10-QPeriod: Q3 FY2021

CINTAS CORP Quarterly Report for Q3 Ended Feb 28, 2021

Filed April 6, 2021For Securities:CTAS

Summary

Cintas Corporation (CTAS) reported its third-quarter fiscal year 2021 results for the period ending February 28, 2021. The company demonstrated resilience amidst the ongoing COVID-19 pandemic, with total revenue experiencing a slight decrease of 1.9% year-over-year to $1.78 billion. This decline was largely attributed to one less workday in the quarter. Despite the revenue dip, operating income saw a notable increase of 3.8% to $326.5 million, driven by improved operating margins (18.4% vs. 17.4%) due to effective cost control measures in both cost of goods sold and selling, general, and administrative expenses. Net income from continuing operations rose by 10.2% to $258.4 million, resulting in diluted earnings per share (EPS) of $2.37, a 9.7% increase compared to the prior year. The First Aid and Safety Services segment showed strong organic growth of 17.7%, offsetting some of the modest decline in the larger Uniform Rental and Facility Services segment. The company also maintained a strong liquidity position and continued its dividend payments, signaling financial stability. Management highlighted the ongoing impacts of the pandemic but expressed confidence in the company's ability to navigate the environment.

Financial Highlights

50 data points
Beta

Revenue

$1.78B

Net Income

$258.38M

14.5% Net Margin

EPS (Diluted)

$0.59

Total Assets

$8.35B

Cash & Equivalents

$553.61M

Free Cash Flow

$289.10M

Financial Statements
Beta
Revenue$1.78B
SG&A Expenses$483.05M
Operating Income$326.47M
Interest Expense$24.55M
Net Income$258.38M
EPS (Basic)$0.61
EPS (Diluted)$0.59
Shares Outstanding (Basic)421.06M
Shares Outstanding (Diluted)431.98M

Key Highlights

  • 1Total revenue for the quarter was $1.78 billion, a slight decrease of 1.9% compared to the prior year, primarily due to one less workday.
  • 2Operating income increased by 3.8% to $326.5 million, with operating margin expanding by 100 basis points to 18.4%.
  • 3Net income from continuing operations grew by 10.2% to $258.4 million.
  • 4Diluted earnings per share (EPS) from continuing operations increased by 9.7% to $2.37.
  • 5The First Aid and Safety Services segment exhibited robust organic revenue growth of 17.7%.
  • 6The company maintained strong liquidity, with cash and cash equivalents at $553.6 million.
  • 7Cintas announced a leadership transition with Todd M. Schneider set to become CEO effective June 1, 2021.

Frequently Asked Questions

The COVID-19 pandemic continued to affect Cintas' business, primarily through government-mandated business closures and restrictions impacting some customers. While total revenue saw a slight decrease, the company effectively managed costs, leading to an increase in operating income and net income. Cintas also noted increased demand for personal protective equipment within its First Aid and Safety segment due to pandemic-related safety requirements.

The increase in profitability was driven by effective cost management. Cost of uniform rental and facility services decreased, and selling and administrative expenses were reduced as a percentage of revenue through efficiencies and lower discretionary spending. This, combined with a shift in revenue mix towards higher-margin services and products, led to an expansion in operating margins and a higher net income.

Cintas maintained a strong liquidity position, with cash and cash equivalents of $553.6 million at the end of the quarter. The company had $249.9 million in short-term debt (senior notes due within one year) and $2.29 billion in long-term debt. Cintas' revolving credit facility remained undrawn. The company stated its belief that it has sufficient liquidity to operate, supported by its strong operating cash flows and access to credit facilities, and was in compliance with all debt covenants.

Management acknowledged the continued impact of the COVID-19 pandemic and the uncertainty surrounding the pace of economic recovery. However, the company's essential business designation allowed it to continue serving customers. The rollout of vaccines and lower case counts were viewed as encouraging. Cintas expressed confidence in its financial flexibility and ability to manage through the uncertain environment, while noting that strategic objectives like acquisitions and dividends remain dependent on economic conditions and liquidity.