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Schawk announces 2010 Q1 results, cites encouraging signs

Thursday, May 06, 2010

Press release from the issuing company

Des Plaines, IL, - Schawk, Inc., a leading provider of brand point management services, enabling companies of all sizes to connect their brands with consumers to create deeper brand affinity, reported first-quarter 2010 results. Net income in the first quarter of 2010 was $2.5 million, or $0.10 per diluted share, versus a net loss of $2.3 million, or $0.09 per diluted share, in the first quarter of 2009.

On a non-GAAP basis, adjusting for financial impacts relating to foreign currency exposure and certain expenses as further detailed in this earnings release, Adjusted net income was $4.5 million, or $0.17 per diluted share, in the first quarter of 2010 compared to an Adjusted net loss of $0.6 million, or $0.02 per diluted share, during the prior-year period, on a comparable basis.

President and Chief Executive Officer David A. Schawk, commented, "Although we believe first quarter 2010 client spending reflected typical first quarter softness relative to other quarters of the year, we continue to see encouraging signs from our consumer packaged goods clients that brand innovation activity is increasing, thereby contributing to the revenue growth on a year-over-year basis. In addition, our previously disclosed and ongoing cost-reduction activities continue to drive year-over-year improvements in margins and operating income for the Company."

Consolidated Results for First Quarter Ended March 31, 2010
Consolidated net sales in the first quarter of 2010 were $111.7 million compared to $105.1 million in the same period of 2009, an increase of approximately $6.6 million, or 6.3 percent. Approximately $3.4 million of the sales increase quarter over quarter was the result of changes in foreign currency translation rates, as the U.S. dollar declined in value relative to the local currencies of certain of the Company's non-U.S. subsidiaries. The remainder of the quarter-over-quarter increase in sales was the result of an increase in the Company's business compared to the first quarter of 2009, as consumer packaged goods (CPG) clients increased their product and brand innovation and introduction activity.

CPG accounts sales in the first quarter of 2010 were $80.4 million, or 71.9 percent of total sales, compared to $73.1 million in the same period of 2009, representing an increase of 9.9 percent. The increase over the prior-year quarter was primarily driven by increased product and brand innovation and introduction activity by the Company's CPG clients. Advertising and retail accounts sales of $20.8 million, or 18.7 percent of total sales, in the first quarter of 2010 decreased 2.3 percent, from $21.3 million in the prior-year period. Entertainment accounts sales for the first quarter of 2010 of $6.5 million, or 5.8 percent of total sales, declined 16.7 percent, from $7.8 million in the same period in 2009. The lower year-over-year sales within advertising and retail and entertainment accounts were primarily driven by reduced client promotional spending.

Gross profit was $41.9 million in the first quarter of 2010, an increase of $8.8 million from the first quarter of 2009. First-quarter 2010 gross profit as a percentage of sales increased to 37.5 percent of sales from 31.5 percent of sales in the 2009 first-quarter period. The increase was largely attributable to the Company's continued cost-reduction activities implemented throughout 2009, coupled with higher sales in the 2010 first quarter relative to the prior-year comparable period, which further leveraged the Company's cost-reduction activities.

Selling, general and administrative (SG&A) expenses declined approximately $1.5 million to $32.5 million in the first quarter of 2010 from $34.0 million in the first quarter of 2009, primarily as a result of the Company's cost-reduction activities.

The Company recorded a $1.8 million loss on foreign exchange exposures in the first quarter of 2010, of which $1.7 million related to unrealized currency remeasurements as compared to a gain of $0.1 million in the comparable prior-year period. The unrealized, non-cash currency losses in the first quarter of 2010 were principally due to the deterioration of the Euro during the quarter. The Company's foreign exchange gains or losses relate primarily to unhedged currency exposure from intercompany debt obligations of the Company's non-US subsidiaries. Since the losses relate primarily to intercompany financing activity, the economic impact to the Company is minimal as it is largely offset by gains in Accumulated comprehensive income, net, included in Stockholder's equity.

Expenses related to impairment of long-lived assets were $0.7 million during the first quarter of 2010 compared to $0.1 million in the first quarter of 2009. The increase period over period was related to certain equipment, which sustained water damage and was rendered inoperable at one of the Company's facilities.

Acquisition integration and restructuring expenses declined from $0.8 million in the first quarter of 2009 to $0.3 million in the first quarter of 2010. The charges in the 2010 first quarter arose from the Company's continued focus on consolidating, reducing and re-aligning the Company's work force and operations and are for employee terminations and other associated costs. These actions are expected to result in annualized savings of approximately $1.9 million, with approximately $1.5 million to be realized during 2010.

The Company reported operating income of $6.5 million in the 2010 first quarter compared to an operating loss of $1.6 million in the first quarter of 2009. The increase in operating income compared to the prior-year period was primarily the result of the increase in gross margin driven by increased revenue and the Company's previously discussed cost reduction efforts.

Net income in the first quarter of 2010 was $2.5 million, or $0.10 per diluted share, compared to a net loss of $2.3 million, or $0.09 per diluted share, in the first quarter of 2009. Excluding the after-tax effects of foreign currency loss, long-lived asset impairment expenses, acquisition integration and restructuring expenses, and first-quarter 2009 remediation and related expenses, first-quarter 2010 Adjusted net income was $4.5 million, or $0.17 per diluted share, compared to an Adjusted net loss of approximately $0.6 million, or $0.02 per diluted share, on a comparable basis for the prior-year period. Please refer to the tables at the end of this press release for a reconciliation of these non-GAAP measures.

 

 

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