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Cintas Corporation (CTAS) today reported results for its
first quarter ended August 31, 2012. Revenue for the first quarter was
$1.05 billion, representing a 3.4% increase compared to last year’s
first quarter. Organic growth, which adjusts for the impact of
acquisitions, compared to last year’s first quarter, was 3.2%. Recycled
paper prices remained lower than last year, and this negatively impacted
first quarter consolidated revenue by $8.3 million, or 0.8%, compared to
last year’s first quarter.
The Company’s operating income of $139.3 million was an 8.3% increase as
compared to last year’s first quarter. Net income increased 11.8% to
$76.7 million as compared to $68.6 million in last year’s first quarter.
Earnings per diluted share (EPS) for the first quarter were $0.60, a
15.4% increase over the $0.52 earnings per diluted share in last year’s
first quarter.
Scott D. Farmer, Chief Executive Officer, stated, "In my July earnings
release comments, I spoke of a U.S. economy without momentum. During our
first quarter, we saw nothing that would change that assessment.
However, despite this continued absence of momentum and another quarter
of difficult year-over-year recycled paper price comparisons, we are
pleased to report solid revenue growth and a double-digit increase in
earnings per share."
Mr. Farmer added, "We continue to be pleased with our operating margin
performance, particularly in our Rental operating segment. The Rental
segment’s operating margin improved to 15.5% of revenue, compared to
last year’s first quarter operating margin of 13.8%. Our total operating
margin improved to 13.2% from last year’s first quarter operating margin
of 12.6% despite the recycled paper price impact. We will continue our
focus on selling profitable business, managing our cost structure and
improving efficiencies through process improvement."
During the first quarter of fiscal 2013, Cintas purchased 1.8 million
shares of its common stock at an aggregate cost of $70.6 million. While
it had no impact on the first quarter EPS, this buyback is expected to
benefit fiscal year 2013 EPS by approximately $0.03. The Cintas Board of
Directors authorized a $500.0 million share buyback program in October
2011. As of August 31, 2012, the Company had $299.8 million available
under the current Board authorization.
Mr. Farmer concluded, "Based on our first quarter results, we reiterate
our fiscal 2013 revenue expectations to be in the range of $4.25 billion
to $4.35 billion. We are updating our full year EPS guidance to
incorporate the impact of the first quarter share buyback. As a result,
we now expect EPS to be in the range of $2.50 to $2.58. This guidance
assumes no further deterioration in the U.S. economy and some
improvement in recycled paper prices from our first quarter level. It
does not consider any additional share buybacks."
About Cintas
Headquartered in Cincinnati, Cintas Corporation provides highly
specialized services to businesses of all types primarily throughout
North America. Cintas designs, manufactures and implements corporate
identity uniform programs, and provides entrance mats, restroom
supplies, promotional products, first aid, safety, fire protection
products and services and document management services for over 900,000
businesses. Cintas is a publicly held company traded over the Nasdaq
Global Select Market under the symbol CTAS and is a component of the
Standard & Poor’s 500 Index.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor from civil litigation for forward-looking statements. Forward-looking
statements may be identified by words such as "estimates,"
"anticipates," "predicts," "projects," "plans," "expects," "intends,"
"target," "forecast," "believes," "seeks," "could," "should," "may" and
"will" or the negative versions thereof and similar words, terms and
expressions and by the context in which they are used. Such
statements are based upon current expectations of Cintas and speak only
as of the date made. You should not place undue reliance on any
forward-looking statement. We cannot guarantee that any
forward-looking statement will be realized. These statements are
subject to various risks, uncertainties, potentially inaccurate
assumptions and other factors that could cause actual results to differ
from those set forth in or implied by this Press Release. Factors
that might cause such a difference include, but are not limited to, the
possibility of greater than anticipated operating costs including energy
and fuel costs, lower sales volumes, loss of customers due to
outsourcing trends, the performance and costs of integration of
acquisitions, fluctuations in costs of materials and labor including
increased medical costs, costs and possible effects of union organizing
activities, failure to comply with government regulations concerning
employment discrimination, employee pay and benefits and employee health
and safety, uncertainties regarding any existing or newly-discovered
expenses and liabilities related to environmental compliance and
remediation, the cost, results and ongoing assessment of internal
controls for financial reporting required by the Sarbanes-Oxley Act of
2002, disruptions caused by the inaccessibility of computer systems
data, the initiation or outcome of litigation, investigations or other
proceedings, higher assumed sourcing or distribution costs of products,
the disruption of operations from catastrophic or extraordinary events,
the amount and timing of repurchases of our common stock, if any,
changes in federal and state tax and labor laws, the reactions of
competitors in terms of price and service and the finalization of our
financial statements for the quarter ended August 31, 2012. Cintas
undertakes no obligation to publicly release any revisions to any
forward-looking statements or to otherwise update any forward-looking
statements whether as a result of new information or to reflect events,
circumstances or any other unanticipated developments arising after the
date on which such statements are made. A further list and
description of risks, uncertainties and other matters can be found in
our Annual Report on Form 10-K for the year ended May 31, 2012 and in
our reports on Forms 10-Q and 8-K. The risks and uncertainties
described herein are not the only ones we may face. Additional risks and
uncertainties presently not known to us or that we currently believe to
be immaterial may also harm our business.
Cintas Corporation
Consolidated Condensed Statements of Income
(Unaudited)
(In thousands except per share data)
Three Months Ended
------------------------------------------------
August 31, August 31, % Chng.
2012 2011
----------------- --------------- -------
Revenue:
Rental uniforms and ancillary products $ 754,843 $ 719,423 4.9
Other services 296,482 297,757 -0.4
--------- ---------
Total revenue $ 1,051,325 $ 1,017,180 3.4
Costs and expenses:
Cost of rental uniforms and ancillary products $ 428,148 $ 403,406 6.1
Cost of other services 177,302 174,734 1.5
Selling and administrative expenses 306,581 310,466 -1.3
--------- ---------
Operating income $ 139,294 $ 128,574 8.3
Interest income $ (77 ) $ (365 ) -78.9
Interest expense 16,598 17,334 -4.2
--------- ---------
Income before income taxes $ 122,773 $ 111,605 10.0
Income taxes 46,040 42,967 7.2
--------- ---------
Net income $ 76,733 $ 68,638 11.8
======= ========= === =========
Per share data:
Basic earnings per share $ 0.61 $ 0.52 17.3
======= ========= === =========
Diluted earnings per share $ 0.60 $ 0.52 15.4
======= ========= === =========
Weighted average number of shares outstanding 126,110 131,309
Diluted average number of shares outstanding 126,458 131,338
CINTAS CORPORATION SUPPLEMENTAL DATA
Three Months Ended
---------------------------------------
August 31, August 31,
2012 2011
----------------- ---------------
Rental uniforms and ancillary products gross margin 43.3 % 43.9 %
Other services gross margin 40.2 % 41.3 %
Total gross margin 42.4 % 43.2 %
Net margin 7.3 % 6.7 %
Depreciation and amortization $ 46,442 $ 48,510
Capital expenditures $ 47,438 $ 44,421
Computation of Free Cash Flow
Three Months Ended
---------------------------------------
August 31, August 31,
2012 2011
----------------- ---------------
Net cash provided by operations $ 94,865 $ 56,562
Capital expenditures (47,438 ) (44,421 )
--------- - --------- ---
Free cash flow $ 47,427 $ 12,141
======= ========= === =========
Note: Management uses free cash flow to assess the financial performance
of the Company. Management believes that free cash flow is useful to
investors because it relates the operating cash flow of the Company to
the capital that is spent to continue to improve and grow business
operations.
SUPPLEMENTAL SEGMENT DATA Rental Uniform First Aid, Document Corporate Total
Uniforms and Direct Sales Safety and Management
Ancillary Fire
Products Protection
--------------- ------------- ------------ ------------ ------------- -----------
For the three months ended August 31, 2012
Revenue $ 754,843 $ 100,279 $ 110,841 $ 85,362 $ - $ 1,051,325
Gross margin $ 326,695 $ 29,478 $ 47,791 $ 41,911 $ - $ 445,875
Selling and administrative expenses $ 209,788 $ 20,737 $ 38,770 $ 37,286 $ - $ 306,581
Interest income $ - $ - $ - $ - $ (77 ) $ (77 )
Interest expense $ - $ - $ - $ - $ 16,598 $ 16,598
Income (loss) before income taxes $ 116,907 $ 8,741 $ 9,021 $ 4,625 $ (16,521 ) $ 122,773
Assets $ 2,774,417 $ 125,094 $ 359,387 $ 563,172 $ 330,165 $ 4,152,235
For the three months ended August 31, 2011
Revenue $ 719,423 $ 101,702 $ 103,743 $ 92,312 $ - $ 1,017,180
Gross margin $ 316,017 $ 29,108 $ 44,787 $ 49,128 $ - $ 439,040
Selling and administrative expenses $ 216,599 $ 20,701 $ 36,404 $ 36,762 $ - $ 310,466
Interest income $ - $ - $ - $ - $ (365 ) $ (365 )
Interest expense $ - $ - $ - $ - $ 17,334 $ 17,334
Income (loss) before income taxes $ 99,418 $ 8,407 $ 8,383 $ 12,366 $ (16,969 ) $ 111,605
Assets $ 2,761,317 $ 150,228 $ 363,692 $ 575,615 $ 277,040 $ 4,127,892
Cintas Corporation
Consolidated Balance Sheets
(In thousands except share data)
ASSETS August 31, May 31,
2012 2012
-------------------------------------------------------------------------------------------- ---------------- --------------
(Unaudited)
Current assets:
Cash & cash equivalents $ 319,217 $ 339,825
Marketable securities 10,948 -
Accounts receivable, net 459,302 450,861
Inventories, net 241,699 251,205
Uniforms and other rental items in service 462,541 452,785
Income taxes, current - 22,188
Prepaid expenses and other 30,170 24,704
---------- ----------
Total current assets 1,523,877 1,541,568
Property and equipment, at cost, net 953,761 944,305
Goodwill 1,489,104 1,485,375
Service contracts, net 72,297 76,822
Other assets, net 113,196 112,836
---------- ----------
$ 4,152,235 $ 4,160,906
=== ========== == ==========
LIABILITIES AND SHAREHOLDERS’ EQUITY
--------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 110,906 $ 94,840
Accrued compensation and related liabilities 40,531 91,214
Accrued liabilities 213,440 256,642
Income taxes, current 7,930 -
Deferred tax liability 10,668 2,559
Long-term debt due within one year 636 225,636
---------- ----------
Total current liabilities 384,111 670,891
Long-term liabilities:
Long-term debt due after one year 1,309,012 1,059,166
Deferred income taxes 206,856 204,581
Accrued liabilities 97,841 87,133
---------- ----------
Total long-term liabilities 1,613,709 1,350,880
Shareholders’ equity:
Preferred stock, no par value: - -
100,000 shares authorized, none outstanding
Common stock, no par value: 171,091 148,255
425,000,000 shares authorized
FY13: 174,357,822 issued and 125,117,508 outstanding
FY12: 173,745,913 issued and 126,519,758 outstanding
Paid-in capital 93,331 107,019
Retained earnings 3,558,806 3,482,073
Treasury stock: (1,712,828 ) (1,634,875 )
FY13: 49,240,314 shares
FY12: 47,226,155 shares
Other accumulated comprehensive income (loss):
Foreign currency translation 59,416 52,399
Unrealized loss on derivatives (15,767 ) (16,104 )
Other 366 368
---------- ----------
Total shareholders’ equity 2,154,415 2,139,135
$ 4,152,235 $ 4,160,906
=== ========== == ==========
Cintas Corporation
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
Three Months Ended
-------------------------------------
Cash flows from operating activities: August 31, August 31,
2012 2011
----------------------------------------------------------------------------- -------------- --------------
Net income $ 76,733 $ 68,638
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 40,342 38,277
Amortization of deferred charges 6,100 10,233
Stock-based compensation 5,448 4,522
Deferred income taxes 9,716 (7,808 )
Change in current assets and liabilities, net of
acquisitions of businesses:
Accounts receivable, net (7,128 ) (10,142 )
Inventories, net 9,889 (30,770 )
Uniforms and other rental items in service (8,672 ) (11,124 )
Prepaid expenses and other (5,392 ) (5,983 )
Accounts payable 16,278 (9,329 )
Accrued compensation and related liabilities (50,793 ) (27,611 )
Accrued liabilities (27,400 ) (10,201 )
Income taxes payable 29,744 47,860
-------- --------
Net cash provided by operating activities 94,865 56,562
Cash flows from investing activities:
-----------------------------------------------------------------------------
Capital expenditures (47,438 ) (44,421 )
Proceeds from redemption of marketable securities 24,720 63,561
Purchase of marketable securities and investments (36,970 ) (107,145 )
Acquisitions of businesses, net of cash acquired (2,130 ) (870 )
Other 577 6,539
-------- --------
Net cash used in investing activities (61,241 ) (82,336 )
Cash flows from financing activities:
-----------------------------------------------------------------------------
Proceeds from issuance of debt 250,000 -
Repayment of debt (225,154 ) (444 )
Exercise of stock-based compensation awards 1,119 -
Repurchase of common stock (77,953 ) (262,639 )
Other (3,491 ) 926
-------- --- --------
Net cash used in financing activities (55,479 ) (262,157 )
Effect of exchange rate changes on cash and cash equivalents 1,247 137
Net decrease in cash and cash equivalents (20,608 ) (287,794 )
Cash and cash equivalents at beginning of period 339,825 438,106
-------- --------
Cash and cash equivalents at end of period $ 319,217 $ 150,312
=== ======== === ========
SOURCE: Cintas Corporation
Cintas Corporation
William C. Gale, Sr. Vice President-Finance and Chief Financial Officer, 513-573-4211
J. Michael Hansen, Vice President and Treasurer, 513-701-2079
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