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 August 31, 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
(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 October 6, 1995
Common Stock, no par value 47,046,610
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CINTAS CORPORATION
INDEX
Page No.
Part I. Financial Information:
Consolidated Condensed Balance Sheet -
August 31, 1995 and May 31, 1995 3
Consolidated Condensed Statement of Income -
Three Months Ended August 31, 1995 and 1994 4
Consolidated Condensed Statement of Cash Flows -
Three Months Ended August 31, 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
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CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(Dollars in Thousands)
August 31, May 31,
1995 1995
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 7,526 $ 6,685
Marketable securities 53,670 38,797
Accounts receivable (net) 70,025 69,032
Inventories 36,715 36,883
Uniforms and other rental items
in service 90,401 88,670
Prepaid expenses 2,142 1,355
Total current assets 260,479 241,422
Property, plant and equipment:
Cost 340,006 333,390
Less accumulated depreciation (105,436) (105,393)
234,570 227,997
Investments and other assets 124,589 126,762
$ 619,638 $ 596,181
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,306 $ 17,265
Accrued liabilities 37,689 42,158
Income taxes -
Current 7,740 2,191
Deferred 25,877 23,368
Long-term debt due within one year 11,341 10,030
Total current liabilities 100,953 95,012
Long-term debt due after one year 119,788 120,275
Deferred income taxes 18,639 16,550
Shareholders' equity:
Preferred stock, no par value,
100,000 shares authorized, none
outstanding ------ -----
Common stock, no par value,
120,000,000 shares authorized,
47,044,678 shares issued and outstanding
(47,005,340 at May 31, 1995) 42,249 42,035
Retained earnings 338,699 323,284
Cumulative translation adjustment (690) (975)
Total shareholders' equity 380,258 364,344
$619,638 $596,181
See accompanying notes.
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CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
Three months ended
August 31,
1995 1994
Revenues:
Net rentals $ 154,268 $ 127,294
Net sales 16,075 14,743
170,343 142,037
Costs and expenses (income):
Cost of rentals 87,276 72,190
Cost of sales 13,811 12,366
Selling and administrative expenses 40,718 34,265
Interest income (421) (498)
Interest expense 2,510 1,521
143,894 119,844
Income before income taxes 26,449 22,193
Income taxes 10,161 8,433
Net income $ 16,288 $ 13,760
Earnings per share $ .35 $ .29
Weighted average number of
shares outstanding 47,033,104 46,805,209
See accompanying notes.
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CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
August 31
1995 1994
Cash flows from operating activities:
Net income $16,288 $13,760
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 6,968 6,381
Amortization of deferred charges 3,163 2,726
Provision for losses on accounts
receivable 542 429
Change in current assets and liabilities:
Accounts receivable (1,535) (2,115)
Inventories (1,563) (6,694)
Prepaid expenses (787) 399
Accounts payable 1,041 1,826
Accrued liabilities (3,482) (4,293)
Income taxes payable 5,549 5,545
Deferred income taxes 4,598 1,996
Net cash provided by operating activities 30,782 19,960
Cash flows from investing activities:
Capital expenditures (13,541) (11,690)
Change in investments and other assets (1,082) (249)
Proceeds from sale or redemption of
marketable securities 8,066 7,916
Purchase of marketable securities (22,939) (3,843)
Acquisition of businesses net of
cash acquired (496) (40)
Net cash used by investing activities (29,992) (7,906)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 407 -----
Repayment of long-term debt (570) (7,222)
Issuance of common stock 214 225
Tax benefit resulting from exercise
of employee stock options ----- 11
Purchase of treasury stock ----- (4,719)
Net cash provided from (used in)
financing activities 51 (11,705)
Net increase in cash and cash equivalents 841 349
Cash and cash equivalents at beginning
of period 6,685 8,449
Cash and cash equivalents at end
of period $ 7,526 $ 8,798
See accompanying notes.
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CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
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, 1995.
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.
The Company adopted SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, in the first
quarter of fiscal 1995. At August 31, 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.
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, 1995, options as to 1,164,569 shares granted
under the 1993 Plan and a previous plan, were outstanding
at prices ranging from $5.92 - $38.38 per share. Of these
options outstanding, 167,109 were exercisable at May 31,
1995. On July 25, 1995, additional options as to 284,050
shares exercisable at $38.75 per share were granted under
the 1993 Plan. During the first quarter of fiscal 1995,
options as to 39,426 shares were exercised ranging in price
from $11.00 to $13.33 per share.
In fiscal year 1991, shareholders 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 commencing two years
after grant, so long as the holder remains on the Board of
Directors. In fiscal 1995, 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 August 31, 1995, under both
Directors' plans, options for 32,000 shares are
outstanding, ranging in price from $13.33 to $33.50, of
which 18,750 shares are exercisable.
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Inventories:
Inventories are valued at the lower of cost (first-in,
first-out) or market. Substantially all inventories
represent finished goods.
Supplemental Cash Flow Disclosures:
Cash paid during the three months ended August 31, 1995
and 1994.
1995 1994
Interest, net of amount capitalized $1,318,000 $1,227,000
Income taxes $934,000 $1,013,000
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total revenues increased 20% in the first quarter of fiscal
1996 over the same period in fiscal 1995. Net rental
revenue increased 21% for the three months ended August 31,
1995, over the same period in the prior fiscal year.
Growth in the customer base and price increases in
established operations for the three months ended August
31, 1995, accounted for a 15% increase in rental revenues
and the remaining 6% was due primarily to acquisitions.
First quarter revenues from the sale of uniforms and other
direct sale items increased 9% over the prior year's first
quarter, principally as a result of an increase in unit
sales and other direct sale items. The increase in
revenues from the sale of uniforms and other direct sale
items were not significantly affected by acquisitions.
Net income and earnings per share increased 18% and 21%,
respectively, for the three months ended August 31, 1995,
over the same period in fiscal 1995.
Net interest expense (interest expense less interest
income) was $2,089,000 for the first quarter of fiscal 1996
compared to $1,023,000 in the first quarter of fiscal 1995.
Net interest expense has increased primarily due to an
increase in the amount of long-term debt associated with
the acquisition of Cadet Uniform Services, Ltd. in the
third quarter of fiscal 1995.
During the first quarter of fiscal 1996, the Company
announced plans to open a new distribution center in
Montgomery, Alabama. The new distribution center will
service the Company's operations in the South, Southeast
and Southwest regions of the United States. The expansion
will allow the Company to free up capacity in its
Cincinnati distribution center in order to more effectively
service growth in the Midwest, on the East Coast and
Canada.
Financial Condition
Marketable securities have increased since May 31, 1995,
primarily due to an increase in cash generated from
internal operations.
The Company believes that its current cash position, funds
anticipated to be generated from operations and the
strength of its banking relationships are sufficient to
meet its anticipated operational and capital needs.
-8-
CINTAS CORPORATION
Part II. Other Information
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: October 11, 1995 William C. Gale
William C. Gale
Vice President - Finance
(Chief Accounting Officer)