01—Abstract
Summary
Summary of the 10-Q filed April 5, 2019. Cited figures are marked; the original filing is the authoritative source.
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 billiona.
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 $5.91b 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.
02—Key points
Key Highlights
- Total revenue for the nine months ended February 28, 2019, grew 6.1% to $5.1 billion, driven by organic growth.
- Uniform Rental and Facility Services revenue increased 5.6% organically, while First Aid and Safety Services revenue saw a strong 9.3% organic increase.
- Diluted earnings per share from continuing operations rose 10.5% to $5.91 for the nine-month period, indicating improved profitability.
- Gross 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.
- Operating cash flow increased slightly to $670.7 million for the nine months, highlighting the company's strong operational cash generation.
- Cintas continues its share repurchase program, buying back approximately $546.6 million worth of stock in the nine-month period.
- The 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.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2019, Cintas Corp kept $0.12.
- Revenue$1.68B100.0%
- Cost of revenue−$927.2M55.1%
- Gross profit$755.2M44.9%
- Operating costs−$476.9M28.3%
- Operating income$278.3M16.5%
- Interest, other & tax−$74.9M4.5%
- Net income$203.3M12.1%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2019filed April 5, 2019Financial Statements
Q3 FY2019 against Q3 FY2018
| Line item | Q3 FY2019Q3 FY2018 | Change |
|---|---|---|
| Revenue | $1.68B$1.59B | +5.9% |
| Gross Profit | $755.15M$700.46M | +7.8% |
| SG&A Expenses | $476.10M$490.62M | −3.0% |
| Operating Income | $278.25M$200.02M | +39.1% |
| Interest Expense | $26.77M$25.90M | +3.4% |
| Net Income | $203.33M$302.10M | −32.7% |
| EPS (Basic) | $0.48$0.70 | −31.5% |
| EPS (Diluted) | $0.46$0.68 | −31.7% |
| Shares Outstanding (Basic) | 420.32M426.23M | −1.4% |
| Shares Outstanding (Diluted) | 432.65M440.70M | −1.8% |
05—Questions
Frequently Asked Questions
What was the primary driver of Cintas' revenue growth in this period?
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.
How did Cintas manage its expenses relative to revenue growth?
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.
What is the company's stance on liquidity and capital allocation?
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.
Were there any significant accounting changes that impacted the financial results?
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.
06—Continue