Cintas Corporation Announces Fiscal 2010 Second Quarter Results
CINCINNATI, December 22, 2009 — Cintas Corporation (Nasdaq:CTAS) today reported results for the second quarter of its fiscal year 2010, which ended on November 30, 2009. Revenue for the quarter was $884.5 million, a 1% decrease as compared to the first quarter of fiscal 2010, which ended on August 31, 2009. However, when adjusted for a comparable number of workdays, revenue increased 1% compared to the first quarter.
Scott D. Farmer, Chief Executive Officer, stated, “According to the U.S. Department of Labor, the U.S. economy has lost jobs for 23 consecutive months, with 7.2 million jobs lost during that time frame. These job losses directly affect our business as many of our products and services are dependant on customer employee levels. While job losses have moderated recently, 1.2 million jobs were lost during the last six months and we do not know when positive job growth will return. We will continue to focus on taking care of our customers and actively managing our cost structure in this difficult environment.”
Second quarter net income was $57.2 million and earnings per share were $0.37. Both represented a 6% increase over the first quarter of fiscal 2010. Excluding one-time legal settlements net of insurance proceeds of $4.1 million in the second quarter and $19.5 million in the first quarter, second quarter net income decreased 10% to $59.7 million and earnings per share decreased 9% to $0.39. The Company offset revenue declines, primarily due to job losses, by adding new customers and further penetrating existing customer accounts with additional products and services. The costs associated with this additional revenue, as well as heightened pricing pressures, impacted second quarter margins. In addition, the Company’s effective tax rate increased to 39.3% as expected due to quarterly tax reserve requirements. The Company believes its full fiscal year 2010 tax rate will be approximately 37.5%.
Mr. Farmer continued, “It appears that our business has stabilized as this was our third straight quarter of relatively flat revenue on a per workday basis. Given our businesses’ correlation to employment levels, it is unlikely that we will return to steady growth until the U. S. job market begins to recover, which historically has lagged general economic growth. We anticipate that when job recovery does occur, it will be a slow and lengthy process. In addition, the third quarter of our fiscal year is traditionally our most challenging, with fewer workdays and customer holiday closures. This year, we anticipate customer holiday closures will be longer and more widespread than they have been in better economic climates. For these reasons, we believe that current analyst expectations for Cintas revenue and earnings are too optimistic.”
Mr. Farmer emphasized, “Our solid foundation and focus on cost control and cash generation continue to enable us to weather this difficult economic environment. Over the last six months, we have significantly increased our cash flow. We generated $246 million of free cash flow in the first six months of this fiscal year, which is a $167 million increase over the first six months of last year. This cash flow has helped strengthen an already robust balance sheet. We continue to be a market leader in all of our businesses, with state-of-the-art technology, efficient operations and dedicated employee partners. When market conditions improve, we expect these competitive advantages will provide us enhanced opportunities.”
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 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 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, investigations or other proceedings, higher assumed sourcing or distribution costs of products, the disruption of operations from catastrophic or extraordinary events, changes in federal and state tax and labor laws and the reactions of competitors in terms of price and service. 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, 2009 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
Michael L. Thompson
Vice President and Treasurer