Business Wire | Mar 17, 2021 08:30AM EDT

Cintas Corporation Announces Fiscal 2021 Third Quarter Results

Mar. 17, 2021

CINCINNATI--(BUSINESS WIRE)--Mar. 17, 2021--Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2021 third quarter ended February 28, 2021. Revenue for the third quarter of fiscal 2021 was $1.78 billion compared to $1.81 billion in last year's third quarter. Diluted earnings per share (EPS) were $2.37 in the third quarter of fiscal 2021, an increase of 9.7% from last year's third quarter diluted EPS.

The organic revenue growth rate for the third quarter of fiscal 2021, which is adjusted for the impacts of acquisitions, divestitures, foreign currency exchange rate fluctuations and differences in the number of workdays, was flat. The organic revenue growth rate for the Uniform Rental and Facility Services operating segment was also flat. Organic revenue for the First Aid and Safety Services operating segment increased 17.7%.

Gross margin for the third quarter of fiscal 2021 was $809.5 million compared to $824.4 million in last year's third quarter. Gross margin as a percentage of revenue increased 10 basis points to 45.6% for the third quarter of fiscal 2021 compared to 45.5% in the third quarter of fiscal 2020.

Operating income for the third quarter of fiscal 2021 of $326.5 million increased 3.8% from last year's third quarter operating income of $314.7 million. Operating income as a percentage of revenue increased 100 basis points to 18.4% in the third quarter of fiscal 2021 compared to 17.4% in the third quarter of fiscal 2020.

Net income from continuing operations was $258.4 million for the third quarter of fiscal 2021, an increase of 10.2% from last year's third quarter net income from continuing operations of $234.5 million. Third quarter of fiscal 2021 diluted EPS were $2.37, an increase of 9.7% from last year's third quarter diluted EPS of $2.16.

During the third quarter of fiscal 2021, Cintas purchased $82.0 million of Cintas common stock under its buyback program. On March 15, 2021, Cintas paid shareholders $79.5 million in quarterly dividends.

Scott D. Farmer, Cintas' Chairman and Chief Executive Officer, stated, "The COVID-19 coronavirus pandemic continues, and it remains a significant disruption to the economy. COVID-19 case counts surged early in our third quarter, and the economy slowed considerably. We were further challenged in the quarter by severe winter weather which caused extensive energy blackouts in the U.S. Fortunately, after peaking in January, COVID-19 case counts decreased even more quickly than they had increased. Widespread business restrictions were not imposed and demand for personal protective equipment remained strong, positioning us to exceed our financial expectations."

Mr. Farmer continued, "Regardless of the conditions, our employee-partners work with urgency to get businesses Ready for the Workday(r). Significant opportunities for new revenue exist because businesses must instill confidence in their employees and customers that they will remain safe and healthy. Cintas employee-partners remain Ready(tm) to listen, offer solutions and deliver for every business. Every business has a need Cintas can fulfill."

Mr. Farmer concluded, "For our fiscal fourth quarter, we expect revenue to be in the range of $1.80 billion to $1.83 billion and diluted EPS to be in the range of $2.20 to $2.40. This financial guidance does not include any future share buybacks or additional restrictions on businesses due to increasing COVID-19 case counts."

About Cintas

Cintas Corporation helps more than one million businesses of all types and sizes get Ready(tm) 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(r). The company is also the creator of the Total Clean Program(tm) - 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 2021 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 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

February 28, February 29, % 2021 2020 Change

Revenue:

Uniform rental and facility services $ 1,417,865 $ 1,448,021 (2.1)%

Other 359,191 362,627 (0.9)%

Total revenue 1,777,056 1,810,648 (1.9)%



Costs and expenses:

Cost of uniform rental and facility 761,850 784,930 (2.9)%services

Cost of other 205,690 201,323 2.2%

Selling and administrative expenses 483,048 509,743 (5.2)%



Operating income 326,468 314,652 3.8%



Interest income (87) (347) (74.9) %

Interest expense 24,552 25,943 (5.4)%



Income before income taxes 302,003 289,056 4.5%

Income taxes 43,619 54,536 (20.0) %

Net income $ 258,384 $ 234,520 10.2%



Basic earnings per share $ 2.44 $ 2.23 9.4%



Diluted earnings per share $ 2.37 $ 2.16 9.7%



Basic weighted average common shares 105,264 104,245 outstanding

Diluted weighted average common shares 107,996 107,588 outstanding

Cintas Corporation

Consolidated Condensed Statements of Income

(Unaudited)

(In thousands except per share data)

Nine Months Ended

February 28,2021

February 29, 2020

% Change

Revenue:

Uniform rental and facility services

$

4,222,764

$

4,372,524

(3.4)%

Other

1,057,914

1,093,012

(3.2)%

Total revenue

5,280,678

5,465,536

(3.4)%

Costs and expenses:

Cost of uniform rental and facility services

2,217,073

2,338,543

(5.2)%

Cost of other

608,004

601,065

1.2%

Selling and administrative expenses

1,426,555

1,570,666

(9.2)%

Operating income

1,029,046

955,262

7.7%

Interest income

(369)

(792)

(53.4)%

Interest expense

73,659

79,441

(7.3)%

Income before income taxes

955,756

876,613

9.0%

Income taxes

112,510

144,838

(22.3)%

Income from continuing operations

843,246

731,775

15.2%

Loss from discontinued operations, net of tax

-

(323)

(100.0)%

Net income

$

843,246

$

731,452

15.3%

Basic earnings per share:

Continuing operations

$

7.99

$

6.98

14.5%

Discontinued operations

0.00

0.00

-%

Basic earnings per share

$

7.99

$

6.98

14.5%

Diluted earnings per share:

Continuing operations

$

7.78

$

6.76

15.1%

Discontinued operations

0.00

0.00

-%

Diluted earnings per share

$

7.78

$

6.76

15.1%

Basic weighted average common shares outstanding

104,782

103,840

Diluted weighted average common shares outstanding

107,696

107,280

CINTAS CORPORATION SUPPLEMENTAL DATA

Cintas Corporation

Consolidated Condensed Statements of Income

(Unaudited)

(In thousands except per share data)

Nine Months Ended

February 28, February 29, % 2021 2020 Change

Revenue:

Uniform rental and facility services $ 4,222,764 $ 4,372,524 (3.4)%

Other 1,057,914 1,093,012 (3.2)%

Total revenue 5,280,678 5,465,536 (3.4)%



Costs and expenses:

Cost of uniform rental and facility 2,217,073 2,338,543 (5.2)%services

Cost of other 608,004 601,065 1.2%

Selling and administrative expenses 1,426,555 1,570,666 (9.2)%



Operating income 1,029,046 955,262 7.7%



Interest income (369) (792) (53.4)%

Interest expense 73,659 79,441 (7.3)%



Income before income taxes 955,756 876,613 9.0%

Income taxes 112,510 144,838 (22.3)%

Income from continuing operations 843,246 731,775 15.2%

Loss from discontinued operations, net - (323) (100.0)of tax %

Net income $ 843,246 $ 731,452 15.3%



Basic earnings per share:

Continuing operations $ 7.99 $ 6.98 14.5%

Discontinued operations 0.00 0.00 -%

Basic earnings per share $ 7.99 $ 6.98 14.5%



Diluted earnings per share:

Continuing operations $ 7.78 $ 6.76 15.1%

Discontinued operations 0.00 0.00 -%

Diluted earnings per share $ 7.78 $ 6.76 15.1%



Basic weighted average common shares 104,782 103,840 outstanding

Diluted weighted average common shares 107,696 107,280 outstanding

CINTAS CORPORATION SUPPLEMENTAL DATA

Gross Margin and Net Income Margin Results

Three Months Ended

February 28, February 29, 2021 2020



Uniform rental and facility services gross margin 46.3% 45.8%

Other gross margin 42.7% 44.5%

Total gross margin 45.6% 45.5%

Net income margin 14.5% 13.0%



Nine Months Ended

February 28, February 29, 2021 2020



Uniform rental and facility services gross margin 47.5% 46.5%

Other gross margin 42.5% 45.0%

Total gross margin 46.5% 46.2%

Net income margin, continuing operations 16.0% 13.4%

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 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

Nine Months Ended

February 28, February 29, 2021 2020

Net cash provided by operations $ 904,815 $ 934,549

Capital expenditures (100,410) (189,379)

Free cash flow $ 804,405 $ 745,170

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 Nine Months Ended

February 28, February 29, Growth February 28, February 29, Growth 2021 2020 % 2021 2020 %

A B G I J O

Revenue $ 1,777,056 $ 1,810,648 (1.9)% $ 5,280,678 $ 5,465,536 (3.4)%

G= O= (A-B)/ (I-J)/ B J

C D K L

Workdays in 64 65 195 195 the period



E F H M N P

Workdayadjusted $ 1,804,823 $ 1,810,648 (0.3)% $ 5,280,678 $ 5,465,536 (3.4)%revenue growth

H= P= E=(A/C)*D F=(B/D)*D (E-F)/ M=(I/K)*L N=(J/L)*L (M-N)/ F N



Acquisition,divestituresand foreign 0.2% 0.2%currency exchangeimpact, net



Organic (0.1)% (3.2)%growth

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, divestitures and foreign currency exchange rate fluctuations.

SUPPLEMENTAL SEGMENT DATA

Uniform First Aid Rental and Safety All Corporate Total and Facility Services Other Services

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 andadministrative $ 372,612 $ 60,521 $ 49,915 $ - $ 483,048 expenses

Interest $ - $ - $ - $ (87) $ (87) income

Interest $ - $ - $ - $ 24,552 $ 24,552 expense

Income (loss)before income $ 283,403 $ 25,820 $ 17,245 $ (24,465) $ 302,003 taxes



For the three months ended February 29, 2020

Revenue $ 1,448,021 $ 170,541 $ 192,086 $ - $ 1,810,648

Gross margin $ 663,091 $ 81,910 $ 79,394 $ - $ 824,395

Selling andadministrative $ 391,462 $ 57,218 $ 61,063 $ - $ 509,743 expenses

Interest $ - $ - $ - $ (347) $ (347) income

Interest $ - $ - $ - $ 25,943 $ 25,943 expense

Income (loss)before income $ 271,629 $ 24,692 $ 18,331 $ (25,596) $ 289,056 taxes



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 andadministrative $ 1,091,651 $ 186,189 $ 148,715 $ - $ 1,426,555 expenses

Interest $ - $ - $ - $ (369) $ (369) income

Interest $ - $ - $ - $ 73,659 $ 73,659 expense

Income (loss)before income $ 914,040 $ 65,853 $ 49,153 $ (73,290) $ 955,756 taxes



For the nine months ended February 29, 2020

Revenue $ 4,372,524 $ 512,299 $ 580,713 $ - $ 5,465,536

Gross margin $ 2,033,981 $ 248,272 $ 243,675 $ - $ 2,525,928

Selling andadministrative $ 1,206,982 $ 174,170 $ 189,514 $ - $ 1,570,666 expenses

Interest $ - $ - $ - $ (792) $ (792) income

Interest $ - $ - $ - $ 79,441 $ 79,441 expense

Income (loss)before income $ 826,999 $ 74,102 $ 54,161 $ (78,649) $ 876,613 taxes

Cintas Corporation

Consolidated Condensed Balance Sheets

(In thousands except per share data)

February 28,2021

May 31, 2020

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

553,611

$

145,402

Accounts receivable, net

929,492

870,369

Inventories, net

533,211

408,898

Uniforms and other rental items in service

777,364

770,411

Income taxes, current

57,929

-

Prepaid expenses and other current assets

126,949

114,619

Total current assets

2,978,556

2,309,699

Property and equipment, net

1,329,930

1,403,065

Investments

264,581

214,847

Goodwill

2,895,251

2,870,020

Service contracts, net

418,318

451,529

Operating lease right-of-use assets, net

156,850

159,967

Other assets, net

304,011

260,758

$

8,347,497

$

7,669,885

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

237,857

$

230,995

Accrued compensation and related liabilities

224,641

127,417

Accrued liabilities

514,159

456,653

Income taxes, current

-

27,099

Operating lease liabilities, current

43,767

43,031

Debt due within one year

249,936

-

Total current liabilities

1,270,360

885,195

Long-term liabilities:

Debt due after one year

2,291,418

2,539,705

Deferred income taxes

389,553

388,579

Operating lease liabilities

119,071

122,695

Accrued liabilities

460,585

498,509

Total long-term liabilities

3,260,627

3,549,488

Shareholders' equity:

Preferred stock, no par value:

-

-

100,000 shares authorized, none outstanding

Common stock, no par value:

1,403,229

1,102,689

425,000,000 shares authorized

FY 2021: 188,913,700 issued and 105,039,174 outstanding

FY 2020: 186,793,207 issued and 103,415,368 outstanding

Paid-in capital

74,451

171,521

Retained earnings

7,688,425

7,296,509

Treasury stock:

(5,336,627)

(5,182,137)

FY 2021: 83,874,526 shares

FY 2020: 83,377,839 shares

Accumulated other comprehensive loss

(12,968)

(153,380)

Total shareholders' equity

3,816,510

3,235,202

$

8,347,497

$

7,669,885

Cintas Corporation

Consolidated Condensed Balance Sheets

(In thousands except per share data)

February 28, May 31, 2021 2020

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents $ 553,611 $ 145,402

Accounts receivable, net 929,492 870,369

Inventories, net 533,211 408,898

Uniforms and other rental items in service 777,364 770,411

Income taxes, current 57,929 -

Prepaid expenses and other current assets 126,949 114,619

Total current assets 2,978,556 2,309,699



Property and equipment, net 1,329,930 1,403,065



Investments 264,581 214,847

Goodwill 2,895,251 2,870,020

Service contracts, net 418,318 451,529

Operating lease right-of-use assets, net 156,850 159,967

Other assets, net 304,011 260,758

$ 8,347,497 $ 7,669,885



LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 237,857 $ 230,995

Accrued compensation and related liabilities 224,641 127,417

Accrued liabilities 514,159 456,653

Income taxes, current - 27,099

Operating lease liabilities, current 43,767 43,031

Debt due within one year 249,936 -

Total current liabilities 1,270,360 885,195



Long-term liabilities:

Debt due after one year 2,291,418 2,539,705

Deferred income taxes 389,553 388,579

Operating lease liabilities 119,071 122,695

Accrued liabilities 460,585 498,509

Total long-term liabilities 3,260,627 3,549,488



Shareholders' equity:

Preferred stock, no par value: - -

100,000 shares authorized, none outstanding

Common stock, no par value: 1,403,229 1,102,689

425,000,000 shares authorized

FY 2021: 188,913,700 issued and 105,039,174outstanding

FY 2020: 186,793,207 issued and 103,415,368outstanding

Paid-in capital 74,451 171,521

Retained earnings 7,688,425 7,296,509

Treasury stock: (5,336,627) (5,182,137)

FY 2021: 83,874,526 shares

FY 2020: 83,377,839 shares

Accumulated other comprehensive loss (12,968) (153,380)

Total shareholders' equity 3,816,510 3,235,202

$ 8,347,497 $ 7,669,885

Cintas Corporation

Consolidated Condensed Statements of Cash Flows

(Unaudited)

(In thousands)

Nine Months Ended

February 28,2021

February 29, 2020

Cash flows from operating activities:

Net income

$

843,246

$

731,452

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

Depreciation

182,132

175,261

Amortization of intangible assets and capitalized contract costs

107,689

107,232

Stock-based compensation

83,421

96,428

Gain on sale of operating assets

(21,861)

-

Deferred income taxes

(36,259)

5,013

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

Accounts receivable, net

(63,178)

(31,135)

Inventories, net

(123,678)

(17,780)

Uniforms and other rental items in service

(6,269)

(33,732)

Prepaid expenses and other current assets and capitalized contract costs

(76,971)

(95,169)

Accounts payable

5,113

14,271

Accrued compensation and related liabilities

97,474

(4,792)

Accrued liabilities and other

(1,357)

3,426

Income taxes, current

(84,687)

(15,926)

Net cash provided by operating activities

904,815

934,549

Cash flows from investing activities:

Capital expenditures

(100,410)

(189,379)

Purchases of investments

(7,873)

(10,461)

Proceeds from sale of operating assets, net of cash disposed

32,490

13,300

Acquisitions of businesses, net of cash acquired

(7,570)

(47,850)

Other, net

(5,301)

(2,090)

Net cash used in investing activities

(88,664)

(236,480)

Cash flows from financing activities:

Payments of commercial paper, net

-

(112,500)

Proceeds from exercise of stock-based compensation awards

120,049

81,547

Dividends paid

(371,818)

(268,042)

Repurchase of common stock

(154,490)

(261,327)

Other, net

(3,836)

30

Net cash used in financing activities

(410,095)

(560,292)

Effect of exchange rate changes on cash and cash equivalents

2,153

19

Net increase in cash and cash equivalents

408,209

137,796

Cash and cash equivalents at beginning of period

145,402

96,645

Cash and cash equivalents at end of period

$

553,611

$

234,441

View source version on businesswire.com: https://www.businesswire.com/news/home/20210317005130/en/

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