Acquisitions and Divestitures (Tables)

12 Months Ended

May 31, 2017

Schedule of Aggregate Purchase Price for Businesses Acquired



Assets:
Cash and cash equivalents	$	333
Accounts receivable	16,705
Inventory	5,987
Other current assets	1,443
Property, plant and equipment	849
Goodwill	87,442
Service contracts	34,000
Other intangibles	4,500
Liabilities:
Accounts payable	(7,195		)
Accrued liabilities	(4,428		)
Deferred income taxes	(5,636		)
Total consideration	$	134,000

The final purchase price allocation was determined by management with the assistance of third-party valuation specialists, and was based on estimates of the fair value of assets acquired and liabilities assumed as of August 1, 2015. The components of the final purchase price allocation, at fair value, are as follows:



Assets:
Cash and cash equivalents	$	333
Accounts receivable	16,705
Inventory	5,987
Other current assets	1,443
Property, plant and equipment	849
Goodwill	87,442
Service contracts	34,000
Other intangibles	4,500
Liabilities:
Accounts payable	(7,195		)
Accrued liabilities	(4,428		)
Deferred income taxes	(5,636		)
Total consideration	$	134,000

The net consideration transferred for G&K consisted of the following items:



(In thousands)

Cash consideration for common stock	$	1,901,845		⁽¹⁾
Cash consideration for share-based awards	62,257			⁽²⁾
Cash consideration for G&K revolving debt	124,180			⁽³⁾
Cash consideration for transaction expenses	24,529			⁽⁴⁾
Total consideration	2,112,811
Cash acquired	(34,393		)	⁽⁵⁾
Net consideration transferred	$	2,078,418

⁽¹⁾ The cash consideration for outstanding shares of G&K common stock is the product of the agreed-upon cash per share price of $97.50 and total G&K outstanding shares of approximately 19.5 million.

⁽²⁾ The cash consideration for share-based awards is the product of the agreed-upon cash per share price of $97.50 and the total number of restricted stock outstanding and the “in the money” stock options net of the weighted average exercise price.

⁽³⁾ The cash consideration for G&K revolving debt reflects the repayment of the outstanding obligation.

⁽⁴⁾ Represents G&K legal and professional fees that were incurred prior to acquisition and were due upon the closing of the transaction.

⁽⁵⁾ Represents the G&K cash balance acquired at acquisition.

The following summarizes the aggregate purchase price and fair value allocations for all businesses acquired:



(In thousands)	2017		2016

Fair value of tangible assets acquired	$	550,491	$	26,759
Fair value of service contracts acquired	529,235		55,694
Fair value of other intangibles acquired	17,556		4,639
Net goodwill recognized	1,507,554		97,097
Total fair value of assets acquired	2,604,836		184,189
Fair value of liabilities assumed	502,465		27,610
Total cash paid for acquisitions	$	2,102,371	$	156,579

The components of the preliminary purchase price allocation, at fair value, are as follows:



Assets:	March 21, 2017
Accounts receivable	$	95,846
Inventories	30,254
Uniforms and other rental items in service	93,659
Income taxes, current	14,626
Prepaid expenses and other current assets	43,235
Property and equipment	254,035
Goodwill	1,493,211
Service contracts	519,000
Trade names	17,000
Other assets	15,585
Liabilities:
Accounts payable	(53,220		)
Accrued compensation and related liabilities	(9,594		)
Accrued liabilities	(115,109		)
Long term accrued liabilities	(28,380		)
G&K Senior notes	(105,359		)
Deferred income taxes	(186,371		)
Total consideration	$	2,078,418

Schedule of Preliminary Valuation and Amortization Period of Identifiable Intangible Assets

The table below sets forth the preliminary valuation and amortization period of identifiable intangible assets:



Identifiable intangible assets:	Preliminary Valuation		Amortization Period

Service contracts	$	519,000	15 years
Trade names	17,000		3 years
Total	$	536,000

Schedule of Pro Forma Financial Information

The following unaudited pro forma information presents the combined financial results for Cintas and G&K as if the G&K acquisition had been completed at the beginning of Cintas’ prior fiscal year, June 1, 2015. Prior to the acquisition, G&K used a 52-week or 53-week fiscal year ending on the Saturday nearest June 30. The pro forma financial information set forth below for the year ended May 31, 2016 includes G&K's annual results for the period of June 28, 2015 through July 2, 2016 adjusted for number of working days in Cintas' fiscal 2016. The pro forma financial information for the year ended May 31, 2017 includes G&K's publicly reported results for the period of July 2, 2016 through December 31, 2016 annualized and adjusted for the number of work days in the stub period of June 1, 2016 through March 21, 2017 and the actual results from March 22, 2017 through May 31, 2017. Actual net sales and net income of the acquired G&K business included in reported fiscal 2017 results were $187.7 million and $5.7 million, respectively.



In thousands except per share data	2017		2016

Net sales	$	6,107,109	$	5,762,741
Net income	$	488,482	$	520,224

Earnings per common share - diluted	$	4.45	$	4.66