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Schawk, Inc. Annual Report
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CORPORATE MISSION
Schawk, Inc. is an international Company providing value-added products and
services to specialized markets. Highly trained personnel and
quality-controlled technologies are utilized. From our beginnings as a provider
of prepress graphic services, a commitment to quality and service has been our
only guarantee for continued growth. At Schawk, a Quality Improvement
Philosophy was part of our corporate culture long before such programs became
commonplace.
WE ARE GUIDED BY FIVE KEY AIMS.
1. EMPLOYEE SATISFACTION. It's very simple: our employees are crucial to the
success of our Company. We recognize them as our most important asset, a belief
demonstrated through continued training and by incomparable service to our
customers. It is clearly a whatever-it-takes attitude, and it enables Schawk to
consistently move a superior product out the door. We must continue this
support of our employees in tandem with highly professional attention to our
customers to be successful during 1995 -- and beyond.
2. CUSTOMER SATISFACTION. Our customers have traditionally chosen us because
we offer the best products and service at competitive prices. In the current,
unprecedented environment of corporate reorganization and downsizing, such
corporate underpinnings are critical. Our high regard for basic customer
service is the key to increased sales and profitability, a key we both
understand and possess at every level of our organization.
3. CAPITAL MANAGEMENT. Fiscal prudence drives our ability to stay
competitive. Every decision related to spending is judiciously reviewed, with
strict adherence to an Economic Value Added (EVA) approach. We constantly find
and then evaluate paths to new successes, to improved margins, including:
- Increased productivity through continued investment in technology and
training.
- Business simplification, by which we focus more on the 20% of our
customers who generate 80% of our profits.
- Adherence to guidelines related to customer credit and supplier incentive
agreements.
4. TECHNOLOGY AND INNOVATION. We firmly believe that the Schawk Companies
will remain positioned on the cutting edge of technology. The Company has
invested more than $65 million in capital expenditures over the last four years
for new manufacturing equipment, R&D capabilities, computer technology,
buildings, and the renovation of existing facilities.
5. STOCKHOLDER VALUE. The continuing health and vitality of the Company is
inextricably linked to the four points above. And the integrity of our efforts
is measured by increased value to our stockholders. Specifically, our
financial goal is to grow earnings at a long-term annual rate of 15%, which
will put us in the top 25% of momentum-growth companies.
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FINANCIAL HIGHLIGHTS - SCHAWK, INC.
<TABLE>
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PRO FORMA (A) HISTORICAL
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YEARS ENDED DECEMBER 31, 1994 1993 1994 1993 1992
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(Thousands of Dollars, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT INFORMATION
Net sales $186,145 $169,038 $186,145 $169,038 $110,999
Operating income 26,254 21,820 24,273 19,965 14,331
Income before income taxes
and minority interest 21,016 17,640 19,035 15,785 12,854
Income taxes 7,071 6,400 3,849 (b) 840 571
Net income 12,585 9,907 13,469 14,616 12,466
Pro forma net income adjusted
only for income taxes -- -- 10,247 9,056 7,737
Pro forma net income per share .64 .49 -- -- --
CONSOLIDATED BALANCE SHEET INFORMATION
Working capital -- -- $ 25,254 $ 30,049 $ 26,186
Total assets -- -- 193,426 180,193 155,756
Long-term debt
(Excluding capital lease obligations) -- -- 75,059 76,918 64,061
Stockholders' equity -- -- 76,275 51,119 44,183
</TABLE>
(a) Pro forma net income includes adjustments for the merger, purchase
accounting and income tax adjustments. See Note 15 to the consolidated
financial statements.
(b) Includes a one-time deferred tax charge of $3,000 for termination of S
Corporation tax election.
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<CAPTION>
1992 1993 1994
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NET SALES $111.0 $169.0 $186.1
ACTUAL OPERATING INCOME $14.3 $20.0 $24.3
PRO FORMA OPERATING INCOME -- $21.8 $26.3
PRO FORMA NET INCOME* $7.7 $9.9 $12.6
</TABLE>
* Pro forma for income taxes in 1992 and for merger, purchase accounting and
income taxes in 1993 and 1994.
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LETTER TO STOCKHOLDERS - SCHAWK, INC.
In this, our first annual report to stockholders of the merged Schawk, Inc. we
are proud to report strong earnings. Operating income grew by 20% year over
year indicating the increasing margin improvement in both the Plastics and
Graphics Groups.
[PHOTO]
We were very pleased with the results of 1994 -- both in how our people and
Companies performed, and in the new corporate structure resulting from the
merger of Filtertek and Schawk's Graphic operations.
Our big news for the year was the merger of the Schawk and Filtertek
Companies -- approved by more than 83% of the non-Schawk-related stockholders,
without votes by the Schawk Family. SGK-NYSE is now a public company. The
Schawk ticker, SGK, went up on the New York Stock Exchange on Thursday, January
5, 1995 -- a very proud day for each Schawk employee. Moving forward as a
single Company with a focused management team, we are setting the stage for the
next level of growth with a stronger capital base, improved cash flow and
synergistic management efficiencies. The Schawk Family will continue to direct
management of the new Company and will remain the Company's largest
stockholder.
In this, our first annual report to stockholders of the merged Company, we
are proud to report strong earnings. On internal growth alone, we saw sales
increase 10% to $186 million in 1994 from $169 million in 1993. More
significantly, the operating income increased to $24 million during the 1994
year, exceeding by 20% the posting of $20 million achieved during 1993.
Growth in earnings per share also posted impressive increases: we gained
over 30% at $0.64 per share for 1994,
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surpassing the Company's pro forma earnings per share of $0.49 for 1993.
One objective of our new Company is to focus on a higher-than-industry
average return on equity by achieving a 20% return within three to five years.
***
After the merger, Schawk, Inc. filed a registration with the S.E.C. for a stock
offering of 4 million shares. Our Executive Management Team made a decision in
February 1995, to withdraw the offering due to then-current market conditions.
Our decision was based on the belief that the then-market price did not
adequately support the earnings outlook of the Company. Capital which would
have been raised and additional float which would have been created were not
sufficient to overcome the dilutive impact of the then-current market price.
The registration statement was officially withdrawn from the S.E.C. in March
1995.
We welcome Hollis W. Rademacher to our Board of Directors. From 1957
to 1993, Mr. Rademacher has held various positions with Continental
Bank, N.A. Chicago, Illinois and Continental Bank Corporation,
Chicago, Illinois, most recently serving as Chief Financial Officer. Mr.
Rademacher increases our Board membership to ten and the number of outside
Directors to three. He serves on the Board's audit, option and compensation
committees.
The Schawk Executive Management Team will continue to direct the merged
Companies with Schawk's operating philosophies. We prioritize relationships
with our employees and customers. We add product value through our concentrated
customer service effort and emphasis on technology consulting. We focus our
plant managers to achieve superior financial returns by improving operating
margins in order to maximize stockholder value.
OVER THE PAST SEVERAL MONTHS, WE HAVE OFTEN BEEN ASKED WHAT WE CONSIDER TO BE
OUR BIGGEST CHALLENGE... THE ANSWER IS TO CONTROL AND MANAGE OUR GROWTH.
Over the past several months, we have often been asked what we consider to
be our biggest challenge... The answer is to control and manage our growth. We
have multiple acquisition opportunities before us and we will continue to make
judicious decisions regarding those opportunities to optimize good strategic
fit. We also emphasize growing internally with our existing Fortune 500
customer base by increasing the number of opportunities that our Companies have
to serve them. Finally, the Company continues to grow through process
improvements that reduce cycle time throughout both our development and
manufacturing processes. Controlling and managing growth will improve
stockholder value through the year 2000 and beyond.
Should you have questions regarding our Company, please feel free to contact
our Investor Relations Department at (708) 827-9494. We always look forward to
your comments and questions.
Very truly yours,
Clarence W. Schawk
Chairman of the Board
David A. Schawk
President and Chief Executive Officer
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THE SCHAWK COMPANIES BUILD PARTNERSHIPS AND ALLIANCES THAT STAND THE TEST OF
TIME.
SCHAWK, INC. CORPORATE HEADQUARTERS
SCHAWK, INC.
1695 River Road
Des Plaines, IL 60018
1-800-621-1909
(708) 827-9494
FAX (708) 827-1264
SCHAWK COMPANIES/GRAPHICS GROUP
AMBER DESIGN, INC.
(Div. of Process Color Plate)
1500 Route 517
Hackettstown, NJ 07874
(908) 850-6300
FAX (908) 850-5673
Electronic production design
COLOR DATA EAST, INC.
5 North Greenwich Road
Armonk, NY 10504
1-800-634-8459
(914) 273-6665
FAX (914) 273-6889
Electronic color separations and finished film for lithography, flexography and
gravure
FLEXO GRAPHICS, INC.
2269 W. County Road C
Roseville, MN 55113
1-800-451-4781
(612) 636-0611
FAX (612) 636-0560
Color separations and photo-polymer plates for flexography and lithography
LINCOLN GRAPHICS, INC.
1110 Cornell Avenue
Cherry Hill, NJ 08002
(609) 662-3433
(609) 662-5957
Full-service prepress for lithography, flexography and gravure
LITHO COLORPLATE COMPANY, INC.
2626 2nd Street N.E.
Suite #100
Minneapolis, MN 55418
(612) 788-8308
FAX (612) 789-5424
Full-service prepress for lithography, flexography, gravure, and production
press proofs
LSI/ATLANTA
5000 Highlands Overlook,
Suite 215
Wilson Way
Smyrna, GA 30082
(404) 333-9432
FAX (404) 333-4280
Color separations for lithography and flexography
LSI/KALA
2325 North Burdick
Kalamazoo, MI 49007
(616) 381-3820
FAX (616) 382-9070
Color separations for lithography and flexography, production press proofs
(including metal decorating)
THE PALM GROUP
2626 2nd Street N.E.
Suite #100
Minneapolis, MN 55418
(612) 339-2000
FAX (612) 781-6296
High-level electronic retouching
PROCESS COLOR PLATE CO., INC.
1200 W. Monroe Street
Chicago, IL 60607
(312) 243-2216
FAX (312) 243-2859
Full-service prepress for flexography and gravure
SCHAWK CLIENT SERVICES GROUP
1695 River Road
Des Plaines, IL 60018
1-800-621-1909
(708) 827-9494
FAX (708) 827-1967
Consulting, needs analysis, systems integration, technical education and
training services to other Graphics Group divisions and their customers
SCHAWKGRAPHICS
1600 East Sherwin Avenue
Des Plaines, IL 60018
(708) 296-6000
FAX (708) 296-9466
Full-service prepress for lithography, metal decorating, flexography, and
gravure
TOTAL REPRODUCTIONS/ NORAL, INC.
6901 Hamlin Avenue
Lincolnwood, IL 60645
(708) 674-6400
FAX (708) 674-6024
Full-service color separations
TRUE COLOR SOLUTIONS, INC.
6901 Hamlin Avenue
Lincolnwood, IL 60645
(708) 674-6470
FAX (708) 674-6024
Full-service printing
WESTON ENGRAVING CO.
2626 2nd Street N.E.
Suite #100
Minneapolis, MN 55418
(612) 789-8514
FAX (612) 789-5424
Electronic production design, full-service prepress for lithography,
flexography and gravure, and production press proofs
SCHAWK COMPANIES/PLASTICS GROUP
FILTERTEK, INC.
11411 Price Road
P.O. Box 310
Hebron, IL 60034
1-800-248-2461
(815) 648-2416
FAX (815) 648-2929
Design and manufacture of insert injection molded filtration products
FILTERTEK DE PUERTO RICO, INC.
CARR #757, K.M. 0.4
Box 800
Patillas, PR 00723
(809) 839-6363
FAX (809) 839-6360
FILTERTEK, B.V.
Industrial Estate
Newcastle West
County Limerick, Ireland
011-353-696-2666
FAX 011-353-696-2475
FILTERTEK, SA
ZA Du pre de la Dame Jeanne
B.P. 11
60128, Plailly, France
011-33-4454-1990
FAX 011-33-4454-3892
FILTERTEK GMBH
Langer Weg 1-9
D-4048 Grevenbroich 4
Gustorf, Germany
011-49-2181-491-923
FAX 011-49-2181-491-930
PLASTIC MOLDED CONCEPTS, INC.
111 Murphy Drive
P.O. Box 490
Eagle, WI 53119
(414) 594-2191
FAX (414) 594-3589
Design and manufacture of injection molded plastic products
TEK PACKAGING GROUP HEADQUARTERS
11320 E. Main Street
P.O. Box 68
Huntley, IL 60142
(708) 669-5291
FAX (708) 669-5263
Design and manufacture of thermoformed packaging products for the consumer
products industry
TEK PACKAGING GROUP
Midwest Facility
11000 Bakley St.
Huntley, IL 60142
(708) 669-0522
FAX (708) 669-0524
Design and manufacture of thermoformed packaging products for the healthcare
and electronics industries
TEK PACKAGING GROUP
West Coast Facility
3614 Zephyr Court
Stockton, CA 35206
(209) 982-0209
FAX (209) 982-0206
Design and manufacture of thermoformed packaging products for the healthcare
and electronics industries
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[PHOTO]
AN ONGOING INVESTMENT IN TECHNOLOGY AND TRAINING
The Schawk Companies are united by a common business strategy: to build and
maintain a leadership role in technology-intensive enterprises, enabling us to
better serve our client base of Fortune 100 and 500 companies. Our high levels
of expertise, innovation and customer service enable us to provide high-margin
products that assure our long-term growth and viability.
One of our strengths lies in our ability to help our customers maximize the
opportunities presented by changing technology. As a result of experiences in
the graphic arts field, where electronic technology revolutionized an industry
in less than a decade, we realized early on that by embracing all aspects of
developing technology, we would increase our growth and profitability, while
better serving our customers.
[PHOTO]
Responsible industry leadership has required an ongoing investment in new
technologies and the knowledge to master them. It has meant a focus on the
philosophy of quality throughout our Companies. It has also meant the
relentless support of employee training and improvement, since the key to each
of Schawk's proprietary products is expertise.
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[PHOTO]
"It's the Schawk Technical Advisory Board's (STAB's) job to help the Schawk
Companies keep ahead of the technology curve by investigating what's new, doing
research, and advising our operating companies. Rapidly advancing technology
also requires much education and information dissemination to our own employees
and those of our customers. Through our Schawk Prep and Seminar Programs alone,
we were able to provide training for over 3,000 individuals last year. In
addition, our electronic file verification services--making sure everything's
OK before a project transitions into production--is a resource that all of our
Graphics Companies can offer to their customers. In the end, it's all about
service."
Bruce Miller
Chairman, Schawk Technical
Advisory Board (STAB)
Vice President, Technical Director
Weston Engraving (Minneapolis, MN)
Lida Jalali
General Manager, Schawk's
Client Services Consulting Group
Schawk, Inc. (Des Plaines, IL)
OUR GRAPHICS GROUP: SPECIALTY SERVICES BASED ON TECHNOLOGY VALUE ADDED
Our Graphics Group provides premium prepress products and services for each of
the three main printing processes used in packaging and related promotional
materials: lithography, flexography and gravure. We know of no other group that
provides the comprehensive press services to the packaging industry.
The challenge is posed by many factors, primarily due to the fact that with
packaging, a variety of inks are often applied to a package made of plastic,
metal, cardboard, colored stock, or other material instead of
[PHOTO]
standardized paper. With packaging, a minor error in color balance can change
the breakfast visual on a million packages to an unpleasant green; a smiling
baby can develop a worrisome pallor. Since a very high percentage of the
purchasing decisions for food, beverage and other household products are made
at the point of purchase, accuracy is critically important.
The specific task of our Graphics Group is not printing, but modifying
artwork and photography to present either film or digitized information to the
printers who then print the actual packages or labels. We have become the agent
who assures perfect balance of colors, specifically adapted for the unique
material of each package.
Our Company's profitability has expanded during the digital revolution that
continues to consolidate our industry, driving many competitors out of
business. Though computers have made it possible to do prepress work at lower
unit cost with faster turnaround times, hardware and software continue to
advance at a rate that presents the challenge of requiring a continuous
investment in equipment and training.
This challenge has characterized our long-term route to growth. Many years
ago, our Graphics Group established direct relationships with the consumer food
manufacturers and consumer products companies and people making the key
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[PHOTO]
decisions. Thus, our technical expertise places us in the role of consultant
and trainer as well as supplier to Fortune 100 and 500 customers, putting us in
an excellent position for providing a full range of profitable specialty
services that bring us closer to our customer base.
For example, during 1994, we established installations on-site at six
customer locations. These were staffed by Schawk personnel in order to help
those customers more efficiently coordinate their marketing staffs and
converters, to better coordinate with our own production-operation people. This
level of partnership -- a level of service far beyond that of conventional
prepress -- is likely to represent as much as 30% of our workforce within five
years.
In addition, we have traditionally strengthened our market position through
an aggressive, ongoing acquisition program in which we target companies for
their key customer lists.
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[PHOTO]
"Schawk's dedication to growth through acquisitions and commitment to quality
has taken us into a new era. Schawk has set the stage for bringing the Plastics
Group into new markets with accelerative growth prospects. Schawk, Inc. is
preparing for the future as a premiere international leader in the graphics and
plastics industries it serves."
Larry Larkin
Executive Vice President
Plastics Group (Hebron, IL)
In January 1995, Schawk Inc. completed the acquisition of Noral Color Corp. of
Chicago and merged its operations with one of the Company's existing
facilities, Total Reproductions, Inc. Previously, in May of 1994, Schawk
acquired Clockface & Creole, merging it with our Client Services Group. This
well-known graphics technology and training firm is working
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internally with our own employees and externally with those of our customers.
Over the years, our Graphics Group has been strengthened through its work as
alpha and beta sites for such software developers as Adobe, Aldus, Barco,
Altsys/Macromedia, and Alias, and hardware companies including Scitex,
Linotype-Hell, Silicon Graphics, and AGFA. This participation has provided an
opportunity to become familiar early on with new software. It also allows us to
have input in the development of the software and hardware itself. This means
it is possible for the Graphics Group to develop skills prior to final,
full-market release of such developing technology.
As an example, in 1994 we performed alpha and beta services for a number of
companies, including Radius Corp., the first licensee of the Macintosh
operating system, whose line of Mac clones is targeted at high-end graphics
users such as ourselves.
In addition, our Graphics Group provides service early in the packaging
process, offering high-level computer production design capabilities to our
packaging clients.
SCHAWK PLASTICS GROUP: STRATEGIC ALLIANCES TO DOMINATE NICHE MARKETS
Our Plastics and Packaging Groups adhere to the Schawk philosophy of investment
in knowledge-intensive systems and people. For example, we believe our use of
advanced design software to be a first for our industry. Linked to a
multi-dimensional modeling capability, all Schawk Plastics Group facilities can
today provide extremely rapid turnaround of design and prototyping for both
filter and packaging customers -- much faster than industry standards.
Filtertek, our insert injection molding firm, is the world's largest
manufacturer of custom insert injection molded filtration devices, serving
markets including auto-
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[PHOTO]
motive, healthcare and industrial applications from facilities in the U.S.,
Puerto Rico and Europe. Consolidation of our European manufacturing operations
was completed during 1994 with the closing of our German manufacturing facility
and merging such work into our existing French and Irish operations. ISO 9000
certification was achieved by the Irish facility during 1994. French
certification is planned for 1995, while efforts for U.S. certification are
moving on a parallel track.
By establishing strategic alliances with suppliers and customers alike,
Filtertek has gained an international reputation for solving complex customer
needs through design, innovation and excellence in manufacturing process
technology. These alliances provide valuable assistance in
[PHOTO]
designing new products, developing new engineered materials, securing new
product patents, and efficiently accessing new distribution channels for our
products.
For the automotive industry, Filtertek develops and manufactures many of the
unique filters now found in anti-lock braking systems, fuel injection systems
and automatic transmissions, to name but a few.
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[PHOTO]
"We applied TQM principles to reengineering our wage delivery system for our
manufacturing population. The previous system was an incentive piece rate
system which had been organized in a haphazard manner. To change it, an
employee-elected process team of manufacturing employees developed job
descriptions, a grade structure, appraisal forms, and then reviewed competitive
wage data, and established new wage ranges for the entire manufacturing
workforce. It took about five months, but today we have a merit-based system of
hourly rates that's fairer to everyone... including the customer. Employee
empowerment works at our company.
Anita Bordeau
Director of Human Resources
Filtertek, Inc. (Hebron, IL)
Three new patented designs for an all plastic automatic transmission sump
filter went into production during 1994: two as an OEM supplier to Ford and one
to General Motors. All three are now being sold into the aftermarket as well.
Our patented sump filters are made of a newly engineered resin which, as part
of a strategic alliance, is licensed exclusively for the application.
Aftermarket distribution is also the result of an exclusive strategic alliance,
with a key distributor in the automotive aftermarket field.
For the healthcare field, the Company pioneered two new filters in 1994 that
[PHOTO]
provide a level of bacterial control not previously achieved, creating a
healthier environment for dental patients. The first product, launched in
October 1994, as the Clearline(TM) Dental Water Filter, fits in a dental
chair's water supply line and protects the patient from microbial contamination
in the water line, as well as preventing contaminant backflush. The
daily-disposable Clearline(TM) Dental Water Filter is being exclusively
manufactured for our alliance partner, Scitech Dental of Seattle, WA.
Filtertek's second dental exclusive is a filter that fits inside the dental
hand piece. This per-patient filter is scheduled for launch in late 1995
through an exclusive strategic partnership with a leading manufacturer of
high-speed dental hand pieces. With more than 140,000 dentists in the U.S.
alone, the potential market is enormous.
Plastic Molded Concepts, Inc. (PMC), our custom injection molding firm, is
known for its ability to produce complex specialty products with engineered
plastics. It works with difficult-to-mold engineering-grade resins to produce a
range of durable goods from gas tanks for small engines to faucet parts for
garbage disposals to parts for high-tech medical and healthcare diagnostic
equipment. Like all Schawk Companies, PMC seeks to build a strong base of
knowledge, often working with resin suppliers in beta-fashion to gain expertise
with new resins and to then extend its experience in handling tough jobs.
During 1994, we provided our PMC facility with added business critical mass
with the complete relocation of our Plasti-Chain product line from Illinois to
our PMC facility in Eagle, Wisconsin.
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[PHOTO]
[PHOTO]
THE PLASTICS PACKAGING GROUP: REFOCUSED IN 1994; NATIONAL OBJECTIVES IN 1995
Within the Plastics Group, our packaging Companies focus on "visual packaging"
- -- the kind of packaging that displays the product inside a clear plastic
shell. Our markets include both consumer products and specialty clean room
packaging for the healthcare and electronics industries.
Consolidated in 1994 as Tek Packaging Group, our visual and protective
packaging operations, formerly known as Robinson Industries, provides its
customers with a full line of plastic components to package their products,
including package design, the engineering and building of tools (molds), the
thermoformed blisters, clamshells and trays themselves, as well as the prepress
and printing of any printed packaging components such as blister cards.
Clean room and healthcare packaging is produced by two units that were
merged in 1994 with Tek Packaging Group, previously known as Fuzere
Manufacturing Co. and Fuzere Midwest. The primary features
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[PHOTO]
of these specialized facilities are their design capability and clean
room/sterile manufacturing environment.
Tek Packaging Group products have been used for custom-designed implement
trays utilized in a variety of surgical procedures and sterilizable packaging
for items needing complex protection such as artificial hip and knee joints.
Our capabilities include not only manufacturing to precise specifications, but
also comfortably meeting FDA guidelines for GMPs (Good Manufacturing
Procedures).
[PHOTO]
THE FUTURE IS GLOBAL
The pace of change is accelerating. All of our Companies look forward to
continued opportunities presented by the technologies and markets that define
their clients' needs. Our commitment to the best technology, coupled with our
ongoing training programs for employees and customers, enables us to maintain
leadership in all our industries.
The bottom line for Schawk is simply this: we take relationships one step
further with our customers and employees, building partnerships and alliances
that stand the test of time.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION - SCHAWK, INC.
BACKGROUND
Schawk has grown through a series of strategic acquisitions over the last 20
years in which many owner-manager teams of acquired firms have been retained.
Purchase terms have typically involved cash, notes and performance-based future
compensation. These acquisitions have been assimilated and in nearly every
instance have been accretive to future earnings growth.
These successful acquisitions are elements of a strategic plan to acquire
market niche companies with Fortune 500 customer lists, excellent customer
service or proprietary products and solid management which receives performance
incentives to continue to grow the business. All Schawk's acquisitions were in
strong markets serving customers with both technological and quality
advantages. The Company believes that continued emphasis on complementary
acquisitions of companies serving targeted markets will allow it to broaden its
prepress and plastics product offerings. The Company also believes it has
greater versatility in manufacturing and serving its customers than smaller,
less-capitalized and less-integrated competitors, and that this versatility
will result in greater opportunities for internal growth.
Schawk acquired or initiated the start-up of the following companies during the
last three years. In May 1992, Schawk acquired Lincoln Graphics, Inc. in Cherry
Hill, New Jersey. Lincoln Graphics gives the Graphics Group a strong East Coast
presence in the prepress packaging markets. In July 1992, Schawk acquired Flexo
Graphics, Inc. in Roseville, Minnesota. Flexo Graphics, Weston Engraving and
Litho Colorplate are three Graphics Group companies servicing the
Minneapolis-St. Paul packaging markets. Schawk Client Services Consulting Group
was formed during the third quarter of 1992 to service the graphic arts
software, hardware, and training needs of the Graphics Group's customers. In
1994, Schawk Client Services Group was enhanced when the previous owners of
Clockface & Creole, a well-known graphic arts training company, agreed to
liquidate its operation, join the group and further develop the technical
training and education division of Schawk.
Schawk effectively acquired a controlling interest of the outstanding equity of
Filtertek in September 1992. On June 1, 1993, Filtertek purchased Plastic
Molded Concepts (PMC) in Eagle, Wisconsin. PMC is a manufacturer of specialty
plastic components for the healthcare and industrial industries. On October 2,
1993, Filtertek purchased three plastics thermoforming operations: Robinson
Industries and Fuzere Midwest, both located in Huntley, Illinois, from Schawk
and Fuzere Manufacturing Company, Inc., located in Stockton, California, from
the stockholders of Schawk (collectively, the "Robinson/Fuzere transaction").
These thermoforming companies are now operated as the Tek Packaging Group, Inc.
Filtertek and Schawk had been operating under common control and management
since September 1992. During that time, it became apparent to management that
combining the companies would simplify and enhance the operations, management,
and strategic direction. In November 1994, Filtertek and Schawk agreed to
merge, and, following receipt of the requisite stockholder approval by more
than 66 2/3% of the independent stockholders of Filtertek, Schawk merged with
and into Filtertek effective as of December 30, 1994. Filtertek's name was
changed then to Schawk, Inc.
BASIS OF PRESENTATION
The merger was accounted for using the purchase method of accounting. Because
Schawk owned a controlling interest in Filtertek prior to the merger, under
AICPA Accounting Interpretation 26 of Accounting Principles Board Opinion No.
16, the merger is required to be accounted for as if Schawk had acquired the
minority interest in Filtertek's Class A Common Stock outstanding at the
effective time of the merger. Accordingly, the consolidated financial
statements of Schawk will be treated as the Company's historical financial
statements in future financial reporting. Such historical financial statements
of Schawk include the results of Filtertek since Schawk's acquisition of its
controlling interest in September 1992.
In light of the changes to be made in future accounting presentation, the
following discussion of periods prior to the consummation of the merger
includes an analysis of (i) pro forma consolidated income statement data for
the Company; and (ii) the historical consolidated results of operations and
financial condition of Schawk, which include 100% of sales but only 60% of
earnings for 1992, 1993 and 1994, since Schawk's controlling interest in
Filtertek beginning September 1992.
13
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION - SCHAWK, INC.
Pro forma calculations:
The earnings per share presented are pro forma calculations. The Company
believes that the pro forma presentation best represents the actual results of
the combined operations as if they had been merged for the comparable periods
of 1993 and 1994. The actual earnings per share for Schawk, Inc. are not
informative because Schawk was a privately owned S Corporation and had a
limited number of outstanding shares prior to the merger with Filtertek, Inc.
on December 30, 1994. Further, as an S Corporation, taxation of the Corporate
entity was minimal. The shares outstanding in the pro forma earnings per share
calculations account for the shares exchanged in the merger as if the exchange
occurred at the beginning of each of the periods presented. Consequently, the
minority interest in the earnings of Filtertek has been eliminated. In
addition, pro forma purchase accounting adjustments for increased goodwill
amortization, increased depreciation for fair value adjustments to property and
equipment, and reductions in compensation expense for new employee/stockholder
agreements effective January 1, 1995 have also been made to present pro forma
earnings per share. Additionally, the earnings have been adjusted as if the
Graphics Group had been taxed at regular corporate income tax rates instead of
S Corporation rates. Schawk terminated S Corporation tax status on December 30,
1994.
PRO FORMA FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PRO FORMA CONSOLIDATED RESULTS--1994 VERSUS 1993
Net Sales. Sales were $186.1 million for 1994 versus 1993 sales of $169.0
million. This was a 10.1% increase due to steady internal growth of the
Company's existing customer base.
Operating Income and Margin. Pro forma operating income for 1994 was $26.3
million, a 20.3% increase over 1993 operating income of $21.8 million. The
operating margin increased to 14.1% in 1994, from 12.9% in 1993. This margin
improvement resulted from operating efficiencies, the closure of excess
manufacturing capacity in Germany, and continued improvements through
automation of manufacturing processes.
Income Before Income Taxes. Pro forma income before income taxes for 1994 was
$21.0 million compared with $17.6 million for the same period in 1993. This was
a 19.1% increase in income before income taxes. Interest expense increased from
$4.9 million in 1993 to $5.2 million in 1994 due to rising interest rates. The
Company also recorded in the fourth quarter a $1.0 million pre-tax charge to
income related to the proposed offering of Schawk, Inc. Class A common stock
which was withdrawn from the Securities and Exchange Commission (S.E.C.) in
March 1995.
Net Income. Pro forma primary and fully diluted earnings per share adjusted for
the merger, purchase accounting, and income taxes (see Note 15 to the Schawk,
Inc. audited financial statements) for Schawk, Inc. was $0.64 for 1994, a 30.6%
increase over pro forma primary and fully diluted 1993 earnings per share
adjusted for the merger, purchase accounting and income taxes of $0.49. Pro
forma net income increased to $12.6 million in 1994 from $9.9 million in 1993.
The Company also recorded in the fourth quarter of 1994 a $0.6 million
after-tax charge to income related to the proposed offering of Schawk, Inc.
Class A common stock which was withdrawn from the S.E.C. in March 1995.
PRO FORMA GRAPHICS GROUP--1994 VERSUS 1993
Net Sales. Sales increased 8.4% to $103.9 million in 1994, from $95.8 million
in 1993. The largest sales increases were seen in the flexographics operations
with more food and consumer products moving toward flexible packaging. This
increase was due to continued product extensions, increased product entries
into the market, and packaging label changes required by Federal Law.
Operating Income and Margin. Operating income rose 24.6% to $20.4 million
for 1994 as compared with $16.4 million for 1993. The 1994 operating margin was
19.6% as compared to the 1993 operating margin of 17.1%. This increase reflects
higher gross margins on increased sales with only modest increases in selling,
general and administrative expenses. Technology gains and enhanced training for
production personnel have improved gross margins because work moves more
quickly through the manufacturing sites.
PRO FORMA PLASTICS GROUP--1994 VERSUS 1993
Net Sales. Sales for the Plastics Group for 1994 increased 12.3% to $82.3
million compared with $73.2 million for 1993. The Plastics Group's sales growth
was primarily due to increases at the Tek Packaging Group's Robinson facility,
the Filtertek U.S. and French divisions and PMC.
Year over year automotive filter product sales were up 24%, consumer sales
were up 10% and industrial sales were up 30%. Healthcare filter product sales
declined 9% due in part to a significant drop in orders during the fourth
quarter 1994 as healthcare customers reduced inventories.
14
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION - SCHAWK, INC.
Operating Income and Margin. Operating income for 1994 increased 7.9% to $4.1
million in 1994 from $3.8 million in 1993. The 1994 operating margin for this
group was 5% as compared with the 1993 operating margin of 5.2%. Margins
continued to lag in Europe from pricing pressures and the closing of the German
manufacturing facility and assimilation of much of its volume into other
operations. Margins also were impacted by the greater percentage of automotive
product orders which have lower product margins than the healthcare, industrial
and consumer segments.
HISTORICAL FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HISTORICAL CONSOLIDATED RESULTS--1994 VERSUS 1993
Net Sales. Historical sales for this period were identical to the pro forma
sales.
Operating Income and Margin. Operating income increased by 21.6% from $20.0
million in 1993 to $24.3 million in 1994. Operating margin improved from 11.8%
in 1993 to 13% in 1994. This increase reflects higher gross margins on
increased sales with only modest increases in selling, general and
administrative expenses. A faster generation of equipment and a well-trained
workforce that can take advantage of such technology advances has improved
gross margins because work moves more quickly through the manufacturing sites.
Income Before Income Taxes and Minority Interest. Income before income taxes
and minority interest for 1994 was $19.0 million, up 20.6% from $15.8 million
in 1993 as a result of the above discussion regarding net sales and operating
income and margin.
Net Income. Net income for 1994 was $13.5 million, down 7.8% from $14.6 million
in 1993. The 1994 income tax provision includes a $3.0 million adjustment to
reflect the termination of the S Corporation status of Schawk. Additionally,
1994 reflects a $0.6 million after-tax charge related to the proposed offering
of Schawk, Inc. Class A common stock which was withdrawn from the S.E.C. in
March 1995.
HISTORICAL CONSOLIDATED RESULTS--1993 VERSUS 1992
Net Sales. Net sales increased 52.3% to $169.0 million for the year ended 1993
from $111.0 million for the year ended 1992. Net sales reflect a full year of
Filtertek sales in 1993 compared to only three months of 1992 sales as well as
a full year of sales from two Graphics Group acquisitions, Lincoln Graphics and
Flexo Graphics. Internal growth of 10.1% was attributable to increased orders
from existing Graphics Group customers including the fourth quarter orders as
customers began to change their food and beverage labels to comply with the
federally mandated NLEA requirements, offset by a sales decline in a
non-packaging commercial prepress and printing facility.
Operating Income and Margin. Operating income increased by 39.3% to $20.0
million in 1993 from $14.3 million in 1992. The operating margin declined from
12.9% in 1992 to 11.8% in 1993 because of the inclusion of a full year of
Filtertek operations in 1993 which has lower margins than Schawk. Operating
income from the Graphics Group increased 15.5% to $16.4 million in 1993
compared with $14.2 million in 1992, as operating margins in this segment
remained the same on increased volume.
Income Before Income Taxes and Minority Interest. Income before income taxes
and minority interest increased 22.8% to $15.8 million in 1993 from $12.9
million in 1992. Interest expense increased 110.4% from $2.3 million in 1992 to
$4.9 million in 1993 as a result of additional debt incurred for the
acquisition of a controlling interest in Filtertek.
Net Income. Net income increased by 17.2% to $14.6 million in 1993 compared
with 1992 net income of $12.5 million due to the factors discussed above.
15
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION - SCHAWK, INC.
LIQUIDITY AND CAPITAL RESOURCES
Schawk has a $49.0 million Revolving Credit Agreement to provide financing,
acquisition funding and working capital flexibility. The agreement was
effective in September 1992 and matures on August 31, 1999. Advances under the
revolver bear interest at an annual rate equal to either the Eurodollar
interest rate plus 0.625% until August 31, 1996, and 0.75% thereafter, or, at
the election of the borrower, the lender's prime rate. The blended interest
rate for the year ended December 31, 1994 was 5.3%. On December 31, 1994
advances under the revolver were $46 million, down from the December 31, 1993
level of $51.5 million. Amounts borrowed and repaid under the facility may be
borrowed again from time to time up to the current maximum of $49.0 million.
Schawk has an interest rate swap (floating to fixed) which sets the rate of
interest on the revolving credit facility at 5.81%. See Note 8 to the Schawk,
Inc. audited financial statements. The swap amount at December 31, 1994 was
$26.0 million and had a positive value of $643,000. If the swap was terminated
at December 31, 1994, the bank would owe Schawk, Inc. $643,000. From November
1992 through November 1994 the swap had a negative value. The amount of
additional interest from November 1992 through November 1994 was approximately
$1.4 million.
In connection with the merger, Schawk issued notes payable in payment of the
$8.8 million S Corporation dividend to the Schawk Family. These notes bear
interest at 5% per annum and are payable on demand or, if not repaid earlier,
December 31, 1995. The Company has arranged an unsecured short-term credit
facility for up to $8.8 million to fund repayment of these notes payable if
needed. This facility bears interest at LIBOR plus 0.5% and matures at December
31, 1995.
Filtertek currently has a $30.0 million Revolving Credit Agreement to provide
financing, acquisition funding and working capital flexibility. The agreement
was effective in December 1993 and matures in December 1998. Advances under
this revolver bear interest at an annual rate of LIBOR plus 0.5% or, at the
election of Filtertek, the lender's prime rate. At December 31, 1994, Filtertek
had outstanding advances of $28.3 million pursuant to the revolver, up from the
December 31, 1993 level of $22.0 million. The blended interest rate for the
year ended December 31, 1994 was 5.5%.
Filtertek negotiated a $3.5 million foreign currency line of credit to
facilitate the funding of European working capital needs. This short-term line
is available to provide cash flow to cover the costs related to the closing of
the German manufacturing site. At December 31, 1994, Filtertek had borrowed
$645,000 on this line of credit.
The Company's working capital at December 31, 1993 was $30.0 million,
representing a 14.8% increase over the 1992 year-end level of $26.2 million,
and was $25.3 million at December 31, 1994. Management believes that the level
of combined 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, through cash generated from future operations, or
through short-term or long-term financing. The Company currently pays a regular
quarterly dividend on the Class A Common Stock of $0.065 per share, or $0.26
per share annually. The Company also pays a 5% dividend on its preferred stock.
The Company had combined capital expenditures for 1994 of $13.9 million. The
Schawk combined capital expenditures during 1993 were $19.1 million, and $11.1
million during 1992. The expenditures were primarily due to acquisitions,
building renovations, the purchase of several properties and new equipment.
As a result of the Schawk's acquisition of the majority interest in Filtertek,
the acquisitions of Flexo Graphics and Lincoln Graphics, and the combined
capital expenditures of the Plastics and the Graphics Groups, combined
depreciation and amortization increased from $7.8 million in 1992 to $15.3
million in 1993 and to $14.9 million for the year ended 1994.
Acquisitions of $48.3 million in the Schawk 1992 cash flow statement are
related to the Filtertek, Lincoln Graphics and Flexo Graphics acquisitions, and
acquisition costs of $13.4 million in 1993 were due to the second stage of the
Filtertek transaction and Filtertek's acquisition of PMC. Acquisitions during
1994 were negligible.
Schawk's current revolving credit facility is being renegotiated to increase
the Company's borrowing capacity and recognize the improved credit worthiness
of the combined entities. The Company anticipates putting a new revolver in
place early in the second quarter of 1995. This revolver will supersede the
current Schawk revolver, the Filtertek revolver, the foreign currency line of
credit and the short-term dividend note. The new revolver is anticipated to
have more favorable pricing than our combined existing lines of credit. The
unused portions of the Company's revolving credit facilities will be available
to fund possible future acquisitions and for general corporate purposes.
16
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION - SCHAWK, INC.
1995 ACQUISITIONS
To further strengthen its market position, the Company has recently completed
or is currently contemplating the acquisition of the following companies:
On November 30, 1994, Schawk, Inc. announced its agreement to acquire the
business and certain assets of Noral Color Corporation, a prepress graphic arts
business servicing packaging, point-of-sale and the advertising markets. The
Company has merged Noral's operations into the Total Reproductions operating
division of the Graphics Group which is located in Lincolnwood, Illinois. For
the fiscal year ended April 30, 1994, Noral had sales of approximately $5.6
million. The acquisition was completed during the week of January 3, 1995.
In November 1994, the Company entered into an agreement in principle to acquire
a small teleproductions company in the Chicago area, which will provide the
Company entree into a new multi-media product line. The purchase price, payable
in cash or stock, plus additional consideration based on earnings, is not
material to the Company. It is also contemplated that the Company will enter
into long-term employment agreements with the sellers. The acquisition is
subject to the satisfaction of certain conditions, including completion of a
due diligence audit and negotiation of a definitive agreement.
CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Effective December 30, 1994, the corporation previously known as Schawk, Inc.
("Old Schawk") and certain affiliated corporations (collectively with Old
Schawk, the "Old Schawk Companies") were merged into the Registrant (formerly
known as "Filtertek, Inc.") in a transaction accounted for as a purchase. The
surviving corporation in the merger was Filtertek, Inc. which then changed its
name to Schawk, Inc.; however, under applicable accounting rules the historical
financial statements of the Old Schawk Companies, rather than the Filtertek,
Inc. statements, will be treated as the financial statements of the Registrant.
The Registrant's operations consist of two segments, its graphics business
(the "Graphics Group") and its plastics business (the "Plastics Group"). The
Plastics Group is comprised primarily of what was the business of Filtertek,
Inc. prior to the merger and the Graphics Group is comprised primarily of what
was the business of the Old Schawk Companies.
The Registrant's principal accountant from 1983 through January 16, 1995 had
been Arthur Andersen LLP. The Old Schawk Companies' principal accountant from
January 1, 1992 through December 30, 1994 had been Ernst & Young LLP.
On January 16, 1995, the Board of Directors decided to continue to retain
Arthur Andersen LLP to audit the Plastics Group and Ernst & Young LLP to audit
the Graphics Group for the fiscal year ended December 31, 1994. However, as a
result of the merger, Ernst & Young LLP has become the Registrant's principal
accountants because, as stated above, under accounting rules the financial
statements of the Old Schawk Companies will be treated as the financial
statements of the Registrant. Consequently, Ernst & Young LLP will deliver an
audit opinion on behalf of the Registrant for the fiscal year ended December
31, 1994. Arthur Andersen LLP will deliver an audit opinion with respect to the
Plastics Group for the year ended December 31, 1994, and Ernst & Young LLP will
refer to such opinion in delivering its audit opinion on behalf of the
Registrant.
The Registrant and Arthur Andersen LLP have not disagreed on any matter of
accounting principles or practice, financial statement disclosure or auditing
scope or procedure in connection with the audits for the Registrant's two most
recent audited fiscal years or during the period of January 1, 1994 to January
16, 1995. The Board of Directors' determination not to retain Arthur Andersen
LLP was not based on the expectation that any such disagreement would arise in
connection with the audit of its financial statements for the year ended
December 31, 1994, but rather by virtue of the merger.
Other than as described above, Filtertek, Inc. has not engaged or otherwise
consulted with Ernst & Young LLP regarding any matter relating to Filtertek,
Inc.'s financial statements, and no written report or oral advice was provided
to Filtertek, Inc. by Ernst & Young LLP regarding any decision of Filtertek,
Inc. as to any accounting, audit or financial reporting issue.
17
<PAGE> 20
CONSOLIDATED STATEMENTS OF INCOME - SCHAWK, INC.
<TABLE>
<CAPTION>
(Thousands of Dollars, Except Per Share Amounts)
------------------------------------------------
YEAR ENDED DECEMBER 31 1994 1993 1992
- ---------------------- ---- ---- ----
<S> <C> <C> <C>
Net sales $186,145 $169,038 $110,999
Cost of sales 119,964 109,549 66,753
Selling, general, and administrative
expenses 41,908 39,524 29,915
Operating income 24,273 19,965 14,331
Other Income (expense):
Interest and dividend income 997 627 807
Interest expense (5,231) (4,922) (2,339)
Other (1,004) 115 55
(5,238) (4,180) (1,477)
-------- -------- --------
Income before income taxes and
minority interest 19,035 15,785 12,854
-------- -------- --------
Income Taxes:
Income taxes prior to termination
of S Corporation status 849 840 571
Deferred income tax charge related
to termination of S Corporation status 3,000 -- --
Income before minority interest 15,186 14,945 12,283
Minority interest in net (income) loss
of consolidated subsidiary (1,717) (329) 183
-------- -------- --------
Net income $ 13,469 $ 14,616 $ 12,466
======== ======== ========
Pro Forma Data (unaudited):
Pro forma income taxes $ 7,071 $ 6,400 $ 5,300
Pro forma net income adjusted only
for income taxes 10,247 9,056 7,737
Pro forma net income adjusted for
merger, purchase accounting
and income taxes (Note 15) 12,585 9,907 --
Pro forma primary and fully diluted
earnings per share adjusted for
merger, purchase accounting, and
income taxes 0.64 0.49 --
Pro forma weighted average number
of common and common
equivalent shares outstanding 19,543 20,105 --
</TABLE>
See accompanying notes.
18
<PAGE> 21
CONSOLIDATED BALANCE SHEETS - SCHAWK, INC.
<TABLE>
<CAPTION>
(Thousands of Dollars)
----------------------
DECEMBER 31 1994 1993
- ----------- ---- ----
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 2,288 $ 3,533
Trade accounts receivable, less allowance for
doubtful accounts of $947 in 1994 and $791 in 1993 31,906 30,760
Inventories 19,078 17,569
Prepaid expenses and other 3,464 3,277
-------- --------
Total current assets 56,736 55,139
Property and equipment--net 81,450 76,578
Excess of cost over net assets acquired, less accumulated
amortization of $4,516 in 1994 and $4,173 in 1993 48,287 38,193
Other intangible assets, less accumulated amorization
of $1,788 in 1994 and $1,110 in 1993 1,321 1,828
Other 5,632 8,455
-------- --------
Total assets $193,426 $180,193
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 6,719 $ 7,758
Accrued expenses 13,908 12,584
Dividends payable -- 2,235
Notes to payable stockholders 8,780 902
Current portion of long-term debt and capital lease obligations 2,075 1,611
------- --------
Total current liabilities 31,482 25,090
Long-term debt 75,059 76,918
Capital lease obligations 6,031 6,353
Minority interest -- 18,797
Other 1,209 1,615
Deferred income taxes 3,370 301
Commitments and Contingencies
Stockholders' Equity:
Common stock 164 108
Preferred stock -- --
Additional paid-in capital 75,412 16,559
Retained earnings 3,971 38,107
Cumulative foreign currency translation adjustment (947) (1,393)
-------- --------
78,600 53,381
Less: treasury stock at cost 2,325 2,262
-------- --------
76,275 51,119
-------- --------
Total liabilities and stockholders' equity $193,426 $180,193
======== ========
</TABLE>
See accompanying notes.
19
<PAGE> 22
CONSOLIDATED STATEMENTS OF CASH FLOWS - SCHAWK, INC.
<TABLE>
<CAPTION>
(Thousands of Dollars)
-----------------------------------------
YEAR ENDED DECEMBER 31 1994 1993 1992
- ---------------------- ---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $13,469 $14,616 $12,466
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization 14,866 15,336 7,784
Deferred income taxes 3,051 (13) --
Other (147) (1,291) (176)
Changes in operating assets and
liabilities, net of effects from
acquisitions:
Trade accounts receivable (1,146) (2,018) (926)
Inventories (1,509) (715) 739
Prepaid expenses and other (169) (1,058) 385
Trade accounts payable and
accrued expenses 285 1,682 212
------- ------- -------
Net cash provided by operating activities 28,700 26,539 20,484
INVESTING ACTIVITIES
Purchases of property and equipment (13,882) (19,066) (11,060)
Cash proceeds from disposals of
property and equipment 1,423 333 --
Advances from (to) related parties 1,238 (410) (609)
Acquisitions, net of cash acquired (618) (13,414) (48,298)
Other (401) 347 (1,336)
------- ------- -------
Net cash used in investing activities (12,240) (32,210) (61,303)
FINANCING ACTIVITIES
Proceeds from debt 22,495 45,253 53,858
Principal payments on debt (25,035) (32,434) (11,492)
Principal payments on capital lease
obligations (293) (192) (98)
Cash dividends (12,878) (9,165) (10,395)
Repurchase of common stock -- -- (78)
Increase in additional paid-in capital, net 198 1,748 --
Capitalization of acquisition corporations -- -- 6,565
Capital contribution to Fuzere
Manufacturing Company, Inc. -- 1,578 --
(Purchase) sale of Class A common
stock, net (1,960) 1,085 --
Foreign currency rate fluctuation (175) (99) --
Sale of Class B common stock 57 -- --
Other (114) -- --
------- ------- -------
Net cash (used in) provided by
financing activities (17,705) 7,774 38,360
Net (decrease) increase in cash and
cash equivalents (1,245) 2,103 (2,459)
Cash and cash equivalents beginning
of year 3,533 1,430 3,889
------- ------- -------
Cash and cash equivalents end of year $ 2,288 $ 3,533 $ 1,430
======= ======= =======
</TABLE>
See accompanying notes.
20
<PAGE> 23
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - SCHAWK, INC.
<TABLE>
<CAPTION>
(Thousands of Dollars)
----------------------
Year Ended December 31, 1992, 1993, and 1994
- --------------------------------------------
OLD SCHAWK SCHAWK, INC. SCHAWK, INC. SCHAWK, INC. SCHAWK, INC. ADDITIONAL RETAINED CUMULATIVE TREASURY
COMPANIES CLASS A CLASS B SERIES A SERIES B PAID-IN EARNINGS CURRENCY STOCK
COMMON COMMON COMMON PREFERRED PREFERRED CAPITAL TRANSLATION
STOCK STOCK STOCK STOCK STOCK ADJUSTMENT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1991 $ 73 $ -- $ -- $ -- $ -- $ 8,319 $30,500 $ -- $(2,262)
====== ==== ==== ===== ===== ======= ====== ====== =======
Net income -- -- -- -- -- -- 12,466 -- --
Capitalization related
to purchase of Lincoln
Graphics, Inc. 10 -- -- -- -- 5,251 -- -- --
Capitalization related
to purchase of Flexo
Graphics, Inc. 25 -- -- -- -- 975 -- -- --
Capital contribution to
Flexo Graphics, Inc. -- -- -- -- -- 304 -- -- --
Dividends -- -- -- -- -- -- (10,662) -- --
Cumulative foreign
currency translation
adjustment -- -- -- -- -- -- -- (816) --
Balance at
December 31, 1992 108 -- -- -- -- 14,849 32,304 (816) (2,262)
====== ==== ==== ===== ===== ======= ====== ====== =======
Net income -- -- -- -- -- -- 14,616 -- --
Capital contribution to
Fuzere Manufacturing
Company, Inc. -- -- -- -- -- 1,550 -- -- --
Capital contribution to
Flexo Graphics, Inc. -- -- -- -- -- 198 -- -- --
Dividends -- -- -- -- -- -- (8,801) -- --
Cumulative foreign
currency translation
adjustment -- -- -- -- -- -- -- (577) --
Other -- -- -- -- -- (38) (12) -- --
Balance at
December 31, 1993 108 -- -- -- -- 16,559 38,107 (1,393) (2,262)
====== ==== ==== ===== ===== ======= ====== ====== =======
Net income -- -- -- -- -- -- 13,469 -- --
Capital contribution to
Flexo Graphics, Inc. -- -- -- -- -- 198 -- -- --
Dividends -- -- -- -- -- -- (20,398) -- --
Cumulative foreign
currency translation
adjustment -- -- -- -- -- -- -- 446 --
Issuance of Series A
preferred stock -- -- -- -- -- 22,000 (22,000) -- --
Issuance of Series B
preferred stock -- -- -- -- -- 5,207 (5,207) -- --
Deemed purchase of
minority stockholders -- -- -- -- -- 31,502 -- -- --
Recapitalization
for merger (108) 155 9 -- -- (54) -- -- (63)
Balance at
December 31, 1994 $ -- $155 $ 9 $ -- $ -- $75,412 $3,971 ($947) ($2,325)
====== ==== ==== ===== ===== ======= ====== ====== =======
</TABLE>
See accompanying notes.
21
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SCHAWK, INC.
(Thousands of Dollars, Except Per Share Amounts)
NOTE 1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
Schawk, Inc. (the Company) operates in two business segments, graphics and
plastics. The graphics segment provides prepress graphics arts services to
customers primarily in the consumer products industries located in the United
States. The plastics segment develops and manufactures insert-injection molded
plastic filtration elements and custom specialty plastic products for the
automotive, healthcare and industrial markets. The Plastics Group also
manufactures thermoform visual and specialty packaging for the general
commercial, healthcare, and consumer markets. The Company operates plastics
manufacturing facilities in the United States, Puerto Rico, Ireland, and
France.
The graphics segment consists of the company known as Schawk, Inc. (Old
Schawk) and companies previously affiliated through common ownership, Lincoln
Graphics, Inc. and Flexo Graphics, Inc., collectively, the Old Schawk
Companies. The plastics segment consists of the previously 60% owned
subsidiaries, Filtertek, Inc. and subsidiaries (Filtertek or the Filtertek
Companies).
On December 30, 1994, the Old Schawk Companies merged with and into
Filtertek (the merger). Pursuant to the merger, Filtertek issued an aggregate
of 16,245,399 shares of Class A common stock, 22,000 shares of Series A
Preferred stock, and 5,207 shares of Series B Preferred stock to the
stockholders of the Old Schawk Companies, and the shares of Filtertek's Class A
common stock previously held by Old Schawk (which had a controlling interest
prior to the merger) were cancelled. The new Company was renamed Schawk, Inc.
Because Old Schawk owned a controlling interest of Filtertek prior to the
merger, AICPA Accounting Interpretation 26 of Accounting Principles Board
Opinion No. 16 requires that the merger be accounted for as if the Old Schawk
Companies acquired all the remaining Class A common stock of Filtertek.
The accompanying consolidated financial statements include the accounts of
the Old Schawk Companies and the Filtertek Companies based upon Old Schawk's
effective control as of September 21, 1992. All significant intercompany
balances and transactions have been eliminated. The Company's consolidated
balance sheet at December 31, 1994 reflects the accounting as described in the
previous paragraph as of the date of the merger and includes purchase
accounting adjustments for the portion of Filtertek (40%) not owned by Old
Schawk prior to the merger.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
Cash equivalents include highly liquid debt instruments and time deposits with
an original maturity of three months or less. Cash equivalents are stated at
cost, which approximates market.
INVENTORIES
Inventories are stated at the lower of cost or market. Certain inventories,
which approximate 11% in 1994 and 16% in 1993, respectively, of total
inventories, are determined on the last in, first out (LIFO) cost basis. The
remaining inventories are determined on the first in, first out (FIFO) cost
basis.
PROPERTY AND EQUIPMENT
Property and equipment, including capitalized leases, are stated at cost, less
accumulated depreciation and amortization and are being depreciated and
amortized using the straight-line method over the estimated useful lives of the
assets or the term of the leases, ranging from 3 to 40 years.
INTANGIBLE ASSETS
Intangible assets are comprised primarily of excess of cost over net assets
acquired (goodwill) and noncompete agreements. Goodwill acquired is being
amortized using the straight-line method over periods ranging from 5 to 40
years. The Company continually evaluates the existence of goodwill impairment
on the basis of whether the goodwill is fully recoverable from projected,
undiscounted net cash flows of the related business unit. Noncompete agreements
are being amortized using the straight-line method over the terms of the
agreements ranging from 1 to 5 years.
FOREIGN CURRENCY TRANSLATION
Foreign currency assets and liabilities are translated at the rate of exchange
existing at year-end, and income amounts are translated at the average of the
monthly exchange rates. Gains and losses resulting from the translation of
foreign currency financial statements are deferred and classified as a separate
component of stockholders' equity.
INCOME TAXES
The Old Schawk Companies elected to be taxed as S Corporations under applicable
provisions of the Internal Revenue Code (IRC). S Corporation income for federal
income tax purposes is treated substantially as if the company were a
partnership and, therefore, is not ordinarily subject to federal income tax.
Upon consummation of the merger, Schawk, Inc. recorded a provision for deferred
22
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SCHAWK, INC.
(Thousands of Dollars, Except Per Share Amounts)
income taxes of $3,000 to reflect the termination of the S Corporation status
of the Old Schawk Companies. For informational purposes, the statements of
income include an unaudited pro forma adjustment for income taxes which would
have been recorded if these companies had been C Corporations, based on the tax
laws in effect during those periods. Filtertek is a C Corporation under
applicable provisions of the Internal Revenue Code.
Effective January 1, 1993, Filtertek adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Under the provisions of this statement, deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax
basis of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. A valuation allowance is
provided when it is more likely than not that some portion of the deferred tax
assets arising from temporary differences and net operating losses will not be
realized. The adoption of SFAS No. 109 did not have a material effect on the
financial condition or results of operations of Filtertek.
EARNINGS PER SHARE
Pro forma primary and fully diluted earnings per share is computed by dividing
net income adjusted as described in Note 15 by the pro forma weighted average
number of common and common equivalent shares outstanding as a result of the
merger.
RECLASSIFICATIONS
Certain amounts in the 1992 and 1993 financial statements have been
reclassified to conform to the 1994 presentation.
NOTE 3. ACQUISITIONS
The following acquisitions were completed during 1992, 1993 and 1994. All have
been accounted for using the purchase method of accounting. Accordingly, the
purchase price has been allocated to the respective net assets acquired based
on the fair value of such assets, including certain noncompete agreements (Note
8) and liabilities as of the date of the acquisitions, and the results of
operations have been included in the accompanying consolidated statements of
income from the effective date of the acquisitions.
FLEXO GRAPHICS STOCK PURCHASE
During 1992, the stockholders of Old Schawk formed the Flexographics
Acquisition Company (Flexo Graphics Acquisition). Effective July 1, 1992, Flexo
Graphics Acquisition acquired all of the outstanding stock of Flexo Graphics
for approximately $1,813, of which $1,000 was paid in cash, $500 in a note
payable, and $313 in amounts payable. Subsequent to this transaction, Flexo
Graphics Acquisition was merged into Flexo Graphics. The following summarizes
the purchase price allocation and cash paid:
<TABLE>
<S> <C>
Fair value of assets acquired,
net of cash acquired
of approximately $188 $1,536
Cost in excess of net assets acquired 966
Liabilities assumed (1,690)
------
Cash paid, net of cash acquired $ 812
======
</TABLE>
The cost in excess of net assets acquired is being amortized over 10 years.
LINCOLN GRAPHICS STOCK PURCHASE
During 1992, the stockholders of Schawk formed Schawk of New Jersey, Inc.
(Schawk NJ). Effective May 5, 1992, Schawk NJ acquired all of the outstanding
stock of Lincoln Graphics for approximately $5,261 in cash. Subsequent to this
transaction, Schawk NJ was merged into Lincoln Graphics. The following
summarizes the purchase price allocation and cash paid:
<TABLE>
<S> <C>
Fair value of assets acquired,
net of cash acquired
of approximately $508 $12,351
Cost in excess of net assets acquired 890
Liabilities assumed (8,488)
------
Cash paid, net of cash acquired $ 4,753
=======
</TABLE>
The cost in excess of net assets acquired is being amortized over 10 years.
FILTERTEK
On September 21, 1992, Old Schawk acquired 2,884,596 shares of Class A common
stock and 254,363 stock options of Filtertek for approximately $43,573 in cash.
In addition, on September 21, 1992, an additional 744,939 shares of Class A
common stock of Filtertek were placed in an irrevocable trust as part of an
agreement by Schawk to purchase these shares. This additional purchase was
secured by a letter of credit of $10,770. On January 5, 1993, the shares in the
trust were distributed to Schawk for $10,770 in cash. As a result, Schawk had
effective control of Filtertek as of September 21, 1992. The allocation of the
purchase price was finalized in 1993 upon completion of analyses, valuations,
and other studies relating to the acquired assets and assumed liabilities. The
fair value of assets acquired includes a step up in basis by Old Schawk's
ownership interest (60%) of the excess of fair value of the related assets over
their net book values at the date of acquisition. The following summarizes the
purchase price allocation and cash paid:
23
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SCHAWK, INC.
(Thousands of Dollars, Except Per Share Amounts)
<TABLE>
<S> <C>
Fair value of assets acquired $31,416
Fair value of stock options acquired 1,065
Cost in excess of net assets acquired 34,505
Liabilities assumed (12,643)
-------
Cash paid $54,343
=======
</TABLE>
During 1994, Old Schawk acquired approximately 51,000 additional shares of
Filtertek for $618. On December 30, 1994, the Old Schawk Companies merged with
and into Filtertek. As described in Note 1, the merger was accounted for as if
the Old Schawk Companies had acquired all the remaining Class A common stock of
Filtertek. The following summarizes the purchase price allocation in connection
with the merger:
<TABLE>
<S> <C>
Fair value of remaining Filtertek
Class A common stock $31,502
Elimination of minority interest (18,017)
-------
13,485
Increase of property and equipment to fair value (4,252)
-------
Increase to cost in excess of net assets acquired $ 9,233
=======
</TABLE>
The cost in excess of net assets acquired is being amortized over 40 years.
All of the Class A common stock and stock options acquired by Old Schawk on
September 21, 1992 were cancelled pursuant to the terms of the merger.
PLASTIC MOLDED CONCEPTS, INC. STOCK PURCHASE
Effective June 2, 1993, Filtertek acquired all of the outstanding stock of
Plastic Molded Concepts, Inc. for approximately $3,673, of which $2,650 was
paid in cash and $1,023 in shares of Class A common stock (105,069 shares). The
following summarizes the purchase price allocation and cash paid:
<TABLE>
<S> <C>
Fair value of assets acquired,
net of cash acquired
of approximately $6 $4,417
Cost in excess of net assets acquired 1,093
Liabilities assumed (1,843)
Class A common stock issued (1,023)
------
Cash paid, net of cash acquired $2,644
======
</TABLE>
The cost in excess of net assets acquired is being amortized over 40 years.
NOTE 4. RELATED PARTY TRANSACTIONS
Other noncurrent assets include $1,238 in notes receivable at December 31, 1993
from a trust set up for the beneficial interest of certain stockholders and
their family members. The notes paid interest at rates ranging from 5% to 9%.
Interest of approximately $162 was accrued at December 31, 1993 and is included
in prepaid expenses and other current assets. Interest income related to these
notes was $50, $88, and $55 for 1994, 1993 and 1992, respectively.
Included in prepaid expenses and other at December 31, 1994 and 1993, was
approximately $141 and $355, respectively, of advances to Geneva Waterfront,
Inc., which is owned by a stockholder of the Company.
Other noncurrent assets also include approximately $685 and $629 in notes
receivable from employees at December 31, 1994 and 1993, respectively. The
notes are non-interest bearing demand notes collateralized by Class B common
stock.
The Company has approximately $8,780 and $902 in notes payable at December
31, 1994, and 1993, respectively, payable to certain stockholders. The notes
bear interest at rates ranging from 5% to 6%. Interest expense related to these
notes was $100, $108, and $40 for 1994, 1993, and 1992, respectively.
NOTE 5. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993
- ------------ ---- ----
<S> <C> <C>
Raw materials $ 7,633 $ 6,556
Work in process 6,792 7,663
Finished goods 5,298 3,982
------- -------
19,723 18,201
Less: LIFO reserve (645) (632)
------- -------
$19,078 $17,569
======= =======
</TABLE>
24
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SCHAWK, INC.
(Thousands of Dollars, Except Per Share Amounts)
NOTE 6. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<Cation>
DECEMBER 31, 1994 1993
- ------------ ---- ----
<S> <C> <C>
Land and improvements $ 2,315 $ 2,644
Buildings and improvements 35,390 32,806
Machinery and equipment 81,782 70,234
Leasehold improvements 3,167 2,387
Building and improvements
under capital leases 7,500 7,500
------- -------
130,154 115,571
Accumulated depreciation
and amortization 48,704 38,993
------- -------
$81,450 $76,578
======= =======
</TABLE>
Accumulated depreciation and amortization includes $1,501 and $1,087 for
building and improvements under capital leases at December 31, 1994 and 1993,
respectively. Depreciation and amortization expense for property and equipment
was $12,868, $13,089, and $6,520 in 1994, 1993, and 1992, respectively.
NOTE 7. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993
- ------------ ---- ----
<S> <C> <C>
Accrued compensation
and payroll taxes $ 8,805 $ 8,279
Accrued income taxes 557 667
Other 4,546 3,638
------- -------
$13,908 $12,584
======= =======
</TABLE>
NOTE 8. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993
- ------------ ---- ----
<S> <C> <C>
OLD SCHAWK
Revolving credit facility $46,000 $51,500
Obligations under
noncompete agreements 855 1,333
Other 799 1,883
THE FILTERTEK COMPANIES
Revolving credit facility 28,300 22,000
Deutsche Mark line of credit,
due April 1995 (interest at
Eurodeutsche Mark rate plus 0.5%) 645 --
Term loans, denominated in French
Francs, due in quarterly installments
through May 2004 (interest ranging
from 8.725% to 10.784%) -- 2,076
Other 213 347
------- -------
76,812 79,139
Less: current portion (1,753) (2,221)
------- -------
$75,059 $76,918
======= =======
</TABLE>
OLD SCHAWK
On September 21, 1992, Old Schawk entered into a revolving credit facility with
three participating banks (collectively, Lenders). The facility has a
termination date of August 31, 1999. On December 30, 1994, as a result of the
merger, Schawk, Inc. became the new borrower of the Old Schawk revolving credit
facility.
The maximum borrowing limit of $49,000, as amended, is reduced on a
semiannual basis, in amounts ranging from $3,000 to $4,000 through February
1999 with a maximum borrowing limit of $18,500 for the period from March 1999
through August 1999. Schawk may permanently reduce the facility in multiples of
$1,000 at any time.
The revolving credit facility bears interest at the Eurodollar interest
rate plus .625% (6.1% at December 31, 1994), as defined, or the Lenders'
alternate base rate (6.5% at December 31, 1994), as defined, as determined by
the Company. Interest is payable at intervals ranging from 30 days to 90 days.
The unused facility carries a 0.25% commitment fee. A letter of credit facility
of $3,000 is also provided for under the revolving credit facility.
Borrowings under the revolving credit facility are unsecured but are
subject to certain restrictive covenants which include, among other things: (i)
restrictions on the incurrence of additional indebtedness; (ii) limitations on
capital expenditures; (iii) limitations on new leases; and (iv) restric-
25
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SCHAWK, INC.
(Thousands of Dollars, Except Per Share Amounts)
tions on the payment of dividends or other distributions to stockholders. In
addition, the facility requires the Company to maintain certain net worth,
interest coverage, and other financial ratio requirements.
In November 1992, Old Schawk entered into an interest rate swap agreement
to hedge the impact of changes in interest rates on its revolving credit
facility. The agreement converts the interest rate on the revolving credit
facility to a fixed rate of 5.81%. The agreement applies to $40,000 of the
outstanding principal balance, decreasing by $2,000 each quarter until
termination in October 1997. If the swap was terminated at December 31, 1994,
it would result in a net receipt by the Company of approximately $643. Net
amounts paid or received on interest rate swap agreements that qualify as
hedges are recognized over the term of the agreement as an adjustment to
interest expense. Realized gains and losses resulting from interest rate swap
agreements are recognized in the period the agreement is terminated. Unrealized
gains and losses from interest rate swap agreements are deferred until
realized.
In connection with the $8,800 notes payable to certain stockholders
described in Note 9, Old Schawk arranged an unsecured short-term credit
facility for up to $8,800 to fund repayment of these notes payable. The
facility bears interest at LIBOR plus 0.5% and matures at December 31, 1995. No
amounts on this facility are outstanding as of December 31, 1994.
THE FILTERTEK COMPANIES
The revolving credit facility, executed in 1993, provides for a maximum
borrowing limit of $30,000 until December 31, 1998. The commitment is reduced
by $2,000 annually as part of the agreement. The unused line of credit carries
a 0.25% commitment fee.
The revolving credit facility bears interest at an average banking rate
which approximates prime (8.5% at December 31, 1994) or LIBOR plus 0.5% (6.5%
at December 31, 1994) as determined by Filtertek.
Borrowings under the above agreement are unsecured. However, the agreement
contains restrictive covenants which include, among other things: (i)
restrictions on the incurrence of additional indebtedness; (ii) limitations on
capital transactions; (iii) limitations on new leases; (iv) limitations on
investments; and (v) restrictions on the payment of dividends. In addition, the
agreement requires the maintenance of certain tangible net worth, leverage
ratios, and other financial ratio requirements.
Filtertek also entered into a working capital foreign currency line of
credit agreement for $3,500 through May 31, 1995. The line bears interest at
the Eurodollar interest rate plus 0.5%.
OBLIGATIONS UNDER NONCOMPETE AGREEMENTS
All obligations under noncompete agreements are guaranteed by the Company.
Annual maturities of all long-term debt at December 31, 1994 are as follows:
<TABLE>
<S> <C>
1995 $ 1,753
1996 11,471
1997 9,625
1998 31,471
1999 22,268
Thereafter 224
-------
$76,812
=======
</TABLE>
As substantially all of the debt of the Company bears interest at floating
rates, the carrying value of the Company's debt approximates fair value.
Interest paid on long-term debt during the years ended December 31, 1994,
1993, and 1992, was approximately $5,375, $5,803, and $2,028, respectively.
NOTE 9. STOCKHOLDERS' EQUITY
Stockholders' equity consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993
- ------------ ---- ----
COMMON STOCK: SCHAWK, INC.
<S> <C> <C>
Class A voting, $0.008 par value;
40,000,000 shares authorized;
19,601,863 shares issued; 19,388,852
shares outstanding $ 155 $ --
Class B nonvoting, $0.05 par value;
200,000 shares authorized;
172,281 shares issued; 138,432
shares outstanding 9 --
</TABLE>
26
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SCHAWK, INC.
(Thousands of Dollars, Except Per Share Amounts)
OLD SCHAWK COMPANIES
<TABLE>
<S> <C> <C>
Old Schawk, $0.10 par value;
900,000 shares authorized;
733,767 shares issued;
461,196 shares outstanding -- 73
Lincoln Graphics, $0.50 par value;
100,000 shares authorized;
20,139.60 shares issued and outstanding -- 10
Flexo Graphics, $1.00 par value;
25,000 shares authorized, issued,
and outstanding -- 25
------- -------
$ 164 $ 108
======= =======
PREFERRED STOCK, 1,000,000 SHARES AUTHORIZED: SCHAWK, INC.
Series A, $0.01 par value;
22,000 shares issued and outstanding $ -- $ --
Series B, $0.01 par value;
5,207 shares issued and outstanding -- --
------- -------
$ -- $ --
======= =======
Additional paid-in capital:
Schawk, Inc. $75,412 $ --
Old Schawk -- 9,831
Lincoln Graphics -- 5,251
Flexo Graphics -- 1,477
------- -------
$75,412 $16,559
======= =======
Retained earnings:
Schawk, Inc. $ 3,971 $ --
Old Schawk -- 37,207
Lincoln Graphics -- 349
Flexo Graphics -- 551
------- -------
$ 3,971 $38,107
======= =======
Treasury stock:
Schawk, Inc.,
213,011 shares Class A and
33,849 shares Class B, at cost $ 2,325 --
Old Schawk, 272,571 shares, at cost $ -- 2,262
------- -------
$ 2,325 $ 2,262
======= =======
</TABLE>
In December 1994, prior to the merger, the Old Schawk Companies paid a dividend
of previously taxed and undistributed S Corporation earnings of the Old Schawk
Companies to the existing stockholders in the form of notes payable in the
aggregate amount of $8,800 plus an aggregate of 27,207 shares of preferred
stock.
On December 30, 1994, the Company issued 22,000 shares of Series A
preferred stock and 5,207 shares of Series B preferred stock. The liquidation
value of each share is equal to $1,000 per share plus all accumulated and
unpaid dividends. The Series A preferred shares are mandatorily redeemable by
the Company on December 31, 2004, or, at the option of the Board, on any
December 31, beginning on December 31, 1995, and ending on December 31, 2003,
by issuing to the holder the number of shares of Class A common stock equal to
the sum of $1,000 plus an amount equal to all accumulated and unpaid dividends
per share divided by $13.80, or cash in the amount of the fair market value, as
defined, of the number of shares of Class A common stock. The Series B
preferred shares are mandatorily redeemable by the Company on December 31, 1999
under the same redemption formula as Series A. Dividends shall accrue on each
share of preferred stock at the rate of 5% per year and are payable quarterly.
Holders of preferred shares are entitled to limited voting rights.
Upon the liquidation, dissolution or winding up of the Company, the holders
of Class A common and Class B common stock are entitled to receive ratably the
net assets of the Company available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding preferred stock,
until the holders of Class B common stock Schawk, Inc. have received
distributions (maximum amount of $10,000) equal to the par value of their
shares. Thereafter, all distributions shall be made for the benefit of the
holders of Class A common stock.
NOTE 10. INCOME TAXES
The provision (credit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1994 1993 1992
- ---------------------- ---- ---- ----
<S> <C> <C> <C>
Current:
U.S./Puerto Rico $ 76 $ 212 $ 17
State 722 635 457
Foreign -- 6 (21)
------ ----- ----
798 853 453
Deferred:
U.S./Puerto Rico 2,404 87 31
State 390 -- --
Foreign 257 (100) 87
------ ----- ----
3,051 (13) 118
------ ----- ----
Total $3,849 $ 840 $571
====== ===== ====
</TABLE>
27
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SCHAWK, INC.
(Thousands of Dollars, Per Share Amounts)
On December 30, 1994, the effective date of the merger, Schawk, Inc. recorded a
$3,000 deferred income tax charge related to the termination of the S
Corporation status of the Old Schawk Companies.
Components of deferred income tax assets and liabilities (tax effected) are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993
- ------------ ---- ----
<S> <C> <C>
Current deferred income taxes:
Inventory $ 246 $ 112
Accruals and reserves not currently
deductible 1,493 193
Offering costs 400 --
Other 334 88
Valuation allowance (2,369) (307)
------- -------
Net current asset $ 104 $ 86
======= =======
Long-term deferred income taxes:
Depreciation (3,396) (1,244)
Property and equipment acquisition
basis differences (2,432) --
Net operating losses and other credit
carryforwards 6,792 7,808
Other (507) 44
Valuation allowance (3,827) (6,909)
------- -------
Net long-term liability $(3,370) $ (301)
======= =======
</TABLE>
The European (primarily German and French) and U.S. losses cannot be further
benefited due to the inability to carryback the losses against taxable income
from previous years or to further benefit the losses against any remaining
deferred tax liabilities in the future. As a result, a valuation allowance
under SFAS No. 109 has been established against net operating losses.
A reconciliation between the provision for income taxes computed by applying
the Federal statutory tax rate to income before income taxes and minority
interest and the actual provision is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1994 1993 1992
- ---------------------- ---- ---- ----
<S> <C> <C> <C>
Income taxes at
statutory rate 34.0% 34.0% 34.0%
Income exempt
from income tax (32.9) (121.5) (40.5)
State income taxes 3.8 4.0 3.3
European operating
losses not benefited -- 98.0 8.9
S Corporation
earnings of acquired
entities -- (10.7) (2.4)
Deferred tax related
to S Corporation
termination 15.8 -- --
Other (0.5) 1.5 1.1
---- ------ -----
20.2% 5.3% 4.4%
==== ====== =====
</TABLE>
The Company's Puerto Rican operation is exempt from the payment of Puerto Rican
income taxes on 90% of its income from the manufacture and sale of all products
in Puerto Rico until January 2010. This exemption was received from the
government of Puerto Rico in January 1974 and amended in June 1981, June 1983,
and December 1990, under the Puerto Rico Industrial Incentive Acts of 1963 and
1987. In addition, 90% of the dividends paid to residents of Puerto Rico are
exempt from tax under grant.
The Company's operation in the Republic of Ireland is subject to a 10%
income tax.
The approximate effects of these tax holidays described above was to
increase net income by $1,334, $1,420 and $1,397 in 1994, 1993, and 1992
respectively, and to increase pro forma earnings per share by $0.07 and $0.07
in 1994 and 1993, respectively.
The Company qualifies under Section 936 of the Internal Revenue Code to
receive a credit equal to its United States tax on income from sources in
Puerto Rico. As a result, no United States income tax has been provided on the
exempt income.
Tax loss carryforwards at December 31, 1994 are approximately $7,990,
$1,232, and $7,972, in the United States, France, and Germany, respectively.
These loss carryforwards can be recognized through future taxable income in the
United States through the years 2003 through 2007 and in France and Germany for
an indefinite period of years. Of the U.S. tax loss carryforward, approximately
$2,100 will be recognized in stockholders' equity when realized and the
remaining amounts will be recognized in the statements of income.
28
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SCHAWK, INC.
(Thousands of Dollars, Except Per Share Amounts)
The undistributed earnings of foreign subsidiaries were approximately $4,780 at
December 31, 1994. No income taxes are provided on the distribution of such
earnings because they are considered permanently invested. The foreign
component of income (losses) before income taxes and minority interest was
($745,000), ($4,036,000) and ($790,000) for the years 1994, 1993, and 1992,
respectively.
Income taxes paid during the years ended December 31, 1994, 1993, and 1992
were approximately $959, $654, and $372, respectively.
NOTE 11. LEASES AND COMMITMENTS
The Company leases land and a building from an unrelated party. This lease
requires monthly installments of approximately $48 through January 2010. A
related party has an option to purchase the land and building in January 2000.
The Company also leases land and a building from a related party, with
monthly installments of approximately $32 through June 2002. The agreement
contains an option to purchase the land and building at the end of the lease
for 90% of fair market value at the end of the lease. The Company is required
to pay utilities, real estate taxes, and insurance on the property on both
leases. These leases are recorded as capital leases.
The Company also leases various plant facilities and equipment under
noncancellable operating leases that expire at various dates through February
2010. Total rent expense incurred under all operating leases, was approximately
$808, $1,099, and $942 for the years ended December 31, 1994, 1993, and 1992,
respectively.
Future minimum payments under leases with terms of one year or more are as
follows at December 31, 1994:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------ ------
<S> <C> <C>
1995 $ 959 $ 668
1996 959 551
1997 959 404
1998 959 285
1999 959 227
Thereafter 6,779 737
------- -------
11,574 $ 2,872
=======
Less: Amounts representing interest 5,221
-------
6,353
Less: Current portion 322
-------
$ 6,031
=======
</TABLE>
The Company's production facility in Ireland is being financed in part by
grants from the Industrial Development Authority of Ireland (IDA). The grants
provide 25% of the actual amount of funds expended on the acquisition and
equipping of the production facility up to a maximum of approximately 1.4
million Irish Punts (approximately $2,158 at December 31, 1994). Grants
received to date totaling approximately 1.2 million Irish Punts ($1,837 at
December 31, 1994), are reported as a reduction of the related assets, and
Schawk, Inc. are being amortized over the life of the asset. A contingent
liability for repayment of the grants received exists if the Ireland operations
were liquidated. The grants are forgiven ratably over a ten-year period. The
unamortized grant liability totaled approximately 0.4 million Irish Punts ($541
at December 31, 1994). In 2001, all obligations for repayment of the grants
terminate. There is no intention of liquidating the Ireland operation.
NOTE 12. EMPLOYEE BENEFIT PLANS
DEFINED-CONTRIBUTION PLANS
The Company has the following defined-contribution plans for the benefit of its
employees. The Schawk, Inc. Employee Retirement Plan, a 401(k) plan, covers all
nonunion employees of the Illinois, New York, California, Michigan, and
Minneapolis operations, plus a related company, Geneva Waterfront, Inc. The
Weston Engraving, Inc. Profit Sharing Plan is a frozen plan that previously
covered employees of the Weston Engraving division who are currently covered in
the Schawk, Inc. Employee Savings Plan. Effective January 1, 1995, the Weston
Engraving, Inc. Profit Sharing Plan was merged into the Schawk, Inc. Employee
Retirement Plan. The Schawkgraphics, Inc. Profit Sharing Plan covers the union
employees of the Schawk Graphics division. The Lincoln Graphics, Inc. Flexible
Compensation Plan, a 401(k) plan, covers all nonunion employees of Lincoln
Graphics. Effective January 1, 1994, the Lincoln Graphics, Inc. Flexible
Compensation Plan was merged into the Schawk, Inc. Employee Retirement Plan.
The Filtertek, Inc. Retirement Savings Plan, covers employees of the Illinois
and Puerto Rico operations. The plans provide a 100% match of employee
contributions up to 5% of wages (as defined).
29
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SCHAWK, INC.
(Thousands of Dollars, Except Per Share Amounts)
Contributions to the plans were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 1993 1992
- ----------------------- ---- ---- ----
<S> <C> <C> <C>
Schawk, Inc. Employee
Retirement Plan $1,093 $ 930 $ 843
Schawkgraphics, Inc.
Profit Sharing Plan 40 40 40
Lincoln Graphics, Inc.
Flexible Compensation
Plan -- 90 7
Filtertek, Inc.
Retirement Savings
Plan 383 321 --
------ ------ -----
$1,516 $1,381 $ 890
====== ====== =====
</TABLE>
MULTIEMPLOYER PENSION PLANS
The Company is required to contribute to certain defined-contribution union
pension plans under various labor contracts covering union employees. Pension
expense related to the union plans, which is determined based upon payroll
data, was approximately $558, $587, and $519 in 1994, 1993, and 1992,
respectively.
NOTE 13. STOCK/EQUITY OPTION PLANS
In 1988, the Company adopted an Equity Option Plan which, as amended, provides
for the issuance of up to 2,252,250 shares of common stock to key employees.
In 1991, the Company adopted an Outside Directors' Formula Stock Option
Plan as amended in 1994 and authorized grants thereunder to nonemployee
directors of options of shares of common stock.
In addition, in 1984 and 1987, options totaling 236,226 shares were made
available and granted to former employees.
The Employees Stock Bonus Plan and Trust, a retirement program, had
previously been granted options representing 260,481 shares. During 1992, this
plan was terminated.
Options granted under all of these plans are at market price at date of
grant and are exercisable for a period of ten years from the date of grant.
A summary of options outstanding at each of the three years ended December 31,
1994, 1993, and 1992, and other data for the three years then ended under all
option plans, including options granted to the Employees Stock Bonus Plan and
Trust is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 1993 1992
- ----------------------- ---- ---- ----
<S> <C> <C> <C>
Outstanding
January 1 $ 846,033 $1,153,288 $1,605,388
Granted 364,984 35,000 90,000
Exercised (21,966) (334,182) (538,846)
Cancelled (258,363) (8,073) (3,254)
--------- ---------- ---------
Outstanding
December 31 930,688 846,033 1,153,288
========= ========== =========
Average price of
options exercised 6.00 6.00 6.00
Average price of
options outstanding 9.37 8.17 7.55
Available for grant
December 31 $ 919,681 $ 58,481 $ 68,481
========= ======== ========
</TABLE>
30
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SCHAWK, INC.
(Thousands of Dollars, Except Per Share Amounts)
NOTE 14. SEGMENT DATA
The Company operates in two industry segments, graphics and plastics as
described in Note 1. Net sales, operating income, capital expenditures,
depreciation and amortization, and identifiable assets, by segment are
summarized as follows:
<TABLE>
<CAPTION>
GRAPHICS PLASTICS GENERAL
GROUP GROUP CORPORATE
-------- -------- ---------
<S> <C> <C> <C>
1994
Net sales $103,889 $82,256 $ --
Operating income 20,380 4,087 (194)
Capital expenditures 4,551 8,750 581
Depreciation and
amortization 7,192 7,674 --
Identifiable assets 43,781 130,588 19,057
1993
Net sales $ 95,809 $73,229 $ --
Operating income 16,356 3,789 (180)
Capital expenditures 6,138 9,100 3,828
Depreciation and
amortization 8,906 6,430 --
Identifiable assets 46,332 111,940 21,921
1992
Net sales $ 82,860 $28,139 $ --
Operating income 14,165 266 (100)
Capital expenditures 3,898 5,623 1,539
Depreciation and
amortization 5,928 1,856 --
Identifiable assets 46,227 92,558 16,971
</TABLE>
General corporate identifiable assets consist primarily of cash, property and
equipment, and miscellaneous other assets.
NOTE 15. EARNINGS PER SHARE
Historical earnings per share is computed by dividing net income adjusted only
for pro forma income taxes by the historical weighted average number of common
shares outstanding of the Old Schawk Companies.
The historical earnings per share adjusted only for pro forma income taxes is
as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1994 1993 1992
- ---------------------- ---- ---- ----
<S> <C> <C> <C>
Net income $13,469 $14,616 $12,466
Pro forma
income taxes 7,071 6,400 5,300
Pro forma net
income adjusted
only for income
taxes 10,247 9,056 7,737
Primary and fully
diluted common
shares outstanding 507,328 507,328 488,115
Primary and fully
diluted earnings per
share adjusted only
for income taxes $20.20 $17.85 $15.85
</TABLE>
Because of the merger with Filtertek on December 30, 1994, the Company does not
consider the historical earnings per share calculation shown above to be
meaningful information. Pro forma earnings per share information shown on the
statements of income is presented to compare net income and earnings per share
as if the merger had occurred at the beginning of each of the periods
presented. The following pro forma adjustments have been made to each of the
periods. Increased depreciation and amortization was recorded to reflect the
increased basis in property and equipment and goodwill amortization resulting
from the merger. Compensation expense was reduced to reflect the terms of
employee/stockholder agreements in effect at January 1, 1995. Income tax
expense was adjusted to reflect taxation at regular income tax rates instead of
S Corporation rates. Preferred stock dividends were recorded to reflect the
issuance of preferred stock in connection with the merger.
31
<PAGE> 34
MANAGEMENT'S RESPONSIBILITIES FOR FINANCIAL REPORTING . SCHAWK, INC.
The management of Schawk, Inc. is responsible for the preparation and integrity
of all financial statements and other information contained in the Schawk, Inc.
Annual Report to Stockholders. The consolidated financial statements have been
prepared in conformity with generally accepted accounting principles and
necessarily include amounts based on judgments and estimates by management
giving due consideration to materiality. The Company maintains internal
control systems designed to provide reasonable assurance that the Company's
financial records reflect the transactions of the Company and that its assets
are protected from loss or unauthorized use.
The Company's financial statements have been audited by Ernst & Young LLP,
independent public accountants, whose report thereon follows. Their report
relies on the audit of Arthur Andersen LLP, which audits the Company's Plastics
Group. As part of their audit of the Company's financial statements, Ernst &
Young LLP and Arthur Andersen LLP considered the Company's system of internal
control to the extent they deemed necessary to determine the nature, timing and
extent of their audit tests. Management has made available to Ernst & Young LLP
and Arthur Andersen LLP the Company's financial records and related data.
The Audit Committee of the Board of Directors is responsible for reviewing and
evaluating the overall performance of the Company's financial reporting and
accounting practices. The Committee meets periodically and independently with
management and the independent accountants to discuss the Company's internal
accounting controls, auditing and financial reporting matters. The independent
accountants have unrestricted access to the Audit Committee.
David A. Schawk Marie Meisenbach Graul
President and Chief Financial Officer
Chief Executive Officer and Treasurer
32
<PAGE> 35
REPORT OF INDEPENDENT AUDITORS . SCHAWK, INC.
The Board of Directors and Stockholders
Schawk, Inc.
We have audited the accompanying consolidated balance sheets of Schawk, Inc.
and subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1994. These financial statements
are the responsibility of Schawk, Inc. management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did
not audit the financial statements of Filtertek, Inc. (the Plastics Group of
Schawk, Inc.), which statements reflect total assets of $77,723,000 and
$72,930,000 as of December 30, 1994 and December 31, 1993, respectively, and
total revenues of $82,257,000 and $73,183,000 for the period ended December 30,
1994 and the year ended December 31, 1993, respectively, and $12,368,000 for
the period from September 21, 1992 to December 31, 1992. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to data included for the Plastics Group, is
based solely on the report of other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Schawk, Inc. at
December 31, 1994 and 1993, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994, in conformity with generally accepted accounting principles.
Chicago, Illinois
February 24, 1995
33
<PAGE> 36
SELECTED FINANCIAL DATA . SCHAWK, INC.
(Thousands of Dollars, Except Per Share Amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1994 1993 1994 1993 1992(C) 1991 1990
- ---------------------- ---- ---- ---- ---- ------- ---- ----
Pro Forma (a) Historical
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT
INFORMATION
Net sales $186,145 $169,038 $ 186,145 $169,038 $110,999 $79,432 $77,537
Operating income 26,254 21,820 24,273 19,965 14,331 12,325 12,874
Income before income
taxes and minority interest 21,016 17,640 19,035 15,785 12,854 11,706 11,974
Income taxes 7,071 6,400 3,849 (b) 840 571 248 275
Net income 12,585 9,907 13,469 14,616 12,466 11,458 11,699
PRO FORMA INFORMATION
Pro forma income taxes -- -- 7,071 6,400 5,300 4,700 4,800
Pro forma net income
adjusted only for
income taxes -- -- 10,247 9,056 7,737 7,006 7,174
Pro forma net income
per share .64 .49 -- -- -- -- --
CONSOLIDATED BALANCE SHEET
INFORMATION
Working capital -- -- $ 25,254 $ 30,049 $ 26,186 $12,984 $12,014
Total assets -- -- 193,426 180,193 155,756 55,401 58,613
Long-term debt, capital lease
obligations and redeemable
preferred stock -- -- 81,090 83,271 70,803 7,172 13,802
Stockholders' equity -- -- 76,275 51,119 44,183 36,630 31,426
OTHER DATA
Cash dividends per
common share (d) -- -- -- -- -- -- --
Depreciation and
amortization -- -- 14,866 15,336 7,784 4,485 4,127
Capital expenditures -- -- 13,882 19,066 11,060 3,747 4,552
</TABLE>
(a) Pro forma net income includes adjustments for the merger, purchase
accounting, and income tax adjustments. See Note 15 to the Schawk,
Inc. audited financial statements.
(b) Includes a one-time deferred tax charge of $3,000 for termination of
S Corporation tax election.
(c) On September 21, 1992, Old Schawk effectively acquired a controlling
interest in Filtertek which was accounted for as a purchase.
(d) Because of the limited number of stockholders prior to the merger,
dividends per share data is not meaningful and has not been
presented.
34
<PAGE> 37
SCHAWK, INC. SUPPLEMENTAL STOCKHOLDER INFORMATION - QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
(Thousands of Dollars, Except Per Share Amounts)
NET SALES COST OF NET INCOME PRO FORMA NET INCOME PRIMARY AND FULLY
SALES (LOSS) ADJUSTED ONLY FOR DILUTED EARNINIGS
INCOME TAXES (a) PER SHARE (a)
<S> <C> <C> <C> <C> <C>
1994 QUARTER ENDED:
March 31 $ 46,430 $ 28,667 $ 5,361 $ 3,395 $ 6.69
June 30 48,839 31,084 4,548 2,848 5.61
September 30 44,630 27,929 4,764 2,983 5.88
December 31 46,246 32,284 (1,204) 1,021 2.02
-------- -------- ------- ------- ------
Total $186,145 $119,964 $13,469 $10,247 $20.20
======== ======== ======= ======= ======
1993 QUARTER ENDED:
March 31 $ 40,763 $ 27,938 $ 2,541 $ 1,577 $ 3.11
June 30 42,827 27,021 4,781 2,959 5.83
September 30 43,458 28,816 2,458 1,527 3.01
December 31 41,990 25,774 4,836 2,993 5.90
-------- -------- ------- ------- ------
Total $169,038 $109,549 $14,616 $ 9,056 $17.85
======== ======== ======= ======= ======
</TABLE>
DIVIDENDS DECLARED (B)
<TABLE>
<CAPTION>
QUARTER ENDED 1994 1993
- ------------- ---- ----
<S> <C> <C>
March 31 $ -- $ --
June 30 5,789 4,390
September 30 5,809 2,661
December 31 8,800 1,750
------- ------
Total $20,398 $8,801
======= ======
</TABLE>
(a) Adjusted only for pro forma income taxes (see Note 15 to the Schawk,
Inc. audited financial statements).
(b) Dividends declared are for the Old Schawk Companies and do not include
amounts of the former Registrant, Filtertek, Inc. Prior to the
merger with Filtertek, Inc. on December 30, 1994, the Old Schawk
Companies were privately held S Corporations with a limited number of
shares outstanding. Dividends were declared on the basis of
stockholder cash requirements and not necessarily on the basis of
earnings. Dividends declared per share computations have not been
presented because management does not consider this information to be
meaningful.
STOCK PRICES (C)
<TABLE>
<S> <C> <C>
QUARTER ENDED 1994 HIGH/LOW 1993 HIGH/LOW
- ------------- ------------- -------------
March 31 9 7/8 - 8 1/2 10 7/8 - 8 3/4
June 30 10 3/4 - 8 1/4 9 7/8 - 8 3/8
September 30 13 3/8 - 9 5/8 10 3/8 - 8 3/4
December 31 13 1/8 - 9 3/8 10 3/4 - 9 1/8
</TABLE>
(c) Stock prices are for the former Registrant, Filtertek, Inc. The
Registrant had 2,400 stockholders of record on November 7, 1994. The
Registrant's stock is listed on the NYSE.
35
<PAGE> 38
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS - SCHAWK, INC.
[PHOTO]
TOP ROW:
LARRY LARKIN, JOHN T. MCENROE, ESQ., HOLLIS W. RADEMACHER,
RONALD J. KAY, ROBERT F. MEINKEN, JUDITH W. MCCUE, ESQ.
BOTTOM ROW:
MARIE MEISENBACH GRAUL, DAVID A. SCHAWK,
CLARENCE W. SCHAWK, A. ALEX SARKISIAN
BOARD OF DIRECTORS
Clarence W. Schawk
Chairman of the Board
Director since 1992
David A. Schawk
President and Chief Executive Officer
Director since 1992
A. Alex Sarkisian
President, Graphics Group, Executive Vice President,
and Corporate Secretary
Director since 1992
Marie Meisenbach Graul
Chief Financial Officer and Treasurer
Director since 1992
Ronald J. Kay
President, Plastics Group
North American Operations
Director since 1993
Larry Larkin
Executive Vice President, Plastics Group
Director since 1988
John T. McEnroe, Esq.
Partner, Vedder, Price, Kaufman & Kammholz
Director since 1992
Judith W. McCue, Esq.
Partner, Keck, Mahin & Cate
Director since 1992
Robert F. Meinken
Private Investor
Director since 1992
Hollis W. Rademacher
Investments
Director since 1995
EXECUTIVE OFFICERS
Clarence W. Schawk
Chairman of the Board
David A. Schawk
President and Chief Executive Officer
A. Alex Sarkisian
President, Graphics Group, Executive Vice President,
and Corporate Secretary
Marie Meisenbach Graul
Chief Financial Officer and Treasurer
Ronald J. Kay
President, Plastics Group
North American Operations
36
<PAGE> 39
INVESTOR INFORMATION - SCHAWK, INC.
SECURITIES LISTING
The Schawk, Inc. Class A common stock
is traded under the symbol SGK on the
New York Stock Exchange.
CORPORATE HEADQUARTERS
Schawk, Inc.
1695 River Road
Des Plaines, IL 60018
708-827-9494
PUBLIC INFORMATION OFFICER
Marie Meisenbach Graul
708-827-9494
INVESTOR RELATIONS CONTACT
Anita L. Fletcher
708-827-9494 ext: 228
TRANSFER AGENT
First Chicago Trust Company
of New York
P.O. Box 2500
Jersey City, NJ 07303
800-446-2617
INDEPENDENT AUDITORS
Arthur Andersen Co. LLP
Chicago, IL
Ernst & Young LLP
Chicago, IL
LEGAL COUNSEL
Vedder, Price, Kaufman and Kammholz
Chicago, IL
ANNUAL MEETING
The Schawk, Inc. 1995 Annual Meeting of Stockholders will be held on Tuesday,
May 17th, 1995 at 10:00 a.m. CDST, at Schawkgraphics, 1600 Sherwin Avenue, Des
Plaines, IL, 60018. All stockholders are encouraged to attend and participate.
Doors will open at 8:30 a.m. for plant tours and exhibits.
DIVIDEND PAYMENTS
Common Stock Dividends generally are paid on Feb. 15, May 15, Aug. 15, and Nov.
15 to Schawk stockholders of record on Feb 1, May 1, Aug. 1, and Nov. 1,
respectively. Dividends are subject to declaration by the Board of Directors,
which establishes the amount of each quarterly dividend to be paid and fixes
the record date and payment date.
SEC FORM 10-K
A copy of the Schawk, Inc. Form 10-K to the U.S. Securities and Exchange
Commission or other corporate publications are available without charge upon
request. All materials may be requested by contacting the Investor Relations
Department at 708-827-9494.
FINANCIAL INFORMATION
Prospective investors, analysts and representatives of financial institutions
requiring information regarding Schawk, Inc. should contact the Investor
Relations Department at 708-827-9494.
