February 2012 Jobs Growth in Uniform Sectors

The February BLS jobs report was as expected with uniform-wearing industry gains

continuing to outpace the broader economy, supporting recent positive trends in

uniform rental stocks. Add/Stop employment (traditional uniform wearing-industries)

gains remain consistent with prior mid-cycle recovery levels (e.g., mid-late

1990s/2004-2006) with YTD employment gains near the high end of prior growth cycles.

While we have been clear to recognize the sector's recent stock performance, we continue

to view the data as supportive of a modestly overweight portfolio.

■ Payrolls meet healthy expectations. February payrolls met strong expectations,

increasing by 227,000, above the +210,000 consensus, suggesting sustainability after

three sequential months of 200,000+ gains. The YOY change in employment increased

+1.55% (highest rate this cycle) with the unemployment rate holding constant at 8.3%

(as expected). We note particular strength in professional and business services

(+82,000), education and health (+71,000) and leisure and hospitality (+44,000).

Manufacturing employment also continues to outpace the broader economy (+1.9%

YOY).

■ Uniform-related employment growth near high end of previous growth cycles.

Baird's Add/Stop Employment Index specific to uniform rental-related employment

remains healthy, increasing by 59,000, with an additional 14,000 wearers added through

previous data revisions. While the monthly gain is below last month's exceptionally

strong read (+96,000, revised), average gains over the past three months (+81,000) are

consistent with high-end growth rates of prior mid-cycle recovery levels (e.g., mid-late

1990s / 2004-2006). Stable organic growth is realized when the Baird index is in the

50-70k jobs range.

■ Remain modestly overweight in uniform stocks. Add/Stops are now becoming a

greater contributor to overall growth rates and our recent conversations with both public

and private uniform providers suggest prior pricing initiatives have been maintained,

reducing a long-time headwind for the industry. We continue to view uniform stocks

positively, with conservatively set guidance providing a pathway to upwardly biased

earnings revisions; nonetheless, we expect alpha generation likely to be more modest

than 2011's gains.

■ G&K (Outperform): We continue to see opportunity through progress on

management's turnaround strategy. We suggest investors focus on EBITDA margin

expansion and long-term earnings power, supported by GKSR's cash flow and balance

sheet.

■ Cintas (Outperform): Recent performance has been strong, though more difficult

comps are approaching. We still see opportunities across CTAS's business (particularly

beyond garment rental) and cite likely upside to conservatively set guidance.

■ UniFirst (Outperform): UniFirst continues to execute above peers, suggesting share

gains. Although rising merchandise costs have pressured earnings, we believe

opportunities for balance sheet deployment provide a potential catalyst.

INDUSTRY UPDATE

Prices as of 3/8/12

Ticker PriceMkt Cap

(mil)Rating Risk

CTAS $39.26 $5,092 O A

GKSR $32.65 $611 O A

UNF $58.96 $1,156 O A

Baird covered companies

March 9, 2012 Baird Equity ResearchBusiness Services

Facility ServicesBLS Payroll Data; Still Positive for Uniform Stocks

Andrew J. Wittmann, CFA

[email protected]

414.298.1898

Justin P. Hauke

[email protected]

314.445.6519

[Please refer to Appendix- Important Disclosuresand Analyst Certification]

2

Details

Employment Trends Remain Conducive to an Overweight UniformPortfolio

The February BLS jobs report was as expected with uniform-wearing industry gains continuing to

outpace the broader economy, supporting recent organic growth trends and operating leverage at

uniform rental companies. Add/Stop employment (traditional uniform wearing-industries) gains remain

consistent with prior mid-cycle recovery levels (e.g., mid-late 1990s/2004-2006) with YTD employment

gains near the high-end of prior growth cycles. While we have been clear to recognize the sector's

recent stock performance, we continue to view the data as supportive of a modestly overweight portfolio.

Our primary basis for sector recommendation at this point remains upwardly biased estimates,

continuing recent trend (see below), as consensus expectations may still not fully appreciate

top-line momentum. We note that this has been our team's position on the group since early this year.

We previously (prior to December 2011) highlighted opportunities for both positive estimate revisions as

well as multiple expansion for the group.

Management guidance appears relatively conservative across our list, in our view, with estimates likely

biased higher at least over the near-term. Indeed, this has been the pattern of uniform stock

performance throughout the recovery as estimates have been slow to adjust to an improving labor

market (we note, however, that the reverse phenomenon was also apparent on the way down). The

charts below demonstrate quarterly EPS outperformance versus consensus at CTAS, GKSR, and UNF

over the past 10 quarters.

Cintas Corp. Quarterly EPS vs. Consensus

Source: Company reports

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

F1Q10 F2Q10 F3Q10 F4Q10 F1Q11 F2Q11 F3Q11 F4Q11 F1Q12 F2Q12

Consensus

Actual

March 9, 2012 | Facility Services

Robert W. Baird & Co.

3

G&K Services Quarterly EPS vs. Consensus


$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

F1Q10 F2Q10 F3Q10 F4Q10 F1Q11 F2Q11 F3Q11 F4Q11 F1Q12 F2Q12

Consensus

Actual

UniFirst Quarterly EPS vs. Consensus


$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

F1Q09 F2Q09 F3Q09 F4Q09 F1Q10 F2Q10 F3Q10 F4Q10 F1Q11 F2Q11 F3Q11 F4Q11 F1Q12

Consensus

Actual

The uniform stocks were strong alpha generators in 2011 and have continued to outperform in 2012.

Previous stock performance was driven largely by cyclical momentum (both revenue and margins) on

previously low expectations. Recently the “buy USA” trade has brought new interest to uniform rental

companies, in our view. Cintas (CTAS) has consistently outperformed both the group and the market

over the past year.



4

Uniform Stock Performance

Source: FactSet Research Systems

One-Month Percentage Price Change YTD Percentage Price Change

Three-Month Percentage Price Change Trailing 12 Months Percentage Price Change

0% 2% 4% 6% 8% 10% 12% 14%

U niFirst

S&P 500

U niform Index

G&K Services

Cintas

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%

G &K Services

S&P 500

U niFirst

Uniform Index

Cintas

-6% -4% -2% 0% 2% 4%

UniFirst

Uniform Index

G &K Services

S&P 500

Cintas

0% 5% 10% 15% 20% 25% 30% 35% 40%

UniFirst

S&P 500

G &K Services

Uniform Index

C intas

As noted above, we now see upwardly biased earnings revisions for the group as the primary driver of

additional alpha generation as multiples have recovered to historical (5-year) averages (in fact, a slight

premium). The group is now trading at an average forward 12-month EV/EBITDA multiple of 7.3x and

15.2x earnings, compared to average (5-year) levels of 6.9x and 15.0x. We believe multiples reflect

recent momentum, but could offer opportunity should estimates prove conservative.

Uniform Industry Valuation

Company Ticker Price Price Target Rating MktCap ($M) FTM AVG FTM AVG

Cintas CTAS $39.30 $42 O $5,098 8.3x 7.7x 16.4x 16.2x

G&K Services GKSR $32.64 $38 O $609 7.4x 7.3x 14.6x 15.9x

UniFirst UNF $59.25 $68 O $1,159 6.3x 5.7x 14.4x 13.0x

Average: 7.3x 6.9x 15.2x 15.0x

As of 03/09/2012

Source: FactSet Research Systems and Baird estimates

EV/EBITDA, ftm P/E, ftm

Facility Services Valuation, EV / EBITDA (FTM)

Note: The blue bars indicate FTM 5-year ranges; IRM reflects 3-year average/range

Source: FactSet Research Systems and Baird estimates

14.1x

10.4x9.5x

8.9x8.3x

7.4x

6.3x

3.0x

5.0x

7.0x

9.0x

11.0x

13.0x

15.0x

17.0x

19.0x

ROL ECL ABM IRM CTAS GKSR UNF

5-YR AVG

Current



5

The February BLS Employment Report

The February payrolls report met strong expectations, increasing by 227,000, above the +210,000

consensus, suggesting sustainability after three sequential months of 200,000+ gains. The YOY change

in employment increased +1.55% (highest rate this cycle) with the unemployment rate holding constant

at 8.3% (as expected). We note particular strength in professional and business services (+82,000),

education and health (+71,000) and leisure and hospitality (+44,000). Manufacturing employment also

continues to outpace the broader economy (+1.9% YOY).

We note this winter's unusually warm winter weather has likely played some role in the strength of recent

data reports. Should this be the case, we would not be surprised to see some sequential moderation in

the March BLS report but expect underlying trends to remain healthy.

BLS Nonfarm Payrolls

Source: Bureau of Labor Statistics and Baird Research

(1000)

(800)

(600)

(400)

(200)

0

200

400

600

800

1000

-6%

-4%

-2%

0%

2%

4%

6%

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

BLS Nonfarm Payrolls 1-month change (000s), right

BLS Nonfarm Payrolls YOY Growth Rate, left

Forward-looking employment indicators were little changed. Total average weekly hours held constant at

34.5 hours while wages rose slightly (+$0.03 to $23.31), +0.1% (some economists have cited worries of

wage inflation given the stronger employment environment). We also note that the ISM Manufacturing

Employment Diffusion Index remained positive in February at 53.2 (50 is a neutral rating).

ISM Manufacturing, Employment Diffusion Index

Note: The solid red line reflects a "neutral" reading; A reading above (below) indicates sequential improvement (deterioration)

Source: Institute for Supply Management

25

30

35

40

45

50

55

60

65

70

75

Jan-90 Jun-91 Nov-92 Apr-94 Sep-95 Feb-97 Jul-98 Nov-99 Apr-01 Sep-02 Feb-04 Jul-05 Nov-06 Apr-08 Sep-09 Feb-11



6

While the U.S. employment recovery has been slow, the pace of gains has gradually improved (in fact,

the sequential rate of employment growth over the past two months has been similar to levels in the late

1990s and relatively strong when compared across all cycles). That said, the overall trajectory of

employment growth is still well below prior post-recession recovery gains. Indeed, the figure below

shows the growth in employment (indexed at the solid black line to cycle peak employment), which

demonstrates the pronounced sluggishness of the current "recovery" but also the fact that growth rates

have, at least, become more similar (actually now exceeding) to the mid-2000s cycle (off of a lower

base).

Nonfarm Payroll Growth (indexed at month of cyclical employment peak)


90

95

100

105

110

115-2

6

-24

-22

-20

-18

-16

-14

-12

-10 -8 -6 -4 -2 0 2 4 6 8

10

12

14

16

18

20

22

24

26

28

30

32

34

36

38

40

42

44

46

48

Sep-48 Jul-53

Aug-57 Apr-60

Mar-70 Jul-74

Mar-80 Jul-81

Jun-90 Feb-01

Jan-08

Current Cycle

2000-2001 Cycle



7

Baird Add/Stop Employment Index Gains Similar to Prior Growth Cycles

Baird's Add/Stop Employment Index specific to uniform rental-related employment remains healthy,

increasing by 59,000, with an additional 14,000 wearers added through previous data revisions. While

the monthly gain is below last month's exceptionally strong read (+96,000, revised), average gains over

the past three months (+81,000) are consistent with the high-end of growth rates seen in prior recoveries

(e.g., mid-late 1990s / 2004-2006). Stable organic growth is realized when the Baird index is in the

50-70k jobs range. In 2011, the average monthly rate was 56,000, demonstrating the additional

momentum in recent months.

Baird Add/Stop Employment Index


(400)

(300)

(200)

(100)

0

100

200

-8%

-6%

-4%

-2%

0%

2%

4%

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Baird Add/Stop Employment Index (000s), right

Baird Add/Stop Employment Index YOY Growth Rate, left

Average = 65k Average = 54k

Cycle Average = 49k (since Mar 2010)

2011 Average = 56k

3-Month Average = 81k

Baird Add/Stop Employment Index (Recent Cycle)


(400)

(300)

(200)

(100)

0

100

200

-8%

-6%

-4%

-2%

0%

2%

4%

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

Baird Add/Stop Employment Index (000s), right

Baird Add/Stop Employment Index YOY Growth Rate, left

We continue to highlight the recent momentum in Add/Stop momentum over the past several months as

a critical dynamic to the data. Following a slowdown in employment in mid-2011, hiring appears to have

strongly recovered as we headed into the end of the year and now suggests evidence of stability. We

note that this factor also parallels the increasing role of Add/Stops as a contributor to overall organic

growth in 4Q11 at the uniform rental companies (a positive, as employee additions at existing accounts

typically carry higher incremental margins). Our conversations with industry participants at this week's



8

CSC Convention support this trend. We also point to higher industry growth expectations from our recent

1Q12 industry survey.

At what rate do you expect your revenue to grow excluding acquisitions in the next 12 months?"

Note: Growth rates reflect average responses of survey participants

Source: Baird Research, March 2012 Uniform Rental Industry Survey

5.7%5.4%

5.7%

5.3%

5.8% 5.9%

4.7%5.0% 5.0%

3.8%

1.5%

0.3%0.0%

2.7%

2.3%

2.9%

3.3%

4.3%4.6%

5.4%

4.5%

5.1%

5.6%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Finally, we note that the YOY growth rate in Add/Stop Index employment categories continues to

outpace the broader economy for the first time since late 2006/early 2007 (a phenomenon which has

been apparent throughout 2011, supporting alpha generation in the uniform rental stocks, in our

opinion). As we have highlighted, this has been a critical element of the data as uniform employment

lagged broader employment categories throughout the recovery until February 2011.

Total Non-Farm Employment vs. Baird Add/Stop Employment Index (YOY Change)


-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

Ja

n-0

7

Ma

r-0

7

Ma

y-0

7

Ju

l-0

7

Se

p-0

7

No

v-0

7

Ja

n-0

8

Ma

r-0

8

Ma

y-0

8

Ju

l-0

8

Se

p-0

8

No

v-0

8

Ja

n-0

9

Ma

r-0

9

Ma

y-0

9

Ju

l-0

9

Se

p-0

9

No

v-0

9

Ja

n-1

0

Ma

r-1

0

Ma

y-1

0

Ju

l-1

0

Se

p-1

0

No

v-1

0

Ja

n-1

1

Ma

r-1

1

Ma

y-1

1

Ju

l-1

1

Se

p-1

1

No

v-1

1

Ja

n-1

2

BLS Total Non-Farm Employment

Baird Add/Stop Employment Index

Growth in Baird Add/Stop

Index employment

continues to outpace

total NFP employment

Uniform growth led by F&B industries, but overall trends remains positive. Most uniform verticals

comprising our Add/Stop Index posted positive growth in February, led by F&B industries, partially offset

by a decline in Machinery employment. Previously (several months ago), trends had been more mixed.

The figure below shows the absolute job gains/losses within several of the primary uniform-wearing

industries comprising our Index over the last month. We also note continued good growth in various

manufacturing verticals (which continue to outpace the broader economy).



9

Baird Add/Stop Employment Index Component Industries: 1-Month Employment Change (000s)


(15)

(5)

(1)

(0)

1

3

3

3

5

5

10

11

41

Machinery

Wholesale Trade - Durable Goods

Gasoline Stations

Truck Transportation

Specialty Trade Contractors

Repair and Maintenance

Food and Beverage Stores

Wholesale Trade - Nondurable Goods

Fabricated Metal Products

Motor Vehicle and Parts Dealers

Chemicals

Food Manufacturing

Food Services and Drinking Places

1-month Employment Change (000s)

Add/Stop Employment historically a good predictor of uniform organic growth. Importantly we

continue to note that the YOY change in our Add/Stop Index has historically been well-correlated with

uniform rental organic growth rates, particularly at CTAS. The figure below demonstrates this

relationship. Continued momentum in employment could suggest positive bias to management guidance

at all three uniform companies, in our view.

CTAS Organic (Rental) Revenue Growth YOY vs. Baird Add/Stop Employment Index

Note: CTAS organic growth reflects interpolated calendar growth figures; 3Q11-4Q11 reflect Baird estimates

Source: Bureau of Labor Statistics, Company Reports and Baird Research

R² = 0.7286

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

-8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0%

Add/Stop Index

CTAS Organic

Rental Revenue



10

Derivative Employment Data

Derivative employment data also continued to improve in February.

ADP Employment Report. The February ADP report (published 3/7) was similar to the BLS report,

suggesting continued growth modestly above consensus expectations with net job growth of 216,000

(versus the +200,000 consensus). Similar to recent months, gains were predominantly driven by small

(+108,000) and medium (+88,000) businesses as well as the service economy (+170,000) versus

goods-producing (+46,000) industries. Large firm (+500 employees or more) employment continues to

hold relatively flat, which may suggest hiring has come primarily through attrition. Manufacturing

employment grew by 21,000, its fourth consecutive month of positive gains and the largest 1-month job

gain in nearly a year.

Recall, that the ADP report tracks private payroll only and is based on actual payroll receipts received by

ADP, as opposed to the survey/model-driven BLS report, which may suggest that ADP provides a better

gauge of actual employment conditions.

Total Nonfarm Private Payrols, by Firm Size (000s)

Source: ADP Employment Report

105,000

107,000

109,000

111,000

113,000

115,000

117,000

(1,000)

(800)

(600)

(400)

(200)

-

200

400

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Large Firms (499+), MoM Change

Medium Firms (50-499), MoM Change

Small Firms (1-49), MoM Change

Total Employment, (right)

Initial Jobless Claims. Initial jobless claims continued to improve in February and are now near

350,000/week, well below the critical 400,000 level consistent with a declining unemployment rate. The

4-week moving average is currently at 354,250 versus 374,000 as of 12/31/11 (see figure below).



11

Initial Jobless Claims

Note: The red line reflects claim levels historically associated with net employment growth. Gray bars denote NBER recessions

Source: U.S. Department of Labor, Bureau of Labor Statistics; National Bureau of Economic Research

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

550,000

600,000

650,000

700,000

Jan-67 Feb-70 Mar-73 Apr-76 May-79 Jun-82 Jul-85 Aug-88 Sep-91 Oct-94 Nov-97 Nov-00 Nov-03 Nov-06 Nov-09

Claims below

400,000 since

November 2011

Initial Jobless Claims (Recent Cycle)

Note: The solid red line indicates the level of jobless claims historically associated with net employment growth

Source: U.S. Department of Labor, Bureau of Labor Statistics

250,000

300,000

350,000

400,000

450,000

500,000

550,000

600,000

650,000

700,000

Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12

Initial Jobless Claims (4-wk MA)

Continuing Jobless Claims. Continuing claims also continue to move steadily lower and remain below

previous cyclical peaks. The 4-week moving average fell to 3.417 million at the end of February versus

3.50 million in January and 3.61 million on 12/31/11. Continuing claims are ~52.5% below the recent

cyclical peak in early 2009 (see figure below).



12

Continuing Jobless Claims

Note: Gray bars denote NBER recessions

Source: U.S. Department of Labor, Bureau of Labor Statistics; National Bureau of Economic Research

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

Jan-67 Feb-70 Mar-73 Apr-76 May-79 Jun-82 Jul-85 Aug-88 Sep-91 Oct-94 Nov-97 Nov-00 Nov-03 Nov-06 Nov-09

Unemployment Rate. The U.S. unemployment rate (which is based on a separate survey) held

constant in February at 8.3%, consistent with expectations, but above the estimated (Federal Reserve)

natural rate of unemployment of ~6.2%. Still, the unemployment rate is now at its lowest point of the

current cycle (post-recession) and (positively) we continue to see a stable to declining unemployment

rate despite a growing labor pool (which may signal an improving employment backdrop). The U-6

unemployment rate (which includes involuntary part-time employment and other underutilized labor)

declined to 14.9% (-20 bps sequentially). The unemployment rate still remains well above the previous

cyclical peaks of 6.3% in June 2003 and 7.8% rate in June 1992, however.

Civilian Unemployment Rate (persons 16 years of age and older)

Note: The solid grey bars indicate recessions, as determined by the National Bureau of Economic Research

Source: U.S. Department of Labor, Bureau of Labor Statistics

0

2

4

6

8

10

12

14

16

18

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

U3 rate ("Official" unemployment rate)

U6 rate (Total unemployed, plus all marginally attached workers)



13

Investment Perspective and Valuation

Holding Outperform rating on all three uniform companies, but GKSR is our top idea. We believe

fundamentals remain strong enough to suggest continued upside to consensus estimates near-term,

with risk/reward likely biased higher. We view valuation as fair, but not cheap, with EPS upside likely to

be the largest driver of future stock performance. While all three companies should benefit from strong

employment fundamentals over the near-term, our top idea remains GKSR for longer-term (12-18+

months) investors, as we view profitability initiatives underway as offering outsized earnings growth

potential over the next several years, relative to peers. Our company-specific investment theses are

summarized below.

UNIFIRST

■ We rate UniFirst (UNF; $68 price target) at Outperform. Our upgrade from Neutral to Outperform

last quarter was primarily based on valuation, but also due to opportunities for balance sheet

deployment which could be accretive to earnings/value. While the relative valuation gap versus peers

(which formed the basis of our upgrade) has likely closed, we continue to see modest upside through

continued execution, cyclical tailwinds, and, importantly, deployment of a potentially underlevered

balance sheet. Indeed, return-of-capital initiatives and/or M&A could create shareholder value through

strategic deployment (we see potential for up to $400 million of incremental balance sheet capacity,

or $20/share) and is the primary catalyst for the stock today, in our opinion.

- Thoughts on the balance sheet. Net debt/capital has declined to just 6.2% and 0.6x TTM

EBITDA, well below historical levels in the 20-25%/1.5x range providing (we believe) roughly $400

million of available balance sheet capacity today. Historically, UNF has utilized the balance sheet to

pursue M&A. However, with the M&A market still soft (supported by anecdotal discussions) and free

cash flow generation likely to bring UNF to a net cash position by the end of F2012, we view some

form of shareholder deployment as a likely use of cash going forward.

■ Valuation. Our $68 price target reflects a 6.2x FTM EBITDA multiple, generally consistent with

current levels, on our estimates 12-months from today. We believe current multiples are appropriate,

at a modest premium to historical (five-year) levels but at a discount to peers in the 7-8x EBITDA

range today (we note UNF's dual-class share structure has historically driven a ~1-2 point valuation

discount versus peers). In addition, we note that adjusted for what we see as an underlevered

balance sheet, we believe the stock's forward earnings multiples (ex-cash) is closer to 10x versus a

~13x historical (five-year) average.

■ Risks. Risks to our price target include a highly competitive market/pricing, employment trends,

energy and other commodity price fluctuations and a 10:1 super-voting dual-class insider share

structure.

G&K Services

■ We rate G&K Services (GKSR; $38 price target) at Outperform. F1Q12 results (January) were

ahead of expectations, with better-than-expected organic growth and SG&A leverage offsetting gross

margin pressure (merchandise cost from new accounts). Our valuation contemplates what we see as

opportunity for multi-year value creation over the next 2-3 years. With continued opportunity to drive

additional operating efficiencies, solid execution, achievable forward estimates and reasonable

valuation, in our view, we highlight what could prove to be stronger-than-expected results, particularly

in F2013.

■ Valuation. We believe investors are best served by taking a multi-year look at GKSR’s earnings

power. In addition, we believe outsized earnings growth potential at GKSR relative to peers continues



14

to justify a growth multiple for the stock. Our $38 price target assumes an essentially constant

multiple of 7.3x EBITDA and 15.0x earnings, consistent with the stock's historical (five-year) average

on an EBITDA basis and perhaps providing additional opportunity given what we see as above

average EPS growth potential over the next several years with an implied PEG ratio of just 0.75x (we

assume ~20% EPS growth through F2013). We also note that our DCF model supports a price target

in the upper $30s, supporting the value of the franchise beyond simple multiples analysis.

■ Risks. Risks to our price target include a highly competitive industry/pricing, employment trends, and

energy and other commodity price fluctuations.

CINTAS

■ We rate Cintas (CTAS; $42 price target) at Outperform. F2Q12 earnings in December

demonstrated meaningful momentum, with management's view for the balance of the year improved.

Importantly, CTAS sees runway for additional margin gains ahead, with recent performance providing

confidence and the company's strong cash flow and healthy balance sheet likely providing

opportunities for additional return of capital initiatives. We see conservative guidance setting the

stage for additional beat-and-raise quarters as the most likely catalyst for the stock today.

■ Valuation. Our $42 price target assumes a constant multiple of 8.0x our FTM EBITDA estimate

12-months from today and 15.9x earnings. While these multiples are generally consistent with the

stock's five-year average of 7.7x/16.2x, we view industry fundamentals as stronger today relative to

our historical valuation history with significant operating leverage providing opportunity for

above-average EPS growth.

■ Risks. Risks to our price target include a highly competitive industry/pricing, employment trends,

energy and scrap paper price fluctuations and acquisition integration.



15

Appendix - Important Disclosures and Analyst Certification

Covered Companies Mentioned

All stock prices below are the March 8, 2012 closing price.

Cintas Corporation (CTAS - $39.26 - Outperform)G&K Services, Inc. (GKSR - $32.65 - Outperform)UniFirst Corporation (UNF - $58.96 - Outperform)(See recent research reports for more information)

Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q18

16

24

32

40

2009 2010 2011 2012

06/01/09N:$27

09/23/09U:$28

12/23/09U:$26

02/17/10U:$22

07/21/10N:$28

09/22/10N:$30

12/22/10N:$32

03/14/11O:$34

03/23/11O:$35

07/20/11O:$36

09/12/11O:$34

12/21/11O:$38

02/21/12O:$42

Rating and Price Target History for: Cintas Corporation (CTAS) as of 03-08-2012

Created by BlueMatrix

Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q18

16

24

32

40

2009 2010 2011 2012

04/29/09N:$26

06/01/09N:$22

08/07/09N:$21

09/23/09U:$21

10/28/09N:$23

01/27/10N:$26

04/28/10N:$28

06/15/10N:$23

08/18/10N:$24

11/02/10N:$30

01/19/11O:$37

02/02/11O:$38

05/03/11O:$40

08/17/11O:$37

01/31/12O:$38

Rating and Price Target History for: G&K Services, Inc. (GKSR) as of 03-08-2012




16

Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q10

15

30

45

60

75

2009 2010 2011 2012

06/01/09N:$37

06/02/09N:$36

07/02/09N:$39

09/23/09U:$42

10/29/09U:$43

01/07/10O:$59

04/01/10O:$60

07/01/10O:$51

10/20/10O:$54

01/05/11O:$57

01/19/11N:$58

03/30/11N:$60

06/30/11N:$61

09/12/11N:$57

10/19/11O:$60

01/05/12O:$68

Rating and Price Target History for: UniFirst Corporation (UNF) as of 03-08-2012


1 Robert W. Baird & Co. Incorporated makes a market in the securities of CTAS, GKSR and UNF.

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February 2012 Jobs Growth in Uniform Sectors

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