01—Abstract
Summary
Summary of the 10-K filed July 29, 2016. Cited figures are marked; the original filing is the authoritative source.
Cintas Corporation's 2016 10-K report highlights a year of robust growth, with total revenue increasing by 9.6% to $4.9 billiona.
This growth was driven by strong organic expansion of 6.7%, supplemented by strategic acquisitions, notably ZEE Medical Inc., which significantly boosted the First Aid and Safety Services segment. The company demonstrated operational efficiency, with its primary Uniform Rental and Facility Services segment improving its gross margin by 90 basis points due to new business acquisition and process enhancements. Financially, Cintas maintained a healthy performance with income from continuing operations rising 11.3% to $456.9 millionb, translating to diluted earnings per share of $4.09.
The company also returned significant capital to shareholders through dividends and a substantial share repurchase program, underscoring its commitment to shareholder value. Despite a challenging economic environment and competitive landscape, Cintas' diversified business model and strategic focus on customer penetration and expansion position it for continued success.
02—Key points
Key Highlights
- Total revenue grew by 9.6% to $4.9 billion in fiscal year 2016, driven by both organic growth (6.7%) and acquisitions.
- The Uniform Rental and Facility Services segment saw a 6.7% revenue increase, with gross margin improving by 90 basis points due to operational efficiencies and new business.
- The First Aid and Safety Services segment experienced substantial growth of 41.4%, largely attributed to the acquisition of ZEE Medical Inc.
- Net income from continuing operations increased by 11.3% to $456.9 million, resulting in diluted EPS of $4.09, up 18.2% from the prior year.
- Cintas returned $866.7 million to shareholders through share repurchases ($780.1 million) and dividends ($115.3 million) in fiscal year 2016.
- The company ended fiscal year 2016 with a strong liquidity position, including $139.4 million in cash and cash equivalents and $70.4 million in marketable securities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Cintas Corp kept $0.14.
- Revenue$4.80B100.0%
- Cost of revenue−$2.69B56.2%
- Gross profit$2.10B43.8%
- Operating costs−$1.33B27.8%
- Operating income$768.9M16.0%
- Interest, other & tax−$75.4M1.6%
- Net income$693.5M14.5%
Where FY2016 revenue went
$4.80B- Cost of revenue: $2.69B, 56% of revenue
- SG&A: $1.33B, 28% of revenue
- Net income: $693.5M, 14% of revenue
- Interest, other & tax: $75.4M, 1.6% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed July 29, 2016Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $4.80B$4.37B | +9.8% |
| Gross Profit | $2.10B$1.89B | +11.0% |
| SG&A Expenses | $1.33B$1.21B | +10.2% |
| Operating Income | $768.94M$683.64M | +12.5% |
| Interest Expense | $64.52M$65.16M | −1.0% |
| Net Income | $693.52M$430.62M | +61.1% |
| EPS (Basic) | $1.57$0.92 | +71.2% |
| EPS (Diluted) | $1.55$0.91 | +71.1% |
| Shares Outstanding (Basic) | 432.88M463.60M | −6.6% |
| Shares Outstanding (Diluted) | 439.82M470.17M | −6.5% |
05—Questions
Frequently Asked Questions
What were the main drivers of Cintas' revenue growth in fiscal year 2016?
Revenue growth in fiscal year 2016 was driven by a combination of factors. Organic growth, which excludes the impact of acquisitions, divestitures, and currency fluctuations, contributed 6.7%. This was supplemented by revenue from acquisitions (2.7%) and an additional workday in the fiscal year (0.9%). The acquisition of ZEE Medical Inc. was a significant contributor to the growth in the First Aid and Safety Services segment.
How did Cintas manage its costs and margins in fiscal year 2016?
Cintas focused on operational efficiency. The Uniform Rental and Facility Services segment improved its gross margin by 90 basis points, benefiting from new business, increased product penetration, process efficiencies, and lower energy costs. While the First Aid and Safety Services segment's gross margin decreased due to integration costs and lower efficiency of acquired routes, overall selling and administrative expenses as a percentage of revenue remained stable, demonstrating effective cost management.
What is Cintas' strategy for future growth?
Cintas' strategy involves increasing penetration at existing customers and broadening its customer base. This is achieved through a dedicated sales force that builds strong customer relationships, allowing for the introduction of additional products and services. The company also pursues geographic expansion, particularly in its First Aid and Safety and Fire Protection businesses, and evaluates strategic acquisitions to supplement internal growth.
How did Cintas manage its capital and shareholder returns in fiscal year 2016?
Cintas demonstrated a strong commitment to returning capital to shareholders. In fiscal year 2016, the company repurchased $780.1 million of its common stock under its share buyback programs and paid $115.3 million in dividends. The company also maintained a solid liquidity position with $139.4 million in cash and cash equivalents and $70.4 million in marketable securities at the end of the fiscal year.
06—Continue