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 |
| | |
SCHAWK ANNOUNCES 2010 THIRD-QUARTER RESULTS
Company Reports GAAP EPS of $0.30 per Share and Year-Over-Year Improvement in Consumer Packaged Goods’ Account Sales
Des Plaines, IL, November 3, 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 third-quarter 2010 results. Net income in the third quarter of 2010 was $7.8 million, or $0.30 per diluted share, versus $13.3 million, or $0.53 per diluted share, in the third quarter of 2009. Net income for the first nine months of 2010 was $26.1 million, or $1.01 per diluted share, compared to $15.8 million, or $0.63 per diluted share, for the comparable prior-year period.
Net income for the third quarter and first nine months of 2009 was positively impacted by the receipt of $9.2 million in cash as part of an indemnity claim settlement in connection with the Company’s 2005 acquisition of Seven Worldwide Holdings, Inc., of which $5.0 million was reported as income. The favorable after-tax per share impact was $0.20 per share for both periods ended September 30, 2009. On a non-GAAP basis, adjusting for financial impacts relating to the indemnity claim settlement, foreign currency exposure and certain other items as further detailed in this earnings release, Adjusted net income was $8.8 million, or $0.34 per diluted share, in the third quarter of 2010 compared to Adjusted net income of $7.9 million, or $0.31 per diluted share, during the prior-year period, on a comparable basis. 60; For the first nine months of 2010, Adjusted net income was $23.7 million, or $0.92 per diluted share, compared to Adjusted net income of $13.8 million, or $0.55 per diluted share, during the prior-year period, on a comparable basis.
President and Chief Executive Officer David A. Schawk, commented, “During the third quarter, we continued to see measured progress year over year with our largest client channel, consumer packaged goods accounts. However, new product introductions and packaging changes were slower than anticipated for the quarter as CPG’s have become more cautious as general economic uncertainty continues. We remain dedicated to managing our operations efficiently to keep pace with the trends we are seeing in the marketplace.”
Schawk Announces Third-Quarter 2010 Results
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Mr. Schawk added, “During the third quarter, we completed the acquisition of Untitled London Limited based in London, UK, which expands Schawk’s digital marketing service capabilities. This acquisition reflects our commitment to further strengthening our overall portfolio of brand point management services we offer to our clients as they expand their ways of connecting with consumers.”
Consolidated Results for Third Quarter Ended September 30, 2010
Consolidated net sales in the third quarter of 2010 were $112.6 million compared to $113.5 million in the same quarter of 2009, a decrease of approximately $0.9 million, or 0.8 percent. Quarter-over-quarter sales were negatively impacted by changes in foreign currency translation rates of approximately $0.1 million, as the U.S. dollar increased in value relative to the local currencies of certain of the Company’s non-U.S. subsidiaries.
Consumer packaged goods (CPG) accounts sales in the third quarter of 2010 were $82.1 million, or 72.9 percent of total sales, compared to $80.2 million in the same quarter of 2009, an increase of 2.3 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 in the third quarter of 2010 were $20.1 million, or 17.9 percent of total sales, a decrease of 8.8 percent, from $22.1 million in the third quarter of 2009, largely driven by the loss of a lower margin, non-core retail client. However, the profit impact associated with this client loss was largely mitigated through cost reduction actions implemented during the quarter and throughout the year. Entertainment accounts sales f or the third quarter of 2010 of $7.1 million, or 6.3 percent of total sales, decreased 15.6 percent, from $8.5 million in the same period of 2009, driven by continued declines in promotional activity.
Gross profit was $43.8 million in the third quarter of 2010, a decrease of $1.7 million from the third quarter of 2009. Third-quarter 2010 gross profit as a percentage of sales decreased to 38.9 percent of sales from 40.1 percent of sales in the 2009 third-quarter period. The decline in gross profit percent was largely driven by the reduced operating leverage resulting from the lower year-over-year revenue coupled with the restoration of certain temporary cost-reduction actions the Company enacted for 2009 in response to the economic environment during that period.
Selling, general and administrative (SG&A) expenses declined approximately $3.5 million to $28.7 million in the third quarter of 2010 from $32.2 million in the third quarter of 2009. The decline in SG&A expenses year over year is primarily driven by the Company’s cost-reduction activities implemented in 2009 and 2010 coupled with $1.5 million in certain insurance recoveries detailed further in the Company’s third quarter 2010 Form 10-Q. The aforementioned items were partially offset by restoration of certain temporary cost-reduction actions the Company enacted for 2009 as previously discussed.
The Company recorded a $0.7 million loss on foreign exchange exposures in the third quarter of 2010, compared to a gain of $0.6 million in the third quarter of 2009. The Company’s foreign exchange gains or losses relate primarily to unhedged currency exposure from intercompany debt obligations of the Company’s non-U.S. subsidiaries. Since foreign currency gains or losses primarily relate to intercompany financing activity, the economic impact to the Company is
Schawk Announces Third-Quarter 2010 Results
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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 $1.3 million in the third quarter of 2009 to $0.4 million in the third quarter of 2010. The charges in the 2010 third quarter relate to employee terminations and other associated costs and arose from the Company’s continued focus on consolidating, reducing and re-aligning its work force and operations. These third-quarter actions are expected to result in annualized savings of approximately $1.2 million, with approximately $0.4 million to be realized during 2010. For the first nine months of 2010, acquisition integration and restructuring expenses were $1.4 million. The expected annualized savings resulting from actions taken in the first nine months of 2010 are approximately $7.8 million, with approximately $4.5 million to be realized during 2010.
During the third quarter of 2010, the Company recorded an additional $0.5 million expense related to its 2008 decision to terminate participation in a union supplemental retirement and disability fund. The additional $0.5 million of multi-employer pension withdrawal expense arose out of the Company’s estimate of its future termination liability. The Company recorded an initial $7.3 million liability related to its decision to terminate participation in the fund in the fourth quarter of 2008 with an additional $1.8 million recorded in the fourth quarter of 2009.
Schawk reported operating income of $13.6 million in the 2010 third quarter compared to $17.6 million in the third quarter of 2009. In the third quarter of 2009, the Company received $9.2 million in cash as part of an indemnity claim settlement in connection with the Company’s 2005 acquisition of Seven Worldwide Holdings, Inc., of which $5.0 million was reported as income. Excluding the effect of the indemnity claim settlement in the third quarter of 2009, operating income increased approximately $0.9 million compared to the prior-year quarter.
For the third quarter of 2010, the Company reported a tax expense of $4.2 million compared to $1.6 million during the same quarter in 2009. The increase in tax expense for the third quarter of 2010 compared to the prior-year quarter is primarily due to discrete period tax benefits related to the non-taxable indemnity settlement and amended tax return adjustments during the third quarter of 2009.
Net income in the third quarter of 2010 was $7.8 million, or $0.30 per diluted share, compared to $13.3 million, or $0.53 per diluted share, in the third quarter of 2009. Excluding the aforementioned after-tax effects of the indemnity settlement, acquisition integration and restructuring expenses, foreign currency gain or loss, multiemployer pension plan withdrawal expense, and amended tax return adjustments, Adjusted net income was $8.8 million, or $0.34 per diluted share, for the third quarter of 2010 compared to $7.9 million, or $0.31 per diluted share, on a comparable basis for the 2009 third quarter. Please refer to the tables at the end of this press release for a reconciliation of these non-GAAP measures.
Adjusted EBITDA and Management Adjusted EBITDA Performance
Adjusted EBITDA for the third quarter of 2010 was $18.3 million compared to $23.0 million for the third quarter of 2009. Management adjusted EBITDA for the third quarter of 2010 was $19.9 million compared to $19.3 million for the third quarter of 2009. For the first nine months of
Schawk Announces Third-Quarter 2010 Results
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2010, Adjusted EBITDA was $51.4 million compared to $41.6 million for the first nine months of 2009. Management adjusted EBITDA for the first nine months of 2010 was $55.6 million as compared to $43.0 million for the first nine months of 2009. Please refer to the “Reconciliation of Non-GAAP Adjusted 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 third-quarter 2010 earnings conference call on Thursday, November 4, 2010, at 9:00 a.m. Central time. To participate in the conference call, please dial 800-322-5044 or 617-614-4927 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=3477624. If you are unavailable to participate on the live call, a replay will be available through November 11 at 11:59 p.m. Central time. To access the replay, dial 888-286-8010 or 617-801-6888, enter conference ID 57623405, 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=3477624.
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 40 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 Adjusted 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 alternati ves 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 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.
Schawk Announces Third-Quarter 2010 Results
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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 Third-Quarter 2010 Results
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Schawk, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
| | | Three months Ended | | | | | | | |
| | | September 30, | | | Increase (Decrease) | |
| | | 2010 | | | 2009 | | | Amount | | | Percent | |
| | | | | | | | | | | | | |
| Net sales | | $ | 112,562 | | | $ | 113,463 | | | $ | (901 | ) | | | (0.8 | )% |
| Cost of sales | | | 68,768 | | | | 67,957 | | | | 811 | | | | 1.2 | % |
| Gross profit | | | 43,794 | | | | 45,506 | | | | (1,712 | ) | | | (3.8 | )% |
| | | | | | | | | | | | | | | | | |
| Selling, general and administrative expenses | | | 28,675 | | | | 32,193 | | | | (3,518 | ) | | | (10.9 | )% |
| Foreign exchange (gain) loss | | | 694 | | | | (644 | ) | | | 1,338 | | | nm | |
| Indemnity settlement | | | — | | | | (4,986 | ) | | | 4,986 | | | nm | |
| Acquisition integration and restructuring expenses | | | 371 | | | | 1,328 | | | | (957 | ) | | | (72.1 | )% |
| Multiemployer pension withdrawal expense | | | 500 | | | | — | | | | 500 | | | nm | |
| Operating income | | | 13,554 | | | | 17,615 | | | | (4,061 | ) | | | (23.1 | )% |
| | | | | | | | | | | | | | | | | |
| Other income (expense) | | | | | | | | | | | | | | | | |
| Interest income | | | 15 | | | | 124 | | | | (109 | ) | | | (87.9 | )% |
| Interest expense | | | (1,642 | ) | | | (2,880 | ) | | | 1,238 | | | | (43.0 | )% |
| | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 11,927 | | | | 14,859 | | | | (2,932 | ) | | | (19.7 | )% |
| Income tax provision (benefit) | | | 4,154 | | | | 1,553 | | | | 2,601 | | | | 167.5 | % |
| | | | | | | | | | | | | | | | | |
| Net income | | $ | 7,773 | | | $ | 13,306 | | | $ | (5,533 | ) | | | (41.6 | )% |
| | | | | | | | | | | | | | | | | |
| Earnings per share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.30 | | | $ | 0.53 | | | $ | (0.23 | ) | | | | |
| Diluted | | $ | 0.30 | | | $ | 0.53 | | | $ | (0.23 | ) | | | | |
| | | | | | | | | | | | | | | | | |
Weighted average number of common and common equivalent shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 25,557 | | | | 24,955 | | | | | | | | | |
| Diluted | | | 25,923 | | | | 25,040 | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| nm = not meaningful | | | | | | | | | | | | | | | | |
Schawk Announces Third-Quarter 2010 Results
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Schawk, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
| | | Nine months Ended | | | | | | | |
| | | September 30, | | | Increase (Decrease) | |
| | | 2010 | | | 2009 | | | Amount | | | Percent | |
| | | | | | | | | | | | | |
| Net sales | | $ | 342,110 | | | $ | 330,540 | | | $ | 11,570 | | | | 3.5 | % |
| Cost of sales | | | 209,617 | | | | 209,006 | | | | 611 | | | | 0.3 | % |
| Gross profit | | | 132,493 | | | | 121,534 | | | | 10,959 | | | | 9.0 | % |
| | | | | | | | | | | | | | | | | |
| Selling, general and administrative expenses | | | 91,619 | | | | 98,313 | | | | (6,694 | ) | | | (6.8 | )% |
| Foreign exchange (gain) loss | | | 2,244 | | | | (1,089 | ) | | | 3,333 | | | nm | |
| Indemnity settlement | | | — | | | | (4,986 | ) | | | 4,986 | | | nm | |
| Acquisition integration and restructuring expenses | | | 1,386 | | | | 3,646 | | | | (2,260 | ) | | | (62.0 | )% |
| Multiemployer pension withdrawal expense | | | 500 | | | | — | | | | 500 | | | nm | |
| Impairment of long-lived assets | | | 680 | | | | 136 | | | | 544 | | | | 400.0 | % |
| Operating income | | | 36,064 | | | | 25,514 | | | | 10,550 | | | | 41.3 | % |
| | | | | | | | | | | | | | | | | |
| Other income (expense) | | | | | | | | | | | | | | | | |
| Interest income | | | 31 | | | | 224 | | | | (193 | ) | | | (86.2 | )% |
| Interest expense | | | (5,401 | ) | | | (6,797 | ) | | | 1,396 | | | | (20.5 | )% |
| | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 30,694 | | | | 18,941 | | | | 11,753 | | | | 62.1 | % |
| Income tax provision | | | 4,596 | | | | 3,163 | | | | 1,433 | | | | 45.3 | % |
| | | | | | | | | | | | | | | | | |
| Net income | | $ | 26,098 | | | $ | 15,778 | | | $ | 10,320 | | | | 65.4 | % |
| | | | | | | | | | | | | | | | | |
| Earnings per share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 1.03 | | | $ | 0.63 | | | $ | 0.40 | | | | | |
| Diluted | | $ | 1.01 | | | $ | 0.63 | | | $ | 0.38 | | | | | |
| | | | | | | | | | | | | | | | | |
Weighted average number of common and common equivalent shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 25,387 | | | | 24,937 | | | | | | | | | |
| Diluted | | | 25,794 | | | | 24,949 | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| nm = not meaningful | | | | | | | | | | | | | | | | |
Schawk Announces Third-Quarter 2010 Results
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Schawk, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
| | | September 30, 2010 | | | December 31, 2009 | |
| | | (unaudited) | | | | |
| Assets | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 28,959 | | | $ | 12,167 | |
Trade accounts receivable, less allowance for doubtful accounts of $1,187 at September 30, 2010 and $1,619 at December 31, 2009 | | | 86,802 | | | | 88,822 | |
| Inventories | | | 21,324 | | | | 20,536 | |
| Prepaid expenses and other current assets | | | 10,314 | | | | 8,192 | |
| Income tax receivable | | | 212 | | | | 2,565 | |
| Deferred income taxes | | | 3,544 | | | | 992 | |
| Total current assets | | | 151,155 | | | | 133,274 | |
| | | | | | | | | |
Property and equipment, less accumulated depreciation of $103,459 at September 30, 2010 and $96,440 at December 31, 2009 | | | 46,215 | | | | 50,247 | |
| Goodwill | | | 188,641 | | | | 187,664 | |
| Other intangible assets, net | | | 34,534 | | | | 37,605 | |
| Deferred income taxes | | | 1,294 | | | | 1,424 | |
| Other assets | | | 6,919 | | | | 6,005 | |
| | | | | | | | | |
| Total assets | | $ | 428,758 | | | $ | 416,219 | |
| | | | | | | | | |
| Liabilities and stockholders’ equity | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Trade accounts payable | | $ | 15,925 | | | $ | 16,957 | |
| Accrued expenses | | | 62,624 | | | | 64,079 | |
| Deferred income taxes | | | 5,510 | | | | 205 | |
| Income taxes payable | | | 4,976 | | | | 14,600 | |
| Current portion of long-term debt | | | 21,189 | | | | 12,858 | |
| Total current liabilities | | | 110,224 | | | | 108,699 | |
| | | | | | | | | |
| Long-term liabilities: | | | | | | | | |
| Long-term debt | | | 41,423 | | | | 64,707 | |
| Other liabilities | | | 15,988 | | | | 15,920 | |
| Deferred income taxes | | | 4,350 | | | | 2,059 | |
| Total long-term liabilities | | | 61,761 | | | | 82,686 | |
| | | | | | | | | |
| Stockholders’ equity: | | | | | | | | |
Common stock, $0.008 par value, 40,000,000 shares authorized, 30,390,003 and 29,855,796 shares issued at September 30, 2010 and December 31, 2009, respectively; 25,644,433 and 25,108,894 shares outstanding at September 30, 2010 and December 31, 2009, respectively | | | 223 | | | | 220 | |
| Additional paid-in capital | | | 197,580 | | | | 191,701 | |
| Retained earnings | | | 108,996 | | | | 85,953 | |
| Accumulated comprehensive income, net | | | 10,795 | | | | 7,804 | |
Treasury stock, at cost, 4,745,570 and 4,746,902 shares of common stock at September 30, 2010 and December 31, 2009, respectively | | | (60,821 | ) | | | (60,844 | ) |
| Total stockholders’ equity | | | 256,773 | | | | 224,834 | |
| | | | | | | | | |
| Total liabilities and stockholders’ equity | | $ | 428,758 | | | $ | 416,219 | |
Schawk Announces Third-Quarter 2010 Results
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Schawk, Inc.
Segment Financial Data
(Unaudited)
(In thousands)
| | | Three months Ended | | | | | | | |
| | | September 30, | | | Increase (Decrease) | |
| | | 2010 | | | 2009 | | | Amount | | | Percent | |
| | | | | | | | | | | | | |
| Sales to external clients: | | | | | | | | | | | | |
| North America | | $ | 97,360 | | | $ | 98,493 | | | $ | (1,133 | ) | | | (1.2 | )% |
| Europe | | | 16,724 | | | | 16,978 | | | | (254 | ) | | | (1.5 | )% |
| Asia Pacific | | | 7,547 | | | | 7,668 | | | | (121 | ) | | | (1.6 | )% |
| Intercompany sales elimination | | | (9,069 | ) | | | (9,676 | ) | | | 607 | | | | (6.3 | )% |
| | | | | | | | | | | | | | | | | |
| Sales to external clients | | $ | 112,562 | | | $ | 113,463 | | | $ | (901 | ) | | | (0.8 | )% |
| | | | | | | | | | | | | | | | | |
| Operating segment income (loss): | | | | | | | | | | | | | | | | |
| North America | | $ | 17,627 | | | $ | 18,164 | | | $ | (537 | ) | | | (3.0 | )% |
| Europe | | | 1,490 | | | | 1,022 | | | | 468 | | | | 45.8 | % |
| Asia Pacific | | | 982 | | | | 2,192 | | | | (1,210 | ) | | | (55.2 | )% |
| Corporate | | | (6,545 | ) | | | (3,763 | ) | | | (2,782 | ) | | | (73.9 | )% |
| | | | | | | | | | | | | | | | | |
| Operating segment income | | $ | 13,554 | | | $ | 17,615 | | | $ | (4,061 | ) | | | 23.1 | % |
| | | | | | | | | | | | | | | | | |
| | | Nine months Ended | | | | | | | | | |
| | | September 30, | | | Increase (Decrease) | |
| | | | 2010 | | | | 2009 | | | Amount | | | Percent | |
| | | | | | | | | | | | | | | | | |
| Sales to external clients: | | | | | | | | | | | | | | | | |
| North America | | $ | 297,996 | | | $ | 285,722 | | | $ | 12,274 | | | | 4.3 | % |
| Europe | | | 49,099 | | | | 48,872 | | | | 227 | | | | 0.5 | % |
| Asia Pacific | | | 22,609 | | | | 20,690 | | | | 1,919 | | | | 9.3 | % |
| Intercompany sales elimination | | | (27,594 | ) | | | (24,744 | ) | | | (2,850 | ) | | | 11.5 | % |
| | | | | | | | | | | | | | | | | |
| Sales to external clients | | $ | 342,110 | | | $ | 330,540 | | | $ | 11,570 | | | | 3.5 | % |
| | | | | | | | | | | | | | | | | |
| Operating segment income (loss): | | | | | | | | | | | | | | | | |
| North America | | $ | 50,906 | | | $ | 38,765 | | | $ | 12,141 | | | | 31.3 | % |
| Europe | | | 2,853 | | | | 2,180 | | | | 673 | | | | 30.9 | % |
| Asia Pacific | | | 3,637 | | | | 5,287 | | | | (1,650 | ) | | | (31.2 | )% |
| Corporate | | | (21,332 | ) | | | (20,718 | ) | | | (614 | ) | | | (3.0 | )% |
| | | | | | | | | | | | | | | | | |
| Operating segment income | | $ | 36,064 | | | $ | 25,514 | | | $ | 10,550 | | | | 41.3 | % |
| | | | | | | | | | | | | | | | | |
Schawk Announces Third-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 September 30, | | | Nine Months Ended September 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | | | | | | | | | | | |
| Income before income taxes - GAAP | | $ | 11,927 | | | $ | 14,859 | | | $ | 30,694 | | | $ | 18,941 | |
| Adjustments: | | | | | | | | | | | | | | | | |
| Acquisition integration and restructuring expenses | | | 371 | | | | 1,328 | | | | 1,386 | | | | 3,646 | |
| Remediation and related expenses | | | — | | | | 723 | | | | — | | | | 4,042 | |
| Multiemployer pension withdrawal expense | | | 500 | | | | — | | | | 500 | | | | — | |
| Impairment of long-lived assets (1) | | | — | | | | — | | | | 680 | | | | 136 | |
| Indemnity settlement | | | — | | | | (4,986 | ) | | | — | | | | (4,986 | ) |
| Foreign currency (gain) loss | | | 694 | | | | (644 | ) | | | 2,244 | | | | (1,089 | ) |
| Adjusted income before income tax - non GAAP | | | 13,492 | | | | 11,280 | | | | 35,504 | | | | 20,690 | |
| Adjusted income tax provision – non GAAP | | | 4,676 | | | | 3,386 | | | | 11,808 | | | | 6,913 | |
| | | | | | | | | | | | | | | | | |
| Adjusted net income – non GAAP | | $ | 8,816 | | | $ | 7,894 | | | $ | 23,696 | | | $ | 13,777 | |
| | | | | | | | | | | | | | | | | |
| Weighted average common and common stock | | | | | | | | | | | | | | | | |
| equivalents outstanding - GAAP | | | 25,923 | | | | 25,040 | | | | 25,794 | | | | 24,949 | |
| | | | | | | | | | | | | | | | | |
| Earnings per diluted share - GAAP | | $ | 0.30 | | | $ | 0.53 | | | $ | 1.01 | | | $ | 0.63 | |
| Adjustments – net of tax effects: | | | | | | | | | | | | | | | | |
| Acquisition integration and restructuring expenses | | | 0.01 | | | | 0.04 | | | | 0.03 | | | | 0.10 | |
| Remediation and related expenses | | | — | | | | 0.02 | | | | — | | | | 0.10 | |
| Multiemployer pension withdrawal expense | | | 0.01 | | | | — | | | | 0.01 | | | | — | |
| Impairment of long-lived assets | | | — | | | | — | | | | 0.02 | | | | — | |
| Indemnity settlement | | | — | | | | (0.20 | ) | | | — | | | | (0.20 | ) |
| Foreign currency (gain) loss | | | 0.02 | | | | (0.02 | ) | | | 0.07 | | | | (0.03 | ) |
| Uncertain tax positions | | | — | | | | — | | | | — | | | | — | |
| Amended tax return adjustments | | | — | | | | (0.05 | ) | | | — | | | | (0.06 | ) |
| Effective settlement of certain income tax audits | | | — | | | | — | | | | (0.22 | ) | | | — | |
| | | | | | | | | | | | | | | | | |
| Adjusted earnings per diluted share – non GAAP | | $ | 0.34 | | | $ | 0.31 | | | $ | 0.92 | | | $ | 0.55 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Income tax provision (benefit) - GAAP | | $ | 4,154 | | | $ | 1,553 | | | $ | 4,596 | | | $ | 3,163 | |
| Adjustments: (2) | | | | | | | | | | | | | | | | |
| Acquisition integration and restructuring expenses | | | 161 | | | | 438 | | | | 539 | | | | 1,149 | |
| Remediation and related expenses | | | — | | | | 287 | | | | — | | | | 1,605 | |
| Multiemployer pension withdrawal expense | | | 199 | | | | — | | | | 199 | | | | — | |
| Impairment of long-lived assets | | | — | | | | — | | | | 270 | | | | 45 | |
| Foreign currency (gain) loss | | | 162 | | | | (170 | ) | | | 574 | | | | (327 | ) |
| Uncertain tax positions | | | — | | | | (95 | ) | | | — | | | | (95 | ) |
| Amended tax return adjustments | | | — | | | | 1,373 | | | | — | | | | 1,373 | |
| Effective settlement of certain income tax audits | | | — | | | | — | | | | 5,630 | | | | — | |
| | | | | | | | | | | | | | | | | |
| Adjusted income tax provision – non GAAP | | $ | 4,676 | | | $ | 3,386 | | | $ | 11,808 | | | $ | 6,913 | |
| | | | | | | | | | | | | | | | | |
(1) Please see Note 6 to the Company’s unaudited consolidated financial statements in the Company’s 2010 Third-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 Third-Quarter 2010 Results
Page 11
Schawk, Inc.
Reconciliation of Non-GAAP Adjusted EBITDA and Management Adjusted EBITDA
(Unaudited)
(In Thousands)
| | | Three Months Ended | | | Nine Months Ended | | | Trailing 12 Months | |
| | | September 30, | | | September 30, | | | Ended September 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | | | | | | | | | | | | | | | | | |
| Net income (loss) - GAAP | | $ | 7,773 | | | $ | 13,306 | | | $ | 26,098 | | | $ | 15,778 | | | $ | 29,817 | | | $ | (42,588 | ) |
| Interest expense | | | 1,642 | | | | 2,880 | | | | 5,401 | | | | 6,797 | | | | 7,828 | | | | 8,550 | |
| Income tax expense (benefit) | | | 4,154 | | | | 1,553 | | | | 4,596 | | | | 3,163 | | | | 9,030 | | | | (8,658 | ) |
| Adjusted Income (loss) – non GAAP | | | 13,569 | | | | 17,739 | | | | 36,095 | | | | 25,738 | | | | 46,675 | | | | (42,696 | ) |
| Depreciation and amortization expense | | | 4,358 | | | | 4,701 | | | | 13,258 | | | | 14,209 | | | | 17,702 | | | | 18,897 | |
| Impairment of goodwill | | | — | | | | — | | | | — | | | | — | | | | — | | | | 48,041 | |
| Impairment of long-lived assets | | | — | | | | — | | | | 680 | | | | 136 | | | | 1,985 | | | | 523 | |
| Non-cash restructuring charges | | | — | | | | 133 | | | | — | | | | 210 | | | | — | | | | 246 | |
| Stock based compensation | | | 373 | | | | 411 | | | | 1,414 | | | | 1,290 | | | | 1,861 | | | | 2,675 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted EBITDA – non GAAP | | | 18,300 | | | | 22,984 | | | | 51,447 | | | | 41,583 | | | | 68,223 | | | | 27,686 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Permitted add backs on debt covenants: | | | | | | | | | | | | | | | | | | | | | | | | |
| (Gain) loss on sale of property and equipment | | | — | | | | — | | | | — | | | | 44 | | | | — | | | | 568 | |
| Proforma effect of acquisitions and asset sales | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,027 | |
Acquisition integration and restructuring expenses(1) | | | — | | | | 758 | | | | — | | | | 2,999 | | | | — | | | | 8,237 | |
| Multiemployer pension plan withdrawal expense | | | — | | | | — | | | | — | | | | — | | | | — | | | | 7,254 | |
| Adjusted EBITDA for covenant compliance – non GAAP | | | 18,300 | | | | 23,742 | | | | 51,447 | | | | 44,626 | | | | 68,223 | | | | 45,772 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Acquisition integration and restructuring expenses | | | 371 | | | | 437 | | | | 1,386 | | | | 437 | | | | 4,198 | | | | 437 | |
| Multiemployer pension plan withdrawal expense | | | 500 | | | | — | | | | 500 | | | | — | | | | 2,300 | | | | — | |
| Indemnity settlement income | | | — | | | | (4,986 | ) | | | — | | | | (4,986 | ) | | | — | | | | (4,986 | ) |
| Foreign exchange (gain) loss | | | 694 | | | | (644 | ) | | | 2,244 | | | | (1,089 | ) | | | 2,791 | | | | 9 | |
| Remediation and related expenses | | | — | | | | 723 | | | | — | | | | 4,042 | | | | 415 | | | | 4,042 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Management adjusted EBITDA – non GAAP | | $ | 19,865 | | | $ | 19,272 | | | $ | 55,577 | | | $ | 43,030 | | | $ | 77,927 | | | $ | 45,274 | |
| (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 Adjusted EBITDA, Adjusted EBITDA for covenant compliance, and Management adjusted EBITDA
Adjusted EBITDA, as presented within this release, is defined as earnings before interest, income taxes, depreciation and amortization, and other certain non-cash items. Adjusted EBITDA for covenant compliance, as defined in the Company’s January 2010 debt agreements, is defined as Adjusted EBITDA excluding 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 a s 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 or EBITDA as defined under guidance from the Securities and Exchange Commission.
