CINCINNATI, December 20, 2018 -- Cintas Corporation
(Nasdaq: CTAS) today reported results for its fiscal 2019 second quarter
ended November 30, 2018.
Revenue for the second quarter of fiscal 2019 was $1.72 billion, an
increase of 7.0% over last year’s second quarter. The organic growth rate,
which adjusts for the impacts of acquisitions and foreign currency exchange
rate fluctuations, was also 7.0%. The organic growth rate for the Uniform
Rental and Facility Services operating segment increased to 6.6% in the
second quarter of fiscal 2019 from 4.9% in the first quarter. The First Aid
and Safety Services operating segment organic growth rate remained very
strong at 10.2% in the second quarter.
Gross margin for the second quarter of fiscal 2019 of $775.2 million
increased 8.2% from last year’s second quarter. Gross margin as a
percentage of revenue was 45.1% for the second quarter of fiscal 2019
compared to 44.6% in the second quarter of last fiscal year. Uniform Rental
and Facility Services gross margin as a percentage of revenue improved to
45.3% for the second quarter of fiscal 2019 from 44.7% in the second
quarter of last fiscal year.
Operating income for the second quarter of fiscal 2019 of $275.6 million
increased 17.2% from last year’s second quarter operating income of $235.2
million. Operating income was negatively impacted by integration expenses
related to the G&K Services, Inc. (G&K) acquisition by $7.8 million
in the second quarter of fiscal 2019 and $13.1 million in the second
quarter of fiscal 2018. Operating income as a percentage of revenue was
16.0% in the second quarter of fiscal 2019 compared to 14.6% in the second
quarter of fiscal 2018. Excluding the integration expenses related to
G&K, operating income as a percentage of revenue was 16.5% in the
second quarter of fiscal 2019 compared to 15.5% in the second quarter last
fiscal year.
Net income from continuing operations for the second quarter of fiscal 2019
of $243.0 million increased 76.4% from last year’s second quarter net
income from continuing operations of $137.7 million. Earnings per diluted
share (EPS) from continuing operations for the second quarter of fiscal
2019 were $2.18, an increase of 75.8% from last year’s second quarter EPS
from continuing operations of $1.24. Net income from continuing operations
and EPS from continuing operations were positively impacted by a lower
effective tax rate in this fiscal year’s second quarter compared to last
fiscal year’s second quarter primarily from the enactment of The Tax Cuts
and Jobs Act (the Tax Act). The effective tax rate for the second quarter
of fiscal 2019 was 24.2% compared to an effective tax rate of 33.3% in last
year’s second quarter. Additionally, fiscal 2019 second quarter EPS from
continuing operations included a one-time, positive impact of $0.47 from a
gain on the sale of a cost method investment. Finally, fiscal 2019 and
fiscal 2018 second quarter EPS from continuing operations included a
negative impact of $0.05 and $0.07, respectively, from integration expenses
related to the G&K acquisition.
The following table provides a comparison of fiscal 2019 second quarter EPS to fiscal 2018 second quarter EPS:
Scott D. Farmer, Cintas’ Chairman and Chief Executive Officer, stated, “We
are pleased with our second quarter and year-to-date performance. We
continue to make significant progress on integrating the G&K
acquisition and implementing our enterprise resource planning system. The
Company is on pace to achieve another year of strong growth in revenue,
earnings, and cash flow generation. I thank our employee-partners for the
consistently high execution that helps get our customers Ready for the Workday™.”
Mr. Farmer added, “Earlier this month, on December 7th, we paid
an annual dividend of $2.05 per share, an increase of 26.5% over last
year’s annual dividend. We have increased the annual dividend for 35
consecutive years. In addition, we increased total shareholder return by
executing on the share buyback program. In fiscal 2019, through the end of
our second quarter, we have purchased $447 million of Cintas stock under
our buyback program.”
Mr. Farmer concluded, “Following our second quarter results, we are
increasing our annual guidance for fiscal 2019. We are raising our revenue
guidance from a range of $6.80 billion to $6.855 billion to a range of
$6.87 billion to $6.91 billion and EPS from continuing operations excluding
certain items from a range of $7.19 to $7.29 to a range of $7.30 to $7.38.
Fiscal 2019 guidance excludes any future integration expenses related to
the acquired G&K business.”
The following table provides a comparison of fiscal 2018 revenue and EPS to our fiscal 2019 revenue and EPS guidance.
Fiscal 2019 EPS guidance does not include any future G&K integration expenses. However, we expect that these expenses will
be incurred in the remainder of fiscal 2019 as we continue to integrate this significant acquisition. We estimate that these expenses will
range from $18 million to $22 million for the full fiscal year.
About Cintas
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
Paul F. Adler, Vice President and Treasurer - 513-972-4195