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SGK Announces 2013 Fourth-Quarter and Full-Year Results

Thursday, March 06, 2014

Press release from the issuing company

Full-Year 2013 Operating Income Grew $55.2 Million, Earnings per Diluted Share From Continuing Operations Improved $1.41 and Debt Reduced by 30.2 Percent

DES PLAINES, IL - Schawk, Inc, now marketed as SGK (the "Company"), a leading global brand development, activation and deployment company, reported fourth-quarter and full-year 2013 results. Income from continuing operations in the fourth quarter of 2013 was $5.8 million, or $0.22 per diluted share, versus a loss of $18.1 million, or a loss of $0.69 per diluted share, in the fourth quarter of 2012. For the 2013 full year, income from continuing operations was $13.2 million, or $0.50 per diluted share, compared to a loss of$23.6 million, or a loss of $0.91 per diluted share, for the comparable prior-year period.

Improvement in income from continuing operations for the 2013 fourth-quarter and full-year periods included a decrease in multiemployer pension withdrawal expense of $31.7 million and $31.5 million for the fourth quarter and full year, respectively, related to the Company's decision in 2012 to completely withdraw from its remaining multiemployer pension plan within the United States.

Operating income for the fourth quarter of 2013 was $10.8 million compared to an operating loss of $26.5 million for the same quarter of 2012. For the full year of 2013, operating income was $24.2 million compared to an operating loss of $31.0 million in 2012, representing an improvement of $55.2 million.

On a non-GAAP basis, adjusting for financial impacts relating to the 2012 multiemployer pension withdrawal expense and certain other items further detailed in this release, 2013 fourth-quarter adjusted operating income was $13.2 million compared to $8.6 million in the prior-year period for an improvement of 53.4 percent. For the full-year 2013, adjusted operating income was $35.2 million compared to $23.7 million in 2012 for an improvement of 48.6 percent.

Adjusted income from continuing operations was $7.3 million, or $0.28 per diluted share, for the fourth quarter of 2013 compared to $3.7 million, or $0.14 per diluted share, during the same period of 2012. For the 2013 full year, adjusted income from continuing operations was $20.2 million, or $0.77 per diluted share, compared to $10.8 million, or $0.41per 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 2013, our profitability rose significantly as we further leveraged our operations, continued to align with client strategies and market trends and expanded our technological capabilities. The year-over-year improvement in adjusted operating income was $11.5 million, or 48.6 percent. Moreover, we reduced our total debt by $25.1 million, or 30.2 percent, during the year, primarily reflecting the improved cash flow from increased profitability and capital spending reductions on technology initiatives.

"Meantime, revenue grew 2.7 percent globally within our largest client channel, consumer packaged goods. Despite the continued challenging economic environment, our CPG revenue has grown for two consecutive years reflecting the investments we have made and continue to make in expanding our opportunities for long-term profitable revenue growth. However, our CPG revenue growth for 2013 was offset by continued declines in promotional activity with retail and advertising clients, which occurred primarily within the Americas segment. Our Europe segment and, in particular, our Asia Pacific segment continued to expand in 2013, benefiting from improved penetration in emerging markets, investments in expanding global capabilities, and client actions to consolidate spending with fewer marketing partners."

Consolidated Results for the Year Ended December 31, 2013
Consolidated net revenues in 2013 were $442.6 million compared to $441.3 million in 2012, an increase of approximately $1.4 million, or 0.3 percent. Year-over-year revenues were negatively impacted by changes in foreign currency translation rates of approximately $2.6 million, as the U.S. dollar increased in value relative to the local currencies of certain of the company's non-U.S. subsidiaries. Excluding the negative impact of foreign currency translation changes, consolidated net revenues would have grown approximately $3.9 million, or 0.9 percent.

Consumer packaged goods (CPG) client revenue during 2013 was $384.1 million, or 86.8 percent of total net revenues, compared to $374.1 million in the same period of 2012, an increase of 2.7 percent, primarily due to greater product activity with brand development and deployment. Retail and advertising client revenue in 2013 was $58.5 million, or 13.2 percent of total revenues, a decrease of 12.9 percent, from $67.2 million during 2012, primarily driven by continued reductions in client promotional activity.

Cost of services (excluding depreciation and amortization) was $270.6 million in 2013, a decrease of approximately$9.3 million from $279.9 million in 2012 mainly due to cost reduction actions taken during 2012 and throughout 2013. As a percentage of revenue, 2013 cost of services (excluding depreciation and amortization) improved 230 basis points to 61.1 percent from 63.4 percent in the prior year.

Selling, general and administrative expenses (excluding depreciation and amortization) decreased $1.3 million to $118.7 million in 2013 from $120.0 million in 2012. Reductions in expenses were driven by the Company's cost reduction efforts implemented during 2012 and throughout 2013 and more than offset investments that the Company made to improve its opportunities for long-term revenue growth. As a percentage of revenue, 2013 selling, general and administrative expenses (excluding depreciation and amortization) improved 40 basis points to 26.8 percent from 27.2 percent in 2012.

Business and systems integration expenses related to the Company's information technology and business process improvement initiative decreased $4.6 million to $7.5 million in 2013 from $12.1 million in 2012, as the Company's investment in the system build phase was substantially complete.

Acquisition integration and restructuring expenses related to employee terminations and other associated costs arising from the Company's continued focus on consolidating, reducing and re-aligning its work force and operations decreased from $5.3 million in 2012 to $1.8 million in 2013. The actions taken during 2013 are expected to result in annualized savings of approximately $6.4 million, with approximately $2.8 million realized during 2013.

Multiemployer pension withdrawal expense decreased $31.5 million during 2013 compared to the prior year, as expenses related to the Company's decision in 2012 to completely withdraw from its remaining multiemployer pension plan in the United States were not incurred in 2013.

Long-lived asset impairment expenses decreased by $3.8 million, to $0.5 million, in 2013 compared to the prior year, principally related to the write down in 2012 of customer relationship intangible assets at certain locations within theAmericas and Europe segments, coupled with expenses associated with company-owned real estate that was written down to its estimated market value.

Operating income improved to $24.2 million in 2013 compared to a loss of $31.0 million in 2012 driven primarily by the absence of multiemployer pension withdrawal expense in 2013 as well as the aforementioned reduction in other expenses. Non-GAAP adjusted operating income was $35.2 million for 2013 compared to $23.7 million in the prior-year comparable period.

Tax expense was $6.9 million in 2013 compared to a benefit of $10.9 million during 2012, due primarily to the Company's improvement in year-over-year income from continuing operations.

Income from continuing operations was $13.2 million in 2013, or $0.50 per diluted share, compared to a loss of $23.6 million, or a loss of $0.91 per diluted share, in 2012. Non-GAAP adjusted income from continuing operations was$20.2 million, or $0.77 per diluted share, for 2013 compared to $10.8 million, or $0.41 per diluted share, on a comparable basis for the prior-year period.

Management Adjusted EBITDA Performance
Management Adjusted EBITDA for 2013 was $55.3 million compared to $44.6 million in the prior-year period. Please refer to the "Reconciliation of Non-GAAP Management Adjusted EBITDA" table attached at the end of this press release for a reconciliation of these measures.

 

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