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 February 29, 1996
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 April 1, 1996
Common Stock, no par value 47,182,798
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CINTAS CORPORATION
INDEX
Page No.
Part I. Financial Information:
Consolidated Condensed Balance Sheets -
February 29, 1996 and May 31, 1995 3
Consolidated Condensed Statements of Income -
Three Months and Nine Months Ended
February 29, 1996 and February 28, 1995 4
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended February 29, 1996 and
February 28, 1995 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
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CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except share data)
<TABLE>
<CAPTION>
February 29, May 31,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,555 $ 6,685
Marketable securities 65,988 38,797
Accounts receivable (net) 76,878 69,032
Inventories 36,184 36,883
Uniforms and other rental items in service 95,244 88,670
Prepaid expenses 1,748 1,355
Total current assets 287,597 241,422
Property, plant and equipment:
Cost 362,015 333,390
Less accumulated depreciation (113,785) (105,393)
248,230 227,997
Other assets 121,700 126,762
$ 657,527 $ 596,181
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 17,408 $ 17,265
Accrued liabilities 49,359 42,158
Income taxes -
Current 2,045 2,191
Deferred 24,552 23,368
Long-term debt due within one year 11,485 10,030
Total current liabilities 104,849 95,012
Long-term debt due after one year 114,467 120,275
Deferred income taxes 18,246 16,550
Shareholders' equity:
Preferred stock, no par value,
100,000 shares authorized, none out-
standing ----- -----
Common stock, no par value,
120,000,000 shares authorized,
47,177,168 shares issued and outstanding
(47,005,340 at May 31, 1995) 43,888 42,035
Retained earnings 376,944 323,284
Cumulative translation adjustment (867) (975)
Total shareholders' equity 419,965 364,344
$657,527 $596,181
</TABLE>
See accompanying notes.
PAGE
<PAGE>
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 29, February 28, February 29, February 28,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Net rentals $ 162,485 $ 134,279 $ 476,608 $ 394,067
Net sales 20,492 16,938 59,081 50,778
182,977 151,217 535,689 444,845
Costs and expenses (income):
Cost of rentals 92,971 77,644 270,959 225,444
Cost of sales 16,884 14,214 49,393 43,059
Selling and administrative
expenses 41,319 33,594 122,289 100,652
Interest income (817) (696) (1,685) (1,632)
Interest expense 2,320 1,726 7,123 5,071
152,677 126,482 448,079 372,594
Income before income
taxes 30,300 24,735 87,610 72,251
Income taxes 11,776 9,420 33,951 27,420
Net income $ 18,524 $ 15,315 $ 53,659 $ 44,831
Earnings per share $ .39 $ .33 $ 1.14 $ .96
Weighted average number
of shares outstanding 47,122 46,932 47,069 46,855
</TABLE>
See accompanying notes.
PAGE
<PAGE>
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
February 29, February 28,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $53,659 $44,831
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 21,394 19,529
Amortization of deferred charges 9,350 8,362
Provision for losses on accounts receivable 1,426 735
Change in current assets and liabilities:
Accounts receivable (9,272) (7,498)
Inventories (5,875) (15,488)
Prepaid expenses (393) 69
Accounts payable 143 (368)
Accrued liabilities 7,201 2,283
Income taxes payable (146) 486
Deferred income taxes 2,880 1,019
Net cash provided by operating activities 80,367 53,960
Cash flows from investing activities:
Capital expenditures (41,629) (40,525)
Change in other assets (1,830) (624)
Proceeds from sale or redemption of marke-
table securities 52,113 75,050
Purchase of marketable securities (79,304) (60,006)
Acquisition of businesses net of cash acquired (2,289) (47,177)
Net cash used in investing activities (72,939) (73,282)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 408 41,885
Repayment of long-term debt (4,498) (11,541)
Issuance of common stock 682 674
Tax benefit resulting from exercise of employee stock
options 850 111
Purchase of treasury stock ---- (7,118)
Net cash (used in) provided by financing
activities (2,558) 24,011
Net increase in cash and cash equivalents 4,870 4,689
Cash and cash equivalents at beginning of
period 6,685 8,449
Cash and cash equivalents at end of period $11,555 $13,138
See accompanying notes.
</TABLE>
<PAGE>
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, 1995.
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.
3. Stock Options:
Under a stock option plan adopted by the Company in fiscal
1993 (the"1993 Plan"), 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 February 29, 1996, options as to 1,235,558 shares
granted under the 1993 Plan and a previous plan, were outstanding
at prices ranging from $7.96 - $48.75 per share.
Of these options outstanding, 221,138 were exercisable at
February 29, 1996. During the nine months ended February 29,
1996, options as to 217,841 shares were exercised ranging
in price from $5.92 to $22.50 per share.
In fiscal year 1991, Shareholders 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 (the "1991
Directors' Plan"). 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. In fiscal 1995,
shareholders voted to adopt the 1994 Directors' Stock Option Plan
(the "1994 Directors' Plan"). The 1994 Directors' 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 which may be granted under
this Plan is 30,000 shares. Options under the 1994 Directors'
Plan are granted at 100% of the market value of the underlying
Common Stock on the date of grant and become exercisable at a
rate of 25% per year commencing one year after grant, so
long as the holder remains on the Board of Directors. As of
February 29, 1996, under both Directors' plans, options for
37,000 shares are outstanding, ranging in price from $13.33 to
$43.25, of which 26,000 shares are exercisable.
4. Inventories:
Inventories are valued at the lower of cost (first-in,
first-out) or market. Substantially all inventories represent
finished goods.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total revenues increased 21% and 20% in the three months and nine
months ended February 29, 1996, respectively, over the same
periods in the prior fiscal year. These periods in fiscal 1996
included an extra work day in February due to the leap year. Net
rental revenue increased 21% for both the three months and nine
months ended February 29, 1996. For the nine months ended
February 29, 1996, growth in the customer base and price
increases in established operations accounted for a 16% increase
and the remaining 5% was due primarily to acquisitions. Third
quarter revenues from the sale of uniforms and other direct sale
items increased 21% over the prior year's third quarter. For the
nine months ended February 29, 1996, such sales increased 16%
over the same period in fiscal 1995. The increase 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.
Net income increased 21% and 20% for the three months and nine
months ended February 29, 1996, respectively, over the same
periods in fiscal 1995. The increase in net income for the nine
months ended February 29, 1996, over the same period in the prior
year was primarily the result of increased revenues.
Net interest expense (interest expense less interest income) was
$1,503,000 and $5,438,000 for the three months and nine months
ended February 29, 1996, respectively, compared to $1,030,000
and $3,439,000, respectively, for the same periods in the prior
fiscal year. Net interest expense has increased primarily due to
an increase in the amount of long-term debt associated with the
acquisition of Cadet Uniform Services, Ltd. in the third quarter
of fiscal 1995.
The Company's previously announced new distribution center in
Montgomery, Alabama is expected to begin operations in the first
quarter of fiscal 1997. The new distribution center will service
the Company's operations in the South, Southeast and Southwest
regions of the United States. The expansion into Montgomery, as
well as an expansion of the Cincinnati distribution center, will
allow the Company to free up capacity in Cincinnati in order to
more effectively service growth in the Midwest, on the East Coast
and Canada.
At the end of the third quarter of fiscal 1996, the Company had
eight uniform rental facilities in various stages of
construction.
Financial Condition
Marketable securities have increased since May 31, 1995,
primarily due to an increase in cash generated from operations.
Property, plant and equipment have increased from May 31, 1995,
primarily due to the construction of new uniform rental
facilities and the expansion of several existing uniform rental
facilities in the U.S. 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.
<PAGE>
CINTAS CORPORATION
Part II. Other Information
Item 5. Other Information.
On February 14, 1996, the registrant declared an annual
cash dividend of $.25 per share on outstanding common stock, a
25% increase over the dividend paid in the prior year. The
dividend was payable on April 2, 1996, to shareholders of
record as of March 8, 1996.
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: April 10, 1996 William C. Gale
William C. Gale
Vice President - Finance
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> FEB-29-1996
<CASH> 11,555,000
<SECURITIES> 65,988,000
<RECEIVABLES> 80,333,000
<ALLOWANCES> 3,455,000
<INVENTORY> 131,428,000
<CURRENT-ASSETS> 287,597,000
<PP&E> 362,015,000
<DEPRECIATION> 113,785,000
<TOTAL-ASSETS> 657,527,000
<CURRENT-LIABILITIES> 104,849,000
<BONDS> 0
0
0
<COMMON> 43,888,000
<OTHER-SE> 376,077,000
<TOTAL-LIABILITY-AND-EQUITY> 657,527,000
<SALES> 59,081,000
<TOTAL-REVENUES> 535,689,000
<CGS> 49,393,000
<TOTAL-COSTS> 320,352,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,123,000
<INCOME-PRETAX> 87,610,000
<INCOME-TAX> 33,951,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,659,000
<EPS-PRIMARY> 1.14
<EPS-DILUTED> 0
</TABLE>
