Cintas Corporation reported results for its third quarter ended February 28, 2014. Revenue for the third quarter was $1.13 billion, representing a 5.1% increase compared to last year’s third quarter. Adjusting for one more workday in this year’s third quarter compared to last year’s third quarter, revenue grew 3.5%.
Organic growth, which adjusts for the impact of acquisitions and the one additional workday, was 3.1%. This organic growth rate reflects the impact of a weaker Canadian dollar relative to the U.S. dollar and the difficult year-over-year comparison due to our Uniform Direct Sales operating segment having the largest uniform program roll-out in the Company’s history during last year’s third quarter. These items negatively impacted organic growth by 0.5% and 1.7%, respectively.
The Company’s operating income of $150.2 million was a 12.9% increase as compared to $133.0 million in last year’s third quarter. Net income increased 13.2% to $84.6 million as compared to $74.7 million in last year’s third quarter. Earnings per diluted share (EPS) for the third quarter were $0.69, a 15.0% increase over the $0.60 EPS in last year’s third quarter.
Scott D. Farmer, Chief Executive Officer, stated, “Despite the impact of the severe winter weather which affected our customers and our operations, as well as the weaker Canadian dollar, we were able to grow earnings at a double-digit rate. We are pleased with our results for the quarter and our fiscal year to date achieved by the hard work and dedication of our employees, who we call partners.”
Mr. Farmer concluded, “We are updating our fiscal 2014 guidance based on our third quarter results. We expect fiscal 2014 revenue in the range of $4.550 billion to $4.575 billion and EPS in the range of $2.75 to $2.79. This guidance assumes no deterioration in the U.S. economy and does not consider any additional share buybacks.”
The Company announced an agreement with the shareholders of Shred-it International Inc. (Shred-it) to combine Cintas’ Document Shredding business with Shred-it’s Document Shredding business. Under the agreement, Cintas and Shred-it will each contribute its document shredding business to a newly formed partnership that will be owned 42% by Cintas and 58% by the shareholders of Shred-it.
The combined entity will operate under the Shred-it brand and is expected to have annual revenue in excess of $600 million. In addition to its 42% ownership of the partnership, Cintas will receive approximately $180 million in cash at the closing of the transaction which is expected to occur before May 31, 2014. The updated guidance above does not include any impact of this transaction.