What changed in this filing

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Item 1. Financial Statements

2023-04-06 compared with 2023-01-06 · 133 added, 124 removed, 516 unchanged (33% of the section changed)

2 unchanged sentences

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

Three Months Ended Six Months Ended

(In thousands except per share data) November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Three Months Ended Nine Months Ended

(In thousands except per share data) February 28, 2023 February 28, 2022 February 28, 2023 February 28, 2022

Uniform rental and facility services $ 1,716,165 $ 1,553,320 $ 5,123,924 $ 4,596,767

18 unchanged sentences

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended Six Months Ended

(In thousands) November 30,

2022 November 30,

2021 November 30,

2022 November 30,

Three Months Ended Nine Months Ended

(In thousands) February 28,

2023 February 28,

2022 February 28,

2023 February 28,

Net income $ 325,827 $ 315,448 $ 1,001,809 $ 941,296

3 unchanged sentences

Change in fair value of interest rate lock

agreements, net of tax expense (benefit)

of $ 2,531 , $ 3,744 , $ 2,851 and $( 8,810 ),

agreements, net of tax expense of $ 513 ,

$ 11,832 , $ 3,364 and $ 3,022 , respectively

1,501 34,567 9,829 8,828

Amortization of interest rate lock agreements, net of tax expense of $ 513 , $ 148 , $ 1,025 and $ 296 , respectively

Amortization of interest rate lock agreements, net of tax benefit of $( 512 ), $( 149 ), $( 1,537 ) and $( 445 ), respectively

( 1,521 ) ( 459 ) ( 4,563 ) ( 1,378 )

Other comprehensive (loss) income, net of tax

expense (benefit) of $ 3,044 , $ 3,892 , $ 3,876

and $( 8,514 ), respectively

expense of $ 1 , $ 11,683 , $ 1,827 and

$ 2,577 , respectively

( 7,992 ) 39,405 ( 31,813 ) ( 18,741 )

3 unchanged sentences

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands except per share data) November 30,

(In thousands except per share data) February 28,

Current assets:

69 unchanged sentences

Balance at November 30, 2022 191,857 $ 1,933,145 $ 9,160,346 $ 84,096 ( 90,256 ) $ ( 7,747,049 ) $ 3,430,538

Net income — — 325,827 — — — 325,827

Comprehensive loss, net of tax — — — ( 7,992 ) — — ( 7,992 )

Dividends — — ( 117,495 ) — — — ( 117,495 )

Stock-based compensation — 23,797 — — — — 23,797

Vesting of stock-based compensation awards 3 — — — — — —

Stock options exercised 172 24,668 — — ( 54 ) ( 23,852 ) 816

Repurchase of common stock — — — — ( 49 ) ( 22,235 ) ( 22,235 )

Balance at February 28, 2023 192,032 $ 1,981,610 $ 9,368,678 $ 76,104 ( 90,359 ) $ ( 7,793,136 ) $ 3,633,256

CINTAS CORPORATION

23 unchanged sentences

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 — — ( 30 ) ( 12,000 ) 8,438

Repurchase of common stock — — — — ( 1,436 ) ( 557,115 ) ( 557,115 )

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

See accompanying notes.

1 unchanged sentence

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Six Months Ended

(In thousands) November 30, 2022 November 30, 2021

Nine Months Ended

(In thousands) February 28, 2023 February 28, 2022

Cash flows from operating activities:

4 unchanged sentences

Stock-based compensation 75,334 83,687

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

Gain on sale of operating assets — ( 12,129 )

18 unchanged sentences

Cash flows from financing activities:

Issuance of commercial paper, net 124,046 167,000

(Payments) issuance of commercial paper, net ( 62,200 ) 559,210

Repayment of debt — ( 250,000 )

22 unchanged sentences

Inventory is comprised of the following:

(In thousands) November 30,

(In thousands) February 28,

Raw materials $ 26,440 $ 19,071

2 unchanged sentences

$ 531,270 $ 472,150

Inventories are recorded net of reserves for obsolete inventory (excess and slow-moving) of $ 70.2 million and $ 100.3 million at November 30, 2022 and May 31, 2022, respectively.

Inventories are recorded net of reserves for obsolete inventory (excess and slow-moving) of $ 83.0 million and $ 100.3 million at February 28, 2023 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.

4 unchanged sentences

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

Three Months Ended Six Months Ended

(In thousands) November 30,

2022 November 30,

2021 November 30,

2022 November 30,

Three Months Ended Nine Months Ended

(In thousands) February 28,

2023 February 28,

2022 February 28,

2023 February 28,

Uniform Rental and

24 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 six months ended November 30, 2022 or 2021.

No constraints on our revenue recognition were applied during the three or nine months ended February 28, 2023 or 2022.

The Company reassesses these estimates during each reporting period.

5 unchanged sentences

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.

The portion of the allowance for credit losses 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.

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.

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

We update our allowance for credit losses quarterly, considering recent write-offs and collections information and underlying economic expectations.

Costs to Obtain a Contract

6 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 November 30, 2022, the current and noncurrent assets related to deferred commissions totaled $ 88.2 million and $ 244.1 million, respectively.

As of February 28, 2023, the current and noncurrent assets related to deferred commissions totaled $ 90.4 million and $ 248.8 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 $ 23.4 million and $ 21.7 million during the three months ended November 30, 2022 and 2021, respectively.

During the six months ended November 30, 2022 and 2021, we recorded amortization expense related to deferred commissions of $ 45.8 million and $ 43.1 million, respectively.

We recorded amortization expense related to deferred commissions of $ 24.0 million and $ 22.0 million during the three months ended February 28, 2023 and 2022, respectively.

During the nine months ended February 28, 2023 and 2022, we recorded amortization expense related to deferred commissions of $ 69.8 million and $ 65.1 million, respectively.

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

2 unchanged sentences

Each new contract is evaluated to determine if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease.

All identified leases are recorded on the consolidated condensed balance sheet with a corresponding operating lease right-of-use asset, net, representing the right to use the underlying asset for the lease term and the operating lease liabilities representing the obligation to make lease payments arising from the lease.

Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the consolidated condensed balance sheet.

All identified leases are recorded on the consolidated condensed balance sheets with a corresponding operating lease right-of-use asset, net, representing the right to use the underlying asset for the lease term and the operating lease liabilities representing the obligation to make lease payments arising from the lease.

Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the consolidated condensed balance sheets.

Operating lease right-of-use assets, net and operating lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised.

3 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 $ 20.0 million and $ 18.0 million for the three months ended November 30, 2022 and 2021, respectively.

For the six months ended November 30, 2022 and 2021, operating lease costs, including short-term lease expense and variable lease costs which were immaterial in both periods, were $ 39.5 million and $ 36.2 million, respectively.

The following table provides supplemental information related to the Company's consolidated condensed statements of cash flows for the six months ended November 30:

Operating lease costs, including short-term lease expense and variable lease costs which were immaterial in both periods, were $ 19.8 million and $ 19.0 million for the three months ended February 28, 2023 and 2022, respectively.

For the nine months ended February 28, 2023 and 2022, operating lease costs, including short-term lease expense and variable lease costs which were immaterial in both periods, were $ 59.3 million and $ 55.2 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:

(In thousands) 2023 2022

2 unchanged sentences

operating lease liabilities $ 42,900 $ 17,452

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 2.75 % 2.20 %

The contractual future minimum lease payments of Cintas' operating lease liabilities by fiscal year are as follows as of November 30, 2022:

The contractual future minimum lease payments of Cintas' operating lease liabilities by fiscal year are as follows as of February 28, 2023:

(In thousands)

2023 (remaining six months)

2023 (remaining three months)

Thereafter 47,856

3 unchanged sentences

Note 4 - Fair Value Measurements

All financial instruments that are measured at fair value on a recurring basis (at least annually) have been classified within the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the consolidated condensed balance sheet date.

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

As of November 30, 2022

As of February 28, 2023

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

20 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 fiscal 2022 was recorded at fair value.

See Note 10 entitled Acquisitions for additional information.

Note 5 - Investments

Cintas' investments are summarized as follows:

(In thousands) November 30,

(In thousands) February 28,

Cash surrender value of insurance policies $ 237,423 $ 237,136

2 unchanged sentences

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

For the three and six months ended November 30, 2022 and 2021, no impairment losses were recorded.

For the three and nine months ended February 28, 2023 and 2022, no impairment losses were recorded.

Note 6 - Earnings Per Share

1 unchanged sentence

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 Six Months Ended

Three Months Ended Nine Months Ended

Basic Earnings per Share

(In thousands except per share data)

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

February 28, 2023 February 28, 2022 February 28, 2023 February 28, 2022

Net income $ 325,827 $ 315,448 $ 1,001,809 $ 941,296

5 unchanged sentences

Basic earnings per share $ 3.19 $ 3.04 $ 9.82 $ 9.05

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

Diluted Earnings per Share

(In thousands except per share data)

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

February 28, 2023 February 28, 2022 February 28, 2023 February 28, 2022

Net income $ 325,827 $ 315,448 $ 1,001,809 $ 941,296

9 unchanged sentences

Diluted earnings per share $ 3.14 $ 2.97 $ 9.65 $ 8.84

For the three months ended November 30, 2022 and 2021, options granted to purchase 1.1 million and 0.1 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share.

For the six months ended November 30, 2022 and 2021, options granted to purchase 0.9 million and 0.1 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share.

For the three months ended February 28, 2023 and 2022, options granted to purchase 0.5 million and 0.6 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share.

For the nine months ended February 28, 2023 and 2022, options granted to purchase 1.0 million and 0.5 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).

1 unchanged sentence

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 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.

From the inception of the July 27, 2021 share buyback program through February 28, 2023, 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 tables summarize the share buyback activity by program and period:

Three Months Ended Six Months Ended

November 30, 2022 November 30, 2022

Three Months Ended Nine Months Ended

February 28, 2023 February 28, 2023

Buyback Activity

9 unchanged sentences

Total repurchase of Cintas common stock $ 22,235 $ 370,917

Three Months Ended Six Months Ended

November 30, 2021 November 30, 2021

Three Months Ended Nine Months Ended

February 28, 2022 February 28, 2022

Buyback Activity

11 unchanged sentences

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 months ended November 30, 2022, Cintas acquired 0.1 million shares of Cintas common stock via such non-cash transactions at an average price of $ 421.85 for a total non-cash value of $ 28.0 million.

During the six months ended November 30, 2022, Cintas acquired 0.3 million shares of Cintas common stock via such non-cash transactions at an average price of $ 414.46 for a total non-cash value of $ 107.6 million.

During the three and six months ended November 30, 2021, there were no shares of Cintas common stock acquired via non-cash transactions, in connection with net-share settlements of option exercises.

The following tables summarizes Cintas' non-cash share buyback activity:

Three Months Ended Nine Months Ended

February 28, 2023 February 28, 2023

(In thousands except per share data)

per Share Non-Cash

Value Shares Avg.

per Share Non-Cash

Non-cash transaction activity 54 $ 445.60 $ 23,852 313 $ 419.78 $ 131,418

Three Months Ended Nine Months Ended

February 28, 2022 February 28, 2022

per Share Non-Cash

Value Shares Avg.

per Share Non-Cash

Non-cash transaction activity 30 $ 391.03 $ 12,000 30 $ 391.03 $ 12,000

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

Changes in the carrying amount of goodwill and service contracts for the six months ended November 30, 2022, by reportable operating segment and All Other, are as follows:

Changes in the carrying amount of goodwill and service contracts for the nine months ended February 28, 2023, by reportable operating segment and All Other, are as follows:

(in thousands)

5 unchanged sentences

Foreign currency translation ( 18,466 ) ( 1,636 ) ( 64 ) ( 20,166 )

Balance as of November 30, 2022 $ 2,623,720 $ 291,210 $ 122,576 $ 3,037,506

Balance as of February 28, 2023 $ 2,630,003 $ 290,775 $ 122,800 $ 3,043,578

Service Contracts

7 unchanged sentences

Foreign currency translation ( 3,432 ) ( 150 ) — ( 3,582 )

Balance as of November 30, 2022 $ 328,080 $ 23,193 $ 16,339 $ 367,612

Balance as of February 28, 2023 $ 319,427 $ 21,972 $ 15,747 $ 357,146

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

As of November 30, 2022 As of May 31, 2022

As of February 28, 2023 As of May 31, 2022

(In thousands) Carrying

10 unchanged sentences

Total other assets, net $ 832,267 $ 455,647 $ 376,620 $ 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 November 30, 2022 and May 31, 2022, is $ 88.2 million and $ 83.7 million, respectively.

Amortization expense for service contracts and other assets, was $ 37.3 million and $ 36.9 million for the three months ended November 30, 2022 and 2021, respectively.

For the six months ended November 30, 2022 and 2021, amortization expense for service contracts and other assets was $ 73.7 million and $ 73.4 million, respectively.

(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, 2023 and May 31, 2022, is $ 90.4 million and $ 83.7 million, respectively.

Amortization expense for service contracts and other assets, was $ 37.8 million and $ 38.0 million for the three months ended February 28, 2023 and 2022, respectively.

For the nine months ended February 28, 2023 and 2022, amortization expense for service contracts and other assets was $ 111.5 million and $ 111.4 million, respectively.

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

As of November 30, 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 February 28, 2023, 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)

2023 (remaining six months)

2023 (remaining three months)

Thereafter 203,474

5 unchanged sentences

Issued Fiscal Year

Maturity November 30,

Maturity February 28,

Debt due within one year

15 unchanged sentences

(1) Variable rate debt instrument.

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

The rate presented is the variable borrowing rate at February 28, 2023.

(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 November 30, 2022 were $ 2,935.2 million and $ 2,876.9 million, respectively, and as of May 31, 2022 were $ 2,811.2 million and $ 2,862.2 million, respectively.

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

The carrying value and fair value of Cintas' debt as of February 28, 2023 were $ 2,749.0 million and $ 2,641.2 million, respectively, and as of May 31, 2022 were $ 2,811.2 million and $ 2,862.2 million, respectively.

During the nine months ended February 28, 2023, Cintas paid $ 62.2 million, net of commercial paper.

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 has a revolving credit facility with a capacity of $ 2.0 billion.

1 unchanged sentence

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

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 February 28, 2023, there was $ 199.0 million of commercial paper outstanding with a weighted average interest rate of 4.79 % and maturity dates less than 90 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 90 days and no borrowings on our revolving credit facility.

3 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 comprehensive income of $ 1.5 million and $ 0.4 million for the three months ended November 30, 2022 and 2021, respectively.

For the six months ended November 30, 2022 and 2021, the amortization of the interest rate locks resulted in a decrease to comprehensive income of $ 3.0 million and $ 0.9 million, respectively.

The amortization of the interest rate locks resulted in a decrease to comprehensive income of $ 1.5 million and $ 0.5 million for the three months ended February 28, 2023 and 2022, respectively.

For the nine months ended February 28, 2023 and 2022, the amortization of the interest rate locks resulted in a decrease to comprehensive income of $ 4.6 million and $ 1.4 million, 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 November 30, 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:

November 30, 2022 May 31, 2022

The aggregate notional value of outstanding cash flow hedges was $ 500.0 million at both February 28, 2023 and May 31, 2022.

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

February 28, 2023 May 31, 2022

Fiscal Year of Issuance

3 unchanged sentences

2020 $ 44,417 $ 38,546

The change in fair value of the interest rate locks are 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 six months ended November 30, 2022 or 2021.

The change in fair value of the interest rate locks are recorded in other comprehensive (loss) income, 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, 2023 or 2022.

Cintas has certain covenants related to debt agreements.

6 unchanged sentences

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 November 30, 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.

As of February 28, 2023 and May 31, 2022, recorded unrecognized tax benefits were $ 27.9 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.

8 unchanged sentences

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 22.1 % and 18.0 % for the three months ended November 30, 2022 and 2021, respectively.

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

Cintas’ effective tax rate was 22.1 % and 18.2 % for the three months ended February 28, 2023 and 2022, respectively.

For the nine months ended February 28, 2023 and 2022, Cintas' effective tax rate was 19.7 % and 15.8 %, respectively.

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

Note 10 - Acquisitions

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

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 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 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 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 and six months ended November 30, 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 deductible for income tax purposes.

The final purchase price allocation, 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 16,246

Operating lease right-of-use assets 16,882

Goodwill 55,970

Separately identifiable intangible assets 9,201

Total current liabilities ( 6,425 )

Operating lease liabilities ( 17,734 )

Total allocation (consideration) $ 91,492

The separately identifiable intangible assets are primarily made up of a customer relationship intangible asset that will be amortized over a period of nine 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 condensed statements of income subsequent to the date of acquisition, and are not material to the consolidated condensed financial statements.

Note 10 - Accumulated Other Comprehensive Income (Loss)

15 unchanged sentences

Balance at November 30, 2022 ( 12,101 ) 97,974 ( 1,777 ) 84,096

Other comprehensive (loss) income before

reclassifications ( 7,972 ) 1,501 — ( 6,471 )

Amounts reclassified from accumulated other comprehensive income (loss)

— ( 1,521 ) — ( 1,521 )

Net current period other comprehensive loss ( 7,972 ) ( 20 ) — ( 7,992 )

Balance at February 28, 2023 $ ( 20,073 ) $ 97,954 $ ( 1,777 ) $ 76,104

(In thousands) Foreign

Currency Unrealized Loss on

Interest Rate Locks Other Total

Currency Unrealized (Loss) Income

on Interest Rate Locks Other Total

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

10 unchanged sentences

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

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

6 unchanged sentences

Statements of Income

Three Months Ended Six Months Ended

(In thousands) November 30,

2022 November 30,

2021 November 30,

2022 November 30,

Three Months Ended Nine Months Ended

(In thousands) February 28,

2023 February 28,

2022 February 28,

2023 February 28,

Amortization of interest rate locks

15 unchanged sentences

Other Corporate (1)

For the three months ended November 30, 2022

For the three months ended February 28, 2023

Revenue $ 1,716,165 $ 231,605 $ 242,216 $ — $ 2,189,986

Income (loss) before income taxes $ 359,995 $ 47,271 $ 39,546 $ ( 28,446 ) $ 418,366

For the three months ended November 30, 2021

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

As of and for the six months ended November 30, 2022

As of and for the nine months ended February 28, 2023

Revenue $ 5,123,924 $ 701,740 $ 705,634 $ — $ 6,531,298

1 unchanged sentence

Total assets $ 7,150,227 $ 694,777 $ 532,434 $ 88,563 $ 8,466,001

As of and for the six months ended November 30, 2021

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

Revenue $ 4,596,767 $ 614,234 $ 568,772 $ — $ 5,779,773

10 unchanged sentences

This is a contract dispute whereby plaintiffs allege that Cintas breached its contracts with participating public agencies and seek, among other things, contract-based damages in an unspecified amount.

In March 2022, the District Court denied Cintas’ motion to compel arbitration.

Cintas’ appeal from the denial of its motion is pending.

In March 2022, the District Court denied Cintas’ motion to compel arbitration, and on March 6, 2023, the Ninth Circuit Court of Appeals affirmed.

Liability in this matter is not probable nor estimable at this time.

However, this matter, if decided adversely to Cintas or settled, may result in liability material to Cintas’ consolidated financial condition, consolidated results of operation or consolidated cash flows.

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