UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended fiscal year endedMay 31, 20192021
 ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-11399
Commission file number 0-11399
ctas-20210531_g1.jpg
Cintas Corporation
(Exact name of registrant as specified in its charter)
Washington31-1188630
(State or Other Jurisdiction of Incorporation)Incorporation or Organization)(IRS Employer Identification Number)

6800 Cintas Boulevard
P.O. Box 625737
Cincinnati, Ohio 45262-5737
Cincinnati,Ohio45262-5737
(Address of Principal Executive Offices)(Zip Code)
Registrant's Telephone Number, Including Area Code: (513) 459-1200
Securities registered pursuant to Section 12(b) of the Act:
Act
Title of each classTrading symbol(s)Name of each exchange on which registered
Common stock, no par valueCTAS
The NASDAQ Stock Market LLC
 (NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YESYesü☒NONo ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YESYes☐NONoü☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
YESYesü☒NONo☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files.
YESYesü☒NONo☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filerü☒Accelerated Filer☐Non-Accelerated Filer☐
Smaller Reporting Company☐Emerging Growth Company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.762(b)) by the registered public accounting firm that prepared or issued is audit report. ☒
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).
YESYes☐NONoü☒
The aggregate market value of the Registrant's Common Stock held by non-affiliates as of November 30, 2018,2020, was $19,698,043,866$37,301,430,580 based on a closing sale price of $187.38$355.30 per share. As of June 30, 2019, 184,831,0982021, 189,135,107 shares of the Registrant's Common Stock were issued and 102,487,039102,967,245 shares were outstanding.
Documents Incorporated by Reference
Portions of the Registrant's Proxy Statement to be filed with the Commission for its 20192021 Annual Meeting of Shareholders are incorporated by reference in Part III of this Form 10-K.

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Cintas Corporation
Index to Annual Report on Form 10-K




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Item 1.
Business
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Item 1A.
Risk Factors
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Item 1B.
Unresolved Staff Comments
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Item 2.
Properties
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Item 3.
Legal Proceedings
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Item 4.
Mine Safety Disclosures
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Part II
Item 5.
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Part I


Item 1.  Business
Overview
Cintas Corporation (Cintas, Company, we, us or our), a Washington corporation, helps more than one million businesses of all types and sizes, primarily in North America,the United States (U.S.), as well as Canada and Latin America, Europe and Asia, get Ready™READY™ to open their doors with confidence every day by providing a wide range of products and services that enhance our customers’ image and help keep their facilities and employees clean, safe and looking their best. With products and services including uniforms, floor care,mats, mops, restroom supplies, first aid and safety products, fire extinguishers and testing, and safety and compliance training, Cintas helps customers get Ready for the Workday™Workday®.The company is also the creator of the Total Clean Program™ — a first-of-its-kind service that includes scheduled delivery of essential cleaning supplies, hygienically clean laundering, and sanitizing and disinfecting projects and services. Cintas was founded in 1968 by Richard T. Farmer, currently the Chairman Emeritus of the Board of Directors, when he left his family's industrial laundry business in order to develop uniform programs using an exclusive new fabric. In the early 1970's, Cintas acquired the family industrial laundry business. Over the years, Cintas developed additional products and services that complemented its core uniform business and broadened the scope of products and services available to its customers.


Business Segments
Cintas’ reportable operating segments are the Uniform Rental and Facility Services operating segment and the First Aid and Safety Services.Services operating segment. The Uniform Rental and Facility Services reportable operating segment consists of the rental and servicing of uniforms and other garments, including flame resistant clothing, mats, mops and shop towels and other ancillary items. In addition to these rental items, restroom cleaning services and supplies carpet and tile cleaning services and the sale of items from our catalogs to our customers on route are included within this reportable operating segment. The First Aid and Safety Services reportable operating segment consists of first aid and safety products and services. The remainder of Cintas’ business, which consists of the Fire Protection Services operating segment and itsthe Uniform Direct Sale business,operating segment, is included in All Other.


On March 21, 2017, Cintas completedThe following table sets forth Cintas' total revenue and the acquisition of G&K Services, Inc. (G&K). G&K is a wholly-owned subsidiary of Cintas that operates withinrevenue derived from each reportable operating segment and the Uniform Rental and Facility Servicesremaining operating segment. In fiscal 2018, Cintas sold a significant business referred to as "Discontinued Services." Prior to the sale of Discontinued Services, the operations were primarilysegments included in the All Other and classified as held for sale. In accordance with the applicable accounting guidancecategory for the disposal of long-lived assets and discontinued operations, the results of Discontinued Services have been excluded from both continuing operations andfiscal years ended May 31:
(In thousands)202120202019
Uniform Rental and Facility Services$5,689,632 $5,643,494 $5,552,430 
First Aid and Safety Services784,291 708,569 619,470 
All Other642,417 733,057 720,403 
Total Revenue$7,116,340 $7,085,120 $6,892,303 

Additional information regarding each reportable operating segment results for all periods presented. Please see and All Other is also included in Note 1714 entitled Discontinued OperationsOperating Segment Information of "Notes"Notes to Consolidated Financial Statements"Statements."

COVID-19 Pandemic
In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China, and has since spread globally. In March 2020, the World Health Organization characterized COVID-19 as a pandemic. Efforts to contain the spread of COVID-19 intensified during our fiscal 2020 fourth quarter and have remained in effect throughout our fiscal 2021. Most states and municipalities within the U.S., as well as Canada, enacted temporary closures of businesses, issued quarantine orders and took other restrictive measures in response to the COVID-19 pandemic. Many of the business closures, quarantine orders and other restrictive measures remained in place through fiscal 2021. Within the U.S., our business was designated an essential business, which allowed us to continue to serve customers that remained open. During our fiscal 2021 fourth quarter, the roll out of vaccines, lower COVID-19 case counts and lifting of restrictions on businesses had a positive impact on our business.

We have operations throughout the U.S. and Canada and participate in a global supply chain. During most of fiscal 2021, the existence of the 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
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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 2021 and could result in future inventory reserve increases if demand for personal protective equipment declines. See Note 1 entitled Significant Accounting Policies of "Notes to Consolidated Financial Statements" for additional information.detail on the additional reserve placed on inventory. The impact of the 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. For more information, see the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Risk Factors” within this Annual Report on Form 10-K.


Customers
We provide our products and services to over one million businesses of all types, from small service and manufacturing companies to major corporations that employ thousands of people. This diversity in customer base results in no individual customer accounting for greater than one percent of Cintas' total revenue. As a result, the loss of one account would not have a significant financial impact on Cintas.


The following table sets forth Cintas' total revenue and the revenue derived from each reportable operating segment and All Other for the fiscal years ended May 31:
(In thousands)2019 2018 2017
      
Uniform Rental and Facility Services$5,552,430
 $5,247,124
 $4,202,490
First Aid and Safety Services619,470
 564,706
 508,233
All Other720,403
 664,802
 612,658
Total Revenue$6,892,303
 $6,476,632
 $5,323,381
Additional information regarding each reportable operating segment and All Other is also included in Note 15 entitled Operating Segment Information of "Notes to Consolidated Financial Statements."

Competition
The primary markets served by all Cintas businesses are local in nature and highly fragmented. Cintas competes with national, regional and local providers, large national retailers and small local retailers as well as companies with a significant online presence and the level of competition varies at each of Cintas' local operations. Product, design, price, quality, service and convenience to the customer are the competitive elements in each of our businesses.



Operations and Distribution
Within the Uniform Rental and Facility Services reportable operating segment, Cintas provides its products and services to customers via local delivery routes originating from rental processing plants and branches. Within the First Aid and Safety Services reportable operating segment and All Other, Cintas provides its products and services via its distribution network and local delivery routes or local representatives. InAt May 31, 2021, Cintas, in total, Cintas hashad approximately 11,40011,000 local delivery routes, 470460 operational facilities and 1113 distribution centers. At May 31, 2019,

Sourcing
Cintas employed approximately 45,000 employee-partners, of which approximately 1,600 were represented by labor unions.

is committed to sourcing responsibly. Cintas sources finished products from many outside suppliers. As mentioned on our website, www.cintas.com, each and every supplier must comply with a vendor code of conduct as a condition of doing business with Cintas. Cintas also conducts internal training to ensure that employees who have direct responsibility for supply chain management are knowledgeable and aware of issues and concerns surrounding our supply chain. In addition to sourcing from third-party suppliers, Cintas operates five manufacturing facilities that provide for standard uniform needs. Cintas purchases fabric, used in the manufacturing of it'sits products, from several suppliers. Cintas is not aware of any circumstances that would hinder its ability to continue obtaining these materials.


Government Laws and Regulations
Cintas is subject to a wide array of laws, government regulations, including environmental regulations, and standards in each domestic and foreign jurisdiction in which it operates. In addition to Cintas’s U.S. operations, which in fiscal 2021 generated over 90% of its consolidated net sales, Cintas also operates its business through wholly-owned subsidiaries in foreign jurisdictions, primarily in Canada. Compliance with these laws, government regulations, including environmental regulations, and standards requires the dedication of time and effort of employees as well as financial resources.

Compliance with environmental regulations and prioritizing our environmental sustainability efforts are important to us as a good corporate citizen. Our journey started in 1929 during the Great Depression when Doc and Amelia Farmer collected shop towels that had been disposed of by manufacturing facilities along the Ohio River. They washed, recycled and sold the clean towels back to companies. Today, the majority of our total Company revenue comes from our Uniform Rental and Facility Services reportable operating segment. Most of these items are cleaned and processed in ways that extend their lifespan and, when not in use, are re-stocked for future customers to maximize their lifespan. Our laundering processes generate far less wastewater than home laundering. Water
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discharged into the environment is treated at our operating facilities and in accordance with local discharge standards and permits. Our lasting commitment to the environment and our communities is evident from our processes and innovation, which are designed to ensure that our operational facilities are operating efficiently. Cintas is subject to various environmental laws and regulations, as are other companies in the uniform rental industry. The primary federal statutes that apply to our activities in the U.S. are the Clean Air Act, the Clean Water Act and the Resource Conservation and Recovery Act. We are also subject to the Superfund Amendments and Reauthorization Act of 1986, which imposes certain reporting requirements as to emissions of hazardous substances into the air, land and water. While environmental compliance is not a material component of itsour costs, Cintas must incurmakes capital expenditures and associated operating costs, primarily for water treatment and waste removal, on a regular basis.basis in order to comply with environmental laws and regulations, to promote employee safety and to carry out its environmental sustainability principles. Environmental spending related to water treatment and waste removal was approximately $21$19.0 million in fiscal 2019 and2021, approximately $20$20.0 million in fiscal 2018.2020 and approximately $21.0 million in fiscal 2019. Capital expenditures to limit or monitor hazardous substances totaled approximately $10$1.0 million in fiscal 2019 and2021, approximately $2$3.0 million in fiscal 2018.2020 and approximately $10.0 million in fiscal 2019.


In addition, health and safety regulations (including laws or regulations promulgated in response to the ongoing COVID-19 pandemic) have necessitated, and may continue to necessitate, increased operating costs or capital investments to promote a safe working environment. Cintas is also required to comply with increasingly complex and changing laws and regulations enacted to protect business and personal data in the U.S. and other jurisdictions regarding privacy, data protection and data security, including those related to the collection, storage, use, transmission and protection of personal information and other consumer, customer, vendor or employee data. With respect to the laws and regulations noted above, as well as other applicable laws and regulations, Cintas’s compliance programs may under certain circumstances involve material investments in the form of additional processes, training, personnel, information technology and capital. In fiscal 2021, compliance with the applicable laws, government regulations, including environmental regulations, and standards did not have a material effect on Cintas’s capital expenditures or consolidated results of operations. For a discussion of the risks associated with government regulations that may materially impact Cintas, please see “Item 1A: Risk Factors—Legal and Regulatory Risks.”

Communication
Cintas uses its corporate website, www.cintas.com, as a channel for routine distribution of important information, including news releases, analyst presentations and financial information. This year, Cintas produced an expanded Environmental, Social and Governance (ESG) Report to share our focus on making a positive impact through our key ESG priorities. This included work in areas of safety and health, energy and emissions, water usage, sustainable supply chain, and governance, ethics and integrity to support diversity and equality, assisting our employee-partners in need and giving back to the communities where we live and work. Particularly during unprecedented times and issues as a result of the COVID-19 pandemic, Cintas responded with improved policies, cleaning regimens and sanitizing products and services to help keep our employee-partners, and in turn, our customers, safer. We are also READY™ to help as many of our customers fully reopen their businesses.

Cintas files with or furnishes to the Securities and Exchange Commission (SEC) Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports, as well as proxy statements and annual reports to shareholders, and, from time to time, other documents. The reports and other documents filed with or furnished to the SEC are available to investors on or through our corporate website free of charge as soon as reasonably practicable after we electronically file them with or furnish them to the SEC. The SEC maintains an internet site located at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers, such as Cintas, that file electronically with the SEC. Cintas' SEC filings can be found on the Investors page of its website at www.cintas.com/investors/highlights.aspxfinancials.aspx and its Code of Conduct and Business Ethics can be found on the About Us page of its website at www.cintas.com/company. These documents are available in print to any shareholder who requests a copy by writing or calling Cintas as set forth on the Investor Information page. The content on any website referred to in this Annual Report on Form 10-K is not incorporated by reference into this Form 10-K unless expressly noted.

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Human Capital
Cintas’ key human capital management objectives are to attract, retain and develop talent to deliver on the Company’s strategy. To support these objectives, Cintas’ human resources programs are designed to: keep people safe and healthy; enhance the Company’s culture through efforts aimed at making the workplace more inclusive; acquire and retain diverse talent; reward and support employee-partners through competitive pay and benefit programs; develop talent to prepare them for critical roles and leadership positions; and facilitate internal talent mobility to create a high-performing workforce. The principles and values our employee-partners share are the driving force behind all our accomplishments. At May 31, 2021, Cintas employed approximately 40,000 employee-partners in our global workforce, of which approximately 1,000 were represented by labor unions.

Our primary areas of focus in managing our human capital include the following:

Corporate Culture
We believe that our culture at Cintas is just as essential as our products and services. Our culture impacts the quality of the employee-partners we hire, the way we communicate and interact with our customers and each other and our performance standards. Our culture is the cornerstone representing our values, our behaviors, our way of working and how we approach our business, which is strong relationships and a dedication to taking care of one another and our customers. We operate according to the Cintas Code of Conduct, available on our website www.cintas.com, which mandates full compliance with applicable laws and regulations and helps to preserve the integrity of our Company.

Health and Safety
We aspire to achieve zero workplace injuries and provide a safe, open and accountable work environment for our employee-partners. To enforce internationally recognized standards, we have implemented an occupational health and safety management system in accordance with the Occupational Safety and Health Administration (OSHA). Employee-partners, contractors, vendors and visitors are all covered by the system, which focuses on hazard prevention, training, management commitment and worker involvement. We are also committed to continuously improving performance through our Safety Improvement Committees in every operation, while corporate safety and health employee-partners conduct annual reviews of our operations. Additionally, every year our employee-partners receive online, on-the-job and classroom training on over 30 safety topics, and all maintenance staff must complete the Maintenance Safety Certification. Every Cintas driver completes monthly driver safety training courses or on-the-road skills evaluations. Every manager attends OSHA’s 10-hour Safety Improvement course, and each member of our Senior Management team takes the Management and Leadership Skills for Environmental Health and Safety Professionals Course, part of the Harvard T.H Chan School of Public Health safety and health curriculum. In addition, we provide several channels for all employee-partners to speak up, ask for guidance and report concerns related to ethics or safety violations, and we address those concerns and take appropriate actions to uphold our Cintas values and safety culture. Through these efforts, Cintas has reduced our recordable injury rate by over 70% since 2008, has been awarded 118 OSHA Star sites in the Voluntary Protection Program (VPP), which is more than double any other company in the U.S. and have received numerous safety, health and ergonomics awards from national and international groups.

Employee-Partner Wellness
We are committed to the health and wellness of our employee-partners. We provide our employee-partners and their families with access to a variety of health and wellness programs, including our long-running Live Well program that supports employee-partners on their health and wellness journeys. We provide free annual biometric screening and health assessments at work or offsite, annual free flu shot clinics onsite or offsite, a tobacco cessation program, weight management programs and an employee-partner assistance program, which offers advice on mental health, legal and financial issues.

In response to the COVID-19 pandemic, we utilized our Preparedness Plan and implemented controls that we consider to be in the best interest of our employee-partners and the communities in which we operate, and which comply with government regulations. Some of the controls implemented in response to the COVID-19 pandemic, include physical barriers, social distancing, remote-working where possible, travel restrictions, appropriate personal protective equipment and additional hygiene and cleaning regimes. Keeping people safe remains our top priority, and the diligence and flexibility of our employee-partners in complying with these new controls has allowed us to continue to focus on providing essential products and services to our customers, ranging from cleaning supplies, disinfectant services, hand sanitizer, scrubs, face masks and face shields.
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Diversity & Inclusion
Cintas supports diversity and inclusion by fostering a respectful, creative and productive environment where all employee-partners can reach their full potential without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability or protected veteran status. We actively recruit, retain, develop and advance a diverse and talented workforce. We have four Employee-Partner Business Resource Groups, focused on Women, African Americans, Hispanic and Latin Americans, and Military and Veteran employee-partners. These groups provide platforms for our employee-partners to showcase skills, experiences and perspectives. The Employee-Partner Business Resource Groups also help foster inclusion among all employee-partners to build awareness, recruit and retain a diverse workforce and support the overall success of Cintas. We also have a Management Trainee program that helps Cintas find the best talent for our leadership pipeline, and we monitor representation across management positions. Cintas’ diversity and inclusion efforts are led by our Chief Diversity Officer. This position regularly reports to our Chief Executive Officer and works to help achieve our goals and obtain a diverse and talented workforce, which is critical to our success.

Compensation Programs and Employee Benefits
Our compensation and benefits programs provide a total rewards package designed to attract, retain and motivate our employee-partners. In addition to competitive base salaries, the total rewards package (which may vary by position and country) includes, among other items, bonuses, long-term incentives, retirement savings plans, medical insurance, prescription drug benefits, dental insurance, vision insurance, accident and critical illness insurance, life and disability insurance, health savings accounts, flexible spending accounts and an employee-partner assistance program.

Talent Development
Cintas is committed to the continued development of its employee-partners. We provide numerous training opportunities for our employee-partners, with a focus on continuous learning and development and methodologies to manage performance, provide feedback and develop talent. We offer a wide array of training solutions (classroom, hands-on and e-learning) for our employee-partners. Our talent development programs strive to provide employee-partners resources to achieve career goals and build management and leadership skills. We offer mentoring programs, a management trainee program and executive leadership programs to support the professional growth of our employee-partners and ensure we have the right succession plans in place.

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Item 1A.  Risk Factors
The statements in this section describe the most significant risks that could materially and adversely affect our business, consolidated financial condition and consolidated results of operation and the trading price of our debt or equity securities. Although the risks are organized by headings, and each risk is discussed separately, many are interrelated.


In addition, this section sets forth statements which constitute our cautionary statements under the Private Securities Litigation Reform Act of 1995.


This Annual Report on Form 10-K contains forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements. Forward-looking statements may be identified by words such as “estimates,” “anticipates,” “predicts,” “projects,” “plans,” “expects,” “intends,” “target,” “forecast,” “believes,” “seeks,” “could,” “should,” “may” and “will” or the negative versions thereof and similar words, terms and expressions and by the context in which they are used. Such statements are based upon current expectations of Cintas and speak only as of the date made. You should not place undue reliance on any forward-looking statement. We cannot guarantee that any forward-looking statement will be realized. These statements are subject to various risks, uncertainties, potentially inaccurate assumptions and other factors that could cause actual results to differ from those set forth in or implied by this Annual Report. Factors that might cause such a difference include, but are not limited to, risks inherent with the G&K transaction in the achievement of cost synergies and the timing thereof, including whether the transaction will be accretive and within the expected timeframe and the actual amounts of future integration expenses; the possibility of greater than anticipated operating costs including energy and fuel costs; lower sales volumes; loss of customers due to outsourcing trends; the performance and costs of integration of acquisitions, including G&K;acquisitions; fluctuations in costs of materials and labor including increased medical costs; costs and possible effects of union organizing activities; failure to comply with government regulations concerning employment discrimination, employee pay and benefits and employee health and safety; the effect on operations of exchange rate fluctuations, tariffs and other political, economic and regulatory risks; uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation; the cost, results and ongoing assessment of internal controls for financial reporting required by the Sarbanes-Oxley Act of 2002;reporting; the effect of new accounting pronouncements; costs of our SAP system implementation; disruptions caused by the inaccessibility of computer systems data, including cybersecurity risks; the initiation or outcome of litigation, investigations or other proceedings; higher assumed sourcing or distribution costs of products; the disruption of operations from catastrophic or extraordinary events;events including viral pandemics such as the COVID-19 coronavirus; the amount and timing of repurchases of our common stock, if any; changes in federal and state tax and labor laws; and the reactions of competitors in terms of price and service. Cintas undertakes no obligation to publicly release any revisions to any forward-looking statements or to otherwise update any forward-looking statements whether as a result of new information or to reflect events, circumstances or any other unanticipated developments arising after the date on which such statements are made, except otherwise as required by law. The risks and uncertainties described herein are not the only ones we may face. Additional risks and uncertainties presently not known to us or that we currently believe to be immaterial may also harm our business. Investors should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.


Risks Relating to Business Strategy & Operations
Negative global economic factors, including the COVID-19 pandemic, may adversely affect our financial performance.
Negative economic conditions, in North America and our other markets, may adversely affect our financial performance. Higher levels of unemployment, inflation, tax rates and other changes in tax laws and other economic factors could adversely affect the demand for Cintas’ products and services. Increases in labor costs, including the cost to provide employee-partner related healthcare benefits, minimum wages, labor shortages or shortages of skilled labor, regulations regarding the classification of employees and/or their eligibility for overtime wages, higher material costs for items such as fabrics and textiles, the inability to obtain insurance coverage at cost-effective rates, higher interest rates, inflation, higher tax rates and other changes in tax laws and other economic factors could increase our costs of rental uniforms and facility services, cost of other services and selling and administrative expenses. As a result, these factors could adversely affect our sales and consolidated results of operations.


The COVID-19 pandemic has created widespread disruption in the global economy and has had, and could continue to have, an adverse impact on our consolidated results of operations and financial performance, as well as on the results of operations and financial performance of many of the customers and suppliers in industries that we serve and operate. The duration of the pandemic itself and the market and workplace disruptions it has caused, including disruptions imposed by federal, state and local actions, as well as the potential for new government
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regulations, and the long-term effects on the economy and our customers are uncertain and as yet unknowable. These factors, as they become more certain, could adversely affect our workforce, sales and overall business. Furthermore, the ultimate impact of the COVID-19 pandemic on our consolidated results of operations and financial performance depends on many factors that are not within our control, including, but not limited to: governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic and actions taken in response on global and regional economies; the availability of federal, state or local funding programs; general economic uncertainty in key financial markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of recovery when the COVID-19 pandemic subsides. We are unable to predict the extent to which the pandemic and related impacts will continue to adversely impact our business operations, financial performance, consolidated results of operations, consolidated financial position and the achievement of our strategic objectives.

Increased competition could adversely affect our financial performance.
We operate in highly competitive industries and compete with national, regional and local providers. Product, design, price, quality, service and convenience to the customer are the competitive elements in these industries. If existing or future competitors seek to gain or retain market share by reducing prices, Cintas may be required to lower prices, which would hurt its results of operations. Cintas' competitors also generally compete with Cintas for acquisition candidates, which can increase the price for acquisitions and reduce the number of available acquisition candidates. In addition, our customers and prospects may decide to perform certain services in-house instead of outsourcing these services to us. These competitive pressures could adversely affect our sales and consolidated results of operations.



An inability to open new, cost effective operating facilities may adversely affect our expansion efforts.
We plan to expand our presence in existing markets and enter new markets. The opening of new operating facilities is necessary to gain the capacity required for this expansion. Our ability to open new operating facilities depends on our ability to identify attractive locations, negotiate leases or real estate purchase agreements on acceptable terms, identify and obtain adequate utility and water sources and comply with environmental regulations, zoning laws and other similar factors. Any inability to effectively identify and manage these items may adversely affect our expansion efforts, and, consequently, adversely affect our financial performance.


Risks associated with our acquisition practice could adversely affect our consolidated results of operations.
Historically, a portion of our growth has come from acquisitions. We continue to evaluate opportunities for acquiring businesses that may supplement our internal growth. However, there can be no assurance that we will be able to locate and purchase suitable acquisitions. In addition, the success of any acquisition, including the ability to realize anticipated cost synergies, depends in part on our ability to integrate the acquired company. The process of integrating acquired businesses may involve unforeseen difficulties and may require a disproportionate amount of our management's attention and our financial and other resources. If management is not able to effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, we may not be able to realize anticipated cost synergies resulting from acquisitions and our business could suffer. Although we conduct due diligence investigations prior to each acquisition, there can be no assurance that we will discover or adequately protect against all material liabilities of an acquired business for which we may be responsible as a successor owner or operator. The failure to identify suitable acquisitions and successfully integrate these acquired businesses, or to discover liabilities associated with such businesses in the diligence process, could adversely affect our consolidated results of operations.

Our indebtedness may limit cash flow available to invest in the ongoing needs of our business.
Our outstanding indebtedness may have negative consequences on our business, such as requiring us to dedicate a substantial portion of our cash flow from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, dividend increases, stock buybacks and other general corporate purposes, as well as increase our vulnerability to adverse economic or industry conditions. In addition, it may limit our ability to obtain additional financing in the future to enable us to react to changes in our business or industry or place us at a competitive disadvantage compared to businesses in our industry that have less debt.

Changes in the fuel and energy industry could adversely affect our financial condition and results of operations.
The price of fuel and energy needed to run our vehicles and equipment is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for fuel and other energy related products, actions by energy producers, war and unrest in oil producing countries, regional production patterns, limits on refining capacities, natural disasters and environmental concerns. Increases in fuel and energy costs could adversely affect our consolidated financial condition and consolidated results of operations.

Failure to preserve positive labor relationships with our employees could adversely affect our consolidated results of operations.
While we believe that our employee relations are good, we have been and could continue to be the target of a unionization campaign by several unions. These unions have attempted to pressure Cintas into surrendering its employees' rights to a government-supervised election by unilaterally accepting union representation. We will continue to vigorously oppose any unionization campaign and defend our employees' rights to a government-supervised election. Unionization campaigns could be materially disruptive to our business and could adversely affect our consolidated results of operations.


Risks associated with the suppliers from whom our products are sourced could adversely affect our consolidated results of operations.
The products we sell are sourced from a wide variety of domestic and international suppliers. Global sourcing of many of the products we sell is an important factor in our financial performance. We require all our suppliers to comply with applicable laws, including labor and environmental laws, and otherwise be certified as meeting our required supplier standards of conduct. Our ability to find qualified suppliers who meet our standards, and to access products in a timely and efficient manner is a significant challenge, especially with respect to suppliers located and goods sourced outside the United States.U.S. Political and economic stability in the countries in which foreign suppliers are located, the financial stability of suppliers, suppliers' failure to meet our supplier standards, labor problems experienced by our suppliers, the availability of raw materials to suppliers, currency exchange rates, transport availability and cost, inflation and other


factors relating to the suppliers and the countries in which they are located are beyond our control. In addition, U.S. and foreign trade policies, tariffs and other impositions on imported goods,
9


trade sanctions imposed on certain countries, the limitation on the importation of certain types of goods or of goods containing certain materials from other countries and other factors relating to foreign trade are beyond our control. These and other factors, including the potential negative impact of viral pandemics such as COVID-19 affecting our suppliers and our access to products could adversely affect our consolidated results of operations.

Fluctuations in foreign currency exchange could adversely affect our financial condition and results of operations.
We earn revenue, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S. dollar, including the Canadian dollar, British pound, and the euro. In fiscal years 2019, 2018 and 2017, revenue denominated in currencies other than the U.S. dollar represented less than 10% of our consolidated revenue. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenue, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, fluctuations in the value of the U.S. dollar against other major currencies, particularly in the event of significant increases in foreign currency revenue, will impact our revenue and operating income and the value of balance sheet items denominated in foreign currencies. This impact could adversely affect our consolidated financial condition and consolidated results of operations.

Failure to comply with federal and state regulations to which we are subject could result in penalties or costs that could adversely affect our results of operations. 
Our business is subject to complex and stringent state and federal regulations, including employment laws and regulations, minimum wage requirements, overtime requirements, working condition requirements, citizenship requirements, transportation and other laws and regulations. In particular, we are subject to the regulations promulgated by the U.S. Department of Transportation, or USDOT, and under the Occupational Safety and Health Act of 1970, as amended, or OSHA. We have incurred, and will continue to incur, capital and operating expenditures and other costs in the ordinary course of our business in complying with the USDOT, OSHA and other laws and regulations to which we are subject. Changes in laws, regulations and the related interpretations, including any laws or regulations that may be enacted by the current U.S. presidential administration and Congress, may alter the landscape in which we do business and may affect our costs of doing business. The impact of new laws and regulations cannot be predicted. Compliance with new laws and regulations may increase our operating costs or require significant capital expenditures. Any failure to comply with applicable laws or regulations could result in substantial fines by government authorities, payment of damages to private litigants, or possible revocation of our authority to conduct our operations, which could adversely affect our ability to service customers and our consolidated results of operations.

We are subject to legal proceedings that may adversely affect our financial condition and results of operations.
We are subject to various litigation claims and legal proceeding arising from the ordinary course of our business, including personal injury, customer contract, environmental and employment claims. Certain of these lawsuits or potential future lawsuits, if decided adversely to us or settled by us, may result in liability and expense material to our consolidated financial condition and consolidated results of operations.

Compliance with environmental laws and regulations could result in significant costs that adversely affect our results of operations.
Our operating locations are subject to environmental laws and regulations relating to the protection of the environment and health and safety matters, including those governing discharges of pollutants to the air and water, the management and disposal of hazardous substances and wastes and the clean-up of contaminated sites. The operation of our businesses entails risks under environmental laws and regulations. We could incur significant costs, including clean-up costs, fines and sanctions and claims by third parties for property damage and personal injury, as a result of violations of or liabilities under these laws and regulations. We are currently involved in a limited number of remedial investigations and actions at various locations, including those acquired in the G&K acquisition. While based on information currently known to us, we believe that we maintain adequate reserves with respect to these matters, our liability could exceed forecasted amounts, and the imposition of additional clean-up obligations or the discovery of additional contamination at these or other sites could result in significant additional costs which could adversely affect our results of operations. In addition, potentially significant expenditures could be required to comply with environmental laws and regulations, including requirements that may be adopted or imposed in the future.

Under applicable environmental laws, an owner or operator of real estate may be required to pay the costs of removing or remediating hazardous materials located on or emanating from property, whether or not the owner or operator knew of or was responsible for the presence of such hazardous materials. While we regularly engage in environmental due


diligence in connection with acquisitions, we can give no assurance that locations that have been acquired or leased have been operated in compliance with environmental laws and regulations during prior periods or that future uses or conditions will not make us liable under these laws or expose us to third-party actions, including tort suits.


We rely extensively on computer systems, including third-party systems, to process transactions, maintain information and manage our businesses. Disruptions in the availability of computer systems due to implementation of a new system or otherwise, or privacy breaches involving computer systems, could impact our ability to service our customers and adversely affect our sales, consolidated results of operations and reputation and expose us to litigation risk.
Our businesses rely on ourvarious computer systems, including third-party systems, to provide customer information, process customer transactions and provide other general information necessary to manage our businesses. We have an active disaster recovery plan in place that is frequently reviewed and tested. However, our computer systems are subject to damage or interruption due to system conversions, such as our current conversion to SAP enterprise system, power outages, computer or telecommunication failures, catastrophic events such as fires, tornadoes and hurricanes and usage errors by our employees. Although we believe that we have adopted appropriate measures to mitigate potential risks to our technology and our operations from these information technology-related and other potential disruptions, given the unpredictability of the timing, nature and scope of such disruptions, we could potentially be subject to production downtimes, operational delays and interruptions in our ability to provide products and services to our customers. Any disruption caused by the unavailability of our computer systems could adversely affect our sales, could require us to make a significant investment to fix or replace them and, therefore, could adversely affect our consolidated results of operations. In addition, cyber-security attacks are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and corruption of data. We have experienced cybersecurity incidents in the past, but none of these incidents, individually or in the aggregate, have had a material adverse effect on our business or results of operations. If the network of security controls, policy enforcement mechanisms and monitoring systems to address these threats to our technology fails, or we are unable to successfully address security incidents, production downtimes, operational delays and interruptions in our ability to provide products and services to our customers, the compromising of confidential or otherwise protected Company, customer, or employee information, destruction or corruption of data, security breaches, or other manipulation or improper use of our systems and networks could result in financial losses from remedial actions, loss of business or potential liability and damage to our reputation.


We also rely on software applications, enterprise cloud storage systems and cloud computing services provided by third-party vendors for certain information technology services, including our SAP enterprise system, payroll data, risk management data and lease data. If these third-party vendors, as well as our suppliers and other vendors, experience service interruptions or damage, security breaches, cyber-attacks, computer viruses, ransomware or other similar events or intrusions, our business and our consolidated results of operations may be adversely affected.

Failure to achieve and maintain effective internal controls could adversely affect our business and stock price.
Effective internal controls are necessary for us to provide reliable financial reports. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to the consolidated financial statement preparation and presentation. While we continue to evaluate our internal controls, we cannot be certain that these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future. If we fail to maintain the adequacy of our internal controls or if we or our independent registered public accounting firm were to discover material weaknesses in our internal controls, as such standards are modified, supplemented or amended, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Failure to achieve and maintain an effective internal control environment could cause us to be unable to produce reliable financial reports or prevent fraud. This may cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price.

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We may experience difficulties in attracting and retaining competent personnel in key positions. Failure to preserve positive labor relationships with our employees could adversely affect our consolidated results of operations.
We believe that a key component of our success is our corporate culture, which has been imparted by management throughout our corporate organization. This factor,Our corporate culture, along with our entire operation, depends on our ability to attract, develop and retain key employees. Competitive pressures within and outside our industry may make it more difficult and expensive for us to attract and retain key employees which could adversely affect our businesses.


We believe we have positive labor relationships with our employees. However, factors such as difficulty to attract key employees, reduced employee engagement, third-party organizational efforts and increased employee turnover could adversely affect our labor relationships with our employees. A failure to preserve positive labor relationships with our employees and could adversely affect our consolidated financial condition and consolidated results of operations.

Unexpected events could negatively impact our operations and adversely affect our consolidated results of operations.
Unexpected events, including fires or explosions at facilities, severe weather conditions, natural disasters such as hurricanes and tornadoes, war or terrorist activities, unplanned outages, viral pandemics such as COVID-19, supply disruptions, failure of equipment or systems or changes in laws and/or regulations impacting our businesses, could adversely affect our consolidated results of operations. These events could result in customer disruption, physical damage to one or more key operating facilities, the temporary closure of one or more key operating facilities or the temporary disruption of information systems. In addition, negative publicity, whether warranted or not, impacting brand image perception could adversely affect our consolidated results of operations.



Financial Risks

Our indebtedness may limit cash flow available to invest in the ongoing needs of our business.
Our outstanding indebtedness may have negative consequences on our business, such as requiring us to dedicate a substantial portion of our cash flow from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, dividend increases, stock buybacks and other general corporate purposes, as well as increase our vulnerability to adverse economic or industry conditions. In addition, it may limit our ability to obtain additional financing in the future to enable us to react to changes in our business or industry or place us at a competitive disadvantage compared to businesses in our industry that have less debt.

Changes in the fuel and energy industry could adversely affect our consolidated financial condition and consolidated results of operations.
The price of fuel and energy needed to run our vehicles and equipment is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for fuel and other energy related products, actions by energy producers, war and unrest in oil producing countries, regional production patterns, limits on refining capacities, natural disasters, environmental concerns and viral pandemics such as COVID-19. Increases in fuel and energy costs could adversely affect our consolidated financial condition and consolidated results of operations.

Fluctuations in foreign currency exchange could adversely affect our consolidated financial condition and consolidated results of operations.
We earn revenue, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S. dollar, primarily the Canadian dollar. In fiscal years 2021, 2020 and 2019, revenue denominated in currencies other than the U.S. dollar represented less than 10% of our consolidated revenue. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenue and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, fluctuations in the value of the U.S. dollar against other major currencies, particularly in the event of significant increases in foreign currency revenue, will impact our revenue and operating income and the value of balance sheet items denominated in foreign currencies. This impact could adversely affect our consolidated financial condition and consolidated results of operations.
11


We may recognize impairment charges, which could adversely affect our consolidated financial condition and consolidated results of operations.
We assess our goodwill and other intangible assets and our long-lived assets for impairment when required by U.S. Generally Accepted Accounting Principles (U.S. GAAP). These accounting principles require that we record an impairment charge if circumstances indicate that the asset carrying values exceed their estimated fair values. The estimated fair value of these assets is impacted by, general economicbut not limited to, macroeconomic, industry and market conditions in the locations in which we operate. Deterioration in these general economic conditions may result in: declining revenue, which can lead to excess capacity and declining operating cash flow; reductions in management's estimates for future revenue and operating cash flow growth; increases in borrowing rates and other deterioration in factors that impact our weighted average cost of capital; and deteriorating real estate values. If our assessment of goodwill, other intangible assets or long-lived assets indicates an impairment of the carrying value for which we recognize an impairment charge, this may adversely affect our consolidated financial condition and consolidated results of operations.


The effects of credit market volatility and changes in our credit ratings could adversely affect our liquidity and consolidated results of operations.
Our operating cash flows, combined with access to the credit markets, provide us with significant discretionary funding capacity. However, deterioration in the global credit markets may limit our ability to access credit markets, which could adversely affect our liquidity and/or increase our cost of borrowing. In addition, credit market deterioration and its actual or perceived effects on our results of operations and financial condition, along with deterioration in general economic conditions, may increase the likelihood that the major independent credit agencies will downgrade our credit ratings, which could increase our cost of borrowing. Increases in our cost of borrowing could adversely affect our consolidated results of operations.


Legal and Regulatory Risks
Failure to comply with federal and state regulations to which we are subject could result in penalties or costs that could adversely affect our consolidated results of operations. 
Our business is subject to complex and stringent state and federal regulations, including employment laws and regulations, minimum wage requirements, overtime requirements, working condition requirements, citizenship requirements, transportation and other laws and regulations. In particular, we are subject to the regulations promulgated by the U.S. Department of Transportation (USDOT) and under the Occupational Safety and Health Act of 1970, as amended (OSHA Act). We have incurred, and will continue to incur, capital and operating expenditures and other costs in the ordinary course of our business in complying with the USDOT regulations, the OSHA Act and other laws and regulations to which we are subject. Changes in laws, regulations and the related interpretations, including any laws or regulations that may be enacted by the current U.S. presidential administration and Congress, may alter the landscape in which we do business and may affect our costs of doing business. The impact of new laws and regulations cannot be predicted. Compliance with new laws and regulations may increase our operating costs or require significant capital expenditures. Any failure to comply with applicable laws or regulations could result in substantial fines by government authorities, payment of damages to private litigants, or possible revocation of our authority to conduct our operations, which could adversely affect our ability to service customers and our consolidated results of operations.

We are subject to legal proceedings that may adversely affect our consolidated financial condition and consolidated results of operations.
We are subject to various litigation claims and legal proceeding arising from the ordinary course of our business, including personal injury, customer contract, environmental and employment claims. Certain of these lawsuits or potential future lawsuits, if decided adversely to us or settled by us, may result in liability and expense material to our consolidated financial condition and consolidated results of operations.

Compliance with environmental laws and regulations could result in significant costs that adversely affect our consolidated results of operations.
Our operating locations are subject to environmental laws and regulations relating to the protection of the environment and health and safety matters, including those governing discharges of pollutants to the air and water, the management and disposal of hazardous substances and wastes and the clean-up of contaminated sites. The operation of our businesses entails risks under environmental laws and regulations. We could incur significant costs, including clean-up costs, fines and sanctions and claims by third parties for property damage and personal
12


injury, as a result of violations of or liabilities under these laws and regulations. We are currently involved in a limited number of remedial investigations and actions at various locations. While based on information currently known to us, we believe that we maintain adequate reserves with respect to these matters, our liability could exceed forecasted amounts, and the imposition of additional clean-up obligations or the discovery of additional contamination at these or other sites could result in significant additional costs which could adversely affect our results of operations. In addition, potentially significant expenditures could be required to comply with environmental laws and regulations, including requirements that may be adopted or imposed in the future.

Under applicable environmental laws, an owner or operator of real estate may be required to pay the costs of removing or remediating hazardous materials located on or emanating from property, whether or not the owner or operator knew of or was responsible for the presence of such hazardous materials. While we regularly engage in environmental due diligence in connection with acquisitions, we can give no assurance that locations that have been acquired or leased have been operated in compliance with environmental laws and regulations during prior periods or that future uses or conditions will not make us liable under these laws or expose us to third-party actions, including tort suits.

Increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters could adversely impact our financial results.
Changes in tax laws or regulations in the jurisdictions in which we do business, or other tax law implementations or interpretations, could increase our effective tax rate, restrict our ability to repatriate undistributed offshore earnings, or impose new restrictions, costs or prohibitions on our current practices and reduce our net income and adversely affect our cash flows.


We are also subject to tax audits, including with respect to transfer pricing, in the United StatesU.S. and other jurisdictions and our tax positions may be challenged by tax authorities. Although we believe that our current tax provisions are reasonable and appropriate, there can be no assurance that these items will be settled for the amounts accrued, that additional tax exposures will not be identified in the future or that additional tax reserves will not be necessary for any such exposures. Any increase in the amount of taxation incurred as a result of challenges to our tax filing positions could result in a material adverse effect on our business, consolidated results of operations and consolidated financial condition.


Item 1B.  Unresolved Staff Comments
None.




13


Item 2.  Properties
Cintas occupies 481473 facilities located in 332329 cities. Cintas leases 249242 of these facilities for various terms ranging from monthly to the year 2032. Cintas expects that it will be able to renew or replace its leases on satisfactory terms. Of the five manufacturing facilities noted below, Cintas controls the operations ofall but one manufacturing facility, but does not own or lease the real estate related to the operation. All remaining facilities are owned.owned by Cintas. The principal executive office in Cincinnati, Ohio, provides centrally located administrative functions including accounting, finance, marketing and computer system development and support. Cintas operates rental processing plants that house administrative, sales and service personnel and the necessary equipment involved in the cleaning of uniforms and bulk items, such as entrance mats and shop towels. Branch operations provide administrative, sales and service functions. Cintas operates 1113 distribution centers and five manufacturing facilities. Cintas also operates first aid and safety and fire protection facilities and direct sales offices. Cintas considers the facilities it operates to be adequate for their intended use. Cintas owns or leases approximately 20,00020,300 vehicles which are used for the route-based services and by the sales and management employee-partners.


The following chart provides additional information concerning Cintas' facilities:
Type of Facility# of Facilities
Rental Processing Plants211205 
Rental Branches142134 
First Aid and Safety Facilities6062 
All Other Facilities5254 
Distribution Centers(1)
1113 
(1)
Manufacturing Facilities5
Total481

Total473 
(1) Includes the principal executive office, which is attached to the distribution center in Cincinnati, Ohio.

Certain facilities are utilized by multiple operating segments. These facilities are only presented once, in their primary operating segment, herein. Rental processing plants, rental branches, distribution centers and manufacturing facilities are used in Cintas' Uniform Rental and Facility Services reportable operating segment. First aid and safety facilities, rental processing plants and distribution centers are used in the First Aid and Safety Services reportable operating segment. Rental processing plants, rental branches, first aid and safety facilities, fire protection facilities, direct sales offices, distribution centers and manufacturing facilities are all utilized by the businessesoperating segments included in All Other.


Item 3.  Legal Proceedings
Cintas is subject to legal proceedings, insurance receipts, legal settlements and claims arising from the ordinary course of its business, including personal injury, customer contract, environmental and employment claims. In the opinion of management, the aggregate liability, if any, with respect to such ordinary course of business actions will not have a material adverse effect on the consolidated financial position, consolidated results of operations or consolidated cash flows of Cintas.


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.

Item 4.  Mine Safety Disclosures
Not applicable.

14




Part II


Item 5.  Market for Registrant's Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities
Market and Shareholder Information
Cintas' common stock is traded on the NASDAQ Global Select Market under the symbol "CTAS." The following table provides the high and low sales prices of shares of Cintas' common stock by quarter during the last two fiscal years:
Fiscal 2019   
Quarter EndedHigh Low
    
May 2019$227.64
 $191.91
February 2019$207.33
 $155.98
November 2018$217.34
 $168.02
August 2018$214.75
 $182.20
    
Fiscal 2018   
Quarter EndedHigh Low
    
May 2018$184.22
 $162.11
February 2018$172.91
 $147.38
November 2017$157.81
 $131.75
August 2017$139.74
 $123.00

Holders
At May 31, 2019,2021, there were approximately 2,0001,400 shareholders of record of Cintas' common stock. Cintas believes that this represents approximately 144,000240,000 beneficial owners.

Dividends
Dividends on Cintas' outstanding common stock have historically been paid annually and amountedannually. In fiscal 2021, however, Cintas' Board of Directors approved a change in dividend policy from an annual dividend to $2.05 per share, $1.62 per share and $1.33 per sharequarterly dividends. Our Board of Directors declared the following dividends during the fiscal years ended May 31:
Declaration Date
(In millions except per share data)
Record
 Date		Payment
 Date		Dividend
Per Share		Amount
Fiscal Year 2021
October 27, 2020November 6, 2020December 4, 2020$2.81 $297.7 
October 27, 2020November 6, 2020December 4, 20200.70 74.1 
January 19, 2021February 15, 2021March 15, 20210.75 79.5 
April 13, 2021 (1)
May 15, 2021June 15, 20210.75 79.2 
Total$5.01 $530.5 
Fiscal Year 2020
October 29, 2019November 8, 2019December 6, 2019$2.55 $268.0 
Fiscal Year 2019
October 30, 2018November 9, 2018December 7, 2018$2.05 $220.8 

(1) The dividend declared on April 13, 2021 was included in fiscal 2019, 2018 and 2017, respectively.current accrued liabilities on the consolidated balance sheet at May 31, 2021.




Stock Performance Graph
The following graph summarizes the cumulative return on $100 invested in Cintas' common stock, the S&P 500 Stock Index and the common stocks of a selected peer group of companies. Because our products and services are diverse, Cintas does not believe that any single published industry index is appropriate for comparing shareholder return. Therefore, the peer group used in the performance graph combines publicly traded companies in the business services industry that have similar characteristics as Cintas for each fiscal year, such as route based delivery of products and services. The companies included in the Peer Group are UniFirst Corporation, ABM Industries, Aramark, Rollins, Inc. and Rollins, Inc.

UniFirst Corporation.
Total shareholder return was based on the increase in the price of the common stock and assumed reinvestment of all dividends. Further,Furthermore, total return was weighted according to market capitalization of each company. The companies in the Peer Group are not the same as those considered by the Compensation Committee of the Board of Directors.


15


Total Shareholder Returns
Comparison of Five-Year Cumulative Total Return
totalreturnlinegrapha05.jpg

ctas-20210531_g2.jpg




Purchases of Equity Securities by the Issuer and Affiliated Purchases
Period
(In millions, except share and per share data)
Total number
of shares
purchased		Average
price paid
per share
Total number
of shares
purchased as part
of the publicly
announced
plan (1)
Maximum
approximate dollar
value of shares that
may yet be
purchased under
the plan (1)
March 1 - 31, 2021 (2)
23,733 $337.41 23,600 $970.9 
April 1 - 30, 2021 (3)
4,907 $348.32 — $970.9 
May 1 - 31, 2021 (4)
1,106,628 $352.29 1,106,293 $581.2 
Total1,135,268 $351.96 1,129,893 $581.2 
Period
(In millions, except share and per share data)
Total number
of shares
purchased
 
Average
price paid
per share
 
Total number of
shares purchased
as part of the
publicly announced
plan (1)
 
Maximum
approximate dollar
value of shares that
may yet be
purchased under
the plan (1)
        
March 1 - 31, 2019 (2)
410,974
 $203.25
 410,051
 $780.1
April 1 - 30, 2019 (3)
34,342
 $214.57
 34,030
 $772.8
May 1 - 31, 2019 (4)
1,433,251
 $221.17
 1,429,730
 $456.6
Total1,878,567
 $217.13
 1,873,811
 $456.6


(1)On October 30, 2018,29, 2019, Cintas announced that the Board of Directors authorized a $1.0 billion share buyback program, which does not have an expiration date. From the inception of the October 30, 201829, 2019 share buyback program through May 31, 2019,2021, Cintas has purchased a total of 2.71.2 million shares of Cintas common stock at an average price of $203.30$350.31 per share for a total purchase price of $543.4$418.8 million.
(2)During March 2019,2021, Cintas acquired 923133 shares of Cintas common stock in satisfaction of employee payroll taxes due on restricted stock awards that vested during the fiscal year. These shares were purchased at an average price of $200.72$341.20 per share for a total purchase price of $0.2less than $0.1 million.
(3)During April 2019,2021, Cintas acquired 3124,907 shares of Cintas common stock in satisfaction of employee payroll taxes due on restricted stock awards that vested during the fiscal year. These shares were purchased at an average price of $216.87$348.32 per share for a total purchase price of $0.1$1.7 million.
(4) During May 2019,2021, Cintas acquired 3,521335 shares of Cintas common stock in satisfaction of employee payroll taxes due on restricted stock awards that vested during the fiscal year. These shares were purchased at an average price of $221.76$355.17 per share for a total purchase price of $0.8$0.1 million.



Item 6.  Selected Financial Data
Five-Year Financial Summary
(In thousands except per share and percentage data)[Reserved.]
16
Fiscal Years Ended May 31,
2015(1)
 
2016(1)
 
2017(1)(3)
 
2018(1)
 
2019(1)(2)
 
Compound
Annual
Growth
(2015-2019)
            
Revenue$4,369,677
 $4,795,772
 $5,323,381
 $6,476,632
 $6,892,303
 12.1%
Net Income, Continuing Operations402,553
 448,605
 457,286
 783,932
 882,635
 21.7%
Net Income, Discontinued Operations28,065
 244,915
 23,422
 58,654
 2,346
 (46.2)%
Net Income$430,618

$693,520

$480,708
 $842,586
 $884,981
 19.7%
            
Basic Earnings Per Share:           
Continuing Operations$3.44
 $4.08
 $4.27
 $7.24
 $8.23
 24.4%
Discontinued Operations0.24
 2.22
 0.22
 0.54
 0.02
 (46.3)%
Basic Earnings Per Share$3.68
 $6.30
 $4.49
 $7.78
 $8.25
 22.4%
Diluted Earnings Per Share:           
Continuing Operations$3.39
 $4.02
 $4.17
 $7.03
 $7.97
 23.8%
Discontinued Operations0.24
 2.19
 0.21
 0.53
 0.02
 (46.3)%
Diluted Earnings Per Share$3.63
 $6.21
 $4.38
 $7.56
 $7.99
 21.8%
            
Dividends Per Share$1.70
 $1.05
 $1.33
 $1.62
 $2.05
 4.8%
Total Assets (4)
$4,185,675
 $4,098,815
 $6,844,057
 $6,958,214
 $7,436,662
 15.5%
Shareholders' Equity$1,932,455
 $1,842,659
 $2,302,793
 $3,016,526
 $3,002,721
 11.6%
Return on Average Equity (5)
19.5% 23.8% 22.1% 29.5% 29.3%  
Long-Term Debt (4)
$1,293,215
 $1,294,422
 
$ 3,133,524(6)

 $2,535,309
 $2,849,771
  



(1)
In accordance with the applicable accounting guidance for the disposal of long-lived assets and discontinued operations, the results of Discontinued Services, Shredding and Storage have been excluded from continuing operations for all periods presented. Please see Note 17 entitled Discontinued Operations of "Notes to Consolidated Financial Statements" for additional information.

(2)
In accordance with the applicable accounting guidance for revenue from contracts with customers, Cintas capitalizes commission expenses and amortizes them on a straight-line basis over the expected period of benefit. The current and noncurrent assets related to capitalized contract costs included in the consolidated balance sheet at May 31, 2019, totaled $69.6 million and $206.0 million, respectively. Historical periods presented prior to fiscal 2019 do not include capitalized contract costs, and, as a result, the information may not be comparable. Please see Note 2 entitled Revenue Recognition of "Notes to Consolidated Financial Statements" for additional information.

(3)
Includes G&K results of operations from March 21, 2017 through May 31, 2017. Historical periods presented prior to fiscal 2017 do not include G&K, and, as a result, the information may not be comparable.

(4)
In accordance with the applicable accounting guidance for simplifying the presentation of debt issuance costs, the debt costs related to recognized debt liabilities have been excluded from Total Assets and reclassified to Long-Term Debt as a direct deduction from the carrying amount of the debt liabilities. The impact of this change in accounting principle on balances previously reported for fiscal 2016 and 2015 were reclassifications of $5.6 million and $6.8 million, respectively, from other assets to long-term liabilities.

(5)
Return on average equity is computed as net income from continuing operations divided by the average of shareholders' equity. We believe that disclosure of this non-GAAP financial measure gives management and shareholders a good indication of Cintas' historical performance.

(6)
Includes issuance of approximately $2.1 billion in debt to fund the G&K acquisition. Please see Note 7 entitled Debt and Derivatives of "Notes to Consolidated Financial Statements" for additional information.




Item 7.  Management's Discussion and Analysis
Analysis of Financial Condition and Results of Operations
Business Strategy
Cintas helps more than one million businesses of all types and sizes, primarily in North America,the U.S., as well as Canada and Latin America, Europe and Asia, get Ready™READY™ to open their doors with confidence every day by providing a wide range of products and services that enhance our customers’ image and help keep their facilities and employees clean, safe and looking their best. With products and services including uniforms, floor care,mats, mops, restroom supplies, first aid and safety products, fire extinguishers and testing, and safety and compliance training, Cintas helps customers get Ready for the Workday™Workday®. Cintas is also the creator of the Total Clean Program™ — a first-of-its-kind service that includes scheduled delivery of essential cleaning supplies, hygienically clean laundering, and sanitizing and disinfecting projects and services.


We are North America's leading provider of corporate identity uniforms through rental and sales programs, as well as a significant provider of related business services, including entrance mats, restroom cleaning services and supplies, carpet and tile cleaning services, first aid and safety services and fire protection products and services.


Cintas' principal objective is "to exceed customers' expectations in order to maximize the long-term value of Cintas for shareholders and working partners," and it provides the framework and focus for Cintas' business strategy. This strategy is to achieve revenue growth for all our products and services by increasing our penetration at existing customers and by broadening our customer base to include businessmarket segments to which we have not historically served. We will also continue to identify additional product and service opportunities for our current and future customers.


To pursue the strategy of increasing penetration, we have a highly talented and diverse team of service professionals visiting our customers on a regular basis. This frequent contact with our customers enables us to develop close personal relationships. The combination of our distribution system and these strong customer relationships provides a platform from which we launch additional products and services.


We pursue the strategy of broadening our customer base in several ways. Cintas has a national sales organization introducing all ourits products and services to prospects in all businessmarket segments. Our broad range of products and services allows our sales organization to consider any type of business a prospect. We also broaden our customer base through geographic expansion, especially in our first aid and safety and fire protection businesses.expansion. Finally, we evaluate strategic acquisitions as opportunities arise.


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Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations focuses on discussion of fiscal 2021 results compared to fiscal 2020 results. For discussion of fiscal 2020 results compared to fiscal 2019 results, see the "Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Annual Report on Form 10-K for the fiscal year ended May 31, 2020, filed with the SEC on July 29, 2020.

Cintas classifies its business into two reportable operating segments and places the remainder of its operating segments in an All Other category. Cintas’ two reportable operating segments are Uniform Rental and Facility Services and First Aid and Safety Services. The Uniform Rental and Facility Services reportable operating segment consists of the rental and servicing of uniforms and other garments including flame resistant clothing, mats, mops and shop towels and other ancillary items. In addition to these rental items, restroom cleaning services and supplies carpet and tile cleaning services and the sale of items from our catalogs to our customers on route are included within this reportable operating segment. The First Aid and Safety Services reportable operating segment consists of first aid and safety products and services. The remainder of Cintas’ business, which consists of the Fire Protection Services operating segment and itsthe Uniform Direct Sale business,operating segment, is included in All Other. These operating segments consist of fire protection products and services and the direct sale of uniforms and related items. Cintas evaluates operating segment performance based on revenue and income before income taxes. Revenue and income before income taxes for each of these reportable operating segments for the years ended May 31, 2019, 20182021, 2020 and 20172019 are presented in Note 1514 entitled Operating Segment Information of "Notes"Notes to Consolidated Financial Statements.Statements." 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.


OnIn December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China, and has since spread globally. In March 21, 2017, Cintas completed2020, the acquisitionWorld Health Organization characterized COVID-19 as a pandemic. Efforts to contain the spread of G&K Services, Inc. (G&K). G&K is a wholly-owned subsidiary of Cintas that operatesCOVID-19 intensified during our fiscal 2020 fourth quarter and have remained in effect throughout our fiscal 2021. Most states and municipalities within the Uniform RentalU.S., as well as Canada, enacted temporary closures of businesses, issued quarantine orders and Facility Services operating segment. In fiscal 2018, Cintas sold a significant business referred to as "Discontinued Services." Priortook other restrictive measures in response to the saleCOVID-19 pandemic. Many of Discontinued Services, the business closures, quarantine orders and other restrictive measures remained in place through fiscal 2021. Within the U.S., our business was designated an essential business, which allowed us to continue to serve customers that remained open. During our fiscal 2021 fourth quarter, the roll out of vaccines, lower COVID-19 case counts and lifting of restrictions on businesses had a positive impact on our business.

We have operations were primarily includedthroughout the U.S. and Canada and participate in All Other and classified as held for sale. In accordancea global supply chain. During most of fiscal 2021, the existence of the COVID-19 pandemic, the fear associated with the applicable accounting guidanceCOVID-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 2021 and could result in future inventory reserve increases if demand for the disposal of long-lived assets and discontinued operations, the results of Discontinued Services have been excluded from both continuing operations and operating segment results for all periods presented.personal protective equipment declines. See Note 17 entitled Discontinued Operations of "Notes to Consolidated Financial Statements" for additional information.



In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers (Topic 606)," to clarify revenue recognition principles. This guidance is intended to improve disclosure requirements and enhance the comparability of revenue recognition practices. Cintas adopted this ASU, and all the related amendments, effective June 1, 2018 using the modified retrospective method. See Note 1 entitled Significant Accounting Policies and Note 2 entitled Revenue Recognition of "Notes"Notes to Consolidated Financial Statements"Statements" for more information.additional detail on the additional reserve placed on inventory. The impact of the 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.


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The following table sets forth certain consolidated statements of income data as a percent of revenue by reportable operating segment, All Other and in total for the fiscal years ended May 31:
202120202019
Revenue:   
Uniform Rental and Facility Services80.0%79.7%80.6%
First Aid and Safety Services11.0%10.0%9.0%
All Other9.0%10.3%10.4%
Total revenue100.0%100.0%100.0%
Cost of sales:   
Uniform Rental and Facility Services52.4%54.1%54.5%
First Aid and Safety Services57.6%52.2%52.0%
All Other57.0%58.2%57.4%
Total cost of sales53.4%54.4%54.6%
Gross margin:   
Uniform Rental and Facility Services47.6%45.9%45.5%
First Aid and Safety Services42.4%47.8%48.0%
All Other43.0%41.8%42.6%
Total gross margin46.6%45.6%45.4%
Selling and administrative expenses:
Uniform Rental and Facility Services26.0%28.1%27.6%
First Aid and Safety Services32.0%32.7%33.4%
All Other30.8%34.9%33.3%
Total selling and administrative expenses27.1%29.2%28.7%
G&K Services, Inc. integration expenses—%—%0.2%
Gain on sale of a cost method investment—%—%1.0%
Interest expense, net1.4%1.5%1.5%
Income from continuing operations before income taxes18.1%14.9%16.0%
 2019 2018 2017
      
Revenue:     
Uniform Rental and Facility Services80.6% 81.0% 79.0%
First Aid and Safety Services9.0% 8.7% 9.5%
All Other10.4% 10.3% 11.5%
Total revenue100.0% 100.0% 100.0%
      
Cost of sales:     
Uniform Rental and Facility Services54.5% 55.0% 54.9%
First Aid and Safety Services52.0% 52.9% 54.7%
All Other57.4% 57.5% 58.3%
Total cost of sales54.6% 55.1% 55.3%
      
Gross margin:     
Uniform Rental and Facility Services45.5% 45.0% 45.1%
First Aid and Safety Services48.0% 47.1% 45.3%
All Other42.6% 42.5% 41.7%
Total gross margin45.4% 44.9% 44.7%
      
Selling and administrative expenses:     
Uniform Rental and Facility Services27.6% 28.6% 27.1%
First Aid and Safety Services33.4% 33.7% 34.9%
All Other33.3% 33.9% 34.5%
Total selling and administrative expenses28.7% 29.6% 28.7%
      
G&K Services, Inc. transaction and integration expenses0.2% 0.6% 1.5%
      
Gain on sale of a cost method investment1.0% —% —%
      
Interest expense, net1.5% 1.7% 1.6%
      
Income from continuing operations before income taxes16.0%
13.0%
12.9%



Fiscal 20192021 Compared to Fiscal 20182020
Fiscal 20192021 total revenue was $6.9$7.1 billion, an increase of 6.4%0.4% over the prior fiscal year. Revenue increased organically by 6.5%0.2% as a result of increased sales volume. Organic growth adjusts for the impact of acquisitions and divestitures, and foreign currency exchange rate fluctuations.fluctuations and workday differences. Total revenue was negatively impacted by a net 0.3% due to acquisitions and divestitures, positively impacted by 0.2% due to acquisitionsforeign currency exchange rate fluctuations and negativelypositively impacted by 0.3% due to foreign currency exchange rate fluctuations.one more workday in fiscal 2021 compared to fiscal 2020.


As previously discussed, government enactments of temporary and indefinite closures of certain businesses in response to the COVID-19 pandemic continued to impact our ability to access and service some of our customers impacted by these mandates during fiscal 2021. Due to the constantly changing impact of the COVID-19 pandemic, uncertainty remains about the pace of the economic recovery and about its impact on future Cintas consolidated financial results.

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Organic growthrevenue by quarter for fiscal 20192021 is as follows:
Organic Revenue
Organic Growth
First Quarter Endedquarter ended August 31, 201820205.2%(5.0)%
Second Quarter Endedquarter ended November 30, 201820207.0%(4.4)%
Third Quarter Endedquarter ended February 28, 201920216.0%(0.1)%
Fourth Quarter Endedquarter ended May 31, 201920217.6%11.5%
For the Fiscal Year Endedfiscal year ended May 31, 201920216.5%0.2%


Uniform Rental and Facility Services reportable operating segment revenue consists predominantly of revenue derived from the rental of corporate identity uniforms and other garments, including flame resistant clothing and the rental and/or sale of mats, mops, shop towels, restroom supplies and other rental services. Revenue from the Uniform Rental and Facility Services reportable operating segment increased 5.8%0.8% compared to fiscal 20182020 due to an organic growth increase of 6.1%0.7%. Revenue growth was negatively impacted by 0.3%a net 0.5% due to acquisitions and divestitures, positively impacted by 0.2% due to foreign currency exchange rate fluctuations.fluctuations and positively impacted by 0.4% due to one more workday in fiscal 2021 compared to fiscal 2020. Revenue growth was a result of new business, the penetration of additional products and services into existing customers, and price increases, partially offset by lost business. New business growth resulted from an increase in the number and productivity of sales representatives. Generally, sales productivity improvements are due to increased tenure and improved training, which produce a higher number of products and services sold.


Other revenue, consisting of revenue from the First Aid and Safety Services reportable operating segment and All Other, increased 9.0%decreased 1.0% compared to fiscal 2018.2020. Revenue increasedimprovement from increases in sales representative productivity and sales of personal protection equipment was more than offset by a decrease in sales related to customers in All Other as a result of the impact from the COVID-19 pandemic. Revenue declined organically by 7.8% primarily due to improved sales representative productivity.1.9%. Revenue growth was positively impacted by 1.2%0.5% due to acquisitions.revenue growth derived through acquisitions in our First Aid and Safety Services reportable operating segment and our Fire Protection operating segment, which is included in All Other, and by 0.4% due to one more workday in fiscal 2021 compared to fiscal 2020.


Cost of uniform rental and facility services increased 4.9%decreased 2.3% compared to fiscal 2018.2020. Cost of uniform rental and facility services consists primarily of production expenses, delivery expenses and the amortization of in service inventory, including uniforms, mats, shop towels and other ancillary items. The cost of uniform rental and facility services increasedecreased compared to fiscal 2018 was2020 primarily due to increased Uniform Rentalcertain cost control measures such as reduced labor and Facility Services reportable operating segment sales volume from organic growth.supplies that were partially offset by increases in material cost, primarily related to personal protective equipment.


Cost of other consists primarily of cost of goods sold (predominantly first aid and safety products, personal protective equipment, uniforms and fire protection products), delivery expenses and distribution expenses in the First Aid and Safety Services reportable operating segment and All Other. Cost of other increased 8.1%2.8% in fiscal 20192021 compared to fiscal 2018.2020. The increase was primarily relateddue to an increase in the increasedproportion of sales volumes in the First Aid and Safety Services reportable operating segment of personal protective equipment, which typically have lower gross margins compared to other First Aid and All Other.Safety Services reportable operating segment products.


Selling and administrative expenses increased $63.9decreased $141.9 million, or 3.3%,to 27.1% as a percent of revenue, compared to 29.2% in fiscal 20182020. The improvement as a percent of revenue was primarily due to increasesefficiencies in labor and other employee-partner related expenses.

Operating income in bothexpenses as well as lower discretionary spending and a one-time benefit from the gain on the sale of certain operating assets. In addition, during the fourth quarter of fiscal 20192020, Cintas initiated certain one-time activities to reduce operating costs and 2018 was negatively impacted by $14.4 million and $41.9 million, respectively, of integration expenses incurred in connectionbetter align its workforce with the G&K acquisition. The after-tax effectneeds of these integration expenses represents a negative impact on diluted earnings per share of $0.10 per shareits ongoing business and recorded $24.5 million in fiscal 2019employee termination costs and $0.26 per share$9.2 million in fiscal 2018.long-lived asset impairment costs.

During fiscal 2019, Cintas sold a cost method investment for $73.3 million, resulting in a pre-tax gain of $69.4 million. The after-tax effect of the gain represents a positive impact on diluted earnings per share of $0.47 per share.


Net interest expense (interest expense less interest income) was $100.5$97.7 million in fiscal 20192021 compared to $108.8$104.4 million in fiscal 2018.2020. The decrease in net interest expense was primarily due to lowerthe decrease in total debt outstanding during the fiscal 2019 as a result of the payment of $300.0 million aggregate principal amount of our 6.13% 10-year senior notes2021 compared to fiscal 2020.

20



that matured on December 1, 2017. Also, during fiscal 2018, Cintas paid off the term loan balance of $250.0 million with cash on hand.
Income before income taxes was $1,102.4$1,287.7 million, an increase of $261.4$229.5 million, or 31.1%21.7%, compared to fiscal 2018.2020. The increase in income before income taxes was primarily due to both cost of sales and selling and administrative expenses decreasing in total and as a percent of revenue growing atin fiscal 2021. Income before income taxes also benefited from a faster pace than expenses, theone-time net gain on the sale of a cost method investment and the decrease in integration expenses.certain operating assets.


Cintas' effective tax rate on continuing operations was 19.9%13.7% for fiscal 20192021 compared to 6.8%17.2% in fiscal 2018.2020. The effective tax rate in both periods was impacted by certain discrete items, (primarilyprimarily the tax accounting impact for stock-based compensation). Thecompensation. In addition, the effective tax rate for fiscal 2018 was also largely impacted by2021 included a one-time tax benefit on the one-time revaluationsale of deferred tax assets and liabilities as a result of the Tax Cuts and Jobs Act (Tax Act).certain operating assets.


Net income from continuing operations for fiscal 20192021 of $882.6$1,111.0 million was a 12.6%26.8% increase compared to fiscal 2018.2020. Diluted earnings per share from continuing operations of $7.97$10.24 was a 13.4%26.3% increase compared to fiscal 2018.2020 diluted earnings per share from continuing operations of $8.11. Diluted earnings per share from continuing operations increased primarily due to the increase in earnings from continuing operations explained above.net income.


Uniform Rental and Facility Services Reportable Operating Segment
Uniform Rental and Facility Services reportable operating segment revenue increased $305.3$46.1 million, or 5.8%0.8%, and the cost of uniform rental and facility services increased $140.6decreased $71.6 million, or 4.9%2.3%, due to the reasons previously discussed. The reportable operating segment's fiscal 20192021 gross margin was 45.5%47.6% of revenue compared to 45.0%45.9% in fiscal 2018.2020. The increase in gross margin was drivenprimarily due to certain cost control measures such as reduced labor and supplies that were partially offset by new business sold byincreases in material cost, including increases related to increased sales representatives, penetration of additional products and services into existing customers and continuous improvements in process efficiency.personal protective equipment.


Selling and administrative expenses for the Uniform Rental and Facility Services reportable operating segment increased $33.1decreased $103.5 million in fiscal 20192021 compared to fiscal 2018.2020. Selling and administrative expense as a percent of revenue for fiscal 20192021 was 27.6%26.0% compared to 28.6%28.1% in fiscal 2018.2020. The decreaseimprovement in selling and administrative expenses as a percent of revenue was primarily due to revenue growing at a faster pace thanefficiencies in labor and employee-partner related expenses as well as lower discretionary spending and a one-time cash payment to employee-partners duringbenefit from the gain on the sale of certain operating assets, which was partially offset by a one-time asset impairment on certain long-lived assets. Also, in the fourth quarter of fiscal 2018 following2020, the enactment of the Tax Act.

The Uniform Rental and Facility Services reportable operating segment incurred $14.4initiated certain one-time activities to reduce operating costs and better align its workforce with the needs of its ongoing business. During the fourth quarter of fiscal 2020, the reportable operating segment recorded $20.2 million in employee termination costs and $41.9$9.2 million of integration expenses directly related to the G&K acquisition in fiscal 2019 and 2018, respectively. The expenses incurred in fiscal 2019 consisted primarily of facility closure expenses.long-lived asset impairment costs.


Income before income taxes increased $159.1$221.3 million to $976.7$1,225.8 million for fiscal 20192021 compared to fiscal 2018.2020. Income before income taxes as a percent of revenue at 17.6%21.5% increased 200370 basis points from 15.6%17.8% in fiscal 2018.2020. The increase was primarily due to the increasepreviously discussed improvement in sales, the one-time cash payment to employee-partners in the prior yeargross margin and the reduction in G&K integration expenses.selling and administrative expenses as a percent of revenue.


First Aid and Safety Services Reportable Operating Segment
First Aid and Safety Services reportable operating segment revenue increased $54.8$75.7 million in fiscal 2019, an 9.7%2021, a 10.7% increase compared to fiscal 2018.2020. Revenue increased organically by 9.7%10.0% as a result of increasednew business and sales volume.productivity increases, penetration of additional products and services into existing customers and sales of personal protective equipment in response to the COVID-19 pandemic. Revenue growth was positively impacted by 0.1%0.2% due to acquisitions, and negatively impacted by 0.1% due to foreign currency exchange rate fluctuations.fluctuations and by 0.4% due to one more workday in fiscal 2021 compared to fiscal 2020.


Cost of sales for the First Aid and Safety Services reportable operating segment increased $23.5$82.0 million, or 7.9%22.2%, in fiscal 2019,2021, primarily due to higher sales volume.volume and change in sales mix. Gross margin for the First Aid and Safety Services reportable operating segment is defined as revenue less cost of goods, warehouse expenses, service expenses and training expenses. The gross margin as a percent of revenue was 48.0%42.4% for fiscal 20192021 compared to 47.1%47.8% in fiscal 2018.2020. The increasedecrease was primarily driven by improved sourcing, leveraginga result of existing warehousesthe increase in the proportion of sales related to personal protective equipment, as a result of the impact of the COVID-19 pandemic. Personal protective equipment typically has lower gross margins than other First Aid and optimization of delivery routes.Safety Services reportable operating segment products.

21


Selling and administrative expenses for the First Aid and Safety Services reportable operating segment increased by $16.4$19.4 million, or 8.6%8.4%, in fiscal 20192021 compared to fiscal 2018. Selling and administrative expenses2020, but improved as a percent of revenue were 33.4%to 32.0% in fiscal 20192021 compared to 33.7%32.7% in fiscal 2018.2020. The decrease in selling and administrative expensesimprovement as a percent of revenue was primarily due to revenue growing at a faster pace than labor and employee-partner related expenses and the one-time cash payment to employee-partners during fiscal 2018.lower discretionary spending.




Income before income taxes for the First Aid and Safety Services reportable operating segment was $90.1$81.2 million in fiscal 2019, an increase2021, a decrease of $14.9$25.7 million,, or 19.8%24.1%, compared to fiscal 2018.2020. Income before income taxes as a percent of revenue at 14.5%10.4%, increaseddecreased from 13.3%15.1% in fiscal 20182020 due to the previously discussed growthdecrease in revenue, improvement in the gross margin percentage and improvement in selling and administrative expenses as a percent of revenue.

Fiscal 2018 Compared to Fiscal 2017
Fiscal 2018 total revenue was $6.5 billion, an increase of 21.7% over the prior fiscal year. Revenue increased organically by 7.1% as a result of increased sales volume. Organic growth adjusts for the impact of acquisitions, divestitures and foreign currency exchange rate fluctuations. Total revenue was positively impacted by 14.3% due to acquisitions, primarily G&K. Revenue growth was positively impacted by 0.3% due to foreign currency exchange rate fluctuations.

Organic growth by quarter for fiscal 2018 is as follows:
Organic Growth
First Quarter Ended August 31, 20178.3%
Second Quarter Ended November 30, 20177.7%
Third Quarter Ended February 28, 20187.8%
Fourth Quarter Ended May 31, 20185.1%
For the Fiscal Year Ended May 31, 20187.1%

Uniform Rental and Facility Services reportable operating segment revenue consists predominantly of revenue derived from the rental of corporate identity uniforms and other garments, including flame resistant clothing, and the rental and/or sale of mats, mops, shop towels, restroom supplies and other rental services. Revenue from the Uniform Rental and Facility Services reportable operating segment increased 24.9% compared to fiscal 2017. Revenue was positively impacted by 17.9% due to acquisitions, primarily G&K. The remaining increase primarily resulted from an organic growth increase in revenue of 6.7%. The amount of new business grew, resulting from an increase in the number and productivity of sales representatives. Generally, sales productivity improvements are the result of increased tenure and improved training, which result in a higher number of products and services sold. Revenue growth was positively impacted by 0.3% due to foreign currency exchange rate fluctuations.

Other revenue, consisting of revenue from the First Aid and Safety Services reportable operating segment and All Other, increased 9.7% compared to fiscal 2017. Revenue increased organically by 8.6% due primarily to improved sales representative productivity. Revenue growth was positively impacted by 0.1% due to foreign currency exchange rate fluctuations. Acquisitions positively impacted revenue by 1.0%.

Cost of uniform rental and facility services increased 25.1% compared to fiscal 2017. Cost of uniform rental and facility services consists primarily of production expenses, delivery expenses and the amortization of in service inventory, including uniforms, mats, shop towels and other ancillary items. The cost of uniform rental and facility services increase compared to fiscal 2017 was due to increased Uniform Rental and Facility Services reportable operating segment sales volume from organic growth and the acquired G&K sales volume.

Cost of other consists primarily of cost of goods sold (predominantly first aid and safety products, uniforms and fire protection products), delivery expenses and distribution expenses in the First Aid and Safety Services reportable operating segment and All Other. Cost of other increased 7.2% in fiscal 2018 compared to fiscal 2017. The increase was primarily related to the increased sales volumes in the First Aid and Safety Services reportable operating segment and All Other.

Selling and administrative expenses increased $389.4 million, or 25.5%, compared to fiscal 2017 due primarily to a one-time cash payment to employee-partners, increased labor and other employee-partner related expenses as a result of the acquisition of G&K, increased amortization expense related to intangible assets acquired as a result of the G&K acquisition and increased costs related to investments in a new enterprise resource planning system. The one-time cash payment to employee-partners was made following the enactment of the Tax Act, which was signed into legislation by the President on December 22, 2017. The one-time cash payment to employee-partners amounted to an expense of approximately $40 million, or 0.6% of total revenue. Operating income for fiscal 2018 was negatively impacted by $41.9 millio


n, or 0.6% of total revenue, from transaction and integration expenses incurred in connection with the G&K acquisition and $79.2 million, or 1.5% of total revenue, in fiscal 2017.

Net interest expense (interest expense less interest income) was $108.8 million in fiscal 2018 compared to $86.3 million in fiscal 2017. The increase in net interest expense is primarily due to the additional debt issued to finance the G&K acquisition.

Income before income taxes was $841.0 million, an increase of $153.6 million, or 22.3%, compared to fiscal 2017. The increase in income before income taxes was primarily due to revenue growing at a faster pace than expenses.

Cintas' effective tax rate on continuing operations was 6.8% for fiscal 2018 compared to 33.5% in fiscal 2017. The decrease was due to the impact of the Tax Act. The effective tax rate in fiscal 2017 was impacted by certain discrete items (primarily the tax accounting for stock-based compensation).

Net income from continuing operations for fiscal 2018 of $783.9 million was a 71.4% increase compared to fiscal 2017. Diluted earnings per share from continuing operations of $7.03 was a 68.6% increase compared to fiscal 2017. Diluted earnings per share from continuing operations increased primarily due to the lower effective tax rate as a result of the Tax Act, the gain on the sale of Discontinued Services and higher gross margin.


Uniform Rental and Facility Services Reportable Operating Segment

Uniform Rental and Facility Services reportable operating segment revenue increased $1,044.6 million, or 24.9%, and the cost of uniform rental and facility services increased $579.2 million, or 25.1%, as previously discussed. The reportable operating segment's fiscal 2018 gross margin was 45.0% of revenue compared to 45.1% in fiscal 2017. The slight decrease in gross margin was driven by the G&K acquisition, which had lower margins than the legacy Cintas margins. In addition, we incurred expected integration inefficiencies which impacted margins in the short-term.

Selling and administrative expenses for the Uniform Rental and Facility Services reportable operating segment increased $362.3 million in fiscal 2018 compared to fiscal 2017. Selling and administrative expense as a percent of revenue for fiscal 2018 was 28.6% compared to 27.1% in fiscal 2017. The increase in selling and administrative expenses for the Uniform Rental and Facility Services reportable operating segment was primarily related to a onetime cash payment to employee-partners, increased labor and employee-partner related expenses as a result of the G&K acquisition, increased amortization expense related to intangibles acquired as a result of the G&K acquisition and an investment in an enterprise resource planning system.

As a result of the G&K acquisition, the Uniform Rental and Facility Services reportable operating segment incurred $41.9 million of transaction and integration expenses directly related to the acquisition. The expenses incurred in fiscal 2018 consisted of lease cancellation costs, facility closure expenses and other integration related expenses.

Income before income taxes increased $140.5 million to $817.6 million for fiscal 2018 compared to fiscal 2017. Income before income taxes as a percent of revenue at 15.6% decreased 50 basis points from 16.1% in fiscal 2017. The decrease is primarily due to the increase in selling and administrative expenses as previously discussed.

First Aid and Safety Services Reportable Operating Segment

First Aid and Safety Services reportable operating segment revenue increased $56.5 million in fiscal 2018, an 11.1% increase compared to fiscal 2017. Revenue increased organically by 10.5% as a result of increased sales volume. Revenue growth was positively impacted by 0.5% due to acquisitions.

Cost of first aid and safety services increased $20.9 million, or 7.5%, in fiscal 2018, due primarily to higher sales volume. Gross margin for the First Aid and Safety Services reportable operating segment is defined as revenue less cost of goods, warehouse expenses, service expenses and training expenses. The gross margin as a percent of revenue was 47.1% for fiscal 2018 compared to 45.3% in fiscal 2017. The increase was driven primarily by improved sourcing, leveraging of existing warehouses and optimization of delivery routes.

Selling and administrative expenses for the First Aid and Safety Services reportable operating segment increased by $13.2 million, or 7.4%, in fiscal 2018 compared to fiscal 2017. The increase was due primarily to increased labor, including a one-time cash payment to employee-partners. Selling and administrative expenses as a percent of revenue


were 33.7% in fiscal 2018 compared to 34.9% in fiscal 2017. The decrease in selling and administrative expenses as a percent of revenue was due to revenue growing at a faster pace than labor and employee-partner related expenses.

Income before income taxes was $75.2 million in fiscal 2018, an increase of $22.4 million, or 42.5%, compared to fiscal 2017. Income before income taxes as a percent of revenue at 13.3%, increased from 10.4% in fiscal 2017 due to the previously discussed growth in revenue, improvement in the gross margin percentage and improvement in selling and administrative expenses as a percent of revenue.

Liquidity and Capital Resources
The following table summarizes our cash flows and cash and cash equivalents as of and for the fiscal years ended May 31:
(In thousands)20212020
Net cash provided by operating activities$1,360,740 $1,291,483 
Net cash used in investing activities$(137,215)$(285,398)
Net cash used in financing activities$(879,868)$(955,207)
Cash and cash equivalents at end of year$493,640 $145,402 
(In thousands)2019 2018
    
Net cash provided by operating activities$1,067,862
 $964,160
Net cash used in investing activities$(235,638) $(135,698)
Net cash used in financing activities$(873,305) $(864,140)
    
Cash and cash equivalents at end of year$96,645
 $138,724


Cash and cash equivalents as of May 31, 20192021 and 20182020 include $28.5$37.9 million and $33.9$30.2 million, respectively, that is located outside of the United States.U.S.


Cash flows provided by operating activities have historically supplied us with a significant source of liquidity. We generally use these cash flows to fund most, if not all, of our operations and expansion activities and dividends on our common stock. We may also use cash flows provided by operating activities, as well as proceeds from long-term debt and short-term borrowings, to fund growth and expansion opportunities, as well as other cash requirements such as the repurchase of our common stock and payment of long-term debt.


The disruption from the COVID-19 pandemic continued to have an impact on Cintas' fiscal 2021 financial results. However, net cash flow provided by operating activities was not significantly impacted. We expect our cash flows from operating activities to remain sufficient to provide us with adequate levels of short-term liquidity. In addition, we have access to $1.0 billion of short-term debt from our revolving credit facility. Although the impact of the COVID-19 pandemic is fluid and continues to evolve, we believe our long-term liquidity position remains strong. We believe the Company has sufficient liquidity to operate in the current business environment. Acquisitions and dividends remain strategic objectives, but they will be dependent on the economic outlook and liquidity of the Company.

Net cash provided by operating activities was $1.1$1.36 billion for fiscal 2019,2021, which was an increase of $103.7$69.3 million compared to fiscal 2018.2020. The increase was primarily the result of higherincreased net income and favorable changes in deferred taxes,accrued compensation and other, partially offset by changes in working capital.capital, specifically income taxes, accounts receivable and accrued liabilities and other.


Net cash used in investing activities was $235.6$137.2 million in fiscal 20192021, compared to $135.7$285.4 million in fiscal 2018.2020. Net cash used in investing activities includes capital expenditures, purchases of investments, proceeds from the sale of operating assets and cash paid for acquisitions of businesses. Capital expenditures were $276.7$143.5 million and $271.7$230.3 million for fiscal 20192021 and fiscal 2018,2020, respectively. Capital expenditures for fiscal 20192021 included $220.4$104.0 million for the Uniform Rental and Facility Services reportable operating segment and $36.8$34.4 million for the First Aid and Safety Services reportable operating segment. The decrease in capital expenditures from fiscal 2020 to fiscal 2021 was due to reduced growth capacity needs within the slower growth landscape of the COVID-19 pandemic. Cash paid for acquisitions of businesses, net of cash acquired, was $9.8$10.0 million and $19.3$53.7 million for fiscal 20192021 and fiscal 2018,2020, respectively. The acquisitions in both fiscal 20192021 and 20182020 occurred in our Uniform Rental and Facility Services reportable operating segment, our First Aid and Safety Services reportable operating segment and our Fire Protection business,operating segment, which is included in All Other. In fiscal 2019,2021 and fiscal 2020, investing activities included proceeds of $73.3$31.7 million and $13.3 million, respectively, from the sale of a cost method investment and $3.2 million from the salecertain operating assets, net of a business included in discontinued operations, and during fiscal 2018, included proceeds of $127.8 million related to the sale of Discontinued Services.
22


cash disposed. Net cash used in investing activities also included $17.8$4.3 million and $10.0 million of investment purchases during fiscal 2019 and net proceeds of $26.1 million from purchases and redemptions of marketable securities and investments during fiscal 2018.2021 and fiscal 2020, respectively.


Net cash used in financing activities was $873.3$879.9 million for fiscal 2019,2021, compared to $864.1$955.2 million in fiscal 2018.2020. The increasedecrease in fiscal 2019cash used from financing activities from fiscal 20182020 is primarily due to the payment of the $312.5 million of debt in fiscal 2020, partially offset by an increase in cash used to pay dividends and repurchase of common stock in fiscal 2019.2021. On August 2, 2016,October 30, 2018, we announced that the Board of Directors authorized a $500.0 million share buyback program. During fiscal 2019, under the August 2, 2016$1.0 billion share buyback program, we purchased a total of 2.1 million shares of Cintas common stock at an average price of $192.55 per share for a total purchase price of $410.0 million to complete the August 2, 2016 share buyback program.which was completed during fiscal 2021. On October 30, 2018,29, 2019, we announced that the Board of Directors authorized a new $1.0 billion share buyback program, which does not have an expiration date. DuringThe following table summarizes the buyback activity by program and fiscal year ended May 31:
20212020
Buyback Program
(In thousands except per share data)
SharesAvg. Price per SharePurchase PriceSharesAvg. Price per SharePurchase Price
October 30, 2018190 $319.88 $60,877 1,607 $246.19 $395,681 
October 29, 20191,196 350.31 418,779 — — — 
1,386 $346.13 $479,656 1,607 $246.19 $395,681 

In the period subsequent to May 31, 2021 through July 28, 2021, we completed the October 29, 2019 under this new program we purchased 2.7by purchasing 1.6 million shares of Cintas common stock at an average price of $203.30$365.41 for a total purchase price of $543.4 million. During fiscal 2018, under the August 2, 2016 share buyback program, we purchased 0.5 million shares of Cintas common at an average price of $173.51 per share for a total purchase price of $90.0 million. Subsequent to May 31, 2019 through July 26, 2019, under the new share buyback program, Cintas purchased 0.8 million shares at an average price of $230.66 per share for a total purchase price of $193.1$581.2 million. From the inception of the October 30, 2018 share buyba


ck29, 2019 program through July 26, 2019,28, 2021, Cintas has purchased a total of 3.52.8 million shares of Cintas common stock at an average price of $209.82$358.93 per share for a total purchase price of $736.5 million. Also,$1.0 billion. In addition, for the fiscal year ended May 31, 2019,2021, Cintas acquired 0.30.2 million shares of Cintas common stock in satisfaction of employee payroll taxes due on restricted stock awards that vested during the fiscal year. These shares were acquired at an average price of $204.50$302.52 per share for a total purchase price of $62.9$74.4 million. For the fiscal year ended May 31, 2020, Cintas acquired 0.3 million shares of Cintas common stock in satisfaction of employee payroll taxes due on restricted awards that vested during the fiscal year. These shares were acquired at an average price of $260.89 per share for a total purchase price of $68.8 million.


On October 30, 2018,27, 2020, Cintas declared an annual cash dividend of $2.05 per share on outstanding common stock, representing a
26.5% 10.2% increase over the annual dividend paid in the prior fiscal year. The dividend was paid on December 7, 2018 to shareholders of record as of November 9, 2018. This marked the 3638th consecutive year that Cintas has increased its annual dividend, every year since going public in 1983. Also on October 27, 2020, the Cintas Board of Directors approved a change in the dividend policy from an annual dividend to a quarterly dividend and subsequently declared a quarterly dividend on outstanding common stock. Any future dividend declarations, including the amount of any dividends, are at the discretion of the Board of Directors and dependent upon then-existing conditions, including the Company's consolidated operating results and consolidated financial condition, capital requirements, contractual restrictions, business prospects and other factors that the Board of Directors may deem relevant. Our Board of Directors declared the following dividends during the fiscal years ended May 31:

Declaration Date
(In millions except per share data)
Record
 Date		Payment
 Date		Dividend
Per Share		Amount
Fiscal Year 2021
October 27, 2020November 6, 2020December 4, 2020$2.81 $297.7 
October 27, 2020November 6, 2020December 4, 20200.70 74.1 
January 19, 2021February 15, 2021March 15, 20210.75 79.5 
April 13, 2021 (1)
May 15, 2021June 15, 20210.75 79.2 
Total$5.01 $530.5 
Fiscal Year 2020
October 29, 2019November 8, 2019December 6, 2019$2.55 $268.0 
Fiscal Year 2019
October 30, 2018November 9, 2018December 7, 2018$2.05 $220.8 
.(1) The dividend declared on April 13, 2021 was included in current accrued liabilities on the consolidated balance sheet at May 31, 2021.
23


During the fiscal year ended May 31, 2019,2020, Cintas issuedpaid a net total of $112.5 million ofon commercial paper and received proceeds of $200.0 million as a result of a new term loan. During fiscal 2018, Cintas paid a net total of $50.5 million of commercial paperborrowings and paid off the term loan balance of $250.0$200.0 million with cash on hand. On December 1, 2017, Cintas paid the $300.0 million aggregate principal amount of its 6.13% 10-year senior notes that matured on that date with cash on hand and proceeds from the issuance ofThere was no commercial paper.

paper outstanding during fiscal 2021. The following table summarizes Cintas' outstanding debt at May 31:
(In thousands)Interest
 Rate		Fiscal Year
Issued		Fiscal Year
Maturity		20212020
Debt due within one year
Senior notes4.30%20122022$250,000 $— 
Senior notes2.90%20172022650,000 — 
Debt issuance costs(930)— 
Total debt due within one year$899,070 $— 
Debt due after one year
Senior notes4.30%20122022$— $250,000 
Senior notes2.90%20172022— 650,000 
Senior notes3.25%20132023300,000 300,000 
Senior notes (1)
2.78%2013202350,815 51,250 
Senior notes (2)
3.11%2015202551,301 51,637 
Senior notes3.70%201720271,000,000 1,000,000 
Senior notes6.15%20072037250,000 250,000 
Debt issuance costs(9,283)(13,182)
   Total debt due after one year$1,642,833 $2,539,705 
(In thousands)
Interest
 Rate
 
Fiscal Year
Issued
 
Fiscal Year
Maturity
 2019 2018
          
Debt due within one year         
Commercial paper2.68%
(1) 
2019 2020 $112,500
 $—
Term loan3.06%
(1) 
2019 2020 200,000
 —
Debt issuance costs      (236) —
Total debt due within one year      $312,264
 $—
          
Debt due after one year         
Senior notes4.30% 2012 2022 $250,000
 $250,000
Senior notes2.90% 2017 2022 650,000
 650,000
Senior notes3.25% 2013 2023 300,000
 300,000
Senior notes (2)
2.78% 2013 2023 51,684
 52,119
Senior notes (3)
3.11% 2015 2025 51,973
 52,309
Senior notes3.70% 2017 2027 1,000,000
 1,000,000
Senior notes6.15% 2007 2037 250,000
 250,000
Debt issuance costs      (16,150) (19,119)
   Total debt due after one year      $2,537,507
 $2,535,309
(1)     Variable     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 debt instrument. The rate presentedshown above is the variable borrowingeffective interest rate. The principal amount of these notes is $50.0 million with a stated interest rate of 3.73%.
(2)     Cintas assumed these senior notes with the acquisition of G&K in the fourth quarter of fiscal 2017, and they were recorded at May 31, 2019.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%.

(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%.
(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%.
The credit agreement that supports our commercial paper program was amended and restated on May 24, 2019. The amendment increased the capacity of the revolving credit facility from $600.0 million to $1.0 billion and created a new term loan of $200.0 million. The credit agreement has an accordion feature that provides Cintas the ability to request increases to the borrowing commitments under either the revolving credit facility or the term loan of up to $250.0 million in the aggregate, subject to customary conditions. The maturity date of the revolving credit facility is May 22, 2024, and the maturity date of the term loan is May 22, 2020, which can be extended 12 months, annually, for up to four years.23, 2024. As of May 31, 2019,2021 and 2020, there was $112.5 million ofno commercial paper outstanding with a weighted average interest rate of 2.7% and maturity dates less than 30 days and no borrowings on our revolving credit facility. No commercial paper or borrowingsOn June 1, 2021, in accordance with the terms of the notes, Cintas paid the $250.0 million aggregate principal amount of its 4.30%, 10-year senior notes that matured on our revolving credit facility were outstanding at May 31, 2018.that date with cash on hand. During fiscal 2022, Cintas expects to issue long-term debt to pay the $650.0 million principal amount of its 2.90%, 5-year senior notes that mature in the fourth quarter of fiscal 2022.




Cintas has certain covenants related to debt agreements. These covenants limit Cintas' ability to incur certain liens, to engage in sale-leaseback transactions and to merge, consolidate or sell all or substantially all of Cintas' assets. These covenants also require Cintas to maintain certain debt to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) and interest coverage ratios. Cross-default provisions exist between certain debt instruments. If a default of a significant covenant were to occur, the default could result in an acceleration of the maturity of the indebtedness, impair liquidity and limit the ability to raise future capital. Cintas was in compliance with all of the debt covenants for all periods presented.


Our access to the commercial paper and long-term debt markets has historically provided us with sources of liquidity. We do not anticipate having difficulty in obtaining financing from those markets in the future in view of our favorable experiences in the debt markets in the recent past. Ourpast, including our ability to refinance the $650.0 million aggregate principal amount of our senior notes that mature in fiscal 2022. Additionally, our ability to continue to access the commercial paper and long-term debt markets on favorable interest rate and other terms will depend, to a significant degree, on the ratings assigned by the credit rating agencies to our indebtedness. 
24


As of May 31, 2019,2021, our ratings were as follows:
Rating AgencyOutlookCommercial
Paper		Long-term
Debt
Rating AgencyOutlookCommercial PaperLong-term Debt
Standard & Poor’sStableA-2A-
Moody’s Investors ServiceStableP-2A3


In the event that the ratings of our commercial paper or our outstanding long-term debt issues were substantially lowered or withdrawn for any reason, or if the ratings assigned to any new issue of long-term debt securities were significantly lower than those noted above, particularly if we no longer had investment grade ratings, our ability to access the debt markets may be adversely affected. In addition, in such a case, our cost of funds for new issues of commercial paper and long-term debt would be higher than our cost of funds would have been had the ratings of those new issues been at or above the level of the ratings noted above. The rating agency ratings are not recommendations to buy, sell or hold our commercial paper or debt securities. Each rating may be subject to revision or withdrawal at any time by the assigning rating organization and should be evaluated independently of any other rating. Moreover, each credit rating is specific to the security to which it applies.
 
To monitor our credit rating and our capacity for long-term financing, we consider various qualitative and quantitative factors. One such factor is the ratio of our total debt to EBITDA. For the purpose of this calculation, debt is defined as the sum of short-term borrowings, long-term debt due within one year, obligations under capital leases due in one year, long-term debt long-term obligations under capital leases and standby letters of credit. 

Financial and Nonfinancial Disclosure About Issuers and Guarantors of Cintas’ Senior Notes
Cintas Corporation No. 2 (Corp. 2) is the indirectly, wholly owned principal operating subsidiary of Cintas. Corp. 2 is the issuer of the $2,550.0 million aggregate principal amount of senior notes outstanding as of May 31, 2021, which are unconditionally guaranteed, jointly and severally, by Cintas Corporation and its wholly owned, direct and indirect domestic subsidiaries. See Note 7 entitled Debt and Derivatives of "Notes to Consolidated Financial Statements" for more information on Cintas' outstanding debt.

Basis of Preparation of the Summarized Financial Information
The following tables include summarized financial information of Cintas Corporation (Issuer), Corp. 2 and subsidiary guarantors (together, the Obligor Group). Investments in and equity in the earnings of non-guarantors, which are not members of the Obligor Group, have been excluded. Non-guarantor subsidiaries are located outside the U.S., and therefore, excluded from the Obligor Group.

The summarized financial information of the Obligor Group is presented on a combined basis with intercompany balances and transactions between entities in the Obligor Group eliminated. The Obligor Group’s amounts due from, amounts due to and transactions with non-guarantors have been presented in separate line items, if they are material. Summarized financial information of the Obligor Group is as follows for the fiscal years ended May 31:

Summarized Consolidated Statements of Income
(In thousands)
20212020
Net sales to unrelated parties$6,705,820 $6,642,196 
Net sales to non-guarantors$3,460 $4,778 
Operating income$1,319,444 $1,140,318 
Net income$1,058,837 $860,022 

25


Summarized Consolidated Balance Sheets
(In thousands)
20212020
Assets
Receivables due from non-obligor subsidiaries$2,292 $3,199 
Total other current assets$2,652,810 $2,143,489 
Total other noncurrent assets$4,924,550 $4,938,093 
Liabilities
Amounts due to non-obligor subsidiaries$457 $3,437 
Current liabilities$1,893,352 $843,203 
Noncurrent liabilities$2,549,911 $3,495,956 

Contractual Obligations
Payments Due by Period
(In thousands)TotalOne year
or less		Two to
three years		Four to
five years		After five
years
Debt (1)
$2,550,000 $900,000 $350,000 $50,000 $1,250,000 
Operating leases (2)
185,801 47,564 69,138 39,089 30,010 
Interest payments510,653 90,155 115,370 106,690 198,438 
Total contractual cash obligations$3,246,454 $1,037,719 $534,508 $195,779 $1,478,448 
 Payments Due by Period
(In thousands)Total 
One year
or less
 
Two to
three years
 
Four to
five years
 
After five
years
          
Debt (1)
$2,862,500
 $312,500
 $900,000
 $350,000
 $1,300,000
Operating leases (2)
223,241
 54,027
 82,280
 46,968
 39,966
Interest payments (3)
708,985
 102,802
 185,685
 115,370
 305,128
Unconditional purchase obligations—
 —
 —
 —
 —
Total contractual cash obligations$3,794,726
 $469,329
 $1,167,965
 $512,338
 $1,645,094
(1)See Note 7 entitled Debt and Derivatives of "Notes to Consolidated Financial Statements" for a detailed presentation of Cintas' debt.
(1)
(2)See Note 8 entitled Leases of "Notes to Consolidated financial Statements" for a detailed presentation of Cintas' leases.
See Note 7 entitled Debt and Derivatives of "Notes to Consolidated Financial Statements" for a detailed presentation of Cintas' debt.
(2)
Operating leases consist primarily of operational facility leases and vehicle leases.
(3)
Interest payments could include interest on both fixed and variable rate debt. As of May 31, 2019, Cintas had approximately $312.5 million of variable rate debt outstanding, which consisted of $112.5 million of commercial paper and a $200.0 million term loan. The interest payments for variable rate debt were estimated using forecasted rates in future years.
Cintas also makes payments to defined contribution plans and may make payments to defined benefit plans to satisfy minimum funding requirements. The amount of contributions made to the defined contribution plans are at the discretion of the Board of Directors of Cintas. Future contributions to the defined contribution plans are expected to be $73.6$82.6 million in the next year, $158.4$177.9 million in the next two to three years and $174.7$196.1 million in the next four to five years. Future contributions to the defined benefit plans are expected to be $3.1$0.3 million in the next year, $6.1$3.0 million in the next two to three years and $6.1$3.0 million in the next four to five years.


Other Commitments
Amount of Commitment Expiration per Period
(In thousands)TotalOne year
or less		Two to
three years		Four to
five years		After five
years
Lines of credit (1)
$999,234 $— $999,234 $— $— 
Standby letters of credit and surety bonds (2)
120,597 120,597 — — — 
Total other commitments$1,119,831 $120,597 $999,234 $— $— 
 Amount of Commitment Expiration per Period
(In thousands)Total 
One year
or less
 
Two to
three years
 
Four to
five years
 
After five
years
          
Lines of credit (1)
$887,377
 $—
 $—
 $887,377
 $—
Standby letters of credit and surety bonds (2)
120,637
 120,637
 —
 —
 —
Total other commitments$1,008,014
 $120,637
 $—
 $887,377
 $—
(1)Back-up facility for the commercial paper program (reference Note 7 entitled Debt and Derivatives of "Notes to Consolidated Financial Statements" for further discussion).
(1)
(2)These standby letters of credit and surety bonds support certain outstanding debt (reference Note 7 entitled Debt and Derivatives of "Notes to Consolidated Financial Statements"), self-insured workers' compensation and general liability insurance programs.
Back-up facility for the commercial paper program (reference Note 7 entitled Debt and Derivatives of "Notes to Consolidated Financial Statements" for further discussion).
(2)
These standby letters of credit and surety bonds support certain outstanding debt (reference Note 7 entitled Debt and Derivatives of "Notes to Consolidated Financial Statements"), self-insured workers' compensation and general liability insurance programs.
Inflation and Changing Prices
Changes in wages, benefits and energy costs have the potential to materially impact Cintas' consolidated financial results.results of operations. Management believes inflation has not had a material impact on Cintas' consolidated financial condition or a negative impact on the consolidated results of operations.

26


Litigation and Other Contingencies
Cintas is subject to legal proceedings, insurance receipts, legal settlements and claims arising from the ordinary course of its business, including personal injury, customer contract, environmental and employment claims. In the opinion of management, the aggregate liability, if any, with respect to such ordinary course of business actions will not have a material adverse effect on the consolidated financial position, consolidated results of operations or consolidated cash flows of Cintas.


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 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.
New Accounting Standards
In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)," to clarify revenue recognition principles. This guidance is intended to improve disclosure requirements and enhance the comparability of revenue recognition practices. Improved disclosures under the amended guidance relate to the nature, amount, timing and uncertainty of revenue that is recognized from contracts with customers. We adopted ASU 2014-09, and all the related amendments, effective June 1, 2018 using the modified retrospective method. ASU 2014-09 requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Upon adoption of ASU 2014-09, we recorded an adjustment to the opening balance of retained earnings as of June 1, 2018. The adjustment to retained earnings primarily relates to the capitalization of certain direct and incremental contract costs required by the new guidance. Capitalized costs are amortized ratably over the anticipated period of benefit. We applied ASU 2014-09 only to contracts that were not completed prior to fiscal 2019. Results for reporting periods beginning after May 31, 2018 are presented under ASU 2014-09, while comparative prior period amounts have not been restated and continue to be presented under accounting standards in effect in those periods.

There were two implementation adjustments upon adoption of ASU 2014-09: (1) capitalization of certain direct and incremental contract costs and (2) the timing of revenue recognition for certain contracts with customers that create an asset with no alternative use to the Company and an enforceable right of payment from the customer upon termination. Adoption of ASU 2014-09 impacted the Company's previously reported results as of May 31, 2018 as follows:
Capitalization of Contract Costs. The Company has elected to apply the guidance, as a practical expedient, 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.


Assets With No Alternative Use.For our Uniform Direct Sale business, our revenue, prior to the adoption of ASU 2014-09, was primarily generated from the sale of finished products to customers as products are shipped and title passes to the customers. For certain contracts with customers, the Company creates an asset with no alternative use to the Company, and the Company has an enforceable right to payment for performance completed to date. For these contracts, we have moved from a point-in-time model to an over-time model in which our measure of progress is finished goods with no alternative use in accordance with the provisions of ASU 2014-09. We expect ASU 2014-09 will have no cash impact and will not affect the economics of our underlying customer contracts.
   
Impacts of Adopting
ASU 2014-09
  
(In thousands)
May 31,
2018
 
Capitalization of
Contract Costs
 
Assets With No
Alternative Use
 
June 1,
2018
        
Assets       
Accounts receivable, net$804,583
 $—
 $13,426
 $818,009
Inventories, net280,347
 —
 (11,265) 269,082
Prepaid expenses and other current assets32,383
 63,463
 —
 95,846
Total current assets1,977,932
 63,463
 2,161
 2,043,556
        
Other assets, net29,315
 187,503
 —
 216,818
        
Total assets$6,958,214
 $250,966
 $2,161
 $7,211,341
        
Liabilities and Shareholders' Equity       
Deferred income taxes$352,581
 $63,389
 $546
 $416,516
Total long-term liabilities3,165,831
 63,389
 546
 3,229,766
        
Retained earnings5,837,827
 187,577
 1,615
 6,027,019
Total shareholders' equity3,016,526
 187,577
 1,615
 3,205,718
        
Total liabilities and shareholders' equity$6,958,214
 $250,966
 $2,161
 $7,211,341

The impacts of adopting ASU 2014-09 on our fiscal 2019 consolidated financial statements are presented in the following tables:
 Fiscal year ended May 31, 2019
Consolidated Statement of Income
(In thousands)
As
Reported
 
Under Historical
Guidance
 
Impact of Adopting
ASU 2014-09
      
Revenue:     
Uniform rental and facility services$5,552,430
 $5,557,056
 $(4,626)
Other1,339,873
 1,337,954
 1,919
Total revenue6,892,303
 6,895,010
 (2,707)
      
Costs and expenses:     
Cost of other736,116
 735,703
 413
Selling and administrative expenses1,980,644
 2,006,134
 (25,490)
Operating income1,133,534
 1,111,164
 22,370
      
Income before income taxes1,102,399
 1,080,029
 22,370
Income taxes219,764
 214,306
 5,458
Income from continuing operations882,635
 865,723
 16,912
Net income$884,981
 $868,069
 $16,912
      
Diluted earnings per share$7.99
 $7.84
 $0.15



 As of May 31, 2019
Consolidated Balance Sheet
(In thousands)
As
Reported
 
Under Historical
Guidance
 
Impact of Adopting
ASU 2014-09
      
Assets     
Accounts receivable, net$910,120
 $894,301
 $15,819
Inventories, net334,589
 346,267
 (11,678)
Income taxes, current7,475
 7,904
 (429)
Prepaid expenses and other current assets103,318
 33,759
 69,559
Total current assets2,236,280
 2,163,009
 73,271
      
Other assets, net240,315
 38,518
 201,797
      
Total assets$7,436,662
 $7,161,594
 $275,068
      
Liabilities and Shareholders' Equity     
Long-term liabilities:     
Deferred income taxes$438,179
 $369,215
 $68,964
Total long-term liabilities3,306,208
 3,237,244
 68,964
      
Retained earnings6,691,236
 6,485,132
 206,104
Total shareholders' equity3,002,721
 2,796,617
 206,104
      
Total liabilities and shareholders' equity$7,436,662
 $7,161,594
 $275,068
The adoption of ASU 2014-09 had no impact to the Company's fiscal 2019 operating cash flow, and the only impact of the adoption on our fiscal 2019 consolidated statement of comprehensive income was the impact to net income as presented in the table above.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” as amended. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Topic 842 provides a number of optional practical expedients in transition, and we have determined to use certain of these practical expedients. The Company plans to elect the package of practical expedients permitted under Topic 842, which allows a lessee to carryforward their population of existing leases, the classification of each lease, as well as the treatment of initial direct costs as of the period of adoption. The Company also plans to elect the practical expedient related to lease and non-lease components, as an accounting policy election for all asset classes, which allows a lessee to not separate non-lease from lease components and instead account for consideration paid in a contract as a single lease component. In addition, the Company plans to elect the short-term lease recognition exemption for all leases with a term of 12 months or less, which means it will not recognize right-of-use assets or lease liabilities for these leases. The Company does not expect to elect the use-of-hindsight practical expedient. This guidance will be adopted by the Company on June 1, 2019. In accordance with Topic 842, a registrant can elect not to present comparative financial information under Topic 842 if it recognizes a cumulative-effect adjustment to retained earnings upon adoption. The Company intends to make this transition election. The Company has implemented a new lease system in connection with the adoption of Topic 842. The majority of our lease spend relates to certain real estate with the remaining lease spend primarily related to vehicles and equipment. Based on the Company's portfolio of leases at May 31, 2019, approximately $160.0 million to $185.0 million of lease assets and liabilities will be recognized on the balance sheet upon adoption. We do not expect a material impact on the consolidated statements of income or consolidated statements of cash flows. The Company is substantially complete with its implementation efforts.
In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” ASU 2016-15 makes eight targeted changes to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company’s adoption of this standard on June 1, 2018 did not have a material impact on its consolidated statements of cash flows.



In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates the two-step process that required identification of potential impairment and a separate measure of the actual impairment. Goodwill impairment charges, if any, would be determined by the difference between a reporting unit's carrying value and its fair value (impairment loss is limited to the carrying value). This standard is effective for annual or any interim goodwill impairment tests beginning after December 15, 2019. The adoption of this standard is not expected to have a material impact on the consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs.” ASU 2017-07 continues to require the service component of pension and other postretirement benefit costs to be presented in the same line item as other employee compensation costs on the consolidated statement of income and changes the presentation of other components of net benefit cost so that these items will be presented outside of operating income within the consolidated statements of income. Cintas retrospectively adopted ASU 2017-07 on June 1, 2017. The adoption of this standard did not have a material effect on the consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. Among other amendments, the update allows entities to designate the variability in cash flows attributable to changes in a contractually specified component stated in the contract as the hedged risk in a cash flow hedge of a forecasted purchase or sale of a nonfinancial asset. This standard is effective for annual periods beginning after December 15, 2018. We adopted the standard effective as of June 1, 2018, and the effect of adoption of this standard did not have a material impact to our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." ASU 2018-02 allows entities to elect to reclassify the income tax effects of the Tax Act on items within accumulated other comprehensive income to retained earnings and requires additional related disclosures. This standard is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Cintas is currently evaluating the impact that ASU 2018-02 will have on its consolidated financial statements.

In April 2019, the FASBFinancial Accounting Standards Board (FASB) issued ASUAccounting Standards Update (ASU) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 will replacereplaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In connection with recognizing credit losses on receivablesaccounts receivable and other financial instruments, Cintas will be required to usenow uses a forward-looking expected loss model rather than the incurred loss model. This standard is effective for annual periods beginning after December 15, 2019, with early adoption permitted. The adoptionAdoption of this standard will beASU 2016-13 requires using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date.date to align existing credit loss methodology with the new standard. This standard was adopted by Cintas is currently evaluatingon June 1, 2020 and did not have a material impact on the impact that ASU 2016-13 will have on itsCompany's consolidated financial statements.


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



Critical Accounting Policies and Estimates
The preparation of Cintas' consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that have a significant effect on the amounts reported in the consolidated financial statements and accompanying notes. These critical accounting policies should be read in conjunction with Note 1 entitled Significant Accounting Policies of "Notes"Notes to Consolidated Financial Statements.Statements." Significant changes, estimates or assumptions related to any of the following critical accounting policies, including those impacted by the COVID-19 pandemic, could possibly have a material impact on the consolidated financial statements.

Revenue recognition
Rental revenue, which is recorded in the Uniform Rental and Facility Services reportable operating segment, is recognized when services are performed.performed or the obligations under the terms of a contract with a customer are satisfied. Other revenue, which is recorded in the First Aid and Safety Services reportable operating segments and All Other, is recognized when either services are performed or the obligations under the terms of a contract with a customer are satisfied. See Note 2 entitled Revenue Recognition of the "Notes"Notes to Consolidated Financial Statements"Statements" for more information on Cintas' revenue.


Uniforms and other rental items in service
Uniforms and other rental items in service 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. 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 ancillary products that are presented in the consolidated financial statements.

27

Property and equipment
Depreciation is calculated using the straight-line method over the estimated useful lives of the assets based on industry and Cintas specific experience, which is typically 30 to 40 years for buildings, 5 to 20 years for building improvements, 3 to 10 years for equipment and 2 to 15 years for leasehold improvements. When events or circumstances indicate that the carrying amount of long-lived assets may not be recoverable, the estimated undiscounted future cash flows are compared to the carrying amount of the assets. If the estimated undiscounted future cash flows are less than the carrying amount of the assets, an impairment loss is recorded based on the excess of the carrying amount of the assets over their respective fair values. Fair value is generally determined by discounted cash flows or based on prices of similar assets, as appropriate. Cintas did not identify any indicators of impairment for the fiscal years ended May 31, 2019 and 2018.

Goodwill
Goodwill, obtained through acquisitions of businesses, is valued at cost less any impairment. Cintas completes an annual impairment test, that includes an assessment of qualitative factors including, but not limited to, macroeconomic conditions, industry and market conditions, and entity specific factors such as strategies and financial performance. We test for goodwill impairment at the reporting unit level. Cintas has identified four reporting units for purposes of evaluating goodwill impairment: Uniform Rental and Facility Services, First Aid and Safety Services and two reporting units within All Other. Based on the results of the annual impairment tests, Cintas was not required to recognize an impairment of goodwill for the fiscal years ended May 31, 2019, 20182021, 2020 or 2017.2019. Cintas will continue to perform impairment tests as of March 1 in future years and when indicators of impairment exist.


Service contracts and other assetsInsurance reserve
Service contracts and other assets, which consist primarily of noncompete and consulting agreements obtained through acquisitions of businesses, are amortized by use of the straight-line method over the estimated lives of the agreements, which are generally 5 to 10 years. The G&K service contract asset is being amortized over a period of 15 years, whichinsurance reserve represents the estimated life of the economic benefit and the asset amortization is based on the annual economic value of the underlying asset, which generally decreases over the 15-year term. Certain noncompete agreements, as well as all service contracts, require that a valuation be determined using a discounted cash flow model. The assumptions and judgments used in these models involve estimates of cash flows and discount rates, among other factors. Because of the assumptions used to value these intangible assets, actual results over time could vary from original estimates. Impairment of service contracts and other assets is accomplished through specific identification. No impairment has been recognized by Cintas for the fiscal years ended May 31, 2019, 2018 or 2017.


Business Combinations
Accounting for acquisitions requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement.  As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of income.
General insurance liabilities
General insurance liabilities represent the estimated ultimate cost of all asserted and unasserted claims, incurred, primarily related to worker'sworkers' compensation, auto liability and other general liability exposure through the consolidated balance sheet dates. Our incurred but not reported reserves are estimated through actuarial procedures, with the assistance of third-party actuarial specialists, of the insurance industry and by using industry assumptions, adjusted for specific expectations based on our claims history. Cintas records an increase or decrease in selling and administrative expenses related to development of prior claims, higher claims activity and other environmental factors in the period in which it becomes known. These changes in estimates may be material to the consolidated financial statements.


Stock-based compensation
Compensation expense is recognized for all share-based payments to employees, including stock options and restricted stock awards, in the consolidated statements of income based on the fair value of the awards that are granted. The fair value of stock options is estimated at the date of grant using the Black-Scholes option-pricing model. Generally, measured compensation cost, net of estimatedactual forfeitures, is recognized on a straight-line basis over the vesting period of the related share-based compensation award. See Note 1312 entitled Stock-Based Compensation of "Notes"Notes to Consolidated Financial Statements"Statements" for further information.


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. U.S. 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. Significant judgment is required to determine the existence of a liability, as well as the amount to be recorded. While a significant change in assumptions and judgments could have a material impact on the amounts recorded for contingent liabilities, Cintas does not believe that they will result in a material adverse effect on the consolidated financial statements.


Income taxes
Deferred tax assets and liabilities are determined by the differences between the consolidated financial statement carrying amounts and the tax basis of assets and liabilities. Therefore, the Company has not recorded deferred taxes for basis differences expected to reverse in future periods. Cintas accounts for Global Intangible Low-Taxed Income (GILTI) as a current-period expense when incurred. See Note 9 entitled Income Taxes of "Notes"Notes to Consolidated Financial Statements"Statements" for the types of items that give rise to significant deferred income tax assets and liabilities. Deferred income taxes are classified as assets or liabilities based on the classification of the related asset or liability for financial reporting purposes. Cintas regularly reviews deferred tax assets for recoverability based upon projected future taxable income and the expected timing of the reversals of existing temporary differences. Although realization is not assured, management believes it is more likely than not that the recorded deferred tax assets, as adjusted for valuation allowances, will be realized.

Accounting for uncertain tax positions requires the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Companies may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.
28


Cintas is periodically reviewed by domestic and foreign tax authorities regarding the amount of taxes due. These reviews include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposure associated with various filing positions, Cintas records reserves as deemed appropriate. Based on Cintas' evaluation of current tax positions, Cintas believes its tax related accruals are appropriate.



Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
Earnings may be affected by changes in short-term interest rates due to investments, if any, in marketable securities and money market accounts and periodic issuances of commercial paper. If short-term rates changed by one-half percent (or 50 basis points), Cintas' income before income taxes would change by approximately $1.1$0.5 million. This estimated exposure considers the effects on investments. This analysis does not consider the effects of a change in economic activity or a change in Cintas' capital structure.


Through its foreign operations, Cintas is exposed to foreign currency risk. Foreign currency exposures arise from transactions denominated in a currency other than the functional currency and from foreign denominated revenue and profit translated into U.S. dollars. Foreign denominated revenue and profit represents less than 10% of Cintas' consolidated revenue and profit. Cintas periodically uses foreign currency hedges such as average rate options and forward contracts to mitigate the risk of foreign currency exchange rate movements resulting from foreign currency revenue and from international cash flows. The primary foreign currency to which Cintas is exposed is the Canadian dollar.

29



Item 8.  Financial Statements and Supplementary Data

Index to Consolidated Financial Statements
Audited Consolidated Financial Statements for the Fiscal Years Ended May 31, 2019, 20182021, 2020 and 20172019


3231
3332
35
36
37
38
39
40




30


Management's Report on
Internal Control over Financial Reporting


To the Shareholders of Cintas Corporation:
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even an effective system of internal control over financial reporting will provide only reasonable assurance with respect to financial statement preparation.

With the supervision of our ChairmanPresident and Chief Executive Officer and our Chief Financial Officer, management assessed our internal control over financial reporting as of May 31, 2019.2021. Management based its assessment on criteria established in Internal Control — Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management's assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies and our overall control environment. This assessment is supported by testing and monitoring performed by our internal audit function.

Based on our assessment, management has concluded that our internal control over financial reporting was effective as of May 31, 2019,2021, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States.

We reviewed the results of management's assessment with the Audit Committee of our Board of Directors. Additionally, our independent registered public accounting firm, Ernst & Young LLP, independently assessed the effectiveness of Cintas Corporation's internal control over financial reporting. Ernst & Young LLP has issued an attestation report, which is included in this Annual Report on Form 10-K.


Todd M. Schneider
President and Chief Executive Officer
Scott D. Farmer
Chairman and Chief Executive Officer
J. Michael Hansen

Executive Vice President and Chief Financial Officer



31


Report of Independent
Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Cintas Corporation


Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cintas Corporation (the Company) as of May 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended May 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at May 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of May 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated July 28, 2021, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements, and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
Valuation of Insurance Reserves
Description of the Matter
At May 31, 2021, the Company's insurance reserve was $156.4 million. 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.
32



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. 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.

/s/ Ernst & Young LLP
We have served as the Company's auditor since 1968
Cincinnati, Ohio
July 28, 2021
33


Report of Independent
Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Cintas Corporation 
Opinion on Internal Control over Financial Reporting
We have audited Cintas Corporation’s internal control over financial reporting as of May 31, 2019,2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Cintas Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of May 31, 2019,2021, based on the COSO criteria.


We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of May 31, 20192021 and 2018, and2020, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended May 31, 2019,2021, and the related notes and financial statement schedule listed in the Index at Item 15(a), and our report dated July 26, 2019,28, 2021, expressed an unqualified opinion thereon.


Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying “Report of Management”“Management's Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.


Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.


Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ ERNSTErnst & YOUNGYoung LLP

Cincinnati, Ohio
July 26, 2019


Report of Independent Registered Public Accounting Firm28, 2021
34


To the Shareholders and the Board of Directors of Cintas Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cintas Corporation (the Company) as of May 31, 2019 and 2018, and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended May 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at May 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of May 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated July 26, 2019, expressed an unqualified opinion thereon.

Adoption of New Accounting Standard
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for revenue from contracts with customers and recognizing costs related to obtaining customer contracts in the period ended May 31, 2019.

Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ ERNST & YOUNG LLP


Consolidated
Statements of Income		Fiscal Years Ended May 31,
(In thousands except per share data)202120202019
Revenue:   
Uniform rental and facility services$5,689,632 $5,643,494 $5,552,430 
Other1,426,708 1,441,626 1,339,873 
Total revenue7,116,340 7,085,120 6,892,303 
Costs and expenses:   
Cost of uniform rental and facility services2,983,514 3,055,145 3,027,599 
Cost of other818,175 796,227 736,116 
Selling and administrative expenses1,929,159 2,071,052 1,980,644 
G&K Services, Inc. integration expenses0 0 14,410 
Operating income1,385,492 1,162,696 1,133,534 
Gain on sale of a cost method investment0 0 69,373 
Interest income(467)(988)(1,228)
Interest expense98,210 105,393 101,736 
Income before income taxes1,287,749 1,058,291 1,102,399 
Income taxes176,781 181,931 219,764 
Income from continuing operations1,110,968 876,360 882,635 
(Loss) income from discontinued operations, net of tax
   (benefit) expense of $0, $(107) and $757, respectively
0 (323)2,346 
Net income$1,110,968 $876,037 $884,981 
Basic earnings per share:
Continuing operations$10.52 $8.36 $8.23 
Discontinued operations0.00 0.00 0.02 
Basic earnings per share$10.52 $8.36 $8.25 
Diluted earnings per share:
Continuing operations$10.24 $8.11 $7.97 
Discontinued operations0.00 0.00 0.02 
Diluted earnings per share$10.24 $8.11 $7.99 
Dividends declared and paid per share$5.01 $2.55 $2.05 
We have served as the Company’s auditor since 1968
Cincinnati, Ohio
July 26, 2019



Consolidated
Statements of Income
     
 Fiscal Years Ended May 31,
(In thousands except per share data)2019 2018 2017
      
Revenue:     
Uniform rental and facility services$5,552,430
 $5,247,124
 $4,202,490
Other1,339,873
 1,229,508
 1,120,891
Total revenue6,892,303
 6,476,632
 5,323,381
      
Costs and expenses:     
Cost of uniform rental and facility services3,027,599
 2,886,959
 2,307,774
Cost of other736,116
 681,150
 635,312
Selling and administrative expenses1,980,644
 1,916,792
 1,527,380
G&K Services, Inc. transaction and integration expenses14,410
 41,897
 79,224
Operating income1,133,534
 949,834
 773,691
      
Gain on sale of a cost method investment69,373
 —
 —
      
Interest income(1,228) (1,342) (237)
Interest expense101,736
 110,175
 86,524
      
Income before income taxes1,102,399
 841,001
 687,404
Income taxes219,764
 57,069
 230,118
Income from continuing operations882,635
 783,932
 457,286
Income from discontinued operations, net of tax of $757,
$35,313 and $15,057, respectively		2,346
 58,654
 23,422
Net income$884,981
 $842,586
 $480,708
      
Basic earnings per share:     
Continuing operations$8.23
 $7.24
 $4.27
Discontinued operations0.02
 0.54
 0.22
Basic earnings per share$8.25
 $7.78
 $4.49
      
Diluted earnings per share:     
Continuing operations$7.97
 $7.03
 $4.17
Discontinued operations0.02
 0.53
 0.21
Diluted earnings per share$7.99
 $7.56
 $4.38
      
Dividends declared and paid per share$2.05
 $1.62
 $1.33



See accompanying notes.



35
Consolidated Statements
of Comprehensive Income
     
 Fiscal Years Ended May 31,
(In thousands)2019 2018 2017
      
Net income$884,981
 $842,586
 $480,708
      
Other comprehensive (loss) income, net of tax:     
Foreign currency translation adjustments(21,572) 19,276
 (10,252)
Change in fair value of interest rate lock agreements(27,659) —
 31,136
Amortization of interest rate lock agreements(1,179) (933) 1,076
Other(5,085) 1,029
 (115)
      
Other comprehensive (loss) income, net of tax (benefit) expense
of ($9,635), $690 and $19,118, respectively		(55,495) 19,372
 21,845
      
Comprehensive income$829,486
 $861,958
 $502,553




Consolidated Statements
of Comprehensive Income		Fiscal Years Ended May 31,
(In thousands)202120202019
Net income$1,110,968 $876,037 $884,981 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments68,182 (11,321)(21,572)
Change in fair value of interest rate lock agreements, net of tax
   expense (benefit) of $36,172, $(32,793) and $(8,734),
   respectively
106,843 (94,954)(27,659)
Amortization of interest rate lock agreement, net of tax benefit
   of $463, $463 and $717, respectively
(1,433)(1,433)(1,179)
Other, net of tax expense (benefit) of $3,578, $(2,802) and
   $(1,618), respectively
10,676 (8,495)(5,085)
Other comprehensive income (loss), net of tax expense (benefit)
   of $40,213, $(35,132) and $(9,635), respectively
184,268 (116,203)(55,495)
Comprehensive income$1,295,236 $759,834 $829,486 


See accompanying notes.




36
Consolidated
Balance Sheets
   
 As of May 31,
(In thousands except share data)2019 2018
    
Assets   
Current assets:   
Cash and cash equivalents$96,645
 $138,724
Accounts receivable, principally trade, less allowance of $37,809 and
$33,510, respectively		910,120
 804,583
Inventories, net334,589
 280,347
Uniforms and other rental items in service784,133
 702,261
Income taxes, current7,475
 19,634
Prepaid expenses and other current assets103,318
 32,383
Total current assets2,236,280
 1,977,932
    
Property and equipment, net1,430,685
 1,382,730
    
Investments192,346
 175,581
Goodwill2,842,441
 2,846,888
Service contracts, net494,595
 545,768
Other assets, net240,315
 29,315
 $7,436,662
 $6,958,214
Liabilities and Shareholders' Equity   
Current liabilities:   
Accounts payable$226,020
 $215,074
Accrued compensation and related liabilities155,509
 140,654
Accrued liabilities433,940
 420,129
Debt due within one year312,264
 —
Total current liabilities1,127,733
 775,857
    
Long-term liabilities:   
Debt due after one year2,537,507
 2,535,309
Deferred income taxes438,179
 352,581
Accrued liabilities330,522
 277,941
Total long-term liabilities3,306,208
 3,165,831
    
Shareholders' equity:   
Preferred stock, no par value:   
100,000 shares authorized, none outstanding—
 —
Common stock, no par value:   
425,000,000 shares authorized   
2019: 184,790,626 shares issued and 103,284,401 shares outstanding 
  
2018: 182,723,471 shares issued and 106,326,383 shares outstanding840,328
 618,464
Paid-in capital227,928
 245,211
Retained earnings6,691,236
 5,837,827
Treasury stock: 
  
2019: 81,506,225 shares   
2018: 76,397,088 shares(4,717,619) (3,701,319)
Accumulated other comprehensive (loss) income(39,152) 16,343
Total shareholders' equity3,002,721
 3,016,526
 $7,436,662
 $6,958,214



Consolidated
Balance Sheets		As of May 31,
(In thousands except share data)20212020
Assets  
Current assets:  
Cash and cash equivalents$493,640 $145,402 
Accounts receivable, principally trade, less allowance of $12,097 and
    $35,433, respectively
901,710 870,369 
Inventories, net481,797 408,898 
Uniforms and other rental items in service810,104 770,411 
Income taxes, current22,282 0 
Prepaid expenses and other current assets133,776 114,619 
Total current assets2,843,309 2,309,699 
Property and equipment, net1,318,438 1,403,065 
Investments274,616 214,847 
Goodwill2,913,069 2,870,020 
Service contracts, net408,445 451,529 
Operating lease right-of-use assets, net168,532 159,967 
Other assets, net310,414 260,758 
$8,236,823 $7,669,885 
Liabilities and Shareholders' Equity  
Current liabilities:  
Accounts payable$230,786 $230,995 
Accrued compensation and related liabilities241,469 127,417 
Accrued liabilities518,910 456,653 
Income taxes, current0 27,099 
Operating lease liabilities, current43,850 43,031 
Debt due within one year899,070 0 
Total current liabilities1,934,085 885,195 
Long-term liabilities:  
Debt due after one year1,642,833 2,539,705 
Deferred income taxes386,647 388,579 
Operating lease liabilities130,774 122,695 
Accrued liabilities454,637 498,509 
Total long-term liabilities2,614,891 3,549,488 
Shareholders' equity:  
Preferred stock, no par value:
100,000 shares authorized, NaN outstanding
0 0 
Common stock, no par value:
425,000,000 shares authorized
2021: 189,071,185 shares issued and 104,061,391 shares outstanding
2020: 186,793,207 shares issued and 103,415,368 shares outstanding
1,417,343 1,102,689 
Paid-in capital98,859 171,521 
Retained earnings7,877,015 7,296,509 
Treasury stock:
2021: 85,009,794 shares
2020: 83,377,839 shares
(5,736,258)(5,182,137)
Accumulated other comprehensive income (loss)30,888 (153,380)
Total shareholders' equity3,687,847 3,235,202 
$8,236,823 $7,669,885 

See accompanying notes.

37


Consolidated
Statements of Shareholders' Equity
Common Stock  Paid-In
Capital		Retained
Earnings		Other
Accumulated
Comprehensive
Income (Loss)		Treasury Stock  Total
Shareholders'
Equity
(In thousands)SharesAmountSharesAmount
Balance at June 1, 2018182,723 $618,464 $245,211 $5,837,827 $16,343 (76,397)$(3,701,319)$3,016,526 
Net income— — — 884,981 — — — 884,981 
Comprehensive loss, net of tax— — — — (55,495)— — (55,495)
Dividends— — — (220,764)— — — (220,764)
Stock-based compensation— — 139,210 — — — — 139,210 
Vesting of stock-based compensation awards766 156,493 (156,493)— — — — 0 
Stock options exercised, net of shares
    surrendered		1,302 65,371 — — — — — 65,371 
Repurchase of common stock— — — — — (5,109)(1,016,300)(1,016,300)
Cumulative effect of change in accounting
   principle		— — — 189,192 — — — 189,192 
Balance at May 31, 2019184,791 840,328 227,928 6,691,236 (39,152)(81,506)(4,717,619)3,002,721 
Net income— — — 876,037 — — — 876,037 
Comprehensive loss, net of tax— — — — (116,203)— — (116,203)
Dividends— — — (267,956)— — — (267,956)
Stock-based compensation— — 115,435 — — — — 115,435 
Vesting of stock-based compensation awards641 171,842 (171,842)— — — — 0 
Stock options exercised, net of shares
    surrendered		1,361 90,519 — — — — — 90,519 
Repurchase of common stock— — — — — (1,872)(464,518)(464,518)
Cumulative effect of change in accounting
   principle		— — — (2,808)1,975 — — (833)
Balance at May 31, 2020186,793 1,102,689 171,521 7,296,509 (153,380)(83,378)(5,182,137)3,235,202 
Net income— — — 1,110,968 — — — 1,110,968 
Comprehensive income, net of tax— — — — 184,268 — — 184,268 
Dividends— — — (530,462)— — — (530,462)
Stock-based compensation— — 112,035 — — — — 112,035 
Vesting of stock-based compensation awards610 184,697 (184,697)— — — — 0 
Stock options exercised, net of shares
    surrendered		1,668 129,957 — — — — — 129,957 
Repurchase of common stock— — — — — (1,632)(554,121)(554,121)
Balance at May 31, 2021189,071 $1,417,343 $98,859 $7,877,015 $30,888 (85,010)$(5,736,258)$3,687,847 
 Common Stock   
Paid-In
Capital
 
Retained
Earnings
 
Other
Accumulated
Comprehensive
Income (Loss)
 Treasury Stock   
Total
Shareholders'
Equity
(In thousands)Shares Amount    Shares Amount 
                
Balance at June 1, 2016179,598
 $409,682
 $205,260
 $4,805,867
 $(24,874) (75,385) $(3,553,276) $1,842,659
Net income—
 —
 —
 480,708
 —
 —
 —
 480,708
Comprehensive income, net of tax—
 —
 —
 —
 21,845
 —
 —
 21,845
Dividends—
 —
 —
 (142,433) —
 —
 —
 (142,433)
Stock-based compensation—
 —
 88,868
 —
 —
 —
 —
 88,868
Vesting of stock-based compensation awards429
 43,516
 (43,516) —
 —
 —
 —
 —
Stock options exercised, net of shares
    surrendered
966
 31,870
 —
 —
 —
 —
 —
 31,870
Repurchase of common stock—
 —
 —
 —
 —
 (207) (20,724) (20,724)
Adoption of new accounting guidance—
 —
 (26,688) 26,688
 —
 —
 —
 —
Balance at May 31, 2017180,993
 485,068
 223,924
 5,170,830
 (3,029) (75,592) (3,574,000) 2,302,793
Net income—
 —
 —
 842,586
 —
 —
 —
 842,586
Comprehensive income, net of tax—
 —
 —
 —
 19,372
 —
 —
 19,372
Dividends—
 —
 —
 (175,589) —
 —
 —
 (175,589)
Stock-based compensation—
 —
 112,835
 —
 —
 —
 —
 112,835
Vesting of stock-based compensation awards701
 91,548
 (91,548) —
 —
 —
 —
 —
Stock options exercised, net of shares
    surrendered
1,029
 41,848
 —
 —
 —
 —
 —
 41,848
Repurchase of common stock—
 —
 —
 —
 —
 (805) (127,319) (127,319)
Balance at May 31, 2018182,723
 618,464
 245,211
 5,837,827
 16,343
 (76,397) (3,701,319) 3,016,526
Net income—
 —
 —
 884,981
 —
 —
 —
 884,981
Comprehensive loss, net of tax—
 —
 —
 —
 (55,495) —
 —
 (55,495)
Dividends—
 —
 —
 (220,764) —
 —
 —
 (220,764)
Stock-based compensation—
 —
 139,210
 —
 —
 —
 —
 139,210
Vesting of stock-based compensation awards766
 156,493
 (156,493) —
 —
 —
 —
 —
Stock options exercised, net of shares
    surrendered
1,302
 65,371
 —
 —
 —
 —
 —
 65,371
Repurchase of common stock—
 —
 —
 —
 —
 (5,109) (1,016,300) (1,016,300)
Cumulative effect of change in accounting
   principle
—
 —
 —
 189,192
 —
 —
 —
 189,192
Balance at May 31, 2019184,791
 $840,328
 $227,928
 $6,691,236
 $(39,152) (81,506) $(4,717,619) $3,002,721




See accompanying notes.


38
Consolidated
Statements of Cash Flows
     
 Fiscal Years Ended May 31,
(In thousands)2019 2018 2017
Cash flows from operating activities:     
Net income$884,981
 $842,586
 $480,708
Adjustments to reconcile net income to net cash provided by operating activities:     
Depreciation223,631
 215,476
 171,565
Amortization of intangible assets and capitalized contract costs136,462
 63,940
 25,030
Stock-based compensation139,210
 112,835
 88,868
Gain on sale of a cost method investment(69,373) —
 —
Gain on sale of business(3,200) (96,400) (26,917)
Asset impairment charge—
 —
 23,331
G&K Services, Inc. transaction and integration costs—
 —
 31,445
Short-term debt financing fees included in net income—
 —
 17,062
Settlement of cash flow hedges—
 —
 30,194
Deferred income taxes31,708
 (119,295) 3,902
Change in current assets and liabilities, net of acquisitions of businesses: 
  
  
Accounts receivable, net(94,918) (66,267) (93,557)
Inventories, net(60,039) (3,323) (668)
Uniforms and other rental items in service(90,228) (64,299) (8,732)
Prepaid expenses and other current assets and capitalized
   contract costs
(100,765) (15,526) 24,201
Accounts payable12,276
 35,275
 13,726
Accrued compensation and related liabilities15,321
 (9,392) 13,654
Accrued liabilities and other30,910
 42,468
 (501)
Income taxes, current11,886
 26,082
 (29,424)
Net cash provided by operating activities1,067,862
 964,160
 763,887
      
Cash flows from investing activities:     
Capital expenditures(276,719) (271,699) (273,317)
Proceeds from redemption of marketable securities and investments—
 179,857
 218,324
Purchase of marketable securities and investments(17,841) (153,708) (181,065)
Proceeds from sale of a cost method investment73,342
 —
 —
Proceeds from sale of business3,200
 127,835
 28,276
Acquisitions of businesses, net of cash acquired(9,813) (19,346) (2,102,371)
Other, net(7,807) 1,363
 (196)
Net cash used in investing activities(235,638) (135,698) (2,310,349)
      
Cash flows from financing activities:     
Issuance (payments) of commercial paper, net112,500
 (50,500) 50,500
Proceeds from issuance of debt, net200,000
 —
 1,932,229
Repayment of debt—
 (550,000) (250,000)
Payment of short-term debt financing fees—
 —
 (17,062)
Proceeds from exercise of stock-based compensation awards65,371
 41,848
 31,870
Dividends paid(220,764) (175,589) (142,433)
Repurchase of common stock(1,016,300) (127,319) (20,724)
Other, net(14,112) (2,580) (5,878)
Net cash (used in) provided by financing activities(873,305) (864,140) 1,578,502
Effect of exchange rate changes on cash and cash equivalents(998) 5,136
 (2,131)
Net (decrease) increase in cash and cash equivalents(42,079) (30,542) 29,909
Cash and cash equivalents at beginning of year138,724
 169,266
 139,357
Cash and cash equivalents at end of year$96,645
 $138,724
 $169,266



Consolidated
Statements of Cash Flows		Fiscal Years Ended May 31,
(In thousands)202120202019
Cash flows from operating activities:   
Net income$1,110,968 $876,037 $884,981 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation243,836 235,905 223,631 
Amortization of intangible assets and capitalized contract costs144,115 143,148 136,462 
Stock-based compensation112,035 115,435 139,210 
Net gain on sale of operating assets(22,030)0 (3,200)
Long-lived asset impairment5,114 9,220 0 
Gain on sale of a cost method investment0 0 (69,373)
Deferred income taxes(42,242)(16,252)31,708 
Change in current assets and liabilities, net of acquisitions of businesses:   
Accounts receivable, net(32,576)39,681 (94,918)
Inventories, net(75,501)(74,773)(60,039)
Uniforms and other rental items in service(35,659)12,773 (90,228)
Prepaid expenses and other current assets and capitalized
   contract costs		(102,600)(110,248)(100,765)
Accounts payable(2,604)2,629 12,276 
Accrued compensation and related liabilities113,769 (26,476)15,321 
Accrued liabilities and other(6,735)49,906 30,910 
Income taxes, current(49,150)34,498 11,886 
Net cash provided by operating activities1,360,740 1,291,483 1,067,862 
Cash flows from investing activities:   
Capital expenditures(143,470)(230,289)(276,719)
Purchase of marketable securities and investments(4,299)(10,031)(17,841)
Proceeds from sale of operating assets, net of cash disposed31,705 13,300 3,200 
Proceeds from sale of a cost method investment0 0 73,342 
Acquisitions of businesses, net of cash acquired(10,038)(53,720)(9,813)
Other, net(11,113)(4,658)(7,807)
Net cash used in investing activities(137,215)(285,398)(235,638)
Cash flows from financing activities:   
(Payments) issuance of commercial paper, net0 (112,500)112,500 
Proceeds from issuance of debt0 0 200,000 
Repayment of debt0 (200,000)0 
Proceeds from exercise of stock-based compensation awards129,957 90,519 65,371 
Dividends paid(451,327)(267,956)(220,764)
Repurchase of common stock(554,121)(464,518)(1,016,300)
Other, net(4,377)(752)(14,112)
Net cash used in financing activities(879,868)(955,207)(873,305)
Effect of exchange rate changes on cash and cash equivalents4,581 (2,121)(998)
Net increase (decrease) in cash and cash equivalents348,238 48,757 (42,079)
Cash and cash equivalents at beginning of year145,402 96,645 138,724 
Cash and cash equivalents at end of year$493,640 $145,402 $96,645 

See accompanying notes.

39


Notes to Consolidated Financial Statements

Note 1.  Significant Accounting Policies
Business description.  Cintas Corporation (collectively with its majority-owned subsidiaries and any entities over which it has control, Cintas, Company, we, us or our) helps more than one million1000000 businesses of all types and sizes, primarily in North America,the United States (U.S.), as well as Canada and Latin America, Europe and Asia, get Ready™READY™ to open their doors with confidence every day by providing a wide range of products and services that enhance our customers’ image and help keep their facilities and employees clean, safe and looking their best. With products and services including uniforms, floor care,mats, mops, restroom supplies, first aid and safety products, fire extinguishers and testing, and safety and compliance training, Cintas helps customers get Ready for the Workday™Workday®. Cintas is also the creator of the Total Clean Program™ — a first-of-its-kind service that includes scheduled delivery of essential cleaning supplies, hygienically clean laundering, and sanitizing and disinfecting projects and services.


Cintas’ reportable operating segments are the Uniform Rental and Facility Services operating segment and the First Aid and Safety Services.Services operating segment. The Uniform Rental and Facility Services reportable operating segment, consists of the rental and servicing of uniforms and other garments including flame resistant clothing, mats, mops and shop towels and other ancillary items. In addition to these rental items, restroom cleaning services and supplies carpet and tile cleaning services and the sale of items from our catalogs to our customers on route are included within this reportable operating segment. The First Aid and Safety Services reportable operating segment consists of first aid and safety products and services. The remainder of Cintas’ business,operating segments, which consists of the Fire Protection Services operating segment and itsthe Uniform Direct Sale business, isoperating segment, are included in All Other. Cintas evaluates operating segment performance based on revenue and income before income taxes. Revenue and income before income taxes for each of these reportable operating segments for the years ended May 31, 2019, 20182021, 2020 and 20172019 are presented in Note 1514 entitled Operating Segment Information. The Company regularly reviews its operating segments for reporting purposes based on the information its chief operating decision maker (CODM) regularly reviews for purposes of allocating resources and assessing performance and makes changes when appropriate.


OnIn December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China, and has since spread globally. In March 21, 2017, Cintas completed2020, the acquisitionWorld Health Organization characterized COVID-19 as a pandemic. Efforts to contain the spread of G&K Services, Inc. (G&K). G&K is a wholly-owned subsidiary of Cintas that operatesCOVID-19 intensified during our fiscal 2020 fourth quarter and have remained in effect throughout our fiscal 2021. Most states and municipalities within the Uniform RentalU.S., as well as Canada, enacted temporary closures of businesses, issued quarantine orders and Facility Services operating segment. In fiscal 2018, Cintas sold a significant business referred to as "Discontinued Services." Priortook other restrictive measures in response to the saleCOVID-19 pandemic. Many of Discontinued Services, the operations were primarily includedbusiness closures, quarantine orders and other restrictive measures remained in All Otherplace through fiscal 2021. Within the U.S., our business was designated an essential business, which allowed us to continue to serve customers that remained open. In these consolidated financial statements and classified as held for sale. In accordance withrelated disclosures, we have assessed the applicable accounting guidance for the disposalcurrent impact of long-lived assets and discontinued operations, theCOVID-19 on our consolidated financial condition, results of Discontinued Services have been excluded from both continuing operations, and operating segmentcash flows, as well as our estimates and accounting policies. We have made additional disclosures of these assessments, as necessary. The impact of the COVID-19 pandemic is fluid and continues to evolve, and therefore, we cannot predict the extent to which our business, consolidated results for all periods presented. See Note 17 entitled Discontinued Operations for additional information.of operations, consolidated financial condition or liquidity will ultimately be impacted.


Principles of consolidation.  The consolidated financial statements include the accounts of Cintas controlled majority-owned subsidiaries and any entities over which Cintas has control. Intercompany balances and transactions have been eliminated as appropriate.


Use of estimates.  The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principlesgenerally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company’s results are affected by economic, political, legislative, regulatory and legal actions. Economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies, government policies surrounding the containment of COVID-19 and changes in the prices of raw materials, can have a significant effect on operations. These factors and other events couldmay cause actual results to differ from management's estimates.

40

Revenue recognition.  Rental revenue, which is recorded in the Uniform Rental and Facility Services reportable operating segment, is recognized when services are performed.performed or the performance obligation under the terms of a contract with a customer are satisfied. 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. See Note 2 entitled Revenue Recognition.


Cost of uniform rental and facility services.  Cost of uniform rental and facility services consists primarily of production expenses, delivery expenses and the amortization of in service inventory, including uniforms, mats, shop towels and other ancillary items. The Uniform Rental and Facility Services reportable operating segment inbound


freight charges, purchasing and receiving costs, inspection costs, warehousing costs and other costs of distribution are included in the cost of uniform rental and facility services.


Cost of other.  Cost of other consists primarily of cost of goods sold (predominantly first aid and safety products, uniforms and fire protection products), delivery expenses and distribution expenses in the First Aid and Safety Services reportable operating segment and All Other. Cost of other includes inbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs and other costs of distribution.


Selling and administrative expenses.  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 has had on the economic environment in North America and the ongoing uncertainty regarding the severity and duration of the pandemic, Cintas initiated certain activities to reduce operating costs and better align its workforce with the needs of its ongoing business. During the fourth quarter of fiscal 2020, Cintas recorded a total of $24.5 million in employee termination costs, 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. The related liability balance was $0.0 million at May 31, 2021 and was $10.2 million at May 31, 2020. The May 31, 2020 liability balance was recorded in accrued compensation and related liabilities on the consolidated balance sheets. Cintas did 0t record employee termination costs during fiscal 2021.


G&K transaction andServices, Inc. integration expenses. As a result of the acquisition of G&K Services, Inc. (G&K) in fiscal 2017, the Company incurred various transaction and integration expenses in fiscal 2019, 2018 and 2017, which related primarily to facility closure expenses. No such costs were incurred in fiscal 2021 or 2020. The integration expenses asset impairment charges, legalfor fiscal 2019 are included in a single line in the consolidated statements of income and professional fees, employee termination expenses, the write-off of excess inventory and other miscellaneous expenses. See are reported by operating segment in Note 1814 entitled G&K Services, Inc. Transaction and Integration Expenses.Operating Segment Information.


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, 20192021 and 2018,2020, cash and cash equivalents includes $31.4$31.8 million and $30.9 million, respectively, of restricted cash used as collateral associated with the generalour insurance program.reserve.


Marketable securities.  Marketable securities are typically comprised of fixed income securities and are classified as available-for-sale.

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. The allowance isincludes both an estimate, based on historical rates of collections, and allowancesreserves for specific accounts identified as uncollectible. The portion of the allowance that is an estimate based on Cintas' historical rates of collections is recorded for overdue amounts, beginning with a nominal percentage when the account is current and increasing substantially as the account ages. The 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. As of May 31, 2020, in response to the economic disruption created by the COVID-19 pandemic, Cintas performed an additional evaluation of amounts due from customers in every operating segment that were deemed to be higher collection risk. This evaluation, which occurred in the fourth quarter of fiscal 2020, resulted in an allowance for doubtful accounts in excess of historical rates. The judgment applied to increase the allowance for doubtful accounts beyond our historical policy was deemed to be reasonable and supportable based on the data available as of the consolidated balance sheet date. Certain of the corresponding trade receivables were collected during fiscal 2021, and $14.2 million of incremental allowance for doubtful accounts recorded as of May 31, 2020 was reversed through selling and administrative expenses as the Company's estimates and assumptions related to the impact of COVID-19 changed
41

during fiscal 2021. As of May 31, 2021, no incremental allowance for doubtful accounts was deemed necessary. When an account is considered uncollectible, it is written off against the allowance for doubtful accounts.


Inventories, net.   Inventories are valued at the lower of cost (first-in, first-out) or net realizable value. Cintas applies a commonly accepted practice of using inventory turns to apply variances between actual and standard costs to the inventory balances. The judgments and estimates used to calculate inventory turns will have an impact on the valuation of inventories at the lower of cost or net realizable value. Inventory is comprised of the following amounts at May 31:
(In thousands)2019 2018(In thousands)20212020
   
Raw materials$17,812
 $17,042
Raw materials$15,109 $18,661 
Work in process28,820
 27,350
Work in process37,664 29,497 
Finished goods287,957
 235,955
Finished goods429,024 360,740 
$334,589
 $280,347
$481,797 $408,898 
Inventories are recorded net of reserves for obsolete inventory (excess and slow-moving) of $32.7$111.0 million and $37.0$45.5 million at May 31, 20192021 and 2018,2020, respectively. 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, 2021 and 2020. As of May 31, 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 an increase to the obsolescence reserve of $43.6 million as of May 31, 2021, in comparison to May 31, 2020. As of May 31, 2020, an incremental obsolescence reserve was recorded within our Uniform Direct Sales operating segment due to larger quantities of inventory remaining on hand, at the consolidated balance sheet date, as a result of disruption created by the onset of the COVID-19 pandemic. Obsolete inventory reserves are recorded in selling and administrative expenses on the consolidated statements of income. The judgment applied to increase the obsolete inventory reserve as of May 31, 2021 and 2020, beyond our historical policy was deemed to be reasonable and supportable based on the data available as of the consolidated balance sheet dates. Once a specific inventory item is written down to the lower of cost or net realizable value, a new cost basis has been established, and that inventory item cannot subsequently be marked up.


Uniforms and other rental items in service.  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. 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.



Property and equipment.   Property and equipment is stated at cost, less accumulated depreciation or at fair value upon acquisition. Depreciation is calculated using the straight-line method primarily over the following estimated useful lives of the assets based on industry and Cintas specific experience, in years:
experience:
Years
Buildings30 to 40
Building improvements5 to 20
Equipment3 to 10
Leasehold improvements2 to 15


When events or circumstances indicate that the carrying amount of long-lived assets may not be recoverable, the estimated undiscounted future cash flows are compared to the carrying amount of the assets. If the estimated undiscounted future cash flows are less than the carrying amount of the assets, an impairment loss is recorded based on the excess of the carrying amount of the assets over their respective fair values. Fair value is generally determined by discounted cash flows, prices of similar assets or third-party real estate valuations, as appropriate. As a result of certain activities to eliminate excess capacity and reduce our cost structure in response to COVID-19, 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. 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 both fiscal years were based on the excess of the carrying amount of
42

asset over their respective fair values. The long-lived asset impairment charge was 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, 2019.

Investments. Investments consists primarily of the cash surrender value of life insurance policies and equity method investments. The equity method is used to account for an investment if our investment gives us the ability to exercise significant influence over the operating and financial policies of the investee. In general, equity method investments are initially measured at cost. Cintas recognizes its share of the investee’s earnings or losses in income. Equity method investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable.


Long-lived assets.  When events or circumstances indicate that the carrying amount of long-lived assets may not be recoverable, the estimated undiscounted future cash flows are compared to the carrying amount of the assets. If the estimated undiscounted future cash flows are less than the carrying amount of the assets, an impairment loss is recorded based on the excess of the carrying amount of the assets over their respective fair values. Fair value is generally determined by discounted cash flows, prices of similar assets or third-party real estate valuations, as appropriate. Cintas did not identify any indicators of impairment for the fiscal years ended May 31, 2019 and 2018.

Goodwill.  Goodwill, obtained through acquisitions of businesses, is valued at cost less any impairment. Cintas completes an annual impairment test, that includes an assessment of qualitative factors including, but not limited to, macroeconomic conditions, industry and market conditions, and entity specific factors such as strategies and financial performance. We test for goodwill impairment at the reporting unit level. Cintas has identified four4 reporting units for purposes of evaluating goodwill impairment: Uniform Rental and Facility Services, First Aid and Safety Services and two reporting units within All Other. The Company evaluated impairment indicators for all reporting units and noted none. Based on the results of the annual impairment tests, Cintas was not required to recognize an impairment of goodwill for the fiscal years ended May 31, 2019, 20182021, 2020 or 2017.2019. Cintas will continue to perform impairment tests as of March 1 in future years and when indicators of impairment exist.


Service contracts and other assets.  Service contracts and other assets, which consist primarily of capitalized contract costs and noncompete and consulting agreements obtained through acquisitions of businesses, are generally amortized by use of the straight-line method over the estimated lives of the agreements, which are generally 5 to 10 years. The G&K service contract asset is being amortized over a period of 15 years, which represents the estimated life of the economic benefit. The G&K service contract asset amortization is based on the annual economic value of the underlying asset which generally decreases over the 15-year term. Certain noncompete agreements, as well as all service contracts, require that a valuation be determined using a discounted cash flow model. The assumptions and judgments used in these models involve estimates of cash flows and discount rates, among other factors. Because of the assumptions used to value these intangible assets, actual results over time could vary from original estimates. Impairment of service contracts and other assets is accomplished through specific identification. NoNaN impairment has been recognized by Cintas for the fiscal years ended May 31, 2019, 20182021, 2020 and 2017.2019.


Business Combinations. Accounting for acquisitions requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement.  As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of income.

Debt Issuance Costs. 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.



Accrued liabilities.  Current accrued liabilities are recorded when it is probable that a liability has occurred and the amount of the liability can be reasonably estimated. Current accrued liabilities consist of the following at May 31:
(In thousands)20212020
Insurance reserve$156,447 $165,427 
Employee benefit related liabilities129,348 134,846 
Dividends79,135 0 
Accrued interest24,420 24,538 
Other129,560 131,842 
$518,910 $456,653 

Long-term accrued liabilities consist primarily of retirement obligations, which are described in more detail in Note 10 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.
43

(In thousands)2019 2018
    
General insurance liabilities$165,667
 $163,400
Employee benefit related liabilities123,794
 112,801
Taxes and related liabilities7,716
 8,148
Accrued interest24,687
 24,763
Other112,076
 111,017
 $433,940
 $420,129

GeneralInsurance reserve. The insurance liabilities representreserve represents the estimated ultimate cost of all asserted and unasserted claims incurred, primarily related to workers' compensation, auto liability and other general liability exposure through the consolidated balance sheet dates. Our reserves areincurred but not reported reserve is estimated through actuarial procedures, with the assistance of third-party actuarial specialists, of the insurance industry and by using industry assumptions, adjusted for specific expectations based on our claims history. Cintas records an increase or decrease in selling and administrative expenses related to development of prior claims, higher claims activity and other environmental factors in the period in which it becomes known. These changes in estimates may be material to the consolidated financial statements.


Long-term accrued liabilities consist primarily of retirement obligations, which are described in more detail in Note 11 entitled Employee Benefit Plans, reserves associated with unrecognized tax benefits, which are described in more detail in Note 9 entitled Income Taxes and environmental obligations acquired primarily through the G&K acquisition, which are further described below.

Environmental Obligations.obligations. Environmental obligations, including obligations obtained through past business acquisitions, are recorded when it is probable that obligations have been incurred and the costs can be reasonably estimated. Cintas’ environmental obligations are estimated based on an evaluation of various factors, including currently available facts, existing technology, presently enacted laws and regulations, and remediation experience. Where the available information is sufficient to estimate the amount of the obligation, that estimate has been recorded. Where the information is only sufficient to establish a range of probable liability and no point within the range is more likely than any other, the lower end of the range has been used. Management actively monitors all locations for compliance and changes in facts and circumstances. No one location or site is deemed to be material or in violation of the applicable laws and regulations, even though costs are being incurred. Costs estimated for environmental obligations are not discounted to their present value.


Pension Plans.plans. The Company assumed G&K's noncontributory, defined benefit pension plan (the Pension Plan) covering substantially all employees who were employed as of July 1, 2005, except certain employees who are covered by union-administered plans. Benefits are based on the number of years of service and each employee's compensation near retirement. G&K froze the Pension Plan effective December 31, 2006. Future growth in benefits will not occur after this date. The Company's funding policy provides for contributions of an amount between the minimum required and maximum amount that can be deducted for federal income tax purposes. The funded status is measured as the difference between the fair value of plan assets and the benefit obligation at May 31, the measurement date. The benefit obligation is the projected benefit obligation (PBO). The PBO represents the actuarial present value of benefits expected to be paid upon retirement based on estimated future compensation levels. The measurement of the PBO is based on the Company’s estimates and actuarial valuations. 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. 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. We determine the expected return on assets using the fair value of plan assets. See Note 10 entitled Employee Benefit Plans.


Stock-based compensation.  Compensation expense is recognized for all share-based payments to employees, including stock options and restricted stock awards, in the consolidated statements of income based on the fair value of the awards that are granted. The fair value of stock options is estimated at the date of grant using the Black-Scholes


option-pricing model. Generally, measured compensation cost, net of actual forfeitures, is recognized on a straight-line basis over the vesting period of the related share-based compensation award. See Note 12 entitled Stock-Based Compensation.


Derivatives and hedging activities.  Cintas formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. Derivatives are recorded at fair value on the consolidated balance sheet, and gains and losses are recorded as adjustments to income or other comprehensive income, as appropriate. For derivative financial instruments that are designated as a hedge, unrealized gains and losses related to the effective portion are either recognized in income immediately to offset the realized gain or loss on the hedged item, or are deferred and reported as a component of other comprehensive income (loss) in stockholders'shareholders' equity and subsequently recognized in net income when the hedged item affects net income.


Income taxes. The provision for income taxes includes taxes paid, currently payable or receivable and those deferred. Deferred tax assets and liabilities are determined by the differences between the consolidated financial statement carrying amounts and the tax basis of assets and liabilities. Therefore, the Company has not recorded deferred taxes for basis differences expected to reverse in future periods. Cintas accounts for Global Intangible
44

Low-Taxed Income (GILTI) as a current-period expense when incurred. See Note 9 entitled Income Taxes for the types of items that give rise to significant deferred income tax assets and liabilities. Deferred income taxes are classified as assets or liabilities based on the classification of the related asset or liability for financial reporting purposes. Cintas regularly reviews deferred tax assets for recoverability based upon projected future taxable income and the expected timing of the reversals of existing temporary differences. Although realization is not assured, management believes it is more likely than not that the recorded deferred tax assets, as adjusted for valuation allowances, will be realized.


Accounting for uncertain tax positions requires the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Companies may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.


Cintas is periodically reviewed by domestic and foreign tax authorities regarding the amount of taxes due. These reviews include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposure associated with various filing positions, Cintas records reserves as deemed appropriate. Based on Cintas' evaluation of current tax positions, Cintas believes its tax related accruals are appropriate.


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. U.S. 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.


Fair value measurements. Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk. It also establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1 —Quoted prices in active markets for identical assets or liabilities.
Level 2 —Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 —Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.



In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Cintas' assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no transfers between levels for the years ended May 31, 20192021 or 2018.2020. The carrying value of accounts receivable and accounts payable, and other current assets and liabilities, approximate fair value because of the short-term maturity of those instruments.

In order to meet the requirements of ASC 820, Cintas utilizes two basic valuation approaches to determine the fair value of its assets and liabilities required to be recorded on a recurring basis at fair value. The first approach is the cost approach. The cost approach is generally the value a market participant would expect to replace the respective
45

asset or liability. The second approach is the market approach. The market approach looks at what a market participant would consider valuing an exact or similar asset or liability to that of Cintas, including those traded on exchanges.


Cintas' non-financial assets and liabilities not permitted or required to be measured at fair value on a recurring basis primarily relate to assets revalued in an impairment analysis and to assets and liabilities acquired in a business acquisition unless otherwise noted in Note 3 entitled Fair Value Disclosures. Cintas is required to provide additional disclosures about fair value measurements as part of the consolidated financial statements for each major category of assets and liabilities measured at fair value on a non-recurring basis (including business acquisitions). Based on the nature of Cintas' business acquisitions, which occur regularly throughout the fiscal year, the majority of the assets acquired and liabilities assumed consist of working capital, primarily valued using Level 2 inputs, property and equipment, also primarily valued using Level 2 inputs and goodwill and other identified intangible assets valued using Level 3 inputs. In general, non-recurring fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities, which generally are not applicable to non-financial assets and liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as definitive sales agreements, appraisals or established market values of comparable assets. 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.


New accounting pronouncements. In May 2014,April 2019, the FASB issued Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers (Topic 606)," to clarify revenue recognition principles. This guidance is intended to improve disclosure requirements and enhance the comparability of revenue recognition practices. Improved disclosures under the amended guidance relate to the nature, amount, timing and uncertainty of revenue that is recognized from contracts with customers. We adopted ASU 2014-09, and all the related amendments, effective June 1, 2018 using the modified retrospective method. ASU 2014-09 requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Upon adoption of ASU 2014-09, we recorded an adjustment to the opening balance of retained earnings as of June 1, 2018. The adjustment to retained earnings primarily relates to the capitalization of certain direct and incremental contract costs required by the new guidance. Capitalized costs are amortized ratably over the anticipated period of benefit. We applied ASU 2014-09 only to contracts that were not completed prior to fiscal 2019. Results for reporting periods beginning after May 31, 2018 are presented under ASU 2014-09, while comparative prior period amounts have not been restated and continue to be presented under accounting standards in effect in those periods.

There were two implementation adjustments upon adoption of ASU 2014-09: (1) capitalization of certain direct and incremental contract costs and (2) the timing of revenue recognition for certain contracts with customers that create an asset with no alternative use to the Company and an enforceable right of payment from the customer upon termination. Adoption of ASU 2014-09 impacted the Company's previously reported results as of May 31, 2018 as follows:
Capitalization of Contract Costs. The Company has elected to apply the guidance, as a practical expedient, 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.


Assets With No Alternative Use.For our Uniform Direct Sale business, our revenue, prior to the adoption of ASU 2014-09, was primarily generated from the sale of finished products to customers as products are shipped and title passes to the customers. For certain contracts with customers, the Company creates an asset with no alternative use to the Company, and the Company has an enforceable right to payment for performance completed to date. For these contracts, we have moved from a point-in-time model to an over-time model in which our measure of progress is finished goods with no alternative use in accordance with the provisions of ASU 2014-09. We expect ASU 2014-09 will have no cash impact and will not affect the economics of our underlying customer contracts.
   
Impacts of Adopting
ASU 2014-09
  
(In thousands)
May 31,
2018
 
Capitalization of
Contract Costs
 
Assets With No
Alternative Use
 
June 1,
2018
        
Assets       
Accounts receivable, net$804,583
 $—
 $13,426
 $818,009
Inventories, net280,347
 —
 (11,265) 269,082
Prepaid expenses and other current assets32,383
 63,463
 —
 95,846
Total current assets1,977,932
 63,463
 2,161
 2,043,556
        
Other assets, net29,315
 187,503
 —
 216,818
        
Total assets$6,958,214
 $250,966
 $2,161
 $7,211,341
        
Liabilities and Shareholders' Equity       
Deferred income taxes$352,581
 $63,389
 $546
 $416,516
Total long-term liabilities3,165,831
 63,389
 546
 3,229,766
        
Retained earnings5,837,827
 187,577
 1,615
 6,027,019
Total shareholders' equity3,016,526
 187,577
 1,615
 3,205,718
        
Total liabilities and shareholders' equity$6,958,214
 $250,966
 $2,161
 $7,211,341
The impacts of adopting ASU 2014-09 on our fiscal 2019 consolidated financial statements are presented in the following tables:
 Fiscal year ended May 31, 2019
Consolidated Statement of Income
(In thousands)
As
Reported
 
Under Historical
Guidance
 
Impact of Adopting
ASU 2014-09
      
Revenue:     
Uniform rental and facility services$5,552,430
 $5,557,056
 $(4,626)
Other1,339,873
 1,337,954
 1,919
Total revenue6,892,303
 6,895,010
 (2,707)
      
Costs and expenses:     
Cost of other736,116
 735,703
 413
Selling and administrative expenses1,980,644
 2,006,134
 (25,490)
Operating income1,133,534
 1,111,164
 22,370
      
Income before income taxes1,102,399
 1,080,029
 22,370
Income taxes219,764
 214,306
 5,458
Income from continuing operations882,635
 865,723
 16,912
Net income$884,981
 $868,069
 $16,912
      
Diluted earnings per share$7.99
 $7.84
 $0.15


 As of May 31, 2019
Consolidated Balance Sheet
(In thousands)
As
Reported
 
Under Historical
Guidance
 
Impact of Adopting
ASU 2014-09
      
Assets     
Accounts receivable, net$910,120
 $894,301
 $15,819
Inventories, net334,589
 346,267
 (11,678)
Income taxes, current7,475
 7,904
 (429)
Prepaid expenses and other current assets103,318
 33,759
 69,559
Total current assets2,236,280
 2,163,009
 73,271
      
Other assets, net240,315
 38,518
 201,797
      
Total assets$7,436,662
 $7,161,594
 $275,068
      
Liabilities and Shareholders' Equity     
Long-term liabilities:     
Deferred income taxes$438,179
 $369,215
 $68,964
Total long-term liabilities3,306,208
 3,237,244
 68,964
      
Retained earnings6,691,236
 6,485,132
 206,104
Total shareholders' equity3,002,721
 2,796,617
 206,104
      
Total liabilities and shareholders' equity$7,436,662
 $7,161,594
 $275,068
The adoption of ASU 2014-09 had no impact to the Company's fiscal 2019 operating cash flow, and the only impact of the adoption on our fiscal 2019 consolidated statement of comprehensive income was the impact to net income as presented in the table above.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” as amended. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Topic 842 provides a number of optional practical expedients in transition, and we have determined to use certain of these practical expedients. The Company plans to elect the package of practical expedients permitted under Topic 842, which allows a lessee to carryforward their population of existing leases, the classification of each lease, as well as the treatment of initial direct costs as of the period of adoption. The Company also plans to elect the practical expedient related to lease and non-lease components, as an accounting policy election for all asset classes, which allows a lessee to not separate non-lease from lease components and instead account for consideration paid in a contract as a single lease component. In addition, the Company plans to elect the short-term lease recognition exemption for all leases with a term of 12 months or less, which means it will not recognize right-of-use assets or lease liabilities for these leases. The Company does not expect to elect the use-of-hindsight practical expedient. This guidance will be adopted by the Company on June 1, 2019. In accordance with Topic 842, a registrant can elect not to present comparative financial information under Topic 842 if it recognizes a cumulative-effect adjustment to retained earnings upon adoption. The Company intends to make this transition election. The Company has implemented a new lease system in connection with the adoption of Topic 842. The majority of our lease spend relates to certain real estate with the remaining lease spend primarily related to vehicles and equipment. Based on the Company's portfolio of leases at May 31, 2019, approximately $160.0 million to $185.0 million of lease assets and liabilities will be recognized on the balance sheet upon adoption. We do not expect a material impact on the consolidated statements of income or consolidated statements of cash flows. The Company is substantially complete with its implementation efforts.

In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” ASU 2016-15 makes eight targeted changes to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company’s adoption of this standard on June 1, 2018 did not have a material impact on its consolidated statements of cash flows.



In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates the two-step process that required identification of potential impairment and a separate measure of the actual impairment. Goodwill impairment charges, if any, would be determined by the difference between a reporting unit's carrying value and its fair value (impairment loss is limited to the carrying value). This standard is effective for annual or any interim goodwill impairment tests beginning after December 15, 2019. The adoption of this standard is not expected to have a material impact on the consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs.” ASU 2017-07 continues to require the service component of pension and other postretirement benefit costs to be presented in the same line item as other employee compensation costs on the consolidated statement of income and changes the presentation of other components of net benefit cost so that these items will be presented outside of operating income within the consolidated statements of income. Cintas retrospectively adopted ASU 2017-07 on June 1, 2017. The adoption of this standard did not have a material effect on the consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. Among other amendments, the update allows entities to designate the variability in cash flows attributable to changes in a contractually specified component stated in the contract as the hedged risk in a cash flow hedge of a forecasted purchase or sale of a nonfinancial asset. This standard is effective for annual periods beginning after December 15, 2018. We adopted the standard effective as of June 1, 2018, and the effect of adoption of this standard did not have a material impact to our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." ASU 2018-02 allows entities to elect to reclassify the income tax effects of the Tax Cuts and Jobs Act (Tax Act) on items within accumulated other comprehensive income to retained earnings and requires additional related disclosures. This standard is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Cintas is currently evaluating the impact that ASU 2018-02 will have on its consolidated financial statements.

In April 2019, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 will replacereplaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In connection with recognizing credit losses on receivablesaccounts receivable and other financial instruments, Cintas will be required to usenow uses a forward-looking expected loss model rather than the incurred loss model. This standard is effective for annual periods beginning after December 15, 2019, with early adoption permitted. The adoptionAdoption of this standard will beASU 2016-13 requires using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date.date to align existing credit loss methodology with the new standard. This standard was adopted by Cintas is currently evaluatingon June 1, 2020 and did not have a material impact on the impact that ASU 2016-13 will have on itsCompany's consolidated financial statements.


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


Note 2.  Revenue Recognition
The following table presents Cintas' total revenue disaggregated by service typeoperating segment for the fiscal years ended May 31:
(In thousands)202120202019
Uniform Rental and Facility
   Services		$5,689,632 80.0 %$5,643,494 79.6 %$5,552,430 80.6 %
First Aid and Safety Services784,291 11.0 %708,569 10.0 %619,470 9.0 %
Fire Protection Services446,441 6.3 %422,688 6.0 %405,467 5.9 %
Uniform Direct Sales195,976 2.7 %310,369 4.4 %314,936 4.5 %
Total revenue$7,116,340 100.0 %$7,085,120 100.0 %$6,892,303 100.0 %
 2019 2018 2017
(In thousands)Revenue% Revenue% Revenue%
         
Uniform Rental and Facility Services$5,552,430
80.6% $5,247,124
81.0% $4,202,490
78.9%
First Aid and Safety Services619,470
9.0% 564,706
8.7% 508,233
9.5%
Fire Protection Services405,467
5.9% 349,968
5.4% 311,445
5.9%
Uniform Direct Sales314,936
4.5% 314,834
4.9% 301,213
5.7%
Total revenue$6,892,303
100.0% $6,476,632
100.0% $5,323,381
100.0%




For the fiscal years ended May 31, 2019, 2018 and 2017, the percentage of revenue recognized over time as the services are performed was 95.6%, 95.4% and 94.9% respectively, of Uniform Rental and Facility Services revenue, 90.5%, 90.5% and 90.6%, respectively, of First Aid and Safety Services revenue and 100.0% for all fiscal years, of Fire Protection Services revenue. During the same periods, the Uniform Direct Sales business unit recognized 96.5%, 96.9% and 96.9%, respectively, of revenue at a point in time, which generally occurs when the goods are transferred to the customer. Fire Protection Services and Uniform Direct Sales operating segments are recordedincluded within the All Other reportable segmentas disclosed in Note 1514 entitled Operating Segment Information.


Revenue Recognition Policy
More thanApproximately 95% of the Company's revenues are derived from fees for route servicing of Uniform Rental and Facility Services, First Aid and Safety Services and Fire Protection Services, performed by a Cintas employee-partner, at the customer's location of business. RevenuesRevenue from our route servicing customer contracts represent a single-performance obligation. The Company recognizes these revenuesrevenue over time as services are performed based on the nature of services provided and contractual rates (input(output method). or at a point in time when the performance
46

obligation under the terms of the contract with a customer are satisfied, at the customer's location of business. The Company's remaining revenues,revenue, primarily within the Uniform Direct Sales operating segment, and representing less thanapproximately 5% of the Company's total revenues, arerevenue, is recognized when the obligations under the terms of a contract with a customer are satisfied. This generally occurs when the goods are transferred to the customer.


Revenue recorded is presented net of sales and other taxes we collect on behalf of governmental authorities. Shipping and handling costs charged to customers are treated as fulfillment activities and are recorded in both revenue and cost of sales at the time control is transferred to the customer. Certain of our customer contracts primarily within our Uniform Direct Sales business, 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. When determining if variable consideration should be constrained, the Company considers whether factors outside its control could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal. The Company's performance period generally corresponds with the monthly invoice period. No constraints on our revenue recognition were applied during the yearfiscal years ended May 31, 2021, 2020 or 2019. 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 sheet.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.ASU 2014-08, "Revenue from Contracts with Customers (Topic 606)." These assets are included in other assets, net on the consolidated balance sheet.sheets.


Additionally, in accordance with ASCTopic 606, certain Uniform Direct Sales operating segment customer contracts contain a provision with an enforceable right of payment and the underlying product has no alternative use to Cintas. Consequently, when both aforementioned provisions are prevalent in a customer contract, the revenue is recorded for finished goods that the customer is obligated to purchase under the termination terms of the contract.


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 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 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. The deferred commissions are amortized on a straight-line basis over the expected period of benefit. We review the deferred commission balances for impairment on an ongoing basis. Deferred commissions are classified as current or noncurrent based on the timing of when we expect to recognize the expense. 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 balance sheets. As of May 31, 2019,2021 the current and noncurrent assets related to deferred commissions totaled $69.6$79.4 million and $206.0$227.1 million, respectively. As of May 31, 2020 the current and noncurrent assets related to deferred commissions totaled $76.2 million and $227.1 million, respectively. We recorded amortization expense related to deferred commissions of $83.1 million, $77.8 million and $71.1 million during the fiscal yearyears ended May 31, 2019.2021, 2020 and 2019, respectively. These expenses are classified in selling and administrative expenseexpenses on the consolidated statements of income.




47

Note 3.  Fair Value Disclosures
All financial instruments that are measured at fair value on a recurring basis (at least annually) have been classified intowithin 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:
As of May 31, 2021
(In thousands)Level 1Level 2Level 3Fair Value
Cash and cash equivalents$493,640 $0 $0 $493,640 
Other assets, net:
Interest rate lock agreements0 40,400 0 40,400 
Total assets at fair value$493,640 $40,400 $0 $534,040 
Long-term accrued liabilities:
  Interest rate lock agreements$0 $61,567 $0 $61,567 
Total liabilities at fair value$0 $61,567 $0 $61,567 
 As of May 31, 2019
(In thousands)Level 1 Level 2 Level 3 Fair Value
        
Cash and cash equivalents$96,645
 $—
 $—
 $96,645
Total assets at fair value$96,645
 $—
 $—
 $96,645
        
Long-term accrued liabilities:       
  Interest rate lock agreements$—
 $36,393
 $—
 $36,393
Total liabilities at fair value$—
 $36,393
 $—
 $36,393

As of May 31, 2020
(In thousands)Level 1Level 2Level 3Fair Value
Cash and cash equivalents$145,402 $0 $0 $145,402 
Other assets, net:
Interest rate lock agreements0 1,546 0 1,546 
Total assets at fair value$145,402 $1,546 $0 $146,948 
Long-term accrued liabilities:
  Interest rate lock agreements$0 $165,686 $0 $165,686 
Total liabilities at fair value$0 $165,686 $0 $165,686 
 As of May 31, 2018
(In thousands)Level 1 Level 2 Level 3 Fair Value
        
Cash and cash equivalents$138,724
 $—
 $—
 $138,724
Total assets at fair value$138,724
 $—
 $—
 $138,724


Cintas' cash and cash equivalents and marketable securities are generally classified within Level 1 or Level 2 of the fair value hierarchy. Financial instruments classified as Level 1 are based on quoted market prices in active markets, and financial instruments classified as Level 2 are based on quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. The types of financial instruments Cintas classifies within Level 1 include most bank deposits and money market securities. Cintas does not adjust the quoted market price for such financial instruments.


Interest, realized gains and losses and declines in value determined to be other than temporary on available-for-sale securities are included in interest income or expense. The cost of the securities sold is based on the specific identification method. There were no outstanding marketable securities as of May 31, 2019 or 2018. There were no purchases of marketable securities for the fiscal year ended May 31, 2019. For the fiscal years ended May 31, 2018 and 2017, purchases of marketable securities were $143.9 million and $171.3 million, respectively.

As of May 31, 2019, long-term accrued liabilities included the fair valuevalues of outstanding interest rate lock agreements.agreements are included in other assets, net and long-term accrued liabilities at both May 31, 2021 and 2020. The fair values of Cintas' interest rate lock agreements are based on similar exchange traded derivatives (market approach) and are, therefore, included within Level 2 of the fair value hierarchy. The fair value was determined by comparing the locked rates against the benchmarked treasury rate. AllNo other amounts included in other asset, net or long-term accrued liabilities are not recorded at fair value.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. GAAP. The assets and liabilities measured at fair value on a nonrecurring basis primarily relate to assets revalued in an impairment analysis and assets and liabilities acquired in a business acquisition.




48

Note 4.  Property and Equipment
Cintas' property and equipment is summarized as follows at May 31:
(In thousands)20212020
Land$190,711 $188,720 
Buildings and improvements698,094 682,768 
Equipment2,409,785 2,347,636 
Leasehold improvements38,320 40,188 
Construction in progress36,749 54,548 
3,373,659 3,313,860 
Accumulated depreciation(2,055,221)(1,910,795)
Property and equipment, net$1,318,438 $1,403,065 
(In thousands)2019 2018
    
Land$189,828
 $177,281
Buildings and improvements684,699
 644,322
Equipment2,207,481
 2,070,009
Leasehold improvements43,227
 34,891
Construction in progress67,129
 119,937
 3,192,364
 3,046,440
Less: accumulated depreciation1,761,679
 1,663,710
    
Property and equipment, net$1,430,685
 $1,382,730


Interest expense is net of capitalized interest of $0.7 million, $1.0 million and $2.1 million for the fiscal years ended May 31, 2019, 2018 and 2017, respectively. Cintas capitalizes certain expenditures for software that are purchased or internally developed for use in business. Included in equipment at May 31, 20192021 and 20182020, were $259.5$283.8 million and $253.8$273.0 million, respectively, of internal use software. DepreciationAmortization of internal use software begins when the software is ready for service and continues on the straight-line method over the estimated useful life, generally 10 years. Accumulated depreciationamortization related to internal use software was $110.2$154.1 million and $88.8$131.7 million at May 31, 2021 and 2020, respectively. We recorded amortization expense related to internal use software of $22.3 million, $21.5 million and $21.6 million for the fiscal years ended May 31, 2021, 2020 and 2019, respectively. These expenses are classified in selling and 2018, respectively.administrative expenses on the consolidated statements of income.


Note 5.  Investments
Investments atAt May 31, 2019 of $192.32021, investments were $274.6 million and include the cash surrender value of insurance policies of $170.5$252.1 million, equity method investments of $18.6$19.4 million and cost method investments of $3.2$3.1 million. Investments atAt May 31, 2018 of $175.62020, investments were $214.8 million and include the cash surrender value of insurance policies of $154.0$192.7 million, equity method investments of $16.4$19.0 million and cost method investments of $5.2$3.1 million. Investments are evaluated for impairment on an annual basis or when indicators of impairment exist. For fiscal years 2021, 2020 and 2019, 2018 and 2017, no0 impairment losses due to impairment were recorded.


During fiscal 2019, Cintas sold a cost method investment to a third party. Proceeds from the sale were $73.3 million, which resulted in a pre-tax gain of $69.4 million.

Note 6.  Goodwill, Service Contracts and Other Assets
Changes in the carrying amount of goodwill and service contracts by reportable operating segment and All Other, are presented in the following tables:
Goodwill
(In thousands)
Uniform Rental
and Facility
Services		First Aid
 and Safety
 Services		All
Other		Total
Balance at June 1, 2019$2,496,402 $243,459 $102,580 $2,842,441 
Goodwill acquired21,081 164 11,137 32,382 
Foreign currency translation(4,442)(357)(4)(4,803)
Balance at May 31, 20202,513,041 243,266 113,713 2,870,020 
Goodwill acquired1,568 2,545 3,161 7,274 
Foreign currency translation32,901 2,760 114 35,775 
Balance at May 31, 2021$2,547,510 $248,571 $116,988 $2,913,069 

49

Goodwill (in thousands)
Uniform Rental
and Facility
Services
 
First Aid
 and Safety
 Services
 
All
Other
 Total
        
Balance at June 1, 2017$2,448,070
 $243,112
 $91,153
 $2,782,335
Goodwill acquired (1)
55,152
 370
 5,939
 61,461
Foreign currency translation2,254
 797
 41
 3,092
Balance at May 31, 20182,505,476
 244,279
 97,133
 2,846,888
Goodwill acquired1,153
 —
 5,484
 6,637
Foreign currency translation(10,227) (820) (37) (11,084)
Balance at May 31, 2019$2,496,402
 $243,459
 $102,580
 $2,842,441
(1)
Adjustments to the G&K preliminary purchase price allocation represents $52.7 million of the acquired goodwill in fiscal 2018 in the Uniform Rental and Facility Services reportable operating segment.

Service Contracts
(In thousands)
Uniform Rental
and Facility
Services		First Aid
 and Safety
 Services		All
Other		Total
Balance at June 1, 2019$445,016 $23,380 $26,199 $494,595 
Service contracts acquired11,058 325 3,288 14,671 
Service contracts amortization(47,070)(3,877)(5,374)(56,321)
Foreign currency translation(1,393)(23)0 (1,416)
Balance at May 31, 2020407,611 19,805 24,113 451,529 
Service contracts acquired2,369 2,132 1,736 6,237 
Service contracts amortization(49,016)(3,912)(4,839)(57,767)
Foreign currency translation8,177 269 0 8,446 
Balance at May 31, 2021$369,141 $18,294 $21,010 $408,445 

Service Contracts (in thousands)
Uniform Rental
and Facility
Services
 
First Aid
 and Safety
 Services
 
All
Other
 Total
        
Balance at June 1, 2017$529,923
 $30,062
 $27,003
 $586,988
Service contracts acquired4,098
 985
 4,310
 9,393
Service contracts amortization(45,296) (3,842) (4,906) (54,044)
Foreign currency translation3,342
 89
 —
 3,431
Balance at May 31, 2018492,067
 27,294
 26,407
 545,768
Service contracts acquired2,864
 14
 5,186
 8,064
Service contracts amortization(46,943) (3,853) (5,394) (56,190)
Foreign currency translation(2,972) (75) —
 (3,047)
Balance at May 31, 2019$445,016
 $23,380
 $26,199
 $494,595


Information regarding Cintas' service contracts and other assets is as follows:follows as of May 31:
20212020
(In thousands)Carrying
Amount		Accumulated
Amortization		NetCarrying
Amount		Accumulated
Amortization		Net
Service contracts$961,942 $553,497 $408,445 $941,383 $489,854 $451,529 
Capitalized contract costs (1)
$459,079 $231,940 $227,139 $375,912 $148,853 $227,059 
Noncompete and consulting
   agreements		44,683 42,408 2,275 43,890 41,317 2,573 
Other105,371 24,371 81,000 54,239 23,113 31,126 
Other assets$609,133 $298,719 $310,414 $474,041 $213,283 $260,758 
 As of May 31, 2019
(In thousands)
Carrying
Amount
 
Accumulated
Amortization
 Net
      
Service contracts$928,635
 $434,040
 $494,595
      
Capitalized contract costs (1)
$277,016
 $71,062
 $205,954
Noncompete and consulting agreements42,308
 40,524
 1,784
Other50,306
 17,729
 32,577
Other assets$369,630
 $129,315
 $240,315
(1)
The current portion of capitalized contract costs included in prepaid expenses and other current assets on the consolidated balance sheet as of May 31, 2019, is $69.6 million.

 As of May 31, 2018
(In thousands)
Carrying
Amount
 
Accumulated
Amortization
 Net
      
Service contracts$924,978
 $379,210
 $545,768
      
Noncompete and consulting agreements$41,710
 $39,877
 $1,833
Other38,787
 11,305
 27,482
Other assets$80,497
 $51,182
 $29,315
(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, 2021 and 2020, is $79.4 million and $76.2 million, respectively.


Amortization expense for service contracts and other assets for continuing operations was $134.0$141.9 million, $61.2$140.8 million and $22.8$134.0 million for the fiscal years ended May 31, 2019, 20182021, 2020 and 2017, respectively. Estimated amortization expense for service contracts and other assets for continuing operations, excluding any future acquisitions and commissions to be earned, for each of the next five full fiscal years and thereafter is $131.9 million, $116.9 million, $104.7 million, $86.3 million, $74.6 million and $264.5 million,2019, respectively. At May 31, 2019,2021, the weighted average amortization period for service contracts, capitalized contract costs, noncompete and consulting agreements and other was 14 years, 7 years, 5 years and 310 years, respectively. As of May 31, 2021, the estimated future amortization expense for service contracts and other assets for continuing operations, excluding any future acquisitions and commissions to be earned, is as follows:


Fiscal Year (In thousands)
2022$137,142 
2023117,803 
2024105,362 
202591,948 
202674,815 
Thereafter192,794 
Total future amortization expense$719,864 


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Note 7.  Debt and Derivatives

Cintas' outstanding debt is summarized as follows at May 31:
(In thousands)Interest
 Rate		Fiscal Year
Issued		Fiscal Year
Maturity		20212020
Debt due within one year
Senior notes4.30%20122022$250,000 $0 
Senior notes2.90%20172022650,000 0 
Debt issuance costs(930)0 
Total debt due within one year$899,070 $0 
Debt due after one year
Senior notes4.30%20122022$0 $250,000 
Senior notes2.90%201720220 650,000 
Senior notes3.25%20132023300,000 300,000 
Senior notes (1)
2.78%2013202350,815 51,250 
Senior notes (2)
3.11%2015202551,301 51,637 
Senior notes3.70%201720271,000,000 1,000,000 
Senior notes6.15%20072037250,000 250,000 
Debt issuance costs(9,283)(13,182)
   Total debt due after one year$1,642,833 $2,539,705 
(In thousands)
Interest
 Rate
 
Fiscal Year
Issued
 
Fiscal Year
Maturity
 2019 2018
          
Debt due within one year         
Commercial paper2.68%
(1) 
2019 2020 $112,500
 $—
Term loan3.06%
(1) 
2019 2020 200,000
 —
Debt issuance costs      (236) —
Total debt due within one year      $312,264
 $—
          
Debt due after one year         
Senior notes4.30% 2012 2022 $250,000
 $250,000
Senior notes2.90% 2017 2022 650,000
 650,000
Senior notes3.25% 2013 2023 300,000
 300,000
Senior notes (2)
2.78% 2013 2023 51,684
 52,119
Senior notes (3)
3.11% 2015 2025 51,973
 52,309
Senior notes3.70% 2017 2027 1,000,000
 1,000,000
Senior notes6.15% 2007 2037 250,000
 250,000
Debt issuance costs      (16,150) (19,119)
   Total debt due after one year      $2,537,507
 $2,535,309
(1)    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%.
(1)
Variable rate debt instrument. The rate presented is the variable borrowing rate at May 31, 2019.
(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%.
(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%.

(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 3.88%.
The average interest rate for all Cintas debt at May 31, 20192021 was 3.7%3.8%, 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, and term loan 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, 20192021 were $2,866.2$2,550.0 million and $2,998.7$2,788.8 million, respectively, and as of May 31, 20182020 were $2,550.0 million and $2,582.0$2,804.2 million, respectively. During the twelve monthsfiscal year ended May 31, 2019,2020, Cintas issuedpaid a net total of $112.5 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 of its 4.30%, 10-year senior notes that matured on that date with cash on hand. There was 0 commercial paper outstanding during fiscal 2021.
Letters of credit outstanding were $120.6 million and $143.0 million at both May 31, 20192021 and 2018, respectively.2020. Maturities of debt during each of the next five years are $312.5$900.0 million, $350.0 million, $0.0 million, $900.0 million, $350.0$50.0 million and $0.0 million, respectively.


Interest paid was $101.8$98.3 million, $122.1$105.5 million and $76.6$101.8 million for the fiscal years ended May 31, 2021, 2020 and 2019, 2018 and 2017, respectively. Interest paid in fiscal 2017 included the payment of $17.1 million in short-term debt financing fees, which were related to the acquisition of G&K and are not reoccurring.


The credit agreement that supports our commercial paper program was amended and restated on May 24, 2019. The amendment increased the capacity of the revolving credit facility from $600.0 million to $1.0 billion and created a new term loan of $200.0 million. The credit agreement has an accordion feature that provides Cintas the ability to request increases to the borrowing commitments under either the revolving credit facility or the term loan of up to $250.0 million in the aggregate, subject to customary conditions. The maturity date of the revolving credit facility is May 22, 2024, and the maturity date of the term loan is May 22, 2020, which can be extended 12 months, annually, for up to four years.23, 2024. As of May 31, 2019,2021 and 2020, there was $112.5 million of0 commercial paper outstanding with a weighted average interest rate of 2.7% and maturity dates less than 30 days and no0 borrowings on our revolving credit facility. No commercial paper or borrowings on our revolving credit facility were outstanding at May 31, 2018. The fair value of the commercial paper, which approximates the carrying value, is estimated using Level 2 inputs based on general market prices.

51


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 lock agreements to hedge against movements in the treasury rates at the time Cintas issued its senior notes in fiscal 2007, fiscal 2012, fiscal 2013 and fiscal 2017. The amortization of the cash flow hedges resulted in a decrease to other comprehensive income (loss) of $1.2$1.4 million, $1.4 million and $0.9$1.2 million in the fiscal years ended May 31, 2021, 2020 and 2019, and 2018, respectively and an increase to other comprehensive income of $1.1 million in the fiscal year ended May 31, 2017.respectively. During fiscal 2020 and 2019, Cintas entered into interest rate lock agreements with a total notional value of $950.0 million and $500.0 million, respectively, for a forecasted debt issuance. Asissuances in connection with upcoming debt maturities.

The fair values of the outstanding interest rate lock agreements is summarized as follows at May 31, 2019, the fair value of these31:
20212020
Fiscal Year of Issuance
(in thousands)
Notional
 Value		Other
assets, net		Long-term
accrued liabilities		Other
assets, net		Long-term
accrued liabilities
2020$950,000 $40,400 $0 $1,546 $53,817 
2019$500,000 $0 $61,657 $0 $111,869 

The interest rate locks was a liability of $36.4 million that wasare also recorded in long-term accrued liabilities and in other comprehensive income (loss), net of tax. These interest rate locks had no impact on net income or cash flows from continuing operations for the fiscal years ended May 31, 2021, 2020 or 2019.

To hedge the exposure of movements in the foreign currency rates, Cintas may use foreign currency hedges. These hedges reduce the impact on cash flows from movements in the foreign currency exchange rates. Examples of foreign currency hedge instruments that Cintas may use are average rate options and forward contracts. There were no foreign currency hedge instruments outstanding during fiscal 2019, 2018 or 2017. Cintas had no foreign currency forward contracts as of May 31, 2019 or 2018.


Cintas has certain covenants related to debt agreements. These covenants limit Cintas' ability to incur certain liens, to engage in sale-leaseback transactions and to merge, consolidate or sell all or substantially all of Cintas' assets. These covenants also require Cintas to maintain certain debt to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA)EBITDA and interest coverage ratios. Cross-default provisions exist between certain debt instruments. If a default of a significant covenant were to occur, the default could result in an acceleration of the maturity of the indebtedness, impair liquidity and limit the ability to raise future capital. Cintas was in compliance with all of the debt covenants for all periods presented.


As of May 31, 2020, the Company had unrecognized inventory purchase commitments with various suppliers totaling $117.6 million, respectively. All unrecognized inventory purchase commitments outstanding at May 31, 2020 were satisfied during fiscal 2021.
52

Note 8.  Leases
Cintas conductshas operating leases for certain operations from leasedoperating facilities, and leases certain vehicles and equipment. Mostequipment, which provide the right to use the underlying asset and require lease payments over the term of the lease. 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 contain renewal optionsare 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 periodsthe lease term and the operating lease liabilities representing the obligation to make lease payments arising from 1 to 10 years. Thethe lease. Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the consolidated balance sheet.

Operating lease agreements provide for increases in rent expense ifright-of-use assets, net and operating lease liabilities are recognized at the options are exercisedcommencement date of the lease based on increases in certain price level factors or other prearranged factors. Step rent provisions, escalation clauses, capital improvements funding and other lease concessions are taken into account in computing minimum lease payments. Minimumthe present value of lease payments over the lease term and include options to extend or terminate the lease when they are recognizedreasonably 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 minimum lease term. Cintas has noterm and variable lease payments dependentcosts 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 an existing indexthe Company's consolidated statements of income. The Company's lease agreements do not contain any material residual value guarantees or rate,material restrictive covenants.

Operating lease costs, including short-term lease expense and as such, are not includedvariable lease costs, which were immaterial in minimum lease payments. It is anticipated that expiring leases will be renewed or replaced.

The minimum rental payments under noncancelable lease arrangements for each of the next five years and thereafter are $54.0period, were $71.0 million, $46.2 million, $36.1 million, $28.3 million, $18.6$70.4 million and $40.0$69.7 million respectively.

Rent expense for continuing operations under operating leases during the fiscal years ended May 31, 2019, 20182021, 2020 and 2017, was $69.7 million, $70.0 million and $49.6 million,2019, respectively.




The following table provides supplemental information related to the Company's consolidated statements of cash flows for the fiscal years ended May 31:
(In thousands)20212020
Cash paid for amounts included in the measurement of operating lease liabilities$49,345 $50,816 
Operating lease right-of-use assets obtained in exchange for new and renewed
   operating lease liabilities		$51,850 $40,728 

Other information related to the operating lease right-of-use assets, net and operating lease liabilities was as follows at May 31:
20212020
Weighted-average remaining lease term - operating leases5.33 years5.19 years
Weighted-average discount rate - operating leases2.32%2.66%

The contractual future minimum lease payments of Cintas' operating lease liabilities by fiscal year are as follows as of May 31, 2021:
(In thousands)
2022$47,564 
202339,585 
202429,553 
202522,310 
202616,779��
Thereafter30,010 
Total payments185,801 
Less interest(11,177)
Total present value of lease payments$174,624 

53

Note 9.  Income Taxes
Income before income taxes for continuing operations consists of the following components for the fiscal years ended May 31:
(In thousands)202120202019
U.S. operations$1,221,690 $1,035,902 $1,061,505 
Foreign operations66,059 22,389 40,894 
$1,287,749 $1,058,291 $1,102,399 
(In thousands)2019 2018 2017
      
U.S. operations$1,061,505
 $798,215
 $673,055
Foreign operations40,894
 42,786
 14,349
 $1,102,399
 $841,001
 $687,404


Income tax expense (benefit) for continuing operations consists of the following components for the fiscal years ended May 31:
(In thousands)202120202019
Current:   
Federal$164,104 $153,736 $134,174 
State and local42,340 34,502 40,949 
Foreign12,417 6,985 9,882 
218,861 195,223 185,005 
Deferred(42,080)(13,292)34,759 
$176,781 $181,931 $219,764 
(In thousands)2019 2018 2017
      
Current:     
Federal$134,174
 $124,861
 $184,130
State and local40,949
 32,322
 30,201
Foreign9,882
 15,103
��6,996
 185,005
 172,286
 221,327
Deferred34,759
 (115,217) 8,791
 $219,764
 $57,069
 $230,118


Reconciliation of income tax expense (benefit) for continuing operations using the statutory rate and actual income tax expense is as follows for the fiscal years ended May 31:
(In thousands)202120202019
Income taxes at the U.S. federal statutory rate$270,427 $222,258 $231,503 
Permanent differences (1)
(101,870)(67,075)(51,201)
State and local income taxes, net of federal benefit27,304 25,294 31,687 
Capital loss carryback(14,072)0 0 
Other (2)
(5,008)1,454 6,506 
Impact of the Tax Cuts and Jobs Act (the Tax Act):
Deemed repatriation of non-U.S. earnings, net of foreign
    tax credits and other (collectively, transition tax)		0 0 153 
Non-U.S. withholding taxes related to certain non-U.S.
    earnings subject to repatriation		0 0 690 
Remeasurement of U.S. net deferred tax liabilities from
    35% to 21%		0 0 426 
$176,781 $181,931 $219,764 
(1)    Primarily consists of the excess tax benefits related to stock-based compensation.

(2)    Primarily consists of adjustments for uncertain tax positions and tax credits.
54
(In thousands)2019 2018 2017
      
Income taxes at the U.S. federal statutory rate$231,503
 $245,322
 $240,677
Permanent differences (1)
(51,201) (47,137) (29,414)
State and local income taxes, net of federal benefit31,687
 24,783
 19,210
Other (2)
6,506
 (4,451) (355)
Impact of the Tax Act:     
Deemed repatriation of non-U.S. earnings, net of foreign
    tax credits and other (collectively, transition tax)
153
 9,768
 —
Non-U.S. withholding taxes related to certain non-U.S.
    earnings subject to repatriation
690
 4,363
 —
Remeasurement of U.S. net deferred tax liabilities from
    35% to 21%
426
 (175,579) —
 $219,764
 $57,069
 $230,118

(1)
Includes the excess tax benefits related to share based compensation.

(2)
Primarily consists of adjustments for uncertain tax positions, tax credits and return to provision adjustments.


The components of deferred income taxes included on the consolidated balance sheets are as follows at May 31:
(In thousands)20212020
Deferred tax assets:  
Reserves related to accounts receivable$10,292 $14,718 
Inventory obsolescence30,617 13,744 
Insurance reserves45,802 45,197 
Stock-based compensation74,898 78,802 
Net operating loss and foreign related carry-forwards3,885 7,657 
Treasury locks3,140 39,046 
Operating lease liabilities44,530 42,191 
Deferred compensation and other107,528 73,562 
320,692 314,917 
Valuation allowance(2,037)(6,411)
318,655 308,506 
Deferred tax liabilities:  
Uniform and other rental items in service202,846 189,787 
Property and equipment167,622 177,664 
Service contracts and other intangible assets207,834 207,610 
Capitalized contract costs79,356 77,741 
Operating lease right-of-use assets44,530 42,191 
State taxes and other3,114 2,092 
705,302 697,085 
Net deferred tax liability$386,647 $388,579 
(In thousands)2019 2018
    
Deferred tax assets:   
Allowance for doubtful accounts$9,495
 $8,209
Inventory obsolescence9,257
 10,425
Insurance and contingencies45,339
 43,482
Stock-based compensation77,697
 64,376
Net operating loss and foreign related carry-forwards (1)
9,109
 12,882
Treasury locks5,806
 —
Deferred compensation and other48,922
 37,319
 205,625
 176,693
Valuation allowance(7,308) (11,302)
 198,317
 165,391
Deferred tax liabilities:   
Uniform and other rental items in service194,939
 170,157
Property and equipment159,186
 126,273
Service contracts and other intangible assets210,531
 215,455
Treasury locks—
 4,185
Capitalized contract costs70,228
 —
State taxes and other1,612
 1,902
 636,496
 517,972
Net deferred tax liability$438,179
 $352,581

(1)
The majority of these net operating losses and carryforwards have a five-year expiration period and generally expire in fiscal year 2020 to 2025.


Although realization is not assured, management has evaluated its deferred tax assets to determine whether a valuation allowance is required or should be adjusted. 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, Managementmanagement 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)20212020
Balance at beginning of year$(6,411)$(7,308)
Subtractions4,374 897 
Balance at end of year$(2,037)$(6,411)
(In thousands)2019 2018
    
Balance at beginning of year$(11,302) $(18,088)
Additions—
 (3,268)
Subtractions (1)
3,994
 10,054
Balance at end of year$(7,308)
$(11,302)
(1)
Primarily related to expiration of net operating loss carryforwards.


Income taxes paid were $173.2$245.5 million, $175.3$160.3 million and $269.6$173.2 million for the fiscal years ended May 31, 2019, 20182021, 2020 and 2017,2019, respectively.


As of May 31, 20192021 and 2018,2020, there was $37.3$34.2 million and $26.9$35.9 million, respectively, in total unrecognized tax benefits, which, if recognized, would favorably impact Cintas' effective tax rate. Cintas recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense in the consolidated statements of income, which is consistent with the recognition of these items in prior reporting periods. The total amount accrued for interest and penalties as of May 31, 20192021 and 2018,2020, was $2.8$4.2 million and $1.8$3.7 million, respectively. Cintas records this tax liability in long-term accrued liabilities on the consolidated balance sheets, as appropriate.sheets.

55



A reconciliation of the beginning and ending amount of the gross unrecognized tax benefits (exclusive of interest and penalties) is as follows:
(In thousands) 
  
Balance at June 1, 2017$17,357
Additions for tax positions of the current year10,164
Additions from G&K acquisition (1)
6,394
Additions for tax positions of prior years5,675
Statute expirations(2,943)
Balance at May 31, 2018$36,647
Additions for tax positions of the current year3,641
Additions for tax positions of prior years10,239
Statute expirations(1,812)
Balance at May 31, 2019$48,715
(In thousands)
(1)
Balance at June 1, 2019		Increase in unrecognized$48,715 
Additions for tax benefit associated with unrecognized benefits assumed inpositions of the G&K acquisition.current year3,976 
Additions for tax positions of prior years4,325 
Settlements(5,473)
Statute expirations(6,873)
Balance at May 31, 202044,670 
Additions for tax positions of the current year4,728 
Additions for tax positions of prior years2,726 
Settlements(5,593)
Statute expirations(4,074)
Balance at May 31, 2021$42,457 


The majority of Cintas' operations are in North America. Cintas is required to file federal income tax returns, as well as state income tax returns in a majority of the domestic states and also in certain Canadian provinces. At times, Cintas is subject to audits in these jurisdictions. The audits, by nature, are sometimes complex and can require several years to resolve. The final resolution of any such tax audit could result in either a reduction in Cintas' accruals or an increase in its income tax provision, either of which could have an impact on the consolidated results of operation in any given period.


All U.S. federal income tax returns are closed to audit through fiscal 2015.2017. Cintas is currently in various audits in certain foreign jurisdictions and certain domestic states. 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 expected that the balance of unrecognized tax benefits will not materially change for the fiscal year ending May 31, 2020.2022.


The Tax Act
In fiscal year 2018, the Company’s tax expense and effective tax rate was impacted by the enactment of the Tax Act in the United States on December 22, 2017, which provided for a reduction of the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018 and required companies to pay a one-time transition tax on earnings of foreign subsidiaries. The Tax Act also included provisions that were expected to offset some of the benefit of the U.S. corporate tax rate reduction, including the repeal of the deduction for domestic production activities and the expansion of the limitation on the deduction of certain executive compensation. In addition, the Tax Act altered the landscape of taxation of non-U.S. operations and provided immediate deductions for certain new investments, among other provisions.

As a result of the statutory rate reduction to 21% during fiscal year 2018, the Company recorded an income tax benefit of $175.6 million related to the remeasurement of its deferred taxes and additional tax expense of $9.8 million relating to the Tax Act’s transition tax liability. The Company considered the effects of the Tax Act to be provisional pursuant to the guidance in SEC Staff Accounting Bulletin No. 118, primarily due to lack of implementation guidance at the balance sheet date related to among other items the state tax impacts of federal tax reform, which resulted in the use of estimates to compute the future blended tax rate. During the third quarter of fiscal 2019, Cintas finalized the accounting for the tax effects of the Tax Act. The Company recorded $0.4 million and $0.2 million to income tax expense as an adjustment to the provisional amounts recorded as of fiscal 2018 relating to the deferred tax remeasurement and transition tax liability, respectively.

Cintas also analyzed and recorded the impact of the Tax Act on executive compensation, the foreign derived intangible income deduction and global intangible low-taxed income and determined that the impact was immaterial for the year ended May 31, 2019. Cintas has elected to account for Global Intangible Low-Taxed Income (GILTI) as a current-period expense when incurred. Therefore, the Company has not recorded deferred taxes for basis differences expected to reverse in future periods.



Foreign Withholding Tax
In fiscal 2018, Cintas revised its position regarding unrepatriated foreign earnings to a partially reinvested assertion. The Company asserts that all foreign earnings will be indefinitely reinvested, with the exception of certain foreign investments in which earnings and cash generation are in excess of local needs. With the passage of the Tax Act in the U.S., dividends of earnings from non-U.S. operations are generally no longer subject to U.S. income tax. Cintas continues to analyze and adjust the estimated impact of the non-U.S. income and withholding tax liabilities based on the source of these earnings, as well as the expected means through which those earnings may be taxed. Cintas has accrued a withholdingtaxed; however, the unrecorded tax estimate of $0.7 million related to fiscal 2019 earnings that areis not deemed to be permanently reinvested. The unrecognized tax liability associated with the operations in which Cintas asserts permanent reinvestment is $5.4 million as of May 31, 2019. We will continue to monitor all foreign earnings and profits we believe to be permanently reinvested in foreign operations.material.

10.  Acquisitions
The purchase price paid for each acquisition has been allocated to the fair value of the assets acquired and liabilities assumed. During fiscal 2019, Cintas acquired five businesses included in the Uniform Rental and Facility Services reportable operating segment, one business included in the First Aid and Safety Services reportable operating segment and seven businesses included in All Other. During fiscal 2018, Cintas acquired five businesses 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 six businesses included in All Other.

The following summarizes the aggregate purchase price and fair value allocations for all businesses acquired during the fiscal years ended May 31:
56
(In thousands)2019 2018
    
Fair value of tangible assets acquired$840
 $421
Fair value of service contracts acquired8,064
 9,271
Fair value of other intangibles acquired1,035
 892
Net goodwill recognized6,637
 12,094
Total fair value of assets acquired16,576
 22,678
Fair value of liabilities assumed6,763
 3,332
Total cash paid for acquisitions, net of cash acquired$9,813
 $19,346

Cintas is required to provide additional disclosures about fair value measurements as part of the consolidated financial statements for each major category of assets and liabilities measured at fair value on a nonrecurring basis (including business acquisitions). 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, service contracts and other intangibles were valued using Level 3 inputs, which are unobservable by nature, and included internal estimates of future cash flow using a discount rate of 9.5% (income approach). Significant increases (decreases) in any of those unobservable inputs in isolation would result in a significantly lower (higher) fair value measurement. As necessary, Management utilizes third-party valuation firms to assist in the determination of purchase accounting fair values, and specifically those considered Level 3 measurements. Management ultimately oversees the third-party valuation firms to ensure that the transaction-specific assumptions are appropriate for Cintas.



11.Note 10.  Employee Benefit Plans
Pension Plans
In conjunction with the acquisition of G&K in fiscal 2017, Cintas assumed G&K's noncontributory defined benefit pension plan (thethe Pension Plan)Plan that covers substantially all legacy G&K employees who were employed as of July 1, 2005, except certain employees who were covered by union-administered plans. Benefits are based on the number of years of service and each employee’s compensation near retirement. We will make annual contributions to the Pension Plan consistent with federal funding requirements. The Pension Plan was frozen by G&K effective December 31, 2006. Future growth in benefits will not occur beyond this date. Applicable accounting standards require that the consolidated balance sheetsheets reflect the funded status of the pension plan.Pension Plan. The funded status of the Pension Plan is measured as the difference between the plan assets at fair value and the projected benefit obligation.PBO. The PBO represents the actuarial present value of benefits expected to be paid upon retirement based on estimated future compensation levels. The measurement of the PBO is based on the Company’s estimates and actuarial valuations. The net pension liability at May 31, 20192021 and 20182020 is included in the long-term accrued liabilities on the consolidated balance sheet.sheets. Unrecognized differences between actual amounts and estimates based on actuarial assumptions are included in accumulated other comprehensive income in(loss) on our consolidated balance sheet.sheets. The difference between actual amounts and estimates based on actuarial assumptions are recognized in other comprehensive income (loss), net of tax, in the period in which they occur. The estimated amortization from accumulated other comprehensive income (loss) into net periodic benefit cost during fiscal year 20202022 is immaterial.
Obligations and Funded Status at May 31:
(In thousands)
20212020
Change in benefit obligation:
Projected benefit obligation, beginning of year$105,357 $91,935 
Interest cost2,050 2,881 
Actuarial (gain) loss(4,460)13,662 
Benefits paid(3,219)(3,121)
Projected benefit obligation, end of year$99,728 $105,357 
Change in plan assets:  
Fair value of plan assets, beginning of year$68,341 $62,267 
Actual return on plan assets9,509 7,097 
Employer contributions3,613 2,098 
Benefits paid(3,219)(3,121)
Fair value of plan assets, end of year$78,244 $68,341 
Funded status-net amount recognized$(21,484)$(37,016)
Obligations and Funded Status at May 31:
   
(in thousands)2019 2018
    
Change in benefit obligation:   
Projected benefit obligation, beginning of year$86,341
 $87,387
Interest cost3,124
 2,818
Actuarial loss (gain)5,455
 (940)
Benefits paid(2,985) (2,924)
Projected benefit obligation, end of year$91,935
 $86,341
    
Change in plan assets: 
  
Fair value of plan assets, beginning of year$58,781
 $59,396
Actual return on plan assets2,437
 2,309
Employer contributions4,034
 —
Benefits paid(2,985) (2,924)
Fair value of plan assets, end of year$62,267
 $58,781
    
Funded status-net amount recognized$(29,668) $(27,560)

The accrued benefitnet pension liability of $29.7$21.5 million and $27.6$37.0 million was included in long-term accrued liabilities on the consolidated balance sheetsheets as of May 31, 20192021 and 2018,2020, respectively. An unrecognized net actuarial loss of $6.7$5.0 million and $0.8$16.2 million related to the Pension Plan was included in "other" within in the accumulated other comprehensive income (loss) on the consolidated balance sheetsheets at May 31, 20192021 and 2018,2020, respectively.

The components of net periodic pension benefit are summarized as follows for the fiscal years ended May 31:

(In thousands)20212020
Interest cost$2,050 $2,881 
Expected return on assets(2,924)(2,961)
Amortization of net loss222 0 
Net periodic pension benefit$(652)$(80)

57
Components of Net Periodic Benefit Cost   
(in thousands)2019 2018
    
Interest cost$3,124
 $2,818
Expected return on assets(2,882) (2,832)
Net periodic benefit cost$242
 $(14)


Assumptions
The following weighted average assumptions were used to determine benefit obligations for the Pension Plan for the fiscal years ended May 31 :  
20212020
Discount rate2.83 %2.54 %
Rate of compensation increaseN/AN/A
 2019 2018
Discount rate3.54% 3.95%
Rate of compensation increaseN/A
 N/A



The following weighted average assumptions were used to determine net periodic pension benefit cost for the Pension Plan for the fiscal years ended May 31:  
20212020
Discount rate2.54 %3.54 %
Expected return on plan assets4.25 %4.80 %
Rate of compensation increaseN/AN/A
 2019 2018
Discount rate3.95% 3.79%
Expected return on plan assets4.90% 4.90%
Rate of compensation increaseN/A
 N/A

Plan Assets
The asset allocations in the Pension Plan at May 31, 20192021 and 20182020 are as follows: 

2019 2019 2018202120212020
Target Asset
Allocation		 Actual Asset
Allocation		 
Actual Asset
Allocation
 Target Asset
Allocation		Actual Asset
Allocation		Actual Asset
Allocation
     
Large cap equity26.0% 26.4% 26.5%Large cap equity26.0 %29.8 %25.0 %
Small cap equity5.0% 5.3% 5.6%Small cap equity5.0 %6.0 %4.4 %
International equity8.0% 7.8% 7.9%International equity8.0 %8.3 %6.7 %
Fixed income45.0% 45.0% 44.2%Fixed income45.0 %44.1 %51.5 %
Absolute return strategy funds16.0% 13.3% 15.8%Absolute return strategy funds16.0 %11.3 %11.9 %
Cash—% 2.2% —%Cash0 %0.5 %0.5 %
Total100.0% 100.0% 100.0%Total100.0 %100.0 %100.0 %


Our investment committee, assisted by outside consultants, evaluates the objectives and investment policies concerning our long-term investment goals and asset allocation strategies. Plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification and investment return over the long term. To develop the expected long-term rate of return on asset assumptions, we consider the historical returns and future expectations of returns for each asset class, as well as the target asset allocation, changes in investments expenses and investment goals of the pension portfolio. This resulted in the selection of 4.90%4.25% expected return on plan assets for fiscal year 20192021 and 4.90%4.80% expected return on plan assets for fiscal year 2018.2020. The investment goals are (1) to meet or exceed the assumed actuarial rate of return over the long term within reasonable and prudent levels of risk, and (2) to preserve the real purchasing power of assets to meet future obligations. The nature and duration of benefit obligations, along with assumptions concerning asset class returns and return correlations, are considered when determining an appropriate asset allocation to achieve the investment objectives. Pension plan assets for our qualified pension plans are held in a trust for the benefit of the plan participants and are invested in a diversified portfolio of equity investments, fixed income investments and cash. Risk targets are established and monitored against acceptable ranges. All investment policies and procedures are designed to ensure that the plans' investments are in compliance with the Employee Retirement Income Security Act. Guidelines are established defining permitted investments within each asset class.


The implementation of the investment strategy discussed above is executed through a variety of investment types, including U.S. government securities, corporate debt and mutual funds. TheseThe mutual fund investments are valued at the closing price reported on the active market on which the individual securities are traded.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.

58

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 reportingconsolidated balance sheet date.



Information on the Pension Plan investments, as of May 31, 2019 and 2018, using the fair value hierarchy discussed in Note 1 entitled Significant Accounting Polices, is as follows:  follows as of May 31:  
20212020
(In thousands)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Cash equivalents$556 $0 $0 $556 $585 $0 $0 $585 
U.S. government
   securities		3,066 4,500 0 7,566 2,733 4,327 0 7,060 
Corporate debt0 26,762 0 26,762 0 27,666 0 27,666 
Mutual funds:
   U.S. securities36,909 0 0 36,909 28,455 0 0 28,455 
   International securities6,451 0 0 6,451 4,575 0 0 4,575 
Total$46,982 $31,262 $0 $78,244 $36,348 $31,993 $0 $68,341 
 May 31, 2019
(in thousands)Level 1 Level 2 Level 3 Total
        
Cash equivalents$1,379
 $—
 $—
 $1,379
U.S. government securities2,113
 3,974
 —
 6,087
Corporate debt—
 21,970
 —
 21,970
Mutual funds:

 

 

 

   U.S. securities27,984
 —
 —
 27,984
   International securities4,847
 —
 —
 4,847
Total$36,323
 $25,944
 $—
 $62,267
 May 31, 2018
(in thousands)Level 1 Level 2 Level 3 Total
        
Cash equivalents$487
 $—
 $—
 $487
U.S. government securities2,426
 3,458
 —
 5,884
Corporate debt—
 19,826
 —
 19,826
Mutual funds:       
   U.S. securities27,901
 —
 —
 27,901
   International securities4,683
 —
 —
 4,683
Total$35,497
 $23,284
 $—
 $58,781


We expect to make contributions of approximately $3.1$0.3 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 $3.7 million, $3.9 million, $4.0$4.1 million, $4.2 million, $4.3$4.4 million, $4.5 million, $4.7 million and $23.5$25.0 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 expensebenefit (cost) and liabilities. We cannot predict the impact of these changes in the future, and any changes may 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. As of May 31, 20192021 and 2018,2020, the fair value of this pension plan's total assets was $7.3$9.2 million and $7.5$7.3 million, respectively, and the projected benefit obligationPBO was $7.9$8.9 million and $7.4 million, respectively. For the years ended May 31, 2019 and 2018, the net periodic benefit cost recorded for this plan was expense of $0.6 million and income of $0.1$9.4 million, respectively.


Non-Contributory Retirement Plans
Cintas' Partners' Plan (the Plan) is a non-contributory profit sharing plan and Employee Stock Ownership Plan (ESOP) for the benefit of substantially all U.S. Cintas employee-partners who have completed one year of service. The Plan also includes a 401(k) savings feature covering substantially all U.S. employee-partners. The amounts of contributions to the Plan and ESOP, as well as the matching contribution to the 401(k), are made at the discretion of the Board of Directors. During fiscal 2018, the G&K 401(k) plan was merged into the Plan. There were no changes to the Plan as a result of the merger. Total contributions, including Cintas' matching contributions, which approximate cost, were $67.6$75.6 million, $56.7$74.3 million and $47.5$67.6 million for the fiscal years ended May 31, 2021, 2020 and 2019, 2018respectively. The expense associated with these contributions was recorded in selling and 2017, respectively.administrative expenses on the consolidated statements of income.


Cintas has a non-contributory deferred profit sharing plan (DPSP), which covers substantially all Canadian employee-partners. In addition, a registered retirement savings plan (RRSP) is offered to those employees. The amounts of contributions to the DPSP, as well as the matching contribution to the RRSP, are made at the discretion of the Board of Directors. Total contributions, which approximate cost, were $2.5$3.1 million, $2.8$2.6 million and $1.8$2.5 million for the fiscal years ended May 31, 2019, 20182021, 2020 and 2017,2019, respectively.




Cintas has a supplemental executive retirement plan (SERP) subject to Section 409A of the Internal Revenue Code for the benefit of certain highly compensated Cintas employee-partners. The SERP allows participants to defer the receipt of compensation which would otherwise become payable to them. Matching contributions are made at the discretion of the Board of Directors. Total matching contributions, which approximates cost, were $8.6$9.1 million, $8.2$8.4 million and $6.9$8.6 million for the fiscal years ended May 31, 2021, 2020 and 2019, 2018respectively. The expense associated with these contributions was recorded in selling and 2017, respectively.administrative expenses on the consolidated statements of income.

59

12.Note 11.  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. See Note 12 entitled Stock-Based Compensation for additional information on restricted stock awards. The following table setstables 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
(In thousands except per share data)
2019 2018 2017
Basic Earnings per Share from Continuing Operations
(In thousands except per share data)
202120202019
     
Income from continuing operations$882,635
 $783,932
 $457,286
Income from continuing operations$1,110,968 $876,360 $882,635 
Less: income from continuing operations allocated to
participating securities
9,568
 11,794
 8,168
Less: income from continuing operations allocated to
participating securities
7,623 8,158 9,568 
Income from continuing operations available to common shareholders$873,067
 $772,138
 $449,118
Income from continuing operations available to common
shareholders
$1,103,345 $868,202 $873,067 
Basic weighted average common shares outstanding106,080
 106,593
 104,964
Basic weighted average common shares outstanding104,874 103,816 106,080 
     
Basic earnings per share from continuing operations$8.23
 $7.24
 $4.27
Basic earnings per share from continuing operations$10.52 $8.36 $8.23 


Diluted Earnings per Share from Continuing Operations
(In thousands except per share data)
202120202019
Income from continuing operations$1,110,968 $876,360 $882,635 
Less: income from continuing operations allocated to
   participating securities
7,623 8,158 9,568 
Income from continuing operations available to common
   shareholders
$1,103,345 $868,202 $873,067 
Basic weighted average common shares outstanding104,874 103,816 106,080 
Effect of dilutive securities – employee stock options2,833 3,196 3,415 
Diluted weighted average common shares outstanding107,707 107,012 109,495 
Diluted earnings per share from continuing operations$10.24 $8.11 $7.97 
Diluted Earnings per Share from Continuing Operations
(In thousands except per share data)
2019 2018 2017
      
Income from continuing operations$882,635
 $783,932
 $457,286
Less: income from continuing operations allocated to
   participating securities
9,568
 11,794
 8,168
Income from continuing operations available to common
   shareholders
$873,067
 $772,138
 $449,118
Basic weighted average common shares outstanding106,080
 106,593
 104,964
Effect of dilutive securities – employee stock options3,415
 3,217
 2,819
Diluted weighted average common shares outstanding109,495
 109,810
 107,783
      
Diluted earnings per share from continuing operations$7.97
 $7.03
 $4.17

Basic and diluted earnings per share from discontinued operations were calculated using the two-class method. There were no discontinued operations for the fiscal year ended May 31, 2021. Basic earnings per share from discontinued operations wererounded to $0.00 and $0.02 $0.54 and $0.22 for the fiscal years ended May 31, 2019, 20182020 and 2017,2019, respectively. Diluted earnings per share from discontinued operations wererounded to $0.00 and $0.02 $0.53 and $0.21 for the fiscal years ended May 31, 2019, 20182020 and 2017,2019, respectively.


For the fiscal years ended May 31, 2019, 20182021, 2020 and 2017,2019, options granted to purchase 0.50.2 million, 0.80.2 million and 0.60.5 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share. The exercise prices of these options were greater than the average market price of the common shares (anti-dilutive).



On August 4, 2015, we announced that the Board of Directors authorized a $500.0 million share buyback program. This program was completed in June 2016. On August 2, 2016, we announced that the Board of Directors authorized a $500.0 million share buyback program. This program was completed in November 2018. On October 30, 2018, we announced that the Board of Directors authorized a $1.0 billion share buyback program. This program was completed in January 2021. On October 29, 2019, we announced the Board of Directors authorized a new $1.0 billion share buyback program, which does not have an expiration date.
60

The following table summarizes the buyback activity by program and fiscal year ended May 31:
202120202019
Buyback Program
(In thousands except
   per share data)
SharesAverage
Price per Share		Purchase
Price		SharesAverage
Price per Share		Purchase
Price		SharesAverage
Price per Share		Purchase
Price
August 2, 20160 $0 $0 0 $0 $0 2,130 $192.55 $410,003 
October 30, 2018190 $319.88 $60,877 1,607 $246.19 $395,681 2,673 $203.30 $543,442 
October 29, 20191,196 $350.31 $418,779 0 $0 $0 0 $0 $0 
1,386 $346.13 $479,656 1,607 $246.19 $395,681 4,803 $198.53 $953,445 
(In thousands except per share data)2019 2018 2017
Buyback ProgramShares Avg. Price per Share Purchase Price Shares Avg. Price per Share Purchase Price Shares Avg. Price per Share Purchase Price
                  
August 4, 2015—
 $—
 $—
 —
 $—
 $—
 39
 $94.09
 $3,691
August 2, 20162,130
 $192.55
 $410,003
 518
 $173.51
 $89,997
 —
 $—
 $—
October 30, 20182,673
 $203.30
 $543,442
 —
 $—
 $—
 —
 $—
 $—
 4,803
 $198.53
 $953,445
 518

$173.51

$89,997

39

$94.09

$3,691


SubsequentIn the period subsequent to May 31, 20192021, through July 26, 2019, Cintas purchased 0.8 million shares at an average price of $230.66 per share for a total purchase price of $193.1 million. Under28, 2021, we completed the October 30, 201829, 2019 program through July 26, 2019, Cintas has purchased a total of 3.5by purchasing 1.6 million shares of Cintas common stock at an average price of $209.82$365.41 for a total purchase price of $581.2 million. From the inception of the October 29, 2019 program through July 28, 2021, Cintas has purchased a total of 2.8 million shares of Cintas common stock at an average price of $358.93 per share for a total purchase price of $736.5 million.$1.0 billion.


In addition to the buyback program,programs, Cintas acquired shares of Cintas common stock in satisfaction of employee payroll taxes due on restricted stock awards that vested during the fiscal year. For the fiscal year ended May 31, 2021, Cintas acquired 0.2 million shares at an average price of $302.52 per share for a total purchase price of $74.4 million. For the fiscal year ended May 31, 2020, Cintas acquired 0.3 million shares at an average price of $260.89 per share for a total purchase price of $68.8 million. For the fiscal year ended May 31, 2019, Cintas acquired 0.3 million shares at an average price of $204.50 per share for a total purchase price of $62.9 million. For the fiscal year ended May 31, 2018, Cintas acquired 0.3 million shares at an average price of $130.30 per share for a total purchase price of $37.3 million. For the fiscal year ended May 31, 2017, Cintas acquired 0.2 million shares at an average price of $101.37 per share for a total purchase price of $17.0 million.


13.Note 12.  Stock-Based Compensation
On August 2, 2016, the Board of Directors approved and adopted the Cintas Corporation 2016 Equity and Incentive Compensation Plan (the 2016 Plan) to replace the Cintas' 2005 Equity Compensation Plan, as amended (the 2005 Plan). The 2016 Plan was approved by Cintas shareholders at its Annual Meeting on October 18, 2016, at which time the 2016 Plan became effective. Under the 2016 Plan, Cintas may grant officers and key employee-partners equity compensation in the form of stock options, stock appreciation rights, restricted and unrestricted stock awards, performance awards and other stock unit awards representing up to an aggregate of 12,500,000 shares of Cintas' common stock. Any shares of common stock that remained available under the 2005 Plan became part of the total available share balance of 12,500,000 shares under the 2016 Plan. At May 31, 2019, 8,230,4322021, 6,358,437 shares of common stock were reserved for future issuance under the 2016 Plan. Total compensation cost for stock-based awards for continuing operations was $139.2$112.0 million,, $110.7 $115.4 million and $87.5$139.2 million for the fiscal years ended May 31, 2019, 20182021, 2020 and 2017,2019, respectively. Cintas accounts for forfeitures of stock-based awards as they occur. The total income tax benefit recognized in the consolidated statements of income statement for share-based compensation arrangements for continuing operations was $34.0$28.6 million,, $32.3 $29.2 million and $32.5$34.0 million for the fiscal years ended May 31, 2019, 20182021, 2020 and 2017,2019, respectively.

Stock Options
Stock options are granted at the fair market value of the underlying common stock on the date of grant. The option terms are determined by the Compensation Committee of the Board of Directors, but no stock option may be exercised later than 10 years after the date of the grant. The option awards generally have 10-year10-year terms with graded vesting in years 3 through 5 based on continuous service during that period. Cintas recognizes compensation expense for these options using the straight-line recognition method over the vesting period.



The fair value of options was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions for the fiscal years ended May 31:
202120202019
Risk-free interest rate0.4 %1.9 %2.7 %
Dividend yield1.1 %1.1 %1.2 %
Expected volatility of Cintas' common stock23.5 %19.0 %17.9 %
Expected life of the option in years5.56.06.0
61
 2019 2018 2017
      
Risk-free interest rate2.7% 1.8% 1.2%
Dividend yield1.2% 1.2% 1.3%
Expected volatility of Cintas' common stock17.9% 17.2% 21.6%
Expected life of the option in years6.0
 6.5
 7.5


The risk-free interest rate is based on U.S. government issues with a remaining term equal to the expected life of the stock options. The determination of expected volatility is based on historical volatility of Cintas' common stock over the period commensurate with the expected term of stock options, as well as other relevant factors. The weighted average expected term was determined based on the historical employee exercise behavior of the options. The weighted-average fair value of stock options granted during fiscal 2021, 2020 and 2019 2018was $66.52, $48.20 and 2017 was $43.71, $37.62 and $23.34,$47.68, respectively.


The information presented in the following table relates primarily to stock options granted and outstanding under either the 2016 Plan or under previously adopted plans:
SharesWeighted
Average
Exercise Price
Outstanding, June 1, 2018 (2,006,922 shares exercisable)8,930,186 $96.71 
Granted1,013,005 219.37 
Canceled(3,045)58.03 
Forfeited(397,304)155.39 
Exercised(1,333,908)54.14 
Outstanding, May 31, 2019 (1,919,976 shares exercisable)8,208,934 123.80 
Granted575,813 250.50 
Canceled(5,432)72.17 
Forfeited(312,391)185.08 
Exercised(1,361,525)70.03 
Outstanding, May 31, 2020 (1,913,374 shares exercisable)7,105,399 145.54 
Granted747,550 348.24 
Canceled(1,452)59.51 
Forfeited(91,722)193.94 
Exercised(1,704,251)83.31 
Outstanding, May 31, 2021 (1,548,867 shares exercisable)6,055,524 $191.11 
 Shares 
Weighted
Average
Exercise Price
    
Outstanding, June 1, 2016 (1,649,236 shares exercisable)8,419,907
 $61.83
Granted1,343,180
 126.51
Canceled(5,368) 32.45
Forfeited(165,452) 73.43
Exercised(1,004,217) 35.95
Outstanding, May 31, 2017 (1,795,898 shares exercisable)8,588,050
 74.77
Granted1,664,867
 175.86
Canceled(7,809) 45.10
Forfeited(255,627) 94.73
Exercised(1,059,295) 44.06
Outstanding, May 31, 2018 (2,006,922 shares exercisable)8,930,186
 96.71
Granted1,013,005
 219.37
Canceled(3,045) 58.03
Forfeited(397,304) 155.39
Exercised(1,333,908) 54.14
Outstanding, May 31, 2019 (1,919,976 shares exercisable)8,208,934
 $123.80


The intrinsic value of stock options exercised was $193.6$402.3 million,, $110.9 $262.1 million and $76.5$193.6 million for the fiscal years ended May 31, 2019, 20182021, 2020 and 2017,2019, respectively. The total cash received from employees as a result of employee stock option exercises for the fiscal years ended May 31, 2021, 2020 and 2019 2018was $130.0 million, $90.5 million and 2017 was $65.4 million, $41.8 million and $31.9 million, respectively.


The fair value of stock options vested was $22.4$30.5 million, $17.9$27.8 million and $12.7$22.4 million for the fiscal years ended May 31, 2019, 20182021, 2020 and 2017,2019, respectively.




The following table summarizes the information related to stock options outstanding at May 31, 2019:2021:
  Outstanding OptionsExercisable Options
Range of
Exercise Prices		Number
Outstanding		Average
Remaining
Option Life		Weighted
Average
Exercise Price		Number
Exercisable		Weighted
Average
Exercise Price
$28.14 - $108.391,621,3753.93$83.28 1,248,866 $75.94 
$108.40 - $204.481,329,2366.30143.30 280,610 137.55 
$204.49 - $260.791,865,6667.58228.36 6,752 230.79 
$260.80 - $361.091,239,2479.61327.37 12,639 277.33 
$28.14 - $361.096,055,5246.74$191.11 1,548,867 $89.42 
   Outstanding Options Exercisable Options
Range of
Exercise Prices
Number
Outstanding
 
Average
Remaining
Option
Life
 
Weighted
Average
Exercise
Price
 
Number
Exercisable
 
Weighted
Average
Exercise
Price
$22.61 - $63.451,938,231 3.96 $49.30
 1,549,449
 $45.75
$63.46 - $108.392,516,838 6.61 96.18
 335,335
 84.71
$108.40 - $204.481,696,559 8.23 141.26
 35,192
 128.42
$204.49 - $221.832,057,306 9.52 213.39
 —
 —
$22.61 - $221.838,208,934 7.05 $123.80
 1,919,976
 $54.07


At May 31, 2019,2021, the aggregate intrinsic value of stock options outstanding and exercisable was $804.7$983.6 million and $322.1$409.1 million, respectively. The weighted-average remaining contractual term of stock options exercisable is 4.24.1 years.
62

Restricted Stock Awards
Restricted stock awards consist of Cintas' common stock that is subject to such conditions, restrictions and limitations as the Compensation Committee of the Board of Directors determines to be appropriate. The vesting period is generally three years after the grant date. The recipient of restricted stock awards will have all rights of a shareholder of Cintas, including the right to vote and the right to receive cash dividends during the vesting period. Cintas recognizes compensation expense for these restricted stock awards using the straight-line recognition method over the vesting period.


The information presented in the following table relates to restricted stock awards granted and outstanding under either the 2016 Plan or under previously adopted plans:
SharesWeighted
Average
Grant Price
Outstanding, unvested grants at June 1, 20182,641,114 $122.18 
Granted425,614 221.27 
Forfeited(109,393)169.48 
Vested(765,647)93.37 
Outstanding, unvested grants at May 31, 20192,191,688 149.12 
Granted228,292 248.39 
Forfeited(135,934)208.37 
Vested(658,831)113.93 
Outstanding, unvested grants at May 31, 20201,625,215 199.73 
Granted274,843 352.68 
Forfeited(48,586)241.95 
Vested(610,249)147.32 
Outstanding, unvested grants at May 31, 20211,241,223 $264.63 
 Shares 
Weighted
Average
Grant Price
    
Outstanding, unvested grants at June 1, 20162,603,436
 $75.94
Granted614,076
 128.63
Forfeited(46,766) 81.23
Vested(428,672) 48.67
Outstanding, unvested grants at May 31, 20172,742,074
 91.91
Granted669,932
 183.83
Forfeited(69,416) 102.96
Vested(701,476) 64.64
Outstanding, unvested grants at May 31, 20182,641,114
 122.18
Granted425,614
 221.27
Forfeited(109,393) 169.48
Vested(765,647) 93.37
Outstanding, unvested grants at May 31, 20192,191,688
 $149.12


The remaining unrecognized compensation cost related to unvested stock options and restricted stock at May 31, 20192021 was $253.8 million.$224.0 million. The weighted-average period of time over which this cost will be recognized is 1.91.98 years.




63
14.

Note 13.  Accumulated Other Comprehensive Income (Loss)
The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive income (loss), net of tax:
(In thousands)Foreign
 Currency		Unrealized
Loss on
Interest
Rate Hedges		OtherTotal
Balance at June 1, 2019$(15,022)$(18,389)$(5,741)$(39,152)
Cumulative effect of change in accounting principle (1)
0 2,058 (83)1,975 
Other comprehensive loss before reclassifications(11,321)(94,954)(8,495)(114,770)
Amounts reclassified from accumulated other
   comprehensive income (loss)		0 (1,433)0 (1,433)
Net current period other comprehensive loss(11,321)(96,387)(8,495)(116,203)
Balance at May 31, 2020(26,343)(112,718)(14,319)(153,380)
Other comprehensive income before reclassifications68,182 106,843 10,676 185,701 
Amounts reclassified from accumulated other
   comprehensive income (loss)		0 (1,433)0 (1,433)
Net current period other comprehensive income68,182 105,410 10,676 184,268 
Balance at May 31, 2021$41,839 $(7,308)$(3,643)$30,888 
(In thousands)
Foreign
 Currency
 
Unrealized
Income (Loss) on Interest
Rate Hedges
 Other Total
        
Balance at June 1, 2017$(12,726) $11,382
 $(1,685) $(3,029)
Other comprehensive income before reclassifications19,276
 —
 1,029
 20,305
Amounts reclassified from accumulated other
   comprehensive income (loss)
—
 (933) —
 (933)
Net current period other comprehensive income (loss)19,276
 (933) 1,029
 19,372
Balance at May 31, 20186,550
 10,449
 (656) 16,343
Other comprehensive loss before reclassifications(21,572) (27,659) (5,085) (54,316)
Amounts reclassified from accumulated other
   comprehensive income (loss)
—
 (1,179) —
 (1,179)
Net current period other comprehensive loss(21,572) (28,838) (5,085) (55,495)
Balance at May 31, 2019$(15,022) $(18,389) $(5,741) $(39,152)
(1) Effective June 1, 2019, Cintas adopted ASU 2018-02, on a prospective basis, which resulted in this reclassification adjustment of the stranded tax effects from retained earnings to accumulated other comprehensive income that was determined using a specific identification method.


The following table summarizes the reclassifications out of accumulated other comprehensive income (loss) during the fiscal years ended May 31:

Details about Accumulated
Other Comprehensive
Income (Loss) Components		Amount Reclassified from
Accumulated Other
Comprehensive Income (Loss)		Affected Line in the
Consolidated
 Statements of Income
(In thousands)20212020
Amortization of interest rate locks$1,896 $1,896 Interest expense
Tax expense(463)(463)Income taxes
Amortization of interest rate locks,
   net of tax		$1,433 $1,433 


64
Reclassifications out of Accumulated Other Comprehensive Income (Loss)
       
Details about Accumulated
Other Comprehensive
Income (Loss) Components
 
Amount Reclassified from
Accumulated Other
Comprehensive Income (Loss)
 
Affected Line in the
Consolidated
 Statements of Income
       
(in thousands) 2019 2018  
       
Amortization of interest rate locks $1,896
 $1,504
 Interest expense
Tax expense (717) (571) Income taxes
Amortization of interest rate locks, net of tax $1,179
 $933
 Net of tax





15.Note 14.  Operating Segment Information
Cintas’ reportable operating segments are Uniform Rental and Facility Services and First Aid and Safety Services. The Uniform Rental and Facility Services reportable operating segment, consists of the rental and servicing of uniforms and other garments including flame resistant clothing, mats, mops and shop towels and other ancillary items. In addition to these rental items, restroom cleaning services and supplies, carpet and tile cleaning services and the sale of items from our catalogs to our customers on route are included within this reportable operating segment. The First Aid and Safety Services reportable operating segment consists of first aid and safety products and services. The remainder of Cintas’ business,operating segments, which consists of the Fire Protection Services operating segment and itsthe Uniform Direct Sale business,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. The accounting policies of the operating segments are the same as those described in Note 1 entitled Significant Accounting Policies. Information related to the operations of Cintas' reportable operating segments and All Other is set forth below:
(In thousands)Uniform Rental
and Facility Services		First Aid
 and Safety Services		All Other
Corporate (1)
Total
May 31, 2021     
Revenue$5,689,632 $784,291 $642,417 $0 $7,116,340 
Gross margin$2,706,118 $332,336 $276,197 $0 $3,314,651 
Selling and administrative expenses1,480,278 251,153 197,728 0 1,929,159 
Interest expense, net0 0 0 97,743 97,743 
Income before income taxes$1,225,840 $81,183 $78,469 $(97,743)$1,287,749 
Depreciation and amortization$323,596 $43,314 $21,041 $0 $387,951 
Capital expenditures$104,020 $34,384 $5,066 $0 $143,470 
Total assets$6,743,272 $637,663 $362,248 $493,640 $8,236,823 
May 31, 2020 
Revenue$5,643,494 $708,569 $733,057 $0 $7,085,120 
Gross margin$2,588,349 $338,661 $306,738 $0 $3,233,748 
Selling and administrative expenses1,583,791 231,769 255,492 0 2,071,052 
Interest expense, net0 0 0 104,405 104,405 
Income before income taxes$1,004,558 $106,892 $51,246 $(104,405)$1,058,291 
Depreciation and amortization$317,699 $38,516 $22,838 $0 $379,053 
Capital expenditures$183,364 $35,678 $11,247 $0 $230,289 
Total assets$6,531,673 $611,205 $381,605 $145,402 $7,669,885 
May 31, 2019 
Revenue$5,552,430 $619,470 $720,403 $0 $6,892,303 
Gross margin$2,524,831 $297,074 $306,683 $0 $3,128,588 
Selling and administrative expenses1,533,711 206,990 239,943 0 1,980,644 
G&K Services, Inc. integration expenses14,410 0 0 0 14,410 
Gain on sale of a cost method investment0 0 0 69,373 69,373 
Interest expense, net0 0 0 100,508 100,508 
Income before income taxes$976,710 $90,084 $66,740 $(31,135)$1,102,399 
Depreciation and amortization$301,328 $36,824 $21,941 $0 $360,093 
Capital expenditures$220,373 $36,783 $19,563 $0 $276,719 
Total assets$6,442,461 $504,920 $392,636 $96,645 $7,436,662 
(In thousands)
Uniform Rental
and Facility Services
 
First Aid
 and Safety Services
 All Other 
Corporate (1)
 Total
May 31, 2019         
Revenue$5,552,430
 $619,470
 $720,403
 $—
 $6,892,303
Gross margin$2,524,831
 $297,074
 $306,683
 $—
 $3,128,588
Selling and administrative expenses1,533,711
 206,990
 239,943
 —
 1,980,644
G&K Services, Inc. integration expenses14,410
 —
 —
 —
 14,410
Gain on sale of a cost method investment—
 —
 —
 69,373
 69,373
Interest expense, net—
 —
 —
 100,508
 100,508
Income before income taxes$976,710
 $90,084
 $66,740
 $(31,135) $1,102,399
Depreciation and amortization$301,328
 $36,824
 $21,941
 $—
 $360,093
Capital expenditures$220,373
 $36,783
 $19,563
 $—
 $276,719
Total assets$6,442,461
 $504,920
 $392,636
 $96,645
 $7,436,662
          
May 31, 2018         
Revenue$5,247,124
 $564,706
 $664,802
 $—
 $6,476,632
Gross margin$2,360,165
 $265,785
 $282,573
 $—
 $2,908,523
Selling and administrative expenses1,500,644
 190,567
 225,581
 —
 1,916,792
G&K Services, Inc. transaction and
   integration expenses
41,897
 —
 —
 —
 41,897
Interest expense, net—
 —
 —
 $108,833
 108,833
Income before income taxes$817,624
 $75,218
 $56,992
 $(108,833) $841,001
Depreciation and amortization$236,773
 $21,898
 $20,745
 $—
 $279,416
Capital expenditures$225,694
 $27,932
 $18,073
 $—
 $271,699
Total assets$5,977,314
 $471,165
 $371,011
 $138,724
 $6,958,214
          
May 31, 2017         
Revenue$4,202,490
 $508,233
 $612,658
 $—
 $5,323,381
Gross margin$1,894,716
 $230,166
 $255,413
 $—
 $2,380,295
Selling and administrative expenses1,138,345
 177,378
 211,657
 —
 1,527,380
G&K Services, Inc. transaction and
   integration expenses
79,224
 —
 —
 —
 79,224
Interest expense, net—
 —
 —
 86,287
 86,287
Income before income taxes$677,147
 $52,788
 $43,756

$(86,287)
$687,404
Depreciation and amortization$156,998
 $19,962
 $17,905
 $1,730
 $196,595
Capital expenditures$232,832
 $26,863
 $12,645
 $977
 $273,317
Total assets$5,801,680
 $444,717
 $367,562
 $230,098
 $6,844,057
(1)
Corporate assets include cash and marketable securities(1)     Corporate assets represent the consolidated cash balance in all periods presented. Corporate assets as of May 31, 2017 also include the assets of Discontinued Services. Corporate depreciation, amortization and capital expenditures includes depreciation and amortization of Discontinued Services.


16.  Quarterly Financial Data (Unaudited)
The following is a summary of the results of operation for each of the quarters within the fiscal years ended May 31, 2019 and 2018:
May 31, 2019 (in thousands)
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
        
Revenue$1,697,975
 $1,718,268
 $1,682,330
 $1,793,730
Gross margin$774,712
 $775,158
 $755,153
 $823,565
Net income, continuing operations$212,547
 $242,994
 $200,923
 $226,171
Basic earnings per share, continuing operations$1.96
 $2.25
 $1.89
 $2.13
Diluted earnings per share, continuing operations$1.89
 $2.18
 $1.83
 $2.06
Weighted average number of shares outstanding106,835
 106,475
 105,080
 105,018
May 31, 2018 (in thousands)
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
        
Revenue$1,611,503
 $1,606,441
 $1,589,138
 $1,669,550
Gross margin$739,353
 $716,369
 $700,463
 $752,338
Net income, continuing operations$161,108
 $137,737
 $295,789
 $189,298
Basic earnings per share, continuing operations$1.50
 $1.27
 $2.73
 $1.74
Diluted earnings per share, continuing operations$1.45
 $1.24
 $2.66
 $1.68
Weighted average number of shares outstanding105,740
 106,340
 106,558
 106,593

17.  Discontinued Operations
In fiscal 2018, Cintas sold a significant business referred to as Discontinued Services and received $127.8 million of proceeds from the sale. Prior to the sale, Discontinued Services was primarily included in All Other and was classified as held for sale. In fiscal 2015 and 2016, Cintas sold the storage business (Storage) and the investment in the Shred-it Partnership (Shred-it), respectively. In accordance with the applicable accounting guidance for the disposal of long-lived assets, the results of Discontinued Services, Storage and Shred-it have been excluded from both continuing operations and operating segment results for all periods presented.

In fiscal 2017, we received additional proceeds related to the sale of Storage and Shred-it and realized a pre-tax gain of $2.4 million and $25.5 million, respectively, as a result of the additional consideration received. During fiscal 2019, we received the final proceeds related to contingent consideration on the sale of Shred-it and realized a pre-tax gain of $3.2 million.

Following is selected financial information included in net income from discontinued operations for Discontinued Services, Storage and Shred-it for the fiscal years ended May 31:
65
(In thousands)2019 2018 2017
      
Revenue$—
 $10,773
 $105,559
      
(Loss) income before income taxes, excluding gains from sale
    transactions and investments
(97) (2,433) 10,622
Income tax benefit (expense)24
 706
 (3,930)
Gain on sale of business3,200
 96,400
 27,857
Income tax expense on net gain(781) (36,019) (11,127)
Net income from discontinued operations$2,346
 $58,654
 $23,422


18.  G&K Services, Inc. Transaction and Integration Expenses
As a result of the acquisition of G&K in fiscal 2017, the Company incurred $14.4 million, $41.9 million and $79.2 million, in transaction and integration expenses in fiscal 2019, 2018 and 2017, respectively. In fiscal 2019, the Company incurred integration expenses directly related to the acquisition of $16.9 million, which primarily consisted of facility closure expenses, partially offset by a $2.5 million adjustment to the accrual for employee termination expenses previously recognized under ASC Topic 712, "Compensation - Nonretirement Postemployment Benefits" (Topic 712). The $41.9 million of costs incurred in fiscal 2018 related to lease cancellation costs, facility closure expenses and other integration expenses directly related to the acquisition. In fiscal 2017, the expenses related to asset impairment charges of $23.3 million and other transaction and integration expenses of $55.9 million, which consisted of the following: $17.4 million of legal and professional fees directly related to the acquisition, $31.0 million of employee termination expenses recognized under Topic 712, $5.5 million write-off of excess inventory and $2.0 million of other miscellaneous integration expenses.

The transaction and integration expenses for all fiscal years are included in a single line in the consolidated statements of income and are reported by operating segment in Note 15 entitled Operating Segment Information. Our accounting policy for long-lived assets is described in Note 1 entitled Significant Accounting Policies. The asset impairment charges in fiscal 2017 of $23.3 million relate to the write-down of machinery and equipment and other fixed assets to their fair value in G&K plants and branches that were identified by the Company on April 30, 2017 for future closure. The Company determined that these assets cannot be used for other purposes, and the undiscounted projected future cash flows associated with these assets are less than their carrying value at April 30, 2017. The fair value utilized for purposes of the asset impairment analysis was determined by using Level 2 inputs based on both the cost and market approaches.

The amount of employee termination benefits paid during the fiscal year ended May 31, 2019, 2018 and 2017 was $3.8 million, $15.2 million and $6.7 million, respectively, which resulted in a related liability balance of $2.8 million, $9.1 million and $24.3 million, respectively. We anticipate the remaining accrued employee termination benefits to be paid by the end of the next fiscal year.

19.  Supplemental Guarantor Information
Cintas Corporation No. 2 (Corp. 2) is the indirectly, wholly-owned principal operating subsidiary of Cintas. Corp. 2 is the issuer of the $112.5 million aggregate principal amount of commercial paper, term loan of $200.0 million and the $2,550.0 million aggregate principal amount of senior notes outstanding as of May 31, 2019, which are unconditionally guaranteed, jointly and severally, by Cintas Corporation and its wholly-owned, direct and indirect domestic subsidiaries.
As allowed by Securities and Exchange Commission rules, the following condensed consolidating financial statements are provided as an alternative to filing separate financial statements of the guarantors. Each of the subsidiaries presented in the following condensed consolidating financial statements has been fully consolidated in Cintas' consolidated financial statements. The following condensed consolidating financial statements should be read in conjunction with the consolidated financial statements of Cintas and notes thereto of which this note is an integral part.
Condensed consolidating financial statements for Cintas, Corp. 2, the subsidiary guarantors and non-guarantors are presented on the following pages:


Condensed Consolidating Income Statement

Year Ended May 31, 2019
(in thousands)
Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Revenue:           
 Uniform rental and facility
    services
$—
 $4,506,235
 $728,463
 $404,226
 $(86,494) $5,552,430
 Other—
 2,125,827
 190
 96,545
 (882,689) 1,339,873
 Equity in net income of
   affiliates
882,635
 —
 —
 —
 (882,635) —
 Total revenue882,635
 6,632,062
 728,653
 500,771
 (1,851,818) 6,892,303
            
Costs and expenses (income):           
Cost of uniform rental and
   facility services
—
 2,518,588
 445,116
 260,366
 (196,471) 3,027,599
Cost of other—
 1,479,797
 (66,349) 72,066
 (749,398) 736,116
Selling and administrative
   expenses
—
 2,233,197
 (343,532) 125,864
 (34,885) 1,980,644
G&K Services, Inc. integration
   expenses
—
 8,709
 3,559
 2,142
 —
 14,410
Operating income882,635
 391,771
 689,859
 40,333
 (871,064) 1,133,534
            
Gain on sale of a cost method investment—
 —
 69,373
 —
 —
 69,373
            
Interest income—
 (812) (371) (52) 7
 (1,228)
Interest expense (income)—
 102,466
 (745) 15
 —
 101,736
            
Income before income taxes882,635
 290,117
 760,348
 40,370
 (871,071) 1,102,399
Income tax expense—
 58,378
 151,861
 9,630
 (105) 219,764
Income from continuing
    operations
882,635
 231,739
 608,487
 30,740
 (870,966) 882,635
Income from discontinued
    operations, net of tax
2,346
 2,346
 —
 —
 (2,346) 2,346
Net income$884,981
 $234,085
 $608,487
 $30,740
 $(873,312) $884,981



Condensed Consolidating Income Statement

Year Ended May 31, 2018
(in thousands)
Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Revenue:           
Uniform rental and facility
   services
$—
 $4,361,716
 $681,846
 $400,792
 $(197,230) $5,247,124
Other—
 1,778,845
 112
 88,092
 (637,541) 1,229,508
Equity in net income of
   affiliates
783,932
 —
 —
 —
 (783,932) —
Total revenue783,932
 6,140,561
 681,958
 488,884
 (1,618,703) 6,476,632
            
Costs and expenses (income):           
Cost of uniform rental and
   facility services
—
 2,511,854
 418,722
 254,718
 (298,335) 2,886,959
Cost of other—
 1,183,036
 (57,220) 62,368
 (507,034) 681,150
Selling and administrative
   expenses
—
 2,093,655
 (271,222) 125,545
 (31,186) 1,916,792
G&K Services, Inc. transaction
    and integration expenses
—
 15,383
 22,148
 4,366
 —
 41,897
Operating income783,932
 336,633
 569,530
 41,887
 (782,148) 949,834
            
Interest income—
 (310) (242) (793) 3
 (1,342)
Interest expense (income)—
 111,292
 (1,017) (100) —
 110,175
            
Income before income taxes783,932
 225,651
 570,789
 42,780
 (782,151) 841,001
Income tax (benefit) expense—
 (48,907) 90,886
 15,212
 (122) 57,069
Income from continuing
   operations
783,932
 274,558
 479,903
 27,568
 (782,029) 783,932
Income (loss) from discontinued
    operations, net of tax
58,654
 68,293
 (9,688) —
 (58,605) 58,654
Net income$842,586
 $342,851
 $470,215
 $27,568
 $(840,634) $842,586


Condensed Consolidating Income Statement

Year Ended May 31, 2017
(in thousands)
Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Revenue:           
Uniform rental and facility
   services
$—
 $3,511,483
 $604,679
 $257,288
 $(170,960) $4,202,490
Other—
 1,604,877
 1,810
 73,006
 (558,802) 1,120,891
Equity in net income of
   affiliates
457,286
 —
 —
 —
 (457,286) —
Total revenue457,286
 5,116,360
 606,489
 330,294
 (1,187,048) 5,323,381
            
Costs and expenses (income):           
Cost of uniform rental and
   facility services
—
 2,021,365
 378,404
 164,969
 (256,964) 2,307,774
Cost of other—
 1,070,780
 (41,509) 56,210
 (450,169) 635,312
Selling and administrative
   expenses
—
 1,686,209
 (220,887) 87,672
 (25,614) 1,527,380
G&K Services, Inc. transaction
   and integration expenses
—
 51,868
 19,060
 8,296
 —
 79,224
Operating income457,286
 286,138
 471,421
 13,147
 (454,301) 773,691
            
Interest income—
 (26) (191) (22) 2
 (237)
Interest expense (income)—
 89,706
 (2,978) (204) —
 86,524
            
Income before income taxes457,286
 196,458
 474,590
 13,373
 (454,303) 687,404
Income tax expense—
 65,829
 159,025
 5,365
 (101) 230,118
Income from continuing
    operations
457,286
 130,629
 315,565
 8,008
 (454,202) 457,286
Income from discontinued
    operations, net of tax
23,422
 22,287
 —
 1,135
 (23,422) 23,422
Net income$480,708
 $152,916
 $315,565
 $9,143
 $(477,624) $480,708


Condensed Consolidating Statement of Comprehensive Income

Year Ended May 31, 2019
(in thousands)
Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Net income$884,981
 $234,085
 $608,487
 $30,740
 $(873,312) $884,981
            
Other comprehensive (loss)
   income, net of tax:
          
Foreign currency translation
    adjustments
(21,572) —
 —
 (21,572) 21,572
 (21,572)
Change in fair value of interest
   rate lock agreements
(27,659) (27,659) —
 —
 27,659
 (27,659)
Amortization of interest rate
    lock agreements
(1,179) (1,179) —
 —
 1,179
 (1,179)
Other(5,085) (4,489) (596) —
 5,085
 (5,085)
            
Other comprehensive loss(55,495) (33,327) (596) (21,572) 55,495
 (55,495)
            
Comprehensive income$829,486
 $200,758
 $607,891
 $9,168
 $(817,817) $829,486


Condensed Consolidating Statement of Comprehensive Income

Year Ended May 31, 2018
(in thousands)
Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Net income$842,586
 $342,851
 $470,215
 $27,568
 $(840,634) $842,586
            
Other comprehensive income
   (loss), net of tax:
           
Foreign currency translation
    adjustments
19,276
 —
 —
 19,276
 (19,276) 19,276
Amortization of interest rate
    lock agreements
(933) (933) —
 —
 933
 (933)
Other1,029
 267
 762
 —
 (1,029) 1,029
            
Other comprehensive income (loss)19,372
 (666) 762
 19,276
 (19,372) 19,372
            
Comprehensive income$861,958
 $342,185
 $470,977
 $46,844
 $(860,006) $861,958


Condensed Consolidating Statement of Comprehensive Income

Year Ended May 31, 2017
(in thousands)
Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Net income$480,708
 $152,916
 $315,565
 $9,143
 $(477,624) $480,708
            
Other comprehensive (loss)
   income, net of tax:
           
Foreign currency translation
    adjustments
(10,252) —
 —
 (10,252) 10,252
 (10,252)
Change in fair value of cash
    flow hedges
31,136
 31,136
 —
 —
 (31,136) 31,136
Amortization of interest rate
    lock agreements
1,076
 1,076
 —
 —
 (1,076) 1,076
 Other(115) —
 (115) —
 115
 (115)
            
Other comprehensive income (loss)21,845
 32,212
 (115) (10,252) (21,845) 21,845
            
Comprehensive income (loss)$502,553
 $185,128
 $315,450
 $(1,109) $(499,469) $502,553



Condensed Consolidating Balance Sheet

As of May 31, 2019
(in thousands)
Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Assets           
Current assets:           
Cash and cash equivalents$—
 $54,963
 $13,151
 $28,531
 $—
 $96,645
Accounts receivable, net—
 719,914
 121,803
 68,403
 —
 910,120
Inventories, net—
 278,666
 35,081
 20,842
 —
 334,589
Uniforms and other rental
   items in service
—
 645,862
 90,458
 60,061
 (12,248) 784,133
Income taxes, current—
 (9,728) 11,722
 5,481
 —
 7,475
Prepaid expenses and other
    current assets
—
 81,117
 20,334
 1,867
 —
 103,318
Total current assets—
 1,770,794
 292,549
 185,185
 (12,248) 2,236,280
            
Property and equipment, net—
 948,830
 369,006
 112,849
 —
 1,430,685
            
Investments (1)
321,083
 3,589,234
 964,802
 1,716,870
 (6,399,643) 192,346
Goodwill—
 —
 2,586,406
 256,147
 (112) 2,842,441
Service contracts, net—
 427,437
 —
 67,158
 —
 494,595
Other assets, net2,216,391
 211,102
 5,424,413
 1,716
 (7,613,307) 240,315
 $2,537,474
 $6,947,397
 $9,637,176
 $2,339,925
 $(14,025,310) $7,436,662
            
Liabilities and
Shareholders' Equity
           
Current liabilities:           
Accounts payable$(465,247) $(2,090,954) $2,793,558
 $(48,769) $37,432
 $226,020
Accrued compensation and
    related liabilities
—
 117,404
 26,870
 11,235
 —
 155,509
Accrued liabilities—
 84,296
 328,267
 21,377
 —
 433,940
Debt due within one year—
 312,264
 —
 —
 —
 312,264
Total current liabilities(465,247) (1,576,990) 3,148,695
 (16,157) 37,432
 1,127,733
            
Long-term liabilities: 
  
  
  
  
  
Debt due after one year—
 2,537,507
 —
 —
 —
 2,537,507
Deferred income taxes—
 307,334
 100,162
 30,683
 —
 438,179
Accrued liabilities—
 116,469
 197,934
 16,119
 —
 330,522
Total long-term liabilities—
 2,961,310
 298,096
 46,802
 —
 3,306,208
Total shareholders' equity3,002,721
 5,563,077
 6,190,385
 2,309,280
 (14,062,742) 3,002,721
 $2,537,474
 $6,947,397
 $9,637,176
 $2,339,925
 $(14,025,310) $7,436,662
(1) Investments include inter company investment activity. Corp 2 and Subsidiary Guarantors hold $19.8 million and $172.5 million, respectively, of the $192.3 million consolidated net investments.


Condensed Consolidating Balance Sheet

As of May 31, 2018
(in thousands)
Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Assets           
Current assets:           
Cash and cash equivalents$—
 $44,499
 $60,310
 $33,915
 $—
 $138,724
Accounts receivable, net—
 620,920
 120,767
 62,896
 —
 804,583
Inventories, net—
 225,581
 38,844
 15,922
 —
 280,347
Uniforms and other rental
    items in service
—
 585,108
 81,494
 54,248
 (18,589) 702,261
Income taxes, current—
 5,546
 9,258
 4,830
 —
 19,634
Prepaid expenses and other
     current assets
—
 9,453
 21,688
 1,242
 —
 32,383
Total current assets—
 1,491,107
 332,361
 173,053
 (18,589) 1,977,932
            
Property and equipment, net—
 900,014
 370,186
 112,530
 —
 1,382,730
            
Investments (1)
321,083
 3,595,668
 950,239
 1,716,070
 (6,407,479) 175,581
Goodwill—
 —
 2,579,769
 267,231
 (112) 2,846,888
Service contracts, net—
 468,283
 —
 77,485
 —
 545,768
Other assets, net2,230,196
 593
 4,381,476
 8,656
 (6,591,606) 29,315
 $2,551,279
 $6,455,665
 $8,614,031
 $2,355,025
 $(13,017,786) $6,958,214
            
Liabilities and
Shareholders' Equity
           
Current liabilities:           
Accounts payable$(465,247) $(1,724,844) $2,395,434
 $(28,216) $37,947
 $215,074
Accrued compensation and  related liabilities—
 104,560
 24,878
 11,216
 —
 140,654
Accrued liabilities—
 88,949
 308,485
 22,695
 —
 420,129
Total current liabilities(465,247) (1,531,335) 2,728,797
 5,695
 37,947
 775,857
            
Long-term liabilities: 
  
  
  
  
  
Debt due after one year—
 2,534,919
 —
 390
 —
 2,535,309
Deferred income taxes—
 215,881
 104,559
 32,141
 —
 352,581
Accrued liabilities—
 63,073
 198,181
 16,687
 —
 277,941
Total long-term liabilities—
 2,813,873
 302,740
 49,218
 —
 3,165,831
Total shareholders' equity3,016,526
 5,173,127
 5,582,494
 2,300,112
 (13,055,733) 3,016,526
 $2,551,279
 $6,455,665
 $8,614,031
 $2,355,025
 $(13,017,786) $6,958,214
(1) Investments include inter company investment activity. Corp 2 and Subsidiary Guarantors hold $17.6 million and $158.0 million, respectively, of the $175.6 million consolidated net investments.



Condensed Consolidating Statement of Cash Flows
Year Ended May 31, 2019
(in thousands)
Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Cash flows from operating activities:           
Net income$884,981
 $234,085
 $608,487
 $30,740
 $(873,312) $884,981
Adjustments to reconcile net income to net cash provided by (used in) operating activities:           
Depreciation—
 155,778
 53,519
 14,334
 —
 223,631
Amortization of intangible assets and
   capitalized contract costs
—
 123,133
 5,118
 8,211
 —
 136,462
Stock-based compensation139,210
 —
 —
 —
 —
 139,210
Gain on sale of a cost method investment—
 —
 (69,373) —
 —
 (69,373)
     Gain on sale of business—
 (3,200) —
 —
 —
 (3,200)
Deferred income taxes—
 36,254
 (4,416) (130) —
 31,708
Changes in current assets and liabilities, net of acquisitions of businesses:           
Accounts receivable, net—
 (85,568) (1,037) (8,313) —
 (94,918)
Inventories, net—
 (64,149) 8,314
 (4,204) —
 (60,039)
Uniforms and other rental items in service—
 (60,745) (13,514) (9,628) (6,341) (90,228)
Prepaid expenses and other current
   assets and capitalized contract costs
—
 (98,528) (1,538) (699) —
 (100,765)
Accounts payable—
 (359,733) 368,519
 4,005
 (515) 12,276
Accrued compensation and related liabilities—
 12,844
 1,992
 485
 —
 15,321
Accrued liabilities and other—
 15,624
 15,521
 (235) —
 30,910
Income taxes, current—
 15,274
 (2,472) (916) —
 11,886
Net cash provided by (used in) operating activities1,024,191
 (78,931) 969,120
 33,650
 (880,168) 1,067,862
            
Cash flows from investing activities:           
Capital expenditures—
 (204,601) (52,622) (19,496) —
 (276,719)
Purchase of marketable securities and investments—
 6,434
 (14,439) —
 (9,836) (17,841)
Proceeds from sale of a cost method investment—
 —
 73,342
 —
 —
 73,342
Proceeds from sale of business—
 3,200
 —
 —
 —
 3,200
Acquisitions of businesses, net of cash acquired—
 (9,813) —
 —
 —
 (9,813)
Other, net147,409
 (4,213) (1,025,822) (15,185) 890,004
 (7,807)
Net cash provided by (used in) investing activities147,409
 (208,993) (1,019,541) (34,681) 880,168
 (235,638)
            
Cash flows from financing activities:           
Issuance of commercial paper, net—
 112,500
 —
 —
 —
 112,500
Proceeds from issuance of debt, net—
 200,000
 3,262
 (3,262) —
 200,000
Proceeds from exercise of stock-based
   compensation awards
65,371
 —
 —
 —
 —
 65,371
Dividends paid(220,671) —
 —
 (93) —
 (220,764)
Repurchase of common stock(1,016,300) —
 —
 —
 —
 (1,016,300)
Other, net—
 (14,112) —
 —
 —
 (14,112)
Net cash (used in) provided by financing activities(1,171,600) 298,388
 3,262
 (3,355) —
 (873,305)
            
Effect of exchange rate changes on cash and cash equivalents—
 —
 —
 (998) —
 (998)
Net increase (decrease) in cash and cash
   equivalents
—
 10,464
 (47,159) (5,384) —
 (42,079)
Cash and cash equivalents at beginning of year—
 44,499
 60,310
 33,915
 —
 138,724
Cash and cash equivalents at end of year$—
 $54,963
 $13,151
 $28,531
 $—
 $96,645


Condensed Consolidating Statement of Cash Flows
Year Ended May 31, 2018
(in thousands)
Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Cash flows from operating activities:           
Net income$842,586
 $342,851
 $470,215
 $27,568
 $(840,634) $842,586
Adjustments to reconcile net income to net cash
    provided by operating activities:
           
Depreciation—
 143,301
 58,206
 13,969
 —
 215,476
Amortization of intangible assets—
 50,231
 5,102
 8,607
 —
 63,940
Stock-based compensation112,835
 —
 —
 —
 —
 112,835
(Gain) loss on sale of business—
 (111,921) 15,521
 —
 

 (96,400)
Deferred income taxes—
 (80,328) (38,906) (61) —
 (119,295)
Changes in current assets and liabilities,
   net of acquisitions of businesses:
           
Accounts receivable, net—
 (76,945) 17,129
 (6,451) —
 (66,267)
Inventories, net—
 15,080
 (17,377) 360
 (1,386) (3,323)
Uniforms and other rental items in service—
 (51,682) (3,483) (8,730) (404) (64,299)
Prepaid expenses and other current assets—
 3,676
 (19,421) 219
 —
 (15,526)
Accounts payable—
 (60,978) 108,724
 (12,310) (161) 35,275
Accrued compensation and related liabilities—
 9,522
 (18,595) (319) —
 (9,392)
Accrued liabilities and other—
 (133,671) 173,905
 2,234
 —
 42,468
Income taxes, current—
 11,874
 15,898
 (1,690) —
 26,082
Net cash provided by operating activities955,421
 61,010
 766,918
 23,396
 (842,585) 964,160
            
Cash flows from investing activities:           
Capital expenditures—
 (192,668) (65,211) (13,820) —
 (271,699)
Proceeds from redemption of marketable securities—
 13,589
 (1,189) 167,457
 —
 179,857
Purchase of marketable securities and investments—
 9,789
 (24,636) (143,861) 5,000
 (153,708)
Proceeds from sale of business—
 127,835
 —
 —
 —
 127,835
Acquisitions of businesses, net of cash acquired—
 (19,346) —
 —
 —
 (19,346)
Other, net(694,429) 599,192
 (633,629) (107,356) 837,585
 1,363
Net cash (used in) provided by investing activities(694,429) 538,391
 (724,665) (97,580) 842,585
 (135,698)
            
Cash flows from financing activities:           
Payments of commercial paper, net—
 (50,500) —
 —
 —
 (50,500)
Repayment of debt—
 (550,000) —
 —
 —
 (550,000)
Proceeds from exercise of stock-based compensation awards41,848
 —
 —
 —
 —
 41,848
Dividends paid(175,521) —
 —
 (68) —
 (175,589)
Repurchase of common stock(127,319) —
 —
 —
 —
 (127,319)
Other, net—
 (3,060) 755
 (275) —
 (2,580)
Net cash (used in) provided by financing activities(260,992) (603,560) 755
 (343) —
 (864,140)
            
Effect of exchange rate changes on cash and cash equivalents—
 —
 —
 5,136
 —
 5,136
Net (decrease) increase in cash and cash equivalents—
 (4,159) 43,008
 (69,391) —
 (30,542)
Cash and cash equivalents at beginning of year—
 48,658
 17,302
 103,306
 —
 169,266
Cash and cash equivalents at end of year$—
 $44,499
 $60,310
 $33,915
 $—
 $138,724


Condensed Consolidating Statement of Cash Flow
Year Ended May 31, 2017
(in thousands)
Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Cash flows from operating activities:           
Net income$480,708
 $152,916
 $315,565
 $9,143
 $(477,624) $480,708
Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:
           
Depreciation—
 117,578
 43,660
 10,327
 —
 171,565
Amortization of intangible assets—
 21,496
 1,178
 2,356
 —
 25,030
Stock-based compensation88,868
 —
 —
 —
 —
 88,868
Gain on sale of business—
 (24,976) —
 (1,941) —
 (26,917)
Asset impairment charge—
 20,966
 —
 2,365
 —
 23,331
G&K Services, Inc. transaction and integration
    costs
—
 26,453
 —
 4,992
 —
 31,445
Short-term debt financing fees included in
    net income
—
 17,062
 —
 —
 —
 17,062
Settlement of cash flow hedges—
 30,194
 —
 —
 —
 30,194
Deferred income taxes—
 (26,289) 26,058
 4,133
 —
 3,902
Changes in current assets and liabilities, net of
   acquisitions of businesses:

          
Accounts receivable, net—
 (50,012) (40,380) (3,165) —
 (93,557)
Inventories, net—
 7,787
 (2,317) (3,679) (2,459) (668)
Uniforms and other rental items in service—
 (4,951) (5,011) 1,959
 (729) (8,732)
Prepaid expenses and other current assets—
 21,119
 2,775
 307
 —
 24,201
Accounts payable—
 1,765,713
 (1,509,215) (242,875) 103
 13,726
Accrued compensation and related liabilities—
 (7,498) 19,815
 1,337
 —
 13,654
Accrued liabilities and other—
 2,813
 (5,675) 2,361
 —
 (501)
Income taxes, current—
 (5,205) (22,445) (1,774) —
 (29,424)
Net cash provided by (used in) operating activities569,576
 2,065,166
 (1,175,992) (214,154) (480,709) 763,887
            
Cash flows from investing activities:           
Capital expenditures—
 (153,963) (102,682) (16,672) —
 (273,317)
Proceeds from redemption of marketable securities—
 —
 —
 218,324
 —
 218,324
Purchase of marketable securities and investments—
 18,150
 (797,559) 598,344
 —
 (181,065)
Proceeds from sale of business—
 26,335
 —
 1,941
 —
 28,276
Acquisitions of businesses, net of cash acquired—
 (2,112,015) —
 9,644
 —
 (2,102,371)
Other, net(438,344) (1,562,294) 2,039,740
 (520,007) 480,709
 (196)
Net cash (used in) provided by investing activities(438,344) (3,783,787) 1,139,499
 291,574
 480,709
 (2,310,349)
            
Cash flows from financing activities:           
Proceeds from issuance of commercial paper, net—
 50,500
 —
 —
 —
 50,500
Proceeds from the issuance of debt, net—
 1,932,229
 (2,000) 2,000
 —
 1,932,229
Repayment of debt—
 (250,000) —
 —
 —
 (250,000)
Payment of short-term debt financing fees—
 (17,062) —
 —
 —
 (17,062)
Proceeds from exercise of stock-based compensation awards31,870
 —
 —
 —
 —
 31,870
Dividends paid(142,378) —
 —
 (55) —
 (142,433)
Repurchase of common stock(20,724) —
 —
 —
 —
 (20,724)
Other, net—
 (6,282) 404
 —
 —
 (5,878)
Net cash (used in) provided by financing activities(131,232) 1,709,385
 (1,596) 1,945
 —
 1,578,502
            
Effect of exchange rate changes on cash and cash equivalents—
 —
 —
 (2,131) —
 (2,131)
Net (decrease) increase in cash and cash
   equivalents
—
 (9,236) (38,089) 77,234
 —
 29,909
Cash and cash equivalents at beginning of year—
 57,894
 55,391
 26,072
 —
 139,357
Cash and cash equivalents at end of year$—
 $48,658
 $17,302
 $103,306
 $—
 $169,266


Item 9.  Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
None.


Item 9A.  Controls and Procedures
Disclosure Controls and Procedures
With the participation of Cintas' management, including Cintas' ChairmanPresident and Chief Executive Officer, Chief Financial Officer, General Counsel and Controllers, Cintas has evaluated the effectiveness of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act) as of May 31, 2019.2021. Based on such evaluation, Cintas' management, including Cintas' ChairmanPresident and Chief Executive Officer, Chief Financial Officer, General Counsel and Controllers, have concluded that Cintas' disclosure controls and procedures were effective as of May 31, 2019,2021, in ensuring (i) information required to be disclosed by Cintas in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and (ii) information required to be disclosed by Cintas in the reports that it files or submits under the Exchange Act is accumulated and communicated to Cintas' management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.


Internal Control over Financial Reporting
Management's Report on Internal Control over Financial Reporting and the Report of Ernst & Young LLP, Independent Registered Public Accounting Firm thereon are set forth in Part II, Item 8 of this Annual Report on Form 10-K and are incorporated by reference herein.
There were no changes in Cintas' internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended May 31, 2019,2021, that have materially affected, or are reasonably likely to materially affect, Cintas' internal control over financial reporting.


Item 9B.  Other Information
None.




Item 9C. Disclosure Regarding
Foreign Jurisdictions that Prevent Inspections
Not applicable.
66

Part III


Item 10.  Directors, Executive Officers and Corporate Governance
The information required under this item is incorporated herein by reference to the material contained in Cintas' definitive proxy statement for the 20192021 annual meeting of shareholders to be filed with the SEC pursuant to Regulation 14A not later than 120 days after the close of the fiscal year (the Proxy Statement).


Item 11.  Executive Compensation
The information required under this item is incorporated herein by reference to the material contained in the Proxy Statement.


Item 12.  Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters
The information required under this item is incorporated herein by reference to the material contained in the Proxy Statement, except that the information required by Item 201(d) of Regulation S-K can be found below.

The following table provides information about Cintas' common stock that may be issued under Cintas' equity compensation plans as of May 31, 2019.2021.
Equity Compensation Plan Information



Plan category
Number of shares
to be issued
upon exercise of
outstanding options (1)
Weighted average
exercise price of
outstanding options (1)
Number of shares
remaining available
for future issuance
under equity
compensation plans
Equity compensation plans approved by shareholders6,055,524 $191.11 6,358,437 
Equity compensation plans not approved by shareholders— — — 
Total6,055,524 $191.11 6,358,437 
Equity Compensation Plan Information



Plan category
Number of shares
to be issued
upon exercise of
outstanding options (1)
 
Weighted average
exercise price of
outstanding options (1)
 
Number of shares
remaining available
for future issuance
under equity
compensation plans
      
Equity compensation plans approved by shareholders8,208,934
 $123.80
 8,230,432
Equity compensation plans not approved by shareholders—
 —
 —
Total8,208,934
 $123.80
 8,230,432


(1)
Excludes 2,191,688 unvested restricted stock units.

(1)    Excludes 1,241,223 unvested restricted stock units.

Item 13.  Certain Relationships and
Related Transactions, and Director Independence
The information required under this item is incorporated herein by reference to the material contained in the Proxy Statement.


Item 14.  Principal Accountant Fees and Services
The information required under this item is incorporated herein by reference to the material contained in the Proxy Statement.




67

Part IV


Item 15.  Exhibits and Financial Statement Schedules
(a) (1)Financial Statements. All financial statements required to be filed by Item 8 of Form 10-K and included in this Annual Report are listed in Item 8. No additional financial statements are filed because the requirements of paragraph (c) under Item 15 are not applicable to Cintas.
(a) (2)Financial Statement Schedule:
For each of the three years in the period ended May 31, 2019.2021.
All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the Consolidated Financial Statements or Notes thereto.
(a) (3)Exhibits.

All documents referenced below were filed pursuant to the Exchange Act by Cintas Corporation, file number 000-11399, unless otherwise noted.
Exhibit
Number		Description of Exhibit
Exhibit
Number2.1
Description of Exhibit
2.1

***
Agreement and Plan of Merger, among Cintas Corporation, G&K Services, Inc. and Bravo Merger Sub, Inc., dated as of August 15, 2016 (Incorporated by reference to Exhibit 2.1 to Cintas' Current Report on Form 8-K filed on August 16, 2016).
3.1

Restated Articles of Incorporation, as amended (Incorporated by reference to Exhibit 4.1 to Post Effective Amendment No. 1 to Cintas' Registration Statement No. 333-136631-09 on Form S-3 filed on December 3, 2007).
3.2

Amended and Restated By-laws (Incorporated by reference to Exhibit 3.1 to Cintas' Current Report on Form 8-K filed on August 3, 2018).
4.1

Indenture dated as of May 28, 2002, among Cintas Corporation No. 2, as issuer, Cintas Corporation, as parent guarantor, the subsidiary guarantors thereto and Wachovia Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.1 to Cintas' Annual Report on Form 10-K for the year ended May 31, 2002).
4.2

Form of 6.15% Senior Note due 2036 (Incorporated by reference to Exhibit 4.3 to Cintas' Current Report on Form 8-K filed on August 21, 2006).
4.3

Form of 4.30% Senior Note due 2021 (Incorporated by reference to Exhibit 4.2 to Cintas' Current report on Form 8-K filed on May 23, 2011).
4.4

Form of 3.25% Senior Note due 2022 (Incorporated by reference to Exhibit 4.1 to Cintas' Current Report on Form 8-K filed on June 8, 2012).
4.5

Form of 2.900% Senior Notes due 2022 (Incorporated by reference to Exhibit 4.1 to Cintas' Current Report on Form 8-K filed on March 14, 2017).
4.6

Form of 3.700% Senior Notes due 2027 (Incorporated by reference to Exhibit 4.2 to Cintas' Current Report on Form 8-K filed on March 14, 2017).
4.7

Form of 3.250% Senior Notes due 2022 (Incorporated by reference to Exhibit 4.3 to Cintas' Current Report on Form 8-K filed on March 14, 2017).
4.8

Description of Securities (Incorporated by reference to Exhibit 4.8 to Cintas' Annual Report on Form 10-K for the year ended May 31, 2019).
10.1

Second Amended and Restated Credit Agreement, dated as of May 24, 2019, among Cintas No. 2, the Lenders party thereto and KeyBank National Association, as Administrative Agent (Incorporated by reference to Exhibit 10.1 to Cintas' Current Report on Form 8-K filed on May 30, 2019).
10.2

Amended and Restated Note Purchase Agreement, dated as of March 21, 2017, among G&K Services, Inc. and the Note holders (Incorporated by reference to Exhibit 4.1 to Cintas' Current Report on Form 8-K filed on March 21, 2017).
10.3
*Partners' Plan (Incorporated by reference to Cintas' Annual Report on Form 10-K for the year ended May 31, 1993).
10.4

*
First Amendment to Partners' Plan (Incorporated by reference to Exhibit 4.2 to Cintas' Registration Statement No. 33-56623 on Form S-8 filed on November 28, 1994).
10.5

*
Second Amendment to Partners' Plan (Incorporated by reference to Exhibit 4.3 to Cintas' Registration Statement No. 33-56623 on Form S-8 filed on November 28, 1994).
10.6

*
Directors' Deferred Compensation Plan (Incorporated by reference to Exhibit 10.12 to Cintas' Quarterly Report on Form 10-Q for the quarter ended November 30, 2000).
10.7

*
Form of agreement signed by Officers, General/Branch Managers, Professionals and Key Managers, including Executive Officers (Incorporated by reference to Exhibit 10 to Cintas' Quarterly Report on Form 10-Q for the quarter ended February 28, 2005).
10.8

*
President and CEO Executive Compensation Plan (Incorporated by reference to Exhibit 10.18 to Cintas' Annual Report on Form 10-K for the year ended May 31, 2005).
10.9

*
2006 Executive Incentive Plan (Incorporated by reference to Exhibit 10.19 to Cintas' Annual Report on Form 10-K for the year ended May 31, 2005).
10.10

*
2005 Equity Compensation Plan (Incorporated by reference to Cintas' Definitive Proxy Statement on Schedule 14A filed on September 1, 2005).
10.11

*
Criteria for Performance Evaluation of the President and CEO (Incorporated by reference to Exhibit 10.21 to Cintas' Annual Report on Form 10-K for the year ended May 31, 2006).
10.12

*
2007 Executive Incentive Plan (Incorporated by reference to Exhibit 10.22 to Cintas' Annual Report on Form 10-K for the year ended May 31, 2006).
10.13

*
Amendment No. 1 to 2005 Equity Compensation Plan (Incorporated by reference to Exhibit 10.17 to Cintas' Annual Report on Form 10-K for the year ended May 31, 2011).
10.14

*
Form of Restricted Stock Agreement (Incorporated by reference to Exhibit 10.18 to Cintas' Annual Report on Form 10-K for the year ended May 31, 2011).
10.15

*
Amendment No. 2 to Cintas Corporation 2005 Equity Compensation Plan (Incorporated by reference to Exhibit 10.1 to Cintas' Current Report on Form 8-K filed on July 27, 2012).
10.16

*
Form of Restricted Stock Agreement (Incorporated by reference to Exhibit 10.2 to Cintas' Current Report on Form 8-K filed on July 27, 2012).
10.17

*
Amendment No. 3 to Cintas Corporation 2005 Equity Compensation Plan (Incorporated by reference to Exhibit 10.4 to Cintas' Current Report on Form 8-K filed on October 23, 2013).
10.18

*
Amendment No. 4 to Cintas Corporation 2005 Equity Compensation Plan (Incorporated by reference to Exhibit 10.5 to Cintas' Current Report on Form 8-K filed on October 22, 2014).
10.19

*
Cintas Corporation Management Incentive Plan (Incorporated by reference to Exhibit 10.5 to Cintas' Current Report on Form 8-K filed on October 23, 2013).
10.20

*
Cintas Corporation 2016 Equity and Incentive Compensation Plan (Incorporated by reference to Exhibit 10.1 to Cintas' Current Report on Form 8-K filed on October 20, 2016).
10.21

*
Amendment No. 1 to Cintas Corporation 2016 Equity and Incentive Compensation Plan (Incorporated by reference to Exhibit 10.1 to Cintas' Quarterly Report on Form 10-Q for the quarter ended November 30, 2017).
14

Code of Ethics (Incorporated by reference to Exhibit 14 to Cintas' Annual Report on Form 10-K for the year ended May 31, 2004).
21

**
Subsidiaries of the Registrant.
22
**
Subsidiary Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize Securities of the Registrant.
23

**
Consent of Independent Registered Public Accounting Firm.
31.1

**
Certification of Principal Executive Officer, Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2

**
Certification of Principal Financial Officer, Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
32.1

**
32.2

**
101.INS
**XBRL Instance Document.
101.SCH
**XBRL Taxonomy Extension Schema Document.
101.CAL
**XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
**XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
**XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
**XBRL Taxonomy Extension Presentation Linkbase Document.

*101 Management compensatory contractsThe following financial statements from Cintas' Annual Report on Form 10-K for the fiscal year ended May 31, 2021, formatted in Inline XBRL: (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Shareholders' Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

**104 Filed herewith

***Certain exhibits and schedules have been omitted and Cintas agrees to furnish supplementally toThe cover page from Cintas' Annual Report on Form 10-K for the Securities and Exchange Commission a copy of any omitted exhibits upon request.fiscal year ended May 31, 2021, formatted in Inline XBRL (included as Exhibit 101).



*           Management compensatory contracts

**          Filed herewith

***       Pursuant to Item 601(a)(5), certain exhibits and schedules have been omitted and Cintas agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted exhibits upon request.

Item 16.  Form 10-K Summary
None.


68

Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CINTAS CORPORATION
By:/s/Scott D. FarmerTodd M. Schneider
Scott D. FarmerTodd M. Schneider
ChairmanPresident and Chief Executive Officer


DATE SIGNED: July 26, 201928, 2021



Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

SignatureCapacityDate
/s/
Todd M. Schneider
Todd M. Schneider
President, Chief Executive Officer and Director
(Principal Executive Officer)		July 28, 2021
/s/
Scott D. Farmer
Scott D. Farmer
Executive Chairman of the Board of DirectorsJuly 28, 2021
/s/
Ronald W. Tysoe
Ronald W. Tysoe
DirectorJuly 28, 2021
/s/
John F. Barrett
John F. Barrett
DirectorJuly 28, 2021
/s/
Karen L. Carnahan
Karen L. Carnahan
DirectorJuly 28, 2021
SignatureCapacityDate
/s/
Scott D. Farmer
Scott D. Farmer
Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)July 26, 2019
/s/
Ronald W. Tysoe
Ronald W. Tysoe
DirectorJuly 26, 2019
/s/
John F. Barrett
John F. Barrett
DirectorJuly 26, 2019
/s/
James J. Johnson
James J. Johnson
DirectorJuly 26, 2019
/s/
Robert E. Coletti
Robert E. Coletti
DirectorJuly 26, 2019
/s/
J. Michael Hansen
J. Michael Hansen
Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)
July 26, 201928, 2021



69

Cintas Corporation
Schedule II — Valuation and Qualifying Accounts and Reserves
(In thousands)Balance at
Beginning of Year

Additions (1)

Deductions (2)(4)
Balance at
End of Year
Allowance for Doubtful Accounts    
May 31, 2019 (3)
$10,053 $7,752 $6,462 $11,343 
May 31, 2020 (3)
$11,343 $40,521 $16,431 $35,433 
May 31, 2021$35,433 $27,517 $50,853 $12,097 

(1)Represents amounts charged to expense to increase reserve for estimated future bad debts.

(2)Represents reductions in the consolidated balance sheet reserve due to the actual write-off of non-collectible accounts receivable. These amounts do not impact Cintas' consolidated statements of income.

(3) Fiscal 2020 and fiscal 2019 have been recast to align with the allowance for doubtful account methodology and presentation upon adoption of Topic 326 on June 1, 2020.

(4) The deductions in fiscal 2021 include $14.2 million of incremental allowance for doubtful accounts recorded as of May 31, 2020 in response to uncertainties related to customer collections impacted by the COVID-19 pandemic. Certain of the corresponding trade receivables were collected during fiscal 2021, and the incremental reserve was reversed as the Company's estimates and assumptions related to the impact of COVID-19 changed during fiscal 2021.

(In thousands)
Balance at
Beginning of Year
 

Additions (1)
 

Deductions (2)
 
Balance at
End of Year
        
Allowance for Doubtful Accounts       
May 31, 2017$19,103
 $6,446
 $5,024
 $20,525
May 31, 2018$20,525
 $13,358
 $373
 $33,510
May 31, 2019$33,510
 $10,761
 $6,462
 $37,809
        
Reserve for Obsolete Inventory       
May 31, 2017$32,716
 $10,049
 $4,460
 $38,305
May 31, 2018$38,305
 $1,335
 $2,597
 $37,043
May 31, 2019$37,043
 $2,346
 $6,711
 $32,678

(1)
Represents amounts charged to expense to increase reserve for estimated future bad debts or to increase reserve for obsolete inventory. Amounts related to inventory are computed by performing a thorough analysis of future marketability by specific inventory item as well as an estimate based on Cintas' historical rates of obsolescence.

(2)
Represents reductions in the balance sheet reserve due to the actual write-off of non-collectible accounts receivable or the physical disposal of obsolete inventory items. These amounts do not impact Cintas' consolidated income statement.



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