) reported earnings of 57 cents per share for fiscal second quarter
2012 ending November 30. Results comfortably surpassed the Zacks
Consensus Estimate of 48 cents and were 50% higher than the 38
cents earned in the year-ago quarter.
Strong performance at all the segments except Document
Management Services helped in the better-than-forecast results.
However, the Document Management Services segment was affected by a
steep drop in recycled paper prices and poor results at its
European business due to the difficult economic environment.
Total revenue in the quarter under review increased 9% to a
record $1.02 billion, striding ahead of the Zacks Consensus
Estimate of $1 billion. Organic growth in the quarter was 7.0%.
Cost of rental uniforms and ancillary products increased 9% year
over year to $410 million and cost of services rose 6% to $179
million during the quarter. Selling general and administrative
expenses flared 3% on a year-over-year basis to $297 million.
Operating income during the quarter improved 25% to $133
million. Operating margin expanded 200 basis points year over year
Rental uniform and ancillary products revenue of $722.8 million
in the quarter increased 10% from $657.8 million in the year-ago
quarter. Uniform Direct Sales revenue grossed $111.9 million, up 3%
from $108.8 million in the year-ago quarter.
First Aid, Safety and Fire Protection revenue was $101.7
million, up 9% from the year-earlier quarter. Document Management
revenue of $82.75 million in the quarter increased 8% from $77
million in the year-ago quarter.
Cintas exited the quarter with cash and cash equivalent of
$207.8 million, an improvement from $150.3 million at first quarter
end. Long-term debt, at $1.06 billion, was flat sequentially. As of
November 30, 2011, the debt-to-capitalization ratio increased
marginally to 37.9% from 37.8% as of August 31, 2011.
Cash flow from operations was $176 million during the first half
of fiscal 2012, up from $109 million in the year-ago comparable
period. Free cash flow improved substantially to $96.2 million in
the fiscal first half from $21 million in the first half of
Cintas' Board of Directors approved a new $500 million share
buyback authorization in October, but the company has not made any
purchases under the program during the quarter.
Cintas, in fiscal 2012, expects to generate revenue in the band
of $4.075 billion to $4.125 billion, up from the previous
expectation of $4.0 billion to $4.1 billion. Earnings are now
projected in the range of $2.16 to $2.20 per share in place of the
prior range of $1.97 to $2.05 per share.
The company expects capital expenditure to be between $180
million and $200 million in fiscal 2012.
We are encouraged by the solid organic growth and margin
expansion displayed by Cintas. Furthermore, Cintas' solid balance
sheet and cash flow characteristics support a renewed repurchase
authorization and a dividend hike. However, cost headwinds from
cotton and energy and the uncertain economic environment remain
We retain our Neutral rating on Cintas Corporation. The
quantitative Zacks #3 Rank (short term Hold rating) for the company
indicates no clear directional pressure on the shares over
the near term.
Cincinnati, Ohio-based Cintas Corporation designs, manufactures
and implements corporate identity uniform programs, and provides
entrance mats, restroom supplies, promotional products, and first
aid and safety products for approximately 900,000 businesses.
Cintas competes with
G&K Services Inc.
) and privately held Alsco Inc. and ARAMARK Corporation.
CINTAS CORP (
): Free Stock Analysis Report
G&K SVCS A (
): Free Stock Analysis Report
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