Cintas Corp. 10-Q Summary: Period Ended February 29, 1996
Business Context and Reporting Period
This is a quarterly report (Form 10-Q) for Cintas Corporation, covering the three and nine months ended February 29, 1996. The company provides uniform rental and direct sales services. The reporting period includes an extra work day in February due to the leap year.
Key Financial Metrics
| Metric | 9 Months Ended Feb 29, 1996 | 9 Months Ended Feb 28, 1995 |
|---|---|---|
| Total Revenues | $535,689,000 | $444,845,000 |
| Net Income | $53,659,000 | $44,831,000 |
| Earnings Per Share | $1.14 | $0.96 |
| Net Cash from Operating Activities | $80,367,000 | $53,960,000 |
| Cash and Cash Equivalents (Ending) | $11,555,000 | $13,138,000 |
| Total Debt (Current + Long-term) | $125,952,000 | $130,305,000 |
| Working Capital | $182,748,000 | $146,410,000 |
Note: Figures are in thousands except per share data. Net interest expense for the nine months was $5,438,000.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 20% for the nine-month period, driven by a 21% increase in net rental revenue and a 16% increase in net sales.
- Profitability: Net income rose 20% to $53.7 million, primarily due to increased revenues.
- Interest Expense: Net interest expense increased significantly (from $3.4 million to $5.4 million) due to higher long-term debt associated with the acquisition of Cadet Uniform Services, Ltd. in the prior fiscal year.
- Balance Sheet: Marketable securities increased from $38.8 million to $66.0 million, funded by operating cash flow. Property, plant, and equipment increased due to new facility construction.
Outlook, Management Commentary, and Risks
- Expansion: A new distribution center in Montgomery, Alabama, is expected to begin operations in the first quarter of fiscal 1997 to service the South, Southeast, and Southwest regions. The Cincinnati distribution center is also being expanded.
- Construction: At the end of the third quarter, eight uniform rental facilities were under construction.
- Liquidity: Management believes current cash, anticipated operating funds, and banking relationships are sufficient to meet operational and capital needs.
- Dividend: An annual cash dividend of $0.25 per share was declared, a 25% increase over the prior year.
- Risks/Contingencies: Interim results are subject to variations and may not be indicative of full-year results. No specific legal contingencies were detailed in the provided text.
Investor Verification Checklist
- Verify the sustainability of the 20% revenue growth rate, distinguishing between organic growth (customer base/price increases) and acquisition impact.
- Confirm the timeline and capital requirements for the new Montgomery distribution center and the eight facilities under construction.
- Monitor the impact of increased long-term debt on future interest expense and net income margins.
- Review the full fiscal year 1995 annual report for detailed historical context on the Cadet Uniform Services acquisition.