MINNEAPOLIS, April 25 /PRNewswire/ -- G&K Services, Inc. (Nasdaq: GKSRA),
a leading supplier of uniforms and related textile services, today announced
revenue and earnings results for its third quarter ended March 25, 2000.
Consolidated revenues increased 9.4 percent compared to the prior-year
quarter, driven by improved revenue growth in the core rental business. Net
income decreased 2.8 percent compared with the prior-year quarter, due
primarily to continued operating losses in the direct sale/catalog group.
"We continue to see accelerated revenue growth in our core industrial
rental business. The majority of our rental operating regions have posted
improved revenue growth for the past three consecutive quarters," said Richard
Fink, chairman. "During the quarter, we focused on improving the bottom-line
financial results in the direct sale/catalog group." While the overall
operating loss was consistent with the prior quarter as expected, significant
progress was achieved in reducing the operating loss monthly run-rate during
the quarter."
Revenues for the third quarter rose to $143.4 million from $131.1 million
in the third quarter last year. The Company reported diluted earnings per
share of $0.45 for the third quarter compared with $0.46 for the prior-year
quarter. Net income decreased 2.8 percent to $9.2 million from $9.4 million
in the prior-year quarter. Excluding the operating loss from the direct
sale/catalog group, earnings grew 11 percent driven by a healthy core rental
business.
Third quarter revenue from G&K's rental businesses increased 9.7 percent
to $138.8 million over the prior-year period and 6.9 percent on a comparable
basis, after adjusting for acquisitions and divestitures. The improvement was
driven by the U.S. industrial rental growth rate, offset by slower revenue
growth in the cleanroom business. Consolidated direct sale revenue for the
quarter increased 1.4 percent to $4.6 million. Direct sale revenue growth was
lower in the third quarter, as the Company focused on improving bottom line
results.
Cost of rental operations for the quarter increased to 56.7 percent of
rental revenue compared with 56.5 percent for the prior-year quarter, but
reflects a decrease from 57.1 percent in the second quarter. The decrease
reflects the leverage of increasing revenues and improved production costs,
offset by rising fuel costs.
Cost of direct sales increased to 86.9 percent of direct sale revenue
compared with 71.1 percent last year. Expenses associated with a new
fulfillment center and information system implemented in the direct
sale/catalog group caused the increase. The Company reported that it
accomplished the following business turnaround initiatives during the quarter:
1. Initiated a management change in the direct sale business.
2. Made further fulfillment center headcount reductions.
3. Reorganized the fulfillment center operation to provide for enhanced
inventory flow and improved worker productivity.
These efforts have resulted in progressively reduced monthly operating
losses.
SG&A expenses increased 11.6 percent in the third quarter compared with
the prior-year quarter. This increase was driven primarily by a larger sales
force to re-establish a higher revenue growth rate and the expansion expenses
incurred in the direct sale/catalog group.
Year-to-date revenues rose 8.7 percent to $420.7 million from
$387.1 million a year ago. Diluted earnings per share for the nine-month
period were $1.34 compared with $1.33 a year ago, reflecting a slight increase
in net income to $27.4 million.
Thomas Moberly, chief executive officer, said, "We have been working hard
to improve the results of our direct sale/catalog business, and have made
steady progress during the quarter. Of equal importance, we continue to see
positive signs of revenue growth momentum in our core rental business. Not
only does this support our efforts to re-establish historical internal growth,
but affirms the health and growth potential of our industry."
The Company noted that it operates on a fifty-two week accounting
convention. Once every seven years, the Company reports fifty-three weeks of
operating results. Accordingly, fourth quarter results for fiscal year 2000
will be positively impacted by an extra week of revenues and earnings.
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
judgement 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 June 26, 1999.
G&K Services, Inc. is headquartered in Minneapolis, Minnesota. The
company is one of the largest suppliers of uniforms and related products in
the United States, and is the largest uniform service provider in Canada. G&K
operates over 130 uniform processing facilities and branch offices, serving
over 105,000 customers and processing over 2 million garments daily.
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G&K SERVICES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(US dollars in thousands, except per share amounts)
(unaudited)
For the Three For the Nine
Months Ended Months Ended
March 25 March 27 March 25 March 27
2000 1999 2000 1999
REVENUES
Rental operations $138,792 $126,569 $405,207 $374,388
Direct sales 4,641 4,578 15,541 12,746
Total revenues 143,433 131,147 420,748 387,134
OPERATING EXPENSES
Cost of rental operations 78,729 71,531 229,481 210,833
Cost of direct sales 4,034 3,256 12,853 8,830
Selling and administrative 31,294 28,037 92,574 83,144
Depreciation 7,624 7,010 21,688 20,051
Amortization of intangibles 2,377 2,142 6,754 6,424
Total operating expenses 124,058 111,976 363,350 329,282
INCOME FROM OPERATIONS 19,375 19,171 57,398 57,852
Interest expense 4,291 4,180 12,344 13,201
Other income, net (210) (581) (541) (521)
INCOME BEFORE INCOME TAXES 15,294 15,572 45,595 45,172
Provision for income taxes 6,133 6,151 18,220 17,826
NET INCOME $9,161 $9,421 $27,375 $27,346
Basic weighted
average number
of shares outstanding 20,452 20,412 20,456 20,407
BASIC EARNINGS
PER COMMON SHARE $0.45 $0.46 $1.34 $1.34
Diluted weighted
average number
of shares outstanding 20,455 20,527 20,497 20,512
DILUTED EARNINGS
PER COMMON SHARE $0.45 $0.46 $1.34 $1.33
Dividends per share $0.0175 $0.0175 $0.0525 $0.0525
G&K SERVICES, INC.
SELECTED BALANCE SHEET INFORMATION
(US dollars in thousands)
March 25, June 26,
2000 1999
(unaudited)
WORKING CAPITAL $60,417 $73,168
TOTAL ASSETS 580,581 541,432
LONG-TERM DEBT 185,425 193,952
STOCKHOLDERS' EQUITY 262,945 235,633
SOURCE G&K Services, Inc.
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CONTACT:
Richard M. Fink, Chairman, or Jeffrey L.
Wright, Chief Financial Officer, both of G&K Services, Inc.,
612-912-5500; or Michael Rosenbaum of The Financial Relations
Board, 312-266-7800
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