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 call over to Mr. Mike Hansen, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Good evening and thank you for joining us. With me is Paul Adler, Cintas’ Vice President and Treasurer. We will discuss our third quarter results for fiscal 2019. 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 third quarter of fiscal 2019 was $1.68 billion, an increase of 5.9% over last year's third quarter. The organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations was 6%. In the third quarter of fiscal 2019, the organic growth rate for the Uniform Rental and Facility Services operating segment was 6.2%, and the organic growth rate for the First Aid and Safety Services operating segment was 8.6%. The organic growth rates of both segments were negatively impacted by a greater number of customers being closed for business in this year's third quarter compared to last year’s third quarter due to severe winter weather and the timing of the holidays, Christmas Eve and New Year's Eve fell on a Monday this year compared to on a Sunday in the prior year. Gross margin for the third quarter of fiscal 2019 of $755.2 million increased 7.8%. Gross margin as a percentage of revenue was 44.9% for the third quarter of fiscal 2019, compared to 44.1% in the third quarter of fiscal 2018. Uniform Rental and Facility Services operating segment gross margin as a percentage of revenue improved 80 basis points from last year's third quarter to 44.9%, and the First Aid and Safety Services operating segment gross margin percentage improved 130 basis points to 48.2%. Reported operating income for the third quarter of fiscal 2019 of $278.3 million increased 39.1%. Operating income margin was 16.5% in the third quarter of fiscal 2019 compared to 12.6% in fiscal 2018. Operating income was negatively impacted by integration expenses related to the G&K acquisition by $800,000 in the third quarter of fiscal 2019 and $9.8 million in the third quarter of fiscal 2018. Operating income in the third quarter of fiscal 2018 was also reduced $39.7 million by a one-time cash payment to Cintas employees following the enactment of the Tax Cuts and Jobs Act signed into legislation on December 22, 2017. Excluding the integration expenses related to the G&K acquisition and the one-time cash payment to employees, operating income increased 11.8% and operating income margin improved 90 basis points to 16.6% in the third quarter of fiscal 2019 compared to 15.7% in the third quarter of fiscal 2018. Reported net income from continuing operations for the third quarter of fiscal 2019 was $200.9 million, and reported earnings per diluted share from continuing operations for the third quarter of fiscal 2019 were $1.83. Please note that there were a few items impacting the comparability of reported financial results. First, G&K acquisition integration expenses negatively impacted reported EPS in the third quarter of fiscal 2019 and 2018 by $0.01 and $0.06 respectively. Also, reported EPS in the third quarter of fiscal 2018 included a negative impact of $0.24 from the one-time cash payment to employees. Finally, reported EPS in the third quarter of fiscal 2018 included a positive impact of $1.59 from benefits under the Tax Act, primarily due to a one-time re-evaluation of deferred tax assets and liabilities. Excluding these items, net income dollars increased 31.7% and net income margin was 12% compared to 9.6% last year. EPS increased 34.3%. As Scott Farmer, our Chairman and CEO stated in today's press release, we're pleased with our third quarter financial performance. Our employee partners are working diligently to exceed customer expectations while also making significant progress on integrating the G&K acquisition and converting more operations to our new enterprise resource planning system. And while our employee partners are focused on getting customers ready for the work day, we remain committed to efforts to increase shareholder value. In this year's third quarter, we paid an annual dividend totaling $220.8 million. The dividend of $2.05 per share was an increase of 26.5% over last year's dividend. Also in the quarter, we purchased $100 million of Cintas stock under our buyback program. As of February 28, we have now purchased $546.6 million of Cintas stock during fiscal 2019, and the amount remaining under our buyback program is $863.4 million. We updated our annual guidance for fiscal 2019, we expect revenue to be in the range of $6.87 billion to $6.885 billion. This implies a strong finish to our fiscal 2019 year, with fourth quarter revenue growth in the range of 6% to 7%, and operating income margin in the range of 17% to 17.5%. We expect EPS from continuing operations excluding certain items to be in the range of $7.42 to $7.48. Note the following regarding the EPS guidance, it assumes an effective tax rate for fiscal 2019 of 20.6%. This implies a fourth quarter effective tax rate of 24.5%. The reported effective tax rate in last year's fourth quarter was 21.5%. The higher tax rate expected in the fourth quarter of this year will have a negative impact of $0.07 to $0.08. Keep in mind that the tax rate can move up or down from period-to-period based on discrete events including the amount of stock compensation benefits. Our guidance assumes that diluted share count from -- for computing EPS of 111.5 million shares. It does not assume any future G&K integration expenses and it does not assume any future share buybacks. I'll now turn the call over to Paul.

Thank you, Mike. Please note that our fiscal third quarter contained the same number of work days as the prior year third quarter. Additionally, there will be no work day differences in our fiscal fourth quarter. Looking ahead to fiscal 2020, please note that there will be one less work day than in fiscal 2019. Each quarter of fiscal 2020 will contain 65 work days. One less day will negatively impact fiscal 2020 total revenue growth by about 40 to 50 basis points. To illustrate the magnitude of the headwind using fiscal 2019’s third quarter revenue, one work day is about $26 million. One less work day also has a negative impact on operating margin. Fiscal 2020 operating income margin will be reduced by about 10 to 15 basis points in comparison to fiscal 2019. The negative impact on the margin occurs because certain expenses, like amortization of uniforms and entrance mats are expensed on a monthly basis as opposed to on a daily basis, and we will have one less day of revenue to cover the expenses. Please keep these headwinds in mind when modeling our fiscal 2020 results. We have two reportable operating segments, Uniform Rental and Facility Services, and First Aid and Safety Services. The remainder of our businesses included in All Other. All Other consists of Fire Protection Services, and our Uniform Direct Sale business. First Aid and Safety Services and All Other are combined and presented as other services on the income statement. Uniform Rental and Facility Services operating segment includes the rental and servicing of uniforms, mats, and towels, and the provision of restroom supplies and other facility products and services. The segment also includes the sale of items from our catalogs to our customers on route. Uniform Rental and Facility Services revenue was $1,358 million, an increase of 5.7%. Excluding the impact of acquisitions and foreign currency exchange rate changes, the organic growth rate was 6.2%. As Mike mentioned earlier, the organic growth rate was negatively impacted by customer closures caused by the severe weather and the holiday calendar. Our Uniform Rental and Facility Services segment gross margin was 44.9% for the third quarter compared to 44.1% in last year's third quarter, an improvement of 80 basis points. Energy expense as a percentage of revenue was 2.4% compared to 2.5% in the prior year quarter. We are pleased with the gross margin expansion and our ability to overcome the weather and holiday challenges, as well as continued wage pressures, increased commodity costs such as for hangers which are sourced mostly from China, and the inefficiencies that are customary with an acquisition integration and an ERP system implementation. Our First Aid and Safety Services operating segment includes revenue from the sale and servicing of First Aid products, safety products and training. This segment’s revenue for the third quarter was $149.2 million. The organic growth rate for the segment was 8.6%. This segment too was negatively impacted by severe weather and the timing of the holidays. The First Aid segment gross margin was 48.2% in the third quarter compared to 46.9% in last year's third quarter, an increase of 130 basis points. Note that First Aid segment gross margins are at record levels and had been marching higher since the acquisition of ZEE Medical three and half years ago. National account new business continues to help drive high-single digit organic growth. Penetration of existing customers with more products and services is also a major contributor to top line growth and it results in above average gross margins. Our Fire Protection Services and Uniform Direct Sale businesses are reported in the All Other category. Our Fire business continues to grow each year at a strong pace. Uniform Direct Sale business growth rates are generally low-single digits and are subject to volatility, such as when we install a multimillion dollar account. Uniform Direct Sale however is a key business for us and its customers are often significant opportunities to cross sell and provide products and services from other business units. All Other revenue was $174.8 million, an increase a 4.5%. The organic growth rate was 2.3% and was driven by 11.3% organic growth in the Fire business. All Other gross margin was 42.3% for the third quarter of this fiscal year compared to 41.7% for last year's third quarter. Selling and administrative expenses as a percentage of revenue were 28.3% in the third quarter compared to 30.9% in last year's third quarter. Note that the one-time cash payment to employees in last year's third quarter that Mike mentioned earlier was recorded in selling and administrative expenses. Excluding this payment, last year’s selling administrative expense as a percent of revenue was 28.4% compared to 28.3% in this year's third quarter. Our effective tax rate on continuing operations for the third quarter of fiscal 2019 was 20.1%. In the third quarter of fiscal 2018 we realized a significant tax benefit from the Tax Act, primarily due to a one-time revaluation of deferred tax assets and liabilities. Our fiscal 2019 EPS guidance assumes an effective tax rate of 20.6% this implies a fourth quarter effective tax rate of 24.5%. The effective tax rate in last year's fourth quarter was 21.5%. As Mike stated previously the higher expected tax rate will have a negative impact on fourth quarter EPS of $0.07 to $0.08. Our cash and equivalents balance as of February 28 was $80.9 million. Operating cash flow in the third quarter of fiscal 2019 increased 15.7% from the amount of operating cash flow in the third quarter of fiscal 2018. Capital expenditures in the third quarter were $70.2 million, our CapEx by operating segment was as follows, $55.8 million in Uniform Rental and Facility Services, $8.1 million in First Aid and Safety and $6.3 million in All Other. We expect fiscal 2019 CapEx to be in the range of $270 million to $285 million. As of February 28, total debt was $2,754.5 million, $2,537 million is fixed interest rate debt and $217.5 million is variable rate commercial paper. At February 28, we are at our targeted leverage of 2 times debt to EBITDA. That concludes our prepared remarks. We are happy to answer your questions.

Thank you. The floor is now open for questions. [Operator Instructions] Our first question comes from Toni Kaplan with Morgan Stanley.

Hi, good afternoon.

Hi, Toni.

Uniform Rental was a bit below what we'd expected this quarter. Could you just give us the organic growth ex the holiday shift and ex the weather closure? And is it possible that any sales were bumped into the fourth quarter?

We expect that the impact was about 60 basis points to the growth of both rental and the total company. And I would say that we don't expect much to be bumped to the fourth quarter, and that's why you see the guidance coming down from a revenue perspective a little bit greater than the 60 basis points for the third quarter, 60 basis points is roughly $10 million in the quarter. When we think about that quarter, this is the first year since fiscal 2015 that the holidays weren’t either on a Friday or a Monday. A Friday, the weekend or a Monday. And we just found there were many of our customers not only took off for holiday, but took off the Monday before the holiday, took off a day or so after the holidays as well. And when that happened, it just created a lot of disruption to our -- for example our new business effort where appointment setting for our sales reps became very, very difficult, and the momentum that they had going into the holidays was really stopped. And they had to regain that momentum with the decision maker meetings, et cetera after the holidays. The other thing was the weather, I mean, we -- if you think about the polar vortex for example, we had customer shutdowns from Minnesota all the way to the East Coast. And again, that creates real challenges for our sales people to get continued momentum of meeting with decision makers, et cetera, and it also has an impact on our drivers. Our drivers we call them service sales reps or SSRs. When our customers close, our SSRs have to squeeze more stops into a fewer number of days. And when that happens, our SSRs have less time to look for revenue opportunities. There's less -- because the customers are closed, there is less customer traffic to use our restroom products, for example. So, it certainly did have an impact on the quarter.

Okay, great. And then I wanted to understand all other a little bit better. It sounds like fire was really strong with 11% organic growth. So I'm guessing that means that direct sales were sort of weaker. Was it fire that drove the strong margins in that segment? I know that they jump around, but given last quarter was a little bit on the weaker side, was this sort of a catch up or was it the mix shift; just wanted to understand all other margin a little bit better? Thanks.

Yes, Toni, it's Paul. You are right, fire had a very strong quarter organically. And so, then the corollary is that Uniform Direct Sale did not perform as well. You know, that that direct sale business, it's non-recurring revenue, so it's a little harder to forecast, it's lumpier, it depends on rollouts, and it's tougher to forecast and the sales cycle is longer as well. So it's UDS, the Uniform Direct Sale business did come in lighter than we expected, and of course that suppressed margins as well. The Fire business overall, still continues to perform very well, high-single digit organic growth is the expectations and those margins will continue to improve rather as the organic growth continues to tick up.

Thank you.

Thank you. Our next question comes from Manav Patnaik with Barclays Capital.

Good evening, guys. I just wanted to see if I could reconcile this right. So you said the impact in the quarter from both weather and I guess two less days was $10 million, but then for 2020 one less work day impacts you $26 million for the full year. So I mean is -- like is it just because it was in that holiday period maybe and it was less of an impact?

Well, Manav when we have customers close, our goal is to reschedule the visit to them. So it's not like we completely lose one full day of revenue. We will still get the rental revenue. We just have to reschedule the stop so that we can pick up for example, dirty uniforms drop off clean, and we will still generate revenue because of that. But when we are doing that, it's the things like continuing to look for the penetration opportunities that suffer a bit. It's the new business that suffers a little bit. So we don't lose all of the days’ revenue. Because we have to still visit and serve the customer, it’s just that the penetration opportunities and the new business productivity was challenged a bit. And despite all of that, 6.2% organic growth rate is still a pretty good performance by our rental business despite the challenges that we have. You're right though, as we think about 2020 that's a full day that we lose and don't get back in terms of the revenue within that fiscal year. And so that $26 million that Paul referenced, that's just an example of if you take our total revenue, divided by the number of workdays this past quarter, that's effectively the impact that it would have next year.

Okay, got it. And then maybe just the latest on the G&K integration, I guess just what's the next milestones we should be looking to hear from you guys?

Yes, Manav, the integration continues to progress very nicely. It doesn't mean though, that there's not heavy lifting going on in our operations still. That heavy lifting is typically now in the form of rerouting. And we expect that to continue into fiscal 2020. What we're really trying to do Manav is, in certain markets to minimize the disruption kind of sync up the rerouting for the G&K acquisition with the SAP conversion. So to minimize disruption to the operation, to the customers kind of handle all that change management at one-time. So yes, still some inefficiencies exists in those markets where they're going through that. As I mentioned, that'll continue into 2020. But, the operations are doing a very nice job of taking care of the customer. And I think that the solid financial results are kind of a testament to that fact.

Got it. Thanks a lot, guys.

Thank you. Our next question comes from Andrew Steinerman with JPMorgan Securities.

Hi, guys. You're going to hate this question, but I'm going to try it. When you look at the legacy G&K portfolio business, how fast do you think it's growing relative to 6% organic overall. And if you could talk about, sales force productivity in getting that G&K legacy business cross selling, et cetera?

So, you're right, Andrew that's a really tough question. But I would say that the growth isn't quite near the legacy Cintas levels yet. We are seeing some nice performance in things like our hygiene penetration. And so we really do like the direction, but I would say we're likely not where legacy Cintas locations are just yet, but it's really hard to tell, because we have we have transferred so much volume from close locations to Cintas locations, we have as we optimize routes, we are moving G&K volume into Cintas and Cintas into G&K. So it's really -- it’s very muddy when you try to parse that out. As it relates to the sales rep productivity, we have one sales team. Let's make sure we're clear on that. And the productivity is still very, very good. It's better than a year ago, it's not quite as high as it was in the second quarter because of some of the challenges that I mentioned a few minutes ago. But we're still very pleased with that performance.

Any milestones ahead on crush selling that you could talk about into that G&K legacy business.

I would say, because the business is so blended, Andrew. Our goal is just continuing to manage the business location by location, but we'll be reporting on it in total because it's so difficult. And we'll do our best to give some color like we have in the last couple quarters of that we like the revenue performance in former G&K customers. But it's going to be -- there's going to be a little bit more anecdotal as we go forward because of the blending of that. But if you think about the impact that I mentioned in terms of the weather on holidays, that's kind of turns of 6.2 into about a 6.8. And that performance we really like and certainly there is some help compared to where we were a year ago in terms of penetration at legacy G&K customers. Pretty hard to give a specific number, but we know there are some -- these certainly are signs of success.

Okay, thank you.

Thank you. Our next question comes from Gary Bisbee with Bank of America Merrill Lynch.

Hey, guys. Good afternoon. I guess the first one just following up on Andrew’s question. This is the question, I think we all get all the time about the cross sell and you've never really provided any disclosure of any metrics consistently that would help people think about it. Have you -- and I know you have historically said, competitive reasons you didn't want to give too much. But I mean, have you thought about, potentially, at some point introducing some metrics to help us track the success that you're having, whether it's customer accounts that we could look at revenue per customer or any other metric, it seems to me it would be helpful to your investor base if you were to provide something.

Well, I certainly can appreciate that, Gary. We -- as you said, for competitive reasons, we don't like to give too much of that information. But I will tell you practically, if you think about what we've had going on over the last few years, we're talking about the largest integration that we've had in our rental business, the largest integration we've ever had in our First Aid business, and an SAP conversion. There's a lot going on and to try to get the kind of data that we would be comfortable enough providing externally out of the three different systems that we've been on that would be very, very challenging. And I understand your request and as we get fully on to SAP, we will certainly give that some hard thought. But gosh, we're in the midst of a lot of things going on that would make that kind of reporting pretty challenging.

Yes, fair point. I'll ask you again once SAP is fully up and running. That's a good point.

I will expect that question in a couple years.

Fair enough. A couple of other ones. So a quarter ago, you said fairly strongly that you are seeing no signs of economic weakness from the customer base in the U.S. and Canada, do you have the same level of conviction or is that same statement ring through today or give -- has the trade impact and some of the other things that have been out there? Have you noticed any impact in the last three months that would change that kind of statement? Thanks.

Gary, we still like the environment that we're operating in. Aside from the weather challenges, we like the environment and our customers seem to be very healthy. They're investing. There are lots of job openings. And GDP is still at a level today and expected for the rest of the calendar year where we'd like to operate. So we haven't seen a lot of change other than the weather disruption, which was certainly real.

Thank you. And then just one last one, the amount of SG&A leverage if we back out the one-time payment a year ago, still positive but narrowed relative to the last few quarters. I would guess that the revenue impact this quarter had -- was part of the reason. But is there anything from your perspective changing in the ability to deliver operating leverage in the near-term or was that anything else to explain that? Thank you.

Yes, the weather that we’ve talked about, the revenue challenge that we’ve talked about probably took 20 basis points of additional leverage in SG&A. So we probably would have been 30 basis points better than last year in total. No, there are ups and downs we are self-insured we get some things that are -- that go up and down. We invest for example in our First Aid and Safety business where we've been growing so nicely. But there's nothing that I would look at as a challenge as we move forward to continue to see that number tweak down.

Great, thanks a lot.

Thank you. Our next question comes from Justin Hauke with R.W. Baird.

Yes, great. Thanks guys. Two questions here, I guess one, I think the positive that we can take away from this is the margins were pretty good considering the revenue shortfall. And, you called out some of the factors that are still out there the inflationary costs and whatnot. But I guess I was curious on the labor costs specifically, if you could just comment on maybe where that's trending were net pricing is trending? How those have changed from maybe three or six months ago?

Yes, labor pressures, I would say, are about the same as we've seen in the first two quarters of this fiscal year. I wouldn't call it any worse. But they still remain. And as we've talked about in the past, we work diligently to deal with those. First of all, we want to retain our partners. And so, we do as much as we can to keep our partners engaged and satisfied in terms of working with us. We want to pay them the right wages for sure so that we can, again help keep them engaged. And that's -- partner retention, which remains high for us is such an important part of managing our labor. But in addition to that, we look for opportunities for process improvement, we look for automation and other types of efficiencies and we've been doing a pretty good job of that so far, not to mention the fact that the synergies that we're getting off of the G&K integration certainly help and are timely. But they remain. And our goal is to continue to perform well despite them. As it relates to the pricing environment, we haven't seen a lot of change from quarter-to-quarter in that environment either. And I don't look for that to change a whole lot as we move forward, at least in the next quarter or so.

Okay, great. Second one here, just maybe more numerical, but the G&K integration expense was pretty light and your guidance to $0.09 looks like it's probably going to stay fairly light in the fourth quarter as well from the -- I think you were saying $18 million to $22 million was the total for the year. So is it because you're just ahead of schedule, and there's not more expense or those moving into 2020? Or just how should we think about the level of integration expense that remains?

Yes, Justin. I mentioned earlier about the integration activities, and it's largely rerouting and then our supply chain is still hard at work. Realizing synergies as well. But, rerouting does not really drive significant costs. The purpose of the rerouting is to get those routes more dense that lowers energy costs provides us with more time to spend with the customers. So, it's a smallest bucket of the synergies. And the fact is that the larger expenses related to the integration came when the plant closings occurred, closing the plants, decommissioning them, severing and we just don't have any of that left. So we would expect another maybe $2 million to $3 million of integration expenses in the fourth quarter. So we'll probably end the year at about $16 million in total. And then looking ahead to fiscal 2020, it's going to be very small, very nominal amount of integration expenses. But again, we're not finished with the integration activities. We're still rerouting. A lot of challenges out there for our operations, but it just doesn't drive the significant expenses that the other activities did.

And just to be clear, there are still expenses and inefficiencies for example duplicate routing, training overtime and attempts. But the expenses Paul talking about are those that are identifiable that can be really called out into that integration line. The heavy lifting in the route optimization remains and the inefficiencies and the costs associated with it also remain, they're just really hard to call out. So for example, when we're training SSRs to -- on new routes, we've got a little bit of duplicate labor going on when we're training and pulling them out of their off of their routes. There's a little bit of inefficiency in duplicate labor. When we've got overtime, it's hard to tell how much of that is the day-to-day and how much of that is the true integration work. So there are expenses and inefficiencies that remain. They're just much harder to call out specifically.

That makes sense. That's helpful. Thank you very much.

Thank you. Our next question comes from Dan Dolev with Nomura Securities International.

Hey, guys. Thanks for taking my question. Appreciate it. So sorry to harp on this, but if I think about the organic growth even ex. the impact of weather, et cetera, the 6.8 it's about a 20 basis points acceleration. And if I look back your comp was getting about 80 basis points easier if I'm not wrong. Is there anything to read into that and what is driving that as far as I remember back in like 2017 you put out like 8% comp quarters like what are the odds of us getting back to those rates and what's driving the meter acceleration ex. weather? Thanks.

Yes, the -- I mean, Dan, the 8% that you're referring to they were strong and they were without any G&K in them that was prior to G&K becoming inorganic. And so we're -- we -- I had a question from Andrew a little bit ago about how much is the legacy G&K business growing and while it's very, very difficult to tell, it's also pretty clear that that they are not growing quite at the legacy Cintas levels yet. We certainly believe that they can get there over time, but that doesn't happen overnight. As we look to the fourth quarter, the range of revenue that we've given is a 6% to 7%. We think it's a very, very healthy range. And at the midpoint there's some acceleration there. And so we're very, very pleased with the progress that we've made. We got a little bit of a hiccup with the weather and the holiday challenges, customer closure challenges, but gosh, we're right where we wanted to be.

Got it. And just 6% to 7% overall not just uniformly, right?

6% to 7% overall, yes.

Got it. And then my second question is -- sorry.

Go ahead.

No, I was going to ask about the synergies in the quarter and like if you can give us I think last time you had $25 million.

Yes, Dan, the synergies and we began the fiscal year and we said got it to $90 million to $95 million in total for the year. And we're on track to achieving that, we'll actually probably wind up a bit above the top end of that range. And then next fiscal year, think about incremental synergies of maybe $30 million to $35 million. So, the bottom line is that we continue to track very nicely what we committed to in the beginning, which was the $130 million to $140 million of synergies within those four years.

Perfect. Good stuff, thank you.

Thank you. Our next question comes from George Tong with Goldman Sachs.

Hi, thanks, good afternoon. You’ve previously indicated that ancillary products such as First Aid and Fire Safety have less than 20% penetration among Uniform Rental customers, can you help frame where that number can go as cross selling increases not only at G&K, but also the broader Cintas customer base?

Yes, we haven't really talked about that a lot publicly and the reason is it's -- that's a difficult thing to specifically target, we certainly think about that in the different verticals. And some verticals are better than others for that penetration. But George, we're not really ready to give goals and targets. I would say this, the standalone businesses are still growing very, very nicely. And we think there's a lot of runway in just simply growing each business on their own. But there's no question there's more penetration opportunity available, but I'm really hesitant to put that -- put us in a box and say there's a goal there just yet.

Got it. And then drilling down into the SAP implementation, can you give us an update on how many branches have undergone the conversion and when you would expect to start seeing margin benefits?

George, we are about 57% now through the conversion, and that's about 202 operations that are now on SAP. If you remember, like this time last quarter, we were at 48% converted. So, a lot of good activity obviously in this past quarter. As far as the margin benefits, we haven't quantified any of the benefits, we've talked about and given examples in terms of the power of the system, and what it can do for our route people with a satellite based type of handheld device, the efficiencies that that brings, opportunities in our stock rooms with managing inventory and sharing it and having visibility. But then also a lot of benefits in terms of opportunities to cross sell and look into the system of First Aid and Safety to better understand national accounts and just a lot of opportunities around big data and being able to do profitability analysis and price reviews and all that type of stuff. So we will have more commentary on that as we continue to get through the rollout, but a lot of those benefits for the system, especially as they relate to the top line and some profitability improvements. You need the entire network to be in and we're just over half of the way. So nothing that we can quantify for you at this point in time in terms of the benefits.

Got it, thank you.

Thank you. Our next question comes from Hamzah Mazari with Macquarie Capital.

Hey guys, this is actually Mario Cortellacci filling in for Hamzah. Could you give us any color on your net add stops during the quarter. And actually just curious how relevant that metric is to-date compared to it was -- compared to history because the portfolio has changed with the time. So once you see if that's actually relevant anymore.

Yeah, the add stops metric, is a real -- we consider it a very old legacy Uniform Rental type of metric that, we use decades ago when we were predominantly providing uniforms and entrance mats, it might be meaningful still to some of our comp competitors. But it's not as meaningful to us because we have such a huge breadth of products and services that we have more to offer to customers than just uniforms and mats. And we are not also dependent upon the customer base, just adding jobs and going along with GDP and kind of being propelled or held back by employment you look back at our results and we have grown consistently in multiples of excess of GDP and jobs. So the add stops metric, which is more about kind of same store sales, how is that particular customer growing? Are they adding or subtracting? It's not as meaningful to us. We're trying to drive the growth through penetration and through attacking new verticals like scrub rental with new products and services. So long winded answer to say, it's not meaningful to us, there wasn't anything significant to note in add stops. I would say that, to Mike's point earlier, we rely on penetration of our existing customers. And it was clear in looking at our operational data, that the weather and the holidays did impact that our ability to penetrate and then that's part of that 60 basis points headwind that we had this quarter.

Got it. And just one more, I'll turn it over. I guess just given the portfolio changes, since the last major slowdown. Could just give us a sense of how Cintas might perform in a decelerating macro environment? I'm sure a piece of your business could be a little considered late cycle, I assume that First Aid would be a little more resilient. And I just didn't know I guess obviously a piece of the business is still levered to the employment cycle. But I guess what would that look like if there was slowdown?

Mario, I typically answer those questions by -- with starting out with it depends on how deep and how broad that next slowdown would be. We have a very diverse customer base. We've got customers of all types in all types of verticals, customers of all sizes. And so we've got a very diverse customer base, and that helps us when things like a few years ago, the oil and gas customers really were suffering with low oil prices helped us a few years ago when there were some measurements of an industrial recession. And we still grew through those kind of things. But it really depends on how deep and how broad. If we can hit our revenue guidance, and our EPS guidance, it will be 48 out of the last 50 years, where we have grown sales and grown profits. And that would be growing through six out of the last seven recessions. So how do we stand in the next one, depends on how deep and how broad. We have done some things since the great recession that we think are beneficial to our performance through the next slow down and that would be a broader product line, so that we have more things to offer to our prospects and our existing customers. We have a sales team that is a little bit more sophisticated than it was prior to the great recession where we specifically attack specific certain verticals. And we sell to existing customers a little bit more proactively. So we look to drive more revenue that way. And we have probably even more diverse customers today than we had prior to the last recession where we’ve really targeted things like health care and education, which are a little bit more recession resistant. So we've made some changes since the great recession. But we've also performed very well over the course of the last 50 years in all kinds of economic cycles. But I would always go back to dependent on how deep and how broad.

Got it, thank you so much.

Thank you. Our next question comes from Scott Schneeberger with Oppenheimer.

Thanks. Good evening, guys. You just gave synergy guidance for next year as well on an earlier question. I found it interesting because it sounds like you're trending really well on the 90 to 95. So, the inferences you're at the high end of that. And then the incremental guide 30 to 35 the high end of that gets you to the 130 the low end of the total. So, just kind of curious, is there might you finish a year earlier than originally anticipated? Or might be there -- might there be incremental upside that we see in this? And, if so, where the areas sourcing, routing, you touched on a little bit books, where the areas that maybe you're progressing ahead of that are worth addressing at this juncture? Thanks.

Yes, great question. Scott. I would say this, we have some sourcing synergies that we are still working on. And as we've talked about, they come a little longer because we had to burn through G&K inventory. And then we have to source from either our new supply chains or put the volume, the greater volume into our existing supply chains. We have to then get the inventory to our locations and put it in service where it becomes -- where it begins to amortize. And so there will be synergies in our fiscal 2021 that still are from that global supply chain effort. And it's hard to pull those forward. So getting back to your question, I think there may be a little bit of upside, and I think that upside, you may have heard me say a few times in the past, I think the biggest bucket for the upside is that sourcing and supply chain. Where we kind of built that opportunity off of the G&K inventory and supply chain. And the opportunity -- the upside opportunity might be does that impact the Cintas sourcing and supply chain. In other words, does the combined volume then help even the Cintas pricing to drive lower as well. I'm not ready to give any kind of numbers, but I think that's where the opportunity lies. And as you suggested, we expect to be at the low end of that range next fiscal year and driving towards the high end and possibly through the high end in fiscal 2021.

Great, thanks. It’s good progress. More a housekeeping question for my follow up, tax rate has been jumping around and just for our benefit in modeling fiscal 2020, how would you think about it for the annual and quarterly as we model out ahead, just some rules of thumb because I think without a little guidance that could be all over the place?

Yes, you're right about that, Scott. I think with the with the change in the stock compensation a few years ago, this tax rate has really been bouncing around because we don't -- we can't control the exercises of options and we can't control the stock price. We talked a little bit about a 24.5% in the fourth quarter. So that is our expectation there. And as we look to finish this year, if we do that 24.5% in the fourth quarter, that would put us at a 20.6% for the full fiscal 2019 year. That's lower than we would expect our typical run rate to be. With our stock performance, we had a tremendous amount of exercises this year. And it's hard to say that those are going to repeat next year. So I would expect that our tax rate would be right in the range of 22% next year, with a fairly low tax rate in the first quarter because we generally get more stock comp benefits followed by a higher rate in Qs two through four. And I would suggest maybe using fiscal 2019's quarterly rates that we've talked about as maybe a bit of a guide to ratably get you there. But I would say for the full year, I think a 22% type of a number would be right, where I would say that's currently our expectation. So obviously then that if we are at a 22% next year and a 20.6% this year, that puts a little bit of pressure on us with that increase.

Great, thanks. I appreciate that incremental color. Good job, guys.

Thank you. Our next question comes from Tim Mulrooney with William Blair.

Yes, good afternoon, guys. Pretty much hit on everything. But maybe I'll talk -- ask about the balance sheet, a 2 times leverage it seems like a good point to check in on your capital allocation priorities. How should we think about capital deployment after CapEx between the dividend, share repurchase and M&A?

Yes, so our cash flow remains healthy. In fact it was very good in the third quarter and we expect it to continue to perform well into the future. That creates opportunities obviously. We want to continue to invest in the business, we will do that by growing the business via things like adding routes, adding sales people and doing advertising and R&D. Those things will run through the P&L just like they have, but those are very, very important pieces for us. Our CapEx, I would expect to continue kind of in that 4% to 4.5%. And that's very important to us. We want to make sure we are creating the capacity for growth. Those are our two highest priorities. Aside from that, we certainly love the tuck-in acquisitions, and we will continue to look for opportunities there as best we can in our Rental, First Aid and Fire businesses. We will also look at there are larger opportunities, particularly in our existing businesses, we would love to take a look at those. So we'll be as aggressive as we can be on looking for great value out of small and larger types of acquisitions, particularly within our businesses. That's going to leave us though with some cash. And so, we certainly love to increase the dividend we've done so every year since 1983. I would expect that the Board will continue to look very strongly at that, and then there may be buy backup opportunity. And as we've shown so far this fiscal year, where we've acquired almost $550 million through our first three quarters. We like that program, we like the momentum of the business. And I would expect that we'll continue to look at that opportunistically. In addition to all of that, our EBITDA continues to grow and we like that 2 times leverage neighborhood. We are there right now and our expectation is we’ll continue to be in that range.

Okay, Thanks, Mike. Thank you for the thoughtful answer. Just on the M&A front, are there still areas in the U.S. where you feel there may be more room to grow through M&A in your Rental business? And also what's your position with respect to expanding internationally? Thanks for your time.

Sure, from a U.S. perspective, it's more about the opportunities and it is the geography. We are in almost all geographies in U.S. and Canada, but there are still 600 or so independent operators out there. And so the opportunity really is more about the location of those independent operators and having a dialogue with them and understanding if we can team up and create long-term value together. So we will, will continue to look for those opportunities, no matter the geography in the U.S. and Canada. From an international perspective, I would say this, we love the U.S. and Canadian opportunities. We think there are a lot there, we will continue to invest heavily in those businesses. I think there may be a time in our future where we get in into other international geographies. It's not our highest priority. But I think that's something that we’ll keep our eyes on. I would say that in our business, startups are pretty difficult. And so it would likely be through some sort of M&A, but it would have to be with the right partner, in the right geography, and one in which we felt like we could operate successfully.

Thank you. Our next question comes from Seth Weber with RBC Capital Markets.

Hey, guys, good afternoon, and thanks for keeping the call going here. Most of the questions have been asked and answered, but maybe just going back to the CapEx commentary for a second. I think, earlier this year, you had brought the CapEx number down a little bit because you had sort of message that you're able to extract some of the -- some benefits from the G&K business. So how should we be thinking about CapEx going forward? Is it brick and mortar? Are you -- do you feel like you need more capacity here? Or is there anything that you could point to that you'll be spending money on specifically? Thank you.

Well, we -- you're absolutely right, Seth, we did get some benefit from the G&K acquisition in terms of capacity, and it allowed us to delay certainly some CapEx related to new capacity both in plants and in our routes. But we're continuing to grow and we're continuing to grow well. And capacity is really a local thing. And so there are certainly still geographies where there may not have been a G&K presence, where we're growing well, where we need capacity. And so we'll continue to look for or we will have a CapEx related to laundry capacity and routing capacity. I would say from a growth perspective most of our CapEx growth will be in that form, laundry facility capacity and routes and i.e. trucks. Same goes for our First Aid and Fire businesses as well. We are growing very, very nicely. And the growth will come primarily in the way of additional trucks. We’ll certainly have some maintenance CapEx too, but from a growth perspective, yes, certainly bricks and mortar and trust.

Super, that's all I had guys. Thank you very much.

Thank you. And we have another other questions at this time. I would now like to turn the conference back to Mr. Mike Hansen for any closing remarks.

Well, thank you again for joining us tonight. We will issue our fourth quarter financial results in July, and we look forward to speaking with you again at that time. Thank you.

Ladies and gentlemen, this concludes today's conference. You may now disconnect.