Schawk Q2 revenues grow 5.2%
Thursday, August 05, 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 second-quarter 2010 results. Net income in the second quarter of 2010 was $15.8 million, or $0.61 per diluted share, versus $4.8 million, or $0.19 per diluted share, in the second quarter of 2009. Net income for the first six months of 2010 was $18.3 million, or $0.71 per diluted share, compared to $2.5 million, or $0.10 per diluted share, for the comparable prior-year period.
President and Chief Executive Officer David A. Schawk, commented, "Schawk's second-quarter financial results reflect the signals we received from our consumer packaged goods clients in late 2009 and early 2010 that product and brand activity would be increasing. Our revenue growth, as well as previous and continued cost-reduction activities, drove improved operating margins and earnings per share both for the second quarter and first six months of 2010 compared to the prior-year comparable periods."
Consolidated Results for Second Quarter Ended June 30, 2010
Consolidated net sales in the second quarter of 2010 were $117.8 million compared to $112.0 million in the same quarter of 2009, an increase of approximately $5.9 million, or 5.2 percent. Approximately $1.0 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 product and brand activity from consumer packaged goods (CPG) clients as well as increased promotional activity from advertising and retail clients.
CPG accounts sales in the second quarter of 2010 were $82.9 million, or 70.4 percent of total sales, compared to $79.9 million in the same quarter of 2009, an increase of 3.7 percent. The increase over the prior-year quarter was primarily driven by increased product and brand activity by Schawk's CPG clients. Advertising and retail accounts sales of $23.4 million, or 19.9 percent of total sales, in the second quarter of 2010 increased 12.0 percent, from $20.9 million in the second quarter of 2009, driven by increased promotional activity relative to last year. Entertainment accounts sales for the second quarter of 2010 of $8.0 million, or 6.8 percent of total sales, decreased 3.1 percent, from $8.3 million in the same period of 2009.
Gross profit was $46.8 million in the second quarter of 2010, an increase of $3.9 million from the second quarter of 2009. Second-quarter 2010 gross profit as a percentage of sales increased to 39.7 percent of sales from 38.3 percent of sales in the 2009 second-quarter period. The increase was largely attributable to the Company's cost-reduction activities implemented throughout 2009 and during 2010, coupled with higher sales in the 2010 second quarter relative to the 2009 second quarter, which further leveraged these cost-reduction activities.
Selling, general and administrative (SG&A) expenses declined approximately $1.7 million to $30.4 million in the second quarter of 2010 from $32.2 million in the second quarter of 2009. The decline in SG&A expenses year over year is primarily driven by certain insurance recoveries, totaling $1.4 million, related to previously reported asset losses coupled with a $1.3 million reduction in professional fees related to the Company's prior internal control remediation and related activities. The aforementioned items were partially offset by the restoration of certain temporary cost-reduction actions that the Company enacted for 2009 in response to the economic environment during that period.
The Company recorded a $0.3 million gain on foreign exchange exposures in both the second quarter of 2010 and 2009. 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 foreign currency gains or losses primarily relate to intercompany financing activity, the economic impact to the Company is minimal as these gains or losses are largely offset by corresponding losses or gains in accumulated comprehensive income, net, included in stockholder's equity.
Acquisition integration and restructuring expenses declined from $1.5 million in the second quarter of 2009 to $0.7 million in the second quarter of 2010. The charges in the 2010 second quarter arose from 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 $4.8 million, with approximately $2.6 million to be realized during 2010. For the first six months of 2010, acquisition integration and restructuring expenses were $1.0 million. The expected annualized savings resulting from the year-to-date 2010 actions are approximately $6.6 million, with approximately $4.1 million to be realized during 2010.
There were no expenses related to impairment of long-lived assets during the second quarter of 2010 compared to $0.1 million in the second quarter of 2009.
Schawk reported operating income of $16.0 million in the 2010 second quarter compared to $9.5 million in the second quarter of 2009. The increase in operating income compared to the prior-year quarter was primarily the result of the increase in gross margin and reduced SG&A and acquisition integration and restructuring expenses.
For the second quarter of 2010, the Company reported a tax benefit of $1.6 million compared to a tax expense of $2.3 million during the same quarter in 2009. The tax benefit was principally the result of an effective settlement of certain income tax audits, net of federal and state tax benefits, of $5.6 million.
Net income in the second quarter of 2010 was $15.8 million, or $0.61 per diluted share, compared to $4.8 million, or $0.19 per diluted share, in the second quarter of 2009. Excluding the after-tax effects of acquisition integration and restructuring expenses, long-lived asset impairment expenses, foreign currency gain or loss and discrete tax period benefits, Adjusted net income was $10.4 million, or $0.40 per diluted share, for the second quarter of 2010 compared to $6.5 million, or $0.26 per diluted share, on a comparable basis for the 2009 second quarter. Please refer to the tables at the end of this press release for a reconciliation of these non-GAAP measures.
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