EXHIBIT 99.1
[SCHAWK GRAPHIC]
AT SCHAWK, INC.: AT DRESNER CORPORATE SERVICES:
JAMES J. PATTERSON KRISTINE WALCZAK
SR. VP AND CFO 312-726-3600
847-827-9494 KWALCZAK@DRESNERCO.COM
JPATTERSON@SCHAWK.COM ----------------------
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SCHAWK ANNOUNCES INCREASED SALES AND EARNINGS
o Q2 EPS Of 21 Cents In 2003 Versus 18 Cents In 2002
o Sales Increased 9.8 Percent Versus Prior Year Second Quarter
o Q2 Operating Margin Increased To 13.6 Percent From 9.7 Percent Due
To Increased Sales
DES PLAINES, IL, JULY 24, 2003--SCHAWK, INC. (NYSE: SGK), one of North America's
leading providers of digital imaging graphics services to the consumer products
industry, reported second quarter earnings of $0.21 per fully diluted share
compared to $0.18 per fully diluted share in the second quarter of 2002. For the
six months ended June 30, 2003, the Company reported earnings of $0.41 per fully
diluted share compared to $0.31 per fully diluted share in the first six months
of 2002.
Net income was $4.6 million in the second quarter of 2003, compared with $4.0
million in the prior year second quarter. For the six months ended June 30,
2003, net income was $8.8 million compared to $6.7 million in the prior year
six-month period.
SECOND QUARTER ENDED JUNE 30, 2003
Schawk reported net sales of $51.6 million for the second quarter of 2003
compared to $47.0 million in the same quarter of 2002, a 9.8 percent increase.
Strong sales of graphics services to consumer products packaging clients, which
increased 11.6 percent, were offset by a slight decrease in sales of graphics
services to advertising agency clients compared to the same quarter of 2002.
Gross margin for the second quarter decreased to 40.5 percent in 2003 from 41.7
percent in 2002, primarily due to higher costs related to integrating new
business into workflow.
Operating income for the second quarter of 2003 was $7.0 million compared to
$4.6 million in the second quarter of 2002, primarily due to strength in sales
to consumer products packaging clients. Operating margin was 13.6 percent in the
second quarter of 2003 compared to 9.7 percent in the same period of 2002, due
to higher sales in the 2003 period.
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Other income (expense) for the second quarter of 2003 was $0.3 million of net
other income, a $0.8 million increase over the second quarter of 2002. The
change in results was due to the following items:
Proceeds from life insurance policy $0.4 million
Litigation settlement in Schawk's favor $0.4 million
Lower interest income -- prior year second quarter
included interest income from tax refunds ($0.2 million)
Lower interest expense due to lower outstanding
debt and lower interest rates $0.2 million
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Net change in other income (expense) $0.8 million
Income tax expense for the second quarter of 2003 was at an effective tax rate
of 37.5 percent compared to an unusually low rate of 1.0 percent in the prior
year second quarter, which was a result of state tax refunds and the settlement
of an outstanding tax obligation.
SIX MONTHS ENDED JUNE 30, 2003
For the six-month period ended June 30, 2003, net sales were $100.3 million
compared to $90.6 million for the same period of the prior year, a 10.7 percent
increase, due mainly to the strengthening market for graphics services for
consumer products packaging clients in the first half of 2003.
Gross margin for the first six months of 2003 was 41.8 percent compared to 41.0
percent in the comparable prior year period. Gross margin increased in the 2003
period by 0.6 percent due to the inclusion of a gain on the sale of a building.
Operating income increased to $14.5 million for the six months ended June 30,
2003, compared to $9.6 million in the same period last year, and operating
margin for the 2003 six-month period was 14.5 percent compared to 10.6 percent
for the prior year period. The primary reason for the increased operating income
and operating margin was increased sales in the first half of 2003. In addition,
first half of 2003 results included a gain on the sale of a building of $0.5
million. Conversely, the operating results from the first half of 2002 were
negatively impacted by $2.1 million in impairment and other charges.
Other income (expense) in the six-month period ended June 30, 2003, resulted in
net other expense of $0.2 million, a $1.0 million decrease, compared to $1.2
million in the comparable prior year period. The decrease in other expense was
primarily a result of the items described above in the second quarter results,
and lower interest expense due to repayment of bank debt and lower interest
rates.
Income tax expense for the first half of 2003 was at an effective rate of 38.4
percent compared to an unusually low rate of 20.3 percent in the prior year
period. The lower rate in the 2002 period was as a result of state tax refunds
and the settlement of an outstanding tax obligation in the second quarter of
that year. It is currently anticipated that the effective tax rate will be in
the range of 38 percent to 39 percent for the full year of 2003.
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OTHER INFORMATION
Depreciation and amortization expense was $3.1 million for the second quarter of
2003 compared to $3.1 million in the prior year second quarter. For the 2003
six-month period, depreciation and amortization was $5.9 million compared to
$6.3 million in the prior year six-month period.
Capital expenditures in the second quarter of 2003 were $2.5 million compared to
$1.9 million in the second quarter of 2002. For the first six months of 2003,
capital expenditures were $4.1 million compared to $3.5 million in the prior
year period.
In addition, during the second quarter, Schawk repurchased $2.3 million of its
outstanding common shares pursuant to the approval of its Board of Directors.
Also, since the Company's long-term credit facility matures in May 2004,
Schawk's outstanding borrowings of $14 million are listed under current
liabilities as "short term debt expected to be refinanced" on the balance sheet.
The Company intends to refinance the outstanding borrowings on its credit
facility, and its bank has indicated its interest in extending long-term credit
prior to or concurrent with the maturity date of the credit facility.
MANAGEMENT COMMENTS
David A. Schawk, President and Chief Executive Officer commented, "Business
levels remained strong in the second quarter after a solid first quarter in the
graphic services for consumer products packaging market. Our strong second
quarter performance in 2003 marks the seventh consecutive quarterly
year-over-year increase in net income and earnings per share for Schawk, Inc.
Our 13.6 percent operating margin was in line with our expectations for the
second quarter, and we will strive to continue to achieve mid-teen operating
margins for the balance of 2003. We also further reduced total borrowings to the
lowest level in ten years at $36.4 million and have a very conservative 27
percent debt-to-total capital ratio.
"During the second quarter, we continued to benefit from volume related to
business recently awarded to us from both existing and new clients," Mr. Schawk
continued. "The fact that we are an independent graphic services provider with
international operations and a full array of services, from concept to print
management, continues to be a differentiating factor in obtaining this increased
volume. Many of these assignments included multiple high value services such as
workflow management, prepress, digital asset management, and design and art
production. These services are being purchased by companies seeking to leverage
our services to bring enhanced value across their supply chain. By offering
these integrated services, Schawk is able to help reduce the amount of time it
takes to bring a new product to market, as well as achieve significant cost
savings for its consumer package goods and retail clients."
Mr. Schawk concluded, "We are encouraged by the strong sales and earnings growth
in the second quarter and first half of 2003. We will continue to pursue
strategies to increase future sales and profits from both organic growth and
acquisitions."
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Schawk, Inc., headquartered in suburban Chicago, is a leading supplier of
digitized high resolution color graphic services, brand consulting and design
and an array of digitally based workflow solutions, all aimed at bringing
enhanced value to its clients. Schawk provides these advanced services for the
food, beverage, and consumer products packaging, point of sale, and advertising
markets.
Certain statements in this press release are forward-looking statements within
the meaning of Section 21E of the Securities and 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, 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, loss of key management and operational personnel, our ability to
implement our growth strategy, the stability of state, federal and foreign tax
laws, our ability to identify and exploit industry trends and to exploit
technological advances in the imaging industry, our ability to continue to
implement our restructuring plan, the stability of political conditions in Asia
and other foreign countries in which we have production capabilities, terrorist
attacks and the U.S. response to such attacks, as well as other factors detailed
in Schawk, Inc.'s filings with the Securities and Exchange Commission.
Schawk invites you to join its Second Quarter of 2003 Earnings Conference Call,
on Thursday, July 24 at 10:00 a.m. central time. Hosting the call will be David
A. Schawk, President and CEO, A. Alex Sarkisian, Executive Vice President and
Corporate Secretary, and James J. Patterson, Sr. Vice President and CFO. To join
the call, please dial 800-240-7305 or 303-205-0033 at least five minutes prior
to start time and ask for the Schawk, Inc. conference call. If you are unable to
participate on the call, a replay will be available through July 31 at 11:59
p.m. eastern time, by dialing 800-405-2236 or 303-590-3000, entering pass code
16311, and following the prompts.
To access the call on the Internet, go to: http://www.actioncast.acttel.com.
For more information about Schawk, visit our website at http://www.schawk.com.
Financial Tables to Follow
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SCHAWK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2003 2002
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Net sales $ 51,635 $ 47,011
Cost of sales 30,716 27,418
Selling, general, and administrative expenses 13,871 12,921
Restructuring and other charges -- 2,121
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Operating income 7,048 4,551
Other income (expense)
Interest income 51 223
Interest expense (528) (721)
Other income 749 --
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272 (498)
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Income before income taxes and minority interest 7,320 4,053
Income tax provision 2,742 34
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Income before minority interest 4,578 4,019
Minority interest in net income of subsidiary -- (17)
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Net income $ 4,578 $ 4,002
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Earnings per share:
Basic $ 0.21 $ 0.19
Diluted $ 0.21 $ 0.18
Weighted average number of common and common
equivalent shares outstanding 21,635 21,715
Dividends per common share $ 0.0325 $ 0.0325
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SCHAWK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2003 2002
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Net sales $ 100,340 $ 90,629
Cost of sales 58,395 53,434
Selling, general, and administrative expenses 27,426 25,425
Restructuring and other charges -- 2,121
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Operating income 14,519 9,649
Other income (expense)
Interest income 51 228
Interest expense (1,056) (1,468)
Other income 749 --
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(256) (1,240)
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Income before income taxes and minority interest 14,263 8,409
Income tax provision 5,484 1,704
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Income before minority interest 8,779 6,705
Minority interest in net loss of subsidiary -- 21
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Net income $ 8,779 $ 6,726
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Earnings per share:
Basic $ 0.41 $ 0.31
Diluted $ 0.41 $ 0.31
Weighted average number of common and common
equivalent shares outstanding 21,594 21,684
Dividends per common share $ 0.065 $ 0.065
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SCHAWK, INC.
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
JUNE 30, DEC. 31,
2003 2002
(UNAUDITED)
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ASSETS
Current assets:
Cash and cash equivalents $ 2,091 $ 2,051
Trade accounts receivable, less allowance for doubtful accounts
of $1,479 in 2003 and $1,269 in 2002 37,600 37,946
Inventories 9,315 8,540
Prepaid expenses and other 3,780 3,539
Refundable income taxes 1,194 889
Deferred income taxes 1,707 1,713
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Total current assets 55,687 54,678
Property and equipment, net 39,196 40,652
Goodwill 61,275 60,476
Other assets 4,100 4,664
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Total assets $ 160,258 $ 160,470
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 5,233 $ 4,696
Accrued expenses 14,811 13,787
Income taxes payable 396 --
Notes payable to banks 4,117 3,281
Current portion of long-term debt and capital lease obligations 6,139 6,260
Short-term debt expected to be refinanced
14,000 --
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Total current liabilities 44,696 28,024
Long-term debt 12,168 37,186
Capital lease obligations 57 46
Other 995 1,029
Deferred income taxes 4,446 4,418
STOCKHOLDERS' EQUITY:
Common stock 186 186
Additional paid-in capital 86,703 85,922
Retained earnings 34,646 27,253
Accumulated comprehensive loss, net 663 (1,558)
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122,198 111,803
Treasury stock, at cost (24,302) (22,036)
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Total stockholders' equity 97,896 89,767
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Total liabilities and stockholders' equity $ 160,258 $ 160,470
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