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

 

 

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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