DOW JONES NEWSWIRES
Cintas Corp.'s (CTAS) fiscal third-quarter net income fell 12%
as demand from businesses slackened, sending revenue below
expectations and leading the company to cut 9% of its work
force.
The provider of uniforms and business supplies said many
customers continued to cut back on employees and spending, as well
as consolidate the facilities Cintas supplies. The business
environment led Cintas to cut its headcount by more than 9% and to
take other actions to eliminate $50 million in costs during the
quarter.
"We have not seen such a sudden and dramatic change in our
business since we started our company in 1968," said Chief
Executive Scott Farmer.
But a week ago the company bucked recent trends by raising its
dividend when many companies have foregone the payments to build up
cash.
For the quarter ended Feb. 28, Cintas posted earnings of $71.8
million, or 47 cents a share, down from $81.8 million, or 53 cents
a share, a year earlier.
Revenue fell 6.9% to $908.6 million.
Analysts had been expecting earnings of 48 cents a share on
revenue of $959 million.
Gross margin fell to 41.4% from 42.1%.
The company stopped giving guidance in December and again
withheld any speculation on the future.
It said, however, that it generated $340 million in net cash and
noted that it still has a strong balance sheet as it reduced debt
by $84 million in the quarter.
The company cited its free cash flow last week when it raised
the 2009 annual dividend rate by a penny. It has raised the
dividend every year since it started the payments in 1983, it
said.
Cintas also said its strong position had led it to recently buy
a document-management business in Munich as it expands in
Europe.
"We will continue to look for other expansion opportunities for
our document management business, both domestically and abroad,"
Farmer said.
Shares ended Wednesday 3.4% higher at $21.93 and were little
changed in late trading.
-By David Benoit, Dow Jones Newswires; 201-938-2472;
david.benoit@dowjones.com