SCHAWK INC - FORM 10-K - March 9, 2011

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EX-32 - EX-32 - SCHAWK INC	ex32.htm
EX-31.2 - EX-31.2 - SCHAWK INC	ex31_2.htm
EX-31.1 - EX-31.1 - SCHAWK INC	form31_1.htm
EX-21 - EX-21 - SCHAWK INC	formex_21.htm
EX-23 - EX-23 - SCHAWK INC	formex_23.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-09335

SCHAWK, INC.

(Exact name of Registrant as specified in its charter)

Delaware		66-0323724
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1695 South River Road
Des Plaines, Illinois		60018
(Address of principal executive office)		(Zip Code)

847-827-9494

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:

Title of Each Class	Name of Exchange on Which Registered
Class A Common Stock, $.008 par value	New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company: See the definitions of “large accelerated filer,” “ accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer ý Non- accelerated filer o Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Act). Yes o No ý

The aggregate market value on June 30, 2010 of the voting and non-voting common equity stock held by non-affiliates of the registrant was approximately $133,503,000.

The number of shares of the Registrant’s Common Stock outstanding as of February 25, 2011 was 25,854,364.

Documents Incorporated by Reference

Portions of the proxy statement for the Registrant’s 2011 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

SCHAWK, INC.

FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

DECEMBER 31, 2010

		Page
	PART I
Item 1.	Business	3
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	20
Item 2.	Properties	20
Item 3.	Legal Proceedings	21
Item 4.	[Removed and Reserved]	21

	PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
Item 6.	Selected Financial Data	25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosure about Market Risk	50
Item 8.	Financial Statements and Supplementary Data	51
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	94
Item 9A.	Controls and Procedures	94
Item 9B.	Other Information	96

	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	96
Item 11.	Executive Compensation	96
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	96
Item 13.	Certain Relationships and Related Transactions, and Director Independence	96
Item 14.	Principal Accountant Fees and Services	96

	PART IV

Item 15.	Exhibits and Financial Statement Schedules	97
Signatures		101

General

Schawk, Inc. and its subsidiaries (“Schawk” or the “Company”) provide strategic, creative and executional graphic services and solutions to clients in the consumer products packaging, retail, pharmaceutical and advertising markets. In so doing, the Company helps its clients develop, deploy and promote their brands and products through its comprehensive offering of integrated strategic, creative and executional services across print and digital mediums. The Company, headquartered in Des Plaines, Illinois, has been in operation since 1953 and is incorporated under the laws of the State of Delaware.

The Company is one of the world’s largest independent business service providers in the graphics industry. The Company currently delivers these services through more than 150 locations in 18 countries across North America, Europe, Asia and Australia. By leveraging its global comprehensive portfolio of strategic, creative and executional capabilities, the Company believes it helps companies of all sizes create compelling and consistent brand experiences that strengthen consumers’ affinity for these brands. The Company does this by helping its clients “activate” their brands worldwide.

The Company believes that it is positioned to deliver its offering in a category that is unique to its competition. This category, brand point management, reflects Schawk’s ability to provide integrated strategic, creative and executional services globally across the four primary points in which its clients’ brands touch consumers: at home, on the go, at the store and on the shelf. “At Home” includes brand touchpoints such as direct mail, catalogs, advertising, circulars, and the internet. “On the Go,” includes brand touchpoints such as outdoor advertising, mobile/cellular, and the internet. “In the Store” includes brand touchpoints such as point-of-sale displays, in-store merchandising and interactive displays. “On the Shelf” focuses on packaging as a key brand touchpoint.

The Company’s strategic services are delivered primarily through its branding and design capabilities, performed under its Anthem Worldwide (“Anthem”) brand. These services include brand analysis and articulation, design strategy and design. These services help clients revitalize existing brands and bring new products to market that respond to changing consumer desires and trends. Anthem’s services also help certain retailers optimize their brand portfolios, helping them create fewer, smarter and potentially more profitable brands. The impact of changes to design and brand strategy can potentially exert a significant impact on a company’s brand, category, market share, equity and sales. Strategic services also represent some of Schawk’s highest value, highest margin services.

The Company’s creative services are delivered through Anthem and through various sub-specialty capabilities whose services include digital photography, 3D imaging, creative retouching, CGI (Computer Generated Images), packaging mock-ups/sales samples, brand compliance, retail marketing (catalogs, circulars, point-of-sale displays), interactive media and large-format printing. These services support the creation, adaptation and maintenance of brand imagery used across brand touchpoints – including packaging, advertising, marketing and sales promotion materials – offline in printed materials and online in visual media such as the internet, mobile/cellular, interactive displays and television. The Company believes that creative services, since they often represent the creation of clients’ original intellectual property, present a high-margin growth opportunity for Schawk.

The Company’s executional services are delivered primarily through its legacy premedia business, which at this time continues to account for the most significant portion of its revenues. Premedia products such as color proofs, production artwork, digital files and flexographic, lithographic and gravure image carriers are supported by color management and print management services that the Company believes provides a vital interface between the creative design and production processes. The Company believes this ensures the production of consistent, high quality brand/graphic images on a global scale at the speed required by clients to remain competitive in today’s markets on global, regional and local scales. Increasingly, the Company has been offering executional services in the growing digital space, in order to meet growing client demand to market their brands on the internet and via mobile and interactive technologies. Additionally, the Company’s graphic lifecycle content management software and services facilitates the organization, management, application and re-use of proprietary brand assets. The Company believes that products such as BLUE™ confer the benefits of brand consistency, accuracy and speed to market for its clients.

As the only truly global supplier of integrated strategic, creative and executional graphics capabilities, Schawk helps clients meet their growing need for consistency across brand touchpoints from a single coordinated contact. A high level of consistency can impact clients’ businesses in potentially significant ways such as retention and growth of the equity in their brands and improved consumer recognition, familiarity and affinity. The latter has the potential to help clients improve sales and market share of their brands. Additionally, through its global systems, the Company provides processes that reduce opportunities for third parties to counterfeit its clients’ brands in developing regions. The Company also believes that its integrated and comprehensive capabilities provide clients with the potential for long-term cost-reductions across their graphic workflows.

The Company’s clients currently include more than 20 of the Fortune 100 companies and more than 55 of the Fortune 500 companies. These clients select Schawk for its comprehensive brand point management services as they seek to more effectively and consistently communicate their visual identities and execute their branding and marketing strategies on a global scale. The Company believes its clients are increasingly choosing to outsource their graphic and creative services needs to it for a variety of reasons, including its:

·	ability to service our clients’ graphic requirements throughout the world;

·	rapid turnaround and delivery times;

·	comprehensive, up-to-date knowledge of the print specifications and capabilities of converters and printers located throughout the world;

·	high quality design and creative capabilities with integrated production art expertise;

·	consistent reproduction of brand equity across multiple packaging and promotional media;

·	digital imaging asset management; and

·	efficient workflow management resulting in globally competitive overall cost to the client.

The Company also sees evidence that many consumer products manufacturers are continuing to outsource what they believe are “non-core competencies”. These non-core competencies include those functions that are outside the competency of creating and manufacturing the products they sell. This would include the type of services that Schawk offers.

The Company’s North America reportable segment includes all of the Company’s operations located in North America, including its Canadian and Mexican operations, its United States (“U.S.”) branding and design capabilities and its U.S. digital solutions business. North America is the dominant segment with 87 percent of consolidated revenues as of December 31, 2010. The Company’s Europe reportable segment includes all operations in Europe, including its European branding and design capabilities and its digital solutions business in London. The Company’s Asia Pacific reportable segment includes all operations in Asia and Australia, including its Asia Pacific branding and design capabilities.

Graphic Services Industry

Industry services. The Company’s principal industry, premedia graphic services, includes the tasks involved in creating, manipulating and preparing tangible images and text for reproduction to exact specifications for a variety of media, including packaging for consumer products, point-of-sale displays, other promotional and/or advertising materials, and the internet. Packaging for consumer products encompasses folding cartons, boxes, trays, bags, pouches, cans, containers, packaging labels and wraps. Graphic services do not entail the actual printing or production of such packaging materials, but rather include the various preparatory steps such as art production, color separation and plate manufacturing services. While graphic services represent a relatively small percentage of overall product packaging and promotion costs, the visual impact and effectiveness of product packaging and promotions are largely dependent upon the quality of graphic imaging work.

Size of industry. The global graphic services industry has thousands of market participants, including independent premedia service providers, converters, printers and, to a lesser extent, advertising agencies. Most graphic services companies focus on publication work such as textbooks, advertising, catalogs, newspapers and magazines. The Company’s target markets, however, are high-end packaging, advertising and promotional applications for the consumer products, retail and pharmaceutical industries. The Company estimates the North American market for graphic services in the consumer products packaging industry is approximately $1.5 billion and the worldwide market is as high as $6.0 billion. The Company estimates the broader market for graphic services including publishing, advertising and promotional as well as packaging applications in North America may be as high as $8.0 billion and worldwide may be as high as $30.0 billion. Within the consumer products graphic industry, the market is highly fragmented with thousands of limited service partners, only a small number of which have annual revenues exceeding $20.0 million.

While the cost of technology has reduced some of the barriers to entry in relation to equipment costs, the demand for expertise, systems, speed, consistency and dependability that is scalable and can be delivered locally, regionally and globally have created a different and expanded set of entry barriers. As a result, the Company believes new start-ups have difficulty competing with it. Other barriers to entry include expanded restrictions and compliance requirements brought about by varying governmental regulations related to consumer products packaging, increasing customization demands of retailers, certainty of supply and many clients’ preference for established firms with a global reach. The Company believes that the number of graphic services providers to the consumer products industry will continue to diminish due to consolidation and attrition caused by competitive forces such as accelerating technological requirements for advanced systems, the need for highly skilled personnel and the growing demands of clients for full-service knowledge based regional and global capabilities.

Graphic services for consumer products companies. High quality graphic services are critical to the effectiveness of any consumer products’ marketing strategy. A strategic, creative or executional change in the graphic image of a package, advertisement or point-of-sale promotional display can dramatically increase sales of a particular product. New product development has become a vital strategy for consumer products companies, which introduce thousands of new products each year. In addition to introducing new products, consumer products companies are constantly redesigning their packaging, advertising and promotional materials for existing products to respond to rapidly changing consumer tastes (such as the fat or carbohydrate content of foods), current events (such as major sports championships and blockbuster film releases) and changing regulatory requirements. The speed and frequency of these changes and events have led to increased demand for shorter turnaround and delivery time between the creative design phase and the distribution of packaged products and related advertising and promotional materials that promote them. Moreover, the demand for global brand equity consistency between visuals and copy across brand touchpoints – a product package, point of sale, advertisement out of home advertising and more recently online media – has been accelerating. The Company believes that all of these factors lead consumer products and retail companies to seek out larger graphics services companies with integrated strategic, creative and executional service offerings with a geographic reach that will enable them to bring their products to market more quickly, consistently and efficiently.

Graphic services for consumer product packaging, whether it is an over-the-counter product on drug store shelves, a private label product on grocery store shelves, or a national food or beverage brand on discount retailers’ shelves, present specific challenges. Packaging requirements for consumer products are complex and demanding due to variations in package materials, shapes, sizes, substrates, custom colors, storage conditions, expanding regulatory requirements and marketing objectives. An ever-increasing number of stock-keeping units, or SKUs, compete for shelf space and market share, making product differentiation essential to our clients. In recent years consumer products companies have redirected significant portions of their marketing budgets toward package design and point-of-sale media as they recognize the power of point-of-sale marketing on consumer buying behavior. Because premedia services represent only a small portion (estimated to be less than 10 percent) of the overall cost of consumer products packaging, changes in package design have only a modest impact on overall costs. Recognizing this high benefit/low cost relationship and the continuous need to differentiate their offerings, consumer products companies change package designs frequently as part of their core marketing strategy.

Factors driving increased demand for our brand development and deployment services. Rapidly changing consumer tastes, shifting marketing budgets, the need for product differentiation, changing regulatory requirements, the relative cost-effectiveness of packaging redesign and other factors continue to drive increases in the volume and frequency of package design modifications. These factors, along with the related changes in advertising and promotional materials, has resulted in significantly increased demand for the services Schawk provides. Additionally, the trend among progressive grocery retailers to develop private label brands, activate them in the marketplace and optimize their brand portfolios is favorable to Schawk. As grocery retailers become more sophisticated marketers, the Company believes they are increasingly recognizing the benefit of Schawk’s services offering.

Our Services

Schawk’s offerings include strategic, creative and executional services related to four core competencies: graphic services, brand and package strategy and design, digital promotion and advertising, and software. Graphic services, brand and package strategy and design and digital promotion and advertising represented approximately 97 percent of the Company’s revenues in 2010, with software sales representing the remaining 3 percent.

Graphic services. Under the Schawk brand, graphic services encompasses a number of creative and executional service offerings including traditional premedia business as well as high-end digital photography, color retouching, large format digital printing and sales and promotional samples. Additionally, Schawk offers digital three-dimensional modeling of prototypes or existing packages for its consumer products clients. Graphic service operations are located throughout North America, Europe and Asia.

Brand and package strategy and design. Under the Anthem brand, the Company offers brand consulting and creative design for packaging applications to consumer products companies, food and beverage retailers and mass merchandisers. Anthem consists of leading creative design firms acquired since 1998 in Toronto, San Francisco, Cincinnati, Sydney, London, York, England, Melbourne and Hilversum, the Netherlands, as well as start-ups in Chicago, New Jersey, New York, and Singapore.

Digital promotion and advertising. Under the Untitled and Real Branding brands, the Company has entered the digital advertising markets in the United Kingdom and North American regions, which will enable the Company to expand its array of creative and visual brand-related creative services to the rapidly growing digital communications markets. As product manufacturers and retailers continue to use digital technology to connect with their consumers, Schawk has invested in digital markets to complement its existing capabilities and drive its clients’ brands across the rapidly expanding digital medium.

Software. Services that help differentiate Schawk from its competitors are its software products that include graphic lifecycle content management systems that are comprised of digital asset management, workflow management, online proofing and intelligence performance management modules. These products are supported by services that include implementation, on-site management, validation for highly regulated environments, and support and training. Schawk offers these products and services through its digital solutions subsidiary, a software development company that develops software solutions for the marketing services departments of consumer products companies, pharmaceutical/life sciences companies and retail companies. In 2009, Schawk Digital Solutions launched and successfully implemented for several clients an innovative Copy Management System that serves as a “single source of truth” for all copy and automates its placement on packaging mechanicals, simplifying complex workflows, improving time to market and reducing the risks that incorrect labeling presents to its clients. Through its integrated software solution, BLUE™, Schawk Digital Solutions works with clients to organize their digital assets, streamline their internal workflow, improve efficiency, reduce waste, and help clients meet the requirements of regulatory bodies globally. The improved speed to market allows consumer products companies to increase the number of promotions without increasing costs. Schawk’s software products are supported with managed services, asset optimization, implementation and support and training for clients.

To capitalize on market trends, management believes the Company must continue to provide clients with the ability to make numerous changes and enhancements while delivering additional value directed at meeting the expanded needs of its clients within increasingly shorter turnaround times. Accordingly, the Company focuses its efforts on improving its response times and continues to invest in rapidly emerging technology and the continuing education of its employees.

The Company also educates its clients on the opportunities and complexities of state-of-the-art equipment and software. For example, the Company has anticipated the need to provide services to comply with expanded regulatory requirements related to proposed regulations regarding food, beverage and product safety. The Company believes that its ability to provide quick turnaround, expanded services and delivery times, dependability and value-added training and education programs will continue to give it a competitive advantage in serving clients who require high volume, high quality product imagery.

Over the course of our business history, the Company has developed strong relationships with many of the major converters and printers in the United States, Canada, Europe and Asia. As a result, the Company has compiled an extensive proprietary database containing detailed information regarding the specifications, capabilities and limitations of printing equipment in the markets it serves around the world. This database enables it to increase the overall efficiency of the printing process. Internal operating procedures and conditions may vary from printer to printer, affecting the quality of the color image. In order to minimize the effects of these variations, the Company makes necessary adjustments to the color separation work to account for irregularities or idiosyncrasies in the printing presses of each of the clients’ converters. The Company’s database also enhances its ability to ensure the consistency of its clients’ branding strategies. The Company strives to afford its clients total control over their imaging processes with customized and coordinated services designed to fit each individual client’s particular needs, all aimed at ensuring that the color quality, accuracy and consistency of a client’s printed matter are maintained.

Summary financial information for continuing operations by significant geographic area is contained in Item 8, Note 18 – Segment and Geographic Reporting to the Company’s consolidated financial statements.

Competitive Strengths

The Company believes that the following factors have been critical to its past success and represent the foundation for future growth.

The Company is a leader in a highly fragmented market. The Company is one of the world’s largest independent graphics services providers. There are thousands of independent market participants in its industry in North America and the vast majority of these are single-location, small niche firms with annual revenues of less than $20.0 million. The Company believes that its size, expertise, breadth of services and global presence represent a substantial competitive advantage in its industry.

The Company has direct client relationships. While many participants in the graphic services industry serve only intermediaries such as advertising firms and printers, the Company typically maintains direct relationships with its clients. As part of this focus on direct client relationships, the Company also deploys employees on-site at and near client locations, leading to faster turnaround and delivery times and deeper, longer-lasting client relationships. At December 31, 2010, the Company had more than 100 sites at or near client locations staffed by approximately 360 Schawk employees. The Company’s direct client relationships enable it to strengthen and expand client relationships by better and more quickly anticipating and adapting to clients’ needs.

The Company has a comprehensive service offering. The Company provides its clients with a comprehensive offering of integrated strategic, creative and executional services. The Company has built upon its core premedia services by acquiring and integrating high value/high margin services such as brand strategy and design, creative services and workflow management software and services. In addition to generating more revenue, the increased breadth of its service offering enables it to manage the premedia graphic process, from design and image creation to media fulfillment. Additionally, as a result of investments made in 2010, consistent with its strategy of capitalizing on its expertise in developing and deploying brands for clients across multiple mediums, the Company now offers its clients creative and deployment services across digital environments that allow those clients to communicate directly with customers and consumers via digital mediums including, but not limited to, social media. This results in quicker, more consistent and cost-effective solutions for its clients that enables them to undertake more product introductions or existing packaging alterations without exceeding their budgets.

The Company has unique global capabilities. The Company has more than 150 locations in 18 countries across 5 continents. The Company has combined this global platform with its proprietary databases of printer assets across the world, ensuring that the Company provides consistent service to clients on a local, regional and global basis. The ability to ensure a consistent and compelling brand image is increasingly important to global clients as they continue to expand their markets, extend and unify their brands and outsource their products internationally. The Company's global presence and proprietary databases help ensure consistent and compelling brand images for its clients around the world.

The Company generates strong cash flow. The Company has a history of generating strong cash flow through profitable growth in operating performance and a strong financial discipline. The Company has been able to manage its costs efficiently, address prevailing market conditions and avoid dependence on revenue growth to maintain or increase profitability. Also, historically, the Company has had only a modest need for maintenance capital investment. The Company believes that these factors should enable it to continue to generate strong cash flow.

Strategy

The Company seeks to enhance its leadership position in the graphic services industry. Its strategies to realize this objective include:

Capitalizing on our enhanced platform. The Company seeks to capitalize on the breadth of its services and its global presence. The Company’s dedicated business development team emphasizes the ability to tailor integrated solutions on a global scale to meet its clients’ specific needs. Its total brand point management approach yields new opportunities by expanding service offerings to existing clients and winning global representation of clients previously using its services only in a single market. This strategy is expected to drive additional organic growth in the future.

Matching our services to the needs of our clients. The Company’s clients continually create new products and seek to extend and enhance their existing brands while maximizing brand equity consistency across the regions in which they sell their products, whether these regions are local, regional or global in nature. The Company continues to match its service offerings to meet its clients’ needs and, where necessary, adapt services as their needs change and grow. The Company’s adaptability is exemplified by its ability to scale its service offerings, shift employees among its locations to address surges in a client’s promotional activity, and originate services from additional global locations based on changes in a client’s global branding strategy. During 2010, as its clients requirements accelerated toward use of digital mediums for communicating with their customers and consumers, the Company acquired Untitled in the United Kingdom and Real Branding in the U.S. to position the Company to be able to provide services across the rapidly growing digital communication mediums, including but not limited to internet and cellular mediums.

Pursuing acquisitions opportunistically. Where opportunities arise and in response to client needs, Schawk seeks strategic acquisitions of selected businesses to broaden its service offerings, enhance its client base or build a new market presence. The Company believes that there will continue to be a number of attractive acquisition candidates in the fragmented and consolidating industry in which the Company operates. As discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Liquidity and Capital Resources,” the Company’s current credit facility, renegotiated in January 2010, contains covenants that may limit its ability to make significant acquisitions.

Acquisitions

Since 1965, the Company has integrated approximately 59 graphic imaging, creative and design businesses into its operations, ranging in size from $2 million to $370 million in revenue. The Company typically has sought to acquire businesses that represent market niche companies with Fortune 1000 client lists, excellent client services or proprietary products, solid management and/or offer the opportunity to expand into new service or geographic markets.

The Company’s acquisition of Winnetts and Seven in 2005 increased its ability to meet and adapt to clients’ needs and industry trends by:

·	expanding its geographic reach to Europe, Australia and India, which benefits its existing clients as they seek to establish global brand consistency; and

·	increasing and expanding the scope of its global service offerings, such as creative design and high-end retouching, enhanced capabilities in serving life-sciences industry clients, and entering into new markets, such as retail and media.

The Seven and Winnetts acquisitions also increased the amount of business the Company does for the world’s largest consumer products companies, particularly for the non-U.S. divisions of our existing clients. As a result of these and subsequent acquisitions, the Company maintains the necessary geographic reach and range of service offerings to succeed in meeting its clients’ imaging and branding needs on a global basis. The Company believes it is the only brand image solutions company positioned to offer such a breadth of services on a global scale. The Company’s recent acquisitions are noted below:

·	Effective November 10, 2010, the Company acquired Real Branding LLC., a United States-based digital marketing agency. Real Branding provides digital marketing services to consumer product and entertainment clients through its locations in Los Angeles and New York.

·	Effective September 17, 2010, the Company acquired the operating assets of Untitled London Limited, a United Kingdom-based agency that provides strategic, creative and technical services for digital marketing.

Effective December 31, 2008, the Company acquired Brandmark International Holding B.V., a Netherlands-based brand identity and creative design firm, which has historically done business as DJPA. Brandmark provides services to consumer products companies through its locations in Hilversum, The Netherlands and London, United Kingdom.

·	On May 31, 2008, the Company acquired Marque Brand Consultants Pty Ltd, an Australian-based brand strategy and creative design firm that provides services to consumer product companies.

As discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Liquidity and Capital Resources,” the Company’s current credit facility contains covenants that may limit its ability to make acquisitions.

Marketing and Distribution

The Company markets its services nationally and internationally through its website, social media, media engagement and highly focused marketing programs, targeted at existing and potential clients. The Company sells its services through a group of approximately 200 direct salespersons who call on consumer products manufacturers, including those in the food and beverage, home products, pharmaceutical and cosmetics industries and mass merchant retailers. The Company’s salespersons, business development group and client service technicians share responsibility for marketing its offerings to existing and potential clients, thereby fostering long-term institutional relationships with our clients.

Clients

The Company’s clients consist of direct purchasers of graphic services, including end-use consumer product manufacturers of food, beverage, non-food and beverage and pharmaceutical products, groceries, pharmacies, department and mass merchant retailers, converters and advertising agencies. Many of its clients, a number of whom are Fortune 1000 companies, have global operations and often use numerous converters both domestically and internationally. Because these clients desire uniformity of color and image quality across a variety of media, the Company plays a very important role in coordinating their printing activities by maintaining current equipment specifications regarding its clients and converters. Management believes that this role has enabled it to establish closer and more stable relationships with these clients. Converters have worked closely with the Company to reduce required lead-time, thereby lowering their costs. End-use clients often select and use Schawk to ensure better control of their packaging or other needs and depend on Schawk to act as their agent to ensure quality management of data along with consistency among numerous converters and packaging media. Schawk has established more than 100 on-site locations at or near clients that require high volume, specialized service. As its art production services continue to expand, the Company anticipates that it will further develop our on-site services.

Many clients purchase from Schawk on a daily and weekly basis and work closely with it year-round as they frequently redesign product packaging or introduce new products. While certain promotional activities are seasonal, such as those relating to summer, back-to-school time and holidays, shorter technology-driven graphic cycle time has enabled consumer products manufacturers to tie their promotional activities to regional and/or current events (such as sporting events or motion picture releases). This prompts manufacturers to redesign their packages more frequently, resulting in a correspondingly higher number of packaging redesign assignments. This technology-driven trend toward more frequent packaging changes has offset previous seasonal fluctuations in the volume of Schawk’s business. See “Seasonality and Cyclicality.”

In addition, consumer product manufacturers have a tendency to single-source their graphic work with respect to a particular product line so that continuity can be assured in changes to the product image. As a result, the Company developed a base of steady clients in the food and beverage, health and beauty and home care industries. In 2010 and 2009, its largest client accounted for approximately 9.6 percent and 9.4 percent of the Company’s total revenues, respectively. In 2010 and 2009, the 10 largest clients in the aggregate accounted for approximately 44.0 percent and 41.3 percent of revenues, respectively.

Competition

Regarding print execution, the Company’s competition comes primarily from other graphic service providers and converters and printers that have graphic service capabilities. The Company believes that converters and printers serve approximately one-half of its target market, and the other one-half is served by independent graphic service providers. Independent graphic service providers are companies whose business is performing graphic services for one or more of the principal printing processes. The Company believes that only two firms – Southern Graphics Systems and Matthews International Corporation – compete with it on a fully national or international basis in certain markets. The remaining independent graphic service providers are regional or local firms that compete in specific markets. To remain competitive, each firm must maintain client relationships and recognize, develop and capitalize on state-of-the-art technology and contend with the increasing demands for speed. These groups are primarily focused on traditional graphic services activities, while the Company continues to expand into adjacent activities to capitalize on trends, while managing risk of technology changes by moving into other mediums.

Regarding brand and packaging strategy, and creative design for print and digital work, competition currently comes from a variety of suppliers. However, the Company is not aware of any competitors who offer the breath or combination of services that Schawk does, from strategy through development through deployment on a global basis.

Some printers with graphic service capabilities compete with Schawk by performing such services in connection with printing work. Independent graphic service providers, such as Schawk, however, may offer greater technical capabilities, image quality control and speed of delivery. In addition, printers often utilize Schawk’s services because of the rigorous demands being placed on them by clients who are requiring faster turnaround times. Increasingly, printers are being required to invest in technology to improve speed in the printing process and have avoided spending on graphic services technology.

As requirements of speed, consistency and efficiency continue to be critical, along with the recognition of the importance of focusing on their core competencies, the Company believes clients have increasingly recognized that Schawk provides services at a rate and cost that makes outsourcing more cost effective and efficient.

Research and Development

The Company is dedicated to keeping abreast of and, in a number of cases, initiating technological process developments in its industry that have applications for a variety of purposes including, but not limited to, speed. To build upon its leadership position, the Company is actively involved in system and software technical evaluations of various computer systems and software manufacturers and also independently pursues software development for implementation at its operating facilities. The Company continually invests in new technology designed to support its high quality graphic services. The Company concentrates its efforts in understanding systems and equipment available in the marketplace and creating solutions using off-the-shelf products customized to meet a variety of specific client and internal requirements. BLUE™ and Schawk 3-D imaging capabilities are examples of Schawk’s commitment to research and development.

As an integral part of our commitment to research and development, the Company supports its internal Schawk Technical Advisory Board, as it researches and evaluates new technologies in the graphic arts and telecommunications industries. This board meets quarterly to review new equipment and programs, and then disseminates the information to the entire Company and to clients as appropriate.

Employees

As of December 31, 2010, Schawk had approximately 3,200 employees worldwide. Of this number, approximately 11 percent are production employees represented by local units of the Graphic Communications Conference of the International Brotherhood of Teamsters and by local units of the Communications, Energy & Paperworkers Union of Canada and the GPMU in the UK. The percentage of employees covered by union contracts that expire within one year is approximately 7 percent. The Company’s union and non-union employees are vital to its operations. Schawk considers its relationships with its employees and unions to be good.

Backlog

The Company does not maintain backlog figures as the rapid turn-around requirements of its clients result in little backlog. Basic graphic service projects are generally in and out of its facilities in five to seven days. More complex projects and orders are generally in and out of its facilities within two to four weeks. Approximately one-half of total revenues are derived from clients with whom the Company has entered into agreements that generally have terms of between one year and five years in duration. With respect to revenues from clients that are not under contract, Schawk maintains client relationships by delivering timely graphic services, providing technology enhancements to make the process more efficient and bringing extensive experience with and knowledge of printers and converters.

Seasonality and Cyclicality

The Company’s business for the consumer product packaging graphic market is not currently seasonal because of the number of design changes that are able to be processed as a result of speed-to-market concepts and all-digital workflows. As demand for new products has increased, traditional cycles related to timing of major brand redesign activity have gone from a three to four year cycle to a much shorter cycle. With respect to the advertising markets, some seasonality has historically existed in that the months of December and January were typically the slowest months of the year in this market because advertising agencies and their clients typically finish their work by mid-December and do not start up again until mid-January. In recent years, late summer months have seen a slowdown brought about primarily as a result of Schawk’s ability to turn work more efficiently and the holiday schedules of its client base. With respect to the fourth quarter, this seasonality in Schawk’s business is expected to be offset by the increase in holiday-related business with respect to the retail portion of its business in the United States. Advertising spending is generally cyclical as the consumer economy is cyclical. When consumer spending and GDP decreases, advertising and marketing activity is often reduced or changed. As an example, this may result in fewer advertising and/or marketing campaigns and/or the reduction in print and broadcast media ads and the redeployment to internet programs.

Purchasing and Raw Materials

The Company purchases photographic film and chemicals, storage media, ink, paper, plate materials and various other supplies and chemicals on consignment for use in its business. These items are purchased from a variety of sources and are available from a number of producers, both foreign and domestic. In 2010, materials and supplies accounted for $18 million or approximately 6.3 percent of the Company's cost of sales, and no shortages are anticipated. Furthermore, as a growing proportion of the workflow is digital, the already small percentage of cost of sales attributable to material costs will continue to decrease. Historically, the Company has negotiated and enjoys significant volume discounts on materials and supplies from most of its major suppliers.

Intellectual Property

The Company owns no significant patents. The trademarks “Schawk!,” “Schawk,” “Schawk Digital Solutions,” “Anthem!,” “Anthem Worldwide,” “PaRTS,” “BLUE,” “BLUE DNA,” “ENVISION,” “MPX,” “MEDIALINK,” “MEDIALINK STUDIO,” “RPM (Retail Performance Manager),” “CPM (Campaign Performance Manager),” “BRANDSQUARE,” “AGT,” “APPLIED GRAPHICS TECHNOLOGIES,” and the trade names “Ambrosi,” “Anthem New Jersey,” “Anthem New York,” “Anthem Los Angeles,” “Anthem San Francisco,” “Anthem Toronto,” “Anthem Chicago,” “Anthem Singapore,”, “Anthem Cincinnati,” “Anthem York,” “Schawkgraphics,” “Schawk Asia,” “Schawk Atlanta,” “Schawk Cactus,” “Schawk Canada,” “Schawk Cherry Hill,” “Schawk Chicago,” “Schawk Cincinnati 446,” “Schawk Cincinnati 447,” “Schawk Creative Imaging,” “Schawk Designer’s Atelier,” “Schawk India,” “Schawk Japan,” “Schawk Australia,” “Schawk Kalamazoo,” “Schawk Mexico,” “Schawk Milwaukee,” “Schawk Minneapolis,” “Schawk Los Angeles,” “Schawk San Francisco,” “Schawk UK Limited,” “Schawk New York,” “Schawk Penang,” “Schawk St. Paul,” “Schawk Toronto,” “Schawk Shanghai,” “Schawk Singapore,” “Schawk Stamford,” “Schawk 3-D,” “Laserscan,” “Protopak,” “Seven,” “DJPA,” “Schawk Retail Marketing,” “Real Branding,” and “Winnetts” are the most significant trademarks and trade names used by the Company or its subsidiaries.

Available Information

The Company’s website is www.schawk.com, where investors can obtain copies of the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company has filed such materials with, or furnished them to, the SEC. The Company will also furnish a paper copy of such filings free of charge upon request.

Item 1A. Risk Factors

The Company’s operating results can be adversely affected by economic conditions and events that adversely affect its clients’ spending decisions.

The Company’s revenues are derived from clients in a variety of industries and businesses whose product introduction, marketing and advertising spending levels may significantly fluctuate or decline in reaction to changes in, among other things, general economic conditions and business and consumer confidence and spending, and the Company’s operating results are sensitive to the effects that these changes have on its clients’ businesses. In addition, because the Company conducts its operations in a variety of markets, it is subject to economic conditions in each of these markets. Accordingly, general economic downturns or localized downturns in markets where the Company has operations or other circumstances that result in reductions in its clients’ investment in product introduction and innovation or marketing and advertising budgets can negatively impact the Company’s sales volume and revenues, its margins and its ability to respond to competition or to take advantage of business opportunities.

Prolonged weakness or uncertainty in global economic conditions and in the credit and capital markets and weak or stagnant consumer and business confidence has and could continue to significantly impact the overall demand for the Company’s services. As clients come under increasing pressures or continue to operate in a weak or uncertain economic environment, it may result in, among other consequences, a further reduction in spending on the services that the Company provides, which could have a material adverse effect on its operating cash flows, financial condition or results of operations.

The Company’s business is subject to unpredictable order flows, which might cause its results to fluctuate significantly from period to period.

Although approximately one-half of the Company’s revenues are derived from clients with whom the Company has contractual agreements ranging from one to five years in duration, individual assignments from clients are on an “as needed”, project-by-project basis. The contractual agreements do not require minimum volumes, therefore, depending on the level of activity with its clients, the Company can experience unpredictable order flows. While technological advances have enabled the Company to shorten considerably its production cycle to meet its clients’ increasing speed-to-market demands, the Company may in turn receive less advance notice from its clients of upcoming projects or the cancellation or postponement of anticipated projects. Although the Company has established long-standing relationships with many of its clients and believes its reputation for quality service is excellent, the Company is not able to predict with certainty the volume of its business even in the near future and will remain susceptible to its client's order patterns and unexpected fluctuations in client spending.

The Company operates in a highly competitive industry and if it does not continue to successfully compete, it could lose market share or fail to further grow its business.

The Company competes with other providers of graphic imaging and creative services. The market for such services is highly fragmented, with several national and many regional participants in the United States as well as in foreign countries in which it operates. The Company faces, and will continue to face, competition in its business from many sources, including national and large regional companies, some of which have greater financial, marketing and other resources than the Company. In addition, local and regional firms specializing in particular markets compete on the basis of established long-term relationships or specialized knowledge of such markets. The introduction of new technologies also may create lower barriers to entry that may allow other firms to provide competing services.

There can be no assurance that competitors will not introduce services or products that achieve greater market acceptance than, or are technologically superior to, the Company’s current service offerings. The Company cannot offer assurance that it will be able to continue to compete successfully or that competitive pressures will not adversely affect its business, financial condition and results of operations.

The Company may not realize expected benefits from its technology enhancement, cost reduction and capacity utilization initiatives.

In order to improve the efficiency of its operations, the Company implemented certain technology enhancement, cost reduction and capacity utilization activities in 2008 through 2010, including workforce reductions and work site realignment, and has plans to continue these or similar actions throughout 2011 in order to achieve certain cost savings and to strategically realign its resources. The Company cannot assure you that it will realize the expected cost savings or improve its operating performance as a result of its past, current and future cost reduction activities and technology enhancement initiatives, and certain technology enhancement initiatives, such as the Company’s plans to improve its information technology systems in 2011 and 2012, may cause its expenses to increase in the short term. It also cannot assure you that its cost reduction activities will not adversely affect its ability to retain key employees, the significant loss of whom could adversely affect its operating results. Further, as a result of its cost reduction activities, the Company may not have the appropriate level of resources and personnel to appropriately react to significant changes or fluctuations in its markets and in the level of demand for its services.

The Company may encounter difficulties arising from future acquisitions or consolidation efforts, which may adversely impact its business.

The Company has a history of making acquisitions and, over the past several years, has invested, and in the future may continue to invest, a substantial amount of capital in acquisitions. Acquisitions involve numerous risks, including:

difficulty in assimilating the operations and personnel of the acquired company with the Company’s existing operations and realizing anticipated synergies;

the loss of key employees or key clients of the acquired company;

difficulty in maintaining uniform standards, controls, procedures and policies; and

unrecorded liabilities of acquired companies that the Company failed to discover during its due diligence investigations.

There is no assurance that the Company will realize the expected benefits from any future acquisitions or that its existing operations will not be harmed as a result of any such acquisitions. In addition, the cost of unsuccessful acquisition efforts could adversely affect its financial performance. The Company has undertaken consolidation efforts in the past in connection with its acquisitions, and in connection with any future acquisitions, the Company will likely undertake consolidation plans to eliminate duplicate facilities and to otherwise improve operating efficiences. Any future consolidation efforts may divert the attention of management, disrupt the Company's ordinary operations or those of its subsidiaries, result in charges and additional costs or otherwise adversely affect the Company's financial performance.

Future acquisitions or organic growth also may place a strain on the Company’s financial and other resources. In order to manage future growth of its client services staff, the Company will need to continue to improve its operational, financial and other internal systems. If the Company’s management is unable to manage growth effectively and revenues do not increase sufficiently to cover its increased expenses, the Company’s results of operations could be adversely affected.

The Company is dependent on a limited number of clients for a significant amount of its revenues, and the loss of one or more significant key clients could have a material adverse effect on its revenues and results of operations.

In 2010 and 2009, the Company’s ten largest clients accounted for approximately 44.0 percent and 41.3 percent, respectively, of its revenues, and approximately 9.6 percent and 9.4 percent, respectively, of total revenues came from the Company’s largest single client. While the Company seeks to build long-term client relationships, revenues from any particular client may fluctuate from period to period due to such client’s purchasing patterns, which, with respect to the Company’s consumer product company clients, are driven by changes in their level of investment in brand enhancements, product introductions and product modifications. Any termination of a business relationship with, or a significant sustained reduction in business received from, one or more of the Company’s principal clients could have a material adverse effect on the Company’s revenues and results of operations.

The Company’s clients could shift a significant portion of their marketing and advertising dollars from print to online and digital environments at levels that exceed the Company’s current ability to deliver the online services they seek and in a manner that they require.

As digital media marketing and advertising opportunities continue to grow as a direct, measurable, and interactive way for the Company’s clients to reach consumers, more companies are shifting marketing dollars away from print to digital media environments. While the Company currently offers an array of services to meet its clients’ digital marketing and advertising needs, responding quickly, effectively and efficiently to client demand for more comprehensive interactive services might require further investment or the acquisition of additional talent or established interactive agencies. If the Company is unable to keep pace with or capitalize on these shifting marketing and advertising trends or if the Company’s clients perceive that the Company is not able to provide the comprehensive, digital, interactive services they seek, the Company’s business and prospects for increased sales may be adversely affected.

The Company remains susceptible to risks associated with technological and industry changes, including risks based on the services it provides and may seek to provide in the future as a result of technological and industry changes.

The Company believes its ability to develop and exploit emerging technologies has contributed to its success and has demonstrated to its clients the value of using its services rather than attempting to perform these functions in-house or through lower-cost, reduced-service competitors. The Company believes its success also has depended in part on its ability to adapt its business as technology advances in its industry have changed the way graphics projects are produced. These changes include a shift from traditional production of images to offering more consulting and project management services to clients and, more recently, repositioning the Company in the marketplace to reflect the Company’s brand point management services. Accordingly, the Company’s ability to grow will depend upon its ability to keep pace with technological advances, industry evolutions and client expectations on a continuing basis and to integrate available technologies and provide additional services commensurate with client needs in a commercially appropriate manner. Its business may be adversely affected if the Company is unable to keep pace with relevant technological and industry changes or if the technologies or business strategies that the Company adopts or services it promotes do not receive widespread market acceptance.

If the Company fails to maintain an effective system of disclosure and internal controls, it may not be able to accurately report its financial results and may incur substantial costs related to remediation of its internal controls.

The Company reported certain material weaknesses in internal control in connection with its assessment of the effectiveness of its internal controls as of December 31, 2008 and December 31, 2007, which have since been remediated. Additionally, in March 2008, it announced that a material charge for impairment of goodwill associated with one of the Company’s Canadian operating units should have been recorded as of December 31, 2002. As a result of accounting errors previously identified, the Company restated its 2006 and 2005 financial statements in its Form 10-K for the year ended December 31, 2007 and restated its consolidated balance sheet at December 31, 2007. If the Company were to determine that its previous material weaknesses were not properly rectified or fails to maintain the effectiveness of its internal controls, its operating results could be harmed and could result in further material misstatements in its financial statements. Inferior controls and procedures or the identification of additional accounting errors could cause the Company’s investors to lose confidence in its internal controls and question its reported financial information, which, among other things, could have a negative impact on the trading price of the Company’s stock, and subject the Company to increased regulatory scrutiny and a higher risk of stockholder litigation.

Additionally, the Company has incurred significant costs in connection with remediating its internal control weaknesses and may incur further significant costs in maintaining and enhancing its internal controls. There can be no assurances that it will not discover additional instances of significant deficiencies or material weaknesses in its internal controls and operations, which could have a further adverse effect on its financial results.

The Company’s operating results fluctuate from quarter to quarter, which may cause the value of its stock to decline.

The Company’s quarterly operating results have fluctuated in the past and may fluctuate in the future as a result of a variety of factors, many of which are outside of the Company’s control, including:

timing of the completion of particular projects or orders;

material reduction, postponement or cancellation of major projects, or the loss of a major client;

timing and amount of new business;

differences in order flows;

sensitivity to the effects of changing economic conditions on its clients’ businesses;

the strength of the consumer products industry;

the relative mix of different types of work with differing margins;

costs relating to expansion or reduction of operations, including costs to integrate current and any future acquisitions;

changes in interest costs, foreign currency exchange rates and tax rates; and

costs associated with compliance with legal and regulatory requirements.

Because of this, fixed costs that are not in line with revenue levels may not be detected until late in any given quarter and operating results could be adversely affected. Due to these factors or other unanticipated events, the Company’s financial and operating results in any one quarter may not be a reliable indicator of its future performance.

The United States Securities and Exchange Commission (the “SEC”) investigation may result in significant costs and expenses, may divert resources and could have a material adverse effect on the Company’s business and results of operations.

As further described under Item 3 – “Legal Proceedings,” in March 2009 the Company was advised by the Staff of the SEC that the SEC had commenced a formal investigation arising out of the Company’s April 2008 restatement of its financial results for 2005, 2006 and the first three quarters of 2007. The Company has incurred professional fees and other costs in responding to the SEC’s earlier informal inquiry and presently ongoing formal inquiry and expects to continue to incur professional fees and other costs in the future, which may be significant, until resolved.

In addition, the Company’s management, board of directors and employees may need to expend a substantial amount of time in addressing the SEC’s investigation, which could divert a significant amount of resources and attention that would otherwise be directed toward operations. Further, if the SEC were to conclude that enforcement action is appropriate, the Company and/or its current or former officers and directors could be sanctioned or required to pay significant civil penalties and fines. Any of these events could have a material adverse effect on the Company’s business and results of operations.

Impairment charges have had and could continue to have a material adverse effect on the Company’s financial results.

The Company has recorded a significant amount of goodwill and other identifiable intangible assets, primarily customer relationships. Goodwill and other identifiable intangible assets were approximately $231 million as of December 31, 2010, or approximately 51 percent of total assets. Goodwill, which represents the excess of cost over the fair value of the net assets of the businesses acquired, was approximately $194 million as of December 31, 2010, or 43 percent of total assets. Goodwill and other identifiable intangible assets are recorded at fair value on the date of acquisition and, in accordance with the Intangibles – Goodwill and Other Topic of the Codification (ASC 350), are reviewed at least annually for impairment. For the fiscal year ended December 31, 2008, the Company recorded $48.0 million of impairment charges related to goodwill. Future events may occur that could adversely affect the value of the Company’s assets and require additional impairment charges. Such events may include, but are not limited to, strategic decisions made in response to changes in economic and competitive conditions, the impact of a deteriorating economic environment and decreases in the Company’s market capitalization due to a decline in the trading price of the Company’s common stock. Circumstances and conditions that gave rise to charges in 2008 could occur again in the future, which may create a need to record additional impairment adjustments that could have a material adverse affect on the Company’s financial results.

Currency exchange rate fluctuations could have an adverse effect on the Company’s revenue, cash flows and financial results.

For the fiscal year ended December 31, 2010, consolidated net sales from operations outside the United States were approximately $127 million, which represented approximately 28 percent of consolidated net sales. Because the Company conducts a significant portion of its business outside the United States, it faces exposure to adverse movements in foreign currency exchange rates. Currency exchange rates fluctuate in response to, among other things, changes in local, regional or global economic conditions, changes in monetary or trade policies and unexpected changes in regulatory environments.

Fluctuations in currency exchange rates may affect the Company’s operating performance by impacting revenues and expenses outside of the United States due to fluctuations in currencies other than the U.S. dollar or where the Company translates into U.S. dollars for financial reporting purposes the assets and liabilities of its foreign operations conducted in local currencies. A weakened U.S. dollar will increase the cost of local operating expenses to the extent that the Company must purchase components in foreign currencies, while an increase in the value of the dollar could increase the real cost to its clients outside the United States where the Company sells services in U.S. dollars. Accordingly, the Company’s financial results could ultimately be materially adversely affected by fluctuations in foreign currency exchange rates.

The Company’s foreign operations are subject to political, investment, currency, regulatory and other risks that could hinder it from transferring funds out of a foreign country, delay its debt service payments, cause its operating costs to increase and adversely affect its results of operations.

The Company presently operates in eighteen countries in North America, Europe and Asia and intends to continue expanding its global operations. As a result, the Company is subject to various risks associated with operating in foreign countries, such as:

local economic and market conditions;

political, social and economic instability;

war, civil disturbance or acts of terrorism;

taking of property by nationalization or expropriation without fair compensation;

adverse or unexpected changes in government policies and regulations;

imposition of limitations on conversions of foreign currencies into U. S. dollars or remittance of dividends and other payments by foreign subsidiaries;

imposition or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries;

rapidly rising inflation in certain foreign countries; and

impositions or increase of investment and other restrictions or requirements by foreign governments.

These and other risks could disrupt the Company’s operations or force it to incur unanticipated costs and have an adverse effect on its ability to make payments on its debt obligations.

Certain Schawk family members and affiliated trusts collectively own a significant interest in the Company and may collectively exercise their control in a manner that may be adverse to your interests.

Certain members of the Schawk family and certain Schawk family trusts collectively control a majority of the outstanding voting power of the Company. Therefore, the Schawk family has the power in most cases to determine the outcome of any matter that is required to be submitted to stockholders for approval, including the election of all the Company’s directors. Clarence W. Schawk and David A. Schawk, members of the Schawk family, also serve on the board of directors of the Company. Accordingly, it is possible that members of the Schawk family could influence or exercise their control over the Company in a manner that may be adverse to your interests.

In addition, as a result of the Schawk family’s controlling interest, as permitted under the corporate governance rules of the New York Stock Exchange (“NYSE”), the Company has elected “controlled company” status under those rules. As a controlled company, the Company may rely on exemptions from certain NYSE corporate governance requirements that otherwise would be applicable to a NYSE-listed company, including the requirements that (1) a majority of the board of directors consist of independent directors and (2) the Company have a separate nominating and corporate governance committee and a separate compensation committee, in each case composed entirely of independent directors and operating pursuant to written charters. The Company has relied on the controlled company exemption in the past and intends to continue to rely on it in the future. As a result, although the Company is listed on the NYSE, stockholders may not realize the benefits from the requirements and protections that these corporate governance rules impose on the significant number of NYSE-listed companies that do not operate under the controlled company exemption.

The Company is subject to debt covenants under its debt arrangements that may restrict its operational flexibility and limit the Company’s ability to take advantage of opportunities for growth.

As further discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources,” the Company’s current credit facility, as well as its outstanding senior notes, contain covenants that limit the extent to which it may, among other things, incur additional indebtedness, make capital expenditures, grant liens on its assets, increase dividends being paid on its common stock, repurchase its outstanding shares and make other restricted payments, sell its assets, make acquisitions or enter into consolidations or mergers. The credit facility also requires the Company to maintain specified financial ratios and satisfy financial condition tests. These ratios, tests and covenants could restrict the Company’s business plans or limit or prohibit its ability to take actions that the Company believes would be beneficial to the Company and its stockholders, including making significant acquisitions as opportunities arise. Additionally, these ratios, tests and covenants could place the Company at a competitive disadvantage to its competitors who may not be subject to similar restrictions and could limit the Company's ability to plan for or react to changes in industry and market conditions.

In the event the Company fails to comply with the debt covenants under its debt arrangements, it may not be able to obtain the necessary amendments or waivers, and its lenders could accelerate the payment of all outstanding amounts due under those arrangements.

The Company’s ability to meet the financial ratios and tests contained in its credit facility, its senior notes and other debt arrangements, and otherwise comply with debt covenants may be affected by various events, including those that may be beyond the Company’s control. Accordingly, it may not be able to continue to meet those ratios, tests and covenants. A significant breach of any of these covenants, ratios, tests or restrictions, as applicable, could result in an event of default under the Company’s debt arrangements, which would allow its lenders to declare all amounts outstanding to be immediately due and payable. If the lenders were to accelerate the payment of the Company’s indebtedness, its assets may not be sufficient to repay in full the indebtedness and any other indebtedness that would become due as a result of any acceleration. Further, as a result of any breach and during any cure period or negotiations to resolve a breach or expected breach, the Company’s lenders may refuse to make further loans, which would materially affect its liquidity and results of operations.

In the event the Company were to fall out of compliance with one or more of its debt covenants in the future, it may not be successful in amending its debt arrangements or obtaining waivers for any such non-compliance. Even if it is successful in entering into an amendment or waiver, the Company could incur substantial costs in doing so, its borrowing costs could increase, and it may be subject to more restrictive covenants than the covenants under its existing amended debt arrangements. It is possible that any amendments to the Company’s credit facility or any restructured credit facility could impose covenants and financial ratios more restrictive than under its current facilities, and it may not be able to maintain compliance with those more restrictive covenants and financial ratios. In that event, the Company would need to seek another amendment to, or a refinancing of, its debt arrangements. Any of the foregoing events could have a material adverse impact on the Company’s business and results of operations, and there can be no assurance that it would be able to obtain the necessary waivers or amendments on commercially reasonable terms, or at all.

The loss of key personnel could adversely affect the Company’s current operations and its ability to achieve continued growth.

The Company is highly dependent upon the continued service and performance of the its senior management team and other key employees, in particular David A. Schawk, its President and Chief Executive Officer, A. Alex Sarkisian, its Chief Operating Officer, and Timothy J. Cunningham, its Chief Financial Officer. The loss of any of these officers may significantly delay or prevent the achievement of the Company’s business objectives.

The Company’s continued success also will depend on retaining the highly skilled employees that are critical to the continued advancement, development and support of its client services and ongoing sales and marketing efforts. Any loss of a significant number of its client service, sales or marketing professionals could negatively affect its business and prospects. Although the Company generally has been successful in its recruiting efforts, it competes for qualified individuals with companies engaged in its business lines and with other technology, marketing and manufacturing companies. Accordingly, the Company may be unable to attract and retain suitably qualified individuals, and its failure to do so could have an adverse effect on its ability to implement its business plan. If, for any reason, these officers or key employees do not remain with the Company, operations could be adversely affected until suitable replacements with appropriate experience can be found.

Work stoppages and other labor relations matters, such as multi-employer pension withdrawal obligations, may make it substantially more difficult or expensive for the Company to produce its products and services, which could result in decreased sales or increased costs, either of which would negatively impact the Company’s financial condition and results of operations.

The Company is subject to risk of work stoppages and other labor relations matters, as approximately 11 percent of its employees worldwide are unionized. A prolonged work stoppage or strike at any one of the Company’s principal facilities could have a negative impact on its business, financial condition or results of operations. Also, periodic renegotiation of labor contracts may result in increased costs or charges to the Company. In addition, future decisions by the Company to reduce or terminate participation in multi-employer pension plans at any of its participating facilities may trigger additional liabilities for partial termination withdrawals under the multi-employer plans.

The price for the Company’s common stock can be volatile and unpredictable.

The market price of the Company’s common stock can be volatile and may experience broad fluctuations over short periods of time. From January 1 through December 31, 2010, the high and low sales price of its common stock on the New York Stock Exchange ranged from $12.18 to $21.24, and the Company’s stock price experienced similar volatility in 2009. See the market price information under the caption “Stock Prices” under “Item 5. Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities.” The market price of the Company’s common stock may continue to experience strong fluctuations due to unexpected events affecting the Company, variations in its operating results, analysts’ earnings estimates or investors’ expectations concerning its future results and its business generally, and such fluctuations may be exacerbated by limited market liquidity as a significant number of the Company’s outstanding shares are held by the Schawk family. In addition, the market price of its common stock may fluctuate due to broader market and industry factors, such as:

·	adverse information about, or the operating and stock price performance of, other companies in the Company’s industry or companies that comprise its client base, such as consumer products companies;

·	deterioration or adverse changes in general economic conditions;

·	continued high levels of volatility in the stock markets due to, among other things, disruptions in the capital and credit markets; and

·	announcements of new clients or service offerings by the Company’s competitors.

These and other market and industry factors may seriously harm the market price of the Company’s common stock, regardless of its actual operating performance.

The Company may be subject to losses that might not be covered in whole or in part by existing insurance coverage. These uninsured losses could result in substantial liabilities to the Company that would negatively impact its financial condition.

The Company carries comprehensive liability, fire and extended coverage insurance on all of its facilities, and other specialized coverages, including errors and omissions coverage, with policy specifications and insured limits customarily carried for similar properties and purposes. There are certain types of risks and losses, however, that generally are not insured because they are either uninsurable or not economically insurable. In addition, there are some types of possible events or losses, such as a substantial monetary judgment stemming from a product liability claim or recall, that could exceed the Company’s policy limits. Should an uninsured loss or a loss in excess of insured limits occur, the Company could incur significant liabilities, and if such loss affects property the Company owns, the Company could lose capital invested in that property or the anticipated future revenues derived from the activities conducted at that property, while remaining liable for any lease or other financial obligations related to the property. In addition to substantial financial liabilities, an uninsured loss or a loss that exceeds the Company’s coverage could adversely affect its ability to replace property or capital equipment that is destroyed or damaged, and its productive capacity may diminish.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of December 31, 2010, the Company owns or leases the following office and operating facilities, in the respective business segment:

Location	Square Feet	Owned/ Leased	Purpose	Lease Expiration Date	Operating Segment
Addison, Texas	3,150	Leased	Operating Facility	October, 2011	North America
Atlanta, Georgia	28,700	Leased	Operating Facility	March, 2017	North America
Antwerp, Belgium	39,000	Owned	Operating Facility	N/A	Europe
Battle Creek, Michigan	7,300	Leased	Operating Facility	January, 2014	North America
Bristol, U.K.	7,700	Leased	Vacant	September, 2014	Europe
Carlstadt, New Jersey	46,000	Leased	Subletting	February, 2011	North America
Chennai, India	37,000	Leased	Operating Facility	October, 2011	Asia Pacific
Chicago, Illinois	68,100	Leased	Operating Facility	June, 2012	North America
Chicago, Illinois	42,000	Leased	Vacant	June, 2019	North America
Chicago, Illinois	58,800	Leased	Operating Facility	September, 2015	North America
Cincinnati, Ohio	74,200	Leased	Operating Facility	August, 2014	North America
Cincinnati, Ohio	32,600	Leased	Operating Facility	June, 2015	North America
Crystal Lake, Illinois	5,900	Owned	Vacant	N/A	North America
Des Plaines, Illinois	18,200	Owned	Executive Offices	N/A	North America
Des Plaines, Illinois	54,800	Leased	Operating Facility	March, 2014	North America
Dusseldorf, Germany	2,300	Leased	Operating Facility	October, 2012	Europe
Hilversum, Netherlands	5,300	Leased	Operating Facility	October, 2016	Europe
Kalamazoo, Michigan	67,000	Owned	Operating Facility	N/A	North America
Leeds, U.K.	4,400	Leased	Operating Facility	December, 2013	Europe
London, U.K.	42,700	Leased	Operating Facility	March, 2015	Europe
Los Angeles, California	100,500	Owned	Operating Facility	N/A	North America
Manchester, U.K.	45,200	Leased	Operating Facility	September, 2023	Europe
Meerhout, Belgium	5,900	Leased	Operating Facility	July, 2011	Europe
Minneapolis, Minnesota	31,000	Owned	Operating Facility	N/A	North America
Mississauga, Canada	58,000	Leased	Operating Facility	December, 2014	North America
Mt. Olive, New Jersey	12,900	Leased	Operating Facility	August, 2012	North America
North Ryde, Australia	13,900	Leased	Operating Facility	May, 2011	Asia Pacific
New Berlin, Wisconsin	43,000	Leased	Operating Facility	June, 2013	North America
New York, New York	52,500	Leased	Subletting	December, 2012	North America
New York, New York	8,000	Leased	Subletting	January, 2011	North America
New York, New York	15,000	Leased	Operating Facility	Month-to-month	North America
New York, New York	5,000	Leased	Operating Facility	April, 2015	North America
Newcastle, U.K.	17,800	Leased	Operating Facility	September, 2015	Europe
Penang, Malaysia	38,000	Owned	Operating Facility	N/A	Asia Pacific
Plano, Texas	12,300	Leased	Subletting	November, 2011	North America
Queretaro, Mexico	18,000	Owned	Operating Facility	N/A	North America
Redmond, Washington	24,200	Leased	Operating Facility	April, 2017	North America
Roseville, Minnesota	28,000	Leased	Operating Facility	May, 2011	North America
San Francisco, California	20,100	Leased	Operating Facility	August, 2013	North America
San Francisco, California	13,500	Leased	Operating Facility	October, 2014	North America
San Francisco, California	17,000	Leased	Operating Facility	Month-to-month	North America
São Paulo, Brazil	500	Leased	Operating Facility	November, 2011	North America
Shanghai, China	22,100	Leased	Operating Facility	August, 2015	Asia Pacific
Shenzhen, China	7,100	Leased	Operating Facility	December, 2011	Asia Pacific
Shenzhen, China	11,300	Leased	Operating Facility	December, 2011	Asia Pacific
Singapore	7,700	Leased	Operating Facility	November, 2013	Asia Pacific
Stamford, Connecticut	20,000	Leased	Operating Facility	August, 2011	North America
Sterling Heights, Michigan	26,400	Leased	Operating Facility	December, 2012	North America
Surry Hills, Australia	3,900	Leased	Operating Facility	June, 2011	Asia Pacific
Swindon, U.K.	39,000	Leased	Subletting	September, 2018	Europe
Tokyo, Japan	1,900	Leased	Operating Facility	April, 2012	Asia Pacific
Toronto, Ontario, Canada	13,600	Leased	Operating Facility	February, 2013	North America
York, U.K.	8,400	Leased	Operating Facility	Month-to-month	Europe

Item 3. Legal Proceedings

In addition, from time to time, the Company has been a party to routine pending or threatened legal proceedings and arbitrations. The Company insures some, but not all, of its exposure with respect to such proceedings. Based upon information presently available, and in light of legal and other defenses available to the Company, management does not consider the exposure from any threatened or pending litigation to be material to the Company.

Item 4. [Removed and Reserved]

PART II

Item 5. Market for Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities

Stock Prices

The Company’s Class A common stock is listed on the New York Stock Exchange under the symbol “SGK”. The Company had approximately 990 stockholders of record as of February 25, 2011.

Set forth below are the high and low sales prices for the Company’s Class A common stock for each quarterly period within the two most recent fiscal years.

Quarter Ended		2010 High /Low		2009 High /Low

March 31	$	18.49-12.18	$	11.75-5.18
June 30		20.01-14.79		8.38-5.92
September 30		18.74-13.96		12.82-6.44
December 31		21.24-15.57		13.82-9.38

Dividends Declared Per Class A Common Share

Quarter Ended		2010		2009

March 31	$	0.0400	$	0.0325
June 30		0.0400		0.0100
September 30		0.0400		0.0100
December 31		0.0800		0.0100

Total	$	0.2000	$	0.0625

During 2009, the terms of the Company’s credit facility and senior notes restricted dividends to a maximum of $0.3 million per quarter, which was waived for the dividend declared in the first quarter of 2009. Following the Company’s January 2010 refinancing of its credit facility and senior notes, the Company increased its quarterly dividend to $0.04 per share, or approximately $1.0 million per quarter, for each of the first three quarters of 2010.

In November 2010, the Company further amended its credit facility and senior notes to, among other things, increase the annual limit on dividends, stock repurchases and other restricted payments, as further discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operation—2010 Revolving Credit Facility Refinancing and Note Purchase Agreement Amendments.” As a result, the Company increased its fourth quarter 2010 dividend to $0.08 per share, or approximately $2.0 million. The Company expects quarterly dividends at this rate to continue throughout 2011, subject to declaration by the Board of Directors and its discretion to increase, decrease or eliminate such dividends.

The graph below compares the cumulative total shareholder return on the Company’s common stock for the last five fiscal years with (i) the cumulative total return of the Russell 2000 Index, a broad market index for small cap stocks, and (ii) the Morgan Stanley Consumer Index, an index designed to measure the performance of consumer-oriented, stable growth industries.

Comparison of 5 Year Cumulative Total Return

Assumes Initial Investment of $100*

*Assumes $100 invested at the close of trading 12/05 in Schawk, Inc. common stock, Russell 2000 Index, and Morgan Stanley Consumer Index . Cumulative total return assumes reinvestment of dividends.

Equity Compensation Plan Information

The following table summarizes information as of December 31, 2010, relating to equity compensation plans of the Company pursuant to which Common Stock is authorized for issuance (shares in thousands).

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding shares reflected in the first column)

Equity compensation plans approved by security holders	2,054	$	13.77	1,193

Equity compensation plans not approved by security holders	--		--	--

Total	2,054	$	13.77	1,193

Purchases of Equity Securities by the Company

The Company did not repurchase any shares of its common stock during the year ended December 31, 2010. During the year ended December 31, 2009, the Company repurchased 488,700 shares of its common stock, prior to discontinuing its share repurchase program in March 2009. In addition, shares of common stock are occasionally tendered to the Company by certain employee and director stockholders in payment of stock options exercised. During the year ended December 31, 2010, 2,415 shares of Schawk, Inc. common stock were tendered to the Company in connection with stock option exercises. No shares were tendered during the year ended December 31, 2009. The Company records the receipt of common stock in payment for stock options exercised as a reduction of common stock issued and outstanding.

In November 2010, the Board of Directors of the Company reinstituted the Company’s share repurchase program, which had been suspended in March 2009, that authorizes the Company to repurchase from time to time up to two million shares of Company common stock per year, subject to the restricted payment limitations of the Company’s amended debt agreements.

Item 6. Selected Financial Data

		Year Ended December 31,
(in thousands, except per share amounts)		2010		2009		2008		2007		2006

Consolidated Statement of Operations
Information
Net sales	$	460,626	$	452,446	$	494,184	$	544,409	$	546,118
Operating income (loss)	$	49,566	$	35,784	$	(56,555)	$	60,173	$	54,912
Net income (loss) from continuing operations	$	32,420	$	19,497	$	(60,006)	$	30,598	$	25,949
Earnings (loss) per common share from continuing operations:
Basic	$	1.27	$	0.78	$	(2.24)	$	1.14	$	0.98
Diluted	$	1.25	$	0.78	$	(2.24)	$	1.10	$	0.95

Consolidated Balance Sheet Information
Total assets	$	449,859	$	416,219	$	440,353	$	534,987	$	530,760
Long-term debt	$	37,080	$	64,707	$	112,264	$	105,942	$	140,763

Other Data
Cash dividends per common share	$	0.20	$	0.0625	$	0.13	$	0.13	$	0.13

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Information

Certain statements contained herein and in “Item 1. Business” that relate to the Company’s beliefs or expectations as to future events are not statements of historical fact and are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The Company intends any such statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Although the Company believes that the assumptions upon which such forward-looking statements are based are reasonable within the bounds of its knowledge of its industry, business and operations, it can give no assurance the assumptions will prove to have been correct and undue reliance should not be placed on such statements. Important factors that could cause actual results to differ materially and adversely from the Company’s expectations and beliefs include, among other things, the strength of the United States economy in general and, specifically, market conditions for the consumer products industry in the U.S. and abroad; the level of demand for the Company’s services; unfavorable foreign exchange fluctuations; changes in or weak consumer confidence and consumer spending; loss of key management and operational personnel; the ability of the Company to implement its business strategy and plans; the ability of the Company to comply with the financial covenants contained in its debt agreements and obtain waivers or amendments in the event of non-compliance; the ability of the Company to maintain an effective system of disclosure and internal controls; the discovery of new internal control deficiencies or weaknesses, which may require substantial costs and resources to rectify; the stability of state, federal and foreign tax laws; the ability of the Company to identify and capitalize on industry trends and technological advances in the imaging industry; higher than expected costs associated with compliance with legal and regulatory requirements; higher than expected costs or unanticipated difficulties associated with integrating acquired operations; the stability of political conditions in foreign countries in which the Company has production capabilities; terrorist attacks and the U.S. response to such attacks; as well as other factors detailed in the Company’s filings with the Securities and Exchange Commission. The Company assumes no obligation to update publicly any of these statements in light of future events.

Executive Overview

Marketing, promotional and advertising spending by consumer products companies and retailers drives a majority of the Company’s revenues. The markets served are primarily consumer products, pharmaceutical, entertainment and retail. The Company’s principal business in this area involves producing graphic images for various applications.

Generally, the Company or a third party creates an image and then the image is manipulated to enhance the color and to prepare it for print. The applications vary from consumer product packaging, including food and beverage packaging images, to retail advertisements in newspapers, including freestanding inserts (FSI’s), magazine ads and the Internet. The graphics process is generally the same regardless of the application. The following steps in the graphics process must take place to produce a final image:

·	Strategic Analysis

·	Planning and Messaging

·	Conceptual Design

·	Content Creation

·	File Building

·	Retouching

·	Art Production

Pre-Media

The Company’s involvement with a client’s project may involve all of the above steps or just one of the steps, depending on the client’s needs. Each client assignment, or ‘‘job’’, is a custom job in that the image being produced is unique, even if it only involves a small change from an existing image, such as adding a ‘‘low fat’’ banner on a food package. Essentially, such changes equal new revenue for Schawk. The Company is paid for its graphic imaging work regardless of the success or failure of the food product, the promotion or the ad campaign.

Historically, a substantial majority of the Company’s revenues have been derived from providing graphic services for consumer product packaging applications. Packaging changes occur with regular frequency and lack of advance notice, and client turn-around requirements are tight, thereby creating little backlog. There are regular promotions throughout the year that create revenue opportunities for the Company, such as: Valentine’s Day, Easter, Fourth of July, Back-to-School, Halloween, Thanksgiving and Christmas. In addition, there are event-driven promotions that occur regularly, such as the Super Bowl, Grammy Awards, World Series, Indianapolis 500 and the Olympics. Changing regulatory requirements also necessitate new packaging from time to time, as do the number of health related ‘‘banners’’ that are added to food and beverage packaging, such as ‘‘heart healthy,’’ ‘‘low in carbohydrates,’’ ‘‘enriched with essential vitamins,’’ ‘‘low in saturated fat’’ and ‘‘caffeine free.’’ All of these items require new product packaging designs or changes in existing designs, in each case creating additional opportunities for revenue. Graphic services for the consumer products packaging industry generally involve higher margins due to the substantial expertise necessary to meet consumer products companies’ precise specifications and to quickly, consistently and efficiently bring their products to market, as well as due to the complexity and variety of packaging materials, shapes and sizes, custom colors and storage conditions.

Through several acquisitions in 2004 and 2005, the Company increased the percentage of its revenue derived from providing graphics services to advertising and retail clients and added to its service offering graphic services to the entertainment market. These clients typically require high volume, commodity-oriented premedia graphic services. Graphic services for these clients typically yield relatively lower margins due to the lower degree of complexity in providing such services, and the number and size of companies in the industry capable of providing such services.

In 2010, approximately 9.6 percent of the Company’s total revenues came from its largest single client. While the Company seeks to build long-term client relationships, revenues from any particular client can fluctuate from period to period due to the client’s purchasing patterns. Any termination of or significant reduction in the Company business relationship with any of its principal clients could have a material adverse effect on its business, financial condition and results of operations.

Recent Acquisitions

The Company has grown its business through a combination of internal growth and acquisitions. Schawk has completed approximately 59 acquisitions since 1965. The Company’s recent acquisitions have significantly expanded its service offerings and its geographic presence, making us the only independent premedia firm with substantial operations in North America, Europe, Asia and Australia. As a result of these acquisitions, the Company is able to offer a broader range of services to its clients. Its expanded geographic presence also allows us to better serve its multinational clients’ demands for global brand consistency.

Real Branding LLC. Effective November 10, 2010, the Company acquired Real Branding LLC. (“Real Branding”), a United States - based digital marketing agency. Real Branding provides digital marketing services to consumer product and entertainment clients through its locations in Los Angeles and New York. The net assets and results of operations of Real Branding are included in the Consolidated Financial Statements as of November 10, 2010 in the North America operating segment. This business was acquired to strengthen the Company’s ability to offer integrated strategic, creative and executional services across digital consumer touchpoints. The purchase price was $9.8 million, which includes $3.6 million recorded as an estimated liability to the sellers for contingent consideration based on future performance of the business. Under the acquisition agreement, the purchase price may be increased by up to $6.0 million if a specified target of earnings before interest, taxes, depreciation and amortization is achieved for the years 2011 through 2014. Based on performance projections available at the date of the acquisition, the Company recorded estimated contingent consideration of $3.9 million, less a present value discount of $0.3 million. The contingent consideration is payable periodically during 2012 through 2015, based on actual future performance. The Company may adjust its estimate of the contingent consideration payable when it finalizes the purchase price allocation in 2011.

Untitled London Limited. Effective September 17, 2010, the Company acquired the operating assets of Untitled London Limited, a United Kingdom-based agency that provides strategic, creative and technical services for digital marketing. The net assets and results of operations of Untitled London Limited are included in the Consolidated Financial Statements in the Europe operating segment, effective September 17, 2010. This business was acquired to expand the Company’s digital marketing capabilities in Europe. The purchase price was approximately $0.9 million.

Brandmark International Holding B.V. Effective December 31, 2008, the Company acquired 100 percent of the outstanding stock of Brandmark International Holding B.V., a Netherlands-based brand identity and creative design firm. Brandmark provides services to consumer products companies through its locations in Hilversum, the Netherlands and London, United Kingdom. The net assets of Brandmark are included in the Consolidated Financial Statements as of December 31, 2008, in the Europe operating segment. The purchase price was $10.5 million, subject to contingent additional purchase consideration of up to $0.7 million if a specified target of earnings before interest and taxes was achieved for the fiscal year ended March 31, 2009. During 2010, the Company and the former owners of Brandmark settled the contingent additional purchase consideration for a minimal amount.

Marque Brand Consultants Pty Ltd. Effective May 31, 2008, the Company acquired 100 percent of the outstanding stock of Marque Brand Consultants Pty Ltd, an Australia-based brand strategy and creative design firm that provides services to consumer products companies. The net assets and results of operations of Marque are included in the Consolidated Financial Statements in the Asia Pacific operating segment beginning June 1, 2008. The purchase price was $2.5 million and was subject to adjustment if certain thresholds of net sales and earnings before interest and taxes were exceeded for calendar years 2008 and 2009. The Company paid $0.2 million and $0.4 million as purchase price adjustments for the years ended December 31, 2008 and December 31, 2009, respectively.

Financial Results Overview

Net sales increased $8.2 million or 1.8 percent for the year ended December 31, 2010 to $460.6 million from $452.4 million in 2009. Year-over-year sales were positively impacted by changes in foreign currency translation rates of approximately $5.2 million, as the U.S. dollar decreased in value relative to the local currencies of certain of the Company’s non-U.S. subsidiaries. For the year ended December 31, 2010, net income was $32.4 million or $1.25 per fully diluted share, as compared to a net income of $19.5 million or $0.78 million per fully diluted share for 2009.

The Company experienced a 2.8 percent net sales decrease in the fourth quarter of 2010 as compared to the fourth quarter of 2009. The quarter-over-quarter sales decline reflects lower revenue in the Company’s North America and Europe operating segments, partially offset by a small revenue increase in the Asia Pacific operating segment. For the full year of 2010, sales increased in the North America operating segment by 2.3 percent and in the Asia Pacific operating segment by 7.0 percent, while sales decreased in the Europe operating segment by 1.7 percent.

Gross profit increased by $7.5 million or 4.4 percent in 2010 to $178.6 million from $171.1 million in 2009. The gross profit increased in the North America and Europe segments, partially offset by a decrease in gross profit in the Asia Pacific segment. The gross profit in the North America segment increased by $6.3 million or 4.7 percent. The gross profit in the Europe segment increased by $1.3 million or 6.4 percent. The gross profit in the Asia Pacific segment decreased by $0.2 million or 1.3 percent. The overall improvement in gross profit in 2010 over the previous year was mainly driven by the improved operating leverage resulting from higher sales and certain cost-reduction activities enacted by the Company during 2010.

Operating income increased by $13.8 million, or 38.5 percent, to $49.6 million in 2010 as compared to 35.8 million in 2009. Selling, general and administrative expenses decreased $6.9 million, or 5.3 percent, in 2010 to $124.2 million from $131.1 million in 2009. The decrease in selling, general and administrative expenses includes a decrease of $4.5 million in professional fees related to the Company’s remediation efforts and cost savings from the Company’s cost reduction initiatives. Included in selling, general and administrative expenses in 2010 are $1.6 million of business and systems integration expenses related to the Company’s information technology and business process improvement initiative. During 2010, the Company recorded insurance recoveries totaling $2.9 million, of which $2.8 million was recorded as a reduction of selling, general and administrative expense and $0.1 million was recorded as a reduction of cost of sales. Of the total $2.9 million recovery, $1.7 million related to property damage claims and $1.2 million was an officers’ and directors’ insurance settlement for certain expenses related to the Company’s ongoing SEC investigation.

Other items that impacted the operating income increase year-over-year are as follows: Acquisition integration and restructuring expenses, related to the Company’s cost reduction and capacity utilization initiatives, were $2.0 million in 2010 compared to $6.5 million in 2009. Impairment of long-lived assets decreased year-over-year, from $1.4 million in 2009 to $0.7 million in 2010. The Company recorded a net loss on foreign exchange exposures of $2.3 million in 2010 compared to a net gain of $0.5 million in 2009. The net loss on foreign exchange exposures in 2010 included unrealized losses of $1.2 million as compared to unrealized gains on foreign exchange exposures of $0.6 million in 2009. The unrealized foreign exchange gains and losses related primarily to unhedged currency exposure from intercompany debt obligations of the Company’s foreign subsidiaries. The Company recorded income of $0.2 million in 2010 related to an adjustment to its multiemployer pension withdrawal liability, compared to an expense of $1.8 million in 2009. The Company entered into a settlement agreement with the pension fund during the fourth quarter of 2010, which provides for a total payment of $9.0 million by the Company in settlement of its liability. In addition, the Company recorded income of $5.0 million in 2009 for an indemnity settlement related to the Company’s 2005 acquisition of Seven Worldwide Holdings Ltd.

Goodwill impairment

The Company’s intangible assets not subject to amortization consist entirely of goodwill. The Company performs a goodwill impairment test annually, or when events or changes in business circumstances indicate that the carrying value may not be recoverable. The Company performs its annual impairment test as of October 1st each year.

The Company performed the required goodwill impairment tests for 2010 and 2009 as of October 1, 2010 and October 1, 2009, respectively. The Company allocated its goodwill on a geographic basis to its operating segments, which were determined to be reporting units for goodwill impairment testing. Using projections of operating cash flow for each reporting unit, the Company performed a step one assessment of the fair value of each reporting unit as compared to the carrying value of each reporting unit. The step one impairment analysis indicated no potential impairment of the assigned goodwill for either year.

The Company performed its 2008 impairment test as of October 1, 2008, and recorded a goodwill impairment charge of $48.0 million. The impairment charge was recorded in the Company’s operating segments as follows: North America – $14.3 million, Europe – $32.7 million and Asia Pacific – $1.0 million. The goodwill impairment reflected the decline in global economic conditions and general reduction in consumer and business confidence experienced during the fourth quarter of 2008. Further details can be found in item 8, Note 7 – Goodwill and Other Intangible Assets.

Cost reduction and capacity utilization actions

Beginning in 2008 and continuing throughout 2009 and 2010, the Company incurred restructuring costs for employee terminations, obligations for future lease payments, fixed asset impairments, and other associated costs as part of its previously announced plan to reduce costs through a consolidation and realignment of its work force and facilities. The total expense recorded for 2010 was $2.0 million and is presented as Acquisition integration and restructuring expense in the Consolidated Statements of Operations.

The expense for the years 2008 through 2010 and the cumulative expense since the cost reduction program’s inception was recorded in the following operating segments:

		North				Asia
(in millions)		America		Europe		Pacific		Corporate		Total

Year ended December 31, 2010	$	1.3	$	0.5	$	--	$	0.2	$	2.0
Year ended December 31, 2009		3.6		1.4		1.0		0.4		6.4
Year ended December 31, 2008		5.7		3.6		0.2		0.9		10.4

Cumulative since program inception	$	10.6	$	5.5	$	1.2	$	1.5	$	18.8

It is estimated that cost savings resulting from the 2010 cost reduction actions was approximately $4.9 million for 2010 and will be approximately $10.9 million for 2011. Cost savings resulting from the 2009 cost reduction actions is estimated to have been approximately $8.9 million during 2009 and $15.6 million annually over the subsequent two-year period. Cost savings resulting from the 2008 cost reduction actions is estimated to have been approximately $7.4 million during 2008 and $21.9 million annually over the subsequent two-year period.

Multiemployer pension withdrawal expense

As more fully described in Item 8, Note 14 - Employee Benefit Plans, in the fourth quarter of 2008 the Company decided to terminate participation in the Supplemental Retirement and Disability Fund for employees of its Minneapolis, MN and Cherry Hill, NJ facilities and notified the board of trustees of the union’s pension fund that it would no longer be making contributions for these facilities to the union’s plan. The Company’s decision triggered the assumption of a partial termination withdrawal liability. The Company recorded a liability as of December 31, 2008, net of discount, for $7.3 million to reflect this obligation. At December 31, 2009, the Company recorded an additional expense of $1.8 million as a result of updates to the assumptions used in the termination withdrawal calculation. During the fourth quarter of 2010, the Company entered into a settlement and release agreement with the pension fund to settle the withdrawal liability for a total of $9.0 million and recorded income of $0.2 million to adjust the Company’s liability to the agreed amount. The expense for years 2008 through 2010 associated with the pension withdrawal liability is reflected in Multiemployer pension withdrawal expense on the Consolidated Statements of Operations. At December 31, 2010, the Company had recorded a liability of $8.8 million, included in Accrued expenses on the Consolidated Balance Sheets. This liability reflects the $9.0 million settlement amount less the first installment of $0.2 million paid before year-end 2010. The Company will pay $0.4 million of the remaining liability in the first quarter of 2011, with the balance of $8.4 million due in the second quarter of 2011.

Impairment of long lived assets

The following table summarizes the impairment of long-lived assets by asset category for the periods presented in this Form 10-K:

		Year Ended December 31,
(in millions)		2010		2009		2008

Land and buildings	$	--	$	1.3	$	3.5
Internal use software		--		--		2.3
Other fixed assets		0.7		--		0.6
Intangible assets, other than goodwill		--		0.1		0.2

Total	$	0.7	$	1.4	$	6.6

During 2010, certain newly purchased and installed production equipment sustained water damage and became no longer operable. The Company recorded an impairment charge in 2010 in the amount of $0.7 million, the net book value of the damaged equipment, which is included in Impairment of long-lived assets in the Consolidated Statements of Operations. The Company maintains insurance coverage for property loss, business interruption, and directors and officers liability and records insurance recoveries in the period in which the insurance carrier validates the claim and confirms the amount of reimbursement to be paid. The loss sustained for the water-damaged production equipment was recovered by an insurance settlement during 2010, which was recorded as a reduction of Selling, general and administrative expenses on the Consolidated Statements of Operations. See item 8, Note 6 – Impairment of Long-lived Assets for additional information regarding this and other insurance recoveries during 2010.

During 2008, the Company made a decision to sell land and buildings at three locations and engaged independent appraisers to assess their fair values. Based on the appraisal reports, the Company determined that the carrying values of the properties could not be supported by their estimated fair values. The combined carrying value of $10.0 million was written down by $3.5 million at December 31, 2008, based on the properties’ estimated fair values less costs to sell of $6.5 million. The revised carrying value of $6.5 million was classified as Assets held for sale on the Consolidated Balance Sheets at December 31, 2008. During 2009, two of the three properties were sold with selling prices approximately equal to their carrying values, and the Company reappraised the third property to assess its current value. As a result of the updated appraisal, the Company recorded a further write-down of the property in the amount of $1.3 million at December 31, 2009, which is included in Impairment of long-lived assets on the Consolidated Statements of Operations. In addition, the Company reclassified the remaining property from held for sale to held and used at December 31, 2009, because the sale of the property during the next twelve months was unlikely.

Also during 2008, software that had been capitalized by the Company in accordance with the Internal-Use Software Subtopic of the Codification, ASC 350–40, was reviewed for impairment due to changes in circumstances which indicated that the carrying amount of these assets might not be recoverable. As a result of these circumstances, the Company wrote down the capitalized costs of the software to fair value. The amount of the write-down recorded in 2008 was $2.3 million.

There were various other impairments recorded in both 2009 and 2008 related to fixed assets and to customer relationship intangible assets. The total impairment expense recorded was $1.4 million and $6.6 million for 2009 and 2008, respectively, and is reflected as Impairment of long-lived assets on the Consolidated Statements of Operations. See Item 8, Note 6 – Impairment of Long-lived Assets for additional information.

Controls and Procedures

In connection with management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010, management has concluded that its internal control over financial reporting was effective as of the end of such period. See Part II, Item 9A. “Controls and Procedures” for a discussion of management’s evaluation of the Company’s disclosure controls and procedures, Management’s Report on Internal Control over Financial Reporting and its remediation activities.

Results of Operations

Consolidated

The following table sets forth certain amounts, ratios and relationships from the Consolidated Statements of Operations for the Years Ended December 31, 2010 and 2009:

	Comparative Consolidated Statements of Operations Years ended December 31, 2010 and 2009

							$	%
(in thousands)			2010		2009		Change	Change

Net sales		$	460,626	$	452,446	$	8,180	1.8	%
Cost of sales			282,070		281,372		698	0.2	%
Gross profit			178,556		171,074		7,482	4.4	%
Gross profit percentage			38.8	%	37.8	%

Selling, general and administrative expenses			124,222		131,118		(6,896)	(5.3)	%
Acquisition integration and restructuring expenses			1,974		6,459		(4,485)	(69.4)	%
Foreign exchange loss (gain)			2,306		(542)		2,848	nm
Impairment of long-lived assets			688		1,441		(753)	(52.3)	%
Multiemployer pension withdrawal (income) expense			(200)		1,800		(2,000)	nm
Indemnity settlement income			--		(4,986)		4,986	nm
Operating income			49,566		35,784		13,782	38.5	%
Operating margin percentage			10.8	%	7.9	%

Other income (expense):
Interest income			39		535		(496)	(92.7)	%
Interest expense			(7,201)		(9,225)		2,024	(21.9)	%

Income before income taxes			42,404		27,094		15,310	56.5	%
Income tax provision			9,984		7,597		2,387	31.4	%

Net income		$	32,420	$	19,497	$	12,923	66.3	%

Effective income tax rate			23.5	%	28.0	%

Expressed as a percentage of Net Sales:

Gross margin	38.8	%	37.8	%	100	bp
Selling, general and administrative expense	27.0	%	29.0	%	(200)	bp
Acquisition integration and restructuring expenses	0.4	%	1.4	%	(100)	bp
Foreign exchange loss (gain)	0.5	%	(0.1)	%	60	bp
Impairment of long-lived assets	0.1	%	0.3	%	(20)	bp
Multiemployer pension withdrawal expense	--	%	0.4	%	(40)	bp
Indemnity settlement	--	%	(1.1)	%	110	bp
Operating margin	10.8	%	7.9	%	290	bp

bp = basis points

nm = not meaningful

Net sales for the twelve months ended December 31, 2010 were $460.6 million compared to $452.4 million for the twelve months ended December 31, 2009, an increase of $8.2 million, or 1.8 percent. Net sales increased by $8.9 million or 2.3 percent in the North America segment and $2.0 million or 7.0 percent in the Asia Pacific segment. However, sales decreased by $1.2 million or 1.7 percent in the Europe segment. Sales attributable to acquisitions for the twelve months ended December 31, 2010 was $1.0 million, or 0.2 percent. Excluding acquisitions, revenue would have increased by $7.2 million, or 1.6 percent, compared to the prior year. Approximately $5.2 million of the sales increase, period-over-period, was the result of changes in foreign currency translation rates, as the U.S. dollar decreased in value relative to certain of the local currencies of certain of the Company’s foreign subsidiaries. The year-over-year increase in sales primarily reflects an overall improvement in the global economy, which started in the latter half of 2009 and continued throughout 2010. The improved economy was reflected in the increased revenue from the Company’s consumer product packaging accounts during 2010, as the Company’s entertainment and retail and advertising accounts declined period-over-period. In response to improving economic conditions, many of the Company’s consumer packaged goods clients increased brand innovation and introduction activities as compared to 2009, including the frequency of packaging redesigns and sales promotion projects, resulting in higher revenue for the Company.

Consumer products packaging accounts sales for 2010 were $329.0 million, or 71.4 percent of total sales, as compared to $318.7 million, or 70.4 percent, in the prior year, representing an increase of 3.2 percent. As market and economic conditions improved, many of the Company’s consumer products packaging clients increased the frequency of packaging designs, sales promotions and new product introductions as compared to the prior year. Advertising and retail accounts sales for 2010 were $88.4 million, or 19.2 percent of total sales as compared to $89.8 million, or 19.8 percent of sales in the prior year, representing a decline of 1.5 percent. Entertainment account sales for 2010 were $29.1 million, or 6.3 percent of total sales as compared to $32.8 million, or 7.2 percent in 2009, representing a decline of 11.3 percent.

Gross profit was $178.6 million, or 38.8 percent of sales, in 2010, an increase of $7.5 million, or 4.4 percent, from $171.1 million, or 37.8 percent of sales, in the prior year. The increase in gross profit is largely attributable to the increase in revenue period-over-period and cost savings related to the Company’s restructuring initiatives. The gross profit increased in the North America and Europe segments, partially offset by a decrease in gross profit in the Asia Pacific segment. The gross profit in the North America segment increased by $6.3 million or 4.7 percent. The gross profit in the Europe segment increased by $1.3 million or 6.4 percent. The gross profit in the Asia Pacific segment decreased by $0.2 million or 1.3 percent.

Selling, general and administrative expenses decreased $6.9 million, or 5.3 percent, in 2010 to $124.2 million from $131.1 million in 2009. The decrease in selling, general and administrative expenses includes a decrease of $4.5 million in professional fees related to the Company’s remediation efforts and cost savings from the Company’s cost reduction initiatives. Included in selling, general and administrative expenses in 2010 are $1.6 million of business and systems integration expenses related to the Company’s information technology and business process improvement initiative. During 2010, the Company recorded insurance recoveries totaling $2.9 million, of which $2.8 million was recorded as a reduction of selling, general and administrative expense and $0.1 million was recorded as a reduction of cost of sales. Of the total $2.9 million recovery, $1.7 million related to property damage claims and $1.2 million was an officers and directors insurance settlement for certain expenses related to the Company’s ongoing SEC investigation.

Acquisition integration and restructuring expenses, related to the Company’s cost reduction and capacity utilization initiatives, were $2.0 million in 2010 compared to $6.5 million in 2009. Impairment of long-lived assets decreased year-over-year, from $1.4 million in 2009 to $0.7 million in 2010. The Company recorded a net loss on foreign exchange exposures of $2.3 million in 2010 compared to a net gain of $0.5 million in 2009. The net loss on foreign exchange exposures in 2010 included unrealized losses of $1.2 million as compared to unrealized gains on foreign exchange exposures of $0.6 million in 2009. The unrealized foreign exchange gains and losses related primarily to unhedged currency exposure from intercompany debt obligations of the Company’s foreign subsidiaries. The Company recorded income of $0.2 million in 2010 related to its multiemployer pension withdrawal liability, compared to an expense of $1.8 million in 2009. The Company entered into a settlement agreement with the pension fund during the fourth quarter of 2010, which provides for a total payment of $9.0 million by the Company in settlement of its liability. In addition, the Company recorded income of $5.0 million in 2009 for an indemnity settlement related to the Company’s 2005 acquisition of Seven Worldwide Holdings Ltd.

Operating income increased by $13.8 million, to $49.6 million in 2010, from $35.8 million in 2009. The operating income percentage was 10.8 percent of sales for 2010, compared to an operating income of 7.9 percent of sales in 2009. The increase in operating income in 2010 compared to 2009 is principally due to the increase in revenue period-over-period, lower operating costs resulting from the Company’s cost reduction initiatives, and the net effect of the items described above.

Interest expense for 2010 was $7.2 million compared to $9.2 million for 2009, a decrease of $2.0 million or 21.9 percent. The reduction in interest expense is primarily due to the decrease in average debt outstanding year-over-year.

Income tax provision was at an effective tax rate of 23.5 percent and 28.0 percent for 2010 and 2009, respectively. The decrease in the effective tax rate for 2010 compared to the prior year is primarily due to an increase in the amount of discrete period tax benefits from the release of uncertain tax positions during 2010 of $6.6 million compared to the $5.0 million nontaxable indemnity and federal examination affirmative adjustments of $2.8 million reflected in 2009.

Net income was $32.4 million, or 7.0 percent of sales, for 2010, as compared to net income of $19.5 million, or 4.3 percent of sales, for 2009.

Other Information

Depreciation and amortization expense was $17.6 million for 2010, as compared to $18.7 million in 2009.

Capital expenditures for 2010 were $12.2 million compared to $5.3 million for 2009. The Company had limited its capital expenditures during 2009 as part of its cost reduction efforts.

The following table sets forth certain amounts, ratios and relationships from the Consolidated Statements of Operations for the Years Ended December 31, 2009 and 2008:

Comparative Consolidated Statements of Operations Years Ended December 31, 2009 and 2008

						$	%
(in thousands)		2009		2008		Change	Change

Net sales	$	452,446	$	494,184	$	(41,738)	(8.4)	%
Cost of sales		281,372		329,814		(48,442)	(14.7)	%
Gross profit		171,074		164,370		6,704	4.1	%
Gross profit percentage		37.8	%	33.3	%

Selling, general and administrative expenses		131,118		144,328		(13,210)	(9.2)	%
Acquisition integration and restructuring expenses		6,459		10,390		(3,931)	(37.8)	%
Indemnity settlement income		(4,986)		--		(4,986)	nm
Multiemployer pension withdrawal expense		1,800		7,254		(5,454)	(75.2)	%
Impairment of long-lived assets		1,441		6,644		(5,203)	(78.3)	%
Foreign exchange (gain) loss		(542)		4,268		(4,810)	nm
Impairment of goodwill		--		48,041		(48,041)	nm
Operating income (loss)		35,784		(56,555)		92,339	nm
Operating margin percentage		7.9	%	(11.4)	%

Other income (expense):
Interest income		535		291		244	83.8	%
Interest expense		(9,225)		(6,852)		(2,373)	(34.6)	%

Income (loss) before income taxes		27,094		(63,116)		90,210	nm
Income tax provision (benefit)		7,597		(3,110)		10,707	nm

Net income (loss)	$	19,497	$	(60,006)	$	79,503	nm

Effective income tax rate		28.0	%	4.9	%

Expressed as a percentage of Net Sales:
Gross margin	37.8	%	33.3	%	450	bp
Selling, general and administrative expense	29.0	%	29.2	%	(20)	bp
Acquisition integration and restructuring expenses	1.4	%	2.1	%	(70)	bp
Indemnity settlement	(1.1)	%	--	%	(110)	bp
Multiemployer pension withdrawal expense	0.4	%	1.5	%	(110)	bp
Impairment of long-lived assets	0.3	%	1.3	%	(100)	bp
Foreign exchange (gain) loss	(0.1)	%	0.9	%	(100)	bp
Impairment of goodwill	--	%	9.7	%	(970)	bp
Operating margin (loss)	7.9	%	(11.4)	%	1,930	bp

bp = basis points

nm = not meaningful

Net sales for the twelve months ended December 31, 2009 were $452.4 million compared to $494.2 million for the twelve months ended December 31, 2008, a reduction of $41.7 million, or 8.4 percent. Sales declined by $34.3 million or 8.1 percent in the North America segment and $3.6 million or 5.1 percent in the Europe segment. However, sales increased by $0.7 million or 2.5 percent in the Asia Pacific segment. Sales attributable to acquisitions for the twelve months ended December 31, 2009 compared to the prior year totaled $11.1 million, or 2.5 percent. Excluding acquisitions, revenue would have declined by $52.8 million, or 10.7 percent, versus the prior year. Approximately $13.7 million of the sales decline period-over-period was the result of changes in foreign currency translation rates, as the U.S. dollar increased in value relative to certain of the local currencies of the Company’s foreign subsidiaries. The period-over-period decline in sales primarily reflects the slowdown in the US and global economies, which started in the latter half of 2008 and continued throughout 2009. Many of the Company’s clients delayed packaging redesigns and sales promotion projects, resulting in lower revenues in 2009 compared to 2008. However, revenue in the fourth quarter of 2009 increased in comparison to the fourth quarter of 2008.

Consumer products packaging accounts sales for 2009 were $318.7 million, or 70.4 percent of total sales, as compared to $346.7 million in 2008, representing a decline of 8.1 percent. Advertising and retail accounts sales for 2009 were $89.8 million or 19.8 percent of total sales as compared to $102.0 million in 2008, representing a decline of 12.0 percent. Entertainment account sales for 2009 were $32.8 million or 7.2 percent of total sales as compared to $36.1 million in 2008 representing a decline of 9.2 percent. In response to adverse economic conditions, many of the Company’s clients maintained reduced levels of advertising, marketing and new product introductions, as compared to the prior year, and, particularly with respect to the Company’s consumer products packaging accounts, delayed packaging redesigns and sales promotion projects, resulting in lower revenue for the Company. However, consumer products packaging revenue increased in the fourth quarter of 2009 compared to the fourth quarter of 2008.

Gross profit was $171.1 million, or 37.8 percent of sales, in 2009, an increase of $6.7 million or 4.1 percent, from $164.4 million, or 33.3 percent of sales, in 2008. The increase in gross profit is largely attributable to cost savings related to the Company’s cost reduction efforts. The gross profit in 2009 increased in all reportable segments as compared to prior year. North America increased by $3.7 million or 2.8 percent, Europe increased by $1.9 million or 9.8 percent and Asia Pacific increased by $1.1 million or 8.2 percent. Gross profit as a percentage of sales in 2009 improved by 4.5 percent over the previous year.

Selling, general and administrative expenses decreased $13.2 million or 9.2 percent in 2009 to $131.1 million from $144.3 million in 2008. The decrease in selling, general and administrative expenses is primarily attributable to the decrease in salaries and payroll costs associated with the Company’s cost reduction efforts.

Operating income (loss) increased by $92.3 million, to $35.8 million in 2009, from an operating loss of $56.6 million in 2008. The operating income percentage was 7.9 percent in 2009 compared to an operating loss of 11.4 percent in 2008. The increase in operating income in 2009 compared to 2008 is due to an improvement in gross profit and a decrease in selling, general and administrative expenses as described above, as well as the following expense reductions in 2009 as compared to similar expenses in 2008: impairment of goodwill in 2008 of $48.0 million not repeated in 2009; restructuring expenses associated with the Company’s cost reductions activities of $6.5 million in 2009 versus $10.4 million in 2008; pension withdrawal expenses of $1.8 million in 2009 versus $7.3 million in 2008; gains of $0.5 million associated with foreign currency transactions in 2009 versus foreign currency losses of $4.3 million in 2008; and impairment of long lived assets of $1.4 million in 2009 compared to $6.6 million in 2008. In addition, the Company recorded income of $5.0 million in 2009 for an indemnity settlement related to the 2005 acquisition of Seven Worldwide Holdings Ltd.

Interest expense for 2009 was $9.2 million compared to $6.9 million for 2008 an increase of $2.4 million or 34.6 percent. The higher interest expense in the 2009 period reflects an increase in interest costs attributable to the Company’s June 2009 debt amendments. See “Revolving Credit Facility, Note Purchase Agreement and Other Debt Arrangements” section below for further information.

Income tax provision (benefit) was at an effective tax rate of 28.0 percent and 4.9 percent for 2009 and 2008, respectively. The 2009 effective tax rate was impacted by the receipt of a $5.0 million non-taxable indemnity settlement and federal examination affirmative adjustments of $2.8 million. The 2008 effective tax rate was impacted by the non-deductibility of $10.5 million of goodwill impairment charges, an increase in the deferred tax asset valuation allowance of approximately $6.8 million and income tax reserve increases of approximately $4.4 million.

Other Information

Depreciation and amortization expense was $18.7 million for 2009 compared to $20.8 million in 2008.

Capital expenditures in 2009 were $5.3 million compared to $14.9 million in 2008, reflecting the Company’s cost reduction efforts during 2009.

Segment Information

Effective July 1, 2009, the Company restructured its operations on a geographic basis, in three operating segments: North America, Europe and Asia Pacific. This organization reflects a change in the management reporting structure that was implemented during the third quarter of 2009. Accordingly, all previously reported amounts have been reclassified to conform to the current-period presentation.

North America Segment

The following table sets forth North America segment results for the years ended December 31, 2010, 2009 and 2008.

								2010 vs. 2009 Increase (Decrease)				2009 vs. 2008 Increase (Decrease)
								2010 vs. 2009 Increase (Decrease)				2009 vs. 2008 Increase (Decrease)
(in thousands)		2010		2009		2008		$	%			$	%

Net Sales	$	399,658	$	390,713	$	425,055	$	8,945	2.3	%	$	(34,342)	(8.1)	%
Acquisition integration and restructuring expenses	$	1,266	$	3,614	$	5,701	$	(2,348)	(65.0)	%	$	(2,087)	(36.6)	%
Foreign exchange (gain) loss	$	120	$	149	$	(35)	$	(29)	(19.5)	%	$	184	nm
Impairment of long-lived assets	$	688	$	1,366	$	4,308	$	(678)	(49.6)	%	$	(2,942)	(68.3)	%
Goodwill impairment charges	$	--	$	--	$	14,334	$	--	--	%	$	(14,334)	nm
Depreciation and amortization	$	10,931	$	11,601	$	12,783	$	(670)	(5.8)	%	$	(1,182)	(9.2)	%
Operating income	$	68,428	$	56,734	$	23,848	$	11,694	20.6	%	$	32,886	nm
Operating margin		17.1	%	14.5	%	5.6	%		260	bp			890	bp
Capital expenditure	$	5,464	$	3,653	$	10,404	$	1,811	49.6	%	$	(6,751)	(64.9)	%
Total assets	$	348,440	$	320,655	$	328,494	$	27,785	8.7	%	$	(7,839)	(2.4)	%

bp = basis points

nm = not meaningful

2010 compared to 2009

Net sales for the twelve months ended December 31, 2010 for the North America segment were $399.7 million compared to $390.7 million in the prior year, an increase of $8.9 million or 2.3 percent. Sales contributed by acquisitions totaled $0.8 million for the twelve months ended December 31, 2010. Approximately $4.2 million of the period-over-period sales increase was the result of changes in foreign currency translation rates, as the U.S. dollar decreased in value relative to the local currencies of certain of the Company’s foreign subsidiaries. In addition to gains attributable to foreign currency changes, the period-over- period increase in sales reflects the improvement in the North American economy, which started in the latter half of 2009 and continued throughout 2010. In response to improving economic conditions, many of the Company’s consumer products clients increased their level of marketing and new product introductions and increased the frequency of packaging redesigns and sales promotion projects, resulting in higher revenues for the Company.

Operating income was $68.4 million, or 17.1 percent of sales, in 2010 compared to $56.7 million, or 14.5 percent of sales, in 2009, an increase of $11.7 million, or 20.6 percent. The increase in operating income is principally due to the increase in revenue period-over-period and the Company’s cost reduction initiatives, as well as a decrease in acquisition integration and restructuring expense and impairment of long-lived assets.

2009 compared to 2008

Net sales for the twelve months ended December 31, 2009 for the North America segment were $390.7 million compared to $425.1 million in the prior year, a reduction of $34.3 million or 8.1 percent. Approximately $3.8 million of the period-over-period sales decline was the result of changes in foreign currency translation rates, as the U.S. dollar increased in value relative to the local currencies of certain of the Company’s foreign subsidiaries. The period-over-period decline in sales reflects the slowdown in the North American economy, which started in the latter half of 2008 and continued throughout 2009. In response to adverse economic conditions, many of the Company’s clients reduced their levels of advertising, marketing and new product introductions and, particularly with respect to the Company’s consumer products packaging accounts, delayed packaging redesigns and sales promotion projects, resulting in lower revenue for the Company.

Operating income was $56.7 million, or 14.5 percent of sales, in 2009 compared to $23.8 million, or 5.6 percent of sales, in 2008, an increase of $32.9 million. The increase in operating income is principally due to the Company’s cost reduction initiatives, which began in the second half of 2008 and continued throughout 2009, as well as the effect of the goodwill impairment charge that was not repeated in 2009.

Europe Segment

The following table sets forth Europe segment results for the years ended December 31, 2010, 2009 and 2008.

								2010 vs. 2009 Increase (Decrease)				2009 vs. 2008 Increase (Decrease)
								2010 vs. 2009 Increase (Decrease)				2009 vs. 2008 Increase (Decrease)
(in thousands)		2010		2009		2008		$	%			$	%

Net Sales	$	66,238	$	67,409	$	71,040	$	(1,171)	(1.7)	%	$	(3,631)	(5.1)	%
Acquisition integration and restructuring expenses	$	555	$	1,400	$	3,552	$	(845)	(60.4)	%	$	(2,152)	(60.6)	%
Foreign exchange (gain) loss	$	242	$	270	$	3,268	$	(28)	(10.4)	%	$	(2,999)	(91.8)
Impairment of long-lived assets	$	--	$	75	$	--	$	(75)	nm	%	$	75	nm	%
Goodwill impairment charges	$	--	$	--	$	32,703	$	--	--	%	$	(32,703)	nm
Depreciation and amortization	$	2,760	$	3,075	$	3,344	$	(315)	(10.2)	%	$	(269)	(8.0)	%
Operating income	$	3,812	$	3,836	$	(37,324)	$	(24)	(0.6)	%	$	41,160	nm
Operating margin		5.8	%	5.7	%	(52.5)	%		10	bp			5,820	bp
Capital expenditure	$	1,712	$	618	$	2,233	$	1,094	nm	%	$	(1,615)	(72.3)	%
Total assets	$	74,319	$	44,508	$	46,554	$	29,811	67.0	%	$	(2,046)	(4.4)	%

bp = basis points

nm = not meaningful

2010 compared to 2009

Net sales in the Europe segment for the twelve months ended December 31, 2010 were $66.2 million compared to $67.4 million in the prior year, a reduction of $1.2 million or 1.7 percent. Sales contributed by acquisitions for the twelve months ended December 31, 2010, totaled $0.2 million. Approximately $1.3 million of the period-over-period sales decline was the result of changes in foreign currency translation rates, as the U.S. dollar increased in value relative to the local currencies of certain of the Company’s foreign subsidiaries.

Operating income was relatively flat, year-over-year, at $3.8 million, or 5.8 percent of sales, in 2010, compared to $3.8 million, or 5.7 percent of sales, in the prior year.

2009 compared to 2008

Net sales in the Europe segment for the twelve months ended December 31, 2009 were $67.4 million compared to $71.0 million in the prior year, a reduction of $3.6 million or 5.1 percent. Sales contributed by acquisitions for the twelve months ended December 31, 2009 compared to the prior year totaled $10.2 million or 15.1 percent. Excluding acquisitions, revenues would have declined by $13.8 million or 19.4 percent versus the prior year. Approximately $9.3 million of the period-over-period sales decline was the result of changes in foreign currency translation rates, as the U.S. dollar increased in value relative to the local currencies of the Company’s foreign subsidiaries. As in North America, many of the Company’s European clients delayed projects, resulting in lower revenues for the Company.

Operating income was $3.8 million, or 5.7 percent of sales, in 2009 compared to an operating loss of $37.3 million, or 52.5 percent of sales, in 2008, an increase of $41.2 million. The increase in operating income is principally due to $32.7 million of impairment of goodwill in 2008 that did not repeat in 2009 and a decrease in acquisition integration and restructuring expenses of 2.2 million. Operating costs were also lower in the twelve months of 2009 compared to 2008.

Asia Pacific

The following table sets forth Asia Pacific segment results for the years ended December 31, 2010, 2009 and 2008.

								2010 vs. 2009 Increase (Decrease)				2009 vs. 2008 Increase (Decrease)
								2010 vs. 2009 Increase (Decrease)				2009 vs. 2008 Increase (Decrease)
(in thousands)		2010		2009		2008		$	%			$	%

Net Sales	$	31,393	$	29,348	$	28,630	$	2,045	7.0	%	$	718	2.5	%
Acquisition integration and restructuring expenses	$	(70)	$	992	$	248	$	(1,062)	nm	%	$	744	nm	%
Foreign exchange (gain) loss	$	442	$	(1,504)	$	1,034	$	1,946	nm	%	$	(2,538)	nm
Goodwill impairment charges	$	--	$	--	$	1,004	$	--	--	%	$	(1,004)	nm	%
Depreciation and amortization	$	1,208	$	1,008	$	935	$	200	19.8	%	$	73	7.8	%
Operating income	$	4,855	$	7,389	$	1,366	$	(2,534)	(34.3)	%	$	6,023	nm
Operating margin		15.5	%	25.2	%	4.8	%		(970)	bp			2,040	bp
Capital expenditure	$	1,924	$	898	$	1,425	$	1,026	nm	%	$	(527)	(37.0)	%
Total assets	$	23,903	$	21,839	$	29,073	$	2,064	9.5	%	$	(7,234)	(24.9)	%

bp = basis points

nm = not meaningful

2010 compared to 2009

Net sales in the Asia Pacific segment for the twelve months ended December 31, 2010 were $31.4 million compared to $29.3 million in the prior year, an increase of $2.0 million or 7.0 percent. Changes in foreign currency translation rates contributed $2.3 million to 2010 net sales, as the U.S. dollar decreased in value relative to the local currencies of certain of the Company’s foreign subsidiaries.

Operating income was $4.9 million in the twelve months of 2010, or 15.5 percent of sales, as compared to $7.4 million, or 25.2 percent of sales, in 2009, a decrease of $2.5 million or 34.3 percent. The decrease in operating income was due in part to the impact of the Company’s efforts to enhance global production efficiencies, resulting in revised pricing for work done for other Schawk locations. In addition, the Asia Pacific segment recorded a foreign exchange loss of $0.4 million in the 2010 period, compared to a foreign exchange gain of $1.5 million in the 2009 period.

2009 compared to 2008

Net sales in the Asia Pacific segment for the twelve months ended December 31, 2009 were $29.3 million compared to $28.6 million in the prior year, an increase of $0.7 million or 2.5 percent. Sales contributed by acquisitions for 2009 compared to the prior year totaled $0.9 million or 3.1 percent. Excluding acquisitions, revenues would have declined by $0.2 million or 0.7 percent versus the prior year.

Approximately $0.6 million of the period-over-period sales decline was the result of changes in foreign currency translation rates, as the U.S. dollar increased in value relative to certain of the Company’s foreign subsidiaries.

Operating income was $7.4 million in the twelve months of 2009, or 25.2 percent of sales, as compared to $1.4 million, or 4.8 percent of sales, in 2008, an increase of $6.0 million. The increase in operating income is principally due to lower operating expenses for 2009 due to the Company’s cost reduction efforts. Additionally the goodwill impairment charges of 1.0 million in 2008 did not repeat in 2009.

Liquidity and Capital Resources

The Company’s primary liquidity needs are to fund capital expenditures, support working capital requirements and service indebtedness. The Company’s principal sources of liquidity are cash generated from its operating activities and borrowings under its credit agreement. The Company’s total debt outstanding at December 31, 2010 was $66.7 million compared to $77.6 million at December 31, 2009. As noted below, the Company entered into an amended and restated credit agreement in January 2010.

As of December 31, 2010, the Company had $36.9 million in consolidated cash and cash equivalents, compared to $12.2 million at December 31, 2009. During 2010, the Company accumulated cash in its foreign subsidiaries at year-end pursuant to its international cash management policies, and in January 2011, $26.7 million was loaned to the United States and was used to reduce the Company’s revolving credit balance and private placement debt.

Cash provided by operating activities

Cash provided by operating activities was $49.0 million in 2010 compared to cash provided by operating activities of $56.4 million in 2009. The decrease in cash provided by operating activities year-over-year reflects changes in net working capital accounts, offset by the improvement in net income to $32.4 million in 2010 compared to $19.5 million in 2009. The cash provided by operating activities in 2009 includes $9.2 million of cash received from an indemnity settlement related to the 2005 acquisition of Seven Worldwide Holdings, Inc. Of the $9.2 million of cash received, $5.0 million was recorded as income in 2009 and $4.2 million as settlement of an outstanding receivable.

Depreciation and intangible asset amortization expense in 2010 was $13.1 million and $4.6 million, respectively, as compared to $13.9 million and $4.7 million, respectively, in 2009. The decrease in depreciation expense in 2010 compared to the prior year reflects the Company’s efforts to reduce capital expenditures in recent years.

Cash used in investing activities

Cash used in investing activities was $15.9 million in 2010 compared to $0.9 million of cash used in investing activities during 2009. The increase in cash used in investing activities in 2010 compared to the prior year is due in part to an increase in capital expenditures and acquisitions year-over-year. In addition, the cash flow from investing activities in 2009 reflects proceeds of $5.1 million from the sale of property and equipment, mainly from the sale of land and buildings that had been classified as held for sale at year-end 2008. Partially offsetting cash used in investing activities during 2010 is a $1.5 million insurance settlement related to property damage claims. Capital expenditures were $12.2 million in 2010 compared to $5.3 million in 2009. Cash used in investing activities includes acquisitions in 2010 of $5.8 million compared to $0.7 million in 2009. Over the next five years, assuming no significant business acquisitions, routine capital expenditures are expected to be in the range of $10.0 to $12.0 million annually. In addition, during the next two years, the Company expects to incur capital investment and related business and system integration expenses in the range of $20 million to $26 million for the Company’s information technology and business process improvement initiative to improve customer service, business effectiveness and internal controls, as well as to reduce operating costs.

Cash used in financing activities

Cash used in financing activities in 2010 was $10.5 million compared to $63.2 million in 2009. The cash used in financing activities in 2010 reflects $10.9 million of net payments on debt compared to $58.3 million of net payments on debt in 2009. The debt payments in 2009 included $20.0 million of prepayments made by the Company to its lenders in June 2009, as well as additional paydowns of its revolving credit facility using cash generated from operations during 2009. See “Revolving Credit Facility, Note Purchase Agreement and Other Debt Arrangement” section below for further information.

The Company used $4.3 million to purchase shares of its common stock during 2009. No shares were repurchased by the Company during 2010. In addition, the Company received proceeds of $5.5 million from the issuance of common stock during 2010 compared to $1.9 million in 2009, attributable in both periods to stock option exercises and issuance of shares pursuant to the Company’s employee stock purchase plan.

The Company paid dividends of $5.1 million in 2010, compared to $1.5 million in 2009. Dividend payments during 2009 were restricted by the Company’s June 2009 amendments to its revolving credit agreement. See “2009 Amendments to Revolving Credit Facility and Note Purchase Agreements” below. In January 2010, the Company entered into an amended and restated credit agreement with its lenders, which removed the specific restriction on dividends but included dividend payments in the definition of restricted payments, along with stock repurchases and certain other payments, for which there was a $5.0 million annual limitation. See “2010 Revolving Credit Facility Refinancing and Note Purchase Agreement Amendments” below. For the first three quarters of 2010, the Company increased its quarterly dividend to $0.04 per share, or approximately $1.0 million per quarter. Effective November 17, 2010, the Company entered into an amendment to its revolving credit facility which, among other things, increased the annual limit on restricted payments to $14.0 million and provided for one or more additional restricted payments not to exceed $13.0 million on or before December 31, 2011. Pursuant to this amendment, the Company increased its fourth quarter 2010 dividend to $0.08 per share, or approximately $2.0 million. The Company expects quarterly dividends at this rate to continue throughout 2011, subject to declarations at the discretion of the Board of Directors.

Revolving Credit Facility, Note Purchase Agreements and Other Debt Arrangements

Borrowings and Debt Agreements at December 31, 2010

In December 2003, the Company entered into a private placement of debt (the “2003 Private Placement”) to provide long-term financing. The terms of the Note Purchase Agreement relating to this transaction, as amended, provided for the issuance and sale by the Company of two series of notes: Tranche A, for $15.0 million, payable in annual installments of $2.1 million from 2007 through 2013, and Tranche B, for $10.0 million, payable in annual installments of $1.4 million from 2008 through 2014. The terms of these notes were amended in June 2009. See “2009 Amendments to Revolving Credit Facility and Note Purchase Agreements” below. Under the original terms, the Tranche A note was payable in annual installments of $2.1 million from 2007 to 2013, and the Tranche B note was payable in annual installments of $1.4 million from 2008 to 2014. Pursuant to the 2009 amendment, $1.9 million of the combined principal of the two notes was paid at closing and $0.6 million was paid later in June 2009, with the payments being applied on a prorata basis to reduce the original installment amounts. Under the amended terms, the remaining balance of the Tranche A note is payable in annual installments of $1.8 million from 2009 to 2013, and the remaining balance of the Tranche B note is payable in annual installments of $1.2 million from 2010 to 2014. As amended, the Tranche A and Tranche B notes bear interest at 8.90 percent and 8.98 percent, respectively. The combined remaining balance of the of the Tranche A and Tranche B notes, $10.5 million, is included on the December 31, 2010 Consolidated Balance Sheets as follows: $3.1 million is included in Current portion of long-term debt and $7.4 million is included in Long-term debt.

In January 2005, the Company entered into a five year unsecured revolving credit facility credit agreement with JPMorgan Chase Bank, N.A. On February 28, 2008, certain covenants of the credit agreement were amended to allow the Company to increase certain restricted payments (primarily dividends and stock repurchases) and maximum acquisition amounts. This facility was further amended in June 2009. Pursuant to the 2009 amendment, $7.9 million of the outstanding revolving credit balance at December 31, 2008 was paid at closing and $2.6 million was paid later in June 2009. See “2009 Amendments to Revolving Credit Facility and Note Purchase Agreements” below. This credit facility has since been terminated in connection with the Company’s January 2010 refinancing. See “2010 Revolving Credit Facility Refinancing and Note Purchase Agreement Amendments” below. The total balance outstanding under the Company’s current revolving credit facility at December 31, 2010 was $21.2 million and is included on the December 31, 2010 Consolidated Balance Sheets as follows: $8.7 million is included in Current portion of long-term debt and $12.5 million is included in Long-term debt.

In January 2005, the Company entered into a Note Purchase and Private Shelf Agreement (the “2005 Private Placement”) with Prudential Investment Management Inc, pursuant to which the Company sold $50.0 million in a series of three Senior Notes. The first note, in the original principal amount of $10.0 million, matured in January 2010. The second and third notes, each in the original principal amount of $20.0 million, mature in January 2011 and January 2012, respectively. The terms of these notes were amended in June 2009. See “2009 Amendments to Revolving Credit Facility and Note Purchase Agreements” below. Pursuant to the 2009 amendment, $5.2 million of the combined principal of the three notes was paid at closing and $1.8 million was paid later in June 2009, with the payments being applied on a prorata basis to reduce the original maturity amounts shown above. Under the revised payment schedule, $8.6 million matured in January 2010, and $17.2 million will mature in both 2011 and 2012. Additionally as amended, the second and third notes bear interest at 8.99 percent and 9.17 percent, respectively. The total outstanding balance of these notes, $34.4 million, is included on the December 31, 2010 Consolidated Balance Sheets as follows: $17.2 million is included in Current portion of long-term debt and $17.2 million is included in Long-term debt.

In December 2007, the Company’s Canadian subsidiary entered into a revolving demand credit facility with a Canadian bank to provide working capital needs up to $1.0 million Canadian dollars. The credit line is guaranteed by the Company. There was no balance outstanding on this credit facility at December 31, 2010.

2009 Amendments to Revolving Credit Facility and Note Purchase Agreements

As a result of goodwill impairment charges and restructuring activities in the fourth quarter of 2008, compounded by the Company’s stock repurchase program and weaker earnings performance, the Company was in violation of certain restrictive debt covenants at December 31, 2008 and March 31, 2009. On June 11, 2009, the Company entered into amendments that, among other things, restructured its leverage and minimum net worth covenants under its revolving credit facility and note purchase agreements. In particular the amendments:

·	reduced the size of the Company’s revolving credit facility by $32.5 million from $115.0 million (expandable to $125.0 million) to $82.5 million;

·	after the payment of $2.6 million in June 2009, the size of the Company’s revolving credit facility was further reduced to $80.0 million;

·	increased the Company’s maximum permitted cash-flow leverage ratio from 3.25 to 5.00 for the first quarter of 2009, decreasing to 3.00 in the fourth quarter of 2009 and thereafter;

·	amended the credit facility’s pricing terms, including increasing the interest rate margin applicable on the revolving credit facility indebtedness to a variable rate of LIBOR plus 300 to 450 basis points (“bpts”), depending on the cash flow leverage ratio, and set the minimum LIBOR at 2.0 percent;

·	increased the unused revolver commitment fee rate to 50 bpts per year;

·	increased the interest rate on indebtedness outstanding under each of the notes outstanding under the Company’s note agreements by 400 bpts;

·	reset the Company’s minimum quarterly fixed charge coverage ratio;

prohibited the Company from repurchasing its shares without lender consent and restricted future dividend payments by the Company (beginning with the first dividend declared after March, 2009) to an aggregate $0.3 million per fiscal quarter, or approximately $0.01 per share based on the number of shares of common stock currently outstanding;

·	required the Company to obtain lender approval of any acquisitions;

·	revised the Company’s minimum consolidated net worth covenant to be based on 90 percent of the Company’s consolidated net worth as of March 31, 2009;

·	reduced the amount of the Company’s permitted capital expenditures to $17.5 million, from $25.0 million, during any fiscal year; and

·	provided a waiver for any noncompliance with certain financial and other covenants.

In addition, all amounts due under the credit facility and the outstanding senior notes became fully secured through liens on substantially all of the Company’s and its domestic subsidiaries’ personal property.

As part of the credit facility amendments, the note purchase agreements associated with the Company’s outstanding senior notes were amended to include financial and other covenants that were the same as or substantially equivalent to the revised financial and other covenants under the amended credit facility. The amended credit facility was terminated upon entry into a new facility in 2010, as discussed below.

2010 Revolving Credit Facility Refinancing and Note Purchase Agreement Amendments

Effective January 12, 2010, the Company and certain subsidiary borrowers of the Company entered into an amended and restated credit agreement (the “Credit Agreement”) in order to refinance its revolving credit facility. The Credit Agreement provides for a two and one-half year secured, multicurrency revolving credit facility in the principal amount of $90.0 million, including a $10.0 million swing-line loan subfacility and a $10.0 million subfacility for letters of credit. The Company may, at its option and subject to certain conditions, increase the amount of the facility by up to $10.0 million by obtaining one or more new commitments from new or existing lenders to fund such increase. Immediately following the closing of the facility, there was approximately $15.0 million in outstanding borrowings. Loans under the facility generally bear interest at a rate of LIBOR plus a margin that varies with the Company’s cash flow leverage ratio, in addition to applicable commitment fees, with a maximum rate of LIBOR plus 350 basis points. Loans under the facility are not subject to a minimum LIBOR floor. At December 31, 2010 the applicable margin was 250 basis points, resulting in an interest rate at closing of 2.75 percent.

Borrowings under the facility will be used for general corporate purposes, such as working capital and capital expenditures. Additionally, together with anticipated cash generated from operations, the unutilized portion of the credit facility is expected to be available to provide financing flexibility and support in the funding of principal payments due in 2011 and succeeding years on the Company’s other long-term debt obligations.

Outstanding obligations due under the facility continue to be secured through security interests in and liens on substantially all of the Company’s and its domestic subsidiaries’ current and future personal property and on 100 percent of the capital stock of the Company’s existing and future domestic subsidiaries and 65 percent of the capital stock of certain foreign subsidiaries.

The Credit Agreement contains certain customary affirmative and negative covenants and events of default. Under the terms of the Credit Agreement, permitted capital expenditures excluding acquisitions are restricted to not more than $18.5 million per fiscal year, or $40.0 million over the term of the credit facility, and dividends, stock repurchases and other restricted payments are limited to $5.0 million per fiscal year. Other covenants include, among other things, restrictions on the Company’s and in certain cases its subsidiaries’ ability to incur additional indebtedness; dispose of assets; create or permit liens on assets; make loans, advances or other investments; incur certain guarantee obligations; engage in mergers, consolidations or acquisitions, other than those meeting the requirements of the Credit Agreement; engage in certain transactions with affiliates; engage in sale/leaseback transactions; and engage in certain hedging arrangements. The Credit Agreement also requires compliance with specified financial ratios and tests, including a minimum fixed charge coverage ratio, a maximum cash flow ratio and a minimum consolidated net worth requirement. The Company was in compliance with all covenants at December 31, 2009 and 2010.

Concurrently with its entry into the Credit Agreement, the Company also amended the note purchase agreements underlying its outstanding senior notes in order to conform the financial and other covenants contained in the note purchase agreements to the covenants contained in the Credit Agreement described above.

Effective November 17, 2010, the Company entered into Amendment No.1 (the “Credit Facility Amendment”) to the Credit Agreement. Pursuant to the Credit Facility Amendment, the amount of restricted payments, including dividends and stock repurchases, permitted to be made by the Company per year (the “Annual Restricted Payments”) was increased from $5.0 million per fiscal year to an amount not to exceed $14.0 million for the period January 1, 2011 through the credit facility termination date (July 12, 2012), provided that any such restricted payments may not exceed $10.0 million in the aggregate for any four consecutive fiscal quarters during the aforementioned period. In addition to the annual restricted payment provisions, the Credit Facility Amendment provides that the Company may make one or more additional restricted payments on or before December 31, 2011 that in the aggregate amount do not exceed $13.0 million. The Credit Facility Amendment also decreased the Company’s maximum cash flow leverage ratio for periods ending on and after December 31, 2010.

Concurrently with its entry into the Credit Facility Amendment, the Company also amended the note purchase agreements underlying its outstanding senior notes in order to conform the financial and other covenants contained in the note purchase agreements to the covenants contained in the Credit Facility Amendment described above.

Management believes that the level of working capital is adequate for the Company's liquidity needs related to normal operations both currently and in the foreseeable future, and that the Company has sufficient resources to support its operations, either through currently available cash and cash generated from future operations, or pursuant to its current credit facility. The Company’s ability to realize its near-term business objectives is subject to, among other things, its ability to remain in compliance with its covenants under its debt arrangements. Based on its 2011 business plan, which contains a number of assumptions related to economic trends and the Company’s business and operations, the Company presently expects to remain in compliance with its debt covenants for the foreseeable future; however compliance in 2011 and thereafter remains subject to many variables, including those described under “Risk Factors” contained in this report.

The Company operates in eighteen countries. The Company currently believes that there are no political, economic or currency restrictions that materially limit the Company’s flexibility in managing its global cash resources.

Seasonality

With the acquisitions of Winnetts and Seven, the seasonal fluctuations in business on a combined basis generally result in lower revenues in the first quarter as compared to the other quarters of the year ended December 31.

Off-Balance Sheet Arrangements and Contractual Obligations

The Company does not have any material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on its financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Cash flows from its historically profitable operations have permitted the Company to re-invest in the business through capital expenditures and acquisitions of complementary businesses. Over the next five years, assuming no significant business acquisitions, routine capital expenditures are expected to be in the range of $10.0 to $12.0 million annually. In addition, during the next two years, the Company expects to incur capital investment and related expenses in the range of $20.0 million to $26.0 million for information technology systems to improve customer service and business effectiveness and enhance internal controls, as well as to reduce operating costs. Also, over the next five years, the Company’s two and a half-year revolving credit facility and all of its long-term private placement debt matures. The Company’s total contractual obligations over the next five years total approximately $136 million, including all debt obligations (see contractual obligation table below.) At this time, the Company believes that cash flow from operations and its ability to refinance its maturing debt obligations will be sufficient to finance the Company during the next five years, assuming no significant business acquisitions. If a significant acquisition is undertaken in the next five years, the Company would likely need to access the debt and equity markets to finance such an acquisition.

The following table summarizes the effect that minimum debt, lease and other material noncancelable commitments are expected to have on the Company’s cash flow in the future periods:

		Payments Due by Period
(in thousands)				Less						More
				than 1		1-3		3-5		than 5
Contractual Obligations		Total		Year		years		years		years

Debt obligations	$	66,667	$	29,587	$	35,851	$	1,229	$	--
Interest on debt (1)		4,226		2,843		1,328		55		--
Operating lease obligations		46,723		12,872		19,729		9,018		5,104
Purchase obligations		7,371		6,585		786		--		--
Deferred compensation		2,284		85		94		31		2,074
Multiemployer pension withdrawal		8,850		8,850		--		--		--
Uncertain tax positions (2)		--		--		--		--		--

Total	$	136,121	$	60,822	$	57,788	$	10,333	$	7,178

(1)

Reflects scheduled interest payments on fixed-rate debt. Variable-rate interest on approximately $21,201 of variable rate debt under its revolving credit agreement as of December 31, 2010 is excluded because regular interest payments are not scheduled and fluctuate depending on outstanding principal balance and market-rate interest levels.

(2)

As of December 31, 2010, the Company’s total liability for uncertain tax positions was $4,566, including $317 of accrued interest and penalties. Due to the high degree of uncertainty regarding the timing of potential future cash flows associated with these liabilities, the Company was unable to make a reasonably reliable estimate of the amount and period in which these liabilities might be paid.

Purchase obligations resulting from purchase orders entered in the normal course of business are not significant. The Company’s major service cost is employees’ labor.

The Company expects to fund future contractual obligations through funds generated from operations, together with general company financing transactions.

Subsequent to December 31, 2010, the Company entered into an agreement with a consulting firm to provide system implementation and integration assistance to the Company related to its information technology and business process improvement initiative. The total consulting fees and related expenses will be in a range of $13.0 million to $15.0 million, through December 2012. The Company also entered into a contract for approximately $1.6 million related to renovations during 2011 to an existing operating facility. These agreements, which were entered into subsequent to December 31, 2010, are not included in the contractual obligation table above.

Critical accounting policies and estimates

The discussion and analysis of the Company’s financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of its financial statements. Actual results may differ from these estimates under different assumptions or conditions. Critical accounting estimates are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. The Company believes that the following are the most critical accounting estimates that could have an effect on Schawk’s reported results.

Accounts Receivable. The Company’s clients are primarily consumer product manufacturers, advertising agencies, retailers, both grocery and non-grocery, and entertainment companies. Accounts receivable consist primarily of amounts due to Schawk from its normal business activities. The Company’s allowance for doubtful accounts is determined using assumptions of minimum reserve requirement percentages applied to the aging of the Company’s trade accounts receivable, along with specific reserves for known collection issues. For example, the aging-based portion of the Company’s reserve is determined by applying a 25 percent reserve to amounts overdue by more than 120 days, a 60 percent reserve to amounts overdue by more than 180 days and a 100 percent reserve for amounts overdue by more than 360 days. In the Company’s experience, this policy as supplemented by specific reserves for known collection issues, broadly captures the credit risk in its receivables. Based on the Company’s estimates and assumptions, an allowance for doubtful accounts and credit memos of $1.5 million was established at December 31, 2010, compared to an allowance of $1.6 million at December 31, 2009. A change in the Company’s assumptions would result in the Company recovering an amount of its accounts receivable that differs from the carrying value. Any difference could result in an increase or decrease in bad debt expense.

Impairment of Long-Lived Assets. The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired. Events that may indicate that certain long-lived assets might be impaired might include a significant downturn in the economy or the consumer packaging industry, a loss of a major customer or several customers, a significant decrease in the market value of an asset, a significant adverse change in the manner in which an asset is used or an adverse change in the physical condition of an asset. The Company tests long-lived assets for impairment when facts and circumstances have changed and a potential impairment trigger is indicated. Impairment is evaluated by a comparison of the carrying value of an asset to the estimated future net undiscounted cash flows expected to be generated by the asset. If this comparison indicates that an asset is impaired, the loss recognized is the amount by which the carrying value exceeds the estimated fair value.

The Company’s impairment losses in regard to long-lived assets have in recent years primarily related to surplus properties resulting from restructuring (i.e. facility consolidation) actions. For significant losses, the Company estimates fair value based on market valuation studies performed by qualified third-party valuation experts. Assumptions used in estimating cash flows include among other things those assumptions concerning periods of operation and prjections of revenues and costs of revenues, industry trends and market interest rates.

There are inherent uncertainties associated with the judgments and estimates used in assessing asset impairment and it is possible that impairment charges recognized in a given period would differ if the assessment was made in a different period. During 2010, the Company recorded an impairment charge of $0.7 million for certain production equipment which became inoperable due to water damage. The expense is reflected as an Impairment of long-lived assets in the Consolidated Statements of Operations at December 31, 2010. A change in the Company’s business climate in future periods, including a significant downturn in the Company’s operations, could lead to a required assessment of the recoverability of the Company’s long-lived assets, resulting in future additional impairment charges.

Goodwill and Other Acquired Intangible Assets. The Company has made acquisitions in the past that included a significant amount of goodwill, customer relationships and, to a lesser extent, other intangible assets. Goodwill is not amortized but is subject to an annual (or under certain circumstances more frequent) impairment test based on its estimated fair value. Other intangible assets, including customer relationships, are amortized over their useful lives and are tested for impairment when facts and circumstances have changed and a potential impairment trigger is indicated. Events that may indicate potential impairment include a loss of, or a significant decrease in volume from, a major customer, a change in the expected useful life of an asset, a change in the market value of an asset, a significant adverse change in legal factors or business climate, unanticipated competition relative to a major customer or the loss of key personnel relative to a major customer. Impairment is evaluated in a recoverability test including a comparison of the carrying value of an asset to the future net undiscounted cash flows expected to be generated by the asset. If this comparison indicates that an acquired intangible asset is impaired, the loss recognized is the amount by which the carrying value exceeds the estimated fair value.

The Company performs a goodwill impairment test annually, or when events or changes in business circumstances indicate that the carrying value may not be recoverable. The Company performs its annual impairment test as of October 1st each year.

The Company performed its 2010 and 2009 goodwill impairment tests as of October 1, 2010 and 2009, respectively, and determined that no impairment of goodwill was indicated for either year. For both years, the Company performed its annual impairment review on a geographic basis at the operating segment level. The Company has determined that its operating segments are also its reporting units for goodwill testing in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic No. 350, Intangibles - Goodwill and Other (“ASC 350”). Using projection of operating cash flow for each reporting unit, the Company performed a step one assessment of the fair value of each reporting unit using the income approach (i.e. discounted cash flow, or “DCF”), as compared to the carrying value of each reporting unit. In addition, the Company utilized a market approach, which assumes that companies operating in the same industry will share similar characteristics and the company values will correlate to those characteristics, to validate the results of the income approach valuations. However, due to lack of comparable industry data, the Company ultimately relied on the income approach in arriving at the fair value of the reporting units. The DCF method was used due to company specific growth and profitability factors best captured in management’s projections, which are considered most representative of the future outlook for the reporting units.

The step one impairment analysis for the October 1, 2010 test indicated no potential impairment of the assigned goodwill. The following table summarizes the results of the Company’s step one impairment analysis as of October 1, 2010:

		North				Asia
(in millions)		America		Europe		Pacific		Total

Fair value of reporting unit	$	440.4	$	45.5	$	42.6	$	528.5
Carrying value of reporting unit	$	219.1	$	19.6	$	18.1	$	256.8
Percentage fair value over carrying value		101.0	%	132.1	%	135.4	%	105.8	%
Goodwill allocated to reporting unit	$	172.8	$	8.0	$	7.9	$	188.7

Based on the October 1, 2010 closing price of the Company’s common stock, the Company had a market capitalization of $475.1, compared to its estimated fair value of $528.5, which indicates an implied control premium of approximately 11 percent.

The discounted cash flow model used for the income valuation approach was based on the Company’s ten-year projections of operating income for each reporting unit. Projections for the first three years (2011-2013) were consistent with the Company’s three-year business plan as approved by the Company’s board of directors and utilized for financing discussions and transactions with current and prospective lenders. The Company’s ten year projection assumes revenue growth of 2 percent to 3 percent annually, with a commensurate increase in operating expenses. The discount rate used for the cash flow model varied from 14 percent to 16 percent, by reporting unit.

The Company performed its 2008 impairment test as of October 1, 2008. In accordance with the Intangibles – Goodwill and Other Topic of the Codification, ASC 350, the Company allocated its goodwill to multiple reporting units, mainly on a geographic basis at the operating segment level. As a result of the test, the Company recorded a goodwill impairment charge of $48.0 million. The impairment charge was recorded in the Company’s operating segments as follows: North America – $14.3 million, Europe – $32.7 million and Asia Pacific – $1.0 million. The goodwill impairment reflected the decline in global economic conditions and general reduction in consumer and business confidence experienced during the fourth quarter of 2008. Further details can be found in Item 8, Note 7 – Goodwill and Other Intangible Assets.

In evaluating the recoverability of goodwill, it is necessary to estimate the fair value of the reporting units. In making this assessment, the Company’s management relies on a number of factors to discount anticipated future cash flows, including operating results, business plans and present value techniques. There are inherent uncertainties in the assumptions and estimates used in developing future cash flows and management’s judgment is required in applying these assumptions and estimates to the analysis of goodwill impairment, including projecting revenues and profits, interest rates, cost of capital, tax rates, the corporation’s stock price and the allocation of shared or corporate items. Many of the factors used in assessing fair value are outside the control of management and it is reasonably likely that assumptions and estimates will change from period to period. These changes may result in future impairments. For example, the Company’s revenue growth rate could be lower than projected due to economic, industry or competitive factors or the discount rate used in the Company’s cash flow model could increase due to a change in market interest rates. Additionally, future goodwill impairment charges may be necessary if the Company’s market capitalization decreased due to a decline in the trading price of the Company’s common stock.

Income Taxes. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets arising from temporary differences and net operating losses will not be realized. Federal, state and foreign tax authorities regularly audit Schawk, like other multi-national companies, and tax assessments may arise several years after tax returns have been filed. Effective January 1, 2007, the Company adopted the provisions of Income Taxes Topic of the Codification, ASC 740, formerly FAS 109, that contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. Actual outcomes could result in a change in reported income tax expense for a particular period. For example, the Company’s effective tax rates could be adversely affected by earnings being lower than anticipated in countries which have lower statutory rates and higher than anticipated in countries which have higher statutory rates, by changes in the valuation of deferred tax assets and liabilities, or by changes in the relevant tax, accounting or other laws, regulations, principles and interpretations. The Company is subject to audit in various jurisdictions, and such jurisdictions may assess additional income tax against it. Although the Company believes its tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from its historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on the Company’s operating results or cash flows in the period or periods for which that determination is made.

See Item 8, Note 11 – Income Taxes to the Consolidated Financial Statements for further discussion.

The Company has provided valuation allowances against deferred tax assets, primarily arising from the acquisition of Seven in 2005, due to the dormancy of the companies generating the tax assets or due to income tax rules limiting the availability of the losses to offset future taxable income.

Exit Reserves. The Company records reserves for the consolidation of workforce and facilities of acquired companies. The exit plans are approved by company management prior to, or shortly after, the acquisition date. The exit plans provide for severance pay, lease abandonment costs and other related expenses. A change in any of the assumptions used to estimate the exit reserves that result in a decrease to the reserve would result in a decrease to goodwill. Any change in assumptions that result in an increase to the exit reserves would result in a charge to income. At December 31, 2010, the Company had exit reserves of approximately $0.8 million that were included in Accrued expenses and Other noncurrent liabilities on the Consolidated Balance Sheets, for exit activities completed in 2005 and 2006, primarily for facility closure costs. Future increases or decreases in these reserves are possible, as the Company continues to assess changes in circumstance that would alter the future cost assumptions used in the calculation of the reserves. Exit reserves are adjusted when facts regarding a particular reserve have changed, indicating that the original reserve assumptions are no longer valid. For example, the sublease assumptions originally used in computing a reserve for a vacant leased property could become invalid because of a change in circumstances of a sublease tenant, requiring a recalculation of the correct reserve balance. However, the Company believes that, because the current exit reserves are diminishing, any further changes to the exit reserves would be immaterial to its consolidated financial statements. See Item 8, Note 2 – Acquisitions to the Consolidated Financial Statements for further discussion.

New Accounting Pronouncements

In December 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations (a consensus of the FASB Emerging Issues Task Force). The amendments in ASU 2010-29 specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. It also expands the supplemental pro forma disclosures under ASC 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments in ASU 2010-29 are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual period beginning on or after December 15, 2010. Early adoption is permitted. The Company is currently evaluating the impact of the pending adoption of ASU 2010-29 on the Company’s consolidated financial statements and will adopt ASU 2010-29 during 2011.

In December 2010, the FASB issued ASU No. 2010-28, Intangibles- Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (a consensus of the FASB Emerging Issue Task Force). ASU 2010-28 amends the criteria for performing Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts and requires performing Step 2 if qualitative factors indicate that it is more likely than not that a goodwill impairment exists. The amendments in ASU 2010-28 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. The Company is currently evaluating the impact of the pending adoption of ASU 2010-28 on the Company’s consolidated financial statements and will adopt ASU 2010-28 during 2011.

In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) Improving Disclosures about Fair Value Measurements. The amendments in ASU 2010-06 add additional disclosures about the different classes of assets and liabilities measured at fair value, the valuation techniques and inputs used, the activity in Level 3 fair value measurements, and the transfers between Levels 1, 2, and 3. The amendment is effective for interim and annual periods beginning after December 15, 2009; except for the requirement to separately disclose amounts in the Level 3 rollforward on a gross basis, which is effective for interim and annual periods beginning after December 15, 2010.

Early application is permitted. The adoption of the effective portion of this guidance did not have a material impact on the Company’s consolidated financial statements. The Company is currently evaluating the impact of the provisions, that are effective in fiscal 2011, on the Company’s consolidated financial statements.

In October 2009, the FASB amended the Accounting Standards Codification (“ASC”) as summarized in ASU No. 2009-13, Revenue Recognition (Topic 605) – Multiple-Deliverable Revenue Arrangements, and ASU 2009-14, Software (Topic 985) – Certain Revenue Arrangements That Include Software Elements. As summarized in ASU 2009-13, ASC Topic 605 has been amended (1) to provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and the consideration allocated; (2) to require an entity to allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence (“VSOE”) or third-party evidence of selling price; and (3) to eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method. As summarized in ASU 2009-14, ASC Topic 985 has been amended to remove from the scope of industry specific revenue accounting guidance for software and software related transactions, tangible products containing software components and non-software components that function together to deliver the product’s essential functionality. The accounting changes summarized in ASU 2009-14 and ASU 2009-13 are both effective for fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company is currently evaluating the impact that the adoption of ASU 2009-13 and ASU 2009-14 may have on the Company’s consolidated financial statements.

Impact of Inflation

The Company believes that over the past three years inflation has not had a significant impact on the Company's results of operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Exposure

The Company has $21.2 million of variable rate debt outstanding at December 31, 2010 and expects to use its variable rate credit facilities during 2011 and beyond to fund acquisitions and cash flow needs. The debt is variable to the Euro currency, Canadian and U.S. prime rates. Assuming interest rate volatility in the future is similar to what has been seen in recent years, the Company does not anticipate that short-term changes in interest rates will materially affect its consolidated financial position, results of operations or cash flows. An adverse change of 10 percent in interest rates (from 3.6 percent at December 31, 2010 to 4.0 percent) would add approximately $0.1 million of interest cost annually based on the variable rate debt outstanding at December 31, 2010. In order to manage the risk of rising interest rates on a portion of the Company’s variable rate revolving debt, the Company entered into two “variable to fixed” interest rate swaps with financial institution counterparties during 2010. Both swap agreements were terminated prior to year-end. The Company’s $45.5 million in outstanding fixed rate debt is fixed at rates that range from 8.90 percent to 9.17 percent.

Foreign Exchange Exposure

The Company is subject to changes in various foreign currency exchange rates. The Company’s principal currency exposures relate to the British Pound, Canadian Dollar, Euro, Chinese Yuan Renminbi, Malaysian Ringgit, Japanese Yen, Indian Rupee and the Australian Dollar. The Company’s 2010 results of operations were favorably affected by a decrease in the average value of the US dollar relative to most foreign currencies. An adverse change of 10 percent in exchange rates would have resulted in a decrease in sales of $12.8 million, or 2.8 percent, and a decrease in income before income taxes of $1.3 million, or 3.1 percent, for the year ended December 31, 2010.

For the years ended December 31, 2010 and December 31, 2009, the Company recorded pre-tax foreign exchange losses (gains) of $2.3 million and ($0.5) million, respectively. These losses (gains) were recorded by international subsidiaries primarily for unhedged currency exposure arising from intercompany debt obligations. These losses (gains) are included in Foreign exchange loss (gain) in the Consolidated Statement of Operations. The Company has not historically hedged its foreign currency exposures. However, the Company is currently reviewing its foreign currency management policies and procedures to ascertain the merits of hedging its foreign currency exposures.

Item 8. Financial Statements and Supplementary Data

Index to Financial Statements
		Page

Report of Independent Registered Public Accounting Firm		52

Financial Statements:

Consolidated Balance Sheets — December 31, 2010 and 2009		53

Consolidated Statements of Operations —Years Ended December 31, 2010, 2009 and 2008		54

Consolidated Statements of Cash Flows —Years Ended December 31, 2010, 2009 and 2008		55

Consolidated Statements of Stockholders’ Equity —Years Ended December 31, 2010, 2009 and 2008		56

Notes to Consolidated Financial Statements		57

Financial Statement Schedule:

SCHEDULE II — Valuation Reserves		100

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

Schawk, Inc.

We have audited the accompanying consolidated balance sheets of Schawk, Inc. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Schawk, Inc. and subsidiaries at December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Schawk, Inc. and subsidiaries' internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 9, 2011 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Chicago, Illinois

March 9, 2011

Schawk, Inc.

Consolidated Balance Sheets

(In thousands, except share amounts)

		December 31,		December 31,
		2010		2009

Assets
Current assets:
Cash and cash equivalents	$	36,889	$	12,167
Trade accounts receivable, less allowance for doubtful accounts of $1,525 in 2010 and $1,619 in 2009		95,207		88,822
Inventories		18,250		20,536
Prepaid expenses and other current assets		9,356		8,192
Income tax receivable		2,943		2,565
Deferred income taxes		347		992
Total current assets		162,992		133,274

Property and equipment, net		48,684		50,247
Goodwill, net		193,626		187,664
Other intangible assets, net:
Customer relationships		36,461		36,321
Other		817		1,284
Deferred income taxes		868		1,424
Other assets		6,411		6,005

Total assets	$	449,859	$	416,219

Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable	$	21,930	$	16,957
Accrued expenses		64,007		64,079
Deferred income taxes		3,260		205
Income taxes		1,038		14,600
Current portion of long-term debt		29,587		12,858
Total current liabilities		119,822		108,699

Long-term liabilities:
Long-term debt		37,080		64,707
Deferred income taxes		9,135		2,059
Other long-term liabilities		19,696		15,920
Total long-term liabilities		65,911		82,686

Stockholders’ equity:
Common stock, $0.008 par value, 40,000,000 shares authorized, 30,506,252 and 29,855,796 shares issued at December 31, 2010 and 2009, respectively, 25,761,334 and 25,108,894 shares outstanding at December 31, 2010 and 2009, respectively		224		220
Additional paid-in capital		200,205		191,701
Retained earnings		113,258		85,953
Accumulated comprehensive income, net		11,247		7,804
Treasury stock, at cost, 4,744,918 and 4,746,902 shares of common stock at December 31, 2010 and 2009, respectively		(60,808)		(60,844)
Total stockholders’ equity		264,126		224,834

Total liabilities and stockholders’ equity	$	449,859	$	416,219

The Notes to Consolidated Financial Statements are an integral part of these consolidated statements.

Schawk, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

		Years Ended December 31,
		2010		2009		2008

Net sales	$	460,626	$	452,446	$	494,184
Cost of sales		282,070		281,372		329,814
Gross profit		178,556		171,074		164,370

Selling, general, and administrative expenses		124,222		131,118		144,328
Acquisition integration and restructuring expenses		1,974		6,459		10,390
Foreign exchange loss (gain)		2,306		(542)		4,268
Impairment of long-lived assets		688		1,441		6,644
Multiemployer pension withdrawal (income) expense		(200)		1,800		7,254
Indemnity settlement income		--		(4,986)		--
Impairment of goodwill		--		--		48,041
Operating income (loss)		49,566		35,784		(56,555)

Other income (expense):
Interest income		39		535		291
Interest expense		(7,201)		(9,225)		(6,852)

Income (loss) before income taxes		42,404		27,094		(63,116)
Income tax provision (benefit)		9,984		7,597		(3,110)

Net income (loss)	$	32,420	$	19,497	$	(60,006)

Earnings (loss) per share:
Basic	$	1.27	$	0.78	$	(2.24)
Diluted	$	1.25	$	0.78	$	(2.24)

Weighted average number of common and common equivalent shares outstanding:
Basic		25,465		24,966		26,739
Diluted		25,883		25,001		26,739

Dividends per Class A common share	$	0.20	$	0.0625	$	0.13

The Notes to Consolidated Financial Statements are an integral part of these consolidated statements.

Schawk, Inc.

Consolidated Statements of Cash Flows

(In thousands)

		Years Ended December 31,
		2010		2009		2008
Cash flows from operating activities
Net income (loss)	$	32,420	$	19,497	$	(60,006)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation		13,055		13,924		16,693
Amortization		4,556		4,729		4,058
Impairment of goodwill		--		--		48,041
Impairment of long-lived assets		688		1,441		6,644
Insurance settlement		(1,539)		--		--
Non-cash restructuring charge		--		210		628
Deferred income taxes		11,349		3,200		(8,452)
Amortization of deferred financing fees		674		1,027		168
Loss (gain) on sale of equipment		28		(111)		362
Share-based compensation expense		1,886		1,737		1,385
Tax benefit from stock options exercised		(1,109)		(222)		(100)
Changes in operating assets and liabilities, net of effects from acquisitions:
Trade accounts receivable		(5,293)		(3,278)		25,184
Inventories		2,039		3,576		(2,936)
Prepaid expenses and other current assets		(921)		1,438		969
Trade accounts payable, accrued expenses and other liabilities		3,904		(539)		3,075
Income taxes refundable (payable)		(12,727)		9,801		(2,465)
Net cash provided by operating activities		49,010		56,430		33,248

Cash flows from investing activities
Proceeds from sales of property and equipment		547		5,087		1,189
Proceeds from insurance settlement		1,539		--		--
Purchases of property and equipment		(12,205)		(5,257)		(14,912)
Acquisitions, net of cash acquired		(5,798)		(739)		(12,784)
Other		3		(19)		309
Net cash used in investing activities		(15,914)		(928)		(26,198)

Cash flows from financing activities
Issuance of common stock		5,513		1,945		2,208
Proceeds from issuance of long-term debt		99,062		113,081		185,479
Payments of long-term debt including current portion		(109,960)		(171,343)		(157,446)
Tax benefit from stock options exercised		1,109		222		100
Payment of deferred financing fees		(1,171)		(1,243)		(89)
Cash dividends		(5,079)		(1,547)		(3,411)
Purchase of common stock		--		(4,277)		(27,430)
Net cash used in financing activities		(10,526)		(63,162)		(589)

Effect of foreign currency rate changes		2,152		(378)		1,990

Net increase (decrease) in cash and cash equivalents		24,722		(8,038)		8,451
Cash and cash equivalents beginning of period		12,167		20,205		11,754

Cash and cash equivalents end of period	$	36,889	$	12,167	$	20,205

Supplementary cash flow disclosures:
Dividends issued in the form of Class A common stock	$	37	$	13	$	24
Cash paid for interest	$	5,002	$	6,446	$	5,494
Cash paid (refunds received) for income taxes, net	$	11,651	$	(5,082)	$	6,481

The Notes to Consolidated Financial Statements are an integral part of these consolidated statements.

Schawk, Inc.

Consolidated Statement of Stockholders' Equity

Years Ended December 31, 2008, 2009 and 2010

(In thousands, except share amounts)

	Class A Common Shares Outstanding		Class A Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Comprehensive Income (Loss)		Treasury Stock		Total Stockholders Equity

Balance at December 31, 2007	27,013,482	$	216	$	184,110	$	131,457	$	14,162	$	(29,176)	$	300,769
Net loss	--		--		--		(60,006)		--		--		(60,006)
Foreign currency translation adjustment	--		--		--		--		(12,794)		--		(12,794)
Total comprehensive loss	--		--		--		--		--		--		(72,800)
Sale of Class A common stock	142,533		1		1,431		--		--		--		1,432
Tax benefit from stock options exercised	--		--		100		--		--		--		100
Purchase of Class A treasury stock	(2,000,000)		--		--		--		--		(27,430)		(27,430)
Stock issued under employee stock puurchase plan	60,657		--		775		--		--		--		775
Share-based compensation expense	--		--		1,385		--		--		--		1,385
Issuance of Class A common stock under dividend reinvestment program	1,894		--		--		(24)		--		25		1
Cash dividends	--		--		--		(3,411)		--		--		(3,411)
Balance at December 31, 2008	25,218,566		217		187,801		68,016		1,368		(56,581)		200,821
Net income	--		--		--		19,497		--		--		19,497
Foreign currency translation adjustment	--		--		--		--		6,436		--		6,436
Total comprehensive income	--		--		--		--		--		--		25,933
Sale of Class A common stock	309,997		2		1,387		--		--		--		1,389
Tax benefit from stock options exercised	--		--		222		--		--		--		222
Purchase of Class A treasury stock	(488,700)		--		--		--		--		(4,277)		(4,277)
Stock issued under employee stock puurchase plan	69,031		1		554		--		--		--		555
Share-based compensation expense	--		--		1,737		--		--		--		1,737
Issuance of Class A common stock under dividend reinvestment program	--		--		--		(13)		--		14		1
Cash dividends	--		--		--		(1,547)		--		--		(1,547)
Balance at December 31, 2009	25,108,894		220		191,701		85,953		7,804		(60,844)		224,834
Net income	--		--		--		32,420		--		--		32,420
Foreign currency translation adjustment	--		--		--		--		3,443		--		3,443
Total comprehensive income	--		--		--		--		--		--		35,863
Sale of Class A common stock	624,033		4		5,063		--		--		--		5,067
Tax benefit from stock options exercised	--		--		1,109		--		--		--		1,109
Stock issued under employee stock purchase plan	26,423		--		446		--		--		--		446
Share-based compensation expense	--		--		1,886		--		--		--		1,886
Issuance of Class A common stock under dividend reinvestment program	1,984		--		--		(36)		--		36		--
Cash dividends	--		--		--		(5,079)		--		--		(5,079)

Balance at December 31, 2010	25,761,334	$	224	$	200,205	$	113,258	$	11,247	$	(60,808)	$	264,126

The Notes to Consolidated Financial Statements are an integral part of these financial statements.

Schawk, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Note 1 - Significant Accounting Policies

Basis of Presentation

The Company’s consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain previously reported immaterial amounts have been reclassified to conform to the current-period presentation. There have been no material events subsequent to the balance sheet date that would have affected the amounts recorded or disclosed in the Company's financial statements.

Principles of Consolidation

The consolidated financial statements include the accounts of all wholly and majority owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Cash Equivalents

Cash equivalents include highly liquid debt instruments and time deposits having an original maturity at the date of purchase of three months or less. Cash equivalents are stated at cost, which approximates fair value.

Accounts Receivable and Concentration of Credit Risk

The Company sells its products to a wide range of customers in the consumer products, retail, advertising agency and entertainment industries. The Company performs ongoing credit evaluations of its customers and does not require collateral. An allowance for doubtful accounts and credit memos is maintained at a level management believes is sufficient to cover potential losses. The Company evaluates the collectability of its accounts receivable based on the length of time the receivable is past due and its historic experience of write-offs. Trade accounts receivable are charged to the allowance when the Company determines that the receivable will not be collectible. Trade accounts receivable balances are determined to be delinquent when the amount is past due, based on the payment terms with the customer. An allowance for credit memos is maintained based upon historical credit memo issuance.

Inventories

The Company’s inventories include made-to-order graphic designs, images and text for a variety of media including the consumer products, retail, and entertainment industries and consist primarily of raw materials and work-in-process inventories as well as finished goods inventory related to the Company’s Los Angeles print operation. Raw materials are stated at the lower of cost or market. Work-in-process consists primarily of deferred labor and overhead costs. The overhead pool of costs includes costs associated with direct labor employees (including direct labor costs not chargeable to specific jobs, which are also considered a direct cost of production) and all indirect costs associated with the production/creative design process, excluding any selling, general and administrative costs.

Approximately 21 percent of total inventories in 2010 and 20 percent in 2009 are determined on the last in, first out (“LIFO”) cost basis. The remaining raw materials inventories are determined on the first in, first out (“FIFO”) cost basis. The Company evaluates the realizability of inventories and adjusts the carrying value as necessary.

Property and Equipment

Property and equipment, including capitalized leases, is stated at cost, less accumulated depreciation and amortization, and is being depreciated and amortized using the straight-line method over the estimated useful lives of the assets or the term of the leases, ranging from 3 to 30 years.

Goodwill

Acquired goodwill is not amortized, but instead is subject to an annual impairment test and subject to testing at other times during the year if certain events occur indicating that the carrying value of goodwill may be impaired. In accordance with the Intangibles – Goodwill and Other Topic of the Codification, ASC 350, goodwill must be tested for impairment at the reporting unit level. In the third quarter of 2009, the Company restructured its operations on a geographic basis, into three areas: North America, Europe and Asia Pacific. For purposes of the goodwill impairment test, the reporting units of the Company, after considering the requirements of ASC 350, and the relevant provisions of the Segment Reporting Topic of the Codification, ASC 280, and related interpretive literature, were defined on a geographic basis corresponding to the Company’s realigned operating segments.

If the carrying amount of the reporting unit is greater than the fair value, goodwill impairment may be present. The Company measures the goodwill impairment based upon the fair value of the underlying assets and liabilities of the reporting unit and estimates the implied fair value of goodwill. Fair value is determined considering both the income approach (discounted cash flow), and the market approach. An impairment charge is recognized to the extent the recorded goodwill exceeds the implied fair value of goodwill.

The Company performs its annual goodwill test as of October 1st each year. The Company performed its 2010 and 2009 goodwill test as of October 1, 2010 and 2009, respectively and determined that no impairment of goodwill was indicated. In 2008, when performing the required goodwill test as of October 1, 2008, the Company determined that goodwill was impaired and recorded an impairment charge in the amount of $48,041. See Note 7 - Goodwill and Intangible Assets for further information.

Software Developed for Internal Use

The Company capitalizes certain direct development costs associated with internal-use computer software in accordance with the Internal-Use Software Subtopic of the Codification, ASC 350-40. These costs are incurred during the application development stage of a project and include external direct costs of services and payroll costs for employees devoting time to the software projects principally related to software coding, designing system interfaces and installation and testing of the software. The costs capitalized are primarily employee compensation and outside consultant fees incurred to develop the software prior to implementation. These costs are recorded as fixed assets in computer software and licenses and are amortized over a period of from three to seven years beginning when the asset is substantially ready for use. Costs incurred during the preliminary project stage, as well as maintenance and training costs, are expensed as incurred.

During 2008, software that had been capitalized by the Company in accordance with ASC 350-40 was reviewed for impairment due to changes in circumstances which indicated that the carrying amount of the assets might not be recoverable. These changes in circumstances included the expectation that the software would not provide substantive service potential and there was a change in the extent to which the software was to be used. In addition, it was determined that the cost to modify the software for the Company’s needs would significantly exceed originally expected development costs. As a result of these circumstances, the Company wrote down the capitalized costs of the software to fair value. The amount of this write-down, recorded in 2008, was $2,336 and is included in Impairment of long-lived assets in the Consolidated Statement of Operations. The expense was recorded in Corporate.

Software Developed for Sale to Customers

The Company’s policy for capitalization of internally-developed software for sale to customers is in accordance with the Costs to Be Sold, Leased, or Marketed Subtopic of the Codification Software Topic, ASC 985-20. Substantially all costs are incurred prior to the point at which technological feasibility is established for the computer software under development and as such are charged to expense when incurred.

Long-lived Assets

The recoverability of long-lived assets, including amortizable intangibles, is evaluated by comparing their carrying value to the expected future undiscounted cash flows to be generated from such assets when events or circumstances indicate that impairment may have occurred. The Company also re-evaluates the periods of amortization of long- lived assets to determine whether events and circumstances warrant revised useful lives. If impairment has occurred, the carrying value of the long-lived asset is adjusted to its fair value, generally equal to the future estimated discounted cash flows associated with the asset.

During 2010, 2009 and 2008, the Company recorded $688, $1,441 and $6,644 of impairments related to long-lived assets, respectively. See Note 6 – Impairment of Long-lived Assets for more information.

Revenue Recognition

The Company derives revenue primarily from providing products and services to its clients on a custom-job basis. In accordance with SEC Staff Accounting Bulletin 104, Topic 13 “Revenue Recognition” (“SAB 104”), revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable, and collectability is reasonably assured. The Company records a revenue accrual entry at each month-end for jobs that meet the four SAB 104 criteria, but which have not yet been invoiced to the client. Revenue for services is recognized when the services are provided to the customer.

The Company’s products and services are sold directly through its worldwide sales force and revenue is recognized at the time the products and/or services are delivered, either electronically or through traditional shipping methods, after satisfaction of all the terms and conditions of the underlying arrangement. When the Company provides a combination of products and services to clients, the arrangement is evaluated under the Multiple-Element Arrangements Subtopic within the Revenue Recognition Topic of the Codification, ASC 605-25. ASC 605-25 addresses certain aspects of accounting by a vendor for arrangements under which the vendor will perform multiple revenue-generating activities.

The Company also derives revenue through its Digital Solutions businesses from the sale of software, software implementation services, technical support services and managed application service provider (“ASP”) services. The Company recognizes revenue related to the sales in accordance with the Revenue Recognition Topic within the Software Topic of the Codification, ASC 985-605. In multiple element software arrangements, the Company allocates revenue to each element based on its relative fair value. The fair value of any undelivered element is determined using vendor-specific objective evidence (“VSOE”) or, in the absence of VSOE for all elements, the residual method when VSOE exists for all of the undelivered elements. In the absence of fair value for a delivered element, the Company first allocates revenue based on VSOE of the undelivered elements and the residual revenue to the delivered elements. Where VSOE of the undelivered elements cannot be determined, which is the case for the majority of the Company’s software revenue arrangements, the Company defers revenue for the delivered elements until undelivered elements are delivered and revenue is recognized ratably over the term of the underlying client contract, when obligations have been satisfied. For services performed on a time and materials basis where no other elements are included in the client contract, revenue is recognized upon performance once the criteria of SAB 104 have been met.

Vendor Rebates

The Company has entered into agreements with several of its major suppliers for fixed rate discounts and volume discounts, primarily received in cash, on materials used in its production process. Some of the discounts are determined based upon a fixed discount rate, while others are determined based upon the purchased volume during a given period, typically one year. The Company is following the guidance in the Customer Payments and Incentives Topic within the Revenue Recognition Topic of the Codification, ASC 605-50, as it is recognizing the amount of the discounts as a reduction of the cost of materials either included in raw materials or work in process inventories or as a credit to cost of goods sold to the extent that the product has been sold to a customer. The Company recognizes the amount of volume discounts based upon an estimate of purchasing levels for a given period, typically one year, and past experience with a particular vendor. Some rebate payments are received monthly while others are received quarterly. Historically, the Company has not recorded significant adjustments to estimated vendor rebates.

Customer Rebates

The Company has rebate agreements with certain customers. The agreements offer discount pricing based on volume over a multi-year period. The Company accrues the estimated rebates over the term of the agreement. The Company accounts for changes in the estimated rebate amounts when it has been determined that the estimated sales for the rebate period have changed.

Shipping and Handling Fees and Costs

Shipping and handling fees billed to customers for product shipments are recorded in Net sales in the Consolidated Statements of Operations. Shipping and handling costs are included in inventory for jobs-in-progress and included in Cost of sales in the Consolidated Statements of Operations when jobs are completed and revenue is recognized.

Income Taxes

Income taxes are accounted for using the asset and liability approach. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided if, based on available evidence, it is more likely than not that some portion of the deferred tax assets will not be realized.

Per ASC 740-30-25-17, formerly APB 23, foreign subsidiaries are taxed according to regulations existing in the countries in which they do business. Provision has not been made for United States income taxes on distributions that may be received from foreign subsidiaries that are considered to be permanently reinvested overseas.

The Company, like other multi-national companies, is regularly audited by federal, state and foreign tax authorities, and tax assessments may arise several years after tax returns have been filed. ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures of unrecognized tax benefits.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation

The Company's foreign subsidiaries use the local currency as their functional currency. Accordingly, foreign currency assets and liabilities are translated at the rate of exchange existing at the balance sheet date and income and expense amounts are translated at the average of the monthly exchange rates. Adjustments resulting from the translation of foreign currency financial statements into United States dollars are included in Accumulated comprehensive income, net as a component of Stockholders’ equity.

Fair Value Measurements

Fair value is defined under the Fair Value Measurements and Disclosures Topic of the Codification, ASC 820, as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard established a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.

·	Level 1 – Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.

·	Level 2 – Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments.

Level 3 – Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

For purposes of financial reporting, the Company has determined that the fair value of financial instruments including cash and cash equivalents, accounts receivable, accounts payable and long-term debt approximates carrying value at December 31, 2010 and 2009, except as follows:

		December 31,
(in thousands)		2010		2009

Fair value of fixed-rate notes payable	$	46,086	$	57,449
Carrying value of fixed-rate notes payable	$	44,857	$	56,533

The carrying value of amounts outstanding under the Company’s revolving credit agreement is considered to approximate fair value as interest rates vary, based on prevailing market rates. The fair value of the Company’s fixed rate notes payable is based on quoted market prices (Level 1 within the fair value hierarchy). Under the Financial Instruments Topic of the Codification, ASC 825, entities are permitted to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value measurement option under ASC 825 for any of its financial assets or liabilities.

During 2010 and 2009, the Company has undertaken restructuring activities, as discussed in Note 3 – Acquisition Integration and Restructuring, tested its goodwill as discussed in Note 7 – Goodwill and Other Intangible Assets, and recorded certain asset impairments as discussed in Note 6 – Impairment of Long-Lived Assets. These activities required the Company to perform fair value measurements, based on Level 3 inputs, on a non-recurring basis, on certain asset groups to test for potential impairment. Certain of these fair value measurements indicated that the asset groups were impaired and, therefore, the assets were written down to fair value. Once an asset has been impaired, it is not remeasured at fair value on a recurring basis; however, it is still subject to fair value measurements to test for recoverability of the carrying amount.

Derivative Financial Instruments and Hedging Activities

To mitigate the risk of fluctuations associated with certain balance sheet items, the Company has implemented a derivative financial instruments management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings caused by volatility. The Company’s goal is to manage volatility by modifying the re-pricing characteristics of certain balance sheet items so that fluctuations are not, on a material basis, adversely affected by movements in the underlying factors. The Company may designate hedge accounting, for qualifying hedging instruments, based on the facts and circumstances surrounding a derivative financial instrument. In general, a derivative financial instrument is reported as an asset or a liability at its fair value. Changes in a derivative financial instrument’s fair value are reported in earnings unless the derivative has been designated in a qualifying hedging relationship for accounting purposes. During 2010, the Company executed and terminated two “variable to fixed” interest rate swaps, designated as cash flow hedges, for the total notional amount of $15,000.

Stock Based Compensation

Effective January 1, 2006, the Company adopted the provisions of the Stock Compensation Topic of the Codification, ASC 718, which requires the measurement and recognition of compensation expense for all share-based payment awards to employees and directors based on estimated fair values. ASC 718 supersedes the Company’s previous accounting methodology using the intrinsic value method. Under the intrinsic value method, no share-based compensation expense related to stock option awards granted to employees had been recognized in the Company’s Consolidated Statements of Operations, as all stock option awards granted under the plans had an exercise price equal to the market value of the Common Stock on the date of the grant.

The Company adopted ASC 718 using the modified prospective transition method. Under this transition method, compensation expense recognized during years subsequent to 2005 included compensation expense for all share-based awards granted prior to, but not yet vested, as of December 31, 2005, based on the grant date fair value estimated in accordance with ASC 718 and using an accelerated expense attribution method. Compensation expense during years subsequent to 2005 for share-based awards granted after January 1, 2006 is based on the grant date fair value estimated in accordance with the provisions of ASC 718 and is computed using the straight-line expense attribution method. In accordance with the modified prospective transition method, the Company’s consolidated financial statements for prior periods have not been restated to reflect the impact of ASC 718.

New Accounting Pronouncements

In December 2010, the FASB issued ASU No. 2010-28, Intangibles - Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (a consensus of the FASB Emerging Issue Task Force). ASU 2010-28 amends the criteria for performing Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts and requires performing Step 2 if qualitative factors indicate that it is more likely than not that a goodwill impairment exists. The amendments in ASU 2010-28 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. The Company is currently evaluating the impact of the pending adoption of ASU 2010-28 on the Company’s consolidated financial statements and will adopt ASU 2010-28 during 2011.

In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) improving Disclosures about Fair Value Measurements.

The amendments in ASU 2010-06 add additional disclosures about the different classes of assets and liabilities measured at fair value, the valuation techniques and inputs used, the activity in Level 3 fair value measurements, and the transfers between Levels 1, 2, and 3. The amendment is effective for interim and annual periods beginning after December 15, 2009; except for the requirement to separately disclose amounts in the Level 3 rollforward on a gross basis, which is effective for interim and annual periods beginning after December 15, 2010. Early application is permitted. The adoption of the effective portion of this guidance did not have a material impact on the Company’s consolidated financial statements. The Company is currently evaluating the impact of the provisions, that are effective in fiscal 2011, on the Company’s consolidated financial statements.

Note 2 - Acquisitions

Real Branding LLC.

Effective November 10, 2010, the Company acquired 100 percent of the equity of Real Branding LLC. (“Real Branding”), a United States - based digital marketing agency. Real Branding provides digital marketing services to consumer product and entertainment clients through its locations in Los Angeles and New York. The net assets and results of operations of Real Branding are included in the Consolidated Financial Statements as of November 10, 2010 in the North America operating segment. This business was acquired to strengthen the Company’s ability to offer integrated strategic, creative and executional services across digital consumer touchpoints.

The purchase price of $9,807 consisted of $6,000 paid in cash at closing, $182 accrued for a net working capital adjustment, and $3,625 recorded as an estimated liability to the sellers for contingent consideration based on future performance of the business, as described below.

The Company has recorded a preliminary purchase price allocation based on a fair value appraisal by an independent consulting company. The goodwill ascribed to this acquisition is deductible for tax purposes. A summary of the fair values assigned to the acquired assets is as follows:

Accounts receivable	$	981
Prepaid expenses and other current assets		87
Deferred income taxes		29
Property and equipment		149
Goodwill		4,481
Customer relationships		3,966
Non-compete agreements		100
Trade accounts payable		(77)
Accrued expenses		(1,188)
Other long term liabilities		(3,625)

Total cash paid at closing, net of $1,097 cash acquired	$	4,903

Under the acquisition agreement, the purchase price may be increased by up to $6,000 if a specified target of earnings before interest, taxes, depreciation and amortization is achieved for the years 2011 through 2014. Based on performance projections available at the date of the acquisition, the Company has recorded estimated contingent consideration of $3,990, less a present value discount of $365. The contingent consideration is payable periodically during 2012 through 2015, based on actual future performance. The Company may adjust its estimate of the contingent consideration payable when it finalizes the purchase price allocation in 2011.

The weighted-average amortization period of the customer relationship and non-compete intangible assets is 7.0 years. The intangible asset amortization expense was $83 for the year ended December 31, 2010, and will be approximately $587 each year 2011 through 2014 and approximately $584 for 2015.

Supplemental pro-forma information is not presented because the acquisition is considered to be immaterial to the Company’s consolidated financial statements.

Untitled London Limited

Effective September 17, 2010, the Company acquired the operating assets of Untitled London Limited, a United Kingdom-based agency that provides strategic, creative and technical services for digital marketing. The net assets and results of operations of Untitled London Limited are included in the Consolidated Financial Statements in the Europe operating segment, effective September 17, 2010. This business was acquired to expand the Company’s digital marketing capabilities in Europe.

The purchase price was approximately $860. The Company has recorded a purchase price allocation based on a fair value appraisal performed by an independent consulting firm. The goodwill ascribed to this acquisition is deductible for tax purposes. A summary of the fair values assigned to the acquired net assets is as follows:

Accounts receivable	$	79
Inventory		15
Property and equipment		63
Goodwill		449
Customer relationships		215
Non-compete agreements		39

Total cash paid at closing	$	860

The weighted-average amortization period of the customer relationship and non-compete intangible assets is 8.8 years. The intangible asset amortization expense was $14 for the year ended December 31, 2010, and will be approximately $41 for 2011, $34 for 2012 and $21 for 2013 through 2015.

Supplemental pro-forma information is not presented because the acquisition is considered to be immaterial to the Company’s consolidated financial statements.

Brandmark International Holding B.V.

Effective December 31, 2008, the Company acquired 100 percent of the outstanding stock of Brandmark International Holding B.V. (“Brandmark”), a Netherlands-based brand identity and creative design firm. Brandmark provides services to consumer products companies through its locations in Hilversum, The Netherlands and London, United Kingdom. The net assets and results of operations of Brandmark are included in the Consolidated Financial Statements in the Europe operating segment. This business was acquired to expand the Company’s creative design business in Europe, enhancing the Company’s ability to provide services for its multinational clients.

The purchase price of $10,456 consisted of $8,102 paid in cash to the seller at closing, $2,026 retained in an escrow account, less $245 received from the sellers for a Net Working Capital and Tangible Net Equity adjustment plus $573 paid for acquisition-related professional fees.

The Share Purchase Agreement provides that the purchase price may be increased by up to $703 if a specified target of earnings before interest and taxes was achieved for the fiscal year ended March 31, 2009. At December 31, 2009, $3 was recorded for an estimated purchase price adjustment based on the seller’s preliminary financial statements for the fiscal year ended March 31, 2009 and the additional purchase price was allocated to goodwill. During the first quarter of 2010, a final agreement was reached with the former owners to pay a total of $38 in additional purchase price. The incremental purchase price adjustment of $35 was recorded in the first quarter of 2010 and allocated to goodwill. The $38 total additional purchase price was paid to the former owners in April 2010.

Marque Brand Consultants Pty Ltd.

Effective May 31, 2008, the Company acquired 100 percent of the outstanding stock of Marque Brand Consultants Pty Ltd. (“Marque”), an Australia - based brand strategy and creative design firm that provides services to consumer products companies. The net assets and results of operations of Marque are included in the Consolidated Financial Statements in the Asia Pacific operating segment beginning June 1, 2008. This business was acquired to expand the Company’s creative design business in Australia. Having an expanded creative design capability in Australia will allow the Company to provide services for its multinational clients with Australian operations. Marque is a sister company to Perks Design Partners Pty Ltd., which the Company acquired August 1, 2007.

The purchase price of $2,470 consisted of $994 paid in cash to the seller at closing, $1,108 paid to escrow accounts, $294 paid for a net tangible asset adjustment, and $74 paid for acquisition-related professional fees. The Company recorded a purchase price allocation based on a tangible and intangible asset appraisal performed by an independent consulting firm. The goodwill ascribed to this acquisition is not deductible for tax purposes.

The Share Sale Agreement provides that the purchase price may be increased if certain thresholds of net sales and earnings before interest and taxes are exceeded for calendar years 2008 and 2009. The Company paid $235 and $447 to the former owners for purchase price adjustments earned in years ended December 31, 2008 and December 31, 2009, respectively. The additional purchase price recorded for both years has been allocated to goodwill.

Exit Reserves from Prior Acquisitions

The Company recorded exit reserves related to its acquisitions of Weir Holdings Limited and Seven Worldwide Holdings, Inc., which occurred in 2004 and 2005, respectively. The major expenses included in the exit reserves were employee severance and lease termination expenses. The exit reserve balances related to employee severance were paid in prior years. The exit reserves related to the facility closures are being paid over the term of the leases, with the longest lease expiring in 2015. The adjustments recorded during 2010 are principally due to a reduction in the reserve for a certain vacant facility which the Company re-occupied in September 2010. The remaining reserve balance of $780 is included in Accrued expenses and Other long-term liabilities on the Consolidated Balance Sheets as of December 31, 2010.

The following table summarizes the reserve activity from 2008 through 2010:

		Beginning of						End of
		Period		Adjustments		Payments		Period

2008	$	4,330	$	(1,194)	$	(953)	$	2,183
2009	$	2,183	$	1,056	$	(808)	$	2,431
2010	$	2,431	$	(715)	$	(936)	$	780

Note 3 - Acquisition Integration and Restructuring

Actions Initiated in 2008

In 2008, the Company initiated a cost reduction and restructuring plan involving a consolidation and realignment of its workforce and incurred costs for employee terminations, obligations for future lease payments, fixed asset impairments, and other associated costs. The costs associated with these actions are covered under the Exit or Disposal Cost ObligationTopic of the Codification, ASC 420, and the Compensation Nonretirement Postemployment Benefits Topic, ASC 712.

The following table summarizes the accruals recorded, adjustments, and the cash payments during the years ended December 31, 2010, 2009, and 2008, related to the cost reduction actions initiated during 2008. The adjustments are comprised of reversals of previously recorded expense accruals and foreign currency translation adjustments. The remaining reserve balance of $3,510 is included in Accrued expenses and Other long-term liabilities on the Consolidated Balance Sheets at December 31, 2010.

						Other
		Employee Terminations		Lease Obligations		Related Costs		Total

Liability balance at December 31, 2007	$	--	$	--	$	--	$	--
New accruals		4,552		4,315		895		9,762
Cash payments		(3,259)		(224)		(895)		(4,378)
Liability balance at December 31, 2008		1,293		4,091		--		5,384
New accruals		54		1,885		--		1,939
Adjustments		(310)		(307)		--		(617)
Cash payments		(749)		(1,745)		--		(2,494)
Liability balance at December 31, 2009		288		3,924		--		4,212
New accruals		39		226		--		265
Adjustments		(161)		311		--		150
Cash payments		(24)		(1,093)		--		(1,117)

Liability balance at December 31, 2010	$	142	$	3,368	$	--	$	3,510

Actions Initiated in 2009

During 2009, the Company continued its cost reduction efforts and incurred additional costs for facility closings and employee termination expenses.

The following table summarizes the accruals recorded and the cash payments during the years ended December 31, 2010 and 2009, related to the cost reduction actions initiated during 2009. The remaining reserve balance of $104 is included in Accrued expenses and Other long-term liabilities on the Consolidated Balance Sheets at December 31, 2010.

		Employee		Lease
		Terminations		Obligations		Total

Liability balance at December 31, 2008	$	--	$	--	$	--
New accruals		3,461		192		3,653
Adjustments		(14)		3		(11)
Cash payments		(2,522)		(87)		(2,609)
Liability balance at December 31, 2009		925		108		1,033
New accruals		77		31		108
Adjustments		(198)		(128)		(326)
Cash payments		(700)		(11)		(711)

Liability balance at December 31, 2010	$	104	$	--	$	104

Actions Initiated in 2010

During 2010, the Company continued its cost reduction efforts and incurred additional costs for employee termination expenses.

The following table summarizes the accruals recorded and the cash payments during the years ended December 31, 2010, related to the cost reduction actions initiated during 2010. The remaining reserve balance of $570 is included in Accrued expenses and Other long-term liabilities on the Consolidated Balance Sheets at December 31, 2010.

		Employee
		Terminations

Liability balance at December 31, 2009	$	--
New accruals		1,616
Adjustments		(45)
Cash payments		(1,001)

Liability balance at December 31, 2010	$	570

In addition to the expense of $9,762 recorded during 2008, shown in the table above, the Company recorded fixed asset impairment charges, related to its cost reduction plan, of $628 for the year ended December 31, 2008. For the year ended December 31, 2008, the total expense of $10,390 is presented as Acquisition, integration and restructuring expense in the Consolidated Statement of Operations.

The combined expenses for the cost reduction and restructuring actions initiated in 2008 and 2009, shown in the tables above, were $4,964 for the year ended December 31, 2009. In addition to these expenses, the Company recorded additional restructuring expenses as follows: $882 related primarily to adjustments to acquisition exit reserves, $224 of asset write-offs for leasehold improvements and other fixed assets and $389 for consulting and moving fees related to the Company’s restructuring. For the year ended December 31, 2009, the total expense of $6,459 is presented as Acquisition integration and restructuring expense in the Consolidated Statements of Operations.

The combined expenses for the cost reduction and restructuring actions initiated in 2008, 2009, and 2010, shown in the tables above, were $1,768 for the year ended December 31, 2010. In addition to these expenses, the Company recorded $206 for legal fees related to the Company’s restructuring activities during the year. For the year ended December 31, 2010, the total expense of $1,974 is presented as Acquisition integration and restructuring expense in the Consolidated Statement of Operations.

For the years ended December 31, 2008, 2009 and 2010, the cumulative expense since the cost reductions program’s inception and yearly expense were recorded in the following segments:


		North America		Europe		Asia Pacific		Corporate		Total

Year ended December 31, 2010	$	1,266	$	555	$	(70)	$	223	$	1,974
Year ended December 31, 2009		3,614		1,400		992		453		6,459
Year ended December 31, 2008		5,701		3,552		248		889		10,390

Cumulative since program inception	$	10,581	$	5,507	$	1,170	$	1,565	$	18,823

Sale of Cactus assets

Effective September 30, 2010, the Company sold certain operating assets of its Canadian large format operation, known as Cactus. The assets were sold because the Company is focusing on strategy, creative design and premedia services in the Canadian region.

The selling price was approximately $462 and resulted in a pretax gain of approximately $22, which included a write-off for goodwill allocated to the Cactus business. The Company determined that approximately $50 of its North America segment goodwill should be allocated to the Cactus operation and recorded a charge for this amount in the third quarter of 2010. The following table is a summary of the asset sale:

Net cash received from buyer	$	462
Book value of assets sold		(362)
Expenses of sale		(28)
Goodwill write-off		(50)

Pretax gain on sale of assets	$	22

The pretax gain on sale of assets is recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations for the year ended December 31, 2010. The operating results of the Cactus operation are not reported as discontinued operations because the impact on the Company’s consolidated financial statements is immaterial.

Note 4 - Inventories

Inventories consist of the following:

		December 31,
		2010		2009

Raw materials	$	2,146	$	2,736
Work in process		15,914		16,969
Finished goods		1,112		1,771
		19,172		21,476
Less: LIFO reserve		(922)		(940)

Total	$	18,250	$	20,536

Note 5 - Property and Equipment

Property and equipment consists of the following:

			December 31,
	Useful Life		2010		2009

Land and improvements	10-15 years	$	6,820	$	6,616
Buildings and improvements	15-30 years		15,594		15,148
Machinery and equipment	3-7 years		87,005		85,209
Leasehold improvements	Life of lease		20,708		19,878
Computer software and licenses	3-7 years		23,899		19,836
			154,026		146,687
Accumulated depreciation and amortization			(105,342)		(96,440)

Total		$	48,684	$	50,247

Note 6 - Impairment of Long-lived Assets and Insurance Recoveries

The following table summarizes the impairment of long-lived assets by asset category for the periods presented in this Form 10-K:

		Years Ended December 31,
		2010		2009		2008

Land and buildings	$	--	$	1,305	$	3,470
Internal use software		--		--		2,336
Other fixed assets		680		61		677
Intangible assets, other than goodwill		8		75		161

Total	$	688	$	1,441	$	6,644

During 2010, certain newly purchased and installed production equipment sustained water damage and became no longer operable. The Company recorded an impairment charge in the amount of $680, the net book value of the damaged equipment. The Company also recorded an impairment charge of $8 related to a non-compete agreement that is no longer believed to be recoverable. The expense for these write-downs is included in Impairment of long-lived assets in the Consolidated Statements of Operations in the North America operating segment.

The Company maintains insurance coverage for property loss, professional liability, business interruption, and directors and officers liability and records insurance recoveries in the period in which the insurance carrier validates the claim and confirms the amount of reimbursement to be paid. During 2010, the Company received insurance settlements of $680 related to the water-damaged equipment for which impairment was recorded during 2010 and $859 related to property damage during a 2009 flood at one of its North American operations, as well as $119 for business interruption coverage related to the 2010 damaged production equipment. During 2009, the Company recorded an insurance recovery of $835, related to professional liability coverage. In addition, during 2010 the Company received a directors and officers liability insurance settlement in the amount of $1,196 representing reimbursement of certain expenses related to the Company’s ongoing SEC investigation. See Note 19 – Contingencies for further information related to the SEC investigation.

The table below summarizes where the insurance recoveries for the years ended December 31, 2010 and December 31, 2009 are reflected in the Consolidated Statements of Operations:


		Years Ended December 31,
		2010		2009		2008

Cost of sales:
Business interruption and professional liability coverages	$	119	$	835	$	--

Selling, general and administrative expenses:
Property and professional liability coverages		2,735		--		--

Total insurance recoveries	$	2,854	$	835	$	--

During 2008, the Company made a decision to sell land and buildings at three locations and engaged independent appraisers to assess their market values. Based on the appraisal reports, the Company determined that the carrying values of the properties could not be supported by their estimated fair values. The combined carrying value of $10,025 was written down by $3,470 at December 31, 2008, based on the properties’ estimated fair values, less anticipated costs to sell, of $6,555. During 2009, two of the three properties were sold, with selling prices approximately equal to their carrying values, and the Company reappraised the third property to assess its current value. Based on the updated appraisal, the Company recorded a further write-down of the property in the amount of $1,305 at December 31, 2009.

The expense for these write-downs in both 2009 and 2008 is included in Impairment of long-lived assets in the Consolidated Statements of Operations and was recorded in the North America operating segment. In addition, the Company reclassified the adjusted carrying value of the remaining property from held for sale to held and used at December 31, 2009, because the sale of the property during the next twelve months was unlikely.

During 2009, the Company recorded an impairment charge of $61 related to fixed assets in the North America segment and an impairment charge of $75 related to a customer relationship intangible asset, for which the carrying value could not be supported by future cash flows, in the Europe segment. Both of these charges are included in Impairment of long-lived assets in the Consolidated Statements of Operations. Additionally, the Company incurred $210 of fixed asset impairments in 2009 relating to its restructuring and cost reduction plan, included in Acquisition integration and restructuring expense in the Consolidated Statements of Operations. These charges were principally incurred in the Asia Pacific operating segment. Refer to Note 3 – Acquisition Integration and Restructuring for further information.

During 2008, software that had been capitalized by the Company in accordance with the Internal-Use Software Subtopic of the Codification, ASC 350-40, was reviewed for impairment due to changes in circumstances which indicated that the carrying amount of the assets might not be recoverable. These changes in circumstances included the expectation that the software would not provide substantive service potential and there was a change in the extent to which the software was to be used. In addition, it was determined that the cost to modify the software for the Company’s needs would significantly exceed originally expected development costs. As a result of these circumstances, the Company wrote-down the capitalized costs of the software to fair value. The amount of this write-down recorded in 2008 was $2,336 and is included in Impairment of long-lived assets in the Consolidated Statements of Operations.

The Company also recorded a $468 impairment charge in 2008 to write-down certain fixed assets of its large format print operation to fair value. The expense was recorded in the North America segment. Also, included in the Impairment of long-lived assets in the Consolidated Statement of Operations for 2008, is $209 of additional fixed asset impairments, mainly related to leasehold improvements at a production facility where the lease was terminated prior to the contractual lease termination date. This expense was recorded mainly in the North America segment. In addition, the Company recorded $161 of impairment charges related to customer relationship intangible assets where future cash flows could not support the carrying values. This impairment charge was recorded mainly in the North America operating segment. Additionally, the Company incurred $628 of fixed asset impairments in 2008 relating to its restructuring and cost reduction plan, included in Acquisition integration and restructuring expense in the Consolidated Statements of Operations. Refer to Note 3 – Acquisition Integration and Restructuring for further information.

Note 7 - Goodwill and Other Intangible Assets

The Company’s intangible assets not subject to amortization consist entirely of goodwill. The Company accounts for goodwill in accordance with the Intangibles – Goodwill and Other Topic of the Codification, ASC 350. Under ASC 350, the Company’s goodwill is not amortized throughout the period, but is subject to an annual impairment test. The Company performs an impairment test annually, or when events or changes in business circumstances indicate that the carrying value may not be recoverable. The Company performs its annual impairment test as of October 1st each year.

The Company performed the required goodwill impairment tests for 2010 and 2009 as of October 1, 2010 and October 1, 2009, respectively. The Company allocated its goodwill on a geographic basis to its operating segments, which were determined to be reporting units in accordance with the Intangibles – Goodwill and Other Topic of the Codification, ASC 350. Using projections of operating cash flow for each reporting unit, the Company performed a step one assessment of the fair value of each reporting unit as compared to the carrying value of each reporting unit. The step one impairment analysis indicated no potential impairment of the assigned goodwill for either year.

The Company performed its 2008 impairment test as of October 1, 2008 and determined that goodwill was impaired by $48,041, which was recorded in the fourth quarter of 2008. The Company recorded the impairment charge in its operating segments as follows: North America – $14,334, Europe – $32,703 and Asia Pacific – $1,004. The goodwill impairment reflected the decline in global economic conditions and general reduction in consumer and business confidence experienced during the fourth quarter of 2008.

The estimates and assumptions used by the Company to test its goodwill are consistent with the business plans and estimates used to manage operations and to make acquisition and divestiture decisions. The use of different assumptions could impact whether an impairment charge is required and, if so, the amount of such impairment. If the Company fails to achieve estimated volume and pricing targets, experiences unfavorable market conditions or achieves results that differ from its estimates, then revenue and cost forecasts may not be achieved, and the Company may be required to recognize impairment charges. Additionally, future goodwill impairment charges may be necessary if the Company’s market capitalization decreases due to a decline in the trading price of the Company’s common stock.

Effective September 30, 2010, the Company sold certain operating assets of its Canadian large format operation, known as Cactus. The Company determined that approximately $50 of its North America segment goodwill should be allocated to the Cactus operation and recorded a charge for this amount in the third quarter of 2010. See Note 3 – Acquisition Integration and Restructuring for further information regarding the asset sale.

The changes in the carrying amount of goodwill by operating segment during the years ended December 31, 2010 and 2009 were as follows:

		North				Asia
		America		Europe		Pacific		Total
Cost:
December 31, 2008	$	183,806	$	33,977	$	6,993	$	224,776
Acquisitions		--		177		--		177
Additional purchase accounting adjustments		40		(415)		526		151
Adjustments to exit reserves		(78)		--		--		(78)
Adjustments to exit reserve present value		6		--		--		6
Foreign currency translation		2,989		2,945		901		6,835
December 31, 2009		186,763		36,684		8,420		231,867
Acquisitions		4,481		449		--		4,930
Additional purchase accounting adjustments		--		35		--		35
Goodwill allocated to operations sold		(50)		--		--		(50)
Foreign currency translation		1,037		(1,314)		821		544

December 31, 2010	$	192,231	$	35,854	$	9,241	$	237,326

Accumulated impairment:
December 31, 2008	$	(13,578)	$	(26,316)	$	(845)	$	(40,739)
Foreign currency translation		(701)		(2,515)		(248)		(3,464)
December 31, 2009		(14,279)		(28,831)		(1,093)		(44,203)
Foreign currency translation		(244)		898		(151)		503

December 31, 2010	$	(14,523)	$	(27,933)	$	(1,244)	$	(43,700)

Net book value:
December 31, 2008	$	170,228	$	7,661	$	6,148	$	184,037
December 31, 2009	$	172,484	$	7,853	$	7,327	$	187,664
December 31, 2010	$	177,708	$	7,921	$	7,997	$	193,626

The Company’s other intangible assets subject to amortization are as follows:

			December 31, 2010
	Weighted Average Life		Cost		Accumulated Amortization		Net

Customer relationships	13.8 years	$	55,676	$	(19,215)	$	36,461
Digital images	5.0 years		450		(450)		--
Developed technologies	3.0 years		712		(712)		--
Non-compete agreements	3.6 years		921		(778)		143
Trade names	2.8 years		753		(719)		34
Contract acquisition cost	3.0 years		1,220		(580)		640

	13.1 years	$	59,732	$	(22,454)	$	37,278

			December 31, 2009
	Weighted Average Life		Cost		Accumulated Amortization		Net

Customer relationships	14.3 years	$	51,647	$	(15,326)	$	36,321
Digital images	5.0 years		450		(420)		30
Developed technologies	3.0 years		712		(712)		--
Non-compete agreements	3.6 years		744		(588)		156
Trade names	2.7 years		732		(681)		51
Contract acquisition cost	3.0 years		1,220		(173)		1,047

	13.3 years	$	55,505	$	$(17,900)	$	37,605

Other intangible assets were recorded at fair market value as of the dates of the acquisitions based upon independent third party appraisals. The fair values and useful lives assigned to customer relationship assets are based on the period over which these relationships are expected to contribute directly or indirectly to the future cash flows of the Company. The acquired companies typically have had key long-term relationships with Fortune 500 companies lasting 15 years or more. Because of the custom nature of the work that the Company does, it has been its experience that customers are reluctant to change suppliers. During 2010 the Company recorded an impairment charge of $8 in the North America segment for the remaining carrying value of a non-compete asset which no longer had value. During 2009 the Company recorded an impairment charge of $75 in the Europe operating segment for a digital image asset for which future cash flows did not support the carrying value. In 2008 the Company recorded impairment charges in the North America operating segment of $161 for customer relationship assets for which future cash flows did not support the carrying value. The impairment charges are included in Impairment of long-lived assets in the Consolidated Statements of Operations. Amortization expense for each of the next five years is expected to be approximately $4,807 for 2011, $4,613 for 2012, $4,348 for 2013 and 2014 and $3,537 for 2015.

Note 8 - Accrued Expenses

Accrued expenses consist of the following:

		December 31,
		2010		2009

Accrued employee compensation	$	18,478	$	17,795
Deferred revenue		11,347		10,583
Multiemployer pension withdrawal		8,850		9,151
Other payroll-related expenses		5,732		3,226
Deferred lease costs		3,322		3,817
Accrued sales & use tax		2,443		3,976
Vacant property reserve		2,374		1,564
Accrued customer rebates		1,842		587
Accrued professional fees		1,792		2,481
Restructuring reserves		1,545		3,347
Accrued interest		680		765
Facility exit reserve		664		1,225
Accrued property taxes		629		628
Other		4,309		4,934

Total	$	64,007	$	64,079

Note 9 - Other Long-Term Liabilities

Other long-term liabilities consist of the following:

		December 31,
		2010		2009

Deferred compensation	$	3,931	$	2,630
Acquisition contingent consideration		3,625		--
Deferred revenue		3,276		2,931
Vacant property reserve		2,910		3,660
Restructuring reserve		2,639		1,898
Employment tax reserve		1,709		1,848
Reserve for uncertain tax positions		1,380		1,635
Facility exit reserve		116		1,206
Other		110		112

Total	$	19,696	$	15,920

During 2010 and 2009, the Company recorded adjustments to several vacant property and exit reserves. The adjustments reflect changes in the projections of future costs for the vacant facilities due to reoccupation of vacated space, new sublease agreements executed and other changes in future cost and sublease income assumptions. Expenses of $325 and $1,170, resulting from adjustments to exit reserves and vacant property reserves, were recorded in 2010 and 2009, respectively. An adjustment of $72 to a facility exit reserves was recorded as a credit to goodwill during 2009, as the affected reserve was initially recorded as an exit reserve in connection with an acquisition in accordance with the Recognition Section of the Business Combinations Topic of the Codification, ASC 805-10-25.

Note 10 - Debt

Debt obligations consist of the following:

		December 31,
		2010		2009

Revolving credit agreement	$	21,201	$	19,850
Series A senior note payable - Tranche A		5,530		7,374
Series A senior note payable - Tranche B		4,916		6,145
Series C senior note payable		-		8,602
Series D senior note payable		17,206		17,206
Series E senior note payable		17,206		17,206
Other		608		1,182
		66,667		77,565
Less amounts due in one year or less		(29,587)		(12,858)

Total	$	37,080	$	64,707

Annual maturities of debt obligations at December 31, 2010 are as follows:

2011	$	29,587
2012		32,779
2013		3,072
2014		1,229

	$	66,667

Revolving Credit Facility, Note Purchase Agreements and Other Debt Arrangements

Borrowings and Debt Agreements at December 31, 2010

In December 2003, the Company entered into a private placement of debt (the “2003 Private Placement”) to provide long-term financing. The terms of the Note Purchase Agreement relating to this transaction, as amended, provided for the issuance and sale by the Company of two series of notes: Tranche A, for $15,000, payable in annual installments of $2,143 from 2007 through 2013, and Tranche B, for $10,000, payable in annual installments of $1,429 from 2008 through 2014. The terms of these notes were amended in June 2009. See “2009 Amendments to Revolving Credit Facility and Note Purchase Agreements” below. Under the original terms, the Tranche A note was payable in annual installments of $2,143 from 2007 to 2013, and the Tranche B note was payable in annual installments of $1,429 from 2008 to 2014. Pursuant to the 2009 amendment, $1,871 of the combined principal of the two notes was paid at closing and $624 was paid later in June 2009, with the payments being applied on a prorata basis to reduce the original installment amounts. Under the amended terms, the remaining balance of the Tranche A note is payable in annual installments of $1,843 from 2009 to 2013, and the remaining balance of the Tranche B note is payable in annual installments of $1,229 from 2010 to 2014. As amended, the Tranche A and Tranche B notes bear interest at 8.90 percent and 8.98 percent, respectively. The combined remaining balance of the of the Tranche A and Tranche B notes, $10,446, is included on the December 31, 2010 Consolidated Balance Sheets as follows: $3,072 is included in Current portion of long-term debt and $7,374 is included in Long-term debt.

This credit facility has since been terminated in connection with the Company’s January 2010 refinancing. See “2010 Revolving Credit Facility Refinancing and Note Purchase Agreement Amendments” below. The total balance outstanding under the Company’s current revolving credit facility at December 31, 2010 was $21,201 and is included on the December 31, 2010 Consolidated Balance Sheets as follows: $8,700 is included in Current portion of long-term debt and $12,501 is included in Long-term debt.

In January 2005, the Company entered into a Note Purchase and Private Shelf Agreement (the “2005 Private Placement”) with Prudential Investment Management Inc, pursuant to which the Company sold $50,000 in a series of three Senior Notes. The first note, in the original principal amount of $10,000, matured in January 2010. The second and third notes, each in the original principal amount of $20,000, mature in January 2011 and January 2012, respectively. The terms of these notes were amended in June 2009. See “2009 Amendments to Revolving Credit Facility and Note Purchase Agreements” below. Pursuant to the 2009 amendment, $5,240 of the combined principal of the three notes was paid at closing and $1,746 was paid later in June 2009, with the payments being applied on a prorata basis to reduce the original maturity amounts shown above. Under the revised payment schedule, $8,602 matured in January 2010, and $17,206 will mature in both 2011 and 2012. Additionally as amended, the second and third notes bear interest at 8.99 percent and 9.17 percent, respectively. The total outstanding balance of these notes, $34,412, is included on the December 31, 2010 Consolidated Balance Sheets as follows: $17,206 is included in Current portion of long-term debt and $17,206 is included in Long-term debt.

In December 2007, the Company’s Canadian subsidiary entered into a revolving demand credit facility with a Canadian bank to provide working capital needs up to $1,000 Canadian dollars. The credit line is guaranteed by the Company. There was no balance outstanding on this credit facility at December 31, 2010.

2009 Amendments to Revolving Credit Facility and Note Purchase Agreements

·	reduced the size of the Company’s revolving credit facility by $32,500, from $115,000 (expandable to $125,000) to $82,500;

·	after the payment of $2,630 in June 2009, the size of the Company’s revolving credit facility was further reduced to $80,000;

·	increased the Company’s maximum permitted cash-flow leverage ratio from 3.25 to 5.00 for the first quarter of 2009, decreasing to 3.00 in the fourth quarter of 2009 and thereafter;

·	amended the credit facility’s pricing terms, including increasing the interest rate margin applicable on the revolving credit facility indebtedness to a variable rate of LIBOR plus 300 to 450 basis points (“bpts”), depending on the cash flow leverage ratio, and set the minimum LIBOR at 2.0 percent;

·	increased the unused revolver commitment fee rate to 50 bpts per year;

·	increased the interest rate on indebtedness outstanding under each of the notes outstanding under the Company’s note agreements by 400 bpts;

·	reset the Company’s minimum quarterly fixed charge coverage ratio;

prohibited the Company from repurchasing its shares without lender consent and restricted future dividend payments by the Company (beginning with the first dividend declared after March, 2009) to an aggregate $300 per fiscal quarter, or approximately $0.01 per share based on the number of shares of common stock currently outstanding;

·	required the Company to obtain lender approval of any acquisitions;

·	revised the Company’s minimum consolidated net worth covenant to be based on 90 percent of the Company’s consolidated net worth as of March 31, 2009;

·	reduced the amount of the Company’s permitted capital expenditures to $17,500, from $25,000, during any fiscal year; and

·	provided a waiver for any noncompliance with certain financial covenants.

2010 Revolving Credit Facility Refinancing and Note Purchase Agreement Amendments

Effective January 12, 2010, the Company and certain subsidiary borrowers of the Company entered into an amended and restated credit agreement (the “Credit Agreement”) in order to refinance its revolving credit facility. The Credit Agreement provides for a two and one-half year secured, multicurrency revolving credit facility in the principal amount of $90,000, including a $10,000 swing-line loan subfacility and a $10,000 subfacility for letters of credit. The Company may, at its option and subject to certain conditions, increase the amount of the facility by up to $10,000 by obtaining one or more new commitments from new or existing lenders to fund such increase. Immediately following the closing of the facility, there was approximately $15,000 in outstanding borrowings. Loans under the facility generally bear interest at a rate of LIBOR plus a margin that varies with the Company’s cash flow leverage ratio, in addition to applicable commitment fees, with a maximum rate of LIBOR plus 350 basis points. Loans under the facility are not subject to a minimum LIBOR floor. At December 31, 2010 the applicable margin was 250 basis points, resulting in an interest rate at closing of 2.75 percent.

The Credit Agreement contains certain customary affirmative and negative covenants and events of default. Under the terms of the Credit Agreement, permitted capital expenditures excluding acquisitions are restricted to not more than $18,500 per fiscal year, or $40,000 over the term of the credit facility, and dividends, stock repurchases and other restricted payments are limited to $5,000 per fiscal year. Other covenants include, among other things, restrictions on the Company’s and in certain cases its subsidiaries’ ability to incur additional indebtedness; dispose of assets; create or permit liens on assets; make loans, advances or other investments; incur certain guarantee obligations; engage in mergers, consolidations or acquisitions, other than those meeting the requirements of the Credit Agreement; engage in certain transactions with affiliates; engage in sale/leaseback transactions; and engage in certain hedging arrangements. The Credit Agreement also requires compliance with specified financial ratios and tests, including a minimum fixed charge coverage ratio, a maximum cash flow ratio and a minimum consolidated net worth requirement. The Company was in compliance with all covenants at December 31, 2009 and 2010.

Effective November 17, 2010, the Company entered into Amendment No.1 (the “Credit Facility Amendment”) to the Credit Agreement. Pursuant to the Credit Facility Amendment, the amount of restricted payments, including dividends and stock repurchases, permitted to be made by the Company per year (the “Annual Restricted Payments”) was increased from $5,000 per fiscal year to an amount not to exceed $14,000 for the period January 1, 2011 through the credit facility termination date (July 12, 2012), provided that any such restricted payments may not exceed $10,000 in the aggregate for any four consecutive fiscal quarters during the aforementioned period. In addition to the annual restricted payment provisions, the Credit Facility Amendment provides that the Company may make one or more additional restricted payments on or before December 31, 2011 that in the aggregate amount do not exceed $13,000. The Credit Facility Amendment also decreased the Company’s maximum cash flow leverage ratio for periods ending on and after December 31, 2010.

Deferred Financing Fees

Prior to the June 2009 amendments to its debt agreements, the Company had $173 of unamortized deferred financing fees relating to its original revolving credit agreement and the 2005 and 2003 Private Placements. In accordance with the Debt – Modifications and Extinguishments Subtopic of the Codification, ASC 470-50, the Company has written-off $31 of the previously unamortized deferred finance costs related to its revolving credit facility in proportion to the decrease in its revolving credit limit from $115,000 to $80,000. In accordance with ASC 470-50, fees paid to lenders and third parties to obtain the amended revolving credit facility, amounting to $866, were capitalized as deferred financing fees and were amortized based on the remaining term of the original revolving credit agreement, which expired January 31, 2010. For the years ended December 31, 2010 and 2009, $108 and $758, respectively, of these deferred financing fees had been amortized and are included in Interest expense on the respective Consolidated Statements of Operations.

For the amendments to the 2005 Private Placement and the 2003 Private Placement, the Company has followed the Debt – Modifications and Extinguishments Subtopic of the Codification, ASC 470-50, for situations where the modifications are not accounted for as being similar to debt extinguishments. As a result, no gain or loss has been recognized from the modifications. The fees and costs associated with the modifications have been recorded as follows: 1) the amendment fees of $304 paid to the lenders have been capitalized as deferred financing fees and will be amortized over the life of the amended agreements; 2) fees paid to third parties of $233 have been expensed as incurred; 3) the previously unamortized deferred financing fees of $73 related to the original 2005 and 2003 Private Placements will be amortized over the life of the amended agreements.

In connection with the 2010 refinancing of the revolving credit facility, the Company capitalized $1,171 of legal fees as deferred financing fees during the year ended December 31, 2010 and began amortizing them based on the term of the new credit agreement, which expires on July 12, 2012. At December 31, 2010, $368 of these deferred financing fees had been amortized and are included in interest expense on the Consolidated Statement of Operations for the year ended December 31, 2010.

The total amortization of deferred financing fees was $674, $1,027 and $168 for the years ended December 31, 2010, December 31, 2009 and December 31, 2008, respectively, and is included in Interest expense on the Consolidated Statements of Operations.

Note 11 - Income Taxes

The domestic and foreign components of income (loss) before income taxes are as follows:

			Years Ended December 31,
		2010			2009		2008

United States	$	30,424		$	13,918	$	(23,450)
Foreign		11,980			13,176		(39,666)

Total	$	42,404		$	27,094	$	(63,116)

The provision (benefit) for income taxes is comprised of the following:

			Years Ended December 31,
		2010			2009		2008

Current:
Federal	$	(5,177)		$	103	$	1,219
State		(194)			(118)		887
Foreign		4,006			4,412		3,236
		(1,365)			4,397		5,342
Deferred:
Federal		10,347			2,771		(6,104)
State		1,210			1,097		(1,768)
Foreign		(208)			(668)		(580)
		11,349			3,200		(8,452)

Total	$	9,984		$	7,597	$	(3,110)

The Company’s effective tax rate for the year ended December 31, 2010 is 23.5 percent as compared with 28.0 percent for 2009. The current year’s effective rate reduction was primarily the result of an increase in the amount of tax benefits from the release of uncertain tax positions, net of federal and state benefits, of $6,573.

Reconciliation between the provision for income taxes for continuing operations computed by applying the United States (“U.S.”) federal statutory tax rate to income (loss) before incomes taxes and the actual provision is as follows:

		Years ended December 31,
	2010			2009		2008

Income taxes at U.S. Federal statutory rate	35.0		%	35.0	%	35.0	%
Uncertain tax positions	(15.5)			2.7		(7.1)
Foreign rate differential	(6.5)			(3.5)		(1.1)
Withholding tax expense	4.1			--		--
State income taxes	3.2			2.6		2.0
Nondeductible expenses	1.8			2.2		3.0
Deferred tax asset valuation allowance	1.7			--		(10.8)
Indemnification settlement	--			(6.4)		--
Federal examination settlement	--			(5.1)		--
Remediation adjustments	--			--		0.8
Nondeductible impairment charges	--			--		(16.6)
Other, net	(0.3)			0.5		(0.3)

	23.5		%	28.0	%	4.9	%

Temporary differences and carryforwards giving rise to deferred income tax assets and liabilities are as follows:

		December 31,
		2010		2009

Deferred income tax assets:
Operating loss carryforwards	$	16,703	$	16,997
Income tax credits		6,913		6,601
Capital loss carryforwards		6,814		7,287
Accruals and reserves not currently deductible		2,978		3,160
Deferred expenses		2,723		1,894
Restructuring reserves		1,802		3,561
Multiemployer pension withdrawal liability		--		3,654
Other		5,878		4,648
Deferred income tax assets		43,811		47,802
Valuation allowances		(28,123)		(26,765)

Deferred income tax assets, net		15,688		21,037

Deferred income tax liabilities:
Domestic subsidiary stock		(8,447)		(8,553)
Inventory		(6,304)		(87)
Intangible assets		(4,109)		(3,737)
Depreciation and amortization		(3,042)		(2,784)
Other		(4,966)		(5,724)

Deferred income tax liabilities		(26,868)		(20,885)

Total	$	(11,180)	$	152

As of December 31, 2010, the Company has U.S. federal and state net operating loss carry forwards of $1,552 and $60,497, respectively, $42,787 of foreign net operating loss carry forwards, $24,305 of foreign capital loss carry forwards, and various U.S. and non–U.S. income tax credit carry forwards of $2,132 and $4,781, respectively, which will be available to offset future income tax liabilities. If not used, $1,552 of U.S. federal net operating loss carry forwards will expire in 2023 to 2026, state net operating losses will begin to expire in 2017, and foreign net operating losses have no expiration period. Certain of these carry forwards are subject to limitations on use due to tax rules affecting acquired tax attributes, loss sharing between group members, and business continuation, and therefore the Company has established tax-effected valuation allowances against these tax benefits in the amount of $28,123 at December 31, 2010. The Company has total foreign tax credit carryforwards of $1,911, offset by a valuation allowance of $1,409 in 2010. The Company has the ability to claim a deduction for these credits prior to expiration, and thus the net carrying value of the credits of $502 assumes that a deduction would be claimed instead of a tax credit. If unutilized, these U.S. foreign tax credits will begin to expire in 2016.

The Company’s income in India is currently under a tax holiday until March 2011. The impact of the tax holiday on the effective tax rate is immaterial.

The undistributed earnings of foreign subsidiaries were approximately $55,894 and $44,387 at December 31, 2010 and 2009, respectively. No income taxes are provided on the undistributed earnings because they are considered permanently reinvested.

It is expected that the amount of unrecognized tax benefits that will change in the next twelve months attributable to the anticipated settlement of examinations or statute closures will be in the range of $2,500 to $3,500. Of the total amount of unrecognized tax benefits of $4,249, approximately $500 would reduce the effective tax rate. With the adoption of ASC 805, effective January 1, 2009, increases or decreases to unrecognized tax benefits established in purchase accounting will be recorded as part of the income tax provision as opposed to goodwill.

All federal income tax returns of Schawk, Inc. and its domestic subsidiaries are closed through tax year 2008. In April 2010, Schawk received approval from the Joint Committee of Taxation for the 2008 carryback claim for 2008 net operating losses that resulted in the commencement of an examination of its 2006 to 2008 tax years. The largest contributing factor to the 2008 net operating loss is related to the Company’s filing of a change in accounting method which allows the Company to expense costs as incurred as opposed to capitalizing into inventory those costs associated with providing graphic services, brand strategy and design software to its customers. The Internal Revenue Service approved the method change in January 2010.

State income tax returns are generally subject to examination for a period of 3 to 5 years after filing of the respective return. The impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. Schawk, Inc. and its subsidiaries have various state income tax returns in the process of examination, administrative appeals or litigation.

The Company recognizes accrued interest related to unrecognized tax benefits and penalties in income tax expense in the Consolidated Statements of Operations. During the years ended December 31, 2010 and 2009, the Company recognized $553 and $719 in net interest expense, respectively. The Company had approximately $317 and $1,878 of accrued interest expense and penalties for December 31, 2010, and 2009, respectively.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

		2010		2009		2008

Balance at January 1	$	16,259	$	8,194	$	13,597
Reductions related to settlements		(12,055)		(549)		(3,699)
Additions related to tax positions in prior years		536		8,587		3,009
Reductions due to statute closures		(292)		(69)		(4,606)
Reductions for tax positions in prior years		(112)		(50)		---
Foreign currency translation		(87)		146		(107)

Balance at December 31	$	4,249	$	16,259	$	8,194

Note 12 - Related Party Transactions

The Company leases land and a building from a related party. See Note 13 – Leases and Commitments.

Note 13 - Leases and Commitments

The Company leases land and a building in Des Plaines, Illinois from a related party. Total rent expense incurred under this operating lease was in $574 in 2010, $756 in 2009 and $725 in 2008.

The Company leases various plant facilities and equipment under operating leases that cannot be cancelled and expire at various dates through September 2023. Some of the leases contain renewal options and leasehold improvement incentives. Leasehold improvement incentives received from landlords are deferred and recognized as a reduction of rent expense over the respective lease term. Rent expense is recorded on a straight-line basis, taking into consideration lessor incentives and scheduled rent increases. Total rent expense incurred under all operating leases was approximately $13,185, $13,660 and $14,842, for the years ended December 31, 2010, 2009 and 2008, respectively.

Future minimum payments under leases with terms of one year or more are as follows at December 31, 2010:

		Operating Leases
		Gross rents		Subleases		Net rents

2011	$	13,952	$	(1,080)	$	12,872
2012		12,477		(879)		11,598
2013		8,714		(583)		8,131
2014		6,988		(583)		6,405
2015		3,001		(388)		2,613
Thereafter		5,964		(860)		5,104

	$	51,096	$	(4,373)	$	46,723

The Company has a deferred compensation agreement with the Chairman of the Board of Directors dated June 1, 1983 which was ratified and included in a restated employment agreement dated October 1, 1994. The agreement provides for deferred compensation for 10 years equal to 50 percent of final salary and was modified on March 9, 1998 to determine a fixed salary level for purposes of this calculation. The Company has a deferred compensation liability equal to $815 at December 31, 2010 and December 31, 2009, which is included in Other long-term liabilities on the Consolidated Balance Sheets. The liability was calculated using the net present value of ten annual payments at a 6 percent discount rate assuming, for calculation purposes only, that payments begin one year from the balance sheet date.

The Company also has a non-qualified income deferral plan for which certain highly-compensated employees are eligible.

The plan allows eligible employees to defer a portion of their compensation until retirement or separation from the Company. The plan is unfunded and is an unsecured liability of the Company. The Company’s liability under the plan was $1,362 and $1,134 at December 31, 2010 and December 31, 2009, respectively, and is included in Other long-term liabilities on the Consolidated Balance Sheets.

Note 14 - Employee Benefit Plans

The Company has various defined contribution plans for the benefit of its employees. During 2010, the Company re-instated its matching contribution to the 401K plan which it had suspended during the first quarter of 2009 as part of its cost reduction efforts. The plan in 2010 provides for a match of employee contributions based on the Company’s performance to a target of earnings before interest, taxes, depreciation and amortization, whereas in prior years it was based on a discretionary percentage determined by management. The matching contribution was 2.5 percent of compensation for 2010 and 5.0 percent of compensation in 2008. Contributions to the plans were $2,060, $384 and $4,473 in 2010, 2009 and 2008, respectively. In addition, the Company’s European subsidiaries contributed $771, $671 and $695 to several defined-contribution plans for their employees in 2010, 2009 and 2008, respectively.

The Company is required to contribute to certain union sponsored defined benefit pension plans under various labor contracts covering union employees. Pension expense related to the union plans, which is determined based upon payroll data, was approximately $972, $981 and $1,391 in 2010, 2009 and 2008, respectively.

The Company has participated in the Supplemental Retirement and Disability Fund (SRDF) pursuant to collective bargaining agreements with the Graphic Communications Union (GCU) and its various locals covering employees working at various facilities, including the Company’s facilities in Minneapolis, MN and Cherry Hill, NJ. Effective May 1, 2008, the SRDF decided to meet its obligations under the Pension Protection Act of 2006 by substantially increasing contributions required by participating employers. In the fourth quarter of 2008, the Company decided to terminate participation in the Supplemental Retirement and Disability Fund for employees of its Minneapolis, MN and Cherry Hill, NJ facilities and in March 2009 formally notified the Board of Trustees of the union’s pension fund that they would no longer be making contributions for these facilities to the union’s plan. In accordance with ERISA Section 4203 (a), 29 U.S. C. Section 1383, the Company’s decision triggered the assumption of a partial termination withdrawal liability. The Company recorded a liability as of December 31, 2008, net of discount, for $7,254 to reflect this obligation. At December 31, 2009, the Company recorded an additional expense of $1,800 as a result of updates to the assumptions used in the termination withdrawal calculation. During the fourth quarter of 2010, the Company entered into a settlement and release agreement with the pension fund to settle the withdrawal liability for a total of $9,000, and recorded income of $200 to reduce the Company’s liability to the agreed amount. The expense for 2008 through 2010 associated with the pension withdrawal liability is reflected in Multiemployer pension withdrawal (income) expense on the Consolidated Statement of Operations. At December 31, 2010, the Company had recorded a liability of $8,850, included in Accrued expenses on the Consolidated Balance Sheets. This liability reflects the $9,000 settlement amount less the first installment of $150 paid before year-end 2010. The Company will pay $450 of the remaining liability in the first quarter of 2011, with the balance of $8,400 due in the second quarter of 2011.

The Company established an employee stock purchase plan on January 1, 1999 that permits employees to purchase common shares of the Company through payroll deductions. The number of shares issued for this plan was 26 in 2010, 70 in 2009, and 60 in 2008. The shares were issued at a 5 percent discount from the end-of-quarter closing market price of the Company’s common stock. The discount from market value was $23 in 2010, $29 in 2009 and $41 in 2008.

The Company has collective bargaining agreements with production employees representing approximately 11 percent of its workforce. The significant contracts are with local units of the Graphic Communications Conference of the International Brotherhood of Teamsters, the Communications, Energy & Paperworkers Union of Canada and the GPMU union in the UK and expire in 2011 through 2012. The percentage of employees covered by contracts expiring within one year is approximately 7 percent.

Note 15 - Stock Based Compensation

ASC 718 supersedes the Company’s previous accounting methodology using the intrinsic value method. Under the intrinsic value method, no share-based compensation expense related to stock option awards granted to employees had been recognized in the Company’s Consolidated Statements of Operations, as all stock option awards granted under the plans had an exercise price equal to the market value of the Common Stock on the date of the grant.

The Company adopted ASC 718 using the modified prospective transition method. Under this transition method, compensation expense recognized during the years ended December 31, 2007 and December 31, 2006 included compensation expense for all share-based awards granted prior to, but not yet vested, as of December 31, 2005, based on the grant date fair value estimated in accordance with the original provisions of ASC 718 and using an accelerated expense attribution method. Compensation expense during the three years ended December 31, 2010 for share-based awards granted subsequent to January 1, 2006 is based on the grant date fair value estimated in accordance with the provisions of ASC 718 and is computed using the straight-line expense attribution method. In accordance with the modified prospective transition method, the Company’s Consolidated Financial Statements for prior periods have not been restated to reflect the impact of ASC 718.

2006 Long-Term Incentive Plan

Effective May 17, 2006, the Company’s stockholders approved the Schawk Inc. 2006 Long-Term Incentive Plan (“2006 Plan”). The 2006 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based awards and other cash and stock-based awards to officers, other employees and directors of the Company. Options granted under the plan have an exercise price equal to the market price of the underlying stock at the date of grant and are exercisable for a period of ten years from the date of grant. Options granted pursuant to the 2006 Plan vest over a three-year period. The total number of shares of common stock available for issuance under the 2006 Plan is 570 as of December 31, 2010. No additional shares have been reserved for issuance under the 2006 Plan.

The Company issued 108, 217 and 189 stock options, as well as 85, 153 and 66 restricted shares, during the years ended December 31, 2010, 2009 and 2008, respectively, under the 2006 Plan.

Options

The Company has granted stock options under several share-based compensation plans. The Company’s 2003 Equity Option Plan provided for the granting of options to purchase up to 5,252 shares of Class A common stock to key employees. The Company also adopted an Outside Directors’ Formula Stock Option Plan authorizing unlimited grants of options to purchase shares of Class A common stock to outside directors. Options granted under the plan have an exercise price equal to the market price of the underlying stock at the date of grant and are exercisable for a period of ten years from the date of grant. Options granted pursuant to the 2003 Equity Option Plan and Outside Directors Stock Option Plan vest over a two-year period.

The Company issued 15 stock options each year during 2010, 2009 and 2008, respectively, to its directors under the Outside Directors Stock Option Plan.

The Company recorded $886, $942 and $866 of compensation expense relating to outstanding options during the years ended December 31, 2010 and 2009, and 2008, respectively.

The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model with the assumptions included in the table below. The Company uses historical data among other factors to estimate the expected price volatility, the expected option life and the expected forfeiture rate. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option.

The following assumptions were used to estimate the fair value of options granted during the years ended December 31, 2010, 2009 and 2008 using the Black-Scholes option pricing model:

		2010			2009			2008

Expected dividend yield		0.76 - 1.24	%		1.34 - 1.39	%		0.81 - 0.83	%
Expected stock price volatility		47.75-51.32	%		43.75-43.80	%		31.50-34.80	%
Risk-free interest rate range		1.79 - 3.26	%		2.79 - 3.33	%		2.98 - 3.75	%
Weighted-average expected life		6.53 - 7.40	years		6.81 - 7.21	years		6.50 - 7.50	years
Forfeiture rate		1.00 - 3.00	%		0.85 - 1.00	%		1.00 - 2.00	%
Total fair value of options granted	$	822		$	679		$	1,174

The following table summarizes the Company’s activities with respect to its stock option plans for 2010, 2009 and 2008 (in thousands, except price per share and contractual term):

	Number of Shares		Weighted Average Exercise Price Per Share	Weighted Average Remaining Term		Aggregate Intrinsic Value

Outstanding January 1, 2008	2,973	$	12.45
Granted	204	$	15.87
Exercised	(143)	$	9.97
Cancelled	(115)	$	15.85
Outstanding December 31, 2008	2,919	$	12.40	4.30	$	3,374
Granted	232	$	6.95
Exercised	(169)	$	8.33
Cancelled	(477)	$	12.17
Outstanding December 31, 2009	2,505	$	12.81	4.87	$	5,944
Granted	128	$	14.18
Exercised	(559)	$	9.46
Cancelled	(20)	$	13.22
Outstanding December 31, 2010	2,054	$	13.77	4.85	$	13,978
Vested at December 31, 2010	1,734	$	14.19	3.63	$	11,084
Exercisable at December 31, 2010	1,734	$	14.19	3.63	$	11,084

The weighted-average grant-date fair value of options granted during the years ended December 31, 2010, 2009 and 2008 was $6.67, $2.93 and $5.76, respectively. The total intrinsic value for options exercised during the years ended December 31, 2010, 2009 and 2008, respectively, was $3,819, $433 and $456.

Cash received from option exercises under all plans for the years ended December 31, 2010, 2009 and 2008 was approximately $5,288, $1,389 and $1,432, respectively. The actual tax benefit realized for the tax deductions from option exercises under all plans totaled approximately $1,109, $222 and $100, respectively, for the years ended December 31, 2010, 2009 and 2008.

The following table summarizes information concerning outstanding and exercisable options at December 31, 2010:

	Options Outstanding				Options Exercisable
Range of exercise price	Number outstanding	Weighted average Remaining contractual life (years)		Weighted average exercise price	Number exercisable		Weighted average exercise price

$6.20 - $8.26	176	8.3	$	6.96	43	$	6.98
8.26 - 10.33	520	1.5	$	9.35	520	$	9.35
10.33 - 12.39	40	1.9	$	10.62	40	$	10.62
12.39 - 14.45	501	4.3	$	13.95	409	$	14.19
14.45 - 16.52	166	7.3	$	15.88	92	$	15.81
16.52 - 18.58	203	6.2	$	18.04	192	$	18.04
18.58 - 20.65	433	4.5	$	18.90	433	$	18.90
20.65 - 21.08	15	8.8	$	21.04	5	$	21.08

	2,054				1,734

As of December 31, 2010, 2009 and 2008 there was $879, $974 and $1,311, respectively, of total unrecognized compensation cost related to nonvested options outstanding. That cost is expected to be recognized over a weighted average period of 2 years. A summary of the Company’s nonvested option activity for the years ended December 31, 2010, 2009 and 2008 is as follows (in thousands, except price per share and contractual term):

	Number of Shares		Weighted Average Grant Date Fair Value Per Share
Nonvested at January1, 2008	255	$	6.25
Granted	204	$	5.76
Vested	(107)	$	6.23
Forfeited	(28)	$	6.15
Nonvested at December 31, 2008	324	$	5.95
Granted	232	$	2.93
Vested	(146)	$	5.87
Forfeited	(24)	$	4.22
Nonvested at December 31, 2009	386	$	4.26
Granted	128	$	6.67
Vested	(186)	$	4.49
Forfeited	(8)	$	4.54

Nonvested at December 31, 2010	320	$	4.93

Restricted Stock

As discussed above, the Company’s 2006 Long-Term Incentive Plan provides for the grant of various types of share-based awards, including restricted stock. Restricted shares are valued at the price of the common stock on the date of grant and vest at the end of a three year period. During the vesting period the participant has the rights of a shareholder in terms of voting and dividend rights but is restricted from transferring the shares. The expense is recorded on a straight-line basis over the vesting period.

The Company recorded $1,000, $795 and $519 of compensation expense relating to restricted stock during years ended December 31, 2010, 2009 and 2008, respectively.

A summary of the restricted share activity for the years ended December 31, 2010, 2009 and 2008 is presented below:

	Number of Shares		Weighted Average Grant Date Fair Value per share

Outstanding at January 1, 2008	58	$	18.04
Granted	66	$	15.90
Forfeited	(6)	$	18.32
Outstanding at December 31, 2008	118	$	16.84
Granted	153	$	6.94
Vested – restriction lapsed	(23)	$	10.37
Forfeited	(11)	$	18.32
Outstanding at December 31, 2009	237	$	10.70
Granted	85	$	13.83
Vested – restriction lapsed	(39)	$	16.93
Forfeited	(7)	$	10.39

Outstanding at December 31, 2010	276	$	10.90

As of December 31, 2010, 2009 and 2008, there was $1,316, $1,227 and $1,086, respectively, of total unrecognized compensation cost related to the outstanding restricted shares that will be recognized over a weighted average period of approximately 2.0 years.

Employee Share-Based Compensation Expense

The table below shows the amounts recognized in the financial statements for the three years ended December 31, 2010 for share-based compensation related to employees. The expense is included in selling, general and administrative expenses in the Consolidated Statement of Operations.

		2010		2009		2008

Total cost of share-based compensation	$	1,886	$	1,737	$	1,385
Income tax		(438)		(351)		(263)

Amount charged against income	$	1,448	$	1,386	$	1,122

Impact on net income per common share:
Basic	$	0.06	$	0.06	$	0.04
Diluted	$	0.06	$	0.06	$	0.04

There were no amounts related to employee share-based compensation capitalized as assets during the three years ended December 31, 2010.

Note 16 – Indemnity Settlement

On January 31, 2005, the Company acquired 100 percent of the outstanding stock of Seven Worldwide (“Seven”). The stock purchase agreement entered into by the Company with Kohlberg & Company, L.L.C. (“Kohlberg”) to acquire Seven provided for a payment of $10,000 into an escrow account. The escrow was established to insure that funds were available to pay Schawk any indemnity claims it may have under the stock purchase agreement.

During 2006, Kohlberg filed a Declaratory Judgment Complaint in the state of New York seeking the release of the $10,000 held in escrow. The Company filed a cross-motion for summary judgment asserting that it had valid claims against the amounts held in escrow and that, as a result, such funds should not be released to Kohlberg, but rather paid out to the Company. Kohlberg denied that it had any indemnity obligations to the Company. On April 9, 2009, the court entered an order denying both parties’ cross-motions for summary judgment. As of June 30, 2009, the Company had a receivable from Kohlberg on its Consolidated Balance Sheets in the amount of $4,214, for a Seven Worldwide Delaware unclaimed property liability settlement and certain other tax settlements paid by the Company for pre-acquisition tax liabilities and related professional fees. In addition, in February 2008, the Company paid $6,000 in settlement of Internal Revenue Service audits of Seven Worldwide, Inc., that had been accrued as of the acquisition date for the pre-acquisition years of 1996 to 2003.

On September 8, 2009, a settlement was reached between the Company and Kohlberg with respect to the funds held in escrow, whereby the escrow agent was directed to disperse an escrow amount of $9,200 to the account of the Company and the remainder of the escrow amount to be paid to the account of Kohlberg. Upon disbursement of such funds in September 2009, the escrow account terminated. The disbursement of the escrow amount resolved all disputes between the Company and Kohlberg concerning the disposition of the escrowed funds.

The Company accounted for the $9,200 escrow account distribution as a reduction of the $4,214 balance in the account receivable outstanding from Kohlberg and recorded the remaining $4,986 as income on the Indemnity settlement income line on the December 31, 2009 Consolidated Statements of Operations.

Note 17- Earnings (Loss) Per Share

Basic earnings (loss) per share and diluted earnings (loss) per share are shown on the Consolidated Statements of Operations. Basic earnings (loss) per share is computed by dividing net income by the weighted average shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income by the weighted average number of common shares and common stock equivalent shares (stock options) outstanding for the period. There were no reconciling items to net income (loss) to arrive at income (loss) available to common stockholders.

The following table sets forth the number of common and common stock equivalent shares used in the computation of basic and diluted earnings per share:

		2010		2009		2008

Net income (loss)	$	32,420	$	19,497	$	(60,006)

Weighted average shares-Basic		25,465		24,966		26,739
Effect of dilutive stock options		418		35		--

Weighted average shares-Diluted		25,883		25,001		26,739

Basic earnings (loss) per common share	$	1.27	$	0.78	$	(2.24)
Dilutive earnings (loss) per common share	$	1.25	$	0.78	$	(2.24)

Options to purchase 905 shares of Class A common stock at an exercise price from $12.87 - $21.08 per share were outstanding at December 31, 2010, but were not included in the computation of diluted earnings per share because the options were anti-dilutive. The options expire at various dates through October 18, 2020.

Options to purchase 2,236 shares of Class A common stock at an exercise price from $6.94 - $21.08 per share were outstanding at December 31, 2009, but were not included in the computation of diluted earnings per share because the options were anti-dilutive. The options expire at various dates through April 9, 2019.

Since the Company was in a loss position for the year ended December 31, 2008, there was no difference between the number of shares used to calculate basic and diluted loss per share for those periods. At December 31, 2008, potentially dilutive options to purchase 478 shares of Class A common stock were not included in the diluted per share calculations because they would be antidilutive. In addition, Options to purchase 1,436 shares of Class A common stock at exercise prices ranging from $14.25 - $21.08 per share were outstanding at December 31, 2008, but were not included in the computation of diluted earnings per share because the options were anti-dilutive. The options expire at various dates through September 9, 2018.

Note 18 - Segment and Geographic Reporting

The Company’s service offerings include strategic, creative and executional services related to three core competencies: graphic services, brand strategy and design, and software. Graphic services and brand strategy and design represented approximately 97 percent of the Company’s revenues in 2010, with software sales representing the remaining 3 percent.

These services are provided to clients in the consumer products packaging, retail, pharmaceutical and advertising markets. In 2010 and 2009, the Company’s largest client accounted for approximately $44,328, or 9.6 percent, and $42,496, or 9.4 percent, respectively, of its total revenues, in the North America operating segment. In 2010 and 2009, the 10 largest clients in the aggregate accounted for 44.0 percent and 41.3 percent, respectively, of revenues. The Company’s services are provided with an employment force of approximately 3,200 employees worldwide, of which approximately 11 percent are production employees represented by labor unions. The percentage of employees covered by union contracts that expire within one year is approximately 7 percent.

The Company organizes and manages its operations primarily by geographic area and measures profit and loss of its segments based on operating income (loss). The accounting policies used to measure operating income of the segments are the same as those used to prepare the consolidated financial statements.

Segment Reporting Topic of the Codification, ASC 280, requires that a public business enterprise report financial information about its reportable operating segments. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance.

The Company’s North America segment includes all of the Company’s operations located in North America, including its Canadian and Mexican operations, its U.S. branding and design capabilities and its U.S. digital solutions business. The Company’s Europe segment includes all operations located in Europe, including its European branding and design capabilities and its digital solutions business in London. The Company’s Asia Pacific segment includes all operations in Asia and Australia, including its Asia Pacific branding and design capabilities. The Company has determined that each of its operating segments is also a reportable segment under ASC 280.

Corporate consists of unallocated general and administrative activities and associated expenses, including executive, legal, finance, information technology, human resources and certain facility costs. In addition, certain costs and employee benefit plans are included in Corporate and not allocated to operating segments.

The Company has disclosed operating income (loss) as the primary measure of segment profitability. This is the measure of profitability used by the Company’s CODM and is most consistent with the presentation of profitability reported within the consolidated financial statements.

Segment information relating to results of continuing operations was as follows:

		2010		2009		2008
Sales to external customers:
North America	$	399,658	$	390,713	$	425,055
Europe		66,238		67,409		71,040
Asia Pacific		31,393		29,348		28,630
Intercompany sales elimination		(36,663)		(35,024)		(30,541)

Total	$	460,626	$	452,446	$	494,184

Operating segment income (loss):
North America	$	68,428	$	56,734	$	23,848
Europe		3,812		3,836		(37,324)
Asia Pacific		4,855		7,389		1,366
Corporate		(27,529)		(32,175)		(44,445)
Operating income (loss)		49,566		35,784		(56,555)
Interest expense, net		(7,162)		(8,690)		(6,561)

Income (loss) before income taxes	$	42,404	$	27,094	$	(63,116)

Depreciation and amortization expense:
North America	$	10,931	$	11,601	$	12,783
Europe		2,760		3,075		3,344
Asia Pacific		1,208		1,008		935
Corporate		2,712		2,969		3,689

Total	$	17,611	$	18,653	$	20,751

The operating segment income (loss) for 2008 includes goodwill impairment charges as follows: North America segment-$14,334; Europe segment-$32,703; and Asia Pacific segment-$1,004.

The Corporate operating loss for 2008 includes the following charges: $7,254 for employer pension withdrawal expense; $6,800 for expenses related to remediation of material weaknesses and SEC investigation; and $2,336 for Impairment of long-lived assets.

The Corporate operating loss for 2010 includes $200 recorded as income for pension withdrawal as compared to 2009 which included a $1,800 expense for pension withdrawal and a credit of $4,986 for an indemnity settlement.

The North America operating income for 2009 includes a $1,305 charge for impairment of land and buildings.

Segment information related to total assets and expenditure for long-lived assets was as follows:

		2010		2009

Total Assets:
North America	$	348,440	$	320,655
Europe (1)		74,319		44,508
Asia Pacific		23,903		21,839
Corporate (2)		3,197		29,217

Total	$	449,859	$	416,219

(1) The increase in total assets is mainly the result of a temporary intercompany cash transfer in December 2010.
(2) The decrease in total assets is mainly the result of year-over-year change in deferred tax assets and a temporary intercompany cash transfer in 2010.

		2010		2009		2008
Expenditures for long-lived assets:
North America	$	5,464	$	3,653	$	10,404
Europe		1,712		618		2,233
Asia Pacific		1,924		898		1,425
Corporate		3,105		88		850

Total	$	12,205	$	5,257	$	14,912

Summary financial information for continuing operations by country for 2010, 2009 and 2008 is as follows:

		United States		Canada		Europe		Other		Total

2010
Sales	$	333,833	$	34,790	$	65,209	$	26,794	$	460,626
Long-lived assets	$	42,176	$	2,982	$	4,308	$	5,629	$	55,095

2009
Sales	$	328,442	$	35,071	$	62,558	$	26,375	$	452,446
Long-lived assets	$	44,720	$	3,571	$	4,305	$	3,656	$	56,252

2008
Sales	$	348,469	$	45,976	$	67,764	$	31,975	$	494,184
Long-lived assets	$	51,059	$	3,890	$	4,889	$	3,650	$	63,488

Sales are attributed to countries based on the point of origin of the sale. Approximately 9.6 percent of total revenues came from the Company’s largest single client for the year ended December 31, 2010.

Long-lived assets include property, plant and equipment assets stated at net book value and other non-current assets that are identified with the operations in each country.

Note 19 - Contingencies

United States Securities and Exchange Commission

The United States Securities and Exchange Commission (the “SEC”) has been conducting a fact-finding investigation to determine whether there have been violations of certain provisions of the federal securities laws in connection with the Company’s restatement of its financial results for the years ended December 31, 2005 and 2006 and for the first three quarters of 2007. On March 5, 2009, the SEC notified the Company that it had issued a Formal Order of Investigation. The Company has been cooperating fully with the SEC and is committed to continue to cooperate fully until the SEC completes its investigation. The Company has incurred professional fees and other costs in responding to the SEC’s previously informal inquiry and expects to continue to incur professional fees and other costs in responding to the SEC’s ongoing formal investigation, which may be significant, until resolved.

Note 20 - Quarterly Financial Data (unaudited)

Schawk, Inc. maintains its financial records on the basis of a fiscal year ending December 31. The unaudited quarterly data for 2010 and 2009 is presented below:

		Quarters ended
Year 2010		March 31, 2010		June 30, 2010 (1)		September 30, 2010		December 31, 2010 (2)
(in thousands, except per share amounts)
Net sales	$	111,708	$	117,840	$	112,562	$	118,516
Cost of sales		69,833		71,016		68,768		72,453
Gross profit		41,875		46,824		43,794		46,063

Selling, general and administrative expenses		32,634		30,604		29,030		31,954
Acquisition integration and restructuring expense		219		502		16		1,237
Foreign exchange loss (gain)		1,817		(267)		694		62
Impairment of long-lived assets		680		--		--		8
Multiemployer pension withdrawal (income) expense		--		--		500		(700)

Operating income		6,525		15,985		13,554		13,502

Other income (expense):
Interest income		8		8		15		8
Interest expense		(1,988)		(1,771)		(1,642)		(1,800)

Income before income taxes		4,545		14,222		11,927		11,710
Income tax provision (benefit)		2,025		(1,583)		4,154		5,388

Net income	$	2,520	$	15,805	$	7,773	$	6,322

Earnings per share
Basic	$	0.10	$	0.62	$	0.30	$	0.25
Diluted	$	0.10	$	0.61	$	0.30	$	0.24

(1)

Results for the second quarter of 2010 were favorably impacted by a decrease in the effective tax rate for the quarter. The decrease in the effective tax rate was principally due to a discrete period tax benefit related to the release of uncertain tax positions, net of federal and state benefits, of $6,346, of which $5,630 resulted from the receipt of approval from the Joint Committee on Taxation related to a U. S. federal audit and $716 resulted from other favorable state and international tax settlements and statute closures.

(2)

Results for the fourth quarter of 2010 include a pretax charge of $1,237 for acquisition integration and restructuring expense, a pretax charge of $915 for business and systems integration expenses related to the Company’s information technology and business process improvement initiative, and a pretax credit of $700 adjusting the Company’s withdrawal settlement from a multiemployer pension plan. See Note 3 - Acquisition Integration and Restructuring and Note 14 – Employee Benefit Plans for further information.

				Quarters ended
Year 2009		March 31,		June 30,		September 30,		December 31,
(in thousands, except per share amounts)		2009		2009		2009		2009 (3)

Net sales	$	105,088	$	111,989	$	113,463	$	121,906
Cost of sales		71,994		69,055		67,957		72,366
Gross profit		33,094		42,934		45,506		49,540

Selling, general and administrative expenses		33,969		32,151		32,193		32,805
Foreign exchange loss (gain)		(126)		(319)		(644)		547
Acquisition integration and restructuring expense		817		1,501		1,328		2,813
Indemnity settlement income		--		--		(4,986)		--
Multiemployer pension withdrawal (income) expense		--		--		--		1,800
Impairment of long-lived assets		58		78		--		1,305

Operating income (loss)		(1,624)		9,523		17,615		10,270

Other income (expense):
Interest income		70		30		124		311
Interest expense		(1,449)		(2,468)		(2,880)		(2,428)

Income (loss) before income taxes		(3,003)		7,085		14,859		8,153
Income tax provision (benefit)		(707)		2,317		1,553		4,434

Net income (loss)	$	(2,296)	$	4,768	$	13,306	$	3,719

Earnings (loss) per share
Basic	$	(0.09)	$	0.19	$	0.53	$	0.15
Diluted	$	(0.09)	$	0.19	$	0.53	$	0.15

(3)

Results for the fourth quarter of 2009 include a pretax charge of $1,800 for withdrawal from a multiemployer pension plan, a pretax charge of $2,813 for acquisition integration and restructuring expense and a pretax charge of $1,305 for impairment of long-lived assets. See note 14 - Employee Benefit Plans, Note 3 - Acquisition Integration and Restructuring and Note 6 – Impairment of long-lived assets for further information.

Note 21 – Derivative Financial Instruments

Interest Rate Swaps

In order to manage the risk of rising interest rates on a portion of the Company’s variable rate revolving debt, the Company entered into two “variable to fixed” interest rate swaps with financial institution counterparties for the total notional amount of $15,000 in May of 2010. The swaps, which were set to expire in June 2012, were designated as cash flow hedges. Under the Derivatives and Hedging Topic of the FASB Codification, ASC 815, the effective portion of the derivative fair value gains or losses from these cash flow hedges was deferred in Accumulated comprehensive income, net. The company assessed hedge effectiveness quarterly by comparing the critical terms of the swaps and the debt. Since the Company assessed the hedge to be fully effective, the derivative fair value gains or losses were deferred in Accumulated comprehensive income, net on the Consolidated Balance Sheets during the affected quarters. In December 2010, the Company terminated both interest rate swaps and the related after-tax loss of $110 was reclassified from Accumulated comprehensive income, net into earnings.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) as of the end of the period covered by this Form 10-K. The evaluation was conducted by management under the supervision of the Audit Committee, and with the participation of the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this Form 10-K.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934. Internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and financial officers, or persons performing similar functions, and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States (“GAAP”). Internal control over the financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail, accurately and fairly, reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are properly recorded to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010. In making this assessment, management used the control criteria framework of the Committee of Sponsoring Organizations (COSO) of the Treadway Commission published in its report entitled Internal Control—Integrated Framework . Based on its evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2010. Ernst & Young, the independent registered public accounting firm that audited the financial statements included in this annual report, has issued an auditors’ report on the Company’s internal control over financial reporting as of December 31, 2010.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

on Internal Control over Financial Reporting

Board of Directors and Stockholders of

Schawk, Inc.

We have audited Schawk, Inc.’s internal control over financial reporting as of December 31, 2010 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Schawk, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

In our opinion, Schawk, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Schawk, Inc. as of December 31, 2010 and December 31, 2009, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010, and our report dated March 9, 2011 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Chicago, Illinois

March 9, 2011

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information contained in the Company’s proxy statement for the 2011 annual meeting of stockholders (the “2011 Proxy Statement”) regarding the Company’s directors and executive officers, committees of the Company’s board of directors, audit committee financial experts, Section 16(a) beneficial ownership reporting compliance and stockholder director nomination procedures set forth under the captions and subcaptions “Directors and Executive Officers,” “Corporate Governance,” and “Section 16(a) Beneficial Ownership Reporting Compliance” is incorporated herein by reference.

The Company has adopted a code of ethics (the “Code of Ethics”), as required by the listing standards of the New York Stock Exchange and the rules of the SEC. This Code of Ethics applies to all of the Company’s directors, officers and employees. The Company has also adopted a charter for its Audit Committee. The Company has posted the Code of Ethics and the Audit Committee Charter on its website (www.schawk.com) and will post on its website any amendments to, or waivers from, its Code of Ethics applicable to any of the Company’s directors or executive officers. The foregoing information will also be available in print to any stockholder who requests such information.

As required by New York Stock Exchange rules, in 2010 the Company’s Chief Executive Officer submitted to the NYSE the annual certification relating to the Company’s compliance with NYSE’s corporate governance listing requirements.

Item 11. Executive Compensation

The information contained in the Company’s 2011 Proxy Statement under the captions “Compensation Discussion and Analysis” and “Executive Compensation,” including under the subcaptions “Director Compensation,” “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” is incorporated herein by reference (except that the Compensation Committee Report shall not be deemed to be “filed” with the Securities and Exchange Commission).

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information contained in the Company’s 2011 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management” is incorporated herein by reference. The information regarding securities authorized for issuance under the Company’s equity compensation plans is incorporated herein by reference to Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchasers of Equity Securities,” of this Form 10-K.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information contained in the Company’s 2011 Proxy Statement under the caption “Transactions with Related Persons” and the information related to director independence under the caption “Corporate Governance” is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information contained in the Company’s 2011 Proxy Statement under the caption “Independent Public Accountants” is incorporated herein by reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules

			Page
(a)	1.	The following financial statements of Schawk, Inc. are filed as part of this
		report under Item 8-Financial Statements and Supplementary Data:

		Report of Independent Registered Public Accounting Firm	52
		Consolidated Balance Sheets— December 31, 2010 and 2009	53
		Consolidated Statements of Operations—Years Ended December 31, 2010, 2009 and 2008	54
		Consolidated Statements of Cash Flows—Years Ended December 31, 2010, 2009 and 2008	55
		Consolidated Statements of Stockholders’ Equity—Years Ended December 31, 2010, 2009 and 2008	56
		Notes to Consolidated Financial Statements— December 31, 2010	57

	2.	Financial statement schedules required to be filed by Item 8 of this form, and by Item 15(b) below:

		Schedule II—Valuation and qualifying accounts.	100

	3.	Exhibits

Exhibit	Description	Incorporated herein by reference (1)
3.1	Certificate of Incorporation of Schawk, Inc., as amended.	Exhibit 4.2 to Registration Statement No. 333-39113
3.3	By-Laws of Schawk, Inc., as amended.	Exhibit 3.2 to Form 8-K filed with the SEC December 18, 2007
4.1	Specimen Class A Common Stock Certificate.	Exhibit 4.1 to Registration Statement No. 33-85152
10.1	Lease Agreement dated as of July 1, 1987, by and between Process Color Plate, a division of Schawk, Inc. and The Clarence W. Schawk 1979 Children’s Trust.	Registration Statement No. 33-85152
10.2	Lease Agreement dated as of June 1, 1989, by and between Schawk Graphics, Inc., a division of Schawk, Inc. and C.W. Properties.	Registration Statement No. 33-85152
10.3	Schawk, Inc. 1991 Outside Directors’ Formula Stock Option Plan, as amended.*	Exhibit 10.3 to Form 10-Q filed with the SEC on July 2, 2008
10.4	Form of Amended and Restated Employment Agreement between Clarence W. Schawk and Schawk, Inc.*	Registration Statement No. 33-85152
10.4.1	Addendum to Restated Employment Agreement dated March 9, 1998 between Schawk, Inc. and Clarence W. Schawk.*	Exhibit 10.4.1 to Form 10-K filed with the SEC on April 28, 2008
10.5	Form of Amended and Restated Employment Agreement between David A. Schawk and Schawk, Inc.*	Registration Statement No. 33-85152
10.6	Letter of Agreement dated September 21, 1992, by and between Schawk, Inc. and Judith W. McCue.	Registration Statement No. 33-85152
10.7	Schawk, Inc. Retirement Trust effective January 1, 1996.*	Exhibit 10.37 to Form 10-K filed with the SEC on March 28, 1996
10.8	Schawk, Inc. Retirement Plan for Imaging Employees Amended and Restated effective January 1, 1996.*	Exhibit 10.38 to Form 10-K filed with the SEC on March 28, 1996
10.9	Stockholder Investment Program dated July 28, 1995.	Registration Statement No. 33-61375

10.10	Schawk, Inc. Employee Stock Purchase Plan effective January 1, 1999.*	Registration Statement No. 333-68521
10.11	Note Purchase Agreement dated as of December 23, 2003 by and between Schawk, Inc. and Massachusetts Mutual Life Insurance Company.	Exhibit 10.47 to Form 10-K filed with the SEC on March 8, 2004
10.12	Schawk, Inc. 2001 Equity Option Plan.	Appendix B to Proxy Statement for the 2001 Annual Meeting of Stockholders
10.13	Schawk, Inc. 2003 Equity Option Plan.	Appendix A to Proxy Statement for the 2003 Annual Meeting of Stockholders (File No. 001)
10.14	Stock Purchase Agreement by and among Schawk, Inc., Seven Worldwide, Inc., KAGT Holdings, Inc. and the Stockholders of KAGT Holdings, Inc. dated as of December 17, 2004.	Exhibit 2.1 to Form 8-K filed with the SEC on December 20, 2004
10.15	Business Sale Deed by and among Schawk, Inc., Schawk UK Limited, Sokaris XXI, S.L., Schawk Belgium B.V.B.A. and Weir Holdings Limited dated December 31, 2004.	Exhibit 2.1 to Form 8-K filed with the SEC on January 6, 2005
10.16	Amended and Restated Registration Rights Agreement, dated as of January 31, 2005, among Schawk, Inc. and certain principal stockholders of Schawk, Inc.	Exhibit 10.1 to Form 8-K filed with the SEC on February 2, 2005
10.17	Credit Agreement, dated as of January 28, 2005, among Schawk, Inc., certain subsidiaries of Schawk, Inc. from time to time party thereto, certain financial institutions from time to time party thereto as lenders, and JPMorgan Chase Bank, N.A., as agent.	Exhibit 10.4 to Form 8-K filed with the SEC on February 2, 2005
10.18	Note Purchase and Private Shelf Agreement, dated as of January 28, 2005, among Schawk, Inc., Prudential Investment Management, Inc., The Prudential Insurance Company of America, and RGA Reinsurance Company.	Exhibit 10.5 to Form 8-K filed with the SEC on February 2, 2005
10.19	First Amendment, dated as of January 28, 2005, to Note Purchase Agreement dated as of December 23, 2003 among Schawk, Inc. and the noteholders party thereto.	Exhibit 10.6 to Form 8-K filed with the SEC on February 2, 2005
10.20	Asset Purchase Agreement, dated as of March 3, 2006, by and between CAPS Group Acquisition, LLC and Schawk, Inc.	Exhibit 10.1 to Form 10-Q filed with the SEC on May 10, 2006
10.21	Schawk, Inc. 2006 Long-term Incentive Plan.	Annex A to the Proxy Statement for the 2006 Annual Meeting filed with the SEC on April 21, 2006
10.22	Amendment No. 1, dated as of February 28, 2008, to Credit Agreement dated as of January 28, 2005 among Schawk, Inc., certain subsidiaries of Schawk, Inc., certain lenders, and JPMorgan Chase Bank, N.A., on behalf of itself and as agent.	Exhibit 10.1 to Registrant’s Form 8-K filed with the SEC on March 5, 2008
10.23	Separation Agreement and General Release dated May 31, 2008 between James J. Patterson and Schawk USA, Inc.	Exhibit 10.1 to Form 8-K filed with the SEC on June 5, 2008
10.24	Employment Agreement dated as of September 18, 2008 between Timothy J. Cunningham and Schawk, Inc.*	Exhibit 10.1 to Form 8-K filed with the SEC on September 23, 2008

10.25	Amendment No. 2, dated as of June 11, 2009, to Credit Agreement, as amended, dated as of January 28, 2005, among Schawk, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., on behalf of itself and as agent.	Exhibit 10.1 to Form 8-K filed with the SEC on June 12, 2009
10.26	First Amendment, dated as of June 11, 2009, to Note Purchase and Private Shelf Agreement dated as of January 28, 2005, among Schawk, Inc. and the noteholders party thereto.	Exhibit 10.2 to Form 8-K filed with the SEC on June 12, 2009
10.27	Second Amendment, dated as of June 12, 2009, to Note Purchase Agreement dated as of December 23, 2003 among Schawk, Inc. and the noteholders party thereto.	Exhibit 10.3 to Form 8-K filed with the SEC on June 12, 2009
10.28	Amended and Restated Credit Agreement, dated as of January 12, 2010, among Schawk, Inc., certain subsidiary borrowers of Schawk, Inc., the financial institutions party thereto as lenders and JPMorgan Chase Bank, N.A., on behalf of itself and the other lenders as agent.	Exhibit 10.1 to Form 8-K filed with the SEC on January 14, 2010
10.29	Second Amendment, dated as of January 12, 2010, to Note Purchase and Private Shelf Agreement dated as of January 28, 2005 among Schawk, Inc. and the noteholders party thereto.	Exhibit 10.2 to Form 8-K filed with the SEC on January 14, 2010
10.30	Third Amendment, dated as of January 12, 2010, to Note Purchase Agreement dated as of December 23, 2003 among Schawk, Inc. and the noteholders party thereto.	Exhibit 10.3 to Form 8-K filed with the SEC on January 14, 2010
10.31	Lease Extension Agreement, dated as of January 22, 2010, between Schawk, Inc. and Graphics IV Limited Partnership.	Exhibit 10.31 to Form 10-K filed with the SEC on March 15, 2010
10.32	Commercial Lease, dated as of March 23, 2010, between Schawk, Inc. and Graphics IV Limited Partnership.	Exhibit 10.5 to Form 10-Q filed with the SEC on May 5, 2010
10.33	Outside Directors’ Formula Stock Option Plan, as amended and restated.	Exhibit 10.1 to Form 10-Q filed with the SEC on August 4, 2010
10.34	Amendment No. 1 to Amended and Restated Credit Agreement.	Exhibit 10.1 to Form 8-K filed with the SEC on November 18, 2010
10.35	Third Amendment to Note Purchase and Private Shelf Agreement.	Exhibit 10.2 to Form 8-K filed with the SEC on November 18, 2010
10.36	Fourth Amendment to Note Purchase Agreement.	Exhibit 10.3 to Form 8-K filed with the SEC on November 18, 2010
18	Preferability Letter of Ernst & Young LLP.	Exhibit 18 to Form 10-Q filed with the SEC on November 17, 2008
21	List of Subsidiaries.**
23	Consent of Independent Registered Public Accounting Firm.**
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.**
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.**

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

(1) The file number of each report or filing referred to herein is 001-09335 unless otherwise noted.

*	Represents a management contract or compensation plan or arrangement required to be identified and filed pursuant to Items 15(a)(3) and 15(b) of Form 10-K.

**	Document filed herewith.

SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Allowance for Doubtful Accounts		Balance at Beginning of Year		Provision Charged to Expense		Write-offs/ Allowances Taken (1)		Other Additions (Deductions) (2)		Balance at End of Year

2010	$	1,619	$	(94)	$	1	$	(1)	$	1,525
2009	$	3,138	$	(1,377)	$	(249)	$	107	$	1,619
2008	$	2,063	$	1,834	$	(519)	$	(240)	$	3,138

Deferred Tax Asset Valuation Allowance		Balance at Beginning Of Year		Provision Charged to Expense		Allowance Changes (3)		Other Additions (Deductions) (2)		Balance at End of Year

2010	$	26,765	$	703	$	281	$	374	$	28,123
2009	$	28,619	$	(11)	$	(4,135)	$	2,292	$	26,765
2008	$	27,346	$	7,488	$	(17)	$	(6,198)	$	28,619

(1)	Net of collections on accounts previously written off.

(2)	Consists principally of adjustments related to foreign exchange.

(3)	Allowance changes arising from reductions in net operating loss carry forwards which are precluded from use and purchase accounting adjustments.

100

SIGNATURES

Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Cook County, State of Illinois, on the 9th day of March 2011.

Schawk, Inc.

By: /s/ John B. Toher

John B. Toher

Vice President and

Corporate Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 9th day of March 2011.

/s/ Clarence W. Schawk		Chairman of the Board and Director
Clarence W. Schawk

/s/ David A. Schawk		President, Chief Executive Officer, and Director
David A. Schawk		(Principal Executive Officer)

/s/ A. Alex Sarkisian, Esq.		Executive Vice President, Chief Operating Officer and Director
A. Alex Sarkisian

/s/ Timothy J. Cunningham		Executive Vice President and Chief Financial Officer
Timothy J. Cunningham		(Principal Financial Officer)

/s/ John B. Toher		Vice President and Corporate Controller
John B. Toher		(Principal Accounting Officer)

/s/ John T. McEnroe, Esq.		Director and Assistant Secretary
John T. McEnroe, Esq.

/s/ Leonard S. Caronia		Director
Leonard S. Caronia

/s/ Judith W. McCue, Esq.		Director
Judith W. McCue, Esq.

/s/ Hollis W. Rademacher		Director
Hollis W. Rademacher

s/ Michael G. O’Rourke		Director
Michael G. O’Rourke

/s/ Stanley N. Logan		Director
Stanley N. Logan

101

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