MINNEAPOLIS, Oct. 24 /PRNewswire/ -- G&K Services, Inc. (Nasdaq: GKSRA),
one of North America's market leaders in corporate identity apparel programs
and facility services, today announced revenue and earnings results for its
first quarter ended September 30, 2000. The Company reported revenues for the
first quarter of $145.9 million, up 8.1 percent from $135.0 million in the
first quarter last year. Income from operations was $20.2 million, up
5.2 percent from $19.2 million last year. Earnings per diluted share were
$0.48 compared with $0.47 for the prior-year quarter.
"We remain focused on two key priorities -- improving our revenue growth
rate and positioning our direct sale business for improved bottom-line
results," said Richard Fink, chairman. "During the first quarter we took
additional steps toward these priorities, improving our quarterly results as
well as positioning the Company for enhanced future financial performance.
Our revenue growth initiatives are centered on accelerated internal growth
through an expanded sales force, improved sales productivity, aggressively
building G&K's presence in the national account market, new product
introductions and service marketing."
First quarter revenue from G&K's rental business increased 8.7 percent
over the prior-year period to $141.9 million. Consolidated direct sale
revenue for the quarter decreased 8.6 percent to $4.0 million compared with
$4.4 million last year. Direct sale revenue was down as the Company continues
to focus on improving efficiency and productivity of the fulfillment
operation.
Cost of rental operations for the quarter increased to 57.2 percent of
rental revenue compared with 56.1 percent for the prior-year quarter. The
increase reflects higher fuel costs and increased workers' compensation and
health insurance expenses. Cost of direct sales for the quarter decreased to
82.0 percent of direct sale revenue compared with 83.9 percent last year and
88.0 percent in the fourth quarter of fiscal 2000.
Selling, general and administrative expenses were 21.8 percent of
consolidated total revenue in the first quarter compared with 22.0 percent in
the prior-year quarter. The slight improvement in selling, general and
administrative expense was driven by cost reductions in the direct sale
business.
"We continue to see positive signs throughout the business," said Thomas
Moberly, chief executive officer. "Fueled by internal growth initiatives, our
weekly revenue run rate during the quarter showed nice momentum. In
particular, our focus on increasing our national account customer base is a
real bright spot. Weekly revenue managed under a national account agreement
was up more than 20 percent compared with last year. In fact, we recently
received the Ford Motor Company's Q1 Preferred Quality Award for demonstrating
our ability to generate cost savings and maintain a high level of customer
satisfaction. This award illustrates our success in providing large national
account customers with innovative rental programs designed to meet their
special needs," continued Moberly. "In addition, the revenue generated from
the anti-fatigue mat program, launched as a new rental product in the fourth
quarter of fiscal 2000, is continuing to grow after the initial promotion."
The Company reported strong cash flows for the quarter. Debt, net of
cash, was down $12.8 million from the end of fiscal 2000. Free cash flow,
which is cash from operations less capital expenditures, for the quarter was
$14.7 million, up 18.0 percent from the first quarter last year.
Acquisition Completed
"Subsequent to the end of the first quarter, the Company also reported
that it has completed the acquisition of Uniform Rental Supply, Inc., a North
Carolina based uniform and textile service company. "While this acquisition
represents less than one percent of our consolidated revenues, it expands our
market share and geographic presence in North Carolina," Moberly stated.
"Uniform Rental Supply has a great reputation with its customers. We are
pleased to add them to the G&K family."
Outlook Remains Favorable
The Company reported that it expects to achieve earnings growth for fiscal
2001 consistent with its long-term earnings growth objective of 15 to 18
percent.
G&K Services' first quarter investor conference call is scheduled for
11:00 a.m. EST today, October 24, 2000. This call will also be simulcast and
available for replay over the Internet via the web sites http://www.vcall.com ,
http://www.streetfusion.com , http://www.ccbn.com and http://www.gkservices.com .
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.
G&K Services, Inc. is headquartered in Minneapolis, Minnesota. The
Company 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 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 Months Ended
September 30 September 25
2000 1999
REVENUES
Rental operations $141,898 $130,536
Direct sales 4,043 4,424
Total revenues 145,941 134,960
OPERATING EXPENSES
Cost of rental operations 81,163 73,181
Cost of direct sales 3,315 3,713
Selling and administrative 31,832 29,716
Depreciation 7,000 7,004
Amortization of intangibles 2,425 2,140
Total operating expenses 125,735 115,754
INCOME FROM OPERATIONS 20,206 19,206
Interest expense 4,399 3,886
Other income, net (581) (573)
INCOME BEFORE INCOME TAXES 16,388 15,893
Provision for income taxes 6,571 6,310
NET INCOME $9,817 $9,583
Basic weighted average number
of shares outstanding 20,477 20,459
BASIC EARNINGS PER COMMON SHARE $0.48 $0.47
Diluted weighted average number
of shares outstanding 20,503 20,535
DILUTED EARNINGS PER COMMON SHARE $0.48 $0.47
Dividends per share $0.0175 $0.0175
G&K SERVICES, INC.
SELECTED BALANCE SHEET INFORMATION
(US dollars in thousands)
September 30 July 1
2000 2000
(unaudited)
WORKING CAPITAL $60,761 $49,671
TOTAL ASSETS 592,442 594,952
LONG-TERM DEBT 169,446 167,345
STOCKHOLDERS' EQUITY 279,441 271,522
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, both of G&K Services,
Inc., 952-912-5500, or Leslie Hunziker of The Financial Relations
Board, 312-640-6760
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