Cintas Corporation reported that total revenue for its fiscal third quarter ended February 28, 2002, increased 2 percent to $545 million from $537 million a year ago. Net income of $55.6 million for the third quarter increased 1 percent from $55 million reported in last year's third quarter. Earnings per share of $.32 was comparable to the prior year.
"Our results again illustrate Cintas' ability to grow despite the sluggish economic environment that we are in today," noted Robert J. Kohlhepp, Chief Executive Officer of Cintas. "Our uniform business has been negatively impacted by the reduction in employment. Many customers continue to reduce headcount and cut back on discretionary purchases wherever possible. Moreover, customers shut down operations entirely during the most recent holiday period, which exacerbated the typical holiday slowdown. On the positive side, we continue to add new customers at a record rate. Our new business is increasing at a mid-teens rate ahead of last year. We also have a very strong balance sheet and healthy cash flow. We believe this financial strength, as well as our strong management team, will enable us to weather this economic storm and emerge as a stronger force in our industry."
Cintas' rental revenue was up 6 percent from last year's third quarter. Other services revenue, which includes the sale of uniforms as well as the sale of other products and services, declined 12 percent from a year ago. Mr. Kohlhepp explained, "Since the tragic events of September 11th, our uniform sales customers which include hotels, airlines, auto rental and entertainment businesses have delayed their uniform purchases because of weakness in their business. Although we are disappointed in the sale-side of our uniform business, we believe there is a pent-up demand for new uniforms, which we will benefit from as the economy gains strength."
Strong Margins/Strong Balance Sheet
At February 28, 2002, total assets were $1.9 billion. Shareholders' equity reached $1.4 billion, up from $1.2 billion last year. The Company's balance sheet continued to strengthen with $239 million in cash and marketable securities and debt to total capitalization of 13.1 percent.
Despite increases in sales and marketing costs to propel future growth, productivity improvements and cost control efforts have allowed Cintas to continue to deliver excellent operating performance. Gross margins of 42.0 percent increased from last year's 41.0 percent. Mr. Kohlhepp commented, "In this slower growth environment, we have controlled our costs and improved efficiencies throughout our Company. Operating margins were also a healthy 16.3 percent while net margins were 10.2 percent."
Nine Months Results
For the first nine months of fiscal 2002, total revenue advanced 4 percent to $1.67 billion from $1.60 billion in the comparable prior period. Net income increased 5 percent to $170 million, or 99 cents per share versus $162 million, or 95 cents per share last year.
Last week, Cintas announced it is in negotiations to purchase the non- healthcare portion of Angelica Corporation's Image Apparel Division. The assets being purchased include the contracts with customers who purchase image apparel from Angelica, as well as the associated accounts receivable and inventory pertaining to those customers. Cintas would service these new customers from its Chicago-based National Account Sales Division. Mr. Kohlhepp commented, "We are pleased to have the opportunity to provide uniform services to some of the world's most well-respected companies. Cintas has the capacity and financial resources to, efficiently and effectively, service these new customers."
Outlook Remains Positive
"Cintas has reported 32 consecutive years of uninterrupted growth in sales and profits, and we are confident that fiscal 2002 will continue that record," Kohlhepp said. "We anticipate total revenue growth for fiscal 2002 of 3 percent to 5 percent and growth in earnings per share of 5 percent to 7 percent. We have a solid customer base, a strong balance sheet and the financial flexibility to maximize the long-term value of Cintas for our shareholders and working partners by exceeding our customers' expectations."
During the third quarter, Cintas was recognized as one of America's Most Admired Companies by Fortune magazine. Cintas also announced the extension of its partnership with the National Association for Stock Car Auto Racing (NASCAR) through 2004. Cintas is the Preferred Uniform of NASCAR, as well as the Preferred First Aid Supplier through its Xpect First Aid division. During the quarter, Cintas also announced a 14 percent increase in the Company's annual dividend, which will be paid on April 8, 2002. Cintas is recognized as a "Mergent Dividend Achiever" and a leader in enhancing shareholder value.
Headquartered in Cincinnati, Cintas Corporation is the leader in the corporate identity uniform industry providing uniforms to a wide variety of industries nationwide. The Company also provides a range of outsourcing services including entrance mats, sanitation supplies, cleanroom services and first aid and safety products and services. Cintas is a publicly held company traded over the Nasdaq National Market under the symbol CTAS, and is a Nasdaq- 100 Company and component of the Standard & Poor's 500 Index. The Company has achieved 32 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. This news release contains forward-looking statements that reflect the Company's current views as to future events and financial performance with respect to its operations. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in this news release. Factors that might cause such a difference include the possibility of greater than anticipated operating costs, lower sales volumes, the performance and costs of integration of acquisitions, fluctuations in costs of materials and labor, the outcome of pending environmental matters, higher assumed sourcing or distribution costs of products and the reactions of competitors in terms of price and service. Forward-looking statements speak only as of the date made. Cintas undertakes no obligation under the Act to update any forward-looking statements to reflect the events or circumstances arising after the date on which they are made.
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