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, 1994
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 7, 1994
Common Stock, no par value 46,724,055
(Page 1 of 10)
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CINTAS CORPORATION
INDEX
Page No.
Part I. Financial Information:
Consolidated Condensed Balance Sheet -
August 31, 1994 and May 31, 1994 3
Consolidated Condensed Statement of Income -
Three Months Ended August 31, 1994 and 1993 4
Consolidated Condensed Statement of Cash Flows -
Three Months Ended August 31, 1994 and 1993 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information 10
Signatures 10
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<TABLE>
<CAPTION>
CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(Dollars in Thousands)
August 31, May 31,
1994 1994
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,798 $ 8,449
Marketable securities 48,260 52,333
Accounts receivable (net) 58,033 56,347
Inventories 33,937 29,059
Uniforms and other rental items in
service 75,948 74,132
Prepaid expenses 734 1,133
Total current assets 225,710 221,453
Property, plant and equipment:
Cost 297,276 288,402
Less accumulated depreciation (99,464) (95,899)
197,812 192,503
Investments and other assets 85,343 87,676
$ 508,865 $501,632
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,621 $ 18,795
Accrued liabilities 29,195 33,488
Income taxes -
Current 7,845 2,300
Deferred 22,068 21,159
Long-term debt due within one year 9,171 15,742
Total current liabilities 88,900 91,484
Long-term debt due after one year 83,533 84,184
Deferred income taxes 17,399 16,312
Shareholders' equity:
Preferred stock, no par value,
100,000 shares authorized, none
outstanding ----- -----
Common stock, no par value,
120,000,000 shares authorized,
46,713,283 shares issued and
outstanding 41,213 40,939
(46,801,173 at May 31, 1994)
Treasury stock (4,757) -----
Retained earnings 283,700 269,939
Cumulative translation adjustment (1,123) (1,226)
Total shareholders' equity 319,033 309,652
$508,865 $501,632
</TABLE>
See accompanying notes.
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<TABLE>
<CAPTION>
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
Three months ended
August 31,
1994 1993
<S> <C> <C>
Revenues:
Net rentals $127,294 $111,916
Net sales 14,743 10,308
142,037 122,224
Costs and expenses (income):
Cost of rentals 72,190 62,728
Cost of sales 12,366 9,279
Selling and administrative expenses34,265 30,417
Interest income (498) (306)
Interest expense 1,521 1,813
119,844 103,931
Income before income taxes 22,193 18,293
Income taxes 8,433 7,750
Net income $ 13,760 $ 10,543
Earnings per share $ .29 $ .23
Weighted average number of shares
outstanding 46,805,209 46,636,715
</TABLE>
See accompanying notes.
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<TABLE>
<CAPTION>
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED AUGUST 31, 1994 and 1993
(Unaudited)
(Dollars in thousands)
Three Months Ended
August 31,
Cash flows from operating activities: 1994 1993
<S> <C> <C>
Net income $13,760 $10,543
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 6,381 5,926
Amortization of deferred charges 2,726 2,651
Provision for losses on accounts
receivable 429 272
Change in current assets and liabilities:
Accounts receivable (2,115) (3,122)
Inventories (6,694) (5,950)
Prepaid expenses 399 (130)
Accounts payable 1,826 3,580
Accrued liabilities (4,293) (12,358)
Income taxes payable 5,545 2,610
Deferred income taxes 1,996 4,542
Net cash provided by operating activities19,960 8,564
Cash flows from investing activities:
Capital expenditures (11,690) (7,499)
Change in investments and other assets (249) 779
Proceeds from sale or redemption of
marketable securities 7,916 5,136
Purchase of marketable securities (3,843) (13,767)
Acquisition of businesses net of cash
acquired (40) (1,056)
Net cash used by investing activities(7,906) (16,407)
Cash flows from financing activities:
Repayment of long-term debt (7,222) (706)
Issuance of common stock 225 245
Tax benefit resulting from exercise of
employee stock options 11 126
Purchase of treasury stock (4,719) ---
Net cash used in financing activities(11,705) (335)
Net (decrease) increase in cash and
cash equivalents 349 (8,178)
Cash and cash equivalents at beginning
of period 8,449 14,192
Cash and cash equivalents at end
of period $ 8,798 $ 6,014
</TABLE>
See accompanying notes.
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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,
1994.
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,
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.
3. The Company's net income and earnings per share for
the three months ended August 31, 1993 were adversely
impacted by one-time tax adjustments relating to the
Omnibus Budget Reconciliation Act of 1993, a new tax
law enacted on August 10, 1993. The new tax law
resulted in increases to corporate marginal tax rates,
retroactive to January 1, 1993. In the quarter ended
August 31, 1993, in accordance with the requirements of
SFAS No. 109, the Company recorded a charge to earnings
of $1,064,000 and adjusted current and deferred tax
liabilities to reflect the change in tax rates. The
Act also reinstated jobs tax credits retroactive to
July 1992. This reinstatement amounted to $201,000,
which partially offset the one-time tax rate
adjustment. The effects of these one-time tax
adjustments reduced earnings per share in the quarter
ended August 31, 1993, by $.02 per share.
4. The Company adopted SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, in
the first quarter of fiscal 1995. While the adoption of
SFAS No. 115 did not require restatement of prior year
results or have any financial impact for the quarter
ended August 31, 1994, certain disclosure requirements
are necessary.
Management determines the appropriate classification of
debt securities at the time of purchase and
re-evaluates such designation as of each balance sheet
date. All the Company's marketable equity
securities and debt securities are considered to be
available-for-sale. The unrealized gains and losses
(net of tax) for these securities are reported as a
component of shareholders' equity. At August 31, 1994,
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.
The amortized cost of debt securities in this category
is adjusted for amortization of premiums and accretion
of discounts to maturity. Such amortization is
included in investment income. Realized gains and
losses and declines in value determined to be other-
than-temporary on available-for-sale securities are
included in investment income. The cost of the
securities sold is based on the specific identification
method. Interest and dividends on securities
classified as available-for-sale are included in
investment income.
The following is a summary of available-for-sale
securities:
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<TABLE>
<CAPTION>
Available-for-Sale Maturities
Gross Gross
Unrealized Unrealized
Estimated
(In Thousands) Cost Gains Losses Fair
Value
<S> <C> <C> <C> <C>
August 31, 1994
Obligations of states
and political subdivisions$37,593 $12 $292 $37,313
U.S. Treasury securities
and obligations of U.S.
government agencies 1,535 0 24 1,511
Other debt securities 7,231 0 0 7,231
46,359 12 316 46,055
Equity securities 1,901 0 0 1,960
$48,260 $12 $316 $48,015
</TABLE>
The amortized cost and estimated fair value of debt and
marketable equity securities at August 31, 1994, by
contractual maturity, are shown below. Expected
maturities will differ from contractual maturities
because the issuers of the securities may have the
right to prepay the obligations without prepayment
penalties.
Estimated
(In Thousands) Cost Fair Value
Available-for-sale
Due in one year or less $29,262 $29,216
Due after one year through three years14,161 13,987
Due after three years 4,837 4,812
$48,260 $48,015
5. Stock Options:
Under a stock option plan adopted by the Company in
fiscal 1993, 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, 1994, options as to 1,235,834 shares were
outstanding at prices ranging from $3.46 - $28.75 per
share. Of these options outstanding, 246,551 were
exercisable at May 31, 1994. On July 19, 1994,
additional options as to 214,950 shares exercisable at
$31.815 per share were granted under the plan. During
the first quarter of fiscal 1995, options as to 66,629
shares were exercised ranging in price from $3.46 to
$12.17 per share.
In fiscal year 1991, the Company 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. 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. As of August 31, 1994, options for
24,000 shares are outstanding of which 12,000 shares
are exercisable.
6. On July 20, 1994, the Company announced that
its Board of Directors authorized the repurchase of up
to two million shares of the Company's common stock in
the open market or through privately negotiated
transactions. The repurchased shares will be used to
fund future acquisitions. The stock may be purchased
from time to time as market conditions dictate.
7. Inventories:
Inventories are valued at the lower of cost
(first-in, first-out) or market. Substantially
all inventories represent finished goods.
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8. Supplemental Cash Flow Disclosures:
Cash paid through the three months ended August
31, 1994 and 1993.
1994 1993
Interest, net of amount
capitalized $1,227,000$1,210,000
Income taxes $1,013,000 $734,000
9. Subsequent Events:
On October 13,1994, the Company held its 1994
Annual Shareholders' Meeting at which shareholders
voted to adopt the 1994 Directors' Stock Option Plan.
The 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 for which
options may be granted under this plan is 30,000
shares.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Total revenues increased 16% in the first quarter
of fiscal 1995 over the same period in fiscal 1994.
Net rental revenue increased 14% for the three months
ended August 31, 1994, 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, 1994, accounted for a 12%
increase in rental revenues and the remaining 2% was
due primarily to acquisitions. First quarter revenues
from the sale of uniforms and other direct sale items
increased 43% over the prior year's first quarter
principally as a result of an increase in unit sales
and other direct sale items. The increases in revenues
from the sale of uniforms and other direct sale items
were not significantly affected by acquisitions.
Pre-tax income increased 21% for the three months
ended August 31, 1994, over the same period in fiscal
1994.
In the quarter ended August 31, 1993, net income and
earnings per share were adversely impacted by one-time
tax adjustments relating to the Omnibus Budget
Reconciliation Act of 1993, a new tax law enacted on
August 10, 1993. The new tax law resulted in increases
to corporate marginal tax rates, retroactive to January
1, 1993. In the quarter ended August 31, 1993, in
accordance with the requirements of SFAS No. 109, the
Company recorded a charge to earnings of $1,064,000
and adjusted current and deferred tax liabilities to
reflect the change in tax rates. The Act also
reinstated jobs tax credits retroactive to July
1992. This reinstatement amounted to $201,000, which
partially offset the one-time tax rate adjustment. The
effect of these one-time tax adjustments reduced
earnings per share in the quarter ended August 31,
1993, by $.02 per share.
Income from operations, which excludes interest
income and interest expense, as a percent of revenues
was 16% for both the quarters ended August 31, 1994,
and 1993.
Net interest expense (interest expense less
interest income) was $1,023,000 for the first quarter
of fiscal 1995, compared to $1,507,000 in the first
quarter of fiscal 1994. Net interest expense has
decreased due to an increase in interest income and
lower interest expense as a result of a reduction in
total debt.
Financial Condition
Long-term debt has decreased since May 31, 1994,
primarily due to the repayment of several
industrial revenue bonds for facilities located in
Cleveland, Ohio; Tampa, Florida; and Dallas, Texas.
The Company believes that its capital requirements
for operations, capital improvements, repayment of
long-term debt and dividends can be made from funds on
hand and funds generated from operations.
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CINTAS CORPORATION
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(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 13, 1994 David T. Jeanmougin
David T. Jeanmougin
Senior Vice President-Finance
(Chief Financial Officer)
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