August 26, 1996
Securities and Exchange Commission
Proxy Filing Desk
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Cintas Corporation
To whom it may concern:
We are transmitting the definitive filing of the
Notice, Proxy Statement and Form of Proxy to be
furnished to shareholders of Cintas Corporation for its
Annual Shareholders' Meeting. We have also
transferred $125.00 for the filing fee.
Cintas plans to release these materials to security
holders on or about August 26, 1996.
If you have any questions, you may contact me at
(513)573-4016 or our outside securities counsel, Gary P.
Kreider at (513)579-6411.
Sincerely,
J. Michael Faust
Headquarters Controller
MF/tl
PAGE
FRONT OF CARD
CINTAS CORPORATION PROXY FOR ANNUAL MEETING
6800 Cintas Blvd., P.O. Box 625737, Cincinnati, Ohio 45262-5737
The undersigned hereby appoints RICHARD T. FARMER, ROBERT J. KOHLHEPP,
and WILLIAM C. GALE, or any of them, proxies of the undersigned, each with the
power of substitution, to vote all shares of Common Stock which the
undersigned would be entitled to vote at the Annual Meeting of Shareholders of
Cintas Corporation to be held October 10, 1996 at 10:00 a.m. (Eastern Time) at
the Company's Corporate Headquarters, 6800 Cintas Boulevard, Cincinnati, Ohio
45262 and at any adjournment of such Meeting as specified below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. Authority to establish the number of Directors to be elected at the
Meeting at eight.
_ FOR _ AGAINST _ ABSTAIN
2. Authority to elect eight nominees listed below.
_ FOR all nominees listed below _ WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees
below) listed below
Richard T. Farmer; Robert J. Kohlhepp; Gerald V. Dirvin; Scott D. Farmer;
James J. Gardner; Roger L. Howe; Donald P. Klekamp; John S. Lillard
WRITE THE NAME OF ANY NOMINEE(S) FOR _______________________
WHOM AUTHORITY TO VOTE IS WITHHELD _______________________
(Continued on other side)
BACK OF CARD
3. In their discretion the proxies are authorized to vote upon such
other business as may properly come before the Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
___________________________, 1996 _______________________________
_______________________________
Important: Please sign exactly
as name appears hereon
indicating, where proper, official
position or representative capacity.
In the case of joint holders, all
should sign.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Dear Shareholder:
We are pleased to invite you to attend our 1996 Annual Shareholders'
Meeting. The meeting will be held at 10:00 a.m., Eastern Time, at the
Company's Corporate Headquarters, 6800 Cintas Boulevard, Cincinnati, Ohio, on
Thursday, October 10, 1996.
The purposes of this Annual Meeting are:
1. To establish the number of Directors to be elected at eight;
2. To elect eight Directors;
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Following the formal meeting, we will discuss the Company's operations
during the last year and our plans for the future and answer your questions
regarding the Company. Board members and other officers of the Company will
also be available to discuss the Company's business with you.
Yours truly,
David T. Jeanmougin,
Secretary
Dated: August 23, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE, SIGN AND PROMPTLY
RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE. PROXIES MAY BE REVOKED AT
ANY TIME PRIOR TO THE MEETING BY WRITTEN NOTICE OF REVOCATION DELIVERED TO THE
COMPANY'S SECRETARY, THE SUBMISSION OF A LATER PROXY OR BY ATTENDING THE
MEETING AND VOTING IN PERSON.
CINTAS CORPORATION
6800 Cintas Boulevard
P.O. Box 625737
Cincinnati, Ohio 45262-5737
Telephone (513) 459-1200
______________________________________
P R O X Y S T A T E M E N T
Annual Meeting of Shareholders
October 10, 1996
INTRODUCTION
The enclosed Proxy is solicited by the Board of Directors of Cintas
Corporation ("Cintas" or the "Company") for use at the Annual Meeting of
Shareholders to be held on October 10, 1996, and at any adjournment thereof,
pursuant to the foregoing Notice. The approximate mailing date of the Proxy
Statement and the accompanying proxy card is August 23, 1996.
VOTING AT ANNUAL MEETING
General
Shareholders may vote in person or by proxy at the Shareholders' Meeting.
Proxies given may be revoked at any time prior to the meeting by filing with
the Company's Secretary either a written revocation or a duly executed proxy
bearing a later date, or by appearing at the meeting and voting in person.
All shares will be voted as specified on each properly executed proxy. If no
choice is specified, the shares will be voted as recommended by the Board of
Directors.
As of August 16, 1996, the record date for determining shareholders
entitled to notice of and to vote at the meeting, Cintas had 47,376,432 shares
of Common Stock outstanding. Each share is entitled to one vote on each
matter to be presented at the meeting. Only shareholders of record at the
close of business on August 16, 1996, will be entitled to vote at the meeting.
A quorum consists of the presence in person or by proxy of a majority of all
shares entitled to vote at the meeting.
-2-
Principal Shareholders
The following persons are the only shareholders known by the Company to
own beneficially 5% or more of its outstanding Common Stock as of the record
date:
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
Richard T. Farmer(1) 13,261,783(2) 28.0 %
James J. Gardner(1) 3,395,352(3) 7.2 %
Joan A. Gardner(1) 2,457,486(4) 5.2 %
__________________________
1 The address of Richard T. Farmer, James J. Gardner and Joan A.
Gardner is Cintas Corporation, 6800 Cintas Boulevard, P.O. Box 625737,
Cincinnati, OH 45262-5737.
2 Includes 16,780 shares owned by Mr. Farmer's wife, 1,365,260
shares held in trust for Mr. Farmer's children, 34,290 shares owned by a
corporation controlled by Mr. Farmer, and 12,500 shares which may be acquired
pursuant to stock options which are exercisable within 60 days.
3 Includes 77,022 shares held by a charitable trust established by
Mr. Gardner, 411,152 shares held in various trusts for the benefit of Mr.
Gardner's children, options for 500 shares which are exercisable within 60
days, and 32,791 shares held by a corporation that is controlled by Mr.
Gardner. Also includes 2,667,625 shares held by a family partnership as to
which Mr. Gardner indirectly exercises voting power, of which 1,913,638 shares
are also deemed to be owned beneficially by Mr. Gardner's wife, Joan A.
Gardner, and which were contributed by her to the partnership. Excludes
543,848 shares held in trust for Mrs. Gardner's children.
4 Includes 543,848 shares held in trust for Mrs. Gardner's
children and 1,913,638 shares contributed by Mrs. Gardner to a family
partnership. Excludes shares beneficially owned by her husband, James J.
Gardner.
-3-
Security Ownership of Directors and Executive Officers
The following table sets forth the beneficial ownership of the Company's
Common Stock by its directors, the named executive officers in the Summary
Compensation Table of the Proxy Statement and all directors and executive
officers as a group, as of August 16, 1996:
Amount and
Nature of
Beneficial Percent
Name of Beneficial Owner Ownership Of Class
Richard T. Farmer 13,261,783(1) 28.0%
Robert J. Kohlhepp 1,305,093(2) 2.8%
Gerald V. Dirvin 5,150(3) *
James J. Gardner 3,395,352(1) 7.2%
Roger L. Howe 349,728(4) *
Donald P. Klekamp 90,300(5)(6) *
John S. Lillard 63,954(6) *
Scott D. Farmer 197,609(7) *
David T. Jeanmougin 7,330(8) *
Robert R. Buck 60,569(9) *
William C. Gale 30 *
All Directors and Executive
Officers as a Group (13 persons)18,799,156(10) 39.7%
*Less than 1%
(1) See Principal Shareholders.
(2) Includes 20,000 shares held in trust for members of Mr. Kohlhepp's
family, 696,347 shares held by businesses controlled by Mr. Kohlhepp, and
options for 11,000 shares which are exercisable within 60 days.
(3) Includes options for 2,750 shares which are exercisable within 60 days.
(4) Includes options for 500 shares which are exercisable within 60 days.
(5) Includes 59,690 shares owned by Mr. Klekamp's wife and 20,000 shares as
to which she is trustee.
-4-
(6) Includes options for 6,500 shares which are exercisable within 60 days.
(7) Includes 45,700 shares held in trust for members of Mr. Farmer's family,
10,539 shares owned by his immediate family and options for 35,300 shares
which are exercisable within 60 days.
(8) Includes options for 5,200 shares which are exercisable within 60 days.
(9) Includes options for 800 shares which are exercisable within 60 days.
(10) Includes options for 91,950 shares which are
exercisable within 60 days.
ELECTION OF DIRECTORS
The By-laws of the Company call for the Board of Directors to have at least
three members with the specific number to be elected at the meeting
established by shareholders. At the present time, the Board consists of eight
Directors, and the Board is recommending that this number be retained.
The Board is nominating for reelection all current Directors, namely
Richard T. Farmer, Robert J. Kohlhepp, Gerald V. Dirvin, Scott D. Farmer,
James J.Gardner, Roger L. Howe, Donald P. Klekamp and John S. Lillard.
Proxies solicited by the Board will be voted for the election of the eight
nominees shown above. All Directors elected at the Annual Shareholders'
Meeting will be elected to hold office until the next Annual Meeting or until
their successors are elected and qualified.
Should any of the nominees become unable to serve, proxies will be voted
for any substitute nominee designated by the Board. The Company has no reason
to believe that any nominee for election will be unable or unwilling to serve
if elected.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NO.1 AND THE
ELECTION OF THE EIGHT NOMINEES PROPOSED BY THE BOARD.
Vote Required
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES VOTING AT THE MEETING IS
REQUIRED TO APPROVE PROPOSAL NO. 1. ABSTENTIONS AND BROKER NON-VOTES WILL
HAVE NO EFFECT ON THIS VOTE. THE EIGHT NOMINEES RECEIVING THE HIGHEST NUMBER
OF VOTES CAST FOR THE POSITIONS TO BE FILLED WILL BE ELECTED.
-5-
OTHER MATTERS
Any other matters considered at the meeting including adjournment will
require the affirmative vote of the majority of shares voting with abstentions
and broker non-votes having no effect.
VOTING BY PROXY
All proxies properly signed will, unless a different choice is indicated,
be voted "FOR" the establishment of the number of Directors at eight and "FOR"
the election of all eight nominees proposed by the Board unless authority is
withheld to vote for any or all of those nominees.
If any other matters come before the meeting or any adjournment, each proxy
card will be voted in the discretion of the proxies named therein.
SHAREHOLDER PROPOSALS
Shareholders who desire to have proposals included in the Notice for the
1997 Shareholders' Meeting must submit their proposals in writing to Cintas at
its offices on or before April 25, 1997.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors appointed Ernst & Young LLP as its certified public
accountants for fiscal 1997. Ernst & Young LLP has served as certified public
accountants for the Company in the past. A member of Ernst & Young LLP will
be present at the meeting to make a statement if desired and to answer
questions of shareholders.
-6-
MANAGEMENT
Directors and Executive Officers
The Directors and Executive Officers of Cintas Corporation are:
Position
Name and Age Position Since
Richard T. Farmer(1) Chairman of the Board 1968
61
Robert J. Kohlhepp(1) President, Chief Executive Officer 1984
52 and Director
Gerald V. Dirvin(3) Director 1993
59
James J. Gardner(1&2) Director 1969
63
Roger L. Howe(2&3) Director 1979
61
Donald P. Klekamp(2) Director 1984
64
John S. Lillard(3) Director 1978
66
Scott D. Farmer Vice President and Director 1987
37
Robert R. Buck Senior Vice President 1991
48
Karen L. Carnahan Treasurer 1992
42
William C. Gale Vice President - Finance 1995
44
David T. Jeanmougin Senior Vice President and Secretary1991
55
John S. Kean III Senior Vice President 1986
56
Ages are as of September 1, 1996.
1 Member of the Executive Committee of the Board of Directors.
2 Member of the Audit Committee of the Board of Directors.
3 Member of the Compensation Committee of the Board of Directors.
-7-
Richard T. Farmer has been with the Company and its predecessors since
1957 and has served in his present position with the Company since 1968.
Prior to August 1, 1995, Mr. Farmer also served as Chief Executive Officer. He
is also a Director of Fifth Third Bancorp, Cincinnati, Ohio, a NASDAQ company,
and Safety Kleen Corp., Chicago, Illinois, a business service entity and a
NYSE company.
Robert J. Kohlhepp has been a Director of the Company since 1979. He has
been employed by the Company since 1967 serving in various executive
capacities including Vice President - Finance until 1979 when he became
Executive Vice President. He served in that capacity until October 23, 1984,
when he was elected President by the Board. In addition to serving as the
Company's President, Mr. Kohlhepp was elected Chief Executive Officer on
August 1, 1995.
Gerald V. Dirvin was elected a Director of Cintas in 1993. Mr. Dirvin
joined The Procter & Gamble Company, a Cincinnati-based consumer goods
marketing company and a NYSE company, in 1959 and served in various management
positions. He retired as Executive Vice President and as a Director in 1995.
Mr. Dirvin is also a Director of Fifth Third Bancorp, Cincinnati, Ohio, a
NASDAQ company, and Northern Telecom Limited, Toronto, Canada, a NYSE company.
James J. Gardner served in various management positions with Cintas from
1956 until his retirement in 1988. Mr. Gardner has served as a Director of
the Company since 1969.
Roger L. Howe has been a Director of Cintas since 1979. He is the Chairman
of the Board of U.S. Precision Lens, Inc., a manufacturer of optics for the
instrument, photographic and television industries, and has held that position
in the firm for over five years. Mr. Howe is a Director of Star Banc
Corporation, Cincinnati, Ohio, a NYSE company, and its subsidiary Star Bank,
National Association; Eagle-Picher Industries, Inc., a Cincinnati-based
diversified industrial products manufacturer; and Baldwin Piano and Organ
Company, a Loveland, Ohio, based company which is the largest domestic
manufacturer of keyboard musical instruments and a NASDAQ company.
Donald P. Klekamp was elected a Director of Cintas in 1984. Mr. Klekamp is
a senior partner in the Cincinnati law firm of Keating, Muething & Klekamp.
Keating, Muething & Klekamp serves as counsel for the Company.
John S. Lillard has been a Director of Cintas since 1978. He was a Founder
of JMB Institutional Realty Corporation, a registered investment advisor,
where he served as President from 1978 to 1991. In 1991, he became
Chairman-Founder until his retirement in June 1996. He is also a Director of
Stryker Corporation, a medical equipment company, and a Director of Lake
Forest Bancorporation and Wintrust Financial Corporation, bank holding
companies.
Scott D. Farmer joined Cintas in 1981. He has served in various management
positions including Vice President - National Account Division, Vice President
- - Marketing and Merchandising, and is President of Cintas Sales Corporation, a
wholly-owned subsidiary of the Company. He was elected a Director of Cintas
in 1994.
Robert R. Buck joined Cintas in 1982. He is presently in charge of twenty
Cintas rental operations in the Midwestern United States. Prior to his
operational responsibilities, he served as Senior Vice President - Finance
from 1982 to 1991.
Karen L. Carnahan joined Cintas in 1979. She has held various accounting
and finance positions with the Company. In March 1992, she was elected
Treasurer of the Company.
-8-
William C. Gale joined Cintas in April 1995. He is presently responsible
for the areas of finance and accounting. Prior to joining Cintas, Mr. Gale
was associated with International Paper, a forest products, paper and
packaging company and a NYSE company where he served as auditor since February
1994. Mr. Gale has also held various financial executive positions with
Occidental Petroleum Corporation, an oil products and chemical concern and a
NYSE company.
David T. Jeanmougin joined Cintas in August 1991 as Senior Vice President -
Finance in which he was responsible for the areas of finance, accounting and
administration. He served in that capacity until April 1995, when he was
named Secretary of the Company and Senior Vice President. In this capacity he
is responsible for the areas of manufacturing, distribution, management
information systems, acquisitions and several other key administrative areas.
John S. Kean III joined Cintas in August 1986 upon the acquisition of Red
Stick Services where he served as President. He was appointed Senior Vice
President in 1986 and is responsible for operations in Louisiana, Mississippi,
Alabama, Arkansas and Tennessee.
James J. Gardner is the brother-in-law of Richard T. Farmer. Scott D.
Farmer is the son of Richard T. Farmer. None of the other Executive Officers
and Directors are related.
Board Actions and Compliance with Section 16 of the Exchange Act
The Board of Directors met on four occasions in fiscal 1996. The Executive
Committee is entitled through authorization by the Board of Directors and by
Washington law to perform substantially all of the functions of the Board of
Directors between meetings of the Board. The Executive Committee took action
by written consent on six occasions in fiscal 1996.
The Audit Committee reviews the Company's internal accounting operations,
monitors relationships between the Company and its independent accountants and
recommends the employment of independent auditors. The Audit Committee met on
two occasions in fiscal 1996.
The Compensation Committee establishes compensation levels for all
executives and administers the Company's stock option plans. This Committee
met on one occasion and took action by written consent on ten occasions in
fiscal 1996.
The Company does not have a nominating committee.
Outside directors are paid an annual fee of $9,200 plus $1,625 for each
Board meeting attended and $900 for each Committee meeting attended.
Directors who are executive officers are not paid Director's fees nor do they
participate in the 1994 Directors' Stock Option Plan.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than ten percent of a registered
class of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Officers,
directors and greater than ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it, or
written representation from certain reporting persons that no Form 5's were
required for those persons, the Company believes that during the period of
June 1, 1995, through May 31, 1996, all filing requirements were complied with
applicable to its officers, directors and greater than ten-percent beneficial
owners.
-9-
Executive Compensation
The following table summarizes the annual and long-term compensation of the
Company's Chief Executive Officer and each of the Company's other four most
highly compensated Executive Officers for the years ended May 31, 1996, 1995
and 1994.
SUMMARY COMPENSATION TABLE
Annual Long Term
Compensation Compensation
Shares
Underlying All
Name and Salary Bonus Other Option Other
Principal Position Year ($) ($) ($) Grants (#)Compensation($)(1)
Richard T. Farmer 1996 278,512 207,813 61,061(2) 10,000shs 209,340
Chairman of the 1995 278,512 222,810 ---- 5,000 shs 220,568
Board 1994 267,800 171,392 50,980(2) 10,000shs 220,505
Robert J. Kohlhepp 1996 267,370 174,202 ---- 50,000 shs 58,277
President, Chief 1995 222,809 155,966 69,215(3) 5,000 shs 60,319
Executive Officer 1994 214,240 119,975 ---- 10,000 shs 62,614
and Director
Robert R. Buck 1996 200,000 161,869 ---- 5,000 shs 6,699
Senior Vice 1995 190,000 126,810 ---- ---- 5,987
President 1994 175,000 97,259 ---- 5,000 shs 9,056
David T. Jeanmougin 1996 214,000 69,715 ---- 5,000 shs 6,571
Senior Vice 1995 200,000 70,000 ---- 5,000 shs 6,044
President 1994 175,000 52,400 ---- 5,000 shs 8,134
and Secretary
William C. Gale 1996 170,000 55,381 ---- 10,000 shs 46,918
Vice President- 1995 21,538(4) ---- ---- 5,000 shs ----
Finance
(1) The Company maintains a split-dollar life insurance program for Messrs.
Farmer and Kohlhepp. Under this program, the Company has purchased
insurance policies on the lives of Mr. Farmer and his wife and Mr. Kohlhepp
and his wife. Messrs. Farmer and Kohlhepp are responsible for a portion of
the premiums and the Company pays the remainder of the premiums on the life
insurance policies. Upon the death of Messrs. Farmer or Kohlhepp and their
spouses, the Company will be entitled to receive that portion of the benefits
paid under the life insurance policy that is equal to the premiums paid by
the Company on that policy. The life insurance trust established by the
decedent will receive the remainder of the death benefits. The actuarially
projected current dollar value of the benefit to Messrs. Farmer and Kohlhepp
of the premiums paid to the insurer under these policies for the fiscal years
ended May 31, 1996, 1995 and 1994 is $202,007, $214,669 and $210,317,
respectively, for Mr.Farmer and $51,348, $54,357 and $52,859, respectively,
for Mr. Kohlhepp, which amounts are included above.
-10-
The Company maintains the Cintas Partners' Plan, a non-contributory
employee stock ownership plan and profit sharing plan for the benefit of
Company employees who have completed one year of service. The Plan also
includes a 401(k)savings feature which covers substantially all employees.
The amount of contributions to the profit sharing plan and ESOP and the
matching contribution to the 401(k) are at the discretion of the Company.
Included above are the dollars contributed by the Company pursuant to the
Company's Partners' Plan.
Included for Mr. Gale in 1996 is a $45,862 reimbursement of moving
expenses and the resulting income tax liability.
(2) The amount indicated represents compensation associated with the use
of the Company's aircraft ($52,766 and $42,091 in 1996 and 1994,
respectively) and the remainder attributable to other expense
reimbursements.
(3) The amount indicated represents compensation associated with the use
of the Company's aircraft ($59,663) and the remainder attributable to
other expense reimbursements.
(4) Mr. Gale's employment with the Company began in April 1995.
Stock Options
The following table sets forth information regarding stock options granted
to the executives named in the Summary Compensation Table under the Company's
1992 Stock Option Plan during the fiscal year ended May 31, 1996:
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Realizable
Name Number of Percent of Total Value at Assumed
Shares Options Annual Rates of
Underlying Granted to Exercise Stock
Options Employees in Price Expiration Price Apprec.
Granted Fiscal 1996 ($/Sh.) Date For Option Term
5%($) 10%($)
Richard T.
Farmer 10,000 3.2% 38.75 07/24/00 106,950 236,763
Robert J.
Kohlhepp 50,000 15.9% 38.75 07/24/05 1,218,688 3,088,375
Robert R.
Buck 5,000 1.6% 38.75 07/24/05 121,869 308,838
David T.
Jeanmougin 5,000 1.6% 38.75 07/24/05 121,869 308,838
William C.
Gale 10,000 3.2% 38.75 07/24/05 243,738 617,675
-11-
The following table sets forth information regarding stock options exercised
by the executives named in the Summary Compensation Table during fiscal 1996
and the value of in-the-money unexercised options held by them as of May 31,
1996:
AGGREGATED OPTION EXERCISES IN FISCAL 1996
AND FISCAL 1996 YEAR END OPTION VALUES
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Name Shares Options at May 31,1996 at May 31,1996($)(1)
Acquired
on Value
Exercise(#) Realized($) Exercisable Unexercis. Exercisable Unexercis.
Richard T.
Farmer 75,000 1,968,750 6,250 18,750 162,031 363,594
Robert J.
Kohlhepp ---- ---- 6,000 84,000 248,000 1,797,625
Robert
R. Buck 2,160 85,140 ---- 14,000 ---- 332,750
David T.
Jeanmougin ---- ---- ---- 45,000 ---- 1,239,125
William C.
Gale ---- ---- ---- 15,000 ---- 223,125
(1) Value is calculated as the difference between the fair market value of
the Common Stock on May 31, 1996 ($53.50 per share) and the exercise
price of the options.
Report of the Compensation Committee
The Compensation Committee of the Board of Directors (the "Committee") is
composed of three independent, outside directors. The members of the
Committee for fiscal 1996 were Messrs. Dirvin, Howe and Lillard. The
Committee has the overall responsibility of reviewing and recommending
specific compensation levels for executive officers and key management to the
full Board of Directors. The Committee is also charged with the
responsibility of reviewing the performance of the executive officers and
overall Company performance. The Company's stock option plans are also
administered by the Committee. Compensation decisions for fiscal 1996
followed the same pattern as fiscal 1995.
The Company's executive compensation policies are designed to support the
corporate objective of maximizing the long term value of the Company to its
shareholders and employees. To achieve this objective, the Committee believes
it is important to provide competitive levels of compensation to attract and
retain the most qualified executives, to recognize individuals who exceed
expectations and to link closely overall corporate performance and executive
pay. The methods by which the Committee believes the Company's long term
objectives can be achieved are through incentive compensation plans and the
issuance of options to purchase the Company's common stock.
-12-
The Committee has established three primary components of the Company's
executive compensation plan. The three components are:
base compensation
performance incentive compensation
stock-based performance compensation through stock option grants
The Omnibus Budget Reconciliation Act of 1993 provides that compensation in
excess of $1,000,000 per year paid to the chief executive officer of a company
as well as the other executive officers listed in the compensation table will
no longer be deductible unless the compensation is performance-based and
approved by shareholders. This law was not considered by the Committee in
determining fiscal 1996 compensation since compensation levels were not in
excess of the amounts deductible under the law.
Base Compensation
The Committee annually reviews base salaries of executive officers. Factors
which influence decisions made by the Committee regarding base salaries are
levels of responsibility and potential for future responsibilities, salary
levels offered by competitors and overall performance of the Company. The
Committee's practice in establishing salary levels is based in part upon
overall Company performance and is not based upon any specific objectives or
policies but reflects the subjective judgment of the Committee. However,
specific annual performance goals are established for each executive officer.
Based on the Committee's comparison of the Company's overall compensation
levels as a percent of revenues and net income to comparable companies in
the industry, the Committee believes its overall compensation levels are in
the middle of the range.
Performance Incentive Compensation
The performance incentive compensation, which is paid out in the form of an
annual cash bonus, was established by the Committee to provide a direct
financial incentive to achieve corporate and operating goals. The basis for
determining performance incentive compensation is strictly quantitative in
nature. At the beginning of each fiscal year, the Committee establishes a
target bonus for certain executives based on target levels of increases in
earnings per share. Cash bonuses paid to other executives are based on a
percentage of operating profits of the particular division served by that
officer. Those percentages are not disclosed because they could be used
to determine divisional operating profits which are otherwise not publicly
available.
Stock Option Grants
Executive compensation to reward past performance and to motivate future
performance is also provided through stock options granted under the 1992
Stock Option Plan. The purpose of the plan is to encourage executive officers
to maintain a long-term stock ownership position in the Company in order that
their interests are aligned with those of the Company's shareholders. The
Committee in its discretion has the authority to determine participants in the
plan, the number of shares to be granted and the option price and term. The
Committee has not established specific stock option target awards for
participants. Consideration for stock option awards are evaluated on a
subjective basis and granted to participants until an ownership position
exists which is consistent with the participant's current responsibilities.
Options granted to executive officers in 1996 can be found on page 10 under
the Option Grants Table.
-13-
Chief Executive Officer Compensation
The Committee establishes Mr. Kohlhepp's base salary based primarily on a
subjective evaluation of the Company's prior year's financial results, past
salary levels and compensation paid to other chief executive officers in the
Company's industry. Based on the Committee's comparison of the Company's
overall compensation level for Mr. Kohlhepp as a percent of revenues and net
income to comparable companies in the industry, the Committee believes his
overall compensation level is in the middle of the range. The Committee also
establishes at the beginning of each year a performance incentive bonus
arrangement for Mr. Kohlhepp. Based on the Company's belief that shareholder
value is best enhanced by increases in earnings per share, the Committee based
this arrangement on target levels of increases in earning per share. The
program provided for no bonus if earnings per share did not exceed a minimum
threshold of a 10% increase over the prior year's earnings per share which was
$1.34. The bonus potential ranged from 7% of base salary if earnings per share
increased by fourteen cents over the prior year up to a maximum of 80% if
earnings per share increased by thirty-four cents over the prior year.
John S. Lillard - Chairman
Gerald V. Dirvin
Roger L. Howe
-14-
Common Stock Performance Graph
The following graph summarizes cumulative return on $100 invested in
the Company's Common Stock, the S & P 500 Stock Index and the common stocks of
a representative group of companies in the uniform related industry (the "Peer
Index"). The companies included in the Peer Index are Angelica Corporation, G
& K Services, Inc., National Service Industries, Inc., Unifirst Corporation
and Unitog Company. Total shareholder return was based on the increase in the
price of the stock and assumed reinvestment of all dividends. Further, total
return was weighted according to market capitalization of each company. The
companies included in the Peer Index are not the same as those considered by
the Compensation Committee.
Cintas Corporation
5 Year Cumulative Total
Shareholder Return
Measurement Period
(Quarter End) Cintas Corp. S&P 500 Index Peer Group
Measurement Point: May, 91 $100 $100 $100
August, 91 109 102 95
November, 91 93 98 89
February, 92 127 108 107
May, 92 120 110 97
August, 92 106 110 98
November, 92 118 116 101
February, 93 117 120 111
May, 93 117 123 111
August, 93 124 127 112
November, 93 122 128 112
February, 94 135 130 124
May, 94 133 128 119
August, 94 136 134 123
November, 94 147 129 117
February, 95 162 139 122
May, 95 148 154 132
August, 95 162 163 140
November, 95 197 177 154
February, 96 208 188 168
May, 96 231 197 191
OTHER MATTERS
Cintas knows of no other matters to be presented at the meeting other than
those specified in the Notice.
By order of the Board of Directors.
David T. Jeanmougin
Secretary