Cintas Corporation (Nasdaq: CTAS) today reported results
for its fiscal 2022 third quarter ended February 28, 2022. Revenue
for the third quarter of fiscal 2022 was $1.96 billion compared to
$1.78 billion in last year’s third quarter, an increase of 10.3%.
The organic revenue growth rate for the third quarter of fiscal
2022, which adjusts for the impacts of acquisitions, divestitures
and foreign currency exchange rate fluctuations, was 10.0%.
Gross margin for the third quarter of fiscal 2022 was $898.2
million compared to $809.5 million in last year’s third quarter.
Gross margin as a percentage of revenue was 45.8% for the third
quarter of fiscal 2022 compared to 45.6% in last year's third
quarter. Energy expenses comprised of gasoline, natural gas and
electricity were 45 basis points higher during the third quarter of
fiscal 2022 compared to last year's third quarter.
Operating income for the third quarter of fiscal 2022 was $407.6
million compared to $326.5 million in last year's third quarter.
Operating income as a percentage of revenue was 20.8% in the third
quarter of fiscal 2022 compared to 18.4% in last year's third
quarter. Fiscal 2022 third quarter operating income included a
$30.2 million gain on an equity method investment transaction. The
gain was recorded in selling and administrative expenses. Excluding
this gain, fiscal 2022 third quarter operating income as a
percentage of revenue was 19.3%, an increase of 90 basis points
from last year's third quarter.
Net income was $315.4 million for the third quarter of fiscal
2022 compared to $258.4 million in last year's third quarter. Third
quarter of fiscal 2022 diluted earnings per share (EPS) was $2.97
compared to $2.37 in last year's third quarter. Fiscal 2022 third
quarter diluted EPS contained $0.28 from the gain on an equity
method investment transaction, which included a related $0.07 tax
rate benefit. Excluding this gain and the related tax impact,
fiscal 2022 third quarter diluted EPS was $2.69 compared to $2.37
in last year's third quarter, a 13.5% increase from last year's
diluted EPS.
Fiscal 2022 third quarter net cash provided by operating
activities was $393.3 million compared to $331.9 million in last
year's third quarter, an increase of 18.5%. During the third
quarter of fiscal 2022 and through March 22, 2022, Cintas purchased
$584.2 million of Cintas common stock under its buyback program. On
March 15, 2022, Cintas paid shareholders an aggregate of $99.0
million in quarterly dividends.
Todd M. Schneider, Cintas' President and Chief Executive
Officer, stated, "We are pleased with our third quarter financial
results, led by a revenue increase of 10.3%. Excluding the gain
previously mentioned, operating income and diluted EPS increased
significantly despite inflation. Our financial results are
indicative of our strong value proposition. Businesses prioritize
image, cleanliness, safety and compliance and, challenged with
labor scarcity and rising costs, increasingly count on Cintas to
help get them Ready for the Workday®."
Mr. Schneider concluded, "We are increasing our financial
guidance. We expect our fiscal 2022 fourth quarter revenue to be in
the range of $1.96 billion to $2.02 billion and diluted EPS to be
in the range of $2.54 to $2.74. Our fourth quarter fiscal 2022
effective tax rate is expected to be approximately 23.2% compared
to a rate of 19.4% for last year's fourth quarter. The expected
higher effective tax rate is anticipated to negatively impact
fiscal 2022 fourth quarter diluted EPS guidance by approximately
$0.14 and diluted EPS growth by approximately 560 basis points. Our
financial guidance includes share buybacks through March 22, 2022
but does not include the impact of any future share buybacks."
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 products and services that help
keep their customers’ facilities and employees clean, safe and
looking their best. With offerings including uniforms, mats, mops,
restroom supplies, first aid and safety products, fire
extinguishers and testing, and safety training, Cintas helps
customers get Ready for the Workday®. The Company is also
the creator of the Total Clean Program™ — a first-of-its-kind
service that includes scheduled delivery of essential cleaning
supplies, hygienically clean laundering, and sanitizing and
disinfecting products and services. 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
Nasdaq-100 Index.
Cintas will host a live webcast to review the fiscal 2022 third
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; 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, 2021 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
February 28,
2022
February 28, 2021
% Change
Revenue:
Uniform rental and facility services
$
1,553,320
$
1,417,865
9.6
%
Other
407,222
359,191
13.4
%
Total revenue
1,960,542
1,777,056
10.3
%
Costs and expenses:
Cost of uniform rental and facility
services
834,082
761,850
9.5
%
Cost of other
228,306
205,690
11.0
%
Selling and administrative expenses
490,549
483,048
1.6
%
Operating income
407,605
326,468
24.9
%
Interest income
(56
)
(87
)
(35.6
)%
Interest expense
22,030
24,552
(10.3
)%
Income before income taxes
385,631
302,003
27.7
%
Income taxes
70,183
43,619
60.9
%
Net income
$
315,448
$
258,384
22.1
%
Basic earnings per share
$
3.04
$
2.44
24.6
%
Diluted earnings per share
$
2.97
$
2.37
25.3
%
Basic weighted average common shares
outstanding
103,388
105,264
Diluted weighted average common shares
outstanding
105,641
107,996
Cintas Corporation
Consolidated Condensed
Statements of Income
(Unaudited)
(In thousands except per share
data)
Nine Months Ended
February 28,
2022
February 28, 2021
% Change
Revenue:
Uniform rental and facility services
$
4,596,767
$
4,222,764
8.9
%
Other
1,183,006
1,057,914
11.8
%
Total revenue
5,779,773
5,280,678
9.5
%
Costs and expenses:
Cost of uniform rental and facility
services
2,430,644
2,217,073
9.6
%
Cost of other
663,078
608,004
9.1
%
Selling and administrative expenses
1,503,117
1,426,555
5.4
%
Operating income
1,182,934
1,029,046
15.0
%
Interest income
(168
)
(369
)
(54.5
)%
Interest expense
65,786
73,659
(10.7
)%
Income before income taxes
1,117,316
955,756
16.9
%
Income taxes
176,020
112,510
56.4
%
Net income
$
941,296
$
843,246
11.6
%
Basic earnings per share
$
9.05
$
7.99
13.3
%
Diluted earnings per share
$
8.84
$
7.78
13.6
%
Basic weighted average common shares
outstanding
103,438
104,782
Diluted weighted average common shares
outstanding
105,896
107,696
CINTAS CORPORATION
SUPPLEMENTAL DATA
Gross Margin and Net Income
Margin Results
Three Months Ended
Nine Months Ended
February 28,
2022
February 28, 2021
February 28,
2022
February 28, 2021
Uniform rental and facility services gross
margin
46.3
%
46.3
%
47.1
%
47.5
%
Other gross margin
43.9
%
42.7
%
43.9
%
42.5
%
Total gross margin
45.8
%
45.6
%
46.5
%
46.5
%
Net income margin
16.1
%
14.5
%
16.3
%
16.0
%
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 operating income,
earnings per diluted share and cash flow. 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 measure calculated in accordance with GAAP are shown in
the tables below.
Operating Income
Results
Three Months Ended
(In thousands)
February 28,
2022
% of Revenue
Operating income
$
407,605
20.8
%
Gain on equity method investment
transaction (1)
(30,151
)
Operating income excluding above item
$
377,454
19.3
%
(1)
In connection with the acquisition of the
remaining interest in an equity method investment during the third
quarter of fiscal 2022, the Company was required by U.S. GAAP to
remeasure its existing interest in the equity method investment at
its acquisition-date fair value and recognize the resulting gain in
operating income.
Earnings Per Share
Results
Three Months Ended
February 28,
2022
Growth vs. Fiscal 2021
Diluted EPS
$
2.97
25.3
%
Gain on equity method investment
transaction (1)
(0.21
)
Tax benefit on equity method investment
transaction (1)
(0.07
)
Diluted EPS excluding above item
$
2.69
13.5
%
(1)
In connection with the acquisition of the
remaining interest in an equity method investment during the third
quarter of fiscal 2022, the Company was required by U.S GAAP to
remeasure its existing interest in the equity method investment at
its acquisition-date fair value and recognize the resulting gain in
operating income. The gain taxed at the statutory tax rate resulted
in an earnings per share benefit of $0.21. However, the actual tax
rate associated with the transaction was significantly lower than
the statutory tax rate resulting in an additional earnings per
share benefit of $0.07.
Computation of Free Cash
Flow
Nine Months Ended
February 28,
2022
February 28, 2021
Net cash provided by operations
$
987,055
$
904,815
Capital expenditures
(165,851
)
(100,410
)
Free cash flow
$
821,204
$
804,405
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.
SUPPLEMENTAL SEGMENT DATA
Uniform Rental and Facility
Services
First Aid and Safety Services
All Other
Corporate
Total
For the three months ended February 28,
2022
Revenue
$
1,553,320
$
212,958
$
194,264
$
—
$
1,960,542
Gross margin
$
719,238
$
94,204
$
84,712
$
—
$
898,154
Selling and administrative expenses
$
363,248
$
67,900
$
59,401
$
—
$
490,549
Interest income
$
—
$
—
$
—
$
(56
)
$
(56
)
Interest expense
$
—
$
—
$
—
$
22,030
$
22,030
Income (loss) before income taxes
$
355,990
$
26,304
$
25,311
$
(21,974
)
$
385,631
For the three months ended February 28,
2021
Revenue
$
1,417,865
$
198,474
$
160,717
$
—
$
1,777,056
Gross margin
$
656,015
$
86,341
$
67,160
$
—
$
809,516
Selling and administrative expenses
$
372,612
$
60,521
$
49,915
$
—
$
483,048
Interest income
$
—
$
—
$
—
$
(87
)
$
(87
)
Interest expense
$
—
$
—
$
—
$
24,552
$
24,552
Income (loss) before income taxes
$
283,403
$
25,820
$
17,245
$
(24,465
)
$
302,003
For the nine months ended February 28,
2022
Revenue
$
4,596,767
$
614,234
$
568,772
$
—
$
5,779,773
Gross margin
$
2,166,123
$
271,513
$
248,415
$
—
$
2,686,051
Selling and administrative expenses
$
1,143,136
$
197,404
$
162,577
$
—
$
1,503,117
Interest income
$
—
$
—
$
—
$
(168
)
$
(168
)
Interest expense
$
—
$
—
$
—
$
65,786
$
65,786
Income (loss) before income taxes
$
1,022,987
$
74,109
$
85,838
$
(65,618
)
$
1,117,316
For the nine months ended February 28,
2021
Revenue
$
4,222,764
$
597,373
$
460,541
$
—
$
5,280,678
Gross margin
$
2,005,691
$
252,042
$
197,868
$
—
$
2,455,601
Selling and administrative expenses
$
1,091,651
$
186,189
$
148,715
$
—
$
1,426,555
Interest income
$
—
$
—
$
—
$
(369
)
$
(369
)
Interest expense
$
—
$
—
$
—
$
73,659
$
73,659
Income (loss) before income taxes
$
914,040
$
65,853
$
49,153
$
(73,290
)
$
955,756
Cintas Corporation
Consolidated Condensed Balance
Sheets
(In thousands except per share
data)
February 28,
2022
May 31, 2021
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
84,136
$
493,640
Accounts receivable, net
1,004,632
901,710
Inventories, net
486,750
481,797
Uniforms and other rental items in
service
881,734
810,104
Income taxes, current
66,047
22,282
Prepaid expenses and other current
assets
163,442
133,776
Total current assets
2,686,741
2,843,309
Property and equipment, net
1,312,176
1,318,438
Investments
259,930
274,616
Goodwill
3,032,738
2,913,069
Service contracts, net
402,366
408,445
Operating lease right-of-use assets,
net
167,995
168,532
Other assets, net
306,654
310,414
$
8,168,600
$
8,236,823
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
235,051
$
230,786
Accrued compensation and related
liabilities
212,481
241,469
Accrued liabilities
622,797
518,910
Operating lease liabilities, current
44,105
43,850
Debt due within one year
1,509,056
899,070
Total current liabilities
2,623,490
1,934,085
Long-term liabilities:
Debt due after one year
1,343,513
1,642,833
Deferred income taxes
430,695
386,647
Operating lease liabilities
131,224
130,774
Accrued liabilities
345,778
454,637
Total long-term liabilities
2,251,210
2,614,891
Shareholders’ equity:
Preferred stock, no par value:
—
—
100,000 shares authorized, none
outstanding
Common stock, no par value, and paid-in
capital:
1,729,525
1,516,202
425,000,000 shares authorized
FY 2022: 190,693,424 issued and
102,415,971 outstanding
FY 2021: 189,071,185 issued and
104,061,391 outstanding
Retained earnings
8,522,327
7,877,015
Treasury stock:
(6,970,099
)
(5,736,258
)
FY 2022: 88,277,453 shares
FY 2021: 85,009,794 shares
Accumulated other comprehensive income
12,147
30,888
Total shareholders’ equity
3,293,900
3,687,847
$
8,168,600
$
8,236,823
Cintas Corporation
Consolidated Condensed
Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
February 28,
2022
February 28, 2021
Cash flows from operating
activities:
Net income
$
941,296
$
843,246
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation
184,464
182,132
Amortization of intangible assets and
capitalized contract costs
112,859
107,689
Stock-based compensation
83,687
83,421
Gain on equity method investment
transaction
(30,151
)
—
Gain on sale of operating assets
(12,129
)
(21,861
)
Deferred income taxes
42,652
(36,259
)
Change in current assets and liabilities,
net of acquisitions of businesses:
Accounts receivable, net
(99,223
)
(63,178
)
Inventories, net
2,311
(123,678
)
Uniforms and other rental items in
service
(77,584
)
(6,269
)
Prepaid expenses and other current assets
and capitalized contract costs
(77,450
)
(76,971
)
Accounts payable
6,168
5,113
Accrued compensation and related
liabilities
(28,400
)
97,474
Accrued liabilities and other
(17,717
)
(1,357
)
Income taxes, current
(43,728
)
(84,687
)
Net cash provided by operating
activities
987,055
904,815
Cash flows from investing
activities:
Capital expenditures
(165,851
)
(100,410
)
Purchases of investments
(6,024
)
(7,873
)
Proceeds from sale of operating assets,
net of cash disposed
15,347
32,490
Acquisitions of businesses, net of cash
acquired
(150,844
)
(7,570
)
Other, net
(8,939
)
(5,301
)
Net cash used in investing activities
(316,311
)
(88,664
)
Cash flows from financing
activities:
Issuance of commercial paper, net
559,210
—
Repayment of debt
(250,000
)
—
Proceeds from exercise of stock-based
compensation awards
117,636
120,049
Dividends paid
(276,922
)
(371,818
)
Repurchase of common stock
(1,221,841
)
(154,490
)
Other, net
(6,657
)
(3,836
)
Net cash used in financing activities
(1,078,574
)
(410,095
)
Effect of exchange rate changes on cash
and cash equivalents
(1,674
)
2,153
Net (decrease) increase in cash and cash
equivalents
(409,504
)
408,209
Cash and cash equivalents at beginning of
period
493,640
145,402
Cash and cash equivalents at end of
period
$
84,136
$
553,611
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220323005158/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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