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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, 1997
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
$3,363,035,740 based on a closing price of $69.25 on August 15, 1997. As of
August 15, 1997, 48,563,693 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 1997 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 1997 annual meeting are
incorporated by reference in Parts I, II and III as specified.
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 7
Stockholder Matters
Item 6 - Selected Financial Data 7
Item 7 - Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
Item 8 - Financial Statements and Supplementary Data 7
Item 9 - Changes in and Disagreements with Accountants on 7
Accounting and Financial Disclosure
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 7
Management
Item 13 - Certain Relationships and Related Transactions 7
Part IV
Item 14 - Exhibits, Financial Statement Schedules and 8
Reports on Form 8-K
- 2 -
PART I
ITEM 1.
BUSINESS
The Company began business in 1929 as an Ohio Corporation and changed its
state of incorporation to Washington in 1986. 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 Company believes that the primary
competitive factors that affect its operations are quality, service, design and
price, in that order.
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, linen products and first aid products and services.
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 its standard uniform needs. Additional products are
purchased from 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.
At May 31, 1997, the Company employed 11,996 employees of which 87 were
represented by labor unions. The Company considers its relationship with its
employees to be satisfactory.
The table sets forth the revenues derived from each service provided by
Cintas.
Year Ended May 31
---------------------------------------
1997 1996 1995
---- ---- ----
(in thousands)
Uniform Rental $557,659 $492,369 $415,035
Uniform Sales 94,065 81,373 69,825
Non-Uniform Rentals 173,414 148,652 124,045
Other 14,811 7,736 6,193
--------- ---------- ----------
$839,949 $730,130 $615,098
======== ======== ========
- 3 -
ITEM 2.
PROPERTIES
The Company occupies 139 facilities located in 130 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 three
distribution facilities and has four manufacturing plants, two of which produce
uniform trousers and two producing uniform shirts. The Company also operates two
facilities which distribute first aid products and two cleanroom processing
facilities. The Company considers the facilities it operates to be adequate for
their intended use. The Company owns or leases 3,256 vehicles.
The following chart provides additional information concerning Cintas'
facilities:
Location Type of Facility
-------- ----------------
Cincinnati, Ohio Corporate Offices,
National Account Division,
Distribution Center
Abbotsford, Vancouver (Canada) Processing Plant
Akron, Ohio Processing Plant
Alexandria, Louisiana Branch*
Allentown, Pennsylvania Branch*
Amarillo, Texas Branch*
Asheville, North Carolina Branch*
Ashland, Kentucky Processing Plant
Atlanta, Georgia Processing Plant
Augusta, Georgia Processing Plant
Austin, Texas Processing Plant
Baltimore, Maryland Processing Plant
Baltimore, Maryland First Aid Facility
Barrie, Ontario (Canada) Processing Plant
Baton Rouge (South), Louisiana Processing Plant
Baton Rouge (North), Louisiana Processing Plant
Beaumont, Texas Processing Plant
Birmingham, Alabama Branch*
Boston, Massachusetts Processing Plant
Branford, Connecticut Processing Plant
Brownsville, Texas Branch*
Buffalo, New York Processing Plant
Charlotte, North Carolina Processing Plant
Chattanooga, Tennessee Branch*
Chicago (South), Illinois Processing Plant
Chicago (North), Illinois Processing Plant
Chilliwack, Vancouver (Canada) 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
Denver, Colorado First Aid Facility*
Detroit, Michigan Processing Plant
Etobicoke, Ontario (Canada) Processing Plant
Eugene, Oregon Branch*
Evansville, Indiana Branch*
- 4 -
Flint, Michigan Branch*
Fort Meyers, Florida Branch*
Fort Smith, Arkansas Processing Plant*
Fort Wayne, Indiana Branch*
Grand Rapids, Michigan Branch*
Greenville, South Carolina Processing Plant
Greenville, South Carolina Cleanroom Facility
Greenwood, Mississippi Branch*
Gulfport, Mississippi Branch*
Hammond, Louisiana Branch
Harrison, Arkansas Branch*
Hazard, Kentucky Manufacturing Facility*
Houston, Texas Processing Plant
Indianapolis, Indiana Processing Plant
Jackson, Mississippi Branch*
Jacksonville, Florida Branch*
Joplin, Missouri Branch*
Kansas City, Kansas Processing Plant
Knoxville, Tennessee Branch*
Lafayette, Louisiana Branch
Lake Charles, Louisiana Processing Plant
Lake Station, Indiana Branch*
Laredo, Texas Branch*
Las Vegas, Nevada Processing Plant
Lexington, Kentucky Processing Plant
Little Rock, Arkansas Processing Plant
London, Ontario (Canada) 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 Processing Plant
Miami, Florida Processing Plant
Milwaukee, Wisconsin Branch*
Minneapolis, Minnesota Processing Plant*
Mobile, Alabama Branch*
Montgomery, Alabama Distribution Center*
Montgomery, Alabama Branch*
Mt. Vernon, Kentucky Manufacturing Facility*
Napanee, Ontario (Canada) Processing Plant
Nashville, Tennessee Processing Plant
Natchez, Mississippi Branch*
Newburgh, New York Cleanroom Facility
New Orleans, Louisiana Processing Plant
Oklahoma City, Oklahoma Processing Plant
Ontario, California Processing Plant
Orange, California Branch*
Orlando, Florida Processing Plant
Owingsville, Kentucky Manufacturing Facility
Pensacola, Florida Branch*
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*
Salt Lake City, Utah Processing Plant*
- 5 -
San Angelo, Texas Branch*
San Antonio, Texas Processing Plant
San Diego, California Processing Plant
Sandusky, Ohio Branch*
San Fernando, California 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
Taunton, Massachusetts Branch*
Thibodaux, Louisiana Processing Plant
Toledo, Ohio Branch*
Toronto, 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*
West Chester, 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 2006. 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. 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 1997.
- 6 -
PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
"Market for Registrant's Common Stock" and "Security Holder Information" on
page 29 of the Registrant's Annual Report to Shareholders for 1997 is
incorporated herein by reference. Dividend information is incorporated by
reference to the Consolidated Statements of Shareholders' Equity on page 17.
Dividends on the outstanding Common Stock are paid annually and amounted to $.30
and $.25 per share in fiscal 1997 and 1996, respectively.
During the quarterly period ended May 31, 1997, the Registrant issued
121,989 shares of Common Stock for a company being acquired. This issuance was
exempt from the registration requirements of the Securities Act of 1933 as a
private offering pursuant to Section 4.2 of the Act.
ITEM 6.
SELECTED FINANCIAL DATA
The "Eleven Year Financial Summary" on page 14 of the Registrant's Annual
Report to Shareholders for 1997 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 26 of the Registrant's Annual Report to
Shareholders for 1997 is incorporated herein by reference.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Financial Statements of the Registrant shown on pages 15
through 25 of its Annual Report to Shareholders for 1997 are incorporated herein
by reference:
Consolidated Balance Sheets as of May 31, 1997 and 1996
Consolidated Statements of Income for the years ended May 31, 1997,
1996 and 1995
Consolidated Statements of Shareholders' Equity for the years ended
May 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended May 31, 1997,
1996 and 1995
Notes to Consolidated Financial Statements
Report of Independent Auditors
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Items 10., 11., 12., and 13. of Part III are incorporated by reference to
the Registrant's Proxy Statement for its 1997 Annual Shareholders' Meeting to be
filed with the Commission pursuant to Regulation 14A.
- 7 -
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 are listed in Item
8. No additional financial statements are filed because 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, 1997.
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.
(a) (3) Exhibits.
Exhibit
Number Description of Exhibit Filing Status
------ ---------------------- -------------
3.1 Restated Articles of Incorporation (1)
3.3 Bylaws (1)
Management Compensatory Contracts (Exhibits 10.1-10.5)
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 1997 Annual Report to Shareholders filed herewith
21 Subsidiaries of the Registrant filed herewith
23 Consent of Independent Auditors filed herewith
27 Financial Data Schedule 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 the Company's Registration Statement No.
33-23228 on Form S-8 filed under the Securities Act of 1933.
(3) Incorporated by reference to the Company's Registration Statement No.
33-56623 on Form S-8 filed under the Securities Act of 1933.
(4) Incorporated by reference to the Company's Registration Statement No.
33-71124 on Form S-8 filed under the Securities Act of 1933.
(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 27, 1997 BY: /s/ Robert J. Kohlhepp
----------------------------
Robert J. Kohlhepp
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
- ----------------------- of Directors August 27, 1997
Richard T. Farmer
/s/ Robert J. Kohlhepp Chief Executive
- ----------------------- Officer and Director August 27, 1997
Robert J. Kohlhepp
/s/ Scott D. Farmer President, Chief Operating
- ----------------------- Officer and Director August 27, 1997
Scott D. Farmer
/s/ James J. Gardner Director August 27, 1997
- -----------------------
James J. Gardner
/s/ Donald P. Klekamp Director August 27, 1997
- -----------------------
Donald P. Klekamp
/s/ William C. Gale Vice President & Chief
- ----------------------- Financial Officer
William C. Gale (Principal Financial
and Accounting Officer) August 27, 1997
- 9 -
CINTAS CORPORATION
Schedule II - Valuation and Qualifying Accounts and Reserves
(In Thousands)
Additions
(1) (2)
Balance At Charged to Charged Balance At
Beginning Costs and to Other End of
Description of Year Expenses Accounts Deductions Year
- ----------- ---------- ---------- -------- ---------- ----------
May 31, 1995:
Allowance for Doubtful Accounts $ 2,003 $ 1,465 ($ 325) $1,114 (A) $ 2,029
======= ======= ========== ======= =======
Accumulated Amortization of
Customer Service Contracts ... 21,523 5,967 70 (B) 27,420
Accumulated Amortization of
Non-Compete Agreements &
Consulting .................. 17,015 4,675 1,085 (B) 20,605
Accumulated Amortization of
Debt Issue & Organization
Costs ....................... 423 263 83 (B) 603
Accumulated Amortization of
Goodwill .................... 314 622 -- 936
------- ------- ---------- ------- -------
$39,275 $11,527 $ 1,238 $49,564
======= ======= ======= =======
May 31, 1996:
Allowance for Doubtful Accounts $ 2,029 $ 1,178 $ 175 $1,424 (A) $ 1,958
======= ======= ========== ======= =======
Accumulated Amortization of
Customer Service Contracts .. 27,420 6,161 4,866 (B) 28,715
Accumulated Amortization of
Non-Compete Agreements &
Consulting .................. 20,605 4,667 1,515 (B) 23,757
Accumulated Amortization of
Debt Issue & Organization
Costs ....................... 603 250 71 (B) 782
Accumulated Amortization of
Goodwill .................... 936 1,440 -- 2,376
-------- ------- ------- -------
$49,564 $12,518 $6,452 $55,630
======= ======= ======= =======
(A) Uncollectible Accounts Charged-off, Net of Recoveries.
(B) Elimination of Fully Amortized Amounts.
- 10 -
Additions
(1) (2)
Balance At Charged to Charged Balance At
Beginning Costs and to Other End of
Description of Year Expenses Accounts Deductions Year
- ----------- ---------- ---------- -------- ---------- ----------
May 31,1997:
Allowance for Doubtful Accounts $ 1,958 $ 2,013 $ 530 $1,680 (A) $ 2,821
======= ======= ======= ====== =======
Accumulated Amortization of
Customer Service Contracts . 28,715 5,923 8,374 (B) 26,264
Accumulated Amortization of
Non-Compete Agreements
and Consulting ............ 23,757 4,294 4,798 (B) 23,253
Accumulated Amortization of
Debt Issue & Organization
Costs ..................... 782 239 -- 1,021
Accumulated Amortization of
Goodwill .................. 2,376 1,489 -- 3,865
------- ------- ------- -------
55,630 $11,945 $13,172 $54,403
======= ======= ======= =======
(A) Uncollectible Accounts Charged-off, Net of Recoveries.
(B) Elimination of Fully Amortized Amounts.
- 11 -