10-QPeriod: Q1 FY2010

CINTAS CORP Quarterly Report for Q1 Ended Aug 31, 2009

Filed October 9, 2009For Securities:CTAS

Summary

Cintas Corporation (CTAS) reported its first quarter results for fiscal year 2010, ending August 31, 2009. The company experienced a significant revenue decline of 11.0% year-over-year, totaling $891.6 million, largely attributed to the challenging economic environment impacting customer employment and facility usage. Net income also decreased by 31.3% to $53.98 million, resulting in diluted earnings per share of $0.35, down from $0.51 in the prior year's quarter. Despite the downturn, Cintas managed to increase its cash and cash equivalents and marketable securities by $107.7 million sequentially to $357.9 million, indicating a focus on liquidity and operational efficiency. The company's core Rental Uniforms and Ancillary Products segment saw a 9.1% revenue decrease, while other services collectively declined by 16.0%. Notable cost-saving measures were implemented, including a reduction in selling and administrative expenses by 8.0% and a decrease in energy-related costs. Additionally, Cintas finalized a settlement in principle for a wage and hour lawsuit, with a pre-tax impact of approximately $19.5 million net of insurance proceeds. While the current economic climate presents headwinds, Cintas continues to manage its operations effectively, with a focus on cost control and maintaining a strong liquidity position. The company's business strategy remains centered on increasing penetration at existing customers and broadening its customer base, alongside strategic acquisitions.

Financial Highlights

24 data points
Beta

Revenue

$891.57M

Net Income

$53.98M

6.1% Net Margin

EPS (Diluted)

$0.09

Cash & Equivalents

$227.31M

Free Cash Flow

$120.08M

Financial Statements
Beta
Revenue$891.57M
SG&A Expenses$264.43M
Operating Income$98.89M
Interest Expense$12.04M
Net Income$53.98M
EPS (Basic)$0.09
EPS (Diluted)$0.09

Key Highlights

  • 1Total revenue decreased by 11.0% to $891.6 million for the three months ended August 31, 2009, compared to $1,002.2 million for the same period in the prior year, primarily due to the challenging economic environment.
  • 2Net income declined by 31.3% to $53.98 million, and diluted earnings per share decreased to $0.35 from $0.51 year-over-year.
  • 3The Rental Uniforms and Ancillary Products segment, the company's largest, saw a revenue decrease of 9.1%.
  • 4Selling and administrative expenses were reduced by 8.0% ($22.9 million) due to cost-reduction initiatives and lower bad debt expense.
  • 5Cash and cash equivalents and marketable securities increased by $107.7 million sequentially to $357.9 million, indicating a strengthened liquidity position.
  • 6A legal settlement in principle for the Paul Veliz et al. v. Cintas Corporation wage and hour lawsuit was reached, with an estimated pre-tax impact of $19.5 million.
  • 7The company is actively managing costs, including a reduction in energy-related expenses and workforce adjustments related to restructuring initiated in the prior fiscal year.

Frequently Asked Questions

The primary reason for the revenue decline is the challenging U.S. and Canadian economic environment. This has led to customer job losses, reduced uniform rentals and purchases, decreased demand for hygiene and first aid products, and facility closures impacting services like mat and towel rentals.

Cintas implemented several cost-saving measures, including reducing selling and administrative expenses by 8.0%, lowering energy costs, and benefiting from decreased bad debt expense. They also incurred costs related to workforce reductions and facility consolidations as part of restructuring efforts.

Cintas reached a settlement in principle for approximately $24 million. The pre-tax impact, after accounting for insurance proceeds, was approximately $19.5 million, which was expensed during the quarter. This settlement resolves claims related to wage and hour laws for service sales representatives.

The company's liquidity has strengthened. Cash and cash equivalents and marketable securities increased by $107.7 million sequentially to $357.9 million. This increase is primarily due to cash generated from operations, offsetting capital expenditures and other investments.