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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
X EXCHANGE ACT OF 1934 For the Fiscal Year Ended
May 31, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-11399
CINTAS CORPORATION
(Exact name of registrant as specified in its charter)
Incorporated under IRS Employer ID
the Laws of Washington No. 31-1188630
(State or other juris-
diction of incorporation
or organization)
6800 Cintas Boulevard
P.O. Box 625737
Cincinnati, Ohio 45262-5737
Phone: (513) 459-1200
(Address of principal executive offices)
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(Title of class)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing
requirements for the past 90 days.
YES NO
X
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained to the best of the
Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to the Form 10-K. [X]
The aggregate market value of Common Stock held by
nonaffiliates is $1,051,726,615, based on a closing price
of $38.75 on August 11, 1995. As of August 11, 1995,
47,037,905 shares of no par value Common Stock were issued
and outstanding.
Documents Incorporated by Reference
Portions of the Registrant's Annual Report to Shareholders
for 1995 furnished to the Commission pursuant to Rule 14a-3(b) and portions
of the Registrant's Proxy Statement to be
filed with the Commission for its 1995 annual meeting are
incorporated by reference in Parts I, II and III as
specified.
Page 1 of 37 Pages
CINTAS CORPORATION
INDEX TO ANNUAL REPORT
ON FORM 10-K
Page
Part I
Item 1 - Business 3
Item 2 - Properties 4
Item 3 - Legal Proceedings 6
Item 4 - Submission of Matters to a Vote
of Security Holders 6
Part II
Item 5 - Market for Registrant's Common
Equity and Related Stockholder Matters 6
Item 6 - Selected Financial Data 6
Item 7 - Management's Discussion and Analysis
of Financial Condition and Results
of Operations 6
Item 8 - Financial Statements and
Supplementary Data 7
Item 9 - Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 7
Part III
Item 10 - Directors and Executive Officers
of the Registrant 7
Item 11 - Executive Compensation 7
Item 12 - Security Ownership of Certain
Beneficial Owners and Management 7
Item 13 - Certain Relationships and Related
Transactions 7
Part IV
Item 14 - Exhibits, Financial Statement
Schedules and Reports on Form 8-K 7
-2-
PART I
ITEM 1.
BUSINESS
The business discussion found on pages 2 through 9 of the
Registrant's Annual Report to Shareholders for 1995 is
incorporated herein by reference. Information regarding
revenues from products and services, the number of
employees and competition are listed or described below:
The table sets forth the revenues derived from each service
provided by Cintas.
Year Ended May 31
1995 1994 1993
(Amount in Thousands)
Uniform Rental $415,035 $351,495 $307,904
Uniform Sales 69,825 58,294 47,853
Non-Uniform Rentals 124,045 108,360 92,368
Other 6,193 5,067 4,597
$615,098 $523,216 $452,722
The Company began business in 1929 under Ohio law and
changed its state of incorporation to Washington in 1986.
At May 31, 1995, the Company employed 9,724 employees of
which 73 are represented by labor unions. The Company
considers its relationship with its employees to be
satisfactory.
Cintas provides a highly specialized service to businesses
of all types - from small service companies to major
corporations that employ thousands of people. The Company
designs, manufactures and implements corporate identity
uniform programs throughout the United States.
The rental markets served by the Company are highly
fragmented and competition for this business varies at each
of the Company's locations. There are other companies in
the uniform rental business which have financial resources
comparable to those of the Company, although much of the
competition consists of smaller local and regional firms.
In certain instances, local competitors may also have
financial resources comparable to those deployed by the
Company in a particular market.
The service provided to the rental markets served by the
Company principally consists of the rental and cleaning of
uniforms as well as providing on-going uniform upgrades to
each customer. The Company also offers ancillary products
which includes the rental or sale of walk-off mats, fender
covers, towels, mops and linen products.
Due to its diverse customer base and average account size,
the loss of one account would not have a significant
financial impact on the Company.
In its sale of customized uniforms, Cintas competes on a
national basis with other uniform suppliers and
manufacturers, some of which have financial resources
comparable to the Company's.
The Company operates four manufacturing facilities which
provide for a substantial amount of standard uniform needs.
Additional products are purchased from one of several
outside suppliers. Because of the Company's ability to
manufacture much of its own uniform needs, the loss of one
vendor would not have a significant effect on the Company.
In regard to the availability of fabric for the
manufacturing process, the Company purchases fabric from
several suppliers. The Company is not aware of any
circumstances which would hinder its ability to obtain
these materials.
The Company does not anticipate any material capital
expenditures for environmental controls that would have a
material effect on its financial condition. The Company is
not aware of any material non-compliance with environmental
laws.
The Company believes that the primary competitive factors
that affect its operations are quality, service, design and
price, in that order.
-3-
ITEM 2.
PROPERTIES
The Company currently occupies 113 facilities located in
109 cities. The corporate offices provide centrally
located administrative functions including accounting,
finance, marketing and data processing. The Company
operates processing plants that house administrative, sales
and service personnel and the necessary equipment involved
in the cleaning of uniforms and bulk items. Branch
operations provide administrative, sales and service
functions. Cintas operates two distribution facilities and
has four manufacturing plants, two of which produce uniform
trousers and two producing uniform shirts. The Company
considers the facilities it operates to be adequate for
their intended use. The Company owns or leases 2,384
vehicles.
The following chart provides additional information
concerning Cintas' facilities:
Location Type of Facility
Cincinnati, Ohio Corporate Offices, National
Account Division,Distribution
Center
Akron, Ohio Processing Plant
Ashland, Kentucky Processing Plant
Atlanta, Georgia Processing Plant
Augusta, Georgia Processing Plant
Austin, Texas Processing Plant
Baltimore, Maryland Processing Plant
Baton Rouge, Louisiana Processing Plant
Beaumont, Texas Processing Plant
Birmingham, Alabama Branch*
Boston, Massachusetts Processing Plant
Brownsville, Texas Branch*
Buffalo, New York Processing Plant
Charlotte, North Carolina Branch*
Chattanooga, Tennessee Branch*
Chicago (South), Illinois Processing Plant
Chicago (North), Illinois Processing Plant
Cincinnati, Ohio Processing Plant
Clay City, Kentucky Manufacturing Facility*
Cleveland (West), Ohio Processing Plant
Cleveland (East), Ohio Processing Plant
Colorado Springs, Colorado Branch*
Columbia, South Carolina Processing Plant*
Columbus, Ohio Processing Plant
Corpus Christi, Texas Branch*
Dallas, Texas Processing Plant
Dayton, Ohio Processing Plant
Decatur, Georgia Processing Plant
Denver, Colorado Processing Plant*
Detroit, Michigan Processing Plant
Evansville, Indiana Branch*
Everett, Washington Branch
Flint, Michigan Branch*
Fort Smith, Arkansas Processing Plant*
Fort Wayne, Indiana Branch*
Grand Rapids, Michigan Branch*
Greenville, South Carolina Processing Plant
Greenwood, Mississippi Branch*
Gulfport, Mississippi Branch*
Hammond, Louisiana Branch
Harrison, Arkansas Branch*
Houston, Texas Processing Plant
Indianapolis, Indiana Branch*
Jackson, Mississippi Branch*
-4-
Jacksonville, Florida Branch*
Kansas City, Kansas Processing Plant
Knoxville, Tennessee Branch*
Lafayette, Louisiana Branch
Lake Charles, Louisiana Processing Plant
Laredo, Texas Branch*
Las Vegas, Nevada Processing Plant
Lexington, Kentucky Processing Plant
Little Rock, Arkansas Branch*
Long Island, New York Branch*
Los Angeles, California Processing Plant
Louisville, Kentucky Processing Plant
Lufkin, Texas Branch
Madison, Alabama Branch*
Madison, Wisconsin Processing Plant
Memphis, Tennessee Branch*
Miami, Florida Processing Plant
Milwaukee, Wisconsin Branch*
Minneapolis, Minnesota Processing Plant*
Mobile, Alabama Branch*
Mt. Vernon, Kentucky Manufacturing Facility*
Nashville, Tennessee Processing Plant
New Haven, Connecticut Processing Plant
New Orleans, Louisiana Processing Plant
Oklahoma City, Oklahoma Processing Plant
Orange, California Branch*
Orlando, Florida Processing Plant
Owingsville, Kentucky Manufacturing Facility*
Perry, Kentucky Manufacturing Facility*
Philadelphia, Pennsylvania Processing Plant
Phoenix, Arizona Processing Plant
Piscataway, New Jersey Processing Plant
Pittsburgh, Pennsylvania Processing Plant
Portland, Maine Branch
Portland, Oregon Processing Plant
Raleigh-Durham, North Carolina Branch*
Reno, Nevada Distribution Center*
Richmond, Virginia Processing Plant
Sacramento, California Branch*
San Angelo, Texas Branch*
San Antonio, Texas Processing Plant
San Diego, California Processing Plant
Sandusky, Ohio Branch*
San Francisco(West), California Branch*
San Francisco (East), California Processing Plant*
San Jose, California Processing Plant
Seattle, Washington Processing Plant*
Shreveport, Louisiana Processing Plant
Springdale, Arkansas Processing Plant
Springfield, Missouri Branch*
St. Louis, Missouri Processing Plant*
Tacoma, Washington Branch*
Tampa, Florida Processing Plant
Thibodaux, Louisiana Processing Plant
Toronto, Ontario (Canada) Processing Plant
Etobicoke, Ontario (Canada) Processing Plant
Tulsa, Oklahoma Processing Plant
Tuscaloosa, Alabama Processing Plant
Tyler, Texas Branch*
Victoria, Texas Processing Plant
Vidalia, Georgia Processing Plant
Virginia Beach, Virginia Branch*
-5-
Walden, New York Branch*
Washington, D.C. Processing Plant
Westland, Michigan Processing Plant
West Palm Beach, Florida Branch*
Wichita, Kansas Branch*
Winston-Salem, North Carolina Processing Plant
Youngstown, Ohio Branch*
*Leased for various terms ranging from monthly to 2019.
The Company expects that it will be able to renew its
leases on satisfactory terms. All other properties are
owned.
ITEM 3.
LEGAL PROCEEDINGS
In December 1992, the Company was served with an
"Imminent and Substantial Endangerment and Remedial Action
Order" (the "Order") by the California Department of Toxic
Substances Control relating to the facility leased by the
Company in San Leandro, California. The Order requires
Cintas and three other allegedly responsible parties to
respond to alleged soil and groundwater contamination at
and around the San Leandro facility. Details surrounding
the claim are not yet known, and it is not possible at this
time to estimate the loss or range of loss associated with
the claim. Based on information that has been made
available to the Company, however, it is not believed that
the matter will have a material adverse effect on the
Company's financial condition or results of its operations.
The Company is also a party to incidental litigation
brought in the ordinary course of business, none of which
individually or in the aggregate, is considered to be
material to its operations or financial condition. Cintas
maintains insurance coverage against certain liabilities
that it may incur in its operations from time to time.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None in the fourth quarter of fiscal 1995.
PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
"Market for Registrant's Common Stock and Security
Holders Information" on page 25 of the Registrant's Annual
Report to Shareholders for 1995 is incorporated herein by
reference. Dividend information is incorporated by
reference to the Consolidated Statement of Shareholders'
Equity on page 13. Dividends on the outstanding Common
Stock are paid annually and amounted to $.20 and $.17 per
share in fiscal 1995 and 1994, respectively.
ITEM 6.
SELECTED FINANCIAL DATA
The "Eleven Year Financial Summary" on page 10 of the
Registrant's Annual Report to Shareholders for 1995 is
incorporated herein by reference.
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" commencing on page 22
of the Registrant's Annual Report to Shareholders for 1995
is incorporated herein by reference.
-6-
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Financial Statements of the Registrant
shown on pages 11 through 21 of its Annual Report to
Shareholders for 1995 are incorporated herein by reference:
Consolidated Balance Sheets as of May 31, 1995 and 1994
Consolidated Statements of Income for the years ended
May 31, 1995, 1994 and 1993
Consolidated Statements of Shareholders' Equity for the
years ended May 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years
ended May 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Report of Independent Auditors
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
Items 10., 11., 12., and 13. of Part III are
incorporated by reference to the Registrant's Proxy
Statement for its 1995 Annual Shareholders' Meeting to be
filed with the Commission pursuant to Regulation 14A.
PART IV
ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM
8-K
(a) (1) Financial Statements. All financial
statements required to be filed by Item 8. of this Form and
included in this report have been listed previously on page
7. No additional financial statements are being filed
since the requirements for paragraph (d) under Item 14 are
not applicable to the Company.
(a) (2) Financial Statement Schedule:
For each of the three years in the period ended May 31,
1995.
Schedule II: Valuation and Qualifying Accounts and
Reserves.
All other schedules are omitted because they are not
applicable, or not required, or because the required
information is included in the Consolidated Financial
Statements or Notes thereto.
-7-
(a) (3) Exhibits.
Exhibit
Number Description of Exhibit Filing Status
3.1 Restated Articles of Incorporation (1)
3.3 Bylaws (1)
10.1 Incentive Stock Option Plan (2)
10.2 Partners' Plan, as Amended (3)
10.3 1990 Directors' Stock Option Plan (4)
10.4 1992 Employee Stock Option Plan,
as Amended (5)
10.5 1994 Directors' Stock Option Plan (6)
11 Statement re computation of filed herewith
per share earnings
13 1995 Annual Report to Shareholders filed herewith
21 Subsidiaries of the Registrant filed herewith
23 Consent of Independent Auditors filed herewith
(1) Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended May 31, 1989.
(2) Incorporated by reference to Registration Statement
No. 33-23228 on Form S-8 filed under the Securities Act of
1933.
(3) Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended May 31, 1993, and
the Company's Registration Statement No. 33-56663 on Form
S-8 filed under the Securities Act of 1933.
(4) Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended May 31, 1991.
(5) Incorporated by reference to the Company's Proxy
Statement for its 1995 Annual Shareholders' Meeting.
(6) Incorporated by reference to the Company's Proxy
Statement for its 1994 Annual Shareholders' Meeting.
-8-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CINTAS CORPORATION
DATE SIGNED: August 22, 1995 /s/ Robert J. Kohlhepp
By:Robert J. Kohlhepp
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed by the following
persons on behalf of the Registrant and in the capacities
and on the dates indicated.
Signature Capacity Date
/s/ Richard T. Farmer Chairman of the Board
Richard T. Farmer of Directors August 22, 1995
/s/ Robert J. Kohlhepp President, Chief Executive
Robert J. Kohlhepp Officer and Director August 22, 1995
/s/ Scott D. Farmer Vice President and Director August 22, 1995
Scott D. Farmer
/s/ James J. Gardner Director August 22, 1995
James J. Gardner
/s/ Donald P. Klekamp Director August 22, 1995
Donald P. Klekamp
/s/ William C. Gale Vice President-
William C. Gale Finance (Principal
Financial and Accounting
Officer) August 22, 1995
-9-
CINTAS CORPORATION
Schedule II - Valuation and Qualifying Accounts
and Reserves
(In Thousands)
Additions
(1) (2)
Balance At Charged to Charged to
Beginning Costs and Other
Description of Year Expenses Accounts
May 31, 1993:
Allowance for Doubtful $ 1,375 $ 1,448 $ 407
Accounts
Accumulated Amortization
of Customer Service Contracts 17,659 4,574
Accumulated Amortization of
Non-Compete Agreements 14,101 4,228
Accumulated Amortization of Debt
Issue and Organization Costs 382 181
Accumulated Amortization of
Goodwill -0- 92
$32,142 $ 9,075
Balance
At End of
Description Deductions Year
May 31, 1993:
Allowance for Doubtful Accounts $ 1,254 (A) $ 1,976
Accumulated Amortization of
Customer Service Contracts 4,184 (B) 18,049
Accumulated Amortization of
Non-Compete Agreements 4,574 (B) 13,755
Accumulated Amortization of Debt
Issue and Organization Costs 110 (B) 453
Accumulated Amortization of
Goodwill 92
$ 8,868 $32,349
Additions
(1) (2)
Balance At Charged to Charged to
Beginning Costs and Other
Description of Year Expenses Accounts
May 31, 1994:
Allowance for Doubtful
Accounts $ 1,976 $ 998 $209
Accumulated Amortization
of Customer Service Contracts 18,049 5,608
Accumulated Amortization of
Non-Compete Agreements &
Consulting 13,755 4,706
Accumulated Amortization of Debt
Issue and Organization Costs 453 254
Accumulated Amortization of
Goodwill 92 222
$32,349 $ 10,790
Balance
At End of
Description Deductions Year
May 31, 1994:
Allowance for Doubtful Accounts $ 1,180 (A) $ 2,003
Accumulated Amortization of
Customer Service Contracts 2,134 (B) 21,523
Accumulated Amortization of
Non-Compete Agreements &
Consulting 1,446 (B) 17,015
Accumulated Amortization of Debt
Issue and Organization Costs 284 (B) 423
Accumulated Amortization of
Goodwill 314
$ 3,864 $39,275
-10-
CINTAS CORPORATION
Schedule II - Valuation and Qualifying Accounts and Reserves
(In Thousands)
Additions
(1) (2)
Balance At Charged to Charged to
Beginning Costs and Other
Description of Year Expenses Accounts
May 31, 1995:
Allowance for Doubtful
Accounts $2,003 $1,465 ($325)
Accumulated Amortization
of Customer Service Contracts 21,523 5,967
Accumulated Amortization of
Non-Compete Agreements &
Consulting 17,015 4,675
Accumulated Amortization of Debt
Issue and Organization Costs 423 263
Accumulated Amortization of
Goodwill 314 622
$39,275 $11,527
Balance
At End of
Description Deductions Year
May 31, 1995:
Allowance for Doubtful Accounts $1,114 $2,029
Accumulated Amortization of
Customer Service Contracts 70 (B) 27,420
Accumulated Amortization of
Non-Compete Agreements &
Consulting 1,085 (B) 20,605
Accumulated Amortization of Debt
Issue and Organization Costs 83 (B) 603
Accumulated Amortization of
Goodwill 936
$1,238 $49,564
(A) Uncollectible Accounts Charged-off, Net of Recoveries.
(B) Elimination of Fully Amortized Amounts.
-11-
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
A. Weighted average shares outstanding basis:
Fiscal year ended May 31
1995 1994 1993
Net income $62,743,000 $52,170,000 $44,873,000
Weighted average
shares outstanding 46,891,376 $46,705,656 46,410,860
Earnings per share $1.338 $1.117 $.967
B. Primary basis:
Fiscal year ended May 31
1995 1994 1993
Net income $62,743,000 $52,170,000 $44,873,000
Weighted average
shares outstanding 46,891,376 46,705,656 46,410,860
Plus - net shares to be
issued upon exercise
of dilutive stock options
after applying treasury
stock method 772,338 778,466 899,884
47,663,714 47,484,122 47,310,744
Earnings per share $1.316 $1.099 $.948
-12-
C. Fully diluted basis:
Fiscal year ended May 31
1995 1994 1993
Net income $62,743,000 $52,170,000 $44,873,000
Weighted average
shares outstanding 46,891,376 46,705,656 46,410,860
Plus - net shares to be
issued upon exercise of
dilutive stock options
after applying treasury
stock method 858,738 838,043 902,991
47,750,114 47,543,699 47,313,851
Earnings per share $1.314 $1.097 $.948
Note: Reported earnings per share for each year was based
upon weighted average shares outstanding since neither the
primary nor fully diluted amounts of per share earnings
resulted in a reduction of 3% or more.
-13-
Financial Highlights
Years Ended May 31
(In thousands except per share data)
%
1995 1994 Change
Operating Results
Net revenues $615,098 $523,216 17.6%
Net income 62,743 52,170 20.3%
Return on average equity 18.6% 18.2% 2.2%
Financial Condition
Shareholders' equity $364,344 $309,652 17.7%
Working capital 146,410 129,969 12.6%
Current ratio 2.54:1 2.42:1 5.0%
Per Share Data
Net income $1.34 $1.12 19.6%
Shareholders' equity (book value) 7.75 6.62 17.1%
Dividends 0.20 0.17 17.6%
-14-
To Our Shareholders and Friends:
We are pleased to report that Cintas has achieved record
results for the twenty-sixth consecutive year. All of us
at Cintas are guided by our principle objective which is
"to maximize the long-term value of Cintas for our
shareholders and working partners by exceeding our
customers' expectations". As we pursue that objective, we
constantly uncover new opportunities for continued growth
and exciting opportunities for our employees who we call
"partners".
In addition to the excellent financial progress we achieved
during the year, we are exploring new market niches that
compliment our existing product and delivery systems and
provide current and potential customers with more products
and services. At the same time, we continue to invest in
new technology, both to improve our operational
productivity as well as to better serve our customers by
providing them with services and information that will help
them reduce their costs.
We are in a great business and the opportunities for
continued growth are exciting. We only have 15% of the
served market which, according to industry statistics, is
$3.5 billion. More and more businesses are beginning to
use uniforms for the first time and, therefore, the
business is growing at a significant pace. As a matter of
fact, for the last several years, the majority of our new
customers are businesses that never before had a uniform
service. Cintas has been very successful in converting
these nonusers and, because of our size and geographic
presence, we expect to continue to benefit from this
developing business.
Our prospects for the future are excellent. Now that our
annual revenues exceed $600 million, and we fully expect
them to exceed a billion dollars in a few years, it is time
to make some changes to our organization in order to
prepare for the exciting opportunities we have before us.
Our organization is stronger than it has ever been and we
have the human resources necessary to run a much larger
company.
Beginning in August of 1995, Bob Kohlhepp, our President
and Chief Operating Officer, will take on the additional
responsibilities of Chief Executive Officer. Bob has
served the Company for 28 years in important executive
positions, including Controller, Vice President of Finance
and Treasurer, Executive Vice President and, since 1984,
President and Chief Operating Officer. Bob has been my
closest partner and confidant and has been a key
contributor to the Company's outstanding performance. This
move is part of a long-standing succession plan that has
been in place at Cintas for many years. I will continue to
serve as Chairman of the Board and will remain actively
involved in the business, and concentrate on the overall
corporate strategy, organizational development, marketing
and acquisitions.
In order for Bob to concentrate on his new
responsibilities, Dave Jeanmougin, previously Senior Vice
President - Finance, was promoted to a newly created
position of Senior Vice President, and will be responsible
for manufacturing, distribution, management information
systems and numerous administrative activities. Dave will
also serve as Corporate Secretary. Replacing Dave as Vice
President - Finance and Chief Financial Officer, is Bill
Gale. Bill joined Cintas in April of 1995 after previously
holding various executive financial positions in industry
and public accounting. This new organization structure
will position the Company for continued growth as we
approach the twenty-first century and prepare to run a
company with more than a billion dollars in revenues.
I am also pleased to announce the promotion of Jay Case to
Vice President of our southwestern region. Jay joined
Cintas in 1980 and has served in various management
positions since that time. Most recently, Jay held the
position of General Manager of our Columbus uniform rental
operation. It is comforting to see partners, such as Jay,
who has
-15-
spent his entire career with Cintas, grow and mature to
take over such an important post. This is just one example
of the effectiveness of our management trainee program.
This program is one of our competitive advantages which
enables us to grow at a rapid rate and fill most management
and supervisory positions from within.
During this past fiscal year, another of our executives,
Scott Farmer, was elected to the Board of Directors. He has
rapidly progressed through the Company in his fifteen
years with Cintas, and now serves as President of one of
our largest divisions and Vice President in charge of our
north central operations.
Cintas is positioned to remain the premier company in the
industry. We have excellent financial resources and the
most modern facilities manned by enthusiastic, ownership-driven people.
We will never rest on our past
accomplishments. We pursue the future with a spirit of
positive discontent, a phrase at Cintas which simply means
we are never satisfied -- we are constantly looking for
better ways to serve our customers.
It is a pleasure to offer this special thank you to all of
our partners for their substantial contributions, and we
also thank each shareholder for your continued support and
confidence in Cintas.
Sincerely yours,
Richard T. Farmer
Chairman of the Board
-16-
FISCAL 1995 IN REVIEW
FINANCIAL RESULTS
Cintas achieved sales of $615 million during fiscal 1995,
an 18% increase from last year. Pre-tax income of $101
million increased 18% from $85 million last year, while net
income of $63 million increased 20% over $52 million in
fiscal 1994. Our earnings per share increased 20% to $1.34
per share from $1.12 last year.
TWENTY-SIX YEARS OF RECORD GROWTH
Fiscal 1995 was our Company's twenty-sixth consecutive year
of growth in both sales and profits. During this
twenty-six year period, sales grew at a compound rate of
24% and profits grew at a compound rate of 34%.
GEOGRAPHIC EXPANSION
In our uniform rental operations, we extended our service
to several new markets including St. Louis and Minneapolis.
With a presence in these two important cities, we can now
branch out into contiguous markets in Missouri, Southern
Illinois, Minnesota and Northern Wisconsin. This
geographic coverage also allows us to serve our national
customers on a more efficient and cost-effective basis.
The Company also completed construction of uniform rental
plants in Portland, Oregon; Seattle, Washington; Phoenix,
Arizona; Buffalo, New York and Charlotte, North Carolina.
ACQUISITIONS
Cintas made three key acquisitions during the year. One of
those acquisitions enhanced our market presence in the
southeast Texas area and another added additional volume in
Little Rock, Arkansas and Memphis, Tennessee. In February,
we acquired the remaining 80% ownership of Cadet Uniform
Services, Ltd., based in Toronto, Ontario. Cintas had
owned a 20% interest in the company since fiscal 1991.
Cadet provides Cintas with an excellent opportunity to
expand in the Canadian market. Cadet brings to the Company
annual revenues of approximately $30 million Canadian and
over 3,000 customers served from two state-of-the-art
facilities in Toronto.
MARKET SHARE INCREASE
Each day more than 1.7 million workers go to work wearing a
Cintas uniform. Our base of 150,000 business customers
continues to grow and we now enjoy a national market share
of 15% of the industrial uniform rental industry. The
market continues to expand as many businesses are providing
uniforms for their people for the first time. Fiscal 1995
was the fifth consecutive year in which the majority of our
new business came from companies that never had a uniform
program before. How the public perceives a business, and
how its employees perceive themselves and their company, is
vital to success. Uniforms send a powerful message of
professionalism and competence to customers and employees.
Therefore more and more companies are beginning to use a
uniform service. Cintas is well positioned to take
advantage of this developing business due to our extensive
geographic presence and our marketing expertise. This is a
great opportunity for growth.
-17-
NATIONAL ACCOUNTS
The National Account Division continues to grow at an
exciting pace. Many companies are consolidating their
sources of supply in their quest to reduce costs.
Companies prefer to deal with fewer suppliers to reduce the
activities and costs connected with purchasing and
administration. They are also looking for companies like
Cintas who can provide on-line, paperless ordering, billing
and control systems. This trend is having a positive
impact on Cintas because we have already spent millions of
dollars to develop and perfect these systems to meet our
customers' needs.
CATALOG PROGRAM
Our Catalog Program continues to show healthy growth and a
promising future. By leveraging our inventory and
distribution capabilities, we are able to provide a
valuable service to our customers through the Catalog
Program. This program provides our customers with a
convenient method to purchase shoes, belts, socks, safety
gear, foul weather gear and all the accessories that a
worker might need on the job.
MARKET RESEARCH
We have a first-class Marketing Department. Their primary
focus is to fully understand customer and prospect needs
and expectations so that we can continue to differentiate
ourselves through the development of better service
techniques and products. Each year, more than 20,000
customers are surveyed to monitor our performance on an
ongoing basis. In-person interviews are conducted with
hundreds of uniform wearers and decision makers to evaluate
new product and service concepts.
TRAINING ACTIVITIES
Training is a key element in the development of Cintas
partners. In fiscal 1995, we conducted 42 in-house
seminars covering important management topics such as
corporate culture and quality. We also rolled out an
advanced course in service leadership. Cintas' service
supervisors and managers collectively invested over 10,000
hours in an intense training program to learn and
reinforce concepts on world-class service and exceeding
customers' expectations. These managers are responsible
for the ongoing weekly training of over 1,500 service sales
representatives. Cintas is committed to providing our
partners with the best tools and techniques needed to serve
our customers in the most effective and efficient way
possible.
RESEARCH AND DEVELOPMENT
In fiscal 1995, we created a centralized Research and
Development Group to
spearhead our continuing efforts to improve productivity
and quality. A large part of their effort involves the
development of new technology to use in our operations.
Our new plants have exciting equipment and automation, much
of which was designed in-house by this group. We
continually test new equipment, material handling concepts,
delivery systems and computer software so that we can be
the best-cost producer.
QUALITY PROGRAM
Our people are empowered to meet the needs of our
customers. A few years ago, we implemented a new approach
to total quality management called "Continuous Process
Improvement (CPI)". We are never satisfied with the
"status quo". With the tools of CPI, we question every
step taken in performing our jobs and we identify
opportunities to improve productivity. We then measure our
progress through an extensive customer feedback system.
-18-
THE ULTIMATE COMPETITIVE ADVANTAGE
Our culture attracts a certain kind of people -- people who
have common beliefs and values --working together as a team
-- and these people have set new records for twenty-six
years in a row! We are more committed and enthusiastic
and, just like a sports team, the team with the best
players who are willing to work hard and who have a winning
attitude is the team that wins! This is the ultimate
competitive advantage. Our competitors can copy our
service systems and our sales literature, but not our
culture. It is intangible, rare and difficult to emulate.
It is amazing to see the power of our Corporate Culture.
"The Spirit is the Difference."
-19-
ELEVEN-YEAR FINANCIAL SUMMARY
Years Ended May 31
(in thousands except per share data)
1985 1986 1987 1988 1989 1990
Net Revenues $125,632 $144,621 $185,101 $228,091 $269,260 $311,776
Net Income 9,446 12,318 14,737 18,550 23,101 27,994
Earnings Per Share 0.23 0.30 0.35 0.44 0.52 0.62
Dividends Per Share 0.02 0.02 0.03 0.04 0.05 0.07
Total Assets 124,960 165,474 194,847 213,958 228,000 274,103
Shareholders'
Equity 61,621 72,961 86,646 104,710 138,079 163,026
Return on Avg.
Equity 16.5% 18.3% 18.5% 19.4% 19.0% 18.6%
Long-Term Debt 37,279 62,797 70,757 65,490 43,303 54,079
10 Year
Compd
1991 1992 1993 1994 1995 Growth
Net Revenues $352,480 $401,563 $452,722 $523,216 $615,098 17.2%
Net Income 31,339 39,195 44,873 52,170 62,743 20.8%
Earnings Per Share 0.69 0.85(a) 0.97 1.12 1.34 19.3%
Dividends Per Share 0.09 0.11 0.14 0.17 0.20 25.9%
Total Assets 326,752 361,261 454,165 501,632 596,181 16.9%
Shareholders'
Equity 191,124 225,864 264,914 309,652 364,344 19.4%
Return on Avg.
Equity 17.7% 18.8% 18.3% 18.2% 18.6%
Long-Term Debt 68,974 67,790 103,611 84,184 120,275
(a) Includes earnings of $.06 per share due to the adoption of SFAS
No. 96.
Note: Results prior to October 1, 1991, have been restated to
include Rental Uniform Service of Greenville, S.C., Inc.
-20-
Cintas Corporation
CONSOLIDATED STATEMENTS OF INCOME
Year Ended May 31
(In thousands except per share data)
1995 1994 1993
Revenues:
Net rentals $545,267 $464,922 $404,869
Net sales 69,831 58,294 47,853
615,098 523,216 452,722
Cost and expenses (income):
Cost of rentals 312,313 264,477 228,744
Cost of sales 58,952 48,868 40,910
Selling and administrative
expenses 137,675 119,446 106,143
Interest income (2,148) (1,690) (1,424)
Interest expense 7,345 6,664 7,046
514,137 437,765 381,419
Income before income taxes 100,961 85,451 71,303
Income taxes 38,218 33,281 26,430
Net income $62,743 $52,170 $44,873
Weighted average number of
shares outstanding 46,891 46,706 46,411
Earnings per share $1.34 $1.12 $0.97
Dividends per share $0.20 $0.17 $0.14
See accompanying notes.
-21-
Cintas Corporation
CONSOLIDATED BALANCE SHEETS
May 31
(In thousands except share data)
1995 1994
Assets
Current assets:
Cash and cash equivalents $6,685 $8,449
Marketable securities 38,797 52,333
Accounts receivable, principally
trade, less allowance of $2,029
and $2,003, respectively 69,032 56,347
Inventories 36,883 29,059
Uniforms and other rental items
in service 88,670 74,132
Prepaid expenses 1,355 1,133
Total current assets 241,422 221,453
Property, plant and equipment, at
cost, net 227,997 192,503
Other assets 126,762 87,676
$596,181 $501,632
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $17,265 $18,795
Accrued liabilities 42,158 33,488
Income taxes:
Current 2,191 2,300
Deferred 23,368 21,159
Long-term debt due within one year 10,030 15,742
Total current liabilities 95,012 91,484
Long-term debt due after one year 120,275 84,184
Deferred income taxes 16,550 16,312
Shareholders' equity:
Preferred stock, no par value;
100,000 shares authorized,
none outstanding --- ---
Common stock, no par value;
120,000,000 shares authorized,
47,005,340 and 46,801,173 shares
issued and outstanding,
respectively 42,035 40,939
Retained earnings 323,284 269,939
Cumulative translation adjustment (975) (1,226)
Total shareholders' equity 364,344 309,652
$596,181 $501,632
See accompanying notes.
-22-
Cintas Corporation
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Year Ended May 31
(In thousands)
Common Stock Total
Cumulative Share-
Retained Translation holders'
Shares Amount Earnings Adjustment Equity
Balance at May 31, 1992 46,190 $38,425 $187,745 $(306) $225,864
Net income --- --- 44,873 --- 44,873
Dividends --- --- (6,519) --- (6,519)
Effects of acquisitions 180 401 (377) --- 24
Stock options exercised
net of shares surrendered 209 288 --- --- 288
Tax benefit resulting from
exercise of employee
stock options --- 755 --- --- 755
Translation adjustment --- --- --- (371) (371)
Balance at May 31, 1993 46,579 39,869 225,722 (677) 264,914
Net income --- --- 52,170 --- 52,170
Dividends --- --- (7,953) --- (7,953)
Stock options exercised
net of shares
surrendered 222 750 --- --- 750
Tax benefit resulting
from exercise of employee
stock options --- 320 --- --- 320
Translation adjustment --- --- --- (549) (549)
Balance at May 31, 1994 46,801 40,939 269,939 (1,226) 309,652
Net income --- --- 62,743 --- 62,743
Dividends --- --- (9,398) --- (9,398)
Stock options exercised
net of shares
surrendered 204 906 --- --- 906
Tax benefit resulting
from exercise of employee
stock options --- 190 --- --- 190
Translation adjustment --- --- --- 251 251
Balance at May 31, 1995 47,005 $42,035 $323,284 $(975) $364,344
See accompanying notes.
-23-
Cintas Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended May 31
(In thousands)
1995 1994 1993
Cash flows from operating activities:
Net income $62,743 $52,170 $44,873
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 26,179 24,271 23,149
Amortization of deferred charges 11,527 10,789 9,075
Provision for losses on accounts
receivable 1,165 998 1,448
Equity in earnings of affiliate (428) (347) (159)
Change in current assets and liabilities:
Accounts receivable (11,345) (8,053) (5,768)
Inventories (21,400) (19,777) (7,223)
Prepaid expenses (3) 503 (479)
Accounts payable (2,162) (1,842) 5,770
Accrued liabilities 6,628 4,850 4,879
Income taxes payable 184 684 (1,601)
Deferred income taxes 2,162 7,184 7,644
Net cash provided by operating activities 75,250 71,430 81,608
Cash flows from investing activities:
Proceeds from sale of property,
plant and equipment 2,333 1,326 274
Capital expenditures (58,879) (37,164) (29,699)
Change in other assets 1,126 (2,753) (5,325)
Proceeds from sale or redemption of
marketable securities 196,204 47,053 20,664
Purchase of marketable securities (182,668) (58,609) (47,286)
Acquisitions of businesses, net of
cash acquired (50,095) (11,796) (42,384)
Net cash used by investing activities (91,979) (61,943)(103,756)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 52,208 63 38,384
Repayment of long-term debt (21,829) (8,410) (5,726)
Issuance of common stock 906 750 689
Tax benefit resulting from exercise of
employee stock options 190 320 755
Repurchase common stock (7,112) -- --
Dividends paid (9,398) (7,953) (6,519)
Net cash provided by (used in) financing
activities 14,965 (15,230) 27,583
Net (decrease) increase in cash and cash
equivalents (2,620) (5,743) 5,435
Cash and cash equivalents at beginning
of year 8,449 14,192 8,757
Cash and cash equivalents at end of year $5,829 $8,449 $14,192
See accompanying notes.
-24-
CINTAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except per share and share data)
1. SIGNIFICANT ACCOUNTING POLICIES
Business description. Cintas provides a highly
specialized service to businesses of all types--from small
service companies to major corporations that employ
thousands of people. The Company designs, manufactures and
implements corporate identity uniform programs which it
rents or sells to customers throughout the United States
and Canada.
Principles of consolidation. The consolidated financial
statements include the accounts of Cintas Corporation and
its subsidiaries, all of which are wholly-owned.
Intercompany balances and transactions have been
eliminated.
Earnings per share is calculated on the basis of the
weighted average number of shares of common stock
outstanding during the year, including the dilutive effect,
if any, of assumed conversion of common stock equivalents.
Cash flows. For purposes of the statement of cash
flows, the Company considers all highly liquid investments
with a maturity of three months or less, at date of
purchase, to be cash equivalents.
Inventories are valued at the lower of cost (first-in,
first-out) or market. Substantially all inventories
represent finished goods.
Uniforms and other rental items in service are valued at
cost less amortization, calculated using the straight-line
method generally over periods of eight to eighteen months.
Depreciation is calculated using the straight-line
method over the estimated useful lives of the assets.
Other assets consist primarily of service contracts and
non-compete or consulting agreements obtained through the
acquisition of businesses, which are amortized by use of
the straight-line method over the estimated lives of the
agreements which are generally five to ten years and
goodwill which is amortized using the straight-line method
over forty years.
2. MARKETABLE SECURITIES
All marketable equity securities and debt securities are
classified as available-for-sale. The amortized cost of
debt securities in this category is adjusted for
amortization of premiums and accretion of discounts to
maturity. Such amortization is included in investment
income. Realized gains and losses and declines in value
determined to be other-than-temporary on available-for-sale
securities are included in investment income. The cost of
the securities sold is based on the specific identification
method. Interest and dividends on securities classified as
available-for-sale are included in investment income.
The following is a summary of marketable securities at May
31, 1995:
Estimated
Cost Fair Value
Obligations of state and political
subdivisions $26,434 $26,130
U.S. Treasury securities and
obligations of U.S. government
agencies 5,306 5,317
Other debt securities 7,057 7,036
$38,797 $38,483
The gross realized gains on sales of available-for-sale
securities totaled $154, $42 and $6, for the years ended
May 31, 1995, 1994 and 1993, and the gross realized losses
totaled $203, $78 and $29, respectively. Net unrealized
losses are $314 at May 31, 1995. Marketable securities are
carried at cost which approximates market.
The amortized cost and estimated fair value of debt and
marketable equity securities at May 31, 1995, by
contractual maturity are shown below. Expected maturities
will differ from contractual maturities because the issuers
of the securities may have the right to prepay the
obligations without prepayment penalties.
-25-
Estimated
Cost Fair Value
Due in one year or less $23,371 $23,300
Due after one year through three
years 8,804 8,704
Due after three years 6,622 6,479
$38,797 $38,483
3. PROPERTY, PLANT AND EQUIPMENT 1995 1994
Land $22,526 $19,834
Buildings and improvements 119,109 108,268
Equipment 175,858 152,441
Leasehold improvements 1,035 931
Construction in progress 14,862 6,928
333,390 288,402
Less accumulated depreciation 105,393 95,899
$227,997 $192,503
1995 1994
4. OTHER ASSETS
Goodwill $56,562 $8,875
Service contracts 64,171 58,263
Non-compete and consulting agreements 48,452 46,591
169,185 113,729
Less accumulated amortization 49,564 39,275
119,621 74,454
Other 7,141 13,222
$126,762 $87,676
5. LONG-TERM DEBT 1995 1994
Secured term notes payable due through
2003 at an average rate of 9.14% $39,756 $19,000
Unsecured term notes payable due through
2002 at an average rate of 7.61% 40,000 20,000
Unsecured notes due through 2000 at an
average rate of 6.51% 29,819 41,039
Unsecured revolving note payable due 2000
at a rate of 6.63% 10,000 --
Industrial development revenue bonds due
through 2006 at an average rate of 4.17% 8,236 16,112
Other long-term obligations 2,494 3,775
130,305 99,926
Less amounts due within one year 10,030 15,742
$120,275 $84,184
Debt in the amount of $50,272 is secured by assets with
a carrying value of $45,935 at May 31, 1995, and letters of
credit in the amount of $12,175. Maturities of long-term
debt during the five years ending May 31, 2000 are:
$10,030, $29,265, $6,613, $6,398 and $24,385, respectively.
At May 31, 1995, the fair value of the
-26-
Company's outstanding debt approximates its carrying value.
Interest expense is net of capitalization of $638, $449
and $415 for the years ended May 31, 1995, 1994 and 1993,
respectively. Interest paid, net of amount capitalized,
was $7,453, $7,008 and $6,917 for the years ended May 31,
1995, 1994 and 1993, respectively.
6. LEASES
The Company conducts certain operations from leased
facilities and leases certain equipment. Most leases
contain renewal options for periods from one to ten years.
The lease agreements provide for increases in rentals if
the options are exercised based on increases in certain
price level factors or prearranged increases. The minimum
rental payments for the five years ending May 31, 2000 are:
$3,357, $2,772, $2,501, $2,151 and $2,029, respectively.
Rent expense under operating leases during the years ended
May 31, 1995, 1994 and 1993 was approximately $5,369,
$4,258 and $3,823, respectively.
7. INCOME TAXES 1995 1994 1993
Income taxes consist of the following
components:
Current:
Federal $29,787 $21,900 $16,002
State and local 5,389 4,197 3,485
35,176 26,097 19,487
Deferred 3,042 7,184 6,943
$38,218 $33,281 $26,430
Reconciliation of income tax expense
using the statutory rate and actual
income tax expense is as follows:
Income taxes at the U.S. federal
statutory rate $35,336 $29,908 $24,243
State and local income taxes, net
of federal benefit 3,659 3,412 2,658
Non-taxable income earned (599) (554) (428)
Jobs tax credits (395) (602) (198)
Effect of tax rate changes on tax
liabilities -- 1,064 --
Other 217 53 155
$38,218 $33,281 $26,430
SFAS No. 109, Accounting for Income Taxes, was adopted
by the Company effective June 1, 1993, without restatement
of prior period financial statements or recording of a
cumulative adjustment. The adoption of SFAS No. 109
resulted primarily in the reclassification of certain
deferred tax balances.
The components of deferred income taxes included on the
balance sheets at May 31, 1995, 1994 and 1993, are as
follows:
1995 1994 1993
Deferred tax assets:
Employee benefits $6,450 $4,272 $3,333
Allowance for bad debts and other 6,009 2,667 2,447
12,459 6,939 5,780
Deferred tax liabilities:
In-service inventory 32,627 27,575 22,827
Depreciation 15,104 13,509 11,380
Other 4,646 3,326 1,860
52,377 44,410 36,067
Net deferred tax liability $39,918 $37,471 $30,287
Income taxes paid were $35,362, $29,741 and $20,938 for the
years ended May 31, 1995, 1994 and
-27-
1993, respectively.
8. ACQUISITIONS
On February 13, 1995, the Company acquired 80% of the
outstanding stock of Cadet Uniform Services, Ltd., a
prominent uniform rental company in Toronto, Ontario, for
approximately $41 million which was financed through
borrowings. The purchase increased the Company's ownership
from 20% to 100%. Cadet has annual sales volume of
approximately $22 million.
Information relating to the acquisitions of uniform rental
businesses which were accounted for as purchases is as
follows:
1995 1994 1993
Number of acquisitions 12 8 16
Fair value of assets acquired $52,684 $11,996 $47,264
Liabilities assumed and incurred 2,589 200 4,880
Total cash paid for acquisitions $50,095 $11,796 $42,384
In addition to the acquisitions reflected in the table,
the Company acquired one business in fiscal 1995 by
reissuing 219,765 treasury shares and accounted for the
acquisition as a purchase. The Company acquired one
business in fiscal 1993 in exchange for 180,383 shares of
common stock which was accounted for as a pooling of
interests.
The results of operations from the acquired businesses
are included in the consolidated statements of income from
the dates of acquisition. The unaudited proforma results
of operations for the years ended May 31, 1995 and 1994,
assuming the acquisitions had occurred on June 1 of each
respective year, would be approximately as follows:
1995 1994
Revenues $635,368 $560,702
Net income 64,004 53,434
Earnings per share 1.36 1.14
The unaudited pro forma results of operations are not
necessarily indicative of the actual operating results that
would have occurred had the acquisitions been consummated
on June 1 of each respective year or of future operating
results of the combined companies.
-28-
9. CINTAS PARTNERS' PLAN
The Cintas Partners' Plan (the Plan) is a non-contributory profit
sharing plan and ESOP for the benefit
of Company employees who have completed one year of
service. Contributions to the Plan are determined at the
discretion of the Company. Effective June 1, 1993, the
Company added a defined contribution feature to the Plan
covering substantially all employees. A maximum 20%
matching contribution to the Plan may be made at the
Company's discretion. Total contributions, including the
Company's matching contributions, were $4,956, $4,300 and
$3,700 for the years ended May 31, 1995, 1994 and 1993,
respectively.
10. STOCK OPTIONS
Under a stock option plan adopted by the Company in
fiscal 1993, the Company may grant officers and key
employees incentive stock options and/or non-qualified
stock options to purchase an aggregate of 2,300,000 shares
of the Company's common stock. Options are generally
granted at the fair market value of the underlying common
stock on the date of grant and generally become exercisable
at the rate of 20% per year commencing five years after
grant, so long as the holder remains an employee of the
Company.
The information presented in the following table relates
to incentive stock options granted and outstanding under
either the plan adopted in fiscal 1993, or under a similar
plan which expired in June 1993.
Stock Option
Shares Price Range
Outstanding May 31, 1992
(278,170 shares exercisable) 1,449,324 $2.67-$28.25
Granted 121,950 25.25-28.75
Cancelled (54,120) 3.46-28.25
Exercised (199,678) 2.67-9.42
Outstanding May 31, 1993
(297,654 shares exercisable) 1,317,476 2.67-28.75
Granted 193,750 26.50-27.50
Cancelled (48,710) 5.92-28.25
Exercised (226,682) 2.67-12.17
Outstanding May 31, 1994
(246,551 shares exercisable) 1,235,834 3.46-28.75
Granted 237,200 31.88-38.38
Cancelled (88,950) 5.92-31.88
Exercised (219,515) 3.46-12.17
Outstanding May 31, 1995
(167,109 shares exercisable) 1,164,569 $5.92-$38.38
In addition to the outstanding incentive stock options
reflected in the table there were 205,170, 188,750 and
188,750 outstanding non-qualified stock options at May 31,
1995, 1994 and 1993, respectively. During fiscal 1995,
16,420 non-qualified stock options were granted and none
were exercised. At May 31, 1995, the exercise prices of
these outstanding options ranged from $7.96 to $36.75 and
113,500 of these outstanding options were exercisable.
At May 31, 1995, 4,037,000 shares of common stock are
reserved for future issuance.
-29-
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the results of operations
for each of the quarters within the years ended May 31,
1995 and 1994:
First Second Third Fourth
May 31, 1995 Quarter Quarter Quarter Quarter
Revenues from rentals and sales $142,037 151,591 151,217 170,253
Gross profit $57,481 59,502 59,359 67,491
Net income $13,760 15,756 15,315 17,912
Earnings per share $0.29 0.34 0.33 0.38
Weighted average number of
shares outstanding 46,805 46,829 46,932 47,000
May 31, 1994
Revenues from rentals and sales $122,224 129,783 129,385 141,824
Gross profit $50,217 53,079 51,824 54,751
Net Income $10,543 13,580 13,061 14,986
Earnings per share $0.23 0.29 0.28 0.32
Weighted average number of
shares outstanding 46,637 46,680 46,717 46,790
-30-
REPORT OF AUDIT COMMITTEE
The Audit Committee (the Committee) of the Board of
Directors is composed of three independent directors. The
Committee, which held two audit meetings during fiscal
1995, oversees the Company's financial reporting process on
behalf of the Board of Directors.
In fulfilling its responsibility, the Committee
recommended to the Board of Directors the selection of the
Company's independent auditors. The Committee discussed
with the independent auditors the overall scope and
specific plan for their audits. The Committee also
discussed the Company's consolidated financial statements
and the adequacy of the Company's system of internal
control.
The Committee meets with the Company's independent
auditors, without management present, to discuss the
results of their audits, their evaluation of the system of
internal control and the overall quality of the Company's
financial reporting. The meetings also are designed to
facilitate any private communications with the Committee
desired by the independent auditors.
Roger L. Howe, Chairman
Audit Committee
July 17, 1995
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
The Board of Directors
Cintas Corporation
We have audited the accompanying consolidated balance
sheets of Cintas Corporation as of May 31, 1995 and 1994,
and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three
years in the period ended May 31, 1995. These financial
statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
consolidated financial position of Cintas Corporation at
May 31, 1995 and 1994, and the consolidated results of its
operations and its cash flows for each of the three years
in the period ended May 31, 1995, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Cincinnati, Ohio
July 17, 1995
-31-
CINTAS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FISCAL 1995 COMPARED TO FISCAL 1994
Fiscal 1995 was another record year for the Company. Total
revenues of $615 million, net income of $63 million and
earnings per share of $1.34 were all records, increasing
18%, 20% and 20%, respectively. Net rental revenues
increased 17%. Revenues in existing rental operations
increased 14% while acquisitions accounted for the
remaining growth. Net sales revenues increased 20% due to
new business and expansion of business within existing
national accounts. Return on equity of 19% was comparable
with the prior year.
Income before taxes increased 18% to $101 million The
Company's effective tax rate decreased from 39% to 38%. In
fiscal 1994, the Company recorded a one-time charge for the
retroactive impact (to January 1, 1993) of an increase in
corporate marginal tax rates due to the enactment of the
Omnibus Budget Reconciliation Act of 1993.
In fiscal 1995, the Company acquired 80% of the outstanding
stock of Cadet Uniform Services, Ltd., for approximately
$41 million which was financed through borrowings. The
purchase increased the Company's ownership from 20% to
100%. Cadet has annual sales volume of approximately $22
million. The Company expects this acquisition to be mildly
additive to future earnings.
Cash, cash equivalents and marketable securities decreased
by $15 million due to capital expenditures and acquisitions
which was partially offset by strong cash flow from
operations. The cash, cash equivalents and marketable
securities will be used to finance future acquisitions and
capital expenditures. Marketable securities consist
primarily of industrial revenue bonds and federal
government securities.
Inventories increased $8 million as the Company added
products for the catalog program and proprietary products
in the rental line. The higher level of inventory
positions the Company to maintain service levels for
anticipated growth.
Net property, plant and equipment increased by $35 million.
In fiscal 1995, the Company constructed five new uniform
rental facilities to accommodate growth in rental
operations.
Other assets increased by $39 million, reflecting
goodwill, service contracts and non-compete and consulting
agreements obtained through the acquisition of uniform
businesses.
FISCAL 1994 COMPARED TO FISCAL 1993
Total revenues for fiscal 1994 increased 16% to $523
million. Net rental revenues increased 15%. Revenues in
existing rental operations increased 10% while acquisitions
accounted for the remaining growth.
Net sales revenue increased 22%. The increase was
attributed to the implementation of new uniform programs
for several large national accounts and the conversion of
existing accounts to newly designed uniform programs.
Income before income taxes increased 20% to $85 million.
Net interest expense decreased $1 million reflecting the
repayment of $8 million in debt and an increase in interest
income.
The Company's effective tax rate increased from 37% to 39%
as a result of an increase in the
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federal tax rate.
Return on equity of 18% was comparable with the prior year.
Cash, cash equivalents and marketable securities increased
by $6 million due to strong cash flow from internal
operations. The cash, cash equivalents and marketable
securities will be used to finance future acquisitions and
capital expenditures.
Inventories increased $8 million in order to provide
service to recent acquisitions and to increase the service
level to existing locations. Net property, plant and
equipment increased by $12 million. In fiscal 1994, the
Company constructed three new uniform facilities to
accommodate growth in rental operations.
The current portion of long-term debt increased $11
million, which was in line with the scheduled maturities of
long-term debt.
FINANCIAL CONDITION
At May 31, 1995, the Company had $45 million in cash, cash
equivalents and marketable securities. The Company's
investment policy pertaining to marketable securities is
conservative. Preservation of principal while earning an
attractive yield are the criteria used in making
investments. Working capital increased $16 million to $146
million due primarily to an increase in inventories.
Capital expenditures for fiscal 1995 totaled $59 million.
The Company continues to reinvest profits into land,
buildings and equipment in order to expand capacity for
future growth. The Company anticipates that capital
expenditures for fiscal 1996 will approximate $55 million.
The Company's percentage of debt to total capitalization
was 26% at May 31, 1995, versus 24% at May 31, 1994, due to
acquisitions made during the year.
During the year, the Company paid dividends of $9 million
or $0.20 per share. This dividend is an increase of 18%
over that paid in fiscal 1994.
INFLATION AND CHANGING PRICES
Management believes inflation has not had a material impact
on the Company's financial condition or a negative effect
on operations. Management has been able to control pricing
pressures through vendor negotiations, alternative sourcing
methods and conservation.
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Directors and Officers
Board of Directors Officers
Gerald V. Dirvin Robert R. Buck Carl W. Kettenacker
Retired Executive Vice President Senior Vice President
Vice President
and Director of The
Procter & Gamble
Company Bruce L. Burgess Robert J. Kohlhepp
Vice President President and Chief
Executive Officer
Richard T. Farmer Karen L. Carnahan
Chairman of the Board Treasurer Robert A. Oswald
of the Corporation Vice President
Scott D. Farmer James (Jay) Case David Pollak, Jr.
Vice President of Vice President Vice President
the Corporation
James J. Gardner Richard T. Farmer William L. Pratt
Retired Vice Chairman of the Board Vice President
President
of the Corporation
Roger L. Howe William C. Gale Bruce E. Rotte
Chairman of the Vice President, Vice President
Board of U.S. Finance
Precision Lens, Inc.
Donald P. Klekamp Larry A. Harmon G. Thomas Thornley
Senior Partner of Vice President Vice President
Keating, Muething
and Klekamp
Robert J. Kohlhepp David T. Jeanmougin
President and Chief Senior Vice President
Executive Officer
of the Corporation
John S. Lillard John S. Kean III
Chairman-Founder of Senior Vice President
JMB Institutional
Realty Corporation
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Shareholder Information
EXECUTIVE OFFICES 10-K REPORT
Cintas Corporation A copy of the Form 10-K annual
6800 Cintas Boulevard report filed with the Securities
P.O. Box 625737 and Exchange Commission for the
Cincinnati, Ohio year ended May 31, 1995, is
45262-5737 available at no charge to
shareholders. Direct requests
in writing for this report or
other information to:
AUDITORS William C. Gale
Vice President, Finance
Ernst & Young LLP Cintas Corporation
1300 Chiquita Center 6800 Cintas Boulevard
250 E. Fifth Street P.O. Box 625737
Cincinnati, Ohio 45202 Cincinnati, Ohio 45262-5737
(513) 459-1200
MARKET FOR REGISTRANT'S SECURITY HOLDER INFORMATION
COMMON STOCK
At May 31, 1995, there were
Cintas Corporation Common approximately 1,700 stockholders
Stock is traded on the of record of the Corporation's
NASDAQ National Market Common Stock.The Company
System. The symbol is CTAS. believes that this represents
approximately 12,000
beneficial owners.
REGISTRAR AND TRANSFER AGENT
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
(513) 579-5300
ANNUAL MEETING
October 19, 1995
Cintas Corporate Office
6800 Cintas Boulevard
Cincinnati, Ohio
10:00 a.m.
The following table shows the high and low closing prices
by quarter during the last two fiscal years.
Fiscal 1995 Fiscal 1994
Quarter ended High Low Quarter ended High Low
May 1995 40 1/4 33 3/4 May 1994 32 7/8 29 3/4
February 1995 38 3/4 33 1/2 February 1994 34 1/2 28 1/2
November 1994 36 1/4 31 3/4 November 1993 31 1/2 25
August 1994 33 1/4 29 3/4 August 1993 29 1/4 24 3/4
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EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
STATE/PROVINCE OF
NAME INCORPORATION
Cintas Corporation - East Coast Massachusetts
Cintas Corporation - Ohio Ohio
Cintas Corporation No. 1 Ohio
Cintas Corp. No. 5 Michigan
Cintas Corp. No. 13 Pennsylvania
Cintas Corporation No. 41 Maryland
Cintas Sales Corporation Ohio
Cintas Corp. No. 45 North Carolina
Corporate Business Services, Inc. Illinois
Cintas - R.U.S., Inc. South Carolina
Cintas Cleaning Services, Inc. Ohio
Cintas Executive Services, Inc. Nevada
Cadet Uniform Services Limited Ontario, Canada
Cintas Investment Corp. Ontario, Canada
117561 Ontario, Inc. Ontario, Canada
910946 Ontario, Inc. Ontario, Canada
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Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual
Report on Form 10-K of Cintas Corporation of our report
dated July 17, 1995, included in the 1995 Annual Report to
Shareholders of Cintas Corporation.
Our audits also included the financial statement schedules
of Cintas Corporation listed in Item 14(a). These
schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion
based on our audits. In our opinion, the financial
statement schedules referred to above, when considered in
relation to the basic financial statements as a whole,
present fairly in all material respects the information set
forth therein.
We also consent to the incorporation by reference in the
Registration Statement Number 33-56623 on Form S-8
pertaining to the Partners' Plan, the Registration
Statement Number 33-23228 on Form S-8 pertaining to the
Incentive Stock Option Plan and Registration Statement
Number 33-71124 on Form S-8 pertaining to the 1990
Directors Plan and 1992 Stock Option Plan, of our report
dated July 17, 1995, with respect to the financial
statements and schedules of Cintas Corporation incorporated
by reference in this Annual Report on Form 10-K for the
year ended May 31, 1995.
Ernst & Young LLP
Cincinnati, Ohio
August 23, 1995
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