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 RECORD EARNINGS
IN THE 2004 THIRD-QUARTER AND NINE-MONTH PERIODS
- Q3 EPS 33 Cents in 2004 Versus 20 Cents in 2003
- Quarterly Sales Increased 23.3 Percent Versus 2003
- Q3 Operating Margin Increased to 18.7 Percent from 14.0 Percent
Primarily due to Higher Productivity from Increased Sales
DES PLAINES, IL, OCTOBER 26, 2004--SCHAWK, INC. (NYSE: SGK), one of North
America's leading providers of digital imaging graphic services to the consumer
products industry, reported record third-quarter 2004 earnings of $0.33 per
fully diluted share compared to $0.20 per fully diluted share in the third
quarter of 2003, an increase of 65 percent. For the nine months ended September
30, 2004, the Company reported record earnings of $0.79 per fully diluted share
compared to $0.60 per fully diluted share in the first nine months of 2003, an
increase of 31.7 percent.
Net income was a record $7.3 million in the third quarter of 2004, compared with
$4.3 million in the prior-year third quarter. For the nine months ended
September 30, 2004, net income was $17.6 million compared to $13.1 million in
the prior-year nine-month period.
THIRD QUARTER ENDED SEPTEMBER 30, 2004
Schawk reported net sales of $62.2 million for the third quarter of 2004
compared to $50.5 million in the same quarter of 2003, a 23.3 percent increase.
Strong sales of graphic services to consumer products packaging clients drove
organic growth that totaled 15.7 percent, and acquired companies increased total
revenues by 7.6 percent.
Gross margin for the third quarter increased to 45.3 percent in 2004 from 40.9
percent in 2003, primarily due to higher productivity resulting from increased
volume.
Operating income for the third quarter of 2004 increased to $11.7 million
compared to $7.1 million in the third quarter of 2003, primarily due to
continued strength in sales to consumer products packaging clients. Operating
margin was 18.7 percent in the third quarter of 2004
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compared to 14.0 percent in the same period of 2003 due to higher sales and
higher productivity in the 2004 period.
Other income (expense) for the third quarter of 2004 was $0.4 million of net
other expense, a $0.3 million increase over the same period of 2003.
Third-quarter 2003 net other expense included certain one-time other-income
items. Third-quarter 2004 net other expense consisted of interest expense net of
interest income.
Income tax expense for the third quarter of 2004 was at an effective tax rate of
35.0 percent compared to 37.9 percent in the prior-year third quarter. The lower
effective tax rate in 2004 was due to various federal and state tax refunds and
credits in the third quarter.
NINE MONTHS ENDED SEPTEMBER 30, 2004
For the nine-month period ended September 30, 2004, net sales were $178.8
million compared to $150.8 million for the same period of the prior year, an
18.5 percent increase, and consisted of 11.6 percent internal growth due to
increased demand from consumer products packaging clients and 6.9 percent due to
revenues from acquired companies.
Gross margin for the nine-month period of 2004 was 42.7 percent compared to 41.2
percent in the prior-year period.
For the nine months ended September 30, 2004, operating income increased to
$28.9 million compared to $21.6 million in the same period last year, and
operating margin was 16.2 percent compared to 14.3 percent for the prior-year
period. The primary reasons for the increased operating income and operating
margin was increased sales and higher productivity.
Other income (expense) in the nine-month period of 2004 resulted in net other
expense of $1.4 million, a $1.0 million increase in expense, compared to $0.4
million of net expense in the comparable prior-year period. Other expense in the
2003 period included certain one time other-income items totaling $1.0 million.
Income tax expense for the first nine months of 2004 was at an effective rate of
36.2 percent compared to 38.3 percent in the prior-year period. The lower
effective tax rate in 2004 was due to various federal and state tax refunds and
credits in the third quarter of 2004. It is currently anticipated that the
effective tax rate will be in the range of 36 percent to 37 percent for the full
year of 2004.
OTHER INFORMATION
During the third quarter, one of the company's top 10 clients terminated their
contract. The client had been acquired by a larger company 2 1/2 years ago.
Recently, the parent company decided to consolidate Schawk's client's operations
with the parent, including services previously provided by Schawk. As part of
this consolidation, the parent terminated the contract with Schawk prior to its
expiration date. In accordance with a formula in the contract, a settlement
payment of $1.35 million was agreed to by both parties. The settlement amount is
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included in third quarter net sales, and increased gross profit, operating
income and income before income taxes by $1.35 million in the period.
Depreciation and amortization expense was $2.6 million for the third quarter of
2004 compared to $2.7 million in the prior-year third quarter. For the 2004
nine-month period, depreciation and amortization was $9.5 million compared to
$8.6 million in the prior-year nine-month period.
Capital expenditures in the third quarter of 2004 were $3.8 million compared to
$1.2 million in the third quarter of 2003. For the first nine months of 2004,
capital expenditures were $8.3 million compared to $5.3 million in the
prior-year period. The higher capital expenditures in 2004 were primarily due to
$1.5 million of build-out costs for a new facility in Canada to consolidate
certain operations in the Toronto area.
MANAGEMENT COMMENTS
President and Chief Executive Officer David A. Schawk commented, "As we
indicated in our pre-announcement on September 17, the third quarter was
stronger than previously expected." Our solid third-quarter and nine-month
performance was a record for net income and earnings per share for Schawk, and
our strong operating margin reflected the impact of significantly increased
sales and higher productivity.
"Business was robust through all three months of the third quarter. Driving our
continued sales growth are the health conscious trends that have led to recipe
changes by leading food and beverage companies, as they respond to the health
concerns on the minds of consumers. These recipe alterations have prompted
changes to the products' packaging graphics to draw the consumer's attention to
the new healthier choices on grocers' shelves, thereby creating revenue
opportunities for Schawk. Additionally, as demographics continue to shift more
and more, new adult-focused health and beauty products are being introduced to
the marketplace."
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 increased volume. Many of our 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.
"We are encouraged by the strong sales and earnings growth in the third quarter
of 2004," Mr. Schawk concluded. "We remain dedicated to achieving our growth
targets with a continued focus on both organic growth and acquisitions."
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
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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 Third-Quarter 2004 Earnings Conference Call today
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 chief operating
officer, and Jim Patterson, senior vice president and chief financial officer.
To join the call, please dial 800-218-8862 or 303-262-2140, at least five
minutes prior to the 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
November 2, 2004, at 11:59 p.m. eastern time, by dialing 800-405-2236 or
303-590-3000, entering conference ID 11011198, and following the prompts.
To access the call on the Internet, go to: http://www.actioncast.acttel.com,
event ID 25188, with a replay 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, 2004 AND 2003
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2004 2003
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Net sales $ 62,245 $ 50,500
Cost of sales 34,027 29,864
Selling, general, and administrative expenses 16,562 13,581
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Operating income 11,656 7,055
Other income (expense)
Interest income 126 --
Interest expense (519) (415)
Other income -- 297
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(393) (118)
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Income before income taxes 11,263 6,937
Income tax provision 3,946 2,628
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Net income $ 7,317 $ 4,309
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Earnings per share:
Basic $ 0.34 $ 0.20
Diluted $ 0.33 $ 0.20
Weighted average number of common and common
equivalent shares outstanding 22,511 21,952
Dividends per common share $ 0.0325 $ 0.0325
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SCHAWK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2004 2003
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Net sales $ 178,778 $ 150,840
Cost of sales 102,362 88,659
Selling, general, and administrative expenses 47,516 40,607
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Operating income 28,900 21,574
Other income (expense)
Interest income 127 51
Interest expense (1,497) (1,471)
Other income -- 1,046
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(1,370) (374)
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Income before income taxes 27,530 21,200
Income tax provision 9,965 8,112
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Net income $ 17,565 $ 13,088
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Earnings per share:
Basic $ 0.82 $ 0.61
Diluted $ 0.79 $ 0.60
Weighted average number of common and common
equivalent shares outstanding 22,370 21,718
Dividends per common share $ 0.0975 $ 0.0975
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SCHAWK, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
SEPTEMBER 30,
2004 DECEMBER 31,
(UNAUDITED) 2003
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ASSETS
Current assets:
Cash and cash equivalents $ 9,956 $ 5,227
Trade accounts receivable, less allowance for doubtful accounts
of $1,761 at September 30, 2004 and $1,595 at December 31, 2003 50,040 35,642
Inventories 8,876 8,085
Prepaid expenses and other 5,213 3,902
Refundable income taxes 734 1,204
Deferred income taxes 1,958 2,086
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Total current assets 76,777 56,146
Property and equipment, less accumulated depreciation of $69,915
at September 30, 2004 and $67,423 at December 31, 2003 35,948 36,372
Goodwill 64,631 62,936
Intangible assets, net 4,069 1,912
Other assets 4,220 2,325
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Total assets $ 185,645 $ 159,691
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 6,300 $ 5,108
Accrued expenses 16,175 14,004
Income taxes payable 1,731 446
Current portion of long-term debt and capital lease obligations 6,038 6,062
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Total current liabilities 30,244 25,620
Long-term debt 25,000 21,000
Capital lease obligations -- 21
Other 931 970
Deferred income taxes 4,784 5,708
Stockholders' Equity:
Common stock 190 187
Additional paid-in capital 91,011 87,928
Retained earnings 56,924 41,461
Accumulated comprehensive income 1,439 1,087
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149,564 130,663
Treasury stock, at cost (24,878) (24,291)
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Total stockholders' equity 124,686 106,372
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Total liabilities and stockholders' equity $ 185,645 $ 159,691
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See accompanying notes.
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