Cintas Corporation 10-K Summary: Fiscal Year Ended May 31, 1994
Business Context and Reporting Period
This filing covers the fiscal year ended May 31, 1994, for Cintas Corporation, a national provider of uniform rental and sales services. The company operates 102 facilities across 96 cities in 33 states, serving a diverse customer base ranging from small service companies to major corporations. Cintas designs, manufactures, and implements corporate identity uniform programs. The company reported its 25th consecutive year of growth in sales and profits.
Key Financial Metrics
| Metric | Fiscal 1994 | Fiscal 1993 |
|---|---|---|
| Total Revenues | $523.2 million | $452.7 million |
| Net Income | $52.2 million | $44.9 million |
| Earnings Per Share (Diluted) | $1.12 | $0.97 |
| Net Cash from Operating Activities | $71.4 million | $81.6 million |
| Capital Expenditures | $37.2 million | $29.7 million |
| Long-Term Debt (Total) | $99.9 million | $108.1 million |
| Debt to Total Capitalization | 24.4% | 29.0% |
| Return on Average Equity | 18.2% | 18.3% |
| Dividends Per Share | $0.17 | $0.14 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 15.6% to $523.2 million. Net rental revenues grew 14.8%, driven by a 9.5% increase in existing operations and acquisitions. Net sales revenues surged 21.8% due to new uniform programs for large national accounts.
- Profitability: Income before taxes rose 19.8% to $85.5 million. Pre-tax margins improved from 15.7% to 16.3%, aided by reduced medical benefits and workers' compensation costs.
- Acquisitions: The company completed 8 acquisitions in fiscal 1994, including businesses in Pittsburgh and Baltimore, and the tailored uniform division of Palm Beach Company. This contrasts with 17 acquisitions in fiscal 1993.
- Debt Reduction: Long-term debt decreased by approximately $8.2 million due to repayments, lowering the debt-to-capitalization ratio.
- Facility Expansion: Three new uniform rental facilities were completed in Kansas City, Baton Rouge, and Akron. Construction is underway in Portland, Phoenix, Seattle, and Charlotte.
Guidance, Outlook, and Risks
- Outlook: Management anticipates capital expenditures of approximately $48 million for fiscal 1995. The company expects continued growth driven by internal expansion, acquisitions, and the conversion of non-users to uniform programs (67% of new customers in 1994 were first-time users).
- Stock Repurchase: The Board authorized the repurchase of up to 2 million shares of common stock.
- Tax Impact: A one-time tax expense of approximately $1.1 million ($0.02 per share) was recorded in the first quarter due to the Omnibus Budget Reconciliation Act of 1993, which increased federal tax rates retroactively.
- Legal Proceedings: The company is subject to a remedial action order regarding soil and groundwater contamination at a leased facility in San Leandro, California. Management does not believe this will have a material adverse effect on financial condition.
- Competition: The market is highly fragmented. Cintas competes on quality, service, design, and price. The company notes that smaller competitors face increasing difficulties due to technology and regulations, creating acquisition opportunities.
Investor Verification Checklist
- Verify the impact of the 1993 tax law changes on future effective tax rates and cash flows.
- Confirm the integration progress and financial contribution of the 8 acquisitions made in fiscal 1994.
- Monitor the execution of the $48 million capital expenditure plan for fiscal 1995 and the opening of new facilities.
- Review the status of the San Leandro, California environmental remediation order for potential cost escalations.
- Assess the sustainability of the 21.8% growth in net sales revenues, which was driven by specific large national account conversions.