Business Wire | Jul 15, 2021 08:30AM EDT

Cintas Corporation Announces Fiscal 2021 Fourth Quarter and Full Year Results

Jul. 15, 2021

CINCINNATI--(BUSINESS WIRE)--Jul. 15, 2021--Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2021 fourth quarter ended May 31, 2021. Revenue for the fourth quarter of fiscal 2021 was $1.84 billion compared to $1.62 billion in last year's fourth quarter. Diluted earnings per share (EPS) were $2.47 in the fourth quarter of fiscal 2021, an increase of 83.0% from last year's fourth quarter diluted EPS of $1.35.

The organic revenue growth rate for the fourth 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 11.5%. The organic revenue growth rate for the Uniform Rental and Facility Services reportable operating segment was 13.7%. Organic revenue for the First Aid and Safety Services reportable operating segment declined 6.8%.

Gross margin for the fourth quarter of fiscal 2021 was $859.1 million compared to $707.8 million in last year's fourth quarter. Gross margin as a percentage of revenue increased 310 basis points to 46.8% for the fourth quarter of fiscal 2021 compared to 43.7% in the fourth quarter of fiscal 2020.

Operating income for the fourth quarter of fiscal 2021 of $356.4 million increased 71.8% from last year's fourth quarter operating income of $207.4 million. Operating income as a percentage of revenue increased 660 basis points to 19.4% in the fourth quarter of fiscal 2021 compared to 12.8% in the fourth quarter of fiscal 2020. Fiscal 2020 fourth quarter operating income was affected by many items caused by the COVID-19 pandemic including incremental allowances for doubtful accounts, inventory reserves, employee-partner termination costs, asset impairment charges, and lower incentive compensation expense.

Net income from continuing operations was $267.7 million for the fourth quarter of fiscal 2021, an increase of 85.2% from last year's fourth quarter net income from continuing operations of $144.6 million. Fourth quarter of fiscal 2021 diluted EPS was $2.47, an increase of 83.0% from last year's fourth quarter diluted EPS of $1.35.

During the fourth quarter of fiscal 2021 and our first quarter of fiscal 2022 to date, Cintas purchased $979.0 million of Cintas common stock under its buyback program. On June 15, 2021, Cintas paid shareholders $79.2 million in quarterly dividends in the aggregate.

For the fiscal year ended May 31, 2021, revenue was $7.12 billion compared to $7.09 billion for fiscal 2020. Diluted EPS for fiscal 2021 was $10.24 compared to $8.11 in fiscal 2020. For the fiscal year ended May 31, 2021, free cash flow, which is defined as net cash provided by operating activities less capital expenditures, was $1.22 billion, an increase of 14.7% compared to the fiscal year ended May 31, 2020.

Todd M. Schneider, Cintas' President and Chief Executive Officer, stated, "We are pleased with our fourth quarter financial results. They conclude a fiscal year of significant accomplishments. These include procuring hard-to-find and potentially lifesaving items such as facemasks and gloves, providing hygienically-cleaned healthcare scrubs and isolation gowns, and developing services including hand sanitizer dispensing and sanitizing spray services. Additionally, we improved shareholder returns by increasing the dollar amount of dividends paid and completing share repurchases. Finally, we issued our inaugural Environmental, Social and Governance, or ESG, report."

Mr. Schneider continued, "Our prospects for continued growth are great. Our value proposition is strong, and we have a vast total addressable market. Also, our continued investment in technology is a competitive advantage."

Mr. Schneider concluded, "For our fiscal 2022, we expect revenue to be in the range of $7.53 billion to $7.63 billion and diluted EPS to be in the range of $10.35 to $10.75. Please note the following regarding guidance:

* Our fiscal 2022 effective tax rate is expected to be in the range of 19.5% to 20.5% compared to a rate of 13.7% for fiscal 2021. The higher effective tax rate negatively impacts fiscal 2022 EPS guidance by about $0.85 and diluted EPS growth by about 800 basis points; * Guidance does not include any future share buybacks or potential tax reform; and * We remain in a dynamic environment that can continue to change. Our guidance contemplates a steadily improving economy absent any economic or pandemic-related setbacks."

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 fourth 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, 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

May 31, May 31, % 2021 2020 Change

Revenue:

Uniform rental and facility services $ 1,466,868 $ 1,270,970 15.4%

Other 368,793 348,614 5.8%

Total revenue 1,835,661 1,619,584 13.3%



Costs and expenses:

Cost of uniform rental and facility 766,441 716,602 7.0%services

Cost of other 210,170 195,162 7.7%

Selling and administrative expenses 502,604 500,386 0.4%



Operating income 356,446 207,434 71.8%



Interest income (98) (196) (50.0) %

Interest expense 24,551 25,952 (5.4)%



Income before income taxes 331,993 181,678 82.7%

Income taxes 64,271 37,093 73.3%

Net income $ 267,722 $ 144,585 85.2%



Basic earnings per share $ 2.53 $ 1.38 83.3%



Diluted earnings per share $ 2.47 $ 1.35 83.0%



Basic weighted average common shares 105,143 103,758 outstanding

Diluted weighted average common shares 107,726 106,231 outstanding

Cintas Corporation

Consolidated Condensed Statements of Income

(In thousands except per share data)

Twelve Months Ended

May 31,2021

May 31, 2020

% Change

Revenue:

Uniform rental and facility services

$

5,689,632

$

5,643,494

0.8%

Other

1,426,708

1,441,626

(1.0)%

Total revenue

7,116,340

7,085,120

0.4%

Costs and expenses:

Cost of uniform rental and facility services

2,983,514

3,055,145

(2.3)%

Cost of other

818,175

796,227

2.8%

Selling and administrative expenses

1,929,159

2,071,052

(6.9)%

Operating income

1,385,492

1,162,696

19.2%

Interest income

(467)

(988)

(52.7)%

Interest expense

98,210

105,393

(6.8)%

Income before income taxes

1,287,749

1,058,291

21.7%

Income taxes

176,781

181,931

(2.8)%

Income from continuing operations

1,110,968

876,360

26.8%

Loss from discontinued operations, net of tax

-

(323)

(100.0)%

Net income

$

1,110,968

$

876,037

26.8%

Basic earnings per share:

Continuing operations

$

10.52

$

8.36

25.8%

Discontinued operations

0.00

0.00

-%

Basic earnings per share

$

10.52

$

8.36

25.8%

Diluted earnings per share:

Continuing operations

$

10.24

$

8.11

26.3%

Discontinued operations

0.00

0.00

-%

Diluted earnings per share

$

10.24

$

8.11

26.3%

Basic weighted average common shares outstanding

104,874

103,816

Diluted weighted average common shares outstanding

107,707

107,012

Cintas Corporation

Consolidated Condensed Statements of Income

(In thousands except per share data)

Twelve Months Ended

May 31, May 31, % 2021 2020 Change

Revenue:

Uniform rental and facility services $ 5,689,632 $ 5,643,494 0.8%

Other 1,426,708 1,441,626 (1.0)%

Total revenue 7,116,340 7,085,120 0.4%



Costs and expenses:

Cost of uniform rental and facility 2,983,514 3,055,145 (2.3)%services

Cost of other 818,175 796,227 2.8%

Selling and administrative expenses 1,929,159 2,071,052 (6.9)%



Operating income 1,385,492 1,162,696 19.2%



Interest income (467) (988) (52.7)%

Interest expense 98,210 105,393 (6.8)%



Income before income taxes 1,287,749 1,058,291 21.7%

Income taxes 176,781 181,931 (2.8)%

Income from continuing operations 1,110,968 876,360 26.8%

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

Net income $ 1,110,968 $ 876,037 26.8%



Basic earnings per share:

Continuing operations $ 10.52 $ 8.36 25.8%

Discontinued operations 0.00 0.00 -%

Basic earnings per share $ 10.52 $ 8.36 25.8%



Diluted earnings per share:

Continuing operations $ 10.24 $ 8.11 26.3%

Discontinued operations 0.00 0.00 -%

Diluted earnings per share $ 10.24 $ 8.11 26.3%



Basic weighted average common shares 104,874 103,816 outstanding

Diluted weighted average common shares 107,707 107,012 outstanding

CINTAS CORPORATION SUPPLEMENTAL DATA

Gross Margin and Net Income Margin Results

Three Months Ended

May 31,2021

May 31, 2020

Uniform rental and facility services gross margin

47.7%

43.6%

Other gross margin

43.0%

44.0%

Total gross margin

46.8%

43.7%

Net income margin

14.6%

8.9%

Twelve Months Ended

May 31,2021

May 31, 2020

Uniform rental and facility services gross margin

47.6%

45.9%

Other gross margin

42.7%

44.8%

Total gross margin

46.6%

45.6%

Net income margin, continuing operations

15.6%

12.4%

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.

CINTAS CORPORATION SUPPLEMENTAL DATA



Gross Margin and Net Income Margin Results

Three Months Ended

May 31, May 31, 2021 2020



Uniform rental and facility services gross margin 47.7% 43.6%

Other gross margin 43.0% 44.0%

Total gross margin 46.8% 43.7%

Net income margin 14.6% 8.9%



Twelve Months Ended

May 31, May 31, 2021 2020



Uniform rental and facility services gross margin 47.6% 45.9%

Other gross margin 42.7% 44.8%

Total gross margin 46.6% 45.6%

Net income margin, continuing operations 15.6% 12.4%

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

Twelve Months Ended

May 31, May 31, 2021 2020

Net cash provided by operations $ 1,360,740 $ 1,291,483

Capital expenditures (143,470) (230,289)

Free cash flow $ 1,217,270 $ 1,061,194

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 Twelve Months Ended

May 31, May 31, Growth May 31, May 31, Growth 2021 2020 % 2021 2020 %

A B G I J O

Revenue $ 1,835,661 $ 1,619,584 13.3% $ 7,116,340 $ 7,085,120 0.4%

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

C D K L

Workdays in 66 65 261 260 the period



E F H M N P

Workdayadjusted $ 1,807,848 $ 1,619,584 11.6% $ 7,089,074 $ 7,085,120 0.1%revenuegrowth

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,divestitures

and foreign (0.1)% 0.1%currency

exchangeimpact, net



Organic 11.5% 0.2%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 May 31, 2021

Revenue $ 1,466,868 $ 186,917 $ 181,876 $ - $ 1,835,661

Gross margin $ 700,427 $ 80,294 $ 78,329 $ - $ 859,050

Selling andadministrative $ 388,627 $ 64,964 $ 49,013 $ - $ 502,604 expenses

Interest $ - $ - $ - $ (98) $ (98) income

Interest $ - $ - $ - $ 24,551 $ 24,551 expense

Income (loss)before income $ 311,800 $ 15,330 $ 29,316 $ (24,453) $ 331,993 taxes



For the three months ended May 31,2020

Revenue $ 1,270,970 $ 196,270 $ 152,344 $ - $ 1,619,584

Gross margin $ 554,368 $ 90,389 $ 63,063 $ - $ 707,820

Selling andadministrative $ 376,809 $ 57,599 $ 65,978 $ - $ 500,386 expenses

Interest $ - $ - $ - $ (196) $ (196) income

Interest $ - $ - $ - $ 25,952 $ 25,952 expense

Income (loss)before income $ 177,559 $ 32,790 $ (2,915) $ (25,756) $ 181,678 taxes



For the twelve months ended May 31, 2021

Revenue $ 5,689,632 $ 784,291 $ 642,417 $ - $ 7,116,340

Gross margin $ 2,706,118 $ 332,336 $ 276,197 $ - $ 3,314,651

Selling andadministrative $ 1,480,278 $ 251,153 $ 197,728 $ - $ 1,929,159 expenses

Interest $ - $ - $ - $ (467) $ (467) income

Interest $ - $ - $ - $ 98,210 $ 98,210 expense

Income (loss)before income $ 1,225,840 $ 81,183 $ 78,469 $ (97,743) $ 1,287,749 taxes



For the twelve months ended May 31, 2020

Revenue $ 5,643,494 $ 708,569 $ 733,057 $ - $ 7,085,120

Gross margin $ 2,588,349 $ 338,661 $ 306,738 $ - $ 3,233,748

Selling andadministrative $ 1,583,791 $ 231,769 $ 255,492 $ - $ 2,071,052 expenses

Interest $ - $ - $ - $ (988) $ (988) income

Interest $ - $ - $ - $ 105,393 $ 105,393 expense

Income (loss)before income $ 1,004,558 $ 106,892 $ 51,246 $ (104,405) $ 1,058,291 taxes

Cintas Corporation

Consolidated Condensed Balance Sheets

(In thousands except per share data)

May 31,2021

May 31, 2020

ASSETS

Current assets:

Cash and cash equivalents

$

493,640

$

145,402

Accounts receivable, net

901,710

870,369

Inventories, net

481,797

408,898

Uniforms and other rental items in service

810,104

770,411

Income taxes, current

22,282

-

Prepaid expenses and other current assets

133,776

114,619

Total current assets

2,843,309

2,309,699

Property and equipment, net

1,318,438

1,403,065

Investments

274,616

214,847

Goodwill

2,913,069

2,870,020

Service contracts, net

408,445

451,529

Operating lease right-of-use assets, net

168,532

159,967

Other assets, net

310,414

260,758

$

8,236,823

$

7,669,885

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

230,786

$

230,995

Accrued compensation and related liabilities

241,469

127,417

Accrued liabilities

518,910

456,653

Income taxes, current

-

27,099

Operating lease liabilities, current

43,850

43,031

Debt due within one year

899,070

-

Total current liabilities

1,934,085

885,195

Long-term liabilities:

Debt due after one year

1,642,833

2,539,705

Deferred income taxes

386,647

388,579

Operating lease liabilities

130,774

122,695

Accrued liabilities

454,637

498,509

Total long-term liabilities

2,614,891

3,549,488

Shareholders' equity:

Preferred stock, no par value:

-

-

100,000 shares authorized, none outstanding

Common stock, no par value:

1,417,343

1,102,689

425,000,000 shares authorized

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

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

Paid-in capital

98,859

171,521

Retained earnings

7,877,015

7,296,509

Treasury stock:

(5,736,258)

(5,182,137)

FY 2021: 85,009,794 shares

FY 2020: 83,377,839 shares

Accumulated other comprehensive income (loss)

30,888

(153,380)

Total shareholders' equity

3,687,847

3,235,202

$

8,236,823

$

7,669,885

Cintas Corporation

Consolidated Condensed Balance Sheets

(In thousands except per share data)

May 31, May 31, 2021 2020



ASSETS

Current assets:

Cash and cash equivalents $ 493,640 $ 145,402

Accounts receivable, net 901,710 870,369

Inventories, net 481,797 408,898

Uniforms and other rental items in service 810,104 770,411

Income taxes, current 22,282 -

Prepaid expenses and other current assets 133,776 114,619

Total current assets 2,843,309 2,309,699



Property and equipment, net 1,318,438 1,403,065



Investments 274,616 214,847

Goodwill 2,913,069 2,870,020

Service contracts, net 408,445 451,529

Operating lease right-of-use assets, net 168,532 159,967

Other assets, net 310,414 260,758

$ 8,236,823 $ 7,669,885



LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 230,786 $ 230,995

Accrued compensation and related liabilities 241,469 127,417

Accrued liabilities 518,910 456,653

Income taxes, current - 27,099

Operating lease liabilities, current 43,850 43,031

Debt due within one year 899,070 -

Total current liabilities 1,934,085 885,195



Long-term liabilities:

Debt due after one year 1,642,833 2,539,705

Deferred income taxes 386,647 388,579

Operating lease liabilities 130,774 122,695

Accrued liabilities 454,637 498,509

Total long-term liabilities 2,614,891 3,549,488



Shareholders' equity:

Preferred stock, no par value: - -

100,000 shares authorized, none outstanding

Common stock, no par value: 1,417,343 1,102,689

425,000,000 shares authorized

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

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

Paid-in capital 98,859 171,521

Retained earnings 7,877,015 7,296,509

Treasury stock: (5,736,258) (5,182,137)

FY 2021: 85,009,794 shares

FY 2020: 83,377,839 shares

Accumulated other comprehensive income (loss) 30,888 (153,380)

Total shareholders' equity 3,687,847 3,235,202

$ 8,236,823 $ 7,669,885

Cintas Corporation

Consolidated Condensed Statements of Cash Flows

(In thousands)

Twelve Months Ended

May 31,2021

May 31, 2020

Cash flows from operating activities:

Net income

$

1,110,968

$

876,037

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

Depreciation

243,836

235,905

Amortization of intangible assets and capitalized contract costs

144,115

143,148

Stock-based compensation

112,035

115,435

Net gain on sale of operating assets

(22,030)

-

Long-lived asset impairment

5,114

9,220

Deferred income taxes

(42,242)

(16,252)

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

Accounts receivable, net

(32,576)

39,681

Inventories, net

(75,501)

(74,773)

Uniforms and other rental items in service

(35,659)

12,773

Prepaid expenses and other current assets and capitalized contract costs

(102,600)

(110,248)

Accounts payable

(2,604)

2,629

Accrued compensation and related liabilities

113,769

(26,476)

Accrued liabilities and other

(6,735)

49,906

Income taxes, current

(49,150)

34,498

Net cash provided by operating activities

1,360,740

1,291,483

Cash flows from investing activities:

Capital expenditures

(143,470)

(230,289)

Purchases of investments

(4,299)

(10,031)

Proceeds from sale of operating assets, net of cash disposed

31,705

13,300

Acquisitions of businesses, net of cash acquired

(10,038)

(53,720)

Other, net

(11,113)

(4,658)

Net cash used in investing activities

(137,215)

(285,398)

Cash flows from financing activities:

Payments of commercial paper, net

-

(112,500)

Repayment of debt

-

(200,000)

Proceeds from exercise of stock-based compensation awards

129,957

90,519

Dividends paid

(451,327)

(267,956)

Repurchase of common stock

(554,121)

(464,518)

Other, net

(4,377)

(752)

Net cash used in financing activities

(879,868)

(955,207)

Effect of exchange rate changes on cash and cash equivalents

4,581

(2,121)

Net increase in cash and cash equivalents

348,238

48,757

Cash and cash equivalents at beginning of year

145,402

96,645

Cash and cash equivalents at end of year

$

493,640

$

145,402

View source version on businesswire.com: https://www.businesswire.com/news/home/20210715005179/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