Cintas Corporation Announces Fiscal 2014 Second Quarter Results

  Cintas Corporation Announces Fiscal 2014 Second Quarter Results

Business Wire

CINCINNATI -- December 19, 2013

Cintas Corporation (Nasdaq:CTAS) today reported results for its second quarter
ended November 30, 2013. Revenue for the second quarter was $1.14 billion,
representing a 7.9% 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 7.1%.

The Company’s operating income of $153.0 million was a 10.0% increase as
compared to last year’s second quarter. Net income increased 8.8% to $84.9
million as compared to $78.0 million in last year’s second quarter. Earnings
per diluted share (EPS) for the second quarter were $0.70, an 11.1% increase
over the $0.63 EPS in last year’s second quarter.

The effective tax rate for the second quarter of fiscal 2013 was 36.5%, which
reflected the positive impact of certain revised tax regulations. This year’s
second quarter effective tax rate was 37.9%. We expect the effective tax rate
for the entire 2014 fiscal year to be approximately 37.3%.

Scott D. Farmer, Chief Executive Officer, stated, “We are pleased with our
results for the quarter and our fiscal year to date. Our services continue to
be valued by our customers, and our new business generation remains very
strong. While some signs of economic growth are beginning to appear, our
customers continue to be cautious in adding employees or making any
significant capital investment in their businesses.”

Mr. Farmer added, “Last week, we paid our annual dividend to our shareholders
amounting to $0.77 per share, a 20.3% increase from last year’s dividend of
$0.64 per share. This was the 31^st consecutive year in which we have raised
our dividend, which is every year since we went public.”

Mr. Farmer concluded, “Based on our second quarter results and our view of the
U.S. economic climate, we are updating our fiscal 2014 guidance with revenue
in the range of $4.525 billion to $4.575 billion and EPS to be in the range of
$2.73 to $2.79. 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, 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
November 30, 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
(Unaudited)
(In thousands except per share data)
                                                             
                                                                      
                                  Three Months Ended
                                  November 30,    November 30,    % Change
                                  2013              2012
                                                                      
Revenue:
Rental uniforms and               $ 804,316         $ 755,839         6.4
ancillary products
Other services                     339,437       304,547        11.5
Total revenue                     $ 1,143,753       $ 1,060,386       7.9
                                                                      
Costs and expenses:
Cost of rental uniforms           $ 459,112         $ 438,902         4.6
and ancillary products
Cost of other services              207,722           189,448         9.6
Selling and                        323,947       293,013        10.6
administrative expenses
                                                                      
Operating income                  $ 152,972         $ 139,023         10.0
                                                                      
Interest income                   $ (84       )     $ (149      )     (43.6  )
Interest expense                   16,485        16,294         1.2
                                                                      
Income before income              $ 136,571         $ 122,878         11.1
taxes
Income taxes                       51,709        44,851         15.3
Net income                        $ 84,862       $ 78,027         8.8
                                                                      
Per share data:
Basic earnings per share          $ 0.71         $ 0.63           12.7
Diluted earnings per              $ 0.70         $ 0.63           11.1
share
                                                                      
Weighted average number             119,907           124,185
of shares outstanding
Diluted average number of           121,050           124,609
shares outstanding
                                                                      
                                                                      
                                  Six Months Ended
                                  November 30,    November 30,    % Change
                                  2013              2012
                                                                      
Revenue:
Rental uniforms and               $ 1,597,182       $ 1,510,682       5.7
ancillary products
Other services                     666,914       601,029        11.0
Total revenue                     $ 2,264,096       $ 2,111,711       7.2
                                                                      
Costs and expenses:
Cost of rental uniforms           $ 913,843         $ 867,050         5.4
and ancillary products
Cost of other services              407,354           366,750         11.1
Selling and                        649,857       599,594        8.4
administrative expenses
                                                                      
Operating income                  $ 293,042         $ 278,317         5.3
                                                                      
Interest income                   $ (152      )     $ (226      )     (32.7  )
Interest expense                   33,008        32,892         0.4
                                                                      
Income before income              $ 260,186         $ 245,651         5.9
taxes
Income taxes                       97,570        90,891         7.3
Net income                        $ 162,616      $ 154,760        5.1
                                                                      
Per share data:
Basic earnings per share          $ 1.34         $ 1.24           8.1
Diluted earnings per              $ 1.33         $ 1.23           8.1
share
                                                                      
Weighted average number             121,025           125,153
of shares outstanding
Diluted average number of           122,016           125,541
shares outstanding
                                                                      
                                                                      
                                                                      
CINTAS CORPORATION SUPPLEMENTAL DATA
                                                                      
                                  Three Months Ended
                                  November 30,    November 30,
                                  2013              2012
Rental uniforms and
ancillary products gross            42.9      %       41.9      %
margin
Other services gross                38.8      %       37.8      %
margin
Total gross margin                  41.7      %       40.7      %
Net margin                          7.4       %       7.4       %
                                                                      
Depreciation and                  $ 48,527          $ 46,852
amortization
Capital expenditures              $ 39,323          $ 51,624
                                                                      
                                                                      
                                  Six Months Ended
                                  November 30,    November 30,
                                  2013              2012
Rental uniforms and
ancillary products gross            42.8      %       42.6      %
margin
Other services gross                38.9      %       39.0      %
margin
Total gross margin                  41.6      %       41.6      %
Net margin                          7.2       %       7.3       %
                                                                      
Depreciation and                  $ 96,921          $ 93,294
amortization
Capital expenditures              $ 76,785          $ 99,062
                                                                      
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
                                                            
                                                                     
                                   Six Months Ended
                                   November 30,   November 30,   Growth %
                                   2013             2012
                                                                     
                                   A                B                G
Revenue                            $  2,264,096     $  2,111,711     7.2%
                                                                     G=(A-B)/B
                                   C                D
Workdays in the period                130              131
                                                                     
                                   E                F                H
Revenue adjusted for               $  2,281,512     $  2,111,711     8.0%
workday 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
                             November
                             30,
                             2013
                                                                                       
Long-term                    $ 1,301,329
debt
Letters of                    85,117
credit
Debt                         $ 1,386,446
                                                                                       
                             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,             2013          2013          2013          2013
                             2013
                                                                                       
Net Income                   $ 323,298       $ 84,862      $ 77,754      $ 85,977      $ 74,705
                                                                                       
Add back:
Interest                       65,828          16,485        16,523        16,518        16,302
expense
Taxes                          191,145         51,709        45,861        51,427        42,148
Depreciation                   169,523         42,609        42,571        42,422        41,921
Amortization                  23,481       5,918      5,823      5,829      5,911
EBITDA                       $ 773,275       $ 201,583     $ 188,532     $ 202,173     $ 180,987
                                                                                       
Debt /                        1.8
EBITDA
                                                                                       
                                                                                       
                             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
                                                                                       

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
                                                                 
                                                Six Months Ended
                                                November 30,   November 30,
                                                2013             2012
                                                                 
Net Cash Provided by Operations                 $ 222,280        $ 227,263
                                                                 
Capital Expenditures                            $ (76,785)     $ (99,062)
                                                                 
Free Cash Flow                                  $ 145,495        $ 128,201
                                                                 

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,
2013
Revenue                $ 804,316       $ 121,883     $  124,585     $  92,969      $ -             $ 1,143,753
Gross margin           $ 345,204       $ 35,137      $  54,052      $  42,526      $ -             $ 476,919
Selling and
administrative         $ 219,134       $ 21,273      $  43,467      $  40,073      $ -             $ 323,947
expenses
Interest               $ -             $ -           $  -           $  -           $ (84     )     $ (84       )
income
Interest               $ -             $ -           $  -           $  -           $ 16,485        $ 16,485
expense
Income (loss)
before income          $ 126,070       $ 13,864      $  10,585      $  2,453       $ (16,401 )     $ 136,571
taxes
                                                                                                   
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 six
months ended
November 30,
2013
Revenue                $ 1,597,182     $ 229,345     $  250,460     $  187,109     $ -             $ 2,264,096
Gross margin           $ 683,339       $ 64,851      $  108,949     $  85,760      $ -             $ 942,899
Selling and
administrative         $ 439,876       $ 42,306      $  86,918      $  80,757      $ -             $ 649,857
expenses
Interest               $ -             $ -           $  -           $  -           $ (152    )     $ (152      )
income
Interest               $ -             $ -           $  -           $  -           $ 33,008        $ 33,008
expense
Income (loss)
before income          $ 243,463       $ 22,545      $  22,031      $  5,003       $ (32,856 )     $ 260,186
taxes
Assets                 $ 2,838,831     $ 159,465     $  418,787     $  634,825     $ 313,490       $ 4,365,398
                                                                                                   
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                 $ 2,818,507     $ 143,880     $  393,429     $  590,517     $ 276,349       $ 4,222,682
                                                                                                               

                                                         
                                                                
Cintas Corporation
Consolidated Balance Sheets
(In thousands except share data)
                                                                
                                                                
ASSETS                                       November 30,       May 31,
                                             2013               2013
                                             (unaudited)
Current assets:
Cash & cash equivalents                      $ 309,334          $ 352,273
Marketable securities                          4,156              5,680
Accounts receivable, net                       520,523            496,049
Inventories, net                               249,486            240,440
Uniforms and other rental items in             508,669            496,752
service
Income taxes, current                          -                  9,102
Prepaid expenses                              26,614           24,530     
Total current assets                           1,618,782          1,624,826
                                                                
Property and equipment, at cost, net           988,897            986,703
                                                                
Goodwill                                       1,532,961          1,517,560
Service contracts, net                         88,394             92,153
Other assets, net                             136,364          124,390    
                                                                
                                             $ 4,365,398       $ 4,345,632  
                                                                
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                
Current liabilities:
Accounts payable                             $ 103,242          $ 121,029
Accrued compensation and related               58,649             78,050
liabilities
Accrued liabilities                            360,627            271,821
Income taxes, current                          4,238              -
Deferred tax liability                         87,091             77,169
Long-term debt due within one year            714              8,187      
Total current liabilities                      614,561            556,256
                                                                
Long-term liabilities:
Long-term debt due after one year              1,300,615          1,300,979
Deferred income taxes                          210,187            210,483
Accrued liabilities                           92,063           76,422     
Total long-term liabilities                    1,602,865          1,587,884
                                                                
Shareholders' equity:
Preferred stock, no par value:                 -                  -
100,000 shares authorized, none
outstanding
Common stock, no par value:                    225,372            186,332
425,000,000 shares authorized
FY14: 175,698,922 issued and
119,817,004 outstanding
FY13: 174,786,010 issued and
122,281,507 outstanding
Paid-in capital                                110,003            109,822
Retained earnings                              3,787,067          3,717,771
Treasury stock:                                (2,014,756 )       (1,850,556 )
FY14: 55,881,918 shares
FY13: 52,504,503 shares
Other accumulated comprehensive
income (loss):
Foreign currency translation                   52,706             51,312
Unrealized loss on derivatives                 (13,552    )       (14,339    )
Other                                         1,132            1,150      
Total shareholders' equity                     2,147,972          2,201,492
                                                                
                                             $ 4,365,398       $ 4,345,632  
                                                                             

                                                           
                                                                  
Cintas Corporation
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
                                                                  
                                                                  
                                                 Six Months Ended
Cash flows from operating activities:            November 30,     November 30,
                                                 2013             2012
                                                                  
Net income                                       $ 162,616        $ 154,760
                                                                  
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation                                       85,180           81,321
Amortization of intangible assets                  11,741           11,973
Stock-based compensation                           14,624           11,084
Deferred income taxes                              9,299            23,351
Change in current assets and
liabilities, net of acquisitions of
businesses:
Accounts receivable, net                           (23,755  )       (24,528  )
Inventories, net                                   (9,232   )       15,460
Uniforms and other rental items in                 (12,694  )       (28,105  )
service
Prepaid expenses                                   (1,776   )       (202     )
Accounts payable                                   (19,215  )       23,019
Accrued compensation and related                   (19,381  )       (36,899  )
liabilities
Accrued liabilities                                11,387           (4,570   )
Income taxes payable                              13,486         599      
                                                                  
Net cash provided by operating                     222,280          227,263
activities
                                                                  
Cash flows from investing activities:
                                                                  
Capital expenditures                               (76,785  )       (99,062  )
Proceeds from redemption of marketable             45,114           41,453
securities
Purchase of marketable securities and              (55,413  )       (80,054  )
investments
Acquisitions of businesses, net of cash            (32,514  )       (53,243  )
acquired
Other, net                                        (929     )      (673     )
                                                                  
Net cash used in investing activities              (120,527 )       (191,579 )
                                                                  
Cash flows from financing activities:
                                                                  
Proceeds from issuance of debt                     -                250,000
Repayment of debt                                  (7,837   )       (225,312 )
Proceeds from exercise of stock-based              21,311           2,357
compensation awards
Repurchase of common stock                         (164,200 )       (159,175 )
Other, net                                        6,323          (2,476   )
                                                                  
Net cash used in financing activities              (144,403 )       (134,606 )
                                                                  
Effect of exchange rate changes on cash            (289     )       1,584
and cash equivalents
                                                                  
Net decrease in cash and cash                      (42,939  )       (97,338  )
equivalents
                                                                  
Cash and cash equivalents at beginning            352,273        339,825  
of period
                                                                  
Cash and cash equivalents at end of              $ 309,334       $ 242,487  
period
                                                                             

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