UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): October 30, 2012
G&K
Services, Inc.
(Exact
name of registrant as specified in its charter)
Minnesota |
0-4063 |
41-0449530 |
(State or other jurisdiction |
(Commission File |
(IRS Employer |
5995 Opus Parkway, Minnetonka, Minnesota |
55343 |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (952) 912-5500
NOT
APPLICABLE
(Former name or former address, if changed since last
report)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 | Results of Operations and Financial Condition |
On October 30, 2012, G&K Services, Inc. issued a press release announcing its financial results for the fiscal first quarter ended September 29, 2012. A copy of the press release is furnished as Exhibit 99.1 to this report. The press release contains a non-GAAP financial measure which is rental organic growth rate. The organic growth rate is calculated using rental revenue, adjusted for foreign currency exchange rate differences, acquisitions, and divestitures. Management believes that organic growth is useful in analyzing the company’s overall financial condition and the results of its operations.
The information in this Item 2.02 and Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended.
Item 9.01 | Financial Statements and Exhibits. | ||
(c) | Exhibits. | ||
99.1 | Press Release dated October 30, 2012 (furnished) |
SIGNATURE
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: |
October 30, 2012 |
By: |
/s/ Jeffrey L. Wright |
Name: |
Jeffrey L. Wright |
||
Title: |
Executive Vice President, Director and Chief |
||
Financial Officer |
EXHIBIT INDEX
Exhibit No. |
Description |
99.1 |
Press Release dated October 30, 2012 |
-4-
Exhibit 99.1
G&K Services Reports Fiscal 2013 First Quarter Results
Company Achieves Record Quarterly Earnings Per Diluted Share of $0.62; 38 Percent Growth
Revenue Grows 6.1 Percent to $222 Million
Operating Margin Increases 140 Basis Points to 8.8 Percent
Increases Full-Year Earnings Guidance
MINNEAPOLIS--(BUSINESS WIRE)--October 30, 2012--G&K Services, Inc. (NASDAQ: GKSR) today reported operating results for the first quarter of its fiscal year 2013, which ended on September 29, 2012. First quarter revenue grew by 6.1 percent to $222.4 million, up from $209.7 million in last year’s first quarter, driven by solid growth in both rental operations and direct sales. First quarter net earnings per diluted share grew to $0.62, a 38 percent increase from earnings of $0.45 per diluted share in the prior-year period. This was the highest quarterly earnings per diluted share in the company’s history.
“The first quarter was a terrific start to our fiscal year, continuing our momentum,” said Douglas A. Milroy, Chief Executive Officer. “We were particularly pleased with our strong operating margin improvement, which reflects crisp execution of our game plan, especially a company-wide commitment to service excellence and a focus on improving operations.”
Income Statement Review
First quarter revenue from
rental operations grew solidly to $203.5 million, up from $194.0 million
in the prior-year quarter. The rental organic growth rate was 5.6
percent. The organic growth rate is calculated using revenue adjusted
for foreign currency exchange rate differences, acquisitions and
divestitures. First quarter direct sales grew by 20.7 percent to $19.0
million, up from $15.7 million in the prior-year. Direct sales growth
was primarily due to increased sales from new accounts.
Operating margin expanded to 8.8 percent, a 140 basis point improvement from the 7.4 percent margin in last year’s first quarter. The operating margin increase was primarily due to revenue growth leveraging fixed costs, productivity improvements in rental production and delivery, and lower energy and healthcare costs. These improvements were partially offset by an expected increase in rental merchandise expense.
Net earnings also benefited from lower interest expense and a lower effective tax rate. Interest expense in the first quarter was $1.0 million, down from $1.7 million in the prior-year period, primarily due to a lower effective interest rate, partially offset by higher total debt. The effective tax rate was 35.7 percent, compared to 40.0 percent in last year’s first quarter. The lower tax rate was due to the resolution of a tax contingency in the current period and the prior-year write-off of deferred tax assets related to equity compensation.
Balance Sheet and Cash Flow
The company ended the first
quarter with total debt, net of cash, of $185.5 million and a debt to
total capital ratio of 33.0 percent. The company reduced its total debt
by $12.5 million during the quarter. Total stockholders’ equity at the
end of the quarter was $417.6 million.
The company generated strong cash flow during the quarter. Cash provided by operating activities in the first quarter improved to $19.8 million, an increase of $27.2 million compared to negative $7.4 million in last year’s first quarter. The stronger cash flow was primarily due to improvements in working capital, higher net income, and a lower contribution to the company’s pension plan than in the prior year. Capital expenditures were $10.2 million, up from $7.2 million in the prior year period, due to increased investments to enhance productivity and support profitable revenue growth.
Outlook
The company expects to drive continued
performance gains in fiscal 2013, despite persistent weakness in the
economy, slow employment growth and considerable political uncertainty.
The company continues to expect fiscal 2013 revenue in a range of $890
million to $910 million. Based on first quarter performance, the company
is raising its full-year earnings guidance to a range of $2.25 to $2.45
per diluted share, up from the previously announced range of $2.20 to
$2.40.
Conference Call Information
The company will host a
conference call today at 10:00 a.m. Central Time to discuss its
financial results and outlook. The call will be webcast and is available
in the Investor Relations section of the company’s web site at www.gkservices.com.
A replay of the call will be available on the company’s web site through
November 30, 2012.
Safe Harbor for Forward-Looking Statements
Statements
made in this press release concerning the company’s intentions,
expectations or predictions about future results or events are
“forward-looking statements” within the meaning of The Private
Securities Litigation Reform Act of 1995. These statements reflect the
company’s current expectations or beliefs, and are subject to risks and
uncertainties that could cause actual results or events to vary from
stated expectations, which could be material and adverse. You are
cautioned not to place undue reliance on these statements, and the
company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Information concerning potential factors that could affect future financial results is included in the company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2012.
About G&K Services, Inc.
G&K Services, Inc. is a
service-focused market leader of branded uniform and facility services
programs in the United States, and is the largest such provider in
Canada. Headquartered in Minneapolis, Minnesota, G&K Services has nearly
7,800 employees serving approximately 165,000 customers from 160
facilities in North America. G&K Services is a publicly held company
traded over the NASDAQ Global Select Market under the symbol GKSR and is
a component of the Standard & Poor’s SmallCap 600 Index. For more
information on G&K Services, visit the company’s web site at www.gkservices.com.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
G&K Services, Inc. and Subsidiaries | ||||||||
(Subject to Reclassification) | ||||||||
For the Three Months Ended | ||||||||
(U.S. Dollars, in thousands, except per share data) | September 29, 2012 | October 1, 2011 | ||||||
REVENUES | ||||||||
Rental operations | $ | 203,459 | $ | 194,001 | ||||
Direct sales | 18,969 | 15,722 | ||||||
Total revenues | 222,428 | 209,723 | ||||||
OPERATING EXPENSES | ||||||||
Cost of rental operations | 138,672 | 133,587 | ||||||
Cost of direct sales | 14,333 | 11,915 | ||||||
Selling and administrative | 49,875 | 48,746 | ||||||
Total operating expenses | 202,880 | 194,248 | ||||||
INCOME FROM OPERATIONS | 19,548 | 15,475 | ||||||
Interest expense | 1,036 | 1,653 | ||||||
INCOME BEFORE INCOME TAXES | 18,512 | 13,822 | ||||||
Provision for income taxes | 6,618 | 5,529 | ||||||
NET INCOME | $ | 11,894 | $ | 8,293 | ||||
BASIC EARNINGS PER COMMON SHARE | $ | 0.63 | $ | 0.45 | ||||
DILUTED EARNINGS PER COMMON SHARE | $ | 0.62 | $ | 0.45 | ||||
Weighted average number of shares outstanding, basic | 18,681 | 18,430 | ||||||
Weighted average number of shares outstanding, diluted | 18,949 | 18,610 | ||||||
Dividends declared per share | $ | 0.195 | $ | 0.130 | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
G&K Services, Inc. and Subsidiaries | ||||||||
(Subject to Reclassification) | ||||||||
(U.S. Dollars, in thousands) | September 29, 2012 | June 30, 2012 | ||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 20,230 | $ | 19,604 | ||||
Accounts receivable, net | 93,372 | 93,064 | ||||||
Inventories, net | 175,085 | 178,226 | ||||||
Other current assets | 13,125 | 12,239 | ||||||
Total current assets | 301,812 | 303,133 | ||||||
Property, Plant, Equipment, net | 192,007 | 187,840 | ||||||
Goodwill | 327,467 | 325,336 | ||||||
Other Assets | 59,096 | 57,422 | ||||||
Total assets | $ | 880,382 | $ | 873,731 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 47,840 | $ | 41,358 | ||||
Accrued expenses | 66,440 | 69,902 | ||||||
Deferred income taxes | 8,508 | 8,439 | ||||||
Current maturities of long-term debt | 28,691 | 206 | ||||||
Total current liabilities | 151,479 | 119,905 | ||||||
Long-Term Debt, net of Current Maturities | 177,000 | 218,018 | ||||||
Deferred Income Taxes | 8,758 | 5,473 | ||||||
Accrued Income Taxes | 11,090 | 11,339 | ||||||
Pension Withdrawal Liability | 23,556 | 23,562 | ||||||
Other Noncurrent Liabilities | 90,867 | 92,375 | ||||||
Stockholders' Equity | 417,632 | 403,059 | ||||||
Total Liabilities and stockholders' equity | $ | 880,382 | $ | 873,731 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
G&K Services, Inc. and Subsidiaries | ||||||||||
(Subject to Reclassification) | ||||||||||
For the Three Months Ended | ||||||||||
September 29, | October 1, | |||||||||
(U.S. Dollars, in thousands) | 2012 | 2011 | ||||||||
Operating Activities: | ||||||||||
Net income | $ | 11,894 | $ | 8,293 | ||||||
Adjustments to reconcile net income to net | ||||||||||
cash provided by (used for) operating activities - | ||||||||||
Depreciation and amortization | 8,056 | 8,776 | ||||||||
Other adjustments | 1,387 | 1,001 | ||||||||
Changes in current operating items and other, net | (1,557 | ) | (25,441 | ) | ||||||
Net cash provided by (used for) operating activities | 19,780 | (7,371 | ) | |||||||
Investing Activities: | ||||||||||
Property, plant and equipment additions, net | (10,200 | ) | (7,195 | ) | ||||||
Acquisition of business assets, net of cash | (101 | ) | - | |||||||
Net cash used for investing activities | (10,301 | ) | (7,195 | ) | ||||||
Financing Activities: | ||||||||||
Payments of long-term debt | (133 | ) | (236 | ) | ||||||
(Payments on) Proceeds from revolving credit facilities, net | (12,400 | ) | 2,000 | |||||||
Cash dividends paid | - | (2,446 | ) | |||||||
Net Issuance of common stock, under stock option plans | 3,999 | 536 | ||||||||
Purchase of common stock | (730 | ) | (604 | ) | ||||||
Net cash used for financing activities | (9,264 | ) | (750 | ) | ||||||
Increase (Decrease) in Cash and Cash Equivalents | 215 | (15,316 | ) | |||||||
Effect of Exchange Rates on Cash | 411 | (95 | ) | |||||||
Cash and Cash Equivalents: | ||||||||||
Beginning of period | 19,604 | 22,974 | ||||||||
End of period | $ | 20,230 | $ | 7,563 |
CONTACT:
G&K Services, Inc.
Jeff Huebschen, 952-912-5773
Director,
Investor Relations
jeff.huebschen@gkservices.com