Cintas Corporation (NASDAQ:CTAS) Q1 2020 Earnings Conference Call - Final Transcript

Sep 24, 2019 • 05:00 pm ET

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Cintas Corporation (NASDAQ:CTAS) Q1 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day, everyone, and welcome to the Cintas Quarterly Earnings Results Conference Call. Today's call is being recorded.

At this time, I would like to turn the conference over to Mr. Mike Hansen, Executive Vice President and Chief Financial Officer.

Sir, please go ahead.

Executive
J. Michael Hansen

Thank you, and good evening. Thanks for joining us. With me is Paul Adler, Cintas' Vice President and Treasurer. We will discuss our first quarter results for fiscal 2020. After our commentary, we will be happy to answer questions.

The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor from civil litigation for forward-looking statements. This conference call contains forward-looking statements that reflect the Company's current views as to future events and financial performance. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those we may discuss. I refer you to the discussion on these points contained in our most recent filings with the SEC.

Revenue for the first quarter of fiscal '20 was a record $1.81 billion, an increase of 6.7% over last year's first quarter. The organic growth rate, which adjusts for the impacts of acquisitions, foreign currency exchange rate fluctuations and differences in the number of workdays, was 8.3%. In the first quarter of fiscal '20, the organic growth rate for the Uniform Rental and Facility Services operating segment was 7.5%, and the organic growth rate for the First Aid and Safety Services operating segment was 13.8%.

Gross margin for the first quarter of fiscal '20 of $849.1 million, increased 9.6%. Gross margin as a percentage of revenue was 46.9% for the first quarter of fiscal '20, compared to 45.6% in the first quarter of fiscal '19. Uniform Rental and Facility Services operating segment gross margin as a percent of revenue improved 150 basis points from last year's first quarter to 47.2%. And the First Aid and Safety Services operating segment gross margin percentage improved 110 basis points to 49%.

Reported operating income for the first quarter of fiscal '20 of $306.1 million increased 15.4%. Operating margin was 16.9% in the first quarter of fiscal '20, compared to 15.6% in fiscal '19. Operating income in the first quarter of fiscal '19 was negatively impacted by integration expenses related to the G&K acquisition by $4.9 million, or 30 basis points.

Reported net income for the first quarter of fiscal '20 was $250.8 million, and reported earnings per diluted share for the first quarter of fiscal '20 were $2.32. Excluding the G&K acquisition integration expenses in fiscal '19, EPS increased 20.2%. As our Chairman and CEO, Scott Farmer was quoted in today's press release, we are pleased with our start to our fiscal year. We thank our employee-partners for continuing to execute well on our important initiatives.

Before turning the call over to Paul for more details, I'll provide an update of our fiscal '20 expectations. We expect revenue to be in the range of $7.28 billion to $7.32 billion. We expect EPS to be