XML 31 R17.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Income Taxes | 12 Months Ended
--- | ---
May 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income before income taxes for continuing operations consists of the following components:
(In thousands) | 2018 |  | 2017 |  | 2016
U.S. operations | $ | 798,215 |  |  | $ | 673,055 |  |  | $ | 685,167 |
Foreign operations | 42,786 |  |  | 14,349 |  |  | 20,148 |
| $ | 841,001 |  |  | $ | 687,404 |  |  | $ | 705,315 |
Income tax expense (benefit) for continuing operations consists of the following components:
(In thousands) | 2018 |  | 2017 |  | 2016
Current: |  |  |  |  |
Federal | $ | 137,601 |  |  | $ | 187,134 |  |  | $ | 272,663 |
State and local | 19,582 |  |  | 27,197 |  |  | 25,428 |
Foreign | 15,103 |  |  | 6,996 |  |  | 6,471 |
| 172,286 |  |  | 221,327 |  |  | 304,562 |
Deferred | (115,217 | ) |  | 8,791 |  |  | (47,852 | )
| $ | 57,069 |  |  | $ | 230,118 |  |  | $ | 256,710 |
Reconciliation of income tax expense for continuing operations using the statutory rate and actual income tax expense is as follows:
(In thousands) | 2018 |  | 2017 |  | 2016
Income taxes at the U.S. federal statutory rate | $ | 245,322 |  |  | $ | 240,677 |  |  | $ | 246,881 |
Permanent differences (1) | (47,137 | ) |  | (29,414 | ) |  | — |
State and local income taxes, net of federal benefit | 24,783 |  |  | 19,210 |  |  | 16,339 |
Other (2) | (4,451 | ) |  | (355 | ) |  | (6,510 | )
Impact of the Tax Act: |  |  |  |  |
Deemed repatriation of non-U.S. earnings, net of foreign tax credits and other (collectively, transition tax) | 9,768 |  |  | — |  |  | — |
Non-U.S. withholding taxes related to certain non-U.S. earnings subject to repatriation | 4,363 |  |  | — |  |  | — |
Remeasurement of U.S. net deferred tax liabilities from 35% to 21% | (175,579 | ) |  | — |  |  | — |
| $ | 57,069 |  |  | $ | 230,118 |  |  | $ | 256,710 |
(1) Includes the impact of ASU 2016-09. (2) Primarily consists of adjustments for uncertain tax positions, deferred adjustments and return to provision adjustments. The components of deferred income taxes included on the consolidated balance sheets are as follows:
(In thousands) | 2018 |  | 2017
Deferred tax assets: |  |  |
Allowance for doubtful accounts | $ | 6,955 |  |  | $ | 7,707 |
Inventory obsolescence | 8,668 |  |  | 16,096 |
Insurance and contingencies | 36,727 |  |  | 54,489 |
Stock-based compensation | 53,532 |  |  | 73,027 |
Net operating loss and foreign related carry-forwards (1) | 11,910 |  |  | 37,814 |
Deferred compensation and other | 31,093 |  |  | 25,891 |
| 148,885 |  |  | 215,024 |
Valuation allowance | (11,302 | ) |  | (18,088 | )
| 137,583 |  |  | 196,936 |
Deferred tax liabilities: |  |  |
Uniform and other rental items in service | 143,580 |  |  | 210,766 |
Property and equipment | 115,712 |  |  | 126,872 |
Service contracts and other intangible assets | 183,000 |  |  | 290,049 |
Treasury locks | 3,545 |  |  | 6,435 |
State taxes and other | 44,327 |  |  | 32,142 |
| 490,164 |  |  | 666,264 |
Net deferred tax liability | $ | 352,581 |  |  | $ | 469,328 |
(1) The decrease in fiscal 2018 from fiscal 2017 is primarily due to the utilization of the net operating loss related to the G&K acquisition in fiscal 2017. The majority of these net operating losses have a five-year expiration period. The progression of the valuation allowance is as follows:
(In thousands) | 2018 |  | 2017
Balance at beginning of year | $ | (18,088 | ) |  | $ | (17,047 | )
Additions | (3,268 | ) |  | (1,667 | )
Subtractions (1) | 10,054 |  |  | 626 |
Balance at end of year | $ | (11,302 | ) |  | $ | (18,088 | )
(1) Primarily related to expiration of net operating loss carryforwards and application of the Tax Act. Income taxes paid were $175.3 million, $269.6 million and $452.6 million for the fiscal years ended May 31, 2018, 2017 and 2016, respectively. As of May 31, 2018 and 2017, there was $26.9 million and $12.6 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, 2018 and 2017, was $1.8 million and $0.9 million, respectively. Cintas records this tax liability in long-term accrued liabilities on the consolidated balance sheets, as appropriate. A reconciliation of the beginning and ending amount of the gross unrecognized tax benefits (exclusive of interest and penalties) is as follows:
(In thousands) |
Balance at June 1, 2016 | $ | 16,531 |
Additions from G&K acquisition (1) | 2,084 |
Additions for tax positions of prior years | 2,520 |
Settlements (2) | (1,044 | )
Statute expirations | (2,734 | )
Balance at May 31, 2017 | $ | 17,357 |
Additions for tax positions of the current year | 10,164 |
Additions from G&K acquisition (1) | 6,394 |
Additions for tax positions of prior years | 5,675 |
Statute expirations | (2,943 | )
Balance at May 31, 2018 | $ | 36,647 |
(1) Increase in unrecognized tax benefit associated with unrecognized benefits assumed in the G&K acquisition. (2) Decrease in unrecognized tax benefit associated with the settlement of a fiscal 2012 Internal Revenue Service audit. 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 2014. Cintas is currently in various audits in certain foreign jurisdictions and certain domestic states. The years under foreign and domestic state audits cover fiscal years back to 2013. Based on the resolution of the various audits and other potential regulatory developments, it is expected that the balance of unrecognized tax benefits will not change for the fiscal year ending May 31, 2019. On December 22, 2017, the President signed into legislation the Tax Act. Among other changes, the Tax Act reduced the U.S. corporate tax rate from 35% to 21% and requires companies to pay a one-time transition tax on earnings of foreign subsidiaries. The Tax Act also includes provisions that are expected to offset some of the benefit of the anticipated U.S. corporate tax rate reduction, including the repeal of the deduction for domestic production activities and the expansion of the limitation on the deduction of certain executive compensation. In addition, the Tax Act alters the landscape of taxation of non-U.S. operations and provides immediate deductions for certain new investments, among other provisions. Provisional Deferred Tax Revaluation Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. As changes in tax laws or rates occur, deferred tax assets and liabilities are adjusted through income tax expense in the period changes are enacted. Cintas revalued its deferred tax assets and liabilities based on the newly enacted 21% U.S. corporate tax rate. Cintas will continue to revise certain aspects of the calculation, which could potentially affect the measurement of these balances or give rise to new deferred tax amounts. The provisional amount related to the revaluation of the net deferred tax liability balance was a benefit of $175.6 million, which was recognized as a component of income tax expense for the fiscal year ended May 31, 2018. Provisional Transition Tax The one-time transition tax is based on Cintas' post-1986 earnings and profits (E&P) of foreign subsidiaries that were previously deferred for U.S. income tax purposes. Cintas recorded a transition tax liability, net of foreign tax credits, of $9.8 million that was recognized as additional income tax expense during the fiscal year ended May 31, 2018. Cintas is still revising the transition tax calculation, as the Company has not completed its final analysis of all provisions of the Tax Act. The provisional amount is subject to change based on computation of final fiscal 2018 E&P, the amounts held in cash and cash equivalents at the end of fiscal 2018, a historical E&P validation and foreign tax credit analysis. Foreign Withholding Tax Foreign withholding taxes of $3.7 million have been recognized and paid on certain non-U.S. earnings subject to repatriation that were previously tax deferred. We will continue to monitor all foreign E&P we believe to be permanently reinvested in foreign operations, if any. Given the impact of the G&K acquisition to Cintas' Canadian operations in fiscal 2018, Cintas has revised its position to a partially invested assertion (only a portion of future E&P is no longer deemed to not be permanently reinvested). Cintas has accrued a withholding tax estimate of $0.7 million related to fiscal 2018 earnings not deemed to be permanently reinvested as it relates to E&P generated after the enactment of the Tax Act. As of May 31, 2018, the estimated impacts of the Tax Act recorded during the twelve months ended May 31, 2018 are provisional in nature, and Cintas will continue to assess the impact of the Tax Act and will record adjustments through the income tax provision in the relevant period as amounts are known and reasonably estimable during the measurement period. Accordingly, Cintas has not completed the final analysis related to the tax impact of the Tax Act, consequently, the impact of the Tax Act may differ from Cintas' provisional estimates due to, and among other factors, information currently not available, changes in interpretations and the issuance of additional guidance, as well as changes in assumptions, including actions Cintas may take in future periods as a result of the Tax Act. However, Cintas has recognized a reasonable estimate of the effects of its deferred tax balances and one-time transition tax that are recorded within the financial statements for the fiscal year ended May 31, 2018. Although realization is not assured, management believes it is more likely than not that the recorded deferred tax assets, net of valuation allowances, will be realized.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration