What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-07-27 compared with 2022-07-27 · 142 added, 234 removed, 990 unchanged (28% of the section changed)

3 unchanged sentences

Management's Report on Internal Control over Financial Reporting

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

Reports of Independent Registered Public Accounting Firm (PCAOB ID 42 )

Consolidated Statements of Income

52 unchanged sentences

As described in Note 1 to the Company’s consolidated financial statements, the Company’s insurance reserve represents the estimated ultimate cost of all asserted and unasserted (incurred but not reported) claims primarily related to workers' compensation, auto liability and other general liability exposure.

The incurred but not reported insurance reserve is estimated through actuarial procedures and by using industry assumptions, adjusted for Company specific expectations based on claims history.

Auditing the Company's estimate of the incurred but not reported insurance reserve is judgmental and complex due to the significant estimation uncertainty of the potential value of unasserted claims, which are developed with the assistance of a third-party actuarial specialist.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s incurred but not reported insurance reserve.

This includes internal controls over the claims activity and actuarial methods used to establish the incurred but not reported insurance reserve.

The unasserted (incurred but not reported) insurance reserve is estimated through actuarial procedures using industry assumptions, adjusted for Company specific expectations based on claims history.

Auditing the Company's estimate of the unasserted (incurred but not reported) insurance reserve is judgmental and complex due to the significant estimation uncertainty of the potential value of unasserted claims, which are developed with the assistance of a third-party actuarial specialist.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s unasserted (incurred but not reported) insurance reserve.

This includes internal controls over the claims activity and actuarial methods used to establish the unasserted (incurred but not reported) insurance reserve.

Specifically, we tested internal controls related to management’s review of data provided to the actuary, validation of claim activity and review of actuarial methods.

To test the incurred but not reported insurance reserve, our audit procedures included, among others, assessing the methodologies used to estimate the incurred but not reported insurance reserve, testing the completeness and accuracy of the underlying claims data, vouching payments made to third parties, and testing the mathematical accuracy of the actuarially determined incurred but not reported insurance reserve.

Furthermore, we involved our actuarial specialists to assist in evaluating the methodologies used by management to determine the incurred but not reported insurance reserve and comparing the Company’s recorded incurred but not reported insurance reserve to a range developed based on independently selected actuarial methodologies.

To test the unasserted (incurred but not reported) insurance reserve, our audit procedures included, among others, assessing the methodologies used to estimate the incurred but not reported insurance reserve, testing the completeness and accuracy of the underlying claims data, vouching payments made to third parties, and testing the mathematical accuracy of the actuarially determined unasserted (incurred but not reported) insurance reserve.

Furthermore, we involved our actuarial specialists to assist in evaluating the methodologies used by management to determine the unasserted (incurred but not reported) insurance reserve and comparing the Company’s recorded unasserted (incurred but not reported) insurance reserve to a range developed based on independently selected actuarial methodologies.

/s/ Ernst & Young LLP

42 unchanged sentences

Income taxes 345,138 263,011 176,781

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

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

and $( 107 ), respectively

Net income $ 1,348,010 $ 1,235,757 $ 1,110,968

Basic earnings per share $ 13.21 $ 11.92 $ 10.52

Continuing operations $ 11.92 $ 10.52 $ 8.36

Discontinued operations — — 0.00

Basic earnings per share $ 11.92 $ 10.52 $ 8.36

Diluted earnings per share $ 12.99 $ 11.65 $ 10.24

Continuing operations $ 11.65 $ 10.24 $ 8.11

Discontinued operations — — 0.00

Diluted earnings per share $ 11.65 $ 10.24 $ 8.11

Dividends declared and paid per share $ 4.60 $ 3.80 $ 5.01

7 unchanged sentences

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

expense (benefit) of $ 34,932 , $ 36,172 and $( 32,793 ),

expense of $ 3,461 , $ 34,932 and $ 36,172 , respectively

10,111 102,057 106,843

Amortization of interest rate lock agreement, net of tax benefit

Amortization of interest rate lock agreements, net of tax benefit

of $( 2,049 ), $( 672 ) and $( 463 ), respectively

( 6,085 ) ( 2,061 ) ( 1,433 )

Other, net of tax expense (benefit) of $ 638 , $ 3,578 and

$( 2,802 ), respectively

Other, net of tax (benefit) expense of $( 54 ), $ 638 and $ 3,578 , respectively

( 158 ) 1,866 10,676

Other comprehensive income (loss), net of tax expense (benefit)

of $ 36,242 , $ 40,213 and $( 35,132 ), respectively

Other comprehensive (loss) income, net of tax expense of $ 5,456 , $ 36,242 and $ 40,213 , respectively

( 30,139 ) 77,029 184,268

25 unchanged sentences

Accrued liabilities 632,504 588,948

Income taxes, current 12,470 —

Operating lease liabilities, current 43,710 43,872

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

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

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

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

3 unchanged sentences

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

Cumulative effect of change in accounting

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

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

8 unchanged sentences

Net income — — 1,348,010 — — — 1,348,010

Comprehensive income, net of tax — — — 77,029 — — 77,029

Comprehensive loss, net of tax — — — ( 30,139 ) — — ( 30,139 )

Dividends — — ( 469,858 ) — — — ( 469,858 )

30 unchanged sentences

Capital expenditures ( 331,109 ) ( 240,672 ) ( 143,470 )

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

Purchases of investments ( 4,566 ) ( 6,076 ) ( 4,299 )

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

3 unchanged sentences

Cash flows from financing activities:

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

(Payments) issuance of commercial paper, net ( 261,200 ) 261,200 —

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

6 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 2,628 ) ( 216 ) 4,581

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

Net increase (decrease) in cash and cash equivalents 33,678 ( 403,169 ) 348,238

Cash and cash equivalents at beginning of year 90,471 493,640 145,402

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The Company regularly reviews its operating segments for reporting purposes based on the information its chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance and makes changes when appropriate.

We have operations throughout the U.S.

and Canada and participate in a global supply chain.

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

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

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

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

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

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

Principles of consolidation.

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

Revenue is measured as the amount of

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

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

See Note 2 entitled Revenue Recognition.

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

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

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

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

Cash and cash equivalents.

Cintas considers all highly liquid domestic investments with a maturity of three months or less, at date of purchase, to be cash equivalents.

At both May 31, 2022 and 2021, cash and cash equivalents includes $ 31.8 million of restricted cash used as collateral associated with our insurance reserve.

At May 31, 2023 and 2022, cash and cash equivalents includes $ 32.7 million and $ 31.8 million, respectively, of restricted cash used as collateral associated with our insurance reserve.

Accounts receivable.

Accounts receivable is comprised of amounts owed through product shipments and services provided and is presented net of an allowance for doubtful accounts.

Accounts receivable is comprised of amounts owed through product shipments and services provided and is presented net of an allowance for credit losses.

The allowance includes both an estimate, based on historical rates of collections, and reserves for specific accounts identified as uncollectible.

1 unchanged sentence

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.

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

When an account is considered uncollectible, it is written off against the allowance for credit losses.

Inventories, net.

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

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

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

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

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

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These items are valued at cost less amortization, calculated using the straight-line method.

Uniforms in service (other than cleanroom and flame resistant clothing) are amortized over their useful life of 18 months.

Other rental items, including shop towels, mats, mops, cleanroom garments, flame resistant clothing, linens and restroom dispensers, are amortized over their useful lives, which range from 8 to 60 months.

Uniforms in service (other than cleanroom garments) are amortized over their useful lives, which range from 18 to 30 months.

Other rental items, including shop towels, mats, mops, cleanroom garments, linens and restroom dispensers, are amortized over their useful lives, which range from 8 to 60 months.

The amortization rates used are based on industry experience, Cintas' specific experience and wear tests performed by Cintas.

These factors are critical to determining the amount of in service inventory and related cost of uniforms and facility services that are presented in the consolidated financial statements.

Investments .

Cintas' investments primarily consist of the cash surrender value of insurance policies.

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

For the fiscal years ended May 31, 2023, 2022 and 2021, no impairment losses were recorded.

Property and equipment.

8 unchanged sentences

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

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

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

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

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

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

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

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

Cintas did not identify any indicators of impairment for the fiscal years ended May 31, 2023 and 2022.

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

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

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 is recorded as a reduction in selling and administrative expenses, within the Uniform Rental and Facility Services reportable operating segment, in the fiscal year ended May 31, 2022.

The fair value of the historical equity method investment was determined using a combination of a market and income approach

(discounted cash flow analysis).

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

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

Debt issuance costs.

Debt issuance costs for the revolving credit facility are included in other assets, net and all other debt issuance costs reduce the carrying amount of debt.

Debt issuance costs, if any, for the revolving credit facility are included in other assets, net and all other debt issuance costs reduce the carrying amount of debt.

Accrued liabilities.

8 unchanged sentences

$ 632,504 $ 588,948

Long-term accrued liabilities consist primarily of retirement obligations, which are described in more detail in Note 11 entitled Employee Benefit Plans, interest rate lock agreements, which are described in more detail in Note 7 entitled Debt and Derivatives, reserves associated with unrecognized tax benefits, which are described in more detail in Note 9 entitled Income Taxes and environmental obligations, which are further described below.

Long-term accrued liabilities consist primarily of retirement obligations, which are described in more detail in Note 9 entitled Employee Benefit Plans, reserves associated with unrecognized tax benefits, which are described in more detail in Note 8 entitled Income Taxes and environmental obligations, which are further described below.

Insurance reserve.

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

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

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

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

and mortality rates.

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

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Litigation and other contingencies.

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

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.

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

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

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

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

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

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

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

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

See Note 14 entitled Litigation and Other Contingencies for a detailed discussion of such additional litigation.

Fair value measurements.

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

See Note 10 entitled Acquisitions for additional information.

New accounting pronouncements.

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

Simplifying the Accounting for Income Taxes .

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

ASU 2019-12 removes certain exceptions to the general principles of ASC 740, Income Taxes (ASC 740), in order to reduce the

cost and complexity of its application in the areas of intraperiod tax allocation, deferred tax liabilities related to outside basis differences, year-to-date losses in interim periods and other areas within ASC 740.

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

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

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

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

Revenue Recognition

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Total revenue $ 8,815,769 100.0 % $ 7,854,459 100.0 % $ 7,116,340 100.0 %

Fire Protection Services and Uniform Direct Sales operating segments are included within All Other as disclosed in Note 15 entitled Operating Segment Information.

The Fire Protection Services and Uniform Direct Sales operating segments are included within All Other as disclosed in Note 13 entitled Operating Segment Information.

Revenue Recognition Policy

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Certain of our customer contracts include pricing terms and conditions that include components of variable consideration.

The variable consideration is typically in the form of consideration paid to a customer based on performance metrics specified within the contract.

Specifically, some contracts contain discounts or rebates that the customer can earn through the achievement of specified volume levels.

Each component of variable consideration is earned based on the Company's actual performance during the measurement period specified within the contract.

To determine the transaction price, the Company estimates the variable consideration using the most likely amount method, based on the specific contract provisions and known performance results during the relevant measurement period.

The variable consideration is typically in the form of consideration paid to a customer based on performance metrics specified within the contract and is not material in any period presented.

When determining if variable consideration should be constrained, the Company considers whether factors outside its control could result in a significant reversal of revenue.

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No constraints on our revenue recognition were applied during the fiscal years ended May 31, 2023, 2022 or 2021.

The Company reassesses these estimates during each reporting period.

Cintas maintains a liability for these discounts and rebates within accrued liabilities on the consolidated balance sheets.

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

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

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

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

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

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

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

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.

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

Costs to Obtain a Contract

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

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

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

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

The Company also continues to expense certain costs to obtain a contract if those costs do not meet the criteria of the standard or the amortization period of

the asset would have been one year or less.

The deferred commissions are amortized on a straight-line basis over the expected period of benefit.

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Fair Value Disclosures

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 balance sheet date.

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

11 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 other asset, net or long-term accrued liabilities are recorded at fair value on a recurring basis.

No other amounts included in other asset, 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.

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

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

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

Property and Equipment

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

Cintas' investments are summarized as follows at May 31:

(In thousands) 2022 2021

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

Equity method investments 3,574 19,388

Cost method investments 2,163 3,167

Total investments $ 242,873 $ 274,616

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

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

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

See Note 10 entitled Acquisitions for more information.

Goodwill, Service Contracts and Other Assets

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Noncompete and consulting

agreements 50,637 43,775 6,862 44,683 42,408 2,275

Other 125,941 20,917 105,024 105,371 24,371 81,000

agreements and other 198,260 67,294 130,966 176,578 64,692 111,886

Other assets $ 863,965 $ 480,974 $ 382,991 $ 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 balance sheets as of May 31, 2022 and 2021, is $ 83.7 million and $ 79.4 million, respectively.

(1) The current portion of capitalized contract costs, included in prepaid expenses and other current assets on the consolidated balance sheets as of May 31, 2023 and 2022, was $ 92.5 million and $ 83.7 million, respectively.

Amortization expense for service contracts and other assets was $ 150.0 million, $ 148.4 million and $ 141.9 million for the fiscal years ended May 31, 2023, 2022 and 2021, respectively.

5 unchanged sentences

Total future amortization expense $ 700,709

Debt and Derivatives

Debt, Derivatives and Hedging Activities

Cintas' outstanding debt is summarized as follows at May 31:

8 unchanged sentences

2.78 % 2013 2023 — 50,380

Senior notes 4.30 % 2012 2022 — 250,000

Senior notes 2.90 % 2017 2022 — 650,000

Debt issuance costs — ( 6 )

2 unchanged sentences

Senior notes (3)

Senior notes (2)

3.11 % 2015 2025 $ 50,630 $ 50,965

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

3.11 % 2015 2025 50,965 51,301

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

1 unchanged sentence

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

Debt issuance costs ( 14,225 ) ( 17,033 )

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

The interest rate shown above is the effective interest rate.

The principal amount of these notes is $ 50.0 million with a stated interest rate of 3.73 %.

The interest rate shown above is the effective interest rate until repayment in fiscal 2023.

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

2 unchanged sentences

The average interest rate for all Cintas debt at May 31, 2023 was 4.0 %, with maturity dates through fiscal year 2037.

Cintas' senior notes, excluding the G&K senior notes assumed with the acquisition of G&K in fiscal 2017, are recorded at cost, net of debt issuance costs.

Cintas' senior notes, excluding G&K senior notes assumed with the acquisition of G&K in fiscal 2017, are recorded at cost, net of debt issuance costs.

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 May 31, 2023 were $ 2,500.0 million and $ 2,443.8 million, respectively, and as of May 31, 2022 were $ 2,811.2 million and $ 2,862.2 million, respectively.

During the fiscal year ended May 31, 2023, Cintas paid $ 261.2 million, net of commercial paper.

On April 17, 2023, in accordance with the terms of the notes, Cintas paid the $ 50.0 million aggregate principal amount outstanding of its 3.73 %, private placement, 10-year senior notes that matured on that date with proceeds from short-term commercial paper issuance.

During the fiscal year ended May 31, 2022, Cintas issued $ 261.1 million, net of commercial paper.

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

7 unchanged sentences

Interest paid was $ 111.5 million, $ 97.8 million and $ 98.3 million for the fiscal years ended May 31, 2023, 2022 and 2021, respectively.

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

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

The credit agreement that supports our commercial paper program has capacity under the revolving credit facility 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 May 31, 2022, there was $ 261.2 million of commercial paper outstanding with a weighted average interest rate of 1.20 % and maturity dates less than 120 days and no borrowings on our revolving credit facility.

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

As of May 31, 2023, there was no commercial paper outstanding and no borrowings on our revolving credit facility.

There was no commercial paper outstanding during fiscal 2021.

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

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

As of May 31, 2022, there was $ 261.2 million commercial paper outstanding and no borrowings on our revolving credit facility.

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

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

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

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

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

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

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

The amortization of the interest rate locks resulted in a decrease to other comprehensive income of $ 6.1 million, $ 2.1 million and $ 1.4 million for the fiscal years ended May 31, 2023, 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 May 31, 2023 and 2022.

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

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assets, net Other

assets, net Long-term

accrued liabilities

2022 $ 44,803 $ 18,331

2020 $ 25,646 $ 38,546

2019 $ — $ — $ 61,657

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

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

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

Cintas has certain covenants related to debt agreements.

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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 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 balance sheet.

All identified leases are recorded on the consolidated 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 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.

The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available at lease commencement date.

Lease expense for operating leases is recorded on a straight-line basis over the lease term and variable lease costs are recorded as incurred.

Lease expense for operating leases is recorded on a straight-line basis over the lease term

and variable lease costs are recorded as incurred.

Both lease expense and variable lease costs are primarily recorded in cost of uniform rental and facility services and other on the Company's consolidated statements of income.

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Total present value of lease payments $ 181,988

Income before income taxes for continuing operations consists of the following components for the fiscal years ended May 31:

Income before income taxes consists of the following components for the fiscal years ended May 31:

(In thousands) 2023 2022 2021

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$ 1,693,148 $ 1,498,768 $ 1,287,749

Income tax expense (benefit) for continuing operations consists of the following components for the fiscal years ended May 31:

Income tax expense (benefit) consists of the following components for the fiscal years ended May 31:

(In thousands) 2023 2022 2021

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$ 345,138 $ 263,011 $ 176,781

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

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

(In thousands) 2023 2022 2021

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Reserves related to accounts receivable $ 12,562 $ 10,928

Inventory obsolescence 28,020 30,617

Inventory reserves 22,822 28,020

Insurance reserves 45,153 45,237

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282,519 282,702

Valuation allowance — ( 2,037 )

282,702 318,655

Deferred tax liabilities:

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Property and equipment 171,971 171,819

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

Intangibles and other amortizable assets 190,299 199,256

Treasury locks 32,830 31,566

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This evaluation considers, among other items, the nature, frequency and amount of recent losses, reversal periods of taxable temporary differences, duration of statutory periods and tax planning strategies.

As a result of this analysis, management believes it is more likely than not that the recorded deferred tax assets, net of valuation allowances, will be realized.

The progression of the valuation allowance is as follows at May 31:

(In thousands) 2022 2021

Balance at beginning of year $ ( 2,037 ) $ ( 6,411 )

Subtractions 2,037 4,374

Balance at end of year $ — $ ( 2,037 )

As a result of this analysis, management believes it is more likely than not that the recorded deferred tax assets will be realized.

Income taxes paid were $ 291.9 million, $ 208.5 million and $ 245.5 million for the fiscal years ended May 31, 2023, 2022 and 2021, respectively.

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

Note 10 - Acquisitions

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

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

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

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

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

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

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

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

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

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

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

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

(In thousands) December 10, 2021

Working capital assets $ 17,352

Property and equipment 16,230

Operating lease right-of-use assets 16,882

Goodwill 55,986

Separately identifiable intangible assets 9,201

Total current liabilities ( 6,425 )

Operating lease liabilities ( 17,734 )

Total allocation (consideration) $ 91,492

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

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

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

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

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

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

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

Other Acquisitions

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

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

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

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

(In thousands) 2022 2021

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

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

Fair value of other intangibles acquired 6,045 552

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

Net goodwill recognized 144,105 8,352

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

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

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

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

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

Employee Benefit Plans

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Fair value of plan assets, beginning of year $ 66,723 $ 78,244

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

Actual loss on plan assets ( 3,345 ) ( 8,322 )

Employer contributions — 87

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Expected return on assets ( 3,350 ) ( 3,651 )

Amortization of net loss — 222

Net periodic pension benefit $ ( 261 ) $ ( 1,503 )

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government securities, corporate debt and mutual funds.

The mutual fund investments are valued at the closing price reported on the active market on which the individual securities are traded and are not adjusted from the quoted active market price at the consolidated balance sheet date.

The remaining investments, primarily corporate debt, are valued using unadjusted observable inputs such as third-party quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for the assets or liabilities.

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

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

Furthermore, while we believe our valuation methods are appropriate and

consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the consolidated balance sheet dates.

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

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Corporate debt — 21,437 — 21,437 — 22,681 — 22,681

Municipal obligations — 151 — 151 — — — —

Mutual funds:

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Total $ 36,170 $ 23,868 $ — $ 60,038 $ 40,864 $ 25,859 $ — $ 66,723

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

We expect to make contributions of approximately $ 0.8 million to the Pension Plan during the next 12 months.

The Pension Plan benefit payments expected to be paid for each of the next five years and thereafter are $ 4.4 million, $ 4.6 million, $ 4.8 million, $ 4.9 million, $ 5.0 million and $ 54.0 million, respectively.

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

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

Cintas also administers a pension plan that was assumed in a previous acquisition and is immaterial for detailed disclosure purposes.

As of May 31, 2023 and 2022, the fair value of this pension plan's total assets was $ 7.8 million and $ 8.4 million, respectively, and the PBO was $ 6.9 million and $ 7.5 million, respectively.

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See Note 11 entitled Stock-Based Compensation for additional information on restricted stock awards.

The following tables set forth the computation of basic and diluted earnings per share from continuing operations using the two-class method for amounts attributable to Cintas' common shares for the fiscal years ended May 31:

Basic Earnings per Share from Continuing Operations

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 fiscal years ended May 31:

Basic Earnings per Share

(In thousands except per share data)

2023 2022 2021

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

income from continuing operations allocated to

participating securities

6,132 7,623 8,158

Income from continuing operations available to common

$ 1,229,625 $ 1,103,345 $ 868,202

Net income $ 1,348,010 $ 1,235,757 $ 1,110,968

net income allocated to participating securities 5,463 6,132 7,623

Net income available to common shareholders $ 1,342,547 $ 1,229,625 $ 1,103,345

Basic weighted average common shares outstanding

101,645 103,172 104,874

Basic earnings per share from continuing operations

$ 11.92 $ 10.52 $ 8.36

Diluted Earnings per Share from Continuing Operations

Basic earnings per share $ 13.21 $ 11.92 $ 10.52

Diluted Earnings per Share

(In thousands except per share data)

2023 2022 2021

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

income from continuing operations allocated to

participating securities

6,132 7,623 8,158

Income from continuing operations available to common

$ 1,229,625 $ 1,103,345 $ 868,202

Net income $ 1,348,010 $ 1,235,757 $ 1,110,968

net income allocated to participating securities 5,463 6,132 7,623

Net income available to common shareholders $ 1,342,547 $ 1,229,625 $ 1,103,345

Basic weighted average common shares outstanding

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103,377 105,523 107,707

Diluted earnings per share from continuing operations

$ 11.65 $ 10.24 $ 8.11

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

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

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

Diluted earnings per share $ 12.99 $ 11.65 $ 10.24

For the fiscal years ended May 31, 2023, 2022 and 2021, options granted to purchase 1.0 million, 0.5 million and 0.2 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share.

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

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

On July 27, 2021, we 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 May 31, 2023, Cintas purchased a total of 2.7 million shares of Cintas common stock at an average price of $ 385.80 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 and fiscal year ended May 31:

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July 27, 2021 550 396.69 218,288 2,150 383.01 823,429 — — —

July 26, 2022 — — — — — — — — —

550 $ 396.69 $ 218,288 3,740 $ 375.53 $ 1,404,649 1,386 $ 346.13 $ 479,656

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430 $ 420.21 $ 180,577 305 $ 397.16 $ 121,224 246 $ 302.52 $ 74,465

Total repurchase of

Cintas common

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

Total repurchase of Cintas

common stock $ 398,865 $ 1,525,873 $ 554,121

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

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

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

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

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

There were no share buybacks in the period subsequent to May 31, 2023, through July 27, 2023, under any share buyback program.

In addition to the share buyback activity presented above, beginning in fiscal 2022, Cintas acquired shares of Cintas common stock, via non-cash transactions, in connection with net-share settlements of option exercises.

The following table summarizes Cintas' non-cash share buyback activity for the fiscal year ended May 31:

Buyback Program

(In thousands except per share data)

Shares Average Price

per Share Non-Cash

Value Shares Average Price

per Share Non-Cash

Non-cash transaction activity 360 $ 424.86 $ 152,983 71 $ 402.73 $ 28,670

Stock-Based Compensation

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At May 31, 2023, 5,412,885 shares of common stock were reserved for future issuance under the 2016 Plan.

Total compensation cost for stock-based awards for continuing operations was $ 109.3 million, $ 112.0 million and $ 115.4 million for the fiscal years ended May 31, 2022, 2021 and 2020, respectively.

Total compensation cost for stock-based awards was $ 103.6 million, $ 109.3 million and $ 112.0 million for the fiscal years ended May 31, 2023, 2022 and 2021, respectively.

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

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(Loss) Income

Rate Hedges Other Total

Rate Locks Other Total

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

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

Other comprehensive (loss) income before

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

Amounts reclassified from accumulated other

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

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

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

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

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The remainder of Cintas’ operating segments, which consists of the Fire Protection Services operating segment and the Uniform Direct Sale operating segment, is included in All Other.

Cintas evaluates the performance of each operating segment based on several factors of which the primary financial measures are operating segment revenue and income before income taxes.

Cintas evaluates the performance of each operating segment based on several factors of which the primary ---financial measures are operating segment revenue and operating income.

The accounting policies of the operating segments are the same as those described in Note 1 entitled Significant Accounting Policies.

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(1) Corporate assets represent the consolidated cash balance in all periods presented.

Note 14 - Litigation and Other Contingencies

Cintas is party to additional litigation not considered in the ordinary course of business, including the litigation discussed below.

The Company is a defendant in a purported class action lawsuit, City of Laurel, Mississippi v.

Cintas Corporation No.

2 , filed on March 12, 2021.

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, and on March 6, 2023, the Ninth Circuit Court of Appeals affirmed.

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

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

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

The lawsuit asserts that the defendants improperly managed the costs of the employee retirement plan, breached their fiduciary duties in failing to investigate and select lower cost alternative funds and failed to monitor and control the employee retirement plan’s recordkeeping costs.

The defendants deny liability and a legal contingency is neither probable nor estimable at this time.

Cintas records an accrual for legal contingencies when Cintas determines that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

As of May 31, 2023 and 2022, Cintas did not accrue any additional sums in excess of its other legal contingency accruals for adverse jury verdicts arising in the ordinary course of its business.

The litigation discussed above, if decided or settled adversely to Cintas, may result in liability material to Cintas' consolidated financial condition, consolidated results of operation or consolidated cash flows and could increase costs of operations on an ongoing basis.

Any estimated liability relating to these proceedings is not determinable at this time.

Cintas may enter into discussions regarding settlement of these and other lawsuits, and may enter into settlement agreements if it believes such settlement is in the best interest of Cintas' shareholders.

Changes in and Disagreements with

1 unchanged sentence

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data