Cintas Corp 10-Q for FY2021 Q1

Cintas Corp (CTAS)

10-Q 2020-10-09 For: 2020-08-31

Added on April 12, 2026

About this 10-Q

Cintas Corp filed this 10-Q on October 9, 2020, covering the quarter ended August 31, 2020 (FY2021 Q1).

Headline figures

Quarter ended August 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.75B; down 3.6% from $1.81B a year earlier
Net income: $300.01M; up 19.6% from net income of $250.81M a year earlier
Diluted EPS: $2.78; up 19.8% from $2.32 a year earlier

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☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	August 31, 2020


Washington						31-1188630
(State or Other Jurisdiction of Incorporation)						(IRS Employer Identification Number)


Class						Outstanding September 30, 2020
Common Stock, no par value						104,625,384


	Three Months Ended
	August 31, 2020		August 31, 2019
Revenue:
Uniform rental and facility services	$	1,394,411	$	1,454,527
Other	352,164		356,612
Total revenue	1,746,575		1,811,139

Costs and expenses:
Cost of uniform rental and facility services	715,412		768,676
Cost of other	204,962		193,321
Selling and administrative expenses	476,495		542,996

Operating income	349,706		306,146

Interest income	(64)		(162)
Interest expense	24,550		27,321

Income before income taxes	325,220		278,987
Income taxes	25,215		28,175


Net income	$	300,005	$	250,812




Basic earnings per share	$	2.86	$	2.40




Diluted earnings per share	$	2.78	$	2.32


	Three Months Ended
	August 31, 2020		August 31, 2019

Net income	$	300,005	$	250,812

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	26,946		6,724
Change in fair value of interest rate lock agreements, net of tax expense (benefit) of $3,672 and $(9,844), respectively	10,842		(29,903)
Amortization of interest rate lock agreements, net of tax benefit of $116 and $179, respectively	(358)		(295)

Other comprehensive income (loss), net of tax expense (benefit) of $3,788 and $(9,665), respectively	37,430		(23,474)

Comprehensive income	$	337,435	$	227,338


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from to


	August 31, 2020		May 31, 2020
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	421,542	$	145,402

Accounts receivable, net	866,414		870,369
Inventories, net	488,165		408,898
Uniforms and other rental items in service	756,364		770,411

Prepaid expenses and other current assets	133,692		114,619
Total current assets	2,666,177		2,309,699

Property and equipment, net	1,378,385		1,403,065

Investments	240,431		214,847
Goodwill	2,886,048		2,870,020
Service contracts, net	441,641		451,529
Operating lease right-of-use assets, net	159,120		159,967
Other assets, net	271,579		260,758
	$	8,043,381	$	7,669,885

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	252,513	$	230,995
Accrued compensation and related liabilities	117,577		127,417
Accrued liabilities	406,787		456,653
Income taxes, current	23,251		27,099
Operating lease liabilities, current	43,414		43,031
Debt due within one year	249,808		—
Total current liabilities	1,093,350		885,195

Long-term liabilities:
Debt due after one year	2,290,447		2,539,705
Deferred income taxes	385,149		388,579
Operating lease liabilities	121,727		122,695
Accrued liabilities	547,904		498,509
Total long-term liabilities	3,345,227		3,549,488

Shareholders’ equity:
Preferred stock, no par value:	—		—
100,000 shares authorized, none outstanding
Common stock, no par value:	1,345,233		1,102,689
425,000,000 shares authorized
FY 2021: 188,155,836 shares issued and 104,548,040 shares outstanding
FY 2020: 186,793,207 shares issued and 103,415,368 shares outstanding
Paid-in capital	30,155		171,521
Retained earnings	7,596,514		7,296,509
Treasury stock:	(5,251,148)		(5,182,137)
FY 2021: 83,607,796 shares
FY 2020: 83,377,839 shares
Accumulated other comprehensive loss	(115,950)		(153,380)
Total shareholders’ equity	3,604,804		3,235,202
	$	8,043,381	$	7,669,885


	Common Stock					Paid-In Capital		Retained Earnings		Other Accumulated Comprehensive Loss	Treasury Stock						Total Shareholders' Equity
	Shares	Amount											Shares			Amount

Balance at June 1, 2020	186,793	$	1,102,689	$	171,521	$	7,296,509	$	(153,380)	(83,378)	$	(5,182,137)		$	3,235,202
Net income	—	—		—		300,005		—		—	—			300,005
Comprehensive income, net of tax	—	—		—		—		37,430		—	—			37,430

Stock-based compensation	—	—		29,055		—		—		—	—			29,055
Vesting of stock-based compensation awards	568	170,421		(170,421)		—		—		—	—			—
Stock options exercised, net of shares surrendered	795	72,123		—		—		—		—	—			72,123
Repurchase of common stock	—	—		—		—		—		(230)	(69,011)			(69,011)


Balance at August 31, 2020	188,156	$	1,345,233	$	30,155	$	7,596,514	$	(115,950)	(83,608)	$	(5,251,148)		$	3,604,804


(In thousands)	August 31, 2020		May 31, 2020

Raw materials	$	18,560	$	18,661
Work in process	26,747		29,497
Finished goods	442,858		360,740
	$	488,165	$	408,898




	2020						2019
(In thousands)	Revenue		%		Revenue		%

Uniform Rental and Facility Services	$	1,394,411	79.8	%	$	1,454,527	80.3	%
First Aid and Safety Services	204,481		11.7	%	172,090		9.5	%
Fire Protection Services	108,065		6.2	%	110,126		6.1	%
Uniform Direct Sales	39,618		2.3	%	74,396		4.1	%
Total revenue	$	1,746,575	100.0	%	$	1,811,139	100.0	%



	August 31, 2020	May 31, 2020

Weighted-average remaining lease term - operating leases	5.10 years	5.19 years
Weighted-average discount rate - operating leases	2.62%	2.66%


(In thousands)

2021 (remaining nine months)	$	36,380
2022	40,728
2023	32,079
2024	22,423
2025	15,766
Thereafter	29,643
Total payments	177,019
Less interest	(11,878)
Total present value of lease payments	$	165,141


	As of August 31, 2020
(In thousands)	Level 1		Level 2		Level 3		Fair Value

Cash and cash equivalents	$	421,542	$	—	$	—	$	421,542


Other assets, net:
Interest rate lock agreements	—		6,425		—		6,425
Total assets at fair value	$	421,542	$	6,425	$	—	$	427,967

Long-term accrued liabilities:
Interest rate lock agreements	$	—	$	156,051	$	—	$	156,051
Total liabilities at fair value	$	—	$	156,051	$	—	$	156,051


	As of May 31, 2020
(In thousands)	Level 1		Level 2		Level 3		Fair Value

Cash and cash equivalents	$	145,402	$	—	$	—	$	145,402


Other assets, net
Interest rate lock agreements	—		1,546		—		1,546
Total assets at fair value	$	145,402	$	1,546	$	—	$	146,948

Long-term accrued liabilities:
Interest rate lock agreements	$	—	$	165,686	$	—	$	165,686
Total liabilities at fair value	$	—	$	165,686	$	—	$	165,686


	Three Months Ended
Basic Earnings per Share (in thousands except per share data)	August 31, 2020		August 31, 2019

Net income	$	300,005	$	250,812
Less: income allocated to participating securities	2,173		2,016
Income available to common shareholders	$	297,832	$	248,796
Basic weighted average common shares outstanding	104,110		103,543

Basic earnings per share	$	2.86	$	2.40


	As of August 31, 2020
(In thousands)	Carrying Amount		Accumulated Amortization		Net

Service contracts	$	948,118	$	506,477	$	441,641

Capitalized contract costs ⁽¹⁾	$	399,204	$	169,248	$	229,956
Noncompete and consulting agreements	44,174		41,621		2,553
Other	62,566		23,496		39,070
Total other assets	$	505,944	$	234,365	$	271,579


	As of May 31, 2020
(In thousands)	Carrying Amount		Accumulated Amortization		Net

Service contracts	$	941,383	$	489,854	$	451,529

Capitalized contract costs ⁽¹⁾	$	375,912	$	148,853	$	227,059
Noncompete and consulting agreements	43,890		41,317		2,573
Other	54,239		23,113		31,126
Total other assets	$	474,041	$	213,283	$	260,758


(In thousands)	Interest Rate		Fiscal Year Issued	Fiscal Year Maturity	August 31, 2020		May 31, 2020

Debt due within one year
Senior notes	4.30	%	2012	2022	$	250,000	$	—


Debt issuance costs					(192)		—
Total debt due within one year					$	249,808	$	—

Debt due after one year
Senior notes	4.30	%	2012	2022	$	—	$	250,000
Senior notes	2.90	%	2017	2022	650,000		650,000
Senior notes	3.25	%	2013	2023	300,000		300,000
Senior notes ⁽¹⁾	2.78	%	2013	2023	51,141		51,250
Senior notes ⁽²⁾	3.11	%	2015	2025	51,553		51,637
Senior notes	3.70	%	2017	2027	1,000,000		1,000,000
Senior notes	6.15	%	2007	2037	250,000		250,000

Debt issuance costs					(12,247)		(13,182)
Total debt due after one year					$	2,290,447	$	2,539,705


(In thousands)	Interest Rate		Fiscal Year Issued	Fiscal Year Maturity	August 31, 2020		May 31, 2020

Debt due within one year
Senior notes	4.30	%	2012	2022	$	250,000	$	—


Debt issuance costs					(192)		—
Total debt due within one year					$	249,808	$	—

Debt due after one year
Senior notes	4.30	%	2012	2022	$	—	$	250,000
Senior notes	2.90	%	2017	2022	650,000		650,000
Senior notes	3.25	%	2013	2023	300,000		300,000
Senior notes ⁽¹⁾	2.78	%	2013	2023	51,141		51,250
Senior notes ⁽²⁾	3.11	%	2015	2025	51,553		51,637
Senior notes	3.70	%	2017	2027	1,000,000		1,000,000
Senior notes	6.15	%	2007	2037	250,000		250,000

Debt issuance costs					(12,247)		(13,182)
Total debt due after one year					$	2,290,447	$	2,539,705


	Three Months Ended
Diluted Earnings per Share (in thousands except per share data)	August 31, 2020		August 31, 2019

Net income	$	300,005	$	250,812
Less: income allocated to participating securities	2,173		2,016
Income available to common shareholders	$	297,832	$	248,796
Basic weighted average common shares outstanding	104,110		103,543
Effect of dilutive securities – employee stock options	3,019		3,540
Diluted weighted average common shares outstanding	107,129		107,083

Diluted earnings per share	$	2.78	$	2.32


	2020								2019
Buyback Program (In thousands except per share data)	Shares	Avg. Price per Share		Purchase Price		Shares	Avg. Price per Share		Purchase Price

October 30, 2018	—	$	—	$	—	837	$	230.66	$	193,109
October 29, 2019	—	$	—	$	—	—	$	—	$	—
	—	$	—	$	—	837	$	230.66	$	193,109


Goodwill (in thousands)	Uniform Rental and Facility Services		First Aid and Safety Services		All Other		Total

Balance as of June 1, 2020	$	2,513,041	$	243,266	$	113,713	$	2,870,020
Goodwill acquired	2,001		—		—		2,001

Foreign currency translation	12,942		1,041		44		14,027
Balance as of August 31, 2020	$	2,527,984	$	244,307	$	113,757	$	2,886,048


Service Contracts (in thousands)	Uniform Rental and Facility Services		First Aid and Safety Services		All Other		Total

Balance as of June 1, 2020	$	407,611	$	19,805	$	24,113	$	451,529
Service contracts acquired	1,138		—		—		1,138
Service contracts amortization	(12,031)		(947)		(1,290)		(14,268)
Foreign currency translation	3,169		73		—		3,242
Balance as of August 31, 2020	$	399,887	$	18,931	$	22,823	$	441,641


Fiscal Year (In thousands)

2021 (remaining nine months)	$	102,745
2022	126,441
2023	107,211
2024	95,316
2025	82,492
Thereafter	240,600
Total future amortization expense	$	754,805


(In thousands)	Foreign Currency		Unrealized Loss on Interest Rate Hedges		Other		Total

Balance at June 1, 2020	$	(26,343)	$	(112,718)	$	(14,319)	$	(153,380)

Other comprehensive income before reclassifications	26,946		10,842		—		37,788
Amounts reclassified from accumulated other comprehensive income (loss)	—		(358)		—		(358)
Net current period other comprehensive income	26,946		10,484		—		37,430
Balance at August 31, 2020	$	603	$	(102,234)	$	(14,319)	$	(115,950)


Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)					Affected Line in the Consolidated Condensed Statements of Income
	Three Months Ended
(In thousands)	August 31, 2020		August 31, 2019

Amortization of interest rate locks	$	474	$	474	Interest expense
Tax expense	(116)		(179)		Income taxes
Amortization of interest rate locks, net of tax	$	358	$	295	Net income


Summarized Consolidated Statement of Income (In thousands)	Obligor Group

Net sales to unrelated parties	$	1,647,338
Net sales to non-guarantors	$	831
Operating income	$	338,962
Net income	$	292,039


Summarized Consolidated Balance Sheet (In thousands)	Obligor Group

ASSETS
Receivables due from non-obligor subsidiaries	$	2,950
Total other current assets	$	2,485,529
Total other noncurrent assets	$	4,935,408

LIABILITIES
Amounts due to non-obligor subsidiaries	$	4,099
Current liabilities	$	1,053,554
Noncurrent liabilities	$	3,289,723


Period (In millions, except share and per share data)	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of the publicly announced plan ⁽¹⁾	Maximum approximate dollar value of shares that may yet be purchased under the plan ⁽¹⁾

June 1 - 30, 2020 ⁽²⁾	17,744	$	251.95	—	$	1,060.9
July 1 - 31, 2020 ⁽³⁾	167,822	$	302.44	—	$	1,060.9
August 1 - 31, 2020 ⁽⁴⁾	44,391	$	310.04	—	$	1,060.9
Total	229,957	$	300.01	—	$	1,060.9


31.1			Certification of Principal Executive Officer required by Rule 13a-14(a)
31.2			Certification of Principal Financial Officer required by Rule 13a-14(a)
32.1			Section 1350 Certification of Chief Executive Officer
32.2			Section 1350 Certification of Chief Financial Officer
101.INS			Inline XBRL Instance Document
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)