Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Dec. 31, 2016 | Jan. 26, 2017 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Dec. 31, 2016 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | GK | |
Entity Registrant Name | G&K SERVICES INC | |
Entity Central Index Key | 39,648 | |
Current Fiscal Year End Date | --07-01 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 19,710,175 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2016 | Dec. 26, 2015 | Dec. 31, 2016 | Dec. 26, 2015 | |
Income Statement [Abstract] | ||||
Rental and direct sale revenue | $ 244,145 | $ 243,060 | $ 485,165 | $ 480,231 |
Cost of rental and direct sale revenue | 159,236 | 160,030 | 316,599 | 316,118 |
Gross Margin | 84,909 | 83,030 | 168,566 | 164,113 |
Pension settlement charge | 0 | 0 | 6,010 | 0 |
Merger-related expenses | 10,067 | 0 | 16,123 | 0 |
Selling and administrative | 54,029 | 51,546 | 107,019 | 104,751 |
Income from Operations | 20,813 | 31,484 | 39,414 | 59,362 |
Interest expense | 2,065 | 1,656 | 4,026 | 3,283 |
Income before Income Taxes | 18,748 | 29,828 | 35,388 | 56,079 |
Provision for income taxes | 9,486 | 11,335 | 16,076 | 21,323 |
Net Income | $ 9,262 | $ 18,493 | $ 19,312 | $ 34,756 |
Basic Earnings per Common Share (in dollars per share) | $ 0.47 | $ 0.93 | $ 0.98 | $ 1.74 |
Diluted Earnings per Common Share (in dollars per share) | $ 0.46 | $ 0.92 | $ 0.96 | $ 1.72 |
Weighted average shares outstanding, basic (in shares) | 19,465 | 19,665 | 19,459 | 19,696 |
Weighted average shares outstanding, diluted (in shares) | 19,826 | 19,870 | 19,810 | 19,936 |
Dividends Declared per Share (in dollars per share) | $ 0.39 | $ 0.37 | $ 0.78 | $ 0.74 |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2016 | Dec. 26, 2015 | Dec. 31, 2016 | Dec. 26, 2015 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 9,262 | $ 18,493 | $ 19,312 | $ 34,756 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustments | (2,795) | (4,079) | (4,245) | (11,983) |
Change in pension benefit liabilities | 762 | 676 | 11,519 | 1,353 |
Derivative financial instruments unrecognized gain (loss) | 7,771 | (978) | 7,239 | (5,604) |
Reclassification of derivative financial instruments loss (gain) to net income | 386 | (58) | 675 | (111) |
Other comprehensive income (loss) before income taxes | 6,124 | (4,439) | 15,188 | (16,345) |
Income tax (expense) benefit | (2,200) | 351 | (6,707) | 3,324 |
Other comprehensive income (loss), net of taxes | 3,924 | (4,088) | 8,481 | (13,021) |
Total comprehensive income | $ 13,186 | $ 14,405 | $ 27,793 | $ 21,735 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2016 | Jul. 02, 2016 |
Current Assets | ||
Cash and cash equivalents | $ 29,864 | $ 24,279 |
Accounts receivable, less allowance for doubtful accounts of $4,260 and $3,578 | 108,700 | 102,657 |
Inventory | 36,525 | 34,077 |
Merchandise in service, net | 130,915 | 131,801 |
Other current assets | 15,757 | 20,539 |
Total current assets | 321,761 | 313,353 |
Property, plant and equipment, less accumulated depreciation of $406,430 and $397,209 | 223,777 | 228,642 |
Goodwill | 322,371 | 324,520 |
Other noncurrent assets | 56,539 | 55,022 |
Total assets | 924,448 | 921,537 |
Current Liabilities | ||
Accounts payable | 53,149 | 44,792 |
Accrued expenses and other current liabilities | 65,849 | 72,736 |
Current maturities of long-term debt | 22,000 | 0 |
Total current liabilities | 140,998 | 117,528 |
Long-term debt, net of current maturities | 194,548 | 231,148 |
Deferred income taxes | 79,209 | 68,895 |
Other noncurrent liabilities | 104,384 | 114,426 |
Total liabilities | 519,139 | 531,997 |
Stockholders' Equity | ||
Common stock, $0.50 par value | 9,865 | 9,828 |
Additional paid-in capital | 87,524 | 84,804 |
Retained earnings | 328,306 | 323,775 |
Accumulated other comprehensive loss | (20,386) | (28,867) |
Total stockholders' equity | 405,309 | 389,540 |
Total liabilities and stockholders' equity | $ 924,448 | $ 921,537 |
CONDENSED CONSOLIDATED BALANCE5
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2016 | Jul. 02, 2016 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 4,260 | $ 3,578 |
Accumulated depreciation | $ 406,340 | $ 397,209 |
Common stock, par value (in dollars per share) | $ 0.50 | $ 0.50 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Total | Class A Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income/(Loss) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Cumulative-effect of adoption of share-based compensation accounting guidance | $ 836 | $ 232 | $ 604 | ||
Adjusted opening balances after adoption of share-based compensation accounting guidance | 390,376 | $ 9,828 | 85,036 | 324,379 | $ (28,867) |
Beginning balance (in shares) at Jul. 02, 2016 | 19,661 | ||||
Beginning balance at Jul. 02, 2016 | 389,540 | $ 9,828 | 84,804 | 323,775 | (28,867) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Total comprehensive income | 27,793 | 19,312 | 8,481 | ||
Proceeds from issuance of common stock under stock option plans (in shares) | 93 | ||||
Proceeds from issuance of common stock under stock option plans | 1,028 | $ 47 | 981 | ||
Share-based compensation | 3,357 | 3,357 | |||
Shares withheld for taxes under equity compensation plans (in shares) | (19) | ||||
Shares withheld for taxes under equity compensation plans | (1,860) | $ (10) | (1,850) | ||
Cash dividends declared ($0.78 per share) | (15,385) | (15,385) | |||
Ending balance (in shares) at Dec. 31, 2016 | 19,735 | ||||
Ending balance at Dec. 31, 2016 | $ 405,309 | $ 9,865 | $ 87,524 | $ 328,306 | $ (20,386) |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) | 6 Months Ended |
Dec. 31, 2016$ / shares | |
Statement of Stockholders' Equity [Abstract] | |
Cash dividends (in dollars per share) | $ 0.78 |
CONDENSED CONSOLIDATED STATEME8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Dec. 31, 2016 | Dec. 26, 2015 | |
Operating Activities: | ||
Net income | $ 19,312 | $ 34,756 |
Adjustments to reconcile net income to net cash provided by operating activities - | ||
Depreciation and amortization | 18,241 | 17,242 |
Non-cash pension settlement charge | 6,010 | 0 |
Deferred income taxes | 3,740 | 6,183 |
Share-based compensation | 3,604 | 3,399 |
Changes in operating items, exclusive of acquisitions and divestitures - | ||
Accounts receivable | (6,607) | (3,758) |
Inventory and merchandise in service | (1,699) | (4,168) |
Accounts payable | 9,530 | (2,254) |
Other current assets and liabilities | (1,451) | 10,357 |
Other | 1,367 | (6,109) |
Net cash provided by operating activities | 52,047 | 55,648 |
Investing Activities: | ||
Capital expenditures | (14,980) | (22,933) |
Acquisition of business | 0 | (2,146) |
Net cash used for investing activities | (14,980) | (25,079) |
Financing Activities: | ||
Repayments of long-term debt | 0 | (75,168) |
(Repayments of) proceeds from revolving credit facilities, net | (14,600) | 86,177 |
Cash dividends paid | (15,385) | (14,797) |
Proceeds from issuance of common stock under stock option plans | 1,028 | 731 |
Repurchase of common stock | 0 | (15,020) |
Shares withheld for taxes under equity compensation plans | (1,860) | (2,992) |
Excess tax benefit from share-based compensation | 0 | 1,911 |
Net cash used for financing activities | (30,817) | (19,158) |
Effect of Foreign Exchange Rate Changes on Cash | (665) | (1,197) |
Increase in Cash and Cash Equivalents | 5,585 | 10,214 |
Cash and Cash Equivalents: | ||
Beginning of period | 24,279 | 16,235 |
End of period | 29,864 | 26,449 |
Cash paid for - | ||
Interest | 3,734 | 3,274 |
Income taxes | 7,371 | 1,842 |
Supplemental Non-cash Investing Information: | ||
Capital expenditures not yet paid and included in accounts payable | $ 763 | $ 3,031 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation for Interim Financial Statements The Condensed Consolidated Financial Statements of G&K Services, Inc. (the "Company" or "G&K") as set forth in this quarterly report have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for interim reporting. As permitted under those rules, certain footnotes and other financial information that are normally required by accounting principles generally accepted in the United States can be condensed or omitted. Our accounting policies are described in "Notes to the Consolidated Financial Statements" in our Annual Report on Form 10-K for the fiscal year ended July 2, 2016 ("fiscal year 2016 "). Management is responsible for the unaudited Condensed Consolidated Financial Statements included in this document. The Condensed Consolidated Financial Statements included in this document are unaudited but, in the opinion of management, include all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of our financial position as of December 31, 2016 , the results of our operations for the three and six months ended December 31, 2016 and December 26, 2015 and our cash flows for the six months ended and December 31, 2016 and December 26, 2015 . The results of operations for the three and six month periods ended December 31, 2016 and December 26, 2015 are not necessarily indicative of the results to be expected for the full year. This Quarterly Report on Form 10-Q should be read in conjunction with our Consolidated Financial Statements and notes included in our fiscal year 2016 Annual Report on Form 10-K. Proposed Merger with Cintas Corporation On August 15, 2016, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cintas Corporation ("Cintas") and Bravo Merger Sub, Inc., a wholly-owned subsidiary of Cintas (“Merger Sub”), pursuant to which, subject to the satisfaction or waiver of certain conditions, Merger Sub will merge with and into the Company (the “Merger”). As a result of the Merger, Merger Sub will cease to exist and the Company will survive as a wholly-owned subsidiary of Cintas. The Merger is subject to customary closing conditions, including, without limitation, the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and the requisite approval from the Competition Bureau of Canada pursuant to the Competition Act (Canada) being obtained. Our shareholders approved the Merger on November 15, 2016. The Merger is expected to close not later than the second quarter of calendar year 2017. During the three and six months ended December 31, 2016 , we incurred costs of $10,067 and $16,123 , respectively, related to the Merger for employee-related expenses, professional services and regulatory fees. Many of these expenses are non-deductible for income tax purposes. The after-tax effect of these items are $8,754 and $13,491 , which represents $0.44 and $0.68 per diluted share, respectively, for the three and six months ended December 31, 2016 . See Note 14, "Proposed Merger with Cintas Corporation," of Notes to the Condensed Consolidated Financial Statements for further details. Inventory and Merchandise in Service The components of inventory as of December 31, 2016 and July 2, 2016 are as follows: December 31, July 2, Raw Materials $ 7,507 $ 6,424 Work in Process 1,305 1,431 Finished Goods 27,713 26,222 Inventory $ 36,525 $ 34,077 Merchandise in service, net $ 130,915 $ 131,801 We review the estimated useful lives of our merchandise in service assets on a periodic basis or when trends in our business indicate that the useful lives for certain products might have changed. The selection of estimated useful lives is a sensitive estimate in which a change in lives could have a material impact on our results of operations. There were no material changes to the estimated periods in which the assets will be in service for the three and six months ended December 31, 2016 and December 26, 2015 . Goodwill Goodwill by segment is as follows: United States Canada Total Balance as of July 2, 2016 $ 270,045 $ 54,475 $ 324,520 Foreign currency translation — (2,149 ) (2,149 ) Balance as of December 31, 2016 $ 270,045 $ 52,326 $ 322,371 |
New Accounting Pronouncements
New Accounting Pronouncements | 6 Months Ended |
Dec. 31, 2016 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Pronouncements | New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued updated guidance to clarify revenue recognition principles, which is intended to improve disclosure requirements and enhance the comparability of revenue recognition practices. Improved disclosures under the amended guidance relate to the nature, amount, timing and uncertainty of revenue that is recognized from contracts with customers. This guidance will be effective for us beginning in the first quarter of fiscal year 2019. We are evaluating the impact that this new guidance will have on our Consolidated Financial Statements. In April 2015, the FASB issued updated guidance which changes the presentation of debt issuance costs in financial statements to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. This guidance will be effective for us beginning in the fourth quarter of fiscal year 2017 and is required to be applied on a retrospective basis. We anticipate the implementation of this guidance will not have a material impact on the presentation of our financial position and will have no impact on our results of operations or cash flows. In July 2015, the FASB issued updated guidance to simplify the measurement of inventory at the lower of cost or net realizable value. This guidance will be effective for us beginning in the first quarter of fiscal year 2018. We anticipate the implementation of this guidance will not have a material impact on our financial position, results of operations or cash flows. In January 2016, the FASB issued updated guidance intended to improve the recognition and measurement of financial instruments. This guidance will be effective for us beginning in the first quarter of fiscal year 2019. We are evaluating the impact, if any, that this new guidance will have on our Consolidated Financial Statements. In February 2016, the FASB issued updated guidance, which is intended to increase transparency and comparability by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This guidance will be effective for us beginning in the first quarter of fiscal year 2020, although early adoption is permitted. We are evaluating the impact, if any, that this new guidance will have on our Consolidated Financial Statements. In March 2016, the FASB issued updated guidance, which is intended to simplify several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and classification of excess tax benefits and shares withheld for taxes in the statement of cash flows. We adopted this guidance in the first quarter of fiscal year 2017. The adoption of this guidance is expected to increase the volatility of our effective tax rate as the tax benefits and deficiencies related to stock options exercised and restricted stock vestings are recorded as increases and decreases in income tax expense. In addition, these benefits and deficiencies are reflected within operating cash flows rather than being recorded within equity and reflected as a financing cash flow. As part of the adoption of this guidance we have elected to account for forfeitures of share-based awards as they occur. We continue to reflect tax withholding payments made on an employee's behalf for shares withheld for taxes as a financing cash flow in accordance with the new guidance. The cumulative-effect adjustment of these changes on the Condensed Consolidated Balance Sheet as of December 31, 2016 was $604 , net of tax, an increase to retained earnings and a decrease to paid-in capital. The impact on the Condensed Consolidated Statement of Operations for the three and six months ended December 31, 2016 was a $204 and $1,027 benefit in income tax expense. Our excess tax benefit is no longer included in the calculation of diluted shares under the treasury stock method, which resulted in an increase of 110,000 shares and 105,000 shares in the weighted average number of diluted shares outstanding for the three and six months ended December 31, 2016 , respectively. The election to recognize forfeitures as they occur resulted in an immaterial increase in stock based compensation expense for the three and six months ended December 31, 2016 . In August 2016, the FASB issued updated guidance regarding the classification of certain cash receipts and cash payments in the statement of cash flows. This guidance will be effective for us beginning in the first quarter of fiscal year 2019, although early adoption is permitted. We are evaluating the impact, if any, that this new guidance will have on our Consolidated Statements of Cash Flows. |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share Accounting guidance for participating securities and the two-class method addresses whether awards granted in unvested share-based payment transactions that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and therefore are included in computing earnings per share under the two-class method. Participating securities are securities that may participate in dividends with common stock and the two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that would otherwise have been available to common shareholders. Under the two-class method, earnings for the period are allocated between common shareholders and other shareholders, based on their respective rights to receive dividends. Certain restricted stock awards granted under our equity plans are considered participating securities as these awards receive non-forfeitable dividends at the same rate as common stock. The computations of our basic and diluted earnings per share for the three and six months ended December 31, 2016 and December 26, 2015 are as follows: Three Months Ended Six Months Ended December 31, December 26, December 31, December 26, Net income $ 9,262 $ 18,493 $ 19,312 $ 34,756 Less: Income allocable to participating securities (127 ) (271 ) (265 ) (498 ) Net income available to common stockholders $ 9,135 $ 18,222 $ 19,047 $ 34,258 Basic earnings per share (shares in thousands): Weighted average shares outstanding, basic 19,465 19,665 19,459 19,696 Basic earnings per common share: Basic earnings per share $ 0.47 $ 0.93 $ 0.98 $ 1.74 Diluted earnings per share (shares in thousands): Weighted average shares outstanding, basic 19,465 19,665 19,459 19,696 Weighted average effect of non-vested restricted stock grants and assumed exercise of stock options 361 205 351 240 Weighted average shares outstanding, diluted 19,826 19,870 19,810 19,936 Diluted earnings per common share: Diluted earnings per share $ 0.46 $ 0.92 $ 0.96 $ 1.72 We excluded potential common shares related to our outstanding equity compensation grants of 42,000 and 276,000 for the three months ended December 31, 2016 and December 26, 2015 , and 34,000 and 204,000 for the six months ended December 31, 2016 and December 26, 2015 , respectively, from the computation of diluted earnings per share. Inclusion of these shares would have been anti-dilutive. |
Other Assets and Other Noncurre
Other Assets and Other Noncurrent Liabilities | 6 Months Ended |
Dec. 31, 2016 | |
Other Assets and Other Noncurrent Liabilities [Abstract] | |
Other Assets and Other Noncurrent Liabilities | Other Assets and Other Noncurrent Liabilities Other assets as of December 31, 2016 and July 2, 2016 include the following: December 31, 2016 July 2, 2016 Executive deferred compensation assets $ 34,831 $ 33,080 Cash surrender value of life insurance policies 15,073 14,860 Customer contracts and non-competition agreements, net 2,760 3,464 Derivative financial instruments 784 — Other assets 5,416 6,658 Less: portion classified as current assets (2,325 ) (3,040 ) Total other noncurrent assets $ 56,539 $ 55,022 The customer contracts include the combined value of the written service agreements and the related customer relationship. Customer contracts are amortized over a weighted average life of approximately ten years and are as follows: December 31, 2016 July 2, 2016 Customer contracts and non-competition agreements $ 14,564 $ 14,576 Accumulated amortization (11,804 ) (11,112 ) Net $ 2,760 $ 3,464 Amortization expense was $346 and $340 for the three months ended December 31, 2016 and December 26, 2015 , and $694 and $718 for the six months ended December 31, 2016 and December 26, 2015 , respectively. Estimated amortization expense for each of the next five fiscal years based on the intangible assets as of December 31, 2016 is as follows: 2017 remaining $ 547 2018 435 2019 216 2020 204 2021 192 Thereafter 1,166 Other noncurrent liabilities as of December 31, 2016 and July 2, 2016 include the following: December 31, 2016 July 2, 2016 Multi-employer pension withdrawal liability $ — $ 803 Pension plan liability 28,401 32,446 Executive deferred compensation plan liability 34,831 33,080 Supplemental executive retirement plan liability 18,448 18,523 Accrued income taxes 7,389 7,363 Workers' compensation liability 16,169 18,036 Derivative financial instruments 1,147 8,189 Other liabilities 5,894 5,725 Less: Portion classified as current liabilities (7,895 ) (9,739 ) Total other noncurrent liabilities $ 104,384 $ 114,426 |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt Long-term debt as of December 31, 2016 and July 2, 2016 include the following: December 31, 2016 July 2, 2016 Borrowings under Unsecured Revolver $ 97,000 $ 107,600 Borrowings under A/R Line 19,548 23,548 Borrowings under Fixed Rate Notes 100,000 100,000 216,548 231,148 Less current maturities (22,000 ) — Total long-term debt $ 194,548 $ 231,148 We have a $350,000 unsecured revolver with a syndicate of banks, which expires on April 15, 2020 . Domestic U.S. Dollar borrowings under this revolver generally bear interest at the adjusted London Interbank Offered Rate (" LIBOR ") for specified periods plus a margin, which can range from 1.00% to 1.75% , depending on our consolidated leverage ratio and can be expanded by $200,000 to a total of $550,000 . As of December 31, 2016 , there was $97,000 outstanding under this revolver. The unused portion of the revolver may be used for general corporate purposes, dividends, working capital needs and to provide up to $45,000 in letters of credit. As of December 31, 2016 , we had no letters of credit outstanding under this revolver. As of December 31, 2016 , there is a fee of 0.15% of the unused daily balance of this revolver. As a result of the Merger (see Note 14, "Proposed Merger with Cintas Corporation," of Notes to the Condensed Consolidated Financial Statements) and the cessation of our share repurchase program, we expect to generate excess cash flow over the next 12 months, which we expect to use to pay down our unsecured revolver. Therefore, $22,000 has been classified as current maturities of long-term debt. Availability of credit under this revolver requires that we maintain compliance with certain covenants, which are the most restrictive when compared to our other credit facilities. The following table illustrates compliance with regard to the material financial covenants required by the terms of this revolver as of December 31, 2016 : Required Actual Maximum Leverage Ratio (Debt/EBITDA) 3.50 1.42 Minimum Interest Coverage Ratio (EBITDA/Interest Expense) 3.00 24.29 Our maximum leverage ratio and minimum interest coverage ratio covenants are calculated by adding back certain non-cash charges, as defined in this revolver. Borrowings outstanding as of December 31, 2016 under this revolver bear interest at a weighted average effective rate of 1.78% . We renewed our $50,000 accounts receivable securitization facility and it is scheduled to expire on September 26, 2017 . We intend to refinance these borrowings on or before the expiration date or pay the outstanding balance using our unsecured revolver. There were no material changes to the terms of the facility. Under the terms of the facility, we pay interest at a rate per annum equal to LIBOR plus a margin of 0.75% . The facility is subject to customary fees, including a rate per annum equal to 0.80% for the issuance of letters of credit and 0.26% for any unused portion of the facility. As is customary with transactions of this nature, our eligible accounts receivable are sold to a consolidated subsidiary. As of December 31, 2016 , there was $19,548 outstanding under this securitization facility and there were $30,452 of letters of credit outstanding, primarily related to our property and casualty insurance programs. Borrowings outstanding as of December 31, 2016 under this facility bear interest at an average effective rate of 1.37% . We have $100,000 of fixed rate unsecured senior notes with $50,000 of the notes bearing interest at a fixed interest rate of 3.73% per annum maturing April 15, 2023 and $50,000 of the notes bearing interest at a fixed interest rate of 3.88% per annum maturing on April 15, 2025 . Interest on the notes is payable semiannually on April 15 and October 15. As of December 31, 2016 , the outstanding balance of the notes was $100,000 at an effective rate of 3.81% . See Note 6, "Derivative Financial Instruments," of Notes to the Condensed Consolidated Financial Statements for details of our interest rate swap and hedging activities related to our outstanding debt. |
Derivative Financial Instrument
Derivative Financial Instruments | 6 Months Ended |
Dec. 31, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Financial Instruments | Derivative Financial Instruments In the ordinary course of business, we are exposed to various market risks. We utilize derivative financial instruments to manage interest rate risk and manage the total debt that is subject to variable and fixed interest rates. These interest rate swap contracts modify our exposure to interest rate risk by converting variable rate debt to a fixed rate or by locking in the benchmark interest rate on forecasted issuances of fixed rate debt. For derivative financial instruments that are designated and qualify as cash flow hedges, the effective portion of the change in fair value on the derivative financial instrument is reported as a component of "Accumulated other comprehensive income" and reclassified into the "Interest expense" line item in the Condensed Consolidated Statements of Operations in the same period as the expenses from the cash flows of the interest expense are recognized. Cash payments or receipts are included in "Net cash provided by operating activities" in the Condensed Consolidated Statements of Cash Flows in the same period as the cash is settled. We perform an assessment at the inception of the hedge and on a quarterly basis thereafter to determine whether our derivatives are highly effective in offsetting changes in the value of the hedged items. Any change in the fair value resulting from hedge ineffectiveness is immediately recognized as income or expense. We do not have any derivative financial instruments that have been designated as either a fair value hedge, a hedge of net investment in a foreign operation, or that are held for trading or speculative purposes. Cash flows associated with derivative financial instruments are classified in the same category as the cash flows hedged in the Condensed Consolidated Statements of Cash Flows. As of December 31, 2016 , we held a $75,000 interest rate swap contract which will limit our exposure to interest rate risk and pursuant to which we will pay fixed rates of interest and receive variable rates of interest based on the one-month LIBOR . The 15 year swap contract has an effective interest rate of 2.35% , with a start date of July 1, 2016 and an end date of July 1, 2031 and is a highly effective cash flow hedge. Gains or losses on any ineffectiveness are not expected to be material to any period. The following table summarizes our derivative financial instrument assets and liabilities and the classification on our Condensed Consolidated Balance Sheets as of December 31, 2016 and July 2, 2016 : December 31, 2016 July 2, 2016 Derivative financial instruments, assets: Other noncurrent assets $ 784 $ — Total derivative financial instruments, assets $ 784 $ — Derivative financial instruments, liabilities: Accrued expense and other current liabilities $ 1,147 $ 1,387 Other noncurrent liabilities — 6,802 Total derivative financial instruments, liabilities $ 1,147 $ 8,189 A net gain of $1,053 is deferred in accumulated other comprehensive income as of December 31, 2016 , of which a $572 loss is expected to be reclassified to interest expense in the next 12 months. As of December 31, 2016 and July 2, 2016 , all derivative financial instruments were designated as hedging instruments. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Dec. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements Generally accepted accounting principles ("GAAP") defines fair value, establishes a framework for measuring fair value and establishes disclosure requirements about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We considered non-performance risk when determining fair value of our derivative financial instruments. The fair value hierarchy prescribed under GAAP contains the following three levels: Level 1 — unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date. Level 2 — other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including: -quoted prices for similar assets or liabilities in active markets; -quoted prices for identical or similar assets in non-active markets; -inputs other than quoted prices that are observable for the asset or liability; and -inputs that are derived principally from or corroborated by other observable market data. Level 3 — unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. We do not have any Level 3 assets or liabilities and we did not transfer any items between fair value levels during the first two quarters of fiscal years 2016 or 2017 . The following tables summarize the assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and July 2, 2016 : As of December 31, 2016 Fair Value Measurements Using Inputs Considered as Level 1 Level 2 Total Other assets: Money market mutual funds $ 6,367 $ — $ 6,367 Equity and fixed income mutual funds 28,464 — 28,464 Cash surrender value of life insurance policies — 15,073 15,073 Derivative financial instruments — 784 784 Total assets $ 34,831 $ 15,857 $ 50,688 Derivative financial instruments $ — $ 1,147 $ 1,147 Total liabilities $ — $ 1,147 $ 1,147 As of July 2, 2016 Fair Value Measurements Using Inputs Considered as Level 1 Level 2 Total Other assets: Money market mutual funds $ 5,681 $ — $ 5,681 Equity and fixed income mutual funds 27,306 — 27,306 Cash surrender value of life insurance policies — 14,860 14,860 Total assets $ 32,987 $ 14,860 $ 47,847 Derivative financial instruments $ — $ 8,189 $ 8,189 Total liabilities $ — $ 8,189 $ 8,189 The cash surrender value of life insurance policies are primarily investments established to fund the obligations of the Company's non-qualified, non-contributory supplemental executive retirement plan (SERP). The money market, equity and fixed income mutual funds are investments established to fund the Company's non-qualified deferred compensation plan. The Company classifies these investments as trading securities, and, as a result, unrealized gains and losses are included in earnings. Changes in the deferred compensation liability as a result of the changes in the fair value of investments are also included in earnings, resulting in no impact to net income. The following tables summarize the fair value of financial assets and liabilities recorded at historical cost as of December 31, 2016 and July 2, 2016 : As of December 31, 2016 Fair Value Measurements Using Inputs Considered as Level 1 Level 2 Total Cash and cash equivalents $ 29,864 $ — $ 29,864 Total assets $ 29,864 $ — $ 29,864 Current maturities of long-term debt $ — $ 22,000 $ 22,000 Long-term debt, net of current maturities — 193,677 193,677 Total liabilities $ — $ 215,677 $ 215,677 As of July 2, 2016 Fair Value Measurements Using Inputs Considered as Level 1 Level 2 Total Cash and cash equivalents $ 24,279 $ — $ 24,279 Total assets $ 24,279 $ — $ 24,279 Long-term debt, net of current maturities $ — $ 236,568 $ 236,568 Total liabilities $ — $ 236,568 $ 236,568 |
Employee Benefit Plans
Employee Benefit Plans | 6 Months Ended |
Dec. 31, 2016 | |
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] | |
Employee Benefit Plans | Employee Benefit Plans Defined Benefit Pension Plan On December 31, 2006 , we froze our pension and SERP plans for all participants. The components of net periodic pension cost for these plans for the three and six month periods ended December 31, 2016 and December 26, 2015 are as follows: Pension Plan SERP Three Months Ended Three Months Ended December 31, December 26, December 31, December 26, Interest cost $ 819 $ 943 $ 136 $ 148 Expected return on assets (789 ) (1,068 ) — — Amortization of net loss 635 608 117 60 Net periodic benefit cost $ 665 $ 483 $ 253 $ 208 Pension Plan SERP Six Months Ended Six Months Ended December 31, December 26, December 31, December 26, Interest cost $ 1,666 $ 1,886 $ 272 $ 296 Expected return on assets (1,649 ) (2,136 ) — — Amortization of net loss 1,350 1,216 234 120 Loss on pension settlement 6,010 — — — Net periodic benefit cost $ 7,377 $ 966 $ 506 $ 416 During the first six months of fiscal year 2017 , we contributed approximately $180 to the pension plans. In the fourth quarter of fiscal year 2016, in an effort to continue to reduce the risk in the Company's noncontributory defined benefit pension plan (the "Pension Plan"), we announced a voluntary, limited-time opportunity to former employees who were vested participants in the Pension Plan to request early payment of their entire Pension Plan benefit in the form of a single lump sum payment. Eligible participants who wished to receive the lump sum payment were required to make an election between May 16, 2016 and July 15, 2016, with payments being made on or before August 31, 2016. All payments were made from the Pension Plan trust assets. The target population had a total liability of $34,200 as of July 2, 2016 . Based upon the participation rate of eligible participants, the amount of total payments was $17,281 and resulted in a plan remeasurement and the recognition of a $6,010 settlement loss, or $0.19 per share, related to the pro-rata portion of the unamortized net actuarial loss which was recognized in the Condensed Consolidated Statement of Operations for the six months ended December 31, 2016 . Multi-Employer Pension Plans During the first quarter of fiscal year 2017, we made an $813 settlement payment related to a union sponsored multi-employer pension plan ("MEPP"). Following this payment, we no longer have any liabilities for MEPPs and we no longer participate in any MEPPs in the United States as of December 31, 2016 . |
Income Taxes
Income Taxes | 6 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Our effective tax rate increased to 45.4% in the six months ended December 31, 2016 from 38.0% in the six months ended December 26, 2015 . The current period tax rate is higher than the prior year period due to $10,600 of non-deductible expenses associated with the Merger (see Note 14, "Proposed Merger with Cintas Corporation," of Notes to the Condensed Consolidated Financial Statements). This additional tax expense was partially offset by a tax benefit of $1,027 related to the adoption of new equity compensation accounting rules (see Note 2, "New Accounting Pronouncements," of Notes to the Condensed Consolidated Financial Statements). |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stockholders' Equity | Stockholders' Equity Share Repurchase Program As of December 31, 2016 , we had a $275,000 share repurchase program. For the three and six months ended December 31, 2016 we did not repurchase any shares under this repurchase program. For the three and six months ended December 26, 2015 we repurchased 137,158 and 223,354 shares in open market transactions totaling $9,138 and $15,020 , respectively. As of December 31, 2016 , we had $94,043 remaining under this program. As a result of the Merger, we have suspended additional share repurchases under the repurchase program. Share-Based Compensation Compensation cost for share-based compensation plans is recognized on a straight-line basis over the requisite service period of the award and forfeitures are accounted for as they occur. We grant share-based awards, primarily consisting of restricted stock and options to purchase our common stock. Stock options are granted to employees and directors for a fixed number of shares with an exercise price equal to the fair value of the shares at the date of grant. Share-based compensation is recognized in the Condensed Consolidated Statements of Operations and was $1,749 and $1,458 for the three months ended December 31, 2016 and December 26, 2015, respectively, and $3,604 and $3,399 for the six months ended December 31, 2016 and December 26, 2015 . As share-based compensation expense is recognized, a deferred tax asset is recorded that represents an estimate of the future tax deduction from the exercise of stock options or release of restrictions on the restricted stock. At the time share-based awards are exercised or canceled, or they expire or restrictions lapse, we recognize adjustments to income tax expense. No amount of share-based compensation expense was capitalized during the periods presented. The number of options exercised and restricted stock vested since July 2, 2016 was 124,000 shares. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 6 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss) Changes in accumulated other comprehensive income (loss), net of tax, for the three and six months ended December 31, 2016 and December 26, 2015 are as follows: Three Months Ended December 31, 2016 Foreign currency translation adjustment Pension benefit liabilities Derivative financial instruments Total Accumulated other comprehensive income (loss) at October 1, 2016 $ 1,947 $ (22,190 ) $ (4,067 ) $ (24,310 ) Other comprehensive income (loss) before reclassifications (1,672 ) — 4,877 3,205 Reclassifications from net accumulated other comprehensive income — 477 242 719 Net current period other comprehensive income (loss) (1,672 ) 477 5,119 3,924 Accumulated other comprehensive income (loss) at December 31, 2016 $ 275 $ (21,713 ) $ 1,052 $ (20,386 ) Six Months Ended December 31, 2016 Foreign currency translation adjustment Pension benefit liabilities Derivative financial instruments Total Accumulated other comprehensive income (loss) at July 2, 2016 $ 3,963 $ (28,929 ) $ (3,901 ) $ (28,867 ) Other comprehensive income (loss) before reclassifications (3,688 ) 2,447 4,536 3,295 Reclassifications from net accumulated other comprehensive income — 4,769 417 5,186 Net current period other comprehensive income (loss) (3,688 ) 7,216 4,953 8,481 Accumulated other comprehensive income (loss) at December 31, 2016 $ 275 $ (21,713 ) $ 1,052 $ (20,386 ) Three Months Ended December 26, 2015 Foreign currency translation adjustment Pension benefit liabilities Derivative financial instruments Total Accumulated other comprehensive income (loss) at September 26, 2015 $ 1,490 $ (20,849 ) $ 1,482 $ (17,877 ) Other comprehensive loss before reclassifications (3,860 ) — (613 ) (4,473 ) Reclassifications from net accumulated other comprehensive income (loss) — 422 (37 ) 385 Net current period other comprehensive income (loss) (3,860 ) 422 (650 ) (4,088 ) Accumulated other comprehensive income (loss) at December 26, 2015 $ (2,370 ) $ (20,427 ) $ 832 $ (21,965 ) Six Months Ended December 26, 2015 Foreign currency translation adjustment Pension benefit liabilities Derivative financial instruments Total Accumulated other comprehensive income (loss) at June 27, 2015 $ 7,914 $ (21,272 ) $ 4,414 $ (8,944 ) Other comprehensive loss before reclassifications (10,284 ) — (3,512 ) (13,796 ) Reclassifications from net accumulated other comprehensive income (loss) — 845 (70 ) 775 Net current period other comprehensive income (loss) (10,284 ) 845 (3,582 ) (13,021 ) Accumulated other comprehensive income (loss) at December 26, 2015 $ (2,370 ) $ (20,427 ) $ 832 $ (21,965 ) Amounts reclassified from accumulated other comprehensive income (loss) to net income for the three and six months ended December 31, 2016 and December 26, 2015 are as follows: Three Months Ended Six Months Ended December 31, 2016 December 26, 2015 December 31, 2016 December 26, 2015 Loss (gain) on derivative financial instruments: Interest rate swap contracts (a) $ 386 $ (58 ) $ 675 $ (111 ) Tax (benefit) expense (144 ) 21 (258 ) 41 Total, net of tax 242 (37 ) 417 (70 ) Pension benefit liabilities: Amortization of net loss (b) 762 676 1,604 1,353 Loss on pension settlement (c) — — 6,010 — Tax benefit (285 ) (254 ) (2,845 ) (508 ) Total, net of tax 477 422 4,769 845 Total amounts reclassified, net of tax $ 719 $ 385 $ 5,186 $ 775 (a) Included in interest expense. (b) Included in the computation of net periodic pension cost, which is included in cost of rental and direct sale and selling and administrative. (c) Included in selling and administrative. Income tax (expense) benefit for each component of other comprehensive income are as follows: Three Months Ended Six Months Ended December 31, 2016 December 26, 2015 December 31, 2016 December 26, 2015 Foreign currency translation adjustments $ 1,123 $ 219 $ 557 $ 1,699 Change in pension benefit liabilities (285 ) (254 ) (4,303 ) (508 ) Derivative financial instruments unrecognized gain (loss) (2,894 ) 365 (2,703 ) 2,092 Reclassification of derivative financial instruments loss (gain) to net income (144 ) 21 (258 ) 41 Income tax (expense) benefit $ (2,200 ) $ 351 $ (6,707 ) $ 3,324 |
Contingent Liabilities
Contingent Liabilities | 6 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingent Liabilities | Contingent Liabilities Environmental Matters From time-to-time, we are involved in environmental-related proceedings by certain governmental agencies, which relate primarily to allegedly operating certain facilities in noncompliance with required permits. In addition to these proceedings, in the normal course of our business, we are subject to, among other things, periodic inspections by regulatory agencies, and we are involved in the remediation of various properties. In particular, we have three projects nearing completion, which we expect will be completed within previously established reserves. We also have four other projects on which we are currently working and we expect these will be completed within previously established reserves. Historically, we have borne our property remediation costs as part of our ongoing operations. As part of the second set of projects mentioned above, in the fourth quarter of fiscal year 2015, we determined it was likely that the parties that are contractually obligated to remediate contamination resulting from prior use of perchloroethylene, or PCE, and other contaminants at three of our previously purchased locations would not be able to continue to meet these obligations because of their respective financial condition. These acquisitions date as far back as the 1970s; the most recent one was in 2007. As a result of the foregoing, as of December 31, 2016 and July 2, 2016 , we had remediation-related reserves of approximately $3,176 and $3,607 , respectively, related to these matters. The expense for these matters was not material for the three and six months ended December 31, 2016 and December 26, 2015 . In order to determine whether any additional exposure for remediation exists, we assessed six additional sites which we acquired that had historical dry cleaning operations. Our assessment of these sites is complete, with no further action required. Legal Matters As part of its general enforcement efforts, over the past four years, the U.S. Department of Labor, Office of Federal Contract Compliance Programs (OFCCP) initiated compliance evaluations at a number of our locations to review and assess our current affirmative action activities and employment practices. To close all outstanding compliance evaluations, we entered into a Conciliation Agreement with the OFCCP agreeing to take proactive efforts to address any remaining issues or concerns that were raised by the agency, none of which we expect will have a material impact on our ongoing operations. All amounts that we agreed to pay under this agreement were within previously established reserves. We have had an ongoing dispute with Talent Creation, a Chinese supplier for our former GKdirect managed uniform business. We divested our GKdirect managed uniform business in December 2013. The dispute revolved around the 2010 termination of the parties' agreement. The dispute was submitted to arbitration, and in April 2016, the arbitrator issued an order awarding approximately $1,300 to Talent Creation, consisting of raw material costs, post-termination warehousing costs and awards for violations of non-compete and non-solicitation provisions in the parties' contract. We filed our petition to vacate the award with the U.S. District Court for the Southern District of Ohio in May 2016, after which Talent Creation filed a cross petition to confirm the award. Briefing on the cross motions concluded in September 2016. We believe the liability established for this matter will cover the court of appeals' decision and believe that the possibility of a material adverse effect on our results of operations or financial condition is remote. See Note 14, "Proposed Merger with Cintas Corporation," of Notes to the Condensed Consolidated Financial Statements for further details of litigation related to the Merger. |
Segment Information
Segment Information | 6 Months Ended |
Dec. 31, 2016 | |
Segment Reporting, Measurement Disclosures [Abstract] | |
Segment Information | Segment Information We have two operating segments, United States (includes our Dominican Republic operations) and Canada, which have been identified as components of our organization that are reviewed by our Chief Executive Officer to determine resource allocation and evaluate performance. Each operating segment derives revenue from the branded uniform and facility services programs. Our largest customer represents approximately 2% of our total revenue. All of our customers are in the United States and Canada. We evaluate performance based on income from operations. Financial information by segment for the three and six month periods ended December 31, 2016 and December 26, 2015 is as follows: For the Three Months Ended United States Canada Elimination Total December 31, 2016 Revenue $ 210,197 $ 33,948 $ — $ 244,145 Income from operations 16,576 4,237 — 20,813 Total assets 892,571 140,328 (108,451 ) 924,448 Depreciation and amortization expense 8,297 888 — 9,185 December 26, 2015 Revenue $ 209,438 $ 33,622 $ — $ 243,060 Income from operations 27,266 4,218 — 31,484 Total assets 895,841 125,028 (97,023 ) 923,846 Depreciation and amortization expense 7,931 855 — 8,786 For the Six Months Ended United States Canada Elimination Total December 31, 2016 Revenue $ 418,368 $ 66,797 $ — $ 485,165 Income from operations 31,004 8,410 — 39,414 Total assets 892,571 140,328 (108,451 ) 924,448 Depreciation and amortization expense 16,410 1,831 — 18,241 December 26, 2015 Revenue $ 414,490 $ 65,741 $ — $ 480,231 Income from operations 51,191 8,171 — 59,362 Total assets 895,841 125,028 (97,023 ) 923,846 Depreciation and amortization expense 15,536 1,706 — 17,242 |
Proposed Merger with Cintas Cor
Proposed Merger with Cintas Corporation | 6 Months Ended |
Dec. 31, 2016 | |
Business Combinations [Abstract] | |
Proposed Merger with Cintas Corporation | Proposed Merger with Cintas Corporation On August 15, 2016, we entered into the Merger Agreement with Cintas and Merger Sub, pursuant to which, subject to the satisfaction or waiver of certain conditions, the Merger will be consummated. As a result of the Merger, Merger Sub will cease to exist and the Company will survive as a wholly-owned subsidiary of Cintas. The Merger is subject to customary closing conditions, including, without limitation, the expiration or termination of the applicable waiting periods under the HSR Act, and the requisite approval from the Competition Bureau of Canada pursuant to the Competition Act (Canada) being obtained. Our shareholders approved the Merger on November 15, 2016. The Merger is expected to close not later than the second quarter of calendar year 2017. Pursuant to the Merger Agreement, upon the consummation of the Merger (the “Effective Time”), each share of common stock of the Company (“Class A Common Stock”), issued and outstanding immediately prior to the Effective Time (other than dissenting shares and shares held by the Company or any direct or indirect wholly-owned subsidiary of the Company or Cintas, Merger Sub or any other direct or indirect wholly-owned subsidiary of Cintas) will be converted into the right to receive $ 97.50 in cash. The Merger Agreement contains customary representations and warranties and covenants that we must observe, including certain interim operating covenants that may restrict our operations during the pendency of the Merger, subject to certain exceptions. If the Merger is completed, certain change of control and severance provisions of our compensation arrangements will be triggered at the Effective Time. In addition, the Merger Agreement also contains certain termination rights that may require us to pay Cintas a $60,000 termination fee, or Cintas to pay us a $100,000 termination fee. For additional details of the Merger and the terms thereof, refer to the Merger Agreement, a copy of which is included as Exhibit 2.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 16, 2016. During the three and six months ended December 31, 2016 , we incurred costs of $10,067 and $16,123 , respectively, related to the Merger for employee-related expenses, professional services and regulatory fees. Many of these expenses are non-deductible for income tax purposes. The after-tax effects of these items are $8,754 and $13,491 , which represents $0.44 per diluted share and $0.68 per diluted share, respectively, for the three and six months ended December 31, 2016 . On September 29, 2016, each of the Company and Cintas received a request for additional information and documentary material, commonly referred to as a “second request,” from the Federal Trade Commission (the “FTC”), pursuant to the HSR Act, in connection with the Merger. A “second request” is a routine part of the FTC’s review of proposed transactions. The FTC’s “second request” has the effect of extending the waiting period applicable to the consummation of the Merger until the 30th day after substantial compliance by the Company and Cintas with the “second request,” unless the waiting period is extended voluntarily by the parties or terminated sooner by the FTC. On October 12, 2016, each of the Company and Cintas received a supplementary information request, commonly referred to as a SIR, from the Competition Bureau of Canada, pursuant to the Competition Act (Canada), in connection with the Merger. A SIR is part of the prescribed process for the Competition Bureau's review of proposed transactions in Canada and has the effect of extending the waiting period applicable to the consummation of the Merger until the 30th day after compliance by the Company and Cintas with the SIR, unless the waiting period is extended voluntarily by the parties or terminated sooner by the Competition Bureau of Canada. Litigation Related to the Merger On September 26, 2016, a putative shareholder class action lawsuit, captioned Klein v. G&K Services, Incorporated, et al., Civil Action No. 16-cv-03198 (DWF) (KMM), was filed in the United States District Court for the District of Minnesota, against the Company and the members of the Company's Board of Directors. The complaint asserted claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, and alleged, among other things, that the Company’s proxy statement contained false and misleading statements and/or omitted material information. The complaint sought, among other things, injunctive relief preventing consumption of the Merger, monetary damages and an award of attorneys’ fees and expenses. On October 28, 2016, the Company filed a Form 8-K with the SEC making supplemental disclosures to the Company’s definitive proxy statement filed with the SEC on September 29, 2016. On October 28, 2016, the parties filed a stipulation, and the court entered an order, dismissing this action with prejudice as to the named plaintiff and without prejudice as to all other putative class members. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Components of Inventory | The components of inventory as of December 31, 2016 and July 2, 2016 are as follows: December 31, July 2, Raw Materials $ 7,507 $ 6,424 Work in Process 1,305 1,431 Finished Goods 27,713 26,222 Inventory $ 36,525 $ 34,077 Merchandise in service, net $ 130,915 $ 131,801 |
Schedule of Goodwill by Segment | Goodwill by segment is as follows: United States Canada Total Balance as of July 2, 2016 $ 270,045 $ 54,475 $ 324,520 Foreign currency translation — (2,149 ) (2,149 ) Balance as of December 31, 2016 $ 270,045 $ 52,326 $ 322,371 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |
Computations of Basic and Diluted Earnings Per Share | The computations of our basic and diluted earnings per share for the three and six months ended December 31, 2016 and December 26, 2015 are as follows: Three Months Ended Six Months Ended December 31, December 26, December 31, December 26, Net income $ 9,262 $ 18,493 $ 19,312 $ 34,756 Less: Income allocable to participating securities (127 ) (271 ) (265 ) (498 ) Net income available to common stockholders $ 9,135 $ 18,222 $ 19,047 $ 34,258 Basic earnings per share (shares in thousands): Weighted average shares outstanding, basic 19,465 19,665 19,459 19,696 Basic earnings per common share: Basic earnings per share $ 0.47 $ 0.93 $ 0.98 $ 1.74 Diluted earnings per share (shares in thousands): Weighted average shares outstanding, basic 19,465 19,665 19,459 19,696 Weighted average effect of non-vested restricted stock grants and assumed exercise of stock options 361 205 351 240 Weighted average shares outstanding, diluted 19,826 19,870 19,810 19,936 Diluted earnings per common share: Diluted earnings per share $ 0.46 $ 0.92 $ 0.96 $ 1.72 |
Other Assets and Other Noncur25
Other Assets and Other Noncurrent Liabilities (Tables) | 6 Months Ended |
Dec. 31, 2016 | |
Other Assets and Other Noncurrent Liabilities [Abstract] | |
Schedule of Other Assets | Other assets as of December 31, 2016 and July 2, 2016 include the following: December 31, 2016 July 2, 2016 Executive deferred compensation assets $ 34,831 $ 33,080 Cash surrender value of life insurance policies 15,073 14,860 Customer contracts and non-competition agreements, net 2,760 3,464 Derivative financial instruments 784 — Other assets 5,416 6,658 Less: portion classified as current assets (2,325 ) (3,040 ) Total other noncurrent assets $ 56,539 $ 55,022 |
Schedule of Finite-Lived Intangible Assets | Customer contracts are amortized over a weighted average life of approximately ten years and are as follows: December 31, 2016 July 2, 2016 Customer contracts and non-competition agreements $ 14,564 $ 14,576 Accumulated amortization (11,804 ) (11,112 ) Net $ 2,760 $ 3,464 |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Estimated amortization expense for each of the next five fiscal years based on the intangible assets as of December 31, 2016 is as follows: 2017 remaining $ 547 2018 435 2019 216 2020 204 2021 192 Thereafter 1,166 |
Schedule of Other Noncurrent Liabilities | Other noncurrent liabilities as of December 31, 2016 and July 2, 2016 include the following: December 31, 2016 July 2, 2016 Multi-employer pension withdrawal liability $ — $ 803 Pension plan liability 28,401 32,446 Executive deferred compensation plan liability 34,831 33,080 Supplemental executive retirement plan liability 18,448 18,523 Accrued income taxes 7,389 7,363 Workers' compensation liability 16,169 18,036 Derivative financial instruments 1,147 8,189 Other liabilities 5,894 5,725 Less: Portion classified as current liabilities (7,895 ) (9,739 ) Total other noncurrent liabilities $ 104,384 $ 114,426 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 6 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Amount of Long-Term Debt | Long-term debt as of December 31, 2016 and July 2, 2016 include the following: December 31, 2016 July 2, 2016 Borrowings under Unsecured Revolver $ 97,000 $ 107,600 Borrowings under A/R Line 19,548 23,548 Borrowings under Fixed Rate Notes 100,000 100,000 216,548 231,148 Less current maturities (22,000 ) — Total long-term debt $ 194,548 $ 231,148 |
Material Covenants Required By Terms of This Facility | The following table illustrates compliance with regard to the material financial covenants required by the terms of this revolver as of December 31, 2016 : Required Actual Maximum Leverage Ratio (Debt/EBITDA) 3.50 1.42 Minimum Interest Coverage Ratio (EBITDA/Interest Expense) 3.00 24.29 |
Derivative Financial Instrume27
Derivative Financial Instruments (Tables) | 6 Months Ended |
Dec. 31, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Summary of Derivative Financial Instrument Asset and Liabilities | The following table summarizes our derivative financial instrument assets and liabilities and the classification on our Condensed Consolidated Balance Sheets as of December 31, 2016 and July 2, 2016 : December 31, 2016 July 2, 2016 Derivative financial instruments, assets: Other noncurrent assets $ 784 $ — Total derivative financial instruments, assets $ 784 $ — Derivative financial instruments, liabilities: Accrued expense and other current liabilities $ 1,147 $ 1,387 Other noncurrent liabilities — 6,802 Total derivative financial instruments, liabilities $ 1,147 $ 8,189 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Dec. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following tables summarize the assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and July 2, 2016 : As of December 31, 2016 Fair Value Measurements Using Inputs Considered as Level 1 Level 2 Total Other assets: Money market mutual funds $ 6,367 $ — $ 6,367 Equity and fixed income mutual funds 28,464 — 28,464 Cash surrender value of life insurance policies — 15,073 15,073 Derivative financial instruments — 784 784 Total assets $ 34,831 $ 15,857 $ 50,688 Derivative financial instruments $ — $ 1,147 $ 1,147 Total liabilities $ — $ 1,147 $ 1,147 As of July 2, 2016 Fair Value Measurements Using Inputs Considered as Level 1 Level 2 Total Other assets: Money market mutual funds $ 5,681 $ — $ 5,681 Equity and fixed income mutual funds 27,306 — 27,306 Cash surrender value of life insurance policies — 14,860 14,860 Total assets $ 32,987 $ 14,860 $ 47,847 Derivative financial instruments $ — $ 8,189 $ 8,189 Total liabilities $ — $ 8,189 $ 8,189 |
Summary of Assets and Liabilities at Fair Value | The following tables summarize the fair value of financial assets and liabilities recorded at historical cost as of December 31, 2016 and July 2, 2016 : As of December 31, 2016 Fair Value Measurements Using Inputs Considered as Level 1 Level 2 Total Cash and cash equivalents $ 29,864 $ — $ 29,864 Total assets $ 29,864 $ — $ 29,864 Current maturities of long-term debt $ — $ 22,000 $ 22,000 Long-term debt, net of current maturities — 193,677 193,677 Total liabilities $ — $ 215,677 $ 215,677 As of July 2, 2016 Fair Value Measurements Using Inputs Considered as Level 1 Level 2 Total Cash and cash equivalents $ 24,279 $ — $ 24,279 Total assets $ 24,279 $ — $ 24,279 Long-term debt, net of current maturities $ — $ 236,568 $ 236,568 Total liabilities $ — $ 236,568 $ 236,568 |
Employee Benefit Plans (Tables)
Employee Benefit Plans (Tables) | 6 Months Ended |
Dec. 31, 2016 | |
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] | |
Components of Net Periodic Benefit Cost | The components of net periodic pension cost for these plans for the three and six month periods ended December 31, 2016 and December 26, 2015 are as follows: Pension Plan SERP Three Months Ended Three Months Ended December 31, December 26, December 31, December 26, Interest cost $ 819 $ 943 $ 136 $ 148 Expected return on assets (789 ) (1,068 ) — — Amortization of net loss 635 608 117 60 Net periodic benefit cost $ 665 $ 483 $ 253 $ 208 Pension Plan SERP Six Months Ended Six Months Ended December 31, December 26, December 31, December 26, Interest cost $ 1,666 $ 1,886 $ 272 $ 296 Expected return on assets (1,649 ) (2,136 ) — — Amortization of net loss 1,350 1,216 234 120 Loss on pension settlement 6,010 — — — Net periodic benefit cost $ 7,377 $ 966 $ 506 $ 416 |
Accumulated Other Comprehensi30
Accumulated Other Comprehensive Income (Loss) (Tables) | 6 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Schedule of Accumulated Other Comprehensive Income (Loss) | Changes in accumulated other comprehensive income (loss), net of tax, for the three and six months ended December 31, 2016 and December 26, 2015 are as follows: Three Months Ended December 31, 2016 Foreign currency translation adjustment Pension benefit liabilities Derivative financial instruments Total Accumulated other comprehensive income (loss) at October 1, 2016 $ 1,947 $ (22,190 ) $ (4,067 ) $ (24,310 ) Other comprehensive income (loss) before reclassifications (1,672 ) — 4,877 3,205 Reclassifications from net accumulated other comprehensive income — 477 242 719 Net current period other comprehensive income (loss) (1,672 ) 477 5,119 3,924 Accumulated other comprehensive income (loss) at December 31, 2016 $ 275 $ (21,713 ) $ 1,052 $ (20,386 ) Six Months Ended December 31, 2016 Foreign currency translation adjustment Pension benefit liabilities Derivative financial instruments Total Accumulated other comprehensive income (loss) at July 2, 2016 $ 3,963 $ (28,929 ) $ (3,901 ) $ (28,867 ) Other comprehensive income (loss) before reclassifications (3,688 ) 2,447 4,536 3,295 Reclassifications from net accumulated other comprehensive income — 4,769 417 5,186 Net current period other comprehensive income (loss) (3,688 ) 7,216 4,953 8,481 Accumulated other comprehensive income (loss) at December 31, 2016 $ 275 $ (21,713 ) $ 1,052 $ (20,386 ) Three Months Ended December 26, 2015 Foreign currency translation adjustment Pension benefit liabilities Derivative financial instruments Total Accumulated other comprehensive income (loss) at September 26, 2015 $ 1,490 $ (20,849 ) $ 1,482 $ (17,877 ) Other comprehensive loss before reclassifications (3,860 ) — (613 ) (4,473 ) Reclassifications from net accumulated other comprehensive income (loss) — 422 (37 ) 385 Net current period other comprehensive income (loss) (3,860 ) 422 (650 ) (4,088 ) Accumulated other comprehensive income (loss) at December 26, 2015 $ (2,370 ) $ (20,427 ) $ 832 $ (21,965 ) Six Months Ended December 26, 2015 Foreign currency translation adjustment Pension benefit liabilities Derivative financial instruments Total Accumulated other comprehensive income (loss) at June 27, 2015 $ 7,914 $ (21,272 ) $ 4,414 $ (8,944 ) Other comprehensive loss before reclassifications (10,284 ) — (3,512 ) (13,796 ) Reclassifications from net accumulated other comprehensive income (loss) — 845 (70 ) 775 Net current period other comprehensive income (loss) (10,284 ) 845 (3,582 ) (13,021 ) Accumulated other comprehensive income (loss) at December 26, 2015 $ (2,370 ) $ (20,427 ) $ 832 $ (21,965 ) |
Reclassification out of Accumulated Other Comprehensive Income | Amounts reclassified from accumulated other comprehensive income (loss) to net income for the three and six months ended December 31, 2016 and December 26, 2015 are as follows: Three Months Ended Six Months Ended December 31, 2016 December 26, 2015 December 31, 2016 December 26, 2015 Loss (gain) on derivative financial instruments: Interest rate swap contracts (a) $ 386 $ (58 ) $ 675 $ (111 ) Tax (benefit) expense (144 ) 21 (258 ) 41 Total, net of tax 242 (37 ) 417 (70 ) Pension benefit liabilities: Amortization of net loss (b) 762 676 1,604 1,353 Loss on pension settlement (c) — — 6,010 — Tax benefit (285 ) (254 ) (2,845 ) (508 ) Total, net of tax 477 422 4,769 845 Total amounts reclassified, net of tax $ 719 $ 385 $ 5,186 $ 775 (a) Included in interest expense. (b) Included in the computation of net periodic pension cost, which is included in cost of rental and direct sale and selling and administrative. (c) Included in selling and administrative. |
Schedule of Income Tax for Each Component of Other Comprehensive Income | Income tax (expense) benefit for each component of other comprehensive income are as follows: Three Months Ended Six Months Ended December 31, 2016 December 26, 2015 December 31, 2016 December 26, 2015 Foreign currency translation adjustments $ 1,123 $ 219 $ 557 $ 1,699 Change in pension benefit liabilities (285 ) (254 ) (4,303 ) (508 ) Derivative financial instruments unrecognized gain (loss) (2,894 ) 365 (2,703 ) 2,092 Reclassification of derivative financial instruments loss (gain) to net income (144 ) 21 (258 ) 41 Income tax (expense) benefit $ (2,200 ) $ 351 $ (6,707 ) $ 3,324 |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Dec. 31, 2016 | |
Segment Reporting, Measurement Disclosures [Abstract] | |
Financial Information by Segment | Financial information by segment for the three and six month periods ended December 31, 2016 and December 26, 2015 is as follows: For the Three Months Ended United States Canada Elimination Total December 31, 2016 Revenue $ 210,197 $ 33,948 $ — $ 244,145 Income from operations 16,576 4,237 — 20,813 Total assets 892,571 140,328 (108,451 ) 924,448 Depreciation and amortization expense 8,297 888 — 9,185 December 26, 2015 Revenue $ 209,438 $ 33,622 $ — $ 243,060 Income from operations 27,266 4,218 — 31,484 Total assets 895,841 125,028 (97,023 ) 923,846 Depreciation and amortization expense 7,931 855 — 8,786 For the Six Months Ended United States Canada Elimination Total December 31, 2016 Revenue $ 418,368 $ 66,797 $ — $ 485,165 Income from operations 31,004 8,410 — 39,414 Total assets 892,571 140,328 (108,451 ) 924,448 Depreciation and amortization expense 16,410 1,831 — 18,241 December 26, 2015 Revenue $ 414,490 $ 65,741 $ — $ 480,231 Income from operations 51,191 8,171 — 59,362 Total assets 895,841 125,028 (97,023 ) 923,846 Depreciation and amortization expense 15,536 1,706 — 17,242 |
Summary of Significant Accoun32
Summary of Significant Accounting Policies - Proposed Merger with Cintas Corporation (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2016 | Dec. 26, 2015 | Dec. 31, 2016 | Dec. 26, 2015 | |
Business Acquisition [Line Items] | ||||
Merger-related expenses | $ 10,067 | $ 0 | $ 16,123 | $ 0 |
G&K Services and Cintas Merger | ||||
Business Acquisition [Line Items] | ||||
Merger-related expenses | 10,067 | 16,123 | ||
After-tax effect of merger related costs | $ 8,754 | $ 13,491 | ||
After-tax effect of merger related costs (in dollars per share) | $ 0.44 | $ 0.68 |
Summary of Significant Accoun33
Summary of Significant Accounting Policies - Components of Inventory (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Jul. 02, 2016 |
Accounting Policies [Abstract] | ||
Raw Materials | $ 7,507 | $ 6,424 |
Work in Process | 1,305 | 1,431 |
Finished Goods | 27,713 | 26,222 |
Inventory | 36,525 | 34,077 |
Merchandise in service, net | $ 130,915 | $ 131,801 |
Summary of Significant Accoun34
Summary of Significant Accounting Policies - Goodwill (Details) $ in Thousands | 6 Months Ended |
Dec. 31, 2016USD ($) | |
Goodwill [Roll Forward] | |
Beginning Balance | $ 324,520 |
Foreign currency translation | (2,149) |
Ending Balance | 322,371 |
United States | |
Goodwill [Roll Forward] | |
Beginning Balance | 270,045 |
Foreign currency translation | 0 |
Ending Balance | 270,045 |
Canada | |
Goodwill [Roll Forward] | |
Beginning Balance | 54,475 |
Foreign currency translation | (2,149) |
Ending Balance | $ 52,326 |
New Accounting Pronouncements (
New Accounting Pronouncements (Details) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2016 | Dec. 26, 2015 | Dec. 31, 2016 | Dec. 26, 2015 | Jul. 02, 2016 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Cumulative-effect of adoption of share-based compensation accounting guidance | $ 836 | ||||
Income tax benefit realized | $ 204 | $ 1,027 | |||
Increase in weighted average diluted shares outstanding (in shares) | 361 | 205 | 351 | 240 | |
Immaterial increase to stock based compensation expense | $ 1,749 | $ 1,458 | $ 3,604 | $ 3,399 | |
Retained Earnings | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Cumulative-effect of adoption of share-based compensation accounting guidance | 604 | ||||
Additional Paid-In Capital | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Cumulative-effect of adoption of share-based compensation accounting guidance | $ 232 | ||||
New Accounting Pronouncement, Early Adoption, Effect | Accounting Standards Update 2016-09 | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Increase in weighted average diluted shares outstanding (in shares) | 110 | 105 | |||
Immaterial increase to stock based compensation expense | $ 0 | $ 0 | |||
New Accounting Pronouncement, Early Adoption, Effect | Accounting Standards Update 2016-09 | Retained Earnings | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Cumulative-effect of adoption of share-based compensation accounting guidance | 604 | 604 | |||
New Accounting Pronouncement, Early Adoption, Effect | Accounting Standards Update 2016-09 | Additional Paid-In Capital | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Cumulative-effect of adoption of share-based compensation accounting guidance | $ (604) | $ (604) |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2016 | Dec. 26, 2015 | Dec. 31, 2016 | Dec. 26, 2015 | |
Earnings Per Share [Abstract] | ||||
Net income | $ 9,262 | $ 18,493 | $ 19,312 | $ 34,756 |
Less: Income allocable to participating securities | (127) | (271) | (265) | (498) |
Net income available to common stockholders | $ 9,135 | $ 18,222 | $ 19,047 | $ 34,258 |
Basic earnings per share (shares in thousands): | ||||
Weighted average shares outstanding, basic (in shares) | 19,465 | 19,665 | 19,459 | 19,696 |
Basic earnings per common share (in dollars per share) | $ 0.47 | $ 0.93 | $ 0.98 | $ 1.74 |
Diluted earnings per share: | ||||
Weighted average shares outstanding, basic (in shares) | 19,465 | 19,665 | 19,459 | 19,696 |
Weighted average effect of non-vested restricted stock grants and assumed exercise of stock options (in shares) | 361 | 205 | 351 | 240 |
Weighted average shares outstanding, diluted (In shares) | 19,826 | 19,870 | 19,810 | 19,936 |
Diluted earnings per common share (in dollars per share) | $ 0.46 | $ 0.92 | $ 0.96 | $ 1.72 |
Shares excluded from computation of diluted earnings per share (in shares) | 42 | 276 | 34 | 204 |
Other Assets and Other Noncur37
Other Assets and Other Noncurrent Liabilities - Other Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Jul. 02, 2016 |
Other Assets [Abstract] | ||
Executive deferred compensation assets | $ 34,831 | $ 33,080 |
Cash surrender value of life insurance policies | 15,073 | 14,860 |
Customer contracts and non-competition agreements, net | 2,760 | 3,464 |
Derivative financial instruments | 784 | 0 |
Other assets | 5,416 | 6,658 |
Less: portion classified as current assets | (2,325) | (3,040) |
Total other noncurrent assets | $ 56,539 | $ 55,022 |
Other Assets and Other Noncur38
Other Assets and Other Noncurrent Liabilities - Other Intangible Assets (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Dec. 31, 2016 | Jul. 02, 2016 | |
Finite-Lived Intangible Assets, Net [Abstract] | ||
Customer contracts, weighted average useful life | 10 years | |
Customer contracts and non-competition agreements | $ 14,564 | $ 14,576 |
Accumulated amortization | (11,804) | (11,112) |
Net | $ 2,760 | $ 3,464 |
Other Assets and Other Noncur39
Other Assets and Other Noncurrent Liabilities - Estimated Amortization Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2016 | Dec. 26, 2015 | Dec. 31, 2016 | Dec. 26, 2015 | |
Other Assets and Other Noncurrent Liabilities [Abstract] | ||||
Amortization expense | $ 346 | $ 340 | $ 694 | $ 718 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||||
2017 remaining | 547 | 547 | ||
2,018 | 435 | 435 | ||
2,019 | 216 | 216 | ||
2,020 | 204 | 204 | ||
2,021 | 192 | 192 | ||
Thereafter | $ 1,166 | $ 1,166 |
Other Assets and Other Noncur40
Other Assets and Other Noncurrent Liabilities - Other Noncurrent Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Jul. 02, 2016 |
Other Liabilities, Noncurrent [Abstract] | ||
Multi-employer pension withdrawal liability | $ 0 | $ 803 |
Pension plan liability | 28,401 | 32,446 |
Executive deferred compensation plan liability | 34,831 | 33,080 |
Supplemental executive retirement plan liability | 18,448 | 18,523 |
Accrued income taxes | 7,389 | 7,363 |
Workers' compensation liability | 16,169 | 18,036 |
Derivative financial instruments | 1,147 | 8,189 |
Other liabilities | 5,894 | 5,725 |
Less: Portion classified as current liabilities | (7,895) | (9,739) |
Total other noncurrent liabilities | $ 104,384 | $ 114,426 |
Long-Term Debt - Amount of Long
Long-Term Debt - Amount of Long-Term Debt (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Jul. 02, 2016 |
Debt Instrument [Line Items] | ||
Borrowings under A/R Line | $ 19,548 | $ 23,548 |
Long-term debt including current maturities | 216,548 | 231,148 |
Less current maturities | (22,000) | 0 |
Total long-term debt | 194,548 | 231,148 |
Unsecured Debt | ||
Debt Instrument [Line Items] | ||
Borrowings under Unsecured Revolver | 97,000 | 107,600 |
Senior Notes | ||
Debt Instrument [Line Items] | ||
Borrowings under Fixed Rate Notes | $ 100,000 | $ 100,000 |
Long-Term Debt - Additional Inf
Long-Term Debt - Additional Information (Details) - USD ($) | 6 Months Ended | |
Dec. 31, 2016 | Jul. 02, 2016 | |
Line of Credit Facility [Line Items] | ||
Current maturities of long-term debt | $ 22,000,000 | $ 0 |
Unsecured Debt | ||
Line of Credit Facility [Line Items] | ||
Borrowings outstanding under the revolving credit facility | $ 97,000,000 | $ 107,600,000 |
Effective interest rate (in percent) | 3.81% | |
Long-term debt, notes | $ 100,000,000 | |
Outstanding balance, notes | 100,000,000 | |
Unsecured Debt | Unsecured Senior Notes 1 | ||
Line of Credit Facility [Line Items] | ||
Long-term debt, notes | $ 50,000,000 | |
Debt instrument, interest rate, stated percentage | 3.73% | |
Unsecured Debt | Unsecured Senior Notes 2 | ||
Line of Credit Facility [Line Items] | ||
Long-term debt, notes | $ 50,000,000 | |
Debt instrument, interest rate, stated percentage | 3.88% | |
Unsecured revolving credit facility | ||
Line of Credit Facility [Line Items] | ||
Revolving credit facility | $ 350,000,000 | |
Additional borrowing capacity | 200,000 | |
Maximum borrowing capacity, including additional borrowing capacity | 550,000 | |
Borrowings outstanding under the revolving credit facility | 97,000,000 | |
Letters of credit sub-limit | 45,000,000 | |
Letters of credit outstanding | $ 0 | |
Fee payment on unused credit balances (in percent) | 0.15% | |
Effective interest rate (in percent) | 1.78% | |
Unsecured revolving credit facility | Minimum | ||
Line of Credit Facility [Line Items] | ||
Interest rate spread on notes (in percent) | 1.00% | |
Unsecured revolving credit facility | Maximum | ||
Line of Credit Facility [Line Items] | ||
Interest rate spread on notes (in percent) | 1.75% | |
Secured revolving credit facility | ||
Line of Credit Facility [Line Items] | ||
Revolving credit facility | $ 50,000,000 | |
Interest rate spread on notes (in percent) | 0.75% | |
Borrowings outstanding under the revolving credit facility | $ 19,548,000 | |
Letters of credit outstanding | $ 30,452,000 | |
Fee payment on unused credit balances (in percent) | 0.26% | |
Effective interest rate (in percent) | 1.37% | |
Interest rate on letters of credit outstanding | 0.80% |
Long-Term Debt - Material Coven
Long-Term Debt - Material Covenants Required by Terms of This Facility (Details) - Revolving Credit Facility | 6 Months Ended |
Dec. 31, 2016 | |
Debt Instrument [Line Items] | |
Maximum Leverage Ratio (Debt/EBITDA), Required | 3.50 |
Maximum Leverage Ratio (Debt/EBITADA), Actual | 1.42 |
Minimum Interest Coverage Ratio (EBITDA/Interest Expense), Required | 3 |
Minimum Interest Coverage Ratio (EBITDA/Interest Expense), Actual | 24.29 |
Derivative Financial Instrume44
Derivative Financial Instruments - Narrative (Details) | 6 Months Ended |
Dec. 31, 2016USD ($) | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Net gain deferred in accumulated other comprehensive income | $ 1,053,000 |
Loss expected to be reclassified to interest expense | 572,000 |
Interest Rate Swap Contracts | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Notional amount of interest rate swap contracts | $ 75,000,000 |
Derivative, term of contract | 15 years |
Average rate on interest rate swap contracts | 2.35% |
Derivative Financial Instrume45
Derivative Financial Instruments - Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Jul. 02, 2016 |
Derivative financial instruments, assets: | ||
Total derivative financial instruments, assets | $ 784 | $ 0 |
Derivative financial instruments, liabilities: | ||
Total derivative financial instruments, liabilities | 1,147 | 8,189 |
Other noncurrent assets | ||
Derivative financial instruments, assets: | ||
Total derivative financial instruments, assets | 784 | 0 |
Accrued expense and other current liabilities | ||
Derivative financial instruments, liabilities: | ||
Total derivative financial instruments, liabilities | 1,147 | 1,387 |
Other noncurrent liabilities | ||
Derivative financial instruments, liabilities: | ||
Total derivative financial instruments, liabilities | $ 0 | $ 6,802 |
Fair Value Measurements - Asset
Fair Value Measurements - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Jul. 02, 2016 |
Other assets: | ||
Derivative financial instruments | $ 784 | $ 0 |
Total assets | 29,864 | 24,279 |
Derivative financial instruments | 1,147 | 8,189 |
Total liabilities | 215,677 | 236,568 |
Fair Value, Measurements, Recurring | ||
Other assets: | ||
Money market mutual funds | 6,367 | 5,681 |
Equity and fixed income mutual funds | 28,464 | 27,306 |
Cash surrender value of life insurance policies | 15,073 | 14,860 |
Derivative financial instruments | 784 | |
Total assets | 50,688 | 47,847 |
Derivative financial instruments | 1,147 | 8,189 |
Total liabilities | 1,147 | 8,189 |
Level 1 | ||
Other assets: | ||
Total assets | 29,864 | 24,279 |
Total liabilities | 0 | 0 |
Level 1 | Fair Value, Measurements, Recurring | ||
Other assets: | ||
Money market mutual funds | 6,367 | 5,681 |
Equity and fixed income mutual funds | 28,464 | 27,306 |
Cash surrender value of life insurance policies | 0 | 0 |
Derivative financial instruments | 0 | |
Total assets | 34,831 | 32,987 |
Derivative financial instruments | 0 | 0 |
Total liabilities | 0 | 0 |
Level 2 | ||
Other assets: | ||
Total assets | 0 | 0 |
Total liabilities | 215,677 | 236,568 |
Level 2 | Fair Value, Measurements, Recurring | ||
Other assets: | ||
Money market mutual funds | 0 | 0 |
Equity and fixed income mutual funds | 0 | 0 |
Cash surrender value of life insurance policies | 15,073 | 14,860 |
Derivative financial instruments | 784 | |
Total assets | 15,857 | 14,860 |
Derivative financial instruments | 1,147 | 8,189 |
Total liabilities | $ 1,147 | $ 8,189 |
Fair Value Measurements - Summa
Fair Value Measurements - Summary of Assets and Liabilities at Fair Value (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Jul. 02, 2016 |
Fair Value Inputs Assets Liabilities Quantitative Information [Line Items] | ||
Cash and cash equivalents | $ 29,864 | $ 24,279 |
Total assets | 29,864 | 24,279 |
Current maturities of long-term debt | 22,000 | |
Long-term debt, net of current maturities | 193,677 | 236,568 |
Total liabilities | 215,677 | 236,568 |
Level 1 | ||
Fair Value Inputs Assets Liabilities Quantitative Information [Line Items] | ||
Cash and cash equivalents | 29,864 | 24,279 |
Total assets | 29,864 | 24,279 |
Current maturities of long-term debt | 0 | |
Long-term debt, net of current maturities | 0 | 0 |
Total liabilities | 0 | 0 |
Level 2 | ||
Fair Value Inputs Assets Liabilities Quantitative Information [Line Items] | ||
Cash and cash equivalents | 0 | 0 |
Total assets | 0 | 0 |
Current maturities of long-term debt | 22,000 | |
Long-term debt, net of current maturities | 193,677 | 236,568 |
Total liabilities | $ 215,677 | $ 236,568 |
Employee Benefit Plans - Compon
Employee Benefit Plans - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2016 | Oct. 01, 2016 | Dec. 26, 2015 | Dec. 31, 2016 | Dec. 26, 2015 | |
Defined Benefit Plan Disclosure [Line Items] | |||||
Loss on pension settlement | $ 0 | $ 0 | $ 6,010 | $ 0 | |
Pension Plan | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Interest cost | 819 | 943 | 1,666 | 1,886 | |
Expected return on assets | (789) | (1,068) | (1,649) | (2,136) | |
Amortization of net loss | 635 | 608 | 1,350 | 1,216 | |
Loss on pension settlement | $ 6,010 | 6,010 | 0 | ||
Net periodic benefit cost | 665 | 483 | 7,377 | 966 | |
SERP | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Interest cost | 136 | 148 | 272 | 296 | |
Expected return on assets | 0 | 0 | 0 | 0 | |
Amortization of net loss | 117 | 60 | 234 | 120 | |
Loss on pension settlement | 0 | 0 | |||
Net periodic benefit cost | $ 253 | $ 208 | $ 506 | $ 416 |
Employee Benefit Plans - Additi
Employee Benefit Plans - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Dec. 31, 2016 | Oct. 01, 2016 | Dec. 26, 2015 | Dec. 31, 2016 | Dec. 26, 2015 | Jul. 02, 2016 | |
Multiemployer Plans [Abstract] | ||||||
Loss on pension settlement | $ 0 | $ 0 | $ 6,010 | $ 0 | ||
Settlement payment on multiemployer plan | $ 813 | |||||
Pension Plan | ||||||
Multiemployer Plans [Abstract] | ||||||
Employer contribution for pension plan | 180 | |||||
Total pension liability | $ 34,200 | |||||
Total payments | 17,281 | |||||
Loss on pension settlement | $ 6,010 | $ 6,010 | $ 0 | |||
Settlement loss (in dollars per share) | $ 0.19 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2016 | Dec. 26, 2015 | |
Business Acquisition [Line Items] | |||
Effective tax rate (in percent) | 45.40% | 38.00% | |
Income tax benefit realized | $ 204 | $ 1,027 | |
G&K Services and Cintas Merger | |||
Business Acquisition [Line Items] | |||
Nondeductible expense related to proposed merger | $ 10,600 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2016 | Dec. 26, 2015 | Dec. 31, 2016 | Dec. 26, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||
Authorized share repurchase program value | $ 275,000,000 | $ 275,000,000 | ||
Stock repurchased during period (in shares) | 0 | 137,158 | 0 | 223,354 |
Payments for repurchase of common stock | $ 9,138,000 | $ 0 | $ 15,020,000 | |
Remaining share authorized value | $ 94,043,000 | 94,043,000 | ||
Total compensation expense related to share-based awards | 1,749,000 | 1,458,000 | 3,604,000 | 3,399,000 |
Capitalized share-based compensation expense | $ 0 | $ 0 | $ 0 | $ 0 |
Number of options exercised and restricted stock vested (in shares) | 124,000 |
Accumulated Other Comprehensi52
Accumulated Other Comprehensive Income (Loss) - Changes in accumulated other comprehensive income, net of tax (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2016 | Dec. 26, 2015 | Dec. 31, 2016 | Dec. 26, 2015 | |
Accumulated Other Comprehensive Income Loss [Roll Forward] | ||||
Beginning balance | $ 389,540 | |||
Other comprehensive income (loss), net of taxes | $ 3,924 | $ (4,088) | 8,481 | $ (13,021) |
Ending balance | 405,309 | 405,309 | ||
Foreign currency translation adjustment | ||||
Accumulated Other Comprehensive Income Loss [Roll Forward] | ||||
Beginning balance | 1,947 | 1,490 | 3,963 | 7,914 |
Other comprehensive income (loss) before reclassifications | (1,672) | (3,860) | (3,688) | (10,284) |
Reclassifications from net accumulated other comprehensive income (loss) | 0 | 0 | 0 | 0 |
Other comprehensive income (loss), net of taxes | (1,672) | (3,860) | (3,688) | (10,284) |
Ending balance | 275 | (2,370) | 275 | (2,370) |
Pension benefit liabilities | ||||
Accumulated Other Comprehensive Income Loss [Roll Forward] | ||||
Beginning balance | (22,190) | (20,849) | (28,929) | (21,272) |
Other comprehensive income (loss) before reclassifications | 0 | 0 | 2,447 | 0 |
Reclassifications from net accumulated other comprehensive income (loss) | 477 | 422 | 4,769 | 845 |
Other comprehensive income (loss), net of taxes | 477 | 422 | 7,216 | 845 |
Ending balance | (21,713) | (20,427) | (21,713) | (20,427) |
Derivative financial instruments | ||||
Accumulated Other Comprehensive Income Loss [Roll Forward] | ||||
Beginning balance | (4,067) | 1,482 | (3,901) | 4,414 |
Other comprehensive income (loss) before reclassifications | 4,877 | (613) | 4,536 | (3,512) |
Reclassifications from net accumulated other comprehensive income (loss) | 242 | (37) | 417 | (70) |
Other comprehensive income (loss), net of taxes | 5,119 | (650) | 4,953 | (3,582) |
Ending balance | 1,052 | 832 | 1,052 | 832 |
Total | ||||
Accumulated Other Comprehensive Income Loss [Roll Forward] | ||||
Beginning balance | (24,310) | (17,877) | (28,867) | (8,944) |
Other comprehensive income (loss) before reclassifications | 3,205 | (4,473) | 3,295 | (13,796) |
Reclassifications from net accumulated other comprehensive income (loss) | 719 | 385 | 5,186 | 775 |
Other comprehensive income (loss), net of taxes | 3,924 | (4,088) | 8,481 | (13,021) |
Ending balance | $ (20,386) | $ (21,965) | $ (20,386) | $ (21,965) |
Accumulated Other Comprehensi53
Accumulated Other Comprehensive Income (Loss) - Reclassification from accumulated other comprehensive income (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2016 | Dec. 26, 2015 | Dec. 31, 2016 | Dec. 26, 2015 | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Interest rate swap contracts | $ (2,065) | $ (1,656) | $ (4,026) | $ (3,283) |
Loss (gain) on derivative financial instruments | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Total amounts reclassified, net of tax | (242) | 37 | (417) | 70 |
Pension benefit liabilities | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Total amounts reclassified, net of tax | (477) | (422) | (4,769) | (845) |
Reclassification out of accumulated other comprehensive income | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Total amounts reclassified, net of tax | 719 | 385 | 5,186 | 775 |
Reclassification out of accumulated other comprehensive income | Loss (gain) on derivative financial instruments | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Tax (benefit) expense | (144) | 21 | (258) | 41 |
Total amounts reclassified, net of tax | 242 | (37) | 417 | (70) |
Reclassification out of accumulated other comprehensive income | Pension benefit liabilities, amortization of net loss | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Reclassification from AOCI before tax | 762 | 676 | 1,604 | 1,353 |
Reclassification out of accumulated other comprehensive income | Pension benefit liabilities, loss on pension settlement | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Reclassification from AOCI before tax | 0 | 0 | 6,010 | 0 |
Reclassification out of accumulated other comprehensive income | Pension benefit liabilities | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Tax (benefit) expense | (285) | (254) | (2,845) | (508) |
Total amounts reclassified, net of tax | 477 | 422 | 4,769 | 845 |
Reclassification out of accumulated other comprehensive income | Interest rate swap contracts | Loss (gain) on derivative financial instruments | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Interest rate swap contracts | $ 386 | $ (58) | $ 675 | $ (111) |
Accumulated Other Comprehensi54
Accumulated Other Comprehensive Income (Loss) - Schedule of income tax for each component of other comprehensive income (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2016 | Dec. 26, 2015 | Dec. 31, 2016 | Dec. 26, 2015 | |
Equity [Abstract] | ||||
Foreign currency translation adjustments | $ 1,123 | $ 219 | $ 557 | $ 1,699 |
Change in pension benefit liabilities | (285) | (254) | (4,303) | (508) |
Derivative financial instruments unrecognized gain (loss) | (2,894) | 365 | (2,703) | 2,092 |
Reclassification of derivative financial instruments loss (gain) to net income | (144) | 21 | (258) | 41 |
Income tax (expense) benefit | $ (2,200) | $ 351 | $ (6,707) | $ 3,324 |
Contingent Liabilities (Details
Contingent Liabilities (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | |
Apr. 30, 2016USD ($) | Jun. 27, 2015Location | Dec. 31, 2016USD ($)Facilityproject | Jul. 02, 2016USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | ||||
Number of projects nearing completion | project | 3 | |||
Number of projects in progress | project | 4 | |||
Number of previously purchased locations | Location | 3 | |||
Reserves related to environmental matters | $ | $ 3,176 | $ 3,607 | ||
Number of sites for environmental assessments | Facility | 6 | |||
G&K Services vs. Talent Creation | ||||
Loss Contingencies [Line Items] | ||||
Litigation settlement award | $ | $ 1,300 |
Segment Information - Additiona
Segment Information - Additional Information (Details) | 6 Months Ended |
Dec. 31, 2016Segment | |
Segment Reporting, Measurement Disclosures [Abstract] | |
Number of operating segments | 2 |
Maximum percentage of revenue from one single customer | 2.00% |
Segment Information - Financial
Segment Information - Financial Information by Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2016 | Dec. 26, 2015 | Dec. 31, 2016 | Dec. 26, 2015 | Jul. 02, 2016 | |
Segment Reporting Information [Line Items] | |||||
Revenue | $ 244,145 | $ 243,060 | $ 485,165 | $ 480,231 | |
Income from operations | 20,813 | 31,484 | 39,414 | 59,362 | |
Total assets | 924,448 | 923,846 | 924,448 | 923,846 | $ 921,537 |
Depreciation and amortization expense | 9,185 | 8,786 | 18,241 | 17,242 | |
Operating Segments | United States | |||||
Segment Reporting Information [Line Items] | |||||
Revenue | 210,197 | 209,438 | 418,368 | 414,490 | |
Income from operations | 16,576 | 27,266 | 31,004 | 51,191 | |
Total assets | 892,571 | 895,841 | 892,571 | 895,841 | |
Depreciation and amortization expense | 8,297 | 7,931 | 16,410 | 15,536 | |
Operating Segments | Canada | |||||
Segment Reporting Information [Line Items] | |||||
Revenue | 33,948 | 33,622 | 66,797 | 65,741 | |
Income from operations | 4,237 | 4,218 | 8,410 | 8,171 | |
Total assets | 140,328 | 125,028 | 140,328 | 125,028 | |
Depreciation and amortization expense | 888 | 855 | 1,831 | 1,706 | |
Elimination | |||||
Segment Reporting Information [Line Items] | |||||
Revenue | 0 | 0 | 0 | 0 | |
Income from operations | 0 | 0 | 0 | 0 | |
Total assets | (108,451) | (97,023) | (108,451) | (97,023) | |
Depreciation and amortization expense | $ 0 | $ 0 | $ 0 | $ 0 |
Proposed Merger with Cintas C58
Proposed Merger with Cintas Corporation (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2016 | Dec. 26, 2015 | Dec. 31, 2016 | Dec. 26, 2015 | Aug. 15, 2016 | |
Business Acquisition [Line Items] | |||||
Merger-related expenses | $ 10,067 | $ 0 | $ 16,123 | $ 0 | |
G&K Services and Cintas Merger | |||||
Business Acquisition [Line Items] | |||||
Termination fee | $ 60,000 | ||||
Merger-related expenses | 10,067 | 16,123 | |||
After-tax effect of merger related costs | $ 8,754 | $ 13,491 | |||
After-tax effect of merger related costs (in dollars per share) | $ 0.44 | $ 0.68 | |||
G&K Services | Class A Common Stock | G&K Services and Cintas Merger | |||||
Business Acquisition [Line Items] | |||||
Merger consideration (in dollars per share) | $ 97.50 | ||||
Cintas Corporation | G&K Services and Cintas Merger | |||||
Business Acquisition [Line Items] | |||||
Termination fee | $ 100,000 |