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Item 1. Financial Statements

2023-10-05 compared with 2023-04-06 · 98 added, 247 removed, 402 unchanged (46% of the section changed)

2 unchanged sentences

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

Three Months Ended Nine Months Ended

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

Three Months Ended

(In thousands except per share data) August 31, 2023 August 31, 2022

Uniform rental and facility services $ 1,826,825 $ 1,697,772

18 unchanged sentences

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended Nine Months Ended

(In thousands) February 28,

2023 February 28,

2022 February 28,

2023 February 28,

Three Months Ended

(In thousands) August 31,

2023 August 31,

Net income $ 385,085 $ 351,689

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments

2,634 ( 19,206 )

Change in fair value of interest rate lock

agreements, net of tax expense of $ 513 ,

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

expense of $ 2,806 and $ 320 , respectively

Amortization of interest rate lock agreements, net of tax benefit of

$( 487 ) and $( 512 ), respectively

( 1,442 ) ( 1,521 )

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

$ 2,577 , respectively

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

$ 2,319 and $( 192 ), respectively

9,391 ( 19,793 )

3 unchanged sentences

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands except per share data) February 28,

(In thousands except per share data) August 31,

Current assets:

3 unchanged sentences

Uniforms and other rental items in service 1,021,515 1,011,918

Income taxes, current 2,990 21,708

Prepaid expenses and other current assets 182,191 142,795

12 unchanged sentences

Accrued liabilities 592,370 632,504

Income taxes, current 101,031 12,470

Operating lease liabilities, current 43,803 43,710

Debt due within one year 249,053 311,574

Total current liabilities 1,168,839 1,230,062

32 unchanged sentences

Net income — — 385,085 — — — 385,085

Comprehensive loss, net of tax — — — ( 19,793 ) — — ( 19,793 )

Comprehensive income, net of tax — — — 9,391 — — 9,391

Dividends — — ( 138,272 ) — — — ( 138,272 )

4 unchanged sentences

Balance at August 31, 2023 192,658 $ 2,121,475 $ 9,844,128 $ 87,169 ( 90,730 ) $ ( 7,975,137 ) $ 4,077,635

Net income — — 324,293 — — — 324,293

Comprehensive loss, net of tax — — — ( 4,028 ) — — ( 4,028 )

Dividends — — ( 117,338 ) — — — ( 117,338 )

Stock-based compensation — 25,255 — — — — 25,255

Vesting of stock-based compensation awards 9 — — — — — —

Stock options exercised 194 29,053 — — ( 66 ) ( 27,975 ) 1,078

Repurchase of common stock — — — — ( 68 ) ( 28,348 ) ( 28,348 )

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

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY

and Paid-In Capital Retained

1 unchanged sentence

Comprehensive

Income (Loss) Treasury Stock Total

Income Treasury Stock Total

Shareholders'

9 unchanged sentences

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

Net income — — 294,669 — — — 294,669

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

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

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

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

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

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

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

Net income — — 315,448 — — — 315,448

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

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

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

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

Stock options exercised 215 20,438 — — ( 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

Nine Months Ended

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

Three Months Ended

(In thousands) August 31, 2023 August 31, 2022

Cash flows from operating activities:

4 unchanged sentences

Stock-based compensation 30,242 26,282

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

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

Deferred income taxes ( 1,367 ) 14,829

12 unchanged sentences

Purchases of investments ( 6,525 ) ( 5,930 )

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

Acquisitions of businesses, net of cash acquired ( 55,651 ) ( 7,060 )

2 unchanged sentences

Cash flows from financing activities:

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

Issuance of commercial paper, net — 196,000

Repayment of debt ( 10,000 ) —

15 unchanged sentences

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

While we believe that the disclosures are adequately presented, we suggest that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2022 filed with the SEC on July 27, 2022.

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

See Note 1 entitled Significant Accounting Policies of "Notes to Consolidated Financial Statements" of that Annual Report for a summary of our significant accounting policies.

There have been no material changes in the accounting policies followed by Cintas during the current fiscal year.

2 unchanged sentences

Inventories, net are valued at the lower of cost (first-in, first-out) or net realizable value.

Inventory is comprised of the following:

(In thousands) February 28,

Inventory is comprised of the following at:

(In thousands) August 31,

Raw materials $ 23,199 $ 27,878

1 unchanged sentence

Finished goods 426,138 422,342

$ 531,270 $ 472,150

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.

Inventories, net $ 498,354 $ 506,604

Inventories are recorded net of reserves for obsolete inventory (excess and slow-moving) of $ 74.1 million and $ 80.1 million at August 31, 2023 and May 31, 2023, respectively.

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

3 unchanged sentences

Note 2 - Revenue Recognition

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

Three Months Ended Nine Months Ended

(In thousands) February 28,

2023 February 28,

2022 February 28,

2023 February 28,

Uniform Rental and

Facility Services $ 1,716,165 78.4 % $ 1,553,320 79.2 % $ 5,123,924 78.5 % $ 4,596,767 79.5 %

First Aid and Safety

Services 231,605 10.6 % 212,958 10.9 % 701,740 10.7 % 614,234 10.6 %

Fire Protection

Services 155,762 7.1 % 128,727 6.6 % 454,211 7.0 % 380,199 6.6 %

Uniform Direct

Sales 86,454 3.9 % 65,537 3.3 % 251,423 3.8 % 188,573 3.3 %

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

(In thousands) 2023 2022

Uniform Rental and Facility Services $ 1,826,825 78.0 % $ 1,697,772 78.4 %

First Aid and Safety Services 260,693 11.1 % 234,161 10.8 %

Fire Protection Services 174,316 7.5 % 151,847 7.0 %

Uniform Direct Sales 80,496 3.4 % 82,674 3.8 %

Total revenue $ 2,342,330 100.0 % $ 2,166,454 100.0 %

1 unchanged sentence

Revenue Recognition Policy

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

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

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

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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.

1 unchanged sentence

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

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

The Company reassesses these estimates during each reporting period.

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

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

No constraints on our revenue recognition were applied during the three months ended August 31, 2023 or 2022.

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 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.

2 unchanged sentences

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

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

As permitted by Accounting Standards Codification 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 condensed financial statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts within the portfolio.

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

3 unchanged sentences

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

As of February 28, 2023, the current and noncurrent assets related to deferred commissions totaled $ 90.4 million and $ 248.8 million, respectively.

As of August 31, 2023, the current and noncurrent assets related to deferred commissions totaled $ 94.1 million and $ 255.1 million, respectively.

As of May 31, 2023, the current and noncurrent assets related to deferred commissions totaled $ 92.5 million and $ 251.6 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.

We recorded amortization expense related to deferred commissions of $ 24.4 million and $ 22.4 million during the three months ended August 31, 2023 and 2022, respectively.

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

9 unchanged sentences

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

Operating lease costs, including short-term lease expense and variable lease costs which were immaterial in both periods, were $ 19.8 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:

Operating lease costs, including short-term lease expense and variable lease costs which were immaterial in both periods, were $ 19.7 million and $ 19.5 million for the three months ended August 31, 2023 and 2022, respectively.

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

(In thousands) 2023 2022

2 unchanged sentences

operating lease liabilities $ 14,286 $ 15,836

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:

Weighted-average remaining lease term - operating leases 5.43 years 5.40 years

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 February 28, 2023:

Weighted-average remaining lease term 5.26 years 5.28 years

Weighted-average discount rate 3.03 % 2.87 %

The contractual future minimum lease payments of Cintas' operating lease liabilities by fiscal year are as follows as of August 31, 2023:

(In thousands)

2023 (remaining three months)

2024 (remaining nine months)

Thereafter 35,134

5 unchanged sentences

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

As of February 28, 2023

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

Cash and cash equivalents $ 88,563 $ — $ — $ 88,563

Other assets, net:

Interest rate lock agreements — 70,071 — 70,071

Total assets at fair value $ 88,563 $ 70,071 $ — $ 158,634

As of May 31, 2022

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

As of August 31, 2023 As of May 31, 2023

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

Cash and cash equivalents $ 88,126 $ — $ — $ 88,126 $ 124,149 $ — $ — $ 124,149

Other assets, net:

Interest rate lock agreements — 56,877 — 56,877

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

Interest rate lock

agreements — 81,455 — 81,455 — 70,449 — 70,449

Total assets at fair

value $ 88,126 $ 81,455 $ — $ 169,581 $ 124,149 $ 70,449 $ — $ 194,598

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

9 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.

Note 5 - Investments

Cintas' investments are summarized as follows:

(In thousands) February 28,

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

Other investments 4,373 5,737

Total investments $ 241,796 $ 242,873

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

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

Note 5 - Earnings Per Share

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

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

Three Months Ended Nine Months Ended

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

Basic Earnings per Share

(In thousands except per share data)

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

Net income $ 385,085 $ 351,689

1 unchanged sentence

Net income available to common shareholders $ 383,525 $ 350,169

$ 324,476 $ 313,867 $ 997,654 $ 936,590

Basic weighted average common shares outstanding

1 unchanged sentence

Basic earnings per share $ 3.76 $ 3.45

Three Months Ended Nine Months Ended

Diluted Earnings per Share

(In thousands except per share data)

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

Net income $ 385,085 $ 351,689

1 unchanged sentence

Net income available to common shareholders $ 383,525 $ 350,169

$ 324,476 $ 313,867 $ 997,654 $ 936,590

Basic weighted average common shares outstanding

1 unchanged sentence

Effect of dilutive securities – employee stock options

1,704 2,253 1,774 2,458

Diluted weighted average common shares outstanding

1 unchanged sentence

Diluted earnings per share $ 3.70 $ 3.39

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.

For the three months ended August 31, 2023 and 2022, options granted to purchase 0.2 million and 0.8 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share.

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

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

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

From the inception of the July 27, 2021 share buyback program through 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 Nine Months Ended

February 28, 2023 February 28, 2023

The following table summarizes the share buyback activity by program and period for the three months ended August 31:

Buyback Activity

9 unchanged sentences

Total repurchase of Cintas common stock $ 73,276 $ 320,334

Three Months Ended Nine Months Ended

February 28, 2022 February 28, 2022

Buyback Activity

(In thousands except per share data)

per Share Purchase

Price Shares Avg.

per Share Purchase

October 29, 2019 — $ — $ — 1,590 $ 365.41 $ 581,220

July 27, 2021 1,386 388.03 537,655 1,386 388.03 537,655

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

Shares acquired for taxes due (1)

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

Total repurchase of Cintas common stock $ 557,115 $ 1,221,841

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

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

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

Three Months Ended Nine Months Ended

February 28, 2023 February 28, 2023

The following table summarizes Cintas' non-cash share buyback activity for the three months ended August 31:

(In thousands except per share data)

3 unchanged sentences

Non-cash transaction activity 118 $ 502.24 $ 59,212 193 $ 411.93 $ 79,591

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

In the period subsequent to August 31, 2023, through October 5, 2023, we purchased 0.5 million shares of Cintas common stock at an average price of $ 482.59 for a total purchase price of $ 225.5 million.

From the inception of the July 27, 2021 program through October 5, 2023, Cintas has purchased 3.2 million shares of Cintas common stock in the aggregate, at an average price of $ 400.08 per share, for a total purchase price of $ 1.3 billion.

Cintas has made no purchases under the July 26, 2022 share buyback program.

Note 6 - Goodwill, Service Contracts and Other Assets, Net

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:

Changes in the carrying amount of goodwill and service contracts for the three months ended August 31, 2023, by reportable operating segment and All Other, are as follows:

(In thousands)

5 unchanged sentences

Foreign currency translation 1,150 103 4 1,257

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

Balance as of August 31, 2023 $ 2,683,126 $ 293,984 $ 127,845 $ 3,104,955

Service Contracts

7 unchanged sentences

Foreign currency translation 212 12 — 224

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

Balance as of August 31, 2023 $ 305,181 $ 20,146 $ 14,939 $ 340,266

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

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

As of August 31, 2023 As of May 31, 2023

(In thousands) Carrying

8 unchanged sentences

consulting agreements

Other 142,813 21,376 121,437 125,941 20,917 105,024

and other 212,122 68,129 143,993 198,260 67,294 130,966

Total other assets, net $ 905,262 $ 506,203 $ 399,059 $ 863,965 $ 480,974 $ 382,991

(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.

(1) The current portion of capitalized contract costs, included in prepaid expenses and other current assets on the consolidated condensed balance sheets as of August 31, 2023 and May 31, 2023, is $ 94.1 million and $ 92.5 million, respectively.

Amortization expense for service contracts and other assets, was $ 38.5 million and $ 36.4 million for the three months ended August 31, 2023 and 2022, respectively.

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

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:

As of August 31, 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 three months)

2024 (remaining nine months)

Thereafter 163,288

5 unchanged sentences

Issued Fiscal Year

Maturity February 28,

Debt due within one year

Commercial paper 4.79 % (1)

2023 2023 $ 199,000 $ 261,200

Senior notes (2)

2.78 % 2013 2023 50,054 50,380

Debt issuance costs ( 1 ) ( 6 )

Total debt due within one year $ 249,053 $ 311,574

Maturity August 31,

Debt due after one year

7 unchanged sentences

Total debt due after one year $ 2,477,093 $ 2,486,405

(1) Variable rate debt instrument.

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

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

2 unchanged sentences

The principal amount of these notes is $ 50.0 million with a stated interest rate of 3.88 %.

(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.

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 3.88 %.

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.

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

The carrying value and fair value of Cintas' debt as of February 28, 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.

The carrying value and fair value of Cintas' debt as of August 31, 2023 were $ 2,490.0 million and $ 2,396.5 million, respectively, and as of May 31, 2023 were $ 2,500.0 million and $ 2,443.8 million, respectively.

During the three months ended August 31, 2023, Cintas repurchased, and subsequently retired, $ 10.0 million of its 6.15 %, 30-year senior notes.

In conjunction with this transaction, Cintas recognized a loss of $ 0.8 million during the three months ended August 31, 2023, which is recorded in interest expense on the consolidated condensed statement of income.

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

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 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.

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.

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

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 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 $ 0.5 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.

The amortization of the interest rate locks resulted in a decrease to other comprehensive income (loss) of $ 1.4 million and $ 1.5 million for the three months ended August 31, 2023 and 2022, 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 February 28, 2023 and May 31, 2022.

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

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

February 28, 2023 May 31, 2022

August 31, 2023 May 31, 2023

Fiscal Year of Issuance

3 unchanged sentences

2020 $ 31,446 $ 25,646

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.

The changes 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 months ended August 31, 2023 or 2022.

Cintas has certain covenants related to debt agreements.

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

As of February 28, 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 recorded unrecognized tax benefits were $ 29.3 million as of both August 31, 2023 and May 31, 2023, and are included in long-term accrued liabilities on the consolidated condensed balance sheets.

The majority of Cintas' operations are in North America.

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

Based on the resolution of the various audits and other potential regulatory developments, it is 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 18.2 % 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).

Based on the status and resolution of the various audits and other potential regulatory developments, it is expected that the balance of unrecognized tax benefits will not materially change for the fiscal year ending May 31, 2024.

Cintas’ effective tax rate was 19.2 % and 14.8 % for the three months ended August 31, 2023 and 2022, respectively.

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

Note 9 - Accumulated Other Comprehensive Income (Loss)

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Balance at June 1, 2023 $ ( 17,001 ) $ 96,714 $ ( 1,935 ) $ 77,778

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

Other comprehensive income before reclassifications 2,634 8,199 — 10,833

Amounts reclassified from accumulated other comprehensive income (loss)

— ( 1,442 ) — ( 1,442 )

Net current period other comprehensive loss ( 19,206 ) ( 587 ) — ( 19,793 )

Net current period other comprehensive income 2,634 6,757 — 9,391

Balance at August 31, 2023 $ ( 14,367 ) $ 103,471 $ ( 1,935 ) $ 87,169

Other comprehensive (loss) income before

reclassifications ( 9,901 ) 7,394 — ( 2,507 )

Amounts reclassified from accumulated other comprehensive income (loss)

— ( 1,521 ) — ( 1,521 )

Net current period other comprehensive (loss) income ( 9,901 ) 5,873 — ( 4,028 )

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) Income

Currency Unrealized Income

on Interest Rate Locks Other Total

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

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

Amounts reclassified from accumulated other comprehensive income (loss)

— ( 459 ) — ( 459 )

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

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

Other comprehensive (loss) income before

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— ( 1,521 ) — ( 1,521 )

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

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

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

Amounts reclassified from accumulated other comprehensive income (loss)

— ( 459 ) — ( 459 )

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

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

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

Net current period other comprehensive loss ( 19,206 ) ( 587 ) — ( 19,793 )

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

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

Details about Accumulated

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Statements of Income

Three Months Ended Nine Months Ended

(In thousands) February 28,

2023 February 28,

2022 February 28,

2023 February 28,

Amortization of interest rate locks

$ 2,033 $ 608 $ 6,100 $ 1,823 Interest expense

(In thousands) 2023 2022

Amortization of interest rate locks $ 1,929 $ 2,033 Interest expense

Tax expense ( 487 ) ( 512 ) Income taxes

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Other Corporate (1)

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 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 nine months ended February 28, 2023

As of and for the three months ended August 31, 2023

Revenue $ 1,826,825 $ 260,693 $ 254,812 $ — $ 2,342,330

1 unchanged sentence

Total assets $ 7,346,364 $ 723,687 $ 561,504 $ 88,126 $ 8,719,681

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

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

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

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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 operations or consolidated cash flows.

Any liability in this matter is not 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 August 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 operations or consolidated cash flows and could increase costs of operations on an ongoing basis.

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

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

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