Cintas Corporation Announces Fiscal 2015 Second Quarter Results
CINCINNATI, December 18, 2014 — Cintas Corporation (Nasdaq:CTAS) today reported revenue for its second quarter ended November 30, 2014, of $1.12 billion, which was approximately the same total as last year’s second quarter. This year’s second quarter revenue does not include any Document Shredding revenue as a result of the transaction with Shred-it International Inc. (the “Shred-it Transaction”) that closed on April 30, 2014, whereas last year’s second quarter does. Organic growth, which adjusts for the impacts of acquisitions, foreign currency and the Shred-it Transaction, was 7.2%.
Operating income for the fiscal 2015 second quarter was $181.2 million, an increase of 19.0% compared to last fiscal year’s second quarter. Net income for the fiscal 2015 second quarter was $120.4 million, and earnings per diluted share (EPS) for the fiscal 2015 second quarter were $1.00. Fiscal 2015 second quarter EPS was positively impacted by $0.14 from discontinued operations, which included a gain from the sale of Cintas’ Document Storage and Imaging business. The sale of the Document Storage and Imaging business was previously announced by Cintas in a press release dated November 6, 2014. Fiscal 2015 second quarter EPS from Continuing Operations was $0.86, which is an increase of 24.6% over last fiscal year’s second quarter EPS from Continuing Operations of $0.69. Operating income, net income and EPS are discussed in more detail in the Fiscal 2015 Second Quarter Results section below.
“We are pleased with our second quarter results and remain encouraged by the solid first half of fiscal 2015,” said Scott D. Farmer, Cintas’ Chief Executive Officer. “As was the case in our first quarter, our second quarter organic revenue growth was very good, with Rental operating segment revenue growing organically by 8.1% and First Aid, Safety and Fire Protection operating segment revenue growing organically by 12.1%. Our employees, who we call partners, have executed our game plan very effectively, and we are focused on continuing these efforts during the second half of fiscal 2015.”
FISCAL 2015 SECOND QUARTER RESULTS
The table below labeled “2nd Quarter Revenue Results” presents second quarter revenue for Cintas, reflecting the sale of the Document Storage and Imaging business and presented to exclude fiscal 2014 second quarter Document Shredding revenue. Effective April 30, 2014, Cintas entered into a partnership transaction with the shareholders of Shred-it International Inc. (“Shred-it”) to combine Cintas’ Document Shredding business with Shred-it’s Document Shredding business. Subsequent to the closing of the Shred-it Transaction, Cintas no longer includes Document Shredding revenue in its reported revenue. As a result, we believe that revenue excluding Document Shredding revenue is more representative of the ongoing revenue of Cintas.
The tables below show revenue, gross margin, operating income, net income and EPS for the second quarter of fiscal 2015 and fiscal 2014, as reported and as adjusted. The adjustments between results as reported and as adjusted are explained below. We present revenue, gross margin, operating income, net income from continuing operations and EPS from continuing operations, as adjusted, because we believe they are more representative of the ongoing performance of Cintas.
Fiscal 2015 second quarter gross margin, as adjusted, was $481.4 million, or 42.9% of second quarter revenue, compared to the fiscal 2014 second quarter gross margin, as adjusted, of $434.4 million, or 41.3% of last year’s second quarter revenue. Fiscal 2015 gross margin, as adjusted, increased 10.8% compared to last year’s second quarter.
Fiscal 2015 second quarter operating income, as adjusted, was $181.6 million, or 16.2% of second quarter revenue, compared to the fiscal 2014 second quarter operating income, as adjusted, of $150.5 million, or 14.3% of last year’s second quarter revenue. Fiscal 2015 operating income, as adjusted, increased 20.7% compared to last year’s second quarter. Mr. Farmer added, “In addition to the solid organic growth for the second quarter, our operating margins have continued to improve due to selling profitable business, operating very efficiently and leveraging our infrastructure.”
Fiscal 2015 second quarter net income from continuing operations and EPS from continuing operations, as adjusted, increased over the fiscal 2014 second quarter by 24.2% and 26.5%, respectively.
FISCAL YEAR 2015 GUIDANCE
Mr. Farmer concluded, “We view the state of the U.S. economy as fairly fragile given numerous factors globally and within the U.S., and are hesitant to turn too optimistic. However, we have been pleased with the recent U.S. economic performance and look forward to this current state continuing in the second half of our fiscal year. Based on this view of the U.S. economy and our second quarter results, we are updating our fiscal 2015 guidance. We now expect fiscal 2015 revenue to be in the range of $4.45 billion to $4.50 billion, and fiscal 2015 EPS to be in the range of $3.49 to $3.54. This guidance continues to assume no EPS contribution from the partnership with Shred-it International Inc. due to the expectation of first year integration and transition expenses.”
As mentioned earlier in this press release, subsequent to the closing of the Shred-it Transaction on April 30, 2014, we no longer include Document Shredding revenue in our reported revenue. The table below shows a comparison of fiscal 2014 revenue to our updated 2015 revenue guidance.
The table below shows a comparison of fiscal 2014 EPS to our updated 2015 EPS guidance.
The updated fiscal 2015 EPS guidance assumes no deterioration in the U.S. economy and does not assume any share buybacks for the second half of fiscal 2015.
Headquartered in Cincinnati, Cintas Corporation provides highly specialized services to businesses of all types primarily throughout North America. Cintas designs, manufactures and implements corporate identity uniform programs, and provides entrance mats, restroom supplies, first aid, safety and fire protection products and services. Cintas is a publicly held company traded over the Nasdaq Global Select Market under the symbol CTAS and is a component of the Standard & Poor’s 500 Index.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements. Forward-looking statements may be identified by words such as “estimates,” “anticipates,” “predicts,” “projects,” “plans,” “expects,” “intends,” “target,” “forecast,” “believes,” “seeks,” “could,” “should,” “may” and “will” or the negative versions thereof and similar words, terms and expressions and by the context in which they are used. Such statements are based upon current expectations of Cintas and speak only as of the date made. You should not place undue reliance on any forward-looking statement. We cannot guarantee that any forward-looking statement will be realized. These statements are subject to various risks, uncertainties, potentially inaccurate assumptions and other factors that could cause actual results to differ from those set forth in or implied by this Press Release. Factors that might cause such a difference include, but are not limited to, the Shred-it partnership’s ability to promptly and effectively integrate the Cintas Document Shredding business with Shred-it’s Document Shredding business; the Shred-it partnership’s ability to realize any synergies from the combination of the Cintas Document Shredding business with Shred-it’s Document Shredding business; the Shred-it partnership’s ability to provide a proper accounting of its results; the possibility of greater than anticipated operating costs including energy and fuel costs; lower sales volumes; loss of customers due to outsourcing trends; the performance and costs of integration of acquisitions; fluctuations in costs of materials and labor including increased medical costs; costs and possible effects of union organizing activities; failure to comply with government regulations concerning employment discrimination, employee pay and benefits and employee health and safety; uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation; the cost, results and ongoing assessment of internal controls for financial reporting required by the Sarbanes-Oxley Act of 2002; disruptions caused by the inaccessibility of computer systems data; 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; the amount and timing of repurchases of our common stock, if any; changes in federal and state tax and labor laws; the reactions of competitors in terms of price and service; the ultimate impact of the Affordable Care Act; and the finalization of our financial statements for the quarter ended November 30, 2014. Cintas undertakes no obligation to publicly release any revisions to any forward-looking statements or to otherwise update any forward-looking statements whether as a result of new information or to reflect events, circumstances or any other unanticipated developments arising after the date on which such statements are made. A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the year ended May 31, 2014 and in our reports on Forms 10-Q and 8-K. The risks and uncertainties described herein are not the only ones we may face. Additional risks and uncertainties presently not known to us or that we currently believe to be immaterial may also harm our business.
For additional information, contact:
William C. Gale
Sr. Vice President-Finance and Chief Financial Officer
J. Michael Hansen
Vice President and Treasurer