10-QPeriod: Q1 FY2002

CINTAS CORP Quarterly Report for Q1 Ended Aug 31, 2001

Filed October 12, 2001For Securities:CTAS

Summary

Cintas Corporation reported solid financial performance for the quarter ending August 31, 2001. Total revenue saw a healthy 8% increase year-over-year, driven primarily by an 11% rise in net rental revenue, indicating strong customer base growth. This top-line growth translated into improved profitability, with net income up 11% and diluted earnings per share increasing by 10% to $0.33. The company's financial position remains robust, with substantial cash reserves and marketable securities totaling $127 million, providing ample resources for future investments in acquisitions and capital expenditures, including eight new uniform rental facilities under construction. Management expressed confidence in the company's ability to meet its operational and capital needs through existing cash, operational cash flow, and banking relationships.

Key Highlights

  • 1Total revenue increased by 8% to $564.6 million for the three months ended August 31, 2001, compared to the prior year period.
  • 2Net income rose by 11% to $56.54 million, with diluted earnings per share growing 10% to $0.33.
  • 3The Rentals segment showed strong performance with an 11% increase in revenue, attributed to customer base growth.
  • 4Revenue from the Other Services segment (direct uniform sales and ancillary services) remained flat.
  • 5The company adopted new accounting standards for Goodwill and Intangible Assets (SFAS 142) and Derivative Instruments (SFAS 133), discontinuing goodwill amortization.
  • 6Cash, cash equivalents, and marketable securities increased to $127 million, supporting future growth initiatives.
  • 7Cintas continues to invest in its infrastructure, with eight new uniform rental facilities in development.

Frequently Asked Questions

The primary driver of Cintas' revenue growth was the Rentals segment, which saw an 11% increase in revenue. This growth is primarily attributed to an expanding customer base.

Cintas adopted SFAS 142, which discontinued the amortization of goodwill. For the three months ended August 31, 2001, this change had no impact on reported net income or EPS as goodwill amortization was already zeroed out. However, it's noted that in the prior year period (August 2000), the exclusion of goodwill amortization (net of tax) increased adjusted net income and adjusted EPS.

The company has a strong cash position of $127 million in cash, cash equivalents, and marketable securities. This capital, along with operational cash flow, is intended to fund future acquisitions and capital expenditures. Eight new uniform rental facilities are currently under construction, indicating continued investment in operational capacity.

Net interest expense decreased from $3 million in the prior year period to $2 million. This reduction is due to lower levels of long-term debt and decreased interest rates. Cintas also utilizes interest rate swap agreements for cash flow hedging to convert a portion of its floating-rate debt to a fixed rate.