Cintas Corp. (CTAS, Financial) filed Quarterly Report for the period ended 2009-02-28.
Cintas Corp. provides a specialized service to businesses of all types - from small service and manufacturing companies to major corporations. The company is divided into two operating segments: Rentals and Other Services. The Rentals operating segment designs and manufactures corporate identity uniforms which it rents to its customers. The Other Services operating segment involves the design manufacture and direct sale of uniforms to its customers as well as the sale of ancillary services including sanitation supplies first aid products and cleanroom supplies. Cintas Corp. has a market cap of $3.81 billion; its shares were traded at around $24.96 with a P/E ratio of 12.3 and P/S ratio of 1. The dividend yield of Cintas Corp. stocks is 1.9%. Cintas Corp. had an annual average earning growth of 10.5% over the past 10 years. GuruFocus rated Cintas Corp. the business predictability rank of 5-star.
Document Management Services operating segment revenue increased from $49.4 million to $50.9 million, or 2.9%, for the three months ended February 28, 2009, over the same period in the prior fiscal year. Acquisitions in this operating segment accounted for growth of 6.4% during the quarter. This operating segment had negative internal growth for the period of -3.5% over the same period in the prior fiscal year. Although the operating segment s volume of shredding services increased by 15% during the quarter ended February 28, 2009, compared to the same quarter last year, declining recycled paper prices caused the operating segment to have negative internal growth for the quarter ended February 28, 2009. This segment derives revenue from the sale of shredded paper to paper recyclers. The average price from these paper sales dropped by approximately 50% since February 29, 2008. The price of standard office paper, which accounts for the majority of the recycled paper revenue, dropped from $235 per ton at February 29, 2008, to $125 per ton at February 28, 2009.
Selling and administrative expenses increased $4.0 million, or 0.5%, for the nine months ended February 28, 2009, as compared to the nine months ended February 29, 2008. Medical costs increased by $15.8 million over the same period in the prior fiscal year reflecting continued rising costs in healthcare and additional claims incurred. In addition, bad debt expense increased by $6.1 million as customers have delayed payments during this fiscal year s difficult economic environment. These increases were offset by decreases in labor and payroll tax expenses of $12.1 million due to cost reduction initiatives.
Document Management Services operating segment revenue increased from $128.6 million to $158.9 million, or 23.6%, for the nine months ended February 28, 2009, over the same period in the prior fiscal year. This operating segment s internal growth for the period was 10.3% over the same period in the prior fiscal year. The internal growth was due to the sale of shredding services to new customers, offset by a reduction in recycled paper prices. This segment derives revenue from the sale of shredded paper to paper recyclers. The average price from these paper sales dropped by approximately 50% since February 29, 2008. The price of standard office paper, which accounts for the majority of the recycled paper revenue, dropped from $235 per ton at February 29, 2008, to $125 per ton at February 28, 2009. Acquisitions of document management businesses accounted for growth of 13.9%. The Document Management Services operating segment revenue growth rate was negatively impacted by 0.6% by one fewer work day in the nine month period ended February 28, 2009 compared to the nine month period ended February 29, 2008.
At February 28, 2009, Cintas had $151.9 million in cash and cash equivalents and marketable securities which is $39.8 million less than the $191.7 million at May 31, 2008. The marketable securities consist of highly rated Canadian government securities. This decrease is primarily due to using cash and cash equivalents and marketable securities to pay down debt balances by $164.5 million and to make capital expenditures of $132.8 million, offset by cash generated from operations of $339.7 million. We expect capital expenditures for the year ended May 31, 2009, to be between $150 million and $170 million. Cash and cash equivalents and marketable securities are expected to be used to finance future acquisitions, capital expenditures and expansion.
In May 2005, Cintas announced that the Board of Directors authorized a $500.0 million share buyback program at market prices. In July 2006, Cintas announced that the Board of Directors approved the expansion of its share buyback program by an additional $500.0 million. Cintas made no purchases under the share buyback program during the three months ended February 28, 2009. From the inception of the share buyback program through March 31, 2009, Cintas has purchased a total of approximately 20.3 million shares of Cintas common stock, or approximately 12% of the total shares outstanding at the beginning of the program, at an average price of $39.31 per share for a total purchase price of approximately $797.9 million. The maximum approximate dollar value of shares that may yet be purchased under the plan as of March 31, 2009, is $202.1 million. The Board of Directors did not specify an expiration date for this program.
Read the The complete ReportCTAS is in the portfolios of Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, Robert Olstein of Olstein Financial Alert Fund, Tweedy Browne of Tweedy Browne CO LLC, Arnold Van Den Berg of Century Management, Tom Gayner of Markel Gayner Asset Management Corp.
Cintas Corp. provides a specialized service to businesses of all types - from small service and manufacturing companies to major corporations. The company is divided into two operating segments: Rentals and Other Services. The Rentals operating segment designs and manufactures corporate identity uniforms which it rents to its customers. The Other Services operating segment involves the design manufacture and direct sale of uniforms to its customers as well as the sale of ancillary services including sanitation supplies first aid products and cleanroom supplies. Cintas Corp. has a market cap of $3.81 billion; its shares were traded at around $24.96 with a P/E ratio of 12.3 and P/S ratio of 1. The dividend yield of Cintas Corp. stocks is 1.9%. Cintas Corp. had an annual average earning growth of 10.5% over the past 10 years. GuruFocus rated Cintas Corp. the business predictability rank of 5-star.
Highlight of Business Operations:
As discussed above, Rental Uniforms and Ancillary Products operating segment revenue decreased from $703.6 million to $674.7 million, or 4.1%, and the cost of rental uniforms and ancillary products decreased $18.9 million, or 4.7%. The operating segment s gross margin was $295.2 million, or 43.8% of revenue. This gross margin percent of revenues of 43.8% was 40 basis points higher than prior fiscal year s third quarter of 43.4%. Energy related costs, which include natural gas, electric and gas, decreased a combined 80 basis points as a percent of revenue over prior year s third quarter. In addition, cost reduction initiatives combined to reduce multiple expenses such labor, overtime, temporary labor, supplies, recruiting expense and other expenses by a combined 50 basis points. These improvements were offset by a 70 basis point increase in material cost and depreciation and a 20 basis point increase in hanger costs. The material cost and depreciation amounts increased as a percent of revenue mainly due to lower operating segment revenue. Hanger costs increased as a result of an import tariff imposed by the U.S. government on hangers produced in China.Document Management Services operating segment revenue increased from $49.4 million to $50.9 million, or 2.9%, for the three months ended February 28, 2009, over the same period in the prior fiscal year. Acquisitions in this operating segment accounted for growth of 6.4% during the quarter. This operating segment had negative internal growth for the period of -3.5% over the same period in the prior fiscal year. Although the operating segment s volume of shredding services increased by 15% during the quarter ended February 28, 2009, compared to the same quarter last year, declining recycled paper prices caused the operating segment to have negative internal growth for the quarter ended February 28, 2009. This segment derives revenue from the sale of shredded paper to paper recyclers. The average price from these paper sales dropped by approximately 50% since February 29, 2008. The price of standard office paper, which accounts for the majority of the recycled paper revenue, dropped from $235 per ton at February 29, 2008, to $125 per ton at February 28, 2009.
Selling and administrative expenses increased $4.0 million, or 0.5%, for the nine months ended February 28, 2009, as compared to the nine months ended February 29, 2008. Medical costs increased by $15.8 million over the same period in the prior fiscal year reflecting continued rising costs in healthcare and additional claims incurred. In addition, bad debt expense increased by $6.1 million as customers have delayed payments during this fiscal year s difficult economic environment. These increases were offset by decreases in labor and payroll tax expenses of $12.1 million due to cost reduction initiatives.
Document Management Services operating segment revenue increased from $128.6 million to $158.9 million, or 23.6%, for the nine months ended February 28, 2009, over the same period in the prior fiscal year. This operating segment s internal growth for the period was 10.3% over the same period in the prior fiscal year. The internal growth was due to the sale of shredding services to new customers, offset by a reduction in recycled paper prices. This segment derives revenue from the sale of shredded paper to paper recyclers. The average price from these paper sales dropped by approximately 50% since February 29, 2008. The price of standard office paper, which accounts for the majority of the recycled paper revenue, dropped from $235 per ton at February 29, 2008, to $125 per ton at February 28, 2009. Acquisitions of document management businesses accounted for growth of 13.9%. The Document Management Services operating segment revenue growth rate was negatively impacted by 0.6% by one fewer work day in the nine month period ended February 28, 2009 compared to the nine month period ended February 29, 2008.
At February 28, 2009, Cintas had $151.9 million in cash and cash equivalents and marketable securities which is $39.8 million less than the $191.7 million at May 31, 2008. The marketable securities consist of highly rated Canadian government securities. This decrease is primarily due to using cash and cash equivalents and marketable securities to pay down debt balances by $164.5 million and to make capital expenditures of $132.8 million, offset by cash generated from operations of $339.7 million. We expect capital expenditures for the year ended May 31, 2009, to be between $150 million and $170 million. Cash and cash equivalents and marketable securities are expected to be used to finance future acquisitions, capital expenditures and expansion.
In May 2005, Cintas announced that the Board of Directors authorized a $500.0 million share buyback program at market prices. In July 2006, Cintas announced that the Board of Directors approved the expansion of its share buyback program by an additional $500.0 million. Cintas made no purchases under the share buyback program during the three months ended February 28, 2009. From the inception of the share buyback program through March 31, 2009, Cintas has purchased a total of approximately 20.3 million shares of Cintas common stock, or approximately 12% of the total shares outstanding at the beginning of the program, at an average price of $39.31 per share for a total purchase price of approximately $797.9 million. The maximum approximate dollar value of shares that may yet be purchased under the plan as of March 31, 2009, is $202.1 million. The Board of Directors did not specify an expiration date for this program.
Read the The complete ReportCTAS is in the portfolios of Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, Robert Olstein of Olstein Financial Alert Fund, Tweedy Browne of Tweedy Browne CO LLC, Arnold Van Den Berg of Century Management, Tom Gayner of Markel Gayner Asset Management Corp.
