2014-2015 - CFA Equity Research Challenge

1. Matt Bender | Michael Loffredo |AlexVielmetti | JoeWavering
Cintas Corporation
“The Service Professionals”
CFA Institute Research Challenge 2014 – 2015 ▪ Miami University, Oxford, Ohio

2. Initiation & Company Overview
Industry Landscape
Valuation
Risks & Recommendation
Appendix
3
8
12
16
18

3. 111
Initiation & Company
Overview
Industry Landscape Valuation Risks &
Recommendation
Appendix
Initiation Overview
We recommend Cintas Corporation as a HOLD with a 12 month price target of $81.00,
which represents an upside of 0.77% from the current share price of $81.32, inclusive of a
projected $0.95 dividend
Moving forward, we see several key factors that will result in a NEUTRAL performance for Cintas
 Future opportunities for organic growth will be limited as route saturation and poor add/stops conditions
persist in certain segments
 Continued emphasis on cross-selling and diversified products to improve margins
 Commanding market share allows for economies of scale and possibility of bolt-on acquisitions
 Aggressive plan of returning capital, including share buybacks to bolster EPS growth
Sources: Team Projections
3

4. 111
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Appendix
Company Overview
Key Statistics Stock Performance
FY 2014 Revenue Breakdown
71%
10%
11%
8%
Rental Uniforms &
Ancillary Products
Uniform Direct Sales
First Aid, Safety &
Fire Protection
Document
Management
Business Overview
 Cintas Corporation operates in the commercial
service & supplies industry
 Cintas maintains over 430 facilities and eight
distribution centers across NorthAmerica
 Employs over 30,000 people
 Headquartered in Cincinnati, OH
 NASDAQ: CTAS
Sources: Company 10-K, Bloomberg
Market Data Value
Current Price $81.32 EV/EBITDA 12.72x
Market Cap. $9,303 M EV/Sales 2.28x
Annual Dividend $0.85 Price/Book 4.55x
Dividend Yield 1.05% Price/Earnings 25.94x
FCF per Basic Share 3.43 PEG 2.12
Operations Capital Structure
Gross Margin 42.10% Debt $1,300 M
EBITDA Margin 17.52% Cash & Equivalents $513 M
Operating Margin 13.71% Quick Ratio 1.6x
Profit Margin 9.80% Current Ratio 2.9x
4
0
2
4
6
$50
$60
$70
$80
$90
4/11/2014 7/10/2014 10/8/2014 1/6/2015 4/6/2015
Millions
Volume Price

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Appendix
Contract Structure Rental & Ancillary Revenue
Margins by Product OfferingDistribution Logistics
 Cintas operates its core business through a
trucking system of distribution
 Management aims to “saturate” routes to maximize
revenue per driver and expand margins
 Route logistics are proprietary and seen as a
source of competitive advantage
 Rental contracts are subject to yearly price
increases in accordance with CPI
 Average contract length is five years
 Allows margins to stay relatively consistent across
temporary economic downswings
MarginsAnalysis
15.7% 10.3% 15.3% 2.5%
0%
25%
50%
75%
100%
Rental Uniforms &
Ancillary Products
Uniform Direct
Sales
First Aid, Safety &
Fire Protection
Document
Management
Operating Margin SG&A COGS
Sources: Company 10-K, Bloomberg, FY 2014 Earnings Call
52%
19%
16%
5%
8%
Uniform Rental
Dust Control
Hygiene & Other
Services
Shop Towels
Linen & Other
5

6. 111
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Overview
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Recommendation
Appendix
Document Divestment
 Formed a partnership
with Shred-it
 Cintas owns 42% of
the combined entity
and received $180M
at the time of sale
 Shred-it is expected to
have annual revenues
> $600 million
North America United Kingdom
 Sold its UK-based
document
management division
to Restore PLC. for
$38 million
In 2014, Cintas decided to divest
its Document Management
Division
 Sold their Document Storage and
Imaging business to three separate
buyers for $180 million
 Did not fit intended future of the
company
 Returned much of the additional
cash to shareholders with a special
dividend
Sources: Company 10-K, Company Press Releases, Shred-It, Restore PLC
6

7. 111
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Recommendation
Appendix
DividendYields Debt Levels
Return of CapitalShare Buybacks
 Recently issued a special dividend to return cash
that was acquired from the divestment of the
shredding business
 Cintas has been very aggressive with share
buybacks, signaling confidence in the company
 The recent run-up in the share price lowers the
effectiveness of the buyback program
 Cintas continues to fund share buybacks and
dividends with mainly operational cash flow
 Management refuses to hold an aggressive debt
level to protect their BBB+ rating
 Moving forward this trend will likely continue
with Debt/EBITDA levels staying around 1.5x
Capital Usage
0.0%
0.5%
1.0%
1.5%
2.0%
CTAS GK ARMK UNF
Sources: Company 10-K, Company Conference Call, Bloomberg
7
0%
5%
10%
15%
20%
40
80
120
160
FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Current
Millions
YOY Change Diluted Weighted Avg Shares

8. 111
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Appendix
Breadth of ServicesAnalysis MarginsAnalysis of Rental Segment
Uniform Rental By RevenueMajor Players
 The majority of pure play uniform rentals exist as
smaller companies, as the larger companies
provide a wide variety of services
 Beyond the major players within the industry,
about 400 smaller uniform rental businesses exist
 These smaller companies serve limited geographic
areas but are active in industry consolidation
Industry Landscape
30.0%
12.7%
10.0%6.5%
40.8%
Cintas
Aramark
UniFirst
G&K
Other
15.7% 16.8% 10.7% 11.6%
0%
20%
40%
60%
80%
100%
Cintas UniFirst G&K Aramark
Operating Income SG&A Expense COGS
Sources: Unifirst 10-K,Company 10-K, IBIS World
8

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Overview
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Recommendation
Appendix
Cross-Selling NetAdd/Stops Metric
M&A Activity in Rental Services
$12.4
$22.2
$40.4
$32.5 $32.9
$29.2
272
340
366
421
346
278
0
100
200
300
400
500
$0.0
$20.0
$40.0
$60.0
2009 2010 2011 2012 2013 2014
NumberofDeals
DealValue(Billions)
Deal Value Number of Deals
 Cintas pushes differentiated products to current
rental uniform customers to widen margins and
increase the customers’ reliance on them
 If every customer were to add $10 in weekly
services, it would result in over $400M in
additional net income
 Net amount of jobs added or lost by rental service
customers
 Generally a good indicator of the health of the
uniform rental service industry
 Industries that use this metric are typically more
cyclical than the overall economy
IndustryTrends
Sources: Baird Research, Company Presentation, FY 2014 Earnings Call
9

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Appendix
-8.00%
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
2008 2009 2010 2011 2012 2013 2014 2015
Total Non-Farm Employment vs.Add/Stop Employment Index (YOY Change)
Add/Stops Employment Index BLS Total Non-Farm Employment
Add/Stops Employment Index
Growth in rental add/stops continues
to outperform NFP employment
Sources: Bureau of Labor Statistics
10

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Appendix
2014Add/Stops Component Industries
361
66
63
165
67
29
28
13
34
15
(8)
42
10
Food Services and Drinking Places
Motor Vehnicle and Parts Dealers
Food and Beverage Stores
Specialty Trade Contractors
Wholesale Trade - Durable Goods
Wholesale Trade - Nondurable Goods
Fabricated Metal Products
Gasoline Stations
Machinery Manufacturing
Chemical Manufacturing
Food Manufacturing
Truck Transportation
Repair and Maintenance
2014 Employment Change (thousands)
Core industrial markets are more
indicative of changes in the add/stops for
Cintas specifically
Sources: Bureau of Labor Statistics
11

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$60.00 $70.00 $80.00 $90.00 $100.00
Comparables EV/EBITDA Multiple
Comparables P/E Multiple
Base DCF Perpetuity Growth
Base DCF Exit Multiple
Leveraged Buyout
Summary
Valuation Overview
Sources: Team Projections
FY15 Forward P/E 17.0x 19.9x 22.7x 25.6x
$81.00
12
28.4x

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Appendix
ComparablesValuation Historical P/E
Diluted EPSPeer Group
 Price to Earnings ratio is at a decade high
 EPS projected to grow at a lowerYoY rate than in
years past
 Comparables show that Cintas is slightly under
valued on P/E multiple due to outliers
 EV/EBITDA multiple shows downside due to
depressed UK-based comparables
Multiples Analyses
10x
15x
20x
25x
30x
2010 2011 2012 2013 2014 2015
TTM P/E Annual Average P/E
Sources: Company 10-k, Bloomberg, Team Projections
0%
10%
20%
30%
40%
50%
$0.00
$2.00
$4.00
$6.00
2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E
Base YOY Growth Bear Base Bull
13
Implied Valuation
EV/EBITDA
1st Quartile Median Mean 3rd Quartile
Implied Share Price $52.19 $65.17 $72.91 $92.92
Upside (35.8%) (19.9%) (10.3%) 14.3%
P/E
1st Quartile Median Mean 3rd Quartile
Implied Share Price $79.73 $91.31 $95.73 $106.64
Upside (2.0%) 12.3% 17.7% 31.1%

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Appendix
Exit Multiple Sensitivity Perpetuity Sensitivity
Perpetuity DCFValuationExit Multiple DCFValuation
Discounted Cash Flow
Sources: Team Projections, Bloomberg
Exit Multiple of 12.0x
Terminal Value 11,840,494
PV of Free Cash Flows 1,675,228
PV of Terminal Value 8,704,972
Implied Enterprise Value 10,400,200
Net Debt 854,686
Equity Value 9,545,514
Shares Outstanding 114,394
Implied Price per Share $83.44
Implied Difference to Current Price 2.61%
PPG Method at 2.75%
Terminal Value 11,519,906
PV of Free Cash Flows 1,675,228
PV of Terminal Value 8,488,738
Implied Enterprise Value 10,163,966
Net Debt 854,686
Equity Value 9,309,280
Shares Outstanding 114,394
Implied Price per Share $81.38
Implied Difference to Current Price (0.07%)
WACC
ExitMultiple
$83.44 8.4% 7.9% 7.4% 6.9% 6.4%
13.0x $86.23 $87.99 $89.80 $91.65 $93.55
12.5x $83.17 $84.88 $86.62 $88.41 $90.24
12.0x $80.12 $81.76 $83.44 $85.17 $86.93
11.5x $77.06 $78.65 $80.27 $81.93 $83.62
11.0x $74.01 $75.53 $77.09 $78.68 $80.32
WACC
PerpetuityGrowth
$81.38 8.4% 7.9% 7.4% 6.9% 6.4%
3.3% $71.59 $80.09 $90.62 $103.99 $121.54
3.0% $68.46 $76.23 $85.74 $97.66 $113.03
2.8% $65.62 $72.74 $81.38 $92.07 $105.66
2.5% $63.01 $69.57 $77.46 $87.12 $99.22
2.3% $60.61 $66.68 $73.92 $82.69 $93.56
14

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Appendix
Leverage Ratio Sensitivity Exit Multiple Sensitivity
Transaction SummaryTransaction Potential
 Financial stability and cash flow generation creates
potential for a financial takeover
 Large relative size within market makes a strategic
takeover highly unlikely
 Long history of Farmer family involvement in
executive positions suggests reluctance to yield
ownership
Implied Enterprise Value 10,223,467.9 Equity Value 9,435,776
Leverage Ratio 8.0x Enterprise Value 10,223,468
Sponsor Target IRR 17.5% EBITDA Purchase Multiple 13.5x
Minimum Cash $20,000.0 EBITDA Exit Multiple 13.0x
Exit Year 2019 Debt Used 6,062,976
% of Total Ratio
Leverage Ratio 8.0x
Revolver 0.0% 0.0x
Term Loan A 37.5% 3.0x
Term Loan B 31.3% 2.5x
Subordinated Note 18.8% 1.5x
Mezzanine Debt 12.5% 1.0x
Leveraged Buyout
Interest Rates
Revolver L+ 175 bps
Term Loan A L+ 330 bps
Term Loan B 4.5%
Subordinated Note 7.0%
Mezzanine Debt 9.0%
Leverage Ratio
TargetIRR
7543.8% 7.0x 7.5x 8.0x 8.5x 9.0x
12.0% $87.68 $90.87 $94.06 $97.25 $100.45
14.5% $82.38 $85.57 $88.76 $91.95 $95.15
17.0% $73.67 $76.86 $80.05 $83.25 $86.44
19.5% $73.67 $76.86 $80.05 $83.25 $86.44
22.0% $70.09 $73.28 $76.47 $79.66 $82.85
Exit Multiple
TargetIRR
7543.8% 11.5x 12.0x 12.5x 13.0x 13.5x
12.0% $85.35 $88.25 $94.06 $94.06 $96.97
14.5% $80.98 $83.57 $88.76 $88.76 $91.36
17.0% $73.79 $75.88 $80.05 $80.05 $82.14
19.5% $73.79 $75.88 $80.05 $80.05 $82.14
22.0% $70.83 $72.71 $76.47 $76.47 $78.35
Sources: Team Projections, Bloomberg
15

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Initiation & Company
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Recommendation
Appendix
Positioning Analysis
 Fluctuating currency
exchange rates
 Cross-selling products to
improve margins
 M&A opportunities to
expand distribution or
bring in new product lines
 Low involvement with the food
services industry which is currently
the main driver of add/stops growth
W
TO
 Economies of scale
 Extensive customer network
 Strong cash flow generation
 Experienced management team
S
 Minimum amounts of debt
lead to higher cost of capital
 Employee unionization
 Macroeconomic downturn
 Increased OSHA
regulatory efforts
Sources: Company 10-K, IBIS World
16

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Appendix
Final Rating
Sources: Team Projections
 Future opportunities for organic growth will be limited as route saturation and poor add/stops conditions
persist in certain segments
 Continued emphasis on cross-selling and diversified products to improve margins
 Commanding market share allows for economies of scale and possibility of bolt-on acquisitions
 Aggressive plan of returning capital, including share buybacks to bolster EPS growth
We recommend Cintas Corporation as a HOLD with a 12 month price target of $81.00,
which represents an upside of 0.77% from the current share price of $81.32, inclusive of a
projected $0.95 dividend
17
Moving forward, we see several key factors that will result in a NEUTRAL performance for Cintas

18. 11
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Appendix
18

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Appendix Contents
 Competitor Overview
 Corporate Governance
 ComparablesAnalysis
 Discounted Cash Flows
 Input Determinants
 Base Case Income Statement
 Bull Case Income Statement
 Bear Case Income Statement
 Base Case Balance Sheet
 Base Case Statement of Cash Flows
 Bull Case Discounted Cash Flows
 Bear Case Discounted Cash Flows
 Distribution Center Locations
 Disclosures
19

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G&K Indexed Performance
UniFirstAramark
 Began in food vending industry
 Focused on food & support services
 Uniform supply is simply complimentary
 Primary customers:“construction, utilities,
repair and maintenance, hospitality and
food service industries.”
 Manufacture 70% of uniforms supplied
 Largest in-house digital image processing
capability
 Primary customers:“automobile services,
delivery services, merchandise retailers,
food processors, and light manufacturers”
 Manufacture 47% of uniforms supplied
 Focusing on uniform rentals after it sold off
its direct uniform sales operations
 Primary customers:“automotive,
warehousing, distribution, transportation,
energy, manufacturing, food processing,
pharmaceutical, retail, and restaurants”
Competitor Overview
Sources: Bloomberg, IBIS World, Competitor 10-k
20
Back
80
100
120
140
160
4/11/2014 8/11/2014 12/11/2014 4/11/2015
Indexedto100
CTAS GK UNF ARMK

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Appendix
Codes of Conduct
Experienced Board ManagementHistory
 Cintas was built into its beginning modern form in
1959 by Richard Farmer, who began the first
rental businesses
 The Farmer family has managed Cintas throughout
its history and has continued to after the IPO in
1983
 Strong culture of aggressive growth and budgetary
control set by consistent management
 GeraldAdolph has extensive experience advising
corporations on merger activity
 Senior partner in BoozAllen consulting
 Strong strategic advantage when evaluating
mergers
 Robert Kohlhepp, former CEO and current
Chairman of the Board, has been an employee of
Cintas since 1967
 Will this action endanger anyone’s life, health, or safety?
 Is it legal?
 Will I be violating either a law or a company policy?
 How would I feel if my actions were disclosed to the
media?
 How will my actions make me feel about myself?
Corporate Governance
Sources: Cintas Website, Cintas 10-k
21
Back
Board Backgrounds

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ComparablesAnalysis
22
BackSources: Bloomberg
In millions except for per share data
Company Name
Ticker &
Exchange
Share
Price
Market
Cap.
Enterprise
Value
LTM Price Enterprise Value
EPS (TTM) Estimated EPS
Profit
MarginEBITDA Revenue Earnings Book
LTM
EBITDA
LTM
Revenue
Aramark ARMK-US $30.65 7,369 13,066 1,119 14,772 34.3x 4.2x 11.7x 0.9x 0.81 1.72 1.0%
Berendsen BRSN-LN £1,147.00 2,883 3,470 554 1,711 21.6x 3.9x 6.3x 2.0x 0.87 0.69 8.6%
G&K Services A GK-US $71.24 1,424 1,651 132 922 24.0x 3.7x 12.5x 1.8x 2.98 3.63 5.3%
Johnson Service Group JSG-LN £76.50 330 374 83 347 25.0x 2.8x 4.5x 1.1x 0.05 0.06 4.1%
Rentokil Initial RTO-LN £139.90 3,745 4,921 774 2,868 20.2x -- 6.4x 1.7x 0.24 0.09 15.0%
Superior Uniform Group SGC-US $22.20 314 334 22 196 31.0x 7.8x 15.3x 1.7x 0.75 1.00 5.8%
UniFirst UNF-US $121.14 2,450 2,225 273 1,436 19.8x 2.1x 8.2x 1.5x 6.16 6.37 8.6%
Cintas Corporation CTAS-US $81.32 9,418 10,314 804 4,492 21.6x 4.6x 12.8x 2.3x 3.81 3.74 8.2%
1st Quartile 877 1,013 107 634 20.9x 3.0x 6.3x 1.3x 0.49 0.39 4.7%
Median 2,450 2,225 273 1,436 24.0x 3.8x 8.2x 1.7x 0.81 1.00 5.8%
Mean 2,645 3,720 422 3,179 25.1x 4.1x 9.3x 1.5x 1.69 1.94 6.9%
3rd Quartile 3,314 4,196 664 2,289 28.0x 4.1x 12.1x 1.8x 1.92 2.68 8.6%

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Discounted Cash Flows
23
BackSources: Bloomberg, Team Projections
In thousands except per sharedata
Projected
2014 Q1 Aug. Q2 Nov. Q3 Feb. Q4 May 2015E Q1 Aug. Q2 Nov. Q3 Feb. Q4 May 2016E 2017E 2018E 2019E
EBITDA $757,872 $203,550 $219,674 $211,504 $239,704 $875,211 $210,797 $248,727 $212,852 $255,796 $928,172 $897,566 $956,414 $986,708
LessD&A 190,862 39,654 38,499 37,887 55,769 172,588 40,554 52,802 51,982 54,001 199,339 157,424 165,292 174,444
EBIT $567,010 $163,896 $181,175 $173,617 $183,935 $702,623 $170,242 $195,925 $160,871 $201,795 $728,833 $740,142 $791,123 $812,264
Tax Effect 206,961 59,116 67,809 64,065 68,240 259,230 62,588 79,384 61,774 75,421 279,167 268,175 294,298 301,098
NOPAT $360,049 $104,780 $113,366 $109,552 $115,695 $443,393 $107,654 $116,542 $99,097 $126,374 $449,667 $471,967 $496,825 $511,166
Add: D&A 190,862 39,654 38,499 37,887 55,769 172,588 40,554 52,802 51,982 54,001 199,339 157,424 165,292 174,444
Less: CapEx 145,580 68,050 44,975 50,015 57,709 220,749 72,417 71,396 70,224 73,108 287,145 200,966 212,789 225,392
Less: Changein NWC 1,517 (147,881) 142,074 (5,232) (35,129) (46,168) 226,861 (28,597) 18,414 (39,861) 176,817 39,790 (363,297) (66,586)
Free Cash Flow $403,814 $224,265 ($35,184) $102,656 $148,884 $441,400 ($151,070) $126,545 $62,441 $147,128 $185,043 $388,635 $812,624 $526,804
PV ofFCF N/A N/A N/A N/A 146,234 146,234 (145,740) 119,906 58,112 134,491 166,770 330,628 643,407 388,189
Historical
Assumptions
Shares Outstanding 114,394 Cost of Equity 8.5%
Current Share Price $81.32 Cost of Debt 1.7%
Beta 0.89 Tax Rate 37.5%
Risk-Free Rate 2.0% Market Value of Equity 9,417,486
Expected Market Return 9.4% Market Value of Debt 1,300,000
EV/EBITDA 12.0x WACC 7.5%
Perpetuity Growth Rate 2.75%

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Input Determinants
WACC
Total Debt 1,300,000 12.1%
Total Equity 9,417,486 87.9%
10,717,486 100.0%
Beta 0.89
Expected Market Return 9.4%
Risk Free Rate 2.0%
Cost of Equity 8.2%
Pre-Cost of Debt 2.7%
Tax Rate 38.2%
Cost of Debt 1.7%
WACC 7.4%
Beta
Calculated Beta (1Yr.): 0.993
Calculated Beta (2 Yrs): 0.947
Calculated Beta (5 Yrs): 1.007
Bloomberg Beta: 0.94
Yahoo Beta: 0.79
Google Beta: 0.81
Morning Star Beta: 0.81
TD Ameritrade Beta: 0.8
NASDAQ Beta: 0.96
FactSet Beta: 0.9
CNBC Beta: 0.81
Average: 0.89
24
BackSources: Bloomberg, Team Projections

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Base Case Income Statement
25
BackSources: Bloomberg, Team Projections, Company 10-k
Income Statement Historical Projections
In thousands of dollars except for Per Share data 2010 2011 2012 2013 2014 Q1 Aug. Q2 Nov. Q3 Feb. Q4 May 2015E Q1 Aug. Q2 Nov. Q3 Feb. Q4 May 2016E 2017E 2018E 2019E
Revenue:
Rental uniforms and ancillary products $2,569,357 $2,692,248 $2,912,261 $3,044,587 $3,223,930 $856,872 $865,428 $859,520 $884,862 $3,466,682 $908,284 $917,354 $906,794 $933,529 $3,665,961 $3,885,918 $4,119,074 $4,366,218
Other services 977,982 1,118,136 1,189,739 1,271,884 1,327,882 245,205 257,951 249,327 269,317 $1,021,800 259,737 272,582 263,602 284,938 1,080,859 1,138,221 1,200,646 1,268,588
Total revenue 3,547,339 3,810,384 4,102,000 4,316,471 4,551,812 1,102,077 1,123,379 1,108,847 1,154,179 $4,488,482 1,168,021 1,189,935 1,170,396 1,218,468 4,746,820 5,024,139 5,319,719 5,634,807
Cost and expenses:
Cost of rental uniforms and ancillary products 1,449,576 1,530,456 1,648,551 1,756,297 1,829,427 470,609 477,960 476,092 477,825 1,902,486 499,556 504,545 503,270 508,773 2,016,145 2,137,255 2,265,490 2,379,589
Cost of other services 599,946 670,641 714,841 773,107 807,999 153,522 163,995 157,448 165,982 640,947 161,303 169,181 166,792 180,362 677,638 702,596 733,708 771,260
Selling and administrative expenses 1,086,359 1,168,944 1,198,981 1,221,856 1,302,752 314,050 300,249 301,690 326,436 1,242,425 336,919 320,285 339,463 327,537 1,324,203 1,444,145 1,529,397 1,671,694
Legal settlement, net of insurance proceeds 23,529 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Restructuring Charges (2,880) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Shredding transaction asset impairment charge 0 0 0 0 16,143 0 0 0 0 0 0 0 0 0 0 0 0 0
Shredding transaction costs 0 0 0 0 28,481 0 0 0 0 0 0 0 0 0 0 0 0 0
Total cost and expenses 3,156,530 3,370,041 3,562,373 3,751,260 3,984,802 938,181 942,204 935,230 970,244 3,785,859 997,779 994,010 1,009,525 1,016,673 4,017,986 4,283,997 4,528,596 4,822,543
Operating income 390,809 440,343 539,627 565,211 567,010 163,896 181,175 173,617 183,935 702,623 170,242 195,925 160,871 201,795 728,833 740,142 791,123 812,264
Interest income (1,695) (2,030) (1,942) (409) (229) (53) (19) (96) (101) (269) (104) (123) (90) (90) (407) (441) (212) (611)
Interest expense 48,612 49,704 70,625 65,712 65,822 16,583 15,929 16,254 14,938 63,704 14,938 14,938 14,938 14,938 59,750 63,688 58,438 59,250
Gain (loss) on Shredding deconsolidation 0 0 0 0 106,441 (6,619) 0 0 0 (6,619) 0 0 0 0 0 0 0 0
(Gain) of sale of stock of an equity method invetment 0 0 0 0 0 (21,739) 0 0 0 (21,739) 0 0 0 0 0 0 0 0
Income before income taxes 343,892 392,669 470,944 499,908 607,858 175,724 165,265 157,459 169,098 667,546 155,409 181,110 146,024 186,948 669,491 676,896 732,897 753,625
Income taxes 128,272 145,680 173,307 184,466 233,416 65,677 61,819 57,052 62,905 247,453 57,501 67,011 54,029 69,171 247,712 250,451 271,172 278,841
Loss on investment in Shred-it, net of tax 0 0 0 0 0 (256) 0 (6,771)
Income from continuing operations 215,620 246,989 297,637 315,442 374,442 109,791 103,446 93,636 106,194 420,094 97,908 114,099 91,995 117,777 421,779 426,444 461,725 474,784
Income from discontinued operations, net of tax 0 0 0 0 0 317 16,966 1,247 0 18,530 0 0 0 0 0 0 0 0
Net income $215,620 $246,989 $297,637 $315,442 $374,442 $110,108 $120,412 $94,883 $106,194 $438,624 $97,908 $114,099 $91,995 $117,777 $421,779 $426,444 $461,725 $474,784
Less: net income allocated to unvested securities 661 1,097 1,880 1,896 3,452 613 880 951 637 3,081 587 685 552 707 2,531 2,559 2,770 2,849
Income available to common shareholders $214,959 $245,892 $295,757 $313,546 $370,990 $109,495 $119,532 $93,932 $105,557 $435,543 $97,320 $113,415 $91,443 $117,071 $419,248 $423,886 $458,955 $471,935
Earnings per share data:
Basic earnings per share:
Continuing operations $1.40 $1.68 $2.27 $2.52 $3.08 $0.94 $0.87 $0.80 $0.91 $3.52 $0.85 $0.99 $0.81 $1.04 $3.68 $3.86 $4.28 $4.53
Discontinued operations $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.15 $0.01 $0.00 $0.16 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Basic earnings per share $1.40 $1.68 $2.27 $2.52 $3.08 $0.94 $1.02 $0.81 $0.91 $3.78 $0.85 $0.99 $0.81 $1.04 $3.68 $3.86 $4.28 $4.53
Diluted earnings per share:
Continuing operations $1.40 $1.68 $2.27 $2.52 $3.05 $0.93 $0.86 $0.79 $0.91 $3.49 $0.85 $0.99 $0.80 $1.04 $3.68 $3.85 $4.27 $4.52
Discontinued operations $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.14 $0.01 $0.00 $0.15 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Diluted earnings per share $1.40 $1.68 $2.27 $2.52 $3.05 $0.93 $1.00 $0.80 $0.91 $3.74 $0.85 $0.99 $0.80 $1.04 $3.68 $3.85 $4.27 $4.52
Weighted average number of shares outstanding 152,858 146,586 129,891 123,956 120,377 116,659 117,115 116,178 115,502 115,502 114,826 114,150 113,475 112,799 112,799 109,744 107,286 104,214
Diluted average number of shares outstanding 152,858 146,586 130,033 124,531 121,640 118,030 118,655 117,867 115,733 115,733 115,056 114,379 113,702 113,024 113,024 109,963 107,501 104,422
Dividends declared per common share $0.48 $0.49 $0.54 $0.64 $0.77 $0.00 $1.70 $0.00 $0.00 $1.70 $0.00 $0.95 $0.00 $0.00 $0.95 $1.05 $1.15 $1.30
EBITDA 583,950 633,810 733,792 754,588 757,872 203,550 219,674 211,504 239,704 875,211 210,797 248,727 212,852 255,796 928,172 897,566 956,414 986,708

26. 11
Initiation & Company
Overview
Industry Landscape Valuation Risks &
Recommendation
Appendix
Bull Case Income Statement
26
BackSources: Bloomberg, Team Projections, Company 10-k
Income Statement Historical Projections
In thousands of dollars except for Per Share data 2010 2011 2012 2013 2014 Q1 Aug. Q2 Nov. Q3 Feb. Q4 May 2015E Q1 Aug. Q2 Nov. Q3 Feb. Q4 May 2016E 2017E 2018E 2019E
Revenue:
Rental uniforms and ancillary products $2,569,357 $2,692,248 $2,912,261 $3,044,587 $3,223,930 $856,872 $865,428 $859,520 $888,987 $3,470,807 $912,569 $921,681 $911,091 $942,326 $3,687,667 $3,927,365 $4,182,644 $4,454,516
Other services 977,982 1,118,136 1,189,739 1,271,884 1,327,882 245,205 257,951 249,327 270,595 $1,023,078 260,963 273,871 264,849 287,641 1,087,324 1,150,454 1,219,279 1,294,340
Total revenue 3,547,339 3,810,384 4,102,000 4,316,471 4,551,812 1,102,077 1,123,379 1,108,847 1,159,582 $4,493,885 1,173,531 1,195,552 1,175,940 1,229,968 4,774,991 5,077,819 5,401,923 5,748,856
Cost and expenses:
Cost of rental uniforms and ancillary products 1,449,576 1,530,456 1,648,551 1,756,297 1,829,427 470,609 477,960 476,092 475,608 1,900,269 497,350 502,316 501,100 508,856 2,009,622 2,140,414 2,279,541 2,405,439
Cost of other services 599,946 670,641 714,841 773,107 807,999 153,522 163,995 157,448 165,421 640,386 160,764 168,616 166,260 180,644 676,284 704,435 739,060 780,527
Selling and administrative expenses 1,086,359 1,168,944 1,198,981 1,221,856 1,302,752 314,050 300,249 301,690 322,161 1,238,150 332,637 315,814 335,187 324,469 1,308,107 1,434,143 1,525,960 1,676,699
Legal settlement, net of insurance proceeds 23,529 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Restructuring Charges (2,880) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Shredding transaction asset impairment charge 0 0 0 0 16,143 0 0 0 0 0 0 0 0 0 0 0 0 0
Shredding transaction costs 0 0 0 0 28,481 0 0 0 0 0 0 0 0 0 0 0 0 0
Total cost and expenses 3,156,530 3,370,041 3,562,373 3,751,260 3,984,802 938,181 942,204 935,230 963,191 3,778,806 990,751 986,746 1,002,547 1,013,969 3,994,014 4,278,992 4,544,560 4,862,664
Operating income 390,809 440,343 539,627 565,211 567,010 163,896 181,175 173,617 196,392 715,080 182,781 208,806 173,393 215,998 780,978 798,827 857,363 886,191
Interest income (1,695) (2,030) (1,942) (409) (229) (53) (19) (96) (113) (281) (119) (139) (109) (111) (478) (570) (385) (833)
Interest expense 48,612 49,704 70,625 65,712 65,822 16,583 15,929 16,254 14,938 63,704 14,938 14,938 14,938 14,938 59,750 63,688 58,438 59,250
Gain (loss) on Shredding deconsolidation 0 0 0 0 106,441 (6,619) 0 0 0 (6,619) 0 0 0 0 0 0 0 0
(Gain) of sale of stock of an equity method invetment 0 0 0 0 0 (21,739) 0 0 0 (21,739) 0 0 0 0 0 0 0 0
Income before income taxes 343,892 392,669 470,944 499,908 607,858 175,724 165,265 157,459 181,567 680,015 167,962 194,007 158,564 201,172 721,705 735,710 799,310 827,774
Income taxes 128,272 145,680 173,307 184,466 233,416 65,677 61,819 57,052 66,635 251,183 61,306 70,813 57,876 73,428 263,422 268,534 291,748 302,138
Loss on investment in Shred-it, net of tax 0 0 0 0 0 (256) 0 (6,771)
Income from continuing operations 215,620 246,989 297,637 315,442 374,442 109,791 103,446 93,636 114,932 428,832 106,656 123,195 100,688 127,744 458,283 467,176 507,562 525,637
Income from discontinued operations, net of tax 0 0 0 0 0 317 16,966 1,247 0 18,530 0 0 0 0 0 0 0 0
Net income $215,620 $246,989 $297,637 $315,442 $374,442 $110,108 $120,412 $94,883 $114,932 $447,362 $106,656 $123,195 $100,688 $127,744 $458,283 $467,176 $507,562 $525,637
Less: net income allocated to unvested securities 661 1,097 1,880 1,896 3,452 613 880 951 690 3,134 640 739 604 766 2,750 2,803 3,045 3,154
Income available to common shareholders $214,959 $245,892 $295,757 $313,546 $370,990 $109,495 $119,532 $93,932 $114,242 $444,228 $106,016 $122,456 $100,084 $126,978 $455,533 $464,373 $504,517 $522,483
Earnings per share data:
Basic earnings per share:
Continuing operations $1.40 $1.68 $2.27 $2.52 $3.08 $0.94 $0.87 $0.80 $0.99 $3.59 $0.92 $1.07 $0.88 $1.13 $4.00 $4.23 $4.70 $5.01
Discontinued operations $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.15 $0.01 $0.00 $0.16 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Basic earnings per share $1.40 $1.68 $2.27 $2.52 $3.08 $0.94 $1.02 $0.81 $0.99 $3.78 $0.92 $1.07 $0.88 $1.13 $4.00 $4.23 $4.70 $5.01
Diluted earnings per share:
Continuing operations $1.40 $1.68 $2.27 $2.52 $3.05 $0.93 $0.86 $0.79 $0.99 $3.57 $0.92 $1.07 $0.88 $1.12 $4.00 $4.22 $4.69 $5.00
Discontinued operations $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.14 $0.01 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Diluted earnings per share $1.40 $1.68 $2.27 $2.52 $3.05 $0.93 $1.00 $0.80 $0.99 $3.57 $0.92 $1.07 $0.88 $1.12 $4.00 $4.22 $4.69 $5.00
Weighted average number of shares outstanding 152,858 146,586 129,891 123,956 120,377 116,659 117,115 116,178 115,502 115,502 114,826 114,150 113,475 112,799 112,799 109,744 107,286 104,214
Diluted average number of shares outstanding 152,858 146,586 130,033 124,531 121,640 118,030 118,655 117,867 115,733 115,733 115,056 114,379 113,702 113,024 113,024 109,963 107,501 104,422
Dividends declared per common share $0.48 $0.49 $0.54 $0.64 $0.77 $0.00 $1.70 $0.00 $0.00 $1.70 $0.00 $0.95 $0.00 $0.00 $0.95 $1.05 $1.15 $1.30
EBITDA 583,950 633,810 733,792 754,588 757,872 203,550 219,674 211,504 252,404 887,911 223,513 263,279 227,018 271,958 985,768 957,861 1,025,121 1,064,057

27. 11
Initiation & Company
Overview
Industry Landscape Valuation Risks &
Recommendation
Appendix
Bear Case Income Statement
27
BackSources: Bloomberg, Team Projections, Company 10-k
Income Statement Historical Projections
In thousands of dollars except for Per Share data 2010 2011 2012 2013 2014 Q1 Aug. Q2 Nov. Q3 Feb. Q4 May 2015E Q1 Aug. Q2 Nov. Q3 Feb. Q4 May 2016E 2017E 2018E 2019E
Revenue:
Rental uniforms and ancillary products $2,569,357 $2,692,248 $2,912,261 $3,044,587 $3,223,930 $856,872 $865,428 $859,520 $880,737 $3,462,557 $904,000 $913,027 $902,496 $924,773 $3,644,296 $3,808,289 $3,979,662 $4,158,747
Other services 977,982 1,118,136 1,189,739 1,271,884 1,327,882 245,205 257,951 249,327 268,038 $1,020,521 258,511 271,292 262,355 282,248 1,074,406 1,126,066 1,182,216 1,243,237
Total revenue 3,547,339 3,810,384 4,102,000 4,316,471 4,551,812 1,102,077 1,123,379 1,108,847 1,148,775 $4,483,078 1,162,511 1,184,318 1,164,851 1,207,022 4,718,702 4,934,355 5,161,878 5,401,984
Cost and expenses:
Cost of rental uniforms and ancillary products 1,449,576 1,530,456 1,648,551 1,756,297 1,829,427 470,609 477,960 476,092 484,405 1,909,066 501,720 506,730 505,398 508,625 2,022,473 2,113,601 2,208,713 2,287,311
Cost of other services 599,946 670,641 714,841 773,107 807,999 153,522 163,995 157,448 173,232 648,197 161,830 169,733 167,311 180,062 678,936 700,685 728,298 761,984
Selling and administrative expenses 1,086,359 1,168,944 1,198,981 1,221,856 1,302,752 314,050 300,249 301,690 330,656 1,246,645 341,146 324,699 343,683 330,504 1,340,032 1,442,959 1,509,697 1,629,314
Legal settlement, net of insurance proceeds 23,529 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Restructuring Charges (2,880) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Shredding transaction asset impairment charge 0 0 0 0 16,143 0 0 0 0 0 0 0 0 0 0 0 0 0
Shredding transaction costs 0 0 0 0 28,481 0 0 0 0 0 0 0 0 0 0 0 0 0
Total cost and expenses 3,156,530 3,370,041 3,562,373 3,751,260 3,984,802 938,181 942,204 935,230 988,293 3,803,908 1,004,696 1,001,162 1,016,392 1,019,192 4,041,441 4,257,244 4,446,707 4,678,609
Operating income 390,809 440,343 539,627 565,211 567,010 163,896 181,175 173,617 160,482 679,170 157,815 183,156 148,460 187,830 677,261 677,111 715,171 723,375
Interest income (1,695) (2,030) (1,942) (409) (229) (53) (19) (96) (94) (262) (94) (110) (76) (74) (354) (341) (65) (411)
Interest expense 48,612 49,704 70,625 65,712 65,822 16,583 15,929 16,254 14,938 63,704 14,938 14,938 14,938 14,938 59,750 63,688 58,438 59,250
Gain (loss) on Shredding deconsolidation 0 0 0 0 106,441 (6,619) 0 0 0 (6,619) 0 0 0 0 0 0 0 0
(Gain) of sale of stock of an equity method invetment 0 0 0 0 0 (21,739) 0 0 0 (21,739) 0 0 0 0 0 0 0 0
Income before income taxes 343,892 392,669 470,944 499,908 607,858 175,724 165,265 157,459 145,638 644,086 142,971 168,329 133,598 172,966 617,865 613,765 656,798 664,537
Income taxes 128,272 145,680 173,307 184,466 233,416 65,677 61,819 57,052 54,906 239,454 55,044 64,807 51,435 66,592 237,878 236,299 252,867 255,847
Loss on investment in Shred-it, net of tax 0 0 0 0 0 (256) 0 (6,771)
Income from continuing operations 215,620 246,989 297,637 315,442 374,442 109,791 103,446 93,636 90,733 404,633 87,927 103,523 82,163 106,374 379,987 377,465 403,931 408,690
Income from discontinued operations, net of tax 0 0 0 0 0 317 16,966 1,247 0 18,530 0 0 0 0 0 0 0 0
Net income $215,620 $246,989 $297,637 $315,442 $374,442 $110,108 $120,412 $94,883 $90,733 $423,163 $87,927 $103,523 $82,163 $106,374 $379,987 $377,465 $403,931 $408,690
Less: net income allocated to unvested securities 661 1,097 1,880 1,896 3,452 613 880 951 544 2,988 528 621 493 638 2,280 2,265 2,424 2,452
Income available to common shareholders $214,959 $245,892 $295,757 $313,546 $370,990 $109,495 $119,532 $93,932 $90,188 $420,174 $87,400 $102,901 $81,670 $105,736 $377,707 $375,200 $401,507 $406,238
Earnings per share data:
Basic earnings per share:
Continuing operations $1.40 $1.68 $2.27 $2.52 $3.08 $0.94 $0.87 $0.80 $0.78 $3.39 $0.76 $0.90 $0.72 $0.94 $3.32 $3.42 $3.74 $3.90
Discontinued operations $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.15 $0.01 $0.00 $0.16 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Basic earnings per share $1.40 $1.68 $2.27 $2.52 $3.08 $0.94 $1.02 $0.81 $0.78 $3.55 $0.76 $0.90 $0.72 $0.94 $3.32 $3.42 $3.74 $3.90
Diluted earnings per share:
Continuing operations $1.40 $1.68 $2.27 $2.52 $3.05 $0.93 $0.86 $0.79 $0.78 $3.36 $0.76 $0.90 $0.72 $0.94 $3.31 $3.41 $3.73 $3.89
Discontinued operations $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.14 $0.01 $0.00 $0.16 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Diluted earnings per share $1.40 $1.68 $2.27 $2.52 $3.05 $0.93 $1.00 $0.80 $0.78 $3.55 $0.76 $0.90 $0.72 $0.94 $3.31 $3.41 $3.73 $3.89
Weighted average number of shares outstanding 152,858 146,586 129,891 123,956 120,377 116,659 117,115 116,178 115,502 115,502 114,826 114,150 113,475 112,799 112,799 109,744 107,286 104,214
Diluted average number of shares outstanding 152,858 146,586 130,033 124,531 121,640 118,030 118,655 117,867 115,733 115,733 115,056 114,379 113,702 113,024 113,024 109,963 107,501 104,422
Dividends declared per common share $0.48 $0.49 $0.54 $0.64 $0.77 $0.00 $1.70 $0.00 $0.00 $1.70 $0.00 $0.95 $0.00 $0.00 $0.95 $1.05 $1.15 $1.30
EBITDA 583,950 633,810 733,792 754,588 757,872 203,550 219,674 211,504 216,008 851,515 198,191 235,723 200,208 241,350 875,472 831,842 875,727 890,835

28. 11
Initiation & Company
Overview
Industry Landscape Valuation Risks &
Recommendation
Appendix
Base Case Balance Sheet
28
BackSources: Bloomberg, Team Projections, Company 10-k
Balance Sheet Historical Projections
In thousands of dollars except for Per Share data 2010 2011 2012 2013 2014 Q1 Aug. Q2 Nov. Q3 Feb. Q4 May 2015E Q1 Aug. Q2 Nov. Q3 Feb. Q4 May 2016E 2017E 2018E 2019E
Assets:
Current assets:
Cash and cash equivalents 411,281 438,106 339,825 352,273 513,288 581,453 826,724 445,314 403,633 403,633 416,575 490,281 361,316 361,592 361,592 440,837 211,633 611,139
Marketable securities 154,806 87,220 0 5,680 0 0 0 44,874 44,874 44,874 44,874 44,874 44,874 44,874 44,874 44,874 44,874 44,874
Accounts receivable, net 366,301 429,131 450,861 496,049 508,427 489,211 510,153 497,978 501,817 501,817 507,835 523,048 514,460 529,768 529,768 543,708 575,696 609,794
Inventories, net 169,484 249,658 251,205 240,440 251,239 249,817 235,860 234,641 244,927 244,927 251,414 259,125 257,716 262,171 262,171 264,534 271,160 276,239
Uniforms and other rental items in service 332,106 393,826 452,785 496,752 506,537 513,615 528,332 524,065 507,839 507,839 525,609 535,471 526,678 548,310 548,310 557,679 590,489 625,464
Income taxes, current 15,691 33,542 22,188 9,102 0 0 0 6,633 6,633 6,633 6,633 6,633 6,633 6,633 6,633 6,633 6,633 6,633
Deferred income tax asset 52,415 45,813 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Prepaid expenses 13,423 23,481 24,704 24,530 26,190 27,590 23,591 22,482 28,854 28,854 29,201 29,748 29,260 30,462 30,462 25,121 26,599 28,174
Assets held for sale 9,437 0 0 0 0 151,263 21,320 21,132 0 0 0 0 0 0 0 0 0 0
Total current assets 1,524,944 1,700,777 1,541,568 1,624,826 1,805,681 2,012,949 2,145,980 1,797,119 1,738,577 1,738,577 1,782,141 1,889,181 1,740,937 1,783,811 1,783,811 1,883,387 1,727,083 2,202,317
Long-term assets:
Property and equipment, at cost, net 894,522 946,218 944,305 986,703 855,702 838,493 845,127 853,391 859,162 859,162 893,850 915,269 936,336 958,268 958,268 1,008,510 1,061,707 1,118,055
Investments 0 0 0 0 458,357 451,897 456,864 445,538 445,538 445,538 445,538 445,538 445,538 445,538 445,538 445,538 445,538 445,538
Goodwill 1,356,925 1,487,882 1,485,375 1,517,560 1,267,411 1,189,968 1,189,360 1,194,389 1,190,941 1,190,941 1,188,398 1,185,856 1,183,313 1,180,771 1,180,771 1,174,741 1,169,611 1,164,751
Service contracts, net 103,445 102,312 76,822 92,153 55,675 44,185 41,590 44,824 44,441 44,441 44,158 43,876 43,593 43,311 43,311 42,641 42,071 41,531
Other assets, net 89,900 114,751 112,836 124,390 19,626 18,778 18,650 18,079 18,079 18,079 18,079 18,079 18,079 18,079 18,079 18,079 18,079 18,079
Total Assets 3,969,736 4,351,940 4,160,906 4,345,632 4,462,452 4,556,270 4,697,571 4,353,340 4,296,737 4,296,737 4,372,164 4,497,798 4,367,796 4,429,778 4,429,778 4,572,895 4,464,089 4,990,270
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable 71,747 110,279 94,840 121,029 150,070 141,795 171,629 198,946 146,956 146,956 154,440 159,177 158,311 161,048 161,048 171,169 180,774 189,914
Accrued compensation and related liabilities 66,924 79,834 91,214 78,050 85,026 44,060 60,448 78,007 81,609 81,609 47,169 60,854 91,655 81,884 81,884 90,981 96,352 105,317
Accrued liabilities, current 244,402 242,691 256,642 271,821 299,727 292,548 502,861 281,872 257,523 257,523 264,344 350,337 281,426 275,654 275,654 283,985 314,916 330,839
Deferred tax liability 0 0 0 0 5,960 54,595 17,459 0 3,145 3,145 47,910 3,351 8,104 3,459 3,459 3,757 4,068 4,461
Deferred Income taxes, current 0 0 2,559 77,169 88,845 87,842 98,313 106,788 69,195 69,195 77,086 83,763 59,432 76,088 76,088 80,144 86,775 89,229
Liabilities held for sale 0 0 0 0 0 15,171 1,054 612 0 0 0 0 0 0 0 0 0 0
Long-term debt due within one year 609 1,335 225,636 8,187 503 0 0 0 0 0 250,000 250,000 250,000 250,000 250,000 300,000 0 0
Total current liabilities 383,682 434,139 670,891 556,256 630,131 636,011 851,764 666,225 558,429 558,429 840,948 907,482 848,928 848,133 848,133 930,037 682,884 719,761
Long-term liabilities:
Long-term debt due after one year 785,444 1,284,790 1,059,166 1,300,979 1,300,477 1,300,000 1,300,000 1,300,000 1,300,000 1,300,000 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000 1,450,000
Deferred income taxes 150,560 196,321 204,581 210,483 246,044 242,459 233,597 232,232 232,232 232,232 232,232 232,232 232,232 232,232 232,232 232,232 232,232 232,232
Accrued liabilities 116,021 134,041 87,133 76,422 92,942 105,826 108,876 107,217 107,217 107,217 107,217 107,217 107,217 107,217 107,217 107,217 107,217 107,217
Total long-term liabilities 1,052,025 1,615,152 1,350,880 1,587,884 1,639,463 1,648,285 1,642,473 1,639,449 1,639,449 1,639,449 1,389,449 1,389,449 1,389,449 1,389,449 1,389,449 1,389,449 1,389,449 1,789,449
Shareholders' equity:
Preferred stock, no par value 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Common stock, no par value 132,058 135,401 148,255 186,332 251,753 294,795 309,915 320,248 320,248 320,248 320,248 320,248 320,248 320,248 320,248 320,248 320,248 320,248
Paid-in capital 84,616 95,732 107,019 109,822 134,939 123,954 133,173 145,130 145,130 145,130 145,130 145,130 145,130 145,130 145,130 145,130 145,130 145,130
Retained earnings 3,080,079 3,255,256 3,482,073 3,717,771 3,998,893 4,109,001 4,027,464 4,122,354 4,228,548 4,228,548 4,326,456 4,440,555 4,424,107 4,541,884 4,541,884 4,853,097 5,191,443 5,530,749
Treasury stock (798,857) (1,242,547) (1,634,875) (1,850,556) (2,221,155) (2,282,594) (2,284,728) (2,535,803) (2,590,803) (2,590,803) (2,645,803) (2,700,803) (2,755,803) (2,810,803) (2,810,803) (3,060,803) (3,260,803) (3,510,803)
Other accumulated comprehensive income (loss): 36,133 58,807 36,663 38,123 28,428 26,818 17,510 (4,263) (4,263) (4,263) (4,263) (4,263) (4,263) (4,263) (4,263) (4,263) (4,263) (4,263)
Total shareholders' equity 2,534,029 2,302,649 2,139,135 2,201,492 2,192,858 2,271,974 2,203,334 2,047,666 2,098,860 2,098,860 2,141,768 2,200,867 2,129,419 2,192,196 2,192,196 2,253,409 2,391,755 2,481,061
Total Liabilities and Shareholders' Equity 3,969,736 4,351,940 4,160,906 4,345,632 4,462,452 4,556,270 4,697,571 4,353,340 4,296,737 4,296,737 4,372,164 4,497,798 4,367,796 4,429,778 4,429,778 4,572,895 4,464,089 4,990,270

29. 11
Initiation & Company
Overview
Industry Landscape Valuation Risks &
Recommendation
Appendix
Base Case Statement of Cash Flows
29
BackSources: Bloomberg, Team Projections, Company 10-k
Statement of Cash Flows Historical Projections
In thousands of dollars except for Per Share data 2010 2011 2012 2013 2014 Q1 Aug. Q2 Nov. Q3 Feb. Q4 May 2015E Q1 Aug. Q2 Nov. Q3 Feb. Q4 May 2016E 2017E 2018E 2019E
Cash flows from operating activities:
Net income 215,620 246,989 297,637 315,442 374,442 110,108 120,412 94,883 106,194 431,597 97,908 114,099 91,995 117,777 421,779 426,444 461,725 474,784
Adjustments to reconcile net income to net cash
Depreciation 152,059 150,886 155,831 165,664 168,220 35,448 35,003 34,499 51,938 156,888 37,729 49,977 49,157 51,176 188,039 150,724 159,592 169,044
Amortization of deferred charges 41,082 42,581 38,334 23,713 22,642 4,206 3,496 3,388 3,831 15,700 2,825 2,825 2,825 2,825 11,300 6,700 5,700 5,400
Stock-based compensation 15,349 15,203 20,312 23,310 29,875 12,280 12,505 11,231 0 36,016 0 0 0 0 0 0 0 0
Deferred income taxes 13,295 47,908 56,727 48,023 47,109 2,108 8,238 5,082 0 15,428 0 0 0 0 0 0 0 0
Gain on Storage transaction 0 0 0 0 0 0 (34,137) (899) 0 (35,036)
Gain on deconsolidation of Shredding 0 0 0 0 (106,441) (6,619) 0 0 0 (6,619) 0 0 0 0 0 0 0 0
Gain on sale of stock of an equity method investment 0 0 0 0 0 (21,739) 0 0 0 (21,739) 0 0 0 0 0 0 0 0
Shredding transaction asset impairment charge 0 0 0 0 16,143 0 0 0 0 0 0 0 0 0 0 0 0 0
Shredding transaction costs 0 0 0 0 26,057 0 0 0 0 0 0 0 0 0 0 0 0 0
Loss on investment in Shred-it 0 0 0 0 0 0 0 11,189 0 11,189
Change in current assets and liabilities:
Accounts receivable, net 1,140 (48,986) (24,261) (42,704) (56,231) 8,222 (20,969) 9,579 (3,839) (7,007) (6,018) (15,213) 8,589 (15,309) (27,952) (13,940) (31,987) (34,098)
Inventories, net 30,293 (78,824) (2,330) 10,997 (11,062) 1,377 13,470 523 (10,286) 5,084 (6,487) (7,711) 1,409 (4,455) (17,244) (2,363) (6,626) (5,078)
Uniforms and other rental items in service 4,164 (58,180) (60,279) (44,179) (11,435) (7,112) (16,361) 1,270 16,226 (5,977) (17,771) (9,861) 8,793 (21,632) (40,472) (9,369) (32,809) (34,975)
Prepaid expenses 3,715 360 (1,496) (3,281) (2,177) (5,884) 3,262 1,013 (6,372) (7,981) (346) (548) 488 (1,202) (1,607) 5,341 (1,478) (1,575)
Accounts payable 8,939 29,215 (12,557) 25,023 30,446 (1,325) 29,307 25,397 (51,990) 1,389 7,484 4,737 (865) 2,737 14,092 10,121 9,604 9,141
Accrued compensation and related liabilities 18,393 12,493 11,625 (13,161) 10,931 (41,262) 16,151 18,025 3,602 (3,484) (34,440) 13,685 30,801 (9,771) 275 9,097 5,371 8,965
Accrued liabilities and other 47,528 (2,167) (20,371) 31,873 54,237 10,384 14,396 (22,939) (24,349) (22,508) 6,821 85,993 (68,911) (5,772) 18,131 8,331 30,931 15,923
Income taxes payable 9,995 (16,592) 10,690 12,028 15,213 48,009 (40,401) (20,174) (34,448) (47,014) 52,655 (37,881) (19,578) 12,010 7,206 4,355 6,941 2,848
Assets and Liabilities up for sale 0 0 0 0 0 0 0 0 20,520 20,520 0 0 0 0 0 0 0 0
Net cash provided by operating activities 561,572 340,886 469,862 552,748 607,969 148,201 144,372 172,067 71,028 536,447 140,359 200,102 104,702 128,384 573,547 595,441 606,963 610,377
Cash flows from investing activities:
Capital expenditures (111,078) (182,592) (160,802) (196,486) (145,580) (68,050) (44,975) (50,015) (57,709) (220,749) (72,417) (71,396) (70,224) (73,108) (287,145) (200,966) (212,789) (225,392)
Proceeds from sale or redemption of marketable securities 34,712 139,056 665,016 161,478 54,196 0 0 18,711 0 18,711 0 0 0 0 0 0 0 0
Purchase of marketable securities and investments (81,269) (78,307) (585,655) (178,464) (65,858) (6,981) (4,997) (67,969) 0 (79,947) 0 0 0 0 0 0 0 0
Acquisitions of businesses, net of cash acquired (50,444) (171,552) (24,864) (69,370) (33,441) (2,328) (687) (10,783) 0 (13,798) 0 0 0 0 0 0 0 0
Proceeds from Storage transaction, net of cash contributed 0 0 0 0 0 0 153,996 895
Proceeds from Shredding transaction, net of cash contributed 0 0 0 0 179,359 3,344 0 0 0 3,344 0 0 0 0 0 0 0 0
Dividends received on equity method investment 0 0 0 0 0 5,247 0 0 0 5,247 0 0 0 0 0 0 0 0
Proceeds from sale of stock of an equity method investment 0 0 0 0 0 29,933 0 0 0 29,933 0 0 0 0 0 0 0 0
Other, net 4,579 (5,198) 2,011 (1,339) (5,219) 16 1,665 (98) 0 1,583 0 0 0 0 0 0 0 0
Net cash used in investing activities (203,500) (298,593) (104,294) (284,181) (16,543) (38,819) 105,002 (109,259) (57,709) (100,785) (72,417) (71,396) (70,224) (73,108) (287,145) (200,966) (212,789) (225,392)
Cash flows from financing activities:
Proceeds from issuance of debt 0 1,002,281 0 250,000 0 0 0 0 0 0 0 0 0 0 0 300,000 0 400,000
Repayment of debt (603) (502,208) (1,323) (225,636) (8,187) (180) (184) (92) 0 (456) 0 0 0 0 0 (250,000) (300,000) 0
Exercise of stock-based compensation awards 0 0 3,341 14,807 41,902 13,623 8,849 9,484 0 31,956 0 0 0 0 0 0 0 0
Dividends paid (73,960) (71,812) (70,820) (79,744) (93,320) 0 0 (201,941) 0 (201,941) 0 0 (108,443) 0 (108,443) (115,231) (123,379) (135,478)
Repurchase of common stock (969) (443,690) (392,328) (215,681) (370,599) (61,439) (2,134) (251,075) (55,000) (369,648) (55,000) (55,000) (55,000) (55,000) (220,000) (250,000) (200,000) (250,000)
Other, net (977) (4,609) 555 196 469 6,798 (5,040) 1,381 0 3,139 0 0 0 0 0 0 0 0
Net cash used in financing activities (76,509) (20,038) (460,575) (256,058) (429,735) (41,198) 1,491 (442,243) (55,000) (536,950) (55,000) (55,000) (163,443) (55,000) (328,443) (315,231) (623,379) 14,522
Effect of exchange rate changes on cash and cash equivalents (27) 4,570 (3,274) (61) (676) (19) (5,594) (1,975) 0 (7,588) 0 0 0 0 0 0 0 0
Net increase (decrease) in cash and cash equivalents 281,536 26,825 (98,281) 12,448 161,015 68,165 245,271 (381,410) (41,681) (109,655) 12,942 73,706 (128,965) 276 (42,041) 79,245 (229,205) 399,507
Cash and cash equivalents at beginning of period 129,745 411,281 438,106 339,825 352,273 513,288 581,453 826,724 445,314 513,288 403,633 416,575 490,281 361,316 403,633 361,592 440,837 211,633
Cash and cash equivalents at end of period 411,281 438,106 339,825 352,273 513,288 $581,453 $826,724 $445,314 $403,633 $403,633 $416,575 $490,281 $361,316 $361,592 $361,592 $440,837 $211,633 $611,139

30. 11
Initiation & Company
Overview
Industry Landscape Valuation Risks &
Recommendation
Appendix
Bull Case Discounted Cash Flow
Exit Multiple of 12.0x PPG Method at 2.75%
Terminal Value 12,768,686 Terminal Value 12,635,116
PV of Free Cash Flows 1,790,878 PV of Free Cash Flows 1,790,878
PV of Terminal Value 9,408,934 PV of Terminal Value 9,310,509
Implied Enterprise Value 11,199,812 Implied Enterprise Value 11,101,387
Net Debt 854,686 Net Debt 854,686
Equity Value 10,345,126 Equity Value 10,246,701
Shares Outstanding 114,394 Shares Outstanding 114,394
Implied Price per Share $90.43 Implied Price per Share $89.57
Implied Difference to Current Price 9.66% Implied Difference to Current Price 4.07%
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31. 11
Initiation & Company
Overview
Industry Landscape Valuation Risks &
Recommendation
Appendix
Bear Case Discounted Cash Flow
Exit Multiple of 12.0x PPG Method at 2.75%
Terminal Value 10,690,020 Terminal Value 9,949,220
PV of Free Cash Flows 1,483,843 PV of Free Cash Flows 1,483,843
PV of Terminal Value 7,877,216 PV of Terminal Value 7,331,339
Implied Enterprise Value 9,361,059 Implied Enterprise Value 8,815,182
Net Debt 854,686 Net Debt 854,686
Equity Value 8,506,373 Equity Value 7,960,496
Shares Outstanding 114,394 Shares Outstanding 114,394
Implied Price per Share $74.36 Implied Price per Share $69.59
Implied Difference to Current Price (9.85%) Implied Difference to Current Price (18.91%)
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32. 11
Initiation & Company
Overview
Industry Landscape Valuation Risks &
Recommendation
Appendix
Distribution Center Locations
Legend
Distribution Center
Sources: Company Website
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33. 11
Initiation & Company
Overview
Industry Landscape Valuation Risks &
Recommendation
Appendix
Disclosures
Ownership and material conflicts of interest:
The author(s), or a member of their household, of this report does not hold a financial interest in the securities of this company.
The author(s), or a member of their household, of this report does not know of the existence of any conflicts of interest that might bias the content or publication of this report.
Receipt of compensation:
Compensation of the author(s) of this report is not based on investment banking revenue.
Position as an officer or director:
The author(s), or a member of their household, does not serve as an officer, director or advisory board member of the subject company.
Market making:
The author(s) does not act as a market maker in the subject company’s securities.
Disclaimer:
The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not
make any representation or warranty, express or implied, as to its accuracy or completeness. The information is not intended to be used as the basis of any investment decisions by any
person or entity. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered
to be a recommendation by any individual affiliated with CFA Societies Cincinnati, Columbus, and Dayton, CFA Institute or the CFA Institute Research Challenge with regard to this
company’s stock.
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