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Schawk Reports Earnings, Sales Down, Plans to Cut Staff Another 4%

Thursday, February 22, 2001

Press release from the issuing company

Des Plaines, Ill., February 20, 2001—Schawk, Inc. (NYSE: SGK), North America’s leading provider of digital imaging prepress services to the consumer products industry, today reported diluted earnings per share before restructuring and other charges and before the loss at its e-commerce software development start-up InterchangeDigital for the fourth quarter ended December 31, 2000, of $0.09 cents per share compared with $0.13 cents per share in the prior-year fourth quarter on a comparable basis. The restructuring and asset impairment charges in the fourth quarter of 2000 were $0.05 and $0.02 cents per share, respectively. The loss at InterchangeDigital was $0.01 cent per share. Reported earnings per share for the fourth quarter of 2000 after all charges were $0.01 cent per share as compared to $0.03 cents per share in the prior period. Net income for the fourth quarter excluding restructuring and other charges and InterchangeDigital was $1.9 million versus $2.4 million in the prior-year fourth quarter on a comparable basis. Reported net income for the fourth quarter of 2000 was $0.3 million compared with $0.6 million in the prior year fourth quarter. Fourth Quarter Discussion Fourth quarter sales were $48.3 million, a decrease of 5.7 percent versus sales of $51.2 million in the prior-year fourth quarter. The decrease in sales was 3.5 percent on an apples-to-apples basis when the sales of the Montreal operations, which were sold in June 2000, are excluded from the prior-year fourth quarter. The 3.5 percent decrease in sales was caused by a general softening of the market for digital imaging for consumer products packaging. The Company’s top ten accounts were down 23.4 percent in the fourth quarter. The accounts that dropped off the most were companies that have recently been acquired or have acquired other consumer product companies. The uncertainty surrounding branding decisions is the key factor causing these accounts to delay or cancel promotions and other projects. Gross margin in the fourth quarter of 2000 of 38 percent was the same as the prior-year fourth quarter. 2000 Restructuring – Fourth Quarter 2000 activity - The Company implemented a restructuring plan in the fourth quarter of 2000 to further address staffing levels and excess capacity. The plan included charges for shutting down one operation, reducing staffing levels at certain locations, and additional costs related to the Canadian Restructuring from the third quarter of 2000. The fourth quarter restructuring charges totaled $1.0 million. In addition, the Company recorded a charge for asset impairments of $0.7 million. Year Ended December 31, 2000 Discussion For the year ended December 31, 2000 the Company had record revenues of $206.5 million as compared to $184.8 million in 1999. The increase of 11.7 percent over the prior year was all from acquisitions made in 1999. Although there was minimal net internal revenue growth in 2000, the Company overcame a decrease in revenues of 9.6 percent from its top ten accounts and achieved a slight increase in revenues over the previous year on an apples-to-apples basis. The drop in revenues from the top ten accounts is due in part to the fact that many of these accounts are consumer products companies that have recently been acquired or have announced that they are acquiring other companies as noted above. As a result, these companies are delaying certain brand identity decisions and consequently the Company’s business is negatively affected. Outlook For The Future: Mr. Schawk further continued, “For 2001 we are anticipating a continuation of the choppy market particularly in the first half of the year. In light of this, in January 2001, we continued the restructuring process and reduced staffing to bring our human resources in line with the level of work at certain plants by another 50 positions, or 4 percent. We are determined to continue to change our business in response to long-term trends in the digital imaging services industry and in response to short-term fluctuations in market conditions. There may be more consolidations and restructurings in the future.




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