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 $217.5 million aggregate principal amount of commercial paper and the $2,550.0 million aggregate principal amount of senior notes outstanding as of February 28, 2019 , 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 February 28, 2019 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Revenue: Uniform rental and facility services $ — $ 1,092,594 $ 176,787 $ 99,866 $ (10,925 ) $ 1,358,322 Other — 519,294 44 21,982 (217,312 ) 324,008 Equity in net income of affiliates 200,923 — — — (200,923 ) — Total revenue 200,923 1,611,888 176,831 121,848 (429,160 ) 1,682,330 Costs and expenses (income): Cost of uniform rental and facility services — 612,167 111,103 64,976 (39,275 ) 748,971 Cost of other — 373,168 (25,811 ) 15,649 (184,800 ) 178,206 Selling and administrative expenses — 527,720 (74,507 ) 31,042 (8,156 ) 476,099 G&K Services, Inc. integration expenses — (141 ) (379 ) 1,319 — 799 Operating income 200,923 98,974 166,425 8,862 (196,929 ) 278,255 Interest (income) expense — (56 ) 1 (18 ) 3 (70 ) Interest expense (income) — 26,872 (104 ) 2 — 26,770 Income before income taxes 200,923 72,158 166,528 8,878 (196,932 ) 251,555 Income taxes — 12,330 35,665 2,656 (19 ) 50,632 Income from continuing operations 200,923 59,828 130,863 6,222 (196,913 ) 200,923 Income from discontinued operations, net of tax 2,411 2,411 — — (2,411 ) 2,411 Net income $ 203,334 $ 62,239 $ 130,863 $ 6,222 $ (199,324 ) $ 203,334 Consolidating Condensed Income Statement Three Months Ended February 28, 2018 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Revenue: Uniform rental and facility services $ — $ 1,059,184 $ 169,308 $ 100,941 $ (44,917 ) $ 1,284,516 Other — 437,042 56 21,396 (153,872 ) 304,622 Equity in net income of affiliates 295,789 — — — (295,789 ) — Total revenue 295,789 1,496,226 169,364 122,337 (494,578 ) 1,589,138 Costs and expenses (income): Cost of uniform rental and facility services — 617,276 106,066 64,952 (70,156 ) 718,138 Cost of other — 301,217 (24,654 ) 14,888 (120,914 ) 170,537 Selling and administrative expenses — 491,924 (28,110 ) 33,959 (7,155 ) 490,618 G&K Services, Inc. integration expenses — 5,101 3,968 752 — 9,821 Operating income 295,789 80,708 112,094 7,786 (296,353 ) 200,024 Interest income — (103 ) (24 ) (259 ) 2 (384 ) Interest expense (income) — 26,105 (207 ) 3 — 25,901 Income before income taxes 295,789 54,706 112,325 8,042 (296,355 ) 174,507 Income tax (benefit) expense — (88,275 ) (38,777 ) 5,820 (50 ) (121,282 ) Income from continuing operations 295,789 142,981 151,102 2,222 (296,305 ) 295,789 Income (loss) from discontinued operations, net of tax 6,306 7,269 (1,012 ) — (6,257 ) 6,306 Net income $ 302,095 $ 150,250 $ 150,090 $ 2,222 $ (302,562 ) $ 302,095 Consolidating Condensed Income Statement Nine Months Ended February 28, 2019 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Revenue: Uniform rental and facility services $ — $ 3,365,841 $ 542,826 $ 301,379 $ (86,008 ) $ 4,124,038 Other — 1,532,665 137 72,232 (630,499 ) 974,535 Equity in net income of affiliates 656,464 — — — (656,464 ) — Total revenue 656,464 4,898,506 542,963 373,611 (1,372,971 ) 5,098,573 Costs and expenses (income): Cost of uniform rental and facility services — 1,896,767 332,208 194,305 (166,737 ) 2,256,543 Cost of other — 1,090,265 (74,973 ) 53,110 (531,395 ) 537,007 Selling and administrative expenses — 1,608,906 (207,745 ) 97,964 (26,721 ) 1,472,404 G&K Services, Inc. integration expenses — 8,508 2,754 2,234 — 13,496 Operating income 656,464 294,060 490,719 25,998 (648,118 ) 819,123 Gain on sale of a cost method investment — — 69,373 — — 69,373 Interest income — (559 ) (364 ) (39 ) 5 (957 ) Interest expense (income) — 76,579 (639 ) 14 — 75,954 Income before income taxes 656,464 218,040 561,095 26,023 (648,123 ) 813,499 Income taxes — 42,159 107,497 7,456 (77 ) 157,035 Income from continuing operations 656,464 175,881 453,598 18,567 (648,046 ) 656,464 Income from discontinued operations, net of tax 2,398 2,398 — — (2,398 ) 2,398 Net income $ 658,862 $ 178,279 $ 453,598 $ 18,567 $ (650,444 ) $ 658,862 Consolidating Condensed Income Statement Nine Months Ended February 28, 2018 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Revenue: Uniform rental and facility services $ — $ 3,245,720 $ 504,523 $ 298,469 $ (144,374 ) $ 3,904,338 Other — 1,299,883 50 63,686 (460,875 ) 902,744 Equity in net income of affiliates 594,634 — — — (594,634 ) — Total revenue 594,634 4,545,603 504,573 362,155 (1,199,883 ) 4,807,082 Costs and expenses (income): Cost of uniform rental and facility services — 1,867,547 311,039 190,689 (220,314 ) 2,148,961 Cost of other — 892,201 (69,369 ) 45,061 (365,957 ) 501,936 Selling and administrative expenses — 1,531,248 (161,065 ) 95,076 (20,274 ) 1,444,985 G&K Services, Inc. integration expenses — 10,814 14,722 1,330 — 26,866 Operating income 594,634 243,793 409,246 29,999 (593,338 ) 684,334 Interest income — (179 ) (182 ) (613 ) 2 (972 ) Interest expense (income) — 86,110 (659 ) (104 ) — 85,347 Income before income taxes 594,634 157,862 410,087 30,716 (593,340 ) 599,959 Income tax (benefit) expense — (57,256 ) 50,760 11,915 (94 ) 5,325 Income from continuing operations 594,634 215,118 359,327 18,801 (593,246 ) 594,634 Income (loss) from discontinued operations, net of tax 61,781 71,643 (9,911 ) — (61,732 ) 61,781 Net income $ 656,415 $ 286,761 $ 349,416 $ 18,801 $ (654,978 ) $ 656,415 Consolidating Condensed Statement of Comprehensive Income Three Months Ended February 28, 2019 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Net income $ 203,334 $ 62,239 $ 130,863 $ 6,222 $ (199,324 ) $ 203,334 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments 5,025 — — 5,025 (5,025 ) 5,025 Change in fair value of interest rate lock agreements (8,183 ) (8,183 ) — — 8,183 (8,183 ) Amortization of interest rate lock agreements (295 ) (295 ) — — 295 (295 ) Other comprehensive (loss) income (3,453 ) (8,478 ) — 5,025 3,453 (3,453 ) Comprehensive income $ 199,881 $ 53,761 $ 130,863 $ 11,247 $ (195,871 ) $ 199,881 Consolidating Condensed Statement of Comprehensive Income Three Months Ended February 28, 2018 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Net income $ 302,095 $ 150,250 $ 150,090 $ 2,222 $ (302,562 ) $ 302,095 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments 2,374 — — 2,374 (2,374 ) 2,374 Amortization of interest rate lock agreements (294 ) (294 ) — — 294 (294 ) Other comprehensive income (loss) 2,080 (294 ) — 2,374 (2,080 ) 2,080 Comprehensive income $ 304,175 $ 149,956 $ 150,090 $ 4,596 $ (304,642 ) $ 304,175 Consolidating Condensed Statement of Comprehensive Income Nine Months Ended February 28, 2019 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Net income $ 658,862 $ 178,279 $ 453,598 $ 18,567 $ (650,444 ) $ 658,862 Other comprehensive loss, net of tax: Foreign currency translation adjustments (8,617 ) — — (8,617 ) 8,617 (8,617 ) Change in fair value of interest rate lock agreements (6,430 ) (6,430 ) — — 6,430 (6,430 ) Amortization of interest rate lock agreements (884 ) (884 ) — — 884 (884 ) Other comprehensive loss (15,931 ) (7,314 ) — (8,617 ) 15,931 (15,931 ) Comprehensive income $ 642,931 $ 170,965 $ 453,598 $ 9,950 $ (634,513 ) $ 642,931 Consolidating Condensed Statement of Comprehensive Income Nine Months Ended February 28, 2018 (In thousands) Cintas Corp. 2 Subsidiary Non- Eliminations Cintas Corporation Consolidated Net income $ 656,415 $ 286,761 $ 349,416 $ 18,801 $ (654,978 ) $ 656,415 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments 26,184 — — 26,184 (26,184 ) 26,184 Amortization of interest rate lock agreements (638 ) (638 ) — — 638 (638 ) Other comprehensive income (loss) 25,546 (638 ) — 26,184 (25,546 ) 25,546 Comprehensive income $ 681,961 $ 286,123 $ 349,416 $ 44,985 $ (680,524 ) $ 681,961 Consolidating Condensed Balance Sheet As of February 28, 2019 (In thousands) Cintas Corporation Corp. 2 Subsidiary Guarantors Non- Guarantors Eliminations Cintas Corporation Consolidated ASSETS Current assets: Cash and cash equivalents $ — $ 46,674 $ 11,474 $ 22,711 $ — $ 80,859 Accounts receivable, net — 685,663 122,524 69,850 — 878,037 Inventories, net — 278,360 36,950 20,215 4,280 339,805 Uniforms and other rental items in service — 636,813 90,042 61,488 (14,809 ) 773,534 Income taxes, current — (1,513 ) 33,432 10,633 — 42,552 Prepaid expenses and other current assets — 78,213 29,094 1,662 — 108,969 Total current assets — 1,724,210 323,516 186,559 (10,529 ) 2,223,756 Property and equipment, net — 941,551 366,901 115,611 — 1,424,063 Investments (1) 321,083 3,597,606 964,538 1,718,820 (6,410,229 ) 191,818 Goodwill — — 2,585,134 262,761 (112 ) 2,847,783 Service contracts, net — 437,683 — 70,719 — 508,402 Other assets, net 2,393,162 207,340 4,835,593 1,978 (7,200,222 ) 237,851 $ 2,714,245 $ 6,908,390 $ 9,075,682 $ 2,356,448 $ (13,621,092 ) $ 7,433,673 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ (465,247 ) $ (1,935,479 ) $ 2,614,162 $ (36,455 ) $ 37,586 $ 214,567 Accrued compensation and related liabilities — 106,392 20,735 9,687 — 136,814 Accrued liabilities — 95,156 309,033 21,281 — 425,470 Debt due within one year — 217,500 — — — 217,500 Total current liabilities (465,247 ) (1,516,431 ) 2,943,930 (5,487 ) 37,586 994,351 Long-term liabilities: Debt due after one year — 2,536,568 — 390 — 2,536,958 Deferred income taxes — 293,843 110,221 34,947 — 439,011 Accrued liabilities — 61,126 206,198 16,537 — 283,861 Total long-term liabilities — 2,891,537 316,419 51,874 — 3,259,830 Total shareholders’ equity 3,179,492 5,533,284 5,815,333 2,310,061 (13,658,678 ) 3,179,492 $ 2,714,245 $ 6,908,390 $ 9,075,682 $ 2,356,448 $ (13,621,092 ) $ 7,433,673 (1) Investments include inter-company investment activity. Corp 2 and Subsidiary Guarantors hold $ 19.6 million and $ 172.2 million , respectively, of the $ 191.8 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 Nine Months Ended February 28, 2019 (In thousands) Cintas Corporation Corp. 2 Subsidiary Guarantors Non- Guarantors Eliminations Cintas Corporation Consolidated Cash flows from operating activities: Net income $ 658,862 $ 178,279 $ 453,598 $ 18,567 $ (650,444 ) $ 658,862 Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation — 106,577 47,116 10,687 — 164,380 Amortization of intangible assets and capitalized contract costs — 91,912 3,801 6,236 — 101,949 Stock-based compensation 105,553 — — — — 105,553 Gain on sale of a cost method investment — — (69,373 ) — — (69,373 ) Gain on sale of business — (2,419 ) — — — (2,419 ) Deferred income taxes — 16,059 5,654 3,366 — 25,079 Changes in current assets and liabilities, net of acquisitions of businesses: Accounts receivable, net — (51,317 ) 2,522 (8,027 ) (4,280 ) (61,102 ) Inventories, net — (64,014 ) 1,395 (4,317 ) (3,780 ) (70,716 ) Uniforms and other rental items in service — (51,696 ) (12,329 ) (8,311 ) — (72,336 ) Prepaid expenses and other current assets and capitalized contract costs — (74,606 ) (10,067 ) (450 ) — (85,123 ) Accounts payable — (205,528 ) 204,336 1,632 (361 ) 79 Accrued compensation and related liabilities — 1,832 (4,143 ) (1,555 ) — (3,866 ) Accrued liabilities and other — (274 ) 4,567 (679 ) — 3,614 Income taxes, current — 7,059 (24,957 ) (5,966 ) — (23,864 ) Net cash provided by (used in) operating activities 764,415 (48,136 ) 602,120 11,183 (658,865 ) 670,717 Cash flows from investing activities: Capital expenditures — (147,744 ) (44,151 ) (15,910 ) — (207,805 ) Purchase of marketable securities and investments — (1,938 ) (16,356 ) — 750 (17,544 ) Proceeds from sale of a cost method investment — — 73,342 — — 73,342 Proceeds from sale of business — 3,200 — — — 3,200 Acquisitions of businesses — (7,403 ) — — — (7,403 ) Other, net 10,201 (5,216 ) (663,791 ) (6,113 ) 658,115 (6,804 ) Net cash provided by (used in) investing activities 10,201 (159,101 ) (650,956 ) (22,023 ) 658,865 (163,014 ) Cash flows from financing activities: Issuance of commercial paper, net — 217,500 — — — 217,500 Proceeds from exercise of stock-based compensation awards 54,274 — — — — 54,274 Dividends paid (220,666 ) — — (94 ) — (220,760 ) Repurchase of common stock (608,224 ) — — — — (608,224 ) Other, net — (8,088 ) — — — (8,088 ) Net cash (used in) provided by financing activities (774,616 ) 209,412 — (94 ) — (565,298 ) Effect of exchange rate changes on cash and cash equivalents — — — (270 ) — (270 ) Net increase (decrease) in cash and cash equivalents — 2,175 (48,836 ) (11,204 ) — (57,865 ) Cash and cash equivalents at beginning of period — 44,499 60,310 33,915 — 138,724 Cash and cash equivalents at end of period $ — $ 46,674 $ 11,474 $ 22,711 $ — $ 80,859 Consolidating Condensed Statement of Cash Flows Nine Months Ended February 28, 2018 (In thousands) Cintas Corporation Corp. 2 Subsidiary Guarantors Non- Guarantors Eliminations Cintas Corporation Consolidated Cash flows from operating activities: Net income $ 656,415 $ 286,761 $ 349,416 $ 18,801 $ (654,978 ) $ 656,415 Adjustments to reconcile net income to net cash provided by operating activities Depreciation — 94,846 52,162 10,311 — 157,319 Amortization of intangible assets — 37,338 3,824 6,421 — 47,583 Stock-based compensation 86,044 — — — — 86,044 (Gain) loss on sale of business — (114,581 ) 15,521 — — (99,060 ) Deferred income taxes — (82,475 ) (39,692 ) 1,739 — (120,428 ) Changes in current assets and liabilities, net of acquisitions of businesses: Accounts receivable, net — (57,631 ) 20,615 (3,030 ) — (40,046 ) Inventories, net — 17,558 (15,487 ) 3,326 (1,386 ) 4,011 Uniforms and other rental items in service — (33,728 ) (2,748 ) (7,683 ) 109 (44,050 ) Prepaid expenses and other current assets — 1,252 (19,495 ) 318 — (17,925 ) Accounts payable — 3,657 23,201 (27,279 ) (159 ) (580 ) Accrued compensation and related liabilities — (12,519 ) 13,106 (2,796 ) — (2,209 ) Accrued liabilities and other — (85,980 ) 91,624 5,353 — 10,997 Income taxes, current — 25,777 (930 ) (2,054 ) — 22,793 Net cash provided by operating activities 742,459 80,275 491,117 3,427 (656,414 ) 660,864 Cash flows from investing activities: Capital expenditures — (127,736 ) (59,018 ) (9,286 ) — (196,040 ) Proceeds from redemption of marketable securities — 13,589 (1,189 ) 133,902 — 146,302 Purchase of marketable securities and investments — 6,343 (22,521 ) (144,350 ) 3,000 (157,528 ) Proceeds from sale of business — 127,835 — — — 127,835 Acquisitions of businesses, net of cash acquired — (12,298 ) — — — (12,298 ) Other, net (565,726 ) 323,643 (413,382 ) 3,797 653,414 1,746 Net cash (used in) provided by investing activities (565,726 ) 331,376 (496,110 ) (15,937 ) 656,414 (89,983 ) Cash flows from financing activities: Issuance of commercial paper, net — 137,000 — — — 137,000 Proceeds from issuance of debt — — 2,810 (2,810 ) — — Repayment of debt — (550,000 ) — — — (550,000 ) Proceeds from exercise of stock-based compensation awards 35,838 — — — — 35,838 Dividends paid (175,521 ) — — (68 ) — (175,589 ) Repurchase of common stock (37,050 ) — — — — (37,050 ) Other, net — (2,204 ) (10 ) (275 ) — (2,489 ) Net cash (used in) provided by financing activities (176,733 ) (415,204 ) 2,800 (3,153 ) — (592,290 ) Effect of exchange rate changes on cash and cash equivalents — — — 4,706 — 4,706 Net decrease in cash and cash equivalents — (3,553 ) (2,193 ) (10,957 ) — (16,703 ) Cash and cash equivalents at beginning of period — 48,658 17,302 103,306 — 169,266 Cash and cash equivalents at end of period $ — $ 45,105 $ 15,109 $ 92,349 $ — $ 152,563 |