CINCINNATI, July 16, 2015 — Cintas Corporation (Nasdaq:CTAS) today reported results for its fourth quarter and full fiscal year ended May 31, 2015.
Revenue for the fourth quarter was $1.14 billion. Organic growth, which adjusts for the impacts of acquisitions, foreign currency exchange rate fluctuations and the contribution of the Document Shredding business to Shred-it International Inc. (“Shred-it”), was 6.0%. Revenue growth for the fourth quarter was 0.7% over the prior year period. This year’s fourth quarter and full year revenue does not include any Document Shredding revenue as a result of the transaction with Shred-it (the “Shred-it Transaction”) that closed on April 30, 2014, whereas last year’s fourth quarter and full year does include Document Shredding revenue. The impact of the Shred-it Transaction on revenue is further explained in the Revenue Results section below.
Operating income for the fourth quarter was $177.7 million. Net income was $105.2 million, and earnings per diluted share (EPS) were $0.90. Fourth quarter EPS, excluding discontinued operations, income or loss on Shred-it investment, and certain other impacts, was $0.86, representing an increase of 11.7% over the prior year period. Operating income, net income and EPS are discussed in more detail in the Income and EPS Results section below.
Revenue for the full fiscal year was $4.48 billion, and organic growth was 7.1%. Revenue growth for the full fiscal year was 0.2%. Operating income was $696.4 million, and net income was $430.6 million. Earnings per diluted share for the full fiscal year were $3.63. Earnings per diluted share, excluding discontinued operations, income or loss on Shred-it investment, and certain other impacts, were $3.35, representing an increase of 21.8% over the prior year period.
“Our solid fiscal 2015 results are the product of good execution by our employees, whom we call partners,” said Scott D. Farmer, Cintas’ Chief Executive Officer. “We sold profitable business, provided excellent customer service, and increased the focus on managing our cost structure as a result of the Shred-it Transaction. In addition, we purchased 6.9 million shares of our common stock during the year, including 2.9 million in the fourth quarter, demonstrating our continuing commitment to providing shareholder value.”
The tables below present fourth quarter and full year revenue for Cintas, reflecting the second quarter sale of the Document Storage and Imaging business and presented to exclude fiscal 2014 Document Shredding revenue. Subsequent to the closing of the Shred-it Transaction on April 30, 2014, 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.
INCOME AND EPS RESULTS
The tables below present summary results for the fourth quarter and full fiscal years of 2015 and 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 fourth quarter gross margin was $486.7 million, or 42.6% of revenue, compared to the fiscal 2014 fourth quarter gross margin, as adjusted, of $456.2 million, or 42.2%. The gross margin increased 6.7% compared to last year’s adjusted fourth quarter margin. Operating margin was $177.7 million, or 15.6% of revenue, compared to the fiscal 2014 fourth quarter operating margin, as adjusted, of $166.4 million, or 15.4%. The operating margin increased 6.8% compared to last year’s adjusted operating margin. Net income from continuing operations and EPS from continuing operations, as adjusted, increased over the fiscal 2014 fourth quarter by 6.3% and 11.7%, respectively.
For the full fiscal year of 2015, gross margin improved to $1,921.3 million, or 42.9% of revenue, from adjusted gross margin of $1,749.8 million, or 41.7% of revenue, in fiscal 2014, an increase of 9.8%. Operating margin improved to $696.4 million, or 15.6% of revenue, from adjusted operating margin of $602.7 million, or 14.4% of revenue, in fiscal 2014, an increase of 15.5%. Net income from continuing operations and EPS from continuing operations, as adjusted, increased over fiscal 2014 by 17.5% and 21.8%, respectively.
During the fourth quarter and into the first quarter of fiscal 2016, Cintas purchased 4.4 million shares of common stock at a cost of $370.0 million. This share buyback had a positive impact of $0.01 on fourth quarter EPS since it occurred so late in the fourth quarter and into the first quarter of fiscal 2016. As of July 16, 2015, the Company has $130.0 million available under the current Board of Directors stock repurchase authorization. The total share purchases included acquiring 2.9 million shares at an aggregate cost of approximately $237.1 million during the fourth quarter, and the remaining 1.5 million shares were purchased between the start of fiscal 2016 and July 16, 2015 at an aggregate cost of approximately $132.9 million.
FISCAL YEAR 2016 GUIDANCE
Mr. Farmer concluded, “We expect fiscal 2016 revenue to be in the range of $4.70 billion to $4.78 billion, and fiscal 2016 EPS to be in the range of $3.74 to $3.83. This guidance does not include any EPS impact from the recently announced agreement to sell our investment in Shred-it, which has not yet closed. This guidance includes the impact of having two more workdays in fiscal 2016 compared to fiscal 2015 and does not include any 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 EPS to our fiscal 2016 EPS guidance.
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 successful completion of the sale of Cintas’ investment in the Shred-it Partnership within the expected timeframe or at all; 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 year ended May 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, 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:
J. Michael Hansen
Vice President-Finance and Chief Financial Officer
Paul F. Adler
Vice President and Treasurer