Cintas Corp. 10-Q Summary: Period Ended November 30, 1994
Business Context and Reporting Period
This is an unaudited quarterly report (Form 10-Q) for Cintas Corporation, covering the three and six months ended November 30, 1994. Cintas provides uniform rental and sales services. As of January 9, 1995, there were 46,919,314 shares of common stock outstanding.
Key Financial Metrics
| Metric | 3 Months Ended Nov 30, 1994 | 6 Months Ended Nov 30, 1994 |
|---|---|---|
| Total Revenues | $151,591,000 | $293,628,000 |
| Net Income | $15,756,000 | $29,516,000 |
| Earnings Per Share (EPS) | $0.34 | $0.63 |
| Net Cash from Operating Activities | N/A | $30,797,000 |
| Cash and Equivalents (Nov 30, 1994) | $9,260,000 | |
| Total Debt (Current + Long-term) | $91,267,000 | |
| Working Capital | $138,809,000 |
Note: All figures in thousands except per share data.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 17% for the quarter and 16% for the six-month period compared to the prior year. Net rental revenue grew 16% (quarter) and 15% (six months), driven by a 13% increase from customer base growth and price increases, with 2% from acquisitions. Direct sales revenue surged 23% (quarter) and 31% (six months) due to higher unit sales.
- Profitability: Net income rose 16% for the quarter and 22% for the six months. This growth is partially attributable to the absence of one-time tax charges that impacted the prior year's results.
- Debt Reduction: Total debt decreased due to the repayment of industrial revenue bonds in Cleveland, Tampa, and Dallas. Long-term debt fell from $84,184,000 to $82,188,000 since May 31, 1994.
- Capital Expenditures: Investing activities used $14,814,000 in cash for the six months, primarily for capital expenditures of $25,346,000 related to new facility construction.
Outlook, Risks, and Management Commentary
- Acquisitions: The company reissued treasury stock to fund an acquisition in the second quarter, expected to add approximately $4 million in annual revenues.
- Expansion: New rental uniform facilities were opened in Portland, Oregon, with construction nearing completion in Charlotte, North Carolina, and Seattle, Washington.
- Stock Repurchase: A plan authorized in July 1994 to repurchase up to 2 million shares was utilized to fund the recent acquisition rather than for open market buybacks in this period.
- Tax Adjustments: Management noted that prior year (1993) results were adversely impacted by one-time tax adjustments related to the Omnibus Budget Reconciliation Act of 1993, which reduced EPS by $0.02 in the comparable prior period.
- Liquidity: Management believes current cash, operating cash flow, and banking relationships are sufficient to meet financing requirements.
Investor Verification Checklist
- Verify the sustainability of the 31% growth in direct sales revenue, which was driven by unit sales rather than acquisitions.
- Confirm the integration and revenue contribution of the recent acquisition funded by treasury stock reissuance.
- Monitor the completion and operational ramp-up of new facilities in Charlotte and Seattle.
- Review the impact of the 1993 tax law adjustments on year-over-year comparisons to ensure accurate trend analysis.
- Assess the company's strategy regarding the remaining authorized share repurchase capacity versus future acquisition funding needs.