Cintas Corporation Reports First Quarter Fiscal 2008 Revenue and Earnings and Announces International Expansion
New Sales Organization Gaining Momentum
Company Acquires Business in Europe
CINCINNATI, September 27, 2007 — Cintas Corporation (Nasdaq:CTAS) today reported revenue for the first quarter of fiscal 2008 of $969.1 million, a 6.0% increase from the previous year’s first quarter revenue of $914.2 million. Net income was $81.1 million and earnings per diluted share were $0.51.
Scott D. Farmer, President and Chief Executive Officer, stated, "Our results for the first quarter are in line with our expectations. Our new sales organization is now fully staffed and operational. We believe that the initial disruption in new business sales caused by the rollout of this new organization is behind us and we are beginning to see an improvement in new business results. We expect the new sales organization to continue to gain strength and momentum, resulting in improving revenue growth as we progress through the rest of our fiscal year."
While net income and earnings per diluted share decreased 4.6% and 3.8%, respectively, as compared to the first quarter of last fiscal year, the results were in line with Company projections. The Company indicated that the investment in the new sales organization has impacted profitability, as expected. Mr. Farmer stated, "The investment in the new organization has been made in order to enhance future growth opportunities. As the amount of new business sold improves under this new organization, we expect our selling costs as a percent of revenue to begin to trend back to more traditional levels."
In addition to their first quarter results, Cintas announced that it has expanded internationally. Scott Farmer stated, "I am very pleased to announce that we have acquired Certo Information Management, a privately-held document shredding and storage business located in the Netherlands. We are very excited about the opportunity to now expand our services outside of North America. While the revenue added directly from this acquisition is not material to our operations, our hope and intent is that experience gained from operating this business will provide a platform for further international expansion."
Strong Balance Sheet and Cash Flow
The Company’s balance sheet continues to be strong. As of August 31, 2007, the Company’s current assets exceeded current liabilities by over a four to one ratio and debt to total capitalization was 28.2%. The Company’s cash flow from operations continues to be healthy.
As of June 1, 2007, the Company adopted FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109. As a result of the implementation of FIN 48, the Company recorded a $14 million decrease to opening retained earnings as of June 1, 2007, and a corresponding tax reserve was established.
New Segment Reporting
Cintas also announced that beginning this quarter it will increase the number of operating segments reported in the Company’s financial statements. Scott Farmer stated, "Our Document Management business and our First Aid, Safety and Fire business have grown to a sufficient size and scale that we believe reporting these businesses as separate operating segments is appropriate. These emerging businesses, which have historically been included in our "Other Services" operating segment, will now be broken out separately."
As a result of this change, the Company will now report results for five operating segments: Rental Uniforms and Ancillary Products; Uniform Direct Sales; First Aid, Safety and Fire Protection Services; Document Management Services; and Corporate.
Mr. Farmer stated, "Our first quarter results are in line with our expectations for the quarter. Based on these results and the improvement we are beginning to experience in our new business sales, we reiterate our full fiscal year guidance of $3.9 billion to $4.1 billion in revenue and earnings per diluted share of $2.15 to $2.25. Achieving this guidance would allow us to reach our 39th consecutive year of growth in revenue and earnings."
Headquartered in Cincinnati, Cintas Corporation provides highly specialized services to businesses of all types predominantly in the United States and Canada. Cintas designs, manufactures and implements corporate identity uniform programs, and provides entrance mats, restroom supplies, promotional products, first aid and safety products, fire protection 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. The Company has achieved 38 consecutive years of 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. 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. We cannot guarantee that any forward-looking statement will be realized. 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 result 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.
For additional information, contact:
William C. Gale,
Senior Vice President-Finance and Chief Financial Officer
Michael L. Thompson,
Vice President and Treasurer