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 $173.5 million aggregate principal amount of commercial paper and the $2,550.0 million aggregate principal amount of senior notes outstanding as of 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 November 30, 2018 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Revenue: Uniform rental and facility services $ — $ 1,134,118 $ 182,876 $ 101,830 $ (28,046 ) $ 1,390,778 Other — 522,081 50 25,918 (220,559 ) 327,490 Equity in net income of affiliates 242,994 — — — (242,994 ) — Total revenue 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 — 640,859 111,555 65,316 (56,611 ) 761,119 Cost of other — 375,764 (27,133 ) 19,319 (185,959 ) 181,991 Selling and administrative expenses — 536,276 (68,617 ) 32,559 (8,547 ) 491,671 G&K Services, Inc. integration expenses — 5,973 1,270 604 — 7,847 Operating income 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 — (294 ) (93 ) (5 ) 1 (391 ) Interest expense (income) — 25,046 (173 ) 7 — 24,880 Income before income taxes 242,994 72,575 235,490 9,948 (240,483 ) 320,524 Income taxes — 19,166 55,788 2,613 (37 ) 77,530 Income from continuing operations 242,994 53,409 179,702 7,335 (240,446 ) 242,994 Income from discontinued operations, net of tax 19 19 — — (19 ) 19 Net income $ 243,013 $ 53,428 $ 179,702 $ 7,335 $ (240,465 ) $ 243,013 Consolidating Condensed Income Statement Three Months Ended November 30, 2017 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Revenue: Uniform rental and facility services $ — $ 1,086,667 $ 170,320 $ 100,933 $ (49,882 ) $ 1,308,038 Other — 435,539 (313 ) 21,982 (158,805 ) 298,403 Equity in net income of affiliates 137,737 — — — (137,737 ) — Total revenue 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 — 628,123 105,954 65,220 (75,337 ) 723,960 Cost of other — 302,065 (25,046 ) 15,438 (126,345 ) 166,112 Selling and administrative expenses — 528,369 (85,417 ) 31,211 (6,079 ) 468,084 G&K Services, Inc. integration expenses — 4,192 8,319 563 — 13,074 Operating income 137,737 59,457 166,197 10,483 (138,663 ) 235,211 Interest income — (45 ) (59 ) (187 ) — (291 ) Interest expense (income) — 29,444 (313 ) (2 ) — 29,129 Income before income taxes 137,737 30,058 166,569 10,672 (138,663 ) 206,373 Income taxes — 11,449 54,414 2,798 (25 ) 68,636 Income from continuing operations 137,737 18,609 112,155 7,874 (138,638 ) 137,737 Loss from discontinued operations, net of tax (628 ) (628 ) — — 628 (628 ) Net income $ 137,109 $ 17,981 $ 112,155 $ 7,874 $ (138,010 ) $ 137,109 Consolidating Condensed Income Statement Six Months Ended November 30, 2018 (In thousands) Cintas Corp. 2 Subsidiary Non- 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 affiliates 455,541 — — — (455,541 ) — Total revenue 455,541 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 income 455,541 195,086 324,294 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 taxes 455,541 145,882 394,567 17,145 (451,191 ) 561,944 Income taxes — 29,829 71,832 4,800 (58 ) 106,403 Income from continuing operations 455,541 116,053 322,735 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 Corp. 2 Subsidiary Non- 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 affiliates 298,845 — — — (298,845 ) — Total revenue 298,845 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 income 298,845 163,085 297,152 22,213 (296,985 ) 484,310 Interest income — (76 ) (158 ) (354 ) — (588 ) Interest expense (income) — 60,005 (452 ) (107 ) — 59,446 Income before income taxes 298,845 103,156 297,762 22,674 (296,985 ) 425,452 Income taxes — 31,019 89,537 6,095 (44 ) 126,607 Income from continuing operations 298,845 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 November 30, 2018 (In thousands) Cintas Corp. 2 Subsidiary Non- 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 agreements 4,921 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 Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Net income $ 137,109 $ 17,981 $ 112,155 $ 7,874 $ (138,010 ) $ 137,109 Other comprehensive loss, net of tax: Foreign currency translation adjustments (11,374 ) — — (11,374 ) 11,374 (11,374 ) Amortization of interest rate lock agreements (172 ) (172 ) — — 172 (172 ) Change in fair value of available-for-sale securities (20 ) — — (20 ) 20 (20 ) Other comprehensive loss (11,566 ) (172 ) — (11,394 ) 11,566 (11,566 ) Comprehensive income (loss) $ 125,543 $ 17,809 $ 112,155 $ (3,520 ) $ (126,444 ) $ 125,543 Consolidating Condensed Statement of Comprehensive Income Six Months Ended November 30, 2018 (In thousands) Cintas Corp. 2 Subsidiary Non- 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 agreements 1,753 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 Corp. 2 Subsidiary Non- 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 adjustments 23,810 — — 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, net 2,240,914 203,378 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’ equity 3,027,244 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 $ 18.1 million and $ 165.4 million , respectively, of the $ 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, net 2,230,196 593 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’ equity 3,016,526 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 Six Months Ended November 30, 2018 (In thousands) Cintas Corporation Corp. 2 Subsidiary Guarantors Non- Guarantors Eliminations Cintas Corporation Consolidated Cash flows from operating activities: Net income $ 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 — 68,929 31,274 6,909 — 107,112 Amortization of intangible assets and capitalized contract costs — 61,044 2,339 4,176 — 67,559 Stock-based compensation 74,784 — — — — 74,784 Gain on sale of a cost method investment — — (69,373 ) — — (69,373 ) Deferred income taxes — 10,865 5,519 2,843 — 19,227 Changes in current assets and liabilities, net of acquisitions of businesses: Accounts receivable, net — (52,953 ) (20,151 ) (10,183 ) (2,461 ) (85,748 ) Inventories, net — (52,989 ) 3,546 (2,153 ) (1,631 ) (53,227 ) Uniforms and other rental items in service — (39,481 ) (11,051 ) (7,152 ) — (57,684 ) Prepaid expenses and other current assets and capitalized contract costs — (52,392 ) (5,570 ) (199 ) — (58,161 ) Accounts payable — (98,465 ) 90,324 6,502 (316 ) (1,955 ) Accrued compensation and related liabilities — (16,186 ) (6,468 ) 1,685 — (20,969 ) Accrued liabilities and other — (1,908 ) (9,983 ) (3,431 ) — (15,322 ) Income taxes, current — (5,329 ) (7,109 ) (4,766 ) — (17,204 ) Net cash provided by (used in) operating activities 530,312 (62,825 ) 326,032 6,576 (455,528 ) 344,567 Cash flows from investing activities: Capital expenditures — (92,461 ) (37,357 ) (7,796 ) — (137,614 ) 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 — (6,580 ) — — — (6,580 ) Other, net (54,795 ) (2,534 ) (398,963 ) (953 ) 455,528 (1,717 ) Net cash used in investing activities (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 awards 32,612 — — — — 32,612 Repurchase of common stock (508,129 ) — — — — (508,129 ) Other, net — (5,362 ) — — — (5,362 ) Net cash (used in) provided by financing activities (475,517 ) 168,138 — — — (307,379 ) Effect of exchange rate changes on cash and cash equivalents — — — (793 ) — (793 ) Net increase (decrease) in cash and cash equivalents — 3,272 (50,551 ) (2,966 ) — (50,245 ) Cash and cash equivalents at beginning of period — 44,499 60,310 33,915 — 138,724 Cash and cash equivalents at end of period $ — $ 47,771 $ 9,759 $ 30,949 $ — $ 88,479 Consolidating Condensed Statement of Cash Flows Six Months Ended November 30, 2017 (In thousands) Cintas Corporation Corp. 2 Subsidiary Guarantors Non- Guarantors Eliminations Cintas Corporation Consolidated Cash flows from operating activities: Net income $ 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 — 65,942 34,789 6,847 — 107,578 Amortization of intangible assets — 24,522 2,547 4,192 — 31,261 Stock-based compensation 55,204 — — — — 55,204 (Gain) loss on sale of business — (114,581 ) 15,521 — — (99,060 ) Deferred income taxes — — 40,555 1,607 — 42,162 Changes in current assets and liabilities, net of acquisitions of businesses: Accounts receivable, net — (42,881 ) 20,790 (2,709 ) — (24,800 ) Inventories, net — 17,728 (13,863 ) 115 (1,385 ) 2,595 Uniforms and other rental items in service — (29,520 ) (112 ) (3,305 ) (357 ) (33,294 ) Prepaid expenses and other current assets — (5,428 ) (13,609 ) 464 — (18,573 ) Accounts payable — 155,461 (153,831 ) (10,176 ) (160 ) (8,706 ) Accrued compensation and related liabilities — 6,341 (39,311 ) (3,510 ) — (36,480 ) Accrued liabilities and other — (26,847 ) 26,373 (1,466 ) — (1,940 ) Income taxes, current — 32,963 (22,794 ) (1,427 ) — 8,742 Net cash provided by operating activities 409,524 220,211 96,381 7,211 (354,318 ) 379,009 Cash flows from investing activities: Capital expenditures — (90,497 ) (36,875 ) (5,094 ) — (132,466 ) Proceeds from redemption of marketable securities — 12,400 — 87,859 — 100,259 Purchase of marketable securities and investments — 5,510 (20,064 ) (87,323 ) 2,000 (99,877 ) Proceeds from sale of business — 127,835 — — — 127,835 Acquisitions of businesses, net of cash acquired — (1,099 ) — — — (1,099 ) Other, net (402,385 ) 21,470 26,771 956 352,318 (870 ) Net cash (used in) provided by investing activities (402,385 ) 75,619 (30,168 ) (3,602 ) 354,318 (6,218 ) Cash flows from financing activities: Payments of commercial paper, net — (50,500 ) — — — (50,500 ) Repayment of debt — (250,000 ) — — — (250,000 ) Proceeds from exercise of stock-based compensation awards 28,558 — — — — 28,558 Repurchase of common stock (35,697 ) — — — — (35,697 ) Other, net — (1,862 ) — (20 ) — (1,882 ) Net cash used in financing activities (7,139 ) (302,362 ) — (20 ) — (309,521 ) Effect of exchange rate changes on cash and cash equivalents — — — 3,466 — 3,466 Net (decrease) increase in cash and cash equivalents — (6,532 ) 66,213 7,055 — 66,736 Cash and cash equivalents at beginning of period — 48,658 17,302 103,306 — 169,266 Cash and cash equivalents at end of period $ — $ 42,126 $ 83,515 $ 110,361 $ — $ 236,002 |