Cintas Corporation Reports Third Quarter Fiscal 2008 Revenue Increases 8%; Net Income Increases 7%; Earnings per Diluted Share Increase 10%
CINCINNATI, March 19, 2008 — Cintas Corporation (Nasdaq:CTAS) today reported revenue for the third quarter of fiscal 2008 of $976.0 million, a 7.8% increase from the previous year’s third quarter revenue of $905.4 million. Net income increased 6.6% to $81.8 million as compared to $76.7 million in last year’s third quarter. Earnings per diluted share were $0.53, a 10.4% increase over the $0.48 per diluted share achieved in last year’s third quarter.
Scott D. Farmer, Chief Executive Officer, stated, "We are pleased to announce our third quarter results. Our new sales organization performed well during the quarter, despite challenging economic conditions. New business generated under this new organization continues to meet our expectations. These improved new business results, however, were partially offset by weakness in our existing customer base. The workforce reductions and business contraction that our customers experienced at the end of our second quarter continued through our third quarter, as economic conditions became more demanding."
Higher energy costs, particularly in delivery fuel, caused gross margins to be pressured. Net income results continue to reflect the increased investment the Company has made in its sales organization over the past year. Selling costs have decreased as a percent to sales compared to the second quarter but remain at higher levels as compared to the third quarter of fiscal 2007. The increased sales costs were offset by an improvement in medical expenses as compared to the prior year third quarter.
The Company’s year-to-date effective income tax rate was 36.9%. Through the first three quarters of last fiscal year, the Company’s effective income tax rate was 37.3%. This decrease was due to the impact of FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109. The Company expects its full year fiscal 2008 effective income tax rate to be approximately 37.1%, an improvement from last year’s effective income tax rate of 37.3%.
Strong Balance Sheet and Cash Flow
The Company’s balance sheet and cash flow from operations continue to be strong. As of February 29, 2008, the Company’s current assets exceeded current liabilities by over a three to one ratio and debt to total capitalization was 30.8%.
During the third quarter, the Company issued a total of $300 million of 6.125% Senior Debt. The proceeds generated from this debt issuance were used to reduce the Company’s outstanding balance under its commercial paper program. This refinancing provides the Company a more balanced debt portfolio.
During the third quarter, the Company also announced an 18% increase in its annual dividend, providing $0.46 per share to shareholders of record as of February 6, 2008. The payment of this dividend occurred on March 12, 2008, which was subsequent to quarter end.
Mr. Farmer stated, "We posted solid third quarter results. However, while our sales organization continues to perform as expected, the economic environment has become more demanding. We anticipate this weakness to continue and are aggressively challenging our cost structure in order to maintain our margins during this difficult operating environment. We now expect fiscal year 2008 revenues of $3.930 billion to $3.965 billion and earnings per diluted share of $2.12 to $2.16."
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. Fortune Magazine has consistently listed Cintas as a "Most Admired Company" in its annual survey.
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