[SCHAWK, INC. LOGO]
AT SCHAWK, INC.: AT DRESNER CORPORATE SERVICES:
JAMES J. PATTERSON INVESTORS: KRISTINE WALCZAK
SR. VP AND CFO 312-726-3600
847-827-9494 KWALCZAK@DRESNERCO.COM
JPATTERSON@SCHAWK.COM
MEDIA: KYRA KYLES
312-780-7208
KKYLES@DRESNERCO.COM
SCHAWK ANNOUNCES STRONG GROWTH
IN THE 2004 FOURTH-QUARTER AND FULL-YEAR PERIODS
- Operating income up 49.1 percent and 37.2 percent for the quarter and
year
- Earnings per share up 22.2 percent and 29.5 for the fourth quarter and
year
- Sales up 18.7 percent and 18.6 percent in the fourth-quarter and year
DES PLAINES, IL, FEBRUARY 22, 2005--SCHAWK, INC. (NYSE: SGK), one of North
America's leading providers of digital imaging graphic services to the consumer
products and brand imaging markets, reported record fourth-quarter 2004 earnings
of $0.22 per fully diluted share compared to $0.18 per fully diluted share in
the fourth quarter of 2003, an increase of 22.2 percent. For the full year ended
December 31, 2004, the Company reported record earnings of $1.01 per fully
diluted share compared to $0.78 per fully diluted share in the full year of
2003, an increase of 29.5 percent.
Net income was $5.1 million in the fourth quarter of 2004 compared with $3.9
million in the prior-year fourth quarter. For the year ended December 31, 2004,
net income was $22.7 million compared to $17.0 million in the prior-year period.
FOURTH QUARTER ENDED DECEMBER 31, 2004
Schawk reported net sales of $59.6 million for the fourth quarter of 2004
compared to $50.2 million in the same quarter of 2003, an 18.7 percent increase.
Strong sales of graphic services to consumer products packaging clients and
significant new consumer goods introductions drove organic growth that totaled
11.9 percent, and acquired companies increased total revenues by 6.8 percent.
Gross margin for the fourth quarter increased to 41.8 percent in 2004 from 38.0
percent in 2003, primarily due to higher productivity resulting from increased
volume.
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Operating income for the fourth quarter of 2004 increased 49.1 percent to $8.9
million compared to $6.0 million in the fourth quarter of 2003, primarily due to
continued strength in sales to consumer products packaging clients. Operating
margin was 14.9 percent in the fourth quarter of 2004 compared to 11.9 percent
in the same period of 2003 due to higher sales and higher productivity in the
2004 period.
Other income (expense) for the fourth quarter of 2004 was ($0.4) million of net
other expense, a $0.5 million increase over the same period of 2003.
Fourth-quarter 2003 net other income (expense) included a one-time favorable
resolution of a contingency of $0.5 million related to a prior disposition of a
business. Fourth-quarter 2004 net other expense consisted of interest expense
net of interest income.
Income tax expense for the fourth quarter of 2004 was at an effective tax rate
of 39.8 percent compared to 35.8 percent in the prior-year fourth quarter. The
higher effective tax rate in the 2004 fourth quarter was necessary to adjust the
full-year tax provision for 2004. The lower effective tax rate in the 2003
period was due to various federal and state tax refunds and credits.
TWELVE MONTHS ENDED DECEMBER 31, 2004
For the 12-month period ended December 31, 2004, net sales were $238.3 million
compared to $201.0 million for the same period of the prior year, an 18.6
percent increase, and consisted of 11.7 percent internal growth due to increased
demand from consumer products packaging clients and significant new consumer
goods introductions, and 6.9 percent due to revenues from acquired companies.
Gross margin for the 12-month period of 2004 increased to 42.5 percent from 40.4
percent in the prior-year period.
For the full year ended December 31, 2004, operating income increased 37.2
percent to $37.8 million compared to $27.5 million in the same period last year,
and operating margin was 15.9 percent compared to 13.7 percent for the
prior-year period. The primary reasons for the increased operating income and
operating margin were increased sales and higher productivity.
Other income (expense) in the 12-month period of 2004 resulted in net other
expense of $1.8 million, a $1.5 million increase in expense, compared to $0.3
million of net expense in the comparable prior-year period. Other expense in the
2003 period included a one-time favorable resolution of a contingency of $0.5
million related to prior disposition of a business.
Income tax expense for the full year of 2004 was at an effective rate of 37.0
percent compared to 37.7 percent in the prior-year period.
OTHER INFORMATION
Depreciation and amortization expense was $3.1 million for the fourth quarter of
2004 compared to $2.8 million in the prior-year fourth quarter. For the 2004
12-month period, depreciation and amortization was $12.6 million compared to
$11.4 million in the prior-year 12-month period.
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Capital expenditures in the fourth quarter of 2004 were $4.0 million compared to
$1.6 million in the same period of 2003. For the full year of 2004, capital
expenditures were $12.2 million compared to $6.9 million in the prior-year
period. The higher capital expenditures in 2004 were primarily due to $3.3
million of build-out costs for a new facility in Canada to consolidate certain
operations in the Toronto area and a more normal level of capital expenditures
in 2004 as compared to the unusually low level of capital expenditures in 2003.
The Company completed the acquisition of certain assets of Weir Holdings Inc.
(trade name "Winnetts") on December 31, 2004, for $22 million. Winnetts had
approximately $38 million in revenues in 2004. The acquisition was funded with
$8 million in cash and $14 million under an existing credit facility.
The Company completed the acquisition of Seven Worldwide, Inc. (formerly Applied
Graphics Technologies, Inc.) on January 31, 2005, for $191 million. Seven
Worldwide had approximately $370 million of revenues in 2004. The acquisition
was financed with $72.4 million under a new $100 million credit facility and a
new $50 million private placement of long-term fixed-rate debt. In addition,
Schawk issued four million shares of common stock to the seller at a value of
$68.6 million.
MANAGEMENT COMMENTS
President and Chief Executive Officer David A. Schawk commented, "Significant
new consumer product introductions and continued strong sales to our consumer
packaging clients drove record revenues and earnings for the fourth quarter and
for the full year of 2004. Last year, new product introductions were driven by
consumer products companies' response to consumer demand for convenience and
more healthy choices. In 2005, it is estimated that new product introductions
will continue as food and beverage companies continue to change recipes to
respond to a more health-conscious consumer, and as regulations requiring
disclosure of trans fats, allergens, serving size and other labeling information
not previously required increase.
"Additionally, demographic driven products related to personal appearance, well
being, convenience and home care should also see growth, particularly in the
form of new product introductions. These new products need to get to market
quickly and correctly in a virtual on-demand scenario. Every new or redesigned
product is a new opportunity for our company. Schawk's comprehensive services
and global reach assist consumer products companies in getting new products to
market at world-class speed, with high quality graphics and other solutions that
meet the needs of our clients and the needs of the retailers where their
products are sold.
"As we announced, we completed our acquisition of Winnetts on December 31 and
our acquisition of Seven Worldwide on January 31. We are focused now on the
successful and timely integration of all of our businesses into one company
under the Schawk name. Our goal continues to be providing services that
consistently exceed the expectations of our clients and developing and
implementing collaborative best-practice driven processes that facilitate those
clients' abilities to bring their products to market faster and easier to
facilitate their sale."
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Mr. Schawk continued, "Schawk provides innovative solutions and products that
improve our clients' ability to enhance the value of their brands anywhere and
everywhere in the world. We are brand image creators, facilitators and stewards.
As our clients look for ways to enhance the promotion of their brands, Schawk's
"One Company" approach enables us to deliver world-class, best practice and
proven solutions, either on a consolidated or modular basis, that bring the same
level of predictability to those clients as the clients' brands bring to their
consumers. Our unique blend of expertise and ability to collaborate directly
with the client, as well as other suppliers, distributors and retailers, brings
unparalleled value that makes our clients' brands the most attractive in their
respective markets Our promise enables our clients to market their brands
successfully on a global basis.
"Schawk is well positioned as we move through our third full year of operating
under our Vision 2020 strategic plan," Mr. Schawk concluded. "We are focused on
driving the future growth of our company and on achieving and maintaining
alignment with the growing needs of our client base."
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, health & beauty, pharmaceutical, home care 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 Fourth-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 800-240-4186 or 303-262-2143, 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 March 1, 2005, at 11:59 p.m. eastern time, by dialing 800-405-2236 or
303-590-3000, entering conference ID 11023694, and following the prompts.
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To access the call on the Internet, go to: http://www.actioncast.acttel.com,
event ID 27264, with a replay available for 30 days.
For more information about Schawk, visit our website at
http://www.schawk.com.
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SCHAWK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2004 AND 2003
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2004 2003
--------------- ----------------
Net sales $ 59,567 $ 50,191
Cost of sales 34,655 31,101
Selling, general, and administrative expenses 16,020 13,128
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Operating income 8,892 5,962
Other income (expense)
Interest income 61 21
Interest expense (463) (429)
Other income -- 510
--------------- ----------------
(402) 102
--------------- ----------------
Income before income taxes 8,490 6,064
Income tax provision 3,377 2,168
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Net income $ 5,113 $ 3,896
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Earnings per share:
Basic $ 0.23 $ 0.18
Diluted $ 0.22 $ 0.18
Weighted average number of common and common
equivalent shares outstanding 22,950 22,185
Dividends per common share $ 0.0325 $ 0.0325
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SCHAWK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2004 AND 2003
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2004 2003
--------------- ----------------
Net sales $238,345 $201,031
Cost of sales 137,017 119,760
Selling, general, and administrative expenses 63,536 53,735
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Operating income 37,792 27,536
Other income (expense)
Interest income 188 72
Interest expense (1,960) (1,900)
Other income -- 1,556
--------------- ----------------
(1,772) (272)
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Income before income taxes 36,020 27,264
Income tax provision 13,342 10,280
--------------- ----------------
Net income $ 22,678 $ 16,984
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Earnings per share:
Basic $ 1.05 $ 0.79
Diluted $ 1.01 $ 0.78
Weighted average number of common and common
equivalent shares outstanding 22,515 21,839
Dividends per common share $ 0.13 $ 0.13
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SCHAWK, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31, DECEMBER 31,
2004 2003
(UNAUDITED)
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ASSETS
Current assets:
Cash and cash equivalents $ 7,268 $ 5,227
Trade accounts receivable, less allowance for doubtful accounts
of $1,635 at December 31, 2004 and $1,595 at December 31, 2003 56,332 35,642
Inventories 10,339 8,085
Prepaid expenses and other 4,702 3,902
Refundable income taxes 1,832 1,204
Deferred income taxes 2,353 2,086
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Total current assets 82,826 56,146
Property and equipment, less accumulated depreciation of $68,376
at December 31, 2004 and $67,423 at December 31, 2003 46,431 36,372
Goodwill 71,720 62,936
Intangible assets, net 12,754 1,912
Other assets 7,032 2,325
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Total assets $ 220,763 $ 159,691
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 8,424 $ 5,108
Accrued expenses 27,708 14,004
Income taxes payable -- 446
Current portion of long-term debt and capital lease obligations 6,017 6,062
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Total current liabilities 42,149 25,620
Long-term debt 39,500 21,000
Capital lease obligations -- 21
Other 979 970
Deferred income taxes 6,695 5,708
Stockholders' Equity:
Common stock 191 187
Additional paid-in capital 92,350 87,928
Retained earnings 61,330 41,461
Accumulated comprehensive income 2,442 1,087
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156,313 130,663
Treasury stock, at cost (24,873) (24,291)
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Total stockholders' equity 131,440 106,372
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Total liabilities and stockholders' equity $ 220,763 $ 159,691
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