CINCINNATI, July 19, 2018 -- Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2018 fourth quarter ended May 31, 2018.
Revenue for the fourth quarter of fiscal 2018 was approximately $1.67 billion, an increase of 9.1% 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 5.1%. As a reminder, we closed on the acquisition of G&K Services, Inc. (G&K) on March 21, 2017, so the organic growth rate no longer adjusts for that acquisition. The organic revenue growth rates for the Uniform Rental and Facility Services and First Aid and Safety Services reportable operating segments were 5.3% and 9.4%, respectively.
Operating income for the fourth quarter of fiscal 2018 of $265 million increased 49.7% from last year’s fourth quarter operating income of $177 million. Operating income was reduced $15 million in the fourth quarter of fiscal 2018 and $63 million in the fourth quarter of fiscal 2017 by transaction and integration expenses related to the G&K acquisition.
Scott D. Farmer, Cintas’ Chairman and Chief Executive Officer, stated, “We are pleased to report another quarter of strong financial results. Operating income excluding G&K transaction and integration expenses increased 16.4% over last year’s fourth quarter, resulting in an adjusted operating margin of 16.8% for the fourth quarter of fiscal 2018 compared to 15.8% last year. In addition, we continued to make substantial progress on two significant investments. The first is the acquisition of G&K. We have now closed nearly all operations necessary to eliminate redundancies, which is 63 operations to date. Also, all G&K operations have been converted to Cintas operating systems. The second is the implementation of an enterprise resource planning system. We converted 29 more operations to the new system in the fourth quarter, for a total of 108 so far, which is 34% of the total including G&K operations.”
Net income from continuing operations for the fourth quarter of $189 million increased 130.4% from last year’s fourth quarter. Earnings per diluted share (EPS) from continuing operations for the fourth quarter of fiscal 2018 were $1.68 compared to $0.75 for last year’s fourth quarter. Fiscal 2018 and fiscal 2017 fourth quarter EPS included a negative impact of $0.09 and $0.50, respectively, from transaction and integration expenses related to the G&K acquisition. Excluding G&K transaction and integration expenses, adjusted EPS from continuing operations for the fourth quarter were $1.77 compared to $1.25 for last year’s fourth quarter, an increase of 41.6%.
For the fiscal year ended May 31, 2018, revenue was $6.47 billion, an increase of 21.7% over the prior fiscal year. Organic growth was 7.1%. Earnings per diluted share from continuing operations for fiscal 2018 were $7.03 compared to $4.17 for last fiscal year. Fiscal 2018 EPS included a benefit of $1.59 in the third quarter from the enactment of The Tax Cuts and Jobs Act (the Tax Act) but was negatively impacted by $0.24 due to a one-time cash payment to Cintas employees following the enactment of the Tax Act. In addition, fiscal 2018 and fiscal 2017 EPS included a negative impact of $0.26 and $0.60, respectively, from transaction and integration expenses related to the G&K acquisition.
Mr. Farmer continued, “We finished the year strong and beat our fourth quarter revenue and EPS guidance. In doing so, we solidified the year and added to our record of success. We have now grown revenue and net income 47 of the past 49 years, with the only exception being the two years of the Great Recession. Fiscal 2018’s financial achievement was especially noteworthy given that it was accomplished in a period of extreme change management in which we were also integrating our largest acquisition to-date and implementing a new enterprise resource planning system. Fiscal 2018 was also special because we were included for the first time in the Fortune 500. The inclusion reflects our strong financial growth, expanding line of products and services and innovative technologies. It is a testament to the hard work and dedication of our employee-partners to our shareholders, customers and company. We aren’t finished yet, however. We look forward to climbing even higher in the ranking.”
Mr. Farmer concluded, “Looking ahead to next year, we expect fiscal 2019 revenue to be in the range of $6.75 billion to $6.82 billion and EPS from continuing operations to be in the range of $7.00 to $7.15. This EPS guidance excludes the impact of any fiscal 2019 share buybacks. It also excludes G&K integration expenses. However, we expect G&K integration expenses to be incurred in fiscal 2019 as we continue to integrate this significant acquisition, and we estimate that they will total $15 million to $20 million.”
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, 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, Executive Vice President and Chief Financial Officer - 513-701-2079
Paul F. Adler, Vice President and Treasurer - 513-573-4195