Stock-Based Compensation

12 Months Ended

May 31, 2024

Share-Based Payment Arrangement, Noncash Expense [Abstract]

On August 2, 2016, the Board approved and adopted the Cintas Corporation 2016 Equity and Incentive Compensation Plan (the 2016 Plan) to replace the Cintas' 2005 Equity Compensation Plan, as amended (the 2005 Plan). The 2016 Plan was approved by Cintas shareholders at its Annual Meeting on October 18, 2016, at which time the 2016 Plan became effective. Under the 2016 Plan, Cintas may grant officers and key employee-partners equity compensation in the form of stock options, stock appreciation rights, restricted and unrestricted stock awards, performance awards and other stock unit awards representing up to an aggregate of 12,500,000 shares of Cintas' common stock. Any shares of common stock that remained available under the 2005 Plan became part of the total available share balance of 12,500,000 shares under the 2016 Plan. At May 31, 2024, 4,982,123 shares of common stock were reserved for future issuance under the 2016 Plan. Total compensation cost for stock-based awards was $117.0 million, $103.6 million and $109.3 million for the fiscal years ended May 31, 2024, 2023 and 2022, respectively. Cintas accounts for forfeitures of stock-based awards as they occur. The total income tax benefit recognized in the consolidated statements of income for share-based compensation arrangements was $29.8 million, $26.4 million and $27.9 million for the fiscal years ended May 31, 2024, 2023 and 2022, respectively.

Stock Options

Stock options are granted at the fair market value of the underlying common stock on the date of grant. The option terms are determined by the Compensation Committee of the Board, but no stock option may be exercised later than 10 years after the date of the grant. The option awards generally have 10-year terms with graded vesting in years 3 through 5 based on continuous service during that period. The majority of stock option grants occur in the first quarter of each fiscal year in connection with the annual grant, which is earned in the prior fiscal year. Cintas recognizes compensation expense for these options using the straight-line recognition method over the vesting period.

The fair value of options was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions for the fiscal years ended May 31:


	2024		2023		2022

Risk-free interest rate	3.9	%	2.8	%	0.8	%
Dividend yield	1.1	%	1.1	%	1.2	%
Expected volatility of Cintas' common stock	26.9	%	26.0	%	25.2	%
Expected life of the option in years	5.5		5.5		5.5

The risk-free interest rate is based on U.S. government issues with a remaining term equal to the expected life of the stock options. The determination of expected volatility is based on historical volatility of Cintas' common stock over the period commensurate with the expected term of stock options, as well as other relevant factors. The weighted average expected term was determined based on the historical employee exercise behavior of the options. The weighted-average fair value of stock options granted during fiscal 2024, 2023 and 2022 was $191.15, $136.64 and $100.07, respectively.

The information presented in the following table relates primarily to stock options granted and outstanding under either the 2016 Plan or under previously adopted plans:


	Shares	Weighted Average Exercise Price

Outstanding, June 1, 2021 (1,548,867 shares exercisable)	6,055,524	$	191.11
Granted	531,963	398.92
Canceled	(877)	116.25
Forfeited	(260,249)	273.53
Exercised	(1,238,959)	118.21
Outstanding, May 31, 2022 (1,575,999 shares exercisable)	5,087,402	230.62
Granted	579,146	464.91
Canceled	(1,710)	65.79
Forfeited	(162,598)	339.49
Exercised	(1,074,488)	145.19
Outstanding, May 31, 2023 (1,546,346 shares exercisable)	4,427,752	278.01
Granted	408,497	662.31
Canceled	—	—
Forfeited	(110,593)	411.35
Exercised	(913,398)	171.64
Outstanding, May 31, 2024 (1,385,992 shares exercisable)	3,812,258	$	342.91

The intrinsic value of stock options exercised was $359.8 million, $302.9 million and $348.3 million for the fiscal years ended May 31, 2024, 2023 and 2022, respectively. The total cash received from employees as a result of employee stock option exercises for the fiscal years ended May 31, 2024, 2023 and 2022 was $1.4 million, $3.0 million and $117.7 million, respectively.

The fair value of stock options vested was $34.3 million, $37.9 million and $36.7 million for the fiscal years ended May 31, 2024, 2023 and 2022, respectively.

The following table summarizes the information related to stock options outstanding at May 31, 2024:


		Outstanding Options			Exercisable Options
Range of Exercise Prices	Number Outstanding	Average Remaining Option Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$63.45 - $206.99	1,012,683	3.11	$	152.06	1,006,059	$	151.83
$213.37 - $388.19	924,792	5.76	282.38		368,646	270.37
$388.86 - $397.83	951,732	7.55	392.50		587	388.86
$401.47 - $687.03	923,051	9.43	561.79		10,700	422.39
$63.45 - $687.03	3,812,258	6.39	$	342.91	1,385,992	$	185.55

At May 31, 2024, the aggregate intrinsic value of stock options outstanding and exercisable was $1,278.4 million and $682.5 million, respectively. The weighted-average remaining contractual term of stock options exercisable is 3.8 years.

Restricted Stock Awards

Restricted stock awards consist of Cintas' common stock that is subject to such conditions, restrictions and limitations as the Compensation Committee of the Board determines to be appropriate. The vesting period is generally three years after the grant date. The recipient of restricted stock awards will have all rights of a shareholder of Cintas, including the right to vote and the right to receive cash dividends during the vesting period. Cintas recognizes compensation expense for these restricted stock awards using the straight-line recognition method over the vesting period.

The information presented in the following table relates to restricted stock awards granted and outstanding under either the 2016 Plan or under previously adopted plans:


	Shares	Weighted Average Grant Price

Outstanding, unvested grants at June 1, 2021	1,241,223	$	264.63
Granted	189,874	398.30
Forfeited	(66,589)	323.00
Vested	(527,899)	213.36
Outstanding, unvested grants at May 31, 2022	836,609	331.95
Granted	187,750	470.11
Forfeited	(51,200)	384.61
Vested	(286,529)	267.65
Outstanding, unvested grants at May 31, 2023	686,630	392.02
Granted	173,194	673.55
Forfeited	(44,838)	432.79
Vested	(161,960)	301.83
Outstanding, unvested grants at May 31, 2024	653,026	$	490.32

The remaining unrecognized compensation cost related to unvested stock options and restricted stock at May 31, 2024 was $310.4 million. The weighted-average period of time over which this cost will be recognized is 2.2 years.