Business Wire | Dec 22, 2021 08:30AM EST

Cintas Corporation Announces Fiscal 2022 Second Quarter Results

Dec. 22, 2021

CINCINNATI--(BUSINESS WIRE)--Dec. 22, 2021--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(r)."

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(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 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, November 30, % 2021 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 817,261 739,811 10.5 %services

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 103,646 104,999 outstanding

Diluted weighted average common shares 106,122 107,981 outstanding

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



Cintas Corporation

Consolidated Condensed Statements of Income

(Unaudited)

(In thousands except per share data)



Six Months Ended

November 30, November 30, % 2021 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 1,596,562 1,455,223 9.7 %services

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 103,463 104,546 outstanding

Diluted weighted average common shares 106,026 107,556 outstanding

CINTAS CORPORATION SUPPLEMENTAL DATA



Gross Margin and Net Income Margin Results



Three Months Ended Six Months Ended

November November November November 30, 30, 30, 30, 2021 2020 2021 2020



Uniform rental and facilityservices

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 % of November % of 30, Revenue 30, Revenue 2021 2020

Operating income $ 381,228 19.8 % $ 352,872 20.1 %

Loss (gain) on sale of certain 49 (17,963 ) operating assets

Operating income excluding above $ 381,277 19.8 % $ 334,909 19.1 %item



Six Months Ended

November % of November % of 30, Revenue 30, Revenue 2021 2020

Operating income $ 775,329 20.3 % $ 702,578 20.1 %

Gain on sale of certain operating (12,129 ) (17,963 ) assets

Operating income excluding above $ 763,200 20.0 % $ 684,615 19.5 %item

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

%



Earnings Per Share Results



Three Months Ended

November November Growth 30, 30, vs. 2021 2020 Fiscal 2021

Diluted EPS $ 2.76 $ 2.62 5.3 %

Pre-tax gain and the related tax benefit onsale of certain

operating assets 0.00 (0.25 )

Diluted EPS excluding above item $ 2.76 $ 2.37 16.5 %



Six Months Ended

November November Growth 30, 30, vs. 2021 2020 Fiscal 2021

Diluted EPS $ 5.87 $ 5.40 8.7 %

Pre-tax gain and the related tax benefit onsale 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



Computation of Free Cash Flow



Six Months Ended

November 30, November 30, 2021 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 First Aid Rental and Safety All Corporate Total and Facility Services Other Services

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 andadministrative $ 380,395 $ 65,957 $ 57,561 $ - $ 503,913 expenses

Interest $ - $ - $ - $ (56 ) $ (56 )income

Interest $ - $ - $ - $ 21,902 $ 21,902 expense

Income (loss)before income $ 337,615 $ 22,077 $ 21,536 $ (21,846 ) $ 359,382 taxes



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 andadministrative $ 355,068 $ 62,091 $ 49,853 $ - $ 467,012 expenses

Interest $ - $ - $ - $ (218 ) $ (218 )income

Interest $ - $ - $ - $ 24,557 $ 24,557 expense

Income (loss)before income $ 315,609 $ 21,506 $ 15,757 $ (24,339 ) $ 328,533 taxes



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 andadministrative $ 779,888 $ 129,504 $ 103,176 $ - $ 1,012,568 expenses

Interest $ - $ - $ - $ (112 ) $ (112 )income

Interest $ - $ - $ - $ 43,756 $ 43,756 expense

Income (loss)before income $ 666,997 $ 47,805 $ 60,527 $ (43,644 ) $ 731,685 taxes



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 andadministrative $ 719,039 $ 125,668 $ 98,800 $ - $ 943,507 expenses

Interest $ - $ - $ - $ (282 ) $ (282 )income

Interest $ - $ - $ - $ 49,107 $ 49,107 expense

Income (loss)before income $ 630,637 $ 40,033 $ 31,908 $ (48,825 ) $ 653,753 taxes

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 Balance Sheets

(In thousands except per share data)



November 30, May 31, 2021 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 103,664,439outstanding

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

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20211222005076/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