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 February 28, 1995
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
(Stateorother 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 April 7, 1995
Common Stock, no par value 46,996,729
(Page 1 of 9)
Exhibit Index on Page 9
CINTAS CORPORATION
INDEX
Page No.
Part I. Financial Information:
Consolidated Condensed Balance Sheet -
February 28, 1995 and May 31, 1994 3
Consolidated Condensed Statement of Income -
Three Months and Nine Months Ended
February 28, 1995 and 1994 4
Consolidated Condensed Statement of Cash Flows -
Nine Months Ended February 28, 1995 and 1994 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 9
-2-
CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(Dollars in Thousands)
February 28, May 31,
1995 1994
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 13,138 $ 8,449
Marketable securities 37,289 52,333
Accounts receivable (net) 65,644 56,347
Inventories 36,863 29,059
Uniforms and other rental items
in service 82,773 74,132
Prepaid expenses 1,426 1,133
Total current assets 237,133 221,453
Property, plant and equipment:
Cost 324,729 288,402
Less accumulated depreciation (106,102) (95,899)
218,627 192,503
Investments and other assets 128,027 87,676
$ 583,787 $ 501,632
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,058 $ 18,795
Accrued liabilities 37,648 33,488
Income taxes -
Current 2,786 2,300
Deferred 23,133 21,159
Long-term debt due within one year 8,534 15,742
Total current liabilities 91,159 91,484
Long-term debt due after one year 121,736 84,184
Deferred income taxes 15,642 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,
46,977,840 shares issued and
outstanding
(46,801,173 at May 31, 1994) 41,656 40,939
Retained earnings 314,818 269,939
Cumulative translation adjustment (1,224) (1,226)
Total shareholders' equity 355,250 309,652
$ 583,787 $ 501,632
See accompanying notes.
-3-
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Unaudited)
(Amounts in Thousands Except Per Share Amounts)
Three months ended Nine Months ended
February 28 February 28
1995 1994 1995 1994
Revenues:
Net rentals $ 134,279 $115,117 $394,067 $341,313
Net sales 16,938 14,268 50,778 40,079
151,217 129,385 444,845 381,392
Costs and expenses (income):
Cost of rentals 77,644 66,208 225,444 192,813
Cost of sales 14,214 11,353 43,059 33,459
Selling and
administrative expenses 33,594 29,668 100,652 89,951
Interest income (696) (493) (1,632) (1,246)
Interest expense 1,726 1,570 5,071 5,137
126,482 108,306 372,594 320,114
Income before income taxes 24,735 21,079 72,251 61,278
Income taxes 9,420 8,018 27,420 24,094
Net income $ 15,315 $13,061 $44,831 $37,184
Earnings per share $ .33 $ .28 $ .96 $ .80
Weighted average number
of shares outstanding 46,932 46,717 46,855 46,677
See accompanying notes.
-4-
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine Months Ended
February 28
Cash flows from operating activities: 1995 1994
Net income $44,831 $37,184
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 19,529 18,034
Amortization of deferred charges 8,362 8,043
Provision for losses on accounts
receivable 735 989
Change in current assets and liabilities:
Accounts receivable (7,498) (3,214)
Inventories (15,488) (12,940)
Prepaid expenses 69 (240)
Accounts payable (368) (3,235)
Accrued liabilities 2,283 833
Income taxes payable 486 3,775
Deferred income taxes 1,019 4,067
Net cash provided by operating activities 53,960 53,296
Cash flows from investing activities:
Capital expenditures (40,525) (27,504)
Change in investments and other assets (624) (2,731)
Proceeds from sale or redemption of
marketable securities 75,050 27,412
Purchase of marketable securities (60,006) (43,894)
Acquisition of businesses net of
cash acquired (47,177) (7,357)
Net cash used by investing activities(73,282) (54,074)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 41,885 263
Repayment of long-term debt (11,541) (7,988)
Issuance of common stock 674 585
Tax benefit resulting from exercise of
employee stock options 111 309
Purchase of treasury stock (7,118) -----
Net cash provided from (used in)
financing activities 24,011 (6,831)
Net increase (decrease) in cash and
cash equivalents 4,689 (7,609)
Cash and cash equivalents at beginning
of period 8,449 14,192
Cash and cash equivalents at end of period $13,138 $6,583
See accompanying notes.
-5-
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
nine months ended February 28, 1995, 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 fiscal 1994 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 February 28, 1995,
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"1993 Plan"), 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 1993 Plan. During the nine months ended February 28,
1995, options as to 185,217 shares were exercised ranging
in price from $3.46 to $12.17 per share.
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 (the "1991 Directors' Plan"). 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
-6-
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 "1994 Directors' Plan"). The 1994
Directors' 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'
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 February 28, 1995, under both Directors'
plans, options for 32,000 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 first nine months of fiscal 1995,
219,915 shares were acquired for $7,118,000. These shares
were primarily used for an acquisition in the second
quarter of fiscal 1995 which will add approximately $4
million in annual revenues.
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 during the nine month periods ended February
28, 1995 and 1994.
1995 1994
Interest, net of amount capitalized $4,367,000 $4,837,000
Income taxes $25,768,000 $16,363,000
-7-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total revenues increased 17% for the three months and nine
months ended February 28, 1995, over the same periods in
the prior fiscal year. Net rental revenue increased 17%
and 16%, respectively, for the three months and nine months
ended February 28, 1995, over the same periods in the prior
fiscal year. Growth in the customer base and price
increases in established operations for the nine months
ended February 28, 1995, accounted for a 13% increase and
the remaining 3% was due primarily to acquisitions. Third
quarter revenues from the sale of uniforms and other direct
sale items increased 19% over the prior year's third
quarter. For the nine months ended February 28, 1995,
sales increased 27% 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 17% and 21% for the three months and
nine months ended February 28, 1995, respectively, over the
same periods in fiscal 1994. The increase in net income
for the nine months ended February 28, 1995, 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 nine months ended February 28, 1994,
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 nine months ended February 28, 1994, 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 nine months ended
February 28, 1994, by $.02 per share.
Net interest expense (interest expense less interest
income) was $1,030,000 and $3,439,000 for the third quarter
and nine months ended February 28, 1995, respectively,
compared to $1,077,000 and $3,891,000, respectively, for
the same two periods in the prior fiscal year. For the
nine months ended February 28, 1995, interest expense has
decreased primarily due to an increase in interest income
in the third quarter and due to an overall reduction in the
Company's weighted average outstanding long-term debt
compared to the prior year.
During the first nine months of fiscal 1995, the Company,
in following a stock repurchase plan which was previously
approved by the Board of Directors on July 20, 1994,
reissued 219,915 shares of its treasury stock which had
been acquired previously in the fiscal year. These shares
were primarily used for an acquisition in the second
quarter of fiscal 1995 which will add approximately $4
million in annual revenues.
On February 13, 1995, the Company acquired all of the
outstanding stock of Cadet Uniform Services, LTD., a
uniform rental company in Toronto, Ontario, thereby
increasing its ownership from 20% to 100%. The acquisition
will add approximately $22 million in annual revenues.
Financial Condition
Property, plant and equipment has increased since May 31,
1994, primarily due to the construction of new facilities
in Phoenix, Arizona; Portland, Oregon; Buffalo, New York;
Charlotte, North Carolina; and Seattle, Washington.
Investments, other assets and long-term debt during the
third quarter of 1995 have increased since May 31, 1994,
primarily due to the acquisition of Cadet Uniform Services,
LTD.
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 5. Other Information
On February 15, 1995, the Registrant declared
an annual cash dividend of $.20 per share on
outstanding Common Stock, an 18% increase over
the dividend paid in the prior year. The
dividend was payable on April 3, 1995, to
shareholders of record as of March 10, 1995.
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibit Index
Page in Consecutive
Exhibit Number Description of Exhibit Numbering System
27 Financial Data Schedule 10
(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: April 7, 1995 William C. Gale
William C. Gale
Vice President - Finance
(Chief Financial Officer)
-9-