Cintas Corporation (Nasdaq:CTAS) today reported results
for the third quarter of its fiscal year 2010, which ended on
February 28, 2010. Revenues for the third quarter were $861.8
million and earnings per share were $0.32. Both third quarter
revenues and earnings per share slightly exceeded the top end of
the Company’s previously released guidance issued on February 16,
2010. The third quarter of fiscal year 2010 had one fewer workday
than both last year’s fiscal third quarter and the second quarter
of this fiscal year. When adjusting for the one fewer workday in
this year’s third quarter, revenues were 3.7% less than last year’s
third quarter, an improvement from the 10.2% decline experienced in
our second quarter ending November 30, 2009, versus the prior
year’s second quarter. Revenues were comparable to the first two
quarters of this fiscal year when adjusting for workday
differences.
Scott D. Farmer, Chief Executive Officer, stated, “We are
encouraged that job losses appear to be moderating from what we saw
in calendar year 2009. However, we believe job recovery will
continue to be sluggish and thus our revenues will be slow to
return to prior levels. Despite the weather difficulties and
holiday shut downs during our third quarter, our revenues and
margins met our internal plan.”
Mr. Farmer continued, “Our expectations for our fourth quarter
remain unchanged from our previously released guidance. We expect
revenues to be between $870 and $890 million and earnings per share
to be between $0.30 and $0.34. Our businesses continue to be
profitable, generating positive cash flow. During the third
quarter, we increased cash and marketable securities by over $70
million. With total cash and marketable securities of over $550
million at February 28, 2010, our balance sheet is very strong.
Last week, we paid our annual dividend to our shareholders
amounting to $0.48 per share, an increase from $0.47 paid last
year. We have increased our dividend every year since going public
in 1983.”
Scott Farmer concluded, “We remain confident about the future
because of our strong market share position and balance sheet, and
most importantly, due to the quality and ability of our
employee-partners who have continued their commitment to taking
care of our customers and focusing on managing costs.”
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 approximately 800,000 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.
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 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, 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, changes in
federal and state tax and labor laws and the reactions of
competitors in terms of price and service. 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, 2009
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 Three Months Ended
February 28,2010
November 30,2009
% Chng.
February 28,2009
% Chng. Revenue: Rental uniforms and ancillary
products $ 622,458 $ 643,597 -3.3 $ 674,701 -7.7 Other services
239,354 240,912 -0.6
233,938 2.3 Total revenue $ 861,812 $ 884,509 -2.6 $ 908,639
-5.2 Costs and expenses: Cost of rental uniforms and
ancillary products $ 356,750 $ 363,728 -1.9 $ 379,466 -6.0 Cost of
other services 145,455 150,934 -3.6 152,736 -4.8 Selling and
administrative expenses 275,596 259,406 6.2 257,129 7.2 Legal
settlements, net of insurance proceeds -
4,052 N/A - N/A Operating income
$ 84,011 $ 106,389 -21.0 $ 119,308 -29.6 Interest income
(422 ) (314 ) 34.4 (540 ) -21.9 Interest expense 11,575
12,579 -8.0 12,407 -6.7
Income before income taxes $ 72,858 $ 94,124 -22.6 $ 107,441
-32.2 Income taxes 23,876 36,948
-35.4 35,630 -33.0 Net income $ 48,982
$ 57,176 -14.3 $ 71,811 -31.8 Per share data:
Basic earnings per share $ 0.32 $ 0.37 -13.5 $
0.47 -31.9 Diluted earnings per share $ 0.32 $
0.37 -13.5 $ 0.47 -31.9 Weighted average
number of shares outstanding 152,869 152,866 152,993 Diluted
average number of shares outstanding 152,869 152,866 152,933
Nine Months Ended
February 28,2010
February 28,2009
% Chng. Revenue: Rental uniforms and ancillary
products $ 1,921,693 $ 2,107,528 -8.8 Other services 716,197
788,474 -9.2 Total revenue $ 2,637,890
$ 2,896,002 -8.9 Costs and expenses: Cost of rental uniforms
and ancillary products $ 1,083,407 $ 1,188,370 -8.8 Cost of other
services 442,234 491,112 -10.0 Selling and administrative expenses
799,429 829,032 -3.6 Legal settlements, net of insurance proceeds
23,529 - N/A Operating
income $ 289,291 $ 387,488 -25.3 Interest income (1,095 )
(2,435 ) -55.0 Interest expense 36,192
38,206 -5.3 Income before income taxes $ 254,194 $
351,717 -27.7 Income taxes 94,052
129,432 -27.3 Net income $ 160,142 $ 222,285
-28.0 Per share data: Basic earnings per share $ 1.04
$ 1.45 -28.3 Diluted earnings per share $ 1.04
$ 1.45 -28.3 Weighted average number of
shares outstanding 152,854 152,790 Diluted average number of shares
outstanding 152,854 152,790
CINTAS CORPORATION
SUPPLEMENTAL DATA Three Months
Ended Three Months Ended
February 28,2010
November 30,2009
February 28,2009
Rental uniforms and ancillary products gross margin 42.7 % 43.5 %
43.8 % Other services gross margin 39.2 % 37.3 % 34.7 % Total gross
margin 41.7 % 41.8 % 41.4 % Net margin 5.7 % 6.5 % 7.9 % Net
margin, excluding charges 5.7 % 6.7 % 7.9 % Depreciation and
amortization $ 47,973 $ 47,562 $ 50,248 Capital expenditures $
30,836 $ 23,273 $ 36,826 Debt to total capitalization 24.1 %
24.0 % 25.3 %
Nine Months Ended
February 28,2010
February 28,2009
Rental uniforms and ancillary products gross margin 43.6 % 43.6 %
Other services gross margin 38.3 % 37.7 % Total gross margin 42.2 %
42.0 % Net margin 6.1 % 7.7 % Net margin, excluding charges 6.6 %
7.7 % Depreciation and amortization $ 144,440 $ 150,142
Capital expenditures $ 78,928 $ 132,783 Debt to total
capitalization 24.1 % 25.3 %
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 operating results, net earnings and earnings per share
adjusted to exclude certain costs, expenses and gains and losses.
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.
Management believes earnings per diluted share excluding the
legal settlement charge provides investors pertinent information
given the one-time nature of these charges.
Three Months Ended Three Months Ended
February 28,2010
November 30,2009
% Chng.
February 28,2009
% Chng. Income before income taxes $ 72,858 $
94,124 -22.6 $ 107,441 -32.2 Excluding: Legal settlements,
net of insurance proceeds - 4,052 -
Total charges $ - $ 4,052 $ - Income before income
taxes, excluding charges $ 72,858 $ 98,176 -25.8 $ 107,441 -32.2
Income taxes, excluding charges 23,876 38,517
35,630 Net income, excluding charges $ 48,982 $
59,659 -17.9 $ 71,811 -31.8 Per share data: Earnings per
diluted share, excluding charges $ 0.32 $ 0.39 -17.9 $ 0.47
-31.9
Nine Months Ended
February 28,2010
February 28,2009
% Chng. Income before income taxes $ 254,194 $
351,717 -27.7 Excluding: Legal settlements, net of insurance
proceeds 23,529 - Total charges $
23,529 $ - Income before income taxes, excluding charges $
277,723 $ 351,717 -21.0 Income taxes, excluding charges
102,758 129,432 Net income, excluding charges $
174,965 $ 222,285 -21.3 Per share data: Earnings per
diluted share, excluding charges $ 1.14 $ 1.45 -21.4
Computation of Free Cash Flow Nine
Months Ended February 28, 2010 2009 Net Cash Provided
by Operations $ 429,189 $ 339,719 Capital Expenditures $
(78,928 ) $ (132,783 ) Free Cash Flow $ 350,261 $
206,936
Note:
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.
SUPPLEMENTAL SEGMENT DATA
RentalUniforms
andAncillaryProducts
Uniform
DirectSales
First Aid,Safety
andFireProtection
DocumentManagement
Corporate Total For the three months
ended February 28, 2010 Revenue
$ 622,458 $ 94,428 $ 79,210 $ 65,716 $ - $ 861,812 Gross margin $
265,708 $ 27,915 $ 31,322 $ 34,662 $ - $ 359,607 Selling and
administrative expenses $ 201,389 $ 19,707 $ 29,260 $ 25,240 $ - $
275,596 Interest income $ - $ - $ - $ - $ (422 ) $ (422 ) Interest
expense $ - $ - $ - $ - $ 11,575 $ 11,575 Income (loss) before
income taxes $ 64,319 $ 8,208 $ 2,062 $ 9,422 $ (11,153 ) $ 72,858
For the three months ended November 30, 2009 Revenue $
643,597 $ 99,434 $ 81,557 $ 59,921 $ - $ 884,509 Gross margin $
279,869 $ 29,182 $ 30,560 $ 30,236 $ - $ 369,847 Selling and
administrative expenses $ 187,988 $ 18,707 $ 27,542 $ 25,169 $ - $
259,406 Legal settlements, net of insurance proceeds $ - $ - $ - $
- $ 4,052 $ 4,052 Interest income $ - $ - $ - $ - $ (314 ) $ (314 )
Interest expense $ - $ - $ - $ - $ 12,579 $ 12,579 Income (loss)
before income taxes $ 91,881 $ 10,475 $ 3,018 $ 5,067 $ (16,317 ) $
94,124 For the three months ended February 28, 2009 Revenue
$ 674,701 $ 97,010 $ 86,037 $ 50,891 $ - $ 908,639 Gross margin $
295,235 $ 23,905 $ 33,109 $ 24,188 $ - $ 376,437 Selling and
administrative expenses $ 184,788 $ 23,102 $ 28,968 $ 20,271 $ - $
257,129 Interest income $ - $ - $ - $ - $ (540 ) $ (540 ) Interest
expense $ - $ - $ - $ - $ 12,407 $ 12,407 Income (loss) before
income taxes $ 110,447 $ 803 $ 4,141 $ 3,917 $ (11,867 ) $ 107,441
For the nine months ended February 28, 2010 Revenue $
1,921,693 $ 283,163 $ 250,768 $ 182,266 $ - $ 2,637,890 Gross
margin $ 838,286 $ 84,342 $ 97,144 $ 92,477 $ - $ 1,112,249 Selling
and administrative expenses $ 579,633 $ 57,570 $ 86,277 $ 75,949 $
- $ 799,429 Legal settlements, net of insurance proceeds $ - $ - $
- $ - $ 23,529 $ 23,529 Interest income $ - $ - $ - $ - $ (1,095 )
$ (1,095 ) Interest expense $ - $ - $ - $ - $ 36,192 $ 36,192
Income (loss) before income taxes $ 258,653 $ 26,772 $ 10,867 $
16,528 $ (58,626 ) $ 254,194 Assets $ 2,427,309 $ 158,229 $ 326,496
$ 495,779 $ 552,096 $ 3,959,909 For the nine months ended
February 28, 2009 Revenue $ 2,107,528 $ 334,528 $ 295,059 $ 158,887
$ - $ 2,896,002 Gross margin $ 919,158 $ 98,133 $ 117,675 $ 81,554
$ - $ 1,216,520 Selling and administrative expenses $ 593,282 $
76,090 $ 94,516 $ 65,144 $ - $ 829,032 Interest income $ - $ - $ -
$ - $ (2,435 ) $ (2,435 ) Interest expense $ - $ - $ - $ - $ 38,206
$ 38,206 Income (loss) before income taxes $ 325,876 $ 22,043 $
23,159 $ 16,410 $ (35,771 ) $ 351,717 Assets $ 2,595,144 $ 165,976
$ 338,509 $ 467,911 $ 151,904 $ 3,719,444
Cintas
Corporation Consolidated Balance Sheets (In thousands
except share data)
ASSETS
February 28,2010
May 31,2009
(Unaudited) Current assets: Cash & cash equivalents $
406,503 $ 129,745 Marketable securities 145,593 120,393 Accounts
receivable, net 356,453 357,678 Inventories, net 167,814 202,351
Uniforms and other rental items in service 321,964 335,447 Income
taxes, current 16,088 25,512 Deferred tax asset 68,165 66,368
Prepaid expenses 17,421 17,035 Assets held for sale 15,744
15,744 Total current assets 1,515,745
1,270,273 Property and equipment, at cost, net 894,578
914,627 Goodwill 1,352,096 1,331,388 Service contracts, net
109,402 124,330 Other assets, net 88,088
80,333 $ 3,959,909 $ 3,720,951
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities: Accounts payable $ 80,406 $ 69,965
Accrued compensation and related liabilities 55,702 48,414 Accrued
liabilities 302,543 198,488 Long-term debt due within one year
598 598 Total current liabilities
439,249 317,465 Long-term liabilities: Long-term debt due
after one year 785,595 786,058 Deferred income taxes 162,989
149,032 Accrued liabilities 96,888 100,987
Total long-term liabilities 1,045,472 1,036,077
Shareholders' equity: Preferred stock, no par value: - - 100,000
shares authorized, none outstanding Common stock, no par value:
132,058 129,215 425,000,000 shares authorized FY10: 173,207,493
issued and 152,869,848 outstanding FY09: 173,085,926 issued and
152,790,170 outstanding Paid-in capital 80,978 72,364 Retained
earnings 3,024,601 2,938,419 Treasury stock: (798,848 ) (797,888 )
FY10: 20,337,645 shares FY09: 20,295,756 shares Other accumulated
comprehensive income (loss): Foreign currency translation 43,937
33,505 Unrealized loss on derivatives (7,568 ) (8,207 ) Unrealized
gain on available-for-sale securities 30 1
Total shareholders' equity 2,475,188 2,367,409 $
3,959,909 $ 3,720,951
Cintas
Corporation Consolidated Condensed Statement of Cash
Flows (Unaudited) (In thousands)
Nine Months Ended
Cash flows from operating activities:
February 28,2010
February 28,2009
Net income $ 160,142 $ 222,285
Adjustments to reconcile net
income to net cash provided by operating activities:
Depreciation 113,834 118,119 Amortization of deferred charges
30,606 32,023 Stock-based compensation 11,323 8,904 Deferred income
taxes 11,945 9,052
Change in current assets and
liabilities, net of acquisitions of businesses:
Accounts receivable, net 10,785 42,118 Inventories, net 31,900
(16,427 ) Uniforms and other rental items in service 14,223 12,998
Prepaid expenses (240 ) (5,802 ) Accounts payable 15,167 (22,247 )
Accrued compensation and related liabilities 8,414 (3,250 ) Accrued
liabilities and other 11,507 (45,734 ) Income taxes payable
9,583 (12,320 ) Net cash provided by operating
activities 429,189 339,719
Cash flows from investing activities:
Capital expenditures (78,928 ) (132,783 ) Proceeds from sale
or redemption of marketable securities 34,011 92,061 Purchase of
marketable securities and investments (69,819 ) (94,985 )
Acquisitions of businesses, net of cash acquired (41,375 ) (29,381
) Other 3,804 (428 ) Net cash used in
investing activities (152,307 ) (165,516 )
Cash flows from financing activities:
Proceeds from issuance of debt - 7,500 Repayment of debt
(464 ) (164,510 ) Exercise of stock-based compensation awards 2,843
- Repurchase of common stock (960 ) (25,847 ) Other (3,237 )
736 Net cash used in financing activities
(1,818 ) (182,121 ) Effect of exchange rate changes on cash
and cash equivalents 1,694 (4,055 ) Net increase (decrease)
in cash and cash equivalents 276,758 (11,973 ) Cash and cash
equivalents at beginning of period 129,745
66,224 Cash and cash equivalents at end of period $
406,503 $ 54,251
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