Cintas Corporation Business Information, Profile, and History
Cincinnati, Ohio 45262
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History of Cintas Corporation
Cintas Corporation is the leading supplier of rental uniforms in the United States, with a market share of around 25 percent. It serves some 500,000 customers in North America. Cintas primarily rents its uniforms, and then provides laundry service, pick up and delivery, and related services. The company also provides entrance mats, sanitation supplies, and cleanroom supplies. Through its Xpect First Aid division, the company also delivers first aid kits and safety devices and trains workers in first aid and in Occupational Health and Safety Administration (OSHA) compliance. Cintas also sells its uniforms, as well as accessories such as hats and belts. The company runs 13 garment manufacturing plants and hundreds of laundry facilities and owns a fleet of approximately 3,000 delivery trucks. The company is highly automated, with state-of-the-art manufacturing and distribution facilities allowing for rapid order turnaround. Cintas grew quickly through acquisitions in the 1990s and absorbed a large competitor, Omni Services, Inc., in 2002. The company is publicly traded, with over 20 percent of the shares in the hands of chairman Richard Farmer.
The Cintas saga is a literal rags-to-riches story. Patriarch Richard Farmer started out as a rag man who, with his son Herschell, built up a thriving industrial linen business in the 1930s and 1940s. But it was third-generation leader Richard T. Farmer who would guide the company into uniform rental in the late 1950s and lead a trend-setting consolidation of that industry in the 1980s and 1990s. Called a "visionary" by his second-in-command, Farmer pioneered new fabrics, instituted modern management and control systems, and expanded his target market from industrial to service businesses, among other innovations. In the process, he became one of Cincinnati's wealthiest and most influential businessmen.
The foundations of the family enterprise date to the 1930s, when Richard "Doc" Farmer started a rag business. Born in 1884, Farmer joined the John Robinson traveling circus as an animal trainer at the age of 14. There he met and married a trapeze artist named Amelia Boven. According to a 1962 article in the Post & Times-Star (Cincinnati), a tragic accident ended both performers' careers in 1908. A more recent account of these early days notes that this phase in the family history ended when the circus closed due to the Great Depression.
Forced from his profession, Farmer dabbled in amateur boxing, blacksmithing, and railroading before turning to junk collecting in 1929. He soon concentrated his efforts on salvaging household rags, which he would launder and sell to factories as clean-up cloths. It was not long before this business evolved into a rag rental service, with Farmer completing the recycling loop by picking up dirty rags at the plants, washing them, and returning them to the customer. Farmer moved his business and family from northern Kentucky across the Ohio River to Cincinnati in 1936. By this time, the Acme Overall & Rag Laundry had grown enough to warrant conversion of a local bath house into a laundry. Joined by his adopted son Herschell, Farmer and his family painstakingly refurbished the building at night and on weekends. Unfortunately, tragedy struck the Farmers a second time when the business suffered heavy damage from a major flood in 1937. The family quickly rebuilt, resuming business by the end of the following year. Herschell assumed leadership of the company upon his father's death in 1952 and carried on much as his father had.
Expansion into Uniform Rentals
Rapid growth at the family company began in the late 1950s, following the arrival of Richard T. Farmer, son of Herschell. Born in 1934, young Richard graduated from Miami University of Ohio in 1956 and joined the U.S. Marines. His stint as an officer was cut short, however, and Richard was discharged for medical reasons in 1957. He returned home that year and joined the family business. The young graduate was brimming with new ideas, chief among them an urge to expand into uniform rental. Scarred by the financial struggles of the Great Depression, Herschell strongly resisted his son's notion that the company should borrow to finance growth. However, Richard's youthful enthusiasm soon won him over; in 1957, Herschell relinquished day-to-day management of the business to his 23-year-old son.
The company immediately began to experiment with uniform rental. Within two years, this line of business had grown to such an extent that the firm changed its name to the more inclusive Acme Uniform & Shop Towel Supply Co. According to a 1962 profile of the father-son team in the Post & Times-Star, revenues multiplied six-fold in just five years. During this period Acme rented uniforms to individual, mostly blue-collar, businesses ranging from large industrial plants to corner auto repair shops. In the 1960s, Richard hit on the first of several innovations that would help make his company an industry leader. Up to this time, most industrial uniforms were fashioned from all-cotton fabric, which required a great deal of ironing and could only be expected to last a year. The development of easy-care poly-cotton blends in the mid-1960s presented a unique opportunity for the company. Made of 65 percent cotton and 35 percent polyester, the fabric resisted wrinkling but held a crease. Uniforms made from the new blend could last at least twice as long as cotton ones. Richard Farmer drew up exclusive contracts with the developers of this new material and made major investments in the conversion of his plant from soap-and-water laundering to the dry-cleaning that was then the ideal care for the new blend. By 1966, Acme was laundering about 80 tons of uniforms a week and making annual revenues of $1.8 million.
Richard soon proved himself a forward-looking businessman. With a view to taking the family company public in the future, he formed what was essentially a holding company, Satellite Corp., in the late 1960s. Funded with $400,000 in equity raised by Farmer and his 23-year-old controller, Robert Kohlhepp, Satellite established new uniform plants throughout the Midwest's major cities, starting with Cleveland, in 1968. Satellite and Acme merged two years later, and the unified company's name was changed to Cintas in 1972. Farmer had originally hoped to raise additional growth funds by taking the company public in 1973 but found equity markets inhospitable to initial public offerings at that time.
Cintas tapped the "corporate identity" segment of the uniform market in the late 1960s and early 1970s. Richard Farmer broke into this market by convincing companies of the benefits uniformed employees bring to the workplace. As Susan Avery of the trade magazine Purchasing noted in 1994, "Employees in uniform are perceived to be trained, competent, and dependable. ... [They] also help convey images of cleanliness, safety, and security." Acme designed uniforms especially for each segment, incorporating corporate logos and signature colors in highly functional clothing tailored for each particular work environment. Working with national companies compelled Cintas to grow geographically in order to service its new customers; by 1972, it had established offices throughout Ohio and in Chicago, Detroit, and Washington, D.C. Sales surpassed the $10 million mark in 1973. Within two years, Cintas boasted operations in 13 states.
IPO Presages Acquisition Spree in 1980s
Richard Farmer finally took his company public in 1983, selling a minority stake on the over-the-counter market at $17 per share. The equity sale signaled the beginning of a string of acquisitions that would catapult Cintas to the highest ranks of the uniform rental industry. Though some regional mergers and acquisitions had occurred before this time, the 1980s witnessed an unprecedented consolidation of this service industry, which shrunk from about 1,600 mom-and-pop companies in 1981 to less than 800 by the early 1990s. Cintas was one of a handful of trend-setting companies, among them Unitog Co.; UniFirst Corp.; G & K Services, Inc.; and the leader, Aramark Uniform Services Inc. (formerly Aratex, Inc.), a subsidiary of Aramark Corporation.
Over the course of the 1980s, Cintas expanded into 17 new geographic markets via savvy--and often small--acquisitions. Revenues doubled from $63 million in 1983 to $123.7 million in 1987, then doubled again by 1989, to $285 million. By the early 1990s, the company had a presence in three-fourths of the nation's 100 largest markets, and its market share had more than doubled from about 3.5 percent in 1983 to ten percent. Significantly, only about one-third of Cintas' growth during this period was generated by acquisitions, with the remainder coming from organic growth.
In the latter years of the decade, Cintas spearheaded the uniform industry's expansion from a blue-collar base into more tailored uniforms for hotel and motel employees, restaurant workers, and even bank employees. Within its core airline constituency, for example, the company moved from coveralls for baggage handlers and mechanics to uniforms for pilots, flight attendants, and other customer service workers. By the mid-1990s, major national clients included Wal-Mart, Delta, Coca-Cola, Pepsi, Northwest Airlines, Chevron, Jiffy Lube, Sunoco, Aamco, Safety Kleen, and Chemlawn.
Growth Continues in Early 1990s
From 1992 to 1997, Cintas added 70 new cities to its roster of service areas. As it grew, the company also focused on improving its productivity, committing millions to research and development each year. For example, it brought in automated manufacturing systems featuring computerized design, cutting, and embroidery machines, while electronic data interchange systems used bar-coding to manage inventory, processing, and distribution. Mechanization of laundering facilities cut staffing in those operations in half.
Cintas went international with the 1995 acquisition of Toronto's Cadet Uniform Services Ltd. While geographic diversification such as this continued to be key to growth, the company also experimented with new product lines during this period. In 1997, Cintas acquired two businesses that supplied OSHA-required first-aid kits to companies. With only $18 million in sales that year, this new business segment was little more than an interesting sideline at first. The company quickly assembled four major brands through acquisition, and over the next three years picked up over 100 small first aid companies.
In the mid-1990s, Richard Farmer initiated a management transition that would culminate in his exit from Cintas. In 1995, he turned over the chief executive office and presidency to his longtime right-hand man, Robert Kohlhepp. In 1997, Richard's son Scott Farmer was promoted to president, setting up the fourth generation of Farmers to lead the company. Meanwhile, the elder Farmer concentrated on broad strategic initiatives with a view to capturing an ever-larger share of the latent market for uniforms.
Leading the Market in the Late 1990s
Growth continued through acquisitions during the late 1990s and into the 2000s, while the uniform rental industry as a whole also continued to expand. Census Bureau statistics showed the uniform rental industry growing at a rate of over eight percent a year over the late 1990s, and Cintas management believed that there were many more business sectors left that would benefit from uniforms. The company had an impressive record of rising sales and profits, with growth in the double digits through the late 1990s. This served to boost Cintas's stock price, and the company was able to make many acquisitions by swapping its valuable shares. Between 1997 and 1999, the company acquired 65 companies. Most were small companies in the uniform rental business, with some providing first aid supplies and services, a growing segment for Cintas. Some were larger companies, such as Uniforms to You, which Cintas bought in 1998. Uniforms to You was a private company based in Chicago, with sales of around $150 million. Sales for Cintas in 1998 were over $1 billion. Then, in 1999, Cintas made its largest acquisition yet, taking up one of its prime rivals, Kansas City-based Unitog Co. The transaction, which was paid for in Cintas stock, was valued at roughly $357 million. Unitog ran a uniform rental operation in 24 states and in Canada, and it had close to 60 plants. With this new purchase under its belt, Cintas increased its market share to about 25 percent. It became the largest company in the uniform rental industry, surpassing Aramark for the first time. Integration of the new company, however, was not altogether smooth. Within six months, three-quarters of Unitog's sales force had resigned.
By 1999, Cintas's operations had grown to over 200 uniform rental facilities across the United States. It had expanded its manufacturing facilities from four to 13; it had six distribution centers; its cleanroom business had grown to six facilities; and its first aid business now had 32 business centers. About 4 million people put on a Cintas uniform every day, yet the company still saw room in the market for more penetration. The uniform rental market in total was worth about $10 billion annually in the late 1990s, but Cintas management thought that figure could still grow to around $31 billion. The company's research showed that some 37 million people worked in occupations where uniforms could or should be used. The company seemed successful in expanding into the ancillary area of first aid, too, assembling an array of small companies and unifying them into one brand, which it debuted in 2000 as Xpect First Aid. The first aid division and other services outside of uniform rental still accounted for less than a quarter of the firm's revenue, however.
As the industry leader, Cintas was nevertheless still intent on growing and consolidating. In 2002, the company spent $22 million to acquire certain portions of the uniform manufacturing and marketing division of the Missouri-based laundry company Angelica Corp. One month after the Angelica sale was completed, Cintas announced it had bought out Omni Services, Inc., in what was its largest acquisition, surpassing the Unitog deal of two years earlier. Omni Services, of Culpepper, Virginia, was owned by the French company Filuxel, S.A., and it had apparently suggested the merger. Omni had annual sales of around $300 million, with 90,000 customers in over 30 states. The merger was expected to bump Cintas's sales to around $2.5 billion, and it would clearly continue to lead the industry over the next several years.
Principal Subsidiaries: Respond Industries, Inc.; Xpect First Aid Corp.
Principal Competitors: Aramark Corp.; G&K Services, Inc.; UniFirst Corp.
- Key Dates:
- 1929: Richard Farmer begins a rag salvage business.
- 1952: Farmer dies, and the business passes to his son Herschell.
- 1957: Herschell's son Richard takes over the business and begins to expand into uniform rental.
- 1972: The company's name is changed to Cintas.
- 1983: Cintas goes public.
- 1997: The company moves into the first aid market.
- 1999: Cintas acquires Unitog.
- 2002: Omni Services, Inc. is acquired.
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