01—Abstract
Summary
Summary of the 10-Q filed April 2, 2015. Cited figures are marked; the original filing is the authoritative source.
Cintas Corporation (CTAS) reported solid financial results for the third quarter and the first nine months of fiscal year 2015, ending February 28, 2015.
Revenue remained largely stable year-over-year on a consolidated basis, but demonstrated robust organic growth driven primarily by the core "Rental Uniforms and Ancillary Products" segment. The company successfully managed costs, leading to improved operating income and significant growth in diluted earnings per share, boosted by ongoing share repurchases. Key strategic moves during the period included the deconsolidation of the shredding business and the sale of the storage business, which impacted reported revenue figures but allowed for increased focus on core operations.
The company also continued its commitment to shareholder returns, completing a $500 milliona share buyback program and initiating a new one, signaling confidence in its financial health and future prospects. Despite some headwinds from foreign currency fluctuations, Cintas demonstrated operational strength and effective cost management.
02—Key points
Key Highlights
- For the three months ended February 28, 2015, Cintas reported revenue of $1,108.8 million, a slight decrease from $1,111.0 million in the prior year, but achieved 7.5% organic revenue growth.
- Net income for the third quarter increased to $94.9 million from $84.6 million in the prior year, with diluted earnings per share from continuing operations rising to $0.79 from $0.69.
- The "Rental Uniforms and Ancillary Products" segment showed strong performance, with revenue increasing by 7.2% year-over-year, driven by organic growth of 7.8%.
- The company completed a $500 million share buyback program and announced a new $500 million program, demonstrating a commitment to returning capital to shareholders.
- The deconsolidation of the shredding business and the sale of the storage business impacted reported revenue, but management emphasized organic growth drivers.
- Operating income increased by 16.0% for the three months ended February 28, 2015, reaching $173.6 million from $149.6 million in the prior year, reflecting effective cost management.
- Cash flow from operations remained strong, totaling $377.6 million for the nine months ended February 28, 2015, though slightly down from $385.8 million in the prior year.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2015, Cintas Corp kept $0.09.
- Revenue$1.11B100.0%
- Cost of revenue−$633.5M57.1%
- Gross profit$475.3M42.9%
- Operating costs−$301.7M27.2%
- Operating income$173.6M15.7%
- Interest, other & tax−$78.7M7.1%
- Net income$94.9M8.6%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2015filed April 2, 2015Financial Statements
Q3 FY2015 against Q3 FY2014
| Line item | Q3 FY2015Q3 FY2014 | Change |
|---|---|---|
| Revenue | $1.11B$1.11B | −0.2% |
| Gross Profit | $475.31M$469.63M | +1.2% |
| SG&A Expenses | $301.69M$317.87M | −5.1% |
| Operating Income | $173.62M$149.60M | +16.1% |
| Interest Expense | $16.25M$16.42M | −1.0% |
| Net Income | $94.88M$84.60M | +12.2% |
| EPS (Basic) | $0.20$0.17 | +15.7% |
| EPS (Diluted) | $0.20$0.17 | +15.9% |
| Shares Outstanding (Basic) | 464.71M479.65M | −3.1% |
| Shares Outstanding (Diluted) | 471.47M485.12M | −2.8% |
05—Questions
Frequently Asked Questions
How did Cintas' revenue perform in the third quarter of fiscal year 2015?
For the three months ended February 28, 2015, Cintas reported total revenue of $1,108.8 million, a slight decrease of 0.2% compared to $1,111.0 million in the same period of the prior fiscal year. However, excluding the impact of deconsolidations (shredding business) and foreign currency fluctuations, the company achieved a robust organic revenue growth of 7.5%, primarily driven by its core Rental Uniforms and Ancillary Products segment.
What is the impact of the deconsolidation of the shredding business and the sale of the storage business on the financial results?
The deconsolidation of the shredding business and the sale of the storage business significantly impacted reported revenue. The shredding business contributed $74.9 million in revenue in the prior year's third quarter, and its deconsolidation reduced reported revenue by 7.2%. The storage business was classified as discontinued operations and its sale completed in November 2014, with proceeds of $154.9 million received in the nine-month period. These divestitures allowed Cintas to focus more on its core, higher-margin businesses.
How did Cintas manage its expenses and profitability?
Cintas demonstrated effective cost management. For the third quarter, selling and administrative expenses decreased by 5.1% year-over-year, partly due to the deconsolidation of the shredding business but also reflecting improved efficiency. Operating income increased by 16.0% to $173.6 million. This, combined with a decrease in weighted average shares outstanding due to share repurchases, led to a significant 14.5% increase in diluted earnings per share from continuing operations to $0.79.
What is the company's approach to capital allocation and shareholder returns?
Cintas continues to prioritize shareholder returns. The company completed a $500 million share buyback program authorized in July 2013 and announced a new $500 million program in January 2015. This ongoing commitment to share repurchases not only returns capital to shareholders but also contributes to the increase in diluted earnings per share by reducing the number of outstanding shares. The company also declared dividends, with $1.70 per share paid during the nine-month period ended February 28, 2015, up from $0.77 in the prior year's comparable period.
06—Continue