Cintas Corporation Announces Record Fiscal 2019 Results Marks 48th Year of Record Revenue and Net Income In Past 50 Years
CINCINNATI - July 16, 2019 - Cintas Corporation (Nasdaq: CTAS) today reported record revenue and net income for its fiscal 2019 fourth quarter and full year ended May 31, 2019.
Revenue for the fourth quarter of fiscal 2019 was $1.79 billion, an increase of 7.4% over last year’s fourth quarter. The organic revenue growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 7.6%. The organic revenue growth rate for the Uniform Rental and Facility Services operating segment was 6.8%, and the organic revenue growth rate for the First Aid and Safety Services operating segment was 10.7%.
Gross margin for the fourth quarter of fiscal 2019 of $823.6 million increased 9.5% from last year’s fourth quarter. Gross margin as a percentage of revenue was 45.9% for the fourth quarter of fiscal 2019 compared to 45.1% in the fourth quarter of last fiscal year. Uniform Rental and Facility Services operating segment gross margin as a percentage of revenue improved 100 basis points from last year’s fourth quarter to 46.0%, and the First Aid and Safety Services operating segment gross margin percentage improved 70 basis points to 47.7%.
Operating income for the fourth quarter of fiscal 2019 of $314.4 million increased 18.4% from last year’s fourth quarter operating income of $265.5 million. Operating income as a percentage of revenue was 17.5% in the fourth quarter of fiscal 2019 compared to 15.9% in the fourth quarter of fiscal 2018. Operating income was negatively impacted by integration expenses related to the G&K Services, Inc. (G&K) acquisition by $0.9 million in the fourth quarter of fiscal 2019 and $15.0 million in the fourth quarter of fiscal 2018. Excluding the integration expenses related to the G&K acquisition, operating income as a percentage of revenue was 17.6% in the fourth quarter of fiscal 2019 compared to 16.8% in the fourth quarter of last fiscal year.
Net income from continuing operations was $226.2 million for the fourth quarter of fiscal 2019, compared to $189.3 million in the fourth quarter of fiscal 2018, an increase of 19.5%. Earnings per diluted share (EPS) from continuing operations were $2.06 for the fourth quarter of fiscal 2019, compared to $1.68 in the prior year fourth quarter. G&K acquisition integration expenses negatively impacted EPS in the fourth quarter of fiscal year 2019 and 2018 by $0.01 and $0.09, respectively. Excluding the integration expenses related to the G&K acquisition, adjusted EPS from continuing operations for the fourth quarter were $2.07 compared to $1.77 for last year's fourth quarter, an increase of 16.9%.
For the fiscal year ended May 31, 2019, revenue was $6.89 billion, an increase of 6.4% over the prior fiscal year. The organic revenue growth rate was 6.5%. Earnings per diluted share from continuing operations for fiscal 2019 were $7.97 compared to $7.03 for last fiscal year. Fiscal 2019 EPS included a benefit of $0.47 from a non-recurring gain on the sale of an investment. Fiscal 2018 EPS included a benefit of $1.59 from the enactment of the Tax Cuts and Jobs Act (Tax Act) but was partially offset by $0.24 due to a one-time cash payment to Cintas employees following the enactment of the Tax Act. In addition, fiscal 2019 and 2018 EPS included a negative impact of $0.10 and $0.26, respectively, from integration expenses related to the G&K acquisition. Excluding the aforementioned items, adjusted EPS from continuing operations for fiscal year 2019 were $7.60 compared to $5.94 in fiscal year 2018, an increase of 27.9%.
The following table provides a comparison of fiscal 2019 fourth quarter EPS to fiscal 2018 fourth quarter EPS.
Scott D. Farmer, Cintas' Chairman and Chief Executive Officer, stated, "We are pleased with these fourth quarter financial results which conclude a very successful year. For the ninth consecutive year, our organic revenue growth was in the mid- to high- single digits and EPS grew double digits when adjusted for one-time and special items. Additionally, our strong cash flow and balance sheet enabled us to deploy cash to increase shareholder value. In fiscal 2019 we paid an annual dividend of $220.8 million that increased 26.5% over the prior year, and we purchased 4.8 million shares of company stock in a total amount of $953.4 million."
Mr. Farmer added, “The Cintas story is one of growth. We have grown revenue and profit 48 of the past 50 years. Our opportunity for continued growth is great. We have a product or service to help nearly every business get Ready for the Workday™. All businesses care about image, safety, cleanliness or compliance, and businesses continue to outsource to concentrate on their core competency. We remain well-positioned to benefit from these tailwinds.”
Mr. Farmer concluded, “For our fiscal 2020, we expect revenue to be in the range of $7.24 billion to $7.31 billion and EPS from continuing operations to be in the range of $8.30 to $8.45. This guidance does not include any potential deterioration in the U.S. economy or future share buybacks.”
The following table provides a comparison of fiscal 2020 revenue and EPS guidance to fiscal 2019 actual results:
(1) Fiscal 2020 contains one less workday than fiscal 2019. One less workday negatively impacts revenue growth by 40 basis points.
(2) One less workday negatively impacts fiscal 2020 EPS guidance by about $0.06 and EPS growth by about 90 basis points.
(3) Fiscal 2020 guidance assumes an effective tax rate of 21.0% compared to a rate of 19.9% for fiscal 2019. The higher effective tax rate negatively impacts fiscal 2020 EPS guidance by about $0.14 and EPS growth by about 180 basis points.
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 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 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:
Michael Hansen, Executive Vice President and Chief Financial Officer - 513-972-2079
Paul F. Adler, Vice President and Treasurer - 513-972-4195