Cintas Corporation Announces Fiscal 2021 Second Quarter Results

Rhea-AI Summary

Cintas Corporation (Nasdaq: CTAS) reported fiscal 2021 Q2 results with revenue of $1.76 billion, a decline from $1.84 billion year-over-year. EPS rose 15.4% to $2.62. Organic revenue decreased by 4.4%, while Uniform Rental and Facility Services dropped 3.6%. However, First Aid and Safety Services grew by 14.5%. Gross margin was $819.9 million, with a percentage of revenue increase to 46.7%. Operating income grew 5.5% to $352.9 million. Cintas announced a shift to quarterly dividends and increased the annual dividend by 10.2% for the 37th consecutive year.

Positive

• EPS increased by 15.4% to $2.62.
• Organic revenue for First Aid and Safety Services rose by 14.5%.
• Operating income grew 5.5% to $352.9 million.
• Annual dividend increased by 10.2%, marking 37 consecutive years of growth.
• Gross margin as a percentage of revenue improved to 46.7%.

Negative

• Total revenue declined by 4.3% compared to the previous year.
• Organic revenue for Uniform Rental and Facility Services fell by 3.6%.
• No third-quarter guidance provided due to economic uncertainty.

Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2021 second quarter ended November 30, 2020. Revenue for the second quarter of fiscal 2021 was $1.76 billion compared to $1.84 billion in last year’s second quarter. Earnings per diluted share from continuing operations (EPS) were $2.62 in the second quarter of fiscal 2021, an increase of 15.4% from last year's second quarter EPS.

Organic revenue for the second quarter of fiscal 2021, which is adjusted for the impacts of acquisitions, divestitures and foreign currency exchange rate fluctuations, declined 4.4% from last year's second quarter. Organic revenue for the Uniform Rental and Facility Services operating segment declined 3.6%. Organic revenue for the First Aid and Safety Services operating segment increased 14.5%.

Gross margin for the second quarter of fiscal 2021 was $819.9 million compared to $852.4 million in last year’s second quarter. Gross margin as a percentage of revenue increased 50 basis points to 46.7% for the second quarter of fiscal 2021 compared to 46.2% in the second quarter of fiscal 2020.

Operating income for the second quarter of fiscal 2021 of $352.9 million increased 5.5% from last year’s second quarter operating income of $334.5 million. Operating income as a percentage of revenue was 20.1% in the second quarter of fiscal 2021 compared to 18.1% in the second quarter of fiscal 2020.

Net income from continuing operations was $284.9 million for the second quarter of fiscal 2021, an increase of 15.6% from last year's second quarter net income from continuing operations of $246.4 million. Second quarter of fiscal 2021 EPS were $2.62, an increase of 15.4% from last year's second quarter EPS of $2.27.

In the second quarter of fiscal 2021, certain Uniform Rental and Facility Services operating assets were sold. The pre-tax gain on sale of $18.0 million was recorded in selling and administrative expenses and impacted operating margin by 100 basis points. The pre-tax gain and the related tax benefit impacted EPS by 25 cents.

Scott D. Farmer, Cintas' Chairman and Chief Executive Officer, stated, "During our second quarter of fiscal 2021, Cintas declared its annual dividend and also announced that the Board of Directors approved a change in dividend policy from an annual dividend to quarterly dividends. Earlier this month, we paid the annual dividend of $2.81 per share, an increase of 10.2% over last year's annual dividend. We have increased the annual dividend for 37 consecutive years. In addition, we paid a quarterly dividend of $0.70 per share. We remain committed to delivering shareholder value, even in this difficult environment."

Mr. Farmer added, "I am pleased with our second quarter financial performance. The COVID-19 coronavirus pandemic remained a significant disruption to the economy, and the recovery slowed in November as the number of coronavirus cases increased. However, our employee-partners have not wavered in their passion for getting businesses Ready for the Workday^®_.”

Mr. Farmer concluded, “We find ourselves at a time of increasing uncertainty regarding the next 90 days. A number of states and municipalities have reinstituted temporary economic restrictions in response to rising COVID-19 coronavirus cases, and others are considering them. On the other hand, vaccines are being distributed and the U.S. government continues to discuss additional stimulus. The uncertainty of the resolutions of these impactful events makes providing third quarter guidance very difficult. As a result, we are not providing guidance at this time. Despite the near-term uncertainty, I remain confident in the long-term opportunity of Cintas to provide essential, unparalleled image, safety, cleanliness and compliance to a society focused on health, readiness and the 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 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 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
	November 30, 2020				November 30, 2019				% Change
Revenue:
Uniform rental and facility services	$	1,410,488			$	1,469,976			(4.0)%
Other	346,560				373,773				(7.3)%
Total revenue	1,757,048				1,843,749				(4.7)%
Costs and expenses:
Cost of uniform rental and facility services	739,811				784,937				(5.7)%
Cost of other	197,353				206,421				(4.4)%
Selling and administrative expenses	467,012				517,927				(9.8)%
Operating income	352,872				334,464				5.5%
Interest income	(218)				(283)				(23.0)%
Interest expense	24,557				26,177				(6.2)%
Income before income taxes	328,533				308,570				6.5%
Income taxes	43,676				62,127				(29.7)%
Income from continuing operations	284,857				246,443				15.6%
Loss from discontinued operations, net of tax	—				(323)				(100.0)%
Net income	$	284,857			$	246,120			15.7%
Basic earnings per share:
Continuing operations	$	2.69			$	2.35			14.5%
Discontinued operations	0.00				0.00				—%
Basic earnings per share	$	2.69			$	2.35			14.5%
Diluted earnings per share:

FAQ

What were the revenue results for Cintas in fiscal 2021 Q2?

Cintas reported revenue of $1.76 billion in fiscal 2021 Q2, down from $1.84 billion in the same period last year.

How did Cintas' EPS perform in fiscal 2021 Q2?

Cintas' EPS for fiscal 2021 Q2 was $2.62, reflecting a 15.4% increase from $2.27 in the prior year.

What impact did COVID-19 have on Cintas' revenue?

Cintas experienced a 4.4% decline in organic revenue due to the ongoing disruptions caused by the COVID-19 pandemic.

What changes were made to Cintas' dividend policy?

Cintas shifted from an annual dividend to quarterly dividends, increasing the annual dividend by 10.2%.

Did Cintas provide guidance for the third quarter of fiscal 2021?

No, Cintas did not provide guidance for the third quarter due to uncertainty surrounding ongoing economic conditions.