Cintas (CTAS) 10-K risk factor changes: FY2019 vs FY2018

Our outstanding [removed: indebtedness, including the] indebtedness [removed: we incurred to consummate the G&K transaction,] may have negative consequences on our business, such as requiring us to dedicate a substantial portion of our cash flow from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, dividend increases, stock buybacks and other general corporate purposes, as well as increase our vulnerability to adverse economic or industry conditions.

We require all [removed: of] our suppliers to comply with applicable laws, including labor and environmental laws, and otherwise be certified as meeting our required supplier standards of conduct.

Political and economic stability in the countries in which foreign suppliers are located, the financial stability of suppliers, suppliers' failure to meet our supplier standards, labor problems experienced by our suppliers, the availability of raw materials to suppliers, currency exchange rates, transport availability and cost, [added: inflation and other]

[removed: inflation and other] factors relating to the suppliers and the countries in which they are located are beyond our control.

In fiscal years [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] revenue denominated in currencies other than the U.S. dollar represented less than 10% of our consolidated revenue.

[added: diligence in connection with acquisitions, we can give no assurance that locations that] have been [added: acquired or leased have been] operated in compliance with environmental laws and regulations during prior periods or that future uses or conditions will not make us liable under these laws or expose us to third-party actions, including tort suits.

While we continue to evaluate our internal [removed: controls] [added: controls,] we cannot be certain that these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future.

Unexpected events could [removed: disrupt] [added: negatively impact] our operations and adversely affect our results of operations.

Unexpected events, including fires or explosions at facilities, [added: severe weather conditions,] natural disasters such as hurricanes and tornadoes, war or terrorist activities, unplanned outages, supply disruptions, failure of equipment or systems or changes in laws and/or regulations impacting our businesses, could adversely affect our consolidated results of operations.

[added: The] estimated fair value of these assets is impacted by general economic conditions in the locations in which we operate.

[removed: Other changes] [added: Changes] in tax laws or regulations in the jurisdictions in which we do business, [removed: including the United States,] or [removed: changes in how the Tax Cuts and Jobs Act or] other tax [removed: laws are implemented] [added: law implementations] or [removed: interpreted,] [added: interpretations,] could [removed: further] increase our effective tax rate, [removed: further] restrict our ability to repatriate undistributed offshore earnings, or impose new restrictions, costs or prohibitions on our current practices and reduce our net income and adversely affect our cash flows.

While we regularly engage in environmental due

In addition, negative publicity, whether warranted or not, impacting brand image perception could adversely affect our consolidated results of operations.

Increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters could adversely impact our financial results.

Following the G&K transaction, more of our labor force is unionized.

While we regularly engage in environmental due diligence in connection with acquisitions, we can give no assurance that locations that have been acquired or leased

The

If we are unable to accurately predict our future tax liabilities or become subject to increased levels of taxation or our tax contingencies are unfavorably resolved, our results of operations and financial condition could be adversely affected.

The United States recently adopted tax reform legislation commonly known as the Tax Cuts and Jobs Act, which will increase our effective income tax rate by imposing a new tax regime impacting our non-U.S. operations.

The U.S. tax changes also provide flexibility related to repatriating non-U.S. earnings to the United States without additional U.S. taxation, and as a result, we have changed classification of certain earnings that were previously deemed to be permanently reinvested offshore and recorded deferred tax liabilities for the associated withholding taxes.

With products and services including uniforms, floor care, restroom supplies, first aid and safety products, fire extinguishers and [removed: testing,] [added: testing] and safety and compliance training, Cintas helps customers get Ready for the Workday™.

This strategy is to achieve revenue growth for all [removed: of] our products and services by increasing our penetration at existing customers and by broadening our customer base to include business segments to which we have not historically served.

Cintas has a national sales organization introducing all [removed: of] our products and services to prospects in all business segments.

On March 21, 2017, Cintas completed the acquisition of G&K [removed: for consideration of approximately $2.1 billion.][added: Services, Inc. (G&K).]

Cintas’ [added: two] reportable operating segments are Uniform Rental and Facility Services and First Aid and Safety Services.

Revenue and income before income taxes for each of these reportable operating segments for the years ended May 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] are presented in Note [removed: 14] [added: 15] entitled Operating Segment Information of "Notes to Consolidated Financial Statements." The Company regularly reviews its operating segments for reporting purposes based on the information its chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance and makes changes when appropriate.

[added: In fiscal 2018, Cintas sold a significant business referred to as "Discontinued Services."] Prior to the [removed: sale,] [added: sale of] Discontinued [removed: Services was] [added: Services, the operations were] primarily included in All Other and classified as held for sale.

In accordance with the applicable accounting guidance for the disposal of long-lived assets and discontinued operations, the results of Discontinued [removed: Services, Shredding and Storage] [added: Services] have been excluded from both continuing operations and operating segment results for all periods presented.

[removed: Please see] [added: See] Note [removed: 16] [added: 17] entitled Discontinued Operations of "Notes to Consolidated Financial Statements" for additional information.

| | [removed: 2018 | | | 2017] [added: 2019] | | [added: 2018] | [removed: 2016] | [added: 2017] |

| Revenue: | | | | | | [removed: | | |]

| Uniform Rental and Facility Services | [removed: 81.0 | % | | 79.0] [added: 80.6%] | [removed: %] | [added: 81.0%] | [removed: 78.4] | [removed: %] [added: 79.0%] |

| First Aid and Safety Services | [removed: 8.7 | % | | 9.5] [added: 9.0%] | [removed: %] | [added: 8.7%] | [removed: 9.6] | [removed: %] [added: 9.5%] |

| Total revenue | [removed: 100.0 | % | | 100.0] [added: 100.0%] | [removed: %] | [added: 100.0%] | [removed: 100.0] | [removed: %] [added: 100.0%] |

| Cost of sales: | | | | | | [removed: | | |]

| Uniform Rental and Facility Services | [removed: 55.0 | % | | 54.9] [added: 54.5%] | [removed: %] | [added: 55.0%] | [removed: 55.7] | [removed: %] [added: 54.9%] |

| First Aid and Safety Services | [removed: 52.9 | % | | 54.7] [added: 52.0%] | [removed: %] | [added: 52.9%] | [removed: 57.3] | [removed: %] [added: 54.7%] |

| Gross margin: | | | | | | [removed: | | |]

| Uniform Rental and Facility Services | [removed: 45.0 | % | | 45.1] [added: 45.5%] | [removed: %] | [added: 45.0%] | [removed: 44.3] | [removed: %] [added: 45.1%] |

| First Aid and Safety Services | [removed: 47.1 | % | | 45.3] [added: 48.0%] | [removed: %] | [added: 47.1%] | [removed: 42.7] | [removed: %] [added: 45.3%] |

| Selling and administrative expenses: | | | | | | [removed: | | |]

| Uniform Rental and Facility Services | [removed: 28.6 | % | | 27.1] [added: 27.6%] | [removed: %] | [added: 28.6%] | [removed: 26.5] | [removed: %] [added: 27.1%] |

| First Aid and Safety Services | [removed: 33.7 | % | | 34.9] [added: 33.4%] | [removed: %] | [added: 33.7%] | [removed: 31.9] | [removed: %] [added: 34.9%] |

| Total selling and administrative expenses | [removed: 29.6 | % | | 28.7] [added: 28.7%] | [removed: %] | [added: 29.6%] | [removed: 27.8] | [removed: %] [added: 28.7%] |

| G&K Services, Inc. transaction and integration expenses | [removed: 0.6 | % | | 1.5] [added: 0.2%] | [removed: %] | [added: 0.6%] | [removed: —] | [removed: %] [added: 1.5%] |

| Income from continuing operations before income taxes | [removed: 13.0 | % | | 12.9] [added: 16.0%] | [removed: %] | [added: 13.0%] | [removed: 14.7] | [removed: %] [added: 12.9%] |

Organic growth adjusts for the impact of acquisitions, [removed: divestitures, workday differences] [added: divestitures] and foreign currency exchange rate fluctuations.

[removed: The amount of new] [added: New] business [removed: grew, resulting] [added: growth resulted] from an increase in the number and productivity of sales representatives.

Generally, sales productivity improvements are [removed: the result of] [added: due to] increased tenure and improved training, which [removed: result in] [added: produce] a higher number of products and services sold.

The one-time cash payment to employee-partners was made following the enactment of [removed: The Tax Cuts and Jobs Act (the] [added: the] Tax [removed: Act)] [added: Act,] which was signed into legislation by the President on December 22, 2017.

[removed: Operating income for fiscal 2018 was negatively impacted by $41.9 million,] [added: n,] or 0.6% of total revenue, from transaction and integration expenses incurred in connection with the G&K acquisition and $79.2 million, or 1.5% of total revenue, in fiscal 2017.

The increase in selling and administrative expenses for the Uniform Rental and Facility Services reportable operating segment was primarily related to a [removed: one-time] [added: onetime] cash payment to employee-partners, increased labor and employee-partner related expenses as a result of the G&K acquisition, increased amortization expense related to intangibles acquired as a result of the G&K acquisition and an investment in an enterprise resource planning system.

Selling and administrative expenses as a percent of revenue were [removed: 33.7%] [added: 33.4%] in fiscal [removed: 2018] [added: 2019] compared to [removed: 34.9%] [added: 33.7%] in fiscal [removed: 2017.][added: 2018.]

Fiscal [removed: 2017] [added: 2019] total revenue was [removed: $5.3] [added: $6.9] billion, an increase of [removed: 11.0%] [added: 6.4%] over the prior fiscal year.

Revenue increased organically by [removed: 6.7%] [added: 6.5%] as a result of increased sales volume.

Organic growth adjusts for the impact of acquisitions, [removed: divestitures, workday differences] [added: divestitures] and foreign currency exchange rate fluctuations.

Revenue growth was [added: positively impacted by 0.1% due to acquisitions and] negatively impacted by 0.1% due to foreign currency exchange rate [removed: fluctuations and 0.4% due to one less workday in fiscal 2017 compared to fiscal 2016.][added: fluctuations.]

| First Quarter Ended August 31, [removed: 2016] [added: 2018] | [removed: 6.0%] [added: 5.2%] |

| Second Quarter Ended November 30, [removed: 2016] [added: 2018] | [removed: 6.0%] [added: 7.0%] |

| Third Quarter Ended February 28, [removed: 2017] [added: 2019] | [removed: 6.6%] [added: 6.0%] |

Cintas classifies its business into two reportable operating segments and places the remainder of its operating segments in an All Other category.

These operating segments consist of fire protection products and services and the direct sale of uniforms and related items.

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers (Topic 606)," to clarify revenue recognition principles.

Cintas adopted this ASU, and all the related amendments, effective June 1, 2018 using the modified retrospective method.

See Note 1 entitled Significant Accounting Policies and Note 2 entitled Revenue Recognition of "Notes to Consolidated Financial Statements" for more information.

| | | | | | |

| --- | --- | --- | --- | --- | --- |

| | | | | | |

| | | | | | |

| All Other | 10.4% | | 10.3% | | 11.5% |

| | | | | | |

| All Other | 57.4% | | 57.5% | | 58.3% |

| Total cost of sales | 54.6% | | 55.1% | | 55.3% |

| | | | | | |

| All Other | 42.6% | | 42.5% | | 41.7% |

| Total gross margin | 45.4% | | 44.9% | | 44.7% |

| | | | | | |

| All Other | 33.3% | | 33.9% | | 34.5% |

| | | | | | |

| | | | | | |

| Gain on sale of a cost method investment | 1.0% | | —% | | —% |

| | | | | | |

| Interest expense, net | 1.5% | | 1.7% | | 1.6% |

| | | | | | |

Fiscal 2019 Compared to Fiscal 2018

Total revenue was positively impacted by 0.2% due to acquisitions and negatively impacted by 0.3% due to foreign currency exchange rate fluctuations.

Organic growth by quarter for fiscal 2019 is as follows:

Revenue growth was a result of new business, the penetration of additional products and services into existing customers and price increases, partially offset by lost business.

Operating income in both fiscal 2019 and 2018 was negatively impacted by $14.4 million and $41.9 million, respectively, of integration expenses incurred in connection with the G&K acquisition.

The after-tax effect of these integration expenses represents a negative impact on diluted earnings per share of $0.10 per share in fiscal 2019 and $0.26 per share in fiscal 2018.

During fiscal 2019, Cintas sold a cost method investment for $73.3 million, resulting in a pre-tax gain of $69.4 million.

The after-tax effect of the gain represents a positive impact on diluted earnings per share of $0.47 per share.

The decrease in net interest expense was primarily due to lower debt outstanding during the fiscal 2019 as a result of the payment of $300.0 million aggregate principal amount of our 6.13% 10-year senior notes

that matured on December 1, 2017.

Also, during fiscal 2018, Cintas paid off the term loan balance of $250.0 million with cash on hand.

The increase in income before income taxes was primarily due to revenue growing at a faster pace than expenses, the gain on sale of a cost method investment and the decrease in integration expenses.

The effective tax rate in both periods was impacted by certain discrete items (primarily the tax accounting for stock-based compensation).

The effective tax rate for fiscal 2018 was also largely impacted by the one-time revaluation of deferred tax assets and liabilities as a result of the Tax Cuts and Jobs Act (Tax Act).

Diluted earnings per share from continuing operations increased primarily due to the increase in earnings from continuing operations explained above.

The decrease in selling and administrative expenses as a percent of revenue was due to revenue growing at a faster pace than labor and employee-partner related expenses and a one-time cash payment to employee-partners during fiscal 2018 following the enactment of the Tax Act.

To finance the G&K acquisition, Cintas used a combination of new senior notes, a term loan, other borrowings under its existing credit facility and cash on hand.

G&K's results of operations are included in Cintas' consolidated financial statements as of and from the date of acquisition.

In fiscal 2018, Cintas sold a significant business referred to as Discontinued Services.

In fiscal 2014, Cintas completed its partnership transaction with the shareholders of Shred-it International Inc. to combine Shredding with the shredding business of Shred-it International Inc. Pursuant to the Shredding Transaction, the Shred-it Partnership was owned 42% by Cintas and 58% by the shareholders of Shred-it International Inc. Cintas' investment in Shred-it and the results of Shredding are classified as discontinued operations for all periods presented as a result of selling the investment during fiscal 2016.

During fiscal 2015, Cintas sold Storage and, as a result, its operations are also classified as discontinued operations for all periods presented.

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | |

| | | | | | | | | |

| All Other | 10.3 | % | | 11.5 | % | | 12.0 | % |

| | | | | | | | | |

| All Other | 57.5 | % | | 58.3 | % | | 58.6 | % |

| Total cost of sales | 55.1 | % | | 55.3 | % | | 56.2 | % |

| | | | | | | | | |

| All Other | 42.5 | % | | 41.7 | % | | 41.4 | % |

| Total gross margin | 44.9 | % | | 44.7 | % | | 43.8 | % |

| | | | | | | | | |

| All Other | 33.9 | % | | 34.5 | % | | 33.1 | % |

| | | | | | | | | |

| | | | | | | | | |

| Interest expense, net | 1.7 | % | | 1.6 | % | | 1.3 | % |

| | | | | | | | | |

Organic growth by quarter is shown in the table below.

Fiscal 2017 Compared to Fiscal 2016

Total revenue was positively impacted by 4.8% due to acquisitions, primarily through the acquisition of G&K.

Organic growth by quarter is shown in the table below.

The increase resulted from an organic growth increase in revenue of 6.9%.

Revenue growth was negatively impacted by 0.1% due to foreign currency exchange rate fluctuations and 0.4% due to one less workday in fiscal 2017 compared to the same period in the prior fiscal year.

Acquisitions positively impacted revenue by 2.6%.

As a result of the acquisition of G&K in fiscal 2017, the Company incurred various transaction and integration expenses, which related primarily to asset impairment charges, legal and professional fees, employee termination expenses, the write-off of excess inventory and other miscellaneous expenses.

In fiscal 2017, G&K transaction and integration expenses were $79.2 million or 1.5% of total revenue.

The increase in net interest expense was primarily due to the additional debt issued to finance the G&K acquisition and $17.1 million of short-term debt financing fees incurred in connection with the acquisition.

The decrease in income before income taxes was due to the G&K transaction and integration expenses and the increase in interest expense previously mentioned.

These impacts were partially offset by the increase in gross margin.

The decrease was primarily due to the adoption of Accounting Standard Update (ASU) 2016-09, "Improvements to Employee Share-Based Payment Accounting." The effective tax rate in fiscal 2017 included a benefit of $29.4 million as a result of the adoption of ASU 2016-09.

This benefit was partially offset by the election to recognize forfeitures as they occur, which resulted in additional stock compensation expense of $8.3 million when compared to our historical practice of estimating forfeiture for expense purposes.

The adoption of ASU 2016-09 also resulted in an increase in the effect of dilutive securities in fiscal 2017 of 0.8 million shares.

For fiscal 2017, the net impact on diluted earnings per share from the adoption of ASU 2016-09 was an increase of $0.19 per share over what diluted earnings per share would have been if ASU 2016-09 was not adopted in fiscal 2017.

Diluted earnings per share from continuing operations increased due to the lower effective tax rate combined with the decrease in weighted average common shares outstanding.

The decrease in weighted average common shares outstanding resulted from purchasing 8.8 million shares of common stock under the January 13, 2015 and August 4, 2015 share buyback programs since the beginning of fiscal 2016.

Earnings [removed: are] [added: may be] affected by changes in short-term interest rates due to [removed: investments] [added: investments, if any,] in marketable securities and money market accounts and periodic issuances of commercial paper.

If short-term rates changed by one-half percent (or 50 basis points), Cintas' income before income taxes would [removed: not be impacted because we had no variable rate debt as of May 31, 2018.][added: change by approximately $1.1 million.]

On March 21, 2017, Cintas completed the acquisition of G&K Services, Inc. [removed: (G&K) for consideration of approximately $2.1 billion.][added: (G&K).]

The Uniform Rental and Facility Services reportable operating [removed: segment,] [added: 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 accordance with the applicable accounting guidance for the disposal of long-lived assets and discontinued operations, the results of Discontinued [removed: Services, Shredding and Storage] [added: Services] have been excluded from both continuing operations and operating segment results for all periods presented.

Please see Note [removed: 16] [added: 17] entitled Discontinued Operations of "Notes to Consolidated Financial Statements" for additional information.

The following table sets forth Cintas' total revenue and the revenue derived from each reportable operating segment and All [removed: Other:][added: Other for the fiscal years ended May 31:]

| Uniform Rental and Facility Services | $ | [removed: 5,247,124] [added: 5,552,430] | | | $ | [removed: 4,202,490] [added: 5,247,124] | | | $ | [removed: 3,759,524] [added: 4,202,490] | |

| First Aid and Safety Services | [removed: 564,706] [added: 619,470] | | | | [removed: 508,233] [added: 564,706] | | | | [removed: 461,783] [added: 508,233] | | |

| All Other | [removed: 664,802] [added: 720,403] | | | | [removed: 612,658] [added: 664,802] | | | | [removed: 574,465] [added: 612,658] | | |

| Total Revenue | $ | [removed: 6,476,632] [added: 6,892,303] | | | $ | [removed: 5,323,381] [added: 6,476,632] | | | $ | [removed: 4,795,772] [added: 5,323,381] | |

Additional information regarding each reportable operating segment and All Other is also included in Note [removed: 14] [added: 15] entitled Operating Segment Information of "Notes to Consolidated Financial Statements."

In total, Cintas has approximately [removed: 11,100] [added: 11,400] local delivery routes, [removed: 474] [added: 470] operational facilities and 11 distribution centers.

At May 31, [removed: 2018,] [added: 2019,] Cintas employed approximately [removed: 41,000 employees,] [added: 45,000 employee-partners,] of which approximately 1,600 were represented by labor unions.

Cintas purchases fabric, used in [removed: its] [added: the] manufacturing [removed: process,] [added: of it's products,] from several suppliers.

Environmental spending related to water treatment and waste removal was approximately [removed: $20] [added: $21] million in fiscal [removed: 2018] [added: 2019] and approximately [removed: $14] [added: $20] million in fiscal [removed: 2017.][added: 2018.]

Capital expenditures to limit or monitor hazardous substances totaled approximately [removed: $2] [added: $10] million in fiscal [removed: 2018] [added: 2019] and approximately [removed: $3] [added: $2] million in fiscal [removed: 2017.][added: 2018.]

| (In thousands) | 2019 | | | | 2018 | | | | 2017 | | |

To finance the G&K acquisition, Cintas used a combination of new senior notes, a term loan, other borrowings under its existing credit facility and cash on hand.

G&K's results of operations are included in Cintas' consolidated financial statements as of and from the date of acquisition.

In fiscal 2014, Cintas completed its partnership transaction with the shareholders of Shred-it International Inc. to combine Cintas' shredding business (Shredding) with the shredding business of Shred-it International Inc. (the Shredding Transaction).

Pursuant to the Shredding Transaction, the newly formed partnership (the Shred-it Partnership) was owned 42% by Cintas and 58% by the shareholders of Shred-it International Inc. Cintas' investment in the Shred-it Partnership (Shred-it) and the results of Shredding are classified as discontinued operations for all periods presented as a result of selling the investment during fiscal 2016.

During fiscal 2015, Cintas sold the storage business (Storage) and, as a result, its operations are also classified as discontinued operations for all periods presented.

| Fiscal Year Ended May 31, (in thousands) | 2018 | | | | 2017 | | | | 2016 | | |

As a result of the G&K acquisition in fiscal 2017, Cintas' environmental spend and the cost or environmental compliance could increase in future years; however, Cintas is not aware of any material non-compliance with environmental laws.

In addition, the public may read and copy any of the materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington D.C. 20549.

The public may obtain information on the operation of the facilities by calling the SEC at 1-800-SEC-0330.

| | For the Fiscal Year Ended May 31, [removed: 2018] [added: 2019] |

| [removed: WASHINGTON | |] [added: Washington] | | 31-1188630 |

| (State or Other Jurisdiction of [removed: Incorporation or Organization) | |] [added: Incorporation)] | | [removed: (I.R.S.] [added: (IRS] Employer Identification [removed: No.)] [added: Number)] |

| [removed: | |] 6800 Cintas Boulevard P.O. Box 625737 Cincinnati, Ohio 45262-5737 [removed: (Address of Principal Executive Offices)] | | |

[removed: | | | (513) 459-1200 (Registrant's] [added: Registrant's] Telephone Number, Including Area [removed: Code) | | |][added: Code: (513) 459-1200]

| Title of each class | [added: | Trading symbol(s) | |] Name of each exchange on which registered |

| Common [removed: Stock,] [added: stock,] no par value | [added: | CTAS | |] The NASDAQ Stock Market LLC (NASDAQ Global Select Market) |

Securities registered pursuant to Section 12(g) of the Act: [added: None]

Indicate by check mark whether the Registrant has submitted electronically [removed: and posted on its corporate website, if any,] every Interactive Data File required to be submitted [removed: 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 [removed: and post] such [removed: files).][added: files.]

See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting [removed: company",] [added: company"] and "emerging growth company" in Rule 12b-2 of the Exchange Act.

| Large Accelerated Filer | ü | Accelerated Filer | | Non-Accelerated Filer | | [removed: (Do not check if a smaller reporting company.)] |

The aggregate market value of the Registrant's Common Stock held by non-affiliates as of November 30, [removed: 2017,] [added: 2018,] was [removed: $16,762,648,293] [added: $19,698,043,866] based on a closing sale price of [removed: $157.44] [added: $187.38] per share.

As of June 30, [removed: 2018, 182,752,319] [added: 2019, 184,831,098] shares of the Registrant's Common Stock were issued and [removed: 106,279,307] [added: 102,487,039] shares were outstanding.

Portions of the Registrant's Proxy Statement to be filed with the Commission for its [removed: 2018] [added: 2019] Annual Meeting of Shareholders are incorporated by reference in Part III of this Form 10-K.

| [Item [removed: 1.](#sB689E067F11F5ACFBA9434D120563D80)] [added: 1.](#s8095D7001FD954C390C1E131942B2CEB)] | [removed: [Business](#sB689E067F11F5ACFBA9434D120563D80)] [added: [Business](#s8095D7001FD954C390C1E131942B2CEB)] | [removed: [3](#sB689E067F11F5ACFBA9434D120563D80)] [added: [3](#s8095D7001FD954C390C1E131942B2CEB)] |

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10-K 1 ctas531201910k.htm 10-K

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| (Address of Principal Executive Offices) | | |

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| [Part I](#s911014DFD86D51E2A8878E1C08C51940) | | |

| [Part II](#sAB8B253D6297514BB9DFF54853192DB2) | | |

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| [Part IV](#s9A3027F4578856A4B299391C79FCE2CA) | | |

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10-K 1 ctas531201810k.htm 10-K

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| --- | --- |

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None

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

| [Part I](#s0EA41097C4425844BE06BFD821D90BE5) | | |

| [Part II](#sAB342C1E848A585994A16DA77315CC7D) | | |

| [Part IV](#s6D829833A29756B9A6D4518B082F8D9B) | | |

Cintas occupies [removed: 485] [added: 481] facilities located in [removed: 330] [added: 332] cities.

Cintas leases [removed: 251] [added: 249] of these facilities for various terms ranging from monthly to the year 2032.

Cintas owns or leases approximately [removed: 20,200] [added: 20,000] vehicles which are used for the route-based services and by the sales and management employee-partners.

| Rental Processing Plants | [removed: 210] [added: 211] | | |

| Rental Branches | [removed: 151] [added: 142] | | |

| First Aid and Safety Facilities | [removed: 55] [added: 60] | | |

| All Other Facilities | [removed: 53] [added: 52] | | |

| Total | 481 | | |

| Total | 485 | | |

At May 31, [removed: 2018,] [added: 2019,] there were approximately 2,000 shareholders of record of Cintas' common stock.

Cintas believes that this represents approximately [removed: 106,000] [added: 144,000] beneficial owners.

Dividends on Cintas' outstanding common stock have been paid annually and amounted to [removed: $1.62] [added: $2.05] per share, [removed: $1.33] [added: $1.62] per share and [removed: $1.05] [added: $1.33] per share in fiscal [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively.

[removed: ][added: ]

[removed: | (1) | On August 6, 2016, Cintas announced that the Board of Directors authorized a $500.0 million share buyback program, which does not have an expiration date.] From the inception of the [removed: August 6, 2016] [added: October 30, 2018] share buyback program through May 31, [removed: 2018,] [added: 2019,] Cintas has purchased a total of [removed: 0.5] [added: 2.7] million shares of Cintas common stock at an average price of [removed: $173.51] [added: $203.30] per share for a total purchase price of [removed: $90.0] [added: $543.4] million. [removed: |]

(2) During March [removed: 2018,] [added: 2019,] Cintas acquired [removed: 548] [added: 923] shares of Cintas common stock in satisfaction of employee payroll taxes due on restricted stock awards that vested during the fiscal year.

These shares were purchased at an average price of [removed: $169.59] [added: $216.87] per share for a total purchase price of [removed: less than] $0.1 million.

[removed: (3)] [added: (4)] During May [removed: 2018,] [added: 2019,] Cintas acquired [removed: 1,256] [added: 3,521] shares of Cintas common stock in satisfaction of employee payroll taxes due on restricted stock awards that vested during the fiscal year.

These shares were purchased at an average price of [removed: $180.62] [added: $200.72] per share for a total purchase price of $0.2 million.

| Fiscal 2019 | | | | | | | |

| May 2019 | $ | 227.64 | | | $ | 191.91 | |

| February 2019 | $ | 207.33 | | | $ | 155.98 | |

| November 2018 | $ | 217.34 | | | $ | 168.02 | |

| August 2018 | $ | 214.75 | | | $ | 182.20 | |

| March 1 - 31, 2019 (2) | 410,974 | | | $ | 203.25 | | | 410,051 | | | $ | 780.1 | |

| April 1 - 30, 2019 (3) | 34,342 | | | $ | 214.57 | | | 34,030 | | | $ | 772.8 | |

| May 1 - 31, 2019 (4) | 1,433,251 | | | $ | 221.17 | | | 1,429,730 | | | $ | 456.6 | |

| Total | 1,878,567 | | | $ | 217.13 | | | 1,873,811 | | | $ | 456.6 | |

(1) On October 30, 2018, Cintas announced that the Board of Directors authorized a $1.0 billion share buyback program, which does not have an expiration date.

(3) During April 2019, Cintas acquired 312 shares of Cintas common stock in satisfaction of employee payroll taxes due on restricted stock awards that vested during the fiscal year.

These shares were purchased at an average price of $221.76 per share for a total purchase price of $0.8 million.

| Fiscal 2017 | | | | | | | |

| May 2017 | $ | 128.85 | | | $ | 117.21 | |

| February 2017 | $ | 122.21 | | | $ | 112.96 | |

| November 2016 | $ | 119.94 | | | $ | 102.07 | |

| August 2016 | $ | 117.69 | | | $ | 91.24 | |

| March 1 - 31, 2018 (2) | 548 | | | $ | 169.59 | | | — | | | $ | 500.0 | |

| April 1 - 30, 2018 | 203,002 | | | 171.30 | | | | 203,002 | | | 465.3 | | |

| May 1 - 31, 2018 (3) | 316,930 | | | 174.96 | | | | 315,674 | | | 410.0 | | |

| Total | 520,480 | | | $ | 173.53 | | | 518,676 | | | $ | 410.0 | |

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| --- | --- |

| [removed: (In thousands except per share and percentage data)] Fiscal Years Ended May 31, | [removed: 2014(1)] [added: 2015(1)] | | | | [removed: 2015(1)] [added: 2016(1)] | | | | [removed: 2016(1)] [added: 2017(1)(3)] | | | | [removed: 2017(1)(2)] [added: 2018(1)] | | | | [removed: 2018(1)] [added: 2019(1)(2)] | | | | Compound Annual Growth [removed: (2014-2018) |] [added: (2015-2019)] |

| Revenue | $ | [removed: 4,091,204 | | | $ |] 4,369,677 | | | $ | 4,795,772 | | | $ | 5,323,381 | | | $ | 6,476,632 | | | [removed: 12.2] [added: $] | [removed: %] [added: 6,892,303] | [added: | | 12.1% |]

| Net Income, Continuing Operations | [removed: 330,541 | | | |] 402,553 | | | | 448,605 | | | | 457,286 | | | | 783,932 | | | | [removed: 24.1] [added: 882,635] | [removed: %] | [added: | | 21.7% |]

| Net Income, Discontinued Operations | [removed: 43,901 | | | |] 28,065 | | | | 244,915 | | | | 23,422 | | | | 58,654 | | | | [removed: 7.5] [added: 2,346] | [removed: %] | [added: | | (46.2)% |]

| Net Income | $ | [removed: 374,442 | | | $ |] 430,618 | | | $ | 693,520 | | | $ | 480,708 | | | $ | 842,586 | | | [removed: 22.5] [added: $] | [removed: %] [added: 884,981] | [added: | | 19.7% |]

| Basic Earnings Per Share: | | | | | | | | | | | | | | | | | | | | | | [removed: |]

| Continuing Operations | $ | [removed: 2.72 | | | $ |] 3.44 | | | $ | 4.08 | | | $ | 4.27 | | | $ | 7.24 | | | [removed: 27.7] [added: $] | [removed: %] [added: 8.23] | [added: | | 24.4% |]

| Discontinued Operations | [removed: 0.36 | | | |] 0.24 | | | | 2.22 | | | | 0.22 | | | | 0.54 | | | | [removed: 10.7] [added: 0.02] | [removed: %] | [added: | | (46.3)% |]

| Basic Earnings Per Share | $ | [removed: 3.08 | | | $ |] 3.68 | | | $ | 6.30 | | | $ | 4.49 | | | $ | 7.78 | | | [removed: 26.1] [added: $] | [removed: %] [added: 8.25] | [added: | | 22.4% |]

| Diluted Earnings Per Share: | | | | | | | | | | | | | | | | | | | | | | [removed: |]

| Continuing Operations | $ | [removed: 2.69 | | | $ |] 3.39 | | | $ | 4.02 | | | $ | 4.17 | | | $ | 7.03 | | | [removed: 27.1] [added: $] | [removed: %] [added: 7.97] | [added: | | 23.8% |]

| Discontinued Operations | [removed: 0.36 | | | |] 0.24 | | | | 2.19 | | | | 0.21 | | | | 0.53 | | | | [removed: 10.2] [added: 0.02] | [removed: %] | [added: | | (46.3)% |]

| Diluted Earnings Per Share | $ | [removed: 3.05 | | | $ |] 3.63 | | | $ | 6.21 | | | $ | 4.38 | | | $ | 7.56 | | | [removed: 25.5] [added: $] | [removed: %] [added: 7.99] | [added: | | 21.8% |]

| Dividends Per Share | $ | [removed: 0.77 | | | $ |] 1.70 | | | $ | 1.05 | | | $ | 1.33 | | | $ | 1.62 | | | [removed: 20.4] [added: $] | [removed: %] [added: 2.05] | [added: | | 4.8% |]

| Total Assets [removed: (3) | $ | 4,454,457 | |] [added: (4)] | $ | 4,185,675 | | | $ | 4,098,815 | | | $ | 6,844,057 | | | $ | 6,958,214 | | | [removed: 11.8] [added: $] | [removed: %] [added: 7,436,662] | [added: | | 15.5% |]

| Shareholders' Equity | $ | [removed: 2,192,858 | | | $ |] 1,932,455 | | | $ | 1,842,659 | | | $ | 2,302,793 | | | $ | 3,016,526 | | | [removed: 8.3] [added: $] | [removed: %] [added: 3,002,721] | [added: | | 11.6% |]

| Return on Average Equity [removed: (4) | 15.0 | | % |] [added: (5)] | 19.5 | | % | | 23.8 | | % | | 22.1 | | % | | 29.5 | | % | | [added: 29.3] | | [added: % | | |]

| Long-Term Debt [removed: (3)] [added: (4)] | $ | [removed: 1,292,482] [added: 1,293,215] | | | $ | [removed: 1,293,215] [added: 1,294,422] | | | $ [added: 3,133,524(6)] | [removed: 1,294,422] | | | $ [removed: 3,133,524(5)] | [added: 2,535,309] | | | $ | [removed: 2,535,309 |] [added: 2,849,771] | | | |

| (1) | In accordance with the applicable accounting guidance for the disposal of long-lived assets and discontinued operations, the results of Discontinued Services, Shredding and Storage have been excluded from continuing operations for all periods presented. Please see Note [removed: 16] [added: 17] entitled Discontinued Operations of "Notes to Consolidated Financial Statements" for additional information. |

| [removed: (2)] [added: (3)] | Includes G&K results of operations from March 21, 2017 through May 31, 2017. Historical periods presented prior to fiscal 2017 do not include G&K, [removed: and] [added: and,] as a result, the information may not be comparable. [removed: Please see Note 9 entitled Acquisitions and Divestitures of "Notes to Consolidated Financial Statements" for additional information regarding the G&K acquisition.] |

| [removed: (3)] [added: (4)] | In accordance with the applicable accounting guidance for simplifying the presentation of debt issuance costs, the debt costs related to recognized debt liabilities have been excluded from Total Assets and reclassified to Long-Term Debt as a direct deduction from the carrying amount of the debt liabilities. The impact of this change in accounting principle on balances previously reported for fiscal [removed: 2016, 2015] [added: 2016] and [removed: 2014] [added: 2015] were reclassifications of $5.6 [removed: million, $6.8] million and [removed: $8.0] [added: $6.8] million, respectively, from other assets to long-term liabilities. |

| [removed: (4)] [added: (5)] | Return on average equity is computed as net income from continuing operations divided by the average of shareholders' equity. We believe that disclosure of this non-GAAP financial measure gives management and shareholders a good indication of Cintas' historical performance. |

| [removed: (5)] [added: (6)] | Includes issuance of approximately $2.1 billion in debt to fund the G&K acquisition. Please see Note [removed: 6] [added: 7] entitled Debt and Derivatives of "Notes to Consolidated Financial Statements" for additional information. |

(In thousands except per share and percentage data)

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| (2) | In accordance with the applicable accounting guidance for revenue from contracts with customers, Cintas capitalizes commission expenses and amortizes them on a straight-line basis over the expected period of benefit. The current and noncurrent assets related to capitalized contract costs included in the consolidated balance sheet at May 31, 2019, totaled $69.6 million and $206.0 million, respectively. Historical periods presented prior to fiscal 2019 do not include capitalized contract costs, and, as a result, the information may not be comparable. Please see Note 2 entitled Revenue Recognition of "Notes to Consolidated Financial Statements" for additional information. |

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Audited Consolidated Financial Statements for the Fiscal Years Ended May 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016][added: 2017]

| [Management's Report on Internal Control over Financial [removed: Reporting](#s0A2F1D7692E954D7B4F947E395F4314C)] [added: Reporting](#s7AEF601AA43D5DDF8E258619EF3853D2)] | [removed: [31](#s0A2F1D7692E954D7B4F947E395F4314C)] [added: [32](#s7AEF601AA43D5DDF8E258619EF3853D2)] |

| [Reports of Independent Registered Public Accounting [removed: Firm](#s0B69AA53240B5077B345309D1D813951)] [added: Firm](#s198DAD90B87F5A0B894AF962048CF1B1)] | [removed: [32](#s0B69AA53240B5077B345309D1D813951)] [added: [33](#s198DAD90B87F5A0B894AF962048CF1B1)] |

| [Consolidated Statements of [removed: Income](#s4754F97013FC5F6D8640FB4371970FE8)] [added: Income](#sD87D610F882E5B5DB7FFD2A4D8138EA0)] | [removed: [34](#s4754F97013FC5F6D8640FB4371970FE8)] [added: [35](#sD87D610F882E5B5DB7FFD2A4D8138EA0)] |

| [Consolidated Statements of Comprehensive [removed: Income](#s5107908260765F1F886CE80A77619905)] [added: Income](#s74574623750E54968F4B2DDC945EA9D3)] | [removed: [35](#s5107908260765F1F886CE80A77619905)] [added: [36](#s74574623750E54968F4B2DDC945EA9D3)] |

| [Consolidated Balance [removed: Sheets](#s02190EBE51B15B31AB31F6B6DE1075B2)] [added: Sheets](#sB4D9876B76BD5CF6892F09C1285FFDF0)] | [removed: [36](#s02190EBE51B15B31AB31F6B6DE1075B2)] [added: [37](#sB4D9876B76BD5CF6892F09C1285FFDF0)] |

| [Consolidated Statements of Shareholders' [removed: Equity](#s933ED75A237C53C78EC0980D458873D2)] [added: Equity](#sD04569FA958053509DB0EF53F42B856D)] | [removed: [37](#s933ED75A237C53C78EC0980D458873D2)] [added: [38](#sD04569FA958053509DB0EF53F42B856D)] |

| [Consolidated Statements of Cash [removed: Flows](#s72C3E9A302895F629A57323AD860575E)] [added: Flows](#s0815901563CE53AF87822324DFFEED1C)] | [removed: [38](#s72C3E9A302895F629A57323AD860575E)] [added: [39](#s0815901563CE53AF87822324DFFEED1C)] |

| [Notes to Consolidated Financial [removed: Statements](#sACEB00F5ABBF5EEEB6B3B743E79CD28C)] [added: Statements](#s621CC68A732B5343915D5D1C7AD26B8D)] | [removed: [39](#sACEB00F5ABBF5EEEB6B3B743E79CD28C)] [added: [40](#s621CC68A732B5343915D5D1C7AD26B8D)] |

With the supervision of our Chairman and Chief Executive Officer and our Chief Financial Officer, management assessed our internal control over financial reporting as of May 31, [removed: 2018.][added: 2019.]

Based on our assessment, management has concluded that our internal control over financial reporting was effective as of May 31, [removed: 2018,] [added: 2019,] to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States.

| [removed: | |] Scott D. Farmer Chairman and Chief Executive Officer |

| [removed: | |] J. Michael Hansen Executive Vice President and Chief Financial Officer |

We have audited Cintas Corporation’s internal control over financial reporting as of May 31, [removed: 2018,] [added: 2019,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Cintas Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of May 31, [removed: 2018,] [added: 2019,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of May 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended May 31, [removed: 2018,] [added: 2019,] and the related notes and financial statement schedule listed in the Index at Item 15(a), and our report dated July [removed: 27, 2018,] [added: 26, 2019,] expressed an unqualified opinion thereon.

We have audited the accompanying consolidated balance sheets of Cintas Corporation (the Company) as of May 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended May 31, [removed: 2018,] [added: 2019,] and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at May 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended May 31, [removed: 2018,] [added: 2019,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of May 31, [removed: 2018,] [added: 2019,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated July [removed: 27, 2018,] [added: 26, 2019,] expressed an unqualified opinion thereon.

| (In thousands except per share data) | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | |

| Uniform rental and facility services | $ | [removed: 5,247,124] [added: 5,552,430] | | | $ | [removed: 4,202,490] [added: 5,247,124] | | | $ | [removed: 3,759,524] [added: 4,202,490] | |

| Other | [removed: 1,229,508] [added: 1,339,873] | | | | [removed: 1,120,891] [added: 1,229,508] | | | | [removed: 1,036,248] [added: 1,120,891] | | |

| [added: Total revenue] | [removed: 6,476,632] [added: 6,892,303] | | | | [removed: 5,323,381] [added: 6,476,632] | | | | [removed: 4,795,772] [added: 5,323,381] | | |

| Cost of uniform rental and facility services | [removed: 2,886,959] [added: 3,027,599] | | | | [removed: 2,307,774] [added: 2,886,959] | | | | [removed: 2,092,833] [added: 2,307,774] | | |

| Cost of other | [removed: 681,150] [added: 736,116] | | | | [removed: 635,312] [added: 681,150] | | | | [removed: 601,599] [added: 635,312] | | |

| Selling and administrative expenses | [removed: 1,916,792] [added: 1,980,644] | | | | [removed: 1,527,380] [added: 1,916,792] | | | | [removed: 1,332,399] [added: 1,527,380] | | |

| G&K Services, Inc. transaction and integration expenses | [removed: 41,897] [added: 14,410] | | | | [removed: 79,224] [added: 41,897] | | | | [removed: —] [added: 79,224] | | |

| Operating income | [removed: 949,834] [added: 1,133,534] | | | | [removed: 773,691] [added: 949,834] | | | | [removed: 768,941] [added: 773,691] | | |

| Interest income | [removed: (1,342] [added: (1,228] | | ) | | [removed: (237] [added: (1,342] | | ) | | [removed: (896] [added: (237] | | ) |

| Interest expense | [removed: 110,175] [added: 101,736] | | | | [removed: 86,524] [added: 110,175] | | | | [removed: 64,522] [added: 86,524] | | |

| Income before income taxes | [removed: 841,001] [added: 1,102,399] | | | | [removed: 687,404] [added: 841,001] | | | | [removed: 705,315] [added: 687,404] | | |

| Income taxes | [removed: 57,069] [added: 219,764] | | | | [removed: 230,118] [added: 57,069] | | | | [removed: 256,710] [added: 230,118] | | |

| Income from continuing operations | [removed: 783,932] [added: 882,635] | | | | [removed: 457,286] [added: 783,932] | | | | [removed: 448,605] [added: 457,286] | | |

| Income from discontinued operations, net of tax of [removed: $35,313, $15,057] [added: $757, $35,313] and [removed: $138,184,] [added: $15,057,] respectively | [removed: 58,654] [added: 2,346] | | | | [removed: 23,422] [added: 58,654] | | | | [removed: 244,915] [added: 23,422] | | |

| Net income | $ | [removed: 842,586] [added: 884,981] | | | $ | [removed: 480,708] [added: 842,586] | | | $ | [removed: 693,520] [added: 480,708] | |

| Continuing operations | $ | [removed: 7.24] [added: 8.23] | | | $ | [removed: 4.27] [added: 7.24] | | | $ | [removed: 4.08] [added: 4.27] | |

| Discontinued operations | [removed: 0.54] [added: 0.02] | | | | [removed: 0.22] [added: 0.54] | | | | [removed: 2.22] [added: 0.22] | | |

| Basic earnings per share | $ | [removed: 7.78] [added: 8.25] | | | $ | [removed: 4.49] [added: 7.78] | | | $ | [removed: 6.30] [added: 4.49] | |

| Continuing operations | $ | [removed: 7.03] [added: 7.97] | | | $ | [removed: 4.17] [added: 7.03] | | | $ | [removed: 4.02] [added: 4.17] | |

| Discontinued operations | [removed: 0.53] [added: 0.02] | | | | [removed: 0.21] [added: 0.53] | | | | [removed: 2.19] [added: 0.21] | | |

| |

| --- |

| |

| |

July 26, 2019

Adoption of New Accounting Standard

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for revenue from contracts with customers and recognizing costs related to obtaining customer contracts in the period ended May 31, 2019.

July 26, 2019

| Gain on sale of a cost method investment | 69,373 | | | | — | | | | — | | |

| Change in fair value of interest rate lock agreements | (27,659 | | ) | | — | | | | 31,136 | | |

| | $ | 7,436,662 | | | $ | 6,958,214 | |

| 2019: 184,790,626 shares issued and 103,284,401 shares outstanding | | | | | | | |

| 2019: 81,506,225 shares | | | | | | | |

| | $ | 7,436,662 | | | $ | 6,958,214 | |

| Net income | — | | | — | | | | — | | | | 884,981 | | | | — | | | | — | | | — | | | | 884,981 | | |

| Dividends | — | | | — | | | | — | | | | (220,764 | | ) | | — | | | | — | | | — | | | | (220,764 | | ) |

| Repurchase of common stock | — | | | — | | | | — | | | | — | | | | — | | | | (5,109 | ) | | (1,016,300 | | ) | | (1,016,300 | | ) |

| Cumulative effect of change in accounting principle | — | | | — | | | | — | | | | 189,192 | | | | — | | | | — | | | — | | | | 189,192 | | |

| Balance at May 31, 2019 | 184,791 | | | $ | 840,328 | | | $ | 227,928 | | | $ | 6,691,236 | | | $ | (39,152 | ) | | (81,506 | ) | | $ | (4,717,619 | ) | | $ | 3,002,721 | |

| Gain on sale of a cost method investment | (69,373 | | ) | | — | | | | — | | |

| Proceeds from sale of a cost method investment | 73,342 | | | | — | | | | — | | |

Revenue is measured as the amount of consideration we expect to receive in exchange for the performance of the service or transfer of the inventory.

See Note 2 entitled Revenue Recognition.

Inventories, net.

| | $ | 334,589 | | | $ | 280,347 | |

| | $ | 433,940 | | | $ | 420,129 | |

option-pricing model.

We adopted ASU 2014-09, and all the related amendments, effective June 1, 2018 using the modified retrospective method.

Upon adoption of ASU 2014-09, we recorded an adjustment to the opening balance of retained earnings as of June 1, 2018.

The adjustment to retained earnings primarily relates to the capitalization of certain direct and incremental contract costs required by the new guidance.

Capitalized costs are amortized ratably over the anticipated period of benefit.

We applied ASU 2014-09 only to contracts that were not completed prior to fiscal 2019.

Results for reporting periods beginning after May 31, 2018 are presented under ASU 2014-09, while comparative prior period amounts have not been restated and continue to be presented under accounting standards in effect in those periods.

Adoption of ASU 2014-09 impacted the Company's previously reported results as of May 31, 2018 as follows:

Capitalization of Contract Costs.

The Company has elected to apply the guidance, as a practical expedient, to a portfolio of contracts (or performance obligations) with similar characteristics because the Company reasonably expects that the effects on the consolidated financial statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts within the portfolio.

The Company also continues to expense certain costs to obtain a contract if those costs do not meet the criteria of the new standard or the amortization period of the asset would have been one year or less.

Assets With No Alternative Use.

For our Uniform Direct Sale business, our revenue, prior to the adoption of ASU 2014-09, was primarily generated from the sale of finished products to customers as products are shipped and title passes to the customers.

For certain contracts with customers, the Company creates an asset with no alternative use to the Company, and the Company has an enforceable right to payment for performance completed to date.

| | | |

| --- | --- | --- |

July 27, 2018

July 27, 2018

| Cumulative translation adjustment on Shred-it | — | | | | — | | | | 6,472 | | |

| Change in fair value of cash flow hedges | — | | | | 31,136 | | | | (12,156 | | ) |

| Marketable securities | — | | | | 22,219 | | |

| Assets held for sale | — | | | | 38,613 | | |

| | $ | 6,958,214 | | | $ | 6,844,057 | |

| Liabilities held for sale | — | | | | 11,457 | | |

| 2017: 180,992,605 shares issued and 105,400,629 shares outstanding | 618,464 | | | | 485,068 | | |

| 2017: 75,591,976 shares | (3,701,319 | | ) | | (3,574,000 | | ) |

| | $ | 6,958,214 | | | $ | 6,844,057 | |

| Balance at June 1, 2015 | 178,117 | | | $ | 329,248 | | | $ | 157,183 | | | $ | 4,227,620 | | | $ | (8,471 | ) | | (66,414 | ) | | $ | (2,773,125 | ) | | $ | 1,932,455 | |

| Net income | — | | | — | | | | — | | | | 693,520 | | | | — | | | | — | | | — | | | | 693,520 | | |

| Dividends | — | | | — | | | | — | | | | (115,273 | | ) | | — | | | | — | | | — | | | | (115,273 | | ) |

| Repurchase of common stock | — | | | — | | | | — | | | | — | | | | — | | | | (8,971 | ) | | (780,151 | | ) | | (780,151 | | ) |

| Other | — | | | — | | | | 20,992 | | | | — | | | | — | | | | — | | | — | | | | 20,992 | | |

| Gain on Storage | — | | | | (1,460 | | ) | | (15,786 | | ) |

| Gain on Shred-it | — | | | | (25,457 | | ) | | (354,071 | | ) |

| Proceeds from Storage transactions | — | | | | 2,400 | | | | 35,338 | | |

| Proceeds from Shredding transactions | — | | | | 25,876 | | | | 580,837 | | |

To finance the G&K acquisition, Cintas used a combination of new senior notes, a term loan, other borrowings under its existing credit facility and cash on hand.

G&K's results of operations are included in Cintas' consolidated financial statements as of and from the date of acquisition.

In fiscal 2014, Cintas completed its partnership transaction with the shareholders of Shred-it International Inc. to combine Cintas' shredding business (Shredding) with the shredding business of Shred-it International Inc. (the Shredding Transaction).

Pursuant to the Shredding Transaction, the newly formed partnership (the Shred-it Partnership) was owned 42% by Cintas and 58% by the shareholders of Shred-it International Inc. Cintas' investment in the Shred-it Partnership (Shred-it) and the results of Shredding are classified as discontinued operations for all periods presented as a result of selling the investment during fiscal 2016.

During fiscal 2015, Cintas sold the storage business (Storage) and, as a result, its operations are also classified as discontinued operations for all periods presented.

Inventories.

| | $ | 280,347 | | | $ | 278,218 | |

Uniforms acquired in the G&K acquisition were amortized over 12 months.

Other rental items,

However, an equity method investment resulting from a transaction in which a controlled group of assets that constitutes a business is deconsolidated is initially measured at fair value.

Cintas also adjusts its share of the investee's earnings for intra-entity transactions, basis differences, investee capital transactions and other comprehensive income through income or other comprehensive income as appropriate.

During fiscal 2017, as a result of the identification of certain G&K plants and branches for future closure, an indicator of potential impairment was identified.

Cintas recognized an impairment loss of $23.3 million during the fiscal year ended May 31, 2017, based on the excess of the carrying amount of asset over their respective fair values.

The undiscounted cash flows used to test recoverability were performed, using Level 2 inputs based on both the cost and market approaches, at the lowest discernible level, which is at the location level.

The test may also include the determination of the estimated fair value of Cintas' reporting units via comparisons to current market values, where available, and discounted cash flow analyses.

Assumptions may include growth rates based on historical trends and margin improvement leveraged from such growth, as well as discount rates.

We determine discount rates separately for each reporting unit using the weighted average cost of capital, which includes a calculation of cost of equity, which is developed using the capital asset pricing model and comparable company betas (a measure of systemic risk), and cost of debt.

We also use comparable market earnings multiple data and our market capitalization to corroborate our reporting unit valuations.

With the participation of Cintas' management, including Cintas' Chairman and Chief Executive Officer, Chief Financial Officer, General Counsel and Controllers, Cintas has evaluated the effectiveness of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act) as of May 31, [removed: 2018.][added: 2019.]

Based on such evaluation, Cintas' management, including Cintas' Chairman and Chief Executive Officer, Chief Financial Officer, General Counsel and Controllers, have concluded that Cintas' disclosure controls and procedures were effective as of May 31, [removed: 2018,] [added: 2019,] in ensuring (i) information required to be disclosed by Cintas in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and (ii) information required to be disclosed by Cintas in the reports that it files or submits under the Exchange Act is accumulated and communicated to Cintas' management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in Cintas' internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended May 31, [removed: 2018,] [added: 2019,] that have materially affected, or are reasonably likely to materially affect, Cintas' internal control over financial reporting.

The information required under this item is incorporated herein by reference to the material contained in Cintas' definitive proxy statement for the [removed: 2018] [added: 2019] annual meeting of shareholders to be filed with the SEC pursuant to Regulation 14A not later than 120 days after the close of the fiscal year (the Proxy Statement).

The following table provides information about Cintas' common stock that may be issued under Cintas' equity compensation plans as of May 31, [removed: 2018.][added: 2019.]

[added: |] (1) [added: |] Excludes [removed: 2,641,114] [added: 2,191,688] unvested restricted stock units. [added: |]

| Equity compensation plans approved by shareholders | 8,208,934 | | | $ | 123.80 | | | 8,230,432 | |

| Total | 8,208,934 | | | $ | 123.80 | | | 8,230,432 | |

| | |

| --- | --- |

| Equity compensation plans approved by shareholders | 8,930,186 | | | $ | 96.71 | | | 10,595,954 | |

| Total | 8,930,186 | | | $ | 96.71 | | | 10,595,954 | |

| | | | For each of the three years in the period ended May 31, [removed: 2018.] [added: 2019.] |

| [removed: [2.1](http://www.sec.gov/Archives/edgar/data/723254/000110465914020801/a14-8366_1ex2d1.htm)] [added: [2.1](http://www.sec.gov/Archives/edgar/data/723254/000110465916140051/a16-16841_1ex2d1.htm)] | | * | [removed: [JV Framework Agreement, dated March 18, 2014, by] [added: [Agreement] and [added: Plan of Merger,] among Cintas [removed: Corporation No.2, CC Shredding Holdco LLC and CC Dutch Shredding Holdco BV, each a wholly owned subsidiary of Cintas,] [added: Corporation, G&K Services, Inc.] and [removed: Shred-It International] [added: Bravo Merger Sub,] Inc., [removed: Boost JV LP, Boost Holdings LP and Boost GP Corp] [added: dated as of August 15, 2016] (Incorporated by reference to Exhibit 2.1 to Cintas' Current Report on Form 8-K filed on [removed: March 19, 2014).](http://www.sec.gov/Archives/edgar/data/723254/000110465914020801/a14-8366_1ex2d1.htm)] [added: August 16, 2016).](http://www.sec.gov/Archives/edgar/data/723254/000110465916140051/a16-16841_1ex2d1.htm)] |

| [removed: [3.2](http://www.sec.gov/Archives/edgar/data/723254/000089225108000207/ex3101408.htm)] [added: [3.2](http://www.sec.gov/Archives/edgar/data/723254/000072325418000018/ex31cintascorpamendedandre.htm)] | | | [Amended and Restated By-laws (Incorporated by reference to Exhibit [removed: 3] [added: 3.1] to Cintas' Current Report on Form 8-K filed on [removed: October 14, 2008).](http://www.sec.gov/Archives/edgar/data/723254/000089225108000207/ex3101408.htm)] [added: August 3, 2018).](http://www.sec.gov/Archives/edgar/data/723254/000072325418000018/ex31cintascorpamendedandre.htm)] |

| [removed: [10.1](http://www.sec.gov/Archives/edgar/data/723254/000072325416000059/ex101amendedandrestatedcre.htm)] [added: [10.1](http://www.sec.gov/Archives/edgar/data/723254/000072325419000013/ex101cintascreditagreement.htm)] | | | [removed: [Amended] [added: [Second Amended] and Restated Credit Agreement, dated as of [removed: September 16, 2016,] [added: May 24, 2019,] among Cintas [removed: Corp.] No. 2, the Lenders party thereto and KeyBank National Association, as Administrative Agent (Incorporated by reference to Exhibit 10.1 to Cintas' Current Report on Form 8-K filed on [removed: September 22, 2016).](http://www.sec.gov/Archives/edgar/data/723254/000072325416000059/ex101amendedandrestatedcre.htm)] [added: May 30, 2019).](http://www.sec.gov/Archives/edgar/data/723254/000072325419000013/ex101cintascreditagreement.htm)] |

| [removed: [21](https://www.sec.gov/Archives/edgar/data/723254/000072325418000015/a21-subsidiaries2018.htm)] [added: [21](https://www.sec.gov/Archives/edgar/data/723254/000072325419000021/a21-subsidiaries2019.htm)] | | | [Subsidiaries of the [removed: Registrant.](https://www.sec.gov/Archives/edgar/data/723254/000072325418000015/a21-subsidiaries2018.htm)] [added: Registrant.](https://www.sec.gov/Archives/edgar/data/723254/000072325419000021/a21-subsidiaries2019.htm)] |

| [removed: [23](https://www.sec.gov/Archives/edgar/data/723254/000072325418000015/a23-consentofey2018.htm)] [added: [23](https://www.sec.gov/Archives/edgar/data/723254/000072325419000021/a23-consentofey2019.htm)] | | | [Consent of Independent Registered Public Accounting [removed: Firm.](https://www.sec.gov/Archives/edgar/data/723254/000072325418000015/a23-consentofey2018.htm)] [added: Firm.](https://www.sec.gov/Archives/edgar/data/723254/000072325419000021/a23-consentofey2019.htm)] |

| [removed: [31.1](https://www.sec.gov/Archives/edgar/data/723254/000072325418000015/ctas10k2018ex311.htm)] [added: [31.1](https://www.sec.gov/Archives/edgar/data/723254/000072325419000021/ctas10k2019ex311.htm)] | | | [Certification of Principal Executive Officer, Pursuant to Rule 13a-14(a) of the Securities Exchange Act of [removed: 1934.](https://www.sec.gov/Archives/edgar/data/723254/000072325418000015/ctas10k2018ex311.htm)] [added: 1934.](https://www.sec.gov/Archives/edgar/data/723254/000072325419000021/ctas10k2019ex311.htm)] |

| [removed: [31.2](https://www.sec.gov/Archives/edgar/data/723254/000072325418000015/ctas10k2018ex312.htm)] [added: [31.2](https://www.sec.gov/Archives/edgar/data/723254/000072325419000021/ctas10k2019ex312.htm)] | | | [Certification of Principal Financial Officer, Pursuant to Rule 13a-14(a) of the Securities Exchange Act of [removed: 1934.](https://www.sec.gov/Archives/edgar/data/723254/000072325418000015/ctas10k2018ex312.htm)] [added: 1934.](https://www.sec.gov/Archives/edgar/data/723254/000072325419000021/ctas10k2019ex312.htm)] |

| [removed: [32.1](https://www.sec.gov/Archives/edgar/data/723254/000072325418000015/ctas10k2018ex321.htm)] [added: [32.1](https://www.sec.gov/Archives/edgar/data/723254/000072325419000021/ctas10k2019ex321.htm)] | | | [Certification of Chief Executive Officer, Pursuant to 18 U.S.C. § [removed: 1350.](https://www.sec.gov/Archives/edgar/data/723254/000072325418000015/ctas10k2018ex321.htm)] [added: 1350.](https://www.sec.gov/Archives/edgar/data/723254/000072325419000021/ctas10k2019ex321.htm)] |

| [removed: [32.2](https://www.sec.gov/Archives/edgar/data/723254/000072325418000015/ctas10k2018ex322.htm)] [added: [32.2](https://www.sec.gov/Archives/edgar/data/723254/000072325419000021/ctas10k2019ex322.htm)] | | | [Certification of Chief Financial Officer, Pursuant to 18 U.S.C. § [removed: 1350.](https://www.sec.gov/Archives/edgar/data/723254/000072325418000015/ctas10k2018ex322.htm)] [added: 1350.](https://www.sec.gov/Archives/edgar/data/723254/000072325419000021/ctas10k2019ex322.htm)] |

| [4.8](https://www.sec.gov/Archives/edgar/data/723254/000072325419000021/ex48descriptionofsecurities.htm) | | | [Description of Securities](https://www.sec.gov/Archives/edgar/data/723254/000072325419000021/ex48descriptionofsecurities.htm) |

| [2.2](http://www.sec.gov/Archives/edgar/data/723254/000072325415000029/exhibit201.htm) | | * | [Securities Purchase Agreement, dated as of July 15, 2015, by and among Cintas, Shred-it International Inc., Stericycle, Inc. and the other parties thereto (Incorporated by reference to Exhibit 2.1 to Cintas' Current Report on Form 8-K filed on October 1, 2015).](http://www.sec.gov/Archives/edgar/data/723254/000072325415000029/exhibit201.htm) |

| [2.3](http://www.sec.gov/Archives/edgar/data/723254/000110465916140051/a16-16841_1ex2d1.htm) | | * | [Agreement and Plan of Merger, among Cintas Corporation, G&K Services, Inc. and Bravo Merger Sub, Inc., dated as of August 15, 2016 (Incorporated by reference to Exhibit 2.1 to Cintas' Current Report on Form 8-K filed on August 16, 2016).](http://www.sec.gov/Archives/edgar/data/723254/000110465916140051/a16-16841_1ex2d1.htm) |

DATE SIGNED: July [removed: 27, 2018][added: 26, 2019]

| /s/ | Scott D. Farmer Scott D. Farmer | | Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) | | July [removed: 27, 2018] [added: 26, 2019] |

| /s/ | Ronald W. Tysoe Ronald W. Tysoe | | Director | | July [removed: 27, 2018] [added: 26, 2019] |

| /s/ | John F. Barrett John F. Barrett | | Director | | July [removed: 27, 2018] [added: 26, 2019] |

| /s/ | James J. Johnson James J. Johnson | | Director | | July [removed: 27, 2018] [added: 26, 2019] |

| /s/ | Robert E. Coletti Robert E. Coletti | | Director | | July [removed: 27, 2018] [added: 26, 2019] |

| /s/ | J. Michael Hansen J. Michael Hansen | | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | | July [removed: 27, 2018] [added: 26, 2019] |

| May 31, 2019 | $ | 33,510 | | | $ | 10,761 | | | $ | 6,462 | | | $ | 37,809 | |

| May 31, 2019 | $ | 37,043 | | | $ | 2,346 | | | $ | 6,711 | | | $ | 32,678 | |

| May 31, 2016 | $ | 15,497 | | | $ | 8,274 | | | $ | 4,668 | | | $ | 19,103 | |

| May 31, 2016 | $ | 30,531 | | | $ | 5,195 | | | $ | 3,010 | | | $ | 32,716 | |