FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to
___________________
Commission file number 0-11399
CINTAS CORPORATION
(Exact name of registrant as specified in its charter)
WASHINGTON 31-1188630
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6800 CINTAS BOULEVARD
P.O. BOX 625737
CINCINNATI, OHIO 45262-5737
(Address of principal executive offices)
(Zip Code)
(513) 459-1200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Class Outstanding January 9, 1995
Common Stock, no par value 46,919,314
(Page 1 of 10)
CINTAS CORPORATION
INDEX
Page No.
Part I. Financial Information:
Consolidated Condensed Balance Sheet -
November 30, 1994 and May 31, 1994 3
Consolidated Condensed Statement of Income -
Three Months and Six Months Ended
November 30, 1994 and 1993 4
Consolidated Condensed Statement of Cash Flows -
Six Months Ended November 30, 1994 and 1993 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information 9
Signatures 10
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CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(Dollars in Thousands)
November 30, May 31,
1994 1994
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 9,260 $ 8,449
Marketable securities 35,571 52,333
Accounts receivable (net) 65,734 56,347
Inventories 35,841 29,059
Uniforms and other rental
items in service 79,491 74,132
Prepaid expenses 1,170 1,133
Total current assets 227,067 221,453
Property, plant and equipment:
Cost 309,423 288,402
Less accumulated depreciation (103,974) (95,899)
205,449 192,503
Investments and other assets 94,580 87,676
$ 527,096 $ 501,632
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,448 $ 18,795
Accrued liabilities 33,598 3,488
Income taxes -
Current 4,473 2,300
Deferred 22,660 21,159
Long-term debt due within one year 9,079 15,742
Total current liabilities 88,258 91,484
Long-term debt due after one year 82,188 84,184
Deferred income taxes 16,875 16,312
Shareholders' equity:
Preferred stock, no par value,
100,000 shares authorized, none
outstanding ------ -----
Common stock, no par value,
120,000,000 shares authorized,
46,900,187 shares issued and
outstanding
(46,801,173 at May 31, 1994) 41,462 40,939
Retained earnings 299,456 269,939
Cumulative translation adjustment (1,143) (1,226)
Total shareholders' equity 339,775 309,652
$ 527,096 $ 501,632
See accompanying notes.
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CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Unaudited)
(Amounts in Thousands Except Per Share Amounts)
Three months ended Six Months ended
November 30 November 30
1994 1993 1994 1993
Revenues:
Net rentals $132,494 $114,280 $259,788 $226,196
Net sales 19,097 15,503 33,840 25,811
151,591 129,783 293,628 252,007
Costs and expenses (income):
Cost of rentals 75,610 63,877 147,800 126,605
Cost of sales 16,479 12,827 28,845 22,106
Selling and
administrative
expenses 32,793 29,866 67,058 60,283
Interest income (438) (447) (936) (753)
Interest expense 1,824 1,754 3,345 3,567
126,268 107,877 246,112 211,808
Income before income
taxes 25,323 21,906 47,516 40,199
Income taxes 9,567 8,326 18,000 16,076
Net income $ 15,756 $ 13,580 $ 29,516 $ 24,123
Earnings per share $ .34 $ .29 $ .63 $ .52
Weighted average
number of shares
outstanding 46,829 46,680 46,815 46,658
See accompanying notes.
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CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended
November 30,
Cash flows from operating activities: 1994 1993
Net income $29,516 $24,123
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 12,954 11,965
Amortization of deferred charges 5,538 5,348
Provision for losses on accounts
receivable 363 587
Change in current assets and liabilities:
Accounts receivable (9,440) (8,224)
Inventories (12,037) (11,132)
Prepaid expenses (18) (468)
Accounts payable (417) 5,949
Accrued liabilities 101 (9,753)
Income taxes payable 2,173 5,706
Deferred income taxes 2,064 4,412
Net cash provided by operating activities 30,797 28,513
Cash flows from investing activities:
Capital expenditures (25,346) (15,595)
Change in investments and other assets (319) 540
Proceeds from sale or redemption of
marketable securities 32,469 14,965
Purchase of marketable securities (15,707) (25,389)
Acquisition of businesses net of
cash acquired (5,911) (6,075)
Net cash used by investing activities (14,814) (31,554)
Cash flows from financing activities:
Proceeds from issuance of long-term debt ----- 63
Repayment of long-term debt (8,659) (2,537)
Issuance of common stock 457 227
Tax benefit resulting from exercise of
employee stock options 74 362
Purchase of treasury stock (7,044) -----
Net cash used in financing activities (15,172) (1,885)
Net increase (decrease) in cash and cash
equivalents 811 (4,926)
Cash and cash equivalents at beginning
of period 8,449 14,192
Cash and cash equivalents at end of period $9,260 $ 9,266
See accompanying notes.
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CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated condensed financial statements of
Cintas Corporation (the "Company") included herein have
been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and
regulations. While the Company believes that the
disclosures presented are adequate to make the information
not misleading, it is suggested that these consolidated
condensed financial statements be read in conjunction with
the financial statements and notes included in the
Company's most recent annual report for the fiscal year
ended May 31, 1994.
2. Interim results are subject to variations and are not
necessarily indicative of the results of operations for a
full fiscal year. In the opinion of management, except as
discussed in Note 3., all adjustments (which include only
normal recurring adjustments) necessary for a fair
statement of the results of the interim periods shown have
been made.
3. The Company's net income and earnings per share for the
six months ended November 30, 1993 were adversely impacted
by one-time tax adjustments relating to the Omnibus Budget
Reconciliation Act of 1993, a new tax law enacted on August
10, 1993. The new tax law resulted in increases to
corporate marginal tax rates, retroactive to January 1,
1993. In the quarter ended August 31, 1993, in accordance
with the requirements of SFAS No. 109, the Company recorded
a charge to earnings of $1,064,000 and adjusted current and
deferred tax liabilities to reflect the change in tax
rates. The Act also reinstated jobs tax credits
retroactive to July 1992. This reinstatement amounted to
$201,000, which partially offset the one-time tax rate
adjustment. The effects of these one-time tax adjustments
reduced earnings per share in the quarter ended August 31,
1993, by $.02 per share.
4. The Company adopted SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, in the
first quarter of fiscal 1995. The adoption of SFAS No. 115
did not require restatement of prior year results or have
any financial impact upon adoption. At November 30, 1994,
the difference between cost and fair value for the
Company's marketable securities was not significant and not
reported as a component of shareholders' equity.
5. Stock Options:
Under a stock option plan adopted by the Company in
fiscal 1993, the Company may grant officers and key
employees incentive stock options and/or non-qualified
stock options to purchase an aggregate of 2,300,000 shares
of the Company's common stock. Options are generally
granted at the fair market value of the underlying Common
Stock on the date of the grant and generally become
exercisable at the rate of 20% per year commencing five
years after grant, so long as the holder remains an
employee of the Company.
At May 31, 1994, options as to 1,235,834 shares granted
under the 1993 plan and a previous plan, were outstanding
at prices ranging from $3.46 - $28.75 per share. Of these
options outstanding, 246,551 were exercisable at May 31,
1994. On July 19, 1994, additional options as to 214,950
shares exercisable at $31.815 per share were granted under
the plan. During the first quarter of fiscal 1995, options
as to 66,629 shares were exercised ranging in price from
$3.46 to $12.17 per share. During the second quarter of
fiscal 1995, options as to 36,259 shares were exercised
ranging in price from $5.92 to $12.17.
In fiscal year 1991, the Company adopted a stock option
plan for the non-employee members of its Board of
Directors, and granted options for 30,000 shares of common
stock. Options were granted at 100% of the market value of
the underlying Common Stock on the date immediately prior
to the grant and become exercisable at a rate of 25% per
year commencing two years after grant, so long as the
holder remains on the Board of Directors. On October 13,
1994, shareholders voted to adopt the 1994 Directors' Stock
Option Plan. The plan provides for each non-employee
Director of the Company to be granted an option to purchase
1,000 shares of Cintas Common Stock, and, upon each
subsequent election as a Director, another option for 1,000
shares. The total number of shares which may be granted
under this plan is 30,000 shares. Options under the 1994
Directors' Stock Option Plan were granted at 100% of the
market value of the underlying Common Stock on the date of
grant and become exercisable at a rate of 25% per year
commencing one year after grant, so long as the holder
remains on the Board of Directors. As of November 30,
1994, under both Directors' plans, options for 29,000
shares are outstanding, ranging in price from $13.33 to
$33.50, of which 18,000 shares are exercisable.
6. On July 20, 1994, the Company announced that its Board
of Directors authorized the repurchase of up to two million
shares of the Company's common stock in the open market or
through privately negotiated transactions. The primary
purpose of purchasing these shares was to fund future
acquisitions. During the second quarter, the Company, in
following this plan, reissued its treasury shares which
were acquired for $7,044,000 in the first six months of
fiscal 1995 to fund an acquisition. The acquisition will
add approximately $4 million in annual revenues.
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7. Inventories:
Inventories are valued at the lower of cost (first-in,
first-out) or market. Substantially all inventories
represent finished goods.
8. Supplemental Cash Flow Disclosures:
Cash paid through the six months ended November 30,
1994 and 1993.
1994 1993
Interest, net of amount capitalized $3,299,000 $3,542,000
Income taxes $13,588,000 $6,079,000
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total revenues increased 17% for the three months and six
months ended November 30, 1994, over the same periods in
the prior fiscal year. Net rental revenue increased 16%
and 15% for the three months and six months ended November
30, 1994, respectively, over the same periods in fiscal
1994. Growth in the customer base and price increases in
established operations accounted for a 13% increase and the
remaining 2% was due primarily to acquisitions. Second
quarter revenues from the sale of uniforms and other direct
sale items increased 23% over the prior year's second
quarter. For the six months ended November 30, 1994, sales
increased 31% over the same period in fiscal 1994. The
increase in revenues from the sale of uniforms and other
direct sale items is attributable to an increase in unit
sales and was not significantly affected by acquisitions.
Net income increased 16% and 22% for the three months and
six months ended November 30, 1994, respectively, over the
same periods in fiscal 1994. The increase in net income
for the six months ended November 30, 1994, over the same
period in the prior year was primarily the result of
increased revenues, however, net income and earnings per
share reported for the six months ended November 30, 1993,
were adversely impacted by one-time tax adjustments
relating to the Omnibus Budget Reconciliation Act of 1993,
a new tax law enacted on August 10, 1993. The new tax law
resulted in increases to corporate marginal tax rates,
retroactive to January 1, 1993. The reported tax expense
for the six months ended November 30, 1993, in accordance
with the requirements of SFAS No. 109, includes a charge to
earnings of $1,064,000 and an adjustment to current and
deferred tax liabilities to reflect the change in tax
rates. The Act also reinstated jobs tax credits
retroactive to July 1992. This reinstatement amounted to
$201,000, which partially offset the one-time tax rate
adjustment. The effect of these one-time tax adjustments
reduced earnings per share in the six months ended November
30, 1993, by $.02 per share.
Net interest expense (interest expense less interest
income) was $1,386,000 and $2,409,000 for the second
quarter and six months ended November 30, 1994,
respectively, compared to $1,307,000 and $2,814,000,
respectively, for the same two periods in the prior fiscal
year. Net interest expense for the three months ended
November 30, 1994, has increased over the same period in
the prior year due to a decrease in interest income. For
the six months ended November 30, 1994, interest expense
has decreased primarily due to an overall reduction in
total debt.
During the second quarter, the Company, in following a
stock repurchase plan which was previously approved by the
Board of Directors on July 20, 1994, reissued its treasury
stock which had been acquired in the first six months of
fiscal 1995 to fund an acquisition. The acquisition will
add approximately $4 million in annual revenues.
During the second quarter of fiscal 1995, the Company
opened a newly constructed rental uniform facility in
Portland, Oregon. Final stages of construction are also
taking place in Charlotte, North Carolina, and Seattle,
Washington.
Financial Condition
Property, plant and equipment has increased since May 31,
1994, primarily due to the construction of new facilities
in Portland, Oregon; Charlotte, North Carolina and Seattle,
Washington.
Long-term debt has decreased since May 31, 1994, primarily
due to the repayment of several industrial revenue bonds
for facilities located in Cleveland, Ohio; Tampa, Florida;
and Dallas, Texas.
The Company believes that its current cash position, funds
anticipated to be generated from operations and the
strength of its banking relationships is sufficient to meet
its anticipated financing requirements.
-8-
CINTAS CORPORATION
Part II. Other Information
Item 4. Submission of matters to a vote of security
holders
The Annual Shareholders' Meeting of the Company was held on
October 13, 1994, at which the following issues were
adopted by shareholders:
Issue No. 1
Authority to amend the Articles of Incorporation
concerning Directors.
FOR 27,788,968 AGAINST 6,173,202 ABSTAIN 409,671
BROKER NON-VOTES 1,745,110
Issue No. 2
Authority to amend the Articles of Incorporation to adopt
the Washington Interested Shareholder Statute.
FOR 27,411,665 AGAINST 6,020,739 ABSTAIN 939,432
BROKER NON-VOTES 1,745,116
Issue No. 3
Authority to adopt the 1994 Directors' Stock Option Plan.
FOR 33,860,941 AGAINST 1,102,638 ABSTAIN 292,123
BROKER NON-VOTES 861,250
Issue No. 4
Authority to establish the number of Directors to be
elected at eight.
FOR 34,801,964 AGAINST 1,102,238 ABSTAIN 212,751
BROKER NON-VOTES 0
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Issue No. 5
Authority to elect eight (8) Directors.
Name Shares For Shares -
Withheld Shares Broker
Authority Abstained Non-Votes
Richard T. Farmer 35,689,230 427,721 0 0
Scott D. Farmer 35,676,121 440,830 0 0
Gerald V. Dirvin 35,821,823 295,128 0 0
James J. Gardner 35,689,948 427,003 0 0
Roger L. Howe 35,822,941 294,010 0 0
Donald P. Klekamp 35,686,821 430,130 0 0
Robert J. Kohlhepp 35,689,378 427,573 0 0
John S. Lillard 35,822,715 294,235 0 0
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibit Index
Exhibit Number Description of Exhibit
27 Financial Data Schedule
(b.) No reports were filed on Form 8-K during the quarter.
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CINTAS CORPORATION
(Registrant)
Date: January 9, 1995 David T. Jeanmougin
David T. Jeanmougin
Senior Vice President - Finance
(Chief Financial Officer)
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