FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 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 March 31, 1997
Common Stock, no par value 48,260,627
<PAGE>
CINTAS CORPORATION
INDEX
Page No.
Part I. Financial Information:
Consolidated Condensed Balance Sheets-
February 28, 1997 and May 31, 1996 3
Consolidated Condensed Statements of Income-
Three Months and Nine Months Ended
February 28, 1997 and February 29, 1996 4
Consolidated Condensed Statements of Cash Flows-
Nine Months Ended February 28, 1997 and
February 29, 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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<PAGE>
CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except share data)
<TABLE>
<CAPTION>
February 28, May 31,
1997 1996
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,003 $ 9,066
Marketable securities 98,436 73,477
Accounts receivable (net) 85,642 78,244
Inventories 42,504 34,678
Uniforms and other rental items in
service 107,141 100,307
Prepaid expenses 1,869 1,730
Total current assets 343,595 297,502
Property, plant and equipment, at cost, net 277,130 252,597
Other assets 121,122 118,663
$741,847 $668,762
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,321 $ 19,363
Accrued liabilities 50,599 49,168
Income taxes:
Current 4,997 ----
Deferred 30,385 27,471
Long-term debt due within one year 6,666 6,592
Total current liabilities 112,968 102,594
Long-term debt due after one year 112,449 117,924
Deferred income taxes 19,616 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, 48,130,488
shares issued and outstanding
(47,199,299 at May 31, 1996) 44,706 43,657
Retained earnings 452,735 386,673
Foreign currency translation adjustment (627) (833)
Total shareholders' equity 496,814 429,497
$741,847 $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 Nine months ended
February 28, February 29, February 28, February 29,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Net rentals $ 185,439 $ 162,485 $ 541,830 $ 476,608
Net sales 24,513 20,492 69,476 59,081
209,952 182,977 611,306 535,689
Costs and exp enses (income):
Cost of rentals 105,133 92,971 305,976 270,959
Cost of sales 20,220 16,884 58,621 49,393
Selling and
administrative
expenses 47,439 41,319 139,154 122,289
Interest income (1,161) (817) (3,071) (1,685)
Interest expense 2,007 2,320 6,018 7,123
173,638 152,677 506,698 448,079
Income before income
taxes 36,314 30,300 104,608 87,610
Income taxes 13,860 11,776 39,759 33,951
Net income $ 22,454 $ 18,524 $ 64,849 $53,659
Earnings per share $ 0.47 $ 0.39 $ 1.37 $ 1.14
Weighted average
number of shares
outstanding 47,584 47,122 47,420 47,069
</TABLE>
See accompanying notes.
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<PAGE>
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
February 28, February 29,
Cash flows from operating activities: 1997 1996
<S> <C> <C>
Net income $ 64,849 $ 53,659
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 25,950 21,394
Amortization of deferred charges 8,838 9,350
Deferred income taxes 3,642 2,880
Change in current assets and liabilities,
net of acquisitions of businesses:
Accounts receivable (6,952) (7,846)
Inventories (14,480) (5,875)
Prepaid expenses (118) (393)
Accounts payable 655 143
Accrued liabilities 1,169 7,201
Income taxes payable 4,997 (146)
Net cash provided by operating activities 88,550 80,367
Cash flows from investing activities:
Proceeds from sale of property, plant and
equipment 299 ----
Capital expenditures (49,006) (41,629)
Proceeds from sale or redemption of
marketable securities 25,820 52,113
Purchase of marketable securities (50,778) (79,304)
Acquisitions of businesses, net of cash
acquired (8,570) (2,289)
Other (3,208) (1,830)
Net cash used in investing activities (85,443) (72,939)
Cash flows from financing activities:
Proceeds from issuance of long-term debt ---- 408
Repayment of long-term debt (5,401) (4,498)
Issuance of common stock 1,026 682
Other 205 850
Net cash used in financing activities (4,170) (2,558)
Net increase (decrease) in cash and cash
equivalents (1,063) 4,870
Cash and cash equivalents at beginning of
period 9,066 6,685
Cash and cash equivalents at end of period $ 8,003 $11,555
</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 15% and 14% for the three and nine months ended
February 28, 1997 respectively, over the same periods in fiscal 1996.
Net rental revenues increased 14% for the three and nine months ended
February 28, 1997 over the same periods in the prior fiscal year, due
primarily to growth in the customer base. The first nine months of
fiscal 1997 had one less workday than the similar period of fiscal 1996.
Third quarter revenues from the sale of uniforms and other direct sale
items increased 20% over the prior year's third quarter. For the nine
months ended February 28, 1997, sales increased 18% 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 21% for the three and nine months ended February
28, 1997, over the same periods in fiscal 1996.
Net interest expense (interest expense less interest income) was
$846,000 and $2,947,000 for the three and nine months ended February 28,
1997 compared to $1,503,000 and $5,438,000, 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 $24
million at February 28, 1997 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 $25 million from May 31,
1996 to February 28, 1997. At the end of the third quarter of fiscal
1997, the Company had five uniform rental facilities in various stages
of construction.
During the first quarter of fiscal 1997, the Company's new distribution
center in Montgomery, Alabama began operations. The new distribution
center will service the Company's operations in the South, Southeast and
Southwest regions of the United States. The expansion into Montgomery,
as well as 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 February 28, 1997, the Company had $106 million in cash, cash
equivalents and marketable securities. The Company believes that its
current cash position, funds anticipated to be generated form 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 2. Changes in Securities
(c.) During the quarterly period ended February 28,
1997, the registrant issued 644,160 shares of
Common Stock for companies being acquired.
These issuances were exempt from the
registration requirements of the Securities Act
of 1933 as private offerings pursuant to Section
4.7 of that Act.
Item 5. Other Information
On February 18, 1997, the registrant declared an
annual cash dividend of $.30 per share on outstanding
common stock, a 20% increase over the dividend paid in
the prior year. The dividend was payable on April 4,
1997, to shareholders of record as of March 7, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibit Index
Exhibit Number Description of Exhibit
27 Financial Data Schedule
(b.) No reports were filed on Form 8-K during the
quarter.
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CINTAS CORPORATION
(Registrant)
Date: April 9, 1997 William C. Gale
William C. Gale
Vice President - Finance
(Chief Accounting
Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 8,003,000
<SECURITIES> 98,436,000
<RECEIVABLES> 88,931,000
<ALLOWANCES> 3,289,000
<INVENTORY> 149,645,000
<CURRENT-ASSETS> 343,595,000
<PP&E> 404,139,000
<DEPRECIATION> 127,010,000
<TOTAL-ASSETS> 741,847,000
<CURRENT-LIABILITIES> 112,968,000
<BONDS> 0
0
0
<COMMON> 44,706,000
<OTHER-SE> 452,108,000
<TOTAL-LIABILITY-AND-EQUITY> 741,847,000
<SALES> 69,476,000
<TOTAL-REVENUES> 611,306,000
<CGS> 58,621,000
<TOTAL-COSTS> 364,597,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,018,000
<INCOME-PRETAX> 104,608,000
<INCOME-TAX> 39,759,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,849,000
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 0
</TABLE>
