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For the quarterly period ended November 30, 2000
OR
For the transition period from _____________________ to ___________________
Commission file number 0-11399
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 15, 2000
-------------------------------
-----------------------------------
Common Stock, no par value
168,756,504
CINTAS CORPORATION
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
November 30, 2000 and May 31, 2000 3
Consolidated Condensed Statements of Income -
Three Months and Six Months Ended November 30, 2000 and 1999 4
Consolidated Condensed Statements of Cash Flows -
Six Months Ended November 30, 2000 and 1999 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 10
Part II. Other Information 11
Signatures 12
CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except share data)
November 30, May 31,
2000 2000
---------------------- ----------------------
(Unaudited)
ASSETS
------
Current assets:
Cash and cash equivalents $ 34,176 $ 52,182
Marketable securities 37,311 57,640
Accounts receivable, net 252,537 225,735
Inventories 200,449 164,906
Uniforms and other rental items in service 230,119 213,770
Prepaid expenses 8,530 7,237
---------------------- ----------------------
Total current assets 763,122 721,470
Property and equipment, at cost, net 678,065 642,507
Other assets 229,586 217,365
---------------------- ----------------------
$ 1,670,773 $ 1,581,342
====================== ======================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 55,362 $ 50,976
Accrued compensation and related liabilities 29,233 28,140
Accrued liabilities 67,555 90,058
Deferred income taxes 60,138 49,614
Long-term debt due within one year 15,850 16,604
---------------------- ----------------------
Total current liabilities 228,138 235,392
Long-term debt due after one year 238,939 254,378
Deferred income taxes 53,344 48,696
Shareholders' equity:
Preferred stock, no par value,
100,000 shares authorized, none outstanding ---- ----
Common stock, no par value,
425,000,000 shares authorized,
168,735,788 shares issued and outstanding
(168,281,506 at May 31, 2000) 58,938 54,738
Retained earnings 1,096,750 992,450
Accumulated other comprehensive income (loss) (5,336) (4,312)
---------------------- ----------------------
Total shareholders' equity 1,150,352 1,042,876
---------------------- ----------------------
$ 1,670,773 $ 1,581,342
====================== ======================
See accompanying notes.
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per share data)
Three months ended Six months ended
November 30 November 30
----------- ----------
2000 1999 2000 1999
---- ---- ---- ----
Revenue:
Rentals $ 398,929 $ 349,726 $ 788,556 $ 694,243
Other services 140,123 116,123 272,455 228,981
------------------ ------------------- ----------------- ------------------
539,052 465,849 1,061,011 923,224
Costs and expenses (income):
Cost of rentals 223,997 199,645 441,818 397,572
Cost of other services 91,678 76,038 178,552 151,197
Selling and admin. expenses 129,921 109,334 262,856 220,721
Interest income (1,127) (1,086) (2,387) (2,216)
Interest expense 3,883 3,908 7,970 8,017
------------------ ------------------- ----------------- ------------------
448,352 387,839 888,809 775,291
------------------ ------------------- ----------------- ------------------
Income before income taxes 90,700 78,010 172,202 147,933
Income taxes 34,167 29,675 64,820 56,433
------------------ ------------------- ----------------- ------------------
Net income $ 56,533 $ 48,335 $ 107,382 $ 91,500
================== =================== ================= ================
Basic earnings per share $ .34 $ .29 $ .64 $ .55
================== ================== ================= ================
Diluted earnings per share $ .33 $ .29 $ .63 $ .54
================== ================== ================= ================
See accompanying notes.
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
November 30
Cash flows from operating activities: 2000 1999
------------------------------------ ---- ----
Net income $ 107,382 $ 91,500
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 43,856 39,003
Amortization of deferred charges 10,481 10,553
Deferred income taxes 15,172 11,810
Change in current assets and liabilities, net of
acquisitions of businesses:
Accounts receivable (26,219) (23,870)
Inventories (35,772) 2,526
Uniforms and other rental items in service (16,418) (10,489)
Prepaid expenses (1,319) (1,307)
Accounts payable 3,746 (246)
Accrued compensation and related liabilities 1,160 (3,407)
Accrued liabilities (22,765) (8,082)
--------------------- --------------------
Net cash provided by operating activities 79,304 107,991
Cash flows from investing activities:
-------------------------------------
Proceeds from divestiture of certain facilities - 8,769
Capital expenditures (78,041) (81,914)
Proceeds from sale or redemption of marketable securities 30,687 62,423
Purchase of marketable securities (10,358) (57,455)
Acquisitions of businesses, net of cash acquired (15,044) (7,315)
Other (8,582) (922)
--------------------- --------------------
Net cash used by investing activities (81,338) (76,414)
Cash flows from financing activities:
-------------------------------------
Repayment of long-term debt (19,149) (23,858)
Issuance of common stock 971 2,370
Other 2,206 538
--------------------- --------------------
Net cash used in financing activities (15,972) (20,950)
Net (decrease)/increase in cash and cash equivalents (18,006) 10,627
Cash and cash equivalents at beginning of period 52,182 15,803
--------------------- --------------------
Cash and cash equivalents at end of period $ 34,176 $ 26,430
===================== ====================
See accompanying notes.
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in thousands except per share data)
Three Months Ended Six Months Ended
November 30 November 30
2000 1999 2000 1999
---- ---- ---- ----
Numerator:
Net income $56,533 $48,335 $107,382 $91,500
=========== =========== ============= =============
Denominator:
Denominator for basic earnings per
share-weighted avg. shares 168,660 166,898 168,513 166,698
Effect of dilutive securities- employee
stock options 3,178 2,934 2,932 3,078
------------- ------------- --------------- ---------------
Denominator for diluted earnings per
share-adjusted weighted avg. shares and
assumed conversions
171,838 169,832 171,445 169,776
============= ============= =============== ===============
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In thousands except per share data)
Three Months Ended Six Months Ended
November 30 November 30
2000 1999 2000 1999
---- ---- ---- ----
Basic earnings per share $ .34 $ .29 $ .64 $ .55
============ ========== =========== =============
Diluted earnings per share $ .33 $ .29 $ .63 $ .54
============ ========== =========== =============
Three Months Ended Six Months Ended
November 30 November 30
2000 1999 2000 1999
---- ---- ---- ----
Net income $56,533 $48,335 $107,382 $91,500
Other comprehensive income:
Foreign currency translation
adjustment (1,669) 395 (1,024) 152
---------------- -------------- -------------- --------------
Comprehensive income $54,864 $ 48,730 $106,35 $ 91,652
================ ============== ============== ==============
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In thousands except per share data)
Other services
Rentals Corporate Total
------------------- --- ------------- --------------- --------------------
For the three months ended November
30, 2000
Revenue $ 398,929 $ 140,123 $ -- $ 539,052
=============== ============= =========== ================
Income before income taxes $ 77,087 $ 16,369 $ (2,756) $ 90,700
=============== ============= =========== ================
For the three months ended November
30, 1999
Revenue $ 349,726 $ 116,123 $ -- $ 465,849
=============== ============= =========== ================
Income before income taxes $ 67,784 $ 13,048 $ (2,822) $ 78,010
=============== ============= =========== ================
As of and for the six months ended
November 30, 2000
Revenue $ 788,556 $ 272,455 $ -- $ 1,061,011
=============== ============= =========== ================
Income before income taxes $ 150,328 $ 27,457 $ (5,583) $ 172,202
=============== ============= =========== ================
Total assets $ 1,304,031 $ 295,255 $ 71,487 $ 1,670,773
=============== ============= =========== ================
As of and for the six months ended
November 30, 1999
Revenue $ 694,243 $ 228,981 $ -- $ 923,224
=============== ============= =========== ================
Income before income taxes $ 129,828 $ 23,906 $ (5,801) $ 147,933
=============== ============= =========== ================
Total assets $ 1,150,455 $ 242,333 $ 93,777 $ 1,486,565
=============== ============= =========== ================
CINTAS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total revenues increased 16% and 15%, respectively, for the three and six months ended November 30, over the same periods in fiscal 2000. Net rental revenue increased 14% for the three and six months ended November 30, over the same periods in the prior fiscal year primarily due to growth in the customer base. Revenue from the sale of uniforms and other direct sale items increased 21% and 19%, respectively, for the three and six months ended November 30, over the same periods in the prior year, as a result of the increased sales in our catalog business, as well as our First Aid and Safety, Cleanroom, National Account and Uniforms To You divisions.
Net income increased 17% for the three and six months ended November 30, over the same periods in fiscal 2000. Diluted earnings per share increased 14% and 17%, respectively, for the three and six months ended November 30, over the same periods in the prior fiscal year.
Net interest expense (interest expense less interest income) was $2,756,000 and $5,583,000 for the three and six months ended November 30, 2000 compared to $2,822,000 and $5,801,000, respectively, for the same periods in the prior fiscal year. Net interest expense has decreased primarily due to the repayment of long-term debt. Also, in February 2000, we refinanced our variable rate bank debt and replaced it with our own commercial paper program. Cintas received an A1/P1 rating from Standard & Poor’s and Moody’s. Cintas’ effective tax rate was 37.7% and 37.6% for the three and six months ended November 30, compared to 38.0% and 38.1%, respectively, for the same periods in fiscal 2000. The decrease was primarily the result of a decrease in state and local income taxes attributable to state tax planning programs.
Cash, cash equivalents and marketable securities decreased by $38 million at November 30, 2000 from May 31, 2000 due to capital expenditures for new uniform facilities and an acceleration in sales growth causing our working capital assets, primarily accounts receivable and inventories, to increase. In addition, we prefunded the majority of our medical costs into a VEBA Trust, thereby generating a favorable tax impact. The cash, cash equivalents and marketable securities will be used to finance future acquisitions and capital expenditures.
Net property and equipment increased by $36 million from May 31, 2000 to November 30, 2000. At the end of the second quarter of fiscal 2001, we had nine uniform rental facilities in various stages of construction.
Financial ConditionAt November 30, 2000, we had $71 million in cash, cash equivalents and marketable securities. We believe that our current cash position, funds generated from operations and the strength of our banking relationships are sufficient to meet our anticipated operational and capital requirements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In our normal operations, Cintas has market risk exposure to interest rates. There has been no significant change in our exposure to these risks, which has been previously disclosed.
Forward-Looking StatementsThe Private Securities Litigation Reform Act of 1995 provides safe harbor from civil litigation for forward-looking statements. This report contains forward-looking statements that reflect our current views as to future events and financial performance with respect to our operations. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in this report. Factors that might cause such a difference include the possibility of greater than anticipated operating costs, lower sales volumes, the performance and costs of integration of acquisitions, fluctuations in costs of materials and labor, the outcome of pending environmental matters and the reactions of competitors in terms of price and service. Forward-looking statements speak only as of the date made. Cintas undertakes no obligation to update any forward-looking statements to reflect the events or circumstances arising after the date of which they are made.
CINTAS CORPORATION
Part II. Other Information
Item 4. Submission of matters to a vote of security holders
Cintas’ Annual Shareholders’ meeting was held on October 25, 2000, 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 seven.
FOR 154,170,157 AGAINST 1,041,060 ABSTAIN 131,562 BROKER NON-VOTES 0
Issue No. 2
-----------------
Authority to elect seven Directors.
Shares -
Name Shares For Withheld Authority
------------------------------- ----------------------------- -----------------------------
Richard T. Farmer 150,325,280 5,017,499
Scott D. Farmer 150,340,327 5,002,452
Gerald V. Dirvin 150,543,170 4,799,609
James J. Gardner 150,316,165 5,026,614
Roger L. Howe 150,558,957 4,783,822
Donald P. Klekamp 150,304,247 5,038,532
Robert J. Kohlhepp 150,341,343 5,001,436
CINTAS CORPORATION
Issue No. 3
----------------
Proposal to increase shares of Common Stock.
FOR 153,920,786 AGAINST 1,226,506 ABSTAIN 195,487 BROKER NON-VOTES 0
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibit Index
Exhibit Number
Description of Exhibit
10.12
Directors' Deferred Compensation Plan
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 3, 2001 /s/William C. Gale
----------------------- ---------------------------------------
William C. Gale
Vice President and Chief Financial Officer
(Chief Accounting Officer)
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