-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PyQyxtRBxFmlQPS7EEIn9sNzkYJRrtXfLXr3nbWEpkaHK1bbabeooCvJwO0s4FuS ZAgN9e4qx7nMefBGvBCM6Q== 0000892251-00-000096.txt : 20000410 0000892251-00-000096.hdr.sgml : 20000410 ACCESSION NUMBER: 0000892251-00-000096 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20000229 FILED AS OF DATE: 20000407 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CINTAS CORP CENTRAL INDEX KEY: 0000723254 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 311188630 STATE OF INCORPORATION: WA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11399 FILM NUMBER: 595466 BUSINESS ADDRESS: STREET 1: 6800 CINTAS BLVD STREET 2: P O 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 FOR THE QUARTER ENDED FEBRUARY 29, 2000 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 29, 2000 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, 2000 - -------------------------- -------------------------- Common Stock, no par value 167,457,774 1 CINTAS CORPORATION INDEX Page No. -------- Part I. Financial Information Item 1. Financial Statements Consolidated Condensed Balance Sheets - February 29, 2000 and May 31, 1999................................ 3 Consolidated Condensed Statements of Income - Three Months and Nine Months Ended February 29, 2000 and February 28, 1999........................................ 4 Consolidated Condensed Statements of Cash Flows - Nine Months Ended February 29, 2000 and February 28, 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 2 CINTAS CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands except share data) February 29, May 31, 2000 1999 ------------ ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 40,812 $ 15,803 Marketable securities 74,065 72,315 Accounts receivable, net 231,510 202,079 Inventories 153,466 137,983 Uniforms and other rental items in service 207,051 200,154 Prepaid expenses 9,880 6,151 ----------- ----------- Total current assets 716,784 634,485 Property, plant and equipment, at cost, net 617,856 573,087 Other assets 209,244 200,246 ----------- ----------- $ 1,543,884 $ 1,407,818 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 52,406 $ 46,783 Accrued compensation and related liabilities 24,875 25,521 Accrued liabilities 73,782 83,209 Income taxes - Current 2,226 -- Deferred 53,728 40,214 Long-term debt due within one year 16,035 16,370 ----------- ----------- Total current liabilities 223,052 212,097 Long-term debt due after one year 255,390 283,581 Deferred income taxes 45,289 40,717 Shareholders' equity: Preferred stock, no par value, 100,000 shares authorized, none outstanding -- -- Common stock, no par value, 300,000,000 shares authorized, 167,445,644 shares issued and outstanding (166,423,911 at May 31, 1999) 53,961 49,974 Retained earnings 969,296 825,268 Accumulated other comprehensive income (3,104) (3,819) ----------- ----------- Total shareholders' equity 1,020,153 871,423 ----------- ----------- $ 1,543,884 $ 1,407,818 =========== =========== See accompanying notes. 3 CINTAS CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) (In thousands except per share data) Three Months Ended Nine Months Ended ------------------------ -------------------------- February 29 February 28 February 29 February 28 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Revenue: Rentals $355,739 $322,614 $1,049,982 $ 960,447 Other service 118,190 111,055 347,171 336,150 ------- ------- --------- ---------- 473,929 433,669 1,397,153 1,296,597 Costs and expenses (income): Cost of rentals 202,323 183,592 599,894 550,540 Cost of other service revenue 77,031 73,399 228,229 227,264 Selling and admin. expenses 112,701 111,929 333,422 316,483 Interest income (1,259) (1,112) (3,475) (3,589) Interest expense 3,998 3,711 12,015 12,587 ---------- ---------- ---------- ---------- 394,794 371,519 1,170,085 1,103,285 ---------- ---------- ---------- ---------- Income before income taxes 79,135 62,150 227,068 193,312 Income taxes 30,073 23,519 86,506 74,052 ---------- ---------- ---------- ---------- Net income $ 49,062 $ 38,631 $140,562 $119,260 ========== ========== ========== ========== Basic earnings per share $ .29 $ .23 $ .84 $ .72 ========== ========== ========== ========== Diluted earnings per share $ .29 $ .22 $ .83 $ .70 ========== ========== ========== ========== See accompanying notes. 4 CINTAS CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Nine Months Ended February 29 February 28 2000 1999 ----------- ----------- Cash flows from operating activities: - ------------------------------------ Net income $ 140,562 $ 119,260 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 58,465 49,800 Amortization of deferred charges 15,239 14,504 Deferred income taxes 18,086 1,734 Change in current assets and liabilities, net of acquisitions of businesses: Accounts receivable (23,016) (9,732) Inventories (13,181) (10,282) Uniforms and other rental items in service (8,914) (15,924) Prepaid expenses (3,628) (1,182) Accounts payable 2,635 (11,222) Accrued compensation and related liabilities (701) 937 Accrued liabilities (11,429) 22,226 Income taxes payable 2,226 -- --------- --------- Net cash provided by operating activities 176,344 160,119 Cash flows from investing activities: - ------------------------------------ Capital expenditures (124,234) (128,109) Proceeds from sale or redemption of marketable securities 75,680 117,549 Purchase of marketable securities (77,430) (103,130) Acquisitions of businesses, net of cash acquired (21,754) (9,533) Proceeds from divestiture of certain facilities 21,578 19,911 Other (713) 4,842 --------- --------- Net cash used by investing activities (126,873) (98,470) Cash flows from financing activities: - ------------------------------------ Proceeds from issuance of long-term debt 140,000 11,859 Repayment of long-term debt (168,549) (55,055) Issuance of common stock 2,986 1,482 Dividends paid -- (1,692) Other 1,101 (1,475) --------- --------- Net cash used by financing activities (24,462) (44,881) Net increase in cash and cash equivalents 25,009 16,768 Cash and cash equivalents at beginning of period 15,803 13,423 --------- --------- Cash and cash equivalents at end of period $ 40,812 $ 30,191 ========= ========= See accompanying notes. 5 CINTAS CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) (In thousands except per share data) 1. The consolidated condensed financial statements of Cintas Corporation included herein have been prepared by Cintas, 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 we believe that the disclosures are adequately presented, it is suggested that these consolidated condensed financial statements be read in conjunction with the finan-cial statements and notes included in our most recent annual report for the fiscal year ended May 31, 1999. A summary of our significant accounting policies is presented on page 27 of our most recent annual report. There have been no material changes in the accounting policies followed by Cintas during fiscal year 2000. Certain fiscal 1999 amounts have been reclassified to conform to the fiscal 2000 presentation. 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. In March 1999, Cintas acquired Unitog Company, a rental and direct sale uniform provider. The acquisition was accounted for using the pooling of interests method of accounting. At that time, the accompanying consolidated financial statements were restated to include the financial position and operating results of Unitog for all periods. 4. On January 18, 2000, Cintas announced a 3-for-2 split of its common stock. The stock split was distributed on March 7, 2000 to shareholders of record on February 4, 2000. All share and per share data contained herein has been adjusted to reflect the stock split. 5. The following table represents a reconciliation of the shares used to calculate basic and diluted earnings per share for the respective years: Three Months Ended Nine Months Ended ----------------------- ------------------------ February 29 February 28 February 29 February 28 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Numerator: Net income $ 49,062 $ 38,631 $140,562 $119,260 Denominator: Denominator for basic earnings per share- weighted avg. shares 167,368 166,224 166,921 165,960 ======== ======== ======== ======== Effect of dilutive securities-employee stock options 1,948 3,450 2,849 3,506 ======== ======== ======== ======== 6 CINTAS CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) (In thousands except per share data) Three Months Ended Nine Months Ended ----------------------- ------------------------ February 29 February 28 February 29 February 28 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Denominator for diluted earnings per share- adjusted weighted avg. shares and assumed conversions 169,316 169,674 169,770 169,466 ======== ======== ======== ======== Basic earnings per share $ .29 $ .23 $ .84 $ .72 ======== ======== ======== ======== Diluted earnings per share $ .29 $ .22 $ .83 $ .70 ======== ======== ======== ======== 6. The components of comprehensive income for the three and nine month periods ended February 29, 2000 and February 28, 1999 are as follows: Three Months Ended Nine Months Ended ----------------------- ------------------------ February 29 February 28 February 29 February 28 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Net income $ 49,062 $ 38,631 $ 140,562 $ 119,260 Other comprehensive income: Foreign currency translation adjustment 563 924 715 (1,877) ---------- --------- --------- ---------- Comprehensive income $ 49,625 $ 39,555 $ 141,277 $ 117,383 ========== ======== ========= ========== 7. Cintas classifies its businesses into two operating segments: Rentals and Other Services. The Rental operating segment designs and manufactures corporate identity uniforms which it rents, along with other items, to its customers. The Other Services operating segment involves the design, manufacture and direct sale of uniforms to its customers as well as the sale of ancillary services including sanitation supplies, first aid products and services and cleanroom supplies. All of these services are provided throughout the United States and Canada to businesses of all types - from small service and manufacturing companies to major corporations that employ thousands of people. Information as to the operations of our different business segments is set forth based on the distribution of products and services offered. Cintas evaluates performance based on several financial measures, which are primarily business segment revenue and income before income taxes. 7 CINTAS CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) (In thousands except per share data) Other Rentals Services Corporate Total ---------- ---------- ----------- ----------- For the three months ended February 29, 2000 Revenue $ 355,739 $ 118,190 $ -- $ 473,929 ========== ========== ============ ========== Income before income taxes $ 68,144 $ 13,730 $ (2,739) $ 79,135 ========== ========== ============ ========== For the three months ended February 28, 1999 Revenue $ 322,614 $ 111,055 $ -- $ 433,669 ========== ========== ============ ========== Income before income taxes $ 54,113 $ 10,636 $ (2,599) $ 62,150 ========== ========== ============ ========== As of and for the nine months ended February 29, 2000 Revenue $1,049,982 $ 347,171 $ -- $1,397,153 ========== ========== ============ ========== Income before income taxes $ 197,972 $ 37,636 $ (8,540) $ 227,068 ========== ========== ============ ========== Total assets $1,187,835 $ 241,172 $ 114,877 $1,543,884 ========== ========== ============ ========== As of and for the nine months ended February 28, 1999 Revenue $ 960,447 $ 336,150 $ -- $1,296,597 ========== ========== ============ ========== Income before income taxes $ 169,671 $ 32,639 $ (8,998) $ 193,312 ========== ========== ============ ========== Total assets $1,061,340 $ 227,846 $ 79,315 $1,368,501 ========== ========== ============ ========== 8 CINTAS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Total revenues increased 9% and 8% respectively, for the three and nine months ended February 29, 2000 over the same periods in fiscal 1999. The third quarter in fiscal 2000 included an extra work day in February due to the leap year. Net rental revenue increased 10% and 9%, respectively, for the three and nine months ended February 29, 2000 over the same periods in the prior fiscal year, due primarily to growth in the customer base. This revenue growth came despite the disposition of linen volume occurring from September 1998 through February 2000 and the high rate of lost business occurring at Unitog operations prior to the merger. For the three and nine months ended February 29, 2000 revenues from other services increased 6% and 3%, respectively, over the same periods in fiscal 1999, principally as a result of the increased sales of first aid supplies. Net income increased 27% and 18%, respectively, for the three and nine months ended February 29, 2000 over the same periods in fiscal 1999. Diluted earnings per share increased 32% and 19%, respectively, for the three and nine months ended February 29, 2000 over the same periods in fiscal 1999. In the third quarter of last fiscal year, Unitog recorded a special charge related to environmental costs. Excluding that special charge, net income for the quarter increased 18% and diluted earnings per share for the quarter increased 16%. Net interest expense (interest expense less interest income) was $2,739,000 and $8,540,000, respectively, for the three and nine months ended February 29, 2000 compared to $2,599,000 and $8,998,000, respectively, for the same periods in the prior fiscal year. The net interest expense for the third quarter of fiscal 2000 increased over the third quarter of fiscal 1999 because of the recent spike in interest rates as a result of actions taken by the Federal Reserve. Year to date interest expense has decreased primarily due to the repayment of long-term debt. Cintas' effective tax rate was approximately 38% in both periods of fiscal 2000 as well as fiscal 1999. Cash, cash equivalents and marketable securities increased by $27 million at February 29, 2000 from May 31, 1999 primarily due to strong cash flow from operations. These sources will be used to finance future acquisitions and capital expenditures. Net property, plant and equipment increased by $45 million from May 31, 1999 to February 29, 2000. At the end of the third quarter of fiscal 2000, we had eight uniform rental facilities in various stages of construction. The integration of Unitog facilities and corporate functions are progressing as planned. Activity in the third quarter of fiscal 2000 related to the Special Charge accrual established in fiscal 1999 for the Unitog integration amounted to $1.4 million, primarily related to cash payments for severance. The remaining severance accrual at the end of the third quarter of fiscal 2000 is $.6 million. Financial Condition At February 29, 2000, we had $115 million in cash, cash equivalents and marketable securities. We believe that our current cash position, funds anticipated to be generated from operations and the strength of our banking relationships are sufficient to meet our anticipated operational and capital needs requirements. 9 CINTAS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Quantitative and Qualitative Disclosures About Market Risk In our normal operations, we have market risk exposure to interest rates. There has been no significant change in our exposure to these risks which has been previously disclosed. Impact of Year 2000 We have completed the changes required to ensure that all of our software, hardware and operating equipment will function properly with respect to dates in the year 2000 and thereafter. The total cost of these changes was not material and was expensed as incurred. We incurred the majority of our Year 2000 costs during fiscal 1998, with substantially all of the remaining costs expensed in fiscal 1999. As of the date of this filing, our ability to manufacture and distribute products and services has not been adversely affected by Year 2000 issues. Forward-Looking Statements The 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 views as to future performance. These statements are based on our expectations concerning future events which involve a number of risks and uncertainties such as the performance and costs of integration of acquisitions, fluctuations in costs of materials and labor, the outcome of pending environmental matters and Year 2000 issues. 10 CINTAS CORPORATION Part II. Other Information Item 5. Other Events On January 18, 2000, Cintas declared an annual cash dividend of $.19 per share on outstanding common stock, a 27% increase over the dividend paid in the prior year. The dividend was payable on March 7, 2000 to shareholders of record as of February 4, 2000. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit Index Exhibit Number Description of Exhibit -------------- ---------------------------------------- 27.1 Financial Data Schedule 27.2 Financial Data Schedule - Restated Six Months Ended November 1999 27.3 Financial Data Schedule - Restated Three Months Ended August 1999 27.4 Financial Data Schedule - Restated Twelve Months Ended May 1999 27.5 Financial Data Schedule - Restated Nine Months Ended February 1999 27.6 Financial Data Schedule - Restated Six Months Ended November 1998 27.7 Financial Data Schedule - Restated Three Months Ended August 1998 (b) No reports were filed on Form 8-K during the quarter 11 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) /s/William C. Gale ---------------------------------------- Date: April 7, 2000 William C. Gale Vice President and Chief Financial Officer (Chief Accounting Officer) EX-27 2 EXHIBIT 27.1
5 3-MOS MAY-31-2000 FEB-29-2000 40,812,000 74,065,000 239,429,000 7,919,000 360,517,000 716,784,000 902,885,000 285,029,000 1,543,884,000 223,052,000 0 0 0 53,961,000 966,192,000 1,543,884,000 118,190,000 473,929,000 77,031,000 279,354,000 112,701,000 0 3,998,000 79,135,000 30,073,000 0 0 0 0 49,062,000 0.29 0.29
EX-27 3 EXHIBIT 27.2
5 3-MOS MAY-31-2000 NOV-30-1999 26,430,000 67,347,000 234,662,000 7,666,000 345,707,000 673,950,000 911,003,000 295,882,000 1,486,565,000 213,171,000 0 0 0 53,345,000 916,324,000 1,486,565,000 116,123,000 465,849,000 76,038,000 275,683,000 109,334,000 0 3,908,000 78,010,000 29,675,000 0 0 0 0 48,335,000 0.29 0.29
EX-27 4 EXHIBIT 27.3
5 3-MOS MAY-31-2000 AUG-31-1999 31,800,000 50,422,000 214,051,000 9,084,000 335,234,000 630,095,000 866,238,000 266,511,000 1,429,203,000 203,473,000 0 0 0 52,227,000 864,372,000 1,429,203,000 112,858,000 457,375,000 75,159,000 273,086,000 111,387,000 0 4,109,000 69,923,000 26,758,000 0 0 0 0 43,165,000 0.26 0.25
EX-27 5 EXHIBIT 27.4
5 3-MOS MAY-31-2000 MAY-31-1999 15,803,000 72,315,000 210,833,000 8,754,000 338,137,000 634,485,000 855,356,000 282,269,000 1,407,818,000 212,097,000 0 0 0 49,974,000 821,449,000 1,407,818,000 118,170,000 454,971,000 79,161,000 276,865,000 144,651,000 0 3,855,000 30,682,000 11,003,000 0 0 0 0 19,679,000 0.12 0.12
EX-27 6 EXHIBIT 27.5
5 3-MOS MAY-31-2000 FEB-28-1999 28,258,000 73,735,000 178,190,000 5,890,000 277,965,000 557,968,000 643,403,000 193,556,000 1,145,089,000 179,309,000 0 0 0 48,686,000 720,372,000 1,145,089,000 93,669,000 360,504,000 63,547,000 210,966,000 87,692,000 0 2,034,000 60,924,000 23,052,000 0 0 0 0 37,872,000 0.23 0.22
EX-27 7 EXHIBIT 27.6
5 3-MOS MAY-31-1999 NOV-30-1998 4,441,000 74,849,000 192,642,000 5,534,000 268,687,000 541,745,000 615,827,000 192,936,000 1,103,002,000 177,153,000 0 0 0 48,182,000 681,836,000 1,103,002,000 102,461,000 367,327,000 70,961,000 218,075,000 83,317,000 0 2,538,000 64,570,000 24,770,000 0 0 0 0 39,800,000 0.27 0.26
EX-27 8 EXHIBIT 27.7
5 3-MOS MAY-31-1999 AUG-31-1998 17,904,000 80,744,000 168,851,000 4,851,000 252,516,000 520,283,000 577,733,000 185,502,000 1,050,846,000 180,044,000 0 0 0 47,784,000 638,286,000 1,050,846,000 94,879,000 354,345,000 65,835,000 211,321,000 86,430,000 0 2,443,000 55,358,000 21,498,000 0 0 0 0 33,860,000 0.22 0.22
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