<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended September 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
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of each of the issuer's classes of common
stock as of September 30, 1996, are:
<TABLE>
<S> <C>
19,754,643 shares, Common Stock, $.008 par value 135,708 shares, Class B Common Stock, $.05 par value
- ------------------------------------------------ ----------------------------------------------------
</TABLE>
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
<PAGE> 2
PART I
Schawk, Inc.
Condensed Consolidated Balance Sheets
(Thousands of Dollars)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED)
-----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,439 $ 1,917
Trade accounts receivable, less allowance for doubtful
accounts of $812 in 1996 and $984 in 1995 29,292 29,865
Inventories 17,575 16,806
Prepaid expenses and other 3,932 3,463
Deferred income taxes 1,504 1,504
----------------------
Total current assets 55,742 53,555
Property and equipment - net 75,951 76,540
Excess of cost over net assets acquired, less accumulated
amortization of $7,198 in 1996 and $6,331 in 1995 49,235 47,858
Unallocated acquisition costs 6,680 --
Other intangible assets, less accumulated amortization of
$2,736 in 1996 and $2,336 in 1995 938 873
Other 6,042 5,637
----------------------
Total assets $194,588 $184,463
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 8,532 $ 7,943
Accrued expenses 15,087 11,750
Notes payable to stockholders 5,765 5,765
Current portion of long-term debt and capital lease obligations 6,297 1,222
----------------------
Total current liabilities 35,681 26,680
Long-term debt 65,278 69,907
Capital lease obligations 5,385 5,675
Deferred income taxes 5,269 4,736
Other 1,206 1,036
Stockholders' equity:
Common stock 166 165
Preferred stock -- --
Additional paid-in capital 79,366 75,506
Retained earnings 5,872 4,573
Cumulative foreign currency translation adjustment (1,159) (450)
----------------------
84,245 79,794
Treasury stock, at cost (1,806) (2,695)
Notes receivable from employees (670) (670)
----------------------
81,769 76,429
----------------------
Total liabilities and stockholders' equity $194,588 $184,463
======================
</TABLE>
See accompanying notes.
2
<PAGE> 3
Schawk, Inc.
Condensed Consolidated Statements of Income
Three Months Ended September 30, 1996 and 1995
(Unaudited)
(Thousands of dollars, except per share data)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net sales $40,541 $40,681
Cost of sales 27,185 29,539
Selling, general and administrative expenses 8,573 8,861
------- -------
Operating income 4,783 2,281
Interest income (106) (149)
Interest expense 1,368 1,659
Other income 7 47
------- -------
1,269 1,557
------- -------
Income before income taxes 3,514 724
Income tax provision (credit) 1,293 (223)
------- -------
Net income 2,221 947
Preferred dividends 313 340
------- -------
Net income available for Class A common shares $ 1,908 $ 607
======= =======
Primary and fully diluted income per Class A
common share $ 0.10 $ 0.03
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 19,607 19,132
Weighted average Class B common shares
outstanding 136 140
</TABLE>
See accompanying notes.
3
<PAGE> 4
Schawk, Inc.
Condensed Consolidated Statements of Income
Nine Months Ended September 30, 1996 and 1995
(Unaudited)
(Thousands of dollars, except per share data)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net sales $123,919 $131,449
Cost of sales 84,979 92,528
Selling, general and administrative expenses 26,043 29,498
-------- --------
Operating income 12,897 9,423
Interest income (359) (417)
Interest expense 4,055 4,776
Other income -- (208)
-------- --------
3,696 4,151
-------- --------
Income before income taxes 9,201 5,272
Income tax provision 3,180 717
-------- --------
Net income 6,021 4,555
Preferred dividends 939 1,020
-------- --------
Net income available for Class A common shares $ 5,082 $ 3,535
======== ========
Primary and fully diluted income per Class A
common share $ 0.260 $ 0.180
Cash dividends per Class A common share $ 0.195 $ 0.195
Cash dividends per Class B common share $ 1.350 $ 1.350
Weighted average Class A common shares
outstanding 19,463 19,216
Weighted average Class B common shares
outstanding 136 140
</TABLE>
See accompanying notes.
4
<PAGE> 5
Schawk, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30, 1996 and 1995
(Thousands of Dollars)
<TABLE>
<CAPTION>
1996 1995
--------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 6,021 $ 4,555
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 11,759 12,282
Deferred income taxes 491 (896)
Other -- (357)
Changes in operating assets and liabilities, net of
effects from acquisitions:
Trade accounts receivable 2,851 (338)
Inventories (2,274) 155
Prepaid expenses and other 162 961
Trade accounts payable and accrued expenses 426 1,231
-------------------
Net cash provided by operating activities 19,436 17,593
INVESTING ACTIVITIES
Purchases of property and equipment (9,912) (6,986)
Acquisitions, net of cash acquired (6,826) (1,243)
Other (1,441) --
-------------------
Net cash used in investing activities (18,179) (8,229)
FINANCING ACTIVITIES
Proceeds from sale of operating division 5,000 --
Proceeds from long term note collected 4,034 --
Proceeds from debt 3,035 4,700
Principal payments on debt and capital leases (7,590) (6,999)
Principal payments on notes payable to stockholders -- (3,093)
Cash dividends (2,618) (4,585)
Purchase of common stock (1,269) (1,062)
Issuance of common stock 70 755
Other -- (223)
-------------------
Net cash provided by (used in) financing activities 662 (10,507)
Effect of foreign currency exchange rates (397) --
-------------------
Net increase (decrease) in cash and cash equivalents 1,522 (1,143)
Cash and cash equivalents beginning of period 1,917 2,288
-------------------
Cash and cash equivalents end of period $ 3,439 $ 1,145
===================
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Dividends issued in the form of Class A common stock 2,104 --
Cash paid for interest 3,336 2,402
Cash paid for income taxes 2,689 524
Note received for sale of operating division 2,619 --
Common stock issued in connection with acquisitions 3,800 --
</TABLE>
See accompanying notes.
5
<PAGE> 6
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.
NOTE 4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
---- ----
<S> <C> <C>
Raw materials $ 5,732 $ 6,432
Work in process 9,086 6,565
Finished goods 3,470 4,522
------- -------
18,288 17,519
Less: LIFO reserve (713) (713)
------- -------
$17,575 $16,806
======= =======
</TABLE>
6
<PAGE> 7
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
---- ----
<S> <C> <C>
Land and improvements $ 2,344 $ 2,315
Building and improvements 36,932 35,998
Machinery and equipment 95,095 85,067
Leasehold improvements 2,965 2,786
Building and improvements under capital leases 7,500 7,500
-------- --------
144,836 133,666
Accumulated depreciation and amortization (68,885) (57,126)
-------- --------
$ 75,951 $ 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 nine
months ended September 30, 1996.
NOTE 7. ACQUISITIONS
On July 31, 1996 the Company acquired 100% of Converter Scan, Inc. an Imaging
company, with operations in Connecticut and Georgia for cash of $1,900, stock
of $2,800, and assumption of debt of $1,400.
Effective September 1, 1996, the Company acquired 100% of Stanmont, Inc. an
Imaging company, with operations in Toronto and Montreal, for cash of $3,500,
stock of $1,000, and assumption of debt of $4,379.
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 $40,541 for the third quarter of 1996 changed less than 1% from
net sales of $40,681 for the third quarter of 1995. Sales in the Plastics
Group decreased by 10% for the third quarter of 1996 (increased by 1% excluding
Plastics Molded Concepts, Inc. (PMC) which was sold on May 1, 1996), while
sales in the Imaging Group increased by 9% over the same period. The Imaging
Group sales increase was due almost entirely to the acquisitions of Converter
Scan, Inc. and Stanmont, Inc. which had two months and one month of sales,
respectively, included in the third quarter. Sales for the first nine months
of 1996 of $123,919 declined 6% from sales of $131,449 for the first nine
months of 1995 (declined 2% excluding PMC).
COST OF SALES for the third quarter of 1996 decreased to 67% from 73% from the
third quarter of 1995. The Plastics Group cost of sales decreased to 81% for
the third quarter of 1996 from 86% for the same period in 1995 as manufacturing
processes improved in Europe and Puerto Rico. The Imaging Group cost of sales
decreased to 57% for the third quarter of 1996 from 60% for the same period in
1995 due to manufacturing efficiencies implemented during the last year. Cost
of sales for the first nine months of 1996 decreased to 69% compared to the
first nine months of 1995 of 70%.
INCOME FROM OPERATIONS increased 110% to $4,783 for the third quarter of 1996
versus operating income of $2,281 for the third quarter of 1995 as gross
margin increased as previously discussed and general administrative expenses
decreased 3%. For the nine month period, income from operations increased to
$12,897 from income from operations of $9,423 for the first nine months of
1995.
OTHER EXPENSE declined to $1,269 for the third quarter of 1996 from $1,557 for
the third quarter of 1995 on lower interest expense due to debt reduction. For
the first nine months of 1996, net other expense decreased to $3,696 compared
to $4,151 for the same period of 1995.
NET INCOME available for Class A common stock increased 214% to $1,908 for the
third quarter of 1996 compared to $607 for the third quarter of 1995, and for
the nine month period increased to $5,082 from $3,535 as a result of the
factors previously discussed. The income tax provision for the third quarter
and first nine months of 1995 includes a credit of $544 and 1,088,
respectively, 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 third
quarter of 1996 from primary and fully diluted earnings per share of $0.03 for
the third quarter of 1995, and increased to $0.26 for the first nine months of
1996 compared to primary and fully diluted earnings per share of $0.18 for the
first nine months of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Long-term debt decreased to $65,278 at September 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 September 30, 1996 was 1.6
with available working capital of $20,061 compared to a current ratio of 2.0
with available working capital of $26,875 at December 31, 1995. The decline in
working capital is the result of the financing of the Stanmont acquisition with
short term debt.
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 $9,912 for the nine month ended September 30,
1996 from $6,986 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
<PAGE> 9
ACQUISITIONS
On July 31, 1996 the Company acquired 100% of Converter Scan, Inc. an Imaging
company, with operations in Connecticut and Georgia for cash of $1,900, stock
of $2,800, and assumption of debt of $1,400.
Effective September 1, 1996, the Company acquired 100% of Stanmont, Inc. an
Imaging company, with operations in Toronto and Montreal, for cash of $3,500,
stock of $1,000, and assumption of debt of $4,379.
9
<PAGE> 10
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 September
30, 1996:
Form 8-K dated August 26, 1996
Form 8-K dated October 8, 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 November, 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 September 30
1996 1995
---- ----
<S> <C> <C>
Primary:
Average number of shares used to compute primary
earnings per share 19,543 19,072
Common stock issuable upon assumed conversion of
stock option exercises 64 60
------- -------
Total 19,607 19,132
======= =======
Net income available for Class A common shares:
Net income $ 2,221 $ 947
Less preferred dividends 313 340
------- -------
Net income available for Class A common shares $ 1,908 $ 607
======= =======
Primary earnings per share $ 0.10 $ 0.03
Fully diluted:
Average number of shares used to compute fully
diluted earnings per share 19,543 19,072
Common stock issuable upon assumed conversion
of stock option exercises 64 60
------- -------
19,607 19,132
======= =======
Net income available for Class A common shares:
Net income $ 2,221 $ 947
Less preferred dividends 313 340
------- -------
Net income available for Class A common shares $ 1,908 $ 607
======= =======
Fully diluted earnings per share $ 0.10 $ 0.03
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Nine months ended September 30
1996 1995
------- -------
<S> <C> <C>
Primary:
Average number of shares used to compute primary
earnings per share 19,377 19,134
Common stock issuable upon assumed conversion of
stock option exercises 86 82
------- -------
Total 19,463 19,216
======= =======
Net income available for Class A common shares:
Net income $ 6,021 $ 4,555
Less preferred dividends 939 1,020
------- -------
Net income available for Class A common shares $ 5,082 $ 3,535
======= =======
Primary earnings per share $ 0.26 $ 0.18
Fully diluted:
Average number of shares used to compute fully
diluted earnings per share 19,377 19,134
Common stock issuable upon assumed conversion
of stock option exercises 86 82
------- -------
19,463 19,216
======= =======
Net income available for Class A common shares:
Net income $ 6,021 $ 4,555
Less preferred dividends 939 1,020
------- -------
Net income available for Class A common shares $ 5,082 $ 3,535
======= =======
Fully diluted earnings per share $ 0.26 $ 0.18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> SEP-30-1996 SEP-30-1996
<CASH> 3,439 3,439
<SECURITIES> 0 0
<RECEIVABLES> 30,104 30,104
<ALLOWANCES> 812 812
<INVENTORY> 17,575 17,575
<CURRENT-ASSETS> 55,742 55,742
<PP&E> 144,836 144,836
<DEPRECIATION> 68,885 68,885
<TOTAL-ASSETS> 194,588 194,588
<CURRENT-LIABILITIES> 35,681 35,681
<BONDS> 65,278 65,278
<COMMON> 0 0
0 0
166 166
<OTHER-SE> 81,603 81,603
<TOTAL-LIABILITY-AND-EQUITY> 194,588 194,588
<SALES> 40,541 123,919
<TOTAL-REVENUES> 40,541 123,919
<CGS> 27,185 84,979
<TOTAL-COSTS> 27,185 84,979
<OTHER-EXPENSES> 8,573 26,043
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,368 4,055
<INCOME-PRETAX> 3,514 9,201
<INCOME-TAX> 1,293 3,180
<INCOME-CONTINUING> 2,221 6,021
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,221 6,021
<EPS-PRIMARY> 0.10 0.26
<EPS-DILUTED> 0.10 0.26
</TABLE>
