CINCINNATI, December 21, 2022 -- Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2023 second quarter ended November 30, 2022. Revenue for the second quarter of fiscal 2023 was $2.17 billion compared to $1.92 billion in last year’s second quarter, an increase of 13.1%. The organic revenue growth rate for the second quarter of fiscal 2023, which adjusts for the impacts of acquisitions, divestitures and foreign currency exchange rate fluctuations, was 12.8%.
Gross margin for the second quarter of fiscal 2023 was $1,022.4 million compared to $885.1 million in last year’s second quarter, an increase of 15.5%. Gross margin as a percentage of revenue was 47.0% for the second quarter of fiscal 2023 compared to 46.0% in last year's second quarter, an increase of 100 basis points. Energy expenses comprised of gasoline, natural gas and electricity were 10 basis points higher during the second quarter of fiscal 2023 compared to last year's second quarter.
Operating income for the second quarter of fiscal 2023 was $444.9 million compared to $381.2 million in last year's second quarter, an increase of 16.7%. Operating income as a percentage of revenue was 20.5% in the second quarter of fiscal 2023 compared to 19.8% in last year's second quarter, an increase of 70 basis points.
Net income was $324.3 million for the second quarter of fiscal 2023 compared to $294.7 million in last year's second quarter, an increase of 10.1%. Second quarter of fiscal 2023 diluted earnings per share (EPS) was $3.12 compared to $2.76 in last year's second quarter, an increase of 13.0%.
On September 15, 2022, Cintas paid an aggregate quarterly cash dividend of $117.3 million to shareholders.
Todd M. Schneider, Cintas' President and Chief Executive Officer, stated, "Our financial performance is the result of the exceptional execution of our employee-partners in providing businesses with the image, safety, cleanliness and compliance they need to get Ready for the Workday®. Each of our operating segments again grew revenue at a double-digit rate. Strong volume growth from new customers and the penetration of existing customers with more products and services generated operating leverage. This contributed to the achievement of double-digit increases in operating income and diluted EPS despite high inflation."
Mr. Schneider concluded, "We are increasing our full fiscal year financial guidance. We are raising our annual revenue expectations from a range of $8.58 billion to $8.67 billion to a range of $8.67 billion to $8.75 billion and diluted EPS from a range of $12.30 to $12.65 to a range of $12.50 to $12.80."
The following table provides a comparison of fiscal 2022 revenue and diluted EPS to our updated fiscal 2023 guidance.
Fiscal 2023
Fiscal 2023
Revenue Guidance
($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
$
8,670.0
10.4%
$
8,750.0
11.4%
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
$
12.50
10.8%
$
12.80
13.5%
•Fiscal year 2023 operating income is expected to be in the range of $1.75 billion to $1.79 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 $113.0 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 20.7% 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%.
•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 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 Quarterly Report. 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; inflationary pressures and fluctuations in costs of materials and labor, including increased medical costs; interest rate volatility; 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; our ability to meet our goals relating to environmental, social and governance (ESG) opportunities, improvements and efficiencies; 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 global health 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.
For additional information, 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
Cintas Corporation
Consolidated Condensed Statements of Income
(Unaudited)
(In thousands except per share data)
Three Months Ended
November 30, 2022
November 30, 2021
% Change
Revenue:
Uniform rental and facility services
$
1,709,987
$
1,535,271
11.4%
Other
464,871
387,010
20.1%
Total revenue
2,174,858
1,922,281
13.1%
Costs and expenses:
Cost of uniform rental and facility services
906,727
817,261
10.9%
Cost of other
245,684
219,879
11.7%
Selling and administrative expenses
577,513
503,913
14.6%
Operating income
444,934
381,228
16.7%
Interest income
(344)
(56)
514.3%
Interest expense
28,920
21,902
32.0%
Income before income taxes
416,358
359,382
15.9%
Income taxes
92,065
64,713
42.3%
Net income
$
324,293
$
294,669
10.1%
Basic earnings per share
$
3.18
$
2.83
12.4%
Diluted earnings per share
$
3.12
$
2.76
13.0%
Basic weighted average common shares outstanding
101,637
103,646
Diluted weighted average common shares outstanding
103,356
106,122
Cintas Corporation
Consolidated Condensed Statements of Income
(Unaudited)
(In thousands except per share data)
Six Months Ended
November 30, 2022
November 30, 2021
% Change
Revenue:
Uniform rental and facility services
$
3,407,759
$
3,043,447
12.0%
Other
933,553
775,784
20.3%
Total revenue
4,341,312
3,819,231
13.7%
Costs and expenses:
Cost of uniform rental and facility services
1,797,493
1,596,562
12.6%
Cost of other
493,260
434,772
13.5%
Selling and administrative expenses
1,165,505
1,012,568
15.1%
Operating income
885,054
775,329
14.2%
Interest income
(499)
(112)
345.5%
Interest expense
56,640
43,756
29.4%
Income before income taxes
828,913
731,685
13.3%
Income taxes
152,931
105,837
44.5%
Net income
$
675,982
$
625,848
8.0%
Basic earnings per share
$
6.63
$
6.02
10.1%
Diluted earnings per share
$
6.51
$
5.87
10.9%
Basic weighted average common shares outstanding
101,530
103,463
Diluted weighted average common shares outstanding
103,343
106,026
CINTAS CORPORATION SUPPLEMENTAL DATA
Gross Margin and Net Income Margin Results
Three Months Ended
Six Months Ended
November 30, 2022
November 30, 2021
November 30, 2022
November 30, 2021
Uniform rental and facility services gross margin
47.0%
46.8%
47.3%
47.5%
Other gross margin
47.2%
43.2%
47.2%
44.0%
Total gross margin
47.0%
46.0%
47.2%
46.8%
Net income margin
14.9%
15.3%
15.6%
16.4%
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 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
Six Months Ended
November 30, 2022
% of Revenue
November 30, 2021
% of Revenue
Growth vs. Fiscal 2022
Operating income
$
885,054
20.4%
$
775,329
20.3%
14.2%
Gain on sale of operating assets
(12,129)
Operating income excluding above item
$
885,054
20.4%
$
763,200
20.0%
16.0%
Earnings Per Share Results
Six Months Ended
November 30, 2022
November 30, 2021
Growth vs.
Fiscal 2022
Diluted EPS
$
6.51
$
5.87
10.9%
Pre-tax gain and the related tax benefit on sale of certain operating assets
(0.09)
Diluted EPS excluding above item
$
6.51
$
5.78
12.6%
Computation of Free Cash Flow
Six Months Ended
(In thousands)
November 30, 2022
November 30, 2021
Net cash provided by operations
$
619,149
$
593,782
Capital expenditures
(146,404)
(108,629)
Free cash flow
$
472,745
$
485,153
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 November 30, 2022
Revenue
$
1,709,987
$
235,974
$
228,897
$
—
$
2,174,858
Gross margin
$
803,260
$
119,153
$
100,034
$
—
$
1,022,447
Selling and administrative expenses
$
434,165
$
73,658
$
69,690
$
—
$
577,513
Interest income
$
—
$
—
$
—
$
(344)
$
(344)
Interest expense
$
—
$
—
$
—
$
28,920
$
28,920
Income (loss) before income taxes
$
369,095
$
45,495
$
30,344
$
(28,576)
$
416,358
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 and administrative expenses
$
380,395
$
65,957
$
57,561
$
—
$
503,913
Interest income
$
—
$
—
$
—
$
(56)
$
(56)
Interest expense
$
—
$
—
$
—
$
21,902
$
21,902
Income (loss) before income taxes
$
337,615
$
22,077
$
21,536
$
(21,846)
$
359,382
For the six months ended November 30, 2022
Revenue
$
3,407,759
$
470,135
$
463,418
$
—
$
4,341,312
Gross margin
$
1,610,266
$
235,290
$
205,003
$
—
$
2,050,559
Selling and administrative expenses
$
876,400
$
148,949
$
140,156
$
—
$
1,165,505
Interest income
$
—
$
—
$
—
$
(499)
$
(499)
Interest expense
$
—
$
—
$
—
$
56,640
$
56,640
Income (loss) before income taxes
$
733,866
$
86,341
$
64,847
$
(56,141)
$
828,913
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 and administrative expenses
$
779,888
$
129,504
$
103,176
$
—
$
1,012,568
Interest income
$
—
$
—
$
—
$
(112)
$
(112)
Interest expense
$
—
$
—
$
—
$
43,756
$
43,756
Income (loss) before income taxes
$
666,997
$
47,805
$
60,527
$
(43,644)
$
731,685
Cintas Corporation
Consolidated Condensed Balance Sheets
(In thousands except per share data)
November 30, 2022
May 31, 2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
89,799
$
90,471
Accounts receivable, net
1,135,833
1,006,220
Inventories, net
514,839
472,150
Uniforms and other rental items in service
986,505
916,706
Income taxes, current
13,657
21,708
Prepaid expenses and other current assets
152,537
124,728
Total current assets
2,893,170
2,631,983
Property and equipment, net
1,340,658
1,323,673
Investments
243,574
242,873
Goodwill
3,037,506
3,042,976
Service contracts, net
367,612
391,638
Operating lease right-of-use assets, net
176,276
170,003
Other assets, net
368,211
344,110
$
8,427,007
$
8,147,256
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
310,986
$
251,504
Accrued compensation and related liabilities
208,342
236,992
Accrued liabilities
556,211
588,948
Operating lease liabilities, current
42,792
43,872
Debt due within one year
435,406
311,574
Total current liabilities
1,553,737
1,432,890
Long-term liabilities:
Debt due after one year
2,485,277
2,483,932
Deferred income taxes
493,379
473,777
Operating lease liabilities
136,520
129,064
Accrued liabilities
327,556
319,397
Total long-term liabilities
3,442,732
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:
425,000,000 shares authorized
FY 2023: 191,857,155 issued and 101,601,032 outstanding
FY 2022: 190,837,921 issued and 101,711,215 outstanding
1,933,145
1,771,917
Retained earnings
9,160,346
8,719,163
Treasury stock:
FY 2023: 90,256,123 shares
FY 2022: 89,126,706 shares
(7,747,049)
(7,290,801)
Accumulated other comprehensive income
84,096
107,917
Total shareholders’ equity
3,430,538
3,308,196
$
8,427,007
$
8,147,256
Cintas Corporation
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months Ended
November 30, 2022
November 30, 2021
Cash flows from operating activities:
Net income
$
675,982
$
625,848
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
126,561
122,274
Amortization of intangible assets and capitalized contract costs
74,693
74,365
Stock-based compensation
51,537
60,893
Gain on sale of operating assets
—
(12,129)
Deferred income taxes
18,565
29,941
Change in current assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net
(133,897)
(77,343)
Inventories, net
(43,266)
13,406
Uniforms and other rental items in service
(73,475)
(69,513)
Prepaid expenses and other current assets and capitalized contract costs
(85,532)
(47,978)
Accounts payable
61,421
11,400
Accrued compensation and related liabilities
(28,212)
(59,988)
Accrued liabilities and other
(33,352)
(10,519)
Income taxes, current
8,124
(66,875)
Net cash provided by operating activities
619,149
593,782
Cash flows from investing activities:
Capital expenditures
(146,404)
(108,629)
Purchases of investments
(5,182)
(5,967)
Proceeds from sale of operating assets, net of cash disposed
—
15,347
Acquisitions of businesses, net of cash acquired
(15,457)
(45,670)
Other, net
(4,381)
(6,676)
Net cash used in investing activities
(171,424)
(151,595)
Cash flows from financing activities:
Issuance of commercial paper, net
124,046
167,000
Repayment of debt
—
(250,000)
Proceeds from exercise of stock-based compensation awards
2,125
109,198
Dividends paid
(215,017)
(177,949)
Repurchase of common stock
(348,682)
(664,726)
Other, net
(8,840)
(3,399)
Net cash used in financing activities
(446,368)
(819,876)
Effect of exchange rate changes on cash and cash equivalents
