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, 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
(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 22, 1997
- --------------------------------------- -----------------------------
Common Stock, no par value 97,800,753
<PAGE>
CINTAS CORPORATION
INDEX
Page No.
Part I. Financial Information:
Consolidated Condensed Balance Sheets -
November 30, 1997 and May 31, 1997 3
Consolidated Condensed Statements of Income -
Three Months and Six Months Ended November 30, 1997 and 1996 4
Consolidated Condensed Statements of Cash Flows -
Six Months Ended November 30, 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
<PAGE>
CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except share data)
November 30, May 31,
1997 1997
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 16,020 $ 14,221
Marketable securities 83,825 88,655
Accounts receivable (net) 113,041 95,161
Inventories 51,599 43,076
Uniforms and other rental items in service 125,505 112,844
Prepaid expenses 2,378 2,018
---------- -----------
Total current assets 392,368 355,975
Property, plant and equipment, at cost, net 313,175 287,446
Other assets 117,453 118,402
------- -------
$822,996 $761,823
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,282 $ 20,719
Accrued liabilities 47,460 55,336
Income taxes -
Current 4,941 454
Deferred 39,234 32,889
Long-term debt due within one year 6,872 6,733
---------- --------
Total current liabilities 126,789 116,131
Long-term debt due after one year 108,964 111,457
Deferred income taxes 23,590 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,
97,573,749 shares issued and outstanding
(96,533,578 at May 31, 1997) 45,660 45,039
Retained earnings 519,742 468,411
Foreign currency translation adjustment (1,749) (1,074)
--------- --------
Total shareholders' equity 563,653 512,376
-------- --------
$822,996 $761,823
======== ========
See accompanying notes.
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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,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Net rentals $ 212,302 $181,892 $ 415,301 $ 356,391
Other service revenue 39,682 26,676 72,184 44,963
------- ------- ------- -------
251,984 208,568 487,485 401,354
Costs and expenses (income):
Cost of rentals 118,979 102,379 231,650 200,843
Cost of other service revenue 30,919 22,318 56,809 38,401
Selling and administrative expenses 56,748 46,494 114,273 91,715
Interest income (1,202) (1,056) (2,310) (1,910)
Interest expense 1,644 2,022 3,464 4,011
----- ----- ----- -----
207,088 172,157 403,886 333,060
Income before income taxes 44,896 36,411 83,599 68,294
Income taxes 16,920 13,713 31,565 25,899
------ ------ ------ ------
Net income $ 27,976 $ 22,698 $ 52,034 $ 42,395
========== ========= ======== =========
Earnings per share $ .29 $ .24 $ .54 $ .45
========== ========= ======== =========
Weighted average number of shares
outstanding 97,472 94,839 97,138 94,685
========== ========== ======= =========
</TABLE>
See accompanying notes.
<PAGE>
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
November 30,
Cash flows from operating activities: 1997 1996
Net income $ 52,034 $ 42,395
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 20,356 16,845
Amortization of deferred charges 5,631 5,159
Deferred income taxes 8,058 5,137
Change in current assets and liabilities,
net of acquisitions of businesses:
Accounts receivable (13,201) (10,029)
Inventories (5,426) (4,596)
Uniforms and other rental items in service (12,600) (6,218)
Prepaid expenses (290) 95
Accounts payable 3,499 7,951
Accrued liabilities (8,910) (5,928)
Income taxes payable 4,487 4,315
------ ------
Net cash provided by operating activities 53,638 55,126
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 795 248
Capital expenditures (42,823) (31,719)
Proceeds from sale or redemption of marketable securities 39,342 18,608
Purchase of marketable securities (34,512) (32,093)
Acquisitions of businesses, net of cash acquired (5,445) (3,744)
Other 1,207 (876)
----- -----
Net cash used by investing activities (41,436) (49,576)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 8 -----
Repayment of long-term debt (9,015) (4,848)
Issuance of common stock 522 894
Repurchase of common stock (1,282) -----
Other (636) 366
------- ------
Net cash used in financing activities (10,403) (3,588)
Net increase in cash and cash equivalents 1,799 1,962
Cash and cash equivalents at beginning of period 14,221 9,066
------ ------
Cash and cash equivalents at end of period $16,020 $11,028
======= =======
See accompanying notes.
<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, 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.
3. On October 22, 1997, the Company announced a 2-for-1 split of its common
stock. The stock split was distributed on November 18, 1997 to shareholders of
record on November 3, 1997. All share and per share data contained herein has
been adjusted to reflect the stock split.
<PAGE>
CINTAS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total revenues increased 21% for the three and six months ended November 30,
1997 over the same periods in fiscal 1997. Net rental revenue increased 17% for
the three and six months ended November 30, 1997 over the same periods in the
prior fiscal year, due primarily to growth in the customer base. Second quarter
revenues from other services increased 49% over the prior year=s second quarter.
For the six months ended November 30, 1997 these revenues increased 61% over the
same period in fiscal 1997. These increases are a result of the addition of
first aid supplies to the Company=s product offerings in addition to increased
catalog and national account sales.
Net income increased 23% for the three and six months ended November 30, 1997,
over the same period in fiscal 1997. Earnings per share increased 21% and 20%
respectively, for the three and six months ended November 30, 1997, over the
same periods in fiscal 1997.
Net interest expense (interest expense less interest income) was $442,000 and
$1,154,000 respectively, for the three and six months ended November 30, 1997
compared to $966,000 and $2,101,000 respectively, for the same 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 from the prior year) 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 1998
as well as fiscal 1997.
Cash, cash equivalents and marketable securities decreased by $3 million at
November 30, 1997 from May 31, 1997 primarily due to higher capital
expenditures. The cash, cash equivalents and marketable securities will be used
to finance future acquisitions and capital expenditures.
Net property, plant and equipment increased by $26 million from May 31, 1997 to
November 30, 1997. At the end of the second quarter of fiscal 1998, the Company
had eleven uniform rental facilities in various stages of construction.
Financial Condition
At November 30, 1997, the Company had $100 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.
<PAGE>
CINTAS CORPORATION
Part II. Other Information
Item 2. Changes in Securities
(c.) During the quarterly period ended November 30, 1997,
the registrant issued 307,376 shares of Common Stock
for companies being acquired in four separate
transactions to the owners of those companies
numbering one, two, one and one, respectively. 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 4. Submission of matters to a vote of security holders
The Annual Shareholder's meeting of the Company was held on
October 22, 1997, at which the following issues were voted
upon by shareholders:
Issue No. 1
Authority to establish the number of Directors to be elected at the
Meeting at eight.
FOR 43,783,112 AGAINST 58,488 ABSTAIN 66,155 BROKER NON-VOTES 0
---------- --------- --------- -----
Issue No. 2
Authority to elect eight Directors.
Name Shares For Shares - Shares Broker
Withheld Authority Abstained Non-Votes
Richard T. Farmer 43,538,624 369,131 0 0
Scott D. Farmer 43,538,819 368,936 0 0
Gerald V. Dirvin 43,538,744 369,011 0 0
James J. Gardner 43,538,459 369,296 0 0
Roger L. Howe 43,538,759 368,996 0 0
Donald P. Klekamp 43,538,359 369,396 0 0
Robert J. Kohlhepp 43,538,819 368,936 0 0
John S. Lillard 43,538,859 368,896 0 0
- -------------------- --------------- ------------------- ---------- -----------
Issue No. 3
Shareholder proposal regarding "soft dollar" political contributions.
FOR 1,814,319 AGAINST 36,350,077 ABSTAIN 721,805 BROKER NON-VOTES 5,021,554
--------- ---------- ------- ---------
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: December 29, 1997 /s/ William C. Gale
-------------------------
William C. Gale
Vice President and Chief Financial Officer
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> NOV-30-1997
<CASH> 16,020,000
<SECURITIES> 83,825,000
<RECEIVABLES> 117,107,000
<ALLOWANCES> 4,066,000
<INVENTORY> 177,104,000
<CURRENT-ASSETS> 392,368,000
<PP&E> 466,530,000
<DEPRECIATION> 153,355,000
<TOTAL-ASSETS> 822,996,000
<CURRENT-LIABILITIES> 126,789,000
<BONDS> 0
0
0
<COMMON> 45,660,000
<OTHER-SE> 517,993,000
<TOTAL-LIABILITY-AND-EQUITY> 822,996,000
<SALES> 39,682,000
<TOTAL-REVENUES> 251,984,000
<CGS> 30,919,000
<TOTAL-COSTS> 149,898,000
<OTHER-EXPENSES> 56,748,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,644,000
<INCOME-PRETAX> 44,896,000
<INCOME-TAX> 16,920,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,976,000
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0
</TABLE>
