01—Abstract
Summary
Summary of the 10-K filed July 31, 2017. Cited figures are marked; the original filing is the authoritative source.
Cintas Corporation's 2017 Form 10-K details a year marked by significant strategic acquisition and continued operational growth.
The company successfully completed the acquisition of G&K Services, Inc. for approximately $2.1 billiona, a move that substantially expanded its Uniform Rental and Facility Services segment. This acquisition, financed through a combination of debt and cash, is expected to drive future revenue and synergy realization, though it also introduced integration costs and increased debt levels. Financially, Cintas demonstrated robust performance with an 11.0% increase in total revenue, reaching $5.3 billion.
This growth was driven by an organic increase of 6.7%b and the contribution from acquisitions. The Uniform Rental and Facility Services segment saw an 11.8% revenue increase, while the First Aid and Safety Services segment grew by 10.1%.
Despite higher transaction and integration expenses, along with increased interest costs due to the G&K acquisition, the company managed to achieve a modest 1.9% increase in net income from continuing operations, reaching $457.3 millionc, and a 3.7% rise in diluted earnings per share from continuing operations to $4.17. The company also continued its commitment to shareholder returns, increasing its annual dividend for the 34th consecutive year.
02—Key points
Key Highlights
- Cintas completed the significant acquisition of G&K Services, Inc. for approximately $2.1 billion, integrating it into the Uniform Rental and Facility Services segment.
- Total revenue increased by 11.0% to $5.3 billion, driven by 6.7% organic growth and acquisition contributions.
- Net income from continuing operations grew by 1.9% to $457.3 million.
- Diluted earnings per share from continuing operations increased by 3.7% to $4.17.
- The Uniform Rental and Facility Services segment revenue grew by 11.8%.
- The First Aid and Safety Services segment revenue increased by 10.1%.
- Cintas increased its annual dividend for the 34th consecutive year, demonstrating a commitment to shareholder returns.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Cintas Corp kept $0.09.
- Revenue$5.32B100.0%
- Cost of revenue−$2.94B55.3%
- Gross profit$2.38B44.7%
- Operating costs−$1.61B30.2%
- Operating income$773.7M14.5%
- Interest, other & tax−$293.0M5.5%
- Net income$480.7M9.0%
Where FY2017 revenue went
$5.32B- Cost of revenue: $2.94B, 55% of revenue
- SG&A: $1.53B, 29% of revenue
- Net income: $480.7M, 9.0% of revenue
- Other operating costs: $79.2M, 1.5% of revenue
- Interest, other & tax: $293.0M, 5.5% of revenue
Kept 9.0% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed July 31, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $5.32B$4.80B | +11.0% |
| Gross Profit | $2.38B$2.10B | +13.3% |
| SG&A Expenses | $1.53B$1.33B | +14.6% |
| Operating Income | $773.69M$768.94M | +0.6% |
| Interest Expense | $86.52M$64.52M | +34.1% |
| Net Income | $480.71M$693.52M | −30.7% |
| EPS (Basic) | $1.12$1.57 | −28.7% |
| EPS (Diluted) | $1.09$1.55 | −29.5% |
| Shares Outstanding (Basic) | 419.86M432.88M | −3.0% |
| Shares Outstanding (Diluted) | 431.13M439.82M | −2.0% |
05—Questions
Frequently Asked Questions
What was the impact of the G&K Services acquisition on Cintas' financial performance?
The G&K Services acquisition, completed in March 2017 for $2.1 billion, significantly boosted Cintas' total revenue by 4.8% and contributed to an 11.8% revenue increase in the Uniform Rental and Facility Services segment. However, it also led to $79.2 million in transaction and integration expenses and a substantial increase in long-term debt, which consequently raised net interest expense.
How did Cintas' revenue grow in fiscal year 2017?
Cintas reported an 11.0% increase in total revenue for fiscal year 2017, reaching $5.3 billion. This growth was comprised of 6.7% organic growth, primarily from increased sales volume and sales representative productivity, and 4.8% from acquisitions, most notably the G&K acquisition.
What is Cintas' approach to shareholder returns?
Cintas demonstrated a consistent commitment to shareholder returns. The company increased its annual dividend for the 34th consecutive year, paying $1.33 per share in fiscal 2017. Additionally, Cintas actively repurchased its common stock, completing its $500 million buyback program authorized in August 2015 and announcing a new $500 million program.
Were there any significant risk factors highlighted in the report?
Key risks highlighted include challenges related to the G&K acquisition's integration and synergy realization, potential increases in operating costs (energy, fuel, labor, materials), competitive pressures, reliance on key suppliers, and the potential impact of macroeconomic factors on demand for services. The company also noted risks associated with union organizing activities and compliance with various government regulations.
06—Continue