Cintas (CTAS) 10-Q 2007 Q2 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedNovember 30, 2006

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission file number 0-11399

CINTAS CORPORATION

(Exact name of registrant as specified in its charter)

WASHINGTON	31-1188630
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

6800 CINTAS BOULEVARD
P.O. BOX 625737
CINCINNATI, OHIO 45262-5737
(Address of principal executive offices)
(Zip Code)

(513) 459-1200
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12 b-2 of the Exchange Act.

Large Accelerated Filerþ      Accelerated Filero      Non-Accelerated Filero

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12 b-2 of the Exchange Act). Yeso Noþ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding December 31, 2006
Common Stock, no par value	159,707,836

CINTAS CORPORATION
INDEX

	Page No.
Part I. Financial Information
Item 1.   Financial Statements.
Consolidated Condensed Statements of Income — Three Months and Six Months Ended November 30, 2006 and 2005		3
Consolidated Condensed Balance Sheets — November 30, 2006 and May 31, 2006		4
Consolidated Condensed Statements of Cash Flows — Six Months Ended November 30, 2006 and 2005		5
Notes to Consolidated Condensed Financial Statements		6
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.		25
Item 3.   Quantitative and Qualitative Disclosures About Market Risk.		33
Item 4.   Controls and Procedures.		33
Part II. Other Information		35
Item 1.   Legal Proceedings.		35
Item 1A. Risk Factors.		36
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.		36
Item 4.   Submission of Matters to a Vote of Security Holders.		37
Item 6.   Exhibits.		38
Signatures		38
Certifications		39
EX-31.1
EX-31.2
EX-32.1
EX-32.2

2

CINTAS CORPORATION

ITEM 1. FINANCIAL STATEMENTS.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)

(In thousands except per share data)

	Three Months Ended						Six Months Ended
	November 30,						November 30,
	2006			2005			2006			2005
				(Restated)*						(Restated)*
Revenue:
Rentals	$	684,491		$	631,590		$	1,372,149		$	1,259,598
Other services		238,775			204,195			465,278			399,662
		923,266			835,785			1,837,427			1,659,260
Costs and expenses (income):
Cost of rentals		380,015			349,658			758,315			689,083
Cost of other services		152,178			135,666			297,558			264,228
Selling and administrative expenses		248,628			221,044			492,756			445,594
Interest income		(1,623	)		(1,332	)		(3,149	)		(3,034	)
Interest expense		12,483			7,484			24,915			14,820
		791,681			712,520			1,570,395			1,410,691
Income before income taxes		131,585			123,265			267,032			248,569
Income taxes		49,058			46,426			99,543			93,308
Net income	$	82,527		$	76,839		$	167,489		$	155,261
Basic earnings per share	$	.51		$	.46		$	1.04		$	.92
Diluted earnings per share	$	.51		$	.46		$	1.04		$	.92

* Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.

See accompanying notes.

3

CINTAS CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands except share data)

	November 30, 2006			May 31, 2006
	(Unaudited)			(Restated)*
ASSETS
Current assets:
Cash and cash equivalents	$	38,939		$	38,914
Marketable securities		133,282			202,539
Accounts receivable, net		405,042			389,905
Inventories, net		217,575			198,000
Uniforms and other rental items in service		347,021			337,487
Prepaid expenses		13,594			11,163
Total current assets		1,155,453			1,178,008
Property and equipment, at cost, net		880,955			863,783
Goodwill		1,170,480			1,136,175
Service contracts, net		171,391			179,965
Other assets, net		56,785			67,306
	$	3,435,064		$	3,425,237
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	79,144		$	71,635
Accrued compensation and related liabilities		50,649			50,134
Accrued liabilities		162,316			188,927
Income taxes:
Current		81,886			43,694
Deferred		56,493			51,669
Long-term debt due within one year		229,477			4,288
Total current liabilities		659,965			410,347
Long-term debt due after one year		561,796			794,454
Deferred income taxes		116,891			130,244
Shareholders’ equity:
Preferred stock, no par value:
100,000 shares authorized, none outstanding		—			—
Common stock, no par value:
425,000,000 shares authorized,
FY 2007: 172,743,841 issued and 159,947,356 outstanding
FY 2006: 172,571,083 issued and 163,181,738 outstanding		126,641			120,860
Paid in capital		45,696			47,644
Retained earnings		2,428,406			2,260,917
Treasury stock:
FY 2007: 12,796,485 shares
FY 2006:   9,389,345 shares		(523,573	)		(381,613	)
Other accumulated comprehensive income		19,242			42,384
Total shareholders’ equity		2,096,412			2,090,192
	$	3,435,064		$	3,425,237

* Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.

See accompanying notes.

4

CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Six Months Ended
	November 30,
	2006			2005
				(Restated)*
Cash flows from operating activities:
Net income	$	167,489		$	155,261
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		66,074			61,982
Amortization of deferred charges		19,679			15,678
Stock-based compensation		1,250			3,045
Deferred income taxes		999			6,413
Change in current assets and liabilities, net of acquisitions of businesses:
Accounts receivable		(14,179	)		(27,567	)
Inventories		(19,254	)		3,096
Uniforms and other rental items in service		(9,534	)		(10,027	)
Prepaid expenses		(2,424	)		710
Accounts payable		7,506			(10,751	)
Accrued compensation and related liabilities		515			1,657
Accrued liabilities		(28,979	)		(43,231	)
Tax benefit on exercise of stock options		(97	)		(301	)
Income taxes payable		38,289			49,934
Net cash provided by operating activities		227,334			205,899
Cash flows from investing activities:
Capital expenditures		(81,321	)		(70,181	)
Proceeds from sale or redemption of marketable securities		80,485			73,171
Purchase of marketable securities		(10,218	)		(10,277	)
Acquisitions of businesses, net of cash acquired		(53,782	)		(87,078	)
Other		(2,740	)		3,111
Net cash used in investing activities		(67,576	)		(91,254	)
Cash flows from financing activities:
Proceeds from issuance of debt		252,460			—
Repayment of debt		(259,929	)		(6,403	)
Stock options exercised		5,781			7,152
Tax benefit on exercise of stock options		97			301
Purchase of common stock		(141,960	)		(114,170	)
Other		(16,182	)		7,875
Net cash used in financing activities		(159,733	)		(105,245	)
Net increase in cash and cash equivalents		25			9,400
Cash and cash equivalents at beginning of period		38,914			43,196
Cash and cash equivalents at end of period	$	38,939		$	52,596

* Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.

See accompanying notes.

5

CINTAS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands except per share data)

1. Basis of Presentation

The consolidated condensed financial statements of Cintas Corporation (Cintas) included herein have been prepared by Cintas, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. While we believe that the disclosures are adequately presented, it is suggested that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes included in our most recent Form 10-K for the fiscal year ended May 31, 2006. A summary of our significant accounting policies is presented on page 36 of that report. There has been no material changes in the accounting policies followed by Cintas during the fiscal year, with the exception of the new accounting standard discussed in Note 2 below.

Interim results are subject to variations and are not necessarily indicative of the results of operations for a full fiscal year. In the opinion of management, adjustments (which include only normal recurring adjustments) necessary for a fair statement of the consolidated results of the interim periods shown have been made.

Certain prior year amounts have been reclassified to conform to current year presentation.

2. New Accounting Standard

At November 30, 2006, Cintas had an equity compensation plan, which is described in Note 6. Prior to June 1, 2006, Cintas accounted for this plan under the intrinsic value method proscribed by APB Opinion No. 25,Accounting for Stock Issued to Employees, and related Interpretations, as permitted by FASB Statement No. 123,Accounting for Stock-Based Compensation. Effective June 1, 2006, Cintas adopted the fair value recognition provisions of FASB Statement No. 123(R),Share-Based Payment, using the modified-retrospective transition method. Under that transition method, all prior periods have been restated based on the amounts previously calculated in the pro forma footnote disclosures required by Statement 123. Statement 123(R) requires all share-based payments to employees, including stock options, to be recognized as an expense in the statement of income based on their fair values. Due to this restatement, Cintas’ income before income taxes and net income decreased by $1,132 for the three months ended November 30, 2005, and $2,245 for the six months ended November 30, 2005. This adoption did not result in a change to basic and diluted earnings per share for the second quarter of fiscal 2006 as it remained at $0.46 per share for the quarter, but it did lower basic and diluted earnings per share year-to-date from $0.93 per share to $0.92 per share. The cumulative effect of the change on total shareholders’ equity as of May 31, 2006, was less than $1,000.

As a result of adopting Statement 123(R) on June 1, 2006, Cintas’ income before income taxes and net income for the six months ended November 30, 2006, are $1,250 and $552 lower, respectively, than if it had continued to account for share-based compensation under Opinion 25. Basic and diluted earnings per share for the six months ended November 30, 2006, are less than $.01 lower than if Cintas had continued to account for share-based compensation under Opinion 25.

6

CINTAS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(In thousands except per share data)

3. Earnings per Share

The following table represents a reconciliation of the shares used to calculate basic and diluted earnings per share for the respective periods:

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2006		2005		2006		2005
			(Restated)*				(Restated)*
Numerator:
Net income	$	82,527	$	76,839	$	167,489	$	155,261
Denominator:
Denominator for basic earnings per share-weighted average shares		160,312		167,975		160,542		168,460
Effect of dilutive securities-employee stock options		409		636		390		623
Denominator for diluted earnings per share-adjusted weighted average shares and assuming conversions		160,721		168,611		160,932		169,083
Basic earnings per share	$	.51	$	.46	$	1.04	$	.92
Diluted earnings per share	$	.51	$	.46	$	1.04	$	.92

* Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.

4. Goodwill, Service Contracts and Other Assets

Changes in the carrying amount of goodwill and service contracts for the six months ended November 30, 2006, by operating segment, are as follows:

				Other
	Rentals			Services			Total
Goodwill
Balance as of June 1, 2006	$	855,135		$	281,040		$	1,136,175
Goodwill acquired		(1,373	)		36,445			35,072
Foreign currency translation		(581	)		(186	)		(767	)
Balance as of November 30, 2006	$	853,181		$	317,299		$	1,170,480

7

CINTAS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(In thousands except per share data)

				Other
	Rentals			Services			Total
Service Contracts
Balance as of June 1, 2006	$	132,391		$	47,574		$	179,965
Service contracts acquired		304			6,722			7,026
Service contracts amortization		(10,088	)		(4,626	)		(14,714	)
Foreign currency translation		(844	)		(42	)		(886	)
Balance as of November 30, 2006	$	121,763		$	49,628		$	171,391

Information regarding Cintas’ service contracts and other assets are as follows:

	As of November 30, 2006
	Carrying		Accumulated
	Amount		Amortization		Net
Service contracts	$	300,463	$	129,072	$	171,391
Noncompete and consulting agreements	$	49,791	$	18,968	$	30,823
Other		29,952		3,990		25,962
Total	$	79,743	$	22,958	$	56,785

	As of May 31, 2006
	Carrying		Accumulated
	Amount		Amortization		Net
Service contracts	$	295,929	$	115,964	$	179,965
Noncompete and consulting agreements	$	45,801	$	15,484	$	30,317
Other		40,512		3,523		36,989
Total	$	86,313	$	19,007	$	67,306

Amortization expense was $19,679 and $15,678 for the six months ended November 30, 2006 and November 30, 2005, respectively. Estimated amortization expense, excluding any future acquisitions, for each of the next five years is $39,160, $36,170, $33,936, $30,938 and $27,267, respectively.

8

CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In thousands except per share data)

5. Debt, Derivatives and Hedging Activities

On August 15, 2006, Cintas issued $250,000 of senior notes due in 2036. This debt bears an interest rate of 6.15% paid semi-annually beginning February 15, 2007. The proceeds generated from the offering were used to repay a portion of our outstanding commercial paper borrowings.

Cintas formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. Cintas’ hedging activities are transacted only with highly-rated institutions, reducing the exposure to credit risk in the event of nonperformance. Cintas periodically uses derivatives for fair value hedging and cash flow hedging purposes. There were no fair value hedges in place as of November 30, 2006.

Cash flow hedges are derivative instruments that hedge the exposure of variability in short-term interest rates. These agreements effectively convert a portion of the floating rate debt to a fixed rate basis, thus reducing the impact of interest rate changes on future interest expense. The effective portion of the net gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains or losses on the ineffective portion of the hedge are charged to earnings in the current period. When outstanding, the effectiveness of these derivative instruments is reviewed at least every fiscal quarter. Examples of cash flow hedging instruments that Cintas may use are interest rate swaps, lock agreements and forward starting swaps. There were no interest rate swap or lock agreements outstanding as of November 30, 2006. There was a cash settled forward starting swap in place as of November 30, 2006, which is discussed below.

During the third quarter of fiscal 2006, Cintas entered into a cash settled forward starting swap to protect forecasted interest payments from interest rate movement for an anticipated $200,000 debt issuance in fiscal 2008. The Hypothetical Derivative Method is used to measure hedge effectiveness. Cintas expects the forward starting swap to be perfectly effective as the critical terms of the anticipated debt issuance will perfectly offset the hedged cash flows of the forecasted interest payments. When the $200,000 of hedged debt is issued, the lender will make a payment to Cintas if the 30-year Treasury rate has increased since the inception of the cash settled forward starting swap. Conversely, if the 30-year Treasury rate decreases during that period, Cintas will pay the lender. The value of the cash settled forward starting swap prior to the debt issuance is recorded in other comprehensive income in shareholders’ equity and other assets or accrued liabilities depending on the value of the swap at the end of each reporting period. Once the debt is issued, the value of the forward starting swap will be settled with cash and will be amortized to earnings over the term of the debt issuance.

Cintas used interest rate lock agreements to hedge against movements in the treasury rates at the time Cintas issued its senior notes, both for the senior notes issued in fiscal 2002 and the senior notes issued in fiscal 2007. The amortization of the cash flow hedges resulted in a credit to other comprehensive income of $104 for the three months ended November 30, 2006, and $177 for the six months ended November 30, 2006.

Cintas has certain significant 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 capitalization and interest coverage ratios. Cross default provisions exist between certain debt instruments. Cintas is in compliance with all of the significant debt covenants for all periods presented. Were a default of a significant covenant to occur, the default could result in an acceleration of indebtedness, impair liquidity and limit the ability to raise future capital. Cintas’ debt, net of cash and marketable securities, is $619,052 as of November 30, 2006. For the six months ended November 30, 2006, net cash provided by operating activities was $227,334 and capital expenditures were $81,321.

9

CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In thousands except per share data)

6. Stock-Based Compensation

Under the 2005 equity compensation plan, which was approved by shareholders and adopted by Cintas in fiscal 2006, Cintas may grant officers and key employees equity compensation in the form of stock options, stock appreciation rights, restricted and unrestricted stock, performance awards and other stock unit awards up to an aggregate of 14,000,000 shares of Cintas’ common stock. The compensation cost charged against income was $1,847 and $1,432 for the three month periods ended November 30, 2006 and November 30, 2005, respectively. The compensation cost charged against income was $1,250 and $3,045 for the six month periods ended November 30, 2006 and November 30, 2005, respectively. The amount recorded in the six month period ended November 30, 2006, reflects a cumulative catch-up adjustment of $2,169 ($2,088 after tax), due to a change in the estimated forfeitures for certain existing stock option and restricted stock grants. Basic and diluted earnings per share for the six months ended November 30, 2006, are both $.01 higher, respectively, due to this change in estimated forfeitures. The total income tax benefit recognized in the income statement for share-based compensation arrangements was $441 and $113 for the three month periods ended November 30, 2006 and 2005, respectively, and was $697 and $301 for the six month periods ended November 30, 2006 and 2005, respectively.

Stock Options

Stock options are granted at the fair market value of the underlying common stock on the date of grant. The option terms are determined by the Cintas Compensation Committee, but no stock option may be exercised later than ten years after the date of the grant. The option awards generally have ten year terms with graded vesting in years five through ten based on continuous service during that period. Cintas recognizes compensation expense for these options using the straight-line recognition method over the vesting period.

The fair value of these options was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions:

	Three and Six Months Ended
	November 30,
	2006			2005
Risk-free interest rate		4.00	%		4.00	%
Dividend yield		.70	%		.50	%
Expected volatility of Cintas’ common stock		35	%		35	%
Expected life of the option in years		7.5			9

The risk-free interest rate is based on U.S. government issues with a remaining term equal to the expected life of the stock options. The determination of expected volatility is based on historical volatility of Cintas stock over the period commensurate with the expected term of stock options, as well as other relevant factors. The weighted average expected term was determined based on the historical employee exercise behavior of the options. The weighted-average grant date fair value of stock options granted during the three months ended November 30, 2006, was $17.47 and was $20.95 for the three months ended November 30, 2005. The weighted-average grant date fair value of stock options granted during the six months ended November 30, 2006, was $15.89 and was $20.95 for the six months ended November 30, 2005.

The information presented in the following table relates primarily to stock options granted and outstanding under either the plan adopted in fiscal 2006 or under previously adopted plans:

10

CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In thousands except per share data)

				Weighted Average
	Shares			Exercise Price
Outstanding May 31, 2006 (2,718,180 shares exercisable)		6,535,404		$	40.08
Granted		1,061,005			37.60
Forfeitures/Cancellations		(157,435	)		42.52
Exercised		(144,607	)		18.95
Outstanding August 31, 2006 (2,707,855 shares exercisable)		7,294,367		$	40.09
Granted		111,500			41.31
Forfeitures/Cancellations		(198,545	)		42.02
Exercised		(79,038	)		24.38
Outstanding November 30, 2006 (2,561,212 shares exercisable)		7,128,284		$	40.23

The intrinsic value of stock options exercised in the three and six months ended November 30, 2006, was $1,464 and $4,068, respectively.

The following table summarizes the information related to stock options outstanding at November 30, 2006:

		Outstanding Options					Exercisable Options
			Average		Weighted				Weighted
			Remaining		Average				Average
Range of	Number		Option		Exercise		Number		Exercise
Exercise Prices	Outstanding		Life		Price		Exercisable		Price
$18.00–$39.19		1,919,132		6.70	$	33.43		584,350	$	26.06
39.29 – 41.98		1,989,902		5.91		40.69		947,062		41.77
42.06 – 44.33		1,668,000		6.77		42.35		446,650		42.76
44.43 – 53.19		1,551,250		7.20		45.67		583,150		47.69
$18.00–$53.19		7,128,284		6.61	$	40.23		2,561,212	$	39.71

At November 30, 2006, the aggregate intrinsic value of stock options outstanding and exercisable was $19,974 and $9,825, respectively.

Restricted Stock

Restricted stock consists of Cintas’ common stock which is subject to such conditions, restrictions and limitations as the Cintas Compensation Committee determines to be appropriate. The vesting period is generally three years after the grant date.

The information presented in the following table relates to restricted stock granted and outstanding under the plan adopted in fiscal 2006:

11

CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In thousands except per share data)

				Weighted Average
	Shares			Price
Outstanding, unvested grants at May 31, 2006		128,075		$	36.08
Granted		230,365			38.06
Cancelled		—			—
Vested		—			—
Outstanding, unvested grants at August 31, 2006		358,440		$	37.36
Granted		15,866			38.97
Cancelled		(2,460	)		36.08
Vested		—			—
Outstanding, unvested grants at November 30, 2006		371,846		$	37.43

The remaining unrecognized compensation cost related to unvested stock options and restricted stock at November 30, 2006, was approximately $45,548, and the weighted-average period of time over which this cost will be recognized is 3.7 years.

Cintas reserves shares of common stock to satisfy share option exercises and/or future restricted stock grants. At November 30, 2006, 13,244,833 shares of common stock are reserved for future issuance under the 2005 plan.

During fiscal 2005, the Compensation Committee of the Board of Directors approved a resolution to accelerate the vesting for certain “out-of-the-money” options. The “out-of-the-money” options that were accelerated were provided to employees during fiscal 2000, 2001, 2002 and 2003. The Compensation Committee approved this acceleration in order to provide these employees the increased benefit of exercising these options when they become “in-the-money” and to avoid recognizing future compensation expense related to outstanding options under Statement 123(R). After amendment of all underlying option agreements, compensation expense to be recognized in the statement of income during the first year of adoption of Statement 123(R) was reduced by approximately $3,500.

7. Comprehensive Income

Total comprehensive income represents the net change in shareholders’ equity during a period from sources other than transactions with shareholders and, as such, includes net earnings. For Cintas, the only components of total comprehensive income are the change in cumulative foreign currency translation adjustments, the change in the fair value of derivatives and the change in the fair value of available-for-sale securities. The components of comprehensive income for the three and six month periods ended November 30, 2006 and November 30, 2005 are as follows:

12

CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In thousands except per share data)

	Three Months Ended					Six Months Ended
	November 30,					November 30,
	2006			2005		2006			2005
				(Restated)*					(Restated)*
Net income	$	82,527		$	76,839	$	167,489		$	155,261
Other comprehensive income:
Foreign currency translation adjustment		(6,563	)		2,637		(7,094	)		10,787
Change in fair value of derivatives**		(6,258	)		73		(16,688	)		146
Change in fair value of available-for-sale securities, net of $164 and $375 of tax, respectively		292			—		640			—
Comprehensive income	$	69,998		$	79,549	$	144,347		$	166,194

*	Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.
**	Net of $3,736 of tax for the three months ended November 30, 2006, and net of $9,905 of tax for the six months ended November 30, 2006.

8. Litigation and Other Contingencies

Cintas is subject to legal proceedings and claims arising from the ordinary course of its business, including personal injury, customer contract, environmental and employment claims. In the opinion of management, the aggregate liability, if any, with respect to such ordinary course of business actions, will not have a material adverse effect on the consolidated financial position or results of operations of Cintas. Cintas is party to additional litigation not considered in the ordinary course of business, including the litigation discussed below.

Cintas is a defendant in a purported class action lawsuit,Paul Veliz, et al. v. Cintas Corporation, filed on March 19, 2003, in the United States District Court, Northern District of California, Oakland Division, alleging that Cintas violated certain federal and state wage and hour laws applicable to its service sales representatives, whom Cintas considers exempt employees, and asserting additional related ERISA claims. On August 23, 2005, an amended complaint was filed alleging additional state law wage and hour claims under the following state laws: Arkansas, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, New Mexico, Ohio, Oregon, Pennsylvania, Rhode Island, Washington, West Virginia and Wisconsin. The plaintiffs are seeking unspecified monetary damages, injunctive relief or both. Cintas denies these claims and is defending the plaintiffs’ allegations. On February 14, 2006, the court ordered a majority of the opt-in plaintiffs to arbitrate their claims in accordance with the terms of their Cintas employment agreement. On February 14, 2006, the court also permitted plaintiffs to file a second amended complaint alleging state law claims in the 15 states listed above only with respect to the putative class members that may litigate their claims in court. No determination has been made by the court or an arbitrator regarding class certification. There can be no assurance as to whether a class will be certified or, if a class is certified, as to the geographic or other scope of such class. If a court or arbitrator certifies a class in this action and there is an adverse verdict on the merits, or in the event of a negotiated settlement of the action, the resulting liability and/or any increased costs of operations on an ongoing basis could be material to Cintas. Any estimated liability relating to this lawsuit is not determinable at this time.

Cintas also is a defendant in a purported class action lawsuit,Mirna E. Serrano, et al. v. Cintas Corporation, filed on May 10, 2004, and pending in the United States District Court, Eastern District of Michigan, Southern Division (“Serrano”).Serranoalleges that Cintas discriminated against women in

13

CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In thousands except per share data)

hiring into various SSR positions across all divisions of Cintas throughout the United States. On November 15, 2005, the Equal Employment Opportunity Commission (“EEOC”) intervened in theSerranolawsuit. TheSerranoplaintiffs seek injunctive relief, compensatory damages, punitive damages, attorneys’ fees and other remedies. Cintas is a defendant in another purported class action lawsuit,Nelly Blanca Avalos, et al. v. Cintas Corporation, currently pending in the United States District Court, Eastern District of Michigan, Southern Division (“Avalos”).Avalosalleges that Cintas discriminated against women, African-Americans and Hispanics in hiring into various SSR positions in Cintas’ Rental division only throughout the United States. On April 27, 2005, the EEOC intervened in the claims asserted inAvalos. TheAvalosplaintiffs seek injunctive relief, compensatory damages, punitive damages, attorneys’ fees and other remedies. The claims inAvalosoriginally were brought in the previously disclosed lawsuit captionedRobert Ramirez, et al. v. Cintas Corporation, filed on January 20, 2004, in the United States District Court, Northern District of California, San Francisco Division (“Ramirez”). On May 11, 2006, however, those claims were severed fromRamirezand transferred to the Eastern District of Michigan, Southern Division, where the case was re-namedAvalos. On July 10, 2006,AvalosandSerranowere consolidated for all pretrial purposes, including proceedings on class certification. The consolidated case is known asMirna E. Serrano/Blanca Nelly Avalos, et al. v. Cintas Corporation, and remains pending in the United States District Court, Eastern District of Michigan, Southern Division. No filings or determinations have been made inSerrano/Avalosas to class certification. There can be no assurance as to whether a class will be certified or, if a class is certified, as to the geographic or other scope of such class. The non-SSR hiring claims in the previously disclosedRamirezcase that have not been dismissed remain pending in the Northern District of California, San Francisco Division, but were ordered to arbitration and stayed pending the completion of arbitration. TheRamirezpurported class action claims currently in arbitration include allegations that Cintas failed to promote Hispanics into supervisory positions, discriminated against African-Americans and Hispanics in SSR route assignments and discriminated against African-Americans in hourly pay in Cintas’ Rental division only throughout the United States. TheRamirezplaintiffs seek injunctive relief, compensatory damages, punitive damages, attorneys’ fees and other remedies. No filings or determinations have been made inRamirezas to class certification. There can be no assurance as to whether a class will be certified or, if a class is certified, as to the geographic or other scope of such class. In addition, a class action lawsuit,Larry Houston, et al. v. Cintas Corporation,was filed on August 3, 2005, in the United States District Court for the Northern District of California on behalf of African-American managers alleging racial discrimination. On November 22, 2005, the court entered an order requiring the named plaintiffs in theHoustonlawsuit to arbitrate all of their claims for monetary damages. If there is an adverse verdict or a negotiated settlement of all or any of these actions, the resulting liability and/or any increased costs of operations on an ongoing basis could be material to Cintas. Any estimated liability relating to these proceedings is not determinable at this time.

Several other similar administrative proceedings are pending including two charges filed on November 30, 2004, by an EEOC Commissioner with the EEOC Systemic Litigation Unit alleging: (i) failure to hire and assign females to production job positions; and (ii) failure to hire females, African-Americans and Hispanics into the Management Trainee program. The investigations of these allegations are pending and no determinations have been made. On January 24, 2005, Jennifer Fargo filed a charge on behalf of herself and a similarly situated class with the Augusta Human Relations Commission and the EEOC Detroit District office alleging gender and equal pay discrimination against female sales representatives and sales associates. The investigation of these allegations is pending and no determinations have been made. On August 29, 2006, the EEOC Indianapolis District Office issued a dismissal and notice of rights and closed its file on the Clifton Cooper charge filed on March 23, 2005, by Cooper on behalf of himself and a similarly situated class with the EEOC Systemic Litigation Unit alleging discriminatory pay and treatment due to race. On May 26, 2006, the EEOC issued a dismissal and notice of rights and closed its file on the Melissa Schulz charge filed on April 25, 2005, on behalf of herself and a similarly situated class with the EEOC Systemic Litigation Unit and the Oregon Bureau of Labor and Industries, Civil Rights

14

CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In thousands except per share data)

Division alleging discriminatory pay and treatment due to race and gender, following a determination that it was unable to conclude that the information obtained established a violation of statute.

Cintas is also a defendant in a lawsuit,J. Lester Alexander, III vs. Cintas Corporation, et al., which was originally filed on October 25, 2004, and is currently pending in the Circuit Court of Randolph County, Alabama. The case was brought by J. Lester Alexander, III, the Chapter 7 Trustee (the “Trustee”) of Terry Manufacturing Company, Inc. (“TMC”) and Terry Uniform Company, LLC (“TUC”), against Cintas in Randolph County, Alabama. The Trustee seeks damages against Cintas for allegedly breaching fiduciary duties to TMC and TUC and for allegedly aiding and abetting breaches of fiduciary duties by others to those entities. The complaint also includes allegations that Cintas breached certain limited liability company agreements, or alternatively, misrepresented its intention to perform its obligations in those agreements and acted as alter egos of the bankrupt TMC and is therefore liable for all of TMC’s debts. The Trustee is seeking $50,000 in compensatory damages and $100,000 in punitive damages. Cintas denies these claims and is vigorously defending itself against all claims in the complaint. If there is an adverse verdict on the merits or in the event of a negotiated settlement of this lawsuit, the resulting liability could be material to Cintas. Any estimated liability relating to this lawsuit is not determinable at this time.

The litigation discussed above, if decided adversely to or settled by Cintas, may, individually or in the aggregate, result in liability material to Cintas’ financial condition or results of operations. Cintas may enter into discussions regarding settlement of these and other lawsuits, and may enter into settlement agreements if it believes such settlement is in the best interests of Cintas’ shareholders.

9. Segment Information

Cintas classifies its businesses into two operating segments, Rentals and Other Services, based on the similar economic characteristics of the products and services within each segment. The Rentals operating segment reflects the rental and servicing of uniforms and other garments, mats, mops and shop towels. In addition to these rental items, restroom and hygiene products and services are also provided within this segment. The Other Services operating segment consists of the direct sale of uniforms and related items, first aid, safety and fire protection products and services, document management services and branded promotional products. Both segments provide these products and services throughout the United States and Canada to businesses of all types — from small service and manufacturing companies to major corporations that employ thousands of people.

Information as to the operations of Cintas’ different business segments is set forth below based on the distribution of products and services offered. Cintas evaluates performances based on several factors of which the primary financial measures are business segment revenue and income before income taxes.

15

CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In thousands except per share data)

			Other
	Rentals		Services		Corporate			Total
For the three months ended November 30, 2006
Revenue	$	684,491	$	238,775	$	—		$	923,266
Income (loss) before income taxes	$	117,797	$	24,648	$	(10,860	)	$	131,585
For the three months ended November 30, 2005 (Restated)*
Revenue	$	631,590	$	204,195	$	—		$	835,785
Income (loss) before income taxes	$	112,637	$	16,780	$	(6,152	)	$	123,265
As of and for the six months ended November 30, 2006
Revenue	$	1,372,149	$	465,278	$	—		$	1,837,427
Income (loss) before income taxes	$	241,877	$	46,921	$	(21,766	)	$	267,032
Total assets	$	2,531,085	$	731,758	$	172,221		$	3,435,064
As of and for the six months ended November 30, 2005 (Restated)*
Revenue	$	1,259,598	$	399,662	$	—		$	1,659,260
Income (loss) before income taxes	$	227,796	$	32,559	$	(11,786	)	$	248,569
Total assets	$	2,284,343	$	580,690	$	255,934		$	3,120,967

* Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.

10. Supplemental Guarantor Information

Effective June 1, 2000, Cintas reorganized its legal structure and created Cintas Corporation No. 2 (Corp. 2) as its indirectly, wholly-owned principal operating subsidiary. Cintas and its wholly-owned, direct and indirect domestic subsidiaries, other than Corp. 2, unconditionally guaranteed, jointly and severally, debt of Corp. 2.

On May 13, 2002, Cintas completed the acquisition of Omni Services, Inc. (Omni). A portion of the purchase price for Omni was funded with $450,000 in long-term notes. Corp. 2 was the issuer of the long-term notes, which are unconditionally guaranteed, jointly and severally, by Cintas Corporation and the subsidiary guarantors.

As allowed by SEC rules, the following condensed consolidating financial statements are provided as an alternative to filing separate financial statements of the guarantors. Each of the subsidiaries presented in the condensed consolidating financial statements has been fully consolidated in Cintas’ financial statements. The condensed consolidating financial statements should be read in conjunction with the financial statements of Cintas and notes thereto of which this note is an integral part.

Condensed consolidating financial statements for Cintas, Corp. 2, the subsidiary guarantors and non-guarantors are presented below:

16

CONDENSED CONSOLIDATING INCOME STATEMENT
THREE MONTHS ENDED NOVEMBER 30, 2006

															Cintas
	Cintas					Subsidiary									Corporation
	Corporation		Corp. 2			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenue:
Rentals	$	—	$	502,623		$	138,631		$	43,389		$	(152	)	$	684,491
Other services		—		342,641			130,277			16,009			(250,152	)		238,775
Equity in net income of affiliates		82,527		—			—			—			(82,527	)		—
		82,527		845,264			268,908			59,398			(332,831	)		923,266
Costs and expenses (income):
Cost of rentals		—		318,314			79,434			25,428			(43,161	)		380,015
Cost of other services		—		265,011			84,905			9,673			(207,411	)		152,178
Selling and administrative expenses		—		225,676			11,815			12,697			(1,560	)		248,628
Interest income		—		(843	)		(3	)		(777	)		—			(1,623	)
Interest expense		—		12,538			(1,451	)		1,396			—			12,483
		—		820,696			174,700			48,417			(252,132	)		791,681
Income before income taxes		82,527		24,568			94,208			10,981			(80,699	)		131,585
Income taxes		—		9,397			35,995			3,666			—			49,058
Net income	$	82,527	$	15,171		$	58,213		$	7,315		$	(80,699	)	$	82,527

17

CONDENSED CONSOLIDATING INCOME STATEMENT
THREE MONTHS ENDED NOVEMBER 30, 2005
(RESTATED)*

															Cintas
	Cintas					Subsidiary									Corporation
	Corporation		Corp. 2			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenue:
Rentals	$	—	$	463,499		$	129,694		$	38,524		$	(127	)	$	631,590
Other services		—		290,925			102,980			14,035			(203,745	)		204,195
Equity in net income of affiliates		76,839		—			—			—			(76,839	)		—
		76,839		754,424			232,674			52,559			(280,711	)		835,785
Costs and expenses (income):
Cost of rentals		—		292,922			76,735			22,532			(42,531	)		349,658
Cost of other services		—		218,488			69,319			9,043			(161,184	)		135,666
Selling and administrative expenses		—		202,677			8,016			10,123			228			221,044
Interest income		—		(898	)		(106	)		(328	)		—			(1,332	)
Interest expense		—		7,403			(986	)		1,067			—			7,484
		—		720,592			152,978			42,437			(203,487	)		712,520
Income before income taxes		76,839		33,832			79,696			10,122			(77,224	)		123,265
Income taxes		—		12,808			29,874			3,744			—			46,426
Net income	$	76,839	$	21,024		$	49,822		$	6,378		$	(77,224	)	$	76,839

* Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.

18

CONDENSED CONSOLIDATING INCOME STATEMENT
SIX MONTHS ENDED NOVEMBER 30, 2006

															Cintas
	Cintas					Subsidiary									Corporation
	Corporation		Corp. 2			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenue:
Rentals	$	—	$	1,008,146		$	277,871		$	86,436		$	(304	)	$	1,372,149
Other services		—		662,760			260,504			29,046			(487,032	)		465,278
Equity in net income of affiliates		167,489		—			—			—			(167,489	)		—
		167,489		1,670,906			538,375			115,482			(654,825	)		1,837,427
Costs and expenses (income):
Cost of rentals		—		632,626			160,882			50,693			(85,886	)		758,315
Cost of other services		—		509,362			169,991			17,717			(399,512	)		297,558
Selling and administrative expenses		—		453,164			19,679			23,479			(3,566	)		492,756
Interest income		—		(1,694	)		(5	)		(1,450	)		—			(3,149	)
Interest expense		—		24,978			(2,834	)		2,771			—			24,915
		—		1,618,436			347,713			93,210			(488,964	)		1,570,395
Income before income taxes		167,489		52,470			190,662			22,272			(165,861	)		267,032
Income taxes		—		19,859			72,161			7,523			—			99,543
Net income	$	167,489	$	32,611		$	118,501		$	14,749		$	(165,861	)	$	167,489

19

CONDENSED CONSOLIDATING INCOME STATEMENT
SIX MONTHS ENDED NOVEMBER 30, 2005
(RESTATED)*

															Cintas
	Cintas					Subsidiary									Corporation
	Corporation		Corp. 2			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenue:
Rentals	$	—	$	925,447		$	259,701		$	74,703		$	(253	)	$	1,259,598
Other services		—		587,496			201,936			27,088			(416,858	)		399,662
Equity in net income of affiliates		155,261		—			—			—			(155,261	)		—
		155,261		1,512,943			461,637			101,791			(572,372	)		1,659,260
Costs and expenses (income):
Cost of rentals		—		578,709			152,418			43,838			(85,882	)		689,083
Cost of other services		—		442,244			138,889			17,453			(334,358	)		264,228
Selling and administrative expenses		—		424,882			(998	)		22,186			(476	)		445,594
Interest income		—		(2,233	)		(197	)		(604	)		—			(3,034	)
Interest expense		—		14,717			(1,993	)		2,096			—			14,820
		—		1,458,319			288,119			84,969			(420,716	)		1,410,691
Income before income taxes		155,261		54,624			173,518			16,822			(151,656	)		248,569
Income taxes		—		20,902			66,395			6,011			—			93,308
Net income	$	155,261	$	33,722		$	107,123		$	10,811		$	(151,656	)	$	155,261

* Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.

20

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF NOVEMBER 30, 2006

																Cintas
	Cintas						Subsidiary									Corporation
	Corporation			Corp. 2			Guarantors			Non-Guarantors			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—		$	4,470		$	7,270		$	27,199		$	—		$	38,939
Marketable securities		—			77,644			—			55,638			—			133,282
Accounts receivable, net		—			269,760			128,971			23,372			(17,061	)		405,042
Inventories, net		—			190,279			27,385			7,693			(7,782	)		217,575
Uniforms and other rental items in service		—			277,926			82,359			19,785			(33,049	)		347,021
Prepaid expenses		—			6,886			5,951			757			—			13,594
Total current assets		—			826,965			251,936			134,444			(57,892	)		1,155,453
Property and equipment, at cost, net		—			600,950			230,088			49,917			—			880,955
Goodwill		—			308,170			841,733			20,577			—			1,170,480
Service contracts, net		—			104,998			61,146			5,247			—			171,391
Other assets, net		1,611,923			76,054			1,293,662			176,575			(3,101,429	)		56,785
	$	1,611,923		$	1,917,137		$	2,678,565		$	386,760		$	(3,159,321	)	$	3,435,064
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	(465,247	)	$	(314,011	)	$	828,255		$	(1,946	)	$	32,093		$	79,144
Accrued compensation and related liabilities		—			35,011			12,998			2,640			—			50,649
Accrued liabilities		—			203,635			(45,562	)		4,288			(45	)		162,316
Income taxes:
Current		—			8,707			72,756			423			—			81,886
Deferred		—			—			55,339			1,154			—			56,493
Long-term debt due within one year		—			228,563			1,101			—			(187	)		229,477
Total current liabilities		(465,247	)		161,905			924,887			6,559			31,861			659,965
Long-term debt due after one year		—			567,073			(57,256	)		86,572			(34,593	)		561,796
Deferred income taxes		—			10,263			102,005			4,623			—			116,891
Total shareholders’ equity		2,077,170			1,177,896			1,708,929			289,006			(3,156,589	)		2,096,412
	$	1,611,923		$	1,917,137		$	2,678,565		$	386,760		$	(3,159,321	)	$	3,435,064

21

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF MAY 31, 2006
(RESTATED)*

																Cintas
	Cintas						Subsidiary									Corporation
	Corporation			Corp. 2			Guarantors			Non-Guarantors			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—		$	9,461		$	8,674		$	20,779		$	—		$	38,914
Marketable securities		—			154,711			—			47,828			—			202,539
Accounts receivable, net		—			256,602			124,143			21,378			(12,218	)		389,905
Inventories, net		—			172,279			27,582			8,256			(10,117	)		198,000
Uniforms and other rental items in service		—			272,197			77,636			19,996			(32,342	)		337,487
Prepaid expenses		—			8,169			2,539			455			—			11,163
Total current assets		—			873,419			240,574			118,692			(54,677	)		1,178,008
Property and equipment, at cost, net		—			604,813			208,684			50,286			—			863,783
Goodwill		—			292,969			822,165			21,041			—			1,136,175
Service contracts, net		—			112,016			61,324			6,625			—			179,965
Other assets, net		1,582,561			70,113			1,165,524			186,430			(2,937,322	)		67,306
	$	1,582,561		$	1,953,330		$	2,498,271		$	383,074		$	(2,991,999	)	$	3,425,237
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	(465,247	)	$	(205,605	)	$	716,714		$	(12,240	)	$	38,013		$	71,635
Accrued compensation and related liabilities		—			34,796			12,651			2,687			—			50,134
Accrued liabilities		—			190,728			(7,518	)		6,666			(949	)		188,927
Income taxes:
Current		—			4,081			37,355			2,258			—			43,694
Deferred		—			—			50,421			1,248			—			51,669
Long-term debt due within one year		—			3,549			911			—			(172	)		4,288
Total current liabilities		(465,247	)		27,549			810,534			619			36,892			410,347
Long-term debt due after one year		—			801,649			(61,312	)		89,770			(35,653	)		794,454
Deferred income taxes		—			10,263			115,187			4,794			—			130,244
Total shareholders’ equity		2,047,808			1,113,869			1,633,862			287,891			(2,993,238	)		2,090,192
	$	1,582,561		$	1,953,330		$	2,498,271		$	383,074		$	(2,991,999	)	$	3,425,237

* Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.

22

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED NOVEMBER 30, 2006

																Cintas
	Cintas						Subsidiary			Non-						Corporation
	Corporation			Corp. 2			Guarantors			Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	167,489		$	32,611		$	118,501		$	14,749		$	(165,861	)	$	167,489
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		—			40,653			22,155			3,266			—			66,074
Amortization of deferred charges		—			11,174			7,194			1,311			—			19,679
Stock-based compensation		1,250			—			—			—			—			1,250
Deferred income taxes		—			9,479			(8,264	)		(216	)		—			999
Changes in current assets and liabilities, net of acquisitions of businesses:
Accounts receivable		—			(12,662	)		(4,097	)		(2,263	)		4,843			(14,179	)
Inventories		—			(17,989	)		507			563			(2,335	)		(19,254	)
Uniforms and other rental items in service		—			(5,729	)		(4,723	)		211			707			(9,534	)
Prepaid expenses		—			1,283			(3,405	)		(302	)		—			(2,424	)
Accounts payable		—			(108,406	)		111,538			10,294			(5,920	)		7,506
Accrued compensation and related liabilities		—			215			347			(47	)		—			515
Accrued liabilities		—			9,737			(37,242	)		(2,378	)		904			(28,979	)
Tax benefit on exercise of stock options		(97	)		—			—			—			—			(97	)
Income taxes payable		—			4,626			35,498			(1,835	)		—			38,289
Net cash provided by (used in) operating activities		168,642			(35,008	)		238,009			23,353			(167,662	)		227,334
Cash flows from investing activities:
Capital expenditures		—			(35,782	)		(42,406	)		(3,133	)		—			(81,321	)
Proceeds from sale or redemption of marketable securities		—			78,272			—			2,213			—			80,485
Purchase of marketable securities		—			(52	)		—			(10,166	)		—			(10,218	)
Acquisitions of businesses, net of cash acquired		—			(23,546	)		(30,201	)		(35	)		—			(53,782	)
Other		(29,265	)		26,486			(171,052	)		4,474			166,617			(2,740	)
Net cash (used in) provided by investing activities		(29,265	)		45,378			(243,659	)		(6,647	)		166,617			(67,576	)
Cash flows from financing activities:
Proceeds from issuance of debt		—			250,000			2,460			—			—			252,460
Repayment of debt		—			(259,562	)		1,786			(3,198	)		1,045			(259,929	)
Stock options exercised		5,781			—			—			—			—			5,781
Tax benefit on exercise of stock options		97			—			—			—			—			97
Purchase of common stock		(141,960	)		—			—			—			—			(141,960	)
Other		(3,295	)		(5,799	)		—			(7,088	)		—			(16,182	)
Net cash (used in) provided by financing activities		(139,377	)		(15,361	)		4,246			(10,286	)		1,045			(159,733	)
Net (decrease) increase in cash and cash equivalents		—			(4,991	)		(1,404	)		6,420			—			25
Cash and cash equivalents at beginning of period		—			9,461			8,674			20,779			—			38,914
Cash and cash equivalents at end of period	$	—		$	4,470		$	7,270		$	27,199		$	—		$	38,939

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED NOVEMBER 30, 2005
(RESTATED)*

																Cintas
	Cintas						Subsidiary			Non-						Corporation
	Corporation			Corp. 2			Guarantors			Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	155,261		$	33,722		$	107,123		$	10,811		$	(151,656	)	$	155,261
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		—			38,300			20,614			3,068			—			61,982
Amortization of deferred charges		—			8,974			5,314			1,390			—			15,678
Stock-based compensation		3,045			—			—			—			—			3,045
Deferred income taxes		—			—			5,985			428			—			6,413
Changes in current assets and liabilities, net of acquisitions of businesses:
Accounts receivable		—			(6,729	)		(9,082	)		(10,680	)		(1,076	)		(27,567	)
Inventories		—			5,831			101			74			(2,910	)		3,096
Uniforms and other rental items in service		—			(6,089	)		(1,806	)		(1,437	)		(695	)		(10,027	)
Prepaid expenses		—			951			(308	)		67			—			710
Accounts payable		—			(77,407	)		69,010			(2,354	)		—			(10,751	)
Accrued compensation and related liabilities		—			69			1,273			315			—			1,657
Accrued liabilities		—			(8,060	)		(35,578	)		(510	)		917			(43,231	)
Tax benefit on exercise of stock options		(301	)		—			—			—			—			(301	)
Income taxes payable		—			7,823			41,636			475			—			49,934
Net cash provided by (used in) operating activities		158,005			(2,615	)		204,282			1,647			(155,420	)		205,899
Cash flows from investing activities:
Capital expenditures		—			(32,062	)		(32,181	)		(5,938	)		—			(70,181	)
Proceeds from sale or redemption of marketable securities		—			63,035			—			10,136			—			73,171
Purchase of marketable securities		—			(298	)		—			(9,979	)		—			(10,277	)
Acquisitions of businesses, net of cash acquired		—			(12,379	)		(70,130	)		(4,569	)		—			(87,078	)
Other		(48,230	)		4,527			(102,395	)		(7,679	)		156,888			3,111
Net cash (used in) provided by investing activities		(48,230	)		22,823			(204,706	)		(18,029	)		156,888			(91,254	)
Cash flows from financing activities:
Repayment of debt		—			(6,132	)		(4,764	)		5,961			(1,468	)		(6,403	)
Stock options exercised		7,152			—			—			—			—			7,152
Tax benefit on exercise of stock options		301			—			—			—			—			301
Purchase of common stock		(114,170	)		—			—			—			—			(114,170	)
Other		(3,058	)		146			—			10,787			—			7,875
Net cash (used in) provided by financing activities		(109,775	)		(5,986	)		(4,764	)		16,748			(1,468	)		(105,245	)
Net increase (decrease) in cash and cash equivalents		—			14,222			(5,188	)		366			—			9,400
Cash and cash equivalents at beginning of period		—			13,259			12,570			17,367			—			43,196
Cash and cash equivalents at end of period	$	—		$	27,481		$	7,382		$	17,733		$	—		$	52,596

* Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.

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CINTAS CORPORATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

BUSINESS STRATEGY

Cintas provides highly specialized products and services to businesses of all types throughout the United States and Canada. We are North America’s leading provider of corporate identity uniforms through rental and sales programs, as well as a significant provider of related business services, including entrance mats, restroom products and services, first aid, safety and fire protection products and services, document management services and branded promotional products. Our products and services are designed to enhance our customers’ images and to provide additional safety and protection in the workplace.

Our business strategy is to increase our market share of the uniform rental and sales business in North America through the sale of new uniform programs and to provide our customers with all of the products and services we offer. We will also continue to identify additional product and service opportunities for our current and future customers. Our long-term goal is to provide a product or service to every business in North America.

To pursue this strategy, we focus on the development of a highly talented and diverse team of employees (whom we call partners) — a team that is properly trained and motivated to service our customers. We support our partners’ service efforts by providing superior products with distinct competitive advantages, and we embrace technological advances.

Continuous cost containment and product and process innovation are considered hallmarks of our organization. In order to sustain these efforts, we employ a Six Sigma effort within Cintas. Six Sigma is an analytical process that assists companies in improving quality and customer satisfaction while reducing cycle time and operating costs. We are pleased with our progress in this endeavor and are optimistic about the improved efficiencies that this process has and will continue to yield to Cintas.

We continue to leverage our size and core competencies to become a more valued business service provider to our current and future customers. We will also continue to supplement our internal growth with strategic acquisitions and the cultivation of new businesses.

RESULTS OF OPERATIONS

Cintas classifies its businesses into two operating segments, Rentals and Other Services, based on the similar economic characteristics of the products and services within each segment. The Rentals operating segment reflects the rental and servicing of uniforms and other garments, mats, mops and shop towels. In addition to these rental items, we also provide our restroom and hygiene products and services within this segment. The Other Services operating segment consists of the direct sale of uniforms and related items, first aid, safety and fire protection products and services, document management services and branded promotional products. Both segments provide these products and services throughout the United States and Canada to businesses of all types — from small service and manufacturing companies to major corporations that employ thousands of people.

New Accounting Pronouncement

At November 30, 2006, Cintas had an equity compensation plan, which is more fully described in Note 6 entitled Stock-Based Compensation of “Notes to Consolidated Financial Statements.” Prior to June 1, 2006, Cintas accounted for this plan under the intrinsic value method proscribed by APB Opinion No. 25,Accounting for Stock Issued to Employees, and related Interpretations, as permitted by FASB Statement No. 123,Accounting for Stock-Based Compensation. Effective June 1, 2006, Cintas adopted the fair value recognition provisions of FASB Statement No. 123(R),Share-Based Payment, using the modified-

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retrospective transition method. Under that transition method, all prior periods have been restated based on the amounts previously calculated in the pro forma footnote disclosures required by Statement 123. Statement 123(R) requires all share-based payments to employees, including stock options, to be recognized as an expense in the statement of income based on their fair values. Due to this restatement, Cintas’ income before income taxes and net income decreased by $1.1 million for the three months ended November 30, 2005, and $2.2 million for the six months ended November 30, 2005. This adoption did not result in any change to basic and diluted earnings per share for the second quarter of fiscal 2006 as it remained at $0.46 per share for the quarter, but it did lower basic and diluted earnings per share year-to-date from $0.93 per share to $0.92 per share. The cumulative effect of the change on total shareholders’ equity as of May 31, 2006, was less than $1 million.

As a result of adopting Statement 123(R) on June 1, 2006, Cintas’ income before income taxes and net income for the six months ended November 30, 2006, are $1.3 million and $.6 million lower than if Cintas had continued to account for share-based compensation under Opinion 25. Basic and diluted earnings per share for the six months ended November 30, 2006, are less than $.01 lower than if the company had continued to account for share-based compensation under Opinion 25.

Three Months Ended November 2006 Compared to Three Months Ended November 2005

Revenue, Expenses and Income

Revenue Comparison

Total revenue increased 10.5% for the three months ended November 30, 2006, over the same period in fiscal 2006. Internal growth for this period was 6.1%. The remaining 4.4% represents growth derived mainly through the acquisitions of uniform and mat rental businesses in our Rentals segment and acquisitions of first aid, safety and fire protection businesses and document management businesses within our Other Services segment.

Net Rentals revenue increased 8.4% for the three months ended November 30, 2006, over the same period in the prior fiscal year. Rentals operating segment internal growth for the second quarter of fiscal 2007 was 5.2% as compared to the three months ended November 30, 2005. The Net Rentals revenue internal growth is primarily due to the sale of new rental programs to customers, offset by lost business. The remaining growth was generated primarily through the acquisition of uniform and mat rental businesses.

Other Services revenue increased 16.9% for the three months ended November 30, 2006, over the same period in the prior year. Other Services operating segment internal growth for the second quarter of fiscal 2007 was 8.9% as compared to the three months ended November 30, 2005. This internal growth was generated primarily through the increased direct sale of uniforms to national customers and increased sales of first aid and safety products and services and document management services to customers. The additional growth was generated through a combination of acquisitions of first aid, safety and fire protection businesses and document management businesses.

Expense Comparison

Cost of rentals consists primarily of production expenses, delivery expenses and the amortization of in service inventory, including uniforms, mats, shop towels and other rental items. Cost of rentals increased 8.7% for the three months ended November 30, 2006, as compared to the three months ended November 30, 2005. This increase reflects a rise in material costs of $12.6 million due to increased Rentals revenue and higher restroom supply material costs. These increases were offset by a 3.8% decrease in Rentals energy costs from approximately $26 million in the three months ended November 30, 2005, to $25 million in the three months ended November 30, 2006.

Cost of other services consists primarily of cost of goods sold (predominantly uniforms and first aid products), delivery expenses and distribution expenses. Cost of other services increased 12.2% for the three months ended November 30, 2006, as compared to the three months ended November 30, 2005. This increase was mainly due to increased sales in this segment. Gross margin within this segment may

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fluctuate depending on the type of product or service sold, as more cost efficient sourcing is employed and as products which require additional services or specialization generate higher gross margins. For example, tailored garments that incorporate high levels of design and customization tend to generate higher gross margins than work wear and standard catalog items. The current quarter’s gross margin is 36.3%, which is in line with the expected range of 32% to 37% for this segment.

Selling and administrative expenses increased 12.5% for the three months ended November 30, 2006, as compared to the three months ended November 30, 2005. In order to accelerate revenue growth, we continue to increase our sales force, marketing plans and sales promotions. These measures combined to increase our selling costs by $6.0 million over the prior year. The cost of providing medical and retirement benefits to our employees increased $10.7 million, representing a 33.5% increase over the prior year. In addition, administrative expenses increased by $1.5 million as a result of an increase in professional services relating to legal and the outsourcing of certain human resource functions. Administrative expenses also increased by $2.1 million due to the amortization of intangibles obtained with new acquisitions.

Net interest expense (interest expense less interest income) was $10.9 million for the three months ended November 30, 2006, compared to $6.2 million for the same period in the prior fiscal year. This increase in net interest expense is primarily due to the increased level of borrowing used to fund acquisitions and to fund the stock buyback program.

Cintas’ effective tax rate is 37.3% for the three months ended November 30, 2006, which is consistent with the first quarter of fiscal 2007. This effective tax rate is slightly lower than the effective tax rate of 37.7% for the three months ended November 30, 2005, as a result of changes in state tax rates.

Income Comparison

Net income increased 7.4% for the three months ended November 30, 2006, over the same period in fiscal 2006, primarily due to revenue growth. Diluted earnings per share increased 10.9% for the three months ended November 30, 2006, over the same period in the prior fiscal year. This increase is greater than the net income increase of 7.4% due to the impact of the stock buyback program.

Six Months Ended November 2006 Compared to Six Months Ended November 2005

Revenue, Expenses and Income

Revenue Comparison

Total revenue increased 10.7% for the six months ended November 30, 2006, over the same period in fiscal 2006. Internal growth for this period was 6.2%. The remaining 4.5% represents growth derived mainly through the acquisitions of uniform and mat rental businesses in our Rentals segment and acquisitions of first aid, safety and fire protection businesses and document management businesses within our Other Services segment.

Net Rentals revenue increased 8.9% for the six months ended November 30, 2006, over the same period in the prior fiscal year. Rentals operating segment internal growth for the second quarter of fiscal 2007 was 5.7% as compared to the six months ended November 30, 2005. The net Rentals revenue growth is primarily due to the sale of new rental programs to customers, offset by lost business. The remaining growth was generated primarily through the acquisition of uniform and mat rental businesses.

Other Services revenue increased 16.4% for the six months ended November 30, 2006, over the same period in the prior year. Other Services operating segment internal growth through the second quarter of fiscal 2007 was 7.7% as compared to the six months ended November 30, 2005. This internal growth was generated primarily through the increased direct sale of uniforms to national customers and increased sales of first aid and safety products and services and document management services to

27

customers. The additional growth was generated through a combination of acquisitions of first aid, safety and fire protection businesses and document management businesses.

Expense Comparison

Cost of rentals consists primarily of production expenses, delivery expenses and the amortization of in service inventory, including uniforms, mats, shop towels and other rental items. Cost of rentals increased 10.0% for the six months ended November 30, 2006, as compared to the six months ended November 30, 2005. This increase reflects the growth in Rentals revenue and a 10.6% increase in Rentals energy costs. Rentals energy costs were approximately $52 million for the six months ended November 30, 2006, versus approximately $47 million for the same period in the prior year. In addition, we incurred $3.7 million in impairment and other related charges due to the closing of a Detroit, Michigan Rental processing plant. Partially offsetting these increased costs was an insurance recovery of $1.9 million representing receipt of the final settlement of our claims related to the hurricanes which occurred in fiscal 2006. As a result of these items, cost of rentals increased as a percent to Rentals revenue to 55.3% for the six months ended November 30, 2006, as compared to 54.7% for the six months ended November 30, 2005.

Cost of other services consists primarily of cost of goods sold (predominantly uniforms and first aid products), delivery expenses and distribution expenses. Cost of other services increased 12.6% for the six months ended November 30, 2006, as compared to the six months ended November 30, 2005. This increase was mainly due to increased sales in this segment. Gross margin within this segment may fluctuate depending on the type of product or service sold, as more cost efficient sourcing is employed and as products which require additional services or specialization generate higher gross margins. For example, tailored garments that incorporate high levels of design and customization tend to generate higher gross margins than work wear and standard catalog items. The gross margin for the six months ended November 30, 2006, is 36.0%, which is in line with the expected range of 32% to 37% for this segment.

Selling and administrative expenses increased 10.6% for the six months ended November 30, 2006, as compared to the six months ended November 30, 2005. Selling and administrative expenses as a percent of revenue decreased 0.1% for the six months ended November 30, 2006, as compared to the six months ended November 30, 2005. This decrease on a percent to revenue basis reflects a cumulative catch-up adjustment of $2.2 million to stock-based compensation expense due to a change in estimated forfeitures for certain existing stock option and restricted stock awards and improved leverage of higher sales in both Rentals and Other Services. In order to accelerate revenue growth, we continue to increase our sales force, marketing plans and sales promotions. These measures combined to increase our selling costs by $10.0 million over the prior year. The cost of providing medical and retirement benefits to our employees increased $14.8 million, representing an 22.2% increase over the prior year. In addition, administrative expenses increased by $4.2 million as a result of an increase in professional services relating to legal and the outsourcing of certain human resource functions. Administrative expenses also increased by $4.0 million due to the amortization of intangibles obtained with new acquisitions.

Net interest expense (interest expense less interest income) was $21.8 million for the six months ended November 30, 2006, compared to $11.8 million for the same period in the prior fiscal year. This increase in net interest expense is primarily due to the increased level of borrowing used to fund acquisitions and to fund the stock buyback program.

Cintas’ effective tax rate is 37.3% for the six months ended November 30, 2006. This effective tax rate is slightly lower than the effective tax rate of 37.5% for the six months ended November 30, 2005, as a result of changes in state tax rates.

Income Comparison

Net income increased 7.9% for the six months ended November 30, 2006, over the same period in fiscal 2006, primarily due to revenue growth. Diluted earnings per share increased 13.0% for the six months ended November 30, 2006, over the same period in the prior fiscal year. This increase is greater than the net income increase of 7.9% due to the impact of the stock buyback program.

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Financial Condition

At November 30, 2006, there was $172 million in cash, cash equivalents and marketable securities, a decrease of $69 million from May 31, 2006. This decrease was primarily due to pre-funding of employee medical costs and the purchasing of our company stock, as discussed below. Capital expenditures were approximately $81 million for the six months ended November 30, 2006. We expect capital expenditures for the year to be between $150 and $170 million. Cash, cash equivalents and marketable securities are expected to be used to finance future acquisitions, capital expenditures, expansion and additional purchases under the stock buyback program as detailed below. We believe that our current cash position, funds generated from operations and the strength of our banking relationships are sufficient to meet our anticipated operational and capital requirements.

Net property and equipment increased by $17 million from May 31, 2006 to November 30, 2006, due to our continued investment in rental facilities and equipment. At the end of the second quarter of fiscal 2007, Cintas had three uniform rental facilities under construction.

In May, 2005, the Board of Directors authorized and announced a $500 million stock buyback program. This program was essentially completed during the first quarter of fiscal 2007. The Board of Directors approved an expansion of this share buyback program in July, 2006 by an additional $500 million. For the three months ended November 30, 2006, Cintas purchased approximately 660,000 shares of Cintas stock at an average price of $41.58 per share for a total purchase price of approximately $27.5 million. In December 2006, Cintas purchased an additional 250,000 shares of Cintas stock at an average price of $40.10 per share for a purchase price of approximately $10 million. From the inception of the stock buyback program through December 31, 2006, Cintas has purchased a total of approximately 13.1 million shares of Cintas stock at an average price of $40.90 per share for a total purchase price of approximately $534 million.

Following is information regarding Cintas’ long-term contractual obligations and other commitments outstanding as of November 30, 2006:

(In thousands)	Payments Due by Period
					Two to
			One year		three		Four to		After five
Long-term contractual obligations	Total		or less		years		five years		Years
Long-term debt (1)	$	789,145	$	228,870	$	78,419	$	1,233	$	480,623
Capital lease obligations (2)		2,128		607		921		240		360
Operating leases (3)		58,363		17,211		23,280		11,369		6,503
Interest payments (4)		545,190		39,595		58,788		58,560		388,247
Interest swap agreements (5)		—		—		—		—		—
Unconditional purchase obligations		—		—		—		—		—
Total contractual cash obligations	$	1,394,826	$	286,283	$	161,408	$	71,402	$	875,733

Cintas also makes payments to defined contribution plans. The amounts of contributions made to the plans are made at the discretion of Cintas. Future contributions are assumed to increase 15% annually. Assuming this 15% increase, payments due in one year or less would be $31,791, two to three years would be $78,602 and four to five years would be $103,951. Payments for years thereafter are assumed to continue increasing by 15% each year.

(1)	Long-term debt primarily consists of $700,000 in long-term notes, including $225,000 of long-term debt due within one year.
(2)	Capital lease obligations are classified as debt on the balance sheet.
(3)	Operating leases consist primarily of building leases and a synthetic lease on a corporate jet.
(4)	Interest payments include interest on both fixed and variable rate debt. Rates have been assumed to remain constant for the remainder of fiscal 2007, increase 50 basis points in fiscal 2008, an additional 25 basis points in fiscal 2009 and then remain constant in future years.
(5)	Reference Note 5 entitled Debt, Derivatives and Hedging Activities of “Notes to Consolidated Condensed Financial Statements” for a detailed discussion of interest swap agreements.

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(In thousands)	Amount of Commitment Expiration Per Period
					Two to
			One year		three		Four to		After five
Other commercial commitments	Total		or less		years		five years		Years
Lines of credit (1)	$	400,000	$	—	$	—	$	400,000	$	—
Standby letter of credit (2)		56,948		56,948		—		—		—
Guarantees		—		—		—		—		—
Standby repurchase obligations		—		—		—		—		—
Other commercial commitments		—		—		—		—		—
Total commercial commitments	$	456,948	$	56,948	$	—	$	400,000	$	—

(1)	Back-up facility for the commercial paper program.
(2)	Support certain outstanding debt and self-insured workers’ compensation and general liability insurance programs.

Cintas has no off-balance sheet arrangements other than a synthetic lease on a corporate jet. The synthetic lease on the aircraft does not currently have, and is not reasonably likely to have, a current or future material effect on Cintas’ financial condition, changes in Cintas’ financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Litigation and Other Contingencies

Cintas is subject to legal proceedings and claims arising from the ordinary course of its business, including personal injury, customer contract, environmental and employment claims. In the opinion of management, the aggregate liability, if any, with respect to such ordinary course of business actions, will not have a material adverse effect on the financial position or results of operations of Cintas. Cintas is party to additional litigation not considered in the ordinary course of business, including the litigation discussed below.

Cintas is a defendant in a purported class action lawsuit,Paul Veliz, et al., v. Cintas Corporation, filed on March 19, 2003, in the United States District Court, Northern District of California, Oakland Division, alleging that Cintas violated certain federal and state wage and hour laws applicable to its service sales representatives, whom Cintas considers exempt employees, and asserting additional related ERISA claims. On August 23, 2005, an amended complaint was filed alleging additional state law wage and hour claims under the following state laws: Arkansas, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, New Mexico, Ohio, Oregon, Pennsylvania, Rhode Island, Washington, West Virginia and Wisconsin. The plaintiffs are seeking unspecified monetary damages, injunctive relief or both. Cintas denies these claims and is defending the plaintiffs’ allegations. On February 14, 2006, the court ordered a majority of the opt-in plaintiffs to arbitrate their claims in accordance with the terms of their Cintas employment agreement. On February 14, 2006, the court also permitted plaintiffs to file a second amended complaint alleging state law claims in the 15 states listed above only with respect to the putative class members that may litigate their claims in court. No determination has been made by the court or an arbitrator regarding class certification. There can be no assurance as to whether a class will be certified or, if a class is certified, as to the geographic or other scope of such class. If a court or arbitrator certifies a class in this action and there is an adverse verdict on the merits, or in the event of a negotiated settlement of the action, the resulting liability and/or any increased costs of operations on an ongoing basis could be material to Cintas. Any estimated liability relating to this lawsuit is not determinable at this time.

Cintas also is a defendant in a purported class action lawsuit,Mirna E. Serrano, et al. v. Cintas Corporation, filed on May 10, 2004, and pending in the United States District Court, Eastern District of Michigan, Southern Division (“Serrano”).Serranoalleges that Cintas discriminated against women in hiring into various SSR positions across all divisions of Cintas throughout the United States. On November 15, 2005, the Equal Employment Opportunity Commission (“EEOC”) intervened in theSerranolawsuit. TheSerranoplaintiffs seek injunctive relief, compensatory damages, punitive damages, attorneys’ fees and other remedies. Cintas is a defendant in another purported class action lawsuit,Nelly Blanca Avalos, et al. v. Cintas Corporation, currently pending in the United States District Court, Eastern District of Michigan, Southern Division (“Avalos”).Avalosalleges that Cintas discriminated against

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women, African-Americans and Hispanics in hiring into various SSR positions in Cintas’ Rental division only throughout the United States. On April 27, 2005, the EEOC intervened in the claims asserted inAvalos. TheAvalosplaintiffs seek injunctive relief, compensatory damages, punitive damages, attorneys’ fees and other remedies. The claims inAvalosoriginally were brought in the previously disclosed lawsuit captionedRobert Ramirez, et al. v. Cintas Corporation, filed on January 20, 2004, in the United States District Court, Northern District of California, San Francisco Division (“Ramirez”). On May 11, 2006, however, those claims were severed fromRamirez and transferred to the Eastern District of Michigan, Southern Division, where the case was re-namedAvalos. On July 10, 2006,AvalosandSerranowere consolidated for all pretrial purposes, including proceedings on class certification. The consolidated case is known asMirna E. Serrano/Blanca Nelly Avalos, et al. v. Cintas Corporation, and remains pending in the United States District Court, Eastern District of Michigan, Southern Division. No filings or determinations have been made inSerrano/Avalosas to class certification. There can be no assurance as to whether a class will be certified or, if a class is certified, as to the geographic or other scope of such class. The non-SSR hiring claims in the previously disclosedRamirezcase that have not been dismissed remain pending in the Northern District of California, San Francisco Division, but were ordered to arbitration and stayed pending the completion of arbitration. TheRamirezpurported class action claims currently in arbitration include allegations that Cintas failed to promote Hispanics into supervisory positions, discriminated against African-Americans and Hispanics in SSR route assignments and discriminated against African-Americans in hourly pay in Cintas’ Rental division only throughout the United States. TheRamirezplaintiffs seek injunctive relief, compensatory damages, punitive damages, attorneys’ fees and other remedies. No filings or determinations have been made inRamirezas to class certification. There can be no assurance as to whether a class will be certified or, if a class is certified, as to the geographic or other scope of such class. In addition, a class action lawsuit,Larry Houston, et al. v. Cintas Corporation,was filed on August 3, 2005, in the United States District Court for the Northern District of California on behalf of African-American managers alleging racial discrimination. On November 22, 2005, the court entered an order requiring the named plaintiffs in theHoustonlawsuit to arbitrate all of their claims for monetary damages. If there is an adverse verdict or a negotiated settlement of all or any of these actions, the resulting liability and/or any increased costs of operations on an ongoing basis could be material to Cintas. Any estimated liability relating to these proceedings is not determinable at this time.

Several other similar administrative proceedings are pending including two charges filed on November 30, 2004, by an EEOC Commissioner with the EEOC Systemic Litigation Unit alleging: (i) failure to hire and assign females to production job positions; and (ii) failure to hire females, African-Americans and Hispanics into the Management Trainee program. The investigations of these allegations are pending and no determinations have been made. On January 24, 2005, Jennifer Fargo filed a charge on behalf of herself and a similarly situated class with the Augusta Human Relations Commission and the EEOC Detroit District office alleging gender and equal pay discrimination against female sales representatives and sales associates. The investigation of these allegations is pending and no determinations have been made. On August 29, 2006, the EEOC Indianapolis District Office issued a dismissal and notice of rights and closed its file on the Clifton Cooper charge filed on March 23, 2005, by Cooper on behalf of himself and a similarly situated class with the EEOC Systemic Litigation Unit alleging discriminatory pay and treatment due to race. On May 26, 2006, the EEOC issued a dismissal and notice of rights and closed its file on the Melissa Schulz charge filed on April 25, 2005, on behalf of herself and a similarly situated class with the EEOC Systemic Litigation Unit and the Oregon Bureau of Labor and Industries, Civil Rights Division alleging discriminatory pay and treatment due to race and gender, following a determination that it was unable to conclude that the information obtained established a violation of statute.

Cintas is also a defendant in a lawsuit,J. Lester Alexander, III vs. Cintas Corporation, et al., which was originally filed on October 25, 2004, and is currently pending in the Circuit Court of Randolph County, Alabama. The case was brought by J. Lester Alexander, III, the Chapter 7 Trustee (the “Trustee”) of Terry Manufacturing Company, Inc. (“TMC”) and Terry Uniform Company, LLC (“TUC”), against Cintas in Randolph County, Alabama. The Trustee seeks damages against Cintas for allegedly breaching fiduciary duties to TMC and TUC and for allegedly aiding and abetting breaches of fiduciary duties by others to those entities. The complaint also includes allegations that Cintas breached certain limited liability company agreements, or alternatively, misrepresented its intention to perform its obligations in those agreements and acted as alter egos of the bankrupt TMC and is therefore liable for all of TMC’s debts. The Trustee is seeking $50 million in compensatory damages and $100 million in punitive damages. Cintas denies these claims and is vigorously defending itself against all claims in the complaint. If there

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is an adverse verdict on the merits or in the event of a negotiated settlement of this lawsuit, the resulting liability could be material to Cintas. Any estimated liability relating to this lawsuit is not determinable at this time.

The litigation discussed above, if decided adversely to or settled by Cintas, may, individually or in the aggregate, result in liability material to Cintas’ financial condition or results of operations. Cintas may enter into discussions regarding settlement of these and other lawsuits, and may enter into settlement agreements if it believes such settlement is in the best interests of Cintas’ shareholders.

Outlook

Our outlook remains positive for fiscal 2007. In an effort to further increase our revenue, we have reorganized our sales efforts to become more efficient and productive. We will also continue searching out additional products and services to become an even more valuable resource for our customers. As such, we see upside potential for all of our business units. Although difficult to predict, we anticipate continued growth in all of our business units.

In the marketplace, competition and related pricing pressure will continue; however, we believe cost containment initiatives, technological advances and continued leverage of our infrastructure will soften or offset any impact.

When appropriate opportunities arise, we will supplement our internal growth with strategic acquisitions.

Like most other companies, we experienced, and anticipate continuing to experience, increased costs for wages and benefits, including medical benefits. Changes in energy costs and changes in federal and state tax laws also impact our results.

For the remainder of fiscal year 2007, we expect our effective tax rate to be consistent with that of the six months ended November 30, 2006.

We will continue to evaluate the opportunities for executing the stock buyback program that was approved by the Board of Directors in May, 2005 and expanded in the first quarter of fiscal 2007.

Cintas continues to be the target of a corporate unionization campaign by Unite Here and the Teamsters unions. These unions are attempting to pressure Cintas into surrendering our employees’ rights to a government-supervised election and unilaterally accept union representation. Cintas’ philosophy in regard to unions is straightforward: We believe that employees have the right to say yes to union representation and the freedom to say no. This campaign could be materially disruptive to our business and could materially adversely affect results of operations. We will continue to vigorously oppose this campaign and to defend our employees’ rights.

We believe that the high level of customer service provided by our partners and supported by our infrastructure, quality products, financial resources and corporate culture will provide for continued business success. However, a number of factors influence future revenue, margins and profit which make forecasting difficult.

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ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

In our normal operations, Cintas has market risk exposure to interest rates. This market risk exposure to interest rates has been previously disclosed on page 28 of our most recent Form 10-K.

Through its foreign operations, Cintas is exposed to foreign currency risk. Foreign currency exposures arise from transactions denominated in a currency other than the functional currency and from foreign denominated revenue and profit translated into U.S. dollars. The primary foreign currency to which Cintas is exposed is the Canadian dollar. Cintas does not currently use forward exchange contracts to limit potential losses in earnings or cash flows from foreign currency exchange rate movements.

ITEM 4.
CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

With the participation of Cintas’ management, including Cintas’ Chief Executive Officer and President, Chief Financial Officer, General Counsel and Controllers, Cintas has evaluated the effectiveness of the disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of November 30, 2006. Based on such evaluation, Cintas’ management, including Cintas’ Chief Executive Officer and President, Chief Financial Officer, General Counsel and Controllers, have concluded that Cintas’ disclosure controls and procedures were effective as of November 30, 2006, in ensuring (i) information required to be disclosed by Cintas in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed by Cintas in the reports that it files or submits under the Exchange Act is accumulated and communicated to Cintas’ management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Internal Control over Financial Reporting

There were no changes in Cintas’ internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended November 30, 2006, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. See “Management’s Report on Internal Control over Financial Reporting” and “Report of Independent Registered Public Accounting Firm” on pages 29 and 30 of our most recent Form 10-K.

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Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements. Forward-looking statements may be identified by words such as “estimates,” “anticipates,” “projects,” “plans,” “expects,” “intends,” “believes,” “seeks,” “could,” “should,” “may” and “will” or the negative versions thereof and similar expressions and by the context in which they are used. Such statements are based upon current expectations of Cintas and speak only as of the date made. These statements are subject to various risks, uncertainties and other factors that could cause actual results to differ from those set forth in or implied by this Quarterly Report. Factors that might cause such a difference include, but are not limited to, the possibility of greater than anticipated operating costs including energy costs, lower sales volumes, the performance and costs of integration of acquisitions, fluctuations in costs of materials and labor including increased medical costs, costs and possible effects of union organizing activities, uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation, the cost, results and ongoing assessment of internal controls for financial reporting required by the Sarbanes-Oxley Act of 2002, the initiation or outcome of litigation, higher assumed sourcing or distribution costs of products, the disruption of operations from catastrophic events, changes in federal and state tax laws and the reactions of competitors in terms of price and service. Cintas undertakes no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which they are made.

Also note that we provide a cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our businesses in Part II, Item 1A, of this Quarterly Report and in our Annual Report on Form 10-K for the year ended May 31, 2006. These are factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the risk factors identified in Part II, Item 1A, in this Quarterly Report and in our Form 10-K for the year ended May 31, 2006, to be a complete discussion of all potential risks or uncertainties.

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CINTAS CORPORATION

Part II. Other Information

     Item 1. Legal Proceedings

I. Supplemental Information: We discuss certain legal proceedings pending against us in Part I of this Quarterly Report on Form 10-Q under the caption “Item 1. Financial Statements,” in Note 8 to our financial statements, which is captioned “Litigation and Other Contingencies,” and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Litigation and Other Contingencies.” We refer you to those discussions for important information concerning those legal proceedings, including the basis for such actions and, where known, the relief sought. We provide the following additional information concerning those legal proceedings which sets forth the name of the lawsuit, the court in which the lawsuit is pending and the date on which the petition commencing the lawsuit was filed.

Wage and Hour Litigation:Paul Veliz, et al. v. Cintas Corporation, United States District Court, Northern District of California, Oakland Division, March 19, 2003.On August 23, 2005, an amended complaint was filed alleging additional state law wage and hour claims under the following state laws: Arkansas, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, New Mexico, Ohio, Oregon, Pennsylvania, Rhode Island, Washington, West Virginia and Wisconsin. On February 14, 2006, the court permitted plaintiffs to file a second amended complaint alleging state law claims in the 15 states listed above only with respect to the putative class members that may litigate their claims in court.

Race and Gender Litigation and Related Charges:Robert Ramirez, et al. v. Cintas Corporation, United States District Court, Northern District of California, San Francisco Division, January 20, 2004; On April 27, 2005, the EEOC intervened in some of the claims inRamirez;Mirna E. Serrano, et al. v. Cintas Corporation, United States District Court for the Eastern District of Michigan, Southern Division, May 10, 2004; On November 15, 2005, the EEOC intervened inSerrano; On May 11, 2006, theRamirezAfrican-American, Hispanic and female failure to hire into service sales representative position claims and the EEOC’s intervention were transferred to the Eastern District of Michigan, Southern Division; The remaining claims inRamirezwere dismissed or compelled to arbitration; On July 10, 2006, the claims that were transferred fromRamirezto the Eastern District of Michigan, Southern Division were consolidated with theSerranocase for pretrial purposes and the case was renamedMirna E. Serrano/Blanca Nelly Avalos, et al. v. Cintas Corporation; Larry Houston, et al. v. Cintas Corporation, United States District Court for the Northern District of California, August 3, 2005; On November 22, 2005, the named plaintiffs inHoustonwere ordered to arbitration; EEOC charges filed by an EEOC Commissioner on November 30, 2004, with the EEOC Systemic Litigation Unit; EEOC Detroit District Office and Augusta Human Relations Committee charge filed by Jennifer Fargo on behalf of herself and other similarly situated individuals on January 24, 2005. On May 26, 2006, the EEOC issued a dismissal and notice of rights and closed its file on the previously disclosed class action charge filed by Melissa Schulz on April 25, 2005, with the EEOC Systemic Litigation Unit and the Oregon Bureau of Labor and Industries, Civil Rights Division. On August 29, 2006, the EEOC issued a dismissal and notice of rights and closed its file on the previously disclosed class action charge filed by Clifton Cooper on March 23, 2005, with the EEOC Systemic Litigation Unit.

Breach of Fiduciary Duties:J. Lester Alexander, III vs. Cintas Corporation, et al.,Randolph County, Alabama Circuit Court, October 25, 2004.

On September 14, 2006, the labor union UNITE-HERE filed a lawsuit, captionedUNITE-HERE v. Cintas Corporation, in the United States District Court for the Southern District of New York alleging that Cintas’ Proxy Statement for its Annual Shareholders Meeting scheduled for October 10, 2006, contains false and misleading statements in violation of Section 14(a) of the Securities Exchange Act of 1934. On October 4, 2006, the court denied the plaintiff’s request to enjoin the meeting. On October 9, 2006, plaintiff filed a notice of dismissal of the case without prejudice.

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     Item 1A. Risk Factors

The risks described in Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended May 31, 2006, describe risks that could materially and adversely affect our business, financial condition and results of operations and the trading price of our debt or equity securities could decline. These risks are not the only risks that we face. Our business, financial condition and results of operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations.

     Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c) On May 2, 2005, Cintas announced that the Board of Directors authorized a $500 million stock buyback program at market prices. In July 2006, Cintas announced that the Board of Directors approved the expansion of its share buyback program by an additional $500 million. The Board did not specify an expiration date for this program.

					Total number of		Maximum approximate
					shares purchased as		dollar value of
					part of the		shares that may yet
	Total number of		Average price paid		publicly announced		be purchased under
Period	shares purchased		per share		plan		the plan
September 2006		—		—		12,134,136	$	503,968,617
October 2006		401,823	$	41.44		12,535,959	$	487,318,184
November 2006		260,526	$	41.81		12,796,485	$	476,426,792
Total		662,349	$	41.58		12,796,485	$	476,426,792

For the three months ended November 30, 2006, Cintas purchased 662,349 shares of Cintas stock at an average price of $41.58 per share for a total purchase price of approximately $27.5 million. In December 2006, Cintas purchased an additional 250,000 shares of Cintas stock at an average price of $40.10 per share for a purchase price of approximately $10 million. From the inception of the stock buyback program through December 31, 2006, Cintas has purchased a total of approximately 13.1 million shares of Cintas stock at an average price of $40.90 per share for a total purchase price of approximately $534 million. The maximum approximate dollar value of shares that may yet be purchased under the plan as of December 31, 2006, is $466,402,264.

During the second quarter of fiscal 2007, Cintas also acquired 24,202 shares as payment received from employees upon the exercise of options under the stock option plan.

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     Item 4. Submission of Matters to a Vote of Security Holders

Cintas’ Annual Shareholders’ meeting was held on October 10, 2006, at which the following issues were voted upon by shareholders:

Issue No. 1

     Authority to elect nine Directors.

			Shares -
Name	Shares For		Withheld Authority
Richard T. Farmer		142,652,254		7,769,567
Robert J. Kohlhepp		148,265,590		2,156,231
Scott D. Farmer		145,400,321		5,021,500
Gerald S. Adolph		148,999,546		1,422,275
Paul R. Carter		148,996,090		1,425,731
Gerald V. Dirvin		148,461,581		1,960,240
Joyce Hergenhan		148,913,637		1,508,184
Roger L. Howe		145,808,198		4,613,623
David C. Phillips		144,992,702		5,429,119

Issue No. 2

     Ratification of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2007.

FOR148,715,343      AGAINST964,387      ABSTAIN742,091      BROKER NON-VOTES0

Issue No. 3

Proposal to adopt a policy that the Chairman of the Board of Directors be an independent director who has not previously served as an executive officer of Cintas.

FOR35,114,512      AGAINST98,468,209      ABSTAIN1,112,469      BROKER NON-VOTES15,726,631

Issue No. 4

Proposal to amend Cintas’ Articles of Incorporation to provide that the director nominees be elected by the affirmative vote of the majority of votes cast at the Annual Meeting of Shareholders.

FOR55,619,548      AGAINST77,934,616      ABSTAIN1,139,426      BROKER NON-VOTES15,728,231

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     Item 6. Exhibits

31.1	Certification of Principal Executive Officer required by Rule 13a-14(a)
31.2	Certification of Principal Financial Officer required by Rule 13a-14(a)
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer

Signatures

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CINTAS CORPORATION             (Registrant)
Date: January 4, 2007	/s/ William C. Gale
	William C. Gale
	Senior Vice President and Chief Financial Officer         (Chief Accounting Officer)

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