EX-99 2 ex99122007.htm EXHIBIT 99 - PRESS RELEASE ex99122007.htm
FOR IMMEDIATE RELEASE
December 20, 2007

Cintas Corporation Reports Second Quarter Fiscal 2008
Revenue and Earnings


 
CINCINNATI, December 20, 2007 -- Cintas Corporation (Nasdaq:CTAS) today reported revenue for the second quarter of fiscal 2008 of $983.9 million, a 6.6% increase from the previous year’s second quarter revenue of $923.3 million.  Net income was $82.9 million and earnings per diluted share were $0.53.
 
Scott D. Farmer, President and Chief Executive Officer, stated, “We are pleased to announce our second quarter results, which are in line with our expectations.  Our new sales organization continues to gain momentum.  The new business results being achieved under this new organization are meeting our expectations, most notably in our emerging business units.”
 
Net income increased 0.4% and earnings per diluted share increased 3.9% as compared to the second quarter of fiscal 2007.  These results were impacted by an increase in the Company’s effective tax rate, which increased to 38.3% as compared to 37.3% in last year’s second quarter.  This increase was due to the second quarter impact of FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109.  The Company expects its full year fiscal 2008 effective tax rate to be the same as last year’s effective rate of 37.3%.  Results for the quarter were also impacted by the increased investment the Company has made to its sales organization over the past year.
 
Share Buyback
 
Mr. Farmer also announced, “We have resumed purchases under our authorized share buyback program.  During our second quarter, we purchased 5.2 million shares at a cost of approximately $191 million.  Since the program’s inception, we have bought back 19.4 million shares, which equates to over 11% of our outstanding stock that existed at the program’s inception.  We have $228 million in remaining authorization available under the program.”
 
Strong Balance Sheet and Cash Flow
 
The Company’s balance sheet and cash flow from operations continue to be strong.  As of November 30, 2007, the Company’s current assets exceeded current liabilities by over a three to one ratio and debt to total capitalization was 30.6%.

On December 7, 2007, subsequent to the end of the second quarter, the Company issued $250 million of 6.125% Senior Debt.  The proceeds generated from this debt issuance were used to reduce the Company’s outstanding balance under its commercial paper program.

Outlook
 
Mr. Farmer stated, “Our results through the second quarter continue to be in line with our expectations.  Based on these results and our current outlook for the remainder of our fiscal year, we reiterate our full fiscal year guidance of $3.9 billion to $4.1 billion in revenue and earnings per diluted share of $2.15 to $2.25.  Achieving this guidance would allow us to reach our 39th consecutive year of growth in revenue and earnings.”
 
About Cintas
 
Headquartered in Cincinnati, Cintas Corporation provides highly specialized services to businesses of all types predominantly in the United States and Canada. 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 800,000 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 38 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”, “predicts”, “projects”, “plans”, “expects”, “intends”, “target”, “forecast”, “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.  We cannot guarantee that any forward-looking statement will be realized.  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, loss of customers due to outsourcing trends, 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, failure to comply with government regulations concerning employment discrimination, employee pay and benefits and employee health and safety, 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 whether as a result of new information or to reflect events or circumstances arising after the date on which they are made.  You are advised, however, to consult any further disclosures we make on related subjects in our Form 10-Q, 8K and 10-K reports to the SEC.

 
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, 2007
   
Nov. 30, 2006
   
% Chng.
   
Nov. 30, 2007
   
Nov. 30, 2006
   
% Chng.
 
Revenue:
                             
Rental uniforms and ancillary products
  $ 708,845     $ 684,491       3.6     $ 1,419,199     $ 1,372,149       3.4  
Other services
    275,020       238,775       15.2       533,794       465,278       14.7  
Total revenue
  $ 983,865     $ 923,266       6.6     $ 1,952,993     $ 1,837,427       6.3  
                                                 
Costs and expenses (income):
                                               
Cost of rental uniforms and ancillary products 
  $ 392,211     $ 380,015       3.2     $ 783,701     $ 758,315       3.3  
Cost of other services
    171,086       152,178       12.4       331,352       297,558       11.4  
Selling and administrative expenses
    275,125       248,628       10.7       551,835       492,756       12.0  
Interest income
    (1,796 )     (1,623 )     10.7       (3,258 )     (3,149 )     3.5  
Interest expense
    12,993       12,483       4.1       25,830       24,915       3.7  
Total costs and expenses
  $ 849,619     $ 791,681       7.3     $ 1,689,460     $ 1,570,395       7.6  
                                                 
Income before income taxes
  $ 134,246     $ 131,585       2.0     $ 263,533     $ 267,032       -1.3  
Income taxes
    51,393       49,058       4.8       99,617       99,543       0.1  
Net income
  $ 82,853     $ 82,527       0.4     $ 163,916     $ 167,489       -2.1  
                                               
Per share data:
                                               
Basic earnings per share
  $ 0.53     $ 0.51       3.9     $ 1.04     $ 1.04       0.0  
Diluted earnings per share
  $ 0.53     $ 0.51       3.9     $ 1.04     $ 1.04       0.0  
                                               
Basic shares outstanding
    156,563       160,312               157,673       160,542          
Diluted shares outstanding
    156,813       160,721               157,949       160,932          

CINTAS CORPORATION SUPPLEMENTAL DATA
 
 
Three Months Ended
   
Six Months Ended
 
 
Nov. 30, 2007
 
Nov. 30, 2006
 
% Chng.
   
Nov. 30, 2007
 
Nov. 30, 2006
 
% Chng.
 
Rental uniforms and ancillary products
   gross margin
    44.7 %     44.5 %         44.8 %     44.7 %    
Other services gross margin
    37.8 %     36.3 %         37.9 %     36.0 %    
Total gross margin
    42.7 %     42.4 %         42.9 %     42.5 %    
Net margin
    8.4 %     8.9 %         8.4 %     9.1 %    
                                       
Depreciation and amortization
  $ 47,390     $ 42,985       10.2     $ 93,612     $ 85,753       9.2  
Capital expenditures
  $ 47,863     $ 44,825       6.8     $ 93,207     $ 81,321       14.6  
                                               
Debt to total capitalization
    30.6 %     27.4 %             30.6 %     27.4 %        

RECONCILIATION TO GAAP MEASURES
                             
 
Three Months Ended
   
Six Months Ended
 
 
Nov. 30, 2007
 
Nov. 30, 2006
 
% Chng.
 
Nov. 30, 2007
 
Nov. 30, 2006
 
% Chng.
 
Income before income taxes
  $ 134,246     $ 131,585       2.0     $ 263,533     $ 267,032       -1.3  
Interest income
    (1,796 )     (1,623 )     10.7       (3,258 )     (3,149 )     3.5  
Interest expense
    12,993       12,483       4.1       25,830       24,915       3.7  
Earnings before interest and taxes
  $ 145,443     $ 142,445       2.1     $ 286,105     $ 288,798       -0.9  





SUPPLEMENTAL SEGMENT DATA
 Rental
Uniforms and Ancillary Products
 
Uniform Direct Sales
 
First Aid, Safety and Fire Protection
 
Document Management
   
Corporate
   
Total
 
For the three months ended November 30, 2007
                                   
Revenue
  $ 708,845     $ 134,455     $ 99,153     $ 41,412     $ 0     $ 983,865  
Gross margin
  $ 316,634     $ 43,315     $ 38,415     $ 22,204     $ 0     $ 420,568  
  Selling and administrative expenses
  $ 198,635     $ 27,565     $ 31,069     $ 17,856     $ 0     $ 275,125  
Income (loss) before income taxes
  $ 117,999     $ 15,750     $ 7,346     $ 4,348     $ (11,197 )   $ 134,246  
                                                 
For the three months ended November 30, 2006
                                               
Revenue
  $ 684,491     $ 127,968     $ 87,468     $ 23,339     $ 0     $ 923,266  
Gross margin
  $ 304,476     $ 40,258     $ 34,912     $ 11,427     $ 0     $ 391,073  
  Selling and administrative expenses
  $ 186,679     $ 24,732     $ 26,150     $ 11,067     $ 0     $ 248,628  
Income (loss) before income taxes
  $ 117,797     $ 15,526     $ 8,762     $ 360     $ (10,860 )   $ 131,585  
                                                 
As of and for the six months ended November 30, 2007
                                             
Revenue
  $ 1,419,199     $ 253,260     $ 201,409     $ 79,125     $ 0     $ 1,952,993  
Gross margin
  $ 635,498     $ 79,785     $ 80,235     $ 42,422     $ 0     $ 837,940  
Selling and administrative expenses
  $ 402,706     $ 52,908     $ 62,268     $ 33,953     $ 0     $ 551,835  
Income (loss) before income taxes
  $ 232,792     $ 26,877     $ 17,967     $ 8,469     $ (22,572 )   $ 263,533  
Assets
  $ 2,622,562     $ 191,910     $ 340,453     $ 390,390     $ 154,267     $ 3,699,582  
                                                 
As of and for the six months ended November 30, 2006
                                             
Revenue
  $ 1,372,149     $ 244,965     $ 175,804     $ 44,509     $ 0     $ 1,837,427  
Gross margin
  $ 613,834     $ 75,951     $ 69,242     $ 22,527     $ 0     $ 781,554  
Selling and administrative expenses
  $ 371,957     $ 48,522     $ 51,301     $ 20,976     $ 0     $ 492,756  
Income (loss) before income taxes
  $ 241,877     $ 27,429     $ 17,941     $ 1,551     $ (21,766 )   $ 267,032  
Assets
  $ 2,531,085     $ 173,427     $ 298,465     $ 259,866     $ 172,221     $ 3,435,064  

 



Consolidated Condensed Balance Sheets
(In thousands except share data)

 
Nov. 30, 2007
(Unaudited)
   
May 31, 2007
 
ASSETS
       
Current assets:
           
Cash and cash equivalents
  $ 56,640     $ 35,360  
Marketable securities
    97,627       120,053  
Accounts receivable, net
    420,667       408,870  
Inventories, net
    238,944       231,741  
Uniforms and other rental items in service
    363,802       344,931  
Deferred tax asset
    33,672       -  
Prepaid expenses
    16,311       15,781  
Total current assets
    1,227,663       1,156,736  
               
Property and equipment, at cost, net
    949,396       920,243  
                 
Goodwill
    1,277,929       1,245,877  
Service contracts, net
    160,769       171,361  
Other assets, net
    83,825       76,263  
               
    $ 3,699,582     $ 3,570,480  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
               
Current liabilities:
               
Accounts payable
  $ 73,837     $ 64,622  
Accrued compensation & related liabilities
    40,750       62,826  
Accrued liabilities
    174,803       200,686  
Income taxes:
               
Current
    72,474       18,584  
Deferred
    -       52,179  
Long-term debt due within one year
    1,324       4,141  
Total current liabilities
    363,188       403,038  
               
Long-term liabilities:
               
Long-term debt due after one year
    947,473       877,074  
Deferred income taxes
    120,961       122,630  
Accrued liabilities
    120,332       0  
Total long-term liabilities
    1,188,766       999,704  
               
Shareholders' equity:
               
Preferred stock, no par value: 100,000 shares authorized, none outstanding
    -       -  
Common stock, no par value: 425,000,000 shares authorized
               
FY 2008:  173,069,626 shares issued and 153,677,303 shares outstanding
               
FY 2007:  172,874,195 shares issued and 158,676,872 shares outstanding
    128,563       120,811  
Paid-in capital
    57,973       56,909  
Retained earnings
    2,683,644       2,533,459  
Treasury stock
               
FY 2008:  19,392,323 shares; FY 2007:  14,197,323 shares
    (772,041 )     (580,562 )
Other accumulated comprehensive income
    49,489       37,121  
Total shareholders' equity
    2,147,628       2,167,738  
               
  $ 3,699,582     $ 3,570,480  




Cintas Corporation
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)

 
Six Months Ended
 
 
Nov. 30, 2007
   
Nov. 30, 2006
 
Cash flows from operating activities:
 
 
     
       
Net income
  $ 163,916     $ 167,489  
               
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
    72,271       66,074  
Amortization of deferred charges
    21,341       19,679  
Stock-based compensation
    4,809       1,250  
Deferred income taxes
    3,626       999  
Change in current assets and liabilities, net of acquisitions of businesses:
               
Accounts receivable
    (8,216 )     (14,179 )
Inventories
    (6,719 )     (19,254 )
Uniforms and other rental items in service
    (17,422 )     (9,534 )
Prepaid expenses
    (453 )     (2,424 )
Accounts payable
    8,771       7,506  
Accrued compensation and related liabilities
    (22,250 )     515  
Accrued liabilities and other
    (17,425 )     (28,979 )
Income taxes payable
    68,413       38,192  
Net cash provided by operating activities
    270,662       227,334  
               
Cash flows from investing activities:
               
               
Capital expenditures
    (93,207 )     (81,321 )
Proceeds from sale or redemption of marketable securities
    41,930       80,485  
Purchase of marketable securities and investments
    (22,861 )     (10,218 )
Acquisitions of businesses, net of cash acquired
    (56,031 )     (53,782 )
Other
    732       (2,740 )
  Net cash used in investing activities
    (129,437 )     (67,576 )
               
Cash flows from financing activities:
               
 
               
Proceeds from issuance of debt
    296,000       252,460  
Repayment of debt
    (228,418 )     (259,929 )
Stock options exercised
    7,752       5,781  
Repurchase of common stock
    (191,479 )     (141,960 )
Other
    (3,800 )     (16,085 )
  Net cash used in financing activities
    (119,945 )     (159,733 )
               
Net increase in cash and cash equivalents
    21,280       25  
Cash and cash equivalents at beginning of period
    35,360       38,914  
Cash and cash equivalents at end of period
  $ 56,640     $ 38,939