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Cintas Corporation Announces Fiscal 2019 Third Quarter Results

Nachrichtenquelle: Business Wire (engl.)
21.03.2019, 21:15  |  294   |   |   

Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2019 third quarter ended February 28, 2019.

Revenue for the third quarter of fiscal 2019 was $1.68 billion, an increase of 5.9% over last year’s third quarter. The organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 6.0%. In the third quarter of fiscal 2019, the organic growth rate for the Uniform Rental and Facility Services operating segment was 6.2%, and the organic growth rate for the First Aid and Safety Services operating segment was 8.6%. Scott D. Farmer, Cintas’ Chairman and Chief Executive Officer, stated, “Customer closures caused by the severe weather and the holiday calendar during the quarter created challenges within our route schedules. Despite these challenges, we still delivered solid organic growth for the quarter.”

Gross margin for the third quarter of fiscal 2019 of $755.2 million increased 7.8% from last year’s third quarter. Gross margin as a percentage of revenue was 44.9% for the third quarter of fiscal 2019 compared to 44.1% in the third quarter of last fiscal year. Uniform Rental and Facility Services operating segment gross margin as a percentage of revenue also improved 80 basis points from last year’s third quarter to 44.9%, and the First Aid and Safety Services operating segment gross margin percentage improved 130 basis points to 48.2%.

Operating income for the third quarter of fiscal 2019 of $278.3 million increased 39.1% from last year’s third quarter operating income of $200.0 million. Operating income as a percentage of revenue was 16.5% in the third quarter of fiscal 2019 compared to 12.6% in the third quarter of fiscal 2018. Operating income was negatively impacted by integration expenses related to the G&K Services, Inc. (G&K) acquisition by $0.8 million in the third quarter of fiscal 2019 and $9.8 million in the third quarter of fiscal 2018. Operating income in the third quarter of fiscal 2018 was also reduced $39.7 million by a one-time cash payment to Cintas employees following the enactment of The Tax Cuts and Jobs Act (Tax Act) signed into legislation on December 22, 2017. Excluding the integration expenses related to the G&K acquisition and the one-time cash payment to employees, operating income as a percentage of revenue was 16.6% in the third quarter of fiscal 2019 compared to 15.7% in the third quarter of last fiscal year.

Net income from continuing operations was $200.9 million for the third quarter of fiscal 2019, compared to $295.8 million in the third quarter of fiscal 2018. Earnings per diluted share (EPS) from continuing operations were $1.83 for the third quarter of fiscal 2019, compared to $2.66 in the prior year third quarter. G&K acquisition integration expenses negatively impacted EPS in the third quarter of fiscal year 2019 and 2018 by $0.01 and $0.06, respectively. Earnings per diluted share from continuing operations in the third quarter of fiscal 2018 also included a negative impact of $0.24 from the one-time cash payment to employees and a positive impact of $1.59 from benefits under the Tax Act, primarily due to a one-time revaluation of deferred tax assets and liabilities.

The following table provides a comparison of fiscal 2019 third quarter EPS to fiscal 2018 third quarter EPS:

  Three Months Ended
February 28,   February 28,   Growth vs.
Earnings Per Share Results 2019 2018 FY 2018
 
EPS - continuing operations $ 1.83 $ 2.66
G&K integration expenses 0.01 0.06
One-time cash payment to employees 0.24
One-time deferred tax benefit of Tax Act   (1.59 )  
EPS excluding above items $ 1.84   $ 1.37   34.3 %
 
Nine Months Ended
February 28, February 28, Growth vs.
2019 2018 FY 2018
 
EPS - continuing operations $ 5.91 $ 5.35
G&K integration expenses 0.09 0.16
One-time cash payment to employees 0.24
Non-recurring gain on sale of investment

(0.47

)

One-time deferred tax benefit of Tax Act   (1.59 )  
EPS excluding above items $ 5.53   $ 4.16   32.9 %
 

“We remain committed to effectively deploying cash to increase shareholder value,” stated Mr. Farmer. “In this year’s third quarter, we paid an annual dividend totaling $220.8 million. The dividend of $2.05 per share was an increase of 26.5% over last year’s dividend. In addition, we purchased $100.0 million of Cintas stock under our buyback program in our third quarter. As of February 28, 2019, we have now purchased $546.6 million of Cintas stock during fiscal 2019, and the amount remaining under our buyback program is $863.4 million.”

Mr. Farmer added, “Strong financial performance is a result of the dedication of our employee-partners to getting our customers Ready for the Workday. I thank our employee-partners for exceeding customer expectations while also making significant progress on integrating the G&K acquisition and converting more operations to our new enterprise resource planning system.”

Mr. Farmer concluded, “We are updating our annual guidance for fiscal 2019. We expect revenue to be in the range of $6.870 billion to $6.885 billion. This implies a strong finish to our fiscal 2019 with fiscal fourth quarter revenue growth in the range of 6% to 7% and operating income margin in the range of 17.0% to 17.5%. We expect EPS from continuing operations excluding certain items to be in the range of $7.42 to $7.48. This guidance does not include any potential deterioration in the U.S. economy, future share buybacks, or any future integration expenses related to the acquisition of G&K.”

The following table provides a comparison of fiscal 2018 revenue and EPS to our fiscal 2019 revenue and EPS guidance:

    Fiscal 2019     Fiscal 2019  
Fiscal Low End Growth High End Growth
2018   of Range   vs. 2018   of Range   vs. 2018
 

Fiscal 2019 Revenue Guidance

($s in millions)
Revenue Guidance $ 6,476.6   $ 6,870.0   6.1 % $ 6,885.0   6.3 %
 

Fiscal 2019 Earnings Per Share Guidance

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