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| 8-K - 8-K - CINTAS CORP | ctasform8-k9x13.htm |
Exhibit 99
FOR IMMEDIATE RELEASE
September 19, 2013
Cintas Corporation Announces Fiscal 2014 First Quarter Results
CINCINNATI, September 19, 2013 -- Cintas Corporation (Nasdaq:CTAS) today reported revenue for its first quarter ended August 31, 2013, of $1.12 billion, a 6.6% increase compared to last year's first quarter. Adjusting for one less workday in this year's first quarter compared to last year's first quarter, revenue grew 8.2%. Organic growth, which adjusts for the impact of acquisitions and the impact of one less workday, was 7.1%.
Scott D. Farmer, Chief Executive Officer, stated, “We are pleased to report a solid start to our fiscal 2014 year. All four of our operating segments had strong revenue performance in the first quarter, with each segment reporting organic growth of better than six percent.”
Operating income increased to $140.1 million, or 12.5% of revenue. The operating margin of 12.5% was lower than last year's first quarter operating margin of 13.2% due to the effects of one less workday in this year's first quarter, route capacity added in fiscal 2013 and lower recycled paper prices. Net income increased 1.3% to $77.8 million as compared to $76.7 million in last year's first quarter. Earnings per diluted share (EPS) for the first quarter were $0.63, a 5.0% increase over the $0.60 EPS in last year's first quarter.
During the first quarter and into September, Cintas purchased 3.0 million shares of its common stock at a cost of approximately $147.0 million. The total purchases included acquiring 2.1 million shares at a cost of approximately $100.7 million during the latter part of the first quarter, and the remaining 0.9 million shares were purchased through September 19, 2013, at a cost of approximately $46.3 million. While it had no impact on the first quarter EPS, the share buyback is expected to benefit fiscal year 2014 EPS by approximately $0.04. The Cintas Board of Directors authorized a $500.0 million share buyback program in October 2011 and approved an additional share repurchase program of $500.0 million on July 30, 2013. As of September 19, 2013, the Company had available for future share repurchases $15.4 million under the October 2011 share buyback program and $500.0 million under the July 2013 program.
Mr. Farmer concluded, “When we introduced our fiscal 2014 guidance in July, we indicated our outlook was based on an uncertain U.S. economic landscape which caused delays to the hiring and investment decisions of our customers. We have not seen any evidence since that time to change our outlook of the U.S. economy. With that in mind, we reiterate our fiscal 2014 revenue expectations to be in the range of $4.5 billion to $4.6 billion. We are updating our full year EPS guidance to incorporate the impact of the share buybacks through September 19, 2013. As a result, we now expect EPS to be in the range of $2.70 to $2.79. This guidance assumes no deterioration in the U.S. economy and does not consider any additional share buybacks. It does incorporate the impact of having one less workday in fiscal 2014 compared to fiscal 2013 and our current estimate of the impact of the Affordable Care Act on our cost structure during fiscal year 2014.”
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 one million 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, the ultimate impact of the Affordable Care Act and the finalization of our financial statements for the quarter ended August 31, 2013. 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, 2013 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, 2013 | August 31, 2012 | % Chng. | ||||||||
Revenue: | ||||||||||
Rental uniforms and ancillary products | $ | 792,866 | $ | 754,843 | 5.0% | |||||
Other services | 327,477 | 296,482 | 10.5% | |||||||
Total revenue | $ | 1,120,343 | $ | 1,051,325 | 6.6% | |||||
Costs and expenses: | ||||||||||
Cost of rental uniforms and ancillary products | $ | 454,731 | $ | 428,148 | 6.2% | |||||
Cost of other services | 199,632 | 177,302 | 12.6% | |||||||
Selling and administrative expenses | 325,910 | 306,581 | 6.3% | |||||||
Operating income | $ | 140,070 | $ | 139,294 | 0.6% | |||||
Interest income | $ | (68 | ) | $ | (77 | ) | (11.7)% | |||
Interest expense | 16,523 | 16,598 | (0.5)% | |||||||
Income before income taxes | $ | 123,615 | $ | 122,773 | 0.7% | |||||
Income taxes | 45,861 | 46,040 | (0.4)% | |||||||
Net income | $ | 77,754 | $ | 76,733 | 1.3% | |||||
Per share data: | ||||||||||
Basic earnings per share | $ | 0.63 | $ | 0.61 | 3.3% | |||||
Diluted earnings per share | $ | 0.63 | $ | 0.60 | 5.0% | |||||
Weighted average number of shares outstanding | 122,130 | 126,110 | ||||||||
Diluted average number of shares outstanding | 122,892 | 126,458 | ||||||||
CINTAS CORPORATION SUPPLEMENTAL DATA
Three Months Ended | ||||||||
August 31, 2013 | August 31, 2012 | |||||||
Rental uniforms and ancillary products gross margin | 42.6 | % | 43.3 | % | ||||
Other services gross margin | 39.0 | % | 40.2 | % | ||||
Total gross margin | 41.6 | % | 42.4 | % | ||||
Net margin | 6.9 | % | 7.3 | % | ||||
Depreciation and amortization | $ | 48,394 | $ | 46,442 | ||||
Capital expenditures | $ | 37,462 | $ | 47,438 | ||||
Reconciliation of Non-GAAP Financial Measures and Regulation G Disclosure
The press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. To supplement its consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), the Company provides additional measures of revenue growth, debt and cash flow. The Company believes that these non-GAAP financial measures are appropriate to enhance understanding of its past performance as well as prospects for future performance. A reconciliation of the differences between these non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP is shown below.
Computation of Workday Adjusted Revenue Growth
Three Months Ended | ||||||
August 31, 2013 | August 31, 2012 | Growth % | ||||
A | B | G | ||||
Revenue | $1,120,343 | $1,051,325 | 6.6% | |||
G=(A-B)/B | ||||||
C | D | |||||
Workdays in the period | 65 | 66 | ||||
E | F | H | ||||
Revenue adjusted for workday difference | $1,137,579 | $1,051,325 | 8.2% | |||
H=(E-F)/F | ||||||
E=(A/C)*D | F=(B/D)*D | |||||
Management believes that Workday Adjusted Revenue Growth is valuable to investors because it reflects the revenue performance compared to a prior period with the same number of revenue generating days.
Computation of Debt to EBITDA
As of | |||||||||||||||
August 31, 2013 | |||||||||||||||
Long-term debt | $ | 1,308,999 | |||||||||||||
Letters of credit | 85,117 | ||||||||||||||
Debt | $ | 1,394,116 | |||||||||||||
Rolling Twelve Months Ended August 31, 2013 | Three Months Ended August 31, 2013 | Three Months Ended May 31, 2013 | Three Months Ended February 28, 2013 | Three Months Ended November 30, 2012 | |||||||||||
Net Income | $ | 316,463 | $ | 77,754 | $ | 85,977 | $ | 74,705 | $ | 78,027 | |||||
Add back: | |||||||||||||||
Interest expense | 65,637 | 16,523 | 16,518 | 16,302 | 16,294 | ||||||||||
Taxes | 184,287 | 45,861 | 51,427 | 42,148 | 44,851 | ||||||||||
Depreciation | 167,893 | 42,571 | 42,422 | 41,921 | 40,979 | ||||||||||
Amortization | 23,436 | 5,823 | 5,829 | 5,911 | 5,873 | ||||||||||
EBITDA | $ | 757,716 | $ | 188,532 | $ | 202,173 | $ | 180,987 | $ | 186,024 | |||||
Debt / EBITDA | 1.8 | ||||||||||||||
As of | |||||||||||||||
August 31, 2012 | |||||||||||||||
Long-term debt | $ | 1,309,648 | |||||||||||||
Letters of credit | 85,719 | ||||||||||||||
Debt | $ | 1,395,367 | |||||||||||||
Rolling Twelve Months Ended August 31, 2012 | Three Months Ended August 31, 2012 | Three Months Ended May 31, 2012 | Three Months Ended February 29, 2012 | Three Months Ended November 30, 2011 | |||||||||||
Net Income | $ | 305,732 | $ | 76,733 | $ | 78,614 | $ | 76,035 | $ | 74,350 | |||||
Add back: | |||||||||||||||
Interest expense | 69,889 | 16,598 | 18,344 | 17,219 | 17,728 | ||||||||||
Taxes | 176,380 | 46,040 | 44,675 | 44,655 | 41,010 | ||||||||||
Depreciation | 157,896 | 40,342 | 40,265 | 38,644 | 38,645 | ||||||||||
Amortization | 34,201 | 6,100 | 8,814 | 9,416 | 9,871 | ||||||||||
EBITDA | $ | 744,098 | $ | 185,813 | $ | 190,712 | $ | 185,969 | $ | 181,604 | |||||
Debt / EBITDA | 1.9 | ||||||||||||||
Management believes the ratio of debt to earnings before interest, taxes, depreciation and amortization (EBITDA) is valuable to investors, particularly investors of the company's debt, because it is a common metric that reflects the company's earnings and cash flow available for debt service payments.
Computation of Free Cash Flow
Three Months Ended | ||||||||
August 31, 2013 | August 31, 2012 | |||||||
Net Cash Provided by Operations | $ | 82,559 | $ | 94,865 | ||||
Capital Expenditures | $ | (37,462 | ) | $ | (47,438 | ) | ||
Free Cash Flow | $ | 45,097 | $ | 47,427 | ||||
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, 2013 | ||||||||||||||||||||||||
Revenue | $ | 792,866 | $ | 107,462 | $ | 125,875 | $ | 94,140 | $ | — | $ | 1,120,343 | ||||||||||||
Gross margin | $ | 338,135 | $ | 29,714 | $ | 54,897 | $ | 43,234 | $ | — | $ | 465,980 | ||||||||||||
Selling and administrative expenses | $ | 220,742 | $ | 21,033 | $ | 43,451 | $ | 40,684 | $ | — | $ | 325,910 | ||||||||||||
Interest income | $ | — | $ | — | $ | — | $ | — | $ | (68 | ) | $ | (68 | ) | ||||||||||
Interest expense | $ | — | $ | — | $ | — | $ | — | $ | 16,523 | $ | 16,523 | ||||||||||||
Income (loss) before income taxes | $ | 117,393 | $ | 8,681 | $ | 11,446 | $ | 2,550 | $ | (16,455 | ) | $ | 123,615 | |||||||||||
Assets | $ | 2,842,058 | $ | 143,993 | $ | 410,633 | $ | 631,634 | $ | 282,859 | $ | 4,311,177 | ||||||||||||
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 | $ | 2,779,217 | $ | 125,094 | $ | 359,387 | $ | 563,172 | $ | 330,165 | $ | 4,157,035 | ||||||||||||
Cintas Corporation
Consolidated Balance Sheets
(In thousands except share data)
August 31, 2013 | May 31, 2013 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash & cash equivalents | $ | 278,670 | $ | 352,273 | ||||
Marketable securities | 4,189 | 5,680 | ||||||
Accounts receivable, net | 511,642 | 496,049 | ||||||
Inventories, net | 245,470 | 240,440 | ||||||
Uniforms and other rental items in service | 500,384 | 496,752 | ||||||
Income taxes, current | — | 9,102 | ||||||
Prepaid expenses | 31,934 | 24,530 | ||||||
Total current assets | 1,572,289 | 1,624,826 | ||||||
Property and equipment, at cost, net | 991,331 | 986,703 | ||||||
Goodwill | 1,531,006 | 1,517,560 | ||||||
Service contracts, net | 93,119 | 92,153 | ||||||
Other assets, net | 123,432 | 124,390 | ||||||
$ | 4,311,177 | $ | 4,345,632 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 124,952 | $ | 121,029 | ||||
Accrued compensation and related liabilities | 43,247 | 78,050 | ||||||
Accrued liabilities | 235,237 | 271,821 | ||||||
Income taxes, current | 23,367 | — | ||||||
Deferred tax liability | 80,692 | 77,169 | ||||||
Long-term debt due within one year | 8,200 | 8,187 | ||||||
Total current liabilities | 515,695 | 556,256 | ||||||
Long-term liabilities: | ||||||||
Long-term debt due after one year | 1,300,799 | 1,300,979 | ||||||
Deferred income taxes | 214,221 | 210,483 | ||||||
Accrued liabilities | 84,451 | 76,422 | ||||||
Total long-term liabilities | 1,599,471 | 1,587,884 | ||||||
Shareholders’ equity: | ||||||||
Preferred stock, no par value: 100,000 shares authorized, none outstanding | — | — | ||||||
Common stock, no par value: 425,000,000 shares authorized FY14: 175,492,504 issued and 120,778,629 outstanding FY13: 174,786,010 issued and 122,281,507 outstanding | 217,107 | 186,332 | ||||||
Paid-in capital | 102,961 | 109,822 | ||||||
Retained earnings | 3,795,525 | 3,717,771 | ||||||
Treasury stock: FY14: 54,713,875 shares FY13: 52,504,503 shares | (1,957,533 | ) | (1,850,556 | ) | ||||
Other accumulated comprehensive income (loss): | ||||||||
Foreign currency translation | 50,666 | 51,312 | ||||||
Unrealized loss on derivatives | (13,851 | ) | (14,339 | ) | ||||
Other | 1,136 | 1,150 | ||||||
Total shareholders’ equity | 2,196,011 | 2,201,492 | ||||||
$ | 4,311,177 | $ | 4,345,632 | |||||
Cintas Corporation
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
Three Months Ended | ||||||||
August 31, 2013 | August 31, 2012 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 77,754 | $ | 76,733 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 42,571 | 40,342 | ||||||
Amortization of intangible assets | 5,823 | 6,100 | ||||||
Stock-based compensation | 6,984 | 5,448 | ||||||
Deferred income taxes | 7,373 | 9,716 | ||||||
Change in current assets and liabilities, net of acquisitions of businesses: | ||||||||
Accounts receivable, net | (14,903 | ) | (7,128 | ) | ||||
Inventories, net | (5,258 | ) | 9,889 | |||||
Uniforms and other rental items in service | (4,150 | ) | (8,672 | ) | ||||
Prepaid expenses | (7,216 | ) | (5,392 | ) | ||||
Accounts payable | 2,915 | 16,278 | ||||||
Accrued compensation and related liabilities | (34,777 | ) | (50,793 | ) | ||||
Accrued liabilities | (27,215 | ) | (27,400 | ) | ||||
Income taxes payable | 32,658 | 29,744 | ||||||
Net cash provided by operating activities | 82,559 | 94,865 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (37,462 | ) | (47,438 | ) | ||||
Proceeds from redemption of marketable securities | 35,233 | 24,720 | ||||||
Purchase of marketable securities and investments | (32,941 | ) | (36,970 | ) | ||||
Acquisitions of businesses, net of cash acquired | (32,216 | ) | (2,130 | ) | ||||
Other, net | 382 | 577 | ||||||
Net cash used in investing activities | (67,004 | ) | (61,241 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of debt | — | 250,000 | ||||||
Repayment of debt | (167 | ) | (225,154 | ) | ||||
Proceeds from exercise of stock-based compensation awards | 14,085 | 1,119 | ||||||
Repurchase of common stock | (106,977 | ) | (77,953 | ) | ||||
Other, net | 4,126 | (3,491 | ) | |||||
Net cash used in financing activities | (88,933 | ) | (55,479 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (225 | ) | 1,247 | |||||
Net decrease in cash and cash equivalents | (73,603 | ) | (20,608 | ) | ||||
Cash and cash equivalents at beginning of period | 352,273 | 339,825 | ||||||
Cash and cash equivalents at end of period | $ | 278,670 | $ | 319,217 | ||||