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, 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 January 9, 1996
Common Stock, no par value 47,105,294
-1-
CINTAS CORPORATION
INDEX
Page No.
Part I. Financial Information:
Consolidated Condensed Balance Sheet -
November 30, 1995 and May 31, 1995 3
Consolidated Condensed Statement of Income -
Three Months and Six Months Ended
November 30, 1995 and 1994 4
Consolidated Condensed Statement of Cash Flows -
Six Months Ended November 30, 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 10
-2-
CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands except share data)
November 30, May 31,
1995 1995
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 6,615 $ 6,685
Marketable securities 53,799 38,797
Accounts receivable (net) 77,522 69,032
Inventories 37,384 36,883
Uniforms and other rental
items in service 95,281 88,670
Prepaid expenses 1,189 1,355
Total current assets 271,790 241,422
Property, plant and equipment:
Cost 353,613 333,390
Less accumulated depreciation (111,642) (105,393)
241,971 227,997
Other assets 124,900 126,762
$ 638,661 $ 596,181
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,892 $ 17,265
Accrued liabilities 41,706 42,158
Income taxes -
Current 1,667 2,191
Deferred 26,123 23,368
Long-term debt due within
one year 11,276 10,030
Total current liabilities 101,664 95,012
Long-term debt due after one year 118,366 120,275
Deferred income taxes 18,089 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,
47,070,545 shares issued and
outstanding (47,005,340 at
May 31, 1995) 42,466 42,035
Retained earnings 358,420 323,284
Cumulative translation
adjustment (344) (975)
Total shareholders' equity 400,542 364,344
$638,661 $596,181
See accompanying notes.
-3-
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Unaudited)
(In thousands except per share data)
Three months ended Six Months ended
November 30 November 30
1995 1994 1995 1994
Revenues:
Net rentals $ 159,855 $ 132,494 $ 314,123 $ 259,788
Net sales 22,514 19,097 38,589 33,840
182,369 151,591 352,712 293,628
Costs and expenses (income):
Cost of rentals 90,712 75,610 177,988 147,800
Cost of sales 18,698 16,479 32,509 28,845
Selling and administrative
expenses 40,252 32,793 80,970 67,058
Interest income (447) (438) (868) (936)
Interest expense 2,293 1,824 4,803 3,345
151,508 126,268 295,402 246,112
Income before income taxes 30,861 25,323 57,310 47,516
Income taxes 12,014 9,567 22,175 18,000
Net income $ 18,847 $ 15,756 $ 35,135 $ 29,516
Earnings per share $ .40 $ .34 $ .75 $ .63
Weighted average number of
shares outstanding 47,053 46,829 47,043 46,815
See accompanying notes
-4-
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
November 30
Cash flows from operating activities: 1995 1994
Net income $35,135 $29,516
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 14,037 12,954
Amortization of deferred charges 6,275 5,538
Provision for losses on accounts
receivable 973 363
Change in current assets and liabilities:
Accounts receivable (9,463) (9,440)
Inventories (7,112) (12,037)
Prepaid expenses 166 (18)
Accounts payable 3,627 (417)
Accrued liabilities (452) 101
Income taxes payable (524) 2,173
Deferred income taxes 4,294 2,064
Net cash provided by operating activities 46,956 30,797
Cash flows from investing activities:
Capital expenditures (28,011) (25,346)
Change in other assets (628) (319)
Proceeds from sale or redemption of
marketable securities 42,586 32,469
Purchase of marketable securities (57,588) (15,707)
Acquisition of businesses net of cash
acquired (2,289) (5,911)
Net cash used by investing activities (45,930) (14,814)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 408 -----
Repayment of long-term debt (1,935) (8,659)
Issuance of common stock 423 457
Tax benefit resulting from exercise of
employee stock options 8 74
Purchase of treasury stock ---- (7,044)
Net cash used in financing activities (1,096) (15,172)
Net (decrease) increase in cash and
cash equivalents (70) 811
Cash and cash equivalents at beginning
of period 6,685 8,449
Cash and cash equivalents at end of period $ 6,615 $ 9,260
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, 1995.
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, 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. 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 November 30, 1995, options as to 1,448,619 shares granted
under the 1993 Plan and a previous plan, were outstanding at
prices ranging from $5.92 - $38.75 per share. Of these options
outstanding, 167,109 were exercisable at May 31, 1995. During
the first quarter of fiscal 1996, options as to 39,426 shares
were exercised ranging in price from $5.92 to $13.33 per share.
During the second quarter of fiscal 1996, options as to 28,371
shares were exercised ranging in price from $7.96 to $13.33.
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 are 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, 1995, under both Directors'
plans, options for 37,000 shares are outstanding, ranging in
price from $13.33 to $43.25, of which 26,000 shares are
exercisable.
4. Inventories:
Inventories are valued at the lower of cost (first-in, first-out)
or market. Substantially all inventories represent finished
goods.
5. Supplemental Cash Flow Disclosures:
Cash paid during the six months ended November 30, 1995 and 1994.
1995 1994
Interest, net of amount capitalized $ 4,183,000 $ 3,299,000
Income taxes $19,103,000 $13,588,000
-7-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total revenues increased 20% in the three months and six months
ended November 30, 1995 over the same periods in the prior fiscal
year. Net rental revenue increased 21% for both the three months
and six months ended November 30, 1995. Growth in the customer
base and price increases in established operations accounted for
a 16% increase and the remaining 5% was due primarily to
acquisitions. Second quarter revenues from the sale of uniforms
and other direct sale items increased 18% over the prior year's
second quarter. For the six months ended November 30, 1995,
sales increased 14% over the same period in fiscal 1995. 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 20% and 19% for the three months and six
months ended November 30, 1995, respectively, over the same
periods in fiscal 1995. The increase in net income for the six
months ended November 30, 1995, over the same period in the prior
year was primarily the result of increased revenues.
Net interest expense (interest expense less interest income) was
$1,846,000 and $3,935,000 for the three months and six months
ended November 30, 1995, respectively, compared to $1,386,000
and $2,409,000, respectively, for the same two periods in the
prior fiscal year. 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 into Montgomery, as well as an expansion of the
Cincinnati distribution center, will allow the Company to free up capacity
in Cincinnati in order to more effectively service growth in the Midwest,
on the East Coast and Canada.
During the second quarter of fiscal 1996, the Company entered
eight new markets and continued construction of new uniform
rental facilities in Austin, Texas; Denver, Colorado;
Indianapolis, Indiana; and Las Vegas, Nevada.
Financial Condition
Marketable securities have increased since May 31, 1995,
primarily due to an increase in cash generated from internal
operations.
Property, plant and equipment have increased from May 31, 1995,
primarily due to the construction of new uniform rental
facilities previously mentioned as well as the expansion of other existing
uniform rental facilities in several U.S. cities.
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 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 19, 1995, at which the following issues were
adopted by shareholders:
Issue No. 1
Authority to amend the 1992 Stock Option Plan.
FOR 36,476,709 AGAINST 1,416,708 ABSTAIN 109,282 BROKER NON-VOTES 0
Issue No. 2
Authority to elect eight (8) Directors.
Name Shares For Shares - Shares Broker
Withheld Authority Abstained Non-Votes
Richard T. Farmer 37,599,265 242,637 0 0
Scott D. Farmer 37,583,876 238,027 0 0
Gerald V. Dirvin 37,665,803 156,009 0 0
James J. Gardner 37,583,318 238,585 0 0
Roger L. Howe 37,681,918 159,985 0 0
Donald P. Klekamp 37,582,984 220,918 0 0
Robert J. Kohlhepp 37,599,116 242,787 0 0
John S. Lillard 37,680,969 160,933 0 0
-9-
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, 1996 William C. Gale
William C. Gale
Vice President - Finance
(Chief Accounting Officer)