CINCINNATI, December 21, 2017 -- Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2018 second quarter ended November 30, 2017.
Revenue for the second quarter was $1.61 billion, an increase of 26.4% over last year’s second quarter. The organic revenue growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 7.7%. The organic revenue growth rates for the Uniform Rental and Facility Services and First Aid and Safety Services reportable operating segments were 7.3% and 10.8%, respectively.
Operating income for the second quarter of $235 million increased 17.3% from last year’s second quarter operating income of $200 million. Operating income was negatively impacted by transaction and integration expenses related to the G&K Services, Inc. (G&K) acquisition by $13 million in the second quarter of fiscal 2018 and $3 million in the second quarter of fiscal 2017.
Net income from continuing operations for the second quarter of $137 million increased 12.9% from last year’s second quarter. Earnings per diluted share (EPS) from continuing operations for the second quarter were $1.24 compared to $1.12 for last year’s second quarter. Fiscal 2018 and fiscal 2017 second quarter EPS included a negative impact of $0.07 and $0.02, respectively, from transaction and integration expenses related to the G&K acquisition. The following table provides a comparison of fiscal 2018 EPS to the comparable period of fiscal 2017:
Scott D. Farmer, Cintas’ Chairman and Chief Executive Officer, stated, “The integration of G&K continues to proceed as planned. Our pace increased in the second quarter, and we realized about $14 million in synergies, which is almost twice the amount achieved in the first quarter. Also, significant progress was made in our implementation of an enterprise resource planning system, which remains on schedule. Finally, I thank our employees, whom we call partners, for steady focus on profitable growth as evidenced by strong organic revenue and earnings per share growth rates.”
Mr. Farmer added, “Earlier this month, on December 8th, we were pleased to increase total shareholder return by paying an annual dividend of $1.62 per share, an increase of 21.8% over last year’s annual dividend. We have increased the annual dividend for 34 consecutive years.”
Mr. Farmer concluded, “As a result of our second quarter results, we are increasing our annual guidance for fiscal 2018. We are raising our revenue guidance from a range of $6.325 billion to $6.400 billion to a range of $6.365 billion to $6.430 billion and EPS from continuing operations from a range of $5.30 to $5.38 to a range of $5.39 to $5.46. Fiscal 2018 guidance excludes any potential impact of U.S. tax reform. It also excludes any future transaction and integration expenses related to the G&K acquisition. However, we do expect these expenses to be incurred as we continue to integrate this significant acquisition, and we estimate that these expenses will total $50 million to $60 million for the full fiscal year.”
The table below provides a comparison of fiscal 2017 revenue and EPS to our fiscal 2018 guidance.
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