EX-99 2 ex99071509.htm EXHIBIT 99 - PRESS RELEASE DATED 7/15/09 ex99071509.htm
FOR IMMEDIATE RELEASE
 
July 15, 2009





Cintas Corporation Announces Fiscal 2009 Results

 
CINCINNATI, July 15, 2009 -- Cintas Corporation (Nasdaq:CTAS) today reported revenue for its fiscal year ended May 31, 2009, of $3.8 billion, a 4 percent decrease from the prior fiscal year. Net income for the year was $226 million and earnings per diluted share were $1.48.  For the fourth quarter ended May 31, 2009, revenue was $879 million, a 13 percent decrease from prior year fourth quarter revenue. Fourth quarter net income was $4 million and earnings per diluted share were $0.03.

The Company announced on May 29, 2009, that, in response to economic conditions, current year results would include a restructuring, fixed asset impairment and inventory valuation charge.  The $54 million after-tax charge was recorded in the fourth quarter.  Excluding this charge, earnings per diluted share were $1.83 for the year and $0.38 for the fourth quarter.

Scott D. Farmer, Chief Executive Officer, stated, "As we mentioned in May, the U.S. economy continues to lose employment at a rapid rate, directly impacting our customers and prospects.  According to the US Department of Labor, the largest calendar year job loss on record was over 60 years ago when in 1945 the U.S. economy lost 2.75 million jobs.  Over the last twelve months, the U.S. economy has lost approximately 5.5 million jobs, or twice that historical high.  During May and June alone, over 800,000 U.S. jobs were lost."
 
Mr. Farmer continued, "The severity of these job losses resulted in the need for us to take significant cost reduction measures.  We have continued to right-size our workforce and reduced our operating capacity to reflect current revenue levels.  Over the last year we have also implemented stringent controls over discretionary spending."

Mr. Farmer emphasized, "While market conditions and related job loss are negatively impacting our business, when conditions improve and jobs are added, we expect to see improvement in our results. Cintas is a market leader in its businesses, has the most modern infrastructure, remains profitable, continues to generate significant cash flow and has a strong balance sheet."

Despite lower net income, free cash flow for Fiscal 2009 increased $11 million over Fiscal 2008. Using this strong cash flow, the Company was able to pay off all of its outstanding commercial paper as of May 31, 2009, increase its annual dividend payment to shareholders and increase its total cash position by over $60 million.  In addition, the Company further strengthened its sound balance sheet, improving its current ratio to over four to one and improving its total debt to total capitalization ratio to 25%.

In closing, Mr. Farmer stated, "Our strong financial position and our commitment to continue to deliver exceptional quality and service to our customers will provide enhanced opportunities when economic conditions improve."
 
 
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, safety, fire protection products and 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.
 


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 words, terms and 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.  You should not place undue reliance on any forward-looking statement.  We cannot guarantee that any forward-looking statement will be realized.  These statements are subject to various risks, uncertainties, potentially inaccurate assumptions and other factors that could cause actual results to differ from those set forth in or implied by this Press 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, investigations or other proceedings, higher assumed sourcing or distribution costs of products, the disruption of operations from catastrophic or extraordinary events, changes in federal and state tax and labor laws and the reactions of competitors in terms of price and service.  Cintas undertakes no obligation to publicly release any revisions to any forward-looking statements or to otherwise update any forward-looking statements whether as a result of new information or to reflect events, circumstances or any other unanticipated developments arising after the date on which such statements are made.  A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the year ended May 31, 2008 and in our reports on Forms 10-Q and 8-K.  The risks and uncertainties described herein are not the only ones we may face. Additional risks and uncertainties presently not known to us or that we currently believe to be immaterial may also harm our business.


For additional information, contact:

William C. Gale, Sr. 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
   
Twelve Months Ended
 
   
May 31, 2009
   
May 31, 2008
   
% Chng.
   
May 31,
 2009
   
May 31, 2008
   
% Chng.
 
Revenue:
                                   
  Rental uniforms and ancillary products
  $ 647,487     $ 711,728       -9.0     $ 2,755,015     $ 2,834,568       -2.8  
  Other services
    231,196       297,227       -22.2       1,019,670       1,103,332       -7.6  
  Total revenue
  $ 878,683     $ 1,008,955       -12.9     $ 3,774,685     $ 3,937,900       -4.1  
                                                 
Costs and expenses (income):
                                               
  Cost of rental uniforms and ancillary products
  $ 373,860     $ 399,599       -6.4     $ 1,562,230     $ 1,581,618       -1.2  
  Cost of other services
    170,472       176,921       -3.6       661,584       674,682       -1.9  
  Selling and administrative expenses
    253,677       279,116       -9.1       1,082,709       1,104,145       -1.9  
  Restructuring Charges
    10,209       -       N/A       10,209       -       N/A  
  Impairment of Long-Lived Assets
    48,888       -       N/A       48,888       -       N/A  
                                                 
Operating income
  $ 21,577     $ 153,319       -85.9     $ 409,065     $ 577,455       -29.2  
                                                 
  Interest income
    (329 )     (1,304 )     -74.8       (2,764 )     (6,072 )     -54.5  
  Interest expense
    12,030       13,371       -10.0       50,236       52,823       -4.9  
                                                 
Income before income taxes
  $ 9,876     $ 141,252       -93.0     $ 361,593     $ 530,704       -31.9  
Income taxes
    5,804       51,591       -88.7       135,236       195,299       -30.8  
Net income
  $ 4,072     $ 89,661       -95.5     $ 226,357     $ 335,405       -32.5  
                                                 
Per share data:
                                               
Basic earnings per share
  $ 0.03     $ 0.58       -94.8     $ 1.48     $ 2.15       -31.2  
Diluted earnings per share
  $ 0.03     $ 0.58       -94.8     $ 1.48     $ 2.15       -31.2  
                                                 
Weighted average number of shares outstanding
    152,790       153,686               152,942       155,678          
Diluted average number of shares outstanding
    153,199       153,854               153,366       155,930          
 
 
 
   
Three Months Ended
   
Twelve Months Ended
 
CINTAS CORPORATION SUPPLEMENTAL DATA
May 31, 2009
   
May 31, 2008
   
% Chng.
   
May 31,
 2009
   
May 31,
 2008
   
% Chng.
 
Rental uniforms and ancillary products gross margin
    42.3%       43.9%             43.3%       44.2%        
Other services gross margin
    26.3%       40.5%             35.1%       38.9%        
Total gross margin
    38.1%       42.9%             41.1%       42.7%        
Net margin
    0.5%       8.9%             6.0%       8.5%        
                                             
Depreciation and amortization
  $ 49,964     $ 49,456       1.0     $ 200,106     $ 191,903       4.3  
Capital expenditures
  $ 27,309     $ 45,485       -40.0     $ 160,092     $ 190,333       -15.9  
                                                 
Debt to total capitalization
    24.9%       29.5%               24.9%       29.5%          
 

 

 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 May 31, 2009
                               
Revenue
  $ 647,487     $ 93,841     $ 83,038     $ 54,317     $ -     $ 878,683  
Gross margin
  $ 273,627     $ 7,900     $ 26,505     $ 26,319     $ -     $ 334,351  
  Selling and administrative expenses
  $ 175,993     $ 22,041     $ 32,610     $ 23,033     $ -     $ 253,677  
Restructuring charges
  $ 8,782     $ 547     $ 564     $ 316     $ -     $ 10,209  
Impairment of long-lived assets
  $ 44,204     $ 4,135     $ 543     $ 6     $ -     $ 48,888  
Income (loss) before income taxes
  $ 44,648     $ (18,823 )   $ (7,212 )   $ 2,964     $ (11,701 )   $ 9,876  
                                                 
For the three months ended May 31, 2008
                                           
Revenue
  $ 711,728     $ 138,953     $ 104,549     $ 53,725     $ -     $ 1,008,955  
Gross margin
  $ 312,130     $ 48,207     $ 42,344     $ 29,754     $ -     $ 432,435  
  Selling and administrative expenses
  $ 200,149     $ 26,504     $ 31,999     $ 20,464     $ -     $ 279,116  
Income (loss) before income taxes
  $ 111,981     $ 21,703     $ 10,345     $ 9,290     $ (12,067 )   $ 141,252  
                                                 
As of and for the twelve months ended May 31, 2009
                                         
Revenue
  $ 2,755,015     $ 428,369     $ 378,097     $ 213,204     $ -     $ 3,774,685  
Gross margin
  $ 1,192,785     $ 106,033     $ 144,180     $ 107,873     $ -     $ 1,550,871  
Selling and administrative expenses
  $ 769,275     $ 98,131     $ 127,126     $ 88,177     $ -     $ 1,082,709  
Restructuring charges
  $ 8,782     $ 547     $ 564     $ 316     $ -     $ 10,209  
Impairment of long-lived assets
  $ 44,204     $ 4,135     $ 543     $ 6     $ -     $ 48,888  
Income (loss) before income taxes
  $ 370,524     $ 3,220     $ 15,947     $ 19,374     $ (47,472 )   $ 361,593  
Assets
  $ 2,511,902     $ 137,709     $ 321,400     $ 470,619     $ 253,809     $ 3,695,439  
                                                 
As of and for the twelve months ended May 31, 2008
                                         
Revenue
  $ 2,834,568     $ 517,490     $ 403,552     $ 182,290     $ -     $ 3,937,900  
Gross margin
  $ 1,252,951     $ 168,210     $ 160,823     $ 99,616     $ -     $ 1,681,600  
Selling and administrative expenses
  $ 801,691     $ 103,444     $ 125,185     $ 73,825     $ -     $ 1,104,145  
Income (loss) before income taxes
  $ 451,260     $ 64,766     $ 35,638     $ 25,791     $ (46,751 )   $ 530,704  
Assets
  $ 2,620,138     $ 205,638     $ 345,479     $ 445,651     $ 191,695     $ 3,808,601  

Reconciliation of Non-GAAP Financial Measures and Regulation G Disclosure
 
To supplement its consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), the Company provides additional measures of operatings results, net earnings and earnings per share adjusted to exclude certain costs, expenses and gains and losses.  Also, in addition to measuring its cash flow based upon the classifications established under GAAP of operating, investing and financing activities, the Company also measures its free cash flow generation.  The Company believes that these non-GAAP financial measures are appropriate to enhance understanding of its past performance as well as prospects for future performance.
 
The press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission.  A reconciliation of the differences between these non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP follows.
 

 
Reconciliation of Restructuring, Impairment and Inventory Valuation Charge


   
Three Months Ended
May 31, 2009
 
       
Income Before Income Taxes
  $ 9,876  
         
Excluding:
       
Restructuring Charge
  $ 10,209  
Impairment of Long-Lived Assets (1)
  $ 48,888  
Inventory Valuation Charge (2)
  $ 27,486  
         
Total Restructuring, Impairment and Inventory Valuation Charge
  $ 86,583  
         
Income Before Income Taxes, excluding Charge
  $ 96,459  
         
Income Taxes, excluding Charge
  $ 38,186  
         
Net Income, excluding Charge
  $ 58,273  
         
Diluted Average Number of Shares Outstanding
    153,199  
         
Earnings per Diluted Share excluding Charge
  $ 0.38  
 
 
(1)
Impairment of Long-Lived Assets is an impairment of fixed assets and, to a lesser extent, uniforms and other rental items in-service.  No impairment was required or made for intangibles or goodwill.

(2)
The inventory valuation charge is included in cost of goods sold.  $8,419 of the charge is included in Cost of Rental Uniforms and Ancillary Products and $19,067 is included in Cost of Other Services.

Note:
Management believes that earnings per diluted share excluding the restructuring, impairment and inventory valuation charge provides investors pertinent information given the one-time nature of this change.
 
Computation of Free Cash Flow

   
Twelve Months
 
   
Ended May 31,
 
   
2009
   
2008
 
             
Net Cash Provided by Operations
  $ 523,522     $ 542,740  
                 
Capital Expenditures
  $ (160,092 )   $ (190,333 )
                 
Free Cash Flow
  $ 363,430     $ 352,407  

 
Note:
Management uses free cash flow to assess the financial performance of the Company.  Management believes that free cash flow is useful to investors because it relates the operating cash flow of the Company to the capital that is spent to continue, improve and grow business operations.

 
 

 

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

 
   
May 31, 2009
   
May 31, 2008
 
ASSETS
           
Current assets:
           
  Cash and cash equivalents
  $ 129,745     $ 66,224  
  Marketable securities
    120,393       125,471  
  Accounts receivable, net
    357,678       430,078  
  Inventories, net
    202,351       238,669  
  Uniforms and other rental items in service
    335,447       370,416  
  Deferred tax asset
    66,368       39,410  
  Prepaid expenses
    17,035       12,068  
  Assets held for sale
    15,744       -  
Total current assets
    1,244,761       1,282,336  
                 
Property and equipment, at cost, net
    914,627       974,575  
                 
Goodwill
    1,331,388       1,315,569  
Service contracts, net
    124,330       152,757  
Other assets, net
    80,333       83,364  
                 
    $ 3,695,439     $ 3,808,601  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
               
Current liabilities:
               
  Accounts payable
  $ 69,965     $ 94,755  
  Accrued compensation & related liabilities
    48,414       50,605  
  Accrued liabilities
    198,488       207,925  
  Current income taxes (prepaid) payable
    (25,512 )     12,887  
  Long-term debt due within one year
    598       1,070  
Total current liabilities
    291,953       367,242  
                 
Long-term liabilities:
               
  Long-term debt due after one year
    786,058       942,736  
  Deferred income taxes
    149,032       124,184  
  Accrued liabilities
    100,987       120,308  
Total long-term liabilities
    1,036,077       1,187,228  
                 
Shareholders' equity:
               
   Preferred stock, no par value: 100,000 shares authorized, none outstanding
    -       -  
  Common stock, no par value: 425,000,000 shares authorized  
    129,215       129,182  
    FY 2009:  173,085,926 issued and 152,790,170 outstanding
    FY 2008:  173,083,426 issued and 153,691,103 outstanding
               
  Paid-in capital
    72,364       60,408  
  Retained earnings
    2,938,419       2,784,302  
  Treasury stock
               
  FY 2009: 20,295,756; FY 2008: 19,392,323
    (797,888 )     (772,041 )
  Other accumulated comprehensive income (loss):
               
    Foreign currency translation
    33,505       61,206  
    Unrealized loss on derivatives
    (8,207 )     (8,815 )
    Unrealized loss on available-for-sale securities
    1       (111 )
Total shareholders' equity
    2,367,409       2,254,131  
                 
    $ 3,695,439     $ 3,808,601  

 
 

 

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


   
Twelve Months Ended
May 31
 
   
2009
   
2008
 
Cash flows from operating activities:
           
             
Net income
  $ 226,357     $ 335,405  
                 
Adjustments to reconcile net income to net cash provided by operating activities:
               
  Depreciation
    157,572       148,566  
  Amortization of deferred charges
    42,534       43,337  
  Impairment of long-lived assets
    48,888       -  
  Stock-based compensation
    11,953       7,456  
  Deferred income taxes
    (1,174 )     1,663  
  Change in current assets and liabilities, net of acquisitions of businesses:
               
    Accounts receivable, net
    71,149       (14,939 )
    Inventories, net
    35,136       (6,100 )
    Uniforms and other rental items in service
    29,661       (23,854 )
    Prepaid expenses
    (4,949 )     3,830  
    Accounts payable
    (24,560 )     30,567  
    Accrued compensation and related liabilities
    (2,012 )     (12,430 )
    Accrued liabilities and other
    (28,991 )     20,398  
    Income taxes payable
    (38,042 )     8,841  
      Net cash provided by operating activities
    523,522       542,740  
                 
Cash flows from investing activities:
               
                 
Capital expenditures
    (160,092 )     (190,333 )
Proceeds from sale or redemption of marketable securities
    116,433       45,791  
Purchase of marketable securities and investments
    (128,402 )     (54,498 )
Acquisitions of businesses, net of cash acquired
    (30,909 )     (111,535 )
Other
    (251 )     (400 )
      Net cash used in investing activities
    (203,221 )     (310,975 )
                 
Cash flows from financing activities:
               
                 
Proceeds from issuance of debt
    7,500       295,000  
Repayment of debt
    (164,649 )     (232,409 )
Stock options exercised
    -       8,371  
Dividends paid
    (72,207 )     (70,831 )
Repurchase of common stock
    (25,847 )     (191,479 )
Other
    855       (11,356 )
      Net cash used in financing activities
    (254,348 )     (202,704 )
                 
Effect of exchange rate changes on cash and cash equivalents
    (2,432 )     1,803  
                 
Net (decrease) in cash and cash equivalents
    63,521       30,864  
Cash and cash equivalents at beginning of period
    66,224       35,360  
Cash and cash equivalents at end of period
  $ 129,745     $ 66,224