Cintas Management Discusses Q4 2012 Results - Earnings Call Transcript

Cintas (CTAS)

Q4 2012 Earnings Call

July 16, 2012 5:00 pm ET

Executives

William C. Gale - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

J. Michael Hansen - Vice President and Treasurer

Analysts

James Samford - Citigroup Inc, Research Division

Sara Gubins - BofA Merrill Lynch, Research Division

Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division

Joe Box - KeyBanc Capital Markets Inc., Research Division

Gary E. Bisbee - Barclays Capital, Research Division

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

John M. Healy - Northcoast Research

Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division

Nathan Brochmann - William Blair & Company L.L.C., Research Division

Gregory W. Halter - LJR Great Lakes Review

Presentation

Operator

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 call over to Mr. Bill Gale, Senior Vice President of Finance and Chief Financial Officer. Please go ahead, sir.

William C. Gale

Good evening. Thank you for joining us as we report our fourth quarter results for fiscal 2012. With me is Mike Hansen, Cintas' Vice President and Treasurer. After some commentary on the results and our fiscal 2013 guidance, 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.

We are pleased to report record fourth quarter revenue of $1,054,000,000. In an increasingly sluggish U.S. economy, fourth quarter revenue grew 4.1% from last year's fourth quarter. Fourth quarter net income increased by 11.1% to $79 million, and earnings per diluted share were $0.60, a 22.4% increase over last year. Mike will provide more details shortly on the fourth quarter performance.

This fourth quarter concluded a very successful fiscal 2012 year for Cintas in which our revenue topped the $4 billion mark for the first time at $4,102,000,000 and our earnings per diluted share hit a record level of $2.27. Our employees, who we call partners, did a great job of executing our game plan throughout this past 12 months. Congratulations to our partners on their achievements this year.

We remain confident in our business' opportunities and our ability to execute our game plan. As such, during our fourth quarter, we purchased 3.3 million shares of Cintas stock at an aggregate cost of $129.6 million. Since these purchases were made so late in the fiscal year, they had no impact on our fourth quarter results. However, we expect it will positively increase fiscal 2013 earnings per diluted share by about $0.06. This impact is incorporated into our fiscal 2013 guidance. Our board authorized a $500 million share buyback program in October 2011, so we now have $370.4 million remaining of that authorization.

Now I would like to turn the call over to Mike for more details on the fourth quarter, after which I will provide additional comments on our fiscal 2013 guidance.

J. Michael Hansen

Thank you, Bill. As Bill mentioned, total revenue increased 4.1% from the fourth quarter of last year with total company organic growth being 4%. Total company gross margin for the fourth quarter was 42.1%, which is down from last year's fourth quarter gross margin of 42.8% mainly due to lower recycled paper prices. I will discuss these items in more detail by segment. Before doing so, please let me remind you that there are 66 workdays in our fourth quarter, which was the same as last year. Looking forward to fiscal 2013, our workdays will be as follows: 66 in the first quarter, 65 in the second quarter, 64 workdays in the third quarter and 66 in the fourth quarter. The total workdays in fiscal 2013 will be 261, which is one less than fiscal 2012. The difference occurs in the third quarter, where there were 65 workdays in fiscal 2012. The one less workday in fiscal 2013 will negatively impact fiscal 2013 total revenue growth by about 40 basis points.

We have 4 reportable operating segments: Rental Uniforms and Ancillary Products; Uniform Direct Sales; First Aid, Safety and Fire Protection Services; and Document Management Services. Uniform Direct Sales; First Aid, Safety and Fire Protection Services and Document Management Services are combined and presented as Other Services on the face of the income statement. The Rental Uniforms and Ancillary Products operating segment consists of the rental and servicing of uniforms, mats, towels and other related items. This segment also includes restroom supplies and other facility products and services. Rental Uniforms and Ancillary Products revenue accounted for 71% of company revenue in the fourth quarter.

Within Rental, based on fourth quarter revenue levels, uniform rental accounted for approximately 52% of the revenue; dust control, which is mainly entrance mats, accounted for 19%; hygiene and other services, which is restroom supply, cleaning services and chemical services, was 16%; shop towel revenue was 5%; and linen and other, which is mainly nonperson-specific garments, such as aprons and butcher coats, was 8%.

Read the rest of this transcript for free on seekingalpha.com

More from Stocks

Finding Stocks Right for You: Cramer's 'Mad Money' Recap (Friday 8/25/18)

Finding Stocks Right for You: Cramer's 'Mad Money' Recap (Friday 8/25/18)

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain

Dow and S&P 500 Decline, Energy Shares Fall as U.S. Crude Oil Slides 4%

Dow and S&P 500 Decline, Energy Shares Fall as U.S. Crude Oil Slides 4%

Replay: Jim Cramer on the Markets, 10-Year Yield, Oil Prices and Foot Locker

Replay: Jim Cramer on the Markets, 10-Year Yield, Oil Prices and Foot Locker