Long-Term Debt and Derivatives



(In thousands)	2016		2015

Unsecured term notes due through 2036 at an average rate of 4.6%	$	1,300,000	$	1,300,000
Less: amounts due within one year	250,000		—
	$	1,050,000	$	1,300,000

Cintas' senior notes are recorded at cost. The fair value of the senior notes is estimated using Level 2 inputs based on general market prices. The carrying value and fair value of Cintas' long-term debt as of May 31, 2016 were $1,300.0 million and $1,416.6 million, respectively, and as of May 31, 2015 were $1,300.0 million and $1,418.6 million, respectively.

Letters of credit outstanding were $83.4 million and $82.7 million at May 31, 2016 and 2015, respectively. Maturities of long-term debt during each of the next five years are $250.0 million, $300.0 million, $0, $0 and $0, respectively.

Interest paid was $64.5 million, $65.3 million and $65.9 million for the fiscal years ended May 31, 2016, 2015 and 2014, respectively.

Cintas' commercial paper program has a capacity of $300.0 million at May 31, 2016, 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. The revolving credit facility was amended on May 29, 2014, to extend the maturity date from October 6, 2016 to May 28, 2019, and to adjust the applicable margin used to calculate the interest payable on any outstanding loans and the facility fee payable under the agreement. On June 23, 2016, the revolving credit facility was amended to extend the maturity date from May 28, 2019 to June 22, 2021, increase the capacity to $450.0 million, and add an accordion feature that allows for a maximum borrowing capacity of $600.0 million. No commercial paper or borrowings on our revolving credit facility were outstanding at May 31, 2016 or 2015. On June 1, 2016, Cintas paid the $250.0 million 5-year senior notes that matured on that date with cash and $218.5 million proceeds from the issuance of commercial paper.

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 $2.0 million in each of the fiscal years ended May 31, 2016, 2015 and 2014. During the third quarter of fiscal 2016, Cintas entered into an interest rate lock agreement with a notional value of $550.0 million for a forecasted debt issuance. As of May 31, 2016, the fair value of this treasury lock was $19.6 million and is recorded in long-term liabilities and other comprehensive income, net of tax. The interest rate lock had no impact on net income or cash flows from continuing operations for fiscal 2016.

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. These instruments did not impact foreign currency exchange during fiscal 2016, 2015 or 2014. Cintas had no foreign currency forward contracts as of May 31, 2016 or 2015.

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 was in compliance with all of the 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.