DES PLAINES, Ill., Feb. 20-- Schawk, Inc., North America's leading provider of digital imaging graphics services to the consumer products industry, reported that it had 2001 fourth quarter earnings of $0.11 per share, fully diluted, a significant increase compared to $0.01 per share, fully diluted, in the prior year fourth quarter. Full year earnings per share for the year ended December 31, 2001 were $0.37 per share, fully diluted, compared with $0.50 per share, fully diluted, in the prior year. Schawk reported net income of $2.4 million in the fourth quarter of 2001 compared with $0.3 million in the prior year fourth quarter. Net sales for the quarter were $45.6 million compared with $48.3 million in fourth quarter 2000. For the year ended December 31, 2001, net income was $8.0 million as compared with $10.6 million in the prior year. Net sales for the year ended December 31, 2001 were $186.2 million compared with $206.5 million for the prior year. David A. Schawk, president and chief executive officer commented: "The restructuring efforts we have made the past two years are beginning to have a positive impact on earnings per share. Despite a drop in overall sales in the fourth quarter, the packaging prepress business showed signs of strength. However, promotional and advertising agency business, which represents nearly 30% of the Company's business, continued to be soft. Advertising pages continue to be down due to the recession and there is no clear indication as to when this part of the business will improve. "Our earnings per share in the fourth quarter reflect some of the benefits of our restructuring efforts. As a result, although we experienced less revenue, we were able to deliver better earnings than in the prior year fourth quarter. During the fourth quarter, we continued productivity and service- based initiatives to give the company and its clients long-term benefits in speed, responsiveness and efficiency. We continue to work on strategies to reduce costs and leverage our strengths. These strategies may involve further restructuring charges in 2002.'' Fourth Quarter Results Revenues were down 5.5% in the 2001 fourth quarter as compared with the prior year fourth quarter. One point of the sales drop relates to print sales in Canada that were discontinued at the end of 2000. The print sales were at lower margins and not strategic. The company's blended gross margin was 40.4% in the fourth quarter of 2001 versus 38.1% in the prior year fourth quarter. The cost reduction programs and restructurings that the company implemented over the past two years are helping the company improve its gross margin, despite a drop in revenues. The cost reductions were permanent in nature, including staffing reductions and plant closings. Operating income increased $2.7 million to $5.0 million. A $2.2 million decrease in restructuring charges was the biggest contributor to the higher operating income in the fourth quarter of 2001. Operating margins before restructuring charges increased two points to 11.3% from 9.3% in the prior year fourth quarter on the same basis. The increase in operating income and margins before restructuring charges was primarily due to lower costs as a result of the restructurings as previously discussed. Interest expense of $839,000 in the fourth quarter of 2001 was $673,000, or 44.5% less than the prior year fourth quarter interest expense of $1.5 million. The decrease in interest expense was from a combination of lower interest rates and lower average debt balances versus the prior year fourth quarter. Year End Review Revenues for the year ended December 31, 2001, were $186.2 million, a 9.8% decline from the comparable prior year period.Most of the decrease occurred in the first six months of 2001 as the company's clients reduced spending on branding, marketing and advertising in reaction to the slowing economy in 2001. In addition, $4.1 million, or two points, of the decrease in sales related to discontinuing non-strategic print sales in Canada. The company achieved the same gross margin percentage of 40.3% in 2001 as in 2000 on less sales as a result of cost reduction efforts. Operating income was $17.4 million for the year ended December 31, 2001, a decrease of $5.6 million from the prior year. Before restructuring charges, the operating margin was 9.9% in the current year as compared with 12.6% for the prior year on the same basis. The decrease in operating income and margins was primarily due to lower sales in the first half of the year and the negative impact of start-up operations throughout 2001. Income taxes were at an effective rate of 40.5% for the year ended December 31, 2001, as compared with 41.8% in the comparable prior year period. Net income was $8.0 million for the year ended December 31, 2001, as compared with $10.6 million for the prior year. The lower revenues and operating income from a combination of a slow down in the economy and the impact of additional costs of start-ups were the main reasons for the decrease in net income. The company was able to reduce debt significantly at the end of 2001 and in the first month of 2002. Our debt totaled $66.7 million at the end of the third quarter and as of the date of this press release it has been reduced $12 million to $54.7 million. Lower capital expenditures in the fourth quarter and improved earnings helped to drive the debt down to its lowest level in two-and-a-half years. The lower debt level and low interest rates contributed to higher earnings in the fourth quarter versus the prior year fourth quarter. "As we have discussed previously, we continue to incur start-up losses at certain operations, including InterchangeDigital, because we believe that these investments have the potential to generate significant value in the future,'' said Mr. Schawk. "Although these investments negatively impact short term results, we continue to focus on what we need to do to keep Schawk as the leading provider of digital imaging graphics services and consulting services, not only for today but for tomorrow.'' Mr. Schawk concluded: "We are encouraged by the continued improvement quarter over quarter. Our focus on improving gross margins and operating income by taking costs out of our operations has begun to show up in improved results. We believe that these actions position us to more efficiently provide our unparalleled array of services to clients while improving value to our shareholders as the overall economy improves. 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.