What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-07-27 compared with 2021-07-28 · 209 added, 188 removed, 1015 unchanged (28% of the section changed)

3 unchanged sentences

Management's Report on Internal Control over Financial Reporting

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Fir m (PCAO B ID 42 )

Consolidated Statements of Income

98 unchanged sentences

Selling and administrative expenses 2,044,876 1,929,159 2,071,052

G&K Services, Inc.

integration expenses — — 14,410

Operating income 1,587,370 1,385,492 1,162,696

Gain on sale of a cost method investment — — 69,373

Interest income ( 242 ) ( 467 ) ( 988 )

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Income from continuing operations 1,235,757 1,110,968 876,360

(Loss) income from discontinued operations, net of tax

(benefit) expense of $ 0 , $( 107 ) and $ 757 , respectively

— ( 323 ) 2,346

Loss from discontinued operations, net of tax benefit of $ 0 , $ 0

and $( 107 ), respectively

Net income $ 1,235,757 $ 1,110,968 $ 876,037

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Net income $ 1,235,757 $ 1,110,968 $ 876,037

Other comprehensive income (loss), net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments ( 24,833 ) 68,182 ( 11,321 )

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Accrued liabilities 588,948 518,910

Income taxes, current — 27,099

Operating lease liabilities, current 43,872 43,850

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100,000 shares authorized, none outstanding

Common stock, no par value:

Common stock, no par value, and paid-in capital:

425,000,000 shares authorized

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1,771,917 1,516,202

Paid-in capital 98,859 171,521

Retained earnings 8,719,163 7,877,015

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( 7,290,801 ) ( 5,736,258 )

Accumulated other comprehensive income (loss) 30,888 ( 153,380 )

Accumulated other comprehensive income 107,917 30,888

Total shareholders' equity 3,308,196 3,687,847

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Statements of Shareholders' Equity

Common Stock Paid-In

Capital Retained

and Paid-In Capital Retained

Earnings Other

Comprehensive

Income (Loss) Treasury Stock Total

(Loss) Income Treasury Stock Total

Shareholders'

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Vesting of stock-based compensation awards 641 — — — — — —

Stock options exercised, net of shares

surrendered 1,302 65,371 — — — — — 65,371

Stock options exercised 1,361 90,519 — — — — 90,519

Repurchase of common stock — — — — ( 1,872 ) ( 464,518 ) ( 464,518 )

3 unchanged sentences

Net income — — 1,110,968 — — — 1,110,968

Comprehensive loss, net of tax — — — — ( 116,203 ) — — ( 116,203 )

Comprehensive income, net of tax — — — 184,268 — — 184,268

Dividends — — ( 530,462 ) — — — ( 530,462 )

1 unchanged sentence

Vesting of stock-based compensation awards 610 — — — — — —

Stock options exercised, net of shares

surrendered 1,361 90,519 — — — — — 90,519

Stock options exercised 1,668 129,957 — — — — 129,957

Repurchase of common stock — — — — ( 1,632 ) ( 554,121 ) ( 554,121 )

Cumulative effect of change in accounting

principle — — — ( 2,808 ) 1,975 — — ( 833 )

Balance at May 31, 2021 189,071 1,516,202 7,877,015 30,888 ( 85,010 ) ( 5,736,258 ) 3,687,847

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Vesting of stock-based compensation awards 528 — — — — — —

Stock options exercised, net of shares

surrendered 1,668 129,957 — — — — — 129,957

Stock options exercised 1,239 146,407 — — ( 71 ) ( 28,670 ) 117,737

Repurchase of common stock — — — — ( 4,046 ) ( 1,525,873 ) ( 1,525,873 )

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Stock-based compensation 109,308 112,035 115,435

Gain on equity method investment transaction ( 30,151 ) — —

Net gain on sale of operating assets ( 12,129 ) ( 22,030 ) —

Long-lived asset impairment — 5,114 9,220

Gain on sale of a cost method investment — — ( 69,373 )

Deferred income taxes 52,110 ( 42,242 ) ( 16,252 )

12 unchanged sentences

Capital expenditures ( 240,672 ) ( 143,470 ) ( 230,289 )

Purchase of marketable securities and investments ( 4,299 ) ( 10,031 ) ( 17,841 )

Purchase of investments ( 6,076 ) ( 4,299 ) ( 10,031 )

Proceeds from sale of operating assets, net of cash disposed 15,347 31,705 13,300

Proceeds from sale of a cost method investment — — 73,342

Acquisitions of businesses, net of cash acquired ( 164,228 ) ( 10,038 ) ( 53,720 )

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Cash flows from financing activities:

(Payments) issuance of commercial paper, net — ( 112,500 ) 112,500

Issuance (payments) of commercial paper, net 261,200 — ( 112,500 )

Proceeds from issuance of debt 1,190,506 — —

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Effect of exchange rate changes on cash and cash equivalents ( 216 ) 4,581 ( 2,121 )

Net increase (decrease) in cash and cash equivalents 348,238 48,757 ( 42,079 )

Net (decrease) increase in cash and cash equivalents ( 403,169 ) 348,238 48,757

Cash and cash equivalents at beginning of year 493,640 145,402 96,645

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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.

Cintas’ reportable operating segments are the Uniform Rental and Facility Services operating segment and the First Aid and Safety Services operating segment.

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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.

Revenue and income before income taxes the reportable operating segments for the years ended May 31, 2022, 2021 and 2020 are presented in Note 15 entitled Operating Segment Information.

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.

In these consolidated financial statements and related disclosures, we have assessed the current impact of COVID-19 on our consolidated financial condition, results of operations, and cash flows, as well as our estimates and accounting policies.

We have made additional disclosures of these assessments, as necessary.

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.

We have operations throughout the U.S.

and Canada and participate in a global supply chain.

Since fiscal 2020, the existence of the novel strain of coronavirus (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 2022 and fiscal 2021.

The 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.

Principles of consolidation.

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The Company’s results are affected by economic, political, legislative, regulatory and legal actions.

Economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies, government policies surrounding the containment of COVID-19 and changes in the prices of raw materials, can have a significant effect on operations.

Economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies and changes in the prices of raw materials, can have a significant effect on operations.

These factors and other events may cause actual results to differ from management's estimates.

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Other revenue, which is recorded in the First Aid and Safety Services reportable operating segment and All Other, is recognized when either services are performed or the performance obligation under the terms of a contract with a customer are satisfied.

Revenue is measured as the amount of consideration we expect to receive in exchange for the performance of the service or transfer of the inventory.

Revenue is measured as the amount of

consideration we expect to receive in exchange for the performance of the service or transfer of the inventory.

See Note 2 entitled Revenue Recognition.

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Cost of other consists primarily of cost of goods sold (predominantly first aid and safety products, 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 includes inbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs and other costs of distribution.

Cost of other includes inbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs, service costs and other costs of distribution.

Selling and administrative expenses.

Selling and administrative expenses consist primarily of sales labor and commissions, management and administrative labor, payroll taxes, medical expense, insurance expense, legal and professional costs and amortization of finite-lived intangible assets and capitalized contract costs.

As a result of the adverse impact that the COVID-19 pandemic has had on the economic environment in North America and the ongoing uncertainty regarding the severity and duration of the pandemic, Cintas initiated certain activities to reduce operating costs and better align its workforce with the needs of its ongoing business .

During the fourth quarter of fiscal 2020, Cintas recorded a total of $ 24.5 million in employee termination costs, of which $ 20.2 million was recorded in the Uniform Rental and Facility Services reportable operating segment.

As a result of the adverse impact that the COVID-19 pandemic, Cintas recorded a total of $ 24.5 million in employee termination costs at the onset of the COVID-19 pandemic in fiscal 2020, of which $ 20.2 million was recorded in the Uniform Rental and Facility Services reportable operating segment.

The amount of employee termination benefits paid during the fiscal year ended May 31, 2021 and 2020 was $ 10.2 million and $ 14.3 million, respectively.

The related liability balance was $ 0.0 million at May 31, 2021 and was $ 10.2 million at May 31, 2020.

The May 31, 2020 liability balance was recorded in accrued compensation and related liabilities on the consolidated balance sheets.

Cintas did no t record employee termination costs during fiscal 2021.

G&K Services, Inc.

integration expenses.

As a result of the acquisition of G&K Services, Inc.

(G&K) in fiscal 2017, the Company incurred various integration expenses in fiscal 2019, which related primarily to facility closure expenses.

No such costs were incurred in fiscal 2021 or 2020.

The integration expenses for fiscal 2019 are included in a single line in the consolidated statements of income and are reported by operating segment in Note 14 entitled Operating Segment Information.

Cintas did no t record employee termination costs during fiscal 2022 or 2021.

Cash and cash equivalents.

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The amount provided as the account ages will differ slightly between the Uniform Rental and Facility Services reportable operating segment, the First Aid and Safety Services reportable operating segment and All Other because of differences in customers served and the nature of each business.

As of May 31, 2020, in response to the economic disruption created by the COVID-19 pandemic, Cintas performed an additional evaluation of amounts due from customers in every operating segment that were deemed to be higher collection risk.

This evaluation, which occurred in the fourth quarter of fiscal 2020, resulted in an allowance for doubtful accounts in excess of historical rates.

The judgment applied to increase the allowance for doubtful accounts beyond our historical policy was deemed to be reasonable and supportable based on the data available as of the consolidated balance sheet date.

Certain of the corresponding trade receivables were collected during fiscal 2021, and $ 14.2 million of incremental allowance for doubtful accounts recorded as of May 31, 2020 was reversed through selling and administrative expenses as the Company's estimates and assumptions related to the impact of COVID-19 changed

during fiscal 2021.

As of May 31, 2021, no incremental allowance for doubtful accounts was deemed necessary.

When an account is considered uncollectible, it is written off against the allowance for doubtful accounts.

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The disruption created by the COVID-19 pandemic beginning in the fourth quarter of fiscal 2020 resulted in larger quantities of inventory on hand as of May 31, 2022 and 2021.

As of May 31, 2021, our Uniform Rental and Facility Services and First Aid and Safety reportable operating segments held an excess amount of personal protective equipment inventory on hand.

The excess inventory, determined through specific identification, resulted in an increase to the obsolescence reserve of $ 43.6 million as of May 31, 2021, in comparison to May 31, 2020.

As of May 31, 2020, an incremental obsolescence reserve was recorded within our Uniform Direct Sales operating segment due to larger quantities of inventory remaining on hand, at the consolidated balance sheet date, as a result of disruption created by the onset of the COVID-19 pandemic.

As of May 31, 2022 and 2021, our Uniform Rental and Facility Services and First Aid and Safety reportable operating segments held an excess amount of personal protective equipment inventory on hand.

The excess inventory, determined through specific identification, resulted in a specific reserve of $ 28.5 million and $ 43.6 million as of May 31, 2022 and 2021, respectively.

Obsolete inventory reserves are recorded in selling and administrative expenses on the consolidated statements of income.

The judgment applied to increase the obsolete inventory reserve as of May 31, 2021 and 2020, beyond our historical policy was deemed to be reasonable and supportable based on the data available as of the consolidated balance sheet dates.

The judgment applied to record the obsolete inventory reserve as of May 31, 2022 and 2021, beyond our historical policy was deemed to be reasonable and supportable based on the data available as of the consolidated balance sheet dates.

Once a specific inventory item is written down to the lower of cost or net realizable value, a new cost basis has been established, and that inventory item cannot subsequently be marked up.

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Fair value is generally determined by discounted cash flows, prices of similar assets or third-party real estate valuations, as appropriate.

As a result of certain activities to eliminate excess capacity and reduce our cost structure in response to COVID-19, an indicator of impairment was identified.

In fiscal 2020, as a result of certain activities to eliminate excess capacity and reduce our cost structure in response to the onset of the COVID-19 pandemic, an indicator of impairment was identified.

Cintas recognized an impairment loss of $ 9.2 million in the Uniform Rental and Facility Services reportable operating segment during the year ended May 31, 2020.

Cintas recognized a long-lived asset impairment loss of $ 5.1 million in the Uniform Direct Sale operating segment during the year ended May 31, 2021.

The long-lived asset impairments in both fiscal years were based on the excess of the carrying amount of

asset over their respective fair values.

The long-lived asset impairment charge was recorded within selling and administrative expenses on the consolidated statements of income.

Based on its regular evaluation and the evolving impact of the COVID-19 pandemic, Cintas recognized a long-lived asset impairment loss of $ 5.1 million in the Uniform Direct Sale operating segment during the year ended May 31, 2021.

The long-lived asset impairments in fiscal 2021 and 2020 were based on the excess of the carrying amount of asset over their respective fair values and were recorded within selling and administrative expenses on the consolidated statements of income.

The undiscounted cash flows were estimated, using Level 2 inputs based on both the cost and market approaches, at the lowest discernible level of cash flows, which is at the location level.

Cintas did not identify any indicators of impairment for the fiscal year ended May 31, 2022.

Investments consists primarily of the cash surrender value of life insurance policies and equity method investments.

The equity method is used to account for an investment if our investment gives us the ability to exercise significant influence over the operating and financial policies of the investee.

In general, equity method investments are initially measured at cost.

Cintas recognizes its share of the investee’s earnings or losses in income.

Equity method investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable.

Goodwill, obtained through acquisitions of businesses, is valued at cost less any impairment.

Cintas completes an annual impairment test, that includes an assessment of qualitative factors including, but not limited to, macroeconomic conditions, industry and market conditions, and entity specific factors such as strategies and financial performance.

Cintas completes an annual impairment test, that includes an assessment of quantitative and qualitative factors including, but not limited to, macroeconomic conditions, industry and market conditions and entity specific factors such as strategies and financial performance.

We test for goodwill impairment at the reporting unit level.

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Service contracts and other assets.

Service contracts and other assets, which consist primarily of capitalized contract costs and noncompete and consulting agreements obtained through acquisitions of businesses, are generally amortized by use of the straight-line method over the estimated lives of the agreements, which are generally 5 to 10 years.

The G&K service contract asset is being amortized over a period of 15 years, which represents the estimated life of the economic benefit.

The G&K service contract asset amortization is based on the annual economic value of the underlying asset which generally decreases over the 15 -year term.

Service contracts and other assets, which consist primarily of capitalized contract costs and noncompete and consulting agreements obtained through acquisitions of businesses, are generally amortized by use of the straight-line method, or an accelerated method that represents the estimated economic benefit, over the estimated lives of the agreements, which are generally 5 to 15 years.

Certain noncompete agreements, as well as all service contracts, require that a valuation be determined using a discounted cash flow model.

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No impairment has been recognized by Cintas for the fiscal years ended May 31, 2022, 2021 and 2020.

Business acquisitions.

The Company allocates the purchase price of its acquisitions to the assets acquired and liabilities assumed based upon their respective fair values at the acquisition date.

The excess of the acquisition price over the estimated fair value of the net assets acquired is recorded as goodwill.

Goodwill is adjusted for any changes to acquisition date fair value amounts made within the measurement period.

Acquisition-related transaction costs are recognized separately from the business combinations and expensed as incurred.

Debt issuance costs.

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The fair value of plan assets represents the current market value of assets held by an irrevocable trust fund for the sole benefit of participants.

These valuations reflect the terms of the Pension Plan and use participant-specific information such as compensation, age and years of service, as well as certain assumptions that require significant judgment, including estimates of discount rates, expected return on plan assets, rate of compensation increases, interest crediting rates and mortality rates.

These valuations reflect the terms of the Pension Plan and use participant-specific information such as

compensation, age and years of service, as well as certain assumptions that require significant judgment, including estimates of discount rates, expected return on plan assets, rate of compensation increases, interest crediting rates and mortality rates.

We recognize, as of a measurement date, any unrecognized actuarial net gains or losses that exceed ten percent of the larger of the projected benefit obligations or the plan assets, defined as the "corridor." Amounts outside the corridor are amortized over the plan participants' life expectancy.

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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.

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

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 for the types of items that give rise to significant deferred income tax assets and liabilities.

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In the opinion of management, the aggregate liability, if any, with respect to such ordinary course of business actions will not have a material adverse effect on the consolidated financial position or consolidated results of operations of Cintas.

The Company, the Board of Directors, Scott Farmer (Executive Chairman) and the Investment Policy Committee are defendants in a purported class action, filed on December 13, 2019, pending in the U.S.

District Court for the Southern District of Ohio alleging violations of The Employee Retirement Income Security Act of 1974 (ERISA).

The lawsuit asserts that the defendants improperly managed the costs of the employee retirement plan, breached their

fiduciary duties in failing to investigate and select lower cost alternative funds and failed to monitor and control the employee retirement plan’s recordkeeping costs.

The defendants deny liability and a legal contingency is neither probable or estimable at May 31, 2022 or 2021.

Fair value measurements.

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements (ASC 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.

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The first approach is the cost approach.

The cost approach is generally the value a market participant would expect to replace the respective

asset or liability.

The cost approach is generally the value a market participant would expect to replace the respective asset or liability.

The second approach is the market approach.

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Cintas is required to provide additional disclosures about fair value measurements as part of the consolidated financial statements for each major category of assets and liabilities measured at fair value on a non-recurring basis (including business acquisitions).

Based on the nature of Cintas' business acquisitions, which occur regularly throughout the fiscal year, the majority of the assets acquired and liabilities assumed consist of working capital, primarily valued using Level 2 inputs, property and equipment, also primarily valued using Level 2 inputs and goodwill and other identified intangible assets valued using Level 3 inputs.

In general, non-recurring fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities, which generally are not applicable to non-financial assets and liabilities.

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Fair values determined by Level 3 inputs are unobservable data points for the asset or liability and include situations where there is little, if any, market activity for the asset or liability, such as internal estimates of future cash flows and company specific discount rates.

See Note 10 entitled Acquisitions for additional information.

New accounting pronouncements.

In April 2019, the 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 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 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 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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Revenue Recognition Policy

Approximately 95 % of the Company's revenues are derived from fees for route servicing of Uniform Rental and Facility Services, First Aid and Safety Services and Fire Protection Services, performed by a Cintas employee-partner, at the customer's location of business.

Approximately 95 % of the Company's revenue is derived from fees for route servicing of Uniform Rental and Facility Services, First Aid and Safety Services and Fire Protection Services customers, performed by a Cintas employee-partner, at the customer's location of business.

Revenue from our route servicing customer contracts represent a single-performance obligation.

The Company recognizes revenue over time as services are performed based on the nature of services provided and contractual rates (output method) or at a point in time when the performance

obligation under the terms of the contract with a customer are satisfied, at the customer's location of business.

The Company recognizes revenue over time as services are performed based on the nature of services provided and contractual rates (output method) or at a point in time when the performance obligation under the terms of the contract with a customer are satisfied, at the customer's location of business.

The Company's remaining revenue, primarily within the Uniform Direct Sales operating segment, and representing approximately 5 % of the Company's total revenue, is recognized when the obligations under the terms of a contract with a customer are satisfied.

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Variable consideration also includes consideration paid to a customer at the beginning of a contract.

Cintas capitalizes this consideration and amortizes it over the life of the contract as a reduction to revenue in accordance with ASU 2014-08, "Revenue from Contracts with Customers (Topic 606)." These assets are included in other assets, net on the consolidated balance sheets.

Additionally, in accordance with Topic 606, certain Uniform Direct Sales operating segment customer contracts contain a provision with an enforceable right of payment and the underlying product has no alternative use to Cintas.

Consequently, when both aforementioned provisions are prevalent in a customer contract, the revenue is recorded for finished goods that the customer is obligated to purchase under the termination terms of the contract.

Cintas capitalizes this consideration and amortizes it over the life of the contract as a reduction to revenue in accordance with ASC 606, Revenue from Contracts with Customers (ASC 606).

These assets are included in other current assets and in other assets, net on the consolidated balance sheets.

We are exposed to credit losses primarily through our trade receivables.

We determine the allowance for credit losses using both an estimate, based on historical rates of collections and reserves for specific accounts identified as uncollectible.

The portion of the allowance that is an estimate based on Cintas' historical rates of collections is recorded for overdue amounts, beginning with a nominal percentage when the account is current and increasing substantially as the account ages.

We update our estimate of credit loss reserves quarterly, considering recent write-offs and collections information and underlying economic expectations.

Costs to Obtain a Contract

The Company capitalizes commission expenses paid to our employee-partners when the commissions are deemed to be incremental for obtaining the route servicing customer contract.

As permitted by Topic 606, the Company has elected to apply the guidance to a portfolio of contracts (or performance obligations) with similar characteristics because the Company reasonably expects that the effects on the consolidated financial statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts within the portfolio.

As permitted by ASC 606, the Company has elected to apply the guidance to a portfolio of contracts (or performance obligations) with similar characteristics because the Company reasonably expects that the effects on the consolidated financial statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts within the portfolio.

The Company also continues to expense certain costs to obtain a contract if those costs do not meet the criteria of the new standard or the amortization period of the asset would have been one year or less.

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Total assets at fair value $ 90,471 $ 56,877 $ — $ 147,348

Long-term accrued liabilities:

Interest rate lock agreements $ — $ 61,567 $ — $ 61,567

Total liabilities at fair value $ — $ 61,567 $ — $ 61,567

As of May 31, 2021

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Cintas does not adjust the quoted market price for such financial instruments.

The fair values of outstanding interest rate lock agreements are included in other assets, net and long-term accrued liabilities at both May 31, 2021 and 2020.

The fair values of Cintas' interest rate lock agreements are based on similar exchange traded derivatives (market approach) and are, therefore, included within Level 2 of the fair value hierarchy.

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Furthermore, while Cintas believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the consolidated balance sheet dates.

In addition to assets and liabilities that are recorded at fair value on a recurring basis, Cintas records assets and liabilities at fair value on a nonrecurring basis as required under U.S.

The assets and liabilities measured at fair value on a nonrecurring basis primarily relate to assets revalued in an impairment analysis and assets and liabilities acquired in a business acquisition.

Property and Equipment

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These expenses are classified in selling and administrative expenses on the consolidated statements of income.

At May 31, 2021, investments were $ 274.6 million and include the cash surrender value of insurance policies of $ 252.1 million, equity method investments of $ 19.4 million and cost method investments of $ 3.1 million.

At May 31, 2020, investments were $ 214.8 million and include the cash surrender value of insurance policies of $ 192.7 million, equity method investments of $ 19.0 million and cost method investments of $ 3.1 million.

Investments are evaluated for impairment on an annual basis or when indicators of impairment exist.

Cintas' investments are summarized as follows at May 31:

(In thousands) 2022 2021

Cash surrender value of insurance policies $ 237,136 $ 252,061

Equity method investments 3,574 19,388

Cost method investments 2,163 3,167

Total investments $ 242,873 $ 274,616

Investments are generally evaluated for impairment on an annual basis or when indicators of impairment exist.

For fiscal years 2022, 2021 and 2020, no impairment losses were recorded.

During fiscal 2019, Cintas sold a cost method investment to a third party.

Proceeds from the sale were $ 73.3 million, which resulted in a pre-tax gain of $ 69.4 million.

During fiscal 2022, Cintas acquired the remaining interest of an equity method investment, and as a result, such investment is no longer accounted for as an equity method investment at May 31, 2022, and is no longer included in the table above.

See Note 10 entitled Acquisitions for more information.

Goodwill, Service Contracts and Other Assets

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(1) The current portion of capitalized contract costs, included in prepaid expenses and other current assets on the consolidated balance sheets as of May 31, 2022 and 2021, is $ 83.7 million and $ 79.4 million, respectively.

Amortization expense for service contracts and other assets for continuing operations was $ 141.9 million, $ 140.8 million and $ 134.0 million for the fiscal years ended May 31, 2021, 2020 and 2019, respectively.

Amortization expense for service contracts and other assets was $ 148.4 million, $ 141.9 million and $ 140.8 million for the fiscal years ended May 31, 2022, 2021 and 2020, respectively.

At May 31, 2022, the weighted average amortization period for service contracts, capitalized contract costs, noncompete and consulting agreements and other was 13 years, 7 years, 5 years and 10 years, respectively.

As of May 31, 2021, the estimated future amortization expense for service contracts and other assets for continuing operations, excluding any future acquisitions and commissions to be earned, is as follows:

As of May 31, 2022, the estimated future amortization expense for service contracts and other assets, excluding any future acquisitions and commissions to be earned, is as follows:

Fiscal Year (In thousands)

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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) Variable rate debt instrument.

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

(2) 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.

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The carrying value and fair value of Cintas' debt as of May 31, 2022 were $ 2,811.2 million and $ 2,862.2 million, respectively, and as of May 31, 2021 were $ 2,550.0 million and $ 2,788.8 million, respectively.

During the fiscal year ended May 31, 2020, Cintas paid a net total of $ 112.5 million of commercial paper.

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.

There was no commercial paper outstanding during fiscal 2021.

Letters of credit outstanding were $ 120.6 million at both May 31, 2021 and 2020.

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.

Letters of credit outstanding were $ 106.7 million and $ 120.6 million at May 31, 2022 and 2021, respectively.

Maturities of debt during each of the next five years are $ 311.2 million, $ 0.0 million , $ 450.0 million, $ 0.0 million and $ 1,000.0 million, respectively.

Interest paid was $ 97.8 million, $ 98.3 million and $ 105.5 million for the fiscal years ended May 31, 2022, 2021 and 2020, respectively.

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 revolving credit facility.

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.

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

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

There was no commercial paper outstanding during fiscal 2021.

The fair value of the commercial paper, which approximates carrying value, is estimated using level 2 inputs based on general market prices and interest rates.

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 uses interest rate locks to manage its overall interest expense as interest rate locks effectively change the interest rate of specific debt issuances.

The interest rate locks are entered into to protect against unfavorable movements in the benchmark treasury rate related to forecasted debt issuances.

Cintas used interest rate lock agreements to hedge against movements in the treasury rates at the time Cintas issued its senior notes in fiscal 2007, fiscal 2012, fiscal 2013 and fiscal 2017.

The amortization of the cash flow hedges resulted in a decrease to other comprehensive income (loss) of $ 1.4 million, $ 1.4 million and $ 1.2 million in the fiscal years ended May 31, 2021, 2020 and 2019, respectively.

During fiscal 2020 and 2019, Cintas entered into interest rate lock agreements with a total notional value of $ 950.0 million and $ 500.0 million, respectively, for forecasted debt issuances in connection with upcoming debt maturities.

The fair values of the outstanding interest rate lock agreements is summarized as follows at May 31:

Cintas used interest rate locks, which represent cash flow hedges, to hedge against movements in the treasury rates at the time Cintas issued its senior notes in fiscal 2007, fiscal 2012, fiscal 2013, fiscal 2017 and fiscal 2022.

The amortization of the interest rate locks resulted in a decrease to other comprehensive income (loss) of $ 2.1 million, $ 1.4 million and $ 1.4 million in the fiscal years ended May 31, 2022, 2021 and 2020, respectively.

During fiscal 2022, fiscal 2020 and fiscal 2019, Cintas entered into interest rate lock agreements for forecasted debt issuances.

The aggregate notional value of outstanding cash flow hedges was $ 500.0 million and $ 1.2 billion at May 31, 2022 and 2021, respectively.

The fair values of the outstanding interest rate locks, for forecasted debt issuances, are summarized as follows at May 31:

Fiscal Year of Issuance

(in thousands)

assets, net Long-term

accrued liabilities Other

assets, net Other

assets, net Long-term

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2020 $ 38,546 $ 40,400 $ —

2019 $ — $ — $ 61,657

The interest rate locks are also recorded in other comprehensive income (loss), net of tax.

These interest rate locks had no impact on net income or cash flows from continuing operations for the fiscal years ended May 31, 2021, 2020 or 2019.

In conjunction with the issuance of long-term debt in fiscal 2022, Cintas settled interest rate lock agreements, which were in an asset position of $ 58.9 million at the date of settlement, with the cash received recorded within operating cash flows, in accordance with Company's accounting policy.

The balance recorded in other comprehensive income (loss) will be amortized as a reduction to interest expense beginning in the fourth quarter of fiscal 2022 through the remaining life of the debt.

The interest rate locks had no impact on net income or cash flows from continuing operations for the fiscal years ended May 31, 2021 or 2020.

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.

As of May 31, 2020, the Company had unrecognized inventory purchase commitments with various suppliers totaling $ 117.6 million, respectively.

All unrecognized inventory purchase commitments outstanding at May 31, 2020 were satisfied during fiscal 2021.

Cintas has operating leases for certain operating facilities, vehicles and equipment, which provide the right to use the underlying asset and require lease payments over the term of the lease.

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operating lease liabilities $ 26,862 $ 51,850

Operating lease right-of-use assets acquired in business combinations $ 17,734 $ —

Other information related to the operating lease right-of-use assets, net and operating lease liabilities was as follows at May 31:

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$ 263,011 $ 176,781 $ 181,931

Reconciliation of income tax expense (benefit) for continuing operations using the statutory rate and actual income tax expense is as follows for the fiscal years ended May 31:

Reconciliation of income tax expense for continuing operations using the statutory rate and actual income tax expense is as follows for the fiscal years ended May 31:

(In thousands) 2022 2021 2020

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Capital loss carryback — ( 14,072 ) —

( 5,008 ) 1,454 6,506

Impact of the Tax Cuts and Jobs Act (the Tax Act):

Deemed repatriation of non-U.S.

earnings, net of foreign

tax credits and other (collectively, transition tax) — — 153

withholding taxes related to certain non-U.S.

earnings subject to repatriation — — 690

Remeasurement of U.S.

net deferred tax liabilities from

35% to 21% — — 426

Other 136 ( 5,008 ) 1,454

$ 263,011 $ 176,781 $ 181,931

(1) Primarily consists of the excess tax benefits related to stock-based compensation.

(2) Primarily consists of adjustments for uncertain tax positions and tax credits.

The components of deferred income taxes included on the consolidated balance sheets are as follows at May 31:

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Stock-based compensation 62,522 74,898

Net operating loss and foreign related carry-forwards 3,885 7,657

Treasury locks 3,140 39,046

Operating lease liabilities 43,745 44,530

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Service contracts and other intangible assets 199,256 207,834

Treasury locks 31,566 —

Capitalized contract costs 81,314 79,356

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The majority of Cintas' operations are in North America.

Cintas is required to file federal income tax returns, as well as state income tax returns in a majority of the domestic states and also in certain Canadian provinces.

Cintas is required to file U.S.

federal income tax returns, as well as state income tax returns in a majority of the domestic states and also in certain Canadian provinces.

At times, Cintas is subject to audits in these jurisdictions.

The audits, by nature, are sometimes complex and can require several years to resolve.

The final resolution of any such tax audit could result in either a reduction in Cintas' accruals or an increase in its income tax provision, either of which could have an impact on the consolidated results of operation in any given period.

The final resolution of any such tax audit could result in either a reduction in Cintas' accruals or an increase in its income tax expense, either of which could have an impact on the consolidated results of operation in any given period.

federal income tax returns are closed to audit through fiscal 2018.

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The years under foreign and domestic state audits cover fiscal years back to 2014.

Based on the resolution of the various audits and other potential regulatory developments, it is expected that the balance of unrecognized tax benefits will not materially change for the fiscal year ending May 31, 2022.

Based on the status and resolution of the various audits and other potential regulatory developments, it is expected that the balance of unrecognized tax benefits will not materially change for the fiscal year ending May 31, 2023.

Foreign Withholding Tax

The Company asserts that all foreign earnings will be indefinitely reinvested, with the exception of certain foreign investments in which earnings and cash generation are in excess of local needs.

With the passage of the Tax Act in the U.S., dividends of earnings from non-U.S.

With the passage of the Tax Cuts and Jobs Act in the U.S., dividends of earnings from non-U.S.

operations are generally no longer subject to U.S.

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income and withholding tax liabilities based on the source of these earnings, as well as the expected means through which those earnings may be taxed;

however, the unrecorded tax is not material.

however, the unrecorded tax is not material to the consolidated financial statements.

Note 10 - Acquisitions

On December 10, 2021, Cintas acquired the remaining interest of an equity method investment.

The acquisition will operate as a component of Cintas' supply chain within the Uniform Rental and Facility Services reportable operating segment.

The cash consideration transferred to acquire the remaining interest of the equity method investment was $ 48.0 million, net of cash acquired of $ 1.7 million.

Under applicable accounting guidance, the Company was required to record its historical equity method investment at fair value ($ 43.5 million), resulting in a gain of $ 30.2 million, which is recorded as a reduction in selling and administrative expenses, within the Uniform Rental and Facility Services reportable operating segment, in the fiscal year ended May 31, 2022.

The fair value of the historical equity method investment was determined using a combination of a market and income approach (discounted cash flow analysis).

The key assumptions and estimates utilized in these approaches included market data and market multiples, discount rates, as well as future levels of revenue growth and operating margins.

The Company believes these assumptions and estimates are reasonable and based on the best information available at the valuation date.

Cintas accounted for the acquisition using the acquisition method of accounting.

The preliminary purchase price allocation was determined by management with the assistance of third-party valuation specialists and is based on estimates of the fair value of assets acquired and liabilities assumed as of December 10, 2021.

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

The factors contributing to the recognition of the amount of goodwill are based on several strategic supply chain and synergistic benefits that will allow for Cintas to further vertically integrate the operations for certain product lines, and are expected to be realized from the acquisition.

No ne of the goodwill is expected to be deductible for income tax purposes.

The allocation of the preliminary purchase price, including the value of the previously held equity method investment, at fair value is as follows:

(In thousands) December 10, 2021

Working capital assets $ 17,352

Property and equipment 16,230

Operating lease right-of-use assets 16,882

Goodwill 55,986

Separately identifiable intangible assets 9,201

Total current liabilities ( 6,425 )

Operating lease liabilities ( 17,734 )

Total allocation (consideration) $ 91,492

As additional information is obtained, adjustments may be made to the preliminary purchase price allocation.

The Company is still finalizing the estimated fair value of certain of the tangible and identifiable intangible assets acquired and liabilities assumed.

The separately identifiable intangible assets are primarily made up of a customer relationship intangible asset that will be amortized over a period of 9 years, which represents the estimated useful life of the economic benefit.

Cintas is required to provide additional disclosures about fair value measurements as part of the consolidated condensed financial statements for each major category of assets and liabilities measured at fair value on a nonrecurring basis (including business combinations).

The working capital assets and liabilities, as well as the property and equipment acquired, were valued using Level 2 inputs which included data points that are observable, such as definitive sales agreements, appraisals or established market values of comparable assets (market approach).

Goodwill and separately identifiable intangible assets were valued using Level 3 inputs, which are unobservable by nature, and included internal estimates of future cash flows (income approach).

The results of operations of the acquisition are included in Cintas' consolidated statements of income subsequent to the date of acquisition and are not material to the consolidated financial statements.

Other Acquisitions

The purchase price paid for each acquisition in the fiscal year ended May 31, 2022 has been allocated to the fair value of the assets acquired and liabilities assumed.

Excluding the acquisition of the remaining interest in an equity method investment discussed above, during the fiscal year ended May 31, 2022, Cintas acquired three businesses included in the Uniform Rental and Facility Services reportable operating segment, ten businesses included in the First Aid and Safety Services reportable operating segment and seven businesses included in All Other.

During the fiscal year ended May 31, 2021, Cintas acquired two business included in the Uniform Rental and Facility Services reportable operating segment, three businesses included in the First Aid and Safety Services reportable operating segment and five businesses included in All Other.

The following summarizes the aggregate purchase price and fair value allocations for all businesses acquired during the fiscal year ended May 31:

(In thousands) 2022 2021

Fair value of tangible assets acquired $ 37,412 $ 609

Fair value of service contracts acquired 44,738 5,466

Fair value of other intangibles acquired 6,045 552

Fair value of operating lease right-of-use assets, net 16,882 —

Net goodwill recognized 144,105 8,352

Total fair value of assets acquired 249,182 14,979

Fair value of liabilities assumed ( 23,720 ) ( 4,941 )

Fair value of operating lease liabilities ( 17,734 ) —

Total fair value of liabilities assumed ( 41,454 ) ( 4,941 )

Total consideration for acquisitions, net of cash acquired $ 207,728 $ 10,038

Employee Benefit Plans

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The measurement of the PBO is based on the Company’s estimates and actuarial valuations.

The net pension liability at May 31, 2021 and 2020 is included in long-term accrued liabilities on the consolidated balance sheets.

Unrecognized differences between actual amounts and estimates based on actuarial assumptions are included in accumulated other comprehensive income (loss) on our consolidated balance sheets.

The difference between actual amounts and estimates based on actuarial assumptions are recognized in other comprehensive income (loss), net of tax, in the period in which they occur.

The estimated amortization from accumulated other comprehensive income (loss) into net periodic benefit cost during fiscal year 2022 is immaterial.

The estimated amortization from accumulated other comprehensive income (loss) into net periodic benefit cost during fiscal year 2023 is not material.

Obligations and Funded Status at May 31:

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Interest cost 2,148 2,050

Actuarial (gain) loss ( 4,460 ) 13,662

Actuarial gain ( 14,044 ) ( 4,460 )

Benefits paid ( 3,286 ) ( 3,219 )

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Fair value of plan assets, beginning of year $ 78,244 $ 68,341

Actual return on plan assets 9,509 7,097

Actual (loss) return on plan assets ( 8,322 ) 9,509

Employer contributions 87 3,613

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Discount rate 4.11 % 2.83 %

Rate of compensation increase N/A N/A

The following weighted average assumptions were used to determine net periodic pension benefit for the Pension Plan for the fiscal years ended May 31:

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Expected return on plan assets 4.80 % 4.25 %

Rate of compensation increase N/A N/A

The asset allocations in the Pension Plan at May 31, 2021 and 2020 are as follows:

The asset allocations in the Pension Plan are as follows at May 31:

2022 2022 2021

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Our investment committee, assisted by outside consultants, evaluates the objectives and investment policies concerning our long-term investment goals and asset allocation strategies.

Plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification and investment return over the long term.

Pension Plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification and investment return over the long term.

To develop the expected long-term rate of return on asset assumptions, we consider the historical returns and future expectations of returns for each asset class, as well as the target asset allocation, changes in investments expenses and investment goals of the pension portfolio.

This resulted in the selection of 4.25 % expected return on plan assets for fiscal year 2021 and 4.80 % expected return on plan assets for fiscal year 2020.

This resulted in the selection of 4.80 % expected return on Pension Plan assets for fiscal year 2022 and 4.25 % expected return on Pension Plan assets for fiscal year 2021.

The investment goals are (1) to meet or exceed the assumed actuarial rate of return over the long term within reasonable and prudent levels of risk, and (2) to preserve the real purchasing power of assets to meet future obligations.

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Furthermore, while we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the consolidated balance sheet date.

Information on the Pension Plan investments, using the fair value hierarchy discussed in Note 1 entitled Significant Accounting Polices, is as follows as of May 31:

Information on the Pension Plan assets, using the fair value hierarchy discussed in Note 1 entitled Significant Accounting Polices, is as follows as of May 31:

(In thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

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Total $ 40,864 $ 25,859 $ — $ 66,723 $ 46,982 $ 31,262 $ — $ 78,244

We expect to make contributions of approximately $ 0.3 million to the Pension Plan during the next 12 months.

We expect to make no contributions to the Pension Plan during the next 12 months.

The Pension Plan benefit payments expected to be paid for each of the next five years and thereafter are $ 4.2 million, $ 4.4 million, $ 4.5 million, $ 4.7 million, $ 4.8 million and $ 61.9 million, respectively.

Future changes in plan asset returns, assumed discount rates and various other factors related to the Pension Plan will impact future net periodic pension benefit (cost) and liabilities.

We cannot predict the impact of these changes in the future, and any changes may have a material impact on our consolidated results of operations and consolidated financial position.

Future changes in plan asset returns, assumed discount rates and various other factors related to the Pension Plan will impact future net periodic pension benefit (cost) and liabilities, however, any changes would not have a material impact on our consolidated results of operations and consolidated financial position.

Cintas also administers a pension plan that was assumed in a previous acquisition and has historically been deemed immaterial for disclosure purposes.

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Total contributions, which approximate cost, were $ 3.4 million, $ 3.1 million and $ 2.6 million for the fiscal years ended May 31, 2022, 2021 and 2020, respectively.

The expense associated with these contributions was recorded in selling and administrative expenses on the consolidated statements of income.

Cintas has a supplemental executive retirement plan (SERP) subject to Section 409A of the Internal Revenue Code for the benefit of certain highly compensated Cintas employee-partners.

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Basic and diluted earnings per share from discontinued operations were calculated using the two-class method.

There were no discontinued operations for the fiscal year ended May 31, 2021.

Basic earnings per share from discontinued operations rounded to $ 0.00 and $ 0.02 for the fiscal years ended May 31, 2020 and 2019, respectively.

Diluted earnings per share from discontinued operations rounded to $ 0.00 and $ 0.02 for the fiscal years ended May 31, 2020 and 2019, respectively.

There were no discontinued operations for the fiscal years ended May 31, 2022 and 2021.

Basic and diluted earnings per share from discontinued operations rounded to $ 0.00 for the fiscal year ended May 31, 2020.

For the fiscal years ended May 31, 2022, 2021 and 2020, options granted to purchase 0.5 million, 0.2 million and 0.2 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share.

The exercise prices of these options were greater than the average market price of the common shares (anti-dilutive).

On August 2, 2016, we announced that the Board of Directors authorized a $ 500.0 million share buyback program.

This program was completed in November 2018.

On October 30, 2018, we announced that the Board of Directors authorized a $ 1.0 billion share buyback program.

This program was completed in January 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 30, 2018, we announced that the Board of Directors authorized a $ 1.0 billion share buyback program, which was completed during the third quarter of fiscal 2021.

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

On July 27, 2021, we announced that 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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Price per Share Purchase

August 2, 2016 — $ — $ — — $ — $ — 2,130 $ 192.55 $ 410,003

October 30, 2018 — $ — $ — 190 $ 319.88 $ 60,877 1,607 $ 246.19 $ 395,681

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 1,607 $ 246.19 $ 395,681

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 has 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 to the buyback programs, Cintas acquired shares of Cintas common stock in satisfaction of employee payroll taxes due on restricted stock awards that vested during the fiscal year.

For the fiscal year ended May 31, 2021, Cintas acquired 0.2 million shares 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 at an average price of $ 260.89 per share for a total purchase price of $ 68.8 million.

For the fiscal year ended May 31, 2019, Cintas acquired 0.3 million shares at an average price of $ 204.50 per share for a total purchase price of $ 62.9 million.

Shares acquired for

taxes due (1)

305 $ 397.16 $ 121,224 246 $ 302.52 $ 74,465 264 $ 260.89 $ 68,837

Total repurchase of

Cintas common

stock $ 1,525,873 $ 554,121 $ 464,518

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

In addition to the share buyback activity presented above, Cintas acquired shares of Cintas common stock, via non-cash transactions, in connection with net-share settlements of option exercises.

During the fiscal year ended May 31, 2022, Cintas acquired 0.1 million shares of Cintas common stock via such non-cash transactions at an average price of $ 402.73 for a total non-cash value of $ 28.7 million.

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 per share, for a total purchase price of $ 1.0 billion.

Stock-Based Compensation

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Cintas accounts for forfeitures of stock-based awards as they occur.

The total income tax benefit recognized in the consolidated statements of income for share-based compensation arrangements for continuing operations was $ 28.6 million, $ 29.2 million and $ 34.0 million for the fiscal years ended May 31, 2021, 2020 and 2019, respectively.

The total income tax benefit recognized in the consolidated statements of income for share-based compensation arrangements was $ 27.9 million, $ 28.6 million and $ 29.2 million for the fiscal years ended May 31, 2022, 2021 and 2020, respectively.

Stock Options

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The option awards generally have 10-year terms with graded vesting in years 3 through 5 based on continuous service during that period.

The majority of stock option grants occur in the first quarter of each fiscal year in connection with the annual grant, which is earned in the prior fiscal year.

Cintas recognizes compensation expense for these options using the straight-line recognition method over the vesting period.

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Currency Unrealized

(Loss) Income

Rate Hedges Other Total

Balance at June 1, 2020 $ ( 26,343 ) $ ( 112,718 ) $ ( 14,319 ) $ ( 153,380 )

Cumulative effect of change in accounting principle (1)

— 2,058 ( 83 ) 1,975

Other comprehensive loss before reclassifications ( 11,321 ) ( 94,954 ) ( 8,495 ) ( 114,770 )

Other comprehensive income before reclassifications 68,182 106,843 10,676 185,701

Amounts reclassified from accumulated other

comprehensive income (loss) — ( 1,433 ) — ( 1,433 )

Net current period other comprehensive loss ( 11,321 ) ( 96,387 ) ( 8,495 ) ( 116,203 )

Net current period other comprehensive income 68,182 105,410 10,676 184,268

Balance at May 31, 2021 41,839 ( 7,308 ) ( 3,643 ) 30,888

Other comprehensive income before reclassifications 68,182 106,843 10,676 185,701

Other comprehensive (loss) income before

reclassifications ( 24,833 ) 102,057 1,866 79,090

Amounts reclassified from accumulated other

comprehensive income (loss) — ( 2,061 ) — ( 2,061 )

Net current period other comprehensive income 68,182 105,410 10,676 184,268

Net current period other comprehensive (loss) income ( 24,833 ) 99,996 1,866 77,029

Balance at May 31, 2022 $ 17,006 $ 92,688 $ ( 1,777 ) $ 107,917

(1) Effective June 1, 2019, Cintas adopted ASU 2018-02, on a prospective basis, which resulted in this reclassification adjustment of the stranded tax effects from retained earnings to accumulated other comprehensive income that was determined using a specific identification method.

The following table summarizes the reclassifications out of accumulated other comprehensive income (loss) during the fiscal years ended May 31:

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Selling and administrative expenses 1,583,791 231,769 255,492 — 2,071,052

G&K Services, Inc.

integration expenses 14,410 — — — 14,410

Gain on sale of a cost method investment — — — 69,373 69,373

Interest expense, net — — — 104,405 104,405

7 unchanged sentences

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 8. Financial Statements and Supplementary Data