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CINTAS CORP - Quarter Report: 2006 February (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 February 28, 2006

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 a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12 b-2 of the Exchange Act).

         Large Accelerated Filer   [X}                   Accelerated Filer [  ]                   Non-Accelerated Filer [  ]

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

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

                    Class                    Outstanding March 31, 2006
Common Stock, no par value 168,148,930

-1-


CINTAS CORPORATION

INDEX

Part I.    Financial Information

        Item 1.    Financial Statements.

                       Consolidated Condensed Statements of Income -
                            Three Months and Nine Months Ended
                             February 28, 2006 and February 29, 2005

                       Consolidated Condensed Balance Sheets -
                            February 28, 2006 and May 31, 2005

                       Consolidated Condensed Statements of Cash Flows -
                            Nine Months Ended February 28, 2006 and 2005

                       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

        Item 1.    Legal Proceedings.

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

        Item 5.    Other Information.

        Item 6.    Exhibits.


Signatures

Certifications
Page No.





   3


   4


   5

   6


  23


  30

  31


  32

  32

  33

  33

  33


  34

  35

2


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

Three Months Ended
February 28,

Nine Months Ended
February 28,

2006
2005
2006
2005
Revenue:                    
   Rentals   $ 631,322   $ 582,619   $ 1,890,920   $ 1,748,086  
   Other services    205,099    172,622    604,761    509,951  




     836,421    755,241    2,495,681    2,258,037  
Costs and expenses (income):  
   Cost of rentals    350,655    320,724    1,039,738    961,767  
   Cost of other services    132,796    113,063    397,024    340,023  
   Selling and administrative expenses    223,269    203,912    666,618    597,152  
   Interest income    (1,925 )  (2,149 )  (4,959 )  (4,785 )
   Interest expense    7,239    6,499    22,059    18,550  




     712,034    642,049    2,120,480    1,912,707  




Income before income taxes    124,387    113,192    375,201    345,330  
 
Income taxes    46,642    41,860    139,950    127,772  




Net income   $ 77,745   $ 71,332   $ 235,251   $ 217,558  




Basic earnings per share   $ .47   $ .42   $ 1.40   $ 1.27  




Diluted earnings per share   $ .46   $ .41   $ 1.39   $ 1.26  




See accompanying notes.

3


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

February 28, 2006
May 31, 2005
(Unaudited)
ASSETS            
Current assets:  
   Cash and cash equivalents   $ 48,043   $ 43,196  
   Marketable securities    202,758    266,232  
   Accounts receivable, net    358,033    326,896  
   Inventories, net    207,921    216,412  
   Uniforms and other rental items in service    322,044    305,450  
   Prepaid expenses    9,161    8,358  


     Total current assets    1,147,960    1,166,544  
 
Property and equipment, at cost, net    848,899    817,198  
 
Goodwill    1,123,795    889,538  
Service contracts, net    180,104    146,596  
Other assets, net    61,606    39,868  


    $ 3,362,364   $ 3,059,744  


LIABILITIES AND SHAREHOLDERS' EQUITY  
Current liabilities:  
   Accounts payable   $ 62,031   $ 69,296  
   Accrued compensation and related liabilities    40,332    38,710  
   Accrued liabilities    216,371    166,428  
   Income taxes:  
     Current    37,105    32,864  
     Deferred    49,175    41,883  
   Long-term debt due within one year    4,284    7,300  


     Total current liabilities    409,298    356,481  
 
Long-term debt due after one year    634,193    465,291  
 
Deferred income taxes    134,342    133,837  
 
Shareholders' equity:  
   Preferred stock, no par value:  
     100,000 shares authorized, none outstanding    --    --  
   Common stock, no par value:  
       425,000,000 shares authorized,  
     FY 2006: 172,477,911 issued and 168,116,977 outstanding  
     FY 2005: 172,127,502 issued and 170,658,601 outstanding    121,052    114,171  
   Retained earnings    2,212,419    2,035,992  
   Treasury stock:  
     FY 2006: 4,360,934 shares  
     FY 2005: 1,468,901 shares    (172,374 )  (58,204 )
   Other accumulated comprehensive income (loss):  
     Foreign currency translation    28,593    13,507  
     Unrealized loss on derivatives    (5,159 )  (1,331 )


     Total shareholders' equity    2,184,531    2,104,135  


    $ 3,362,364   $ 3,059,744  


See accompanying notes.

4


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

Nine Months Ended
February 28,

2006
2005
Cash flows from operating activities:            
 
   Net income   $ 235,251   $ 217,558  
   Adjustments to reconcile net income to net cash provided  
      by operating activities:  
        Depreciation    94,014    89,459  
        Amortization of deferred charges    24,130    20,726  
        Deferred income taxes    7,797    6,856  
        Change in current assets and liabilities, net of  
          acquisitions of businesses:  
             Accounts receivable    (14,187 )  (12,119 )
             Inventories    11,984    (27,143 )
             Uniforms and other rental items in service    (11,240 )  (252 )
             Prepaid expenses    (790 )  (1,319 )
             Accounts payable    (9,210 )  3,476  
             Accrued compensation and related liabilities    1,622    (185 )
             Accrued liabilities    (32,293 )  (24,816 )
             Income taxes payable    4,241    15,984  


Net cash provided by operating activities    311,319    288,225  
 
Cash flows from investing activities:  
 
   Capital expenditures    (102,080 )  (100,956 )
   Proceeds from sale or redemption of marketable securities    74,820    35,099  
   Purchase of marketable securities    (11,346 )  (164,065 )
   Acquisitions of businesses, net of cash acquired    (327,983 )  (82,186 )
   Other    (13,830 )  (1,877 )


Net cash used in investing activities    (380,419 )  (313,985 )
 
Cash flows from financing activities:  
 
   Proceeds from issuance of debt    173,000    --  
   Repayment of debt    (7,068 )  (7,264 )
   Stock options exercised    6,175    3,844  
   Repurchase of common stock    (114,170 )  --  
   Other    16,010    13,683  


Net cash provided by financing activities    73,947    10,263  


Net increase (decrease) in cash and cash equivalents    4,847    (15,497 )
 
Cash and cash equivalents at beginning of period    43,196    87,357  


Cash and cash equivalents at end of period   $ 48,043   $ 71,860  


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 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 annual report for the fiscal year ended May 31, 2005. A summary of our significant accounting policies is presented on page 30 of that 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. This is especially true in the second and third quarters of fiscal 2006 given the effects of weather events and the significant increase in fuel costs. 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

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued Statement No. 123 (revised 2004), Share-Based Payment, (Statement 123R), which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation.  Generally, the approach in Statement 123R is similar to the approach described in Statement 123.  However, Statement 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of income 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) no later than the beginning of the first fiscal year beginning after June 15, 2005. Cintas will adopt this Statement on June 1, 2006. Cintas is in the process of determining the impact that the adoption of Statement 123R will have on its consolidated financial position and results of operations.

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
February 28,

Nine Months Ended
February 28,

2006
2005
2006
2005
Numerator:                          
Net income   $ 77,745  $ 71,332  $ 235,251  $ 217,558  




Denominator:  
Denominator for basic earnings per  
   share-weighted average shares    168,038   171,802   168,321   171,629  




Effect of dilutive securities-  
   employee stock options    561   988   594   1,071  




Denominator for diluted earnings per  
   share-adjusted weighted average  
   shares and assuming conversions    168,599   172,790   168,915   172,700  




Basic earnings per share   $ .47  $ .42  $ 1.40  $ 1.27  




Diluted earnings per share   $ .46  $ .41  $ 1.39  $ 1.26  




4.     Goodwill, Service Contracts and Other Assets

Changes in the carrying amount of goodwill and service contracts for the nine months ended February 28, 2006, by operating segment, are as follows:

Rentals
Other
Services

Total
Goodwill                
Balance as of June 1, 2005   $ 701,422   $ 188,116   $ 889,538  
 
Goodwill acquired    159,095    73,392    232,487  
 
Foreign currency translation    1,493    277    1,770  



Balance as of February 28, 2006   $ 862,010   $ 261,785   $ 1,123,795  



7


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

Rentals
Other
Services

Total
Service Contracts                
Balance as of June 1, 2005   $ 118,350   $ 28,246   $ 146,596  
Service contracts acquired    32,670    19,000    51,670  
Service contracts amortization    (15,532 )  (4,898 )  (20,430 )
Foreign currency translation    2,193    75    2,268  



Balance as of February 28, 2006   $ 137,681   $ 42,423   $ 180,104  



Information regarding Cintas’ service contracts and other assets follows:

As of February 28, 2006
Carrying
Amount

Accumulated
Amortization

Net
Service contracts     $ 289,710   $ 109,606   $ 180,104  



Noncompete and  
   consulting agreements   $ 57,827   $ 19,054   $ 38,773  
Other    26,139    3,306    22,833  



Total   $ 83,966   $ 22,360   $ 61,606  




As of May 31, 2005
Carrying
Amount

Accumulated
Amortization

Net
Service contracts     $ 236,179   $ 89,583   $ 146,596  



Noncompete and  
   consulting agreements   $ 36,158   $ 17,163   $ 18,995  
Other    23,671    2,798    20,873  



Total   $ 59,829   $ 19,961   $ 39,868  



Amortization expense was $24,130 and $20,726 for the nine months ended February 28, 2006 and February 28, 2005, respectively. Estimated amortization expense, excluding any future acquisitions, for each of the next five years is $33,743, $37,565, $34,768, $32,223 and $29,073, respectively.

8


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

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.

From time to time, Cintas will use 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.

From time to time, 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 measuring the effectiveness of these swaps. There are no interest rate swap agreements outstanding as of February 28, 2006. When outstanding, 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. These agreements involve the receipt of fixed rate amounts in exchange for floating rate interest payments over the life of the agreements without an exchange of underlying principal amount. The mark-to-market values of both the fair value hedging instruments and the underlying debt obligations are equal and recorded as offsetting gains and losses in current period earnings. Cintas has determined that the current reverse interest rate swap agreements, designated as fair value hedges, qualify for treatment under the short-cut method of measuring effectiveness. Under the provisions of Statement 133, these hedges are determined to be perfectly effective and there is no requirement to periodically evaluate effectiveness. Cintas terminated its reverse interest rate swap agreements on September 1, 2005, thereby converting $225,000 in long-term debt back to fixed rate debt with an effective interest rate of 5.13%.

Cintas entered into two interest rate lock agreements as part of the Omni acquisition in fiscal 2002. The amortization of the cash flow hedge, pertaining to these lock agreements, resulted in a credit to other comprehensive income of $72 for the three months ended February 28, 2006, and $218 for the nine months ended February 28, 2006.

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 2007. The Hypothetical Derivative Method will be used to measure hedge effectiveness. Cintas expects that the forward starting swap will be perfectly effective as the critical terms of the anticipated debt issuance will perfectly offset the hedged cash flows of the forecasted interest payments. Over the next eighteen months, if the 30-year Treasury rate increases, the bank will make a payment to Cintas. Conversely, if the 30-year Treasury rate decreases, Cintas will pay the bank. These payments will increase or decrease cash with an offset to other comprehensive income in shareholders’ equity and will be amortized to earnings over the term of the debt issuance in 2007.

9


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

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 $387,676. For the nine months ended February 28, 2006, net cash provided by operating activities was $311,319. Capital expenditures were approximately $102,080 for the same period.

6.    Stock-Based Compensation

Cintas follows the disclosure requirements of FASB Statement No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, but continues to apply Accounting Principles Board Opinion No. 25 as the method used to account for stock-based employee compensation arrangements. See Note 2 entitled New Accounting Standard regarding a new accounting standard for share-based payments, which Cintas will adopt on June 1, 2006. 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
February 28,

Nine Months Ended
February 28,

2006
2005
2006
2005
 
Net income, as reported     $ 77,745   $ 71,332   $ 235,251   $ 217,558  
Deduct: Total stock-based  
    employee compensation expense  
    determined under fair value based  
    method for all awards, net of  
    related tax effects    1,151   2,170   3,396   6,450  




Pro forma net income   $ 76,594  $ 69,162  $ 231,855  $ 211,108  




Earnings per share:  
   Basic - as reported   $ .47  $ .42  $ 1.40  $ 1.27  




   Basic - pro forma   $ .46  $ .40  $ 1.38  $ 1.23  




   Diluted - as reported   $ .46  $ .41  $ 1.39  $ 1.26  




   Diluted - pro forma   $ .45  $ .40  $ 1.37  $ 1.22  




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 options which 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 SFAS No. 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 SFAS No. 123(R) was reduced by approximately $3,500.

10


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

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 of the forecasted cash flows associated with a derivative accounted for as a cash flow hedge. The components of comprehensive income for the three and nine month periods ended February 28, 2006 and February 28, 2005 are as follows:

Three Months Ended
February 28,

Nine Months Ended
February 28,

2006
2005
2006
2005
Net income     $ 77,745   $ 71,332   $ 235,251   $ 217,558  
 
Other comprehensive income:  
   Foreign currency translation adjustment    4,299    (5,158 )  15,086    11,339  
   Net unrealized income on cash flow hedges    72    73    218    218  
   Net unrealized loss on interest rate swap    (4,046 )  --    (4,046 )  --  




Comprehensive income   $ 78,070   $ 66,247   $ 246,509   $ 229,115  




8.    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, we also provide 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.

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.

11


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

Rentals
Other
Services

Corporate
Total
For the three months                      
   ended February 28, 2006  
Revenue   $ 631,322   $ 205,099   $ --  $ 836,421  




Income (loss) before income taxes   $ 109,523   $ 20,178   $ (5,314)  $ 124,387  




For the three months  
   ended February 28, 2005  
Revenue   $ 582,619   $ 172,622   $ --  $ 755,241  




Income (loss) before income taxes   $ 102,277   $ 15,265   $ (4,350) $ 113,192  




As of and for the nine months  
   ended February 28, 2006  
Revenue   $ 1,890,920   $ 604,761   $ --  $ 2,495,681  




Income (loss) before income taxes   $ 339,017   $ 53,284   $ (17,100)  $ 375,201  




Total assets   $ 2,491,807   $ 619,756   $ 250,801  $ 3,362,364  




As of and for the nine months  
   ended February 28, 2005  
Revenue   $ 1,748,086   $ 509,951   $ --  $ 2,258,037  




Income (loss) before income taxes   $ 316,013   $ 43,082   $ (13,765)  $ 345,330  




Total assets   $ 2,228,303   $ 459,431   $ 367,789  $ 3,055,523  




9.    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. 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.

12


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

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 applicants and 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. The court has ordered four of the named plaintiffs to arbitrate their claims. On April 27, 2005, the United States Equal Employment Opportunity Commission (EEOC) intervened in order to participate in this lawsuit. No filings or determination has been made in regard to the lawsuit 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. Several related proceedings with similar allegations and seeking similar relief damages and fees are pending, including a class action lawsuit, Mirna E. Serrano, et al., v. Cintas Corporation, filed on May 10, 2004, in the United States District Court for the Eastern District of Michigan, Southern Division on behalf of female service sales representative job applicants at all Cintas locations in Michigan. On September 6, 2005, a Magistrate Judge granted Plaintiffs’ motion for leave to file a second amended complaint to expand the lawsuit to a nationwide claim. On November 15, 2005, the EEOC intervened in Serrano to participate in the lawsuit in continuation of an EEOC charge filed on April 17, 2000, by Mirna Serrano with the EEOC Detroit District office. On February 24, 2006, a motion to intervene in Serrano was filed by intervening Plaintiffs Colleen Grindle, et al., on behalf of a nationwide subclass and an Ohio subclass of female employees in Cintas’ Rental Division who were allegedly denied hire, promotion or transfer to a SSR position. On July 15, 2005, the EEOC terminated the processing of an administrative action filed on December 15, 2004, by James Morgan with the EEOC Washington, D.C. office and the California Department of Fair Employment and Housing alleging racial discrimination in compensation and training opportunities and issued a right to sue letter. On August 3, 2005, Morgan joined the Ramirez lawsuit. On November 2, 2005, the Court entered an order requiring Morgan to arbitrate all of his claims for monetary damages. 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 the Houston lawsuit to arbitrate all of their claims for monetary damages. If there is an adverse verdict or a negotiated settlement 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: (i) two charges filed on November 30, 2004, by an EEOC Commissioner with the EEOC Systemic Litigation Unit alleging failure to hire and assign females to production job positions, and failing to hire females, African-Americans and Hispanics into the Management Trainee program, (ii) a charge filed on January 24, 2005, by Jennifer Fargo 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, (iii) a charge filed on March 23, 2005, by Clifton Cooper on behalf of himself and a similarly situated class with the EEOC Systemic Litigation Unit alleging discriminatory pay and treatment due to race, (iv) a charge filed on April 25, 2005, by Melissa Schulz 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 and (v) a charge filed on June 10, 2005, by Mattie Cooper on behalf of herself and a similarly situated class with the EEOC Systemic Litigation Unit alleging discriminatory pay and treatment due to race and gender. The investigations of these allegations are pending and no determinations have been made. On November 2, 2005, the EEOC issued a dismissal and notice of rights letter and closed its file on the Lorelei Reynolds charge filed on March 28, 2005, with the EEOC Birmingham District office alleging discriminatory pay and treatment due to race and gender on behalf of herself and a similarly situated class.

13


##

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

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 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.

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:

14


CONDENSED CONSOLIDATING INCOME STATEMENT
THREE MONTHS ENDED FEBRUARY 28, 2006

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-Guarantors
Eliminations
Cintas
Corporation
Consolidated

Revenue:                            
   Rentals   $ --   $ 462,276   $ 129,045   $ 40,139   $ (138 ) $ 631,322  
   Other services    --    271,594    108,688    12,976    (188,159 )  205,099  
   Equity in net income of affiliates    77,745    --    --    --    (77,745 )  --  






     77,745    733,870    237,733    53,115    (266,042 )  836,421  
Costs and expenses (income):  
   Cost of rentals    --    291,750    76,548    24,038    (41,681 )  350,655  
   Cost of other services    --    200,937    73,736    8,712    (150,589 )  132,796  
   Selling and administrative expenses    --    209,097    1,560    11,998    614    223,269  
   Interest income    --    (1,398 )  (60 )  (467 )  --    (1,925 )
   Interest expense    --    7,155    (1,007 )  1,091    --    7,239  






     --    707,541    150,777    45,372    (191,656 )  712,034  






Income before income taxes    77,745    26,329    86,956    7,743    (74,386 )  124,387  
Income taxes    --    10,155    33,516    2,971    --    46,642  






Net income   $ 77,745   $ 16,174   $ 53,440   $ 4,772   $ (74,386 ) $ 77,745  






15


CONDENSED CONSOLIDATING INCOME STATEMENT
THREE MONTHS ENDED FEBRUARY 28, 2005

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-Guarantors
Eliminations
Cintas
Corporation
Consolidated

Revenue:                            
   Rentals   $ --   $ 429,797   $ 118,689   $ 34,220   $ (87 ) $ 582,619  
   Other services    --    172,531    81,942    11,604    (93,455 )  172,622  
   Equity in net income of affiliates    71,332    --    --    --    (71,332 )  --  






     71,332    602,328    200,631    45,824    (164,874 )  755,241  
Costs and expenses (income):  
   Cost of rentals    --    263,438    68,427    20,870    (32,011 )  320,724  
   Cost of other services    --    87,682    86,708    7,546    (68,873 )  113,063  
   Selling and administrative expenses    --    194,028    (10,292 )  12,876    7,300    203,912  
   Interest income    --    (1,787 )  (3 )  (359 )  --    (2,149 )
   Interest expense    --    6,466    (906 )  939    --    6,499  






     --    549,827    143,934    41,872    (93,584 )  642,049  






Income before income taxes    71,332    52,501    56,697    3,952    (71,290 )  113,192  
Income taxes    --    5,635    34,546    1,679    --    41,860  






Net income   $ 71,332   $ 46,866   $ 22,151   $ 2,273   $ (71,290 ) $ 71,332  






16


CONDENSED CONSOLIDATING INCOME STATEMENT
NINE MONTHS ENDED FEBRUARY 28, 2006

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-Guarantors
Eliminations
Cintas
Corporation
Consolidated

Revenue:                            
   Rentals   $ --   $ 1,387,723   $ 388,746   $ 114,842   $ (391 ) $ 1,890,920  
   Other services    --    859,090    310,624    40,064    (605,017 )  604,761  
   Equity in net income of affiliates    235,251    --    --    --    (235,251 )  --  






     235,251    2,246,813    699,370    154,906    (840,659 )  2,495,681  
Costs and expenses (income):  
   Cost of rentals    --    870,459    228,966    67,876    (127,563 )  1,039,738  
   Cost of other services    --    643,181    212,625    26,165    (484,947 )  397,024  
   Selling and administrative expenses    --    633,979    (1,683 )  34,184    138    666,618  
   Interest income    --    (3,631 )  (257 )  (1,071 )  --    (4,959 )
   Interest expense    --    21,872    (3,000 )  3,187    --    22,059  






     --    2,165,860    436,651    130,341    (612,372 )  2,120,480  






Income before income taxes    235,251    80,953    262,719    24,565    (228,287 )  375,201  
Income taxes    --    30,853    100,115    8,982    --    139,950  






Net income   $ 235,251   $ 50,100   $ 162,604   $ 15,583   $ (228,287 ) $ 235,251  






17


CONDENSED CONSOLIDATED INCOME STATEMENT
NINE MONTHS ENDED FEBRUARY 28, 2005

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-Guarantors
Eliminations
Cintas
Corporation
Consolidated

Revenue:                            
   Rentals   $ --   $ 1,295,310   $ 354,544   $ 98,471   $ (239 ) $ 1,748,086  
   Other services    --    537,885    239,427    29,081    (296,442 )  509,951  
   Equity in net income of affiliates    217,558    --    --    --    (217,558 )  --  






     217,558    1,833,195    593,971    127,552    (514,239 )  2,258,037  
Costs and expenses (income):  
   Cost of rentals    --    792,017    210,097    58,542    (98,889 )  961,767  
   Cost of other services    --    366,660    168,260    18,505    (213,402 )  340,023  
   Selling and administrative expenses    --    565,350    (23,079 )  29,774    25,107    597,152  
   Interest income    --    (3,976 )  (9 )  (800 )  --    (4,785 )
   Interest expense    --    18,276    (2,556 )  2,830    --    18,550  






     --    1,738,327    352,713    108,851    (287,184 )  1,912,707  






Income before income taxes    217,558    94,868    241,258    18,701    (227,055 )  345,330  
Income taxes    --    17,056    104,413    6,303    --    127,772  






Net income   $ 217,558   $ 77,812   $ 136,845   $ 12,398   $ (227,055 ) $ 217,558  






18


CONDENSED CONSOLIDATING BALANCE SHEET
AS OF FEBRUARY 28, 2006

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-Guarantors
Eliminations
Cintas
Corporation
Consolidated

Assets                            
Current assets:  
   Cash and cash equivalents   $ --   $ 13,180   $ 8,075   $ 26,788   $ --   $ 48,043  
   Marketable securities    --    161,893    --    40,865    --    202,758  
   Accounts receivable, net    --    239,710    110,680    18,957    (11,314 )  358,033  
   Inventories, net    --    185,135    25,027    8,848    (11,089 )  207,921  
   Uniforms and other rental items in service    --    261,930    75,559    18,747    (34,192 )  322,044  
   Prepaid expenses    --    6,420    2,156    585    --    9,161  






Total current assets    --    868,268    221,497    114,790    (56,595 )  1,147,960  
 
Property and equipment, at cost, net    --    603,936    199,750    45,213    --    848,899  
Goodwill    --    299,112    804,658    20,025    --    1,123,795  
Service contracts, net    --    117,307    55,834    6,963    --    180,104  
Other assets, net    1,754,674    65,069    893,085    178,268    (2,829,490 )  61,606  






    $ 1,754,674   $ 1,953,692   $ 2,174,824   $ 365,259   $ (2,886,085 ) $ 3,362,364  






Liabilities and Shareholders' Equity  
Current liabilities:  
   Accounts payable   $ (465,247 ) $ 4,020   $ 484,496   $ 749   $ 38,013   $ 62,031  
   Accrued compensation and related liabilities    --    27,872    10,437    2,023    --    40,332  
   Accrued liabilities    58,824    183,130    (30,276 )  4,738    (45 )  216,371  
   Income taxes:  
     Current    --    9,924    26,080    1,101    --    37,105  
     Deferred    --    --    47,797    1,378    --    49,175  
   Long-term debt due within one year    --    3,549    907    --    (172 )  4,284  






Total current liabilities    (406,423 )  228,495    539,441    9,989    37,796    409,298  
 
Long-term debt due after one year    --    641,165    (59,074 )  86,998    (34,896 )  634,193  
Deferred income taxes    --    10,222    119,252    4,868    --    134,342  
Total shareholders' equity    2,161,097    1,073,810    1,575,205    263,404    (2,888,985 )  2,184,531  






    $ 1,754,674   $ 1,953,692   $ 2,174,824   $ 365,259   $ (2,886,085 ) $ 3,362,364  






19


CONDENSED CONSOLIDATING BALANCE SHEET
AS OF MAY 31, 2005

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-Guarantors
Eliminations
Cintas
Corporation
Consolidated

Assets                            
Current assets:  
   Cash and cash equivalents   $ --   $ 13,259   $ 12,570   $ 17,367   $ --   $ 43,196  
   Marketable securities    --    226,658    --    39,574    --    266,232  
   Accounts receivable, net    --    237,152    93,109    9,025    (12,390 )  326,896  
   Inventories, net    --    199,236    24,120    9,087    (16,031 )  216,412  
   Uniforms and other rental items in service    --    250,222    74,887    16,584    (36,243 )  305,450  
   Prepaid expenses    --    5,781    1,989    588    --    8,358  






Total current assets    --    932,308    206,675    92,225    (64,664 )  1,166,544  
 
Property and equipment, at cost, net    --    599,757    176,648    40,793    --    817,198  
 
Goodwill    --    140,405    734,113    15,020    --    889,538  
Service contracts, net    --    95,560    43,727    7,309    --    146,596  
Other assets, net    1,626,712    44,757    829,890    164,544    (2,626,035 )  39,868  






    $ 1,626,712   $ 1,812,787   $ 1,991,053   $ 319,891   $ (2,690,699 ) $ 3,059,744  






Liabilities and Shareholders' Equity  
Current liabilities:  
   Accounts payable   $ (465,247 ) $ 91,255   $ 402,657   $ 2,618   $ 38,013   $ 69,296  
   Accrued compensation and related liabilities    --    28,287    8,523    1,900    --    38,710  
   Accrued liabilities    --    191,123    (28,212 )  4,479    (962 )  166,428  
   Income taxes:  
     Current    --    (640 )  32,232    1,301    (29 )  32,864  
     Deferred    --    --    40,635    1,248    --    41,883  
   Long-term debt due within one year    --    6,588    871    --    (159 )  7,300  






Total current liabilities    (465,247 )  316,613    456,706    11,546    36,863    356,481  
 
Long-term debt due after one year    --    471,750    (52,413 )  78,778    (32,824 )  465,291  
Deferred income taxes    --    10,222    119,212    4,403    --    133,837  
Total shareholders' equity    2,091,959    1,014,202    1,467,548    225,164    (2,694,738 )  2,104,135  






    $ 1,626,712   $ 1,812,787   $ 1,991,053   $ 319,891   $ (2,690,699 ) $ 3,059,744  






20


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED FEBRUARY 28, 2006

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-
Guarantors

Eliminations
Cintas
Corporation
Consolidated

Cash flows from operating activities:                            
   Net income   $ 235,251   $ 50,100   $ 162,604   $ 15,583   $ (228,287 ) $ 235,251  
   Adjustments to reconcile net income to net  
     cash provided by (used in) operating activities:  
       Depreciation    --    57,851    31,449    4,714    --    94,014  
       Amortization of deferred charges    --    13,499    8,524    2,107    --    24,130  
       Deferred income taxes    --    --    7,202    595    --    7,797  
       Changes in current assets and liabilities,  
         net of acquisitions of businesses:  
            Accounts receivable    --    7,307    (10,486 )  (9,932 )  (1,076 )  (14,187 )
            Inventories    --    16,692    (5 )  239    (4,942 )  11,984  
            Uniforms and other rental items in service    --    (6,354 )  (672 )  (2,163 )  (2,051 )  (11,240 )
            Prepaid expenses    --    (639 )  (154 )  3    --    (790 )
            Accounts payable    --    (87,513 )  80,184    (1,881 )  --    (9,210 )
            Accrued compensation and related liabilities    --    (415 )  1,914    123    --    1,622  
            Accrued liabilities    --    (15,207 )  (18,103 )  100    917    (32,293 )
            Income taxes payable    --    10,564    (6,152 )  (200 )  29    4,241  






Net cash provided by (used in) operating activities    235,251    45,885    256,305    9,288    (235,410 )  311,319  
 
Cash flows from investing activities:  
   Capital expenditures    --    (43,263 )  (49,794 )  (9,023 )  --    (102,080 )
   Proceeds from sale or redemption of marketable securities    --    65,075    --    9,745    --    74,820  
   Purchase of marketable securities    --    (310 )  --    (11,036 )  --    (11,346 )
   Acquisitions of businesses, net of cash acquired    --    (228,965 )  (94,449 )  (4,569 )  --    (327,983 )
   Other    (127,962 )  (5,141 )  (107,847 )  (8,290 )  235,410    (13,830 )






Net cash (used in) provided by investing activities    (127,962 )  (212,604 )  (252,090 )  (23,173 )  235,410    (380,419 )
 
Cash flows from financing activities:  
   Proceeds from issuance of debt    --    173,000    --    --    --    173,000  
   Repayment of debt    --    (6,578 )  (8,710 )  8,220    --    (7,068 )
   Stock options exercised    6,175    --    --    --    --    6,175  
   Repurchase of common stock    (114,170 )  --    --    --    --    (114,170 )
   Other    706    218    --    15,086    --    16,010  






Net cash (used in) provided by financing activities    (107,289 )  166,640    (8,710 )  23,306    --    73,947  






Net (decrease) increase in cash and cash equivalents    --    (79 )  (4,495 )  9,421    --    4,847  
Cash and cash equivalents at beginning of period    --    13,259    12,570    17,367    --    43,196  






Cash and cash equivalents at end of period   $ --   $ 13,180   $ 8,075   $ 26,788   $ --   $ 48,043  






21


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED FEBRUARY 28, 2005

Cintas
Corporation

Corp. 2
Subsidiary
Guarantors

Non-
Guarantors

Eliminations
Cintas
Corporation
Consolidated

Cash flows from operating activities:                            
   Net income   $ 217,558   $ 77,812   $ 136,845   $ 12,398   $ (227,055 ) $ 217,558  
   Adjustments to reconcile net income to net  
     cash provided by (used in) operating activities:  
       Depreciation    --    56,443    28,641    4,375    --    89,459  
       Amortization of deferred charges    --    13,265    5,712    1,749    --    20,726  
       Deferred income taxes    --    --    6,140    716    --    6,856  
       Changes in current assets and liabilities,  
         net of acquisitions of businesses:  
            Accounts receivable    --    (5,294 )  (5,145 )  (591 )  (1,089 )  (12,119 )
            Inventories    --    (31,484 )  2,645    (2,112 )  3,808    (27,143 )
            Uniforms and other rental items in service    --    (208 )  (5,412 )  (321 )  5,689    (252 )
            Prepaid expenses    --    353    (1,175 )  (497 )  --    (1,319 )
            Accounts payable    --    44,100    (50,149 )  9,525    --    3,476  
            Accrued compensation and related liabilities    --    (931 )  524    222    --    (185 )
            Accrued liabilities    --    (7,087 )  (18,543 )  (116 )  930    (24,816 )
            Income taxes payable    --    11,459    4,729    (204 )  --    15,984  






Net cash provided by (used in) operating activities    217,558    158,428    104,812    25,144    (217,717 )  288,225  
 
Cash flows from investing activities:  
   Capital expenditures    --    (60,672 )  (33,756 )  (6,528 )  --    (100,956 )
   Proceeds from sale or redemption of marketable securities    --    33,287    --    1,812    --    35,099  
   Purchase of marketable securities    --    (130,256 )  --    (33,809 )  --    (164,065 )
   Acquisitions of businesses, net of cash acquired    --    (4,565 )  (77,206 )  (415 )  --    (82,186 )
   Other    (223,528 )  (611 )  11,649    (9,030 )  219,643    (1,877 )






Net cash (used in) provided by investing activities    (223,528 )  (162,817 )  (99,313 )  (47,970 )  219,643    (313,985 )
 
Cash flows from financing activities:  
   Repayment of debt    --    (6,559 )  (6,041 )  7,262    (1,926 )  (7,264 )
   Stock options exercised    3,844    --    --    --    --    3,844  
   Other    2,126    218    --    11,339    --    13,683  






Net cash provided by (used in) financing activities    5,970    (6,341 )  (6,041 )  18,601    (1,926 )  10,263  






Net decrease in cash and cash equivalents    --    (10,730 )  (542 )  (4,225 )  --    (15,497 )
Cash and cash equivalents at beginning of period    --    56,455    8,057    22,845    --    87,357  






Cash and cash equivalents at end of period   $ --   $ 45,725   $ 7,515   $ 18,620   $ --   $ 71,860  






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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 a significant provider of related business services, including entrance mats, restroom products and services, restroom cleaning services, first aid, safety and fire protection products and services, document management services and cleanroom services. 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 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.

Continuous cost containment and product and process innovation are considered hallmarks of our organization. In order to sustain these efforts, we implemented 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 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 through 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.

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Three Months Ended February 2006 Compared to Three Months Ended February 2005

Revenue, Expenses and Income

Revenue Comparison

Total revenue increased 10.7% for the three months ended February 28, 2006, over the same period in fiscal 2005. Internal growth for this period was 7.7%. The remaining 3.0% 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 February 28, 2006, over the same period in the prior fiscal year. Rentals operating segment internal growth for the third quarter of fiscal 2006 was 7.5% as compared to the three months ended February 28, 2005, when adjusted for the impact of the hurricanes. This increase 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 18.8% for the three months ended February 28, 2006, over the same period in the prior year. Other Services operating segment internal growth for the third quarter of fiscal 2006 was 9.5% as compared to the three months ended February 28, 2005, when adjusted for the impact of the hurricanes. 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 9.3% for the three months ended February 28, 2006, as compared to the three months ended February 28, 2005. This increase reflects the growth in Rentals revenue and a 40% increase in Rentals energy costs, offset by various operational efficiencies. Rentals energy costs were approximately $28 million for the three months ended February 28, 2006, versus approximately $20 million for the same period in the prior year. Cost of rentals increased as a percent to Rentals revenue to 55.5% for the three months ended February 28, 2006, as compared to 55.0% for the three months ended February 28, 2005. This 0.5% increase reflects a Rentals energy charge increase of 1.0% of Rentals revenue, offset by various operational efficiencies.

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 17.5% for the three months ended February 28, 2006, as compared to the three months ended February 28, 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. Generally, the gross margin for Other Services is in the 30% to 35% range. The current quarter’s gross margin is 35.3%, which is slightly above that general range, mainly due to product mix.

Selling and administrative expenses increased 9.5% for the three months ended February 28, 2006, as compared to the three months ended February 28, 2005. Selling and administrative expenses as a percent of revenue decreased 0.3% for the three months ended February 28, 2006, as compared to the three months ended February 28, 2005. This decrease on a percent to revenue basis reflects the improved leverage

24


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 approximately $5 million over the prior year. In addition, administrative expenses increased by approximately $3 million as a result of increases in medical and retirement benefits.

We expect recent increases in fuel costs to continue to negatively impact our operating results in coming quarters, except to the extent we are able to offset such costs with price increases and increased operating efficiencies. Our Gulf Coast operations continue to be negatively impacted by the hurricanes Katrina, Rita and Wilma. While physical damage to our facilities is minimal, many of our customers in the region have yet to reopen or to return to pre-hurricane staffing levels. This lower business volume will continue to have an impact on our results. We are actively pursuing settlement of our losses related to these hurricanes with our insurance carrier. We do not yet have a clear indication of when a settlement agreement will be resolved, nor can we be sure of the amount, if any, we will receive.

Net interest expense (interest expense less interest income) was $5.3 million for the three months ended February 28, 2006, compared to $4.4 million for the same period in the prior fiscal year. This increase in net interest expense is primarily due to increased interest rates on our outstanding debt and the increased level of borrowing used to fund the stock repurchase program.

Cintas’ effective tax rate increased to 37.5% for the three months ended February 28, 2006, as compared to 37.0% for the three months ended February 28, 2005, due to changes in state tax laws. Our fiscal year to date effective tax rate is 37.3%.

Income Comparison

Net income increased 9.0% for the three months ended February 28, 2006, over the same period in fiscal 2005, primarily due to revenue growth. Diluted earnings per share increased 12.2% for the three months ended February 28, 2006, over the same period in the prior fiscal year.

Nine Months Ended February 2006 Compared to Nine Months Ended February 2005

Revenue, Expenses and Income

Revenue Comparison

Total revenue increased 10.5% for the nine months ended February 28, 2006, over the same period in fiscal 2005. Internal growth for this period was 8.1%. The remaining 2.4% 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 8.2% for the nine months ended February 28, 2006, over the same period in the prior fiscal year. Rentals operating segment internal growth through the third quarter of fiscal 2006 was 7.8% as compared to the nine months ended February 28, 2005, when adjusted for the impact of the hurricanes. This increase 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 18.6% for the nine months ended February 28, 2006, over the same period in the prior year. Other Services operating segment internal growth through the third quarter of fiscal 2006 was 10.6% as compared to the nine months ended February 28, 2005, when adjusted for the impact of the hurricanes. 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.

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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 8.1% for the nine months ended February 28, 2006, as compared to the nine months ended February 28, 2005. This increase reflects the growth in Rentals revenue and a 34% increase in Rentals energy costs, offset by various operational efficiencies. Rentals energy costs were approximately $74.7 million for the nine months ended February 28, 2006, versus approximately $55.8 million for the same period in the prior year. Cost of rentals as a percent to Rentals revenue was 55.0% for both the nine months ended February 28, 2006 and 2005. The cost of rentals as a percent to Rentals revenue for the nine months ended February 28, 2006 reflects a Rentals energy charge increase of 1.0% of Rentals revenue compared to the nine months ended February 28, 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 16.8% for the nine months ended February 28, 2006, as compared to the nine months ended February 28, 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. Generally, the gross margin for Other Services is in the 30% to 35% range. The current year to date gross margin is 34.4%, which is at the upper end of that general range, mainly due to product mix.

Selling and administrative expenses increased 11.6% for the nine months ended February 28, 2006, as compared to the nine months ended February 28, 2005. Selling and administrative expenses increased primarily due to higher selling expenses. 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 approximately $17 million over the prior year. The cost of providing medical and retirement benefits to our employees increased $12.7 million, representing a 14.4% increase over the prior year. In addition, administrative expenses increased by $3.9 million as a result of an increase in the bad debt reserve and by $4.6 million as a result of an increase in professional services relating to the outsourcing of certain human resource functions.

Recent increases in fuel costs will continue to negatively impact our operating results in coming quarters, except to the extent we are able to offset such costs with price increases and increased operating efficiencies. Our Gulf Coast operations continue to be negatively impacted by the hurricanes Katrina, Rita and Wilma. While physical damage to our facilities is minimal, many of our customers in the region have yet to reopen or to return to pre-hurricane staffing levels. This lower business volume will continue to have an impact on our results. We are actively pursuing settlement of our losses related to these hurricanes with our insurance carrier. We do not yet have a clear indication of when a settlement agreement will be resolved, nor can we be sure of the amount, if any, we will receive.

Net interest expense (interest expense less interest income) was $17.1 million for the nine months ended February 28, 2006, compared to $13.8 million for the same period in the prior fiscal year. This increase in net interest expense is due to increased interest rates on our outstanding debt and the increased level of borrowing used to fund the stock repurchase program.

Cintas’ effective tax rate increased to 37.3% for the nine months ended February 28, 2006, as compared to 37.0% for the nine months ended February 28, 2005, due to changes in state tax laws.

Income Comparison

Net income increased 8.1% for the nine months ended February 28, 2006, over the same period in fiscal 2005, primarily due to revenue growth. Diluted earnings per share increased 10.3% for the nine months ended February 28, 2006, over the same period in the prior fiscal year.

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Financial Condition

At February 28, 2006, there was $251 million in cash, cash equivalents and marketable securities, a decrease of $59 million from May 31, 2005. This decrease was primarily due to funding the shareholder dividend, recent acquisitions and the repurchasing of our company stock, as discussed below. Capital expenditures were approximately $102 million for the nine months ended February 28, 2006. We expect capital expenditures for the year to be between $130 and $140 million. Cash, cash equivalents and marketable securities will be used to finance future acquisitions, capital expenditures, expansion and additional repurchases under the stock repurchase 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 $32 million from May 31, 2005 to February 28, 2006, due to our continued investment in rental facilities and equipment. At the end of the third quarter of fiscal 2006, Cintas had two uniform rental facilities under construction.

During fiscal 2006, Cintas has executed its $500 million stock repurchase program that the Board of Directors authorized and announced in May 2005. No shares were repurchased in the three months ended February 28, 2006. For the nine months ended February 28, 2006, Cintas purchased approximately 2.9 million shares of Cintas stock at an average price of $39.48 per share for a total purchase price of approximately $114 million. From the inception of the stock repurchase program through March 31, 2006, Cintas has purchased approximately 4.4 million shares of Cintas stock at an average price of $39.53 per share for a total purchase price of approximately $172 million. The Board did not specify an expiration date for this program.

Following is information regarding Cintas’ long-term contractual obligations and other commitments outstanding as of February 28, 2006:

(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)     $ 636,009   $ 3,696   $ 401,762   $ 764   $ 229,787  
Capital lease obligations (2)    2,468    588    1,252    268    360  
Operating leases (3)    47,530    15,546    20,803    6,446    4,735  
Interest payments (4)    110,679    34,260    30,852    27,618    17,949  
Interest swap agreements (5)    --    --    --    --    --  
Unconditional purchase obligations    --    --    --    --    --  





Total contractual cash obligations   $ 796,686   $ 54,090   $ 454,669   $ 35,096   $ 252,831  





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 $29,092, two to three years would be $71,929 and four to five years would be $95,126. 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 related to the Omni acquisition.
(2) Capital lease obligations are classified as debt on the balance sheet.
(3) Operating leases consist primarily of building leases and synthetic leases on 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 2006, an additional 25 basis points in fiscal 2007, an additional 25 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
Other commercial commitments
Total
One year
or less

Two to
three
years

Four to
five years

After five
Years

Lines of credit (1)     $ 400,000   $ --   $ --   $ 400,000   $ --  
Standby letter of credit (2)    62,809    62,809    --   --    -- 
Guarantees    --    --    --   --    -- 
Standby repurchase obligations    --    --    --   --    -- 
Other commercial commitments    --    --    --   --    -- 





Total commercial commitments   $ 462,809   $ 62,809   --  $ 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 the synthetic leases on 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.

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. 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 applicants and 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. The court has ordered four of the named plaintiffs to arbitrate their claims. On April 27, 2005, the United States Equal Employment Opportunity Commission (EEOC) intervened in order to participate in this lawsuit. No filings or determination has been made in regard to the lawsuit 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. Several

28


related proceedings with similar allegations and seeking similar relief damages and fees are pending, including a class action lawsuit, Mirna E. Serrano, et al., v. Cintas Corporation, filed on May 10, 2004, in the United States District Court for the Eastern District of Michigan, Southern Division on behalf of female service sales representative job applicants at all Cintas locations in Michigan. On September 6, 2005, a Magistrate Judge granted Plaintiffs’ motion for leave to file a second amended complaint to expand the lawsuit to a nationwide claim. On November 15, 2005, the EEOC intervened in Serrano to participate in the lawsuit in continuation of an EEOC charge filed on April 17, 2000, by Mirna Serrano with the EEOC Detroit District office. On February 24, 2006, a motion to intervene in Serrano was filed by intervening Plaintiffs Colleen Grindle, et al., on behalf of a nationwide subclass and an Ohio subclass of female employees in Cintas’ Rental Division who were allegedly denied hire, promotion or transfer to a SSR position. On July 15, 2005, the EEOC terminated the processing of an administrative action filed on December 15, 2004, by James Morgan with the EEOC Washington, D.C. office and the California Department of Fair Employment and Housing alleging racial discrimination in compensation and training opportunities and issued a right to sue letter. On August 3, 2005, Morgan joined the Ramirez lawsuit. On November 2, 2005, the Court entered an order requiring Morgan to arbitrate all of his claims for monetary damages. 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 the Houston lawsuit to arbitrate all of their claims for monetary damages. If there is an adverse verdict or a negotiated settlement 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: (i) two charges filed on November 30, 2004, by an EEOC Commissioner with the EEOC Systemic Litigation Unit alleging failure to hire and assign females to production job positions, and failing to hire females, African-Americans and Hispanics into the Management Trainee program, (ii) a charge filed on January 24, 2005, by Jennifer Fargo 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, (iii) a charge filed on March 23, 2005, by Clifton Cooper on behalf of himself and a similarly situated class with the EEOC Systemic Litigation Unit alleging discriminatory pay and treatment due to race, (iv) a charge filed on April 25, 2005, by Melissa Schulz 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 and (v) a charge filed on June 10, 2005, by Mattie Cooper on behalf of herself and a similarly situated class with the EEOC Systemic Litigation Unit alleging discriminatory pay and treatment due to race and gender. The investigations of these allegations are pending and no determinations have been made. On November 2, 2005, the EEOC issued a dismissal and notice of rights letter and closed its file on the Lorelei Reynolds charge filed on March 28, 2005, with the EEOC Birmingham District office alleging discriminatory pay and treatment due to race and gender on behalf of herself and a similarly situated class.

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 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.

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Outlook

As we look forward to the remainder of fiscal 2006, our outlook remains positive, but guarded. Our revenue and profits continue to increase at healthy rates despite the negative impacts from hurricanes Katrina, Rita and Wilma as well as increased energy costs. While these events and circumstances will continue to have an impact on our results, we expect continued growth in revenues and profits in our businesses. Overall performance will be largely driven by external market conditions.

We expect our effective tax rate to be consistent with the year to date level for the remainder of the fiscal year.

Although no shares were repurchased in the third quarter, we will continue to evaluate the stock repurchase program authorized by the Board of Directors in fiscal 2005.

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.

We will continue to supplement our internal growth with strategic acquisitions when appropriate opportunities arise.

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 have the potential to impact our results.

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. This is unacceptable. 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.

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 64 of our most recent annual report. The exposure to variable interest rates has been mitigated through the termination of the interest rate swap agreements on September 1, 2005.

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.

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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 February 28, 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 February 28, 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 February 28, 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 53 and 54 of our most recent annual report.

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.

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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 9 to our financial statements, which is captioned “Litigation and Other Contingencies,” and refer you to that discussion 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.

  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 Ramirez; 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 in Serrano; 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 in Houston were ordered to arbitration; EEOC charge filed by an EEOC Commissioner on November 30, 2004 with the EEOC Systemic Litigation Unit; EEOC charge filed by Jennifer Fargo on January 24, 2005 with the Augusta Human Relations Commission and the EEOC Detroit District; EEOC charge filed by Clifton Cooper on March 23, 2005 with the EEOC Systemic Litigation Unit; EEOC 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 and EEOC charge filed by Mattie Cooper on June 10, 2005 with the EEOC Systemic Litigation Unit. A previously disclosed EEOC charge filed by James Morgan on December 15, 2004, with the EEOC Washington, D.C. office and the California Department of Fair Employment and Housing was terminated on July 15, 2005, and a right to sue letter was issued. On August 3, 2005, Morgan joined the Ramirez lawsuit. On November 2, 2005, the EEOC issued a dismissal and notice of rights letter and closed its file on a previously disclosed EEOC charge filed by Lorelei Reynolds on March 28, 2005, with the EEOC Birmingham District office.

  Breach of Fiduciary Duties: J. Lester Alexander, III vs. Cintas Corp., et al., United States Bankruptcy Court for the Middle District of Alabama, Eastern Division, October 25, 2004.

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       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 repurchase program at market prices. The Board did not specify an expiration date for this program.

Period
Total number of
shares purchased

Average price
paid per share

Total number of
shares purchased as
part of the
publicly announced
plan

Maximum approximate
dollar value of shares
that may yet be
purchased under the plan

                December 2005       --     --    4,360,934   $ 327,625,981  
                January 2006    --   --   4,360,934   $ 327,625,981  
                February 2006    --   --   4,360,934   $ 327,625,981  




                        Total    --   --   4,360,934   $ 327,625,981  





  During fiscal 2006, Cintas has executed its $500 million stock repurchase program that the Board of Directors authorized and announced in May 2005. No shares were repurchased in the three months ended February 28, 2006. For the nine months ended February 28, 2006, Cintas purchased approximately 2.9 million shares of Cintas stock at an average price of $39.48 per share for a total purchase price of approximately $114 million. As such, from the inception of the stock repurchase program through March 31, 2006, Cintas has purchased a total of approximately 4.4 million shares of Cintas stock at an average price of $39.53 per share for a total purchase price of approximately $172 million. The maximum approximate dollar value of shares that may yet be purchased under the plan as of March 31, 2006, is $327,625,981.

  During the third quarter of fiscal 2006, Cintas also acquired 14,446 shares as payment received from employees upon the exercise of options under the stock option plan.

      Item 5.    Other Information

  On January 24, 2006, Cintas declared an annual cash dividend of $.35 per share on outstanding common stock, a 9 percent increase over the dividends paid in the prior year. The dividend was paid on March 14, 2006, to shareholders of record as of February 7, 2006.

      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

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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.




Date:   April 7, 2006
CINTAS CORPORATION
   (Registrant)


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

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