01—Abstract
Summary
Summary of the 10-K filed July 30, 2015. Cited figures are marked; the original filing is the authoritative source.
Cintas Corporation's 2015 10-K filing shows a company focused on its core uniform rental and ancillary services, which form the largest segment by revenue.
The company has undergone significant structural changes, notably the deconsolidation of its Document Management Services segment, which included the sale of its Shredding business via a partnership with Shred-it and the sale of its Storage business. These transactions, while impacting reported revenue comparisons, are part of a strategy to streamline operations and focus on core competencies. Financially, Cintas demonstrated steady revenue growth, albeit modest in the reported year, with organic growth being a key driver.
The company's profitability remains strong, supported by efficient operations within its main segments. Cintas also continued its commitment to shareholder returns through dividend increases and significant share repurchases, underscoring financial discipline and confidence in its business outlook. The company navigates various risks including competition, economic conditions, and operational costs, but its diversified customer base and strong market position provide resilience.
02—Key points
Key Highlights
- Total revenue for the fiscal year ended May 31, 2015, reached $4.48 billion, a slight increase of 0.2% over the prior year, driven by 7.1% organic revenue growth.
- The 'Rental Uniforms and Ancillary Products' segment remains the largest revenue contributor, accounting for approximately 77.2% of total revenue in fiscal year 2015.
- Cintas completed the deconsolidation of its Shredding business through a partnership with Shred-it in April 2014 and sold its Storage business, with results from these segments excluded from continuing operations for fiscal 2015.
- Net income from continuing operations increased by 9.0% to $408.1 million in fiscal year 2015, with diluted EPS from continuing operations rising by 12.8% to $3.44.
- The company returned significant value to shareholders through a dividend increase to $1.70 per share in fiscal 2015 (including a special dividend) and substantial share repurchases totaling $237.1 million under its new buyback program initiated in January 2015.
- Cintas maintained effective internal controls over financial reporting as audited by Ernst & Young LLP.
- The company's outlook is positive, supported by strong execution in its core businesses and a continued focus on customer penetration and broadening its customer base.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Cintas Corp kept $0.10.
- Revenue$4.37B100.0%
- Cost of revenue−$2.48B56.7%
- Gross profit$1.89B43.3%
- Operating costs−$1.21B27.7%
- Operating income$683.6M15.6%
- Interest, other & tax−$253.0M5.8%
- Net income$430.6M9.9%
Where FY2015 revenue went
$4.37B- Cost of revenue: $2.48B, 57% of revenue
- SG&A: $1.21B, 28% of revenue
- Net income: $430.6M, 9.9% of revenue
- Interest, other & tax: $253.0M, 5.8% of revenue
Kept 9.9% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed July 30, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $4.37B$4.19B | +4.2% |
| Gross Profit | $1.89B$1.75B | +8.2% |
| SG&A Expenses | $1.21B$1.15B | +5.4% |
| Operating Income | $683.64M$602.72M | +13.4% |
| Interest Expense | $65.16M$65.82M | −1.0% |
| Net Income | $430.62M$374.44M | +15.0% |
| EPS (Basic) | $0.92$0.77 | +19.5% |
| EPS (Diluted) | $0.91$0.76 | +19.0% |
| Shares Outstanding (Basic) | 463.60M481.51M | −3.7% |
| Shares Outstanding (Diluted) | 470.17M486.56M | −3.4% |
05—Questions
Frequently Asked Questions
What were the major strategic changes in fiscal year 2015?
The most significant strategic change was the restructuring of the Document Management Services segment. Cintas completed a partnership transaction for its Shredding business with Shred-it International Inc. and sold its Storage business. These actions resulted in deconsolidation and exclusion of these businesses from continuing operations for fiscal year 2015, allowing the company to focus on its core segments: Rental Uniforms and Ancillary Products, Uniform Direct Sales, and First Aid, Safety and Fire Protection Services.
How did the deconsolidation of Shredding and sale of Storage impact the financial results?
The deconsolidation of Shredding and sale of Storage significantly impacted year-over-year revenue comparisons. While total revenue saw a modest increase, the organic growth rate of 7.1% highlights the underlying strength of the continuing operations. The company also recognized a gain on the deconsolidation of Shredding and a gain on the sale of Storage, which contributed to net income, but the core operational performance in the primary segments drove the sustained growth in earnings per share.
What is Cintas' approach to returning capital to shareholders?
Cintas demonstrates a strong commitment to shareholder returns. In fiscal year 2015, the company increased its dividend to $1.70 per share, which included a special dividend reflecting proceeds from the Shredding Transaction. Furthermore, Cintas actively engaged in share repurchases, initiating a new $500 million buyback program in January 2015 and repurchasing approximately $237.1 million worth of shares by the end of the fiscal year. This strategy reflects confidence in the company's financial health and value proposition.
What are the primary risks Cintas faces according to the 10-K?
Key risks identified include negative global economic factors impacting demand, increased competition leading to potential price reductions, difficulties in opening new cost-effective facilities, risks associated with acquisitions and integration, rising fuel and energy costs, potential unionization campaigns, supplier risks, foreign currency exchange fluctuations, regulatory compliance failures, and ongoing litigation. Additionally, the company highlighted the risk associated with the pending sale of its investment in the Shred-It Partnership.
06—Continue