DES PLAINES, IL--(Marketwire - May 5, 2010) - Schawk, Inc. (
NYSE:
SGK), a leading
provider of brand point management services, enabling companies of all
sizes to connect their brands with consumers to create deeper brand
affinity, reported first-quarter 2010 results. Net income in the first
quarter of 2010 was $2.5 million, or $0.10 per diluted share, versus a net
loss of $2.3 million, or $0.09 per diluted share, in the first quarter of
2009.
On a non-GAAP basis, adjusting for financial impacts relating to foreign
currency exposure and certain expenses as further detailed in this earnings
release, Adjusted net income was $4.5 million, or $0.17 per diluted share,
in the first quarter of 2010 compared to an Adjusted net loss of $0.6
million, or $0.02 per diluted share, during the prior-year period, on a
comparable basis.
President and Chief Executive Officer David A. Schawk, commented, "Although
we believe first quarter 2010 client spending reflected typical first
quarter softness relative to other quarters of the year, we continue to see
encouraging signs from our consumer packaged goods clients that brand
innovation activity is increasing, thereby contributing to the revenue
growth on a year-over-year basis. In addition, our previously disclosed
and ongoing cost-reduction activities continue to drive year-over-year
improvements in margins and operating income for the Company."
Consolidated Results for First Quarter Ended March 31, 2010
Consolidated net sales in the first quarter of 2010 were $111.7 million
compared to $105.1 million in the same period of 2009, an increase of
approximately $6.6 million, or 6.3 percent. Approximately $3.4 million of
the sales increase quarter over quarter was the result of changes in
foreign currency translation rates, as the U.S. dollar declined in value
relative to the local currencies of certain of the Company's non-U.S.
subsidiaries. The remainder of the quarter-over-quarter increase in sales
was the result of an increase in the Company's business compared to the
first quarter of 2009, as consumer packaged goods (CPG) clients increased
their product and brand innovation and introduction activity.
CPG accounts sales in the first quarter of 2010 were $80.4 million, or 71.9
percent of total sales, compared to $73.1 million in the same period of
2009, representing an increase of 9.9 percent. The increase over the
prior-year quarter was primarily driven by increased product and brand
innovation and introduction activity by the Company's CPG clients.
Advertising and retail accounts sales of $20.8 million, or 18.7 percent of
total sales, in the first quarter of 2010 decreased 2.3 percent, from $21.3
million in the prior-year period. Entertainment accounts sales for the
first quarter of 2010 of $6.5 million, or 5.8 percent of total sales,
declined 16.7 percent, from $7.8 million in the same period in 2009. The
lower year-over-year sales within advertising and retail and entertainment
accounts were primarily driven by reduced client promotional spending.
Gross profit was $41.9 million in the first quarter of 2010, an increase of
$8.8 million from the first quarter of 2009. First-quarter 2010 gross
profit as a percentage of sales increased to 37.5 percent of sales from
31.5 percent of sales in the 2009 first-quarter period. The increase was
largely attributable to the Company's continued cost-reduction activities
implemented throughout 2009, coupled with higher sales in the 2010 first
quarter relative to the prior-year comparable period, which further
leveraged the Company's cost-reduction activities.
Selling, general and administrative (SG&A) expenses declined approximately
$1.5 million to $32.5 million in the first quarter of 2010 from $34.0
million in the first quarter of 2009, primarily as a result of the
Company's cost-reduction activities.
The Company recorded a $1.8 million loss on foreign exchange exposures in
the first quarter of 2010, of which $1.7 million related to unrealized
currency remeasurements as compared to a gain of $0.1 million in the
comparable prior-year period. The unrealized, non-cash currency losses in
the first quarter of 2010 were principally due to the deterioration of the
Euro during the quarter. The Company's foreign exchange gains or losses
relate primarily to unhedged currency exposure from intercompany debt
obligations of the Company's non-US subsidiaries. Since the losses relate
primarily to intercompany financing activity, the economic impact to the
Company is minimal as it is largely offset by gains in Accumulated
comprehensive income, net, included in Stockholder's equity.
Expenses related to impairment of long-lived assets were $0.7 million
during the first quarter of 2010 compared to $0.1 million in the first
quarter of 2009. The increase period over period was related to certain
equipment, which sustained water damage and was rendered inoperable at one
of the Company's facilities.
Acquisition integration and restructuring expenses declined from $0.8
million in the first quarter of 2009 to $0.3 million in the first quarter
of 2010. The charges in the 2010 first quarter arose from the Company's
continued focus on consolidating, reducing and re-aligning the Company's
work force and operations and are for employee terminations and other
associated costs. These actions are expected to result in annualized
savings of approximately $1.9 million, with approximately $1.5 million to
be realized during 2010.
The Company reported operating income of $6.5 million in the 2010 first
quarter compared to an operating loss of $1.6 million in the first quarter
of 2009. The increase in operating income compared to the prior-year period
was primarily the result of the increase in gross margin driven by
increased revenue and the Company's previously discussed cost reduction
efforts.
Net income in the first quarter of 2010 was $2.5 million, or $0.10 per
diluted share, compared to a net loss of $2.3 million, or $0.09 per diluted
share, in the first quarter of 2009. Excluding the after-tax effects of
foreign currency loss, long-lived asset impairment expenses, acquisition
integration and restructuring expenses, and first-quarter 2009 remediation
and related expenses, first-quarter 2010 Adjusted net income was $4.5
million, or $0.17 per diluted share, compared to an Adjusted net loss of
approximately $0.6 million, or $0.02 per diluted share, on a comparable
basis for the prior-year period. Please refer to the tables at the end of
this press release for a reconciliation of these non-GAAP measures.
EBITDA and Management Adjusted EBITDA Performance
EBITDA for the first quarter of 2010 was $12.2 million compared to EBITDA
of $3.7 million for the first quarter of 2009. Management adjusted EBITDA
for the first quarter of 2010 was $14.3 million compared to $6.4 million
for the first quarter of 2009. Please refer to the "Reconciliation of
Non-GAAP EBITDA and Management Adjusted EBITDA" table attached at the end
of this press release for a reconciliation of these measures.
Conference Call
Schawk invites you to join its first-quarter 2010 earnings conference call
on Thursday, May 6, 2010, at 9:00 a.m. Central time. To participate in the
conference call, please dial 866-383-8003 or 617-597-5330 at least five
minutes prior to the start time and ask for the Schawk, Inc. conference
call, or on the Internet, go to
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=82169&eventID=3057928. If you are unavailable to
participate on the live call, a replay will be available through May 13 at
11:59 p.m. Central time. To access the replay, dial 888-286-8010 or
617-801-6888, enter conference ID 11152641, and follow the prompts. The
replay will also be available on the Internet for 30 days at the following
address
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=82169&eventID=3057928.
About Schawk, Inc.
Schawk, Inc. is a leading provider of brand point management services,
enabling companies of all sizes to connect their brands with consumers to
create deeper brand affinity. With a global footprint of more than 48
offices, Schawk helps companies create compelling and consistent brand
experiences by providing integrated strategic, creative and executional
services across brand touchpoints. Founded in 1953, Schawk is trusted by
many of the world's leading organizations to help them achieve global brand
consistency. For more information about Schawk, visit
http://www.schawk.com.
Non-GAAP Financial Measures
In addition to the presentation of EBITDA and Management adjusted EBITDA in
this release, the Company has presented certain other non-GAAP measures in
the attachment entitled "Reconciliation of Non-GAAP measures to GAAP."
Management believes that the presentation of non-GAAP measures provides
investors with greater transparency and supplemental data relating to the
Company's financial condition and results of operations and provides more
consistent insight into the performance of the Company's core operations
from period to period by showing the effects of certain non-operating
items. These non-GAAP measures are reconciled to the closest GAAP measures
on the schedules attached to this press release. The non-GAAP measures
should not be viewed as alternatives to GAAP and may not be consistent with
similar measures provided by other companies.
Safe Harbor Statement
Certain statements in this press release are forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, and are subject to the safe harbor created thereby. These
statements are made based upon current expectations and beliefs that are
subject to risk and uncertainty. Actual results might differ materially
from those contained in the forward-looking statements because of factors,
such as, among other things, our ability to maintain an effective system of
disclosure and internal controls and the discovery of any future control
deficiencies or weaknesses, which may require substantial costs and
resources to rectify; higher than expected costs, or unanticipated
difficulties associated with, integrating acquired operations; higher than
expected costs associated with compliance with legal and regulatory
requirements; the strength of the United States economy in general and,
specifically, market conditions for the consumer products industry; the
level of demand for Schawk's services; changes in or weak consumer
confidence and consumer spending; unfavorable foreign exchange rate
fluctuations; loss of key management and operational personnel; our ability
to implement our growth strategy, rebranding initiatives and cost reduction
plans and to realize anticipated cost savings; the ability of the Company
to comply with the financial covenants contained in its debt agreements and
obtain waivers or amendments in the event of non-compliance with such
covenants; the stability of state, federal and foreign tax laws; our
continued ability to identify and exploit industry trends and exploit
technological advances in the imaging industry; our ability to implement
restructuring plans; the stability of political conditions in foreign
countries in which we have production capabilities; terrorist attacks and
the U.S. response to such attacks; as well as other factors detailed in
Schawk, Inc.'s filings with the Securities and Exchange Commission.
For more information about Schawk, visit its website at
http://www.schawk.com.
Schawk, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
March 31,
--------------------
2010 2009
--------- ---------
Net sales $ 111,708 $ 105,088
Cost of sales 69,833 71,994
--------- ---------
Gross profit 41,875 33,094
Selling, general and administrative expenses 32,524 33,969
Foreign exchange (gain) loss 1,817 (126)
Impairment of long-lived assets 680 58
Acquisition integration and restructuring expenses 329 817
--------- ---------
Operating income (loss) 6,525 (1,624)
Other income (expense)
Interest income 8 70
Interest expense (1,988) (1,449)
--------- ---------
(1,980) (1,379)
--------- ---------
Income (loss) before income taxes 4,545 (3,003)
Income tax provision (benefit) 2,025 (707)
--------- ---------
Net income (loss) $ 2,520 $ (2,296)
========= =========
Earnings (loss) per share:
Basic $ 0.10 $ (0.09)
Diluted $ 0.10 $ (0.09)
Weighted average number of common and
common equivalent shares outstanding:
Basic 25,183 24,936
Diluted 25,557 24,936
Dividends per Class A common share $ 0.0400 $ 0.0325
Schawk, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
March 31, December 31,
2010 2009
----------- -----------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 12,119 $ 12,167
Trade accounts receivable, less allowance for
doubtful accounts of $1,522 at March 31, 2010
and $1,619 at December 31, 2009 90,982 88,822
Inventories 22,599 20,536
Prepaid expenses and other current assets 8,090 8,192
Income tax receivable 2,697 2,565
Deferred income taxes 1,012 992
----------- -----------
Total current assets 137,499 133,274
Property and equipment, less accumulated
depreciation of $98,534 at March 31, 2010
and $96,440 at December 31, 2009 48,316 50,247
Goodwill 188,009 187,664
Other intangible assets, net 35,928 37,605
Deferred income taxes 1,456 1,424
Other assets 6,798 6,005
----------- -----------
Total assets $ 418,006 $ 416,219
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 17,496 $ 16,957
Accrued expenses 56,916 64,079
Deferred income taxes 5,504 205
Income taxes payable 9,247 14,600
Current portion of long-term debt 20,278 12,858
----------- -----------
Total current liabilities 109,441 108,699
----------- -----------
Long-term liabilities:
Long-term debt 61,652 64,707
Other long-term liabilities 15,772 15,920
Deferred income taxes 2,174 2,059
----------- -----------
Total long-term liabilities 79,598 82,686
----------- -----------
Stockholders' equity:
Common stock, $0.008 par value, 40,000,000
shares authorized, 30,025,551 and 29,855,796
shares issued at March 31, 2010 and December
31, 2009, respectively, 25,279,083 and
25,108,894 shares outstanding at March 31,
2010 and December 31, 2009, respectively 220 220
Additional paid-in capital 192,936 191,701
Retained earnings 87,463 85,953
Accumulated comprehensive income, net 9,184 7,804
=========== ===========
289,803 285,678
Treasury stock, at cost, 4,746,468 and 4,746,902
shares of common stock at March 31, 2010 and
December 31, 2009, respectively (60,836) (60,844)
----------- -----------
Total stockholders' equity 228,967 224,834
----------- -----------
Total liabilities and stockholders' equity $ 418,006 $ 416,219
=========== ===========
Schawk, Inc.
Segment Financial Data
(Unaudited)
(In Thousands)
Three Months Ended
March 31,
--------------------
2010 2009
--------- ---------
Sales to external clients:
North America $ 96,318 $ 91,170
Europe 17,374 15,583
Asia Pacific 6,822 5,909
Intercompany sales elimination (8,806) (7,574)
--------- ---------
Total $ 111,708 $ 105,088
========= =========
Operating segment income (loss):
North America $ 14,024 $ 5,691
Europe 548 627
Asia Pacific 879 803
Corporate (8,926) (8,745)
--------- ---------
Operating income (loss) $ 6,525 $ (1,624)
========= =========
Schawk, Inc.
Reconciliation of Non-GAAP measures to GAAP
(Unaudited)
(In Thousands, Except Share Amounts)
Three Months Ended
March 31,
------------------
2010 2009
--------- --------
Income (loss) before income taxes - GAAP $ 4,545 $ (3,003)
Adjustments:
Foreign currency (gain) loss 1,817 (126)
Impairment of long-lived assets 680 58
Acquisition integration and restructuring expenses 329 817
Remediation and related expenses -- 2,028
--------- --------
Adjusted income (loss) before income tax - non GAAP 7,371 (226)
Adjusted income tax provision - non GAAP 2,904 351
--------- --------
Adjusted net income (loss) - non GAAP $ 4,467 $ (577)
========= ========
Weighted average common and common stock
equivalents outstanding - GAAP 25,557 24,936
========= ========
Earnings (loss) per diluted share - GAAP $ 0.10 $ (0.09)
Adjustments - net of tax effects:
Foreign currency (gain) loss 0.05 --
Impairment of long-lived assets 0.01 --
Acquisition integration and restructuring expenses 0.01 0.02
Remediation and related expenses -- 0.05
--------- --------
Adjusted earnings (loss) per diluted share - non GAAP $ 0.17 $ (0.02)
========= ========
Income tax provision (benefit) - GAAP $ 2,025 $ (707)
Adjustments:(1)
Foreign currency (gain) loss 484 (39)
Impairment of long-lived assets 270 23
Acquisition integration and restructuring expenses 125 269
Remediation and related expenses -- 805
--------- --------
Adjusted income tax provision - non GAAP $ 2,904 $ 351
========= ========
(1) Adjustments have been tax-effected at the jurisdictions'
statutory rates.
Schawk, Inc.
Reconciliation of Non-GAAP EBITDA and Management Adjusted EBITDA
(Unaudited)
(In Thousands)
Three Months Ended Trailing 12 Months
March 31, Ended March 31,
------------------ ------------------
2010 2009 2010 2009
--------- -------- --------- --------
Net income (loss) - GAAP $ 2,520 $ (2,296) $ 24,313 $(66,562)
Interest expense 1,988 1,449 9,763 6,523
Income tax expense (benefit) 2,025 (707) 10,329 (4,549)
--------- -------- --------- --------
Adjusted Income (loss) - non GAAP 6,533 (1,554) 44,405 (64,588)
Depreciation and amortization
expense 4,494 4,778 18,369 20,011
Impairment of goodwill -- -- -- 48,041
Impairment of long-lived assets 680 58 2,063 6,702
Non-cash restructuring charges -- -- 210 628
Stock based compensation 457 378 1,816 1,763
--------- -------- --------- --------
EBITDA - non GAAP 12,164 3,660 66,863 12,557
Permitted add backs on debt
covenants:
(Gain) loss on sale of property and
equipment -- (28) 143 339
Proforma effect of acquisitions and
asset sales -- -- -- 2,566
Acquisition integration and
restructuring expenses(1) -- 817 2,183 10,579
Multiemployer pension plan
withdrawal expense -- -- -- 7,254
--------- -------- --------- --------
EBITDA for covenant
compliance - non GAAP 12,164 4,449 69,189 33,295
Acquisition integration and
restructuring expenses 329 -- 3,578 --
Multiemployer pension plan
withdrawal expense -- -- 1,800 --
Indemnity settlement income -- -- (4,986) --
Foreign exchange (gain) loss 1,817 (126) 1,402 971
Remediation and related expenses -- 2,028 2,455 2,028
--------- -------- --------- --------
Management adjusted EBITDA - non
GAAP $ 14,310 $ 6,351 $ 73,438 $ 36,294
========= ======== ========= ========
(1) Capped at $3.0 million for 2009 per the Company's new debt agreements.
Amounts in excess of $3.0 million are included as an adjustment for
Management adjusted EBITDA.
Use of Non-GAAP EBITDA, EBITDA for covenant compliance, and Management
adjusted EBITDA
EBITDA is defined as earnings before interest, income taxes, depreciation
and amortization, and other certain non-cash items. EBITDA for covenant
compliance, as defined in the Company's January 2010 debt agreements, is
defined as EBITDA adjusted to exclude certain items, including items that
are generally considered non-operating, as permitted under the Company's
current revolving credit facility, and is used by management to gauge its
ongoing compliance with the Company's principal debt covenants, as well as
pricing on its revolving credit facility. Management adjusted EBITDA is
used to evaluate the core operating activities of the Company from period
to period. None of the measures presented above represent cash flows from
operations as defined by generally accepted accounting principles, should
not be considered as an alternative to net income or cash flow from
operations as an indicator of our operating performance, and are not
indicative of cash available to fund all cash flow needs. These measures
also may be inconsistent with similar measures presented by other
companies.
Contact Information: AT SCHAWK, INC.:
Timothy Allen
Vice President, Finance
Operations and Investor Relations
847-827-9494
Timothy.Allen@schawk.com
AT DRESNER CORPORATE SERVICES:
Investors: Philip Kranz
312-780-7240
pkranz@dresnerco.com