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EX-31.1 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER - CINTAS CORPctas-2016x831x10xqxex311.htm
EX-32.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER - CINTAS CORPctas-2016x831x10xqxex322.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - CINTAS CORPctas-2016x831x10xqxex321.htm
EX-31.2 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER - CINTAS CORPctas-2016x831x10xqxex312.htm


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, 2016
 
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 and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes   ü   No     
 
Indicate by checkmark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
 
Large Accelerated Filer    ü               Accelerated Filer                          Smaller Reporting Company     
Non-Accelerated Filer          (Do not check if a smaller reporting company)
 
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, 2016
Common Stock, no par value
 
104,935,651




CINTAS CORPORATION
TABLE OF CONTENTS

Part I.
Financial Information
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended August 31, 2016 and 2015
 
 
 
 
 
 
 
 
Three Months Ended August 31, 2016 and 2015
 
 
 
 
 
 
 
 
August 31, 2016 and May 31, 2016
 
 
 
 
 
 
 
 
    Three Months Ended August 31, 2016 and 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibits
 
 
 
 
 
 
 
 

2



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

 
Three Months Ended
 
August 31,
2016
 
August 31,
2015
Revenue:
 

 
 

Uniform rental and facility services
$
999,596

 
$
938,408

Other
294,534

 
260,482

 
1,294,130

 
1,198,890

Costs and expenses:
 

 
 

Cost of uniform rental and facility services
540,932

 
518,503

Cost of other
169,424

 
156,243

Selling and administrative expenses
374,026

 
338,637

G&K Services, Inc. acquisition expenses
2,787

 

 
 
 
 
Operating income
206,961

 
185,507

 
 
 
 
Interest income
(65
)
 
(119
)
Interest expense
14,172

 
16,412

 
 
 
 
Income before income taxes
192,854


169,214

Income taxes
54,763

 
63,016

Income from continuing operations
138,091

 
106,198

Loss from discontinued operations, net of tax benefit of $3,419

 
(6,017
)
Net income
$
138,091

 
$
100,181

 
 
 
 
Basic earnings (loss) per share:
 
 
 
Continuing operations
$
1.29

 
$
0.94

Discontinued operations

 
(0.05
)
Basic earnings per share
$
1.29

 
$
0.89

 
 
 
 
Diluted earnings (loss) per share:
 
 
 
Continuing operations
$
1.26

 
$
0.93

Discontinued operations

 
(0.05
)
Diluted earnings per share
$
1.26


$
0.88

 

See accompanying notes.

3



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

 
Three Months Ended
 
August 31, 2016
 
August 31, 2015
 
 
 
 
Net income
$
138,091

 
$
100,181

 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
Foreign currency translation adjustments
115

 
(12,013
)
Change in fair value of derivatives
(12,037
)
 

Amortization of interest rate lock agreements
385

 
488

Change in fair value of available-for-sale securities
(1
)
 
(8
)
 
 
 
 
Other comprehensive loss
(11,538
)
 
(11,533
)
 
 
 
 
Comprehensive income
$
126,553

 
$
88,648


See accompanying notes.







4



CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except share data)
 
August 31,
2016
 
May 31,
2016
 
(Unaudited)
 
 

ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
99,209

 
$
139,357

Marketable securities
64,558

 
70,405

Accounts receivable, net
586,372

 
563,178

Inventories, net
262,156

 
249,362

Uniforms and other rental items in service
542,124

 
539,956

Income taxes, current

 
1,712

Prepaid expenses and other current assets
40,329

 
26,065

Total current assets
1,594,748

 
1,590,035

 
 
 
 
Property and equipment, at cost, net
1,033,160

 
994,237

 
 
 
 
Investments
140,876

 
124,952

Goodwill
1,298,375

 
1,291,593

Service contracts, net
84,792

 
83,715

Other assets, net
15,194

 
14,283

 
$
4,167,145

 
$
4,098,815

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
129,650

 
$
114,514

Accrued compensation and related liabilities
64,692

 
101,976

Accrued liabilities
313,888

 
349,065

Income taxes, current
38,829

 

Debt due within one year
163,800

 
250,000

Total current liabilities
710,859

 
815,555

 
 
 
 
Long-term liabilities:
 

 
 

Debt due after one year
1,044,628

 
1,044,422

Deferred income taxes
255,380

 
259,475

Accrued liabilities
168,876

 
136,704

Total long-term liabilities
1,468,884

 
1,440,601

 
 
 
 
Shareholders’ equity:
 

 
 

Preferred stock, no par value:

 

100,000 shares authorized, none outstanding


 


Common stock, no par value:
463,375

 
409,682

425,000,000 shares authorized
 

 
 

FY 2017:  180,482,036 issued and 104,905,807 outstanding
 

 
 

FY 2016:  179,598,516 issued and 104,213,479 outstanding
 
 
 
Paid-in capital
161,938

 
205,260

Retained earnings
4,970,647

 
4,805,867

Treasury stock:
(3,572,146
)
 
(3,553,276
)
FY 2017:  75,576,229 shares
 

 
 

FY 2016:  75,385,037 shares
 
 
 
Accumulated other comprehensive loss
(36,412
)
 
(24,874
)
Total shareholders’ equity
1,987,402

 
1,842,659

 
$
4,167,145

 
$
4,098,815

See accompanying notes.

5



CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) 
 
Three Months Ended
 
August 31,
2016
 
August 31,
2015
Cash flows from operating activities:
 

 
 

Net income
$
138,091

 
$
100,181

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation
39,679

 
36,165

Amortization of intangible assets
3,489

 
3,603

Stock-based compensation
20,779

 
23,917

Gain on Storage transaction

 
(4,843
)
Loss on Shred-it

 
14,516

Deferred income taxes
1,970

 
5,632

Change in current assets and liabilities, net of acquisitions of businesses:
 

 
 

Accounts receivable, net
(22,946
)
 
(19,255
)
Inventories, net
(13,017
)
 
(8,109
)
Uniforms and other rental items in service
(1,872
)
 
(4,939
)
Prepaid expenses and other current assets
(5,655
)
 
(6,024
)
Accounts payable
17,480

 
15,531

Accrued compensation and related liabilities
(37,276
)
 
(35,579
)
Accrued liabilities and other
(23,676
)
 
(26,253
)
Income taxes, current
40,542

 
48,540

Net cash provided by operating activities
157,588

 
143,083

 
 
 
 
Cash flows from investing activities:
 

 
 

Capital expenditures
(78,580
)
 
(62,631
)
Proceeds from redemption of marketable securities
109,612

 
152,907

Purchase of marketable securities and investments
(119,729
)
 
(196,020
)
Proceeds from Storage transaction

 
24,395

Acquisitions of businesses, net of cash acquired
(10,991
)
 
(121,434
)
Other, net
(918
)
 
921

Net cash used in investing activities
(100,606
)
 
(201,862
)
 
 
 
 
Cash flows from financing activities:
 

 
 

Proceeds from issuance of commercial paper, net
163,800

 

Repayment of debt
(250,000
)
 
(16
)
Prepaid short-term debt financing fees
(8,625
)
 

Proceeds from exercise of stock-based compensation awards
16,282

 
11,844

Repurchase of common stock
(18,870
)
 
(221,598
)
Other, net
385

 
51

Net cash used in financing activities
(97,028
)
 
(209,719
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(102
)
 
(1,715
)
 
 
 
 
Net decrease in cash and cash equivalents
(40,148
)
 
(270,213
)
 
 
 
 
Cash and cash equivalents at beginning of period
139,357

 
417,073

 
 
 
 
Cash and cash equivalents at end of period
$
99,209

 
$
146,860

 See accompanying notes.

6



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, it is suggested 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, 2016. A summary of our significant accounting policies is presented beginning on page 36 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 in Note 2. 
 
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.

Cintas' investment in the Shred-it Partnership (Shred-it) and the shredding business (Shredding) are classified as discontinued operations for all periods presented as a result of the sale of Shred-it during fiscal 2016. During fiscal 2015, Cintas sold its document imaging and retention services (Storage) business and, as a result, its operations are also classified as discontinued operations for all periods presented. See Note 12 entitled Discontinued Operations for more information.

As disclosed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2016, inventories are valued at the lower of cost (first-in, first-out) or market. Inventory is comprised of the following amounts at: 
(In thousands)
August 31,
2016
 
May 31,
2016
 
 
 
 
Raw materials
$
13,059

 
$
17,794

Work in process
17,537

 
14,731

Finished goods
231,560

 
216,837

 
$
262,156

 
$
249,362


2.             New Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” which amended accounting guidance related to the reporting of discontinued operations and disclosures of disposals of components of an entity. The amended guidance changes the thresholds for disposals to qualify as discontinued operations and requires additional disclosures. This guidance is effective for reporting periods beginning after December 15, 2014 and is required to be applied prospectively. Cintas adopted ASU 2014-08 during the quarter ended August 31, 2015 and applied the amended accounting guidance to Shred-it and will apply it to future transactions, as appropriate.

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)," to clarify revenue recognition principles. This guidance is intended to improve disclosure requirements and enhance the comparability of revenue recognition practices. Improved disclosures under the amended guidance relate to the nature, amount, timing and uncertainty of revenue that is recognized from contracts with customers. This guidance will be effective for reporting periods beginning after December 15, 2017 and will be required to be applied retrospectively. Early application of the amendments in this update is not permitted. Cintas is currently evaluating the impact that ASU 2014-09 will have on its consolidated condensed financial statements.






7



In April 2015, the FASB issued ASU 2015-03, "Interest - Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs." ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the consolidated condensed balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This guidance is effective for annual and interim periods beginning after December 15, 2015. The guidance is applied retrospectively and early adoption is permitted. Cintas adopted ASU 2015-03 during the quarter ended August 31, 2016 and has applied this amended accounting guidance to its long-term debt and other assets for all periods presented. The impact of this change in accounting principle on balances previously reported as of May 31, 2016 was a reclassification of $5.6 million from other assets to long-term liabilities.

In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments.” This amendment eliminates the requirement to retrospectively account for adjustments made to provisional amounts recognized in a business combination. This amendment became effective for Cintas beginning June 1, 2016, and was adopted prospectively in accordance with the standard. The adoption of this amendment did not have an effect on our consolidated condensed financial statements for the quarter ended August 31, 2016.

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. Topic 842 supersedes the previous leases standard, Accounting Standard Codification 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 is currently evaluating the impact that ASU 2016-02 will have on its consolidated condensed financial statements.

In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting." ASU 2016-09 is intended to simplify accounting for share-based payments. Upon adoption, ASU 2016-09 requires that excess tax benefits for share-based payments be recorded as a reduction of income tax expense and reflected within operating cash flows rather than being recorded within equity and reflected within financing cash flows. The standard also permits the repurchase of more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on our cash flows statement, and provides an accounting policy election to account for forfeitures as they occur. ASU 2016-09 is effective for interim and annual periods beginning after December 15, 2016, however early adoption is permitted. Cintas adopted ASU 2016-09 during the quarter ended August 31, 2016 and elected to make an accounting policy change to recognize forfeitures as they occur. The adoption impact on the consolidated condensed balance sheet was a cumulative-effect adjustment of $26.7 million, increasing opening retained earnings and decreasing paid-in capital. The impact of the adoption on the consolidated condensed income statement was a decrease of $17.2 million in income taxes. As a result of the adoption of ASU 2016-09, our excess tax benefit is no longer included in our calculation of diluted shares under the treasury stock method, resulting in an increase of 0.8 million shares in the effect of dilutive securities for the three months ended August 31, 2016. The election to recognize forfeitures as they occur resulted in an increase of $1.7 million in stock based compensation for the three months ended August 31, 2016.

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.



8



3.             Fair Value Measurements
 
All financial instruments that are measured at fair value on a recurring basis (at least annually) 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, 2016
 (In thousands)
Level 1
 
Level 2
 
Level 3
 
Fair Value
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
99,209

 
$

 
$

 
$
99,209

Marketable securities:
 

 
 

 
 

 
 

Canadian treasury securities

 
64,558

 

 
64,558

Total assets at fair value
$
99,209

 
$
64,558

 
$

 
$
163,767

 
 
 
 
 
 
 
 
Long-term accrued liabilities:
 
 
 
 
 
 
 
  Interest rate lock agreement
$

 
$
38,827

 
$

 
$
38,827

Total liabilities at fair value
$

 
$
38,827

 
$

 
$
38,827

 
As of May 31, 2016
 (In thousands)
Level 1
 
Level 2
 
Level 3
 
Fair Value
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
139,357

 
$

 
$

 
$
139,357

Marketable securities:
 
 
 
 
 
 
 
Canadian treasury securities

 
70,405

 

 
70,405

Total assets at fair value
$
139,357

 
$
70,405

 
$

 
$
209,762

 
 
 
 
 
 
 
 
Long-term accrued liabilities:
 
 
 
 
 
 
 
  Interest rate lock agreement
$

 
$
19,628

 
$

 
$
19,628

Total liabilities at fair value
$

 
$
19,628

 
$

 
$
19,628

 
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.

The types of financial instruments Cintas classifies within Level 2 are primarily high grade domestic commercial paper and Canadian treasury securities (federal). The valuation technique used for Cintas’ marketable securities classified within Level 2 of the fair value hierarchy is primarily the market approach. The primary inputs to value Cintas’ marketable securities are the respective instrument's future cash flows based on its stated yield and the amount a market participant would pay for a similar instrument. Primarily all of Cintas’ marketable securities are actively traded and the recorded fair value reflects current market conditions. However, due to the inherent volatility in the investment market, there is at least a possibility that recorded investment values may change in the near term.

The funds invested in Canadian treasury securities are not presently expected to be repatriated, but instead are expected to be invested indefinitely in foreign subsidiaries. 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. The amortized cost basis of marketable securities as of August 31, 2016 and May 31, 2016 was $64.6 million and $70.4 million, respectively. All outstanding marketable securities as of August 31, 2016 and May 31, 2016 had contractual maturities due within one year.

At both August 31, 2016 and May 31, 2016, long-term accrued liabilities include interest rate lock agreements. The fair value of Cintas' interest rate lock agreements are based on similar exchange traded derivatives (market approach)

9



and are, therefore, included within Level 2 of the fair value hierarchy. All other amounts included in long-term liabilities are not recorded at fair value.

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 date.
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. The Company's acquisition of ZEE Medical Inc. (ZEE) on August 1, 2015 was recorded at fair value. See Note 9 entitled Acquisitions for additional information on the measurement of the ZEE assets acquired and liabilities assumed.

4.             Investments
 
Investments at August 31, 2016 of $140.9 million include the cash surrender value of insurance policies of $121.2 million, equity method investments of $14.7 million, and cost method investments of $5.0 million. Investments at May 31, 2016 of $125.0 million include the cash surrender value of insurance policies of $108.1 million, equity method investments of $14.5 million and cost method investments of $2.4 million.

Investments are evaluated for impairment on an annual basis or when indicators of impairment exist. For the three months ended August 31, 2016 and 2015, no impairment losses were recorded.

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 Ended
(In thousands except per share data)
August 31,
2016
 
August 31,
2015
 
 
 
 
Basic Earnings per Share from Continuing Operations
 

 
 

Income from continuing operations
$
138,091

 
$
106,198

Less: income from continuing operations allocated to participating securities
2,727

 
1,742

Income from continuing operations available to common shareholders
$
135,364

 
$
104,456

Basic weighted average common shares outstanding
104,483

 
110,597

 
 
 
 
Basic earnings per share from continuing operations
$
1.29

 
$
0.94

 
Three Months Ended
(In thousands except per share data)
August 31,
2016
 
August 31,
2015
 
 
 
 
Diluted Earnings per Share from Continuing Operations
 

 
 

Income from continuing operations
$
138,091

 
$
106,198

Less: income from continuing operations allocated to participating securities
2,727

 
1,742

Income from continuing operations available to common shareholders
$
135,364

 
$
104,456

Basic weighted average common shares outstanding
104,483

 
110,597

Effect of dilutive securities – employee stock options
2,631

 
1,632

Diluted weighted average common shares outstanding
107,114

 
112,229

 
 
 
 
Diluted earnings per share from continuing operations
$
1.26

 
$
0.93



10



Basic and diluted losses per share from discontinued operations were $0.05 for the three months ended August 31, 2015. For the three months ended August 31, 2016 and 2015, options granted to purchase 0.7 million and 0.5 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share. The exercise prices of these options were greater than the average market price of the common stock (anti-dilutive).
On August 4, 2015, we announced that the Board of Directors authorized a new $500.0 million share buyback program. In June 2016, we purchased less than 0.1 million shares at an average price of $94.09 per share for a total purchase price of $3.7 million. This completed the August 4, 2015 program through which Cintas purchased a total of 5.7 million shares of Cintas common stock at an average price of $87.89 per share for a total purchase price of $500.0 million. On August 2, 2016, Cintas announced that the Board of Directors authorized a new $500.0 million share buyback program, which does not have an expiration date.
For the three months ended August 31, 2016, Cintas acquired 0.2 million shares of Cintas common stock for employee payroll taxes due on restricted stock awards that vested during the three months ended August 31, 2016. These shares were acquired at an average price of $99.67 per share for a total purchase price of $15.1 million.


6.             Goodwill, Service Contracts and Other Assets
 
Changes in the carrying amount of goodwill and service contracts for the three months ended August 31, 2016, 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
 
 
 
 
 
 
 
 
Balance as of June 1, 2016
$
953,216

 
$
241,448

 
$
96,929

 
$
1,291,593

Goodwill acquired
5,739

 
1,050

 
34

 
6,823

Foreign currency translation
(15
)
 
(27
)
 
1

 
(41
)
Balance as of August 31, 2016
$
958,940

 
$
242,471

 
$
96,964

 
$
1,298,375

Service Contracts (in thousands)
Uniform
 Rental and Facility Services
 
First Aid
 and Safety Services
 
All
Other
 
Total
 
 

 
 

 
 

 
 

Balance as of June 1, 2016
$
21,191

 
$
32,252

 
$
30,272

 
$
83,715

Service contracts acquired
3,521

 

 
757

 
4,278

Service contracts amortization
(798
)
 
(936
)
 
(1,465
)
 
(3,199
)
Foreign currency translation

 
(2
)
 

 
(2
)
Balance as of August 31, 2016
$
23,914

 
$
31,314

 
$
29,564

 
$
84,792


Information regarding Cintas’ service contracts and other assets is as follows:
 
As of August 31, 2016
(In thousands)
Carrying Amount
 
Accumulated Amortization
 
Net
 
 
 
 
 
 
Service contracts
$
399,738

 
$
314,946

 
$
84,792

 
 
 
 
 
 
Noncompete and consulting agreements
$
42,422

 
$
41,045

 
$
1,377

Other
16,477

 
2,660

 
13,817

Total other assets
$
58,899

 
$
43,705

 
$
15,194


11



 
As of May 31, 2016
(In thousands)
Carrying Amount
 
Accumulated Amortization
 
Net
 
 
 
 
 
 
Service contracts
$
395,482

 
$
311,767

 
$
83,715

 
 
 
 
 
 
Noncompete and consulting agreements
$
42,378

 
$
40,928

 
$
1,450

Other
15,275

 
2,442

 
12,833

Total other assets
$
57,653

 
$
43,370

 
$
14,283


Amortization expense for continuing operations was $3.5 million and $3.6 million for the three months ended August 31, 2016 and August 31, 2015, respectively. Estimated amortization expense for continuing operations, excluding any future acquisitions, for each of the next five full fiscal years is $14.7 million, $12.6 million, $12.1 million, $11.6 million and $9.7 million, respectively.

7.             Debt, Derivatives and Hedging Activities
 
Cintas' senior notes are recorded at cost, net of debt issuance costs. The fair value of the senior notes is estimated using Level 2 inputs based on general market prices. The carrying value and fair value of Cintas' senior notes as of August 31, 2016 were $1,050.0 million and $1,185.1 million, respectively, and as of May 31, 2016 were $1,300.0 million and $1,416.6 million, respectively. On June 1, 2016, Cintas paid the $250.0 million five-year senior notes that matured on that date with cash on hand and proceeds from the issuance of commercial paper.

Cintas’ commercial paper program has a capacity of $450.0 million that is fully supported by a backup revolving credit facility through a credit agreement with its banking group. This revolving credit facility has an accordion feature that allows for a maximum borrowing capacity of $600.0 million. On June 23, 2016, the revolving credit facility was amended to extend the maturity date from May 28, 2019 to June 22, 2021, increase the capacity from $300.0 million to $450.0 million and add an accordion feature that allows for a maximum borrowing capacity of $600.0 million. As of August 31, 2016, there was $163.8 million of commercial paper outstanding with a weighted average interest rate of 0.74% and maturity dates less than 30 days. The carrying value approximates fair value. No commercial paper or borrowings on our revolving credit facility were outstanding as of May 31, 2016.

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 treasury 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 2008, fiscal 2011 and fiscal 2013. The amortization of the cash flow hedges resulted in an increase to other comprehensive income of $0.4 million and $0.5 million for the three months ended August 31, 2016 and 2015, respectively. During the third quarter of fiscal 2016, Cintas entered into an interest rate lock agreement with a notional value of $550.0 million for a forecasted debt issuance. As of August 31, 2016 and May 31, 2016, the the fair value of this treasury lock was $38.8 million and $19.6 million, respectively and is recorded in long-term liabilities and as a decrease to other comprehensive income, net of tax. The interest rate lock had no impact on net income or cash flows from continuing operations for the three months ending August 31, 2016.

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.

On August 15, 2016, the Company entered into the Agreement and Plan of Merger (Merger Agreement) pursuant to which the Company will acquire all outstanding shares of G&K Services, Inc (G&K Services) for $97.50 per share in cash, for a total enterprise value of approximately $2.2 billion, including acquired net debt. It is expected that this acquisition will be financed with short and long-term debt. To that end, the credit agreement that supports the 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 $150.0 million increase

12



in the revolving credit facility will take effect on the earlier date of either the consummation of the merger (Merger) contemplated by the Merger Agreement among the Corporation, G&K Services and Bravo Merger Sub, Inc. (Merger Sub) a wholly-owned subsidiary of Cintas, dated as of August 15, 2016, or the date on which the Merger Agreement is validly terminated. The term loan facility shall be only funded upon the consummation of the Merger. The credit agreement has an accordion feature that provides Cintas the ability to request increases to the borrowing commitments under either the Revolving Credit Facility or the Term Loan Facility of up to $250.0 million in the aggregate, subject to customary conditions. The amendment also extended the maturity date of the agreement to September 15, 2021.

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. During the three months ended August 31, 2016, unrecognized tax benefits increased by approximately $0.1 million and accrued interest increased by approximately $0.2 million.

All U.S. federal income tax returns are closed to audit through fiscal 2011. Cintas is currently in advanced stages of its U.S. federal audit and various audits in certain foreign jurisdictions and certain domestic states. The years under foreign and domestic state audits cover fiscal years back to 2009. Based on the resolution of the various audits and other potential regulatory developments, it is reasonably possible that the balance of unrecognized tax benefits will decrease by $2.6 million for the fiscal year ending May 31, 2017.

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.


13



9.             Acquisitions
On August 1, 2015, the Company acquired all of the shares of ZEE for acquisition-date fair value consideration of$134.0 million, consisting of cash of $120.6 million and contingent consideration, subject to certain holdback provisions of $13.4 million. ZEE operates within the First Aid and Safety Services reportable operating segment. This acquisition has expanded our footprint in van delivered first aid, safety, training and emergency products and will allow us to serve an even greater number of customers in North America.
The table below summarizes the final purchase price allocation of ZEE as determined by management with the assistance of third-party valuation specialists. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. None of the goodwill is deductible for income tax purposes. The assets acquired and liabilities assumed are valued at the estimated fair value at the acquisition date as required by GAAP.
Assets:
 
Cash and cash equivalents
$
333

Accounts receivable
16,705

Inventory
5,987

Other current assets
1,443

Property, plant and equipment
849

Goodwill
87,442

Service contracts
34,000

Other intagibles
4,500

Liabilities:
 
Accounts payable
(7,195
)
Accrued liabilities
(4,428
)
Deferred income taxes
(5,636
)
Total consideration
$
134,000

The estimated useful life of the acquired service contracts is 10 years.
Cintas is required to provide additional disclosures about fair value measurements as part of the consolidated financial statements for each major category of assets and liabilities measured at fair value on a nonrecurring basis (including business acquisitions). The working capital assets and liabilities, as well as the property and equipment acquired, were valued using Level 2 inputs which included data points that are observable, such as definitive sales agreements, appraisals or established market values of comparable assets (market approach). Goodwill, service contracts and other intangibles were valued using Level 3 inputs, which are unobservable by nature, and included internal estimates of future cash flow using a discount rate of 11% (income approach).
The results of operations for the acquired businesses are included in the consolidated condensed statements of income from the dates of acquisition. The proforma revenue, net income and earnings per share information relating to acquired businesses are not presented because they are not significant to Cintas.
On August 15, 2016, the Company entered into the Merger Agreement pursuant to which the Company will acquire all outstanding shares of G&K Services for $97.50 per share in cash, for a total enterprise value of approximately $2.2 billion, including acquired net debt. The completion of the Merger is subject to customary conditions, including, without limitation: the adoption of the Merger by G&K Services’ shareholders; the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; the receipt of Canadian antitrust approvals; the absence of any order, law or other legal restraint or prohibition preventing or prohibiting completion of the Merger; subject to certain exceptions, the accuracy of representations and warranties of the Company, Merger Sub and G&K Services; and the performance or compliance by the Company, Merger Sub and G&K Services with their respective covenants and agreements. The Merger has not closed as of the date of the filing of this Form 10-Q.


14



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
Loss on
Derivatives
 
Other
 
Total
 
 
 
 
 
 
 
 
Balance at June 1, 2016
$
(2,474
)
 
$
(20,830
)
 
$
(1,570
)
 
$
(24,874
)
Other comprehensive income (loss) before reclassifications
115

 
(12,037
)
 
(1
)
 
(11,923
)
Amounts reclassified from accumulated other comprehensive income (loss)

 
385

 

 
385

Net current period other comprehensive income (loss)
115


(11,652
)

(1
)

(11,538
)
Balance at August 31, 2016
$
(2,359
)

$
(32,482
)

$
(1,571
)

$
(36,412
)
(In thousands)
Foreign Currency
 
Unrealized
Loss on
Derivatives
 
Other
 
Total
 
 
 
 
 
 
 
 
Balance at June 1, 2015
$
2,987

 
$
(10,626
)
 
$
(832
)
 
$
(8,471
)
Other comprehensive (loss) income before reclassifications
(12,013
)
 

 
(8
)
 
(12,021
)
Amounts reclassified from accumulated other comprehensive income (loss)

 
488

 

 
488

Net current period other comprehensive (loss) income
(12,013
)

488


(8
)

(11,533
)
Balance at August 31, 2015
$
(9,026
)
 
$
(10,138
)
 
$
(840
)
 
$
(20,004
)

The following table summarizes the reclassifications out of accumulated other comprehensive loss:
Reclassifications out of Accumulated Other Comprehensive Loss
 
 
 
 
 
 
 
Details about Accumulated Other Comprehensive Loss Components
 
Amount Reclassified from Accumulated
 Other Comprehensive Loss
Affected Line in the Consolidated Condensed Statements of Income
 
 
 
 
 
 
 
Three Months Ended
 
 
(In thousands)
 
August 31, 2016
 
August 31, 2015
 
 
 
 
 
 
 
 
 
Amortization of interest rate locks
 
$
(615
)
 
$
(783
)
 
Interest expense
Tax benefit
 
230

 
295

 
Income taxes
Amortization of interest rate locks, net of tax
 
$
(385
)
 
$
(488
)

Net of tax


15



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 primarily of Fire Protection Services and its 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
 
 
 
 
 
 
 
 
 
 
As of and for the three months ended August 31, 2016
 

 
 

 
 

 
 

 
 

Revenue
$
999,596

 
$
124,839

 
$
169,695

 
$

 
$
1,294,130

Income (loss) before income taxes
$
185,245

 
$
11,511

 
$
10,205

 
$
(14,107
)
 
$
192,854

Total assets
$
3,199,904

 
$
436,920

 
$
366,554

 
$
163,767

 
$
4,167,145

 
 
 
 
 
 
 
 
 
 
As of and for the three months ended August 31, 2015
 
 
 
 
 
 
 
 
 
Revenue
$
938,408

 
$
99,488

 
$
160,994

 
$

 
$
1,198,890

Income (loss) before income taxes
$
165,381

 
$
8,592

 
$
11,534

 
$
(16,293
)
 
$
169,214

Total assets
$
2,865,675

 
$
397,573

 
$
341,839

 
$
511,378

 
$
4,116,465


(1) Corporate assets include cash and marketable securities in all periods. Corporate assets as of August 31, 2015 include the investment in Shred-it which was classified as held for sale.

16



12.      Discontinued Operations
 
During fiscal 2016, Cintas sold its investment in Shred-it and, as a result, the operations of Shred-it are classified as discontinued operations for all periods presented. During fiscal 2015, Cintas sold Storage and, as a result, its operations are also classified as discontinued operations for all periods presented. Shredding and Storage were previously included in the former Document Management Services reportable operating segment. In accordance with the applicable accounting guidance for the disposal of long-lived assets, the results of Shredding and Storage have been excluded from both continuing operations and operating segment results for all periods presented.

In the first quarter of fiscal 2016, Cintas recorded a net loss on the investment in Shred-it of $9.3 million and sold the remaining Storage assets classified as held for sale. In connection with the sale of Storage assets, Cintas received proceeds of $24.4 million and realized a pre-tax gain of $4.8 million.

Following is selected financial information included in net loss from discontinued operations for Shred-it and Storage:
 
Three Months Ended
(In thousands)
August 31, 2016
August 31, 2015
 
 
 
Revenue
$

$

 
 
 
Income before income taxes

237

Gain on Storage transaction

4,843

Loss on Shred-it

(14,516
)
Income tax benefit on net loss

3,419

Net loss from discontinued operations
$

$
(6,017
)




17



13.      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 $163.8 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 condensed consolidating financial statements are provided as an alternative to filing separate financial statements of the guarantors. Each of the subsidiaries presented in the following condensed consolidating financial statements has been fully consolidated in Cintas’ consolidated financial statements. The following condensed consolidating financial statements should be read in conjunction with the consolidated financial statements of Cintas and notes thereto of which this note is an integral part. 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.
 
Condensed consolidating financial statements for Cintas, Corp. 2, the subsidiary guarantors and non-guarantors are presented on the following pages: 




18



Condensed Consolidating Income Statement
Three Months Ended August 31, 2016
(In thousands)

 
Cintas
Corporation
 
Corp. 2
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Cintas
Corporation
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 

 
 

 
 

 
 

 
 

 
 

Uniform rental and facility services
$

 
$
837,274

 
$
149,148

 
$
57,663

 
$
(44,489
)
 
$
999,596

Other

 
410,248

 
968

 
18,875

 
(135,557
)
 
294,534

Equity in net income of affiliates
138,091

 

 

 

 
(138,091
)
 

 
138,091

 
1,247,522

 
150,116

 
76,538

 
(318,137
)
 
1,294,130

Costs and expenses (income):
 

 
 

 
 

 
 

 
 

 
 

Cost of uniform rental and facility services

 
479,056

 
90,672

 
37,114

 
(65,910
)
 
540,932

Cost of other

 
280,024

 
(14,931
)
 
13,828

 
(109,497
)
 
169,424

Selling and administrative expenses

 
411,934

 
(50,734
)
 
20,265

 
(7,439
)
 
374,026

G&K Services, Inc. acquisition expenses

 

 
2,787

 

 

 
2,787

Operating income
138,091

 
76,508

 
122,322

 
5,331

 
(135,291
)
 
206,961

 
 
 
 
 
 
 
 
 
 
 
 
Interest income

 

 
(17
)
 
(48
)
 

 
(65
)
Interest expense (income)

 
14,827

 
(702
)
 
47

 

 
14,172

 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
138,091


61,681


123,041


5,332


(135,291
)

192,854

Income taxes

 
17,810

 
35,526

 
1,453

 
(26
)
 
54,763

 
 
 
 
 
 
 
 
 
 
 
 
Net income from continuing operations
$
138,091

 
$
43,871

 
$
87,515

 
$
3,879

 
$
(135,265
)
 
$
138,091



19



Condensed Consolidating Income Statement
Three Months Ended August 31, 2015
(In thousands)

 
Cintas
Corporation
 
Corp. 2
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Cintas
Corporation
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 

 
 

 
 

 
 

 
 

 
 

Uniform rental and facility services
$

 
$
787,169

 
$
136,425

 
$
54,012

 
$
(39,198
)
 
$
938,408

Other

 
372,611

 
1,293

 
14,811

 
(128,233
)
 
260,482

Equity in net income of affiliates
106,198

 

 

 

 
(106,198
)
 

 
106,198

 
1,159,780

 
137,718

 
68,823

 
(273,629
)
 
1,198,890

Costs and expenses (income):
 

 
 

 
 

 
 

 
 

 
 

Cost of uniform rental and facility services

 
455,207

 
86,198

 
35,820

 
(58,722
)
 
518,503

Cost of other

 
258,990

 
(14,256
)
 
11,106

 
(99,597
)
 
156,243

Selling and administrative expenses

 
369,693

 
(41,472
)
 
17,880

 
(7,464
)
 
338,637

Operating income
106,198

 
75,890

 
107,248

 
4,017

 
(107,846
)
 
185,507

 
 
 
 
 
 
 
 
 
 
 
 
Interest income

 

 
(48
)
 
(71
)
 

 
(119
)
Interest expense (income)

 
16,375

 
38

 
(1
)
 

 
16,412

 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
106,198

 
59,515

 
107,258

 
4,089

 
(107,846
)
 
169,214

Income taxes

 
22,382

 
39,403

 
1,256

 
(25
)
 
63,016

Income from continuing operations
106,198


37,133


67,855


2,833


(107,821
)

106,198

 
 
 
 
 
 
 
 
 
 
 


Loss from discontinued operations, net of tax
(6,017
)
 
(5,323
)
 

 
(694
)
 
6,017

 
(6,017
)
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
100,181


$
31,810


$
67,855


$
2,139


$
(101,804
)

$
100,181













20



Condensed Consolidating Statement of Comprehensive Income
Three Months Ended August 31, 2016
(In thousands)

 
Cintas
Corporation
 
Corp. 2
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Cintas
Corporation
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
138,091

 
$
43,871

 
$
87,515

 
$
3,879

 
$
(135,265
)
 
$
138,091

 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
115

 

 

 
115

 
(115
)
 
115

Change in fair value of derivatives
(12,037
)
 
(12,037
)
 

 

 
12,037

 
(12,037
)
Amortization of interest rate lock agreements
385

 
385

 

 

 
(385
)
 
385

Change in fair value of available-for-sale securities
(1
)
 

 

 
(1
)
 
1

 
(1
)
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive (loss) income
(11,538
)
 
(11,652
)
 

 
114

 
11,538

 
(11,538
)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
126,553

 
$
32,219

 
$
87,515

 
$
3,993

 
$
(123,727
)
 
$
126,553



21



Condensed Consolidating Statement of Comprehensive Income
Three Months Ended August 31, 2015
(In thousands)

 
Cintas
Corporation
 
Corp. 2
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Cintas
Corporation
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
100,181

 
$
31,810

 
$
67,855

 
$
2,139

 
$
(101,804
)
 
$
100,181

 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments

 

 

 
(12,013
)
 

 
(12,013
)
Amortization of interest rate lock agreements

 
488

 

 

 

 
488

Change in fair value of available-for-sale securities

 

 

 
(8
)
 

 
(8
)
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss)

 
488

 

 
(12,021
)
 

 
(11,533
)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
$
100,181

 
$
32,298

 
$
67,855

 
$
(9,882
)
 
$
(101,804
)
 
$
88,648












22



Condensed Consolidating Balance Sheet
As of August 31, 2016
(In thousands)

 
Cintas
Corporation
 
Corp. 2
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Cintas
Corporation
Consolidated
Assets
 

 
 

 
 

 
 

 
 

 
 

Current assets:
 

 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$

 
$
37,205

 
$
38,230

 
$
23,774

 
$

 
$
99,209

Marketable securities

 

 

 
64,558

 

 
64,558

Accounts receivable, net

 
452,028

 
98,129

 
36,215

 

 
586,372

Inventories, net

 
234,154

 
17,343

 
11,968

 
(1,309
)
 
262,156

Uniforms and other rental items in service

 
449,115

 
75,719

 
36,607

 
(19,317
)
 
542,124

Prepaid expenses and other current assets

 
15,512

 
23,698

 
1,119

 

 
40,329

Total current assets

 
1,188,014

 
253,119

 
174,241

 
(20,626
)
 
1,594,748

 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment, at cost, net

 
632,073

 
324,484

 
76,603

 

 
1,033,160

 
 
 
 
 
 
 
 
 
 
 
 
Investments
321,083

 
1,774,464

 
917,468

 
955,196

 
(3,827,335
)
 
140,876

Goodwill

 

 
1,257,747

 
40,740

 
(112
)
 
1,298,375

Service contracts, net

 
79,143

 
9

 
5,640

 

 
84,792

Other assets, net
1,201,072

 
(460
)
 
3,545,468

 
9,022

 
(4,739,908
)
 
15,194

 
$
1,522,155

 
$
3,673,234

 
$
6,298,295

 
$
1,261,442

 
$
(8,587,981
)
 
$
4,167,145

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Shareholders’ Equity
 

 
 

 
 

 
 

 
 

 
 

Current liabilities:
 

 
 

 
 

 
 

 
 

 
 

Accounts payable
$
(465,247
)
 
$
(1,843,480
)
 
$
2,385,059

 
$
15,198

 
$
38,120

 
$
129,650

Accrued compensation and related liabilities

 
47,584

 
12,881

 
4,227

 

 
64,692

Accrued liabilities

 
64,603

 
235,678

 
13,607

 

 
313,888

Income taxes, current

 
4,797

 
34,446

 
(414
)
 

 
38,829

Debt due within one year

 
163,800