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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 1 0 - K
(Mark one)
_X_ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Fiscal Year Ended July 1, 1995
___ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-4063
G&K SERVICES, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0449530
(State of incorporation) (I.R.S. Employer Identification No.)
505 WATERFORD PARK, STE. 455
MINNEAPOLIS, MINNESOTA 55441
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 546-7440
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which Registered
None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock (par value $0.50 per share)
Class B Common Stock (par value $0.50 per share)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_. No _____.
The aggregate market value of the voting stock of registrant held by
non-affiliates of registrant, on September 21, 1995, computed by reference to
the closing sale price of such shares on such date, was approximately
$424,463,000.
At September 21, 1995, there were outstanding 18,539,118 and 1,865,089
shares of the registrant's Class A and Class B Common Stock, respectively.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes _X_. No ___.
DOCUMENTS INCORPORATED BY REFERENCE
PART OF 10-K INTO WHICH
DOCUMENT DOCUMENT IS INCORPORATED
Portions of annual report to stockholders
for the fiscal year ended July 1, 1995 Parts II and IV
Portions of proxy statement for the annual meeting
of stockholders to be held November 1, 1995 Parts I and III
PART I
ITEM 1. BUSINESS
G&K Services, Inc. and its wholly owned subsidiaries (the "Company" or
"G&K"), leases and maintains uniforms and related textile products. During
fiscal 1995, approximately 60% of total revenues were derived from uniform
rentals. The balance was principally from rentals of non-uniform items, such as
floor mats, dust mops and cloths, wiping towels and selected linen items, and
the manufacture and sale of garments. The revenue generated from manufacturing
is not a material part of G&K's revenue.
The Company has been expanding its operations steadily into additional
geographic markets. In the United States, G&K currently operates in 27 states
from 22 processing plants and 41 sales and service centers. In Canada, the
Company serves customers from 18 locations, including 8 processing plants in the
provinces of Ontario and Quebec. By comparison, in 1985, G&K operated from 33
locations in 14 states.
The Company targets its marketing efforts first to focus on those
customers, industries and geographic locations that are expanding and which need
a quality-oriented uniform program; and then to provide high levels of product
quality, customer service and communication. The Company's experience with both
existing and potential customers confirms that a large segment of the market
wants these features built into their uniform programs and are willing to pay a
premium price to a vendor that can supply them consistently.
PRODUCTS
Uniforms
The Company's full-service leasing program supplies a broad range of work
garments, specialized uniforms for corporate identity programs, anti-static
garments, ultraclean particle-free garments, and dress clothing for supervisors,
sales personnel and others needing upgraded work apparel.
Its products are used in a diversified spectrum of businesses including:
pharmaceutical and electronics manufacturers, transportation and distribution
firms, health care and food service operations, auto dealerships and equipment
repair companies, and schools and office buildings. Its customer base includes
divisions of more than half of the Fortune 100 companies as well as tens of
thousands of smaller businesses. No one customer accounts for over one-quarter
of 1% of the Company's total revenues.
Uniform programs provide customers a number of benefits:
* Identification - uniforms help identify employees as working for a
particular company or department.
* Image - uniforms enhance the appearance of employees appearing before
the public and help create a more professional image for the company.
* Worker protection - uniforms help protect workers from difficult
environments such as heavy soils, heat, flame or chemicals.
* Product protection - uniforms help protect products against
contamination in the food, pharmaceutical, electronics and health care
industries.
* Employee morale - uniforms can provide a valued benefit to employees
and help improve morale.
The Company provides its uniform leasing customers with a full range of
services. Advice and assistance are offered in choosing fabrics, styles and
colors appropriate to the customer's specific needs. A large stock of new and
used garments is available to provide rapid response as individual customer
needs change due to increases, decreases or turnover in their work force.
Professional cleaning, finishing, repair and replacement of uniforms in use is a
normal part of the rental service. Soiled uniforms are picked up at the
customer's location and returned clean on a weekly cycle.
Uniform leasing provides customers with significant advantages over
ownership. Leasing eliminates investment in uniforms; offers flexibility in
styles, colors and quantities as customer requirements change; assures
consistent professional cleaning, finishing, repair and replacement of items in
use; and provides freedom from the expense and management time necessary to
administer a uniform program.
Non-Uniform Items
Most customers also lease items other than uniforms, primarily floor mats,
dust mops and cloths, wiping towels and linens. Such items make up approximately
40% of total rental revenues.
Floor mats are used to protect facilities from dust, grease, moisture and
other hazards. Floor mats can also enhance decor, provide a corporate identity
logo, or improve traffic safety. Dust mops, cloths and wiping towels are
chemically treated to attract and hold dirt, and are provided in a range of
sizes. The Company's wiping towels are used by its customers for numerous wiping
and cleaning tasks in varied settings. Selected linen items, primarily aprons
and towels, are used for sanitary, or cleaning jobs.
Competition
The Company's business encounters a high level of competition with a number
of companies in the geographic areas it serves. The Company believes that it
ranks among the nation's largest garment rental suppliers. Major competitors
include AraMark (a division of ARA Services, Inc.), and such publicly held
companies as National Service Industries, Inc., Unifirst Corporation and Cintas
Corporation. Some of these competitors have greater financial resources than
G&K. The Company believes that it competes effectively in its line of business
because of the quality and breadth of its product line, and the comprehensive
customer service programs it offers. G&K's information regarding its competitive
position is based on available public information and trade association data.
Environmental Matters
The Company generates modest amounts of wastes in connection with its
operations. The Company believes that all of these wastes have been disposed of
properly. Some of these wastes may be classified as hazardous wastes under
recently enacted environmental legislation.
The Company has been identified as a potentially responsible party ("PRP")
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or similar state laws, at a number of waste
disposal sites. Under such laws, PRP's typically are jointly and severally
liable for any investigation and remediation costs incurred with respect to such
sites. The Company's ultimate responsibility, therefore, could be greater than
the share of waste contributed by the Company would otherwise indicate.
The Company has entered into administrative agreements at certain of these
sites to perform remedial actions. At the landfill in Andover, Minnesota, the
cost of remediation is estimated to range from $10 million to $15 million. As
one of numerous PRP's, the Company has entered into a Consent Decree and has
paid $160,000. The Company believes that it has no further responsibility for
site remediation at the Andover Landfill based upon the Consent Decree.
The Company has also entered into a Consent Decree involving the landfill
site in East Bethel, Minnesota as one of 56 PRP's. The Company was sued by the
landfill operator, Sylvester Bros. Development Company, for contribution to the
cost of cleaning up this site pursuant to directives from the Minnesota
Pollution Control Agency or the Environmental Protection Agency (EPA). Based
upon an estimate that the total cleanup of the site will not exceed $7,095,980,
the Company has agreed to pay an initial amount of $190,500. In addition, the
Company has agreed to pay its pro rata share of any additional amounts by which
the actual clean up costs exceed the initial total cost estimate. Whether this
will occur depends upon a number of contingencies, therefore any potential
future liability is uncertain.
The Company has been notified by the EPA that it is a PRP with respect to
hazardous waste discovered at the MIG Landfill which is located near Belvedere,
Illinois. As a result, the Company has been participating in the investigative
phase of the EPA. The company is now finalizing an agreement with the EPA which,
based on available information, will terminate the Company's liability at this
site. Pursuant to the agreement with the EPA, the Company will be a de minimis
party. The agreement provides that the Company has no further exposure to
liability from the EPA or any other party involved at the MIG Landfill site.
The Company is also resolving its potential liability related to a lawsuit
filed by a local citizens' group in San Francisco, California under the Clean
Water Act. The citizens' group alleged that the Company discharged wastewater
into the local sewer system in violation of the Company's permitted discharge
and that such alleged violation interfered with the local authorities' ability
to process the wastewater. The Company has entered into an agreement with the
citizens' group which resolves the Company's alleged liability for acclaimed
wastewater discharge in excess of its local permit. This agreement has been
approved by the United States District Court for the Northern District of
California.
The Company is resolving its potential liability for the release of
hazardous waste at the Ekotek recycling site in Salt Lake City, Utah. A PRP
group at the Ekotek site claimed that the Company contributed hazardous waste at
the site. The Company is resolving its potential liability through a de minimus
settlement with the EPA. Pursuant to such agreement, the Company should have no
furhter liability to the EPA or any other contributor to the site. The Company
expects to receive an order dismissing it form the lawsuit in the Unted states
District Court for the District of Utah in the very near future.
Employees
The Company's U.S. operations had a total of 4035 employees as of July 1,
1995, consisting of 156 professional sales personnel, 721 route personnel, 2431
production employees, 305 clerical employees, and 422 management and staff
employees. Approximately 16% of the Company's employees are represented by
unions. Management believes employee relations to be satisfactory.
The Company's Canadian operations had a total of 943 employees as of July
1, 1995, consisting of 34 professional sales personnel, 135 route personnel, 560
production employees, 75 clerical employees, and 125 management and staff
employees. Approximately 60% of the Company's Canadian employees are represented
by unions. Management believes employee relations to be satisfactory.
The Company's Canadian operations had a total of 943 employees as of July
1, 1995, consisting of 34 professional sales personnel, 135 route personnel, 560
production employees, 75 clerical employees, and 125 management and staff
employees. Approximately 60% of the Company's Canadian employees are represented
by unions. Management believes employee relations to be satisfactory.
Foreign and Domestic Operations
Financial information relating to foreign and domestic operation is set
forth on page 26 of the Company's 1995 Annual Report to Stockholders.
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ITEM 2. PROPERTIES
The Company cleans and supplies rental items principally from twenty-two
industrial garment, dust control and linen supply plants located in the
following cities in the United States:
Building
City Square Footage
Albuquerque, New Mexico 38,800
Atlanta, Georgia 40,000
Chicago, Illinois 48,700
Denver, Colorado 55,000
Fort Worth, Texas 38,000
Green Bay, Wisconsin 51,700
Houston, Texas 42,400
Kansas City, Missouri 45,000
Los Angeles, California 48,300
Mesa, Arizona 36,000
Miami, Florida 42,000
Milwaukee, Wisconsin 41,000
Minneapolis, Minnesota (two plants) 70,000
93,000
Mobile, Alabama 47,300
New Orleans, Louisiana 29,000
Pittsburg, California 47,000
Rockford, Illinois 32,000
Salt Lake City, Utah 41,500
San Antonio, Texas 40,700
San Jose, California 58,600
Seattle, Washington 44,000
All of these facilities are owned by the Company except the Miami,
Florida, facility which is leased. The Seattle plant was opened July
10, 1995. The leased plant prior to July 10, 1995, was 9500 square
feet.
The Company also operates principally from eight plants located in the
following cities in Canada:
Building
City Square Footage
Toronto, Ontario (three plants) 49,000
40,000
39,700
Montreal, Quebec 38,800
Brantford, Ontario 28,800
Ottawa, Ontario 35,000
Windsor, Ontario 42,900
Sault St. Marie, Ontario 16,800
All of these facilities are owned by the Company, except the Ottawa,
Ontario and Windsor, Ontario facilities, which are leased.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings other than routine
litigation incidental to the business of the Company and as set forth in Item 1.
Business -- Environmental Matters.
Executive Officers of G&K Services, Inc.
Position with Officer
Name the Company Age Since
Richard M. Fink Chairman of the Board 65 1970
and CEO
William M. Hope President 62 1973
Thomas Moberly Vice President 46 1993
Stephen F. LaBelle Secretary and Treasurer 46 1978
The executive officers have, as their principal occupation, been employed
by the Company in the capacities set forth above for more than the last five
years, except for Mr. Moberly who was promoted in 1993. Each of such executive
officers serve in their capacities as officers of the Company at the pleasure of
the Board of Directors.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
Reference is made to the information with respect to the principal markets
on which the Company's Common Stock is being traded and prices for each
quarterly period for the last two years set forth on page 28 of the Company's
1995 Annual Report to Stockholders, and by such reference, such information is
incorporated herein. The Company's debt agreement contain various restrictive
covenants which limit cash dividends, among other things.
The approximate number of stockholders of record of the Company's Common
Stock as of September 26, 1995 was 678.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to the financial data with respect to the Company set
forth on page 5 of the Company's 1995 Annual Report to Stockholders, and by such
reference, such financial data is incorporated herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Reference is made to the management's discussion and analysis of financial
condition and results of operations presented in the form of the Financial
Review set forth on pages 14 through 16 of the Company's 1995 Annual Report to
Stockholders, and by such reference, such information is incorporated herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements and supplementary data set
forth on pages 16 through 27 of the Company's 1995 Annual Report to
Stockholders, and by such reference, such information is incorporated herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
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PART III
Reference is made to the definitive proxy statement filed pursuant to
Regulation 14A, which involves the election of directors at the annual meeting
of stockholders to be held November 1, 1995, which will be filed with the
Commission within 120 days after the close of its fiscal year ended July 1,
1995, and by such reference, said proxy statement is incorporated herein in
response to the information called for by Part III (Item 10. Directors and
Executive Officers of Registrant; Item II. Executive Compensation; Item 12.
Security Ownership of Certain Beneficial Owners and Management; and Item 13.
Certain Relationships and Related Transactions.)
(THIS SPACE INTENTIONALLY LEFT BLANK)
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The financial statements listed below are filed as part of this Annual
Report on Form 10-K:
Data is incorporated by reference from the Annual Report to Stockholders of
G&K Services, Inc. for the fiscal year ended July 1, 1995. With the exception of
the information specifically incorporated herein by reference, the Annual Report
to Stockholders for fiscal 1995 is not to be deemed "filed" as part of the
Annual Report on Form 10-K.
Page In
Annual Report
Report of independent public accountants 27
Consolidated statements of income for each of
the three fiscal years in the period ended
July 1, 1995 16
Consolidated balance sheets as of
July 1, 1995, and July 2, 1994 17
Consolidated statements of cash flows for each
of the three fiscal years in the period ended
July 1, 1995 18
Consolidated statements of stockholders'
equity for each of the three fiscal years
in the period ended July 1, 1995 19
Notes to consolidated financial statements 20-26
Separate financial statements of the subsidiaries of the Registrant have
been omitted because the Registrant is primarily an operating company and all
subsidiaries included in the consolidated financial statements are wholly owned.
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements or the notes thereto.
(b) Reports on Form 8-K
None filed during the fourth quarter of fiscal 1995.
(c) The following exhibits, as required by Item 601 of Regulation S-K are
filed as a part of this report:
(THIS SPACE INTENTIONALLY LEFT BLANK)
EXHIBIT NO.
3(a) Restated Articles of Incorporation, as amended, as filed with the
Secretary of State of Minnesota (incorporated herein by reference to
the Registrant's Registration Statement on Form S-1 and Amendment No.
1 thereto, Registration No. 33-15456). Certificate of Amendment, as
filed with the Secretary of State of Minnesota on November 12, 1987.
3(b) Bylaws, as amended, (incorporated herein by reference to the
Registrant's Registration Statement on Form S-1 and Amendment No. 1
thereto, Registration No. 33-15456 and incorporated by reference to
exhibit 3ii of the Registrants' 10-Q filed May 17, 1994).
10(a) Employment Agreement between the Registrant and Richard Fink, dated
January 6, 1987, (incorporated herein by reference to the Registrant's
Registration No. 33-15456).
10(b) Employment Agreement between the Registrant and Stephen LaBelle,
dated January 25, 1984, and amendments thereto (incorporated herein by
reference to the Registrants's Registration Statement on Form S-1 and
Amendment No. 1 thereto, Registration No. 33-15456).
10(c) Stockholder Agreement by and among the Registrant, Richard Fink,
William Hope, Stephen LaBelle, Daniel Nielsen, Phillip Oberg and
Robert Stotts, dated June 14, 1985, (incorporated herein by reference
to the Registrants Schedule 13E-4 filing dated May 13, 1985).
10(d) 1989 Stock Option and Compensation Plan (incorporated herein by
reference to the Registrant's definitive proxy statement for the 1989
Annual Meeting of Shareholders filed August 29, 1989).
10(e) Loan Agreement between the Registrant and Metropolitan Life Insurance
Company, dated as of September 28, 1990 (incorporated herein by
reference to the Registrant's Form 8-K dated September 28, 1990, and
Amendment No. 1 thereto dated December 13, 1990).
10(f) Credit Agreement dated as of September 28, 1990, among G&K Services,
Inc., various banks and Norwest Bank, Minnesota, National Association,
as Agent, as amended (incorporated herein by reference to the
Registrant's Form 8-K dated September 28, 1990, and Amendment No. 1
thereto dated December 13, 1990).
10(g) Loan Agreement between Work Wear Acquisition Corporation and Canadian
Imperial Bank of Commerce dated as of September 28, 1990, as amended
(incorporated herein by reference to the Registrant's Form 8-K dated
September 28, 1990, and Amendment No. 1 thereto dated December 13,
1990).
10(h) Credit Agreement dated as of June 21, 1994, among G&K Services, Inc.,
various banks and Norwest Bank, Minneapolis, National Association, as
Agent.
10(i) Employment Agreement between Registrant and Thomas Moberly, dated
February 20, 1990 (incorporated herein by reference to the
Registrant's form 10-K filed September 30, 1993).
13 1995 Annual Report to Stockholders.
22 Subsidiaries of G&K Services, Inc.
24 Consent of Independent Public Accountants
25 Power of Attorney dated as of September 15, 1995.
27 Financial Data Schedule (for SEC use only)
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: September 25, 1995
G&K SERVICES, INC.
(Registrant)
By: /s/Richard Fink
Richard Fink
Chairman of the Board and Chief
Executive Officer
By: /s/Stephen F. LaBelle
Stephen F. LaBelle
Treasurer and Secretary, and
Principal Accounting and Financial
Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report on Form 10-K has been signed below on the 25th day of September 1995, by
the following persons in the capacity indicated:
G&K SERVICES, INC.
/s/Richard Fink
By: Richard Fink
Chairman of the Board and
Chief Executive Officer
/s/Richard Fink Chairman of the Board, Chief
Richard Fink Executive Officer and Director
* President and Director
William Hope
* Vice President
Thomas Moberly
s/Stephen F. LaBelle Secretary and Treasurer (Principal
Stephen F. LaBelle Financial and Accounting Officer)
* Director
Bruce Allbright
* Director
Donald Goldfus
* Director
Bernard Sweet
* Director
Wayne Fortun
* Director
Paul Baszucki
* By /s/Richard Fink
Richard Fink
Attorney-in-fact