Cintas Corp. 10-Q Summary: Period Ended November 30, 1996
Business Context and Reporting Period
This is a quarterly report (Form 10-Q) for Cintas Corporation, covering the three and six months ended November 30, 1996 (Fiscal Year 1997). The company provides uniform rental and sales services. The report is unaudited and compares results to the same periods in the prior fiscal year (ended November 30, 1995).
Key Financial Metrics
| Metric (in thousands) | 3 Months Ended Nov 30, 1996 | 6 Months Ended Nov 30, 1996 | Balance Sheet (Nov 30, 1996) |
|---|---|---|---|
| Total Revenues | $208,568 | $401,354 | - |
| Net Income | $22,698 | $42,395 | - |
| Earnings Per Share | $0.48 | $0.90 | - |
| Operating Cash Flow | - | $55,126 | - |
| Cash & Marketable Securities | - | - | $97,990 |
| Long-Term Debt | - | - | $113,244 |
| Current Ratio | - | - | 2.96x |
Note: Current Ratio calculated as Total Current Assets ($334,344) divided by Total Current Liabilities ($112,988).
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 14% for both the three and six-month periods compared to the prior year. Net rental revenues grew 14% (3 months) and 13% (6 months), driven by customer base expansion and price increases. Direct sales of uniforms increased 18% (3 months) and 17% (6 months) due to higher unit sales.
- Profitability: Net income rose 20% for the quarter and 21% for the six-month period. Earnings per share increased from $0.40 to $0.48 (quarter) and $0.75 to $0.90 (six months).
- Interest Expense: Net interest expense decreased significantly to $966,000 (quarter) and $2,101,000 (six months) from $1,846,000 and $3,935,000 in the prior year. This was due to higher interest income from increased cash holdings and lower interest rates on reduced long-term debt.
- Balance Sheet: Cash, cash equivalents, and marketable securities increased by approximately $15 million since May 31, 1996. Net property, plant, and equipment increased by $16 million.
Outlook, Commentary, and Risks
- Management Commentary: Management attributes revenue growth to organic expansion and pricing power. The company noted that the first six months of fiscal 1997 had one fewer workday than the prior year, making the growth figures more significant.
- Capital Expenditures & Expansion: The company is investing in infrastructure, with five uniform rental facilities under construction and a new distribution center in Montgomery, Alabama, recently opened to service the South, Southeast, and Southwest regions.
- Liquidity: With $98 million in liquid assets, management believes current cash positions and operating cash flows are sufficient to meet operational needs and fund future acquisitions and capital expenditures.
- Risks/Contingencies: The filing notes that interim results are subject to variation and may not be indicative of full-year results. No specific legal contingencies or unusual items were disclosed in the provided text.
Investor Verification Checklist
- Verify the sustainability of the 14% revenue growth rate given the one-day reduction in the work period.
- Confirm the utilization rates of the new Montgomery, Alabama distribution center and the five facilities under construction.
- Monitor the trend in net interest expense to ensure it remains low as debt levels fluctuate.
- Review the "Uniforms and other rental items in service" asset balance ($106.7 million) to assess the scale of the rental fleet relative to revenue.