01—Abstract
Summary
Summary of the 10-Q filed April 8, 2011. Cited figures are marked; the original filing is the authoritative source.
Cintas Corporation's (CTAS) fiscal third quarter 2011 report for the period ending February 28, 2011, demonstrates solid top-line growth and improved profitability.
Total revenue increased by 8.8% year-over-year, driven by a combination of organic growth (5.5%) and strategic acquisitions, particularly in the Document Management Services, First Aid, Safety and Fire Protection Services, and Rental Uniforms and Ancillary Products segments. Profitability also saw a significant boost, with net income rising by 20.6% and diluted earnings per share increasing by 28.1% to $0.41a, benefiting from revenue growth outpacing operating expense increases and the positive impact of share repurchases. The company's core Rental Uniforms and Ancillary Products segment showed consistent performance with steady gross margins, while the "Other Services" segments, including Uniform Direct Sales, First Aid, Safety, and Document Management, experienced robust growth, signaling successful diversification and expansion efforts.
Management highlights improved sales representative productivity and customer retention as key drivers for this performance. The company maintained compliance with debt covenants and a healthy liquidity position, supported by operating cash flows and an established credit facility.
02—Key points
Key Highlights
- Total revenue increased by 8.8% to $937.8 million for the three months ended February 28, 2011, compared to the prior year period.
- Net income grew by 20.6% to $59.1 million, with diluted earnings per share increasing by 28.1% to $0.41.
- The "Other Services" revenue, comprising Uniform Direct Sales, First Aid, Safety and Fire Protection, and Document Management, grew by 14.0%, with strong organic growth of 8.6%.
- The Rental Uniforms and Ancillary Products segment revenue increased by 6.8%, with gross margin percentage remaining stable at 42.8%.
- The company actively repurchased shares, with 7.7 million shares bought under the share buyback program during the nine months ended February 28, 2011, contributing to the higher EPS growth.
- Cash flows from operating activities were $208.0 million for the nine months ended February 28, 2011, a decrease from the prior year, partly due to increased working capital needs from higher sales volumes and inventory buildup for a system conversion.
- The company reported compliance with all significant debt covenants and maintained a favorable credit rating.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2011, Cintas Corp kept $0.06.
- Revenue$937.8M100.0%
- Cost of revenue−$545.9M58.2%
- Gross profit$391.9M41.8%
- Operating costs−$283.0M30.2%
- Operating income$108.9M11.6%
- Interest, other & tax−$49.8M5.3%
- Net income$59.1M6.3%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2011filed April 8, 2011Financial Statements
Q3 FY2011 against Q3 FY2010
| Line item | Q3 FY2011Q3 FY2010 | Change |
|---|---|---|
| Revenue | $937.83M$861.81M | +8.8% |
| Gross Profit | $391.92M— | — |
| SG&A Expenses | $283.05M$275.60M | +2.7% |
| Operating Income | $108.88M$84.01M | +29.6% |
| Interest Expense | $12.52M$11.57M | +8.2% |
| Net Income | $59.07M$48.98M | +20.6% |
| EPS (Basic) | $0.10$0.08 | +28.1% |
| EPS (Diluted) | $0.10$0.08 | +28.1% |
| Shares Outstanding (Basic) | 581.21M— | — |
| Shares Outstanding (Diluted) | 581.21M— | — |
05—Questions
Frequently Asked Questions
How did Cintas' revenue perform in the reported quarter compared to the previous year?
Cintas reported a robust 8.8% increase in total revenue for the three months ended February 28, 2011, reaching $937.8 million, up from $861.8 million in the prior year period. This growth was driven by both organic expansion and strategic acquisitions across its business segments.
What was the primary driver behind the significant increase in diluted earnings per share (EPS)?
Diluted EPS increased by 28.1% to $0.41. While net income grew by 20.6%, the larger EPS increase was significantly influenced by Cintas' active share repurchase program. The company purchased approximately 7.7 million shares during the nine months ended February 28, 2011, which reduces the number of outstanding shares and thus boosts EPS.
How is the company managing its debt obligations and liquidity?
Cintas reported compliance with all significant debt covenants as of February 28, 2011. The company has a strong liquidity position supported by operating cash flows and an accessible revolving credit facility with a capacity of $450 million. The debt-to-capitalization ratio remained at a healthy 24.6%.
What is the outlook for the different business segments?
The core Rental Uniforms and Ancillary Products segment showed steady performance. The 'Other Services' segments, including Uniform Direct Sales, First Aid, Safety, and Document Management, demonstrated strong growth, particularly through organic expansion and acquisitions, indicating successful diversification. Management highlighted improved sales representative productivity and customer retention as key growth drivers.
06—Continue