Debt, Derivatives and Hedging Activities

9 Months Ended

Feb. 28, 2022

Debt, Derivatives and Hedging Activities

Cintas' outstanding debt is summarized as follows:


(In thousands)	Interest Rate			Fiscal Year Issued	Fiscal Year Maturity	February 28, 2022		May 31, 2021

Debt due within one year
Senior notes	4.30	%		2012	2022	$	—	$	250,000
Senior notes	2.90	%		2017	2022	650,000		650,000
Senior notes	3.25	%		2013	2023	300,000		—
Commercial paper	0.43	%	(1)	2022	2022	559,210		—
Debt issuance costs						(154)		(930)
Total debt due within one year						$	1,509,056	$	899,070

Debt due after one year
Senior notes	3.25	%		2013	2023	$	—	$	300,000
Senior notes (2)	2.78	%		2013	2023	50,489		50,815
Senior notes (3)	3.11	%		2015	2025	51,049		51,301
Senior notes	3.70	%		2017	2027	1,000,000		1,000,000
Senior notes	6.15	%		2007	2037	250,000		250,000

Debt issuance costs						(8,025)		(9,283)
Total debt due after one year						$	1,343,513	$	1,642,833

(1) Variable rate debt instrument. The rate presented is the variable borrowing rate at February 28, 2022.

(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, 2022 were $2,859.0 million and $2,994.0 million, respectively, and as of May 31, 2021 were $2,550.0 million and $2,788.8 million, respectively. On June 1, 2021, in accordance with the terms of the notes, Cintas paid the $250.0 million aggregate principal amount of its 4.30%, 10-year senior notes that matured on that date with cash on hand. 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 was amended and restated on March 23, 2022. The amendment increased the capacity of the revolving credit facility from $1.0 billion to $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, 2022, there was $559.2 million of commercial paper outstanding with a weighted average interest rate of 0.43% and maturity dates less than 120 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 treasury rate related to forecasted debt issuances. Cintas used interest rate locks, which represent cash flow hedges, to hedge against movements in the treasury rates at the time Cintas issued its senior notes in fiscal 2007, fiscal 2012, fiscal 2013 and fiscal 2017. The amortization of the interest rate locks resulted in a decrease to other comprehensive income of $0.5 million and $0.4 million for the three months ended February 28, 2022 and 2021, respectively. For the nine months ended February 28, 2022 and 2021, the

amortization of the interest rate locks resulted in a decrease to other comprehensive income of $1.4 million and $1.1 million, respectively.

The notional and fair values of the outstanding interest rate locks, for forecasted debt issuances, are summarized as follows:


			February 28, 2022								May 31, 2021
Fiscal Year of Issuance (in thousands)	Notional Value		Prepaid expenses and other current assets		Other assets, net		Current accrued liabilities		Long-term accrued liabilities		Other assets, net		Long-term accrued liabilities

2022	$	250,000	$	—	$	—	$	—	$	793	$	—	$	—
2020	$	950,000	$	22,645	$	21,370	$	—	$	—	$	40,400	$	—
2019	$	500,000	$	—	$	—	$	52,540	$	—	$	—	$	61,657

The interest rate locks are also recorded in other comprehensive income (loss), net of tax. These interest rate locks had no impact on net income or cash flows for the three and nine months ended February 28, 2022 or 2021.

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 consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) and interest coverage ratios. Cross-default provisions exist between certain debt instruments. 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. Cintas was in compliance with all of the debt covenants for all periods presented.