01—Abstract
Summary
Summary of the 10-Q filed October 10, 2013. Cited figures are marked; the original filing is the authoritative source.
Cintas Corporation's (CTAS) 10-Q filing for the period ending August 31, 2013, demonstrates solid top-line growth driven by its core Rental Uniforms and Ancillary Products segment, which saw a 5.0%a revenue increase.
Overall revenue grew by 6.6% to $1.12 billionb, with organic growth of 7.1% indicating strong underlying business performance. While net income saw a modest increase of 1.3% to $77.8 million, diluted earnings per share rose 5.0% to $0.63, benefiting from a reduction in outstanding shares due to ongoing share repurchases. The company's financial health remains robust, supported by consistent operating cash flow, although slightly lower than the prior year.
Cintas continues to actively manage its capital structure, with significant share buybacks undertaken during the quarter. Management highlights operational efficiencies, particularly in selling and administrative expenses, which grew slower than revenue, indicating effective cost leverage. However, investors should note potential headwinds from reduced industrial paper prices impacting the Document Management Services segment and the ongoing litigation risks, though management currently believes these will not have a material adverse effect.
02—Key points
Key Highlights
- Total revenue increased by 6.6% to $1.12 billion for the three months ended August 31, 2013, compared to the prior year period.
- Rental Uniforms and Ancillary Products segment revenue grew 5.0% to $792.9 million, indicating strength in the core business.
- Net income rose slightly by 1.3% to $77.8 million, while diluted earnings per share increased by 5.0% to $0.63.
- Operating cash flow was $82.6 million, a decrease from the prior year but indicative of continued operational generation.
- The company continued its share repurchase program, buying back 2.1 million shares for $100.8 million during the quarter.
- Selling and administrative expenses as a percentage of revenue were managed effectively, increasing at a slower rate than overall revenue.
- Document Management Services segment revenue grew 10.3%, but profitability was impacted by a 25% decrease in recycled paper prices.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2014, Cintas Corp kept $0.07.
- Revenue$1.10B100.0%
- Cost of revenue−$644.2M58.5%
- Gross profit$456.1M41.5%
- Operating costs−$316.5M28.8%
- Operating income$139.6M12.7%
- Interest, other & tax−$61.9M5.6%
- Net income$77.8M7.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2014filed October 10, 2013Financial Statements
Q1 FY2014 against Q1 FY2013
| Line item | Q1 FY2014Q1 FY2013 | Change |
|---|---|---|
| Revenue | $1.10B$1.05B | +4.7% |
| Gross Profit | $456.10M$445.88M | +2.3% |
| SG&A Expenses | $316.48M$306.58M | +3.2% |
| Operating Income | $139.61M$139.29M | +0.2% |
| Interest Expense | $16.52M$16.60M | −0.5% |
| Net Income | $77.75M$76.73M | +1.3% |
| EPS (Basic) | $0.16$0.15 | +3.3% |
| EPS (Diluted) | $0.16$0.15 | +5.0% |
| Shares Outstanding (Basic) | 488.52M504.44M | −3.2% |
| Shares Outstanding (Diluted) | 491.57M505.83M | −2.8% |
05—Questions
Frequently Asked Questions
What is the overall financial performance of Cintas for the quarter ended August 31, 2013?
Cintas reported a 6.6% increase in total revenue to $1.12 billion for the quarter ended August 31, 2013. Net income saw a modest increase of 1.3% to $77.8 million, while diluted earnings per share grew by 5.0% to $0.63, partly due to share repurchases.
How did the different operating segments perform?
The Rental Uniforms and Ancillary Products segment, Cintas' largest, showed strong revenue growth of 5.0%. The First Aid, Safety and Fire Protection Services segment also performed well with a 13.6% revenue increase. The Document Management Services segment saw a 10.3% revenue increase, but its profitability was negatively affected by lower recycled paper prices.
What is the company's cash flow situation and capital allocation strategy?
Net cash provided by operating activities was $82.6 million for the quarter. Cintas continues to actively engage in its share repurchase program, buying back approximately 2.1 million shares for $100.8 million during the period. The company also made significant acquisitions in the First Aid, Safety and Fire Protection Services and Document Management Services segments.
Are there any significant legal or market risks highlighted in the report?
The report mentions ongoing class-action lawsuits related to alleged discrimination, which Cintas is contesting. While management believes these will not have a material adverse effect, they represent a potential risk. The company also faces market risk from fluctuations in interest rates and foreign currency exchange rates, primarily with the Canadian dollar, though hedging activities are noted as not significant.
06—Continue