What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-04 compared with 2024-04-05 · 108 added, 167 removed, 167 unchanged (62% of the section changed)

5 unchanged sentences

We are North America’s leading provider of corporate identity uniforms through rental and sales programs, as well as a significant provider of related business services, including entrance mats, restroom cleaning services and supplies, first aid and safety services, and fire protection products and services.

Cintas’ principal objective is “to exceed customers’ expectations in order to maximize the long-term value of Cintas for its shareholders and working partners,” and it provides the framework and focus for Cintas’ business strategy.

Cintas’ principal objective is “to exceed customers’ expectations in order to maximize the long-term value of Cintas for shareholders and working partners,” and it provides the framework and focus for Cintas’ business strategy.

This strategy is to achieve revenue growth for all our products and services by increasing our penetration at existing customers and by broadening our customer base to include market segments to which we have not historically served.

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These operating segments consist of fire protection products and services and the direct sale of uniforms and related items.

Cintas evaluates operating segment performance based on revenue and income before income taxes.

Revenue and income before income taxes for the three and nine months ended February 29, 2024 and February 28, 2023, for the two reportable operating segments and All Other are presented in Note 11 entitled Segment Information of “Notes to Consolidated Condensed Financial Statements.”

Cintas evaluates operating segment performance based on revenue and operating income.

Revenue and operating income for the three months ended August 31, 2024 and 2023, for the two reportable operating segments and All Other are presented in Note 10 entitled Segment Information of “Notes to Consolidated Condensed Financial Statements.”

All references made to common stock shares, equity awards, common stock per share amounts or treasury share amounts throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations have been retroactively adjusted to reflect the effects of a four-for-one split of the Company's common stock on September 11, 2024 (the Stock Split).

See Note 1 entitled Basis of Presentation of "Notes to Consolidated Condensed Financial Statements" for additional information on the Stock Split.

Consolidated Results

Three Months Ended February 29, 2024 Compared to Three Months Ended February 28, 2023

Total revenue increased 9.9% to $2,406.2 million for the three months ended February 29, 2024, compared to $2,190.0 million for the three months ended February 28, 2023.

Three Months Ended August 31, 2024 Compared to Three Months Ended August 31, 2023

Total revenue increased 6.8% to $2,501.6 million for the three months ended August 31, 2024, compared to $2,342.3 million for the three months ended August 31, 2023.

The organic revenue growth rate, which adjusts for the impact of acquisitions, workday differences and foreign currency exchange rate fluctuations, was 8.0%.

Revenue growth was positively impacted by 0.5% due to acquisitions and by 1.7% due to one more workday in the three months ended February 29, 2024 compared to the three months ended February 28, 2023.

Uniform Rental and Facility Services reportable operating segment revenue was $1,876.6 million for the three months ended February 29, 2024, compared to $1,716.2 million for the three months ended February 28, 2023, which was an increase of 9.4%.

Revenue growth was positively impacted by 0.6% due to acquisitions, negatively impacted by 1.6% due to one less workday in the three months ended August 31, 2024 compared to the three months ended August 31, 2023 and negatively impacted by 0.2% due to foreign currency exchange rate fluctuations.

Uniform Rental and Facility Services reportable operating segment revenue was $1,933.8 million for the three months ended August 31, 2024, compared to $1,826.8 million for the three months ended August 31, 2023, which was an increase of 5.9%.

The organic revenue growth rate for this reportable operating segment was 7.0%.

Revenue growth in the Uniform Rental and Facility Services reportable operating segment was positively impacted by 0.5% due to acquisitions, by 1.7% due to one more workday in the three months ended February 29, 2024 compared to the three months ended February 28, 2023, and by 0.1% due to foreign currency exchange rate fluctuations.

Revenue growth in the Uniform Rental and Facility Services reportable operating segment was positively impacted by 0.7% due to acquisitions, negatively impacted by 1.6% due to one less workday in the three months ended August 31, 2024 compared to the three months ended August 31, 2023, and negatively impacted by 0.2% due to foreign currency exchange rate fluctuations.

Revenue growth was a result of new business, the penetration of additional products and services into existing customers and price increases, partially offset by lost business.

New business growth resulted from an increase in the number and productivity of sales representatives.

Other revenue, consisting of revenue from the First Aid and Safety Services reportable operating segment and All Other, increased 11.8% for the three months ended February 29, 2024, compared to the three months ended February 28, 2023, from $473.8 million to $529.5 million.

Other revenue, consisting of revenue from the First Aid and Safety Services reportable operating segment and All Other, increased 10.1% for the three months ended August 31, 2024, compared to the three months ended August 31, 2023, from $515.5 million to $567.7 million.

The organic revenue growth rate for other revenue was 11.4%.

Revenue growth was positively impacted by 0.5% due to acquisitions and by 1.8% due to one more workday in the three months ended February 29, 2024 compared to the three months ended February 28, 2023.

Revenue growth was positively impacted by 0.4% due to acquisitions and negatively impacted by 1.7% due to one less workday in the three months ended August 31, 2024 compared to the three months ended August 31, 2023.

Cost of uniform rental and facility services consists primarily of production expenses, delivery expenses and the amortization of in service inventory, including uniforms, mats, shop towels and other ancillary items.

Cost of uniform rental and facility services increased $52.2 million, or 5.8%, for the three months ended February 29, 2024, compared to the three months ended February 28, 2023.

Cost of uniform rental and facility services improved as a percent of revenue, decreasing from 52.9% for the three months ended February 28, 2023, to 51.2% for the three months ended February 29, 2024.

This improvement as a percent of revenue was primarily due to efficiency gains in energy usage, material cost amortization and improved leverage of fixed costs.

Cost of uniform rental and facility services increased $33.6 million, or 3.5%, for the three months ended August 31, 2024, compared to the three months ended August 31, 2023.

Cost of uniform rental and facility services improved as a percent of revenue, decreasing from 51.9% for the three months ended August 31, 2023, to 50.7% for the three months ended August 31, 2024.

This improvement as a percent of revenue was primarily due to efficiency gains in energy and in-service inventory usage and improved leverage of fixed costs.

Cost of other consists primarily of cost of goods sold (predominantly first aid and safety products, personal protective equipment, uniforms and fire protection products), delivery expenses and distribution expenses in the First Aid and Safety Services reportable operating segment and All Other.

Cost of other increased $10.2 million, or 4.1%, for the three months ended February 29, 2024, compared to the three months ended February 28, 2023, primarily due to increased sales volume in each of the underlying operating segments.

Cost of other improved as a percent of revenue, decreasing from 52.3% for three months ended February 28, 2023, to 48.7% for the three months ended February 29, 2024.

Cost of other increased $15.1 million, or 6.0%, for the three months ended August 31, 2024, compared to the three months ended August 31, 2023 as a result of higher other revenue.

Cost of other improved as a percent of revenue, decreasing from 49.1% for three months ended August 31, 2023, to 47.3% for the three months ended August 31, 2024.

The improvement in cost of sales as a percent of revenue was primarily due to favorable changes in the sales mix and sourcing and productivity initiatives in the First Aid and Safety Services reportable operating segment, as well as i mproved leverage of fixed costs for both the First Aid and Safety Services reportable operating segment and All Other.

Selling and administrative expenses increased $79.8 million, or 13.6%, in the three months ended February 29, 2024, compared to the three months ended February 28, 2023.

Selling and administrative expenses as a percent of revenue were 27.7% for the three months ended February 29, 2024, compared to 26.8% for the three months ended February 28, 2023.

The change as a percent of revenue is primarily due to investing in additional selling resources, investing in our management trainee program, expanding our talent acquisition efforts for future growth, as well as costs associated with the tentative legal settlement discussed in Note 12 to the consolidated condensed financial statements.

The costs associated with the tentative legal settlement discussed in Note 12 to the consolidated condensed financial statements were not material to the consolidated statements of income.

Operating income was $520.8 million, or 21.6% of revenue, for the three months ended February 29, 2024, compared to $446.8 million, or 20.4% of revenue, for the three months ended February 28, 2023.

The improvement in operating income as a percent of revenue was primarily due to operating leverage from revenue growth, efficiency gains in energy usage and productivity initiatives, partially offset by the increase in selling and administrative expense noted above.

Net interest expense (interest expense less interest income) was $24.6 million for the three months ended February 29, 2024, compared to $28.4 million for the three months ended February 28, 2023.

The decrease was primarily due to a reduction in the average amount of outstanding debt during the three months ended February 29, 2024 compared to the three months ended February 28, 2023.

Cintas’ effective tax rate was 19.9% and 22.1% for the three months ended February 29, 2024 and February 28, 2023, respectively.

Selling and administrative expenses increased $50.1 million, or 7.8%, in the three months ended August 31, 2024, compared to the three months ended August 31, 2023.

Selling and administrative expenses as a percent of revenue were 27.6% for the three months ended August 31, 2024, compared to 27.4% for the three months ended August 31, 2023.

The change as a percent of revenue is primarily due to an increase in employee-partner related expenses.

Operating income was $561.0 million, or 22.4% of revenue, for the three months ended August 31, 2024, compared to $500.6 million, or 21.4% of revenue, for the three months ended August 31, 2023.

The improvement in operating income as a percent of revenue was primarily due to operating leverage from revenue growth, efficiency gains in energy and in-service inventory usage, partially offset by the increase in selling and administrative expense noted above.

Net interest expense (interest expense less interest income) was $24.4 million for the three months ended August 31, 2024, compared to $24.1 million for the three months ended August 31, 2023.

The change was primarily due to an increase in the average amount of outstanding debt during the three months ended August 31, 2024 compared to the three months ended August 31, 2023.

Cintas’ effective tax rate was 15.8% and 19.2% for the three months ended August 31, 2024 and August 31, 2023, respectively.

The effective tax rate in both periods was impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation.

Net income was $397.6 million for the three months ended February 29, 2024, an increase of 22.0%, compared to the three months ended February 28, 2023.

Diluted earnings per share were $3.84 for the three months ended February 29, 2024, which was an increase of 22.3% compared to the three months ended February 28, 2023.

Net income was $452.0 million for the three months ended August 31, 2024, an increase of 17.4%, compared to the three months ended August 31, 2023.

Diluted earnings per share were $1.10 for the three months ended August 31, 2024, which was an increase of 18.3% compared to the three months ended August 31, 2023.

Diluted earnings per share increased primarily due to the increase in net income.

Uniform Rental and Facility Services Reportable Operating Segment

Three Months Ended February 29, 2024 Compared to Three Months Ended February 28, 2023

Uniform Rental and Facility Services reportable operating segment revenue was $1,876.6 million for the three months ended February 29, 2024 compared to $1,716.2 million for the three months ended February 28, 2023.

Three Months Ended August 31, 2024 Compared to Three Months Ended August 31, 2023

Uniform Rental and Facility Services reportable operating segment revenue was $1,933.8 million for the three months ended August 31, 2024 compared to $1,826.8 million for the three months ended August 31, 2023.

The organic revenue growth rate for the reportable operating segment was 7.0%.

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The reportable operating segment’s gross margin was $952.7 million.

Gross margin as a percent of revenue was 48.8% for the three months ended February 29, 2024 compared to 47.1% for the three months ended February 28, 2023.

The improvement in gross margin was primarily the result of efficiency gains in energy usage, material cost amortization, and improved leverage of fixed costs.

Selling and administrative expenses for the Uniform Rental and Facility Services reportable operating segment increased $47.8 million in the three months ended February 29, 2024 compared to the three months ended February 28, 2023.

Selling and administrative expenses as a percent of revenue for the three months ended February 29, 2024 were 26.4% compared to the 26.1% in the three months ended February 28, 2023.

The change as a percent of revenue was primarily due to investing in additional selling resources, investing in our management trainee program and expanding our talent acquisition efforts for future growth.

Income before income taxes increased $60.4 million, or 16.8%, for the Uniform Rental and Facility Services reportable operating segment for the three months ended February 29, 2024, compared to the three months ended February 28, 2023.

Income before income taxes was 22.4% of the reportable operating segment's revenue compared to the three months ended February 28, 2023 of 21.0% of revenue.

Gross margin as a percent of revenue was 49.3% for the three months ended August 31, 2024 compared to 48.1% for the three months ended August 31, 2023.

The improvement in gross margin was primarily the result of efficiency gains in energy and in-service inventory usage and improved leverage of fixed costs.

Selling and administrative expenses for the Uniform Rental and Facility Services reportable operating segment increased $33.5 million in the three months ended August 31, 2024 compared to the three months ended August 31, 2023.

Selling and administrative expenses as a percent of revenue for the three months ended August 31, 2024 were 26.2% compared to the 25.9% in the three months ended August 31, 2023.

The change as a percent of revenue was primarily due to an increase in employee-partner related expenses.

Income before income taxes increased $39.9 million, or 9.8%, for the Uniform Rental and Facility Services reportable operating segment for the three months ended August 31, 2024, compared to the three months ended August 31, 2023.

Income before income taxes was 23.1% of the reportable operating segment's revenue compared to the three months ended August 31, 2023 of 22.3% of revenue.

The improvement in income before income taxes was a result of the expansion in gross margin which was partially offset by the investments in selling and administrative expenses noted above.

First Aid and Safety Services Reportable Operating Segment

Three Months Ended February 29, 2024 Compared to Three Months Ended February 28, 2023

First Aid and Safety Services reportable operating segment revenue increased from $231.6 million to $262.6 million, or 13.4%, for the three months ended February 29, 2024, over the three months ended February 28, 2023.

Three Months Ended August 31, 2024 Compared to Three Months Ended August 31, 2023

First Aid and Safety Services reportable operating segment revenue increased from $260.7 million to $292.6 million, or 12.2%, for the three months ended August 31, 2024, over the three months ended August 31, 2023.

The organic revenue growth rate for the reportable operating segment was 14.0%.

First Aid and Safety Services reportable operating segment revenue was positively impacted by 0.1% due to acquisitions and by 1.8% due to one more workday in the three months ended February 29, 2024 compared to the three months ended February 28, 2023.

The increase in revenue was driven by many factors including new business sold by sales representatives, penetration of additional products and services into existing customers, price increases and strong customer retention.

Cost of first aid and safety services for the three months ended February 29, 2024, increased $2.7 million, or 2.4%, compared to the three months ended February 28, 2023.

The gross margin as a percent of revenue was 56.3% for the three months ended February 29, 2024, compared to the gross margin as a percent of revenue of 51.6% in the three months ended February 28, 2023.

The improvement in gross margin was primarily driven by favorable changes in the sales mix, sourcing and productivity initiatives, as well as i mproved leverage of fixed costs and a reduction in energy expense as a percent of revenue.

Selling and administrative expenses increased $17.9 million in the three months ended February 29, 2024, compared to the three months ended February 28, 2023.

Selling and administrative expenses as a percent of revenue for the three months ended February 29, 2024 were 34.3%, compared to 31.1% in the third quarter of the prior fiscal year.

The change as a percent of revenue was primarily due to investing in additional selling resources for future growth as well as an increase in inventory obsolescence reserves.

Income before income taxes for the First Aid and Safety Services reportable operating segment increased $10.4 million to $57.7 million for the three months ended February 29, 2024, compared to the three months ended February 28, 2023.

Income before income taxes was 22.0% of the reportable operating segment’s revenue

compared to the three months ended February 28, 2023 of 20.4%.

First Aid and Safety Services reportable operating segment revenue was negatively impacted by 1.7% due to one less workday in the three months ended August 31, 2024 compared to the three months ended August 31, 2023 and by 0.1% due to foreign currency exchange rate fluctuations.

The increase in revenue was driven by many factors including increases in new business sold by sales representatives, penetration of additional products and services into existing customers, price increases and strong customer retention.

Cost of first aid and safety services for the three months ended August 31, 2024, increased $8.8 million, or 7.7%, compared to the three months ended August 31, 2023.

The gross margin as a percent of revenue was 57.7% for the three months ended August 31, 2024, compared to the gross margin as a percent of revenue of 55.9% in the three months ended August 31, 2023.

The improvement in gross margin as a percent of revenue was primarily driven by a favorable sales mix, sourcing and productivity initiatives, as well as i mproved leverage of fixed costs and a reduction in energy expense as a percent of revenue.

Selling and administrative expenses increased $11.3 million in the three months ended August 31, 2024, compared to the three months ended August 31, 2023.

Selling and administrative expenses as a percent of revenue for the three months ended August 31, 2024 were 33.3%, compared to 33.1% in the first quarter of the prior fiscal year.

The change as a percent of revenue was primarily due to increases in labor and other employee-partner related expenses, including investing in additional selling resources for future growth.

Income before income taxes for the First Aid and Safety Services reportable operating segment increased $11.7 million to $71.3 million for the three months ended August 31, 2024, compared to the three months ended August 31, 2023.

Income before income taxes was 24.4% of the reportable operating segment’s revenue compared to the three months ended August 31, 2023 of 22.9%.

The increase in income before income taxes was primarily due to the previously discussed improvements in gross margin, partially offset by the increase in selling and administrative expenses.

Consolidated Results

Nine Months Ended February 29, 2024 Compared to Nine Months Ended February 28, 2023

Total revenue increased 9.1% to $7,125.7 million for the nine months ended February 29, 2024, compared to $6,531.3 million for the nine months ended February 28, 2023.

Total organic revenue growth was 8.2%.

Organic growth adjusts for the impact of acquisitions, workday differences and foreign currency exchange rate fluctuations.

Revenue growth was positively impacted by 0.3% due to acquisitions and by 0.6% due to one more workday in the nine months ended February 29, 2024 compared to the nine months ended February 28, 2023.

Uniform Rental and Facility Services reportable operating segment revenue was $5,554.0 million for the nine months ended February 29, 2024, compared to $5,123.9 million in the nine months ended February 28, 2023, which was an increase of 8.4%.

Organic revenue growth for this reportable operating segment was 7.6%.

Uniform Rental and Facility Services reportable operating segment revenue was positively impacted by 0.3% due to acquisitions, positively impacted by 0.6% due to one more workday in the nine months ended February 29, 2024 compared to the nine months ended February 28, 2023, and negatively impacted by 0.1% due to foreign currency exchange rate fluctuations.

Revenue growth was a result of new business, the penetration of additional products and services into existing customers and price increases, partially offset by lost business.

New business growth resulted from an increase in the number and productivity of sales representatives.

Other revenue, consisting of revenue from the First Aid and Safety Services reportable operating segment and All Other, was $1,571.7 million for the nine months ended February 29, 2024, compared to $1,407.4 million for the nine months ended February 28, 2023, which was an increase of 11.7%.

Other revenue organic growth was 10.7%.

Revenue growth was positively impacted by 0.4% due to acquisitions and by 0.6% due to one more workday in the nine months ended February 29, 2024 compared to the nine months ended February 28, 2023.

Cost of uniform rental and facility services increased $176.5 million, or 6.5%, for the nine months ended February 29, 2024, compared to the nine months ended February 28, 2023, primarily due to increased sales volume in each of the underlying operating segments.

Cost of uniform rental and facility services improved as a percent of revenue, decreasing from 52.8% for the nine months ended February 28, 2023, to 51.9% for the nine months ended February 29, 2024.

This improvement as a percent of revenue was primarily due to efficiency gains in energy usage and improved leverage of fixed costs.

Cost of other consists primarily of cost of goods sold (predominantly first aid and safety products, personal protective equipment, uniforms, and fire protection products), delivery expenses and distribution expenses in the First Aid and Safety Services reportable operating segment and All Other.

Cost of other increased $31.5 million, or 4.2%, for the nine months ended February 29, 2024, compared to the nine months ended February 28, 2023.

Cost of other improved as a percent of revenue, decreasing from 52.7% for nine months ended February 28, 2023, to 49.2% for the nine months ended February 29, 2024.

The improvement in cost of sales as a percent of revenue was primarily due to favorable changes in the sales mix and sourcing and productivity initiatives in the First Aid and Safety Services reportable operating segment as well as i mproved leverage of fixed costs for both the First Aid and Safety Services reportable operating segment and All Other.

Selling and administrative expenses increased $197.2 million, or 11.3%, for the nine months ended February 29, 2024, compared to the nine months ended February 28, 2023.

Selling and administrative expenses as a percent of revenue were 27.4% for the nine months ended February 29, 2024, compared to 26.8% for the nine months ended February 28, 2023.

The change as a percent of revenue is primarily due to investing in additional selling resources, investing in our management trainee program, expanding our talent acquisition efforts for future growth, as well as the previously noted costs associated with the tentative legal settlement discussed in Note 12 .

Operating income was $1,521.0 million, or 21.3% of revenue, for the nine months ended February 29, 2024, compared to $1,331.9 million, or 20.4% of revenue, for the nine months ended February 28, 2023.

The change in

operating income as a percent of revenue was due to the previously mentioned improvements in gross margin, partially offset by the increase in selling and administrative expenses noted above.

Net interest expense (interest expense less interest income) was $74.5 million for the nine months ended February 29, 2024, compared to $84.6 million for the nine months ended February 28, 2023.

The change was primarily due to a decrease in the average amount of outstanding debt during the nine months ended February 29, 2024.

Cintas’ effective tax rate was 20.0% and 19.7% for the nine months ended February 29, 2024 and February 28, 2023, respectively.

The effective tax rate in both periods was impacted by certain discrete items, primarily the tax accounting for stock-based compensation.

Net income for the nine months ended February 29, 2024, increased $155.5 million, or 15.5%, compared to the nine months ended February 28, 2023.

Diluted earnings per share was $11.15 for the nine months ended February 29, 2024, which was an increase of 15.5% compared to the nine months ended February 28, 2023.

Diluted earnings per share increased due to the increase in net income.

Uniform Rental and Facility Services Reportable Operating Segment

Nine Months Ended February 29, 2024 Compared to Nine Months Ended February 28, 2023

Uniform Rental and Facility Services reportable operating segment revenue increased 8.4% to $5,554.0 million for the nine months ended February 29, 2024, compared to $5,123.9 million for the nine months ended February 28, 2023.

Organic revenue growth for this reportable operating segment was 7.6%.

This increase in revenue was driven by many factors including new business sold by sales representatives, penetration of additional products and services into existing customers, price increases, and strong customer retention.

Cost of uniform rental and facility services increased $176.5 million, or 6.5%, for the nine months ended February 29, 2024 over the nine months ended February 28, 2023.

The reportable operating segment’s gross margin was $2,672.0 million, or 48.1% of revenue, for the nine months ended February 29, 2024, compared to the gross margin of 47.2% for the nine months ended February 28, 2023.

The improvement in gross margin was primarily the result of efficiency gains in energy usage and improved leverage of fixed costs.

Selling and administrative expenses for the Uniform Rental and Facility Services reportable operating segment increased $120.9 million, increasing as a percent of revenue for the nine months ended February 29, 2024 to 26.0%, compared to 25.9% for the nine months ended February 28, 2023.

As a percent of revenue, expenses were largely consistent as compared to the nine months ended February 28, 2023.

Income before income taxes increased $132.7 million, or 12.1%, for the Uniform Rental and Facility Services reportable operating segment for the nine months ended February 29, 2024, compared to the nine months ended February 28, 2023.

Income before income taxes was 22.1% of the reportable operating segment’s revenue, compared to 21.3% for the nine months ended February 28, 2023.

The change as a percent of revenue was primarily a result of the improvement in gross margin.

First Aid and Safety Services Reportable Operating Segment

Nine Months Ended February 29, 2024 Compared to Nine Months Ended February 28, 2023

First Aid and Safety Services reportable operating segment revenue increased from $701.7 million to $789.7 million, or 12.5%, for the nine months ended February 29, 2024, over the nine months ended February 28, 2023.

Organic revenue growth for this reportable operating segment was 11.8%.

First Aid and Safety Services reportable operating segment revenue was positively impacted by 0.2% due to acquisitions, positively impacted by 0.6% due to one more workday in the nine months ended February 29, 2024 compared to the nine months ended February 28, 2023, and negatively impacted by 0.1% due to foreign currency exchange rate fluctuations.

Cost of first aid and safety services increased $3.8 million, or 1.1%, for the nine months ended February 29, 2024, from the nine months ended February 28, 2023, due to higher sales volume.

The gross margin as a percent of revenue was 55.6% for the nine months ended February 29, 2024, which was an increase of 510 basis points compared to the gross margin as a percent of revenue of 50.5% in the nine months ended February 28, 2023.

improvement in gross margin was primarily driven by favorable changes in the sales mix, sourcing and productivity initiatives, as well as i mproved leverage of fixed costs and a reduction in energy expense as a percent of revenue.

Selling and administrative expenses increased $41.9 million, and increased as a percent of revenue to 33.3%, for the nine months ended February 29, 2024, compared to 31.5% for the nine months ended February 28, 2023.

The change as a percent of revenue was largely due to investing in additional selling resources for future growth as well as an increase in inventory obsolescence reserves.

Income before income taxes for the First Aid and Safety Services reportable operating segment was $175.8 million for the nine months ended February 29, 2024, compared to $133.6 million for the nine months ended February 28, 2023.

Income before income taxes, at 22.3% of the reportable operating segment’s revenue, increased 330 basis points compared to the nine months ended February 28, 2023 due to the improvements in gross margin, partially offset by increases selling and administrative expenses.

Liquidity and Capital Resources

The following is a summary of our cash flows and cash and cash equivalents as of and for the nine months ended:

(In thousands) February 29, 2024 February 28, 2023

The following is a summary of our cash flows and cash and cash equivalents as of and for the three months ended August 31:

(In thousands) 2024 2023

Net cash provided by operating activities $ 466,732 $ 336,945

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Cash and cash equivalents at the end of the period $ 101,373 $ 88,126

Cash and cash equivalents as of February 29, 2024 and February 28, 2023, include $52.4 million and $40.4 million, respectively, that is located outside of the U.S.

Cash and cash equivalents as of August 31, 2024 and 2023, include $51.0 million and $30.2 million, respectively, that is located outside of the U.S.

Cash flows provided by operating activities have historically supplied us with a significant source of liquidity.

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Acquisitions, repurchases of our common stock and dividends remain strategic objectives, but they will be dependent on the economic outlook and liquidity of the Company.

Net cash provided by operating activities was $1,386.7 million for the nine months ended February 29, 2024, compared to $1,044.2 million for the nine months ended February 28, 2023.

The change from the prior fiscal year was primarily due to an increase in net income and favorable changes in working capital, specifically accounts receivable, inventories, net and uniforms and other rental items in service.

These improvements were partially offset by unfavorable changes in working capital, specifically, accrued compensation and related liabilities and accounts payable.

Net cash provided by operating activities was $466.7 million for the three months ended August 31, 2024, compared to $336.9 million for the three months ended August 31, 2023.

The change from the prior fiscal year was primarily due to an increase in net income and favorable changes in working capital, specifically accounts payable and accrued compensation and related liabilities.

These improvements were partially offset by unfavorable changes in working capital, specifically, income taxes and uniforms and other rental items in service.

Net cash used in investing activities includes capital expenditures, purchases of investments and cash paid for acquisitions of businesses.

Capital expenditures were $307.6 million and $224.1 million for the nine months ended February 29, 2024 and February 28, 2023, respectively.

Capital expenditures in the nine months ended February 29, 2024, included $197.2 million for the Uniform Rental and Facility Services reportable operating segment and $73.2 million for the First Aid and Safety Services reportable operating segment.

The increase in capital expenditures during the nine months ended February 29, 2024, over the nine months ended February 28, 2023, was due to investments in the operating segments to support continued revenue growth, an increase in equipment purchases, primarily trucks, due to vendors clearing backlogged orders and spending associated with the SAP implementation in the Fire Protection Services operating segment, which is included in All Other.

Cash paid for acquisitions of businesses was $185.0 million and $33.0 million for the nine months ended February 29, 2024 and

February 28, 2023, respectively.

The acquisitions during both the nine months ended February 29, 2024 and February 28, 2023, occurred in our Uniform Rental and Facility Services reportable operating segment, our First Aid and Safety Services reportable operating segment and our Fire Protection operating segment, which is included in All Other.

Net cash used in investing activities also includes $7.6 million and $4.6 million of purchases of investments during the nine months ended February 29, 2024 and February 28, 2023, respectively.

Net cash used in financing activities was $879.5 million and $774.6 million for the nine months ended February 29, 2024 and February 28, 2023, respectively.

Capital expenditures were $92.9 million and $106.7 million for the three months ended August 31, 2024 and 2023, respectively.

Capital expenditures in the three months ended August 31, 2024, included $67.7 million for the Uniform Rental and Facility Services reportable operating segment and $10.6 million for the First Aid and Safety Services reportable operating segment.

Cash paid for acquisitions of businesses was $9.4 million and $55.7 million for the three months ended August 31, 2024 and 2023, respectively.

The acquisitions during both the three months ended August 31, 2024 and 2023, occurred in our Uniform Rental and Facility Services reportable operating segment, our First Aid and Safety Services reportable operating segment and our Fire Protection operating segment, which is included in All Other.

Net cash used in investing activities also includes $7.1 million and $6.5 million of purchases of investments during the three months ended August 31, 2024 and 2023, respectively.

Net cash used in financing activities was $592.8 million and $202.4 million for the three months ended August 31, 2024 and 2023, respectively.

The increase in cash used in financing activities was due to the increase in share buyback activity and an increase in dividends paid.

This increase was partially offset by a decrease in payments of debt and commercial paper in the nine months ended February 29, 2024.

On July 27, 2021, Cintas announced that the Board of Directors authorized a $1.5 billion share buyback program, which does not have an expiration date.

On July 26, 2022, Cintas announced that the Board of Directors authorized a new $1.0 billion share buyback program, which does not have an expiration date.

The following table summarizes the buyback activity by program for the nine months ended:

February 29, 2024 February 28, 2023

This increase was partially offset by the net issuance of commercial paper and a decrease in payments of debt in the three months ended August 31, 2024.

Cintas announced on July 27, 2021, July 26, 2022, and July 23, 2024, that the Board of Directors (the Board) authorized share buyback programs for $1.5 billion, $1.0 billion and $1.0 billion, respectively.

None of the share buyback programs have an expiration date.

The following table summarizes the share buyback activity by program for the three months ended August 31:

Buyback Activity

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July 27, 2021 (1)

— $ — $ — — $ — $ —

July 26, 2022 2,732 173.40 473,617 — — —

July 23, 2024 — — — — — —

— $ 173.40 $ 473,617 — $ — $ —

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Total repurchase of Cintas common stock $ 614,802 $ 73,276

(1) The July 21, 2021 share buyback program was completed during the fourth quarter of fiscal 2024.

(2) Shares of Cintas common stock acquired for employee payroll taxes due on options exercised and vested restricted stock awards.

Our Board of Directors declared the following dividends:

There were no share buybacks in the period subsequent to August 31, 2024, through October 4, 2024.

From the inception of the July 26, 2022 share buyback program through October 4, 2024, Cintas has purchased 3.1 million shares of Cintas common stock in the aggregate, at an average price of $172.85 per share, for a total purchase price of $530.7 million.

Cintas has made no purchases under the July 23, 2024 share buyback program.

The Board declared the following dividends:

Paid Dividends

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Per Share Total

Nine months ended February 29, 2024

Three months ended August 31, 2024

April 9, 2024 May 15, 2024 June 14, 2024 $ 0.3375 $ 138.2

July 25, 2023 August 15, 2023 September 15, 2023 1.35 138.2

October 24, 2023 November 15, 2023 December 15, 2023 1.35 137.5

$ 3.85 $ 393.3

Nine months ended February 28, 2023

Three months ended August 31, 2023

April 11, 2023 May 15, 2023 June 15, 2023 $ 0.2875 $ 117.6

July 26, 2022 August 15, 2022 September 15, 2022 1.15 117.3

October 25, 2022 November 15, 2022 December 15, 2022 1.15 117.4

$ 3.25 $ 332.4

Accrued Dividends

As of February 29, 2024

January 16, 2024 (1)

February 15, 2024 March 15, 2024 $ 1.35 $ 137.6

As of February 28, 2023

January 10, 2023 (1)

February 15, 2023 March 15, 2023 $ 1.15 $ 117.5

(1) The dividends declared during the three months ended February 29, 2024 and February 28, 2023 were included in current accrued liabilities on the consolidated condensed balance sheet at February 29, 2024 and February 28, 2023.

Any future dividend declarations, including the amount of any dividends, are at the discretion of the Board of Directors and dependent upon then-existing conditions, including the Company's consolidated operating results and consolidated financial condition, capital requirements, contractual restrictions, business prospects and other factors that the Board of Directors may deem relevant.

During the nine months ended February 29, 2024, Cintas repurchased, and subsequently retired, $13.5 million of its 6.15%, 30-year senior notes.

During the nine months ended February 28, 2023, Cintas paid $62.2 million, net of commercial paper.

As of August 31, 2024

July 23, 2024 (1)

August 15, 2024 September 3, 2024 $ 0.39 $ 157.3

As of August 31, 2023

July 25, 2023 (1)

August 15, 2023 September 15, 2023 $ 0.3375 $ 138.3

(1) The dividends declared during the three months ended August 31, 2024 and 2023 were included in current accrued liabilities on the consolidated condensed balance sheet at August 31, 2024 and 2023.

Any future dividend declarations, including the amount of any dividends, are at the discretion of the Board and dependent upon then-existing conditions, including the Company's consolidated operating results and consolidated financial condition, capital requirements, contractual restrictions, business prospects and other factors that the Board may deem relevant.

During the three months ended August 31, 2024, Cintas issued a net $166.0 million of commercial paper.

During the three months ended August 31, 2023, Cintas repurchased, and subsequently retired, $10.0 million of its 6.15%, 30-year senior notes.

The following table summarizes Cintas' outstanding debt:

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Issued Fiscal Year

Maturity February 29,

Debt due after one year

Maturity August 31,

Debt due within one year

Commercial paper 5.44 % (1)

2025 2025 $ 166,000 $ —

Senior notes (2)

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Senior notes 3.45 % 2022 2025 400,000 400,000

Debt issuance costs (508) (699)

Total debt due within one year $ 615,702 $ 449,595

Debt due after one year

Senior notes 3.70 % 2017 2027 $ 1,000,000 $ 1,000,000

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Total debt due after one year $ 2,026,448 $ 2,025,934

(1) Variable rate debt instrument.

The rate presented is the variable borrowing rate at August 31, 2024.

(2) Cintas assumed these senior notes with the acquisition of G&K Services, Inc.

(G&K) in the fourth quarter of fiscal 2017, and they were recorded at fair value.

The interest rate shown above is the effective interest rate.

The principal amount of these senior notes is $50.0 million with a stated interest rate of 3.88%.

The interest rate shown above is the effective interest rate until repayment in fiscal 2025.

The credit agreement that supports our commercial paper program has a revolving credit facility with a capacity of $2.0 billion.

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The maturity date of the revolving credit facility is March 23, 2027.

As of both February 29, 2024 and May 31, 2023, there was no commercial paper outstanding and no borrowings on our revolving credit facility.

As of August 31, 2024, there was $166.0 million of commercial paper outstanding with a weighted average interest rate of 5.44% and no borrowings on our revolving credit facility.

As of May 31, 2024, there was no commercial paper outstanding and no borrowings on our revolving credit facility.

Cintas has certain covenants related to debt agreements.

These covenants limit our ability to incur certain liens, to engage in sale-leaseback transactions and to merge, consolidate or sell all or substantially all of Cintas' assets.

These covenants also require Cintas to maintain certain debt to earnings before interest, taxes, depreciation and amortization (EBITDA) and interest coverage ratios.

These covenants also require Cintas to maintain certain debt to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) and interest coverage ratios.

Cross-default provisions exist between certain debt instruments.

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Additionally, our ability to continue to access the commercial paper and long-term debt markets on favorable interest rate and other terms will depend, to a significant degree, on the ratings assigned by the credit rating agencies to our indebtedness.

As of February 29, 2024, our ratings were as follows:

As of August 31, 2024, our ratings were as follows:

Rating Agency Outlook Commercial

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In the event that the ratings of our commercial paper or our outstanding long-term debt issues were substantially lowered or withdrawn for any reason, or if the ratings assigned to any new issue of long-term debt securities were significantly lower than those noted above, particularly if we no longer had investment grade ratings, our ability to access the debt markets may be adversely affected.

In addition, in such a case, our cost of funds for new issues of commercial paper and long-term debt would be higher than our cost of funds would have been had the ratings of

those new issues been at or above the level of the ratings noted above.

In addition, in such a case, our cost of funds for new issues of commercial paper and long-term debt would be higher than our cost of funds would have been had the ratings of those new issues been at or above the level of the ratings noted above.

The rating agency ratings are not recommendations to buy, sell or hold our commercial paper or debt securities.

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2) is the indirectly, wholly owned principal operating subsidiary of Cintas.

2 is the issuer of the $2,486.6 million aggregate principal amount of senior notes outstanding as of February 29, 2024, which are unconditionally guaranteed, jointly and severally, by Cintas Corporation and its wholly owned, direct and indirect domestic subsidiaries.

2 is the issuer of the $2,486.6 million aggregate principal amount of senior notes outstanding as of August 31, 2024, which are unconditionally guaranteed, jointly and severally, by Cintas Corporation and its wholly owned, direct and indirect domestic subsidiaries.

Basis of Preparation of the Summarized Financial Information

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Summarized financial information of the Obligor Group is as follows:

Nine Months Ended

Three Months Ended

Summarized Consolidated Condensed Statements of Income

(In thousands)

2024 February 28,

2024 August 31,

Net sales to unrelated parties $ 2,372,606 $ 2,215,406

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Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements.

This Quarterly Report on Form 10-Q contains forward-looking statements, including statements regarding our future business plans and expectations.

The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements.

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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;

supply chain constraints and macroeconomic conditions, including inflationary pressures and higher interest rates;

fluctuations in costs of materials and labor, including increased medical costs;

costs and possible effects of union organizing activities;

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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 opportunities, improvements and efficiencies;

our ability to meet our aspirations relating to sustainability 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;

risks associated with cybersecurity threats, including disruptions caused by the inaccessibility of computer systems data and cybersecurity management, 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 disruption of operations from catastrophic or extraordinary events including global health pandemics;

the amount and timing of repurchases of our common stock, if any;

changes in federal and state tax and labor laws;

changes in global tax and labor laws;

and the reactions of competitors in terms of price and service.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis