Organic Revenue Up 6.8% and Operating Income Increased 13.5%
CINCINNATI, September 24, 2015 — Cintas Corporation (Nasdaq: CTAS) today reported results for its first quarter of fiscal year 2016 ended August 31, 2015.
Revenue for the first quarter was $1.20 billion, an increase of 8.8% over the prior year period. Organic growth, which adjusts for the impacts of acquisitions, workday differences and foreign currency exchange rate fluctuations, was 6.8%.
Operating income for the first quarter of fiscal year 2016 of $185.5 million increased 13.5% from the prior year period. Operating income margin improved seventy basis points to 15.5% from 14.8% of revenue in last year’s first quarter.
Net income from continuing operations for the first quarter of fiscal year 2016 was $106.2 million compared to $105.9 million in the prior year period, and earnings per diluted share (EPS) from continuing operations for the first quarter of fiscal year 2016 were $0.93 compared to $0.89 for the first quarter of last year. First quarter of fiscal year 2015 net income and EPS from continuing operations were positively impacted by a gain from the sale of stock in an equity method investment. Excluding this benefit to net income of $13.6 million or EPS of $0.11, first quarter of fiscal 2016 net income and EPS from continuing operations increased 15.1% and 19.2%, respectively, compared to the prior year period. Net income from continuing operations as a percent of revenue improved fifty basis points to 8.9% from 8.4% of revenue in last fiscal year’s first quarter, excluding the prior year period gain.
Scott D. Farmer, Chief Executive Officer, stated, “We are pleased to report a good start to our fiscal year 2016. We continue to focus on both adding new customers and providing existing customers with additional products and services. Our revenue and earnings growth is the result of the consistently strong performance of our employees, whom we call partners.”
During August and into September through the close of business yesterday, Cintas purchased 2.9 million shares of common stock. This share buyback had no impact on first quarter EPS but is expected to benefit full fiscal year EPS by $0.05. Since the beginning of fiscal year 2016, approximately 4.5 million shares of common stock have been purchased at an aggregate cost of $381.2 million. As of September 23, 2015, Cintas had $381.8 million available under the current Board of Directors stock repurchase authorization.
Fiscal Year 2016 Guidance
Mr. Farmer concluded, “As a result of our first quarter results and the recent acquisition of Zee Medical, we are updating our annual guidance. We expect fiscal 2016 revenue to be in the range of $4.80 billion to $4.88 billion and fiscal 2016 EPS from continuing operations to be in the range of $3.79 to $3.88. This guidance does not include any EPS impact from the announced agreement to sell our investment in Shred-it, which has not yet closed. This guidance does not include any potential deterioration in the U.S. economy or additional share buybacks.”
The table below provides a comparison of fiscal 2015 revenue to our fiscal 2016 revenue guidance.
The table below provides a comparison of fiscal 2015 adjusted EPS to our fiscal 2016 EPS guidance. We present fiscal 2015 EPS as adjusted because we believe it is more representative of the ongoing performance of Cintas.
Cintas Reportable Operating Segments
U.S. Generally Accepted Accounting Principles require companies to evaluate their reportable operating segments when certain events occur. As a result of a recent evaluation, effective June 1, 2015, we will report the following operating segments: Uniform Rental and Facility Services, First Aid and Safety Services, and All Other. All Other primarily consists of Fire Protection Services and our Direct Sale business division. Please refer to the Supplemental Segment Data following our first quarter income statement accompanying this earnings release for more information.
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 and safety services and fire protection 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 successful completion of the sale of Cintas’ investment in the Shred-it Partnership within the expected timeframe or at all; our ability to promptly and effectively integrate ZEE Medical; our ability to realize any synergies from the acquisition of ZEE Medical, 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; the effect on operations of exchange rate fluctuations, tariffs and other political, economic and regulatory risks; 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, including cybersecurity risks; 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 August 31, 2015. 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, 2015 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:
J. Michael Hansen
Vice President-Finance and Chief Financial Officer
Paul F. Adler
Vice President and Treasurer