Schawk Slips into Net Loss for Second Quarter

DES PLAINES, IL—August 1, 2012—Schawk Inc. reported a second-quarter 2012 net loss of $1.5 million vs. net income of $4.0 million in the second quarter of 2011. Business and system integration expenses for the company's ongoing information technology and business process improvement initiative increased by approximately $2.1 million for the quarter compared to the prior-year period, which contributed in part to the decline in net income.

On a non-GAAP basis, adjusting for financial impacts relating to the business and system integration expense and other items as further detailed in this release, adjusted net income was $2.7 million, compared to $6.9 million during the prior-year period.

CEO David A. Schawk commented, “We continued to see client expansion in emerging markets, as evidenced by our growth in Europe and Asia Pacific during the second quarter and first six months of 2012. In addition, we have seen growth with existing key clients as they continue to consolidate their spending with fewer vendors.

“The year-over-year decline in profitability reflects certain investments we made to expand our brand development and deployment capabilities and extend our presence in emerging markets. However, due to persistent economic headwinds in the Americas, we took additional steps to leverage our operations and will continue to look for opportunities to improve our profitability over time,” Schawk added.

Consolidated Results for the Second Quarter
Consolidated net sales in the second quarter of 2012 were $116.3 million, compared to $113.3 million in 2011, an increase of approximately $2.9 million, or 2.6 percent.

Year-over-year sales were negatively impacted by changes in foreign currency translation rates of approximately $1.7 million, as the U.S. dollar increased in value relative to the local currencies of certain of the company's non-U.S. subsidiaries. Adjusting for the negative impact of foreign currency translation rates, consolidated net sales grew approximately 4.1 percent in the second quarter of 2012 compared to the prior-year period.

• Consumer packaged goods (CPG) accounts sales in the second quarter of 2012 were $92.4 million, or 79.5 percent of total net sales, compared to $86.8 million in the same period of 2011, an increase of 6.5 percent, primarily due to increased product and brand development activity.

• Advertising and retail accounts sales in the second quarter of 2012 were $18.2 million, or 15.6 percent of total sales, a decrease of 6.0 percent, from $19.3 million during the second quarter 2011, primarily driven by continued reductions in client promotional activity.

• Entertainment accounts sales for the second quarter of 2012 of $5.7 million, or 4.9 percent of total sales, decreased 21.7 percent, from $7.2 million in the 2011 period, driven by continued declines in print-related promotional activity.

Gross profit was $39.8 million in the second quarter of 2012, a decline of $1.7 million from the second quarter of 2011. Gross profit as a percentage of sales decreased to 34.3 percent from 36.7 percent in the prior-year period.

The company reported an operating loss of $1.1 million in the second quarter of 2012, compared to operating income of $7.0 million in the 2011 period. The decline in income year over year was driven primarily by the decline in gross profit and increased expenses for business and systems integration, acquisition integration and restructuring and SG&A. Partially offsetting these expense increases was a reduction in multiemployer pension withdrawal expense.

Net loss in the second quarter of 2012 was $1.5 million, compared to net income of $4.0 million in 2011. Non-GAAP adjusted net income was $2.7 million, compared to $6.9 million on a comparable basis for the prior-year period.

Management adjusted EBITDA for the second quarter of 2012 was $11.0 million compared to $17.0 million for the prior-year period.

About Schawk
Schawk Inc. is a leading provider of brand development and deployment services, enabling companies of all sizes to connect their brands with consumers. With a global footprint of operations in 26 countries, Schawk helps companies create compelling and consistent brand experiences by providing integrated strategic, creative and executional services across brand touchpoints. Founded in 1953, Schawk is trusted by many of the world's leading organizations to help them achieve global brand consistency.

Source: Schawk.