10-QPeriod: Q3 FY2019

CINTAS CORP Quarterly Report for Q3 Ended Feb 28, 2019

Filed April 5, 2019For Securities:CTAS

Summary

Cintas Corporation reported solid top-line growth for the nine months ended February 28, 2019, with total revenue increasing by 6.1% to $5.1 billion. This growth was driven by a 5.6% increase in the core Uniform Rental and Facility Services segment and a robust 9.3% increase in the First Aid and Safety Services segment. Diluted earnings per share from continuing operations saw a healthy increase of 10.5% to $5.91 for the same period. The company also demonstrated effective cost management, with selling and administrative expenses increasing only slightly as a percentage of revenue, and improvements in gross margins across key segments. Cintas maintained a strong liquidity position, with net cash provided by operating activities increasing year-over-year. The company continued its commitment to shareholder returns through share repurchases and dividend payments.

Financial Highlights

51 data points
Beta

Revenue

$1.68B

44.9% Gross Margin

Net Income

$203.33M

12.1% Net Margin

EPS (Diluted)

$0.46

Total Assets

$7.43B

Cash & Equivalents

$80.86M

Free Cash Flow

$255.96M

Financial Statements
Beta
Revenue$1.68B
Gross Profit$755.15M
SG&A Expenses$476.10M
Operating Income$278.25M
Interest Expense$26.77M
Net Income$203.33M
EPS (Basic)$0.48
EPS (Diluted)$0.46
Shares Outstanding (Basic)420.32M
Shares Outstanding (Diluted)432.65M

Key Highlights

  • 1Total revenue for the nine months ended February 28, 2019, grew 6.1% to $5.1 billion, driven by organic growth.
  • 2Uniform Rental and Facility Services revenue increased 5.6% organically, while First Aid and Safety Services revenue saw a strong 9.3% organic increase.
  • 3Diluted earnings per share from continuing operations rose 10.5% to $5.91 for the nine-month period, indicating improved profitability.
  • 4Gross margins showed improvement across key segments, with Uniform Rental and Facility Services at 45.3% and First Aid and Safety Services at 48.0% for the nine months.
  • 5Operating cash flow increased slightly to $670.7 million for the nine months, highlighting the company's strong operational cash generation.
  • 6Cintas continues its share repurchase program, buying back approximately $546.6 million worth of stock in the nine-month period.
  • 7The company successfully navigated the adoption of new accounting standard ASC 606 (Revenue from Contracts with Customers) with no material negative impact on its financial results.

Frequently Asked Questions

Cintas' revenue growth was primarily driven by increased sales volume across its core segments, particularly in Uniform Rental and Facility Services and First Aid and Safety Services. The company also benefited from new business acquisition and strong customer retention, along with some inorganic growth from acquisitions in the Fire Protection and First Aid and Safety businesses.

Cintas demonstrated effective expense management. While costs of services increased with sales volume, selling and administrative expenses grew at a slower pace than revenue, leading to improved operating leverage. Gross margins also saw an increase in key segments, contributing to overall profitability.

Cintas maintained a strong liquidity position, with operating cash flow increasing year-over-year. The company actively returned capital to shareholders through share repurchases totaling $546.6 million for the nine-month period and dividend payments. Capital expenditures for expansion and acquisitions were also funded, demonstrating a balanced approach to capital allocation.

Yes, Cintas adopted the new revenue recognition standard, ASC 606, effective June 1, 2018. The adoption was handled using the modified retrospective method and did not have a material negative impact on the company's reported financial results for the period. The adoption primarily affected the timing of revenue recognition and the capitalization of certain contract costs.