What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-01-06 compared with 2022-10-06 · 150 added, 88 removed, 193 unchanged (55% of the section changed)

25 unchanged sentences

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

Revenue and income before income taxes for the three months ended August 31, 2022 and 2021, for the two reportable operating segments and All Other are presented in Note 1 2 entitled Segment Information of “Notes to Consolidated Condensed Financial Statements.”

Revenue and income before income taxes for the three and six months ended November 30, 2022 and 2021, for the two reportable operating segments and All Other are presented in Note 12 entitled Segment Information of “Notes to Consolidated Condensed Financial Statements.”

Consolidated Results

Three Months Ended August 31, 2022 Compared to Three Months Ended August 31, 2021

Total revenue increased 14.2% to $2,166.5 million for the three months ended August 31, 2022, compared to $1,897.0 million for the three months ended August 31, 2021.

Three Months Ended November 30, 2022 Compared to Three Months Ended November 30, 2021

Total revenue increased 13.1% to $2,174.9 million for the three months ended November 30, 2022, compared to $1,922.3 million for the three months ended November 30, 2021.

The organic revenue growth rate, which adjusts for the impact of acquisitions, divestitures and foreign currency exchange rate fluctuations, was 12.8%.

Revenue growth was positively impacted by 0.7% due primarily to acquisitions and negatively impacted by 0.4% due to foreign currency exchange rate fluctuations.

Uniform Rental and Facility Services reportable operating segment revenue was $1,697.8 million for the three months ended August 31, 2022, compared to $1,508.2 million for the same period in the prior fiscal year, which was an increase of 12.6%.

Uniform Rental and Facility Services reportable operating segment revenue was $1,710.0 million for the three months ended November 30, 2022, compared to $1,535.3 million for the same period in the prior fiscal year, which was an increase of 11.4%.

The organic revenue growth rate for this reportable operating segment was 11.3%.

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

Other revenue, consisting of revenue from the First Aid and Safety Services reportable operating segment and All Other, increased 20.6% for the three months ended August 31, 2022, compared to the same period in the prior fiscal year, from $388.8 million to $468.7 million.

Other revenue, consisting of revenue from the First Aid and Safety Services reportable operating segment and All Other, increased 20.1% for the three months ended November 30, 2022, compared to the same period in the prior fiscal year, from $387.0 million to $464.9 million.

The organic revenue growth rate for other revenue was 19.0%.

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

Cost of uniform rental and facility services increased $111.5 million, or 14.3%, for the three months ended August 31, 2022, compared to the three months ended August 31, 2021.

This change from the same period in the prior fiscal year was primarily due to higher Uniform Rental and Facility Services reportable operating segment sales volume, as well as increased energy costs and investments in labor and material cost to support increased revenue growth achieved during the three months ended August 31, 2022.

Cost of uniform rental and facility services increased $89.5 million, or 10.9%, for the three months ended November 30, 2022, compared to the three months ended November 30, 2021.

This change from the same period in the prior fiscal year was primarily due to higher Uniform Rental and Facility Services reportable operating segment sales volume, as well as increased energy costs and investments in material cost to support increased revenue growth achieved during the three months ended November 30, 2022.

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

Cost of other increased $32.7 million, or 15.2%, for the three months ended August 31, 2022, compared to the three months ended August 31, 2021, primarily due to increased sales volume in each of the underlying operating segments.

Cost of other improved as a percentage of revenue, decreasing from 55.3% for three months ended August 31, 2021 to 52.8% for the three months ended August 31, 2022.

The improvement in cost of sales as a percent to revenue was primarily due to favorable changes in the sales mix for each of the underlying operating segments as well as efficiencies gained in labor and delivery routes, partially offset by increases in energy costs.

Selling and administrative expenses increased $79.3 million, or 15.6%, in the three months ended August 31, 2022, compared to the same period of the prior fiscal year.

In the three months ended August 31, 2021, there was a gain on the sale of certain operating assets within the Uniform Direct Sales operating segment of $12.2 million, which was recorded as a reduction of selling and administrative expenses.

The remaining increase of $67.2 million, or 12.9%, was primarily due to increases in labor and other employee-partner expenses.

Selling and administrative expenses as a percent of revenue were 27.1% for the three months ended August 31, 2022, compared to 26.8% for the same period in the prior fiscal year.

The previously mentioned gain on the sale of certain operating assets of $12.2 million in the same period of the prior year reduced selling and administrative expenses by 70 basis points for such period.

The remaining selling and administrative expenses improved as a percent to revenue due to employee-partner related expenses increasing at a lower rate than revenue growth in the three months ended August 31, 2022.

Operating income was $440.1 million, or 20.3% of revenue, for the three months ended August 31, 2022, compared to $394.1 million, or 20.8% of revenue, for the three months ended August 31, 2021.

The decrease in operating income as a percent of revenue was due to a gain on the sale of certain operating assets within the Uniform Direct Sales operating segment of $12.2 million, or 70 basis points, recorded in the three months ended August 31, 2021.

The remaining operating income for the three months ended August 31, 2022 improved as a percent of revenue due to previously mentioned improvements in selling and administrative expenses as a percent of revenue.

Net interest expense (interest expense less interest income) was $27.6 million for the three months ended August 31, 2022, compared to $21.8 million for the three months ended August 31, 2021.

The change was primarily due to an increase in interest rates on commercial paper and an increase in outstanding short-term debt during the three months ended August 31, 2022 compared to the three months ended August 31, 2021.

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

Cost of other increased $25.8 million, or 11.7%, for the three months ended November 30, 2022, compared to the three months ended November 30, 2021, primarily due to increased sales volume in each of the underlying operating segments.

Cost of other improved as a percentage of revenue, decreasing from 56.8% for three months ended November 30, 2021 to 52.8% for the three months ended November 30, 2022.

The improvement in cost of sales as a percent to revenue was primarily due to favorable changes in the sales mix in the First Aid and Safety Services reportable operating segment as well as i mproved leverage of fixed costs for both the First Aid and Safety Services reportable operating segment and All Other.

Selling and administrative expenses increased $73.6 million, or 14.6%, in the three months ended November 30, 2022, compared to the same period of the prior fiscal year.

The increase was primarily due to increases in labor and other employee-partner expenses.

Selling and administrative expenses as a percent of revenue were 26.6% for the three months ended November 30, 2022, compared to 26.2% for the same period in the prior fiscal year.

Selling and administrative expenses increased as a percent to revenue due to employee-partner related expenses, including medical expenses, increasing at a faster rate than revenue growth in the three months ended November 30, 2022.

Operating income was $444.9 million, or 20.5% of revenue, for the three months ended November 30, 2022, compared to $381.2 million, or 19.8% of revenue, for the three months ended November 30, 2021.

The increase in operating income as a percent of revenue was due to previously mentioned improvements in cost of sales slightly offset by the increase in selling and administrative expenses as a percent of revenue.

Net interest expense (interest expense less interest income) was $28.6 million for the three months ended November 30, 2022, compared to $21.8 million for the three months ended November 30, 2021.

The change was primarily due to an increase in interest rates on commercial paper and an increase in outstanding commercial paper during the three months ended November 30, 2022 compared to the three months ended November 30, 2021.

Cintas’ effective tax rate was 22.1% and 18.0% for the three months ended November 30, 2022 and 2021, respectively.

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

Net income for the three months ended August 31, 2022, increased $20.5 million, or 6.2%, compared to the three months ended August 31, 2021.

Diluted earnings per share were $3.39 for the three months ended August 31, 2022, which was an increase of 9.0% compared to the same period in the prior fiscal year.

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

The decrease in diluted weighted average common shares outstanding resulted from purchasing an aggregate of approximately 2.7 million shares of common stock under the board approved share buyback programs since the beginning of the third quarter of fiscal 2022 through the first quarter of fiscal 2023.

Net income for the three months ended November 30, 2022, increased $29.6 million, or 10.1%, compared to the three months ended November 30, 2021.

Diluted earnings per share were $3.12 for the three months ended November 30, 2022, which was an increase of 13.0% compared to the same period in the prior fiscal year.

Diluted earnings per share increased primarily due to the increase in net income combined with the decrease in diluted

weighted average common shares outstanding.

Uniform Rental and Facility Services Reportable Operating Segment

Three Months Ended August 31, 2022 Compared to Three Months Ended August 31, 2021

Uniform Rental and Facility Services reportable operating segment revenue was $1,697.8 million for the three months ended August 31, 2022 compared to $1,508.2 million for the same period of the prior fiscal year.

Three Months Ended November 30, 2022 Compared to Three Months Ended November 30, 2021

Uniform Rental and Facility Services reportable operating segment revenue was $1,710.0 million for the three months ended November 30, 2022 compared to $1,535.3 million for the same period of the prior fiscal year.

The organic revenue growth rate for the reportable operating segment was 11.3%.

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The reportable operating segment’s gross margin was $803.3 million.

Gross margin as a percentage of revenue was 47.5% for the three months ended August 31, 2022 and 48.3% for the three months ended August 31, 2021.

The change in gross margin was caused by a 40 basis point increase in energy-related expenses and investments in labor and material cost to support increased revenue growth achieved, partially offset by i mproved leverage of fixed costs.

Selling and administrative expenses for the Uniform Rental and Facility Services reportable operating segment increased $42.7 million in the three months ended August 31, 2022 compared to the same period of the prior fiscal year.

Selling and administrative expenses as a percent of revenue for the three months ended August 31, 2022 improved to 26.0% compared to the 26.5% in the first quarter of the prior fiscal year.

The improvement as percent of revenue was primarily due to efficiencies in labor realized in the three months ended August 31, 2022.

Income before income taxes increased $35.4 million, or 10.7%, for the Uniform Rental and Facility Services reportable operating segment for the three months ended August 31, 2022, compared to the same period in the prior fiscal year.

Income before income taxes was 21.5% of the reportable operating segment’s revenue, which was a 30 basis point decrease from the first quarter of the prior fiscal year of 21.8%.

This decrease was primarily due to the previously discussed decrease in gross margin partially offset by the improvements in selling and administrative expenses.

Gross margin as a percentage of revenue was 47.0% for the three months ended November 30, 2022 and 46.8% for the three months ended November 30, 2021.

The improvement in gross margin was the result of efficiencies in labor and i mproved leverage of fixed costs , partially offset by investments in material cost to support increased revenue growth and a 20 basis point increase in energy costs .

Selling and administrative expenses for the Uniform Rental and Facility Services reportable operating segment increased $53.8 million in the three months ended November 30, 2022 compared to the same period of the prior fiscal year.

Selling and administrative expenses as a percent of revenue for the three months ended November 30, 2022 was 25.4% compared to the 24.8% in the second quarter of the prior fiscal year.

The change as a percent of revenue was primarily due to higher employee-partner related expenses, including medical expenses, in the three months ended November 30, 2022.

Income before income taxes increased $31.5 million, or 9.3%, for the Uniform Rental and Facility Services reportable operating segment for the three months ended November 30, 2022, compared to the same period in the prior fiscal year.

Income before income taxes was 21.6% of the reportable operating segment’s revenue, which was a 40 basis point decrease from the second quarter of the prior fiscal year of 22.0%.

This decrease as a percent of revenue was primarily due to the previously discussed increase in selling and administrative expenses partially offset by the improvements in gross margin.

First Aid and Safety Services Reportable Operating Segment

Three Months Ended August 31, 2022 Compared to Three Months Ended August 31, 2021

First Aid and Safety Services reportable operating segment revenue increased from $199.1 million to $234.2 million, or 17.6%, for the three months ended August 31, 2022, over the same period in the prior fiscal year.

Three Months Ended November 30, 2022 Compared to Three Months Ended November 30, 2021

First Aid and Safety Services reportable operating segment revenue increased from $202.2 million to $236.0 million, or 16.7%, for the three months ended November 30, 2022, over the same period in the prior fiscal year.

The organic revenue growth rate for the reportable operating segment was 15.1%.

First Aid and Safety Services reportable operating segment revenue was positively impacted by 1.8% due to acquisitions.

First Aid and Safety Services reportable operating segment revenue was positively impacted by 1.9% due to acquisitions and negatively impacted by 0.3% due to foreign currency exchange rate fluctuations.

The increase in revenue was driven by many factors including new business sold by sales representatives, penetration of additional products and services into existing customers, price increases and strong customer retention.

Cost of first aid and safety services increased $8.2 million, or 7.4%, for the three months ended August 31, 2022, over the three months ended August 31, 2021, due to higher sales volume.

The gross margin as a percent of

revenue was 49.6% for the quarter ended August 31, 2022, compared to the gross margin as a percent of revenue of 44.8% in the same period of the prior fiscal year.

The improvement in gross margin from the first quarter of the prior fiscal year was primarily driven by favorable changes in the sales mix as well as efficiencies gained in labor and delivery routes.

Selling and administrative expenses increased $11.7 million in the three months ended August 31, 2022, compared to the same period of the prior fiscal year.

Selling and administrative expenses as a percent of revenue for the three months ended August 31, 2022 were 32.2%, compared to 31.9% in the first quarter of the prior fiscal year.

The change as a percent of revenue from the same period in the prior fiscal year was primarily due to an increase in bad debt expense partially offset by lower labor in selling and administrative expenses.

Income before income taxes for the First Aid and Safety Services reportable operating segment increased $15.1 million to $40.8 million for the three months ended August 31, 2022, compared to the same period in the prior fiscal year.

Income before income taxes was 17.4% of the reportable operating segment’s revenue compared to the first quarter of the prior fiscal year of 12.9%.

The increase in income before income taxes was due to the previously discussed increase in gross margin.

Cost of first aid and safety services increased $2.7 million, or 2.4%, for the three months ended November 30, 2022, over the three months ended November 30, 2021, due to higher sales volume.

The gross margin as a percent of revenue was 50.5% for the quarter ended November 30, 2022, compared to the gross margin as a percent of revenue of 43.5% in the same period of the prior fiscal year.

The improvement in gross margin from the second quarter of the prior fiscal year was primarily driven by favorable changes in the sales mix as well as i mproved leverage of fixed costs .

Selling and administrative expenses increased $7.7 million in the three months ended November 30, 2022, compared to the same period of the prior fiscal year.

Selling and administrative expenses as a percent of revenue for the three months ended November 30, 2022 were 31.2%, compared to 32.6% in the second quarter of the prior fiscal year.

The improvement as a percent of revenue from the same period in the prior fiscal year was primarily due to a decrease in bad debt expense and efficiencies realized in selling and administrative labor expenses.

Income before income taxes for the First Aid and Safety Services reportable operating segment increased $23.4 million to $45.5 million for the three months ended November 30, 2022, compared to the same period in the prior fiscal year.

Income before income taxes was 19.3% of the reportable operating segment’s revenue compared to the second quarter of the prior fiscal year of 10.9%.

The increase in income before income taxes was due to the previously discussed improvements in gross margin and selling and administrative expenses.

Consolidated Results

Six Months Ended November 30, 2022 Compared to Six Months Ended November 30, 2021

Total revenue increased 13.7% to $4,341.3 million for the six months ended November 30, 2022, compared to $3,819.2 million for the six months ended November 30, 2021.

Total organic revenue growth was 13.4%.

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

Revenue growth was positively impacted by a net 0.6% due primarily to acquisitions and negatively impacted by 0.3% due to foreign currency exchange rate fluctuations.

Uniform Rental and Facility Services reportable operating segment revenue was $3,407.8 million for the six months ended November 30, 2022, compared to $3,043.4 million in the same period of the prior fiscal year, which was an increase of 12.0%.

Organic revenue growth for this reportable operating segment was 11.8%.

Uniform Rental and Facility Services reportable operating segment revenue was positively impacted by 0.6% due to acquisitions and negatively impacted by 0.4% due to foreign currency exchange rate fluctuations.

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

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

Other revenue, consisting of revenue from the First Aid and Safety Services reportable operating segment and All Other, was $933.6 million for the six months ended November 30, 2022, compared to $775.8 million for the six months ended November 30, 2021, which was an increase of 20.3%.

Other revenue organic growth was 19.8%.

Revenue growth was positively impacted by a net 0.7% due primarily to acquisitions and negatively impacted by 0.2% due to foreign currency exchange rate fluctuations.

Cost of uniform rental and facility services increased $200.9 million, or 12.6%, for the six months ended November 30, 2022, compared to the six months ended November 30, 2021.

This increase over the same period of the prior fiscal year was due to higher Uniform Rental and Facility Services reportable operating segment sales volume, as well as a 30 basis point increase in energy costs.

Cost of other increased $58.5 million, or 13.5%, for the six months ended November 30, 2022, compared to the six months ended November 30, 2021.

Cost of other improved as a percentage of revenue, decreasing from 56.0% for six months ended November 30, 2021 to 52.8% for the six months ended November 30, 2022.

Selling and administrative expenses increased $152.9 million, or 15.1%, for the six months ended November 30, 2022, compared to the same period in the prior fiscal year.

Selling and administrative expenses as a percent to revenue were 26.8% for the six months ended November 30, 2022, compared to 26.5% for the same period of the prior fiscal year.

The change as a percent of revenue is primarily due to the $12.1 million gain on the sale of certain operating assets recorded within the Uniform Direct Sales operating segment as a reduction of selling and administrative expenses in the six months ended November 30, 2021.

Operating income was $885.1 million, or 20.4% of revenue, for the six months ended November 30, 2022, compared to $775.3 million, or 20.3% of revenue, for the six months ended November 30, 2021.

The improvement in operating income as a percent of revenue was due to the improvements in gross margin for both the First Aid and Safety Services reportable operating segment and All Other, noted above.

Net interest expense (interest expense less interest income) was $56.1 million for the six months ended November 30, 2022, compared to $43.6 million for the six months ended November 30, 2021.

The change was primarily due to an increase in interest rates on commercial paper and an increase in outstanding commercial paper during the six months ended November 30, 2022.

Cintas’ effective tax rate was 18.4% and 14.5% for the six months ended November 30, 2022 and 2021, respectively.

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

Net income for the six months ended November 30, 2022, increased $50.1 million, or 8.0%, compared to the six months ended November 30, 2021.

Diluted earnings per share was $6.51 for the six months ended November 30, 2022, which was an increase of 10.9% compared to the same period in the prior fiscal year.

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

Uniform Rental and Facility Services Reportable Operating Segment

Six Months Ended November 30, 2022 Compared to Six Months Ended November 30, 2021

Uniform Rental and Facility Services reportable operating segment revenue increased 12.0% to $3,407.8 million for the six months ended November 30, 2022, compared to $3,043.4 million for the same period of the prior fiscal year.

Organic revenue growth for this reportable operating segment was 11.8%.

The cost of uniform rental and facility services increased $200.9 million, or 12.6%, for the six months ended November 30, 2022 over the same period in the prior fiscal year.

The reportable operating segment’s gross margin was $1,610.3 million, or 47.3% of revenue, for the six months ended November 30, 2022, compared to the gross margin of 47.5% for the six months ended November 30, 2021.

The change in gross margin was primarily due to a 30 basis point increase in energy costs in the current year.

Selling and administrative expenses for the Uniform Rental and Facility Services reportable operating segment increased $96.5 million, increasing as a percent to revenue for the six months ended November 30, 2022 to 25.7%, compared to 25.6% for the same period of the prior fiscal year.

The increase was primarily due to higher employee-partner related expenses, including medical expenses.

Income before income taxes increased $66.9 million, or 10.0%, for the Uniform Rental and Facility Services reportable operating segment for the six months ended November 30, 2022, compared to the same period in the prior fiscal year.

Income before income taxes was 21.5% of the reportable operating segment’s revenue, compared to 21.9% for the six months ended November 30, 2021.

The change in percent to revenue is due to the reasons previously discussed.

First Aid and Safety Services Reportable Operating Segment

Six Months Ended November 30, 2022 Compared to Six Months Ended November 30, 2021

First Aid and Safety Services reportable operating segment revenue increased from $401.3 million to $470.1 million, or 17.2%, for the six months ended November 30, 2022, over the same period in the prior fiscal year.

Organic revenue growth for this reportable operating segment was 15.4%.

First Aid and Safety Services reportable operating segment revenue was positively impacted by 1.9% due to acquisitions and negatively impacted by 0.1% due to foreign currency exchange rate fluctuations.

Increases in new business sold by sales representatives, penetration of additional products and services into existing customers and strong customer retention.

Cost of first aid and safety services increased $10.9 million, or 4.9%, for the six months ended November 30, 2022, from the six months ended November 30, 2021, due to higher sales volume.

The gross margin as a percent of revenue was 50.0% for the six months ended November 30, 2022, which was an increase of 580 basis points compared to the gross margin as a percent of revenue of 44.2% in the same period of the prior fiscal year.

The change in gross margin from the first half of the prior fiscal year was primarily driven by favorable changes in the sales mix as well as i mproved leverage of fixed costs.

Selling and administrative expenses increased $19.4 million, but decreased as a percent of revenue to 31.7%, for the six months ended November 30, 2022, compared to 32.3% for the six months ended November 30, 2021.

The decrease in expenses as a percent of revenue was primarily due efficiencies realized in selling and administrative labor expenses.

Income before income taxes for the First Aid and Safety Services reportable operating segment was $86.3 million for the six months ended November 30, 2022, compared to $47.8 million for the same period in the prior fiscal year.

Income before income taxes, at 18.4% of the reportable operating segment’s revenue, increased 650 basis points compared to the same period of the prior fiscal year due to the improvements in both gross margin and selling and administrative expenses.

Liquidity and Capital Resources

The following is a summary of our cash flows and cash and cash equivalents as of and for the three months ended August 31:

The following is a summary of our cash flows and cash and cash equivalents as of and for the six months ended November 30:

(In thousands) 2022 2021

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Cash and cash equivalents at the end of the period $ 89,799 $ 113,170

Cash and cash equivalents as of August 31, 2022 and 2021, include $23.4 million and $38.1 million, respectively, that is located outside of the U.S.

Cash and cash equivalents as of November 30, 2022 and 2021, include $29.8 million and $64.8 million, respectively, that is located outside of the U.S.

Cash flows provided by operating activities have historically supplied us with a significant source of liquidity.

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In addition, we have access to $2.0 billion of debt capacity from our amended and restated revolving credit facility.

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

We believe the Company has sufficient liquidity to operate in the current business environment for at least the next 12 months and the foreseeable future thereafter.

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

Net cash provided by operating activities was $298.2 million for the three months ended August 31, 2022, compared to $262.1 million for the three months ended August 31, 2021.

The change from the prior fiscal year was primarily due to an increase in net income and favorable changes in working capital, specifically accounts payable and current income taxes, which was partially offset by unfavorable changes in working capital, specifically, accounts receivable and uniforms and other rental items in service, which resulted from the growth in revenue.

Net cash provided by operating activities was $619.1 million for the six months ended November 30, 2022, compared to $593.8 million for the six months ended November 30, 2021.

The change from the prior fiscal year was primarily due to an increase in net income and favorable changes in working capital, specifically accounts payable and current income taxes, which was partially offset by unfavorable changes in working capital, specifically, accounts receivable and inventories, net which resulted from the growth in revenue.

Net cash used in investing activities includes capital expenditures, purchases of investments, proceeds from sale of operating assets and cash paid for acquisitions of businesses.

Capital expenditures were $70.0 million and $48.7 million for the three months ended August 31, 2022 and 2021, respectively.

Capital expenditures in the three months ended August 31, 2022 included $54.1 million for the Uniform Rental and Facility Services reportable operating segment and $11.7 million for the First Aid and Safety Services reportable operating segment.

The increase in capital expenditures during the three months ended August 31, 2022 over the same period in the prior fiscal year is due to an investment in the operating segments to support continued market penetration and revenue growth.

Cash paid for acquisitions of businesses was $7.1 million and $35.7 million for the three months ended

August 31, 2022 and 2021, respectively.

The acquisitions during both the three months ended August 31, 2022 and 2021 occurred in our Uniform Rental and Facility Services reportable operating segment, our First Aid and Safety Services reportable operating segment and our Fire Protection operating segment, which is included in All Other.

During the three months ended August 31, 2021, the Company received proceeds of $15.1 million from the sale of certain operating assets, net of cash disposed in the Uniform Direct Sales operating segment, which is included in All Other.

Net cash used in investing activities also includes $5.9 million and $8.7 million of purchases of investments during the three months ended August 31, 2022 and 2021, respectively.

Net cash used in financing activities was $226.2 million and $590.1 million for the three months ended August 31, 2022 and 2021, respectively.

The decrease in cash used in financing activities was primarily due to the decrease in share buyback activity and debt payments, partially offset by the decrease in net issuance of commercial paper in the three months ended August 31, 2022.

Capital expenditures were $146.4 million and $108.6 million for the six months ended November 30, 2022 and 2021, respectively.

Capital expenditures in the six months ended November 30, 2022, included $105.7 million for the Uniform Rental and Facility Services reportable operating segment and $28.0 million for the First Aid and Safety Services reportable operating segment.

The increase in capital expenditures during the six months ended November 30, 2022 over the same period in the prior fiscal year is due to an investment in the operating segments to support continued market penetration and revenue growth.

Cash paid for acquisitions of businesses was $15.5 million and $45.7 million for the six months ended November 30, 2022 and 2021, respectively.

The acquisitions during both the six months ended November 30, 2022 and 2021, occurred in our Uniform Rental and Facility Services reportable operating segment, our First Aid and Safety Services reportable operating segment and our Fire Protection operating segment, which is included in All Other.

During the six months ended November 30, 2021, the Company received proceeds of $15.3 million from the sale of certain operating assets, net of cash disposed in the Uniform Direct Sales operating segment, which is included in All Other.

Net cash used in investing activities also includes $5.2 million and $6.0 million of purchases of investments during the six months ended November 30, 2022 and 2021, respectively.

Net cash used in financing activities was $446.4 million and $819.9 million for the six months ended November 30, 2022 and 2021, respectively.

The decrease in cash used in financing activities was primarily due to the decrease in share buyback activity and debt payments partially offset by the increase in dividends paid in the six months ended November 30, 2022.

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.

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.

From the inception of the July 27, 2021 share buyback program through November 30, 2022, Cintas purchased a total of 2.7 million shares of Cintas common stock at an average price of $385.62 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 table summarizes the buyback activity by program for the three months ended August 31:

The following table summarizes the buyback activity by program for the six months ended November 30:

Buyback Activity

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326 $ 408.97 $ 133,248 211 $ 395.84 $ 83,506

Total repurchase of Cintas

common stock $ 320,334 $ 659,235

Total repurchase of Cintas common stock $ 348,682 $ 664,726

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

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Per Share Total

Three months ended August 31, 2022

Six months ended November 30, 2022

April 12, 2022 May 16, 2022 June 15, 2022 $ 0.95 $ 97.7

Three months ended August 31, 2021

July 26, 2022 August 15, 2022 September 15, 2022 1.15 117.3

$ 2.10 $ 215.0

Six months ended November 30, 2021

April 13, 2021 May 15, 2021 June 15, 2021 $ 0.75 $ 79.1

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

$ 1.70 $ 177.9

Accrued Dividends

As of August 31, 2022

July 26, 2022 (1)

August 15, 2022 September 15, 2022 $ 1.15 $ 117.5

As of August 31, 2021

July 27, 2021 (1)

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

(1) The dividends declared during the three months ended August 31, 2022 and 2021 were included in current accrued liabilities on the consolidated condensed balance sheet at August 31, 2022 and 2021.

As of November 30, 2022

October 25, 2022 (1)

November 15, 2022 December 15, 2022 $ 1.15 $ 117.4

As of November 30, 2021

October 26, 2021 (1)

November 15, 2021 December 15, 2021 $ 0.95 $ 99.1

(1) The dividends declared during the three months ended November 30, 2022 and 2021 were included in current accrued liabilities on the consolidated condensed balance sheet at November 30, 2022 and 2021.

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

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

During the six months ended November 30, 2022 and 2021, Cintas issued a net $124.0 million and $167.0 million of commercial paper, 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.

The following table summarizes Cintas' outstanding debt:

2 unchanged sentences

Issued Fiscal Year

Maturity August 31,

Maturity November 30,

Debt due within one year

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(1) Variable rate debt instrument.

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

The rate presented is the variable borrowing rate at November 30, 2022.

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

8 unchanged sentences

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

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 November 30, 2022, there was $385.2 million of commercial paper outstanding with a weighted average interest rate of 4.30% 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.

6 unchanged sentences

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

We do not anticipate having difficulty in obtaining financing from those markets in the future in view of our favorable experiences in the debt markets in the recent past, including, without limitation, to repay our long-term debt that is maturing in the next twelve months.

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

As of August 31, 2022, our ratings were as follows:

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

Additionally, our ability to continue to access the commercial paper and long-term debt markets on favorable interest rate and other terms will depend, to a significant

degree, on the ratings assigned by the credit rating agencies to our indebtedness.

As of November 30, 2022, our ratings were as follows:

Rating Agency Outlook Commercial

13 unchanged sentences

2) is the indirectly, wholly owned principal operating subsidiary of Cintas.

2 is the issuer of the $2,550.0 million aggregate principal amount of senior notes outstanding as of August 31, 2022, which are unconditionally guaranteed, jointly and severally, by Cintas Corporation and its wholly owned, direct and indirect domestic subsidiaries.

2 is the issuer of the $2,550.0 million aggregate principal amount of senior notes outstanding as of November 30, 2022, which are unconditionally guaranteed, jointly and severally, by Cintas Corporation and its wholly owned, direct and indirect domestic subsidiaries.

Basis of Preparation of the Summarized Financial Information

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Summarized financial information of the Obligor Group is as follows:

Three Months Ended

Six Months Ended

Summarized Consolidated Condensed Statement of Income

(In thousands)

2022 August 31,

2022 November 30,

Net sales to unrelated parties $ 4,105,128 $ 3,599,543

11 unchanged sentences

Litigation and Other Contingencies

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

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

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, consolidated results of operations or consolidated cash flows of Cintas.

Cintas is also party to additional litigation not considered in the ordinary course of business.

See Note 13 entitled Litigation and Other Contingencies of “Notes to Consolidated Condensed Financial Statements” for a detailed discussion of such additional litigation.

Forward-Looking Statements

31 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 2. Management’s Discussion and Analysis