Schawk Announces Improved Earnings for Second Quarter Vs First Quarter of 2001
Press release from the issuing company
DES PLAINES, Ill., July 19 Schawk, Inc., North America's leading provider of digital imaging prepress services to the consumer products industry, today reported income after taxes of $2.5 million before net restructuring charges and the loss at Schawk's software start-up InterchangeDigital for the second quarter of 2001, better than $1.8 million in the first quarter of 2001, but below the prior year second quarter of $4.1 million on the same basis. Earnings per share for the second quarter ended June 30, 2001, excluding the net restructuring charges of $0.01 per share and the loss at InterchangeDigital of $0.01 per share, were $0.12 per share compared to $0.09 per share in the first quarter of 2001 and versus $0.19 per share in the prior year second quarter on the same basis.
Net income for the second quarter of 2001 was $2.1 million compared to $1.4 million in the first quarter of 2001 and $3.9 million in the prior year second quarter. Earnings per share for the second quarter of 2001 were $0.10 per share as compared to $0.07 per share in the first quarter of 2001 and compared to $0.18 per share in the prior year second quarter.
Revenues of $47.5 million decreased by 11% in the second quarter of 2001 versus the second quarter of 2000, excluding $1.2 million as of June 30, 2000, from the Montreal operations which were sold June 1, 2000, and therefore, excluded for comparative purposes. The total decrease in revenues was 13%. The decrease in revenues reflected the soft economy both in consumer products packaging spending and in advertising spending. Despite the decrease in revenues, the Company achieved a 40.8% gross margin. This is compared to 41.3% in the prior year. The consolidation of facilities and cost cutting initiatives that the company completed over the past eighteen months contributed to keeping the gross margin close to the prior year, despite $6.1 million less in revenues in the second quarter of 2001.
Operating income, before restructuring charges of $0.4 million and the loss at InterchangeDigital of $0.5 million, was $5.3 million in the quarter ended June 30, 2001, a $1.0 million increase over the March 31, 2001 quarter, and a $3.1 million decrease from $8.4 million on the same basis in the prior year second quarter. The decrease in operating income was primarily a result of lower revenues as described previously. The operating margin before restructuring charges and InterchangeDigital's loss was 11.3% for the second quarter of 2001 versus 9.4% in the first quarter of 2001 and 15.5% on the same basis in the second quarter of 2000.
In the second quarter of 2001, the Company reduced staffing levels and incurred severance costs of $0.2 million in connection with the on-going 2001 restructuring announced in the first quarter of 2001. This amount is included on the Statement of Operations on the line labeled restructuring charges and other. In addition, the Company recorded an additional restructuring charge of $0.2 million to terminate the lease of a facility that was closed in connection with the Company's 1999 restructuring.
Interest expense was $1.1 million in the second quarter of 2001 and $1.5 million in the second quarter of 2000. The decreased interest cost is a result of lower average debt levels and lower interest rates in 2001 as compared to the prior year.
Other income (expense) for the second quarter ended June 30, 2001, includes a $0.2 million pretax gain on the sale of equipment at a location that is being impacted by the Company's restructuring efforts. This gain is excluded from the adjusted income after tax amounts described in the first paragraph of this release.
For the six month period ended June 30, 2001, revenues were $93.4 million, an 11% decrease, as compared to $105.3 million in the comparable prior year period, excluding $2.3 million as of June 30, 2000, from the Montreal operations which were sold June 1, 2000, and therefore excluded for comparative purposes. The decrease is due to the reasons described previously for the second quarter.
Net income for the six months ended June 30, 2001, was $3.5 million as compared to $6.8 million for the six month period ended June 30, 2000. Earnings per share for the six months ended June 30, 2001, were $0.16 per share as compared to $0.32 per share for the six month period ended June 30, 2000. The decrease in earnings was caused by the factors described previously in the second quarter discussion.
David A. Schawk, president and chief executive officer, commented on the results for the quarter, "In the second quarter, we saw an increase in business at certain of our locations as compared to the first quarter of 2001. However, last year's second quarter was an all time record high for the Company, both in terms of sales and profits. In the current soft economy, itis difficult to make comparisons to last year. In the advertising industry, ad pages are down 10% from a year ago, negatively impacting our business. In packaging, consumer products companies are tightening their belts to ride out the downturn in the economy and our sales and profits suffer as a result.''
Mr. Schawk continued, "On a positive note, looking forward, new disclosures on packaging should result in new business for the Company over the next twelve months. Certain 'non-allergenic language' and statements claiming that the product in the package is 'free of genetically engineered ingredients' are being voluntarily added to packages by leading consumer product companies, to assist consumers in their buying decisions.''
Mr. Schawk concluded with, "Despite the slow economy in the United States, our international operations continue to grow at a good pace. Both Asia and Latin America are growing nicely. It is rewarding to see that our decision to expand globally is starting to bear fruit. We look forward to the recovery of the economy in the United States later in 2001 or early in 2002.''
Schawk, Inc., headquartered in suburban Chicago, is a leading supplier of digitized high- resolution color imaging, database management and on-site facility management, as well as related prepress and digital archiving and distribution services. Schawk provides advanced technology services for the food, beverage and consumer products packaging, advertising and promotional markets.
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