MINNEAPOLIS, Jan. 30 /PRNewswire/ -- G&K Services, Inc. (Nasdaq: GKSRA)
today reported revenue for the second quarter ended December 30, 2000 of
$150.7 million, up 5.8 percent from $142.4 million in the second quarter last
year and income from operations of $17.3 million, down 7.9 percent from
$18.8 million last year. The decrease in operating income was attributed to
soaring energy costs and higher employee benefit costs, partially offset by
improved direct sale margins. Earnings per diluted share were $0.39 compared
to $0.42 for the prior-year quarter.
"We continue to focus on initiatives to bolster our rental revenue growth
rate in addition to a more aggressive response to our rising operating costs,"
said Richard Fink, chairman of G&K Services. "On the direct sale side of the
business, we are pleased with the improved position of this business as it
reached expected bottom-line results."
Second quarter revenue from G&K's rental business increased to
$144.7 million, up 6.5 percent over the prior-year period. Direct sale
revenue decreased 8.5 percent, to $5.9 million versus $6.5 million last year.
While direct sale revenue was down, the second quarter marked the third
straight quarter of improved bottom-line results.
Cost of rental operations for the quarter increased to 59.4 percent of
rental revenue versus 57.1 percent for the prior-year quarter. The increase
reflects higher natural gas prices, higher gasoline prices, increased employee
benefit costs and lower operating performance from one region in the United
States. Cost of direct sales for the quarter decreased to 71.9 percent of
direct sale revenue compared to 78.8 percent last year and 82.0 percent in the
first quarter of fiscal 2001. This reflects a substantial improvement in the
fulfillment operation.
Selling, general and administration expenses were 22.2 percent of
consolidated total revenue in the second quarter, remaining the same from the
prior-year quarter.
Year-to-date revenue rose to $296.6 million, up 7.0 percent from a year
ago. Diluted earnings per share for the six-month period were $0.87 compared
with $0.89 a year ago.
"The market for corporate identity apparel programs and facility services
continues to expand and presents significant opportunity for G&K to reach our
long-term growth objectives," said Thomas Moberly, chief executive officer.
"G&K's revenue growth over the past several quarters has been below
expectations. However, we are convinced that the initiatives we have launched
will have a measurable impact on our revenue growth results."
The company reported strong cash flows for the quarter. Free cash flow,
which is cash from operations less capital expenditures, was $5.5 million for
the quarter and $20.1 million for the six-month period ending December 30,
2000. Capital expenditures for the quarter were $8.3 million.
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 estimates that capital expenditures for the year will be in the range
of $40 million to $43 million.
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.
To receive the latest information about G&K Services, Inc. by fax,
at no cost, dial 1-800-PRO-INFO, code GKSRA
G&K SERVICES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(US dollars in thousands, except per share amounts)
(unaudited)
For the Three Months For the Six Months
Ended Ended
Dec 30, Dec 25, Dec 30, Dec 25,
2000 1999 2000 1999
REVENUES
Rental operations $144,728 $135,879 $286,626 $266,415
Direct sales 5,928 6,476 9,971 10,900
Total revenues 150,656 142,355 296,597 277,315
OPERATING EXPENSES
Cost of rental operations 85,947 77,571 167,110 150,752
Cost of direct sales 4,261 5,106 7,576 8,819
Selling and administrative 33,384 31,564 65,216 61,280
Depreciation 7,203 7,060 14,203 14,064
Amortization of intangibles 2,537 2,237 4,962 4,377
Total operating expenses 133,332 123,538 259,067 239,292
INCOME FROM OPERATIONS 17,324 18,817 37,530 38,023
Interest expense 4,396 4,167 8,795 8,053
Other (income) expense, net (420) 242 (1,001) (331)
INCOME BEFORE INCOME TAXES 13,348 14,408 29,736 30,301
Provision for income taxes 5,353 5,777 11,924 12,087
NET INCOME $7,995 $8,631 $17,812 $18,214
Basic weighted average number
of shares outstanding 20,480 20,357 20,479 20,458
BASIC EARNINGS PER COMMON SHARE $0.39 $0.42 $0.87 $0.89
Diluted weighted average number
of shares outstanding 20,495 20,400 20,499 20,517
DILUTED EARNINGS PER COMMON SHARE $0.39 $0.42 $0.87 $0.89
Dividends per share $0.0175 $0.0175 $0.0350 $0.0350
G&K SERVICES, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(US dollars in thousands)
December 30, July 1,
2000 2000
(unaudited)
ASSETS
Current Assets
Cash $4,100 $6,420
Accounts receivable 70,191 63,970
Inventories 92,398 89,975
Prepaid expenses 14,063 15,937
Total current assets 180,752 176,302
Property, Plant and Equipment 220,400 216,434
Other Assets 205,635 202,216
$606,787 $594,952
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $15,762 $15,892
Accrued expenses 43,274 37,978
Deferred income taxes 14,361 14,406
Current maturities of long-term
debt 45,812 58,355
Total current liabilities 119,209 126,631
Long-Term Debt 172,248 167,345
Deferred Income Taxes 14,770 15,243
Other Noncurrent Liabilities 14,101 14,211
Stockholders' Equity 286,459 271,522
$606,787 $594,952
G&K SERVICES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(US dollars in thousands)
(unaudited)
For the Six Months Ended
December 30, December 25,
2000 1999
OPERATING ACTIVITIES
Net Income $17,812 $18,214
Adjustments to reconcile net income
to net cash
provided by operating activities
-
Depreciation and amortization 19,165 18,441
Deferred income taxes (462) (139)
Changes in current operating
items, exclusive of acquisitions (289) 6,977
Other, net 466 1,475
Net cash provided by operating
activities 36,692 44,968
INVESTING ACTIVITIES
Property, plant and equipment
additions, net (16,553) (22,206)
Acquisition of business assets and
other (12,978) (36,869)
Net cash used for investing
activities (29,531) (59,075)
FINANCING ACTIVITIES
Proceeds from debt financing 64,100 42,527
Repayments of debt financing (72,819) (31,256)
Cash dividends paid (718) (717)
Sale of common stock 1 207
Net cash provided by (used for)
financing activities (9,436) 10,761
DECREASE IN CASH AND CASH EQUIVALENTS (2,275) (3,346)
EFFECT OF EXCHANGE RATES ON CASH (45) 5
CASH AND CASH EQUIVALENTS
Beginning of period 6,420 6,297
End of period $4,100 $2,956
SOURCE G&K Services, Inc.
 back to top
CONTACT:
Jeffrey L. Wright, Chief Financial Officer,
or Glenn L. Stolt, Assistant Treasurer, both of G & K Services,
952-912-5500; or Leslie Hunziker of The Financial Relations
Board, 312-640-6760
|
