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CINTAS CORP - Quarter Report: 2004 November (Form 10-Q)

FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

  (X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2004

OR

  (   ) 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
 incorporation or organization)
(I.R.S. Employer
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. Yes   [X]        No  [   ]

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12 b-2 of the Exchange Act).     Yes  [X]       No  [   ]

        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, 2004
Common Stock, no par value 171,724,135

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CINTAS CORPORATION

INDEX

Part I.    Financial Information

        Item 1.    Financial Statements.

                       Consolidated Condensed Statements of Income -
                            Three Months and Six Months Ended
                             November 30, 2004 and November 30, 2003

                       Consolidated Condensed Balance Sheets -
                            November 30, 2004 and May 31, 2004

                       Consolidated Condensed Statements of Cash Flows -
                            Six Months Ended November 30, 2004 and November 30, 2003

                       Notes to Consolidated Condensed Financial Statements

        Item 2.    Management's Discussion and Analysis of Financial
                            Condition and Results of Operations.

        Item 3.    Quantitative and Qualitative Disclosures About
                            Market Risk.

        Item 4.    Controls and Procedures.


Part II.   Other Information

Signatures

Certifications
Page No.





   3


   4


   5

   6


  21


  27

  27


  28

  29

  30

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CINTAS CORPORATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per share data)

Three Months Ended
November 30,

Six Months Ended
November 30,

2004
2003
2004
2003
Revenue:          
   Rentals  $ 583,808   $    548,456   $ 1,165,467   $ 1,086,860  
   Other services  173,032   152,853   337,329   292,105  




   756,840   701,309   1,502,796   1,378,965  
Costs and expenses (income): 
   Cost of rentals  323,289   305,335   641,043   603,480  
   Cost of other services  117,596   102,537   226,960   194,600  
   Selling and admin. expenses  194,431   176,954   393,240   353,084  
   Interest income  (1,514 ) (560 ) (2,636 ) (973 )
   Interest expense  6,218   6,468   12,051   13,348  
   Write-off of loan receivable  --   --   --   4,343  




   640,020   590,734   1,270,658   1,167,882  




Income before income taxes  116,820   110,575   232,138   211,083  
 
Income taxes  43,260   40,918   85,912   78,099  




Net income  $   73,560   $      69,657   $    146,226   $    132,984  




Basic earnings per share  $          .43   $             .41   $             .85   $             .78  




Diluted earnings per share  $          .43   $             .40   $             .85   $             .77  




See accompanying notes.

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CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(In thousands except share data)

November 30,
2004

May 31,
2004

(Unaudited)
ASSETS            
Current assets:  
   Cash and cash equivalents   $ 113,395   $ 87,357  
   Marketable securities    242,769    166,964  
   Accounts receivable, net    308,996    285,592  
   Inventories, net    202,115    188,688  
   Uniforms and other rental items in service    309,216    298,247  
   Prepaid expenses    9,019    7,395  


     Total current assets    1,185,510    1,034,243  
 
Property and equipment, at cost, net    799,873    785,310  
 
Goodwill    830,492    805,441  
Service contracts, net    140,327    144,664  
Other assets, net    37,893    40,639  


    $ 2,994,095   $ 2,810,297  


LIABILITIES AND SHAREHOLDERS' EQUITY  
Current liabilities:  
   Accounts payable   $ 65,750   $ 53,451  
   Accrued compensation and related liabilities    33,338    31,804  
   Accrued liabilities    100,498    146,226  
   Income taxes:  
     Current    73,804    36,640  
     Deferred    60,538    47,042  
   Long-term debt due within one year    10,155    10,523  


     Total current liabilities    344,083    325,686  
 
Long-term debt due after one year    465,178    473,685  
 
Deferred income taxes    129,713    122,957  
 
Shareholders' equity:  
   Preferred stock, no par value:  
     100,000 shares authorized, none outstanding    --    --  
   Common stock, no par value:  
     425,000,000 shares authorized,  
     171,689,744 shares issued and outstanding  
     (171,377,679 at May 31, 2004)    98,853    94,569  
   Retained earnings    1,936,773    1,790,547  
   Other accumulated comprehensive income (loss):  
     Foreign currency translation    20,971    4,474  
     Unrealized loss on derivatives    (1,476 )  (1,621 )


     Total shareholders' equity    2,055,121    1,887,969  


    $ 2,994,095   $ 2,810,297  


See accompanying notes.

-4-


CINTAS CORPORATION
CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

Six Months Ended
November 30,

2004
2003
Cash flows from operating activities:
 
           
   Net income   $ 146,226   $ 132,984  
   Adjustments to reconcile net income to net cash provided  
   by operating activities:  
     Depreciation    59,521    58,460  
     Amortization of deferred charges    13,543    12,874  
     Deferred income taxes    20,252    8,319  
     Change in current assets and liabilities, net of  
       acquisitions of businesses:  
          Accounts receivable    (21,901 )  (978 )
          Inventories    (13,079 )  16,540  
          Uniforms and other rental items in service    (10,969 )  3,440  
          Prepaid expenses    (1,595 )  632  
          Accounts payable    12,218    2,357  
          Accrued compensation and related liabilities    1,534    (1,287 )
          Accrued liabilities    (46,290 )  (36,008 )
          Income taxes payable    37,164    52,197  


Net cash provided by operating activities    196,624    249,530  
 
Cash flows from investing activities:
 
  
   Capital expenditures    (73,863 )  (57,021 )
   Proceeds from sale or redemption of marketable securities    18,571    12,838  
   Purchase of marketable securities    (94,376 )  (84,937 )
   Acquisitions of businesses, net of cash acquired    (33,692 )  (13,595 )
   Other    (1,492 )  1,713  


Net cash used in investing activities    (184,852 )  (141,002 )
 
Cash flows from financing activities:
 
  
   Repayment of long-term debt    (6,660 )  (51,273 )
   Stock options exercised    2,654    3,054  
   Other    18,272    6,048  


Net cash provided by (used in) financing activities    14,266    (42,171 )


Net increase in cash and cash equivalents    26,038    66,357  
 
Cash and cash equivalents at beginning of period    87,357    32,239  


Cash and cash equivalents at end of period   $ 113,395   $ 98,596  


See accompanying notes.

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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 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 financial statements and notes included in our most recent annual report for the fiscal year ended May 31, 2004. A summary of our significant accounting policies is presented on page 24 of our most recent annual report. There have been no material changes in the accounting policies followed by Cintas during the fiscal year.

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 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

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation.  Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123.  However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The new standard will be effective for public entities (excluding small business issuers) in the first interim or annual reporting period beginning after June 15, 2005. Cintas will adopt this Statement in the second quarter of fiscal 2006.

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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 years:

Three Months Ended
November 30,

Six Months Ended
November 30,

2004
2003
2004
2003
Numerator:                    
Net income   $ 73,560   $ 69,657   $ 146,226   $ 132,984  




Denominator:  
Denominator for basic earnings per  
   share-weighted average shares    171,638    170,804    171,544    170,727  




Effect of dilutive securities-  
   employee stock options    1,026    1,408    1,090    1,294  




Denominator for diluted earnings per  
   share-adjusted weighted average  
   shares and assumed conversions    172,664    172,212    172,634    172,021  




Basic earnings per share   $ .43   $ .41   $ .85   $ .78  




Diluted earnings per share   $ .43   $ .40   $ .85   $ .77  




4.    Goodwill, Service Contracts and Other Assets

Changes in the carrying amount of goodwill for the six months ended November 30, 2004, by operating segment, are as follows:

Rentals
Other
Services

Total
Balance as of June 1, 2004     $ 685,261   $ 120,180   $ 805,441  
 
Goodwill acquired during the period    4,438    18,587    23,025  
 
Foreign currency translation    1,907    119    2,026  



Balance as of November 30, 2004   $ 691,606   $ 138,886   $ 830,492  



-7-


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

Information regarding Cintas’ service contracts and other assets follows:

As of November 30, 2004
Carrying
Amount

Accumulated
Amortization

Net
Service contracts     $ 220,281   $ 79,954   $ 140,327  



Noncompete and  
   consulting agreements   $ 32,746   $ 17,775   $ 14,971  
Other    25,952    3,030    22,922  



Total   $ 58,698   $ 20,805   $ 37,893  




As of May 31, 2004
Carrying
Amount

Accumulated
Amortization

Net
Service contracts     $ 216,997   $ 72,333   $ 144,664  



Noncompete and  
   consulting agreements   $ 33,720   $ 19,665   $ 14,055  
Other    29,100    2,516    26,584  



Total   $ 62,820   $ 22,181   $ 40,639  



Amortization expense was $13,543 and $12,874 for the six months ended November 30, 2004 and November 30, 2003, respectively. Estimated amortization expense, excluding any future acquisitions, for each of the next five years is $27,082, $25,339, $23,634, $21,389 and $19,018, respectively.

5.    Debt, Derivatives and Hedging Activities

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 uses derivatives for both cash flow hedging and fair value hedging purposes. For derivative instruments that hedge the exposure of variability in short-term interest rates, designated as cash flow hedges, 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. For the ineffective portion of the hedge, gains or losses are charged to earnings in the current period. For derivative instruments that hedge the exposure to changes in the fair value of certain fixed rate debt, designated as fair value hedges, the effective portion of the net gain or loss on the derivative instrument, as well as the offsetting gain or loss on the fixed rate debt attributable to the hedged risk, are recorded in current period earnings.

-8-


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

Cintas uses interest rate swap and lock agreements as hedges against 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. Cintas uses the Hypothetical Derivative Method for assessing the effectiveness of these swaps. The effectiveness of these swaps is reviewed at least every fiscal quarter. Cintas also uses reverse interest rate swap agreements to convert a portion of fixed rate debt to a floating rate basis, thus hedging for changes in the fair value of the fixed rate debt being hedged. Cintas has determined that the current interest rate swap agreements, designated as fair value hedges, qualify for treatment under the short-cut method of measuring effectiveness. Under the provisions of SFAS 133, these hedges are determined to be perfectly effective and there is no requirement to periodically evaluate effectiveness.

The amortization of the cash flow hedge, pertaining to interest rate swap and lock agreements, resulted in a credit to other comprehensive income of $72 for the three months ended November 30, 2004, and $145 for the six months ended November 30, 2004. The reverse interest rate swap agreements are fair value hedges that convert $225 million of fixed rate debt to a floating rate. These agreements expire in 2007 and allow Cintas to receive an effective interest rate of 5.13% and pay an interest rate based on LIBOR. Because these fair value hedges are 100% effective, the $3 million unfavorable change in the fair value of these hedges for the three months ended November 30, 2004, and the net $2 million unfavorable change for the six months ended November 30, 2004, were directly offset by a decrease in the fair value of the debt.

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. However, Cintas’ debt, net of cash and marketable securities, is only $119 million. For the six months ended November 30, 2004, alone, net cash provided by operating activities was $197 million. Capital expenditures were $74 million for the same period.

-9-


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

6.    Stock-Based Compensation

During the third quarter of fiscal 2003, Cintas adopted the disclosure requirements of FASB Statement No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, but will continue to apply Accounting Principles Board Opinion No. 25 as the method used to account for stock-based employee compensation arrangements. The following table illustrates the effect on net income and earnings per share as if the fair value based method had been applied to all outstanding and unvested awards in each period.

Three Months Ended
November 30,

Six Months Ended
November 30,

2004
2003
2004
2003
Net income, as reported     $ 73,560   $ 69,657   $ 146,226   $ 132,984  
 
Deduct: Total stock-based  
employee compensation expense  
determined under fair value based  
method for all awards, net of  
related tax effects    2,224    1,634    4,280    3,269  




Pro forma net income   $ 71,336   $ 68,023   $ 141,946   $ 129,715  




Earnings per share:  
   Basic - as reported   $ .43   $ .41   $ .85   $ .78  




   Basic - pro forma   $ .42   $ .40   $ .83   $ .76  




   Diluted - as reported   $ .43   $ .40   $ .85   $ .77  




   Diluted - pro forma   $ .41   $ .39   $ .82   $ .75  




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 and the change in the fair value forecasted cash flows associated with a derivative accounted for as a cash flow hedge. The components of comprehensive income for the three and six month periods ended November 30, 2004 and November 30, 2003 are as follows:

Three Months Ended
November 30,

Six Months Ended
November 30,

2004
2003
2004
2003
Net income     $ 73,560   $ 69,657   $ 146,226   $ 132,984  
Other comprehensive income (loss):  
   Foreign currency translation  
     adjustment    12,407    6,972    16,497    5,524  
   Net unrealized income on  
     cash flow hedges    72    163    145    524  




Comprehensive income   $ 86,039   $ 76,792   $ 162,868   $ 139,032  




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

8.    Segment Information

Cintas classifies its businesses into two operating segments: Rentals and Other Services. The Rentals operating segment designs and manufactures corporate identity uniforms which it rents, along with entrance mats, shop towels, restroom supplies and other items, to its customers. The Other Services operating segment involves the design, manufacture and direct sale of uniforms to its customers, as well as the sale of ancillary products and services. These ancillary products and services include first aid and safety products and services, document management services and cleanroom supplies. All of these services are provided 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.

The $4,343 write-off of the loan receivable in the first quarter of fiscal 2004 has been included in the Corporate segment.

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.

Rentals
Other
Services

Corporate
Total
For the three months                      
   ended November 30, 2004  
Revenue   $ 583,808   $ 173,032   $ --  $ 756,840  




Income before income taxes   $ 106,779   $ 14,745   $(4,704) $ 116,820  




For the three months  
   ended November 30, 2003  
Revenue   $ 548,456   $ 152,853   $ --  $ 701,309  




Income before income taxes   $ 102,834   $ 13,649   $(5,908) $ 110,575  




As of and for the six months  
   ended November 30, 2004  
Revenue   $ 1,165,467   $ 337,329   $--  $ 1,502,796  




Income before income taxes   $ 213,736   $ 27,817   $(9,415) $ 232,138  




Total assets   $ 2,233,966   $ 403,965   $356,164  $ 2,994,095  




As of and for the six months  
   ended November 30, 2003  
Revenue   $ 1,086,860   $ 292,105   $--  $ 1,378,965  




Income before income taxes   $ 203,651   $ 24,150   $(16,718) $ 211,083  




Total assets   $ 2,217,892   $ 280,936   $196,115  $ 2,694,943  




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

9.    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) for $656,071. The purchase price for Omni was funded with $450,000 in long-term notes, $100,000 of borrowings under a commercial paper program and $106,071 in cash. The $450,000 in long-term notes consists of $225,000 with five-year maturities at an interest rate of 5.125% and $225,000 with ten-year maturities at an interest rate of 6%. An additional working capital payment of $3,055 was made during the second quarter of fiscal 2003, bringing the total purchase price to $659,126. Corp. 2 was the issuer of the $450,000 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 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:

-12-


CONDENSED CONSOLIDATED INCOME STATEMENT
THREE MONTHS ENDED NOVEMBER 30, 2004

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-Guarantors
Eliminations
Cintas
Corporation
Consolidated

Revenue:                            
   Rentals   $ --   $ 432,722   $ 117,896   $ 33,271   $ (81 ) $ 583,808  
   Other services    --    187,681    79,161    10,205    (104,015 )  173,032  
   Equity in net income of affiliates    73,560    --    --    --    (73,560 )  --  






     73,560    620,403    197,057    43,476    (177,656 )  756,840  
Costs and expenses (income):  
   Cost of rentals    --    265,140    70,818    19,679    (32,348 )  323,289  
   Cost of other services    --    142,417    43,209    6,588    (74,618 )  117,596  
   Selling and administrative expenses    --    185,635    (8,800 )  8,726    8,870    194,431  
   Interest income    --    (1,250 )  (3 )  (261 )  --    (1,514 )
   Interest expense    --    6,119    (851 )  950    --    6,218  






     --    598,061    104,373    35,682    (98,096 )  640,020  






Income before income taxes    73,560    22,342    92,684    7,794    (79,560 )  116,820  
Income taxes    --    5,808    34,857    2,595    --    43,260  






Net income   $ 73,560   $ 16,534   $ 57,827   $ 5,199   $ (79,560 ) $ 73,560  






-13-


CONDENSED CONSOLIDATED INCOME STATEMENT
THREE MONTHS ENDED NOVEMBER 30, 2003

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-Guarantors
Eliminations
Cintas
Corporation
Consolidated

Revenue:                            
   Rentals   $ --   $ 409,675   $ 110,421   $ 28,402   $ (42 ) $ 548,456  
   Other services    --    269,667    56,533    7,842    (181,189 )  152,853  
   Equity in net income of affiliates    69,657    --    --    --    (69,657 )  --  






     69,657    679,342    166,954    36,244    (250,888 )  701,309  
Costs and expenses (income):  
   Cost of rentals    --    258,951    66,707    17,769    (38,092 )  305,335  
   Cost of other services    --    199,812    39,146    4,627    (141,048 )  102,537  
   Selling and administrative expenses    --    176,403    (6,911 )  7,504    (42 )  176,954  
   Interest income    --    (376 )  (36 )  (148 )  --    (560 )
   Interest expense    --    6,425    (1,018 )  1,061    --    6,468  






     --    641,215    97,888    30,813    (179,182 )  590,734  






Income before income taxes    69,657    38,127    69,066    5,431    (71,706 )  110,575  
Income taxes    --    5,925    33,834    1,159    --    40,918  






Net income   $ 69,657   $ 32,202   $ 35,232   $ 4,272   $ (71,706 ) $ 69,657  






-14-


CONDENSED CONSOLIDATED INCOME STATEMENT
SIX MONTHS ENDED NOVEMBER 30, 2004

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-Guarantors
Eliminations
Cintas
Corporation
Consolidated

Revenue:                            
   Rentals   $ --   $ 865,513   $ 235,855   $ 64,251   $ (152 ) $ 1,165,467  
   Other services    --    365,354    157,485    17,477    (202,987 )  337,329  
   Equity in net income of affiliates    146,226    --    --    --    (146,226 )  --  






     146,226    1,230,867    393,340    81,728    (349,365 )  1,502,796  
Costs and expenses (income):  
   Cost of rentals    --    528,579    141,670    37,672    (66,878 )  641,043  
   Cost of other services    --    278,978    81,552    10,959    (144,529 )  226,960  
   Selling and administrative expenses    --    371,322    (12,787 )  16,898    17,807    393,240  
   Interest income    --    (2,189 )  (6 )  (441 )  --    (2,636 )
   Interest expense    --    11,810    (1,650 )  1,891    --    12,051  






     --    1,188,500    208,779    66,979    (193,600 )  1,270,658  






Income before income taxes    146,226    42,367    184,561    14,749    (155,765 )  232,138  
Income taxes    --    11,421    69,867    4,624    --    85,912  






Net income   $ 146,226   $ 30,946   $ 114,694   $ 10,125   $ (155,765 ) $ 146,226  






-15-


CONDENSED CONSOLIDATED INCOME STATEMENTSIX
MONTHS ENDED NOVEMBER 30, 2003

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-Guarantors
Eliminations
Cintas
Corporation
Consolidated

Revenue:                            
   Rentals   $ --   $ 812,071   $ 219,437   $ 55,447   $ (95 ) $ 1,086,860  
   Other services    --    525,594    110,719    15,529    (359,737 )  292,105  
   Equity in net income of affiliates    132,984    --    --    --    (132,984 )  --  






     132,984    1,337,665    330,156    70,976    (492,816 )  1,378,965  
Costs and expenses (income):  
   Cost of rentals    --    516,544    128,555    34,475    (76,094 )  603,480  
   Cost of other services    --    389,046    78,496    9,430    (282,372 )  194,600  
   Selling and administrative expenses    --    353,130    (15,622 )  15,649    (73 )  353,084  
   Interest income    --    (718 )  (57 )  (198 )  --    (973 )
   Interest expense    --    13,231    (1,963 )  2,080    --    13,348  
   Write-off of loan receivable    --    --    4,343    --    --    4,343  






     --    1,271,233    193,752    61,436    (358,539 )  1,167,882  






Income before income taxes    132,984    66,432    136,404    9,540    (134,277 )  211,083  
Income taxes    --    11,311    63,672    3,116    --    78,099  






Net income   $ 132,984   $ 55,121   $ 72,732   $ 6,424   $ (134,277 ) $ 132,984  






-16-


CONDENSED CONSOLIDATED BALANCE SHEET
AS OF NOVEMBER 30, 2004

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-Guarantors
Eliminations
Cintas
Corporation
Consolidated

Assets                            
Current assets:  
   Cash and cash equivalents   $ --   $ 84,679   $ 6,477   $ 22,239   $ --   $ 113,395  
   Marketable securities    --    205,176    --    37,593    --    242,769  
   Accounts receivable, net    --    224,702    84,782    10,985    (11,473 )  308,996  
   Inventories, net    --    190,901    21,103    9,000    (18,889 )  202,115  
   Uniforms and other rental items in service    --    248,977    73,888    17,053    (30,702 )  309,216  
   Prepaid expenses    --    6,231    1,974    814    --    9,019  






Total current assets    --    960,666    188,224    97,684    (61,064 )  1,185,510  
 
Property and equipment, at cost, net    --    603,467    152,332    44,074    --    799,873  
 
Goodwill    --    128,716    685,948    15,828    --    830,492  
Service contracts, net    --    99,437    32,030    8,860    --    140,327  
Other assets, net    1,570,379    26,682    762,156    174,142    (2,495,466 )  37,893  






    $ 1,570,379   $ 1,818,968   $ 1,820,690   $ 340,588   $ (2,556,530 ) $ 2,994,095  






Liabilities and Shareholders' Equity  
Current liabilities:  
   Accounts payable   $ (465,247 ) $ 262,594   $ 211,585   $ 18,805   $ 38,013   $ 65,750  
   Accrued compensation and related liabilities    --    24,141    7,176    2,021    --    33,338  
   Accrued liabilities    --    178,963    (82,409 )  3,989    (45 )  100,498  
   Income taxes:  
     Current    --    (24,943 )  96,945    1,831    (29 )  73,804  
     Deferred    --    --    58,457    2,081    --    60,538  
   Long-term debt due within one year    --    9,625    676    13    (159 )  10,155  






Total current liabilities    (465,247 )  450,380    292,430    28,740    37,780    344,083  
 
Long-term debt due after one year    --    474,042    (58,159 )  83,374    (34,079 )  465,178  
Deferred income taxes    --    10,222    113,602    5,889    --    129,713  
Total shareholders' equity    2,035,626    884,324    1,472,817    222,585    (2,560,231 )  2,055,121  






    $ 1,570,379   $ 1,818,968   $ 1,820,690   $ 340,588   $ (2,556,530 ) $ 2,994,095  






-17-


CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MAY 31, 2004

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-Guarantors
Eliminations
Cintas
Corporation
Consolidated

Assets                            
Current assets:  
   Cash and cash equivalents   $ --   $ 56,455   $ 8,057   $ 22,845   $ --   $ 87,357  
   Marketable securities    --    150,652    --    16,312    --    166,964  
   Accounts receivable, net    --    210,026    79,425    8,703    (12,562 )  285,592  
   Inventories, net    --    172,586    20,249    6,624    (10,771 )  188,688  
   Uniforms and other rental items in service    --    240,833    70,741    15,954    (29,281 )  298,247  
   Prepaid expenses    --    6,006    1,011    378    --    7,395  






Total current assets    --    836,558    179,483    70,816    (52,614 )  1,034,243  
 
Property and equipment, at cost, net    --    596,037    149,461    39,812    --    785,310  
 
Goodwill    --    124,845    667,128    13,468    --    805,441  
Service contracts, net    --    106,348    29,653    8,663    --    144,664  
Other assets, net    1,419,869    29,861    769,746    141,897    (2,320,734 )  40,639  






    $ 1,419,869   $ 1,693,649   $ 1,795,471   $ 274,656   $ (2,373,348 ) $ 2,810,297  






Liabilities and Shareholders' Equity  
Current liabilities:  
   Accounts payable   $ (465,247 ) $ 168,429   $ 298,501   $ 13,755   $ 38,013   $ 53,451  
   Accrued compensation and related liabilities    --    23,863    6,307    1,634    --    31,804  
   Accrued liabilities    --    179,525    (36,472 )  4,148    (975 )  146,226  
   Income taxes:  
     Current    --    (33,638 )  69,796    511    (29 )  36,640  
     Deferred    --    601    44,630    1,811    --    47,042  
   Long-term debt due within one year    --    9,655    655    372    (159 )  10,523  






Total current liabilities    (465,247 )  348,435    383,417    22,231    36,850    325,686  
 
Long-term debt due after one year    --    482,360    (49,928 )  72,529    (31,276 )  473,685  
Deferred income taxes    --    9,621    108,143    5,193    --    122,957  
Total shareholders' equity    1,885,116    853,233    1,353,839    174,703    (2,378,922 )  1,887,969  






    $ 1,419,869   $ 1,693,649   $ 1,795,471   $ 274,656   $ (2,373,348 ) $ 2,810,297  






-18-


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED NOVEMBER 30, 2004

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-
Guarantors

Eliminations
Cintas
Corporation
Consolidated

Cash flows from operating activities:                            
   Net income   $ 146,226   $ 30,946   $ 114,694   $ 10,125   $ (155,765 ) $ 146,226  
   Adjustments to reconcile net income to net  
   cash provided by (used in) operating activities:  
     Depreciation    --    37,696    18,893    2,932    --    59,521  
     Amortization of deferred charges    --    8,856    3,539    1,148    --    13,543  
     Deferred income taxes    --    --    19,286    966    --    20,252  
     Changes in current assets and liabilities,  
       net of acquisitions of businesses:  
          Accounts receivable    --    (14,826 )  (3,704 )  (2,282 )  (1,089 )  (21,901 )
          Inventories    --    (21,369 )  2,597    (2,425 )  8,118    (13,079 )
          Uniforms and other rental items in service    --    (5,090 )  (6,250 )  (1,050 )  1,421    (10,969 )
          Prepaid expenses    --    (225 )  (934 )  (436 )  --    (1,595 )
          Accounts payable    --    94,165    (86,997 )  5,050    --    12,218  
          Accrued compensation and related liabilities    --    278    869    387    --    1,534  
          Accrued liabilities    --    128    (47,189 )  (159 )  930    (46,290 )
          Income taxes payable    --    8,695    27,149    1,320    --    37,164  






Net cash provided by (used in) operating activities    146,226    139,254    41,953    15,576    (146,385 )  196,624  
 
Cash flows from investing activities:  
   Capital expenditures    --    (46,007 )  (20,579 )  (7,277 )  --    (73,863 )
   Proceeds from sale or redemption of marketable securities    --    18,542    --    29    --    18,571  
   Purchase of marketable securities    --    (73,066 )  --    (21,310 )  --    (94,376 )
   Acquisitions of businesses, net of cash acquired    --    (4,565 )  (28,712 )  (415 )  --    (33,692 )
   Other    (150,510 )  54    13,968    (14,192 )  149,188    (1,492 )






Net cash (used in) provided by investing activities    (150,510 )  (105,042 )  (35,323 )  (43,165 )  149,188    (184,852 )
 
Cash flows from financing activities:  
   Repayment of long-term debt    --    (6,133 )  (8,210 )  10,486    (2,803 )  (6,660 )
   Stock options exercised    2,654    --    --    --    --    2,654  
   Other    1,630    145    --    16,497    --    18,272  






Net cash provided by (used in) financing activities    4,284    (5,988 )  (8,210 )  26,983    (2,803 )  14,266  






Net increase (decrease) in cash and cash equivalents    --    28,224    (1,580 )  (606 )  --    26,038  
Cash and cash equivalents at beginning of period    --    56,455    8,057    22,845    --    87,357  






Cash and cash equivalents at end of period   $ --   $ 84,679   $ 6,477   $ 22,239   $ --   $ 113,395  






-19-


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED NOVEMBER 30, 2003

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-
Guarantors

Eliminations
Cintas
Corporation
Consolidated

Cash flows from operating activities:                            
   Net income   $ 132,984   $ 55,121   $ 72,732   $ 6,424   $ (134,277 ) $ 132,984  
   Adjustments to reconcile net income to net  
   cash provided by (used in) operating activities:  
     Depreciation    --    37,399    18,251    2,810    --    58,460  
     Amortization of deferred charges    --    4,221    7,552    1,101    --    12,874  
     Deferred income taxes    --    211    7,615    493    --    8,319  
     Changes in current assets and liabilities,  
       net of acquisitions of businesses:  
          Accounts receivable    --    (5,203 )  8,435    (1,906 )  (2,304 )  (978 )
          Inventories    --    16,293    201    348    (302 )  16,540  
          Uniforms and other rental items in service    --    1,788    215    (159 )  1,596    3,440  
          Prepaid expenses    --    846    (537 )  323    --    632  
          Accounts payable    --    107,177    (109,227 )  4,407    --    2,357  
          Accrued compensation and related liabilities    --    (1,431 )  131    13    --    (1,287 )
          Accrued liabilities    --    (1,840 )  (33,857 )  (1,258 )  947    (36,008 )
          Income taxes payable    --    4,044    48,332    (179 )  --    52,197  






Net cash provided by (used in) operating activities    132,984    218,626    19,843    12,417    (134,340 )  249,530  
 
Cash flows from investing activities:  
   Capital expenditures    --    (36,240 )  (16,934 )  (3,847 )  --    (57,021 )
   Proceeds from sale or redemption of marketable securities    --    12,838    --    --    --    12,838  
   Purchase of marketable securities    --    (79,184 )  (1,000 )  (4,753 )  --    (84,937 )
   Acquisitions of businesses, net of cash acquired    --    (1,215 )  (12,380 )  --    --    (13,595 )
   Other    (136,038 )  (5,854 )  13,932    (4,365 )  134,038    1,713  






Net cash (used in) provided by investing activities    (136,038 )  (109,655 )  (16,382 )  (12,965 )  134,038    (141,002 )
 
Cash flows from financing activities:  
   Repayment of long-term debt    --    (51,176 )  (3,103 )  3,856    (850 )  (51,273 )
   Stock options exercised    3,054    --    --    --    --    3,054  
   Other    --    524    --    5,524    --    6,048  






Net cash provided by (used in) financing activities    3,054    (50,652 )  (3,103 )  9,380    (850 )  (42,171 )






Net increase (decrease) in cash and cash equivalents    --    58,319    358    8,832    (1,152 )  66,357  
Cash and cash equivalents at beginning of period    --    16,592    5,166    9,329    1,152    32,239  






Cash and cash equivalents at end of period   $ --   $ 74,911   $ 5,524   $ 18,161   $ --   $ 98,596  






-20-


-20-

CINTAS CORPORATION
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

BUSINESS STRATEGY

We are North America’s leading provider of corporate identity uniforms through rental and sales programs, as well as related business services, including entrance mats, restroom products, first aid and safety products and services, document management services and cleanroom services. Our 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 to provide to 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 (who 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.

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. The Rentals operating segment designs and manufactures corporate identity uniforms which it rents, along with mats, shop towels, restroom supplies and other items, to its customers. The Other Services operating segment involves the design, manufacture and direct sale of uniforms to customers as well as the sale of ancillary products and services. These ancillary products and services include first aid and safety products and services, document management services and cleanroom supplies. Our products and services are provided 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.

Three Months Ended November 2004 Compared to Three Months Ended November 2003

Revenue, Expenses and Income

Revenue Comparison

Total revenue increased 8% for the three months ended November 30, 2004, over the same period in fiscal 2004. Internal growth for this period was 5%. The remaining 3% represents external growth derived mainly through the acquisitions of first aid and safety and document management businesses within our Other Services segment.

-21-


Net Rentals revenue increased 6% for the three months ended November 30, 2004, over the same period in the prior fiscal year. Rentals operating segment internal growth for the second quarter of fiscal 2005 was 6% as compared to the three months ended November 30, 2003. This increase is primarily due to the sale of new rental programs to new customers as well as the continued penetration of ancillary products into our existing customer base. This Rentals revenue growth is net of any lost business.

Other Services revenue increased 13% for the three months ended November 30, 2004, over the same period in the prior year. This increase was mainly due to a combination of acquisitions of first aid and safety service and document management businesses. Other Services operating segment internal growth for the second quarter of fiscal 2005 was 2% as compared to the three months ended November 30, 2003. This internal growth was generated by increased sales of first aid and safety products and services to new and existing customers.

Expense Comparison

Cost of rentals consists primarily of production expenses, delivery expenses and amortization of in service uniforms and other rental items. Cost of rentals increased 6% for the three months ended November 30, 2004, as compared to the three months ended November 30, 2003, which corresponds to the growth in Rentals revenue. Energy costs increased 30 basis points for this period; however, other efficiencies offset this increase.

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 15% for the three months ended November 30, 2004, as compared to the three months ended November 30, 2003. This increase was mainly due to the increased sales in this segment. The cost of other services increased greater than the growth in segment sales due to customer sales mix. Gross margin within this segment will fluctuate depending on the type of product or service sold, as products which require additional services generate higher gross margins. Generally, the gross margin for Other Services is in the 30% to 35% range. The current quarter’s gross margin is 32%, which is well within that range.

Selling and administrative expenses increased 10% for the three months ended November 30, 2004, as compared to the three months ended November 30, 2003. Selling and administrative expenses increased mainly due to selling expenses. In order to accelerate revenue growth, we have increased our sales force by approximately 10% over the last year and also increased marketing and sales promotions. These measures combined to increase our selling costs by approximately $10 million over the prior year. The cost of providing medical benefits to our employees also increased $4 million.

We anticipate a continued rise in energy and labor-related costs.

Net interest expense (interest expense less interest income) was $5 million for the three months ended November 30, 2004, compared to $6 million for the same period in the prior fiscal year. This decrease was primarily a result of lower outstanding debt levels as compared to the prior year.

Cintas’ effective tax rate was 37.0% for both the three months ended November 30, 2004 and November 30, 2003.

-22-


Income Comparison

Net income increased 6% for the three months ended November 30, 2004, over the same period in fiscal 2004, primarily due to revenue growth. Diluted earnings per share increased 8% for the three months ended November 30, 2004, over the same period in the prior fiscal year.

Six Months Ended November 2004 Compared to Six Months Ended November 2003

Revenue, Expenses and Income

Revenue Comparison

Total revenue increased 9% for the six months ended November 30, 2004, over the same period in fiscal 2004. Internal growth for this period was 6%. (When adjusted for the additional workday for the six months ended November 30, 2004, internal growth was 5% over the prior year.) The remaining 3% increase represents external growth derived mainly through the acquisitions of first aid and safety and document management businesses within our Other Services segment.

Net Rentals revenue increased 7% for the six months ended November 30, 2004, over the same period in the prior fiscal year. Rentals operating segment internal growth was also 7%. (When adjusted for the additional workday for the six months ended November 30, 2004, Rentals internal growth was 6%.) This increase is primarily due to the sale of new rental programs to new customers and the continued penetration of ancillary products into our existing customer base. Rentals revenue growth was negatively impacted by lost business.

Other Services revenue increased 16% for the six months ended November 30, 2004, over the same period in the prior year. This increase was mainly due to a combination of acquisitions of first aid and safety service and document management businesses. Other Services operating segment internal growth through the second quarter of fiscal 2005 was 4% as compared to the six months ended November 30, 2003. This internal growth was generated by increased sales of first aid and safety products and services to new and existing customers.

Expense Comparison

Cost of rentals consists primarily of production expenses, delivery expenses and amortization of in service uniforms and other rental items. Cost of rentals increased 6% for the six months ended November 30, 2004, as compared to the six months ended November 30, 2003, which corresponds to the growth in Rentals revenue. Energy costs increased 25 basis points for this period; however, other efficiencies offset this increase.

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 17% for the six months ended November 30, 2004, as compared to the six months ended November 30, 2003. This increase was mainly due to the increased sales in this segment. The cost of other services increased greater than the growth in segment sales due to customer sales mix. Gross margin within this segment will fluctuate depending on the type of product or service sold, as products which require additional services generate higher gross margins. Generally, the gross margin for Other Services is in the 30% to 35% range. This period’s gross margin was 33%, which is well within that range.

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Selling and administrative expenses increased 11% for the six months ended November 30, 2004, as compared to the six months ended November 30, 2003. Selling and administrative expenses increased mainly due to selling expenses. In order to accelerate revenue growth, we have increased our sales force by approximately 10% over the last year and also increased marketing and sales promotions. These measures combined to increase our selling costs by approximately $20 million over the prior year. The cost of providing medical benefits to our employees also increased $8 million.

We anticipate a continued rise in energy and labor-related costs.

Net interest expense (interest expense less interest income) was $9 million for the six months ended November 30, 2004, compared to $12 million for the same period in the prior fiscal year. This decrease was primarily a result of lower outstanding debt levels as compared to the prior year.

Cintas’ effective tax rate was 37.0% for both the six months ended November 30, 2004 and November 30, 2003.

Included in net income for the first quarter of fiscal 2004 was a pre-tax charge of $4.3 million from a write-off of a receivable from a garment manufacturer. Based on concerns on the supplier’s viability to remain as a going concern, the receivable was completely written off.

Income Comparison

Net income increased 10% for the six months ended November 30, 2004, over the same period in fiscal 2004, primarily due to increased revenues. Diluted earnings per share increased 10% for the six months ended November 30, 2004, over the same period in the prior fiscal year.

Financial Condition

At November 30, 2004, there was $356 million in cash, cash equivalents and marketable securities, an increase of $102 million from May 31, 2004, primarily due to additional cash generation from increased operating income. Capital expenditures were $74 million for the six months ended November 30, 2004, and we expect capital expenditures for the year to be between $140 and $160 million. Cash, cash equivalents and marketable securities will be used to finance future growth, capital expenditures, repayment of debt and dividends. Cintas also has additional borrowing capacity for use in future acquisitions. 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 $15 million from May 31, 2004 to November 30, 2004, due to continued investment in rental facilities and equipment. At the end of the second quarter of fiscal 2005, Cintas had four uniform rental facilities in various stages of construction.

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Following is information regarding Cintas’ long-term contractual obligations and other commitments outstanding as of November 30, 2004:

(In thousands)
Payments Due by Period
Long-term contractual obligations
Total
One year
or less

Two to
three
years

Four to
five years

After five
years

Long-term debt (1)     $ 472,074   $ 9,597   $ 233,713   $ 400   $ 228,364  
Capital lease obligations (2)    3,259    558    1,187    914    600  
Operating leases (3)    50,768    14,502    20,011    10,459    5,796  
Interest payments (4)    133,072    26,125    45,269    27,257    34,421  
Interest swap agreements (5)    (3,870 )  (2,273 )  (1,597 )  --    --  
Unconditional purchase obligations    --    --    --    --    --  





Total contractual cash obligations   $ 655,303   $ 48,509   $ 298,583   $ 39,030   $ 269,181  





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 $26,697, two to three years would be $66,009 and four to five years would be $87,297. Payments for years thereafter are assumed to continue increasing by 15% each year.

(1) Long-term debt primarily consists of $450,000 in long-term notes.
(2) Capital lease obligations are classified as long-term debt on the balance sheet.
(3) Operating leases consist primarily of building leases and synthetic leases on the two corporate jets.
(4) Interest payments include interest on both fixed and variable rate debt. Rates have been assumed to increase 25 basis points for the remainder of fiscal 2005, an additional 25 basis points in fiscal 2006 and an additional 25 basis points in fiscal 2007.
(5) Reference Note 5 entitled Debt, Derivatives and Hedging Activities for a detailed discussion of interest swap agreements.

(In thousands)
Amount of Commitment Expiration Per Period
Other commercial commitments
Total
One year
or less

Two to
three
years

Four to
five years

After five
Years

Lines of credit (1)     $ 300,000   $ --   $--   $ 300,000   $--  
Standby letter of credit (2)    61,471    61,471    --   --    -- 
Guarantees    --    --    --   --    -- 
Standby repurchase obligations    --    --    --   --    -- 
Other commercial commitments    --    --    --   --    -- 





Total commercial commitments   $ 361,471   $ 61,471   $--  $300,000   $-- 





(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 the synthetic leases on the two corporate jets. The synthetic leases on the aircraft do not currently have, and are 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.

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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. The plaintiffs are seeking unspecified monetary damages, injunctive relief, or both. Cintas denies these claims and is defending the plaintiffs’ allegations. The court ordered arbitration for all potential plaintiffs except for those that fall into one of four narrowly defined exceptions. As a result, Cintas believes that a majority of the potential plaintiffs will be required to arbitrate their claims. 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 is also a defendant in a purported class action lawsuit, Robert Ramirez, et al., v. Cintas Corporation, filed on January 20, 2004, and pending in the United States District Court, Northern District of California, San Francisco Division. The case was brought on behalf of all past and present female, African-American and Hispanic employees of Cintas and its subsidiaries. The complaint alleges that Cintas has engaged in a pattern and practice of discriminating against women and minorities in recruitment, hiring, promotions, transfers, job assignments and pay. The complaint seeks injunctive relief, compensatory damages, punitive damages and attorney’s fees, among other things. Cintas denies these claims and is defending the plaintiffs’ allegations. No filings or determination has been made as 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. If a court 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 is also a defendant in a lawsuit, J. Lester Alexander, III vs. Cintas Corp., et al., which was originally filed on October 25, 2004, and is currently pending in the United States Bankruptcy Court for the Middle District of Alabama, Eastern Division.  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 their intention to perform their obligations in those agreements and acted as alter egos of the bankrupt TMC and are 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 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.

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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.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

In our normal operations, Cintas has market risk exposure to interest rates. There has been no significant change in our exposure to these risks, which has been previously disclosed on page 47 of our most recent annual report.

ITEM 4.

CONTROLS AND PROCEDURES.

An evaluation was completed under the supervision and with the participation of Cintas’ management, including Cintas’ President and Chief Executive Officer, Chief Financial Officer, General Counsel and Controllers, of the effectiveness of the design and operation of Cintas’ disclosure controls and procedures as of November 30, 2004. Based on these evaluations, Cintas’ management, including the President and Chief Executive Officer, Chief Financial Officer, General Counsel and Controllers, concluded that Cintas’ disclosure controls and procedures were effective as of November 30, 2004. There has been no change to Cintas’ internal control over financial reporting that occurred during the second quarter of fiscal 2005 that has materially affected, or is reasonably likely to materially affect, Cintas’ internal control over financial reporting.

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, should 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 this report. Factors that might cause such a difference include the possibility of greater than anticipated operating costs, lower sales volumes, the performance and costs of integration of acquisitions, fluctuations in costs of materials and labor, costs and possible effects of union organizing activities, outcome of pending environmental matters, the cost, results and timely completion of assessment and remediation 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 and the reactions of competitors in terms of price and service. Cintas undertakes no obligation to update any forward-looking statements to reflect the events or circumstances arising after the date on which they are made.

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CINTAS CORPORATION

Part II.    Other Information

  Item 4. Submission of matters to a vote of security holders

  Cintas’ Annual Shareholders’ meeting was held on October 19, 2004, at
which the following issues were voted upon by shareholders:

  Issue No. 1
     Authority to elect nine Directors.

Name
Shares For
Shares -
Withheld Authority

  Richard T. Farmer 152,761,642  3,756,082 
  Robert J. Kohlhepp 153,122,547  3,395,177 
  152,904,543  3,613,181 
  Paul R. Carter 151,777,045  4,740,679 
  Gerald V. Dirvin 153,284,062  3,233,662 
  Robert J. Herbold 153,287,506  3,230,218 
  Joyce Hergenhan 155,249,473  1,268,251 
  Roger L. Howe 148,330,183  8,187,541 
  David C. Phillips 152,212,162  4,305,562 

  Issue No. 2
     Ratification of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2005.

             FOR   149,094,272            AGAINST    6,641,099              ABSTAIN    782,353              BROKER NON-VOTES   0

  Issue No. 3
     Proposal to adopt a policy of expensing the cost of stock options in Cintas’ income statement.

             FOR   48,153,449            AGAINST    89,108,915            ABSTAIN    2,376,854            BROKER NON-VOTES   16,878,506

  Issue No. 4
      Proposal to issue a report on Cintas’ code of conduct for vendors and other workplace policies.

             FOR   138,861,961            AGAINST    12,870,755          ABSTAIN     4,779,023          BROKER NON-VOTES     5,985

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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)


BY: /s/William C. Gale
      ——————————————
      William C. Gale
      Senior Vice President and Chief Financial Officer
     (Chief Accounting Officer)

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