-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, NkjfdghM3EcYM+zbYynbO7rPePOdplT3c+JyW+LzE2T0uKTbgBAk9zFjCTTkQbGv 4uJzq15j3nWoamEh/dmUvA== 0000723254-94-000008.txt : 19941026 0000723254-94-000008.hdr.sgml : 19941026 ACCESSION NUMBER: 0000723254-94-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940831 FILED AS OF DATE: 19941014 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CINTAS CORP CENTRAL INDEX KEY: 0000723254 STANDARD INDUSTRIAL CLASSIFICATION: 2320 IRS NUMBER: 311188630 STATE OF INCORPORATION: WA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11399 FILM NUMBER: 94552662 BUSINESS ADDRESS: STREET 1: 6800 CINTAS BLVD PO BOX 625737 CITY: CINCINNATI STATE: OH ZIP: 45262 BUSINESS PHONE: 5134591200 MAIL ADDRESS: STREET 1: 6800 CINTAS BOULEVARD STREET 2: P O BOX 625737 CITY: CINCINNATI STATE: OH ZIP: 45262 10-Q 1 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 August 31, 1994 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 October 7, 1994 Common Stock, no par value 46,724,055 (Page 1 of 10) CINTAS CORPORATION INDEX Page No. Part I. Financial Information: Consolidated Condensed Balance Sheet - August 31, 1994 and May 31, 1994 3 Consolidated Condensed Statement of Income - Three Months Ended August 31, 1994 and 1993 4 Consolidated Condensed Statement of Cash Flows - Three Months Ended August 31, 1994 and 1993 5 Notes to Consolidated Condensed Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. Other Information 10 Signatures 10 -2-
CINTAS CORPORATION CONSOLIDATED CONDENSED BALANCE SHEET (Dollars in Thousands) August 31, May 31, 1994 1994 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 8,798 $ 8,449 Marketable securities 48,260 52,333 Accounts receivable (net) 58,033 56,347 Inventories 33,937 29,059 Uniforms and other rental items in service 75,948 74,132 Prepaid expenses 734 1,133 Total current assets 225,710 221,453 Property, plant and equipment: Cost 297,276 288,402 Less accumulated depreciation (99,464) (95,899) 197,812 192,503 Investments and other assets 85,343 87,676 $ 508,865 $501,632 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 20,621 $ 18,795 Accrued liabilities 29,195 33,488 Income taxes - Current 7,845 2,300 Deferred 22,068 21,159 Long-term debt due within one year 9,171 15,742 Total current liabilities 88,900 91,484 Long-term debt due after one year 83,533 84,184 Deferred income taxes 17,399 16,312 Shareholders' equity: Preferred stock, no par value, 100,000 shares authorized, none outstanding ----- ----- Common stock, no par value, 120,000,000 shares authorized, 46,713,283 shares issued and outstanding 41,213 40,939 (46,801,173 at May 31, 1994) Treasury stock (4,757) ----- Retained earnings 283,700 269,939 Cumulative translation adjustment (1,123) (1,226) Total shareholders' equity 319,033 309,652 $508,865 $501,632
See accompanying notes. -3-
CINTAS CORPORATION CONSOLIDATED CONDENSED STATEMENT OF INCOME (Unaudited) (Dollars in Thousands Except Per Share Amounts) Three months ended August 31, 1994 1993 Revenues: Net rentals $127,294 $111,916 Net sales 14,743 10,308 142,037 122,224 Costs and expenses (income): Cost of rentals 72,190 62,728 Cost of sales 12,366 9,279 Selling and administrative expenses34,265 30,417 Interest income (498) (306) Interest expense 1,521 1,813 119,844 103,931 Income before income taxes 22,193 18,293 Income taxes 8,433 7,750 Net income $ 13,760 $ 10,543 Earnings per share $ .29 $ .23 Weighted average number of shares outstanding 46,805,209 46,636,715
See accompanying notes. -4-
CINTAS CORPORATION CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS THREE MONTHS ENDED AUGUST 31, 1994 and 1993 (Unaudited) (Dollars in thousands) Three Months Ended August 31, Cash flows from operating activities: 1994 1993 Net income $13,760 $10,543 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 6,381 5,926 Amortization of deferred charges 2,726 2,651 Provision for losses on accounts receivable 429 272 Change in current assets and liabilities: Accounts receivable (2,115) (3,122) Inventories (6,694) (5,950) Prepaid expenses 399 (130) Accounts payable 1,826 3,580 Accrued liabilities (4,293) (12,358) Income taxes payable 5,545 2,610 Deferred income taxes 1,996 4,542 Net cash provided by operating activities19,960 8,564 Cash flows from investing activities: Capital expenditures (11,690) (7,499) Change in investments and other assets (249) 779 Proceeds from sale or redemption of marketable securities 7,916 5,136 Purchase of marketable securities (3,843) (13,767) Acquisition of businesses net of cash acquired (40) (1,056) Net cash used by investing activities(7,906) (16,407) Cash flows from financing activities: Repayment of long-term debt (7,222) (706) Issuance of common stock 225 245 Tax benefit resulting from exercise of employee stock options 11 126 Purchase of treasury stock (4,719) --- Net cash used in financing activities(11,705) (335) Net (decrease) increase in cash and cash equivalents 349 (8,178) Cash and cash equivalents at beginning of period 8,449 14,192 Cash and cash equivalents at end of period $ 8,798 $ 6,014
See accompanying notes. -5- 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, 1994. 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, except as discussed in Note 3., all 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's net income and earnings per share for the three months ended August 31, 1993 were adversely impacted by one-time tax adjustments relating to the Omnibus Budget Reconciliation Act of 1993, a new tax law enacted on August 10, 1993. The new tax law resulted in increases to corporate marginal tax rates, retroactive to January 1, 1993. In the quarter ended August 31, 1993, in accordance with the requirements of SFAS No. 109, the Company recorded a charge to earnings of $1,064,000 and adjusted current and deferred tax liabilities to reflect the change in tax rates. The Act also reinstated jobs tax credits retroactive to July 1992. This reinstatement amounted to $201,000, which partially offset the one-time tax rate adjustment. The effects of these one-time tax adjustments reduced earnings per share in the quarter ended August 31, 1993, by $.02 per share. 4. The Company adopted SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, in the first quarter of fiscal 1995. While the adoption of SFAS No. 115 did not require restatement of prior year results or have any financial impact for the quarter ended August 31, 1994, certain disclosure requirements are necessary. Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. All the Company's marketable equity securities and debt securities are considered to be available-for-sale. The unrealized gains and losses (net of tax) for these securities are reported as a component of shareholders' equity. At August 31, 1994, the difference between cost and fair value for the Company's marketable securities was not significant and not reported as a component of shareholders' equity. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in investment income. Realized gains and losses and declines in value determined to be other- than-temporary on available-for-sale securities are included in investment income. The cost of the securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in investment income. The following is a summary of available-for-sale securities: -6-
Available-for-Sale Maturities Gross Gross Unrealized Unrealized Estimated (In Thousands) Cost Gains Losses Fair Value August 31, 1994 Obligations of states and political subdivisions$37,593 $12 $292 $37,313 U.S. Treasury securities and obligations of U.S. government agencies 1,535 0 24 1,511 Other debt securities 7,231 0 0 7,231 46,359 12 316 46,055 Equity securities 1,901 0 0 1,960 $48,260 $12 $316 $48,015
The amortized cost and estimated fair value of debt and marketable equity securities at August 31, 1994, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay the obligations without prepayment penalties. Estimated (In Thousands) Cost Fair Value Available-for-sale Due in one year or less $29,262 $29,216 Due after one year through three years14,161 13,987 Due after three years 4,837 4,812 $48,260 $48,015 5. Stock Options: Under a stock option plan adopted by the Company in fiscal 1993, the Company may grant officers and key employees incentive stock options and/or non-qualified stock options to purchase an aggregate of 2,300,000 shares of the Company's common stock. Options are generally granted at the fair market value of the underlying Common Stock on the date of the grant and generally become exercisable at the rate of 20% per year commencing five years after grant, so long as the holder remains an employee of the Company. At May 31, 1994, options as to 1,235,834 shares were outstanding at prices ranging from $3.46 - $28.75 per share. Of these options outstanding, 246,551 were exercisable at May 31, 1994. On July 19, 1994, additional options as to 214,950 shares exercisable at $31.815 per share were granted under the plan. During the first quarter of fiscal 1995, options as to 66,629 shares were exercised ranging in price from $3.46 to $12.17 per share. In fiscal year 1991, the Company adopted a stock option plan for the non-employee members of its Board of Directors, and granted options for 30,000 shares of common stock. Options were granted at 100% of the market value of the underlying Common Stock on the date immediately prior to the grant and become exercisable at a rate of 25% per year commencing two years after grant, so long as the holder remains on the Board of Directors. As of August 31, 1994, options for 24,000 shares are outstanding of which 12,000 shares are exercisable. 6. On July 20, 1994, the Company announced that its Board of Directors authorized the repurchase of up to two million shares of the Company's common stock in the open market or through privately negotiated transactions. The repurchased shares will be used to fund future acquisitions. The stock may be purchased from time to time as market conditions dictate. 7. Inventories: Inventories are valued at the lower of cost (first-in, first-out) or market. Substantially all inventories represent finished goods. -7- 8. Supplemental Cash Flow Disclosures: Cash paid through the three months ended August 31, 1994 and 1993. 1994 1993 Interest, net of amount capitalized $1,227,000$1,210,000 Income taxes $1,013,000 $734,000 9. Subsequent Events: On October 13,1994, the Company held its 1994 Annual Shareholders' Meeting at which shareholders voted to adopt the 1994 Directors' Stock Option Plan. The plan provides for each non-employee Director of the Company to be granted an option to purchase 1,000 shares of Cintas Common Stock, and, upon each subsequent election as a director, another option for 1,000 shares. The total number of shares for which options may be granted under this plan is 30,000 shares. -8- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Total revenues increased 16% in the first quarter of fiscal 1995 over the same period in fiscal 1994. Net rental revenue increased 14% for the three months ended August 31, 1994, over the same period in the prior fiscal year. Growth in the customer base and price increases in established operations for the three months ended August 31, 1994, accounted for a 12% increase in rental revenues and the remaining 2% was due primarily to acquisitions. First quarter revenues from the sale of uniforms and other direct sale items increased 43% over the prior year's first quarter principally as a result of an increase in unit sales and other direct sale items. The increases in revenues from the sale of uniforms and other direct sale items were not significantly affected by acquisitions. Pre-tax income increased 21% for the three months ended August 31, 1994, over the same period in fiscal 1994. In the quarter ended August 31, 1993, net income and earnings per share were adversely impacted by one-time tax adjustments relating to the Omnibus Budget Reconciliation Act of 1993, a new tax law enacted on August 10, 1993. The new tax law resulted in increases to corporate marginal tax rates, retroactive to January 1, 1993. In the quarter ended August 31, 1993, in accordance with the requirements of SFAS No. 109, the Company recorded a charge to earnings of $1,064,000 and adjusted current and deferred tax liabilities to reflect the change in tax rates. The Act also reinstated jobs tax credits retroactive to July 1992. This reinstatement amounted to $201,000, which partially offset the one-time tax rate adjustment. The effect of these one-time tax adjustments reduced earnings per share in the quarter ended August 31, 1993, by $.02 per share. Income from operations, which excludes interest income and interest expense, as a percent of revenues was 16% for both the quarters ended August 31, 1994, and 1993. Net interest expense (interest expense less interest income) was $1,023,000 for the first quarter of fiscal 1995, compared to $1,507,000 in the first quarter of fiscal 1994. Net interest expense has decreased due to an increase in interest income and lower interest expense as a result of a reduction in total debt. Financial Condition Long-term debt has decreased since May 31, 1994, primarily due to the repayment of several industrial revenue bonds for facilities located in Cleveland, Ohio; Tampa, Florida; and Dallas, Texas. The Company believes that its capital requirements for operations, capital improvements, repayment of long-term debt and dividends can be made from funds on hand and funds generated from operations. -9- CINTAS CORPORATION Part II. Other Information Item 6. Exhibits and Reports on Form 8-K (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: October 13, 1994 David T. Jeanmougin David T. Jeanmougin Senior Vice President-Finance (Chief Financial Officer) -10- -----END PRIVACY-ENHANCED MESSAGE-----