Cintas Corporation (CTAS)
F4Q10 (Qtr End 05/31/10) Earnings Call Transcript
July 20, 2010 5:00 pm ET
Bill Gale – SVP and CFO
Mike Hansen – VP and Treasurer
John Healy – Northcoast Research
Gary Bisbee – Barclays Capital
Scott Schneeberger – Oppenheimer
Phil Stiller – Citigroup
Vance Edelson – Morgan Stanley
Chris McGinnis – Sidoti & Company
Vishnu Lekraj – Morningstar
Previous Statements by CTAS
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Good day. 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 call over to Mr. Bill Gale, Senior Vice President of Finance and Chief Financial Officer. Please go ahead, sir.
Good evening and thank you for joining us to discuss the fourth quarter of fiscal 2010. With me this evening is Cintas’ Vice President and Treasurer, Mike Hansen. Mike Hansen was recently promoted to this position from Corporate Controller to replace Mike Thompson, who has assumed a role in a rental organization as Senior Vice President, Facility Services.
We are pleased to report that revenues increased 3.5% from last year’s fourth quarter. Internal growth, adjusting for acquisitions and the one additional workday in this year’s fourth quarter, compared to last year was also positive at 1.9%. After the very difficult economic conditions experienced since the beginning of the recession, this marks our first positive growth period in revenue since our quarter ending August 31, 2008.
Our fourth quarter revenue of $909 million was above our previously released guidance of $870 to $890 million. Earnings per share for the quarter were $0.36, compared to last year’s $0.03 per share. Prior year numbers included restructuring and impairment charges of approximately $49 million before tax or $0.35 per share. Current year earnings per share were positively impacted by approximately $0.01 due to the reversal of certain restructuring charges.
As we have reported in the last couple of quarters, we continue to see signs of stability with the employment levels of our customers. While customers continue to be hesitant to add employees, we no longer see the significant reductions that occurred during the past couple of years.
The result is that our new business is beginning to offset the impact of lost business or stops at existing customers. The pricing environment continues to be very competitive both with the new business, as well as, renewal of existing contracts.
We continue to be very pleased with the overall financial condition. During fiscal 2010, we paid our annual dividend amounting to $74 million and still increased our cash and marketable securities by over $300 million. As of May 31, 2010, we had no commercial paper outstanding and have cash and marketable securities of over $560 million.
During the recession, we continued to generate substantial cash flow and are able to keep our debt capacity available for opportunities that will arise for additional acquisitions or more rapid expansion throughout the world.
Now that we have more confidence in our view of the future economic environment, we are resuming providing guidance. Our expectations are for revenues for the fiscal year ending May 31, 2011 to be between $3.55 and $3.75 billion, and earnings per share to be between $1.50 and $1.58.
This guidance assumes a slowly improving economy with a relatively modest increase in employment levels and no significant increases in costs such as energy or medical benefits. We also expect our growth in both sales and profits to improve, as the year progresses on a workday adjusted basis.
We are pleased to report our continued expansion outside of North America. Earlier this month, we acquired Squirrel Storage in the United Kingdom that has 10 record storage centers, serving six markets in England, Scotland and Wales.
This acquisition, which has over 10 million pounds in annual revenue, now gives Cintas the opportunity to provide Document Management Services to customers in Germany, the Netherlands, Belgium, as well as, the U.K. We are excited to have a Cintas presence in the United Kingdom.
We are encouraged with the stabilization of the economy. Through the very hard work of our employees, coupled with our strong customer relationships, we have weathered the most serious economic downturn since the 1930s. With our breadth of business services and strong financial position, we believe that we are prepared to benefit from the improved economic conditions that we expect to prevail in the next several years.
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.
Mike Hansen will now provide more detail on our results and after his comments we will open the call to questions.
Thank you, Bill. Total revenue for the fourth quarter of fiscal 2010 of $909 million represented a 3.5% increase from the fourth quarter of last year. This year’s fourth quarter had 66 workdays, one more than last year’s fourth quarter and two more than this year’s third quarter.
On an adjusted workday basis, total revenue grew 1.9%, compared to last year’s fourth quarter. Total company internal growth was also 1.9%, an improvement over a third quarter internal growth of negative 3.6%. As compared to this year’s third quarter, revenue increased 2% on an adjusted workday basis.