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Cintas Corporation Announces Fiscal 2022 Fourth Quarter and Full Year Results

·16 min read

CINCINNATI, July 14, 2022--(BUSINESS WIRE)--Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2022 fourth quarter ended May 31, 2022. Revenue for the fourth quarter of fiscal 2022 was $2.07 billion compared to $1.84 billion in last year’s fourth quarter, an increase of 13.0%. The organic revenue growth rate for the fourth quarter of fiscal 2022, which adjusts for the impacts of acquisitions, divestitures and foreign currency exchange rate fluctuations, was 12.7%. The organic revenue growth rates for the Uniform Rental and Facility Services and First Aid and Safety Services reportable operating segments were 10.5% and 15.1%, respectively.

Gross margin for the fourth quarter of fiscal 2022 was $946.2 million compared to $859.1 million in last year’s fourth quarter, an increase of 10.1%. Gross margin as a percentage of revenue was 45.6% for the fourth quarter of fiscal 2022 compared to 46.8% in last year's fourth quarter. Operating income for the fourth quarter of fiscal 2022 was $404.4 million compared to $356.4 million in last year's fourth quarter, an increase of 13.5%. Operating income as a percentage of revenue was 19.5% in the fourth quarter of fiscal 2022 compared to 19.4% in last year's fourth quarter.

Net income was $294.5 million for the fourth quarter of fiscal 2022 compared to $267.7 million in last year's fourth quarter. Fourth quarter of fiscal 2022 diluted earnings per share (EPS) were $2.81 compared to $2.47 in last year's fourth quarter, an increase of 13.8%.

Fiscal 2022 fourth quarter free cash flow, defined as net cash provided by operating activities less capital expenditures, increased 15.2% compared to fiscal 2021, to $475.7 million. On June 15, 2022, Cintas paid shareholders an aggregate of $98.2 million in quarterly cash dividends. During the fourth quarter of fiscal 2022 and through July 13, 2022, Cintas purchased $496.5 million of Cintas common stock under its buyback program.

Todd M. Schneider, Cintas' President and Chief Executive Officer, stated, "We are pleased with our fourth quarter financial results which were led by a strong increase in revenue. Challenged with finding labor to run their businesses, heightened concerns over sanitization, and inflationary labor and purchasing costs, businesses increasingly outsource to Cintas to help them get Ready for the Workday®. We provide products and services better, faster, and economically, enabling businesses to concentrate on their core competencies."

For the fiscal year ended May 31, 2022, revenue was $7.85 billion, compared to $7.12 billion for fiscal 2021, an increase of 10.4%. Diluted EPS for fiscal 2022 was $11.65 compared to $10.24 in fiscal 2021, an increase of 13.8%. Fiscal year 2022 diluted EPS included a gain on sale of operating assets and a gain on an equity method investment transaction. Adjusted to exclude the gains, diluted EPS for fiscal 2022 was $11.28, an increase of 10.2%. For the fiscal year ended May 31, 2022, free cash flow was $1.30 billion, an increase of 6.5% compared to the fiscal year ended May 31, 2021.

Mr. Schneider continued, "We achieved significant accomplishments this fiscal year despite significant inflation, including delivering upon our stated financial goals of mid- to high-single digit organic revenue growth rates, incremental operating margins in the range of 20% to 30%, double-digit EPS growth, and the allocation of capital to improve shareholder returns. We achieved these great results by productively selling new business, penetrating existing customers with more products and services, providing excellent service, driving operational efficiencies, and obtaining price increases. I thank our employees, whom we call "partners", for their continued focus on our customers, our shareholders, and each other."

Mr. Schneider concluded, "For our fiscal year 2023, we expect revenue to be in the range of $8.47 billion to $8.58 billion and diluted EPS to be in the range of $11.90 to $12.30. The following table provides a comparison of fiscal 2022 revenue and diluted EPS to fiscal 2023 guidance.

Fiscal 2023

Fiscal 2023

Fiscal

Low end

Growth

High end

Growth

2022

of Range

vs. 2022

of Range

vs. 2022

Revenue Guidance

($s in millions)

Total Revenue

$

7,854.5

$

8,470.0

7.8

%

$

8,580.0

9.2

%

Fiscal 2022

Fiscal 2023

Fiscal 2023

Operating

Tax

Low end

Growth

High end

Growth

Income

Rate

EPS

of Range

vs. 2022

of Range

vs. 2022

Earnings Per Share Guidance

($s in millions, except EPS)

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

$

11.90

5.5

%

$

12.30

9.0

%

  • Fiscal year 2023 operating income is expected to be in the range of $1.68 billion to $1.73 billion, compared to $1.55 billion in fiscal 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 2022, after excluding the gains and their related tax impacts from the reported rate of 17.5%. The expected higher effective tax rate will negatively impact fiscal 2023 diluted EPS by approximately $0.32 and diluted EPS growth by approximately 290 basis points.

  • Our diluted EPS guidance includes share buybacks through July 13, 2022 but does not include the impact of any 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®. 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 fourth quarter and full year 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; 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, 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

May 31,
2022

May 31,
2021

%

Change

Revenue:

Uniform rental and facility services

$

1,630,213

$

1,466,868

11.1

%

Other

444,473

368,793

20.5

%

Total revenue

2,074,686

1,835,661

13.0

%

Costs and expenses:

Cost of uniform rental and facility services

885,789

766,441

15.6

%

Cost of other

242,702

210,170

15.5

%

Selling and administrative expenses

541,759

502,604

7.8

%

Operating income

404,436

356,446

13.5

%

Interest income

(74

)

(98

)

(24.5

)%

Interest expense

23,058

24,551

(6.1

)%

Income before income taxes

381,452

331,993

14.9

%

Income taxes

86,991

64,271

35.4

%

Net income

$

294,461

$

267,722

10.0

%

Basic earnings per share

$

2.87

$

2.53

13.4

%

Diluted earnings per share

$

2.81

$

2.47

13.8

%

Basic weighted average common shares outstanding

102,375

105,143

Diluted weighted average common shares outstanding

104,427

107,726

Cintas Corporation

Consolidated Condensed Statements of Income

(In thousands except per share data)

Twelve Months Ended

May 31,
2022

May 31,
2021

%

Change

Revenue:

Uniform rental and facility services

$

6,226,980

$

5,689,632

9.4

%

Other

1,627,479

1,426,708

14.1

%

Total revenue

7,854,459

7,116,340

10.4

%

Costs and expenses:

Cost of uniform rental and facility services

3,316,433

2,983,514

11.2

%

Cost of other

905,780

818,175

10.7

%

Selling and administrative expenses

2,044,876

1,929,159

6.0

%

Operating income

1,587,370

1,385,492

14.6

%

Interest income

(242

)

(467

)

(48.2

)%

Interest expense

88,844

98,210

(9.5

)%

Income before income taxes

1,498,768

1,287,749

16.4

%

Income taxes

263,011

176,781

48.8

%

Net income

$

1,235,757

$

1,110,968

11.2

%

Basic earnings per share

$

11.92

$

10.52

13.3

%

Diluted earnings per share

$

11.65

$

10.24

13.8

%

Basic weighted average common shares outstanding

103,172

104,874

Diluted weighted average common shares outstanding

105,523

107,707

CINTAS CORPORATION SUPPLEMENTAL DATA

Gross Margin and Net Income Margin Results

Three Months Ended

Twelve Months Ended

May 31,
2022

May 31,
2021

May 31,
2022

May 31,
2021

Uniform rental and facility services gross margin

45.7

%

47.7

%

46.7

%

47.6

%

Other gross margin

45.4

%

43.0

%

44.3

%

42.7

%

Total gross margin

45.6

%

46.8

%

46.2

%

46.6

%

Net income margin

14.2

%

14.6

%

15.7

%

15.6

%

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, effective tax rate, 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

Twelve Months Ended

(In thousands)

May 31,
2022

% of
Revenue

Operating income

$

1,587,370

20.2

%

Q1 Gain on sale of operating assets

(12,129

)

Q3 Gain on equity method investment transaction (1)

(30,151

)

Operating income excluding above items

$

1,545,090

19.7

%

(1)

In connection with the acquisition of the remaining interest in an equity method investment during the third quarter of fiscal 2022, the Company was required by U.S. GAAP to remeasure its existing interest in the equity method investment at its acquisition-date fair value and recognize the resulting gain in operating income.

Effective Tax Rate Results

Twelve Months Ended

(In thousands)

May 31,
2022

Effective Tax Rate

17.5

%

Q1 Gain on sale of operating assets

0.1

%

Q3 Gain on equity method investment transaction

0.3

%

Effective Tax Rate excluding above items

17.9

%

Earnings Per Share Results

Twelve Months Ended

May 31,
2022

Growth vs.
Fiscal 2021

Diluted EPS

$

11.65

13.8

%

Q1 Pre-tax gain and the related tax benefit on sale of certain operating assets

(0.09

)

Q3 Pre-tax gain and the related tax benefit on equity method investment transaction

(0.28

)

Diluted EPS excluding above items

$

11.28

10.2

%

Computation of Free Cash Flow

Three Months Ended

Twelve Months Ended

May 31,
2022

May 31,
2021

May 31,
2022

May 31,
2021

Net cash provided by operations

$

550,570

$

455,925

$

1,537,625

$

1,360,740

Capital expenditures

(74,821

)

(43,060

)

(240,672

)

(143,470

)

Free cash flow

$

475,749

$

412,865

$

1,296,953

$

1,217,270

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 May 31, 2022

Revenue

$

1,630,213

$

218,224

$

226,249

$

$

2,074,686

Gross margin

$

744,424

$

100,680

$

101,091

$

$

946,195

Selling and administrative expenses

$

413,921

$

68,026

$

59,812

$

$

541,759

Interest income

$

$

$

$

(74

)

$

(74

)

Interest expense

$

$

$

$

23,058

$

23,058

Income (loss) before income taxes

$

330,503

$

32,654

$

41,279

$

(22,984

)

$

381,452

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 and administrative expenses

$

388,627

$

64,964

$

49,013

$

$

502,604

Interest income

$

$

$

$

(98

)

$

(98

)

Interest expense

$

$

$

$

24,551

$

24,551

Income (loss) before income taxes

$

311,800

$

15,330

$

29,316

$

(24,453

)

$

331,993

For the twelve months ended May 31, 2022

Revenue

$

6,226,980

$

832,458

$

795,021

$

$

7,854,459

Gross margin

$

2,910,547

$

372,193

$

349,506

$

$

3,632,246

Selling and administrative expenses

$

1,557,057

$

265,430

$

222,389

$

$

2,044,876

Interest income

$

$

$

$

(242

)

$

(242

)

Interest expense

$

$

$

$

88,844

$

88,844

Income (loss) before income taxes

$

1,353,490

$

106,763

$

127,117

$

(88,602

)

$

1,498,768

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 and administrative expenses

$

1,480,278

$

251,153

$

197,728

$

$

1,929,159

Interest income

$

$

$

$

(467

)

$

(467

)

Interest expense

$

$

$

$

98,210

$

98,210

Income (loss) before income taxes

$

1,225,840

$

81,183

$

78,469

$

(97,743

)

$

1,287,749

Cintas Corporation

Consolidated Condensed Balance Sheets

(In thousands except per share data)

May 31,
2022

May 31,
2021

ASSETS

Current assets:

Cash and cash equivalents

$

90,471

$

493,640

Accounts receivable, net

1,006,220

901,710

Inventories, net

472,150

481,797

Uniforms and other rental items in service

916,706

810,104

Income taxes, current

21,708

22,282

Prepaid expenses and other current assets

124,728

133,776

Total current assets

2,631,983

2,843,309

Property and equipment, net

1,323,673

1,318,438

Investments

242,873

274,616

Goodwill

3,042,976

2,913,069

Service contracts, net

391,638

408,445

Operating lease right-of-use assets, net

170,003

168,532

Other assets, net

344,110

310,414

$

8,147,256

$

8,236,823

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

251,504

$

230,786

Accrued compensation and related liabilities

236,992

241,469

Accrued liabilities

588,948

518,910

Operating lease liabilities, current

43,872

43,850

Debt due within one year

311,574

899,070

Total current liabilities

1,432,890

1,934,085

Long-term liabilities:

Debt due after one year

2,483,932

1,642,833

Deferred income taxes

473,777

386,647

Operating lease liabilities

129,064

130,774

Accrued liabilities

319,397

454,637

Total long-term liabilities

3,406,170

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:

1,771,917

1,516,202

425,000,000 shares authorized

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

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

Retained earnings

8,719,163

7,877,015

Treasury stock:

(7,290,801

)

(5,736,258

)

FY 2022: 89,126,706 shares

FY 2021: 85,009,794 shares

Accumulated other comprehensive income

107,917

30,888

Total shareholders’ equity

3,308,196

3,687,847

$

8,147,256

$

8,236,823

Cintas Corporation

Consolidated Condensed Statements of Cash Flows

(In thousands)

Twelve Months Ended

May 31,
2022

May 31,
2021

Cash flows from operating activities:

Net income

$

1,235,757

$

1,110,968

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

Depreciation

249,376

243,836

Amortization of intangible assets and capitalized contract costs

150,325

144,115

Stock-based compensation

109,308

112,035

Gain on equity method investment transaction

(30,151

)

Gain on sale of operating assets

(12,129

)

(22,030

)

Long-lived asset impairment

5,114

Deferred income taxes

52,110

(42,242

)

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

Accounts receivable, net

(100,392

)

(32,576

)

Inventories, net

16,194

(75,501

)

Uniforms and other rental items in service

(111,332

)

(35,659

)

Prepaid expenses and other current assets and capitalized contract costs

(28,581

)

(102,600

)

Accounts payable

22,697

(2,604

)

Accrued compensation and related liabilities

(3,625

)

113,769

Accrued liabilities and other

(9,241

)

(6,735

)

Income taxes, current

(2,691

)

(49,150

)

Net cash provided by operating activities

1,537,625

1,360,740

Cash flows from investing activities:

Capital expenditures

(240,672

)

(143,470

)

Purchases of investments

(6,076

)

(4,299

)

Proceeds from sale of operating assets, net of cash disposed

15,347

31,705

Acquisitions of businesses, net of cash acquired

(164,228

)

(10,038

)

Other, net

(7,006

)

(11,113

)

Net cash used in investing activities

(402,635

)

(137,215

)

Cash flows from financing activities:

Issuance of commercial paper, net

261,200

Proceeds from issuance of debt, net

1,190,506

Repayment of debt

(1,200,000

)

Proceeds from exercise of stock-based compensation awards

117,737

129,957

Dividends paid

(375,119

)

(451,327

)

Repurchase of common stock

(1,525,873

)

(554,121

)

Other, net

(6,394

)

(4,377

)

Net cash used in financing activities

(1,537,943

)

(879,868

)

Effect of exchange rate changes on cash and cash equivalents

(216

)

4,581

Net (decrease) increase in cash and cash equivalents

(403,169

)

348,238

Cash and cash equivalents at beginning of year

493,640

145,402

Cash and cash equivalents at end of year

$

90,471

$

493,640

View source version on businesswire.com: https://www.businesswire.com/news/home/20220714005519/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