Cintas Corporation Announces Fiscal 2008 Results

Cintas Corporation (Nasdaq:CTAS) today reported revenue for its fiscal year ended May 31, 2008, of $3.9 billion, a 6 percent increase over the previous fiscal year. Net income for the year was $335 million and earnings per diluted share were $2.15. For the fourth quarter ended May 31, 2008, revenue was slightly in excess of $1.0 billion, a 5 percent increase over prior year fourth quarter revenue. This marks the first time that Cintas revenue has exceeded one billion dollars for a fiscal quarter. Fourth quarter net income was $90 million and earnings per diluted share were $0.58. Scott D. Farmer, President and Chief Executive Officer, stated, "I am pleased to announce that we have recently completed our 39th consecutive year of growth in both revenue and earnings. Despite difficult and challenging economic conditions, including significant increases in energy costs, we were able to achieve these positive results. These results could not have been achieved without the continued support of our customers and the hard work and dedication of our 34,000 employee-partners.” Mr. Farmer continued, "Our products and services, which include uniforms, facility services, first aid and fire protection services and document management services, continue to be effective, efficient solutions for businesses of all sizes and types. All of our operating divisions continued to grow in fiscal 2008, demonstrating the value our services provide to our customers.” Cintas also continues to be recognized throughout North America for its social and environmental commitment. Recognition during the fiscal year included being listed in the Top 50 military friendly businesses by G.I. Jobs magazine, receiving the "Governor’s Pollution Prevention Award” by the Illinois Department of Natural Resources and receiving the New Jersey Governor’s Occupational Safety and Health Award. Cintas was also named among the best employers in Canada for the fourth consecutive year by Canada’s Globe and Mail news, and was listed among FORTUNE magazine’s list of "America’s Most Admired Companies” for the eighth consecutive year. Financial Strength Cintas continues to be financially sound. Despite significantly higher energy costs in fiscal 2008, the Company maintained gross margins of 43% of revenue and generated operating income of 15% of revenue. The Company also generated free cash flow of $354 million, representing 9% of revenue. Approximately $112 million of this free cash flow was used to make acquisitions, as the Company continued to expand its national footprint and scope. In addition to acquisitions, $191 million was used to purchase shares under the Company’s share buyback program. Since the program’s inception the Company has bought back a total of $772 million of its stock, reducing outstanding shares by over 11%. The Company has $228 million in remaining authorization under the program and continues to balance purchases under the program with acquisition opportunities and overall balance sheet management. During its fourth quarter the Company also paid an annual dividend of $0.46 per share, an 18% increase over the $0.39 per share paid in fiscal 2007. This marks the 25th consecutive year Cintas has increased its dividend, which is every year since the Company went public in 1983. The Company’s balance sheet remains strong. Despite the acquisition and buyback activity, the Company’s debt to total capitalization remains under 30% and the Company’s current ratio is a healthy 3.5 to 1. Outlook Mr. Farmer stated, "We are excited with the opportunities that lie ahead for Cintas. Today, there is hardly a business or industry that you can think of that does not need one or more of our products and services.” Mr. Farmer continued, "While we remain bullish on all of our products and services, we expect the difficult economic environment to continue, which will impact our fiscal 2009 performance. Given this economic landscape, we expect revenue for fiscal 2009 to be in the range of $4.1 billion to $4.2 billion, with full year earnings per diluted share in the range of $2.22 to $2.30.” About Cintas Headquartered in Cincinnati, Cintas Corporation provides highly specialized services to businesses of all types 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 approximately 800,000 businesses. Cintas is a publicly held company traded over the Nasdaq Global Select Market under the symbol CTAS, and is a Nasdaq-100 company and 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 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. These statements are subject to various risks, uncertainties and other factors that could cause actual results to differ from those set forth in or implied by this news release. Factors that might cause such a difference include, but are not limited to, the possibility of greater than anticipated operating costs including energy 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, the initiation or outcome of litigation, higher assumed sourcing or distribution costs of products, the disruption of operations from catastrophic events, changes in federal and state tax laws and the reactions of competitors in terms of price and service. Cintas undertakes no obligation to update any forward-looking statements whether as a results of new information or to reflect events or circumstances arising after the date on which they are made. You are advised, however, to consult any further disclosures we make on related subjects in our Form 10-Q, 8K and 10-K reports to the SEC. Cintas Corporation Consolidated Condensed Statements of Income (In thousands except per share data)                           Three Months Ended   Twelve Months Ended   (Unaudited)               May 31, 2008   May 31, 2007   % Chng.   May 31, 2008   May 31, 2007   % Chng. Revenue:                       Rental uniforms and ancillary products $711,728     $696,833     2.1   $2,834,568     $2,734,629     3.7 Other services 297,227     267,242     11.2   1,103,332     972,271     13.5 Total revenue $1,008,955     $964,075     4.7   $3,937,900     $3,706,900     6.2                         Costs and expenses (income):                       Cost of rental uniforms and ancillary products $399,599     $385,685     3.6   $1,581,618     $1,515,185     4.4 Cost of other services 176,921     164,416     7.6   674,682     610,360     10.5 Selling and administrative expenses 279,116     258,074     8.2   1,104,145     1,003,958     10.0                         Operating income 153,319     155,900     -1.7   577,455     577,397     0.0                         Interest income (1,304 )   (1,992 )   -34.5   (6,072 )   (6,480 )   -6.3 Interest expense 13,371     13,825     -3.3   52,823     50,324     5.0                         Income before income taxes 141,252     144,067     -2.0   $530,704     $533,553     -0.5 Income taxes 51,591     53,745     -4.0   195,299     199,015     -1.9 Net income $89,661     $90,322     -0.7   $335,405     $334,538     0.3                         Per share data:                       Basic earnings per share $0.58     $0.57     1.8   $2.15     $2.09     2.9 Diluted earnings per share $0.58     $0.57     1.8   $2.15     $2.09     2.9                         Basic shares outstanding 153,686     158,657         155,678     159,769       Diluted shares outstanding 153,854     158,997         155,930     160,187       CINTAS CORPORATION SUPPLEMENTAL DATA   Three Months Ended   Twelve Months Ended   May 31, 2008   May 31, 2007   % Chng.   May 31, 2008   May 31, 2007   % Chng. Rental uniforms and ancillary products gross margin 43.9%   44.7%       44.2%   44.6%     Other services gross margin 40.5%   38.5%       38.9%   37.2%     Total gross margin 42.9%   42.9%       42.7%   42.7%     Net margin 8.9%   9.4%       8.5%   9.0%                             Depreciation and amortization $49,456   $45,875   7.8   $191,903   $175,926   9.1 Capital expenditures $45,485   $52,188   -12.8   $190,333   $180,824   5.3                         Debt to total capitalization 29.5%   28.9%       29.5%   28.9%     RECONCILIATION TO GAAP MEASURES   Twelve Months Ended   May 31, 2008   May 31, 2007   % Chng. Net cash provided by operating activities $544,543     $449,391     21.2 Capital expenditures ($190,333 )   ($180,824 )   5.3 Free cash flow $354,210     $268,567     31.9 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 May 31, 2008                       Revenue $711,728   $138,953   $104,549   $53,725   $0     $1,008,955 Gross margin $312,130   $48,207   $42,344   $29,754   $0     $432,435 Selling and administrative expenses $200,149   $26,504   $31,999   $20,464   $0     $279,116 Income (loss) before income taxes $111,981   $21,703   $10,345   $9,290   ($12,067 )   $141,252                         For the three months ended May 31, 2007                       Revenue $696,833   $132,264   $99,506   $35,472   $0     $964,075 Gross margin $311,148   $43,206   $39,873   $19,747   $0     $413,974 Selling and administrative expenses $195,818   $25,150   $28,143   $15,187   ($6,224 )   $258,074 Income (loss) before income taxes $115,330   $18,056   $11,730   $4,560   ($5,609 )   $144,067                         As of and for the twelve months ended May 31, 2008                       Revenue $2,834,568   $517,490   $403,552   $182,290   $0     $3,937,900 Gross margin $1,252,951   $168,210   $160,823   $99,616   $0     $1,681,600 Selling and administrative expenses $801,691   $103,444   $125,185   $73,825   $0     $1,104,145 Income (loss) before income taxes $451,260   $64,766   $35,638   $25,791   ($46,751 )   $530,704 Assets $2,620,138   $205,638   $345,479   $445,651   $191,695     $3,808,601                         As of and for the twelve months ended May 31, 2007                       Revenue $2,734,629   $501,443   $362,417   $108,411   $0     $3,706,900 Gross margin $1,219,444   $160,676   $144,439   $56,796   $0     $1,581,355 Selling and administrative expenses $757,058   $97,361   $106,171   $49,592   ($6,224 )   $1,003,958 Income (loss) before income taxes $462,386   $63,315   $38,268   $7,204   ($37,620 )   $533,553 Assets $2,567,070   $183,373   $330,735   $333,889   $155,413     $3,570,480 Cintas Corporation Consolidated Condensed Balance Sheets (In thousands except share data)               May 31, 2008   May 31, 2007 ASSETS           Current assets:           Cash and cash equivalents $66,224     $35,360   Marketable securities 125,471     120,053   Accounts receivable, net 430,078     408,870   Inventories, net 238,669     231,741   Uniforms and other rental items in service 370,416     344,931   Deferred tax asset 39,410     -   Prepaid expenses 12,068     15,781   Total current assets 1,282,336     1,156,736               Property and equipment, at cost, net 974,575     920,243               Goodwill 1,315,569     1,245,877   Service contracts, net 152,757     171,361   Other assets, net 83,364     76,263                 $3,808,601     $3,570,480               LIABILITIES AND SHAREHOLDERS' EQUITY           Current liabilities:           Accounts payable $94,755     $64,622   Accrued compensation & related liabilities 50,605     62,826   Accrued liabilities 207,925     200,686   Income taxes:           Current 12,887     18,584   Deferred -     52,179   Long-term debt due within one year 1,070     4,141   Total current liabilities 367,242     403,038               Long-term liabilities:           Long-term debt due after one year 942,736     877,074   Deferred income taxes 124,184     122,630   Accrued liabilities 120,308     0   Total long-term liabilities 1,187,228     999,704               Shareholders' equity:           Preferred stock, no par value: 100,000 shares authorized, none outstanding -     -   Common stock, no par value: 425,000,000 shares authorized   FY 2008: 173,083,426 shares issued and 153,691,103 shares outstanding FY 2007: 172,874,195 shares issued and 158,676,872 shares outstanding 129,182     120,811   Paid-in capital 60,408     56,909   Retained earnings 2,784,302     2,533,459   Treasury stock FY 2008: 19,392,323 shares; FY 2007: 14,197,323 shares (772,041 )   (580,562 ) Other accumulated comprehensive income 52,280     37,121   Total shareholders' equity 2,254,131     2,167,738                 $3,808,601     $3,570,480   Cintas Corporation Consolidated Condensed Statements of Cash Flows (In thousands)                   Twelve Months Ended   May 31, 2008   May 31, 2007 Cash flows from operating activities:               Net income $335,405     $334,538           Adjustments to reconcile net income to net cash provided by operating activities:       Depreciation 148,566     135,181   Amortization of deferred charges 43,337     40,745   Stock-based compensation 7,456     4,500   Deferred income taxes 1,663     (332 ) Change in current assets and liabilities, net of acquisitions of businesses:       Accounts receivable, net (14,939 )   (11,460 ) Inventories, net (6,100 )   (32,090 ) Uniforms and other rental items in service (23,854 )   (6,968 ) Prepaid expenses 3,830     (4,502 ) Accounts payable 30,567     (7,654 ) Accrued compensation and related liabilities (12,430 )   12,600   Accrued liabilities and other 22,201     9,981   Income taxes payable 8,841     (25,148 ) Net cash provided by operating activities 544,543     449,391           Cash flows from investing activities:               Capital expenditures (190,333 )   (180,824 ) Proceeds from sale or redemption of marketable securities 45,791     118,174   Purchase of marketable securities and investments (54,498 )   (48,515 ) Acquisitions of businesses, net of cash acquired (111,535 )   (160,707 ) Other (400 )   (1,836 ) Net cash used in investing activities (310,975 )   (273,708 )         Cash flows from financing activities:               Proceeds from issuance of debt 295,000     252,460   Repayment of debt (232,409 )   (169,987 ) Stock options exercised 8,371     10,863   Dividends paid (70,831 )   (61,996 ) Repurchase of common stock (191,479 )   (198,949 ) Other (11,356 )   (11,628 ) Net cash used in financing activities (202,704 )   (179,237 )         Net increase (decrease) in cash and cash equivalents 30,864     (3,554 ) Cash and cash equivalents at beginning of period 35,360     38,914   Cash and cash equivalents at end of period $66,224     $35,360