10-QPeriod: Q3 FY2010

CINTAS CORP Quarterly Report for Q3 Ended Feb 28, 2010

Filed April 9, 2010For Securities:CTAS

Summary

Cintas Corporation (CTAS) reported a decrease in revenue and net income for the three and nine months ended February 28, 2010, compared to the prior year. This decline is primarily attributed to broader economic conditions, including job losses impacting customer demand for uniform rentals and ancillary products. Despite the revenue challenges, the company demonstrated improved cost management, particularly in the cost of goods sold for both rental uniforms and other services. The Document Management Services segment showed robust growth, significantly offsetting declines in other areas. The company also maintained a strong cash position and improved its debt-to-capitalization ratio, indicating financial resilience amidst the economic downturn.

Financial Highlights

25 data points
Beta

Revenue

$861.81M

Net Income

$48.98M

5.7% Net Margin

EPS (Diluted)

$0.08

Cash & Equivalents

$406.50M

Free Cash Flow

$104.18M

Financial Statements
Beta
Revenue$861.81M
SG&A Expenses$275.60M
Operating Income$84.01M
Interest Expense$11.57M
Net Income$48.98M
EPS (Basic)$0.08
EPS (Diluted)$0.08

Key Highlights

  • 1Total revenue decreased by 5.2% for the three months ended Feb 28, 2010, and by 8.9% for the nine months ended Feb 28, 2010, year-over-year, largely due to economic conditions and job losses impacting customer demand.
  • 2Net income for the three months ended Feb 28, 2010, decreased by 31.8% to $48.98 million, with diluted EPS falling to $0.32 from $0.47 in the prior year period.
  • 3The Rental Uniforms and Ancillary Products segment, the largest revenue contributor, saw a 7.7% decrease in revenue for the quarter, driven by lower sales volume.
  • 4The Document Management Services segment exhibited strong growth, with revenue increasing by 29.1% for the three months ended Feb 28, 2010, driven by new customer acquisition and higher recycled paper prices.
  • 5Selling and administrative expenses increased by 7.2% for the three months ended Feb 28, 2010, primarily due to planned increases in sales force headcount and higher medical expenses.
  • 6The company maintained a strong liquidity position, with cash and cash equivalents and marketable securities increasing to $552.1 million at February 28, 2010, and improved its total debt to capitalization ratio to 24.1% from 24.9%.
  • 7A significant legal settlement related to wage and hour laws (Paul Veliz) was reached in principle for approximately $24 million, with a pre-tax impact of $19.5 million.

Frequently Asked Questions

The primary driver of the revenue decline was the broader economic downturn, characterized by significant job losses in the U.S. and Canadian economies. This impacted customer demand for Cintas' core services, particularly in uniform rentals and ancillary products, as well as facility services like mats and fire protection.

Cintas focused on cost management, reducing the cost of rental uniforms and ancillary products by 6.0% and the cost of other services by 4.8% for the three months ended February 28, 2010. They also reduced selling and administrative expenses by 3.6% for the nine-month period, partly due to headcount reductions from cost-saving initiatives.

The Document Management Services segment was a strong performer, demonstrating significant revenue growth of 29.1% for the quarter, driven by new customer acquisitions and favorable recycled paper prices. This growth helped to partially offset declines in other segments.

Cintas reported a strong liquidity position with increased cash and cash equivalents and marketable securities. The company also improved its debt-to-capitalization ratio, indicating a solid financial footing to manage operations and pursue future opportunities, including potential acquisitions and capital expenditures.