Cintas Corporation (Nasdaq: CTAS) today reported results
for its fiscal 2021 first quarter ended August 31, 2020. Revenue
for the first quarter of fiscal 2021 was $1.75 billion, a decrease
of 3.6% from last year’s first quarter. Earnings per diluted share
(EPS) were $2.78 in the first quarter of fiscal 2021, an increase
of 19.8% from last year's first quarter diluted EPS.
Organic revenue for the first quarter of fiscal 2021, which is
adjusted for the impacts of acquisitions, foreign currency exchange
rate fluctuations and differences in the number of workdays,
declined 5.0% from last year's first quarter. Organic revenue for
the Uniform Rental and Facility Services operating segment declined
5.4%. Organic revenue for the First Aid and Safety Services
operating segment increased 17.1%.
Gross margin for the first quarter of fiscal 2021 of $826.2
million decreased 2.7% from last year’s first quarter. Gross margin
as a percentage of revenue increased 40 basis points to 47.3% for
the first quarter of fiscal 2021 compared to 46.9% in the first
quarter of fiscal 2020.
Operating income for the first quarter of fiscal 2021 of $349.7
million increased 14.2% from last year’s first quarter operating
income of $306.1 million. Operating income as a percentage of
revenue was 20.0% in the first quarter of fiscal 2021 compared to
16.9% in the first quarter of fiscal 2020.
Net income was $300.0 million for the first quarter of fiscal
2021, an increase of 19.6% from last year's first quarter net
income of $250.8 million. First quarter of fiscal 2021 diluted EPS
were $2.78, an increase of 19.8% from last year's first quarter
diluted EPS of $2.32.
Net cash provided by operating activities for the first quarter
of fiscal 2021 of $312.3 million increased 12.8% from last year's
first quarter net cash provided by operating activities of $276.9
million. Free cash flow, which is defined as net cash provided by
operating activities less capital expenditures, for the first
quarter of fiscal 2021 was $281.4 million, an increase of 32.6%
from last year's first quarter.
Scott D. Farmer, Cintas' Chairman and Chief Executive Officer,
stated, "The COVID-19 coronavirus (COVID-19) pandemic remains a
significant disruption to the economy and our business. Our
objectives include keeping our employees, whom we call partners,
healthy and safe and serving our customers in any way possible. I
am pleased with our performance on both priorities, and I thank our
employee-partners for their unwavering passion, strong work ethic,
and commitment."
Mr. Farmer concluded, “Visibility to future financial
performance remains impaired due to the COVID-19 pandemic.
Therefore, we are not providing fiscal year financial guidance at
this time. However, we will provide our second quarter financial
estimates. We expect our second quarter revenue to be in the range
of $1.725 billion to $1.750 billion and diluted EPS to be in the
range of $2.00 to $2.20. Despite the short-term uncertainty, I'm
confident in our ability to continue to manage the volatility while
maintaining focus on our compelling long-term objectives. Our value
proposition of getting businesses Ready for the Workday® by
providing essential, unparalleled image, safety, cleanliness and
compliance resonates loudly in a society focused on health,
readiness and outsourcing of non-core activities.”
About Cintas
Cintas Corporation helps more than one million businesses of all
types and sizes get READY™ to open their doors with
confidence every day by providing a wide range of products and
services that enhance our customers’ image and help keep their
facilities and employees clean, safe and looking their best. With
products and services including uniforms, floor care, restroom
supplies, first aid and safety products, fire extinguishers and
testing, and safety and compliance training, Cintas helps customers
get Ready for the Workday®. Headquartered in
Cincinnati, Cintas is a publicly held Fortune 500 company traded
over the Nasdaq Global Select Market under the symbol CTAS and is a
component of both the Standard & Poor’s 500 Index and the
Nasdaq-100 Index.
Cintas will host a live webcast to review the fiscal 2021 first
quarter results today at 10:00 a.m., Eastern Time. The webcast will
be available to the public on Cintas' website at www.Cintas.com. A
replay of the webcast will be available approximately two hours
after the completion of the live call and will remain available for
two weeks.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a
safe harbor from civil litigation for forward-looking statements.
Forward-looking statements may be identified by words such as
“estimates,” “anticipates,” “predicts,” “projects,” “plans,”
“expects,” “intends,” “target,” “forecast,” “believes,” “seeks,”
“could,” “should,” “may” and “will” or the negative versions
thereof and similar words, terms and expressions and by the context
in which they are used. Such statements are based upon current
expectations of Cintas and speak only as of the date made. You
should not place undue reliance on any forward-looking statement.
We cannot guarantee that any forward-looking statement will be
realized. These statements are subject to various risks,
uncertainties, potentially inaccurate assumptions and other factors
that could cause actual results to differ from those set forth in
or implied by this Press Release. Factors that might cause such a
difference include, but are not limited to, the possibility of
greater than anticipated operating costs including energy and fuel
costs; lower sales volumes; loss of customers due to outsourcing
trends; the performance and costs of integration of acquisitions;
fluctuations in costs of materials and labor including increased
medical costs; costs and possible effects of union organizing
activities; failure to comply with government regulations
concerning employment discrimination, employee pay and benefits and
employee health and safety; the effect on operations of exchange
rate fluctuations, tariffs and other political, economic and
regulatory risks; uncertainties regarding any existing or
newly-discovered expenses and liabilities related to environmental
compliance and remediation; the cost, results and ongoing
assessment of internal controls for financial reporting required by
the Sarbanes-Oxley Act of 2002; the effect of new accounting
pronouncements; disruptions caused by the inaccessibility of
computer systems data, including cybersecurity risks; the
initiation or outcome of litigation, investigations or other
proceedings; higher assumed sourcing or distribution costs of
products; the disruption of operations from catastrophic or
extraordinary events including viral pandemics such as the COVID-19
coronavirus; the amount and timing of repurchases of our common
stock, if any; changes in federal and state tax and labor laws; and
the reactions of competitors in terms of price and service. Cintas
undertakes no obligation to publicly release any revisions to any
forward-looking statements or to otherwise update any
forward-looking statements whether as a result of new information
or to reflect events, circumstances or any other unanticipated
developments arising after the date on which such statements are
made. A further list and description of risks, uncertainties and
other matters can be found in our Annual Report on Form 10-K for
the year ended May 31, 2020 and in our reports on Forms 10-Q and
8-K. The risks and uncertainties described herein are not the only
ones we may face. Additional risks and uncertainties presently not
known to us, or that we currently believe to be immaterial, may
also harm our business.
Cintas Corporation
Consolidated Condensed Statements of Income (Unaudited) (In
thousands except per share data)
Three Months Ended
August 31, 2020
August 31, 2019
% Change
Revenue:
Uniform rental and facility services
$
1,394,411
$
1,454,527
(4.1)%
Other
352,164
356,612
(1.2)%
Total revenue
1,746,575
1,811,139
(3.6)%
Costs and expenses:
Cost of uniform rental and facility
services
715,412
768,676
(6.9)%
Cost of other
204,962
193,321
6.0%
Selling and administrative expenses
476,495
542,996
(12.2)%
Operating income
349,706
306,146
14.2%
Interest income
(64)
(162)
(60.5)%
Interest expense
24,550
27,321
(10.1)%
Income before income taxes
325,220
278,987
16.6%
Income taxes
25,215
28,175
(10.5)%
Net income
$
300,005
$
250,812
19.6%
Basic earnings per share
$
2.86
$
2.40
19.2%
Diluted earnings per share
$
2.78
$
2.32
19.8%
Basic weighted average common shares
outstanding
104,110
103,543
Diluted weighted average common shares
outstanding
107,129
107,083
CINTAS CORPORATION SUPPLEMENTAL DATA
Gross Margin and Net Income
Margin Results
Three Months Ended
August 31, 2020
August 31, 2019
Uniform rental and facility services gross
margin
48.7%
47.2%
Other gross margin
41.8%
45.8%
Total gross margin
47.3%
46.9%
Net income margin
17.2%
13.8%
Reconciliation of Non-GAAP Financial
Measures and Regulation G Disclosure
The press release contains non-GAAP financial measures within
the meaning of Regulation G promulgated by the Securities and
Exchange Commission. To supplement its consolidated condensed
financial statements presented in accordance with U.S. generally
accepted accounting principles (GAAP), the Company provides the
additional non-GAAP financial measures of cash flow and workday
adjusted revenue growth. The Company believes that these non-GAAP
financial measures are appropriate to enhance understanding of its
past performance as well as prospects for future performance. A
reconciliation of the differences between these non-GAAP financial
measures with the most directly comparable financial measures
calculated in accordance with GAAP are shown in the tables within
the narrative of the press release or below.
Computation of Free Cash
Flow
Three Months Ended
August 31, 2020
August 31, 2019
Net cash provided by operations
$
312,292
$
276,901
Capital expenditures
(30,876)
(64,743)
Free cash flow
$
281,416
$
212,158
Management uses free cash flow to assess the financial
performance of the Company. Management believes that free cash flow
is useful to investors because it relates the operating cash flow
of the Company to the capital that is spent to continue, improve
and grow business operations.
Computation of Growth on a
Constant Workday Basis
Three Months Ended
August 31, 2020
August 31, 2019
Growth %
A
B
G
Revenue
$
1,746,575
$
1,811,139
(3.6)%
G=(A-B)/B
C
D
Workdays in the period
66
65
E
F
H
Workday adjusted revenue growth
$
1,720,112
$
1,811,139
(5.0)%
E=(A/C)*D
F=(B/D)*D
H=(E-F)/F
Acquisition and foreign currency exchange
impact, net
0.0%
Organic growth
(5.0)%
Management believes that organic revenue growth is valuable to
investors because it reflects the revenue performance compared to a
prior period with the same number of revenue generating days and
excludes the impact from acquisitions and foreign currency exchange
rate fluctuations.
SUPPLEMENTAL SEGMENT DATA
Uniform Rental and Facility
Services
First Aid and Safety Services
All Other
Corporate
Total
For the three months ended August 31,
2020
Revenue
$
1,394,411
$
204,481
$
147,683
$
—
$
1,746,575
Gross margin
$
678,999
$
82,104
$
65,098
$
—
$
826,201
Selling and administrative expenses
$
363,971
$
63,577
$
48,947
$
—
$
476,495
Interest income
$
—
$
—
$
—
$
(64)
$
(64)
Interest expense
$
—
$
—
$
—
$
24,550
$
24,550
Income (loss) before income taxes
$
315,028
$
18,527
$
16,151
$
(24,486)
$
325,220
For the three months ended August 31,
2019
Revenue
$
1,454,527
$
172,090
$
184,522
$
—
$
1,811,139
Gross margin
$
685,851
$
84,287
$
79,004
$
—
$
849,142
Selling and administrative expenses
$
416,840
$
59,518
$
66,638
$
—
$
542,996
Interest income
$
—
$
—
$
—
$
(162)
$
(162)
Interest expense
$
—
$
—
$
—
$
27,321
$
27,321
Income (loss) before income taxes
$
269,011
$
24,769
$
12,366
$
(27,159)
$
278,987
Cintas Corporation
Consolidated Condensed Balance Sheets (In thousands except per
share data)
August 31, 2020
May 31, 2020
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
421,542
$
145,402
Accounts receivable, net
866,414
870,369
Inventories, net
488,165
408,898
Uniforms and other rental items in
service
756,364
770,411
Prepaid expenses and other current
assets
133,692
114,619
Total current assets
2,666,177
2,309,699
Property and equipment, net
1,378,385
1,403,065
Investments
240,431
214,847
Goodwill
2,886,048
2,870,020
Service contracts, net
441,641
451,529
Operating lease right-of-use assets,
net
159,120
159,967
Other assets, net
271,579
260,758
$
8,043,381
$
7,669,885
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
252,513
$
230,995
Accrued compensation and related
liabilities
117,577
127,417
Accrued liabilities
406,787
456,653
Income taxes, current
23,251
27,099
Operating lease liabilities, current
43,414
43,031
Debt due within one year
249,808
—
Total current liabilities
1,093,350
885,195
Long-term liabilities:
Debt due after one year
2,290,447
2,539,705
Deferred income taxes
385,149
388,579
Operating lease liabilities
121,727
122,695
Accrued liabilities
547,904
498,509
Total long-term liabilities
3,345,227
3,549,488
Shareholders’ equity:
Preferred stock, no par value:
100,000 shares authorized, none
outstanding
—
—
Common stock, no par value: 425,000,000
shares authorized FY 2021: 188,155,836 issued and 104,548,040
outstanding FY 2020: 186,793,207 issued and 103,415,368
outstanding
1,345,233
1,102,689
Paid-in capital
30,155
171,521
Retained earnings
7,596,514
7,296,509
Treasury stock:
FY 2021: 83,607,796 shares FY 2020:
83,377,839 shares
(5,251,148)
(5,182,137)
Accumulated other comprehensive loss
(115,950)
(153,380)
Total shareholders’ equity
3,604,804
3,235,202
$
8,043,381
$
7,669,885
Cintas Corporation
Consolidated Condensed Statements of Cash Flows (Unaudited) (In
thousands)
Three Months Ended
August 31, 2020
August 31, 2019
Cash flows from operating
activities:
Net income
$
300,005
$
250,812
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation
60,574
56,726
Amortization of intangible assets and
capitalized contract costs
35,605
35,268
Stock-based compensation
29,055
40,395
Deferred income taxes
(8,716)
7,910
Change in current assets and liabilities,
net of acquisitions of businesses:
Accounts receivable, net
7,118
(6,636)
Inventories, net
(77,944)
(1,726)
Uniforms and other rental items in
service
16,552
(11,305)
Prepaid expenses and other current assets
and capitalized contract costs
(42,277)
(41,928)
Accounts payable
20,358
13,357
Accrued compensation and related
liabilities
(10,067)
(58,718)
Accrued liabilities and other
(14,297)
(24,082)
Income taxes, current
(3,674)
16,828
Net cash provided by operating
activities
312,292
276,901
Cash flows from investing
activities:
Capital expenditures
(30,876)
(64,743)
Purchase of investments
(4,940)
(9,391)
Acquisitions of businesses, net of cash
acquired
(1,984)
(3,896)
Other, net
(2,142)
(109)
Net cash used in investing activities
(39,942)
(78,139)
Cash flows from financing
activities:
Issuance of commercial paper, net
—
26,500
Proceeds from exercise of stock-based
compensation awards
72,123
37,915
Repurchase of common stock
(69,011)
(256,830)
Other, net
(869)
(1,192)
Net cash provided by (used in) financing
activities
2,243
(193,607)
Effect of exchange rate changes on cash
and cash equivalents
1,547
331
Net increase in cash and cash
equivalents
276,140
5,486
Cash and cash equivalents at beginning of
period
145,402
96,645
Cash and cash equivalents at end of
period
$
421,542
$
102,131
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200923005237/en/
J. Michael Hansen, Executive Vice President and Chief Financial
Officer - 513-972-2079 Paul F. Adler, Vice President - Treasurer
& Investor Relations - 513-972-4195
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