01—Abstract
Summary
Summary of the 10-Q filed October 5, 2018. Cited figures are marked; the original filing is the authoritative source.
Cintas Corporation (CTAS) reported its first quarter fiscal year 2019 results for the period ending August 31, 2018.
The company demonstrated solid top-line growth, with total revenue increasing by 5.4% year-over-year to $1.70 billiona, driven by a 5.2% organic increase. This growth was primarily fueled by strong performance in the Uniform Rental and Facility Services segment, which saw a 4.8% revenue increase, and the "Other" revenue category (including First Aid and Safety Services) which grew by 7.8%. Profitability also showed improvement, with net income from continuing operations up significantly by 31.9% to $212.5 million.
Diluted earnings per share (EPS) from continuing operations rose by 30.3% to $1.89b. This strong financial performance was supported by effective cost management and favorable tax adjustments related to the Tax Cuts and Jobs Act. The company also continued its share repurchase program, demonstrating a commitment to returning value to shareholders.
02—Key points
Key Highlights
- Total revenue increased 5.4% to $1.70 billion, with organic growth of 5.2%.
- Net income from continuing operations grew by 31.9% to $212.5 million.
- Diluted earnings per share (EPS) from continuing operations increased by 30.3% to $1.89.
- Uniform Rental and Facility Services revenue grew 4.8% organically.
- First Aid and Safety Services and "All Other" revenue segments (combined as 'Other revenue') increased 7.8% (6.4% organically).
- The company's effective tax rate decreased significantly to 12.0% from 26.5% due to the Tax Cuts and Jobs Act.
- Share repurchase activity continued, with $78.5 million spent in the quarter under the authorized $500 million program.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2019, Cintas Corp kept $0.13.
- Revenue$1.70B100.0%
- Cost of revenue−$923.3M54.4%
- Gross profit$774.7M45.6%
- Operating costs−$509.5M30.0%
- Operating income$265.2M15.6%
- Interest, other & tax−$52.7M3.1%
- Net income$212.5M12.5%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed October 5, 2018Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Revenue | $1.70B$1.61B | +5.4% |
| Gross Profit | $774.71M$739.35M | +4.8% |
| SG&A Expenses | $504.63M$486.28M | +3.8% |
| Operating Income | $265.23M$249.10M | +6.5% |
| Interest Expense | $24.30M$30.32M | −19.8% |
| Net Income | $212.51M$217.21M | −2.2% |
| EPS (Basic) | $0.49$0.51 | −3.0% |
| EPS (Diluted) | $0.47$0.49 | −3.6% |
| Shares Outstanding (Basic) | 427.34M422.96M | +1.0% |
| Shares Outstanding (Diluted) | 442.59M434.15M | +1.9% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in this quarter?
Revenue growth was primarily driven by increased sales volume across both the Uniform Rental and Facility Services segment (up 4.8% year-over-year) and the "Other" revenue segments (First Aid and Safety Services and All Other, up 7.8% year-over-year). This growth was attributed to new business acquisition, increased penetration of services within existing customer bases, and strong customer retention.
How did the Tax Cuts and Jobs Act impact Cintas' financial results?
The Tax Cuts and Jobs Act (TCJA) significantly lowered Cintas' effective tax rate to 12.0% for the quarter, down from 26.5% in the prior year's comparable period. This reduction in the corporate tax rate, along with adjustments related to the provisional transition tax, positively impacted net income from continuing operations and diluted EPS.
What is the company's stance on share repurchases and capital allocation?
Cintas continued to execute its share repurchase program, buying back approximately $78.5 million worth of its common stock during the quarter under its authorized $500 million program. This reflects the company's ongoing commitment to returning capital to shareholders and managing its capital structure.
Were there any significant expenses or one-time items impacting profitability this quarter?
The company incurred $4.9 million in G&K Services integration expenses during the quarter. The after-tax impact of these expenses was approximately $0.04 per diluted share, negatively affecting operating income. However, this impact was largely offset by overall revenue growth and the favorable tax rate.
06—Continue