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Schawk Reports Net Loss Due to Challenging Americas Market

November 1, 2012
DES PLAINES, IL—Oct. 31, 2012—Schawk Inc. reported 2012 third-quarter results. Net loss in the third quarter of 2012 was $2.2 million, vs. net income of $8.1 million in the third quarter of 2011. Included in the 2012 third-quarter net loss is $4.3 million of non-cash expense related to the impairment of long-lived assets. In addition, business and system integration expenses for the company’s ongoing information technology and business process improvement initiative increased by approximately $1.0 million for the quarter compared to the prior-year period, which also contributed in part to the decline in net income.

On a non-GAAP basis, adjusting for financial impacts relating to the non-cash impairment expenses, business and system integration expense and other items, adjusted net income was $3.1 million, compared to $5.6 million during the prior-year period.

CEO David A. Schawk, commented, “During the third quarter, we saw measured growth with our largest client channel, consumer packaged goods, offset by continued declines in promotional activity with our retail and advertising and entertainment clients. Our growth in Europe and Asia Pacific continued to positively reflect the impact of emerging markets, investments made in expanding our capabilities, and our clients’ desire to consolidate their spending with fewer vendors.

“However, the Americas continued to reflect our clients’ uncertainty with local markets by taking a more cautionary approach to spending domestically. Adjusting for the non-cash impairment charge during the third quarter, the year-over-year decline in profitability was primarily driven by certain investments made to expand our brand development and deployment capabilities and extend our presence in emerging markets. Due to continued economic headwinds in the Americas, we took additional steps to leverage our operations during the third quarter, which will extend to the fourth quarter and set us up for a more competitive cost structure in 2013.”

Consolidated Results
Consolidated net sales in the third quarter of 2012 were $110.8 million, compared to $112.3 million in 2011, a decrease of approximately $1.5 million, or 1.3 percent. Year-over-year sales were negatively impacted by changes in foreign currency translation rates of approximately $0.6 million, as the U.S. dollar increased 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 third quarter of 2012 were $88.2 million, or 79.5 percent of total net sales, compared to $86.2 million in the same period of 2011, an improvement of 2.3 percent, primarily due to higher product and brand development activity.

• Retail and advertising accounts sales in the third quarter of 2012 were $17.3 million, or 15.6 percent of total sales, a decrease of 9.8 percent, from $19.2 million during the 2011 third quarter, primarily driven by continued reductions in client promotional activity.

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