,319 | | | $ | - | | | $ | 334,351 | |
| Selling and administrative expenses | | $ | 175,993 | | | $ | 22,041 | | | $ | 32,610 | | | $ | 23,033 | | | $ | - | | | $ | 253,677 | |
| Restructuring charges | | $ | 8,782 | | | $ | 547 | | | $ | 564 | | | $ | 316 | | | $ | - | | | $ | 10,209 | |
| Impairment of long-lived assets | | $ | 44,204 | | | $ | 4,135 | | | $ | 543 | | | $ | 6 | | | $ | - | | | $ | 48,888 | |
| Income (loss) before income taxes | | $ | 44,648 | | | $ | (18,823 | ) | | $ | (7,212 | ) | | $ | 2,964 | | | $ | (11,701 | ) | | $ | 9,876 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended May 31, 2008 | | | | | | | | | | | | | | | | | | | | | | |
| Revenue | | $ | 711,728 | | | $ | 138,953 | | | $ | 104,549 | | | $ | 53,725 | | | $ | - | | | $ | 1,008,955 | |
| Gross margin | | $ | 312,130 | | | $ | 48,207 | | | $ | 42,344 | | | $ | 29,754 | | | $ | - | | | $ | 432,435 | |
| Selling and administrative expenses | | $ | 200,149 | | | $ | 26,504 | | | $ | 31,999 | | | $ | 20,464 | | | $ | - | | | $ | 279,116 | |
| Income (loss) before income taxes | | $ | 111,981 | | | $ | 21,703 | | | $ | 10,345 | | | $ | 9,290 | | | $ | (12,067 | ) | | $ | 141,252 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| As of and for the twelve months ended May 31, 2009 | | | | | | | | | | | | | | | | | | | | | |
| Revenue | | $ | 2,755,015 | | | $ | 428,369 | | | $ | 378,097 | | | $ | 213,204 | | | $ | - | | | $ | 3,774,685 | |
| Gross margin | | $ | 1,192,785 | | | $ | 106,033 | | | $ | 144,180 | | | $ | 107,873 | | | $ | - | | | $ | 1,550,871 | |
| Selling and administrative expenses | | $ | 769,275 | | | $ | 98,131 | | | $ | 127,126 | | | $ | 88,177 | | | $ | - | | | $ | 1,082,709 | |
| Restructuring charges | | $ | 8,782 | | | $ | 547 | | | $ | 564 | | | $ | 316 | | | $ | - | | | $ | 10,209 | |
| Impairment of long-lived assets | | $ | 44,204 | | | $ | 4,135 | | | $ | 543 | | | $ | 6 | | | $ | - | | | $ | 48,888 | |
| Income (loss) before income taxes | | $ | 370,524 | | | $ | 3,220 | | | $ | 15,947 | | | $ | 19,374 | | | $ | (47,472 | ) | | $ | 361,593 | |
| Assets | | $ | 2,511,902 | | | $ | 137,709 | | | $ | 321,400 | | | $ | 470,619 | | | $ | 253,809 | | | $ | 3,695,439 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| As of and for the twelve months ended May 31, 2008 | | | | | | | | | | | | | | | | | | | | | |
| Revenue | | $ | 2,834,568 | | | $ | 517,490 | | | $ | 403,552 | | | $ | 182,290 | | | $ | - | | | $ | 3,937,900 | |
| Gross margin | | $ | 1,252,951 | | | $ | 168,210 | | | $ | 160,823 | | | $ | 99,616 | | | $ | - | | | $ | 1,681,600 | |
| Selling and administrative expenses | | $ | 801,691 | | | $ | 103,444 | | | $ | 125,185 | | | $ | 73,825 | | | $ | - | | | $ | 1,104,145 | |
| Income (loss) before income taxes | | $ | 451,260 | | | $ | 64,766 | | | $ | 35,638 | | | $ | 25,791 | | | $ | (46,751 | ) | | $ | 530,704 | |
| Assets | | $ | 2,620,138 | | | $ | 205,638 | | | $ | 345,479 | | | $ | 445,651 | | | $ | 191,695 | | | $ | 3,808,601 | |
Reconciliation of Non-GAAP Financial Measures and Regulation G Disclosure
To supplement its consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), the Company provides additional measures of operatings results, net earnings and earnings per share adjusted to exclude certain costs, expenses and gains and losses. Also, in addition to measuring its cash flow based upon the classifications established under GAAP of operating, investing and financing activities, the Company also measures its free cash flow generation. The Company believes that these non-GAAP financial measures are appropriate to enhance understanding of its past performance as well as prospects for future performance.
The press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. A reconciliation of the differences between these non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP follows.
Reconciliation of Restructuring, Impairment and Inventory Valuation Charge
| | | Three Months Ended May 31, 2009 | |
| | | | |
| Income Before Income Taxes | | $ | 9,876 | |
| | | | | |
| Excluding: | | | | |
| Restructuring Charge | | $ | 10,209 | |
| Impairment of Long-Lived Assets (1) | | $ | 48,888 | |
| Inventory Valuation Charge (2) | | $ | 27,486 | |
| | | | | |
| Total Restructuring, Impairment and Inventory Valuation Charge | | $ | 86,583 | |
| | | | | |
| Income Before Income Taxes, excluding Charge | | $ | 96,459 | |
| | | | | |
| Income Taxes, excluding Charge | | $ | 38,186 | |
| | | | | |
| Net Income, excluding Charge | | $ | 58,273 | |
| | | | | |
| Diluted Average Number of Shares Outstanding | | | 153,199 | |
| | | | | |
| Earnings per Diluted Share excluding Charge | | $ | 0.38 | |
| (1) | Impairment of Long-Lived Assets is an impairment of fixed assets and, to a lesser extent, uniforms and other rental items in-service. No impairment was required or made for intangibles or goodwill. |
| (2) | The inventory valuation charge is included in cost of goods sold. $8,419 of the charge is included in Cost of Rental Uniforms and Ancillary Products and $19,067 is included in Cost of Other Services. |
| Note: | Management believes that earnings per diluted share excluding the restructuring, impairment and inventory valuation charge provides investors pertinent information given the one-time nature of this change. |
Computation of Free Cash Flow
| | | Twelve Months | |
| | | Ended May 31, | |
| | | 2009 | | | 2008 | |
| | | | | | | |
| Net Cash Provided by Operations | | $ | 523,522 | | | $ | 542,740 | |
| | | | | | | | | |
| Capital Expenditures | | $ | (160,092 | ) | | $ | (190,333 | ) |
| | | | | | | | | |
| Free Cash Flow | | $ | 363,430 | | | $ | 352,407 | |
| Note: | Management uses free cash flow to assess the financial performance of the Company. Management believes that free cash flow is useful to investors because it relates the operating cash flow of the Company to the capital that is spent to continue, improve and grow business operations. |
Cintas CorporationConsolidated Condensed Balance Sheets
(Unaudited)
(In thousands except share data)
| | | May 31, 2009 | | | May 31, 2008 | |
| ASSETS | | | | | | |
| Current assets: | | | | | | |
Cash and cash equivalents | | $ | 129,745 | | | $ | 66,224 | |
Marketable securities | | | 120,393 | | | | 125,471 | |
Accounts receivable, net | | | 357,678 | | | | 430,078 | |
Inventories, net | | | 202,351 | | | | 238,669 | |
Uniforms and other rental items in service | | | 335,447 | | | | 370,416 | |
Deferred tax asset | | | 66,368 | | | | 39,410 | |
Prepaid expenses | | | 17,035 | | | | 12,068 | |
Assets held for sale | | | 15,744 | | | | - | |
| Total current assets | | | 1,244,761 | | | | 1,282,336 | |
| | | | | | | | | |
| Property and equipment, at cost, net | | | 914,627 | | | | 974,575 | |
| | | | | | | | | |
| Goodwill | | | 1,331,388 | | | | 1,315,569 | |
| Service contracts, net | | | 124,330 | | | | 152,757 | |
| Other assets, net | | | 80,333 | | | | 83,364 | |
| | | | | | | | | |
| | | $ | 3,695,439 | | | $ | 3,808,601 | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | |
| Current liabilities: | | | | | | | | |
Accounts payable | | $ | 69,965 | | | $ | 94,755 | |
Accrued compensation & related liabilities | | | 48,414 | | | | 50,605 | |
Accrued liabilities | | | 198,488 | | | | 207,925 | |
Current income taxes (prepaid) payable | | | (25,512 | ) | | | 12,887 | |
Long-term debt due within one year | | | 598 | | | | 1,070 | |
| Total current liabilities | | | 291,953 | | | | 367,242 | |
| | | | | | | | | |
| Long-term liabilities: | | | | | | | | |
Long-term debt due after one year | | | 786,058 | | | | 942,736 | |
Deferred income taxes | | | 149,032 | | | | 124,184 | |
Accrued liabilities | | | 100,987 | | | | 120,308 | |
| Total long-term liabilities | | | 1,036,077 | | | | 1,187,228 | |
| | | | | | | | | |
| Shareholders' equity: | | | | | | | | |
Preferred stock, no par value: 100,000 shares authorized, none outstanding | | | - | | | | - | |
Common stock, no par value: 425,000,000 shares authorized | | | 129,215 | | | | 129,182 | |
FY 2009: 173,085,926 issued and 152,790,170 outstanding FY 2008: 173,083,426 issued and 153,691,103 outstanding | | | | | | | | |
Paid-in capital | | | 72,364 | | | | 60,408 | |
Retained earnings | | | 2,938,419 | | | | 2,784,302 | |
Treasury stock | | | | | | | | |
FY 2009: 20,295,756; FY 2008: 19,392,323 | | | (797,888 | ) | | | (772,041 | ) |
Other accumulated comprehensive income (loss): | | | | | | | | |
Foreign currency translation | | | 33,505 | | | | 61,206 | |
Unrealized loss on derivatives | | | (8,207 | ) | | | (8,815 | ) |
Unrealized loss on available-for-sale securities | | | 1 | | | | (111 | ) |
| Total shareholders' equity | | | 2,367,409 | | | | 2,254,131 | |
| | | | | | | | | |
| | | $ | 3,695,439 | | | $ | 3,808,601 | |
Cintas CorporationConsolidated Condensed Statements of Cash Flows(Unaudited)(In thousands)
| | | Twelve Months Ended May 31 | |
| | | 2009 | | | 2008 | |
Cash flows from operating activities: | | | | | | |
| | | | | | | |
| Net income | | $ | 226,357 | | | $ | 335,405 | |
| | | | | | | | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
Depreciation | | | 157,572 | | | | 148,566 | |
Amortization of deferred charges | | | 42,534 | | | | 43,337 | |
Impairment of long-lived assets | | | 48,888 | | | | - | |
Stock-based compensation | | | 11,953 | | | | 7,456 | |
Deferred income taxes | | | (1,174 | ) | | | 1,663 | |
Change in current assets and liabilities, net of acquisitions of businesses: | | | | | | | | |
Accounts receivable, net | | | 71,149 | | | | (14,939 | ) |
Inventories, net | | | 35,136 | | | | (6,100 | ) |
Uniforms and other rental items in service | | | 29,661 | | | | (23,854 | ) |
Prepaid expenses | | | (4,949 | ) | | | 3,830 | |
Accounts payable | | | (24,560 | ) | | | 30,567 | |
Accrued compensation and related liabilities | | | (2,012 | ) | | | (12,430 | ) |
Accrued liabilities and other | | | (28,991 | ) | | | 20,398 | |
Income taxes payable | | | (38,042 | ) | | | 8,841 | |
Net cash provided by operating activities | | | 523,522 | | | | 542,740 | |
| | | | | | | | | |
Cash flows from investing activities: | | | | | | | | |
| | | | | | | | | |
| Capital expenditures | | | (160,092 | ) | | | (190,333 | ) |
| Proceeds from sale or redemption of marketable securities | | | 116,433 | | | | 45,791 | |
| Purchase of marketable securities and investments | | | (128,402 | ) | | | (54,498 | ) |
| Acquisitions of businesses, net of cash acquired | | | (30,909 | ) | | | (111,535 | ) |
| Other | | | (251 | ) | | | (400 | ) |
Net cash used in investing activities | | | (203,221 | ) | | | (310,975 | ) |
| | | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
| | | | | | | | | |
| Proceeds from issuance of debt | | | 7,500 | | | | 295,000 | |
| Repayment of debt | | | (164,649 | ) | | | (232,409 | ) |
| Stock options exercised | | | - | | | | 8,371 | |
| Dividends paid | | | (72,207 | ) | | | (70,831 | ) |
| Repurchase of common stock | | | (25,847 | ) | | | (191,479 | ) |
| Other | | | 855 | | | | (11,356 | ) |
Net cash used in financing activities | | | (254,348 | ) | | | (202,704 | ) |
| | | | | | | | | |
| Effect of exchange rate changes on cash and cash equivalents | | | (2,432 | ) | | | 1,803 | |
| | | | | | | | | |
| Net (decrease) in cash and cash equivalents | | | 63,521 | | | | 30,864 | |
| Cash and cash equivalents at beginning of period | | | 66,224 | | | | 35,360 | |
| Cash and cash equivalents at end of period | | $ | 129,745 | | | $ | 66,224 | |
