<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 June 30, 1998 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:
<TABLE>
<S> <C>
Title of Each Class Name of Exchange on Which Registered
------------------------ -----------------------------------------------
CLASS A COMMON STOCK, NEW YORK STOCK EXCHANGE
$.008 PAR VALUE
</TABLE>
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, 1998, are:
22,273,386 shares, Common Stock, $.008 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
<PAGE> 2
PART I
Schawk, Inc.
Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
JUNE 30,
1998 DECEMBER 31,
(UNAUDITED) 1997
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,081 $ 4,022
Short term investments 12,120 12,250
Trade accounts receivable, less allowance for doubtful accounts
of $586 in 1998 and $464 in 1997 23,570 22,884
Inventories 5,693 4,464
Prepaid expenses and other 1,817 2,817
Deferred income taxes 417 543
--------- ---------
Total current assets 56,698 46,980
Marketable securities 24,999 33,917
Property and equipment, net 31,277 30,147
Excess of cost over net assets acquired, less accumulated amortization
of $4,623 in 1998 and $4,207 in 1997 15,825 12,713
Other assets 2,621 3,166
--------- ---------
Total assets $ 131,420 $ 126,923
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 3,573 $ 3,393
Accrued expenses 7,888 8,128
Income taxes payable 1,579 4,061
Notes payable to banks 3,917 4,685
Current portion of long-term debt and capital lease obligations 452 430
--------- ---------
Total current liabilities 17,409 20,697
Long-term debt 40,000 40,000
Capital lease obligations 4,623 4,854
Other 1,266 1,308
Deferred income taxes 3,208 4,156
STOCKHOLDERS' EQUITY:
Common stock 180 160
Preferred stock -- --
Additional paid-in capital 78,146 79,243
Accumulated deficit (9,355) (21,140)
Accumulated comprehensive income, net (253) 965
--------- ---------
68,718 59,228
Treasury stock, at cost (3,804) (3,320)
--------- ---------
Total stockholders' equity 64,914 55,908
--------- ---------
Total liabilities and stockholders' equity $ 131,420 $ 126,923
========= =========
</TABLE>
See accompanying notes.
2
<PAGE> 3
Schawk, Inc.
Consolidated Statements of Operations
Three Months Ended June 30, 1998 and 1997
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Net sales $ 34,050 $ 29,397
Cost of sales 18,334 16,167
Selling, general, and administrative expenses 8,988 8,374
-------- --------
Operating income 6,728 4,856
Other income (expense)
Interest and dividend income 779 997
Interest expense (903) (966)
Other income 1,763 141
-------- --------
1,639 172
-------- --------
Income before income taxes 8,367 5,028
Income tax provision 3,348 2,011
-------- --------
Net income 5,019 3,017
Preferred dividends -- (285)
-------- --------
Net income available for common shares $ 5,019 $ 2,732
======== ========
Earnings per share:
Basic $ 0.23 $ 0.14
Diluted $ 0.22 $ 0.14
Weighted average number of common and common
equivalent shares outstanding 22,549 19,861
Dividends per Class A common share $ 0.065 $ 0.065
</TABLE>
See accompanying notes.
3
<PAGE> 4
Schawk, Inc.
Consolidated Statements of Operations
Six Months Ended June 30, 1998 and 1997
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Net sales $ 65,061 $ 55,589
Cost of sales 34,686 31,330
Selling, general, and administrative expenses 17,301 15,655
-------- --------
Operating income 13,074 8,604
Other income (expense)
Interest and dividend income 1,555 1,306
Interest expense (1,812) (1,873)
Other income 2,136 141
-------- --------
1,879 (426)
-------- --------
Income before income taxes 14,953 8,178
Income tax provision 5,982 3,271
-------- --------
Net income 8,971 4,907
Preferred dividends (114) (570)
Discount on redemption of preferred stock 5,832 --
-------- --------
Net income available for common shares $ 14,689 $ 4,337
======== ========
Earnings per share:
Basic $ 0.68 $ 0.22
Diluted $ 0.67 $ 0.22
Weighted average number of common and common
equivalent shares outstanding 21,931 19,883
Dividends per Class A common share $ 0.13 $ 0.13
</TABLE>
See accompanying notes.
4
<PAGE> 5
Schawk, Inc.
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1998 and 1997
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 8,971 $ 4,907
Adjustments to reconcile net income to cash provided by (used in) operating
activities:
Depreciation and amortization 3,750 3,510
Deferred income taxes (822) --
Gain realized on sale of marketable securities (2,136) --
Changes in operating assets and liabilities, net of effects from acquisitions:
Trade accounts receivable 755 (402)
Inventories (1,089) (1,262)
Prepaid expenses and other 1,006 2,119
Trade accounts payable and accrued expenses (546) (3,545)
Income taxes payable (2,482) (1,307)
-------- --------
Net cash provided by (used in) operating activities 7,407 4,020
INVESTING ACTIVITIES
Proceeds from disposal of operating division -- 93,485
Proceeds from sale of marketable securities 19,125 --
Proceeds from disposal of property and equipment -- 441
Purchase of marketable securities (7,941) (55,519)
Purchases of property and equipment (3,951) (3,130)
Acquisitions, net of cash acquired (1,938) --
Other (219) (1,146)
-------- --------
Net cash provided by (used in) investing activities 5,076 34,131
FINANCING ACTIVITIES
Issuance of common stock 16,029 --
Redemption of preferred stock (14,715) --
Principal payments on debt (746) (27,379)
Principal payments on capital lease obligations (231) (213)
Principal payments on notes payable to stockholders -- (5,765)
Cash dividends (3,018) (3,149)
Purchase of common stock (490) (1,027)
Other (253) (211)
-------- --------
Net cash provided by (used in) financing activities (3,424) (37,744)
-------- --------
Net increase (decrease) in cash and cash equivalents 9,059 407
Cash and cash equivalents beginning of period 4,022 483
-------- --------
Cash and cash equivalents end of period $ 13,081 $ 890
======== ========
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Stock issued in connection with acquisition $ 3,469 $ --
Dividends issued in the form of Class A common stock 2 5
Cash paid for interest 1,517 2,368
Cash paid for income taxes 8,700 4,449
</TABLE>
See accompanying notes.
5
<PAGE> 6
Schawk, Inc.
Notes to Consolidated Interim Financial Statements
(Thousands of dollars, except per share data)
NOTE 1. BASIS OF PRESENTATION
The 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, 1997.
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. is a leading provider of digital imaging prepress services for the
consumer products industry in the United States and Canada primarily serving the
consumer products, advertising and promotional markets. The Company offers a
complete line of high quality prepress services, digital image management,
digital photography and art production. The Company also provides services for
point-of-sale, advertising and direct mail.
NOTE 4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
------- -----------
<S> <C> <C>
Raw materials $ 1,252 $ 1,239
Work in process 5,346 4,130
------- -------
6,598 5,369
Less: LIFO reserve (905) (905)
------- -------
$ 5,693 $ 4,464
======= =======
</TABLE>
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
-------- -----------
<S> <C> <C>
Land and improvements $ 520 $ 520
Building and improvements 7,872 7,872
Machinery and equipment 52,345 49,567
Leasehold improvements 3,998 3,998
Building and improvements under capital leases 7,500 7,500
-------- --------
72,235 69,457
Accumulated depreciation and amortization (40,958) (39,310)
-------- --------
$ 31,277 $ 30,147
======== ========
</TABLE>
6
<PAGE> 7
NOTE 6. INVESTMENTS
At June 30, 1998 all of the Company's investments were classified as
available-for-sale. Available-for-sale securities are carried at fair value,
with unrealized gains and losses, net of income taxes, reported in a separate
component of stockholders' equity. Realized gains and losses and declines in
value judged to be other than temporary on available for sale securities are
included in investment income. The cost of securities sold is based on the
specific identification method. Interest and dividends on securities classified
as available-for-sale are included in investment income. Unrealized appreciation
on these securities totaled $409 ($245 net of tax effects) at June 30, 1998 and
is included as a separate component of stockholders' equity.
The following is a summary of available for sale securities at June 30, 1998:
<TABLE>
<CAPTION>
Gross Estimated
Unrealized Fair
Cost Gains Value
---------- ---------- ---------
<S> <C> <C> <C>
Equity securities $ 31 $ -- $ 31
U.S. Treasury and U.S. Government notes 5,230 38 5,268
Corporate bonds 3,271 26 3,297
Bond mutual funds 28,178 345 28,523
------- ------- -------
$36,710 $ 409 $37,119
======= ======= =======
</TABLE>
During the three month period ended June 30, 1998 available-for-sale securities
were sold with a fair value at date of sale of $10,964 including a gross
realized gain of $1,763.
The following is a summary of available-for-sale securities by maturity date:
<TABLE>
<CAPTION>
Estimated
Fair
Cost Value
------- ----------
<S> <C> <C>
Due in one year or less $13,649 $13,749
Due after one year through five years 22,181 22,483
Due after five years through ten years 849 856
------- -------
Total debt securities 36,679 37,088
Equity securities 31 31
------- -------
$36,710 $37,119
======= =======
</TABLE>
Amounts shown as short term investments on the balance sheet at June 30, 1998
represent management's estimates of amounts available for current operations.
NOTE 7. EARNINGS PER SHARE
Basic earnings per share and diluted earnings per share are shown on the face of
the statement of operations. Basic earnings per share is computed by dividing
net income less preferred dividends, plus the discount on the redemption of
preferred stock, by the weighted average shares outstanding for the period.
Diluted earnings per share is computed by dividing net income less preferred
dividends, plus the discount on the redemption of preferred stock, by weighted
average number of common shares and common stock equivalent shares outstanding
(stock options) for the period.
7
<PAGE> 8
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three months ended June 30
1998 1997
--------------------------
<S> <C> <C>
Net income $ 5,019 $ 3,017
Preferred stock dividends -- (285)
-------- --------
Income available for common shareholders $ 5,019 $ 2,732
======== ========
Weighted average shares 22,276 19,830
Effect of dilutive employee stock options 273 31
-------- --------
Adjusted weighted average shares and
assumed conversions 22,549 19,861
======== ========
Basic earnings per share $ 0.23 $ 0.14
======== ========
Diluted earnings per share $ 0.22 $ 0.14
======== ========
Six months ended June 30
1998 1997
------------------------
Net income $ 8,971 $ 4,907
Preferred stock dividends (114) (570)
Discount on redemption of preferred stock 5,832 --
-------- --------
Income available for common shareholders $ 14,689 $ 4,337
======== ========
Weighted average shares 21,744 19,858
Effect of dilutive employee stock options 187 25
-------- --------
Adjusted weighted average shares and
assumed conversions 21,931 19,883
======== ========
Basic earnings per share $ 0.68 $ 0.22
======== ========
Diluted earnings per share $ 0.67 $ 0.22
======== ========
</TABLE>
NOTE 8. SEGMENT REPORTING
The Company operates a single business segment, Imaging and Information
Technologies. The Company operates primarily in two geographic areas, the United
States and Canada. Summary financial information for the three and six months
ended June 30, 1998 and 1997 by geographic area is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
1998 UNITED STATES CANADA TOTAL
<S> <C> <C> <C>
Sales $ 29,156 $ 4,894 $ 34,050
Operating income 6,384 344 6,728
Total assets 118,846 12,574 131,420
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
1997 UNITED STATES CANADA TOTAL
<S> <C> <C> <C>
Sales $25,388 $4,009 $29,397
Operating income 4,836 20 4,856
Identifiable assets 120,565 12,186 132,751
SIX MONTHS ENDED JUNE 30
1998 UNITED STATES CANADA TOTAL
Sales $55,743 $9,318 $65,061
Operating income 12,421 653 13,074
Total assets 118,846 12,574 131,420
1997 UNITED STATES CANADA TOTAL
Sales $47,439 $8,150 $55,589
Operating income 8,371 233 8,604
Identifiable assets 120,565 12,186 132,751
</TABLE>
NOTE 9. STOCK OFFERING
In February 1998 the Company completed a public offering of 3,450 shares of
Class A common stock. The Company issued 1,950 of the shares and certain
stockholders of the Company sold the remaining 1,500 shares. The Company did not
receive any of the proceeds from the sale of stock by participating
stockholders. The proceeds of the offering to the Company after deducting
estimated underwriting discounts, commissions and expenses of the offering were
$16,029. The proceeds were used to redeem all of the Company's outstanding
Series A and Series B stock. The preferred stock was redeemed at a discount of
$6,035 from its liquidation value of $20,607. This discount was recorded as
additional income (after net income) available to common shareholders in the
first quarter of 1998.
NOTE 10. COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement 130, "Reporting
Comprehensive Income." Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or shareholder's
equity. Statement 130 requires unrealized gains and losses on the Company's
available-for -sale securities and foreign currency translation adjustments,
which prior to adoption were reported separately in shareholder's equity, to be
included in comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of Statement 130.
The components of comprehensive income, net of related tax, for the three and
six month periods ended June 30, 1998 and 1997 are as follows:
<TABLE>
Three months ended June 30
--------------------------
1998 1997
---------- ----------
<S> <C> <C>
Net income $5,019 $3,017
Increase (decrease) in unrealized
appreciation of investments (911) 1,195
Foreign currency translation adjustments (206) (308)
------ ------
Comprehensive income $3,902 $3,904
====== ======
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
Six months ended June 30
------------------------
1998 1997
--------- ---------
<S> <C> <C>
Net income $ 8,971 $ 4,907
Increase (decrease) in unrealized
appreciation of investments (1,029) 1,195
Foreign currency translation adjustments (189) (107)
------- -------
Comprehensive income $ 7,753 $ 5,995
======= =======
</TABLE>
The components of accumulated other comprehensive income, net of related tax, at
June 30, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
------ -------
<S> <C> <C>
Unrealized appreciation of investments $ 245 $ 1,274
Foreign currency translation adjustments (498) (309)
------ -------
Accumulated comprehensive income $ (253) $ 965
</TABLE> ====== =======
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(Thousands of dollars, except per share amounts)
Statements contained herein that relate to the Company's beliefs or expectations
as to future events relating to, among other things, the success of the
Company's growth strategy, the ability of the Company to exploit industry
trends, such as outsourcing, and the Company's technological advancements in the
imaging industry, are not statements of historical fact and are forward-looking
statements with in the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act and are subject to the "Safe Harbor" created thereby.
Although the Company believes that the assumptions upon which such
forward-looking statements are based are reasonable within the bounds of its
knowledge of its business and operations, it can give no assurance that the
assumptions will prove to have been correct. Important factors that could cause
actual results to differ materially and adversely from the Company's
expectations and beliefs include the ability of the Company to implement its
growth strategy, to identify and exploit industry trends, and to exploit
technological advances in the imaging industry.
NET SALES Of $34,050 for the second quarter of 1998 represents an 15.8% increase
from sales of $29,397 for the same period in 1997. The increase was attributable
to higher revenues due to expansion of business with the existing client base
and additional new consumer products clients won during the latter part of 1997.
Internal sales growth accounted for 73.2% of the increase in the second quarter
and the remainder was from a 1998 first quarter acquisition.
Net sales of $65,061 for the first half of 1998 represents a 17.0% increase from
sales of $55,589 for the same period of 1997. Internal sales growth accounted
for 81.4% of the sales growth and the balance was acquisition related.
COST OF SALES for the second quarter of 1998 decreased to 53.8% from 55.0% of
net sales for the same period in 1997. Cost of sales decreased to 53.3% from
56.4% of net sales for the first half of 1998 versus the first half of 1997. The
Company experienced operating efficiencies from increased volume over its fixed
operating costs. The sales mix of high margin projects also contributed to the
decrease in cost of sales as a percentage of sales.
OPERATING INCOME in the second quarter of 1998 increased 38.6% to $6,728 from
$4,856 for the same period in 1997, and increased 52.0% to $13,074 for the first
half of 1998 compared to $8,604 for the first half of 1997. This increase was
due to the cost of sales improvement previously described as well as lower
selling, general and administrative expenses as a percentage of sales. Selling,
general and administrative expenses decreased to 26.4% of sales for the second
quarter of 1998 from 28.5% of sales for the same period in 1997, and decreased
to 26.6% of sales for the first half of 1998 compared to 28.2% of sales for the
first half of 1997. Sales volume increases resulted in efficiencies leveraging
the fixed portion of selling, general and administrative expenses.
OTHER INCOME (EXPENSE) - NET increased to $1,639 for the second quarter of 1998
compared with $172 for the same period of 1997, and increased to $1,879 for the
first half of 1998 from $(426) for the first half of 1997. Interest expense has
remained relatively constant over the periods as the Company's debt level has
remained stable. Interest and dividend income fluctuations result from the
changes in the invested balances over periods shown. During the second quarter
of 1998 the Company sold investments to provide additional liquidity for
operations resulting in a gain of $1,763.
INCOME BEFORE INCOME TAXES increased to $8,367 for the second quarter of 1998
from $5,028 for the same period of 1997, and increased to $14,953 for the first
half of 1998 from $8,178 for the first half of 1997 for the reasons previously
discussed.
INCOME TAX PROVISION remained constant at an effective tax rate of 40% of
pre-tax income for the second quarter of 1998 and 1997, and for the first half
of 1998 and 1997.
NET INCOME increased 66.4% to $5,019 for the second quarter of 1998 from $3,017
for the same period of 1997, and increased 82.8% to $8,971 from $4,907 for the
first half of 1998 compared to the first half of 1997 for the reasons previously
discussed.
11
<PAGE> 12
PREFERRED DIVIDENDS decreased to $114 for the first half of 1998 from $570 for
the same period of 1997 as the Company repurchased all of the preferred stock
outstanding in February of 1998.
DISCOUNT ON REDEMPTION OF PREFERRED STOCK resulted in non-recurring income
available for common shares of $5,832 for the first half of 1998 as the Company
repurchased its outstanding preferred stock at a discount over its liquidation
value of $20,607 in February 1998.
BASIC AND DILUTED EARNINGS PER SHARE increased to $0.23 and $0.22, respectively
for the second quarter of 1998 from $0.14 for the same period in 1997. Basic and
diluted earnings per share increased to $0.68 and $0.67, respectively, for the
first half of 1998 compared to $0.22 for the first half of 1997. Basic and
diluted earnings per share for the first half of 1998 without the non-recurring
benefit from the repurchase of the Company preferred stock would have been $0.41
and $0.40, respectively. Weighted average common and common equivalent shares
outstanding increased to 22,549 for the second quarter of 1998 from 19,861 for
the same period of 1997, and from 21,931 from 19,883 for the first half of 1998
compared to the first half of 1997, primarily as a result of an offering of
common stock in February of 1998, stock issued in connection with acquisitions,
increase in dilution from stock options, and reduced by shares repurchased under
its common stock repurchase program.
LIQUIDITY AND CAPITAL RESOURCES
The Company presently finances its business from available cash held by the
Company and from cash generated from operations. The Company maintains a $10,000
unsecured credit facility and its consolidated Canadian subsidiary maintains a
Cdn $10,000 unsecured working capital facility. Both facilities are due on
demand. The domestic credit facility was unused at June 30, 1998 and the
Canadian credit facility had approximately U.S. $2,900 available at June 30,
1998.
The Company held invested balances at June 30, 1998 of $37,119 (including
$12,120 classified as short term investments) primarily in bond mutual funds,
U.S. Treasury and U.S. Government notes, corporate bonds. These funds are
available-for-sale to provide for acquisitions and corporate requirements.
Unrealized appreciation on these investments of $408 ($245 net of tax effects)
at June 30, 1998, has been excluded from earnings in the Company's consolidated
statement of operations and has been included as a separate component of
stockholders' equity.
At June 30, 1998, outstanding debt of the Company consisted of: (i) unsecured
notes issued pursuant to a Note Purchase Agreement dated August 18, 1995, for
$40,000 due in installments from 1999 through 2005 (averaging seven years) at an
average interest rate of 6.88%; and (ii) approximately US $3,900 of borrowings
under the Company's Canadian subsidiary's working capital facility.
Management believes that the level of 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 and investments, cash generated
through future operations, or through short term financing.
Capital expenditures of $1,596 were made during the second quarter of 1998 and
$3,951 for the first half of 1998 for land, machinery, equipment and automation
to expand production facilities and improve productivity. Depreciation and
amortization for the second quarter of 1998 totaled $1,863 and $3,750 for the
first half of 1998.
YEAR 2000 COMPLIANCE
The Company has upgraded or replaced its computer software and systems which the
Company believes accommodates the "Year 2000" dating changes necessary to permit
correct recording of year dates for 2000 and later years. The Company does not
expect that additional costs with regard to year 2000 compliance will be
material to its financial condition or results of operations. The Company does
not currently anticipate any material disruption in its operations as the result
of any failure by the Company to be in compliance. The Company does not
currently have any information concerning the compliance status of its suppliers
and customers.
12
<PAGE> 13
STOCK OFFERING
In February 1998, the company issued 1,950 shares of Class A Common Stock in an
underwritten public offering at price of $9.00 per share. The proceeds from the
sale of the stock net of underwriting discounts, commissions and estimated
expenses, were approximately $16,000. Proceeds from the sale of the stock were
used to repurchase 15,400 shares of Series A Preferred Stock of the Company and
5,207 shares of Series B Preferred Stock of the Company for $14,715 and the
remaining proceeds are available for general corporate requirements.
SEASONALITY
Historically, the Company has experienced lower revenues in the first and fourth
quarters due to the seasonal trends of its clients and lower overall economic
activity. However, this did not occur during the fourth quarter of 1997 or the
first half of 1998 and the Company believes that this seasonal effect on the
Company's revenues will be less pronounced in the future as a result of frequent
redesigns of packaging for promotional and other reasons by its clients.
IMPACT OF INFLATION
The Company believes that over the past three years inflation has not had a
significant impact on the Company's results of operations.
13
<PAGE> 14
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) Reports on Form 8-K
No forms on 8-K were filed during the three month period ended June 30,
1998
(B) Exhibit 27 - Financial Data Schedule
14
<PAGE> 15
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 7th day of August, 1998.
SCHAWK, INC.
- --------------------------------------------------------------
(Registrant)
/s/ David A. Schawk
- --------------------------------------------------------------
President, Chief Executive Officer and Director
/s/ James J. Patterson
- --------------------------------------------------------------
Senior Vice President and Chief Financial Officer
/s/ Dennis D. Wilson
- --------------------------------------------------------------
Director of Financial Reporting and Chief Accounting Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 13,081 13,081
<SECURITIES> 12,120 12,120
<RECEIVABLES> 24,156 24,156
<ALLOWANCES> 586 586
<INVENTORY> 5,693 5,693
<CURRENT-ASSETS> 56,698 56,698
<PP&E> 72,235 72,235
<DEPRECIATION> 40,958 40,958
<TOTAL-ASSETS> 131,420 131,420
<CURRENT-LIABILITIES> 17,409 17,409
<BONDS> 44,623 44,623
0 0
0 0
<COMMON> 180 180
<OTHER-SE> 64,734 64,734
<TOTAL-LIABILITY-AND-EQUITY> 131,420 131,420
<SALES> 34,050 65,061
<TOTAL-REVENUES> 34,050 65,061
<CGS> 18,334 34,686
<TOTAL-COSTS> 18,334 34,686
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 903 1,812
<INCOME-PRETAX> 8,367 14,953
<INCOME-TAX> 3,348 5,982
<INCOME-CONTINUING> 5,019 8,971
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,019 8,971
<EPS-PRIMARY> 0.23 0.68
<EPS-DILUTED> 0.22 0.67
</TABLE>
