EX-99 2 ex99121906.htm EXHIBIT 99 Exhibit 99
FOR IMMEDIATE RELEASE
December 19, 2006

Cintas Corporation Reports Second Quarter Fiscal 2007
Revenue and Earnings
Revenue increases 10.5%
Earnings Per Diluted Share increases 10.9%

 
CINCINNATI, December 19, 2006 -- Cintas Corporation (Nasdaq:CTAS) today reported revenue for the second quarter of fiscal 2007 of $923.3 million, a 10.5% increase from the previous year’s second quarter revenue of $835.8 million. Earnings per diluted share of $0.51 increased 10.9% from $0.46 per diluted share last year, and net income of $82.5 million increased 7.4% from $76.8 million last year.
 
Scott D. Farmer, President and Chief Executive Officer, stated, “I am proud to announce that we have achieved both revenue growth and earnings per share growth in excess of 10%. Our results are a tribute to the effort that our more than 32,000 employee partners make every day in servicing our 700,000 business customers. We continue to allocate capital and resources to grow the company at double digit rates while maintaining strong profit margins. This marks our sixth consecutive quarter of achieving revenue growth in excess of 10%.
 
“During the second quarter, we purchased approximately 660,000 shares of Cintas common stock under our authorized share buyback program at a cost of $27.5 million. Since the inception of this program, we have now bought back approximately 12.8 million of our outstanding shares at a cost of approximately $524 million. These purchases, coupled with acquisitions made during the second half of fiscal 2006, have increased our debt levels and in turn our interest expense. We are pleased to report a healthy 10.1% improvement in our earnings before interest and taxes over the second quarter of fiscal 2006.”
 
Mr. Farmer added, “We continue to implement our new sales structure and now have the new organization in place. Orientation and training of affected partners continues to be on schedule. Once our employee partners become fully oriented and acclimated to their roles, we expect the new organization to drive future improvements in internal growth. The new sales structure is designed to better develop and execute additional cross-selling opportunities and improve sales productivity.”
 
Strong Balance Sheet
 
The Company’s balance sheet continues to be strong. Despite increased debt levels related to acquisitions made in late fiscal 2006 and the Company’s share repurchase program, debt to total capitalization as of November 30, 2006 was only 27.4%. Cash and marketable securities were $172.2 million as of November 30, 2006. As marketable securities mature, it is the Company’s intention to use the funds to reduce its outstanding debt under its commercial paper program, contingent upon other cash needs. Total shareholders’ equity was $2.1 billion.


Outlook
 
Mr. Farmer commented, “Based on our sales results through the second quarter and more consistent energy costs as compared to fiscal 2006, we reiterate our fiscal 2007 guidance which calls for fiscal 2007 revenue of $3.77 to $3.85 billion and diluted earnings per share of $2.10 to $2.20. We expect fiscal 2007 to be another record year at Cintas, which would result in our 38th consecutive year of growth in sales and earnings.”
 
About Cintas 
 
Headquartered in Cincinnati, Cintas Corporation provides highly specialized services to businesses of all types throughout North America. Cintas designs, manufactures and implements corporate identity uniform programs, and provides entrance mats, restroom supplies, promotional products, first aid and safety products, fire protection services and document management services for approximately 700,000 businesses. Cintas is a publicly held company traded over the Nasdaq Global Select Market under the symbol CTAS, and is a Nasdaq-100 company and component of the Standard & Poor’s 500 Index. The Company has achieved 37 consecutive years of growth in sales and earnings, to date.
 
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
 
The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements.  Forward-looking statements may be identified by words such as “estimates,” “anticipates,” “projects,” “plans,” “expects,” “intends,” “believes,” “seeks,” “could,” “should,” “may” and “will” or the negative versions thereof and similar expressions and by the context in which they are used.  Such statements are based upon current expectations of Cintas and speak only as of the date made.  These statements are subject to various risks, uncertainties and other factors that could cause actual results to differ from those set forth in or implied by this news release.  Factors that might cause such a difference include, but are not limited to, the possibility of greater than anticipated operating costs including energy costs, lower sales volumes, the performance and costs of integration of acquisitions, fluctuations in costs of materials and labor including increased medical costs, costs and possible effects of union organizing activities, uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation, the cost, results and ongoing assessment of internal controls for financial reporting required by the Sarbanes-Oxley Act of 2002, the initiation or outcome of litigation, higher assumed sourcing or distribution costs of products, the disruption of operations from catastrophic events, changes in federal and state tax laws and the reactions of competitors in terms of price and service.  Cintas undertakes no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which they are made.

 
For additional information, contact:
 
William C. Gale, Senior Vice President-Finance and Chief Financial Officer - 513-573-4211
Michael L. Thompson, Vice President and Treasurer - 513-573-4133
 


Cintas Corporation
Consolidated Condensed Statements of Income
(Unaudited)
(In thousands except per share data)

 
Three Months Ended
  
Six Months Ended
 
Nov. 30, 2006
  
Nov. 30, 2005 (Restated)*
  
% Chng.
  
Nov. 30, 2006
  
Nov. 30, 2005 (Restated)*
  
% Chng.
Revenue:
 
  
 
  
 
  
 
  
 
  
 
Rentals
$684,491
 
$631,590
 
8.4
  
$1,372,149
 
$1,259,598
 
8.9
Other services
238,775
 
204,195
 
16.9
  
465,278
 
399,662
 
16.4
Total revenue
$923,266
 
$835,785
 
10.5
  
$1,837,427
 
$1,659,260
 
10.7
 
 
  
 
  
 
  
 
  
 
  
 
Costs and expenses (income):
 
  
 
  
 
  
 
  
 
  
 
Cost of rentals
$380,015
 
$349,658
 
8.7
  
$758,315
 
$689,083
 
10.0
Cost of other services
152,178
 
135,666
 
12.2
  
297,558
 
264,228
 
12.6
     Selling and administrative expenses
248,628
 
221,044
 
12.5
  
492,756
 
445,594
 
10.6
Interest income
(1,623
 )
(1,332
)
21.8
  
(3,149
 ) 
(3,034
 ) 
3.8
Interest expense
12,483
 
7,484
 
66.8
  
24,915
 
14,820
 
68.1
Total costs and expenses
$791,681
 
$712,520
 
11.1
  
$1,570,395
 
$1,410,691
 
11.3
 
 
  
 
  
 
  
 
  
 
  
 
Income before income taxes
$131,585
 
$123,265
 
6.7
  
$267,032
 
$248,569
 
7.4
Income taxes
49,058
 
46,426
 
5.7
  
99,543
 
93,308
 
6.7
Net income
$82,527
 
$76,839
 
7.4
  
$167,489
 
$155,261
 
7.9
 
 
  
 
  
 
  
 
  
 
  
 
Per share data:
 
  
 
  
 
  
 
  
 
  
 
Basic earnings per share
$0.51
 
$0.46
 
10.9
  
$1.04
 
$0.92
 
13.0
Diluted earnings per share
$0.51
 
$0.46
 
10.9
  
$1.04
 
$0.92
 
13.0
 
 
  
 
  
 
  
 
  
 
  
 
Basic shares outstanding
160,312
 
167,975
 
 
  
160,542
 
168,460
 
 
Diluted shares outstanding
160,721
 
168,611
 
 
  
160,932
 
169,083
 
 
 
CINTAS CORPORATION SUPPLEMENTAL DATA
 
Three Months Ended
  
Six Months Ended
 
Nov. 30, 2006
  
Nov. 30, 2005 (Restated)*
  
% Chng.
  
Nov. 30, 2006
  
Nov. 30, 2005 (Restated)*
  
% Chng.
Rentals gross margin
44.5%
  
44.6%
  
 
  
44.7%
  
45.3%
  
 
Other services gross margin
36.3%
  
33.6%
  
 
  
36.0%
  
33.9%
  
 
Total gross margin
42.4%
  
41.9%
  
 
  
42.5%
  
42.5%
  
 
Net margin
8.9%
  
9.2%
  
 
  
9.1%
  
9.4%
  
 
 
 
  
 
  
 
  
 
  
 
  
 
Depreciation and amortization
$42,985
  
$39,307
  
9.4
  
$85,753
  
$77,660
  
10.4
Capital expenditures
$44,825
  
$34,037
  
31.7
  
$81,321
  
$70,181
  
15.9
 
 
  
 
  
 
  
 
  
 
  
 
Debt to total capitalization
27.4%
  
17.7%
  
 
  
27.4%
  
17.7%
  
 

RECONCILIATION TO GAAP MEASURES
 
Three Months Ended
  
Six Months Ended
 
Nov. 30, 2006
  
Nov. 30, 2005 (Restated)*
  
% Chng.
  
Nov. 30, 2006
  
Nov. 30, 2005 (Restated)*
  
% Chng.
Income before income taxes
$131,585
 
$123,265
 
6.7
  
$267,032
 
$248,569
 
7.4
Interest income
(1,623
 )
(1,332
 )
21.8
  
(3,149
 )
(3,034
 ) 
3.8
Interest expense
12,483
 
7,484
 
66.8
  
24,915
 
14,820
 
68.1
Earnings before interest and taxes
$142,445
 
$129,417
 
10.1
  
$288,798
 
$260,355
 
10.9
 
*Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.

Cintas Corporation
Consolidated Condensed Balance Sheets
(In thousands except share data)

 
Nov. 30, 2006 (Unaudited)
  
May 31, 2006 (Restated)*
  
ASSETS
 
  
 
  
Current assets:
 
  
 
  
Cash and cash equivalents
$38,939
 
$38,914
 
Marketable securities
133,282
 
202,539
 
Accounts receivable, net
405,042
 
389,905
 
Inventories, net
217,575
 
198,000
 
Uniforms and other rental items in service
347,021
 
337,487
 
Prepaid expenses
13,594
 
11,163
 
Total current assets
1,155,453
 
1,178,008
 
 
 
  
 
  
Property and equipment, at cost, net
880,955
 
863,783
 
 
 
  
 
  
Goodwill
1,170,480
 
1,136,175
 
Service contracts, net
171,391
 
179,965
 
Other assets, net
56,785
 
67,306
 
 
        
 
$3,435,064
  
$3,425,237
  
     
 
  
LIABILITIES AND SHAREHOLDERS' EQUITY
    
 
  
Current liabilities:
 
  
 
  
Accounts payable
$79,144
 
$71,635
 
Accrued compensation & related liabilities
50,649
 
50,134
 
Accrued liabilities
162,316
 
188,927
 
Income taxes:
 
  
 
  
Current
81,886
 
43,694
 
Deferred
56,493
 
51,669
 
Long-term debt due within one year
229,477
 
4,288
 
Total current liabilities
659,965
 
410,347
 
 
 
  
 
  
Long-term debt due after one year
561,796
 
794,454
 
 
 
  
 
  
Deferred income taxes
116,891
 
130,244
 
 
 
  
 
  
Shareholders' equity:
 
  
 
  
Preferred stock, no par value: 100,000 shares
 
  
 
  
             authorized, none outstanding
-
 
-
 
Common stock, no par value: 425,000,000 shares authorized
 
  
 
  
             FY 2007: 172,743,841 shares issued and 159,947,356
    
 
  
     shares outstanding
 
  
 
  
     FY 2006: 172,571,083 shares issued and 163,181,738
 
  
 
  
     shares outstanding
126,641
 
120,860
 
    Paid in capital
45,696
 
47,644
 
    Retained earnings
2,428,406
 
2,260,917
 
    Treasury stock
 
  
 
  
     FY 2007: 12,796,485 shares; FY 2006: 9,389,345  shares
(523,573
) 
(381,613
 ) 
    Other accumulated comprehensive income
19,242
 
42,384
 
Total shareholders' equity
2,096,412
 
2,090,192
 
 
 
  
 
  
 
$3,435,064
  
$3,425,237
  

*Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.
 

Cintas Corporation
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
 
 
 
Six Months Ended
 
Nov. 30, 2006
  
Nov. 30, 2005 (Restated)*
Cash flows from operating activities:
      
 
 
  
 
  
Net income
$167,489
 
$155,261
  
 
 
  
 
  
Adjustments to reconcile net income to net cash
    provided by operating activities:
 
  
 
  
  Depreciation
66,074
 
61,982
  
  Amortization of deferred charges
19,679
 
15,678
  
  Stock-based compensation
1,250
 
3,045
  
  Deferred income taxes
999
 
6,413
  
  Change in current assets and liabilities, net of acquisitions
      of  businesses:
 
  
 
  
  Accounts receivable
(14,179
)
(27,567
)
  Inventories
(19,254
)
3,096
 
  Uniforms and other rental items in service
(9,534
)
(10,027
)
  Prepaid expenses
(2,424
)
710
 
  Accounts payable
7,506
  
(10,751
)
  Accrued compensation and related liabilities
515
  
1,657
 
  Accrued liabilities
(28,979
)
(43,231
)
  Tax benefit on exercise of stock options
(97
)
(301
)
  Income taxes payable
38,289
  
49,934
  
Net cash provided by operating activities
227,334
 
205,899
 
 
 
  
 
  
Cash flows from investing activities:
 
  
 
  
 
 
  
 
  
Capital expenditures
(81,321
)
(70,181
)
Proceeds from sale or redemption of marketable securities
80,485
  
73,171
  
Purchase of marketable securities
(10,218
)
(10,277
)
Acquisitions of businesses, net of cash acquired
(53,782
)
(87,078
)
Other
(2,740
)
3,111
 
Net cash used in investing activities
(67,576
)
(91,254)
  
 
 
  
 
  
Cash flows from financing activities:
 
  
 
  
 
 
  
 
  
Proceeds from issuance of debt
252,460
 
0
  
Repayment of debt
(259,929
)
(6,403
)
Stock options exercised
5,781
  
7,152
  
Tax benefit on exercise of stock options
97
  
301
  
Repurchase of common stock
(141,960
)
(114,170
)
Other
(16,182
)
7,875
  
Net cash used in financing activities
(159,733
)
(105,245
)
 
 
  
 
  
Net increase in cash and cash equivalents
25
  
9,400
  
Cash and cash equivalents at beginning of period
38,914
 
43,196
  
Cash and cash equivalents at end of period
$38,939
 
52,596
  

*Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.