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, INC. ANNOUNCES INCREASED EARNINGS
IN THE FOURTH QUARTER AND FULL YEAR
o Q4 EPS OF 18 CENTS IN 2003 VERSUS 17 CENTS IN 2002
o FULL YEAR EPS OF 78 CENTS IN 2003 VERSUS 62 CENTS IN 2002
o Q1 04 OUTLOOK LOWER THAN ESTIMATE
DES PLAINES, IL, FEBRUARY 24, 2004--SCHAWK, INC. (NYSE: SGK), North America's
leading provider of digital imaging graphics services to the consumer products
industry, reported fourth quarter earnings of $0.18 per fully diluted share,
compared to $0.17 per fully diluted share in the prior-year fourth quarter. In
addition, the Company reported annual earnings of $0.78 per share for the year
ended December 31, 2003, a 26 percent increase over $0.62 per share for the
prior year.
Net income was $3.9 million in the fourth quarter of 2003, compared with $3.7
million in the prior-year fourth quarter. Net income for the year ended December
31, 2003, was $17.0 million, compared to $13.5 million in the prior year.
FOURTH QUARTER ENDED DECEMBER 31, 2003
Schawk reported net sales of $50.2 million for the fourth quarter of 2003,
compared to sales of $49.0 million in the same quarter of 2002, a 2.4 percent
increase. Strong revenues on the graphics services for consumer products
packaging side of the business, which increased 4.7 percent, were offset by 11.4
percent lower revenues in the graphics services for advertising agency business
compared to the fourth quarter of 2002. Currently, 88 percent of the Company's
revenues are derived from consumer products packaging accounts and the remainder
is primarily advertising agency accounts.
Gross margin for the fourth quarter of 2003 increased to 38.6 percent from 37.5
percent in the prior-year fourth quarter, primarily due to maintaining cost
levels while increasing sales.
Operating income for the fourth quarter of 2003 was $6.0 million compared to
$6.6 million in the same period last year. The decrease in operating income is
primarily due to a $1.0 million increase in general and administrative costs in
the fourth quarter of 2003 resulting from a combination of $0.5 million of
higher staffing costs in the fourth quarter of 2003 and $0.5 million of
unusually low costs in the fourth quarter of 2002. The increased staffing costs
in the fourth quarter of 2003 consisted of $0.3 million of higher costs in Asia
in connection with the
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SCHAWK FOURTH-QUARTER AND FULL-YEAR 2003 RESULTS
addition of new management to prepare for growth, and $0.2 million of increased
costs related to integrating new business. The unusually low costs in the same
period of 2002 were primarily from various non-recurring reductions in general
and administrative costs, as well as higher exchange gains in 2002 compared to
2003.
The decrease in operating margin to 11.9 percent from 13.5 percent was primarily
due to the higher general and administrative costs as described above.
Other income (expense) increased to $0.1 million of other income from $0.4
million of other expense in the prior-year fourth quarter, due to lower interest
expense and the favorable resolution of a contingency of $0.5 million related to
prior disposition of a business. Interest expense for the fourth quarter of 2003
was $0.4 million versus $0.6 million in the same period of 2002, primarily due
to lower debt levels as a result of a reduction in debt in 2003 and lower
interest rates on the floating rate portion of the Company's debt.
Income tax expense for the fourth quarter of 2003 was at an effective tax rate
of 35.8 percent compared to 41.3 percent in the fourth quarter of 2002. The
decreased effective rate was due to state tax refunds and the results of other
tax planning strategies in the fourth quarter of 2003.
YEAR ENDED DECEMBER 31, 2003
For the year ended December 31, 2003, net sales were $201.0 million, compared to
$186.2 million for the prior year, an 8.0 percent increase. Substantially all of
the growth in sales was from internal growth, not from acquisitions. Schawk's
direct consumer products packaging related business was strong in 2003, as it
increased 9.8 percent. New accounts added to the Company's client roster in
2003 also contributed to the sales growth. Consumer products companies added a
number of line extensions and promotions to their most popular food and beverage
brands in 2003, increasing volume for Schawk. However, the Company's advertising
agency business was down 3.1 percent for the full year 2003 due to decreased
advertising agency spending.
Gross margin for the year ended December 31, 2003, was 40.9 percent compared to
39.8 percent in the prior year. The higher gross margin is primarily due to the
increase in sales, as well as a reduction in material usage, as computer to
plate workflows obviate the need for photographic film.
Operating income for 2003 was $27.5 million versus $22.0 million in 2002. The
increase in operating income was primarily due to increased sales and lower
costs as a result of efficiency-related efforts over the past two years. In
addition, incorporated in the calculation of operating income for 2002 were $2.6
million of special charges, including $2.2 million for impairment of long-lived
assets and $0.4 million of severance costs classified as restructuring and other
charges. No significant asset impairments were noted in 2003.
The operating margin for 2003 was 13.7 percent compared to 11.8 percent in the
prior year for the same reasons that operating income increased.
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SCHAWK FOURTH-QUARTER AND FULL-YEAR 2003 RESULTS
Other income (expense) for the year ended December 31, 2003, was $0.3 million of
expense, compared to $2.3 million of expense in the prior year. The $2.0 million
decrease in expense was due to the following items: lower net interest expense
of $0.7 million from lower rates and lower borrowing levels; favorable
litigation settlement of $0.4 million; favorable resolution of a contingency
related to a prior disposition of a business of $0.5 million and proceeds from a
life insurance policy of $0.4 million.
Income tax expense for the year ended December 31, 2003, was at an effective
rate of 37.7 percent. The effective rate in 2002 was 31.5 percent; significantly
lower than 2003 due to state tax refunds and the settlement of an outstanding
tax obligation.
OTHER INFORMATION
Depreciation and amortization expense was $2.8 million for the fourth quarter of
2003 and $3.0 million for the fourth quarter of 2002. For the year 2003,
depreciation and amortization was $11.4 million compared to $12.0 million in the
prior year.
Capital expenditures in the fourth quarter of 2003 were $1.6 million compared to
$1.9 million in the fourth quarter of 2002. For the year 2003, capital
expenditures were $6.9 million compared to $7.6 million in the prior year.
The Company entered into a private placement for $25 million of long-term debt
in December of 2003. The debt has a ten-year term and is at a fixed rate of 4.90
percent on the first $15 million, which was drawn in December 2003, and 4.98
percent on the remaining $10 million to be drawn April 30, 2004. The initial
proceeds were used to fund acquisitions and reduce amounts outstanding on our
credit facility to zero.
MANAGEMENT COMMENTS
David A. Schawk, president and chief executive officer commented, "We had a very
successful year in 2003. Our sales and profits increased significantly over the
prior year as a result of executing our strategic plan. Sales growth of eight
percent was derived entirely from internal growth, due in part to our business
development team's success in securing new clients. The business development
team was organized as a separate group at the beginning of 2003, and they are
making great strides in getting Schawk's extensive service offerings in front of
new prospects. Net profits grew 26 percent, as we achieved higher operating
profits on increased sales. Also, strong cash flow reduced our debt, which
lowered interest expense and also contributed to increased profits."
Mr. Schawk continued "The fourth quarter of 2003 marked the ninth consecutive
year-over-year quarterly increase in net income and earnings per share for
Schawk. These results reflect the improvement we set out to achieve through our
strategic plan, and we view the drop in operating profit in the fourth quarter
as a temporary pause. We expect that spending in the fourth quarter for
infrastructure to integrate some of the new business we won and to position
Schawk to take on increasing levels of business globally will result in
increased profits in future periods."
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SCHAWK FOURTH-QUARTER AND FULL-YEAR 2003 RESULTS
First Quarter of 2004 Outlook
Mr. Schawk continued, "Thus far, the first quarter of 2004 has opened softer
than anticipated due to a number of factors, the most significant of which were
continuing weakness in the advertising portion of the business and transition
costs related to integrating our acquisitions. In addition, certain locations
that serve consumer products companies packaging needs also had lower sales and
profits than plan in the month of January due to a slow start to 2004 in graphic
services volumes from Schawk's clients. Despite the lower initial results, we
are encouraged by signs of increased activity at virtually all of our locations.
It is too early to tell whether the slow start to the year will negatively
impact the balance of 2004, therefore, we are not giving any new guidance on the
full year of 2004 at this time.
Summary
Mr. Schawk concluded, "We look forward to a stronger year in 2004 than in 2003
in terms of both sales and profits. Recently, and as previously announced, we
completed the acquisition of three businesses - Blue Mint, Pixxon and Virtual
Color. While the initial months of integration have resulted in lower profits,
all three of these acquisitions are anticipated to be accretive to earnings for
the full year of 2004. On the internal growth front, we were awarded new
business in January and February 2004, which when combined with our new business
wins at the end of 2003, bode well for strong organic growth in 2004. In
addition, our completed acquisitions and the continuation of our acquisition
plans in 2004 should help us achieve our goal of 20 percent growth in sales.
Schawk invites you to join its Fourth Quarter and Full Year 2003 Earnings
Conference Call, on Tuesday, February 24, 2004, at 9:30 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, senior
vice president and CFO. To join us on the call, please dial 800-218-0530 or
303-262-2140 at least five minutes prior to the start time and ask for the
Schawk, Inc. conference call, or on the Internet at
http://www.actioncast.acttel.com, event ID 19889. If you are unavailable to
participate on the call, a replay will be available through March 2 at 11:59
p.m. eastern time, by dialing 800-405-2236 or 303-590-3000, entering pass code
567354, and following the prompts. The replay will also be available on the
Internet at http://www.actioncast.acttel.com, event ID 19889, for 30 days.
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
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SCHAWK FOURTH-QUARTER AND FULL-YEAR 2003 RESULTS
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.
For more information about Schawk, visit our website at www.schawk.com.
Financial Tables to Follow. . .
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SCHAWK FOURTH-QUARTER AND FULL-YEAR 2003 RESULTS
SCHAWK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2003 2002
-------- --------
Net sales $ 50,191 $ 49,004
Cost of sales 30,831 30,605
Selling, general, and administrative expenses 13,398 11,673
Restructuring and other charges -- 89
-------- --------
Operating income 5,962 6,637
Other income (expense)
Interest and dividend income 21 7
Interest expense (429) (614)
Other income 510 234
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102 (373)
-------- --------
Income before income taxes 6,064 6,264
Income tax provision 2,168 2,584
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Net income $ 3,896 $ 3,680
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Earnings per share
Basic $ 0.18 $ 0.17
Diluted $ 0.18 $ 0.17
Weighted average number of common and common
equivalent shares outstanding 22,185 21,609
Dividends per common share $ 0.0325 $ 0.0325
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SCHAWK FOURTH-QUARTER AND FULL-YEAR 2003 RESULTS
SCHAWK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003 AND 2002
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2003 2002
--------- ---------
Net sales $ 201,031 $ 186,189
Cost of sales 118,859 112,165
Selling, general, and administrative expenses 54,636 49,361
Restructuring and other charges -- 2,631
--------- ---------
Operating income 27,536 22,032
Other income (expense)
Interest and dividend income 72 236
Interest expense (1,900) (2,789)
Other income 1,556 234
--------- ---------
(272) (2,319)
--------- ---------
Income before income taxes and minority interest 27,264 19,713
Income tax provision 10,280 6,203
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Income before minority interest 16,984 13,510
Minority interest in net loss of subsidiary -- 21
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Net income $ 16,984 $ 13,531
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Earnings per share:
Basic $ 0.79 $ 0.63
Diluted $ 0.78 $ 0.62
Weighted average number of common and common
equivalent shares outstanding 21,839 21,675
Dividends per common share $ 0.13 $ 0.13
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SCHAWK FOURTH-QUARTER AND FULL-YEAR 2003 RESULTS
SCHAWK, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31, DECEMBER 31,
2003 2002
(UNAUDITED)
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,227 $ 2,051
Trade accounts receivable, less allowance
for doubtful accounts of $1,595 in 2003
and $1,269 in 2002 35,642 37,946
Inventories 8,085 8,540
Prepaid expenses and other 3,902 3,539
Refundable income taxes 1,204 889
Deferred income taxes 2,086 1,713
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Total current assets 56,146 54,678
Property and equipment, net 36,372 40,652
Goodwill, less accumulated amortization
of $11,496 in 2003 and 2002 62,936 60,476
Other assets 4,237 4,664
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Total assets $159,691 $ 160,470
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 5,108 $ 4,696
Accrued expenses 14,004 13,787
Income taxes payable 446 --
Notes payable to banks -- 3,281
Current portion of long-term debt
and capital lease obligations 6,062 6,260
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Total current liabilities 25,620 28,024
Long-term debt 21,000 37,186
Capital lease obligations 21 46
Other 970 1,029
Deferred income taxes 5,708 4,418
STOCKHOLDERS' EQUITY:
Common stock 187 186
Additional paid-in capital 87,928 85,922
Retained earnings 41,461 27,253
Accumulated comprehensive income
(loss), net 1,087 (1,558)
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130,663 111,803
Treasury stock, at cost (24,291) (22,036)
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Total stockholders' equity 106,372 89,767
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Total liabilities and stockholders' equity $159,691 $ 160,470
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