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, 2023

 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 or Organization)	(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, 2023
Common Stock, no par value	101,701,804

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, 2023 and 2022	3
	Consolidated Condensed Statements of Comprehensive Income – Three and Nine Months Ended February 28, 2023 and 2022	4
	Consolidated Condensed Balance Sheets – February 28, 2023 and May 31, 2022	5
	Consolidated Condensed Statements of Shareholders' Equity - Three and Nine Months Ended February 28, 2023 and 2022	6
	Consolidated Condensed Statements of Cash Flows – Nine Months Ended February 28, 2023 and 2022	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 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 6.	Exhibits	35
Signatures		36

Part I. Financial Information

ITEM 1.                             

FINANCIAL STATEMENTS

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended				Nine Months Ended
(In thousands except per share data)	February 28, 2023		February 28, 2022		February 28, 2023		February 28, 2022
Revenue:
Uniform rental and facility services	$	1,716,165	$	1,553,320	$	5,123,924	$	4,596,767
Other	473,821		407,222		1,407,374		1,183,006
Total revenue	2,189,986		1,960,542		6,531,298		5,779,773
Costs and expenses:
Cost of uniform rental and facility services	907,993		834,082		2,705,486		2,430,644
Cost of other	247,962		228,306		741,222		663,078
Selling and administrative expenses	587,219		490,549		1,752,724		1,503,117
Operating income	446,812		407,605		1,331,866		1,182,934
Interest income	(373)		(56)		(872)		(168)
Interest expense	28,819		22,030		85,459		65,786
Income before income taxes	418,366		385,631		1,247,279		1,117,316
Income taxes	92,539		70,183		245,470		176,020
Net income	$	325,827	$	315,448	$	1,001,809	$	941,296
Basic earnings per share	$	3.19	$	3.04	$	9.82	$	9.05
Diluted earnings per share	$	3.14	$	2.97	$	9.65	$	8.84
Dividends declared per share	$	1.15	$	0.95	$	3.45	$	2.85

See accompanying notes.

3

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended				Nine Months Ended
(In thousands)	February 28, 2023		February 28, 2022		February 28, 2023		February 28, 2022
Net income	$	325,827	$	315,448	$	1,001,809	$	941,296
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	(7,972)		5,297		(37,079)		(26,191)
Change in fair value of interest rate lock    agreements, net of tax expense of $513,    $11,832, $3,364 and $3,022, respectively	1,501		34,567		9,829		8,828
Amortization of interest rate lock agreements, net of tax benefit of $(512), $(149), $(1,537) and $(445), respectively	(1,521)		(459)		(4,563)		(1,378)
Other comprehensive (loss) income, net of tax    expense of $1, $11,683, $1,827 and    $2,577, respectively	(7,992)		39,405		(31,813)		(18,741)
Comprehensive income	$	317,835	$	354,853	$	969,996	$	922,555

See accompanying notes.

4

CINTAS CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands except per share data)	February 28, 2023		May 31, 2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	88,563	$	90,471
Accounts receivable, net	1,133,096		1,006,220
Inventories, net	531,270		472,150
Uniforms and other rental items in service	999,029		916,706
Income taxes, current	2,990		21,708
Prepaid expenses and other current assets	155,208		124,728
Total current assets	2,910,156		2,631,983
Property and equipment, net	1,358,181		1,323,673
Investments	241,796		242,873
Goodwill	3,043,578		3,042,976
Service contracts, net	357,146		391,638
Operating lease right-of-use assets, net	178,524		170,003
Other assets, net	376,620		344,110
	$	8,466,001	$	8,147,256
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	281,649	$	251,504
Accrued compensation and related liabilities	203,726		236,992
Accrued liabilities	610,863		588,948
Operating lease liabilities, current	42,970		43,872
Debt due within one year	249,053		311,574
Total current liabilities	1,388,261		1,432,890
Long-term liabilities:
Debt due after one year	2,485,952		2,483,932
Deferred income taxes	496,778		473,777
Operating lease liabilities	139,107		129,064
Accrued liabilities	322,647		319,397
Total long-term liabilities	3,444,484		3,406,170
Shareholders’ equity:
Preferred stock, no par value:	—		—
100,000 shares authorized, none outstanding
Common stock, no par value, and paid-in capital:	1,981,610		1,771,917
425,000,000 shares authorized
FY 2023: 192,031,528 shares issued and 101,672,333 shares outstanding
FY 2022: 190,837,921 shares issued and 101,711,215 shares outstanding
Retained earnings	9,368,678		8,719,163
Treasury stock:	(7,793,136)		(7,290,801)
FY 2023: 90,359,195 shares
FY 2022: 89,126,706 shares
Accumulated other comprehensive income	76,104		107,917
Total shareholders’ equity	3,633,256		3,308,196
	$	8,466,001	$	8,147,256

See accompanying notes.

5

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

	Common Stock and Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income		Treasury Stock			Total Shareholders' Equity
(In thousands)	Shares	Amount						Shares	Amount
Balance at June 1, 2022	190,838	$	1,771,917	$	8,719,163	$	107,917	(89,127)	$	(7,290,801)	$	3,308,196
Net income	—	—		351,689		—		—	—		351,689
Comprehensive loss, net of tax	—	—		—		(19,793)		—	—		(19,793)
Dividends	—	—		(117,461)		—		—	—		(117,461)
Stock-based compensation	—	26,282		—		—		—	—		26,282
Vesting of stock-based compensation awards	273	—		—		—		—	—		—
Stock options exercised	543	80,638		—		—		(193)	(79,591)		1,047
Repurchase of common stock	—	—		—		—		(802)	(320,334)		(320,334)
Balance at August 31, 2022	191,654	$	1,878,837	$	8,953,391	$	88,124	(90,122)	$	(7,690,726)	$	3,229,626
Net income	—	—		324,293		—		—	—		324,293
Comprehensive loss, net of tax	—	—		—		(4,028)		—	—		(4,028)
Dividends	—	—		(117,338)		—		—	—		(117,338)
Stock-based compensation	—	25,255		—		—		—	—		25,255
Vesting of stock-based compensation awards	9	—		—		—		—	—		—
Stock options exercised	194	29,053		—		—		(66)	(27,975)		1,078
Repurchase of common stock	—	—		—		—		(68)	(28,348)		(28,348)
Balance at November 30, 2022	191,857	$	1,933,145	$	9,160,346	$	84,096	(90,256)	$	(7,747,049)	$	3,430,538
Net income	—	—		325,827		—		—	—		325,827
Comprehensive loss, net of tax	—	—		—		(7,992)		—	—		(7,992)
Dividends	—	—		(117,495)		—		—	—		(117,495)
Stock-based compensation	—	23,797		—		—		—	—		23,797
Vesting of stock-based compensation awards	3	—		—		—		—	—		—
Stock options exercised	172	24,668		—		—		(54)	(23,852)		816
Repurchase of common stock	—	—		—		—		(49)	(22,235)		(22,235)
Balance at February 28, 2023	192,032	$	1,981,610	$	9,368,678	$	76,104	(90,359)	$	(7,793,136)	$	3,633,256

6

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

	Common Stock and Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Total Shareholders' Equity
(In thousands)	Shares	Amount						Shares	Amount
Balance at June 1, 2021	189,071	$	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 awards	493	—		—		—		—	—		—
Stock options exercised	564	72,896		—		—		—	—		72,896
Repurchase of common stock	—	—		—		—		(1,788)	(659,235)		(659,235)
Balance at August 31, 2021	190,128	$	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 awards	31	—		—		—		—	—		—
Stock options exercised	317	36,302		—		—		—	—		36,302
Repurchase of common stock	—	—		—		—		(13)	(5,491)		(5,491)
Balance at November 30, 2021	190,476	$	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 awards	2	—		—		—		—	—		—
Stock options exercised	215	20,438		—		—		(30)	(12,000)		8,438
Repurchase of common stock	—	—		—		—		(1,436)	(557,115)		(557,115)
Balance at February 28, 2022	190,693	$	1,729,525	$	8,522,327	$	12,147	(88,277)	$	(6,970,099)	$	3,293,900

See accompanying notes.

7

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
(In thousands)	February 28, 2023		February 28, 2022
Cash flows from operating activities:
Net income	$	1,001,809	$	941,296
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	190,801		184,464
Amortization of intangible assets and capitalized contract costs	113,281		112,859
Stock-based compensation	75,334		83,687
Gain on equity method investment transaction	—		(30,151)
Gain on sale of operating assets	—		(12,129)
Deferred income taxes	22,001		42,652
Change in current assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net	(132,473)		(99,223)
Inventories, net	(60,563)		2,311
Uniforms and other rental items in service	(85,991)		(77,584)
Prepaid expenses and other current assets and capitalized contract costs	(116,842)		(77,450)
Accounts payable	32,851		6,168
Accrued compensation and related liabilities	(32,666)		(28,400)
Accrued liabilities and other	17,856		(17,717)
Income taxes, current	18,793		(43,728)
Net cash provided by operating activities	1,044,191		987,055
Cash flows from investing activities:
Capital expenditures	(224,116)		(165,851)
Purchases of investments	(4,618)		(6,024)
Proceeds from sale of operating assets, net of cash disposed	—		15,347
Acquisitions of businesses, net of cash acquired	(32,983)		(150,844)
Other, net	(6,894)		(8,939)
Net cash used in investing activities	(268,611)		(316,311)
Cash flows from financing activities:
(Payments) issuance of commercial paper, net	(62,200)		559,210
Repayment of debt	—		(250,000)
Proceeds from exercise of stock-based compensation awards	2,941		117,636
Dividends paid	(332,421)		(276,922)
Repurchase of common stock	(370,917)		(1,221,841)
Other, net	(11,996)		(6,657)
Net cash used in financing activities	(774,593)		(1,078,574)
Effect of exchange rate changes on cash and cash equivalents	(2,895)		(1,674)
Net decrease in cash and cash equivalents	(1,908)		(409,504)
Cash and cash equivalents at beginning of period	90,471		493,640
Cash and cash equivalents at end of period	$	88,563	$	84,136

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, 2022 filed with the SEC on July 27, 2022. A summary of our significant accounting policies is presented beginning on page 41 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, 2023		May 31, 2022
Raw materials	$	26,440	$	19,071
Work in process	59,342		34,280
Finished goods	445,488		418,799
	$	531,270	$	472,150

Inventories are recorded net of reserves for obsolete inventory (excess and slow-moving) of $83.0 million and $100.3 million at February 28, 2023 and May 31, 2022, 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

There are no new accounting pronouncements recently issued or newly effective that had, or are 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
(In thousands)	February 28, 2023				February 28, 2022				February 28, 2023				February 28, 2022
Uniform Rental and    Facility Services	$	1,716,165	78.4	%	$	1,553,320	79.2	%	$	5,123,924	78.5	%	$	4,596,767	79.5	%
First Aid and Safety    Services	231,605		10.6	%	212,958		10.9	%	701,740		10.7	%	614,234		10.6	%
Fire Protection    Services	155,762		7.1	%	128,727		6.6	%	454,211		7.0	%	380,199		6.6	%
Uniform Direct    Sales	86,454		3.9	%	65,537		3.3	%	251,423		3.8	%	188,573		3.3	%
Total revenue	$	2,189,986	100.0	%	$	1,960,542	100.0	%	$	6,531,298	100.0	%	$	5,779,773	100.0	%

The Fire Protection Services and Uniform Direct Sales operating segments are included within All Other as disclosed in Note 11 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 operating segment customers, performed by a Cintas employee-partner, at the customer's location of business. Revenue from our route servicing customer contracts represent a single-performance obligation. The Company recognizes revenue 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, 2023 or 2022. 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.

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 for credit losses 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

10

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 allowance for credit losses 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 Accounting Standards Codification 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, 2023, the current and noncurrent assets related to deferred commissions totaled $90.4 million and $248.8 million, respectively. As of May 31, 2022, the current and noncurrent assets related to deferred commissions totaled $83.7 million and $232.2 million, respectively. We recorded amortization expense related to deferred commissions of $24.0 million and $22.0 million during the three months ended February 28, 2023 and 2022, respectively. During the nine months ended February 28, 2023 and 2022, we recorded amortization expense related to deferred commissions of $69.8 million and $65.1 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 sheets 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 sheets.

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 $19.8 million and $19.0 million for the three months ended February 28, 2023 and 2022, respectively. For the nine months ended February 28, 2023 and 2022, operating lease costs, including short-term lease expense and variable lease costs which were immaterial in both periods, were $59.3 million and $55.2 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)	2023		2022
Cash paid for amounts included in the measurement of operating lease liabilities	$	37,103	$	36,923
Operating lease right-of-use assets obtained in exchange for new and renewed    operating lease liabilities	$	42,900	$	17,452
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, 2023	May 31, 2022
Weighted-average remaining lease term - operating leases	5.43 years	5.40 years
Weighted-average discount rate - operating leases	2.75%	2.20%

The contractual future minimum lease payments of Cintas' operating lease liabilities by fiscal year are as follows as of February 28, 2023:

(In thousands)
2023 (remaining three months)	$	12,310
2024	45,627
2025	37,790
2026	30,830
2027	22,314
Thereafter	47,856
Total payments	196,727
Less interest	(14,650)
Total present value of lease payments	$	182,077

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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 dates. These financial instruments measured at fair value on a recurring basis are summarized below: 

	As of February 28, 2023
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Cash and cash equivalents	$	88,563	$	—	$	—	$	88,563
Other assets, net:
Interest rate lock agreements	—		70,071		—		70,071
Total assets at fair value	$	88,563	$	70,071	$	—	$	158,634

	As of May 31, 2022
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Cash and cash equivalents	$	90,471	$	—	$	—	$	90,471
Other assets, net:
Interest rate lock agreements	—		56,877		—		56,877
Total assets at fair value	$	90,471	$	56,877	$	—	$	147,348

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 other assets, net, 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.

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Note 5 - Investments

Cintas' investments are summarized as follows:

(In thousands)	February 28, 2023		May 31, 2022
Cash surrender value of insurance policies	$	237,423	$	237,136
Other investments	4,373		5,737
Total investments	$	241,796	$	242,873

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, 2023 and 2022, 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 (In thousands except per share data)	February 28, 2023		February 28, 2022		February 28, 2023		February 28, 2022
Net income	$	325,827	$	315,448	$	1,001,809	$	941,296
Less: net income allocated to participating securities	1,351		1,581		4,155		4,706
Net income available to common    shareholders	$	324,476	$	313,867	$	997,654	$	936,590
Basic weighted average common shares outstanding	101,714		103,388		101,589		103,438
Basic earnings per share	$	3.19	$	3.04	$	9.82	$	9.05

	Three Months Ended				Nine Months Ended
Diluted Earnings per Share (In thousands except per share data)	February 28, 2023		February 28, 2022		February 28, 2023		February 28, 2022
Net income	$	325,827	$	315,448	$	1,001,809	$	941,296
Less: net income allocated to participating securities	1,351		1,581		4,155		4,706
Net income available to common    shareholders	$	324,476	$	313,867	$	997,654	$	936,590
Basic weighted average common shares outstanding	101,714		103,388		101,589		103,438
Effect of dilutive securities – employee stock options	1,704		2,253		1,774		2,458
Diluted weighted average common shares outstanding	103,418		105,641		103,363		105,896
Diluted earnings per share	$	3.14	$	2.97	$	9.65	$	8.84

For the three months ended February 28, 2023 and 2022, options granted to purchase 0.5 million and 0.6 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share. For the nine months ended February 28, 2023 and 2022, options granted to purchase 1.0 million and 0.5 million shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share. The exercise prices of these options were greater than the average market price of the common stock (anti-dilutive).

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On October 29, 2019, we announced that the Board of Directors authorized a $1.0 billion share buyback program, which was completed during the first quarter of fiscal 2022. On July 27, 2021, Cintas announced that the Board of Directors authorized a $1.5 billion share buyback program, which does not have an expiration date. From the inception of the July 27, 2021 share buyback program through February 28, 2023, Cintas purchased a total of 2.7 million shares of Cintas common stock at an average price of $385.62 per share for a total purchase price of $1.0 billion. On July 26, 2022, Cintas announced that the Board of Directors authorized a new $1.0 billion share buyback program, which does not have an expiration date. The following tables summarize the share buyback activity by program and period:

	Three Months Ended					Nine Months Ended
	February 28, 2023					February 28, 2023
Buyback Activity (In thousands except per share data)	Shares	Avg. Price per Share		Purchase Price		Shares	Avg. Price per Share		Purchase Price
July 27, 2021	—	$	—	$	—	544	$	395.97	$	215,434
July 26, 2022	—	—		—		—	—		—
	—	$	—	$	—	544	$	395.97	$	215,434
Shares acquired for taxes due (1)	49	$	448.79	$	22,235	375	$	414.23	$	155,483
Total repurchase of Cintas common stock				$	22,235				$	370,917

	Three Months Ended					Nine Months Ended
	February 28, 2022					February 28, 2022
Buyback Activity (In thousands except per share data)	Shares	Avg. Price per Share		Purchase Price		Shares	Avg. Price per Share		Purchase Price
October 29, 2019	—	$	—	$	—	1,590	$	365.41	$	581,220
July 27, 2021	1,386	388.03		537,655		1,386	388.03		537,655
	1,386	$	388.03	$	537,655	2,976	$	375.94	$	1,118,875
Shares acquired for taxes due (1)	50	$	390.60	$	19,460	261	$	394.84	$	102,966
Total repurchase of Cintas common stock				$	557,115				$	1,221,841

(1) Shares of Cintas common stock acquired for employee payroll taxes due on options exercised and vested restricted stock awards.

In addition to the share buyback activity presented above, Cintas acquired shares of Cintas common stock, via non-cash transactions, in connection with net-share settlements of option exercises. The following tables summarizes Cintas' non-cash share buyback activity:

	Three Months Ended					Nine Months Ended
	February 28, 2023					February 28, 2023
(In thousands except per share data)	Shares	Avg. Price per Share		Non-Cash Value		Shares	Avg. Price per Share		Non-Cash Value
Non-cash transaction activity	54	$	445.60	$	23,852	313	$	419.78	$	131,418
	Three Months Ended					Nine Months Ended
	February 28, 2022					February 28, 2022
	Shares	Avg. Price per Share		Non-Cash Value		Shares	Avg. Price per Share		Non-Cash Value
Non-cash transaction activity	30	$	391.03	$	12,000	30	$	391.03	$	12,000

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Note 7 - Goodwill, Service Contracts and Other Assets, Net

Changes in the carrying amount of goodwill and service contracts for the nine months ended February 28, 2023, by reportable operating segment and All Other, are as follows:

Goodwill (in thousands)	Uniform Rental  and Facility Services		First Aid  and Safety Services		All Other		Total
Balance as of June 1, 2022	$	2,635,099	$	285,769	$	122,108	$	3,042,976
Goodwill acquired	13,370		6,642		756		20,768
Foreign currency translation	(18,466)		(1,636)		(64)		(20,166)
Balance as of February 28, 2023	$	2,630,003	$	290,775	$	122,800	$	3,043,578

Service Contracts (in thousands)	Uniform Rental  and Facility Services		First Aid  and Safety Services		All Other		Total
Balance as of June 1, 2022	$	349,634	$	24,144	$	17,860	$	391,638
Service contracts acquired	5,679		1,823		1,154		8,656
Service contracts amortization	(32,454)		(3,845)		(3,267)		(39,566)
Foreign currency translation	(3,432)		(150)		—		(3,582)
Balance as of February 28, 2023	$	319,427	$	21,972	$	15,747	$	357,146

Information regarding Cintas’ service contracts and other assets, net is as follows:

	As of February 28, 2023						As of May 31, 2022
(In thousands)	Carrying Amount		Accumulated Amortization		Net		Carrying Amount		Accumulated Amortization		Net
Service contracts	$	1,001,864	$	644,718	$	357,146	$	1,001,311	$	609,673	$	391,638
Capitalized contract    costs (1)	$	637,891	$	389,140	$	248,751	$	551,582	$	319,358	$	232,224
Noncompete and    consulting agreements	51,563		45,131		6,432		50,637		43,775		6,862
Other	142,813		21,376		121,437		125,941		20,917		105,024
Total other assets, net	$	832,267	$	455,647	$	376,620	$	728,160	$	384,050	$	344,110

(1)    The current portion of capitalized contract costs, included in prepaid expenses and other current assets on the consolidated condensed balance sheets as of February 28, 2023 and May 31, 2022, is $90.4 million and $83.7 million, respectively.

Amortization expense for service contracts and other assets, was $37.8 million and $38.0 million for the three months ended February 28, 2023 and 2022, respectively. For the nine months ended February 28, 2023 and 2022, amortization expense for service contracts and other assets was $111.5 million and $111.4 million, respectively. These expenses are recorded in selling and administrative expenses on the consolidated condensed statements of income. As of February 28, 2023, the estimated future amortization expense for service contracts and other assets, excluding any future acquisitions and commissions to be earned, is as follows:

Fiscal Year (In thousands)
2023 (remaining three months)	$	37,864
2024	142,394
2025	127,831
2026	107,040
2027	87,552
Thereafter	203,474
Total future amortization expense	$	706,155

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Note 8 - Debt, Derivatives and Hedging Activities

Cintas' outstanding debt is summarized as follows:

(In thousands)	Interest  Rate			Fiscal Year Issued	Fiscal Year Maturity	February 28, 2023		May 31, 2022
Debt due within one year
Commercial paper	4.79	%	(1)	2023	2023	$	199,000	$	261,200
Senior notes (2)	2.78	%		2013	2023	50,054		50,380
Debt issuance costs						(1)		(6)
Total debt due within one year						$	249,053	$	311,574
Debt due after one year
Senior notes (3)	3.11	%		2015	2025	$	50,714	$	50,965
Senior notes	3.45	%		2022	2025	400,000		400,000
Senior notes	3.70	%		2017	2027	1,000,000		1,000,000
Senior notes	4.00	%		2022	2032	800,000		800,000
Senior notes	6.15	%		2007	2037	250,000		250,000
Debt issuance costs						(14,762)		(17,033)
Total debt due after one year						$	2,485,952	$	2,483,932

(1)    Variable rate debt instrument. The rate presented is the variable borrowing rate at February 28, 2023.

(2)  Cintas assumed these senior notes with the acquisition of G&K Services, Inc. (G&K) in the fourth quarter of fiscal 2017, and they were recorded at fair value. The interest rate shown above is the effective interest rate. The principal amount of these notes is $50.0 million with a stated interest rate of 3.73%.

(3)    Cintas assumed these senior notes with the acquisition of G&K in the fourth quarter of fiscal 2017, and they were recorded at fair value. The interest rate shown above is the effective interest rate. The principal amount of these notes is $50.0 million with a stated interest rate of 3.88%.

Cintas' senior notes, excluding the G&K senior notes assumed with the acquisition of G&K in fiscal 2017, are recorded at cost, net of debt issuance costs. The fair value of the long-term debt is estimated using Level 2 inputs based on general market prices. The carrying value and fair value of Cintas' debt as of February 28, 2023 were $2,749.0 million and $2,641.2 million, respectively, and as of May 31, 2022 were $2,811.2 million and $2,862.2 million, respectively. During the nine months ended February 28, 2023, Cintas paid $62.2 million, net of commercial paper. During the nine months ended February 28, 2022, Cintas issued $559.2 million, net of commercial paper.

The credit agreement that supports our commercial paper program has a revolving credit facility with a capacity of $2.0 billion. The credit agreement has an accordion feature that provides Cintas the ability to request increases to the borrowing commitments under the revolving credit facility of up to $500.0 million in the aggregate, subject to customary conditions. The maturity date of the revolving credit facility is March 23, 2027. As of February 28, 2023, there was $199.0 million of commercial paper outstanding with a weighted average interest rate of 4.79% and maturity dates less than 90 days and no borrowings on our revolving credit facility. As of May 31, 2022, there was $261.2 million of commercial paper outstanding with a weighted average interest rate of 1.20% and maturity dates less than 90 days and no borrowings on our revolving credit facility. The fair value of the commercial paper, which approximates carrying value, is estimated using level 2 inputs based on general market prices and interest rates.

Cintas uses interest rate locks to manage its overall interest expense as interest rate locks effectively change the interest rate of specific debt issuances. The interest rate locks are entered into to protect against unfavorable movements in the benchmark t