FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 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 December 31, 1996
Common Stock, no par value 47,472,870
<PAGE>
CINTAS CORPORATION
INDEX
Page No.
Part I. Financial Information:
Consolidated Condensed Balance Sheets -
November 30, 1996 and May 31, 1996 3
Consolidated Condensed Statements of Income -
Three Months and Six Months Ended November 30, 1996 and 1995 4
Consolidated Condensed Statements of Cash Flows -
Six Months Ended November 30, 1996 and 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 9
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<PAGE>
CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except share data)
<TABLE>
<CAPTION>
November 30, May 31,
1996 1996
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,028 $ 9,066
Marketable securities 86,962 73,477
Accounts receivable (net) 88,719 78,244
Inventories 39,274 34,678
Uniforms and other rental items in
service 106,705 100,307
Prepaid expenses 1,656 1,730
Total current assets 334,344 297,502
Property, plant and equipment, at cost, net 268,908 252,597
Other assets 117,689 118,663
$720,941 $668,762
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 27,617 $ 19,363
Accrued liabilities 43,456 49,168
Income taxes -
Current 4,315 ----
Deferred 31,176 27,471
Long-term debt due within one year 6,424 6,592
Total current liabilities 112,988 102,594
Long-term debt due after one year 113,244 117,924
Deferred income taxes 20,320 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, 47,465,173
shares issued and outstanding
(47,199,299 at May 31, 1996) 44,574 43,657
Retained earnings 430,280 386,673
Foreign currency translation adjustment (465) (833)
Total shareholders' equity 474,389 429,497
$720,941 $668,762
</TABLE>
See accompanying notes.
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<PAGE>
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
November 30, November 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Net rentals $ 181,892 $ 159,855 $ 356,391 $ 314,123
Net sales 26,676 22,514 44,963 38,589
208,568 182,369 401,354 352,712
Costs and expenses (income):
Cost of rentals 102,379 90,712 200,843 177,988
Cost of sales 22,318 18,698 38,401 32,509
Selling and
administrative
expenses 46,494 40,252 91,715 80,970
Interest income (1,056) (447) (1,910) (868)
Interest expense 2,022 2,293 4,011 4,803
172,157 151,508 333,060 295,402
Income before income
taxes 36,411 30,861 68,294 57,310
Income taxes 13,713 12,014 25,899 22,175
Net income $ 22,698 $ 18,847 $ 42,395 $ 35,135
Earnings per share $ .48 $ .40 $ .90 $ .75
Weighted average
number of shares
outstanding 47,419 47,053 47,343 47,043
</TABLE>
See accompanying notes.
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<PAGE>
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
November 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 42,395 $35,135
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 16,845 14,037
Amortization of deferred charges 5,159 6,275
Deferred income taxes 5,137 4,294
Change in current assets and liabilities, net of
acquisitions of businesses:
Accounts receivable (10,029) (8,490)
Inventories (10,814) (7,112)
Prepaid expenses 95 166
Accounts payable 7,951 3,627
Accrued liabilities (5,928) (452)
Income taxes payable 4,315 (524)
Net cash provided by operating activities 55,126 46,956
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 248 ----
Capital expenditures 31,719) (28,011)
Proceeds from sale or redemption of marketable
securities 18,608 42,586
Purchase of marketable securities (32,093) (57,588)
Acquisitions of businesses, net of cash acquired (3,744) (2,289)
Other (876) (628)
Net cash used in investing activities (49,576) (45,930)
Cash flows from financing activities:
Proceeds from issuance of long-term debt ----- 408
Repayment of long-term debt (4,848) (1,935)
Issuance of common stock 894 423
Other 366 8
Net cash used in financing activities (3,588) (1,096)
Net increase (decrease) in cash and cash equivalents 1,962 (70)
Cash and cash equivalents at beginning of period 9,066 6,685
Cash and cash equivalents at end of period $11,028 $ 6,615
</TABLE>
See accompanying notes.
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<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, 1996.
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. The Company adopted SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, in the
first quarter of fiscal 1997. The adoption of this Statement did not
have a material financial impact on the Company.
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<PAGE>
CINTAS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total revenues increased 14% for the three and six months ended November 30,
1996 over the same periods in fiscal 1996. Net rental revenues increased 14%
and 13% for the three and six months ended November 30, 1996, respectively,
over the same periods in the prior fiscal year, due primarily to growth in the
customer base and price increases in established operations. The first
quarter and first six months of fiscal 1997 had one less workday than the
similar periods of fiscal 1996. Second quarter revenues from the sale of
uniforms and other direct sale items increased 18% over the prior years second
quarter. For the six months ended November 30, 1996, sales increased 17% over
the same period in fiscal 1996. The increase in revenues from the sale of
uniforms and other direct sale items is principally a result of an increase in
unit sales.
Net income increased 20% and 21% for the three and six months ended November
30, 1996, respectively, over the same periods in fiscal 1996.
Net interest expense (interest expense less interest income) was $966,000 and
$2,101,000 for the three and six months ended November 30, 1996 compared to
$1,846,000 and $3,935,000, respectively, for the same two periods in the
prior fiscal year. 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 of fiscal 1997 compared to 39% in
the same periods in fiscal 1996.
Cash, cash equivalents and marketable securities increased by $15 million at
November 30, 1996 from May 31, 1996, 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.
Net property, plant and equipment increased by $16 million from May 31, 1996
to November 30, 1996. At the end of the second quarter of fiscal 1997, the
Company had five uniform rental facilities in various stages of construction.
During the first quarter of fiscal 1997, the Companys new distribution center
in Montgomery, Alabama began operations. The new distribution center will
service the Companys operations in the South, Southeast and Southwest regions
of the United States. The expansion into Montgomery, as well as the expansion
of the Cincinnati distribution center completed in fiscal 1996, frees up
capacity in Cincinnati in order to more effectively service growth in the
Midwest, on the East Coast and Canada.
Financial Condition
At November 30, 1996, the Company had $98 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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<PAGE>
CINTAS CORPORATION
Part II. Other Information
Item 4. Submission of matters to a vote of security holders
The Annual Shareholders meeting of the Company was held
on October 10, 1996, at which the following issues were
adopted by shareholders:
Issue No. 1
Authority to establish the number of Directors to be elected at the
Meeting at eight.
FOR 38,857,448 AGAINST 59,343 ABSTAIN 42,893 BROKER NON-VOTES 0
Issue No. 2
Authority to elect eight Directors.
<TABLE>
<CAPTION>
Name Shares For Shares - Shares Broker
Withheld Authority Abstained Non-Votes
<S> <C> <C> <C> <C>
Richard T. Farmer 38,654,421 305,263 0 0
Scott D. Farmer 38,654,193 305,491 0 0
Gerald V. Dirvin 38,713,553 246,131 0 0
James J. Gardner 38,653,293 306,391 0 0
Roger L. Howe 38,713,593 246,091 0 0
Donald P. Klekamp 38,479,183 480,501 0 0
Robert J. Kohlhepp 38,654,415 305,270 0 0
John S. Lillard 38,712,893 246,791 0 0
</TABLE>
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<PAGE>
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: January 14, 1997 William C. Gale
William C. Gale
Vice President - Finance
(Chief Accounting Officer)
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<PAGE>
CINTAS CORPORATION
Part II. Other Information
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: January 14, 1997
William C. Gale
Vice President - Finance
(Chief Accounting Officer)
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 11,028,000
<SECURITIES> 86,962,000
<RECEIVABLES> 91,547,000
<ALLOWANCES> 2,828,000
<INVENTORY> 145,979,000
<CURRENT-ASSETS> 334,344,000
<PP&E> 393,133,000
<DEPRECIATION> 124,225,000
<TOTAL-ASSETS> 720,941,000
<CURRENT-LIABILITIES> 112,988,000
<BONDS> 0
0
0
<COMMON> 44,574,000
<OTHER-SE> 429,815,000
<TOTAL-LIABILITY-AND-EQUITY> 720,941,000
<SALES> 44,963,000
<TOTAL-REVENUES> 401,354,000
<CGS> 38,401,000
<TOTAL-COSTS> 239,244,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,011,000
<INCOME-PRETAX> 68,294,000
<INCOME-TAX> 25,899,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,395,000
<EPS-PRIMARY> .90
<EPS-DILUTED> 0
</TABLE>
