What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-07-27 compared with 2021-07-28 · 116 added, 109 removed, 283 unchanged (44% of the section changed)

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With products and services including uniforms, mats, mops, restroom supplies, first aid and safety products, fire extinguishers and testing, and safety training, Cintas helps customers get Ready for the Workday ® .

Cintas is also the creator of the Total Clean Program ™ — a first-of-its-kind service that includes scheduled delivery of essential cleaning supplies, hygienically clean laundering, and sanitizing and disinfecting projects and services.

We are North America's leading provider of corporate identity uniforms through rental and sales programs, as well as a significant provider of related business services, including entrance mats, restroom cleaning services and supplies, first aid and safety services and fire protection products and services.

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Cintas evaluates operating segment performance based on revenue and income before income taxes.

Revenue and income before income taxes for each of these reportable operating segments for the years ended May 31, 2021, 2020 and 2019 are presented in Note 14 entitled Operating Segment Information of " Notes to Consolidated Financial Statements ." The Company regularly reviews its operating segments for reporting purposes based on the information its chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance and makes changes when appropriate.

In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China, and has since spread globally.

In March 2020, the World Health Organization characterized COVID-19 as a pandemic.

Efforts to contain the spread of COVID-19 intensified during our fiscal 2020 fourth quarter and have remained in effect throughout our fiscal 2021.

Most states and municipalities within the U.S., as well as Canada, enacted temporary closures of businesses, issued quarantine orders and took other restrictive measures in response to the COVID-19 pandemic.

Many of the business closures, quarantine orders and other restrictive measures remained in place through fiscal 2021.

Within the U.S., our business was designated an essential business, which allowed us to continue to serve customers that remained open.

During our fiscal 2021 fourth quarter, the roll out of vaccines, lower COVID-19 case counts and lifting of restrictions on businesses had a positive impact on our business.

Revenue and income before income taxes for the reportable operating segments for the years ended May 31, 2022, 2021 and 2020 are presented in Note 15 entitled Operating Segment Information of " Notes to Consolidated Financial Statements ." The Company regularly reviews its operating segments for reporting purposes based on the information its chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance and makes changes when appropriate.

We have operations throughout the U.S.

and Canada and participate in a global supply chain.

During most of fiscal 2021, the existence of the COVID-19 pandemic, the fear associated with the COVID-19 pandemic and the reactions of governments around the world in response to the COVID-19 pandemic to regulate the flow of labor and products and impede the business of our customers, impacted our ability to conduct normal business operations, which had an adverse effect on our business.

Since fiscal 2020, the existence of the COVID-19 pandemic, the fear associated with the COVID-19 pandemic and the reactions of governments around the world in response to the COVID-19 pandemic to regulate the flow of labor and products and impede the business of our customers, impacted our ability to conduct normal business operations, which had an adverse effect on our business.

Many of Cintas' customers were also impacted by the COVID-19 pandemic, and we saw an impact on some customer's ability to pay timely.

While there was minimal disruption to our supply chain, Cintas did increase inventory, primarily personal protective equipment and facility services inventory, in response to the customer needs and demand associated with the safety and cleanliness requirements of COVID-19.

The increase in inventory resulted in additional inventory reserves during fiscal 2021 and could result in future inventory reserve increases if demand for personal protective equipment declines.

See Note 1 entitled Significant Accounting Policies of " Notes to Consolidated Financial Statements " for additional detail on the additional reserve placed on inventory.

The impact of the COVID-19 pandemic is fluid and continues to evolve, and therefore, we cannot predict the extent to which our business, consolidated results of operations, consolidated financial condition or liquidity will ultimately be impacted.

The increase in inventory resulted in additional inventory reserves during fiscal 2022 and fiscal 2021.

See Note 1 entitled Significant Accounting Policies of " Notes to Consolidated Financial Statements " for additional detail on the incremental reserves placed on inventory.

The on-going roll out of the COVID-19 vaccines and gradual lifting of COVID-19 restrictions had a positive impact on our business during fiscal 2022.

The impact of the on-going COVID-19 pandemic is fluid and continues to evolve, and therefore, we cannot predict the extent to which our business, consolidated results of operations, consolidated financial condition or liquidity will ultimately be impacted.

The following table sets forth certain consolidated statements of income data as a percent of revenue by reportable operating segment, All Other and in total for the fiscal years ended May 31:

2021 2020 2019

Uniform Rental and Facility Services 79.3% 80.0%

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Total selling and administrative expenses 26.0% 27.1%

G&K Services, Inc.

integration expenses —% —% 0.2%

Gain on sale of a cost method investment —% —% 1.0%

Interest expense, net 1.1% 1.4%

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Revenue increased organically by 10.2% as a result of increased sales volume.

Organic growth adjusts for the impact of acquisitions and divestitures, foreign currency exchange rate fluctuations and workday differences.

Total revenue was negatively impacted by a net 0.3% due to acquisitions and divestitures, positively impacted by 0.2% due to foreign currency exchange rate fluctuations and positively impacted by 0.3% due to one more workday in fiscal 2021 compared to fiscal 2020.

Organic growth adjusts for the impact of acquisitions, divestitures and foreign currency exchange rate fluctuations.

Total revenue was positively impacted by 0.1% due primarily to acquisitions and by 0.1% due to foreign currency exchange rate fluctuations.

As previously discussed, government enactments of temporary and indefinite closures of certain businesses in response to the COVID-19 pandemic continued to impact our ability to access and service some of our customers impacted by these mandates during fiscal 2021.

The roll out of the COVID-19 vaccines and general lifting of COVID-19 restrictions had a positive impact on our business during fiscal 2022.

Due to the constantly changing impact of the COVID-19 pandemic, uncertainty remains about the pace of the economic recovery and about its impact on future Cintas consolidated financial results.

Organic revenue by quarter for fiscal 2021 is as follows:

Organic Revenue

Organic revenue growth by quarter for fiscal 2022 is as follows:

Organic Growth

First quarter ended August 31, 2021

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Revenue from the Uniform Rental and Facility Services reportable operating segment increased 9.4% compared to fiscal 2021 due to an organic growth increase of 9.0%.

Revenue growth was negatively impacted by a net 0.5% due to acquisitions and divestitures, positively impacted by 0.2% due to foreign currency exchange rate fluctuations and positively impacted by 0.4% due to one more workday in fiscal 2021 compared to fiscal 2020.

Revenue growth was a result of new business, the penetration of additional products and services into existing customers, partially offset by lost business.

New business growth resulted from an increase in the productivity of sales representatives.

Revenue growth was positively impacted by 0.2% due primarily to acquisitions and by 0.2% due to foreign currency exchange rate fluctuations.

Organic revenue growth was a result of new business, the penetration of additional products and services into existing customers, the positive impact from the lifting of COVID-19 restrictions and price increases, partially offset by lost business.

New business growth resulted from an increase in the number and productivity of sales representatives.

Generally, sales productivity improvements are due to increased tenure and improved training, which produce a higher number of products and services sold.

Other revenue, consisting of revenue from the First Aid and Safety Services reportable operating segment and All Other, decreased 1.0% compared to fiscal 2020.

Revenue improvement from increases in sales representative productivity and sales of personal protection equipment was more than offset by a decrease in sales related to customers in All Other as a result of the impact from the COVID-19 pandemic.

Revenue declined organically by 1.9%.

Revenue growth was positively impacted by 0.5% due to revenue growth derived through acquisitions in our First Aid and Safety Services reportable operating segment and our Fire Protection operating segment, which is included in All Other, and by 0.4% due to one more workday in fiscal 2021 compared to fiscal 2020.

Cost of uniform rental and facility services decreased 2.3% compared to fiscal 2020.

Other revenue, consisting of revenue from the First Aid and Safety Services reportable operating segment and All Other, increased 14.1% compared to fiscal 2021.

Revenue improved from increases in sales representative productivity and from the lifting of COVID-19 restrictions.

Revenue increased organically by 14.9%.

Revenue growth was negatively impacted by 0.8% due to divestitures.

Cost of uniform rental and facility services increased 11.2% compared to fiscal 2021.

Cost of uniform rental and facility services consists primarily of production expenses, delivery expenses and the amortization of in service inventory, including uniforms, mats, shop towels and other ancillary items.

The cost of uniform rental and facility services decreased compared to fiscal 2020 primarily due to certain cost control measures such as reduced labor and supplies that were partially offset by increases in material cost, primarily related to personal protective equipment.

The cost of uniform rental and facility services as a percent of revenue increased compared to fiscal 2021 primarily due to increased energy costs and investments in labor to support the increased revenue growth.

Cost of other consists primarily of cost of goods sold (predominantly first aid and safety products, personal protective equipment, uniforms and fire protection products), delivery expenses and distribution expenses in the First Aid and Safety Services reportable operating segment and All Other.

Cost of other increased 2.8% in fiscal 2021 compared to fiscal 2020.

The increase was primarily due to an increase in the proportion of sales in the First Aid and Safety Services reportable operating segment of personal protective equipment, which typically have lower gross margins compared to other First Aid and Safety Services reportable operating segment products.

Selling and administrative expenses decreased $141.9 million, to 27.1% as a percent of revenue, compared to 29.2% in fiscal 2020.

The improvement as a percent of revenue was primarily due to efficiencies in labor and employee-partner related expenses as well as lower discretionary spending and a one-time benefit from the gain on the sale of certain operating assets.

In addition, during the fourth quarter of fiscal 2020, Cintas initiated certain one-time activities to reduce operating costs and better align its workforce with the needs of its ongoing business and recorded $24.5 million in employee termination costs and $9.2 million in long-lived asset impairment costs.

Cost of other increased 10.7% in fiscal 2022 compared to fiscal 2021, but decreased as a percent of revenue to 55.7%, compared to 57.3% in fiscal 2021.

The improvement in cost of sales as a percent to revenue was primarily due to favorable changes in the sales mix for each of the underlying operating segments, including a decrease in the proportion of sales related to personal protective equipment, which typically have lower gross margins compared to the first aid cabinet sales in the First Aid and Safety Services reportable operating segment.

Selling and administrative expenses increased $115.7 million, to 26.0% as a percent of revenue, compared to 27.1% in fiscal 2021.

The improvement as a percent of revenue was primarily due to lower labor expense as a percent of revenue as well as a $12.1 million gain on the sale of certain operating assets and a $30.2 million gain on an equity method investment transaction recorded in fiscal 2022.

The impacts from the gains recorded in fiscal 2022 were partially offset by the $22.0 million gain on the sale of certain operating assets recorded in fiscal 2021.

Net interest expense (interest expense less interest income) was $88.6 million in fiscal 2022 compared to $97.7 million in fiscal 2021.

The decrease in net interest expense was primarily due to the decrease in total debt outstanding during fiscal 2021 compared to fiscal 2020.

The change was primarily due to the replacement of the $250.0 million of senior notes with an interest rate of 4.30% that matured on June 1, 2021, with lower interest rate bearing commercial paper.

Income before income taxes was $1,498.8 million, an increase of $211.0 million, or 16.4%, compared to fiscal 2021.

The increase in income before income taxes was primarily due to both cost of sales and selling and administrative expenses decreasing in total and as a percent of revenue in fiscal 2021.

Income before income taxes also benefited from a one-time net gain on the sale of certain operating assets.

The increase in income before income taxes was primarily due to revenue growth and the decrease in selling and administrative expenses as a percent of revenue in fiscal 2022.

Income before income taxes also benefited from the previously mentioned one-time gains recorded in fiscal 2022.

Cintas' effective tax rate on continuing operations was 17.5% for fiscal 2022 compared to 13.7% in fiscal 2021.

The effective tax rate in both periods was impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation.

In addition, the effective tax rate for fiscal 2021 included a one-time tax benefit on the sale of certain operating assets.

In addition, the effective tax rate for fiscal 2022 and 2021 included tax benefits from a gain on an equity method investment transaction in fiscal 2022 and the sale of certain operating assets in both fiscal 2022 and fiscal 2021.

Net income from continuing operations for fiscal 2022 of $1,235.8 million was a 11.2% increase compared to fiscal 2021.

Diluted earnings per share from continuing operations of $11.65 was a 13.8% increase compared to fiscal 2021 diluted earnings per share from continuing operations of $10.24.

Diluted earnings per share from continuing operations increased primarily due to the increase in net income.

Diluted earnings per share from continuing operations increased primarily due to the increase in net income combined with the decrease in diluted weighted average common shares outstanding.

The decrease in diluted weighted average common shares outstanding resulted from purchasing an aggregate of approximately 3.7 million shares of common stock under the Board approved share buyback programs during fiscal 2022.

Uniform Rental and Facility Services Reportable Operating Segment

Uniform Rental and Facility Services reportable operating segment revenue increased $46.1 million, or 0.8%, and the cost of uniform rental and facility services decreased $71.6 million, or 2.3%, due to the reasons previously discussed.

Uniform Rental and Facility Services reportable operating segment revenue increased $537.3 million, or 9.4%, and the cost of uniform rental and facility services increased $332.9 million, or 11.2%, due to the reasons previously discussed.

The reportable operating segment's fiscal 2022 gross margin was 46.7% of revenue compared to 47.6% in fiscal 2021.

The increase in gross margin was primarily due to certain cost control measures such as reduced labor and supplies that were partially offset by increases in material cost, including increases related to increased sales of personal protective equipment.

Selling and administrative expenses for the Uniform Rental and Facility Services reportable operating segment decreased $103.5 million in fiscal 2021 compared to fiscal 2020.

The decrease in gross margin was primarily due to a 50 basis point increase in energy costs and investments in labor to support the increased revenue growth.

Selling and administrative expenses for the Uniform Rental and Facility Services reportable operating segment increased $76.8 million in fiscal 2022 compared to fiscal 2021.

Selling and administrative expense as a percent of revenue for fiscal 2022 was 25.0% compared to 26.0% in fiscal 2021.

The improvement in selling and administrative expenses as a percent of revenue was primarily due to efficiencies in labor and employee-partner related expenses as well as lower discretionary spending and a one-time benefit from the gain on the sale of certain operating assets, which was partially offset by a one-time asset impairment on certain long-lived assets.

Also, in the fourth quarter of fiscal 2020, the Uniform Rental and Facility Services reportable operating segment initiated certain one-time activities to reduce operating costs and better align its workforce with the needs of its ongoing business .

During the fourth quarter of fiscal 2020, the reportable operating segment recorded $20.2 million in employee termination costs and $9.2 million in long-lived asset impairment costs.

The improvement in selling and administrative expenses as a percent of revenue was primarily due to efficiencies in labor and the previously mentioned one-time gain of $30.2 million on an equity method investment transaction.

Income before income taxes increased $127.7 million to $1,353.5 million for fiscal 2022 compared to fiscal 2021.

Income before income taxes as a percent of revenue at 21.7% increased 20 basis points from 21.5% in fiscal 2021.

The increase was primarily due to the previously discussed improvement in gross margin and selling and administrative expenses as a percent of revenue.

The increase was primarily due to the previously discussed improvement in selling and administrative expenses, partially offset by decreases in gross margin as a percent of revenue.

First Aid and Safety Services Reportable Operating Segment

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Revenue increased organically by 5.1% as a result of new business and sales productivity increases, penetration of additional products and services into existing customers and sales of personal protective equipment in response to the COVID-19 pandemic.

Revenue growth was positively impacted by 0.2% due to acquisitions, by 0.1% due to foreign currency exchange rate fluctuations and by 0.4% due to one more workday in fiscal 2021 compared to fiscal 2020.

Cost of sales for the First Aid and Safety Services reportable operating segment increased $82.0 million, or 22.2%, in fiscal 2021, primarily due to higher sales volume and change in sales mix.

Gross margin for the First Aid and Safety Services reportable operating segment is defined as revenue less cost of goods, warehouse expenses, service expenses and training expenses.

The gross margin as a percent of revenue was 42.4% for fiscal 2021 compared to 47.8% in fiscal 2020.

The decrease was primarily a result of the increase in the proportion of sales related to personal protective equipment, as a result of the impact of the COVID-19 pandemic.

Personal protective equipment typically has lower gross margins than other First Aid and Safety Services reportable operating segment products.

Selling and administrative expenses for the First Aid and Safety Services reportable operating segment increased by $19.4 million, or 8.4%, in fiscal 2021 compared to fiscal 2020, but improved as a percent of revenue to 32.0% in fiscal 2021 compared to 32.7% in fiscal 2020.

The improvement as a percent of revenue was primarily due to revenue growing at a faster pace than labor and employee-partner related expenses and lower discretionary spending.

Income before income taxes for the First Aid and Safety Services reportable operating segment was $81.2 million in fiscal 2021, a decrease of $25.7 million, or 24.1%, compared to fiscal 2020.

Income before income taxes as a percent of revenue at 10.4%, decreased from 15.1% in fiscal 2020 due to the previously discussed decrease in gross margin.

Revenue growth was positively impacted by 0.9% due to acquisitions and by 0.1% due to foreign currency exchange rate fluctuations.

Cost of sales for the First Aid and Safety Services reportable operating segment increased $8.3 million, or 1.8%, in fiscal 2022, primarily due to higher sales volume.

Gross margin for the First Aid and Safety Services reportable operating segment is defined as revenue less cost of goods, warehouse expenses and service expenses.

Gross margin as a percent of revenue was 44.7% for fiscal 2022 compared to 42.4% in fiscal 2021.

The improvement in gross margin as a percentage of revenue in fiscal 2022 was primarily due to a decrease in the proportion of sales related to personal protective equipment, which typically have lower gross margins compared to the first aid cabinet sales.

Selling and administrative expenses for the First Aid and Safety Services reportable operating segment increased by $14.3 million, or 5.7%, in fiscal 2022 compared to fiscal 2021, and improved as a percent of revenue to 31.9% in fiscal 2022 compared to 32.0% in fiscal 2021.

The improvement as a percent of revenue was primarily due to revenue growing at a faster pace than labor and employee-partner related expenses.

Income before income taxes for the First Aid and Safety Services reportable operating segment was $106.8 million in fiscal 2022, an increase of $25.6 million, or 31.5%, compared to fiscal 2021.

Income before income taxes as a percent of revenue at 12.8%, increased from 10.4% in fiscal 2021 due to the previously discussed increases, primarily in gross margin.

Liquidity and Capital Resources

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We may also use cash flows provided by operating activities, as well as proceeds from long-term debt and short-term borrowings, to fund growth and expansion opportunities, as well as other cash requirements such as the repurchase of our common stock and payment of long-term debt.

The disruption from the COVID-19 pandemic continued to have an impact on Cintas' fiscal 2021 financial results.

However, net cash flow provided by operating activities was not significantly impacted.

We expect our cash flows from operating activities to remain sufficient to provide us with adequate levels of short-term liquidity.

In addition, we have access to $1.0 billion of short-term debt from our revolving credit facility.

Although the impact of the COVID-19 pandemic is fluid and continues to evolve, we believe our long-term liquidity position remains strong.

We expect our cash flows from operating activities to remain sufficient to provide us with adequate levels of liquidity.

In addition, we have access to $2.0 billion of debt capacity from our amended and restated revolving credit facility, the maturity of which was extended on March 23, 2022 until March 23, 2027.

We believe the Company has sufficient liquidity to operate in the current business environment.

Acquisitions and dividends remain strategic objectives, but they will be dependent on the economic outlook and liquidity of the Company.

Net cash provided by operating activities was $1.36 billion for fiscal 2021, which was an increase of $69.3 million compared to fiscal 2020.

The increase was primarily the result of increased net income and favorable changes in accrued compensation and other, partially offset by changes in working capital, specifically income taxes, accounts receivable and accrued liabilities and other.

Acquisitions, repurchases of our common stock and dividends remain strategic objectives, but they will be dependent on the economic outlook and liquidity of the Company.

Net cash provided by operating activities was $1.54 billion for fiscal 2022, which was an increase of $176.9 million, or 13.0%, compared to fiscal 2021.

The increase was primarily the result of increased net income which was partially offset by unfavorable changes in working capital, specifically, accounts receivable and uniforms and other rental items in service, which resulted from the growth in revenue.

In addition, we had a favorable change in inventories, net, which was the result of a large amount of inventory purchases in the prior fiscal year period related to the COVID-19 pandemic, including sanitizer, sanitizer stands, masks and gloves.

Net cash used in investing activities was $402.6 million in fiscal 2022, compared to $137.2 million in fiscal 2021.

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Capital expenditures for fiscal 2022 included $166.6 million for the Uniform Rental and Facility Services reportable operating segment and $59.7 million for the First Aid and Safety Services reportable operating segment.

The decrease in capital expenditures from fiscal 2020 to fiscal 2021 was due to reduced growth capacity needs within the slower growth landscape of the COVID-19 pandemic.

The increase in capital expenditures from fiscal 2021 to fiscal 2022 was due to an investment in the operating segments to support continued market penetration and revenue growth.

Cash paid for acquisitions of businesses, net of cash acquired, was $164.2 million and $10.0 million for fiscal 2022 and fiscal 2021, respectively.

The acquisitions in both fiscal 2022 and 2021 occurred in our Uniform Rental and Facility Services reportable operating segment, our First Aid and Safety Services reportable operating segment and our Fire Protection operating segment, which is included in All Other.

In fiscal 2021 and fiscal 2020, investing activities included proceeds of $31.7 million and $13.3 million, respectively, from the sale of certain operating assets, net of

cash disposed.

The fiscal 2022 acquisitions also includes the acquisition of the remaining interest of an equity method investment.

In fiscal 2022 and fiscal 2021, investing activities included proceeds of $15.3 million and $31.7 million, respectively, from the sale of certain operating assets, net of cash disposed.

Net cash used in investing activities also included $6.1 million and $4.3 million of purchases of investments during fiscal 2022 and fiscal 2021, respectively.

Net cash used in financing activities was $1,537.9 million for fiscal 2022, compared to $879.9 million in fiscal 2021.

The decrease in cash used from financing activities from fiscal 2020 is primarily due to the payment of the $312.5 million of debt in fiscal 2020, partially offset by an increase in cash used to pay dividends and repurchase common stock in fiscal 2021.

The increase in cash used from financing activities from fiscal 2021 is primarily due to the increase in repurchases of common stock in fiscal 2022, offset by the $261.2 million net issuance of commercial paper and the $76.2 million higher dividends paid in fiscal 2021 due to the transition from an annual dividend payment in the second quarter of fiscal 2021 to quarterly dividend payments thereafter.

On October 30, 2018, we announced that the Board of Directors authorized a $1.0 billion share buyback program, which was completed during fiscal 2021.

On October 29, 2019, we announced the Board of Directors authorized a new $1.0 billion share buyback program, which does not have an expiration date.

On October 29, 2019, we announced the Board of Directors authorized a $1.0 billion share buyback program, which was completed during fiscal 2022.

On July 27, 2021, we announced the Board of Directors authorized a new $1.5 billion share buyback program, which does not have an expiration date.

The following table summarizes the buyback activity by program and fiscal year ended May 31:

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October 29, 2019 1,590 365.41 581,220 1,196 350.31 418,779

July 27, 2021 2,150 383.01 823,429 — — —

3,740 $ 375.53 $ 1,404,649 1,386 $ 346.13 $ 479,656

In the period subsequent to May 31, 2021 through July 28, 2021, we completed the October 29, 2019 program by purchasing 1.6 million shares of Cintas common stock at an average price of $365.41 for a total purchase price of $581.2 million.

From the inception of the October 29, 2019 program through July 28, 2021, Cintas purchased a total of 2.8 million shares of Cintas common stock at an average price of $358.93 per share for a total purchase price of $1.0 billion.

In addition, for the fiscal year ended May 31, 2021, Cintas acquired 0.2 million shares of Cintas common stock in satisfaction of employee payroll taxes due on restricted stock awards that vested during the fiscal year.

These shares were acquired at an average price of $302.52 per share for a total purchase price of $74.4 million.

For the fiscal year ended May 31, 2020, Cintas acquired 0.3 million shares of Cintas common stock in satisfaction of employee payroll taxes due on restricted awards that vested during the fiscal year.

These shares were acquired at an average price of $260.89 per share for a total purchase price of $68.8 million.

On October 27, 2020, Cintas declared an annual cash dividend on outstanding common stock, representing a 10.2% increase over the annual dividend paid in the prior fiscal year.

This marked the 38 th consecutive year that Cintas has increased its annual dividend, every year since going public in 1983.

Also on October 27, 2020, the Cintas Board of Directors approved a change in the dividend policy from an annual dividend to a quarterly dividend and subsequently declared a quarterly dividend on outstanding common stock.

Any future dividend declarations, including the amount of any dividends, are at the discretion of the Board of Directors and dependent upon then-existing conditions, including the Company's consolidated operating results and consolidated financial condition, capital requirements, contractual restrictions, business prospects and other factors that the Board of Directors may deem relevant.

Shares acquired for taxes due (1)

305 $ 397.16 $ 121,224 246 $ 302.52 $ 74,465

Total repurchase of Cintas

common stock $ 1,525,873 $ 554,121

(1) Shares of Cintas stock acquired for employee payroll taxes due on options exercised and vested restricted stock awards.

In the period subsequent to May 31, 2022 through July 27, 2022, we purchased 0.5 million shares of Cintas common stock at an average price of $396.39 for a total purchase price of $210.8 million.

From the inception of the July 27, 2021 share buyback program through July 27, 2022, Cintas has purchased 2.7 million shares of Cintas common stock in the aggregate, at an average price of $385.66, for a total purchase price of $1.0 billion.

Our Board of Directors declared the following dividends during the fiscal years ended May 31:

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Fiscal Year 2022

October 27, 2020 November 6, 2020 December 4, 2020 $ 2.81 $ 297.7

July 27, 2021 August 13, 2021 September 15, 2021 $ 0.95 $ 98.8

October 26, 2021 November 15, 2021 December 15, 2021 0.95 99.1

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Fiscal Year 2021

October 29, 2019 November 8, 2019 December 6, 2019 $ 2.55 $ 268.0

Fiscal Year 2019

October 27, 2020 (1)

November 6, 2020 December 4, 2020 $ 2.81 $ 297.7

October 27, 2020 November 6, 2020 December 4, 2020 0.70 74.1

.(1) The dividend declared on April 13, 2021 was included in current accrued liabilities on the consolidated balance sheet at May 31, 2021.

During the fiscal year ended May 31, 2020, Cintas paid a net total of $112.5 million on commercial paper borrowings and paid off the term loan balance of $200.0 million with cash on hand.

January 19, 2021 February 15, 2021 March 15, 2021 0.75 79.5

April 13, 2021 (2)

May 15, 2021 June 15, 2021 0.75 79.2

Total $ 5.01 $ 530.5

(1) Beginning October 27, 2020, our Board of Directors authorized a change in dividend policy from an annual dividend to quarterly dividends.

(2) The dividends declared on April 12, 2022 and April 13, 2021 were included in current accrued liabilities on the consolidated balance sheet at May 31, 2022 and 2021, respectively.

During the fiscal year ended May 31, 2022, Cintas issued a net total of $261.2 million of commercial paper.

There was no commercial paper outstanding during fiscal 2021.

On June 1, 2021, in accordance with the terms of the notes, Cintas paid the $250.0 million aggregate principal amount outstanding of its 4.30%, 10-year senior notes that matured on that date with cash on hand.

On April 1, 2022, in accordance with the terms of the notes, Cintas paid the $650.0 million aggregate principal amount outstanding of its 2.90%, 5-year senior notes that matured on that date with proceeds from short-term borrowings.

On May 1, 2022, Cintas redeemed at par value the $300.0 million aggregate principal amount outstanding of its 3.25%, 10-year senior notes 30 days in advance of the maturation date with proceeds from short-term borrowings.

On May 3, 2022, Cintas issued $400.0 million aggregate principal amount of senior notes that bear an interest rate of 3.45% and mature on May 1, 2025.

On May 3, 2022, Cintas also issued $800.0 million aggregate principal amount of senior notes that bear an interest rate of 4.00% and mature on May 1, 2032.

The net proceeds from these issuances were utilized for general business purposes, including reducing Cintas’ short-term borrowings.

The following table summarizes Cintas' outstanding debt at May 31:

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Debt due within one year

Commercial paper 1.20% (1)

2022 2023 $ 261,200 $ —

Senior notes (2)

2.78% 2013 2023 50,380 —

Senior notes 4.30% 2012 2022 — 250,000

Senior notes 2.90% 2017 2022 — 650,000

Debt issuance costs (6) (930)

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Senior notes (2)

Senior notes 3.25% 2013 2023 300,000 300,000

Senior notes (1)

2.78% 2013 2023 — 50,815

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Senior notes 3.70% 2017 2027 1,000,000 1,000,000

Senior notes 4.00% 2022 2032 800,000 —

Senior notes 6.15% 2007 2037 250,000 250,000

Debt issuance costs (17,033) (9,283)

Total debt due after one year $ 2,483,932 $ 1,642,833

(1) Cintas assumed these senior notes with the acquisition of G&K in the fourth quarter of fiscal 2017, and they were recorded at fair value.

(1) Variable rate debt instrument.

The rate presented is the variable borrowing rate at May 31, 2022.

(2) Cintas assumed these senior notes with the acquisition of G&K Services, Inc.

(G&K) in the fourth quarter of fiscal 2017, and they were recorded at fair value.

The interest rate shown above is the effective interest rate.

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The principal amount of these notes is $50.0 million with a stated interest rate of 3.88%.

The credit agreement that supports our commercial paper program was amended and restated on May 24, 2019.

The amendment increased the capacity of the revolving credit facility from $600.0 million to $1.0 billion and created a new term loan of $200.0 million.

The credit agreement has an accordion feature that provides Cintas the ability to request increases to the borrowing commitments under either the revolving credit facility or the term loan of up to $250.0 million in the aggregate, subject to customary conditions.

The maturity date of the revolving credit facility is May 23, 2024.

As of May 31, 2021 and 2020, there was no commercial paper outstanding and no borrowings on our credit facility.

On June 1, 2021, in accordance with the terms of the notes, Cintas paid the $250.0 million aggregate principal amount of its 4.30%, 10-year senior notes that matured on that date with cash on hand.

During fiscal 2022, Cintas expects to issue long-term debt to pay the $650.0 million principal amount of its 2.90%, 5-year senior notes that mature in the fourth quarter of fiscal 2022.

The credit agreement that supports our commercial paper program was amended and restated on March 23, 2022.

The amendment increased the capacity of the revolving credit facility from $1.0 billion to $2.0 billion.

The credit agreement has an accordion feature that provides Cintas the ability to request increases to the borrowing commitments under the revolving credit facility of up to $500.0 million in the aggregate, subject to customary conditions.

The maturity date of the revolving credit facility is March 23, 2027.

As of May 31, 2022, there was $261.2

million of commercial paper outstanding with a weighted average interest rate of 1.20% and maturity dates less than 120 days and no borrowings on our revolving credit facility.

As of May 31, 2021, there was no commercial paper outstanding and no borrowings on our revolving credit facility.

Subsequent to May 31, 2022, in June 2022, Cintas borrowed $125.0 million under the revolving credit facility to fund short-term operating needs and repaid the amount later in June 2022.

Cintas has certain covenants related to debt agreements.

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Cintas was in compliance with all of the debt covenants for all periods presented.

Our access to the commercial paper and long-term debt markets has historically provided us with sources of liquidity.

We do not anticipate having difficulty in obtaining financing from those markets in the future in view of our favorable experiences in the debt markets in the recent past, including our ability to refinance the $650.0 million aggregate principal amount of our senior notes that mature in fiscal 2022.

Our access to the commercial paper and long-term debt markets has historically provided us with sources of both short-term and long-term liquidity to meet material cash obligations.

We do not anticipate having difficulty in obtaining financing from those markets in the future in view of our favorable experiences in the debt markets in the recent past.

Additionally, our ability to continue to access the commercial paper and long-term debt markets on favorable interest rate and other terms will depend, to a significant degree, on the ratings assigned by the credit rating agencies to our indebtedness.

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Noncurrent liabilities $ 3,346,851 $ 2,549,911

Contractual Obligations

Contractual and Other Material Cash Obligations

Payments Due by Period

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Interest payments 780,157 105,114 200,230 168,750 306,063

Total contractual cash obligations $ 3,246,454 $ 1,037,719 $ 534,508 $ 195,779 $ 1,478,448

Total contractual and other material cash obligations $ 3,774,974 $ 463,413 $ 716,876 $ 1,207,124 $ 1,387,561

(1) See Note 7 entitled Debt and Derivatives of " Notes to Consolidated Financial Statements " for a detailed presentation of Cintas' debt.

(2) See Note 8 entitled Leases of " Notes to Consolidated financial Statements " for a detailed presentation of Cintas' leases.

(2) See Note 8 entitled Leases of " Notes to Consolidated financial Statements " for a detailed presentation of Cintas' operating leases.

Cintas also makes payments to defined contribution plans and may make payments to defined benefit plans to satisfy minimum funding requirements.

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Changes in wages, benefits and energy costs have the potential to materially impact Cintas' consolidated results of operations.

Management believes inflation has not had a material impact on Cintas' consolidated financial condition or a negative impact on the consolidated results of operations.

In fiscal 2022, we experienced significant impacts from inflation, including, but not limited to, higher labor, fuel and transportation costs.

Management has been able to mitigate these inflationary pressures through pricing and various efficiency initiatives.

Management has mitigated these impacts such that net of the mitigation strategy and initiatives, inflation and changing prices has not had a material impact on Cintas' consolidated financial condition or a negative impact on the consolidated results of operations.

Litigation and Other Contingencies

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New Accounting Standards

In April 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, “Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

In connection with recognizing credit losses on accounts receivable and other financial instruments, Cintas now uses a forward-looking expected loss model rather than the incurred loss model.

Adoption of ASU 2016-13 requires using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date to align existing credit loss methodology with the new standard.

This standard was adopted by Cintas on June 1, 2020 and did not have a material impact on the Company's consolidated financial statements.

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

ASU 2019-12 is part of the FASB’s overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements.

ASU 2019-12 removes certain exceptions to the general principles of Accounting Standards Codification (ASC) 740, Income Taxes (ASC 740), in order to reduce the cost and complexity of its application in the areas of intraperiod tax allocation, deferred tax liabilities related to outside basis differences, year-to-date losses in interim periods and other areas within ASC 740.

The Company adopted ASU 2019-12 on June 1, 2021.

The adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated condensed financial statements currently but may in future periods.

No other new accounting pronouncement recently issued or newly effective had or is expected to have a material impact on the consolidated financial statements.

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Cintas is subject to legal proceedings and claims arising from the ordinary course of its business, including personal injury, customer contract, environmental and employment claims.

GAAP requires that a liability for contingencies be recorded when it is probable that a liability has occurred and the amount of the liability can be reasonably estimated.

GAAP requires that a liability for contingencies be recorded when it is probable that a liability has occurred and the amount of the liability can be

reasonably estimated.

Significant judgment is required to determine the existence of a liability, as well as the amount to be recorded.

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Deferred tax assets and liabilities are determined by the differences between the consolidated financial statement carrying amounts and the tax basis of assets and liabilities.

Therefore, the Company has not recorded deferred taxes for basis differences expected to reverse in future periods.

Cintas accounts for Global Intangible Low-Taxed Income (GILTI) as a current-period expense when incurred.

See Note 9 entitled Income Taxes of " Notes to Consolidated Financial Statements " for the types of items that give rise to significant deferred income tax assets and liabilities.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis