) reported second-quarter fiscal 2013 (ended November 30, 2012)
earnings of 63 cents per share, in line with the Zacks Consensus
Estimate. Results improved 11% from the prior-year quarter
earnings of 57 cents per share.
Total revenue in the quarter increased 4% year over year to
$1.06 billion, at par with the Zacks Consensus Estimate. Organic
growth in the quarter was 3.4%.
Lower recycled paper prices had a negative impact of $5.5
million on revenues in the quarter. The average price for
recycled paper prices was slightly over $150 per ton, a 32%
decline from second quarter 2011 average price of just over $220
Cost of rental uniforms and ancillary products increased 7%
year over year to $438.9 million and cost of other services rose
6% to $189 million during the quarter. Selling, general and
administrative expenses decreased 1% on a year-over-year basis to
$293 million. Operating income for the quarter improved 5% to
$139 million. Operating margin remained flat at 13%.
Rental uniforms and ancillary product revenues for the quarter
improved 5% year over year to $755.8 million. Gross profit inched
up 1% to $316.9 million from $312 million in the prior-year
quarter. Gross margin decreased 130 bps year over year to
Uniform Direct Sales revenues grossed $100.2 million, down 2%
from $111.9 million in the year-ago quarter. Gross profit for the
segment decreased 9% to $30.2 million from $29.1 in the year-ago
quarter. Gross margin contracted 220 bps year over year to
First Aid, Safety and Fire Protection revenues went up 10% to
$111.5 million from the year-earlier quarter. Gross profit
increased 8% to $47.3 million from the year-ago quarter. Gross
margin declined 70 bps year over year to 42.4% in the
Document Management revenues remained flat at $82.8 million.
Gross profit declined 6.7% to $37.6 million from the prior-year
quarter of $40.3 million. The gross margin decreased 340 bps year
over year to 45.4%.
Cash and cash equivalents were $242. 5 million as of the
second quarter end, decreasing from $319.2 million as of the
first quarter end. Long-term debt was $1.31 billion as of the
second quarter end, flat compared with the first quarter end.
The company's debt-to-capitalization ratio increased to 38.6%
as of November 30, 2012 from 37.8% as of August 31, 2012. Cash
flow from operations was $227.3 million during the first half of
fiscal 2013 compared with $175.9 million in the comparable period
of fiscal 2012. Free cash flow for the same period increased to
$128.2 million from $96 million in the year-ago comparable
During the reported quarter, Cintas purchased 1.9 million
shares of its common stock at an aggregate price of $81.1
million. The company has $218.7 million remaining under its
existing share repurchase authorization as of November 30,
Outlook for Fiscal 2013
Citing an uncertain U.S. economic outlook, the company revised
its revenue guidance to the range of $4.275 billion-$4.325
billion from its previous guidance of $4.25-$4.35 billion. The
company also reiterated its earnings guidance of
Cintas continues to deliver organic growth by winning new
businesses and selling newer services. Margins at Cintas continue
to expand based on cost efficiencies despite headwinds from
higher input costs. In the first half of fiscal 2013, operating
margin expansion was driven by lower selling, general and
administrative expenses (SG&A). Management sees the
opportunity for modest SG&A leverage for the balance of
So far in fiscal 2013, the company witnessed top-line growth
across all the segments except Uniform Direct Sales and the
Document Management segments. Results were negatively affected by
lower recycle paper prices and weakness in Europe.
If recycled paper price remains low then it may weigh on
results going forward. To add to the woes, employment growth has
been choppy and disappointing over the past few months and
leading indicators of US labor demand are weakening. This raises
concern that Cintas uniform segment growth may be affected in the
Cincinnati, Ohio-based Cintas Corporation provides specialized
services to businesses of all types throughout North America. The
company designs, manufactures, implements corporate identity
uniform programs, and provides entrance mats, restroom supplies,
promotional products and first aid and safety products for
approximately 800,000 businesses.
Cintas competes with
ABM Industries Incorporated
). The company retains a short-term Zacks #4 Rank (Sell).
ABM INDUSTRIES (ABM): Free Stock Analysis
CINTAS CORP (CTAS): Free Stock Analysis
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