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Cintas Corporation (CTAS)

F1Q2011 Earnings Call Transcript

September 21, 2010 5:00 pm ET


Bill Gale – SVP & CFO

Mike Hansen – VP & Treasurer


Stephen Gregory – Mandalay Research

Andrew Steinerman – JPMorgan

Justin Hott [ph] – Robert W. Baird

Chris McGinnis – Sidoti & Company

Ashwin Shirvaikar – Citi

Bhupender Bohra – Oppenheimer

Gary Bisbee – Barclays Capital

Vance Edelson – Morgan Stanley

Greg Halter – Great Lakes Review



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Previous Statements by CTAS
» Cintas Corporation F4Q10 (Qtr End 05/31/10) Earnings Call Transcript
» Cintas Corporation F3Q10 (Qtr End 02/28/10) Earnings Call Transcript
» Cintas Corporation F2Q10 (Qtr End 11/30/09) Earnings Call Transcript

Good day, everyone, and welcome to the Cintas quarterly earnings results conference call. As a reminder, today’s call is being recorded. At this time, I would like to turn the call over to Mr. Bill Gale, Senior Vice President of Finance and Chief Financial Officer. Please go ahead, sir.

Bill Gale

Good evening and thank you for joining Mike Hansen and myself for our first quarter of fiscal 2011 earnings conference call. Cintas reported today growth in revenues and net income for the first quarter. We saw revenue growth in each of our operating segments. Overall revenue growth was 3.6% compared to last year. Revenues were also approximately 1.7% higher than the fourth quarter of fiscal 2010, a quarter with the same number of work days as this quarter.

Earnings per share were $0.40 this year compared to last year’s $0.35 per share. Last year’s first quarter earnings did include an $0.08 charge for a legal statement on wage and hour litigation.

During the quarter and continuing into September, the Company purchased 7.6 million shares of its stock. Most of these purchases were made under a 10b5 filing that went into effect when the Company entered quiet period in mid-August. The Company made these purchases from cash and did not incur any debt.

At August 31


, 2010, Cintas has $369 million in cash and marketable securities. Of this amount approximately $167 million is outside the U.S., resulting from cash flow from non-U.S. operating units, leaving about $202 million of U.S. cash and marketable securities and no short term debt.

In September, $72 million of the August 31


, 2010, cash was used for share purchases. This completes the authorization for share purchases by the board. The board will determine at its future meetings whether any additional authorizations will be given. As noted in our release, the share purchases had no impact on earnings per share in the first quarter, but will increase earnings per share by about $0.05 over the rest of the year.

As a result, while revenue guidance for the year remains unchanged from that provided in July, our earnings per share guidance is increased by $0.05 per share on both the lower and upper end of the range given in July. We are encouraged with the recent modest growth and we believe that the North American economy will continue to improve at a relatively slow pace.

As a result, Cintas will continue to focus on taking care of its customers by providing valued products and services. In addition, we will continue to enhance our existing customer relations by providing additional products and services as well as seeking out new customers in all of our business lines. Finally, we will focus on cost control and investment in acquisitions, our capital investment that meet the appropriate return criteria.

As a reminder, the Private Securities Litigation Reform Act of 1995 provides a Safe Harbor from civil litigations for forward-looking statements. This conference call contains forward-looking statements that reflect the Company’s current views as to future events and financial performances. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those we may discuss. I refer you to the discussion on these points contained in our most recent flings with the SEC as well as in the press release issued today announcing our first quarter 2011 results.

I will now turn the call over to Mike Hansen who will discuss this quarter’s results in more detail. We will then be happy to answer your questions.

Mike Hansen

Thank you, Bill. Total revenue for the first quarter of fiscal 2011 was $924 million, representing a 3.6% increase from the first quarter of last year. Total company internal growth was 2.8%. As Bill mentioned, each operating segment’s revenue grew compared to last year, both in total and organically.

Before discussing the quarter in more detail, please note that our fiscal 2011 work days are the same as last year. That means there are 66 work days in the first quarter, 65 in the second quarter, 64 in Q3, and 66 in Q4.

We have four reportable operating segments

Rental Uniforms and Ancillary Products, Uniform Direct Sales, First Aid, Safety and Fire Protection Services, and Document Management Services. Uniform Direct Sales, First Aid, Safety and Fire Protection Services, and Document Management Services are combined and presented as Other Services on the face of the income statement.

The Rental Uniforms and Ancillary Products operating segment consists of the rental servicing of uniforms, mats, towels, and other related items. This segment also includes restroom supplies and other facility products and services. Rental Uniforms and Ancillary Products revenue accounted for 71% of Company revenue in the first quarter. Rental revenue was $657.6 million for the quarter, which is relatively flat compared to last year’s first quarter, but up 1.5% compared to – ended May 31


. Internal growth was 0.1% over last year, which is also an improvement from last quarter’s internal growth of negative 1.1%.

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