G&K surpasses $1 billion in fiscal year revenue
G&K Services Inc reported record revenue for the fiscal year ended June 28, 2008 of $1,002.4 million, a 7.8 percent increase from previous year revenue of $929.5 million.
The increase in revenue was driven by rental organic growth, strong revenue contribution from acquisitions and the benefit of foreign currency translation.
For the fiscal year, earnings were a record $2.27 per diluted share, a 12.4 percent increase from $2.02 per diluted share in the prior fiscal year.
The increase in earnings per diluted share was driven by a 14.1 percent improvement in operating income as a result of leverage from revenue growth, improved productivity and lower merchandise costs.
The growth in operating income was achieved despite continued economic softness, higher energy costs, lower contribution from direct sales and expenses related to systems implementation activities.
Fiscal 2008 earnings per diluted share were also impacted by a higher effective tax rate of 38.5 percent as compared to the prior year tax rate of 34.0 percent. The lower effective tax rate resulted in a $0.14 per diluted share benefit in the prior year.
“Surpassing one billion in annual revenue marks another milestone we've achieved since introducing our new strategic vision four years ago,” said Richard Marcantonio, chairman and chief executive officer.
“I would like to thank each member of the G&K team for their continued hard work and dedication in driving this record level of revenue, our thirty-ninth consecutive year of revenue growth.
In addition to reporting solid top-line revenue growth, we delivered improved operating margins, record earnings and record cash flow for the fiscal year.
Overall, we're pleased to report another strong fiscal year, despite challenging economic conditions. We'll continue to execute against our long-term strategic plan to drive further positive momentum and achieve our vision of being the market leader in enhancing image and safety in the workplace through innovation.”
For the fourth quarter ended June 28, 2008, total revenue was $252.2 million, a 4.9 percent increase over prior-year revenue of $240.4 million. The increase in fourth quarter revenue was driven by rental organic growth, revenue contribution from acquisitions and the benefit of foreign currency translation.
The company reported fourth quarter earnings of $0.55 per diluted share, which exceeded expectations. Fourth quarter earnings per diluted share were driven by leverage from overall revenue growth, savings from productivity initiatives and the accretive benefit of continued share repurchase activity.
These benefits were offset by higher energy costs, increased product input prices, increased interest expense associated with the higher debt levels required to fund acquisitions and share repurchases and a higher effective tax rate.
Prior-year fourth quarter earnings of $0.57 per diluted share reflected a lower effective tax rate of 34.6 percent. The lower effective tax rate resulted in a $0.05 per diluted share benefit in the prior-year period.
Fourth quarter revenue from G&K's rental business increased to $234.5 million, up 7.0 percent over the prior-year period. The company's organic rental growth rate was approximately 2.0 percent in the quarter.
Organic rental growth continues to reflect solid new account sales, route sales performance and price increases, offset by an increase in economic-driven customer attrition and a reduction in employment levels within certain industries.
Direct sale revenue was $17.7 million, compared to $21.3 million in the prior-year period. Direct sales volume compared to the year-ago period continues to be impacted by weakness in certain customer end-markets and soft overall economic conditions.