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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2005
-----------
COMMISSION FILE NUMBER 1-9335
SCHAWK, INC.
(Exact name of Registrant
as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
36-2545354
(I.R.S. Employer Identification No.)
1695 RIVER ROAD
DES PLAINES, ILLINOIS
(Address of principal executive office)
60018
(Zip Code)
847-827-9494
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act.)
Yes No X
------- -------
The number of shares outstanding of each of the issuer's classes of common stock
as of July 29, 2005 is:
26,109,571 Shares of Class A Common Stock, $.008 par value
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1
SCHAWK, INC.
FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
June 30, 2005
PART I - FINANCIAL INFORMATION Page
- -------------------------------- ----
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
Item 4. Controls and Procedures 20
PART II - OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Schawk, Inc.
Consolidated Balance Sheets
(In Thousands, Except Share Amounts)
JUNE 30, DECEMBER 31,
2005 2004
(UNAUDITED)
------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 14,641 $ 7,268
Trade accounts receivable, less allowance for doubtful accounts
of $5,735 at June 30, 2005 and $1,773 at December 31, 2004 125,428 56,332
Inventories 34,123 10,339
Prepaid expenses and other 10,620 4,702
Refundable income taxes 313 1,832
Deferred income taxes 16,449 2,353
------------------------
Total current assets 201,574 82,826
Property and equipment, less accumulated depreciation of $73,015
at June 30, 2005 and $69,668 at December 31, 2004 92,097 46,431
Goodwill 211,503 71,720
Intangible assets, net 54,248 12,754
Other assets 6,654 7,032
------------------------
Total assets $ 566,076 $ 220,763
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 24,977 $ 8,424
Accrued expenses 77,596 26,578
Income taxes payable 12,835 --
Current portion of long-term debt and capital lease obligations 6,611 6,683
------------------------
Total current liabilities 122,019 41,685
Long-term debt 172,411 39,500
Capital lease obligations 203 464
Other 15,920 979
Deferred income taxes 40,284 6,695
Stockholders' equity:
Common stock, $0.008 par value, 40,000,000 shares authorized, 28,297,731 and
24,025,915 shares issued at June 30, 2005 and
December 31, 2004, respectively; 26,057,455 and 21,816,879 shares
outstanding at June 30, 2005 and December 31, 2004,
respectively 225 191
Additional paid-in capital 166,184 92,350
Retained earnings 73,078 61,330
Accumulated comprehensive income 1,350 2,442
------------------------
240,837 156,313
Treasury stock, at cost, 2,240,276 and 2,209,036 shares of common
stock at June 30, 2005 and December 31, 2004, respectively (25,598) (24,873)
------------------------
Total stockholders' equity 215,239 131,440
------------------------
Total liabilities and stockholders' equity $ 566,076 $ 220,763
========================
</Table>
See accompanying notes.
3
Schawk, Inc.
Consolidated Statements of Operations
Three Months Ended June 30, 2005 and 2004
(Unaudited)
(In Thousands, Except Per Share Amounts)
2005 2004
------------------------
Net sales $ 158,648 $ 64,456
Cost of sales 103,666 37,025
Selling, general, and administrative expenses 38,433 16,412
Acquisition integration expenses 2,072 --
------------------------
Operating income 14,477 11,019
Other income (expense)
Interest income 82 1
Interest expense (2,480) (513)
Other income 486 --
------------------------
(1,912) (512)
------------------------
Income before income taxes 12,565 10,507
Income tax provision 4,713 3,886
------------------------
Net income $ 7,852 $ 6,621
========================
Earnings per share:
Basic $ 0.31 $ 0.31
Diluted $ 0.29 $ 0.30
Weighted average number of common and common
equivalent shares outstanding - diluted 27,243 22,323
Dividends per common share $ 0.0325 $ 0.0325
See accompanying notes.
4
Schawk, Inc.
Consolidated Statements of Operations
Six Months Ended June 30, 2005 and 2004
(Unaudited)
(In Thousands, Except Per Share Amounts)
2005 2004
------------------------
Net sales $ 289,399 $ 116,533
Cost of sales 189,863 68,335
Selling, general, and administrative expenses 72,109 30,954
Acquisition integration expenses 2,072 --
------------------------
Operating income 25,355 17,244
Other income (expense)
Interest income 151 1
Interest expense (4,423) (978)
Other income 486 -
------------------------
(3,786) (977)
------------------------
Income before income taxes 21,569 16,267
Income tax provision 8,153 6,019
------------------------
Net income $ 13,416 $ 10,248
========================
Earnings per share:
Basic $ 0.54 $ 0.48
Diluted $ 0.51 $ 0.46
Weighted average number of common and common
equivalent shares outstanding - diluted 26,413 22,320
Dividends per common share $ 0.065 $ 0.065
See accompanying notes.
5
Schawk, Inc.
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2005 and 2004
(Unaudited)
(In Thousands)
2005 2004
------------------------
OPERATING ACTIVITIES
Net income $ 13,416 $ 10,248
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization 13,046 6,805
Deferred income taxes (124) 195
Loss (gain) realized on sale of property and equipment (58) 44
Tax benefit from stock options exercised 595 -
Changes in operating assets and liabilities, net of effects from
acquisitions:
Trade accounts receivable 2,104 (15,872)
Inventories (3,780) (526)
Prepaid expenses and other (946) 561
Trade accounts payable and accrued expenses (11,607) 1,578
Other liabilities (2,384) -
Income taxes refundable/payable 3,332 3
------------------------
Net cash provided by operating activities 13,594 3,036
INVESTING ACTIVITIES
Proceeds from sales of property and equipment 2,300 186
Capital expenditures (7,470) (4,435)
Acquisitions, net of cash acquired (204,273) (5,243)
Contingent acquisition purchase price received from (paid to) escrow
account 890 (1,600)
Other 171 (99)
------------------------
Net cash used in investing activities (208,382) (11,191)
FINANCING ACTIVITIES
Proceeds from debt 142,030 18,700
Principal payments on debt (9,131) (8,550)
Principal payments on capital lease obligations (371) (34)
Payment of deferred loan fees (663) --
Common stock dividends (1,668) (1,389)
Purchase of common stock (726) (603)
Issuance of common stock 73,274 2,238
------------------------
Net cash provided by financing activities 202,745 10,362
------------------------
Effect of foreign currency rate changes (584) (370)
------------------------
Net increase in cash and cash equivalents 7,373 1,837
Cash and cash equivalents beginning of period 7,268 5,227
------------------------
Cash and cash equivalents end of period $ 14,641 $ 7,064
========================
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 2,765 $ 872
Cash paid for income taxes 4,949 5,782
See accompanying notes.
6
Schawk, Inc.
Notes to Consolidated Interim Financial Statements
(Unaudited)
(In thousands of dollars, except per share data)
NOTE 1. BASIS OF PRESENTATION
The consolidated interim financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission (SEC). Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted pursuant to such rules and
regulations, although Schawk, Inc. (the Company) believes the disclosures
included are adequate to make the information presented not misleading. In
addition, certain prior year amounts have been reclassified to conform to the
current year presentation. In the opinion of management, all adjustments
necessary for a fair presentation for the periods presented have been reflected
and are of a normal recurring nature. These financial statements should be read
in conjunction with the Company's consolidated financial statements and the
notes thereto for the three years ended December 31, 2004, as filed with its
2004 annual report on Form 10-K.
NOTE 2. INTERIM RESULTS
Results of operations for the interim periods are not necessarily indicative of
the results to be expected for the full year.
NOTE 3. DESCRIPTION OF BUSINESS
The Company is a leading supplier of digitized high resolution color graphic
services to food, beverage, health & beauty, pharmaceutical, home care and
consumer products packaging, point of sale, retail and advertising markets.
NOTE 4. INVENTORIES
Inventories consist of the following:
June 30, December 31,
2005 2004
---- ----
Raw materials $ 4,377 $ 3,768
Work in process 30,828 7,653
-------- --------
35,205 11,421
Less: LIFO reserve (1,082) (1,082)
-------- --------
$ 34,123 $ 10,339
======== ========
NOTE 5. EARNINGS PER SHARE
Basic earnings per share and diluted earnings per share are shown on the
Consolidated Statements of Operations. Basic earnings per share are computed by
dividing net income by the weighted average shares outstanding for the period.
Diluted earnings per share are computed by dividing net income by the weighted
average number of common shares and common stock equivalent shares outstanding
(stock options) for the period.
7
The following table sets forth the computation of basic and diluted earnings per
share:
Three months ended June 30,
--------------------------
2005 2004
------- -------
Net income $ 7,852 $ 6,621
======= =======
Weighted average shares 25,651 21,522
Effect of dilutive stock options 1,592 801
------- -------
Adjusted weighted average shares and
assumed conversions 27,243 22,323
======= =======
Basic earnings per share $ 0.31 $ 0.31
======= =======
Diluted earnings per share $ 0.29 $ 0.30
======= =======
Six months ended June 30,
------------------------
2005 2004
------- -------
Net income $13,416 $10,248
======= =======
Weighted average shares 24,945 21,493
Effect of dilutive stock options 1,468 827
------- -------
Adjusted weighted average shares and
assumed conversions 26,413 22,320
======= =======
Basic earnings per share $ 0.54 $ 0.48
======= =======
Diluted earnings per share $ 0.51 $ 0.46
======= =======
NOTE 6. SEGMENT REPORTING
The Company operates in a single business segment, Digital Imaging Graphic Arts.
The Company operates primarily in three geographic areas, the United States,
U.K. and Europe and Canada. Summary financial information by geographic area is
as follows:
Three months ended June 30, 2005
--------------------------------
U.K. and Other
United States Canada Europe Foreign Total
------------- ------ ------ ------- -----
Sales $ 120,945 $ 8,162 $ 23,855 $ 5,686 $ 158,648
Long-lived assets 315,563 18,830 23,319 6,790 364,502
Net Assets 204,707 13,830 (1,723) (1,575) 215,239
<Table>
<Caption>
Three months ended June 30, 2004
--------------------------------
U.K. and Other
United States Canada Europe Foreign Total
------------- ------ ------ ------- -----
Sales $ 52,735 $ 8,113 -- $ 3,608 $ 64,456
Long-lived assets 83,143 16,427 -- 7,404 106,974
Net Assets 107,925 10,541 -- (2,290) 116,176
<Table>
<Caption>
Six months ended June 30, 2005
--------------------------------
U.K. and Other
United States Canada Europe Foreign Total
------------- ------ ------ ------- -----
Sales $ 219,204 $ 16,932 $ 43,171 $ 10,092 $ 289,399
Long-lived assets 315,563 18,830 23,319 6,790 364,502
Net Assets 204,707 13,830 (1,723) (1,575) 215,239
<Table>
<Caption>
Six months ended June 30, 2004
--------------------------------
U.K. and Other
United States Canada Europe Foreign Total
------------- ------ ------ ------- -----
Sales $ 94,640 $ 15,557 -- $ 6,336 $ 116,533
Long-lived assets 83,143 16,427 -- 7,404 106,974
Net Assets 107,925 10,541 -- (2,290) 116,176
NOTE 7. COMPREHENSIVE INCOME
The components of comprehensive income, net of related tax, for the quarter and
six months ended June 30, 2005 and 2004, respectively, are as follows:
Three months ended June 30,
--------------------------
2005 2004
-------- --------
Net income $ 7,852 $ 6,621
Foreign currency translation adjustments (731) (423)
-------- --------
Comprehensive income $ 7,121 $ 6,198
======== ========
Six months ended June 30,
--------------------------
2005 2004
-------- --------
Net income $ 13,416 $ 10,248
Foreign currency translation adjustments (1,092) (690)
-------- --------
Comprehensive income $ 12,324 $ 9,558
======== ========
NOTE 8. STOCK BASED COMPENSATION
The Company has an Equity Option Plan that provides for the granting of options
to purchase up to 5,252 shares of Class A common stock to key employees. The
Company has also adopted an Outside Directors' Formula Stock Option Plan
authorizing unlimited grants of options to purchase shares of Class A common
stock to outside directors. Options granted under these plans have an exercise
price equal to the market price of the underlying stock at the date of grant and
are exercisable for a period of ten years from the date of grant and vest over a
three-year period.
The Company accounts for these plans under the recognition and measurement
principles of Accounting Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to Employees", and related interpretations. No stock-based employee
compensation cost is reflected in the net income, as all options granted under
these plans have an exercise price equal to the market value of the underlying
common stock on the date of grant. The following table illustrates the effect on
net income and earnings per share if the Company had applied the fair value
recognition provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation", to stock-based employee compensation.
9
Three Months Ended June 30,
---------------------------
2005 2004
---- ----
Net income, as reported $ 7,852 $ 6,621
Less: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects (859) (184)
---------- ----------
Net income, pro forma $ 6,993 $ 6,437
========== ==========
Earnings per share
Basic $ 0.31 $ 0.31
Diluted $ 0.29 $ 0.30
Pro forma earnings per share
Basic $ 0.27 $ 0.30
Diluted $ 0.26 $ 0.29
Six Months Ended June 30,
-------------------------
2005 2004
---- ----
Net income, as reported $ 13,416 $ 10,248
Less: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects (989) (733)
---------- ----------
Net income, pro forma $ 12,427 $ 9,515
========== ==========
Earnings per share
Basic $ 0.54 $ 0.48
Diluted $ 0.51 $ 0.46
Pro forma earnings per share
Basic $ 0.50 $ 0.44
Diluted $ 0.47 $ 0.43
In December 2004, the FASB issued SFAS 123(R) (revised December 2004), "Share-
Based Payment", which is a revision of SFAS 123, "Accounting for Stock-Based
Compensation," and supersedes APB Opinion No. 25, "Accounting for Stock Issued
to Employees." This statement requires that the fair value at the grant date
resulting from all share-based payment transactions be recognized in the
financial statements. Further, SFAS 123(R) requires entities to apply a
fair-value based measurement method in accounting for these transactions. This
value is recorded over the vesting period. This statement is effective for the
first fiscal year beginning after June 15, 2005. The Company is currently
evaluating the provisions of SFAS 123(R), and the impact on its consolidated
financial position and results of operations.
10
NOTE 9. ACQUISITIONS
On January 31, 2005, the Company completed its acquisition of 100% of the
outstanding stock of Seven Worldwide Holdings, Inc., formerly known as KAGT
Holdings, Inc. Seven Worldwide Holdings was the parent of Seven Worldwide, Inc,
a graphics services company with operations in North America, Europe, and the
Asia-Pacific region. The results of operations of Seven Worldwide, Inc. for the
periods April 1, 2005 through June 30, 2005 and February 1 through June 30, 2005
are included in the Consolidated Statement of Operations for the three and six
month periods ended June 30, 2005, respectively. The acquisition resulted in the
recognition of goodwill in the Company's financial statements because the
purchase price reflects the complimentary strategic fit that the acquired
business brings to the Company's existing operations. The Company expects to
realize significant operating synergies as a result of this acquisition through
consolidation of duplicate facilities and reduced operating expenses. The
goodwill is not expected to be deductible as an operating expense for tax
purposes.
The purchase price of $209,936 consisted of $135,566 paid in cash at closing,
$3,850 of acquisition-related professional fees and the issuance of 4,000 shares
of the Company's Class A common stock with a value of $70,520, based on the
average market price of the Company's common stock for the five day period
beginning two business days before the execution of the acquisition agreement.
Included in the purchase price were cash of $5,993 and 448 shares of the
Company's Class A common stock, valued at $7,892, paid to the KAGT Holdings,
Inc. Rabbi Trust, to be allocated to the subaccounts of certain stockholders and
Seven Worldwide executives under the KAGT Holdings, Inc 2005 Deferred
Compensation Plan. The assets of the Rabbi Trust were distributed to the
participants in the KAGT Holdings, Inc. Deferred Compensation Plan during the
second quarter of 2005.
The Company has recorded a preliminary purchase price allocation based upon a
tangible and intangible asset appraisal that is in progress and will adjust the
allocation as needed upon completion of the appraisal. A summary of the
preliminary estimated fair values assigned to the acquired assets is as follows:
Trade accounts receivable $ 71,200
Inventory 20,004
Other current assets 4,972
Fixed assets 53,076
Intangible assets, principally customer relationships 44,157
Goodwill 137,657
Other assets 1,522
Accounts payable (19,093)
Other current liabilities (61,705)
Income taxes payable (16,445)
Long term debt and capital lease obligations (50)
Deferred income taxes (14,194)
Other liabilities (17,325)
--------
Total purchase price, net of $6,160 cash received $203,776
The weighted-average amortization period of the intangible assets, principally
customer relationships, is 13.9 years. The intangible asset amortization expense
was $832 and $1,678 for the three month and six month periods ended June 30,
2005, respectively, and will be approximately $4,000 annually for the twelve
month periods ending June 30, 2006 and 2007, approximately $3,400 for the twelve
month period ending June 30, 2008 and approximately $2,600 for the twelve month
periods ending June 30, 2009 and 2010.
The Company expects significant synergies and reduced operating expenses from
the consolidation of duplicate facilities acquired in this acquisition and began
work on a consolidation plan before the acquisition was finalized. Based on the
preliminary consolidation plan, the Company recorded an estimated restructuring
reserve at January 31, 2005 in the amount of $11,790. The major expenses
included in the restructuring reserve are employee severance and lease
termination expenses. The Company expects that most of the facility
consolidations included in this plan will be initiated in the second half of
2005 and will adjust the restructuring reserve as better information becomes
available. The reserve was recorded as an increase to Goodwill and Accrued
expenses. The following table summarizes the reserve recorded at January 31,
2005 and the activity through June 30, 2005:
11
Balance Balance Balance
Jan 30, Mar 31, June 30,
2005 Payments 2005 Additions Payments 2005
----------------------------------------------------------------------
Employee
severance $ 7,075 ($1,729) $ 5,346 $ 583 ($1,318) $ 4,611
Lease termination 1,861 (62) 1,799 1,427 (348) 2,878
Other 2,854 (180) 2,674 (1,612) (166) 896
----------------------------------------------------------------------
Total $11,790 ($1,971) $ 9,819 $ 398 ($1,832) $ 8,385
======================================================================
The Company has reviewed the tax history with respect to its acquisition of KAGT
Holdings and its Seven Worldwide, Inc. subsidiary and has accrued additional tax
liabilities through purchase accounting for certain tax implications of the
prior acquisition of Seven Worldwide, Inc. by the prior owner. The Company is a
party to an indemnity provision in the Stock Purchase Agreement which may allow
for a recovery of some or all of these liabilities if and when a final
determination is made.
The following table presents the unaudited pro forma results of operations of
the Company for the three and six month periods ended June 30, 2005 and June 30,
2004. The unaudited pro forma financial information summarizes the results of
operations for the periods indicated as if the KAGT Holdings, Inc. acquisition
had occurred at the beginning of each period. The pro forma information contains
the actual combined operating results of Schawk Inc. and Seven Worldwide, Inc.,
with the results prior to the acquisition adjusted to include the pro forma
impact of: 1) elimination of Seven Worldwide interest expense and deferred
financing cost amortization related to bank debt retired at acquisition, offset
by pro forma interest expense on Schawk Inc. bank debt and private placement
financing used to fund the acquisition, 2) elimination of redundant Seven
Worldwide senior management not retained post-acquisition, and 3) proforma
adjustment of depreciation and intangible asset amortization based on estimated
fair values of the Seven Worldwide assets used in the Company's June 30, 2005
financial statements. The Seven Worldwide results of operations for the three
month and six month periods ended June 30, 2004 have been restated to eliminate
discontinued operations of a division of the company divested in mid 2004.
Pro forma, unaudited, in thousands, Three months ended Three months ended
except per share amounts June 30, 2005 June 30, 2004
- --------------------------------------------------------------------------------------------
Total revenue $158,648 $157,935
Net income 7,852 7,336
Diluted earnings per share $ 0.29 $ 0.27
Pro forma, unaudited, in thousands, Six months ended Six months ended
except per share amounts June 30, 2005 June 30, 2004
- --------------------------------------------------------------------------------------------
Total revenue $313,593 $296,083
Net income 10,742 8,495
Diluted earnings per share $ 0.41 $ 0.32
On December 31, 2004, the Company acquired the operating assets and assumed
certain liabilities of Weir Holdings Limited (Winnetts.) The purchase price
allocation for this acquisition has not been finalized. The Company will adjust
the preliminary purchase price allocation upon the completion of the tangible
and intangible asset appraisal that is in process. During the 2nd quarter, the
Company recorded an increase to the purchase price of this acquisition in the
amount of $497, principally for additional acquisition-related professional
fees.
In connection with its acquisition of the assets of Weir Holdings Limited
(Winnetts) on December 31, 2004, the Company established a restructuring
reserve, primarily for employee severance and lease abandonment expenses, in the
amount of $2,500. The following table summarizes the activity in the reserve for
the first six months of 2005:
12
Balance Balance Balance
Dec 31, Mar 31, June 30,
2004 Payments 2005 Payments 2005
------------------------------------------------
Employee severance $1,254 -- $1,254 ($ 198) $1,056
Lease termination 837 -- 837 -- 837
Other 409 -- 409 (53) 356
------------------------------------------------
Total $2,500 -- $2,500 ($ 251) $2,249
================================================
One of the highest priorities of the Company during the first half of 2005 has
been the integration of the Seven Worldwide and Winnetts acquisitions into the
Company's combined operations. This has involved planning and executing the
consolidation of duplicate facilities in locations served by separate facilities
of the pre-acquisition businesses as well as elimination of duplicate
administrative functions. During the second quarter, the Company recorded
Acquisition integration expenses of $2,072 which are shown as a separate line in
the operating expense section of the Consolidated Statement of Operations for
the three month and six month periods ended June 30, 2005. The major items
included in this expense are severance pay for employees at legacy Schawk Inc
facilities that have been merged with operations of the acquired businesses,
retention pay for key employees whose services were necessary during a
transition period, travel expenses related to the planning and execution of
facility consolidations, and professional fees for accounting, human resource,
and integration planning advice.
NOTE 10. DEBT
In connection with the Company's financing of the Seven Worldwide acquisition,
the Company entered into a credit agreement dated January 28, 2005 with JPMorgan
Chase Bank, N.A. The credit agreement provides for a five-year unsecured
revolving credit facility of $100,000, expandable to $125,000, with interest at
LIBOR plus a margin based on the Company's cash flow leverage ratio. On April
15, 2005, the accordion feature of the agreement was utilized to increase the
revolving credit commitment to $115,000. $97,400 was outstanding under this
agreement at June 30, 2005 and is included in Long-term debt on the Consolidated
Balance Sheet.
Also on January 28, 2005, the Company entered into a Note Purchase and Private
Shelf Agreement with Prudential Investment Management Inc, pursuant to which the
Company sold $50,000 in a series of three Senior Notes. The first note, in the
amount of $10,000, will mature in 2010 and bears interest at 4.81%. The second
and third notes, each in the amount of $20,000, mature in 2011 and 2012,
respectively, and bear interest at the rate of 4.99% and 5.17%, respectively.
The total of these notes, $50,000, is included in Long-term debt on the June 30,
2005 Consolidated Balance Sheet.
The borrowings under both agreements are subject to certain restrictive
covenants. The Company is in compliance with these covenants as of June 30,
2005.
On February 1, 2005, the Company executed an unsecured Line of Credit Note for
$10,000 with a due date of May 31, 2005 and interest at the prime rate. The note
was paid in full when the Company expanded its unsecured revolving credit
facility to $115,000 on April 15, 2005.
13
NOTE 11. INTANGIBLES
As of June 30, 2005, the acquired intangible assets related to the Winnetts
acquisition on December 31, 2004 and the Seven Worldwide acquisition on January
31, 2005 have been valued based on preliminary purchase price allocations. The
amounts allocated to intangible assets may be adjusted when these purchase price
allocations are finalized. Intangible assets, resulting primarily from the
Winnetts, Seven Worldwide and previous acquisitions accounted for under the
purchase method of accounting, consist of the following:
June 30, December 31, Weighted
2005 2004 Average Life
-------- ----------- ------------
Customer relationships $ 52,174 $ 12,632 15.2 years
Non-compete agreements 681 681 3.5 years
Patents 315 311 20.0 years
Developed technologies 4,061 -- 3.0 years
-------- --------
57,231 13,624 14.2 years
Accumulated amortization (2,983) (870)
-------- --------
$ 54,248 $ 12,754
Amortization expense related to intangible assets was $948 and $2,113 for the
three month and six month periods ended June 30, 2005. Amortization expense for
each of the next five fiscal years beginning July 1, 2005 is expected to be
approximately $4,878 for fiscal years 2006 and 2007, $4,314 for fiscal year
2008, $3,509 for fiscal year 2009 and $3,493 for fiscal year 2010.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements contained herein that relate to the Company's beliefs or
expectations as to future events are not statements of historical fact and are
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. The Company intends any such statements
to be covered by the safe harbor provisions for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1999. Although the
Company believes that the assumptions upon which such forward-looking statements
are based are reasonable within the bounds of its knowledge of its business and
operations, it can give no assurance the assumptions will prove to have been
correct and undue reliance should not be placed as such statements. Important
factors that could cause actual results to differ materially and adversely from
the Company's expectations and beliefs include, among other things, higher than
expected costs or unanticipated difficulties associated with integrating the
acquired operations of Winnetts and Seven Worldwide, higher than expected costs
associated with compliance with legal and regulatory requirements, the strength
of the United States economy in general and specifically market conditions for
the consumer products industry, the level of demand for the Company's services,
loss of key management and operational personnel, the ability of the Company to
implement its growth strategy, the stability of state, federal and foreign tax
laws, the ability of the Company to identify and exploit industry trends and to
exploit technological advances in the imaging industry, ability to implement
restructuring plans, the stability of political conditions in Asia and other
countries in which the Company has production capabilities, terrorist attacks,
wars, diseases and other geo-political events as well as other factors detailed
in the Company's filings with the Securities and Exchange Commission. The
Company assumes no obligation to update publicly any of these statements in
light of future events.
EXECUTIVE-LEVEL OVERVIEW
The Company grew substantially in the first half of 2005 as a result of two
important acquisitions. The Company's annual revenue is expected to reach
$625,000 - $635,000 in 2005 as compared to $238,000 in 2004 with most of the
growth attributable to the two acquisitions, Weir Holdings, Inc. (trade name
"Winnetts") on December 31, 2004 and Seven Worldwide, Inc. (Seven Worldwide) on
January 31, 2005.
A majority of the Company's revenues are driven by marketing and advertising
spending by consumer products companies and retailers. The markets served are
consumer products manufacturers and pharmaceutical, entertainment, retail and
publishing companies. All of the company's business involves producing graphic
images for various applications. Generally, a graphic image is created by the
Company or a third party and then the Company manipulates that image to enhance
the color of the image and to prepare it for print. The applications vary from
consumer product packaging, including food and beverage packaging images, to
retail advertisements in newspapers, including free standing inserts (FSI's),
magazine ads, publications, catalogs and textbooks.
The graphics process is generally the same regardless of the application. The
following steps in the graphics process must take place to produce a final
image:
- Planning and Messaging
- Strategic Design
- Content Creation
- File Building
- Retouching
- Art Production
- Pre-Media
The Company's involvement in a client project may involve many of the above
steps or just one of the steps, depending on the client's needs.
The Company has 61 operating locations globally that produce graphic images for
clients. While providing a variety of services from location to location, the
Company's operations are similar to one another in that regardless of the client
assignment, graphic artists produce the work in an office environment by
applying specialized techniques and using standard graphics software and
computers. Many locations produce graphic images for more than one market.
15
Each client assignment, or "job", is a custom job in that the image being
produced is unique, even if it only involves a small change from an existing
image, such as adding a "low fat" banner on a food package. Essentially, change
equals revenue. The Company is paid for its graphic imaging work based on time
and materials, not based on the success or failure of the food product, the
promotion or the ad campaign.
For the quarter ended June 30, 2005, the Company increased sales by 146.1% over
the second quarter of 2004. The revenue growth was primarily a result of the
Winnetts and Seven Worldwide acquisitions. The Company's gross profit and
operating income increased in the second quarter of 2005 as a result of the
acquisitions. The gross margin and operating margin percentages decreased in the
second quarter of 2005 relative to the second quarter of 2004 as a result of
lower margin business from the acquired companies. Net income increased to
$7,852 from $6,621 quarter over quarter. Second quarter earnings per share were
29 cents, fully diluted, compared to the prior year second quarter earnings per
share of 30 cents.
The Company's sales for the six-month period ended June 30, 2005 were 148.3%
higher than the first half of 2004, with the increase attributable to the two
acquisitions. The lower margin business from the acquisitions resulted in gross
margin and operating margin percentages that were lower in the first half of
2005 compared to the first half of 2004. Net income increased 30.9%, from
$10,248 for the first six months of 2004 to $13,416 for the first six months of
2005. Earnings per share for the first half of 2005 were 51 cents, fully
diluted, compared to 46 cents, fully diluted, in the first half of 2004.
As previously disclosed, on January 31, 2005, the Company completed the
acquisition of Seven Worldwide, a $370 million in revenue graphic services
company with operations in 40 locations in the United States, Europe, Asia and
Australia. The purchase price of $209,936 consisted of $135,566 paid in cash at
closing, $3,850 of acquisition-related professional fees and the issuance of
4,000 shares of the Company's Class A common stock with a value of $70,520.
The Company expects significant synergies and reduced operating expenses from
the consolidation of duplicate facilities acquired in this acquisition and began
work on a consolidation plan before the acquisition was finalized. The Company
has recorded an estimated restructuring reserve based on the preliminary
consolidation plan. The major expenses included in the restructuring reserve are
severance pay for employees of acquired facilities that will be merged with
existing operations and lease termination expenses. In addition, during the
second quarter, the Company recorded Acquisition integration expenses of $2,072
which are shown as a separate line in the operating expense section of the
Consolidated Statement of Operations for the three month and six month periods
ended June 30, 2005. The major items included in this expense are severance pay
for employees at legacy Schawk Inc facilities that have been merged with
operations of the acquired businesses, retention pay for key employees whose
services were necessary during a transition period, travel expenses related to
the planning and execution of facility consolidations, and professional fees for
accounting, human resource, and integration planning advice.
In connection with the Company's financing of the Seven Worldwide acquisition,
the Company entered into a credit agreement dated January 28, 2005 with JPMorgan
Chase Bank, N.A. The credit agreement provides for a five-year unsecured
revolving credit facility of $100,000, which was expanded to $115,000 on April
15, 2005. Also on January 28, 2005, the Company entered into a Note Purchase and
Private Shelf Agreement with Prudential Investment Management Inc, pursuant to
which the Company sold $50,000 in a series of three Senior Notes. As of June 30,
2005 there was $179,022 of debt outstanding of which $172,411 was considered
long-term.
16
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2005 AND 2004
(Thousands of dollars, except per share amounts)
Schawk, Inc.
Comparative Consolidated Statements of Operations
Three Months Ended June 30, 2005 and 2004
(in thousands)
$ %
2005 2004 CHANGE CHANGE
---- ---- ------ ------
Net sales $ 158,648 $ 64,456 $ 94,192 146.1%
Cost of sales 103,666 37,025 66,641 180.0%
--------- --------- ---------
Gross profit 54,982 27,431 27,551 100.4%
Gross margin percentage 34.7% 42.6%
Selling, general and administrative expenses 38,433 16,412 22,021 134.2%
Acquisition integration expenses 2,072 -- 2,072 nm
--------- --------- ---------
Operating income 14,477 11,019 3,458 31.4%
Operating margin percentage 9.1% 17.1%
Other income (expense)
Interest income 82 1 81 nm
Income expense (2,480) (513) (1,967) 383.4%
Other income 486 -- 486 nm
--------- --------- ---------
(1,912) (512) (1,400) 273.4%
--------- --------- ---------
Income before income taxes 12,565 10,507 2,058 19.6%
Income tax provision 4,713 3,886 827 21.3%
--------- --------- ---------
Effective income tax rate 37.5% 37.0%
Net income 7,852 6,621 $ 1,231 18.6%
========= ========= =========
nm - Percentage not meaningful
Net sales increased $94.2 million or 146.1% as compared to the prior year second
quarter. The increase is primarily due to the acquisitions of Winnetts and Seven
Worldwide.
Gross margin for the second quarter of 2005 decreased to 34.7% from 42.6% for
the second quarter of 2004, primarily due to lower margin business from the
Seven Worldwide and Winnetts acquisitions.
Operating income for the second quarter of 2005 increased 31.4% to $14.5 million
compared to $11.0 million in the second quarter of 2004. The increase is
primarily due to the additional operating income from the acquired companies.
The operating margin percentage decreased to 9.1% in the second quarter of 2005
compared to 17.1% in the second quarter of 2004, primarily due to lower margin
business from the Seven Worldwide and Winnetts acquisitions.
Interest expense of $2.5 million for the second quarter of 2005 increased $2.0
million compared to the same period in 2004. The increase is due to additional
indebtedness incurred during the first half of 2005 in connection with the
Winnetts and Seven Worldwide acquisitions.
Other income of $0.5 million in the second quarter of 2005 represents the
proceeds of a life insurance policy.
17
Income tax expense for the second quarter of 2005 was at an effective tax rate
of 37.5% compared to a rate of 37.0% in the second quarter of 2004. The higher
effective tax rate in 2005 was attributable to increased profits in higher tax
jurisdictions as compared to the prior year. It is anticipated that the
effective tax rate for 2005 will be in the range of 37.0% to 38.0%.
Net income was higher in the second quarter of 2005 as compared to the second
quarter of 2004 for the reasons previously described.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(Thousands of dollars, except per share amounts)
Schawk, Inc.
Comparative Consolidated Statements of Operations
Six Months Ended June 30, 2005 and 2004
(in thousands)
$ %
2005 2004 CHANGE CHANGE
---- ---- ------ ------
Net sales $ 289,399 $ 116,533 $ 172,866 148.3%
Cost of sales 189,863 68,335 121,528 177.8%
--------- --------- ---------
Gross profit 99,536 48,198 51,338 106.5%
Gross margin percentage 34.4% 41.4%
Selling, general and administrative expenses 72,109 30,954 41,155 133.0%
Acquisition integration expenses 2,072 -- 2,072 nm
--------- --------- ---------
Operating income 25,355 17,244 8,111 47.0%
Operating margin percentage 8.8% 14.8%
Other income (expense)
Interest income 151 1 150 nm
Income expense (4,423) (978) (3,445) 352.2%
Other income 486 -- 486 nm
--------- --------- ---------
(3,786) (977) (2,809) 287.5%
--------- --------- ---------
Income before income taxes 21,569 16,267 5,302 32.6%
Income tax provision 8,153 6,019 2,134 35.5%
--------- --------- ---------
Effective income tax rate $ 37.8% $ 37.0%
Net income $ 13,416 $ 10,248 $ 3,168 30.9%
========= ========= =========
nm - Percentage not meaningful
Net sales increased $172.9 million or 148.3% in the first half of 2005 as
compared to the first half of the prior year. The increase is primarily due to
the acquisitions of Winnetts and Seven Worldwide.
Gross margin for the first half of 2005 decreased to 34.4% from 41.4% for the
first half of 2004, primarily due to lower margin business from the Seven
Worldwide and Winnetts acquisitions.
Operating income for the first half of 2005 increased 47.0% to $25.4 million
compared to $17.2 million in the first half of 2004. The increase is primarily
due to the additional operating income from the acquired companies. The
operating margin percentage decreased to 8.8% in the first half of 2005 compared
to 14.8% in the first half of 2004 primarily due to lower margin business from
the Seven Worldwide and Winnetts acquisitions.
18
Interest expense of $4.4 million for the first half of 2005 increased $3.4
million compared to the same period in 2004. The increase is due to additional
indebtedness incurred during the first half of 2005 in connection with the
Winnetts and Seven Worldwide acquisitions.
Income tax expense for the first half of 2005 was at an effective tax rate of
37.8% compared to a rate of 37.0% in the first half of 2004. The higher
effective tax rate in 2005 was attributable to increased profits in higher tax
jurisdictions as compared to the prior year. It is anticipated that the
effective tax rate for 2005 will be in the range of 37.0% to 38.0%.
Net income and earnings per share were higher in the first half of 2005 as
compared to the first half of 2004 for the reasons previously described.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2005, the Company had $14,641 in consolidated cash and cash
equivalents, compared to $7,268 at December 31, 2004.
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Cash provided by operations was $13,594 in the first six months of 2005 compared
to cash provided by operations of $3,036 in the first six months of 2004. The
increase in cash provided by operations was due in part to a decrease in trade
accounts receivable during the second quarter of 2005 and reflects the Company's
efforts to reduce outstanding accounts receivable at all operating units.
Depreciation and amortization expense in the first six months of 2005 was
$13,046 as compared to $6,805 in the first six months of the prior year. The
increase in depreciation and amortization expense is attributable to the
additional property, plant and equipment and intangible assets acquired in the
Seven Worldwide and Winnetts acquisitions.
CASH USED IN INVESTING ACTIVITIES
Cash used in investing activities was $208,382 in the first six months of 2005
compared to $11,191 in the first six months of 2004. The increase in cash used
in the first six months of 2005 reflects the acquisition of Seven Worldwide for
$203,776. In the first six months of 2004, $6,843, including $1,600 of
contingent purchase price paid to an escrow account, was used for acquisition of
the assets of Virtualcolor.
Capital expenditures were $7,470 in the first six months of 2005 compared to
$4,435 in the first six months of 2004. The increase in capital expenditures in
2005 is primarily due to the completion of the build-out of the new Toronto
facility as well as capital expenditures at the newly acquired companies.
Capital expenditures are anticipated to be in a range of $15,000 to $18,000 for
all of 2005.
CASH PROVIDED BY FINANCING ACTIVITIES
Cash provided by financing activities was $202,745 for the first six months of
2005 compared to $10,362 in the first six months of 2004. The cash provided by
financing activities in the first quarter of 2005 includes $142,030 of proceeds
from new debt and $70,520 of common stock issued to finance the Seven Worldwide
acquisition.
Dividend payments on common stock were $1,668 for the first six months of 2005
compared to $1,389 in the first six of 2004. It is anticipated that the Company
will continue to pay dividends at the current level for the remainder of 2005.
In January 2005, the Company entered into a credit agreement with JPMorgan Chase
Bank, N.A. The agreement provides for a five year unsecured revolving credit
facility of $100,000, expandable to $125,000, with interest at LIBOR plus a
margin based on the Company's cash flow leverage ratio. This credit agreement
replaced a $30,000 unsecured credit agreement previously in place. $97,400 was
outstanding under the new agreement at June 30, 2005 and is included in
Long-term debt on the June 30, 2005 Consolidated Balance Sheet. On April 15,
2005, the accordion feature of the credit agreement was utilized to increase the
size of the revolving credit commitment to $115 million from $100 million to
provide additional flexibility to the Company
Also in January 2005, the Company entered into a Note Purchase and Private Shelf
Agreement with Prudential Investment Management Inc, pursuant to which the
Company sold $50,000 in a series of three Senior Notes. The first note, in the
amount of $10,000, will mature in 2010 and bears interest at 4.81%. The second
and third notes, each in the amount of $20,000, mature in 2011 and 2012,
respectively, and bear interest at the rate of 4.99% and 5.17%, respectively.
The total of these notes, $50,000, is included in Long-term debt on the June 30,
2005 Consolidated Balance Sheet.
19
The Company executed an unsecured Line of Credit Note with JPMorgan Chase Bank,
N.A. on February 1, 2005 for $10,000 with a due date of May 31, 2005 and
interest at the prime rate. The Line of Credit Note was paid in full when the
unsecured revolving credit agreement was expanded to $115 million on April 15,
2005.
In December of 2003, the Company entered into a private placement of debt to
provide long-term financing. The terms of the Note Purchase Agreement relating
to this transaction provided for the issuance and sale by the Company, pursuant
to an exception from the registration requirements of the Securities Act of
1933, of two series of notes: 1) Tranche A, due December 31, 2013, for $15,000,
which closed in December 2003; and, 2) Tranche B, due April 30, 2014, for
$10,000, which closed in April 2004. The total debt of $25,000 issued under the
private placement agreement is shown as Long Term Debt on the June 30, 2005
Consolidated Balance Sheet.
Management believes that the level of working capital is adequate for the
Company's liquidity needs related to normal operations both currently and in the
foreseeable future, and that the Company has sufficient resources to support its
growth, either through currently available cash and cash generated from future
operations, or pursuant to its revolving credit facility.
SEASONALITY
With the acquisitions of Winnetts and Seven Worldwide, the seasonal fluctuations
in business on a combined basis generally result in lower revenues in the first
quarter as compared to the rest of the year ended December 31.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A discussion regarding market risk is disclosed in the Company's December 31,
2004 Form 10-K. There have been no material changes in information regarding
market risk relating to the Company's business on a consolidated basis since
December 31, 2004.
ITEM 4. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures designed to ensure that
it is able to collect the information it is required to disclose in the reports
it files with the Securities and Exchange Commission (SEC), and to process,
summarize and disclose this information within the time periods specified in the
rules of the SEC. Based on an evaluation of the Company's disclosure controls
and procedures as of the end of the period covered by this report conducted by
the Company's management, with the participation of the Chief Executive and
Chief Financial Officers, the Chief Executive and Chief Financial Officers
believe that these controls and procedures are effective to ensure that the
Company is able to collect, process and disclose the information it is required
to disclose in the reports it files with the SEC within the required time
periods.
In order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of
2002 ("Section 404"), beginning with the Company's Annual Report on Form 10-K
for the fiscal year ending December 31, 2005, the Company will be required to
furnish a report of management as to the effectiveness of the Company's internal
control over financial reporting and a report by the Company's independent
auditors addressing management's assessment. The Company is in the process of
documenting and evaluating the design and operating effectiveness of its
internal control procedures. These assessments, which have been underway for
more than a year and are not yet complete, have been impacted by the Company's
recent growth related to the Winnetts and Seven Worldwide acquisitions. Since
December 31, 2004, the Company has grown from approximately 30 operating
locations to approximately 61 combined operating locations worldwide, with
varied policies, procedures, systems, personnel and internal control procedures
which are still in the process of being integrated.
In connection with its assessment, management has identified and communicated to
the Company's Audit Committee and independent auditors the following
deficiencies in the documentation, design and effectiveness of its internal
control over financial reporting that the Company is in the process of
remediating:
20
Inadequate general computer controls primarily relating to a lack of
segregation of duties surrounding (i) financial systems and information
technology infrastructure change controls; and (ii) user access rights to
certain financial systems at multiple global locations; and
Primarily as a result of the recently completed Winnetts and Seven
Worldwide acquisitions, lack of (i) documented, comprehensive, standardized
policies and procedures for the combined global company; and (ii)
sufficient documentation over the financial statement closing process,
combined with key employee turnover and redundant staffing levels.
Although management believes it has made significant progress in these areas,
there is a significant risk that remediation and testing of these deficiencies
may not be completed on a timely basis. It is also possible that the Company
could experience further delays in its Section 404 compliance efforts or
identify deficiencies in addition to those discussed above. If the Company is
unable to complete Section 404 compliance efforts and/or its remediation and
testing process in a timely manner, management may be required to conclude that
its internal control over financial reporting is not effective as of December
31, 2005.
Because the Company has not completed its evaluation of the deficiencies
described above, it has not been able to determine whether the deficiencies
described above or any as yet unidentified deficiencies constitute significant
deficiencies, material weaknesses or aggregate to material weaknesses in the
Company's internal control over financial reporting.
CHANGE IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no other changes to our internal control over financial reporting
during the quarter ended June 30, 2005 that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
21
PART II - OTHER INFORMATION
ITEMS 1, 3, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
PURCHASES OF EQUITY SECURITIES BY THE COMPANY
As previously disclosed, the Company occasionally repurchases its common shares,
pursuant to a general authorization from the Board of Directors, which is
renewed annually. In addition, shares of common stock are occasionally tendered
to the Company by certain employee stockholders in payment of stock options
exercised. The Company records the receipt of common stock in payment for stock
options exercised as a purchase of treasury stock.
The following table summarizes the shares repurchased by the Company during the
first six months of 2005:
Total No. Avg. Price No. Shares Purchased
Shares Paid Per as Part of Publicly
Period Purchased Share Announced Program
--------------------------------------------------------------------
January -- -- --
February -- -- --
March 2,056 $ 20.98 --
---------------------------------------------
1st Qtr 2005 Total 2,056 $ 20.98 --
=============================================
April -- -- --
May -- -- --
June 30,567 $ 22.33 --
---------------------------------------------
2nd Qtr 2005 Total 30,567 $ 22.33 --
=============================================
Year-to-date Total 32,623 $ 22.25 --
=============================================
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 17, 2005, the Company held its annual stockholders' meeting. There were
25,848,508 shares of Class A common stock outstanding entitled to vote, and a
total of 24,999,707 (96.7%) were represented at the meeting in person or by
proxy. The following summarizes vote results of proposals submitted to the
stockholders:
22
PROPOSAL 1: ELECTION OF DIRECTORS:
NAME FOR AGAINST WITHHELD
- ----------------------------------------------------------------------------
Clarence W. Schawk 24,729,095 0 270,612
David A. Schawk 24,727,429 0 272,278
A. Alex Sarkisian, Esq. 24,728,910 0 270,797
Leonard S. Caronia 24,730,754 0 268,953
Judith W. McCue, Esq. 24,738,987 0 260,720
Hollis W. Rademacher 24,809,824 0 189,883
John T. McEnroe, Esq. 24,729,110 0 270,597
Christopher Lacovara 24,734,583 0 265,124
PROPOSAL 2: RATIFICATION OF ERNST & YOUNG AS INDEPENDENT AUDITORS FOR FISCAL
YEAR 2005:
For Against Abstain
- -----------------------------------------------
24,917,101 80,516 2,090
ITEM 6. EXHIBITS
A. Exhibits
EXHIBIT # DESCRIPTION
--------- -----------
3.1 Certificate of Incorporation of Schawk, Inc., as amended.
Incorporated herein by reference to Registration Statement No.
33-85152.
3.3 By-Laws of Schawk, Inc., as amended. Incorporated herein by
reference to Registration Statement No. 333-39113.
4.1 Specimen Class A Common Stock Certificate. Incorporated herein by
reference to Registration Statement No. 33-85152
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of
1934, as amended *
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of
1934, as amended *
32 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 *
* Filed herewith
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 12th day of August 2005.
SCHAWK, INC.
- ------------
(Registrant)
/s/ David A. Schawk
- ------------------------------------
President, Chief Executive Officer and Director
/s/ James J. Patterson
- ------------------------------------
Senior Vice President and Chief Financial Officer
24