Workplace uniform giant Cintas (NASDAQ: CTAS) completed its $2.2 billion acquisition of competitor G&K Services in March 2017, and integrating the two companies and realizing merger benefits has proved to be a multiyear project, as management had originally projected. But efforts to wring more value from the tie-up finally seem to be coming to fruition.
In Cintas' fiscal second-quarter 2020 earnings conference call on Dec. 17, executives discussed examples of recent progress in the integration effort. Let's briefly review three of management's comments to gauge how the process is affecting Cintas' results and long-term investment prospects for its shares.
[In] our uniform rental and facility services segment, gross margin was 46.6% for the second quarter, compared to 45.3% in last year's second quarter, an improvement of 130 basis points. Operating-income margin was a record 19.5% for the second quarter, and it was 19% year to date. Profit margins have strengthened for many reasons, including strong revenue growth and realization of cost synergies from the acquisition of G&K.