Cintas Corporation Announces Fiscal 2013 Second Quarter Results

  Cintas Corporation Announces Fiscal 2013 Second Quarter Results

Business Wire

CINCINNATI -- December 20, 2012

Cintas Corporation (Nasdaq:CTAS) today reported results for its second quarter
ended November 30, 2012. Revenue for the second quarter was $1.06 billion,
representing a 4.0% increase compared to last year’s second quarter. Organic
growth, which adjusts for the impact of acquisitions, compared to last year’s
second quarter, was 3.4%. Recycled paper prices remained lower than last year,
and this negatively impacted second quarter consolidated revenue by $5.5
million, or 0.6%, compared to last year’s second quarter.

The Company’s operating income of $139.0 million was a 4.8% increase as
compared to last year’s second quarter. Net income increased 4.9% to $78.0
million as compared to $74.4 million in last year’s second quarter. Earnings
per diluted share (EPS) for the second quarter were $0.63, a 10.5% increase
over the $0.57 earnings per diluted share in last year’s second quarter.

Scott D. Farmer, Chief Executive Officer, stated, “We continued to operate
during the second quarter in a climate of much economic uncertainty. These
uncertainties, largely regarding U.S. tax policies and changing healthcare
regulation and costs, caused our customers to be very cautious about both
spending and hiring.”

The Company’s balance sheet and cash flow remain very strong. Cash and
marketable securities totaled $276.3 million at November 30, 2012. Cash flow
from operations in the first half of fiscal 2013 improved to $227.3 million, a
29.2% increase over the first half of last fiscal year. As of November 30,
2012, the Company’s current ratio was 2.7 to one, and its debt to EBITDA was
1.9 to one.

During the second quarter of fiscal 2013, the Company purchased 1.9 million
shares of its common stock at an aggregate cost of $81.1 million. While it had
no impact on the second quarter EPS, this buyback is expected to benefit
fiscal year 2013 EPS by approximately $0.01. The Cintas Board of Directors
authorized a $500.0 million share buyback program in October 2011. As of
November 30, 2012, the Company had $218.7 million available under the current
Board authorization for future share repurchases.

Mr. Farmer added, “Last week, we paid our annual dividend to our shareholders
amounting to $0.64 per share, an 18.5% increase from last year’s dividend of
$0.54 per share. Our consistently strong operating results have allowed us to
continue to increase our dividend while executing our stock buyback program,
demonstrating our continued commitment to increase shareholder value.”

Mr. Farmer concluded, “Based on our second quarter results and the uncertain
U.S. economic climate, we are updating our fiscal 2013 revenue expectations to
be in the range of $4.275 billion to $4.325 billion. We are not changing our
EPS guidance, which is an expectation of fiscal 2013 EPS to be in the range of
$2.50 to $2.58. This guidance assumes no further deterioration in the U.S.
economy and does not consider any additional share buybacks.”

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 over one million businesses. Cintas is a publicly held company traded over
the Nasdaq Global Select Market under the symbol CTAS and is a 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 and fuel 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 inaccessibility of
computer systems data, 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, the amount and timing of repurchases of our common stock, if any,
changes in federal and state tax and labor laws, the reactions of competitors
in terms of price and service and the finalization of our financial statements
for the quarter ended November 30, 2012. 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, 2012 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.

                                                              
                                                                       
Cintas Corporation
Consolidated Condensed Statements of Income
(Unaudited)
(In thousands except per share data)
                                                                       
                                                                       
                                   Three Months Ended
                                   November 30,    November 30,    % Chng.
                                   2012              2011
Revenue:
Rental uniforms and                $ 755,839         $ 722,789         4.6
ancillary products
Other services                      304,547       296,337        2.8
Total revenue                      $ 1,060,386       $ 1,019,126       4.0
                                                                       
Costs and expenses:
Cost of rental uniforms            $ 438,902         $ 410,247         7.0
and ancillary products
Cost of other services               189,448           179,082         5.8
Selling and administrative          293,013       297,112        -1.4
expenses
                                                                       
Operating income                   $ 139,023         $ 132,685         4.8
                                                                       
Interest income                    $ (149      )     $ (403      )     -63.0
Interest expense                    16,294        17,728         -8.1
                                                                       
Income before income taxes         $ 122,878         $ 115,360         6.5
Income taxes                        44,851        41,010         9.4
Net income                         $ 78,027       $ 74,350         4.9
                                                                       
Per share data:
Basic earnings per share           $ 0.63         $ 0.57           10.5
Diluted earnings per share         $ 0.63         $ 0.57           10.5
                                                                       
Weighted average number of           124,185           129,727
shares outstanding
Diluted average number of            124,609           129,740
shares outstanding
                                                                       
                                                                       
                                   Six Months Ended
                                   November 30,    November 30,    % Chng.
                                   2012              2011
Revenue:
Rental uniforms and                $ 1,510,682       $ 1,442,212       4.7
ancillary products
Other services                      601,029       594,094        1.2
Total revenue                      $ 2,111,711       $ 2,036,306       3.7
                                                                       
Costs and expenses:
Cost of rental uniforms            $ 867,050         $ 813,653         6.6
and ancillary products
Cost of other services               366,750           353,816         3.7
Selling and administrative          599,594       607,578        -1.3
expenses
                                                                       
Operating income                   $ 278,317         $ 261,259         6.5
                                                                       
Interest income                    $ (226      )     $ (768      )     -70.6
Interest expense                    32,892        35,062         -6.2
                                                                       
Income before income taxes         $ 245,651         $ 226,965         8.2
Income taxes                        90,891        83,977         8.2
Net income                         $ 154,760      $ 142,988        8.2
                                                                       
Per share data:
Basic earnings per share           $ 1.24         $ 1.09           13.8
Diluted earnings per share         $ 1.23         $ 1.09           12.8
                                                                       
Weighted average number of           125,153           130,522
shares outstanding
Diluted average number of            125,541           130,543
shares outstanding
                                                                       
                                                                       
                                                                       
CINTAS CORPORATION SUPPLEMENTAL DATA
                                                                       
                                   Three Months Ended
                                   November 30,    November 30,
                                   2012              2011
Rental uniforms and
ancillary products gross             41.9      %       43.2      %
margin
Other services gross                 37.8      %       39.6      %
margin
Total gross margin                   40.7      %       42.2      %
Net margin                           7.4       %       7.3       %     
                                                                       
Depreciation and                   $ 46,852          $ 48,516
amortization
Capital expenditures               $ 51,624          $ 35,411
                                                                       
                                                                       
                                   Six Months Ended
                                   November 30,    November 30,
                                   2012              2011
Rental uniforms and
ancillary products gross             42.6      %       43.6      %
margin
Other services gross                 39.0      %       40.4      %
margin
Total gross margin                   41.6      %       42.7      %
Net margin                           7.3       %       7.0       %
                                                                       
Depreciation and                   $ 93,294          $ 97,026
amortization
Capital expenditures               $ 99,062          $ 79,832
                                                                       
Debt / EBITDA                        1.9               2.0
                                                                       


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, net margin 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 the ratio of debt to earnings before interest, taxes,
depreciation and amortization (EBITDA) is valuable to investors, particularly
investors of the company's debt, because it is a common metric that reflects
the company's earnings and cash flow available for debt service payments.


                     As of                                            
                             November
                             30,
                             2012
                                                                                       
Long-term                    $ 1,309,490
debt
Letters of                    85,719
credit
Debt                         $ 1,395,209
                                                                                       
                             Rolling         Three         Three                       Three
                             Twelve          Months        Months        Three         Months
                             Months          Ended         Ended         Months        Ended
                             Ended         November    August      Ended       February
                             November        30,           31,           May 31,       29,
                             30,             2012          2012          2012          2012
                             2012
                                                                                       
Net Income                   $ 309,409       $ 78,027      $ 76,733      $ 78,614      $ 76,035
                                                                                       
Add back:
Interest                       68,455          16,294        16,598        18,344        17,219
expense
Taxes                          180,221         44,851        46,040        44,675        44,655
Depreciation                   160,230         40,979        40,342        40,265        38,644
Amortization                  30,203         5,873        6,100        8,814        9,416
EBITDA                       $ 748,518       $ 186,024     $ 185,813     $ 190,712     $ 185,969
                                                                                       
Debt /                        1.9
EBITDA
                                                                                       
                                                                                       
                             As of
                             November
                             30,
                             2011
                                                                                       
Long-term                    $ 1,285,222
debt
Letters of                    85,720
credit
Debt                         $ 1,370,942
                                                                                       
                             Rolling         Three         Three                       Three
                             Twelve          Months        Months        Three         Months
                             Months          Ended         Ended         Months        Ended
                             Ended         November    August      Ended       February
                             November        30,           31,           May 31,       28,
                             30,             2011          2011          2011          2011
                             2011
                                                                                       
Net Income                   $ 272,834       $ 74,350      $ 68,638      $ 70,776      $ 59,070
                                                                                       
Add back:
Interest                       60,331          17,728        17,334        12,749        12,520
expense
Taxes                          167,673         41,010        42,967        46,130        37,566
Depreciation                   153,245         38,645        38,277        38,760        37,563
Amortization                  41,503         9,871        10,233       10,415       10,984
EBITDA                       $ 695,586       $ 181,604     $ 177,449     $ 178,830     $ 157,703
                                                                                       
Debt /                        2.0
EBITDA
                                                                                       

                                                    
Computation of Free Cash Flow
                                                             
                                            Six Months Ended
                                            November 30,   November 30,
                                            2012             2011
                                                             
Net Cash Provided by Operations             $  227,263       $  175,958
                                                             
Capital Expenditures                        $  (99,062 )   $  (79,832 )
                                                             
Free Cash Flow                              $  128,201       $  96,126
                                                                        

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.
        

                                                                                    
                       Rental                        First Aid,
SUPPLEMENTAL           Uniforms        Uniform       Safety         Document
SEGMENT DATA           and           Direct      and Fire     Management   Corporate     Total
                       Ancillary       Sales         Protection
                       Products
For the three
months ended
November 30,
2012
Revenue                $ 755,839       $ 110,203     $  111,513     $  82,831      $ -             $ 1,060,386
Gross margin           $ 316,937       $ 30,206      $  47,279      $  37,614      $ -             $ 432,036
Selling and
administrative         $ 200,886       $ 19,802      $  37,625      $  34,700      $ -             $ 293,013
expenses
Interest               $ -             $ -           $  -           $  -           $ (149    )     $ (149      )
income
Interest               $ -             $ -           $  -           $  -           $ 16,294        $ 16,294
expense
Income (loss)
before income          $ 116,051       $ 10,404      $  9,654       $  2,914       $ (16,145 )     $ 122,878
taxes
                                                                                                   
For the three
months ended
November 30,
2011
Revenue                $ 722,789       $ 111,946     $  101,687     $  82,704      $ -             $ 1,019,126
Gross margin           $ 312,542       $ 33,127      $  43,800      $  40,328      $ -             $ 429,797
Selling and
administrative         $ 208,065       $ 19,885      $  34,838      $  34,324      $ -             $ 297,112
expenses
Interest               $ -             $ -           $  -           $  -           $ (403    )     $ (403      )
income
Interest               $ -             $ -           $  -           $  -           $ 17,728        $ 17,728
expense
Income (loss)
before income          $ 104,477       $ 13,242      $  8,962       $  6,004       $ (17,325 )     $ 115,360
taxes
                                                                                                   
For the six
months ended
November 30,
2012
Revenue                $ 1,510,682     $ 210,482     $  222,354     $  168,193     $ -             $ 2,111,711
Gross margin           $ 643,632       $ 59,684      $  95,070      $  79,525      $ -             $ 877,911
Selling and
administrative         $ 410,674       $ 40,539      $  76,395      $  71,986      $ -             $ 599,594
expenses
Interest               $ -             $ -           $  -           $  -           $ (226    )     $ (226      )
income
Interest               $ -             $ -           $  -           $  -           $ 32,892        $ 32,892
expense
Income (loss)
before income          $ 232,958       $ 19,145      $  18,675      $  7,539       $ (32,666 )     $ 245,651
taxes
Assets                 $ 2,813,707     $ 143,880     $  393,429     $  590,517     $ 276,349       $ 4,217,882
                                                                                                   
For the six
months ended
November 30,
2011
Revenue                $ 1,442,212     $ 213,648     $  205,430     $  175,016     $ -             $ 2,036,306
Gross margin           $ 628,559       $ 62,235      $  88,587      $  89,456      $ -             $ 868,837
Selling and
administrative         $ 424,664       $ 40,586      $  71,242      $  71,086      $ -             $ 607,578
expenses
Interest               $ -             $ -           $  -           $  -           $ (768    )     $ (768      )
income
Interest               $ -             $ -           $  -           $  -           $ 35,062        $ 35,062
expense
Income (loss)
before income          $ 203,895       $ 21,649      $  17,345      $  18,370      $ (34,294 )     $ 226,965
taxes
Assets                 $ 2,803,231     $ 157,339     $  364,461     $  552,676     $ 337,605       $ 4,215,312
                                                                                                               

                                                        
                                                                   
Cintas Corporation
Consolidated Balance Sheets
(In thousands except share data)
                                                                   
                                                                   
ASSETS                                            November 30,     May 31,
                                                  2012             2012
                                                  (Unaudited)
Current assets:
    Cash & cash equivalents                       $ 242,487        $ 339,825
    Marketable securities                         33,862           -
    Accounts receivable, net                      479,106          450,861
    Inventories, net                              236,195          251,205
    Uniforms and other rental items in            482,001          452,785
    service
    Income taxes, current                         20,976           22,188
    Prepaid expenses and other                    25,035           24,704
        Total current assets                      1,519,662        1,541,568
                                                                   
Property and equipment, at cost, net              967,260          944,305
                                                                   
Goodwill                                          1,522,411        1,485,375
Service contracts, net                            90,480           76,822
Other assets, net                                 118,069          112,836
                                                                   
                                                  $ 4,217,882      $ 4,160,906
                                                                   
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                   
Current liabilities:
    Accounts payable                              $ 118,534        $ 94,840
    Accrued compensation and related              54,480           91,214
    liabilities
    Accrued liabilities                           325,077          256,642
    Deferred tax liability                        56,427           2,559
    Long-term debt due within one year            661              225,636
        Total current liabilities                 555,179          670,891
                                                                   
Long-term liabilities:
    Long-term debt due after one year             1,308,829        1,059,166
    Deferred income taxes                         206,782          204,581
    Accrued liabilities                           66,448           87,133
        Total long-term liabilities               1,582,059        1,350,880
                                                                   
Shareholders' equity:
    Preferred stock, no par value:                -                -
        100,000 shares authorized, none
        outstanding
    Common stock, no par value:                   173,127          148,255
        425,000,000 shares authorized
        FY13: 174,419,454 issued and
        123,228,777 outstanding
        FY12: 173,745,913 issued and
        126,519,758 outstanding
    Paid-in capital                               98,311           107,019
    Retained earnings                             3,557,088        3,482,073
    Treasury stock:                               (1,794,050)      (1,634,875)
        FY13: 51,190,677 shares
        FY12: 47,226,155 shares
    Other accumulated comprehensive
    income (loss):
        Foreign currency translation              61,091           52,399
        Unrealized loss on derivatives            (15,279)         (16,104)
        Other                                     356              368
        Total shareholders' equity                2,080,644        2,139,135
                                                                   
                                                  $ 4,217,882      $ 4,160,906
                                                                   

                                                        
                                                                  
Cintas Corporation
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
                                                                  
                                                                  
                                                   Six Months Ended
Cash flows from operating activities:              November 30,   November 30,
                                                   2012           2011
                                                                  
Net income                                         $ 154,760      $ 142,988
                                                                  
Adjustments to reconcile net income to net
cash provided
by operating activities:
         Depreciation                                81,321         76,922
         Amortization of deferred charges            11,973         20,104
         Stock-based compensation                    11,084         9,756
         Deferred income taxes                       55,245         (11,767  )
         Change in current assets and
         liabilities, net of
         acquisitions of businesses:
                Accounts receivable, net             (24,528  )     (20,850  )
                Inventories, net                     15,460         (39,268  )
                Uniforms and other rental            (28,105  )     (29,630  )
                items in service
                Prepaid expenses and other           (202     )     (5,128   )
                Accounts payable                     23,019         1,843
                Accrued compensation and             (36,899  )     (15,314  )
                related liabilities
                Accrued liabilities                  (36,464  )     26,306
                Income taxes payable                599          19,996   
                                                                  
         Net cash provided by operating              227,263        175,958
         activities
                                                                  
Cash flows from investing activities:
                                                                  
Capital expenditures                                 (99,062  )     (79,832  )
Proceeds from redemption of marketable               41,453         140,162
securities
Purchase of marketable securities and                (80,054  )     (193,527 )
investments
Acquisitions of businesses, net of cash              (53,243  )     (14,551  )
acquired
Other, net                                          (673     )    5,772    
                                                                  
         Net cash used in investing                  (191,579 )     (141,976 )
         activities
                                                                  
Cash flows from financing activities:
                                                                  
Proceeds from issuance of debt                       250,000        -
Repayment of debt                                    (225,312 )     (903     )
Proceeds from exercise of stock-based                2,357          78
compensation awards
Repurchase of common stock                           (159,175 )     (262,682 )
Other, net                                          (2,476   )    1,454    
                                                                  
         Net cash used in financing                  (134,606 )     (262,053 )
         activities
                                                                  
Effect of exchange rate changes on cash              1,584          (2,263   )
and cash equivalents
                                                                  
Net decrease in cash and cash equivalents            (97,338  )     (230,334 )
                                                                  
Cash and cash equivalents at beginning of           339,825      438,106  
period
                                                                  
Cash and cash equivalents at end of period         $ 242,487     $ 207,772  
                                                                             

Contact:

Cintas Corporation
William C. Gale, 513-573-4211
Sr. Vice President-Finance and Chief Financial Officer
or
J. Michael Hansen, 513-701-2079
Vice President and Treasurer
 
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