-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SOHfLcoszUjk/wqURA++3/mEZynm520laEdCJPMaU5bYysFxB+xGIczmhbktPIy1 bqzwd5yq0bEdYDQJ4HRCZQ== 0000897101-95-000431.txt : 19951120 0000897101-95-000431.hdr.sgml : 19951120 ACCESSION NUMBER: 0000897101-95-000431 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: G&K SERVICES INC CENTRAL INDEX KEY: 0000039648 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PERSONAL SERVICES [7200] IRS NUMBER: 410449530 STATE OF INCORPORATION: MN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-04063 FILM NUMBER: 95593089 BUSINESS ADDRESS: STREET 1: 505 WATERFORD PARK STREET 2: STE 455 CITY: MINNEAPOLIS STATE: MN ZIP: 55441 BUSINESS PHONE: 6125467440 MAIL ADDRESS: STREET 1: 505 WATERFORD PARK STREET 2: STE 455 CITY: MINNEAPOLIS STATE: MN ZIP: 55441 FORMER COMPANY: FORMER CONFORMED NAME: NORTHWEST LINEN CO DATE OF NAME CHANGE: 19681227 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________ F O R M 10 - Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended September 30, 1995, Commission file number 0-4063 G&K SERVICES, INC. (Exact name of registrant as specified in its charter) MINNESOTA 41-0449530 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 505 WATERFORD PARK, STE. 455 MINNEAPOLIS, MINNESOTA 55441 (Address of principal executive offices and zip code) (612) 546-7440 (Registrant's telephone number, including zip code) Indicate by check mark 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 ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. CLASS A Outstanding September 30, 1995 Common Stock, par value $.50 per share 18,539,118 CLASS B Outstanding September 30, 1995 Common Stock, par value $.50 per share 1,865,089 PART I FINANCIAL INFORMATION ITEM 1. Financial Statements G&K SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) SEPTEMBER 30, 1995 (Unaudited)
SEPTEMBER 30, July 1, October 1, 1995 1995 1994 ASSETS CURRENT ASSETS Cash $ 2,583 $ 3,045 $ 2,380 Accounts receivable, net 34,455 32,674 26,662 Inventories- New goods 18,237 17,561 11,042 Goods in service 31,197 30,986 24,027 Prepaid expenses 3,654 3,053 2,982 Total current assets 90,126 87,319 67,093 PROPERTY, PLANT AND EQUIPMENT Land 16,596 16,159 17,036 Buildings and improvements 52,638 50,852 41,572 Machinery and equipment 112,384 106,365 100,366 Automobiles and trucks 21,904 20,713 17,039 Less accumulated depreciation (83,774) (79,638) (78,478) 119,748 114,451 97,535 OTHER ASSETS Goodwill 35,974 35,577 37,465 Restrictive covenants, customer lists and other assets arising from acquisitions 8,021 8,366 9,652 Other assets 7,645 7,620 7,581 Total other assets 51,640 51,563 54,698 $ 261,514 $ 253,333 $ 219,326 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 7,429 $ 12,086 $ 8,330 Accrued expenses - Salaries and employee benefits 6,963 6,999 6,299 Other 5,759 5,773 5,095 Reserve for income taxes 13,319 10,146 10,728 Current maturities of debt 7,445 7,445 5,553 Total current liabilities 40,915 42,449 36,005 LONG TERM DEBT, NET OF CURRENT MATURITIES 80,110 76,519 61,335 DEFERRED INCOME TAXES 10,486 10,582 10,922 OTHER NONCURRENT LIABILITIES 5,534 5,254 4,567 STOCKHOLDERS' EQUITY Common stock, $0.50 par Class A, 20,000,000 shares authorized, 18,539,118, 18,543,360 and 18,498,504 shares issued and outstanding 9,272 9,272 9,249 Class B, 10,000,000 shares authorized, 1,865,089, 1,865,089 and 1,865,089 shares issued and outstanding 933 933 933 Additional paid-in capital 19,227 19,228 18,879 Retained earnings 100,361 95,174 82,595 Cumulative translation adjustment (5,324) (6,078) (5,159) Total stockholders' equity 124,469 118,529 106,497 $ 261,514 $ 253,333 $ 219,326
The accompanying notes are an integral part of these statements. G&K SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) SEPTEMBER 30, 1995 (Unaudited) For the Three Months Ended SEPTEMBER 30, October 1, 1995 1994 REVENUES Rental operations $68,905 $58,844 Direct sales 2,049 1,689 Total revenues 70,954 60,533 EXPENSES Cost of rental operations 38,913 33,440 Cost of direct sales 1,406 1,153 Selling and administrative 15,413 13,663 Depreciation 4,044 3,250 Amortization of intangibles 620 674 Total operating expenses 60,396 52,180 INCOME FROM OPERATIONS 10,558 8,353 Interest expense 2,181 1,288 Other (income) expense, net (154) (294) INCOME BEFORE INCOME TAXES 8,531 7,359 Provision for income taxes 3,344 3,001 NET INCOME $5,187 $4,358 Weighted average number of shares outstanding 20,405 20,364 NET INCOME PER SHARE $0.25 $0.21 Dividends per share $0.0175 $0.0175 The accompanying notes are an integral part of these statements. G&K SERVICES, INC. AND SUBSIDARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) SEPTEMBER 30, 1995 (Unaudited) For The Three Months Ended SEPTEMBER 30, October 1, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 5,187 $ 4,358 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 4,663 3,924 Noncurrent deferred income taxes (110) (110) Changes in current operating items - Inventories (666) (1,753) Accounts receivable and prepaid expenses (2,197) 69 Accounts payable and other current liabilities (1,695) 1,449 Other, net 81 172 Net cash provided by operating activities 5,263 8,109 CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment additions, net (8,877) (7,838) Acquisition of operating assets 0 (9,100) Net cash used for investing activities (8,877) (16,938) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from debt financing 3,151 5,348 Repayment of debt 0 730 Cash dividends paid 0 0 Net cash provided from (used for) financing activities 3,151 6,078 INCREASE (DECREASE) IN CASH (463) (2,751) Cash: Beginning of the period 3,045 5,131 End of the period $ 2,582 $ 2,380 The accompanying notes are an integral part of these statements. ITEM 2. Management's Discussion and Analysis of Operations REVENUES Revenues from rentals and services totaled $68,905,000 and $58,844,000 in the first three months of fiscal 1996 and 1995. Direct sales include revenue from our manufacturing and direct sales divisions. Revenues for G&K's U.S. rental operations grew at a 17.6% rate for the first three months of fiscal 1996 when compared with the same period last year. This 17.6% increase was realized without the benefit of acquisitions. Intensified marketing, strong sales to new accounts, and good customer retention rates helped us achieve this result. This 17.6% rental revenue growth rate is higher than the 14.2% gain for the first three months last year. Revenues for Canadian rental operations increased at a 14.5% rate for the first three months of fiscal 1996 compared to the same period last year. Revenues in Canadian dollars increased 13.2% as compared to the same period last year. There were no significant changes in product mix or selling prices during the first three months of fiscal 1996. EXPENSES Rental operating expenses were $38,913,000 and $33,440,000 representing 56.5% and 56.8% of revenues from rental operations for the first three months of fiscal 1996 and 1995. As a percentage of revenues, improvements in cost of merchandise for rental operations was offset by higher delivery costs. Selling and administrative expenses were $15,413,000 and $13,663,000 in the first three months of fiscal 1996 and 1995, representing a 12.8% increase over 1995 fiscal. As a percentage of revenues, these expenses were 21.7% and 22.6% in the first three months of fiscal 1996 and 1995 respectively. The improvement resulted from reduced administrative costs as a percentage of rental revenues. Interest expense of $2,181,000 increased 69.4% in the first three months of fiscal 1996 because of higher average borrowing levels. Additional borrowing occurred after the first quarter of 1995 and was used to fund the acquisition of a manufacturing division, capital expenditures and increases in working capital requirements. Other income was $154,000 and $294,000 in the first three months of fiscal 1996 and 1995. This decrease resulted from the recognition of losses in invested funds. Effective income tax rates were 39.2% and 40.8% in the first three months of fiscal 1996 and 1995. The decrease resulted from lower effective rates in the U.S. and improved profitability in Canada. NET INCOME Net income for the first three months of fiscal 1996 totaled $5,187,000 representing a 19.0% increase compared with the same period in 1995. LIQUIDITY AND CAPITAL RESOURCES Cash flows from operating activities were $5,263,000 in the first three months of fiscal 1996 compared with $8,109,000 in the same period last year. The decrease is the result of increases in accounts receivable and prepaid expenses and decreases to accounts payable and other current liabilities during the quarter. The Company made purchases of $8,877,000 in property, plant and equipment. These purchases were funded through cash operations and an increase in the line of credit. Management believes that funds generated from operations and existing lines of credit should provide adequate funding for current business operations and should enable G&K to service its debt in a timely manner. G&K SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated financial statements included herein, except for the July 1, 1995, balance sheet which was extracted from the audited financial statements of July 1, 1995, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report. 2. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of September 30, 1995 and October 1, 1994, the results of operations for the three months ended September 30, 1995 and October 1,1994, and the changes in financial position for the periods then ended. The accounting policies followed by the Company are set forth in Note 1 to the Company's Annual Consolidated Financial Statements. In addition, the Company's policy regarding foreign currency translation is to translate balance sheet accounts at the current period-end exchange rate and income statement items at the average exchange rate for the period for its foreign operations. Resulting translation adjustments are made directly to a separate component of stockholders' equity. The results of operations for the three month period ended September 30, 1995, and October 1, 1994, are not necessarily indicative of the results to be expected for the full year. 3. Net income per share is based on the weighted average number of shares of common stock outstanding. 4. Financial Accounting Standards Board Statement No. 123, "Accounting for Stock-Based Compensation" ("Statement No. 123"), issued in October 1995 and effective for fiscal years beginning after December 15, 1995, encourages, but does not require, a fair value based method of accounting for employee stock options or similar equity investments. It also allows an entity to elect to continue to measure compensation cost under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"), but requires pro forma disclosures of net income and earnings per share as if the fair value based method of accounting had been applied. The Company expects to adopt Statement No. 123 in fiscal year 1997. While the Company is still evaluating Statement No. 123, it currently expects to elect to continue to measure compensation cost under APB No. 25 and comply with the pro forma disclosure requirements. If the Company makes this election, this statement will have no impact on the Company's results of operations or financial position. PART II OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K a. Exhibits Exhibit 27 - Financial Data Schedule (SEC use only) b. Reports on Form 8-K. Not Applicable 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. G&K SERVICES, INC. (Registrant) Date: November 10, 1995 /s/Stephen F. LaBelle Stephen F. LaBelle Secretary and Treasurer (Chief Financial Officer) EX-27 2
5 1,000 3-MOS JUN-29-1996 JUL-02-1995 SEP-29-1995 2,583 0 33,430 (1,028) 49,434 90,126 203,522 (83,774) 261,514 40,915 0 10,205 0 0 114,264 261,514 70,954 70,954 1,406 60,396 (154) 552 2,181 8,531 3,344 5,187 0 0 0 5,187 .25 .25
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