Cintas Corporation Announces Fiscal 2015 Third Quarter Results
CINCINNATI - March 18, 2015 - Cintas Corporation (Nasdaq: CTAS) today reported revenue for its third quarter ended February 28, 2015, of $1.11 billion, which represented organic growth of 7.5%. Organic growth adjusts for the impacts of acquisitions, foreign currency and the contribution of the Document Shredding business to Shred-it International Inc. ("Shred-it"). Fiscal 2015 third quarter revenue was approximately the same total as last year's third quarter. This year's third quarter 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 third quarter does.
Operating income for the fiscal 2015 third quarter was $173.6 million, an increase of 16.1% compared to last fiscal year's third quarter. Net income for the fiscal 2015 third quarter was $94.9 million, and earnings per diluted share (EPS) for the fiscal 2015 third quarter were $0.80. Fiscal 2015 third quarter net income and EPS were negatively impacted by $6.8 million and $0.06, respectively, due to the recording of a net loss on Cintas' investment in Shred-it. Shred-it results in the period were adversely affected by integration costs and foreign currency exchange due to the weakened Canadian dollar. Fiscal 2015 third quarter EPS from discontinued operations was $0.01. Fiscal 2015 third quarter EPS, excluding the Shred-it impact and discontinued operations was $0.85. Operating income, net income and EPS are discussed in more detail in the Fiscal 2015 Third Quarter Results section below.
"Our third quarter results reflect a continuation of the fiscal 2015 game plan," said Scott D. Farmer, Cintas' Chief Executive Officer. "Our employees, whom we call partners, continue to execute at high levels. In addition to the solid results for the quarter, we are pleased to report that we purchased 3.2 million shares of our common stock during the third quarter, demonstrating our commitment to provide shareholder value." The shares purchased during the third quarter were done so at an aggregate cost of $250.8 million, and this concluded the $500 million share buyback program authorized by Cintas' Board of Directors in July 2013. As announced on January 13, 2015, the Board of Directors approved an additional $500 million share buyback program, and that entire program remains available as of March 18, 2015.
FISCAL 2015 THIRD QUARTER RESULTS
The table below labeled "3rd Quarter Revenue Results" presents third quarter revenue for Cintas, reflecting the second quarter sale of the Document Storage and Imaging business and presented to exclude fiscal 2014 third quarter Document Shredding revenue. Effective April 30, 2014, Cintas entered into a partnership transaction with the shareholders of 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 from continuing operations and EPS from continuing operations for the third 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 third quarter gross margin was $475.3 million, or 42.9% of third quarter revenue, compared to the fiscal 2014 third quarter gross margin, as adjusted, of $436.4 million, or 42.1% of last year's third quarter revenue. Fiscal 2015 gross margin increased 8.9% compared to last year’s adjusted third quarter margin.
Fiscal 2015 third quarter operating income was $173.6 million, or 15.7% of third quarter revenue, compared to the fiscal 2014 third quarter operating income, as adjusted, of $148.3 million, or 14.3% of last year's third quarter revenue. Fiscal 2015 operating income increased 17.1% compared to last year's adjusted third quarter income.
Fiscal 2015 third quarter net income from continuing operations and EPS from continuing operations, as adjusted, increased over the fiscal 2014 third quarter by 20.2% and 25.0%, respectively.
FISCAL YEAR 2015 GUIDANCE
Mr. Farmer concluded, "We are updating our fiscal 2015 guidance based on our third quarter results. We expect fiscal 2015 revenue to be in the range of $4.46 billion to $4.49 billion, and fiscal 2015 EPS to be in the range of $3.55 to $3.58. This guidance assumes no EPS impact in the fourth quarter from the partnership with Shred-it due to continued integration and transition expenses. This guidance also assumes no deterioration in the U.S. economy and does not consider any additional share buybacks."
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.
About Cintas Corporation
Cintas Corporation helps more than one million businesses of all types and sizes get Ready™ to open their doors with confidence every day by providing a wide range of products and services that enhance our customers’ image and help keep their facilities and employees clean, safe and looking their best. With products and services including uniforms, mats, mops, restroom supplies, first aid and safety products, fire extinguishers and testing, and safety and compliance training, Cintas helps customers get Ready for the Workday®. Headquartered in Cincinnati, Cintas is a publicly held Fortune 500 company traded over the Nasdaq Global Select Market under the symbol CTAS and is a component of both the Standard & Poor’s 500 Index and Nasdaq-100 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 February 28, 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 – 513-701-2079
Paul F. Adler, Vice President and Treasurer – 513-573-4195