Cintas Corp. 10-Q Summary: Period Ended February 28, 1995
Business Context and Reporting Period
This is a quarterly report (Form 10-Q) for Cintas Corporation, a provider of uniform rental and direct sales services. The reporting period covers the three and nine months ended February 28, 1995. The company operates primarily in the United States and Canada, with recent expansion into Toronto, Ontario.
Key Financial Metrics
| Metric | 9 Months Ended Feb 28, 1995 | 9 Months Ended Feb 28, 1994 |
|---|---|---|
| Total Revenues | $444,845,000 | $381,392,000 |
| Net Income | $44,831,000 | $37,184,000 |
| Earnings Per Share (EPS) | $0.96 | $0.80 |
| Operating Cash Flow | $53,960,000 | $53,296,000 |
| Net Interest Expense | $3,439,000 | $3,891,000 |
| Cash and Equivalents (End of Period) | $13,138,000 | $6,583,000 |
| Long-Term Debt | $121,736,000 | $84,184,000 |
Margins: The filing does not explicitly state gross or operating margin percentages; however, net income represents approximately 10.1% of total revenues for the nine-month period.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 17% for the three months and 16.6% for the nine months ended February 28, 1995, compared to the prior year. Net rental revenue grew 17% (quarter) and 16% (nine months), driven by a 13% increase from customer base growth and price increases, with acquisitions contributing the remaining 3%.
- Direct Sales: Sales of uniforms and other direct sale items increased 27% for the nine-month period, attributed to higher unit sales rather than acquisitions.
- Profitability: Net income increased 21% for the nine-month period. This growth is partially attributable to the absence of one-time tax charges that impacted the prior year's results.
- Debt and Assets: Long-term debt increased significantly from $84.2 million to $121.7 million, primarily to fund the acquisition of Cadet Uniform Services, LTD. Property, plant, and equipment increased due to new facility construction in Phoenix, Portland, Buffalo, Charlotte, and Seattle.
Guidance, Outlook, and Management Commentary
- Acquisitions: On February 13, 1995, Cintas acquired 100% of Cadet Uniform Services, LTD., increasing ownership from 20%. This acquisition is expected to add approximately $22 million in annual revenues. A second acquisition in the second quarter is expected to add $4 million in annual revenues.
- Dividends: On February 15, 1995, the company declared an annual cash dividend of $0.20 per share, an 18% increase over the prior year.
- Stock Repurchases: The company repurchased 219,915 shares for $7.1 million during the first nine months of fiscal 1995. These shares were primarily reissued to fund the Cadet acquisition.
- Liquidity: Management states that current cash, anticipated operating funds, and banking relationships are sufficient to meet financing requirements.
- Tax Adjustments: The prior year's results were adversely impacted by one-time tax adjustments related to the Omnibus Budget Reconciliation Act of 1993, which reduced prior-year EPS by $0.02. No similar one-time charges are noted for the current period.
Investor Verification Checklist
- Verify the integration progress and revenue contribution of the Cadet Uniform Services, LTD. acquisition ($22M annual run-rate).
- Confirm the sustainability of the 13% organic growth rate in the customer base and pricing power in established operations.
- Monitor the impact of increased long-term debt ($121.7M) on future interest expense and liquidity ratios.
- Review the utilization of the remaining authorized stock repurchase capacity (up to 2 million shares authorized; 219,915 used).
- Assess the capital expenditure requirements for new facilities in Phoenix, Portland, Buffalo, Charlotte, and Seattle.