01—Abstract
Summary
Summary of the 10-Q filed October 8, 2019. Cited figures are marked; the original filing is the authoritative source.
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 $2.32a.
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 millionb 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 millionc, 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.
02—Key points
Key Highlights
- Total revenue grew 6.7% to $1.81 billion, with organic growth of 8.3%, indicating strong underlying business performance.
- Net income from continuing operations increased by 18.0% to $250.8 million, demonstrating improved profitability.
- Diluted EPS from continuing operations rose 22.8% to $2.32, significantly exceeding the prior year's $1.89.
- Uniform 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.
- Operating income improved by 15.4% to $306.1 million, reflecting effective cost control and operational leverage.
- The company actively returned capital to shareholders through significant share repurchases, spending $193.1 million in the quarter under its $1.0 billion buyback program.
- Operating cash flow increased substantially by 67.0% to $276.9 million, highlighting strong cash generation capabilities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2020, Cintas Corp kept $0.14.
- Revenue$1.81B100.0%
- Cost of revenue−$962.0M53.1%
- Gross profit$849.1M46.9%
- Operating costs−$543.0M30.0%
- Operating income$306.1M16.9%
- Interest, other & tax−$55.3M3.1%
- Net income$250.8M13.8%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed October 8, 2019Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $1.81B$1.70B | +6.7% |
| Gross Profit | $849.14M$774.71M | +9.6% |
| SG&A Expenses | $543.00M$504.63M | +7.6% |
| Operating Income | $306.15M$265.23M | +15.4% |
| Interest Expense | $27.32M$24.30M | +12.4% |
| Net Income | $250.81M$212.51M | +18.0% |
| EPS (Basic) | $0.60$0.49 | +22.4% |
| EPS (Diluted) | $0.58$0.47 | +22.8% |
| Shares Outstanding (Basic) | 414.17M427.34M | −3.1% |
| Shares Outstanding (Diluted) | 428.33M442.59M | −3.2% |
05—Questions
Frequently Asked Questions
What was the primary driver of Cintas' revenue growth in this quarter?
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.
How did Cintas manage its expenses and maintain profitability?
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.
What is Cintas' approach to capital allocation and shareholder returns?
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.
How is Cintas managing its debt and liquidity?
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.
06—Continue