Cintas Corporation (Nasdaq: CTAS) is the largest corporate uniform and services company in the U.S. with over 800,000 customers. In addition to its bread-and-butter uniform sales and rentals, Cintas offers its customers other products and services such as shop towel rentals, first aid products, and document shredding. The company sells its products directly to customers through a network of regional offices and delivery routes. Cintas reaches out to costumers by offering specialized products such as the distinctive long jackets worn by the bellmen at the Drake Hotel in Chicago. The company's focus on providing customers with specialized choices, combined with its expansive distribution network, has allowed it to capture over 30% of the $7 billion market for uniform rentals in the U.S.
Cintas competes with G&K Services (GKSR), Unifirst (UNF), and Aramark (a private company), the three of which constitute another 40% of the market for uniform rentals. Despite Cintas's strong position, rising unemployment  and record-high oil prices pose a threat to its profitability. Fewer employees means fewer uniforms, and higher fuel costs can raise operating expenses substantially. Therefore, CTAS's profits are somewhat dependent upon the general economy of the entire country.
Rentals accounted for 74% of Cintas' revenues and roughly 81% of its pre-tax income. The Rentals segment consists of rentals of uniforms, shop towels, floor mats, restroom, and hygiene products to customers. In a uniform rental contract, costumers pay Cintas a rental fee and Cintas provides the costumer with clean uniforms every week. In between deliveries, Cintas launders the uniforms and makes any necessary repairs. The same basic contract structure is used for rentals of shop towels, floor mats, and all other rental products. Cintas is the largest corporate uniform and services company in the US followed by G&K Services (GKSR), Unifirst (UNF), and Aramark.
Other Services contributed 26% of Cintas'revenues and 19% of its pre-tax income. Other Services includes direct sales of uniforms as well as first-aid, safety and fire protection, document shredding, and branded promotional products and services. Cintas' first-aid activities involve van delivered first-aid supplies and other safety items. They are the nations second largest supplier of fire protection services such as fire extinguisher supply, maintenance, and inspection.
Unemployment has been rising in recent years, in part due to the 2007 Credit Crunch and 2008 Financial Crisis. Becasue uniform rentals are Cintas' main source of income (81% of pre-tax income), the increase in the unemployment rate has the potential to impact Cintas' total revenues. As the unemployment rate rises, employers will need less uniforms to clothe their employees and will rent and buy less uniforms. When costumers discontinue rentals or hold off on purchases, Cintas' revenues decrease. On the other hand, when unemployment is low, employers will have more employees to clothe and Cintas' uniform rentals and sales will increase.
In 2003, labor unions like the Teamsters and the AFL-CIO began attempts to unionize Cintas' 34,000 employees. Cintas is still negotiating lawsuits with unions regarding what Cintas claims is an extortion campaign designed by unions to force Cintas' workers to unionize. Enrollment in unions by Cintas employees has actually declined since unions began actively recruiting the company's workers. However, if Cintas is unable to prevent future unionization of workers, they will see their labor costs increase drastically as the average union worker makes 33% more than their non-union counterparts.