10-QPeriod: Q2 FY2011

CINTAS CORP Quarterly Report for Q2 Ended Nov 30, 2010

Filed January 7, 2011For Securities:CTAS

Summary

Cintas Corporation's (CTAS) 10-Q filing for the period ending November 30, 2010, shows a revenue increase of 5.9% to $936.6 million for the quarter, driven by organic growth and strategic acquisitions, particularly in the Document Management and First Aid segments. While overall net income saw a slight decrease of 2.3% to $55.9 million for the quarter ($0.38 EPS), the six-month period demonstrated a 5.4% increase in net income to $117.1 million ($0.78 EPS), reflecting strong performance in the "Other Services" revenue streams. The company continues to invest in growth, with capital expenditures increasing significantly year-over-year, primarily for system conversions and expansion. Cintas also significantly repurchased $203.3 million of its common stock during the six-month period, utilizing existing cash reserves, and announced a new $500 million share buyback program. The company remains compliant with its debt covenants and maintained stable credit ratings, indicating a solid financial position despite increased operating expenses like selling and administrative costs and energy prices.

Financial Highlights

51 data points
Beta

Revenue

$936.57M

41.7% Gross Margin

Net Income

$55.87M

6.0% Net Margin

EPS (Diluted)

$0.10

Total Assets

$3.93B

Cash & Equivalents

$260.95M

Free Cash Flow

$34.00M

Financial Statements
Beta
Revenue$936.57M
Gross Profit$390.65M
SG&A Expenses$288.30M
Operating Income$102.34M
Interest Expense$12.16M
Net Income$55.87M
EPS (Basic)$0.10
EPS (Diluted)$0.10
Shares Outstanding (Basic)582.04M
Shares Outstanding (Diluted)582.04M

Key Highlights

  • 1Total revenue increased by 5.9% to $936.6 million for the three months ended November 30, 2010, compared to the prior year period.
  • 2Net income for the three months ended November 30, 2010, decreased by 2.3% to $55.9 million, resulting in diluted EPS of $0.38.
  • 3For the six months ended November 30, 2010, net income increased by 5.4% to $117.1 million, with diluted EPS of $0.78.
  • 4"Other Services" revenue (Uniform Direct Sales, First Aid, Safety & Fire Protection, Document Management) saw a substantial 15.7% increase for the quarter, driven by organic growth and acquisitions.
  • 5Cintas repurchased approximately $203.3 million of its common stock in the six months ended November 30, 2010, and announced a new $500 million share buyback program.
  • 6Capital expenditures increased significantly to $88.1 million in the six-month period, supporting expansion and system conversions.
  • 7The company resolved a significant portion of its legal settlements during the period, including a $24 million settlement in the Veliz wage and hour lawsuit.

Frequently Asked Questions

For the three months ended November 30, 2010, Cintas Corporation reported a total revenue increase of 5.9% to $936.6 million compared to the same period in the prior year. The six-month period also showed a 4.8% increase in total revenue to $1.86 billion.

For the three months ended November 30, 2010, net income decreased slightly by 2.3% to $55.9 million, resulting in diluted earnings per share of $0.38. This was primarily due to increased selling and administrative expenses and higher energy costs, partially offset by revenue growth.

Cintas is pursuing growth through increasing penetration at existing customers and broadening its customer base, including through strategic acquisitions in its emerging businesses. The company is also actively returning capital to shareholders through share repurchases, having spent $203.3 million in the six-month period and announcing a new $500 million buyback program. Capital expenditures are also increasing to support expansion and system improvements.

Cintas reached a settlement in principle for approximately $24 million in the Veliz wage and hour lawsuit, which was accrued in current liabilities. The company also had other legal settlements totaling $4.1 million net of insurance proceeds. While management believes ordinary course litigation will not materially affect the financial position, specific larger litigation is ongoing and could potentially have material impacts.