Cintas Corporation (Nasdaq: CTAS) today reported revenue for its third quarter ended February 28, 2015, of $1.11 billion, which represented organic growth of 7.5%. Organic growth adjusts for the impacts of acquisitions, foreign currency and the contribution of the Document Shredding business to Shred-it International Inc. (“Shred-it”). Fiscal 2015 third quarter revenue was approximately the same total as last year’s third quarter. This year’s third quarter revenue does not include any Document Shredding revenue as a result of the transaction with Shred-it (the “Shred-it Transaction”) that closed on April 30, 2014, whereas last year’s third quarter does.
Operating income for the fiscal 2015 third quarter was $173.6 million, an increase of 16.1% compared to last fiscal year’s third quarter. Net income for the fiscal 2015 third quarter was $94.9 million, and earnings per diluted share (EPS) for the fiscal 2015 third quarter were $0.80. Fiscal 2015 third quarter net income and EPS were negatively impacted by $6.8 million and $0.06, respectively, due to the recording of a net loss on Cintas’ investment in Shred-it. Shred-it results in the period were adversely affected by integration costs and foreign currency exchange due to the weakened Canadian dollar. Fiscal 2015 third quarter EPS from discontinued operations was $0.01. Fiscal 2015 third quarter EPS, excluding the Shred-it impact and discontinued operations was $0.85. Operating income, net income and EPS are discussed in more detail in the Fiscal 2015 Third Quarter Results section below.
“Our third quarter results reflect a continuation of the fiscal 2015 game plan,” said Scott D. Farmer, Cintas’ Chief Executive Officer. “Our employees, whom we call partners, continue to execute at high levels. In addition to the solid results for the quarter, we are pleased to report that we purchased 3.2 million shares of our common stock during the third quarter, demonstrating our commitment to provide shareholder value.” The shares purchased during the third quarter were done so at an aggregate cost of $250.8 million, and this concluded the $500 million share buyback program authorized by Cintas’ Board of Directors in July 2013. As announced on January 13, 2015, the Board of Directors approved an additional $500 million share buyback program, and that entire program remains available as of March 18, 2015.
FISCAL 2015 THIRD QUARTER RESULTS
The table below labeled “3rd Quarter Revenue Results” presents third quarter revenue for Cintas, reflecting the second quarter sale of the Document Storage and Imaging business and presented to exclude fiscal 2014 third quarter Document Shredding revenue. Effective April 30, 2014, Cintas entered into a partnership transaction with the shareholders of Shred-it to combine Cintas’ Document Shredding business with Shred-it’s Document Shredding business. Subsequent to the closing of the Shred-it Transaction, Cintas no longer includes Document Shredding revenue in its reported revenue. As a result, we believe that revenue excluding Document Shredding revenue is more representative of the ongoing revenue of Cintas.
Organic | ||||||||||||||
3rd Quarter Revenue Results | Q3, FY15 | Q3, FY14 | Growth % | |||||||||||
(dollar amounts in millions) | (See Note 1) | (See Note 1) | Growth % | (See Note 2) | ||||||||||
Rental Uniforms & Ancillary Products | $ | 859.5 | $ | 801.7 | 7.2 | % | 7.8 | % | ||||||
Uniform Direct Sales | 112.2 | 107.7 | 4.2 | % | 4.8 | % | ||||||||
First Aid, Safety & Fire Protection | 137.1 | 126.7 | 8.2 | % | 7.5 | % | ||||||||
Revenue, excluding Document Shredding | $ | 1,108.8 | $ | 1,036.1 | 7.0 | % | 7.5 | % | ||||||
Document Shredding (See Note 3) | - | 74.9 | - | - | ||||||||||
Total Cintas Revenue | $ | 1,108.8 | $ | 1,111.0 | (0.2 | %) | 7.5 | % | ||||||
Note 1 – | Both fiscal 2015 and 2014 third quarter revenue reflect the classification of the Document Storage and Imaging business to discontinued operations, and as a result, no revenue amounts are included in either period. | ||
Note 2 – | Organic growth reflects the revenue growth for the third quarter of fiscal 2015 when adjusting for the impact of acquisitions, foreign currency and the Shred-it Transaction, compared to the third quarter of fiscal 2014. | ||
Note 3 – | As a result of the Shred-it Transaction, Cintas no longer includes Document Shredding revenue in its reported revenue. However, the fiscal 2014 third quarter Document Shredding revenue must continue to be included in the reported fiscal 2014 third quarter revenue in accordance with generally accepted accounting principles (“GAAP”). | ||
The tables below show revenue, gross margin, operating income, net income from continuing operations and EPS from continuing operations for the third quarter of fiscal 2015 and fiscal 2014, as reported and as adjusted. The adjustments between results as reported and as adjusted are explained below. We present revenue, gross margin, operating income, net income from continuing operations and EPS from continuing operations, as adjusted, because we believe they are more representative of the ongoing performance of Cintas.
Document | ||||||||||||||
Shredding | ||||||||||||||
As reported | Impact | Percent of | ||||||||||||
Q3, Fiscal 2015 | (see Note 1) | (see Note 2) | As adjusted | Revenue | ||||||||||
(dollar amounts in millions, except EPS) | ||||||||||||||
Revenue | $ | 1,108.8 | - | $ | 1,108.8 | 100.0 | % | |||||||
Gross Margin | 475.3 | - | 475.3 | 42.9 | % | |||||||||
Operating Income | 173.6 | - | 173.6 | 15.7 | % | |||||||||
Net Income, continuing operations | 93.6 | $ | (6.8 | ) | 100.4 | 9.1 | % | |||||||
EPS, continuing operations | $ | 0.79 | $ | (0.06 | ) | $ | 0.85 | |||||||
Document | ||||||||||||||
Shredding | ||||||||||||||
As reported | Impact | Percent of | ||||||||||||
Q3, Fiscal 2014 | (see Note 1) | (see Note 2) | As adjusted | Revenue | ||||||||||
(dollar amounts in millions, except EPS) | ||||||||||||||
Revenue | $ | 1,111.0 | $ | 74.9 | $ | 1,036.1 | 100.0 | % | ||||||
Gross Margin | 469.6 | 33.2 | 436.4 | 42.1 | % | |||||||||
Operating Income | 149.6 | 1.3 | 148.3 | 14.3 | % | |||||||||
Net Income, continuing operations | 84.3 | 0.8 | 83.5 | 8.1 | % | |||||||||
EPS, continuing operations | $ | 0.69 | $ | 0.01 | $ | 0.68 | ||||||||
Note 1 – | The “As reported” figures for both fiscal 2015 and 2014 third quarters reflect the change in classification of the Document Storage and Imaging business to discontinued operations within the Consolidated Condensed Statements of Income. | ||
Note 2 – | As a result of the Shred-it Transaction, Cintas no longer includes Document Shredding results in its reported revenue, gross margin and operating income. During fiscal 2015, Cintas will recognize its share of the Shred-it partnership income, net of tax, in net income from continuing operations and EPS from continuing operations. Cintas’ share of the fiscal 2015 third quarter Shred-it net income was $(6.8) million. In accordance with GAAP, the fiscal 2014 third quarter Document Shredding revenue, gross margin, operating income, net income from continuing operations and EPS from continuing operations results must continue to be included in the reported fiscal 2014 results because of Cintas’ continuing ownership in Shred-it. | ||
Fiscal 2015 third quarter gross margin was $475.3 million, or 42.9% of third quarter revenue, compared to the fiscal 2014 third quarter gross margin, as adjusted, of $436.4 million, or 42.1% of last year’s third quarter revenue. Fiscal 2015 gross margin increased 8.9% compared to last year’s adjusted third quarter margin.
Fiscal 2015 third quarter operating income was $173.6 million, or 15.7% of third quarter revenue, compared to the fiscal 2014 third quarter operating income, as adjusted, of $148.3 million, or 14.3% of last year’s third quarter revenue. Fiscal 2015 operating income increased 17.1% compared to last year’s adjusted third quarter income.
Fiscal 2015 third quarter net income from continuing operations and EPS from continuing operations, as adjusted, increased over the fiscal 2014 third quarter by 20.2% and 25.0%, respectively.
FISCAL YEAR 2015 GUIDANCE
Mr. Farmer concluded, “We are updating our fiscal 2015 guidance based on our third quarter results. We expect fiscal 2015 revenue to be in the range of $4.46 billion to $4.49 billion, and fiscal 2015 EPS to be in the range of $3.55 to $3.58. This guidance assumes no EPS impact in the fourth quarter from the partnership with Shred-it due to continued integration and transition expenses. This guidance also assumes no deterioration in the U.S. economy and does not consider any additional share buybacks.”
As mentioned earlier in this press release, subsequent to the closing of the Shred-it Transaction on April 30, 2014, we no longer include Document Shredding revenue in our reported revenue. The table below shows a comparison of fiscal 2014 revenue to our updated 2015 revenue guidance.
Fiscal 2015 | Fiscal 2015 | |||||||||||||||
Updated Revenue Guidance | Low End | Growth vs. | High End | Growth vs. | ||||||||||||
(dollar amounts in millions) | Fiscal 2014 | of Range | Fiscal 2014 | of Range | Fiscal 2014 | |||||||||||
Revenue, excluding Document Shredding | $ | 4,193.9 | $ | 4,460.0 | 6.3 | % | $ | 4,490.0 | 7.1 | % | ||||||
Document Shredding Revenue | 275.7 | |||||||||||||||
Total Cintas Revenue | $ | 4,469.6 | ||||||||||||||
The table below shows a comparison of fiscal 2014 EPS to our updated 2015 EPS guidance.
Fiscal 2015 | Fiscal 2015 | |||||||||||||||||
Low End | Growth vs. | High End | Growth vs. | |||||||||||||||
Updated EPS Guidance | Fiscal 2014 | of Range | Fiscal 2014 | of Range | Fiscal 2014 | |||||||||||||
EPS, excluding Special Items | $ | 2.75 | $ | 3.31 | 20.4 | % | $ | 3.34 | 21.5 | % | ||||||||
Impact of Shredding business | 0.04 | (0.06 | ) | (0.06 | ) | |||||||||||||
Impact of sale of stock in equity investment | - | 0.11 | 0.11 | |||||||||||||||
Impact of Shred-it Transaction | 0.26 | 0.04 | 0.04 | |||||||||||||||
Impact of discontinued operations | - | 0.15 | 0.15 | |||||||||||||||
Total Reported Cintas EPS | $ | 3.05 | $ | 3.55 | 16.4 | % | $ | 3.58 | 17.4 | % | ||||||||
About Cintas
Headquartered in
Cincinnati, Cintas Corporation provides highly specialized services to
businesses of all types primarily throughout North America. Cintas
designs, manufactures and implements corporate identity uniform
programs, and provides entrance mats, restroom supplies, first aid,
safety and fire protection products and services. Cintas is a publicly
held company traded over the Nasdaq Global Select Market under the
symbol CTAS and is a component of the Standard & Poor’s 500 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, the
Shred-it partnership’s ability to promptly and effectively integrate the
Cintas Document Shredding business with Shred-it’s Document Shredding
business; the Shred-it partnership’s ability to realize any synergies
from the combination of the Cintas Document Shredding business with
Shred-it’s Document Shredding business; the Shred-it partnership’s
ability to provide a proper accounting of its results; 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; 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; 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; disruptions caused by the
inaccessibility of computer systems data; 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; the reactions of competitors in terms of price and
service; the ultimate impact of the Affordable Care Act; and the
finalization of our financial statements for the quarter ended February
28, 2015. 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, 2014 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.
Cintas Corporation | |||||||||||||
Consolidated Condensed Statements of Income | |||||||||||||
(Unaudited) | |||||||||||||
(In thousands except per share data) | |||||||||||||
Three Months Ended | |||||||||||||
February 28, | February 28, | ||||||||||||
2015 | 2014 | % Change | |||||||||||
Revenue: | |||||||||||||
Rental uniforms and ancillary products | $ | 859,520 | $ | 801,702 | 7.2 | ||||||||
Other services | 249,327 | 309,271 | -19.4 | ||||||||||
Total revenue | 1,108,847 | 1,110,973 | -0.2 | ||||||||||
Costs and expenses: | |||||||||||||
Cost of rental uniforms and ancillary products | 476,092 | 450,086 | 5.8 | ||||||||||
Cost of other services | 157,448 | 191,253 | -17.7 | ||||||||||
Selling and administrative expenses | 301,690 | 317,873 | -5.1 | ||||||||||
Shredding transaction costs | - | 2,158 | -100.0 | ||||||||||
Operating income | 173,617 | 149,603 | 16.1 | ||||||||||
Interest income | (96 | ) | (44 | ) | 118.2 | ||||||||
Interest expense | 16,254 | 16,418 | -1.0 | ||||||||||
Income before income taxes | 157,459 | 133,229 | 18.2 | ||||||||||
Income taxes | 57,052 | 48,903 | 16.7 | ||||||||||
Loss on investment in Shred-it, net of tax of $4,010 | (6,771 | ) | - | -100.0 | |||||||||
Income from continuing operations | 93,636 | 84,326 | 11.0 | ||||||||||
Income from discontinued operations, net of tax of $53 and $284, respectively | 1,247 | 276 | 351.8 | ||||||||||
Net income | $ | 94,883 | $ | 84,602 | 12.2 | ||||||||
Basic earnings per share: | |||||||||||||
Continuing operations | $ | 0.80 | $ | 0.70 | 14.3 | ||||||||
Discontinued operations | 0.01 | 0.00 | 100.0 | ||||||||||
Basic earnings per share | $ | 0.81 | $ | 0.70 | 15.7 | ||||||||
Diluted earnings per share: | |||||||||||||
Continuing operations | $ | 0.79 | $ | 0.69 | 14.5 | ||||||||
Discontinued operations | 0.01 | 0.00 | 100.0 | ||||||||||
Diluted earnings per share | $ | 0.80 | $ | 0.69 | 15.9 | ||||||||
Weighted average number of shares outstanding | 116,178 | 119,913 | |||||||||||
Diluted average number of shares outstanding | 117,867 | 121,280 | |||||||||||
Nine Months Ended | |||||||||||||
February 28, | February 28, | ||||||||||||
2015 | 2014 | % Change | |||||||||||
Revenue: | |||||||||||||
Rental uniforms and ancillary products | $ | 2,581,820 | $ | 2,398,884 | 7.6 | ||||||||
Other services | 752,483 | 936,266 | -19.6 | ||||||||||
Total revenue | 3,334,303 | 3,335,150 | 0.0 | ||||||||||
Costs and expenses: | |||||||||||||
Cost of rental uniforms and ancillary products | 1,424,661 | 1,363,929 | 4.5 | ||||||||||
Cost of other services | 474,965 | 578,413 | -17.9 | ||||||||||
Selling and administrative expenses | 915,989 | 949,224 | -3.5 | ||||||||||
Shredding transaction costs | - | 2,158 | -100.0 | ||||||||||
Operating income | 518,688 | 441,426 | 17.5 | ||||||||||
Gain on deconsolidation of Shredding business | 6,619 | - | 100.0 | ||||||||||
Gain on sale of stock of an equity method investment | 21,739 | - | 100.0 | ||||||||||
Interest income | (168 | ) | (196 | ) | -14.3 | ||||||||
Interest expense | 48,766 | 49,426 | -1.3 | ||||||||||
Income before income taxes | 498,448 | 392,196 | 27.1 | ||||||||||
Income taxes | 184,548 | 146,016 | 26.4 | ||||||||||
Loss on investment in Shred-it, net of tax of $4,162 | (7,027 | ) | - | -100.0 | |||||||||
Income from continuing operations | 306,873 | 246,180 | 24.7 | ||||||||||
Income from discontinued operations, net of tax of $12,204 and $740, respectively | 18,530 | 1,038 | 1685.2 | ||||||||||
Net income | $ | 325,403 | $ | 247,218 | 31.6 | ||||||||
Basic earnings per share: | |||||||||||||
Continuing operations | $ | 2.61 | $ | 2.03 | 28.6 | ||||||||
Discontinued operations | 0.16 | 0.01 | 1,500.0 | ||||||||||
Basic earnings per share | $ | 2.77 | $ | 2.04 | 35.8 | ||||||||
Diluted earnings per share: | |||||||||||||
Continuing operations | $ | 2.58 | $ | 2.01 | 28.4 | ||||||||
Discontinued operations | 0.15 | 0.01 | 1,400.0 | ||||||||||
Diluted earnings per share | $ | 2.73 | $ | 2.02 | 35.1 | ||||||||
Weighted average number of shares outstanding | 116,653 | 120,658 | |||||||||||
Diluted average number of shares outstanding | 118,214 | 121,814 | |||||||||||
CINTAS CORPORATION SUPPLEMENTAL DATA | ||||||||
Three Months Ended | ||||||||
February 28, | February 28, | |||||||
2015 | 2014 | |||||||
Rental uniforms and ancillary products gross margin | 44.6 | % | 43.9 | % | ||||
Other services gross margin* | 36.9 | % | 38.2 | % | ||||
Total gross margin* | 42.9 | % | 42.3 | % | ||||
Net margin, continuing operations* | 8.4 | % | 7.6 | % | ||||
Nine Months Ended | ||||||||
February 28, | February 28, | |||||||
2015 | 2014 | |||||||
Rental uniforms and ancillary products gross margin | 44.8 | % | 43.1 | % | ||||
Other services gross margin* | 36.9 | % | 38.2 | % | ||||
Total gross margin* | 43.0 | % | 41.8 | % | ||||
Net margin, continuing operations* | 9.2 | % | 7.4 | % | ||||
* Amounts presented for the three months and nine months ended February 28, 2014 have been adjusted to reflect the results of continuing operations.
Computation of Diluted Earnings Per Share from Continuing Operations | ||||||||
Three Months Ended | ||||||||
February 28, | February 28, | |||||||
2015 | 2014 | |||||||
Income from continuing operations | $ | 93,636 | $ | 84,326 | ||||
Less: income from continuing operations allocated to participating securities | 951 | 740 | ||||||
Income from continuing operations available to common shareholders | $ | 92,685 | $ | 83,586 | ||||
Basic weighted average common shares outstanding | 116,178 | 119,913 | ||||||
Effect of dilutive securities - employee stock options & awards | 1,689 | 1,367 | ||||||
Diluted weighted average common shares outstanding | 117,867 | 121,280 | ||||||
Diluted earnings per share from continuing operations | $ | 0.79 | $ | 0.69 | ||||
Nine Months Ended | ||||||||
February 28, | February 28, | |||||||
2015 | 2014 | |||||||
Income from continuing operations | $ | 306,873 | $ | 246,180 | ||||
Less: income from continuing operations allocated to participating securities | 2,444 | 1,217 | ||||||
Income from continuing operations available to common shareholders | $ | 304,429 | $ | 244,963 | ||||
Basic weighted average common shares outstanding | 116,653 | 120,658 | ||||||
Effect of dilutive securities - employee stock options & awards | 1,561 | 1,156 | ||||||
Diluted weighted average common shares outstanding | 118,214 | 121,814 | ||||||
Diluted earnings per share from continuing operations | $ | 2.58 | $ | 2.01 | ||||
Reconciliation of Non-GAAP Financial Measures and Regulation G Disclosure
The press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. To supplement its consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), the Company provides additional measures of revenue and related growth, gross margin, operating income, net income, earnings per diluted share, and cash flow. The Company believes that these non-GAAP financial measures are appropriate to enhance understanding of its past performance as well as prospects for future performance. Reconciliations of the differences between these non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP are shown in the tables within the narrative of the press release or below.
Computation of Free Cash Flow | ||||||||||
Nine Months Ended | ||||||||||
February 28, | February 28, | |||||||||
2015 | 2014 | |||||||||
Net cash provided by operations | $ | 464,640 | $ | 385,773 | ||||||
Capital expenditures | (163,040 | ) | (113,615 | ) | ||||||
Free cash flow | $ | 301,600 | $ | 272,158 | ||||||
Management uses free cash flow to assess the financial performance of the Company. Management believes that free cash flow is useful to investors because it relates the operating cash flow of the Company to the capital that is spent to continue, improve and grow business operations.
Results from Continuing Operations as Reported and as Adjusted | ||||||||||||||||||||
Document | Document | Gain on | ||||||||||||||||||
Shredding | Shredding | Investment | ||||||||||||||||||
As Reported | Impact | Gain | Sale | Percent of | ||||||||||||||||
For the nine months ended February 28, 2015 | (see Note 1) | (see Note 2) | (see Note 3) | (see Note 4) | As Adjusted | Revenue | ||||||||||||||
Revenue | $ | 3,334,303 | $ | - | $ | - | $ | - | $ | 3,334,303 | 100.0 | % | ||||||||
Gross Margin | $ | 1,434,677 | $ | - | $ | - | $ | - | $ | 1,434,677 | 43.0 | % | ||||||||
Operating Income | $ | 518,688 | $ | - | $ | - | $ | - | $ | 518,688 | 15.6 | % | ||||||||
Net Income, continuing operations | $ | 306,873 | $ | (7,027 | ) | $ | 4,143 | $ | 13,609 | $ | 296,148 | 8.9 | % | |||||||
Diluted earnings per share, continuing operations | $ | 2.58 | $ | (0.06 | ) | $ | 0.04 | $ | 0.11 | $ | 2.49 | |||||||||
For the nine months ended February 28, 2014 | ||||||||||||||||||||
Revenue | $ | 3,335,150 | $ | 222,040 | $ | - | $ | - | $ | 3,113,110 | 100.0 | % | ||||||||
Gross Margin | $ | 1,392,808 | $ | 99,263 | $ | - | $ | - | $ | 1,293,545 | 41.6 | % | ||||||||
Operating Income | $ | 441,426 | $ | 5,097 | $ | - | $ | - | $ | 436,329 | 14.0 | % | ||||||||
Net Income, continuing operations | $ | 246,180 | $ | 3,195 | $ | - | $ | - | $ | 242,985 | 7.8 | % | ||||||||
Diluted earnings per share, continuing operations | $ | 2.01 | $ | 0.03 | $ | - | $ | - | $ | 1.98 | ||||||||||
Note 1 - | The "As reported" figures reflect the change in classification of the Document Storage and Imaging business to discontinued operations within the Consolidated Condensed Statements of Income. | ||
Note 2 - | As a result of the Shred-it Transaction completed in fiscal 2014, Cintas no longer includes Document Shredding results in its reported revenue and gross margin. During fiscal 2015, Cintas will recognize its share of the Shred-it partnership income or loss in net income and earnings per share from continuing operations. In accordance with GAAP, the fiscal 2014 Document Shredding revenue, gross margin, operating income, net income and earnings per share must continue to be reported in fiscal 2014 results from continuing operations. | ||
Note 3 - | Cintas recorded an additional gain related to the Shred-it Transaction due to receiving additional proceeds during the first quarter of fiscal 2015. | ||
Note 4 - | During the first quarter of fiscal 2015, Cintas recognized a gain on the sale of stock in an equity method investment. | ||
Rental | |||||||||||||||||||||
Uniforms and | First Aid, Safety | ||||||||||||||||||||
Ancillary | Uniform Direct | and Fire | Document | ||||||||||||||||||
SUPPLEMENTAL SEGMENT DATA | Products | Sales | Protection | Management* | Corporate** | Total | |||||||||||||||
For the three months ended February 28, 2015 | |||||||||||||||||||||
Revenue | $ | 859,520 | $ | 112,185 | $ | 137,142 | $ | - | $ | - | $ | 1,108,847 | |||||||||
Gross margin | $ | 383,428 | $ | 31,109 | $ | 60,770 | $ | - | $ | - | $ | 475,307 | |||||||||
Selling and administrative expenses | $ | 234,418 | $ | 21,304 | $ | 45,968 | $ | - | $ | - | $ | 301,690 | |||||||||
Interest income | $ | - | $ | - | $ | - | $ | - | $ | (96 | ) | $ | (96 | ) | |||||||
Interest expense | $ | - | $ | - | $ | - | $ | - | $ | 16,254 | $ | 16,254 | |||||||||
Income (loss) before income taxes | $ | 149,010 | $ | 9,805 | $ | 14,802 | $ | - | $ | (16,158 | ) | $ | 157,459 | ||||||||
For the three months ended February 28, 2014 | |||||||||||||||||||||
Revenue | $ | 801,702 | $ | 107,678 | $ | 126,743 | $ | 74,850 | $ | - | $ | 1,110,973 | |||||||||
Gross margin | $ | 351,616 | $ | 29,659 | $ | 55,131 | $ | 33,228 | $ | - | $ | 469,634 | |||||||||
Selling and administrative expenses | $ | 223,234 | $ | 20,405 | $ | 44,477 | $ | 29,757 | $ | - | $ | 317,873 | |||||||||
Shredding transaction costs | $ | - | $ | - | $ | - | $ | 2,158 | $ | - | $ | 2,158 | |||||||||
Interest income | $ | - | $ | - | $ | - | $ | - | $ | (44 | ) | $ | (44 | ) | |||||||
Interest expense | $ | - | $ | - | $ | - | $ | - | $ | 16,418 | $ | 16,418 | |||||||||
Income (loss) before income taxes | $ | 128,382 | $ | 9,254 | $ | 10,654 | $ | 1,313 | $ | (16,374 | ) | $ | 133,229 | ||||||||
As of and for the nine months ended February 28, 2015 | |||||||||||||||||||||
Revenue | $ | 2,581,820 | $ | 334,851 | $ | 417,632 | $ | - | $ | - | $ | 3,334,303 | |||||||||
Gross margin | $ | 1,157,159 | $ | 94,026 | $ | 183,492 | $ | - | $ | - | $ | 1,434,677 | |||||||||
Selling and administrative expenses | $ | 708,988 | $ | 64,664 | $ | 142,337 | $ | - | $ | - | $ | 915,989 | |||||||||
Gain on deconsolidation of Shredding business | $ | - | $ | - | $ | - | $ | - | $ | 6,619 | $ | 6,619 | |||||||||
Gain on sale of stock of an equity method investment | $ | - | $ | - | $ | - | $ | - | $ | 21,739 | $ | 21,739 | |||||||||
Interest income | $ | - | $ | - | $ | - | $ | - | $ | (168 | ) | $ | (168 | ) | |||||||
Interest expense | $ | - | $ | - | $ | - | $ | - | $ | 48,766 | $ | 48,766 | |||||||||
Income (loss) before income taxes | $ | 448,171 | $ | 29,362 | $ | 41,155 | $ | - | $ | (20,240 | ) | $ | 498,448 | ||||||||
Assets | $ | 2,941,476 | $ | 127,652 | $ | 444,763 | $ | - | $ | 839,449 | $ | 4,353,340 | |||||||||
As of and for the nine months ended February 28, 2014 | |||||||||||||||||||||
Revenue | $ | 2,398,884 | $ | 337,023 | $ | 377,203 | $ | 222,040 | $ | - | $ | 3,335,150 | |||||||||
Gross margin | $ | 1,034,955 | $ | 94,510 | $ | 164,080 | $ | 99,263 | $ | - | $ | 1,392,808 | |||||||||
Selling and administrative expenses | $ | 663,110 | $ | 62,711 | $ | 131,395 | $ | 92,008 | $ | - | $ | 949,224 | |||||||||
Shredding transaction costs | $ | - | $ | - | $ | - | $ | 2,158 | $ | - | $ | 2,158 | |||||||||
Interest income | $ | - | $ | - | $ | - | $ | - | $ | (196 | ) | $ | (196 | ) | |||||||
Interest expense | $ | - | $ | - | $ | - | $ | - | $ | 49,426 | $ | 49,426 | |||||||||
Income (loss) before income taxes | $ | 371,845 | $ | 31,799 | $ | 32,685 | $ | 5,097 | $ | (49,230 | ) | $ | 392,196 | ||||||||
Assets | $ | 2,852,065 | $ | 138,994 | $ | 419,647 | $ | 484,112 | $ | 505,623 | $ | 4,400,441 | |||||||||
* As a result of the Shred-it partnership transaction and the Document Storage and Imaging Transactions, we no longer have a Document Management Services Operating Segment. For illustrative purposes in this press release, we have shown the results of the Document Destruction business within the Document Management Services Operating Segment for the three and nine month periods ended February 28, 2014. However, this information will be combined into the Corporate Operating Segment for reporting purposes in the Form 10-Q.
** Corporate assets as of February 28, 2015 include the investment in the Shred-it partnership. Corporate assets also include the real estate assets of the Document Storage and Imaging business that were not included in the sale transactions. Corporate assets as of February 28, 2014 include the assets of the Document Storage and Imaging business.
Cintas Corporation | |||||||||
Consolidated Balance Sheets | |||||||||
(In thousands except share data) | |||||||||
ASSETS | February 28, | May 31, | |||||||
2015 | 2014 | ||||||||
(unaudited) | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 445,314 | $ | 513,288 | |||||
Marketable securities | 44,874 | - | |||||||
Accounts receivable, net | 497,978 | 508,427 | |||||||
Inventories, net | 234,641 | 251,239 | |||||||
Uniforms and other rental items in service | 524,065 | 506,537 | |||||||
Income taxes, current | 6,633 | - | |||||||
Assets held for sale | 21,132 | - | |||||||
Prepaid expenses and other current assets | 22,482 | 26,190 | |||||||
Total current assets | 1,797,119 | 1,805,681 | |||||||
Property and equipment, at cost, net | 853,391 | 855,702 | |||||||
Investments | 445,538 | 458,357 | |||||||
Goodwill | 1,194,389 | 1,267,411 | |||||||
Service contracts, net | 44,824 | 55,675 | |||||||
Other assets, net | 18,079 | 19,626 | |||||||
$ | 4,353,340 | $ | 4,462,452 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 198,946 | $ | 150,070 | |||||
Accrued compensation and related liabilities | 78,007 | 85,026 | |||||||
Accrued liabilities | 281,872 | 299,727 | |||||||
Income taxes, current | - | 5,960 | |||||||
Deferred tax liability | 106,788 | 88,845 | |||||||
Liabilities held for sale | 612 | - | |||||||
Long-term debt due within one year | - | 503 | |||||||
Total current liabilities | 666,225 | 630,131 | |||||||
Long-term liabilities: | |||||||||
Long-term debt due after one year | 1,300,000 | 1,300,477 | |||||||
Deferred income taxes | 232,232 | 246,044 | |||||||
Accrued liabilities | 107,217 | 92,942 | |||||||
Total long-term liabilities | 1,639,449 | 1,639,463 | |||||||
Shareholders' equity: | |||||||||
Preferred stock, no par value: | - | - | |||||||
100,000 shares authorized, none outstanding | |||||||||
Common stock, no par value: | 320,248 | 251,753 | |||||||
425,000,000 shares authorized | |||||||||
FY15: 177,886,323 issued and 114,344,969 outstanding | |||||||||
FY14: 176,378,412 issued and 117,037,784 outstanding | |||||||||
Paid-in capital | 145,130 | 134,939 | |||||||
Retained earnings | 4,122,354 | 3,998,893 | |||||||
Treasury stock: | (2,535,803 | ) | (2,221,155 | ) | |||||
FY15: 63,541,354 shares | |||||||||
FY14: 59,340,628 shares | |||||||||
Accumulated other comprehensive (loss) income | (4,263 | ) | 28,428 | ||||||
Total shareholders' equity | 2,047,666 | 2,192,858 | |||||||
$ | 4,353,340 | $ | 4,462,452 | ||||||
Cintas Corporation | |||||||||
Consolidated Condensed Statements of Cash Flows | |||||||||
(Unaudited) | |||||||||
(In thousands) | |||||||||
Nine Months Ended | |||||||||
February 28, | February 28, | ||||||||
Cash flows from operating activities: | 2015 | 2014 | |||||||
Net income | $ | 325,403 | $ | 247,218 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
Depreciation | 104,950 | 127,761 | |||||||
Amortization of intangible assets | 11,090 | 17,524 | |||||||
Stock-based compensation | 36,016 | 22,248 | |||||||
Gain on Storage transaction | (35,036 | ) | - | ||||||
Gain on deconsolidation of Shredding business | (6,619 | ) | - | ||||||
Gain on sale of stock of an equity method investment | (21,739 | ) | - | ||||||
Loss on investment in Shred-it | 11,189 | - | |||||||
Deferred income taxes | 15,428 | 8,733 | |||||||
Change in current assets and liabilities, net of acquisitions of businesses: | |||||||||
Accounts receivable, net | (3,168 | ) | (34,024 | ) | |||||
Inventories, net | 15,370 | (16,130 | ) | ||||||
Uniforms and other rental items in service | (22,203 | ) | (4,142 | ) | |||||
Prepaid expenses and other current assets | (1,609 | ) | (1,892 | ) | |||||
Accounts payable | 53,379 | (7,037 | ) | ||||||
Accrued compensation and related liabilities | (7,086 | ) | 2,219 | ||||||
Accrued liabilities | 1,841 | 5,025 | |||||||
Income taxes, current | (12,566 | ) | 18,270 | ||||||
Net cash provided by operating activities | 464,640 | 385,773 | |||||||
Cash flows from investing activities: | |||||||||
Capital expenditures | (163,040 | ) | (113,615 | ) | |||||
Proceeds from redemption of marketable securities | 18,711 | 49,635 | |||||||
Purchase of marketable securities and investments | (79,947 | ) | (63,335 | ) | |||||
Proceeds from Storage transactions, net of cash contributed | 154,891 | - | |||||||
Proceeds from Shredding transaction | 3,344 | - | |||||||
Proceeds from sale of stock of an equity method investment | 29,933 | - | |||||||
Dividends received on equity method investment | 5,247 | - | |||||||
Acquisitions of businesses, net of cash acquired | (13,798 | ) | (32,965 | ) | |||||
Other, net | 1,583 | (868 | ) | ||||||
Net cash used in investing activities | (43,076 | ) | (161,148 | ) | |||||
Cash flows from financing activities: | |||||||||
Repayment of debt | (456 | ) | (8,010 | ) | |||||
Proceeds from exercise of stock-based compensation awards | 31,956 | 29,286 | |||||||
Dividends paid | (201,941 | ) | (93,314 | ) | |||||
Repurchase of common stock | (314,648 | ) | (164,462 | ) | |||||
Other, net | 3,139 | 10,339 | |||||||
Net cash used in financing activities | (481,950 | ) | (226,161 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (7,588 | ) | (1,878 | ) | |||||
Net decrease in cash and cash equivalents | (67,974 | ) | (3,414 | ) | |||||
Cash and cash equivalents at beginning of period | 513,288 | 352,273 | |||||||
Cash and cash equivalents at end of period | $ | 445,314 | $ | 348,859 |
Contacts:
J. Michael Hansen, Vice President-Finance and
Chief Financial Officer, 513-701-2079
or
Paul F. Adler,
Corporate Controller, 513-573-4195