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 ended	February 28, 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

Cintas Corporation

(Exact name of registrant as specified in its charter)

Washington	31-1188630
(State or Other Jurisdiction of Incorporation)	(IRS Employer Identification Number)

6800 Cintas Boulevard
P.O. Box 625737
Cincinnati,	Ohio	45262-5737
(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 class	Trading symbol(s)	Name of each exchange on which registered
Common stock, no par value	CTAS	The 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, 2021
Common Stock, no par value	105,053,197

CINTAS CORPORATION

TABLE OF CONTENTS

		Page
Part I. Financial Information
Item 1.	Financial Statements
	Consolidated Condensed Statements of Income – Three and Nine Months Ended February 28, 2021 and February 29, 2020	3
	Consolidated Condensed Statements of Comprehensive Income – Three and Nine Months Ended February 28, 2021 and February 29, 2020	4
	Consolidated Condensed Balance Sheets – February 28, 2021 and May 31, 2020	5
	Consolidated Condensed Statements of Shareholders' Equity - Three and Nine Months ended February 28, 2021 and February 29, 2020	6
	Consolidated Condensed Statements of Cash Flows – Nine Months Ended February 28, 2021 and February 29, 2020	8
	Notes to Consolidated Condensed Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
Part II. Other Information
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 5.	Other Information	36
Item 6.	Exhibits	36
Signatures		37

2

Part I. Financial Information

ITEM 1.                              FINANCIAL STATEMENTS

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)

(In thousands except per share data)

	Three Months Ended				Nine Months Ended
	February 28, 2021		February 29, 2020		February 28, 2021		February 29, 2020
Revenue:
Uniform rental and facility services	$	1,417,865	$	1,448,021	$	4,222,764	$	4,372,524
Other	359,191		362,627		1,057,914		1,093,012
Total revenue	1,777,056		1,810,648		5,280,678		5,465,536
Costs and expenses:
Cost of uniform rental and facility services	761,850		784,930		2,217,073		2,338,543
Cost of other	205,690		201,323		608,004		601,065
Selling and administrative expenses	483,048		509,743		1,426,555		1,570,666
Operating income	326,468		314,652		1,029,046		955,262
Interest income	(87)		(347)		(369)		(792)
Interest expense	24,552		25,943		73,659		79,441
Income before income taxes	302,003		289,056		955,756		876,613
Income taxes	43,619		54,536		112,510		144,838
Income from continuing operations	258,384		234,520		843,246		731,775
Loss from discontinued operations,   net of tax benefit of $107	—		—		—		(323)
Net income	$	258,384	$	234,520	$	843,246	$	731,452
Basic earnings per share:
Continuing operations	$	2.44	$	2.23	$	7.99	$	6.98
Discontinued operations	0.00		0.00		0.00		0.00
Basic earnings per share	$	2.44	$	2.23	$	7.99	$	6.98
Diluted earnings per share:
Continuing operations	$	2.37	$	2.16	$	7.78	$	6.76
Discontinued operations	0.00		0.00		0.00		0.00
Diluted earnings per share	$	2.37	$	2.16	$	7.78	$	6.76
Dividends declared per share	$	0.75	$	—	$	4.26	$	2.55

See accompanying notes.

3

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Three Months Ended				Nine Months Ended
	February 28, 2021		February 29, 2020		February 28, 2021		February 29, 2020
Net income	$	258,384	$	234,520	$	843,246	$	731,452
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	8,947		(4,039)		38,853		4,098
Change in fair value of interest rate lock    agreements, net of tax expense (benefit)    of $25,689, $(17,294), $34,761 and    $(19,792), respectively	75,850		(53,582)		102,634		(60,724)
Amortization of interest rate lock agreements, net of tax benefit of $116,    $116, $347 and $411, respectively	(358)		(358)		(1,075)		(1,011)
Other comprehensive income (loss), net of    tax expense (benefit) of $25,805,    $(17,178), $35,108 and $(19,381),    respectively	84,439		(57,979)		140,412		(57,637)
Comprehensive income	$	342,823	$	176,541	$	983,658	$	673,815

See accompanying notes.

4

CINTAS CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands except share data)

	February 28, 2021		May 31, 2020
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	553,611	$	145,402
Accounts receivable, net	929,492		870,369
Inventories, net	533,211		408,898
Uniforms and other rental items in service	777,364		770,411
Income taxes, current	57,929		—
Prepaid expenses and other current assets	126,949		114,619
Total current assets	2,978,556		2,309,699
Property and equipment, net	1,329,930		1,403,065
Investments	264,581		214,847
Goodwill	2,895,251		2,870,020
Service contracts, net	418,318		451,529
Operating lease right-of-use assets, net	156,850		159,967
Other assets, net	304,011		260,758
	$	8,347,497	$	7,669,885
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	237,857	$	230,995
Accrued compensation and related liabilities	224,641		127,417
Accrued liabilities	514,159		456,653
Income taxes, current	—		27,099
Operating lease liabilities, current	43,767		43,031
Debt due within one year	249,936		—
Total current liabilities	1,270,360		885,195
Long-term liabilities:
Debt due after one year	2,291,418		2,539,705
Deferred income taxes	389,553		388,579
Operating lease liabilities	119,071		122,695
Accrued liabilities	460,585		498,509
Total long-term liabilities	3,260,627		3,549,488
Shareholders’ equity:
Preferred stock, no par value:	—		—
100,000 shares authorized, none outstanding
Common stock, no par value:	1,403,229		1,102,689
425,000,000 shares authorized
FY 2021: 188,913,700 shares issued and 105,039,174 shares outstanding
FY 2020: 186,793,207 shares issued and 103,415,368 shares outstanding
Paid-in capital	74,451		171,521
Retained earnings	7,688,425		7,296,509
Treasury stock:	(5,336,627)		(5,182,137)
FY 2021: 83,874,526 shares
FY 2020: 83,377,839 shares
Accumulated other comprehensive loss	(12,968)		(153,380)
Total shareholders’ equity	3,816,510		3,235,202
	$	8,347,497	$	7,669,885

See accompanying notes.

5

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

(In thousands)

	Common Stock			Paid-In Capital		Retained Earnings		Other Accumulated Comprehensive Loss		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance at June 1, 2020	186,793	$	1,102,689	$	171,521	$	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 awards	568	170,421		(170,421)		—		—		—	—		—
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, 2020	188,156	$	1,345,233	$	30,155	$	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 awards	21	7,094		(7,094)		—		—		—	—		—
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, 2020	188,601	$	1,387,734	$	51,608	$	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 awards	9	2,976		(2,976)		—		—		—	—		—
Stock options exercised, net of shares surrendered	304	12,519		—		—		—		—	—		12,519
Repurchase of common stock	—	—		—		—		—		(260)	(83,108)		(83,108)
Balance at February 28, 2021	188,914	$	1,403,229	$	74,451	$	7,688,425	$	(12,968)	(83,875)	$	(5,336,627)	$	3,816,510

6

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

(In thousands)

	Common Stock			Paid-In Capital		Retained Earnings		Other Accumulated Comprehensive Loss		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance at June 1, 2019	184,791	$	840,328	$	227,928	$	6,691,236	$	(39,152)	(81,506)	$	(4,717,619)	$	3,002,721
Net income	—	—		—		250,812		—		—	—		250,812
Comprehensive loss, net of tax	—	—		—		—		(23,474)		—	—		(23,474)
Stock-based compensation	—	—		40,395		—		—		—	—		40,395
Vesting of stock-based compensation awards	605	157,882		(157,882)		—		—		—	—		—
Stock options exercised, net of shares surrendered	557	37,915		—		—		—		—	—		37,915
Repurchase of common stock	—	—		—		—		—		(1,082)	(256,830)		(256,830)
Cumulative effect of change in accounting principle	—	—		—		(2,808)		1,975		—	—		(833)
Balance at August 31, 2019	185,953	$	1,036,125	$	110,441	$	6,939,240	$	(60,651)	(82,588)	$	(4,974,449)	$	3,050,706
Net income	—	—		—		246,120		—		—	—		246,120
Comprehensive income, net of tax	—	—		—		—		23,816		—	—		23,816
Dividends	—	—		—		(268,050)		—		—	—		(268,050)
Stock-based compensation	—	—		29,003		—		—		—	—		29,003
Vesting of stock-based compensation awards	21	5,403		(5,403)		—		—		—	—		—
Stock options exercised, net of shares surrendered	324	25,286		—		—		—		—	—		25,286
Repurchase of common stock	—	—		—		—		—		(7)	(1,911)		(1,911)
Balance at November 30, 2019	186,298	$	1,066,814	$	134,041	$	6,917,310	$	(36,835)	(82,595)	$	(4,976,360)	$	3,104,970
Net income	—	—		—		234,520		—		—	—		234,520
Comprehensive loss, net of tax	—	—		—		—		(57,979)		—	—		(57,979)
Dividends	—	—		—		8		—		—	—		8
Stock-based compensation	—	—		27,030		—		—		—	—		27,030
Vesting of stock-based compensation awards	25	6,914		(6,914)		—		—		—	—		—
Stock options exercised, net of shares surrendered	309	18,346		—		—		—		—	—		18,346
Repurchase of common stock	—	—		—		—		—		(10)	(2,586)		(2,586)
Balance at February 29, 2020	186,632	$	1,092,074	$	154,157	$	7,151,838	$	(94,814)	(82,605)	$	(4,978,946)	$	3,324,309

See accompanying notes.

7

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands) 

	Nine Months Ended
	February 28, 2021		February 29, 2020
Cash flows from operating activities:
Net income	$	843,246	$	731,452
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	182,132		175,261
Amortization of intangible assets and capitalized contract costs	107,689		107,232
Stock-based compensation	83,421		96,428
Gain on sale of operating assets	(21,861)		—
Deferred income taxes	(36,259)		5,013
Change in current assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net	(63,178)		(31,135)
Inventories, net	(123,678)		(17,780)
Uniforms and other rental items in service	(6,269)		(33,732)
Prepaid expenses and other current assets and capitalized contract costs	(76,971)		(95,169)
Accounts payable	5,113		14,271
Accrued compensation and related liabilities	97,474		(4,792)
Accrued liabilities and other	(1,357)		3,426
Income taxes, current	(84,687)		(15,926)
Net cash provided by operating activities	904,815		934,549
Cash flows from investing activities:
Capital expenditures	(100,410)		(189,379)
Purchases of investments	(7,873)		(10,461)
Proceeds from sale of operating assets, net of cash disposed	32,490		13,300
Acquisitions of businesses, net of cash acquired	(7,570)		(47,850)
Other, net	(5,301)		(2,090)
Net cash used in investing activities	(88,664)		(236,480)
Cash flows from financing activities:
Payments of commercial paper, net	—		(112,500)
Proceeds from exercise of stock-based compensation awards	120,049		81,547
Dividends paid	(371,818)		(268,042)
Repurchase of common stock	(154,490)		(261,327)
Other, net	(3,836)		30
Net cash used in financing activities	(410,095)		(560,292)
Effect of exchange rate changes on cash and cash equivalents	2,153		19
Net increase in cash and cash equivalents	408,209		137,796
Cash and cash equivalents at beginning of period	145,402		96,645
Cash and cash equivalents at end of period	$	553,611	$	234,441

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, 2020. 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 other than the adoption of new accounting pronouncements discussed below. 

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, 2021		May 31, 2020
Raw materials	$	15,757	$	18,661
Work in process	32,290		29,497
Finished goods	485,164		360,740
	$	533,211	$	408,898

Inventories are recorded net of reserves for obsolete inventory of $63.6 million and $45.5 million at February 28, 2021 and May 31, 2020, 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.

New Accounting Pronouncements

Effective June 1, 2020, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In connection with recognizing credit losses on accounts receivable and other financial instruments, Cintas now uses a forward-looking expected loss model rather than the incurred loss model. Adoption of ASU 2016-13 requires using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date to align existing credit loss methodology with the new standard. The adoption of ASU 2016-13 did not have a material impact on the Company's consolidated condensed financial statements.

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 Ended								Nine Months Ended
	February 28, 2021				February 29, 2020				February 28, 2021				February 29, 2020
(In thousands)	Revenue		%		Revenue		%		Revenue		%		Revenue		%
Uniform Rental and Facility Services	$	1,417,865	79.8	%	$	1,448,021	80.0	%	$	4,222,764	80.0	%	$	4,372,524	80.0	%
First Aid and Safety Services	198,474		11.2	%	170,541		9.4	%	597,373		11.3	%	512,299		9.4	%
Fire Protection Services	110,212		6.2	%	107,127		5.9	%	322,913		6.1	%	323,988		5.9	%
Uniform Direct Sales	50,505		2.8	%	84,959		4.7	%	137,628		2.6	%	256,725		4.7	%
Total revenue	$	1,777,056	100.0	%	$	1,810,648	100.0	%	$	5,280,678	100.0	%	$	5,465,536	100.0	%

Fire Protection Services and Uniform Direct Sales are included within All Other as disclosed in Note 12 entitled Segment Information.

Revenue Recognition Policy

More than 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, 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 these revenues over time as services are performed based on the nature of services provided and contractual rates (output method). The Company's remaining revenues, primarily within the Uniform Direct Sales operating segment, and representing less than 5% of the Company's total revenues, are 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, primarily within our Uniform Direct Sales operating segment, 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, 2021 or February 29, 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 in accordance with Accounting Standards Codification (ASC) 606, "Revenue" (Topic 606). These assets are included in other assets, net on the consolidated condensed balance sheets.

Additionally, in accordance with Topic 606, 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

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. 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, 2021, the current and noncurrent assets related to deferred commissions totaled $79.1 million and $229.3 million, respectively. As of May 31, 2020, the current and noncurrent assets related to deferred commissions totaled $76.2 million and $227.1 million, respectively. We recorded amortization expense related to deferred commissions of $20.9 million and $19.7 million during the three months ended February 28, 2021 and February 29, 2020, respectively. During the nine months ended February 28, 2021 and February 29, 2020, we recorded amortization expense related to deferred commissions of $62.0 million and $57.7 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 each period, were $17.7 million and $18.0 million for the three months ended February 28, 2021 and February 29, 2020, respectively. For both the nine months ended February 28, 2021 and February 29, 2020, operating lease costs, including short-term lease expense and variable lease costs, which were immaterial in each period, were $52.9 million.

The following table provides supplemental information related to the Company's consolidated condensed statements of cash flows for the nine months ended:

(In thousands)	February 28, 2021		February 29, 2020
Cash paid for amounts included in the measurement of operating lease liabilities	$	36,654	$	38,292
Operating lease right-of-use assets obtained in exchange for new and renewed operating lease liabilities	$	27,771	$	33,382

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Other information related to the operating lease right-of-use assets, net and operating lease liabilities was as follows:

	February 28, 2021	May 31, 2020
Weighted-average remaining lease term - operating leases	5.00 years	5.19 years
Weighted-average discount rate - operating leases	2.46%	2.66%

The contractual future minimum lease payments of Cintas' operating lease liabilities by fiscal year are as follows as of February 28, 2021:

(In thousands)
2021 (remaining three months)	$	12,273
2022	44,593
2023	36,182
2024	26,018
2025	18,976
Thereafter	35,420
Total payments	173,462
Less interest	(10,624)
Total present value of lease payments	$	162,838

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, 2021
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Cash and cash equivalents	$	553,611	$	—	$	—	$	553,611
Other assets, net:
Interest rate lock agreements	—		35,814		—		35,814
Total assets at fair value	$	553,611	$	35,814	$	—	$	589,425
Long-term accrued liabilities:
Interest rate lock agreements	$	—	$	62,560	$	—	$	62,560
Total liabilities at fair value	$	—	$	62,560	$	—	$	62,560

	As of May 31, 2020
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Cash and cash equivalents	$	145,402	$	—	$	—	$	145,402
Other assets, net:
Interest rate lock agreements	—		1,546		—		1,546
Total assets at fair value	$	145,402	$	1,546	$	—	$	146,948
Long-term accrued liabilities:
Interest rate lock agreements	$	—	$	165,686	$	—	$	165,686
Total liabilities at fair value	$	—	$	165,686	$	—	$	165,686

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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 outstanding interest rate lock agreements are included in other assets, net and long-term accrued liabilities at both February 28, 2021 and May 31, 2020. 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 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 for the three and nine months ended February 28, 2021 and February 29, 2020.

Note 5 - Investments

At February 28, 2021, investments were $264.6 million and include the cash surrender value of insurance policies of $238.4 million, equity method investments of $23.0 million and cost method investments of $3.2 million. At May 31, 2020, investments were $214.8 million and include the cash surrender value of insurance policies of $192.7 million, equity method investments of $19.0 million and cost method investments of $3.1 million. 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, 2021 and February 29, 2020, no impairment losses were recorded.

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 Ended				Nine Months Ended
Basic Earnings per Share from Continuing Operations (in thousands except per share data)	February 28, 2021		February 29, 2020		February 28, 2021		February 29, 2020
Income from continuing operations	$	258,384	$	234,520	$	843,246	$	731,775
Less: income from continuing operations allocated to participating securities	1,894		2,193		5,908		6,864
Income from continuing operations available to common shareholders	$	256,490	$	232,327	$	837,338	$	724,911
Basic weighted average common shares outstanding	105,264		104,245