Cintas Corporation (NASDAQ:CTAS) Q3 2016 Earnings Conference Call - Preliminary Transcript

Mar 22, 2016 • 05:00 pm ET


Cintas Corporation (NASDAQ:CTAS) Q3 2016 Earnings Conference Call - Preliminary Transcript


Loading Event

Loading Transcript

Mike Hansen

and expand our e-commerce capabilities. We anticipate that these extensions will be a capital investment of roughly $40 million over the next year or so.

Given the progress made and proximity to implementation, we have better visibility and are now able to share with you the estimated impacts to our fiscal years 2017 and 2018. We expect to begin depreciating the rental capital project around December of 2016.

Therefore, our fiscal year 2017 will include about a half of a year of depreciation. It will also include about half of a year of system maintenance costs. The conversion of hundreds of our operations to SAP will occur during fiscal 2017 and extend through fiscal 2018.

Training costs, which are expensed when incurred as opposed to amortized over time, will exist in both fiscal '17 and '18. As is customary in such a conversion, we expect to have additional - other additional costs in 2017 and 2018 as a result of inefficiencies until the old system is completely offline.

We estimate that the investment in SAP will result in $30 million to $35 million of expense in fiscal 2017 and $45 million to $50 million of expense in fiscal 2018. We will begin to realize some cost structure benefits in fiscal 2019, but will likely see the power of the system beginning in fiscal 2020, once all operations have had some experience in running it.

This is a transformational investment and we are confident it will be successful. We've seen many companies, including some in our own industry, struggle with these large implementation projects.

Our financial strength and commitment to the long-term has enabled us to dedicate the required internal resources to the project in every phase. We also have the best external resource assisting us as SAP and not a third-party consulting firm has been working with us every step of the way.

And as previously mentioned, we have a great experience with SAP from our prior implementations. We look forward to the long-term benefits this investment will provide.

That concludes our prepared remarks and we'll now be happy to answer any questions.