10-QPeriod: Q2 FY2019

CINTAS CORP Quarterly Report for Q2 Ended Nov 30, 2018

Filed January 8, 2019For Securities:CTAS

Summary

Cintas Corporation reported a strong performance for the quarter and six months ended November 30, 2018. Total revenue increased by 7.0% 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.

Financial Highlights

50 data points
Beta

Revenue

$1.72B

45.1% Gross Margin

Net Income

$243.01M

14.1% Net Margin

EPS (Diluted)

$0.55

Total Assets

$7.41B

Cash & Equivalents

$88.48M

Free Cash Flow

$108.50M

Financial Statements
Beta
Revenue$1.72B
Gross Profit$775.16M
SG&A Expenses$491.67M
Operating Income$275.64M
Interest Expense$24.88M
Net Income$243.01M
EPS (Basic)$0.56
EPS (Diluted)$0.55
Shares Outstanding (Basic)425.90M
Shares Outstanding (Diluted)439.50M

Key Highlights

  • 1Total revenue increased by 7.0% to $1.718 billion for the three months ended November 30, 2018, compared to the prior year period.
  • 2Uniform Rental and Facility Services revenue grew by 6.3% organically, demonstrating continued strength in the core business.
  • 3Net income from continuing operations significantly increased by 76.4% to $243.0 million for the three months ended November 30, 2018.
  • 4Diluted earnings per share from continuing operations rose to $2.18, an increase of 75.8% year-over-year.
  • 5The company realized a significant pre-tax gain of $69.4 million from the sale of a cost method investment.
  • 6Cintas declared an annual cash dividend of $2.05 per share, a 26.5% increase from the prior year.
  • 7Net cash provided by operating activities was $344.6 million for the six months ended November 30, 2018, supporting financial flexibility.

Frequently Asked Questions

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.

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.

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.

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.