CTAS

Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2023 second quarter ended November 30, 2022. Revenue for the second quarter of fiscal 2023 was $2.17 billion compared to $1.92 billion in last year’s second quarter, an increase of 13.1%. The organic revenue growth rate for the second quarter of fiscal 2023, which adjusts for the impacts of acquisitions, divestitures and foreign currency exchange rate fluctuations, was 12.8%.

Gross margin for the second quarter of fiscal 2023 was $1,022.4 million compared to $885.1 million in last year’s second quarter, an increase of 15.5%. Gross margin as a percentage of revenue was 47.0% for the second quarter of fiscal 2023 compared to 46.0% in last year's second quarter, an increase of 100 basis points. Energy expenses comprised of gasoline, natural gas and electricity were 10 basis points higher during the second quarter of fiscal 2023 compared to last year's second quarter.

Operating income for the second quarter of fiscal 2023 was $444.9 million compared to $381.2 million in last year's second quarter, an increase of 16.7%. Operating income as a percentage of revenue was 20.5% in the second quarter of fiscal 2023 compared to 19.8% in last year's second quarter, an increase of 70 basis points.

Net income was $324.3 million for the second quarter of fiscal 2023 compared to $294.7 million in last year's second quarter, an increase of 10.1%. Second quarter of fiscal 2023 diluted earnings per share (EPS) was $3.12 compared to $2.76 in last year's second quarter, an increase of 13.0%.

On September 15, 2022, Cintas paid an aggregate quarterly cash dividend of $117.3 million to shareholders.

Todd M. Schneider, Cintas' President and Chief Executive Officer, stated, "Our financial performance is the result of the exceptional execution of our employee-partners in providing businesses with the image, safety, cleanliness and compliance they need to get Ready for the Workday®. Each of our operating segments again grew revenue at a double-digit rate. Strong volume growth from new customers and the penetration of existing customers with more products and services generated operating leverage. This contributed to the achievement of double-digit increases in operating income and diluted EPS despite high inflation."

Mr. Schneider concluded, "We are increasing our full fiscal year financial guidance. We are raising our annual revenue expectations from a range of $8.58 billion to $8.67 billion to a range of $8.67 billion to $8.75 billion and diluted EPS from a range of $12.30 to $12.65 to a range of $12.50 to $12.80."

The following table provides a comparison of fiscal 2022 revenue and diluted EPS to our updated fiscal 2023 guidance.

 

 

 

 

 

 

 

Fiscal 2023

 

Fiscal 2023

Revenue Guidance

($s in millions)

Fiscal 2022

 

 

 

 

 

Low End

of Range

Growth vs.

Fiscal 2022

 

High End

of Range

Growth vs.

Fiscal 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

$

7,854.5

 

 

 

 

 

 

$

8,670.0

10.4

%

 

$

8,750.0

11.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2022

 

Fiscal 2023

 

Fiscal 2023

Earnings Per Share Guidance

($s in millions, except EPS)

Operating

Income

 

Tax

Rate

 

EPS

 

Low End

of Range

Growth vs.

Fiscal 2022

 

High End

of Range

Growth vs.

Fiscal 2022

 

 

 

 

 

 

 

 

 

 

 

 

Reported

$

1,587.4

 

 

17.5

%

 

$

11.65

 

 

 

 

 

 

 

Q1 gain on sale of operating

assets

 

(12.1

)

 

0.1

%

 

 

(0.09

)

 

 

 

 

 

 

Q3 gain on an equity method

investment

 

(30.2

)

 

0.3

%

 

 

(0.28

)

 

 

 

 

 

 

After above items

$

1,545.1

 

 

17.9

%

 

$

11.28

 

 

$

12.50

10.8

%

 

$

12.80

13.5

%

• Fiscal year 2023 operating income is expected to be in the range of $1.75 billion to $1.79 billion compared to $1.55 billion in fiscal year 2022, adjusted to exclude the gains in the table above.

• Fiscal year 2023 interest expense is expected to be approximately $113.0 million compared to $88.8 million in fiscal year 2022, due in part to higher interest rates.

• Fiscal year 2023 effective tax rate is expected to be 20.7% compared to a rate of 17.9% in fiscal year 2022, after excluding the gains in the table above and their related tax impacts from the reported rate of 17.5%.

• Our diluted EPS guidance includes no future share buybacks.

• We remain in a dynamic environment that can continue to change. Our guidance assumes a stable economy and excludes COVID-19 pandemic-related setbacks or economic downturns.

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®. 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 2023 second 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 Quarterly Report. 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; inflationary pressures and fluctuations in costs of materials and labor, including increased medical costs; interest rate volatility; 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; our ability to meet our goals relating to environmental, social and governance (ESG) opportunities, improvements and efficiencies; 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 global health 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, 2022 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

 

November 30, 2022

 

November 30, 2021

 

%

Change

Revenue:

 

 

 

 

 

Uniform rental and facility services

$

1,709,987

 

 

$

1,535,271

 

 

11.4

%

Other

 

464,871

 

 

 

387,010

 

 

20.1

%

Total revenue

 

2,174,858

 

 

 

1,922,281

 

 

13.1

%

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

Cost of uniform rental and facility services

 

906,727

 

 

 

817,261

 

 

10.9

%

Cost of other

 

245,684

 

 

 

219,879

 

 

11.7

%

Selling and administrative expenses

 

577,513

 

 

 

503,913

 

 

14.6

%

 

 

 

 

 

 

Operating income

 

444,934

 

 

 

381,228

 

 

16.7

%

 

 

 

 

 

 

Interest income

 

(344

)

 

 

(56

)

 

514.3

%

Interest expense

 

28,920

 

 

 

21,902

 

 

32.0

%

 

 

 

 

 

 

Income before income taxes

 

416,358

 

 

 

359,382

 

 

15.9

%

Income taxes

 

92,065

 

 

 

64,713

 

 

42.3

%

Net income

$

324,293

 

 

$

294,669

 

 

10.1

%

 

 

 

 

 

 

Basic earnings per share

$

3.18

 

 

$

2.83

 

 

12.4

%

 

 

 

 

 

 

Diluted earnings per share

$

3.12

 

 

$

2.76

 

 

13.0

%

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

101,637

 

 

 

103,646

 

 

 

Diluted weighted average common shares outstanding

 

103,356

 

 

 

106,122

 

 

 

Cintas Corporation

Consolidated Condensed Statements of Income

(Unaudited)

(In thousands except per share data)

 

 

Six Months Ended

 

November 30, 2022

 

November 30, 2021

 

%

Change

Revenue:

 

 

 

 

 

Uniform rental and facility services

$

3,407,759

 

 

$

3,043,447

 

 

12.0

%

Other

 

933,553

 

 

 

775,784

 

 

20.3

%

Total revenue

 

4,341,312

 

 

 

3,819,231

 

 

13.7

%

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

Cost of uniform rental and facility services

 

1,797,493

 

 

 

1,596,562

 

 

12.6

%

Cost of other

 

493,260

 

 

 

434,772

 

 

13.5

%

Selling and administrative expenses

 

1,165,505

 

 

 

1,012,568

 

 

15.1

%

 

 

 

 

 

 

Operating income

 

885,054

 

 

 

775,329

 

 

14.2

%

 

 

 

 

 

 

Interest income

 

(499

)

 

 

(112

)

 

345.5

%

Interest expense

 

56,640

 

 

 

43,756

 

 

29.4

%

 

 

 

 

 

 

Income before income taxes

 

828,913

 

 

 

731,685

 

 

13.3

%

Income taxes

 

152,931

 

 

 

105,837

 

 

44.5

%

Net income

$

675,982

 

 

$

625,848

 

 

8.0

%

 

 

 

 

 

 

Basic earnings per share

$

6.63

 

 

$

6.02

 

 

10.1

%

 

 

 

 

 

 

Diluted earnings per share

$

6.51

 

 

$

5.87

 

 

10.9

%

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

101,530

 

 

 

103,463

 

 

 

Diluted weighted average common shares outstanding

 

103,343

 

 

 

106,026

 

 

 

CINTAS CORPORATION SUPPLEMENTAL DATA

 

Gross Margin and Net Income Margin Results

 

 

Three Months Ended

 

Six Months Ended

 

November 30, 2022

 

November 30, 2021

 

November 30, 2022

 

November 30, 2021

 

 

 

 

 

 

 

 

Uniform rental and facility services

gross margin

47.0%

 

46.8%

 

47.3%

 

47.5%

Other gross margin

47.2%

 

43.2%

 

47.2%

 

44.0%

Total gross margin

47.0%

 

46.0%

 

47.2%

 

46.8%

Net income margin

14.9%

 

15.3%

 

15.6%

 

16.4%

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

 

 

Six Months Ended

 

November 30, 2022

% of Revenue

 

November 30, 2021

% of Revenue

Growth vs. Fiscal 2022

Operating income

$

885,054

20.4

%

 

$

775,329

 

20.3

%

14.2

%

Gain on sale of operating assets

 

 

 

 

(12,129

)

 

 

Operating income excluding above item

$

885,054

20.4

%

 

$

763,200

 

20.0

%

16.0

%

Earnings Per Share Results

 

 

Six Months Ended

 

November 30, 2022

 

November 30, 2021

Growth vs.

Fiscal 2022

Diluted EPS

$

6.51

 

$

5.87

 

10.9

%

Pre-tax gain and the related tax benefit on sale of certain

operating assets

 

 

 

(0.09

)

 

Diluted EPS excluding above item

$

6.51

 

$

5.78

 

12.6

%

Computation of Free Cash Flow

 

 

Six Months Ended

(In thousands)

November 30, 2022

 

November 30, 2021

 

 

 

 

Net cash provided by operations

$

619,149

 

 

$

593,782

 

Capital expenditures

 

(146,404

)

 

 

(108,629

)

Free cash flow

$

472,745

 

 

$

485,153

 

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

 

(In thousands)

Uniform Rental

and Facility Services

 

First Aid

and Safety Services

 

All

Other

 

Corporate

 

Total

For the three months ended November 30, 2022

 

 

 

 

 

 

 

 

Revenue

$

1,709,987

 

$

235,974

 

$

228,897

 

$

—

 

 

$

2,174,858

 

Gross margin

$

803,260

 

$

119,153

 

$

100,034

 

$

—

 

 

$

1,022,447

 

Selling and administrative expenses

$

434,165

 

$

73,658

 

$

69,690

 

$

—

 

 

$

577,513

 

Interest income

$

—

 

$

—

 

$

—

 

$

(344

)

 

$

(344

)

Interest expense

$

—

 

$

—

 

$

—

 

$

28,920

 

 

$

28,920

 

Income (loss) before income taxes

$

369,095

 

$

45,495

 

$

30,344

 

$

(28,576

)

 

$

416,358

 

 

 

 

 

 

 

 

 

 

 

For the three months ended November 30, 2021

 

 

 

 

 

 

 

 

Revenue

$

1,535,271

 

$

202,160

 

$

184,850

 

$

—

 

 

$

1,922,281

 

Gross margin

$

718,010

 

$

88,034

 

$

79,097

 

$

—

 

 

$

885,141

 

Selling and administrative expenses

$

380,395

 

$

65,957

 

$

57,561

 

$

—

 

 

$

503,913

 

Interest income

$

—

 

$

—

 

$

—

 

$

(56

)

 

$

(56

)

Interest expense

$

—

 

$

—

 

$

—

 

$

21,902

 

 

$

21,902

 

Income (loss) before income taxes

$

337,615

 

$

22,077

 

$

21,536

 

$

(21,846

)

 

$

359,382

 

 

 

 

 

 

 

 

 

 

 

For the six months ended November 30, 2022

 

 

 

 

 

 

 

 

Revenue

$

3,407,759

 

$

470,135

 

$

463,418

 

$

—

 

 

$

4,341,312

 

Gross margin

$

1,610,266

 

$

235,290

 

$

205,003

 

$

—

 

 

$

2,050,559

 

Selling and administrative expenses

$

876,400

 

$

148,949

 

$

140,156

 

$

—

 

 

$

1,165,505

 

Interest income

$

—

 

$

—

 

$

—

 

$

(499

)

 

$

(499

)

Interest expense

$

—

 

$

—

 

$

—

 

$

56,640

 

 

$

56,640

 

Income (loss) before income taxes

$

733,866

 

$

86,341

 

$

64,847

 

$

(56,141

)

 

$

828,913

 

 

 

 

 

 

 

 

 

 

 

For the six months ended November 30, 2021

 

 

 

 

 

 

 

 

Revenue

$

3,043,447

 

$

401,276

 

$

374,508

 

$

—

 

 

$

3,819,231

 

Gross margin

$

1,446,885

 

$

177,309

 

$

163,703

 

$

—

 

 

$

1,787,897

 

Selling and administrative expenses

$

779,888

 

$

129,504

 

$

103,176

 

$

—

 

 

$

1,012,568

 

Interest income

$

—

 

$

—

 

$

—

 

$

(112

)

 

$

(112

)

Interest expense

$

—

 

$

—

 

$

—

 

$

43,756

 

 

$

43,756

 

Income (loss) before income taxes

$

666,997

 

$

47,805

 

$

60,527

 

$

(43,644

)

 

$

731,685

 

Cintas Corporation

Consolidated Condensed Balance Sheets

(In thousands except per share data)

 

 

November 30, 2022

 

May 31, 2022

 

(Unaudited)

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

89,799

 

 

$

90,471

 

Accounts receivable, net

 

1,135,833

 

 

 

1,006,220

 

Inventories, net

 

514,839

 

 

 

472,150

 

Uniforms and other rental items in service

 

986,505

 

 

 

916,706

 

Income taxes, current

 

13,657

 

 

 

21,708

 

Prepaid expenses and other current assets

 

152,537

 

 

 

124,728

 

Total current assets

 

2,893,170

 

 

 

2,631,983

 

 

 

 

 

Property and equipment, net

 

1,340,658

 

 

 

1,323,673

 

 

 

 

 

Investments

 

243,574

 

 

 

242,873

 

Goodwill

 

3,037,506

 

 

 

3,042,976

 

Service contracts, net

 

367,612

 

 

 

391,638

 

Operating lease right-of-use assets, net

 

176,276

 

 

 

170,003

 

Other assets, net

 

368,211

 

 

 

344,110

 

 

$

8,427,007

 

 

$

8,147,256

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

310,986

 

 

$

251,504

 

Accrued compensation and related liabilities

 

208,342

 

 

 

236,992

 

Accrued liabilities

 

556,211

 

 

 

588,948

 

Operating lease liabilities, current

 

42,792

 

 

 

43,872

 

Debt due within one year

 

435,406

 

 

 

311,574

 

Total current liabilities

 

1,553,737

 

 

 

1,432,890

 

 

 

 

 

Long-term liabilities:

 

 

 

Debt due after one year

 

2,485,277

 

 

 

2,483,932

 

Deferred income taxes

 

493,379

 

 

 

473,777

 

Operating lease liabilities

 

136,520

 

 

 

129,064

 

Accrued liabilities

 

327,556

 

 

 

319,397

 

Total long-term liabilities

 

3,442,732

 

 

 

3,406,170

 

 

 

 

 

Shareholders’ equity:

 

 

 

Preferred stock, no par value:

 

—

 

 

 

—

 

100,000 shares authorized, none outstanding

Common stock, no par value, and paid-in capital:

 

1,933,145

 

 

 

1,771,917

 

425,000,000 shares authorized

FY 2023: 191,857,155 issued and 101,601,032 outstanding

FY 2022: 190,837,921 issued and 101,711,215 outstanding

Retained earnings

 

9,160,346

 

 

 

8,719,163

 

Treasury stock:

 

(7,747,049

)

 

 

(7,290,801

)

FY 2023: 90,256,123 shares

FY 2022: 89,126,706 shares

Accumulated other comprehensive income

 

84,096

 

 

 

107,917

 

Total shareholders’ equity

 

3,430,538

 

 

 

3,308,196

 

 

$

8,427,007

 

 

$

8,147,256

 

Cintas Corporation

Consolidated Condensed Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

Six Months Ended

 

November 30, 2022

 

November 30, 2021

Cash flows from operating activities:

 

 

 

Net income

$

675,982

 

 

$

625,848

 

 

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation

 

126,561

 

 

 

122,274

 

Amortization of intangible assets and capitalized contract costs

 

74,693

 

 

 

74,365

 

Stock-based compensation

 

51,537

 

 

 

60,893

 

Gain on sale of operating assets

 

—

 

 

 

(12,129

)

Deferred income taxes

 

18,565

 

 

 

29,941

 

Change in current assets and liabilities, net of acquisitions of businesses:

 

 

 

Accounts receivable, net

 

(133,897

)

 

 

(77,343

)

Inventories, net

 

(43,266

)

 

 

13,406

 

Uniforms and other rental items in service

 

(73,475

)

 

 

(69,513

)

Prepaid expenses and other current assets and capitalized contract costs

 

(85,532

)

 

 

(47,978

)

Accounts payable

 

61,421

 

 

 

11,400

 

Accrued compensation and related liabilities

 

(28,212

)

 

 

(59,988

)

Accrued liabilities and other

 

(33,352

)

 

 

(10,519

)

Income taxes, current

 

8,124

 

 

 

(66,875

)

Net cash provided by operating activities

 

619,149

 

 

 

593,782

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Capital expenditures

 

(146,404

)

 

 

(108,629

)

Purchases of investments

 

(5,182

)

 

 

(5,967

)

Proceeds from sale of operating assets, net of cash disposed

 

—

 

 

 

15,347

 

Acquisitions of businesses, net of cash acquired

 

(15,457

)

 

 

(45,670

)

Other, net

 

(4,381

)

 

 

(6,676

)

Net cash used in investing activities

 

(171,424

)

 

 

(151,595

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Issuance of commercial paper, net

 

124,046

 

 

 

167,000

 

Repayment of debt

 

—

 

 

 

(250,000

)

Proceeds from exercise of stock-based compensation awards

 

2,125

 

 

 

109,198

 

Dividends paid

 

(215,017

)

 

 

(177,949

)

Repurchase of common stock

 

(348,682

)

 

 

(664,726

)

Other, net

 

(8,840

)

 

 

(3,399

)

Net cash used in financing activities

 

(446,368

)

 

 

(819,876

)

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(2,029

)

 

 

(2,781

)

 

 

 

 

Net decrease in cash and cash equivalents

 

(672

)

 

 

(380,470

)

Cash and cash equivalents at beginning of period

 

90,471

 

 

 

493,640

 

Cash and cash equivalents at end of period

$

89,799

 

 

$

113,170

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221221005033/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