UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
( X )QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31,November 30, 2018
 OR 
(    )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                        to                                        
 
Commission file number 0-11399
 
CINTAS CORPORATION
(Exact name of Registrant as specified in its charter)
 
WASHINGTON 31-1188630
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
 
6800 CINTAS BOULEVARD
P.O. BOX 625737
CINCINNATI, OHIO 45262-5737
(Address of principal executive offices)(Zip code)
 
(513) 459-1200
(Registrant’s telephone number, including area code)
 
Indicate by checkmark 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.
Yes   ü  No  _   
 
Indicate by checkmark 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). Yes   ü  No   _  
 
Indicate by checkmark 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.  (Check one):
Large Accelerated Filer   ü          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 checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 
Yes      No     ü  
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class Outstanding September 30,December 31, 2018
Common Stock, no par value 106,895,748104,543,895


CINTAS CORPORATION
TABLE OF CONTENTS

    Page No.
Part I.Financial Information 
     
   
     
   
Three and Six Months Ended August 31,November 30, 2018 and 2017
     
   
Three and Six Months Ended August 31,November 30, 2018 and 2017
     
   
August 31,November 30, 2018 and May 31, 2018
     
   
    ThreeSix Months Ended August 31,November 30, 2018 and 2017
     
   
     
  
     
  
     
  
     
 
     
  
Item 5.
     
  
     
  
     


Part I.  Financial Information

CINTAS CORPORATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per share data)

 Three Months Ended Six Months Ended
 November 30,
2018
 November 30,
2017
 November 30,
2018
 November 30,
2017
Revenue: 
  
    
Uniform rental and facility services$1,390,778
 $1,308,038
 $2,765,716
 $2,619,822
Other327,490
 298,403
 650,527
 598,122
Total revenue1,718,268
 1,606,441
 3,416,243
 3,217,944
        
Costs and expenses: 
  
    
Cost of uniform rental and facility services761,119
 723,960
 1,507,572
 1,430,823
Cost of other181,991
 166,112
 358,801
 331,399
Selling and administrative expenses491,671
 468,084
 996,305
 954,367
G&K Services, Inc. integration expenses7,847
 13,074
 12,697
 17,045
        
Operating income275,640
 235,211
 540,868
 484,310
        
Gain on sale of a cost method investment69,373
 
 69,373
 
        
Interest income(391) (291) (887) (588)
Interest expense24,880
 29,129
 49,184
 59,446
        
Income before income taxes320,524

206,373

561,944

425,452
Income taxes77,530
 68,636
 106,403
 126,607
Income from continuing operations242,994
 137,737
 455,541
 298,845
Income (loss) from discontinued operations,
net of tax expense of $6, tax benefit of
$624, tax benefit of $4 and tax expense
of $41,103, respectively
19
 (628) (13) 55,475
Net income$243,013
 $137,109

$455,528

$354,320
        
Basic earnings (loss) per share:       
Continuing operations$2.25
 $1.27
 $4.21
 $2.77
Discontinued operations0.00
 (0.01) 0.00
 0.51
Basic earnings per share$2.25
 $1.26

$4.21

$3.28
        
Diluted earnings (loss) per share:       
Continuing operations$2.18
 $1.24
 $4.07
 $2.69
Discontinued operations0.00
 (0.01) 0.00
 0.50
Diluted earnings per share$2.18

$1.23

$4.07

$3.19
        
Dividends declared per share$2.05
 $1.62
 $2.05
 $1.62
 Three Months Ended
 August 31,
2018
 August 31,
2017
Revenue: 
  
Uniform rental and facility services$1,374,938
 $1,311,784
Other323,037
 299,719
Total revenue1,697,975
 1,611,503
    
Costs and expenses: 
  
Cost of uniform rental and facility services746,453
 706,863
Cost of other176,810
 165,287
Selling and administrative expenses504,634
 486,283
G&K Services, Inc. integration expenses4,850
 3,971
    
Operating income265,228
 249,099
    
Interest income(496) (297)
Interest expense24,304
 30,317
    
Income before income taxes241,420

219,079
Income taxes28,873
 57,971
Income from continuing operations212,547
 161,108
(Loss) income from discontinued operations, net of tax benefit of $10
   and tax expense of $41,727, respectively
(32) 56,103
Net income$212,515
 $217,211
    
Basic earnings per share:   
Continuing operations$1.96
 $1.50
Discontinued operations0.00
 0.52
Basic earnings per share$1.96
 $2.02
    
Diluted earnings per share:   
Continuing operations$1.89
 $1.45
Discontinued operations0.00
 0.51
Diluted earnings per share$1.89

$1.96
 

See accompanying notes.


CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)

Three Months EndedThree Months Ended Six Months Ended
August 31, 2018 August 31, 2017November 30, 2018 November 30, 2017 November 30, 2018 November 30, 2017
          
Net income$212,515
 $217,211
$243,013
 $137,109
 $455,528
 $354,320
          
Other comprehensive (loss) income, net of tax:          
Foreign currency translation adjustments(3,019) 35,184
(10,623) (11,374) (13,642) 23,810
Change in fair value of interest rate lock agreements(3,168) 
4,921
 
 1,753
 
Amortization of interest rate lock agreements(295) (172)(294) (172) (589) (344)
Change in fair value of available-for-sale securities
 20

 (20) 
 
          
Other comprehensive (loss) income(6,482) 35,032
(5,996) (11,566) (12,478) 23,466
          
Comprehensive income$206,033
 $252,243
$237,017
 $125,543
 $443,050
 $377,786

See accompanying notes.








CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except share data)
August 31,
2018
 May 31,
2018
November 30,
2018
 May 31,
2018
(Unaudited)  
(Unaudited)  
ASSETS 
  
 
  
Current assets: 
  
 
  
Cash and cash equivalents$118,356
 $138,724
$88,479
 $138,724
Accounts receivable, net838,192
 804,583
904,062
 804,583
Inventories, net303,770
 280,347
321,874
 280,347
Uniforms and other rental items in service724,708
 702,261
758,246
 702,261
Income taxes, current6,878
 19,634
36,595
 19,634
Prepaid expenses and other current assets112,474
 32,383
106,614
 32,383
Total current assets2,104,378
 1,977,932
2,215,870
 1,977,932
      
Property and equipment, net1,394,634
 1,382,730
1,410,530
 1,382,730
      
Investments180,262
 175,581
183,548
 175,581
Goodwill2,850,082
 2,846,888
2,845,244
 2,846,888
Service contracts, net535,865
 545,768
521,505
 545,768
Other assets, net221,983
 29,315
228,386
 29,315
$7,287,204
 $6,958,214
$7,405,083
 $6,958,214
      
LIABILITIES AND SHAREHOLDERS’ EQUITY 
  
 
  
Current liabilities: 
  
 
  
Accounts payable$214,011
 $215,074
$211,900
 $215,074
Accrued compensation and related liabilities84,308
 140,654
117,645
 140,654
Accrued liabilities380,775
 420,129
611,641
 420,129
Debt due within one year173,500
 
Total current liabilities679,094
 775,857
1,114,686
 775,857
      
Long-term liabilities: 
  
 
  
Debt due after one year2,535,859
 2,535,309
2,536,408
 2,535,309
Deferred income taxes424,344
 352,581
435,461
 352,581
Accrued liabilities301,939
 277,941
291,284
 277,941
Total long-term liabilities3,262,142
 3,165,831
3,263,153
 3,165,831
      
Shareholders’ equity: 
  
 
  
Preferred stock, no par value:
 

 
100,000 shares authorized, none outstanding

 



 

Common stock, no par value:796,988
 618,464
804,234
 618,464
425,000,000 shares authorized 
  
 
  
FY 2019: 184,055,883 shares issued and 106,969,908 shares outstanding 
  
FY 2019: 184,152,836 shares issued and 105,123,513 shares outstanding 
  
FY 2018: 182,723,471 shares issued and 106,326,383 shares outstanding      
Paid-in capital140,371
 245,211
166,837
 245,211
Retained earnings6,239,535
 5,837,827
6,261,756
 5,837,827
Treasury stock:(3,840,787) (3,701,319)(4,209,448) (3,701,319)
FY 2019: 77,085,975 shares 
  
FY 2019: 79,029,323 shares 
  
FY 2018: 76,397,088 shares      
Accumulated other comprehensive income9,861
 16,343
3,865
 16,343
Total shareholders’ equity3,345,968
 3,016,526
3,027,244
 3,016,526
$7,287,204
 $6,958,214
$7,405,083
 $6,958,214
See accompanying notes.


CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) 
Three Months EndedSix Months Ended
August 31,
2018
 August 31,
2017
November 30,
2018
 November 30,
2017
Cash flows from operating activities: 
  
 
  
Net income$212,515
 $217,211
$455,528
 $354,320
Adjustments to reconcile net income to net cash provided by operating activities: 
  
 
  
Depreciation52,745
 53,568
107,112
 107,578
Amortization of intangible assets and capitalized contract costs33,550
 14,941
67,559
 31,261
Stock-based compensation46,172
 28,630
74,784
 55,204
Gain on sale of a cost method investment(69,373) 
Gain on sale of business
 (100,269)
 (99,060)
Deferred income taxes9,022
 24,938
19,227
 42,162
Change in current assets and liabilities, net of acquisitions of businesses: 
  
 
  
Accounts receivable, net(15,051) 8,955
(85,748) (24,800)
Inventories, net(34,629) (5,827)(53,227) 2,595
Uniforms and other rental items in service(23,019) (13,058)(57,684) (33,294)
Prepaid expenses and other current assets and other assets, net(46,930) (16,011)
Prepaid expenses and other current assets and capitalized
contract costs
(58,161) (18,573)
Accounts payable(329) 17,684
(1,955) (8,706)
Accrued compensation and related liabilities(56,186) (30,306)(20,969) (36,480)
Accrued liabilities and other(27,556) (16,218)(15,322) (1,940)
Income taxes, current12,681
 70,128
(17,204) 8,742
Net cash provided by operating activities162,985
 254,366
344,567
 379,009
      
Cash flows from investing activities: 
  
 
  
Capital expenditures(64,528) (62,517)(137,614) (132,466)
Proceeds from redemption of marketable securities1,558
 65,256

 100,259
Purchase of marketable securities and investments
 (58,022)(14,071) (99,877)
Proceeds from sale of a cost method investment73,342
 
Proceeds from sale of business
 128,511

 127,835
Acquisitions of businesses, net of cash acquired(7,613) (302)(6,580) (1,099)
Other, net(202) (304)(1,717) (870)
Net cash (used in) provided by investing activities(70,785) 72,622
Net cash used in investing activities(86,640) (6,218)
      
Cash flows from financing activities: 
  
 
  
Payments of commercial paper, net
 (43,000)
Issuance (payments) of commercial paper, net173,500
 (50,500)
Repayment of debt
 (250,000)
 (250,000)
Proceeds from exercise of stock-based compensation awards27,512
 17,256
32,612
 28,558
Repurchase of common stock(139,468) (35,040)(508,129) (35,697)
Other, net(552) (649)(5,362) (1,882)
Net cash used in financing activities(112,508) (311,433)(307,379) (309,521)
      
Effect of exchange rate changes on cash and cash equivalents(60) 6,593
(793) 3,466
      
Net (decrease) increase in cash and cash equivalents(20,368) 22,148
(50,245) 66,736
      
Cash and cash equivalents at beginning of period138,724
 169,266
138,724
 169,266
      
Cash and cash equivalents at end of period$118,356
 $191,414
$88,479
 $236,002
See accompanying notes.


CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited) 

1.    Basis of Presentation
 
The consolidated condensed financial statements of Cintas Corporation (Cintas, the Company, we, us or our) included herein have been prepared by Cintas, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. While we believe that the disclosures are adequately presented, we suggest that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2018. A summary of our significant accounting policies is presented beginning on page 39 of that report. There have been no material changes in the accounting policies followed by Cintas during the current fiscal year other than the adoption of new accounting pronouncements discussed below. 
 
Interim results are subject to variations and are not necessarily indicative of the results of operations for a full fiscal year. In the opinion of management, adjustments (which include only normal recurring adjustments) necessary for a fair statement of the consolidated results of the interim periods shown have been made.

On March 21, 2017, Cintas completed the acquisition of G&K Services, Inc. (G&K) for consideration of approximately $2.1 billion. G&K is now a wholly-owned subsidiary of Cintas that operates within the Uniform Rental and Facility Services operating segment. To finance the G&K acquisition, Cintas used a combination of new senior notes, a term loan, other borrowings under its existing credit facility (see Note 7 entitled Debt, Derivatives and Hedging Activities for additional discussion related to debt obligations) and cash on hand. G&K's results of operations are included in Cintas' consolidated financial statements as of and from the date of acquisition.

During the three months ended August 31, 2017, Cintas sold a significant business, referred to as "Discontinued Services," and as a result, its operations are classified as discontinued operations for all periods presented. See Note 12 entitled Discontinued Operations for more information.

Inventories, net are measured at the lower of cost (first-in, first-out) or net realizable value. Inventory is comprised of the following amounts at: 
(In thousands)August 31,
2018
 May 31,
2018
November 30,
2018
 May 31,
2018
      
Raw materials$17,220
 $17,042
$14,005
 $17,042
Work in process31,840
 27,350
32,420
 27,350
Finished goods254,710
 235,955
275,449
 235,955
$303,770
 $280,347
$321,874
 $280,347
Inventories are recorded net of reserves for obsolete inventory of $31.2$31.9 million and $37.0 million at August 31,November 30, 2018 and May 31, 2018, respectively.
 


New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard 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 condensed financial statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts within the portfolio. The Company also continues to expense certain costs to obtain a contract if those costs do not meet the criteria of the 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 condensed financial statements are presented in the following tables:
Three Months Ended
 August 31, 2018
Six Months Ended
November 30, 2018
Consolidated Condensed Statement of Income
(In thousands)

As
 Reported
 
Under
 Historical Guidance
 
Impact of Adopting
ASU 2014-09

As
 Reported
 
Under
 Historical Guidance
 
Impact of Adopting
ASU 2014-09
          
Revenue:  
       
Uniform rental and facility services$1,374,938
 $1,375,833
 $(895)$2,765,716
 $2,767,884
 $(2,168)
Other323,037
 322,660
 377
650,527
 649,802
 725
Total revenue1,697,975
 1,698,493
 (518)3,416,243
 3,417,686
 (1,443)
          
Costs and expenses:          
Cost of other176,810
 176,404
 406
358,801
 357,902
 899
Selling and administrative expenses504,634
 511,674
 (7,040)996,305
 1,010,394
 (14,089)
Operating income265,228
 259,112
 6,116
540,868
 529,121
 11,747
          
Income before income taxes241,420
 235,304
 6,116
561,944
 550,197
 11,747
Income taxes28,873
 27,328
 1,545
106,403
 103,537
 2,866
Income from continuing operations212,547
 207,976
 4,571
455,541
 446,660
 8,881
Net income$212,515
 $207,944
 $4,571
$455,528
 $446,647
 $8,881
          
Diluted earnings per share$1.89
 $1.85
 $0.04
$4.07
 $3.99
 $0.08

Balance at
August 31, 2018
Balance at
November 30, 2018
Consolidated Condensed Balance Sheet
(In thousands)

As
 Reported
 
Under
 Historical Guidance
 
Impact of Adopting
ASU 2014-09

As
 Reported
 
Under
 Historical Guidance
 
Impact of Adopting
ASU 2014-09
          
ASSETS          
Accounts receivable, net$838,192
 $824,328
 $13,864
$904,062
 $889,716
 $14,346
Inventories, net303,770
 315,388
 (11,618)321,874
 334,038
 (12,164)
Income taxes, current6,878
 6,114
 764
36,595
 36,600
 (5)
Prepaid expenses and other current assets112,474
 47,139
 65,335
106,614
 39,642
 66,972
Total current assets2,104,378
 2,036,033
 68,345
2,215,870
 2,146,721
 69,149
          
Other assets, net221,983
 30,321
 191,662
228,386
 32,666
 195,720
          
Total assets$7,287,204
 $7,027,197
 $260.007
$7,405,083
 $7,140,214
 $264,869
          
LIABILITIES AND SHAREHOLDERS’ EQUITY          
     
Long-term liabilities:     
Deferred income taxes$424,344
 $358,188
 $66,156
$435,461
 $368,665
 $66,796
Total long-term liabilities3,262,142
 3,195,986
 66,156
3,263,153
 3,196,357
 66,796
          
Retained earnings6,239,535
 6,045,684
 193,851
6,261,756
 6,063,683
 198,073
Total shareholders' equity3,345,968
 3,152,117
 193,851
3,027,244
 2,829,171
 198,073
          
Total liabilities and shareholders' equity$7,287,204
 $7,027,197
 $260,007
$7,405,083
 $7,140,214
 $264,869

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 condensed 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),” which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). 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. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The guidance also requires disclosures that meet the objective of enabling financial statement users to assess the amount, timing, and uncertainty of cash flows arising from leases. Topic 842 supersedes the previous leases standard, Accounting Standards Codification (ASC) 840, "Leases." This guidance is effective for reporting periods beginning after December 15, 2018, however, early adoption is permitted. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Cintas will adopt this ASU on June 1, 2019 and we expect to elect the practical expedient which will allow us to not apply the amended lease accounting guidance to comparative periods that will be presented. The Company is implementing new lease systems in connection with the adoption. The Companyadoption and is also evaluating the impact that ASU 2016-02 will have on its consolidated condensed financial statements. The majority of our lease spend relates to certain real estate with the remaining lease spend primarily related to equipment. We currently expect the adoption of this standard to result in a material increase to the assets and liabilities on the consolidated balance sheets, but we do not expect a material impact on the consolidated condensed statements of income or consolidated condensed statements of cash flows.

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 JanuaryJune 1, 2018 did not have a material impact on its consolidated condensed 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 an impact on the consolidated condensed 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 resulting from the Tax Cuts and Jobs Act (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, however, early adoption is permitted. Cintas is currently evaluating the impact that ASU 2018-02 will have on its consolidated condensed 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 condensed financial statements.

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




2.    Revenue Recognition
The following table presents Cintas' total revenue disaggregated by service type:
 Three Months Ended
 
August 31,
 2018
 
August 31,
 2017
(In thousands)Revenue% Revenue%
      
Uniform Rental and Facility Services$1,374,938
81.0% $1,311,784
81.4%
First Aid and Safety Services153,417
9.0% 140,582
8.7%
Fire Protection Services98,109
5.8% 86,547
5.4%
Uniform Direct Sales71,511
4.2% 72,590
4.5%
Total Revenue$1,697,975
100.0% $1,611,503
100.0%

 Three Months Ended Six Months Ended
 
November 30,
2018
 
November 30,
2017
 
November 30,
2018
 
November 30,
2017
(In thousands)Revenue% Revenue% Revenue% Revenue%
            
Uniform Rental and
   Facility Services
$1,390,778
81.0% $1,308,038
81.4% $2,765,716
81.0% $2,619,822
81.4%
First Aid and Safety
   Services
153,348
8.9% 139,090
8.7% 306,765
9.0% 279,672
8.7%
Fire Protection
   Services
96,183
5.6% 80,949
5.0% 194,292
5.7% 167,496
5.2%
Uniform Direct Sales77,959
4.5% 78,364
4.9% 149,470
4.3% 150,954
4.7%
Total revenue$1,718,268
100.0% $1,606,441
100.0% $3,416,243
100.0% $3,217,944
100.0%

For the three and six months ended August 31,November 30, 2018, the percentage of revenue recognized over time as the services are performed was 95.9%94.7% and 95.2%, respectively, of Uniform Rental and Facility Services revenue, 90.8% and 90.8%, respectively, of First Aid and Safety Services revenue and 100% and 100%, respectively, of Fire Protection Services revenue. During thatthe same period,periods, the Uniform Direct Sales business unit recognized 94.7%96.7% and 96.4%, 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 are recorded within the All Other reportable segment disclosed in Note 11 entitled Segment Information.

Revenue Recognition Policy
More than 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. Revenues from our route servicing customer contracts represent a single-performance obligation. The Company recognizes these revenues over time as services are performed based on the nature of services provided and contractual rates (input method). The Company's remaining revenues, primarily within the Uniform Direct Sales operating segment, and representing less than 5% of the Company's total revenues, are 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.

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 three or six months ended August 31,November 30, 2018. The Company reassesses these estimates during each reporting period. Cintas maintains a liability for these discounts and rebates within accrued liabilities on the consolidated condensed balance sheets. Variable consideration also includes consideration paid to a customer at the beginning of a contract. Cintas capitalizes this consideration and amortizes it over the life of the contract as a reduction to revenue in accordance with ASC 606. These assets are included in Other Assets, net on the consolidated condensed balance sheet.

Additionally, in accordance with ASC 606, certain Uniform Direct Sales 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. 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 condensed balance sheets. As of August 31,November 30, 2018, the current and noncurrent assets related to deferred commissions totaled $65.3$67.0 million and $194.4$199.7 million, respectively. During the three months ended August 31, 2018, weWe recorded $17.1 million of amortization expense related to deferred commissions. This expense iscommissions of $17.6 million and $34.7 million during the three and six months ended November 30, 2018, respectively. These expenses are classified in selling and administrative expense on the consolidated condensed statements of income.




3.    Fair Value Measurements
 
All financial instruments that are measured at fair value on a recurring basis have been classified within the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the consolidated condensed balance sheet date. These financial instruments measured at fair value on a recurring basis are summarized below: 
As of August 31, 2018As of November 30, 2018
(In thousands)Level 1 Level 2 Level 3 Fair ValueLevel 1 Level 2 Level 3 Fair Value
              
Cash and cash equivalents$118,356
 $
 $
 $118,356
$88,479
 $
 $
 $88,479
Other assets, net:       
Interest rate lock agreements
 2,307
 
 2,307
Total assets at fair value$118,356
 $
 $
 $118,356
$88,479
 $2,307
 $
 $90,786
       
Accrued liabilities:       
Interest rate lock agreements$
 $4,169
 $
 $4,169
Total liabilities at fair value$
 $4,169
 $
 $4,169
 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 November 30, 2018 or May 31, 2018.

As of August 31,November 30, 2018, current accrued liabilitiesother assets included the fair value of outstanding interest rate lock agreements. 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.

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 condensed balance sheet dates.
In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records assets and liabilities at fair value on a nonrecurring basis as required under GAAP.


4.    Investments
 
Investments at August 31,November 30, 2018 of $180.3$183.5 million include the cash surrender value of insurance policies of $160.2$165.4 million, equity method investments of $14.9$16.9 million and cost method investments of $5.2$1.2 million. Investments at May 31, 2018 of $175.6 million include the cash surrender value of insurance policies of $154.0 million, equity method investments of $16.4 million and cost method investments of $5.2 million. Investments are generally evaluated for impairment on an annual basis or when indicators of impairment exist. For the threesix months ended August 31,November 30, 2018 and 2017, no impairment losses were recorded. Subsequent to August 31,

During the three months ended November 30, 2018, Cintas reached an agreement to sellsold a cost method investment to a third party. The anticipated gain onProceeds from the sale will be recorded upon consummationwere $73.3 million, which resulted in a pre-tax gain of the sale.$69.4 million.




5.    Earnings Per Share
 
The following table sets 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: 
Three Months EndedThree Months Ended Six Months Ended
Basic Earnings per Share from Continuing Operations
(in thousands except per share data)
August 31,
2018
 August 31,
2017
November 30,
2018
 November 30,
2017
 November 30,
2018

November 30,
2017
          
Income from continuing operations$212,547
 $161,108
$242,994
 $137,737
 $455,541
 $298,845
Less: income from continuing operations allocated to participating securities2,945
 3,187
3,376
 2,111
 6,308
 5,298
Income from continuing operations available to common shareholders$209,602
 $157,921
$239,618
 $135,626

$449,233

$293,547
Basic weighted average common shares outstanding106,835
 105,740
106,475
 106,340
 106,652
 106,039
          
Basic earnings per share from continuing operations$1.96
 $1.50
$2.25
 $1.27

$4.21
 $2.77
Three Months EndedThree Months Ended Six Months Ended
Diluted Earnings per Share from Continuing Operations
(in thousands except per share data)
August 31,
2018
 August 31,
2017
November 30,
2018
 November 30,
2017
 November 30,
2018
 November 30,
2017
          
Income from continuing operations$212,547
 $161,108
$242,994
 $137,737
 $455,541
 $298,845
Less: income from continuing operations allocated to participating securities2,945
 3,187
3,376
 2,111
 6,308
 5,298
Income from continuing operations available to common shareholders$209,602
 $157,921
$239,618
 $135,626
 $449,233
 $293,547
Basic weighted average common shares outstanding106,835
 105,740
106,475
 106,340
 106,652
 106,039
Effect of dilutive securities – employee stock options3,813
 2,797
3,399
 3,478
 3,605
 2,899
Diluted weighted average common shares outstanding110,648
 108,537
109,874
 109,818
 110,257
 108,938
          
Diluted earnings per share from continuing operations$1.89
 $1.45
$2.18
 $1.24
 $4.07
 $2.69

For the three and six months ended August 31,November 30, 2018, both basic and diluted earnings per share from discontinued operations were $0.00. BasicBoth basic and diluted loss per share from discontinued operations were $0.01 for the three months ended November 30, 2017. For the six months ended November 30, 2017, basic and diluted earnings per share from discontinued operations were $0.52$0.51 and $0.51, respectively, for the three months ended August 31, 2017.$0.50, respectively.


For the three months ended August 31,November 30, 2018 and 2017, options granted to purchase 0.30.4 million and 0.5 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share. For the six months ended November 30, 2018 and 2017, options granted to purchase 0.4 million and 0.6 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share. The exercise prices of these options were greater than the average market price of the common stock (anti-dilutive).

On August 2, 2016, Cintas announced that the Board of Directors authorized a $500.0 million share buyback program, which does not have an expiration date. ForThe August 2, 2016 share buyback program was completed during the three months endedsecond quarter of fiscal 2019. From the inception of the August 31,2, 2016 share buyback program through November 2018, weCintas purchased 0.4a total of 2.6 million shares of Cintas common stock at an average price of $200.97$188.82 per share for a total purchase price of $78.5$500.0 million. On October 30, 2018, we announced that the Board of Directors authorized a new $1.0 billion share buyback program, which does not have an expiration date. The following table summarizes the buyback activity by program and fiscal period.
(In thousands except per share data)
Three Months Ended
 November 30, 2018
 
Six Months Ended
 November 30, 2018
Buyback ProgramShares Avg. Price per Share Purchase Price Shares Avg. Price per Share Purchase Price
            
August 2, 20161,740
 $190.66
 $331,547
 2,130
 $192.55
 $410,003
October 30, 2018201
 $181.41
 $36,579
 201
 $181.41
 $36,579
 1,941
 $189.69
 $368,126
 2,331
 $191.58
 $446,582
In the period subsequent to August 31,November 30, 2018 through October 5, 2018,January 8, 2019, we purchased 0.6 million shares of Cintas common stock under the new share buyback program at an average price of $167.32 for a total purchase price of $100.0 million. From the inception of the October 30, 2018 share buyback program through January 8, 2019, Cintas has purchased a total of 0.8 million shares of Cintas common stock at an average price of $198.35$170.87 for a total purchase price of $156.3$136.6 million. From

For the inception of the August 2, 2016 share buyback program through October 5,three months ended November 30, 2018, Cintas has purchased a total of 1.7acquired less than 0.1 million shares of Cintas common stock for employee payroll taxes dues on restricted stock awards that vested during the three months ended November 30, 2018. These shares were acquired at an average price of $191.36$194.14 per share for a total purchase price of $324.7$0.4 million.
For During the threesix months ended August 31,November 30, 2018, Cintas acquired 0.3 million shares of Cintas common stock for employee payroll taxes due on restricted stock awards that vested during the threesix months ended August 31,November 30, 2018. These shares were acquired at an average price of $204.39$204.32 per share for a total purchase price of $61.0$61.5 million.


6.    Goodwill, Service Contracts and Other Assets
 
Changes in the carrying amount of goodwill and service contracts for the threesix months ended August 31,November 30, 2018, by reportable operating segment and All Other, are as follows:
Goodwill (in thousands)
Uniform Rental
 and Facility Services
 
First Aid
 and Safety Services
 
All
Other
 Total
Uniform Rental
 and Facility Services
 
First Aid
 and Safety Services
 
All
Other
 Total
              
Balance as of June 1, 2018$2,505,476
 $244,279
 $97,133
 $2,846,888
$2,505,476
 $244,279
 $97,133
 $2,846,888
Goodwill acquired
 
 4,964
 4,964
15
 
 5,092
 5,107
Foreign currency translation(1,631) (129) (10) (1,770)(6,233) (499) (19) (6,751)
Balance as of August 31, 2018$2,503,845
 $244,150
 $102,087
 $2,850,082
Balance as of November 30, 2018$2,499,258
 $243,780
 $102,206
 $2,845,244
Service Contracts (in thousands)
Uniform Rental
 and Facility Services
 
First Aid
 and Safety Services
 
All
Other
 Total
Uniform Rental
 and Facility Services
 
First Aid
 and Safety Services
 
All
Other
 Total
 
  
  
  
 
  
  
  
Balance as of June 1, 2018$492,067
 $27,294
 $26,407
 $545,768
$492,067
 $27,294
 $26,407
 $545,768
Service contracts acquired
 13
 4,620
 4,633
739
 14
 4,959
 5,712
Service contracts amortization(11,729) (963) (1,334) (14,026)(23,477) (1,926) (2,680) (28,083)
Foreign currency translation(497) (13) 
 (510)(1,845) (47) 
 (1,892)
Balance as of August 31, 2018$479,841
 $26,331
 $29,693
 $535,865
Balance as of November 30, 2018$467,484
 $25,335
 $28,686
 $521,505

Information regarding Cintas’ service contracts and other assets is as follows:
As of August 31, 2018As of November 30, 2018
(In thousands)
Carrying
Amount
 
Accumulated
Amortization
 Net
Carrying
Amount
 
Accumulated
Amortization
 Net
          
Service contracts$928,920
 $393,055
 $535,865
$928,010
 $406,505
 $521,505
          
Capitalized contract costs (1)
$276,873
 $17,126
 $259,747
$234,446
 $34,726
 $199,720
Noncompete and consulting agreements42,062
 40,048
 2,014
42,116
 40,190
 1,926
Other38,525
 12,969
 25,556
41,282
 14,542
 26,740
Total other assets$357,460
 $70,143
 $287,317
$317,844
 $89,458
 $228,386
(1) The current portion of capitalized contract costs, included in prepaid expenses and other current assets on the consolidated condensed balance sheet as of August 31,November 30, 2018, is $65.3$67.0 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
Total other assets$80,497
 $51,182
 $29,315

Amortization expense for service contracts and other assets for continuing operations was $33.0$33.3 million and $14.1$15.6 million for the three months ended August 31,November 30, 2018 and 2017, respectively. Amortization expense for service contracts and other assets for continuing operations was $66.2 million and $29.8 million for the six months ended November 30, 2018 and 2017, respectively. Estimated amortization expense for service contracts and other assets, excluding any future acquisitions and commissions to be earned, for each of the next five full fiscal years and thereafter is $131.6$132.6 million, $121.1$124.7 million, $106.1$109.6 million, $94.3$97.7 million, $76.3$79.7 million and $313.7$323.1 million, respectively.



7.    Debt, Derivatives and Hedging Activities
 
Cintas' outstanding debt is summarized as follows:
(In thousands)
Interest
 Rate
 
Fiscal Year
Issued
 
Fiscal Year
Maturity
 
August 31,
2018
 
May 31,
2018
Interest
 Rate
 
Fiscal Year
Issued
 
Fiscal Year
Maturity
 
November 30,
2018
 
May 31,
2018
     
Debt due within one year     
Commercial paper2.60%
(1) 
Various Various $173,500
 $
Total debt due within one year  $173,500
 $
          
Debt due after one year          
Senior notes4.30% 2012 2022 $250,000
 $250,000
4.30% 2012 2022 $250,000
 $250,000
Senior notes2.90% 2017 2022 650,000
 650,000
2.90% 2017 2022 650,000
 650,000
Senior notes3.25% 2013 2023 300,000
 300,000
3.25% 2013 2023 300,000
 300,000
Senior notes (1)
2.78% 2013 2023 52,011
 52,119
Senior notes (2)
3.11% 2015 2025 52,224
 52,309
2.78% 2013 2023 51,902
 52,119
Senior notes (3)
3.11% 2015 2025 52,140
 52,309
Senior notes3.70% 2017 2027 1,000,000
 1,000,000
3.70% 2017 2027 1,000,000
 1,000,000
Senior notes6.15% 2007 2037 250,000
 250,000
6.15% 2007 2037 250,000
 250,000
Debt issuance costs  (18,376) (19,119)  (17,634) (19,119)
Total debt due after one year  $2,535,859
 $2,535,309
  $2,536,408
 $2,535,309
(1)Variable rate debt instrument. The rate presented is the variable borrowing rate at November 30, 2018.
(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%.
(2)(3) Cintas assumed these senior notes with the acquisition of G&K in the fourth quarter of fiscal 2017, and they were recorded at fair value. The interest rate shown above is the effective interest rate. The principal amount of these notes is $50.0 million with a stated interest rate of 3.88%.

Cintas' senior notes, excluding the G&K senior notes assumed with the acquisition of G&K in fiscal 2017, are recorded at cost, net of debt issuance costs. The fair value of the long-term debt is estimated using Level 2 inputs based on general market prices. The carrying value and fair value of Cintas' debt as of August 31,November 30, 2018 were $2,550.0$2,723.5 million and $2,585.0$2,715.0 million, respectively, and as of May 31, 2018 were $2,550.0 million and $2,582.0 million, respectively. During the six months ended November 30, 2018, Cintas issued $173.5 million, net of commercial paper.

The credit agreement that supports our commercial paper program was amended on September 16, 2016. The amendment increased the capacity of the revolving credit facility from $450.0 million to $600.0 million and added a $250.0 million term loan facility. 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 a new term loan of up to $250.0 million in the aggregate, subject to customary conditions. The maturity date of the credit agreement is September 15, 2021. As of August 31,November 30, 2018, there was $173.5 million of commercial paper outstanding with a weighted average interest rate of 2.60% and maturity dates less than 30 days and no borrowings on our revolving credit facility. As of May 31, 2018, there was no commercial paper outstanding and no borrowings on our revolving credit facility.

Cintas uses interest rate locks to manage our 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 of $0.3 million and $0.2$0.1 million for the three months ended August 31,November 30, 2018 and 2017, respectively. For the six months ended November 30, 2018 and 2017, the amortization of the cash flow hedges resulted in a decrease to other comprehensive income of $0.6 million and $0.3 million, respectively. During the first quarter ended August 31, 2018,of fiscal 2019, Cintas entered into interest rate lock agreements with a notional value of $500.0 million for a forecasted debt issuance. As of August 31,November 30, 2018, the fair value of these interest rate locks was a liabilityan asset of $4.2$2.3 million recorded in current liabilitiesother assets and in other comprehensive income, net of tax. The interest rate locks had no impact on net income or cash flows from continuing operations for the three and six months ended August 31,November 30, 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) 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 debt covenants for all periods presented.


8.    Income Taxes
 
In the normal course of business, Cintas provides for uncertain tax positions and the related interest and adjusts its unrecognized tax benefits and accrued interest accordingly. As of August 31,November 30, 2018 and May 31, 2018, recorded unrecognized tax benefits were $28.0$28.8 million and $26.9 million, respectively, and are included in long-term accrued liabilities on the consolidated condensed balance sheet.

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 condensed results of operations in any given period.

All U.S. federal income tax returns are closed to audit through fiscal 2014. 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 2013. Based on the resolution of the various audits and other potential regulatory developments, it is reasonably possible that the balance of unrecognized tax benefits would not change for the fiscal year ending May 31, 2019.

On December 22, 2017, the President signed into legislation the Tax Cuts and Jobs Act (the Tax Act).Act. Among other changes, the Tax Act reduces the U.S. corporate tax rate from 35% to 21% and requires companies to pay a one-time transition tax on earnings of foreign subsidiaries. The Tax Act also includes provisions that are 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 alters the landscape of taxation of non-U.S. operations and provides immediate deductions for certain new investments, among other provisions.

In acknowledgment of the substantial changes incorporated in the Tax Act, and with the timing of the enactment being just weeks before the majority of the provisions became effective, the SEC staff issued Staff Accounting Bulletin (SAB) 118 to provide certain guidance in determining the accounting for income tax effects of the legislation in the accounting period of enactment as well as provide a measurement period within which to finalize and reflect such final effects associated with the Tax Act. During the three months ended August 31, 2018,first quarter of fiscal 2019, Cintas recorded an adjustment to the provisional transition tax, net of foreign tax credits, of $3.3 million. Cintas is still revising the transition tax calculation, and this amount is subject to change based on computation of the final fiscal 2018 earnings and profit and the amounts held in cash and cash equivalents at the end of fiscal 2018. There were no provisional adjustments recorded during the three months ended November 30, 2018. Cintas also analyzed the impact of the new provisions under the Tax Act surrounding executive compensation, the foreign derived intangible income deduction and global intangible low-taxed income and determined that the impact was immaterial for the quarterthree and six months ended August 31,November 30, 2018.

Cintas’ effective tax rate for continuing operations was 12.0%24.2% and 26.5%33.3% for the three months ended August 31,November 30, 2018 and 2017, respectively. For the six months ended November 30, 2018 and 2017, Cintas' effective tax rate for continuing operations was 18.9% and 29.8%, respectively. The effective tax rate for bothall periods was largely impacted by certain discrete items (primarily the tax accounting for stock-based compensation). The three month periodand six-month periods ended August 31,November 30, 2018 waswere also impacted by the reduced U.S. corporate tax rate as a result of the enactment of the Tax Act.



9.    Pension Plans

In conjunction with the acquisition of G&K in fiscal 2017, Cintas assumed G&K's noncontributory frozen defined benefit pension plan (the Pension Plan) that covers substantially all 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 condensed balance sheet reflect the funded status of the 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. The net pension liability is included in long-term accrued liabilities on the consolidated condensed balance sheets. Unrecognized differences between actual amounts and estimates based on actuarial assumptions are included in accumulated other comprehensive income in our consolidated condensed balance sheets. The difference between actual amounts and estimates based on actuarial assumptions are recognized in other comprehensive income in the period in which they occur. The Pension Plan assumptions are evaluated annually and are updated as deemed necessary.

The components of net periodic pension cost (benefit) recognized in other comprehensive income for the Pension Plan are as follows:
 Three Months EndedThree Months Ended Six Months Ended
(In thousands) 
August 31,
 2018
 
August 31,
 2017
November 30, 2018 November 30, 2017 November 30, 2018 November 30, 2017
           
Interest cost $781
 $711
$781
 $711
 $1,562
 $1,421
Expected return on assets (721) (716)(720) (716) (1,441) (1,432)
Total net periodic pension cost (benefit) $60
 $(5)$61
 $(5) $121
 $(11)




10.    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 Income on Interest Rate Hedges Other Total
Foreign
Currency
 Unrealized Income on Interest Rate Hedges Other Total
              
Balance at June 1, 2018$6,550
 $10,449
 $(656) $16,343
$6,550
 $10,449
 $(656) $16,343
Other comprehensive loss before reclassifications(3,019) (3,168) 
 (6,187)(3,019) (3,168) 
 (6,187)
Amounts reclassified from accumulated other comprehensive income (loss)
 (295) 
 (295)
 (295) 
 (295)
Net current period other comprehensive loss(3,019)
(3,463)


(6,482)(3,019)
(3,463)


(6,482)
Balance at August 31, 2018$3,531

$6,986

$(656)
$9,861
3,531

6,986

(656)
9,861
Other comprehensive (loss) income before
reclassifications
(10,623) 4,921
 
 (5,702)
Amounts reclassified from accumulated other comprehensive income (loss)
 (294) 
 (294)
Net current period other comprehensive (loss) income(10,623) 4,627
 
 (5,996)
Balance at November 30, 2018$(7,092)
$11,613

$(656)
$3,865
(In thousands)
Foreign
Currency
 Unrealized Income on Interest Rate Hedges Other Total
Foreign
Currency
 Unrealized Income on Interest Rate Hedges Other Total
              
Balance at June 1, 2017$(12,726) $11,382
 $(1,685) $(3,029)$(12,726) $11,382
 $(1,685) $(3,029)
Other comprehensive income before reclassifications35,184
 
 20
 35,204
35,184
 
 20
 35,204
Amounts reclassified from accumulated other comprehensive income (loss)
 (172) 
 (172)
 (172) 
 (172)
Net current period other comprehensive income (loss)35,184

(172)
20

35,032
35,184

(172)
20

35,032
Balance at August 31, 2017$22,458
 $11,210
 $(1,665) $32,003
22,458
 11,210
 (1,665) 32,003
Other comprehensive loss before reclassifications(11,374) 
 (20) (11,394)
Amounts reclassified from accumulated other comprehensive income (loss)
 (172) 
 (172)
Net current period other comprehensive loss(11,374) (172) (20) (11,566)
Balance at November 30, 2017$11,084
 $11,038
 $(1,685) $20,437

The following table summarizes the reclassifications out of accumulated other comprehensive income (loss):
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
Condensed Statements of Income
Amount Reclassified from Accumulated Other
 Comprehensive Income (Loss)
Affected Line in the Consolidated Condensed Statements of Income
       
 Three Months Ended Three Months Ended Six Months Ended 
(In thousands) August 31, 2018 August 31, 2017  November 30, 2018 November 30, 2017 November 30, 2018 November 30, 2017 
             
Amortization of interest rate locks $474
 $278
 Interest expense$474
 $278
 $948
 $556
Interest expense
Tax expense (179) (106) Income taxes(180) (106) (359) (212)Income taxes
Amortization of interest rate locks,
net of tax
 $295
 $172
 Net income$294
 $172

$589

$344
Net income


11.    Segment Information
 
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 Fire Protection Services and its Uniform Direct Sale business, 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 Basis of Presentation. Information related to the operations of Cintas’ operating segments is set forth below: 
(In thousands)
Uniform Rental
and Facility Services
 
First Aid
and Safety Services
 
All
Other
 
Corporate (1)
 Total
Uniform Rental
and Facility Services
 
First Aid
and Safety Services
 
All
Other
 
Corporate (1)
 Total
                  
As of and for the three months
ended August 31, 2018
 
  
  
  
  
For the three months ended
November 30, 2018
 
  
  
  
  
Revenue$1,390,778
 $153,348
 $174,142
 $
 $1,718,268
Income before income taxes$242,891
 $21,328
 $11,421
 $44,884
 $320,524
         
For the three months ended
November 30, 2017
 
  
  
  
  
Revenue$1,308,038
 $139,090
 $159,313
 $
 $1,606,441
Income (loss) before income taxes$203,814
 $17,975
 $13,422
 $(28,838) $206,373
         
As of and for the six months ended
November 30, 2018
 
  
  
  
  
Revenue$2,765,716
 $306,765
 $343,762
 $
 $3,416,243
Income before income taxes$474,425
 $43,311
 $23,132
 $21,076
 $561,944
Total assets$6,438,400
 $495,054
 $383,150
 $88,479
 $7,405,083
         
As of and for the six months ended
November 30, 2017
         
Revenue$1,374,938
 $153,417
 $169,620
 $
 $1,697,975
$2,619,822
 $279,672
 $318,450
 $
 $3,217,944
Income (loss) before income taxes$231,534
 $21,983
 $11,711
 $(23,808) $241,420
$422,724
 $37,386
 $24,200
 $(58,858) $425,452
Total assets$6,298,849
 $486,965
 $383,034
 $118,356
 $7,287,204
$5,899,010
 $467,902
 $353,155
 $258,734
 $6,978,801
         
As of and for the three months
ended August 31, 2017
         
Revenue$1,311,784
 $140,582
 $159,137
 $
 $1,611,503
Income (loss) before income taxes$218,910
 $19,411
 $10,778
 $(30,020) $219,079
Total assets$5,844,718
 $456,391
 $337,457
 $213,040
 $6,851,606
(1) Corporate assets include cash and marketable securities in all periods.


12.    Discontinued Operations
 
During the three months ended August 31, 2017,first quarter of fiscal 2018, Cintas sold a significant business referred to as Discontinued Services and received proceeds from the sale of $128.5$127.8 million. The results of Discontinued Services are included in discontinued operations for all periods presented. In accordance with the applicable accounting guidance 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.

Following is selected financial information included in net income (loss) income from discontinued operations for Discontinued Services:
 Three Months Ended
(In thousands)August 31, 2018 August 31, 2017
    
Revenue$
 $10,773
    
Loss before income taxes(42) (2,439)
Income tax benefit10
 902
Gain on sale of business
 100,269
Income tax expense on net gain
 (42,629)
Net (loss) income from discontinued operations$(32) $56,103
 Three Months Ended Six Months Ended
(In thousands)November 30, 2018 November 30, 2017 November 30, 2018 November 30, 2017
        
Revenue$
 $
 $
 $10,773
        
Income (loss) before income taxes25
 (43) (17) (2,482)
Income tax (expense) benefit(6) 18
 4
 920
(Loss) gain on sale of business
 (1,209) 
 99,060
Income tax benefit (expense) on net gain
 606
 
 (42,023)
Net income (loss) from discontinued
    operations
$19
 $(628)
$(13)
$55,475


13.     G&K Services, Inc. Integration Expenses
 
As a result of the acquisition of G&K in fiscal 2017, the Company incurred $4.9$7.8 million and $4.0$13.1 million in expenses during the three months ended August 31,November 30, 2018 and 2017, respectively, and $12.7 million and $17.0 million during the six months ended November 30, 2018 and 2017, respectively. The $4.9$7.8 million and $12.7 million of costs incurred in the three and six months ended August 31,November 30, 2018 related to integration expenses directly related to the acquisition, primarily comprised of facility closure expenses. DuringThe $13.1 million of costs incurred in the three months ended August 31,November 30, 2017 related to integration expenses directly related to the acquisition. During the six months ended November 30, 2017, the costs incurred related to $3.0$16.0 million of integration expenses directly related to the acquisition and $1.0 million of employee termination expenses recognized under ASC Topic 712, "Compensation - Nonretirement Postemployment Benefits."

As of August 31,November 30, 2018 and May 31, 2018, employee termination benefits included in accrued compensation and related liabilities on the consolidated condensed balance sheet was $6.7$5.8 million and $9.1 million, respectively. The amount of employee termination benefits paid during the three and six months ended August 31,November 30, 2018 was $2.4 million.$0.9 million and $3.3 million, respectively. We anticipate the remaining accrued employee termination benefits will be paid over the remainder of fiscal 2019.

 


14.    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 $173.5 million aggregate principal amount of commercial paper and the $2,550.0 million aggregate principal amount of senior notes outstanding as of August 31,November 30, 2018, which are unconditionally guaranteed, jointly and severally, by Cintas Corporation and certain wholly-owned, direct and indirect domestic subsidiaries.

As allowed by SEC rules, the following consolidating condensed financial statements are provided as an alternative to filing separate financial statements of the guarantors. Each of the subsidiaries presented in the following consolidating condensed financial statements has been fully consolidated in Cintas’ consolidated condensed financial statements. The following consolidating condensed financial statements should be read in conjunction with the consolidated condensed financial statements of Cintas and notes thereto of which this note is an integral part. During fiscal 2018, the Company sold Discontinued Services (see Note 12) previously included in Cintas Corporation and Corp. 2. The sale of Discontinued Services has been reflected as discontinued operations as of the beginning of the earliest period presented herein. Consolidating condensed financial statements for Cintas, Corp. 2, the subsidiary guarantors and non-guarantors are presented on the following pages: 



Consolidating Condensed Income Statement
Three Months Ended August 31,November 30, 2018
(In thousands)

Cintas
Corporation
 Corp. 2 Subsidiary
Guarantors
 Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
Cintas
Corporation
 Corp. 2 Subsidiary
Guarantors
 Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
                      
Revenue: 
  
  
  
  
  
 
  
  
  
  
  
Uniform rental and facility services$
 $1,139,129
 $183,163
 $99,683
 $(47,037) $1,374,938
$
 $1,134,118
 $182,876
 $101,830
 $(28,046) $1,390,778
Other
 491,290
 43
 24,332
 (192,628) 323,037

 522,081
 50
 25,918
 (220,559) 327,490
Equity in net income of affiliates212,547
 
 
 
 (212,547) 
242,994
 
 
 
 (242,994) 
Total revenue212,547
 1,630,419
 183,206
 124,015
 (452,212) 1,697,975
242,994
 1,656,199
 182,926
 127,748
 (491,599) 1,718,268
                      
Costs and expenses (income): 
  
  
  
  
  
 
  
  
  
  
  
Cost of uniform rental and facility services
 643,741
 109,550
 64,013
 (70,851) 746,453

 640,859
 111,555
 65,316
 (56,611) 761,119
Cost of other
 341,333
 (22,029) 18,142
 (160,636) 176,810

 375,764
 (27,133) 19,319
 (185,959) 181,991
Selling and administrative expenses
 544,910
 (64,621) 34,363
 (10,018) 504,634

 536,276
 (68,617) 32,559
 (8,547) 491,671
G&K Services, Inc. integration
expenses

 2,676
 1,863
 311
 
 4,850

 5,973
 1,270
 604
 
 7,847
Operating income212,547
 97,759
 158,443
 7,186
 (210,707) 265,228
242,994
 97,327
 165,851
 9,950
 (240,482) 275,640
                      
Gain on sale of a cost method
investment

 
 69,373
 
 
 69,373
           
Interest income
 (209) (272) (16) 1
 (496)
 (294) (93) (5) 1
 (391)
Interest expense (income)
 24,661
 (362) 5
 
 24,304

 25,046
 (173) 7
 
 24,880
                      
Income before income taxes212,547

73,307

159,077

7,197

(210,708)
241,420
242,994
 72,575
 235,490
 9,948
 (240,483) 320,524
Income taxes
 10,663
 16,044
 2,187
 (21) 28,873

 19,166
 55,788
 2,613
 (37) 77,530
Income from continuing operations212,547

62,644

143,033

5,010

(210,687) 212,547
242,994
 53,409
 179,702
 7,335
 (240,446) 242,994
                      
Loss from discontinued operations,
net of tax
(32) (32) 
 
 32
 (32)
Income from discontinued operations,
net of tax
19
 19
 
 
 (19) 19
                      
Net income$212,515
 $62,612
 $143,033
 $5,010
 $(210,655) $212,515
$243,013
 $53,428
 $179,702
 $7,335
 $(240,465) $243,013




















Consolidating Condensed Income Statement
Three Months Ended August 31,November 30, 2017
(In thousands)

Cintas
Corporation
 Corp. 2 Subsidiary
Guarantors
 Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
Cintas
Corporation
 Corp. 2 Subsidiary
Guarantors
 Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
                      
Revenue: 
  
  
  
  
  
 
  
  
  
  
  
Uniform rental and facility services$
 $1,099,869
 $164,895
 $96,595
 $(49,575) $1,311,784
$
 $1,086,667
 $170,320
 $100,933
 $(49,882) $1,308,038
Other
 427,302
 307
 20,308
 (148,198) 299,719

 435,539
 (313) 21,982
 (158,805) 298,403
Equity in net income of affiliates161,108
 
 
 
 (161,108) 
137,737
 
 
 
 (137,737) 
Total revenue161,108
 1,527,171
 165,202
 116,903
 (358,881) 1,611,503
137,737
 1,522,206
 170,007
 122,915
 (346,424) 1,606,441
                      
Costs and expenses (income): 
  
  
  
  
  
 
  
  
  
  
  
Cost of uniform rental and facility
services

 622,148
 99,019
 60,517
 (74,821) 706,863

 628,123
 105,954
 65,220
 (75,337) 723,960
Cost of other
 288,919
 (19,669) 14,735
 (118,698) 165,287

 302,065
 (25,046) 15,438
 (126,345) 166,112
Selling and administrative expenses
 510,955
 (47,538) 29,906
 (7,040) 486,283

 528,369
 (85,417) 31,211
 (6,079) 468,084
G&K Services, Inc. integration
expenses

 1,521
 2,435
 15
 
 3,971

 4,192
 8,319
 563
 
 13,074
Operating income161,108
 103,628
 130,955
 11,730
 (158,322) 249,099
137,737
 59,457
 166,197
 10,483
 (138,663) 235,211
                      
Interest income
 (31) (99) (167) 
 (297)
 (45) (59) (187) 
 (291)
Interest expense (income)
 30,561
 (139) (105) 
 30,317

 29,444
 (313) (2) 
 29,129
                      
Income before income taxes161,108
 73,098
 131,193
 12,002
 (158,322) 219,079
137,737
 30,058
 166,569
 10,672
 (138,663) 206,373
Income taxes
 19,570
 35,123
 3,297
 (19) 57,971

 11,449
 54,414
 2,798
 (25) 68,636
Income from continuing operations161,108

53,528

96,070

8,705

(158,303)
161,108
137,737

18,609

112,155

7,874

(138,638)
137,737
          

          

Income (loss) from discontinued
operations, net of tax
56,103
 65,002
 (8,899) 
 (56,103) 56,103
Loss from discontinued operations,
net of tax
(628) (628) 
 
 628
 (628)
                      
Net income$217,211

$118,530

$87,171

$8,705

$(214,406)
$217,211
$137,109

$17,981

$112,155

$7,874

$(138,010)
$137,109























Consolidating Condensed Income Statement of Comprehensive Income
ThreeSix Months Ended August 31,November 30, 2018
(In thousands)

 Cintas
Corporation
 Corp. 2 Subsidiary
Guarantors
 Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Net income$212,515
 $62,612
 $143,033
 $5,010
 $(210,655) $212,515
            
Other comprehensive (loss)
    income, net of tax:
           
Foreign currency translation adjustments(3,019) 
 
 (3,019) 3,019
 (3,019)
Change in fair value of interest rate lock agreements(3,168) (3,168) 
 
 3,168
 (3,168)
Amortization of interest rate
   lock agreements
(295) (295) 
 
 295
 (295)
            
Other comprehensive loss(6,482) (3,463) 
 (3,019) 6,482
 (6,482)
            
Comprehensive income$206,033
 $59,149
 $143,033
 $1,991
 $(204,173) $206,033

 Cintas
Corporation
 Corp. 2 Subsidiary
Guarantors
 Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Revenue: 
  
  
  
  
  
Uniform rental and facility services$
 $2,273,247
 $366,039
 $201,513
 $(75,083) $2,765,716
Other
 1,013,371
 93
 50,250
 (413,187) 650,527
Equity in net income of affiliates455,541
 
 
 
 (455,541) 
Total revenue455,541
 3,286,618
 366,132
 251,763
 (943,811) 3,416,243
            
Costs and expenses (income): 
  
  
  
  
  
Cost of uniform rental and facility services
 1,284,600
 221,105
 129,329
 (127,462) 1,507,572
Cost of other
 717,097
 (49,162) 37,461
 (346,595) 358,801
Selling and administrative expenses
 1,081,186
 (133,238) 66,922
 (18,565) 996,305
G&K Services, Inc. integration
   expenses

 8,649
 3,133
 915
 
 12,697
Operating income455,541
 195,086
 324,294
 17,136
 (451,189) 540,868
            
Gain on sale of a cost method
   investment

 
 69,373
 
 
 69,373
            
Interest income
 (503) (365) (21) 2
 (887)
Interest expense (income)
 49,707
 (535) 12
 
 49,184
            
Income before income taxes455,541
 145,882
 394,567
 17,145
 (451,191) 561,944
Income taxes
 29,829
 71,832
 4,800
 (58) 106,403
Income from continuing operations455,541
 116,053
 322,735
 12,345
 (451,133) 455,541
            
Loss from discontinued operations,
   net of tax
(13) (13) 
 
 13
 (13)
            
Net income$455,528
 $116,040
 $322,735
 $12,345
 $(451,120) $455,528



Consolidating Condensed Income Statement
Six Months Ended November 30, 2017
(In thousands)

 Cintas
Corporation
 Corp. 2 Subsidiary
Guarantors
 Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Revenue: 
  
  
  
  
  
Uniform rental and facility services$
 $2,186,536
 $335,215
 $197,528
 $(99,457) $2,619,822
Other
 862,841
 (6) 42,290
 (307,003) 598,122
Equity in net income of affiliates298,845
 
 
 
 (298,845) 
Total revenue298,845
 3,049,377
 335,209
 239,818
 (705,305) 3,217,944
            
Costs and expenses (income): 
  
  
  
  
  
Cost of uniform rental and facility services
 1,250,271
 204,973
 125,737
 (150,158) 1,430,823
Cost of other
 590,984
 (44,715) 30,173
 (245,043) 331,399
Selling and administrative expenses
 1,039,324
 (132,955) 61,117
 (13,119) 954,367
G&K Services, Inc. integration
   expenses

 5,713
 10,754
 578
 
 17,045
Operating income298,845
 163,085
 297,152
 22,213
 (296,985) 484,310
            
Interest income
 (76) (158) (354) 
 (588)
Interest expense (income)
 60,005
 (452) (107) 
 59,446
            
Income before income taxes298,845
 103,156
 297,762
 22,674
 (296,985) 425,452
Income taxes
 31,019
 89,537
 6,095
 (44) 126,607
Income from continuing operations298,845
 72,137
 208,225
 16,579
 (296,941) 298,845
            
Income (loss) from discontinued
   operations, net of tax
55,475
 64,374
 (8,899) 
 (55,475) 55,475
            
Net income$354,320
 $136,511
 $199,326
 $16,579
 $(352,416) $354,320



Consolidating Condensed Statement of Comprehensive Income
Three Months Ended August 31,November 30, 2018
(In thousands)

 Cintas
Corporation
 Corp. 2 Subsidiary
Guarantors
 Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Net income$243,013
 $53,428
 $179,702
 $7,335
 $(240,465) $243,013
            
Other comprehensive (loss)
    income, net of tax:
           
Foreign currency translation adjustments(10,623) 
 
 (10,623) 10,623
 (10,623)
Change in fair value of interest rate lock agreements4,921
 4,921
 
 

 (4,921) 4,921
Amortization of interest rate
   lock agreements
(294) (294) 
 
 294
 (294)
            
Other comprehensive (loss)
     income
(5,996) 4,627
 
 (10,623) 5,996
 (5,996)
            
Comprehensive income (loss)$237,017
 $58,055
 $179,702
 $(3,288) $(234,469) $237,017



Consolidating Condensed Statement of Comprehensive Income
Three Months Ended November 30, 2017
(In thousands)

Cintas
Corporation
 Corp. 2 Subsidiary
Guarantors
 Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
Cintas
Corporation
 Corp. 2 Subsidiary
Guarantors
 Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
                      
Net income$217,211
 $118,530
 $87,171
 $8,705
 $(214,406) $217,211
$137,109
 $17,981
 $112,155
 $7,874
 $(138,010) $137,109
                      
Other comprehensive income
(loss), net of tax:
           
Other comprehensive loss,
net of tax:
           
Foreign currency translation adjustments35,184
 
 
 35,184
 (35,184) 35,184
(11,374) 
 
 (11,374) 11,374
 (11,374)
Amortization of interest rate lock agreements(172) (172) 
 
 172
 (172)(172) (172) 
 
 172
 (172)
Change in fair value of available-for-sale securities20
 
 
 20
 (20) 20
(20) 
 
 (20) 20
 (20)
                      
Other comprehensive income
(loss)
35,032
 (172) 
 35,204
 (35,032) 35,032
Other comprehensive loss(11,566) (172) 
 (11,394) 11,566
 (11,566)
                      
Comprehensive income$252,243
 $118,358
 $87,171
 $43,909
 $(249,438) $252,243
Comprehensive income (loss)$125,543
 $17,809
 $112,155
 $(3,520) $(126,444) $125,543



































Consolidating Condensed Balance SheetStatement of Comprehensive Income
As of August 31,Six Months Ended November 30, 2018
(In thousands)

 
Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
ASSETS 
  
  
  
  
  
Current assets: 
  
  
  
  
  
Cash and cash equivalents$
 $46,600
 $48,565
 $23,191
 $
 $118,356
Accounts receivable, net
 652,912
 117,386
 67,894
 
 838,192
Inventories, net
 251,523
 36,144
 15,321
 782
 303,770
Uniforms and other rental
    items in service

 595,908
 89,399
 56,611
 (17,210) 724,708
Income taxes, current
 524
 788
 5,566
 
 6,878
Prepaid expenses and
   other current assets

 73,940
 37,288
 1,246
 
 112,474
Total current assets
 1,621,407
 329,570
 169,829
 (16,428) 2,104,378
            
Property and equipment, net
 911,174
 372,734
 110,726
 
 1,394,634
            
Investments (1)
321,083
 3,594,114
 956,474
 1,718,070
 (6,409,479) 180,262
Goodwill
 
 2,584,732
 265,462
 (112) 2,850,082
Service contracts, net
 460,728
 
 75,137
 
 535,865
Other assets, net2,559,638
 195,144
 4,446,682
 5,349
 (6,984,830) 221,983
 $2,880,721
 $6,782,567
 $8,690,192
 $2,344,573
 $(13,410,849) $7,287,204
            
LIABILITIES AND SHAREHOLDERS’ EQUITY  
  
  
  
Current liabilities: 
  
  
  
  
  
Accounts payable$(465,247) $(1,688,023) $2,363,714
 $(34,682) $38,249
 $214,011
Accrued compensation
  and related liabilities

 62,650
 13,896
 7,762
 
 84,308
Accrued liabilities
 103,729
 258,085
 18,961
 
 380,775
Total current liabilities(465,247) (1,521,644) 2,635,695
 (7,959) 38,249
 679,094
            
Long-term liabilities: 
  
  
  
  
  
Debt due after one year
 2,535,469
 
 390
 
 2,535,859
Deferred income taxes
 284,201
 106,684
 33,459
 
 424,344
Accrued liabilities
 63,073
 222,286
 16,580
 
 301,939
Total long-term liabilities
 2,882,743
 328,970
 50,429
 
 3,262,142
            
Total shareholders’ equity3,345,968
 5,421,468
 5,725,527
 2,302,103
 (13,449,098) 3,345,968
 $2,880,721
 $6,782,567
 $8,690,192
 $2,344,573
 $(13,410,849) $7,287,204

 Cintas
Corporation
 Corp. 2 Subsidiary
Guarantors
 Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Net income$455,528
 $116,040
 $322,735
 $12,345
 $(451,120) $455,528
            
Other comprehensive (loss)
    income, net of tax:
           
Foreign currency translation adjustments(13,642) 
 
 (13,642) 13,642
 (13,642)
Change in fair value of interest rate lock agreements1,753
 1,753
 
 
 (1,753) 1,753
Amortization of interest rate
   lock agreements
(589) (589) 
 
 589
 (589)
            
Other comprehensive (loss)
   income
(12,478) 1,164
 
 (13,642) 12,478
 (12,478)
            
Comprehensive income (loss)$443,050
 $117,204
 $322,735
 $(1,297) $(438,642) $443,050



Consolidating Condensed Statement of Comprehensive Income
Six Months Ended November 30, 2017
(In thousands)

 Cintas
Corporation
 Corp. 2 Subsidiary
Guarantors
 Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
            
Net income$354,320
 $136,511
 $199,326
 $16,579
 $(352,416) $354,320
            
Other comprehensive income
   (loss), net of tax:
           
Foreign currency translation adjustments23,810
 
 
 23,810
 (23,810) 23,810
Amortization of interest rate
   lock agreements
(344) (344) 
 
 344
 (344)
            
Other comprehensive income
   (loss)
23,466
 (344) 
 23,810
 (23,466) 23,466
            
Comprehensive income$377,786
 $136,167
 $199,326
 $40,389
 $(375,882) $377,786



Consolidating Condensed Balance Sheet
As of November 30, 2018
(In thousands)

 
Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
ASSETS 
  
  
  
  
  
Current assets: 
  
  
  
  
  
Cash and cash equivalents$
 $47,771
 $9,759
 $30,949
 $
 $88,479
Accounts receivable, net
 689,606
 143,378
 71,078
 
 904,062
Inventories, net
 267,335
 34,467
 17,611
 2,461
 321,874
Uniforms and other rental
    items in service

 624,589
 90,914
 59,701
 (16,958) 758,246
Income taxes, current
 10,875
 16,362
 9,358
 
 36,595
Prepaid expenses and
   other current assets

 75,840
 29,394
 1,380
 
 106,614
Total current assets
 1,716,016
 324,274
 190,077
 (14,497) 2,215,870
            
Property and equipment, net
 923,931
 376,274
 110,325
 
 1,410,530
            
Investments (1)
321,083
 3,596,134
 957,740
 1,718,070
 (6,409,479) 183,548
Goodwill
 
 2,584,875
 260,481
 (112) 2,845,244
Service contracts, net
 449,590
 
 71,915
 
 521,505
Other assets, net2,240,914
 203,378
 4,783,008
 2,143
 (7,001,057) 228,386
 $2,561,997
 $6,889,049
 $9,026,171
 $2,353,011
 $(13,425,145) $7,405,083
            
LIABILITIES AND SHAREHOLDERS’ EQUITY  
  
  
  
Current liabilities: 
  
  
  
  
  
Accounts payable$(465,247) $(1,828,417) $2,495,759
 $(27,826) $37,631
 $211,900
Accrued compensation
  and related liabilities

 88,374
 18,410
 10,861
 
 117,645
Accrued liabilities
 87,221
 504,186
 20,234
 
 611,641
Debt due within one year
 173,500
 
 
 
 173,500
Total current liabilities(465,247) (1,479,322) 3,018,355
 3,269
 37,631
 1,114,686
            
Long-term liabilities: 
  
  
  
  
  
Debt due after one year
 2,536,018
 
 390
 
 2,536,408
Deferred income taxes
 291,233
 110,089
 34,139
 
 435,461
Accrued liabilities
 61,597
 213,289
 16,398
 
 291,284
Total long-term liabilities
 2,888,848
 323,378
 50,927
 
 3,263,153
            
Total shareholders’ equity3,027,244
 5,479,523
 5,684,438
 2,298,815
 (13,462,776) 3,027,244
 $2,561,997
 $6,889,049
 $9,026,171
 $2,353,011
 $(13,425,145) $7,405,083

(1) Investments include inter-company investment activity. Corp 2 and Subsidiary Guarantors hold $16.1$18.1 million and $164.2$165.4 million, respectively, of the $180.3$183.5 million consolidated net investments.



Consolidating Condensed 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.




Consolidating Condensed Statement of Cash Flows
ThreeSix Months Ended August 31,November 30, 2018
(In thousands)

Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
Cash flows from operating activities: 
  
  
  
  
  
 
  
  
  
  
  
Net income$212,515
 $62,612
 $143,033
 $5,010
 $(210,655) $212,515
$455,528
 $116,040
 $322,735
 $12,345
 $(451,120) $455,528
Adjustments to reconcile net income to net
cash provided by operating activities
 
  
  
  
  
  
 
  
  
  
  
  
Depreciation
 33,866
 15,427
 3,452
 
 52,745

 68,929
 31,274
 6,909
 
 107,112
Amortization of intangible assets and
capitalized contract costs

 30,156
 1,278
 2,116
 
 33,550

 61,044
 2,339
 4,176
 
 67,559
Stock-based compensation46,172
 
 
 
 
 46,172
74,784
 
 
 
 
 74,784
Gain on sale of a cost method investment
 
 (69,373) 
 
 (69,373)
Deferred income taxes
 5,388
 2,122
 1,512
 
 9,022

 10,865
 5,519
 2,843
 
 19,227
Changes in current assets and liabilities, net of acquisitions of businesses: 
  
  
  
  
  
 
  
  
  
  
  
Accounts receivable, net
 (12,891) 3,381
 (5,541) 
 (15,051)
 (52,953) (20,151) (10,183) (2,461) (85,748)
Inventories, net
 (37,207) 2,700
 660
 (782) (34,629)
 (52,989) 3,546
 (2,153) (1,631) (53,227)
Uniforms and other rental items
in service

 (10,800) (7,904) (2,936) (1,379) (23,019)
 (39,481) (11,051) (7,152) 
 (57,684)
Prepaid expenses and other current
assets and other assets, net

 (25,060) (21,838) (32) 
 (46,930)
Prepaid expenses and other current
assets and capitalized contract costs

 (52,392) (5,570) (199) 
 (58,161)
Accounts payable
 41,784
 (37,657) (4,758) 302
 (329)
 (98,465) 90,324
 6,502
 (316) (1,955)
Accrued compensation and related liabilities
 (41,910) (10,982) (3,294) 
 (56,186)
 (16,186) (6,468) 1,685
 
 (20,969)
Accrued liabilities and other
 2,305
 (26,295) (3,566) 
 (27,556)
 (1,908) (9,983) (3,431) 
 (15,322)
Income taxes, current
 5,022
 8,474
 (815) 
 12,681

 (5,329) (7,109) (4,766) 
 (17,204)
Net cash provided by (used in) operating activities258,687
 53,265
 71,739
 (8,192) (212,514) 162,985
530,312
 (62,825) 326,032
 6,576
 (455,528) 344,567
                      
Cash flows from investing activities: 
  
  
  
  
  
 
  
  
  
  
  
Capital expenditures
 (43,966) (17,979) (2,583) 
 (64,528)
 (92,461) (37,357) (7,796) 
 (137,614)
Proceeds from redemption of marketable securities and investments
 1,554
 4
 
 
 1,558
Purchase of marketable securities and investments
 (466) (13,605) 
 
 (14,071)
Proceeds from sale of a cost method
investment

 
 73,342
 
 
 73,342
Acquisitions of businesses
 (7,613) 
 
 
 (7,613)
 (6,580) 
 
 
 (6,580)
Other, net(146,731) (4,048) (65,509) 2,582
 213,504
 (202)(54,795) (2,534) (398,963) (953) 455,528
 (1,717)
Net cash used in investing activities(146,731) (54,073) (83,484) (1) 213,504
 (70,785)(54,795) (102,041) (376,583) (8,749) 455,528
 (86,640)
                      
Cash flows from financing activities: 
  
  
  
  
  
 
  
  
  
  
  
Issuance of commercial paper, net
 173,500
 
 
 
 173,500
Proceeds from exercise of stock-based compensation awards27,512
 
 
 
 
 27,512
32,612
 
 
 
 
 32,612
Repurchase of common stock(139,468) 
 
 
 
 (139,468)(508,129) 
 
 
 
 (508,129)
Other, net
 2,909
 
 (2,471) (990) (552)
 (5,362) 
 
 
 (5,362)
Net cash (used in) provided by financing activities(111,956) 2,909
 
 (2,471) (990) (112,508)(475,517) 168,138
 
 
 
 (307,379)
                      
Effect of exchange rate changes on cash
and cash equivalents

 
 
 (60) 
 (60)
 
 
 (793) 
 (793)
                      
Net increase (decrease) in cash and cash
equivalents

 2,101
 (11,745) (10,724) 
 (20,368)
 3,272
 (50,551) (2,966) 
 (50,245)
Cash and cash equivalents at beginning of period
 44,499
 60,310
 33,915
 
 138,724

 44,499
 60,310
 33,915
 
 138,724
Cash and cash equivalents at end of period$
 $46,600
 $48,565
 $23,191
 $
 $118,356
$
 $47,771
 $9,759
 $30,949
 $
 $88,479


Consolidating Condensed Statement of Cash Flows
ThreeSix Months Ended August 31,November 30, 2017
(In thousands)

Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
Cintas
Corporation
 Corp. 2 
Subsidiary
Guarantors
 
Non-
Guarantors
 Eliminations 
Cintas
Corporation
Consolidated
                      
Cash flows from operating activities: 
  
  
  
  
  
 
  
  
  
  
  
Net income$217,211
 $118,530
 $87,171
 $8,705
 $(214,406) $217,211
$354,320
 $136,511
 $199,326
 $16,579
 $(352,416) $354,320
Adjustments to reconcile net income to net
cash provided by operating activities
 
  
  
  
  
  
 
  
  
  
  
  
Depreciation
 32,658
 17,613
 3,297
 
 53,568

 65,942
 34,789
 6,847
 
 107,578
Amortization of intangible assets
 11,722
 1,273
 1,946
 
 14,941

 24,522
 2,547
 4,192
 
 31,261
Stock-based compensation28,630
 
 
 
 
 28,630
55,204
 
 
 
 
 55,204
(Gain) loss on sale of business
 (115,787) 15,518
 
 
 (100,269)
 (114,581) 15,521
 
 
 (99,060)
Deferred income taxes
 
 27,468
 (2,530) 
 24,938

 
 40,555
 1,607
 
 42,162
Changes in current assets and liabilities, net of acquisitions of businesses: 
  
  
  
  
  
 
  
  
  
  
  
Accounts receivable, net
 (32,847) 37,443
 4,359
 
 8,955

 (42,881) 20,790
 (2,709) 
 (24,800)
Inventories, net
 7,262
 (11,826) 122
 (1,385) (5,827)
 17,728
 (13,863) 115
 (1,385) 2,595
Uniforms and other rental items in service
 (16,077) 818
 2,480
 (279) (13,058)
 (29,520) (112) (3,305) (357) (33,294)
Prepaid expenses and other current
assets

 966
 (17,353) 376
 
 (16,011)
 (5,428) (13,609) 464
 
 (18,573)
Accounts payable
 137,191
 (110,445) (8,909) (153) 17,684

 155,461
 (153,831) (10,176) (160) (8,706)
Accrued compensation and related liabilities
 (15,841) (14,403) (62) 
 (30,306)
 6,341
 (39,311) (3,510) 
 (36,480)
Accrued liabilities and other
 (19,869) 6,704
 (3,053) 
 (16,218)
 (26,847) 26,373
 (1,466) 
 (1,940)
Income taxes, current
 20,069
 49,407
 652
 
 70,128

 32,963
 (22,794) (1,427) 
 8,742
Net cash provided by operating activities245,841
 127,977
 89,388
 7,383
 (216,223) 254,366
409,524
 220,211
 96,381
 7,211
 (354,318) 379,009
                      
Cash flows from investing activities: 
  
  
  
  
  
 
  
  
  
  
  
Capital expenditures
 (36,267) (31,327) 5,077
 
 (62,517)
 (90,497) (36,875) (5,094) 
 (132,466)
Proceeds from redemption of marketable securities
 12,400
 
 52,856
 
 65,256

 12,400
 
 87,859
 
 100,259
Purchase of marketable securities and investments
 2,724
 (12,223) (50,523) 2,000
 (58,022)
 5,510
 (20,064) (87,323) 2,000
 (99,877)
Proceeds from sale of business
 128,511
 
 
 
 128,511

 127,835
 
 
 
 127,835
Acquisitions of businesses, net of cash acquired
 (302) 
 
 
 (302)
 (1,099) 
 
 
 (1,099)
Other, net(228,057) 57,686
 (23,492) (20,664) 214,223
 (304)(402,385) 21,470
 26,771
 956
 352,318
 (870)
Net cash (used in) provided by investing activities(228,057) 164,752
 (67,042) (13,254) 216,223
 72,622
(402,385) 75,619
 (30,168) (3,602) 354,318
 (6,218)
                      
Cash flows from financing activities: 
  
  
  
  
  
 
  
  
  
  
  
Issuance of commercial paper, net
 (43,000) 
 
 
 (43,000)
Payments of commercial paper, net
 (50,500) 
 
 
 (50,500)
Repayment of debt
 (250,000) 
 
 
 (250,000)
 (250,000) 
 
 
 (250,000)
Proceeds from exercise of stock-based compensation awards17,256
 
 
 
 
 17,256
28,558
 
 
 
 
 28,558
Repurchase of common stock(35,040) 
 
 
 
 (35,040)(35,697) 
 
 
 
 (35,697)
Other, net
 (478) (171) 
 
 (649)
 (1,862) 
 (20) 
 (1,882)
Net cash used in financing activities(17,784) (293,478) (171) 
 
 (311,433)(7,139) (302,362) 
 (20) 
 (309,521)
                      
Effect of exchange rate changes on cash and
cash equivalents

 
 
 6,593
 
 6,593

 
 
 3,466
 
 3,466
                      
Net (decrease) increase in cash and cash
equivalents

 (749) 22,175
 722
 
 22,148

 (6,532) 66,213
 7,055
 
 66,736
Cash and cash equivalents at beginning of period
 48,658
 17,302
 103,306
 
 169,266

 48,658
 17,302
 103,306
 
 169,266
Cash and cash equivalents at end of period$
 $47,909
 $39,477
 $104,028
 $
 $191,414
$
 $42,126
 $83,515
 $110,361
 $
 $236,002


CINTAS CORPORATION
ITEM 2. MANAGEMENT’S DISCUSSION AND 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, as well as Latin America, Europe and Asia, get 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, restroom supplies, first aid and safety products, fire extinguishers and testing, and safety and compliance training, Cintas helps customers get Ready for the Workday™.

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 of our products and services by increasing our penetration at existing customers and by broadening our customer base to include business 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 of its products and services to prospects in all business 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 service reportable operating segment and fire protection businesses. Finally, we evaluate strategic acquisitions as opportunities arise.
  
RESULTS OF OPERATIONS
 
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 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 and carpet and tile cleaning services are also provided within this operating segment. The First Aid and Safety Services operating segment consists of first aid and safety services. The remainder of Cintas’ business, which consists of Fire Protection Services and its Uniform Direct Sale business, is included in All Other. These operating segments consist of fire protection products and services and the direct sale of uniforms and related items. Revenue and income before income taxes for the three and six months ended August 31,November 30, 2018 and 2017 for the two reportable operating segments and All Other is presented in Note 11 entitled Segment Information of “Notes to Consolidated Condensed Financial Statements.”

On March 21, 2017, Cintas completed the acquisition of G&K Services, Inc. (G&K) for consideration of approximately $2.1 billion. G&K is now a wholly-owned subsidiary of Cintas that operates within the Uniform Rental and Facility Services operating segment. To finance the G&K acquisition, Cintas used a combination of new senior notes, a term loan, other borrowings under its existing credit facility and cash on hand. G&K's results of operations are included in Cintas' consolidated financial statements as of and from the date of acquisition.



During the first quarter of fiscal 2018, Cintas sold a significant business, referred to as "Discontinued Services," and as a result, its operations are classified as discontinued operations for all periods presented. See Note 12 entitled Discontinued Operations of “Notes to Consolidated Condensed Financial Statements” for more information.



In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard 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 Basis of Presentation and Note 2 entitled Revenue Recognition of "Notes to Consolidated Condensed Financial Statements" for more information.

Consolidated Results
 
Three Months Ended August 31,November 30, 2018 Compared to Three Months Ended August 31,November 30, 2017
 
Total revenue increased 5.4%7.0% for the three months ended August 31,November 30, 2018 over the same period in the prior fiscal year, from $1,611.5$1,606.4 million to $1,698.0$1,718.3 million. Revenue increased organically by 5.2%7.0% as a result of increased sales volume. Organic growth adjusts for the impact of acquisitions and foreign currency exchange rate fluctuations. Total revenue was positively impacted by 0.3% due to acquisitions and negatively impacted by 0.1%0.3% due to foreign currency exchange rate fluctuations.

Uniform Rental and Facility Services reportable operating segment revenue increased 4.8%6.3% for the three months ended August 31,November 30, 2018 over the same period in the prior fiscal year, from $1,311.8$1,308.0 million to $1,374.9$1,390.8 million. Revenue increased organically by 4.9%6.6%. Revenue growth was negatively impacted 0.1% by 0.3% due to foreign currency exchange rate fluctuations. Growth was driven by many factors including new business sold by sales representatives, penetration of additional products and services into existing customers and strong customer retention.
 
Other revenue, consisting of revenue from the First Aid and Safety Services reportable operating segment and All Other, increased 7.8%9.7% for the three months ended August 31,November 30, 2018 compared to the same period in the prior fiscal year, from $299.7298.4 million to $323.0327.5 million. Revenue increased organically by 6.4%8.4%. Revenue growth was positively impacted by 1.4% due to growth derived through acquisitions in our Fire Protection business, which is included in All Other, and our First Aid and Safety Services reportable operating segment.segment and negatively impacted by 0.1% due to foreign currency exchange rate fluctuations.

Cost of uniform rental and facility services consists primarily of production expenses, delivery expenses and the amortization of in service inventory, including uniforms, mats, shop towels and other ancillary items. Cost of uniform rental and facility services increased $39.6$37.2 million, or 5.6%5.1%, for the three months ended August 31,November 30, 2018, compared to the three months ended August 31,November 30, 2017. This increase was due to higher Uniform Rental and Facility Services reportable operating segment sales volume as well as increased labor and energy costs.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 $11.515.9 million, or 7.0%9.6%, for the three months ended August 31,November 30, 2018, compared to the three months ended August 31,November 30, 2017. The increase was primarily due to higher sales volume in the First Aid and Safety Services reportable operating segment and All Other.

Selling and administrative expenses increased $18.423.6 million, or 3.8%5.0%, for the three months ended August 31,November 30, 2018, compared to the same period in the prior fiscal year. The majority of the increase was due to higher Uniform Rental and Facility Services and First Aid and Safety Services reportable operating segment sales volume, as well as increased stock compensation expense that was partially offset by lower employee-partner related expenses.

Operating income for the three months ended August 31,November 30, 2018 was negatively impacted by $4.9$7.8 million of integration expenses incurred in connection with the G&K acquisition. For the three months ended August 31,November 30, 2018, the after-tax effect of these integration expenses represents a negative impact of $0.04$0.05 per share on diluted earnings per share.

During the three months ended November 30, 2018, Cintas sold a cost method investment for $73.3 million, resulting in a pre-tax gain of $69.4 million. For the three months ended November 30, 2018, the after-tax effect of the gain represents a positive impact of $0.47 per share on diluted earnings per share.



Net interest expense (interest expense less interest income) was $23.8$24.5 million for the three months ended August 31,November 30, 2018, compared to $30.0$28.8 million for the three months ended August 31,November 30, 2017. The decrease was primarily due to lower debt outstanding during the current period as a result of the payment of $300.0 million aggregate principal amount of our 6.13% 10-year senior notes that matured on December 1, 2017 with cash on hand and proceeds from the issuance of commercial paper.2017. Also, during the firstsecond quarter of the prior year, Cintas made payments of $43.0$7.5 million, net on commercial paper borrowings and paid off the term loan balance of $250.0 million with cash on hand.


borrowings.

Cintas’ effective tax rate for continuing operations was 12.0%24.2% and 26.5%33.3% for the three months ended August 31,November 30, 2018 and 2017, respectively. The effective tax rate for both periods was largely impacted by certain discrete items (primarily the tax accounting for stock-based compensation). The three monththree-month period ended August 31,November 30, 2018 was also impacted by the reduced U.S. corporate tax rate as a result of the enactment of the Tax Cuts and Jobs Act (the Tax Act).

Net income from continuing operations for the three months ended August 31,November 30, 2018 increased $51.4$105.3 million, or 31.9%76.4%, compared to the three months ended August 31,November 30, 2017. Diluted earnings per share from continuing operations was $1.89$2.18 for the three months ended August 31,November 30, 2018, which was an increase of 30.3%75.8% compared to the same period in the prior fiscal year. Diluted earnings per share from continuing operations increased due to the increase in earnings from continuing operations.

Uniform Rental and Facility Services Reportable Operating Segment
 
Three Months Ended August 31,November 30, 2018 Compared to Three Months Ended August 31,November 30, 2017
 
Uniform Rental and Facility Services reportable operating segment revenue increased from $1,311.81,308.0 million to $1,374.91,390.8 million, or 4.8%6.3%, for the three months ended August 31,November 30, 2018, over the same period in the prior fiscal year, and the cost of uniform rental and facility services increased $39.637.2 million, or 5.6%5.1%. Revenue increased organically by 4.9%6.6%. The reportable operating segment’s gross margin was $628.5629.7 million, or 45.7%45.3% of revenue. The gross margin was 4060 basis points lowerhigher than the prior fiscal year’s firstsecond quarter gross margin of 46.1%44.7%. The decreaseincrease was driven by increasedlower production laborrelated supplies expenses and energy expenses.improvements in process efficiency.
 
Selling and administrative expenses increased $10.1$11.7 million, but decreased as a percent of revenue to 28.5%27.2%, compared to 29.1%28.1% in the firstsecond quarter of the prior fiscal year. The decrease in expenses as a percent of revenue was primarily due to lower labor and employee-partner related expenses.expenses as a percent of revenue.
 
Income before income taxes increased $12.6$39.1 million, or 5.8%19.2%, for the Uniform Rental and Facility Services reportable operating segment for the three months ended August 31,November 30, 2018 compared to the same period in the prior fiscal year. Income before income taxes was 16.8%17.5% of the reportable operating segment’s revenue, which was a 10190 basis point increase compared to the firstsecond quarter of the prior fiscal year of 16.7%15.6%. This increase was due primarily to the increase in sales as previously discussed.discussed and a reduction in G&K integration expenses compared to the second quarter of the prior year.

First Aid and Safety Services Reportable Operating Segment
 
Three Months Ended August 31,November 30, 2018 Compared to Three Months Ended August 31,November 30, 2017

First Aid and Safety Services reportable operating segment revenue increased from $140.6$139.1 million to $153.4$153.3 million, or 9.1%10.3%, for the three months ended August 31,November 30, 2018 over the same period in the prior fiscal year. Revenue increased organically by 9.0%10.2% as a result of increased sales volume and was positively impacted by 0.1% due to acquisitions. Growth was driven by many factors including new business sold by sales representatives, penetration of additional products and services into existing customers and strong customer retention.

Cost of first aid and safety services increased $6.1$5.8 million, or 8.3%7.9%, for the three months ended August 31,November 30, 2018, over the three months ended August 31,November 30, 2017, due to higher sales volume. The gross margin as a percent of revenue was 47.9%48.0% for the quarter ended August 31,November 30, 2018, which is an increase of 40110 basis points compared to the gross margin as a percent of revenue of 47.5%46.9% in the same period of the prior fiscal year. The increase was driven primarily by improved sourcing, leveraging of existing warehouses and optimization of delivery routes.



Selling and administrative expenses increased $4.1$5.1 million compared to the same quarter in the prior fiscal year. The increase was due primarily to increased labor.employee-partner related expenses. Selling and administrative expenses as a percent of revenue decreasedincreased to 33.6%34.1% compared to 33.7%34.0% in the firstsecond quarter of the prior fiscal year. The decreaseincrease in selling and administrative expenses as a percent to revenue was due to lowerhigher employee-partner related expenses.

Income before income taxes for the First Aid and Safety Services reportable operating segment increased $2.6$3.4 million to $22.0$21.3 million for the three months ended August 31,November 30, 2018, compared to the same period in the prior fiscal year, due to the previously discussed growth in revenue and improvement in the gross margin percentage. Income before income taxes, at 14.3%13.9% of the reportable operating segment’s revenue, was a 50100 basis point increase compared to the same quarter of the prior fiscal year due to the reasons previously mentioned.

Consolidated Results
Six Months Ended November 30, 2018 Compared to Six Months Ended November 30, 2017
Total revenue increased 6.2% for the six months ended November 30, 2018 over the same period in the prior fiscal year, from $3,217.9 million to $3,416.2 million. Revenue increased organically by 6.1% as a result of increased sales volume. Organic growth adjusts for the impact of acquisitions and foreign currency exchange rate fluctuations. Total revenue was positively impacted by 0.3% due to acquisitions and negatively impacted by 0.2% due to foreign currency exchange rate fluctuations.

Uniform Rental and Facility Services reportable operating segment revenue increased 5.6% for the six months ended November 30, 2018 over the same period in the prior fiscal year, from $2,619.8 million to $2,765.7 million. Revenue increased organically by 5.8%. Revenue growth was negatively impacted 0.2% by foreign currency exchange rate fluctuations. Growth was driven by many factors including new business sold by sales representatives, penetration of additional products and services into existing customers and strong customer retention.
Other revenue, consisting of revenue from the First Aid and Safety Services reportable operating segment and All Other, increased 8.8% for the six months ended November 30, 2018 compared to the same period in the prior fiscal year, from $598.1 million to $650.5 million. Revenue increased organically by 7.4%. Revenue growth was positively impacted by 1.4% due to growth derived through acquisitions in our Fire Protection business, which is included in All Other, and our First Aid and Safety Services reportable operating segment.

Cost of uniform rental and facility services consists primarily of production expenses, delivery expenses and the amortization of in service inventory, including uniforms, mats, shop towels and other ancillary items. Cost of uniform rental and facility services increased $76.7 million, or 5.4%, for the six months ended November 30, 2018, compared to the six months ended November 30, 2017. This increase was due to higher Uniform Rental and Facility Services reportable operating segment 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 $27.4 million, or 8.3%, for the six months ended November 30, 2018, compared to the six months ended November 30, 2017. The increase was primarily due to higher sales volume in the First Aid and Safety Services reportable operating segment and All Other.

Selling and administrative expenses increased $41.9 million, or 4.4%, for the six months ended November 30, 2018, compared to the same period in the prior fiscal year. The majority of the increase was due to higher Uniform Rental and Facility Services and First Aid and Safety Services reportable operating segment sales volume as well as increased employee-partner related expenses.

Operating income for the six months ended November 30, 2018 was negatively impacted by $12.7 million of integration expenses incurred in connection with the G&K acquisition. For the six months ended November 30, 2018, the after-tax effect of these integration expenses represents a negative impact of $0.09 per share on diluted earnings per share.

During the six months ended November 30, 2018, Cintas sold a cost method investment for $73.3 million, resulting in a pre-tax gain of $69.4 million. For the six months ended November 30, 2018, the after-tax effect of the gain represents a positive impact of $0.47 per share on diluted earnings per share.



Net interest expense (interest expense less interest income) was $48.3 million for the six months ended November 30, 2018, compared to $58.9 million for the six months ended November 30, 2017. The decrease was primarily due to lower debt outstanding during the current period as a result of the payment of $300.0 million aggregate principal amount of our 6.13% 10-year senior notes that matured on December 1, 2017. Also, during the first half of the prior fiscal year, Cintas made payments of $50.5 million, net on commercial paper borrowings and paid off the term loan balance of $250.0 million with cash on hand.

Cintas’ effective tax rate for continuing operations was 18.9% and 29.8% for the six months ended November 30, 2018 and 2017, respectively. The effective tax rate for both periods was largely impacted by certain discrete items (primarily the tax accounting for stock-based compensation). The six months ended November 30, 2018 was also impacted by the reduced U.S. corporate tax rate as a result of the enactment of the Tax Act.

Net income from continuing operations for the six months ended November 30, 2018 increased $156.7 million, or 52.4%, compared to the six months ended November 30, 2017. Diluted earnings per share from continuing operations was $4.07 for the six months ended November 30, 2018, which was an increase of 51.3% compared to the same period in the prior fiscal year. Diluted earnings per share from continuing operations increased due to the increase in earnings from continuing operations.

Uniform Rental and Facility Services Reportable Operating Segment
Six Months Ended November 30, 2018 Compared to Six Months Ended November 30, 2017
Uniform Rental and Facility Services reportable operating segment revenue increased from $2,619.8 million to $2,765.7 million, or 5.6%, for the six months ended November 30, 2018, over the same period in the prior fiscal year, and the cost of uniform rental and facility services increased $76.7 million, or 5.4%. Revenue increased organically by 5.8%. The reportable operating segment’s gross margin was $1,258.1 million, or 45.5% of revenue. The gross margin was 10 basis points higher than the first six months of the prior fiscal year’s gross margin of 45.4%. The increase was driven by lower production related supplies expenses.
Selling and administrative expenses increased $21.8 million, but decreased as a percent of revenue to 27.9%, compared to 28.6% in the first six months of the prior fiscal year. The decrease in expenses as a percent of revenue was primarily due to lower labor and employee-partner related expenses.
Income before income taxes increased $51.7 million, or 12.2%, for the Uniform Rental and Facility Services reportable operating segment for the six months ended November 30, 2018 compared to the same period in the prior fiscal year. Income before income taxes was 17.2% of the reportable operating segment’s revenue, which was a 110 basis point increase compared to the first six months of the prior fiscal year of 16.1%. This increase was due primarily to the increase in sales as previously discussed and a reduction in G&K integration expenses compared to the same period in the prior year.

First Aid and Safety Services Reportable Operating Segment
Six Months Ended November 30, 2018 Compared to Six Months Ended November 30, 2017

First Aid and Safety Services reportable operating segment revenue increased from $279.7 million to $306.8 million, or 9.7%, for the six months ended November 30, 2018 over the same period in the prior fiscal year. Revenue increased organically by 9.6% as a result of increased sales volume and was positively impacted by 0.1% due to acquisitions. Growth was driven by many factors including new business sold by sales representatives, penetration of additional products and services into existing customers and strong customer retention.

Cost of first aid and safety services increased $12.0 million, or 8.1%, for the six months ended November 30, 2018, over the six months ended November 30, 2017, due to higher sales volume. The gross margin as a percent of revenue was 48.0% for the six months ended November 30, 2018, which is an increase of 80 basis points compared to the gross margin as a percent of revenue of 47.2% in the same period of the prior fiscal year. The increase was driven primarily by improved sourcing, leveraging of existing warehouses and optimization of delivery routes.



Selling and administrative expenses increased $9.2 million during the six months ended November 30, 2018 compared to the same period in the prior fiscal year. The increase was due primarily to increased employee-partner related expenses. Selling and administrative expenses as a percent of revenue increased to 33.9% compared to 33.8% in the first six months of the prior fiscal year. The increase in selling and administrative expenses as a percent to revenue was due to higher employee-partner related expenses.

Income before income taxes for the First Aid and Safety Services reportable operating segment increased $5.9 million to $43.3 million for the six months ended November 30, 2018, compared to the same period in the prior fiscal year, due to the previously discussed growth in revenue and improvement in the gross margin percentage. Income before income taxes, at 14.1% of the reportable operating segment’s revenue, was a 70 basis point increase compared to the same period of the prior fiscal year due to the reasons previously mentioned.

LIQUIDITY AND CAPITAL RESOURCES
 
The following is a summary of our cash flows and cash, cash equivalents and marketable securities as of and for the threesix months ended August 31,November 30, 2018 and 2017:
(In thousands)2018 20172018 2017
      
Net cash provided by operating activities$162,985
 $254,366
$344,567
 $379,009
Net cash (used in) provided by investing activities$(70,785) $72,622
Net cash used in investing activities$(86,640) $(6,218)
Net cash used in financing activities$(112,508) $(311,433)$(307,379) $(309,521)
      
Cash and cash equivalents at the end of the period$118,356
 $191,414
$88,479
 $236,002
Marketable securities at the end of the period$
 $21,626
$
 $22,732

Cash, cash equivalents and marketable securities as of August 31,November 30, 2018 and 2017 include $23.2$30.9 million and $125.7$133.1 million, respectively, that is located outside of the United States.
 
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.

Net cash provided by operating activities was $163.0$344.6 million for the threesix months ended August 31,November 30, 2018, a decrease of $91.4$34.4 million compared to the threesix months ended August 31,November 30, 2017. The decrease was primarily the result of changes in working capital.capital, which were partially offset by an increase in net income.

Net cash used in investing activities includes capital expenditures, proceeds from the sale of investments and businesses and cash paid for acquisitions of businesses. Capital expenditures were $64.5137.6 million and $62.5132.5 million for the threesix months ended August 31,November 30, 2018 and 2017, respectively. Capital expenditures in fiscal 2019 primarily relate to expansion efforts in the Uniform Rental and Facility Services reportable operating segment, representing $51.7$109.8 million of the current fiscal year amount. Cash paid for acquisitions of businesses was $7.6$6.6 million and $0.3$1.1 million for the threesix months ended August 31,November 30, 2018 and 2017, respectively. The acquisitions during the threesix months ended August 31,November 30, 2018 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, which is included in All Other. ForAlso, during the threesix months ended August 31, 2017,November 30, 2018, investing activities included proceeds of $128.5$73.3 million from the sale of a cost method investment, and during the six months ended November 30, 2017, included proceeds of $127.8 million related to the sale of Discontinued Services. Net cash used in investing activities also includes net proceeds from purchases and redemptions of marketable securities and investments of $1.6$14.1 million for the threesix months ended August 31, 2018. For the three months ended August 31, 2017, net cash provided by investing activities includesNovember 30, 2018 and net proceeds from purchasesredemptions and redemptionspurchases of marketable securities and investments of $7.2 million.$0.4 million for the six months ended November 30, 2017.
 


Net cash used in financing activities was $112.5$307.4 million and $311.4$309.5 million for the threesix months ended August 31,November 30, 2018 and 2017, respectively. On August 2, 2016, we announced that the Board of Directors authorized a $500.0 million share buyback program, which does not have an expiration date. During the threesix months ended August 31,November 30, 2018, under the August 2, 2016 plan, we purchased a total of 0.42.1 million shares of Cintas common stock at an average price of $200.97$192.55 for a total purchase price of $78.5$410.0 million. During the three months ended August 31, 2017, no share buybacks occurred under the August 2, 2016 program. Subsequent to August 31, 2018 through October 5, 2018, Cintas purchased 0.8 million shares at an average price of $198.35 per share for a total purchase price of $156.3 million. From the inception ofThis completed the August 2, 2016 share buyback plan throughprogram. On October 5,30, 2018, Cintas haswe announced that the Board of Directors authorized a new $1.0 billion share buyback program, which does not have an expiration date. Under this new program, we purchased a total of 1.70.2 million shares of Cintas common stock at an average price of $191.36$181.41 for a total purchase price of $324.7$36.6 million. Subsequent to November 30, 2018 through January 8, 2019, under the new share buyback program, Cintas purchased 0.6 million shares at an average price of $167.32 per share for a total purchase price of $100.0 million. From the inception of the October 30, 2018 share buyback plan through January 8, 2019, Cintas has purchased a total of 0.8 million shares of Cintas common stock at an average price of $170.87 for a total purchase price of $136.6 million. In addition, for the threesix months ended August 31,November 30, 2018, Cintas acquired 0.3 million shares of Cintas common stock for employee payroll taxes due on restricted stock awards that vested during the threesix months ended August 31,November 30, 2018. These shares were acquired at an average price of $204.39$204.32 per share for a total purchase price of $61.0$61.5 million.

During the threesix months ended August 31,November 30, 2018, Cintas issued $173.5 million, net of commercial paper borrowings. During the six months ended November 30, 2017, Cintas made payments of $43.0$50.5 million, net on commercial paper borrowings and paid off the term loan balance of $250.0 million with cash on hand.



The following table summarizes Cintas' outstanding debt:
(In thousands)
Interest
 Rate
 
Fiscal Year
Issued
 
Fiscal Year
 Maturity
 
August 31,
2018
 
May 31,
2018
Interest
 Rate
 
Fiscal Year
Issued
 
Fiscal Year
 Maturity
 
November 30,
2018
 
May 31,
2018
     
Debt due within one year     
Commercial paper2.60%
(1) 
Various Various $173,500
 $
Total debt due within one year  $173,500
 $
          
Debt due after one year          
Senior notes4.30% 2012 2022 $250,000
 $250,000
4.30% 2012 2022 $250,000
 $250,000
Senior notes2.90% 2017 2022 650,000
 650,000
2.90% 2017 2022 650,000
 650,000
Senior notes3.25% 2013 2023 300,000
 300,000
3.25% 2013 2023 300,000
 300,000
Senior notes (1)
2.78% 2013 2023 52,011
 52,119
Senior notes (2)
3.11% 2015 2025 52,224
 52,309
2.78% 2013 2023 51,902
 52,119
Senior notes (3)
3.11% 2015 2025 52,140
 52,309
Senior notes3.70% 2017 2027 1,000,000
 1,000,000
3.70% 2017 2027 1,000,000
 1,000,000
Senior notes6.15% 2007 2037 250,000
 250,000
6.15% 2007 2037 250,000
 250,000
Debt issuance costs  (18,376) (19,119)  (17,634) (19,119)
Total debt due after one year  $2,535,859
 $2,535,309
  $2,536,408
 $2,535,309
(1) Variable rate debt instrument. The rate presented is the variable borrowing rate at November 30, 2018.
(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%.
(2)(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 on September 16, 2016. The amendment increased the capacity of the revolving credit facility from $450.0 million to $600.0 million and added a $250.0 million term loan facility. 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 a new term loan of up to $250.0 million in the aggregate, subject to customary conditions. The maturity date of the credit agreement is September 15, 2021. As of August 31,November 30, 2018, there was $173.5 million commercial paper outstanding and no borrowings on our revolving credit facility. As of May 31, 2018, there was no commercial paper outstanding and no borrowings on our revolving credit facility.



Cintas has certain covenants related to debt agreements. These covenants limit our 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 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. As of August 31,November 30, 2018, Cintas was in compliance with all debt covenants.

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. Our ability to continue to access the commercial paper and long-term debt markets on favorable interest rate and other terms will depend, to a significant degree, on the ratings assigned by the credit rating agencies to our indebtedness. As of August 31,November 30, 2018, our ratings were as follows:
Rating Agency Outlook Commercial Paper Long-term Debt
       
Standard & Poor’s Positive A-2 BBB+
Moody’s Investors Service Stable P-2 A3

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 and long-term obligations under capital leases. 




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 or results of operation of Cintas. 


Forward-Looking Statements

This Quarterly Report on Form 10-Q 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 Quarterly 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; 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; 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; 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.  A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the year ended May 31, 2018 and in our reports on Forms 10-Q and 8-K.  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.




ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
In our normal operations, Cintas has market risk exposure to interest rates. There has been no material change to this market risk exposure to interest rates from that which was previously disclosed on page 30 of our Annual Report on Form 10-K for the year ended May 31, 2018.
 
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 currency denominated revenue and profit translated into U.S. dollars. The primary foreign currency to which Cintas is exposed is the Canadian dollar. 
 
ITEM 4.
CONTROLS AND PROCEDURES.
 
Disclosure Controls and Procedures
 
With the participation of Cintas’ management, including Cintas’ Chief Executive Officer, Chief Financial Officer, General Counsel and Controllers, Cintas has evaluated the effectiveness of the disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act)) as of August 31,November 30, 2018.  Based on such evaluation, Cintas’ management, including Cintas’ Chief Executive Officer, Chief Financial Officer, General Counsel and Controllers, has concluded that Cintas’ disclosure controls and procedures were effective as of August 31,November 30, 2018, 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
 
Beginning June 1, 2018, we adopted ASU 2014-09 and implemented certain changes to our related revenue recognition control activities, including the development of new policies and periodic reviews of revenue transactions based on the five-step model provided in the new revenue standard, enhanced contract review requirements and other ongoing monitoring activities. There were no other 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 quartersix months ended August 31,November 30, 2018, that have materially affected, or are reasonably likely to materially affect, Cintas' internal control over financial reporting.






Part II.  Other Information
 
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.PROCEEDS
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)
        
June 1 - 30, 2018 (2)
75,924
 $188.55
 75,650
 $395.7
July 1 - 31, 2018 (3)
463,209
 $203.25
 225,637
 $350.0
August 1 - 31, 2018 (4)
149,754
 $207.03
 89,100
 $331.5
Total688,887
 $202.45
 390,387
 $331.5
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)
        
September 1 - 30, 2018 (2)
111,424
 $204.68
 111,153
 $308.8
October 1 - 31, 2018 (3)
994,552
 $196.76
 993,400
 $1,113.3
November 1 - 30, 2018 (4)
836,831
 $179.32
 836,069
 $963.4
Total1,942,807
 $189.70
 1,940,622
 $963.4

(1) On August 2, 2016, Cintas announced that the Board of Directors authorized a $500.0 million share buyback program, which does not have an expiration date. From the inception of the August 2, 2016 share buyback program through August 31,November 2018, Cintas has purchased a total of 0.92.6 million shares of Cintas common stock at an average price of $185.30$188.82 per share for a total purchase price of $168.5$500.0 million. On October 30, 2018, Cintas announced that the Board of Directors authorized a new $1.0 billion share buyback program, which does not have an expiration date. From the inception of the October 30, 2018 share buyback program through November 30, 2018, Cintas has purchased a total of 0.2 million shares of Cintas common stock at an average price of $181.41 per share for a total purchase price of $36.6 million.
(2) During JuneSeptember 2018, Cintas acquired 274271 shares of Cintas common stock in trade for employee payroll taxes due on restricted stock awards that vested during the fiscal year. These shares were acquired at an average price of $186.59$214.61 per share for a total purchase price of less than $0.1 million.
(3) During JulyOctober 2018, Cintas acquired 237,5721,152 shares of Cintas common stock in trade for employee payroll taxes due on restricted stock awards that vested during the fiscal year. These shares were acquired at an average price of $203.77$193.28 per share for a total purchase price of $48.4$0.2 million.
(4) During AugustNovember 2018, Cintas acquired 60,654762 shares of Cintas common stock in trade for employee payroll taxes due on restricted stock awards that vested during the fiscal year. These shares were acquired at an average price of $206.92$187.38 per share for a total purchase price of $12.6$0.1 million.

ITEM 5.
OTHER INFORMATION

On October 30, 2018, Cintas declared an annual cash dividend of $2.05 per share on outstanding common stock, a 26.5% increase over the annual dividend paid in the prior year. The dividend was paid on December 7, 2018, to shareholders of record as of November 9, 2018.


ITEM 6.
EXHIBITS.EXHIBITS
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document



Signatures
 

Pursuant to the requirements 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 
   (Registrant) 
      
Date:October 5, 2018January 8, 2019 /s/J. Michael Hansen 
     
    J. Michael Hansen
    Executive Vice President and Chief Financial Officer
    (Principal Financial and Accounting Officer)

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