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Income Taxes | 12 Months Ended
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May 31, 2012
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes
(In thousands) | 2012 |  | 2011 |  | 2010
Income before income taxes consist of the following components: |  |  |  |  |
U.S. operations | $ | 454,811 |  |  | $ | 377,922 |  |  | $ | 315,717 |
Foreign operations | 16,133 |  |  | 14,747 |  |  | 28,175 |
| $ | 470,944 |  |  | $ | 392,669 |  |  | $ | 343,892 |
(In thousands) | 2012 |  | 2011 |  | 2010
Income tax expense consists of the following components: |  |  |  |  |
Current: |  |  |  |  |
Federal | $ | 139,251 |  |  | $ | 70,811 |  |  | $ | 106,389 |
State and local | 17,780 |  |  | 15,063 |  |  | 12,909 |
| 157,031 |  |  | 85,874 |  |  | 119,298 |
Deferred | 16,276 |  |  | 59,806 |  |  | 8,974 |
| $ | 173,307 |  |  | $ | 145,680 |  |  | $ | 128,272 |
(In thousands) | 2012 |  | 2011 |  | 2010
Reconciliation of income tax expense using the statutory rate and actual income tax expense is as follows: |  |  |  |  |
Income taxes at the U.S. federal statutory rate | $ | 164,830 |  |  | $ | 137,434 |  |  | $ | 120,362 |
State and local income taxes, net of federal benefit | 11,876 |  |  | 11,984 |  |  | 8,631 |
Other | (3,399 | ) |  | (3,738 | ) |  | (721 | )
| $ | 173,307 |  |  | $ | 145,680 |  |  | $ | 128,272 |
The components of deferred income taxes included on the consolidated balance sheets are as follows:
(In thousands) | 2012 |  | 2011
Deferred tax assets: |  |  |
Allowance for doubtful accounts | $ | 5,577 |  |  | $ | 5,630 |
Inventory obsolescence | 11,507 |  |  | 11,204 |
Insurance and contingencies | 28,708 |  |  | 19,121 |
Stock-based compensation | 16,017 |  |  | 12,585 |
Foreign tax credit carry-forward | 9,054 |  |  | — |
Other | 18,453 |  |  | 15,065 |
| 89,316 |  |  | 63,605 |
Valuation allowance | (9,054 | ) |  | — |
| 80,262 |  |  | 63,605 |
Deferred tax liabilities: |  |  |
In service inventory | 64,061 |  |  | 10,108 |
Property | 122,675 |  |  | 118,413 |
Intangibles | 88,696 |  |  | 77,910 |
State taxes and other | 11,970 |  |  | 7,682 |
| 287,402 |  |  | 214,113 |
Net deferred tax liability | $ | 207,140 |  |  | $ | 150,508 |
Although realization is not assured, management believes it is more likely than not that the recorded deferred tax assets, as adjusted for valuation allowances, will be realized. Income taxes paid were $160.8 million, $105.8 million and $103.8 million for the fiscal years ended May 31, 2012, 2011 and 2010, respectively. In the fourth quarter of fiscal 2012, Cintas repatriated approximately $110 million of cash from foreign subsidiaries on which no U.S. federal income taxes were previously provided, since Cintas had previously intended to permanently reinvest cumulative undistributed earnings of its foreign subsidiaries in foreign operations. Cintas recognized an income tax expense of $7.4 million net of foreign tax credits as a result of the repatriation described above. Remaining undistributed earnings of foreign subsidiaries were approximately $140.7 million, $222.0 million and $198.3 million for the fiscal years ended May 31, 2012, 2011 and 2010, respectively, for which deferred taxes have not been provided. Such earnings are considered to be permanently reinvested in Cintas' foreign subsidiaries. If such earnings were repatriated, additional tax expense may result. The current calculation of such additional taxes is not practicable. On December 23, 2011, the U.S. Department of the Treasury and the Internal Revenue Service issued temporary regulations (Regulations Section 2011-14) that provide guidance on amounts paid to improve tangible property, and acquire or produce tangible property, as well as guidance regarding the disposition of property and the expensing of supplies and materials. The finalized regulations are effective for Cintas' fiscal year ending May 31, 2013. Cintas continues to review these regulations for their impact on Cintas' consolidated financial statements. Accounting for uncertain tax positions requires the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Companies may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. As of May 31, 2012 and 2011, there was $9.0 million and $18.8 million, respectively, in total unrecognized tax benefits, which, if recognized, would favorably impact Cintas' effective tax rate. Cintas recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense in the consolidated statements of income, which is consistent with the recognition of these items in prior reporting periods. The total amount accrued for interest and penalties as of May 31, 2012 and 2011, was $2.0 million and $9.1 million, respectively. Cintas records this tax liability as current and long-term accrued liabilities on the consolidated balance sheets, as appropriate. In the normal course of business, Cintas provides for uncertain tax positions and the related interest, and adjusts its unrecognized tax benefits and accrued interest accordingly. Unrecognized tax benefits related to continuing operations decreased by $55.0 million in fiscal 2012, increased by $6.4 million in fiscal 2011 and increased by $0.9 million in fiscal 2010. Accrued interest decreased by $7.1 million in fiscal 2012, decreased by $6.6 million in fiscal 2011 and decreased by less than $0.1 million in fiscal 2010. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(In thousands) |
Balance at June 1, 2010 | $ | 95,857 |
Additions for tax positions of prior years | 10,529 |
Settlements | (2,194 | )
Statute expirations | (1,093 | )
Balance at May 31, 2011 | $ | 103,099 |
Additions for tax positions of prior years | 5,660 |
Settlements | (5,048 | )
Change in tax regulations | (57,182 | )
Statute expirations | (1,998 | )
Balance at May 31, 2012 | $ | 44,531 |
The majority of Cintas' operations are in North America. Cintas is required to file federal income tax returns, as well as state income tax returns in a majority of the domestic states and also in certain Canadian provinces. At times, Cintas is subject to audits in these jurisdictions. The audits, by nature, are sometimes complex and can require several years to resolve. The final resolution of any such tax audit could result in either a reduction in Cintas' accruals or an increase in its income tax provision, either of which could have an impact on the consolidated results of operation in any given period. All U.S. federal income tax returns are closed to audit through fiscal 2010. Cintas is currently in advanced stages of various audits in certain foreign jurisdictions and certain domestic states. The years under audit cover fiscal years back to 2005. Based on the resolution of the various audits and other potential regulatory developments, it is reasonably possible that the balance of unrecognized tax benefits could decrease by approximately $2.4 million for the fiscal year ended May 31, 2013.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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