10-KPeriod: FY2017

CINTAS CORP Annual Report, Year Ended May 31, 2017

Filed July 31, 2017For Securities:CTAS

Summary

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 billion, 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% 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 million, 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.

Financial Highlights

55 data points
Beta

Revenue

$5.32B

44.7% Gross Margin

Net Income

$480.71M

9.0% Net Margin

EPS (Diluted)

$1.09

Total Assets

$6.84B

Cash & Equivalents

$169.27M

Free Cash Flow

$490.57M

Financial Statements
Beta
Revenue$5.32B
Gross Profit$2.38B
SG&A Expenses$1.53B
Operating Income$773.69M
Interest Expense$86.52M
Net Income$480.71M
EPS (Basic)$1.12
EPS (Diluted)$1.09
Shares Outstanding (Basic)419.86M
Shares Outstanding (Diluted)431.13M

Key Highlights

  • 1Cintas completed the significant acquisition of G&K Services, Inc. for approximately $2.1 billion, integrating it into the Uniform Rental and Facility Services segment.
  • 2Total revenue increased by 11.0% to $5.3 billion, driven by 6.7% organic growth and acquisition contributions.
  • 3Net income from continuing operations grew by 1.9% to $457.3 million.
  • 4Diluted earnings per share from continuing operations increased by 3.7% to $4.17.
  • 5The Uniform Rental and Facility Services segment revenue grew by 11.8%.
  • 6The First Aid and Safety Services segment revenue increased by 10.1%.
  • 7Cintas increased its annual dividend for the 34th consecutive year, demonstrating a commitment to shareholder returns.

Frequently Asked Questions

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.

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.

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.

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.