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Cintas Solution to Ruin Hard Drives

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The Document Management segment of Cintas Corporation (CTAS) has commenced its hard drive destruction program that destroys hard drives safely and securely. The program destroys the hard drives through a compliant recycling process and minimizes the risks of potential fines for improper destruction process.

Conventional hard drive destruction methods are generally time consuming and involve the risks of human error as well as non-compliance with disposal laws. The process, if not compliant with the data confidentiality rules, ends up with serious financial penalties.   

The penalties include the Health Insurance Portability and Accountability Act (:HIPAA) that levy fines of up to $250,000 along with a 10-year imprisonment for each violation of patient health information privacy rules, and Gramm-Leach-Bliley Act that imposes penalties of up to $100,000 per violation by financial institutions.

Moreover, the discarded hard drives contain information that is confidential and recoverable. Therefore, any loss of sensitive data will have a material impact on the business reputation.

The hard drive destruction program provided by Cintas also guarantees that the confidential files are not exposed and are compliant with data privacy standards. Moreover, the customers can view all hard drives to ensure that they are destroyed before the Cintas truck leaves the customers’ parking lot.

Based in Cincinnati, Ohio, Cintas 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.

Cintas’ first-quarter fiscal 2013 (ended August 31, 2012) earnings were 60 cents per share, beating the Zacks Consensus Estimate by a penny. Total revenues improved 3.4% year over year to $1.05 billion, missing the Zacks Consensus Estimate of $1.06 billion.

One of the important raw materials used in Document Management is recycled paper. Gross margin in the second quarter slipped 80 basis points year over year due to lower recycled paper prices. If paper price remains low then it may weigh on the company’s revenues going forward. Moreover, Cintas faces tough competition from leading companies like ABM Industries Incorporated (ABM) and G&K Services (GKSR) and UniFirst Corp. (UNF).

The company retains a short-term Zacks #2 Rank (Buy). We have a long-term Neutral recommendation on the stock.

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