Cintas Corp. (NASDAQ:CTAS)

Current Income Tax Expense

The current income tax expense exhibits a generally increasing trend over the periods analyzed. It rises from $185,005 thousand in 2019 to $432,543 thousand in 2024, with a notable acceleration beginning in 2022. This significant increase suggests growing taxable income or changes in tax rates or policies affecting the current period tax liabilities.

Deferred Income Tax Expense

The deferred income tax expense demonstrates considerable volatility throughout the periods. Starting at $34,759 thousand in 2019, it turns negative in 2020 and 2021, indicating deferred tax benefits or reductions in tax liabilities during these years. In 2022, it reverses to a positive figure of $51,635 thousand before declining again to -$30,500 thousand by 2024. This fluctuation may reflect changes in temporary differences, tax planning strategies, or adjustments related to timing differences in recognition of income and expenses.

Total Income Tax Expense

The total income tax expense, combining current and deferred amounts, fluctuates but generally increases from $219,764 thousand in 2019 to a peak of $345,138 thousand in 2023 before slightly declining to $402,043 thousand in 2024. The increase aligns largely with the rise in current tax expense, while deferred tax movements add variability to the overall figure. The data suggests the company’s tax expense is influenced primarily by current tax obligations but remains subject to adjustments related to deferred tax positions.

The analysis of the income tax rates over the six-year period reveals distinct patterns and fluctuations in the effective income tax rate compared to the constant U.S. federal statutory rate.

U.S. Federal Statutory Rate

Remained constant at 21% throughout the entire period from May 31, 2019, to May 31, 2024, indicating no changes in the statutory corporate tax rate affecting the company during these years.

Effective Income Tax Rate

Displayed notable variability across the years. Starting at 19.94% in 2019, it decreased significantly to 17.19% in 2020 and further to a low of 13.73% in 2021. This downward trend suggests the company benefited from tax planning strategies, credits, or other tax benefits reducing its tax burden below the statutory rate during these years.

However, the effective rate increased to 17.55% in 2022, indicating a reversal or reduction in those benefits or changes in taxable income components. This upward trend continued in 2023, with the rate rising to 20.38%, nearing the statutory rate level.

In 2024, the effective income tax rate stabilized slightly at 20.37%, maintaining a position close to the statutory rate, suggesting fewer deviations or adjustments influencing the tax expense.

Overall, the data implies that while the statutory rate remained unchanged, the effective tax rate fluctuated significantly but showed a clear increasing trend toward the statutory rate in the latter years. This may reflect changes in corporate tax planning effectiveness, regulatory impacts, or variations in earnings composition impacting taxable income.

The financial data presents various trends across multiple reserve categories, liabilities, assets, and tax-related items over the period from May 31, 2019, to May 31, 2024.

Accounts Receivable Reserves

There is a general upward trend, increasing from 9,495 thousand USD in 2019 to 13,478 thousand USD in 2024, peaking at 14,718 thousand USD in 2020 before slightly fluctuating thereafter.

Inventory Reserves

Inventory reserves show significant volatility, with an increase from 9,257 thousand USD in 2019 to a peak of 30,617 thousand USD in 2021, then declining steadily to 18,913 thousand USD in 2024.

Insurance Reserves

Insurance reserves remain relatively stable, fluctuating narrowly around 45,000 thousand USD throughout the period, indicating consistent risk coverage without significant changes.

Stock-based Compensation

Compensation expense shows a declining trend from 77,697 thousand USD in 2019 to 62,522 thousand USD in 2022, followed by a recovery to 71,146 thousand USD in 2024, suggesting adjustments in stock remuneration policies or employee incentive programs.

Net Operating Loss and Foreign Carry-forwards

Values decline from 9,109 thousand USD in 2019 to 3,885 thousand USD in 2021, with missing data for 2022 and 2023 and a level of 2,169 thousand USD in 2024, indicating potential utilization or expiration of loss carry-forwards.

Treasury Locks

Initially rising sharply to 39,046 thousand USD in 2020, treasury locks substantially decrease to 3,140 thousand USD in 2021, with subsequent negative values reflecting liabilities from 2021 through 2024, possibly indicating changes in hedging positions.

Operating Lease Liabilities

Starting from zero in 2019, this liability category steadily increases to 48,964 thousand USD in 2024, reflecting recognition of lease obligations over time consistent with accounting standards.

Deferred Compensation and Other Obligations

This category displays an overall upward trend—rising from 48,922 thousand USD in 2019 to 114,786 thousand USD in 2024—though with fluctuations between years, suggesting growing deferred compensation commitments or related liabilities.

Deferred Tax Assets

Deferred tax assets increase markedly from 205,625 thousand USD in 2019 to 314,610 thousand USD in 2024, with a peak in 2021, reflecting enhanced tax-accounting positions potentially associated with timing differences or carryforwards.

Valuation Allowance on Deferred Tax Assets

Valuation allowance amounts decrease in magnitude from -7,308 thousand USD in 2019 to near zero in 2021, with missing data for intermediate years, and a small negative value in 2024, indicating changes in assessments of realizability of deferred tax assets.

Net Deferred Tax Assets (After Valuation Allowance)

This net figure follows a trajectory similar to deferred tax assets, ranging from 198,317 thousand USD in 2019 to 312,481 thousand USD in 2024, signaling generally improved tax asset recognition after adjustments.

Uniform and Other Rental Items in Service

These assets consistently show increasing negative balances from -194,939 thousand USD in 2019 to -251,394 thousand USD in 2024, indicating either growing liabilities or accumulated charges in this category.

Property and Equipment

Property and equipment balances are negative and largely stable, moving from -159,186 thousand USD in 2019 to -175,214 thousand USD in 2024, with a modest downward trend, possibly reflecting depreciation or disposals.

Intangibles and Other Amortizable Assets

This asset category shows a consistent decrease in negative balance from -210,531 thousand USD in 2019 to -178,583 thousand USD in 2024, indicating amortization or impairment reduction effects.

Capitalized Contract Costs

Continued increases in negative balance from -70,228 thousand USD in 2019 to -91,551 thousand USD in 2024 suggest additional capitalization of contract-related expenditures or amortization over time.

Operating Lease Right-of-Use Assets

First recorded in 2020 at -42,191 thousand USD, these assets increase in magnitude to -48,964 thousand USD in 2024, consistent with the growth in lease liabilities and reflecting recognition under lease accounting standards.

State Taxes and Other

Amounts fluctuate annually, showing an increase in negative balance from -1,612 thousand USD in 2019 to -5,085 thousand USD in 2024, indicating growing state tax liabilities or accruals.

Deferred Tax Liabilities

These liabilities grow steadily larger in negative balances from -636,496 thousand USD in 2019 to -787,993 thousand USD in 2024, showing increased deferred tax obligations.

Net Deferred Tax Asset (Liability)

The net deferred tax position is negative throughout, with fluctuations moving from -438,179 thousand USD in 2019, improving slightly in 2020 and 2021, but declining materially in 2022 and 2023 before improving somewhat in 2024. This reflects a predominance of deferred tax liabilities over assets and changing tax timing differences over time.

The deferred tax liabilities demonstrate fluctuations over the six-year period from May 31, 2019, to May 31, 2024. Initially, there is a downward trend from 438,179 thousand US dollars in 2019 to a lower point of 386,647 thousand US dollars in 2021. Following this decline, deferred tax liabilities increase significantly in 2022, reaching 473,777 thousand US dollars, and continue to rise in 2023 to 498,356 thousand US dollars. However, the year 2024 shows a slight decrease, with deferred tax liabilities recorded at 475,512 thousand US dollars.

Trend observation

The liabilities first decrease for two consecutive years and then increase sharply for two years before a subsequent minor decline.

Magnitude of change

The lowest point is reached in 2021, representing a reduction of approximately 11.8% compared to 2019. The peak in 2023 represents a level roughly 14% higher than the 2019 figure.

Recent movement

The slight reduction in 2024 compared to 2023 suggests a moderate adjustment but still maintains elevated deferred tax liabilities relative to the earlier years.

The financial data over the six-year period reveals notable trends in the reported and adjusted values of liabilities, shareholders’ equity, and net income.

Total liabilities

Reported total liabilities increase steadily from approximately 4.43 billion USD in 2019 to around 4.85 billion USD in 2024, reflecting an overall growth trend with minor fluctuations. Adjusted total liabilities follow a similar upward trajectory, rising from roughly 4.00 billion USD in 2019 to about 4.38 billion USD in 2024. The difference between reported and adjusted figures suggests consistent adjustments reducing the liabilities by an average of several hundred million USD annually.

Shareholders’ equity

Reported shareholders’ equity exhibits an increasing trend, growing from 3.00 billion USD in 2019 to approximately 4.32 billion USD in 2024. However, there is a slight dip around 2022, where equity decreases from about 3.69 billion USD in 2021 to 3.31 billion USD, before recovering and increasing in subsequent years. Adjusted shareholders’ equity consistently registers higher values than reported, increasing steadily from 3.44 billion USD in 2019 to close to 4.79 billion USD in 2024. These adjustments imply positive recalculations, possibly accounting for deferred tax effects or other comprehensive income elements.

Net income

Reported net income demonstrates a generally upward trend, rising from approximately 885 million USD in 2019 to 1.57 billion USD in 2024. There is slight variability between 2019 and 2020, with a small decline. Adjusted net income presents a varying pattern initially, with a dip from about 920 million USD in 2019 to 863 million USD in 2020, followed by a recovery and growth to 1.54 billion USD in 2024. The adjusted figures often diverge from the reported ones, indicating the impact of deferred income tax adjustments and other accounting treatments that influence earnings.

Overall, the data indicates consistent growth in liabilities, equity, and net income, with adjustments generally reflecting accounting for deferred tax effects and influencing the capitalization and profitability metrics positively. The equity and net income adjustments suggest a strengthening financial position when taking into account the deferred tax impacts. Minor fluctuations between years, particularly in equity, may result from transitional accounting periods or specific fiscal events.

The analysis of the annual financial data reveals several notable trends in profitability, leverage, and returns over the examined period.

Net Profit Margin

The reported net profit margin exhibits overall growth from 12.84% in 2019 to 16.38% in 2024, with a slight dip in 2020 and minor fluctuations thereafter. The adjusted net profit margin similarly shows a positive trend, starting at 13.34% in 2019, declining slightly in 2020, then rising to peak at 16.39% in 2022 before settling around 16.06% in 2024. This indicates an increasing ability to convert revenue into net profit over the years, with adjustments accounting for tax impacts smoothing some variations.

Financial Leverage

Both reported and adjusted financial leverage ratios demonstrate a gradual decline across the period. Reported financial leverage decreases from 2.48 in 2019 to 2.12 in 2024, while adjusted leverage drops from 2.16 to 1.91 in the same timeframe. This trend suggests a consistent reduction in debt reliance relative to equity, reflecting potential de-risking in the company’s capital structure or improved equity financing.

Return on Equity (ROE)

Reported ROE shows substantial variation, beginning at 29.47% in 2019, dipping to 27.08% in 2020, then rising sharply to a peak of 37.35% in 2022 before easing slightly to 36.41% by 2024. Adjusted ROE follows a similar trajectory but consistently remains lower, ranging from 26.73% to 32.16%. This pattern reflects improving profitability and efficient equity use, though the adjustment for taxes reduces the magnitude of returns somewhat, indicating the tax effect's significance on equity profitability.

Return on Assets (ROA)

The reported ROA steadily increases from 11.9% in 2019 to 17.14% in 2024, showing consistent improvement in asset utilization for profit generation. The adjusted ROA mirrors this trend, starting at 12.37% and reaching 16.81% by the end of the period, signifying that after adjusting for tax impacts, the company has maintained and enhanced its efficiency in generating returns from total assets.

Overall, the data reflects an improving profitability profile, marked by rising profit margins and returns, alongside a strategic reduction in financial leverage. The adjustment for deferred and reported income taxes moderates some metrics slightly but does not alter the positive growth direction. These trends likely indicate strengthening operational performance, effective capital management, and enhanced shareholder value creation over the analyzed years.

The analysis of the annual financial data reveals distinct trends in reported and adjusted net income and the corresponding profit margins over the six-year period ending May 31, 2024.

Reported Net Income

Reported net income exhibited a generally upward trajectory, rising from 884,981 thousand US dollars in 2019 to 1,571,592 thousand US dollars in 2024. There was a slight dip observed in 2020, with income decreasing to 876,037 thousand US dollars compared to the previous year. However, from 2021 onwards, the net income showed consistent growth each year, achieving its highest value in 2024.

Adjusted Net Income

Adjusted net income displayed a more variable pattern initially, declining from 919,740 thousand US dollars in 2019 to 862,745 thousand US dollars in 2020. Subsequently, it rebounded and increased to a peak in 2022 at 1,287,392 thousand US dollars. After a slight decrease in 2023, the adjusted net income marginally declined again in 2024, ending at 1,541,092 thousand US dollars. Overall, despite some fluctuations, the adjusted net income followed a growth trend similar to the reported net income but showed greater volatility.

Reported Net Profit Margin

The reported net profit margin percentage exhibited positive growth over the period. Starting at 12.84% in 2019, the margin decreased slightly to 12.36% in 2020, then increased notably to 15.61% in 2021. The margin remained relatively stable through 2022 at 15.73%, followed by a mild decrease in 2023. In 2024, the margin improved again to 16.38%, reaching the highest level in the six-year span, indicating enhanced profitability relative to revenue.

Adjusted Net Profit Margin

The adjusted net profit margin demonstrated a somewhat fluctuating but generally positive trend. Beginning at 13.34% in 2019, it declined to 12.18% in 2020, suggesting a drop in profitability after tax adjustments. Thereafter, the margin increased substantially to 15.02% in 2021 and peaked at 16.39% in 2022, the highest in the period. However, it experienced a slight decline in the subsequent years, settling at 16.06% in 2024, still above earlier years, which implies that adjustments continued to impact profit margins but the overall profitability remained strong.

The financial data reveals several notable trends in the company’s equity and leverage positions over the six-year period.

Shareholders’ equity

Both reported and adjusted shareholders’ equity show an overall upward trajectory from 2019 to 2024. Reported shareholders’ equity increased from approximately $3.0 billion in 2019 to over $4.3 billion in 2024. Adjusted shareholders’ equity follows a similar pattern, starting higher than the reported figure in 2019 at approximately $3.44 billion and reaching about $4.79 billion by 2024. While both measures generally grow, the adjusted equity consistently remains above the reported equity, reflecting the impact of deferred income tax adjustments on equity valuation.

Fluctuations in equity

A closer look at the year-over-year changes shows a dip in reported shareholders’ equity in 2022, dropping from around $3.69 billion in 2021 to approximately $3.31 billion in 2022. A similar but less pronounced decline occurs in adjusted shareholders’ equity during the same period, indicating some temporary pressure on equity levels, possibly linked to external or operational factors affecting earnings or tax adjustments during that year. Equity then recovers strongly in 2023 and continues increasing into 2024.

Financial leverage

Both reported and adjusted financial leverage ratios exhibit a declining trend over the period, suggesting an improving capital structure and reduced reliance on debt relative to equity. The reported financial leverage ratio decreased from 2.48 in 2019 to 2.12 in 2024, while adjusted financial leverage decreased from 2.16 to 1.91 over the same timeframe. These declines indicate a gradual strengthening of the equity base relative to liabilities, and potentially more conservative financial management or improved earnings retention.

Comparison of reported versus adjusted leverage

The adjusted financial leverage is consistently lower than the reported figure, reflecting the effect of accounting adjustments related to deferred income taxes. This suggests that when these adjustments are considered, the company's leverage position appears stronger (i.e., less leveraged) than reported numbers alone indicate. The gap between adjusted and reported leverage narrows slightly over the period but remains evident.

Overall, the data reflects a positive trend in shareholders’ equity growth alongside a decreasing leverage ratio, signaling improving financial stability and capital adequacy. Short-term volatility in equity around 2022 is evident but is followed by a robust recovery. The distinction between reported and adjusted figures highlights the importance of considering deferred tax impacts for a comprehensive understanding of financial health.

The financial data reveals several notable trends over the six-year period ending May 31, 2024. Reported net income demonstrates a general upward trajectory, increasing from approximately 885 million USD in 2019 to over 1.57 billion USD by 2024. Adjusted net income follows a similar pattern but shows slightly lower values in certain years, indicating the effect of tax adjustments and other reconciliations on profitability figures.

Shareholders’ equity, both reported and adjusted, also increases consistently throughout the period. Reported shareholders’ equity rises from just over 3 billion USD in 2019 to approximately 4.32 billion USD in 2024, while adjusted shareholders’ equity grows from around 3.44 billion USD to roughly 4.79 billion USD. The adjusted figures are consistently higher than the reported ones, signifying the incorporation of deferred tax effects or other adjustments that increase equity measures.

Return on equity (ROE) presents some variation over time. Reported ROE begins at 29.47% in 2019, dips to about 27.08% in 2020, then peaks at 37.35% in 2022 before slightly decreasing to 36.41% in 2024. Adjusted ROE shows a comparable trend but with generally lower percentages—starting at 26.73% in 2019, dropping to 23.81% in 2020, and reaching a high of 34.04% in 2022, before settling at around 32.16% by 2024. The gap between reported and adjusted ROE narrows in later years, indicating a possible convergence in profitability measures when accounting for tax adjustments.

Overall, profitability and equity exhibit positive growth trends, with fluctuations in ROE reflecting changes in profit generation relative to shareholders’ equity. The consistent premium of adjusted equity over reported equity suggests the significance of deferred tax adjustments in the company’s financial structure. The steady increase in net income and equity points to strengthening financial performance over the examined period.

Net Income Trends

Reported net income demonstrates a steady upward trajectory from May 31, 2019, to May 31, 2024, increasing from $884,981 thousand to $1,571,592 thousand. This reflects a significant overall growth in profitability over the five-year span. Adjusted net income shows a similar growth pattern, with a slight fluctuation in 2020 where it dipped to $862,745 thousand from $919,740 thousand in 2019, followed by consistent increases in subsequent years, reaching $1,541,092 thousand by 2024. The adjustment seems to smooth some variances seen in reported figures, particularly in 2020 and 2021.

Return on Assets (ROA) Trends

Both reported and adjusted ROA indicate improving efficiency in asset utilization to generate profit over the period analyzed. Reported ROA increased from 11.9% in 2019 to 17.14% in 2024, highlighting a marked improvement in the company's ability to convert assets into net income. Adjusted ROA follows a comparable trend but starts slightly lower at 12.37% in 2019, dips in 2020 to 11.25%, then climbs steadily to 16.81% by 2024. This adjusted measure reveals some impact of deferred tax adjustments on asset return calculations, particularly during 2020.

Analysis of Adjustments Impact

The differences between reported and adjusted figures suggest that deferred income tax adjustments have a noticeable but varying impact on financial outcomes. Adjusted net income is generally aligned with reported net income but tends to be higher in some years, smoothing anomalies related to tax impacts. The adjustment also affects ROA figures, indicating it has implications for assessing operational efficiency and profitability metrics.

Overall Observations

The data collectively indicate a positive growth trend in both profitability and asset utilization efficiency over the six-year period. Despite some fluctuations related to tax adjustments, the company has shown resilience and improvement in generating returns. These trends of increasing net income and ROA suggest strength in operational performance and financial management, with tax adjustments providing additional clarity and consistency to reported results.