10-Q 1 ctas-2013x831x10xq.htm 10-Q CTAS-2013-8.31-10-Q


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
( X )
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2013
 
OR 
(    )
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                         to                                        
 
Commission file number 0-11399
 
CINTAS CORPORATION
(Exact name of Registrant as specified in its charter)
 
WASHINGTON
 
31-1188630
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
6800 CINTAS BOULEVARD
P.O. BOX 625737
CINCINNATI, OHIO 45262-5737
(Address of principal executive offices)(Zip Code)
 
(513) 459-1200
(Registrant’s telephone number, including area code)
 
Indicate by checkmark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes   ü   No     
 
Indicate by a checkmark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes   ü   No     
 
Indicate by checkmark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
 
Large Accelerated Filer    ü               Accelerated Filer                          Smaller Reporting Company     
Non-Accelerated Filer          (Do not check if a smaller reporting company)
 
Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes      No     ü  
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
 
Outstanding September 30, 2013
Common Stock, no par value
 
119,889,137




CINTAS CORPORATION
TABLE OF CONTENTS

Part I.
Financial Information
Page No.
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibits
 
 
 
 
 
 
 
 

2



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

 
Three Months Ended
 
August 31,
2013
 
August 31,
2012
Revenue:
 

 
 

Rental uniforms and ancillary products
$
792,866

 
$
754,843

Other services
327,477

 
296,482

 
1,120,343

 
1,051,325

Costs and expenses:
 

 
 

Cost of rental uniforms and ancillary products
454,731

 
428,148

Cost of other services
199,632

 
177,302

Selling and administrative expenses
325,910

 
306,581

 
 
 
 
Operating income
140,070

 
139,294

 
 
 
 
Interest income
(68
)
 
(77
)
Interest expense
16,523

 
16,598

 
 
 
 
Income before income taxes
123,615

 
122,773

Income taxes
45,861

 
46,040

Net income
$
77,754

 
$
76,733

 
 
 
 
Basic earnings per share
$
0.63

 
$
0.61

 
 
 
 
Diluted earnings per share
$
0.63

 
$
0.60

 
 
See accompanying notes.

3



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

 
Three Months Ended
 
August 31, 2013
 
August 31, 2012
 
 
 
 
Net income
$
77,754

 
$
76,733

 
 
 
 
Other comprehensive (loss) income, net of tax:
 
 
 
        Foreign currency translation adjustments
(646
)
 
7,017

      Change in fair value of derivatives(1)

 
(151
)
      Amortization of interest rate lock agreements (2)
488

 
488

      Change in fair value of available-for-sale securities(3)
(14
)
 
(2
)
 
 
 
 
Other comprehensive (loss) income
(172
)
 
7,352

 
 
 
 
Comprehensive income
$
77,582

 
$
84,085



(1)      Net of less than $0.1 million of tax expense for the three months ended August 31, 2012.

(2)      Net of less than $0.1 million of tax benefit for the three months ended August 31, 2013 and 2012, respectively.

(3)      Net of less than $0.1 million of tax expense for the three months ended August 31, 2013 and 2012, respectively.

See accompanying notes.







4



CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except share data)
 
August 31,
2013
 
May 31,
2013
 
(Unaudited)
 
 

ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
278,670

 
$
352,273

Marketable securities
4,189

 
5,680

Accounts receivable, net
511,642

 
496,049

Inventories, net
245,470

 
240,440

Uniforms and other rental items in service
500,384

 
496,752

Income taxes, current

 
9,102

Prepaid expenses
31,934

 
24,530

Total current assets
1,572,289

 
1,624,826

 
 
 
 
Property and equipment, at cost, net
991,331

 
986,703

 
 
 
 
Goodwill
1,531,006

 
1,517,560

Service contracts, net
93,119

 
92,153

Other assets, net
123,432

 
124,390

 
$
4,311,177

 
$
4,345,632

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
124,952

 
$
121,029

Accrued compensation and related liabilities
43,247

 
78,050

Accrued liabilities
235,237

 
271,821

Income taxes, current
23,367

 

Deferred tax liability
80,692

 
77,169

Long-term debt due within one year
8,200

 
8,187

Total current liabilities
515,695

 
556,256

 
 
 
 
Long-term liabilities:
 

 
 

Long-term debt due after one year
1,300,799

 
1,300,979

Deferred income taxes
214,221

 
210,483

Accrued liabilities
84,451

 
76,422

Total long-term liabilities
1,599,471

 
1,587,884

 
 
 
 
Shareholders’ equity:
 

 
 

Preferred stock, no par value:
 

 
 

100,000 shares authorized, none outstanding

 

Common stock, no par value:
 

 
 

425,000,000 shares authorized,
 

 
 

FY 2014:  175,492,504 issued and 120,778,629 outstanding
 

 
 

FY 2013:  174,786,010 issued and 122,281,507 outstanding
217,107

 
186,332

Paid-in capital
102,961

 
109,822

Retained earnings
3,795,525

 
3,717,771

Treasury stock:
 

 
 

FY 2014:  54,713,875 shares
 

 
 

FY 2013:  52,504,503 shares
(1,957,533
)
 
(1,850,556
)
Accumulated other comprehensive income
37,951

 
38,123

Total shareholders’ equity
2,196,011

 
2,201,492

 
$
4,311,177

 
$
4,345,632

See accompanying notes.

5



CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) 
 
Three Months Ended
 
August 31,
2013
 
August 31,
2012
Cash flows from operating activities:
 

 
 

Net income
$
77,754

 
$
76,733

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

 
 

Depreciation
42,571

 
40,342

Amortization of intangible assets
5,823

 
6,100

Stock-based compensation
6,984

 
5,448

Deferred income taxes
7,373

 
9,716

Change in current assets and liabilities, net of acquisitions of businesses:
 

 
 

Accounts receivable, net
(14,903
)
 
(7,128
)
Inventories, net
(5,258
)
 
9,889

Uniforms and other rental items in service
(4,150
)
 
(8,672
)
Prepaid expenses
(7,216
)
 
(5,392
)
Accounts payable
2,915

 
16,278

Accrued compensation and related liabilities
(34,777
)
 
(50,793
)
Accrued liabilities
(27,215
)
 
(27,400
)
Income taxes payable
32,658

 
29,744

Net cash provided by operating activities
82,559

 
94,865

 
 
 
 
Cash flows from investing activities:
 

 
 

Capital expenditures
(37,462
)
 
(47,438
)
Proceeds from redemption of marketable securities
35,233

 
24,720

Purchase of marketable securities and investments
(32,941
)
 
(36,970
)
Acquisitions of businesses, net of cash acquired
(32,216
)
 
(2,130
)
Other, net
382

 
577

Net cash used in investing activities
(67,004
)
 
(61,241
)
 
 
 
 
Cash flows from financing activities:
 

 
 

Proceeds from issuance of debt

 
250,000

Repayment of debt
(167
)
 
(225,154
)
Proceeds from exercise of stock-based compensation awards
14,085

 
1,119

Repurchase of common stock
(106,977
)
 
(77,953
)
Other, net
4,126

 
(3,491
)
Net cash used in financing activities
(88,933
)
 
(55,479
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(225
)
 
1,247

 
 
 
 
Net decrease in cash and cash equivalents
(73,603
)
 
(20,608
)
 
 
 
 
Cash and cash equivalents at beginning of period
352,273

 
339,825

 
 
 
 
Cash and cash equivalents at end of period
$
278,670

 
$
319,217

 
See accompanying notes.

6



CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 
1.             Basis of Presentation
 
The consolidated condensed financial statements of Cintas Corporation (Cintas, the Company, we, us or our) included herein have been prepared by Cintas, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).  Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations.  While we believe that the disclosures are adequately presented, it is suggested 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, 2013.  A summary of our significant accounting policies is presented beginning on page 35 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.

As disclosed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2013, inventories are valued at the lower of cost (first-in, first-out) or market.  Inventory is comprised of the following amounts: 
(In thousands)
August 31,
2013
 
May 31,
2013
 
 
 
 
Raw materials
$
17,389

 
$
19,800

Work in process
15,712

 
17,353

Finished goods
212,369

 
203,287

 
$
245,470

 
$
240,440

 
 

2.             New Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2013-02, "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income." ASU 2013-02 requires an entity to present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income if the item reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For reclassification items not required under GAAP to be reclassified directly to net income in their entirety in the same reporting period, an entity is required to cross-reference to other disclosures currently required under GAAP that provide additional detail about those amounts. ASU 2013-02 applies to all public and private companies that report items of other comprehensive income. ASU 2013-02 is effective for reporting periods beginning after December 15, 2012, with prospective adoption required. The Company adopted ASU 2013-02 effective June 1, 2013. See Note 9 entitled Accumulated Other Comprehensive Income (Loss) of "Notes to Consolidated Condensed Financial Statements" for details of required disclosure.


7



3.             Fair Value Measurements
 
FASB Accounting Standard Codification (ASC) Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.  It also establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
 
Level 1 –    Quoted prices in active markets for identical assets or liabilities.
 
Level 2 –   Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
 
Level 3 –   Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
 
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Cintas’ assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
 
In order to meet the requirements of ASC 820, Cintas utilizes two basic valuation approaches to determine the fair value of its assets and liabilities required to be recorded on a recurring basis at fair value. The first approach is the cost approach. The cost approach is generally the value a market participant would expect to replace the respective asset or liability. The second approach is the market approach. The market approach looks at what a market participant would consider valuing an exact or similar asset or liability to that of Cintas, including those traded on exchanges.
 
All financial instruments that are measured at fair value on a recurring basis (at least annually) have been segregated into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the consolidated balance sheet date.  These financial instruments measured at fair value on a recurring basis are summarized below: 
(In thousands)
As of August 31, 2013
 
Level 1
 
Level 2
 
Level 3
 
Fair Value
Cash and cash equivalents
$
278,670

 
$

 
$

 
$
278,670

Marketable securities:
 

 
 

 
 

 
 

Canadian treasury securities

 
4,189

 

 
4,189

Total assets at fair value
$
278,670

 
$
4,189

 
$

 
$
282,859

 
 
 
 
 
 
 
 
Current accrued liabilities
$

 
$
107

 
$

 
$
107

Total liabilities at fair value
$

 
$
107

 
$

 
$
107

(In thousands)
As of May 31, 2013
 
Level 1
 
Level 2
 
Level 3
 
Fair Value
Cash and cash equivalents
$
352,273

 
$

 
$

 
$
352,273

Marketable securities:
 
 
 
 
 
 
 
U.S. municipal bonds

 
5,680

 

 
5,680

Accounts receivable, net

 
39

 

 
39

Total assets at fair value
$
352,273

 
$
5,719

 
$

 
$
357,992

 

8



Cintas’ cash and cash equivalents and marketable securities are generally classified within Level 1 or Level 2 of the fair value hierarchy. Financial instruments classified as Level 1 are based on quoted market prices in active markets, and financial instruments classified as Level 2 are based on quoted market prices in non-active markets, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. The types of financial instruments Cintas classifies within Level 1 include most bank deposits and money market securities. Cintas does not adjust the quoted market price for such financial instruments.
 
The types of financial instruments Cintas classifies within Level 2 include Canadian treasury securities (federal) and highly rated U.S. state or municipal bonds. The valuation technique used for Cintas’ marketable securities classified within Level 2 of the fair value hierarchy is primarily the market approach. The primary inputs to value Cintas’ marketable securities is the respective instruments future cash flows based on its stated yield and the amount a market participant would pay for a similar instrument. Primarily all of Cintas’ marketable securities are actively traded and the recorded fair value reflects current market conditions. However, due to the inherent volatility in the investment market, there is at least a possibility that recorded investment values may change in the near term.
 
The funds invested in Canadian marketable securities are not presently expected to be repatriated, but instead are expected to be invested indefinitely in foreign subsidiaries. Interest, realized gains and losses and declines in value determined to be other than temporary on available-for-sale securities are included in interest income or expense. The cost of the securities sold is based on the specific identification method. The amortized cost basis of the marketable securities were $4.2 million and $5.7 million as of August 31, 2013 and May 31, 2013, respectively. All outstanding marketable securities at August 31, 2013 and May 31, 2013 had contractual maturities due within one year.
 
As of August 31, 2013, current accrued liabilities include foreign currency forward contracts. As of May 31, 2013, accounts receivable, net include foreign currency forward contracts. The fair value of Cintas' foreign currency forward contracts are based on similar exchange traded derivatives (market approach) and are, therefore, included within Level 2 of the fair value hierarchy.

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 balance sheet date.

Cintas’ non-financial assets and liabilities not permitted or required to be measured at fair value on a recurring basis primarily relate to assets and liabilities acquired in a business acquisition. Cintas is required to provide additional disclosures about fair value measurements as part of the consolidated financial statements for each major category of assets and liabilities measured at fair value on a non-recurring basis (including business acquisitions), if material. Based on the nature of Cintas’ business acquisitions, which occur regularly throughout the fiscal year, the majority of the assets acquired and liabilities assumed consist of working capital, primarily valued using Level 2 inputs, property and equipment, also primarily valued using Level 2 inputs and goodwill and other identified intangible assets valued using Level 3 inputs. In general, non-recurring fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities, which generally are not applicable to non-financial assets and liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as definitive sales agreements, appraisals or established market values of comparable assets. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability and include situations where there is little, if any, market activity for the asset or liability, such as internal estimates of future cash flows and Company specific discount rates.
 

9



4.             Earnings Per Share
 
The following table sets forth the computation of basic and diluted earnings per share using the two-class method for amounts attributable to Cintas’ common shares: 
 
Three Months Ended
(In thousands except per share data)
August 31,
2013
 
August 31,
2012
Basic Earnings per Share
 

 
 

Net income
$
77,754

 
$
76,733

Less: net income allocated to participating unvested securities
460

 
365

Net income available to common shareholders
$
77,294

 
$
76,368

 
 
 
 
Basic weighted average common shares outstanding
122,130

 
126,110

 
 
 
 
Basic earnings per common share
$
0.63

 
$
0.61

 
 
 
 
Diluted Earnings per Share
 

 
 

Net income
$
77,754

 
$
76,733

Less: net income allocated to participating unvested securities
460

 
365

Net income available to common shareholders
$
77,294

 
$
76,368

 
 
 
 
Basic weighted average common shares outstanding
122,130

 
126,110

Effect of dilutive securities – employee stock options
762

 
348

Diluted weighted average common shares outstanding
122,892

 
126,458

 
 
 
 
Diluted earnings per share
$
0.63

 
$
0.60

 
For the three months ended August 31, 2013 and 2012, 0.6 million and 0.8 million options granted to purchase shares of Cintas common stock were excluded from the computation of diluted earnings per share, respectively. The exercise prices of these options were greater than the average market price of the common stock (anti-dilutive).
 
On October 18, 2011, we announced that the Board of Directors authorized a $500.0 million share buyback program. On July 30, 2013, we announced that the Board of Directors authorized a new $500.0 million share buyback program, which does not have an expiration date. In the three months ended August 31, 2013, we purchased 2.1 million shares of Cintas common stock for a total purchase price of $100.8 million. In the period subsequent to August 31, 2013 through October 10, 2013, we purchased 0.9 million shares of Cintas common stock for $46.3 million. From the inception of the October 18, 2011 share buyback program through October 10, 2013, Cintas has purchased a total of 11.4 million shares of Cintas common stock at an average price of $42.44 for a total purchase price of $484.6 million. In addition, for the three months ended August 31, 2013, Cintas acquired 0.1 million shares of Cintas common stock for employee payroll taxes due on restricted stock awards that vested during the three months ended August 31, 2013. These shares were acquired at an average price of $47.67 per share for a total purchase price of $6.2 million.

10



5.             Goodwill, Service Contracts and Other Assets
 
Changes in the carrying amount of goodwill and service contracts for the three months ended August 31, 2013, by operating segment, are as follows:
Goodwill (in thousands)
Rental
Uniforms &
Ancillary
Products
 
Uniform
Direct
Sales
 
First Aid,
Safety &
Fire
Protection
 
Document
Management
 
Total
 
 

 
 

 
 

 
 

 
 

Balance as of June 1, 2013
$
944,325

 
$
23,942

 
$
216,989

 
$
332,304

 
$
1,517,560

Goodwill acquired

 

 
4,866

 
8,203

 
13,069

Foreign currency translation
(271
)
 
(7
)
 

 
655

 
377

Balance as of August 31, 2013
$
944,054

 
$
23,935

 
$
221,855

 
$
341,162

 
$
1,531,006

Service Contracts (in thousands)
Rental
Uniforms &
Ancillary
Products
 
Uniform
Direct
Sales
 
First Aid,
Safety &
Fire
Protection
 
Document
Management
 
Total
 
 

 
 

 
 

 
 

 
 

Balance as of June 1, 2013
$
23,135

 
$

 
$
32,811

 
$
36,207

 
$
92,153

Service contracts acquired

 

 
2,876

 
3,275

 
6,151

Service contracts amortization
(1,497
)
 

 
(2,013
)
 
(1,809
)
 
(5,319
)
Foreign currency translation
(2
)
 

 

 
136

 
134

Balance as of August 31, 2013
$
21,636

 
$

 
$
33,674

 
$
37,809

 
$
93,119


Information regarding Cintas’ service contracts and other assets is as follows:
 
As of August 31, 2013
(In thousands)
Carrying Amount
 
Accumulated Amortization
 
Net
Service contracts
$
426,391

 
$
333,272

 
$
93,119

 
 
 
 
 
 
Noncompete and consulting agreements
$
78,833

 
$
73,608

 
$
5,225

Investments (1)
100,648

 

 
100,648

Other
22,678

 
5,119

 
17,559

Total
$
202,159

 
$
78,727

 
$
123,432

 
As of May 31, 2013
(In thousands)
Carrying Amount
 
Accumulated Amortization
 
Net
Service contracts
$
420,499

 
$
328,346

 
$
92,153

 
 
 
 
 
 
Noncompete and consulting agreements
$
77,863

 
$
72,970

 
$
4,893

Investments (1)
101,525

 

 
101,525

Other
22,711

 
4,739

 
17,972

Total
$
202,099

 
$
77,709

 
$
124,390


(1)      Investments at August 31, 2013, include the cash surrender value of insurance policies of $72.0 million, equity method investments of $27.7 million and cost method investments of $0.9 million.  Investments at May 31, 2013, include the cash surrender value of insurance policies of $73.0 million, equity method investments of $27.6 million and cost method investments of $0.9 million.
 
Amortization expense was $5.8 million and $6.1 million for the three months ended August 31, 2013 and 2012, respectively.  Estimated amortization expense, excluding any future acquisitions, for each of the next five full fiscal years is $22.4 million, $19.6 million, $14.3 million, $9.1 million and $7.9 million, respectively.
 
Investments recorded using the cost method are evaluated for impairment on an annual basis or when indicators of impairment are identified.  For the three months ended August 31, 2013 and 2012, no impairment losses were recognized.  

11



6.             Debt, Derivatives and Hedging Activities
 
Cintas' senior notes are recorded at cost. The fair value is estimated using Level 2 inputs based on Cintas' current incremental borrowing rate for similar types of borrowing arrangements which is similar to the market approach. The carrying value and fair value of Cintas' long-term debt as of August 31, 2013 were $1,309.0 million and $1,399.2 million, respectively, and as of May 31, 2013 were $1,309.2 million and $1,447.1 million, respectively.

Cintas’ commercial paper program has a capacity of $300.0 million that is fully supported by a backup revolving credit facility through a credit agreement with its banking group.  This revolving credit facility has an accordion feature that allows for a maximum borrowing capacity of $450.0 million and has a maturity date of October 6, 2016.  No commercial paper or borrowings on our revolving credit facility were outstanding at August 31, 2013 or May 31, 2013.

On June 1, 2012, Cintas repaid at maturity $225.0 million aggregate principal amount of its 6.00% senior notes due 2012. On June 5, 2012, Cintas issued $250.0 million aggregate principal amount of senior notes due June 1, 2022. These senior notes bear interest at a rate of 3.25% paid semi-annually beginning December 1, 2012.
 
Cintas used interest rate lock agreements to hedge against movements in the treasury rates at the time Cintas issued its senior notes in fiscal 2007, fiscal 2008, fiscal 2011 and fiscal 2013.  The amortization of the cash flow hedges resulted in an increase to other comprehensive income of $0.5 million for the three months ended August 31, 2013 and 2012.

To hedge the exposure of movements in the foreign currency rates, Cintas may use foreign currency hedges. These hedges reduce the impact on cash flows from movements in the foreign currency exchange rates. Examples of foreign currency hedge instruments that Cintas may use are average rate options and forward contracts. Cintas had forward contracts included in current accrued liabilities of $0.1 million as of August 31, 2013. As of May 31, 2013, there were less than $0.1 million of forward contracts included in accounts receivable. These instruments did not impact foreign currency exchange during the three months ended August 31, 2013 or 2012.

Cintas has certain covenants related to debt agreements. These covenants limit Cintas’ ability to incur certain liens, to engage in sale-leaseback transactions and to merge, consolidate or sell all or substantially all of Cintas’ assets. These covenants also require Cintas to maintain certain debt to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) and interest coverage ratios. Cross-default provisions exist between certain debt instruments.  Cintas is in compliance with all of the significant debt covenants for all periods presented. If a default of a significant covenant were to occur, the default could result in an acceleration of the maturity of the indebtedness, impair liquidity and limit the ability to raise future capital. 

7.             Income Taxes
 
In the normal course of business, Cintas provides for uncertain tax positions and the related interest, and adjusts its unrecognized tax benefits and accrued interest accordingly.  During the three months ended August 31, 2013, unrecognized tax benefits increased by approximately $0.2 million and accrued interest decreased by approximately $0.1 million.
 
All U.S. federal income tax returns are closed to audit through fiscal 2010.  Cintas is currently in advanced stages of various audits in certain foreign jurisdictions and certain domestic states. The years under audit cover fiscal years back to 2005.  Based on the resolution of the various audits and changes in tax law, it is reasonably possible that the balance of unrecognized tax benefits could decrease by $0.6 million for the fiscal year ending May 31, 2014.

On September 13, 2013, the Internal Revenue Service released final tangible property regulations under Sections 162(a) and 263(a) of the Internal Revenue Code of 1986 (Code), regarding the deduction and capitalization of expenditures related to tangible property. The final regulations replace temporary regulations that were issued in December 2011. Also released were proposed regulations under Section 168 of the Code regarding dispositions of tangible property. These final and proposed regulations will be effective for Cintas' fiscal year ending May 31, 2015. Early adoption is available, and as such, Cintas elected early adoption of the regulations on specific assets (material and supplies) resulting in a gross balance sheet reclassification of $33.6 million in fiscal 2013 between unrecognized tax benefits and the tax deferred (i.e., between long-term accrued liabilities and current deferred taxes on the Consolidated Condensed Balance Sheet). Transition guidance providing the procedural rules to comply with such regulations is expected to be released in the near term. Cintas continues to review the regulations, but does not believe there will be a material impact on Cintas' consolidated financial statements when they are fully adopted.

12



8. Litigation and Other Contingencies

Cintas is subject to legal proceedings, insurance receipts, legal settlements and claims arising from the ordinary course of its business, including personal injury, customer contract, environmental and employment claims. In the opinion of management, the aggregate liability, if any, with respect to such ordinary course of business actions will not have a material adverse effect on the consolidated financial position, consolidated results of operations or consolidated cash flows of Cintas. Cintas is party to additional litigation not considered in the ordinary course of business, including the litigation discussed below.
Cintas is a defendant in a purported class action lawsuit, Mirna E. Serrano, et al. v. Cintas Corporation (Serrano), filed on May 10, 2004, and pending in the United States District Court, Eastern District of Michigan, Southern Division. The Serrano plaintiffs alleged that Cintas discriminated against women in hiring into various service sales representative positions across all divisions of Cintas. On November 15, 2005, the Equal Employment Opportunity Commission (EEOC) intervened in the Serrano lawsuit. The Serrano plaintiffs seek injunctive relief, compensatory damages, punitive damages, attorneys' fees and other remedies. On October 27, 2008, the United States District Court in the Eastern District of Michigan granted summary judgment in favor of Cintas limiting the scope of the putative class in the Serrano lawsuit to female applicants for service sales representative positions at Cintas locations within the state of Michigan. Consequently, all claims brought by female applicants for service sales representative positions outside of the state of Michigan were dismissed. Similarly, any claims brought by the EEOC on behalf of similarly situated female applicants outside of the state of Michigan have also been dismissed from the Serrano lawsuit. In September 2010, the Court in Serrano dismissed all private individual claims and all claims of the EEOC and the 13 individuals it claimed to represent. The EEOC appealed the District Court's summary judgment decisions and various other rulings to the United States Court of Appeals for the Sixth Circuit. On November 9, 2012, the Sixth Circuit Court of Appeals reversed the District Court's opinion and remanded the claims back to the District Court. On April 16, 2013, Cintas filed with the United States Supreme Court a Petition for a Writ of Certiorari seeking to review the judgment of the United States Court of Appeals for the Sixth Circuit. On October 7, 2013, the Court denied Cintas’ Petition, thus remanding the claims back to the District Court consistent with the Sixth Circuit Court’s November 9, 2012 decision.
Cintas is a defendant in another purported class action lawsuit, Blanca Nelly Avalos, et al. v. Cintas Corporation (Avalos), which was filed in the United States District Court, Eastern District of Michigan, Southern Division. The Avalos plaintiffs alleged that Cintas discriminated against women, African-Americans and Hispanics in hiring into various service sales representative positions in Cintas' Rental division only throughout the United States. The Avalos plaintiffs sought injunctive relief, compensatory damages, punitive damages, attorneys' fees and other remedies. The claims in Avalos originally were brought in the lawsuit captioned Robert Ramirez, et al. v. Cintas Corporation (Ramirez), filed on January 20, 2004, in the United States District Court, Northern District of California, San Francisco Division. On May 11, 2006, the Ramirez and Avalos African-American, Hispanic and female failure to hire into service sales representative positions claims and the EEOC's intervention were consolidated for pretrial purposes with the Serrano case and transferred to the United States District Court for the Eastern District of Michigan, Southern Division. The consolidated case was known as Mirna E. Serrano/Blanca Nelly Avalos, et al. v. Cintas Corporation (Serrano/Avalos). On March 31, 2009, the United States District Court, Eastern District of Michigan, Southern Division entered an order denying class certification to all plaintiffs in the Serrano/Avalos lawsuits. Following denial of class certification, the Court permitted the individual Avalos and Serrano plaintiffs to proceed separately. In the Avalos case, the Court dismissed the remaining claims of the individual plaintiffs who remained in that case after the denial of class certification. On May 11, 2010, Plaintiff Tanesha Davis, on behalf of all similarly situated plaintiffs in the Avalos case, filed a notice of appeal of the District Court's summary judgment order in the United States Court of Appeals for the Sixth Circuit. On May 30, 2013, the United States Court of Appeals for the Sixth Circuit affirmed the denial of class certification.
The litigation discussed above, if decided or settled adversely to Cintas, may, individually or in the aggregate, result in liability material to Cintas' consolidated financial condition, consolidated results of operations or consolidated cash flows and could increase costs of operations on an ongoing basis. Any estimated liability relating to these proceedings is not determinable at this time. Cintas may enter into discussions regarding settlement of these and other lawsuits, and may enter into settlement agreements if it believes such settlement is in the best interest of Cintas' shareholders.



13



9. Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive income (loss):

(In thousands)
For the Three Months Ended August 31, 2013
 
Foreign Currency
 
Unrealized
Loss on
Derivatives
 
Other
 
Total
Balance at June 1, 2013
$
51,312

 
$
(14,339
)
 
$
1,150

 
$
38,123

Other comprehensive loss before reclassifications
(646
)
 

 
(14
)
 
(660
)
Amounts reclassified from accumulated other comprehensive loss

 
488

 

 
488

Net current period other comprehensive (loss) income
(646
)
 
488

 
(14
)
 
(172
)
 
 
 
 
 
 
 
 
Balance at August 31, 2013
$
50,666

 
$
(13,851
)
 
$
1,136

 
$
37,951


The following table summarizes the reclassifications out of accumulated other comprehensive income (loss):

(In thousands)
 
For the Three Months Ended August 31, 2013
Details about Accumulated Other Comprehensive Income Components
 
Amount Reclassified from
Accumulated Other
Comprehensive Loss
 
Affected Line in the Consolidated Condensed Statements of Income
Amortization of interest rate locks
 
$
488

 
Interest Expense



14



10.      Segment Information
 
Cintas classifies its businesses into four operating segments based on the types of products and services provided.  The Rental Uniforms and Ancillary Products operating segment consists of the rental and servicing of uniforms and other garments including flame resistant clothing, mats, mops and shop towels and other ancillary items.  In addition to these rental items, restroom cleaning services and supplies and carpet and tile cleaning services are also provided within this operating segment.  The Uniform Direct Sales operating segment consists of the direct sale of uniforms and related items.  The First Aid, Safety and Fire Protection Services operating segment consists of first aid, safety and fire protection products and services.  The Document Management Services operating segment consists of document destruction, document imaging and document retention services.

Cintas evaluates the performance of each operating segment based on several factors of which the primary financial measures are operating segment revenue and income before income taxes.  The accounting policies of the operating segments are the same as those described in Note 1 entitled Basis of Presentation.  Information related to the operations of Cintas’ operating segments is set forth below: 
(In thousands)
Rental
Uniforms &
Ancillary Products
 
Uniform
Direct Sales
 
First Aid,
Safety &
Fire Protection
 
Document Management
 
Corporate
 
Total
As of and for the three months ended August 31, 2013
 

 
 

 
 

 
 

 
 

 
 

Revenue
$
792,866

 
$
107,462

 
$
125,875

 
$
94,140

 
$

 
$
1,120,343

Income (loss) before income taxes
$
117,393

 
$
8,681

 
$
11,446

 
$
2,550

 
$
(16,455
)
 
$
123,615

Total assets
$
2,842,058

 
$
143,993

 
$
410,633

 
$
631,634

 
$
282,859

 
$
4,311,177

 
 
 
 
 
 
 
 
 
 
 
 
As of and for the three months ended August 31, 2012
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
754,843

 
$
100,279

 
$
110,841

 
$
85,362

 
$

 
$
1,051,325

Income (loss) before income taxes
$
116,907

 
$
8,741

 
$
9,021

 
$
4,625

 
$
(16,521
)
 
$
122,773

Total assets
$
2,779,217

 
$
125,094

 
$
359,387

 
$
563,172

 
$
330,165

 
$
4,157,035



15





11.      Supplemental Guarantor Information
 
Cintas Corporation No. 2 (Corp. 2) is the indirectly, wholly-owned principal operating subsidiary of Cintas.  Corp. 2 is the issuer of the $1,300.0 million aggregate principal amount of long-term senior notes, which are unconditionally guaranteed, jointly and severally, by Cintas Corporation and its wholly-owned, direct and indirect domestic subsidiaries.
 
As allowed by SEC rules, the following condensed consolidating financial statements are provided as an alternative to filing separate financial statements of the guarantors.  Each of the subsidiaries presented in the following condensed consolidating financial statements has been fully consolidated in Cintas’ consolidated financial statements.  The following condensed consolidating financial statements should be read in conjunction with the consolidated financial statements of Cintas and notes thereto of which this note is an integral part.
 
Condensed consolidating financial statements for Cintas, Corp. 2, the subsidiary guarantors and non-guarantors are presented on the following pages: 




16



Condensed Consolidating Income Statement
Three Months Ended August 31, 2013
(In thousands)

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

 
 

 
 

 
 

 
 

 
 

Rental uniforms and ancillary products
$

 
$
605,758

 
$
162,565

 
$
54,965

 
$
(30,422
)
 
$
792,866

Other services

 
404,574

 
8,548

 
31,386

 
(117,031
)
 
327,477

Equity in net income of affiliates
77,754

 

 

 

 
(77,754
)
 

 
77,754

 
1,010,332

 
171,113

 
86,351

 
(225,207
)
 
1,120,343

Costs and expenses (income):
 

 
 

 
 

 
 

 
 

 
 

Cost of rental uniforms and ancillary products

 
383,719

 
98,167

 
38,556

 
(65,711
)
 
454,731

Cost of other services

 
260,595

 
(3,111
)
 
19,064

 
(76,916
)
 
199,632

Selling and administrative expenses

 
308,761

 
(4,859
)
 
26,213

 
(4,205
)
 
325,910

Operating income
77,754

 
57,257

 
80,916

 
2,518

 
(78,375
)
 
140,070

 
 
 
 
 
 
 
 
 
 
 
 
Interest income

 
(8
)
 
(53
)
 
(14,694
)
 
14,687

 
(68
)
Interest expense (income)

 
16,480

 
44

 
(1
)
 

 
16,523

 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
77,754

 
40,785

 
80,925

 
17,213

 
(93,062
)
 
123,615

Income taxes

 
15,104

 
29,968

 
819

 
(30
)
 
45,861

 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
77,754

 
$
25,681

 
$
50,957

 
$
16,394

 
$
(93,032
)
 
$
77,754



17



Condensed Consolidating Income Statement
Three Months Ended August 31, 2012
(In thousands)

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

 
 

 
 

 
 

 
 

 
 

Rental uniforms and ancillary products
$

 
$
576,285

 
$
152,817

 
$
53,784

 
$
(28,043
)
 
$
754,843

Other services

 
369,406

 
10,879

 
29,378

 
(113,181
)
 
296,482

Equity in net income of affiliates
76,733

 

 

 

 
(76,733
)
 

 
76,733

 
945,691

 
163,696

 
83,162

 
(217,957
)
 
1,051,325

Costs and expenses (income):
 

 
 

 
 

 
 

 
 

 
 

Cost of rental uniforms and ancillary products

 
364,197

 
89,342

 
36,620

 
(62,011
)
 
428,148

Cost of other services

 
236,331

 
(2,417
)
 
17,708

 
(74,320
)
 
177,302

Selling and administrative expenses

 
290,644

 
(4,139
)
 
24,301

 
(4,225
)
 
306,581

Operating income
76,733

 
54,519

 
80,910

 
4,533

 
(77,401
)
 
139,294

 
 
 
 
 
 
 
 
 
 
 
 
Interest income

 
(18
)
 
(35
)
 
(24
)
 

 
(77
)
Interest expense

 
16,566

 
31

 
1

 

 
16,598

 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
76,733

 
37,971

 
80,914

 
4,556

 
(77,401
)
 
122,773

Income taxes

 
14,379

 
30,642

 
1,024

 
(5
)
 
46,040

 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
76,733

 
$
23,592

 
$
50,272

 
$
3,532

 
$
(77,396
)
 
$
76,733





18



Condensed Consolidating Statement of Comprehensive Income
Three Months Ended August 31, 2013
(In thousands)

 
Cintas
Corporation
 
Corp. 2
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Cintas
Corporation
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
77,754

 
$
25,681

 
$
50,957

 
$
16,394

 
$
(93,032
)
 
$
77,754

 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
 
       Foreign currency translation
           adjustments

 
7

 

 
(653
)
 

 
(646
)
      Amortization of interest rate lock
          agreements

 
488

 

 

 

 
488

      Change in fair value of available-for-
          sale securities

 

 
(13
)
 
(1
)
 

 
(14
)
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss)

 
495

 
(13
)
 
(654
)
 

 
(172
)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
77,754

 
$
26,176

 
$
50,944

 
$
15,740

 
$
(93,032
)
 
$
77,582



19



Condensed Consolidating Statement of Comprehensive Income
Three Months Ended August 31, 2012
(In thousands)

 
Cintas
Corporation
 
Corp. 2
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Cintas
Corporation
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
76,733

 
$
23,592

 
$
50,272

 
$
3,532

 
$
(77,396
)
 
$
76,733

 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
 
       Foreign currency translation
           adjustments

 
8

 

 
7,009

 

 
7,017

      Change in fair value of derivatives

 
(151
)
 

 

 

 
(151
)
      Amortization of interest rate lock
          agreements

 
488

 

 

 

 
488

      Change in fair value of available-for-
          sale securities

 

 

 
(2
)
 

 
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income

 
345

 

 
7,007

 

 
7,352

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
76,733

 
$
23,937

 
$
50,272

 
$
10,539

 
$
(77,396
)
 
$
84,085







20



Condensed Consolidating Balance Sheet
As of August 31, 2013
(In thousands)

 
Cintas
Corporation
 
Corp. 2
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Cintas
Corporation
Consolidated
Assets
 

 
 

 
 

 
 

 
 

 
 

Current assets:
 

 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$

 
$
64,369

 
$
190,896

 
$
23,405

 
$

 
$
278,670

Marketable securities

 

 

 
4,189

 

 
4,189

Accounts receivable, net

 
365,024

 
102,018

 
44,600

 

 
511,642

Inventories, net

 
209,299

 
22,909

 
9,720

 
3,542

 
245,470

Uniforms and other rental items in service

 
367,936

 
113,866

 
38,312

 
(19,730
)
 
500,384

Income taxes, current

 

 
(2,166
)
 
2,166

 

 

Deferred tax asset (liability)

 
526

 
(526
)
 

 

 

Prepaid expenses

 
7,559

 
20,324

 
4,051

 

 
31,934

Total current assets

 
1,014,713

 
447,321

 
126,443

 
(16,188
)
 
1,572,289

 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment, at cost, net

 
631,172

 
254,952

 
105,207

 

 
991,331

 
 
 
 
 
 
 
 
 
 
 
 
Goodwill

 

 
1,454,846

 
76,160

 

 
1,531,006

Service contracts, net

 
87,264

 
134

 
5,721

 

 
93,119

Other assets, net
1,692,813

 
1,626,975

 
2,804,237

 
794,622

 
(6,795,215
)
 
123,432

 
$
1,692,813

 
$
3,360,124

 
$
4,961,490

 
$
1,108,153

 
$
(6,811,403
)
 
$
4,311,177

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Shareholders’ Equity
 

 
 

 
 

 
 

 
 

 
 

Current liabilities:
 

 
 

 
 

 
 

 
 

 
 

Accounts payable
$
(465,247
)
 
$
(567,870
)
 
$
1,095,369

 
$
24,684

 
$
38,016

 
$
124,952

Accrued compensation and related liabilities

 
30,394

 
8,877

 
3,976

 

 
43,247

Accrued liabilities

 
51,115

 
174,157

 
9,965

 

 
235,237

Income taxes, current

 
1,719

 
21,648

 

 

 
23,367

Deferred tax liability

 

 
71,872

 
8,820

 

 
80,692

Long-term debt due within one year

 
8,470

 
(270
)
 

 

 
8,200

Total current liabilities
(465,247
)
 
(476,172
)
 
1,371,653

 
47,445

 
38,016

 
515,695

 
 
 
 
 
 
 
 
 
 
 
 
Long-term liabilities:
 

 
 

 
 

 
 

 
 

 
 

Long-term debt due after one year

 
1,309,934

 
(9,983
)
 
848

 

 
1,300,799

Deferred income taxes

 
(6
)
 
220,463

 
(6,236
)
 

 
214,221

Accrued liabilities

 

 
83,613

 
838

 

 
84,451

Total long-term liabilities

 
1,309,928

 
294,093

 
(4,550
)
 

 
1,599,471

Total shareholders’ equity
2,158,060

 
2,526,368

 
3,295,744

 
1,065,258

 
(6,849,419
)
 
2,196,011

 
$
1,692,813

 
$
3,360,124

 
$
4,961,490

 
$
1,108,153

 
$
(6,811,403
)
 
$
4,311,177



21



Condensed Consolidating Balance Sheet
As of May 31, 2013
(In thousands)

 
Cintas
Corporation
 
Corp. 2
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Cintas
Corporation
Consolidated
Assets
 

 
 

 
 

 
 

 
 

 
 

Current assets:
 

 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$

 
$
54,511

 
$
247,070

 
$
50,692

 
$

 
$
352,273

Marketable securities

 

 
5,680

 

 

 
5,680

Accounts receivable, net

 
355,429

 
96,569

 
44,051

 

 
496,049

Inventories, net

 
201,260

 
25,584

 
10,342

 
3,254

 
240,440

Uniforms and other rental items in service

 
363,662

 
113,024

 
38,917

 
(18,851
)
 
496,752

Income taxes, current

 
4,172

 
3,437

 
1,493

 

 
9,102

Deferred tax asset (liability)

 
534

 
(534
)
 

 

 

Prepaid expenses

 
7,450

 
12,909

 
4,171

 

 
24,530

Total current assets

 
987,018

 
503,739

 
149,666

 
(15,597
)
 
1,624,826

 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment, at cost, net

 
631,480

 
259,586

 
95,637

 

 
986,703

 
 
 
 
 
 
 
 
 
 
 
 
Goodwill

 

 
1,449,445

 
68,115

 

 
1,517,560

Service contracts, net

 
88,157

 
166

 
3,830

 

 
92,153

Other assets, net
1,698,122

 
1,627,505

 
2,698,197

 
768,903

 
(6,668,337
)
 
124,390

 
$
1,698,122

 
$
3,334,160

 
$
4,911,133

 
$
1,086,151

 
$
(6,683,934
)
 
$
4,345,632

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Shareholders’ Equity
 

 
 

 
 

 
 

 
 

 
 

Current liabilities: