Supplemental Guarantor Information | 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 $99.5 million aggregate principal amount of commercial paper and the $1,050.0 million aggregate principal amount of senior notes, 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 2017, the Company merged a legal entity previously included in subsidiary guarantors into Corp. 2. This restructuring has been reflected 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 February 28, 2017 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Revenue: Uniform rental and facility services $ — $ 826,606 $ 147,293 $ 57,082 $ (37,583 ) $ 993,398 Other — 403,650 297 16,672 (132,882 ) 287,737 Equity in net income of affiliates 118,005 — — — (118,005 ) — 118,005 1,230,256 147,590 73,754 (288,470 ) 1,281,135 Costs and expenses (income): Cost of uniform rental and facility services — 476,004 92,273 36,877 (58,616 ) 546,538 Cost of other — 280,600 (19,449 ) 12,462 (105,440 ) 168,173 Selling and administrative expenses — 399,769 (51,465 ) 20,883 (6,802 ) 362,385 G&K Services, Inc. transaction expenses — — 9,344 — — 9,344 Operating income 118,005 73,883 116,887 3,532 (117,612 ) 194,695 Interest income — (2 ) (6 ) (4 ) 1 (11 ) Interest expense (income) — 14,981 (1,193 ) (92 ) — 13,696 Income before income taxes 118,005 58,904 118,086 3,628 (117,613 ) 181,010 Income taxes — 20,197 40,474 1,712 (20 ) 62,363 Income from continuing operations 118,005 38,707 77,612 1,916 (117,593 ) 118,647 (Loss) income from discontinued operations, net of tax — (1,098 ) 447 9 — (642 ) Net income $ 118,005 $ 37,609 $ 78,059 $ 1,925 $ (117,593 ) $ 118,005 Consolidating Condensed Income Statement Three Months Ended February 29, 2016 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Revenue: Uniform rental and facility services $ — $ 784,876 $ 137,347 $ 50,763 $ (36,421 ) $ 936,565 Other — 390,207 951 14,952 (126,592 ) 279,518 Equity in net income of affiliates 117,279 — — — (117,279 ) — 117,279 1,175,083 138,298 65,715 (280,292 ) 1,216,083 Costs and expenses (income): Cost of uniform rental and facility services — 460,124 87,735 34,056 (57,259 ) 524,656 Cost of other — 270,627 (18,056 ) 11,399 (97,151 ) 166,819 Selling and administrative expenses — 364,555 (43,503 ) 17,459 (6,855 ) 331,656 Operating income 117,279 79,777 112,122 2,801 (119,027 ) 192,952 Interest income — (7 ) (262 ) (68 ) 2 (335 ) Interest expense (income) — 16,350 (207 ) 20 — 16,163 Income before income taxes 117,279 63,434 112,591 2,849 (119,029 ) 177,124 Income taxes — 21,223 37,533 1,118 (29 ) 59,845 Income from continuing operations 117,279 42,211 75,058 1,731 (119,000 ) 117,279 Income (loss) from discontinued operations, net of tax 62 74 — (12 ) (62 ) 62 Net income $ 117,341 $ 42,285 $ 75,058 $ 1,719 $ (119,062 ) $ 117,341 Consolidating Condensed Income Statement Nine Months Ended February 28, 2017 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Revenue: Uniform rental and facility services $ — $ 2,505,322 $ 446,327 $ 172,355 $ (125,445 ) $ 2,998,559 Other — 1,225,276 1,898 53,709 (407,254 ) 873,629 Equity in net income of affiliates 396,473 — — — (396,473 ) — 396,473 3,730,598 448,225 226,064 (929,172 ) 3,872,188 Costs and expenses (income): Cost of uniform rental and facility services — 1,442,713 277,268 111,594 (188,353 ) 1,643,222 Cost of other — 847,992 (53,929 ) 39,926 (326,648 ) 507,341 Selling and administrative expenses — 1,213,418 (150,455 ) 59,851 (21,181 ) 1,101,633 G&K Services, Inc. transaction expenses — — 15,478 — — 15,478 Operating income 396,473 226,475 359,863 14,693 (392,990 ) 604,514 Interest income — (2 ) (30 ) (77 ) 2 (107 ) Interest expense (income) — 44,336 (3,071 ) (130 ) — 41,135 Income before income taxes 396,473 182,141 362,964 14,900 (392,992 ) 563,486 Income taxes — 59,541 118,652 5,176 (75 ) 183,294 Income from continuing operations 396,473 122,600 244,312 9,724 (392,917 ) 380,192 Income from discontinued operations, net of tax — 13,884 447 1,950 — 16,281 Net income $ 396,473 $ 136,484 $ 244,759 $ 11,674 $ (392,917 ) $ 396,473 Consolidating Condensed Income Statement Nine Months Ended February 29, 2016 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Revenue: Uniform rental and facility services $ — $ 2,358,431 $ 410,479 $ 158,449 $ (114,682 ) $ 2,812,677 Other — 1,157,078 2,981 47,279 (385,962 ) 821,376 Equity in net income of affiliates 338,930 — — — (338,930 ) — 338,930 3,515,509 413,460 205,728 (839,574 ) 3,634,053 Costs and expenses (income): Cost of uniform rental and facility services — 1,377,174 260,635 105,811 (174,370 ) 1,569,250 Cost of other — 807,458 (50,603 ) 34,822 (303,026 ) 488,651 Selling and administrative expenses — 1,099,373 (134,457 ) 51,479 (19,051 ) 997,344 Operating income 338,930 231,504 337,885 13,616 (343,127 ) 578,808 Interest income — (19 ) (378 ) (170 ) 2 (565 ) Interest expense (income) — 49,152 (425 ) 19 — 48,746 Income before income taxes 338,930 182,371 338,688 13,767 (343,129 ) 530,627 Income taxes — 64,101 119,044 8,634 (82 ) 191,697 Income from continuing operations 338,930 118,270 219,644 5,133 (343,047 ) 338,930 Income (loss) from discontinued operations, net of tax 223,692 229,355 — (5,663 ) (223,692 ) 223,692 Net income (loss) $ 562,622 $ 347,625 $ 219,644 $ (530 ) $ (566,739 ) $ 562,622 Consolidating Condensed Statement of Comprehensive Income Three Months Ended February 28, 2017 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Net income $ 118,005 $ 37,609 $ 78,059 $ 1,925 $ (117,593 ) $ 118,005 Other comprehensive income, net of tax: Foreign currency translation adjustments 2,400 — — 2,400 (2,400 ) 2,400 Change in fair value of derivatives 2,560 2,560 — — (2,560 ) 2,560 Amortization of interest rate lock agreements 385 385 — — (385 ) 385 Other comprehensive income 5,345 2,945 — 2,400 (5,345 ) 5,345 Comprehensive income $ 123,350 $ 40,554 $ 78,059 $ 4,325 $ (122,938 ) $ 123,350 Consolidating Condensed Statement of Comprehensive Income Three Months Ended February 29, 2016 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Net income $ 117,341 $ 42,285 $ 75,058 $ 1,719 $ (119,062 ) $ 117,341 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments — — — (2,405 ) — (2,405 ) Change in fair value of derivatives — (14,070 ) — — — (14,070 ) Amortization of interest rate lock agreements — 488 — — — 488 Change in fair value of available-for-sale securities — — — (7 ) — (7 ) Other comprehensive loss — (13,582 ) — (2,412 ) — (15,994 ) Comprehensive income (loss) $ 117,341 $ 28,703 $ 75,058 $ (693 ) $ (119,062 ) $ 101,347 Consolidating Condensed Statement of Comprehensive Income Nine Months Ended February 28, 2017 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Net income $ 396,473 $ 136,484 $ 244,759 $ 11,674 $ (392,917 ) $ 396,473 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments (5,135 ) — — (5,135 ) 5,135 (5,135 ) Change in fair value of derivatives 16,913 16,913 — — (16,913 ) 16,913 Amortization of interest rate lock agreements 1,155 1,155 — — (1,155 ) 1,155 Other comprehensive income (loss) 12,933 18,068 — (5,135 ) (12,933 ) 12,933 Comprehensive income $ 409,406 $ 154,552 $ 244,759 $ 6,539 $ (405,850 ) $ 409,406 Consolidating Condensed Statement of Comprehensive Income Nine Months Ended February 29, 2016 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Net income (loss) $ 562,622 $ 347,625 $ 219,644 $ (530 ) $ (566,739 ) $ 562,622 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments — — — (19,044 ) — (19,044 ) Cumulative translation adjustment on Shred-it — 5,875 — 597 — 6,472 Change in fair value of derivatives — (14,070 ) — — — (14,070 ) Amortization of interest rate lock agreements — 1,464 — — — 1,464 Change in fair value of available-for-sale securities — — — (25 ) — (25 ) Other comprehensive loss — (6,731 ) — (18,472 ) — (25,203 ) Comprehensive income (loss) $ 562,622 $ 340,894 $ 219,644 $ (19,002 ) $ (566,739 ) $ 537,419 Consolidating Condensed Balance Sheet As of February 28, 2017 (In thousands) Cintas Corporation Corp. 2 Subsidiary Guarantors Non- Guarantors Eliminations Cintas Corporation Consolidated Assets Current assets: Cash and cash equivalents $ — $ 42,774 $ 9,223 $ 95,247 $ — $ 147,244 Accounts receivable, net — 459,768 103,475 35,620 — 598,863 Inventories, net — 244,455 17,071 12,822 (2,167 ) 272,181 Uniforms and other rental items in service — 446,403 75,754 35,302 (17,729 ) 539,730 Income taxes, current — (12,520 ) 32,327 753 — 20,560 Prepaid expenses and other current assets — 27,233 23,317 813 — 51,363 Total current assets — 1,208,113 261,167 180,557 (19,896 ) 1,629,941 Property and equipment, at cost, net — 660,977 348,996 80,236 — 1,090,209 Investments 321,083 1,775,947 923,278 961,070 (3,833,210 ) 148,168 Goodwill — — 1,262,996 40,154 (112 ) 1,303,038 Service contracts, net — 77,877 — 5,843 — 83,720 Other assets, net 1,391,929 937 3,546,292 8,877 (4,931,947 ) 16,088 $ 1,713,012 $ 3,723,851 $ 6,342,729 $ 1,276,737 $ (8,785,165 ) $ 4,271,164 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ (465,246 ) $ (1,810,057 ) $ 2,344,761 $ 20,363 $ 38,119 $ 127,940 Accrued compensation and related liabilities — 70,302 19,953 5,098 — 95,353 Accrued liabilities — 65,543 242,206 13,575 — 321,324 Debt due within one year — 399,351 — — — 399,351 Total current liabilities (465,246 ) (1,274,861 ) 2,606,920 39,036 38,119 943,968 Long-term liabilities: Debt due after one year — 744,799 — 390 — 745,189 Deferred income taxes — (420 ) 259,562 7,923 — 267,065 Accrued liabilities — — 135,522 1,162 — 136,684 Total long-term liabilities — 744,379 395,084 9,475 — 1,148,938 Total shareholders’ equity 2,178,258 4,254,333 3,340,725 1,228,226 (8,823,284 ) 2,178,258 $ 1,713,012 $ 3,723,851 $ 6,342,729 $ 1,276,737 $ (8,785,165 ) $ 4,271,164 Consolidating Condensed Balance Sheet As of May 31, 2016 (In thousands) Cintas Corporation Corp. 2 Subsidiary Guarantors Non- Guarantors Eliminations Cintas Corporation Consolidated Assets Current assets: Cash and cash equivalents $ — $ 57,893 $ 55,392 $ 26,072 $ — $ 139,357 Marketable securities — — — 70,405 — 70,405 Accounts receivable, net — 430,335 97,516 35,327 — 563,178 Inventories, net — 222,823 19,149 11,235 (3,845 ) 249,362 Uniforms and other rental items in service — 450,065 73,001 36,612 (19,722 ) 539,956 Income taxes, current — (1,634 ) 2,698 648 — 1,712 Prepaid expenses and other current assets — 6,824 18,279 962 — 26,065 Total current assets — 1,166,306 266,035 181,261 (23,567 ) 1,590,035 Property and equipment, at cost, net — 614,656 305,636 73,945 — 994,237 Investments 321,083 1,770,303 901,772 941,396 (3,809,602 ) 124,952 Goodwill — — 1,256,662 35,043 (112 ) 1,291,593 Service contracts, net — 81,462 13 2,240 — 83,715 Other assets, net 1,081,203 (913 ) 3,526,051 9,110 (4,601,168 ) 14,283 $ 1,402,286 $ 3,631,814 $ 6,256,169 $ 1,242,995 $ (8,434,449 ) $ 4,098,815 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ (465,247 ) $ (1,773,815 ) $ 2,298,790 $ 16,781 $ 38,005 $ 114,514 Accrued compensation and related liabilities — 73,545 23,051 5,380 — 101,976 Accrued liabilities — 84,270 251,217 13,578 — 349,065 Debt due within one year — 250,000 — — — 250,000 Total current liabilities (465,247 ) (1,366,000 ) 2,573,058 35,739 38,005 815,555 Long-term liabilities: Debt due after one year — 1,044,032 — 390 — 1,044,422 Deferred income taxes — (427 ) 252,149 7,753 — 259,475 Accrued liabilities — 19,628 116,091 985 — 136,704 Total long-term liabilities — 1,063,233 368,240 9,128 — 1,440,601 Total shareholders’ equity 1,867,533 3,934,581 3,314,871 1,198,128 (8,472,454 ) 1,842,659 $ 1,402,286 $ 3,631,814 $ 6,256,169 $ 1,242,995 $ (8,434,449 ) $ 4,098,815 Consolidating Condensed Statement of Cash Flows Nine Months Ended February 28, 2017 (In thousands) Cintas Corporation Corp. 2 Subsidiary Guarantors Non- Guarantors Eliminations Cintas Corporation Consolidated Cash flows from operating activities: Net income $ 396,473 $ 136,484 $ 244,759 $ 11,674 $ (392,917 ) $ 396,473 Adjustments to reconcile net income to net cash provided by operating activities Depreciation — 79,459 33,697 7,337 — 120,493 Amortization of intangible assets — 10,288 262 671 — 11,221 Stock-based compensation 63,578 — — — — 63,578 Gain on Shred-it — (23,935 ) — (1,941 ) — (25,876 ) Deferred income taxes — (11,104 ) 7,406 226 — (3,472 ) Changes in current assets and liabilities, net of acquisitions of businesses: Accounts receivable, net — (21,965 ) (5,959 ) (722 ) — (28,646 ) Inventories, net — (21,588 ) 2,079 (2,177 ) (1,678 ) (23,364 ) Uniforms and other rental items in service — 3,662 (2,753 ) 1,031 (1,993 ) (53 ) Prepaid expenses and other current assets — (6,460 ) (5,037 ) 110 — (11,387 ) Accounts payable — (36,312 ) 45,593 6,143 114 15,538 Accrued compensation and related liabilities — (3,243 ) (3,099 ) 530 — (5,812 ) Accrued liabilities and other — (10,958 ) 5,110 (231 ) — (6,079 ) Income taxes, current — 10,886 (29,632 ) (110 ) — (18,856 ) Net cash provided by operating activities 460,051 105,214 292,426 22,541 (396,474 ) 483,758 Cash flows from investing activities: Capital expenditures — (125,995 ) (77,025 ) (15,601 ) — (218,621 ) Proceeds from redemption of marketable securities — — — 172,506 — 172,506 Purchase of marketable securities and investments — (5,644 ) (41,180 ) (102,418 ) 23,608 (125,634 ) Proceeds from sale of investment in Shred-it — 23,935 — 1,941 — 25,876 Acquisitions of businesses, net of cash acquired — (9,097 ) — (10,533 ) — (19,630 ) Other, net (322,723 ) 166,718 (218,390 ) 1,557 372,866 28 Net cash (used in) provided by investing activities (322,723 ) 49,917 (336,595 ) 47,452 396,474 (165,475 ) Cash flows from financing activities: Proceeds from issuance of commercial paper, net — 99,500 — — — 99,500 Proceeds from issuance of debt — — (2,000 ) 2,000 — — Repayment of debt — (250,000 ) — — — (250,000 ) Prepaid short-term debt financing fees — (13,949 ) — — — (13,949 ) Proceeds from exercise of stock-based compensation awards 25,114 — — — — 25,114 Dividends paid (142,388 ) — — (56 ) — (142,444 ) Repurchase of common stock (20,054 ) — — — — (20,054 ) Other, net — (5,801 ) — — — (5,801 ) Net cash (used in) provided by financing activities (137,328 ) (170,250 ) (2,000 ) 1,944 — (307,634 ) Effect of exchange rate changes on cash and cash equivalents — — — (2,762 ) — (2,762 ) Net (decrease) increase in cash and cash equivalents — (15,119 ) (46,169 ) 69,175 — 7,887 Cash and cash equivalents at beginning of period — 57,893 55,392 26,072 — 139,357 Cash and cash equivalents at end of period $ — $ 42,774 $ 9,223 $ 95,247 $ — $ 147,244 Consolidating Condensed Statement of Cash Flows Nine Months Ended February 29, 2016 (In thousands) Cintas Corporation Corp. 2 Subsidiary Guarantors Non- Guarantors Eliminations Cintas Corporation Consolidated Cash flows from operating activities: Net income (loss) $ 562,622 $ 347,625 $ 219,644 $ (530 ) $ (566,739 ) $ 562,622 Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation — 70,441 33,208 6,886 — 110,535 Amortization of intangible assets — 11,612 218 306 — 12,136 Stock-based compensation 57,169 — — — — 57,169 Gain on Storage transactions — (12,547 ) — (3,239 ) — (15,786 ) (Gain) loss on Shred-it — (362,237 ) — 12,499 — (349,738 ) Deferred income taxes — (82,115 ) 5,895 1,680 — (74,540 ) Changes in current assets and liabilities, net of acquisitions of businesses: Accounts receivable, net — (29,955 ) (11,251 ) (317 ) — (41,523 ) Inventories, net — (25,169 ) (1,584 ) (1,946 ) 4,690 (24,009 ) Uniforms and other rental items in service — (2,339 ) (1,876 ) (2,118 ) (572 ) (6,905 ) Prepaid expenses and other current assets — 55 (1,730 ) 95 — (1,580 ) Accounts payable — (358,602 ) 385,841 10,132 (1 ) 37,370 Accrued compensation and related liabilities — (2,373 ) (1,118 ) (240 ) — (3,731 ) Accrued liabilities and other — (21,747 ) 4,233 (1,511 ) 724 (18,301 ) Income taxes, current — 55,609 (2,042 ) (132 ) — 53,435 Net cash provided by (used in) operating activities 619,791 (411,742 ) 629,438 21,565 (561,898 ) 297,154 Cash flows from investing activities: Capital expenditures — (120,943 ) (76,161 ) (10,398 ) — (207,502 ) Proceeds from redemption of marketable securities — — — 327,779 — 327,779 Purchase of marketable securities and investments — (3,838 ) (2,235 ) (385,760 ) 7,037 (384,796 ) Proceeds from Storage transactions, net of cash acquired — 32,099 — 3,239 — 35,338 Proceeds from sale of Shred-it — 565,643 — 12,614 — 578,257 Acquisitions of businesses, net of cash acquired — (127,524 ) — (24,207 ) — (151,731 ) Other, net (24,380 ) 121,547 (649,264 ) 945 555,585 4,433 Net cash (used in) provided by investing activities (24,380 ) 466,984 (727,660 ) (75,788 ) 562,622 201,778 Cash flows from financing activities: Proceeds from issuance of debt — — (55 ) 55 — — Repayment of debt — (309 ) 1,053 (36 ) (724 ) (16 ) Exercise of stock-based compensation awards 22,260 — — — — 22,260 Dividends paid (115,232 ) — — (41 ) — (115,273 ) Repurchase of common stock (502,439 ) — — — — (502,439 ) Other, net — 1,464 — (311 ) — 1,153 Net cash (used in) provided by financing activities (595,411 ) 1,155 998 (333 ) (724 ) (594,315 ) Effect of exchange rate changes on cash and cash equivalents — — — (6,574 ) — (6,574 ) Net increase (decrease) in cash and cash equivalents — 56,397 (97,224 ) (61,130 ) — (101,957 ) Cash and cash equivalents at beginning of period — 74,632 248,716 93,725 — 417,073 Cash and cash equivalents at end of period $ — $ 131,029 $ 151,492 $ 32,595 $ — $ 315,116 |