Cintas Corporation Announces Fiscal 2020 First Quarter Results
CINCINNATI - September 24, 2019 - Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2020 first quarter ended August 31, 2019.
Revenue for the first quarter of fiscal 2020 was $1.81 billion, an increase of 6.7% over last year’s first quarter. The organic revenue growth rate, which adjusts for the impacts of acquisitions, foreign currency exchange rate fluctuations, and differences in the number of workdays, was 8.3%. The organic revenue growth rate for the Uniform Rental and Facility Services operating segment was 7.5%, and the organic revenue growth rate for the First Aid and Safety Services operating segment was 13.8%.
Gross margin for the first quarter of fiscal 2020 of $849.1 million increased 9.6% from last year’s first quarter. Gross margin as a percentage of revenue was 46.9% for the first quarter of fiscal 2020 compared to 45.6% in the first quarter of fiscal 2019. Uniform Rental and Facility Services operating segment gross margin as a percentage of revenue improved 150 basis points from last year’s first quarter to 47.2%, and the First Aid and Safety Services operating segment gross margin as a percentage of revenue improved 110 basis points to 49.0%.
Operating income for the first quarter of fiscal 2020 of $306.1 million increased 15.4% from last year’s first quarter operating income of $265.2 million. Operating income as a percentage of revenue was 16.9% in the first quarter of fiscal 2020 compared to 15.6% in the first quarter of fiscal 2019. Operating income in the first quarter of fiscal 2019 was negatively impacted by integration expenses related to the G&K Services, Inc. (G&K) acquisition by $4.9 million, or 30 basis points.
Net income from continuing operations was $250.8 million for the first quarter of fiscal 2020, compared to $212.5 million in the first quarter of fiscal 2019, an increase of 18.0%. Earnings per diluted share (EPS) from continuing operations were $2.32 for the first quarter of fiscal 2020, compared to $1.89 in the prior year first quarter. G&K acquisition integration expenses negatively impacted EPS in the first quarter of fiscal year 2019 by $0.04.
The following table provides a comparison of fiscal 2020 first quarter EPS to fiscal 2019 first quarter EPS:
Scott D. Farmer, Cintas' Chairman and Chief Executive Officer, stated, "We are pleased with our start to fiscal 2020. Our employee-partners continue to execute well on our game plan and on our important initiatives, and we look forward to another successful year."
Mr. Farmer concluded, “We are increasing our fiscal 2020 financial guidance. We are raising our annual revenue expectations from a range of $7.24 billion to $7.31 billion to a range of $7.28 billion to $7.32 billion and EPS from a range of $8.30 to $8.45 to a range of $8.47 to $8.57. This financial guidance does not include any potential deterioration in the U.S. economy or future share buybacks. It does incorporate the impact of having one less workday in fiscal 2020 compared to fiscal 2019.”
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 20.3% compared to a rate of 19.7% for fiscal 2019. The higher effective tax rate negatively impacts fiscal 2020 EPS guidance by about $0.06 and EPS growth by about 80 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, 2019 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