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EX-32.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER - CINTAS CORPctas-2016x1130x10xqxex322.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - CINTAS CORPctas-2016x1130x10xqxex321.htm
EX-31.2 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER - CINTAS CORPctas-2016x1130x10xqxex312.htm
EX-31.1 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER - CINTAS CORPctas-2016x1130x10xqxex311.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 November 30, 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 December 31, 2016
Common Stock, no par value
 
105,039,128




CINTAS CORPORATION
TABLE OF CONTENTS

Part I.
Financial Information
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three and Six Months Ended November 30, 2016 and 2015
 
 
 
 
 
 
 
 
Three and Six Months Ended November 30, 2016 and 2015
 
 
 
 
 
 
 
 
November 30, 2016 and May 31, 2016
 
 
 
 
 
 
 
 
    Six Months Ended November 30, 2016 and 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 5.
 
Other Information.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibits
 
 
 
 
 
 
 
 

2



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

 
Three Months Ended
 
Six Months Ended
 
November 30,
2016
 
November 30,
2015
 
November 30,
2016
 
November 30,
2015
Revenue:
 

 
 

 
 
 
 
Uniform rental and facility services
$
1,005,565

 
$
937,704

 
$
2,005,161

 
$
1,876,112

Other
291,358

 
281,376

 
585,892

 
541,858

 
1,296,923

 
1,219,080

 
2,591,053

 
2,417,970

Costs and expenses:
 

 
 

 
 
 
 
Cost of uniform rental and facility services
555,752

 
526,091

 
1,096,684

 
1,044,594

Cost of other
169,744

 
165,589

 
339,168

 
321,832

Selling and administrative expenses
365,222

 
327,051

 
739,248

 
665,688

G&K Services, Inc. transaction expenses
3,347

 

 
6,134

 

 
 
 
 
 
 
 
 
Operating income
202,858

 
200,349

 
409,819

 
385,856

 
 
 
 
 
 
 
 
Interest income
(31
)
 
(111
)
 
(96
)
 
(230
)
Interest expense
13,267

 
16,171

 
27,439

 
32,583

 
 
 
 
 
 
 
 
Income before income taxes
189,622


184,289


382,476


353,503

Income taxes
66,168

 
68,836

 
120,931

 
131,852

Income from continuing operations
123,454

 
115,453

 
261,545

 
221,651

Income from discontinued operations, net of
   tax expense of $8,953, $146,395, $8,953
   and $142,976, respectively
16,923

 
229,647

 
16,923

 
223,630

Net income
$
140,377

 
$
345,100


$
278,468


$
445,281

 
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
 
Continuing operations
$
1.16

 
$
1.05

 
$
2.45

 
$
1.99

Discontinued operations
0.16

 
2.06

 
0.16

 
2.01

Basic earnings per share
$
1.32

 
$
3.11


$
2.61


$
4.00

 
 
 
 
 
 
 
 
Diluted earnings per share:
 
 
 
 
 
 
 
Continuing operations
$
1.13

 
$
1.03

 
$
2.39

 
$
1.96

Discontinued operations
0.16

 
2.03

 
0.16

 
1.98

Diluted earnings per share
$
1.29


$
3.06


$
2.55


$
3.94

 
 
 
 
 
 
 
 
Dividends declared per share
$
1.33

 
$
1.05

 
$
1.33

 
$
1.05

 

See accompanying notes.

3



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

 
Three Months Ended
 
Six Months Ended
 
November 30, 2016
 
November 30, 2015
 
November 30, 2016
 
November 30, 2015
 
 
 
 
 
 
 
 
Net income
$
140,377

 
$
345,100

 
$
278,468

 
$
445,281

 
 
 
 
 
 
 
 
Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(7,650
)
 
(4,626
)
 
(7,535
)
 
(16,639
)
Cumulative translation adjustment on investment in Shred-it

 
6,472

 

 
6,472

Change in fair value of derivatives
26,390

 

 
14,353

 

Amortization of interest rate lock agreements
385

 
488

 
770

 
976

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

 
(10
)
 

 
(18
)
 
 
 
 
 
 
 
 
Other comprehensive income (loss)
19,126

 
2,324

 
7,588

 
(9,209
)
 
 
 
 
 
 
 
 
Comprehensive income
$
159,503

 
$
347,424

 
$
286,056

 
$
436,072


See accompanying notes.







4



CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except share data)
 
November 30,
2016
 
May 31,
2016
 
(Unaudited)
 
 

ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
143,573

 
$
139,357

Marketable securities

 
70,405

Accounts receivable, net
607,452

 
563,178

Inventories, net
263,301

 
249,362

Uniforms and other rental items in service
543,644

 
539,956

Income taxes, current
1,228

 
1,712

Prepaid expenses and other current assets
41,464

 
26,065

Total current assets
1,600,662

 
1,590,035

 
 
 
 
Property and equipment, at cost, net
1,067,214

 
994,237

 
 
 
 
Investments
140,530

 
124,952

Goodwill
1,301,391

 
1,291,593

Service contracts, net
85,517

 
83,715

Other assets, net
19,265

 
14,283

 
$
4,214,579

 
$
4,098,815

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
127,815

 
$
114,514

Accrued compensation and related liabilities
85,857

 
101,976

Accrued liabilities
469,085

 
349,065

Debt due within one year
66,000

 
250,000

Total current liabilities
748,757

 
815,555

 
 
 
 
Long-term liabilities:
 

 
 

Debt due after one year
1,044,834

 
1,044,422

Deferred income taxes
265,091

 
259,475

Accrued liabilities
130,192

 
136,704

Total long-term liabilities
1,440,117

 
1,440,601

 
 
 
 
Shareholders’ equity:
 

 
 

Preferred stock, no par value:

 

100,000 shares authorized, none outstanding


 


Common stock, no par value:
468,392

 
409,682

425,000,000 shares authorized
 

 
 

FY 2017:  180,589,260 issued and 105,009,742 outstanding
 

 
 

FY 2016:  179,598,516 issued and 104,213,479 outstanding
 
 
 
Paid-in capital
178,668

 
205,260

Retained earnings
4,968,437

 
4,805,867

Treasury stock:
(3,572,506
)
 
(3,553,276
)
FY 2017:  75,579,518 shares
 

 
 

FY 2016:  75,385,037 shares
 
 
 
Accumulated other comprehensive loss
(17,286
)
 
(24,874
)
Total shareholders’ equity
2,025,705

 
1,842,659

 
$
4,214,579

 
$
4,098,815

See accompanying notes.

5



CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) 
 
Six Months Ended
 
November 30,
2016
 
November 30,
2015
Cash flows from operating activities:
 

 
 

Net income
$
278,468

 
$
445,281

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

 
 

Depreciation
79,590

 
73,130

Amortization of intangible assets
7,460

 
7,764

Stock-based compensation
39,582

 
40,241

Gain on Storage transactions

 
(15,786
)
Gain on Shred-it
(25,876
)
 
(349,738
)
Deferred income taxes
(3,833
)
 
(98,423
)
Change in current assets and liabilities, net of acquisitions of businesses:
 

 
 

Accounts receivable, net
(44,920
)
 
(39,418
)
Inventories, net
(14,616
)
 
(19,841
)
Uniforms and other rental items in service
(4,315
)
 
(10,893
)
Prepaid expenses and other current assets
(1,952
)
 
(2,369
)
Accounts payable
15,451

 
19,368

Accrued compensation and related liabilities
(18,936
)
 
(22,771
)
Accrued liabilities and other
(4,866
)
 
1,041

Income taxes, current
484

 
237,451

Net cash provided by operating activities
301,721

 
265,037

 
 
 
 
Cash flows from investing activities:
 

 
 

Capital expenditures
(155,173
)
 
(121,817
)
Proceeds from redemption of marketable securities
172,968

 
212,081

Purchase of marketable securities and investments
(118,270
)
 
(271,341
)
Proceeds from Storage transactions

 
35,338

Proceeds from sale of investment in Shred-it
25,876

 
578,257

Acquisitions of businesses, net of cash acquired
(17,778
)
 
(121,237
)
Other, net
332

 
1,987

Net cash (used in) provided by investing activities
(92,045
)
 
313,268

 
 
 
 
Cash flows from financing activities:
 

 
 

Proceeds from issuance of commercial paper, net
66,000

 

Repayment of debt
(250,000
)
 
(16
)
Prepaid short-term debt financing fees
(13,495
)
 

Proceeds from exercise of stock-based compensation awards
19,225

 
17,444

Repurchase of common stock
(19,230
)
 
(402,293
)
Other, net
(5,572
)
 
646

Net cash used in financing activities
(203,072
)
 
(384,219
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(2,388
)
 
(4,374
)
 
 
 
 
Net increase in cash and cash equivalents
4,216

 
189,712

 
 
 
 
Cash and cash equivalents at beginning of period
139,357

 
417,073

 
 
 
 
Cash and cash equivalents at end of period
$
143,573

 
$
606,785

 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, we suggest that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended May 31, 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)
November 30,
2016
 
May 31,
2016
 
 
 
 
Raw materials
$
11,303

 
$
17,794

Work in process
16,772

 
14,731

Finished goods
235,226

 
216,837

 
$
263,301

 
$
249,362


2.             New Accounting Pronouncements

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.

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.

7



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 six months ended November 30, 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 statements for the three and six months ended November 30, 2016 was a decrease in income tax expense of $2.4 million and $19.6 million, respectively. The election to account for forfeitures as they occur resulted in increases of $1.3 million and $3.0 million in stock based compensation expense for the three and six months ended November 30, 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 November 30, 2016
 (In thousands)
Level 1
 
Level 2
 
Level 3
 
Fair Value
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
143,573

 
$

 
$

 
$
143,573

Other assets, net:
 
 
 
 
 
 
 
  Interest rate lock agreements

 
3,264

 

 
3,264

Total assets at fair value
$
143,573

 
$
3,264

 
$

 
$
146,837

 
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 agreements
$

 
$
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.

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 May 31, 2016 was $70.4 million. All outstanding marketable securities as of May 31, 2016 had contractual maturities due within one year.

Interest rate lock agreements were included in other assets as of November 30, 2016 and in long-term accrued liabilities as of May 31, 2016. The fair value of Cintas' interest rate lock agreements are based on similar exchange traded derivatives (market approach) and are, therefore, included within Level 2 of the fair value hierarchy. All other amounts included in other assets and 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.

9



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) in the first quarter of fiscal 2016 was recorded at fair value. See Note 9 entitled Acquisitions for additional information on the measurement of the ZEE assets acquired and liabilities assumed. There were no material acquisitions during the six months ended November 30, 2016.

4.             Investments
 
Investments at November 30, 2016 of $140.5 million include the cash surrender value of insurance policies of $120.4 million, equity method investments of $15.1 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 six months ended November 30, 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
 
Six Months Ended
(In thousands except per share data)
November 30,
2016
 
November 30,
2015
 
November 30,
2016

November 30,
2015
 
 
 
 
 
 
 
 
Basic Earnings per Share from Continuing Operations
 

 
 

 
 
 
 
Income from continuing operations
$
123,454

 
$
115,453

 
$
261,545

 
$
221,651

Less: income from continuing operations allocated to participating securities
2,228

 
1,887

 
4,955

 
3,629

Income from continuing operations available to common shareholders
$
121,226

 
$
113,566


$
256,590


$
218,022

Basic weighted average common shares outstanding
104,957

 
108,301

 
104,719

 
109,455

 
 
 
 
 
 
 
 
Basic earnings per share from continuing operations
$
1.16

 
$
1.05


$
2.45

 
$
1.99

 
Three Months Ended
 
Six Months Ended
(In thousands except per share data)
November 30,
2016
 
November 30,
2015
 
November 30,
2016
 
November 30,
2015
 
 
 
 
 
 
 
 
Diluted Earnings per Share from Continuing Operations
 

 
 

 
 
 
 
Income from continuing operations
$
123,454

 
$
115,453

 
$
261,545

 
$
221,651

Less: income from continuing operations allocated to participating securities
2,228

 
1,887

 
4,955

 
3,629

Income from continuing operations available to common shareholders
$
121,226

 
$
113,566

 
$
256,590

 
$
218,022

Basic weighted average common shares outstanding
104,957

 
108,301

 
104,719

 
109,455

Effect of dilutive securities – employee stock options
2,690

 
1,812

 
2,559

 
1,685

Diluted weighted average common shares outstanding
107,647

 
110,113

 
107,278

 
111,140

 
 
 
 
 
 
 
 
Diluted earnings per share from continuing operations
$
1.13

 
$
1.03

 
$
2.39

 
$
1.96


10




Basic and diluted income per share from discontinued operations were $0.16 for the three months ended November 30, 2016. Basic and diluted income per share from discontinued operations were $2.06 and $2.03, respectively, for the three months ended November 30, 2015. For the six months ended November 30, 2016, basic and diluted income per share from discontinued operations were $0.16. For the six months ended November 30, 2015, basic and diluted income per share from discontinued operations were $2.01 and $1.98, respectively.

For the three months ended November 30, 2016 and 2015, options granted to purchase 0.7 million and 0.3 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share. For the six months ended November 30, 2016 and 2015, options granted to purchase 0.6 million and 0.4 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 $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 six months ended November 30, 2016, Cintas acquired 0.2 million shares of Cintas common stock for employee payroll taxes due on restricted stock awards that vested during the six months ended November 30, 2016. These shares were acquired at an average price of $99.88 per share for a total purchase price of $15.5 million.

6.             Goodwill, Service Contracts and Other Assets
 
Changes in the carrying amount of goodwill and service contracts for the six months ended November 30, 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
5,704

 
1,871

 
3,227

 
10,802

Foreign currency translation
(482
)
 
(511
)
 
(11
)
 
(1,004
)
Balance as of November 30, 2016
$
958,438

 
$
242,808

 
$
100,145

 
$
1,301,391

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
3,514

 
1,612

 
3,236

 
8,362

Service contracts amortization
(1,647
)
 
(1,873
)
 
(2,965
)
 
(6,485
)
Foreign currency translation
(48
)
 
(27
)
 

 
(75
)
Balance as of November 30, 2016
$
23,010

 
$
31,964

 
$
30,543

 
$
85,517



11



Information regarding Cintas’ service contracts and other assets is as follows:
 
As of November 30, 2016
(In thousands)
Carrying Amount
 
Accumulated Amortization
 
Net
 
 
 
 
 
 
Service contracts
$
403,234

 
$
317,717

 
$
85,517

 
 
 
 
 
 
Noncompete and consulting agreements
$
43,056

 
$
41,132

 
$
1,924

Other
20,266

 
2,925

 
17,341

Total other assets
$
63,322

 
$
44,057

 
$
19,265

 
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 service contracts and other assets was $3.6 million and $4.2 million for the three months ended November 30, 2016 and 2015, respectively. Amortization expense for service contracts and other assets was $7.0 million and $7.8 million for the six months ended November 30, 2016 and 2015, respectively. Estimated amortization expense for service contracts and other assets excluding any future acquisitions, for each of the next five full fiscal years is $14.7 million, $13.1 million, $12.5 million, $12.1 million and $10.2 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 November 30, 2016 were $1,050.0 million and $1,132.6 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.

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) 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-term and long-term debt. In connection with the Company's entry into the Merger Agreement, Cintas pre-paid $13.5 million in fees to acquire the bridge loan financing. As of November 30, 2016, these fees are recorded in prepaid assets on the balance sheet and will be expensed over the life of the bridge loan. In addition, the credit agreement that supports our commercial paper program was amended on September 16, 2016. The amendment increased the capacity of the revolving credit facility from $450.0 million to $600.0 million and added a $250.0 million term loan facility. The $150.0 million increase 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 and Bravo Merger Sub, Inc. (Merger Sub), a wholly-owned subsidiary of Cintas, 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.

As of November 30, 2016, there was $66.0 million of commercial paper outstanding with a weighted average interest rate of 0.84% and maturity dates less than 30 days. The fair value of the commercial paper is estimated using Level 2 inputs based on general market prices. The carrying value equals fair value. No commercial paper or borrowings on our revolving credit facility were outstanding as of May 31, 2016.

12



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 November 30, 2016 and 2015, respectively. For the six months ended November 30, 2016 and 2015, the amortization of the cash flow hedges resulted in an increase to other comprehensive income of $0.8 million and $1.0 million, respectively. During the third quarter of fiscal 2016, Cintas entered into interest rate lock agreements with a notional value of $550.0 million for a forecasted long-term debt issuance. As of November 30, 2016, the fair value of these treasury locks was $3.3 million and are recorded in other assets as an increase to other comprehensive income, net of tax. As of May 31, 2016, the the fair value of these treasury locks was $19.6 million and were recorded in long-term liabilities as a decrease to other comprehensive income, net of tax. The interest rate locks had no impact on net income or cash flows from continuing operations for the six months ended November 30, 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.

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 November 30, 2016, unrecognized tax benefits decreased by approximately $1.8 million and accrued interest decreased by approximately $0.4 million. During the six months ended November 30, 2016, unrecognized tax benefits decreased by approximately $1.7 million and accrued interest decreased by approximately $0.2 million.

All U.S. federal income tax returns are closed to audit through fiscal 2013. Cintas is currently in various audits in certain foreign jurisdictions and certain domestic states. The years under foreign and domestic state audits cover fiscal years back to 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 would not change 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.

9.             Acquisitions
On August 15, 2016, the Company entered into the Merger Agreement pursuant to which the Company will acquire all outstanding shares of G&K 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. The completion of the Merger is subject to customary conditions, including, without limitation: the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act), 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; and the performance or compliance by the Company, Merger Sub and G&K with their respective covenants and agreements. On November 15, 2016, G&K held its annual meeting of shareholders at which the shareholders voted on and approved the Merger. The Merger has not closed as of the date of the filing of this Form 10-Q.

13



On September 29, 2016, both the Company and G&K received a request for additional information and documentary material, commonly referred to as a "second request," from the Federal Trade Commission (FTC), pursuant to the HSR Act, in connection with the Merger. The FTC's second request has the effect of extending the waiting period applicable to the consummation of the Merger until the 30th day after substantial compliance by the Company and G&K with the second request, unless the waiting period is extended voluntarily by the parties or terminated sooner by the FTC.
On October 12, 2016, both the Company and G&K received a supplemental information request, commonly referred to as SIR, from the Competition Bureau of Canada, pursuant to the Canada Competition Act, in connection with the Merger. SIR is part of the prescribed process for review of proposed transactions in Canada and has the effect of extending the waiting period applicable to the consummation of the Merger until the 30th day after compliance by the Company and G&K with the SIR.
During the three and six months ended November 30, 2016, we incurred expenses of $3.3 million and $6.1 million, respectively, related to the pending Merger for legal and professional services and regulatory fees. Many of these expenses are non-deductible for income tax purposes once the Merger has been executed.
During the first quarter of fiscal 2016, 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. To date, the Company has paid $4.5 million of the contingent consideration. This payment occurred during the three months ended November 30, 2016 and is included within other financing activities on the statement of cash flows. 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.

14



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.
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
)
Other comprehensive (loss) income before reclassifications
(7,650
)
 
26,390

 
1

 
18,741

Amounts reclassified from accumulated other comprehensive income (loss)

 
385

 

 
385

Net current period other comprehensive (loss) income
(7,650
)
 
26,775

 
1

 
19,126

Balance at November 30, 2016
$
(10,009
)

$
(5,707
)

$
(1,570
)

$
(17,286
)
(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 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
)
Other comprehensive loss before reclassifications
(4,626
)
 

 
(10
)
 
(4,636
)
Amounts reclassified from accumulated other comprehensive income (loss)
6,472

 
488

 

 
6,960

Net current period other comprehensive income (loss)
1,846

 
488

 
(10
)
 
2,324

Balance at November 30, 2015
$
(7,180
)
 
$
(9,650
)
 
$
(850
)
 
$
(17,680
)

15



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
 
Six Months Ended
 
 
(In thousands)
 
November 30, 2016
 
November 30, 2015
 
November 30, 2016
 
November 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of interest rate locks
 
$
(615
)
 
$
(783
)
 
$
(1,229
)
 
$
(1,565
)
 
Interest expense
Tax benefit
 
230

 
295

 
459

 
589

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

$
(770
)

$
(976
)
 
Net of tax
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
(In thousands)
 
November 30, 2016
 
November 30, 2015
 
November 30, 2016
 
November 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative translation adjustment on Shred-it
 
$

 
$
(10,381
)
 
$

 
$
(10,381
)
 
Income from discontinued operations
Tax benefit
 

 
3,909

 

 
3,909

 
Income from discontinued operations
Cumulative translation adjustment on Shred-it, net of tax
 
$

 
$
(6,472
)
 
$

 
$
(6,472
)
 
Net of tax


16



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
 
 
 
 
 
 
 
 
 
 
For the three months ended November 30, 2016
 

 
 

 
 

 
 

 
 

Revenue
$
1,005,565

 
$
124,797

 
$
166,561

 
$

 
$
1,296,923

Income (loss) before income taxes
$
177,361

 
$
14,779

 
$
10,718

 
$
(13,236
)
 
$
189,622

 
 
 
 
 
 
 
 
 
 
For the three months ended November 30, 2015
 

 
 

 
 

 
 

 
 

Revenue
$
937,704

 
$
120,438

 
$
160,938

 
$

 
$
1,219,080

Income (loss) before income taxes
$
169,295

 
$
14,847

 
$
16,207

 
$
(16,060
)
 
$
184,289

 
 
 
 
 
 
 
 
 
 
As of and for the six months ended
November 30, 2016
 

 
 

 
 

 
 

 
 

Revenue
$
2,005,161

 
$
249,636

 
$
336,256

 
$

 
$
2,591,053

Income (loss) before income taxes
$
362,606

 
$
26,290

 
$
20,923

 
$
(27,343
)
 
$
382,476

Total assets
$
3,266,422

 
$
443,151

 
$
361,433

 
$
143,573

 
$
4,214,579

 
 
 
 
 
 
 
 
 
 
As of and for the six months ended
November 30, 2015
 
 
 
 
 
 
 
 
 
Revenue
$
1,876,112

 
$
219,926

 
$
321,932

 
$

 
$
2,417,970

Income (loss) before income taxes
$
334,676

 
$
23,439

 
$
27,741

 
$
(32,353
)
 
$
353,503

Total assets
$
2,990,828

 
$
426,089

 
$
355,082

 
$
672,611

 
$
4,444,610


(1) Corporate assets include cash and marketable securities in all periods.

17



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.

During the three months ended November 30, 2016, we received additional proceeds related to contingent consideration on the sale of Shred-it. Cintas realized a pre-tax gain of $25.9 million as a result of the additional consideration received. As of November 30, 2016, Cintas still has the opportunity to receive additional consideration, subject to certain holdback provisions. Because of the uncertainty surrounding the holdback provisions, this opportunity represents a gain contingency that has not been recorded.

In the second quarter of fiscal 2016, we completed the transaction to sell our investment in Shred-it. We recorded a pre-tax gain on the sale of Shred-it of $349.7 million. Cintas’ share of the proceeds from the sale were $578.3 million.

In the three and six months ended November 30, 2015, Cintas recorded a net loss on the investment in Shred-it of $9.3 million and $24.3 million, respectively. During the three months ended November 30, 2015, Cintas received additional proceeds related to contingent consideration on the sale of Storage. The Company realized a pre-tax gain of $10.9 million as a result of the additional consideration received. In the first quarter of fiscal 2016, Cintas sold the remaining storage assets classified as held for sale. In connection with the sale of these 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 income from discontinued operations for Shred-it and Storage:
 
Three Months Ended
 
Six Months Ended
(In thousands)
November 30, 2016
 
November 30, 2015
 
November 30,
2016
 
November 30,
2015
 
 
 
 
 
 
 
 
Revenue
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
Income before income taxes

 
845

 

 
1,082

Gain on Storage transactions

 
10,943

 

 
15,786

Gain on Shred-it
25,876

 
364,254

 
25,876

 
349,738

Income tax expense on net gain
(8,953
)
 
(146,395
)
 
(8,953
)
 
(142,976
)
Net income from discontinued operations
$
16,923

 
$
229,647


$
16,923


$
223,630





18



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 $66.0 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: 




19



Condensed Consolidating Income Statement
Three Months Ended November 30, 2016
(In thousands)

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

 
 

 
 

 
 

 
 

 
 

Uniform rental and facility services
$

 
$
841,442

 
$
149,886

 
$
57,610

 
$
(43,373
)
 
$
1,005,565

Other

 
411,378

 
633

 
18,162

 
(138,815
)
 
291,358

Equity in net income of affiliates
140,377

 

 

 

 
(140,377
)
 

 
140,377

 
1,252,820

 
150,519

 
75,772

 
(322,565
)
 
1,296,923

Costs and expenses (income):
 

 
 

 
 

 
 

 
 

 
 

Cost of uniform rental and facility services

 
487,653

 
94,323

 
37,603

 
(63,827
)
 
555,752

Cost of other

 
287,368

 
(19,549
)
 
13,636

 
(111,711
)
 
169,744

Selling and administrative expenses

 
401,715

 
(48,256
)
 
18,703

 
(6,940
)
 
365,222

G&K Services, Inc. transaction expenses

 

 
3,347

 

 

 
3,347

Operating income
140,377

 
76,084

 
120,654

 
5,830

 
(140,087
)
 
202,858

 
 
 
 
 
 
 
 
 
 
 
 
Interest income

 

 
(7
)
 
(25
)
 
1

 
(31
)
Interest expense (income)

 
14,528

 
(1,176
)
 
(85
)
 

 
13,267

 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
140,377


61,556


121,837


5,940


(140,088
)

189,622

Income taxes

 
21,534

 
42,652

 
2,011

 
(29
)
 
66,168

Income from continuing operations
140,377


40,022


79,185


3,929


(140,059
)
 
123,454

 
 
 
 
 
 
 
 
 
 
 
 
Income from discontinued operations, net of tax

 
14,982

 

 
1,941

 

 
16,923

 
 
 
 
 
 
 
 
 
 
 
 
Net income from continuing operations
$
140,377

 
$
55,004

 
$
79,185

 
$
5,870

 
$
(140,059
)
 
$
140,377



20



Condensed Consolidating Income Statement
Three Months Ended November 30, 2015
(In thousands)

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

 
 

 
 

 
 

 
 

 
 

Uniform rental and facility services
$

 
$
786,386

 
$
136,707

 
$
53,674

 
$
(39,063
)
 
$
937,704

Other

 
394,260

 
737

 
17,516

 
(131,137
)
 
281,376

Equity in net income of affiliates
115,453

 

 

 

 
(115,453
)
 

 
115,453

 
1,180,646

 
137,444

 
71,190

 
(285,653
)
 
1,219,080

Costs and expenses (income):
 

 
 

 
 

 
 

 
 

 
 

Cost of uniform rental and facility services

 
461,843

 
86,702

 
35,935

 
(58,389
)
 
526,091

Cost of other

 
277,841

 
(18,291
)
 
12,317

 
(106,278
)
 
165,589

Selling and administrative expenses

 
365,125

 
(49,482
)
 
16,140

 
(4,732
)
 
327,051

Operating income
115,453

 
75,837

 
118,515

 
6,798

 
(116,254
)
 
200,349

 
 
 
 
 
 
 
 
 
 
 
 
Interest income

 
(12
)
 
(68
)
 
(31
)
 

 
(111
)
Interest expense (income)

 
16,427

 
(256
)
 

 

 
16,171

 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
115,453

 
59,422

 
118,839

 
6,829

 
(116,254
)
 
184,289

Income taxes

 
20,496

 
42,108

 
6,260

 
(28
)
 
68,836

Income from continuing operations
115,453


38,926


76,731


569


(116,226
)

115,453

 
 
 
 
 
 
 
 
 
 
 


Income (loss) from discontinued operations,
   net of tax
229,647

 
234,604

 

 
(4,957
)
 
(229,647
)
 
229,647

 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
$
345,100


$
273,530


$
76,731


$
(4,388
)

$
(345,873
)

$
345,100