Schawk, Inc.

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Schawk, Inc.

1695 River Rd.
Des Plaines, Illinois 60018-3013
U.S.A.
(847) 827-9494
Fax: (847) 827-1264
Web site: http://www.schawk.com

Public Company
Incorporated: 1953
Employees: 890
Sales: $116.1 million (1997)
Stock Exchanges: New York
Ticker Symbol: SGK
SICs: 2796 Platemaking & Related Services; 2752 Commercial Printing Lithographic

Schawk, Inc. is one of the leading graphics arts services companies in the United States and Canada, providing prepress imaging and information technology services for consumer products packaging, advertising, and promotion markets—primarily for the food and beverage industry. Schawk’s clients include Fortune 1000 accounts such as Bayer, Campbell Soup, ConAgra, General Mills, Hershey, Keebler, Leo Burnett, Nestle, Pepsico, Pillsbury, Publisher’s Clearing House, and Quaker Oats. Services include digital artwork, image capture and manipulation, direct digital printing, and computer-to-plate technology for the three main processes used in the graphic arts industry: lithography, flexography, and gravure. The company operates or has business alliances with 26 business divisions spanning seven countries, including prepress service providers in the Far East, Europe, and Australia.

Founded in 1953

The company was founded in Chicago, Illinois, in 1953 by Clarence W. Schawk. At that time Schawk, Inc. functioned as a small, single-location platemaking company. Within a few years, however, the company began to expand rapidly, with a strategy of acquiring companies in niche markets with Fortune 1000 client lists. Other attributes considered before the selection of additional businesses included evidence of excellent client service or proprietary products and solid management in companies with revenues ranging from $2 million to $20 million. Start-up operations were added when client servicing requirements or market conditions warranted. Clarence’s son, David Schawk, began by serving as a Schawk director prior to serving as company president beginning in 1985. Clarence Schawk’s commitment to the industry was attested to by his work as president and director of the International prepress Association. Between 1965 and 1985 Schawk acquired Process Color Plate (PCP), Kalacraft, and Molded Rubber Printing Plate, which was merged with PCP. Next, the company acquired Litho Services and merged it with Kalacraft to form LSI/Kala. Crown Rubber Plate Company, North American Flexo Company Progressive Litho, and Fotographics, Inc. were also merged into PCP, among numerous other acquisitions and new client locations.

Schawk, Inc. was structured into two primary operating divisions, the Imaging and Information Technologies Group and the Plastics Group. The Imaging Group concentrated on prepress industry services, art design, and products for consumer products packaging and related marketing and advertising materials in the United States. The division grew through a combination of internal growth, new products and services, and an ongoing series of acquisitions. The role of prepress services involved encompassing tasks for preparation of an image for reproduction by any of several types of printing processes. The prepress services did not actually encompass the printing or production of packaging materials, only the various steps such as electronic and digital art production design, color separation, and other photoplatemaking services prior to printing. Product cartons, boxes, trays, cans, containers, packaging labels, and related point-of-sale and promotional materials were developed by the creative designers in cooperation with consumer products manufacturers. Traditionally, prepress services were performed by skilled craftsmen almost entirely by hand. The Imaging Group, along with its competitors, became increasingly computerized. Artwork that was once created directly by hand was now manipulated by computers using scanning devices and laser optics, then digitized and output to film, tape, or disc. Increasingly, material supplied by clients to Schawk was presented on digitized format on a variety of removable media, including tape, floppy disk, and CD-ROM.

1984: Entering the Plastics Business

In 1984 Schawk acquired Robinson Industries, a supplier of visual packaging products, in a move that cast Schawk into the plastics business. Robinson’s visual or blister packaging operation was a natural extension for Schawk, expanding the company’s expertise in production package design by increasing packaging capabilities. The Plastics Group became a leader in the manufacture of injection molded plastic filtration, custom specialty plastic, and thermoformed products. That group was partially comprised of Filtertek, Plastic Molded Concepts, Inc. (PMC), Tek Packaging Group, Inc. (formerly known as Robinson Industries, Inc.), Fuzere Manufacturing Company, Inc., and the Fuzere Midwest division. Schawk continued to acquire as well as launch various plastics companies, and was introduced to major producer Filtertek, Inc. via its association with Robinson, a supplier to that company. In 1992, Schawk acquired a controlling interest in Filtertek. Two years later, the corporation known as Schawk, Inc. (“Old Schawk”) was merged into Filtertek. The surviving corporation in the merger was Filtertek, which then changed its name to Schawk, Inc., according to company reports. The Plastics Group was comprised primarily of what had been the business of Filtertek prior to the merger and the Imaging Group was comprised primarily of what had been the business of the “Old Schawk” companies.

An emerging industry trend of establishing on-site services was adopted by Schawk. The company developed a strategy of implementing conveniently located services, providing clients with less costly prepress management, and offering exceptional technological advantages and speedier turnaround time. The company placed an emphasis on investment in state-of-the-art systems and equipment, plus continual training and development of its employees through company-sponsored programs, on- and off-site. Schawk’s on-site locations included those at Brach and Brock Confections, Inc., Campbell Soup Company, International Home Foods, The Keebler Company, Nabisco Foods Group, Pepsico, Inc., Pillsbury, Inc., The Quaker Oats Company, and Stouffer Foods Corporation. The company also expanded south of the border with a start-up operation for a client in Queretaro, Mexico.

Further Expansion in the 1990s

Three significant acquisitions were added in 1996: Converterscan, StanMont, Inc., and Stebbins Photography. Converterscan had a reputation for expertise in digital imaging, previously based in Stamford, Connecticut, and Atlanta, Georgia. The company was consolidated with Schawk’s LSI/Atlanta operation in Georgia. Based in Montreal, Quebec, StanMont, Inc. had five operating divisions spanning locations throughout Toronto and Montreal, serving a strong client base and operations intended to serve the imaging needs of Schawk’s consumer products clients in Canada. StanMont also added a strong base of advertising and catalog clients in addition to growth opportunities in the packaging market. Stebbins Photography, based in Minneapolis, Minnesota, added a strong presence in the emerging digital photography area. In 1998, Schawk completed the acquisition of S&M Rotogravure Service, Inc. of Milwaukee, Wisconsin. That company specialized in products and services for the packaging segment of the imaging industry and had 1997 revenues in excess of $6 million.

Recognizing the importance of establishing global brand imagery as consistently as possible, Schawk worked to identify market trends. Researchers determined that shoppers were spending less time shopping, and were looking for ways to make purchasing decisions simpler. They learned that consumers make up to 70 percent of their grocery food purchase decisions in-store. The importance of “brand” remained closely tied to packaging. The goal for businesses was to find what commanded shoppers’ attention, what could be communicated quickly, and what could persuade powerfully. Brand imagery, logos, and brand colors required consideration. In addition, special attention was required in order to ensure accurately produced imagery on materials as diverse as plastic, glass, metal, cardboard, colored stock, and other substrates. Finally, competition for in-store shelf space created intense pressure to create bold, informative packaging. The utilization of special promotions as a marketing tool also affected decisions in terms of speed-to-market time.

In 1996, the company announced the sale of its Plastics Business Segment after determining that its managerial and financial resources should be more focused on its primary area of competency in imaging technologies. In December of that year, Schawk sold the remaining Plastics Business Segment to the ESCO Electronics Corporation of St. Louis, Missouri.

Net sales from continuing operations for 1997 increased 27.9 percent to $116.1 million from $90.8 million for 1996. A substantial growth in operating income—an increase 48.5 percent—was also reported for that period, largely due to increased sales volume and increased operating efficiency. The sale of the plastics business segment resulted in repayment of the entire revolving credit facility of $22.5 million. In February 1998 the company completed a public offering of 3,450 shares of common stock, raising $16.5 million.

Company Perspectives

From our beginnings as a producer of printing plates, we have developed into a multinational group of premier, quality-oriented companies serving the industries in which we participate.

Our growth has occurred in two ways. One, an aggressive strategy of acquisition has provided the strength that comes with diversity.

Two, we adhere to sound management principles that have guided us from the start: fiscal responsibility, the latest training and most appropriate technology for our employees, and a commitment to our customers that no competitor can match.

A trade advertising campaign was initiated in 1997, supported by targeted direct-mail and public relations. Following events of 1997 which included the addition of nine more client locations, Schawk executives reported with glowing optimism that’ ’Our existing client base is strong. We enjoy a client list of nearly all the major food and beverage producers in the U.S. Our 10 largest clients accounted for approximately 36 percent of the Company’s revenues in 1997. Approximately seven percent of the total revenues came from the Company’s largest single client.” Efforts were made over time to enter key North American markets including New York, Los Angeles, Chicago, Philadelphia, Atlanta, Cincinnati, Minneapolis, Kalamazoo, Toronto, Montreal, and Mexico—positions close to clients’ bases of operations. By the end of 1998, Schawk planned to be on-site at 30 client locations, following growth of 68 percent in that area of operations over the previous year. The company considered itself well-positioned to meet future challenges in the fast-paced products packaging, advertising, and promotion environment. Schawk management predicted that the packaging segment of the industry was particularly centered around speed-to-market issues, an area where Schawk officials felt confident that efforts would pay off.

Principal Divisions

Amber Design; Batten Graphics (Canada); Color Data East, Inc.; Cyberimages (Canada); Dimension Imaging; LSI/Atlanta; LSI Kala; Process Color Plate; Schawk Cinci; Schawkgraphics/ Total Reproductions; Lincoln Graphics; Litho Colorplate; StanMont, Inc. (Canada); Weston Engraving; Xzact (Canada).