EXHIBIT 99.1
[SCHAWK LOGO]
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
SCHAWK ANNOUNCES INCREASED SALES AND EARNINGS
o Q3 EPS Of 20 Cents In 2003 Versus 14 Cents In 2002
o Sales Increased 8.5 Percent Versus Prior Year Third Quarter
o Q3 Operating Margin Increased To 14.0 Percent From 12.3 Percent Due To
Increased Sales
DES PLAINES, IL, OCTOBER 22, 2003--SCHAWK, INC. (NYSE: SGK), one of North
America's leading providers of digital imaging graphics services to the consumer
products industry, reported third quarter earnings of $0.20 per fully diluted
share compared to $0.14 per fully diluted share for the third quarter of 2002.
For the nine months ended September 30, 2003, the Company reported earnings of
$0.60 per fully diluted share compared to $0.45 per fully diluted share for the
first nine months of 2002.
Net income was $4.3 million in the third quarter of 2003, compared with $3.1
million for the prior year third quarter. For the nine months ended September
30, 2003, net income was $13.1 million compared to $9.9 million for the prior
year nine-month period.
THIRD QUARTER ENDED SEPTEMBER 30, 2003
Schawk reported net sales of $50.5 million for the third quarter of 2003
compared to $46.6 million in the same quarter of 2002, an 8.5 percent increase.
Strong sales of graphics services to consumer products packaging clients, which
increased 9.5 percent, were accompanied by slight growth in sales of graphics
services to advertising agency clients compared to the same quarter of 2002. The
increase in sales to consumer product packaging clients in the quarter was
primarily the result of growth in sales of package design services and graphic
services to existing accounts that increased the number of product line
extensions, new designs and promotions to improve market share in 2003.
Gross margin for the third quarter increased to 41.3 percent in 2003 from 39.6
percent in 2002, primarily due to higher sales, and as a result of keeping
production costs close to their prior year levels.
Operating income for the third quarter of 2003 was $7.1 million compared to $5.7
million in the third quarter of 2002, primarily due to strength in sales to
consumer products packaging clients. Operating margin was 14.0 percent in the
third quarter of 2003 compared to 12.3 percent in the
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same period of 2002, due to higher sales in the 2003 period. Operating income in
the third quarter of 2002 was negatively impacted by $0.4 million in severance
costs classified as other charges.
Other income (expense) for the third quarter of 2003 was $0.1 million of net
other expense, a $0.6 million decrease from the third quarter of 2002. The
change in results was due to the following items:
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Gain related to the distribution of proceeds from the sale of a
mutual insurance company in which Schawk was a policy holder $0.3 million
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Lower interest expense due to lower outstanding debt and lower
interest rates $0.3 million
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Net decrease in other expenses $0.6 million
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Income tax expense for the third quarter of 2003 and 2002 was at an effective
tax rate of approximately 38 percent.
NINE MONTHS ENDED SEPTEMBER 30, 2003
For the nine-month period ended September 30, 2003, net sales were $150.8
million compared to $137.2 million for the same period of the prior year, a 10.0
percent increase. This increase is primarily the result of the strengthening
market for graphics services for consumer products packaging clients in 2003,
which led to increased sales of 11.6 percent during the period, as compared to
sales of graphics services to advertising agency clients, which were
approximately equal to the prior year period. As noted above, the increase in
sales to consumer product packaging clients in the first nine months of 2003 was
primarily the result of growth in sales of package design services and graphic
services to existing accounts that increased the number of product line
extensions, new designs and promotions to increase market share in 2003.
Gross margin for the nine-month period of 2003 was 41.6 percent compared to 40.5
percent in the comparable prior year period. Gross margin increased in the 2003
period primarily as a result of higher sales and a $0.5 million gain on the sale
of a building in the first quarter of 2003.
Operating income increased to $21.6 million for the nine months ended September
30, 2003, compared to $15.4 million in the same period last year, and operating
margin for the 2003 nine-month period was 14.3 percent compared to 11.2 percent
for the prior year period, primary due to increased sales in 2003. In addition,
results for the nine-month period of 2003 included the aforementioned gain on
the sale of a building of $0.5 million. Conversely, operating income from 2002
was negatively impacted by $2.5 million in impairment and other charges.
Other income (expense) in the nine-month period ended September 30, 2003,
resulted in net other expense of $0.4 million, a $1.6 million decrease, compared
to $2.0 million in the comparable prior year period. The decrease in other
expense was primarily a result of the following items:
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Proceeds from life insurance policy $0.4 million
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Litigation settlement in Schawk's favor $0.4 million
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Lower interest income - prior year period included interest
income from tax refunds ($0.2 million)
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Gain related to the distribution of proceeds from the sale of
a mutual insurance company in which Schawk was a policy holder $0.3 million
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Lower interest expense due to lower outstanding debt and lower
interest rates $0.7 million
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Net decrease in other expense $1.6 million
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Income tax expense for the nine months ended September 30, 2003 was at an
effective rate of 38.3 percent compared to an unusually low rate of 26.9 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.
OTHER INFORMATION
Depreciation and amortization expense was $2.7 million for both the third
quarter of 2003 and the third quarter of 2002. For the 2003 nine-month period,
depreciation and amortization was $8.6 million compared to $9.0 million in the
prior year nine-month period.
Capital expenditures in the third quarter of 2003 were $1.2 million compared to
$2.2 million in the third quarter of 2002. For the nine-month period of 2003,
capital expenditures were $5.3 million compared to $5.7 million in the prior
year period.
Also, since the Company's long-term credit facility matures in May 2004,
Schawk's outstanding borrowings of $16 million drawn under this facility 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 third quarter in the graphic services for consumer
products packaging market. Our strong third quarter performance in 2003 marks
the eighth consecutive quarterly year-over-year increase in net income and
earnings per share for Schawk, Inc. Our 14.0 percent operating margin was in
line with our expectations for the third quarter, and represents an increase
over the second quarter of this year when our operating margin was 13.6 percent.
We will strive to continue to achieve mid-teen operating margins for the fourth
quarter of 2003 and throughout 2004. We also further reduced total borrowings to
the lowest level in ten years at $30.3 million, and have a very conservative 23
percent total debt-to-total capital ratio.
"We have already been awarded a number of new business opportunities in 2003
that we expect will help us to achieve our sales growth targets for 2004. Our
success in this area is evidence that the sales strategy we implemented in the
beginning of this year is beginning to produce the results that we anticipated.
Consistent with our growth strategy, we are also actively considering
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a number of acquisition opportunities that have the potential to help us achieve
20 percent sales growth in 2004."
Mr. Schawk concluded, "As an independent graphic services provider with
international operations and complete services offering from concept to print
management, Schawk is well positioned to deliver value to its clients. Recent
assignments included multiple high value services such as workflow management,
prepress, digital asset management, and design and art production. These
marketing services are being purchased by clients seeking to leverage our
ability to bring enhanced value across their supply chain. By offering
integrated services to it consumer package goods and retail clients, Schawk is
able to reduce the amount of time it takes to bring a new product to market, as
well as achieve significant cost savings for its clients."
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 restructuring plans, 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 Third Quarter 2003 Earnings Conference Call, on
Wednesday, October 22 at 9:30 a.m. central time. Hosting the call will be A.
Alex Sarkisian, Executive Vice President and Corporate Secretary, and James J.
Patterson, Sr. Vice President and CFO. To join the call, please dial
800-366-7417 or 303-262-2050 at least five minutes prior to start time and ask
for the Schawk, Inc. conference call. If you are unable to participate in the
call, a replay will be available through October 29 at 11:59 p.m. eastern time,
by dialing 800-405-2236 or 303-590-3000, entering pass code 555593, and
following the prompts.
To access the call on the Internet, go to: http://www.actioncast.acttel.com. The
event ID number is 17932. The replay on the Internet will be available for 30
days. 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 SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2003 2002
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Net sales $ 50,500 $ 46,556
Cost of sales 29,633 28,126
Selling, general, and administrative expenses 13,812 12,263
Restructuring and other charges -- 421
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Operating income 7,055 5,746
Other income (expense)
Interest income -- 1
Interest expense (415) (707)
Other income 297 --
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(118) (706)
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Income before income taxes 6,937 5,040
Income tax provision 2,628 1,915
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Net income $ 4,309 $ 3,125
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Earnings per share:
Basic $ 0.20 $ 0.15
Diluted $ 0.20 $ 0.14
Weighted average number of common and common
equivalent shares outstanding 21,952 21,721
Dividends per common share $ 0.0325 $ 0.0325
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SCHAWK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2003 2002
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Net sales $ 150,840 $ 137,185
Cost of sales 88,028 81,560
Selling, general, and administrative expenses 41,238 37,688
Restructuring and other charges -- 2,542
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Operating income 21,574 15,395
Other income (expense)
Interest income 51 229
Interest expense (1,471) (2,175)
Other income 1,046 --
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(374) (1,946)
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Income before income taxes and minority interest 21,200 13,449
Income tax provision 8,112 3,619
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Income before minority interest 13,088 9,830
Minority interest in net loss of subsidiary -- 21
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Net income $ 13,088 $ 9,851
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Earnings per share:
Basic $ 0.61 $ 0.46
Diluted $ 0.60 $ 0.45
Weighted average number of common and common
equivalent shares outstanding 21,718 21,696
Dividends per common share $ 0.0975 $ 0.0975
SCHAWK, INC.
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
SEPTEMBER 30 DEC. 31,
2003 2002
(UNAUDITED)
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ASSETS
Current assets:
Cash and cash equivalents $ 2,985 $ 2,051
Trade accounts receivable, less allowance for doubtful accounts of
$1,605 in 2003 and $1,269 in 2002 38,401 37,946
Inventories 9,019 8,540
Prepaid expenses and other 3,378 3,539
Refundable income taxes 487 889
Deferred income taxes 1,722 1,713
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Total current assets 55,992 54,678
Property and equipment, net 37,490 41,113
Goodwill 61,268 60,476
Other assets 4,011 4,203
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Total assets $ 158,761 $ 160,470
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 4,505 $ 4,696
Accrued expenses 15,644 13,787
Income taxes payable 574 --
Notes payable to banks 2,220 3,281
Current portion of long-term debt and capital lease obligations 6,063 6,260
Short-term debt expected to be refinanced 16,000 --
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Total current liabilities 45,006 28,024
Long-term debt 6,000 37,186
Capital lease obligations 40 46
Other 980 1,029
Deferred income taxes 4,692 4,418
STOCKHOLDERS' EQUITY:
Common stock 187 186
Additional paid-in capital 87,431 85,922
Retained earnings 38,261 27,253
Accumulated comprehensive loss, net 460 (1,558)
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126,339 111,803
Treasury stock, at cost (24,296) (22,036)
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Total stockholders' equity 102,043 89,767
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Total liabilities and stockholders' equity $ 158,761 $ 160,470
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