Cintas Corporation Announces Fiscal 2013 Third Quarter Results

  Cintas Corporation Announces Fiscal 2013 Third Quarter Results

Business Wire

CINCINNATI -- March 19, 2013

Cintas Corporation (Nasdaq:CTAS) today reported results for its third quarter
ended February 28, 2013. Revenue for the third quarter was $1.08 billion,
representing a 6.3% increase compared to last year’s third quarter. Adjusting
for one less workday in this year’s third quarter compared to last year’s
quarter, revenue grew 7.9% over last year’s third quarter. Organic growth,
which adjusts for the impact of acquisitions and the impact of one less
workday compared to last year’s third quarter, was 6.9%. Organic growth rates
in each of the Company’s four operating segments increased from second quarter
levels.

Scott D. Farmer, Chief Executive Officer, stated, “We are pleased to report
record quarterly revenue led by very strong Uniform Direct Sales performance.
We are also encouraged to see organic growth rates improve in each of our
operating segments, reflecting the great execution by our dedicated team of
employees, who we call partners.”

The Company’s operating income of $133.0 million and net income of $74.7
million decreased compared to last year’s third quarter by 3.3% and 1.7%,
respectively. These decreases were due in part to the effect of one less
workday compared to last year’s third quarter. In addition, continuing solid
new business sales have resulted in higher material cost amortization and the
need for additional route capacity in our route based businesses.

Earnings per diluted share (EPS) for the third quarter were $0.60, a 3.4%
increase over the $0.58 EPS in last year’s third quarter. EPS increased
despite the decrease in net income as a result of the positive impact of the
Company’s share buyback program in fiscal 2012 and 2013.

The Company’s balance sheet and cash flow remain very strong. Cash and
marketable securities totaled $245.7 million at February 28, 2013. Cash flow
from operations in the first three quarters of fiscal 2013 improved to $368.3
million, a 19.7% increase over the same period of last fiscal year. As of
February 28, 2013, the Company’s current ratio was 3.0 to one, and its debt to
EBITDA was 1.9 to one.

The effective tax rate for the third quarter of fiscal 2013 and fiscal 2012
was 36.1% and 37.0%, respectively. The effective tax rate can fluctuate from
quarter to quarter based on specific discrete items. We expect the effective
tax rate for the entire 2013 fiscal year to be approximately 37.0%, which
would be slightly higher than last year’s effective tax rate of 36.8%.

Mr. Farmer concluded, “Based on our third quarter results, we are updating our
fiscal 2013 guidance with revenue in the range of $4.3 billion to $4.325
billion and EPS to be in the range of $2.50 to $2.54. This guidance assumes no
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 February 28, 2013. 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
                                       February 28,   February 29,   % Chng.
                                       2013            2012
                                                                       
Revenue:
Rental uniforms and ancillary          $ 748,887       $ 721,012       3.9
products
Other services                          326,787      291,100      12.3
Total revenue                          $ 1,075,674     $ 1,012,112     6.3
                                                                       
Costs and expenses:
Cost of rental uniforms and            $ 434,809       $ 409,958       6.1
ancillary products
Cost of other services                   198,924         176,251       12.9
Selling and administrative expenses     308,918      288,367      7.1
                                                                       
Operating income                       $ 133,023       $ 137,536       -3.3
                                                                       
Interest income                        $ (132      )   $ (373      )   -64.6
Interest expense                        16,302       17,219       -5.3
                                                                       
Income before income taxes             $ 116,853       $ 120,690       -3.2
Income taxes                            42,148       44,655       -5.6
Net income                             $ 74,705      $ 76,035       -1.7
                                                                       
Per share data:
Basic earnings per share               $ 0.60        $ 0.58         3.4
Diluted earnings per share             $ 0.60        $ 0.58         3.4
                                                                       
Weighted average number of shares        123,220         129,735
outstanding
Diluted average number of shares         123,857         129,945
outstanding
                                                                       
                                                                       
                                                                       
                                       Nine Months Ended
                                       February 28,   February 29,    % Chng.
                                       2013            2012
                                                                       
Revenue:
Rental uniforms and ancillary          $ 2,259,569     $ 2,163,224     4.5
products
Other services                          927,816      885,194      4.8
Total revenue                          $ 3,187,385     $ 3,048,418     4.6
                                                                       
Costs and expenses:
Cost of rental uniforms and            $ 1,301,859     $ 1,223,611     6.4
ancillary products
Cost of other services                   565,674         530,067       6.7
Selling and administrative expenses     908,512      895,945      1.4
                                                                       
Operating income                       $ 411,340       $ 398,795       3.1
                                                                       
Interest income                        $ (358      )   $ (1,141    )   -68.6
Interest expense                        49,194       52,281       -5.9
                                                                       
Income before income taxes             $ 362,504       $ 347,655       4.3
Income taxes                            133,039      128,632      3.4
Net income                             $ 229,465     $ 219,023      4.8
                                                                       
Per share data:
Basic earnings per share               $ 1.84        $ 1.67         10.2
Diluted earnings per share             $ 1.83        $ 1.67         9.6
                                                                       
Weighted average number of shares        124,483         130,261
outstanding
Diluted average number of shares         124,901         130,321
outstanding
                                                                       
                                                                       
                                                                       
CINTAS CORPORATION SUPPLEMENTAL DATA
                                                                       
                                       Three Months Ended
                                       February 28,   February 29,
                                       2013            2012
Rental uniforms and ancillary            41.9      %     43.1      %
products gross margin
Other services gross margin              39.1      %     39.5      %
Total gross margin                       41.1      %     42.1      %
Net margin                               6.9       %     7.5       %
                                                                       
Depreciation and amortization          $ 47,832        $ 48,060
Capital expenditures                   $ 52,737        $ 37,884
                                                                       
                                                                       
                                       Nine Months Ended
                                       February 28,   February 29,
                                       2013            2012
Rental uniforms and ancillary            42.4      %     43.4      %
products gross margin
Other services gross margin              39.0      %     40.1      %
Total gross margin                       41.4      %     42.5      %
Net margin                               7.2       %     7.2       %
                                                                       
Depreciation and amortization          $ 141,126       $ 145,086
Capital expenditures                   $ 151,799       $ 117,716
                                                                       
Debt / EBITDA                            1.9             1.9
                                                                       

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 revenue growth, debt and cash flow. 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.

                                                                            
Computation of Workday Adjusted Revenue Growth
                       
           Three Months Ended                        Nine Months Ended
           February      February                      February      February
           28,          29,          Growth %      28,          29,          Growth %
           2013          2012                          2013          2012
                                                                                   
           A             B             G               I             J             O
Revenue    $ 1,075,674   $ 1,012,112   6.3    %        $ 3,187,385   $ 3,048,418   4.6    %
                                       G=(A-B)/B                                   O=(I-J)/J
           C             D                             K             L
Workdays
in the       64            65                            195           196
period
                                                                                   
           E             F             H               M             N             P
Revenue
adjusted
for        $ 1,092,481   $ 1,012,112   7.9    %        $ 3,203,731   $ 3,048,418   5.1    %
workday
difference
                                       H=(E-F)/F                                   P=(M-N)/N
           E=(A/C)*D     F=(B/D)*D                     M=(I/K)*L     N=(J/L)*L

Management believes that Workday Adjusted Revenue Growth is valuable to
investors because it reflects the revenue performance compared to a prior
period with the same number of revenue generating days.

                              
Computation of Debt to EBITDA
                                                                
                As of
                February 28,
                2013
                                                                     
Long-term       $  1,309,330
debt
Letters of        85,687
credit
Debt            $  1,395,017
                                                                     
                Rolling         Three        Three       Three       Three
                Twelve          Months       Months      Months      Months
                Months Ended   Ended       Ended      Ended      Ended
                February 28,    February     November    August      May 31,
                2013            28,          30,         31,         2012
                                2013         2012        2012
                                                                     
Net Income      $  308,079      $  74,705    $ 78,027    $ 76,733    $ 78,614
                                                                     
Add back:
Interest           67,538          16,302      16,294      16,598      18,344
expense
Taxes              177,714         42,148      44,851      46,040      44,675
Depreciation       163,507         41,921      40,979      40,342      40,265
Amortization      26,698        5,911     5,873     6,100     8,814
EBITDA          $  743,536      $  180,987   $ 186,024   $ 185,813   $ 190,712
                                                                     
Debt / EBITDA     1.9
                                                                     
                                                                     
                As of
                February 29,
                2012
                                                                     
Long-term       $  1,284,909
debt
Letters of        85,718
credit
Debt            $  1,370,627
                                                                     
                Rolling         Three        Three       Three       Three
                Twelve          Months       Months      Months      Months
                Months Ended   Ended       Ended      Ended      Ended
                February 29,    February     November    August      May 31,
                2012            29,          30,         31,         2011
                                2012         2011        2011
                                                                     
Net Income      $  289,799      $  76,035    $ 74,350    $ 68,638    $ 70,776
                                                                     
Add back:
Interest           65,030          17,219      17,728      17,334      12,749
expense
Taxes              174,762         44,655      41,010      42,967      46,130
Depreciation       154,326         38,644      38,645      38,277      38,760
Amortization      39,935        9,416     9,871     10,233    10,415
EBITDA          $  723,852      $  185,969   $ 181,604   $ 177,449   $ 178,830
                                                                     
Debt / EBITDA     1.9
                                                                     

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.


Computation of Free Cash Flow
                                                 
                                        Nine Months Ended
                                        February 28,  February 29,
                                        2013           2012
                                                       
Net Cash Provided by Operations         $ 368,343      $ 307,714
                                                       
Capital Expenditures                    $ (151,799 )  $ (117,716 )
                                                       
Free Cash Flow                          $ 216,544      $ 189,998

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 February 28, 2013
Revenue          $ 748,887     $ 126,129   $  112,878   $  87,780    $ -           $ 1,075,674
Gross margin     $ 314,078     $ 36,829    $  49,651    $  41,383    $ -           $ 441,941
Selling and
administrative   $ 211,531     $ 20,779    $  39,121    $  37,487    $ -           $ 308,918
expenses
Interest         $ -           $ -         $  -         $  -         $ (132    )   $ (132      )
income
Interest         $ -           $ -         $  -         $  -         $ 16,302      $ 16,302
expense
Income (loss)
before income    $ 102,547     $ 16,050    $  10,530    $  3,896     $ (16,170 )   $ 116,853
taxes
                                                                                   
For the three months ended February 29, 2012
Revenue          $ 721,012     $ 109,114   $  101,378   $  80,608    $ -           $ 1,012,112
Gross margin     $ 311,054     $ 33,226    $  43,759    $  37,864    $ -           $ 425,903
Selling and
administrative   $ 198,583     $ 18,745    $  36,035    $  35,004    $ -           $ 288,367
expenses
Interest         $ -           $ -         $  -         $  -         $ (373    )   $ (373      )
income
Interest         $ -           $ -         $  -         $  -         $ 17,219      $ 17,219
expense
Income (loss)
before income    $ 112,471     $ 14,481    $  7,724     $  2,860     $ (16,846 )   $ 120,690
taxes
                                                                                   
For the nine months ended February 28, 2013
Revenue          $ 2,259,569   $ 336,611   $  335,232   $  255,973   $ -           $ 3,187,385
Gross margin     $ 957,710     $ 96,513    $  144,721   $  120,908   $ -           $ 1,319,852
Selling and
administrative   $ 622,205     $ 61,318    $  115,516   $  109,473   $ -           $ 908,512
expenses
Interest         $ -           $ -         $  -         $  -         $ (358    )   $ (358      )
income
Interest         $ -           $ -         $  -         $  -         $ 49,194      $ 49,194
expense
Income (loss)
before income    $ 335,505     $ 35,195    $  29,205    $  11,435    $ (48,836 )   $ 362,504
taxes
Assets           $ 2,809,886   $ 167,835   $  392,820   $  605,072   $ 245,686     $ 4,221,299
                                                                                   
For the nine months ended February 29, 2012
Revenue          $ 2,163,224   $ 322,762   $  306,808   $  255,624   $ -           $ 3,048,418
Gross margin     $ 939,613     $ 95,461    $  132,346   $  127,320   $ -           $ 1,294,740
Selling and
administrative   $ 623,247     $ 59,331    $  107,277   $  106,090   $ -           $ 895,945
expenses
Interest         $ -           $ -         $  -         $  -         $ (1,141  )   $ (1,141    )
income
Interest         $ -           $ -         $  -         $  -         $ 52,281      $ 52,281
expense
Income (loss)
before income    $ 316,366     $ 36,130    $  25,069    $  21,230    $ (51,140 )   $ 347,655
taxes
Assets           $ 2,813,700   $ 153,181   $  369,288   $  564,383   $ 352,614     $ 4,253,166
                                                                                   


Cintas Corporation
Consolidated Balance Sheets
(In thousands except share data)
                                                           
                                                                
ASSETS                                         February 28,     May 31,
                                               2013             2012
                                               (Unaudited)
Current assets:
  Cash & cash equivalents                      $ 217,470        $ 339,825
  Marketable securities                          28,216           -
  Accounts receivable, net                       495,124          450,861
  Inventories, net                               246,957          251,205
  Uniforms and other rental items in             481,576          452,785
  service
  Income taxes, current                          15,331           22,188
  Prepaid expenses and other                    24,778         24,704     
      Total current assets                       1,509,452        1,541,568
                                                                
Property and equipment, at cost, net             976,844          944,305
                                                                
Goodwill                                         1,519,987        1,485,375
Service contracts, net                           93,573           76,822
Other assets, net                               121,443        112,836    
                                                                
                                               $ 4,221,299     $ 4,160,906  
                                                                
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                
Current liabilities:
  Accounts payable                             $ 109,064        $ 94,840
  Accrued compensation and related               90,533           91,214
  liabilities
  Accrued liabilities                            238,462          256,642
  Deferred tax liability                         62,019           2,559
  Long-term debt due within one year            674            225,636    
      Total current liabilities                  500,752          670,891
                                                                
Long-term liabilities:
  Long-term debt due after one year              1,308,656        1,059,166
  Deferred income taxes                          209,455          204,581
  Accrued liabilities                           72,190         87,133     
      Total long-term liabilities                1,590,301        1,350,880
                                                                
Shareholders' equity:
  Preferred stock, no par value:                 -                -
      100,000 shares authorized, none
      outstanding
  Common stock, no par value:                    178,290          148,255
      425,000,000 shares authorized
      FY13: 174,570,683 issued and
      122,723,896 outstanding
      FY12: 173,745,913 issued and
      126,519,758 outstanding
  Paid-in capital                                103,666          107,019
  Retained earnings                              3,631,793        3,482,073
  Treasury stock:                                (1,821,951 )     (1,634,875 )
      FY13: 51,846,787 shares
      FY12: 47,226,155 shares
  Other accumulated comprehensive income
  (loss):
      Foreign currency translation               52,918           52,399
      Unrealized loss on derivatives             (14,827    )     (16,104    )
      Other                                     357            368        
      Total shareholders' equity                 2,130,246        2,139,135
                                                                
                                               $ 4,221,299     $ 4,160,906  

                                                              
Cintas Corporation
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
                                                                  
                                                                  
                                                   Nine Months Ended
Cash flows from operating activities:              February 28,   February 29,
                                                   2013           2012
                                                                  
Net income                                         $ 229,465      $ 219,023
                                                                  
Adjustments to reconcile net income to net cash
provided
by operating activities:
      Depreciation                                   123,242        115,566
      Amortization of intangible assets              17,884         29,520
      Stock-based compensation                       16,660         15,023
      Deferred income taxes                          63,799         (995     )
      Change in current assets and liabilities,
      net of acquisitions of businesses:
                   Accounts receivable, net          (41,402  )     (11,760  )
                   Inventories, net                  4,437          (26,958  )
                   Uniforms and other rental         (28,803  )     (40,435  )
                   items in service
                   Prepaid expenses and other        9              (5,977   )
                   Accounts payable                  13,475         6,372
                   Accrued compensation and          (680     )     3,251
                   related liabilities
                   Accrued liabilities               (35,682  )     9,327
                   Income taxes payable             5,939        (4,243   )
                                                                  
      Net cash provided by operating activities      368,343        307,714
                                                                  
Cash flows from investing activities:
                                                                  
Capital expenditures                                 (151,799 )     (117,716 )
Proceeds from redemption of marketable               97,651         519,955
securities
Purchase of marketable securities and                (135,398 )     (576,404 )
investments
Acquisitions of businesses, net of cash acquired     (64,625  )     (20,882  )
Other, net                                          (662     )    1,853    
                                                                  
      Net cash used in investing activities          (254,833 )     (193,194 )
                                                                  
Cash flows from financing activities:
                                                                  
Proceeds from issuance of debt                       250,000        -
Repayment of debt                                    (225,472 )     (1,216   )
Proceeds from exercise of stock-based                7,156          356
compensation awards
Dividends paid                                       (79,744  )     (70,820  )
Repurchase of common stock                           (187,076 )     (262,682 )
Other, net                                          (1,385   )    1,390    
                                                                  
      Net cash used in financing activities          (236,521 )     (332,972 )
                                                                  
Effect of exchange rate changes on cash and cash     656            (1,671   )
equivalents
                                                                  
Net decrease in cash and cash equivalents            (122,355 )     (220,123 )
                                                                  
Cash and cash equivalents at beginning of period    339,825      438,106  
                                                                  
Cash and cash equivalents at end of period         $ 217,470     $ 217,983  

Contact:

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