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G&K operating margins increase significantly
30
Jan '08
G&K Services Inc reported revenue for the second quarter ended December 29, 2007 of $255.3 million, a 10.6 percent increase from previous year revenue of $230.8 million. This record quarterly revenue was driven by rental revenue growth and solid gains in the company's direct sale business. Strong revenue contribution from acquisitions and the benefit of foreign currency translation also added to the increase in revenue.

Second quarter earnings per diluted share exceeded expectations and rose to $0.60, a 33.3 percent increase from $0.45 per diluted share during the prior-year period. This increase in earnings compared to the prior-year was driven by higher operating income as a result of overall revenue growth, lower merchandise costs and savings achieved from on-going productivity initiatives.

The improvement in earnings was partially offset by higher fuel costs, investments in growth and technology initiatives and one-time costs of approximately $0.03 per diluted share related to a fire at one of the company's production facilities.

During the first half of fiscal 2008, the company also reported a significant increase in cash flow. For the six months ended December 29, 2007, cash provided by operating activities increased 55.1 percent as compared to the prior-year period. This strong level of cash flow generation was driven primarily by a 27.3 percent improvement in operating income over the prior-year period.

"We're pleased to report another strong year-over-year increase in revenue, operating margin, earnings and cash flow," said Richard Marcantonio, chairman and chief executive officer. "Our record quarterly revenue result marks an annual run-rate that exceeds $1 billion. The continued execution of our strategic initiatives will further accelerate future revenue growth, operating margin expansion and cash flow production."

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