<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 1996 Commission File Number 1-9335
________
SCHAWK, INC.
(Exact name of Registrant
as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
36-2545354
(I.R.S. Employer Identification No.)
1695 RIVER ROAD
DES PLAINES, ILLINOIS
(Address of principal executive office)
60018
(Zip Code)
847-827-9494
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Title of Each Class Name of Exchange on Which Registered
------------------------ -----------------------------------------------
CLASS A COMMON STOCK, NEW YORK STOCK EXCHANGE
$.008 PAR VALUE
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- ------
The number of shares outstanding of each of the issuer's classes of common
stock as of June 30, 1996, are:
19,341,344 shares, Common Stock, 140,866 shares, Class B
$.008 par value Common Stock, $.05 par value
- ----------------------------------- ----------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Pursuant to the Securities Exchange Act of 1934 Release 15502 and Rule
240.03(b), the pages of this document have been numbered sequentially. The
total number of pages contained herein is 14.
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1
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PART I
Schawk, Inc.
Condensed Consolidated Balance Sheets
(Thousands of Dollars)
<TABLE>
JUNE 30, DECEMBER 31,
1996 1995
(UNAUDITED)
------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,861 $ 1,917
Trade accounts receivable, less allowance for doubtful
accounts of $820 in 1996 and $984 in 1995 28,208 29,865
Inventories 16,397 16,806
Prepaid expenses and other 2,852 3,463
Deferred income taxes 1,504 1,504
------------------------------------
Total current assets 50,822 53,555
Property and equipment - net 72,487 76,540
Excess of cost over net assets acquired, less accumulated
amortization of $6,919 in 1996 and $6,331 in 1995 45,661 47,858
Other intangible assets, less accumulated amortization of
$2,898 in 1996 and $2,336 in 1995 902 873
Other 9,009 5,637
------------------------------------
Total assets $178,881 $184,463
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 9,118 $ 7,943
Accrued expenses 10,216 11,750
Notes payable to stockholders 5,765 5,765
Current portion of long-term debt and capital
lease obligations 1,153 1,222
------------------------------------
Total current liabilities 26,252 26,680
Long-term debt 64,788 69,907
Capital lease obligations 5,485 5,675
Deferred income taxes 5,116 4,736
Other 1,058 1,036
Stockholders' equity:
Common stock 166 165
Preferred stock - -
Additional paid-in capital 75,566 75,506
Retained earnings 5,116 4,573
Cumulative foreign currency translation adjustment (1,413) (450)
------------------------------------
79,435 79,794
Treasury stock, at cost (2,583) (2,695)
Notes receivable from employees (670) (670)
------------------------------------
76,182 76,429
------------------------------------
Total liabilities and stockholders' equity $178,881 $184,463
====================================
See accompanying notes.
</TABLE>
2
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Schawk, Inc.
Condensed Consolidated Statements of Income
Three Months Ended June 30, 1996 And 1995
(Unaudited)
(Thousands of dollars, except per share data)
<TABLE>
1996 1995
----- ----
<S> <C> <C>
Net sales $ 42,481 $ 45,348
Cost of sales 28,804 31,830
Selling, general and administrative expenses 9,177 10,121
---------- ---------
Operating income 4,500 3,397
Interest income (122) (124)
Interest expense 1,270 1,559
Other income (53) (149)
---------- ----------
1,095 1,286
---------- ----------
Income before income taxes 3,405 2,111
Income tax provision 1,194 114
---------- ---------
Net income 2,211 1,997
Preferred dividends 313 340
---------- ----------
Net income available for Class A common shares $1,898 $1,657
========= =========
Primary and fully diluted income per Class A
common share $ 0.10 $ 0.09
Cash dividends per Class A common share $0.065 $0.065
Cash dividends per Class B common share $ 0.45 $ 0.45
Weighted average Class A common shares
outstanding 19,380 19,223
Weighted average Class B common shares
outstanding 141 140
See accompanying notes.
</TABLE>
3
<PAGE> 4
<TABLE>
Schawk, Inc.
Condensed Consolidated Statements of Income
Six Months Ended June 30, 1996 And 1995
(Unaudited)
(Thousands of dollars, except per share data)
1996 1995
----- ------
<S> <C> <C>
Net sales $ 83,378 $ 90,768
Cost of sales 57,794 62,989
Selling, general and administrative expenses 17,470 20,637
--------- ---------
Operating income 8,114 7,142
Interest income (253) (268)
Interest expense 2,687 3,117
Other income (7) (255)
--------- ---------
2,427 2,594
--------- ---------
Income before income taxes 5,687 4,548
Income tax provision 1,887 940
-------- ---------
Net income 3,800 3,608
Preferred dividends 626 680
-------- ---------
Net income available for Class A common shares $3,174 $2,928
======== =========
Primary and fully diluted income per Class A
common share $0.16 $0.15
Cash dividends per Class A common share $0.13 $0.13
Cash dividends per Class B common share $0.90 $0.90
Weighted average Class A common shares
outstanding 19,394 19,256
Weighted average Class B common shares
outstanding 141 140
See accompanying notes.
</TABLE>
4
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Schawk, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30, 1996 and 1995
(Thousands of Dollars)
<TABLE>
1996 1995
----------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $3,800 $3,608
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 7,787 7,924
Deferred income taxes 380 (456)
Other (221) 272
Changes in operating assets and liabilities, net of
effects from acquisitions:
Trade accounts receivable 285 156
Inventories (1,556) (1,782)
Prepaid expenses and other 443 1,188
Trade accounts payable and accrued expenses 433 (1,067)
----------------------------------------
Net cash provided by operating activities 11,351 9,843
INVESTING ACTIVITIES
Purchases of property and equipment (7,007) (4,966)
Acquisitions, net of cash acquired -- (1,243)
Other -- --
----------------------------------------
Net cash used in investing activities (7,007) (6,209)
FINANCING ACTIVITIES
Proceeds from sale of operating division 5,000 --
Proceeds from debt -- 3,603
Principal payments on debt (5,188) (977)
Principal payments on capital lease obligations (190) --
Principal payments on notes payable to stockholders -- (2,696)
Cash dividends (2,013) (3,286)
Purchase of common stock (1,139) (804)
Issuance of common stock 70 --
Other (363) (289)
----------------------------------------
Net cash used in financing activities (3,823) (4,449)
Effect of foreign currency exchange rates (577) --
----------------------------------------
Net decrease in cash and cash equivalents (56) (815)
Cash and cash equivalents beginning of period 1,917 2,288
----------------------------------------
Cash and cash equivalents end of period $1,861 $1,473
========================================
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Dividends issued in the form of Class A common stock 1,245 --
Cash paid for interest 2,281 2,402
Cash paid for income taxes 1,443 524
Note received for sale of operating division 2,619 --
See accompanying notes.
</TABLE>
5
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Schawk, Inc.
Notes to Condensed Consolidated Interim Financial Statements
(Thousands of dollars, except per share data)
NOTE 1. BASIS OF PRESENTATION
The condensed consolidated financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes the disclosures included are adequate to make the
information presented not misleading. In the opinion of management, all
adjustments necessary for a fair presentation for the periods presented have
been reflected and are of a normal recurring nature. These financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto for the three years ended December 31, 1995.
NOTE 2. INTERIM RESULTS
Results of operations for the interim periods are not necessarily indicative of
the results to be expected for the year.
NOTE 3. DESCRIPTION OF BUSINESS
Schawk, Inc. (the Company) operates in two business segments, Imaging and
Plastics. The Imaging Group provides prepress graphics arts services to
customers primarily in the consumer products industries located in the United
States. The Plastics Group develops and manufactures insert injection molded
plastic filtration elements for the automotive, healthcare and industrial
markets. The Plastics Group also manufacturers 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.
<TABLE>
NOTE 4.INVENTORIES
Inventories consist of the following:
June 30 December 31
1996 1995
------------ -----------
<S> <C> <C>
Raw materials $ 5,596 $ 6,432
Work in process 8,211 6,565
Finished goods 3,303 4,522
------------ -----------
17,110 17,519
Less: LIFO reserve (713) (713)
------------ -----------
$16,397 $16,806
============ ===========
</TABLE>
6
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NOTE 5.PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
Caption>
June 30 December 31
1996 1995
------------ -----------
<S> <C> <C>
Land and improvements $2,315 $2,315
Building and improvements 35,998 35,998
Machinery and equipment 87,217 85,067
Leasehold improvements 2,786 2,786
Building and improvements under capital leases 7,500 7,500
------------ -----------
135,816 133,666
Accumulated depreciation and amortization (63,329) (57,126)
------------ -----------
$72,487 $76,540
============ ===========
</TABLE>
NOTE 6. SALE OF DIVISION
On May 1, 1996, the Company sold one of its operating divisions, Plastics
Molded Concepts, Inc. (PMC), for cash of $5.0 million and notes receivable of
$2.6 million. No gain or loss was realized on the transaction. The operating
results of PMC were not significant to the consolidated results for the six
months ended June 30, 1996.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(Thousands of dollars, except per share data)
NET SALES of $42,481 for the second quarter of 1996 represents a 6% decline
from net sales of $45,348 for the second quarter of 1995. Sales in the
Plastics Group decreased by 8% for the second quarter of 1996 (increased by 3%
excluding Plastics Molded Concepts, Inc. (PMC) which was sold on May 1, 1996),
while sales in the Imaging Group declined by 5% over the same period. However,
Imaging Group sales increased by 12% from the first quarter of 1996 as customer
orders normalized following a year long period of lower sales. Sales for the
first six months of 1996 of $83,378 declined 8% from sales of $90,768 for the
first half of 1995.
COST OF SALES for the second quarter of 1996 decreased to 68% from 70% from the
second quarter of 1995. The Plastics Group cost of sales decreased to 82% for
the second quarter of 1996 from 89% for the same period in 1995 due the sale of
PMC. The Imaging Group cost of sales decreased to 55% for the second quarter
of 1996 from 58% for the same period in 1995 due to manufacturing efficiencies
implemented during the last year. Cost of sales for the first six months of
1996 remained level at 69% compared to the first six months of 1995.
INCOME FROM OPERATIONS increased to $4,500 for the second quarter of 1996
versus operating income of $3,397 for the second quarter of 1995. For the six
month period, income from operations increased to $8,114 from income from
operations of $7,142 for the first six months of 1995. This increase was
primarily due to manufacturing efficiencies and a 15% reduction in general and
administrative expenses as the Company's cost reduction program was in effect
for a full year.
OTHER EXPENSE declined to $1,095 for the second quarter of 1996 from $1,286 for
the second quarter of 1995 on lower interest expense due to debt reduction.
For the first six months of 1996, net other expense decreased to $2,427
compared to $2,594 for the same period of 1995.
NET INCOME available for Class A common stock increased to $1,898 for the
second quarter of 1996 compared to $1,657 for the second quarter of 1995, and
for the six month period increased to $3,174 from $2,928 for the first six
months of 1995 as a result of the factors previously discussed. The income tax
provision for the second quarter and first six months of 1995 includes a
credit of $544 related to losses from the discontinued operations in Germany
recorded on the Company's books in 1993, for which no tax benefit was
previously recorded. The tax credit is not available for 1996.
PRIMARY AND FULLY DILUTED EARNINGS PER SHARE increased to $0.10 for the second
quarter of 1996 from primary and fully diluted earnings per share of $0.09 for
the second quarter of 1995, and increased to $0.16 for the first six months of
1996 compared to primary and fully diluted earnings per share of $0.15 for the
first six months of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Long-term debt decreased to $64,788 at June 30, 1996 from $69,907 at December
31, 1995 as a result of an effort to use working capital to reduce outstanding
debt. The Company's current ratio at June 30, 1996 was 1.9 with available
working capital of $24,570 compared to a current ratio of 2.0 with available
working capital of $26,875 at December 31, 1995.
The Company believes that available amounts on its existing line of credit
agreement, along with the current level of working capital and the cash
generated from future operations will be sufficient to meet its needs for
working capital, capital expenditures, and the payment of dividends.
Capital expenditures increased to $7,007 for the six month ended June 30, 1996
from $4,966 for the same period in 1995. Management believes that its capital
expenditure program is adequate to allow for the Company's continued growth and
profitability.
8
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SALE OF OPERATING DIVISION
On May 1, 1996 the Company sold Plastic Molded Concepts, Inc. (PMC) for $5,000
in cash and $2,600 in notes receivable. No gain or loss was realized on the
transaction. The operating results of PMC were not significant to the
consolidated results for the six month period ended June 30, 1996.
ACQUISITIONS
The Company has a Letter of Intent to acquire Stanmont, Inc., an Imaging
Company with operations in Montreal and Toronto. Stanmont had approximately
$20,000 (U.S.) in revenues in 1995. The acquisition is not deemed significant
as defined by SEC regulations.
The Company closed on the purchase of ConvertScan on July 31, 1996.
ConverterScan has operations in Stamford, CT and Atlanta, GA. ConverterScan
had approximately $5,200 in revenues in 1995. The acquisition is not deemed
significant as defined by SEC regulations.
9
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PART II - OTHER INFORMATION
Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.
Item 14. Exhibits and Reports on Form 8-K
(A) Exhibits
Exhibit 11 - Calculation of net income per common share.
(B) Reports on Form 8-K
The following reports were filed on Form 8-K for the quarter ended June 30,
1996:
Form 8-K dated July 8, 1996
Form 8-K dated July 29, 1996
(C) Exhibit 27 - Financial Data Schedule
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 1st day of August, 1996.
SCHAWK, INC.
(Registrant)
/s/ David A. Schawk
- ------------------------------------
President, Chief Executive Officer and Director
/s/ Marie Meisenbach Graul
- ------------------------------------
Chief Financial Officer, Treasurer, Public Information Officer and Director
/s/ Dennis D. Wilson
- ------------------------------------
Director of Financial Reporting and Chief Accounting Officer
11
<PAGE> 1
EXHIBIT 11
Schawk, Inc.
Computation of Net Income per Share of Common and Common Equivalent Shares
(Thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Three months ended June 30
1996 1995
------- ------
<S> <C> <C>
Primary:
Average number of shares used to compute primary
earnings per share 19,284 19,154
Common stock issuable upon assumed conversion of
stock option exercises 96 69
------ -----
Total 19,380 19,223
======= ======
Net income available for Class A common shares:
Net income $2,211 $1,997
Less preferred dividends 313 340
------- ------
Net income available for Class A common shares $1,898 $1,657
======= ======
Primary earnings per share $0.10 $0.09
Fully diluted:
Average number of shares used to compute fully
diluted earnings per share 19,284 19,154
Common stock issuable upon assumed conversion
of stock option exercises 96 69
------- ------
19,380 19,223
======= ======
Net income available for Class A common shares:
Net income $2,211 $1,997
Less preferred dividends 313 340
------ ------
Net income available for Class A common shares $1,898 $1,657
======= ======
Fully diluted earnings per share $0.10 $0.09
</TABLE>
12
<PAGE> 2
<TABLE>
<CAPTION>
Six months ended June 30
1996 1995
------- ------
<S> <C> <C>
Primary:
Average number of shares used to compute primary
earnings per share 19,295 19,165
Common stock issuable upon assumed conversion of
stock option exercises 99 91
------- ------
Total 19,394 19,256
======= ======
Net income available for Class A common shares:
Net income $3,800 $3,608
Less preferred dividends 626 680
------- ------
Net income available for Class A common shares $3,174 $2,928
======= ======
Primary earnings per share $ 0.16 $ 0.15
Fully diluted:
Average number of shares used to compute fully
diluted earnings per share 19,295 19,165
Common stock issuable upon assumed conversion
of stock option exercises 99 91
------- ------
19,394 19,256
======= ======
Net income available for Class A common shares:
Net income $3,800 $3,608
Less preferred dividends 626 680
------- ------
Net income available for Class A common shares $3,174 $2,928
======= ======
Fully diluted earnings per share $0.16 $0.15
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
SCHAWK, INC.
FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
(Thousands of dollars, except per share data)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,861
<SECURITIES> 0
<RECEIVABLES> 29,028
<ALLOWANCES> 820
<INVENTORY> 16,397
<CURRENT-ASSETS> 50,822
<PP&E> 135,816
<DEPRECIATION> 63,329
<TOTAL-ASSETS> 178,881
<CURRENT-LIABILITIES> 26,252
<BONDS> 64,788
<COMMON> 166
0
0
<OTHER-SE> 76,016
<TOTAL-LIABILITY-AND-EQUITY> 178,881
<SALES> 83,378
<TOTAL-REVENUES> 83,378
<CGS> 57,794
<TOTAL-COSTS> 57,794
<OTHER-EXPENSES> 17,470
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,687
<INCOME-PRETAX> 5,687
<INCOME-TAX> 1,887
<INCOME-CONTINUING> 3,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,800
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
