10-QPeriod: Q1 FY2020

CINTAS CORP Quarterly Report for Q1 Ended Aug 31, 2019

Filed October 8, 2019For Securities:CTAS

Summary

Cintas Corporation reported strong performance for the first quarter of fiscal year 2020, ending August 31, 2019. Total revenue increased by 6.7% year-over-year, driven by organic growth of 8.3%. This growth was primarily fueled by the Uniform Rental and Facility Services segment, which saw a 5.8% revenue increase, and the First Aid and Safety Services segment, which experienced robust revenue growth of 12.2%. The company demonstrated improved profitability with net income from continuing operations rising by 18.0% and diluted earnings per share (EPS) increasing by 22.8% to $2.32. This strong financial performance reflects effective cost management, increased sales volume, and successful integration of previous acquisitions. The company also continued its capital allocation strategy, repurchasing $193.1 million in common stock during the quarter under its new $1.0 billion share buyback program. Cintas maintains a solid liquidity position, with net cash provided by operating activities significantly increasing to $276.9 million, up from $162.9 million in the prior year period. The company is also actively managing its debt, with no borrowings on its revolving credit facility and a strong compliance with debt covenants, indicating financial stability and operational efficiency.

Financial Highlights

48 data points
Beta

Revenue

$1.81B

46.9% Gross Margin

Net Income

$250.81M

13.8% Net Margin

EPS (Diluted)

$0.58

Total Assets

$7.66B

Cash & Equivalents

$102.13M

Free Cash Flow

$212.16M

Financial Statements
Beta
Revenue$1.81B
Gross Profit$849.14M
SG&A Expenses$543.00M
Operating Income$306.15M
Interest Expense$27.32M
Net Income$250.81M
EPS (Basic)$0.60
EPS (Diluted)$0.58
Shares Outstanding (Basic)414.17M
Shares Outstanding (Diluted)428.33M

Key Highlights

  • 1Total revenue grew 6.7% to $1.81 billion, with organic growth of 8.3%, indicating strong underlying business performance.
  • 2Net income from continuing operations increased by 18.0% to $250.8 million, demonstrating improved profitability.
  • 3Diluted EPS from continuing operations rose 22.8% to $2.32, significantly exceeding the prior year's $1.89.
  • 4Uniform Rental and Facility Services segment revenue increased 5.8% to $1.45 billion, and First Aid and Safety Services segment revenue grew 12.2% to $172.1 million, showcasing strength across core segments.
  • 5Operating income improved by 15.4% to $306.1 million, reflecting effective cost control and operational leverage.
  • 6The company actively returned capital to shareholders through significant share repurchases, spending $193.1 million in the quarter under its $1.0 billion buyback program.
  • 7Operating cash flow increased substantially by 67.0% to $276.9 million, highlighting strong cash generation capabilities.

Frequently Asked Questions

Cintas' revenue growth was primarily driven by organic expansion across its core segments, particularly the Uniform Rental and Facility Services and First Aid and Safety Services segments. This growth was fueled by increased sales volume, new business acquisition, deeper penetration of existing customers with additional products and services, and price adjustments.

Cintas demonstrated strong expense management, which contributed to a significant increase in operating income and net income. While selling and administrative expenses increased, this was largely attributed to higher employee-partner related expenses such as medical costs. However, improved gross margins in key segments, driven by operational efficiencies and higher sales volumes, more than offset these increases, leading to enhanced profitability.

Cintas actively returns capital to shareholders through its share repurchase program. During this quarter, the company repurchased approximately $193.1 million of its common stock under its new $1.0 billion authorization, demonstrating a commitment to enhancing shareholder value.

Cintas maintains a healthy liquidity position, evidenced by a significant increase in operating cash flow to $276.9 million. The company has access to credit facilities, including a $1.0 billion revolving credit facility, though no amounts were drawn on it. Cintas also reported compliance with all debt covenants, indicating sound financial management and the ability to service its debt obligations.