Cintas Corporation Announces Fiscal 2024 First Quarter Results

Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2024 first quarter ended August 31, 2023. Revenue for the first quarter of fiscal 2024 was $2.34 billion compared to $2.17 billion in last year’s first quarter, an increase of 8.1%. The organic revenue growth rate for the first quarter of fiscal 2024, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was also 8.1%.

Gross margin for the first quarter of fiscal 2024 was $1.14 billion compared to $1.03 billion in last year’s first quarter, an increase of 11.0%. Gross margin as a percentage of revenue was 48.7% for the first quarter of fiscal 2024 compared to 47.5% in last year's first quarter, an increase of 120 basis points. Energy expenses comprised of gasoline, natural gas and electricity were 50 basis points lower for the first quarter of fiscal 2024 compared to last year's first quarter.

Operating income for the first quarter of fiscal 2024 increased 13.7% to $500.6 million compared to $440.1 million in last year's first quarter. Operating income as a percentage of revenue was 21.4% in the first quarter of fiscal 2024 compared to 20.3% in last year's first quarter.

Net income was $385.1 million for the first quarter of fiscal 2024 compared to $351.7 million in last year's first quarter. The first quarter of fiscal 2024 effective tax rate was 19.2% compared to 14.8% in last year's first quarter. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation. First quarter of fiscal 2024 diluted earnings per share (EPS) was $3.70 compared to $3.39 in last year's first quarter.

On September 15, 2023, Cintas paid an aggregate quarterly cash dividend of $138.3 million to shareholders, an increase of 17.8% from the amount paid last September.

Todd M. Schneider, Cintas' President and Chief Executive Officer, stated, "We are pleased with our first quarter fiscal 2024 financial results. Our operating segments continue to execute at a high level, leading to robust volume growth and a record high operating margin of 21.4%. These financial results are the product of the exceptional dedication of our employee-partners in helping businesses across North America stay focused on the work that matters most through innovative products and services. I look forward to another successful fiscal year."

Mr. Schneider concluded, "We are increasing our full fiscal year financial guidance. We are raising our annual revenue expectations from a range of $9.35 billion to $9.50 billion to a range of $9.40 billion to $9.52 billion and our diluted EPS from a range of $13.85 to $14.35 to a range of $14.00 to $14.45." Please note the following regarding guidance:

  • Fiscal year 2024 interest expense is expected to be approximately $98.0 million compared to $109.5 million in fiscal year 2023, predominately as a result of lower variable rate debt. This may change as a result of future share buybacks or acquisition activity.
  • Fiscal year 2024 effective tax rate is expected to be 21.3% compared to a rate of 20.4% in fiscal year 2023. The higher effective tax rate negatively impacts fiscal 2024 diluted EPS guidance by approximately $0.16 and diluted EPS growth by approximately 120 basis points.
  • Our diluted EPS guidance includes no future share buybacks.
  • Guidance includes the impact of having one more workday in fiscal year 2024 compared to fiscal year 2023.

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 2024 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; 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, except otherwise as required by law. 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, 2023, 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,

2023

 

August 31,

2022

 

%

Change

Revenue:

 

 

 

 

 

Uniform rental and facility services

$

1,826,825

 

 

$

1,697,772

 

 

7.6

%

Other

 

515,505

 

 

 

468,682

 

 

10.0

%

Total revenue

 

2,342,330

 

 

 

2,166,454

 

 

8.1

%

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

Cost of uniform rental and facility services

 

947,583

 

 

 

890,766

 

 

6.4

%

Cost of other

 

253,176

 

 

 

247,576

 

 

2.3

%

Selling and administrative expenses

 

641,015

 

 

 

587,992

 

 

9.0

%

 

 

 

 

 

 

Operating income

 

500,556

 

 

 

440,120

 

 

13.7

%

 

 

 

 

 

 

Interest income

 

(422

)

 

 

(155

)

 

172.3

%

Interest expense

 

24,544

 

 

 

27,720

 

 

(11.5

)%

 

 

 

 

 

 

Income before income taxes

 

476,434

 

 

 

412,555

 

 

15.5

%

Income taxes

 

91,349

 

 

 

60,866

 

 

50.1

%

Net income

$

385,085

 

 

$

351,689

 

 

9.5

%

 

 

 

 

 

 

Basic earnings per share

$

3.76

 

 

$

3.45

 

 

9.0

%

 

 

 

 

 

 

Diluted earnings per share

$

3.70

 

 

$

3.39

 

 

9.1

%

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

101,895

 

 

 

101,428

 

 

 

Diluted weighted average common shares outstanding

 

103,572

 

 

 

103,337

 

 

 

CINTAS CORPORATION SUPPLEMENTAL DATA

Gross Margin and Net Income Margin Results

 

 

Three Months Ended

 

August 31,

2023

 

August 31,

2022

 

 

 

 

Uniform rental and facility services gross margin

48.1%

 

47.5%

Other gross margin

50.9%

 

47.2%

Total gross margin

48.7%

 

47.5%

Net income margin

16.4%

 

16.2%

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 measure of cash flow. The Company believes that this non-GAAP financial measure is appropriate to enhance understanding of its past performance as well as prospects for future performance. A reconciliation of the difference between this non-GAAP financial measure with the most directly comparable financial measure calculated in accordance with GAAP is shown in the table below.

Computation of Free Cash Flow

 

 

Three Months Ended

(In thousands)

August 31,

2023

 

August 31,

2022

 

 

 

 

Net cash provided by operations

$

336,945

 

 

$

298,156

 

Capital expenditures

 

(106,697

)

 

 

(70,016

)

Free cash flow

$

230,248

 

 

$

228,140

 

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 August 31, 2023

 

 

 

 

 

 

 

 

Revenue

$

1,826,825

 

$

260,693

 

$

254,812

 

$

 

 

$

2,342,330

 

Gross margin

$

879,242

 

$

145,776

 

$

116,553

 

$

 

 

$

1,141,571

 

Selling and administrative expenses

$

472,713

 

$

86,196

 

$

82,106

 

$

 

 

$

641,015

 

Interest income

$

 

$

 

$

 

$

(422

)

 

$

(422

)

Interest expense

$

 

$

 

$

 

$

24,544

 

 

$

24,544

 

Income (loss) before income taxes

$

406,529

 

$

59,580

 

$

34,447

 

$

(24,122

)

 

$

476,434

 

 

 

 

 

 

 

 

 

 

 

For the three months ended August 31, 2022

 

 

 

 

 

 

 

 

Revenue

$

1,697,772

 

$

234,161

 

$

234,521

 

$

 

 

$

2,166,454

 

Gross margin

$

807,006

 

$

116,137

 

$

104,969

 

$

 

 

$

1,028,112

 

Selling and administrative expenses

$

442,235

 

$

75,291

 

$

70,466

 

$

 

 

$

587,992

 

Interest income

$

 

$

 

$

 

$

(155

)

 

$

(155

)

Interest expense

$

 

$

 

$

 

$

27,720

 

 

$

27,720

 

Income (loss) before income taxes

$

364,771

 

$

40,846

 

$

34,503

 

$

(27,565

)

 

$

412,555

 

Cintas Corporation

Consolidated Condensed Balance Sheets

(In thousands except per share data)

 

 

August 31,

2023

 

May 31,

2023

 

(Unaudited)

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

88,126

 

 

$

124,149

 

Accounts receivable, net

 

1,197,342

 

 

 

1,152,993

 

Inventories, net

 

498,354

 

 

 

506,604

 

Uniforms and other rental items in service

 

1,021,515

 

 

 

1,011,918

 

Prepaid expenses and other current assets

 

182,191

 

 

 

142,795

 

Total current assets

 

2,987,528

 

 

 

2,938,459

 

 

 

 

 

Property and equipment, net

 

1,439,266

 

 

 

1,396,476

 

 

 

 

 

Investments

 

266,930

 

 

 

247,191

 

Goodwill

 

3,104,955

 

 

 

3,056,201

 

Service contracts, net

 

340,266

 

 

 

346,574

 

Operating lease right-of-use assets, net

 

181,677

 

 

 

178,464

 

Other assets, net

 

399,059

 

 

 

382,991

 

 

$

8,719,681

 

 

$

8,546,356

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

314,743

 

 

$

302,292

 

Accrued compensation and related liabilities

 

116,892

 

 

 

239,086

 

Accrued liabilities

 

592,370

 

 

 

632,504

 

Income taxes, current

 

101,031

 

 

 

12,470

 

Operating lease liabilities, current

 

43,803

 

 

 

43,710

 

Total current liabilities

 

1,168,839

 

 

 

1,230,062

 

 

 

 

 

Long-term liabilities:

 

 

 

Debt due after one year

 

2,477,093

 

 

 

2,486,405

 

Deferred income taxes

 

499,935

 

 

 

498,356

 

Operating lease liabilities

 

141,459

 

 

 

138,278

 

Accrued liabilities

 

354,720

 

 

 

329,269

 

Total long-term liabilities

 

3,473,207

 

 

 

3,452,308

 

 

 

 

 

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 2024: 192,657,768 issued and 101,927,462 outstanding

FY 2023: 192,198,938 issued and 101,732,148 outstanding

 

2,121,475

 

 

 

2,031,542

 

Retained earnings

 

9,844,128

 

 

 

9,597,315

 

Treasury stock:

FY 2024: 90,730,306 shares

FY 2023: 90,466,790 shares

 

(7,975,137

)

 

 

(7,842,649

)

Accumulated other comprehensive income

 

87,169

 

 

 

77,778

 

Total shareholders’ equity

 

4,077,635

 

 

 

3,863,986

 

 

$

8,719,681

 

 

$

8,546,356

 

Cintas Corporation

Consolidated Condensed Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

Three Months Ended

 

August 31,

2023

 

August 31,

2022

Cash flows from operating activities:

 

 

 

Net income

$

385,085

 

 

$

351,689

 

 

 

 

 

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

 

 

 

Depreciation

 

67,613

 

 

 

63,057

 

Amortization of intangible assets and capitalized contract costs

 

39,199

 

 

 

36,989

 

Stock-based compensation

 

30,242

 

 

 

26,282

 

Deferred income taxes

 

(1,367

)

 

 

14,829

 

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

 

 

 

Accounts receivable, net

 

(43,892

)

 

 

(79,397

)

Inventories, net

 

8,541

 

 

 

(2,476

)

Uniforms and other rental items in service

 

(7,414

)

 

 

(39,327

)

Prepaid expenses and other current assets and capitalized contract costs

 

(66,791

)

 

 

(63,641

)

Accounts payable

 

12,443

 

 

 

41,681

 

Accrued compensation and related liabilities

 

(124,408

)

 

 

(59,957

)

Accrued liabilities and other

 

(48,952

)

 

 

(49,105

)

Income taxes, current

 

86,646

 

 

 

57,532

 

Net cash provided by operating activities

 

336,945

 

 

 

298,156

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Capital expenditures

 

(106,697

)

 

 

(70,016

)

Purchases of investments

 

(6,525

)

 

 

(5,930

)

Acquisitions of businesses, net of cash acquired

 

(55,651

)

 

 

(7,060

)

Other, net

 

(963

)

 

 

(3,589

)

Net cash used in investing activities

 

(169,836

)

 

 

(86,595

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Issuance of commercial paper, net

 

 

 

 

196,000

 

Repayment of debt

 

(10,000

)

 

 

 

Proceeds from exercise of stock-based compensation awards

 

479

 

 

 

1,047

 

Dividends paid

 

(117,565

)

 

 

(97,655

)

Repurchase of common stock

 

(73,276

)

 

 

(320,334

)

Other, net

 

(2,013

)

 

 

(5,257

)

Net cash used in financing activities

 

(202,375

)

 

 

(226,199

)

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(757

)

 

 

(1,275

)

 

 

 

 

Net decrease in cash and cash equivalents

 

(36,023

)

 

 

(15,913

)

Cash and cash equivalents at beginning of period

 

124,149

 

 

 

90,471

 

Cash and cash equivalents at end of period

$

88,126

 

 

$

74,558

 

 

Contacts

J. Michael Hansen, Executive Vice President and Chief Financial Officer - 513-972-2079

Jared Mattingley, Vice President - Treasurer & Investor Relations - 513-972-4195

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