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, 1993
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 8, 1994
Common Stock, no par value 46,706,146
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CINTAS CORPORATION
INDEX
Page No.
Part I. Financial Information:
Consolidated Condensed Balance Sheet -
November 30, 1993 and May 31, 1993 3
Consolidated Condensed Statement of Income -
Three Months and Six Months Ended November 30, 1993 and
1992 4
Consolidated Condensed Statement of Cash Flows -
Six Months Ended November 30, 1993 and 1992 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
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<CAPTION>
CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(Dollars in Thousands)
November 30, May 31,
1993 1993
<S> (Unaudited)
ASSETS
<C> <C>
Current assets:
Cash and cash equivalents $ 9,266 $ 14,192
Marketable securities, at cost,
which approximates market 51,201 40,777
Accounts receivable (net) 56,294 48,075
Inventories 25,940 21,452
Uniforms and other rental items in service68,332 61,001
Prepaid expenses 2,104 1,636
Total current assets 213,137 187,133
Property, plant and equipment:
Cost 274,742 263,053
Less accumulated depreciation (90,204) (82,206)
184,538 180,847
Investments and other assets 84,771 86,185
$ 482,446 $ 454,165
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 26,586 $ 20,637
Accrued liabilities 18,885 28,638
Income taxes -
Current 7,322 1,616
Deferred 20,952 9,823
Long-term debt due within one year 9,643 4,462
Total current liabilities 83,388 65,176
Long-term debt due after one year 95,956 103,611
Deferred income taxes 13,747 20,464
Shareholders' equity:
Preferred stock, no par value,
100,000 shares authorized, none outstanding ------ ----
- -
Common stock, no par value,
120,000,000 shares authorized,
46,692,022 shares issued and outstanding
(46,578,791 at May 31, 1993) 40,458 39,869
Retained earnings 249,845 225,722
Cumulative translation adjustment (948) (677)
Total shareholders' equity 289,355 264,914
$ 482,446 $ 454,165
<FN>
See accompanying notes
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<CAPTION>
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Unaudited)
(Amounts in Thousands Except Per Share Amounts)
Three months ended Six Months ended
November 30 November 30
1993 1992 1993 1992
<S>
Revenues: <C> <C> <C> <C>
Net rentals $ 114,280 $ 97,329 $ 226,196 $ 192,835
Net sales 15,503 13,651 25,811 22,807
129,783 110,980 252,007 215,642
Costs and expenses (income):
Cost of rentals 63,877 53,807 126,605 107,393
Cost of sales 12,827 11,929 22,106 20,254
Selling and administrative expenses29,866 25,057 60,283 51,254
Interest income (447) (341) (753) (575)
Interest expense 1,754 1,777 3,567 3,154
107,877 92,229 211,808 181,480
Income before income taxes 21,906 18,751 40,199 34,162
Income taxes 8,326 7,104 16,076 12,950
Net income $ 13,580 $ 11,647 $ 24,123 $ 21,212
Earnings per share $ .29 $ .25 $ .52 $ .46
Weighted average number of
shares outstanding 46,680 46,316 46,658 46,266
<FN>
See accompanying notes.
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<CAPTION>
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED NOVEMBER 30, 1993 and 1992
(Unaudited)
(Dollars in thousands)
Six Months Ended
November 30
Cash flows from operating activities: 1993 1992
<S> <C> <C>
Net income $ 24,123 $ 21,212
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 11,965 10,565
Amortization of deferred charges 5,348 3,898
Provision for losses on accounts receivable 587 774
Change in current assets and liabilities:
Accounts receivable (8,224) (5,170)
Inventories (11,132) 263
Prepaid expenses (468) 34
Accounts payable 5,949 6,018
Accrued liabilities (9,753) (2,050)
Income taxes payable 5,706 609
Deferred income taxes 4,412 3,355
Net cash provided by operating activities 28,513 39,508
Cash flows from investing activities:
Capital expenditures (15,595) (13,238)
Additions to investments and other assets 540 (3,665)
Proceeds from sale or redemption of marketable securities 14,965
11,388
Purchase of marketable securities (25,389) (41,147)
Acquisition of businesses net of cash acquired (6,075) (4,250)
Net cash used by investing activities (31,554) (50,912)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 63 15,665
Repayment of long-term debt (2,537) (4,735)
Increase in common stock 227 91
Tax benefit resulting from exercise of employee stock options 362
248
Net cash (used by) provided from financing activities (1,885)
11,269
Net decrease in cash and cash equivalents (4,926) (135)
Cash and cash equivalents at beginning of period 14,192 8,757
Cash and cash equivalents at end of period $ 9,266 $ 8,622
<FN>
See accompanying notes.
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CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated condensed financial statements 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.
2. In the opinion of the Company, the accompanying consolidated
condensed financial statements contain all adjustments necessary
to present fairly the financial position as of November 30, 1993
and May 31, 1993, the results of operations for the three months
and six months ended November 30, 1993 and 1992, and cash flows for
the six months ended November 30, 1993 and 1992.
3. The results of operations for the six months ended November 30,
1993 are not necessarily indicative of the results to be expected
for the full year.
4. The Company's net income and earnings per share for the six months
ended November 30, 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 reported tax
expense includes one-time charges of approximately $274,000 to
retroactively apply the new tax rates to January 1, 1993. This
one-time charge was partially offset by jobs tax credits of
$201,000 which the new tax law extended retroactive to June 30,
1992. In addition, during the first quarter of 1994, the Company
adopted SFAS No. 109, Accounting for Income Taxes, which
necessitated the reclassification of certain deferred tax balances
and resulted in a charge to earnings of approximately $789,000.
The effect of these one-time tax adjustments reduced earnings per
share by $.02 per share.
5. Stock Options:
In fiscal year 1993, the Company adopted a new incentive stock option
plan for officers and key employees which provides for the issuance
of 2,300,000 shares of common stock. This plan replaces a similar
plan adopted in 1983 which expired in June, 1993. Options may be
granted at 100% to 110% of the 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, 1993, options as to 1,317,476 shares were outstanding and
exercisable at prices ranging from $2.67 - $28.75 per share. On July
13, 1993, additional options as to 206,250 shares exercisable at
$26.50 per share were granted under the plan. During the first
quarter of fiscal 1994, options as to 101,681 shares were exercised
ranging in price from $2.67 to $11.17 per share. During the second
quarter of fiscal 1994, options as to 22,919 shares were exercised
ranging in price from $3.46 to $11.17.
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.
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6. Inventories:
Inventories are valued at the lower of cost (first-in, first-out) or
market. Substantially all inventories represent finished goods.
8. Supplemental Cash Flow Disclosures:
Supplemental disclosure with respect to cash flow information and non-
cash investing and financing activities is as follows:
Cash paid through the six months ended November 30, 1993 and 1992.
1993 1992
Interest, net of amounts capitalized$3,542,000$2,682,000
Income Taxes $6,079,000 $9,222,000
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Total revenues increased 17% for the three months and six months ended
November 30, 1993 over the same periods in the prior fiscal year. Net
rental revenue also increased 17% in the three months and six months
ended November 30, 1993, over the same periods in the prior fiscal year.
Growth in the customer base and price increases in established
operations accounted for a 9% increase in rental revenues and the
remaining 8% was due primarily to acquisitions. Second quarter revenues
from the sale of uniforms and other direct sale items increased 14% over
the prior year's second quarter. For the six months ended November 30,
1993, sales increased 13% over the same period in fiscal 1993. The
increases 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.
Pre-tax income increased 17% and 18% for the three months and six months
ended November 30, 1993, respectively, over the same periods in fiscal
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 reported tax
expense for the six months ended November 30, 1993 includes one-time
charges of approximately $274,000 to retroactively apply the new tax
rates to January 1, 1993. This one-time charge was partially offset by
jobs tax credits of $201,000 which the new tax law extended retroactive
to June 30, 1992. In addition, during the first quarter of 1994, the
Company adopted SFAS No. 109, Accounting for Income Taxes, which
necessitated the reclassification of certain deferred tax balances and
resulted in a charge to earnings of approximately $789,000. The effects
of these one-time tax adjustments reduced earnings per share in fiscal
1994 by $.02 per share.
Income from operations, which excludes interest income and interest
expense, as a percent of revenues was 18% for both the second quarter of
fiscal 1994 and 1993. Year-to-date, this percentage is 17% for both the
six months ended November 30, 1993 and 1992.
Net interest expense (interest expense less interest income) was
$1,307,000 and $2,814,000 for the second quarter and six months ended
November 30, 1993, respectively, compared to $1,436,000 and $2,579,000,
respectively, for the same two periods in the prior fiscal year. Net
interest expense for the second quarter has decreased primarily due to
an increase in interest income. Net interest expense has increased for
the six months ended November 30, 1993 over the same period in the prior
fiscal year primarily due to debt associated with the acquisition of
Maryatt Industries in December, 1992.
On November 1, 1993, the Company acquired the Career Apparel Division of
Palm Beach Co., Inc. (Palm Beach). Palm Beach was a wholly-owned
subsidiary of Plaid Clothing Group headquartered in New York. The
acquisition of Palm Beach did not have a significant effect on the
second quarter sale of uniforms.
Financial Condition
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 4. Submission of matters to a vote of security holders.
The Annual Shareholders' Meeting of the Company was held on
October 21, 1993 at which the number of Directors to be
elected was established and the Directors of the Company were
elected. The number of Directors to be elected was
established at seven and all persons nominated as Directors
were elected.
Issue No. 1
Authority to establish the number of Directors to be elected at the
meeting at seven (7).
FOR 38,382,204 AGAINST 142,377 ABSTAIN 22,035
BROKER NON-VOTES 0
Issue No. 2
Authority to elect seven (7) nominees listed below.
Name<PAGE>
Shares For Shares -
Withheld
Authority<PAGE>
Shares
Abstaine
d<PAGE>
Broker
Non-Votes<PAGE>
Richard T.
Farmer<PAGE>
38,347,258 199,358 0 0 Gerald V.
Dirvin<PAGE>
38,481,758 64,858 0 0 James J.
Gardner<PAGE>
38,346,838 199,778 0 0 Roger L. Howe 38,484,828 61,788 0 0 Donald P.
Klekamp<PAGE>
38,347,398 199,218 0 0 Robert J.
Kohlhepp<PAGE>
38,346,468 200,148 0 0 John S.
Lillard<PAGE>
38,484,358 62,258 0 0
No reports were filed on Form 8-K during the quarter.
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CINTAS CORPORATION
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 8, 1994 David T. Jeanmougin
David T. Jeanmougin
Senior Vice President - Finance
(Chief Financial Officer)
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