UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant ý | |||
Filed by a Party other than the Registrant o |
|||
Check the appropriate box: |
|||
o |
Preliminary Proxy Statement |
||
o |
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
||
ý |
Definitive Proxy Statement |
||
o |
Definitive Additional Materials |
||
o |
Soliciting Material Pursuant to Section 240.14a-12 |
||
CINTAS CORPORATION |
|||
(Name of Registrant as Specified in Its Charter) |
|||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
Payment of Filing Fee (Check the appropriate box): |
||||
ý |
No fee required. |
|||
o |
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
|||
(1) | Title of each class of securities to which transaction applies: |
|||
(2) | Aggregate number of securities to which transaction applies: |
|||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
|||
(4) | Proposed maximum aggregate value of transaction: |
|||
(5) | Total Fee Paid: |
|||
o |
Fee paid previously with preliminary materials. |
|||
o |
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
|||
(1) |
Amount Previously Paid: |
|||
(2) | Form, Schedule or Registration Statement No.: |
|||
(3) | Filing Party: |
|||
(4) | Date Filed: |
6800 Cintas Boulevard
Cincinnati, Ohio 45262
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
Dear Shareholder:
We invite you to attend our Annual Meeting of Shareholders on October 20, 2009, at 10:00 a.m. Eastern Daylight Time at Cintas' Headquarters, 6800 Cintas Boulevard, Cincinnati, Ohio.
This booklet includes notice of the meeting and the proxy statement. The proxy statement tells you more about the agenda and procedures for the meeting. It also describes how the Board operates and gives personal information about our director candidates.
Shareholders entitled to vote at this Annual Meeting are those of record as of the close of business on August 25, 2009. Please note that only shareholders of record or holders of valid proxies from such shareholders may attend or vote at the meeting. Since seating will be limited, we ask shareholders to call 1-866-246-8277 to make a reservation for the meeting. When making your reservation, please give your full name, company name and address. If you do not make a reservation, you may not be provided entry into the meeting due to limited space.
Upon arrival at the Annual Meeting, shareholders may be asked for a form of personal identification and proof of stock ownership. This can be in the form of a brokerage statement or proxy card. Based on this proof of ownership and the reservation system noted above, an admission ticket will be given to the shareholder at the meeting. No cameras, recording equipment, electronic devices, cellular telephones, large bags, briefcases or packages will be permitted in the meeting.
We are pleased to take advantage of U.S. Securities and Exchange Commission rules that allow companies to furnish their proxy materials over the Internet. As a result, we are mailing to most of our shareholders a Notice of Internet Availability of Proxy Materials (the "Notice") instead of a paper copy of this proxy statement and our 2009 Annual Report. The Notice contains instructions on how to access and review those documents over the Internet. We believe that this process will allow us to provide our shareholders with the information they need in a timely manner, while reducing the environmental impact and lowering the costs of printing and distributing our proxy materials. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice.
Whether or not you plan to attend the meeting, please complete and return your proxy card or vote by telephone or via the Internet by following the instructions on your proxy card.
Sincerely,
Richard
T. Farmer
Chairman of the Board
September 4, 2009
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF CINTAS CORPORATION
Time: | 10:00 a.m., Eastern Daylight Time | |
Date: |
October 20, 2009 |
|
Place: |
Cintas Corporate Headquarters 6800 Cintas Boulevard Cincinnati, Ohio |
|
Purpose: |
||
1. |
To elect as directors the ten nominees named in the attached proxy materials; |
|
2. |
To ratify Ernst & Young LLP as our independent registered public accounting firm for fiscal 2010; |
|
3. |
To vote on a shareholder proposal if properly presented; and |
|
4. |
To conduct other business if properly raised. |
Only shareholders of record on August 25, 2009, may attend or vote at the meeting. The approximate mailing date of the Notice is September 4, 2009.
The vote of each shareholder is important. You can vote your shares by completing and returning the proxy card sent to you. Shareholders can also vote their shares over the Internet or by telephone by following the voting instructions on the proxy card.
Thomas E. Frooman
Vice President and Secretary General Counsel
September 4,
2009
Cintas makes available, free of charge on its website, all of its filings that are made electronically with the Securities and Exchange Commission ("SEC"), including Forms 10-K, 10-Q and 8-K. These filings are also available on the SEC's website (www.sec.gov). To access these filings, go to our website (www.cintas.com) and click on the "Financial Reports" tab at the right under the "Investors" page. Copies of Cintas' Annual Report on Form 10-K for the fiscal year ended May 31, 2009, including financial statements and schedules thereto, filed with the SEC, are also available without charge to shareholders upon written request addressed to:
Thomas
E. Frooman
Vice President and Secretary General Counsel
6800 Cintas Boulevard
P.O. Box 625737
Cincinnati, Ohio 45262-5737
Who may vote
Shareholders of Cintas, recorded in our stock register on August 25, 2009, may vote at the meeting. As of that date, Cintas had 153,976,594 shares of common stock
outstanding. Each share is entitled to one vote on each matter submitted to the shareholders at the annual meeting.
How to vote
You may vote in person at the meeting or by proxy. You may also vote by Internet or telephone using one of the methods described in the proxy card. We recommend you vote by
proxy, Internet or telephone even if you plan to attend the meeting. If you vote by Internet or telephone, please do not return the proxy card. If voting by mail, please complete, sign and date your
proxy card enclosed with these proxy materials. If desired, you can change your vote at the meeting.
How proxies work
Cintas' Board of Directors is asking for your proxy. Giving us your proxy means you authorize us to vote your shares at the meeting in the manner you direct. You may vote for
all, some or none of our director nominees. You may also vote for or against the other proposals or abstain from voting.
All proxies properly signed will, unless a different choice is indicated, be voted "FOR" the election of all nominees proposed by the Nominating and Corporate Governance Committee, "FOR" the ratification of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2010 and "AGAINST" the shareholder proposal if properly presented.
You may receive more than one proxy or voting card depending on how you hold your shares. Shares registered in your name are covered by one card. If you hold shares through someone else, such as a stockbroker or bank, you may get material from them asking how you want to vote. Specifically, if your shares are held in the name of your stockbroker or bank and you wish to vote in person at the meeting, you should request your stockbroker or bank to issue you a proxy covering your shares.
If any other matters come before the meeting or any postponement or adjournment, each proxy will be voted in the discretion of the individuals named as proxies on the card.
Revoking a proxy
You may revoke your proxy at any time before the vote is taken by submitting a new proxy with a later date, by voting in person at the meeting or by notifying Cintas' Secretary
in writing at the address under "Questions?" on page 35.
Quorum
In order to carry on the business of the meeting, we must have a quorum. This means at least a majority of the outstanding shares eligible to vote must be represented at the
meeting, either by proxy or in person.
Votes needed
The ten nominees receiving the most votes will be elected as members of the Board of Directors subject to a resignation policy in our Bylaws that applies to any nominee who
does not receive a majority of the votes cast. See "Election of Directors" on page 2. Approval of all other matters considered at the meeting, including postponement or adjournment, will
require the affirmative vote of a majority of shares voting.
Only votes for or against a proposal count. Abstentions (including abstentions with respect to one or more nominees) and broker nonvotes count for quorum purposes, but not for voting purposes. Broker nonvotes occur when a broker returns a proxy, but does not have authority to vote on a particular proposal.
Attending in person
Only shareholders, their proxy holders and Cintas' guests, each of which must be properly registered as described in the notice herewith, may attend the meeting.
1
ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)
The Nominating and Corporate Governance Committee of the Board of Directors has nominated for election the following current directors, namely: Gerald S. Adolph, Paul R. Carter, Gerald V. Dirvin, Richard T. Farmer, Scott D. Farmer, Joyce Hergenhan, James J. Johnson, Robert J. Kohlhepp, David C. Phillips and Ronald W. Tysoe. Proxies solicited by the Board will be voted for the election of these nominees. All directors elected at the Annual Meeting will be elected to hold office until the next annual meeting. In voting to elect directors, shareholders are not entitled to cumulate their votes.
In accordance with NASDAQ Stock Market, LLC ("NASDAQ") rules, our Board of Directors affirmatively determines the independence of each director and nominee for election as a director in accordance with the elements of independence set forth in the NASDAQ listing standards and Exchange Act rules. Cintas' Director Independence Standards are available on our website at www.cintas.com. Based on these standards, the Board determined that each of the following nonemployee directors is independent: Gerald S. Adolph, Paul R. Carter, Gerald V. Dirvin, Joyce Hergenhan, James J. Johnson, David C. Phillips and Ronald W. Tysoe. Our Audit, Compensation and Nominating and Corporate Governance Committees are composed solely of independent directors. All directors are elected for one-year terms. Information on each of our nominees is given below.
An uncontested election is one in which the number of nominees does not exceed the number of directors to be elected. In an uncontested election, any nominee who does not receive a majority of the shares cast shall promptly offer his or her resignation to the Board. The Nominating and Corporate Governance Committee will take the matter under advisement and make a recommendation to the Board on whether to accept or reject the resignation or whether other action should be taken. The Board has 90 days following certification of the shareholder vote to consider the offer of resignation. Within such 90 day period, the Board will promptly disclose publicly its decision whether to accept the director's resignation offer.
If
a director nominee becomes unavailable before the election, your proxy card authorizes us to vote for a replacement nominee if the Board names one.
The Board recommends you vote FOR each of the following candidates:
Gerald S. Adolph3 & 4 55 |
Gerald S. Adolph was elected a Director of Cintas in 2006. Mr. Adolph is currently a Senior Vice President with Booz & Company. Mr. Adolph has held numerous leadership positions at Booz & Company, including Worldwide Chemicals Practice Leader, Worldwide Consumer and Health Practice Leader and Global Mergers and Restructuring Practice Leader. He has also served on the Booz & Company Board of Directors. | |
Paul R. Carter2 & 4 69 |
Paul R. Carter was elected a Director of Cintas in 2002 and is the Chairman of the Audit Committee. Mr. Carter formerly was a Director of Wal-Mart Stores, Inc. and its Chief Financial Officer. He retired as Executive Vice President of Wal-Mart Stores, Inc. and President of Wal-Mart's real estate division effective January 31, 2003. |
2
Gerald V. Dirvin3 & 4 72 |
Gerald V. Dirvin was elected a Director of Cintas in 1993 and is the Chairman of the Compensation Committee. Mr. Dirvin joined The Procter & Gamble Company in 1959 and served in various management positions. He retired as Executive Vice President and Director of Procter & Gamble in 1994. | |
Richard T. Farmer 74 |
Richard T. Farmer is the founder of Cintas Corporation. He has served as Chairman of the Board of Cintas Corporation and its predecessor companies since 1968. Prior to the founding of Cintas, Mr. Farmer worked with his family owned company, which Cintas acquired in the early 1970s. Prior to August 1, 1995, Mr. Farmer also served as Chief Executive Officer. |
|
Scott D. Farmer1 50 |
Scott D. Farmer joined Cintas in 1981. He has held the positions of Vice President National Account Division, Vice President Marketing and Merchandising, Rental Division Group Vice President and Chief Operating Officer. In 1994, he was elected to the Board of Directors. He was elected Chief Executive Officer in July 2003. |
|
Joyce Hergenhan3 & 4 67 |
Joyce Hergenhan was elected a Director of Cintas in 2004. Ms. Hergenhan was with the General Electric Company for 22 years, serving as both Vice President for Corporate Public Relations and President of the GE Foundation until her retirement in early 2004. |
|
James J. Johnson4 62 |
James J. Johnson was appointed a Director of Cintas in 2009. Mr. Johnson was with the Proctor & Gamble Company for 35 years, retiring in June 2008 as Chief Legal Officer. He is also a Director of the Medical Center Fund of Cincinnati. |
|
Robert J. Kohlhepp1 65 |
Robert J. Kohlhepp has been a Director of Cintas since 1979. He has been employed by Cintas since 1967 serving in various executive capacities including Vice President Finance, Executive Vice President, President and Chief Executive Officer. He now serves as Vice Chairman of the Board. He is also a Director of Parker Hannifin Corporation, Cleveland, Ohio. |
|
David C. Phillips1, 2 & 4 71 |
David C. Phillips was elected a Director of Cintas in 2003. He was designated as Lead Director of the Cintas Board of Directors and is Chairman of the Executive Committee and the Nominating and Corporate Governance Committee. He was with Arthur Andersen LLP for 32 years in which he served in several managing partner leadership positions. After retiring from Arthur Andersen in 1994, he became Chief Executive Officer of Downtown Cincinnati, Inc., from which he retired in 1999 to expand his financial consulting services business and to work with Cincinnati Works, Inc. Cincinnati Works, Inc. is an organization dedicated to reducing the number of people living below the poverty level by assisting them to strive towards self-sufficiency through work. He is also a Director of Meridian Bioscience, Inc. |
3
Ronald W. Tysoe2 & 4 56 |
Ronald W. Tysoe was elected a Director of Cintas in 2008. Mr. Tysoe served as Senior Advisor of Perella Weinberg Partners LP from October 2006 to September 2007. He served as Vice Chairman of Federated Department Stores, Inc. from April 1990 to October 2006. Mr. Tysoe is also a Director of Canadian Imperial Bank of Commerce, Scripps Networks Interactive, Inc., NRDC Acquisition Corp., Pzena Investment Management, Inc., and Taubman Centers Inc. |
Richard T. Farmer is the father of Scott D. Farmer.
4
Cintas is a Washington corporation and, therefore, governed by the corporate laws of Washington. Since its stock is publicly traded on the NASDAQ Global Select Market and it files reports with the Securities and Exchange Commission, it is also subject to the rules of NASDAQ as well as various provisions of federal securities laws and the Sarbanes-Oxley Act of 2002 ("SOX").
Governance of the corporation is placed in the hands of the directors who, in turn, elect officers to manage the business operations. The Board of Directors oversees the management of Cintas on your behalf. It reviews Cintas' long-term strategic plans and exercises direct decision making authority in all major decisions, such as significant acquisitions and the declaration of dividends. The Board also reviews financial and internal controls and management succession plans.
During fiscal 2009, the Board of Directors met on seven occasions (three of which were telephonic). In addition, the independent directors met on four occasions during fiscal 2009 without the presence of management directors. A lead director selected by such independent directors presides over each session.
Cintas expects all directors to attend all Board and shareholder meetings. All directors attended the 2008 Annual Meeting of Shareholders. Each of Cintas' directors attended all meetings of the Board and committees of which they were a member.
Shareholders may communicate with the full Board or individual directors on matters concerning Cintas by mail or through our website, in each case to the attention of the Secretary.
At its meeting on April 28, 2004, the Board reviewed, approved and adopted the Cintas Code of Ethics. A copy of the Cintas Code of Ethics is available on our website, www.cintas.com. Cintas intends to post on its website within four business days after approval any amendments or waivers to the Code of Ethics.
The Directors have organized themselves into the committees described below to help carry out Board responsibilities. In particular, Board committees work on key issues in greater detail than would be possible at full Board meetings. Each committee reviews the results of its meetings with the full Board.
The Executive Committee is composed of David C. Phillips (Chairman), Scott D. Farmer and Robert J. Kohlhepp. It acts for the Board as required between Board meetings. This Committee had no meetings in fiscal 2009.
Each of the following committees is composed of nonemployee directors each of whom meets the relevant independence requirements established by NASDAQ and SOX that apply to their particular assignments.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is responsible for nominating persons for election as directors at each annual shareholders' meeting, making recommendations for filling any Board vacancies that may arise between meetings due to resignation or other factors and developing and recommending to the Board corporate governance policies and guidelines for Cintas. In nominating directors, the Nominating and Corporate Governance Committee takes into account, among other factors which it may deem appropriate, the judgment, skill, diversity, business experience and needs of the Board as its function relates to the business of Cintas. The Nominating and Corporate Governance Committee will consider nominees recommended by security holders in written correspondence directed to the Secretary of Cintas. However, in no event shall any nomination made by a shareholder be binding on Cintas unless it is made in strict accordance with Cintas' Bylaws as they may be amended from time to time. A copy of the
5
Nominating and Corporate Governance Committee Charter is available on our website, www.cintas.com.
Committee members: David C. Phillips (Chairman), Gerald S. Adolph, Paul R. Carter, Gerald V. Dirvin, Joyce Hergenhan, James J. Johnson and Ronald W. Tysoe.
Meetings last year: Four (Two of which were telephonic meetings).
Audit Committee
The Audit Committee is governed by a written charter adopted by the Board. A copy of the Audit Committee Charter is attached to the proxy statement for Cintas' 2006 Annual Shareholders' Meeting and is also available on our website, www.cintas.com. Each member of the Audit Committee has been designated as an Audit Committee financial expert by the Board of Directors and satisfies the expertise standards required by NASDAQ.
The Audit Committee is solely responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm. The Audit Committee also evaluates information received from the independent registered public accounting firm and management to determine whether the registered public accounting firm is independent of management. The independent registered public accounting firm reports directly to the Audit Committee.
The Audit Committee has established procedures for the receipt, retention and treatment of complaints received by Cintas concerning accounting, internal accounting controls or auditing matters and has established procedures for the confidential and anonymous submission by employees of any concerns they may have regarding questionable accounting, auditing or financial matters.
The Audit Committee approves all audit and nonaudit services performed for Cintas by its independent registered public accounting firm prior to the time that those services are commenced. The Chairman also has the authority to approve these services between regularly scheduled meetings. In this event, the Chairman reports approvals made by him to the full Committee at each of its meetings. For these purposes, the Committee, or its Chairman, is provided with information as to the nature, extent and purpose of each proposed service, as well as the approximate time frame and proposed cost arrangements for that service.
Committee members: Paul R. Carter (Chairman), David C. Phillips and Ronald W. Tysoe
Meetings last year: Ten (Seven of which were telephonic meetings).
The Audit Committee oversees Cintas' financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. As part of the oversight processes, the Audit Committee regularly meets with management of Cintas, Cintas' independent registered public accounting firm and Cintas' internal auditors. The Audit Committee regularly meets with each of these groups separately in closed sessions. Throughout the year, the Audit Committee had full access to management, the independent registered public accounting firm and internal auditors for Cintas. To fulfill its responsibilities, the Audit Committee did, among other things, the following:
6
RESPECTFULLY SUBMITTED BY THE MEMBERS OF THE AUDIT COMMITTEE, Paul R. Carter (Chairman), David C. Phillips and Ronald W. Tysoe
7
The Audit Committee appointed Ernst & Young LLP as the independent registered public accounting firm to audit the financial statements of Cintas' fiscal 2009.
Fees billed for services in fiscal 2009 and fiscal 2008 are as follows:
|
Fiscal 2009 | Fiscal 2008 | |||||
---|---|---|---|---|---|---|---|
Audit Fees |
$ | 790,145 | $ | 773,250 | |||
Audit Related Fees(1) |
$ | 143,873 | $ | 186,098 | |||
Tax Fees |
$ | 351,377 | $ | 286,941 | |||
All Other Fees |
$ | 0 | $ | 0 |
Compensation Committee
The Compensation Committee is governed by a written charter adopted by the Board. A copy of the Compensation Committee Charter is available on our website, www.cintas.com. In discharging the responsibilities of the Board of Directors relating to compensation of Cintas' Chief Executive Officer and other senior executive officers, the purposes of the Compensation Committee are, among others, (i) to review and approve the compensation of Cintas' Chief Executive Officer and other senior executive officers, (ii) to oversee the compensation policies and programs of Cintas, including adopting, administering and approving Cintas' incentive compensation and stock plans and awards and amendments to the plans or awards and performing such duties and responsibilities under the terms of any executive compensation plan, incentive-compensation plan or equity-based plan and (iii) to oversee management succession planning. The Compensation Committee has the authority to delegate any of its responsibilities to subcommittees as the Compensation Committee may deem appropriate in its sole discretion. The Committee believes it reviewed the necessary resources available to survey the compensation practices of Cintas' peers and keep abreast of compensation developments in the marketplace. As a result, while the Compensation Committee has in the past considered and expects to consider in the future the use of outside consultants in assisting with recommending the amount or form of executive or director compensation, neither Cintas nor the Committee engaged any outside compensation consultants for the fiscal year ending May 31, 2009.
Cintas' executive compensation policies are designed to support the corporate objective of maximizing the long-term value of Cintas for its shareholders and employee-partners. To achieve this objective, the Committee believes it is important to provide competitive levels of compensation to attract and retain the most qualified employees, to recognize individuals who exceed expectations and to closely link executive compensation with corporate performance. The methods by which the Committee believes Cintas' long-term objectives can best be achieved are through incentive and equity compensation plans.
The Compensation Committee processes and procedures for the consideration and determination of executive and director compensation are discussed in the section entitled "Executive Compensation".
Committee members: Gerald V. Dirvin (Chairman), Gerald S. Adolph and Joyce Hergenhan.
Meetings last year: Two
8
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee has ever been an officer or employee of Cintas. None of the members of the Compensation Committee is an executive officer of another entity at which one of our executive officers serves on the Board of Directors. No named executive officer of Cintas serves as a director or as a member of a committee of any company of which any of Cintas' nonemployee directors are executive officers.
Mr. Adolph is Senior Vice President of Booz & Company. Booz & Company engages Cintas primarily for first aid, safety and fire protection services. Booz & Company paid Cintas fees of $504,905 for services provided during the fiscal year ending May 31, 2009. Mr. Adoph does not receive any direct compensation from services provided by Cintas to Booz & Company.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on the review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Cintas' Proxy Statement on Schedule 14A.
Committee Members: Gerald V. Dirvin (Chairman), Gerald S. Adolph and Joyce Hergenhan.
9
Compensation Discussion and Analysis
This section discusses and analyzes the compensation awarded to, earned by, or paid to the executive officers set forth in the Summary Compensation Table of this proxy statement (collectively, the named executive officers). It also discusses the principles underlying our policies and decisions.
Overview of Compensation Program
The Compensation Committee oversees the compensation programs of Cintas, with particular attention to the compensation for its Chief Executive Officer and the other named executive officers. It is the responsibility of the Committee to review and approve or, as the case may be, recommend to the Board of Directors for approval, changes to Cintas' compensation policies and benefits programs, to administer Cintas' stock plans including recommending and approving stock-based awards to named executive officers, and to otherwise ensure that Cintas' compensation philosophy is consistent with the best interests of Cintas and its shareholders and is properly implemented and monitored. Generally, the types of compensation and benefits provided to the named executive officers are similar to those provided to other executives.
The day-to-day administration of savings plans, profit sharing plans, stock plans, health, welfare and paid-time-off plans and policies applicable to salaried employees in general are handled by Cintas' human resources, finance and legal department employees. The responsibility for certain fundamental changes outside the day-to-day requirements necessary to maintain these plans and policies belongs to the Committee.
Cintas has no policy regarding share ownership by the named executive officers. Cintas strongly encourages the named executive officers to retain shares acquired through the long-term equity incentive program.
Compensation Objectives
The primary focus of our executive compensation program is to support the corporate objective of maximizing the long-term value for our shareholders and employee-partners. We also strive to provide a competitive level of total compensation to all of our employee-partners, including the named executive officers, that attracts and retains talented and experienced individuals and that motivates them to contribute to Cintas' short-term and long-term success.
Our incentive compensation program is designed to reward both individual and team performance, measured by overall Cintas results and the attainment of individual goals and productivity. The Executive Incentive Plan for fiscal 2009 applies to all named executive officers. The incentive compensation arrangement for our Chief Executive Officer, Mr. Scott D. Farmer, was based on growth in earnings per share (EPS), growth in sales and other performance goals outlined by the Committee. The incentive compensation arrangement for our President and Chief Operating Officer, Mr. J. Phillip Holloman, was based on growth in sales and operating income for operations within his responsibility and the accomplishment of certain individual goals. The incentive compensation arrangements for our Senior Vice President and Chief Financial Officer, William C. Gale, our Vice President and Secretary General Counsel, Mr. Thomas E. Frooman and our Vice President and Treasurer, Mr. Michael L. Thompson were based on growth in EPS and the accomplishment of certain individual goals.
Role of Executive Officers in Compensation Decisions
The Compensation Committee determines the compensation for the named executive officers based on recommendations made by management as discussed below. Annually, the Committee
10
performs a market analysis of executive compensation plans. The analysis looks at companies in Cintas' industry as well as companies that we consider to be Cintas' peer group (G&K Services, Unifirst Corporation, Aramark Corporation, The ServiceMaster Corporation, Iron Mountain Incorporated, Convergys Corporation, Robert Half International Inc., Paychex, Inc., Walgreen Co. and Fifth Third Bancorp). The Committee benchmarks base salary, annual cash incentives, long-term compensation and other compensation. Our analysis shows that our named executive officers receive total compensation less than the total compensation of respective named executive officers of the majority of the companies in the peer group identified above.
Based on the market analysis and individual performance, the Vice Chairman of the Board of Directors makes a recommendation to the Committee on the Chief Executive Officer's base salary and annual cash incentive target for the upcoming fiscal year. The Chief Executive Officer makes a recommendation to the Committee for the base salaries and annual cash incentive targets for the upcoming fiscal year for the Senior Vice President and Chief Financial Officer, the Vice President and Secretary General Counsel and the President and Chief Operating Officer. The Senior Vice President and Chief Financial Officer makes a recommendation to the Committee on the Vice President and Treasurer's base salary and annual cash incentive target for the upcoming fiscal year.
Elements Used to Achieve Compensation Components
The table below summarizes the fiscal 2009 compensation program elements for our named executive officers:
|
|
|
|
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Element |
|
Form of Compensation |
|
Purpose |
|
||||||
Base Salaries | Cash | Provides competitive, fixed compensation to attract and retain exceptional executive talent. | ||||||||||
Annual Cash Incentives | Cash | Provides a variable financial incentive to achieve corporate and individual operating goals. | ||||||||||
Long-Term Equity Incentives | Non-qualified stock options and restricted stock | Encourages named executive officers to build and maintain a long-term equity ownership position in Cintas so that their interests are aligned with our shareholders. | ||||||||||
Health, Retirement and Other Benefits | Eligibility to participate in benefit plans generally available to our employee-partners, including Partners' Plan contributions, health, life insurance and disability plans; deferred compensation plan; and certain perquisites | Benefit plans are part of a broad-based employee benefits program. The deferred compensation plan and perquisites provide competitive benefits to our named executive officers. |
We believe that each element of our compensation program plays a substantial role in maximizing long-term value for our shareholders and employee-partners because of the significant emphasis on pay-for-performance principles. Generally, approximately 50% of a named executive officer's total compensation is based on Cintas results and the attainment of individual goals. As a result, performance has a significant effect on the amount of compensation realized by the named executive officers.
11
Each of these elements of pay is described in more detail below.
Base Salaries
The Compensation Committee annually reviews the base salaries of our named executive officers. The Committee also reviews a named executive officer's base salary whenever there is a change in that named executive officer's job responsibilities.
The factors that influence base salary decisions are levels of responsibility, potential for future responsibility, salary levels offered by comparably sized companies and overall performance of the individual. Taking these factors into account, following are the fiscal 2009 base salaries that were approved by the Committee for our named executive offers:
|
|
|
|
|
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Officer |
|
Fiscal 2009 Base Salary |
|
% increase/(decrease) over the prior year |
|
||||||||
Scott D. Farmer | $ | 725,000 | 3.6 | % | ||||||||||
William C. Gale | $ | 442,000 | 3.4 | % | ||||||||||
Thomas E. Frooman | $ | 407,500 | 3.5 | % | ||||||||||
J. Phillip Holloman | $ | 530,000 | 30.8 | % | ||||||||||
Michael L. Thompson | $ | 310,000 | 8.4 | % |
The 30.8% increase over the prior year for Mr. Holloman reflects a full year of compensation as President and Chief Operating Officer in fiscal 2009 compared to only four months in fiscal 2008. Mr. Holloman's annualized base salary in his current position increased $30,000 (6.0%) from fiscal 2008 to fiscal 2009.
Annual Cash Incentives
The Compensation Committee strongly believes that variable annual cash incentives provide a direct financial incentive to achieve corporate and individual operating goals. At the beginning of each fiscal year, the Committee establishes an annual cash incentive target for each named executive officer based on certain financial and non-financial goals.
For fiscal 2009, the Committee approved a total compensation plan for Mr. S. D. Farmer. The aggregate amount of Mr. S. D. Farmer's annual cash incentive for fiscal 2009 is comprised of the financial objectives of growth of fiscal 2009 EPS and fiscal 2009 sales and certain corporate non-financial goals. The percentage of the target annual cash incentive related to the growth of fiscal 2009 EPS, the growth of fiscal 2009 sales and the non-financial goals relating to employee diversity, global expansion and safety are 43%, 43% and 14%, respectively. The Executive Incentive Plan provided that if Cintas met the targeted growth in EPS and sales and the other non-financial goals, Mr. S. D. Farmer would receive a target annual cash incentive of $420,000. Based upon the overall achievement of these objectives, Mr. S. D. Farmer could earn 0% up to a maximum of 200% of the target annual cash incentive.
12
The annual cash incentive payout percentage multiplier for each component of Mr. S. D. Farmer's target annual cash incentive is provided in the following tables:
|
|
|
|
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
EPS Component Level of Achievement |
|
EPS Goals |
|
Annual Cash Incentive Payout |
|
|||||||
Below Threshold | <$2.24 | 0 | % | ||||||||||
Threshold | $2.24 | 11 | % | ||||||||||
Target | $2.32 | 100 | % | ||||||||||
Maximum | $2.41 | 200 | % |
|
|
|
|
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Sales Growth Component Level of Achievement |
|
Sales Growth Goals (% growth over fiscal 2008) |
|
Annual Cash Incentive Payout |
|
|||||||
Below Threshold | 4% or below | 0 | % | ||||||||||
Threshold | 5% | 25 | % | ||||||||||
Target | 8% | 100 | % | ||||||||||
Maximum | 12% | 200 | % |
The EPS and sales growth goals were established in light of the operating plans for Cintas for fiscal 2009.
|
|
|
|
||||||
---|---|---|---|---|---|---|---|---|---|
|
Employee Diversity, Global Expansion and Safety Component Level of Achievement |
|
Annual Cash Incentive Payout |
|
|||||
Does Not Meet Goals | 0 | % | |||||||
Meets Most Goals | 50 | % | |||||||
Meets Goals | 100 | % | |||||||
Exceeds Goals | 150 | % | |||||||
Outstanding Achievement | 200 | % |
Under the Executive Incentive Plan, annual cash incentive calculations for achievement of financial goals are based on actual results, subject to adjustment at the discretion of the Compensation Committee to exclude items that are not operational, such as accounting principle changes or revenue from an acquisition that was not in the business plan.
The Grants of Plan-Based Awards for Fiscal 2009 table outlines estimated future payouts under non-equity incentive plan awards. Based on Cintas' EPS and sales growth for fiscal 2009, Mr. S. D. Farmer did not receive a bonus for these components. Mr. S. D. Farmer received $120,000 based on the performance of the non-financial goals outlined above. Mr. S. D. Farmer's total fiscal 2009 annual cash incentive award was $120,000.
For fiscal 2009, the Committee approved a total compensation plan for Mr. Holloman. Mr. Holloman's financial objectives are based on operations within his responsibility. The aggregate amount of Mr. Holloman's annual cash incentive for fiscal 2009 is comprised of the financial objectives of growth of fiscal 2009 sales and operating income and the accomplishment of certain individual non-financial goals. The percentage of the target annual cash incentive related to the
13
growth of fiscal 2009 sales, the growth of fiscal 2009 operating income and the non-financial goals are 38%, 38% and 24%, respectively. The Executive Incentive Plan provided that if Cintas met the targeted growth in sales and operating income and the other non-financial goals, Mr. Holloman would receive a target annual cash incentive of $212,000. Based upon the overall achievement of these objectives, Mr. Holloman could earn 0% up to a maximum of 200% of the target annual cash incentive.
The annual cash incentive payout percentage multiplier for each financial component of Mr. Holloman's target annual cash incentive is provided in the following tables:
|
|
|
|
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Sales Growth Component Level of Achievement |
|
Sales Growth Goals (% growth over fiscal 2008) |
|
Annual Cash Incentive Payout |
|
|||||||
Below Threshold | <2.36% | 0 | % | ||||||||||
Threshold | 2.36% | 50 | % | ||||||||||
Target | 4.45% | 100 | % | ||||||||||
Maximum | 9.68% | 200 | % |
|
|
|
|
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Operating Income Growth Component Level of Achievement |
|
Operating Income Growth Goals (% growth over fiscal 2008) |
|
Annual Cash Incentive Payout |
|
|||||||
Below Threshold | <9.00% | 0 | % | ||||||||||
Threshold | 9.00% | 25 | % | ||||||||||
Target | 12.40% | 100 | % | ||||||||||
Maximum | 18.00% | 200 | % |
The sales and operating income growth goals were established in light of the operating plans for operations within Mr. Holloman's responsibility for fiscal 2009.
|
|
|
|
||||||
---|---|---|---|---|---|---|---|---|---|
|
Individual Performance Component Level of Achievement |
|
Annual Cash Incentive Payout |
|
|||||
Does Not Meet Goals | 0 | % | |||||||
Meets Most Goals | 50 | % | |||||||
Meets Goals | 100 | % | |||||||
Exceeds Goals | 150 | % | |||||||
Outstanding Achievement | 200 | % |
Under the Executive Incentive Plan, annual cash incentive calculations for achievement of financial goals are based on actual results, subject to adjustment at the discretion of the Compensation Committee to exclude items that are not operational, such as accounting principle changes or revenue from an acquisition that was not in the business plan.
The Grants of Plan-Based Awards for Fiscal 2009 table outlines estimated future payouts under non-equity incentive plan awards. Based on the sales and operating income growth for fiscal 2009, Mr. Holloman did not receive a bonus for these components. Mr. Holloman's individual performance
14
level was "Meets Goals" and, as a result, received $53,000. Mr. Holloman's total fiscal 2009 annual cash incentive award was $53,000.
For fiscal 2009, the Committee approved total compensation plans for Mr. Gale, Mr. Frooman and Mr. Thompson. The aggregate amount of annual cash incentive for fiscal 2009 for Mr. Gale, Mr. Frooman and Mr. Thompson is comprised of the sum of that named executive officer's incentive for the EPS component and the individual performance component. Based upon overall performance, the eligible named executive officers could earn 0% up to a maximum of 200% of the annual cash incentive target. The following table sets forth the annual cash incentive target and performance criteria that were reviewed and approved by the Committee:
|
|
|
|
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Name |
|
Annual Cash Incentive Target |
|
EPS Component |
|
Individual Performance Component |
|
|||||||||||
William C. Gale | $ | 196,100 | 50 | % | 50 | % | |||||||||||||
Thomas E. Frooman | $ | 198,750 | 50 | % | 50 | % | |||||||||||||
Michael L. Thompson | $ | 63,600 | 50 | % | 50 | % |
The annual cash incentive payout percentage multiplier for each component is provided in the following tables:
|
|
|
|
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
EPS Component Level of Achievement |
|
EPS Goals |
|
Annual Cash Incentive Payout |
|
|||||||
Below Threshold | <$2.25 | 0 | % | ||||||||||
Threshold | $2.25 | 50 | % | ||||||||||
Target | $2.32 | 100 | % | ||||||||||
Maximum | $2.44 | 200 | % |
The EPS goals were established in light of the operating plans for Cintas for fiscal 2009.
|
|
|
|
||||||
---|---|---|---|---|---|---|---|---|---|
|
Individual Performance Component Level of Achievement |
|
Annual Cash Incentive Payout |
|
|||||
Does Not Meet Goals | 0 | % | |||||||
Meets Most Goals | 50 | % | |||||||
Meets Goals | 100 | % | |||||||
Exceeds Goals | 150 | % | |||||||
Outstanding Achievement | 200 | % |
Under the Executive Incentive Plan, annual cash incentive calculations for achievement of financial goals are based on actual results, subject to adjustment at the discretion of the Chief Executive Officer to exclude items that are not operational, such as accounting principle changes.
The Grants of Plan-Based Awards for Fiscal 2009 table outlines estimated future payouts under non-equity incentive plan awards. As presented to and approved by the Compensation Committee, the actual annual cash incentive payments earned for fiscal 2009 as reflected in the Summary
15
Compensation Table are as follows: Mr. Gale earned a fiscal 2009 annual cash incentive award of $147,075. His individual performance level was "Exceeds Goals" and Cintas' EPS was "Below Threshold". Mr. Frooman earned a fiscal 2009 annual cash incentive award of $149,063. His individual performance level was "Exceeds Goals" and Cintas' EPS was "Below Threshold". Mr. Thompson earned a fiscal 2009 annual cash incentive award of $63,600. His individual performance level was "Outstanding Achievement" and Cintas' EPS was "Below Threshold".
The performance components and targets were derived from the operating plans for Cintas for fiscal 2009 and represent goals for that year that the Committee believes will be challenging for Cintas, yet achievable if senior and operating management meet or surpass their business unit goals and objectives.
The Committee anticipates that similar performance components and targets will be utilized in fiscal 2010. However, the Committee reserves the right to determine on an ongoing basis the performance components and targets it will use in developing the performance-based portion of the named executive officers' compensation.
Long-Term Equity Incentives
Long-term equity incentive compensation is comprised of non-qualified stock options and restricted stock. With respect to Mr. S. D. Farmer and Mr. Holloman, equity awards are made at the discretion of the Compensation Committee and subjectively based on Cintas' performance and their individual performance during fiscal 2009. With respect to Mr. Gale, Mr. Frooman and Mr. Thompson, these awards are made pursuant to the criteria outlined in the Executive Incentive Plan. The purpose of such awards is to encourage named executive officers to build and maintain a long-term equity ownership position in Cintas so that their interests are aligned with those of our shareholders.
Under the Executive Incentive Plan, the amount of equity awards eligible for Mr. Gale, Mr. Frooman and Mr. Thompson is based on a target level of corporate EPS and achievement of individual goals.
The tables below provide more detail with respect to the award percentage multiplier tied to each milestone level of achievement:
|
|
|
|
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
EPS Component Level of Achievement |
|
EPS Goals |
|
Equity Award % |
|
|||||||
Below Threshold | <$2.25 | 0 | % | ||||||||||
Threshold | $2.25 | 50 | % | ||||||||||
Target | $2.32 | 100 | % | ||||||||||
Maximum | $2.44 | 200 | % |
The EPS goals were established in light of the operating plans for Cintas for fiscal 2009.
|
|
|
|
||||||
---|---|---|---|---|---|---|---|---|---|
|
Individual Performance Component Level of Achievement |
|
Equity Award % |
|
|||||
Does Not Meet Goals | 0 | % | |||||||
Meets Most Goals | 50 | % | |||||||
Meets Goals | 100 | % | |||||||
Exceeds Goals | 150 | % | |||||||
Outstanding Achievement | 200 | % |
16
For fiscal 2009, the Committee determined that equity awards made under the Executive Incentive Plan would be based on an established target for Mr. Gale, Mr. Frooman and Mr. Thompson. The factors that influence the setting of targets are level of responsibility, potential for future responsibility, market compensation analyses and overall performance of the individual. The Compensation Committee reviewed and approved the targets at the beginning of the fiscal year, and the award was granted based upon that named executive officer's performance compared to the targets outlined above.
Non-Qualified Stock Options
Mr. S. D. Farmer's awards were granted on the date the Compensation Committee met to discuss Mr. S. D. Farmer's performance against his performance goals. On July 27, 2009, the Committee awarded 5,000 non-qualified stock options to Mr. S. D. Farmer based on a subjective analysis of his level of performance versus his goals.
On July 17, 2009, Mr. Holloman was awarded 3,000 non-qualified stock options based on a subjective analysis of his level of performance versus his goals, and Mr. Frooman and Mr. Thompson were awarded 5,650 and 5,000 non-qualified stock options, respectively, based on Cintas' fiscal 2009 EPS and their individual performance level, as outlined above under the Annual Cash Incentives section. In accordance with the 2005 Equity Compensation Plan, stock options are not granted to individuals age 55 or older, but instead, any stock option awards that would have been awarded to Mr. Gale were awarded as restricted shares. As such, Mr. Gale did not receive any non-qualified stock options.
As dictated by the 2005 Equity Compensation Plan, stock option awards have an exercise price equal to the closing stock price on the date of the award. As a result, stock options awarded to the named executive officers increase in value only if the market price of the common stock increases.
Restricted Stock
Mr. S. D. Farmer's awards were granted on the date the Compensation Committee met to discuss Mr. S. D. Farmer's performance against his performance goals. On July 27, 2009, the Committee awarded 5,323 restricted stock shares to Mr. S. D. Farmer based on a subjective analysis of his level of performance versus his goals.
On July 17, 2009, Mr. Holloman was awarded 1,000 restricted stock shares based on a subjective analysis of his level of performance versus his goals, and Mr. Gale, Mr. Frooman and Mr. Thompson were awarded 3,784, 1,900 and 1,200 restricted stock shares, respectively, based on Cintas' fiscal 2009 EPS and their individual performance level, as outlined above under the Annual Cash Incentives section.
In addition, on July 21, 2008, the Board of Directors approved a one-time equity grant to retain and incentivize key officers and managers of Cintas and to better align their interests with the interests of the shareholders. Mr. Gale, Mr. Frooman and Mr. Thompson were awarded 34,075, 26,901 and 25,108 restricted stock shares, respectively, as part of this one-time equity grant.
Health, Retirement and Other Benefits
Cintas' benefits program includes retirement plans and group insurance plans. The objective of our group insurance plans is to provide our named executive officers with reasonable and competitive levels of protection from events which could interrupt the named executive officer's employment and/or income received as an active employee.
The retirement plans offered to named executive officers include Cintas' Partners' Plan and the Deferred Compensation Plan. The Partners' Plan is a noncontributory employee stock ownership
17
plan and profit sharing plan with a 401(k) savings feature which covers substantially all employees. The Deferred Compensation Plan is discussed in more detail in the Nonqualified Deferred Compensation for Fiscal 2009 table of this proxy statement, and its accompanying narrative and footnotes.
Executive perquisites are kept by the Committee to a minimal level and do not play a significant role in executive compensation. These benefits and their incremental cost to Cintas are described in the Summary Compensation Table and its footnotes. The Committee believes these perquisites to be reasonable, comparable with peer companies and consistent with Cintas' overall compensation practices.
Change in Control Agreements
Cintas has no policy regarding change in control agreements. For a further discussion on this topic, please see the section titled "Potential Payments Upon Termination, Retirement or Change of Control" of this proxy statement.
Tax Deductibility of Compensation
Section 162(m) of the Internal Revenue Code places a limit of $1 million on the amount of compensation we may deduct in any one year with respect to each named executive officer. There is an exception to the $1 million limitation for performance-based compensation meeting certain requirements. The Committee believes that all compensation paid to the named executive officers for fiscal year 2009 is properly deductible under Section 162(m).
Recovery of Prior Awards
We do not have a policy with respect to adjustment or recovery of awards or payments if relevant company performance measures upon which previous awards were based are restated or otherwise adjusted in a manner that would reduce the size of such award or payment. Under those circumstances, we expect that the Compensation Committee would evaluate whether compensation adjustments were appropriate based upon the facts and circumstances surrounding the applicable restatement or adjustment.
18
The following table provides information regarding the compensation earned by our Chief Executive Officer, Chief Financial Officer and our three other most highly compensated executive officers during fiscal 2009, fiscal 2008 and fiscal 2007. These individuals are collectively known as our named executive officers.
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Name and Principal Position |
|
Fiscal Year |
|
Salary ($) |
|
Bonus(1) ($) |
|
Stock Awards(2) ($) |
|
Option Awards(3) ($) |
|
Non-Equity Incentive Plan Compensation(4) ($) |
|
All Other Compensation(5) ($) |
|
Total ($) |
|
||||||||||||||||||||||||||
|
Scott D. Farmer |
2009 | 725,000 | | 213,578 | 247,656 | 120,000 | 70,101 | 1,376,335 | |||||||||||||||||||||||||||||||||||
|
Chief Executive Officer |
2008 | 700,000 | | 181,094 | 242,956 | 235,000 | 59,692 | 1,418,742 | |||||||||||||||||||||||||||||||||||
|
and Director |
2007 | 660,000 | | 130,771 | 228,120 | 200,000 | 69,119 | 1,288,010 | |||||||||||||||||||||||||||||||||||
|
William C. Gale |
2009 | 442,000 | | 448,490 | 56,948 | 147,075 | 43,345 | 1,137,858 | |||||||||||||||||||||||||||||||||||
|
Senior Vice President and |
2008 | 427,330 | | 110,431 | 56,948 | 191,463 | 27,112 | 813,284 | |||||||||||||||||||||||||||||||||||
|
Chief Financial Officer |
2007 | 391,400 | | 73,801 | 56,948 | 159,800 | 25,258 | 707,207 | |||||||||||||||||||||||||||||||||||
|
Thomas E. Frooman |
2009 | 407,500 | | 268,646 | 83,793 | 149,063 | 42,999 | 952,001 | |||||||||||||||||||||||||||||||||||
|
Vice President and |
2008 | 393,594 | | 70,406 | 78,482 | 191,463 | 32,615 | 766,560 | |||||||||||||||||||||||||||||||||||
|
Secretary General |
2007 | 360,500 | | 51,979 | 66,613 | 158,900 | 31,989 | 669,981 | |||||||||||||||||||||||||||||||||||
|
Counsel |
|||||||||||||||||||||||||||||||||||||||||||
|
J. Phillip Holloman |
2009 | 530,000 | | 99,181 | 99,072 | 53,000 | 26,437 | 807,690 | |||||||||||||||||||||||||||||||||||
|
President and Chief |
2008 | 405,333 | | 93,528 | 96,252 | 185,500 | 28,146 | 808,759 | |||||||||||||||||||||||||||||||||||
|
Operating Officer |
2007 | 325,000 | | 47,751 | 67,833 | 125,000 | 25,114 | 590,698 | |||||||||||||||||||||||||||||||||||
|
Michael L. Thompson |
2009 | 310,000 | | 217,205 | 85,419 | 63,600 | 35,750 | 711,974 | |||||||||||||||||||||||||||||||||||
|
Vice President and |
2008 | 286,000 | | 35,419 | 80,719 | 75,790 | 25,271 | 503,199 | |||||||||||||||||||||||||||||||||||
|
Treasurer |
2007 | 267,120 | | 25,181 | 71,446 | 53,000 | 23,339 | 440,086 |
19
GRANTS OF PLAN-BASED AWARDS FOR FISCAL 2009
The following table sets forth certain information regarding all grants of plan-based awards made to the named executive officers during fiscal 2009:
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
|
Estimated Future Payouts Under Equity Incentive Plan Awards |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Name |
|
Grant Date |
|
Threshold ($) |
|
Target ($) |
|
Maximum ($) |
|
Threshold (#) |
|
Target (#) |
|
Maximum (#) |
|
All Other Stock Awards: Number of Shares of Stock or Units (#) |
|
All Other Option Awards: Number of Securities Underlying Options (#) |
|
Exercise or Base Price of Option Awards(8) ($/sh) |
|
Grant Date Fair Value of Stock and Option Awards ($) |
|
|||||||||||||||||||||||||||||||||||
Scott D. Farmer(1) | 8/19/2008 | 0 | 420,000 | 840,000 | 0 | (2) | 0 | (2) | 0 | (2) | |||||||||||||||||||||||||||||||||||||||||||||||||
7/27/2009 | 5,000 | 24.41 | 51,700 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/27/2009 | 5,323 | 129,934 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
William C. Gale(3) | 8/13/2008 | 0 | 196,100 | 392,200 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/13/2008 | (6) | 0 | 5,000 | 10,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/21/2008 | (7) | 34,075 | 950,011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/17/2009 | 3,784 | 85,556 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Thomas E. Frooman(3) | 8/15/2008 | 0 | 198,750 | 397,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/15/2008 | (5) | 0 | 7,500 | 15,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/15/2008 | (6) | 0 | 2,500 | 5,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/21/2008 | (7) | 26,901 | 750,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/17/2009 | 5,650 | 22.61 | 58,421 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/17/2009 | 1,900 | 42,959 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J. Phillip Holloman(4) | 8/15/2008 | 0 | 212,000 | 424,000 | 0 | (2) | 0 | (2) | 0 | (2) | |||||||||||||||||||||||||||||||||||||||||||||||||
7/17/2009 | 3,000 | 22.61 | 31,020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/17/2009 | 1,000 | 22,610 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael L. Thompson(3) | 8/26/2008 | 0 | 63,600 | 127,200 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/26/2008 | (5) | 0 | 5,000 | 10,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/26/2008 | (6) | 0 | 1,200 | 2,400 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/21/2008 | (7) | 25,108 | 700,011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/17/2009 | 5,000 | 22.61 | 51,700 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/17/2009 | 1,200 | 27,132 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
20
21
OUTSTANDING EQUITY AWARDS AT FISCAL 2009 YEAR-END
The following table provides information regarding unexercised stock options and unvested stock awards held by our named executive officers as of May 31, 2009:
|
|||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Option Awards(1) |
|
Stock Awards(2) |
|
||||||||||||||||||||||||||||||||||
|
Name |
|
Grant Date(3) |
|
Number of Securities Underlying Unexercised Options Exercisable (#) |
|
Number of Securities Underlying Unexercised Options Unexercisable (#) |
|
Option Exercise Price ($) |
|
Option Expiration Date |
|
Number of Shares or Units of Stock That Have Not Vested (#) |
|
Market Value of Shares or Units of Stock That Have Not Vested ($) |
|
|||||||||||||||||||||||
Scott D. Farmer | 7/29/1999 | 15,000 | | 41.96 | 7/29/2009 | ||||||||||||||||||||||||||||||||||
7/24/2000 | 15,000 | | 42.67 | 7/24/2010 | |||||||||||||||||||||||||||||||||||
8/08/2001 | 10,000 | | 47.35 | 8/08/2011 | |||||||||||||||||||||||||||||||||||
7/29/2003 | 10,000 | 40,000 | 39.29 | 7/29/2013 | |||||||||||||||||||||||||||||||||||
7/26/2004 | | 25,000 | 42.06 | 7/26/2014 | |||||||||||||||||||||||||||||||||||
8/01/2005 | | 25,000 | 44.43 | 8/01/2015 | |||||||||||||||||||||||||||||||||||
7/24/2006 | | 15,000 | 35.99 | 7/24/2016 | |||||||||||||||||||||||||||||||||||
7/23/2007 | | 7,500 | 38.74 | 7/23/2017 | |||||||||||||||||||||||||||||||||||
7/21/2008 | | 10,000 | 27.88 | 7/21/2018 | |||||||||||||||||||||||||||||||||||
7/27/2009 | | 5,000 | 24.41 | 7/27/2019 | |||||||||||||||||||||||||||||||||||
24,852 | 578,803 | ||||||||||||||||||||||||||||||||||||||
William C. Gale | 7/29/1999 | 7,501 | | 41.96 | 7/29/2009 | ||||||||||||||||||||||||||||||||||
7/24/2000 | 5,000 | | 42.67 | 7/24/2010 | |||||||||||||||||||||||||||||||||||
7/22/2002 | 5,000 | | 41.65 | 7/22/2012 | |||||||||||||||||||||||||||||||||||
2/28/2003 | 3,000 | 4,500 | 33.57 | 2/28/2013 | |||||||||||||||||||||||||||||||||||
7/26/2004 | | 15,000 | 42.06 | 7/26/2014 | |||||||||||||||||||||||||||||||||||
8/01/2005 | | 7,500 | 44.43 | 8/01/2015 | |||||||||||||||||||||||||||||||||||
7/17/2006 | | 7,500 | 36.08 | 7/17/2016 | |||||||||||||||||||||||||||||||||||
50,117 | 1,167,225 | ||||||||||||||||||||||||||||||||||||||
Thomas E. Frooman | 12/28/2001 | 25,000 | | 49.69 | 12/28/2011 | ||||||||||||||||||||||||||||||||||
7/22/2002 | 15,000 | | 41.65 | 7/22/2012 | |||||||||||||||||||||||||||||||||||
2/28/2003 | 8,000 | 12,000 | 33.57 | 2/28/2013 | |||||||||||||||||||||||||||||||||||
7/26/2004 | | 15,000 | 42.06 | 7/26/2014 | |||||||||||||||||||||||||||||||||||
8/01/2005 | | 7,500 | 44.43 | 8/01/2015 | |||||||||||||||||||||||||||||||||||
7/17/2006 | | 7,500 | 36.08 | 7/17/2016 | |||||||||||||||||||||||||||||||||||
7/03/2007 | | 6,575 | 39.84 | 7/03/2017 | |||||||||||||||||||||||||||||||||||
7/17/2008 | | 8,000 | 27.30 | 7/17/2018 | |||||||||||||||||||||||||||||||||||
7/17/2009 | | 5,650 | 22.61 | 7/17/2019 | |||||||||||||||||||||||||||||||||||
36,201 | 843,121 | ||||||||||||||||||||||||||||||||||||||
J. Phillip Holloman | 7/29/1999 | 4,501 | | 41.96 | 7/29/2009 | ||||||||||||||||||||||||||||||||||
7/24/2000 | 5,000 | | 42.67 | 7/24/2010 | |||||||||||||||||||||||||||||||||||
9/29/2000 | 5,000 | | 43.56 | 9/29/2010 | |||||||||||||||||||||||||||||||||||
8/08/2001 | 2,000 | | 47.35 | 8/08/2011 | |||||||||||||||||||||||||||||||||||
7/22/2002 | 3,000 | | 41.65 | 7/22/2012 | |||||||||||||||||||||||||||||||||||
3/28/2003 | 3,000 | 4,500 | 35.02 | 3/28/2013 | |||||||||||||||||||||||||||||||||||
7/29/2003 | 200 | 800 | 39.29 | 7/29/2013 | |||||||||||||||||||||||||||||||||||
7/26/2004 | | 7,500 | 42.06 | 7/26/2014 | |||||||||||||||||||||||||||||||||||
8/01/2005 | | 15,000 | 44.43 | 8/01/2015 | |||||||||||||||||||||||||||||||||||
7/17/2006 | | 5,650 | 36.08 | 7/17/2016 | |||||||||||||||||||||||||||||||||||
7/03/2007 | | 7,500 | 39.84 | 7/03/2017 | |||||||||||||||||||||||||||||||||||
1/31/2008 | | 25,000 | 32.82 | 1/31/2018 | |||||||||||||||||||||||||||||||||||
7/17/2008 | | 8,000 | 27.30 | 7/17/2018 | |||||||||||||||||||||||||||||||||||
7/17/2009 | | 3,000 | 22.61 | 7/17/2019 | |||||||||||||||||||||||||||||||||||
13,100 | 305,099 | ||||||||||||||||||||||||||||||||||||||
Michael L. Thompson | 7/29/1999 | 2,250 | | 41.96 | 7/29/2009 | ||||||||||||||||||||||||||||||||||
8/08/2001 | 1,000 | | 47.35 | 8/08/2011 | |||||||||||||||||||||||||||||||||||
7/22/2002 | 5,000 | | 41.65 | 7/22/2012 | |||||||||||||||||||||||||||||||||||
1/31/2003 | 1,200 | 1,800 | 41.30 | 1/31/2013 | |||||||||||||||||||||||||||||||||||
7/29/2003 | 600 | 2,400 | 39.29 | 7/29/2013 | |||||||||||||||||||||||||||||||||||
7/26/2004 | | 5,000 | 42.06 | 7/26/2014 | |||||||||||||||||||||||||||||||||||
8/01/2005 | | 5,000 | 44.43 | 8/01/2015 | |||||||||||||||||||||||||||||||||||
1/27/2006 | | 15,000 | 42.73 | 1/27/2016 | |||||||||||||||||||||||||||||||||||
7/17/2006 | | 4,400 | 36.08 | 7/17/2016 | |||||||||||||||||||||||||||||||||||
7/03/2007 | | 5,000 | 39.84 | 7/03/2017 | |||||||||||||||||||||||||||||||||||
7/17/2008 | | 6,250 | 27.30 | 7/17/2018 | |||||||||||||||||||||||||||||||||||
7/17/2009 | | 5,000 | 22.61 | 7/17/2019 | |||||||||||||||||||||||||||||||||||
30,108 | 701,215 | ||||||||||||||||||||||||||||||||||||||
22
Age 51 at fiscal year-end 25% per year vesting, beginning fifth anniversary of grant
Age 52 at fiscal year-end 33% per year vesting, beginning fifth anniversary of grant
Age 53 at fiscal year-end 50% per year vesting, beginning fifth anniversary of grant
Age 54 at fiscal year-end 100% per year vesting, beginning fifth anniversary of grant
Age 55 or older at fiscal year-end stock options are never granted. Those amounts are converted to restricted stock awards.
23
NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL 2009
Our named executive officers are eligible to participate in a Deferred Compensation Plan. This Deferred Compensation Plan permits a group of highly compensated employees of Cintas to defer the receipt of current year compensation which they have earned during the year. This Deferred Compensation Plan is intended to assist Cintas in the retaining and attracting of individuals of exceptional ability.
Our named executive officers may elect to defer up to 75% of their base salary and up to 100% of their earned annual cash incentive awards. Amounts deferred are credited to the named executive officer's account under the Deferred Compensation Plan and are fully vested.
Future payments are distributed in a lump sum or in annual installments, based on the choice of the named executive officer. If the form of payment selected provides for subsequent payments, subsequent payments will be made on the anniversary of the initial payment. All amounts are payable in a lump sum if the named executive officer terminates employment prior to the date specified. All distribution decisions and payments under the Deferred Compensation Plan are subject to compliance with section 409A of the Internal Revenue Code.
While deferred, amounts are credited with "earnings" as if they were invested as the named executive officer chose in one or more investment options available under the Deferred Compensation Plan. The named executive officers' accounts under the Deferred Compensation Plan will be adjusted from time to time, up or down, depending upon performance of the investment options chosen.
The following table provides information relating to the activity in the Deferred Compensation Plan accounts of the named executive officers during fiscal 2009 and the aggregate balance of the accounts as of May 31, 2009:
|
|
|
|
|
|
|
|
|
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Name |
|
Executive Contributions in Fiscal 2009(1) ($) |
|
Aggregate Earnings in Fiscal 2009(2) ($) |
|
Aggregate Balance at May 31, 2009 ($) |
|
|||||||||||
Scott D. Farmer | 230,048 | 151 | 230,199 | ||||||||||||||||
William C. Gale | | | | ||||||||||||||||
Thomas E. Frooman | 20,362 | (9,199 | ) | 36,259 | |||||||||||||||
J. Phillip Holloman | 45,021 | (30,048 | ) | 79,191 | |||||||||||||||
Michael L. Thompson | 93,689 | (40,942 | ) | 138,778 |
24
POTENTIAL PAYMENTS UPON TERMINATION, RETIREMENT OR CHANGE OF CONTROL
Payments Made Upon Termination
Regardless of the manner in which a named executive officer's employment terminates, except for a "for cause" termination, he is entitled to receive
amounts earned during his term of employment. Such amounts include:
In addition, if Cintas elects to terminate a named executive officer, he will receive four weeks written notice or four weeks of base salary instead of notice. Generally, Cintas makes no payments to executives terminated for cause. Cintas has no policy regarding severance payments.
Payments Made Upon Retirement
In the event of the retirement of a named executive officer, he is entitled to receive amounts earned during his term of employment. Such amounts
include:
Cintas has no policy regarding retirement arrangements.
Payments Made Upon Death or Disability
In the event of the death or disability of a named executive officer, in addition to the benefits listed under the heading "Payments Made Upon Retirement" above, the named executive officer will receive benefits under Cintas' disability plan or payments under Cintas' life insurance plan, as appropriate. These payments are generally available to all employees.
Payments Made Upon a Change of Control
Cintas has no policy regarding payments made upon a change of control.
25
NONEMPLOYEE DIRECTOR COMPENSATION FOR FISCAL 2009
For fiscal 2009, Directors who are not employees of Cintas received a $40,000 cash annual retainer, payable quarterly, plus an additional $2,750 for each meeting attended. Directors received $1,375 for each telephonic meeting attended. Committee members also received $1,200 for each Committee meeting attended and $600 for attending each telephonic Committee meeting. Committee Chairmen (other than the Audit Committee Chairman) received an additional fee of $5,000. The Audit Committee Chairman received an additional fee of $8,000. Directors are also reimbursed for reasonable out-of-pocket travel expenses incurred in connection with attendance at Board or Committee meetings. Directors who are employees of Cintas are not separately compensated for serving as Directors.
Directors also receive upon election or appointment to the Board restricted stock valued at $41,000 based on the closing market price of Cintas stock on the date preceding the grant and options to purchase Cintas stock valued at $41,000 based on the fair value of these options estimated at the date preceding the grant using a Black-Scholes option-pricing model. The value of the grants is prorated for Directors appointed to the Board for a partial year. With the exception of Mr. Johnson, each nonemployee Director was therefore granted 1,753 shares of restricted stock and an option to purchase 4,145 shares of Cintas stock at an exercise price equal to the closing market price on the date of grant. Mr. Johnson was appointed to the Board on March 24, 2009, and was granted 927 shares of restricted stock and an option to purchase 2,469 shares of Cintas stock at an exercise price equal to the closing market price on the date of grant. The restricted stock awards vest 100% after three years from the date of grant. The stock options vest 25% per year, beginning on the first anniversary of the grant.
Nonemployee directors may choose to defer all or part of these fees into Cintas stock equivalents with dividends or into a deferred account that earns interest at a rate equal to one-year United States Treasury Bills, determined as of the preceding December 31, increased by 100 basis points. Deferred fees are payable either in a lump sum or over a period of 12 to 120 monthly installments beginning in the month selected by the Director, but in no case later than the first month after the Director leaves the Board.
The following table details fiscal 2009 compensation paid to nonemployee directors:
|
||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Name |
|
Fees Earned or Paid in Cash(1) ($) |
|
Stock Awards(2) ($) |
|
Option Awards(3) ($) |
|
Total ($) |
|
||||||||||||||
|
Gerald S. Adolph |
61,125 | 27,176 | 9,810 | 98,111 | |||||||||||||||||||
|
Paul R. Carter |
74,525 | 27,176 | 14,190 | 115,891 | |||||||||||||||||||
|
Gerald V. Dirvin |
66,725 | 27,176 | 14,190 | 108,091 | |||||||||||||||||||
|
Joyce Hergenhan |
61,125 | 27,176 | 14,190 | 102,491 | |||||||||||||||||||
|
James J. Johnson(4) | 20,750 | 5,680 | 1,802 | 28,232 | |||||||||||||||||||
|
David C. Phillips |
71,525 | 27,176 | 14,190 | 112,891 | |||||||||||||||||||
|
Ronald W. Tysoe |
74,525 | 13,753 | 4,333 | 92,611 |
26
The following table details the grant date fair value of each stock option award granted in fiscal 2009:
|
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Name |
|
Grant Date |
|
Shares Granted (#) |
|
Grant Date Fair Value ($) |
|
|||||||||||
Gerald S. Adolph | 10/14/2008 | 4,145 | 40,124 | ||||||||||||||||
Paul R. Carter | 10/14/2008 | 4,145 | 40,124 | ||||||||||||||||
Gerald V. Dirvin | 10/14/2008 | 4,145 | 40,124 | ||||||||||||||||
Joyce Hergenhan | 10/14/2008 | 4,145 | 40,124 | ||||||||||||||||
James J. Johnson | 3/24/2009 | 2,469 | 24,023 | ||||||||||||||||
David C. Phillips | 10/14/2008 | 4,145 | 40,124 | ||||||||||||||||
Ronald W. Tysoe | 10/14/2008 | 4,145 | 40,124 |
Outstanding option awards for each director at May 31, 2009 are as follows:
|
|||||||||
---|---|---|---|---|---|---|---|---|---|
|
Name |
|
Options Outstanding (#) |
|
|||||
|
Gerald S. Adolph |
9,145 | |||||||
|
Paul R. Carter |
13,145 | |||||||
|
Gerald V. Dirvin |
15,645 | |||||||
|
Joyce Hergenhan |
11,145 | |||||||
|
James J. Johnson |
2,469 | |||||||
|
David C. Phillips |
12,145 | |||||||
|
Ronald W. Tysoe |
6,145 |
27
The following table sets forth the names and addresses of the only shareholders known by Cintas to own beneficially 5% or more of its outstanding Common Stock as of August 25, 2009:
Name of Beneficial Owner |
|
Amount and Nature of Beneficial Ownership |
Percent of Class |
||||||
---|---|---|---|---|---|---|---|---|---|
Scott D. Farmer(1) | 15,402,737 | (3) | 10.0 | % | |||||
Arnhold & S. Bleichroeder Advisers, LLC(2) |
12,160,966 |
7.9 |
% |
28
SECURITY OWNERSHIP OF DIRECTORS AND NAMED EXECUTIVE OFFICERS
The following table shows the amount of Cintas Corporation Common Stock each director and named executive officer named in the Summary Compensation Table owned on August 25, 2009:
|
|
Common Stock Beneficially Owned(1) |
|||||||
---|---|---|---|---|---|---|---|---|---|
Name and Age of Beneficial Owner |
Position | Amount and Nature of Beneficial Ownership |
Percent of Class |
||||||
Scott D. Farmer 50 |
Chief Executive Officer and Director | 15,402,737 | (2) | 10.0 | % | ||||
Richard T. Farmer 74 |
Chairman of the Board |
3,091,141 |
(3) |
2.0 |
% |
||||
Robert J. Kohlhepp 65 |
Vice Chairman of the Board |
1,530,418 |
(4) |
1.0 |
% |
||||
Gerald S. Adolph 55 |
Director |
7,290 |
* |
||||||
Paul R. Carter 69 |
Director |
13,540 |
* |
||||||
Gerald V. Dirvin 72 |
Director |
38,282 |
* |
||||||
Joyce Hergenhan 67 |
Director |
10,540 |
* |
||||||
James J. Johnson 62 |
Director |
927 |
* |
||||||
David C. Phillips 71 |
Director |
11,640 |
(5) |
* |
|||||
Ronald W. Tysoe 56 |
Director |
4,040 |
* |
||||||
William C. Gale |