-----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, WVpXAN+hndEvNBSuKJy14gNo34+qGXJb8VyDPf2Kubt8T2J3ugb2aGRO0PnoKDhW QPYA/h84rFdR6XN91CD5dQ== 0000897101-96-000249.txt : 19960626 0000897101-96-000249.hdr.sgml : 19960626 ACCESSION NUMBER: 0000897101-96-000249 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960330 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: G&K SERVICES INC CENTRAL INDEX KEY: 0000039648 STANDARD INDUSTRIAL CLASSIFICATION: 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: 96564076 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 FORM 10-Q FOR G & K SERVICES, INC. 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 March 30, 1996 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.) 5995 OPUS PARKWAY, SUITE. 500 MINNETONKA, MINNESOTA 55343 (Address of principal executive offices and zip code) (612) 912-5500 (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 April 26, 1996 Common Stock, par value $.50 per share 18,908,884 CLASS B Outstanding April 26, 1996 Common Stock, par value $.50 per share 1,521,121
G&K SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) MARCH 30 July 1 1996 1995 --------- --------- (UNAUDITED) (Audited) ASSETS CURRENT ASSETS Cash $ 1,010 $ 3,045 Accounts receivable, net 34,832 32,674 Inventories- New goods 18,678 17,561 Goods in service 32,065 30,986 Prepaid expenses 4,668 3,053 --------- --------- Total current assets 91,253 87,319 --------- --------- PROPERTY, PLANT AND EQUIPMENT Land 18,097 16,159 Buildings and improvements 60,646 50,852 Machinery and equipment 117,677 106,365 Automobiles and trucks 23,567 20,713 Less accumulated depreciation (91,448) (79,638) --------- --------- 128,539 114,451 --------- --------- OTHER ASSETS Goodwill 35,036 35,577 Restrictive covenants, customer lists, and other assets arising from acquisitions 7,215 8,366 Other assets 7,499 7,620 --------- --------- Total other assets 49,750 51,563 --------- --------- $ 269,542 $ 253,333 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 7,173 $ 12,086 Accrued expenses - Salaries and employee benefits 8,425 6,999 Other 7,760 5,773 Reserve for income taxes 10,422 10,146 Current maturities of debt 7,445 7,445 --------- --------- Total current liabilities 41,225 42,449 --------- --------- LONG TERM DEBT, NET OF CURRENT MATURITIES 77,139 76,519 DEFERRED INCOME TAXES 10,258 10,582 OTHER NONCURRENT LIABILITIES 6,120 5,254 --------- --------- STOCKHOLDERS' EQUITY Common stock, $.50 par Class A, 50,000,000 shares authorized, 18,908,884 and 18,543,360 shares issued and outstanding 9,454 9,272 Class B, 10,000,000 shares authorized, 1,521,121 and 1,865,089 shares issued and outstanding 761 933 Additional paid-in capital 19,693 19,228 Retained earnings 110,577 95,174 Cumulative translation adjustment (5,685) (6,078) --------- --------- Total stockholders' equity 134,800 118,529 --------- --------- $ 269,542 $ 253,333 ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. G&K SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands) (Unaudited)
For the Three Months Ended For the Nine Months Ended --------------------- ---------------------- MARCH 30 APRIL 1 MARCH 30 APRIL 1 1996 1995 1996 1995 --------- --------- --------- --------- REVENUES Rental operations $ 75,117 $ 64,117 $ 216,828 $ 184,934 Direct sales 2,361 2,602 6,692 7,872 --------- --------- --------- --------- Total revenues 77,478 66,719 223,520 192,806 --------- --------- --------- --------- EXPENSES Cost of rental operations 41,339 37,644 121,464 106,284 Cost of direct sales 1,835 1,812 5,139 6,246 Selling and administrative 17,507 13,825 48,740 41,346 Depreciation 4,679 3,790 13,116 10,653 Amortization of intangibles 627 638 1,902 1,969 --------- --------- --------- --------- Total expenses 65,987 57,709 190,361 166,498 --------- --------- --------- --------- INCOME FROM OPERATIONS 11,491 9,010 33,159 26,308 Interest expense 1,909 2,035 6,246 4,768 Other (income) expense, net 310 (464) (17) (1,001) --------- --------- --------- --------- INCOME BEFORE INCOME TAXES 9,272 7,439 26,930 22,541 Provision for income taxes 3,560 3,020 10,456 9,116 --------- --------- --------- --------- NET INCOME $ 5,712 $ 4,419 $ 16,474 $ 13,425 ========= ========= ========= ========= Weighted average number of shares outstanding 20,406 20,368 20,406 20,368 NET INCOME PER SHARE $ 0.28 $ 0.22 $ 0.81 $ 0.66 ========= ========= ========= ========= Dividends per share $ 0.0175 $ 0.0175 $ 0.0525 $ 0.0525
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. G&K SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
For the Three For the Nine Months Ended Months Ended -------------------- -------------------- MARCH 30, ARPIL 1, MARCH 30, ARPIL 1, 1996 1995 1996 1995 -------- -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 5,712 $ 4,419 $ 16,474 $ 13,425 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 5,306 4,428 15,018 12,622 Noncurrent deferred income taxes (110) (107) (331) (326) Change in current operating items- Inventories 404 (3,389) (2,100) (10,772) Accounts receivable and prepaid expenses 127 (425) (3,693) (3,595) Accounts payable and other current liabilities 722 (768) (1,295) 2,185 Other, net 552 (114) 1,530 (235) -------- -------- -------- -------- Net cash provided by operating activities 12,713 4,044 25,603 13,304 -------- -------- -------- -------- CASH FLOWS FROM INVESTMENT ACTIVITIES: Property, plant and equipment additions, net (7,639) (9,746) (27,008) (24,376) Acquisitions of operating assets 0 0 0 (9,480) -------- -------- -------- -------- Net cash used for investment activities (7,639) (9,746) (27,008) (33,856) -------- -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Sale of Common Stock 11 48 11 48 Proceeds from debt financing 0 0 0 15,000 Net Change in Revolving Line of Credit (9,835) 4,994 431 2,296 Acquisition payments refundable from escrow 0 (278) 0 (630) Cash dividends paid (358) (357) (1,072) (1,070) -------- -------- -------- -------- Net cash provided by (used for) financing activities (10,182) 4,407 (630) 15,644 -------- -------- -------- -------- INCREASE (DECREASE) IN CASH (5,108) (1,295) (2,035) (4,908) ======== ======== ======== ======== Cash: Beginning of the period 6,118 1,518 3,045 5,131 ======== ======== ======== ======== End of the period $ 1,010 $ 223 $ 1,010 $ 223 ======== ======== ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. ITEM 2. Management's Discussion and Analysis of Operations REVENUES FROM RENTALS AND SERVICES Revenues from rentals and services totaled $75,117,000 and $64,117,000 for the third quarter of fiscal 1996 and 1995, and $216,828,000 and $184,934,000 for the first nine months. Revenues for G&K's U.S. rental operations grew at 17.2% rate for the third quarter and 17.2% for the first nine months of fiscal 1996 when compared with the same periods last year. The 17.2% 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. The 17.2% revenue growth rate is higher than the 16.8% increase reported in the third quarter last year and the 17.2% revenue growth rate is higher than the 16.8% gain reported in the first nine months of last year. Revenues for Canadian rental operations increased at a 12.6% rate for the third quarter and 13.2% rate for the first nine months of fiscal 1996 compared to the same periods last year. Revenues in Canadian dollars increased 9.7% for the third quarter and 11.4% for the first nine months as compared to the same periods last year. There were no significant changes in product mix or selling prices during the first six months of fiscal 1996. Revenues from direct sales totaled $2,361,000 and $2,602,000 for the third quarter fiscal 1996 and 1995. Revenues totaled $6,692,000 and $7,872,000 for the first nine months of fiscal 1996 and 1995. Decrease in direct sales is due to reduced BCP external revenues as sales to outside customers have been replaced by production of garments to meet internal requirements. EXPENSES Cost of rental operations were $41,339,000 and $37,644,000 representing 55% and 58.7% of revenues from rentals and operations for the third quarter of fiscal 1996 and 1995. Costs of $121,464,000 and $106,284,000 representing 56% and 57.5% of revenues from rentals and operations for the first nine months of fiscal 1996 and 1995. As a percentage of revenues, improvements in cost of merchandise for rental operations were partially offset by higher delivery costs. Cost of direct sales were $1,835,000 and $1,812,000 representing 77.7% and 69.6% of revenues for the third quarter of fiscal 1996 and 1995. Costs of $5,139,000 and $6,246,000 representing 76.8% and 79.3% of revenues for the first nine months of fiscal 1996 and 1995. The decrease in cost of direct sales as a percent of revenues is due to the realization of cost savings resulting from the internal manufacturing of garments versus purchasing from outside sources. Selling and administrative expenses were $48,740,000 and $41,346,000 in the first nine months of fiscal 1996 and 1995, representing a 17.9% increase over fiscal 1995. As a percentage of revenues, these expenses were 21.8% and 21.4% in the first nine months of fiscal 1996 and 1995. Depreciation expense equaled $4,679,000 and $3,790,000, and $13,116,000 and $10,653,000 for the three and nine month periods in fiscal 1996 and 1995, respectively. The increase in depreciation of 23.5% and 23.1% are the result of increased capital spending in fiscal 1995 and fiscal 1996. Interest expense of $6,246,000 increased 31% in the first nine 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 $17,000 and $1,001,000 in the first nine months of fiscal 1996 and 1995. This decrease resulted from the recognition of losses in invested funds in the first quarter, as well as disposal of plant equipment. U.S. exchange losses increased from purchases of BCP garments at Canadian locations. Effective income tax rates were 38.8% and 40.4% in the first nine 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 nine months of fiscal 1996 totaled $16,474,000 representing a 22.7% increase compared with the same period in 1995. LIQUIDITY AND CAPITAL RESOURCES Cash flows from operating activities were $25,603,000 in the first nine months of fiscal 1996 compared with $13,304,000 in the same period last year. The increase is the result of fiscal 1995's increase in inventory relating to the BCP acquisition, while no such increase in inventory occurred in 1996. 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 related to the Work Wear Corporation of Canada acquisition in a timely manner. G&K SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and nine month periods ended March 30, 1996 and April 1, 1995 (Unaudited) 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 March 30, 1996, April 1, 1995, and July 1, 1995, and the results of operations and the changes in financial position for the three and nine months ended March 30, 1996 and April 1, 1995. The accounting policies followed by the Company are set forth in Note 1 to the Company's Annual Consolidated Financial Statements. The results of operations for the nine month period ended March 30, 1996, and April 1, 1995, 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 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 of financial position because the Company plans are fixed stock option and restricted stock plans which have no intrinsic value at the grant date under APB No. 25. PART II OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders a. The Company held its Annual Meeting of Stockholders on November 1, 1995. b. The following seven persons were elected directors: Bruce G. Allbright, Paul Baszucki, Richard Fink, Wayne Fortun, Donald W. Goldfus, William Hope and Bernard Sweet. c. Each director nominee received the following votes: Allbright, 31,700,701 shares in favor, 0 shares voting against and 33,721 shares abstaining, Baszucki, 31,700,260 shares in favor, 0 shares voting against and 34,162 shares abstaining, Fink, 31,701,046 shares in favor, 0 shares voting against and 33,376 shares abstaining, Fortun, 31,695,975 shares in favor, 0 shares voting against and 38,447 shares abstaining, Goldfus, 31,700,586 shares in favor, 0 shares against and 33,836 shares abstaining, Hope, 31,701,046 shares in favor, 0 shares voting against and 33,376 shares abstaining and Sweet, 31,700,551 shares in favor, 0 shares voting against and 33,871 shares abstaining. ITEM 6. Exhibits and Reports on Form 8-K a. Exhibits Exhibit 27 - Financial Data Schedule (for 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: May 14, 1996 /s/Stephen F. LaBelle Stephen F. LaBelle Secretary and Treasurer (Chief Financial Officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS JUN-29-1996 JUL-02-1995 MAR-30-1996 1,010 0 36,289 (1,456) 50,743 91,253 219,988 91,449 269,542 41,225 0 0 0 10,215 124,585 269,542 223,520 223,520 5,139 190,361 (16) 1,629 6,246 26,930 10,456 16,474 0 0 0 16,474 .81 .81
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