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Q1FY15 earnings from operations up 23% at G&K Services
Nov '14
Earnings from continuing operations grew 23 percent year-on-year in the first fiscal quarter ending September 27, 2014, at US based & NASDAQ-listed - G&K Services, a provider of uniform and facility services programs.

In its first fiscal quarter of 2014, earnings from continuing operations grew 23 percent to $0.81 per diluted share, compared to adjusted earnings from continuing operations of $0.66 per diluted share in the prior year first fiscal quarter.

First quarter of 2014 revenue, however grew slower at 4.5 percent to reach $230.2 million, up from $220.2 million in last year’s first fiscal quarter.

The organic growth rate, which adjusts for the impact of currency exchange rate differences, acquisitions and divestitures stood at 5.4 percent from a year ago period.

“This strong organic growth was partially offset by the negative impact of a lower exchange rate for the Canadian dollar,” G&K Services said.

Operating margin from continuing operations expanded to 11.7 percent in the reporting quarter, a 130 basis point increase compared to an adjusted operating margin from continuing operations of 10.4 percent in last year’s first quarter.

G&K Services said, “The higher operating margin was primarily driven by operating leverage from revenue growth and productivity improvements in rental operations. These improvements more than offset higher rental merchandise expense, and increased employee healthcare costs.”

Interest expense in the quarter under review rose to $1.8 million, compared to $1.6 million in the prior-year quarter, primarily due to higher total debt resulting from funding the special dividend which was paid in June 2014.

The effective tax rate decreased to 34.7 percent in the first quarter of 2014, against 38.1 percent in the first quarter last year, primarily due to the release of reserves related to the expiration of certain tax statutes.

The lower tax rate positively impacted first quarter earnings by approximately $0.04 per share. Diluted share count was 20.0 million, compared to 19.8 million in last year’s first quarter.

The company ended the first quarter with total debt, net of cash, of $231.1 million and a ratio of debt to total capital of 41.6 percent. Total stockholders’ equity at the end of the quarter was $378.3 million.

“On a three month annualized basis, return on invested capital (ROIC) increased 180 basis points to 10.8 percent, compared to 9.0 percent in the first quarter last year,” G&K Services informs.

G&K expects fiscal 2015 revenue to be in a range of $930 million to $950 million. Based on first quarter results, the company now expects full-year earnings per diluted share between $3.15 and $3.30, up from the previously announced range of $3.10 to $3.25. (AR)

Fibre2fashion News Desk - India

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