Cintas Corporation (Nasdaq:CTAS) today reported revenue for the
third quarter of fiscal 2007 of $905.4 million, an 8.2% increase
from the previous year�s third quarter revenue of $836.4 million.
Earnings per diluted share of $0.48 increased 6.7% from $0.45 per
diluted share last year, and net income of $76.7 million increased
from last year�s net income of $76.6 million. Current year net
income is being impacted by increased interest expense related to
the Company�s share buyback program. Scott D. Farmer, President and
Chief Executive Officer, stated, �We posted solid growth in revenue
and profits for our third quarter, delivering 8.2% revenue growth
and 6.7% growth in earnings per diluted share. While all of our
businesses are growing, growth in the third quarter was impacted by
three things. First, the very mild winter weather into early
February impacted the seasonal jacket and mat rental volume that
normally occurs in this quarter. �In addition, we continue to
experience economic pressure in our uniform business due to the
continued off-shoring of manufacturing jobs and the ripple effect
this causes to other businesses serving these operations. �Finally,
our new sales force re-organization was completed at the end of the
calendar year. We are encouraged about the early results and the
new organization�s impact on cross-selling and overall improved
revenue growth. In the short term, this change has caused
disruption due to the promotion of many high-performing sales reps
into management jobs, the time to train them in their new roles and
the time necessary to develop their newly hired replacements. The
full benefit of this new organization will be felt as these new
sales representatives come up to speed, which is generally a
6-month to 1-year process.� Mr. Farmer added, �Despite these top
line pressures, we achieved solid growth and delivered earnings
before interest and income taxes of 14.7% of revenue. We continue
to increase our product line and service offerings in all of our
businesses. Revenue growth in our First Aid and Safety, Fire
Protection and Document Management businesses continues to be
strong as we expand our geographic presence.� Share Buyback Program
During the third quarter, Cintas purchased approximately 1.4
million shares of Cintas common stock under an authorized share
buyback program at a cost of $57 million. Since the inception of
this program, the Company has bought back approximately 14.2
million of the outstanding shares, or approximately 8% of the total
shares outstanding at the beginning of the program, at a cost of
approximately $580 million. The Company continues to operate under
this program and has $420 million remaining under its current
authorization. Strong Balance Sheet The Company�s balance sheet
continues to be strong. Despite increased debt levels related to
acquisitions and the share buyback program, debt to total
capitalization as of February 28, 2007, was only 30.1%. Cash and
marketable securities were $157.5 million at the end of the third
quarter. As marketable securities mature, it is the Company�s
intention to use the funds to reduce its outstanding debt under its
commercial paper program, contingent upon other cash needs. Total
shareholders� equity was $2.1 billion. Outlook Mr. Farmer stated,
�Based on our third quarter results and the continuing economic
pressure on our customer base, we are lowering our current year
revenue and earnings guidance. We now estimate that revenue for
fiscal 2007 will be $3.675 to $3.725 billion and earnings per
diluted share will be $2.03 to $2.08. We expect this year will be
another record year at Cintas, which would result in our 38th
consecutive year of growth in sales and earnings. �We continue to
be recognized by our customers and the business community in
general for the services we provide our customers. In fact, we were
recently named the �Most Admired Company� in the diversified
outsourcing industry by FORTUNE magazine. We have consistently
ranked among the top five �Most Admired� organizations in our
industry sector since 2001 and this marks the fourth time we have
topped this prestigious list. We have also been ranked among the
�Best Employers in Canada� by Report on Business magazine in 2007
and were named �Reader�s Choice� as the best uniform supplier to
the food processing industry by Food Processing magazine. This
marks the fifth consecutive year that Cintas received �Golden
Supplier� distinction from food industry professionals.� Mr. Farmer
added, �The accolades that we receive are a direct result of our
employee-partners servicing our customers every day. We are excited
about the future as we continue to expand our role as the
professional services company of choice.� About Cintas
Headquartered in Cincinnati, Cintas Corporation provides highly
specialized services to businesses of all types throughout North
America. Cintas designs, manufactures and implements corporate
identity uniform programs, and provides entrance mats, restroom
supplies, promotional products, first aid and safety products, fire
protection services and document management services for
approximately 700,000 businesses. Cintas is a publicly held company
traded over the Nasdaq Global Select Market under the symbol CTAS,
and is a Nasdaq-100 company and component of the Standard &
Poor�s 500 Index. The Company has achieved 37 consecutive years of
growth in sales and earnings, to date. 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,� �projects,�
�plans,� �expects,� �intends,� �believes,� �seeks,� �could,�
�should,� �may� and �will� or the negative versions thereof and
similar 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. These statements are subject to various
risks, uncertainties and other factors that could cause actual
results to differ from those set forth in or implied by this news
release. Factors that might cause such a difference include, but
are not limited to, the possibility of greater than anticipated
operating costs including energy costs, lower sales volumes, 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,
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, the initiation or outcome of litigation, higher assumed
sourcing or distribution costs of products, the disruption of
operations from catastrophic events, changes in federal and state
tax laws and the reactions of competitors in terms of price and
service. Cintas undertakes no obligation to update any
forward-looking statements to reflect events or circumstances
arising after the date on which they are made. Cintas Corporation
Consolidated Condensed Statements of Income (Unaudited) (In
thousands except per share data) � � � � � � � � � � � � � Three
Months Ended � Nine Months Ended � Feb. 28, 2007 Feb. 28, 2006
(Restated)(a) % Chng. � Feb. 28, 2007 Feb. 28, 2006 (Restated)(a) %
Chng. Revenue: � � � � � � � Rentals $665,647� $631,322� 5.4� �
$2,037,796� $1,890,920� 7.8� Other services 239,751� 205,099� 16.9�
� 705,029� 604,761� 16.6� Total revenue $905,398� $836,421� 8.2� �
$2,742,825� $2,495,681� 9.9� � � � � � � � � Costs and expenses
(income): � � � � � � � Cost of rentals $371,185� $350,655� 5.9� �
$1,129,500� $1,039,738� 8.6� Cost of other services 148,386�
132,796� 11.7� � 445,944� 397,024� 12.3� Selling and administrative
expenses 253,128� 224,420� 12.8� � 745,884� 670,014� 11.3� Interest
income (1,339) (1,925) -30.4� � (4,488) (4,959) -9.5� Interest
expense 11,584� 7,239� 60.0� � 36,499� 22,059� 65.5� Total costs
and expenses $782,944� $713,185� 9.8� � $2,353,339� $2,123,876�
10.8� � � � � � � � � Income before income taxes $122,454�
$123,236� -0.6� � $389,486� $371,805� 4.8� Income taxes 45,727�
46,642� -2.0� � 145,270� 139,950� 3.8� Net income $76,727� $76,594�
0.2� � $244,216� $231,855� 5.3� � � � � � � � � Per share data: � �
� � � � � Basic earnings per share $0.48� $0.46� 4.3� � $1.52�
$1.38� 10.1� Diluted earnings per share $0.48� $0.45� 6.7� � $1.52�
$1.37� 10.9� � � � � � � � � Weighted average number of shares
outstanding 159,311� 168,038� � � 160,144� 168,321� � Diluted
average number of shares outstanding 159,699� 168,599� � � 160,550�
168,915� � � � CINTAS CORPORATION SUPPLEMENTAL DATA � Three Months
Ended � Nine Months Ended � Feb. 28, 2007 Feb. 28, 2006
(Restated)(a) % Chng. � Feb. 28, 2007 Feb. 28, 2006 (Restated)(a) %
Chng. Rentals gross margin 44.2% 44.5% � � 44.7% 45.3% � Other
services gross margin 38.1% 35.3% � � 36.7% 34.4% � Total gross
margin 42.6% 42.2% � � 42.6% 42.4% � Net margin 8.5% 9.2% � � 8.9%
9.3% � � � � � � � � � Depreciation and amortization $44,298�
$40,484� 9.4� � $130,051� $118,144� 10.1� Capital expenditures
$47,315� $31,899� 48.3� � $128,636� $102,080� 26.0� � � � � � � � �
Debt to total capitalization 30.1% 22.6% � � 30.1% 22.6% � � �
RECONCILIATION TO GAAP MEASURES � � � � � � � � � � � � Three
Months Ended � Nine Months Ended � Feb. 28, 2007 Feb. 28, 2006
(Restated)(a) % Chng. � Feb. 28, 2007 Feb. 28, 2006 (Restated)(a) %
Chng. Income before income taxes $122,454� $123,236� -0.6� �
$389,486� $371,805� 4.8� Interest income (1,339) (1,925) -30.4� �
(4,488) (4,959) -9.5� Interest expense 11,584� 7,239� 60.0� �
36,499� 22,059� 65.5� Earnings before interest and taxes $132,699�
$128,550� 3.2� � $421,497� $388,905� 8.4� Cintas Corporation
Consolidated Condensed Balance Sheets (In thousands except share
data) � � � � � Feb. 28, 2007 (Unaudited) May 31, 2006
(Restated)(a) ASSETS � � Current assets: � � Cash and cash
equivalents $31,558� $38,914� Marketable securities 125,935�
202,539� Accounts receivable, net 393,155� 389,905� Inventories,
net 227,083� 198,000� Uniforms and other rental items in service
339,082� 337,487� Prepaid expenses 14,926� 11,163� Total current
assets 1,131,739� 1,178,008� � � � Property and equipment, at cost,
net 900,772� 863,783� � � � Goodwill 1,226,176� 1,136,175� Service
contracts, net 172,842� 179,965� Other assets, net 75,960� 67,306�
� � � � $3,507,489� $3,425,237� � � � LIABILITIES AND SHAREHOLDERS'
EQUITY � � Current liabilities: � � Accounts payable $69,540�
$71,635� Accrued compensation & related liabilities 57,014�
50,134� Accrued liabilities 234,840� 188,927� Income taxes: � �
Current 51,057� 43,694� Deferred 39,506� 51,669� Long-term debt due
within one year 229,139� 4,288� Total current liabilities 681,096�
410,347� � � � Long-term debt due after one year 654,376� 794,454�
� � � Deferred income taxes 115,858� 130,244� � � � Shareholders'
equity: � � Preferred stock, no par value: 100,000 shares
authorized, none outstanding -� -� Common stock, no par value:
425,000,000 shares authorized FY 2007: 172,838,020 shares issued
and 158,640,697 shares outstanding FY 2006: 172,571,083 shares
issued and 163,181,738 shares outstanding 130,389� 120,860� Paid in
capital 44,939� 47,644� Retained earnings 2,443,139� 2,260,917�
Treasury stock FY 2007: 14,197,323 shares; FY 2006: 9,389,345
shares (580,562) (381,613) Other accumulated comprehensive income
18,254� 42,384� Total shareholders' equity 2,056,159� 2,090,192� �
� � � $3,507,489� $3,425,237� Cintas Corporation Consolidated
Condensed Statements of Cash Flows (Unaudited) (In thousands) � � �
� � Nine Months Ended � Feb. 28, 2007 Feb. 28, 2006 (Restated)(a)
Cash flows from operating activities: � � � � � Net income
$244,216� $231,855� � � � Adjustments to reconcile net income to
net cash provided by operating activities: � � Depreciation
100,036� 94,014� Amortization of deferred charges 30,015� 24,130�
Stock-based compensation 2,746� 4,507� Deferred income taxes
(19,062) 7,399� Change in current assets and liabilities, net of
acquisitions of businesses: � � Accounts receivable 911� (14,187)
Inventories (28,176) 11,984� Uniforms and other rental items in
service (1,595) (11,240) Prepaid expenses (3,676) (790) Accounts
payable (2,070) (9,210) Accrued compensation and related
liabilities 6,880� 511� Accrued liabilities (15,511) (32,293) Tax
benefit on exercise of stock options (37) (706) Income taxes
payable 7,400� 4,947� Net cash provided by operating activities
322,077� 310,921� � � � Cash flows from investing activities: � � �
� � Capital expenditures (128,636) (102,080) Proceeds from sale or
redemption of marketable securities 102,871� 74,820� Purchase of
marketable securities (24,901) (11,346) Acquisitions of businesses,
net of cash acquired (135,011) (327,983) Other (16,303) (13,830)
Net cash used in investing activities (201,980) (380,419) � � �
Cash flows from financing activities: � � � � � Proceeds from
issuance of debt 252,460� 173,000� Repayment of debt (167,687)
(7,068) Stock options exercised 9,529� 11,404� Tax benefit on
exercise of stock options 37� 706� Repurchase of common stock
(198,949) (114,170) Other (22,843) 10,473� Net cash (used in)
provided by financing activities (127,453) 74,345� � � � Net
(decrease) increase in cash and cash equivalents (7,356) 4,847�
Cash and cash equivalents at beginning of period 38,914� 43,196�
Cash and cash equivalents at end of period $31,558� $48,043�
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