Operator: Good day, everyone and welcome to the Cintas Corporation Announces Fiscal 2023 Third Quarter Earnings Release Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Paul Adler, Vice President, Treasurer and Investor Relations. Please go ahead, sir.
Paul F. Adler: Thank you Ross and thank you for joining us. With me is Todd Schneider, President and Chief Executive Officer; and Mike Hansen, Executive Vice President and Chief Financial Officer. We will discuss our fiscal 2023 third quarter results. After our commentary, we will open the call to questions from analysts. 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 Securities and Exchange Commission. I'll now turn the call over to Todd.
Todd M. Schneider: Thank you, Paul. Third quarter total revenue grew 11.7% to $2.19 billion. Each of our businesses continue to execute at a high level. The benefit of our strong revenue growth flowed through to our bottom line. Excluding a gain in the related tax benefit in last year's third quarter, operating income margin increased 110 basis points to 20.4% and diluted EPS grew 16.7% to $3.14. I thank our employees whom we call partners for their continued focus on our customers, our shareholders, and each other. The Uniform Rental and Facility Services operating segment revenue for the third quarter of fiscal 2023 was $1.72 billion compared to $1.55 billion last year. The organic revenue growth rate was 10.8%. While price increases contributed at a higher level than historically, revenue growth was driven mostly from increased volume.
Our sales force continues to add new customers and penetrate and cross sell our existing customer base. Businesses prioritize all we provide including image, safety, cleanliness, and compliance. Our First Aid and Safety Services operating segment revenue for the third quarter was $231.6 million compared to $213 million last year. The organic revenue growth rate was 7.8%. The segment was up against a difficult revenue comparison because last year's third quarter revenue included about $15 million in sales of COVID-19 test kits that did not repeat this year. Excluding the prior year test kit sales, the organic revenue growth rate was 16%. We continue to have good momentum in our First Aid Cabinet business, which continues to grow greater than 20%.
Health and safety of employees remains top of mind. We provide businesses with access to quick and effective products and services that promote health and well-being in the workplace. Our Fire Protection Services and Uniform Direct Sale businesses are reported in the all other segment. All other revenue was $242.2 million compared to $194.3 million last year. The fire business revenue was 105 -- $155.8 million and the organic revenue growth rate was 20.7%. Uniform Direct Sale business revenue was $86.5 million and the organic growth rate was 32%. Now before turning the call over to Mike to provide details of our third quarter results, I'll provide our updated financial expectations for our fiscal year. We are increasing our financial guidance.
We are raising our annual revenue expectations from a range of $8.67 billion to $8.75 billion to a range of $8.74 billion to $8.80 billion. The total growth rate of 11.3% to 12%. Also, we are raising our annual diluted EPS expectations from a range of $12.50 to $12.80 to a range of $12.70 to $12.90, a growth rate of 12.6% to 14.4%. Mike.
J. Michael Hansen: Thanks, Todd and good morning. Our fiscal 2023 third quarter revenue was $2.19 billion compared to $1.96 billion last year. The organic revenue growth rate adjusted for acquisitions and foreign currency exchange rate fluctuations was 11.8%. Gross margin for the third quarter of fiscal 2023 was $1 billion compared to $898.2 million last year, an increase of 15.1%. Gross margin as a percent of revenue was 47.2% for the third quarter of fiscal 2023 compared to 45.8% last year, an increase of 140 basis points. Energy expenses comprised of gasoline, natural gas, and electricity were a tailwind, decreasing 15 basis points from last year. Strong volume growth from new customers and the penetration of existing customers with more products and services helped generate great operating leverage.
Gross margin percentage by business was 47.1% for Uniform Rental and Facility Services, 51.6% for First Aid and Safety Services, 48.5% for Fire Protection Services and 35.8% for Uniform Direct Sale. Operating income of $446.8 million compared to $407.6 million last year. Operating income as a percentage of revenue was 20.4% in the third quarter of fiscal 2023 compared to 20.8% in last year's third quarter. Fiscal 2022 third quarter operating income included a $30.2 million gain on an equity method investment transaction. The gain was recorded in selling and administrative expenses. Excluding this gain, fiscal 2023 third quarter operating income as a percentage of revenue was 20.4% compared to 19.3% in last year's third quarter, an increase of 110 basis points.
Our effective tax rate for the third quarter was 22.1% compared to 18.2% last year. The fiscal 2022 third quarter equity method investment transaction included a significant tax benefit. Excluding the transaction, the effective tax rate for the third quarter of fiscal 2022 was 19.6%. Net income for the third quarter was $325.8 million compared to $315.4 million last year. This year's third quarter diluted EPS of $3.14 compared to $2.97 last year. However, fiscal 2022 third quarter diluted EPS contained $0.28 from the gain on the equity method investment transaction, which included a related $0.07 tax rate benefit. Excluding this gain and the related benefit -- the related tax benefit, fiscal 2023 third quarter diluted EPS of $3.14 compared to $2.69 in last year's third quarter, an increase of 16.7%.
Cash flow remains strong. On December 15, 2022 we paid shareholders $117.4 million in quarterly dividends, an increase of 18.6% from the amount paid the previous December. Todd provided our annual financial guidance, related to the guidance please note the following; fiscal 2022 included a gain on sale of operating assets in the first quarter and again on an equity method investment in the third quarter. Excluding these items, fiscal 2022 operating income was $1.55 billion, a margin of 19.7% and diluted EPS was $11.28. Please see the table in our earnings press release for more information. Fiscal 2023 operating income is expected to be in the range of $1.77 billion to $1.80 billion compared to $1.55 billion in fiscal 2022 after excluding the gains.
Fiscal 2023 interest expense is expected to be $112 million compared to $88.8 million in fiscal 2022 due in part to higher interest rates. Our fiscal 2023 effective tax rate is expected to be 20.7%. This compares to a rate of 17.9% in fiscal 2022 after excluding the gains and their related tax impacts. Our financial guidance does not include the impact of any future share buybacks and we remain in a dynamic environment that can continue to change. Our guidance contemplates a stable economy and excludes significant economic disruptions or downturns. I'll turn it back over to Paul.
Paul F. Adler: And that concludes our prepared remarks. Now we are happy to answer questions from the analysts. Please ask just one question and a single follow-up if needed. Thank you.
