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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 March 31, 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 March 31, 1996, are:
19,305,513 shares, Common Stock, 135,310 shares, Class B Common Stock,
$.008 par value $.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 11.
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1
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PART I
Schawk, Inc.
Condensed Consolidated Balance Sheets
(Thousands of Dollars)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
(UNAUDITED)
------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 951 $ 1,917
Trade accounts receivable, less allowance for doubtful
accounts of $906 in 1996 and $984 in 1995 30,359 29,865
Inventories 18,373 16,806
Prepaid expenses and other 3,145 3,463
Deferred income taxes 1,504 1,504
------------------------------
Total current assets 54,332 53,555
Property and equipment - net 76,078 76,540
Excess of cost over net assets acquired, less accumulated
amortization of $6,620 in 1996 and $6,331 in 1995 47,107 47,858
Other intangible assets, less accumulated amortization of
$2,617 in 1996 and $2,336 in 1995 793 873
Other 5,637 5,637
------------------------------
Total assets $183,947 $184,463
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 8,646 $ 7,943
Accrued expenses 9,038 11,750
Notes payable to stockholders 5,765 5,765
Current portion of long-term debt and capital lease
obligations 1,059 1,222
------------------------------
Total current liabilities 24,508 26,680
Long-term debt 71,530 69,907
Capital lease obligations 5,586 5,675
Deferred income taxes 5,113 4,736
Other 1,208 1,036
Stockholders' equity:
Common stock 166 165
Preferred stock -- --
Additional paid-in capital 76,126 75,506
Retained earnings 4,534 4,573
Cumulative foreign currency translation adjustment (805) (450)
------------------------------
80,021 79,794
Treasury stock, at cost (3,349) (2,695)
Notes receivable from employees (670) (670)
------------------------------
76,002 76,429
------------------------------
Total liabilities and stockholders' equity $ 183,947 $ 184,463
==============================
</TABLE>
See accompanying notes.
2
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Schawk, Inc.
Condensed Consolidated Statements of Income
Three Months Ended March 31, 1996 And 1995
(Unaudited)
(Thousands of dollars, except per share data)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net Sales $ 40,898 $ 45,420
Cost of Sales 28,992 31,159
Selling, general and administrative expenses 8,294 10,516
--------- ---------
Operating Income 3,612 3,745
Interest income (130) (144)
Interest expense 1,415 1,558
Other expense (income) 46 (106)
--------- ---------
1,331 1,308
--------- ---------
Income before income taxes 2,281 2,437
Income tax provision 693 826
--------- ---------
Net income 1,588 1,611
Preferred dividends 313 340
--------- ---------
Net income available for Class A common shares $ 1,275 $ 1,271
========= =========
Primary and fully diluted income per Class A
common share $ 0.07 $ 0.07
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 19,451 19,359
Weighted average Class B common shares
outstanding 135 139
</TABLE>
See accompanying notes.
3
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Schawk, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31, 1996 and 1995
(Thousands of Dollars)
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,588 $ 1,611
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization 3,935 4,160
Deferred income taxes 377 (286)
Other -- (833)
Changes in operating assets and liabilities, net of effects from
acquisitions:
Trade accounts receivable (494) (1,744)
Inventories (1,567) (2,408)
Prepaid expenses and other 318 1,310
Trade accounts payable and accrued expenses (2,009) 322
--------------------------------------------
Net cash provided by operating activities 2,148 2,132
INVESTING ACTIVITIES
Purchases of property and equipment (3,013) (2,672)
Acquisitions, net of cash acquired -- (1,243)
Other 172 (337)
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Net cash used in investing activities (2,841) (4,252)
FINANCING ACTIVITIES
Proceeds from debt 1,623 3,162
Principal payments on debt (163) (376)
Principal payments on capital lease obligations (89) --
Principal payments on notes payable to stockholders -- (737)
Cash dividends (1,008) (1,643)
Purchase of common stock (654) --
Other 307 --
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Net cash provided by financing activities 16 406
Effect of foreign currency exchange rates (289) 199
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Net decrease in cash and cash equivalents (966) (1,515)
Cash and cash equivalents beginning of year 1,917 2,288
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Cash and cash equivalents end of year $ 951 $ 773
============================================
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Dividends issued in the form of Class A common stock 621 --
Cash paid for interest 1,192 1,095
Cash paid for income taxes 340 265
</TABLE>
See accompanying notes.
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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 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
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> March 31 December 31
1996 1995
---- ----
<S> <C> <C>
Raw materials $ 6,324 $ 6,432
Work in process 8,019 6,565
Finished goods 4,743 4,522
-------- --------
19,086 17,519
Less: LIFO reserve (713) (713)
-------- --------
$ 18,373 $ 16,806
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</TABLE>
5
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NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
---- ----
<S> <C> <C>
Land and improvements $ 2,315 $ 2,315
Building and improvements 35,998 35,998
Machinery and equipment 87,970 85,067
Leasehold improvements 2,786 2,786
Building and improvements under capital leases 7,500 7,500
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136,569 133,666
Accumulated depreciation and amortization (60,491) (57,126)
-------- --------
$ 76,078 $ 76,540
======== ========
</TABLE>
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE FIRST QUARTER 1996 COMPARED TO THE FIRST QUARTER 1995
(Thousands of dollars, except per share amounts)
NET SALES of $40,898 for the first quarter 1996 represents a 10% decline from
sales of $45,420 for the same period in 1995. Sales in the Plastics Group
decreased 3% as the Plastics Group continued to selectively eliminate low
volume and low margin business in its filter operations. Automotive business
was down 13%, while the medical and consumer product segments were up
approximately 10%. Thermoformed sales were up 9% with increases coming from
new medical customers and existing customer growth. Sales for the Imaging
Group were $19,280, down 17% from the first quarter of 1995 at $23,162. While
sales were below projections, sales volume in February and March showed a 22%
improvement over January's performance, anticipating a return to more normal
market conditions.
COST OF SALES for the first quarter of 1996 increased to 71% from 69% of net
sales for the first quarter of 1995. The Plastics Group cost of sales decreased
to 81% in 1996 from 83% of net sales in 1995 due to manufacturing efficiencies
and change in product mix. The Imaging Group cost of sales increased to 59% in
1996 from 55% of net sales in 1995 due to the resulting under absorption of
overhead on the lower sales volume. This increased cost of sales percentage was
experienced by all prepress Imaging divisions.
INCOME FROM OPERATIONS declined to $3,612 in 1996 from operating income of
$3,745 in the first quarter of 1995. This decline was due to the cost of sales
percentage increase previously described, offset by a 21% decrease in selling,
general and administrative expenses, as the Company has significantly reduced
its administrative cost structure over the last year.
NET INCOME available for Class A common stock was $1,275 in 1996 compared to
$1,271 in the first quarter of 1995 due to the factors described above. The
Company's effective income tax rate declined from 34% in 1995 to 30% in 1996
due to the reduction of income tax reserves of $170 provided for in prior
years.
PRIMARY AND FULLY DILUTED EARNINGS PER SHARE remained unchanged at $0.07 in
1996 and 1995. Fully diluted weighted average shares outstanding increased to
19,451 in 1996 from fully diluted weighted average shares outstanding of 19,359
in 1995 due primarily to the Company's conversion of Series A preferred stock
into Class A common shares during 1995, offset by the Company's purchase of
outstanding shares, and issuance of Class A common shares under the Company's
dividend reinvestment plan.
LIQUIDITY AND CAPITAL RESOURCES
Long-term debt and capital lease obligations increased to $77,116 in 1996 from
$75,582 in 1995 as the Company borrowed to meet short term working capital
needs. As of March 31, 1996 the Company had approximately $25,000 available
under its $55,000 line of credit agreements. The Company's current ratio at
March 31, 1996 was 2.2 with available working capital of $29,824 compared to a
current ratio on March 31, 1995 of 1.5 with available working capital of
$20,925.
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 of $3,013 were made during the first quarter of 1996 for
machinery, equipment, automation, and tooling to expand production facilities
and improve productivity.
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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) Report on Form 8-K
The following report was filed on Form 8-K for the quarter ended March 31,
1996:
Form 8-K dated January 23, 1996
Form 8-K dated January 30, 1996
(C) Exhibit 27 - Financial Data Schedule
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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 8th day of May, 1996.
SCHAWK, INC.
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(Registrant)
/s/ David A. Schawk
- --------------------------------------
President, Chief Executive Officer and
Director
/s/ Marie Meisenbach Graul
- --------------------------------------
Chief Financial Officer, Treasurer,
Public Information Officer and
Director
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EXHIBIT 11
Schawk, Inc.
Computation of Actual and Pro Forma Net Income per Share of Common
and Common Equivalent Shares
(Thousands of dollars, except per share data)
<TABLE>
<CAPTION> Three months ended March 31
1996 1995
---- ----
<S> <C> <C>
Primary:
Average number of shares used to compute primary
earnings per share 19,305 19,176
Common stock issuable upon assumed conversion of
stock option exercises 102 183
------- ---------
Total 19,407 19,359
======= =========
Net income available for Class A common shares:
Net income $ 1,588 $ 1,611
Less preferred dividends 313 340
-------- ---------
Net income available for Class A common shares $ 1,275 $ 1,271
======== =========
Primary earnings per share $ 0.07 $ 0.07
Fully diluted:
Average number of shares used to compute fully
diluted earnings per share 19,305 19,176
Common stock issuable upon assumed conversion
of stock option exercises 146 183
-------- ---------
19,451 19,359
======== =========
Net income available for Class A common shares:
Net income $ 1,588 $ 1,611
Less preferred dividends 313 340
-------- ---------
Net income available for Class A common shares $ 1,275 $ 1,271
======== =========
Fully diluted earnings per share $ 0.07 $ 0.07
</TABLE>
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FDS FOR 1ST QTR
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 951
<SECURITIES> 0
<RECEIVABLES> 31,265
<ALLOWANCES> 906
<INVENTORY> 18,373
<CURRENT-ASSETS> 54,332
<PP&E> 136,569
<DEPRECIATION> 60,491
<TOTAL-ASSETS> 183,947
<CURRENT-LIABILITIES> 24,508
<BONDS> 77,116
<COMMON> 166
0
0
<OTHER-SE> 75,836
<TOTAL-LIABILITY-AND-EQUITY> 183,947
<SALES> 40,898
<TOTAL-REVENUES> 40,898
<CGS> 28,992
<TOTAL-COSTS> 28,992
<OTHER-EXPENSES> 8,294
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,415
<INCOME-PRETAX> 2,281
<INCOME-TAX> 693
<INCOME-CONTINUING> 1,588
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,588
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
