EX-99 2 ex99072010.htm EXHIBIT 99 - PRESS RELEASE DATED 7/20/10 ex99072010.htm
Exhibit 99
FOR IMMEDIATE RELEASE
July 20, 2010
Cintas Corporation Announces Fiscal 2010 Results
 
CINCINNATI, July 20, 2010 -- Cintas Corporation (Nasdaq:CTAS) today reported its results for the quarter ended May 31, 2010.  Revenues were $909 million, a 3.5% increase from last year’s fourth quarter.  Earnings per diluted share were $0.36 compared to $0.03 last year.  This year’s fourth quarter earnings were positively impacted by a $2 million after tax change in estimate to last year’s restructuring charge, or $0.01 per diluted share, and last year’s fourth quarter earnings were negatively impacted by various one-time charges amounting to $54 million after tax, or $0.35 per diluted share.

For the fiscal year ended May 31, 2010, revenues were $3.5 billion, a 6.0% decrease from the prior fiscal year.  Earnings per diluted share were $1.40, and excluding special items in fiscal 2010, earnings per diluted share were $1.49.

Scott D. Farmer, Chief Executive Officer, stated, “We are pleased with our fourth quarter results, which exceeded our internal plan.  Throughout this recent economic downturn, we have worked hard to position ourselves to grow revenue when conditions improve and jobs are added.  Although the U.S. private sector job growth during our fourth quarter was slight, we were able to increase revenue.”

The Company’s balance sheet and cash flow remain very strong.  Cash and marketable securities increased by $316 million in fiscal 2010 to a total of $566 million at May 31, 2010.  As of May 31, 2010, the current ratio was four to one and total debt to total capitalization was 24%.  Free cash flow was $450 million in fiscal 2010, an increase of 24% over fiscal 2009.

Mr. Farmer continued, “Although we are encouraged by our fourth quarter performance, we continue to believe that U.S. private sector job recovery will be sluggish, and the return to pre-recession employment levels will take time.  While we are poised to take advantage of opportunities presented by any employment improvement, we will not rely only on job creation for growth.  Instead, we will continue to focus on adding new customers and penetrating existing customer accounts with additional products and services.  Our products and services, which include uniforms, facility services, first aid and fire protection services and document management services, continue to be effective, efficient solutions for businesses of all sizes and types.”
 
Mr. Farmer concluded, “After two years of very difficult economic times, we expect a return to growth in sales and profits in fiscal 2011.  Our expectations are for revenue in fiscal 2011 to be in the range of $3.55 billion to $3.75 billion, with full year earnings per diluted share in the range of $1.50 to $1.58.  The hard work and dedication of our working partners continue to make us a market leader in all of our businesses.  We look forward to the opportunities that lie ahead for Cintas.”

About Cintas
Headquartered in Cincinnati, Cintas Corporation provides highly specialized services to businesses of all types primarily 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, disruptions caused by the unavailability of computer systems, 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, 2009 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
J. Michael Hansen, Vice President and Treasurer – 513-701-2079
 
 
 

 

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

 
   
Three Months Ended
 
   
(Unaudited)
 
   
May 31,
2010
   
May 31,
2009
   
% Chng.
 
                   
Revenue:
 
 
   
 
   
 
 
  Rental uniforms and ancillary products
  $ 647,664     $ 647,487       0.0  
  Other services
    261,785       231,196       13.2  
  Total revenue
  $ 909,449     $ 878,683       3.5  
 
                       
Costs and expenses:
                       
  Cost of rental uniforms and ancillary products
  $ 366,169     $ 373,860       -2.1  
  Cost of other services
    157,712       170,472       -7.5  
  Selling and administrative expenses
    286,930       253,677       13.1  
  Restructuring charges
    (2,880 )     10,209       -128.2  
  Impairment of long-lived assets
    -       48,888       N/A  
                         
Operating income
  $ 101,518     $ 21,577       370.5  
                         
  Interest income
  $ (600 )   $ (329 )     82.4  
  Interest expense
    12,420       12,030       3.2  
 
                       
Income before income taxes
  $ 89,698     $ 9,876       808.2  
Income taxes
    34,220       5,804       489.6  
Net income
  $ 55,478     $ 4,072       1,262.4  
                         
Per share data:
                       
Basic earnings per share
  $ 0.36     $ 0.03       1,100.0  
Diluted earnings per share
  $ 0.36     $ 0.03       1,100.0  
                         
Weighted average number of shares outstanding
    152,870       152,790          
Diluted average number of shares outstanding
    152,870       152,790          
 
 
 
 
 

 
 
   
Twelve Months Ended
 
   
May 31,
2010
   
May 31,
2009
   
% Chng.
 
Revenue:
                       
  Rental uniforms and ancillary products
  $ 2,569,357     $ 2,755,015       -6.7  
  Other services
    977,982       1,019,670       -4.1  
   Total revenue
  $ 3,547,339     $ 3,774,685       -6.0  
 
                       
Costs and expenses:
                       
  Cost of rental uniforms and ancillary products
  $ 1,449,576     $ 1,562,230       -7.2  
  Cost of other services
    599,946       661,584       -9.3  
  Selling and administrative expenses
    1,086,359       1,082,709       0.3  
  Legal settlements, net of insurance proceeds
    23,529       -       N/A  
  Restructuring charges
    (2,880 )     10,209       -128.2  
  Impairment of long-lived assets
    -       48,888       N/A  
                         
Operating income
  $ 390,809     $ 409,065       -4.5  
                         
  Interest income
  $ (1,695 )   $ (2,764 )     -38.7  
  Interest expense
    48,612       50,236       -3.2  
 
                       
Income before income taxes
  $ 343,892     $ 361,593       -4.9  
Income taxes
    128,272       135,236       -5.1  
Net income
  $ 215,620     $ 226,357       -4.7  
                         
Per share data:
                       
Basic earnings per share
  $ 1.40     $ 1.48       -5.4  
Diluted earnings per share
  $ 1.40     $ 1.48       -5.4  
                         
Weighted average number of shares outstanding
    152,859       152,942          
Diluted average number of shares outstanding
    152,859       152,942          
 
CINTAS CORPORATION SUPPLEMENTAL DATA
                 
   
Three Months Ended
   
   
May 31,
2010
   
May 31,
2009
   
Rental uniforms and ancillary products gross margin
    43.5%       42.3%    
Other services gross margin
    39.8%       26.3%    
Total gross margin
    42.4%       38.1%    
Net margin
    6.1%       0.5%    
Net margin, excluding charges
    5.9%       6.6%    
                   
Depreciation and amortization
  $ 48,701     $ 49,964    
Capital expenditures
  $ 32,150     $ 27,309    
                   
Debt to total capitalization
    23.7%       24.9%    
 
   
Twelve Months Ended
   
   
May 31,
2010
   
May 31,
2009
   
Rental uniforms and ancillary products gross margin
    43.6%       43.3%    
Other services gross margin
    38.7%       35.1%    
Total gross margin
    42.2%       41.1%    
Net margin
    6.1%       6.0%    
Net margin, excluding charges
    6.4%       7.4%    
                   
Depreciation and amortization
  $ 193,141     $ 200,106    
Capital expenditures
  $ 111,078     $ 160,092    
                   
Debt to total capitalization
    23.7%       24.9%    
 
 
 

 
 
 
Reconciliation of Non-GAAP Financial Measures and Regulation G Disclosure

The press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission.  To supplement its consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), the Company provides additional measures of operating results, net earnings and earnings per share adjusted to exclude certain costs, expenses and gains and losses.  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.  A reconciliation of the differences between these non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP is shown below.
 
Management believes earnings per diluted share excluding the legal settlements, restructuring, impairment and inventory valuation charge provides investors pertinent information given the one-time nature of these charges.


   
Three Months Ended
 
   
May 31,
2010
   
May 31,
2009
   
% Chng.
 
                   
Income before income taxes
  $ 89,698     $ 9,876       808.2  
                         
Excluding:
                       
  Restructuring charges
  $ (2,880 )   $ 10,209          
  Impairment of long-lived assets
    -       48,888          
  Inventory valuation charge (1)
    -       27,486          
                         
Total charges
  $ (2,880 )   $ 86,583          
                         
Income before income taxes, excluding charges
  $ 86,818     $ 96,459       -10.0  
Income taxes, excluding charges
    33,216       38,186          
Net income, excluding charges
  $ 53,602     $ 58,273       -8.0  
                         
Per share data:
                       
Earnings per diluted share, excluding charges
  $ 0.35     $ 0.38       -7.9  
                         
 
   
Twelve Months Ended
 
   
May 31,
2010
   
May 31,
2009
   
% Chng.
 
                         
Income before income taxes
  $ 343,892     $ 361,593       -4.9  
                         
Excluding:
                       
  Legal settlements, net of insurance proceeds
  $ 23,529     $ -          
  Restructuring charges
    (2,880 )     10,209          
  Impairment of long-lived assets
    -       48,888          
  Inventory valuation charge (1)
    -       27,486          
                         
Total charges
  $ 20,649     $ 86,583          
                         
Income before income taxes, excluding charges
  $ 364,541     $ 448,176       -18.7  
Income taxes, excluding charges
    135,974       167,618          
Net income, excluding charges
  $ 228,567     $ 280,558       -18.5  
                         
Per share data:
                       
Earnings per diluted share, excluding charges
  $ 1.49     $ 1.83       -18.6  
                         
 
(1)
 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.
 
 
 
 

 
 
Computation of Free Cash Flow

 
   
Twelve Months Ended
 
   
May 31,
2010
   
May 31,
 2009
 
             
Net cash provided by operations
  $ 561,572     $ 523,522  
                 
Capital expenditures
    (111,078 )     (160,092 )
                 
Free cash flow
  $ 450,494     $ 363,430  

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 to improve and grow business operations.

 
 

 


 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, 2010
                                   
Revenue
  $ 647,664     $ 103,207     $ 87,883     $ 70,695     $ -     $ 909,449  
Gross margin
  $ 281,495     $ 31,994     $ 34,582     $ 37,497     $ -     $ 385,568  
  Selling and administrative expenses
  $ 206,512     $ 18,662     $ 32,007     $ 29,749     $ -     $ 286,930  
Restructuring charges
  $ (2,880 )   $ -     $ -     $ -     $ -     $ (2,880 )
Interest income
  $ -     $ -     $ -     $ -     $ (600 )   $ (600 )
Interest expense
  $ -     $ -     $ -     $ -     $ 12,420     $ 12,420  
Income (loss) before income taxes
  $ 77,863     $ 13,332     $ 2,575     $ 7,748     $ (11,820 )   $ 89,698  
                                                 
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  
Interest income
  $ -     $ -     $ -     $ -     $ (329   $ (329
Interest expense
  $ -     $ -     $ -     $ -     $ 12,030     $ 12,030  
Income (loss) before income taxes
  $ 44,648     $ (18,823 )   $ (7,212 )   $ 2,964     $ (11,701   $ 9,876  
                                                 
For the twelve months ended May 31, 2010
                                               
Revenue
  $ 2,569,357     $ 386,370     $ 338,651     $ 252,961     $ -     $ 3,547,339  
Gross margin
  $ 1,119,781     $ 116,336     $ 131,726     $ 129,974     $ -     $ 1,497,817  
  Selling and administrative expenses
  $ 786,145     $ 76,232     $ 118,284     $ 105,698     $ -     $ 1,086,359  
  Legal settlements, net of insurance proceeds
  $ -     $ -     $ -     $ -     $ 23,529     $ 23,529  
Restructuring charges
  $ (2,880 )   $ -     $ -     $ -     $ -     $ (2,880 )
Interest income
  $ -     $ -     $ -     $ -     $ (1,695 )   $ (1,695 )
Interest expense
  $ -     $ -     $ -     $ -     $ 48,612     $ 48,612  
Income (loss) before income taxes
  $ 336,516     $ 40,104     $ 13,442     $ 24,276     $ (70,446 )   $ 343,892  
Assets
  $ 2,375,208     $ 198,955     $ 329,569     $ 499,917     $ 566,087     $ 3,969,736  
                                                 
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  
Interest income
  $ -     $ -     $ -     $ -     $ (2,764 )   $ (2,764 )
Interest expense
  $ -     $ -     $ -     $ -     $ 50,236     $ 50,236  
Income (loss) before income taxes
  $ 370,524     $ 3,220     $ 15,947     $ 19,374     $ (47,472 )   $ 361,593  
Assets
  $ 2,533,406     $ 140,826     $ 324,158     $ 472,423     $ 250,138     $ 3,720,951  

 
 

 

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

ASSETS
 
May 31,
2010
   
May 31,
2009
 
             
Current assets:
           
Cash & cash equivalents
  $ 411,281     $ 129,745  
Marketable securities
    154,806       120,393  
Accounts receivable, net
    366,301       357,678  
Inventories, net
    169,484       202,351  
Uniforms and other rental items in service     332,106        335,447   
Income taxes, current
    15,691       25,512  
Deferred tax asset
    52,415       66,368  
Prepaid expenses
    13,423       17,035  
Assets held for sale
    9,437       15,744  
Total current assets
    1,524,944       1,270,273  
                 
Property and equipment, at cost, net
    894,522       914,627  
                 
Goodwill
    1,356,925       1,331,388  
Service contracts, net
    103,445       124,330  
Other assets, net
    89,900       80,333  
                 
    $ 3,969,736     $ 3,720,951  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
               
                 
Current liabilities:
               
Accounts payable
  $ 71,747     $ 69,965  
  Accrued compensation and related liabilities
    66,924       48,414  
Accrued liabilities
    244,402       181,892  
Long-term debt due within one year
    609       598  
Total current liabilities
    383,682       300,869  
                 
Long-term liabilities:
               
Long-term debt due after one year
    785,444       786,058  
Deferred income taxes
    150,560       149,032  
Accrued liabilities
    116,021       117,583  
Total long-term liabilities
    1,052,025       1,052,673  
                 
Shareholders' equity:
               
Preferred stock, no par value:  100,000 shares authorized, none outstanding
    -       -  
Common stock, no par value:  425,000,000 shares authorized
    132,058       129,215  
    FY10: 173,207,493 issued and 152,869,848 outstanding
               
    FY09: 173,085,926 issued and 152,790,170 outstanding
               
Paid-in capital
    84,616       72,364  
Retained earnings
    3,080,079       2,938,419  
Treasury stock:
    (798,857 )     (797,888 )
FY10:  20,337,645 shares
               
FY09: 20,295,756 shares
               
Other accumulated comprehensive income (loss):
               
Foreign currency translation
    42,870       33,505  
Unrealized loss on derivatives
    (6,997 )     (8,207 )
Other
    287       -  
Unrealized (loss) gain on available-for-sale securities     (27     1  
   Total shareholders' equity
    2,534,029       2,367,409  
                 
    $ 3,969,736     $ 3,720,951  


 
 

 

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

   
Twelve Months Ended
 
Cash flows from operating activities:
 
May 31,
 2010
   
May 31,
 2009
 
             
Net income
  $ 215,620     $ 226,357  
                 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
    152,059       157,572  
Amortization of deferred charges
    41,082       42,534  
Impairment of long-lived assets
    -       48,888  
Stock-based compensation
    15,349       11,953  
Deferred income taxes
    13,295       (1,174 )
Change in current assets and liabilities, net of acquisitions of businesses:
               
Accounts receivable, net
    1,140       71,149  
Inventories, net
    30,293       35,136  
Uniforms and other rental items in service
    4,164       29,661  
Prepaid expenses
    3,715       (4,949 )
Accounts payable
    8,939       (24,560 )
Accrued compensation and related liabilities
    18,393       (2,012 )
Accrued liabilities and other
    47,528       (28,991 )
Income taxes payable (receivable)
    9,995       (38,042 )
                 
Net cash provided by operating activities
    561,572       523,522  
                 
Cash flows from investing activities:
               
                 
Capital expenditures
    (111,078 )     (160,092 )
Proceeds from redemption of marketable securities
    34,712       116,433  
Purchase of marketable securities and investments
    (81,269 )     (128,402 )
Acquisitions of businesses, net of cash acquired
    (50,444 )     (30,909 )
Other
    4,579       (251 )
                 
Net cash used in investing activities
    (203,500 )     (203,221 )
                 
Cash flows from financing activities:
               
                 
Proceeds from issuance of debt
    -       7,500  
Repayment of debt
    (603 )     (164,649 )
Dividends paid
    (73,960 )     (72,207 )
Repurchase of common stock
    (969 )     (25,847 )
Other
    (977 )     855  
                 
Net cash used in financing activities
    (76,509 )     (254,348 )
                 
Effect of exchange rate changes on cash and cash equivalents
    (27 )     (2,432 )
                 
Net increase in cash and cash equivalents
    281,536       63,521  
 
               
Cash and cash equivalents at beginning of period
    129,745       66,224  
                 
Cash and cash equivalents at end of period
  $ 411,281     $ 129,745