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By Vishnu Lekraj | 11-06-2009 02:10 AM

A Uniform Route to a Wide-Moat Business

Cintas CFO Bill Gale on how the company navigated the downturn, adjusted to a service-oriented client base, and consistently manages better margins than its rivals.

Securities mentioned in this video
CTAS Cintas Corp

Vishnu Lekraj: My name is Vishnu Lekraj. I'm an equity analyst here at Morningstar that covers the employment sector. One of the most unique and successful firms that I cover is Cintas Incorporated, and we're lucky enough to have them this week for our 2009 Stock Conference. With me today is chief financial officer Bill Gale. Thank you, sir.

William Gale: Thank you.

Lekraj: Now, the first question that I want to start off with is a macro question. Certain economists have termed this the "great recession," and Cintas has seen some declines in their revenues over the past year, but your profitability has been maintained and maintained pretty well. How have you done this, and what should investors expect going forward from a profitability standpoint?

Gale: Well, there certainly is no question this has been the worst downturn that our company has seen in its existence, and I think the U.S. economy has experienced since the Depression. But we actually saw this starting about 18 months ago, and we began to take some actions at that point in time.

One of the first things that we did is we decided to reduce our hiring, to look for opportunities to say, we didn't need to plan to have the growth that we had always planned to have. So we, in essence, right-sized our organization for whatever might happen. Now Cintas had an advantage in that we had always been a growing company. We knew what we looked like several years ago when were at these revenue levels, and so we began to adjust accordingly.

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