10-QPeriod: Q3 FY2013

CINTAS CORP Quarterly Report for Q3 Ended Feb 28, 2013

Filed April 9, 2013For Securities:CTAS

Summary

Cintas Corporation's filing for the nine months ended February 28, 2013, demonstrates continued revenue growth, with a 4.6% increase to $3.2 billion, driven by solid organic performance in its core Rental Uniforms and Ancillary Products segment and strategic acquisitions in the First Aid, Safety and Fire Protection Services and Document Management segments. Net income saw a modest increase of 4.8% to $229.5 million for the nine-month period. Despite some pressure on gross margins in the Rental segment due to increased material and service costs, and a decline in the Document Management segment influenced by lower recycled paper prices, the company's operational efficiency and strategic focus on sales representative productivity have supported overall profitability. The company also highlighted continued share repurchases and a stable financial position, supported by its credit ratings and access to debt markets.

Financial Highlights

52 data points
Beta

Revenue

$1.08B

41.1% Gross Margin

Net Income

$74.70M

6.9% Net Margin

EPS (Diluted)

$0.15

Total Assets

$4.23B

Cash & Equivalents

$217.47M

Free Cash Flow

$88.34M

Financial Statements
Beta
Revenue$1.08B
Gross Profit$441.94M
SG&A Expenses$308.92M
Operating Income$133.02M
Interest Expense$16.30M
Net Income$74.70M
EPS (Basic)$0.15
EPS (Diluted)$0.15
Shares Outstanding (Basic)492.48M
Shares Outstanding (Diluted)495.03M

Key Highlights

  • 1Total revenue for the nine months ended February 28, 2013, increased by 4.6% to $3.2 billion compared to the prior year period.
  • 2Net income for the nine months increased by 4.8% to $229.5 million, with diluted EPS rising 9.6% to $1.83 due to a decrease in weighted average shares outstanding from share repurchases.
  • 3The Rental Uniforms and Ancillary Products segment, the largest revenue contributor, experienced a 4.5% revenue increase, driven by improved sales representative productivity.
  • 4Acquisitions contributed to growth in the First Aid, Safety and Fire Protection Services (9.3% revenue increase) and Document Management Services (0.1% revenue increase) segments.
  • 5Gross margin for the Rental Uniforms and Ancillary Products segment saw a decrease of 100 basis points to 42.4% due to increased material costs and route expansion expenses.
  • 6The company's financial liquidity remains strong, with net cash provided by operating activities increasing to $368.3 million for the nine-month period.
  • 7Cintas continued its share repurchase program, buying back 4.4 million shares for $179.4 million in the first nine months of fiscal 2013.

Frequently Asked Questions

Cintas reported a 4.6% increase in total revenue for the nine months ended February 28, 2013, reaching $3.2 billion. This growth was primarily driven by organic increases in its core Rental Uniforms and Ancillary Products segment and contributions from acquisitions in other segments.

While Cintas experienced some gross margin pressure in its Rental segment due to rising material and service costs, and a dip in the Document Management segment related to paper prices, overall net income still saw a slight increase. The company's focus on sales representative productivity and strategic acquisitions are key factors in maintaining profitability.

The company demonstrated strong liquidity with an increase in net cash provided by operating activities to $368.3 million for the nine-month period. Cintas also continued its share repurchase program, indicating a commitment to returning value to shareholders and managing its capital structure effectively.

The filing mentions ongoing litigation, specifically class-action lawsuits related to alleged hiring discrimination. While Cintas is contesting these, the outcome could potentially impact financial condition, but any estimated liability is not determinable at this time. The company stated that ordinary course of business legal matters are not expected to have a material adverse effect.