Cintas Announces Quarterly Sales Increase

Top 40 distributor Cintas (asi/162167) has reported that revenue for its fiscal third quarter ended February 28 was $1.28 billion, an increase of 5.3% from last year’s Q3. The company announced organic growth of 6.5%, which adjusts for the impact of acquisitions, foreign currency exchange rate fluctuations and differences in the number of workdays. Organic growth for the Uniform Rental and Facility Services segment increased by 7.3%.

Gross margin increased to 44.2% from 43.1% in last year’s third quarter. Meanwhile, gross margin in the Uniform Rental and Facility Services segment grew to 45%, an increase of 100 basis points, and improved to 44.8% in the First Aid and Safety segment as a result of the acquisition of ZEE Medical in fiscal 2016, the company said.

“This is our 14th consecutive quarter of year-over-year gross margin improvement,” said Chairman and CEO Scott Farmer in a statement. “This and our industry-leading revenue growth are indicative of a healthy company with significant opportunities ahead.”

Operating income at Cintas was $195 million for the quarter, an increase of 0.9% from the same quarter last fiscal year. Net income from continuing operations was $119 million compared to $117.3 million last year, while EPS from continuing operations were $1.08, which includes a positive impact from a change in the accounting for equity compensation as well as a negative impact from expenses incurred during the merger with G&K Services.

Operating income margin was 15.2%, compared to 15.9% last year, and includes $9 million, or 0.7% of third quarter revenue, of expenses related to the acquisition of G&K. The company did not break out promotional product revenue numbers, as is customary.

“Yesterday we completed the acquisition of G&K,” Farmer said. “We expect to realize annual synergies in the range of $130 million to $140 million in the fourth full year following the acquisition. The integration process needed to achieve the annual synergies will result in certain non-recurring costs. In addition, we will continue the purchase accounting process, including certain third-party valuations, which may have a significant impact on our future results. While we have estimated these integration costs and the impact of the purchase price accounting results using assumptions from our due diligence, we must confirm our assumptions and complete the purchase accounting process.”

Farmer added that the company is pulling its guidance for the remainder of the 2017 fiscal year due to the purchase accounting process. “We will provide our expectations for results when the impact of these items becomes clearer,” Farmer said.

Cintas ranks ninth on Counselor’s list of Top 40 distributors, with estimated 2015 revenue of $158.5 million.