MINNEAPOLIS, Jan. 11 /PRNewswire/ -- G&K Services, Inc. (Nasdaq: GKSRA)
today announced that the company's anticipated earnings for its fiscal second
quarter ending December 30, 2000 would range from $0.38 per share to $0.39 per
share compared with $0.42 per share in the prior-year quarter and short of the
analysts' consensus estimate of $0.51 for the current quarter. The company
said that the shortfall is attributable to higher natural gas prices, lower
than anticipated revenue and one under-performing region in the United States.
G&K noted that it expects to report second quarter revenues of
approximately $150.5 million, up 6 percent over the prior-year quarter.
Analysts' consensus estimates for revenue growth were in the 7 percent to
9 percent range. Combined, the company said that the higher expenses and
slower revenue growth will result in full year earnings of approximately $1.86
to $1.89 per share as compared to $1.85 per share in the prior fiscal year and
down from the current consensus estimate of $2.15 per share.
"Obviously, we're disappointed with the projected results," said Tom
Moberly, president and chief executive officer of G&K Services. "Natural gas
prices affect 95 percent of our business, so higher natural gas prices have a
distinct impact on our cost structure. On the revenue side, lower sales
productivity levels and our early reluctance to pass these much higher than
expected cost increases onto our customers were key factors in the result."
To address the revenue growth trends, G&K has already begun to put
programs into effect to counteract both external and internal factors
affecting performance. These measures include:
* Immediate implementation of a systematic and centrally controlled
management system to provide a more timely response to escalating
costs.
* A new field sales training program, which was implemented in the second
quarter to help local management ensure all sales representatives reach
expected productivity levels.
* A new customer relationship management system, which is currently in
pilot phase in a selected number of locations.
* A new targeted selection interviewing system that is already in place.
* A modified sales compensation system that was implemented in the first
quarter.
"While the current quarter does not achieve the company's previous revenue
and earnings projections," Moberly said, "we are pleased with the continued
growth of the national account business. Our success in this area is driven
by our ability to offer a total solution to our customer's uniform needs. We
are also pleased with our improved direct sale results for the quarter. Pat
Kleinman, our new vice president of direct sales, is the ideal person to lead
this high-growth business."
Outlook
G&K expects to achieve revenue of approximately $600 million to
$604 million for fiscal 2001. Earnings are expected to be in the range of
$1.86 to $1.89 per share for the fiscal year ending June 30, 2001.
The Company plans to conduct a conference call beginning at 9 a.m. Eastern
Standard Time on January 12, 2001. The call will be webcast and can be
accessed through the web site http://www.gkservices.com (on the Investor Relations
page, click on the webcast icon and follow the instructions). A replay of the
call will be available through February 11, 2001. The company expects to
report full results for the second quarter on January 30, 2001.
This press release contains "forward-looking statements" within the
meaning of the federal securities laws, including statements concerning
business strategies and their intended results, and similar statements
concerning anticipated future events and expectations that are not historical
facts. These forward-looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. The
forward-looking statements in this press release reflect management's best
judgment at the time they are made, but all such statements are subject to
numerous risks and uncertainties, which could cause actual results to differ
materially from those expressed in or implied by the statements herein.
Additional information concerning potential factors that could effect future
financial results is included in the Company's Annual Report on Form 10-K for
the Fiscal Year Ended July 1, 2000.
About G&K Services, Inc.
Headquartered in Minneapolis, Minnesota, G&K Services, Inc. is a market
leader in corporate identity apparel programs and facility services in the
United States, and is the largest such provider in Canada. G&K operates in
Canada as Work Wear Corporation of Canada Ltd. G&K operates over
130 processing facilities and branch offices, serving over 110,000 customers
and processing more than two million garments daily.
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SOURCE G&K Services, Inc.
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Related links:
http://www.gkservices.com
CONTACT:
Jeffrey L. Wright, Chief Financial Officer or
Glenn L. Stolt, Assistant Treasurer, 952-912-5500, both of G&K
Services; or Leslie Hunziker of Financial Relations Board,
312-640-6760
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