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 |
SCHAWK ANNOUNCES 2010 SECOND-QUARTER RESULTS
Second Quarter Revenues Grow 5.2% While GAAP EPS Increases $0.42 Year Over Year
Des Plaines, IL, August 4, 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 second-quarter 2010 results. Net income in the second quarter of 2010 was $15.8 million, or $0.61 per diluted share, versus $4.8 million, or $0.19 per diluted share, in the second quarter of 2009. Net income for the first six months of 2010 was $18.3 million, or $0.71 per diluted share, compared to $2.5 million, or $0.10 per diluted share, for the comparable prior-year period.
President and Chief Executive Officer David A. Schawk, commented, “Schawk’s second-quarter financial results reflect the signals we received from our consumer packaged goods clients in late 2009 and early 2010 that product and brand activity would be increasing. Our revenue growth, as well as previous and continued cost-reduction activities, drove improved operating margins and earnings per share both for the second quarter and first six months of 2010 compared to the prior-year comparable periods.”
Consolidated Results for Second Quarter Ended June 30, 2010
Consolidated net sales in the second quarter of 2010 were $117.8 million compared to $112.0 million in the same quarter of 2009, an increase of approximately $5.9 million, or 5.2 percent. Approximately $1.0 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 product and brand activity from consumer packaged goods (CPG) clients as well as increased promotional activity from advertising and retail clients.
CPG accounts sales in the second quarter of 2010 were $82.9 million, or 70.4 percent of total sales, compared to $79.9 million in the same quarter of 2009, an increase of 3.7 percent. The increase over the prior-year quarter was primarily driven by increased product and brand activity by Schawk’s CPG clients. Advertising and retail accounts sales of $23.4 million, or 19.9 percent of total sales, in the second quarter of 2010 increased 12.0 percent, from $20.9 million in the
Schawk Announces Second-Quarter 2010 Results
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second quarter of 2009, driven by increased promotional activity relative to last year. Entertainment accounts sales for the second quarter of 2010 of $8.0 million, or 6.8 percent of total sales, decreased 3.1 percent, from $8.3 million in the same period of 2009.
Gross profit was $46.8 million in the second quarter of 2010, an increase of $3.9 million from the second quarter of 2009. Second-quarter 2010 gross profit as a percentage of sales increased to 39.7 percent of sales from 38.3 percent of sales in the 2009 second-quarter period. The increase was largely attributable to the Company’s cost-reduction activities implemented throughout 2009 and during 2010, coupled with higher sales in the 2010 second quarter relative to the 2009 second quarter, which further leveraged these cost-reduction activities.
Selling, general and administrative (SG&A) expenses declined approximately $1.7 million to $30.4 million in the second quarter of 2010 from $32.2 million in the second quarter of 2009. The decline in SG&A expenses year over year is primarily driven by certain insurance recoveries, totaling $1.4 million, related to previously reported asset losses coupled with a $1.3 million reduction in professional fees related to the Company’s prior internal control remediation and related activities. The aforementioned items were partially offset by the restoration of certain temporary cost-reduction actions that the Company enacted for 2009 in response to the economic environment during that period.
The Company recorded a $0.3 million gain on foreign exchange exposures in both the second quarter of 2010 and 2009. 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 foreign currency gains or losses primarily relate to intercompany financing activity, the economic impact to the Company is minimal as these gains or losses are largely offset by corresponding losses or gains in accumulated comprehensive income, net, included in stockholder’s equity.
Acquisition integration and restructuring expenses declined from $1.5 million in the second quarter of 2009 to $0.7 million in the second quarter of 2010. The charges in the 2010 second quarter arose from 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 $4.8 million, with approximately $2.6 million to be realized during 2010. For the first six months of 2010, acquisition integration and restructuring expenses were $1.0 million. The expected annualized savings resulting from the year-to-date 2010 actions are approximately $6.6 million, with approximately $4.1 million to be realized during 2010.
There were no expenses related to impairment of long-lived assets during the second quarter of 2010 compared to $0.1 million in the second quarter of 2009.
Schawk reported operating income of $16.0 million in the 2010 second quarter compared to $9.5 million in the second quarter of 2009. The increase in operating income compared to the prior-year quarter was primarily the result of the increase in gross margin and reduced SG&A and acquisition integration and restructuring expenses.
Schawk Announces Second-Quarter 2010 Results
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For the second quarter of 2010, the Company reported a tax benefit of $1.6 million compared to a tax expense of $2.3 million during the same quarter in 2009. The tax benefit was principally the result of an effective settlement of certain income tax audits, net of federal and state tax benefits, of $5.6 million.
Net income in the second quarter of 2010 was $15.8 million, or $0.61 per diluted share, compared to $4.8 million, or $0.19 per diluted share, in the second quarter of 2009. Excluding the after-tax effects of acquisition integration and restructuring expenses, long-lived asset impairment expenses, foreign currency gain or loss and discrete tax period benefits, Adjusted net income was $10.4 million, or $0.40 per diluted share, for the second quarter of 2010 compared to $6.5 million, or $0.26 per diluted share, on a comparable basis for the 2009 second quarter. 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 second quarter of 2010 was $21.0 million compared to $14.9 million for the second quarter of 2009. Management adjusted EBITDA for the second quarter of 2010 was $21.4 million compared to $17.4 million for the second 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 second-quarter 2010 earnings conference call on Thursday, August 5, 2010, at 9:00 a.m. Central time. To participate in the conference call, please dial 866-783-2143 or 857-350-1602 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/playerlink.zhtml?c=82169&s=wm&e=3253238. If you are unavailable to participate on the live call, a replay will be available through August 12 at 11:59 p.m. Central time. To access the replay, dial 888-286-8010 or 617-801-6888, enter conference ID 90436167, 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/playerlink.zhtml?c=82169&s=wm&e=3253238.
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 GA AP and may not be consistent with similar measures provided by other companies.
Schawk Announces Second-Quarter 2010 Results
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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 comp liance 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; terro rist 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.
The discussion of the Company’s financial results within this earnings release should be read and considered in context of the Company’s most recent annual Form 10-K filing and most recent quarterly Form 10-Q filing with the Securities and Exchange Commission.
For more information about Schawk, visit its website at http://www.schawk.com.
Schawk Announces Second-Quarter 2010 Results
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Schawk Inc. Consolidated Statements of Operations |
| (Unaudited) |
| (In thousands, except per share amounts) |
| | | Three months Ended | | | | | | | |
| | | June 30, | | | Increase (Decrease) | |
| | | 2010 | | | 2009 | | | Amount | | | Percent | |
| | | | | | | | | | | | | |
| Net sales | | $ | 117,840 | | | $ | 111,989 | | | $ | 5,851 | | | | 5.2 | % |
| Cost of sales | | | 71,016 | | | | 69,055 | | | | 1,961 | | | | 2.8 | % |
| Gross profit | | | 46,824 | | | | 42,934 | | | | 3,890 | | | | 9.1 | % |
| | | | | | | | | | | | | | | | | |
| Selling, general and administrative expenses | | | 30,420 | | | | 32,151 | | | | (1,731 | ) | | | (5.4 | )% |
| Foreign exchange (gain) loss | | | (267 | ) | | | (319 | ) | | | 52 | | | | (16.3 | )% |
| Acquisition integration and restructuring expenses | | | 686 | | | | 1,501 | | | | (815 | ) | | | (54.3 | )% |
| Impairment of long-lived assets | | | – | | | | 78 | | | | (78 | ) | | | (100.0 | )% |
| Operating income | | | 15,985 | | | | 9,523 | | | | 6,462 | | | | 67.9 | % |
| | | | | | | | | | | | | | | | | |
| Other income (expense) | | | | | | | | | | | | | | | | |
| Interest income | | | 8 | | | | 30 | | | | (22 | ) | | | (73.3 | )% |
| Interest expense | | | (1,771 | ) | | | (2,468 | ) | | | 697 | | | | (28.2 | )% |
| | | | (1,763 | ) | | | (2,438 | ) | | | 675 | | | | (27.7 | )% |
| | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 14,222 | | | | 7,085 | | | | 7,137 | | | | 100.7 | % |
| Income tax provision (benefit) | | | (1,583 | ) | | | 2,317 | | | | (3,900 | ) | | nm | |
| | | | | | | | | | | | | | | | | |
| Net income | | $ | 15,805 | | | $ | 4,768 | | | $ | 11,037 | | | | 231.5 | % |
| | | | | | | | | | | | | | | | | |
| Earnings per share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.62 | | | $ | 0.19 | | | $ | 0.43 | | | | | |
| Diluted | | $ | 0.61 | | | $ | 0.19 | | | $ | 0.42 | | | | | |
| | | | | | | | | | | | | | | | | |
Weighted average number of common and common equivalent shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 25,400 | | | | 24,921 | | | | | | | | | |
| Diluted | | | 25,884 | | | | 24,921 | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| nm = not meaningful | | | | | | | | | | | | | | | | |
Schawk Announces Second-Quarter 2010 Results
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Schawk Inc. Consolidated Statements of Operations |
| (Unaudited) |
| (In thousands, except per share amounts) |
| | | Six months Ended | | | | | | | |
| | | June 30, | | | Increase (Decrease) | |
| | | 2010 | | | 2009 | | | Amount | | | Percent | |
| | | | | | | | | | | | | |
| Net sales | | $ | 229,548 | | | $ | 217,077 | | | $ | 12,471 | | | | 5.7 | % |
| Cost of sales | | | 140,849 | | | | 141,049 | | | | (200 | ) | | | (0.1 | )% |
| Gross profit | | | 88,699 | | | | 76,028 | | | | 12,671 | | | | 16.7 | % |
| | | | | | | | | | | | | | | | | |
| Selling, general and administrative expenses | | | 62,944 | | | | 66,120 | | | | (3,176 | ) | | | (4.8 | )% |
| Foreign exchange (gain) loss | | | 1,550 | | | | (445 | ) | | | 1,995 | | | nm | |
| Acquisition integration and restructuring expenses | | | 1,015 | | | | 2,318 | | | | (1,303 | ) | | | (56.2 | )% |
| Impairment of long-lived assets | | | 680 | | | | 136 | | | | 544 | | | | 400.0 | % |
| Operating income | | | 22,510 | | | | 7,899 | | | | 14,611 | | | | 185.0 | % |
| | | | | | | | | | | | | | | | | |
| Other income (expense) | | | | | | | | | | | | | | | | |
| Interest income | | | 16 | | | | 100 | | | | (84 | ) | | | (84.0 | )% |
| Interest expense | | | (3,759 | ) | | | (3,917 | ) | | | 158 | | | | (4.0 | )% |
| | | | (3,743 | ) | | | (3,817 | ) | | | 74 | | | | (1.9 | )% |
| | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 18,767 | | | | 4,082 | | | | 14,685 | | | | 359.8 | % |
| Income tax provision | | | 442 | | | | 1,610 | | | | (1,168 | ) | | | (72.5 | )% |
| | | | | | | | | | | | | | | | | |
| Net income | | $ | 18,325 | | | $ | 2,472 | | | $ | 15,853 | | | | 641.3 | % |
| | | | | | | | | | | | | | | | | |
| Earnings per share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.72 | | | $ | 0.10 | | | $ | 0.62 | | | | | |
| Diluted | | $ | 0.71 | | | $ | 0.10 | | | $ | 0.61 | | | | | |
| | | | | | | | | | | | | | | | | |
Weighted average number of common and common equivalent shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 25,292 | | | | 24,928 | | | | | | | | | |
| Diluted | | | 25,731 | | | | 24,929 | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| nm = not meaningful | | | | | | | | | | | | | | | | |
Schawk Announces Second-Quarter 2010 Results
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Schawk, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
| | | June 30, 2010 | | | December 31, 2009 | |
| | | (unaudited) | | | | |
| Assets | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 18,483 | | | $ | 12,167 | |
Trade accounts receivable, less allowance for doubtful accounts of $1,033 at June 30, 2010 and $1,619 at December 31, 2009 | | | 92,353 | | | | 88,822 | |
| Inventories | | | 21,263 | | | | 20,536 | |
| Prepaid expenses and other current assets | | | 9,699 | | | | 8,192 | |
| Income tax receivable | | | 2,565 | | | | 2,565 | |
Deferred income taxes | | | 3,275 | | | | 992 | |
| Total current assets | | | 147,638 | | | | 133,274 | |
| | | | | | | | | |
| Property and equipment, less accumulated depreciation of $101,850 at June 30, 2010 and $96,440 at December 31, 2009 | | | 47,385 | | | | 50,247 | |
| Goodwill | | | 186,931 | | | | 187,664 | |
| Other intangible assets, net | | | 34,228 | | | | 37,605 | |
| Deferred income taxes | | | 1,204 | | | | 1,424 | |
| Other assets | | | 6,158 | | | | 6,005 | |
| | | | | | | | | |
| Total assets | | $ | 423,544 | | | $ | 416,219 | |
| | | | | | | | | |
| Liabilities and stockholders’ equity | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Trade accounts payable | | $ | 18,155 | | | $ | 16,957 | |
| Accrued expenses | | | 57,745 | | | | 64,079 | |
| Deferred income taxes | | | 5,493 | | | | 205 | |
| Income taxes payable | | | 5,641 | | | | 14,600 | |
Current portion of long-term debt | | | 20,278 | | | | 12,858 | |
| Total current liabilities | | | 107,312 | | | | 108,699 | |
| | | | | | | | | |
| Long-term liabilities: | | | | | | | | |
| Long-term debt | | | 53,123 | | | | 64,707 | |
| Other liabilities | | | 14,903 | | | | 15,920 | |
| Deferred income taxes | | | 4,309 | | | | 2,059 | |
| Total long-term liabilities | | | 72,335 | | | | 82,686 | |
| | | | | | | | | |
| Stockholders’ equity: | | | | | | | | |
Common stock, $0.008 par value, 40,000,000 shares authorized, 30,281,763 and 29,855,796 shares issued at June 30, 2010 and December 31, 2009, respectively; 25,535,805 and 25,108,894 shares outstanding at June 30, 2010 and December 31, 2009, respectively | | | 222 | | | | 220 | |
| Additional paid-in capital | | | 195,901 | | | | 191,701 | |
| Retained earnings | | | 102,246 | | | | 85,953 | |
| Accumulated comprehensive income, net | | | 6,356 | | | | 7,804 | |
| | | | 304,725 | | | | 285,678 | |
Treasury stock, at cost, 4,745,958 and 4,746,902 shares of common stock at June 30, 2010 and December 31, 2009, respectively | | | (60,828 | ) | | | (60,844 | ) |
| Total stockholders’ equity | | | 243,897 | | | | 224,834 | |
| | | | | | | | | |
| Total liabilities and stockholders’ equity | | $ | 423,544 | | | $ | 416,219 | |
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Schawk Inc. Segment Financial Data |
| (Unaudited) |
| (In thousands) |
| | | | | | | | | | | | | |
| | | Three months Ended | | | | | | | |
| | | June 30, | | | Increase (Decrease) | |
| | | 2010 | | | 2009 | | | Amount | | | Percent | |
| | | | | | | | | | | | | |
| Sales to external clients: | | | | | | | | | | | | |
| North America | | $ | 104,318 | | | $ | 96,059 | | | $ | 8,259 | | | | 8.6 | % |
| Europe | | | 15,001 | | | | 16,311 | | | | (1,310 | ) | | | (8.0 | )% |
| Asia Pacific | | | 8,240 | | | | 7,113 | | | | 1,127 | | | | 15.8 | % |
| Intercompany sales elimination | | | (9,719 | ) | | | (7,494 | ) | | | (2,225 | ) | | | 29.7 | % |
| | | | | | | | | | | | | | | | | |
| Sales to external clients | | $ | 117,840 | | | $ | 111,989 | | | $ | 5,851 | | | | 5.2 | % |
| | | | | | | | | | | | | | | | | |
| Operating segment income (loss): | | | | | | | | | | | | | | | | |
| North America | | $ | 19,255 | | | $ | 14,910 | | | $ | 4,345 | | | | 29.1 | % |
| Europe | | | 815 | | | | 531 | | | | 284 | | | | 53.5 | % |
| Asia Pacific | | | 1,776 | | | | 2,292 | | | | (516 | ) | | | (22.5 | )% |
| Corporate | | | (5,861 | ) | | | (8,210 | ) | | | 2,349 | | | | (28.6 | )% |
| | | | | | | | | | | | | | | | | |
| Operating segment income | | $ | 15,985 | | | $ | 9,523 | | | $ | 6,462 | | | | 67.9 | % |
| | | Six months Ended | | | | | | | |
| | | June 30, | | | Increase (Decrease) | |
| | | 2010 | | | 2009 | | | Amount | | | Percent | |
| | | | | | | | | | | | | |
| Sales to external clients: | | | | | | | | | | | | |
| North America | | $ | 200,636 | | | $ | 187,229 | | | $ | 13,407 | | | | 7.2 | % |
| Europe | | | 32,375 | | | | 31,894 | | | | 481 | | | | 1.5 | % |
| Asia Pacific | | | 15,062 | | | | 13,022 | | | | 2,040 | | | | 15.7 | % |
| Intercompany sales elimination | | | (18,525 | ) | | | (15,068 | ) | | | (3,457 | ) | | | 22.9 | % |
| | | | | | | | | | | | | | | | | |
| Sales to external clients | | $ | 229,548 | | | $ | 217,077 | | | $ | 12,471 | | | | 5.7 | % |
| | | | | | | | | | | | | | | | | |
| Operating segment income (loss): | | | | | | | | | | | | | | | | |
| North America | | $ | 33,279 | | | $ | 20,601 | | | $ | 12,678 | | | | 61.5 | % |
| Europe | | | 1,363 | | | | 1,158 | | | | 205 | | | | 17.7 | % |
| Asia Pacific | | | 2,655 | | | | 3,095 | | | | (440 | ) | | | (14.2 | )% |
| Corporate | | | (14,787 | ) | | | (16,955 | ) | | | 2,168 | | | | (12.8 | )% |
| | | | | | | | | | | | | | | | | |
| Operating segment income | | $ | 22,510 | | | $ | 7,899 | | | $ | 14,611 | | | | 185.0 | % |
Schawk Announces Second-Quarter 2010 Results
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Schawk, Inc.
Reconciliation of Non-GAAP measures to GAAP
(Unaudited)
(In Thousands, Except Share Amounts)
| | | Three Months Ended June 30, | | | Six Months Ended June 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | | | | | | | | | | | |
| Income before income taxes - GAAP | | $ | 14,222 | | | $ | 7,085 | | | $ | 18,767 | | | $ | 4,082 | |
| Adjustments: | | | | | | | | | | | | | | | | |
| Acquisition integration and restructuring expenses | | | 686 | | | | 1,501 | | | | 1,015 | | | | 2,318 | |
| Remediation and related expenses | | | – | | | | 1,291 | | | | – | | | | 3,319 | |
Impairment of long-lived assets (1) | | | – | | | | 78 | | | | 680 | | | | 136 | |
| Foreign currency (gain) loss | | | (267 | ) | | | (319 | ) | | | 1,550 | | | | (445 | ) |
| Adjusted income before income tax - non GAAP | | | 14,641 | | | | 9,636 | | | | 22,012 | | | | 9,410 | |
| Adjusted income tax provision – non GAAP | | | 4,227 | | | | 3,175 | | | | 7,130 | | | | 3,526 | |
| | | | | | | | | | | | | | | | | |
| Adjusted net income – non GAAP | | $ | 10,414 | | | $ | 6,461 | | | $ | 14,882 | | | $ | 5,884 | |
| | | | | | | | | | | | | | | | | |
| Weighted average common and common stock | | | | | | | | | | | | | | | | |
| equivalents outstanding - GAAP | | | 25,884 | | | | 24,921 | | | | 25,731 | | | | 24,929 | |
| | | | | | | | | | | | | | | | | |
| Earnings per diluted share - GAAP | | $ | 0.61 | | | $ | 0.19 | | | $ | 0.71 | | | $ | 0.10 | |
| Adjustments – net of tax effects: | | | | | | | | | | | | | | | | |
| Acquisition integration and restructuring expenses | | | 0.02 | | | | 0.04 | | | | 0.03 | | | | 0.06 | |
| Remediation and related expenses | | | – | | | | 0.03 | | | | – | | | | 0.08 | |
| Impairment of long-lived assets | | | – | | | | 0.01 | | | | 0.02 | | | | 0.01 | |
| Foreign currency (gain) loss | | | (0.01 | ) | | | (0.01 | ) | | | 0.04 | | | | (0.01 | ) |
| Effective settlement of certain income tax audits | | | (0.22 | ) | | | – | | | | (0.22 | ) | | | – | |
| | | | | | | | | | | | | | | | | |
| Adjusted earnings per diluted share – non GAAP | | $ | 0.40 | | | $ | 0.26 | | | $ | 0.58 | | | $ | 0.24 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Income tax provision (benefit) - GAAP | | $ | (1,583 | ) | | $ | 2,317 | | | $ | 442 | | | $ | 1,610 | |
Adjustments: (2) | | | | | | | | | | | | | | | | |
| Acquisition integration and restructuring expenses | | | 251 | | | | 441 | | | | 376 | | | | 710 | |
| Remediation and related expenses | | | – | | | | 513 | | | | – | | | | 1,318 | |
| Impairment of long-lived assets | | | – | | | | 22 | | | | 270 | | | | 45 | |
| Foreign currency (gain) loss | | | (71 | ) | | | (118 | ) | | | 412 | | | | (157 | ) |
| Effective settlement of certain income tax audits | | | 5,630 | | | | – | | | | 5,630 | | | | – | |
| | | | | | | | | | | | | | | | | |
| Adjusted income tax provision – non GAAP | | $ | 4,227 | | | $ | 3,175 | | | $ | 7,130 | | | $ | 3,526 | |
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| (1) | Please see Note 6 to the Company’s unaudited consolidated financials statements in the Company’s 2010 Second-Quarter Form 10-Q for a discussion related to certain insurance recoveries. |
| (2) | Adjustments have been tax-effected at the jurisdictions’ statutory rates. |
Schawk Announces Second-Quarter 2010 Results
Page 10
Schawk, Inc.
Reconciliation of Non-GAAP EBITDA and Management Adjusted EBITDA
(Unaudited)
(In Thousands)
| | | Three Months Ended | | | Trailing 12 Months | |
| | | June 30, | | | Ended June 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | | | | | | | | | | | |
| Net income (loss) - GAAP | | $ | 15,805 | | | $ | 4,768 | | | $ | 35,350 | | | $ | (62,570 | ) |
| Interest expense | | | 1,771 | | | | 2,468 | | | | 9,066 | | | | 7,295 | |
| Income tax expense (benefit) | | | (1,583 | ) | | | 2,317 | | | | 6,429 | | | | (5,138 | ) |
| Adjusted Income (loss) – non GAAP | | | 15,993 | | | | 9,553 | | | | 50,845 | | | | (60,413 | ) |
| Depreciation and amortization expense | | | 4,406 | | | | 4,730 | | | | 18,045 | | | | 19,341 | |
| Impairment of goodwill | | | – | | | | – | | | | – | | | | 48,041 | |
| Impairment of long-lived assets | | | – | | | | 78 | | | | 1,985 | | | | 6,780 | |
| Non-cash restructuring charges | | | – | | | | 77 | | | | 133 | | | | 705 | |
| Stock based compensation | | | 584 | | | | 501 | | | | 1,899 | | | | 2,264 | |
| | | | | | | | | | | | | | | | | |
| EBITDA – non GAAP | | | 20,983 | | | | 14,939 | | | | 72,907 | | | | 16,718 | |
| | | | | | | | | | | | | | | | | |
| Permitted add backs on debt covenants: | | | | | | | | | | | | | | | | |
| (Gain) loss on sale of property and equipment | | | – | | | | 72 | | | | – | | | | 311 | |
| Proforma effect of acquisitions and asset sales | | | – | | | | – | | | | – | | | | 2,102 | |
Acquisition integration and restructuring expenses(1) | | | – | | | | 1,424 | | | | 1,195 | | | | 9,445 | |
| Multiemployer pension plan withdrawal expense | | | – | | | | – | | | | – | | | | 7,254 | |
| EBITDA for covenant compliance – non GAAP | | | 20,983 | | | | 16,435 | | | | 74,102 | | | | 35,830 | |
| | | | | | | | | | | | | | | | | |
| Acquisition integration and restructuring expenses | | | 686 | | | | – | | | | 3,827 | | | | – | |
| Multiemployer pension plan withdrawal expense | | | – | | | | – | | | | 1,800 | | | | – | |
| Indemnity settlement income | | | – | | | | – | | | | (4,986 | ) | | | – | |
| Foreign exchange (gain) loss | | | (267 | ) | | | (319 | ) | | | 1,454 | | | | 652 | |
| Remediation and related expenses | | | – | | | | 1,291 | | | | 1,138 | | | | 3,319 | |
| | | | | | | | | | | | | | | | | |
| Management adjusted EBITDA – non GAAP | | $ | 21,402 | | | $ | 17,407 | | | $ | 77,335 | | | $ | 39,801 | |
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| (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 principle s, 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.
