SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check
the appropriate box: [x] Preliminary Proxy Statement [ ] Confidential, for Use
of the Commission Only (as permitted by Rule 14a-(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Cintas Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined)
4) Proposed maximum aggregate value of transaction:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identity the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
FRONT OF CARD
CINTAS CORPORATION PROXY FOR ANNUAL MEETING
6800 CINTAS BLVD., P.O. BOX 625737, CINCINNATI, OHIO 45262-5737
The undersigned hereby appoints RICHARD T. FARMER, ROBERT J. KOHLHEPP,
and WILLIAM C. GALE, or any of them, proxies of the undersigned, each with the
power of substitution, to vote all shares of Common Stock which the undersigned
would be entitled to vote at the Annual Meeting of Shareholders of Cintas
Corporation to be held October 21, 1998, at 9:00 a.m. (Eastern Time) at The
Fifth Third Bank, 38 Fountain Square, Fifth Floor, Cincinnati, Ohio 45202 and at
any adjournment of such Meeting as specified below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING
PROPOSALS:
1. Authority to establish the number of Directors to be elected at the Meeting
at eight.
FOR AGAINST ABSTAIN
2. Authority to elect eight nominees listed below.
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees listed
below below)
Richard T. Farmer; Robert J. Kohlhepp; Gerald V. Dirvin; Scott D. Farmer; James
J. Gardner; Roger L. Howe; Donald P. Klekamp; John S. Lillard
WRITE THE NAME OF ANY NOMINEE(S) FOR ---------------------------------
WHOM AUTHORITY TO VOTE IS WITHHELD ---------------------------------
(Continued on other side)
<PAGE>
BACK OF CARD
3. Amendment to articles of incorporation to increase authorized shares of
Common Stock to 300 million shares.
FOR AGAINST ABSTAIN
4. In their discretion the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2 AND 3.
___________________________, 1998 _______________________________
- - ------------------------------
Important: Please sign exactly as
name appears hereon indicating,
where proper, official position or
representative capacity. In the
case of joint holders, all should
sign.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Dear Shareholder:
We are pleased to invite you to attend our 1998 Annual Shareholders'
Meeting. The meeting will be held at 9:00 a.m., Eastern Time, at The Fifth Third
Bank, 38 Fountain Square, Fifth Floor, Cincinnati, Ohio, on Wednesday, October
21, 1998.
The purposes of this Annual Meeting are:
1. To establish the number of Directors to be elected at eight;
2. To elect eight Directors;
3. To amend the Articles of Incorporation to increase authorized shares
of Common Stock to 300 million shares.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Following the formal meeting, we will discuss the Company's operations
during the last year and our plans for the future and answer your questions
regarding the Company. Board members and other officers of the Company will also
be available to discuss the Company's business with you.
Yours truly,
David T. Jeanmougin,
Secretary
Dated: August 31, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE, SIGN AND PROMPTLY
RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE. PROXIES MAY BE REVOKED AT ANY
TIME PRIOR TO THE MEETING BY WRITTEN NOTICE OF REVOCATION DELIVERED TO THE
COMPANY'S SECRETARY, THE SUBMISSION OF A LATER PROXY OR BY ATTENDING THE MEETING
AND VOTING IN PERSON.
<PAGE>
CINTAS CORPORATION
6800 CINTAS BOULEVARD
P.O. BOX 625737
CINCINNATI, OHIO 45262-5737
TELEPHONE (513) 459-1200
--------------------------------------
P R O X Y S T A T E M E N T
ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 21, 1998
INTRODUCTION
The enclosed Proxy is solicited by the Board of Directors of Cintas
Corporation for use at the Annual Meeting of Shareholders to be held on October
21, 1998, and at any adjournment of the meeting. The approximate mailing date of
the Proxy Statement and the accompanying proxy card is August 31, 1998.
VOTING AT ANNUAL MEETING
GENERAL
Shareholders may vote in person or by proxy at the Shareholders'
Meeting. Proxies given may be revoked at any time prior to the meeting by filing
with the Company's Secretary either a written revocation or a duly executed
proxy bearing a later date, or by appearing at the meeting and voting in person.
All shares will be voted as specified on each properly executed proxy. If no
choice is specified, the shares will be voted as recommended by the Board of
Directors.
As of August 21, 1998, the record date for determining shareholders
entitled to notice of and to vote at the meeting, Cintas had shares of Common
Stock outstanding. Each share is entitled to one vote on each matter to be
presented at the meeting. Only shareholders of record at the close of business
on August 21, 1998, will be entitled to vote at the meeting. A quorum consists
of the presence in person or by proxy of a majority of all shares entitled to
vote at the meeting.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following persons are the only shareholders known by the Company to
own beneficially 5% or more of its outstanding Common Stock as of the record
date:
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
Richard T. Farmer1 25,510,9552 24.4%
James J. Gardner1 7,662,4653 7.3%
Joan A. Gardner1 7,662,4653 7.3%
- - --------------------------
1 The address of Richard T. Farmer, James J. Gardner and Joan A. Gardner is
Cintas Corporation, 6800 Cintas Boulevard, P.O. Box 625737, Cincinnati, Ohio
45262-5737.
2 Includes 53,560 shares owned by Mr. Farmer's wife, 3,377,034 shares held
in trust for Mr. Farmer's children, 68,580 shares owned by a corporation
controlled by Mr. Farmer and 30,000 shares which may be acquired pursuant to
stock options which are exercisable within 60 days.
3 Includes the following shares considered to be beneficially owned by both
Mr. & Mrs. Gardner: 165,733 shares held by a charitable trust established by Mr.
Gardner, 65,582 shares held by a corporation that is controlled by Mr. Gardner,
5,887,422 shares held by a family partnership, 850,000 shares owned by Mrs.
Gardner, 20,000 shares held in trust for the Gardner's children and 3,000 shares
which may be acquired pursuant to stock options exercisable within 60 days.
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of the Company's
Common Stock by its directors, the named executive officers in the Summary
Compensation Table of the Proxy Statement and all directors and executive
officers as a group, as of August 21, 1998:
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS
Richard T. Farmer 25,510,955 (1) 24.4%
Robert J. Kohlhepp 2,436,862 (2) 2.3%
Gerald V. Dirvin 13,800 (3) *
James J. Gardner 7,662,465 (1) 7.3%
Roger L. Howe 701,456 (3)(4) *
Donald P. Klekamp 141,736 (3)(5) *
John S. Lillard 129,908 (6) *
Scott D. Farmer 458,454 (7) *
David T. Jeanmougin 38,340 (8) *
Robert R. Buck 126,424 (9) *
All Directors and Executive
Officers as a Group (13 persons) 37,348,620 (10) 35.7%
*Less than 1%
(1) See Principal Shareholders.
(2) Includes 40,000 shares held in trust for members of Mr. Kohlhepp's family,
127,344 shares held by a corporation that is controlled by Mr. Kohlhepp,
1,265,350 shares held by a family partnership and options for 44,500
shares which are exercisable within 60 days.
(3) Includes options for 3,000 shares which are exercisable within 60 days.
<PAGE>
(4) Includes 107,648 shares owned by a limited partnership.
(5) Includes 118,516 shares owned by Mr. Klekamp's wife.
(6) Includes options for 2,000 shares which are exercisable within 60 days.
Does not include 16,000 shares held in a charitable foundation controlled
by Mr. Lillard, of which Mr. Lillard disclaims beneficial ownership.
(7) Includes 91,400 shares held in trust for members of Mr. Farmer's family,
2,692 shares owned by his immediate family 55,920 held by a limited
partnership and options for 60,200 shares which are exercisable within 60
days.
(8) Includes options for 34,000 shares which are exercisable within 60 days.
(9) Includes options for 6,800 shares which are exercisable within 60 days.
(10) Includes options for 204,100 shares which are exercisable within 60 days.
PROPOSAL NO. 1 AND NO. 2 - ELECTION OF DIRECTORS
The By-laws of the Company call for the Board of Directors to have at
least three members with the specific number to be elected at the meeting
established by shareholders. At the present time, the Board consists of eight
Directors, and the Board is recommending that this number be retained.
The Board is nominating for reelection all current Directors, namely
Richard T. Farmer, Robert J. Kohlhepp, Gerald V. Dirvin, Scott D. Farmer, James
J. Gardner, Roger L. Howe, Donald P. Klekamp and John S. Lillard.
Proxies solicited by the Board will be voted for the election of the eight
nominees shown above. All Directors elected at the Annual Shareholders' Meeting
will be elected to hold office until the next Annual Meeting or until their
successors are elected and qualified.
Should any of the nominees become unable to serve, proxies will be voted
for any substitute nominee designated by the Board. The Company has no reason to
believe that any nominee for election will be unable or unwilling to serve if
elected.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote in favor of Proposal No.1 and the
election of the eight nominees proposed by the Board.
<PAGE>
VOTE REQUIRED
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES VOTING AT THE MEETING IS
REQUIRED TO APPROVE PROPOSAL NO. 1. ABSTENTIONS AND BROKER NON-VOTES WILL HAVE
NO EFFECT ON THIS VOTE. THE EIGHT NOMINEES RECEIVING THE HIGHEST NUMBER OF VOTES
CAST FOR THE POSITIONS TO BE FILLED WILL BE ELECTED.
<PAGE>
PROPOSAL NO. 3 - AMENDMENT TO ARTICLES OF INCORPORATION TO INCREASE
AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors of the Company has approved, and is recommending to
the shareholders for approval at the Annual Meeting, an amendment to Article
Five of the Articles of Incorporation to increase the number of authorized
shares of Common Stock from 120 million to 300 million. As of May 31, 1998,
104,610,716 shares were issued and outstanding and the Company had 1,210,700
additional shares reserved for issuance pursuant to stock option plans.
At the current level of authorized shares, the Company is unable to
declare any meaningful stock split and still maintain the ability to fund its
current Stock Option and 401(k) Plans. The Company has regularly utilized Common
Stock in acquisitions and intends to continue that practice. The Board of
Directors believes that the increase in authorized shares of Common Stock will
enable the Company to retain its flexibility in connection with possible future
issuances of stock.
Holders of Common Stock have no preemptive or other rights to subscribe for
additional shares. Additional shares may be issued without shareholder approval.
Further issuance of additional shares of Common Stock might dilute, under
certain circumstances, either shareholders' equity or voting rights. The
authorized but unissued shares of Common Stock could be used to discourage or
make more difficult an attempt to effect a change of control of the Company.
VOTE REQUIRED
The affirmative vote of two-thirds of the shares eligible to vote on the
proposed amendment is required for approval. Abstentions and broker non-votes
have the same effect as a vote against the proposal.
OTHER MATTERS
Any other matters considered at the meeting including adjournment will
require the affirmative vote of the majority of shares voting with abstentions
and broker non-votes having no effect.
VOTING BY PROXY
All proxies properly signed will, unless a different choice is indicated,
be voted AFOR@ the establishment of the number of Directors at eight, "FOR" the
election of all eight nominees proposed by the Board unless authority is
withheld to vote for some or all of those nominees, and "FOR" the amendment to
the Articles of Incorporation to increase the authorized shares of common stock.
If any other matters come before the meeting or any adjournment, each proxy
card will be voted in the discretion of the proxies named therein.
<PAGE>
SHAREHOLDER PROPOSALS
Shareholders who desire to have proposals included in the Notice for the
1999 Shareholders' Meeting must submit their proposals in writing to Cintas at
its offices on or before May 3, 1999.
The form of Proxy for the Company's Annual Meeting of Shareholders grants
authority to the designated proxies to vote in their discretion on any matters
that come before the meeting except those set forth in the Company's Proxy
Statement and except for matters as to which adequate notice is received. In
order for a notice to be deemed adequate for the 1999 Annual Shareholders'
Meeting, it must be received prior to July 19, 1999.
If a shareholder who intends to present a proposal at the 1999 Shareholders'
Meeting does not notify Cintas of such proposal on or before September 6, 1999,
management proxies may use their best judgement in voting on the proposal even
though there is no discussion of the proposal in the proxy statement for the
meeting.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors appointed Ernst & Young LLP as its certified public
accountants for fiscal 1999. Ernst & Young LLP has served as certified public
accountants for the Company in the past. A member of Ernst & Young LLP will be
present at the meeting to make a statement if desired and to answer questions of
shareholders.
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and Executive Officers of Cintas Corporation are:
Name and Age Position
- - --------------------------------------------------------------------------------
Richard T. Farmer1 Chairman of the Board
63
Robert J. Kohlhepp1 Chief Executive Officer
54 and Director
Gerald V. Dirvin3 Director
61
James J. Gardner1&2 Director
65
Roger L. Howe2&3 Director
63
Donald P. Klekamp2 Director
66
John S. Lillard3 Director
68
Scott D. Farmer President, Chief Operating Officer
39 and Director
Robert R. Buck Senior Vice President and
50 President - Uniform Rental Division
Karen L. Carnahan Vice President and Treasurer
44
William C. Gale Vice President and Chief
46 Financial Officer
David T. Jeanmougin Senior Vice President and Secretary
57
John S. Kean III Senior Vice President
58
<PAGE>
Ages are as of September 1, 1998.
1 Member of the Executive Committee of the Board of Directors.
2 Member of the Audit Committee of the Board of Directors.
3 Member of the Compensation Committee of the Board of Directors.
Richard T. Farmer has been with the Company and its predecessors since 1957
and has served in his present position with the Company since 1968. Prior to
August 1, 1995, Mr. Farmer also served as Chief Executive Officer. He is also a
Director of Fifth Third Bancorp and its subsidiary The Fifth Third Bank,
Cincinnati,Ohio, a National Market (NASDAQ) company. He is also the Chairman of
Summerhill, Inc.
Robert J. Kohlhepp has been a Director of the Company since 1979. He has
been employed by the Company since 1967 serving in various executive capacities
including Vice President - Finance until 1979 when he became Executive Vice
President. He served in that capacity until October 23, 1984, when he was
elected President, a position he held until July 1997. Mr. Kohlhepp was elected
to his present position of Chief Executive Officer on August 1, 1995. He is also
a director of The Mead Corporation, Dayton, Ohio, a New York Stock Exchange
(NYSE) company.
Gerald V. Dirvin was elected a Director of Cintas in 1993. Mr. Dirvin
joined The Procter & Gamble Company, a Cincinnati-based consumer goods marketing
company and a NYSE company, in 1959 and served in various management positions.
He retired as Executive Vice President and as a Director in 1994. Mr. Dirvin is
also a Director of Fifth Third Bancorp, Cincinnati, Ohio, a NASDAQ company, and
Northern Telecom Limited, Toronto, Canada, a NYSE company.
James J. Gardner served in various management positions with Cintas from
1956 until his retirement in 1988. Mr. Gardner has served as a Director of the
Company since 1969.
Roger L. Howe has been a Director of Cintas since 1979. He was the Chairman
of the Board of U.S. Precision Lens, Inc., a manufacturer of optics for the
instrument, photographic and television industries, until his retirement on
September 1, 1997. Mr. Howe had held that position in the firm for over five
years. Mr. Howe is a Director of Star Banc Corporation, Cincinnati, Ohio, a NYSE
company, and its subsidiary Star Bank, National Association; Cincinnati Bell
Inc., a NYSE Company; and Baldwin Piano and Organ Company, a Loveland, Ohio,
based company which is the largest domestic manufacturer of keyboard musical
instruments and a NASDAQ company.
Donald P. Klekamp was elected a Director of Cintas in 1984. Mr. Klekamp is
a senior partner in the Cincinnati law firm of Keating, Muething & Klekamp,
P.L.L., which serves as counsel for the Company.
John S. Lillard has been a Director of Cintas since 1978. He is Chairman of
Wintrust Financial Corporation, a bank holding company in Illinois. He was a
Founder of JMB Institutional Realty Corporation, a registered investment
advisor, where he served as President from 1978 to 1991. In 1991, he became
Chairman-Founder until his retirement in June 1996. He is also a Director of
Stryker Corporation, a medical equipment company, and a Director of Lake Forest
Bank and Trust Company, a bank holding company.
<PAGE>
Scott D. Farmer joined Cintas in 1981. He has served in various management
positions including Vice President - National Account Division and Vice
President - Marketing and Merchandising. He was elected a Director of Cintas in
1994. In July 1997, he was elected President and Chief Operating Officer of the
Company.
Robert R. Buck joined Cintas in 1982. He served as Senior Vice President -
Finance and Chief Financial Officer from 1982 to 1991, and Senior Vice President
- - - Midwest Region from 1991 to 1997. In July 1997, he was elected President -
Uniform Rental Division.
Karen L. Carnahan joined Cintas in 1979. She has held various accounting
and finance positions with the Company. In March 1992, she was elected Treasurer
of the Company and was elected Vice President of the Company in July 1997.
William C. Gale joined Cintas in April 1995. He is presently responsible
for the areas of finance, accounting and administration. Prior to joining
Cintas, Mr. Gale was associated with International Paper, a forest products,
paper and packaging company and a NYSE company where he served as auditor since
February 1994. Mr. Gale also held various financial executive positions between
1982 and1994 with Occidental Petroleum Corporation, an oil products and chemical
concern and a NYSE company.
David T. Jeanmougin joined Cintas in August 1991 as Senior Vice President -
Finance and was responsible for the areas of finance, accounting and
administration. He served in that capacity until April 1995, when he was named
Secretary of the Company and Senior Vice President. In this capacity he is
responsible for the area of acquisitions and several other key administrative
areas.
John S. Kean III joined Cintas in August 1986 upon the acquisition of Red
Stick Services where he served as President. He was appointed Senior Vice
President in 1986 and is responsible for operations in Louisiana, Mississippi,
Alabama, Arkansas and Tennessee.
James J. Gardner is the brother-in-law of Richard T. Farmer. Scott D.
Farmer is the son of Richard T. Farmer. None of the other Executive Officers and
Directors are related.
BOARD ACTIONS AND COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
The Board of Directors met on four occasions in fiscal 1998. The Executive
Committee is entitled through authorization by the Board of Directors and by
Washington law to perform substantially all of the functions of the Board of
Directors between meetings of the Board. The Executive Committee took action by
written consent on thirty-seven occasions in fiscal 1998.
The Audit Committee reviews the Company's internal accounting operations,
monitors relationships between the Company and its independent accountants and
recommends the employment of independent auditors. The Audit Committee met on
two occasions in fiscal 1998.
The Compensation Committee establishes compensation levels for all
executives and administers the Company's stock option plans. This Committee met
on one occasion and took action by written consent on ten occasions in fiscal
1998.
The Company does not have a nominating committee.
Outside directors are paid an annual fee of $9,200 plus $1,625 for each
Board meeting attended and $900 for each Committee meeting attended. Directors
who are executive officers are not paid Directors' fees nor do they participate
in the 1994 Directors' Stock Option Plan.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than ten percent of a registered
class of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. These persons
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
received by it, or written representation from certain reporting persons that no
Form 5's were required for those persons, the Company believes that during the
period of June 1, 1997, through May 31, 1998, all filing requirements of such
persons were met.
EXECUTIVE COMPENSATION
The following table summarizes the annual and long-term compensation of
the Company's Chief Executive Officer and each of the Company's other four most
highly compensated Executive Officers for the years ended May 31, 1998, 1997 and
1996.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Long Term
Compensation Compensation
Shares
Other Annual Underlying All Other
Name and Principal Salary Bonus Compensation Option Compensation
Position Year ($) ($) ($) Grants (#) ($)(1)
<S> <C> <C> <C> <C> <C> <C>
Richard T. Farmer 1998 300,000 120,828 48,699(2) -- 179,562
Chairman of the 1997 286,867 188,759 48,522(2) 10,000 195,827
Board 1996 278,512 207,813 61,061(2) 20,000 209,340
Robert J. Kohlhepp 1998 300,000 246,667 58,650(3) -- 52,718
Chief Executive 1997 275,391 207,461 -- 10,000 55,454
Officer and Director 1996 267,370 174,202 -- 100,000 58,277
Scott D. Farmer 1998 250,000 165,556 -- 60,000 7,139
President, Chief 1997 180,000 32,563 -- 10,000 5,738
Operating Officer 1996 150,000 23,866 -- 10,000 6,183
and Director
Robert R. Buck 1998 250,000 194,450 40,000 7,019
Senior Vice President 1997 230,000 185,745 -- 10,000 6,210
and President - 1996 200,000 161,869 -- 10,000 6,699
Uniform Rental
Division
David T. Jeanmougin 1998 229,237 82,780 -- 10,000 6,976
Senior Vice President 1997 220,420 72,518 -- -- 6,068
and Secretary 1996 214,000 69,715 -- 10,000 6,571
</TABLE>
(1) The Company maintains a split-dollar life insurance program for Messrs.
Farmer and Kohlhepp. Under this program, the Company has purchased insurance
policies on the lives of Mr. Farmer and his wife and Mr. Kohlhepp and his wife.
Messrs. Farmer and Kohlhepp are responsible for a portion of the premiums and
the Company pays the remainder. Upon the death of Messrs. Farmer or Kohlhepp and
their spouses, the Company will receive that portion of the benefits paid that
equals the premiums paid by the Company on that policy. The life insurance trust
established by the decedent will receive the remainder of the death benefits.
The actuarially projected current dollar value of the benefit to Messrs. Farmer
and Kohlhepp of the premiums paid to the insurer under these policies for the
fiscal years ended May 31, 1998, 1997 and 1996 is $172,046, $189,185 and
$202,007, respectively, for Mr. Farmer and $45,363, $49,483 and $51,348
respectively, for Mr. Kohlhepp. These amounts are included above.
The Cintas Partners' Plan is a non-contributory employee stock ownership
plan and profit sharing plan with a 401(k) savings feature which covers
substantially all employees. Included above are the dollars contributed by the
Company pursuant to the Partners' Plan.
(2) Represents compensation associated with the use of the Company's
aircraft ($18,134, $20,078 and $52,766 in 1998, 1997 and 1996, respectively),
financial planning ($20,000 and $18,330 in 1998 and 1997 respectively) and other
expense reimbursements.
(3) Represents compensation associated with the use of the Company's
aircraft ($33,202), financial planning ($15,000) and other expense
reimbursements.
STOCK OPTIONS
The following table sets forth information regarding stock options granted to
the executives named in the Summary Compensation Table during the fiscal year
ended May 31, 1998:
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Percent of
Total Potential Realizable
Options Value at Assumed
Number of Granted Annaul Rates of Stock
Shares to Price Appreciation for
Underlying Employees Exercise Option Term ($)
Options In Fiscal Price Expiration -----------------------------
Name Granted 1997 ($/Sh.) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Richard T. __ N/A N/A N/A N/A N/A
Farmer
Robert J. -- N/A N/A N/A N/A N/A
Kohlhepp
Scott D. 60,000 5.5% 35.3125 07/28/07 1,332,470 3,376,742
Farmer
Robert R. 40,000 3.7% 35.3125 07/28/07 888,314 2,251,161
Buck
David T. 10,000 .9% 35.3125 07/28/07 222,078 562,790
Jeanmougin
</TABLE>
The following table sets forth information regarding stock options exercised
by the executives named in the Summary Compensation Table during fiscal 1998 and
the value of in-the-money unexercised options held by them as of May 31, 1998:
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<CAPTION>
Shares
Acquired Number of Shares Valueof Unexercised In-the-
on Value Underlying Unexercised Money Options at May 31,
Exercise Realized Option at May 31, 1998 1998($)(1)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Richard T. Farmer 20,000 665,000 20,000 20,000 537,344 490.781
Robert J. Kohlhepp 1,500 46,000 30,500 158,000 1,166,594 4,432.750
Scott D. Farmer 7,000 212,042 56,200 102,000 2,094,462 1,794,375
Robert R. Buck --- --- 3,200 74,800 110,200 1,372,175
David T. Jeanmougin --- --- 22,400 77,600 771,200 2,276,050
</TABLE>
(1) Value is calculated as the difference between the fair market value of the
Common Stock on May 31, 1998 ($45.6875 per share) and the exercise price of
the options.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is composed of three
independent, outside directors. The members of the Committee for fiscal 1998
were Messrs. Dirvin, Howe and Lillard. The Committee has the overall
responsibility of reviewing and recommending specific compensation levels for
executive officers and key management to the full Board of Directors. The
Committee is also charged with reviewing the performance of the executive
officers in relation to overall Company performance. The Company's stock option
plans are also administered by the Committee. Compensation decisions for fiscal
1998 followed the same pattern as fiscal 1997.
The Company's executive compensation policies are designed to support the
corporate objective of maximizing the long term value of the Company to its
shareholders and employees. To achieve this objective, the Committee believes it
is important to provide competitive levels of compensation to attract and retain
the most qualified executives, to recognize individuals who exceed expectations
and to link closely overall corporate performance and executive pay. The methods
by which the Committee believes the Company's long term objectives can be
achieved are through incentive compensation plans and the issuance of options to
purchase the Company's common stock.
The Committee has established three primary components of the Company's
executive compensation plan. The three components are:
- base compensation
- performance incentive compensation
- stock-based performance compensation through stock option grants
The Omnibus Budget Reconciliation Act of 1993 provides that compensation in
excess of $1,000,000 per year paid to the chief executive officer of a company
as well as the other executive officers listed in the compensation table will no
longer be deductible unless the compensation is performance-based and approved
by shareholders. This law was not considered by the Committee in determining
fiscal 1998 compensation since compensation levels were not in excess of the
amounts deductible under the law.
BASE COMPENSATION
The Committee annually reviews base salaries of executive officers. Factors
which influence decisions made by the Committee regarding base salaries are
levels of responsibility and potential for future responsibilities, salary
levels offered by competitors and overall performance of the Company. The
Committee's practice in establishing salary levels is based in part upon overall
Company performance and is not based upon any specific objectives or policies
but reflects the subjective judgment of the Committee. However, specific annual
performance goals are established for each executive officer. Based on the
Committee's comparison of the Company's overall compensation levels as a percent
of revenues and net income to comparable companies in the industry, the
Committee believes its overall compensation levels are in the middle of the
range.
PERFORMANCE INCENTIVE COMPENSATION
The performance incentive compensation, which is paid out in the form of an
annual cash bonus, was established by the Committee to provide a direct
financial incentive to achieve corporate and operating goals. The basis for
determining performance incentive compensation is strictly quantitative in
nature. At the beginning of each fiscal year, the Committee establishes a target
bonus for certain executives based on target levels of increases in earnings per
share. Cash bonuses paid to other executives are based on a percentage of
operating profits of the particular division served by that officer. Those
percentages are not disclosed because they could be used to determine divisional
operating profits which are otherwise not publicly available.
STOCK OPTION GRANTS
Executive compensation to reward past performance and to motivate future
performance is also provided through stock options granted under the 1992 Stock
Option Plan. The purpose of the plan is to encourage executive officers to
maintain a long-term stock ownership position in the Company in order that their
interests are aligned with those of the Company's shareholders. The Committee in
its discretion has the authority to determine participants in the plan, the
number of shares to be granted and the option price and term. The Committee has
not established specific stock option target awards for participants.
Consideration for stock option awards are evaluated on a subjective basis and
granted to participants until an ownership position exists which is consistent
with the participant's current responsibilities. Options granted to executive
officers in 1998 can be found on page 11 under the Option Grants Table.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee establishes Mr. Kohlhepp=s base salary based primarily on a
subjective evaluation of the Company's prior year's financial results, past
salary levels and compensation paid to other chief executive officers in the
Company's industry. Based on the Committee's comparison of the Company's overall
compensation level for Mr. Kohlhepp as a percent of revenue and net income to
comparable companies in the industry, the Committee believes his overall
compensation level is in the middle of the range. The Committee also establishes
at the beginning of each year a performance incentive bonus arrangement for Mr.
Kohlhepp. Based on the Company's belief that shareholder value is best enhanced
by increases in earnings per share, the Committee based this arrangement on
target levels of increases in earning per share. The program provided for no
bonus if earnings per share did not exceed a minimum threshold of a 10% increase
over the prior year's earnings per share, which was $1.91 (prior to restatement
for stock split). The bonus potential ranged from 10% of base salary if earnings
per share increased by nineteen cents over the prior year up to a maximum of 90%
if earnings per share increased by forty-eight cents over the prior year.
John S. Lillard - Chairman
Gerald V. Dirvin
Roger L. Howe
<PAGE>
COMMON STOCK PERFORMANCE GRAPH
The following graph summarizes the cumulative return on $100 invested in
the Company's Common Stock, the S & P 500 Stock Index and the common stocks of a
representative group of companies in the uniform related industry (the "Peer
Index"). The companies included in the Peer Index are Angelica Corporation, G &
K Services, Inc., Unifirst Corporation and Unitog Company. National Service
Industries which is no longer in the same line of business as the peer group is
no longer included in the peer group. Total shareholder return was based on the
increase in the price of the stock and assumed reinvestment of all dividends.
Further, total return was weighted according to market capitalization of each
company. The companies in the Peer Index are not the same as those considered by
the Compensation Committee. [GRAPH OMITTED]
OTHER MATTERS
Cintas knows of no other matters to be presented at the meeting other
than those specified in the Notice.
By order of the Board of Directors.
David T. Jeanmougin
Secretary
COMMON STOCK PERFORMANCE GRAPH
The following graph summarizes the cumulative return on $100 invested in
the Company's Common Stock, the S & P 500 Stock Index and the common stocks of a
representative group of companies in the uniform related industry (the "Peer
Index"). The companies included in the Peer Index are Angelica Corporation, G &
K Services, Inc., Unifirst Corporation and Unitog Company. National Service
Industries which is no longer in the same line of business as the peer group is
no longer included in the peer group. Total shareholder return was based on the
increase in the price of the stock and assumed reinvestment of all dividends.
Further, total return was weighted according to market capitalization of each
company. The companies in the Peer Index are not the same as those considered by
the Compensation Committee.
MEASURMENT CINTAS S&P 500 PEER
PERIOD CORP INDEX GROUP
(QUARTER END)
MAY, 93 100 100 100
AUG, 93 106 104 105
NOV, 93 105 104 111
FEB, 94 115 106 116
MAY, 94 114 104 114
AUG, 94 116 109 115
NOV, 94 126 105 109
FEB, 95 139 114 110
MAY, 95 127 125 119
AUG, 95 139 133 133
NOV, 95 169 144 141
FEB, 96 178 153 155
MAY, 96 198 161 180
NOV, 96 224 184 185
FEB, 97 199 193 166
MAY, 97 230 208 169
AUG, 97 259 222 187
NOV, 97 289 237 197
FEB, 98 317 261 216
MAY, 98 341 272 203
OTHER MATTERS
Cintas knows of no other matters to be presented at the meeting other
than those specified in the Notice.
By order of the Board of Directors.
David T. Jeanmougin
Secretary
