01—Abstract
Summary
Summary of the 10-K filed July 29, 2020. Cited figures are marked; the original filing is the authoritative source.
Cintas Corporation's 2020 Form 10-K reveals a company navigating the early impacts of the COVID-19 pandemic.
While revenue grew by 2.8% year-over-year to $7.1 billiona, driven by organic growth in the first three quarters, the fourth quarter saw a significant downturn (-8.4% organic growth) due to widespread business closures. Despite these challenges, Cintas' core Uniform Rental and Facility Services segment showed resilience with a 1.6% revenue increase, and the First Aid and Safety Services segment saw robust growth of 14.4%, partly fueled by increased demand for personal protective equipment. The company proactively managed costs, recording $24.5 million in employee termination costs and $9.2 million in long-lived asset impairment charges in the fourth quarter to align its workforce with business needs.
Cintas maintained a strong liquidity position with $1.3 billionb in net cash provided by operating activities, and access to a $1.0 billion revolving credit facility. However, the company prudently limited share buybacks and capital expenditures to preserve cash amidst the evolving pandemic landscape, indicating a cautious outlook for the near term.
02—Key points
Key Highlights
- Total revenue for fiscal year 2020 increased by 2.8% to $7.085 billion compared to $6.892 billion in fiscal year 2019.
- The COVID-19 pandemic significantly impacted the fourth quarter of fiscal 2020, leading to a -8.4% organic revenue decline in that period, contrasting with positive organic growth in the prior three quarters.
- The Uniform Rental and Facility Services segment, Cintas' largest, saw a 1.6% revenue increase, demonstrating relative stability.
- The First Aid and Safety Services segment experienced strong growth of 14.4% in revenue, partly driven by increased demand for personal protective equipment.
- Cintas incurred $24.5 million in employee termination costs and $9.2 million in long-lived asset impairment costs in Q4 FY2020 as part of cost-reduction measures.
- Net cash provided by operating activities was $1.291 billion for fiscal 2020, an increase of $223.6 million from the prior year.
- The company maintained a strong balance sheet with $145.4 million in cash and cash equivalents at year-end and a $1.0 billion revolving credit facility, while limiting share buybacks due to pandemic uncertainty.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Cintas Corp kept $0.12.
- Revenue$7.09B100.0%
- Cost of revenue−$3.85B54.4%
- Gross profit$3.23B45.6%
- Operating costs−$2.07B29.2%
- Operating income$1.16B16.4%
- Interest, other & tax−$286.7M4.0%
- Net income$876.0M12.4%
Where FY2020 revenue went
$7.09B- Cost of revenue: $3.85B, 54% of revenue
- SG&A: $2.07B, 29% of revenue
- Net income: $876.0M, 12% of revenue
- Interest, other & tax: $286.7M, 4.0% of revenue
Kept 12% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed July 29, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $7.09B$6.89B | +2.8% |
| Gross Profit | $3.23B$3.13B | +3.4% |
| SG&A Expenses | $2.07B$1.98B | +4.6% |
| Operating Income | $1.16B$1.13B | +2.6% |
| Interest Expense | $105.39M$101.74M | +3.6% |
| Net Income | $876.04M$884.98M | −1.0% |
| EPS (Basic) | $2.09$2.06 | +1.3% |
| EPS (Diluted) | $2.03$2.00 | +1.5% |
| Shares Outstanding (Basic) | 415.26M424.32M | −2.1% |
| Shares Outstanding (Diluted) | 428.05M437.98M | −2.3% |
05—Questions
Frequently Asked Questions
How did COVID-19 impact Cintas' financial performance in fiscal year 2020?
COVID-19 significantly impacted Cintas' fourth quarter of fiscal year 2020, leading to temporary business closures for some customers and a decline in demand for services. This resulted in a -8.4% organic revenue decline in Q4. In response, Cintas incurred employee termination costs and asset impairment charges, and prudently limited capital expenditures and share buybacks to preserve liquidity.
What were the key drivers of revenue growth in fiscal year 2020?
Overall revenue grew by 2.8% to $7.085 billion. The Uniform Rental and Facility Services segment grew 1.6%, while the First Aid and Safety Services segment saw strong growth of 14.4%, partly due to increased sales of personal protective equipment. Organic growth from new business and increased penetration at existing customers were also key drivers.
What is Cintas' liquidity position and how is it managing financial flexibility?
Cintas maintained a solid liquidity position, with $1.291 billion in net cash provided by operating activities and $145.4 million in cash and cash equivalents at year-end. The company also has access to a $1.0 billion revolving credit facility. To enhance financial flexibility during the pandemic, Cintas reduced capital expenditures and paused share buybacks, while dividends remain a strategic objective.
What is the outlook for Cintas given the ongoing uncertainty from COVID-19?
The company acknowledges the fluid and evolving nature of the COVID-19 pandemic's impact. While Cintas' business was designated as essential, allowing continued operations, the uncertainty surrounding the pace of economic recovery and its effect on future financial results remains. The company is focused on managing costs and maintaining liquidity to navigate this environment.
06—Continue