Cintas Corporation (NASDAQ:CTAS) Q1 2017 Earnings Conference Call - Final Transcript
Sep 27, 2016 • 05:00 pm ET
Good day everyone and welcome to the Cintas quarterly earnings results conference call. Today's call is being recorded. At this time I'd like to turn the conference over to Mr. Mike Hansen, Senior Vice President of Finance and Chief Financial Officer. Please go ahead sir.
Thank you for joining us tonight. With me is Paul Adler, Cintas Vice President and Treasurer. We will discuss our first quarter results for fiscal 2017. After our commentary, we will be happy to answer any questions.
(Forward-Looking Cautionary Statements)
We are pleased to report first-quarter revenue of $1.294 billion, an increase of 7.9% from the prior year first quarter. Organic revenue growth, which adjusts for the impact of acquisitions and foreign currency exchange rate fluctuations, was 5.7%. First quarter operating income was $207 million, an increase of 11.6% over last year's first quarter. Operating margin improved to 16% of revenue compared to an operating margin of 15.5% in the prior fiscal year. Uniform Rental and Facility Services segment led the way with an operating margin of 18.5%, a 90 basis point expansion from the prior year.
Net income from continuing operations for the first quarter of fiscal 2017 was $138 million compared to $106 million in the prior year, an increase of 30%. Net income from continuing operations as a percent of revenue was 10.7% compared to 8.9% of revenue in last fiscal year's first quarter. Earnings per diluted share or EPS from continuing operations for the first quarter were $1.26 versus $0.93 for the first quarter of last year. First quarter EPS from continuing operations increased 35.5% over the prior year.
During the first quarter of fiscal 2017, Accounting Standards Update 2016-09 entitled Improvements To Employee Share-Based Payment Accounting was adopted. Under ASU 2016-09, excess tax benefits and deficiencies associated with employee share-based payments are no longer recognized as additional paid in capital on the balance sheet, but instead recognized directly to income tax expense or benefit in the income statement in the reporting period in which they occur. Other financial statement items impacted include share-based compensation expense and the computation of fully diluted shares outstanding.
The first quarter of fiscal 2017 net benefit to EPS from the adoption of ASU 2016-09 was $0.14, consisting of a reduction of income tax expense of $0.16, partially offset by a $0.01 negative impact from additional employee share-based compensation expense, reducing operating income, and a $0.01 negative impact from an increase in the number of diluted shares outstanding. Also note that our first quarter of fiscal 2017 operating income includes almost $3 million of transaction expenses related to our recently announced agreement to acquire G&K Services.
The impacts of adopting ASU 2016-09 and the G&K transaction expenses make year over year comparison somewhat challenging, so I want to provide some figures to help you better understand first quarter performance. Excluding these impacts, operating margin for the first quarter of fiscal 2017 was 16.3%, an increase of 80 basis points from the prior year period.
Net income from