FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1997
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
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(Exact name of registrant as specified in its charter)
WASHINGTON 31-1188630
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(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
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(Address of principal executive offices)
(Zip Code)
(513) 459-1200
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(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 September 30, 1997
- --------------------------------------- ------------------------------
Common Stock, no par value 48,734,050
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CINTAS CORPORATION
INDEX
Page No.
Part I. Financial Information:
Consolidated Condensed Balance Sheets -
August 31, 1997 and May 31, 1997 3
Consolidated Condensed Statements of Income -
Three Months Ended August 31, 1997 and 1996 4
Consolidated Condensed Statements of Cash Flows -
Three Months Ended August 31, 1997 and 1996 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)
August 31, May 31,
1997 1997
----------- ---------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 12,385 $ 14,221
Marketable securities 92,234 88,655
Accounts receivable (net) 100,896 95,161
Inventories 45,622 43,076
Uniforms and other rental items in service 115,131 112,844
Prepaid expenses 1,947 2,018
--------- ---------
Total current assets 368,215 355,975
Property, plant and equipment, at cost, net 297,776 287,446
Other assets 118,566 118,402
--------- ---------
$ 784,557 $ 761,823
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,589 $ 20,719
Accrued liabilities 40,769 55,336
Income taxes -
Current 9,761 454
Deferred 35,927 32,889
Long-term debt due within one year 6,688 6,733
--------- ---------
Total current liabilities 115,734 116,131
Long-term debt due after one year 109,741 111,457
Deferred income taxes 22,995 21,859
Shareholders' equity:
Preferred stock, no par value,
100,000 shares authorized, none outstanding -- --
Common stock, no par value,
120,000,000 shares authorized,
48,594,597 shares issued and outstanding
(48,266,789 at May 31, 1997) 45,269 45,039
Retained earnings 492,198 468,411
Foreign currency translation adjustment (1,380) (1,074)
--------- ---------
Total shareholders' equity 536,087 512,376
--------- ---------
$ 784,557 $ 761,823
========= =========
See accompanying notes.
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CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per share data)
Three Months Ended
August 31,
--------------------------
1997 1996
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Revenues:
Net rentals $ 202,999 $ 174,499
Other service revenue 32,502 18,287
--------- ---------
235,501 192,786
Costs and expenses (income):
Cost of rentals 112,671 98,464
Cost of other service revenue 25,890 16,083
Selling and administrative expenses 57,525 45,221
Interest income (1,108) (854)
Interest expense 1,820 1,989
--------- ---------
196,798 160,903
--------- ---------
Income before income taxes 38,703 31,883
Income taxes 14,645 12,186
--------- ---------
Net income $ 24,058 $ 19,697
========= =========
Earnings per share $ .50 $ .42
========= =========
Weighted average number of shares outstanding 48,406 47,266
========= =========
See accompanying notes.
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CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
August 31,
---------------------
Cash flows from operating activities: 1997 1996
- ------------------------------------ -------- ---------
Net income $ 24,058 $ 19,697
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 9,966 8,258
Amortization of deferred charges 3,012 2,993
Deferred income taxes 4,174 4,331
Change in current assets and liabilities,
net of acquisitions of businesses:
Accounts receivable (4,592) (1,134)
Inventories (1,820) (2,823)
Uniforms and other rental items in service (2,287) (1,701)
Prepaid expenses 212 231
Accounts payable 566 2,492
Accrued liabilities (14,628) (12,900)
Income taxes payable 9,307 6,490
-------- --------
Net cash provided by operating activities 27,968 25,934
Cash flows from investing activities:
- ------------------------------------
Proceeds from sale of property, plant and equipment 40 120
Capital expenditures (20,125) (14,367)
Proceeds from sale or redemption of marketable securities 18,922 6,182
Purchase of marketable securities (22,502) (14,501)
Acquisitions of businesses, net of cash acquired (4,558) (360)
Other 450 (277)
-------- --------
Net cash used in investing activities (27,773) (23,203)
Cash flows from financing activities:
- ------------------------------------
Repayment of long-term debt (1,955) (450)
Issuance of common stock 230 247
Other (306) (18)
-------- --------
Net cash used in financing activities (2,031) (221)
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Net increase (decrease) in cash and cash equivalents (1,836) 2,510
Cash and cash equivalents at beginning of period 14,221 9,066
-------- --------
Cash and cash equivalents at end of period $ 12,385 $ 11,576
======== ========
See accompanying notes.
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CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated condensed financial statements of Cintas Corporation (the
"Company") included herein have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. While the Company believes that the disclosures presented
are adequate to make the information not misleading, it is suggested that
these consolidated condensed financial statements be read in conjunction
with the financial statements and notes included in the Company's most
recent annual report for the fiscal year ended May 31, 1997.
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.
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<PAGE>
CINTAS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total revenues increased 22% in the first quarter of fiscal 1998 over the same
period in fiscal 1997. Net rental revenue increased 16% for the three months
ended August 31, 1997 over the same period in the prior fiscal year, due
primarily to growth in the customer base. In past filings, the Company has
reported revenue between rental revenues and sales revenues. Sales revenues was
the terminology to distinguish revenues which were nonrental in nature. The
nature of the activity previously classified as sales includes a significant
service element for the customer, and thus this category of revenues is now
called "Other Service Revenue." First quarter revenues from other services
increased 78% over the prior year's first quarter, principally as a result of
the addition of first aid services to the Company's product offerings, and to a
one-time inventory transaction which increased total revenue growth by 2%.
Net income and earnings per share increased 22% and 19%, respectively, for the
three months ended August 31, 1997, over the same period in fiscal 1997.
Net interest expense (interest expense less interest income) was $712,000 for
the first quarter of fiscal 1998 compared to $1,135,000 in the first quarter of
fiscal 1997. Net interest expense has decreased 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 periods.
Cash, cash equivalents and marketable securities increased by $2 million at
August 31, 1997 from May 31, 1997. The cash, cash equivalents and marketable
securities will be used to finance future acquisitions and capital expenditures.
Net property, plant and equipment increased by $10 million from May 31, 1997 to
August 31, 1997. At the end of the first quarter of fiscal 1998, the Company had
six uniform rental facilities in various stages of construction.
Financial Condition
At August 31, 1997, the Company had $105 million in cash, cash equivalents and
marketable securities. 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.
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CINTAS CORPORATION
Part II. Other Information
Item 2. Changes in Securities
(c.) During the quarterly period ended August 31, 1997, the
registrant issued 304,164 shares of Common Stock for
companies being acquired in five separate transactions.
The number of owners in each transaction was as
follows: transaction #1 - one owner, transaction #2 -
one owner, transaction #3 - one owner, transaction #4 -
three owners and transaction #5 - one owner. These
issuances were exempt from the registration
requirements of the Securities Act of 1933 as private
offerings pursuant to Section 4.2 of that Act.
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: October 8, 1997 /s/ William C. Gale
----------------------------------
William C. Gale
Vice President and
Chief Financial Officer
(Chief Accounting Officer)
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> AUG-31-1997
<CASH> 12,385,000
<SECURITIES> 92,234,000
<RECEIVABLES> 105,055,000
<ALLOWANCES> 4,159,000
<INVENTORY> 160,753,000
<CURRENT-ASSETS> 368,215,000
<PP&E> 440,402,000
<DEPRECIATION> 142,626,000
<TOTAL-ASSETS> 784,557,000
<CURRENT-LIABILITIES> 115,734,000
<BONDS> 0
0
0
<COMMON> 45,269,000
<OTHER-SE> 490,818,000
<TOTAL-LIABILITY-AND-EQUITY> 784,557,000
<SALES> 32,502,000
<TOTAL-REVENUES> 235,501,000
<CGS> 25,890,000
<TOTAL-COSTS> 138,561,000
<OTHER-EXPENSES> 57,525,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,820,000
<INCOME-PRETAX> 38,703,000
<INCOME-TAX> 14,645,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,058,000
<EPS-PRIMARY> .50
<EPS-DILUTED> 0
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