10-Q 1 ctas-20211130.htm 10-Q ctas-20211130
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedNovember 30, 2021
 OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                         to                                        
 Commission file number 0-11399
ctas-20211130_g1.jpg
Cintas Corporation
(Exact name of registrant as specified in its charter)
Washington31-1188630
(State or Other Jurisdiction of Incorporation or Organization)(IRS Employer Identification Number)
6800 Cintas Boulevard
P.O. Box 625737
Cincinnati,Ohio45262-5737
(Address of Principal Executive Offices)(Zip Code)
 
Registrant's Telephone Number, Including Area Code: (513) 459-1200
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common stock, no par valueCTASThe NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Indicate by checkmark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑   No ☐
Indicate by checkmark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☑ No ☐
Indicate by checkmark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer  ☑               Accelerated Filer ☐                                               Non-Accelerated Filer ☐ 
Smaller Reporting Company ☐           Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class Outstanding December 31, 2021
Common Stock, no par value 103,732,576


CINTAS CORPORATION
TABLE OF CONTENTS

Page
November 30, 2021 and May 31, 2021
 


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

 Three Months EndedSix Months Ended
 November 30, 2021November 30, 2020November 30, 2021November 30, 2020
Revenue:  
Uniform rental and facility services$1,535,271 $1,410,488 $3,043,447 $2,804,899 
Other387,010 346,560 775,784 698,723 
Total revenue1,922,281 1,757,048 3,819,231 3,503,622 
Costs and expenses:  
Cost of uniform rental and facility services
817,261 739,811 1,596,562 1,455,223 
Cost of other219,879 197,353 434,772 402,314 
Selling and administrative expenses503,913 467,012 1,012,568 943,507 
Operating income381,228 352,872 775,329 702,578 
Interest income(56)(218)(112)(282)
Interest expense21,902 24,557 43,756 49,107 
Income before income taxes359,382 328,533 731,685 653,753 
Income taxes64,713 43,676 105,837 68,891 
Net income$294,669 $284,857 $625,848 $584,862 
Basic earnings per share$2.83 $2.69 $6.02 $5.55 
Diluted earnings per share$2.76 $2.62 $5.87 $5.40 
Dividends declared per share$0.95 $3.51 $1.90 $3.51 
 
See accompanying notes.
3
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)

Three Months EndedSix Months Ended
November 30,
2021		November 30,
2020		November 30,
2021		November 30,
2020
Net income$294,669 $284,857 $625,848 $584,862 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments
(7,472)2,960 (31,488)29,906 
Change in fair value of interest rate lock
   agreements, net of tax expense (benefit)
   of $3,744, $5,400, $(8,810) and $9,072,
   respectively
10,940 15,942 (25,739)26,784 
Amortization of interest rate lock agreements, net of tax benefit
   of $148, $115, $296 and $231, respectively
(460)(359)(919)(717)
Other comprehensive income (loss), net of
   tax expense (benefit) of $3,892, $5,515,
   $(8,514) and $9,303, respectively
3,008 18,543 (58,146)55,973 
Comprehensive income$297,677 $303,400 $567,702 $640,835 

See accompanying notes.






4
CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except share data)

 November 30, 2021May 31,
2021
 (Unaudited) 
ASSETS  
Current assets:  
Cash and cash equivalents$113,170 $493,640 
Accounts receivable, net975,442 901,710 
Inventories, net464,864 481,797 
Uniforms and other rental items in service876,065 810,104 
Income taxes, current89,135 22,282 
Prepaid expenses and other current assets136,798 133,776 
Total current assets2,655,474 2,843,309 
Property and equipment, net1,299,375 1,318,438 
Investments289,123 274,616 
Goodwill2,931,307 2,913,069 
Service contracts, net391,609 408,445 
Operating lease right-of-use assets, net155,677 168,532 
Other assets, net294,845 310,414 
 $8,017,410 $8,236,823 
LIABILITIES AND SHAREHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$240,322 $230,786 
Accrued compensation and related liabilities180,772 241,469 
Accrued liabilities597,171 518,910 
Operating lease liabilities, current43,156 43,850 
Debt due within one year1,116,507 899,070 
Total current liabilities2,177,928 1,934,085 
Long-term liabilities:  
Debt due after one year1,343,367 1,642,833 
Deferred income taxes405,871 386,647 
Operating lease liabilities118,892 130,774 
Accrued liabilities408,225 454,637 
Total long-term liabilities2,276,355 2,614,891 
Shareholders’ equity:  
Preferred stock, no par value:— — 
100,000 shares authorized, none outstanding
Common stock, no par value, and paid-in capital:1,686,293 1,516,202 
425,000,000 shares authorized
  
FY 2022: 190,475,781 shares issued and 103,664,439 shares outstanding
  
FY 2021: 189,071,185 shares issued and 104,061,391 shares outstanding
Retained earnings8,305,076 7,877,015 
Treasury stock:(6,400,984)(5,736,258)
FY 2022: 86,811,342 shares
  
FY 2021: 85,009,794 shares
Accumulated other comprehensive (loss) income(27,258)30,888 
Total shareholders’ equity3,563,127 3,687,847 
 $8,017,410 $8,236,823 
See accompanying notes.
5
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(In thousands)

Common Stock
and Paid-In Capital 		Retained
Earnings		Other
Accumulated
Comprehensive
Income (Loss)		Treasury Stock  Total
Shareholders'
Equity
SharesAmountSharesAmount
Balance at June 1, 2021189,071 $1,516,202 $7,877,015 $30,888 (85,010)$(5,736,258)$3,687,847 
Net income— — 331,179 — — — 331,179 
Comprehensive loss, net of tax— — — (61,154)— — (61,154)
Dividends— — (98,826)— — — (98,826)
Stock-based compensation— 36,496 — — — — 36,496 
Vesting of stock-based compensation awards493 — — — — — — 
Stock options exercised, net of shares
   surrendered		564 72,896 — — — — 72,896 
Repurchase of common stock— — — — (1,788)(659,235)(659,235)
Balance at August 31, 2021190,128 $1,625,594 $8,109,368 $(30,266)(86,798)$(6,395,493)$3,309,203 
Net income— — 294,669 — — — 294,669 
Comprehensive income, net of tax— — — 3,008 — — 3,008 
Dividends— — (98,961)— — — (98,961)
Stock-based compensation— 24,397 — — — — 24,397 
Vesting of stock-based compensation awards31 — — — — — — 
Stock options exercised, net of shares
   surrendered		317 36,302 — — — — 36,302 
Repurchase of common stock— — — — (13)(5,491)(5,491)
Balance at November 30, 2021190,476 $1,686,293 $8,305,076 $(27,258)(86,811)$(6,400,984)$3,563,127 







6
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(In thousands)
Common Stock
and Paid-In Capital  		Retained
Earnings		Other
Accumulated
Comprehensive
Loss		Treasury Stock  Total
Shareholders'
Equity
SharesAmountSharesAmount
Balance at June 1, 2020186,793 $1,274,210 $7,296,509 $(153,380)(83,378)$(5,182,137)$3,235,202 
Net income— — 300,005 — — — 300,005 
Comprehensive income, net of tax— — — 37,430 — — 37,430 
Stock-based compensation— 29,055 — — — — 29,055 
Vesting of stock-based compensation awards568 — — — — — — 
Stock options exercised, net of shares
   surrendered		795 72,123 — — — — 72,123 
Repurchase of common stock— — — — (230)(69,011)(69,011)
Balance at August 31, 2020188,156 $1,375,388 $7,596,514 $(115,950)(83,608)$(5,251,148)$3,604,804 
Net income— — 284,857 — — — 284,857 
Comprehensive income, net of tax— — — 18,543 — — 18,543 
Dividends— — (371,827)— — — (371,827)
Stock-based compensation— 28,547 — — — — 28,547 
Vesting of stock-based compensation awards21 — — — — — — 
Stock options exercised, net of shares
   surrendered		424 35,407 — — — — 35,407 
Repurchase of common stock— — — — (7)(2,371)(2,371)
Balance at November 30, 2020188,601 $1,439,342 $7,509,544 $(97,407)(83,615)$(5,253,519)$3,597,960 

See accompanying notes.
7
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

 Six Months Ended
 November 30, 2021November 30, 2020
Cash flows from operating activities:  
Net income$625,848 $584,862 
Adjustments to reconcile net income to net cash provided by operating activities:
  
Depreciation122,274 121,096 
Amortization of intangible assets and capitalized contract costs74,365 71,558 
Stock-based compensation60,893 57,602 
Gain on sale of operating assets(12,129)(17,963)
Deferred income taxes29,941 (23,099)
Change in current assets and liabilities, net of acquisitions of businesses:  
Accounts receivable, net(77,343)(39,892)
Inventories, net13,406 (124,949)
Uniforms and other rental items in service(69,513)(2,914)
Prepaid expenses and other current assets and capitalized contract costs(47,978)(57,295)
Accounts payable11,400 42,228 
Accrued compensation and related liabilities(59,988)23,809 
Accrued liabilities and other(10,519)21,570 
Income taxes, current(66,875)(83,649)
Net cash provided by operating activities593,782 572,964 
Cash flows from investing activities:  
Capital expenditures(108,629)(57,659)
Purchases of investments(5,967)(7,205)
Proceeds from sale of operating assets, net of cash disposed15,347 23,426 
Acquisitions of businesses, net of cash acquired(45,670)(6,932)
Other, net(6,676)(2,872)
Net cash used in investing activities(151,595)(51,242)
Cash flows from financing activities:  
Issuance of commercial paper, net167,000 — 
Repayment of debt(250,000)— 
Proceeds from exercise of stock-based compensation awards109,198 107,530 
Dividends paid(177,949)— 
Repurchase of common stock(664,726)(71,382)
Other, net(3,399)(1,687)
Net cash (used in) provided by financing activities(819,876)34,461 
Effect of exchange rate changes on cash and cash equivalents(2,781)1,590 
Net (decrease) increase in cash and cash equivalents(380,470)557,773 
Cash and cash equivalents at beginning of period493,640 145,402 
Cash and cash equivalents at end of period$113,170 $703,175 
See accompanying notes.
8
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited) 

Note 1 - Basis of Presentation
The consolidated condensed financial statements of Cintas Corporation (Cintas, the Company, we, us or our) included herein have been prepared by Cintas, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with United States generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations. While we believe that the disclosures are adequately presented, we suggest that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2021. A summary of our significant accounting policies is presented beginning on page 40 of that report. There have been no material changes in the accounting policies followed by Cintas during the current fiscal year. 

Interim results are subject to variations and are not necessarily indicative of the results of operations for a full fiscal year. In the opinion of management, adjustments (which include only normal recurring adjustments) necessary for a fair statement of the consolidated results of the interim periods shown have been made.

Inventories, net are valued at the lower of cost (first-in, first-out) or net realizable value. Inventory is comprised of the following: 
(In thousands)November 30, 2021May 31,
2021
Raw materials$16,385 $15,109 
Work in process35,328 37,664 
Finished goods413,151 429,024 
 $464,864 $481,797 
Inventories are recorded net of reserves for obsolete inventory (excess and slow-moving) of $106.6 million and $111.0 million at November 30, 2021 and May 31, 2021, respectively. The inventory obsolescence reserve is determined by specific identification, as well as an estimate based on Cintas' historical rates of obsolescence. Once a specific inventory item is written down to the lower of cost or net realizable value, a new cost basis has been established, and that inventory item cannot subsequently be marked up.
Reclassification of Prior Year Presentation
Certain prior year amounts have been reclassified for consistency with the current year presentation. The reclassification has been reflected in the consolidated condensed balance sheet and consolidated condensed statement of shareholders' equity for the fiscal year ended May 31, 2021 and the three and six months ended November 30, 2020, to combine common stock and paid-in capital for presentation purposes. These reclassifications had no effect on the Company's reported results of operations.
New Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 is part of the FASB’s overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. ASU 2019-12 removes certain exceptions to the general principles of Accounting Standards Codification (ASC) 740, Income Taxes (ASC 740), in order to reduce the cost and complexity of its application in the areas of intraperiod tax allocation, deferred tax liabilities related to outside basis differences, year-to-date losses in interim periods and other areas within ASC 740. The Company adopted ASU 2019-12 on June 1, 2021. The adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated condensed financial statements currently but may in future periods.

No other new accounting pronouncement recently issued or newly effective had, or is expected to have, a material impact on Cintas' consolidated condensed financial statements.
9
Note 2 - Revenue Recognition
The following table presents Cintas' total revenue disaggregated by operating segment:
Three Months EndedSix Months Ended
(In thousands)November 30,
2021		November 30,
2020		November 30,
2021		November 30,
2020
Uniform Rental and
   Facility Services		$1,535,271 79.9 %$1,410,488 80.3 %$3,043,447 79.7 %$2,804,899 80.0 %
First Aid and Safety
   Services		202,160 10.5 %194,419 11.0 %401,276 10.5 %398,899 11.4 %
Fire Protection
   Services		123,254 6.4 %104,636 6.0 %251,472 6.6 %212,701 6.1 %
Uniform Direct Sales61,596 3.2 %47,505 2.7 %123,036 3.2 %87,123 2.5 %
Total revenue$1,922,281 100.0 %$1,757,048 100.0 %$3,819,231 100.0 %$3,503,622 100.0 %

Fire Protection Services and Uniform Direct Sales operating segments are included within All Other as disclosed in Note 11 entitled Segment Information.

Revenue Recognition Policy
Approximately 95% of the Company's revenue is derived from fees for route servicing of Uniform Rental and Facility Services, First Aid and Safety Services and Fire Protection Services customers, performed by a Cintas employee-partner, at the customer's location of business. Revenues from our route servicing customer contracts represent a single-performance obligation. The Company recognizes revenues over time as services are performed based on the nature of services provided and contractual rates (output method) or at a point in time when the performance obligation under the terms of the contract with a customer are satisfied, at the customer's location of business. The Company's remaining revenue, primarily within the Uniform Direct Sales operating segment, and representing approximately 5% of the Company's total revenue, is recognized when the obligations under the terms of a contract with a customer are satisfied. This generally occurs when the goods are transferred to the customer.

Revenue recorded is presented net of sales and other taxes we collect on behalf of governmental authorities. Shipping and handling costs charged to customers are treated as fulfillment activities and are recorded in both revenue and cost of sales at the time control is transferred to the customer. Certain of our customer contracts, include pricing terms and conditions that include components of variable consideration. The variable consideration is typically in the form of consideration paid to a customer based on performance metrics specified within the contract. Specifically, some contracts contain discounts or rebates that the customer can earn through the achievement of specified volume levels. Each component of variable consideration is earned based on the Company's actual performance during the measurement period specified within the contract. To determine the transaction price, the Company estimates the variable consideration using the most likely amount method, based on the specific contract provisions and known performance results during the relevant measurement period. When determining if variable consideration should be constrained, the Company considers whether factors outside its control could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal. The Company's performance period generally corresponds with the monthly invoice period. No constraints on our revenue recognition were applied during the three or six months ended November 30, 2021 or 2020. The Company reassesses these estimates during each reporting period. Cintas maintains a liability for these discounts and rebates within accrued liabilities on the consolidated condensed balance sheets. Variable consideration also includes consideration paid to a customer at the beginning of a contract. Cintas capitalizes this consideration and amortizes it over the life of the contract as a reduction to revenue. These assets are included in prepaid expenses and other current assets and in other assets, net on the consolidated condensed balance sheets.

Additionally, certain Uniform Direct Sales operating segment customer contracts contain a provision with an enforceable right of payment, and the underlying product has no alternative use to Cintas. Consequently, when both aforementioned provisions are prevalent in a customer contract, the revenue is recorded for finished goods that the customer is obligated to purchase under the termination terms of the contract.

10
We are exposed to credit losses primarily through our trade receivables. We determine the allowance for credit losses using both an estimate, based on historical rates of collections, and reserves for specific accounts identified as uncollectible. The portion of the allowance that is an estimate based on Cintas' historical rates of collections is recorded for overdue amounts, beginning with a nominal percentage when the account is current and increasing substantially as the account ages. The amount provided as the account ages will differ slightly between the Uniform Rental and Facility Services reportable operating segment, the First Aid and Safety Services reportable operating segment and All Other because of differences in customers served and the nature of each business. We update our estimate of credit loss reserves quarterly, considering recent write-offs and collections information and underlying economic expectations.

Costs to Obtain a Contract
The Company capitalizes commission expenses paid to our employee-partners when the commissions are deemed to be incremental for obtaining the route servicing customer contract. As permitted by ASC 606, "Revenue from Contracts with Customers (Topic 606)", the Company has elected to apply the guidance to a portfolio of contracts (or performance obligations) with similar characteristics because the Company reasonably expects that the effects on the consolidated condensed 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 standard or the amortization period of the asset would have been one year or less. The deferred commissions are amortized on a straight-line basis over the expected period of benefit. We review the deferred commission balances for impairment on an ongoing basis. Deferred commissions are classified as current or noncurrent based on the timing of when we expect to recognize the expense. The current portion is included in prepaid expenses and other current assets and the noncurrent portion is included in other assets, net on the Company's consolidated condensed balance sheets. As of November 30, 2021, the current and noncurrent assets related to deferred commissions totaled $81.3 million and $228.9 million, respectively. As of May 31, 2021, the current and noncurrent assets related to deferred commissions totaled $79.4 million and $227.1 million, respectively. We recorded amortization expense related to deferred commissions of $21.7 million and $20.7 million during the three months ended November 30, 2021 and 2020, respectively. During the six months ended November 30, 2021 and 2020, we recorded amortization expense related to deferred commissions of $43.1 million and $41.1 million, respectively. These expenses are classified in selling and administrative expenses on the consolidated condensed statements of income.
Note 3 - Leases
Cintas has operating leases for certain operating facilities, vehicles and equipment, which provide the right to use the underlying asset and require lease payments over the term of the lease. Each new contract is evaluated to determine if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. All identified leases are recorded on the consolidated condensed balance sheet with a corresponding operating lease right-of-use asset, net, representing the right to use the underlying asset for the lease term and the operating lease liabilities representing the obligation to make lease payments arising from the lease. Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the consolidated condensed balance sheet.

Operating lease right-of-use assets, net and operating lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available at lease commencement date. Lease expense for operating leases is recorded on a straight-line basis over the lease term and variable lease costs are recorded as incurred. Both lease expense and variable lease costs are primarily recorded in cost of uniform rental and facility services and other on the Company's consolidated condensed statements of income. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Operating lease costs, including short-term lease expense and variable lease costs which were immaterial in both periods, were $18.0 million and $18.1 million for the three months ended November 30, 2021 and 2020, respectively. For the six months ended November 30, 2021 and 2020, operating lease costs, including short-term lease expense and variable lease costs which were immaterial in both periods, were $36.2 million and $35.2 million, respectively.

11
The following table provides supplemental information related to the Company's consolidated condensed statements of cash flows for the six months ended November 30:
(In thousands)20212020
Cash paid for amounts included in the measurement of operating lease liabilities$24,301 $24,565 
Operating lease right-of-use assets obtained in exchange for new and renewed
   operating lease liabilities		$10,609 $15,735 
Other information related to the operating lease right-of-use assets, net and operating lease liabilities was as follows:
November 30,
2021		May 31,
2021
Weighted-average remaining lease term - operating leases5.15 years5.33 years
Weighted-average discount rate - operating leases2.23%2.32%
The contractual future minimum lease payments of Cintas' operating lease liabilities by fiscal year are as follows as of November 30, 2021:
(In thousands)
2022 (remaining six months)
$23,998 
202341,926 
202431,483 
202523,829 
202618,126 
Thereafter32,379 
Total payments171,741 
Less interest(9,693)
Total present value of lease payments$162,048 

12
Note 4 - Fair Value Measurements
All financial instruments that are measured at fair value on a recurring basis (at least annually) have been classified within the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the consolidated condensed balance sheet date. These financial instruments measured at fair value on a recurring basis are summarized below: 
As of November 30, 2021
(In thousands)Level 1Level 2Level 3Fair Value
Cash and cash equivalents$113,170 $— $— $113,170 
Other assets, net:
  Interest rate lock agreements— 16,202 — 16,202 
Total assets at fair value$113,170 $16,202 $— $129,372 
Current accrued liabilities:
  Interest rate lock agreements$— $71,918 $— $71,918 
Total liabilities at fair value$— $71,918 $— $71,918 
As of May 31, 2021
(In thousands)Level 1Level 2Level 3Fair Value
Cash and cash equivalents$493,640 $— $— $493,640 
Other assets, net:
Interest rate lock agreements— 40,400 — 40,400 
Total assets at fair value$493,640 $40,400 $— $534,040 
Long-term accrued liabilities:
  Interest rate lock agreements$— $61,567 $— $61,567 
Total liabilities at fair value$— $61,567 $— $61,567 

Cintas’ cash and cash equivalents are generally classified within Level 1 or Level 2 of the fair value hierarchy. Financial instruments classified as Level 1 are based on quoted market prices in active markets, and financial instruments classified as Level 2 are based on quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. The types of financial instruments Cintas classifies within Level 1 include most bank deposits and money market securities. Cintas does not adjust the quoted market price for such financial instruments.

The fair values of Cintas' interest rate lock agreements are based on similar exchange traded derivatives (market approach) and are, therefore, included within Level 2 of the fair value hierarchy. The fair value was determined by comparing the locked rates against the benchmarked treasury rate. No other amounts included in other assets, net, current accrued liabilities or long-term accrued liabilities are recorded at fair value on a recurring basis.

The methods described above may produce a fair value that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while Cintas believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the consolidated condensed balance sheet dates.

In addition to assets and liabilities that are recorded at fair value on a recurring basis, Cintas records assets and liabilities at fair value on a nonrecurring basis as required under U.S. GAAP. The assets and liabilities measured at fair value on a nonrecurring basis primarily relate to assets and liabilities acquired in a business acquisition, which were not material during the three or six months ended November 30, 2021 and 2020.

13
Note 5 - Investments
Cintas' investments are summarized as follows:
(In thousands)November 30,
2021		May 31,
2021
Cash surrender value of insurance policies$270,146 $252,061 
Equity method investments16,814 19,388 
Cost method investments2,163 3,167 
Total investments$289,123 $274,616 
Investments are generally evaluated for impairment on an annual basis or when indicators of impairment exist. For the three and six months ended November 30, 2021 and 2020, no impairment losses were recorded.
Subsequent to November 30, 2021, Cintas purchased the remaining interest in an equity method investment that is a component of its supply chain within the Uniform Rental and Facility Services reportable operating segment for cash consideration of $47.7 million. Subsequent to the purchase, Cintas will consolidate the operations of the previously accounted for equity method investment. The acquisition will be accounted for under the acquisition method.

Note 6 - Earnings Per Share 
Cintas uses the two-class method to calculate basic and diluted earnings per share as a result of outstanding participating securities in the form of restricted stock awards. The following tables set forth the computation of basic and diluted earnings per share using the two-class method for amounts attributable to Cintas’ common shares.
Three Months EndedSix Months Ended
Basic Earnings per Share
(In thousands except per share data)
November 30, 2021November 30, 2020November 30, 2021November 30, 2020
Net income$294,669 $284,857 $625,848 $584,862 
Less: income allocated to participating
   securities		1,495 2,015 3,179 4,153 
Income available to common shareholders$293,174 $282,842 $622,669 $580,709 
Basic weighted average common shares outstanding
103,646 104,999 103,463 104,546 
Basic earnings per share$2.83 $2.69 $6.02 $5.55 
Three Months EndedSix Months Ended
Diluted Earnings per Share
(In thousands except per share data)
November 30, 2021November 30, 2020November 30, 2021November 30, 2020
Net income$294,669 $284,857 $625,848 $584,862 
Less: income allocated to participating securities1,495 2,015 3,179 4,153 
Income available to common shareholders$293,174 $282,842 $622,669 $580,709 
Basic weighted average common shares outstanding
103,646 104,999 103,463 104,546 
Effect of dilutive securities – employee stock options
2,476 2,982 2,563 3,010 
Diluted weighted average common shares outstanding
106,122 107,981 106,026 107,556 
Diluted earnings per share$2.76 $2.62 $5.87 $5.40 
14


For the three months ended November 30, 2021 and 2020, options granted to purchase 0.1 million and 0.2 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share. For the six months ended November 30, 2021 and 2020, options granted to purchase 0.1 million and 0.2 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share. The exercise prices of these options were greater than the average market price of the common stock (anti-dilutive).

On October 29, 2019, Cintas announced that the Board of Directors authorized a $1.0 billion share buyback program, which was completed during the first quarter of fiscal 2022. From the inception of the October 29, 2019 share buyback program through July 2021, Cintas purchased a total of 2.8 million shares of Cintas common stock at an average price of $358.93 per share for a total purchase price of $1.0 billion. On July 27, 2021, Cintas announced that the Board of Directors authorized a new $1.5 billion share buyback program, which does not have an expiration date. There were no share buybacks for the three months ended November 30, 2021 or 2020. The following table summarizes the share buyback activity by program for the six months ended November 30:
20212020
Buyback Program
(In thousands except per share data)
SharesAvg. Price
per Share		Purchase
Price		SharesAvg. Price
per Share		Purchase
Price
October 29, 20191,590 $365.41 $581,220 — $— $— 
July 27, 2021— $— $— — $— $— 
1,590 $365.41 $581,220 — $— $— 

For the three months ended November 30, 2021, Cintas acquired less than 0.1 million shares of Cintas common stock for employee payroll taxes due on restricted stock awards that vested. These shares were acquired at an average price of $420.87 per share for a total purchase price of $5.5 million. For the three months ended November 30, 2020, Cintas acquired less than 0.1 million shares of Cintas common stock for employee payroll taxes due on restricted stock awards that vested. These shares were acquired at an average price of $333.60 per share for a total purchase price of $2.4 million. During the six months ended November 30, 2021, Cintas acquired 0.2 million shares of Cintas common stock for employee payroll taxes due on restricted stock awards that vested. These shares were acquired at an average price of $395.84 per share for a total purchase price of $83.5 million. During the six months ended November 30, 2020, Cintas acquired 0.2 million shares of Cintas common stock for employee payroll taxes due on restricted stock awards that vested. These shares were acquired at an average price of $301.01 per share for a total purchase price of $71.4 million.

15
Note 7 - Goodwill, Service Contracts and Other Assets
Changes in the carrying amount of goodwill and service contracts for the six months ended November 30, 2021, by reportable operating segment and All Other, are as follows:
Goodwill
(in thousands)
Uniform Rental
 and Facility Services		First Aid
 and Safety Services		All
Other 		Total
Balance as of June 1, 2021$2,547,510 $248,571 $116,988 $2,913,069 
Goodwill acquired24,512 9,344 570 34,426