Cintas Reports First Quarter Fiscal
2003 Sales and Profits
· Results strong despite slowing economy
· Revenue up 18% to $666 million
· Net income up 9% to $62 million
· Earnings per share of $.36, up 9%
CINCINNATI, September 19, 2002 – Cintas Corporation (Nasdaq: CTAS) today reported that total revenue for its fiscal first quarter ended August 31, 2002, rose 18 percent to $666 million from $565 million a year ago. Net income of $61.6 million was 9 percent above last year's $56.5 million. Earnings per share (diluted) rose 9 percent to 36 cents, up from 33 cents in the first quarter of last fiscal year.
For the first quarter, rental revenue rose 21 percent while other services revenue – including direct sales of uniforms -- was up 8 percent from a year ago. The company noted that there was one less workday in this year's first quarter versus last year. On a comparable basis, rental revenue and other services revenue rose 23 percent and 10 percent, respectively.
In May 2002, Cintas completed the acquisition of Omni Services, Inc., the largest acquisition in the Company’s history. Omni brought to Cintas 90,000 customers located in 31 states, and the opportunity to realize significant synergies from combining the two companies. The Omni acquisition contributed approximately $70 million in revenue in the first quarter. Internal growth in the rental business, adjusting for acquisitions and the workday, noted above, was 5%.
Chairman and Founder Richard T. Farmer said that Cintas, a leader in corporate identity apparel, is on track to extend its record of 33 consecutive years of growth in sales and profits in fiscal 2003. "That track record has distinguished Cintas and demonstrates our ability to continue to grow and leverage our infrastructure to be a more valuable resource for our 500,000 customers," Farmer noted.
Profitability Remains Strong
Margins were strong despite the additional costs incurred from the
Omni acquisition. The operating margin of 15.8 percent and a net
margin of 9.3 percent have absorbed the additional costs incurred
as a result of the acquisition of Omni, as well as integration costs
being incurred to convert the Omni operations to Cintas’ methods
of operation. Robert J. Kohlhepp, Chief Executive Officer of Cintas,
commented, “A number of factors are contributing to Cintas'
ability to sustain margins. Foremost is the fact that we are very
focused on profitability and cash flow during this important period
of integrating Omni’s operations. We are aggressively managing
expenses in every area of our business and continuing our focus
on productivity enhancements and cost control efforts throughout
our entire organization.”
Results Indicate Business Strength
“We are optimistic about our business and our future,”
said Kohlhepp. “Our focus on the unserved market, which is
three times the existing market size that we serve today, is the
reason our new business continues to be strong even in a tough economic
environment. Today, only 12 million people in the United States
and Canada rent uniforms. Our research shows that 37 million people
work in occupations where a full-service uniform rental program
should be used. Our opportunities for continued growth in our core
market are outstanding. We see great opportunities in our other
business services as well. Every company in North America needs
one or more of our services. Our 500,000 business customers only
represent 3.6 percent of the 14 million businesses in North America.
We are just scratching the surface of that potential. ”
Outlook for Fiscal 2003
“The economy continues to show weakness in many areas. Although
our sales force continues to be very successful in adding new customers,
we continue to experience lower sales volume with our existing customers
as they shrink their workforces, eliminate shifts and departments
and even close operations. While it is difficult to estimate when
our customers’ business will improve, we now estimate full
year revenue will be between $2.7 billion and $2.8 billion with
earnings per share in a range of $1.55 to $1.62. When compared to
the guidance that we gave in July 2002, this new guidance is slightly
lower for revenue, but reiterates the previous guidance on earnings
per share. The Omni acquisition integration is going well, we are
realizing the intended value of that acquisition and we are actively
controlling costs in order to reach our targeted earnings per share
goal for the year,” Kohlhepp said.
About Cintas
Cintas Corporation, headquartered in Cincinnati, Ohio, is the leader
in the corporate identity uniform industry providing uniforms to
a wide variety of industries nationwide. The Company also provides
a wide range of outsourcing services including entrance mats, sanitation
supplies, cleanroom services, and first aid and safety products
and services. Cintas is a publicly held company traded over Nasdaq
National Market under the symbol CTAS, and is a Nasdaq-100 company
and component of the Standard & Poor’s 500 Index. The
Company has achieved 33 consecutive years of uninterrupted growth
in sales and earnings, to date.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform
Act of 1995 provides a safe harbor from civil litigation for forward-looking
statements. This news release contains forward-looking statements
that reflect the Company’s current views as to future events
and financial performance with respect to its operations. These
statements are subject to risks and uncertainties that could cause
actual results to differ materially from those set forth in this
news release. Factors that might cause such a difference include
the possibility of greater than anticipated operating costs, lower
sales volumes, the performance and costs of integration of acquisitions,
including, without limitation, the recent acquisitions of Omni Services,
Inc., and certain assets of Angelica Corporation, fluctuations in
costs of materials and labor, the outcome of pending environmental
matters, the initiation or outcome of litigation, higher assumed
sourcing and distribution costs of products and the reactions of
competitors in terms of price and service. Forward-looking statements
speak only as of the date made. Cintas undertakes no obligation
under the Act to update any forward-looking statements to reflect
the events or circumstances arising after the date on which they
are made.
For additional information, contact:
William C. Gale
Vice President-Finance and CFO
(513)573-4211
Karen L. Carnahan
Vice President and Treasurer
(513)573-4013
Cintas
Corporation Consolidated Condensed Statements of Income (Unaudited)
(In thousands except per share data) |
|||
|
|
Three Months Ended |
||
|
|
Aug 31, 2002 |
Aug 31, 2001 |
% Chng. |
| Revenue: |
|||
| Rentals |
$523,656 |
$433,152 |
20.9 |
| Other services |
142,070 |
131,448 |
8.1 |
Total revenue |
$665,726 |
$564,600 |
17.9 |
| Costs and expenses (income): |
|||
| Cost of rentals |
$282,060 |
$237,920 |
18.6 |
| Cost of other services |
101,653 |
90,658 |
12.1 |
| Selling and admin. expenses |
176,832 |
144,488 |
22.4 |
| Interest income |
(739) |
(1,251) |
-40.9 |
| Interest expense |
8,024 |
3,086 |
160.0 |
Total costs and expenses |
$567,830 |
$474,901 |
19.6 |
| Income before income taxes |
97,896 |
89,699 |
9.1 |
| Income taxes |
36,249 |
33,159 |
9.3 |
| Net income |
$61,647 |
$56,540 |
9.0 |
| Per share data: |
|||
| Basic earnings per share |
$.36 |
$.33 |
9.1 |
| Diluted earnings per share |
$.36 |
$.33 |
9.1 |
| Basic shares outstanding |
170,036 |
169,528 |
|
| Diluted shares outstanding |
172,199 |
172,170 |
|
| CINTAS CORPORATION SUPPLEMENTAL DATA | |||
|
Three Months Ended |
|||
|
|
Aug 31, 2002 |
Aug 31, 2001 |
% Chng. |
| EBIT |
$105,181 |
$91,534 |
14.9 |
| EBIT/revenue |
15.8% |
16.2% |
|
| EBITDA |
143,247 |
120,939 |
18.4 |
| EBITDA/revenue |
21.5% |
21.4% |
|
| Rental gross margin |
46.1% |
45.1% |
|
| Other services gross margin |
28.4% |
31.0% |
|
| Total gross margin |
42.4% |
41.8% |
|
| Net margin |
9.3% |
10.0% |
|
| Depreciation and amortization |
38,066 |
29,405 |
29.5 |
| Capital expenditures |
21,647 |
32,731 |
-33.9 |
| Debt to Capitalization |
31.4% |
15.6% |
|
Cintas
Corporation Consolidated Condensed Balance Sheets (Unaudited) (In thousands except share data) |
||
| Aug 31, 2002 |
Aug 31, 2001 |
|
| ASSETS |
||
| Current assets: |
||
| Cash and cash equivalents |
$33,407 |
$64,751 |
| Marketable securities |
35,753 |
61,899 |
| Accounts receivable, net |
282,351 |
248,283 |
| Inventories |
209,513 |
204,208 |
| Uniforms and other rental items in service |
292,057 |
248,983 |
| Prepaid expenses |
10,963 |
10,585 |
| Total current assets |
864,044 |
838,709 |
| Property and equipment, at cost, net |
770,291 |
710,590 |
| Goodwill |
689,043 |
130,745 |
| Service contracts |
155,361 |
56,802 |
| Other assets |
57,213 |
48,424 |
| $2,535,952 |
$1,785,270 |
|
| LIABILITIES AND SHAREHOLDERS' EQUITY |
||
| Current liabilities: |
||
| Accounts payable |
$70,854 |
$42,541 |
| Accrued liabilities |
115,333 |
70,625 |
| Income taxes: |
||
| Current |
26,233 |
26,385 |
| Deferred |
74,290 |
65,575 |
| Long-term debt due within one year |
16,736 |
20,540 |
| Total current liabilities |
303,446 |
225,666 |
| Long-term debt due after one year |
663,590 |
217,738 |
| Deferred income taxes |
83,243 |
53,202 |
| Shareholders’ equity: |
||
Preferred stock, no par value, 100,000 shares authorized, none outstanding |
- |
- |
Common stock, no par value, 425,000,000 shares authorized, 170,142,146 shares issued and outstanding (169,693,847 at August 31, 2001) |
68,579 |
64,173 |
| Retained earnings |
1,426,783 |
1,230,405 |
| Other accumulated comprehensive loss: |
||
| Unrealized loss on derivatives |
(3,286) |
- |
| Foreign currency translation |
(6,403) |
(5,914) |
| Total shareholders' equity |
1,485,673 |
1,288,664 |
| $2,535,952 |
$1,785,270 |
|
Cintas
Corporation Consolidated Condensed Statements of Cash Flows (unaudited) (In thousands) |
||
| Three Months Ended |
||
| Aug 31, 2002 |
Aug 31, 2001 |
|
| Cash flows from operating activities: |
||
| Net income |
$61,647 |
$56,540 |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||
| Depreciation |
30,428 |
24,673 |
| Amortization of deferred charges |
7,638 |
4,732 |
| Deferred income taxes |
16,570 |
12,008 |
| Change in current assets and liabilities, net of acquisitions of businesses: |
||
| Accounts receivable |
1,739 |
(2,435) |
| Inventories |
(15,641) |
10,727 |
| Uniforms and other rental items in service |
(11,121) |
(6,647) |
| Prepaid expenses |
(773) |
(2,100) |
| Accounts payable |
10,388 |
(536) |
| Accrued compensation and related liabilities |
(3,776) |
(16,820) |
| Accrued liabilities |
(41,562) |
(32,685) |
| Income taxes payable |
14,442 |
12,973 |
| Net cash provided by operating activities |
69,979 |
60,430 |
| Cash flows from investing activities: |
||
| Capital expenditures |
(21,647) |
(32,731) |
| Proceeds from sale or redemption of marketable securities |
8,686 |
537 |
| Purchase of marketable securities |
19 |
(25,931) |
| Acquisitions of businesses, net of cash acquired |
(15,931) |
(9,839) |
| Other |
204 |
554 |
| Net cash used in investing activities |
(28,669) |
(67,410) |
| Cash flows from financing activities; |
||
| Repayment of long-term debt |
(48,798) |
(3,267) |
| Stock options exercised |
2,071 |
1,070 |
| Other |
(1,804) |
204 |
| Net cash used in financing activities |
(48,531) |
(1,993) |
| Net decrease in cash and cash equivalents |
(7,221) |
(8,973) |
| Cash and cash equivalents at beginning of period |
40,628 |
73,724 |
| Cash and cash equivalents at end of period |
$33,407 |
$64,751 |
For further information
William C. Gale,
Vice President - Finance and CFO, 513-573-4211, or
Karen L. Carnahan,
Vice President and Treasurer, 513-573-4013,
both of Cintas Corporation
Web site: http://www.cintas.com