DES PLAINES, IL -- (MARKET WIRE) -- May 1, 2007 -- Schawk, Inc. (
NYSE:
SGK), one of the
world's leading providers of digital imaging graphic services to the
consumer products and brand imaging markets, today reported first-quarter
2007 results.
Income from continuing operations resulted in first-quarter 2007 earnings
of $0.26 per fully diluted share compared to $0.19 per fully diluted share
in the same period of 2006. First-quarter 2006 results included a charge
of $0.01 per share for acquisition integration expenses. Excluding
acquisition integration expenses, first-quarter 2006 income from continuing
operations was $0.20 per fully diluted share.
Discontinued operations had no effect on first-quarter 2007 results, while
first-quarter 2006 results included a loss of $0.02 per fully diluted share
for discontinued operations.
Net income per common share in the first quarter of 2007 was $0.26 per
fully diluted share compared to $0.17 per fully diluted share in the same
period of 2006. First-quarter 2006 results included acquisition
integration expenses of $0.01 per share. Excluding acquisition integration
expenses, first-quarter 2006 net income was $0.18 per fully diluted share.
Consolidated Results for First Quarter Ended March 31, 2007
Sales from continuing operations in the first quarter of 2007 decreased
$2.9 million, or 2.1 percent, to $130.9 million from $133.8 million in the
same period of 2006. In the 2007 first quarter, entertainment accounts
revenue continued to be soft, as experienced in the third and fourth
quarters of 2006. The balance of the decrease in sales from continuing
operations in the first quarter of 2007 was due to lower revenues from
accounts the Company resigned from in connection with the closure of an
East Coast facility in June 2006. Partially offsetting these decreases
were increases in consumer product packaging accounts revenue in the first
quarter of 2007 due to new business wins announced in 2006.
Gross margin from continuing operations increased to 36.2 percent in the
first quarter of 2007 from 34.2 percent in the prior-year first quarter.
Despite a reduction in sales in the first quarter, gross margin increased
as a result of the cost reduction efforts implemented in 2006.
Operating income from continuing operations increased to $14.1 million in
the first quarter of 2007 from $10.9 million in the prior-year first
quarter. First-quarter 2007 operating margin from continuing operations
was 10.8 percent compared to 8.1 percent in the 2006 first quarter.
Excluding acquisition integration expenses, 2006 first-quarter operating
income from continuing operations was $11.4 million and operating margin
was 8.5 percent. First-quarter 2007 operating income and operating margin
benefited from improved results in Europe and in the United States due in
part to cost reductions in connection with the integration efforts that
were completed in 2006. First-quarter SG&A costs decreased by $1.1 million
in the 2007 period compared to the 2006 period due to the aforementioned
cost reduction efforts.
The 8.5 percent operating margin and the increase in income from continuing
operations of 29.7 percent for the prior period in the heading of this
press release are Non-GAAP measures because they exclude acquisition
integration expenses in the prior-year period. On a GAAP basis, operating
margin and the increase in income from continuing operations for the period
ended March 31, 2006 were 8.1 percent and 37.8 percent, respectively.
Net interest expense in the 2007 first quarter was approximately $0.1
million lower at $2.3 million due to lower borrowing levels in the first
quarter as compared to the prior-year first quarter. Debt was reduced by
$7.8 million in the 2007 first quarter from December 31, 2006.
The first-quarter income tax provision from continuing operations is at an
effective rate of 39.0 percent for 2007 compared to 38.0 percent in the
2006 period. The increased rate in the 2007 first quarter reflected higher
state tax rates due in part to the sale of the discontinued operations.
Income from continuing operations was $7.2 million in the first quarter of
2007 versus $5.2 million in the 2006 period. Excluding acquisition
integration expenses, first-quarter 2006 income from continuing operations
was $5.5 million.
Other Information
Depreciation and amortization expense was $6.0 million for the first
quarter of 2007 compared to $6.6 million in the prior-year first quarter.
The decrease in 2007 is due to the absence of depreciation and amortization
expense from the discontinued operations in the 2007 results.
Capital expenditures in the first quarter of 2007 were $5.7 million
compared to $5.6 million in the same period of 2006.
The Company's balance sheet as of March 31, 2007, improved compared to the
year ended December 31, 2006, through a $7.8 million reduction in debt.
The percentage of debt to total capital improved to 32.9 percent as of
March 31, 2007, from 34.7 percent as of the year ended December 31, 2006.
The Company also had approximately $55 million of availability on its
revolving credit facility as of March 31, 2007.
Management Comments
President and Chief Executive Officer David A. Schawk commented, "Schawk's
results for the first quarter of 2007 reflect the Company's focus on
optimizing workflows and efficiency throughout 2006 and the first quarter
of 2007. At the end of 2006 we finalized the acquisition integration
process and successfully reduced costs throughout the organization. As a
result of these combined efforts our European operations have turned
profitable, and we have realigned our revenue and cost structures across
the organization."
Mr. Schawk continued, "Although sales for the first quarter were slightly
below the prior-year first quarter, we are optimistic that our
traditionally strong consumer products packaging business will improve for
the balance of 2007. I am confident in this belief because of our new
business wins in 2006 and the requirements our clients have for
customization and new product introduction.
"It is gratifying to see the improvement in margins and earnings per share
as compared to the prior year. We believe that all of the hard work in
completing the integration of our acquisitions and the continuous
improvement and implementation of our global best practices are driving
increased profitability. Our primary focus for the balance of 2007 is to
increase revenues while maintaining our disciplined approach to costs."
Mr. Schawk continued, "One of the key issues for our clients in 2007 is
corporate social responsibility, or CSR, and sustainability. As part of
our culture and corporate pledge, Schawk is committed to driving
sustainability initiatives and programs in our own offices. We are also
committed to helping our clients achieve their CSR and sustainability goals
by sharing our expertise and broad spectrum of capabilities with them to
reduce the amount of their packaging materials and to consult with them on
changes to inks and substrates to more environmentally friendly options."
Mr. Schawk concluded, "We are off to a good start for 2007. We will
continue to work to increase shareholder value by following our strategic
plan and increasing our global service offering. We are committed to
continue leading our industry in delivering the greatest value to our
clients around the globe every day."
Schawk, Inc., headquartered in suburban Chicago, is one of the world's
largest independent brand image solutions companies. Schawk delivers a
broad range of digital pre-media graphic services through 151 locations in
12 countries across North America, Europe, Asia and Australia. Schawk
designs, creates and manages images and text for reproduction to exact
specifications for a variety of media, including packaging for consumer
products, point-of-sale displays and other promotional and advertising
materials. Schawk provides its services to the food, beverage, health &
beauty, pharmaceutical, home care and consumer products industries. For
more information, visit
www.schawk.com.
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, higher than expected costs, 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 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 continued ability to
identify and exploit industry trends and exploit technological advances in
the imaging industry, our ability to implement restructuring plans, the
stability of political conditions in 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 first-quarter 2007 Earnings Conference Call
today at 9:00 a.m. central time. Hosting the call will be David A. Schawk,
president and CEO, A. Alex Sarkisian, executive vice president and COO, and
James J. Patterson, senior vice president and CFO. To participate in the
call, please dial 866-356-3095 or 617-597-5391 at least five minutes prior
to the start time and ask for the Schawk, Inc. conference call, or on the
Internet, go to
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=82169&eventID=1519624. If you are unavailable to
participate on the live call, a replay will be available through May 8,
11:59 p.m. central time. To access the replay, dial 888-286-8010 or
617-801-6888, enter conference ID 51169327, and follow the prompts. The
replay will also be available on the Internet for 30 days at the following
address:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=82169&eventID=1519624.
For more information about Schawk, visit our website at
http://www.schawk.com.
Schawk, Inc.
Consolidated Statements of Operations
Three Months Ended March 31, 2007 and 2006
(Unaudited)
(In Thousands, Except Share Amounts)
2007 2006
---------- ----------
Net sales $ 130,884 $ 133,754
Cost of sales 83,526 88,038
Selling, general, and administrative expenses 33,240 34,316
Acquisition integration expenses -- 530
---------- ----------
Operating income 14,118 10,870
Other income (expense):
Interest income 90 119
Interest expense (2,423) (2,581)
---------- ----------
(2,333) (2,462)
---------- ----------
Income from continuing operations before income
taxes 11,785 8,408
Income tax provision 4,598 3,193
---------- ----------
Income from continuing operations 7,187 5,215
Loss from discontinued operations, net of tax
benefit of $266 -- (433)
---------- ----------
Net income $ 7,187 $ 4,782
========== ==========
Earnings per share:
Basic:
Income from continuing operations $ 0.27 $ 0.20
Loss from discontinued operations -- (0.02)
---------- ----------
Net income per common share $ 0.27 $ 0.18
========== ==========
Diluted:
Income from continuing operations $ 0.26 $ 0.19
Loss from discontinued operations -- (0.02)
---------- ----------
Net income per common share $ 0.26 $ 0.17
========== ==========
Weighted average number of common and common
equivalent shares outstanding:
Basic 26,607 26,183
Diluted 27,444 27,763
Dividends per common share $ 0.0325 $ 0.0325
Schawk, Inc.
Consolidated Balance Sheets
(In Thousands, Except Share Amounts)
March 31,
2007 December 31,
(Unaudited) 2006
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 7,078 $ 10,177
Trade accounts receivable, less allowance for
doubtful accounts of $2,045 at March 31, 2007
and $4,621 at December 31, 2006 115,777 127,627
Inventories 26,883 23,575
Prepaid expenses and other 8,986 10,171
Deferred income taxes 8,584 8,580
----------- -----------
Total current assets 167,308 180,130
Property and equipment, less accumulated
depreciation of $84,538 at March 31, 2007 and
$82,256 at December 31, 2006 82,517 82,227
Goodwill 236,607 235,501
Intangible assets, net 35,487 35,755
Other assets 4,810 4,633
----------- -----------
Total assets $ 526,729 $ 538,246
=========== ===========
Liabilities and Stockholders Equity
Current liabilities:
Trade accounts payable $ 22,065 $ 26,522
Accrued expenses 39,607 51,489
Income taxes payable 16,335 10,249
Current portion of long-term debt and capital
lease obligations 2,174 2,177
----------- -----------
Total current liabilities 80,181 90,437
Long-term debt 132,931 140,751
Capital lease obligations 7 12
Other liabilities 23,424 23,461
Deferred income taxes 14,617 14,657
Stockholders equity:
Common stock, $0.008 par value, 40,000,000
shares authorized, 29,135,658 and 28,989,013
shares issued at March 31, 2007 and December
31, 2006, respectively; 26,702,126 and
26,555,119 shares outstanding at March 31,
2007 and December 31, 2006, respectively 231 229
Additional paid-in capital 179,773 178,415
Retained earnings 117,994 113,365
Accumulated comprehensive income 6,724 6,079
----------- -----------
304,722 298,088
Treasury stock, at cost, 2,433,532 and
2,433,894 shares of common stock at March 31,
2007 and December 31, 2006, respectively (29,153) (29,160)
----------- -----------
Total stockholders equity 275,569 268,928
----------- -----------
Total liabilities and stockholders equity $ 526,729 $ 538,246
=========== ===========
Contact Information: AT SCHAWK, INC.:
James J. Patterson
Sr. VP and CFO
847-827-9494
jpatterson@schawk.com
AT DRESNER CORPORATE SERVICES:
Investors:
Philip Kranz
312-780-7240
pkranz@dresnerco.com