Cintas(US:CTAS)2024-07-25 18:01Part I: Business Item 1. Business Cintas provides uniforms, facility, first aid, safety, and fire protection services to over one million North American businesses Overview Cintas Corporation helps over one million businesses get READY™ by providing a wide range of products and services, including uniforms, mats, mops, restroom supplies, first aid, safety products, fire extinguishers, and safety training61196309 Business Segments Cintas' reportable operating segments are Uniform Rental and Facility Services and First Aid and Safety Services. The 'All Other' category includes Fire Protection Services and Uniform Direct Sale61281508 | Segment | 2024 Revenue (thousands) | 2023 Revenue (thousands) | 2022 Revenue (thousands) | | :----------------------------------- | :----------------------- | :----------------------- | :----------------------- | | Uniform Rental and Facility Services | $7,465,199 | $6,897,130 | $6,226,980 | | First Aid and Safety Services | $1,067,334 | $951,496 | $832,458 | | All Other | $1,064,082 | $967,143 | $795,021 | | Total Revenue | $9,596,615 | $8,815,769 | $7,854,459 | Customers Cintas serves over one million businesses, with no single customer accounting for more than one percent of total revenue, ensuring a diverse customer base62 Competition Cintas operates in highly fragmented local markets, competing with national, regional, and local providers, large retailers, online presence companies, and in-house services, based on product, design, price, quality, service, and convenience63106 Operations and Distribution As of May 31, 2024, Cintas operated approximately 11,700 local delivery routes, 467 operational facilities, and 12 distribution centers43 Sourcing Cintas sources finished products from numerous third-party suppliers, all of whom must comply with a vendor code of conduct. The company also operates five manufacturing facilities for standard uniform needs507 Government Laws and Regulations Cintas is subject to various environmental laws and regulations, including the Clean Air Act, Clean Water Act, and Resource Conservation and Recovery Act44 Environmental spending for water treatment and waste removal was approximately $27.0 million in fiscal 2024, $26.0 million in fiscal 2023, and $22.0 million in fiscal 202244 Capital expenditures to limit or monitor hazardous substances totaled approximately $1.7 million in fiscal 2024, $1.0 million in fiscal 2023, and $0.2 million in fiscal 202244 Sustainability Cintas published its fourth annual sustainability report in fiscal 2024, detailing efforts in climate and energy, water interactions, materials and waste, sustainable supply chain, diversity, equity and inclusion, employee-partner development, safety and health, human rights, and governance97 Corporate Culture Cintas' culture, based on strong relationships and dedication to customers and employee-partners, is essential to its success and is guided by the Cintas Code of Conduct and Business Ethics98 Human Capital Cintas' human capital management objectives are to attract, retain, and develop talent, focusing on safety, health, an inclusive culture, diverse talent acquisition, competitive pay/benefits, and leadership development97 Health and Safety Cintas aims for zero workplace injuries and collisions, implementing an occupational health and safety management system modeled after ISO 45001 and OSHA VPP. These efforts have reduced the recordable injury rate by over 80% since 2008100 - Cintas serves over one million businesses primarily in the U.S., Canada, and Latin America, offering products and services like uniforms, mats, mops, restroom supplies, first aid, safety products, fire extinguishers, and safety training61196309 - The company's reportable operating segments are Uniform Rental and Facility Services, and First Aid and Safety Services. The 'All Other' category includes Fire Protection Services and Uniform Direct Sale61281508 | Segment | 2024 Revenue (thousands) | 2023 Revenue (thousands) | 2022 Revenue (thousands) | | :----------------------------------- | :----------------------- | :----------------------- | :----------------------- | | Uniform Rental and Facility Services | $7,465,199 | $6,897,130 | $6,226,980 | | First Aid and Safety Services | $1,067,334 | $951,496 | $832,458 | | All Other | $1,064,082 | $967,143 | $795,021 | | Total Revenue | $9,596,615 | $8,815,769 | $7,854,459 | - As of May 31, 2024, Cintas employed approximately 46,500 employee-partners globally, with about 1,000 represented by labor unions. The company focuses on talent development, employee wellness, diversity, equity & inclusion, and competitive compensation/benefits977050 - Cintas has reduced its recordable injury rate by over 80% since 2008 and achieved 128 OSHA Star sites in the Voluntary Protection Program (VPP)100 Item 1A. Risk Factors Cintas faces risks from competition, operations, supply chain, cybersecurity, financial factors, and legal/regulatory compliance Risks Relating to Business Strategy and Operations Increased competition could force Cintas to lower prices, negatively impacting consolidated results106 The company's ability to expand is dependent on opening new, cost-effective operating facilities, which faces challenges in identifying locations and complying with regulations107 Acquisition practices carry risks such as integration difficulties, unforeseen liabilities, and increased acquisition costs due to competition108 Supply chain risks, including political/economic instability, supplier financial health, labor issues, raw material availability, and trade policies, could adversely affect operations7677 Cybersecurity attacks, including advanced threats and reliance on third-party systems, pose risks of system disruptions, data breaches, and financial losses7879110111 Failure to adapt to or effectively manage the risks of artificial intelligence (AI) could negatively impact Cintas' competitiveness and reputation80 Maintaining effective internal controls is crucial; failures could lead to unreliable financial reports and negatively impact stock price81113 Difficulties in attracting and retaining competent personnel, or a failure to maintain positive labor relationships, could adversely affect consolidated results82114 Unexpected events like natural disasters, geopolitical conflicts, or global health pandemics could disrupt business operations and damage brand image83115 Financial Risks Cintas' indebtedness may limit cash flow available for investments and increase vulnerability to adverse economic conditions84116 Fluctuations in foreign currency exchange rates, particularly the Canadian dollar, could impact consolidated financial condition and results, as foreign revenue represents less than 10% of total consolidated revenue86 Credit market volatility and potential downgrades in credit ratings could adversely affect liquidity and increase borrowing costs87240 Impairment charges on goodwill, other intangible assets, or long-lived assets, triggered by macroeconomic or market conditions, could negatively affect consolidated financial condition and results118 Unpredictable fuel and energy costs, influenced by geopolitical developments and supply/demand, could adversely affect consolidated financial condition and results117 Legal and Regulatory Risks Failure to comply with complex federal and state regulations, including employment, transportation, ESG, cybersecurity, and data privacy laws, could result in substantial fines or operational restrictions88 Environmental laws and regulations could lead to significant costs for remediation, fines, and third-party claims, potentially exceeding current reserves89120 Increasing global focus on climate change and ESG matters may result in new regulations, increased compliance costs, and scrutiny, potentially impacting reputation, share price, and investor confidence90122150 Changes in income tax rates, tax laws (e.g., Inflation Reduction Act, Pillar Two global minimum tax), or unfavorable resolution of tax audits could increase tax expense and reduce net income91151 Cintas is subject to various litigation claims and legal proceedings, which, if decided adversely or settled, could result in material liabilities and expenses148 - Increased competition, inability to open new facilities, and risks associated with acquisitions could adversely affect Cintas' consolidated results of operations106107108 - Cybersecurity attacks, including those leveraging AI, pose significant risks of system disruptions, data breaches, and financial losses, compounded by reliance on third-party IT vendors787980 - Indebtedness may limit cash flow for business needs, and fluctuations in foreign currency exchange rates, credit market volatility, and potential impairment charges could negatively impact financial performance848687 - Failure to comply with federal and state regulations, environmental laws, and increasing ESG-related requirements could result in penalties, significant costs, and reputational harm88120150 Item 1B. Unresolved Staff Comments There are no unresolved staff comments from the SEC - There are no unresolved staff comments92123 Item 1C. Cybersecurity Cintas manages cybersecurity risks with a NIST-aligned program, board oversight, continuous investment, and third-party assessments - Cintas' cybersecurity risk management program is integrated into its enterprise risk management, leveraging the NIST framework (identify, protect, detect, respond, recover)93 - The Chief Information Security Officer (CISO), with over fifteen years of experience and relevant certifications, is responsible for the cybersecurity program and reports quarterly to the Audit Committee and Board153 - Ongoing investments in IT security include end-user training, layered defenses, critical asset protection, enhanced monitoring, and engagement of external experts. Annual risk and cyber maturity assessments are conducted by independent third parties154125 - Cintas assesses cybersecurity risks associated with third-party service providers, reviewing their practices and conducting security assessments as part of its vendor management process94155 Item 2. Properties Cintas operates 479 facilities across 344 cities and maintains a fleet of approximately 21,900 vehicles for its services - Cintas occupies 479 facilities in 344 cities, with 248 leased and the remainder owned. These facilities include rental processing plants, branches, first aid and safety facilities, distribution centers, and manufacturing facilities157129 - The company owns or leases approximately 21,900 vehicles used for route-based services and by sales and management employee-partners157 Item 3. Legal Proceedings Material legal proceedings are detailed in Note 15 to the Consolidated Financial Statements - Material legal proceedings are discussed in Note 15 entitled Litigation and Other Contingencies of 'Notes to Consolidated Financial Statements'160 Item 4. Mine Safety Disclosures This item is not applicable to Cintas Corporation - Item 4. Mine Safety Disclosures is not applicable161 Part II: Financial Information Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Cintas' common stock trades on NASDAQ, with a 4-for-1 split announced, and the company actively manages capital through buybacks and dividends Market and Shareholder Information Cintas' common stock is traded on the NASDAQ Global Select Market under the symbol 'CTAS'. As of May 31, 2024, there were approximately 1,300 shareholders of record and an estimated 700,000 beneficial owners132 A 4-for-1 split of common stock was announced on May 2, 2024, with shares expected to begin trading on a post-split basis at market open on September 12, 20241162 Dividends | Fiscal Year | Total Dividend Per Share | Total Amount (millions) | | :---------- | :----------------------- | :---------------------- | | 2024 | $5.40 | $550.9 | | 2023 | $4.60 | $469.8 | Dividends declared on April 9, 2024, and April 11, 2023, were included in current accrued liabilities on the consolidated balance sheets134211 Stock Performance Graph The stock performance graph compares the cumulative return on $100 invested in Cintas' common stock against the S&P 500 Stock Index and a selected peer group (ABM Industries, Aramark, Rollins, Inc., and UniFirst Corporation)135164 Purchases of Equity Securities by the Issuer and Affiliated Purchases Cintas completed its $1.5 billion share buyback program (authorized July 27, 2021) during the fourth quarter of fiscal 2024, having purchased 3.6 million shares at an average price of $421.77138184448 A new $1.0 billion share buyback program was authorized on July 26, 2022. As of May 31, 2024, less than 0.1 million shares were purchased under this program for $57.1 million at an average price of $673.78138184185449 Subsequent to May 31, 2024, through July 25, 2024, Cintas purchased an additional 0.7 million shares for $473.6 million under the July 26, 2022 share buyback plan210449 The company acquired shares totaling $10.0 million in March 2024, $6.3 million in April 2024, and $20.4 million in May 2024 to satisfy employee-partner payroll taxes on options exercised and restricted stock awards138 - Cintas' common stock trades on the NASDAQ Global Select Market under the symbol 'CTAS'. As of May 31, 2024, there were approximately 1,300 shareholders of record and 700,000 beneficial owners132 - On May 2, 2024, the Company announced a 4-for-1 split of its common stock, with trading on a post-split basis expected to begin September 12, 20241162 | Fiscal Year | Total Dividend Per Share | Total Amount (millions) | | :---------- | :----------------------- | :---------------------- | | 2024 | $5.40 | $550.9 | | 2023 | $4.60 | $469.8 | - Cintas completed a $1.5 billion share buyback program (authorized July 27, 2021) during the fourth quarter of fiscal 2024, purchasing 3.6 million shares at an average price of $421.77138184448 - A new $1.0 billion share buyback program was authorized on July 26, 2022, with no expiration date. As of May 31, 2024, less than 0.1 million shares were purchased under this program for $57.1 million138184185449 Item 6. [Reserved] This item is reserved and contains no information - Item 6 is reserved167 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Cintas achieved strong fiscal 2024 financial performance with revenue and net income growth, robust liquidity, and mitigated inflationary pressures Business Strategy Cintas' principal objective is to maximize long-term shareholder value by exceeding customer expectations141 The strategy involves increasing penetration at existing customers, broadening the customer base through geographic expansion and strategic acquisitions, and identifying additional product and service opportunities141169197 Results of Operations Total revenue for fiscal 2024 increased by 8.9% to $9.6 billion, with organic revenue growth of 8.0% driven by increased sales volume199 Net income for fiscal 2024 was $1,571.6 million, a 16.6% increase compared to fiscal 2023. Diluted earnings per share also increased by 16.6% to $15.15509 Income before income taxes increased by 16.6% to $1,973.6 million in fiscal 2024, primarily due to revenue growth and gross margin improvements174 Selling and administrative expenses increased to 27.3% of revenue in fiscal 2024 (from 26.9% in fiscal 2023), due to investments in selling resources, management trainee programs, talent acquisition, and costs associated with a legal settlement202 Liquidity and Capital Resources | (In thousands) | 2024 | 2023 | | :----------------------------------- | :---------- | :---------- | | Net cash provided by operating activities | $2,079,781 | $1,597,814 | | Net cash used in investing activities | $(608,631) | $(388,672) | | Net cash used in financing activities | $(1,253,490) | $(1,172,836) | | Cash and cash equivalents at end of year | $342,015 | $124,149 | Net cash provided by operating activities increased by $482.0 million (30.2%) in fiscal 2024, driven by higher net income and favorable changes in working capital207 Net cash used in investing activities increased to $608.6 million in fiscal 2024, including $409.5 million in capital expenditures and $186.8 million for business acquisitions183 Total debt due within one year was $449.6 million in fiscal 2024 (vs. $0 in fiscal 2023), and total debt due after one year was $2,025.9 million (vs. $2,486.4 million in fiscal 2023)188337 Cintas has access to a $2.0 billion revolving credit facility, with no commercial paper outstanding or borrowings as of May 31, 2024 and 2023188368 Inflation and Changing Prices Cintas experienced inflationary impacts on labor, fuel, and transportation costs in fiscal years 2024, 2023, and 2022. These pressures were mitigated through pricing and efficiency initiatives, preventing a material negative impact on financial condition or results219 Litigation and Other Contingencies An agreement in principle was reached in March 2024 for a class action lawsuit (City of Laurel, Mississippi v. Cintas Corporation No. 2), requiring a one-time payment of $45.0 million, which was accrued in accrued liabilities459 Management believes that the aggregate liability for ordinary course of business actions will not have a material adverse effect on the consolidated financial position, results of operations, or cash flows220 New Accounting Standards Cintas is currently evaluating the impact of ASU 2023-07 (Segment Reporting, effective fiscal 2025) and ASU 2023-09 (Income Tax Disclosures, effective fiscal 2026) on its consolidated financial statements221249327356 Critical Accounting Policies and Estimates Key critical accounting policies and estimates include revenue recognition, valuation of uniforms and other rental items in service, goodwill impairment, and the insurance reserve222223224251254 The insurance reserve, representing estimated ultimate costs for asserted and unasserted claims, is estimated through complex actuarial procedures with third-party specialists, involving significant judgment254318 Goodwill is tested annually for impairment, with no impairment recognized for the fiscal years ended May 31, 2024, 2023, or 2022224315 - Total revenue for fiscal 2024 was $9.6 billion, an 8.9% increase over the prior fiscal year, with organic revenue growth of 8.0%199 - Net income for fiscal 2024 increased 16.6% to $1,571.6 million, and diluted earnings per share rose 16.6% to $15.15509 - Net cash provided by operating activities increased 30.2% to $2,079.8 million in fiscal 2024, primarily due to higher net income and favorable working capital changes207 - Cintas maintains strong liquidity with $342.0 million in cash and cash equivalents at year-end fiscal 2024 and access to a $2.0 billion revolving credit facility206182 - Inflationary pressures on labor, fuel, and transportation costs were experienced but mitigated through pricing and efficiency initiatives, without a material negative impact on financial results219 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Cintas faces foreign currency risk from Canadian operations and interest rate risk, with a 50 basis point change impacting income before taxes by $0.6 million - Cintas is exposed to foreign currency risk, primarily from Canadian operations, which account for less than 10% of consolidated revenue and operating income225 - A one-half percent (50 basis points) change in short-term interest rates would change Cintas' income before income taxes by approximately $0.6 million255 Item 8. Financial Statements and Supplementary Data This section presents Cintas' audited consolidated financial statements, management and auditor reports, and detailed notes on accounting policies and financial items Management's Report on Internal Control over Financial Reporting Management concluded that Cintas' internal control over financial reporting was effective as of May 31, 2024, based on criteria established in the COSO Internal Control—Integrated Framework (2013)232262 Reports of Independent Registered Public Accounting Firm Ernst & Young LLP issued an unqualified opinion on Cintas' consolidated financial statements for the period ended May 31, 2024, confirming fair presentation in accordance with U.S. GAAP293 The valuation of insurance reserves was identified as a critical audit matter due to its judgmental and complex nature, involving significant estimation uncertainty and the use of a third-party actuarial specialist237295 Ernst & Young LLP also expressed an unqualified opinion on the effectiveness of Cintas' internal control over financial reporting as of May 31, 2024, based on the COSO criteria268298 Consolidated Statements of Income | (In thousands except per share data) | 2024 | 2023 | 2022 | | :----------------------------------- | :---------- | :---------- | :---------- | | Total revenue | $9,596,615 | $8,815,769 | $7,854,459 | | Operating income | $2,068,633 | $1,802,664 | $1,587,370 | | Income before income taxes | $1,973,635 | $1,693,148 | $1,498,768 | | Net income | $1,571,592 | $1,348,010 | $1,235,757 | | Basic earnings per share | $15.40 | $13.21 | $11.92 | | Diluted earnings per share | $15.15 | $12.99 | $11.65 | | Dividends declared and paid per share | $5.40 | $4.60 | $3.80 | Consolidated Statements of Comprehensive Income | (In thousands) | 2024 | 2023 | 2022 | | :------------- | :---------- | :---------- | :---------- | | Net income | $1,571,592 | $1,348,010 | $1,235,757 | | Other comprehensive income (loss), net of tax | $13,423 | $(30,139) | $77,029 | | Comprehensive income | $1,585,015 | $1,317,871 | $1,312,786 | Consolidated Balance Sheets | (In thousands) | As of May 31, 2024 | As of May 31, 2023 | | :------------- | :----------------- | :----------------- | | Total current assets | $3,185,207 | $2,930,000 | | Total assets | $9,168,817 | $8,540,000 | | Total current liabilities | $1,828,519 | $1,230,000 | | Total long-term liabilities | $3,023,926 | $3,450,000 | | Total shareholders' equity | $4,316,372 | $3,860,000 | Consolidated Statements of Shareholders' Equity Total shareholders' equity increased to $4,316,372 thousand at May 31, 2024, from $3,863,986 thousand at May 31, 2023, driven by net income and stock-based compensation, partially offset by dividends and share repurchases306 Consolidated Statements of Cash Flows | (In thousands) | 2024 | 2023 | 2022 | | :------------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $2,079,781 | $1,597,814 | $1,537,625 | | Net cash used in investing activities | $(608,631) | $(388,672) | $(402,635) | | Net cash used in financing activities | $(1,253,490) | $(1,172,836) | $(1,537,943) | | Cash and cash equivalents at end of year | $342,015 | $124,149 | $90,471 | Notes to Consolidated Financial Statements Note 1. Significant Accounting Policies Approximately 95% of Cintas' revenue is derived from route servicing, recognized over time as services are performed. The remaining 5% from Uniform Direct Sales is recognized when goods are transferred311252 Inventories are valued at the lower of cost (FIFO) or net realizable value, with reserves for obsolete inventory of $63.1 million in FY2024 and $80.1 million in FY2023286342 Uniforms and other rental items in service are amortized using the straight-line method over useful lives ranging from 8 to 60 months, based on industry and company-specific experience314223 The insurance reserve, representing estimated ultimate costs for claims, was $176.8 million in FY2024 and $155.0 million in FY2023, estimated through actuarial procedures with third-party specialists318254 No goodwill impairment was recognized for the fiscal years ended May 31, 2024, 2023, or 2022315224 Note 2. Revenue Recognition | Segment | 2024 Revenue (thousands) | 2023 Revenue (thousands) | 2022 Revenue (thousands) | | :----------------------------------- | :----------------------- | :----------------------- | :----------------------- | | Uniform Rental and Facility Services | $7,465,199 | $6,897,130 | $6,226,980 | | First Aid and Safety Services | $1,067,334 | $951,496 | $832,458 | | Fire Protection Services | $728,610 | $627,747 | $527,517 | | Uniform Direct Sales | $335,472 | $339,396 | $267,504 | | Total Revenue | $9,596,615 | $8,815,769 | $7,854,459 | Capitalized commission expenses for obtaining route servicing contracts totaled $94.6 million (current) and $262.5 million (noncurrent) as of May 31, 2024. Amortization expense for these commissions was $101.4 million in fiscal 2024359 Note 3. Fair Value Disclosures | (In thousands) | Level 1 (2024) | Level 2 (2024) | Total (2024) | Level 1 (2023) | Level 2 (2023) | Total (2023) | | :----------------------------------- | :------------- | :------------- | :----------- | :------------- | :------------- | :----------- | | Cash and cash equivalents | $342,015 | — | $342,015 | $124,149 | — | $124,149 | | Interest rate lock agreements | — | $94,829 | $94,829 | — | $70,449 | $70,449 | | Total assets at fair value | $342,015 | $94,829 | $436,844 | $124,149 | $70,449 | $194,598 | Fair values of interest rate lock agreements are based on similar exchange-traded derivatives (market approach) and classified within Level 2 of the fair value hierarchy360 Note 4. Property and Equipment | (In thousands) | 2024 | 2023 | | :----------------------------------- | :---------- | :---------- | | Land | $194,661 | $190,707 | | Buildings and improvements | $744,617 | $714,376 | | Equipment | $2,963,860 | $2,699,728 | | Leasehold improvements | $46,490 | $44,897 | | Construction in progress | $166,616 | $109,037 | | Accumulated depreciation | $(2,582,076) | $(2,362,269) | | Property and equipment, net | $1,534,168 | $1,396,476 | Internal use software included in equipment was $335.5 million in FY2024 and $308.5 million in FY2023. Amortization expense for internal use software was $26.6 million in FY2024362387 Note 5. Goodwill, Service Contracts and Other Assets Goodwill increased to $3,212,424 thousand at May 31, 2024, from $3,056,201 thousand at May 31, 2023, primarily due to goodwill acquired from business acquisitions388 Service contracts, net, were $321,902 thousand at May 31, 2024, compared to $346,574 thousand at May 31, 2023335 Estimated future amortization expense for service contracts and other assets is $690,298 thousand, with $153,196 thousand expected in fiscal year 2025390 Note 6. Debt, Derivatives and Hedging Activities | (In thousands) | 2024 | 2023 | | :----------------------------------- | :---------- | :---------- | | Total debt due within one year | $449,595 | $0 | | Total debt due after one year | $2,025,934 | $2,486,405 | | Total Debt | $2,475,529 | $2,486,405 | The average interest rate for all Cintas debt at May 31, 2024, was 4.0%, with maturity dates extending through fiscal year 2037366 Cintas repurchased $13.5 million of its 6.15% senior notes in fiscal 2024, resulting in a $0.9 million loss recorded in interest expense392 A $2.0 billion revolving credit facility supports the commercial paper program, with no outstanding commercial paper or borrowings as of May 31, 2024, and 2023368 Interest paid was $100.8 million in fiscal 2024, compared to $111.5 million in fiscal 2023393 Note 7. Leases Operating lease right-of-use assets, net, were $187,953 thousand at May 31, 2024, and operating lease liabilities were $146,824 thousand (long-term) and $45,727 thousand (current)305 The weighted-average remaining lease term for operating leases was 5.15 years in fiscal 2024, with a weighted-average discount rate of 3.48%373 Operating lease costs, including short-term and variable lease expenses, totaled $83.2 million in fiscal 2024, an increase from $79.8 million in fiscal 2023398 Note 8. Income Taxes Income before income taxes from U.S. operations was $1,860.9 million and from foreign operations was $112.8 million in fiscal 2024374 | (In thousands) | 2024 | 2023 | 2022 | | :----------------------------------- | :---------- | :---------- | :---------- | | Current income tax expense | $432,543 | $318,207 | $211,376 | | Deferred income tax expense (benefit) | $(30,500) | $26,931 | $51,635 | | Total income tax expense | $402,043 | $345,138 | $263,011 | Income taxes paid were $423.1 million in fiscal 2024, a significant increase from $291.9 million in fiscal 2023377 The net deferred tax liability was $475.5 million at May 31, 2024, compared to $498.4 million at May 31, 2023401 Total unrecognized tax benefits were $32.7 million at May 31, 2024, with $2.8 million accrued for interest and penalties403 Note 9. Acquisitions In fiscal 2024, Cintas acquired 7 businesses in Uniform Rental and Facility Services, 1 in First Aid and Safety Services, and 8 in All Other406 Total cash consideration for acquisitions, net of cash acquired, was $186.8 million in fiscal 2024, significantly higher than $46.4 million in fiscal 2023433 Goodwill recognized from acquisitions in fiscal 2024 was $157.2 million, representing estimated future economic benefits not individually identifiable407433 Note 10. Employee Benefit Plans The net pension liability for the assumed G&K Pension Plan was $16.0 million at May 31, 2024, a decrease from $17.7 million at May 31, 2023383 Total contributions to the Partners' Plan (profit sharing, ESOP, and 401(k)) were $115.1 million in fiscal 2024, up from $99.1 million in fiscal 2023418 Matching contributions to the Supplemental Executive Retirement Plan (SERP) were $13.1 million in fiscal 2024, an increase from $12.3 million in fiscal 2023446 Note 11. Earnings per Share | (In thousands except per share data) | 2024 | 2023 | 2022 | | :----------------------------------- | :---------- | :---------- | :---------- | | Basic earnings per share | $15.40 | $13.21 | $11.92 | | Diluted earnings per share | $15.15 | $12.99 | $11.65 | | (In thousands except per share data) | 2024 | 2023 | 2022 | | :----------------------------------- | :---------- | :---------- | :---------- | | Proforma basic earnings per share | $3.85 | $3.30 | $2.98 | | Proforma diluted earnings per share | $3.79 | $3.25 | $2.91 | Options to purchase 0.4 million, 1.0 million, and 0.5 million shares were excluded from diluted EPS computation in fiscal 2024, 2023, and 2022, respectively, as their exercise prices were anti-dilutive421 Note 12. Stock-Based Compensation Total compensation cost for stock-based awards was $117.0 million in fiscal 2024, an increase from $103.6 million in fiscal 2023425 The remaining unrecognized compensation cost related to unvested stock options and restricted stock at May 31, 2024, was $310.4 million, to be recognized over a weighted-average period of 2.2 years6 At May 31, 2024, 3,812,258 stock options were outstanding with a weighted average exercise price of $342.91. The aggregate intrinsic value of outstanding options was $1,278.4 million427478 The weighted-average fair value of stock options granted was $191.15 in fiscal 2024, $136.64 in fiscal 2023, and $100.07 in fiscal 2022476 Note 13. Accumulated Other Comprehensive Income (Loss) The balance of accumulated other comprehensive income at May 31, 2024, was $91,201 thousand, an increase from $77,778 thousand at May 31, 20237 Net current period other comprehensive income was $13,423 thousand in fiscal 2024, a significant improvement from a loss of $30,139 thousand in fiscal 20237 Note 14. Operating Segment Information | (In thousands) | Uniform Rental and Facility Services (2024) | First Aid and Safety Services (2024) | All Other (2024) | Corporate (2024) | Total (2024) | | :----------------------------------- | :------------------------------------------ | :----------------------------------- | :--------------- | :--------------- | :----------- | | Revenue | $7,465,199 | $1,067,334 | $1,064,082 | — | $9,596,615 | | Gross margin | $3,600,128 | $592,656 | $493,632 | — | $4,686,416 | | Operating income | $1,659,501 | $239,153 | $169,979 | — | $2,068,633 | | Total assets | $7,503,043 | $730,003 | $593,756 | $342,015 | $9,168,817 | The Uniform Rental and Facility Services segment generated $7,465.2 million in revenue and $1,659.5 million in operating income in fiscal 20249 The First Aid and Safety Services segment reported $1,067.3 million in revenue and $239.2 million in operating income for fiscal 20249 Note 15. Litigation and Other Contingencies An agreement in principle was reached in November 2023 for a class action lawsuit alleging ERISA violations, requiring an immaterial payment covered by insurance11 A tentative settlement was reached in March 2024 for a contract dispute class action lawsuit, requiring a one-time payment of $45.0 million, which has been accrued459 - Management concluded that Cintas' internal control over financial reporting was effective as of May 31, 2024, based on the COSO framework232262 - Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements and on the effectiveness of internal control over financial reporting as of May 31, 2024264268293298 | (In thousands except per share data) | 2024 | 2023 | 2022 | | :----------------------------------- | :---------- | :---------- | :---------- | | Total revenue | $9,596,615 | $8,815,769 | $7,854,459 | | Operating income | $2,068,633 | $1,802,664 | $1,587,370 | | Income before income taxes | $1,973,635 | $1,693,148 | $1,498,768 | | Net income | $1,571,592 | $1,348,010 | $1,235,757 | | Basic earnings per share | $15.40 | $13.21 | $11.92 | | Diluted earnings per share | $15.15 | $12.99 | $11.65 | | Dividends declared and paid per share | $5.40 | $4.60 | $3.80 | | (In thousands) | As of May 31, 2024 | As of May 31, 2023 | | :------------- | :----------------- | :----------------- | | Total current assets | $3,185,207 | $2,930,000 | | Total assets | $9,168,817 | $8,540,000 | | Total current liabilities | $1,828,519 | $1,230,000 | | Total long-term liabilities | $3,023,926 | $3,450,000 | | Total shareholders' equity | $4,316,372 | $3,860,000 | | (In thousands) | 2024 | 2023 | 2022 | | :------------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $2,079,781 | $1,597,814 | $1,537,625 | | Net cash used in investing activities | $(608,631) | $(388,672) | $(402,635) | | Net cash used in financing activities | $(1,253,490) | $(1,172,836) | $(1,537,943) | | Cash and cash equivalents at end of year | $342,015 | $124,149 | $90,471 | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with accountants on accounting and financial disclosure - There were no changes in or disagreements with accountants on accounting and financial disclosure12460 Item 9A. Controls and Procedures Cintas' disclosure controls and procedures were effective as of May 31, 2024, with no material changes in internal control - Cintas' management concluded that its disclosure controls and procedures were effective as of May 31, 2024, ensuring information required by the Exchange Act is recorded, processed, summarized, and reported timely13 - There were no changes in Cintas' internal control over financial reporting during the fiscal quarter ended May 31, 2024, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting14 Item 9B. Other Information This item contains no other information - No other information is reported under this item12488 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item contains no disclosure regarding foreign jurisdictions that prevent inspections - No disclosure regarding foreign jurisdictions that prevent inspections is provided15463 Part III: Directors, Executive Officers and Corporate Governance Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement - Information required under this item is incorporated by reference to the material contained in Cintas' definitive proxy statement for the 2024 annual meeting of shareholders464489 Item 11. Executive Compensation Executive compensation information is incorporated by reference from the Proxy Statement, including equity compensation plan details - Information required under this item is incorporated by reference to the material contained in the Proxy Statement, except for Item 201(d) of Regulation S-K16464 | Plan category | Number of shares to be issued upon exercise of outstanding options | Weighted average exercise price of outstanding options | Number of shares remaining available for future issuance under equity compensation plans | | :----------------------------------- | :------------------------------------------------- | :----------------------------------------------------- | :--------------------------------------------------------------------------------------- | | Equity compensation plans approved by shareholders | 3,812,258 | $342.91 | 4,982,123 | | Equity compensation plans not approved by shareholders | — | — | — | | Total | 3,812,258 | $342.91 | 4,982,123 | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership and related stockholder matters are incorporated by reference from the Proxy Statement - Information required under this item is incorporated by reference to the material contained in the Proxy Statement465 Item 13. Certain Relationships and Related Transactions, and Director Independence Information on related transactions and director independence is incorporated by reference from the Proxy Statement - Information required under this item is incorporated by reference to the material contained in the Proxy Statement465 Item 14. Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the Proxy Statement - Information required under this item is incorporated by reference to the material contained in the Proxy Statement505 Part IV: Exhibits, Financial Statement Schedules Item 15. Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K - All financial statements required by Item 8 of Form 10-K are included in this Annual Report. Schedule II: Valuation and Qualifying Accounts and Reserves is filed for the three years ended May 31, 202419 - Exhibits include restated articles of incorporation, amended by-laws, various indenture agreements, forms of senior notes, credit agreements, and numerous management compensatory contracts and plans20494495 - Certifications of the Principal Executive Officer and Principal Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act and 18 U.S.C. § 1350, are included20468 Item 16. Form 10-K Summary This item indicates that no Form 10-K summary is provided - No Form 10-K Summary is provided470 Signatures The report is signed by Cintas Corporation's President and CEO, Todd M. Schneider, and other officers on July 25, 2024 - The report was signed on behalf of Cintas Corporation by Todd M. Schneider, President and Chief Executive Officer, and other directors and officers on July 25, 202426471472498499 Schedule II — Valuation and Qualifying Accounts and Reserves Schedule II summarizes changes in the Allowance for Credit Losses for fiscal years ended May 31, 2024, 2023, and 2022 | (In thousands) | Balance at Beginning of Year | Additions Deductions | Balance at End of Year | | :----------------------------------- | :--------------------------- | :------------------- | :--------------------- | | May 31, 2022 | $12,097 | $30,278 | $12,918 | | May 31, 2023 | $12,918 | $40,817 | $14,926 | | May 31, 2024 | $14,926 | $53,240 | $17,914 | - The Allowance for Credit Losses increased to $17,914 thousand at May 31, 2024, from $14,926 thousand at May 31, 2023500