ctas-20230831

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	August 31, 2023


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

Commission file number 0-11399

Cintas Corporation

(Exact name of registrant as specified in its charter)


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


6800 Cintas Boulevard
P.O. Box 625737
Cincinnati,	Ohio	45262-5737
(Address of Principal Executive Offices)		(Zip Code)

Registrant's Telephone Number, Including Area Code: (513) 459-1200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common stock, no par value

CTAS

The NASDAQ Stock Market LLC

(NASDAQ Global Select Market)

Indicate by checkmark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by checkmark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☑ No ☐

Indicate by checkmark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☑ Accelerated Filer ☐ Non-Accelerated Filer ☐

Smaller Reporting Company ☐ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class						Outstanding September 30, 2023
Common Stock, no par value						101,854,118

CINTAS CORPORATION

TABLE OF CONTENTS


		Page
Part I. Financial Information

Item 1.	Financial Statements

	Consolidated Condensed Statements of Income – Three Months Ended August 31 , 2023 and 2022	3

	Consolidated Condensed Statements of Comprehensive Income – Three Months Ended August 31 , 2023 and 2022	4

	Consolidated Condensed Balance Sheets – August 31, 2023 and May 31, 2023	5

	Consolidated Condensed Statements of Shareholders' Equity - Three Months Ended August 31 , 2023 and 2022	6

	Consolidated Condensed Statements of Cash Flows – Three Months Ended August 31 , 2023 and 2022	7

	Notes to Consolidated Condensed Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	26

Part II. Other Information

Item 1.	Legal Proceedings	27



Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	27

Item 5.	Other Information	27

Item 6.	Exhibits	28

Signatures		29

Table of Contents

Part I. Financial Information

ITEM 1.

FINANCIAL STATEMENTS

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended
(In thousands except per share data)	August 31, 2023		August 31, 2022
Revenue:
Uniform rental and facility services	$	1,826,825	$	1,697,772
Other	515,505		468,682
Total revenue	2,342,330		2,166,454

Costs and expenses:
Cost of uniform rental and facility services	947,583		890,766
Cost of other	253,176		247,576
Selling and administrative expenses	641,015		587,992

Operating income	500,556		440,120

Interest income	(422)		(155)
Interest expense	24,544		27,720

Income before income taxes	476,434		412,555
Income taxes	91,349		60,866


Net income	$	385,085	$	351,689




Basic earnings per share	$	3.76	$	3.45




Diluted earnings per share	$	3.70	$	3.39

Dividends declared per share	$	1.35	$	1.15

See accompanying notes.

Table of Contents

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended
(In thousands)	August 31, 2023		August 31, 2022

Net income	$	385,085	$	351,689

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	2,634		(19,206)
Change in fair value of interest rate lock agreements, net of tax expense of $2,806 and $320, respectively	8,199		934
Amortization of interest rate lock agreements, net of tax benefit of $(487) and $(512), respectively	(1,442)		(1,521)
Other comprehensive income (loss), net of tax expense (benefit) of $2,319 and $(192), respectively	9,391		(19,793)

Comprehensive income	$	394,476	$	331,896

See accompanying notes.

Table of Contents

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:	2,121,475		2,031,542
425,000,000 shares authorized
FY 2024: 192,657,768 shares issued and 101,927,462 shares outstanding
FY 2023: 192,198,938 shares issued and 101,732,148 shares outstanding

Retained earnings	9,844,128		9,597,315
Treasury stock:	(7,975,137)		(7,842,649)
FY 2024: 90,730,306 shares
FY 2023: 90,466,790 shares
Accumulated other comprehensive income	87,169		77,778
Total shareholders’ equity	4,077,635		3,863,986
	$	8,719,681	$	8,546,356

See accompanying notes.

Table of Contents

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)


	Common Stock and Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income			Treasury Stock				Total Shareholders' Equity
(In thousands)	Shares	Amount						Shares		Amount

Balance at June 1, 2023	192,199	$	2,031,542	$	9,597,315	$	77,778		(90,467)		$	(7,842,649)	$	3,863,986
Net income	—	—		385,085		—			—		—		385,085
Comprehensive income, net of tax	—	—		—		9,391			—		—		9,391
Dividends	—	—		(138,272)		—			—		—		(138,272)
Stock-based compensation	—	30,242		—		—			—		—		30,242
Vesting of stock-based compensation awards	156	—		—		—			—		—		—
Stock options exercised	303	59,691		—		—			(118)		(59,212)		479
Repurchase of common stock	—	—		—		—			(145)		(73,276)		(73,276)


Balance at August 31, 2023	192,658	$	2,121,475	$	9,844,128	$	87,169		(90,730)		$	(7,975,137)	$	4,077,635


	Common Stock and Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income			Treasury Stock				Total Shareholders' Equity
(In thousands)	Shares	Amount						Shares		Amount

Balance at June 1, 2022	190,838	$	1,771,917	$	8,719,163	$	107,917		(89,127)		$	(7,290,801)	$	3,308,196
Net income	—	—		351,689		—			—		—		351,689
Comprehensive loss, net of tax	—	—		—		(19,793)			—		—		(19,793)
Dividends	—	—		(117,461)		—			—		—		(117,461)
Stock-based compensation	—	26,282		—		—			—		—		26,282
Vesting of stock-based compensation awards	273	—		—		—			—		—		—
Stock options exercised	543	80,638		—		—			(193)		(79,591)		1,047
Repurchase of common stock	—	—		—		—			(802)		(320,334)		(320,334)
Balance at August 31, 2022	191,654	$	1,878,837	$	8,953,391	$	88,124		(90,122)		$	(7,690,726)	$	3,229,626

See accompanying notes.

Table of Contents

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended
(In thousands)	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

See accompanying notes.

Table of Contents

CINTAS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Basis of Presentation

The consolidated condensed financial statements of Cintas Corporation (Cintas, the Company, we, us or our) included herein have been prepared by Cintas, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with United States generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations. While we believe that the disclosures are adequately presented, we suggest that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2023 (Annual Report) filed with the SEC on July 27, 2023. See Note 1 entitled Significant Accounting Policies of "Notes to Consolidated Financial Statements" of that Annual Report for a summary of our significant accounting policies. There have been no material changes in the accounting policies followed by Cintas during the current fiscal year.

Interim results are subject to variations and are not necessarily indicative of the results of operations for a full fiscal year. In the opinion of management, adjustments (which include only normal recurring adjustments) necessary for a fair statement of the consolidated results of the interim periods shown have been made.

Inventories, net are valued at the lower of cost (first-in, first-out) or net realizable value. Inventory is comprised of the following at:


(In thousands)	August 31, 2023		May 31, 2023

Raw materials	$	23,199	$	27,878
Work in process	49,017		56,384
Finished goods	426,138		422,342
Inventories, net	$	498,354	$	506,604

Inventories are recorded net of reserves for obsolete inventory (excess and slow-moving) of $74.1 million and $80.1 million at August 31, 2023 and May 31, 2023, respectively. The inventory obsolescence reserve is determined by specific identification, as well as an estimate based on Cintas' historical rates of obsolescence. Once a specific inventory item is written down to the lower of cost or net realizable value, a new cost basis has been established, and that inventory item cannot subsequently be marked up.

New Accounting Pronouncements

There are no new accounting pronouncements recently issued or newly effective that had, or are expected to have, a material impact on Cintas' consolidated condensed financial statements.

Note 2 - Revenue Recognition

The following table presents Cintas' total revenue disaggregated by operating segment for the three months ended August 31:

(In thousands)

2023

2022

SEC Form 10-Q filed by Cintas Corporation