Discontinued Operations

3 Months Ended

Aug. 31, 2015

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

Effective August 31, 2015, Cintas' investment in the Shred-it Partnership (Shred-it) is classified as held for sale and as a discontinued operations for all periods presented as a result of entering into a definitive agreement on July 15, 2015 to sell its investment in Shred-it. During fiscal 2015, Cintas sold its document imaging and retention services (Storage) business and, as a result, its operations are also classified as discontinued operations for all periods presented.

As of August 31, 2015 and May 31, 2015, the equity method investment in Shred-it was $194.3 million and $210.1 million, respectively. Cintas’ carrying value of its investment in Shred-it, as of August 31, 2015, exceeded its share of the underlying equity in the net assets of Shred-it by approximately $91.2 million (basis difference). The remaining basis difference is being amortized over the weighted average estimated useful lives of the underlying assets which generated the basis difference (approximately 9 years) and is recorded as a reduction in our share of income from Shred-it, net of tax. Cintas records its share of Shred-it's income on a one month lag. For the three months ended ended August 31, 2015, Cintas recorded a net loss on the investment in the Shred-it of $9.3 million, which included amortization of basis differences of approximately $2.8 million. After the previously announced sale of Shred-it closes, the basis difference will no longer exist and Cintas will no longer record income or loss from Shred-it. See Note 15 entitled Subsequent Event for additional information on the sale of the investment in Shred-it.

In the first quarter of fiscal 2015, Cintas received additional proceeds related to the contribution of its shredding business to the Shred-it Partnership. The Company realized a $3.9 million gain, net of tax, as a result of the additional consideration received.

In fiscal 2015, Cintas sold Storage, excluding related real estate owned by Cintas, in three separate transactions to three separate buyers. Each transaction involves contingent consideration that the Company has an opportunity to receive if specified future events occur. Because of the uncertainty surrounding the future events, these amounts represent gain contingencies that have not been recorded. Certain real estate owned by Cintas is being leased by the buyers. These lease payments do not represent a material direct cash flow of the disposed Storage business and therefore do not impact the classification of the Storage business as a discontinued operation. On July 10, 2015, Cintas sold the remaining Storage assets classified as held for sale. For the quarter ended August 31, 2015, Cintas received proceeds of $24.4 million from the sale of the remaining Storage assets classified as held for sale and recorded a $3.1 million gain, net of tax on the sale.

Following is selected financial information included in net (loss) income from discontinued operations for Shred-it, Shredding and the Storage business:

	Three Months Ended
(In thousands)	August 31, 2015			August 31, 2014
Revenue	$	—		$	20,785
Income before income taxes	237			575
Income tax expense	(85		)	(240		)
Gain on sale of Storage Assets	4,843			—
Loss on investment in Shred-it Partnership	(14,516		)	—
Gain on the deconsolidation of Shredding(1)	—			6,619
Income tax benefit (expense) on (loss) gain	3,504			(2,751		)
Net (loss) income from discontinued operations	$	(6,017	)	$	4,203

⁽¹⁾ Results for the three months endedAugust 31, 2014 related to the gain on the deconsolidation of Shredding were previously presented in continuing operations and were reclassified to discontinued operations as previously discussed.