Cintas Corporation Announces Fiscal 2023 First Quarter Results

CINCINNATI, September 28, 2022--(BUSINESS WIRE)--Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2023 first quarter ended August 31, 2022. Revenue for the first quarter of fiscal 2023 was $2.17 billion compared to $1.90 billion in last year’s first quarter, an increase of 14.2%. The organic revenue growth rate for the first quarter of fiscal 2023, which adjusts for the impacts of acquisitions, divestitures and foreign currency exchange rate fluctuations, was 13.9%.

Gross margin for the first quarter of fiscal 2023 was $1,028.1 million compared to $902.8 million in last year’s first quarter, an increase of 13.9%. Gross margin as a percentage of revenue was 47.5% for the first quarter of fiscal 2023 compared to 47.6% in last year's first quarter. Energy expenses comprised of gasoline, natural gas and electricity were 30 basis points higher during the first quarter of fiscal 2023 compared to last year's first quarter.

Operating income for the first quarter of fiscal 2023 was $440.1 million compared to $394.1 million in last year's first quarter. Operating income as a percentage of revenue was 20.3% in the first quarter of fiscal 2023 compared to 20.8% in last year's first quarter. Fiscal 2022 first quarter operating income included a $12.1 million gain on the sale of operating assets which was recorded as a reduction of selling and administrative expenses. Excluding the fiscal 2022 first quarter gain, fiscal 2023 first quarter operating income increased 15.2% and operating income as a percentage of revenue increased 20 basis points to 20.3% from 20.1% in last year's first quarter.

Net income was $351.7 million for the first quarter of fiscal 2023 compared to $331.2 million in last year's first quarter. First quarter of fiscal 2023 diluted earnings per share (EPS) was $3.39 compared to $3.11 in last year's first quarter. Fiscal 2022 first quarter diluted EPS included $0.09 from the gain on the sale of operating assets and related income tax impact. Excluding the fiscal 2022 first quarter gain and the related income tax impact, fiscal 2023 first quarter diluted EPS of $3.39 increased 12.3% compared to $3.02 in last year's first quarter.

Fiscal 2023 first quarter net cash provided by operating activities was $298.2 million compared to $262.1 million in last year's first quarter, an increase of 13.8%. On June 15, 2022, Cintas paid shareholders an aggregate of $97.7 million in quarterly cash dividends. During the first quarter of fiscal 2023, Cintas purchased $210.8 million of Cintas common stock under its buyback program.

Todd M. Schneider, Cintas' President and Chief Executive Officer, stated, "We are pleased with our fiscal 2023 first quarter financial results. Each of our operating segments grew revenue at a double-digit rate. Adjusted diluted EPS also increased by double-digits, benefiting from operating income margin expansion despite high inflation. These financial results are the product of the continued focus of our employee-partners on providing businesses with the image, safety, cleanliness and compliance needed to help our customers get Ready for the Workday®."

Mr. Schneider concluded, "We are increasing our full fiscal year financial guidance. We are raising our annual revenue expectations from a range of $8.47 billion to $8.58 billion to a range of $8.58 billion to $8.67 billion and diluted EPS from a range of $11.90 to $12.30 to a range of $12.30 to $12.65."

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

Fiscal 2023

Fiscal 2023

Revenue Guidance

($s in millions)

Fiscal 2022

Low End
of Range

Growth vs.
Fiscal 2022

High End
of Range

Growth vs.
Fiscal 2022

Total Revenue

$

7,854.5

$

8,580.0

9.2

%

$

8,670.0

10.4

%

Fiscal 2022

Fiscal 2023

Fiscal 2023

Earnings Per Share Guidance

($s in millions, except EPS)

Operating
Income

Tax
Rate

EPS

Low End
of Range

Growth vs.
Fiscal 2022

High End
of Range

Growth vs.
Fiscal 2022

Reported

$

1,587.4

17.5

%

$

11.65

Q1 Gain on Sale of Operating Assets

(12.1

)

0.1

%

(0.09

)

Q3 Gain on an Equity Method Investment

(30.2

)

0.3

%

(0.28

)

After Above Items

$

1,545.1

17.9

%

$

11.28

$

12.30

9.0

%

$

12.65

12.1

%

  • Fiscal year 2023 operating income is expected to be in the range of $1.72 billion to $1.76 billion compared to $1.55 billion in fiscal year 2022, adjusted to exclude the gains in the table above.

  • Fiscal year 2023 interest expense is expected to be approximately $110.0 million compared to $88.8 million in fiscal year 2022, due in part to higher interest rates.

  • Fiscal year 2023 effective tax rate is expected to be approximately 20.0% compared to a rate of 17.9% in fiscal year 2022, after excluding the gains in the table above and their related tax impacts from the reported rate of 17.5%. The expected higher effective tax rate will negatively impact fiscal year 2023 diluted EPS by approximately $0.32 and diluted EPS growth by approximately 290 basis points.

  • Our diluted EPS guidance includes no future share buybacks.

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

Cintas

Cintas Corporation helps more than one million businesses of all types and sizes get Ready to open their doors with confidence every day by providing products and services that help keep their customers’ facilities and employees clean, safe and looking their best. With offerings including uniforms, mats, mops, restroom supplies, first aid and safety products, fire extinguishers and testing, and safety training, Cintas helps customers get Ready for the Workday®. Headquartered in Cincinnati, Cintas is a publicly held Fortune 500 company traded over the Nasdaq Global Select Market under the symbol CTAS and is a component of both the Standard & Poor’s 500 Index and Nasdaq-100 Index.

Cintas will host a live webcast to review the fiscal 2023 first 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 including the risk of recession; 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, 2022 and in our reports on Forms 10-Q and 8-K. The risks and uncertainties described herein are not the only ones we may face. Additional risks and uncertainties presently not known to us, or that we currently believe to be immaterial, may also harm our business.

Cintas Corporation

Consolidated Condensed Statements of Income

(Unaudited)

(In thousands except per share data)

Three Months Ended

August 31,
2022

August 31,
2021

%
Change

Revenue:

Uniform rental and facility services

$

1,697,772

$

1,508,176

12.6

%

Other

468,682

388,774

20.6

%

Total revenue

2,166,454

1,896,950

14.2

%

Costs and expenses:

Cost of uniform rental and facility services

890,766

779,301

14.3

%

Cost of other

247,576

214,893

15.2

%

Selling and administrative expenses

587,992

508,655

15.6

%

Operating income

440,120

394,101

11.7

%

Interest income

(155

)

(56

)

176.8

%

Interest expense

27,720

21,854

26.8

%

Income before income taxes

412,555

372,303

10.8

%

Income taxes

60,866

41,124

48.0

%

Net income

$

351,689

$

331,179

6.2

%

Basic earnings per share

$

3.45

$

3.19

8.2

%

Diluted earnings per share

$

3.39

$

3.11

9.0

%

Basic weighted average common shares outstanding

101,428

103,295

Diluted weighted average common shares outstanding

103,337

105,944

CINTAS CORPORATION SUPPLEMENTAL DATA

Gross Margin and Net Income Margin Results

Three Months Ended

August 31,
2022

August 31,
2021

Uniform rental and facility services gross margin

47.5

%

48.3

%

Other gross margin

47.2

%

44.7

%

Total gross margin

47.5

%

47.6

%

Net income margin

16.2

%

17.5

%

Reconciliation of Non-GAAP Financial Measures and Regulation G Disclosure

The press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. To supplement its consolidated condensed financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), the Company provides the additional non-GAAP financial measures of operating income, earnings per diluted share and cash flow. The Company believes that these non-GAAP financial measures are appropriate to enhance understanding of its past performance as well as prospects for future performance. A reconciliation of the differences between these non-GAAP financial measures with the most directly comparable financial measure calculated in accordance with GAAP are shown in the tables below.

Operating Income Results

Three Months Ended

(In thousands)

August 31,
2022

% of
Revenue

August 31,
2021

% of
Revenue

Growth vs.
Fiscal 2022

Operating income

$

440,120

20.3

%

$

394,101

20.8

%

11.7

%

Gain on sale of operating assets

(12,178

)

Operating income excluding above item

$

440,120

20.3

%

$

381,923

20.1

%

15.2

%

Earnings Per Share Results

Three Months Ended

August 31,
2022

August 31,
2021

Growth vs.
Fiscal 2022

Diluted EPS

$

3.39

$

3.11

9.0

%

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

(0.09

)

Diluted EPS excluding above item

$

3.39

$

3.02

12.3

%

Computation of Free Cash Flow

Three Months Ended

(In thousands)

August 31,
2022

August 31,
2021

Net cash provided by operations

$

298,156

$

262,141

Capital expenditures

(70,016

)

(48,748

)

Free cash flow

$

228,140

$

213,393

Management uses free cash flow to assess the financial performance of the Company. Management believes that free cash flow is useful to investors because it relates the operating cash flow of the Company to the capital that is spent to continue, improve and grow business operations.

SUPPLEMENTAL SEGMENT DATA

(In thousands)

Uniform Rental
and Facility
Services

First Aid
and Safety
Services

All
Other

Corporate

Total

For the three months ended August 31, 2022

Revenue

$

1,697,772

$

234,161

$

234,521

$

$

2,166,454

Gross margin

$

807,006

$

116,137

$

104,969

$

$

1,028,112

Selling and administrative expenses

$

442,235

$

75,291

$

70,466

$

$

587,992

Interest income

$

$

$

$

(155

)

$

(155

)

Interest expense

$

$

$

$

27,720

$

27,720

Income (loss) before income taxes

$

364,771

$

40,846

$

34,503

$

(27,565

)

$

412,555

For the three months ended August 31, 2021

Revenue

$

1,508,176

$

199,116

$

189,658

$

$

1,896,950

Gross margin

$

728,875

$

89,275

$

84,606

$

$

902,756

Selling and administrative expenses

$

399,493

$

63,547

$

45,615

$

$

508,655

Interest income

$

$

$

$

(56

)

$

(56

)

Interest expense

$

$

$

$

21,854

$

21,854

Income (loss) before income taxes

$

329,382

$

25,728

$

38,991

$

(21,798

)

$

372,303

Cintas Corporation

Consolidated Condensed Balance Sheets

(In thousands except per share data)

August 31,
2022

May 31,
2022

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

74,558

$

90,471

Accounts receivable, net

1,082,783

1,006,220

Inventories, net

473,888

472,150

Uniforms and other rental items in service

953,717

916,706

Income taxes, current

21,708

Prepaid expenses and other current assets

162,844

124,728

Total current assets

2,747,790

2,631,983

Property and equipment, net

1,329,131

1,323,673

Investments

239,335

242,873

Goodwill

3,037,278

3,042,976

Service contracts, net

379,379

391,638

Operating lease right-of-use assets, net

174,697

170,003

Other assets, net

353,416

344,110

$

8,261,026

$

8,147,256

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

292,321

$

251,504

Accrued compensation and related liabilities

176,865

236,992

Accrued liabilities

543,566

588,948

Income taxes, current

35,783

Operating lease liabilities, current

43,539

43,872

Debt due within one year

507,467

311,574

Total current liabilities

1,599,541

1,432,890

Long-term liabilities:

Debt due after one year

2,484,602

2,483,932

Deferred income taxes

487,755

473,777

Operating lease liabilities

134,010

129,064

Accrued liabilities

325,492

319,397

Total long-term liabilities

3,431,859

3,406,170

Shareholders’ equity:

Preferred stock, no par value:

100,000 shares authorized, none outstanding

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

1,878,837

1,771,917

425,000,000 shares authorized

FY 2023: 191,654,188 issued and 101,532,642 outstanding

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

Retained earnings

8,953,391

8,719,163

Treasury stock:

(7,690,726

)

(7,290,801

)

FY 2023: 90,121,546 shares

FY 2022: 89,126,706 shares

Accumulated other comprehensive income

88,124

107,917

Total shareholders’ equity

3,229,626

3,308,196

$

8,261,026

$

8,147,256

Cintas Corporation

Consolidated Condensed Statements of Cash Flows

(Unaudited)

(In thousands)

Three Months Ended

August 31,
2022

August 31,
2021

Cash flows from operating activities:

Net income

$

351,689

$

331,179

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

Depreciation

63,057

60,955

Amortization of intangible assets and capitalized contract costs

36,989

36,994

Stock-based compensation

26,282

36,496

Gain on sale of operating assets

(12,178

)

Deferred income taxes

14,829

22,887

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

Accounts receivable, net

(79,397

)

(27,742

)

Inventories, net

(2,476

)

14,986

Uniforms and other rental items in service

(39,327

)

(39,274

)

Prepaid expenses and other current assets and capitalized contract costs

(63,641

)

(36,724

)

Accounts payable

41,681

(26,272

)

Accrued compensation and related liabilities

(59,957

)

(85,834

)

Accrued liabilities and other

(49,105

)

(24,342

)

Income taxes, current

57,532

11,010

Net cash provided by operating activities

298,156

262,141

Cash flows from investing activities:

Capital expenditures

(70,016

)

(48,748

)

Purchases of investments

(5,930

)

(8,738

)

Proceeds from sale of operating assets, net of cash disposed

15,070

Acquisitions of businesses, net of cash acquired

(7,060

)

(35,725

)

Other, net

(3,589

)

(6,180

)

Net cash used in investing activities

(86,595

)

(84,321

)

Cash flows from financing activities:

Issuance of commercial paper, net

196,000

326,000

Repayment of debt

(250,000

)

Proceeds from exercise of stock-based compensation awards

1,047

72,896

Dividends paid

(97,655

)

(79,135

)

Repurchase of common stock

(320,334

)

(659,235

)

Other, net

(5,257

)

(610

)

Net cash used in financing activities

(226,199

)

(590,084

)

Effect of exchange rate changes on cash and cash equivalents

(1,275

)

(1,627

)

Net decrease in cash and cash equivalents

(15,913

)

(413,891

)

Cash and cash equivalents at beginning of period

90,471

493,640

Cash and cash equivalents at end of period

$

74,558

$

79,749

View source version on businesswire.com: https://www.businesswire.com/news/home/20220928005124/en/

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