Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - SCHAWK INC | f8k_080311.htm |
EXHIBIT 99.1
| AT SCHAWK, INC.: | AT DRESNER CORPORATE SERVICES: |
| Timothy Allen | Investors: Philip Kranz |
| Vice President, Finance | 312-780-7240 |
| Operations and Investor Relations | pkranz@dresnerco.com |
| 847-827-9494 | |
| Timothy.Allen@schawk.com |
SCHAWK ANNOUNCES 2011 SECOND-QUARTER RESULTS
Company reports GAAP net income and EPS of $4.0 million and $0.15, respectively
Des Plaines, IL, August 3, 2011—Schawk, Inc. (NYSE: SGK), a leading provider of brand development and deployment services, enabling companies of all sizes to connect their brands with consumers, reported second-quarter 2011 results. Net income in the second quarter of 2011 was $4.0 million, or $0.15 per diluted share, versus $15.8 million, or $0.61 per diluted share, in the second quarter of 2010.
On a non-GAAP basis, adjusting for certain financial impacts further detailed in this earnings release, Adjusted net income was $6.9 million, or $0.26 per diluted share, in the second quarter of 2011 compared to $10.4 million, or $0.40 per diluted share, during the prior-year comparable period.
President and Chief Executive Officer David A. Schawk, commented, “Our second quarter 2011 results reflected decreased activity with our advertising and retail clients primarily due to stronger retail promotional activity in the prior-year comparable period. In addition, during the first six months of 2011 some consumer packaged goods clients remained cautious given elevated commodity prices and sustained economic uncertainty domestically and internationally.”
Mr. Schawk added, “However, we see opportunities in this challenging economy from three key industry trends: emerging markets, digital markets, and demand for integrated services. During the second quarter, we expanded or reached agreements to expand our business with certain key global clients as they pushed into developing and emerging markets and sought to take advantage of our full portfolio of integrated services, including our digital marketing capabilities which were enhanced through our acquisitions in 2010. This increased client activity is particularly evident in our European segment where sales have increased over 18% for the quarter and over 9% for the first six months of 2011 compared to the prior-year periods. Furthermore, we continue to believe that existing and prospective clients are seeing the value of our integrated service offering and global capabilities, particularly as they look for ways to differentiate themselves from their competition.”
Consolidated Results for Second Quarter Ended June 30, 2011
Consolidated net sales in the second quarter of 2011 were $113.3 million compared to $117.8 million in the same period of 2010, a decrease of approximately $4.5 million, or 3.8 percent principally driven by a decline in Advertising and retail account sales. Included in the quarter-over-quarter sales decline was an
increase of $3.3 million in net sales related to foreign currency translation gains, as the U.S. dollar declined in value relative to the local currencies of certain of the Company’s non-U.S. subsidiaries.
Consumer packaged goods (CPG) accounts sales in the second quarter of 2011 were $87.1 million, or 76.8 percent of total sales, compared to $86.4 million in the same period of 2010, an increase of 0.8 percent. The increase over the prior-year quarter was primarily driven by slightly higher product and brand activity by the Company’s CPG clients. Advertising and retail accounts sales of $19.0 million, or 16.8 percent of total sales, in the second quarter of 2011 decreased 18.8 percent, from $23.4 million in the prior-year period. Included in the decline in Advertising and retail accounts sales is a $1.3 million decline in revenue related to the previously disclosed loss of a non-core, retail client at the end of the second quarter of 2010 with the balance of the decline driven primarily by lower promotional activity compared to the prior-year period. Entertainment accounts sales declined $0.8 million to $7.2 million, or 6.4 percent of total sales, for the second quarter of 2011 compared to $8.0 million in the same period of 2010.
Gross profit was $41.9 million in the second quarter of 2011, a decrease of $4.9 million from the second quarter of 2010. Second-quarter 2011 gross profit as a percentage of sales decreased to 37.0 percent from 39.7 percent in the 2010 second-quarter period. The decline in gross profit percent was largely driven by the reduced operating leverage resulting from the lower period-over-period revenue.
Selling, general and administrative (SG&A) expenses decreased approximately $0.4 million to $30.0 million in the second quarter of 2011 from $30.4 million in the second quarter of 2010 principally driven by lower revenue year over year.
During the second quarter of 2011, the Company reported business and systems integration expenses of $2.1 million compared to $0.2 million in the prior-year comparable period. As previously disclosed, these expenses relate to the Company’s ongoing information technology and business process improvement initiative.
Acquisition integration and restructuring expenses increased from $0.5 million in the second quarter of 2010 to $0.7 million in the second quarter of 2011. The charges in the 2011 second quarter arose from the Company’s continued focus on consolidating, reducing and re-aligning its work force and operations and are for employee terminations and other associated costs. These actions are expected to result in annualized savings of approximately $0.9 million, with approximately $0.6 million to be realized during 2011.
Additionally, the Company recorded expense of $1.8 million during the quarter as a result of its decision to terminate participation in a union supplemental retirement and disability fund in California.
The Company reported operating income of $7.0 million in the 2011 second quarter compared to $16.0 million in the second quarter of 2010. The decrease in operating income compared to the prior-year period was primarily the result of the decrease in gross margin driven by lower revenue coupled with increased business and systems integration expenses and pension withdrawal expenses.
The Company reported income tax expense of $1.8 million for the second quarter of 2011 compared to an income tax benefit of $1.6 million in the second quarter of 2010. The increase in tax expense over the prior-year period was primarily due to discrete period tax benefits from the release of uncertain tax positions in the second quarter of 2010.
Net income in the second quarter of 2011 was $4.0 million, or $0.15 per diluted share, compared to $15.8 million, or $0.61 per diluted share, in the second quarter of 2010. Excluding the after-tax effects of certain financial impacts detailed within the non-GAAP tables at the end of this earnings release, second-quarter 2011 Adjusted net income was $6.9 million, or $0.26 per diluted share, compared to $10.4 million, or $0.40 per diluted share, on a comparable basis for the prior-year period.
Adjusted EBITDA and Management Adjusted EBITDA Performance
Adjusted EBITDA for the second quarter of 2011 was $12.1 million compared to $21.0 million for the second quarter of 2010. Management adjusted EBITDA for the second quarter of 2011 was $17.0 million compared to $21.4 million for the second quarter of 2010. Please refer to the “Reconciliation of Non-GAAP Adjusted EBITDA and Management Adjusted EBITDA” table attached at the end of this earnings release for a reconciliation of these measures.
Conference Call
Schawk invites you to join its second-quarter 2011 earnings conference call on Thursday, August 4, 2011, at 9:00 a.m. Central time. To participate in the conference call, please dial 800-259-0251 or
617-614-3671 at least five minutes prior to the start time and ask for the Schawk, Inc. conference call, or on the Internet, go to
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=82169&eventID=4159865. If you are unavailable to participate on the live call, a replay will be available through August 11 at
11:59 p.m. Central time. To access the replay, dial 888-286-8010 or 617-801-6888, enter conference ID 49017471, and follow the prompts. The replay will also be available on the Internet for
30 days at the following address http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=82169&eventID=4159865.
About Schawk, Inc.
Schawk, Inc. is a leading provider of brand development and deployment services, enabling companies of all sizes to connect their brands with consumers. With a global footprint of operations in 19 countries, Schawk helps companies create compelling and consistent brand experiences by providing integrated strategic, creative and executional services across brand touchpoints. Founded in 1953, Schawk is trusted by many of the world’s leading organizations to help them achieve global brand consistency. For more information about Schawk, visit http://www.schawk.com.
Non-GAAP Financial Measures
In addition to the presentation of Adjusted EBITDA and Management adjusted EBITDA in this release, the Company has presented certain other non-GAAP measures in the attachment entitled “Reconciliation of Non-GAAP measures to GAAP.” Management believes that the presentation of non-GAAP measures provides investors with greater transparency and supplemental data relating to the Company’s financial condition and results of operations and provides more consistent insight into the performance of the Company’s core operations from period to period by showing the effects of certain non-operating items. These non-GAAP measures are reconciled to the closest GAAP measures on the schedules attached to this earnings release. The non-GAAP measures should not be viewed as alternatives to GAAP and may not be consistent with similar measures provided by other companies.
Safe Harbor Statement
Certain statements in this earnings release are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. These statements are made based upon current expectations and beliefs that are subject to risk and uncertainty. Actual results might differ materially from those contained in the forward-looking statements because of factors, such as, among other things, our ability to maintain an effective system of disclosure and internal controls and the discovery of any future control deficiencies or weaknesses, which may require substantial costs and resources to rectify; higher than expected costs, or unanticipated difficulties associated with, integrating acquired operations; higher than expected costs associated with compliance with legal and regulatory requirements; higher-than-anticipated costs or lower-than-anticipated benefits associated with the Company’s ongoing information technology and business process improvement initiative; the strength of the United States economy in general and, specifically, market conditions for the consumer products industry; the level of demand for Schawk's services; changes in or weak consumer confidence and consumer spending; unfavorable foreign exchange rate fluctuations; loss of key management and operational personnel; our ability to implement our growth strategy, rebranding initiatives and cost reduction plans and to realize anticipated cost savings; 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 with such
covenants; the stability of state, federal and foreign tax laws; our continued ability to identify and exploit industry trends and exploit technological advances in the imaging industry; the stability of political conditions in foreign countries in which we have production capabilities; terrorist attacks and the U.S. response to such attacks; as well as other factors detailed in Schawk, Inc.'s filings with the Securities and Exchange Commission.
The discussion of the Company’s financial results within this earnings release should be read and considered in context of the Company’s most recent annual Form 10-K filing with the Securities and Exchange Commission.
For more information about Schawk, visit its website at http://www.schawk.com.
|
Schawk Inc.
Consolidated Statements of Operations
|
|||||||
|
(Unaudited)
|
|||||||
|
(In thousands, except per share amounts)
|
|
Three Months Ended
|
||||||||||||||||
|
June 30,
|
Increase (Decrease)
|
|||||||||||||||
|
2011
|
2010
|
Amount
|
Percent
|
|||||||||||||
|
Net sales
|
$ | 113,329 | $ | 117,840 | $ | (4,511 | ) | (3.8 | )% | |||||||
|
Cost of sales
|
71,412 | 71,016 | 396 | 0.6 | % | |||||||||||
|
Gross profit
|
41,917 | 46,824 | (4,907 | ) | (10.5 | )% | ||||||||||
|
Selling, general and administrative expenses
|
29,998 | 30,420 | (422 | ) | (1.4 | )% | ||||||||||
|
Business and systems integration expenses
|
2,149 | 184 | 1,965 |
nm
|
||||||||||||
|
Multiemployer pension withdrawal expense
|
1,846 | -- | 1,846 |
nm
|
||||||||||||
|
Acquisition integration and restructuring expenses
|
691 | 502 | 189 | 37.6 | % | |||||||||||
|
Foreign exchange loss (gain)
|
207 | (267 | ) | 474 |
nm
|
|||||||||||
|
Operating income
|
7,026 | 15,985 | (8,959 | ) | (56.0 | )% | ||||||||||
|
Other income (expense)
|
||||||||||||||||
|
Interest income
|
21 | 8 | 13 |
nm
|
||||||||||||
|
Interest expense
|
(1,273 | ) | (1,771 | ) | 498 | (28.1 | )% | |||||||||
|
Income before income taxes
|
5,774 | 14,222 | (8,448 | ) | (59.4 | )% | ||||||||||
|
Income tax provision
|
1,812 | (1,583 | ) | 3,395 |
nm
|
|||||||||||
|
Net income
|
$ | 3,962 | $ | 15,805 | $ | (11,843 | ) | (74.9 | )% | |||||||
|
Earnings per share:
|
||||||||||||||||
|
Basic
|
$ | 0.15 | $ | 0.62 | $ | (0.47 | ) | |||||||||
|
Diluted
|
$ | 0.15 | $ | 0.61 | $ | (0.46 | ) | |||||||||
|
Weighted average number of common and common equivalent shares outstanding:
|
||||||||||||||||
|
Basic
|
25,901 | 25,400 | ||||||||||||||
|
Diluted
|
26,276 | 25,884 | ||||||||||||||
nm = not meaningful
|
Schawk Inc.
Consolidated Statements of Operations
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|||||||
|
(Unaudited)
|
|||||||
|
(In thousands, except per share amounts)
|
|
Six Months Ended
|
||||||||||||||||
|
June 30,
|
Increase (Decrease)
|
|||||||||||||||
|
2011
|
2010
|
Amount
|
Percent
|
|||||||||||||
|
Net sales
|
$ | 220,563 | $ | 229,548 | $ | (8,985 | ) | (3.9 | )% | |||||||
|
Cost of sales
|
139,894 | 140,849 | (955 | ) | (0.7 | )% | ||||||||||
|
Gross profit
|
80,669 | 88,699 | (8,030 | ) | (9.1 | )% | ||||||||||
|
Selling, general and administrative expenses
|
61,030 | 62,944 | (1,914 | ) | (3.0 | )% | ||||||||||
|
Business and systems integration expenses
|
3,388 | 294 | 3,094 |
nm
|
||||||||||||
|
Multiemployer pension withdrawal expense
|
1,846 | -- | 1,846 |
nm
|
||||||||||||
|
Acquisition integration and restructuring expenses
|
1,122 | 721 | 401 | 55.6 | % | |||||||||||
|
Foreign exchange loss
|
708 | 1,550 | (842 | ) | (54.3 | )% | ||||||||||
|
Impairment of long-lived assets
|
-- | 680 | (680 | ) |
nm
|
|||||||||||
|
Operating income
|
12,575 | 22,510 | (9,935 | ) | (44.1 | )% | ||||||||||
|
Other income (expense)
|
||||||||||||||||
|
Interest income
|
39 | 16 | 23 |
nm
|
||||||||||||
|
Interest expense
|
(2,560 | ) | (3,759 | ) | 1,199 | (31.9 | )% | |||||||||
|
Income before income taxes
|
10,054 | 18,767 | (8,713 | ) | (46.4 | )% | ||||||||||
|
Income tax provision
|
3,303 | 442 | 2,861 |
nm
|
||||||||||||
|
Net income
|
$ | 6,751 | $ | 18,325 | $ | (11,574 | ) | (63.2 | )% | |||||||
|
Earnings per share:
|
||||||||||||||||
|
Basic
|
$ | 0.26 | $ | 0.72 | $ | (0.46 | ) | |||||||||
|
Diluted
|
$ | 0.26 | $ | 0.71 | $ | (0.45 | ) | |||||||||
|
Weighted average number of common and common equivalent shares outstanding:
|
||||||||||||||||
|
Basic
|
25,859 | 25,292 | ||||||||||||||
|
Diluted
|
26,264 | 25,731 | ||||||||||||||
nm = not meaningful
Schawk, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
|
June 30,
|
December 31,
|
|||||||
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2011
|
2010
|
|||||||
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(Unaudited)
|
||||||||
|
Assets
|
||||||||
|
CCurrent assets:
|
||||||||
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Cash and cash equivalents
|
$ | 10,704 | $ | 36,889 | ||||
|
Trade accounts receivable, less allowance for doubtful accounts of $1,348 at June 30, 2011 and $1,525 at December 31, 2010
|
88,071 | 95,207 | ||||||
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Inventories
|
20,910 | 18,250 | ||||||
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Prepaid expenses and other current assets
|
9,220 | 9,356 | ||||||
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Income tax receivable
|
3,344 | 2,943 | ||||||
|
Deferred income taxes
|
476 | 347 | ||||||
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Total current assets
|
132,725 | 162,992 | ||||||
|
Property and equipment, net
|
51,361 | 48,684 | ||||||
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Goodwill, net
|
194,473 | 193,626 | ||||||
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Other intangible assets, net:
|
||||||||
|
Customer relationships
|
34,944 | 36,461 | ||||||
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Other
|
581 | 817 | ||||||
|
Deferred income taxes
|
1,333 | 868 | ||||||
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Other assets
|
5,746 | 6,411 | ||||||
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Total assets
|
$ | 421,163 | $ | 449,859 | ||||
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Liabilities and stockholders’ equity
|
||||||||
|
Current liabilities:
|
||||||||
|
Trade accounts payable
|
$ | 17,408 | $ | 21,930 | ||||
|
Accrued expenses
|
53,370 | 64,007 | ||||||
|
Deferred income taxes
|
3,263 | 3,260 | ||||||
|
Income taxes
|
427 | 1,038 | ||||||
|
Current portion of long-term debt
|
20,757 | 29,587 | ||||||
|
Total current liabilities
|
95,225 | 119,822 | ||||||
|
Long-term liabilities:
|
||||||||
|
Long-term debt
|
27,920 | 37,080 | ||||||
|
Deferred income taxes
|
9,242 | 9,135 | ||||||
|
Other long-term liabilities
|
17,516 | 19,696 | ||||||
|
Total long-term liabilities
|
54,678 | 65,911 | ||||||
|
Stockholders’ equity:
|
||||||||
|
Common stock, $0.008 par value, 40,000,000 shares authorized, 30,672,370 and 30,506,252 shares issued at June 30, 2011 and December 31, 2010, respectively, 25,874,822 and 25,761,334 shares outstanding at June 30, 2011 and December 31, 2010, respectively
|
225 | 224 | ||||||
|
Additional paid-in capital
|
202,362 | 200,205 | ||||||
|
Retained earnings
|
115,865 | 113,258 | ||||||
|
Accumulated comprehensive income, net
|
14,480 | 11,247 | ||||||
|
Treasury stock, at cost, 4,797,548 and 4,744,918 shares of common stock at June 30, 2011 and December 31, 2010, respectively
|
(61,672 | ) | (60,808 | ) | ||||
|
Total stockholders’ equity
|
271,260 | 264,126 | ||||||
|
Total liabilities and stockholders’ equity
|
$ | 421,163 | $ | 449,859 | ||||
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Schawk Inc.
Segment Financial data
|
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(Unaudited)
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|
(In thousands)
|
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Three Months Ended
|
||||||||||||||||
|
June 30,
|
Increase (Decrease)
|
|||||||||||||||
|
2011
|
2010
|
Amount
|
Percent
|
|||||||||||||
|
Sales to external clients:
|
||||||||||||||||
|
North America
|
$ | 96,664 | $ | 104,318 | $ | (7,654 | ) | (7.3 | )% | |||||||
|
Europe
|
17,743 | 15,001 | 2,742 | 18.3 | % | |||||||||||
|
Asia Pacific
|
8,748 | 8,240 | 508 | 6.2 | % | |||||||||||
|
Intercompany sales elimination
|
(9,826 | ) | (9,719 | ) | (107 | ) | 1.1 | % | ||||||||
|
Sales to external clients
|
$ | 113,329 | $ | 117,840 | $ | (4,511 | ) | (3.8 | )% | |||||||
|
Operating segment income (loss):
|
||||||||||||||||
|
North America
|
$ | 13,361 | $ | 19,255 | $ | (5,894 | ) | (30.6 | )% | |||||||
|
Europe
|
882 | 815 | 67 | 8.2 | % | |||||||||||
|
Asia Pacific
|
1,378 | 1,776 | (398 | ) | (22.4 | )% | ||||||||||
|
Corporate
|
(8,595 | ) | (5,861 | ) | (2,734 | ) | (46.6 | )% | ||||||||
|
Operating segment income
|
$ | 7,026 | $ | 15,985 | $ | (8,959 | ) | (56.0 | )% | |||||||
|
Six Months Ended
|
||||||||||||||||
|
June 30,
|
Increase (Decrease)
|
|||||||||||||||
| 2011 | 2010 |
Amount
|
Percent
|
|||||||||||||
|
Sales to external clients:
|
||||||||||||||||
|
North America
|
$ | 189,049 | $ | 200,636 | $ | (11,587 | ) | (5.8 | )% | |||||||
|
Europe
|
35,335 | 32,375 | 2,960 | 9.1 | % | |||||||||||
|
Asia Pacific
|
15,401 | 15,062 | 339 | 2.3 | % | |||||||||||
|
Intercompany sales elimination
|
(19,222 | ) | (18,525 | ) | (697 | ) | 3.8 | % | ||||||||
|
Sales to external clients
|
$ | 220,563 | $ | 229,548 | $ | (8,985 | ) | (3.9 | )% | |||||||
|
Operating segment income (loss):
|
||||||||||||||||
|
North America
|
$ | 25,447 | $ | 33,279 | $ | (7,832 | ) | (23.5 | )% | |||||||
|
Europe
|
3,003 | 1,363 | 1,640 | 120.3 | % | |||||||||||
|
Asia Pacific
|
1,408 | 2,655 | (1,247 | ) | (47.0 | )% | ||||||||||
|
Corporate
|
(17,283 | ) | (14,787 | ) | (2,496 | ) | (16.9 | )% | ||||||||
|
Operating segment income
|
$ | 12,575 | $ | 22,510 | $ | (9,935 | ) | (44.1 | )% | |||||||
Schawk, Inc.
Reconciliation of Non-GAAP measures to GAAP
(Unaudited)
(In Thousands, Except Share Amounts)
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Income before income taxes - GAAP
|
$ | 5,774 | $ | 14,222 | $ | 10,054 | $ | 18,767 | ||||||||
|
Adjustments:
|
||||||||||||||||
|
Acquisition integration and restructuring expenses
|
691 | 502 | 1,122 | 721 | ||||||||||||
|
Business and systems integration expenses
|
2,149 | 184 | 3,388 | 294 | ||||||||||||
|
Impairment of long-lived assets (1)
|
-- | -- | -- | 680 | ||||||||||||
|
Multiemployer pension withdrawal expense
|
1,846 | -- | 1,846 | |||||||||||||
|
Foreign currency loss (gain)
|
207 | (267 | ) | 708 | 1,550 | |||||||||||
|
Adjusted income before income tax - non GAAP
|
10,667 | 14,641 | 17,118 | 22,012 | ||||||||||||
|
Adjusted income tax provision – non GAAP
|
3,721 | 4,227 | 5,972 | 7,130 | ||||||||||||
|
Adjusted net income – non GAAP
|
$ | 6,946 | $ | 10,414 | $ | 11,146 | $ | 14,882 | ||||||||
|
Weighted average common and common stock
|
||||||||||||||||
|
equivalents outstanding – GAAP (diluted)
|
26,276 | 25,884 | 26,264 | 25,731 | ||||||||||||
|
Earnings per diluted share - GAAP
|
$ | 0.15 | $ | 0.61 | $ | 0.26 | $ | 0.71 | ||||||||
|
Adjustments – net of tax effects:
|
||||||||||||||||
|
Acquisition integration and restructuring expenses
|
0.02 | 0.01 | 0.03 | 0.02 | ||||||||||||
|
Business and systems integration expenses
|
0.05 | 0.01 | 0.08 | 0.01 | ||||||||||||
|
Impairment of long-lived assets
|
-- | -- | -- | 0.02 | ||||||||||||
|
Multiemployer pension withdrawal expense
|
0.04 | -- | 0.04 | |||||||||||||
|
Foreign currency loss (gain)
|
-- | (0.01 | ) | 0.01 | 0.04 | |||||||||||
|
Effective settlement of certain income tax audits
|
-- | (0.22 | ) | -- | (0.22 | ) | ||||||||||
|
Adjusted earnings per diluted share – non GAAP
|
$ | 0.26 | $ | 0.40 | $ | 0.42 | $ | 0.58 | ||||||||
|
Income tax provision - GAAP
|
$ | 1,812 | $ | (1,583 | ) | $ | 3,303 | $ | 442 | |||||||
|
Adjustments: (2)
|
||||||||||||||||
|
Acquisition integration and restructuring expenses
|
257 | 178 | 398 | 259 | ||||||||||||
|
Business and systems integration expenses
|
853 | 73 | 1,345 | 117 | ||||||||||||
|
Impairment of long-lived assets
|
-- | -- | -- | 270 | ||||||||||||
|
Multiemployer pension withdrawal expense
|
733 | -- | 733 | |||||||||||||
|
Foreign currency loss (gain)
|
66 | (71 | ) | 193 | 412 | |||||||||||
|
Effective settlement of certain income tax audits
|
-- | 5,630 | -- | 5,630 | ||||||||||||
|
Adjusted income tax provision – non GAAP
|
$ | 3,721 | $ | 4,227 | $ | 5,972 | $ | 7,130 | ||||||||
(1) Please see the Company’s discussion related to certain insurance recoveries in its June 30, 2011 Form 10-Q.
(2) Adjustments have been tax-effected at the jurisdictions’ statutory rates.
Schawk, Inc.
Reconciliation of Non-GAAP EBITDA and Management Adjusted EBITDA
(Unaudited)
(In Thousands)
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Three Months Ended
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Six Months Ended
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Trailing 12 Months
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June 30,
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June 30,
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Ended June 30,
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2011
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2010
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2011
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2010
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2011
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2010
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Net income - GAAP
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$ | 3,962 | $ | 15,805 | $ | 6,751 | $ | 18,325 | $ | 20,846 | $ | 35,350 | ||||||||||||
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Interest expense
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1,273 | 1,771 | 2,560 | 3,759 | 6,002 | 9,067 | ||||||||||||||||||
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Income tax expense (benefit)
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1,812 | (1,583 | ) | 3,303 | 442 | 12,845 | 6,429 | |||||||||||||||||
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Adjusted Income – non GAAP
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7,047 | 15,993 | 12,614 | 22,526 | 39,693 | 50,846 | ||||||||||||||||||
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Depreciation and amortization expense
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4,454 | 4,406 | 8,782 | 8,900 | 17,493 | 18,045 | ||||||||||||||||||
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Impairment of long-lived assets
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-- | -- | -- | 680 | 8 | 1,985 | ||||||||||||||||||
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Non-cash restructuring charges
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-- | -- | -- | -- | -- | 133 | ||||||||||||||||||
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Stock based compensation
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599 | 584 | 1,070 | 1,041 | 1,915 | 1,899 | ||||||||||||||||||
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Adjusted EBITDA – non GAAP
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12,100 | 20,983 | 22,466 | 33,147 | 59,109 | 72,908 | ||||||||||||||||||
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Permitted add backs on debt covenants:
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Loss on sale of property and equipment
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-- | -- | -- | -- | -- | 71 | ||||||||||||||||||
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Proforma effect of acquisitions and asset sales
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-- | 254 | -- | 686 | 418 | 686 | ||||||||||||||||||
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Acquisition integration and restructuring expenses
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159 | -- | 239 | -- | 239 | 758 | ||||||||||||||||||
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Adjusted EBITDA for covenant compliance – non GAAP
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12,259 | 21,237 | 22,705 | 33,833 | 59,766 | 74,423 | ||||||||||||||||||
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Acquisition integration and restructuring expenses
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532 | 502 | 883 | 721 | 2,136 | 3,970 | ||||||||||||||||||
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Business and systems integration expenses
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2,149 | 184 | 3,388 | 294 | 4,658 | 294 | ||||||||||||||||||
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Proforma effect of acquisitions and asset sales
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-- | (254 | ) | -- | (686 | ) | (418 | ) | (686 | ) | ||||||||||||||
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Multiemployer pension plan withdrawal expense
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1,846 | -- | 1,846 | -- | 1,646 | 1,800 | ||||||||||||||||||
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Indemnity settlement income
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-- | -- | -- | -- | -- | (4,986 | ) | |||||||||||||||||
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Foreign exchange (gain) loss
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207 | (267 | ) | 708 | 1,550 | 1,464 | 1,454 | |||||||||||||||||
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Remediation and related expenses
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-- | -- | -- | -- | -- | 1,138 | ||||||||||||||||||
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Management adjusted EBITDA – non GAAP
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$ | 16,993 | $ | 21,402 | $ | 29,530 | $ | 35,712 | $ | 69,252 | $ | 77,407 | ||||||||||||
Use of Non-GAAP Adjusted EBITDA, Adjusted EBITDA for covenant compliance, and Management adjusted EBITDA
Adjusted EBITDA, as presented within this release, is defined as earnings before interest, income taxes, depreciation and amortization, and other certain non-cash items. Adjusted EBITDA for covenant compliance, as defined in the Company’s current debt agreements, is defined as Adjusted EBITDA excluding certain items, including items that are generally considered non-operating, as permitted under the Company’s current revolving credit facility, and is used by management to gauge its ongoing compliance with the Company’s principal debt covenants, as well as pricing on its revolving credit facility. Management adjusted EBITDA is used to evaluate the core operating activities of the Company from period to period. None of the measures presented above represent cash flows from operations as defined by generally accepted accounting principles, should not be considered as an alternative to net income or cash flow from operations as an indicator of our operating performance, and are not indicative of cash available to fund all cash flow needs. These measures also may be inconsistent with similar measures presented by other companies or EBITDA as defined under guidance from the Securities and Exchange Commission.