01—Abstract
Summary
Summary of the 10-Q filed October 7, 2011. Cited figures are marked; the original filing is the authoritative source.
Cintas Corporation reported a solid first quarter for fiscal year 2012, with total revenue increasing by 10.1% year-over-year to $1.017 billiona.
This growth was driven by a strong organic increase of 7.6%, complemented by 2.5% growth from acquisitions, particularly in the Document Management and First Aid/Safety segments. Net income rose by 12.0% to $68.6 millionb, and diluted earnings per share (EPS) saw a significant 30.0% increase to $0.52, benefiting from a reduced share count due to share repurchases. The company demonstrated improved operating efficiency, with selling and administrative expenses growing at a slower pace than revenue.
The Rental Uniforms and Ancillary Products segment remains the largest contributor, showing 9.4%c revenue growth and improved gross and operating margins. The "Other Services" revenue, encompassing Uniform Direct Sales, First Aid/Safety, and Document Management, also grew robustly at 11.8%, with Document Management and First Aid/Safety being key organic growth drivers. Despite increased interest expenses due to recent debt issuance, Cintas maintained strong compliance with debt covenants and a healthy liquidity position.
02—Key points
Key Highlights
- Total revenue increased by 10.1% to $1.017 billion for the three months ended August 31, 2011, compared to the prior year period.
- Net income grew by 12.0% to $68.6 million, with diluted earnings per share increasing by 30.0% to $0.52, aided by share repurchases.
- The Rental Uniforms and Ancillary Products segment showed strong performance with a 9.4% revenue increase and improved gross and operating margins.
- Significant growth was observed in the Document Management Services (24.7% revenue increase) and First Aid, Safety and Fire Protection Services (10.9% revenue increase) segments, with strong organic contributions.
- Selling and administrative expenses as a percentage of revenue decreased, indicating improved operational efficiency.
- The company completed its $500 million share buyback program, demonstrating a commitment to returning capital to shareholders.
- Cintas maintained compliance with all significant debt covenants and possesses adequate liquidity for future operations and expansion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2012, Cintas Corp kept $0.07.
- Revenue$1.02B100.0%
- Cost of revenue−$578.1M56.8%
- Gross profit$439.0M43.2%
- Operating costs−$310.5M30.5%
- Operating income$128.6M12.6%
- Interest, other & tax−$59.9M5.9%
- Net income$68.6M6.7%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2012filed October 7, 2011Financial Statements
Q1 FY2012 against Q1 FY2011
| Line item | Q1 FY2012Q1 FY2011 | Change |
|---|---|---|
| Revenue | $1.02B$923.90M | +10.1% |
| Gross Profit | $439.04M$393.67M | +11.5% |
| SG&A Expenses | $310.47M$293.43M | +5.8% |
| Operating Income | $128.57M$100.25M | +28.3% |
| Interest Expense | $17.33M$12.27M | +41.2% |
| Net Income | $68.64M$61.28M | +12.0% |
| EPS (Basic) | $0.13$0.10 | +30.0% |
| EPS (Diluted) | $0.13$0.10 | +30.0% |
| Shares Outstanding (Basic) | 525.24M608.66M | −13.7% |
| Shares Outstanding (Diluted) | 525.35M608.66M | −13.7% |
05—Questions
Frequently Asked Questions
What were the main drivers of Cintas' revenue growth in this quarter?
Cintas experienced a 10.1% increase in total revenue, driven by a combination of organic growth (7.6%) and contributions from acquisitions (2.5%). Key contributors to organic growth included the Document Management Services segment (15.9% increase, boosted by recycled paper prices) and the First Aid, Safety and Fire Protection Services segment (7.9% increase).
How did Cintas manage its expenses relative to revenue growth?
The company demonstrated effective cost management. Selling and administrative expenses grew by 5.8%, a slower rate than the 10.1% revenue growth. This led to a decrease in selling and administrative expenses as a percentage of revenue by 130 basis points, indicating improved operational leverage and efficiency.
What is the company's financial position regarding debt and liquidity?
Cintas has a healthy liquidity position, with $150.3 million in cash and cash equivalents and $126.7 million in marketable securities as of August 31, 2011. The company is in compliance with all significant debt covenants and believes its existing credit facilities and operating cash flow are adequate to meet future cash requirements.
Were there any significant events related to share repurchases or shareholder returns?
Yes, Cintas announced the completion of its $500 million share buyback program authorized in October 2010, repurchasing approximately 15.8 million shares. This resulted in a lower weighted average common stock outstanding, which contributed to the significant 30.0% increase in diluted earnings per share.
06—Continue