UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 2011
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to _____________________
Commission file number 0-11399
CINTAS CORPORATION
(Exact name of Registrant as specified in its charter)
WASHINGTON |
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31-1188630 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
6800 CINTAS BOULEVARD
P.O. BOX 625737
CINCINNATI, OHIO 45262-5737
(Address of principal executive offices)(Zip Code)
(513) 459-1200
(Registrant's telephone number, including area code)
Indicate by checkmark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes Ö No ___
Indicate by a checkmark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes Ö No ___
Indicate by checkmark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer |
Ö Accelerated Filer ___ |
Smaller Reporting Company ___ |
Non-Accelerated Filer |
(Do not check if a smaller reporting company) |
Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ___ No Ö
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class |
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Outstanding March 31, 2011 |
Common Stock, no par value |
|
145,303,323 |
CINTAS CORPORATION
Part I. |
Financial Information |
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Page No. | ||
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3 | ||
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Consolidated Condensed Balance Sheets |
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4 | |
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Consolidated Condensed Statements of Cash Flows |
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5 | |
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Managements Discussion and Analysis of Financial |
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26 | ||
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35 | |||
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36 | |||
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37 | |||
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Unregistered Sales of Equity Securities and Use of Proceeds. |
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37 | ||
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37 | |||
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38 | ||
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Exhibits |
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CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per share data)
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Three Months Ended |
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Nine Months Ended | ||||
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February 28, |
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February 28, | ||||
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2011 |
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2010 |
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2011 |
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2010 |
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Revenue: |
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Rental uniforms and ancillary products |
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$664,976 |
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$622,458 |
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$1,980,387 |
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$1,921,693 |
Other services |
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272,851 |
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239,354 |
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817,910 |
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716,197 |
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937,827 |
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861,812 |
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2,798,297 |
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2,637,890 |
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Costs and expenses: |
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Cost of rental uniforms and ancillary products |
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380,224 |
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356,750 |
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1,129,210 |
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1,083,407 |
Cost of other services |
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165,682 |
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145,455 |
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492,847 |
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442,234 |
Selling and administrative expenses |
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283,045 |
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275,596 |
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864,774 |
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799,429 |
Legal settlements, net of insurance proceeds |
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--- |
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--- |
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--- |
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23,529 |
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Operating income |
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108,876 |
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84,011 |
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311,466 |
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289,291 |
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Interest income |
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(280) |
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(422) |
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(1,252) |
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(1,095) |
Interest expense |
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12,520 |
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11,575 |
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36,955 |
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36,192 |
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Income before income taxes |
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96,636 |
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72,858 |
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275,763 |
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254,194 |
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Income taxes |
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37,566 |
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23,876 |
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99,550 |
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94,052 |
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Net income |
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$ 59,070 |
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$ 48,982 |
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$ 176,213 |
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$ 160,142 |
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Basic earnings per share |
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$ 0.41 |
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$ 0.32 |
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$ 1.19 |
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$ 1.04 |
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Diluted earnings per share |
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$ 0.41 |
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$ 0.32 |
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$ 1.19 |
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$ 1.04 |
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Dividends declared per share |
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$ ---- |
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$ 0.48 |
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$ 0.49 |
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$ 0.48 |
See accompanying notes.
CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except share data)
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February 28, 2011 |
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May 31, 2010 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ 184,731 |
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$ 411,281 |
Marketable securities |
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31,974 |
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154,806 |
Accounts receivable, net |
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416,295 |
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366,301 |
Inventories, net |
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232,294 |
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169,484 |
Uniforms and other rental items in service |
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373,983 |
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332,106 |
Income taxes, current |
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13,026 |
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15,691 |
Deferred income tax asset |
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44,475 |
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52,415 |
Prepaid expenses and other |
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26,160 |
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22,860 |
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Total current assets |
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1,322,938 |
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1,524,944 |
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Property and equipment, at cost, net |
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941,773 |
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894,522 |
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Goodwill |
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1,491,116 |
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1,356,925 |
Service contracts, net |
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107,460 |
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103,445 |
Other assets, net |
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108,783 |
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89,900 |
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$3,972,070 |
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$3,969,736 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ 101,935 |
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$ 71,747 |
Accrued compensation and related liabilities |
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67,396 |
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66,924 |
Accrued liabilities |
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220,674 |
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244,402 |
Long-term debt due within one year |
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1,631 |
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609 |
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Total current liabilities |
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391,636 |
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383,682 |
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Long-term liabilities: |
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Long-term debt due after one year |
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806,447 |
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785,444 |
Deferred income taxes |
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165,271 |
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150,560 |
Accrued liabilities |
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135,774 |
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116,021 |
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Total long-term liabilities |
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1,107,492 |
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1,052,025 |
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Shareholders equity: |
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Preferred stock, no par value: |
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100,000 shares authorized, none outstanding |
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---- |
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---- |
Common stock, no par value: |
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135,276 |
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132,058 |
425,000,000 shares authorized, |
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FY 2011: 173,342,049 issued and 145,301,823 outstanding |
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FY 2010: 173,207,493 issued and 152,869,848 outstanding |
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Paid-in capital |
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90,462 |
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84,616 |
Retained earnings |
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3,184,480 |
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3,080,079 |
Treasury stock: |
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(1,002,071) |
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(798,857) |
FY 2011: 28,040,226 shares |
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FY 2010: 20,337,645 shares |
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Other accumulated comprehensive income |
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64,795 |
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36,133 |
Total shareholders equity |
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2,472,942 |
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2,534,029 |
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$3,972,070 |
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$3,969,736 |
See accompanying notes.
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Nine Months Ended | ||
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February 28, |
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February 28, |
Cash flows from operating activities: |
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Net income |
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$176,213 |
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$160,142 |
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation |
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112,126 |
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113,834 |
Amortization of deferred charges |
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32,166 |
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30,606 |
Stock-based compensation |
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9,813 |
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11,323 |
Deferred income taxes |
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22,524 |
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11,945 |
Change in current assets and liabilities, net of acquisitions of businesses: |
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Accounts receivable, net |
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(32,844) |
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10,785 |
Inventories, net |
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(61,620) |
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31,900 |
Uniforms and other rental items in service |
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(38,433) |
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14,223 |
Prepaid expenses and other |
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(2,418) |
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(240) |
Accounts payable |
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26,974 |
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15,167 |
Accrued compensation and related liabilities |
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241 |
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8,414 |
Accrued liabilities |
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(40,663) |
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11,507 |
Income taxes payable |
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3,876 |
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9,583 |
Net cash provided by operating activities |
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207,955 |
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429,189 |
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Cash flows from investing activities: |
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Capital expenditures |
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(142,298) |
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(78,928) |
Proceeds from redemption of marketable securities |
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137,879 |
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34,011 |
Purchase of marketable securities and investments |
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(23,174) |
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(69,819) |
Acquisitions of businesses, net of cash acquired |
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(158,517) |
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(41,375) |
Other, net |
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(2,845) |
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3,804 |
Net cash used in investing activities |
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(188,955) |
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(152,307) |
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Cash flows from financing activities: |
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Proceeds from issuance of debt |
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304,781 |
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---- |
Repayment of debt |
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(282,755) |
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(464) |
Dividends paid |
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(71,812) |
|
---- |
Repurchase of common stock |
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(203,214) |
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(960) |
Other, net |
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930 |
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(394) |
Net cash used in financing activities |
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(252,070) |
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(1,818) |
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Effect of exchange rate changes on cash and cash equivalents |
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6,520 |
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1,694 |
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Net (decrease) increase in cash and cash equivalents |
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(226,550) |
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276,758 |
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Cash and cash equivalents at beginning of period |
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411,281 |
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129,745 |
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Cash and cash equivalents at end of period |
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$184,731 |
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$406,503 |
See accompanying notes.
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The consolidated condensed financial statements of Cintas Corporation (Cintas, the Company, we, us or our) included herein have been prepared by Cintas, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. While we believe that the disclosures are adequately presented, it is suggested that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes included in our Form 10-K for the fiscal year ended May 31, 2010. A summary of our significant accounting policies is presented beginning on page 39 of that report. There have been no material changes in the accounting policies followed by Cintas during the current fiscal year.
Interim results are subject to variations and are not necessarily indicative of the results of operations for a full fiscal year. In the opinion of management, adjustments (which include only normal recurring adjustments) necessary for a fair statement of the consolidated results of the interim periods shown have been made.
2. Fair Value Measurements
Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. It also establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Cintas assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
All financial instruments that are measured at fair value on a recurring basis (at least annually) have been segregated into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the consolidated condensed balance sheet date.
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
These financial instruments measured at fair value on a recurring basis are summarized below (in thousands):
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As of February 28, 2011 |
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Level 1 |
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Level 2 |
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Level 3 |
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Fair Value |
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Cash and cash equivalents |
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$ |
184,731 |
|
$ |
---- |
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$ |
---- |
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$ |
184,731 |
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Marketable securities: |
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U.S. municipal bonds |
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100 |
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---- |
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---- |
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100 |
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Canadian treasury securities |
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23,703 |
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8,171 |
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---- |
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31,874 |
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Total assets at fair value |
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$ |
208,534 |
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$ |
8,171 |
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$ |
---- |
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$ |
216,705 |
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Current accrued liabilities |
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$ |
---- |
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$ |
575 |
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$ |
---- |
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$ |
575 |
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Total liabilities at fair value |
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$ |
---- |
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$ |
575 |
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$ |
---- |
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$ |
575 |
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As of May 31, 2010 |
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Level 1 |
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Level 2 |
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Level 3 |
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Fair Value |
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Cash and cash equivalents |
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$ |
411,281 |
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$ |
---- |
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$ |
---- |
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$ |
411,281 |
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Marketable securities: |
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U.S. municipal bonds |
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---- |
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21,954 |
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---- |
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21,954 |
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Canadian treasury securities |
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97,791 |
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35,061 |
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---- |
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132,852 |
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Accounts receivable, net |
|
---- |
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450 |
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---- |
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450 |
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Total assets at fair value |
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$ |
509,072 |
|
$ |
57,465 |
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$ |
---- |
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$ |
566,537 |
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Current accrued liabilities |
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$ |
---- |
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$ |
64 |
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$ |
---- |
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$ |
64 |
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Total liabilities at fair value |
|
$ |
---- |
|
$ |
64 |
|
$ |
---- |
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$ |
64 |
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Cintas cash and cash equivalents and marketable securities are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. Cintas does not adjust the quoted market price or the broker or dealer quote for such financial instruments.
The funds invested in Canadian marketable securities are not expected to be repatriated, but instead are expected to be invested indefinitely in foreign subsidiaries. Interest, realized gains and losses and declines in value determined to be other than temporary on available-for-sale securities are included in interest income or expense. The cost of the securities sold is based on the specific identification method. The amortized cost basis of the marketable securities as of February 28, 2011 and May 31, 2010, is $32.0 million and $154.9 million, respectively. All contractual maturities are due within one year.
Accounts receivable, net and current accrued liabilities include foreign currency average rate options. The fair value of Cintas foreign currency average rate options are based on similar exchange traded derivatives and are, therefore, included within Level 2 of the fair value hierarchy.
The methods described above may produce a fair value that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while Cintas believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the consolidated condensed balance sheet date.
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Cintas non-financial assets and liabilities not permitted or required to be measured at fair value on a recurring basis primarily relate to assets and liabilities acquired in a business acquisition. Cintas is required to provide additional disclosures about fair value measurements as part of the consolidated condensed financial statements for each major category of assets and liabilities measured at fair value on a non-recurring basis (including business acquisitions). Based on the nature of Cintas business acquisitions, which occur regularly throughout the fiscal year, the majority of the assets acquired and liabilities assumed consist of working capital, primarily valued using Level 2 inputs, property and equipment, also primarily valued using Level 2 inputs and goodwill and other identified intangible assets valued using Level 3 inputs. In general, non-recurring fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities, which generally are not applicable to non-financial assets and liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as definitive sales agreements, appraisals or established market values of comparable assets. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability and include situations where there is little, if any, market activity for the asset or liability, such as internal estimates of future cash flows.
3. Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share using the two-class method for amounts attributable to Cintas common shares (in thousands except per share data):
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
|
|
Three Months Ended |
|
Nine Months Ended | ||||
|
|
February 28, |
|
February 28, | ||||
|
|
2011 |
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2010 |
|
2011 |
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2010 |
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|
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|
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Basic and Diluted Earnings per Share |
|
|
|
|
|
|
|
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Net income |
|
$ 59,070 |
|
$ 48,982 |
|
$176,213 |
|
$160,142 |
|
|
|
|
|
|
|
|
|
Less dividends to: |
|
|
|
|
|
|
|
|
Common shares |
|
$ --- |
|
$ 73,377 |
|
$ 71,197 |
|
$ 73,377 |
Unvested shares |
|
--- |
|
536 |
|
615 |
|
536 |
Total dividends |
|
$ --- |
|
$ 73,913 |
|
$ 71,812 |
|
$ 73,913 |
|
|
|
|
|
|
|
|
|
Undistributed net income (loss) |
|
$ 59,070 |
|
$(24,931) |
|
$104,401 |
|
$ 86,229 |
|
|
|
|
|
|
|
|
|
Less: net income (loss) allocated to participating unvested securities |
|
316 |
|
(94) |
|
564 |
|
347 |
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders |
|
$ 58,754 |
|
$(24,837) |
|
$103,837 |
|
$ 85,882 |
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
|
145,303 |
|
152,869 |
|
147,686 |
|
152,854 |
|
|
|
|
|
|
|
|
|
Effect of dilutive securities employee stock options |
|
---- |
|
---- |
|
---- |
|
---- |
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding |
|
145,303 |
|
152,869 |
|
147,686 |
|
152,854 |
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share: |
|
|
|
|
|
|
|
|
Common shares distributed earnings |
|
$ 0.00 |
|
$ 0.48 |
|
$ 0.49 |
|
$ 0.48 |
Common shares undistributed earnings |
|
0.41 |
|
(0.16) |
|
0.70 |
|
0.56 |
Total common shares |
|
$ 0.41 |
|
$ 0.32 |
|
$ 1.19 |
|
$ 1.04 |
|
|
|
|
|
|
|
|
|
Unvested shares - distributed earnings |
|
$ 0.00 |
|
$ 0.48 |
|
$ 0.49 |
|
$ 0.48 |
Unvested shares - undistributed earnings |
|
0.41 |
|
(0.16) |
|
0.70 |
|
0.56 |
Total unvested shares |
|
$ 0.41 |
|
$ 0.32 |
|
$ 1.19 |
|
$ 1.04 |
During the nine months ended February 28, 2011, Cintas purchased 7,656,193 shares of Cintas common stock under a share buyback program authorized by the Board of Directors on May 2, 2005, and expanded in July 2006.
For the three months ended February 28, 2011 and 2010, 3.5 million and 4.7 million options granted to purchase shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share. For the nine months ended February 28, 2011 and 2010, 3.6 million and 4.3 million options granted to purchase shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share. The exercise prices of these options were greater than the average market price of the common shares (anti-dilutive).
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
4. Goodwill, Service Contracts and Other Assets
Changes in the carrying amount of goodwill and service contracts for the nine months ended February 28, 2011, by operating segment, are as follows (in thousands):
|
|
Rental |
|
|
|
First Aid, |
|
|
|
|
|
|
|
Uniforms & |
|
Uniform |
|
Safety & |
|
|
|
|
|
|
|
Ancillary |
|
Direct |
|
Fire |
|
Document |
|
|
|
|
|
Products |
|
Sales |
|
Protection |
|
Management |
|
Total |
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 1, 2010 |
|
$861,117 |
|
$23,928 |
|
$181,967 |
|
$289,913 |
|
$1,356,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill acquired |
|
75,740 |
|
---- |
|
10,866 |
|
42,391 |
|
128,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
1,337 |
|
72 |
|
---- |
|
3,785 |
|
5,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of February 28, 2011 |
|
$938,194 |
|
$24,000 |
|
$192,833 |
|
$336,089 |
|
$1,491,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental |
|
|
|
First Aid, |
|
|
|
|
|
|
|
Uniforms & |
|
Uniform |
|
Safety & |
|
|
|
|
|
|
|
Ancillary |
|
Direct |
|
Fire |
|
Document |
|
|
|
|
|
Products |
|
Sales |
|
Protection |
|
Management |
|
Total |
|
Service Contracts |
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 1, 2010 |
|
$ 48,711 |
|
$ ---- |
|
$ 35,599 |
|
$ 19,135 |
|
$ 103,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Service contracts acquired |
|
13,090 |
|
---- |
|
7,498 |
|
7,200 |
|
27,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Service contracts amortization |
|
(14,739) |
|
---- |
|
(5,363) |
|
(6,081) |
|
(26,183) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
1,875 |
|
---- |
|
---- |
|
535 |
|
2,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of February 28, 2011 |
|
$ 48,937 |
|
$ ---- |
|
$ 37,734 |
|
$ 20,789 |
|
$ 107,460 |
|
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Information regarding Cintas service contracts and other assets is as follows (in thousands):
|
|
As of February 28, 2011 | ||||
|
|
Carrying |
|
Accumulated |
|
|
|
|
Amount |
|
Amortization |
|
Net |
|
|
|
|
|
|
|
Service contracts |
|
$376,798 |
|
$269,338 |
|
$107,460 |
|
|
|
|
|
|
|
Noncompete and consulting agreements |
|
$ 75,736 |
|
$ 61,825 |
|
$ 13,911 |
Investments(1) |
|
82,620 |
|
---- |
|
82,620 |
Other |
|
16,636 |
|
4,384 |
|
12,252 |
|
|
|
|
|
|
|
Total |
|
$174,992 |
|
$ 66,209 |
|
$108,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of May 31, 2010 | ||||
|
|
Carrying |
|
Accumulated |
|
|
|
|
Amount |
|
Amortization |
|
Net |
|
|
|
|
|
|
|
Service contracts |
|
$346,569 |
|
$243,124 |
|
$103,445 |
|
|
|
|
|
|
|
Noncompete and consulting agreements |
|
$ 68,435 |
|
$ 53,425 |
|
$ 15,010 |
Investments(1) |
|
68,616 |
|
---- |
|
68,616 |
Other |
|
10,516 |
|
4,242 |
|
6,274 |
|
|
|
|
|
|
|
Total |
|
$147,567 |
|
$ 57,667 |
|
$ 89,900 |
(1) Investments at February 28, 2011, include the cash surrender value of insurance policies of $50.1 million, equity method investments of $29.7 million and cost method investments of $2.8 million. Investments at May 31, 2010, include the cash surrender value of insurance policies of $34.3 million, equity method investments of $30.0 million and cost method investments of $4.3 million.
Amortization expense was $32.2 million and $30.6 million for the nine months ended February 28, 2011 and 2010, respectively. Estimated amortization expense, excluding any future acquisitions, for each of the next five years is $41.6 million, $36.1 million, $19.6 million, $16.4 million and $13.7 million, respectively.
Investments recorded using the cost method are evaluated for impairment on an annual basis or when indicators of impairment are identified. For the nine months ended February 28, 2011 and 2010, no losses due to impairment were recorded.
5. Debt, Derivatives and Hedging Activities
Cintas has a commercial paper program with a capacity of $300.0 million that is fully supported by a backup revolving credit facility through a credit agreement with its banking group. The revolving credit facility has an accordion feature that allows for a maximum borrowing capacity of $450.0 million and an expiration date of September 26, 2014. As of February 28, 2011, Cintas had $21.5 million of commercial paper outstanding, and at May 31, 2010, no commercial paper was outstanding.
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Cintas used interest rate lock agreements to hedge against movements in the treasury rates at the time Cintas issued its senior notes in fiscal 2002, fiscal 2007 and fiscal 2008. The amortization of the interest rate lock agreements resulted in an increase to other comprehensive income of $0.2 million for both of the three months ended February 28, 2011 and 2010, respectively, and $0.6 million for both of the nine months ended February 28, 2011 and 2010, respectively.
To hedge the exposure of movements in the foreign currency rates, Cintas at times uses foreign currency hedges. These hedges would reduce the impact on cash flows from movements in the foreign currency exchange rates. Examples of foreign currency hedge instruments that Cintas may use are average rate options and forward contracts. Cintas had no average rate options included in accounts receivable, net as of February 28, 2011, and $0.5 million included in accounts receivable, net as of May 31, 2010. Cintas had average rate options included in current accrued liabilities of $0.6 million and less than $0.1 million as of February 28, 2011 and May 31, 2010, respectively. The average rate options that settled during the third quarter increased foreign currency exchange costs by $0.1 million and $0.2 million during the three months ended February 28, 2011 and 2010, respectively. The average rate options increased foreign currency exchange costs by less than $0.1 million and by $0.3 million during the nine months ended February 28, 2011 and 2010, respectively.
Cintas has certain covenants related to debt agreements. These covenants limit Cintas ability to incur certain liens, to engage in sale-leaseback transactions and to merge, consolidate or sell all or substantially all of Cintas assets. These covenants also require Cintas to maintain certain debt to capitalization and interest coverage ratios. Cross-default provisions exist between certain debt instruments. If a default of a significant covenant were to occur, the default could result in an acceleration of the maturity of the indebtedness, impair liquidity and limit the ability to raise future capital. As of February 28, 2011, Cintas was in compliance with all significant debt covenants.
6. Income Taxes
In the normal course of business, Cintas provides for uncertain tax positions and the related interest and adjusts its unrecognized tax benefits and accrued interest accordingly. During the three months ended February 28, 2011, unrecognized tax benefits decreased by approximately $1.7 million and accrued interest increased by approximately $0.7 million due to the accrual of additional tax and interest and the reduction of reserves due to the closure of audits and expiration of statutes. During the nine months ended February 28, 2011, unrecognized tax benefits increased by approximately $0.8 million and accrued interest decreased by approximately $7.2 million due to the expiration of certain statutes.
All U.S. federal income tax returns are closed to audit through fiscal 2008. Cintas is currently in advanced stages of audits in certain foreign jurisdictions and certain domestic states. The years under audit cover fiscal years back to 2001. Based on the resolution of the various audits, it is reasonably possible that the balance of unrecognized tax benefits could decrease by $4.0 million for the fiscal year ending May 31, 2011.
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
7. Comprehensive Income
Total comprehensive income represents the net change in shareholders equity during a period from sources other than transactions with shareholders and, as such, includes net income. For Cintas, the only components of total comprehensive income are the change in cumulative foreign currency translation adjustments, the change in the fair value of derivatives, the amortization of interest rate lock agreements and the change in the fair value of available-for-sale securities. The components of comprehensive income for the three and nine month periods ended February 28, 2011 and 2010, are as follows (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended | ||||
|
|
February 28, |
|
February 28, | ||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
|
|
|
|
|
|
|
|
Net income |
|
$59,070 |
|
$48,982 |
|
$176,213 |
|
$160,142 |
|
|
|
|
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
15,472 |
|
(94) |
|
28,846 |
|
10,432 |
Change in fair value of derivatives* |
|
(152) |
|
87 |
|
(777) |
|
64 |
Amortization of interest rate lock agreements |
|
192 |
|
192 |
|
575 |
|
575 |
Change in fair value of available-for-sale securities** |
|
(10) |
|
11 |
|
18 |
|
29 |
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$74,572 |
|
$49,178 |
|
$204,875 |
|
$171,242 |
* Net of less than $(0.1) million and $0.1 million of tax (benefit) expense for the three months ended February 28, 2011 and 2010, respectively. Net of $(0.5) million and less than $0.1 million of tax (benefit) expense for the nine months ended February 28, 2011 and 2010, respectively.
** Net of less than $(0.1) million and less than $0.1 million of tax (benefit) expense for the three months ended February 28, 2011 and 2010, respectively. Net of less than $0.1 million of tax expense for both the nine months ended February 28, 2011 and 2010, respectively.
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
8. Litigation and Other Contingencies
Cintas is subject to legal proceedings, insurance receipts, legal settlements and claims arising from the ordinary course of its business, including personal injury, customer contract, environmental and employment claims. In the opinion of management, the aggregate liability, if any, with respect to such ordinary course of business actions will not have a material adverse effect on the financial position or results of operation of Cintas. Cintas is party to additional litigation not considered in the ordinary course of business, including the litigation discussed below.
Cintas is a defendant in a purported class action lawsuit, Mirna E. Serrano, et al. v. Cintas Corporation (Serrano), filed on May 10, 2004, and pending in the United States District Court, Eastern District of Michigan, Southern Division. The Serrano plaintiffs alleged that Cintas discriminated against women in hiring into various service sales representative positions across all divisions of Cintas. On November 15, 2005, the Equal Employment Opportunity Commission (EEOC) intervened in the Serrano lawsuit. The Serrano plaintiffs seek injunctive relief, compensatory damages, punitive damages, attorneys fees and other remedies. On October 27, 2008, the United States District Court in the Eastern District of Michigan granted summary judgment in favor of Cintas limiting the scope of the putative class in the Serrano lawsuit to female applicants for service sales representative positions at Cintas locations within the state of Michigan. Consequently, all claims brought by female applicants for service sales representative positions outside of the state of Michigan were dismissed. Similarly, any claims brought by the EEOC on behalf of similarly situated female applicants outside of the state of Michigan have also been dismissed from the Serrano lawsuit. Cintas is a defendant in another purported class action lawsuit, Blanca Nelly Avalos, et al. v. Cintas Corporation (Avalos), which was filed in the United States District Court, Eastern District of Michigan, Southern Division. The Avalos plaintiffs alleged that Cintas discriminated against women, African-Americans and Hispanics in hiring into various service sales representative positions in Cintas Rental division only throughout the United States. The Avalos plaintiffs sought injunctive relief, compensatory damages, punitive damages, attorneys fees and other remedies. The claims in Avalos originally were brought in the lawsuit captioned Robert Ramirez, et al. v. Cintas Corporation (Ramirez), filed on January 20, 2004, in the United States District Court, Northern District of California, San Francisco Division. On May 11, 2006, the Ramirez and Avalos African-American, Hispanic and female failure to hire into service sales representative positions claims and the EEOCs intervention were consolidated for pretrial purposes with the Serrano case and transferred to the United States District Court for the Eastern District of Michigan, Southern Division. The consolidated case was known as Mirna E. Serrano/Blanca Nelly Avalos, et al. v. Cintas Corporation (Serrano/Avalos). On March 31, 2009, the United States District Court, Eastern District of Michigan, Southern Division entered an order denying class certification to all plaintiffs in the Serrano/Avalos lawsuits. Following denial of class certification, the Court permitted the individual Avalos and Serrano plaintiffs to proceed separately. In the Avalos case, the court dismissed the remaining claims of the individual plaintiffs who remained in that case after the denial of class certification. On May 11, 2010, Plaintiff Tanesha Davis, on behalf of all similarly situated plaintiffs in the Avalos case, filed a notice of appeal of the District Courts summary judgment order in the United States Court of Appeals for the Sixth Circuit. The Appellate Court has made no determination regarding the merits of Davis appeal. In September 2010, the Court in Serrano dismissed all private individual claims and all claims of the EEOC and the 13 individuals it claimed to represent. The EEOC has appealed the District Courts summary judgment decisions and various other rulings to the United States Court of Appeals for the Sixth Circuit. The Court of Appeals has not yet ruled on the EEOCs appeal.
The litigation discussed above, if decided or settled adversely to Cintas, may, individually or in the aggregate, result in liability material to Cintas consolidated financial condition or results of operation and could increase costs of operations on an ongoing basis. Any estimated liability relating to these proceedings is not determinable at this time. Cintas may enter into discussions regarding settlement of
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
these and other lawsuits, and may enter into settlement agreements if it believes such settlement is in the best interest of Cintas shareholders.
Cintas is a defendant in a purported class action lawsuit, Paul Veliz, et al. v. Cintas Corporation (Veliz), filed on March 19, 2003, in the United States District Court, Northern District of California, Oakland Division, alleging that Cintas violated certain federal and state wage and hour laws applicable to its service sales representatives, whom Cintas considers exempt employees, and asserting additional related ERISA claims. On April 5, 2004 and February 14, 2006, the Court stayed the claims of all plaintiffs with valid arbitration agreements pending arbitration of those claims. Claims made in the Veliz action, therefore, are pending before the United States District Court, Northern District of California and Judge Bruce Meyerson (Ret.), an Arbitrator selected by the parties. On August 5, 2009, the parties in the Veliz action reached a settlement in principle. That settlement has been granted preliminary approval by the District Court. When the settlement is fully documented and approved by the Court, the settlement will resolve all claims now pending or that could have been brought relating to the subject matter of the case before the Court and the Arbitrator. The principal terms of the settlement provide for an aggregate cash payment of approximately $24.0 million. The pre-tax impact, net of insurance proceeds, was $19.5 million. Pursuant to the settlement agreement, on December 17, 2010, Cintas paid $22.8 million to a Court appointed settlement administrator to be held in escrow pending final approval of the settlement by the Court. Once final approval has been granted by the Court, the settlement administrator will distribute the $22.8 million to the class members under the Courts supervision. According to the terms of the settlement agreement, Cintas will pay the remaining settlement funds to satisfy the future income tax liabilities of the class members as they receive their respective shares of the settlement funds. The balance of the settlement funds will be used to pay the fees and expenses of the settlement administrator.
During the second quarter of fiscal 2010, Cintas had legal settlements that totaled $4.0 million, net of insurance proceeds. None of these settlements were significant individually. These settlements included litigation related to multiple subjects including employment practices and insurance coverage.
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
9. Segment Information
Cintas classifies its businesses into four operating segments. The Rental Uniforms and Ancillary Products operating segment consists of the rental and servicing of uniforms and other garments including flame resistant clothing, mats, mops and shop towels and other ancillary items. In addition to these rental items, restroom cleaning services and supplies and tile and carpet cleaning services are also provided within this operating segment. The Uniform Direct Sales operating segment consists of the direct sale of uniforms and related items and branded promotional products. The First Aid, Safety and Fire Protection Services operating segment consists of first aid, safety and fire protection products and services. The Document Management Services operating segment consists of document destruction, document imaging and document retention services.
Cintas evaluates the performance of each operating segment based on several factors of which the primary financial measures are operating segment revenue and income before income taxes. The accounting policies of the operating segments are the same as those described in Note 1 entitled Basis of Presentation. Information related to the operations of Cintas operating segments is set forth below (in thousands):
|
|
Rental |
|
|
|
First Aid, |
|
|
|
|
|
|
|
|
|
Uniforms & |
|
Uniform |
|
Safety & |
|
|
|
|
|
|
|
|
|
Ancillary |
|
Direct |
|
Fire |
|
Document |
|
|
|
|
|
|
|
Products |
|
Sales |
|
Protection |
|
Management |
|
Corporate |
|
Total |
|
For the three months ended February 28, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ 664,976 |
|
$102,598 |
|
$ 91,195 |
|
$ 79,058 |
|
$ ---- |
|
$ 937,827 |
|
Income (loss) before income taxes |
|
$ 85,558 |
|
$ 12,383 |
|
$ 4,628 |
|
$ 6,307 |
|
$ (12,240) |
|
$ 96,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended February 28, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ 622,458 |
|
$ 94,428 |
|
$ 79,210 |
|
$ 65,716 |
|
$ ---- |
|
$ 861,812 |
|
Income (loss) before income taxes |
|
$ 64,319 |
|
$ 8,208 |
|
$ 2,062 |
|
$ 9,422 |
|
$(11,153) |
|
$ 72,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the nine months ended February 28, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$1,980,387 |
|
$310,167 |
|
$278,044 |
|
$229,699 |
|
$ ---- |
|
$2,798,297 |
|
Income (loss) before income taxes |
|
$ 241,888 |
|
$ 35,509 |
|
$ 13,513 |
|
$ 20,556 |
|
$ (35,703) |
|
$ 275,763 |
|
Total assets |
|
$2,508,299 |
|
$294,238 |
|
$358,536 |
|
$594,292 |
|
$ 216,705 |
|
$3,972,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the nine months ended February 28, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$1,921,693 |
|
$283,163 |
|
$250,768 |
|
$182,266 |
|
$ ---- |
|
$2,637,890 |
|
Income (loss) before income taxes |
|
$ 258,653 |
|
$ 26,772 |
|
$ 10,867 |
|
$ 16,528 |
|
$ (58,626) |
|
$ 254,194 |
|
Total assets |
|
$2,427,309 |
|
$158,229 |
|
$326,497 |
|
$495,778 |
|
$ 552,096 |
|
$3,959,909 |
|
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
10. Supplemental Guarantor Information
Cintas Corporation No. 2 (Corp. 2) is the indirectly, wholly-owned principal operating subsidiary of Cintas. Corp. 2 is the issuer of the $775.0 million of long-term notes, which are unconditionally guaranteed, jointly and severally, by Cintas and its wholly-owned, direct and indirect domestic subsidiaries.
As allowed by SEC rules, the following condensed consolidating financial statements are provided as an alternative to filing separate financial statements of the guarantors. Each of the subsidiaries presented in the condensed consolidating financial statements has been fully consolidated in Cintas consolidated financial statements. The condensed consolidating financial statements should be read in conjunction with the consolidated financial statements of Cintas and notes thereto of which this note is an integral part.
Condensed consolidating financial statements for Cintas, Corp. 2, the subsidiary guarantors and non-guarantors are presented on the following pages.
CONDENSED CONSOLIDATING INCOME STATEMENT
THREE MONTHS ENDED FEBRUARY 28, 2011
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Cintas | ||||||
|
|
Cintas |
|
|
|
Subsidiary |
|
Non- |
|
|
|
Corporation | ||||||
|
|
Corporation |
|
Corp. 2 |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated | ||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Rental uniforms and ancillary products |
|
$ |
---- |
|
$ |
509,321 |
|
$ |
129,038 |
|
$ |
49,677 |
|
$ |
(23,060) |
|
$ |
664,976 |
Other services |
|
---- |
|
330,075 |
|
98,708 |
|
27,289 |
|
(183,221) |
|
272,851 | ||||||
Equity in net income of affiliates |
|
59,070 |
|
---- |
|
---- |
|
---- |
|
(59,070) |
|
---- | ||||||
|
|
59,070 |
|
839,396 |
|
227,746 |
|
76,966 |
|
(265,351) |
|
937,827 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Costs and expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cost of rental uniforms and ancillary products |
|
---- |
|
326,000 |
|
75,562 |
|
33,991 |
|
(55,329) |
|
380,224 | ||||||
Cost of other services |
|
---- |
|
211,754 |
|
88,918 |
|
17,490 |
|
(152,480) |
|
165,682 | ||||||
Selling and administrative expenses |
|
---- |
|
264,019 |
|
(1,666) |
|
23,555 |
|
(2,863) |
|
283,045 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating income |
|
59,070 |
|
37,623 |
|
64,932 |
|
1,930 |
|
(54,679) |
|
108,876 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest income |
|
---- |
|
(140) |
|
(97) |
|
(43) |
|
---- |
|
(280) | ||||||
Interest expense (income) |
|
---- |
|
13,002 |
|
(498) |
|
16 |
|
---- |
|
12,520 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Income (loss) before income taxes |
|
59,070 |
|
24,761 |
|
65,527 |
|
1,957 |
|
(54,679) |
|
96,636 | ||||||
Income taxes (benefit) |
|
---- |
|
9,923 |
|
26,931 |
|
717 |
|
(5) |
|
37,566 | ||||||
Net income (loss) |
|
$ |
59,070 |
|
$ |
14,838 |
|
$ |
38,596 |
|
$ |
1,240 |
|
$ |
(54,674) |
|
$ |
59,070 |
CONDENSED CONSOLIDATING INCOME STATEMENT
THREE MONTHS ENDED FEBRUARY 28, 2010
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Cintas |
| |||||
|
|
Cintas |
|
|
|
Subsidiary |
|
Non- |
|
|
|
Corporation |
| |||||
|
|
Corporation |
|
Corp. 2 |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
| |||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Rental uniforms and ancillary products |
$ |
---- |
|
$ |
474,757 |
|
$ |
124,523 |
|
$ |
45,472 |
|
$ |
(22,294) |
|
$ |
622,458 |
|
Other services |
|
---- |
|
288,303 |
|
89,416 |
|
17,179 |
|
(155,544) |
|
239,354 |
| |||||
Equity in net income of affiliates |
|
48,982 |
|
---- |
|
---- |
|
---- |
|
(48,982) |
|
---- |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
48,982 |
|
763,060 |
|
213,939 |
|
62,651 |
|
(226,820) |
|
861,812 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Costs and expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of rental uniforms and ancillary products |
|
---- |
|
299,516 |
|
78,344 |
|
28,399 |
|
(49,509) |
|
356,750 |
| |||||
Cost of other services |
|
---- |
|
188,941 |
|
73,467 |
|
10,943 |
|
(127,896) |
|
145,455 |
| |||||
Selling and administrative expenses |
|
---- |
|
159,910 |
|
98,029 |
|
18,339 |
|
(682) |
|
275,596 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating income |
|
48,982 |
|
114,693 |
|
(35,901) |
|
4,970 |
|
(48,733) |
|
84,011 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Interest income |
|
---- |
|
(80) |
|
(275) |
|
(67) |
|
---- |
|
(422) |
| |||||
Interest expense (income) |
|
---- |
|
12,578 |
|
(1,005) |
|
2 |
|
---- |
|
11,575 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income (loss) before income taxes |
|
48,982 |
|
102,195 |
|
(34,621) |
|
5,035 |
|
(48,733) |
|
72,858 |
| |||||
Income taxes (benefit) |
|
---- |
|
46,690 |
|
(24,988) |
|
2,191 |
|
(17) |
|
23,876 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net income (loss) |
$ |
48,982 |
|
$ |
55,505 |
|
$ |
(9,633) |
|
$ |
2,844 |
|
$ |
(48,716) |
|
$ |
48,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING INCOME STATEMENT
NINE MONTHS ENDED FEBRUARY 28, 2011
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Cintas |
| |||||
|
|
Cintas |
|
|
|
Subsidiary |
|
Non- |
|
|
|
Corporation |
| |||||
|
|
Corporation |
|
Corp. 2 |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
| |||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Rental uniforms and ancillary products |
$ |
---- |
|
$ |
1,522,229 |
|
$ |
393,250 |
|
$ |
143,484 |
|
$ |
(78,576) |
|
$ |
1,980,387 |
|
Other services |
|
---- |
|
1,002,435 |
|
357,282 |
|
78,806 |
|
(620,613) |
|
817,910 |
| |||||
Equity in net income of affiliates |
|
176,213 |
|
---- |
|
---- |
|
---- |
|
(176,213) |
|
---- |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
176,213 |
|
2,524,664 |
|
750,532 |
|
222,290 |
|
(875,402) |
|
2,798,297 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Costs and expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of rental uniforms and ancillary products |
|
---- |
|
978,149 |
|
232,115 |
|
96,549 |
|
(177,603) |
|
1,129,210 |
| |||||
Cost of other services |
|
---- |
|
651,265 |
|
306,777 |
|
49,007 |
|
(514,202) |
|
492,847 |
| |||||
Selling and administrative expenses |
|
---- |
|
789,686 |
|
15,086 |
|
65,402 |
|
(5,400) |
|
864,774 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating income |
|
176,213 |
|
105,564 |
|
196,554 |
|
11,332 |
|
(178,197) |
|
311,466 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Interest income |
|
---- |
|
(494) |
|
(567) |
|
(100,222) |
|
100,031 |
|
(1,252) |
| |||||
Interest expense (income) |
|
---- |
|
38,413 |
|
(1,488) |
|
30 |
|
---- |
|
36,955 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income (loss) before income taxes |
|
176,213 |
|
67,645 |
|
198,609 |
|
111,524 |
|
(278,228) |
|
275,763 |
| |||||
Income taxes (benefit) |
|
---- |
|
23,093 |
|
67,801 |
|
8,658 |
|
(2) |
|
99,550 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net income (loss) |
$ |
176,213 |
|
$ |
44,552 |
|
$ |
130,808 |
|
$ |
102,866 |
|
$ |
(278,226) |
|
$ |
176,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING INCOME STATEMENT
NINE MONTHS ENDED FEBRUARY 28, 2010
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Cintas |
| ||||||
|
|
Cintas |
|
|
|
Subsidiary |
|
Non- |
|
|
|
Corporation |
| ||||||
|
|
Corporation |
|
Corp. 2 |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
| ||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Rental uniforms and ancillary products |
|
$ |
---- |
|
$ |
1,473,440 |
|
$ |
389,227 |
|
$ |
133,925 |
|
$ |
(74,899) |
|
$ |
1,921,693 |
|
Other services |
|
---- |
|
887,147 |
|
244,239 |
|
47,559 |
|
(462,748) |
|
716,197 |
| ||||||
Equity in net income of affiliates |
|
160,142 |
|
---- |
|
---- |
|
---- |
|
(160,142) |
|
---- |
| ||||||
|
|
160,142 |
|
2,360,587 |
|
633,466 |
|
181,484 |
|
(697,789) |
|
2,637,890 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Costs and expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cost of rental uniforms and ancillary products |
|
---- |
|
925,918 |
|
238,015 |
|
81,722 |
|
(162,248) |
|
1,083,407 |
| ||||||
Cost of other services |
|
---- |
|
584,829 |
|
206,990 |
|
30,061 |
|
(379,646) |
|
442,234 |
| ||||||
Selling and administrative expenses |
|
---- |
|
757,038 |
|
(6,733) |
|
48,681 |
|
443 |
|
799,429 |
| ||||||
Legal settlements, net of insurance proceeds |
|
---- |
|
---- |
|
23,529 |
|
---- |
|
---- |
|
23,529 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating income |
|
160,142 |
|
92,802 |
|
171,665 |
|
21,020 |
|
(156,338) |
|
289,291 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest income |
|
---- |
|
(80) |
|
(806) |
|
(209) |
|
---- |
|
(1,095) |
| ||||||
Interest expense (income) |
|
---- |
|
38,060 |
|
(1,887) |
|
19 |
|
---- |
|
36,192 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Income (loss) before income taxes |
|
160,142 |
|
54,822 |
|
174,358 |
|
21,210 |
|
(156,338) |
|
254,194 |
| ||||||
Income taxes (benefit) |
|
---- |
|
20,676 |
|
65,759 |
|
7,634 |
|
(17) |
|
94,052 |
| ||||||
Net income (loss) |
|
$ |
160,142 |
|
$ |
34,146 |
|
$ |
108,599 |
|
$ |
13,576 |
|
$ |
(156,321) |
|
$ |
160,142 |
|
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF FEBRUARY 28, 2011
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Cintas |
| ||||||
|
|
Cintas |
|
|
|
Subsidiary |
|
Non- |
|
|
|
Corporation |
| ||||||
|
|
Corporation |
|
Corp. 2 |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
| ||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents |
|
$ |
---- |
|
$ |
48,871 |
|
$ |
5,663 |
|
$ |
130,197 |
|
$ |
---- |
|
$ |
184,731 |
|
Marketable securities |
|
---- |
|
---- |
|
100 |
|
31,874 |
|
---- |
|
31,974 |
| ||||||
Accounts receivable, net |
|
---- |
|
302,808 |
|
76,923 |
|
36,564 |
|
---- |
|
416,295 |
| ||||||
Inventories, net |
|
---- |
|
192,360 |
|
24,763 |
|
12,129 |
|
3,042 |
|
232,294 |
| ||||||
Uniforms and other rental items in service |
|
---- |
|
289,280 |
|
77,933 |
|
33,714 |
|
(26,944) |
|
373,983 |
| ||||||
Income taxes, current (payable) |
|
---- |
|
(7,657) |
|
(428) |
|
21,111 |
|
---- |
|
13,026 |
| ||||||
Deferred income tax asset (liability) |
|
---- |
|
---- |
|
47,103 |
|
(2,628) |
|
---- |
|
44,475 |
| ||||||
Prepaid expenses and other |
|
---- |
|
5,595 |
|
17,455 |
|
3,110 |
|
---- |
|
26,160 |
| ||||||
Total current assets |
|
---- |
|
831,257 |
|
249,512 |
|
266,071 |
|
(23,902) |
|
1,322,938 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Property and equipment, at cost, net |
|
---- |
|
586,408 |
|
274,503 |
|
80,862 |
|
---- |
|
941,773 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Goodwill |
|
---- |
|
---- |
|
1,408,983 |
|
82,133 |
|
---- |
|
1,491,116 |
| ||||||
Service contracts, net |
|
---- |
|
100,495 |
|
752 |
|
6,213 |
|
---- |
|
107,460 |
| ||||||
Other assets, net |
|
1,942,900 |
|
1,627,636 |
|
824,862 |
|
364,960 |
|
(4,651,575) |
|
108,783 |
| ||||||
|
|
$ |
1,942,900 |
|
$ |
3,145,796 |
|
$ |
2,758,612 |
|
$ |
800,239 |
|
$ |
(4,675,477) |
|
$ |
3,972,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|