Cintas Corporation (NASDAQ:CTAS) Q4 2019 Earnings Conference Call - Final Transcript

Jul 16, 2019 • 05:00 pm ET

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Cintas Corporation (NASDAQ:CTAS) Q4 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Ladies and gentlemen [Operator Instructions]. And our first question will come from Manav Patnaik with Barclays.

Analyst
Greg Bardi

Hi, this is actually Greg calling in. I was just hoping to get an update on the G&K synergies in terms of where we were exiting 2019, what we expect in 2020 and how you guys are feeling about potential sources of upside going forward?

Executive
Mike Hansen

We finished fiscal '19 a little bit over $100 million for the year, a little bit better than we expected at the beginning of the year and I would expect that in fiscal '20, we will get to the neighborhood of $135 million, which is right in the middle of the range that we guided to three years ago, when we announced the G&K deal. So we feel great about achieving the synergies we initially set out to do but if we can get to that $135 million in fiscal '20 that's a year ahead of schedule. We had talked about a four year plan.

And so we feel really good about -- about achieving that. The lifting, the heavy lifting that's left continues to be the route optimization, that will continue in fiscal '20. That's -- as we've talked about over the last few years that's not a source of significant synergies. We will get some energy benefits as we eliminate mileage on our routes. But, but we certainly are growing and need to continue to add capacity on route. So all-in-all, Greg. We feel great about the -- about where we are in that G&K integration.

Analyst
Greg Bardi

Okay that makes sense. And then I also wanted to ask about natural adjacencies out of your -- outside of what is the core business, currently it seems like we're getting towards the end of some of the heavy lifting on the integration and the SAP implementation and leverage is pretty reasonable at this point. I'm just wondering, if that changes, how you guys think about potentially going after some of these markets, and what kind of markets that could potentially be? Thanks.

Executive
Mike Hansen

Well, we, I would say this, we -- I mentioned a little bit in my prepared remarks that that we look for opportunities in image, safety, cleanliness and compliance, and those are some pretty good umbrellas to be covering for our customers. And there are a lot of opportunities there. As we've seen over the years, we have had product adjacencies in all of our businesses and we're continuing to look for those under those four umbrellas that I mentioned. And certainly, we're looking for other things that may also be included under those umbrellas that could be possibly a different route structure or what have you, but we're being disciplined and we want to make sure that there is long-term value that there is a big market opportunity for any new type of product adjacency or business .

We certainly, as you mentioned, we are at our 2 times leverage kind of a goal and we've got a