Summary
Cintas Corporation (CTAS) reported its fiscal second-quarter and year-to-date results for the period ending November 30, 2008. The company experienced a slight overall revenue increase of 0.1% for the quarter and 1.8% for the six months, driven by acquisitions in its Document Management and First Aid/Safety/Fire Protection segments, partially offset by internal growth declines in some areas, notably Uniform Direct Sales. Net income for the quarter and year-to-date declined by 13.3% and 8.2%, respectively, impacting diluted earnings per share which fell by 11.3% and 5.8% in the respective periods. Key drivers of the earnings decline included increased operating costs such as energy, hanger costs, and significantly higher medical expenses. Despite revenue growth in key segments like Document Management, which saw strong internal growth, the company faced headwinds from rising operational expenses and a slightly higher effective tax rate. Cintas maintained a strong liquidity position, with ample capacity under its commercial paper program and a significant share buyback program still with substantial authorization remaining. However, the prevailing economic conditions, as noted in the Management's Discussion and Analysis, presented challenges, particularly impacting the Uniform Direct Sales segment.
Key Highlights
- 1Total revenue for the second quarter of fiscal year 2009 increased by 0.1% to $985.2 million compared to the prior year's quarter.
- 2Net income for the second quarter decreased by 13.3% to $71.8 million, resulting in diluted EPS of $0.47, down from $0.53 in the prior year.
- 3The Rental Uniforms and Ancillary Products segment, the largest revenue contributor, saw a modest 0.4% revenue increase but experienced a 140 basis point decrease in operating income margin due to higher energy, hanger, and medical costs.
- 4Document Management Services segment revenue grew significantly by 28.5% for the quarter, driven by both acquisitions and strong internal growth, although energy costs impacted its gross margin.
- 5Uniform Direct Sales revenue declined by 10.7% for the quarter, impacting profitability and increasing selling and administrative expenses as a percentage of revenue.
- 6Total operating cash flow for the six months ended November 30, 2008, was $175.1 million, a decrease from $269.1 million in the prior year, impacted by changes in working capital and higher costs.
- 7The company had $62.4 million in cash and cash equivalents and $64.9 million in marketable securities as of November 30, 2008, with a $600 million commercial paper program supported by a credit facility.