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Schawk Reports Revenue Decline, Net Income Increase in Q1

Thursday, May 02, 2013

Press release from the issuing company

Gross Margin, Operating Income and Net Income Rise Compared to Last Year; Debt Reduced Versus Levels at Year-End 2012

DES PLAINES, IL -- Schawk, Inc., a leading provider of brand development and deployment services, enabling companies of all sizes to connect their brands with consumers, reported first quarter 2013 results. Net income in the first quarter of 2013 was $1.5 million, or $0.06 per diluted share, versus a net loss of$1.6 million, or a loss of $0.06 per diluted share, in the first quarter of 2012.

Revenue declined by 1.5 percent during the first quarter of 2013 compared to the prior-year quarter. The company's largest client channel, consumer packaged goods (CPG), grew globally by 1.7 percent; however, this CPG growth was offset by declines in retail and advertising and entertainment accounts sales.

Operating income for the first quarter of 2013 was $2.0 million compared to an operating loss of $1.6 million for the same quarter last year. On a non-GAAP basis, adjusting for financial impacts relating to certain items further detailed in this release, 2013 first-quarter adjusted operating income was $4.7 million compared to $3.1 million in the prior-year period.

Adjusted net income was $2.3 million, or $0.09 per diluted share, for the first quarter of 2013 compared to $1.4 million, or $0.05 per diluted share, during the comparable prior-year period. Please refer to the tables at the end of this press release for a reconciliation of these non-GAAP measures.

Chief Executive Officer David A. Schawk commented, "During the first quarter of 2013, we saw continued growth with our consumer packaged goods clients within the Americasand Asia Pacific segments. However, declines in our Europe segment, largely driven by the challenging economic environment within that region, offset some of that growth. Our overall CPG growth in the quarter was offset by continued declines in promotional activity by retail and advertising and entertainment account clients, which are all within ourAmericas segment. Despite the nominal decline in quarter-over-quarter revenue and continued strategic investments to better align with client needs and improve opportunities for long-term revenue growth, operating income improved in the first quarter of 2013, primarily from the impact of cost reduction and capacity utilization actions implemented during 2012 and early 2013. Furthermore, we decreased our debt by approximately $9 million compared to the end of the fourth quarter of 2012, reflecting the continued strength of our cash flow and balance sheet."

Consolidated Results for the Quarter Ended March 31, 2013
Consolidated net sales in the first quarter of 2013 were $111.0 million compared to $112.8 million in the same period of 2012, a decline of approximately $1.8 million, or 1.5 percent. Year-over-year sales were negatively impacted by changes in foreign currency translation rates of approximately $0.3 million, as the U.S. dollar increased in value relative to the local currencies of certain of the company's non-U.S. subsidiaries.

Consumer packaged goods accounts sales during the first quarter of 2013 were $91.5 million, or 82.4 percent of total net sales, compared to $89.9 million in the same period of 2012, an increase of 1.7 percent, primarily due to higher product and brand development and deployment activity. Advertising and retail accounts sales in the first quarter of 2013 were $15.0 million, or 13.5 percent of total sales, a decrease of 13.4 percent, from $17.3 million during the prior-year quarter, primarily driven by continued reductions in client promotional activity. Entertainment accounts sales for the first quarter of 2013 were $4.5 million, or 4.1 percent of total sales, a decline of 18.0 percent from $5.5 million in the same period of 2012, driven by continued declines in print-related promotional activity.

Gross profit was $38.0 million for the first quarter of 2013, an increase of $1.0 million over the prior-year comparable quarter. Gross profit in the first quarter of 2013 as a percentage of sales increased to 34.2 percent from 32.8 percent in the prior-year period. The quarter-over-quarter increase in gross profit and gross profit percent was largely driven by cost reductions primarily related to sales declines within the company's retail and advertising business.

Selling, general and administrative (SG&A) expenses decreased approximately $0.6 million to $33.3 million during the first quarter of 2013 from $33.9 million in the prior-year comparable quarter. The decline in SG&A expenses in the first quarter of 2013 compared to 2012 is principally due to the company's cost reduction initiatives implemented during 2012.

Business and systems integration expenses were $2.7 million in the first quarter of 2013, compared to $3.2 million in the prior-year period, relating to the company's ongoing information technology and business process improvement initiative.

Acquisition integration and restructuring expenses decreased from $1.1 million in the first quarter of 2012 to $0.2 million in the first quarter of 2013, related to employee terminations and other associated costs which arose from the company's continued focus on consolidating, reducing and re-aligning its work force and operations. The actions taken during the first quarter of 2013 are expected to result in annualized savings of approximately $0.9 million, with approximately $0.8 million realized during 2013.

The company recorded a $0.2 million gain on foreign exchange exposures in the first quarter of 2013, compared to a loss of $0.5 million in the prior-year period. Net foreign exchange gains or losses relate primarily to currency exposure from intercompany debt obligations of the company's non-U.S. subsidiaries.

The company reported operating income of $2.0 million in the first quarter of 2013 compared to an operating loss of $1.6 million in the prior-year comparable quarter. The year-over-year increase was driven by higher gross profit coupled with reductions in acquisition integration and restructuring, business and systems integration and SG&A expenses. Non-GAAP adjusted operating income was $4.7 million for the first quarter of 2013 compared to $3.1 million in the prior-year comparable period.

For the first quarter of 2013, the company reported a tax benefit of $0.6 million compared to tax benefit of $0.8 million during the same period in 2012. The tax benefit in the first quarter of 2013 was principally driven by certain discrete tax adjustments.

Net income in the first quarter of 2013 was $1.5 million, or $0.06 per diluted share, compared to a net loss of $1.6 million, or a loss of $0.06 per diluted share, in same period of 2012. Non-GAAP adjusted net income was $2.3 million, or $0.09 per diluted share, for the first quarter of 2013 compared to $1.4 million, or $0.05 per diluted share, on a comparable basis for the prior-year period.

 

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