10-KPeriod: FY2010

CINTAS CORP Annual Report, Year Ended May 31, 2010

Filed July 30, 2010For Securities:CTAS

Summary

Cintas Corporation's Form 10-K for the fiscal year ended May 31, 2010, reveals a company navigating a challenging economic environment. Total revenue saw a decrease of 6.0% year-over-year, largely due to the lingering effects of the economic downturn which impacted customer employee levels and spending on ancillary products and services. Despite the revenue decline, the company demonstrated resilience by increasing net cash provided by operating activities by 7.3% and continuing its track record of consecutive annual dividend increases for the 27th year. The company's core Rental Uniforms and Ancillary Products segment experienced a revenue decrease, but performance in the Document Management Services segment showed robust growth, up 18.6% driven by increased destruction services and higher recycled paper revenue. Cintas maintained a strong balance sheet, with a reduced debt-to-capitalization ratio and a significant cash position. The company also addressed operational inefficiencies by implementing cost reduction initiatives and restructuring activities in response to lower volumes.

Financial Highlights

52 data points
Beta

Revenue

$3.55B

42.2% Gross Margin

Net Income

$215.62M

6.1% Net Margin

EPS (Diluted)

$0.35

Total Assets

$3.97B

Cash & Equivalents

$411.28M

Free Cash Flow

$454.58M

Financial Statements
Beta
Revenue$3.55B
Gross Profit$1.50B
SG&A Expenses$1.09B
Operating Income$390.81M
Interest Expense$48.61M
Net Income$215.62M
EPS (Basic)$0.35
EPS (Diluted)$0.35
Shares Outstanding (Basic)611.43M
Shares Outstanding (Diluted)611.43M

Key Highlights

  • 1Total revenue for fiscal year 2010 decreased by 6.0% to $3.55 billion, reflecting the impact of the economic downturn on customer demand.
  • 2Despite revenue challenges, net cash provided by operating activities increased by 7.3% to $561.6 million, indicating strong operational cash generation.
  • 3The Document Management Services segment was a standout performer, with revenue growing by 18.6% organically, driven by increased demand for destruction services and higher recycled paper prices.
  • 4Cintas continued its commitment to shareholders by increasing its annual dividend for the 27th consecutive year, to $0.48 per share.
  • 5The company actively managed its cost structure, undertaking restructuring activities and implementing cost-reduction initiatives across segments to align with lower volumes.
  • 6The debt-to-capitalization ratio improved, decreasing from 24.9% to 23.7% year-over-year, demonstrating a strengthened financial position.
  • 7The company maintained effective internal controls over financial reporting, as attested by its independent registered public accounting firm.

Frequently Asked Questions

The economic downturn significantly impacted Cintas' revenue, leading to a 6.0% decrease to $3.55 billion. This was primarily due to decreased uniform wearers resulting from job losses, and reduced customer spending on ancillary products like mats and towels due to tighter budgets.

The Document Management Services segment was the strongest performer, with revenue growing 18.6% due to increased demand for destruction services and higher recycled paper prices. The Rental Uniforms and Ancillary Products segment, while still the largest, saw a revenue decrease of 6.7%, reflecting the broader economic challenges.

Cintas implemented several cost management strategies, including reducing excess capacity by closing or converting rental processing plants, workforce reductions, hiring and wage freezes, and cutting discretionary spending. They also engaged in restructuring activities to align costs with lower volumes.

Cintas maintained a strong financial position by reducing its debt-to-capitalization ratio from 24.9% to 23.7%. The company also ended the fiscal year with a substantial cash balance of $566.1 million and no outstanding commercial paper, supported by its credit facility.