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G&K Services reports 2007 Q1 results

31 Oct '06
3 min read

Gross margin for the quarter increased due to lower production and delivery costs, offset by higher levels of merchandise costs primarily associated with new account growth and higher energy costs. Gross margin from direct sales was 23.9 percent compared to 26.5 percent in the prior-year period.

Selling, general and administrative expenses were 22.4 percent of consolidated revenue for the quarter, up from 21.0 percent in the year-earlier period.

Selling, general and administrative expenses increased as a result of the expenses associated with the increase in the company's sales force during the last six months, the continued rollout of the company's information technology initiatives, and ongoing investments in segmented marketing programs.

The effective tax rate for the first quarter increased to 38.5 percent from 34.7 percent in the year-earlier period. The company's effective tax rate in the prior-year quarter was lower due to the reduction of tax reserves no longer required.

Balance Sheet and Cash Flow Statement Review
The company's balance sheet remains strong. As of September 30, 2006, the company had total borrowings of $221.2 million and a total debt to total capitalization ratio of 28.5 percent. Total stockholders' equity increased to $555.5 million.

Cash provided by operating activities for the first quarter was $6.9 million compared to $7.3 million in the prior-year period. Cash used for property, plant and equipment during the quarter totaled $9.8 million compared to $8.5 million in the first quarter of the previous year.

G&K Services Inc

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