Company Announcements

Cintas Corporation Announces Fiscal 2021 First Quarter Results

CINCINNATI--(BUSINESS WIRE)--Sep. 23, 2020-- Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2021 first quarter ended August 31, 2020. Revenue for the first quarter of fiscal 2021 was $1.75 billion, a decrease of 3.6% from last year’s first quarter. Earnings per diluted share (EPS) were $2.78 in the first quarter of fiscal 2021, an increase of 19.8% from last year's first quarter diluted EPS.

Organic revenue for the first quarter of fiscal 2021, which is adjusted for the impacts of acquisitions, foreign currency exchange rate fluctuations and differences in the number of workdays, declined 5.0% from last year's first quarter. Organic revenue for the Uniform Rental and Facility Services operating segment declined 5.4%. Organic revenue for the First Aid and Safety Services operating segment increased 17.1%.

Gross margin for the first quarter of fiscal 2021 of $826.2 million decreased 2.7% from last year’s first quarter. Gross margin as a percentage of revenue increased 40 basis points to 47.3% for the first quarter of fiscal 2021 compared to 46.9% in the first quarter of fiscal 2020.

Operating income for the first quarter of fiscal 2021 of $349.7 million increased 14.2% from last year’s first quarter operating income of $306.1 million. Operating income as a percentage of revenue was 20.0% in the first quarter of fiscal 2021 compared to 16.9% in the first quarter of fiscal 2020.

Net income was $300.0 million for the first quarter of fiscal 2021, an increase of 19.6% from last year's first quarter net income of $250.8 million. First quarter of fiscal 2021 diluted EPS were $2.78, an increase of 19.8% from last year's first quarter diluted EPS of $2.32.

Net cash provided by operating activities for the first quarter of fiscal 2021 of $312.3 million increased 12.8% from last year's first quarter net cash provided by operating activities of $276.9 million. Free cash flow, which is defined as net cash provided by operating activities less capital expenditures, for the first quarter of fiscal 2021 was $281.4 million, an increase of 32.6% from last year's first quarter.

Scott D. Farmer, Cintas' Chairman and Chief Executive Officer, stated, "The COVID-19 coronavirus (COVID-19) pandemic remains a significant disruption to the economy and our business. Our objectives include keeping our employees, whom we call partners, healthy and safe and serving our customers in any way possible. I am pleased with our performance on both priorities, and I thank our employee-partners for their unwavering passion, strong work ethic, and commitment."

Mr. Farmer concluded, “Visibility to future financial performance remains impaired due to the COVID-19 pandemic. Therefore, we are not providing fiscal year financial guidance at this time. However, we will provide our second quarter financial estimates. We expect our second quarter revenue to be in the range of $1.725 billion to $1.750 billion and diluted EPS to be in the range of $2.00 to $2.20. Despite the short-term uncertainty, I'm confident in our ability to continue to manage the volatility while maintaining focus on our compelling long-term objectives. Our value proposition of getting businesses Ready for the Workday® by providing essential, unparalleled image, safety, cleanliness and compliance resonates loudly in a society focused on health, readiness and outsourcing of non-core activities.”

About 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 a wide range of products and services that enhance our customers’ image and help keep their facilities and employees clean, safe and looking their best. With products and services including uniforms, floor care, restroom supplies, first aid and safety products, fire extinguishers and testing, and safety and compliance 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 the Nasdaq-100 Index.

Cintas will host a live webcast to review the fiscal 2021 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; 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

 

August 31,
2020

 

August 31,
2019

 

%
Change

Revenue:

 

 

 

 

 

Uniform rental and facility services

$

1,394,411

 

 

$

1,454,527

 

 

(4.1)%

Other

352,164

 

 

356,612

 

 

(1.2)%

Total revenue

1,746,575

 

 

1,811,139

 

 

(3.6)%

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

Cost of uniform rental and facility services

715,412

 

 

768,676

 

 

(6.9)%

Cost of other

204,962

 

 

193,321

 

 

6.0%

Selling and administrative expenses

476,495

 

 

542,996

 

 

(12.2)%

 

 

 

 

 

 

Operating income

349,706

 

 

306,146

 

 

14.2%

 

 

 

 

 

 

Interest income

(64)

 

 

(162)

 

 

(60.5)%

Interest expense

24,550

 

 

27,321

 

 

(10.1)%

 

 

 

 

 

 

Income before income taxes

325,220

 

 

278,987

 

 

16.6%

Income taxes

25,215

 

 

28,175

 

 

(10.5)%

Net income

$

300,005

 

 

$

250,812

 

 

19.6%

 

 

 

 

 

 

Basic earnings per share

$

2.86

 

 

$

2.40

 

 

19.2%

 

 

 

 

 

 

Diluted earnings per share

$

2.78

 

 

$

2.32

 

 

19.8%

 

 

 

 

 

 

Basic weighted average common shares outstanding

104,110

 

 

103,543

 

 

 

Diluted weighted average common shares outstanding

107,129

 

 

107,083

 

 

 

 

CINTAS CORPORATION SUPPLEMENTAL DATA

 

Gross Margin and Net Income Margin Results

 

 

Three Months Ended

 

August 31,
2020

 

August 31,
2019

Uniform rental and facility services gross margin

48.7%

 

47.2%

Other gross margin

41.8%

 

45.8%

Total gross margin

47.3%

 

46.9%

Net income margin

17.2%

 

13.8%

 

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

 

 

Three Months Ended

 

August 31,
2020

 

August 31,
2019

Net cash provided by operations

$

312,292

 

 

$

276,901

 

Capital expenditures

(30,876)

 

 

(64,743)

 

Free cash flow

$

281,416

 

 

$

212,158

 

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

 

August 31,
2020

 

August 31,
2019

 

Growth %

 

A

 

B

 

G

Revenue

$

1,746,575

 

 

$

1,811,139

 

 

(3.6)%

 

 

 

 

 

G=(A-B)/B

 

C

 

D

 

 

Workdays in the period

66

 

65

 

 

 

 

 

 

 

 

 

E

 

F

 

H

Workday adjusted revenue growth

$

1,720,112

 

 

$

1,811,139

 

 

(5.0)%

 

E=(A/C)*D

 

F=(B/D)*D

 

H=(E-F)/F

 

 

 

 

 

 

Acquisition and foreign currency exchange impact, net

 

 

 

 

0.0%

 

 

 

 

 

 

Organic growth

 

 

 

 

(5.0)%

 

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 and foreign currency exchange rate fluctuations.

SUPPLEMENTAL SEGMENT DATA

 

Uniform Rental
and Facility
Services

 

First Aid
and Safety
Services

 

All
Other

 

Corporate

 

Total

For the three months ended August 31, 2020

 

 

 

 

 

 

 

 

Revenue

$

1,394,411

 

 

$

204,481

 

 

$

147,683

 

 

$

 

 

$

1,746,575

 

Gross margin

$

678,999

 

 

$

82,104

 

 

$

65,098

 

 

$

 

 

$

826,201

 

Selling and administrative expenses

$

363,971

 

 

$

63,577

 

 

$

48,947

 

 

$

 

 

$

476,495

 

Interest income

$

 

 

$

 

 

$

 

 

$

(64)

 

 

$

(64)

 

Interest expense

$

 

 

$

 

 

$

 

 

$

24,550

 

 

$

24,550

 

Income (loss) before income taxes

$

315,028

 

 

$

18,527

 

 

$

16,151

 

 

$

(24,486)

 

 

$

325,220

 

 

 

 

 

 

 

 

 

 

 

For the three months ended August 31, 2019

 

 

 

 

 

 

 

 

Revenue

$

1,454,527

 

 

$

172,090

 

 

$

184,522

 

 

$

 

 

$

1,811,139

 

Gross margin

$

685,851

 

 

$

84,287

 

 

$

79,004

 

 

$

 

 

$

849,142

 

Selling and administrative expenses

$

416,840

 

 

$

59,518

 

 

$

66,638

 

 

$

 

 

$

542,996

 

Interest income

$

 

 

$

 

 

$

 

 

$

(162)

 

 

$

(162)

 

Interest expense

$

 

 

$

 

 

$

 

 

$

27,321

 

 

$

27,321

 

Income (loss) before income taxes

$

269,011

 

 

$

24,769

 

 

$

12,366

 

 

$

(27,159)

 

 

$

278,987

 

 

Cintas Corporation
Consolidated Condensed Balance Sheets
(In thousands except per share data)

 

 

August 31,
2020

 

May 31,
2020

 

(Unaudited)

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

421,542

 

 

$

145,402

 

Accounts receivable, net

866,414

 

 

870,369

 

Inventories, net

488,165

 

 

408,898

 

Uniforms and other rental items in service

756,364

 

 

770,411

 

Prepaid expenses and other current assets

133,692

 

 

114,619

 

Total current assets

2,666,177

 

 

2,309,699

 

 

 

 

 

Property and equipment, net

1,378,385

 

 

1,403,065

 

 

 

 

 

Investments

240,431

 

 

214,847

 

Goodwill

2,886,048

 

 

2,870,020

 

Service contracts, net

441,641

 

 

451,529

 

Operating lease right-of-use assets, net

159,120

 

 

159,967

 

Other assets, net

271,579

 

 

260,758

 

 

$

8,043,381

 

 

$

7,669,885

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

252,513

 

 

$

230,995

 

Accrued compensation and related liabilities

117,577

 

 

127,417

 

Accrued liabilities

406,787

 

 

456,653

 

Income taxes, current

23,251

 

 

27,099

 

Operating lease liabilities, current

43,414

 

 

43,031

 

Debt due within one year

249,808

 

 

 

Total current liabilities

1,093,350

 

 

885,195

 

 

 

 

 

Long-term liabilities:

 

 

 

Debt due after one year

2,290,447

 

 

2,539,705

 

Deferred income taxes

385,149

 

 

388,579

 

Operating lease liabilities

121,727

 

 

122,695

 

Accrued liabilities

547,904

 

 

498,509

 

Total long-term liabilities

3,345,227

 

 

3,549,488

 

 

 

 

 

Shareholders’ equity:

 

 

 

Preferred stock, no par value:

100,000 shares authorized, none outstanding

 

 

 

Common stock, no par value:
425,000,000 shares authorized
FY 2021: 188,155,836 issued and 104,548,040 outstanding
FY 2020: 186,793,207 issued and 103,415,368 outstanding

1,345,233

 

 

1,102,689

 

Paid-in capital

30,155

 

 

171,521

 

Retained earnings

7,596,514

 

 

7,296,509

 

Treasury stock:

FY 2021: 83,607,796 shares
FY 2020: 83,377,839 shares

(5,251,148)

 

 

(5,182,137)

 

Accumulated other comprehensive loss

(115,950)

 

 

(153,380)

 

Total shareholders’ equity

3,604,804

 

 

3,235,202

 

 

$

8,043,381

 

 

$

7,669,885

 

 

Cintas Corporation
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)

 

 

Three Months Ended

 

August 31,
2020

 

August 31,
2019

Cash flows from operating activities:

 

 

 

Net income

$

300,005

 

 

$

250,812

 

 

 

 

 

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

 

 

 

Depreciation

60,574

 

 

56,726

 

Amortization of intangible assets and capitalized contract costs

35,605

 

 

35,268

 

Stock-based compensation

29,055

 

 

40,395

 

Deferred income taxes

(8,716)

 

 

7,910

 

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

 

 

 

Accounts receivable, net

7,118

 

 

(6,636)

 

Inventories, net

(77,944)

 

 

(1,726)

 

Uniforms and other rental items in service

16,552

 

 

(11,305)

 

Prepaid expenses and other current assets and capitalized contract costs

(42,277)

 

 

(41,928)

 

Accounts payable

20,358

 

 

13,357

 

Accrued compensation and related liabilities

(10,067)

 

 

(58,718)

 

Accrued liabilities and other

(14,297)

 

 

(24,082)

 

Income taxes, current

(3,674)

 

 

16,828

 

Net cash provided by operating activities

312,292

 

 

276,901

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Capital expenditures

(30,876)

 

 

(64,743)

 

Purchase of investments

(4,940)

 

 

(9,391)

 

Acquisitions of businesses, net of cash acquired

(1,984)

 

 

(3,896)

 

Other, net

(2,142)

 

 

(109)

 

Net cash used in investing activities

(39,942)

 

 

(78,139)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

Issuance of commercial paper, net

 

 

26,500

 

Proceeds from exercise of stock-based compensation awards

72,123

 

 

37,915

 

Repurchase of common stock

(69,011)

 

 

(256,830)

 

Other, net

(869)

 

 

(1,192)

 

Net cash provided by (used in) financing activities

2,243

 

 

(193,607)

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

1,547

 

 

331

 

 

 

 

 

Net increase in cash and cash equivalents

276,140

 

 

5,486

 

Cash and cash equivalents at beginning of period

145,402

 

 

96,645

 

Cash and cash equivalents at end of period

$

421,542

 

 

$

102,131

 

 

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

Source: Cintas Corporation

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