Cintas Corporation Announces Fiscal 2022 Fourth Quarter and Full Year Results

Rhea-AI Summary

Cintas Corporation (Nasdaq: CTAS) reported fourth-quarter results for fiscal 2022, with revenue of $2.07 billion, up 13% YoY. Organic revenue growth was 12.7%, driven by 10.5% in Uniform Rental and 15.1% in First Aid Services. Gross margin increased by 10.1% to $946.2 million, while operating income rose 13.5% to $404.4 million. Net income reached $294.5 million, up from $267.7 million, with diluted EPS of $2.81. For fiscal 2023, Cintas expects revenue between $8.47 billion and $8.58 billion and diluted EPS between $11.90 and $12.30.

Positive

• 13% increase in fourth-quarter revenue YoY to $2.07 billion.
• Net income up 10% YoY to $294.5 million.
• Diluted EPS increased by 13.8% YoY to $2.81.
• Fiscal 2023 revenue guidance of $8.47 to $8.58 billion indicates growth of 7.8% to 9.2%.

Negative

• Gross margin percentage decreased from 46.8% to 45.6% in Q4.
• Increased interest expense expected at approximately $110 million for FY 2023, up from $88.8 million.

CINCINNATI--(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/

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

FAQ

What were Cintas' fiscal 2022 fourth-quarter earnings results?

Cintas reported Q4 fiscal 2022 revenue of $2.07 billion, with net income of $294.5 million and diluted EPS of $2.81.

What is the revenue guidance for Cintas in fiscal 2023?

For fiscal 2023, Cintas expects revenue between $8.47 billion and $8.58 billion.

How did Cintas perform in terms of organic revenue growth in Q4 2022?

Cintas achieved an organic revenue growth rate of 12.7% in Q4 2022.

What is the expected diluted EPS for Cintas in fiscal 2023?

Cintas projects diluted EPS in the range of $11.90 to $12.30 for fiscal 2023.

What was the free cash flow for Cintas in fiscal 2022?

Cintas reported a free cash flow of $1.30 billion for fiscal 2022, a 6.5% increase from FY 2021.