SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
X EXCHANGE ACT OF 1934 For the Fiscal Year Ended May 31, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-11399
CINTAS CORPORATION
(Exact name of registrant as specified in its charter)
Incorporated under IRS Employer ID
the Laws of Washington No. 31-1188630
(State or other juris-
diction of incorporation
or organization)
6800 Cintas Boulevard
P.O. Box 625737
Cincinnati, Ohio 45262-5737
Phone: (513) 459-1200
(Address of principal executive offices)
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(Title of class)
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, and (2) has been subject to such filing requirements
for the past 90 days.
YES NO
--- --
X
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of the Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [X]
The aggregate market value of Common Stock held by nonaffiliates is
$3,363,035,740 based on a closing price of $69.25 on August 15, 1997. As of
August 15, 1997, 48,563,693 shares of no par value Common Stock were issued and
outstanding.
Documents Incorporated by Reference
Portions of the Registrant's Annual Report to Shareholders for 1997 furnished to
the Commission pursuant to Rule 14a-3(b) and portions of the Registrant's Proxy
Statement to be filed with the Commission for its 1997 annual meeting are
incorporated by reference in Parts I, II and III as specified.
<PAGE>
CINTAS CORPORATION
INDEX TO ANNUAL REPORT
ON FORM 10-K
Page
----
Part I
Item 1 - Business 3
Item 2 - Properties 4
Item 3 - Legal Proceedings 6
Item 4 - Submission of Matters to a Vote of Security Holders 6
Part II
. Item 5 - Market for Registrant's Common Equity and Related 7
Stockholder Matters
Item 6 - Selected Financial Data 7
Item 7 - Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
Item 8 - Financial Statements and Supplementary Data 7
Item 9 - Changes in and Disagreements with Accountants on 7
Accounting and Financial Disclosure
Part III
Item 10 - Directors and Executive Officers of the Registrant 7
Item 11 - Executive Compensation 7
Item 12 - Security Ownership of Certain Beneficial Owners and 7
Management
Item 13 - Certain Relationships and Related Transactions 7
Part IV
Item 14 - Exhibits, Financial Statement Schedules and 8
Reports on Form 8-K
- 2 -
<PAGE>
PART I
ITEM 1.
BUSINESS
The Company began business in 1929 as an Ohio Corporation and changed its
state of incorporation to Washington in 1986. Cintas provides a highly
specialized service to businesses of all types - from small service companies to
major corporations that employ thousands of people. The Company designs,
manufactures and implements corporate identity uniform programs throughout the
United States.
The rental markets served by the Company are highly fragmented and
competition for this business varies at each of the Company's locations. There
are other companies in the uniform rental business which have financial
resources comparable to those of the Company, although much of the competition
consists of smaller local and regional firms. In certain instances, local
competitors may also have financial resources comparable to those deployed by
the Company in a particular market. The Company believes that the primary
competitive factors that affect its operations are quality, service, design and
price, in that order.
The service provided to the rental markets served by the Company
principally consists of the rental and cleaning of uniforms as well as providing
on-going uniform upgrades to each customer. The Company also offers ancillary
products which includes the rental or sale of walk-off mats, fender covers,
towels, mops, linen products and first aid products and services.
Due to its diverse customer base and average account size, the loss of one
account would not have a significant financial impact on the Company.
In its sale of customized uniforms, Cintas competes on a national basis
with other uniform suppliers and manufacturers, some of which have financial
resources comparable to the Company's.
The Company operates four manufacturing facilities which provide for a
substantial amount of its standard uniform needs. Additional products are
purchased from several outside suppliers. Because of the Company's ability to
manufacture much of its own uniform needs, the loss of one vendor would not have
a significant effect on the Company. In regard to the availability of fabric for
the manufacturing process, the Company purchases fabric from several suppliers.
The Company is not aware of any circumstances which would hinder its ability to
obtain these materials.
The Company does not anticipate any material capital expenditures for
environmental controls that would have a material effect on its financial
condition. The Company is not aware of any material non-compliance with
environmental laws.
At May 31, 1997, the Company employed 11,996 employees of which 87 were
represented by labor unions. The Company considers its relationship with its
employees to be satisfactory.
The table sets forth the revenues derived from each service provided by
Cintas.
Year Ended May 31
---------------------------------------
1997 1996 1995
---- ---- ----
(in thousands)
Uniform Rental $557,659 $492,369 $415,035
Uniform Sales 94,065 81,373 69,825
Non-Uniform Rentals 173,414 148,652 124,045
Other 14,811 7,736 6,193
--------- ---------- ----------
$839,949 $730,130 $615,098
======== ======== ========
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<PAGE>
ITEM 2.
PROPERTIES
The Company occupies 139 facilities located in 130 cities. The corporate
offices provide centrally located administrative functions including accounting,
finance, marketing and data processing. The Company operates processing plants
that house administrative, sales and service personnel and the necessary
equipment involved in the cleaning of uniforms and bulk items. Branch operations
provide administrative, sales and service functions. Cintas operates three
distribution facilities and has four manufacturing plants, two of which produce
uniform trousers and two producing uniform shirts. The Company also operates two
facilities which distribute first aid products and two cleanroom processing
facilities. The Company considers the facilities it operates to be adequate for
their intended use. The Company owns or leases 3,256 vehicles.
The following chart provides additional information concerning Cintas'
facilities:
Location Type of Facility
-------- ----------------
Cincinnati, Ohio Corporate Offices,
National Account Division,
Distribution Center
Abbotsford, Vancouver (Canada) Processing Plant
Akron, Ohio Processing Plant
Alexandria, Louisiana Branch*
Allentown, Pennsylvania Branch*
Amarillo, Texas Branch*
Asheville, North Carolina Branch*
Ashland, Kentucky Processing Plant
Atlanta, Georgia Processing Plant
Augusta, Georgia Processing Plant
Austin, Texas Processing Plant
Baltimore, Maryland Processing Plant
Baltimore, Maryland First Aid Facility
Barrie, Ontario (Canada) Processing Plant
Baton Rouge (South), Louisiana Processing Plant
Baton Rouge (North), Louisiana Processing Plant
Beaumont, Texas Processing Plant
Birmingham, Alabama Branch*
Boston, Massachusetts Processing Plant
Branford, Connecticut Processing Plant
Brownsville, Texas Branch*
Buffalo, New York Processing Plant
Charlotte, North Carolina Processing Plant
Chattanooga, Tennessee Branch*
Chicago (South), Illinois Processing Plant
Chicago (North), Illinois Processing Plant
Chilliwack, Vancouver (Canada) Processing Plant
Cincinnati, Ohio Processing Plant
Clay City, Kentucky Manufacturing Facility*
Cleveland (West), Ohio Processing Plant
Cleveland (East), Ohio Processing Plant
Colorado Springs, Colorado Branch*
Columbia, South Carolina Processing Plant*
Columbus, Ohio Processing Plant
Corpus Christi, Texas Branch*
Dallas, Texas Processing Plant
Dayton, Ohio Processing Plant
Decatur, Georgia Processing Plant
Denver, Colorado Processing Plant
Denver, Colorado First Aid Facility*
Detroit, Michigan Processing Plant
Etobicoke, Ontario (Canada) Processing Plant
Eugene, Oregon Branch*
Evansville, Indiana Branch*
- 4 -
<PAGE>
Flint, Michigan Branch*
Fort Meyers, Florida Branch*
Fort Smith, Arkansas Processing Plant*
Fort Wayne, Indiana Branch*
Grand Rapids, Michigan Branch*
Greenville, South Carolina Processing Plant
Greenville, South Carolina Cleanroom Facility
Greenwood, Mississippi Branch*
Gulfport, Mississippi Branch*
Hammond, Louisiana Branch
Harrison, Arkansas Branch*
Hazard, Kentucky Manufacturing Facility*
Houston, Texas Processing Plant
Indianapolis, Indiana Processing Plant
Jackson, Mississippi Branch*
Jacksonville, Florida Branch*
Joplin, Missouri Branch*
Kansas City, Kansas Processing Plant
Knoxville, Tennessee Branch*
Lafayette, Louisiana Branch
Lake Charles, Louisiana Processing Plant
Lake Station, Indiana Branch*
Laredo, Texas Branch*
Las Vegas, Nevada Processing Plant
Lexington, Kentucky Processing Plant
Little Rock, Arkansas Processing Plant
London, Ontario (Canada) Branch*
Long Island, New York Branch*
Los Angeles, California Processing Plant
Louisville, Kentucky Processing Plant
Lufkin, Texas Branch
Madison, Alabama Branch*
Madison, Wisconsin Processing Plant
Memphis, Tennessee Processing Plant
Miami, Florida Processing Plant
Milwaukee, Wisconsin Branch*
Minneapolis, Minnesota Processing Plant*
Mobile, Alabama Branch*
Montgomery, Alabama Distribution Center*
Montgomery, Alabama Branch*
Mt. Vernon, Kentucky Manufacturing Facility*
Napanee, Ontario (Canada) Processing Plant
Nashville, Tennessee Processing Plant
Natchez, Mississippi Branch*
Newburgh, New York Cleanroom Facility
New Orleans, Louisiana Processing Plant
Oklahoma City, Oklahoma Processing Plant
Ontario, California Processing Plant
Orange, California Branch*
Orlando, Florida Processing Plant
Owingsville, Kentucky Manufacturing Facility
Pensacola, Florida Branch*
Philadelphia, Pennsylvania Processing Plant
Phoenix, Arizona Processing Plant
Piscataway, New Jersey Processing Plant
Pittsburgh, Pennsylvania Processing Plant
Portland, Maine Branch
Portland, Oregon Processing Plant
Raleigh-Durham, North Carolina Branch*
Reno, Nevada Distribution Center*
Richmond, Virginia Processing Plant
Sacramento, California Branch*
Salt Lake City, Utah Processing Plant*
- 5 -
<PAGE>
San Angelo, Texas Branch*
San Antonio, Texas Processing Plant
San Diego, California Processing Plant
Sandusky, Ohio Branch*
San Fernando, California Branch*
San Francisco(West), California Branch*
San Francisco (East), California Processing Plant*
San Jose, California Processing Plant
Seattle, Washington Processing Plant
Shreveport, Louisiana Processing Plant
Springdale, Arkansas Processing Plant
Springfield, Missouri Branch*
St. Louis, Missouri Processing Plant*
Tacoma, Washington Branch*
Tampa, Florida Processing Plant
Taunton, Massachusetts Branch*
Thibodaux, Louisiana Processing Plant
Toledo, Ohio Branch*
Toronto, Ontario (Canada) Processing Plant
Tulsa, Oklahoma Processing Plant
Tuscaloosa, Alabama Processing Plant
Tyler, Texas Branch*
Victoria, Texas Processing Plant
Vidalia, Georgia Processing Plant
Virginia Beach, Virginia Branch*
West Chester, New York Branch*
Washington, D.C. Processing Plant
Westland, Michigan Processing Plant
West Palm Beach, Florida Branch*
Wichita, Kansas Branch*
Winston-Salem, North Carolina Processing Plant
Youngstown, Ohio Branch*
*Leased for various terms ranging from monthly to 2006. The Company expects
that it will be able to renew its leases on satisfactory terms. All other
properties are owned.
ITEM 3.
LEGAL PROCEEDINGS
In December 1992, the Company was served with an "Imminent and Substantial
Endangerment and Remedial Action Order" (the "Order") by the California
Department of Toxic Substances Control relating to the facility leased by the
Company in San Leandro, California. The Order requires Cintas and three other
allegedly responsible parties to respond to alleged soil and groundwater
contamination at and around the San Leandro facility. It is not possible at this
time to estimate the loss or range of loss associated with the claim. Based on
information that has been made available to the Company, however, it is not
believed that the matter will have a material adverse effect on the Company's
financial condition or results of its operations.
The Company is also a party to incidental litigation brought in the
ordinary course of business, none of which individually or in the aggregate, is
considered to be material to its operations or financial condition. Cintas
maintains insurance coverage against certain liabilities that it may incur in
its operations from time to time.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None in the fourth quarter of fiscal 1997.
- 6 -
<PAGE>
PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
"Market for Registrant's Common Stock" and "Security Holder Information" on
page 29 of the Registrant's Annual Report to Shareholders for 1997 is
incorporated herein by reference. Dividend information is incorporated by
reference to the Consolidated Statements of Shareholders' Equity on page 17.
Dividends on the outstanding Common Stock are paid annually and amounted to $.30
and $.25 per share in fiscal 1997 and 1996, respectively.
During the quarterly period ended May 31, 1997, the Registrant issued
121,989 shares of Common Stock for a company being acquired. This issuance was
exempt from the registration requirements of the Securities Act of 1933 as a
private offering pursuant to Section 4.2 of the Act.
ITEM 6.
SELECTED FINANCIAL DATA
The "Eleven Year Financial Summary" on page 14 of the Registrant's Annual
Report to Shareholders for 1997 is incorporated herein by reference.
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" commencing on page 26 of the Registrant's Annual Report to
Shareholders for 1997 is incorporated herein by reference.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Financial Statements of the Registrant shown on pages 15
through 25 of its Annual Report to Shareholders for 1997 are incorporated herein
by reference:
Consolidated Balance Sheets as of May 31, 1997 and 1996
Consolidated Statements of Income for the years ended May 31, 1997,
1996 and 1995
Consolidated Statements of Shareholders' Equity for the years ended
May 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended May 31, 1997,
1996 and 1995
Notes to Consolidated Financial Statements
Report of Independent Auditors
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Items 10., 11., 12., and 13. of Part III are incorporated by reference to
the Registrant's Proxy Statement for its 1997 Annual Shareholders' Meeting to be
filed with the Commission pursuant to Regulation 14A.
- 7 -
<PAGE>
PART IV
ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM 8-K
(a) (1) Financial Statements. All financial statements required to
be filed by Item 8. of this Form and included in this report are listed in Item
8. No additional financial statements are filed because the requirements for
paragraph (d) under Item 14 are not applicable to the Company.
(a) (2) Financial Statement Schedule:
For each of the three years in the period ended May 31, 1997.
Schedule II: Valuation and Qualifying Accounts and Reserves.
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the Consolidated
Financial Statements or Notes thereto.
(a) (3) Exhibits.
Exhibit
Number Description of Exhibit Filing Status
------ ---------------------- -------------
3.1 Restated Articles of Incorporation (1)
3.3 Bylaws (1)
Management Compensatory Contracts (Exhibits 10.1-10.5)
10.1 Incentive Stock Option Plan (2)
10.2 Partners' Plan, as Amended (3)
10.3 1990 Directors' Stock Option Plan (4)
10.4 1992 Employee Stock Option Plan, as Amended (5)
10.5 1994 Directors' Stock Option Plan (6)
11 Statement re computation of filed herewith
per share earnings
13 1997 Annual Report to Shareholders filed herewith
21 Subsidiaries of the Registrant filed herewith
23 Consent of Independent Auditors filed herewith
27 Financial Data Schedule filed herewith
- -------------
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended May 31, 1989.
(2) Incorporated by reference to the Company's Registration Statement No.
33-23228 on Form S-8 filed under the Securities Act of 1933.
(3) Incorporated by reference to the Company's Registration Statement No.
33-56623 on Form S-8 filed under the Securities Act of 1933.
(4) Incorporated by reference to the Company's Registration Statement No.
33-71124 on Form S-8 filed under the Securities Act of 1933.
(5) Incorporated by reference to the Company's Proxy Statement for its 1995
Annual Shareholders' Meeting.
(6) Incorporated by reference to the Company's Proxy Statement for its 1994
Annual Shareholders' Meeting.
- 8 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
DATE SIGNED: August 27, 1997 BY: /s/ Robert J. Kohlhepp
----------------------------
Robert J. Kohlhepp
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
--------- -------- ----
/s/ Richard T. Farmer Chairman of the Board
- ----------------------- of Directors August 27, 1997
Richard T. Farmer
/s/ Robert J. Kohlhepp Chief Executive
- ----------------------- Officer and Director August 27, 1997
Robert J. Kohlhepp
/s/ Scott D. Farmer President, Chief Operating
- ----------------------- Officer and Director August 27, 1997
Scott D. Farmer
/s/ James J. Gardner Director August 27, 1997
- -----------------------
James J. Gardner
/s/ Donald P. Klekamp Director August 27, 1997
- -----------------------
Donald P. Klekamp
/s/ William C. Gale Vice President & Chief
- ----------------------- Financial Officer
William C. Gale (Principal Financial
and Accounting Officer) August 27, 1997
- 9 -
<PAGE>
CINTAS CORPORATION
Schedule II - Valuation and Qualifying Accounts and Reserves
(In Thousands)
<TABLE>
<CAPTION>
Additions
(1) (2)
Balance At Charged to Charged Balance At
Beginning Costs and to Other End of
Description of Year Expenses Accounts Deductions Year
- ----------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
May 31, 1995:
Allowance for Doubtful Accounts $ 2,003 $ 1,465 ($ 325) $1,114 (A) $ 2,029
======= ======= ========== ======= =======
Accumulated Amortization of
Customer Service Contracts ... 21,523 5,967 70 (B) 27,420
Accumulated Amortization of
Non-Compete Agreements &
Consulting .................. 17,015 4,675 1,085 (B) 20,605
Accumulated Amortization of
Debt Issue & Organization
Costs ....................... 423 263 83 (B) 603
Accumulated Amortization of
Goodwill .................... 314 622 -- 936
------- ------- ---------- ------- -------
$39,275 $11,527 $ 1,238 $49,564
======= ======= ======= =======
May 31, 1996:
Allowance for Doubtful Accounts $ 2,029 $ 1,178 $ 175 $1,424 (A) $ 1,958
======= ======= ========== ======= =======
Accumulated Amortization of
Customer Service Contracts .. 27,420 6,161 4,866 (B) 28,715
Accumulated Amortization of
Non-Compete Agreements &
Consulting .................. 20,605 4,667 1,515 (B) 23,757
Accumulated Amortization of
Debt Issue & Organization
Costs ....................... 603 250 71 (B) 782
Accumulated Amortization of
Goodwill .................... 936 1,440 -- 2,376
-------- ------- ------- -------
$49,564 $12,518 $6,452 $55,630
======= ======= ======= =======
<FN>
(A) Uncollectible Accounts Charged-off, Net of Recoveries.
(B) Elimination of Fully Amortized Amounts.
</FN>
</TABLE>
- 10 -
<PAGE>
<TABLE>
<CAPTION>
Additions
(1) (2)
Balance At Charged to Charged Balance At
Beginning Costs and to Other End of
Description of Year Expenses Accounts Deductions Year
- ----------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
May 31,1997:
Allowance for Doubtful Accounts $ 1,958 $ 2,013 $ 530 $1,680 (A) $ 2,821
======= ======= ======= ====== =======
Accumulated Amortization of
Customer Service Contracts . 28,715 5,923 8,374 (B) 26,264
Accumulated Amortization of
Non-Compete Agreements
and Consulting ............ 23,757 4,294 4,798 (B) 23,253
Accumulated Amortization of
Debt Issue & Organization
Costs ..................... 782 239 -- 1,021
Accumulated Amortization of
Goodwill .................. 2,376 1,489 -- 3,865
------- ------- ------- -------
55,630 $11,945 $13,172 $54,403
======= ======= ======= =======
<FN>
(A) Uncollectible Accounts Charged-off, Net of Recoveries.
(B) Elimination of Fully Amortized Amounts.
</FN>
</TABLE>
- 11 -
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(in thousands except per share data)
A. Weighted average shares outstanding basis:
Fiscal year ended May 31
------------------------------
1997 1996 1995
-------- -------- --------
Net income .......................... $ 90,840 $ 75,183 $62,743
======== ======== =======
Weighted average
shares outstanding................. 47,631 47,099 46,891
======== ======== =======
Earnings per share.................... $ 1.907 $ 1.596 $ 1.338
======== ======== =======
B. Primary basis:
Fiscal year ended May 31
-----------------------------
1997 1996 1995
------- ------- -------
Net income ............................. $90,840 $75,183 $62,743
======= ======= =======
Weighted average
shares outstanding .................. 47,631 47,099 46,891
Plus - net shares to be issued upon
exercise of dilutive stock
options after applying treasury
stock method ........................ 752 752 773
------- ------- -------
48,383 47,851 47,664
======= ======= =======
Earnings per share...................... $1.878 $1.571 $1.316
======= ======= =======
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<PAGE>
C. Fully diluted basis:
Fiscal year ended May 31
-----------------------------
1997 1996 1995
------- ------- -------
Net income........................... $90,840 $75,183 $62,743
======= ======= =======
Weighted average
shares outstanding................ 47,631 47,099 46,891
Plus - net shares to be issued
upon exercise of dilutive stock
options after applying treasury
stock method...................... 844 905 859
-------- ------- -------
48,475 48,004 47,750
======== ======== =======
Earnings per share.................. $1.874 $1.566 $1.314
======== ======== =======
Note: Reported earnings per share for each year was based upon weighted
average shares outstanding since neither the primary nor fully diluted
amounts of per share earnings resulted in a reduction of 3% or more.
- 13 -
FINANCIAL HIGHLIGHTS
Years Ended May 31
(In thousands except per share data)
%
1997 1996 Change
----------- ------------ ---------
Operating Results
Net Revenues .................... $ 839,949 $ 730,130 15.0%
Net Income ...................... 90,840 75,183 20.8%
Return on Average Equity ........ 19.3% 18.9% 2.1%
Financial Condition
Shareholders' Equity ............ $ 512,376 $ 429,497 19.3%
Working Capital ................. 239,844 194,908 23.1%
Current Ratio ................... 3.07:1 2.90:1 5.9%
Per Share Data
Net Income ...................... $ 1.91 $ 1.60 19.4%
Shareholders' Equity (book value) 10.62 9.10 16.7%
Dividends ....................... 0.30 0.25 20.0%
- 14 -
<PAGE>
TO OUR SHAREHOLDERS AND FRIENDS:
Fiscal 1997 was a very successful year for Cintas Corporation. It was our
twenty-eighth consecutive year of record sales and profits. It was also another
good year for our stock. Our stock appreciated 28% during the twelve month
period ended July 31, 1997, and has appreciated at a compound rate of 25% since
we went public in August 1983.
In this annual report, we want to share with you our accomplishments for fiscal
1997, but more importantly, we want to explain our vision for the future. This
is not a distant vision because we are well on our way to achieving it. In fact,
it has guided us in building the Company to where we are today. We feel that it
is important to share our vision with you, our Shareholders, so that you know
where we are going and how we intend to get there.
Fiscal 1997 can be characterized as a memorable year. Opportunities were seized,
new financial records were established, and our management team was reorganized
for the next decade of growth. Revenues of $840 million increased 15% from $730
million last year. There were two less workdays this fiscal year compared to the
prior year. Revenues actually increased 16% on a comparable workday basis. Net
income of $90.8 million increased 21% over $75.2 million in fiscal 1996.
Earnings per share increased 19% to $1.91 versus $1.60 per share last year.
Our balance sheet continued to strengthen. Our percentage of debt to total
capital is 19%, down from 23% last year. We are a real cash generator - after
spending $68 million on new plants and equipment, reducing debt by $6 million
and paying a $14 million dividend, we finished the year with cash and marketable
securities of over $100 million. Our strong balance sheet enables us to be
aggressive in pursuing acquisitions, and we expect that we will have many
opportunities to make good acquisitions in the future.
Our Uniform Rental Division, which represents approximately 90% of our revenues,
extended service to 15 new markets. Cintas now has uniform rental operations
serving all of the top 50 U.S. metropolitan areas, and we now provide service to
235 of the largest 300 U.S. markets. In Ontario, Canada, we have expanded from
two to five locations. We also added two locations in the province of British
Columbia.
The Company also completed construction of uniform rental facilities in Austin,
Texas; Denver, Colorado; Ontario, California; and Indianapolis, Indiana.
Facilities are currently under construction in Boston, Massachusetts; Corpus
Christi; Texas; Cincinnati, Ohio; Springfield, Missouri; Springdale, Arkansas;
and Long Island, New York. These new facilities are all scheduled to open in
fiscal 1998. Our impressive growth over the past 28 years has been both exciting
and rewarding. We now have 130 uniform rental operations in 36 states and
Canada.
While the uniform service is our core business and will continue to provide the
greatest opportunities for future growth in sales and profits, we cannot lose
sight of the fact that each week, Cintas sales and service personnel visit and
do business with over 170,000 businesses, and today just under two million
people wear a Cintas uniform to work every day. This large and growing customer
base presents an opportunity to provide ancillary services to our customers.
This makes us a more valuable resource for our customers while at the same time
increasing the value and profitability of each customer we serve. This annual
report will highlight some of the things we have done to capitalize on this
opportunity.
In order to prepare for the next decade of continued growth, we recently
announced two key organizational changes. Scott Farmer, a 15 year veteran, was
named President and Chief Operating Officer. Scott has served in many line and
staff positions including production, sales and service management. In 1985,
Scott transferred to the corporate headquarters to install a corporate-wide
quality program. Since then, he has held the positions of Vice President -
National Account Division, Vice President - Marketing, Vice President -
Northeast Region, and President of one of our largest subsidiaries. In 1994, he
was elected to the Board of Directors. Scott's broad
- 15 -
<PAGE>
background and experience make him uniquely qualified for his new position as
President and Chief Operating Officer.
Reporting to Scott will be Bob Buck, recently promoted to a newly created
position of President of the Uniform Rental Division. Bob Buck is a 15 year
veteran who joined the company as Senior Vice President and Chief Financial
Officer, and was later promoted to Senior Vice President - Midwest Region where
he has served for the past six years. Because of his knowledge and experience
and his outstanding performance, Bob Buck is very well qualified to become the
President of our core business, the Uniform Rental Division.
In order to effect these changes, a series of other promotions were necessary.
General Managers of uniform rental plants were promoted to Group Vice Presidents
requiring other managers to be promoted to General Managers. All told, seven
people have been promoted to support this organization change.
These changes illustrate the success of our management development program which
was put in place in 1981. Cintas created its management trainee program to bring
young, college graduates into the Company, give them grass roots, hands-on
experience, and then develop them into top-notch executives. This program allows
the Company to take advantage of market opportunities without going outside of
the Company to hire people to take over important positions. This system of
developing people from within enhances our ability to preserve our corporate
culture which we consider the ultimate competitive advantage.
With fiscal 1997 behind us, we look to the future with great enthusiasm because
we have great opportunities before us, and we have the financial resources and
the management talent to take advantage of them. We thank you, our shareholders
and friends, for your continued interest and loyal support.
Sincerely yours,
Richard T. Farmer Robert J. Kohlhepp
Chairman of the Board Chief Executive Officer
- 16 -
<PAGE>
OUR VISION FOR THE FUTURE
THE FIRST PART OF OUR VISION - TO BE RECOGNIZED AS A COMPANY WHICH
INSISTS ON ABSOLUTE HONESTY AND INTEGRITY IN EVERYTHING WE DO.
First and foremost, we want to have a reputation as a company that is honest,
fair and ethical in every way. We play by the rules and obey the laws. This
reputation enables us to attract the best possible people, and it discourages
people who might want to bend the rules from coming to work for Cintas.
THE SECOND PART OF OUR VISION - TO HAVE A HIGHLY TALENTED, DIVERSE AND
MOTIVATED TEAM OF PARTNERS WHO ARE COMPATIBLE WITH OUR CULTURE AND
ENJOY WHAT THEY DO.
This is the second highest priority in our vision so that we never forget just
how important it is to have people who are compatible with our culture and can
operate in an enthusiastic way and have fun in the process. The result is a
hard-hitting, unified team effort that is more powerful than the sum of the
talents of the individual players.
THE THIRD PART OF OUR VISION - TO HAVE A UNIFORM RENTAL PRESENCE IN
EVERY CITY IN THE UNITED STATES AND CANADA.
This calls for further geographic expansion. In fiscal 1997, we entered 15 new
markets - 9 of them by expanding from existing markets; 6 new markets were
entered through acquisitions. We now have 130 uniform rental operations in 36
states and Canada. These operations currently reach 235 of the top 300 markets
in the United States and 7 markets in Canada.
We will continue to expand our geographic presence throughout the United States
and Canada by expanding into contiguous markets from existing locations and by
making acquisitions. Geographic expansion will continue to be a key component of
our future.
THE FOURTH PART OF OUR VISION - TO LEVERAGE OUR INFRASTRUCTURE TO
BECOME A MORE VALUABLE RESOURCE FOR OUR CUSTOMERS.
Our core business of providing uniform rental services puts us in contact with
over 170,000 business customers every week, and that number is growing each
year. These customers that we visit each week know us; they trust us; and they
rely on us to provide their uniform service. For many years, all we did was pick
up their soiled uniforms and deliver clean ones. We asked ourselves, "What else
can we do for our customers?"
Six years ago we created our catalog to offer our customers a convenient, no
hassle method of buying all kinds of items to supplement their rental uniform
program - things like work shoes, gloves, rain gear and just about everything a
person could need in the workplace. The catalog has been well-received and is
growing nicely.
We are also growing some of the more "traditional" ancillary products and
services, such as entrance mats. In the past, we provided this service as an
accommodation to our uniform customers. We have now developed new marketing
programs to proactively increase the rental of entrance mats to our
- 17 -
<PAGE>
existing customers who currently do not use this service. Entrance mats can
create an immediate positive impression and, at the same time, lower facility
maintenance cost by keeping most of the dirt on the mat instead of having it
spread throughout the building, soiling floors and carpeting.
The objective of being a more valuable resource for our customers was also the
impetus for our recent acquisition of two first aid companies - American First
Aid (AFA) in Baltimore, Maryland and Respond Industries (Respond) in Denver,
Colorado. AFA and Respond are the second and third largest wholesalers in the
market. A wholesaler buys first aid products from manufacturers, puts these
products in brand labeled packages and then sells them to independent
distributors around the country. These distributors then replenish first aid
cabinets in factories, offices and shops.
A survey of our current customers shows that almost all of them have first aid
supplies in their workplace. Approximately one-half of them use a first aid
service with the remainder buying through a catalog or from a retail store. A
van-delivered first aid service, similar to the way we deliver uniforms to our
customers, is a convenient and valuable service. We are convinced that we can
bring the same level of service to our customers in first aid as we do in
uniforms.
There are many opportunities to provide other products and services to our
customers. We will continue to consider additional services that make good sense
for our customers and Cintas.
THE FIFTH PART OF OUR VISION - TO LEVERAGE OUR MARKET PRESENCE TO
BECOME THE UNIFORM PEOPLE TO OTHER SEGMENTS OF INDUSTRY.
Traditionally, Cintas has provided uniforms to blue collar industrial and
service workers. The size of this market is currently estimated to be $4.5
billion. According to our research, it has the potential to be $13.5 billion.
Because of that potential, the Company will continue to focus on that segment of
the uniform business.
There are, however, other segments of the uniform business which present growth
opportunities as well. We have a small presence in the tailored apparel business
- - uniforms worn by real estate salespeople, auto rental personnel, flight
attendants, and others who have a higher level of customer contact. We also have
a small share in the food and lodging business, which includes uniforms worn by
waiters and waitresses. This is an attractive, rapidly growing business. It is
also our vision to serve the uniform needs of security people, like policemen
and guards, and medical and healthcare personnel. All of these additional
segments add up to an additional $4 billion of annual revenues and provide
additional opportunity for growth.
THE SIXTH PART OF OUR VISION - TO BE WELL-KNOWN AS THE OBVIOUS LEADER
IN THE BUSINESS.
Our reputation has become a major advantage in raising capital, recruiting new
partners and calling on prospective customers. We are one of the largest
companies in our industry, with the best long-term growth rates. We are also the
most profitable company with the highest return on sales, equity and assets
compared to the other public companies in the industry. We have a strong stock,
with good liquidity enabling us to use stock for acquisitions. We have the
highest level of customer satisfaction in our industry. As we continue to
successfully execute our vision, we expect to remain the obvious leader in the
business.
- 18 -
<PAGE>
ELEVEN YEAR FINANCIAL SUMMARY
Years Ended May 31
(In thousands except per share data)
<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Revenues.......... $185,101 228,091 269,260 311,776 352,480 401,563
Net Income............ $ 14,737 18,550 23,101 27,994 31,339 39,195
Earnings Per Share.... $ 0.35 0.44 0.52 0.62 0.69 0.85(a)
Dividends Per Share... $ 0.03 0.04 0.05 0.07 0.09 0.11
Total Assets.......... $194,847 213,958 228,000 274,103 326,752 361,261
Shareholders' Equity.. $ 86,646 104,710 138,079 163,026 191,124 225,864
Return on Average
Equity................ 18.5% 19.4% 19.0% 18.6% 17.7% 18.8%
Long-Term Debt........ $ 70,757 65,490 43,303 54,079 68,974 67,790
10 Year
Compd
1993 1994 1995 1996 1997 Growth
---- ---- ---- ---- ---- ------
Net Revenues.......... $452,722 523,216 615,098 730,130 839,949 16.3%
Net Income............ $ 44,873 52,170 62,743 75,183 90,840 20.0%
Earnings Per Share.... $ 0.97 1.12 1.34 1.60 1.91 18.5%
Dividends Per Share... $ 0.14 0.17 0.20 0.25 0.30 25.9%
Total Assets.......... $454,165 501,632 569,181 668,762 761,823 14.6%
Shareholders' Equity.. $264,914 309,652 364,344 429,497 512,376 19.5%
Return on Average
Equity............... 18.3% 18.2% 18.6% 18.9% 19.3%
Long-Term Debt........ $103,611 84,184 120,275 117,924 111,457
<FN>
(a) Includes earnings of $.06 per share due to the adoption of SFAS No. 96.
Note: Results prior to October 1, 1991, have been restated to include Rental
Uniform Service of Greenville, S.C., Inc.
</FN>
</TABLE>
- 19 -
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Years Ended May 31, 1997, 1996 and 1995
(In thousands except per share data)
1997 1996 1995
---- ---- ----
Revenues:
Net rentals ..................... $ 739,207 $ 648,616 $ 545,267
Net sales ....................... 100,742 81,514 69,831
--------- --------- ---------
839,949 730,130 615,098
Costs and expenses (income):
Cost of rentals ................. 416,597 369,386 312,313
Cost of sales ................... 84,062 67,424 58,952
Selling and administrative
expenses ........................ 188,915 164,471 137,675
Interest income ................. (4,213) (2,454) (2,148)
Interest expense ................ 7,970 9,073 7,345
--------- --------- ---------
693,331 607,900 514,137
--------- --------- ---------
Income before income taxes .............. 146,618 122,230 100,961
Income taxes ............................ 55,778 47,047 38,218
--------- --------- ---------
Net income .............................. $ 90,840 $ 75,183 $ 62,743
========= ========= =========
Weighted average number of shares
outstanding ........................... 47,631 47,099 46,891
========= ========= =========
Earnings per share ...................... $ 1.91 $ 1.60 $ 1.34
========= ========= =========
Dividends per share ..................... $ .30 $ 0.25 $ 0.20
========= ========= =========
See accompanying notes.
- 20 -
<PAGE>
Cintas Corporation
CONSOLIDATED BALANCE SHEETS
MAY 31, 1997 AND 1996
(In thousands except share data)
Assets 1997 1996
- ------ ---- ----
Current assets:
Cash and cash equivalents .................... $ 14,221 $ 9,066
Marketable securities ........................ 88,655 73,477
Accounts receivable, principally trade,
less allowance of $2,821 and $1,958,
respectively ............................... 95,161 78,244
Inventories .................................. 43,076 34,678
Uniforms and other rental items in service ... 112,844 100,307
Prepaid expenses ............................. 2,018 1,730
--------- ---------
Total current assets ................................. 355,975 297,502
Property, plant and equipment, at cost, net .......... 287,446 252,597
Other assets ......................................... 118,402 118,663
--------- ---------
$ 761,823 $ 668,762
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable ............................. $ 20,719 $ 19,363
Accrued liabilities .......................... 55,336 49,168
Income taxes:
Current ............................... 454 --
Deferred .............................. 32,889 27,471
Long-term debt due within one year ........... 6,733 6,592
--------- ---------
Total current liabilities ............................ 116,131 102,594
Long-term debt due after one year .................... 111,457 117,924
Deferred income taxes ................................ 21,859 18,747
Shareholders' equity:
Preferred stock, no par value;
100,000 shares authorized, none
outstanding .............................. -- --
Common stock, no par value;
120,000,000 shares authorized,
48,266,789 and 47,199,299 shares
issued and outstanding, respectively ..... 45,039 43,657
Retained earnings ............................ 468,411 386,673
Foreign currency translation adjustment ...... (1,074) (833)
--------- ---------
Total shareholders' equity ........................... 512,376 429,497
--------- ---------
$ 761,823 $ 668,762
See accompanying notes.
- 21 -
<PAGE>
Cintas Corporation
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended May 31, 1997, 1996 and 1995
(In thousands)
Foreign
Currency Total
Common Stock Retained Translation Shareholders'
Shares Amount Earnings Adjustment Equity
------ ------ -------- ---------- -------------
Balance at
May 31, 1994 .... 46,801 $ 40,939 $ 269,939 $ (1,226) $ 309,652
Net income ..... -- -- 62,743 -- 62,743
Dividends ...... -- -- (9,398) -- (9,398)
Stock options
exercised net
of shares
surrendered ... 204 906 -- -- 906
Tax benefit
resulting from
exercise of
employee stock
options ....... -- 190 -- -- 190
Foreign currency
translation
adjustment .... -- -- -- 251 251
Balance at
May 31, 1995 .... 47,005 42,035 323,284 (975) 364,344
Net income ..... -- -- 75,183 -- 75,183
Dividends ...... -- -- (11,794) -- (11,794)
Stock options
exercised net
of shares
surrendered ... 194 768 -- -- 768
Tax benefit
resulting from
exercise of
employee stock
options ....... -- 854 -- -- 854
Foreign currency
translation
adjustment .... -- -- -- 142 142
(Continued)
- 22 -
<PAGE>
Foreign
Currency Total
Common Stock Retained Translation Shareholders'
Shares Amount Earnings Adjustment Equity
------ ------ -------- ------------ ------------
Balance at
May 31, 1996 ..... 47,199 43,657 386,673 (833) 429,497
Net income ...... -- -- 90,840 -- 90,840
Dividends ...... -- -- (14,477) -- (14,477)
Effects of
acquisitions ... 879 -- 5,375 -- 5,375
Stock options
exercised net
of shares
surrendered ... 189 1,121 -- -- 1,121
Tax benefit
resulting from
exercise of
employee stock
options ....... -- 261 -- -- 261
Foreign currency
Translation
adjustment .... -- -- -- (241) (241)
Balance at
May 31, 1997 ..... 48,267 $ 45,039 $ 468,411 $ (1,074) $ 512,376
========= ========= ========= ========= =========
See accompanying notes.
- 23 -
<PAGE>
Cintas Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended May 31, 1997, 1996 and 1995
(In thousands)
1997 1996 1995
------- -------- -------
Cash flows from operating activities:
Net income............................. $90,840 $75,183 $62,743
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation......................... 35,803 30,586 26,179
Amortization of deferred charges..... 11,945 12,518 11,527
Deferred income taxes................ 8,329 6,300 2,162
Equity in earnings of affiliate...... -- -- (428)
Change in current assets and
liabilities, net of acquisitions of
businesses:
Accounts receivable.............. (13,422) (9,171) (10,180)
Inventories...................... (5,864) 2,205 (7,824)
Uniforms and other rental items
in service................... (12,242) (11,637) (13,576)
Prepaid expenses................. (122) (375) (3)
Accounts payable................. (2,290) 2,098 (2,162)
Accrued liabilities.............. 2,854 6,910 6,628
Income taxes payable............. 606 (2,191) 184
------- ------- -------
Net cash provided by operating activities 116,437 112,426 75,250
Cash flows from investing activities:
Proceeds from sale of property, plant
and equipment....................... 694 1,715 2,333
Capital expenditures................... (67,813) (56,780) (58,879)
Proceeds from sale or redemption of
marketable securities................ 49,290 74,220 196,204
Purchase of marketable securities...... (64,468)(108,900)(182,668)
Acquisitions of businesses, net of cash
acquired............................. (9,060) (2,307) (50,095)
Other.................................. (263) (2,173) 1,126
------- ------- -------
Net cash used by investing activities.... (91,620) (94,225) (91,979)
Cash flows from financing activities:
Proceeds from issuance of long-term debt -- 424 52,208
Repayment of long-term debt............ (6,326) (6,213) (21,829)
Issuance of common stock............... 1,121 768 906
Repurchase of common stock............. -- -- (7,112)
Dividends paid......................... (14,477) (11,794) (9,398)
Other.................................. 20 995 190
------- ------- -------
Net cash provided by (used in) financing
activities............................. (19,662) (15,820) 14,965
-------- -------- ------
Net increase (decrease) in cash and
cash equivalents....................... 5,155 2,381 (1,764)
Cash and cash equivalents at beginning of
year................................... 9,066 6,685 8,449
------- ------- -------
Cash and cash equivalents at end of year $14,221 $9,066 $6,685
======= ====== ======
See accompanying notes.
- 24 -
<PAGE>
CINTAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except per share and share data)
1. SIGNIFICANT ACCOUNTING POLICIES
Business description. Cintas designs, manufactures and implements corporate
identity uniform programs which it rents or sells to customers throughout the
United States and Canada. The Company also provides ancillary services including
entrance mats, sanitation supplies and first aid products and services. The
Company provides these highly specialized services to businesses of all
types--from small service companies to major corporations that employ thousands
of people.
Principles of consolidation. The consolidated financial statements include
the accounts of Cintas Corporation and its subsidiaries, all of which are
wholly-owned. Intercompany balances and transactions have been eliminated.
Use of estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes.
Cash and cash equivalents. The Company considers all highly liquid
investments with a maturity of three months or less, at date of purchase, to be
cash equivalents.
Inventories. Inventories are valued at the lower of cost (first-in,
first-out) or market. Substantially all inventories represent finished goods.
Uniforms and other rental items in service. These items are valued at cost
less amortization, calculated using the straight-line method generally over
periods of eight to thirty-six months.
Property, plant and equipment. Depreciation is calculated using the
straight-line method over the following estimated useful lives, in years:
Buildings and Improvements. . . . . .5 to 40
Equipment . . . . . . . . . . . . . .3 to 10
Leasehold Improvements. . . . . . . .2 to 5
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable.
Other assets. Other assets consist primarily of service contracts and
non-compete or consulting agreements obtained through the acquisition of
businesses, which are amortized by use of the straight-line method over the
estimated lives of the agreements which are generally five to ten years, and
goodwill, which is amortized using the straight-line method over forty years.
Revenue recognition. Rental revenues are recognized when services are
performed and sales revenues are recognized when products are shipped. The
Company also establishes allowances for uncollectible accounts when revenues are
recorded.
Stock options. As permitted by SFAS No. 123, Accounting for Stock-Based
Compensation, the Company has chosen to account for stock option grants using
the intrinsic value method prescribed in APB Opinion No. 25, Accounting for
Stock Issued to Employees.
- 25 -
<PAGE>
Interest rate swap agreements. Periodic settlements under interest rate
swap agreements are recognized as adjustments of interest expense for the
relevant periods.
Earnings per share. Earnings per share is calculated on the basis of the
weighted average number of shares of common stock outstanding during the year,
including the dilutive effect, if any, of assumed conversion of common stock
equivalents.
2. MARKETABLE SECURITIES
All marketable equity securities and debt securities are classified as
available-for-sale. 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 interest income. Realized gains and losses and
declines in value determined to be other than temporary on available-for-sale
securities are included in interest 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 interest income.
The following is a summary of marketable securities at May 31, 1997 and
1996:
1997 1996
--------------------- --------------------
Estimated Estimated
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
Obligations of state and
political subdivisions $63,573 $63,476 $57,318 $57,249
U.S. Treasury securities
and obligations of U.S.
government agencies ... 11,444 11,420 6,142 6,077
Other debt securities ... 13,638 13,621 10,017 10,053
------- ------- ------- -------
$88,655 $88,517 $73,477 $73,379
======= ======= ======= =======
The gross realized gains on sales of available-for-sale securities totaled
$31, $77 and $154 for the years ended May 31, 1997, 1996, and 1995, and the
gross realized losses totaled $96, $127 and $203, respectively. Net unrealized
losses are $138 and $98 at May 31, 1997 and 1996, respectively. Marketable
securities are carried at cost which approximates market.
The amortized cost and estimated fair value of debt and marketable
securities at May 31, 1997, 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
Cost Fair Value
---- ----------
Due in one year or less. . . . . . . . . . . $ 45,448 $ 45,438
Due after one year through three years . . . 38,353 38,234
Due after three years. . . . . . . . . . . . 4,854 4,845
----- -----
$ 88,655 $ 88,517
====== ======
- 26 -
<PAGE>
3. PROPERTY, PLANT AND EQUIPMENT
1997 1996
-------- --------
Land . . . . . . . . . . . . . . . . . . . . $ 26,509 $ 24,458
Buildings and improvements . . . . . . . . . 137,758 124,590
Equipment. . . . . . . . . . . . . . . . . . 233,775 198,384
Leasehold improvements . . . . . . . . . . . 1,472 1,016
Construction in progress . . . . . . . . . . 20,709 18,030
------ ------
420,223 366,478
Less accumulated depreciation . . . . . . . . 132,777 113,881
------- -------
$287,446 $252,597
4. OTHER ASSETS
1997 1996
-------- --------
Goodwill . . . . . . . . . . . . . . . . . . $ 58,004 $ 57,962
Service contracts . . . . . . . . . . . . . . 62,240 61,329
Non-compete and consulting agreements . . . . 43,970 47,175
------ ------
164,214 166,466
Less accumulated amortization . . . . . . . . 54,403 55,630
------ ------
109,811 110,836
Other . . . . . . . . . . . . . . . . . . . . 8,591 7,827
-------- --------
$118,402 $118,663
5. LONG-TERM DEBT
1997 1996
------- --------
Secured term notes due through
2003 at an average rate of 6.43%. . . . . . $ 35,390 $ 37,351
Unsecured term notes due through
2002 at an average rate of 7.21%. . . . . . 35,714 38,571
Unsecured notes due through 2009 at an
average rate of 6.07% . . . . . . . . . . . 28,235 29,055
Unsecured revolving note due in 2000
at a rate of 5.94%. . . . . . . . . . . . . 10,000 10,000
Industrial development revenue bonds due
through 2006 at an average rate of 5.25%. . 6,679 7,202
Other long-term obligations . . . . . . . . . 2,172 2,337
-------- --------
118,190 124,516
Less amounts due within one year. . . . . . . 6,733 6,592
-------- --------
$111,457 $117,924
Debt in the amount of $44,110 is secured by assets with a carrying value of
$49,445 at May 31, 1997, and letters of credit in the amount of $10,754.
Maturities of long-term debt during the five years ending May 31, 2002 are:
$6,733, $33,820, $33,976, $5,379 and $7,407, respectively. At May 31, 1997, the
fair value of the Company's outstanding debt approximates its carrying value.
Interest expense is net of capitalization of $551, $435 and $638 for the
years ended May 31, 1997, 1996 and 1995, respectively. Interest paid, net of
amount capitalized, was $8,446, $9,532 and $7,453 for the years ended May 31,
1997, 1996 and 1995, respectively.
- 27 -
<PAGE>
6. LEASES
The Company conducts certain operations from leased facilities and leases
certain equipment. Most leases contain renewal options for periods from one to
ten years. The lease agreements provide for increases in rentals if the options
are exercised based on increases in certain price level factors or prearranged
increases. The minimum rental payments for the five years ending May 31, 2002,
are: $4,496, $3,835, $3,066, $2,431 and $2,131, respectively. Rent expense under
operating leases during the years ended May 31, 1997, 1996 and 1995 was
approximately $5,570, $4,470 and $4,423, respectively.
7. INCOME TAXES
1997 1996 1995
---- ---- ----
Income taxes consist of the
following components:
Current:
Federal . . . . . . . . . . . . . $41,071 $35,001 $29,787
State and local . . . . . . . . . 6,378 5,746 5,389
------- ------- -------
47,449 40,747 35,176
Deferred . . . . . . . . . . . . . . . 8,329 6,300 3,042
------- ------- -------
$55,778 $47,047 $38,218
======= ======= =======
Reconciliation of income tax expense using the statutory rate and actual
income tax expense is as follows:
Income taxes at the U.S. federal
statutory rate . . . . . . . . . $51,317 $42,781 $35,336
State and local income taxes, net
of federal benefit. . . . . . . . 4,902 4,239 3,659
Non-taxable income earned . . . . (1,048) (599) (599)
Tax credits . . . . . . . . . . . (206) (216) (395)
Other . . . . . . . . . . . . . . 813 842 217
------- ------- ------
$55,778 $47,047 $38,218
======= ======= =======
The components of deferred income taxes included on the balance sheets at
May 31, 1997, 1996 and 1995, are as follows:
Deferred tax assets: 1997 1996 1995
---- ---- ----
Employee benefits . . . . . . . $ 5,818 $ 6,936 $ 6,450
Allowance for bad debts and
other . . . . . . . . . . . . 7,496 5,821 6,009
----- ----- -----
13,314 12,757 12,459
Deferred tax liabilities:
In-service inventory. . . . . . 41,022 36,348 32,627
Depreciation . . . . . . . . . 21,083 17,682 15,104
Other . . . . . . . . . . . . . 5,957 4,945 4,646
----- ----- -----
68,062 58,975 52,377
------ ------ ------
Net deferred tax liability . . . . . $54,748 $46,218 $39,918
======= ======= =======
Income taxes paid were $45,207, $40,817 and $35,362 for the years ended May
31, 1997, 1996 and 1995, respectively.
- 28 -
<PAGE>
8. ACQUISITIONS
Information relating to the acquisitions of uniform rental businesses which
were accounted for as purchases is as follows:
1997 1996 1995
---- ---- ----
Number of acquisitions . . . . . 17 3 12
Fair value of assets acquired. . $12,845 $2,407 $52,684
Liabilities assumed and
incurred . . . . . . . . . . . 2,499 100 2,589
------- ------ -------
Total cash paid for
acquisitions . . . . . . . . . $10,346 $2,307 $50,095
======= ====== =======
On February 13, 1995, the Company acquired 80% of the outstanding stock of
Cadet Uniform Services, Ltd., a prominent uniform rental company in Toronto,
Ontario, for approximately $41 million which was financed through borrowings.
The purchase increased the Company's ownership from 20% to 100%.
The results of operations from the acquired businesses are included in the
consolidated statements of income from the dates of acquisition. The unaudited
pro forma results of operations for the years ended May 31, 1997 and 1996,
assuming the acquisitions had occurred on June 1 of each respective year, would
be approximately as follows:
1997 1996
---- ----
Revenues . . . . . . . . . . . $845,632 $740,118
Net income . . . . . . . . . . $ 91,127 $ 75,298
Earnings per share . . . . . . $1.91 $1.60
The unaudited pro forma results of operations are not necessarily
indicative of the actual operating results that would have occurred had the
acquisitions been consummated on June 1 of each respective fiscal year or of
future operating results of the combined companies.
The Company acquired four businesses in fiscal 1997 in exchange for 879,048
shares of common stock. These acquisitions have been accounted for as poolings
of interest. The results of these operations are not material and the
accompanying consolidated financial statements have not been restated.
9. CINTAS PARTNERS' PLAN
The Cintas Partners' Plan (the Plan) is a non-contributory profit sharing
plan and ESOP for the benefit of Company employees who have completed one year
of service. The Plan also includes a 401(k) savings feature covering
substantially all employees. The amount of contributions to the profit-sharing
plan and ESOP, as well as the matching contribution to the 401(k), are made at
the discretion of the Company. Total contributions, including the Company's
matching contributions, were $7,331, $6,188 and $4,956 for the years ended May
31, 1997, 1996 and 1995, respectively.
- 29 -
<PAGE>
10. 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 granted at the fair market value of the
underlying common stock on the date of 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.
The information presented in the following table relates to stock options
granted and outstanding under either the plan adopted in fiscal 1993 or under a
similar plan which expired in June 1993.
Weighted Avg.
Shares Exercise Price
--------- --------------
Outstanding May 31, 1994 (363,671 shares
exercisable) . . . . . . . . . . . . . 1,424,584 $15.97
Granted . . . . . . . . . . . . . . . . 263,700 32.48
Cancelled . . . . . . . . . . . . . . . (99,030) 20.10
Exercised . . . . . . . . . . . . . . . (219,515) 6.72
---------
Outstanding May 31, 1995 (281,359
shares exercisable) . . . . . . . . . 1,369,739 20.32
Granted . . . . . . . . . . . . . . . . 313,750 39.34
Cancelled . . . . . . . . . . . . . . . (28,420) 24.30
Exercised . . . . . . . . . . . . . . . (242,623) 12.95
---------
Outstanding May 31, 1996 (198,006
shares exercisable) . . . . . . . . . 1,412,446 25.73
Granted . . . . . . . . . . . . . . . . 390,050 51.77
Cancelled . . . . . . . . . . . . . . . (63,200) 29.65
Exercised . . . . . . . . . . . . . . . (136,030) 11.65
---------
Outstanding May 31, 1997 (180,336
shares exercisable) . . . . . . . . . 1,603,266 $33.11
========= =====
The following table summarizes information about stock options outstanding
at May 31, 1997.
Outstanding Options Exercisable Options
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contract Exercise Number Exercise
Price Outstanding Life Price Exercisable Price
- -------------- ----------- --------- ------- ----------- --------
$8.17 - $13.33 147,366 1.4 $10.90 100,806 $10.48
21.38 - 31.88 729,000 5.4 25.13 73,780 19.48
33.50 - 43.25 331,950 7.9 38.38 5,750 37.90
48.75 - 62.00 394,950 9.2 51.68 -- --
--------- ---- ------ ------- -------
$8.17 - $62.00 1,603,266 6.5 $33.11 180,336 $15.03
========= === ====== ======= ======
- 30 -
<PAGE>
At May 31, 1997, 3,542,000 shares of common stock are reserved for future
issuance.
Pro forma earnings amounts, prepared under the assumption that the stock
options granted in fiscal 1997 and 1996 were accounted for based on their fair
value as determined under SFAS No. 123, Accounting for Stock-Based Compensation,
are not materially different than reported earnings amounts. The effect of
applying SFAS No. 123 on fiscal 1997 and 1996 is not necessarily indicative of
the effect on future years. SFAS No. 123 does not apply to awards prior to
fiscal 1996 and additional awards in future years are anticipated.
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the results of operations for each of the
quarters within the years ended May 31, 1997 and 1996:
First Second Third Fourth
May 31, 1997 Quarter Quarter Quarter Quarter
- ------------ ------- ------- ------- -------
Revenues from rentals
and sales ............... $192,786 208,568 209,952 228,643
Gross profit .............. $ 78,239 83,871 84,599 92,581
Net income ................ $ 19,697 22,698 22,454 25,991
Earnings per share ........ $ 0.42 0.48 0.47 0.54
Weighted average
number of shares
outstanding (000's)...... 47,266 47,419 47,584 48,258
May 31, 1996
- ------------
Revenues from rentals
and sales ............... $170,343 182,369 182,977 194,441
Gross profit .............. $ 69,256 72,959 73,122 77,983
Net income ................ $ 16,288 18,847 18,524 21,524
Earnings per share ........ $ 0.35 0.40 0.39 0.46
Weighted average
number of shares
outstanding (000's)...... 47,033 47,053 47,122 47,190
- 31 -
<PAGE>
REPORT OF AUDIT COMMITTEE
The Audit Committee (the Committee) of the Board of Directors is composed
of three independent directors. The Committee, which held two audit meetings
during fiscal 1997, oversees the Company's financial reporting process on behalf
of the Board of Directors.
In fulfilling its responsibility, the Committee recommended to the Board of
Directors the selection of the Company's independent auditors. The Committee
discussed with the independent auditors the overall scope and specific plan for
their audits. The Committee also discussed the Company's consolidated financial
statements and the adequacy of the Company's system of internal control.
The Committee meets with the Company's independent auditors, without
management present, to discuss the results of their evaluation of the system of
internal control and the overall quality of the Company's financial reporting.
The meetings are designed to facilitate any private communications with the
Committee desired by the independent auditors.
Roger L. Howe, Chairman
Audit Committee
July 3, 1997
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
The Board of Directors
Cintas Corporation
We have audited the accompanying consolidated balance sheets of Cintas
Corporation as of May 31, 1997 and 1996, and the related consolidated statements
of income, shareholders' equity and cash flows for each of the three years in
the period ended May 31, 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Cintas
Corporation at May 31, 1997 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
May 31, 1997, in conformity with generally accepted accounting principles.
Cincinnati, Ohio
July 3, 1997
- 32 -
<PAGE>
CINTAS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FISCAL 1997 COMPARED TO FISCAL 1996
Fiscal 1997 marked another year of uninterrupted growth for the Company.
Total revenues were $840 million, an increase of 15% over fiscal 1996. Net
income of $91 million and earnings per share of $1.91 represented increases of
21% and 19%, respectively, over the prior fiscal year. Net rental revenues
increased 14%, primarily due to growth in the customer base. Fiscal 1997 had two
less workdays than fiscal 1996. Net sales revenues increased 24% - sales in
existing operations increased 18%, while acquisitions accounted for the
remaining growth. Return on equity of 19% was comparable with the prior year.
Income before taxes increased 20% to $147 million. Net interest expense
decreased $3 million 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 1997
and 1996.
Cash, cash equivalents and marketable securities increased by $20 million,
primarily due to strong cash flow from operations. The cash, cash equivalents
and marketable securities will be used to finance future acquisitions and
capital expenditures. Marketable securities consist primarily of municipal bonds
and federal government securities.
Accounts receivable increased $17 million due to sales growth and
acquisitions made during the year. Inventories increased $8 million due to new
and expanded product lines for rental and catalog customers, as well as first
aid product lines.
Net property, plant and equipment increased by $35 million. In fiscal 1997,
the Company completed construction on four new uniform rental facilities to
accommodate growth in rental operations. At May 31, 1997, the Company had five
uniform rental facilities in various stages of construction.
FISCAL 1996 COMPARED TO FISCAL 1995
During fiscal 1996, total revenues were $730 million, net income was $75
million and earnings per share was $1.60, increasing 19%, 20% and 19%,
respectively. Net rental revenues increased 19%. Revenues in existing rental
operations increased 15% while acquisitions accounted for the remaining growth.
Net sales revenues increased 17%. Return on equity of 19% was comparable with
the prior year.
Income before taxes increased 21% to $122 million. Net interest expense
increased $1 million primarily due to an increase in the amount of long-term
debt associated with the acquisition of Cadet Uniform Services, Ltd., in fiscal
1995. The Company's effective tax rate was 38% in both 1996 and 1995.
Cash, cash equivalents and marketable securities increased by $37 million
primarily due to strong cash flow from operations. The cash, cash equivalents
and marketable securities will be used to finance future acquisitions and
capital expenditures. Marketable securities consist primarily of municipal bonds
and federal government securities.
Inventories decreased $2 million as the Company focused on improving the
efficiency of its distribution operations while still maintaining service levels
for anticipated growth.
- 33 -
<PAGE>
Net property, plant and equipment increased by $25 million. In fiscal 1996,
the Company constructed two new uniform rental facilities to accommodate growth
in rental operations.
FINANCIAL CONDITION
At May 31, 1997, the Company had $103 million in cash, cash equivalents and
marketable securities. The Company's investment policy pertaining to marketable
securities is conservative. Preservation of principal while earning an
attractive yield are the criteria used in making investments. Working capital
increased $45 million to $240 million due primarily to the increase in cash,
cash equivalents, marketable securities, accounts receivable and inventories.
Capital expenditures for fiscal 1997 totaled $68 million. The Company
continues to reinvest profits into land, buildings and equipment in order to
expand capacity for future growth. The Company anticipates that capital
expenditures for fiscal 1998 will approximate $65 million.
The Company's percentage of debt to total capitalization was 19% at May 31,
1997, versus 23% at May 31, 1996.
During the year, the Company paid dividends of $14 million or $0.30 per
share. This dividend is an increase of 20% over that paid in fiscal 1996.
INFLATION AND CHANGING PRICES
Management believes inflation has not had a material impact on the
Company's financial condition or a negative effect on operations.
- 34 -
<PAGE>
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
GERALD V. DIRVIN
RETIRED EXECUTIVE VICE PRESIDENT
AND DIRECTOR OF THE PROCTER & GAMBLE
COMPANY
RICHARD T. FARMER
CHAIRMAN OF THE BOARD
OF THE CORPORATION
SCOTT D. FARMER
PRESIDENT & CHIEF OPERATING OFFICER
OF THE CORPORATION
JAMES J. GARDNER
RETIRED VICE PRESIDENT
OF THE CORPORATION
ROGER L. HOWE
CHAIRMAN OF THE BOARD
OF U.S. PRECISION LENS, INC.
DONALD P. KLEKAMP
SENIOR PARTNER OF KEATING, MUETHING
& KLEKAMP
ROBERT J. KOHLHEPP
CHIEF EXECUTIVE OFFICER
OF THE CORPORATION
JOHN S. LILLARD
RETIRED CHAIRMAN-FOUNDER OF JMB
INSTITUTIONAL REALTY CORPORATION
CORPORATE OFFICERS
RICHARD T. FARMER
CHAIRMAN OF THE BOARD
ROBERT J. KOHLHEPP
CHIEF EXECUTIVE OFFICER
SCOTT D. FARMER
PRESIDENT & CHIEF OPERATING OFFICER
ROBERT R. BUCK
SENIOR VICE PRESIDENT & PRESIDENT -
UNIFORM RENTAL DIVISION
DAVID T. JEANMOUGIN
SENIOR VICE PRESIDENT & SECRETARY
WILLIAM C. GALE
VICE PRESIDENT & CHIEF FINANCIAL OFFICER
KAREN L. CARNAHAN
VICE PRESIDENT & TREASURER
- 35 -
<PAGE>
OPERATING & STAFF OFFICERS
BRUCE L. BURGESS
VICE PRESIDENT
JAMES A. CAIN
VICE PRESIDENT
MIDWEST RENTAL GROUP
JAMES (JAY) CASE
VICE PRESIDENT
SOUTHWEST RENTAL GROUP
JAMES V. CRITCHFIELD
VICE PRESIDENT
NORTHCENTRAL RENTAL GROUP
WILLIAM L. CRONIN
VICE PRESIDENT
NORTHEAST RENTAL GROUP
MICHAEL P. GABURO
VICE PRESIDENT
CLEANROOM DIVISION
ARNOLD GEDMINTAS
VICE PRESIDENT
CANADIAN RENTAL GROUP
WILLIAM W. GOETZ
VICE PRESIDENT
MARKETING & MERCHANDISING
LARRY A. HARMON
VICE PRESIDENT
HUMAN RESOURCES
J. PHILLIP HOLLOMAN
VICE PRESIDENT
RESEARCH & DEVELOPMENT
JOHN S. KEAN III
SENIOR VICE PRESIDENT
SOUTHCENTRAL RENTAL GROUP
JAMES J. KRUPANSKY
VICE PRESIDENT
WESTERN RENTAL GROUP
JOHN W. MILLIGAN
VICE PRESIDENT
GREAT LAKES RENTAL GROUP
ROBERT A. OSWALD
VICE PRESIDENT
DAVID POLLAK, JR.
VICE PRESIDENT
FIRST AID & SAFETY DIVISION
WILLIAM L. PRATT
VICE PRESIDENT
MANUFACTURING & SOURCING
RODGER V. REED
VICE PRESIDENT
NATIONAL ACCOUNT DIVISION
BRUCE E. ROTTE
VICE PRESIDENT
SOUTHEAST RENTAL GROUP
G. THOMAS THORNLEY
VICE PRESIDENT
MANAGEMENT INFORMATION SYSTEMS
- 36 -
<PAGE>
SHAREHOLDER INFORMATION
EXECUTIVE OFFICES 10-K REPORT
Cintas Corporation A copy of the Form 10-K annual
6800 Cintas Boulevard report filed with the Securities
P.O. Box 625737 and Exchange Commission for the year
Cincinnati, Ohio 45262-5737 ended May 31, 1997, is available at
no charge to shareholders. Direct
AUDITORS requests in writing for this report
or other information to:
Ernst & Young LLP
1300 Chiquita Center William C. Gale
250 East Fifth Street Vice President &
Cincinnati, Ohio 45202 Chief Financial Officer
Cintas Corporation
MARKET FOR REGISTRANT'S COMMON STOCK 6800 Cintas Boulevard
P.O. Box 625737
Cintas Corporation Common Stock is Cincinnati, Ohio 45262-5737
traded on the NASDAQ National Market (513) 459-1200
System. The symbol is CTAS.
INFORMATION INTERNET ADDRESS
REGISTRAR AND TRANSFER AGENT
Visit us at our web site at
The Fifth Third Bank http://www.cintas-corp.com
Corporate Trust Services
Mail Drop 1090F5-4129 SECURITY HOLDER INFORMATION
38 Fountain Square Plaza
Cincinnati, Ohio 45263 At May 31, 1997, there were approxi-
(513) 579-5320 mately 1,700 shareholders of record
(800) 837-2755 of the Corporation's Common Stock.
The Company believes that this repre-
ANNUAL MEETING sents approximately 16,000 beneficial
owners.
October 22, 1997
6800 Cintas Boulevard
Cincinnati, Ohio
10:00 a.m.
The following table shows the high and low closing prices by quarter during
the last two fiscal years.
FISCAL 1997 FISCAL 1996
------------------------------- ------------------------------------
Quarter ended High Low Quarter ended High Low
------------- ------ -------- ------------- ------ -------
May 1997 64 3/8 51 May 1996 56 47
February 1997 62 1/4 53 February 1996 50 1/2 41 3/4
November 1996 63 1/2 54 November 1995 48 37 1/2
August 1996 56 49 1/4 August 1995 40 3/8 33 1/2
- 37 -
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
STATE/PROVINCE OF
NAME INCORPORATION
- --------------------------------- -----------------
Cintas Corporation - East Coast Massachusetts
Cintas Corporation - Ohio Ohio
Cintas Corporation No. 1 Ohio
Cintas Corp. No. 5 Michigan
Cintas Corp. No. 13 Pennsylvania
Cintas Corporation No. 41 Maryland
Cintas Sales Corporation Ohio
Cintas Corp. No. 45 North Carolina
Corporate Business Services, Inc. Illinois
Cintas - R.U.S., Inc. South Carolina
Cintas Cleaning Services, Inc. Ohio
Cintas Executive Services, Inc. Nevada
Cadet Uniform Services Limited Ontario, Canada
Cintas Investment Corp. Ontario, Canada
910946 Ontario, Inc. Ontario, Canada
Respond Industries, Inc. Colorado
American First Aid Company Maryland
1202327 Ontario, Inc. Ontario, Canada
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on Form 10-K
of Cintas Corporation of our report dated July 3, 1997, included in the 1997
Annual Report to Shareholders of Cintas Corporation.
Our audits also included the financial statement schedule of Cintas Corporation
listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements as a whole, presents fairly in all
material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statement
Number 33-56623 on Form S-8 pertaining to the Partners' Plan, the Registration
Statement Number 33-23228 on Form S-8 pertaining to the Incentive Stock Option
Plan and Registration Statement Number 33-71124 on Form S-8 pertaining to the
1990 Directors Plan and 1992 Stock Option Plan, of our report dated July 3,
1997, with respect to the financial statements and schedule of Cintas
Corporation incorporated by reference in this Annual Report on Form 10-K for the
year ended May 31, 1997.
Ernst & Young LLP
Cincinnati, Ohio
August 27, 1997
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 14,221,000
<SECURITIES> 88,655,000
<RECEIVABLES> 97,982,000
<ALLOWANCES> 2,821,000
<INVENTORY> 155,920,000
<CURRENT-ASSETS> 355,975,000
<PP&E> 420,223,000
<DEPRECIATION> 132,777,000
<TOTAL-ASSETS> 761,823,000
<CURRENT-LIABILITIES> 116,131,000
<BONDS> 0
0
0
<COMMON> 45,039,000
<OTHER-SE> 467,337,000
<TOTAL-LIABILITY-AND-EQUITY> 761,823,000
<SALES> 100,742,000
<TOTAL-REVENUES> 839,949,000
<CGS> 84,062,000
<TOTAL-COSTS> 500,695,000
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<INTEREST-EXPENSE> 7,970,000
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<INCOME-TAX> 55,778,000
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