01—Abstract
Summary
Summary of the 10-Q filed January 8, 2016. Cited figures are marked; the original filing is the authoritative source.
Cintas Corporation reported strong performance for the quarter and six months ended November 30, 2015.
Total revenue saw a significant increase driven by both organic growth and strategic acquisitions. The Uniform Rental and Facility Services segment remains the largest contributor, showing steady revenue growth and improved gross margins, partly due to lower energy costs and operational efficiencies. The First Aid and Safety Services segment experienced substantial revenue growth, largely fueled by the acquisition of ZEE Medical, though integration costs impacted its gross margin.
Financially, the company demonstrated robust earnings growth from continuing operations and a notable increase in diluted earnings per share, supported by effective cost management and a reduced share count from ongoing share repurchase programs. The company also completed the sale of its Shred-it investment, which significantly boosted cash flow from investing activities. Cintas maintains a strong liquidity position and is in compliance with its debt covenants, with stable credit ratings.
02—Key points
Key Highlights
- Total revenue increased by 8.5% for the three months ended November 30, 2015, compared to the prior year, with 6.5% organic growth.
- Uniform Rental and Facility Services segment revenue grew 5.2%, with an improved gross margin of 43.9%, up 60 basis points year-over-year.
- First Aid and Safety Services segment revenue surged by 46.4% due to the ZEE acquisition, though integration costs impacted its gross margin.
- Net income from continuing operations for the quarter increased by 11.3%, and diluted EPS from continuing operations rose 19.8% to $1.03.
- The company completed the sale of its investment in Shred-it, generating significant proceeds and impacting cash flows from investing activities.
- Shareholders benefited from a 23.5% increase in the declared annual cash dividend to $1.05 per share.
- Cintas repurchased a substantial number of shares under its buyback programs, reducing the share count and contributing to EPS growth.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2016, Cintas Corp kept $0.29.
- Revenue$1.19B100.0%
- Cost of revenue−$670.9M56.3%
- Gross profit$520.2M43.7%
- Operating costs−$319.9M26.9%
- Operating income$200.3M16.8%
- Interest, other & tax$144.8M12.2%
- Net income$345.1M29.0%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2016filed January 8, 2016Financial Statements
Q2 FY2016 against Q2 FY2015
| Line item | Q2 FY2016Q2 FY2015 | Change |
|---|---|---|
| Revenue | $1.19B$1.12B | +6.0% |
| Gross Profit | $520.22M$481.42M | +8.1% |
| SG&A Expenses | $327.05M$299.84M | +9.1% |
| Operating Income | $200.35M$181.58M | +10.3% |
| Interest Expense | $16.17M$15.93M | +1.5% |
| Net Income | $345.10M$120.41M | +186.6% |
| EPS (Basic) | $0.78$0.26 | +204.9% |
| EPS (Diluted) | $0.77$0.25 | +206.0% |
| Shares Outstanding (Basic) | 433.20M468.46M | −7.5% |
| Shares Outstanding (Diluted) | 440.45M474.62M | −7.2% |
05—Questions
Frequently Asked Questions
What was the primary driver of revenue growth in the recent quarter?
Revenue growth was driven by a combination of factors, including increased sales volume from existing customers, new business secured by sales representatives, and the impact of acquisitions, particularly the ZEE Medical acquisition in the First Aid and Safety Services segment. Organic growth accounted for the majority of the increase.
How did the ZEE Medical acquisition affect the First Aid and Safety Services segment's performance?
The ZEE Medical acquisition significantly boosted revenue for the First Aid and Safety Services segment, contributing 36.6% of its growth in the quarter. However, integration costs and lower route efficiency associated with the acquired business led to a decrease in the segment's gross margin compared to the prior year.
What is the status of Cintas' discontinued operations?
Cintas completed the sale of its investment in Shred-it in the quarter ended November 30, 2015. The Storage business, sold in fiscal 2015, continues to be reported as discontinued operations. Results from these activities are now classified separately from continuing operations.
How is Cintas managing its capital and shareholder returns?
Cintas is actively returning capital to shareholders through share repurchases, having bought back a significant number of shares under its various programs, which also reduces the diluted share count and boosts EPS. Additionally, the company announced a 23.5% increase in its annual cash dividend.
06—Continue