Cintas Corporation Announces Fiscal 2019 Third Quarter Results
CINCINNATI - March 21, 2019 - Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2019 third quarter ended February 28, 2019.
Revenue for the third quarter of fiscal 2019 was $1.68 billion, an increase of 5.9% over last year’s third quarter. The organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 6.0%. In the third quarter of fiscal 2019, the organic growth rate for the Uniform Rental and Facility Services operating segment was 6.2%, and the organic growth rate for the First Aid and Safety Services operating segment was 8.6%. Scott D. Farmer, Cintas’ Chairman and Chief Executive Officer, stated, “Customer closures caused by the severe weather and the holiday calendar during the quarter created challenges within our route schedules. Despite these challenges, we still delivered solid organic growth for the quarter.”
Gross margin for the third quarter of fiscal 2019 of $755.2 million increased 7.8% from last year’s third quarter. Gross margin as a percentage of revenue was 44.9% for the third quarter of fiscal 2019 compared to 44.1% in the third quarter of last fiscal year. Uniform Rental and Facility Services operating segment gross margin as a percentage of revenue also improved 80 basis points from last year’s third quarter to 44.9%, and the First Aid and Safety Services operating segment gross margin percentage improved 130 basis points to 48.2%.
Operating income for the third quarter of fiscal 2019 of $278.3 million increased 39.1% from last year’s third quarter operating income of $200.0 million. Operating income as a percentage of revenue was 16.5% in the third quarter of fiscal 2019 compared to 12.6% in the third quarter of fiscal 2018. Operating income was negatively impacted by integration expenses related to the G&K Services, Inc. (G&K) acquisition by $0.8 million in the third quarter of fiscal 2019 and $9.8 million in the third quarter of fiscal 2018. Operating income in the third quarter of fiscal 2018 was also reduced $39.7 million by a one-time cash payment to Cintas employees following the enactment of The Tax Cuts and Jobs Act (Tax Act) signed into legislation on December 22, 2017. Excluding the integration expenses related to the G&K acquisition and the one-time cash payment to employees, operating income as a percentage of revenue was 16.6% in the third quarter of fiscal 2019 compared to 15.7% in the third quarter of last fiscal year.
Net income from continuing operations was $200.9 million for the third quarter of fiscal 2019, compared to $295.8 million in the third quarter of fiscal 2018. Earnings per diluted share (EPS) from continuing operations were $1.83 for the third quarter of fiscal 2019, compared to $2.66 in the prior year third quarter. G&K acquisition integration expenses negatively impacted EPS in the third quarter of fiscal year 2019 and 2018 by $0.01 and $0.06, respectively. Earnings per diluted share from continuing operations in the third quarter of fiscal 2018 also included a negative impact of $0.24 from the one-time cash payment to employees and a positive impact of $1.59 from benefits under the Tax Act, primarily due to a one-time revaluation of deferred tax assets and liabilities.
The following table provides a comparison of fiscal 2019 third quarter EPS to fiscal 2018 third quarter EPS:
“We remain committed to effectively deploying cash to increase shareholder value,” stated Mr. Farmer. “In this year’s third quarter, we paid an annual dividend totaling $220.8 million. The dividend of $2.05 per share was an increase of 26.5% over last year’s dividend. In addition, we purchased $100.0 million of Cintas stock under our buyback program in our third quarter. As of February 28, 2019, we have now purchased $546.6 million of Cintas stock during fiscal 2019, and the amount remaining under our buyback program is $863.4 million.”
Mr. Farmer added, “Strong financial performance is a result of the dedication of our employee-partners to getting our customers Ready for the Workday®. I thank our employee-partners for exceeding customer expectations while also making significant progress on integrating the G&K acquisition and converting more operations to our new enterprise resource planning system.”
Mr. Farmer concluded, “We are updating our annual guidance for fiscal 2019. We expect revenue to be in the range of $6.870 billion to $6.885 billion. This implies a strong finish to our fiscal 2019 with fiscal fourth quarter revenue growth in the range of 6% to 7% and operating income margin in the range of 17.0% to 17.5%. We expect EPS from continuing operations excluding certain items to be in the range of $7.42 to $7.48. This guidance does not include any potential deterioration in the U.S. economy, future share buybacks, or any future integration expenses related to the acquisition of G&K.”
The following table provides a comparison of fiscal 2018 revenue and EPS to our fiscal 2019 revenue and 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, floor care, 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 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 the 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, risks inherent with the G&K transaction in the achievement of cost synergies and the timing thereof, including whether the transaction will be accretive and within the expected timeframe and the actual amounts of future integration expenses; 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, including G&K; 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; the effect of new accounting pronouncements; costs of our SAP system implementation; 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; and the reactions of competitors in terms of price and service. 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, 2018 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, Executive Vice President and Chief Financial Officer - 513-972-2079