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G&K Services reports 2007 Q1 results

31
Oct '06

G&K Services Inc reported revenue for the first quarter ended September 30, 2006 of $223.1 million, a 7.3 percent increase from prior-year revenue of $207.9 million.

Continued increases in rental organic growth and strong direct sale organic growth drove the increase in revenue compared to the prior-year.

Earnings per diluted share totaled $0.43 for the quarter compared to $0.49 during the prior-year quarter. As expected, first quarter earnings reflect higher rental gross margins offset by the increased selling, general and administrative expenses associated with investments in sales, marketing and technology initiatives as compared to the prior-year.

Income Statement Review
First quarter revenue from G&K's rental business increased to $207.3 million, up 6.8 percent over the prior-year period. The company's organic industrial rental growth rate was approximately 5.0 percent in the first quarter, an improvement of 50 basis points compared to the fourth quarter of fiscal 2006 and 200 basis points compared to the prior-year period.

Direct sale revenue, driven almost entirely by organic growth, increased to $15.8 million, up 14.0 percent over the prior-year quarter.

The organic revenue growth rates are calculated using industrial rental and direct sale revenue, respectively, adjusted for foreign currency exchange rate differences and revenue from newly acquired locations compared to prior-period results.

Gross margin from rental operations for the quarter was 36.5 percent, an increase of 70 basis points compared to 35.8 percent in the prior-year period.

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