Cintas is an American company specialized in the manufacture and sale of workwear and uniforms
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, 1997 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 September 30, 1997 - --------------------------------------- ------------------------------ Common Stock, no par value 48,734,050
CINTAS CORPORATION INDEX Page No. Part I. Financial Information: Consolidated Condensed Balance Sheets - August 31, 1997 and May 31, 1997 3 Consolidated Condensed Statements of Income - Three Months Ended August 31, 1997 and 1996 4 Consolidated Condensed Statements of Cash Flows - Three Months Ended August 31, 1997 and 1996 5 Notes to Consolidated Condensed Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II. Other Information 8 Signatures 8 - 2 -
CINTAS CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands except share data) August 31, May 31, 1997 1997 ----------- --------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 12,385 $ 14,221 Marketable securities 92,234 88,655 Accounts receivable (net) 100,896 95,161 Inventories 45,622 43,076 Uniforms and other rental items in service 115,131 112,844 Prepaid expenses 1,947 2,018 --------- --------- Total current assets 368,215 355,975 Property, plant and equipment, at cost, net 297,776 287,446 Other assets 118,566 118,402 --------- --------- $ 784,557 $ 761,823 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 22,589 $ 20,719 Accrued liabilities 40,769 55,336 Income taxes - Current 9,761 454 Deferred 35,927 32,889 Long-term debt due within one year 6,688 6,733 --------- --------- Total current liabilities 115,734 116,131 Long-term debt due after one year 109,741 111,457 Deferred income taxes 22,995 21,859 Shareholders' equity: Preferred stock, no par value, 100,000 shares authorized, none outstanding -- -- Common stock, no par value, 120,000,000 shares authorized, 48,594,597 shares issued and outstanding (48,266,789 at May 31, 1997) 45,269 45,039 Retained earnings 492,198 468,411 Foreign currency translation adjustment (1,380) (1,074) --------- --------- Total shareholders' equity 536,087 512,376 --------- --------- $ 784,557 $ 761,823 ========= ========= See accompanying notes. - 3 -
CINTAS CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) (In thousands except per share data) Three Months Ended August 31, -------------------------- 1997 1996 ----------- ----------- Revenues: Net rentals $ 202,999 $ 174,499 Other service revenue 32,502 18,287 --------- --------- 235,501 192,786 Costs and expenses (income): Cost of rentals 112,671 98,464 Cost of other service revenue 25,890 16,083 Selling and administrative expenses 57,525 45,221 Interest income (1,108) (854) Interest expense 1,820 1,989 --------- --------- 196,798 160,903 --------- --------- Income before income taxes 38,703 31,883 Income taxes 14,645 12,186 --------- --------- Net income $ 24,058 $ 19,697 ========= ========= Earnings per share $ .50 $ .42 ========= ========= Weighted average number of shares outstanding 48,406 47,266 ========= ========= See accompanying notes. - 4 -
CINTAS CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended August 31, --------------------- Cash flows from operating activities: 1997 1996 - ------------------------------------ -------- --------- Net income $ 24,058 $ 19,697 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 9,966 8,258 Amortization of deferred charges 3,012 2,993 Deferred income taxes 4,174 4,331 Change in current assets and liabilities, net of acquisitions of businesses: Accounts receivable (4,592) (1,134) Inventories (1,820) (2,823) Uniforms and other rental items in service (2,287) (1,701) Prepaid expenses 212 231 Accounts payable 566 2,492 Accrued liabilities (14,628) (12,900) Income taxes payable 9,307 6,490 -------- -------- Net cash provided by operating activities 27,968 25,934 Cash flows from investing activities: - ------------------------------------ Proceeds from sale of property, plant and equipment 40 120 Capital expenditures (20,125) (14,367) Proceeds from sale or redemption of marketable securities 18,922 6,182 Purchase of marketable securities (22,502) (14,501) Acquisitions of businesses, net of cash acquired (4,558) (360) Other 450 (277) -------- -------- Net cash used in investing activities (27,773) (23,203) Cash flows from financing activities: - ------------------------------------ Repayment of long-term debt (1,955) (450) Issuance of common stock 230 247 Other (306) (18) -------- -------- Net cash used in financing activities (2,031) (221) -------- -------- Net increase (decrease) in cash and cash equivalents (1,836) 2,510 Cash and cash equivalents at beginning of period 14,221 9,066 -------- -------- Cash and cash equivalents at end of period $ 12,385 $ 11,576 ======== ======== 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, 1997. 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, adjustments (which include only normal recurring adjustments) necessary for a fair statement of the results of the interim periods shown have been made. - 6 -
CINTAS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Total revenues increased 22% in the first quarter of fiscal 1998 over the same period in fiscal 1997. Net rental revenue increased 16% for the three months ended August 31, 1997 over the same period in the prior fiscal year, due primarily to growth in the customer base. In past filings, the Company has reported revenue between rental revenues and sales revenues. Sales revenues was the terminology to distinguish revenues which were nonrental in nature. The nature of the activity previously classified as sales includes a significant service element for the customer, and thus this category of revenues is now called "Other Service Revenue." First quarter revenues from other services increased 78% over the prior year's first quarter, principally as a result of the addition of first aid services to the Company's product offerings, and to a one-time inventory transaction which increased total revenue growth by 2%. Net income and earnings per share increased 22% and 19%, respectively, for the three months ended August 31, 1997, over the same period in fiscal 1997. Net interest expense (interest expense less interest income) was $712,000 for the first quarter of fiscal 1998 compared to $1,135,000 in the first quarter of fiscal 1997. Net interest expense has decreased primarily due to an increase in interest income (related to a higher level of cash and marketable securities on hand) combined with a decrease in interest expense (related to a lower amount of long-term debt and improved interest rates). The Company's effective tax rate was 38% in both periods. Cash, cash equivalents and marketable securities increased by $2 million at August 31, 1997 from May 31, 1997. The cash, cash equivalents and marketable securities will be used to finance future acquisitions and capital expenditures. Net property, plant and equipment increased by $10 million from May 31, 1997 to August 31, 1997. At the end of the first quarter of fiscal 1998, the Company had six uniform rental facilities in various stages of construction. Financial Condition At August 31, 1997, the Company had $105 million in cash, cash equivalents and marketable securities. 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. - 7 -
CINTAS CORPORATION Part II. Other Information Item 2. Changes in Securities (c.) During the quarterly period ended August 31, 1997, the registrant issued 304,164 shares of Common Stock for companies being acquired in five separate transactions. The number of owners in each transaction was as follows: transaction #1 - one owner, transaction #2 - one owner, transaction #3 - one owner, transaction #4 - three owners and transaction #5 - one owner. These issuances were exempt from the registration requirements of the Securities Act of 1933 as private offerings pursuant to Section 4.2 of that Act. 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 8, 1997 /s/ William C. Gale ---------------------------------- William C. Gale Vice President and Chief Financial Officer (Chief Accounting Officer) - 8 -