Long-Term Debt and Derivatives



(In thousands)	2013		2012

Unsecured term notes due through 2036 at an average rate of 4.59%	$	1,309,166	$	1,284,802
Less: amounts due within one year	8,187		225,636
	$	1,300,979	$	1,059,166

Cintas' senior notes are recorded at cost. The fair value is estimated using Level 2 inputs based on Cintas' current incremental borrowing rate for similar types of borrowing arrangements. The carrying value and fair value of Cintas' long-term debt as of May 31, 2013 were $1,309.2 million and $1,447.1 million and as of May 31, 2012 were $1,284.8 million and $1,420.2 million.

Letters of credit outstanding were $85.8 million and $85.7 million at May 31, 2013 and 2012, respectively. Maturities of long-term debt during each of the next five years are $8.2 million, $0.5 million, $0.2 million, $250.2 million and $300.1 million, respectively.

Interest paid was $68.4 million, $62.3 million and $49.2 million for the fiscal years ended May 31, 2013, 2012 and 2011, respectively.

Cintas' commercial paper program has a capacity of $300.0 million 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 October 7, 2011, to extend the maturity date from September 26, 2014 to October 6, 2016, to improve the applicable margin used to calculate the interest rate payable on any outstanding loans and the facility fee payable under the agreement and to replace the financial covenant regarding Cintas' net funded indebtedness to total capitalization with a requirement to maintain a leverage ratio of consolidated indebtedness to consolidated earnings before interest, taxes, depreciation and amortization (debt to EBITDA) of no more than 3.5 to 1.0. We believe this program, along with cash generated from operations, will be adequate to provide necessary funding for our future cash requirements. No commercial paper or borrowings on our revolving credit facility were outstanding at May 31, 2013 or 2012.

On June 1, 2012, Cintas repaid at maturity $225.0 million aggregate principal amount of its 6.00% senior notes due 2012. Subsequently, on June 5, 2012, Cintas issued $250.0 million aggregate principal amount of senior notes due June 1, 2022. These senior notes bear interest at a rate of 3.25% paid semi-annually beginning December 1, 2012. The net proceeds ($25.0 million) generated from the offering were used for general corporate purposes.

Cintas used interest rate lock agreements to hedge against movements in the treasury rates at the time Cintas issued its senior notes in fiscal 2002, 2007, 2008 and 2011. In addition, during the fourth quarter of fiscal 2012, Cintas entered into a new interest rate lock agreement in anticipation of the fiscal 2013 issuance. The amortization of the cash flow hedges resulted in a credit to other comprehensive income of $2.0 million, $1.5 million and $0.8 million for the fiscal years ended May 31, 2013, 2012 and 2011, respectively.

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. Cintas had forward contracts included in accounts receivable of less than $0.1 million at May 31, 2013. Cintas did not have any forward contracts included in accounts receivable at May 31, 2012. These instruments did not impact foreign currency exchange during fiscal 2013 and increased foreign currency exchange loss by less than $0.1 million during fiscal 2012.

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 EBITDA and interest coverage ratios. Cross default provisions exist between certain debt instruments. Cintas is in compliance with all of the significant 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.