01—Abstract
Summary
Summary of the 10-K filed July 27, 2018. Cited figures are marked; the original filing is the authoritative source.
Cintas Corporation reported strong financial performance for the fiscal year ending May 31, 2018, demonstrating robust revenue growth and enhanced profitability.
The company's strategic acquisition of G&K Services in the prior year significantly contributed to a 21.7% increase in total revenue, reaching $6.5 billiona. This growth was driven by both organic expansion, reflecting a 7.1% increase in sales volume, and the integration of G&K's operations. Profitability saw a substantial improvement, with net income from continuing operations rising by 71.4% to $783.9 million.
This surge in earnings was notably influenced by the positive impact of the Tax Cuts and Jobs Act, which significantly reduced the company's effective tax rate to 6.8%b. The company also highlighted operational efficiencies and sales force productivity as key drivers of its financial success. Cintas continued to reward shareholders through dividend increases and share repurchases, underscoring its commitment to shareholder value.
02—Key points
Key Highlights
- Total revenue increased by 21.7% to $6.5 billion, largely driven by the acquisition of G&K Services and organic growth of 7.1%.
- Net income from continuing operations increased by 71.4% to $783.9 million, benefiting from a lower effective tax rate due to the Tax Cuts and Jobs Act.
- The Uniform Rental and Facility Services segment saw a 24.9% revenue increase, primarily due to the G&K acquisition and organic growth.
- First Aid and Safety Services segment revenue grew by 11.1%, with organic growth of 10.5%, showcasing strong performance in this sector.
- The company successfully managed its debt, reducing total debt by $634.7 million year-over-year, primarily due to repayment of debt incurred for the G&K acquisition.
- Cintas demonstrated a strong commitment to shareholder returns, increasing its annual dividend by 21.8% and continuing its share repurchase program.
- The company reported effective internal controls over financial reporting, with an unqualified opinion from its independent registered public accounting firm.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Cintas Corp kept $0.13.
- Revenue$6.48B100.0%
- Cost of revenue−$3.57B55.1%
- Gross profit$2.91B44.9%
- Operating costs−$1.96B30.2%
- Operating income$949.8M14.7%
- Interest, other & tax−$107.2M1.7%
- Net income$842.6M13.0%
Where FY2018 revenue went
$6.48B- Cost of revenue: $3.57B, 55% of revenue
- SG&A: $1.92B, 30% of revenue
- Net income: $842.6M, 13% of revenue
- Other operating costs: $41.9M, 0.6% of revenue
- Interest, other & tax: $107.2M, 1.7% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed July 27, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $6.48B$5.32B | +21.7% |
| Gross Profit | $2.91B$2.38B | +22.2% |
| SG&A Expenses | $1.92B$1.53B | +25.5% |
| Operating Income | $949.83M$773.69M | +22.8% |
| Interest Expense | $110.17M$86.52M | +27.3% |
| Net Income | $842.59M$480.71M | +75.3% |
| EPS (Basic) | $1.95$1.12 | +73.3% |
| EPS (Diluted) | $1.89$1.09 | +72.6% |
| Shares Outstanding (Basic) | 426.37M419.86M | +1.6% |
| Shares Outstanding (Diluted) | 439.24M431.13M | +1.9% |
05—Questions
Frequently Asked Questions
What was Cintas' primary growth driver in fiscal year 2018?
The primary growth driver for Cintas in fiscal year 2018 was the acquisition of G&K Services, which significantly contributed to a 21.7% increase in total revenue. Organic growth of 7.1% also played a crucial role, driven by increased sales volume and productivity improvements from the sales force.
How did the Tax Cuts and Jobs Act impact Cintas' financial results?
The Tax Cuts and Jobs Act had a significant positive impact on Cintas' fiscal year 2018 results, primarily by reducing the company's effective tax rate from 33.5% in fiscal 2017 to 6.8% in fiscal 2018. This reduction in tax expense contributed substantially to the reported increase in net income.
How did Cintas manage its debt after the G&K acquisition?
Following the G&K acquisition, Cintas took steps to manage its debt. In fiscal year 2018, the company repaid a net total of $50.5 million of commercial paper and paid off a $250.0 million term loan with cash on hand, reducing its overall debt burden.
What is Cintas' strategy for increasing revenue?
Cintas' business strategy focuses on two main areas: increasing penetration at existing customers by leveraging regular customer interactions to introduce new products and services, and broadening its customer base through national sales efforts, geographic expansion, and strategic acquisitions.
06—Continue