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Acquisitions | 9 Months Ended
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Feb. 28, 2022
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | Acquisitions On December 10, 2021, Cintas acquired the remaining interest of an equity method investment. The acquisition will operate as a component of Cintas' supply chain within the Uniform Rental and Facility Services reportable operating segment. The cash consideration transferred to acquire the remaining interest of the equity method investment was $48.0 million, net of cash acquired of $1.7 million. Under applicable accounting guidance, the Company was required to record its historical equity method investment at fair value ($43.5 million), resulting in a gain of $30.2 million, which is recorded as a reduction in selling and administrative expenses in the three and nine months ended February 28, 2022. The fair value of the historical equity method investment was determined using a combination of a market and income approach (discounted cash flow analysis). The key assumptions and estimates utilized in these approaches included market data and market multiples, discount rates, as well as future levels of revenue growth and operating margins. The Company believes these assumptions and estimate are reasonable and based on the best information available at the valuation date. Cintas accounted for the acquisition using the acquisition method of accounting. The preliminary purchase price allocation was determined by management with the assistance of third-party valuation specialists and is based on estimates of the fair value of assets acquired and liabilities assumed as of December 10, 2021. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of the amount of goodwill are based on several strategic supply chain and synergistic benefits that will allow for Cintas to further vertically integrate the operations for certain product lines, and are expected to be realized from the acquisition. None of the goodwill is expected to be deductible for income tax purposes. The allocation of the preliminary purchase price, including the value of the previously held equity method investment, at fair value is as follows:
(In thousands) |  | December 10, 2021
ASSETS |  |
Working capital assets |  | $ | 17,352 |
Property and equipment |  | 16,230 |
Operating lease right-of-use assets |  | 16,882 |
Goodwill |  | 55,986 |
Separately identifiable intangible assets |  | 9,201 |
LIABILITIES |  |
Total current liabilities |  | (6,425) |
Operating lease liabilities |  | (17,734) |
Total allocation (consideration) |  | $ | 91,492 |
As additional information is obtained, adjustments may be made to the preliminary purchase price allocation. The Company is still finalizing the estimated fair value of certain of the tangible and identifiable intangible assets acquired and liabilities assumed. The separately identifiable intangible assets are primarily made up of a customer relationship intangible asset that will be amortized over a period of 9 years, which represents the estimated useful life of the economic benefit. Cintas is required to provide additional disclosures about fair value measurements as part of the consolidated condensed financial statements for each major category of assets and liabilities measured at fair value on a nonrecurring basis (including business combinations). The working capital assets and liabilities, as well as the property and equipment acquired, were valued using Level 2 inputs which included data points that are observable, such as definitive sales agreements, appraisals or established market values of comparable assets (market approach). Goodwill and separately identifiable intangible assets were valued using Level 3 inputs, which are unobservable by nature, and included internal estimates of future cash flows (income approach). The results of operations of the acquisition are included in Cintas' consolidated condensed statements of income subsequent to the date of acquisition, and are not material to the consolidated condensed financial statements. Other Acquisitions During Fiscal 2022 The purchase price paid for each acquisition in fiscal 2022 has been allocated to the fair value of the assets acquired and liabilities assumed. Excluding the acquisition of the remaining interest in an equity method investment discussed above, during the nine months ended February 28, 2022, Cintas acquired three businesses included in the Uniform Rental and Facility Services reportable operating segment, seven businesses included in the First Aid and Safety Services reportable operating segment and six businesses included in All Other. During the nine months ended February 28, 2021, Cintas acquired two business included in the Uniform Rental and Facility Services reportable operating segment, three businesses included in the First Aid and Safety Services reportable operating segment and three businesses included in All Other. The following summarizes the aggregate purchase price and fair value allocations for all businesses acquired during the nine months ended February 28:
(In thousands) |  | 2022 |  | 2021
Fair value of tangible assets acquired |  | $ | 36,736 |  |  | $ | 476 |
Fair value of service contracts acquired |  | 41,560 |  |  | 4,203 |
Fair value of other intangibles acquired |  | 5,439 |  |  | 432 |
Fair value of operating lease right-of-use assets, net |  | 16,882 |  |  | — |
Net goodwill recognized |  | 132,206 |  |  | 5,850 |
Total fair value of assets acquired |  | 232,823 |  |  | 10,961 |
Fair value of liabilities assumed |  | (20,746) |  |  | (3,391) |
Fair value of operating lease liabilities |  | (17,734) |  |  | — |
Total fair value of liabilities assumed |  | (38,480) |  |  | (3,391) |
Total consideration for acquisitions, net of cash acquired |  | $ | 194,343 |  |  | $ | 7,570 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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