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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 endedFebruary 28, 2022
 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-20220228_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 March 31, 2022
Common Stock, no par value 102,324,911



CINTAS CORPORATION
TABLE OF CONTENTS

Page
February 28, 2022 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 EndedNine Months Ended
 February 28, 2022February 28, 2021February 28, 2022February 28, 2021
Revenue:  
Uniform rental and facility services$1,553,320 $1,417,865 $4,596,767 $4,222,764 
Other407,222 359,191 1,183,006 1,057,914 
Total revenue1,960,542 1,777,056 5,779,773 5,280,678 
Costs and expenses:  
Cost of uniform rental and facility services
834,082 761,850 2,430,644 2,217,073 
Cost of other228,306 205,690 663,078 608,004 
Selling and administrative expenses490,549 483,048 1,503,117 1,426,555 
Operating income407,605 326,468 1,182,934 1,029,046 
Interest income(56)(87)(168)(369)
Interest expense22,030 24,552 65,786 73,659 
Income before income taxes385,631 302,003 1,117,316 955,756 
Income taxes70,183 43,619 176,020 112,510 
Net income$315,448 $258,384 $941,296 $843,246 
Basic earnings per share$3.04 $2.44 $9.05 $7.99 
Diluted earnings per share$2.97 $2.37 $8.84 $7.78 
Dividends declared per share$0.95 $0.75 $2.85 $4.26 
 
See accompanying notes.
3

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

Three Months EndedNine Months Ended
February 28,
2022
February 28,
2021
February 28,
2022
February 28,
2021
Net income$315,448 $258,384 $941,296 $843,246 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
5,297 8,947 (26,191)38,853 
Change in fair value of interest rate lock
   agreements, net of tax expense
   of $11,832, $25,689, $3,022 and
   $34,761, respectively
34,567 75,850 8,828 102,634 
Amortization of interest rate lock
   agreements, net of tax benefit of $149,
   $116, $445 and $347, respectively
(459)(358)(1,378)(1,075)
Other comprehensive income (loss), net of
   tax expense of $11,981, $25,805, $3,467
   and $35,108, respectively
39,405 84,439 (18,741)140,412 
Comprehensive income$354,853 $342,823 $922,555 $983,658 

See accompanying notes.






4

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

 February 28,
2022
May 31,
2021
 (Unaudited) 
ASSETS  
Current assets:  
Cash and cash equivalents$84,136 $493,640 
Accounts receivable, net1,004,632 901,710 
Inventories, net486,750 481,797 
Uniforms and other rental items in service881,734 810,104 
Income taxes, current66,047 22,282 
Prepaid expenses and other current assets163,442 133,776 
Total current assets2,686,741 2,843,309 
Property and equipment, net1,312,176 1,318,438 
Investments259,930 274,616 
Goodwill3,032,738 2,913,069 
Service contracts, net402,366 408,445 
Operating lease right-of-use assets, net167,995 168,532 
Other assets, net306,654 310,414 
 $8,168,600 $8,236,823 
LIABILITIES AND SHAREHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$235,051 $230,786 
Accrued compensation and related liabilities212,481 241,469 
Accrued liabilities622,797 518,910 
Operating lease liabilities, current44,105 43,850 
Debt due within one year1,509,056 899,070 
Total current liabilities2,623,490 1,934,085 
Long-term liabilities:  
Debt due after one year1,343,513 1,642,833 
Deferred income taxes430,695 386,647 
Operating lease liabilities131,224 130,774 
Accrued liabilities345,778 454,637 
Total long-term liabilities2,251,210 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:1,729,525 1,516,202 
425,000,000 shares authorized
  
FY 2022: 190,693,424 shares issued and 102,415,971 shares outstanding
  
FY 2021: 189,071,185 shares issued and 104,061,391 shares outstanding
Retained earnings8,522,327 7,877,015 
Treasury stock:(6,970,099)(5,736,258)
FY 2022: 88,277,453 shares
  
FY 2021: 85,009,794 shares
Accumulated other comprehensive income12,147 30,888 
Total shareholders’ equity3,293,900 3,687,847 
 $8,168,600 $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 exercised564 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 exercised317 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 
Net income— — 315,448 — — — 315,448 
Comprehensive income, net of tax— — — 39,405 — — 39,405 
Dividends— — (98,197)— — — (98,197)
Stock-based compensation— 22,794 — — — — 22,794 
Vesting of stock-based compensation awards2 — — — — — — 
Stock options exercised215 20,438 — — — — 20,438 
Repurchase of common stock— — — — (1,466)(569,115)(569,115)
Balance at February 28, 2022190,693 $1,729,525 $8,522,327 $12,147 (88,277)$(6,970,099)$3,293,900 
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 exercised795 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 exercised424 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 
Net income— — 258,384 — — — 258,384 
Comprehensive income, net of tax— — — 84,439 — — 84,439 
Dividends— — (79,503)— — — (79,503)
Stock-based compensation— 25,819 — — — — 25,819 
Vesting of stock-based compensation awards9 — — — — — — 
Stock options exercised304 12,519 — — — — 12,519 
Repurchase of common stock— — — — (260)(83,108)(83,108)
Balance at February 22, 2021188,914 $1,477,680 $7,688,425 $(12,968)(83,875)$(5,336,627)$3,816,510 

See accompanying notes.
7

CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 Nine Months Ended
 February 28, 2022February 28, 2021
Cash flows from operating activities:  
Net income$941,296 $843,246 
Adjustments to reconcile net income to net cash provided by operating activities:
  
Depreciation184,464 182,132 
Amortization of intangible assets and capitalized contract costs112,859 107,689 
Stock-based compensation83,687 83,421 
Gain on equity method investment transaction(30,151) 
Gain on sale of operating assets(12,129)(21,861)
Deferred income taxes42,652 (36,259)
Change in current assets and liabilities, net of acquisitions of businesses:  
Accounts receivable, net(99,223)(63,178)
Inventories, net2,311 (123,678)
Uniforms and other rental items in service(77,584)(6,269)
Prepaid expenses and other current assets and capitalized contract costs(77,450)(76,971)
Accounts payable6,168 5,113 
Accrued compensation and related liabilities(28,400)97,474 
Accrued liabilities and other(17,717)(1,357)
Income taxes, current(43,728)(84,687)
Net cash provided by operating activities987,055 904,815 
Cash flows from investing activities:  
Capital expenditures(165,851)(100,410)
Purchases of investments(6,024)(7,873)
Proceeds from sale of operating assets, net of cash disposed15,347 32,490 
Acquisitions of businesses, net of cash acquired(150,844)(7,570)
Other, net(8,939)(5,301)
Net cash used in investing activities(316,311)(88,664)
Cash flows from financing activities:  
Issuance of commercial paper, net559,210  
Repayment of debt(250,000) 
Proceeds from exercise of stock-based compensation awards117,636 120,049 
Dividends paid(276,922)(371,818)
Repurchase of common stock(1,221,841)(154,490)
Other, net(6,657)(3,836)
Net cash used in financing activities(1,078,574)(410,095)
Effect of exchange rate changes on cash and cash equivalents(1,674)2,153 
Net (decrease) increase in cash and cash equivalents(409,504)408,209 
Cash and cash equivalents at beginning of period493,640 145,402 
Cash and cash equivalents at end of period$84,136 $553,611 
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)February 28,
2022
May 31,
2021
Raw materials$23,218 $15,109 
Work in process33,858 37,664 
Finished goods429,674 429,024 
 $486,750 $481,797 
Inventories are recorded net of reserves for obsolete inventory (excess and slow-moving) of $103.0 million and $111.0 million at February 28, 2022 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 nine months ended February 28, 2021, 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 EndedNine Months Ended
(In thousands)February 28,
2022
February 28,
2021
February 28,
2022
February 28,
2021
Uniform Rental and
   Facility Services
$1,553,320 79.2 %$1,417,865 79.8 %$4,596,767 79.5 %$4,222,764 80.0 %
First Aid and Safety
   Services
212,958 10.9 %198,474 11.2 %614,234 10.6 %597,373 11.3 %
Fire Protection
   Services
128,727 6.6 %110,212 6.2 %380,199 6.6 %322,913 6.1 %
Uniform Direct Sales65,537 3.3 %50,505 2.8 %188,573 3.3 %137,628 2.6 %
Total revenue$1,960,542 100.0 %$1,777,056 100.0 %$5,779,773 100.0 %$5,280,678 100.0 %

Fire Protection Services and Uniform Direct Sales operating segments are included within All Other as disclosed in Note 12 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 nine months ended February 28, 2022 or 2021. 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 February 28, 2022, the current and noncurrent assets related to deferred commissions totaled $82.8 million and $232.7 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 $22.0 million and $20.9 million during the three months ended February 28, 2022 and 2021, respectively. During the nine months ended February 28, 2022 and 2021, we recorded amortization expense related to deferred commissions of $65.1 million and $62.0 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 $19.0 million and $17.7 million for the three months ended February 28, 2022 and 2021, respectively. For the nine months ended February 28, 2022 and 2021, operating lease costs, including short-term lease expense and variable lease costs which were immaterial in both periods, were $55.2 million and $52.9 million, respectively.

11

The following table provides supplemental information related to the Company's consolidated condensed statements of cash flows for the nine months ended February 28:
(In thousands)20222021
Cash paid for amounts included in the measurement of operating lease liabilities$36,923 $36,654 
Operating lease right-of-use assets obtained in exchange for new and renewed
   operating lease liabilities
$17,452 $27,771 
Operating lease right-of-use assets acquired in business combinations $17,734 $ 

Other information related to the operating lease right-of-use assets, net and operating lease liabilities was as follows:
February 28,
2022
May 31,
2021
Weighted-average remaining lease term - operating leases5.54 years5.33 years
Weighted-average discount rate - operating leases2.17%2.32%

The contractual future minimum lease payments of Cintas' operating lease liabilities by fiscal year are as follows as of February 28, 2022:
(In thousands)
2022 (remaining three months)
$12,455 
202345,345 
202434,896 
202526,924 
202621,255 
Thereafter45,506 
Total payments186,381 
Less interest(11,052)
Total present value of lease payments$175,329 

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 February 28, 2022
(In thousands)Level 1Level 2Level 3Fair Value
Cash and cash equivalents$84,136 $ $ $84,136 
Prepaid expenses and other current assets:
Interest rate lock agreements 22,645  22,645 
Other assets, net:
  Interest rate lock agreements 21,370  21,370 
Total assets at fair value$84,136 $44,015 $ $128,151 
Current accrued liabilities:
  Interest rate lock agreements$ $52,540 $ $52,540 
Long-term accrued liabilities:
  Interest rate lock agreements 793  793 
Total liabilities at fair value$ $53,333 $ $53,333 
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 prepaid expenses and other current assets, 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.
13

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. The Company's acquisition of the remaining interest of an equity method investment during the three months ended February 28, 2022 was recorded at fair value. See Note 10 entitled Acquisitions for additional information.

Note 5 - Investments
Cintas' investments are summarized as follows:
(In thousands)February 28,
2022
May 31,
2021
Cash surrender value of insurance policies$254,245 $252,061 
Equity method investments3,522 19,388 
Cost method investments2,163 3,167 
Total investments$259,930 $274,616 

Investments are generally evaluated for impairment on an annual basis or when indicators of impairment exist. For the three and nine months ended February 28, 2022 and 2021, no impairment losses were recorded.

During the three months ended February 28, 2022, Cintas acquired the remaining interest of an equity method investment, and as a result, such investment is no longer accounted for as an equity method investment and is no longer included in the table above. See Note 10 entitled Acquisitions for more information.

14

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 EndedNine Months Ended
Basic Earnings per Share
(In thousands except per share data)
February 28, 2022February 28, 2021February 28, 2022February 28, 2021
Net income$315,448 $258,384 $941,296 $843,246 
Less: income allocated to participating securities