Cintas Corporation Announces Fiscal 2013 Results

  Cintas Corporation Announces Fiscal 2013 Results

Business Wire

CINCINNATI -- July 15, 2013

Cintas Corporation (Nasdaq:CTAS) today reported results for its fourth quarter
ended May 31, 2013. Revenue for the fourth quarter was $1.13 billion,
representing a 7.2% increase compared to last year’s fourth quarter. Organic
growth, which adjusts for the impact of acquisitions, compared to last year’s
fourth quarter, was 6.2%. Net income increased 9.4% to $86.0 million as
compared to $78.6 million in last year’s fourth quarter. Earnings per diluted
share (EPS) for the fourth quarter were $0.69, a 15.0% increase over the $0.60
EPS in last year’s fourth quarter.

Scott D. Farmer, Chief Executive Officer, stated, “We are pleased to report
another quarter of record revenue. In addition, our fourth quarter operating
margin of 13.6% of revenue reflects the execution of our plan to sell
profitable business, manage our cost structure and continuously improve the
efficiency of our processes. These solid results conclude a successful year
for Cintas achieved in large part by the hard work and dedication of our
employees, who we call partners.”

For the fiscal year ended May 31, 2013, revenue was a record $4.32 billion, a
5.2% increase from the prior fiscal year. Adjusting for one less workday in
this fiscal year compared to last fiscal year, revenue grew 5.6% over last
fiscal year. Organic growth, which adjusts for the impact of acquisitions and
the impact of one less workday compared to last fiscal year, was 4.9%. Net
income increased 6.0% to $315.4 million compared to last fiscal year. EPS
increased 11.0% to $2.52 as compared to last fiscal year.

Mr. Farmer added, “I am proud to report that we achieved record fiscal year
sales and EPS in fiscal year 2013. It was the third consecutive fiscal year of
double digit EPS growth. In addition, our balance sheet and cash flow remain
very strong. As of May 31, 2013, cash and marketable securities totaled $358.0
million, and debt to EBITDA was 1.9 to one. Cash flow from operations for the
fiscal year increased 17.6% to $552.7 million compared to last fiscal year.”

Mr. Farmer concluded, “While the U.S. economy has shown some signs of
improvement in the past several months, much uncertainty remains. This
uncertainty, due to a number of factors including the effect of the Affordable
Care Act, continues to cause many of our customers to delay hiring and
investment decisions. We have developed our fiscal 2014 expectations with this
uncertain economic landscape in mind. We expect fiscal 2014 revenue to be in
the range of $4.5 billion to $4.6 billion, and full year EPS to be in the
range of $2.66 to $2.75. This guidance assumes no deterioration in the U.S.
economy and does not consider any additional share buybacks. It does
incorporate the impact of having one less workday in fiscal 2014 compared to
fiscal 2013 and our current estimate of the impact of the Affordable Care Act
on our cost structure during fiscal year 2014.”

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, the ultimate impact of the Affordable Care Act
and the finalization of our financial statements for the year ended May 31,
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
(In thousands except per share data)
                                         
                                                                       
                                           Three Months Ended
                                           (Unaudited)
                                           May 31,       May 31,       % Chng.
                                           2013          2012
                                                                       
Revenue:
Rental uniforms and ancillary products     $ 785,018     $ 749,037     4.8
Other services                              344,068     304,545    13.0
Total revenue                              $ 1,129,086   $ 1,053,582   7.2
                                                                       
Costs and expenses:
Cost of rental uniforms and ancillary      $ 454,438     $ 424,940     6.9
products
Cost of other services                       207,433       184,774     12.3
Selling and administrative expenses         313,344     303,036    3.4
                                                                       
Operating income                           $ 153,871     $ 140,832     9.3
                                                                       
Interest income                            $ (51       ) $ (801      ) -93.6
Interest expense                            16,518      18,344     -10.0
                                                                       
Income before income taxes                 $ 137,404     $ 123,289     11.4
Income taxes                                51,427      44,675     15.1
Net income                                 $ 85,977     $ 78,614     9.4
                                                                       
Per share data:
Basic earnings per share                   $ 0.69       $ 0.60       15.0
Diluted earnings per share                 $ 0.69       $ 0.60       15.0
                                                                       
Weighted average number of shares            122,392       128,788
outstanding
Diluted average number of shares             123,103       129,040
outstanding
                                                                       
                                                                       
                                                                       
                                           Twelve Months Ended
                                           May 31,       May 31,       % Chng.
                                           2013          2012
                                                                       
Revenue:
Rental uniforms and ancillary products     $ 3,044,587   $ 2,912,261   4.5
Other services                              1,271,884   1,189,739  6.9
Total revenue                              $ 4,316,471   $ 4,102,000   5.2
                                                                       
Costs and expenses:
Cost of rental uniforms and ancillary      $ 1,756,297   $ 1,648,551   6.5
products
Cost of other services                       773,107       714,841     8.2
Selling and administrative expenses         1,221,856   1,198,981  1.9
                                                                       
Operating income                           $ 565,211     $ 539,627     4.7
                                                                       
Interest income                            $ (409      ) $ (1,942    ) -78.9
Interest expense                            65,712      70,625     -7.0
                                                                       
Income before income taxes                 $ 499,908     $ 470,944     6.2
Income taxes                                184,466     173,307    6.4
Net income                                 $ 315,442    $ 297,637    6.0
                                                                       
Per share data:
Basic earnings per share                   $ 2.53       $ 2.27       11.5
Diluted earnings per share                 $ 2.52       $ 2.27       11.0
                                                                       
Weighted average number of shares            123,956       129,891
outstanding
Diluted average number of shares             124,531       130,033
outstanding
                                                                       
                                                                       
                                                                       
CINTAS CORPORATION SUPPLEMENTAL DATA
                                                                       
                                           Three Months Ended
                                           May 31,       May 31,
                                           2013          2012
Rental uniforms and ancillary products       42.1      %   43.3      %
gross margin
Other services gross margin                  39.7      %   39.3      %
Total gross margin                           41.4      %   42.1      %
Net margin                                   7.6       %   7.5       %
                                                                       
Depreciation and amortization              $ 48,251      $ 49,080
Capital expenditures                       $ 44,687      $ 43,086
                                                                       
                                                                       
                                           Twelve Months Ended
                                           May 31,       May 31,
                                           2013          2012
Rental uniforms and ancillary products       42.3      %   43.4      %
gross margin
Other services gross margin                  39.2      %   39.9      %
Total gross margin                           41.4      %   42.4      %
Net margin                                   7.3       %   7.3       %
                                                                       
Depreciation and amortization              $ 189,377     $ 194,165
Capital expenditures                       $ 196,486     $ 160,802
                                                                       
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
                                                                 
                                                                     
                                         Twelve Months Ended
                                         May 31,      May 31,      Growth %
                                         2013          2012
                                                                     
                                         A             B             G
Revenue                                  $ 4,316,471   $ 4,102,000   5.2%
                                                                     G=(A-B)/B
                                         C             D
Workdays in the period                     261           262
                                                                     
                                         E             F             H
Revenue adjusted for workday             $ 4,333,009   $ 4,102,000   5.6%
difference
                                                                     H=(E-F)/F
                                         E=(A/C)*D     F=(B/D)*D
                                                                     

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         As of
                    May 31,      May 31,
                    2013          2012
                                  
Long-term debt      $ 1,309,166   $ 1,284,802
Letters of credit    85,775      85,716
Debt                $ 1,394,941   $ 1,370,518
                                  
                                  
                    Twelve Months Ended
                    May 31,      May 31,
                    2013          2012
Net Income          $ 315,442     $ 297,637
                                  
Add back:
Interest expense      65,712        70,625
Taxes                 184,466       173,307
Depreciation          165,664       155,830
Amortization         23,713      38,335
EBITDA              $ 754,997     $ 735,734
                                  
Debt / EBITDA        1.9         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
                                              
                                  Twelve Months Ended
                                  May 31,       May 31,
                                  2013           2012
                                                 
Net Cash Provided by Operations   $ 552,748      $ 469,862
                                                 
Capital Expenditures              $ (196,486 )  $ (160,802 )
                                                 
Free Cash Flow                    $ 356,262      $ 309,060

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                                                                 
May 31, 2013
Revenue          $ 785,018     $ 124,717   $  125,360   $  93,991    $ -           $ 1,129,086
Gross margin     $ 330,580     $ 38,472    $  54,593    $  43,570    $ -           $ 467,215
Selling and
administrative   $ 213,044     $ 20,421    $  40,716    $  39,163    $ -           $ 313,344
expenses
Interest         $ -           $ -         $  -         $  -         $ (51     )   $ (51       )
income
Interest         $ -           $ -         $  -         $  -         $ 16,518      $ 16,518
expense
Income (loss)
before income    $ 117,536     $ 18,051    $  13,877    $  4,407     $ (16,467 )   $ 137,404
taxes
                                                                                   
For the three
months ended
May 31, 2012
Revenue          $ 749,037     $ 111,232   $  108,895   $  84,418    $ -           $ 1,053,582
Gross margin     $ 324,097     $ 34,153    $  46,119    $  39,499    $ -           $ 443,868
Selling and
administrative   $ 210,963     $ 21,246    $  36,061    $  34,766    $ -           $ 303,036
expenses
Interest         $ -           $ -         $  -         $  -         $ (801    )   $ (801      )
income
Interest         $ -           $ -         $  -         $  -         $ 18,344      $ 18,344
expense
Income (loss)
before income    $ 113,134     $ 12,907    $  10,058    $  4,733     $ (17,543 )   $ 123,289
taxes
                                                                                   
For the twelve
months ended
May 31, 2013
Revenue          $ 3,044,587   $ 461,328   $  460,592   $  349,964   $ -           $ 4,316,471
Gross margin     $ 1,288,290   $ 134,985   $  199,314   $  164,478   $ -           $ 1,787,067
Selling and
administrative   $ 835,249     $ 81,739    $  156,232   $  148,636   $ -           $ 1,221,856
expenses
Interest         $ -           $ -         $  -         $  -         $ (409    )   $ (409      )
income
Interest         $ -           $ -         $  -         $  -         $ 65,712      $ 65,712
expense
Income (loss)
before income    $ 453,041     $ 53,246    $  43,082    $  15,842    $ (65,303 )   $ 499,908
taxes
Assets           $ 2,830,941   $ 152,551   $  398,614   $  605,573   $ 357,953     $ 4,345,632
                                                                                   
For the twelve
months ended
May 31, 2012
Revenue          $ 2,912,261   $ 433,994   $  415,703   $  340,042   $ -           $ 4,102,000
Gross margin     $ 1,263,710   $ 129,614   $  178,465   $  166,819   $ -           $ 1,738,608
Selling and
administrative   $ 834,210     $ 80,577    $  143,338   $  140,856   $ -           $ 1,198,981
expenses
Interest         $ -           $ -         $  -         $  -         $ (1,942  )   $ (1,942    )
income
Interest         $ -           $ -         $  -         $  -         $ 70,625      $ 70,625
expense
Income (loss)
before income    $ 429,500     $ 49,037    $  35,127    $  25,963    $ (68,683 )   $ 470,944
taxes
Assets           $ 2,770,491   $ 136,478   $  362,128   $  556,784   $ 339,825     $ 4,165,706
                                                                                               

Cintas Corporation
Consolidated Balance Sheets
(In thousands except share data)
                                                          
                                                                
ASSETS                                         May 31,          May 31,
                                               2013             2012
                                                                
Current assets:
     Cash & cash equivalents                   $ 352,273        $ 339,825
     Marketable securities                       5,680            -
     Accounts receivable, net                    496,049          450,861
     Inventories, net                            240,440          251,205
     Uniforms and other rental items in          496,752          452,785
     service
     Income taxes, current                       9,102            22,188
     Prepaid expenses and other                 24,530         21,222     
         Total current assets                    1,624,826        1,538,086
                                                                
Property and equipment, at cost, net             986,703          952,587
                                                                
Goodwill                                         1,517,560        1,485,375
Service contracts, net                           92,153           76,822
Other assets, net                               124,390        112,836    
                                                                
                                               $ 4,345,632     $ 4,165,706  
                                                                
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                
Current liabilities:
     Accounts payable                          $ 121,029        $ 94,840
     Accrued compensation and related            78,050           91,214
     liabilities
     Accrued liabilities                         271,821          261,442
     Deferred tax liability                      77,169           2,559
     Long-term debt due within one year         8,187          225,636    
         Total current liabilities               556,256          675,691
                                                                
Long-term liabilities:
     Long-term debt due after one year           1,300,979        1,059,166
     Deferred income taxes                       210,483          204,581
     Accrued liabilities                        76,422         87,133     
         Total long-term liabilities             1,587,884        1,350,880
                                                                
Shareholders' equity:
     Preferred stock, no par value:              -                -
         100,000 shares authorized, none
         outstanding
     Common stock, no par value:                 186,332          148,255
         425,000,000 shares authorized
         FY13: 174,786,010 issued and
         122,281,507 outstanding
         FY12: 173,745,913 issued and
         126,519,758 outstanding
     Paid-in capital                             109,822          107,019
     Retained earnings                           3,717,771        3,482,073
     Treasury stock:                             (1,850,556 )     (1,634,875 )
         FY13: 52,504,503 shares
         FY12: 47,226,155 shares
     Other accumulated comprehensive
     income (loss):
         Foreign currency translation            51,312           52,399
         Unrealized loss on derivatives          (14,339    )     (16,104    )
         Other                                  1,150          368        
         Total shareholders' equity              2,201,492        2,139,135
                                                                
                                               $ 4,345,632     $ 4,165,706  
                                                                             

Cintas Corporation
Consolidated Condensed Statements of Cash Flows
(In thousands)
                                                            
                                                                  
                                                   Twelve Months Ended
Cash flows from operating activities:              May 31, 2013   May 31, 2012
                                                                  
Net income                                         $ 315,442      $ 297,637
                                                                  
Adjustments to reconcile net income to net
cash provided by operating activities:
   Depreciation                                      165,664        155,831
   Amortization of intangible assets                 23,713         38,334
   Stock-based compensation                          23,310         20,312
   Deferred income taxes                             48,023         56,727
   Change in current assets and liabilities,
   net of acquisitions of businesses:
          Accounts receivable, net                   (42,704  )     (24,261  )
          Inventories, net                           10,997         (2,330   )
          Uniforms and other rental items in         (44,179  )     (60,279  )
          service
          Prepaid expenses and other                 (3,281   )     (1,496   )
          Accounts payable                           25,023         (12,557  )
          Accrued compensation and related           (13,161  )     11,625
          liabilities
          Accrued liabilities                        31,873         (20,371  )
          Income taxes payable                      12,028       10,690   
                                                                  
   Net cash provided by operating activities         552,748        469,862
                                                                  
Cash flows from investing activities:
                                                                  
Capital expenditures                                 (196,486 )     (160,802 )
Proceeds from redemption of marketable               161,478        665,016
securities
Purchase of marketable securities and                (178,464 )     (585,655 )
investments
Acquisitions of businesses, net of cash              (69,370  )     (24,864  )
acquired
Other, net                                          (1,339   )    2,011    
                                                                  
   Net cash used in investing activities             (284,181 )     (104,294 )
                                                                  
Cash flows from financing activities:
                                                                  
Proceeds from issuance of debt                       250,000        -
Repayment of debt                                    (225,636 )     (1,323   )
Proceeds from exercise of stock-based                14,807         3,341
compensation awards
Dividends paid                                       (79,744  )     (70,820  )
Repurchase of common stock                           (215,681 )     (392,328 )
Other, net                                          196          555      
                                                                  
   Net cash used in financing activities             (256,058 )     (460,575 )
                                                                  
Effect of exchange rate changes on cash and          (61      )     (3,274   )
cash equivalents
                                                                  
Net increase (decrease) in cash and cash             12,448         (98,281  )
equivalents
                                                                  
Cash and cash equivalents at beginning of           339,825      438,106  
period
                                                                  
Cash and cash equivalents at end of period         $ 352,273     $ 339,825  

Contact:

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