CINTAS CORP - Quarter Report: 2010 November (Form 10-Q)

Table of Contents

United States

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended November 30, 2010

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

For the transition period from to

Commission file number 0-11399

CINTAS CORPORATION

(Exact name of Registrant as specified in its charter)

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

6800 CINTAS BOULEVARD

P.O. BOX 625737

CINCINNATI, OHIO 45262-5737

(Address of principal executive offices)(Zip Code)

(513) 459-1200

(Registrant’s telephone number, including area code)

Indicate by checkmark 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 o

Indicate by a checkmark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x No o

Indicate by checkmark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer x		Accelerated Filer o

Non-Accelerated Filer o		Smaller Reporting Company o
(Do not check if a smaller reporting company)

Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o 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 December 31, 2010
Common Stock, no par value		145,301,073

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CINTAS CORPORATION

TABLE OF CONTENTS

			Page No.
Part I.	Financial Information

Item 1.		Financial Statements.

		Consolidated Condensed Statements of Income — Three Months and Six Months Ended November 30, 2010 and 2009	3

		Consolidated Condensed Balance Sheets — November 30, 2010 and May 31, 2010	4

		Consolidated Condensed Statements of Cash Flows — Six Months Ended November 30, 2010 and 2009	5

		Notes to Consolidated Condensed Financial Statements	6

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations.	25

Item 3.		Quantitative and Qualitative Disclosures About Market Risk.	35

Item 4.		Controls and Procedures.	36

Part II.	Other Information

Item 1.		Legal Proceedings.	37

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds.	37

Item 5.		Other Information.	37

Item 6.		Exhibits.	37

Signatures			38

Exhibits

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CINTAS CORPORATION

ITEM 1. FINANCIAL STATEMENTS.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)

(In thousands except per share data)

	Three Months Ended						Six Months Ended
	November 30,						November 30,
	2010			2009			2010			2009

Revenue:
Rental uniforms and ancillary products	$	657,847		$	643,597		$	1,315,411		$	1,299,235
Other services	278,719			240,912			545,059			476,843
	936,566			884,509			1,860,470			1,776,078

Costs and expenses:
Cost of rental uniforms and ancillary products	377,471			363,728			748,986			726,657
Cost of other services	168,447			150,934			327,165			296,779
Selling and administrative expenses	288,304			259,406			581,729			523,833
Legal settlements, net of insurance proceeds	—			4,052			—			23,529

Operating income	102,344			106,389			202,590			205,280

Interest income	(394		)	(314		)	(972		)	(673		)
Interest expense	12,161			12,579			24,435			24,617

Income before income taxes	90,577			94,124			179,127			181,336

Income taxes	34,711			36,948			61,984			70,176

Net income	$	55,866		$	57,176		$	117,143		$	111,160

Basic earnings per share	$	0.38		$	0.37		$	0.78		$	0.72

Diluted earnings per share	$	0.38		$	0.37		$	0.78		$	0.72

Dividends declared per share	$	0.49		$	—		$	0.49		$	—

See accompanying notes.

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CINTAS CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands except share data)

	November 30, 2010			May 31, 2010
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	260,953		$	411,281
Marketable securities	23,624			154,806
Accounts receivable, net	402,369			366,301
Inventories, net	208,380			169,484
Uniforms and other rental items in service	364,556			332,106
Income taxes, current	13,765			15,691
Deferred income tax asset	53,346			52,415
Prepaid expenses and other	27,853			22,860

Total current assets	1,354,846			1,524,944

Property and equipment, at cost, net	923,535			894,522

Goodwill	1,435,352			1,356,925
Service contracts, net	104,751			103,445
Other assets, net	109,811			89,900

	$	3,928,295		$	3,969,736

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	92,206		$	71,747
Accrued compensation and related liabilities	53,563			66,924
Accrued liabilities	321,209			244,402
Long-term debt due within one year	1,817			609

Total current liabilities	468,795			383,682

Long-term liabilities:
Long-term debt due after one year	785,222			785,444
Deferred income taxes	145,079			150,560
Accrued liabilities	134,086			116,021

Total long-term liabilities	1,064,387			1,052,025

Shareholders’ equity:
Preferred stock, no par value:
100,000 shares authorized, none outstanding	—			—
Common stock, no par value:
425,000,000 shares authorized,
FY 2011: 173,341,299 issued and 145,301,073 outstanding
FY 2010: 173,207,493 issued and 152,869,848 outstanding	135,254			132,058
Paid-in capital	87,219			84,616
Retained earnings	3,125,411			3,080,079
Treasury stock:
FY 2011: 28,040,226 shares
FY 2010: 20,337,645 shares	(1,002,064		)	(798,857		)
Other accumulated comprehensive income	49,293			36,133
Total shareholders’ equity	2,395,113			2,534,029
	$	3,928,295		$	3,969,736

See accompanying notes.

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CINTAS CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Six Months Ended
	November 30, 2010			November 30, 2009
Cash flows from operating activities:

Net income	$	117,143		$	111,160
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	74,563			75,899
Amortization of deferred charges	21,182			20,568
Stock-based compensation	5,799			7,571
Deferred income taxes	(6,277		)	4,777
Change in current assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net	(27,774		)	(12,843		)
Inventories, net	(38,838		)	34,874
Uniforms and other rental items in service	(30,639		)	5,495
Prepaid expenses and other	(4,526		)	(568		)
Accounts payable	19,765			6,914
Accrued compensation and related liabilities	(13,458		)	(1,646		)
Accrued liabilities	(10,066		)	25,246
Income taxes payable	2,355			16,728
Net cash provided by operating activities	109,229			294,175

Cash flows from investing activities:

Capital expenditures	(88,134		)	(48,092		)
Proceeds from redemption of marketable securities	135,283			25,852
Purchase of marketable securities and investments	(12,472		)	(53,060		)
Acquisitions of businesses, net of cash acquired	(88,799		)	(6,601		)
Other, net	(6,858		)	1,053
Net cash used in investing activities	(60,980		)	(80,848		)

Cash flows from financing activities:

Proceeds from issuance of debt	1,781			—
Repayment of debt	(794		)	(321		)
Repurchase of common stock	(203,207		)	(959		)
Other, net	1,699			(717		)
Net cash used in financing activities	(200,521		)	(1,997		)

Effect of exchange rate changes on cash and cash equivalents	1,944			939

Net (decrease) increase in cash and cash equivalents	(150,328		)	212,269

Cash and cash equivalents at beginning of period	411,281			129,745

Cash and cash equivalents at end of period	$	260,953		$	342,014

See accompanying notes.

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CINTAS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The consolidated condensed financial statements of Cintas Corporation (Cintas, the Company, we, us or our) included herein have been prepared by Cintas, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) 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 Form 10-K for the fiscal year ended May 31, 2010. A summary of our significant accounting policies is presented beginning on page 39 of that report. There have been no material changes in the accounting policies followed by Cintas during the current fiscal year.

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

2. Fair Value Measurements

Financial Accounting Standards Board Accounting Standard Codification Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. It also establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1 —	Quoted prices in active markets for identical assets or liabilities.

Level 2 —	Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 —	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Cintas’ assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

All financial instruments that are measured at fair value on a recurring basis (at least annually) have been segregated into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the consolidated condensed balance sheet date.

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CINTAS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

These financial instruments measured at fair value on a recurring basis are summarized below (in thousands):

	As of November 30, 2010
	Level 1		Level 2		Level 3		Fair Value

Cash and cash equivalents	$	260,953	$	—	$	—	$	260,953
Marketable securities:
U.S. municipal bonds	—		941		—		941
Canadian treasury securities	22,184		499		—		22,683
Accounts receivable, net	—		19		—		19
Total assets at fair value	$	283,137	$	1,459	$	—	$	284,596

Current Accrued Liabilities	$	—	$	12	$	—	$	12
Total Liabilities	$	—	$	12	$	—	$	12

	As of May 31, 2010
	Level 1		Level 2		Level 3		Fair Value

Cash and cash equivalents	$	411,281	$	—	$	—	$	411,281
Marketable securities:
U.S. municipal bonds	—		21,954		—		21,954
Canadian treasury securities	97,791		35,061		—		132,852
Accounts receivable, net	—		450		—		450
Total assets at fair value	$	509,072	$	57,465	$	—	$	566,537

Current accrued liabilities	$	—	$	64	$	—	$	64
Total liabilities at fair value	$	—	$	64	$	—	$	64

Cintas’ cash and cash equivalents and marketable securities are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. Cintas does not adjust the quoted market price for such financial instruments.

The funds invested in Canadian marketable securities are not expected to be repatriated, but instead are expected to be invested indefinitely in foreign subsidiaries. Interest, realized gains and losses and declines in value determined to be other than temporary on available-for-sale securities are included in interest income or expense. The cost of the securities sold is based on the specific identification method. The amortized cost basis of the marketable securities as of November 30, 2010 and May 31, 2010, is $23.6 million and $154.9 million, respectively. All contractual maturities are due within one year.

Accounts receivable, net and current accrued liabilities include foreign currency average rate options. The fair value of Cintas’ foreign currency average rate options are based on similar exchange traded derivatives and are, therefore, included within Level 2 of the fair value hierarchy.

The methods described above may produce a fair value that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while Cintas believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the consolidated condensed balance sheet date.

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CINTAS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

3. Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share using the two-class method for amounts attributable to Cintas’ common shares (in thousands except per share data):

	Three Months Ended					Six Months Ended
	November 30,					November 30,
	2010			2009		2010		2009

Basic Earnings per Share	$	55,866		$	57,176	$	117,143	$	111,160
Net income

Less dividends to:
Common shares	$	71,197		$	—	$	71,197	$	—
Unvested shares	683			—		683		—
Total dividends	$	71,880		$	—	$	71,880	$	—

Undistributed net (loss) income	$	(16,014	)	$	57,176	$	45,263	$	111,160

Less: net (loss) income allocated to participating unvested securities	(74		)	226		204		362

Net (loss) income available to common shareholders	$	(15,940	)	$	56,950	$	45,059	$	110,798

Basic weighted average common shares outstanding	145,511			152,866		148,856		152,847

Basic earnings per share:
Common shares — distributed earnings	$	0.49		$	0.00	$	0.49	$	0.00
Common shares — undistributed earnings	(0.11		)	0.37		0.29		0.72
Total common shares	$	0.38		$	0.37	$	0.78	$	0.72

Unvested shares - distributed earnings	$	0.49		$	0.00	$	0.49	$	0.00
Unvested shares - undistributed earnings	(0.11		)	0.37		0.29		0.72
Total unvested shares	$	0.38		$	0.37	$	0.78	$	0.72

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CINTAS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(In thousands except per share data)

	Three Months Ended					Six Months Ended
	November 30,					November 30,
	2010			2009		2010		2009

Diluted Earnings per Share
Net income	$	55,866		$	57,176	$	117,143	$	111,160

Less dividends to:
Common shares	$	71,197		$	—	$	71,197	$	—
Unvested shares	683			—		683		—
Total dividends	$	71,880		$	—	$	71,880	$	—

Undistributed net (loss) income	$	(16,014	)	$	57,176	$	45,263	$	111,160

Less: net (loss) income allocated to participating unvested securities	(74		)	226		204		362

Net (loss) income available to common shareholders	$	(15,940	)	$	56,950	$	45,059	$	110,798

Basic weighted average common shares outstanding	145,511			152,866		148,856		152,847

Effect of dilutive securities — employee stock options	—			—		—		—

Diluted weighted average common shares outstanding	145,511			152,866		148,856		152,847

Diluted earnings per share:
Common shares — distributed earnings	$	0.49		$	0.00	$	0.48	$	0.00
Common shares — undistributed earnings	(0.11		)	0.37		0.29		0.72
Total common shares	$	0.38		$	0.37	$	0.78	$	0.72

Unvested shares - distributed earnings	$	0.48		$	0.00	$	0.48	$	0.00
Unvested shares - undistributed earnings	(0.11		)	0.37		0.29		0.72
Total unvested shares	$	0.38		$	0.37	$	0.78	$	0.72

During the six months ended November 30, 2010, Cintas purchased 7,656,193 shares of Cintas common stock under a share buyback program authorized by the Board of Directors on May 2, 2005, and expanded in July 2006.

For the three months ended November 30, 2010 and 2009, 3.5 million and 3.6 million options granted to purchase shares of Cintas common stock were excluded from the computation of diluted earnings per share. For the six months ended November 30, 2010 and 2009, 3.9 million and 4.4 million options granted to purchase shares of Cintas common stock were excluded from the computation of diluted earnings per share. The exercise prices of these options were greater than the average market price of the common shares (anti-dilutive).

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CINTAS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

4. Goodwill, Service Contracts and Other Assets

Changes in the carrying amount of goodwill and service contracts for the six months ended November 30, 2010, by operating segment, are as follows (in thousands):

	Rental				First Aid,
	Uniforms &		Uniform		Safety &
	Ancillary		Direct		Fire		Document
	Products		Sales		Protection		Management		Total
Goodwill
Balance as of June 1, 2010	$	861,117	$	23,928	$	181,967	$	289,913	$	1,356,925

Goodwill acquired	23,443		—		17,997		34,904		76,344

Foreign currency translation	577		30		—		1,476		2,083

Balance as of November 30, 2010	$	885,137	$	23,958	$	199,964	$	326,293	$	1,435,352

	Rental					First Aid,
	Uniforms &			Uniform		Safety &
	Ancillary			Direct		Fire			Document
	Products			Sales		Protection			Management			Total
Service Contracts
Balance as of June 1, 2010	$	48,711		$	—	$	35,599		$	19,135		$	103,445

Service contracts acquired	3,664			—		7,327			6,038			17,029

Service contracts amortization	(9,363		)	—		(3,376		)	(4,026		)	(16,765		)

Foreign currency translation	809			—		—			233			1,042

Balance as of November 30, 2010	$	43,821		$	—	$	39,550		$	21,380		$	104,751

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CINTAS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Information regarding Cintas’ service contracts and other assets is as follows (in thousands):

	As of November 30, 2010
	Carrying		Accumulated
	Amount		Amortization		Net

Service contracts	$	364,653	$	259,902	$	104,751
Noncompete and consulting agreements	$	73,770	$	58,701	$	15,069
Investments(1)	80,302		—		80,302
Other	19,110		4,670		14,440

Total	$	173,182	$	63,371	$	109,811

	As of May 31, 2010
	Carrying		Accumulated
	Amount		Amortization		Net

Service contracts	$	346,569	$	243,124	$	103,445
Noncompete and consulting agreements	$	68,435	$	53,425	$	15,010
Investments(1)	68,616		—		68,616
Other	10,516		4,242		6,274

Total	$	147,567	$	57,667	$	89,900

(1) Investments at November 30, 2010, include the cash surrender value of insurance policies of $46.0 million, equity method investments of $30.0 million and cost method investments of $4.3 million. Investments at May 31, 2010, include the cash surrender value of insurance policies of $34.3 million, equity method investments of $30.0 million and cost method investments of $4.3 million.

Amortization expense was $21.2 million and $20.6 million for the six months ended November 30, 2010 and 2009, respectively. Estimated amortization expense, excluding any future acquisitions, for each of the next five years is $40.0 million, $33.7 million, $17.1 million, $13.9 million and $11.2 million, respectively.

Investments recorded using the cost method are evaluated for impairment on an annual basis or when indicators of impairment are identified. For the six months ended November 30, 2010 and 2009, no losses due to impairment were recorded.

5. Debt, Derivatives and Hedging Activities

As of August 31, 2010, Cintas had a commercial paper program with availability of $600.0 million that was fully supported by a backup revolving credit facility through a credit agreement with its banking group. The revolving credit facility had an expiration date of February, 2011. This revolving credit facility was renewed on September 27, 2010, with reduced availability of $300.0 million, an accordion feature that allows for a maximum borrowing capacity of $450.0 million and an expiration date of September 26, 2014. As of November 30, 2010 and May 31, 2010, Cintas had no commercial paper outstanding.

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CINTAS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Cintas used interest rate lock agreements to hedge against movements in the treasury rates at the time Cintas issued its senior notes in fiscal 2002, fiscal 2007 and fiscal 2008. The amortization of the interest rate lock agreements resulted in an increase to other comprehensive income of $0.2 million for both of the three months ended November 30, 2010 and November 30, 2009, respectively, and $0.4 million for both of the six months ended November 30, 2010 and November 30, 2009, respectively.

To hedge the exposure of movements in the foreign currency rates, Cintas at times uses foreign currency hedges. These hedges would reduce the impact on cash flows from movements in the foreign currency exchange rates. Examples of foreign currency hedge instruments that Cintas may use are average rate options and forward contracts. Cintas had average rate options included in accounts receivable, net of less than $0.1 million and $0.5 million as of November 30, 2010 and May 31, 2010, respectively. Cintas also had average rate options included in current accrued liabilities of less than $0.1 million and $0.1 million as of November 30, 2010 and May 31, 2010, respectively. The average rate options that settled during the second quarter decreased foreign currency exchange costs by less than $0.1 million during the three months ended November 30, 2010, and increased foreign currency exchange costs by $0.1 million during the three months ended November 30, 2009. The average rate options decreased foreign currency exchange costs by less than $0.1 million during the six months ended November 30, 2010, and increased foreign currency exchange costs by $0.1 million during the six months ended November 30, 2009.

Cintas has certain 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. If a default of a significant covenant were to occur, the default could result in an acceleration of the maturity of the indebtedness, impair liquidity and limit the ability to raise future capital. As of November 30, 2010, Cintas was in compliance with all significant debt covenants.

6. Income Taxes

In the normal course of business, Cintas provides for uncertain tax positions and the related interest and adjusts its unrecognized tax benefits and accrued interest accordingly. During the three months ended November 30, 2010, unrecognized tax benefits increased by approximately $1.2 million and accrued interest increased by approximately $0.9 million due to the accrual of additional tax and interest. During the six months ended November 30, 2010, unrecognized tax benefits increased by approximately $2.5 million and accrued interest decreased by approximately $7.9 million due to the expiration of certain statutes.

All U.S. federal income tax returns are closed to audit through fiscal 2008. Cintas is currently in advanced stages of audits in certain foreign jurisdictions and certain domestic states. The years under audit cover fiscal years back to 2000. Based on the resolution of the various audits, it is reasonably possible that the balance of unrecognized tax benefits could decrease by $4.3 million for the fiscal year ending May 31, 2011.

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CINTAS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

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 income. For Cintas, the only components of total comprehensive income are the change in cumulative foreign currency translation adjustments, the change in the fair value of derivatives, the amortization of interest rate lock agreements and the change in the fair value of available-for-sale securities. The components of comprehensive income for the three and six month periods ended November 30, 2010 and November 30, 2009, are as follows (in thousands):

	Three Months Ended						Six Months Ended
	November 30,						November 30,
	2010			2009			2010			2009

Net income	$	55,866		$	57,176		$	117,143		$	111,160

Other comprehensive income:
Foreign currency translation adjustment	10,025			9,797			13,374			10,526
Change in fair value of derivatives*	(19		)	(92		)	(625		)	(23		)
Amortization of interest rate lock agreements	191			191			383			383
Change in fair value of available-for-sale securities**	1			31			28			18
Comprehensive income	$	66,064		$	67,103		$	130,303		$	122,064

* Net of less than $0.1 million of tax benefit for both the three months ended November 30, 2010 and November 30, 2009. Net of $0.4 million of tax benefit and net of less than $0.1 million of tax benefit for the six months ending November 30, 2010 and November 30, 2009, respectively.

** Net of less than $0.1 million of tax expense for both the three months ended November 30, 2010 and November 30, 2009. Net of less than $0.1 million of tax expense for the six months ended November 30, 2010 and November 30, 2009, respectively.

8. Litigation and Other Contingencies

Cintas is subject to legal proceedings, insurance receipts, legal settlements 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 operation 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, Mirna E. Serrano, et al. v. Cintas Corporation (Serrano), filed on May 10, 2004, and pending in the United States District Court, Eastern District of Michigan, Southern Division. The Serrano plaintiffs alleged that Cintas discriminated against women in hiring into various service sales representative positions across all divisions of Cintas. On November 15, 2005, the Equal Employment Opportunity Commission (EEOC) intervened in the Serrano lawsuit. The Serrano plaintiffs seek injunctive relief, compensatory damages, punitive damages, attorneys’ fees and

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CINTAS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

other remedies. On October 27, 2008, the United States District Court in the Eastern District of Michigan granted summary judgment in favor of Cintas limiting the scope of the putative class in the Serrano lawsuit to female applicants for service sales representative positions at Cintas locations within the state of Michigan. Consequently, all claims brought by female applicants for service sales representative positions outside of the state of Michigan were dismissed. Similarly, any claims brought by the EEOC on behalf of similarly situated female applicants outside of the state of Michigan have also been dismissed from the Serrano lawsuit. Cintas is a defendant in another purported class action lawsuit, Blanca Nelly Avalos, et al. v. Cintas Corporation (Avalos), which was filed in the United States District Court, Eastern District of Michigan, Southern Division. The Avalos plaintiffs alleged that Cintas discriminated against women, African-Americans and Hispanics in hiring into various service sales representative positions in Cintas’ Rental division only throughout the United States. The Avalos plaintiffs sought injunctive relief, compensatory damages, punitive damages, attorneys’ fees and other remedies. The claims in Avalos originally were brought in the lawsuit captioned Robert Ramirez, et al. v. Cintas Corporation (Ramirez), filed on January 20, 2004, in the United States District Court, Northern District of California, San Francisco Division. On May 11, 2006, the Ramirez and Avalos African-American, Hispanic and female failure to hire into service sales representative positions claims and the EEOC’s intervention were consolidated for pretrial purposes with the Serrano case and transferred to the United States District Court for the Eastern District of Michigan, Southern Division. The consolidated case was known as Mirna E. Serrano/Blanca Nelly Avalos, et al. v. Cintas Corporation (Serrano/Avalos). On March 31, 2009, the United States District Court, Eastern District of Michigan, Southern Division entered an order denying class certification to all plaintiffs in the Serrano/Avalos lawsuits. Following denial of class certification, the Court permitted the individual Avalos and Serrano plaintiffs to proceed separately. In the Avalos case, the court dismissed the remaining claims of the individual plaintiffs who remained in that case after the denial of class certification. On May 11, 2010, Plaintiff Tanesha Davis, on behalf of all similarly situated plaintiffs in the Avalos case, filed a notice of appeal of the District Court’s summary judgment order in the United States Court of Appeals for the Sixth Circuit. The Appellate Court has made no determination regarding the merits of Davis’ appeal. In September 2010, the Court in Serrano dismissed all private individual claims and all claims of the EEOC and the 13 individuals it claimed to represent. The time for appeal has not yet expired on these Serrano dismissals, but, as of the date of this disclosure, no appeal has been taken.

The litigation discussed above, if decided or settled adversely to Cintas, may, individually or in the aggregate, result in liability material to Cintas’ consolidated financial condition or results of operation and could increase costs of operations on an ongoing basis. Any estimated liability relating to these proceedings is not determinable at this time. 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 interest of Cintas’ shareholders.

Cintas is a defendant in a purported class action lawsuit, Paul Veliz, et al. v. Cintas Corporation (Veliz), 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 April 5, 2004 and February 14, 2006, the Court stayed the claims of all plaintiffs with valid arbitration agreements pending arbitration of those claims. Claims made in the Veliz action, therefore, are pending before the United States District Court, Northern District of California and Judge Bruce Meyerson (Ret.), an Arbitrator selected by the parties. On August 5, 2009, the parties in the Veliz action reached a settlement in principle. When the settlement is fully documented and approved by the Court, the settlement will resolve all claims now pending or that could have been brought relating to the subject matter of the case before the Court and the Arbitrator. The principal terms of the settlement provide for an aggregate cash payment of approximately $24.0 million, which is accrued in current accrued liabilities at November 30, 2010. The pre-tax impact, net of insurance proceeds, was $19.5 million.

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CINTAS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

During the second quarter of fiscal 2010, Cintas had legal settlements that totaled $4.1 million, net of insurance proceeds. None of these settlements were significant individually. These settlements included litigation related to multiple subjects including employment practices and insurance coverage.

9. Segment Information

Cintas classifies its businesses into four operating segments. The Rental Uniforms and Ancillary Products operating segment consists of the rental and servicing of uniforms and other garments including flame resistant clothing, mats, mops and shop towels and other ancillary items. In addition to these rental items, restroom cleaning services and supplies and tile and carpet cleaning services are also provided within this operating segment. The Uniform Direct Sales operating segment consists of the direct sale of uniforms and related items and branded promotional products. The First Aid, Safety and Fire Protection Services operating segment consists of first aid, safety and fire protection products and services. The Document Management Services operating segment consists of document destruction, document imaging and document retention services.

Cintas evaluates the performance of each operating segment based on several factors of which the primary financial measures are operating segment revenue and income before income taxes. The accounting policies of the operating segments are the same as those described in Note 1 entitled Basis of Presentation. Information related to the operations of Cintas’ operating segments is set forth below (in thousands):

	Rental				First Aid,
	Uniforms &		Uniform		Safety &
	Ancillary		Direct		Fire		Document
	Products		Sales		Protection		Management		Corporate			Total
For the three months ended November 30, 2010
Revenue	$	657,847	$	108,789	$	93,315	$	76,615	$	—		$	936,566
Income (loss) before income taxes	$	78,112	$	13,279	$	5,107	$	5,846	$	(11,767	)	$	90,577

For the three months ended November 30, 2009
Revenue	$	643,597	$	99,434	$	81,557	$	59,921	$	—		$	884,509
Income (loss) before income taxes	$	91,881	$	10,475	$	3,018	$	5,067	$	(16,317	)	$	94,124

As of and for the six months ended November 30, 2010
Revenue	$	1,315,411	$	207,569	$	186,849	$	150,641	$	—		$	1,860,470
Income (loss) before income taxes	$	156,330	$	23,126	$	8,885	$	14,249	$	(23,463	)	$	179,127
Total assets	$	2,434,313	$	262,810	$	360,908	$	585,687	$	284,577		$	3,928,295

As of and for the six months ended November 30, 2009
Revenue	$	1,299,235	$	188,735	$	171,558	$	116,550	$	—		$	1,776,078
Income (loss) before income taxes	$	194,334	$	18,564	$	8,805	$	7,106	$	(47,473	)	$	181,336
Total assets	$	2,475,877	$	141,920	$	311,870	$	476,441	$	480,240		$	3,886,348

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CINTAS CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

10. Supplemental Guarantor Information

Cintas Corporation No. 2 (Corp. 2) is the indirectly, wholly-owned principal operating subsidiary of Cintas. Corp. 2 is the issuer of the $775.0 million of long-term notes, which are unconditionally guaranteed, jointly and severally, by Cintas and its wholly-owned, direct and indirect domestic subsidiaries.

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’ consolidated financial statements. The condensed consolidating financial statements should be read in conjunction with the consolidated 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 on the following pages.

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CONDENSED CONSOLIDATING INCOME STATEMENT

THREE MONTHS ENDED NOVEMBER 30, 2010

(In thousands)

															Cintas
	Cintas					Subsidiary			Non-						Corporation
	Corporation		Corp. 2			Guarantors			Guarantors			Eliminations			Consolidated
Revenue:
Rental uniforms and ancillary products	$	—	$	505,557		$	131,978		$	47,427		$	(27,115	)	$	657,847
Other services	—		341,415			136,664			28,737			(228,097		)	278,719
Equity in net income of affiliates	55,866		—			—			—			(55,866		)	—
	55,866		846,972			268,642			76,164			(311,078		)	936,566

Costs and expenses (income):
Cost of rental uniforms and ancillary products	—		329,017			76,972			32,738			(61,256		)	377,471
Cost of other services	—		225,797			115,067			17,317			(189,734		)	168,447
Selling and administrative expenses	—		251,458			16,374			21,860			(1,388		)	288,304

Operating income	55,866		40,700			60,229			4,249			(58,700		)	102,344

Interest income	—		(159		)	(189		)	(46		)	—			(394		)
Interest expense (income)	—		12,813			(668		)	16			—			12,161

Income before income taxes	55,866		28,046			61,086			4,279			(58,700		)	90,577
Income taxes	—		9,661			23,843			1,209			(2		)	34,711
Net income	$	55,866	$	18,385		$	37,243		$	3,070		$	(58,698	)	$	55,866

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CONDENSED CONSOLIDATING INCOME STATEMENT

THREE MONTHS ENDED NOVEMBER 30, 2009

(In thousands)

															Cintas
	Cintas					Subsidiary			Non-						Corporation
	Corporation		Corp. 2			Guarantors			Guarantors			Eliminations			Consolidated
Revenue:
Rental uniforms and ancillary products	$	—	$	494,833		$	130,484		$	45,283		$	(27,003	)	$	643,597
Other services	—		302,077			81,362			16,173			(158,700		)	240,912
Equity in net income of affiliates	57,176		—			—			—			(57,176		)	—
	57,176		796,910			211,846			61,456			(242,879		)	884,509

Costs and expenses (income):
Cost of rental uniforms and ancillary products	—		336,163			79,385			27,500			(79,320		)	363,728
Cost of other services	—		177,729			69,720			10,545			(107,060		)	150,934
Selling and administrative expenses	—		346,099			(101,836		)	15,405			(262		)	259,406
Legal settlements, net of insurance proceeds	—		—			4,052			—			—			4,052

Operating income	57,176		(63,081		)	160,525			8,006			(56,237		)	106,389

Interest income	—		—			(248		)	(66		)	—			(314		)
Interest expense (income)	—		12,763			(200		)	16			—			12,579

Income before income taxes	57,176		(75,844		)	160,973			8,056			(56,237		)	94,124
Income taxes	—		(35,690		)	69,889			2,749			—			36,948
Net income	$	57,176	$	(40,154	)	$	91,084		$	5,307		$	(56,237	)	$	57,176

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CONDENSED CONSOLIDATING INCOME STATEMENT

SIX MONTHS ENDED NOVEMBER 30, 2010

(In thousands)

															Cintas
	Cintas					Subsidiary			Non-						Corporation
	Corporation		Corp. 2			Guarantors			Guarantors			Eliminations			Consolidated
Revenue:
Rental uniforms and ancillary products	$	—	$	1,012,908		$	264,212		$	93,807		$	(55,516	)	$	1,315,411
Other services	—		672,360			258,574			51,517			(437,392		)	545,059
Equity in net income of affiliates	117,143		—			—			—			(117,143		)	—
	117,143		1,685,268			522,786			145,324			(610,051		)	1,860,470

Costs and expenses (income):
Cost of rental uniforms and ancillary products	—		652,149			156,553			62,558			(122,274		)	748,986
Cost of other services	—		439,511			217,859			31,517			(361,722		)	327,165
Selling and administrative expenses	—		525,667			16,752			41,847			(2,537		)	581,729

Operating income	117,143		67,941			131,622			9,402			(123,518		)	202,590

Interest income	—		(354		)	(470		)	(100,179		)	100,031			(972		)
Interest expense (income)	—		25,411			(990		)	14			—			24,435

Income before income taxes	117,143		42,884			133,082			109,567			(223,549		)	179,127
Income taxes	—		13,170			40,870			7,941			3			61,984
Net income	$	117,143	$	29,714		$	92,212		$	101,626		$	(223,552	)	$	117,143

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CONDENSED CONSOLIDATING INCOME STATEMENT

SIX MONTHS ENDED NOVEMBER 30, 2009

(In thousands)

															Cintas
	Cintas					Subsidiary			Non-						Corporation
	Corporation		Corp. 2			Guarantors			Guarantors			Eliminations			Consolidated
Revenue:
Rental uniforms and ancillary products	$	—	$	998,683		$	264,704		$	88,453		$	(52,605	)	$	1,299,235
Other services	—		598,844			154,823			30,380			(307,204		)	476,843
Equity in net income of affiliates	111,160		—			—			—			(111,160		)	—
	111,160		1,597,527			419,527			118,833			(470,969		)	1,776,078

Costs and expenses (income):
Cost of rental uniforms and ancillary products	—		626,402			159,671			53,323			(112,739		)	726,657
Cost of other services	—		395,888			133,523			19,118			(251,750		)	296,779
Selling and administrative expenses	—		597,128			(104,762		)	30,342			1,125			523,833
Legal settlements, net of insurance proceeds	—		—			23,529			—			—			23,529

Operating income	111,160		(21,891		)	207,566			16,050			(107,605		)	205,280

Interest income	—		—			(531		)	(142		)	—			(673		)
Interest expense (income)	—		25,482			(882		)	17			—			24,617

Income before income taxes	111,160		(47,373		)	208,979			16,175			(107,605		)	181,336
Income taxes	—		(26,014		)	90,747			5,443			—			70,176
Net income	$	111,160	$	(21,359	)	$	118,232		$	10,732		$	(107,605	)	$	111,160

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CONDENSED CONSOLIDATING BALANCE SHEET

AS OF NOVEMBER 30, 2010

(In thousands)

																Cintas
	Cintas						Subsidiary			Non-						Corporation
	Corporation			Corp. 2			Guarantors			Guarantors			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—		$	42,387		$	90,859		$	127,707		$	—		$	260,953
Marketable securities	—			—			941			22,683			—			23,624
Accounts receivable, net	—			288,898			78,663			34,808			—			402,369
Inventories, net	—			172,010			27,874			10,907			(2,411		)	208,380
Uniforms and other rental items in service	—			282,998			77,440			30,000			(25,882		)	364,556
Income taxes, current (payable)	—			(4,254		)	486			17,533			—			13,765
Deferred income tax asset (liability)	—			—			55,723			(2,377		)	—			53,346
Prepaid expenses and other	—			5,449			18,458			3,946			—			27,853
Total current assets	—			787,488			350,444			245,207			(28,293		)	1,354,846

Property and equipment, at cost, net	—			583,900			262,086			77,549			—			923,535

Goodwill	—			—			1,356,331			79,021			—			1,435,352
Service contracts, net	—			97,415			839			6,497			—			104,751
Other assets, net	1,880,573			1,630,702			821,743			363,412			(4,586,619		)	109,811
	$	1,880,573		$	3,099,505		$	2,791,443		$	771,686		$	(4,614,912	)	$	3,928,295

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts (receivable) payable	$	(465,247	)	$	194,410		$	327,244		$	(2,224	)	$	38,023		$	92,206
Accrued compensation and related liabilities	—			37,701			12,579			3,283			—			53,563
Accrued liabilities	—			61,786			224,525			34,898			—			321,209
Long-term debt due within one year	—			843			974			—			—			1,817
Total current liabilities	(465,247		)	294,740			565,322			35,957			38,023			468,795

Long-term liabilities:
Long-term debt due after one year	—			795,008			(9,786		)	—			—			785,222
Deferred income taxes	—			—			139,911			5,168			—			145,079
Accrued liabilities	—			—			133,473			613			—			134,086
Total long-term liabilities	—			795,008			263,598			5,781			—			1,064,387

Total shareholders’ equity	2,345,820			2,009,757			1,962,523			729,948			(4,652,935		)	2,395,113
	$	1,880,573		$	3,099,505		$	2,791,443		$	771,686		$	(4,614,912	)	$	3,928,295

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CONDENSED CONSOLIDATING BALANCE SHEET

AS OF MAY 31, 2010

(In thousands)

	Cintas Corporation			Corp. 2		Subsidiary Guarantors			Non-Guarantors			Eliminations			Cintas Corporation Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—		$	34,905	$	339,702		$	36,674		$	—		$	411,281
Marketable securities	—			—		21,954			132,852			—			154,806
Accounts receivable, net	—			265,594		74,256			26,451			—			366,301
Inventories, net	—			144,826		16,857			9,420			(1,619		)	169,484
Uniforms and other rental items in service	—			256,398		70,489			25,514			(20,295		)	332,106
Income taxes, current (payable)	—			5,306		(591		)	10,976			—			15,691
Deferred tax asset (liability)	—			—		54,474			(2,059		)	—			52,415
Prepaid expenses and other	—			5,565		15,808			1,487			—			22,860
Total current assets	—			712,594		592,949			241,315			(21,914		)	1,524,944

Property and equipment, at cost, net	—			591,040		240,462			63,020			—			894,522
Goodwill	—			—		1,310,675			46,250			—			1,356,925
Service contracts, net	—			98,335		880			4,230			—			103,445
Other assets, net	2,032,649			1,608,188		814,657			322,707			(4,688,301		)	89,900
	$	2,032,649		$	3,010,157	$	2,959,623		$	677,522		$	(4,710,215	)	$	3,969,736

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts (receivable) payable	$	(465,247	)	$	164,131	$	343,454		$	(8,614	)	$	38,023		$	71,747
Accrued compensation and related liabilities	—			42,181		21,730			3,013			—			66,924
Accrued liabilities	—			53,432		178,698			13,092			(820		)	244,402
Long-term debt due within one year	—			805		(196		)	—			—			609
Total current liabilities	(465,247		)	260,549		543,686			7,491			37,203			383,682

Long-term liabilities:
Long-term debt due after one year	—			795,541		(10,917		)	—			820			785,444
Deferred income taxes	—			—		145,563			4,997			—			150,560
Accrued liabilities	—			—		115,549			472			—			116,021
Total long-term liabilities	—			795,541		250,195			5,469			820			1,052,025
Total shareholders’ equity	2,497,896			1,954,067		2,165,742			664,562			(4,748,238		)	2,534,029
	$	2,032,649		$	3,010,157	$	2,959,623		$	677,522		$	(4,710,215	)	$	3,969,736

Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

SIX MONTHS ENDED NOVEMBER 30, 2010

(In thousands)

	Cintas Corporation			Corp. 2			Subsidiary Guarantors			Non- Guarantors			Eliminations			Cintas Corporation Consolidated
Cash flows from operating activities:
Net income	$	117,143		$	29,714		$	92,211		$	101,627		$	(223,552	)	$	117,143
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	—			46,558			22,383			5,622			—			74,563
Amortization of deferred charges	—			18,889			339			1,954			—			21,182
Stock-based compensation	5,799			—			—			—			—			5,799
Deferred income taxes	—			—			(6,731		)	454			—			(6,277		)
Changes in current assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net	—			(19,216		)	(4,368		)	(4,190		)	—			(27,774		)
Inventories, net	—			(26,531		)	(11,933		)	(1,166		)	792			(38,838		)
Uniforms and other rental items in service	—			(26,556		)	(6,073		)	(3,597		)	5,587			(30,639		)
Prepaid expenses and other	—			188			(2,648		)	(2,066		)	—			(4,526		)
Accounts payable	—			75,896			(73,488		)	17,357			—			19,765
Accrued compensation and related liabilities	—			(4,480		)	(9,151		)	173			—			(13,458		)
Accrued liabilities and other	—			(4,734		)	(7,863		)	1,711			820			(10,066		)
Income taxes payable	—			9,553			(1,076		)	(6,122		)	—			2,355

Net cash provided by (used in) operating activities	122,942			99,281			(8,398		)	111,757			(216,353		)	109,229

Cash flows from investing activities:
Capital expenditures	—			(38,392		)	(43,862		)	(5,880		)	—			(88,134		)
Proceeds from redemption of marketable securities	—			—			21,769			113,514			—			135,283
Purchase of marketable securities and investments	—			(17,693		)	(43,794		)	—			49,015			(12,472		)
Acquisitions of businesses, net of cash acquired	—			(56,875		)	—			(31,924		)	—			(88,799		)
Other, net	80,265			21,107			(176,860		)	(99,528		)	168,158			(6,858		)

Net cash provided by (used in) investing activities	80,265			(91,853		)	(242,747		)	(23,818		)	217,173			(60,980		)

Cash flows from financing activities:
Proceeds from issuance of debt	—			—			1,781			—			—			1,781
Repayment of debt	—			(495		)	521			—			(820		)	(794		)
Repurchase of common stock	(203,207		)	—			—			—			—			(203,207		)
Other, net	—			383			—			1,316			—			1,699

Net cash (used in) provided by financing activities	(203,207		)	(112		)	2,302			1,316			(820		)	(200,521		)

Effect of exchange rate changes on cash and cash equivalents	—			166			—			1,778			—			1,944

Net increase (decrease) in cash and cash equivalents	—			7,482			(248,843		)	91,033			—			(150,328		)
Cash and cash equivalents at beginning of period	—			34,905			339,701			36,675			—			411,281
Cash and cash equivalents at end of period	$	—		$	42,387		$	90,858		$	127,708		$	—		$	260,953

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

SIX MONTHS ENDED NOVEMBER 30, 2009

(In thousands)

	Cintas Corporation			Corp. 2			Subsidiary Guarantors			Non- Guarantors			Eliminations			Cintas Corporation Consolidated
Cash flows from operating activities:
Net income	$	111,160		$	(21,359	)	$	118,232		$	10,732		$	(107,605	)	$	111,160
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	—			48,525			23,198			4,176			—			75,899
Amortization of deferred charges	—			19,033			470			1,065			—			20,568
Stock-based compensation	7,571			—			—			—			—			7,571
Deferred income taxes	—			—			4,757			20			—			4,777
Changes in current assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net	—			15,509			(1,659		)	1,609			(28,302		)	(12,843		)
Inventories, net	—			40,016			(1,383		)	(1,831		)	(1,928		)	34,874
Uniforms and other rental items in service	—			5,809			2,240			(918		)	(1,636		)	5,495
Prepaid expenses and other	—			602			(833		)	(337		)	—			(568		)
Accounts payable	—			(96,788		)	80,361			6,650			16,691			6,914
Accrued compensation and related liabilities	—			(2,092		)	163			283			—			(1,646		)
Accrued liabilities and other	—			(29		)	25,287			(870		)	858			25,246
Income taxes payable	—			7,942			5,978			2,808			—			16,728

Net cash provided by (used in) operating activities	118,731			17,168			256,811			23,387			(121,922		)	294,175

Cash flows from investing activities:
Capital expenditures	—			(23,471		)	(21,556		)	(3,065		)	—			(48,092		)
Proceeds from sale or redemption of marketable securities	—			—			125			25,727			—			25,852
Purchase of marketable securities and investments	—			(1,901		)	(12,401		)	(23,337		)	(15,421		)	(53,060		)
Acquisitions of businesses, net of cash acquired	—			(6,601		)	—			—			—			(6,601		)
Other	(117,772		)	9,920			6,855			(29		)	102,079			1,053

Net cash (used in) provided by investing activities	(117,772		)	(22,053		)	(26,977		)	(704		)	86,658			(80,848		)

Cash flows from financing activities:
Repayment of debt	—			(471		)	(36,327		)	1,213			35,264			(321		)
Repurchase of common stock	(959		)	—			—			—			—			(959		)
Other	—			384			(3,430		)	2,329			—			(717		)

Net cash (used in) provided by financing activities	(959		)	(87		)	(39,757		)	3,542			35,264			(1,997		)

Effect of exchange rate changes on cash and cash equivalents	—			177			—			762			—			939

Net (decrease) increase in cash and cash equivalents	—			(4,795		)	190,077			26,987			—			212,269
Cash and cash equivalents at beginning of period	—			39,397			76,979			13,369			—			129,745
Cash and cash equivalents at end of period	$	—		$	34,602		$	267,056		$	40,356		$	—		$	342,014

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CINTAS CORPORATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

BUSINESS STRATEGY

Cintas provides highly specialized products and services to businesses of all types primarily throughout North America and Latin America, Europe and Asia. We bring value to our customers by helping them provide a cleaner, safer and more pleasant atmosphere for their customers and employees. Our products and services are designed to improve our customers’ images. We also help our customers protect their employees and their company by enhancing workplace safety and helping to ensure legal compliance in key areas of their business.

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 cleaning services and supplies, tile and carpet cleaning services, first aid, safety and fire protection products and services, document management services and branded promotional products.

Cintas’ principal objective is “to exceed customers’ expectations in order to maximize the long-term value of Cintas for shareholders and working partners,” and it provides the framework and focus for Cintas’ business strategy. This strategy is to achieve revenue growth for all of our products and services by increasing our penetration at existing customers and by broadening our customer base to include business segments to which Cintas has not historically served. We will also continue to identify additional product and service opportunities for our current and future customers.

To pursue the strategy of increasing penetration, we have a highly talented and diverse team of service professionals visiting our customers on a regular basis. This frequent contact with our customers enables us to develop close personal relationships. The combination of our distribution system and these strong customer relationships provides a platform from which we launch additional products and services.

We pursue the strategy of broadening our customer base in several ways. Cintas has a national sales organization introducing all of its products and services to prospects in all business segments. Our broad range of products and services allows our sales organization to consider any type of business a prospect. We also broaden our customer base through geographic expansion, especially in our emerging businesses of first aid and safety, fire protection and document management. Finally, we evaluate strategic acquisitions as opportunities arise.

RESULTS OF OPERATIONS

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Consolidated Results

Three Months Ended November 30, 2010 Compared to Three Months Ended November 30, 2009

Total revenue increased 5.9% for the three months ended November 30, 2010, over the same period in the prior fiscal year from $884.5 million to $936.6 million. The increase primarily resulted from an organic growth increase of 4.2%. The remaining 1.7% represents growth derived through acquisitions in our Document Management Services operating segment, our First Aid, Safety and Fire Protection Services operating segment and our Uniform Rentals and Ancillary Products operating segment during the quarter.

Rental Uniforms and Ancillary Products operating segment revenue increased 2.2% for the three months ended November 30, 2010, over the same period in the prior fiscal year from $643.6 million to $657.8 million. Other Services revenue, consisting of revenue from the reportable operating segments of Uniform Direct Sales, First Aid, Safety and Fire Protection Services and Document Management Services, increased 15.7% for the three months ended November 30, 2010, over the same period in the prior fiscal year from $240.9 million to $278.7 million. The increase primarily resulted from an organic increase of 10.4%. The remaining 5.3% represents growth derived through acquisitions in our Document Management Services operating segment and our First Aid, Safety and Fire Protection Services operating segment during the quarter. The organic growth rate for Other Services revenue for the quarter was primarily the result of a 14.7% increase in Document Management operating segment revenue and a 9.4% increase in Uniform Direct Sales operating segment revenue.

Cost of rental uniforms and ancillary products consists primarily of production expenses, delivery expenses and the amortization of in service inventory, including uniforms, mats, shop towels and other ancillary items. Cost of rental uniforms and ancillary products increased $13.7 million, or 3.8%, for the three months ended November 30, 2010, compared to the three months ended November 30, 2009. Higher Rental Uniforms and Ancillary Products operating segment volume resulted in an increase in the cost of rental uniforms and ancillary products. In addition, maintenance costs increased $2.6 million and energy related costs increased $1.7 million compared to the three months ended November 30, 2009.

Cost of other services consists primarily of cost of goods sold (predominantly uniforms and first aid products), delivery expenses and distribution expenses in the Uniform Direct Sales operating segment, the First Aid, Safety and Fire Protection Services operating segment and the Document Management Services operating segment. Cost of other services increased $17.5 million, or 11.6%, for the three months ended November 30, 2010, compared to the three months ended November 30, 2009. This increase was primarily due to increased Other Services sales volume.

Selling and administrative expenses increased $28.9 million, or 11.1%, for the three months ended November 30, 2010, compared to the three months ended November 30, 2009. Selling labor and other selling expenses increased by $10.2 million compared to the same period in the prior fiscal year primarily as a result of an increase in the number of sales representatives. In addition, professional services increased $3.1 million due to costs related to our enterprise-wide system conversion and bad debt expense increased $2.4 million due to a slight deterioration in the aging in part resulting from an on-going accounts receivable consolidation project.

Net interest expense (interest expense less interest income) was $11.8 million for the three months ended November 30, 2010, compared to $12.3 million for the three months ended November 30, 2009.

Cintas’ effective tax rate decreased to 38.3% for the three months ended November 30, 2010, compared to 39.3% for the prior year period. This decrease was due to the impact of the closure of certain tax audits during the three months ended November 30, 2010.

Net income decreased $1.3 million, or 2.3%, for the three months ended November 30, 2010, from the same period in the prior fiscal year. Diluted earnings per share were $0.38 for the three months ended November 30, 2010, which was an increase of 2.7% compared to the same period in the prior fiscal year.

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Rental Uniforms and Ancillary Products Operating Segment

Three Months Ended November 30, 2010 Compared to Three Months Ended November 30, 2009

As discussed above, Rental Uniforms and Ancillary Products operating segment revenue increased from $643.6 million to $657.8 million, or 2.2%, and the cost of rental uniforms and ancillary products increased $13.7 million, or 3.8%. The operating segment’s gross margin was $280.4 million, or 42.6% of revenue. This gross margin percent of revenue of 42.6% was 90 basis points lower than the prior fiscal year’s second quarter of 43.5%. Maintenance costs increased $2.6 million, or approximately 30 basis points, and energy related costs, which include natural gas, electric and gas, increased $1.7 million, or approximately 20 basis points, from the prior fiscal year’s second quarter.

Selling and administrative expenses as a percent of revenue, at 30.7%, increased 150 basis points compared to the second quarter of the prior fiscal year. This increase is primarily due to an increase in selling labor due to the addition of sales representatives. The sales representatives were added to grow revenue in the operating segment.

Income before income taxes decreased $13.8 million to $78.1 million for the Rental Uniforms and Ancillary Products operating segment for the quarter compared to the same quarter last fiscal year. Income before income taxes was 11.9% of the operating segment’s revenue, which is a 240 basis point decrease compared to the second quarter of the prior fiscal year. This decrease is primarily due to the increase in selling and administrative expenses and the lower gross margin as a percent of revenue.

Uniform Direct Sales Operating Segment

Three Months Ended November 30, 2010 Compared to Three Months Ended November 30, 2009

Uniform Direct Sales operating segment revenue increased from $99.4 million to $108.8 million, or 9.4%, for the three months ended November 30, 2010, over the same quarter in the prior fiscal year due to increased customer orders for uniforms.

Cost of uniform direct sales increased $6.0 million, or 8.5%, for the three months ended November 30, 2010, due to increased Uniform Direct Sales volume. The gross margin as a percent of revenue was 29.9% for the quarter ended November 30, 2010, which is a slight improvement over the 29.3% in the same quarter in the prior fiscal year. This increase is due to an increase in sales volume, which causes the operating segment’s fixed costs to be a lower percent of revenue.

Selling and administrative expenses increased $0.6 million compared to the same quarter last fiscal year. However, selling and administrative expenses decreased as a percent of revenue from 18.8% in the second quarter last year to 17.7% in this year’s second quarter. This decrease in selling and administrative expenses as a percent of revenue was due to the selling and administrative expenses increasing at a lower rate than the revenue growth rate.

Income before income taxes increased $2.8 million to $13.3 million for the Uniform Direct Sales operating segment for the quarter ended November 30, 2010. Income before income taxes was 12.2% of the operating segment’s revenue compared to 10.5% for the same quarter last fiscal year. This increase in income before income taxes is primarily due to the increase in revenue.

First Aid, Safety and Fire Protection Services Operating Segment

Three Months Ended November 30, 2010 Compared to Three Months Ended November 30, 2009

First Aid, Safety and Fire Protection Services operating segment revenue increased from $81.6 million to $93.3 million, or 14.4%, for the three months ended November 30, 2010. The increase primarily resulted from organic growth of 8.4%. The remaining 6.0% represents growth derived mainly through acquisitions.

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Cost of first aid, safety and fire protection services increased $4.0 million, or 7.8%, for the three months ended November 30, 2010. Gross margin for the First Aid, Safety and Fire Protection Services operating segment is defined as revenue less cost of goods, warehouse expenses, service expenses and training expenses. The gross margin as a percent of revenue was 41.1% for the quarter ended November 30, 2010, which is a 360 basis point increase compared to the gross margin percentage in the second quarter of the prior fiscal year. This increase is due to an increase in sales volume, which causes the operating segment’s fixed costs to be a lower percent of revenue, and the elimination of lower margin fire installation revenue.

Selling and administrative expenses as a percent of revenue, at 35.6%, increased 180 basis points compared to the second quarter of the prior fiscal year. Selling and administrative expenses increased from $27.5 million in last year’s second quarter to $33.2 million in the second quarter of this fiscal year due to an increase in the number of sales representatives and a $1.4 million increase in bad debt expense.

Income before income taxes for the First Aid, Safety and Fire Protection Services operating segment increased $2.1 million to $5.1 million for the three months ended November 30, 2010. Income before income taxes was 5.5% of the operating segment’s revenue, compared to 3.7% in last fiscal year’s second quarter. This increase is primarily due to the increase in sales volume.

Document Management Services Operating Segment

Three Months Ended November 30, 2010 Compared to Three Months Ended November 30, 2009

Document Management Services operating segment revenue increased from $59.9 million to $76.6 million, or 27.9%, for the quarter ended November 30, 2010, over the same quarter in the prior fiscal year. The increase primarily resulted from an organic growth increase of 14.7%. The remaining 13.2% represents growth derived mainly through acquisitions. This operating segment derives a portion of its revenue from the sale of shredded paper to paper recyclers. The average price from these paper sales increased by approximately 42% in the quarter ended November 30, 2010, compared to the quarter ended November 30, 2009, due to increased volume and increases in recycled paper prices. This increase resulted in higher recycled paper revenue. Excluding the increase in recycled paper prices, operating segment revenue grew 5.0% organically compared to last fiscal year’s second quarter.

Cost of document management services increased $7.5 million, or 25.4%, for the three months ended November 30, 2010, due to increased Document Management Services operating segment volume. Gross margin for the Document Management Services operating segment is defined as revenue less production and service costs. The gross margin as a percent of revenue increased from 50.5% in last year’s second quarter to 51.4% for the quarter ended November 30, 2010. This increase is largely due to the increase in the recycled paper prices which increased overall operating segment revenue.

Selling and administrative expenses increased $8.4 million compared to the same quarter last year primarily due to an increase in the number of sales representatives. These expenses as a percent of revenue, at 43.8%, increased 180 basis points compared to the second quarter of the prior fiscal year.

Income before income taxes for the Document Management Services operating segment increased $0.8 million to $5.9 million for the period compared to the same period in the prior fiscal year. Income before income taxes as a percentage of the operating segment’s revenue decreased from 8.5% in last year’s second quarter to 7.6% for the quarter ended November 30, 2010, primarily as a result of the increase in selling and administrative expenses.

Consolidated Results

Six Months Ended November 30, 2010 Compared to Six Months Ended November 30, 2009

Total revenue increased 4.8% for the six months ended November 30, 2010, over the same period in the prior fiscal year from $1.8 billion to $1.9 billion. The increase primarily resulted from an organic growth

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increase of 3.5%. The remaining 1.3% represents growth derived through acquisitions in our Document Management Services operating segment, our First Aid, Safety and Fire Protection Services operating segment and our Uniform Rentals and Ancillary Products operating segment during the period.

Rental Uniforms and Ancillary Products operating segment revenue increased 1.2% for the six months ended November 30, 2010, over the same period in the prior fiscal year from $1.30 billion to $1.32 billion. Other Services revenue, consisting of revenue from the reportable operating segments of Uniform Direct Sales, First Aid, Safety and Fire Protection Services and Document Management Services, increased 14.3% for the six months ended November 30, 2010, over the same period in the prior fiscal year from $476.8 million to $545.1 million. The increase primarily resulted from an organic increase of 10.4%. The remaining 3.9% represents growth derived through acquisitions in our Document Management Services operating segment and our First Aid, Safety and Fire Protection Services operating segment during the period. The organic growth rate for the quarter was primarily the result of an 18.8% increase in Document Management operating segment revenue and a 10.0% increase in Uniform Direct Sales operating segment revenue.

Cost of rental uniforms and ancillary products consists primarily of production expenses, delivery expenses and the amortization of in service inventory, including uniforms, mats, shop towels and other ancillary items. Cost of rental uniforms and ancillary products increased $22.3 million, or 3.1%, for the six months ended November 30, 2010, compared to the six months ended November 30, 2009. Higher Rental Uniforms and Ancillary Products operating segment volume resulted in an increase in the cost of rental uniforms and ancillary products. In addition, maintenance costs increased $5.4 million and energy related costs increased $2.9 million compared to the six months ended November 30, 2009.

Cost of other services consists primarily of cost of goods sold (predominantly uniforms and first aid products), delivery expenses and distribution expenses in the Uniform Direct Sales operating segment, the First Aid, Safety and Fire Protection Services operating segment and the Document Management Services operating segment. Cost of other services increased $30.4 million, or 10.2%, for the six months ended November 30, 2010, compared to the six months ended November 30, 2009. This increase was primarily due to increased Other Services sales volume.

Selling and administrative expenses increased $57.9 million, or 11.1%, for the six months ended November 30, 2010, compared to the six months ended November 30, 2009. Labor and payroll tax expenses increased by $29.2 million compared to the same period in the prior fiscal year primarily as a result of an increase in the number of sales representatives. In addition, bad debt expense increased $6.1 million due to a slight deterioration in the aging in part resulting from an on-going accounts receivable consolidation project, and professional services increased $5.3 million due to costs related to our enterprise wide system conversion.

During the first quarter of fiscal 2010, Cintas and the plaintiffs involved in the litigation, Paul Veliz, et al. v. Cintas Corporation, reached a settlement in principle. The principal terms of the settlement provide for an aggregate cash payment of approximately $24 million, which Cintas has accrued as of November 30, 2010. The pre-tax impact, net of insurance proceeds, was approximately $19.5 million. This settlement is more fully described in Note 8 entitled Litigation and Other Contingencies in “Notes to Consolidated Condensed Financial Statements.” During the second quarter of fiscal 2010, Cintas had legal settlements that totaled $4.1 million, net of insurance proceeds. None of these settlements were significant individually. These settlements included litigation related to multiple subjects including employment practices and insurance coverage.

Net interest expense (interest expense less interest income) was $23.5 million the six months ended November 30, 2010, compared to $23.9 million for the six months ended November 30, 2009.

Cintas’ effective tax rate decreased to 34.6% for the six months ended November 30, 2010, compared to 38.7% for the prior year period. This decrease was due to the impact of the closure of certain tax audits during the six months ended November 30, 2010.

Net income increased $6.0 million, or 5.4%, for the six months ended November 30, 2010, from the same period in the prior fiscal year. Diluted earnings per share were $0.78 for the six months ended November 30, 2010, which was an increase of 8.3% compared to the same period in the prior fiscal year. The

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increased net income and diluted earnings per share are due primarily to increased revenue for the period, and the legal settlements which occurred last year, offset by higher selling and administrative expenses in the current period.

Rental Uniforms and Ancillary Products Operating Segment

Six Months Ended November 30, 2010 Compared to Six Months Ended November 30, 2009

As discussed above, Rental Uniforms and Ancillary Products operating segment revenue increased from $1.30 billion to $1.32 billion, or 1.2%, and the cost of rental uniforms and ancillary products increased $22.3 million, or 3.1%. The operating segment’s gross margin was $566.4 million, or 43.1% of revenue. This gross margin percent of revenue of 43.1% was 100 basis points lower than the prior fiscal year’s 44.1%. Maintenance costs increased $5.4 million, or approximately 40 basis points, and energy related costs, which include natural gas, electric and gas, increased $2.9 million, or approximately 20 basis points, from the prior fiscal year period.

Selling and administrative expenses as a percent of revenue, at 31.2%, increased 210 basis points compared to the same period of the prior fiscal year. This increase is primarily due to an increase in selling labor due to the addition of sales representatives. The sales representatives were added to grow revenue in the operating segment.

Income before income taxes decreased $38.0 million to $156.3 million for the Rental Uniforms and Ancillary Products operating segment compared to the same period last fiscal year. Income before income taxes was 11.9% of the operating segment’s revenue, which is a 310 basis point decrease compared to the same period of the prior fiscal year. This is primarily due to the increase in selling and administrative expenses and the lower gross margin as a percent of revenue.

Uniform Direct Sales Operating Segment

Six Months Ended November 30, 2010 Compared to Six Months Ended November 30, 2009

Uniform Direct Sales operating segment revenue increased from $188.7 million to $207.6 million, or 10.0%, for the six months ended November 30, 2010, over the same period in the prior fiscal year due to increased customer orders for uniforms.

Cost of uniform direct sales increased $12.8 million, or 9.6%, for the six months ended November 30, 2010, due to increased Uniform Direct Sales volume. The gross margin as a percent of revenue was 30.1% for the six months ended November 30, 2010, which is relatively consistent with the 29.9% in the same period of the prior fiscal year.

Selling and administrative expenses increased $1.5 million compared to last fiscal year. However, selling and administrative expenses decreased as a percent of revenue from 20.1% in the first six months last fiscal year to 19.0% in this fiscal year’s first six months. This decrease in selling and administrative expenses as a percent of revenue was due to the selling and administrative expenses increasing at a lower rate than the revenue growth rate.

Income before income taxes increased $4.6 million to $23.1 million for the Uniform Direct Sales operating segment for the six months ended November 30, 2010. Income before income taxes was 11.1% of the operating segment’s revenue compared to 9.8% for the same period last fiscal year. This increase in income before income taxes is primarily due to the increase in revenue.

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First Aid, Safety and Fire Protection Services Operating Segment

Six Months Ended November 30, 2010 Compared to Six Months Ended November 30, 2009

First Aid, Safety and Fire Protection Services operating segment revenue increased from $171.6 million to $186.8 million, or 8.9%, for the six months ended November 30, 2010. The increase primarily resulted from an organic growth of 5.1%. The remaining 3.8% represents growth derived mainly through acquisitions.

Cost of first aid, safety and fire protection services increased $4.5 million, or 4.3%, for the six months ended November 30, 2010. Gross margin for the First Aid, Safety and Fire Protection Services operating segment is defined as revenue less cost of goods, warehouse expenses, service expenses and training expenses. The gross margin as a percent of revenue was 41.0% for the six months ended November 30, 2010, which is a 260 basis point increase compared to the gross margin percentage for the six months ended November 30, 2009. This increase is due to an increase in sales volume, which causes the operating segment’s fixed costs to be a lower percent of revenue, and the elimination of lower margin fire installation revenue.

Selling and administrative expenses as a percent of revenue, at 36.2%, increased 300 basis points compared to the first six months of the prior fiscal year. Selling and administrative expenses increased from $57.0 million in last fiscal year’s first six months to $67.7 million in the first six months of this fiscal year due to an increase in the number of sales representatives and a $3.0 million increase in bad debt expense.

Income before income taxes for the First Aid, Safety and Fire Protection Services operating segment increased $0.1 million to $8.9 million for the six months ended November 30, 2010. Income before income taxes was 4.8% of the operating segment’s revenue, compared to 5.1% in last fiscal year’s first six months. This decrease in income before income taxes as a percent of revenue is primarily due to the increase in selling and administrative expenses.

Document Management Services Operating Segment

Six Months Ended November 30, 2010 Compared to Six Months Ended November 30, 2009

Document Management Services operating segment revenue increased from $116.6 million to $150.6 million, or 29.3%, for the six months ended November 30, 2010, over the same period in the prior fiscal year. The increase primarily resulted from an organic growth increase of 18.8%. The remaining 10.5% represents growth derived mainly through acquisitions. This operating segment derives a portion of its revenue from the sale of shredded paper to paper recyclers. The average price from these paper sales increased by approximately 52% in the six months ended November 30, 2010, compared to the six months ended November 30, 2009, due to increased volume and increases in recycled paper prices. This increase resulted in higher recycled paper revenue. Excluding the increase in recycled paper prices, segment revenue grew 7.8% organically compared to last fiscal year’s first six months.

Cost of document management services increased $13.1 million, or 22.3%, for the six months ended November 30, 2010, due to increased Document Management Services operating segment volume. Gross margin for the Document Management Services operating segment is defined as revenue less production and service costs. The gross margin as a percent of revenue increased from 49.6% for the six months ended November 30, 2009, to 52.3% for the six months ended November 30, 2010. This increase is due to the increase in the recycled paper prices which increased revenue.

Selling and administrative expenses increased $13.8 million compared to last fiscal year primarily due to an increase in the number of sales representatives. However, these expenses as a percent of revenue, at 42.9%, decreased 60 basis points compared to the first six months of the prior fiscal year. This decrease is due to the revenue growing at a faster rate than the expenses due to the increase in recycled paper prices.

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Income before income taxes for the Document Management Services operating segment increased $7.1 million to $14.2 million for the period compared to the same period in the prior fiscal year. Income before income taxes as a percentage of the operating segment’s revenue increased from 6.1% in last year’s first six months to 9.5% for the six months ended November 30, 2010, primarily as a result of the increase in recycled paper prices.

Liquidity and Capital Resources

The following is a summary of our cash flows and cash and cash equivalents and marketable securities as of and for the six months ended November 30, 2010 (in thousands):

	2010			2009

Net cash provided by operating activities	$	109,229		$	294,175
Net cash used in investing activities	$	(60,980	)	$	(80,848	)
Net cash used in financing activities	$	(200,521	)	$	(1,997	)

Cash and cash equivalents and marketable securities at the end of the period	$	284,577		$	566,087

The cash and cash equivalents and marketable securities as of November 30, 2010, include $152 million that is located outside of the United States. We expect to use these amounts to fund our international operations and expansion activities. The marketable securities at November 30, 2010, consist of United States municipal bonds and Canadian treasury securities. We believe that our investment policy pertaining to marketable securities is conservative. The criterion used in making investment decisions is the preservation of principal, while earning an attractive yield.

Cash flows provided by operating activities have historically supplied us with a significant source of liquidity. We generally use these cash flows to fund most, if not all, of our operations and expansion activities and dividends on our common stock. We may also use cash flows provided by operating activities, as well as proceeds from long-term debt and short-term borrowings, to fund growth and expansion opportunities, as well as other cash requirements such as share buybacks.

Net cash provided by operating activities was $109.2 million for the six months ended November 30, 2010, a decrease of $184.9 million compared to the same period last fiscal year. Last fiscal year’s net cash provided by operating activities benefitted from lower working capital needs associated with our decreasing sales volumes and the accrual of approximately $28 million in legal settlements. As sales volumes have increased this fiscal year, our working capital needs have increased. Accounts receivable has increased $36.1 million since May 31, 2010, and inventories, net and uniforms and other rental items in service has increased $71.3 million since May 31, 2010, both due to the higher sales volumes and an intentional increase in inventory in anticipation of and as a precaution to a planned enterprise-wide system conversion of the Cintas global supply chain division.

Net cash used in investing activities includes capital expenditures and cash paid for acquisitions of businesses. Capital expenditures were $88.1 million and $48.1 million for the six months ended November 30, 2010 and 2009, respectively. These capital expenditures primarily relate to expansion efforts in Rental Uniforms and Ancillary Products and Document Management Services operating segments and to an enterprise wide system conversion. Capital expenditures increased this year compared to last year as economic conditions in the United States and Canada stabilized in 2010, providing better revenue growth opportunities. Cash paid for acquisitions of businesses was $88.8 million and $6.6 million for the six months ended November 30, 2010 and 2009, respectively. The acquisitions this fiscal year occurred in our Document Management Services, First Aid, Safety and Fire Protection Services and Rental Uniforms and Ancillary Products operating segments. The cash used for capital expenditures and acquisitions was offset by net proceeds from the sale or redemption of marketable securities.

Net cash used in financing activities was $200.5 million and $2.0 million for the six months ended November 30, 2010 and 2009, respectively. We completed our existing share buyback program by

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purchasing $203.3 million of Cintas common stock during the six months ended November 30, 2010. We incurred no new debt or short-term borrowings during the period to finance these purchases, but instead used existing cash and cash equivalents.

On October 26, 2010, we announced that the Board of Directors authorized a $500 million share buyback program at market prices. No purchases have been made under this new program.

On October 26, 2010, Cintas declared an annual cash dividend of $0.49 per share on outstanding common stock, a two percent increase over the dividend paid in the prior year. The dividend was paid on December 15, 2010, to shareholders of record as of November 12, 2010.

As of November 30, 2010, we had $775.0 million in fixed rate notes outstanding with maturities ranging from 2012 to 2036. Cintas had a commercial paper program with availability of $600.0 million that was fully supported by a backup revolving credit facility through a credit agreement with its banking group. This revolving credit facility was renewed on September 27, 2010, with availability of $300.0 million and an accordion feature that allows for a maximum borrowing capacity of $450.0 million and an expiration date of September 26, 2014. The availability was reduced from $600.0 million to $450.0 million in order to lower the overall cost of the program. We believe this program will be adequate to provide necessary funding for our cash requirements. As of November 30, 2010 and May 31, 2010, we had no commercial paper outstanding and no outstanding borrowings on our revolving credit facility. However, as a result of cash requirements related primarily to acquisition opportunities, we have issued commercial paper subsequent to November 30, 2010, for varying amounts with a maximum outstanding issuance of approximately $90.0 million.

Our access to the commercial paper and long-term debt markets has historically provided us with sources of liquidity. We do not anticipate having difficulty in obtaining financing from those markets in the future in view of our favorable experiences in the debt markets in the recent past. Our ability to continue to access the commercial paper and long-term debt markets on favorable interest rate and other terms will depend, to a significant degree, on the ratings assigned by the credit rating agencies to our indebtedness. As of November 30, 2010, our ratings were as follows:

Rating Agency	Outlook	Commercial Paper	Long-term Debt

Standard & Poor’s	Stable	A-2	A-
Moody’s Investors Service	Stable	P-1	A2

In the event that the ratings of our commercial paper or our outstanding long-term debt issues were substantially lowered or withdrawn for any reason or if the ratings assigned to any new issue of long-term debt securities were significantly lower than those noted above, particularly if we no longer had investment grade ratings, our ability to access the debt markets may be adversely affected. In addition, in such a case, our cost of funds for new issues of commercial paper and long-term debt would be higher than our cost of funds would have been had the ratings of those new issues been at or above the level of the ratings noted above. The rating agency ratings are not recommendations to buy, sell or hold our commercial paper or debt securities. Each rating may be subject to revision or withdrawal at any time by the assigning rating organization and should be evaluated independently of any other rating. Moreover, each credit rating is specific to the security to which it applies.

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To monitor our credit rating and our capacity for long-term financing, we consider various qualitative and quantitative factors. One such factor is the ratio of our total debt to capitalization. For the purpose of this calculation, debt is defined as the sum of short-term borrowings, long-term debt due within one year, obligations under capital leases due in one year, long-term debt and long-term obligations under capital leases. Total capitalization is defined as debt plus shareholders’ equity. At November 30, 2010 and May 31, 2010, the ratio of our total debt to capitalization was 24.7% and 23.7%, respectively. We believe these levels are reasonable and allow for additional funding if the need arises.

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. Please refer to Note 8 entitled Litigation and Other Contingencies of “Notes to Consolidated Condensed Financial Statements” for a detailed discussion of certain specific litigation.

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Forward-Looking Statements

This Quarterly Report on Form 10-Q contains 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,” “predicts,” “projects,” “plans,” “expects,” “intends,” “target,” “forecast,” “believes,” “seeks,” “could,” “should,” “may” and “will” or the negative versions thereof and similar words, terms and 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. You should not place undue reliance on any forward-looking statement. We cannot guarantee that any forward-looking statement will be realized. These statements are subject to various risks, uncertainties, potentially inaccurate assumptions 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, loss of customers due to outsourcing trends, 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, failure to comply with government regulations concerning employment discrimination, employee pay and benefits and employee health and safety, 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, disruptions caused by the unaccessibility of computer systems data, the initiation or outcome of litigation, investigations or other proceedings, higher assumed sourcing or distribution costs of products, the disruption of operations from catastrophic or extraordinary events, changes in federal and state tax and labor laws and the reactions of competitors in terms of price and service. Cintas undertakes no obligation to publicly release any revisions to any forward-looking statements or to otherwise update any forward-looking statements whether as a result of new information or to reflect events, circumstances or any other unanticipated developments arising after the date on which such statements are made. A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the year ended May 31, 2010 and in our reports on Forms 10-Q and 8-K. The risks and uncertainties described herein are not the only ones we may face. Additional risks and uncertainties presently not known to us or that we currently believe to be immaterial may also harm our business.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

In our normal operations, Cintas has market risk exposure to interest rates. There has been no material change to this market risk exposure to interest rates from that which was previously disclosed on page 30 of our Form 10-K for the year ended May 31, 2010.

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 currency denominated revenue and profit translated into U.S. dollars. The primary foreign currency to which Cintas is exposed is the Canadian dollar. Cintas has average rate options in place to limit a portion of the risks of the revenue translation from Canadian foreign currency exchange rate movements during the remainder of the fiscal year; however, the amount of these options is not significant.

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ITEM 4.

CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

With the participation of Cintas’ management, including Cintas’ Chief Executive Officer, 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 (Exchange Act)) as of November 30, 2010. Based on such evaluation, Cintas’ management, including Cintas’ Chief Executive Officer, Chief Financial Officer, General Counsel and Controllers, has concluded that Cintas’ disclosure controls and procedures were effective as of November 30, 2010, in ensuring (i) information required to be disclosed by Cintas in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed by Cintas in the reports that it files or submits under the Exchange Act is accumulated and communicated to Cintas’ management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Internal Control over Financial Reporting

There were no changes in Cintas’ internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended November 30, 2010, 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 32 and 33 of our Form 10-K for the fiscal year ended May 31, 2010.

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CINTAS CORPORATION

Part II. Other Information

Item 1. Legal Proceedings.

I. Supplemental Information: We discuss material legal proceedings (other than ordinary routine litigation incidental to our business) pending against us in “Item 1. Financial Statements,” in Note 8 entitled Litigation and Other Contingencies of “Notes to Consolidated Condensed Financial Statements.” We refer you to and incorporate by reference into this Part II, Item 1 that discussion for important information concerning those legal proceedings.

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

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

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
September 2010	2,711,262	$	26.51	27,951,175	$	—

October 2010	—	—		—	$	—

November 2010	—	—		—	$	—
Total	2,711,262	$	26.51	27,951,175	$	—

For the three months ended November 30, 2010, Cintas purchased 2,711,262 shares of Cintas common stock under this program at an average price of $26.51 per share for a total purchase price of $71.9 million. From the inception of the share buyback program through December 31, 2010, Cintas has purchased a total of approximately 28.0 million shares of Cintas stock at an average price of $35.78 per share for a total purchase price of $1 billion. These purchases in September completed the existing share buyback program. On October 26, 2010, Cintas announced that the Board of Directors authorized a $500 million share buyback program at market prices. No purchases have been made under this new program.

Item 5. Other Information

Item 6. Exhibits.

10.1		Fourth Amendment Agreement to Credit Agreement, dated as of September 27,2010 (Incorporated by reference to Exhibit 10.5 to Cintas’ Form 8-K dated October 1, 2010)
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.

	CINTAS CORPORATION
	(Registrant)


Date: January 7, 2011	By:	/s/ William C. Gale
		William C. Gale
		Senior Vice President and Chief Financial Officer
		(Chief Accounting Officer)

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EXHIBIT INDEX

10.1		Fourth Amendment Agreement to Credit Agreement, dated as of September 27, 2010 (Incorporated by reference to Exhibit 10.5 to Cintas’ Form 8-K dated October 1, 2010)
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