01—Abstract
Summary
Summary of the 10-Q filed January 8, 2019. Cited figures are marked; the original filing is the authoritative source.
Cintas Corporation reported a strong performance for the quarter and six months ended November 30, 2018.
Total revenue increased by 7.0%a and 6.2% respectively, driven by organic growth in its core Uniform Rental and Facility Services segment and solid performance in First Aid and Safety Services. The company benefited from increased sales volume, strong customer retention, and effective new business acquisition. Net income from continuing operations saw significant year-over-year growth, with diluted EPS also showing robust improvement, partly aided by a lower effective tax rate due to the Tax Cuts and Jobs Act.
Financially, Cintas demonstrated healthy operating cash flow and managed its debt effectively. The company also continued its capital allocation strategy by repurchasing shares under its authorized buyback programs.
A notable event was the substantial gain from the sale of a cost method investment, which positively impacted net income. Cintas also announced an increase in its annual cash dividend, signaling confidence in its ongoing financial strength and commitment to returning value to shareholders.
02—Key points
Key Highlights
- Total revenue increased by 7.0% to $1.718 billion for the three months ended November 30, 2018, compared to the prior year period.
- Uniform Rental and Facility Services revenue grew by 6.3% organically, demonstrating continued strength in the core business.
- Net income from continuing operations significantly increased by 76.4% to $243.0 million for the three months ended November 30, 2018.
- Diluted earnings per share from continuing operations rose to $2.18, an increase of 75.8% year-over-year.
- The company realized a significant pre-tax gain of $69.4 million from the sale of a cost method investment.
- Cintas declared an annual cash dividend of $2.05 per share, a 26.5% increase from the prior year.
- Net cash provided by operating activities was $344.6 million for the six months ended November 30, 2018, supporting financial flexibility.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2019, Cintas Corp kept $0.14.
- Revenue$1.72B100.0%
- Cost of revenue−$943.1M54.9%
- Gross profit$775.2M45.1%
- Operating costs−$499.5M29.1%
- Operating income$275.6M16.0%
- Interest, other & tax−$32.6M1.9%
- Net income$243.0M14.1%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2019filed January 8, 2019Financial Statements
Q2 FY2019 against Q2 FY2018
| Line item | Q2 FY2019Q2 FY2018 | Change |
|---|---|---|
| Revenue | $1.72B$1.61B | +7.0% |
| Gross Profit | $775.16M$716.37M | +8.2% |
| SG&A Expenses | $491.67M$468.08M | +5.0% |
| Operating Income | $275.64M$235.21M | +17.2% |
| Interest Expense | $24.88M$29.13M | −14.6% |
| Net Income | $243.01M$137.11M | +77.2% |
| EPS (Basic) | $0.56$0.32 | +78.6% |
| EPS (Diluted) | $0.55$0.31 | +77.2% |
| Shares Outstanding (Basic) | 425.90M425.36M | +0.1% |
| Shares Outstanding (Diluted) | 439.50M439.27M | +0.1% |
05—Questions
Frequently Asked Questions
What was the primary driver of Cintas' revenue growth in this period?
Revenue growth was primarily driven by increased sales volume across its core segments, particularly Uniform Rental and Facility Services, and strong customer retention. The company also benefited from new business acquired by its sales representatives and strategic acquisitions in certain areas like the Fire Protection business.
How did the gain on sale of investment impact the financial results?
Cintas reported a pre-tax gain of $69.4 million from the sale of a cost method investment during the three months ended November 30, 2018. This gain contributed positively to net income and diluted earnings per share for the period.
What is the company's approach to returning capital to shareholders?
Cintas demonstrated its commitment to shareholder returns through a 26.5% increase in its annual cash dividend to $2.05 per share. Additionally, the company continued to execute its share repurchase programs, buying back shares under both its existing and newly authorized programs.
How did the adoption of new accounting standards affect the financial reporting?
Cintas adopted Accounting Standards Update (ASU) 2014-09, 'Revenue from Contracts with Customers (Topic 606),' effective June 1, 2018. This adoption resulted in adjustments to retained earnings primarily related to the capitalization of certain direct and incremental contract costs and changes in the timing of revenue recognition for specific contracts. The adoption impacted reported figures for fiscal year 2019, with some reclassifications between asset and liability accounts and a net adjustment to retained earnings.
06—Continue