Cintas Corporation Announces Fiscal 2022 Second Quarter Results

CINCINNATI--()--Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2022 second quarter ended November 30, 2021. Revenue for the second quarter of fiscal 2022 was $1.92 billion compared to $1.76 billion in last year’s second quarter, an increase of 9.4%. The organic revenue growth rate for the second quarter of fiscal 2022, which adjusts for the impacts of acquisitions, divestitures and foreign currency exchange rate fluctuations, was 9.3%.

Gross margin for the second quarter of fiscal 2022 was $885.1 million compared to $819.9 million in last year’s second quarter. Gross margin as a percentage of revenue was 46.0% for the second quarter of fiscal 2022 compared to 46.7% in last year's second quarter. Labor expense increased due to investments for current and anticipated revenue growth, and energy-related expenses increased 40 basis points.

Operating income for the second quarter of fiscal 2022 was $381.2 million compared to $352.9 million in last year's second quarter. Operating income as a percentage of revenue was 19.8% in the second quarter of fiscal 2022 compared to 20.1% in last year's second quarter. Last year's second quarter operating income included an $18.0 million gain from the sale of certain Uniform Rental and Facility Services segment operating assets. The gain on sale was recorded in selling and administrative expenses. Excluding this gain, fiscal 2022 second quarter operating income as a percentage of revenue increased 70 basis points from 19.1% in last year's second quarter.

Net income was $294.7 million for the second quarter of fiscal 2022 compared to $284.9 million in last year's second quarter. Second quarter of fiscal 2022 diluted earnings per share (EPS) was $2.76 compared to $2.62 in last year's second quarter. Last year's second quarter diluted EPS included $0.25 from the gain on sale of certain Uniform Rental and Facility Services segment operating assets and the related tax benefit. Excluding this impact, fiscal 2022 second quarter diluted EPS increased 16.5% from last year's diluted EPS of $2.37.

Todd M. Schneider, Cintas' President and Chief Executive Officer, stated, "We are pleased with our second quarter financial results led by a strong revenue increase of 9.4%. Also, operating income and diluted EPS excluding last year's gain previously mentioned increased significantly despite U.S. inflation recently hitting a 39-year high and our investment in labor to support revenue growth. I am proud of the execution of our employee-partners in providing the products and services needed to help our customers get Ready for the Workday®."

Mr. Schneider concluded, "We are increasing our fiscal 2022 financial guidance. We are raising our annual revenue expectations from a range of $7.58 billion to $7.67 billion to a range of $7.63 billion to $7.70 billion and diluted EPS from a range of $10.60 to $10.90 to a range of $10.70 to $10.95. Please note the following regarding guidance:

  • Our fiscal 2022 effective tax rate is expected to be approximately 19.0% compared to a rate of 13.7% for fiscal 2021. The higher effective tax rate negatively impacts fiscal 2022 diluted EPS guidance by about $0.72 and diluted EPS growth by about 700 basis points;
  • Guidance does not include the impact of any future share buybacks; and
  • Guidance assumes an uneven economic recovery caused by COVID-19. However, guidance does not contemplate significant COVID-19 pandemic-related setbacks such as stay-at-home orders or costs necessary to comply with government COVID-19 mandates."

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 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 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

 

November 30,
2021

 

November 30,
2020

 

%

Change

Revenue:

 

 

 

 

 

Uniform rental and facility services

$

1,535,271

 

 

$

1,410,488

 

 

8.8

%

Other

 

387,010

 

 

 

346,560

 

 

11.7

%

Total revenue

 

1,922,281

 

 

 

1,757,048

 

 

9.4

%

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

Cost of uniform rental and facility services

 

817,261

 

 

 

739,811

 

 

10.5

%

Cost of other

 

219,879

 

 

 

197,353

 

 

11.4

%

Selling and administrative expenses

 

503,913

 

 

 

467,012

 

 

7.9

%

 

 

 

 

 

 

Operating income

 

381,228

 

 

 

352,872

 

 

8.0

%

 

 

 

 

 

 

Interest income

 

(56

)

 

 

(218

)

 

(74.3

)%

Interest expense

 

21,902

 

 

 

24,557

 

 

(10.8

)%

 

 

 

 

 

 

Income before income taxes

 

359,382

 

 

 

328,533

 

 

9.4

%

Income taxes

 

64,713

 

 

 

43,676

 

 

48.2

%

Net income

$

294,669

 

 

$

284,857

 

 

3.4

%

 

 

 

 

 

 

Basic earnings per share

$

2.83

 

 

$

2.69

 

 

5.2

%

 

 

 

 

 

 

Diluted earnings per share

$

2.76

 

 

$

2.62

 

 

5.3

%

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

103,646

 

 

 

104,999

 

 

 

Diluted weighted average common shares outstanding

 

106,122

 

 

 

107,981

 

 

 

 

Cintas Corporation

Consolidated Condensed Statements of Income

(Unaudited)

(In thousands except per share data)

 

 

Six Months Ended

 

November 30,
2021

 

November 30,
2020

 

%

Change

Revenue:

 

 

 

 

 

Uniform rental and facility services

$

3,043,447

 

 

$

2,804,899

 

 

8.5

%

Other

 

775,784

 

 

 

698,723

 

 

11.0

%

Total revenue

 

3,819,231

 

 

 

3,503,622

 

 

9.0

%

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

Cost of uniform rental and facility services

 

1,596,562

 

 

 

1,455,223

 

 

9.7

%

Cost of other

 

434,772

 

 

 

402,314

 

 

8.1

%

Selling and administrative expenses

 

1,012,568

 

 

 

943,507

 

 

7.3

%

 

 

 

 

 

 

Operating income

 

775,329

 

 

 

702,578

 

 

10.4

%

 

 

 

 

 

 

Interest income

 

(112

)

 

 

(282

)

 

(60.3

)%

Interest expense

 

43,756

 

 

 

49,107

 

 

(10.9

)%

 

 

 

 

 

 

Income before income taxes

 

731,685

 

 

 

653,753

 

 

11.9

%

Income taxes

 

105,837

 

 

 

68,891

 

 

53.6

%

Net income

$

625,848

 

 

$

584,862

 

 

7.0

%

 

 

 

 

 

 

Basic earnings per share

$

6.02

 

 

$

5.55

 

 

8.5

%

 

 

 

 

 

 

Diluted earnings per share

$

5.87

 

 

$

5.40

 

 

8.7

%

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

103,463

 

 

 

104,546

 

 

 

Diluted weighted average common shares outstanding

 

106,026

 

 

 

107,556

 

 

 

CINTAS CORPORATION SUPPLEMENTAL DATA

 

Gross Margin and Net Income Margin Results

 

 

Three Months Ended

 

Six Months Ended

 

November 30,
2021

 

November 30,
2020

 

November 30,
2021

 

November 30,
2020

 

 

 

 

 

 

 

 

Uniform rental and facility services

gross margin

46.8%

 

47.5%

 

47.5%

 

48.1%

Other gross margin

43.2%

 

43.1%

 

44.0%

 

42.4%

Total gross margin

46.0%

 

46.7%

 

46.8%

 

47.0%

Net income margin

15.3%

 

16.2%

 

16.4%

 

16.7%

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 within the narrative of the press release or below.

 

Operating Income Results

 

 

Three Months Ended

 

November 30,
2021

 

% of
Revenue

 

November 30,
2020

 

% of
Revenue

Operating income

$

381,228

 

 

19.8

%

 

$

352,872

 

 

20.1

%

Loss (gain) on sale of certain operating assets

 

49

 

 

 

 

 

(17,963

)

 

 

Operating income excluding above item

$

381,277

 

 

19.8

%

 

$

334,909

 

 

19.1

%

 

 

 

 

 

 

 

 

 

Six Months Ended

 

November 30,
2021

 

% of
Revenue

 

November 30,
2020

 

% of
Revenue

Operating income

$

775,329

 

 

20.3

%

 

$

702,578

 

 

20.1

%

Gain on sale of certain operating assets

 

(12,129

)

 

 

 

 

(17,963

)

 

 

Operating income excluding above item

$

763,200

 

 

20.0

%

 

$

684,615

 

 

19.5

%

 

Earnings Per Share Results

 

 

Three Months Ended

 

November 30,
2021

 

November 30,
2020

 

Growth vs.
Fiscal 2021

Diluted EPS

$

2.76

 

 

$

2.62

 

 

5.3

%

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

operating assets

 

0.00

 

 

 

(0.25

)

 

 

Diluted EPS excluding above item

$

2.76

 

 

$

2.37

 

 

16.5

%

 

 

 

 

 

 

 

Six Months Ended

 

November 30,
2021

 

November 30,
2020

 

Growth vs.
Fiscal 2021

Diluted EPS

$

5.87

 

 

$

5.40

 

 

8.7

%

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

operating assets

 

(0.09

)

 

 

(0.25

)

 

 

Diluted EPS excluding above item

$

5.78

 

 

$

5.15

 

 

12.2

%

 

Computation of Free Cash Flow

 

 

Six Months Ended

 

November 30,
2021

 

November 30,
2020

Net cash provided by operations

$

593,782

 

 

$

572,964

 

Capital expenditures

 

(108,629

)

 

 

(57,659

)

Free cash flow

$

485,153

 

 

$

515,305

 

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 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 three months ended November 30, 2020

 

 

 

 

 

 

 

 

Revenue

$

1,410,488

 

 

$

194,419

 

 

$

152,141

 

 

$

 

 

$

1,757,048

 

Gross margin

$

670,677

 

 

$

83,597

 

 

$

65,610

 

 

$

 

 

$

819,884

 

Selling and administrative expenses

$

355,068

 

 

$

62,091

 

 

$

49,853

 

 

$

 

 

$

467,012

 

Interest income

$

 

 

$

 

 

$

 

 

$

(218

)

 

$

(218

)

Interest expense

$

 

 

$

 

 

$

 

 

$

24,557

 

 

$

24,557

 

Income (loss) before income taxes

$

315,609

 

 

$

21,506

 

 

$

15,757

 

 

$

(24,339

)

 

$

328,533

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

For the six months ended November 30, 2020

 

 

 

 

 

 

 

 

Revenue

$

2,804,899

 

 

$

398,899

 

 

$

299,824

 

 

$

 

 

$

3,503,622

 

Gross margin

$

1,349,676

 

 

$

165,701

 

 

$

130,708

 

 

$

 

 

$

1,646,085

 

Selling and administrative expenses

$

719,039

 

 

$

125,668

 

 

$

98,800

 

 

$

 

 

$

943,507

 

Interest income

$

 

 

$

 

 

$

 

 

$

(282

)

 

$

(282

)

Interest expense

$

 

 

$

 

 

$

 

 

$

49,107

 

 

$

49,107

 

Income (loss) before income taxes

$

630,637

 

 

$

40,033

 

 

$

31,908

 

 

$

(48,825

)

 

$

653,753

 

 

Cintas Corporation

Consolidated Condensed Balance Sheets

(In thousands except per share data)

 

 

November 30,
2021

 

May 31,
2021

 

(Unaudited)

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

113,170

 

 

$

493,640

 

Accounts receivable, net

 

975,442

 

 

 

901,710

 

Inventories, net

 

464,864

 

 

 

481,797

 

Uniforms and other rental items in service

 

876,065

 

 

 

810,104

 

Income taxes, current

 

89,135

 

 

 

22,282

 

Prepaid expenses and other current assets

 

136,798

 

 

 

133,776

 

Total current assets

 

2,655,474

 

 

 

2,843,309

 

 

 

 

 

Property and equipment, net

 

1,299,375

 

 

 

1,318,438

 

 

 

 

 

Investments

 

289,123

 

 

 

274,616

 

Goodwill

 

2,931,307

 

 

 

2,913,069

 

Service contracts, net

 

391,609

 

 

 

408,445

 

Operating lease right-of-use assets, net

 

155,677

 

 

 

168,532

 

Other assets, net

 

294,845

 

 

 

310,414

 

 

$

8,017,410

 

 

$

8,236,823

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

240,322

 

 

$

230,786

 

Accrued compensation and related liabilities

 

180,772

 

 

 

241,469

 

Accrued liabilities

 

597,171

 

 

 

518,910

 

Operating lease liabilities, current

 

43,156

 

 

 

43,850

 

Debt due within one year

 

1,116,507

 

 

 

899,070

 

Total current liabilities

 

2,177,928

 

 

 

1,934,085

 

 

 

 

 

Long-term liabilities:

 

 

 

Debt due after one year

 

1,343,367

 

 

 

1,642,833

 

Deferred income taxes

 

405,871

 

 

 

386,647

 

Operating lease liabilities

 

118,892

 

 

 

130,774

 

Accrued liabilities

 

408,225

 

 

 

454,637

 

Total long-term liabilities

 

2,276,355

 

 

 

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:

 

1,686,293

 

 

 

1,516,202

 

425,000,000 shares authorized

FY 2022: 190,475,781 issued and 103,664,439 outstanding

FY 2021: 189,071,185 issued and 104,061,391 outstanding

Retained earnings

 

8,305,076

 

 

 

7,877,015

 

Treasury stock:

 

(6,400,984

)

 

 

(5,736,258

)

FY 2022: 86,811,342 shares

FY 2021: 85,009,794 shares

Accumulated other comprehensive (loss) income

 

(27,258

)

 

 

30,888

 

Total shareholders’ equity

 

3,563,127

 

 

 

3,687,847

 

 

$

8,017,410

 

 

$

8,236,823

 

 

Cintas Corporation

Consolidated Condensed Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

Six Months Ended

 

November 30,
2021

 

November 30,
2020

Cash flows from operating activities:

 

 

 

Net income

$

625,848

 

 

$

584,862

 

 

 

 

 

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

 

 

 

Depreciation

 

122,274

 

 

 

121,096

 

Amortization of intangible assets and capitalized contract costs

 

74,365

 

 

 

71,558

 

Stock-based compensation

 

60,893

 

 

 

57,602

 

Gain on sale of operating assets

 

(12,129

)

 

 

(17,963

)

Deferred income taxes

 

29,941

 

 

 

(23,099

)

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

 

 

 

Accounts receivable, net

 

(77,343

)

 

 

(39,892

)

Inventories, net

 

13,406

 

 

 

(124,949

)

Uniforms and other rental items in service

 

(69,513

)

 

 

(2,914

)

Prepaid expenses and other current assets and capitalized contract costs

 

(47,978

)

 

 

(57,295

)

Accounts payable

 

11,400

 

 

 

42,228

 

Accrued compensation and related liabilities

 

(59,988

)

 

 

23,809

 

Accrued liabilities and other

 

(10,519

)

 

 

21,570

 

Income taxes, current

 

(66,875

)

 

 

(83,649

)

Net cash provided by operating activities

 

593,782

 

 

 

572,964

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Capital expenditures

 

(108,629

)

 

 

(57,659

)

Purchases of investments

 

(5,967

)

 

 

(7,205

)

Proceeds from sale of operating assets, net of cash disposed

 

15,347

 

 

 

23,426

 

Acquisitions of businesses, net of cash acquired

 

(45,670

)

 

 

(6,932

)

Other, net

 

(6,676

)

 

 

(2,872

)

Net cash used in investing activities

 

(151,595

)

 

 

(51,242

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Issuance of commercial paper, net

 

167,000

 

 

 

 

Repayment of debt

 

(250,000

)

 

 

 

Proceeds from exercise of stock-based compensation awards

 

109,198

 

 

 

107,530

 

Dividends paid

 

(177,949

)

 

 

 

Repurchase of common stock

 

(664,726

)

 

 

(71,382

)

Other, net

 

(3,399

)

 

 

(1,687

)

Net cash (used in) provided by financing activities

 

(819,876

)

 

 

34,461

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(2,781

)

 

 

1,590

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(380,470

)

 

 

557,773

 

Cash and cash equivalents at beginning of period

 

493,640

 

 

 

145,402

 

Cash and cash equivalents at end of period

$

113,170

 

 

$

703,175

 

 

Contacts

J. Michael Hansen, Executive Vice President and Chief Financial Officer - 513-972-2079
Paul F. Adler, Vice President - Treasurer & Investor Relations - 513-972-4195

Contacts

J. Michael Hansen, Executive Vice President and Chief Financial Officer - 513-972-2079
Paul F. Adler, Vice President - Treasurer & Investor Relations - 513-972-4195