Cintas Corporation Announces Fiscal 2014 First Quarter Results

  Cintas Corporation Announces Fiscal 2014 First Quarter Results

Business Wire

CINCINNATI -- September 19, 2013

Cintas Corporation (Nasdaq:CTAS) today reported revenue for its first quarter
ended August 31, 2013, of $1.12 billion, a 6.6% increase compared to last
year’s first quarter. Adjusting for one less workday in this year’s first
quarter compared to last year’s first quarter, revenue grew 8.2%. Organic
growth, which adjusts for the impact of acquisitions and the impact of one
less workday, was 7.1%.

Scott D. Farmer, Chief Executive Officer, stated, “We are pleased to report a
solid start to our fiscal 2014 year. All four of our operating segments had
strong revenue performance in the first quarter, with each segment reporting
organic growth of better than six percent.”

Operating income increased to $140.1 million, or 12.5% of revenue. The
operating margin of 12.5% was lower than last year’s first quarter operating
margin of 13.2% due to the effects of one less workday in this year’s first
quarter, route capacity added in fiscal 2013 and lower recycled paper prices.
Net income increased 1.3% to $77.8 million as compared to $76.7 million in
last year’s first quarter. Earnings per diluted share (EPS) for the first
quarter were $0.63, a 5.0% increase over the $0.60 EPS in last year’s first
quarter.

During the first quarter and into September, Cintas purchased 3.0 million
shares of its common stock at a cost of approximately $147.0 million. The
total purchases included acquiring 2.1 million shares at a cost of
approximately $100.7 million during the latter part of the first quarter, and
the remaining 0.9 million shares were purchased through September 19, 2013, at
a cost of approximately $46.3 million. While it had no impact on the first
quarter EPS, the share buyback is expected to benefit fiscal year 2014 EPS by
approximately $0.04. The Cintas Board of Directors authorized a $500.0 million
share buyback program in October 2011 and approved an additional share
repurchase program of $500.0 million on July 30, 2013. As of September 19,
2013, the Company had available for future share repurchases $15.4 million
under the October 2011 share buyback program and $500.0 million under the July
2013 program.

Mr. Farmer concluded, “When we introduced our fiscal 2014 guidance in July, we
indicated our outlook was based on an uncertain U.S. economic landscape which
caused delays to the hiring and investment decisions of our customers. We have
not seen any evidence since that time to change our outlook of the U.S.
economy. With that in mind, we reiterate our fiscal 2014 revenue expectations
to be in the range of $4.5 billion to $4.6 billion. We are updating our full
year EPS guidance to incorporate the impact of the share buybacks through
September 19, 2013. As a result, we now expect EPS to be in the range of $2.70
to $2.79. 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 quarter ended August
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, 2013 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)
                                       August 31,      August 31,
                                                                     % Chng.
                                       2013            2012
                                                                       
Revenue:
Rental uniforms and ancillary          $ 792,866       $ 754,843       5.0
products
Other services                          327,477      296,482      10.5
Total revenue                          $ 1,120,343     $ 1,051,325     6.6
                                                                       
Costs and expenses:
Cost of rental uniforms and            $ 454,731       $ 428,148       6.2
ancillary products
Cost of other services                   199,632         177,302       12.6
Selling and administrative expenses     325,910      306,581      6.3
                                                                       
Operating income                       $ 140,070       $ 139,294       0.6
                                                                       
Interest income                        $ (68       )   $ (77       )   -11.7
Interest expense                        16,523       16,598       -0.5
                                                                       
Income before income taxes             $ 123,615       $ 122,773       0.7
Income taxes                            45,861       46,040       -0.4
Net income                             $ 77,754      $ 76,733       1.3
                                                                       
Per share data:
Basic earnings per share               $ 0.63        $ 0.61         3.3
Diluted earnings per share             $ 0.63        $ 0.60         5.0
                                                                       
Weighted average number of shares        122,130         126,110
outstanding
Diluted average number of shares         122,892         126,458
outstanding
                                                                       

CINTAS CORPORATION SUPPLEMENTAL DATA
                                                                
                                                      Three Months Ended
                                                      August 31,   August 31,
                                                                 
                                                      2013         2012
Rental uniforms and ancillary products gross margin   42.6%        43.3%
Other services gross margin                           39.0%        40.2%
Total gross margin                                    41.6%        42.4%
Net margin                                            6.9%         7.3%
                                                                   
Depreciation and amortization                         $48,394      $46,442
Capital expenditures                                  $37,462      $47,438
                                                                   
Debt / EBITDA                                         1.8          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
                                         August 31,    August 31,
                                                                   Growth %
                                         2013          2012
                                                                     
                                         A             B             G
Revenue                                  $ 1,120,343   $ 1,051,325   6.6%
                                                                     G=(A-B)/B
                                         C             D
Workdays in the period                     65            66
                                                                     
                                         E             F             H
Revenue adjusted for workday             $ 1,137,579   $ 1,051,325   8.2%
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
                August 31,

                2013
                                                                     
Long-term       $  1,308,999
debt
Letters of        85,117
credit
Debt            $  1,394,116
                                                                     
                                             Three       Three
                Rolling         Three        Months      Months      Three
                Twelve          Months                               Months
                Months Ended   Ended       Ended      Ended      Ended
                August 31,                                           November
                2013            August 31,   May 31,     February    30,
                                2013                     28,         2012
                                             2013        2013
                                                                     
Net Income      $  316,463      $  77,754    $ 85,977    $ 74,705    $ 78,027
                                                                     
Add back:
Interest           65,637          16,523      16,518      16,302      16,294
expense
Taxes              184,287         45,861      51,427      42,148      44,851
Depreciation       167,893         42,571      42,422      41,921      40,979
Amortization      23,436        5,823     5,829     5,911     5,873
EBITDA          $  757,716      $  188,532   $ 202,173   $ 180,987   $ 186,024
                                                                     
Debt / EBITDA     1.8
                                                                     
                                                                     
                As of
                August 31,

                2012
                                                                     
Long-term       $  1,309,648
debt
Letters of        85,719
credit
Debt            $  1,395,367
                                                                     
                                             Three       Three
                Rolling         Three        Months      Months      Three
                Twelve          Months                               Months
                Months Ended   Ended       Ended      Ended      Ended
                August 31,                                           November
                2012            August 31,   May 31,     February    30,
                                2012                     29,         2011
                                             2012        2012
                                                                     
Net Income      $  305,732      $  76,733    $ 78,614    $ 76,035    $ 74,350
                                                                     
Add back:
Interest           69,889          16,598      18,344      17,219      17,728
expense
Taxes              176,380         46,040      44,675      44,655      41,010
Depreciation       157,896         40,342      40,265      38,644      38,645
Amortization      34,201        6,100     8,814     9,416     9,871
EBITDA          $  744,098      $  185,813   $ 190,712   $ 185,969   $ 181,604
                                                                     
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
                                             
                                  Three Months Ended
                                  August 31,    August 31,

                                  2013          2012
                                                
Net Cash Provided by Operations   $ 82,559      $ 94,865
                                                
Capital Expenditures              $ (37,462 )   $ (47,438 )
                                                
Free Cash Flow                    $ 45,097      $ 47,427
                                                          

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                                                                 
August 31,
2013
Revenue          $ 792,866     $ 107,462   $  125,875   $  94,140    $ -           $ 1,120,343
Gross margin     $ 338,135     $ 29,714    $  54,897    $  43,234    $ -           $ 465,980
Selling and
administrative   $ 220,742     $ 21,033    $  43,451    $  40,684    $ -           $ 325,910
expenses
Interest         $ -           $ -         $  -         $  -         $ (68     )   $ (68       )
income
Interest         $ -           $ -         $  -         $  -         $ 16,523      $ 16,523
expense
Income (loss)
before income    $ 117,393     $ 8,681     $  11,446    $  2,550     $ (16,455 )   $ 123,615
taxes
Assets           $ 2,842,058   $ 143,993   $  410,633   $  631,634   $ 282,859     $ 4,311,177
                                                                                   
For the three
months ended
August 31,
2012
Revenue          $ 754,843     $ 100,279   $  110,841   $  85,362    $ -           $ 1,051,325
Gross margin     $ 326,695     $ 29,478    $  47,791    $  41,911    $ -           $ 445,875
Selling and
administrative   $ 209,788     $ 20,737    $  38,770    $  37,286    $ -           $ 306,581
expenses
Interest         $ -           $ -         $  -         $  -         $ (77     )   $ (77       )
income
Interest         $ -           $ -         $  -         $  -         $ 16,598      $ 16,598
expense
Income (loss)
before income    $ 116,907     $ 8,741     $  9,021     $  4,625     $ (16,521 )   $ 122,773
taxes
Assets           $ 2,774,417   $ 125,094   $  359,387   $  563,172   $ 330,165     $ 4,152,235
                                                                                               

Cintas Corporation
Consolidated Balance Sheets
(In thousands except share data)
                                                          
                                                                
                                               August 31,       May 31,
  ASSETS
                                               2013             2013
                                               (unaudited)
  Current assets:
    Cash & cash equivalents                    $ 278,670        $ 352,273
    Marketable securities                        4,189            5,680
    Accounts receivable, net                     511,642          496,049
    Inventories, net                             245,470          240,440
    Uniforms and other rental items in           500,384          496,752
    service
    Income taxes, current                        -                9,102
    Prepaid expenses                            31,934         24,530     
        Total current assets                     1,572,289        1,624,826
                                                                
  Property and equipment, at cost, net           991,331          986,703
                                                                
  Goodwill                                       1,531,006        1,517,560
  Service contracts, net                         93,119           92,153
  Other assets, net                             123,432        124,390    
                                                                
                                               $ 4,311,177     $ 4,345,632  
                                                                
  LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                
  Current liabilities:
    Accounts payable                           $ 124,952        $ 121,029
    Accrued compensation and related             43,247           78,050
    liabilities
    Accrued liabilities                          235,237          271,821
    Income taxes, current                        23,367           -
    Deferred tax liability                       80,692           77,169
    Long-term debt due within one year          8,200          8,187      
        Total current liabilities                515,695          556,256
                                                                
  Long-term liabilities:
    Long-term debt due after one year            1,300,799        1,300,979
    Deferred income taxes                        214,221          210,483
    Accrued liabilities                         84,451         76,422     
        Total long-term liabilities              1,599,471        1,587,884
                                                                
  Shareholders' equity:
    Preferred stock, no par value:               -                -
        100,000 shares authorized, none
        outstanding
    Common stock, no par value:                  217,107          186,332
        425,000,000 shares authorized
        FY14: 175,492,504 issued and
        120,778,629 outstanding
        FY13: 174,786,010 issued and
        122,281,507 outstanding
    Paid-in capital                              102,961          109,822
    Retained earnings                            3,795,525        3,717,771
    Treasury stock:                              (1,957,533 )     (1,850,556 )
        FY14: 54,713,875 shares
        FY13: 52,504,503 shares
    Other accumulated comprehensive income
    (loss):
        Foreign currency translation             50,666           51,312
        Unrealized loss on derivatives           (13,851    )     (14,339    )
        Other                                   1,136          1,150      
        Total shareholders' equity               2,196,011        2,201,492
                                                                
                                               $ 4,311,177     $ 4,345,632  
                                                                             

Cintas Corporation
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
                                                              
                                                                  
                                                   Three Months Ended
                                                   August 31,     August 31,
Cash flows from operating activities:
                                                   2013           2012
                                                                  
Net income                                         $ 77,754       $ 76,733
                                                                  
Adjustments to reconcile net income to net cash
provided by operating activities:
      Depreciation                                   42,571         40,342
      Amortization of intangible assets              5,823          6,100
      Stock-based compensation                       6,984          5,448
      Deferred income taxes                          7,373          9,716
      Change in current assets and liabilities,
      net of acquisitions of businesses:
                   Accounts receivable, net          (14,903  )     (7,128   )
                   Inventories, net                  (5,258   )     9,889
                   Uniforms and other rental         (4,150   )     (8,672   )
                   items in service
                   Prepaid expenses                  (7,216   )     (5,392   )
                   Accounts payable                  2,915          16,278
                   Accrued compensation and          (34,777  )     (50,793  )
                   related liabilities
                   Accrued liabilities               (27,215  )     (27,400  )
                   Income taxes payable             32,658       29,744   
                                                                  
      Net cash provided by operating activities      82,559         94,865
                                                                  
Cash flows from investing activities:
                                                                  
Capital expenditures                                 (37,462  )     (47,438  )
Proceeds from redemption of marketable               35,233         24,720
securities
Purchase of marketable securities and                (32,941  )     (36,970  )
investments
Acquisitions of businesses, net of cash acquired     (32,216  )     (2,130   )
Other, net                                          382          577      
                                                                  
      Net cash used in investing activities          (67,004  )     (61,241  )
                                                                  
Cash flows from financing activities:
                                                                  
Proceeds from issuance of debt                       -              250,000
Repayment of debt                                    (167     )     (225,154 )
Proceeds from exercise of stock-based                14,085         1,119
compensation awards
Repurchase of common stock                           (106,977 )     (77,953  )
Other, net                                          4,126        (3,491   )
                                                                  
      Net cash used in financing activities          (88,933  )     (55,479  )
                                                                  
Effect of exchange rate changes on cash and cash     (225     )     1,247
equivalents
                                                                  
Net decrease in cash and cash equivalents            (73,603  )     (20,608  )
                                                                  
Cash and cash equivalents at beginning of period    352,273      339,825  
                                                                  
Cash and cash equivalents at end of period         $ 278,670     $ 319,217  
                                                                             

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
 
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