10-QPeriod: Q1 FY2012

CINTAS CORP Quarterly Report for Q1 Ended Aug 31, 2011

Filed October 7, 2011For Securities:CTAS

Summary

Cintas Corporation reported a solid first quarter for fiscal year 2012, with total revenue increasing by 10.1% year-over-year to $1.017 billion. 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 million, 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% 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.

Financial Highlights

51 data points
Beta

Revenue

$1.02B

43.2% Gross Margin

Net Income

$68.64M

6.7% Net Margin

EPS (Diluted)

$0.13

Total Assets

$4.13B

Cash & Equivalents

$150.31M

Free Cash Flow

$12.14M

Financial Statements
Beta
Revenue$1.02B
Gross Profit$439.04M
SG&A Expenses$310.47M
Operating Income$128.57M
Interest Expense$17.33M
Net Income$68.64M
EPS (Basic)$0.13
EPS (Diluted)$0.13
Shares Outstanding (Basic)525.24M
Shares Outstanding (Diluted)525.35M

Key Highlights

  • 1Total revenue increased by 10.1% to $1.017 billion for the three months ended August 31, 2011, compared to the prior year period.
  • 2Net 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.
  • 3The Rental Uniforms and Ancillary Products segment showed strong performance with a 9.4% revenue increase and improved gross and operating margins.
  • 4Significant 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.
  • 5Selling and administrative expenses as a percentage of revenue decreased, indicating improved operational efficiency.
  • 6The company completed its $500 million share buyback program, demonstrating a commitment to returning capital to shareholders.
  • 7Cintas maintained compliance with all significant debt covenants and possesses adequate liquidity for future operations and expansion.

Frequently Asked Questions

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).

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.

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.

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.