Schawk Inc. Consolidated Statements of Operations (Unaudited) (In thousands, except per share amounts) Three months Ended June 30, Increase (Decrease) -------------------- -------------------- 2010 2009 Amount Percent --------- --------- --------- --------- Net sales $ 117,840 $ 111,989 $ 5,851 5.2 % Cost of sales 71,016 69,055 1,961 2.8 % --------- --------- --------- Gross profit 46,824 42,934 3,890 9.1 % Selling, general and administrative expenses 30,420 32,151 (1,731) (5.4)% Foreign exchange (gain) loss (267) (319) 52 (16.3)% Acquisition integration and restructuring expenses 686 1,501 (815) (54.3)% Impairment of long-lived assets -- 78 (78) (100.0)% --------- --------- --------- Operating income 15,985 9,523 6,462 67.9 % Other income (expense) Interest income 8 30 (22) (73.3)% Interest expense (1,771) (2,468) 697 (28.2)% --------- --------- --------- (1,763) (2,438) 675 (27.7)% --------- --------- --------- Income before income taxes 14,222 7,085 7,137 100.7 % Income tax provision (benefit) (1,583) 2,317 (3,900) nm --------- --------- --------- Net income $ 15,805 $ 4,768 $ 11,037 231.5 % ========= ========= ========= Earnings per share: Basic $ 0.62 $ 0.19 $ 0.43 Diluted $ 0.61 $ 0.19 $ 0.42 Weighted average number of common and common equivalent shares outstanding: Basic 25,400 24,921 Diluted 25,884 24,921 nm = not meaningful Schawk Inc. Consolidated Statements of Operations (Unaudited) (In thousands, except per share amounts) Six months Ended June 30, Increase (Decrease) -------------------- ------------------- 2010 2009 Amount Percent --------- --------- --------- -------- Net sales $ 229,548 $ 217,077 $ 12,471 5.7 % Cost of sales 140,849 141,049 (200) (0.1)% --------- --------- --------- Gross profit 88,699 76,028 12,671 16.7 % Selling, general and administrative expenses 62,944 66,120 (3,176) (4.8)% Foreign exchange (gain) loss 1,550 (445) 1,995 nm Acquisition integration and restructuring expenses 1,015 2,318 (1,303) (56.2)% Impairment of long-lived assets 680 136 544 400.0 % --------- --------- --------- Operating income 22,510 7,899 14,611 185.0 % Other income (expense) Interest income 16 100 (84) (84.0)% Interest expense (3,759) (3,917) 158 (4.0)% --------- --------- --------- (3,743) (3,817) 74 (1.9)% --------- --------- --------- Income before income taxes 18,767 4,082 14,685 359.8 % Income tax provision 442 1,610 (1,168) (72.5)% --------- --------- --------- Net income $ 18,325 $ 2,472 $ 15,853 641.3 % ========= ========= ========= Earnings per share: Basic $ 0.72 $ 0.10 $ 0.62 Diluted $ 0.71 $ 0.10 $ 0.61 Weighted average number of common and common equivalent shares outstanding: Basic 25,292 24,928 Diluted 25,731 24,929 nm = not meaningful Schawk, Inc. Consolidated Balance Sheets (In thousands, except share amounts) June 30, December 31, 2010 2009 ----------- ----------- (unaudited) Assets Current assets: Cash and cash equivalents $ 18,483 $ 12,167 Trade accounts receivable, less allowance for doubtful accounts of $1,033 at June 30, 2010 and $1,619 at December 31, 2009 92,353 88,822 Inventories 21,263 20,536 Prepaid expenses and other current assets 9,699 8,192 Income tax receivable 2,565 2,565 Deferred income taxes 3,275 992 ----------- ----------- Total current assets 147,638 133,274 Property and equipment, less accumulated depreciation of $101,850 at June 30, 2010 and $96,440 at December 31, 2009 47,385 50,247 Goodwill 186,931 187,664 Other intangible assets, net 34,228 37,605 Deferred income taxes 1,204 1,424 Other assets 6,158 6,005 ----------- ----------- Total assets $ 423,544 $ 416,219 =========== =========== Liabilities and stockholders' equity Current liabilities: Trade accounts payable $ 18,155 $ 16,957 Accrued expenses 57,745 64,079 Deferred income taxes 5,493 205 Income taxes payable 5,641 14,600 Current portion of long-term debt 20,278 12,858 ----------- ----------- Total current liabilities 107,312 108,699 ----------- ----------- Long-term liabilities: Long-term debt 53,123 64,707 Other liabilities 14,903 15,920 Deferred income taxes 4,309 2,059 ----------- ----------- Total long-term liabilities 72,335 82,686 ----------- ----------- Stockholders' equity: Common stock, $0.008 par value, 40,000,000 shares authorized, 30,281,763 and 29,855,796 shares issued at June 30, 2010 and December 31, 2009, respectively; 25,535,805 and 25,108,894 shares outstanding at June 30, 2010 and December 31, 2009, respectively 222 220 Additional paid-in capital 195,901 191,701 Retained earnings 102,246 85,953 Accumulated comprehensive income, net 6,356 7,804 ----------- ----------- 304,725 285,678 Treasury stock, at cost, 4,745,958 and 4,746,902 shares of common stock at June 30, 2010 and December 31, 2009, respectively (60,828) (60,844) ----------- ----------- Total stockholders' equity 243,897 224,834 ----------- ----------- Total liabilities and stockholders' equity $ 423,544 $ 416,219 =========== =========== Schawk Inc. Segment Financial Data (Unaudited) (In thousands) Three months Ended June 30, Increase (Decrease) -------------------- -------------------- 2010 2009 Amount Percent --------- --------- --------- -------- Sales to external clients: North America $ 104,318 $ 96,059 $ 8,259 8.6 % Europe 15,001 16,311 (1,310) (8.0)% Asia Pacific 8,240 7,113 1,127 15.8 % Intercompany sales elimination (9,719) (7,494) (2,225) 29.7 % --------- --------- --------- Sales to external clients $ 117,840 $ 111,989 $ 5,851 5.2 % ========= ========= ========= Operating segment income (loss): North America $ 19,255 $ 14,910 $ 4,345 29.1 % Europe 815 531 284 53.5 % Asia Pacific 1,776 2,292 (516) (22.5)% Corporate (5,861) (8,210) 2,349 (28.6)% --------- --------- --------- Operating segment income $ 15,985 $ 9,523 $ 6,462 67.9 % ========= ========= ========= Six months Ended June 30, Increase (Decrease) -------------------- -------------------- 2010 2009 Amount Percent --------- --------- --------- -------- Sales to external clients: North America $ 200,636 $ 187,229 $ 13,407 7.2 % Europe 32,375 31,894 481 1.5 % Asia Pacific 15,062 13,022 2,040 15.7 % Intercompany sales elimination (18,525) (15,068) (3,457) 22.9 % --------- --------- --------- Sales to external clients $ 229,548 $ 217,077 $ 12,471 5.7 % ========= ========= ========= Operating segment income (loss): North America $ 33,279 $ 20,601 $ 12,678 61.5 % Europe 1,363 1,158 205 17.7 % Asia Pacific 2,655 3,095 (440) (14.2)% Corporate (14,787) (16,955) 2,168 (12.8)% --------- --------- --------- Operating segment income $ 22,510 $ 7,899 $ 14,611 185.0 % ========= ========= ========= Schawk, Inc. Reconciliation of Non-GAAP measures to GAAP (Unaudited) (In Thousands, Except Share Amounts) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2010 2009 2010 2009 -------- -------- -------- -------- Income before income taxes - GAAP $ 14,222 $ 7,085 $ 18,767 $ 4,082 Adjustments: Acquisition integration and restructuring expenses 686 1,501 1,015 2,318 Remediation and related expenses -- 1,291 -- 3,319 Impairment of long-lived assets (1) -- 78 680 136 Foreign currency (gain) loss (267) (319) 1,550 (445) -------- -------- -------- -------- Adjusted income before income tax - non GAAP 14,641 9,636 22,012 9,410 Adjusted income tax provision - non GAAP 4,227 3,175 7,130 3,526 -------- -------- -------- -------- Adjusted net income - non GAAP $ 10,414 $ 6,461 $ 14,882 $ 5,884 ======== ======== ======== ======== Weighted average common and common stock equivalents outstanding - GAAP 25,884 24,921 25,731 24,929 ======== ======== ======== ======== Earnings per diluted share - GAAP $ 0.61 $ 0.19 $ 0.71 $ 0.10 Adjustments - net of tax effects: Acquisition integration and restructuring expenses 0.02 0.04 0.03 0.06 Remediation and related expenses -- 0.03 -- 0.08 Impairment of long-lived assets -- 0.01 0.02 0.01 Foreign currency (gain) loss (0.01) (0.01) 0.04 (0.01) Effective settlement of certain income tax audits (0.22) -- (0.22) -- -------- -------- -------- -------- Adjusted earnings per diluted share - non GAAP $ 0.40 $ 0.26 $ 0.58 $ 0.24 ======== ======== ======== ======== Income tax provision (benefit) - GAAP $ (1,583) $ 2,317 $ 442 $ 1,610 Adjustments: (2) Acquisition integration and restructuring expenses 251 441 376 710 Remediation and related expenses -- 513 -- 1,318 Impairment of long-lived assets -- 22 270 45 Foreign currency (gain) loss (71) (118) 412 (157) Effective settlement of certain income tax audits 5,630 -- 5,630 -- -------- -------- -------- -------- Adjusted income tax provision - non GAAP $ 4,227 $ 3,175 $ 7,130 $ 3,526 ======== ======== ======== ======== (1) Please see Note 6 to the Company's unaudited consolidated financials statements in the Company's 2010 Second-Quarter Form 10-Q for a discussion related to certain insurance recoveries. (2) Adjustments have been tax-effected at the jurisdictions' statutory rates. Schawk, Inc. Reconciliation of Non-GAAP EBITDA and Management Adjusted EBITDA (Unaudited) (In Thousands) Three Months Ended Trailing 12 Months June 30, Ended June 30, --------------------- -------------------- 2010 2009 2010 2009 ---------- ---------- ---------- --------- Net income (loss) - GAAP $ 15,805 $ 4,768 $ 35,350 $ (62,570) Interest expense 1,771 2,468 9,066 7,295 Income tax expense (benefit) (1,583) 2,317 6,429 (5,138) ---------- ---------- ---------- --------- Adjusted Income (loss) - non GAAP 15,993 9,553 50,845 (60,413) Depreciation and amortization expense 4,406 4,730 18,045 19,341 Impairment of goodwill -- -- -- 48,041 Impairment of long-lived assets -- 78 1,985 6,780 Non-cash restructuring charges -- 77 133 705 Stock based compensation 584 501 1,899 2,264 ---------- ---------- ---------- --------- EBITDA - non GAAP 20,983 14,939 72,907 16,718 Permitted add backs on debt covenants: (Gain) loss on sale of property and equipment -- 72 -- 311 Proforma effect of acquisitions and asset sales -- -- -- 2,102 Acquisition integration and restructuring expenses(1) -- 1,424 1,195 9,445 Multiemployer pension plan withdrawal expense -- -- -- 7,254 ---------- ---------- ---------- --------- EBITDA for covenant compliance - non GAAP 20,983 16,435 74,102 35,830 Acquisition integration and restructuring expenses 686 -- 3,827 -- Multiemployer pension plan withdrawal expense -- -- 1,800 -- Indemnity settlement income -- -- (4,986) -- Foreign exchange (gain) loss (267) (319) 1,454 652 Remediation and related expenses -- 1,291 1,138 3,319 ---------- ---------- ---------- --------- Management adjusted EBITDA - non GAAP $ 21,402 $ 17,407 $ 77,335 $ 39,801 ========== ========== ========== ========== (1) Capped at $3.0 million for 2009 per the Company's new debt agreements. Amounts in excess of $3.0 million are included as an adjustment for Management adjusted EBITDA.Use of Non-GAAP EBITDA, EBITDA for covenant compliance, and Management adjusted EBITDA EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, and other certain non-cash items. EBITDA for covenant compliance, as defined in the Company's January 2010 debt agreements, is defined as EBITDA adjusted to exclude certain items, including items that are generally considered non-operating, as permitted under the Company's current revolving credit facility, and is used by management to gauge its ongoing compliance with the Company's principal debt covenants, as well as pricing on its revolving credit facility. Management adjusted EBITDA is used to evaluate the core operating activities of the Company from period to period. None of the measures presented above represent cash flows from operations as defined by generally accepted accounting principles, should not be considered as an alternative to net income or cash flow from operations as an indicator of our operating performance, and are not indicative of cash available to fund all cash flow needs. These measures also may be inconsistent with similar measures presented by other companies.
Contact Information: AT SCHAWK, INC.: Timothy Allen Vice President, Finance Operations and Investor Relations 847-827-9494 Timothy.Allen@schawk.com AT DRESNER CORPORATE SERVICES: Investors: Philip Kranz 312-780-7240 pkranz@dresnerco.com