1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 2001 Commission File Number 1-9335
--------
SCHAWK, INC.
(Exact name of Registrant
as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
36-2545354
(I.R.S. Employer Identification No.)
1695 RIVER ROAD
DES PLAINES, ILLINOIS
(Address of principal executive office)
60018
(Zip Code)
847-827-9494
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Title of Each Class Name of Exchange on Which Registered
--------------------------- -----------------------------------------
CLASS A COMMON STOCK, NEW YORK STOCK EXCHANGE
$.008 PAR VALUE
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of each of the issuer's classes of common stock
as of June 30, 2001, is: 21,403,307 shares, Common Stock, $.008 par value
DOCUMENTS INCORPORATED BY REFERENCE
Pursuant to the Securities Exchange Act of 1934 Release 15502 and Rule
240.03(b), the pages of this document have been numbered sequentially. The total
number of pages contained herein is 13.
================================================================================
1
2
PART I
Schawk, Inc.
Consolidated Balance Sheets
(In Thousands)
JUNE 30, 2001 DECEMBER 31,
(UNAUDITED) 2000
---------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,516 $ 357
Trade accounts receivable, less allowance for doubtful accounts
of $913 at June 30, 2001 and $807 at December 31, 2000 38,628 40,420
Inventories 9,774 7,930
Prepaid expenses and other 4,968 4,986
Refundable income taxes 747 747
Deferred income taxes 1,236 1,236
---------------------------------
Total current assets 56,869 55,676
Property and equipment less accumulated depreciation and amortization
of $72,364 at June 30, 2001 and $69,879 at December 31, 2000 46,784 44,197
Excess of cost over net assets acquired, less accumulated amortization
of $10,413 at June 30, 2001 and $9,335 at December 31, 2000 61,175 62,302
Other assets 5,086 5,688
---------------------------------
Total assets $ 169,914 $ 167,863
=================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 4,183 $ 6,170
Accrued expenses 12,012 13,520
Income taxes payable 2,661 927
Notes payable to banks 9,052 13,220
Current portion of long-term debt and capital lease obligations 6,160 6,260
---------------------------------
Total current liabilities 34,068 40,097
Long-term debt 54,000 48,000
Capital lease obligations -- 20
Other 1,619 1,687
Deferred income taxes 2,408 2,420
Minority interest in consolidated subsidiary 1,100 1,131
STOCKHOLDERS' EQUITY:
Common stock, $0.008 par value, 40,000,000 shares authorized,
23,243,250 and 23,062,811 shares issued at June 30, 2001
and December 31, 2000, respectively; 21,403,307 and 21,362,993
shares outstanding at June 30, 2001 and December 31, 2000,
respectively 184 183
Additional paid-in capital 84,577 83,057
Retained earnings 13,355 11,276
Accumulated comprehensive loss, net (398) (415)
---------------------------------
97,718 94,101
Treasury stock, at cost, 1,839,943 and 1,699,818 shares of Common
stock at June 30, 2001 and December 31, 2000, respectively (20,999) (19,593)
---------------------------------
Total stockholders' equity 76,719 74,508
---------------------------------
Total liabilities and stockholders' equity $ 169,914 $ 167,863
=================================
See accompanying notes.
2
3
Schawk, Inc.
Consolidated Statements of Operations
Three Months Ended June 30, 2001 and 2000
(Unaudited)
(In Thousands, Except Per Share Amounts)
2001 2000
----------------------------------
Net sales $ 47,454 $ 54,741
Cost of sales 28,075 32,128
Selling, general, and administrative expenses 14,052 13,869
Goodwill amortization 538 578
Restructuring and other charges 420 --
----------------------------------
Operating income 4,369 8,166
Other income (expense)
Interest and dividend income 1 9
Interest expense (1,131) (1,459)
Other income 306 77
----------------------------------
(824) (1,373)
----------------------------------
Income before income taxes and minority interest 3,545 6,793
Income tax provision 1,464 2,906
----------------------------------
Income before minority interest 2,081 3,887
Minority interest in net income of subsidiary (21) --
----------------------------------
----------------------------------
Net income $ 2,060 $ 3,887
==================================
Earnings per share:
Basic $ 0.10 $ 0.18
Diluted $ 0.10 $ 0.18
Weighted average number of common and common
Equivalent shares outstanding 21,562 21,436
Dividends per common share $ 0.0325 $ 0.0325
See accompanying notes.
3
4
Schawk, Inc.
Consolidated Statements of Operations
Six Months Ended June 30, 2001 and 2000
(Unaudited)
(In Thousands, Except Per Share Amounts)
2001 2000
-----------------------------------
Net sales $ 93,424 $ 107,597
Cost of sales 55,583 63,322
Selling, general, and administrative expenses 28,213 28,477
Goodwill amortization 1,078 1,157
Restructuring and other charges 685 --
-----------------------------------
Operating income 7,865 14,641
Other income (expense)
Interest and dividend income 19 29
Interest expense (2,364) (2,886)
Other income 314 94
-----------------------------------
(2,031) (2,763)
-----------------------------------
Income before income taxes and minority interest 5,834 11,878
Income tax provision 2,402 5,138
-----------------------------------
Income before minority interest 3,432 6,740
Minority interest in net loss of subsidiary 31 55
-----------------------------------
Net income $ 3,463 $6,795
===================================
Earnings per share:
Basic $ 0.16 $ 0.32
Diluted $ 0.16 $ 0.32
Weighted average number of common and common
equivalent shares outstanding 21,496 21,448
Dividends per common share $ 0.065 $ 0.065
See accompanying notes.
4
5
Schawk, Inc.
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2001 and 2000
(In Thousands)
2001 2000
-------------------------------------------
OPERATING ACTIVITIES
Net income $ 3,463 $ 6,795
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Depreciation and amortization 7,283 7,582
Deferred income taxes (12) 267
Loss realized on sale of marketable securities -- 2
Gain realized on sale of equipment (291) --
Minority interest (31) (68)
Changes in operating assets and liabilities, net of effects from
acquisitions:
Trade accounts receivable 1,792 (1,165)
Inventories (1,844) (2,085)
Prepaid expenses and other 18 (88)
Trade accounts payable and accrued expenses (3,495) (1,023)
Income taxes refundable/payable 1,734 (64)
-------------------------------------------
Net cash provided by operating activities 8,617 10,153
INVESTING ACTIVITIES
Proceeds from sale of short term investments -- 3,602
Proceeds from sale of equipment 291 --
Capital expenditures (8,805) (5,578)
Acquisitions, net of cash acquired -- (610)
Other 487 112
-------------------------------------------
Net cash used in investing activities (8,027) (2,474)
FINANCING ACTIVITIES
Proceeds (Payments) on short-term borrowings, net (4,268) 600
Proceeds from long term debt 6,000 --
Principal payments on debt -- (9,370)
Principal payments on capital lease obligations (20) (256)
Common stock dividends (1,384) (1,379)
Purchase of common stock (1,419) --
Issuance of common stock 1,534 308
Other -- 104
-------------------------------------------
Net cash provided by (used in) financing activities 443 (9,993)
-------------------------------------------
Effect of foreign currency exchange rate changes 126 --
-------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,159 (2,314)
Cash and cash equivalents beginning of period 357 2,893
-------------------------------------------
Cash and cash equivalents end of period $ 1,516 $ 579
===========================================
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 2,576 $ 2,438
Cash paid for income taxes 652 4,446
See accompanying notes.
5
6
Schawk, Inc.
Notes to Consolidated Interim Financial Statements
(Thousands of dollars, except per share data)
NOTE 1. BASIS OF PRESENTATION
The consolidated financial statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in annual financial statements
prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to such rules and
regulations, although Schawk, Inc. (the Company) believes the disclosures
included are adequate to make the information presented not misleading. In
addition, certain prior year amounts have been reclassified to conform to the
current year presentation. In the opinion of management, all adjustments
necessary for a fair presentation for the periods presented have been reflected
and are of a normal recurring nature. These financial statements should be read
in conjunction with the Company's consolidated financial statements and the
notes thereto for the three years ended December 31, 2000.
NOTE 2. INTERIM RESULTS
Results of operations for the interim periods are not necessarily indicative of
the results to be expected for the full year.
NOTE 3. DESCRIPTION OF BUSINESS
The Company is a leading provider of digital imaging prepress services for the
consumer products industry. The Company focuses on providing these services to
multi-national clients in three primary markets: consumer products packaging,
advertising agencies and promotion.
NOTE 4. RESTRUCTURING AND OTHER CHARGES
In the fourth quarter of the year ended December 31, 2000 the Company carried
out a restructuring plan (the 2000 Restructuring). The plan included the closing
of a small start-up in North Carolina, as well as staffing reductions at a
number of the Company's facilities. In the first quarter of 2001, additional
restructuring efforts contemplated in the 2000 Restructuring were undertaken
resulting in fifty positions being eliminated. A reserve of $265 was established
in the first quarter of 2001 for these costs, which is classified as
Restructuring and other charges on the Consolidated Statement of Operations. In
the second quarter of 2001 an additional $420 was added to the reserve to cover
$237 of severance costs for staff reductions at a company facility on the East
coast, and $183 to terminate the lease of a facility that was closed in
connection with the Company's 1999 restructuring. The $420 additional charge in
the second quarter is classified as Restructuring and other charges on the
Consolidated Statement of Operations.
The Company anticipates that additional restructuring and other charges will
occur in 2001 as the Company continues to restructure its operations. During the
first half of 2001, $1,426 was charged against the restructuring reserves
established in 1999, 2000, and the first two quarters of 2001.
NOTE 5. INVENTORIES
Inventories consist of the following:
June 30 December 31
2001 2000
---- ----
Raw materials $2,467 $2,147
Work in process 8,295 6,771
------ ------
10,762 8,918
Less: LIFO reserve (988) (988)
------ ------
$9,774 $7,930
====== ======
6
7
NOTE 6. EARNINGS PER SHARE
Basic earnings per share and diluted earnings per share are shown on the face of
the statement of operations. Basic earnings per share is computed by dividing
net income by the weighted average shares outstanding for the period. Diluted
earnings per share is computed by dividing net income by the weighted average
number of common shares and common stock equivalent shares outstanding (stock
options) for the period.
The following table sets forth the computation of basic and diluted earnings per
share:
Three months ended June 30
--------------------------
2001 2000
------- -------
Income available for common shareholders $ 2,060 $ 3,887
======= =======
Weighted average shares 21,374 21,278
Effect of dilutive stock options 188 158
------- -------
Adjusted weighted average shares and
assumed conversions 21,562 21,436
======= =======
Basic earnings per share $ 0.10 $ 0.18
======= =======
Diluted earnings per share $ 0.10 $ 0.18
======= =======
Six months ended June 30
-------------------------
2001 2000
------- -------
Income available for common shareholders $ 3,463 $ 6,795
======= =======
Weighted average shares 21,369 21,290
Effect of dilutive stock options 127 158
------- -------
Adjusted weighted average shares and
assumed conversions 21,496 21,448
======= =======
Basic earnings per share $ 0.16 $ 0.32
======= =======
Diluted earnings per share $ 0.16 $ 0.32
======= =======
7
8
NOTE 7. SEGMENT REPORTING
The Company operates in a single business segment, Imaging and Information
Technologies. The Company operates primarily in two geographic areas, the United
States and Canada. Summary financial information by geographic area is as
follows:
Three months ended June 30
--------------------------------------------------------
2001 United States Canada Other Foreign Total
- ---- ------------- ------ ------------- -----
Sales $38,491 $ 7,106 $ 1,857 $ 47,454
Long-lived assets 88,236 16,845 7,964 113,045
Three months ended June 30
--------------------------------------------------------
2000 United States Canada Other Foreign Total
- ---- ------------- ------ ------------- -----
Sales $42,470 $ 10,775 $ 1,496 $ 54,741
Long-lived assets 88,242 19,861 6,278 114,381
Six months ended June 30
--------------------------------------------------------
2001 United States Canada Other Foreign Total
- ---- ------------- ------ ------------- -----
Sales $74,944 $ 14,998 $ 3,482 $ 93,424
Long-lived assets 88,236 16,845 7,964 113,045
Six months ended June 30
--------------------------------------------------------
2000 United States Canada Other Foreign Total
- ---- ------------- ------ ------------- -----
Sales $82,327 $ 22,422 $ 2,848 $ 107,597
Long-lived assets 88,242 19,861 6,278 114,381
8
9
NOTE 8. COMPREHENSIVE INCOME
Statement of Financial Accounting Standards 130 (SFAS 130) requires unrealized
gains and losses on the Company's foreign currency translation adjustments to be
included in comprehensive income.
The following table sets forth the components of comprehensive income, net of
related tax:
Three months ended June 30
--------------------------
2001 2000
------- -------
Net income $ 2,060 $ 3,887
Foreign currency translation adjustments 724 (86)
------- -------
Comprehensive income $ 2,784 $ 3,801
======= =======
Six months ended June 30
--------------------------
2001 2000
------- -------
Net income $ 3,463 $ 6,795
Foreign currency translation adjustments 17 1
------- -------
Comprehensive income $ 3,480 $ 6,796
======= =======
The components of accumulated comprehensive loss, net of related tax as of June
30, 2001 and June 30, 2000 consisted entirely of foreign currency translation
adjustments.
9
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(Thousands of dollars, except per share amounts)
Certain statements contained herein that relate to the Company's beliefs or
expectations as to future events relating to, among other things, an improvement
in operating results as a result of the Company's restructuring efforts and an
improvement in the market for the Company's services in the future, are not
statements of historical fact and are forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act
and are subject to the "Safe Harbor" created thereby. Although the Company
believes that the assumptions upon which such forward-looking statements are
based are reasonable within the bounds of its knowledge of the market for its
services and its business and operations, it can give no assurance the
assumptions will prove to have been correct. Important factors that could cause
actual results to differ materially and adversely from the Company's
expectations and beliefs include, among other things, soft market conditions for
graphics design changes and advertisements in the consumer products industry,
the continued demand for Schawk's services, retention of key management and
operational personnel, the ability of the Company to implement its growth
strategy, the stability of state, federal and foreign tax laws, the ability of
the Company to identify and exploit industry trends and to exploit technological
advances in the imaging industry, as well as other factors detailed in the
Company's filings with the Securities and Exchange Commission.
THREE MONTHS ENDED JUNE 30, 2001 DISCUSSION
NET SALES of $47,454 for the second quarter of 2001 decreased 11.4% from net
sales of $53,550 in the second quarter of 2000, excluding $1,191 from the
Montreal operations that were sold June 1, 2000, and therefore, excluded for
comparative purposes. The decrease in revenues reflected the soft economy both
in consumer products packaging spending and advertising spending. However,
despite the soft economy in 2001, net sales improved in the second quarter of
2001 versus the first quarter of 2001 by 3.3%. At this time, there are no
indications that the market for Schawk's services will improve before the first
quarter of 2002.
COST OF SALES as a percentage of net sales for the first quarter of 2001
increased to 59.2% from 58.7% for the comparable period in the prior year. Given
the fact that net sales dropped 11%, a half-point increase in cost of sales is a
positive result relative to the sales drop. The small increase in the cost of
sales percentage indicates that the cost cutting moves through its
restructurings over the past eighteen months are having a positive effect.
OPERATING INCOME before restructuring charges of $420 and the loss at
InterchangeDigital of $500 in the second quarter of 2001 decreased 37.4% to
$5,289 from $8,440 on a comparable basis for the same period in 2000. The
decrease primarily resulted from lower net sales as described previously. The
restructuring charges were $420 for 2001 and none in 2000 and the loss at
InterchangeDigital was $500 in 2001 versus $274 in the prior year first quarter.
The increased loss at InterchangeDigital reflects additional staffing costs to
support the anticipated growth of its digital asset management software sales
and support business. Sequentially, operating income before restructuring
charges and the loss at InterchangeDigital, in the second quarter of 2001,
increased $1,026 or 24.1% from $4,263 in the first quarter of 2001 on the same
basis. The increase in the second quarter of 2001 over the first quarter of 2001
was primarily due to higher sales in the second quarter of 2001.
Selling, general, and administrative expenses for the second quarter of 2001
increased by $183 as compared to the prior year second quarter. The increase was
primarily due to higher expenses at the corporate office to support the growth
of the company and the centralizing of computer systems, including computer
hardware and software depreciation and amortization, telecommunication costs,
and higher advertising and promotion costs. In addition, start-up costs of $212
were incurred to establish a state-of-the-art studio in downtown Chicago to
support the packaging, advertising agency and promotional markets. Excluding
increased costs at corporate and start-up costs at the Chicago facility, SG&A
would have actually decreased approximately $550 or 4% versus the prior year
second quarter. SG&A expenses as a percentage of net sales increased to 29.7% of
sales for the first quarter of 2001 from 25.4% for the comparable prior year
period. The increased percentage primarily was a function of lower net sales as
described previously.
10
11
RESTRUCTURING CHARGES:
Included in operating income for the three months ended June 30, 2001 is a
restructuring charge of $420. This charge consisted of severance costs for
positions eliminated in the second quarter of 2001 of $237 and a $183 charge to
terminate a lease at a facility that was closed as part of the 1999
Restructuring. The layoffs were in connection with the Company's continuing
restructuring efforts to adjust the size of its workforce to a level that will
increase productivity in the future. There were no restructuring charges in the
prior year second quarter.
OTHER INCOME (EXPENSE) - NET decreased to $(824) of net expense for the second
quarter of 2001 compared with $(1,373) of net expense for the same period of
2000. The decrease consisted of $229 of higher other income, primarily from net
gains on the sale of equipment and $320 of lower interest expense (net of
interest income) for the second quarter of 2001 as compared to the prior year
period. The decrease in interest expense primarily resulted from lower borrowing
levels in the second quarter of 2001 on average as compared to the same period
in the prior year. The lower borrowing levels were due to strong cash flows
since the second quarter of 2000 that were utilized, in part, to pay down debt.
Interest expense also benefited from lower rates in 2001 versus 2000 as
approximately 55% of the Company's debt was at floating rates during the second
quarter of 2001.
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST, restructuring charges and the
pretax loss from InterchangeDigital decreased to $4,465 for the second quarter
of 2001 from $7,067 for the same period of 2000 on a comparable basis for the
reasons previously discussed. Sequentially, this pretax income statistic for the
second quarter of 2001, increased $1,409 or 46% from the $3,056 recorded in the
first quarter of 2001. The increase in the second quarter of 2001 over the first
quarter of 2001 was primarily due to higher sales than the first quarter and
lower interest expense.
INCOME TAX PROVISION decreased to 41.3% of pretax income during the second
quarter of 2001 versus 42.8% for the comparable prior year period. The decrease
in the effective tax rate is primarily attributable to the implementation of
certain tax planning strategies in 2000 and 2001.
NET INCOME decreased to $2,060 for the second quarter of 2001 from $3,887 for
the same period of 2000 for the reasons previously discussed. Sequentially, net
income increased from $1,403 in the first quarter of 2001 to $2,060 in the
second quarter of 2001 for reasons previously mentioned.
BASIC AND DILUTED EARNINGS PER SHARE was $0.10 for the second quarter of 2001
compared with $0.18 for the same period in 2000. Excluding the restructuring
charges and the net loss at InterchangeDigital, earnings per share was $0.12 for
the second quarter of 2001 versus $0.19 for the prior year second quarter on a
comparable basis.
SIX MONTHS ENDED JUNE 30, 2001 DISCUSSION
NET SALES of $93,424 for the six-month period ended June 30, 2001, decreased
11.3% from net sales of $105,293 in the comparable period of the prior year,
excluding $2,304 of sales from the Montreal operation, which were sold June 1,
2000, and therefore excluded for comparative purposes. The decrease in revenues
is due to reasons described above in the second quarter discussion and due to
lower revenues in the first quarter as previously reported.
NET INCOME for the six months ended June 30, 2001 was $3,463 as compared to
$6,795 for the six-month period ended June 30, 2000. When adjusted to remove the
$1,002 pretax loss at InterchangeDigital and the $685 pretax restructuring
charges in 2001's first half after taxes, net income was $4,454 versus $7,037 on
the same basis for the prior year six-month period (a 36.7% decline as compared
to a 49.1% decline on an unadjusted basis). The decline in net income was
primarily attributable to lower sales and higher general and administrative
expenses as described in the second quarter discussion.
BASIC AND DILUTED EARNINGS PER SHARE for the six months ended June 30, 2001 were
$0.16 per share as compared to $0.32 per share for the six months ended June 30,
2000. When adjusted to remove the loss at InterchangeDigital and the
restructuring charges in the first half of 2001, earnings per share were $0.21
per share versus $0.33 per share on the same basis for the prior year six-month
period (a 36.4% decline as compared to a 50% decline on an unadjusted basis).
11
12
LIQUIDITY AND CAPITAL RESOURCES
The Company presently finances its business from available cash held by the
Company and from cash generated from operations. The Company maintains a $65
million unsecured credit facility, which expires in May 2004, of which
approximately $35 million was available for borrowings at June 30, 2001. This
facility is subject to certain financial covenants that require the Company to
maintain certain levels of net worth, working capital, and certain other
financial ratios. In addition, the Company maintains a $15 million unsecured
line of credit to provide financing and working capital flexibility. The line of
credit is due on demand. As of June 30, 2001, approximately $6 million was
available under the line of credit. The Company also maintains working capital
demand lines of credit in Canada (US $3.5 million), China (US $1.0 million), and
Malaysia (US $0.8 million).
Cash from operating activities of $8,617 decreased by approximately $1,536 for
the six month period ended June 30, 2001 versus the comparable period of the
prior year primarily due to lower net sales and profits as discussed above.
At June 30, 2001, outstanding debt of the Company consisted of: (i) unsecured
notes issued pursuant to a Note Purchase Agreement dated August 18, 1995, with
$30 million remaining to be paid in $6 million annual installments from 2001
through 2005 at an interest rate of 6.98%; and (iii) $30 million of borrowings
under the Company's unsecured credit facility; and (ii) approximately $8 million
of borrowings under the Company's US line of credit and zero, US $0.6 million
and US $0.5 million outstanding on the Canadian, Chinese, and Malaysian lines of
credit, respectively.
Capital expenditures of $3,916 were made during the second quarter of 2001.
Depreciation and amortization for the second quarter of 2001 totaled $3,631.
During the second quarter, pursuant to an existing authorization from the Board
of Directors, the Company purchased $1,419 of treasury stock.
Management believes that the level of working capital and the cash generated
from operations is adequate for the Company's liquidity needs related to normal
operations, both currently and in the foreseeable future, and that the Company
has sufficient resources to support its moderate near-term growth, either
through cash generated from future operations or through availability under its
financing arrangements. Company management also believes that if additional
financing is required to take advantage of growth opportunities, such financing
could be achieved at reasonable cost given the Company's historically strong
cash flows.
SEASONALITY
With respect to consumer products packaging, the prepress market is not
currently seasonal. On the other hand, there is generally a three year cycle for
major design changes that the Company has experienced in the last six years
resulting in greater volumes in certain years followed by more modest volumes in
subsequent years.
With respect to the advertising and promotional markets, some seasonality exists
in that the months of December and January are typically the slowest of the year
because advertising agencies and their clients typically finish their work by
mid-December and don't start up again until mid-January. In addition,
advertising and promotion is generally cyclical as the consumer economy is
cyclical. In general, when consumer spending and GDP decreases ad pages decline.
Consequently, when ad pages decline the Company's advertising and promotion
business declines.
IMPACT OF INFLATION
The Company believes that over the past three years inflation has not had a
significant impact on the Company's results of operations.
12
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 2nd day of August, 2001.
SCHAWK, INC.
- ------------
(Registrant)
/s/ David A. Schawk
- ------------------------------------
President, Chief Executive Officer and Director
/s/ James J. Patterson
- ------------------------------------
Senior Vice President and Chief Financial Officer
13