##### Table of Contents



(G & K SERVICES LOGO)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended March 29, 2003 Commission file number 0-4063

G&K SERVICES, INC.

(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|MINNESOTA                                                      |  | 41-0449530                          
|                                                               |  |                                     
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

5995 OPUS PARKWAY, SUITE 500
MINNETONKA, MINNESOTA 55343
(Address of principal executive offices and zip code)

(952) 912-5500
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

|     |  |    
|---- |  | ---
|YESx |  | NOo

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

|     |  |    
|---- |  | ---
|YESx |  | NOo

Indicate the number of shares outstanding of each of the issuers classes
of common stock as of the latest practicable date.

|                                                |  |                                   
|----------------------------------------------- |  | ----------------------------------
|CLASS A
Common Stock, par value $0.50 per share |  | Outstanding May 8, 2003
19,260,402
|                                                |  |                                   
|CLASS B
Common Stock, par value $0.50 per share |  | Outstanding May 8, 2003
1,474,996 





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TABLE OF CONTENTS



|                                      |                                                                                               |                                                      |  |  |  |  |  | 
|------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I                               
|                                      | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                      |                                                                                               | CONSOLIDATED CONDENSED BALANCE SHEETS               
|                                      |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS               
|                                      |                                                                                               | CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS     
|                                      |                                                                                               | NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|                                      | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                      | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                            
|                                      | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II                              
|                                      | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                           
|CERTIFICATION                        
|EX-10.1 Change in Control Agreement  
|EX-99.1 Certifications of CEO and CFO



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##### Table of Contents



G&K Services, Inc.
Form 10-Q

Table of Contents

|               |  |                                                                                       |  |                                                                                                             |    |  |   | 
|-------------- |  | ------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------- | -- |  | - | 
|PART I         |  |                                                                                       |  | PAGE                                                                                                       
|Item 1.        |  | Financial Statements                                                                  |  |                                                                                                             |    | 
|               |  |                                                                                       |  | Consolidated Condensed Balance Sheets as of
March 29, 2003 and June 29, 2002                                |    |  | 3 | 
|               |  |                                                                                       |  | Consolidated Statements of Operations for the three and nine months ended
March 29, 2003 and March 30, 2002 |    |  | 4 | 
|               |  |                                                                                       |  | Consolidated Condensed Statements of Cash Flows for the nine
months ended March 29, 2003 and March 30, 2002 |    |  | 5 | 
|               |  |                                                                                       |  | Notes to Consolidated Condensed Financial Statements                                                        |    |  | 6 | 
|Item 2.        |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations |  |                                                                                                             | 12 | 
|Item 3.        |  | Quantitative and Qualitative Disclosure About Market Risk                             |  |                                                                                                             | 19 | 
|Item 4.        |  | Controls and Procedures                                                               |  |                                                                                                             | 19 | 
|PART II        |  |                                                                                       |  |                                                                                                            
|Item 6.        |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                                                             | 20 | 
|Signatures     |  |                                                                                       |  |                                                                                                             | 21 | 
|Certifications |  |                                                                                       |  |                                                                                                             | 22 | 

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PART I

FINANCIAL INFORMATION







ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETSG&K Services, Inc. and Subsidiaries

|                                          |                                                                                |                           |         |           |         |          |         |        |         | 
|----------------------------------------- | ------------------------------------------------------------------------------ | ------------------------- | ------- | --------- | ------- | -------- | ------- | ------ | ------- | 
|                                          |                                                                                |                           |         | March 29, |         |          |         |       
|                                          |                                                                                |                           |         | 2003      |         | June 29,
|(In thousands)                            |                                                                                | (Unaudited)               |         | 2002     
|                                          |                                                                                |                           |         |          
|ASSETS                                    |                                                                                |                           |         |           |         |          |         |       
|Current Assets                            |                                                                                |                           |         |           |         |          |         |       
|                                          | Cash and cash equivalents                                                      |                           | $       | 14,050    |         |          | $       | 9,986  |        
|                                          | Accounts receivable, less allowance for doubtful
accounts of $4,713 and $3,326 |                           |         | 67,084    |         |          |         | 66,555 |        
|                                          | Inventories                                                                    |                           |         | 94,370    |         |          |         | 91,733 |        
|                                          | Prepaid expenses                                                               |                           |         | 11,040    |         |          |         | 17,536 |        
|                                          |                                                                                |                           |         |           |         |          |         |        |        
|                                          |                                                                                | Total current assets      |         |           | 186,544 |          |         |        | 185,810 | 
|                                          |                                                                                |                           |         |           |         |          |         |        |        
|Property, Plant and Equipment, net        |                                                                                |                           | 246,584 |           |         |          | 230,530 |       
|Goodwill, net                             |                                                                                |                           | 251,046 |           |         |          | 200,140 |       
|Other Assets                              |                                                                                |                           | 69,447  |           |         |          | 65,219  |       
|                                          |                                                                                |                           |         |           |         |          |         |        |        
|                                          |                                                                                | $                         | 753,621 |           |         | $        | 681,699 |       
|                                          |                                                                                |                           |         |           |         |          |         |        |        
|LIABILITIES AND STOCKHOLDERS EQUITY      |                                                                                |                           |         |           |         |          |         |       
|Current Liabilities                       |                                                                                |                           |         |           |         |          |         |       
|                                          | Accounts payable                                                               |                           | $       | 19,507    |         |          | $       | 17,361 |        
|                                          | Accrued expenses                                                               |                           |         | 59,599    |         |          |         | 52,026 |        
|                                          | Deferred income taxes                                                          |                           |         | 11,316    |         |          |         | 11,157 |        
|                                          | Current maturities of long-term debt                                           |                           |         | 10,789    |         |          |         | 9,443  |        
|                                          |                                                                                |                           |         |           |         |          |         |        |        
|                                          |                                                                                | Total current liabilities |         |           | 101,211 |          |         |        | 89,987  | 
|                                          |                                                                                |                           |         |           |         |          |         |        |        
|Long-Term Debt, net of Current Maturities |                                                                                |                           | 245,062 |           |         |          | 214,977 |       
|Deferred Income Taxes                     |                                                                                |                           | 23,434  |           |         |          | 21,570  |       
|Other Noncurrent Liabilities              |                                                                                |                           | 14,634  |           |         |          | 15,007  |       
|Stockholders Equity                      |                                                                                |                           | 369,280 |           |         |          | 340,158 |       
|                                          |                                                                                |                           |         |           |         |          |         |        |        
|                                          |                                                                                | $                         | 753,621 |           |         | $        | 681,699 |       
|                                          |                                                                                |                           |         |           |         |          |         |        |        

The accompanying notes are an integral part of these consolidated condensed financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONSG&K Services, Inc. and Subsidiaries
(Unaudited)

|                                      |                                                       |                          |        |                            |         |                           |        |           |         |           |        |         |         |   |        |         |         | 
|------------------------------------- | ----------------------------------------------------- | ------------------------ | ------ | -------------------------- | ------- | ------------------------- | ------ | --------- | ------- | --------- | ------ | ------- | ------- | - | ------ | ------- | ------- | 
|                                      |                                                       |                          |        | For the Three Months Ended |         | For the Nine Months Ended
|                                      |                                                       |                          |        |                            |         |                          
|                                      |                                                       |                          |        | March 29,                  |         | March 30,                 |        | March 29, |         | March 30,
|(In thousands, except per share data) |                                                       | 2003                     |        | 2002                       |         | 2003                      |        | 2002     
|                                      |                                                       |                          |        |                            |         |                           |        |          
|Revenues                              |                                                       |                          |        |                            |         |                           |        |           |         |           |        |         |         |   |        |        
|                                      | Rental operations                                     |                          | $      | 171,065                    |         |                           | $      | 162,904   |         |           | $      | 508,149 |         |   | $      | 490,555 |        
|                                      | Direct sales                                          |                          |        | 5,455                      |         |                           |        | 4,709     |         |           |        | 17,822  |         |   |        | 16,045  |        
|                                      |                                                       |                          |        |                            |         |                           |        |           |         |           |        |         |         |   |        |         |        
|                                      |                                                       | Total revenues           |        |                            | 176,520 |                           |        |           | 167,613 |           |        |         | 525,971 |   |        |         | 506,600 | 
|                                      |                                                       |                          |        |                            |         |                           |        |           |         |           |        |         |         |   |        |         |        
|Operating Expenses                    |                                                       |                          |        |                            |         |                           |        |           |         |           |        |         |         |   |        |        
|                                      | Cost of rental operations                             |                          |        | 108,524                    |         |                           |        | 99,645    |         |           |        | 316,084 |         |   |        | 301,975 |        
|                                      | Cost of direct sales                                  |                          |        | 4,566                      |         |                           |        | 3,343     |         |           |        | 13,494  |         |   |        | 11,422  |        
|                                      | Selling and administrative                            |                          |        | 40,070                     |         |                           |        | 36,447    |         |           |        | 115,552 |         |   |        | 109,305 |        
|                                      | Depreciation and amortization                         |                          |        | 9,511                      |         |                           |        | 8,939     |         |           |        | 27,984  |         |   |        | 26,540  |        
|                                      |                                                       |                          |        |                            |         |                           |        |           |         |           |        |         |         |   |        |         |        
|                                      |                                                       | Total operating expenses |        |                            | 162,671 |                           |        |           | 148,374 |           |        |         | 473,114 |   |        |         | 449,242 | 
|                                      |                                                       |                          |        |                            |         |                           |        |           |         |           |        |         |         |   |        |         |        
|Income from Operations                |                                                       |                          | 13,849 |                            |         |                           | 19,239 |           |         |           | 52,857 |         |         |   | 57,358 |        
|                                      | Interest expense                                      |                          |        | 3,406                      |         |                           |        | 3,113     |         |           |        | 10,198  |         |   |        | 10,235  |        
|                                      |                                                       |                          |        |                            |         |                           |        |           |         |           |        |         |         |   |        |         |        
|Income before Income Taxes            |                                                       |                          | 10,443 |                            |         |                           | 16,126 |           |         |           | 42,659 |         |         |   | 47,123 |        
|                                      | Provision for income taxes                            |                          |        | 4,073                      |         |                           |        | 6,370     |         |           |        | 16,637  |         |   |        | 18,614  |        
|                                      |                                                       |                          |        |                            |         |                           |        |           |         |           |        |         |         |   |        |         |        
|Net Income                            |                                                       | $                        | 6,370  |                            |         | $                         | 9,756  |           |         | $         | 26,022 |         |         | $ | 28,509 |        
|                                      |                                                       |                          |        |                            |         |                           |        |           |         |           |        |         |         |   |        |         |        
|                                      | Basic weighted average number
of shares outstanding   |                          |        | 20,608                     |         |                           |        | 20,518    |         |           |        | 20,574  |         |   |        | 20,494  |        
|Basic Earnings per Common Share       |                                                       | $                        | 0.31   |                            |         | $                         | 0.48   |           |         | $         | 1.26   |         |         | $ | 1.39   |        
|                                      |                                                       |                          |        |                            |         |                           |        |           |         |           |        |         |         |   |        |         |        
|                                      | Diluted weighted average number
of shares outstanding |                          |        | 20,676                     |         |                           |        | 20,760    |         |           |        | 20,707  |         |   |        | 20,610  |        
|Diluted Earnings per Common Share     |                                                       | $                        | 0.31   |                            |         | $                         | 0.47   |           |         | $         | 1.26   |         |         | $ | 1.38   |        
|                                      |                                                       |                          |        |                            |         |                           |        |           |         |           |        |         |         |   |        |         |        
|Dividends per share                   |                                                       | $                        | 0.0175 |                            |         | $                         | 0.0175 |           |         | $         | 0.0525 |         |         | $ | 0.0525 |        
|                                      |                                                       |                          |        |                            |         |                           |        |           |         |           |        |         |         |   |        |         |        

The accompanying notes are an integral part of these consolidated condensed financial statements.

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWSG&K Services, Inc. and Subsidiaries
(Unaudited)

|                                                 |                                                                                    |                                                          |              |          |                           |        |           |         |        |        | 
|------------------------------------------------ | ---------------------------------------------------------------------------------- | -------------------------------------------------------- | ------------ | -------- | ------------------------- | ------ | --------- | ------- | ------ | ------ | 
|                                                 |                                                                                    |                                                          |              |          | For the Nine Months Ended
|                                                 |                                                                                    |                                                          |              |          |                          
|                                                 |                                                                                    |                                                          |              |          | March 29,                 |        | March 30,
|(In thousands)                                   |                                                                                    | 2003                                                     |              | 2002    
|                                                 |                                                                                    |                                                          |              |         
|Operating Activities:                            |                                                                                    |                                                          |              |          |                           |        |           |        
|                                                 | Net income                                                                         |                                                          | $            | 26,022   |                           |        | $         | 28,509  |       
|                                                 | Adjustments to reconcile net income to net cash
provided by operating activities  |                                                          |              |          |                           |        |           |         |       
|                                                 |                                                                                    | Depreciation and amortization                            |              |          | 27,984                    |        |           |         | 26,540 |       
|                                                 |                                                                                    | Deferred income taxes                                    |              |          | (320                      | )      |           |         | (3,910 | )     
|                                                 |                                                                                    | Amortization of deferred compensation  restricted stock |              |          | 768                       |        |           |         | 695    |       
|                                                 |                                                                                    | Changes in current operating items, exclusive of         |              |          |                           |        |           |         |        |       
|                                                 |                                                                                    |                                                          | acquisitions |          |                           | 17,945 |           |         |        | 12,679 | 
|                                                 | Other, net                                                                         |                                                          |              | 867      |                           |        |           | 1,362   |       
|                                                 |                                                                                    |                                                          |              |          |                           |        |           |         |       
|Net cash provided by operating activities        |                                                                                    |                                                          | 73,266       |          |                           |        | 65,875    |        
|                                                 |                                                                                    |                                                          |              |          |                           |        |           |         |       
|Investing Activities:                            |                                                                                    |                                                          |              |          |                           |        |           |        
|                                                 | Property, plant and equipment additions, net                                       |                                                          |              | (24,703  | )                         |        |           | (21,598 | )     
|                                                 | Acquisitions of business assets and other                                          |                                                          |              | (75,795  | )                         |        |           | (69,724 | )     
|                                                 |                                                                                    |                                                          |              |          |                           |        |           |         |       
|Net cash used for investing activities           |                                                                                    |                                                          | (100,498     | )        |                           |        | (91,322   | )      
|                                                 |                                                                                    |                                                          |              |          |                           |        |           |         |       
|Financing Activities:                            |                                                                                    |                                                          |              |          |                           |        |           |        
|                                                 | Proceeds from debt financing                                                       |                                                          |              | 166,814  |                           |        |           | 86,014  |       
|                                                 | Repayments of debt financing                                                       |                                                          |              | (135,225 | )                         |        |           | (62,788 | )     
|                                                 | Cash dividends paid                                                                |                                                          |              | (1,088   | )                         |        |           | (1,084  | )     
|                                                 | Sale of common stock                                                               |                                                          |              | 500      |                           |        |           | 334     |       
|                                                 |                                                                                    |                                                          |              |          |                           |        |           |         |       
|Net cash provided by financing activities        |                                                                                    |                                                          | 31,001       |          |                           |        | 22,476    |        
|                                                 |                                                                                    |                                                          |              |          |                           |        |           |         |       
|Increase (Decrease) in Cash and Cash Equivalents |                                                                                    |                                                          | 3,769        |          |                           |        | (2,971    | )      
|Effect of Exchange Rates on Cash                 |                                                                                    |                                                          | 295          |          |                           |        | (295      | )      
|Cash and Cash Equivalents:                       |                                                                                    |                                                          |              |          |                           |        |           |        
|                                                 | Beginning of period                                                                |                                                          |              | 9,986    |                           |        |           | 15,317  |       
|                                                 |                                                                                    |                                                          |              |          |                           |        |           |         |       
|                                                 | End of period                                                                      |                                                          | $            | 14,050   |                           |        | $         | 12,051  |       
|                                                 |                                                                                    |                                                          |              |          |                           |        |           |         |       

The accompanying notes are an integral part of these consolidated condensed financial statements.

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G&K SERVICES, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data)
Three and nine month periods ended March 29, 2003 and March 30, 2002
(Unaudited)



| |  | The consolidated condensed financial statements included herein, except
for the June 29, 2002 balance sheet which was derived from the audited
consolidated financial statements for the fiscal year ended June 29,
2002, have been prepared by G&K Services, Inc. (the Company), without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of the Company, the accompanying
unaudited consolidated condensed financial statements contain all
adjustments (consisting of only normal recurring adjustments) necessary
to present fairly the financial position of the Company as of March 29,
2003, and the results of its operations for the three and nine months
ended and its cash flows for the nine months ended March 29, 2003 and
March 30, 2002. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted pursuant to such rules and regulations, although the Company
believes that the disclosures herein are adequate to make the information
presented not misleading. It is suggested that these consolidated
condensed financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Companys latest report on Form 10-K.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The results of operations for the three and nine month periods ended
March 29, 2003 and March 30, 2002 are not necessarily indicative of the
results to be expected for the full year.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|1. |  | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Accounting policies followed by the Company are set forth in Note 1 in
the Companys Annual Report on Form 10-K for the fiscal year ended June
29, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | Nature of Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | G&K Services, Inc. is a market leader in providing corporate identity
apparel and facility services programs to a wide variety of industrial,
service and high-technology companies. The Companys programs provide
rental-lease or purchase options as well as non-apparel items such as
floor mats, dustmops and cloths, wiping towels, selected linen items and
several restroom products. The Company also manufactures certain uniform
garments that it uses to support its garment rental programs.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | The accompanying consolidated condensed financial statements include the
accounts of the Company and its subsidiaries, all of which are wholly
owned. Intercompany balances and transactions have been eliminated in
consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | The Company recognizes revenue from rental operations in the period in
which the services are provided. Direct sale revenue is recognized in
the period in which the product is shipped. Beginning in the third
quarter of fiscal 2003, the Company made a change in the classification
of billings to customers for lost or abused merchandise to a preferred
classification of including such billings in revenue. Accordingly, all
prior period billings for lost or abused garments have been reclassified
from a reduction of cost of rental operations to rental operations
revenue. Billings reclassified totaled $13,471 in the third quarter of
fiscal 2003 and $12,542 in the same period of fiscal 2002. For the nine
months of fiscal 2003 billings reclassified were $40,619 and were $38,770
for the nine months of fiscal 2002. This reclassification did not impact
current or historical net income or stockholders equity.

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| |  | Derivative Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company uses derivative financial instruments principally to manage
the risk that changes in interest rates will affect the amount of its
future interest payments. Interest rate swap contracts are used to
adjust the proportion of total debt that is subject to variable and fixed
interest rates. The interest rate swap contracts are reflected at fair
value in the consolidated condensed balance sheet and the related gains
or losses on these contracts are deferred in stockholders equity (as a
component of other comprehensive income). Amounts to be paid or received
under the contracts are accrued as interest rates change and are
recognized over the life of the contracts as an adjustment to interest
expense. The net effect of this accounting is that interest expense on
the portion of variable rate debt being hedged is at a fixed rate during
the interest rate swap contract period.
|
| |  | The Company may periodically hedge firm cash flow commitments with its
foreign subsidiary, generally with foreign currency contracts. These
agreements are recorded at current market values and the gains and losses
are included in earnings. Gains and losses on such transactions were not
significant in the third quarter of fiscal 2003. Notional amounts
outstanding under foreign currency contracts at March 29, 2003 were
$2,524, all of which will mature during fiscal 2003. No amounts were
outstanding under such contracts at March 30, 2002. Foreign currency
contracts were recorded at fair value as of March 29, 2003.                                                                                                                                                                                                                                                                                
|
| |  | Per Share Data                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Basic earnings per common share was computed by dividing net income by
the weighted average number of shares of common stock outstanding during
the period. Diluted earnings per common share was computed similar to
the computation of basic earnings per share, except that the denominator
is increased for the assumed exercise of dilutive options and other
dilutive securities, including nonvested restricted stock, using the
treasury stock method.                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                                                                                    |  |                    |        |                   |  |         |        |         |  |  |        |  |  |  |        | 
|--------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ------- | ------ | ------- |  |  | ------ |  |  |  | ------ | 
|                                                                                                    |  | Three Months Ended |        | Nine Months Ended
|                                                                                                    |  |                    |        |                  
|                                                                                                    |  | Mar 29,            |        | Mar 30,           |  | Mar 29, |        | Mar 30,
|                                                                                                    |  | 2003               |        | 2002              |  | 2003    |        | 2002   
|                                                                                                    |  |                    |        |                   |  |         |        |        
|Weighted average number of common
shares outstanding used in
computation of basic earning per share |  |                    | 20,608 |                   |  |         | 20,518 |         |  |  | 20,574 |  |  |  | 20,494 | 
|                                                                                                    |  |                    |        |                  
|Weighted average effect of nonvested
restricted stock grants and assumed
exercise of options        |  |                    | 68     |                   |  |         | 242    |         |  |  | 133    |  |  |  | 116    | 
|                                                                                                    |  |                    |        |                   |  |         |        |        
|Shares used in computation of
diluted earnings per share                                            |  |                    | 20,676 |                   |  |         | 20,760 |         |  |  | 20,707 |  |  |  | 20,610 | 
|                                                                                                    |  |                    |        |                   |  |         |        |         |  |  |        |  |  |  |        | 



| |  | Stock-Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company maintains Stock Option and Compensation Plans (the Employee
Plans), which are more fully described in Note 6 in the Companys Annual
Report on Form 10-K for the fiscal year ended June 29, 2002. The Company
applies Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations in accounting for its
stock option plans. Accordingly, only compensation cost related to
restricted stock issued under the Employee Plans has been recognized in
the accompanying consolidated statements of operations. Compensation
cost related to the restricted shares was $224 and $248 for the three
month periods and $768 and $695 for the nine month periods ended March
29, 2003 and March 30, 2002, respectively. Had compensation cost been
recognized based on the fair values of options at the grant dates
consistent with the provisions of Statement of Financial Accounting
Standards No. 123,

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| |  | Accounting for Stock-Based Compensation (SFAS 123), the Companys net income and net income
per common share would have been adjusted as follows:
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                            |             |   |                    |      |                   |   |         |      |         |   |        |      |  |   |        |      | 
|------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | - | ------------------ | ---- | ----------------- | - | ------- | ---- | ------- | - | ------ | ---- |  | - | ------ | ---- | 
|                                                                                                                                            |             |   | Three Months Ended |      | Nine Months Ended
|                                                                                                                                            |             |   |                    |      |                  
|                                                                                                                                            |             |   | Mar 29,            |      | Mar 30,           |   | Mar 29, |      | Mar 30,
|                                                                                                                                            |             |   | 2003               |      | 2002              |   | 2003    |      | 2002   
|                                                                                                                                            |             |   |                    |      |                   |   |         |      |        
|Net income, as reported                                                                                                                     |             | $ | 6,370              |      |                   | $ | 9,756   |      |         | $ | 26,022 |      |  | $ | 28,509 |     
|Deduct: Total stock-based
employee compensation
expense determined under
fair value based method for all awards, net
of related tax effects |             |   | (298               | )    |                   |   | (516    | )    |         |   | (1,228 | )    |  |   | (1,592 | )   
|                                                                                                                                            |             |   |                    |      |                   |   |         |      |         |   |        |      |  |   |        |     
|Pro forma net income                                                                                                                        |             | $ | 6,072              |      |                   | $ | 9,240   |      |         | $ | 24,794 |      |  | $ | 26,917 |     
|                                                                                                                                            |             |   |                    |      |                   |   |         |      |         |   |        |      |  |   |        |     
|Basic net income per share:                                                                                                                 |             |   |                    |      |                   |   |         |      |         |   |        |      |  |   |        |     
|                                                                                                                                            | As reported |   | $                  | 0.31 |                   |   | $       | 0.48 |         |   | $      | 1.26 |  |   | $      | 1.39 | 
|                                                                                                                                            | Pro forma   |   |                    | 0.29 |                   |   |         | 0.45 |         |   |        | 1.21 |  |   |        | 1.31 | 
|Diluted net income per share:                                                                                                               |             |   |                    |      |                   |   |         |      |         |   |        |      |  |   |        |     
|                                                                                                                                            | As reported |   | $                  | 0.31 |                   |   | $       | 0.47 |         |   | $      | 1.26 |  |   | $      | 1.38 | 
|                                                                                                                                            | Pro forma   |   |                    | 0.29 |                   |   |         | 0.45 |         |   |        | 1.20 |  |   |        | 1.31 | 
|                                                                                                                                            |             |   |                    |      |                   |   |         |      |         |   |        |      |  |   |        |     



| |  | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In June 2001, the Financial
Accounting Standards Board issued SFAS No. 143, Accounting for Asset
Retirement Obligations (SFAS 143). SFAS 143 addresses financial
accounting and reporting for obligations associated with the retirement
of tangible long-lived assets and the associated asset retirement costs.
SFAS 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The Company adopted
SFAS 143 effective June 30, 2002. The impact of adopting SFAS 143 was
not material.                                                                                                                                                                                                                                                                                                                           
|
| |  | In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets
(SFAS 144). SFAS 144 establishes a single accounting model, based on the
framework established in SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of (SFAS
121), for long-lived assets to be disposed of by sale. SFAS 144 also
resolves several significant implementation issues related to SFAS 121,
such as eliminating the requirement to allocate goodwill to long-lived
assets to be tested for impairment and establishing criteria to define
whether a long-lived asset is held for sale. The Company adopted SFAS
144 effective June 30, 2002. The impact of adopting SFAS 144 was not
material.                                                                                                                                 
|
| |  | In June 2002, the Financial Accounting Standards Board issued SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities
(SFAS 146). SFAS 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities. It nullifies Emerging
Issues Task Force Issue No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity. SFAS
146 requires that a liability be recognized for costs associated with an
exit or disposal activity only when the liability is incurred. SFAS 146
also establishes fair value as the objective for initial measurement of
liabilities related to exit or disposal activities. SFAS 146 is
effective for exit or disposal activities that are initiated after
December 31, 2002. The Company adopted the provisions of SFAS 146
effective January 1, 2003. The impact of adopting SFAS 146 was not
material.
|
| |  | In December 2002, the Financial Accounting Standards Board issued SFAS
No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure (SFAS 148). SFAS 148 amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition
for a voluntary change to the fair value method of accounting for
stock-based employee compensation. SFAS 148 also amends the disclosures
in both annual and interim financial statements about the method used to
account for                                                                                                                                                                                                                                                                                                                                                                                                                                

8



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|   |  | stock-based employee compensation and the effect of the method used on
reported results. The Company will continue to apply Accounting
Principles Board Opinion No. 25 as the method used to account for
stock-based compensation, where applicable. The Company adopted the
disclosure requirements of SFAS 148 beginning with the third quarter
ended March 29, 2003.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Comprehensive Income                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | For the three and nine month periods ended March 29, 2003 and March 30,
2002, the components of comprehensive income were as follows:                                                                                                                                                                                                                                  

|                           |                                                                     |   |                    |       |                   |   |         |     |         |   |        |       |  |   |        |        |  
|-------------------------- | ------------------------------------------------------------------- | - | ------------------ | ----- | ----------------- | - | ------- | --- | ------- | - | ------ | ----- |  | - | ------ | ------ | -
|                           |                                                                     |   | Three Months Ended |       | Nine Months Ended
|                           |                                                                     |   |                    |       |                  
|                           |                                                                     |   | Mar 29,            |       | Mar 30,           |   | Mar 29, |     | Mar 30,
|                           |                                                                     |   | 2003               |       | 2002              |   | 2003    |     | 2002   
|                           |                                                                     |   |                    |       |                   |   |         |     |        
|Net income                 |                                                                     | $ | 6,370              |       |                   | $ | 9,756   |     |         | $ | 26,022 |       |  | $ | 28,509 |       
|Other comprehensive income |                                                                     |   |                    |       |                   |   |         |     |         |   |        |       |  |   |        |       
|                           | Foreign currency translation adjustments,
net of tax                |   |                    | 4,793 |                   |   |         | 75  |         |   |        | 2,822 |  |   |        | (3,533 | )
|                           | Net unrealized gain on derivative financial
instruments, net of tax |   |                    | 128   |                   |   |         | 537 |         |   |        | 98    |  |   |        | 56     |  
|                           |                                                                     |   |                    |       |                   |   |         |     |         |   |        |       |  |   |        |       
|Comprehensive income       |                                                                     | $ | 11,291             |       |                   | $ | 10,368  |     |         | $ | 28,942 |       |  | $ | 25,032 |       
|                           |                                                                     |   |                    |       |                   |   |         |     |         |   |        |       |  |   |        |       



|3. |  | Acquisitions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | During fiscal year 2003, the Company has made several insignificant
acquisitions, including the acquisition of Rental Uniform Company at the
beginning of the second quarter. All acquisitions were accounted for
using the purchase method. The total purchase consideration, including
related acquisition costs of these transactions, was approximately $3,621
for the three months ended March 29, 2003 and $74,807 for the nine months
ended March 29, 2003. The total purchase price exceeded the estimated
fair values of assets acquired by approximately $7,910 for the three
months ended March 29, 2003 and $50,136 for the nine months ended March
29, 2003.
|  
|   |  | The pro forma effects of these acquisitions, had they been acquired at
the beginning of the fiscal year, were not material to the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|4. |  | Goodwill and Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | In July 2001, the Company adopted the provisions of SFAS No. 141,
Business Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets. The changes in the carrying amount of goodwill for the nine
months ended March 29, 2003, by operating segment, are as follows:                                                                                                                                                                                                                                                                                                                                                                                       

|                                              |  |               |         |        |  |       |        |  |  |   |         | 
|--------------------------------------------- |  | ------------- | ------- | ------ |  | ----- | ------ |  |  | - | ------- | 
|                                              |  | United States |         | Canada |  | Total
|                                              |  |               |         |        |  |      
|Balance as of June 29, 2002                   |  | $             | 173,707 |        |  | $     | 26,433 |  |  | $ | 200,140 | 
|Goodwill acquired during the period           |  |               | 50,136  |        |  |       |       |  |  |   | 50,136  | 
|Other, primarily foreign currency
translation |  |               |        |        |  |       | 770    |  |  |   | 770     | 
|                                              |  |               |         |        |  |      
|Balance as of March 29, 2003                  |  | $             | 223,843 |        |  | $     | 27,203 |  |  | $ | 251,046 | 
|                                              |  |               |         |        |  |      

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| |  | Information regarding the Companys other intangible assets are as
follows:
| |  | ---------------------------------------------------------------------------

|                                                      |  |                      |        |              |  |     |        |  |  |   |        | 
|----------------------------------------------------- |  | -------------------- | ------ | ------------ |  | --- | ------ |  |  | - | ------ | 
|                                                      |  | As of March 29, 2003
|                                                      |  |                     
|                                                      |  | Carrying             |        | Accumulated  |  |     |        | 
|                                                      |  | Amount               |        | Amortization |  | Net
|                                                      |  |                      |        |              |  |    
|Customer contracts and related
customer relationships |  | $                    | 74,700 |              |  | $   | 29,819 |  |  | $ | 44,881 | 
|Non-competition agreements                            |  |                      | 9,581  |              |  |     | 4,806  |  |  |   | 4,775  | 
|                                                      |  |                      |        |              |  |    
|Total                                                 |  | $                    | 84,281 |              |  | $   | 34,625 |  |  | $ | 49,656 | 
|                                                      |  |                      |        |              |  |    

|                                                      |  |                     |        |              |  |     |        |  |  |   |        | 
|----------------------------------------------------- |  | ------------------- | ------ | ------------ |  | --- | ------ |  |  | - | ------ | 
|                                                      |  | As of June 29, 2002
|                                                      |  |                    
|                                                      |  | Carrying            |        | Accumulated  |  |     |        | 
|                                                      |  | Amount              |        | Amortization |  | Net
|                                                      |  |                     |        |              |  |    
|Customer contracts and related
customer relationships |  | $                   | 66,470 |              |  | $   | 24,914 |  |  | $ | 41,556 | 
|Non-competition agreements                            |  |                     | 7,979  |              |  |     | 4,184  |  |  |   | 3,795  | 
|                                                      |  |                     |        |              |  |    
|Total                                                 |  | $                   | 74,449 |              |  | $   | 29,098 |  |  | $ | 45,351 | 
|                                                      |  |                     |        |              |  |    



| |  | Amortization expense for the nine months ended March 29, 2003 was $5,362.
Estimated amortization expense for each of the five succeeding fiscal
years based on the intangible assets as of March 29, 2003 is as follows:
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|               |  |   |       | 
|-------------- |  | - | ----- | 
|2003 remaining |  | $ | 1,904 | 
|2004           |  |   | 7,470 | 
|2005           |  |   | 7,402 | 
|2006           |  |   | 7,098 | 
|2007           |  |   | 6,975 | 
|2008           |  |   | 6,673 | 



|5. |  | Segment Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Company has two operating segments under the guidelines of SFAS
No. 131: United States and Canada, which have been identified as
components of the Company that are reviewed by the Companys Chief
Executive Officer to determine resource allocation and evaluate
performance. Each operating segment derives revenues from the
corporate identity apparel and facility services industry, which
includes garment rental and non-apparel items such as floor mats,
dust mops and cloths, wiping towels, selected linen items and several
restroom products. No one customers transactions account for 1.0%
or more of the Companys revenues.
|  
|   |  | The accounting policies of the segments are the same as those
described in the summary of significant accounting policies (see Note
1). Corporate expenses are allocated to the segments based on
segment revenue. The Company evaluates performance based on income
from operations. Financial information by geographic location for
the three and nine month periods ended March 29, 2003 and March 30,
2002 is as follows:                                                                                                                                                                                                                      

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|                                |                                       |        |        |         |  |       |   |        |  |  |   |         | 
|------------------------------- | ------------------------------------- | ------ | ------ | ------- |  | ----- | - | ------ |  |  | - | ------- | 
|                                |                                       |        | United |         |  |       |   |        |  |  |  
|For the Three Months Ended      |                                       | States |        | Canada  |  | Total
|                                |                                       |        |        |         |  |      
|Third Quarter Fiscal Year 2003: |                                       |        |        |         |  |       |   |        |  |  |   |        
|                                | Revenues                              |        | $      | 154,793 |  |       | $ | 21,727 |  |  | $ | 176,520 | 
|                                | Income from operations                |        |        | 11,000  |  |       |   | 2,849  |  |  |   | 13,849  | 
|                                | Capital expenditures                  |        |        | 4,170   |  |       |   | 2,459  |  |  |   | 6,629   | 
|                                | Depreciation and amortization
expense |        |        | 8,669   |  |       |   | 842    |  |  |   | 9,511   | 
|Third Quarter Fiscal Year 2002: |                                       |        |        |         |  |       |   |        |  |  |   |        
|                                | Revenues                              |        | $      | 147,228 |  |       | $ | 20,385 |  |  | $ | 167,613 | 
|                                | Income from operations                |        |        | 14,901  |  |       |   | 4,338  |  |  |   | 19,239  | 
|                                | Capital expenditures                  |        |        | 6,685   |  |       |   | 1,256  |  |  |   | 7,941   | 
|                                | Depreciation and amortization
expense |        |        | 8,097   |  |       |   | 842    |  |  |   | 8,939   | 
|                                |                                       |        |        |         |  |       |   |        |  |  |   |         | 

|                          |                                       |        |        |         |  |       |   |        |  |  |   |         | 
|------------------------- | ------------------------------------- | ------ | ------ | ------- |  | ----- | - | ------ |  |  | - | ------- | 
|                          |                                       |        | United |         |  |       |   |        |  |  |  
|For the Nine Months Ended |                                       | States |        | Canada  |  | Total
|                          |                                       |        |        |         |  |      
|Fiscal Year 2003:         |                                       |        |        |         |  |       |   |        |  |  |   |        
|                          | Revenues                              |        | $      | 462,678 |  |       | $ | 63,293 |  |  | $ | 525,971 | 
|                          | Income from operations                |        |        | 41,227  |  |       |   | 11,630 |  |  |   | 52,857  | 
|                          | Capital expenditures                  |        |        | 17,011  |  |       |   | 7,692  |  |  |   | 24,703  | 
|                          | Depreciation and amortization
expense |        |        | 25,420  |  |       |   | 2,564  |  |  |   | 27,984  | 
|Fiscal Year 2002:         |                                       |        |        |         |  |       |   |        |  |  |   |        
|                          | Revenues                              |        | $      | 445,260 |  |       | $ | 61,340 |  |  | $ | 506,600 | 
|                          | Income from operations                |        |        | 43,477  |  |       |   | 13,881 |  |  |   | 57,358  | 
|                          | Capital expenditures                  |        |        | 19,920  |  |       |   | 1,678  |  |  |   | 21,598  | 
|                          | Depreciation and amortization
expense |        |        | 23,962  |  |       |   | 2,578  |  |  |   | 26,540  | 
|                          |                                       |        |        |         |  |       |   |        |  |  |   |         | 

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)

Overview

G&K Services, Inc., founded in 1902 and headquartered in Minnetonka, Minnesota,
is a market leader in providing corporate identity apparel and facility
services programs to a wide variety of North American industrial, service and
high-technology companies. We rent uniforms and other related products such as
floor mats, dust mops and cloths, wiping towels, restroom supplies and selected
linen items. We also sell uniforms and other apparel items to customers in our
direct sale programs. The North American rental market is approximately $6.3
billion, while the direct sales market, targeted by us, is approximately
$4.5-$5.0 billion in size.

During fiscal year 2003, we have made several insignificant acquisitions,
including the acquisition of Rental Uniform Company at the beginning of the
second quarter. All acquisitions were accounted for using the purchase method.
The pro forma effects of these acquisitions, had they been acquired at the
beginning of the fiscal year, were not material. The total purchase
consideration, including related acquisition costs of these transactions, was
approximately $3.6 million for the three months ended March 29, 2003 and $74.8
million for the nine months ended March 29, 2003. The total purchase price
exceeded the estimated fair values of assets acquired by approximately $7.9
million for the three months ended March 29, 2003 and $50.1 million for the
nine months ended March 29, 2003.

Critical Accounting Policies

The discussion of the financial condition and results of operations are based
upon the consolidated condensed financial statements, which have been prepared
in conformity with accounting principles generally accepted in the United
States. As such, management is required to make certain estimates, judgments
and assumptions that are believed to be reasonable based on the information
available. These estimates and assumptions affect the reported amount of
assets and liabilities, revenues and expenses, and disclosure of contingent
assets and liabilities at the date of the financial statements. Actual results
may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and potentially result in materially
different results under different assumptions and conditions. See Note 1 to
the consolidated condensed financial statements for additional discussion of
the application of these and other accounting policies.

Revenue Recognition and
Allowance for Doubtful Accounts

We recognize revenue from rental operations in the period in which the services
are provided. Direct sale revenue is recognized in the period in which the
product is shipped. Beginning in the third quarter of fiscal 2003, we made a
change in the classification of billings to customers for lost or abused
merchandise to a preferred classification of including such billings in
revenue. Accordingly, all prior period billings for lost or abused garments
have been reclassified from a reduction of cost of rental operations to rental
operations revenue. Billings reclassified totaled $13.5 million in the third
quarter of fiscal 2003 and $12.5 million in the same period of fiscal 2002.
For the nine months of fiscal 2003 billings reclassified were $40.6 million and
were $38.8 million for the nine months of fiscal 2002. This reclassification
did not impact current or historical net income or stockholders
equity.

Estimates are used in determining the collectability of billed accounts
receivable. Management analyzes specific accounts receivable and historical
bad debt experience, customer credit worthiness, current economic trends and
the age of outstanding balances when evaluating the adequacy of the allowance
for doubtful accounts. Significant management judgments and estimates are used
in connection with establishing the allowance in any accounting period.
Material differences may result in the amount and timing of bad debt expense
recognition for any given period if management makes different judgments or
utilizes different estimates.

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Inventories

Our inventories consist of new goods and rental merchandise in service.
Estimates are used in determining the likelihood that new goods on hand can be
sold to customers or used in rental operations. Historical inventory usage and
current revenue trends are considered in estimating both obsolete and excess
inventories. New goods are stated at lower of cost or market, net of any
reserve for obsolete or excess inventory. Merchandise placed in service to
support rental operations is amortized into cost of rental operations over the
estimated useful lives of the underlying inventory items, primarily on a
straight-line basis. Estimated lives of rental merchandise in service range
from nine months to three years. In establishing estimated lives for
merchandise in service, management considers manufacturer expectations,
historical experience and the intended use of the merchandise. Material
differences may result in the amount and timing of operating profit for any
period if management makes different judgments or utilizes different estimates.

Goodwill, Intangibles and Other
Long-Lived Assets

We adopted SFAS 142 at the beginning of fiscal 2002 and as a result no longer
amortize goodwill. SFAS 142 also requires that companies test goodwill for
impairment on an annual basis and when events occur or circumstances change
that would more likely than not reduce the fair value of the reporting unit to
which goodwill is assigned below its carrying amount. There have been no
impairments of goodwill in fiscal 2003 or 2002. Our evaluation considers
changes in the operating environment, competitive information, market trends,
operating performance and cash flow modeling. Future events could cause
management to conclude that impairment indicators exist and that goodwill and
other intangibles associated with acquired businesses are impaired. Any
resulting impairment loss could have a material impact on our financial
condition and results of operations.

Property, plant and equipment and definite-lived intangible assets are
depreciated or amortized over their useful lives. Useful lives are based on
management estimates of the period that the assets will generate revenue.
Long-lived assets are evaluated for impairment whenever events and
circumstances indicate an asset may be impaired. There have been no
write-downs of any long-lived assets in fiscal 2003 or 2002.

Insurance

We self-insure for certain obligations related to health and workers
compensation programs. We purchase stop-loss insurance policies to protect us
from catastrophic losses. Estimates are used in determining the potential
value associated with reported claims and for losses that have occurred, but
have not been reported. Management estimates consider historical claims
experience, escalating medical cost trends, expected timing of claim payments
and actuarial analysis provided by a third party. Changes in the cost of
medical care, our ability to settle claims or the estimates and judgment used
by management could have a material impact on the amount and timing of expense
for any period.

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Results of Operations

The percentage relationships to net sales of certain income and expense items
for the three and nine month periods ended March 29, 2003 and March 30, 2002,
and the percentage changes in these income and expense items between periods
are presented in the following table:

|                           |                               |                     |     |              |       |             |      |            |       |         |      |             |       |             |      |      |       |  |       |              |     |             |       |      |     | 
|-------------------------- | ----------------------------- | ------------------- | --- | ------------ | ----- | ----------- | ---- | ---------- | ----- | ------- | ---- | ----------- | ----- | ----------- | ---- | ---- | ----- |  | ----- | ------------ | --- | ----------- | ----- | ---- | --- | 
|                           |                               |                     |     | Three Months |       | Nine Months |      | Percentage
|                           |                               |                     |     | Ended        |       | Ended       |      | Change    
|                           |                               |                     |     |              |       |             |      |           
|                           |                               |                     |     |              |       |             |      |            |       |         |      |             |       |             |      |      |       |  |       | Three Months |     | Nine Months
|                           |                               |                     |     | Mar 29,      |       | Mar 30,     |      | Mar 29,    |       | Mar 30, |      | FY 2003     |       | FY 2003    
|                           |                               |                     |     | 2003         |       | 2002        |      | 2003       |       | 2002    |      | vs. FY 2002 |       | vs. FY 2002
|                           |                               |                     |     |              |       |             |      |            |       |         |      |             |       |            
|Revenues:                  |                               |                     |     |              |       |             |      |            |       |         |      |             |       |             |      |      |       |  |       |              |     |             |       |     
|                           | Rental                        |                     |     | 96.9         | %     |             |      | 97.2       | %     |         |      | 96.6        | %     |             |      | 96.8 | %     |  |       | 5.0          | %   |             |       | 3.6  | %  
|                           | Direct                        |                     |     | 3.1          |       |             |      | 2.8        |       |         |      | 3.4         |       |             |      | 3.2  |       |  |       | 15.8         |     |             |       | 11.1 |    
|                           |                               |                     |     |              |       |             |      |            |       |         |      |             |       |             |      |      |       |  |       |              |     |             |       |      |    
|                           |                               | Total revenues      |     |              | 100.0 |             |      |            | 100.0 |         |      |             | 100.0 |             |      |      | 100.0 |  |       |              | 5.3 |             |       |      | 3.8 | 
|                           |                               |                     |     |              |       |             |      |            |       |         |      |             |       |             |      |      |       |  |       |              |     |             |       |     
|Expenses:                  |                               |                     |     |              |       |             |      |            |       |         |      |             |       |             |      |      |       |  |       |              |     |             |       |     
|                           | Cost of rental sales          |                     |     | 63.4         |       |             |      | 61.2       |       |         |      | 62.2        |       |             |      | 61.6 |       |  |       | 8.9          |     |             |       | 4.7  |    
|                           | Cost of direct sales          |                     |     | 83.7         |       |             |      | 71.0       |       |         |      | 75.7        |       |             |      | 71.2 |       |  |       | 36.6         |     |             |       | 18.1 |    
|                           |                               |                     |     |              |       |             |      |            |       |         |      |             |       |             |      |      |       |  |       |              |     |             |       |      |    
|                           |                               | Total cost of sales |     |              | 64.1  |             |      |            | 61.4  |         |      |             | 62.7  |             |      |      | 61.9  |  |       |              | 9.8 |             |       |      | 5.2 | 
|                           |                               |                     |     |              |       |             |      |            |       |         |      |             |       |             |      |      |       |  |       |              |     |             |       |     
|                           | Selling and administrative    |                     |     | 22.7         |       |             |      | 21.7       |       |         |      | 22.0        |       |             |      | 21.6 |       |  |       | 9.9          |     |             |       | 5.7  |    
|                           | Depreciation and
amortization |                     |     | 5.4          |       |             |      | 5.4        |       |         |      | 5.3         |       |             |      | 5.2  |       |  |       | 6.4          |     |             |       | 5.4  |    
|                           |                               |                     |     |              |       |             |      |            |       |         |      |             |       |             |      |      |       |  |       |              |     |             |       |      |    
|Income from operations     |                               |                     | 7.8 |              |       |             | 11.5 |            |       |         | 10.0 |             |       |             | 11.3 |      |       |  | (28.0 | )            |     |             | (7.8  | )   
|                           |                               |                     |     |              |       |             |      |            |       |         |      |             |       |             |      |      |       |  |       |              |     |             |       |     
|Interest expense           |                               |                     | 1.9 |              |       |             | 1.9  |            |       |         | 1.9  |             |       |             | 2.0  |      |       |  | 9.4   |              |     |             | (0.4  | )   
|                           |                               |                     |     |              |       |             |      |            |       |         |      |             |       |             |      |      |       |  |       |              |     |             |       |      |    
|Income before income taxes |                               |                     | 5.9 |              |       |             | 9.6  |            |       |         | 8.1  |             |       |             | 9.3  |      |       |  | (35.2 | )            |     |             | (9.5  | )   
|Provision for income taxes |                               |                     | 2.3 |              |       |             | 3.8  |            |       |         | 3.2  |             |       |             | 3.7  |      |       |  | (36.1 | )            |     |             | (10.6 | )   
|                           |                               |                     |     |              |       |             |      |            |       |         |      |             |       |             |      |      |       |  |       |              |     |             |       |      |    
|                           |                               |                     |     |              |       |             |      |            |       |         |      |             |       |             |      |      |       |  |       |              |     |             |       |     
|Net income                 |                               |                     | 3.6 | %            |       |             | 5.8  | %          |       |         | 4.9  | %           |       |             | 5.6  | %    |       |  | (34.7 | )%           |     |             | (8.7  | )%  
|                           |                               |                     |     |              |       |             |      |            |       |         |      |             |       |             |      |      |       |  |       |              |     |             |       |      |    

Three months ended
March 29, 2003 compared to three months ended March 30,
2002

Revenues.Total revenues in the third quarter of fiscal 2003 increased 5.3% to
$176.5 million from $167.6 million in the third quarter of fiscal 2002. Rental
revenue increased $8.2 million in the third quarter, or 5.0%. The organic
industrial rental growth rate, which is calculated using industrial rental
revenue adjusted for foreign currency exchange rate differences and revenue
from newly acquired business compared to prior-period results, was
approximately negative 2.5%. The decline in the organic industrial rental
growth rate is as a result of an increase in lost uniform wearers within our
existing customer base. We believe that the organic industrial rental growth
rate better reflects the growth of our existing industrial business and is
therefore useful in analyzing our financial condition and results of
operations.

Direct sale revenue increased 15.8% to $5.5 million in the third quarter of
fiscal 2003 compared to $4.7 million in the same period of fiscal 2002. Direct
sale revenue is up due to initiatives to penetrate direct sale opportunities
with existing customers.

Cost of Rental and Direct Sale.Cost of rental operations increased 8.9% to
$108.5 million in the third quarter of fiscal 2003 from $99.6 million in the
same period of fiscal 2002. Gross margin from rental sales decreased to 36.6%
in the third quarter of fiscal 2003 from 38.8% in the third quarter of fiscal
2002. Both rental and direct sale margins were impacted during the quarter by
the closing of the Canadian manufacturing facility. Total expenses related to
closing the facility reduced the overall combined margin by 0.6%. The decrease
in rental gross margin was also

14



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impacted by higher costs for energy, acquisition integration and plant
consolidation costs and lost margin from lower employment levels within our
customer base.

Cost of direct sales increased 36.6% to $4.6 million in the third quarter of
fiscal 2003 from $3.3 million in the same period of fiscal 2002. Gross margin
from direct sales decreased to 16.3% in the third quarter of fiscal 2003 from
29.0% in the third quarter of fiscal 2002. The decrease in gross margin is due
to a change in product mix, increasing price pressure and the impact of
liquidating remaining inventories with the closing of the Canadian
manufacturing facility.

Selling and Administrative.Selling and administrative expenses increased 9.9%
to $40.1 million in the third quarter of fiscal 2003 from $36.4 million in the
same period of fiscal 2002. As a percentage of total revenues, selling and
administrative expenses increased to 22.7% in the third quarter of fiscal 2003
from 21.7% in the same period of fiscal 2002. During the current quarter, we
took actions to reduce certain selling and administrative costs and incurred
severance and other employee-related costs. These actions had an impact of
increasing selling and administrative expenses as a percent of total revenue by
0.5%. In addition to these costs, the increase in selling and administrative
costs as a percent of total revenue was due to expense related to uncollectible
accounts receivable.

Depreciation and Amortization. Depreciation and amortization expense increased
6.4% to $9.5 million in the third quarter of fiscal 2003 from $8.9 million in
the same period of fiscal 2002. As a percentage of total revenues,
depreciation and amortization expense remained constant at 5.4% in both the
third quarter of fiscal 2003 and the same period of fiscal 2002. Capital
expenditures, excluding acquisition of businesses, were $6.6 million in the
third quarter of fiscal 2003 compared to $7.9 million in the prior years
quarter.

Interest Expense. Interest expense was $3.4 million in the third quarter of
fiscal 2003, up from $3.1 million in the same period of fiscal 2002. The
increase in interest expense is due primarily to higher debt levels in
conjunction with acquisition activities.

Provision for Income Taxes. Our effective tax rate decreased to 39.0% in the
third quarter of fiscal 2003 from 39.5% in the same period of fiscal 2002 due
largely to decreases in Canadian statutory income tax rates.

Nine months ended March 29,
2003 compared to nine months ended March 30, 2002

Revenues.Total revenues for the first nine months of fiscal 2003 increased
3.8% to $526.0 million from $506.6 million for the same period of fiscal 2002.
Rental revenue increased $17.6 million in the first nine months or 3.6%. The
organic industrial rental growth rate, which is calculated using industrial
rental revenue adjusted for foreign currency exchange rate differences and
revenue from newly acquired business compared to prior-period results, was
approximately negative 3.1%. The decline in the organic industrial rental
growth rate is as a result of an increase in lost uniform wearers within our
existing customer base.

Direct sale revenue increased 11.1% to $17.8 million in the first nine months
of fiscal 2003 compared to $16.0 million in the same period of fiscal 2002.
Direct sale revenue is up due to the success of our annual winter outerwear
promotion in the second quarter and due to initiatives during the third quarter
to penetrate direct sale opportunities with existing customers.

Cost of Rental and Direct Sale.Cost of rental operations increased 4.7% to
$316.1 million in the first nine months of fiscal 2003 from $302.0 million in
the same period of fiscal 2002. Gross margin from rental sales decreased to
37.8% in the first nine months of fiscal 2003 from 38.4% in the same period of
fiscal 2002. Higher costs for energy, expenses related to closing a
manufacturing facility, acquisition integration and plant consolidation costs
and lost margin from lower employment levels within our customer base,
partially offset by improved operational productivity and lower merchandise
expense, contributed to the rental gross margin decline.

Cost of direct sales increased 18.1% to $13.5 million in the nine months of
fiscal 2003 from $11.4 million in the same period of fiscal 2002. Gross margin
from direct sales decreased to 24.3% in the first nine months of fiscal 2003
from 28.8% in the same period of fiscal 2002. The decrease in gross margin is
due primarily to product mix and pricing pressures, partially offset by the
successful winter outerwear promotion in the second quarter.

15



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Selling and Administrative.Selling and administrative expenses increased 5.7%
to $115.6 million in the first nine months of fiscal 2003 from $109.3 million
in the same period of fiscal 2002. As a percentage of total revenues, selling
and administrative expenses increased to 22.0% in the first nine months of
fiscal 2003 from 21.6% in the same period of fiscal 2002. Expenses related to
uncollectible accounts receivable, severance costs, sales and marketing
expenses focused on organic revenue growth and increasing property and casualty
insurance costs drove the majority of the increase in selling and
administrative expenses as a percent of total revenue.

Depreciation and Amortization.Depreciation and amortization expense increased
5.4% to $28.0 million in the first nine months of fiscal 2003 from $26.5
million in the same period of fiscal 2002. As a percentage of total revenues,
depreciation and amortization expense increased to 5.3% in the first nine
months of fiscal 2003 from 5.2% in the same period of fiscal 2002. Capital
expenditures, excluding acquisition of businesses, were $24.7 million in the
first nine months of fiscal 2003 compared to $21.6 million in the same period
of fiscal 2002.

Interest Expense.Interest expense was $10.2 million in the first nine months
of both fiscal 2003 and fiscal 2002.

Provision for Income Taxes. Our effective tax rate decreased to 39.0% in the
first nine months of fiscal 2003 from 39.5% in the same period of fiscal 2002
due largely to decreases in Canadian statutory income tax rates.

Liquidity, Capital Resources and
Financial Condition

Our primary sources of cash are net cash flows from operations and borrowings
under the term loan and revolving credit facilities. Primary uses of this cash
are interest payments on indebtedness, capital expenditures, acquisition of
business assets and general corporate purposes.

Operating Activities.Net cash provided by operating activities was $73.3
million in the first nine months of fiscal 2003 and $65.9 million in the same
period of fiscal 2002.

Working capital at March 29, 2003 was $85.3 million, down 10.9% from $95.8
million at June 29, 2002. The decrease was largely due to increases in
employment-related liabilities including, workers compensation, vacation and
pension.

Investing Activities.Net cash used in investing activities was $100.5 million
in the first nine months of fiscal 2003 and $91.3 million in the same period of
fiscal 2002. In both fiscal years 2003 and 2002, cash was largely used for
acquisition of business assets and property, plant and equipment additions.

Financing Activities.Cash provided by financing activities was $31.0 million
in the first nine months of fiscal 2003 and $22.5 million in the same period of
fiscal 2002. Cash provided in both fiscal years 2003 and 2002 was used
primarily in acquisitions of businesses. The Company paid dividends of $1.1
million during the first nine months of fiscal 2003.

Cash Obligations.Under various agreements, we are obligated to make future
cash payments in fixed amounts. These include payments under the variable rate
term loan and revolving credit facility, the fixed rate term loan, capital
lease obligations and rent payments required under non-cancelable operating
leases with initial or remaining terms in excess of one year.

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The following table summarizes our fixed cash obligations as of March 29, 2003
for the fiscal years ending June (in thousands):

|                                                      |  |           |       |      |  |      |        |      |  |      |        |       |  |       |        |  |  |   |        |        |  |          |         |  |  |   |         | 
|----------------------------------------------------- |  | --------- | ----- | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ----- |  | ----- | ------ |  |  | - | ------ | ------ |  | -------- | ------- |  |  | - | ------- | 
|                                                      |  |           |       |      |  |      |        |      |  |      |        |       |  |       |        |  |  |   |        |        |  | 2008 and |         |  |  |  
|                                                      |  | 2003      |       |      |  |      |        |      |  |      |        |       |  |       |        |  |  |   |        | There- |  |          |         | 
|                                                      |  | Remaining |       | 2004 |  | 2005 |        | 2006 |  | 2007 |        | after |  | Total
|                                                      |  |           |       |      |  |      |        |      |  |      |        |       |  |      
|Variable rate term loan and revolving
credit facility |  | $         |      |      |  | $    | 13,125 |      |  | $    | 15,000 |       |  | $     | 18,750 |  |  | $ | 22,500 |        |  | $        | 131,500 |  |  | $ | 200,875 | 
|Fixed rate term loan                                  |  |           |      |      |  |      |       |      |  |      | 7,143  |       |  |       | 7,143  |  |  |   | 7,143  |        |  |          | 28,571  |  |  |   | 50,000  | 
|Other debt arrangements, including
capital leases     |  |           | 518   |      |  |      | 1,183  |      |  |      | 1,286  |       |  |       | 66     |  |  |   | 29     |        |  |          |        |  |  |   | 3,082   | 
|Operating leases                                      |  |           | 3,056 |      |  |      | 10,561 |      |  |      | 8,774  |       |  |       | 6,692  |  |  |   | 5,414  |        |  |          | 5,818   |  |  |   | 40,315  | 
|                                                      |  |           |       |      |  |      |        |      |  |      |        |       |  |       |        |  |  |   |        |        |  |          |         |  |  |   |         | 
|Total contractual cash obligations                    |  | $         | 3,574 |      |  | $    | 24,869 |      |  | $    | 32,203 |       |  | $     | 32,651 |  |  | $ | 35,086 |        |  | $        | 165,889 |  |  | $ | 294,272 | 
|                                                      |  |           |       |      |  |      |        |      |  |      |        |       |  |       |        |  |  |   |        |        |  |          |         |  |  |   |         | 

Also, at March 29, 2003, we had stand-by letters of credit totaling $15.4
million that have been issued and are outstanding, primarily in connection with
our property and casualty insurance programs. No amounts have been drawn upon
these letters of credit.

At March 29, 2003, we had available cash on hand of $14.1 million and over
$100.0 million of available capacity under our revolving credit facility. We
anticipate that we will generate sufficient cash flows from operations to
satisfy our cash commitments and capital requirements for fiscal 2003; however,
we may utilize borrowings under the revolving credit facility to supplement our
cash requirements from time to time.

The amount of cash flow generated from operations is subject to a number of
risks and uncertainties. In fiscal 2003, we may actively seek and consider
acquisitions of business assets, the consummation of any acquisition could
affect our liquidity profile and level of outstanding debt. We believe that
available capacity under our revolving credit facility will be adequate to
finance any such acquisitions and planned capital expenditures in fiscal 2003.

Impact of Inflation

In general, management believes that our results of operations are not
dependent on moderate changes in the inflation rate. Historically, we have been
able to manage the impacts of more significant changes in inflation rates
through our customer relationships, and continued focus on improvements of
operational productivity. Customer agreements generally provide for price
increases consistent with the rate of inflation or 5.0%, whichever is greater.

Litigation

We are involved in a variety of legal actions relating to personal injury,
customer contracts, employment, trade practices, environmental and other legal
matters that arise in the normal course of business. These legal actions
include lawsuits that challenge the practice of charging for certain
environmental services on invoices, and being named, along with other
defendants, as a potentially responsible party at certain waste disposal sites
where ground water contamination has been detected or is suspected. While we
are unable to predict the ultimate outcome of these legal actions, it is the
opinion of management that the disposition of these matters will not have a
material adverse effect on our consolidated financial statements taken as a
whole.

Recent Accounting
Pronouncements

In June 2001, the Financial Accounting Standards Board issued SFAS No. 143,
Accounting for Asset Retirement Obligations (SFAS 143). SFAS 143 addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. SFAS 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. We adopted SFAS 143 effective
June 30, 2002. The impact of adopting SFAS 143 was not material.

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In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144).
SFAS 144 establishes a single accounting model, based on the framework
established in SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of (SFAS 121), for long-lived
assets to be disposed of by sale. SFAS 144 also resolves several significant
implementation issues related to SFAS 121, such as eliminating the requirement
to allocate goodwill to long-lived assets to be tested for impairment and
establishing criteria to define whether a long-lived asset is held for sale.
We adopted SFAS 144 effective June 30, 2002. The impact of adopting SFAS 144
was not material.

In June 2002, the Financial Accounting Standards Board issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal Activities (SFAS 146).
SFAS 146 addresses financial accounting and reporting for costs associated with
exit or disposal activities. It nullifies Emerging Issues Task Force Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity. SFAS 146 requires that a liability be
recognized for costs associated with an exit or disposal activity only when the
liability is incurred. SFAS 146 also establishes fair value as the objective
for initial measurement of liabilities related to exit or disposal activities.
SFAS 146 is effective for exit or disposal activities that are initiated after
December 31, 2002. We adopted the provisions of SFAS 146 effective January 1,
2003. The impact of adopting SFAS 146 was not material.

In December 2002, the Financial Accounting Standards Board issued SFAS No. 148,
Accounting for Stock-Based Compensation  Transition and Disclosure (SFAS
148). SFAS 148 amends SFAS No. 123, Accounting for Stock-Based Compensation,
to provide alternative methods of transition for a voluntary change to the fair
value method of accounting for stock-based employee compensation. SFAS 148
also amends the disclosures in both annual and interim financial statements
about the method used to account for stock-based employee compensation and the
effect of the method used on reported results. We will continue to apply
Accounting Principles Board Opinion No. 25 as the method used to account for
stock-based compensation, where applicable. We adopted the disclosure
requirements of SFAS 148 beginning with the third quarter ended March 29, 2003.

Cautionary Statements Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 (the Act) provides
companies with a safe harbor when making forward-looking statements as a way
of encouraging them to furnish their shareholders with information regarding
expected trends in their operating results, anticipated business developments
and other prospective information. Statements made in this report concerning
our intentions, expectations or predictions about future results or events are
forward-looking statements within the meaning of the Act. These statements
reflect our current expectations or beliefs, and are subject to risks and
uncertainties that could cause actual results or events to vary from stated
expectations, which could be material and adverse. Given that circumstances
may change, and new risks to the business may emerge from time to time, having
the potential to negatively impact our business in ways we could not anticipate
at the time of making a forward-looking statement, you are cautioned not to
place undue reliance on these statements, and we undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise.

Some of the factors that could cause actual results or events to vary from
stated expectations include, but are not limited to, the following: unforeseen
operating risks; the effects of overall economic conditions; fluctuations in
costs of insurance and energy; acquisition integration costs; the performance
of acquired businesses; preservation of positive labor relationships;
competition, including pricing, within the corporate identity apparel and
facility services industry; and the availability of capital to finance planned
growth. Additional information concerning potential factors that could effect
future financial results is included in the Companys Annual Report on Form
10-K for the Fiscal Year Ended June 29, 2002.

18



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Interest Rate Risk

We are subject to market risk exposure related to changes in interest rates.
We use financial instruments, including fixed and variable rate debt, as well
as interest rate swaps to manage interest rate risk. Interest rate swap
agreements are entered into for periods consistent with related underlying
exposures and do not constitute positions independent of those exposures.
Assuming the current level of borrowings, a 100 basis point increase in
interest rates under these borrowings would have increased our interest expense
for the third quarter of fiscal 2003 by approximately $0.4 million. This
estimated exposure considers the mitigating effects of interest rate swap
agreements outstanding at March 29, 2003 on the change in the cost of variable
rate debt.

Foreign Currency Exchange Risk

We have a significant foreign subsidiary located in Canada. The assets and
liabilities of this subsidiary are denominated in the Canadian dollar and as
such are translated into U.S. dollars at the exchange rate in effect at the
balance sheet date. Results of operations are translated using the average
exchange rates throughout the period. The effect of exchange rate fluctuations
on translation of assets and liabilities are recorded as a component of
stockholders equity. Gains and losses from foreign currency transactions are
included in results of operations.




ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of management, including our
Chief Executive Officer and Chief Financial Officer, we performed an evaluation
of disclosure controls and procedures within 90 days of filing this quarterly
report (the Evaluation Date). After evaluating the effectiveness of
disclosure controls and procedures, the Chief Executive Officer and Chief
Financial Officer, along with other key management, have determined that
disclosure controls and procedures were effective and designed to ensure that
material information relating to G&K Services and its consolidated subsidiaries
would be made known to them on a timely basis. There were no significant
changes in internal controls or other factors that could significantly affect
these controls subsequent to the Evaluation Date.

19



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PART II

OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a.     Exhibits



| |                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.1 Change of Control Agreement between Registrant and Richard L.
Marcantonio dated November 12, 2002.                                                                                   
|
| | 99.1 Certification of the Companys Chief Executive Officer, Thomas
R. Moberly, and Chief Financial Officer, Jeffrey L. Wright,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

b.     Reports on Form 8-K



| |     
| | ----
| | None

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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|      |              |  |                                 |                                                                                                           
|----- | ------------ |  | ------------------------------- | ----------------------------------------------------------------------------------------------------------
|      |              |  | G&K SERVICES, INC.
(Registrant)
|Date: | May 13, 2003 |  | By:                             | /s/ Jeffrey L. WrightJeffrey L. Wright
Chief Financial Officer and Secretary
(Principal Financial Officer)
|     
|      |              |  | By:                             | /s/ Michael F. Woodard                                                                                    
|     
|      |              |  |                                 | Michael F. Woodard
Controller
(Principal Accounting Officer)                                              

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CERTIFICATION

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Thomas R. Moberly, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of G&K Services, Inc.;                                                                                                                                                                                                                                                     
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have;                                                                                                      



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  |     |  |                                                                                             
|------------------ |  | --- |  | --------------------------------------------------------------------------------------------
|Date: May 13, 2003 |  |     |  |                                                                                             
|                  
|                   |  | By: |  | /s/ Thomas R. MoberlyThomas R. Moberly
Chief Executive Officer
(Principal Executive Officer)

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##### Table of Contents



CERTIFICATION

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jeffrey L. Wright, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of G&K Services, Inc.;                                                                                                                                                                                                                                                     
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have;                                                                                                      



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  |     |  |                                                                                                           
|------------------ |  | --- |  | ----------------------------------------------------------------------------------------------------------
|Date: May 13, 2003 |  |     |  |                                                                                                           
|                  
|                   |  | By: |  | /s/ Jeffrey L. WrightJeffrey L. Wright
Chief Financial Officer and
Secretary
(Principal Financial Officer)

23