DES PLAINES, IL--(Marketwire - November 9, 2009) - 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 third-quarter and first nine-months 2009 results. Net
income in the third quarter of 2009 was $13.3 million, or $0.53 per diluted
share, versus a net loss of $6.7 million, or $0.25 per diluted share, in
the third quarter of 2008. For the first nine months of 2009, net income
was $15.8 million, or $0.63 per diluted share, compared to a net loss of
$1.6 million, or $0.06 per diluted share, in the comparable prior-year
period. Net income in both the third quarter of 2009 and the first nine
months of 2009 was positively impacted by the receipt of $9.2 million in
cash as part of a settlement related to an escrow account that had been
established to pay indemnity claims in connection with the Company's 2005
acquisition of Seven Worldwide Holdings, Inc., of which $5.0 million has
been reported as income and $4.2 million as a reduction in an indemnity
receivable for the third quarter of 2009. The favorable after-tax per share
impact related to the indemnity settlement in both the three- and
nine-month periods ended September 30, 2009, was 20 cents per diluted
share.
Consolidated Results for Third Quarter Ended September 30, 2009
Effective July 1, 2009, the Company restructured its global operations to
be managed on a geographical basis. As a result, the Company has changed
its segments to the following three segments: North America, Europe and
Asia Pacific.
Consolidated net sales in the third quarter of 2009 were $113.5 million
compared to $125.4 million in the same period of 2008, a reduction of
approximately $11.9 million, or 9.6 percent. Approximately $3.4 million of
the sales decline quarter over quarter was the result of changes in foreign
currency translation rates, as the U.S. dollar increased in value relative
to the local currencies of certain of the Company's non-U.S. subsidiaries.
Acquisitions, entirely related to the Europe segment, contributed $2.4
million, or 2.1 percent, during the third quarter of 2009. The remainder of
the quarter-over-quarter decline in sales was the result of a slowdown in
the Company's business compared to the third quarter of 2008.
The slowdown in the Company's business in the 2009 third quarter was
evident in all segments. The North America segment, which accounted for
approximately 87 percent of the Company's sales for the third quarter of
2009, experienced a sales decline of $7.8 million, or 7.3 percent, of which
$0.8 million of the decline was related to changes in foreign currency
translation rates. Sales in the Europe segment declined $1.9 million, or
10.0 percent, of which $2.3 million of the decline was attributable to
changes in foreign currency translation rates. Sales in the Asia Pacific
segment declined $0.3 million, or 4.1 percent, of which $0.2 million was
attributable to changes in foreign currency translation rates.
Consumer products packaging (CPG) accounts sales in the third quarter of
2009 were $80.2 million, or 70.7 percent of total sales, compared to $87.9
million in the same period of 2008, representing a decline of 8.7 percent.
Advertising and retail accounts sales of $22.1 million, or 19.5 percent of
total sales, in the third quarter of 2009 declined 14.0 percent compared to
the prior-year period. Entertainment accounts sales for the third quarter
of 2009 of $8.5 million, or 7.5 percent of total sales, declined 10.1
percent compared to the same period in 2008. In response to continued and
uncertain adverse economic conditions, many of the Company's clients
continue to maintain reduced levels of spending on advertising, marketing
and new product introductions and, particularly with respect to the
Company's CPG accounts, have delayed packaging redesigns and sales
promotion projects, resulting in lower revenue for the Company. However,
despite the softness experienced over the past few quarters, Schawk's
market share has remained strong across its client base.
On a sequential basis, sales for the third quarter of 2009 increased $1.5
million, or 1.3 percent, versus the second quarter of 2009, driven by
increases in retail and entertainment account sales, and slightly higher
packaging related sales.
Gross profit was $45.5 million in the third quarter of 2009, an increase of
$2.3 million from the third quarter of 2008. Third-quarter gross profit as
a percentage of sales increased to 40.1 percent of sales in the 2009 period
from 34.4 percent of sales during the 2008 period, largely attributable to
the Company's continued cost-reduction activities implemented during 2008
and 2009. Third-quarter 2009 gross profit percentage improved by 1.8
percent versus the gross profit percentage for the second quarter of 2009,
driven by the Company's continued cost-reduction efforts in 2009, as well
as higher sequential revenue.
Selling, general and administrative (SG&A) expenses declined $5.7 million,
to $31.5 million in the third quarter of 2009 from $37.2 million in the
third quarter of 2008, principally reflecting the Company's cost-reduction
initiatives. Professional fees, included in SG&A, related to internal
control remediation efforts and related matters were $0.7 million, a
decrease of $1.1 million over the prior-year quarter.
As noted above, during the 2009 third quarter, the Company received $9.2
million in cash as part of a settlement related to an escrow account that
had been established to pay indemnity claims in connection with the
Company's 2005 acquisition of Seven Worldwide Holdings, Inc., of which $5.0
million has been reported as income and $4.2 million as a reduction in an
indemnity receivable for the third quarter of 2009.
Acquisition, integration and restructuring expenses declined $0.6 million
to $1.3 million for the third quarter of 2009, as compared to the same
period last year. The charges in the 2009 third quarter arose from the
Company's previously announced plans to consolidate, reduce and re-align
the Company's work force and operations and are for employee terminations,
asset impairments, obligations for future lease payments and other
associated costs.
There were no expenses related to impairment of long-lived assets during
the third quarter of 2009, compared to expenses related to impairment of
long-lived assets of $4.1 million in the third quarter of 2008.
The Company reported operating income of $17.6 million in the 2009 third
quarter compared to an operating loss of $0.1 million in the third quarter
of 2008. The increase in operating income compared to the prior-year period
was the result of reductions in SG&A expenses, improvements in gross margin
percent, and the benefit from the aforementioned indemnity settlement as
previously described, coupled with reductions in acquisition, integration
and restructuring expenses and long-lived asset impairment expenses.
Remediation and related expenses of $0.7 million in the 2009 third quarter
are included in the Company's SG&A expenses, and are principally due to
costs related to the Company's internal control remediation and related
matters.
The Company reported a gain associated with foreign currency transactions
of $0.6 million in the third quarter of 2009 and a loss of $1.9 million in
the third quarter of 2008. These transactions were recorded by non-U.S.
subsidiaries primarily for unhedged currency exposure arising from
intercompany debt obligations.
Interest expense in the third quarter of 2009 was $2.9 million, compared to
$1.6 million in the third quarter of 2008, due to higher interest payable
under the Company's June 2009 amended debt agreements.
Income tax expense for the third quarter of 2009 was $1.6 million, compared
to income tax expense of $5.1 million in the third quarter of 2008. The
change in the effective tax rate for the third quarter of 2009 compared to
the same period of 2008 was attributed to the nontaxable indemnity
settlement, amended tax return adjustments in 2009, and an increase in the
reserve for uncertain tax positions during 2008.
Net income in the third quarter of 2009 was $13.3 million, or $0.53 per
diluted share, compared to a net loss of $6.7 million, or $0.25 per diluted
share, in the third quarter of 2008. As discussed above, during the third
quarter of 2009 the Company incurred acquisition, integration and
restructuring expenses of $1.3 million and remediation and related expenses
of $0.7 million. Additionally, as previously discussed, the Company
reported income of $5.0 million related to a $9.2 million indemnity
settlement, as well as a gain of $0.6 million on foreign currency
transactions in the third quarter of 2009. The income before income taxes
was $14.9 million. The income tax provision for the third quarter was $1.6
million. Excluding the aforementioned items (net of tax effects),
third-quarter 2009 net income was $7.9 million, or $0.31 per diluted share,
compared to income of $4.1 million, or $0.15 per diluted share, on the same
basis for the comparable prior-year period. Please refer to the tables at
the end of this press release for a reconciliation of non-GAAP measures.
Other Information
Depreciation and amortization expense was $4.7 million in the third quarter
of 2009 compared to $5.1 million in the third quarter of 2008.
Capital expenditures in the third quarter of 2009 were $1.5 million
compared to $4.8 million in the same period of 2008.
EBITDA and Adjusted EBITDA Performance
EBITDA for the third quarter of 2009 was $22.3 million compared to EBITDA
of $12.0 million for the third quarter of 2008. Adjusted EBITDA for the
third quarter of 2009 was $23.2 million compared to $13.8 million for the
third quarter of 2008. These results for EBITDA and Adjusted EBITDA are
calculated consistent with the non-GAAP reconciliation schedule presented
at the end of this press release.
Consolidated Results for Year-to-Date Period Ended September 30, 2009
Year-to-date sales through September 30, 2009, were $330.5 million compared
to $385.3 million in the same period of 2008, a reduction of $54.7 million,
or 14.2 percent. Approximately $17.8 million of the sales decline year over
year was the result of changes in foreign currency translation rates, as
the U.S. dollar increased in value relative to the local currencies of
certain of the Company's non-U.S. subsidiaries. Acquisitions contributed
$7.4 million, or 2.2 percent, during the first nine months of 2009 compared
to the prior year, comprised of $6.7 million in Europe and $0.7 million in
Asia Pacific. The remainder of the year-over-year decline in sales was the
result of a slowdown in the Company's business compared to the same period
of 2008.
The year-to-date slowdown in the Company's business was evident in all
segments. The North America segment, which accounted for approximately 86
percent of the Company's sales for the first nine months of 2009,
experienced a sales decline of $42.4 million, or 12.9 percent, of which
$5.5 million of the period-over-period sales decline was attributable to
changes in foreign currency translation rates. Sales in the Europe segment
declined $8.4 million, or 14.7 percent, of which $10.9 million was
attributable to changes in foreign currency translation rates. Sales in the
Asia Pacific segment declined $1.9 million, or 8.2 percent, of which $1.4
million was attributable to changes in foreign currency translation rates.
CPG accounts sales in the first nine months of 2009 were $233.8 million, or
70.7 percent of total sales, compared to $272.7 million in the same period
of 2008, representing a decline of 14.3 percent. Year-to-date advertising
and retail accounts sales of $63.8 million, or 19.3 percent of total sales,
declined 18.4 percent compared to the prior-year period. Entertainment
accounts sales of $24.5 million, or 7.4 percent of total sales, declined
11.2 percent.
Gross profit was $121.5 million in the first nine months of 2009, a decline
of $11.4 million from the prior-year period. However, nine-months gross
profit as a percent of sales increased to 36.8 percent of sales in the 2009
period from 34.5 percent of sales in the 2008 period, which is largely
attributable to the Company's cost-reduction activities implemented during
2008 and 2009.
SG&A expenses declined $12.4 million to $97.2 million in the first nine
months of 2009, from $109.6 million in the comparable prior-year period.
The reduction in spending reflects the Company's cost-reduction initiatives
partially offset by higher professional fees related to internal control
remediation and related efforts of $4.0 million, an increase of $1.7
million over the prior-year period.
Additionally, in the 2009 nine-month period, the Company received $9.2
million in cash as part of a settlement related to an escrow account that
had been established to pay indemnity claims in connection with the
Company's 2005 acquisition of Seven Worldwide Holdings, Inc., of which $5.0
million has been reported as income and $4.2 million as a reduction in an
indemnity receivable for the nine-month period of 2009.
Acquisition, integration and restructuring expenses declined $1.5 million
to $3.6 million and arose from the Company's previously announced plans to
consolidate, reduce and re-align the Company's work force and operations.
As a result of these actions, the Company incurred costs for employee
terminations, asset impairments, obligations for future lease payments and
other associated costs. Expenses related to impairment of long-lived assets
declined by $6.1 million to $0.1 million in the first nine months of 2009
compared to the same period of 2008.
The Company reported year-to-date operating income of $25.5 million in the
first nine months of 2009 compared to $12.0 million in the same period of
2008. The increase in operating income, compared to the prior-year period,
was the result of reductions in SG&A, acquisition, integration and
restructuring, and long-lived asset impairment expenses coupled with the
benefit from the indemnity settlement as previously described.
The remediation and related expenses of $4.0 million, which is included in
the Company's SG&A expenses, is principally due to costs related to the
Company's internal control remediation and related matters.
The Company reported a year-to-date gain associated with foreign currency
transactions of $1.1 million compared to a loss of $1.4 million on foreign
currency transactions for the same period in 2008. These transactions were
recorded by non-U.S. subsidiaries primarily for unhedged currency exposure
arising from intercompany debt obligations.
Interest expense for the first nine months of 2009 was $6.8 million
compared to $5.1 million in the comparable prior-year period, primarily
driven by higher interest payable related to the Company's June 2009
amended debt agreements.
Income tax for the first nine months of 2009 was $3.2 million, compared to
$8.7 million during the first nine months of 2008. The reduction in the
effective tax rate for the first nine months of 2009 compared to the same
period of 2008 was attributed to the nontaxable indemnity settlement,
amended tax return adjustments in 2009, and the establishment of a
valuation allowance in the United Kingdom during 2008.
Year-to-date net income was $15.8 million, or $0.63 per diluted share,
compared to a net loss of $1.6 million, or $0.06 per diluted share, in the
comparable prior-year period. As discussed above, during the first three
quarters of 2009 the Company incurred acquisition integration and
restructuring expenses of $3.6 million and remediation and related expenses
of $4.0 million. Additionally, as previously discussed, the Company
reported $5.0 million of income related to a $9.2 million indemnity
settlement, as well as a $1.1 million gain on foreign currency transactions
in the first nine months of 2009. The income before income taxes was $18.9
million. The income tax provision for the first three quarters of 2009 was
$3.2 million. Excluding the aforementioned items (net of tax effects),
year-to-date net income was $13.8 million, or $0.55 per diluted share,
compared to income of $12.7 million, or $0.47 per diluted share, on the
same basis for the comparable prior-year period. Please refer to the tables
at the end of this press release for a reconciliation of non-GAAP measures.
Other Information
Depreciation and amortization expense was $14.2 million in the first nine
months of 2009 compared to $16.1 million in the prior-year period.
Year-to-date capital expenditures were $3.9 million compared to $10.3
million in the same period of 2008.
The Company repurchased 488,700 shares of its stock in the first quarter of
2009 for a cost of approximately $4.3 million. The Company suspended its
share repurchase program in March 2009.
EBITDA and Adjusted EBITDA Performance
EBITDA for the first nine months of 2009 was $40.0 million compared to
EBITDA of $35.1 million for the same period of 2008. Adjusted EBITDA for
the first three quarters of 2009 was $43.1 million compared to $40.0
million for the comparable prior-year period. These results for EBITDA and
Adjusted EBITDA are calculated consistent with the non-GAAP reconciliation
schedule presented at the end of this press release.
Cost-Reduction Activities
The Company incurred acquisition, integration and restructuring charges of
$1.3 million in the three-month period ended September 30, 2009 and $3.6
million for the first three quarters of 2009. These year-to-date charges
are anticipated to result in total annual savings of approximately $12.8
million (estimated $8.5 million to be realized in 2009) and is part of the
Company's previously announced actions for 2009. Previously, in its
second-quarter 2009 earnings release, the Company expected $10.0 million in
annualized savings (estimated $7.0 million during 2009) related to
cost-reduction activities initiated during 2009. Furthermore, as disclosed
previously, the Company has taken other specific 2009 cost-reduction
actions expected to reduce expenses approximately $6.0 to $7.0 million for
the year. The Company will continue to evaluate opportunities for further
cost-reduction activities, as they arise.
Debt Update
During the first nine months of 2009, the Company reduced its total debt by
$45.1 million ($22.3 million in the third quarter), to $90.7 million. The
reduction in debt was principally driven by cash flow from operations,
which includes the effect of the indemnity settlement, as well as the
utilization of available international cash balances. At September 30,
2009, the Company had $10.4 million of cash, as well as a revolving credit
facility of $80.0 million, of which approximately $50.5 million was
available.
Full-Year 2009 Sales and "Adjusted EBITDA" Guidance
The Company expects that full-year 2009 revenues will range between $440 to
$450 million, and Adjusted EBITDA (as calculated under the terms of the
Company's amended debt agreements) will range between $52 to $58 million,
which is above the Company's previous estimate for Adjusted EBITDA. The
Company based these annual estimates on expectations that through the
balance of 2009, CPGs, retail and corporate brands will increase the
frequency of their product innovation and promotional activities in
response to competitive pressure, and that the Company's cost reduction
activities in 2008 and during 2009 will continue to lower the expense base
of the Company.
In the event that client spending improves beyond our current expectations,
the Company believes that its full-year 2009 revenue and Adjusted EBITDA
could exceed current projections. In addition, the Company presently
expects that current cash balances and anticipated cash flows from
operations and other activities will be sufficient to fund debt service as
well as debt reduction through the end of 2009 without hindering the
Company's ability to focus on the services provided to its clients.
Management Comments
President and Chief Executive Officer David A. Schawk commented, "Despite
the current global economic challenges, we did experience an outstanding
third quarter, as our gross margins and operating income continued to
improve on both a year-over-year and sequential basis, reflecting our
cost-reduction efforts during 2008 and 2009. Also contributing to the
improvement, the Company reached an indemnity settlement stemming from its
2005 acquisition of Seven Worldwide, Inc., resulting in $5 million of
income for the third quarter and first nine months of 2009.
"Compared to the prior-year period, third-quarter 2009 revenue fell
approximately 9.6 percent, and 6.9 percent if the unfavorable $3.4 million
foreign currency translation impact is excluded, as clients continued to
reduce new product, innovation and other new and product-change related
spending. However, the third quarter of 2009 was our second consecutive
quarter of sequential revenue growth allowing us to further leverage our
cost-reduction efforts and improve operating income.
"During the third quarter of 2009, we experienced substantial improvement
in margins. Gross margin improved to 40.1 percent in the third quarter of
2009 from 34.4 percent in the same period of last year. Additionally,
despite a nearly $12 million decline in revenue, third-quarter operating
income was approximately $17.6 million compared to an operating loss of
$0.1 million in the third quarter of 2008, reflecting the benefits of our
cost-reduction activities, indemnity settlement, and reduced expenses for
restructuring, long-lived asset impairments, and internal control
remediation and related matters."
Schawk continued, "We continue to take steps to better utilize our global
capacity while reducing our overall cost base, and as a result of the
successful implementation of our process-improvement related restructuring
actions thus far in 2009, we now expect to generate almost $12.8 million in
annual cost savings, which is $2.8 million higher than our previous
estimates. These savings are incremental to the other 2009
cost-reduction actions expected to reduce expenses approximately $6 to $7
million for 2009.
"Furthermore, the Company reduced its debt by over $22 million during the
third quarter of 2009 which further strengthens its financial position. The
Company has also reduced its overall debt by approximately $45 million
since year-end 2008.
"Given our performance during the third quarter and progress on
implementing our cost-reductions actions for 2009, we are reaffirming
full-year revenue guidance and increasing Adjusted EBITDA guidance.
However, if client spending improves beyond our expectations, we could
exceed the revenue and Adjusted EBITDA guidance for the year."
Schawk concluded, "The third quarter was an important quarter for the
Company. While there continue to be opportunities for further improvement,
we believe our financial results confirm that the new processes we have put
into place are working. To this end, we believe that continuing on this
path will enable us to capitalize on our global footprint and improve our
operations while being locally and globally agile and thereby able to adapt
to marketplace turbulence. In addition, our platform in Brand Point
Management allows us to deliver end-to-end, all-encompassing solutions to
the right clients, at the right time, and in the right place. We believe
that no other Company in our industry can match the solutions that Schawk
can offer its clients."
Conference Call
Schawk invites you to join its third-quarter 2009 earnings conference call
on Tuesday, November 10, 2009 at 9:00 a.m. Central time. To participate in
the conference call, please dial 866-800-8652 or 617-614-2705 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=2527556. A replay
will be available through November 17 at 11:59 p.m. Central time. To access
the replay, dial
888-286-8010 or 617-801-6888, enter conference ID 17338608, 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=2527556.
About Schawk, Inc.
Schawk, Inc, is the 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 60
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
There are non-GAAP measures attached to this press release entitled
"Reconciliation of Non-GAAP measures to GAAP." Management believes that the
presentation of these 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.
Non-GAAP measures are reconciled to the closest GAAP measures on schedules
attached to this press release. The non-GAAP measures should not be viewed
as alternatives to GAAP. Furthermore, these measures may not be consistent
with similar measures provided by other companies. See also the Company's
discussion of the use of EBITDA and Adjusted EBITDA in the attached
"Reconciliation of Non-GAAP EBITDA and Adjusted EBITDA."
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, unanticipated difficulties associated with
additional accounting issues, if any, which may cause our investors to lose
confidence in our reported financial information and may have a negative
impact on the trading price of our stock; our ability to remedy known
internal control deficiencies and weaknesses and the discovery of 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 ability of the Company to renew or replace its revolving
credit facility when it terminates in January 2010; 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 Nine Months Ended
September 30, September 30,
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Net sales $ 113,463 $ 125,446 $ 330,540 $ 385,289
Cost of sales 67,957 82,279 209,006 252,369
--------- --------- --------- ---------
Gross profit 45,506 43,167 121,534 132,920
Selling, general and
administrative expenses 31,549 37,203 97,224 109,578
Indemnity settlement (4,986) -- (4,986) --
Acquisition integration and
restructuring expenses 1,328 1,942 3,646 5,116
Impairment of long-lived assets -- 4,073 136 6,257
--------- --------- --------- ---------
Operating income (loss) 17,615 (51) 25,514 11,969
Other income (expense)
Interest income 124 63 224 201
Interest expense (2,880) (1,625) (6,797) (5,099)
--------- --------- --------- ---------
(2,756) (1,562) (6,573) (4,898)
--------- --------- --------- ---------
Income (loss) before income
taxes 14,859 (1,613) 18,941 7,071
Income tax provision 1,553 5,063 3,163 8,711
--------- --------- --------- ---------
Net income (loss) $ 13,306 $ (6,676) $ 15,778 $ (1,640)
========= ========= ========= =========
Earnings (loss) per share:
Basic $ 0.53 $ (0.25) $ 0.63 $ (0.06)
Diluted $ 0.53 $ (0.25) $ 0.63 $ (0.06)
Weighted average number of
common and common
equivalent shares outstanding:
Basic 24,955 27,027 24,937 27,071
Diluted 25,040 27,027 24,949 27,071
Dividends per Class A common
share $ 0.01 $ 0.0325 $ 0.0525 $ 0.0975
Schawk, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
September 30, December 31,
2009 2008
------------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 10,352 $ 20,205
Trade accounts receivable, less allowance for
doubtful accounts of $2,016 at September 30,
2009 and $3,138 at December 31, 2008 82,234 83,218
Inventories 22,854 23,617
Prepaid expenses and other current assets 9,266 11,243
Income tax receivable 935 3,348
Assets held for sale 2,085 6,555
Deferred income taxes 2,847 2,765
------------- ------------
Total current assets 130,573 150,951
Property and equipment, less accumulated
depreciation of $102,388 at September 30, 2009
and $92,583 at December 31, 2008 51,869 58,325
Goodwill 187,148 184,037
Other intangible assets, net 38,704 39,125
Deferred income taxes 2,516 2,752
Other assets 6,109 5,163
------------- ------------
Total assets $ 416,919 $ 440,353
============= ============
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 19,270 $ 20,694
Accrued expenses 58,736 52,016
Income taxes payable 6,283 --
Current portion of long-term debt 44,020 23,563
------------- ------------
Total current liabilities 128,309 96,273
------------- ------------
Long-term liabilities:
Long-term debt 46,701 112,264
Other liabilities 21,526 29,137
Deferred income taxes 2,063 1,858
------------- ------------
Total long-term liabilities 70,290 143,259
------------- ------------
Stockholders' equity:
Common stock, $0.008 par value, 40,000,000
shares authorized, 29,739,343 and 29,478,456
shares issued at September 30, 2009 and
December 31, 2008, respectively; 24,992,256
and 25,218,566 shares outstanding at
September 30, 2009 and December 31, 2008,
respectively 219 217
Additional paid-in capital 189,927 187,801
Retained earnings 82,490 68,016
Accumulated comprehensive income, net 6,531 1,368
------------- ------------
279,167 257,402
Treasury stock, at cost, 4,747,087 and
4,259,890 shares of common stock at
September 30, 2009 and December 31, 2008,
respectively (60,847) (56,581)
------------- ------------
Total stockholders' equity 218,320 200,821
------------- ------------
Total liabilities and stockholders' equity $ 416,919 $ 440,353
============= ============
Schawk, Inc.
Reconciliation of Non-GAAP measures to GAAP
(Unaudited)
(In Thousands, Except Share Amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2009 2008 2009 2008
-------- -------- -------- --------
Income (loss) before income taxes -
GAAP $ 14,859 ($ 1,613) $ 18,941 $ 7,071
Adjustments:
Acquisition integration and
restructuring expenses 1,328 1,942 3,646 5,116
Remediation and related expenses 723 1,824 4,042 2,317
Impairment of long-lived assets -- 4,073 136 6,257
Indemnity settlement (4,986) -- (4,986) --
Foreign currency (gain) loss (644) 1,909 (1,089) 1,383
-------- -------- -------- --------
Adjusted income before income tax -
non GAAP 11,280 8,135 20,690 22,144
Adjusted income tax provision - non
GAAP 3,386 4,016 6,913 9,443
-------- -------- -------- --------
Adjusted net income - non GAAP $ 7,894 $ 4,119 $ 13,777 $ 12,701
======== ======== ======== ========
Weighted average common and common
stock equivalents outstanding -
GAAP 25,040 27,027 24,949 27,071
======== ======== ======== ========
Earnings per diluted share - GAAP $ 0.53 ($ 0.25) $ 0.63 ($ 0.06)
Adjustments - net of tax effects:
Acquisition integration and
restructuring expenses 0.04 0.05 0.10 0.12
Remediation and related expenses 0.02 0.04 0.10 0.05
Impairment of long-lived assets -- 0.09 -- 0.14
Indemnity settlement (0.20) -- (0.20) --
Foreign currency (gain) loss (0.02) 0.05 (0.03) 0.04
Uncertain tax positions -- 0.17 -- 0.13
Amended tax return adjustments (0.05) -- (0.06) --
UK valuation allowance -- -- -- 0.05
-------- -------- -------- --------
Adjusted earnings per diluted -
non GAAP $ 0.31 $ 0.15 $ 0.55 $ 0.47
======== ======== ======== ========
Income tax provision (benefit) -
GAAP $ 1,553 $ 5,063 $ 3,163 $ 8,711
Adjustments:
Acquisition integration and
restructuring expenses 438 692 1,149 1,841
Remediation and related expenses 287 724 1,605 920
Impairment of long-lived assets -- 1,568 45 2,436
Indemnity settlement -- -- -- --
Foreign currency (gain) loss (170) 540 (327) 390
Uncertain tax positions (95) (4,571) (95) (3,384)
Amended tax return adjustments 1,373 -- 1,373 --
UK valuation allowance -- -- -- (1,471)
-------- -------- -------- --------
Adjusted income tax provision -
non GAAP $ 3,386 $ 4,016 $ 6,913 $ 9,443
======== ======== ======== ========
Schawk, Inc.
Reconciliation of Non-GAAP EBITDA and Adjusted EBITDA
(Unaudited)
(In Thousands)
Trailing Twelve
Three Months Ended Nine Months Ended Months Ended
September 30, September 30, September 30,
------------------ ------------------ ------------------
2009 2008 2009 2008 2009 2008
-------- -------- -------- -------- -------- --------
Net income
(loss) - GAAP $ 13,306 ($ 6,676) $ 15,778 ($ 1,640) ($42,588) $ 6,158
Interest
expense 2 ,880 1,625 6,797 5,099 8,550 7,255
Income tax
expense
(benefit) 1,553 5,063 3,163 8,711 (8,658) 14,970
-------- -------- -------- -------- -------- --------
Subtotal 17,739 12 25,738 12,170 (42,696) 28,383
Depreciation
and
amortization 4,701 5,145 14,209 16,063 18,897 21,788
Impairment of
goodwill -- -- -- -- 48,041 --
Impairment of
long-lived
assets -- 6,257 136 6,257 523 7,454
Non-cash
restructuring
charge 133 592 210 592 246 592
Unrealized
foreign
currency
(gain) loss (658) -- (1,574) -- (477) 124
Share-based
compensation 411 -- 1,290 -- 2,675 235
-------- -------- -------- -------- -------- --------
EBITDA - non
GAAP $ 22,326 $ 12,006 $ 40,009 $ 35,082 $ 27,209 $ 58,576
Permitted add
backs per
amended debt
agreements:
(Gain) loss on
sale of
property and
equipment 71 (257) 115 (162) 639 (19)
Permitted
acquisitions -- 85 -- 492 2,027 492
Restructuring
charges (1) 759 1,966 3,000 4,524 8,238 4,524
Non-recurring
pension
withdrawal
expense -- -- -- -- 7,254 --
-------- -------- -------- -------- -------- --------
Adjusted EBITDA
- non GAAP $ 23,156 $ 13,800 $ 43,124 $ 39,936 $ 45,367 $ 63,573
======== ======== ======== ======== ======== ========
(1) Capped at $3.0 million for 2009 per the Company's amended debt
agreements
EBITDA is defined as earnings before interest, income taxes, depreciation
and amortization, and other certain non-cash items. Adjusted EBITDA, as
defined in the covenants under the Company's amended debt agreements, is
EBITDA as adjusted to exclude certain items, including items that are
generally considered non-operating. Both measures are important indicators
of performance under the Company's amended debt agreements and provide
management with a consistent measurement tool for evaluating the operating
activities of the Company from period to period. In addition, the 2008
figures above are shown consistent with the Company's EBITDA and Adjusted
EBITDA as defined in the covenants under its amended debt agreements.
These measures do not 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