ITEM 1. BUSINESS
The Company began business in 1929 as an Ohio Corporation and changed its state of incorporation to Washington in 1986. Cintas provides a highly specialized service to businesses of all types - from small service and manufacturing companies to major corporations that employ thousands of people. The Company designs, manufactures and implements corporate identity uniform programs throughout the United States.
The rental markets served by the Company are highly fragmented and competition for this business varies at each of the Company's locations. There are other companies in the uniform rental business which have financial resources comparable to those of the Company, although much of the competition consists of smaller local and regional firms. In certain instances, local competitors may also have financial resources comparable to those deployed by the Company in a particular market. The Company believes that the primary competitive factors that affect its operations are quality, service, design and price, in that order.
The service provided to the rental markets served by the Company principally consists of the rental and cleaning of uniforms as well as providing on-going uniform upgrades to each customer. The Company also offers ancillary products which includes the rental or sale of walk-off mats, fender covers, towels, mops, linen products and first aid products and services.
Due to its diverse customer base and average account size, the loss of one account would not have a significant financial impact on the Company.
In its sale of customized uniforms, Cintas and its subsidiary Uniforms To You, compete on a national basis with other uniform suppliers and manufacturers, some of which have financial resources comparable to the Company's.
The Company operates seven wholly owned manufacturing facilities which provide for a substantial amount of its standard uniform needs. Additional products are purchased from several outside suppliers. Because of the Company's ability to manufacture much of its own uniform needs, the loss of one vendor would not have a significant effect on the Company. In regard to the availability of fabric for the manufacturing process, the Company purchases fabric from several suppliers. The Company is not aware of any circumstances which would hinder its ability to obtain these materials.
The Company does not anticipate any material capital expenditures for environmental controls that would have a material effect on its financial condition. The Company is not aware of any material non-compliance with environmental laws.
At May 31, 1998, the Company employed 16,957 employees of which 770 were represented by labor unions. The Company considers its relationship with its employees to be satisfactory.
The table sets forth the revenues derived from each service provided by Cintas.
Year Ended May 31
1998 1997 1996 (in thousands)
Net Rentals $ 872,739 $739,207 $648,616 Other Service Revenue 325,568 256,000 227,217 -------- -------- -------
$1,198,307 $995,207 $875,833 ========== ======== ========
ITEM 2.
ITEM 2.
PROPERTIES
The Company occupies 193 facilities located in 154 cities. The corporate offices provide centrally located administrative functions including accounting, finance, marketing and data processing. The Company operates processing plants that house administrative, sales and service personnel and the necessary equipment involved in the cleaning of uniforms and bulk items. Branch operations provide administrative, sales and service functions. Cintas operates four distribution facilities and has seven manufacturing plants. The Company also operates facilities which distribute first aid products. The Company considers the facilities it operates to be adequate for their intended use. The Company owns or leases 3,815 vehicles.
The following chart provides additional information concerning Cintas' facilities:
Location Type of Facility
Cincinnati, Ohio Corporate Offices, National Account Division, Distribution Center Abbotsford, Vancouver (Canada) Processing Plant Akron, Ohio Processing Plant Alexandria, Louisiana Branch* Allentown, Pennsylvania Branch* Amarillo, Texas Branch* Angola, Indiana Branch Asheville, North Carolina Branch* Ashland, Kentucky Processing Plant Atlanta, Georgia Processing Plant Augusta, Georgia Processing Plant Austin, Texas Processing Plant Baltimore, Maryland Processing Plant Baltimore, Maryland First Aid Facility Barrie, Ontario (Canada) Processing Plant Baton Rouge (South), Louisiana Processing Plant Baton Rouge (North), Louisiana Processing Plant Battlecreek, Michigan Processing Plant Beaumont, Texas Processing Plant Birmingham, Alabama Branch* Bloomington, Indiana Branch* Boston, Massachusetts Processing Plant Branford, Connecticut Processing Plant Brownsville, Texas Branch* Buffalo, New York Processing Plant Burton, Michigan Branch* Charleston, South Carolina Branch* Charlotte, North Carolina First Aid Facility* Charlotte, North Carolina Processing Plant Chattanooga, Tennessee Branch* Chicago (South), Illinois Processing Plant Chicago (North), Illinois Processing Plant Chicago, Illinois First Aid Chicago, Illinois Distribution Center Chicago, Illinois Manufacturing Facility Cincinnati, Ohio Branch* Cincinnati, Ohio Processing Plant Clay City, Kentucky Manufacturing Facility* Cleveland (West), Ohio Processing Plant
Cleveland (East), Ohio Processing Plant Cleveland, Ohio First Aid Facility* Colorado Springs, Colorado Branch* Columbia, South Carolina Processing Plant* Columbus, Ohio Processing Plant Columbus, Ohio Branch* Corpus Christi, Texas Processing Plant Dallas, Texas Processing Plant Dallas, Texas First Aid Facility* Dallas, Texas First Aid Facility Dayton, Ohio Processing Plant Dayton, Ohio Processing Plant Decatur, Georgia Processing Plant Denver, Colorado Processing Plant Denver, Colorado First Aid Facility* Detroit, Michigan First Aid Facility* Detroit, Michigan Processing Plant Etobicoke, Ontario (Canada) Processing Plant Eugene, Oregon Branch* Evansville, Indiana Processing Plant* Evansville, Indiana Branch* Fairfield, California First Aid Facility* Flint, Michigan Branch* Fort Meyers, Florida Branch* Fort Smith, Arkansas Processing Plant* Fort Wayne, Indiana Branch* Fort Wayne, Indiana Processing Plant Gaylord, Michigan Processing Plant Grand Rapids, Michigan Branch* Grand Rapids, Michigan Branch* Greenville, South Carolina Processing Plant Greenville, South Carolina Processing Plant Greenwood, Mississippi Branch* Griffith, Indiana Branch* Gulfport, Mississippi Branch* Hammond, Louisiana Branch Harrison, Arkansas Branch* Hazard, Kentucky Manufacturing Facility* Hoisington, Kansas Processing Plant* Houston, Texas First Aid Facility* Houston, Texas Processing Plant Huntsville, Alabama Branch* Indianapolis, Indiana Processing Plant Indianapolis, Indiana Processing Plant Indianapolis, Indiana Processing Plant Jackson, Mississippi Branch* Jacksonville, Florida Branch* Joplin, Missouri Branch* Kansas City, Kansas Processing Plant Kansas City, Kansas First Aid Facility Kansas City, Kansas First Aid Facility Knoxville, Tennessee Branch* Knoxville, Tennessee First Aid Facility* Kokomo, Indiana Processing Plant* Lafayette, Louisiana Branch Lafayette, Indiana Processing Plant
Lake Charles, Louisiana Processing Plant Lake Station, Indiana Branch* Laredo, Texas Branch* Las Vegas, Nevada Processing Plant Lexington, Kentucky Processing Plant Lindsay, Ontario (Canada) Processing Plant Little Rock, Arkansas Processing Plant London, Ontario (Canada) Branch* Long Island, New York Processing Plant Los Angeles, California Processing Plant Louisville, Kentucky Processing Plant Louisville, Kentucky Processing Plant Louisville, Kentucky First Aid Facility* Lufkin, Texas Branch Madison, Wisconsin Processing Plant Madison, Wisconsin Direct Sales Memphis, Tennessee Processing Plant Mexico City, Mexico Manufacturing Facility* Miami, Florida Processing Plant Midland, Michigan Processing Plant Milwaukee, Wisconsin Branch* Milwaukee, Wisconsin First Aid Facility* Minneapolis, Minnesota First Aid Facility* Minneapolis, Minnesota Processing Plant* Mobile, Alabama Branch* Montgomery, Alabama Distribution Center* Montgomery, Alabama Branch* Mt. Vernon, Kentucky Manufacturing Facility* Napanee, Ontario (Canada) Processing Plant Nashville, Tennessee Processing Plant Nashville, Tennessee Branch* Natchez, Mississippi Branch* Newburgh, New York Processing Plant New Orleans, Louisiana Processing Plant Oklahoma City, Oklahoma Processing Plant Ontario, California Processing Plant Orange, California Branch* Orlando, Florida Processing Plant Owingsville, Kentucky Manufacturing Facility Pensacola, Florida Branch* Philadelphia, Pennsylvania Processing Plant Phoenix, Arizona Processing Plant Phoenix, Arizona First Aid Facility* Piscataway, New Jersey Processing Plant Pittsburgh, Pennsylvania Processing Plant Portal, Georgia Manufacturing Facility Portland, Maine Branch Portland, Oregon Processing Plant Portland, Oregon First Aid Facility* Raleigh-Durham, North Carolina Branch* Rancho Santa Margarita, California Direct Sales Office Rapid City, South Dakota First Aid Facility* Reno, Nevada Distribution Center* Richmond, Indiana Processing Plant*
Richmond, Virginia Processing Plant Sacramento, California Branch* Savannah, Georgia Branch* Salt Lake City, Utah Processing Plant* San Angelo, Texas Branch* San Antonio, Texas Processing Plant San Diego, California First Aid Facility * San Diego, California Processing Plant Sandusky, Ohio Branch* San Fernando, California Branch* San Francisco(West), California Branch* San Francisco (East), California Processing Plant* San Jose, California Processing Plant San Leandro, California First Aid Facility* Seattle, Washington Processing Plant Scranton, Pennsylvania First Aid Facility* Shreveport, Louisiana Processing Plant South Bend, Indiana Processing Plant Springdale, Arkansas Processing Plant Springfield, Missouri Processing Plant St. Louis, Missouri First Aid Facility* St. Louis, Missouri Processing Plant* Tacoma, Washington Branch* Tampa, Florida Processing Plant Taunton, Massachusetts Branch* Terrre Haute, Indiana Processing Plant Thibodaux, Louisiana Processing Plant Toledo, Ohio Branch* Toronto, Ontario (Canada) Processing Plant Tulsa, Oklahoma Processing Plant Tuscaloosa, Alabama Processing Plant Tyler, Texas Branch* Victoria, Texas Processing Plant Vidalia, Georgia Processing Plant Virginia Beach, Virginia Branch* Warsaw, Indiana Branch West Chester, New York Branch* Washington, D.C. Processing Plant Westland, Michigan Processing Plant West Palm Beach, Florida Branch* West Valley City, Utah First Aid Facility* Wichita, Kansas Branch* Winston-Salem, North Carolina Processing Plant Youngstown, Ohio Branch*
*Leased for various terms ranging from monthly to 2008. The Company expects that it will be able to renew its leases on satisfactory terms. All other properties are owned.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
In December 1992, the Company was served with an "Imminent and Substantial Endangerment and Remedial Action Order" (the "Order") by the California Department of Toxic Substances Control relating to the facility leased by the Company in San Leandro, California. The Order requires Cintas and three other allegedly responsible parties to respond to alleged soil and groundwater contamination at and around the San Leandro facility. It is not possible at this time to estimate the loss or range of loss associated with the claim. Based on information that has been made available to the Company, however, it is not believed that the matter will have a material adverse effect on the Company's financial condition or results of its operations.
The Company is also a party to incidental litigation brought in the ordinary course of business, none of which individually or in the aggregate, is considered to be material to its operations or financial condition. Cintas maintains insurance coverage against certain liabilities that it may incur in its operations from time to time.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None in the fourth quarter of fiscal 1998.
PART II ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
"Market for Registrant's Common Stock@ and ASecurity Holder Information" on page 35 of the Registrant's Annual Report to Shareholders for 1998 is incorporated herein by reference. Dividend information is incorporated by reference to the Consolidated Statements of Shareholders' Equity on page 19. Dividends on the outstanding Common Stock are paid annually and amounted to $.18 and $.15 per share in fiscal 1998 and 1997, respectively.
During the quarterly period ended May 31, 1998, the Registrant issued 2,493,569 shares of Common Stock for companies being acquired in 11 separate transactions to the 21 owners of those companies. In addition, the Registrant issued 3,959,262 shares of Common Stock for the acquisition of Uniforms To You in April 1998. The issuance was to three individuals, seventeen trusts with related trustees and a related corporation. The issuance's were exempt from the registration requirements of the Securities Act of 1933 as private offerings pursuant to Section 4(2) of the Act.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The "Eleven Year Financial Summary" on page 16 of the Registrant's Annual Report to Share holders for 1998 is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results of Operations" commencing on page 32 of the Registrant's Annual Report to Shareholders for 1998 is incorporated herein by reference.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not Applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Financial Statements of the Registrant shown on pages 17 through 31 of its Annual Report to Shareholders for 1998 are incorporated herein by reference:
Consolidated Balance Sheets as of May 31, 1998 and 1997 Consolidated Statements of Income for the years ended May 31, 1998, 1997 and 1996 Consolidated Statements of Shareholders' Equity for the years ended May 31, 1998, 1997 and 1996 Consolidated Statements of Cash Flows for the years ended May 31, 1998, 1997 and 1996 Notes to Consolidated Financial Statements Report of Independent Auditors
ITEM 9.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Items 10., 11., 12., and 13. of Part III are incorporated by reference to the Registrant's Proxy Statement for its 1998 Annual Shareholders' Meeting to be filed with the Commission pursuant to Regulation 14A.
PART IV
ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM 8-K
(a) (1) Financial Statements. All financial statements required to be filed by Item 8. of this Form and included in this report are listed in Item 8. No additional financial statements are filed because the requirements for paragraph (d) under Item 14 are not applicable to the Company.
(a) (2) Financial Statement Schedule:
For each of the three years in the period ended May 31, 1998.
Schedule II: Valuation and Qualifying Accounts and Reserves.
All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the Consolidated Financial Statements or Notes thereto.
(a) (3) Exhibits.
Exhibit Number Description of Exhibit Filing Status
3.1 Restated Articles of Incorporation (1)
3.3 Bylaws (1)
Management Compensatory Contracts (Exhibits 10.1-10.5)
10.1 Incentive Stock Option Plan (2)
10.2 Partners' Plan, as Amended (3)
10.3 1990 Directors' Stock Option Plan (4) 10.4 1992 Employee Stock Option Plan, as Amended (5)
10.5 1994 Directors' Stock Option Plan (6)
13 1998 Annual Report to Shareholders (a) filed herewith
21 Subsidiaries of the Registrant filed herewith
23 Consent of Independent Auditors filed herewith
27 Financial Data Schedule - Twelve Months Ended May 1998 filed herewith
27.1 Financial Data Schedule - Restated Nine months ended February 1998 filed herewith
27.2 Financial Data Schedule - Restated Six Months Ended November 1997 filed herewith
27.3 Financial Data Schedule - Restated Three Months Ended August 1997 filed herewith
27.4 Financial Data Schedule - Restated Twelve Months Ended May 1997 filed herewith
27.5 Financial Data Schedule - Restated Nine Months Ended February 1997 filed herewith
27.6 Financial Data Schedule - Restated Six Months Ended November 1996 filed herewith
27.7 Financial Data Schedule - Restated Three Months Ended August 1996 filed herewith
(a) Only portions of the 1998 Annual Report to Shareholders specifically incorporated by reference are filed herewith. A supplemental paper copy of this report will be provided to the SEC for informational purposes.
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended May 31, 1989.
(2) Incorporated by reference to the Company's Registration Statement No. 33-23228 on Form S-8 filed under the Securities Act of 1933.
(3) Incorporated by reference to the Company's Registration Statement No. 33-56623 on Form S-8 filed under the Securities Act of 1933.
(4) Incorporated by reference to the Company's Registration Statement No. 33-71124 on Form S-8 filed under the Securities Act of 1933.
(5) Incorporated by reference to the Company's Proxy Statement for its 1995 Annual Shareholders' Meeting.
(6) Incorporated by reference to the Company=s Proxy Statement for its 1994 Annual Shareholders' Meeting.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CINTAS CORPORATION
DATE SIGNED: August 28, 1998 /s/ Robert J. Kohlhepp ------------------------ By: Robert J. Kohlhepp Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
/s/ Richard T. Farmer Chairman of the Board ---------------------- of Directors August 28, 1998 Richard T. Farmer
/s/ Robert J. Kohlhepp Chief Executive ----------------------- Officer and Director August 28, 1998 Robert J. Kohlhepp
/s/ Scott D. Farmer President, Chief Operating ----------------------- Officer and Director August 28, 1998 Scott D. Farmer
/s/ James J. Gardner Director August 28, 1998 ----------------------- James J. Gardner
/s/ Donald P. Klekamp Director August 28, 1998 ----------------------- Donald P. Klekamp
/s/ William C. Gale Vice President and Chief ------------------------ Financial Officer (Principal William C. Gale Financial and Accounting Officer) August 28, 1998
CINTAS CORPORATION
(A) Uncollectible Accounts Charged-off, Net of Recoveries.
ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM 8-K
(a) (1) Financial Statements. All financial statements required to be filed by Item 8. of this Form and included in this report are listed in Item 8. No additional financial statements are filed because the requirements for paragraph (d) under Item 14 are not applicable to the Company.
(a) (2) Financial Statement Schedule:
For each of the three years in the period ended May 31, 1998.
Schedule II: Valuation and Qualifying Accounts and Reserves.
All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the Consolidated Financial Statements or Notes thereto.
(a) (3) Exhibits.
Exhibit Number Description of Exhibit Filing Status
3.1 Restated Articles of Incorporation (1)
3.3 Bylaws (1)
Management Compensatory Contracts (Exhibits 10.1-10.5)
10.1 Incentive Stock Option Plan (2)
10.2 Partners' Plan, as Amended (3)
10.3 1990 Directors' Stock Option Plan (4) 10.4 1992 Employee Stock Option Plan, as Amended (5)
10.5 1994 Directors' Stock Option Plan (6)
13 1998 Annual Report to Shareholders (a) filed herewith
21 Subsidiaries of the Registrant filed herewith
23 Consent of Independent Auditors filed herewith
27 Financial Data Schedule - Twelve Months Ended May 1998 filed herewith
27.1 Financial Data Schedule - Restated Nine months ended February 1998 filed herewith
27.2 Financial Data Schedule - Restated Six Months Ended November 1997 filed herewith
27.3 Financial Data Schedule - Restated Three Months Ended August 1997 filed herewith
27.4 Financial Data Schedule - Restated Twelve Months Ended May 1997 filed herewith
27.5 Financial Data Schedule - Restated Nine Months Ended February 1997 filed herewith
27.6 Financial Data Schedule - Restated Six Months Ended November 1996 filed herewith
27.7 Financial Data Schedule - Restated Three Months Ended August 1996 filed herewith
(a) Only portions of the 1998 Annual Report to Shareholders specifically incorporated by reference are filed herewith. A supplemental paper copy of this report will be provided to the SEC for informational purposes.
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended May 31, 1989.
(2) Incorporated by reference to the Company's Registration Statement No. 33-23228 on Form S-8 filed under the Securities Act of 1933.
(3) Incorporated by reference to the Company's Registration Statement No. 33-56623 on Form S-8 filed under the Securities Act of 1933.
(4) Incorporated by reference to the Company's Registration Statement No. 33-71124 on Form S-8 filed under the Securities Act of 1933.
(5) Incorporated by reference to the Company's Proxy Statement for its 1995 Annual Shareholders' Meeting.
(6) Incorporated by reference to the Company=s Proxy Statement for its 1994 Annual Shareholders' Meeting.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CINTAS CORPORATION
DATE SIGNED: August 28, 1998 /s/ Robert J. Kohlhepp ------------------------ By: Robert J. Kohlhepp Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
/s/ Richard T. Farmer Chairman of the Board ---------------------- of Directors August 28, 1998 Richard T. Farmer
/s/ Robert J. Kohlhepp Chief Executive ----------------------- Officer and Director August 28, 1998 Robert J. Kohlhepp
/s/ Scott D. Farmer President, Chief Operating ----------------------- Officer and Director August 28, 1998 Scott D. Farmer
/s/ James J. Gardner Director August 28, 1998 ----------------------- James J. Gardner
/s/ Donald P. Klekamp Director August 28, 1998 ----------------------- Donald P. Klekamp
/s/ William C. Gale Vice President and Chief ------------------------ Financial Officer (Principal William C. Gale Financial and Accounting Officer) August 28, 1998
CINTAS CORPORATION
(A) Uncollectible Accounts Charged-off, Net of Recoveries.