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Item 1. Financial Statements

2022-10-06 compared with 2022-04-07 · 97 added, 253 removed, 457 unchanged (43% of the section changed)

3 unchanged sentences

(In thousands except per share data)

Three Months Ended Nine Months Ended

February 28, 2022 February 28, 2021 February 28, 2022 February 28, 2021

Three Months Ended

August 31, 2022 August 31, 2021

Uniform rental and facility services $ 1,697,772 $ 1,508,176

19 unchanged sentences

(In thousands)

Three Months Ended Nine Months Ended

2022 February 28,

2021 February 28,

2022 February 28,

Three Months Ended

2022 August 31,

Net income $ 351,689 $ 331,179

Other comprehensive income (loss), net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments

( 19,206 ) ( 24,016 )

Change in fair value of interest rate lock

agreements, net of tax expense

of $ 11,832 , $ 25,689 , $ 3,022 and

$ 34,761 , respectively

Change in fair value of interest rate lock agreements, net of tax

expense (benefit) of $ 320 and $( 12,554 ), respectively

934 ( 36,679 )

Amortization of interest rate lock

agreements, net of tax benefit of $ 149 ,

$ 116 , $ 445 and $ 347 , respectively

Amortization of interest rate lock agreements, net of tax expense

of $ 512 and $ 148 , respectively

( 1,521 ) ( 459 )

Other comprehensive income (loss), net of

tax expense of $ 11,981 , $ 25,805 , $ 3,467

and $ 35,108 , respectively

Other comprehensive loss, net of tax expense (benefit)

of $ 832 and $( 12,406 ), respectively

( 19,793 ) ( 61,154 )

24 unchanged sentences

Accrued liabilities 543,566 588,948

Income taxes, current 35,783 —

Operating lease liabilities, current 43,539 43,872

28 unchanged sentences

and Paid-In Capital Retained

Earnings Other

Earnings Accumulated

Comprehensive

11 unchanged sentences

Balance at August 31, 2022 191,654 $ 1,878,837 $ 8,953,391 $ 88,124 ( 90,122 ) $ ( 7,690,726 ) $ 3,229,626

Net income — — 294,669 — — — 294,669

Comprehensive income, net of tax — — — 3,008 — — 3,008

Dividends — — ( 98,961 ) — — — ( 98,961 )

Stock-based compensation — 24,397 — — — — 24,397

Vesting of stock-based compensation awards 31 — — — — — —

Stock options exercised 317 36,302 — — — — 36,302

Repurchase of common stock — — — — ( 13 ) ( 5,491 ) ( 5,491 )

Balance at November 30, 2021 190,476 $ 1,686,293 $ 8,305,076 $ ( 27,258 ) ( 86,811 ) $ ( 6,400,984 ) $ 3,563,127

Net income — — 315,448 — — — 315,448

Comprehensive income, net of tax — — — 39,405 — — 39,405

Dividends — — ( 98,197 ) — — — ( 98,197 )

Stock-based compensation — 22,794 — — — — 22,794

Vesting of stock-based compensation awards 2 — — — — — —

Stock options exercised 215 20,438 — — — — 20,438

Repurchase of common stock — — — — ( 1,466 ) ( 569,115 ) ( 569,115 )

Balance at February 28, 2022 190,693 $ 1,729,525 $ 8,522,327 $ 12,147 ( 88,277 ) $ ( 6,970,099 ) $ 3,293,900

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

and Paid-In Capital Retained

Earnings Other

Earnings Accumulated

Comprehensive

Loss Treasury Stock Total

Income (Loss) Treasury Stock Total

Shareholders'

2 unchanged sentences

Net income — — 331,179 — — — 331,179

Comprehensive income, net of tax — — — 37,430 — — 37,430

Stock-based compensation — 29,055 — — — — 29,055

Vesting of stock-based compensation awards 568 — — — — — —

Stock options exercised 795 72,123 — — — — 72,123

Repurchase of common stock — — — — ( 230 ) ( 69,011 ) ( 69,011 )

Balance at August 31, 2020 188,156 $ 1,375,388 $ 7,596,514 $ ( 115,950 ) ( 83,608 ) $ ( 5,251,148 ) $ 3,604,804

Net income — — 284,857 — — — 284,857

Comprehensive income, net of tax — — — 18,543 — — 18,543

Dividends — — ( 371,827 ) — — — ( 371,827 )

Stock-based compensation — 28,547 — — — — 28,547

Vesting of stock-based compensation awards 21 — — — — — —

Stock options exercised 424 35,407 — — — — 35,407

Repurchase of common stock — — — — ( 7 ) ( 2,371 ) ( 2,371 )

Balance at November 30, 2020 188,601 $ 1,439,342 $ 7,509,544 $ ( 97,407 ) ( 83,615 ) $ ( 5,253,519 ) $ 3,597,960

Net income — — 258,384 — — — 258,384

Comprehensive income, net of tax — — — 84,439 — — 84,439

Comprehensive loss, net of tax — — — ( 61,154 ) — — ( 61,154 )

Dividends — — ( 98,826 ) — — — ( 98,826 )

3 unchanged sentences

Repurchase of common stock — — — — ( 1,788 ) ( 659,235 ) ( 659,235 )

Balance at February 22, 2021 188,914 $ 1,477,680 $ 7,688,425 $ ( 12,968 ) ( 83,875 ) $ ( 5,336,627 ) $ 3,816,510

Balance at August 31, 2021 190,128 $ 1,625,594 $ 8,109,368 $ ( 30,266 ) ( 86,798 ) $ ( 6,395,493 ) $ 3,309,203

See accompanying notes.

2 unchanged sentences

(In thousands)

Nine Months Ended

February 28, 2022 February 28, 2021

Three Months Ended

August 31, 2022 August 31, 2021

Cash flows from operating activities:

4 unchanged sentences

Stock-based compensation 26,282 36,496

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

Gain on sale of operating assets — ( 12,178 )

26 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 1,275 ) ( 1,627 )

Net (decrease) increase in cash and cash equivalents ( 409,504 ) 408,209

Net decrease in cash and cash equivalents ( 15,913 ) ( 413,891 )

Cash and cash equivalents at beginning of period 90,471 493,640

7 unchanged sentences

GAAP) have been condensed or omitted pursuant to such rules and regulations.

While we believe that the disclosures are adequately presented, we suggest that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2021.

A summary of our significant accounting policies is presented beginning on page 41 of that report.

4 unchanged sentences

Inventory is comprised of the following:

(In thousands) February 28,

(In thousands) August 31,

Raw materials $ 25,728 $ 19,071

2 unchanged sentences

$ 473,888 $ 472,150

Inventories are recorded net of reserves for obsolete inventory (excess and slow-moving) of $ 103.0 million and $ 111.0 million at February 28, 2022 and May 31, 2021, respectively.

Inventories are recorded net of reserves for obsolete inventory (excess and slow-moving) of $ 89.1 million and $ 100.3 million at August 31, 2022 and May 31, 2022, respectively.

The inventory obsolescence reserve is determined by specific identification, as well as an estimate based on Cintas' historical rates of obsolescence.

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.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation.

The reclassification has been reflected in the consolidated condensed balance sheet and consolidated condensed statement of shareholders' equity for the fiscal year ended May 31, 2021 and the three and nine months ended February 28, 2021, to combine common stock and paid-in capital for presentation purposes.

These reclassifications had no effect on the Company's reported results of operations.

New Accounting Pronouncements

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 Cintas' consolidated condensed financial statements.

There are no new accounting pronouncements recently issued or newly effective that had, or are expected to have, a material impact on Cintas' consolidated condensed financial statements.

Note 2 - Revenue Recognition

The following table presents Cintas' total revenue disaggregated by operating segment:

Three Months Ended Nine Months Ended

(In thousands) February 28,

2022 February 28,

2021 February 28,

2022 February 28,

Uniform Rental and

Facility Services $ 1,553,320 79.2 % $ 1,417,865 79.8 % $ 4,596,767 79.5 % $ 4,222,764 80.0 %

First Aid and Safety

Services 212,958 10.9 % 198,474 11.2 % 614,234 10.6 % 597,373 11.3 %

Fire Protection

Services 128,727 6.6 % 110,212 6.2 % 380,199 6.6 % 322,913 6.1 %

The following table presents Cintas' total revenue disaggregated by operating segment for the three months ended August 31:

(In thousands) 2022 2021

Uniform Rental and Facility Services $ 1,697,772 78.4 % $ 1,508,176 79.5 %

First Aid and Safety Services 234,161 10.8 % 199,116 10.5 %

Fire Protection Services 151,847 7.0 % 128,218 6.8 %

Uniform Direct Sales 82,674 3.8 % 61,440 3.2 %

17 unchanged sentences

The Company's performance period generally corresponds with the monthly invoice period.

No constraints on our revenue recognition were applied during the three or nine months ended February 28, 2022 or 2021.

No constraints on our revenue recognition were applied during the three months ended August 31, 2022 or 2021.

The Company reassesses these estimates during each reporting period.

3 unchanged sentences

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

Additionally, 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.

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

5 unchanged sentences

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 ASC 606, "Revenue from Contracts with Customers (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 condensed 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 Accounting Standards Codification 606, "Revenue from Contracts with Customers (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 condensed 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 standard or the amortization period of the asset would have been one year or less.

3 unchanged sentences

The current portion is included in prepaid expenses and other current assets and the noncurrent portion is included in other assets, net on the Company's consolidated condensed balance sheets.

As of February 28, 2022, the current and noncurrent assets related to deferred commissions totaled $ 82.8 million and $ 232.7 million, respectively.

As of August 31, 2022, the current and noncurrent assets related to deferred commissions totaled $ 86.1 million and $ 239.2 million, respectively.

As of May 31, 2022, the current and noncurrent assets related to deferred commissions totaled $ 83.7 million and $ 232.2 million, respectively.

We recorded amortization expense related to deferred commissions of $ 22.0 million and $ 20.9 million during the three months ended February 28, 2022 and 2021, respectively.

During the nine months ended February 28, 2022 and 2021, we recorded amortization expense related to deferred commissions of $ 65.1 million and $ 62.0 million, respectively.

We recorded amortization expense related to deferred commissions of $ 22.4 million and $ 21.4 million during the three months ended August 31, 2022 and 2021, respectively.

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

9 unchanged sentences

The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Operating lease costs, including short-term lease expense and variable lease costs which were immaterial in both periods, were $ 19.0 million and $ 17.7 million for the three months ended February 28, 2022 and 2021, respectively.

For the nine months ended February 28, 2022 and 2021, operating lease costs, including short-term lease expense and variable lease costs which were immaterial in both periods, were $ 55.2 million and $ 52.9 million, respectively.

The following table provides supplemental information related to the Company's consolidated condensed statements of cash flows for the nine months ended February 28:

Operating lease costs, including short-term lease expense and variable lease costs which were immaterial in both periods, were $ 19.5 million and $ 18.1 million for the three months ended August 31, 2022 and 2021, respectively.

The following table provides supplemental information related to the Company's consolidated condensed statements of cash flows for the three months ended August 31:

(In thousands) 2022 2021

2 unchanged sentences

operating lease liabilities $ 15,836 $ 2,792

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:

1 unchanged sentence

Weighted-average discount rate - operating leases 2.37 % 2.20 %

The contractual future minimum lease payments of Cintas' operating lease liabilities by fiscal year are as follows as of February 28, 2022:

The contractual future minimum lease payments of Cintas' operating lease liabilities by fiscal year are as follows as of August 31, 2022:

(In thousands)

2022 (remaining three months)

2023 (remaining nine months)

Thereafter 36,036

5 unchanged sentences

These financial instruments measured at fair value on a recurring basis are summarized below:

As of February 28, 2022

As of August 31, 2022

(In thousands) Level 1 Level 2 Level 3 Fair Value

Cash and cash equivalents $ 74,558 $ — $ — $ 74,558

Prepaid expenses and other current assets:

Interest rate lock agreements — 22,645 — 22,645

Other assets, net:

1 unchanged sentence

Total assets at fair value $ 74,558 $ 58,131 $ — $ 132,689

Current accrued liabilities:

Interest rate lock agreements $ — $ 52,540 $ — $ 52,540

Long-term accrued liabilities:

Interest rate lock agreements — 793 — 793

Total liabilities at fair value $ — $ 53,333 $ — $ 53,333

As of May 31, 2022

4 unchanged sentences

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

Cintas’ cash and cash equivalents are generally classified within Level 1 or Level 2 of the fair value hierarchy.

4 unchanged sentences

The fair value was determined by comparing the locked rates against the benchmarked treasury rate.

No other amounts included in prepaid expenses and other current assets, other assets, net, current accrued liabilities or long-term accrued liabilities are recorded at fair value on a recurring basis.

No other amounts included in other assets, net, are recorded at fair value on a recurring basis.

The methods described above may produce a fair value that may not be indicative of net realizable value or reflective of future fair values.

2 unchanged sentences

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

The Company's acquisition of the remaining interest of an equity method investment during the three months ended February 28, 2022 was recorded at fair value.

The Company's acquisition of the remaining interest of an equity method investment during fiscal 2022 was recorded at fair value.

See Note 10 entitled Acquisitions for additional information.

1 unchanged sentence

Cintas' investments are summarized as follows:

(In thousands) February 28,

(In thousands) August 31,

Cash surrender value of insurance policies $ 233,650 $ 237,136

Equity method investments 3,522 19,388

Cost method investments 2,163 3,167

Other investments 5,685 5,737

Total investments $ 239,335 $ 242,873

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

For the three and nine months ended February 28, 2022 and 2021, no impairment losses were recorded.

During the three months ended February 28, 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 and is no longer included in the table above.

See Note 10 entitled Acquisitions for more information.

For the three months ended August 31, 2022 and 2021, no impairment losses were recorded.

Note 6 - Earnings Per Share

Cintas uses the two-class method to calculate basic and diluted earnings per share as a result of outstanding participating securities in the form of restricted stock awards.

The following tables set forth the computation of basic and diluted earnings per share using the two-class method for amounts attributable to Cintas’ common shares.

Three Months Ended Nine Months Ended

The following tables set forth the computation of basic and diluted earnings per share using the two-class method for amounts attributable to Cintas’ common shares for the three months ending August 31:

Basic Earnings per Share

(In thousands except per share data)

February 28, 2022 February 28, 2021 February 28, 2022 February 28, 2021

Net income $ 351,689 $ 331,179

4 unchanged sentences

Basic earnings per share $ 3.45 $ 3.19

Three Months Ended Nine Months Ended

Diluted Earnings per Share

(In thousands except per share data)

February 28, 2022 February 28, 2021 February 28, 2022 February 28, 2021

Net income $ 351,689 $ 331,179

4 unchanged sentences

Effect of dilutive securities – employee stock options

2,253 2,732 2,458 2,914

Diluted weighted average common shares outstanding

1 unchanged sentence

Diluted earnings per share $ 3.39 $ 3.11

For the three months ended February 28, 2022 and 2021, options granted to purchase 0.6 million and 0.1 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share.

For the nine months ended February 28, 2022 and 2021, options granted to purchase 0.5 million and 0.2 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share.

For the three months ended August 31, 2022 and 2021, options granted to purchase 0.8 million and 0.1 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 stock (anti-dilutive).

On October 30, 2018, Cintas 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 that the Board of Directors authorized a $ 1.0 billion share buyback program, which was completed during the first quarter of fiscal 2022.

From the inception of the October 29, 2019 share buyback program through July 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.

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

From the inception of the July 27, 2021 share buyback program through August 31, 2022, Cintas purchased a total of 2.7 million shares of Cintas common stock at an average price of $ 385.66 per share for a total purchase price of $ 1.0 billion.

On July 26, 2022, Cintas announced that the Board of Directors authorized a new $ 1.0 billion share buyback program, which does not have an expiration date.

The following tables summarize the share buyback activity by program and period:

Three Months Ended Nine Months Ended

February 28, 2022 February 28, 2022

The following tables summarize the share buyback activity by program for the three months ended August 31:

Buyback Activity

5 unchanged sentences

July 27, 2021 532 396.39 210,751 — — —

1,386 $ 388.03 $ 537,655 2,976 $ 375.94 $ 1,118,875

Shares acquired for taxes due (1)

50 $ 390.60 $ 19,460 261 $ 394.84 $ 102,966

Total repurchase of Cintas

common stock $ 557,115 $ 1,221,841

Three Months Ended Nine Months Ended

February 28, 2021 February 28, 2021

Buyback Activity

(In thousands except per share data)

per Share Purchase

Price Shares Avg.

per Share Purchase

October 30, 2018 190 $ 319.88 $ 60,877 190 $ 319.88 $ 60,877

October 29, 2019 66 $ 321.51 $ 21,080 66 $ 321.51 $ 21,080

July 26, 2022 — — — — — —

532 $ 396.39 $ 210,751 1,590 $ 365.41 $ 581,220

3 unchanged sentences

common stock $ 320,334 $ 659,235

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

(1) Shares of Cintas common 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 three and nine months ended February 28, 2022, Cintas acquired less than 0.1 million shares of Cintas common stock via such non-cash transactions at an average price of $ 391.03 for a total non-cash value of $ 12.0 million.

In the period subsequent to February 28, 2022, through April 7, 2022, we purchased 0.1 million shares of Cintas common stock at an average price of $ 368.75 for a total purchase price of $ 46.5 million.

From the inception of the July 27, 2021 program through April 7, 2022, Cintas has purchased 1.5 million shares of Cintas common stock in the aggregate, at an average price of $ 386.42 per share, for a total purchase price of $ 584.2 million.

Note 7 - Goodwill, Service Contracts and Other Assets

Changes in the carrying amount of goodwill and service contracts for the nine months ended February 28, 2022, by reportable operating segment and All Other, are as follows:

During the three months ended August 31, 2022, Cintas acquired 0.2 million shares of Cintas common stock via such non-cash transactions at an average price of $ 411.93 for a total non-cash value of $ 79.6 million.

Note 7 - Goodwill, Service Contracts and Other Assets, Net

Changes in the carrying amount of goodwill and service contracts for the three months ended August 31, 2022, by reportable operating segment and All Other, are as follows:

(in thousands)

5 unchanged sentences

Foreign currency translation ( 9,265 ) ( 820 ) ( 32 ) ( 10,117 )

Balance as of February 28, 2022 $ 2,634,621 $ 276,100 $ 122,017 $ 3,032,738

Balance as of August 31, 2022 $ 2,626,486 $ 288,232 $ 122,560 $ 3,037,278

Service Contracts

7 unchanged sentences

Foreign currency translation ( 1,793 ) ( 81 ) — ( 1,874 )

Balance as of February 28, 2022 $ 361,095 $ 22,325 $ 18,946 $ 402,366

Information regarding Cintas’ service contracts and other assets is as follows:

As of February 28, 2022 As of May 31, 2021

Balance as of August 31, 2022 $ 338,313 $ 23,799 $ 17,267 $ 379,379

Information regarding Cintas’ service contracts and other assets, net is as follows:

As of August 31, 2022 As of May 31, 2022

(In thousands) Carrying

9 unchanged sentences

Other 128,491 21,024 107,467 125,941 20,917 105,024

Total other assets $ 671,749 $ 365,095 $ 306,654 $ 609,133 $ 298,719 $ 310,414

(1) The current portion of capitalized contract costs, included in prepaid expenses and other current assets on the consolidated condensed balance sheets as of February 28, 2022 and May 31, 2021, is $ 82.8 million and $ 79.4 million, respectively.

Amortization expense for service contracts and other assets was $ 38.0 million and $ 35.6 million for the three months ended February 28, 2022 and 2021, respectively.

For the nine months ended February 28, 2022 and 2021, amortization expense for service contracts and other assets was $ 111.4 million and $ 106.0 million, respectively.

Total other assets, net $ 760,384 $ 406,968 $ 353,416 $ 728,160 $ 384,050 $ 344,110

(1) The current portion of capitalized contract costs, included in prepaid expenses and other current assets on the consolidated condensed balance sheets as of August 31, 2022 and May 31, 2022, is $ 86.1 million and $ 83.7 million, respectively.

Amortization expense for service contracts and other assets, was $ 36.4 million and $ 36.5 million for the three months ended August 31, 2022 and 2021, respectively.

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

As of February 28, 2022, the estimated future amortization expense for service contracts and other assets, excluding any future acquisitions and commissions to be earned, is as follows:

As of August 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)

2022 (remaining three months)

2023 (remaining nine months)

Thereafter 181,622

5 unchanged sentences

Issued Fiscal Year

Maturity February 28,

Maturity August 31,

Debt due within one year

Senior notes 4.30 % 2012 2022 $ — $ 250,000

Senior notes 2.90 % 2017 2022 650,000 650,000

Senior notes 3.25 % 2013 2023 300,000 —

Commercial paper 2.69 % (1)

2023 2023 $ 457,200 $ 261,200

Senior notes (2)

2.78 % 2013 2023 50,272 50,380

Debt issuance costs ( 5 ) ( 6 )

2 unchanged sentences

Senior notes (3)

Senior notes (2)

3.11 % 2015 2025 $ 50,881 $ 50,965

Senior notes 3.45 % 2022 2025 400,000 400,000

3.11 % 2015 2025 51,049 51,301

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

Senior notes 4.00 % 2022 2032 800,000 800,000

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

Debt issuance costs ( 16,279 ) ( 17,033 )

1 unchanged sentence

(1) Variable rate debt instrument.

The rate presented is the variable borrowing rate at February 28, 2022.

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

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

7 unchanged sentences

The fair value of the long-term debt is estimated using Level 2 inputs based on general market prices.

The carrying value and fair value of Cintas' debt as of February 28, 2022 were $ 2,859.0 million and $ 2,994.0 million, respectively, and as of May 31, 2021 were $ 2,550.0 million and $ 2,788.8 million, respectively.

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 the nine months ended February 28, 2022, Cintas issued $ 559.2 million, net of commercial paper.

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 carrying value and fair value of Cintas' debt as of August 31, 2022 were $ 3,007.2 million and $ 2,990.2 million, respectively, and as of May 31, 2022 were $ 2,811.2 million and $ 2,862.2 million, respectively.

During the three months ended August 31, 2022 and 2021, Cintas issued $ 196.0 million and $ 326.0 million, net of commercial paper, respectively.

The credit agreement that supports our commercial paper program has a revolving credit facility with a capacity of $ 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 February 28, 2022, there was $ 559.2 million of commercial paper outstanding with a weighted average interest rate of 0.43 % and maturity dates less than 120 days and no borrowings on our revolving credit facility.

As of August 31, 2022, there was $ 457.2 million of commercial paper outstanding with a weighted average interest rate of 2.69 % and maturity dates less than 120 days and no borrowings on our revolving credit facility.

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.

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.

2 unchanged sentences

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 2013, fiscal 2017 and fiscal 2022.

The amortization of the interest rate locks resulted in a decrease to other comprehensive income of $ 0.5 million and $ 0.4 million for the three months ended February 28, 2022 and 2021, respectively.

For the nine months ended February 28, 2022 and 2021, the

amortization of the interest rate locks resulted in a decrease to other comprehensive income of $ 1.4 million and $ 1.1 million, respectively.

The amortization of the interest rate locks resulted in a decrease to other comprehensive income of $ 1.5 million and $ 0.5 million for the three months ended August 31, 2022 and 2021, respectively.

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

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

The notional and fair values of the outstanding interest rate locks, for forecasted debt issuances, are summarized as follows:

February 28, 2022 May 31, 2021

August 31, 2022 May 31, 2022

Fiscal Year of Issuance

(in thousands)

Value Prepaid expenses

current assets Other

assets, net Current

accrued liabilities Long-term

liabilities Other

assets, net Long-term

2022 $ 250,000 $ — $ — $ — $ 793 $ — $ —

assets, net Other

2022 $ 19,168 $ 18,331

2020 $ 38,963 $ 38,546

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 for the three and nine months ended February 28, 2022 or 2021.

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

These interest rate locks had no impact on net income or cash flows for the three months ended August 31, 2022 or 2021.

Cintas has certain covenants related to debt agreements.

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In the normal course of business, Cintas provides for uncertain tax positions and the related interest and adjusts its unrecognized tax benefits and accrued interest accordingly.

As of February 28, 2022 and May 31, 2021, recorded unrecognized tax benefits were $ 32.6 million and $ 34.2 million, respectively, and are included in long-term accrued liabilities on the consolidated condensed balance sheets.

As of August 31, 2022 and May 31, 2022, recorded unrecognized tax benefits were $ 26.0 million and $ 30.8 million, respectively, and are included in long-term accrued liabilities on the consolidated condensed balance sheets.

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.

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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 operations in any given period.

All United States federal income tax returns are closed to audit through fiscal 2017.

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

Cintas is currently in various audits in certain foreign jurisdictions and certain domestic states.

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

Cintas’ effective tax rate was 18.2 % and 14.4 % for the three months ended February 28, 2022 and 2021, respectively.

For the nine months ended February 28, 2022 and 2021, Cintas' effective tax rate was 15.8 % and 11.8 %, respectively.

Cintas’ effective tax rate was 14.8 % and 11.0 % for the three months ended August 31, 2022 and 2021, respectively.

The effective tax rate for all periods was impacted by certain discrete items (primarily the tax accounting for stock-based compensation).

In addition, the effective tax rate for the three and nine months ended February 28, 2022, included a one-time tax benefit from a gain on an equity method investment transaction.

The effective tax rate for the nine months ended February 28, 2021, included a one-time tax benefit on the sale of certain operating assets.

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 acquisition operates 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 in the three and nine months ended February 28, 2022.

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 was recorded as a reduction in selling and administrative expenses in fiscal 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 estimate are reasonable and based on the best information available at the valuation date.

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.

During the three months ended August 31, 2022, no material adjustments were made to the preliminary purchase price allocation.

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.

None of the goodwill is expected to be deductible for income tax purposes.

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:

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

Other Acquisitions During Fiscal 2022

The purchase price paid for each acquisition in fiscal 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 nine months ended February 28, 2022, Cintas acquired three businesses included in the Uniform Rental and Facility Services reportable operating segment, seven businesses included in the First Aid and Safety Services reportable operating segment and six businesses included in All Other.

During the nine months ended February 28, 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 three businesses included in All Other.

The following summarizes the aggregate purchase price and fair value allocations for all businesses acquired during the nine months ended February 28:

(In thousands) 2022 2021

Fair value of tangible assets acquired $ 36,736 $ 476

Fair value of service contracts acquired 41,560 4,203

Fair value of other intangibles acquired 5,439 432

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

Net goodwill recognized 132,206 5,850

Total fair value of assets acquired 232,823 10,961

Fair value of liabilities assumed ( 20,746 ) ( 3,391 )

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

Total fair value of liabilities assumed ( 38,480 ) ( 3,391 )

Total consideration for acquisitions, net of cash acquired $ 194,343 $ 7,570

Note 11 - Accumulated Other Comprehensive Income (Loss)

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(In thousands) Foreign

Currency Unrealized (Loss) Income

Currency Unrealized Income

on Interest Rate Locks Other Total

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

Other comprehensive loss before reclassifications ( 24,016 ) ( 36,679 ) — ( 60,695 )

Other comprehensive (loss) income before reclassifications ( 19,206 ) 934 — ( 18,272 )

Amounts reclassified from accumulated other comprehensive income (loss)

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Balance at August 31, 2022 $ ( 2,200 ) $ 92,101 $ ( 1,777 ) $ 88,124

Other comprehensive (loss) income before

reclassifications ( 7,472 ) 10,940 — 3,468

Amounts reclassified from accumulated other comprehensive income (loss)

— ( 460 ) — ( 460 )

Net current period other comprehensive (loss) income ( 7,472 ) 10,480 — 3,008

Balance at November 30, 2021 10,351 ( 33,966 ) ( 3,643 ) ( 27,258 )

Other comprehensive income before reclassifications 5,297 34,567 — 39,864

Amounts reclassified from accumulated other comprehensive income (loss)

— ( 459 ) — ( 459 )

Net current period other comprehensive income 5,297 34,108 — 39,405

Balance at February 28, 2022 $ 15,648 $ 142 $ ( 3,643 ) $ 12,147

(In thousands) Foreign

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Balance at June 1, 2021 $ 41,839 $ ( 7,308 ) $ ( 3,643 ) $ 30,888

Other comprehensive income before reclassifications 26,946 10,842 — 37,788

Other comprehensive loss before reclassifications ( 24,016 ) ( 36,679 ) — ( 60,695 )

Amounts reclassified from accumulated other comprehensive income (loss)

— ( 459 ) — ( 459 )

Net current period other comprehensive income 26,946 10,484 — 37,430

Net current period other comprehensive loss ( 24,016 ) ( 37,138 ) — ( 61,154 )

Balance at August 31, 2021 $ 17,823 $ ( 44,446 ) $ ( 3,643 ) $ ( 30,266 )

Other comprehensive income before reclassifications 2,960 15,942 — 18,902

Amounts reclassified from accumulated other comprehensive income (loss)

— ( 359 ) — ( 359 )

Net current period other comprehensive income 2,960 15,583 — 18,543

Balance at November 30, 2020 3,563 ( 86,651 ) ( 14,319 ) ( 97,407 )

Other comprehensive income before reclassifications 8,947 75,850 — 84,797

Amounts reclassified from accumulated other comprehensive income (loss)

— ( 358 ) — ( 358 )

Net current period other comprehensive income 8,947 75,492 — 84,439

Balance at February 28, 2021 $ 12,510 $ ( 11,159 ) $ ( 14,319 ) $ ( 12,968 )

The following table summarizes the reclassifications out of accumulated other comprehensive income (loss):

The following table summarizes the reclassifications out of accumulated other comprehensive income (loss) for the three months ended August 31:

Details about Accumulated

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Statements of Income

Three Months Ended Nine Months Ended

(In thousands) February 28,

2022 February 28,

2021 February 28,

2022 February 28,

(In thousands) 2022 2021

Amortization of interest rate locks

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Other Corporate (1)

For the three months ended February 28, 2022

Revenue $ 1,553,320 $ 212,958 $ 194,264 $ — $ 1,960,542

Income (loss) before income taxes $ 355,990 $ 26,304 $ 25,311 $ ( 21,974 ) $ 385,631

For the three months ended February 28, 2021

Revenue $ 1,417,865 $ 198,474 $ 160,717 $ — $ 1,777,056

Income (loss) before income taxes $ 283,403 $ 25,820 $ 17,245 $ ( 24,465 ) $ 302,003

As of and for the nine months ended February 28, 2022

As of and for the three months ended August 31, 2022

Revenue $ 1,697,772 $ 234,161 $ 234,521 $ — $ 2,166,454

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Total assets $ 7,036,979 $ 680,864 $ 468,625 $ 74,558 $ 8,261,026

As of and for the nine months ended February 28, 2021

As of and for the three months ended August 31, 2021

Revenue $ 1,508,176 $ 199,116 $ 189,658 $ — $ 1,896,950

3 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-Q

Item 1. Financial Statements