CINCINNATI, September 26, 2017 -- Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2018 first quarter ended August 31, 2017.
Revenue for the first quarter was $1.61 billion, an increase of 27.2% over last year’s first quarter. The organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 8.3%. The organic growth rates for the Uniform Rental and Facility Services and First Aid and Safety Services reportable operating segments were 8.1% and 11.9%, respectively.
Operating income for the first quarter of $249.1 million increased 22.1% from last year’s first quarter operating income of $203.9 million. Operating income was negatively impacted by transaction and integration expenses related to the G&K Services, Inc. (G&K) acquisition by $4.0 million in the first quarter of fiscal 2018 and $2.8 million in the first quarter of fiscal 2017.
Net income from continuing operations for the first quarter of $161.1 million increased 18.3% from last year’s first quarter. Earnings per diluted share (EPS) from continuing operations for the first quarter were $1.45 compared to $1.24 for last year’s first quarter, an increase of 16.9%. Fiscal 2018 and fiscal 2017 first quarter EPS included a negative impact of $0.03 and $0.02, respectively, from transaction and integration expenses related to the G&K acquisition. The following table provides a comparison of fiscal 2018 first quarter EPS to fiscal 2017 first quarter EPS:
Scott D. Farmer, Cintas’ Chairman and Chief Executive Officer, stated, “Our revenue growth rate of 27.2% was driven largely by our acquisition of G&K Services. The integration of G&K continues to proceed as expected, and we remain on track to meet the acquisition’s financial and non-financial objectives. In addition, we remain focused on our vision of increasing the number of businesses we help get Ready for the Workday™ and of adding greater value to our existing customers by providing them with more of our industry-leading products and services. Our high organic growth rates are evidence of this focus. I thank our employees, whom we call partners, for their continued solid execution.”
Mr. Farmer concluded, “As a result of our first quarter results, we are increasing our annual guidance for fiscal 2018. We expect revenue to be in the range of $6.325 billion to $6.400 billion and EPS from continuing operations to be in the range of $5.30 to $5.38. Fiscal 2018 guidance excludes any future transaction and integration expenses related to the acquired G&K business. The guidance does, however, include our preliminary estimates of the negative impact from the major hurricanes affecting Texas, Florida, Puerto Rico and surrounding areas. Based on an early assessment, we estimate fiscal 2018 revenue to be reduced by approximately $10 million to $15 million and EPS to be reduced by approximately $0.05 to $0.08. These estimates are subject to change as more information becomes available.”
The table below provides a comparison of fiscal 2017 revenue and EPS to our fiscal 2018 guidance.
Fiscal 2018 EPS guidance does not include any future G&K transaction and integration expenses. However, we expect that these expenses will be incurred in the remainder of fiscal 2018 as we continue to integrate this significant acquisition. We estimate that these expenses will range from $50 million to $65 million for the full fiscal year.
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 transaction and 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; 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, including the negative impacts from hurricanes Harvey and Irma; 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, 2017 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, Sr. VP-Finance and Chief Financial Officer - 513-701-2079
Paul F. Adler, Vice President and Treasurer - 513-573-4195