Back to GetFilings.com
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, 1998
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 6800 Cintas Boulevard
or organization) 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
$4,922,786,788 based on a closing price of $46.94 on August 21, 1998. As of
August 21, 1998, 104,879,612 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 1998 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 1998 annual meeting are
incorporated by reference in Parts 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. 7
Item 4. - Submission of Matters to a Vote of Security Holders. 8
Part II
Item 5. - Market for Registrant's Common Equity and Related 8
Stockholder Matters.
Item 6. - Selected Financial Data. 8
Item 7. - Management's Discussion and Analysis of Financial 8
Condition and Results of Operations.
Item 7A. - Quantitative and Qualitative Disclosure About Market Risk. 8
Item 8. - Financial Statements and Supplementary Data. 8
Item 9. - Changes in and Disagreements with Accountants on 9
Accounting and Financial Disclosure.
Part III
Item 10. - Directors and Executive Officers of the Registrant. 9
Item 11. - Executive Compensation. 9
Item 12. - Security Ownership of Certain Beneficial Owners and 9
Management.
Item 13. - Certain Relationships and Related Transactions. 9
Part IV
Item 14. - Exhibits, Financial Statement Schedules and 9
Reports on Form 8-K.
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 and manufacturing
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 and its subsidiary Uniforms To You,
compete on a national basis with other uniform suppliers and manufacturers, some
of which have financial resources comparable to the Company's.
The Company operates seven wholly owned 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, 1998, the Company employed 16,957 employees of which 770 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
1998 1997 1996
(in thousands)
Net Rentals $ 872,739 $739,207 $648,616
Other Service Revenue 325,568 256,000 227,217
-------- -------- -------
$1,198,307 $995,207 $875,833
========== ======== ========
ITEM 2.
PROPERTIES
The Company occupies 193 facilities located in 154 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
four distribution facilities and has seven manufacturing plants. The Company
also operates facilities which distribute first aid products. The Company
considers the facilities it operates to be adequate for their intended use. The
Company owns or leases 3,815 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*
Angola, Indiana 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
Battlecreek, Michigan Processing Plant
Beaumont, Texas Processing Plant
Birmingham, Alabama Branch*
Bloomington, Indiana Branch*
Boston, Massachusetts Processing Plant
Branford, Connecticut Processing Plant
Brownsville, Texas Branch*
Buffalo, New York Processing Plant
Burton, Michigan Branch*
Charleston, South Carolina Branch*
Charlotte, North Carolina First Aid Facility*
Charlotte, North Carolina Processing Plant
Chattanooga, Tennessee Branch*
Chicago (South), Illinois Processing Plant
Chicago (North), Illinois Processing Plant
Chicago, Illinois First Aid
Chicago, Illinois Distribution Center
Chicago, Illinois Manufacturing Facility
Cincinnati, Ohio Branch*
Cincinnati, Ohio Processing Plant
Clay City, Kentucky Manufacturing Facility*
Cleveland (West), Ohio Processing Plant
Cleveland (East), Ohio Processing Plant
Cleveland, Ohio First Aid Facility*
Colorado Springs, Colorado Branch*
Columbia, South Carolina Processing Plant*
Columbus, Ohio Processing Plant
Columbus, Ohio Branch*
Corpus Christi, Texas Processing Plant
Dallas, Texas Processing Plant
Dallas, Texas First Aid Facility*
Dallas, Texas First Aid Facility
Dayton, Ohio Processing Plant
Dayton, Ohio Processing Plant
Decatur, Georgia Processing Plant
Denver, Colorado Processing Plant
Denver, Colorado First Aid Facility*
Detroit, Michigan First Aid Facility*
Detroit, Michigan Processing Plant
Etobicoke, Ontario (Canada) Processing Plant
Eugene, Oregon Branch*
Evansville, Indiana Processing Plant*
Evansville, Indiana Branch*
Fairfield, California First Aid Facility*
Flint, Michigan Branch*
Fort Meyers, Florida Branch*
Fort Smith, Arkansas Processing Plant*
Fort Wayne, Indiana Branch*
Fort Wayne, Indiana Processing Plant
Gaylord, Michigan Processing Plant
Grand Rapids, Michigan Branch*
Grand Rapids, Michigan Branch*
Greenville, South Carolina Processing Plant
Greenville, South Carolina Processing Plant
Greenwood, Mississippi Branch*
Griffith, Indiana Branch*
Gulfport, Mississippi Branch*
Hammond, Louisiana Branch
Harrison, Arkansas Branch*
Hazard, Kentucky Manufacturing Facility*
Hoisington, Kansas Processing Plant*
Houston, Texas First Aid Facility*
Houston, Texas Processing Plant
Huntsville, Alabama Branch*
Indianapolis, Indiana Processing Plant
Indianapolis, Indiana Processing Plant
Indianapolis, Indiana Processing Plant
Jackson, Mississippi Branch*
Jacksonville, Florida Branch*
Joplin, Missouri Branch*
Kansas City, Kansas Processing Plant
Kansas City, Kansas First Aid Facility
Kansas City, Kansas First Aid Facility
Knoxville, Tennessee Branch*
Knoxville, Tennessee First Aid Facility*
Kokomo, Indiana Processing Plant*
Lafayette, Louisiana Branch
Lafayette, Indiana Processing Plant
Lake Charles, Louisiana Processing Plant
Lake Station, Indiana Branch*
Laredo, Texas Branch*
Las Vegas, Nevada Processing Plant
Lexington, Kentucky Processing Plant
Lindsay, Ontario (Canada) Processing Plant
Little Rock, Arkansas Processing Plant
London, Ontario (Canada) Branch*
Long Island, New York Processing Plant
Los Angeles, California Processing Plant
Louisville, Kentucky Processing Plant
Louisville, Kentucky Processing Plant
Louisville, Kentucky First Aid Facility*
Lufkin, Texas Branch
Madison, Wisconsin Processing Plant
Madison, Wisconsin Direct Sales
Memphis, Tennessee Processing Plant
Mexico City, Mexico Manufacturing Facility*
Miami, Florida Processing Plant
Midland, Michigan Processing Plant
Milwaukee, Wisconsin Branch*
Milwaukee, Wisconsin First Aid Facility*
Minneapolis, Minnesota First Aid Facility*
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
Nashville, Tennessee Branch*
Natchez, Mississippi Branch*
Newburgh, New York Processing Plant
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
Phoenix, Arizona First Aid Facility*
Piscataway, New Jersey Processing Plant
Pittsburgh, Pennsylvania Processing Plant
Portal, Georgia Manufacturing Facility
Portland, Maine Branch
Portland, Oregon Processing Plant
Portland, Oregon First Aid Facility*
Raleigh-Durham, North Carolina Branch*
Rancho Santa Margarita, California Direct Sales Office
Rapid City, South Dakota First Aid Facility*
Reno, Nevada Distribution Center*
Richmond, Indiana Processing Plant*
Richmond, Virginia Processing Plant
Sacramento, California Branch*
Savannah, Georgia Branch*
Salt Lake City, Utah Processing Plant*
San Angelo, Texas Branch*
San Antonio, Texas Processing Plant
San Diego, California First Aid Facility *
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
San Leandro, California First Aid Facility*
Seattle, Washington Processing Plant
Scranton, Pennsylvania First Aid Facility*
Shreveport, Louisiana Processing Plant
South Bend, Indiana Processing Plant
Springdale, Arkansas Processing Plant
Springfield, Missouri Processing Plant
St. Louis, Missouri First Aid Facility*
St. Louis, Missouri Processing Plant*
Tacoma, Washington Branch*
Tampa, Florida Processing Plant
Taunton, Massachusetts Branch*
Terrre Haute, Indiana Processing Plant
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*
Warsaw, Indiana Branch
West Chester, New York Branch*
Washington, D.C. Processing Plant
Westland, Michigan Processing Plant
West Palm Beach, Florida Branch*
West Valley City, Utah First Aid Facility*
Wichita, Kansas Branch*
Winston-Salem, North Carolina Processing Plant
Youngstown, Ohio Branch*
*Leased for various terms ranging from monthly to 2008. 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 1998.
PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
"Market for Registrant's Common Stock@ and ASecurity Holder
Information" on page 35 of the Registrant's Annual Report to Shareholders for
1998 is incorporated herein by reference. Dividend information is incorporated
by reference to the Consolidated Statements of Shareholders' Equity on page 19.
Dividends on the outstanding Common Stock are paid annually and amounted to $.18
and $.15 per share in fiscal 1998 and 1997, respectively.
During the quarterly period ended May 31, 1998, the Registrant
issued 2,493,569 shares of Common Stock for companies being acquired in 11
separate transactions to the 21 owners of those companies. In addition, the
Registrant issued 3,959,262 shares of Common Stock for the acquisition of
Uniforms To You in April 1998. The issuance was to three individuals, seventeen
trusts with related trustees and a related corporation. The issuance's were
exempt from the registration requirements of the Securities Act of 1933 as
private offerings pursuant to Section 4(2) of the Act.
ITEM 6.
SELECTED FINANCIAL DATA
The "Eleven Year Financial Summary" on page 16 of the Registrant's
Annual Report to Share holders for 1998 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 32 of the Registrant's Annual Report
to Shareholders for 1998 is incorporated herein by reference.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK
Not Applicable.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Financial Statements of the Registrant shown on pages
17 through 31 of its Annual Report to Shareholders for 1998 are incorporated
herein by reference:
Consolidated Balance Sheets as of May 31, 1998 and 1997
Consolidated Statements of Income for the years ended May 31, 1998, 1997
and 1996
Consolidated Statements of Shareholders' Equity for the years
ended May 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended May 31,
1998, 1997 and 1996
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 1998 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 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, 1998.
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)
13 1998 Annual Report to Shareholders (a) filed herewith
21 Subsidiaries of the Registrant filed herewith
23 Consent of Independent Auditors filed herewith
27 Financial Data Schedule - Twelve Months Ended
May 1998 filed herewith
27.1 Financial Data Schedule - Restated Nine months
ended February 1998 filed herewith
27.2 Financial Data Schedule - Restated Six Months
Ended November 1997 filed herewith
27.3 Financial Data Schedule - Restated Three Months
Ended August 1997 filed herewith
27.4 Financial Data Schedule - Restated Twelve Months
Ended May 1997 filed herewith
27.5 Financial Data Schedule - Restated Nine Months
Ended February 1997 filed herewith
27.6 Financial Data Schedule - Restated Six Months
Ended November 1996 filed herewith
27.7 Financial Data Schedule - Restated Three Months
Ended August 1996 filed herewith
(a) Only portions of the 1998 Annual Report to Shareholders specifically
incorporated by reference are filed herewith. A supplemental paper
copy of this report will be provided to the SEC for informational
purposes.
(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.
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 28, 1998 /s/ Robert J. Kohlhepp
------------------------
By: 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 28, 1998
Richard T. Farmer
/s/ Robert J. Kohlhepp Chief Executive
----------------------- Officer and Director August 28, 1998
Robert J. Kohlhepp
/s/ Scott D. Farmer President, Chief Operating
----------------------- Officer and Director August 28, 1998
Scott D. Farmer
/s/ James J. Gardner Director August 28, 1998
-----------------------
James J. Gardner
/s/ Donald P. Klekamp Director August 28, 1998
-----------------------
Donald P. Klekamp
/s/ William C. Gale Vice President and Chief
------------------------ Financial Officer (Principal
William C. Gale Financial and Accounting
Officer) August 28, 1998
CINTAS CORPORATION
Schedule II - Valuation and Qualifying Accounts and Reserves
(In Thousands)
Additions
(1) (2)
Balance At Charged to Charged to Balance At
Beginning of Costs and Other End of
Description Year Expenses Accounts Deductions Year
May 31, 1996:
Allowance for Doubtful Accounts $ 2,870 $2,168 $175 $ 2,420 (A) $ 2,793
======= ====== ==== ======= =======
Reserve for Obsolete Inventory $17,146 $ 9 $ 1 $ 2,573 $14,583
======= ====== ==== ======= =======
May 31, 1997:
Allowance for Doubtful Accounts $ 2,793 $3,881 $530 $ 2,408 (A) $ 4,796
======= ====== ==== ======= =======
Reserve for Obsolete Inventory $14,583 $4,584 $ 13 $ 3,629 $15,551
======= ====== ==== ======= =======
May 31,1998:
Allowance for Doubtful Accounts $ 4,796 $2,868 $960 $ 2,928 (A) $ 5,696
======= ====== ==== ======= =======
Reserve for Obsolete Inventory $15,551 $5,509 $681 $ 3,348 $18,393
======= ====== ==== ======= =======
(A) Uncollectible Accounts Charged-off, Net of Recoveries.