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| 8-K - 8-K - CINTAS CORP | ctasform8-k9x12.htm |
Exhibit 99
FOR IMMEDIATE RELEASE
September 20, 2012
Cintas Corporation Announces Fiscal 2013 First Quarter Results
CINCINNATI, September 20, 2012 -- Cintas Corporation (Nasdaq:CTAS) today reported results for its first quarter ended August 31, 2012. Revenue for the first quarter was $1.05 billion, representing a 3.4% increase compared to last year's first quarter. Organic growth, which adjusts for the impact of acquisitions, compared to last year's first quarter, was 3.2%. Recycled paper prices remained lower than last year, and this negatively impacted first quarter consolidated revenue by $8.3 million, or 0.8%, compared to last year's first quarter.
The Company's operating income of $139.3 million was an 8.3% increase as compared to last year's first quarter. Net income increased 11.8% to $76.7 million as compared to $68.6 million in last year's first quarter. Earnings per diluted share (EPS) for the first quarter were $0.60, a 15.4% increase over the $0.52 earnings per diluted share in last year's first quarter.
Scott D. Farmer, Chief Executive Officer, stated, “In my July earnings release comments, I spoke of a U.S. economy without momentum. During our first quarter, we saw nothing that would change that assessment. However, despite this continued absence of momentum and another quarter of difficult year-over-year recycled paper price comparisons, we are pleased to report solid revenue growth and a double-digit increase in earnings per share.”
Mr. Farmer added, “We continue to be pleased with our operating margin performance, particularly in our Rental operating segment. The Rental segment's operating margin improved to 15.5% of revenue, compared to last year's first quarter operating margin of 13.8%. Our total operating margin improved to 13.2% from last year's first quarter operating margin of 12.6% despite the recycled paper price impact. We will continue our focus on selling profitable business, managing our cost structure and improving efficiencies through process improvement.”
During the first quarter of fiscal 2013, Cintas purchased 1.8 million shares of its common stock at an aggregate cost of $70.6 million. While it had no impact on the first quarter EPS, this buyback is expected to benefit fiscal year 2013 EPS by approximately $0.03. The Cintas Board of Directors authorized a $500.0 million share buyback program in October 2011. As of August 31, 2012, the Company had $299.8 million available under the current Board authorization.
Mr. Farmer concluded, “Based on our first quarter results, we reiterate our fiscal 2013 revenue expectations to be in the range of $4.25 billion to $4.35 billion. We are updating our full year EPS guidance to incorporate the impact of the first quarter share buyback. As a result, we now expect EPS to be in the range of $2.50 to $2.58. This guidance assumes no further deterioration in the U.S. economy and some improvement in recycled paper prices from our first quarter level. It does not consider any additional share buybacks.”
About Cintas
Headquartered in Cincinnati, Cintas Corporation provides highly specialized services to businesses of all types primarily throughout North America. Cintas designs, manufactures and implements corporate identity uniform programs, and provides entrance mats, restroom supplies, promotional products, first aid, safety, fire protection products and services and document management services for over 900,000 businesses. Cintas is a publicly held company traded over the Nasdaq Global Select Market under the symbol CTAS and is a component of the Standard & Poor's 500 Index.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements. Forward-looking statements may be identified by words such as “estimates,” “anticipates,” “predicts,” “projects,” “plans,” “expects,” “intends,” “target,” “forecast,” “believes,” “seeks,” “could,” “should,” “may” and “will” or the negative versions thereof and similar words, terms and expressions and by the context in which they are used. Such statements are based upon current expectations of Cintas and speak only as of the date made. You should not place undue reliance on any forward-looking statement. We cannot guarantee that any forward-looking statement will be realized. These statements are subject to various risks, uncertainties, potentially inaccurate assumptions and other factors that could cause actual results to differ from those set forth in or implied by this Press Release. Factors that might cause such a difference include, but are not limited to, the possibility of greater than anticipated operating costs including energy and fuel costs, lower sales volumes, loss of customers due to outsourcing
trends, the performance and costs of integration of acquisitions, fluctuations in costs of materials and labor including increased medical costs, costs and possible effects of union organizing activities, failure to comply with government regulations concerning employment discrimination, employee pay and benefits and employee health and safety, uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation, the cost, results and ongoing assessment of internal controls for financial reporting required by the Sarbanes-Oxley Act of 2002, disruptions caused by the inaccessibility of computer systems data, the initiation or outcome of litigation, investigations or other proceedings, higher assumed sourcing or distribution costs of products, the disruption of operations from catastrophic or extraordinary events, the amount and timing of repurchases of our common stock, if any, changes in federal and state tax and labor laws, the reactions of competitors in terms of price and service and the finalization of our financial statements for the quarter ended August 31, 2012. Cintas undertakes no obligation to publicly release any revisions to any forward-looking statements or to otherwise update any forward-looking statements whether as a result of new information or to reflect events, circumstances or any other unanticipated developments arising after the date on which such statements are made. A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the year ended May 31, 2012 and in our reports on Forms 10-Q and 8-K. The risks and uncertainties described herein are not the only ones we may face. Additional risks and uncertainties presently not known to us or that we currently believe to be immaterial may also harm our business.
For additional information, contact:
William C. Gale, Sr. Vice President-Finance and Chief Financial Officer - 513-573-4211
J. Michael Hansen, Vice President and Treasurer - 513-701-2079
Cintas Corporation
Consolidated Condensed Statements of Income
(Unaudited)
(In thousands except per share data)
Three Months Ended | |||||||||||
August 31, 2012 | August 31, 2011 | % Chng. | |||||||||
Revenue: | |||||||||||
Rental uniforms and ancillary products | $ | 754,843 | $ | 719,423 | 4.9 | ||||||
Other services | 296,482 | 297,757 | (0.4 | ) | |||||||
Total revenue | $ | 1,051,325 | $ | 1,017,180 | 3.4 | ||||||
Costs and expenses: | |||||||||||
Cost of rental uniforms and ancillary products | $ | 428,148 | $ | 403,406 | 6.1 | ||||||
Cost of other services | 177,302 | 174,734 | 1.5 | ||||||||
Selling and administrative expenses | 306,581 | 310,466 | (1.3 | ) | |||||||
Operating income | $ | 139,294 | $ | 128,574 | 8.3 | ||||||
Interest income | $ | (77 | ) | $ | (365 | ) | (78.9 | ) | |||
Interest expense | 16,598 | 17,334 | (4.2 | ) | |||||||
Income before income taxes | $ | 122,773 | $ | 111,605 | 10.0 | ||||||
Income taxes | 46,040 | 42,967 | 7.2 | ||||||||
Net income | $ | 76,733 | $ | 68,638 | 11.8 | ||||||
Per share data: | |||||||||||
Basic earnings per share | $ | 0.61 | $ | 0.52 | 17.3 | ||||||
Diluted earnings per share | $ | 0.60 | $ | 0.52 | 15.4 | ||||||
Weighted average number of shares outstanding | 126,110 | 131,309 | |||||||||
Diluted average number of shares outstanding | 126,458 | 131,338 | |||||||||
CINTAS CORPORATION SUPPLEMENTAL DATA
Three Months Ended | ||||||||
August 31, 2012 | August 31, 2011 | |||||||
Rental uniforms and ancillary products gross margin | 43.3 | % | 43.9 | % | ||||
Other services gross margin | 40.2 | % | 41.3 | % | ||||
Total gross margin | 42.4 | % | 43.2 | % | ||||
Net margin | 7.3 | % | 6.7 | % | ||||
Depreciation and amortization | $ | 46,442 | $ | 48,510 | ||||
Capital expenditures | $ | 47,438 | $ | 44,421 | ||||
Computation of Free Cash Flow
Three Months Ended | ||||||||
August 31, 2012 | August 31, 2011 | |||||||
Net Cash Provided by Operations | $ | 94,865 | $ | 56,562 | ||||
Capital Expenditures | $ | (47,438 | ) | $ | (44,421 | ) | ||
Free Cash Flow | $ | 47,427 | $ | 12,141 | ||||
Note: Management uses free cash flow to assess the financial performance of the Company. Management believes that free cash flow is useful to investors because it relates the operating cash flow of the Company to the capital that is spent to continue,
improve and grow business operations.
SUPPLEMENTAL SEGMENT DATA | Rental Uniforms and Ancillary Products | Uniform Direct Sales | First Aid, Safety and Fire Protection | Document Management | Corporate | Total | ||||||||||||||||||
For the three months ended August 31, 2012 | ||||||||||||||||||||||||
Revenue | $ | 754,843 | $ | 100,279 | $ | 110,841 | $ | 85,362 | $ | — | $ | 1,051,325 | ||||||||||||
Gross margin | $ | 326,695 | $ | 29,478 | $ | 47,791 | $ | 41,911 | $ | — | $ | 445,875 | ||||||||||||
Selling and administrative expenses | $ | 209,788 | $ | 20,737 | $ | 38,770 | $ | 37,286 | $ | — | $ | 306,581 | ||||||||||||
Interest income | $ | — | $ | — | $ | — | $ | — | $ | (77 | ) | $ | (77 | ) | ||||||||||
Interest expense | $ | — | $ | — | $ | — | $ | — | $ | 16,598 | $ | 16,598 | ||||||||||||
Income (loss) before income taxes | $ | 116,907 | $ | 8,741 | $ | 9,021 | $ | 4,625 | $ | (16,521 | ) | $ | 122,773 | |||||||||||
Assets | $ | 2,774,417 | $ | 125,094 | $ | 359,387 | $ | 563,172 | $ | 330,165 | $ | 4,152,235 | ||||||||||||
For the three months ended August 31, 2011 | ||||||||||||||||||||||||
Revenue | $ | 719,423 | $ | 101,702 | $ | 103,743 | $ | 92,312 | $ | — | $ | 1,017,180 | ||||||||||||
Gross margin | $ | 316,017 | $ | 29,108 | $ | 44,787 | $ | 49,128 | $ | — | $ | 439,040 | ||||||||||||
Selling and administrative expenses | $ | 216,599 | $ | 20,701 | $ | 36,404 | $ | 36,762 | $ | — | $ | 310,466 | ||||||||||||
Interest income | $ | — | $ | — | $ | — | $ | — | $ | (365 | ) | $ | (365 | ) | ||||||||||
Interest expense | $ | — | $ | — | $ | — | $ | — | $ | 17,334 | $ | 17,334 | ||||||||||||
Income (loss) before income taxes | $ | 99,418 | $ | 8,407 | $ | 8,383 | $ | 12,366 | $ | (16,969 | ) | $ | 111,605 | |||||||||||
Assets | $ | 2,761,317 | $ | 150,228 | $ | 363,692 | $ | 575,615 | $ | 277,040 | $ | 4,127,892 | ||||||||||||
Cintas Corporation
Consolidated Balance Sheets
(In thousands except share data)
August 31, 2012 | May 31, 2012 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash & cash equivalents | $ | 319,217 | $ | 339,825 | ||||
Marketable securities | 10,948 | — | ||||||
Accounts receivable, net | 459,302 | 450,861 | ||||||
Inventories, net | 241,699 | 251,205 | ||||||
Uniforms and other rental items in service | 462,541 | 452,785 | ||||||
Income taxes, current | — | 22,188 | ||||||
Prepaid expenses and other | 30,170 | 24,704 | ||||||
Total current assets | 1,523,877 | 1,541,568 | ||||||
Property and equipment, at cost, net | 953,761 | 944,305 | ||||||
Goodwill | 1,489,104 | 1,485,375 | ||||||
Service contracts, net | 72,297 | 76,822 | ||||||
Other assets, net | 113,196 | 112,836 | ||||||
$ | 4,152,235 | $ | 4,160,906 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 110,906 | $ | 94,840 | ||||
Accrued compensation and related liabilities | 40,531 | 91,214 | ||||||
Accrued liabilities | 213,440 | 256,642 | ||||||
Income taxes, current | 7,930 | — | ||||||
Deferred tax liability | 10,668 | 2,559 | ||||||
Long-term debt due within one year | 636 | 225,636 | ||||||
Total current liabilities | 384,111 | 670,891 | ||||||
Long-term liabilities: | ||||||||
Long-term debt due after one year | 1,309,012 | 1,059,166 | ||||||
Deferred income taxes | 206,856 | 204,581 | ||||||
Accrued liabilities | 97,841 | 87,133 | ||||||
Total long-term liabilities | 1,613,709 | 1,350,880 | ||||||
Shareholders’ equity: | ||||||||
Preferred stock, no par value: 100,000 shares authorized, none outstanding | — | — | ||||||
Common stock, no par value: 425,000,000 shares authorized FY13: 174,357,822 issued and 125,117,508 outstanding FY12: 173,745,913 issued and 126,519,758 outstanding | 171,091 | 148,255 | ||||||
Paid-in capital | 93,331 | 107,019 | ||||||
Retained earnings | 3,558,806 | 3,482,073 | ||||||
Treasury stock: FY13: 49,240,314 shares FY12: 47,226,155 shares | (1,712,828 | ) | (1,634,875 | ) | ||||
Other accumulated comprehensive income (loss): | ||||||||
Foreign currency translation | 59,416 | 52,399 | ||||||
Unrealized loss on derivatives | (15,767 | ) | (16,104 | ) | ||||
Other | 366 | 368 | ||||||
Total shareholders’ equity | 2,154,415 | 2,139,135 | ||||||
$ | 4,152,235 | $ | 4,160,906 | |||||
Cintas Corporation
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
Three Months Ended | ||||||||
August 31, 2012 | August 31, 2011 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 76,733 | $ | 68,638 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 40,342 | 38,277 | ||||||
Amortization of deferred charges | 6,100 | 10,233 | ||||||
Stock-based compensation | 5,448 | 4,522 | ||||||
Deferred income taxes | 9,716 | (7,808 | ) | |||||
Change in current assets and liabilities, net of acquisitions of businesses: | ||||||||
Accounts receivable, net | (7,128 | ) | (10,142 | ) | ||||
Inventories, net | 9,889 | (30,770 | ) | |||||
Uniforms and other rental items in service | (8,672 | ) | (11,124 | ) | ||||
Prepaid expenses and other | (5,392 | ) | (5,983 | ) | ||||
Accounts payable | 16,278 | (9,329 | ) | |||||
Accrued compensation and related liabilities | (50,793 | ) | (27,611 | ) | ||||
Accrued liabilities | (27,400 | ) | (10,201 | ) | ||||
Income taxes payable | 29,744 | 47,860 | ||||||
Net cash provided by operating activities | 94,865 | 56,562 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (47,438 | ) | (44,421 | ) | ||||
Proceeds from redemption of marketable securities | 24,720 | 63,561 | ||||||
Purchase of marketable securities and investments | (36,970 | ) | (107,145 | ) | ||||
Acquisitions of businesses, net of cash acquired | (2,130 | ) | (870 | ) | ||||
Other, net | 577 | 6,539 | ||||||
Net cash used in investing activities | (61,241 | ) | (82,336 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of debt | 250,000 | — | ||||||
Repayment of debt | (225,154 | ) | (444 | ) | ||||
Exercise of stock-based compensation awards | 1,119 | — | ||||||
Repurchase of common stock | (77,953 | ) | (262,639 | ) | ||||
Other, net | (3,491 | ) | 926 | |||||
Net cash used in financing activities | (55,479 | ) | (262,157 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 1,247 | 137 | ||||||
Net decrease in cash and cash equivalents | (20,608 | ) | (287,794 | ) | ||||
Cash and cash equivalents at beginning of period | 339,825 | 438,106 | ||||||
Cash and cash equivalents at end of period | $ | 319,217 | $ | 150,312 | ||||