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$CTAS said the growth expectations for the First Aid business have continued to be in the high single digits range. The company has a lot of opportunity to grow its customer base with the safety cabinets and other products and services. $CTAS believes there is plenty of good organic growth to come in future.
$CTAS believes the US tax reform will result in significant benefits to the company. Under the new tax laws, $CTAS expects the effective tax rate for FY18 to be 8-12%. These lower FY18 rates will be incorporated into guidance over the next several months. $CTAS expects effective tax rate for FY19 and thereafter to be 23-26%.
$CTAS reported net income of $137MM or $1.23 per share in 2Q18 compared to $140MM or $1.29 per share in 2Q17. Revenue for 2Q18 was $1.61Bil, an increase of 26.4% over 2Q17. The organic revenue growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 7.7%.
During 1Q18, $CTAS' organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 8.3%. The organic growth rate Uniform Rental and Facility Services segment accelerated to a rate of 8.1% and for First Aid and Safety Services segment it was 11.9%. Gross Margin improved to 45.9% in 1Q18.
$CTAS increased its annual guidance for FY18. The company expects its revenue to be in the range of $6.325-6.400Bil and EPS from continuing operations to be in the range of $5.30-5.38. The increased FY18 guidance does not include any future G&K transaction and integration expenses.
Uniform rental company $CTAS reported higher 1Q18 results. Revenue for the quarter came in at $1.6Bil, up 27.2% compared to prior year period. This was mainly due to the acquisition of G&K Services. Net earnings rose to $217MM, or $1.96 a share, compared with $138MM, or $1.26 a share, in the year-ago period.
$CTAS agreed to buy $GK. $CTAS anticipates realizing annual synergies of $130-140MM. Synergies are projected to be realized in their entirety in the fourth full year after closing. Upon completion of the merger, $GK will be a wholly owned subsidiary of $CTAS, and is expected to initially operate under its existing brand name.
$CTAS agreed to buy $GK for $97.50 per share in cash, for a total enterprise value of about $2.2Bil, including acquired net debt. The BoDs of both companies have approved the transaction,which is expected to close in next 4-6 months.The transaction is expected to be accretive to $CTAS' EPS in its second full year after closing.
$CTAS said new business, which includes new customers, continues to be the strongest driver of growth. New business also includes the penetration of existing customers and this is continuing at a strong pace. Retention has been strong at about 95% and there has been no significant change or movement in the key components of organic growth drivers.
$CTAS continues to expect revenue growth in the mid to high single digits going forward. In terms of G&K, the company expects to see normal customer attrition and also some significant pressures on the new business. Moving forward, $CTAS believes it might see pressure that could bring revenue down by 5-10% over the course of 2018.
In 3Q17, GM for $CTAS’ Uniform Rental and Facility Services segment improved to 45%, an increase of 100BP compared to 3Q16. The First Aid and Safety Services segment GM improved to 44.8%, an increase of 260BP compared to last year. The All Other segment GM was 39.1%.
During 3Q17, $CTAS’ organic growth rate, which adjusts for the impacts of acquisitions, foreign currency exchange rate fluctuations and differences in the number of workdays, was 6.5%. Organic growth for the Uniform Rental and Facility Services segment accelerated to a rate of 7.3%. GM improved to 44.2% in 3Q17.
During 3Q17, $CTAS posted revenues of $993MM in its Uniform Rental and Facility Services segment compared to $936MM in 3Q16. In the First Aid and Safety Services segment, revenues were $124MM compared to $119MM last year. Revenues for All Other were $163MM in 3Q17.