10-QPeriod: Q1 FY2019

CINTAS CORP Quarterly Report for Q1 Ended Aug 31, 2018

Filed October 5, 2018For Securities:CTAS

Summary

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 billion, 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 $1.89. 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.

Financial Highlights

48 data points
Beta

Revenue

$1.70B

45.6% Gross Margin

Net Income

$212.51M

12.5% Net Margin

EPS (Diluted)

$0.47

Total Assets

$7.29B

Cash & Equivalents

$118.36M

Free Cash Flow

$98.46M

Financial Statements
Beta
Revenue$1.70B
Gross Profit$774.71M
SG&A Expenses$504.63M
Operating Income$265.23M
Interest Expense$24.30M
Net Income$212.51M
EPS (Basic)$0.49
EPS (Diluted)$0.47
Shares Outstanding (Basic)427.34M
Shares Outstanding (Diluted)442.59M

Key Highlights

  • 1Total revenue increased 5.4% to $1.70 billion, with organic growth of 5.2%.
  • 2Net income from continuing operations grew by 31.9% to $212.5 million.
  • 3Diluted earnings per share (EPS) from continuing operations increased by 30.3% to $1.89.
  • 4Uniform Rental and Facility Services revenue grew 4.8% organically.
  • 5First Aid and Safety Services and "All Other" revenue segments (combined as 'Other revenue') increased 7.8% (6.4% organically).
  • 6The company's effective tax rate decreased significantly to 12.0% from 26.5% due to the Tax Cuts and Jobs Act.
  • 7Share repurchase activity continued, with $78.5 million spent in the quarter under the authorized $500 million program.

Frequently Asked Questions

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.

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.

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.

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.