10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008
Commission file number 001-09335

SCHAWK, INC.

(Exact name of Registrant as specified in its charter)

Delaware	66-0323724
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1695 South River Road Des Plaines, Illinois (Address of principal executive office)	60018 (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 þ

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 þ

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 o     No þ

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 þ 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 þ

The aggregate market value on June 30, 2008 of the voting and non-voting common equity stock held by non-affiliates of the registrant was approximately $128,633,000.

The number of shares of the Registrant’s Common Stock outstanding as of May 29, 2009, was 24,934,276.

SCHAWK, INC

FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

DECEMBER 31, 2008

			Page
PART I
	Item 1.	Business		3
	Item 1A.	Risk Factors		12
	Item 1B.	Unresolved Staff Comments		19
	Item 2.	Properties		19
	Item 3.	Legal Proceedings		20
	Item 4.	Submission of Matters to a Vote of Security Holders		21
PART II
	Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		21
	Item 6.	Selected Financial Data		24
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
	Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		42
	Item 8.	Financial Statements and Supplementary Data		43
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures		91
	Item 9A.	Controls and Procedures		91
	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 Matters		96
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		97
	Item 14.	Principal Accountant Fees and Services		97
PART IV
	Item 15.	Exhibits and Financial Statement Schedules		97
Signatures				101
EX-21
EX-23
EX-31.1
EX-31.2
EX-32
EX-99.1

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PART I

ITEM 1.   BUSINESS

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. 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 14 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 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 group, Anthem. 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 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 Schawk’s highest value, highest margin services.

The Company’s creative services are delivered through various sub-specialty groups 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), workflow management, 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 — 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 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. 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^tm 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 that include the retention and growth of the equity in their brands and improved consumer recognition, familiarity and affinity. The latter has the

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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 the more services that its clients purchase from Schawk, the greater the potential for substantial 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 50 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 printing press specifications 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.

In January 2005, the Company acquired one of its largest competitors, Seven Worldwide, Inc. (“Seven”) (formerly Applied Graphics Technologies, Inc.) and purchased the business of Winnetts from Weir Holdings, Inc. in December 2004. In February 2006, the Company sold certain operations, including substantially all of the prepress services business being provided through its Book and Publishing operations, most of which were acquired as part of the Seven Worldwide acquisition in 2005.

The Company’s operations are reported in three segments for financial reporting purposes as of December 31, 2008: United States and Mexico, Europe and Other. United States and Mexico is the dominant segment with 66 percent of consolidated revenues as of December 31, 2008. The Other segment consists of the Asia and Canada businesses, the Company’s Anthem Worldwide creative design business and the Company’s enterprise products business, Schawk Digital Solutions. At December 31, 2007, The Company’s operations were reported in two segments: the North America and Europe segment included all graphic service operations in the United States, Mexico, Canada and Europe. The Other segment included the Asia business, the Company’s Anthem Worldwide creative design business and the Company’s enterprise products business, Schawk Digital Solutions. .See “Our Services” for further description of these businesses.

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 and 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.

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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 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 point management 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 described above have all led to a significant

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increase in the volume and frequency of package design modifications. This increase, along with the related changes in advertising and promotional materials, has resulted in significantly increased demand for the services Schawk provides.

Our Services

Schawk’s offerings include strategic, creative and executional services related to three core competencies: graphic services, brand strategy and design, and software.

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. Graphic service business represented approximately 90 percent of the Company’s revenues for the twelve months ended December 31, 2008.

Brand strategy and design.  Under the Anthem Worldwide (“Anthem”) brand, the Company offers brand consulting and creative design for packaging applications to Fortune 1000 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. Anthem represented approximately 9 percent of the Company’s overall revenues for the twelve months ended December 31, 2008.

Software.  Services that help differentiate Schawk from its competitors are its software products and services that include graphic lifecycle content management systems that are comprised of digital asset management, workflow management and online proofing modules. Schawk offers these services through its digital solutions subsidiary, a software development company that develops software solutions for the marketing services departments of consumer products companies, pharmaceutical companies and retail companies. Through its integrated software solution, BLUE^tm, Schawk Digital Solutions works with clients to organize their digital assets, streamline their internal workflow and improve efficiency. 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. Enterprise products represented approximately 2 percent of the Company’s revenues for the twelve months ended December 31, 2008.

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

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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 note 19 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, 2008, the Company had more than 100 sites at or near client locations staffed by approximately 350 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. This results in quicker, more consistent and cost-effective solutions for its clients, and in many cases enables its clients 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 14 countries across 4 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 production 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 proven record 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 capital investment. The Company believes that these factors should enable it to continue to generate strong cash flow.

Strategy

The Company’s goal is to enhance its leadership position in the graphic services industry. Our strategies to realize this objective include:

Capitalizing on our recently 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

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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.

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,” as part of the Company’s June 2009 amendments to its credit facility, the Company agreed to obtain the prior consent of its lenders with respect to any future proposed acquisitions. This requirement may limit its ability to continue its prior practice of acquiring businesses that management believes offer strategic opportunities for the Company. Although the Company will be required to renew or replace its credit facility prior to its expiration in January 2010, there are no assurances that this restriction will be removed in any new or renewed credit facility.

Acquisitions

The Company’s profitability and access to capital have enabled it to make strategic acquisitions of companies that range in size from $2 million to $370 million in revenues. Since 1965, the Company has integrated approximately 57 graphic imaging, creative and design businesses into its operations. 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 acquisitions of Winnetts and Seven increased its ability to meet and adapt to client 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 have 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 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, 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.

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On September 1, 2007, the Company acquired Protopak Innovations, Inc., a Toronto, Canada company that produces prototypes and samples for the packaging industry.

On August 1, 2007, the Company acquired Perks Design Partners Pty Ltd., an Australia-based brand strategy and creative design firm that provides services to consumer products companies.

On August 1, 2007, the Company acquired the remaining 10 percent of the outstanding stock of Schawk India, Ltd. from the minority shareholders. The Company had previously acquired 50 percent of a company currently known as Schawk India, Ltd. in February 2005 as part of its acquisition of Seven Worldwide, Inc. On July 1, 2006, the Company increased its ownership of Schawk India, Ltd. to 90 percent. Schawk India, Ltd. provides artwork management, premedia and print management services

On May 31, 2007, the Company acquired the operating assets of Benchmark Marketing Services, LLC, a Cincinnati, Ohio-based creative design agency that provides services to consumer product companies. The operations of Benchmark have been combined with those of Anthem Cincinnati.

In July 2006, the Company acquired the operating assets of WBK, Inc., a Cincinnati, Ohio-based design agency that provides services to retailers and consumer products companies. This operating unit is now known as Anthem Cincinnati.

As discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Liquidity and Capital Resources,” as part of the Company’s June 2009 amendments to its credit facility, the Company agreed to obtain the prior consent of its lenders with respect to any future proposed acquisitions. This requirement may limit its ability to continue its prior practice of acquiring businesses that management believes offer strategic opportunities for the Company. Although the Company will be required to renew or replace its credit facility prior to its expiration in January 2010, there are no assurances that this restriction will be removed in any new or renewed credit facility.

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 220 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, groceries, department and mass merchant retailers, converters and advertising agencies. Many of its clients, a number of whom are Fortune 1000 companies, are multi-national in scope 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 also have a great deal of confidence in the quality of Schawk’s services and have worked closely with it 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

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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. During 2007 and 2008, its largest client accounted for approximately 9 percent of the Company’s total revenues and the 10 largest clients in the aggregate accounted for approximately 43 percent and 41 percent of revenues, respectively.

Competition

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. Since the acquisition of Seven, the Company believes that only three firms, Southern Graphics Systems, Matthews International Corporation and Vertis, Inc., compete with it on a 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.

Some converters 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, converters often utilize Schawk’s services because of the rigorous demands being placed on them by clients who are requiring faster turnaround times. Increasingly, converters 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 our 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. Total research and development spending is not material.

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.

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Employees

As of December 31, 2008, Schawk had approximately 3,100 employees worldwide. Of this number, approximately 12 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 4 percent. Two collective bargaining agreements, covering 3.8 percent of Schawk employees, expired in 2008, but negotiations to renew have continued into 2009. The Company’s union employees are vital to our 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 three 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, 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 2008, materials and supplies accounted for $31 million or approximately 9.3 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 low percentage of materials in cost of sales will continue to be reduced. 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!^tm” “Schawk,^®” “Schawk Digital Solutions,^tm” “Anthem Worldwide,^tm” “PaRTS,^tm” “BLUE,^tm” “BLUE DNA,^tm” “ENVISION,^tm” “MPX,^tm” “MEDIALINK,^tm” “MEDIALINK STUDIO,^tm” “RPM^tm (Retail Performance Manager^tm),” “CPM^tm (Campaign Performance Manager^tm),” and the trade names “Anthem New Jersey,” “Anthem New York,” “Anthem Los Angeles,” “Anthem San Francisco,” “Anthem Toronto,” “Anthem Chicago,” “Anthem Singapore,”, “Anthem

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Cincinnati,” “Anthem York,” “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 Digital Solutions,” “Schawk India,” “Schawk Japan,” “Schawk Australia,” “Schawk Kalamazoo,” “Schawk Mexico,” “Schawk Milwaukee,” “Schawk Minneapolis,” “Schawk Los Angeles,” “Schawk San Francisco,” “Schawk New York,” “Schawk Penang,” “Schawk St. Paul,” “Schawk Toronto” “Schawk Shanghai,” “Schawk Singapore,” “Schawk Stamford,” “Schawk 3-D,” “Laserscan,” “Protopak,” “Seven,” “DJPA”, and “Schawk Retail Marketing” 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 may be adversely affected by issues that affect its clients’ spending decisions during periods of economic downturn.

The Company’s business is sensitive to general economic conditions. Its revenues are derived from many clients in a variety of industries and businesses, some of whose marketing and advertising spending levels can be subject to significant reductions based on changes in, among other things, general economic conditions. Schawk’s operating results may reflect its clients’ order patterns or the effects of economic downturns on their 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’ marketing and advertising budgets could 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.

Sustained deterioration in global economic conditions along with continued volatility and disruption in the credit and capital markets and declining consumer and business confidence could significantly impact the overall demand for Schawk’s services. As clients come under increasing pressures, 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 is subject to restrictive debt covenants under its debt arrangements that limit its operational flexibility and opportunities for growth.

As a result of goodwill impairment charges and restructuring activities in the fourth quarter of 2008, compounded by a stock repurchase program and weaker earnings performance, the Company was required to restructure certain financial ratios and covenants under its credit facility and note purchase agreements. As further discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources,” in June 2009 the Company negotiated amendments to its credit facility and senior notes that contained covenants that, in certain cases, are more restrictive than similar covenants contained in its previous debt arrangements. These covenants limit or restrict its ability to incur additional indebtedness, 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 may restrict or prohibit its ability to take actions that could be beneficial to the Company and its stockholders, including continuing to make acquisitions as opportunities arise. Additionally, these ratios, tests and covenants could place Schawk at a competitive disadvantage to its competitors who may not be subject to similar

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restrictions and may increase the Company’s vulnerability to sustained economic downturns and changing market conditions.

In the event the Company fails to comply with the restrictive 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 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 accelerate the payment of Schawk’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.

Although the Company was successful in obtaining amendments to its credit facility and outstanding senior notes in June 2009, it may not be successful in amending its debt arrangements or obtaining waivers in the event the Company breaches its covenants in the future. Even if it is successful in entering into any such amendments or waivers, 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 a restructured credit facility will 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 Company may be unable to renew or replace its revolving credit facility when it terminates in January 2010, and the terms of any renewed or replacement facility could be materially different than the terms in place today.

The Company’s current revolving credit facility, as amended, expires in January 2010. At December 31, 2008, Schawk had $66.3 million of outstanding borrowings under its credit facility. Based upon the current condition of credit markets, as well as other factors that may arise, the Company may not be successful in securing a renewal or replacement credit facility on similar terms or at all, which could have a material adverse effect on its business, financial condition or results of operations. Further, in the event the Company is unable to secure additional credit, its future liquidity may be impacted, which could have a material adverse effect on its financial condition or results of operations.

The Company may not realize expected benefits from its cost reduction initiatives.

In order to improve the efficiency of its operations, Schawk implemented certain cost reduction activities in 2008, including workforce reductions and work site realignment, and has plans to continue these or similar actions throughout 2009 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. 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.

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If the Company fails to maintain an effective system of disclosure and internal controls or to rectify identified significant deficiencies and material weaknesses in its internal controls, it may not be able to accurately report its financial results and may continue to incur costs related to remediation of its internal controls.

The Company has 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. Additionally, in March 2008, it announced that a material charge for impairment of goodwill associated with Cactus, 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 fails to properly rectify its material weaknesses in internal controls and, once rectified, 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. Continued 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 in its reported financial information, which, among other things, could have a negative impact on the trading price of the Company’s stock, and subjects the Company to increased regulatory scrutiny and a higher risk of stockholder litigation.

Additionally, the Company has incurred significant costs and may incur substantial increased costs in the future in connection with remediation of its internal control weaknesses, which also has diverted a significant amount of attention from its management that otherwise would have been directed toward operations. 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 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 restatement of its previously issued financial statements. Schawk 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.

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, all of which could materially adversely affect its business and results of 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 $223 million as of December 31, 2008, or approximately 50 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 $184 million as of December 31, 2008, or 41 percent of total assets. Goodwill and other identifiable intangible assets are recorded at fair value on the date of acquisition and, in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, are reviewed at least annually for impairment. In 2008, Schawk recorded $48.0 million in impairment charges related to goodwill and an additional $6.6 million of impairment charges related to other long-lived assets. 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

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conditions and the impact of a deteriorating economic environment. There is also the risk of a decrease 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 these charges may continue 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.

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 changing economic conditions;

•  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 Company is subject to unpredictable order flows.

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 Schawk 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. 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.

The Company is dependent on certain key clients.

The Company’s ten largest clients accounted for approximately 43 percent of its revenues in 2007 and 41 percent of revenues for 2008. In both 2007 and 2008, approximately 9 percent 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 can fluctuate from period to period due to such client’s purchasing patterns. As previously disclosed, in March 2007, the Company lost a retail account that contributed $16.3 million in revenue in 2006. Any termination of, or significant reduction in, its business relationships with any of its principal clients could have a material adverse effect on the Company’s business, financial condition and results of operations.

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The Company’s foreign operations are subject to currency exchange, political, investment 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.

Schawk’s foreign operations have expanded significantly as a result of its acquisition of Winnetts in December 2004 and its acquisition of Seven in January 2005 and it now operates in fourteen countries. For 2008, consolidated net sales from operations outside the United States were approximately $146 million, which represented approximately 29 percent of consolidated net sales. As a result of the Company’s foreign operations, it is subject to various risks associated with operating in foreign countries, such as:

•  political, social and economic instability;

•  war, civil disturbance or acts of terrorism;

•  taking of property by nationalization or expropriation without fair compensation;

•  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.

Additionally, fluctuations in currency exchange rates may affect the Company’s operating performance by impacting the U.S dollar value of revenues and expenses generated outside of the U.S.

The Company operates in a highly competitive industry.

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. 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 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, Schawk’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’s clients could shift a significant portion of their marketing dollars from print to online at a level that exceeds Schawk’s current ability to deliver the online services they need at the volumes they require.

As online 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 online. While Schawk currently offers a number of services that meet its clients’ online marketing and advertising needs, responding quickly, effectively and efficiently to requirements for more comprehensive interactive services might require the acquisition of additional talent or an established interactive agency, and its business might be adversely affected if it is unable to keep pace with or capitalize on these shifting marketing and advertising trends.

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

During the past several years, the Company 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 Schawk’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 future acquisitions, the Company will likely undertake consolidation plans to eliminate duplicate facilities and to otherwise improve operating efficiencies. 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, Schawk 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 operations could be adversely affected.

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 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, particularly in the U.S. and Canada where approximately 16 percent of its employees are unionized. Any prolonged work stoppage or strike at any one of Schawk’s principal facilities could have a negative impact on its business, financial condition or results

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of operations. Additionally, periodic renegotiation of labor contracts may result in increased costs or charges to the Company.

The Company remains susceptible to risks associated with technological and industry change, 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, Schawk’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.

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, recently, the market price of its common stock has experienced broad fluctuations over short periods of time. For example, from June 1 through September 1, 2008, the high and low sales price of its common stock on the New York Stock Exchange ranged from $17.49 to $9.92, and from September 1 through December 31, 2008, the high and low sales price of its common stock ranged from $18.61 to $10.25. The market price of the Company’s common stock may continue to experience strong fluctuations as a result of unexpected events affecting the Company, variations in its operating results, analysts’ earnings estimates or investors’ expectations concerning its future results and its business generally. 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 goods 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 Schawk’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, such as losses resulting from wars or acts of God, that generally are not insured because they are either uninsurable or not economically insurable. 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

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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, 2008, the Company owns or leases the following office and operating facilities:

							Lease
	Square		Owned/				Expiration
Location	Feet		Leased			Purpose	Date	Division
Addison, Texas		3,400		Leased		Operating Facility	July, 2009	Schawk U.S.A.
Antwerp, Belgium		39,000		Owned		Operating Facility	N/A	Schawk Belgium
Battle Creek, Michigan		8,900		Leased		Operating Facility	December, 2009	Schawk U.S.A.
Bristol, U.K.		9,200		Leased		Vacant	September, 2014	Schawk U.K.
Carlstadt, New Jersey		45,000		Vacant		Subletting	February, 2011	Schawk U.S.A.
Chennai, India		37,000		Leased		Operating Facility	October, 2011	Schawk Asia
Cherry Hill, New Jersey		10,000		Leased		Operating Facility	January, 2009	Schawk U.S.A.
Chicago, Illinois		68,000		Leased		Operating Facility	December, 2012	Schawk Retail Mktg.
Chicago, Illinois		42,000		Leased		Vacant	June, 2019	Schawk U.S.A.
Chicago, Illinois		87,000		Owned	(1)	Vacant	N/A	Schawk Retail Mktg.
Chicago, Illinois		58,800		Leased		Operating Facility	September, 2015	Schawk Retail
Chicago, Illinois		11,900		Leased		General Offices	April, 2010	General Offices
Cincinnati, Ohio		74,200		Leased		Operating Facility	August, 2009	Schawk U.S.A.
Cincinnati, Ohio		12,000		Leased		Operating Facility	August, 2009	Schawk U.S.A.
Cincinnati, Ohio		18,000		Leased		Operating Facility	November, 2014	Anthem U.S.A.
Cincinnati, Ohio		12,200		Leased		Vacant	August, 2012	Anthem U.S.A.
Crystal Lake, Illinois		78,800		Owned		Leased	N/A	N/A
Des Plaines, Illinois		18,200		Owned		Executive Offices	N/A	Corporate Office
Des Plaines, Illinois		55,000		Leased		Operating Facility	December, 2010	Schawk U.S.A.
Hilversum, Netherlands		5,400		Leased		Operating Facility	October, 2011	Anthem, Europe
Kalamazoo, Michigan		67,000		Owned		Operating Facility	N/A	Schawk U.S.A.
Kobe, Japan		800		Leased		Operating Facility	February, 2009	Anthem Asia
Leeds, U.K.		16,200		Leased		Operating Facility	January, 2010	Schawk U.K.
Leeds, U.K.		4,400		Leased		Operating Facility	December, 2013	Schawk, U.K.
Lithia Springs, Georgia		79,700		Leased		Operating Facility	July, 2009	Schawk Retail Mktg.
London, U.K.		42,700		Leased		Operating Facility	March, 2015	Schawk U.K.
London, U.K.		4,000		Leased		Vacant	November, 2009	Schawk U.K.
London, U.K.		3,500		Leased		Operating Facility	June, 2010	Anthem Europe
Los Angeles, California		100,500		Owned		Operating Facility	N/A	Schawk U.S.A.
Manchester, U.K.		45,200		Leased		Operating Facility	September, 2023	Schawk U.K.
Meerhout, Belgium		5,900		Leased		Operating Facility	July, 2010	Schawk Retail Mktg.
Melbourne, Australia		4,089		Leased		Operating Facility	October, 2009	Anthem Australia
Minneapolis, Minnesota		31,000		Owned		Operating Facility	N/A	Schawk U.S.A.
Mississauga, Canada		58,000		Leased		Operating Facility	December, 2014	Schawk Canada
Mt. Olive, New Jersey		12,904		Leased		Operating Facility	August, 2012	Anthem U.S.A.

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						Lease
	Square		Owned/			Expiration
Location	Feet		Leased		Purpose	Date	Division
North Ryde, Australia		13,900		Leased	Operating Facility	May, 2011	Schawk Australia
Neenah, Wisconsin		1,350		Leased	Operating Facility	September, 2009	Schawk U.S.A.
New Berlin, Wisconsin		43,000		Leased	Operating Facility	June, 2010	Schawk U.S.A.
New York, New York		52,500		Leased	Subletting	December, 2012	N/A
New York, New York		8,000		Leased	Subletting	January, 2011	N/A
New York, New York		6,400		Leased	Operating Facility	Month-to-month	Schawk Retail Mktg.
New York, New York		5,000		Leased	Operating Facility	May, 2010	Anthem U.S.A.
Newcastle, U.K.		17,000		Leased	Operating Facility	September, 2015	Schawk U.K.
Penang, Malaysia		2,330		Owned	Operating Facility	N/A	Schawk Asia
Penang, Malaysia		34,000		Owned	Operating Facility	N/A	Schawk Asia
Penang, Malaysia		1,700		Owned	Operating Facility	N/A	Schawk Asia
Plano, Texas		12,300		Leased	Subletting	December, 2011	N/A
Pontiac, Illinois		24,900		Owned	Vacant	N/A	N/A
Queretaro, Mexico		18,000		Owned	Operating Facility	N/A	Schawk Mexico
Redmond, Washington		24,000		Leased	Operating Facility	April, 2017	Schawk U.S.A.
Roseville, Minnesota		28,000		Leased	Operating Facility	May, 2009	Schawk/Anthem U.S.A.
San Francisco, CA		20,100		Leased	Operating Facility	August, 2013	Schawk U.S.A.
San Francisco, CA		13,500		Leased	Operating Facility	October, 2014	Anthem U.S.A.
Santa Ana, CA		9,600		Leased	Vacant	July, 2011	Anthem U.S.A.
Shanghai, China		19,400		Leased	Operating Facility	November, 2009	Schawk Asia
Shenzhen, China		7,100		Leased	Operating Facility	December, 2010	Schawk Shenzhen
Shenzhen, China		11,300		Leased	Operating Facility	July, 2009	Anthem Shenzhen
Singapore		7,750		Leased	Operating Facility	November, 2010	Schawk Asia
Slough, U.K.		3,000		Leased	Subletting	January, 2010	Schawk U.K.
Smyrna, Georgia		25,200		Leased	Operating Facility	January, 2009	Schawk U.S.A.
Stamford, Connecticut		20,000		Leased	Operating Facility	August, 2010	Schawk U.S.A.
Sterling Heights, MI		26,400		Leased	Operating Facility	December, 2012	Schawk U.S.A.
Surry Hills, Australia		3,916		Leased	Operating Facility	November, 2009	Anthem Australia
Swindon, U.K.		39,000		Leased	Vacant	September, 2018	Schawk U.K.
Tokyo, Japan		900		Leased	Operating Facility	December, 2010	Schawk Asia
Toronto, Ontario, Canada		8,300		Leased	Operating Facility	January, 2010	Anthem Canada
Toronto, Ontario, Canada		17,500		Leased	Operating Facility	November, 2011	Schawk Canada
Toronto, Ontario, Canada		13,600		Leased	Operating Facility	February, 2010	Schawk Canada
Tunbridge Wells, U.K.		6,400		Leased	Subletting	March, 2009	Schawk U.K.

(1) Sold, March 2009

ITEM 3.   LEGAL PROCEEDINGS

The stock purchase agreement entered into by the Company with Kohlberg & Company, L.L.C. (“Kohlberg”) to acquire Seven Worldwide provided for a payment of $10.0 million into an escrow account. The escrow was established to insure that funds were available to pay Schawk, Inc. any indemnity claims it may have under the stock

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purchase agreement. During 2006, Kohlberg filed a Declaratory Judgment Complaint in the state of New York seeking the release of the $10.0 million held in escrow. The Company filed a cross-motion for summary judgment asserting that it has 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 has denied that it has any indemnity obligations to the Company. On April 9, 2009, the court entered an order denying both parties’ cross-motions for summary judgment. At December 31, 2008, the Company had recorded a receivable from Kohlberg on its Consolidated Balance Sheet in the amount of $3.8 million, 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 $6.0 million 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. During the third quarter ended September 30, 2008, the Company paid interest of $1.0 million in final settlement of Internal Revenue Service audits of Seven Worldwide, Inc. for the years 1996-2003. Additionally during the third quarter, 2008, the Company paid $0.6 million as a partial settlement of state taxes with the filing of amended returns reflecting internal audit adjustments. The Company believes it is entitled to indemnification for these amounts under the terms of the stock purchase agreement and that recoverability is likely.

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.

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 liability from any threatened or pending litigation to be material to the Company. The Company has not experienced any significant environmental problems.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No items were submitted to a vote of security holders during the three months ended December 31, 2008.

PART II

ITEM 5.   MARKET FOR THE 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 1,028 stockholders of record as of March 1, 2009.

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:	2008 High/Low		2007 High/Low
March 31	$	16.70 - 12.79	$	19.62 - 17.00
June 30		17.49 - 11.88		21.97 - 17.75
September 30		18.61 - 9.92		23.89 - 17.21
December 31		15.11 - 10.25		24.71 - 13.53

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Dividends Declared Per Class A Common Share

Quarter Ended:	2008		2007
March 31	$	0.0325	$	0.0325
June 30		0.0325		0.0325
September 30		0.0325		0.0325
December 31		0.0325		0.0325
Total	$	0.1300	$	0.1300

In June 2009, the Company executed certain amendments to its debt agreements that, among other things, restrict dividends to a maximum of $0.3 million per quarter. The lenders waived this restriction for the dividend declared in the first quarter of 2009.

The table below compares the cumulative total shareholder return on the Company’s common stock for the last five fiscal years with the cumulative total return of the Russell 2000 Index and a peer group of companies comprised of the following: Bemis Inc., Bowne & Co., Matthews International Corp., and Multi-Color Corp. (the “Peer Group” Index”). The companies in the Peer Group Index have been chosen due to their similar lines of business.

Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100*
December 2008

* The graph assumes that $100 was invested on December 31, 2003 in each of Schawk, Inc. common stock, the Russell 2000 Index and the Peer Group Index, and that all dividends were reinvested. The Peer Group Index is weighted by market capitalization.

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Equity Compensation Plan Information

The following table summarizes information as of December 31, 2008, relating to equity compensation plans of the Company pursuant to which Common Stock is authorized for issuance (shares in thousands).

					Number of Securities
					Remaining Available
					for Future Issuance
	Number of Securities				Under Equity
	to be Issued Upon		Weighted-Average		Compensation Plans
	Exercise of		Exercise Price of		(Excluding Shares
	Outstanding Options,		Outstanding Options,		Reflected in the First
Plan Category	Warrants and Rights		Warrants and Rights		Column)
Equity compensation plans approved by security holders		2,919	$	12.40		1,274
Equity compensation plans not approved by security holders		—		—		—
TOTAL		2,919	$	12.40		1,274

Purchases of Equity Securities by the Company

The Company occasionally repurchases its common shares, pursuant to a general authorization from the Board of Directors, which is renewed annually. As in prior years, the year 2008 authorization allowed the Company to repurchase up to $2 million of Company common stock in the open market per year. In February 2008, the Company’s Board of Directors authorized an increase in the share repurchase program to allow for the repurchase of up to two million shares. The Company amended its credit facility to allow for a greater number of shares to be repurchased by revising the restricted payments covenant under its credit facility to increase the limit to $45 million annually from $15 million annually. As of December 31, 2008, all shares authorized for repurchase under the program had been repurchased. The Company may repurchase shares under authorized programs periodically during open trading windows when it does not possess material, non-public information or may do so pursuant to Rule 10b5-1 purchase plans. However, in accordance with the June 2009 amendments to its revolving credit facility, the Company has discontinued its share repurchase program.

In addition, shares of common stock are occasionally tendered to the Company by certain employee and director stockholders in payment of stock options exercised, although no shares were tendered during 2008. The Company records the receipt of common stock in payment for stock options exercised as a purchase of treasury stock.

The following table summarizes the shares repurchased by the Company during 2008 (shares in thousands)

					No. Shares
	Total No.		Avg. Price		Purchased as Part of		Dollar Value of Shares
	Shares		Paid per		Publicly Announced		that may be
Period	Purchased		Share		Program		Purchased Under Program
August		119	$	14.24		119		1,881
September		517	$	15.71		517		1,364
October		656	$	12.62		656		708
November		425	$	13.17		425		283
December		283	$	12.94		283		—
2008 Total		2,000	$	13.68		2,000		—

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ITEM 6.   SELECTED FINANCIAL DATA

	Year Ended December 31,
	2008			2007		2006(1)		2005(2)		2004(3)
				(Restated)		(Restated)		(Restated)		(Restated)
				(In thousands, except per share amounts)
CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION
Net sales	$	494,184		$	544,409	$	546,118	$	565,485	$	237,219
Income (loss) from continuing operations		(60,006	)		30,598		25,949		28,522		21,303
Income (loss) per common share from continuing operations:
Basic	$	(2.24	)	$	1.14	$	0.98	$	1.12	$	0.99
Diluted	$	(2.24	)	$	1.10	$	0.95	$	1.06	$	0.95
CONSOLIDATED BALANCE SHEET INFORMATION
Total assets		440,353			534,987		530,760		552,611		216,617
Long-term debt		112,264			105,942		140,763		169,579		39,964
OTHER DATA
Cash dividends per common share	$	0.13		$	0.13	$	0.13	$	0.13	$	0.13

See Note 1 to the Consolidated Financial Statements regarding the restatement to correct an error in the financial statements for the year ended December 31, 2002, which was first reported on Form 10-Q for the quarter ended March 31, 2008. The restatement impacts the information presented above for years 2007, 2006, 2005 and 2004.

(1)	Consolidated Statement of Operations and Balance Sheet Information was impacted by the disposition of the Book and Catalogue operations on February 28, 2006. See Note 4 to the Consolidated Financial Statements. This disposition impacts the information presented above for years 2006 and 2005.
(2)	Consolidated Statement of Operations and Consolidated Balance Sheet Information was impacted by the acquisition of Seven on January 31, 2005 and the acquisition of Winnetts on December 31, 2004. See Note 3 to the Consolidated Financial Statements.
(3)	Consolidated Balance Sheet Information was impacted by the acquisition of Winnetts on December 31, 2004. See Note 3 to the Consolidated Financial Statements.

ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Thousands of dollars, except per share amounts)

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 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; the level of demand for the Company’s services; 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

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the Company to remedy known internal control deficiencies and weaknesses and the discovery of future 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; 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 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) and magazine ads. 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 in a client project may involve many 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 us. 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 notice, and client turn-around requirements are so tight, that there is little backlog. There are regular promotions throughout the year that create revenue opportunities for us, for example: 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. Additionally, changing regulatory requirements necessitate new packaging and a high degree of documentation. Lastly, there are a 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.

As a result of recent acquisitions, the Company has 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.

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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 2008, approximately 9 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 57 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 and Asia. 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. None of the acquisitions described below resulted in a new business segment.

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 Other operating segment. The purchase price was $10.3 million and may be increased by $0.7 million if a specified target of earnings before interest and taxes is achieved for the fiscal year ending March 31, 2009.

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 Other operating segment beginning June 1, 2008. The purchase price was $2.6 million and may be increased if certain thresholds of net sales and earnings before interest and taxes are exceeded for calendar year 2009.

Protopak Innovations, Inc.  On September 1, 2007, the Company acquired Protopak Innovations, Inc., a Toronto, Canada-based company that produces prototypes and samples for the packaging industry. The acquisition price was $12.1 million. The price may be increased if certain thresholds of earnings before interest and taxes are achieved for the fiscal years ending September 30, 2008, 2009 and 2010. Because the earnings threshold was exceeded for the fiscal year ended September 30, 2008, the Company accrued $0.6 million for a purchase price adjustment at September 30, 2008 and allocated the additional purchase price to goodwill. The Company currently believes that future earn-out amounts, if any, will be immaterial to its balance sheet and cash flow. The net assets and results of operations are included in the consolidated financial statements beginning September, 1 2007 and are included in the Other operating segment.

Perks Design Partners Pty Ltd.  On August 1, 2007, the Company acquired Perks Design Partners Pty Ltd., an Australia-based brand strategy and creative design firm that provides services to consumer products companies. The acquisition price was $3.3 million. The net assets and results of operations are included in the Consolidated Financial Statements beginning August 1, 2007 and are included in the Other operating segment.

Benchmark Marketing Services, LLC.  On May 31, 2007, the Company acquired the operating assets of Benchmark Marketing Services, LLC, a Cincinnati, Ohio-based creative design agency that provides services to consumer product companies. The acquisition price was $5.8 million and the price may be increased if certain thresholds of sales are achieved for the fiscal years ending May 31, 2008 and 2009. No purchase price adjustment was recorded for the fiscal year ended May 31, 2008 because the sales target was not achieved. In addition, the Company has recorded a reserve of $0.4 million for the estimated expenses associated with vacating the leased premises that Benchmark formerly occupied. Based on an integration plan formulated at the time of the acquisition,

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it was determined that the Benchmark operations would be merged with the Company’s existing Anthem Cincinnati operations. The Anthem Cincinnati facility was expanded and upgraded to accommodate the combined operations and Benchmark relocated to the Anthem Cincinnati facility in the fourth quarter of 2008. The net assets and results of operations are included in the Consolidated Financial Statements beginning June 1, 2007 and are included in the Other operating segment.

Schawk India, Ltd.   On August 1, 2007, the Company acquired the remaining 10 percent of the outstanding stock of Schawk India, Ltd from the minority shareholders for $0.5 million. The Company had previously acquired 50 percent of a company currently known as Schawk India, Ltd. in February 2005 as part of its acquisition of Seven Worldwide, Inc. On July 1, 2006, the Company increased its ownership of Schawk India, Ltd. to 90 percent. Schawk India, Ltd. provides artwork management, premedia and print management services.

WBK, Inc.  On July 1, 2006, the Company acquired the operating assets of WBK, Inc., a Cincinnati, Ohio-based design agency that provides services to retailers and consumer products companies. This operating unit is now known as Anthem Cincinnati. The acquisition price was $4.9 million and may increase if certain thresholds of sales and earnings before interest, taxes, depreciation and amortization are achieved for years 2007 through 2009. In the first quarter of 2008, the Company paid $0.9 million to the former owner of WBK as a result of achieving the earnings thresholds in 2007. The additional purchase price was allocated to goodwill. No earn-out is due for the year 2008 because the sales and earnings thresholds were not achieved. The Company currently believes that future earn-out amounts, if any, will be immaterial to its balance sheet and cash flow.

Anthem York.  In January 2006, the Company acquired certain operating assets of the internal design agency operation of Nestle UK and entered into a design services agreement with this client. This operation is known as Anthem York. The acquisition price was $2.2 million.

Seven Worldwide, Inc.  On January 31, 2005, the Company acquired Seven Worldwide, Inc. (formerly Applied Graphics Technologies, Inc.), a graphic services company with operations in 40 locations in the United States, Europe, Australia and India. The purchase price of $210.6 million consisted of $135.6 million paid in cash at closing, $4.5 million of acquisition-related professional fees and the issuance of four million shares of common stock with a value of $70.5 million. Seven Worldwide Inc.’s results of operations are included in the consolidated financial statements beginning January 31, 2005.

The stock purchase agreement entered into by the Company with Kohlberg & Company, L. L. C. (“Kohlberg”) to acquire Seven Worldwide, Inc. (“Seven”) provided for a payment of $10.0 million into an escrow account. The escrow was established to insure that funds were available to pay Schawk, Inc. 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 $10.0 million held in escrow. The Company has filed a counter-motion for summary judgment asserting that Schawk, Inc. has valid claims against the amounts held in escrow and that as a result, such funds should not be released but rather paid out to the Company. Kohlberg has denied that it has any indemnity obligations to the Company. At December 31, 2008, the Company had recorded a receivable from Kohlberg on its Consolidated Balance Sheet in the amount of $3.8 million, for a Seven 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 $6.0 million in settlement of Internal Revenue Service audits of Seven, that had been accrued as of the acquisition date, for the pre-acquisition years of 1996 to 2003. The Company believes it is entitled to indemnification for both amounts under the terms of the stock purchase agreement and that recoverability is probable. In addition, there are other tax matters for which the Company has established reserves related to years prior to the Company’s acquisition of Seven. Subsequent to the Company’s adoption of Statement of Financial Accounting Standards No. 141(R), “Business Combinations” (“SFAS No. 141R”), on January 1, 2009, all adjustments to pre-acquisition tax reserves will be adjustments to tax expense, regardless of whether the final determination exceeds or is less than the original liability.

Winnetts.  On December 31, 2004, the Company acquired certain assets and the business of Weir Holdings, Ltd., known as “Winnetts”, a UK based graphic services company with operations in six locations in the UK, Belgium and Spain. The acquisition price was $23.3 million. Winnetts was the Company’s first operation in Europe. The two largest graphics business acquisitions in the Company’s history were Seven and Winnetts. The principal objective in acquiring Winnetts and Seven was to expand the Company’s geographic presence and its service

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offering. This expansion enabled it to provide a more comprehensive level of customer service, to build a broader platform from which to grow its business and continue to pursue greater operating efficiencies.

The Company began work on a consolidation plan before the acquisition of Seven was finalized, recording an exit reserve of approximately $2.5 million based on the plan. The major expenses included in the exit reserve were severance pay for employees of acquired facilities that were merged with existing Schawk operations and lease termination expenses. The Company made payments of approximately $0.9 million in 2008 for lease termination expenses and anticipates making future payments of approximately $1.9 million. (See Note 3 to the Consolidated Financial Statements for further discussion). The Company realized significant synergies and reduced operating costs from the closing of nine US and UK operating facilities and the downsizing of several other operating facilities in 2005 and early 2006 and the elimination of the Seven corporate headquarters in New York City. In addition, the Company recorded acquisition integration and restructuring expenses which are shown as a separate line in the operating expense section of the Consolidated Statement of Operations of $3.9 million for the year ended December 31, 2006. The major items included in this expense were severance pay for employees at legacy Schawk, Inc. facilities that had been merged with operations of the acquired businesses, retention pay for key employees whose services were necessary during a transition period, travel expenses related to the planning and execution of facility consolidations, and professional fees for accounting, human resource, and integration planning advice.

In connection with Schawk’s financing of the Seven acquisition, the Company entered into a credit agreement dated January 28, 2005 with JPMorgan Chase Bank, N.A. Also on January 28, 2005, the Company entered into a Note Purchase and Private Shelf Agreement with Prudential Investment Management Inc, pursuant to which the Company sold $50.0 million in a series of three Senior Notes. See “Liquidity and Capital Resources” for a discussion of 2009 amendments to the terms of the credit agreement and Senior Notes. As of December 31, 2008 there was $135.9 million of debt outstanding, of which $132.0 million was considered long-term.

Financial Results Overview

Net sales declined $50.2 million or 9.2 percent for the year ended December 31, 2008 to $494.2 million from $544.4 million in 2007. For the twelve months ended December 31, 2008, the net loss was $60.0 million or $2.24 per fully diluted share, as compared to net income of $30.6 million or $1.10 per fully diluted share for 2007. The Company experienced a 22.9 percent net sales decline in the fourth quarter of 2008 as compared to same period in 2007. Through the nine months ended September 30, 2008 the company had experienced a 4.5 percent decline in net sales as compared to the comparable prior year period. The 2008 net sales decline occurred in the United States and Mexico operating segment (82.5 percent), the Europe operating segment (15.4 percent) and the Other operating segment (2.1 percent).

Gross profit declined by $28.0 million or 14.6 percent in 2008 to $164.4 million from $192.4 million in 2007. Of this decline, 61 percent is attributable to the lower volume of sales and 39 percent is attributable to a 2.0 percent decline in the gross profit percentage. The decline in the gross profit percentage occurred in all reportable segments.

Selling, general and administrative expenses (excluding impairment of goodwill, restructuring expenses, pension withdrawal expense and impairment of long-lived assets) increased $17.6 million or 13.4 percent in 2008 to $148.6 million from $131.0 million in 2007. The Company also incurred expenses in 2008 for which similar expenses were not recorded in 2007 as follows: impairment of goodwill of $48.0 million; restructuring expenses associated with the Company’s cost reductions activities of $10.4 million; pension withdrawal expenses of $7.3 million; and an increase over the prior year in impairment of long lived assets of $5.4 million. In addition, the Company incurred $6.8 million of professional fees, included in Selling, general and administrative expenses, related to its internal control remediation and related matters. The increase in these operating expenses resulted in an operating loss of $56.6 million in 2008 as compared to operating income of $60.2 million in 2007.

Goodwill impairment   During 2008, the Company changed its annual goodwill testing date from calendar year-end to October 1 and performed the 2008 test as of that date. Goodwill is assigned to multiple reporting units, mainly on a geographic basis at a level below the operating segments. Using projections of operating cash flow for each reporting unit, the Company prepared 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 an impairment of

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the goodwill assigned to the Company’s European and Anthem reporting units. The Company then prepared a step two valuation of the European and Anthem reporting units and concluded, after assigning fair values to all assets and liabilities of these reporting units in a manner similar to a purchase price allocation, that goodwill for the European and Anthem reporting units was impaired by $30.7 million and $17.3 million, respectively, which was recorded in the fourth quarter of 2008. The goodwill impairment reflects the decline in global economic conditions and general reduction in consumer and business confidence experienced during the fourth quarter of 2008.

In the first quarter of 2009, the Company’s market capitalization decreased due to a decline in the trading price of its common stock. Accordingly, the Company has commenced a review for potential impairment, which could result in additional goodwill impairment charges in 2009.

Cost reduction actions   Beginning in the second quarter of 2008, 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 2008 was $10.4 million. The costs associated with these actions are covered under Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS No. 146”) and Statement of Financial Accounting Standards No. 112, “Employers’ Accounting for Postemployment Benefits” (“SFAS No. 112”).

The total expense of $10.4 million is presented as Acquisition integration and restructuring expense in the Consolidated Statement of Operations; $4.8 million of these expenses were recorded in the United States and Mexico segment, $3.4 million in the Europe segment, $1.3 million in the Other operating segment and $0.9 million of these expenses were recorded in Corporate. See Note 6 — Acquisition Integration and Restructuring for additional information.

Costs savings in 2008 associated with these cost reduction activities were approximately $7.4 million with full year 2009 savings expected to be between $20.0 million and $22.0 million.

Pension withdrawal expense   As more fully described in Note 16 — 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 their Minneapolis, MN facility and notified the board of trustees of the union’s pension fund that they would no longer be making contributions for this facility to the union’s plan. Accordingly, the Company’s decision triggers 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, which is included in Other long-term liabilities on the Consolidated Balance Sheets.

Impairment of long lived assets   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, based on the properties’ estimated fair values of $6.5 million.

Also, during 2008, software that had been capitalized by the Company in accordance with the AICPA Statement of Position No. 98-1 “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use” (“SOP No. 98-1”) 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 has written down the capitalized costs of the software to fair value. The amount of the write-down recorded in 2008 was $2.3 million.

The Company also recorded a $0.5 million impairment charge to write-down the net assets of its large format print operation to fair value. See “Discontinued Operations” below and Note 4 — Discontinued Operations for more information.

Also, included in the Impairment of long-lived assets in the Consolidated Statement of Operations is $0.4 million of additional impairment charges for leasehold improvements and customer relationship intangible assets. See Notes 2 — Significant Accounting Policies and 22 — Impairment of Long-lived Assets for additional information.

29

Discontinued Operations

During the third quarter of 2008, the Company made a decision to sell its large format printing operation located in Toronto, Canada and began actively marketing the business to potential buyers. At September 30, 2008, the Company had received an offer from a qualified buyer and expected to complete a sale of the business during the fourth quarter of 2008. In accordance with Statement of Financial Accounting Standards No. “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), the assets and liabilities of the business for sale were disaggregated as assets and liabilities of discontinued operations in the Consolidated Balance Sheet in the Form 10-Q filed for the quarter ended September 30, 2008. The results of operation of the business for sale were also classified as discontinued operations in the Consolidated Statement of Operations in the Form 10-Q filed for the quarter ended September 30, 2008.

The Company recorded an impairment loss of $0.5 million to write-down the net assets of the business to fair value. This charge is included in Impairment of long-lived assets in the Consolidated Statement of Operations for the year-ended December 31, 2008.

The anticipated sale did not close during the fourth quarter as the Company had expected and, in December 2008, the Company reassessed the likelihood of completing the sale of the business within a one year time period and determined that it could no longer meet the requirements of SFAS No. 144 for classifying the business as held for sale and therefore as a discontinued operation. Accordingly, in this Form 10-K, the large format printing operation has been included in continuing operations. The assets and liabilities of the business, which had been disaggregated as assets and liabilities of discontinued operations in the Form 10-Q filed for the quarter ended September 30, 2008 have been reclassified to assets and liabilities of continuing operations and the results of operations of the business has similarly been included in continuing operations in this Form 10-K

Restatement of Prior Period Financial Statements

Restatement reported in Form 10-K for the year ended December 31, 2007

As disclosed in the Company’s Form 10-K for the year ended December 31, 2007, the Company restated its 2006 and 2005 consolidated financial statements to correct accounting errors discovered subsequent to the issuance of the original financial statements and to correct errors that were discovered during the financial statement audits for the respective years but which were not recorded because they were considered at the time of the original financial statement issuance to be immaterial. In addition, the quarterly results for 2006 and the first three quarters of 2007 were restated.

Due to the restatements, the United States Securities and Exchange Commission has been conducting a fact-finding investigation to determine whether there have been violations of certain provisions of the federal securities laws. See Item 3 — Legal Proceedings.

Restatement to correct error in the financial statements for the year ended December 31, 2002

In May 2008, as part of a strategic review, the Company discovered an error in its accounting for the goodwill associated with one of its Canadian operating units, Cactus, which is a large-format print producer acquired by the Company in 1999. For purposes of goodwill testing, this operation had been incorrectly aggregated with the Company’s broader Canadian reporting unit at December 31, 2007 and 2006, and with all operating units of the Company for fiscal years 2002 through 2005. At December 31, 2007 and in previous fiscal years, however, Cactus should have been treated as a separate reporting unit because it is a dissimilar business and met the requirements of a separate reporting unit under Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). Because Cactus should have been treated as a separate reporting unit, its goodwill should have been tested for impairment on a stand-alone basis.

Treating Cactus as a separate reporting unit, the Company performed a discounted cash flow analysis using historical and projected financial performance of Cactus and determined that the goodwill associated with Cactus was impaired by approximately $2.2 million as of December 31, 2002. The Company has presented restated consolidated balance sheet information as of December 31, 2007 in this Form 10-K to reflect changes in the amounts of previously reported goodwill, retained earnings and accumulated comprehensive income, to reflect the

30

correction of this error. The Company has also included the impact of this correction in the financial information presented in “Item 6, Selected Financial Data” of this Form 10-K. See Note 1 to the Consolidated Financial Statements for further discussion of this restatement.

Controls and Procedures

In connection with the Company’s assessment of internal controls as of December 31, 2008, the Company determined that it had a material weakness in its internal controls related to work-in-process inventory and continued to have material weaknesses in its internal controls related to revenue recognition and entity-level controls. Internal controls related to two other areas that were identified as material weaknesses for the year-ended December 31, 2007 (accounting for capitalized software costs and accounting for income taxes) have been remediated. See Part II, Item 9A. “Controls and Procedures” for a discussion of management’s evaluation of the Company’s disclosure controls and procedures, the Management Report on Internal Control over Financial Reporting and its remediation activities and plans.

RESULTS OF OPERATIONS

For the Years Ended December 31, 2008 and 2007

Schawk, Inc.

Comparative Consolidated Statements of Operations

Years Ended December 31, 2008 and 2007

							$			%
	2008			2007			Change			Change
	(In thousands)
Net sales	$	494,184		$	544,409		$	(50,225	)		(9.2	)%
Cost of sales		329,814			352,015			(22,201	)		(6.3	)%
Gross profit		164,370			192,394			(28,024	)		(14.6	)%
Gross profit percentage		33.3	%		35.3	%
Selling, general and administrative expenses		148,596			131,024			17,572			13.4	%
Acquisition integration and restructuring expenses		10,390			—			10,390			nm
Impairment of long-lived assets		6,644			1,197			5,447			nm
Multiemployer pension withdrawal expense		7,254			—			7,254			nm
Impairment of goodwill		48,041			—			48,041			nm
Operating income (loss)		(56,555	)		60,173			(116,728	)		nm
Operating margin percentage		(11.4	%)		11.1	%
Other income (expense):
Interest income		291			297			(6	)		(2.0	)%
Interest expense		(6,852	)		(9,214	)		2,362			(25.6	)%
		(6,561	)		(8,917	)		2,356			(26.4	)%
Income (loss) before income taxes		(63,116	)		51,256			(114,372	)		nm
Income tax provision (benefit)		(3,110	)		20,658			(23,768	)		nm
Net income (loss)	$	(60,006	)	$	30,598		$	(90,604	)		nm
Effective income tax rate		4.9	%		40.3	%

nm — Percentage not meaningful

31

Net sales for the twelve months ended December 31, 2008 were $494.2 million compared to $544.4 million for the twelve months ended December 31, 2007, a reduction of $50.2 million, or 9.2 percent. The sales decline was $41.5 million in the United States and Mexico segment, $7.7 million in the Europe segment and $1.0 million in the Other operating segment.

Consumer products packaging accounts sales for 2008 were $316.3 million, or 64.0 percent of total sales, as compared to $338.6 million in 2007, representing a decline of 6.6 percent. Advertising and retail accounts sales for 2008 were $134.2 million or 27.2 percent of total sales as compared to $157.4 million in 2007, representing a decline of 14.7 percent. Entertainment account sales for 2008 were $36.4 million or 7.4 percent of total sales as compared to $43.2 million in 2007 representing a decline of 15.6 percent. Results for 2008 compared with the year ago period reflect the slowdown in the U.S. economy, as a number of clients have delayed projects, resulting in lower revenue for the Company. No major clients were lost during 2008.

Gross profit declined by $28.0 million or 14.6 percent in 2008 to $164.4 million from $192.4 million in 2007. Of this decline, 61 percent is attributable to the lower volume of sales and 39 percent is attributable to a 2.0 percent decline in the gross profit percentage. The decline in the gross profit percentage occurred in all reportable segments.

Selling, general and administrative expenses (excluding impairment of goodwill, restructuring expenses, pension withdrawal expense and impairment of long-lived assets) increased $17.6 million or 13.4 percent in 2008 to $148.6 million from $131.0 million in 2007. The increase in selling, general and administrative expenses is primarily attributable to professional fees, which included audit fees and other costs related to the Company’s internal control remediation and related matters of $6.8 million, losses associated with foreign currency transactions of $4.5 million, consulting fees related to the Company’s re-branding initiative of $1.2 million, and a $1.1 million gain on sale of assets in the 2007 period that was not repeated in the 2008 period. The Company also incurred charges and expenses in 2008 for which similar expenses were not recorded in 2007 as follows: impairment of goodwill of $48.0 million; restructuring expenses associated with the Company’s cost reductions activities of $10.4 million; pension withdrawal expenses of $7.3 million; and an increase over the prior year in impairment of long lived assets of $5.4 million.

Operating income (loss) declined by $116.7 million in 2008 to a loss of $56.6 million from an operating income of $60.2 million in 2007. The decrease in operating income in 2008 compared to 2007 is principally due to lower gross profit, the increased selling, general and administrative expenses of $17.6 million and the non-recurring expenses and charges cited above.

The Company recorded pre-tax foreign exchange losses of $4.3 million in 2008. These losses were recorded by international subsidiaries that had unhedged currency exposure arising primarily from intercompany debt obligations. The losses were primarily attributable to a 27 percent decline in the exchange rate of the British pound compared to the United States dollar during the second half of 2008.

Interest expense for 2008 was $6.9 million compared to $9.2 million for 2007 as a result of a decrease in average outstanding debt and a reduction in average interest rates.

Income tax provision (benefit) was at an effective tax rate of 4.9 percent and 40.3 percent for 2008 and 2007, respectively. The decrease in the effective rate for 2008 compared to 2007 is primarily due to the non-deductibility of $10.5 million of the goodwill impairment recorded with respect to the Company’s European and Anthem operations, 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 $20.8 million for 2008 compared to $21.4 million in 2007.

Capital expenditures in 2008 were $14.9 million compared to $18.1 million in 2007.

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RESULTS OF OPERATIONS

For the Years Ended December 31, 2007 and 2006

Schawk, Inc.

Comparative Consolidated Statements of Operations

Years Ended December 31, 2007 and 2006

							$			%
	2007			2006			Change			Change
	(In thousands)
Net sales	$	544,409		$	546,118		$	(1,709	)		(0.3	)%
Cost of sales		352,015			356,149			(4,134	)		(1.2	)%
Gross profit		192,394			189,969			2,425			1.3	%
Gross margin percentage		35.3	%		34.8	%
Selling, general and administrative expenses		131,024			137,995			(6,971	)		(5.1	)%
Acquisition integration and restructuring expenses		—			3,933			(3,933	)		nm
Impairment of long-lived assets		1,197			—			1,197			nm
Reserve reversal from litigation settlements		—			(6,871	)		6,871			nm
Operating income		60,173			54,912			5,261			9.6	%
Operating margin percentage		11.1	%		10.1	%
Other income (expense):
Interest income		297			467			(170	)		(36.4	)%
Interest expense		(9,214	)		(10,617	)		1,403			(13.2	)%
		(8,917	)		(10,150	)		1,233			12.1	%
Income from continuing operations before income taxes		51,256			44,762			6,494			14.5	%
Income tax provision		20,658			18,813			1,845			9.8	%
Income from continuing operations		30,598			25,949			4,649			17.9	%
Income (loss) from discontinued operations		—			(1,332	)		1,332			nm
Net income	$	30,598		$	24,617		$	5,981			24.3	%
Effective income tax rate		40.3	%		42.0	%

nm — Percentage not meaningful

Net sales for the twelve months ended December 31, 2007 were $544.4 million compared to $546.1 million for the twelve months ended December 31, 2006, a reduction of $1.7 million, or 0.3 percent. Net sales declined by $24.6 million in the United States and Mexico segment, declined by $1.7 million in the Europe segment and increased by $24.6 million in the Other operating segment.

Consumer products packaging accounts, which represent approximately two-thirds of the Company’s total revenue, increased 8.3 percent, advertising and retail accounts decreased 13.5 percent (the decrease was 7.8 percent excluding a retail account the Company lost in the first quarter of 2007 as previously disclosed and excluding the effects of foreign currency translation) and entertainment accounts decreased 4.9 percent as compared to the prior year. Acquisitions contributed 2.7 points to the increase in consumer products packaging account revenues, and foreign currency translation contributed six-tenths of one percent to the sales increase in 2007. As a result, organic growth for consumer products packaging accounts was 5.0 percent. The organic growth in 2007 was as a result of new business wins in 2006 and 2007 as well as a strong finish to the year with consumer products packaging accounts in the fourth quarter. Organic growth in consumer products packaging accounts in the fourth quarter of 2007 was 8.0 percent. The strong fourth quarter of 2007 was as a result of the timing of volume that the Company expected in the third quarter but its consumer products packaging clients delayed projects until the fourth quarter of

33

2007. The increased volume in consumer products packaging was experienced in all geographies as North America, Europe and Asia all experienced increased net sales as compared to the prior year full year and fourth quarter. The decrease in sales in the advertising and retail accounts was due primarily to fewer ad pages being produced in 2007 versus 2006 and the loss of a significant retail account in early 2007. Entertainment accounts were lower primarily due to softness in the entertainment industry in Los Angeles, particularly in the fourth quarter of 2007.

Gross margin from continuing operations for the twelve months of 2007 was 35.3 percent, as compared to 34.8 percent in the prior-year period. The increase in the gross margin in 2007 reflects the more efficient operations resulting from cost reduction efforts and workflow enhancements.

Operating income from continuing operations increased to $60.2 million in the 2007 period from $54.9 million in the 2006 period. The operating margin from continuing operations increased to 11.1 percent in 2007 as compared to 10.1 percent in 2006. The improvement in operating income year over year was due in part to improved operating results in the Company’s U.K. operations as a result of the restructuring efforts in 2006. In addition, the increase in consumer packaging accounts revenue increased operating income in 2007, as these accounts tend to have higher margins than the Company’s other customer accounts.

There were certain items that had a net positive effect on 2007 operating income as follows: $1.6 million increase in income from reducing a vacant property reserve in the fourth quarter and a $1.1 million gain on the sale of a building in the second quarter of 2007. Offsetting these positive items was a $1.2 million impairment charge primarily for a customer relationship intangible asset for which future estimated cash flows did not support the carrying value; and $1.1 million of acquisition due diligence costs written off in connection with an acquisition that was not consummated.

Other income (expense) from continuing operations in the year ended December 31, 2007, resulted in net interest expense of $8.9 million, compared to $10.2 million of net interest expense in the comparable prior-year period primarily as a result of a reduction of debt with proceeds from improved operating cash flows during the current year.

Income tax provision from continuing operations for 2007 was at an effective rate of 40.3 percent versus 42.0 percent in the 2006 period. The higher rate in 2006 reflected the impact of recording a valuation allowance on a UK deferred tax asset in the fourth quarter of 2006.

As of December 31, 2007, the Company has U.S. Federal and State net operating loss carry forwards of approximately $8.7 million and $68.2 million, respectively, $20.2 million of foreign net operating loss carry forwards, $32.6 million of foreign capital loss carry forwards, and U.S. and Foreign income tax credit carry forwards of approximately $0.2 million and $5.9 million, respectively, which will be available to offset future income tax liabilities. If not used, $8.0 million of the net operating loss carry forwards will expire in 2024 and 2025 while the remainder has no expiration period. Certain of these carry forwards are subject to limitations on use due to tax rules affecting acquired tax attributes and business continuation, and therefore the Company has established tax-effected valuation allowances against these tax benefits in the amount of $27.3 million at December 31, 2007. The Company has valuation allowances of $18.6 million related to pre-acquisition deferred tax assets which were established in prior years as an adjustment to goodwill. During 2007, the Company reduced goodwill by $0.3 million due to the projected use of pre-acquisition deferred tax assets in filing its 2007 income tax returns. With the adoption of SFAS 141R, Business Combinations, effective January 1, 2009, releases of valuation allowances established in purchase accounting after December 31, 2008 will reduce the income tax provision as opposed to goodwill.

The undistributed earnings of foreign subsidiaries were approximately $33.9 million and $15.0 million at December 31, 2007 and 2006, respectively. No income taxes are provided on the undistributed earnings because they are considered permanently reinvested.

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, 2008

34

was $135.9 million. As noted below, the Company would not have been in compliance with certain financial covenants under its credit facility absent certain amendments entered into in June 2009.

As of December 31, 2008, the Company had $20.2 million in consolidated cash and cash equivalents, compared to $11.8 million at December 31, 2007.

Cash provided by Operating Activities

Cash provided by operating activities was $33.2 million in 2008 compared to cash provided by operating activities of $70.4 million in 2007. The decrease in cash provided by operating activities is due to a $60.0 million net loss in 2008 compared to $30.6 million of net income in 2007, partially offset by an increase in non-cash expenses in 2008, including goodwill impairment of $48.0 million and an impairment write-down of fixed assets and intangible assets of $6.6 million. A decrease in trade accounts receivable of $25.2 million during 2008 contributed to the cash provided by operating activities.

Depreciation and amortization expense in 2008 was $20.8 million as compared to $21.4 million in the prior year. The decrease in depreciation and amortization expense reflects the reduction in capital expenditures during 2008 as compared to the prior year.

Cash used in Investing Activities

Cash used in investing activities was $26.2 million for the year ended December 31, 2008 compared to $37.2 million of cash used in investing activities during the year ended December 31, 2007. The cash used in investing activities during 2008 includes $12.8 million for acquisitions, primarily for Brandmark International Holdings, compared to $21.4 million during 2007. Capital expenditures were $14.9 million in 2008 compared to $18.1 million in 2007.

Cash used in Financing Activities

Cash used in financing activities was $0.5 million for 2008 compared to cash used in financing activities of $32.2 million in 2007. During 2008, the Company acquired two million of its common shares on the open market for $27.4 million and financed the purchases with proceeds of $28.0 million from its revolving credit facility. During 2007, the Company paid down its revolving credit facility by $33.4 million, mainly with cash generated from operations.

Revolving Credit Facility, Note Purchase Agreements and Other Debt Arrangements

In January 2005, the Company entered into a five year unsecured revolving credit facility credit agreement with JPMorgan Chase Bank, N.A. At December 31, 2008, $66.3 million was outstanding under the agreement. 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. Specifically, the amendment increased the aggregate dollar amount of restricted payments that the Company may make from $15.0 million to $45.0 million annually, increased the Company’s allowable maximum acquisition amount from $50.0 million to $75.0 million annually and increased the Company’s permitted foreign subsidiary investment amount from $60.0 million to $120.0 million. The increase in the restricted payment covenant was designed primarily to allow for greater share repurchases. 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 will be paid on or before September 30, 2009. See “2009 Amendments to Revolving Credit Facility and Note Purchase Agreements” below. The total balance outstanding under the revolving credit agreement, $66.3 million, is included on the December 31, 2008 Consolidated Balance Sheet as follows: $10.5 million is included in Current maturities of long-term debt and $55.8 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, will mature in 2010. The second and third notes, each in the original principal amount of $20.0 million, mature in 2011 and 2012,

35

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 will be paid on or before September 30, 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 will mature in 2010, and $17.2 million will mature in both 2011 and 2012. Additionally as amended, the first, second and third notes will bear interest at 8.81 percent, 8.99 percent and 9.17 percent, respectively. The total of these notes, $50.0 million, is included on the December 31, 2008 Consolidated Balance Sheet as follows: $7.0 million is included in Current maturities of long-term debt and $43.0 million is included in Long-term debt.

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, pursuant to an exception from the registration requirements of the Securities Act of 1933, of two series of notes: Tranche A, for $15.0 million and Tranche B, for $10.0 million. 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 will be paid on or before September 30, 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 will be payable in annual installments of $1.8 million from 2009 to 2013, and the remaining balance of the Tranche B note will be payable in annual installments of $1.2 million from 2010 to 2014, provided that upon the Company obtaining a consolidated leverage ratio of 2.75 to 1 and the refinancing of the Company’s revolving credit facility, principal installments due under the 2003 Private Placement will return to the pre-2009 amendment levels ($2.1 million on each December 31 and $1.4 million on each April 1). The originally scheduled Tranche B installment payment of $1.4 million was paid when due in April 2009. As amended, the Tranche A and Tranche B notes bear interest at 8.90 percent and 8.98 percent, respectively. The combined balance of the of the Tranche A and Tranche B notes, $19.3 million, is included on the December 31, 2008 Consolidated Balance Sheet as follows: $5.8 million is included in Current maturities of long-term debt and $13.5 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 line at December 31, 2008.

2009 Amendments to Revolving Credit Facility and Note Purchase Agreements

As a result of a goodwill impairment charges and restructuring activities in the fourth quarter of 2008, compounded by the Company’s stock repurchase program and weaker earnings performance, in June 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 on or before September 30, 2009, the size of the Company’s revolving credit facility will be further reduced to $80.0 million, which, based on the Company’s June 1, 2009 outstanding revolving credit balance, is expected to provide approximately $15 million of available credit;

•  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 (“bps”), 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 bps per year;

36

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

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

•  prohibit the Company from repurchasing its shares without lender consent and restrict 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 $.01 per share based on the number of shares of common stock currently outstanding;

•  require 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

•  provide a waiver for any noncompliance with certain financial covenants, as well as with covenants relating to (i) the reduction of indebtedness within prescribed time periods using the proceeds of a previously completed asset sale, (ii) the payment of dividends, and (iii) the delivery of the Company’s annual and quarterly financial statements for the periods ended December 31, 2008 and March 31, 2009, respectively, within prescribed time periods.

In addition, all amounts due under the credit facility and the outstanding notes are now 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 its outstanding senior notes were amended to include financial and other covenants that are the same as or substantially equivalent to the revised financial and other covenants under its amended credit facility.

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 renegotiated 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 2009 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 2009 and thereafter remains subject to many variables, including those described under “Risk Factors” contained in this report. If the Company is not able to remain in compliance with its debt covenants, its lenders could restrict the Company’s ability to draw further on its credit facility or could elect to declare all amounts outstanding under the Company’s material debt arrangements to be immediately due and payable. Either event would materially adversely affect the Company’s liquidity and, in turn, its business and financial condition. If the lenders accelerate the payment of the indebtedness due to any covenant breach, the Company’s 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. See “Risk Factors” for a more detailed discussion of certain of the factors that could adversely affect the Company’s business. Additionally, the Company will need to renew, extend or enter into a new credit facility prior to the expiration of its revolving credit facility in January 2010; however, there can be no assurances that it will be able to successfully negotiate a replacement facility or refinance any of its debt, including its revolving credit facility in January 2010 or its Senior Notes as they become due, on commercially reasonable terms or at all.

The Company operates in thirteen countries besides the United States. 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.

37

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, capital expenditures are expected to be in the range of $10 to $15 million annually. Also, over the next five years, the Company’s revolving credit facility and most of its long-term private placement debt matures, including $67.4 million of debt that matures in 2010. The Company’s total contractual obligations over the next five years total approximately $226 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 believes that it will have sufficient access to both debt and equity markets to finance such an acquisition without unduly burdening the Company’s balance sheet or cash flows.

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
			Less						More
			Than 1		1-3		3-5		Than 5
Contractual Obligations	Total		Year		Year		Years		Years
	(In thousands)
Debt obligations	$	135,827	$	23,563	$	87,684	$	23,351	$	1,229
Interest on debt(1)		12,965		4,272		7,310		1,328		55
Operating lease obligations		50,972		12,645		17,800		11,927		8,600
Purchase obligations		7,155		5,095		2,060		—		—
Deferred compensation		1,942		249		31		31		1,631
Multiemployer pension withdrawal		7,400		—		7,400		—		—
Uncertain tax positions(2)		9,249		1,906		7,343		—		—
Total	$	225,510	$	47,730	$	129,628	$	36,637	$	11,515

(1)	Reflects scheduled interest payments on fixed-rate debt. Variable-rate interest on approximately $66,250 of variable rate debt under its revolving credit agreement as of December 31, 2008 is excluded because regular interest payments are not scheduled and fluctuate depending on outstanding principal balance and market-rate interest levels.
(2)	Represents liability related to uncertain tax positions.

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

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

38

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 its critical accounting estimates are limited to those described below.

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. In assessing the carrying value of its accounts receivable, the Company estimated the recoverability by making assumptions based on its historical write-off experience and specific risks identified in the accounts receivable portfolio. Based on the Company’s estimates and assumptions, an allowance for doubtful accounts and credit memos of $3.1 million was established at December 31, 2008, compared to an allowance of $2.1 million at December 31, 2007. 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 and the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of those items. 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’s cash flow estimates are based on historical results adjusted to reflect its best estimate of future market and operating conditions and forecasts. The net carrying value of assets not recoverable is reduced to fair value. The Company’s estimates of fair value represent its best estimate based on industry trends and reference to market rates and transactions. During 2008, the Company recorded the following impairment charges: $3.5 million for land and buildings where the carrying values could not be supported by current appraised market values; $2.3 million for internally-developed software where a change in circumstances indicated that the future value of the software may not be recoverable; $0.5 million to write-down the carrying value of the Company’s large format print operation to fair value; and $0.2 million for fixed assets, mainly related to leasehold improvements at a facility where the lease was terminated before the lease expiration date. In addition, $0.6 million of asset impairments, mainly for leasehold improvements at vacated facilities, were recorded in connection with the Company’s 2008 restructuring program, included in Acquisition integration and restructuring expense in the Consolidated statement of Operations at December 31, 2008. 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. Effective in 2002, goodwill is no longer amortized but is subject to an annual (or under certain circumstances more frequent) impairment test based on its estimated fair value. Customer relationships and other intangible assets are amortized over their useful lives and are tested for impairment when events and circumstances indicate that an impairment condition may exist. 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. When a potential impairment condition has been identified, an impairment test of the intangible asset is performed, based on estimated future undiscounted cash flows. During the fourth quarter of 2008, the Company recorded an impairment write-down of $0.2 million for customer relationship intangible assets for which it was determined that future estimated cash flows

39

did not support the carrying value. There are many assumptions and estimates underlying the determination of an impairment loss. Another estimate using different, but still reasonable, assumptions could produce a significantly different result. Therefore, additional impairment losses could be recorded in the future. The Company did not identify any other events or changes in circumstances that would indicate an impairment condition existed at December 31, 2008, with respect to its intangible assets other than goodwill.

The Company historically performed an annual goodwill impairment test as of December 31 each year; however, in the fourth quarter of 2008, the Company changed its annual test date to October 1^st, commencing with the test for 2008, in order to have the required testing completed prior to its year-end closing activities. This change did not delay, accelerate or avoid any impairment charge. Accordingly the Company believes that this accounting change is preferable in its circumstances. This change constitutes a change in accounting principle under SFAS No. 154, “Accounting Changes and Error Corrections, (“SFAS No. 154”), a replacement of APB opinion No. 20 and FASB Statement No. 3”.

The Company performed the required impairment test as of October 1, 2008. In accordance with Statement of Financial Accounting Standards (“SFAS No. 142”) “Goodwill and Other Intangible Assets (as amended) and the relevant provisions of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”, the Company assigned its goodwill to multiple reporting units, mainly on a geographic basis at a level below the operating segments. 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 a potential impairment of the goodwill assigned to the Company’s European and Anthem reporting units. The Company then prepared a step two valuation of the European and Anthem reporting units and concluded, after assigning fair values to all assets and liabilities of these reporting units in a manner similar to a purchase price allocation, that goodwill for the European and Anthem reporting units was impaired by $30.7 million and $17.4 million, respectively. The Company recorded this impairment adjustment in the fourth quarter of 2008. See Note 9 — Goodwill and Intangible Assets for further information.

A change in the Company’s business climate in future periods, including a significant downturn in the Company’s operations, and/or a significant decrease in the market value of the Company’s common stock could result in additional impairment charges.

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 us, 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 FASB Interpretation (“FIN No. 48”), “Accounting for Uncertainty in Income Taxes (as amended)an interpretation of FASB Statement No. 109”. FIN No. 48 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109. 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. See Note 13 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

40

goodwill. Any change in assumptions that result in an increase to the exit reserves would result in a charge to income. During 2008, the Company recorded a reduction to its exit reserves for the Seven Worldwide acquisition in the amount of $1.1 million, primarily due to changes in sublease assumptions at several vacated facilities. At December 31, 2008, the Company had exit reserves of approximately $2.6 million that were included in Accrued expenses and Other noncurrent liabilities on the Consolidated Balance Sheet, for exit activities completed in 2005 through 2007, 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. 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 Note 3 to the Consolidated Financial Statements for further discussion.

New Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141(R), “Business Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R) replaces SFAS No. 141, “Business Combinations”, but retains the requirement that the purchase method of accounting for acquisitions be used for all business combinations. SFAS No. 141(R) expands on the disclosures previously required by SFAS No. 141, better defines the acquirer and the acquisition date in a business combination, and establishes principles for recognizing and measuring the assets acquired (including goodwill), the liabilities assumed and any non controlling interests in the acquired business. SFAS 141(R) changes the accounting for acquisition related costs from being included as part of the purchase price of a business acquired to being expensed as incurred and will require the acquiring company to recognize contingent consideration arrangements at their acquisition date fair values, with subsequent changes in fair value generally to be reflected in earnings, as opposed to additional purchase price of the acquired business. As the Company has a history of growing its business through acquisitions, the Company anticipates that the adoption of SFAS 141(R) will have an impact on its results of operations in future periods, which impact depends on the size and the number of acquisitions it consummates in the future.

SFAS No. 141(R) also requires an acquirer to record an adjustment to income tax expense for changes in valuation allowances or uncertain tax positions related to acquired businesses. Certain of the Company’s acquisitions consummated in prior years would be subject to changes in accounting for the changes in valuation allowances on deferred tax assets. After December 31, 2008, reductions of valuation allowances would reduce the income tax provision as opposed to goodwill. SFAS No. 141(R) is effective for all business combinations with an acquisition date in the first annual period following December 15, 2008 and early adoption is not permitted. The Company will adopt SFAS No. 141(R) as of January 1, 2009.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, with earlier adoption prohibited. This statement requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net earnings attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. The statement also amends certain of ARB No. 51’s consolidation procedures for consistency with the requirements of SFAS No. 141(R). This statement also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. The adoption of SFAS No. 160 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

On January 1, 2008, the Company adopted the provisions of Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis under a fair value option. This statement also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. At the adoption date, unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment in retained earnings. Subsequent to adopting SFAS No. 159, changes in fair value are recognized in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The adoption of

41

SFAS No. 159 did not have an impact on the Company’s consolidated financial statements as the Company did not elect to measure any financial assets or financial liabilities at fair value.

On January 1, 2008, the Company adopted the provisions of Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements, but does not require any additional fair value measurements. Relative to SFAS No. 157, the FASB has issued FASB Staff Position No. 157-2, which delays the effective date of SFAS No. 157 for one year for certain nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. As required, the Company adopted SFAS No. 157 on January 1, 2008, for financial assets and liabilities and for nonfinancial assets and liabilities that are remeasured at least annually. There was no material effect on its financial statements upon adoption. The Company does not expect a material impact on its financial statements from adoption of SFAS No. 157 as it pertains to nonfinancial assets and nonfinancial liabilities for the first quarter of 2009.

In April 2008, the FASB issued FASB Staff Position No. 142-3, “Determining the Useful Life of Intangible Assets” (“FSP No. 142-3”). FSP 142-3 amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value by allowing an entity to consider its own historical experience in renewing or extending the useful life of a recognized intangible asset. FSP No. 142-3 is effective for fiscal years beginning after December 15, 2008. The Company is currently assessing the statement but its adoption is not expected to have a material impact on its 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 $66.3 million of variable rate debt outstanding at December 31, 2008 and expects to use its variable rate credit facilities during 2009 and beyond to fund acquisitions and cash flow needs. The debt is variable to the Eurocurrency 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 2.4 percent at December 31, 2008 to 2.64 percent) would add approximately $0.2 million of interest cost annually based on the variable rate debt outstanding at December 31, 2008. The Company does not actively manage interest rate exposure on variable rate debt and the Company does not currently hedge its interest rate exposures. The Company’s remaining debt is fixed at rates that range from 8.81 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, Malaysian Ringgit and the Australian Dollar. The Company’s results of operations were adversely affected by the increase in value of the US dollar relative to most foreign currencies that occurred during the second half of 2008. An additional adverse change of 10 percent in exchange rates would have resulted in a decrease in sales of $13.5 million, or 2.7 percent, and an increase in income before income taxes of $3.3 million, or 5.8 percent, for the year ended December 31, 2008.

For the years ended December 31, 2008 and December 31, 2007, the Company recorded pre-tax foreign exchange losses (gains) of $4.3 million and $(0.2 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 selling, general and administrative expenses in the Consolidated Statement of Operations. The Company does not currently hedge its foreign currency exposures.

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ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

	Page
Report of Independent Registered Public Accounting Firm		44
FINANCIAL STATEMENTS:
Consolidated Balance Sheets — December 31, 2008 and 2007		45
Consolidated Statements of Operations — Years Ended December 31, 2008, 2007 and 2006		46
Consolidated Statements of Cash Flows — Years Ended December 31, 2008, 2007 and 2006		47
Consolidated Statements of Stockholders’ Equity — Years Ended December 31, 2008, 2007 and 2006		48
Notes to Consolidated Financial Statements		49
FINANCIAL STATEMENT SCHEDULES:
SCHEDULE II — Valuation Reserves		100

43

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Schawk, Inc.

We have audited the accompanying consolidated balance sheets of Schawk, Inc. and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. Our audit also included the financial statement schedule listed in the Index at Item 15(a). 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, 2008 and 2007, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the consolidated balance sheet as of December 31, 2007 and related consolidated statements of stockholders’ equity for the years ended December 31, 2007 and 2006 have been restated.

During 2007, as discussed in Notes 2 and 13 to the consolidated financial statements, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Schawk, Inc.’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report, dated June 11, 2009 expressed an adverse opinion on the effectiveness of internal control over financial reporting.

/s/ ERNST & YOUNG LLP

Chicago, Illinois

June 11, 2009

44

Schawk, Inc.

Consolidated Balance Sheets

	December 31,
	2008			2007
				(Restated)
	(In thousands, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	20,205		$	11,754
Trade accounts receivable, less allowance for doubtful accounts of $3,138 in 2008 and $2,063 in 2007		83,218			113,215
Inventories		23,617			21,902
Prepaid expenses and other current assets		11,243			13,524
Income tax receivable		3,348			—
Assets held for sale		6,555			—
Deferred income taxes		2,765			4,755
Total current assets		150,951			165,150
Property and equipment, net		58,325			77,083
Goodwill		184,037			246,368
Other intangible assets, net		39,125			41,528
Deferred income taxes		2,752			—
Other assets		5,163			4,858
Total assets	$	440,353		$	534,987
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	20,694		$	26,308
Accrued expenses		52,016			52,420
Income taxes payable		—			4,754
Current portion of long-term debt		23,563			4,433
Total current liabilities		96,273			87,915
Long-term debt		112,264			105,942
Deferred income taxes		1,858			15,814
Other long-term liabilities		29,137			24,547
Stockholders’ Equity:
Common stock, $0.008 par value, 40,000,000 shares authorized, 29,478,456 and 29,213,166 shares issued at December 31, 2008 and 2007, respectively , 25,218,566 and 27,013,482 shares outstanding at December 31, 2008 and 2007, respectively		217			216
Additional paid-in capital		187,801			184,110
Retained earnings		68,016			131,457
Accumulated comprehensive income, net		1,368			14,162
		257,402			329,945
Treasury stock, at cost, 4,259,890 and 2,199,684 shares of common stock at December 31, 2008 and 2007, respectively		(56,581	)		(29,176	)
Total stockholders’ equity		200,821			300,769
Total liabilities and stockholders’ equity	$	440,353		$	534,987

See accompanying notes.

45

Schawk, Inc.

Consolidated Statements of Operations

	Years Ended December 31,
	2008			2007			2006
	(In thousands, except per share amounts)
Net sales	$	494,184		$	544,409		$	546,118
Cost of sales		329,814			352,015			356,149
Gross profit		164,370			192,394			189,969
Selling, general, and administrative expenses		148,596			131,024			136,710
Impairment of goodwill		48,041			—			—
Acquisition integration and restructuring expenses		10,390			—			3,933
Multiemployer pension withdrawal expense		7,254			—			1,285
Impairment of long-lived assets		6,644			1,197			—
Reserve reversal from litigation settlement		—			—			(6,871	)
Operating income (loss)		(56,555	)		60,173			54,912
Other income (expense):
Interest income		291			297			467
Interest expense		(6,852	)		(9,214	)		(10,617	)
		(6,561	)		(8,917	)		(10,150	)
Income (loss) from continuing operations before income taxes		(63,116	)		51,256			44,762
Income tax provision (benefit)		(3,110	)		20,658			18,813
Income (loss) from continuing operations		(60,006	)		30,598			25,949
Loss from discontinued operations, net of tax benefit of $851 in 2006		—			—			(1,332	)
Net income (loss)	$	(60,006	)	$	30,598		$	24,617
Earnings per share:
Basic:
Income (loss) from continuing operations	$	(2.24	)	$	1.14		$	0.98
Loss from discontinued operations	$	—		$	—		$	(0.05	)
Net income (loss) per common share	$	(2.24	)	$	1.14		$	0.93
Diluted:
Income (loss) from continuing operations	$	(2.24	)	$	1.10		$	0.95
Loss from discontinued operations	$	—		$	—		$	(0.05	)
Net income (loss) per common share	$	(2.24	)	$	1.10		$	0.90
Weighted average shares outstanding:
Basic		26,739			26,869			26,393
Diluted		26,739			27,701			27,395
Dividends per Class A common share	$	0.13		$	0.13		$	0.13

See accompanying notes.

46

Schawk, Inc.

Consolidated Statements of Cash Flows

	Years Ended December 31,
	2008			2007			2006
	(In thousands)
Operating activities
Net income (loss)	$	(60,006	)	$	30,598		$	24,617
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		16,693			17,574			19,051
Amortization		4,058			3,779			3,466
Impairment write-down of goodwill		48,041			—			—
Impairment write-down of long-lived assets		6,644			1,197			—
Non-cash restructuring charge		628			—			—
Deferred income taxes		(8,452	)		1,323			(9,826	)
Reserve reversal from litigation settlement		—			—			(6,871	)
Loss (gain) on sale of equipment		362			(852	)		532
Share-based compensation expense		1,385			1,011			1,059
Tax benefit from stock options exercised		(100	)		(608	)		(1,662	)
Changes in operating assets and liabilities, net of effects from acquisitions:
Trade accounts receivable		25,184			21,204			(3,568	)
Inventories		(2,936	)		883			1,564
Prepaid expenses and other current assets		1,048			(3,971	)		11
Trade accounts payable, accrued expenses and other liabilities		1,993			(5,884	)		(20,130	)
Income taxes refundable (payable)		(1,383	)		4,175			19,952
Net cash provided by operating activities		33,159			70,429			28,195
Investing activities
Proceeds from disposal of property and equipment		1,189			2,605			4,551
Proceeds from sale of business		—			—			28,184
Purchases of property and equipment		(14,912	)		(18,121	)		(24,662	)
Acquisitions, net of cash acquired		(12,784	)		(21,384	)		(9,747	)
Other		309			(261	)		(112	)
Net cash used in investing activities		(26,198	)		(37,161	)		(1,786	)
Financing activities
Issuance of common stock		2,208			4,116			6,921
Net principal proceeds (payments) on debt		28,033			(33,408	)		(27,514	)
Principal payments on capital lease obligations		—			(37	)		(492	)
Tax benefit from stock options exercised		100			608			1,662
Cash dividends		(3,411	)		(3,474	)		(3,424	)
Purchase of common stock		(27,430	)		(42	)		(1,223	)
Net cash used in financing activities		(500	)		(32,237	)		(24,070	)
Effect of foreign currency rate changes		1,990			546			319
Net increase in cash and cash equivalents		8,451			1,577			2,658
Cash and cash equivalents beginning of period		11,754			10,177			7,519
Cash and cash equivalents end of period	$	20,205		$	11,754		$	10,177
Supplementary cash flow disclosures:
Dividends issued in the form of Class A common stock	$	24		$	24		$	23
Cash paid for interest	$	5,494		$	7,574		$	8,898
Cash paid for income taxes, net	$	6,481		$	15,923		$	3,686

See accompanying notes.

47

Schawk, Inc.

Consolidated Statements of Stockholders’ Equity

Years Ended December 31, 2006 (Restated), 2007 (Restated) and 2008

	Class A
	Common			Class A		Additional						Accumulated						Total
	Shares			Common		Paid-in			Retained			Comprehensive			Treasury			Stockholders
	Outstanding			Stock		Capital			Earnings			Income (Loss)			Stock			Equity
	(In thousands, except share amounts)
Balance at December 31, 2005 (As originally reported)		26,070,747		$	208	$	168,794		$	86,081		$	1,933		$	(27,963	)	$	229,053
Restatement Adjustments										(2,191	)		(784	)					(2,975	)
Balance at December 31, 2005 (Restated)		26,070,747			208		168,794			83,890			1,149			(27,963	)		226,078
Net income		—			—		—			24,617			—			—			24,617
Foreign currency translation adjustment		—			—		—			—			5,506			—			5,506
Total comprehensive income		—			—		—			—			—			—			30,123
Sale of Class A common stock		559,086			3		5,814			—			—			—			5,817
Tax benefit from stock options exercised		—			—		1,662			—			—			—			1,662
Purchase of Class A treasury stock		(64,281	)		—		—			—			—			(1,223	)		(1,223	)
Stock issued under employee stock purchase plan		53,929			1		1,103			—			—			—			1,104
Share-based compensation expense		—			—		1,059			—			—			—			1,059
Issuance of Class A common stock under dividend reinvestment program		1,329			—		—			(23	)		—			26			3
Cash dividends		—			—		—			(3,424	)		—						(3,424	)
Balance at December 31, 2006 (Restated)		26,620,810			212		178,432			105,060			6,655			(29,160	)		261,199
Net income		—			—		—			30,598			—			—			30,598
Foreign currency translation adjustment		—			—		—			—			7,507			—			7,507
Total comprehensive income		—			—		—			—			—			—			38,105
Adoption of FIN 48		—			—		(53	)		(703	)		—			—			(756	)
Sale of Class A common stock		345,754			3		3,266			—			—			—			3,269
Tax benefit from stock options exercised		—			—		608			—			—			—			608
Purchase of Class A treasury stock		(2,146	)		—		—			—			—			(42	)		(42	)
Stock issued under employee stock purchase plan		47,683			1		846			—			—			—			847
Share-based compensation expense		—			—		1,011			—			—			—			1,011
Issuance of Class A common stock under dividend reinvestment program		1,381			—		—			(24	)		—			26			2
Cash dividends		—			—		—			(3,474	)		—			—			(3,474	)
Balance at December 31, 2007 (Restated)		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 purchase 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

See accompanying notes.

48

Schawk, Inc.

Notes to Consolidated Financial Statements

(In Thousands, Except Per Share Amounts)

NOTE 1.   Restatement of Previously Issued Financial Statements

Restatement to correct error in the financial statements for the year ended December 31, 2002

In May 2008, as part of a strategic review, the Company discovered an error in its accounting for the goodwill associated with one of its Canadian operating units, Cactus, which is a large-format print producer acquired by the Company in 1999. For purposes of goodwill testing, this operation had been incorrectly aggregated with the Company’s broader Canadian reporting unit at December 31, 2007 and 2006, and with all operating units of the Company for fiscal years 2002 through 2005. At December 31, 2007 and in previous fiscal years, however, Cactus should have been treated as a separate reporting unit because it is a dissimilar business and met the requirements of a separate reporting unit under Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). Because Cactus should have been treated as a separate reporting unit, its goodwill should have been tested for impairment on a stand-alone basis.

Treating Cactus as a separate reporting unit, the Company performed a discounted cash flow analysis using historical and projected financial performance of Cactus and determined that the goodwill associated with Cactus was impaired by approximately $2,191 as of December 31, 2002. The Company performed an analysis to determine if this error was material to the current period or any individual prior period, taking into account the requirements of SEC Staff Accounting Bulletin No. 99, “Materiality” (“SAB No. 99”) and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB No. 108”). Based on this analysis, the Company concluded that the error was material to the results of operations for the year ended December 31, 2002, and would have been material to the 2008 income statement.

The Company has presented a restated consolidated balance sheet as of December 31, 2007 in this Form 10-K to reflect changes in the amounts of previously reported goodwill, retained earnings and accumulated comprehensive income, to reflect the correction of this error. The restatement has resulted in a decrease of goodwill in the amount of $3,527 as of December 31, 2007, a decrease in accumulated comprehensive income of $1,336 due to the fluctuation in exchange rates between the Canadian dollar and the US dollar and a decrease in retained earnings of $2,191. The accounting error has no effect on net income for any period after fiscal 2002. The Company has also included the impact of this correction in the financial information presented in “Item 6, Selected Financial Data” of this Form 10-K.

49

Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

The following is a summary of the effect of the restatement to correct an error in the December 31, 2002 financial statements on the Consolidated Balance Sheet for the year ended December 31, 2007:

Consolidated Balance Sheet

	December 31, 2007
	Previously
	Reported			Restated
Assets
Current assets:
Cash and cash equivalents	$	11,754		$	11,754
Trade accounts receivable, less allowance for doubtful accounts of $2,063		113,215			113,215
Inventories		21,902			21,902
Prepaid expenses and other current assets		13,524			13,524
Deferred income taxes		4,755			4,755
Total current assets		165,150			165,150
Property and equipment, net		77,083			77,083
Goodwill		249,895			246,368
Other intangible assets, net		41,528			41,528
Other assets		4,858			4,858
Total assets	$	538,514		$	534,987
Liabilities and Stockholders’ Equity
Current liabilities:
Trade accounts payable	$	26,308		$	26,308
Accrued expenses		52,420			52,420
Income taxes payable		4,754			4,754
Current portion of long-term debt		4,433			4,433
Total current liabilities		87,915			87,915
Long-term debt		105,942			105,942
Other long-term liabilities		24,547			24,547
Deferred income taxes		15,814			15,814
Stockholders’ Equity:
Common stock		216			216
Additional paid-in capital		184,110			184,110
Retained earnings		133,648			131,457
Accumulated comprehensive income, net		15,498			14,162
		333,472			329,945
Treasury stock, at cost		(29,176	)		(29,176	)
Total stockholders’ equity		304,296			300,769
Total liabilities and stockholders’ equity	$	538,514		$	534,987

50

Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

NOTE 2.   Significant Accounting Policies

Basis of Presentation

The Company’s consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain previously reported amounts have been reclassified to conform to the current-period presentation. The Company’s results as discussed in the financial statements reflect continuing operations, unless otherwise noted — see Note 4 — Discontinued Operations.

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 a 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 of primarily 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 13 percent of total inventories in 2008 and 12 percent in 2007 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 periodically 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.

51

Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

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 Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets, as amended”, goodwill must be tested for impairment at the reporting unit level. For purposes of the goodwill impairment test, the reporting units of the Company, after considering the requirements of SFAS 142 and the relevant provisions of Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS No. 131”), and related interpretive literature are defined primarily on a geographic basis.

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.

During 2008, the Company changed its annual goodwill testing date from year-end to October 1 and performed the 2008 test as of that date. The Company determined that goodwill allocated to its Europe and Anthem reporting units was impaired and recorded an impairment adjustment in the amount of $48,041. See Note 9 — 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 AICPA Statement of Position 98-1 “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” (“SOP No. 98-1”). 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 the AICPA Statement of Position No. 98-1 “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use” (“SOP No. 98-1”) 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 has written 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 Statement of Financial Accounting Standards No. 86 “Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed” (“SFAS No. 86”). 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.

52

Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

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 undiscounted cash flows associated with the asset.

During 2008, the Company recorded $6,644 of impairments related to long-lived assets. See Note 22 — 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 No. 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 Emerging Issues Task Force Issue (EITF) No. 00-21, “Revenue Arrangements with Multiple Deliverables” (“EITF No. 00-21”). EITF 00-21 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 AICPA Statement of Position 97-2, “Software Revenue Recognition.” (“SOP No. 97-2”). 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 EITF 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor”, (“EITF No. 02-16”) as it is recognizing the amount of the discounts as a reduction of the cost of materials either included in raw materials or

53

Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

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.

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 which are considered to be permanently invested 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. In June 2006, the Financial Accounting Standards Board issued FIN 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109, Accounting for Income Taxes” (“FIN 48”), which was adopted by the Company on January 1, 2007. FIN 48 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 FIN 48, 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. FIN 48 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.

54

Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

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 Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS No. 157”) 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 SFAS 157 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, 2008 and 2007, except as follows:

	December 31,
	2008		2007
Fair value of fixed-rate notes payable	$	65,262	$	71,487
Carrying value of fixed-rate notes payable		69,286		72,857

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 Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”), 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 SFAS No. 159 for any of its financial assets or liabilities.

During 2008, the Company has undertaken restructuring activities, as discussed in Note 6 — Acquisition Integration and Restructuring, tested its goodwill as discussed in Note 9 — Goodwill and Other Intangible Assets, and recorded certain asset impairments as discussed in Note 22 — 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.

55

Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

Stock Based Compensation

Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R),“Share-Based Payments,” (“SFAS No. 123(R)”), which requires the measurement and recognition of compensation expense for all share-based payment awards to employees and directors based on estimated fair values. SFAS 123(R) supersedes the Company’s previous accounting methodology using the intrinsic value method under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). 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 SFAS 123(R) 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 the original provisions of SFAS 123 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 SFAS 123(R) 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 SFAS 123(R).

New Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141(R), “Business Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R) replaces SFAS No. 141, “Business Combinations”, but retains the requirement that the purchase method of accounting for acquisitions be used for all business combinations. SFAS No. 141(R) expands on the disclosures previously required by SFAS No. 141, better defines the acquirer and the acquisition date in a business combination, and establishes principles for recognizing and measuring the assets acquired (including goodwill), the liabilities assumed and any non controlling interests in the acquired business. SFAS 141(R) changes the accounting for acquisition related costs from being included as part of the purchase price of a business acquired to being expensed as incurred and will require the acquiring company to recognize contingent consideration arrangements at their acquisition date fair values, with subsequent changes in fair value generally to be reflected in earnings, as opposed to additional purchase price of the acquired business. As the Company has a history of growing its business through acquisitions, the Company anticipates that the adoption of SFAS 141(R) will have an impact on its results of operations in future periods, which impact depends on the size and the number of acquisitions it consummates in the future.

SFAS No. 141(R) also requires an acquirer to record an adjustment to income tax expense for changes in valuation allowances or uncertain tax positions related to acquired businesses. Certain of the Company’s acquisitions consummated in prior years would be subject to changes in accounting for the changes in valuation allowances on deferred tax assets. After December 31, 2008, reductions of valuation allowances would reduce the income tax provision as opposed to goodwill. SFAS No. 141(R) is effective for all business combinations with an acquisition date in the first annual period following December 15, 2008 and early adoption is not permitted. The Company will adopt SFAS No. 141(R) as of January 1, 2009.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, with earlier adoption prohibited. This statement requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net earnings attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. The

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statement also amends certain of ARB No. 51’s consolidation procedures for consistency with the requirements of SFAS No. 141(R). This statement also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. The adoption of SFAS No. 160 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

On January 1, 2008, the Company adopted the provisions of SFAS No. 159. The statement permits entities to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis under a fair value option. This statement also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. At the adoption date, unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment in retained earnings. Subsequent to adopting SFAS No. 159, changes in fair value are recognized in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 159 did not have an impact on the Company’s consolidated financial statements as the Company did not elect to measure any financial assets or financial liabilities at fair value.

On January 1, 2008, the Company adopted the provisions of SFAS No. 157. The statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements, but does not require any additional fair value measurements. Relative to SFAS No. 157, the FASB has issued FASB Staff Position No. 157-2, which delays the effective date of SFAS No. 157 for one year for certain nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. As required, the Company adopted SFAS No. 157 on January 1, 2008, for financial assets and liabilities and for nonfinancial assets and liabilities that are remeasured at least annually. There was no material effect on its financial statements upon adoption. The Company does not expect a material impact on its financial statements from adoption of SFAS No. 157 as it pertains to nonfinancial assets and nonfinancial liabilities for the first quarter of 2009.

In April 2008, the FASB issued FASB Staff Position No. 142-3, “Determining the Useful Life of Intangible Assets” (“FSP No. 142-3”). FSP 142-3 amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value by allowing an entity to consider its own historical experience in renewing or extending the useful life of a recognized intangible asset. FSP No. 142-3 is effective for fiscal years beginning after December 15, 2008. The Company is currently assessing the statement but its adoption is not expected to have a material impact on its consolidated financial statements.

NOTE 3.   Acquisitions

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, 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. The net assets of Brandmark are included in the consolidated financial statements as of December 31, 2008, in the Other operating segment. The primary reason for the acquisition was to expand the Company’s creative design business in Europe, enhancing the Company’s ability to provide services for its multinational clients. This was the primary factor that resulted in the recognition of goodwill in the Company’s consolidated financial statements. The goodwill is not deductible for tax purposes.

The purchase price of $10,279 consisted of $8,102 paid in cash to the seller at closing, $2,026 retained in an escrow account, less $245 accrued as a receivable from the sellers for a Net Working Capital and Tangible Net Equity adjustment and $396 accrued for acquisition-related professional fees.

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Notes to Consolidated Financial Statements — (Continued)

The Company has recorded a preliminary purchase price allocation based on a fair value appraisal by an independent consulting company that is in process. The purchase price allocation will be adjusted upon finalization of the appraisal in 2009. A summary of the preliminary fair values assigned to the acquired net assets is as follows:

Accounts receivable	$	1,193
Inventory		3
Other current assets		78
Fixed assets		146
Goodwill		7,661
Customer relationships		5,008
Trade names		56
Accounts payable		(472	)
Accrued expenses		(634	)
Income tax payable		(140	)
Deferred income taxes		(590	)
Other long term liabilities		(2,460	)
Total cash paid at closing, net of $430 cash acquired	$	9,849

The purchase price may be increased by up to $703 if a specified target of earnings before interest and taxes is achieved for fiscal year ending March 31, 2009. The purchase price allocation will be adjusted if the additional purchase price amount is earned.

The weighted-average amortization period of the customer relationship and trade name intangible assets is 5.9 years. The intangible asset amortization expense will be approximately $891 in 2009 and $835 each year in 2010 through 2013.

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

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 Other operating segment beginning June 1, 2008. The primary reason for the acquisition was 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. These were the primary factors that resulted in the recognition of goodwill in the Company’s consolidated financial statements. The goodwill is not deductible for tax purposes.

The purchase price of $2,626 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, $74 paid for acquisition-related professional fees and $156 accrued for an estimated purchase price adjustment for the first earnout period ended December 31, 2008. The

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Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

Company has recorded a purchase price allocation based on a tangible and intangible asset appraisal performed by an independent consulting firm. A summary of the fair values assigned to the acquired net assets is as follows:

Inventory	$	1
Other current assets		1
Fixed assets		40
Goodwill		26
Customer relationships		1,292
Non-compete agreement		92
Trade names		37
Accounts payable		(48	)
Income tax payable		(136	)
Other current liabilities		(49	)
Total cash paid at closing, net of $1,370 cash acquired	$	1,256

The purchase price may be increased if certain thresholds of net sales and earnings before interest and taxes are exceeded for calendar year 2009. The purchase price allocation will be adjusted if the additional purchase price amount is earned.

The weighted-average amortization period of the customer relationship, non-compete agreement and trade name intangible assets is 14.2 years. The intangible asset amortization expense was $56 for the year ended December 31, 2008, and will be approximately $90 in 2009 and 2010, $75 in 2011 and $67 in each of 2012 and 2013.

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

Perks Design Partners Pty Ltd.

Effective August 1, 2007, the Company acquired 100 percent of the outstanding stock of Perks Design Partners Pty Ltd (“Perks”), an Australia-based brand strategy and creative design firm that provides services to consumer products companies. The net assets and results of operations of Perks are included in the consolidated financial statements in the Other operating segment beginning August 1, 2007. The primary reason for the acquisition was to expand the Company’s creative design business in Australia. The Company has multinational clients which have requested that we increase our global coverage to include Australia so that the Company can provide design services for their Australian operations. The reputation of Perks as a quality provider of design services to multinational consumer products clients was another factor we considered in acquiring Perks. These were the primary factors that contributed to the recognition of goodwill in the Company’s consolidated financial statements. The goodwill is not deductible as an operating expense for tax purposes.

The purchase price of $3,328 consisted of $1,792 paid in cash to the seller at closing, $1,193 paid to escrow accounts, $178 accrued for an estimated net tangible asset adjustment and $165 paid for acquisition-related professional fees. The Company has recorded a purchase price allocation based upon a tangible and intangible asset appraisal performed by an independent consulting firm. In June 2008, the Company paid $67 of the $178 net tangible asset adjustment that had been accrued at December 31, 2007. The balance of $111 remains in dispute at December 31, 2008.

Protopak Innovations, Inc.

Effective September 1, 2007, the Company acquired 100% of the outstanding stock of Protopak Innovations, Inc. (“Protopak”), a Toronto, Canada-based Company that produces prototypes and samples used by the consumer

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Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

products packaging industry as part of the marketing and sales of their products. The net assets and results of operations of Protopak are included in the consolidated financial statements in the Other operating segment. The primary reason for the acquisition was to complement the Company’s existing consumer packaging business. The prototype service provided by Protopak will allow the Company to provide its customers with product packaging samples reflecting its customers’ proposed modifications to its products. Prior to acquiring this business, the Company had, for the most part, outsourced this service. The Company determined that Protopak was a leader in this business and serviced many U.S.-based multinational consumer product companies both in Canada and for clients’ U.S. offices. Many of Protopak’s clients were also clients of the Company, so management of the Company believed there was a complimentary fit between the two businesses. These were the primary factors that resulted in the recognition of goodwill in the Company’s consolidated financial statements. The goodwill is not deductible for tax purposes.

The base purchase price of $12,109 consisted of $11,367 paid in cash to the seller, $588 accrued for a working capital adjustment based on the final closing date balance sheet and $154 paid for acquisition-related professional fees. The Company paid the working capital adjustment in April 2008. During the first quarter of 2008, the Company finalized the purchase price allocation based on a tangible and intangible asset appraisal performed by an independent consulting firm. The final allocation resulted in an increase of $285 in the fair value assigned to fixed assets with a corresponding decrease of $285 in goodwill. In addition, in the first quarter of 2008, $18 of professional fees related to the acquisition was capitalized as additional goodwill. A summary of the final fair values assigned to the acquired net assets is as follows:

Trade accounts receivable	$	836
Other current assets		132
Fixed assets		765
Goodwill		7,020
Customer relationships		4,736
Non-compete agreement		379
Trade names		284
Accounts payable		(52	)
Income tax payable		(84	)
Deferred income taxes		(2,176	)
Total cash paid at closing, net of $269 cash acquired	$	11,840

The acquisition agreement provides that the purchase price may be increased if certain thresholds of earnings before interest and taxes are exceeded for the fiscal years ending September 30, 2008, September 30, 2009 and September 30, 2010. Because the earnings threshold was exceeded for the fiscal year ended September 30, 2008, the Company accrued $629 for a purchase price adjustment at September 30, 2008 and allocated the additional purchase price to goodwill. The purchase price adjustment was remitted to the former owners in the first quarter of 2009. If the earnings thresholds are exceeded for the fiscal years ending September 30, 2009 and September 30, 2010, the purchase price allocation will be adjusted to reflect these additional purchase price adjustments.

Schawk India, Ltd.

The Company acquired 50 percent of a company currently known as Schawk India, Ltd., which provides artwork management, pre media and print management services. In February 2005, as part of the Company’s acquisition of Seven Worldwide Holdings, Inc. and an additional 40 percent was acquired on July 1, 2006. The net assets and results of operations of Schawk India, Inc., net of minority interest, have been included in the consolidated financial statements in the Other operating segment since July 1, 2006.

Effective August 1, 2007, the Company purchased the remaining 10 percent of the outstanding stock of Schawk India, Ltd. from the minority shareholders for $500. The purchase price, less $33 representing the minority

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Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

interest, was allocated to goodwill. The primary reason for the acquisition was to acquire the remaining minority interest in Schawk, India, Ltd. The Company previously acquired a 90 percent interest in this company and determined that 100 percent ownership would allow the Company to better manage and make better use of the workforce and resources in India. This resulted in the recognition of goodwill in the Company’s consolidated financial statements.

Benchmark Marketing Services, LLC

On May 31, 2007, the Company acquired the operating assets of Benchmark Marketing Services, LLC (“Benchmark”), a Cincinnati, Ohio-based creative design agency that provides services to consumer products companies. The net assets and results of operations of Benchmark are included in the Consolidated Statement of Operations beginning June 1, 2007. The primary reason for the acquisition was to acquire an established workforce in the Cincinnati area to complement the Company’s existing Anthem Cincinnati creative design operation. This resulted in the recognition of goodwill in the Company’s consolidated financial statements. The goodwill is deductible as an operating expense for tax purposes.

The base purchase price of $5,833 consisted of $5,213 paid in cash to the seller at closing, $550 paid to the seller for a working capital adjustment based on the closing date balance sheet and $70 paid for acquisition-related professional fees. In addition, the Company recorded a reserve of $666 as of the acquisition date for the estimated expenses associated with vacating the leased premises that Benchmark currently occupies. Based on an integration plan formulated at the time of the acquisition, it was determined that the Benchmark operations would be merged with the Company’s existing Anthem Cincinnati operations. The Anthem Cincinnati facility was expanded and upgraded to accommodate the combined operations and Benchmark relocated to this facility in October 2008. The initial reserve and subsequent reserve modifications were recorded as adjustments to goodwill in accordance with Emerging Issues Task Force No. 95-3 “Recognition of Liabilities in Connection with a Purchase Business Combination.” (“EITF No. 95-3”) and as adjustments to current and non-current liabilities. The remaining reserve balance of $426 is included in Accrued expenses and Other non-current liabilities on the Consolidated Balance Sheet as of December 31, 2008.

The following table summarizes the reserve activity from December 31, 2007 through December 31, 2008:

	Balance								Balance
	December 31,								December 31,
	2007		Adjustments			Payments			2008
Facility closure cost	$	666	$	(198	)	$	(42	)	$	426

The acquisition agreement provides that the purchase price may be adjusted if certain sales targets are exceeded for the fiscal years ending May 31, 2008, and May 31, 2009. No purchase price adjustment was recorded for the fiscal year ended May 31, 2008 because the sales target was not achieved. If the sales target for fiscal year ending May 31, 2009 is achieved, the purchase price allocation will be adjusted to reflect the additional purchase price due.

WBK, Inc.

On July 1, 2006, the Company acquired the operating assets of WBK, Inc., a Cincinnati, Ohio-based design agency that provides services to retailers and consumer products companies. The results of operations of WBK, Inc. are included in the Consolidated Statement of Operations beginning July 1, 2006. A primary reason for the acquisition of WBK, Inc. was to acquire an established design firm in Cincinnati with a track record in working with major consumer product clients. This resulted in the recognition of goodwill in the Company’s consolidated financial statements. The goodwill is deductible as an operating expense for tax purposes.

The purchase price of $4,865 consisted of $4,813 paid in cash to the seller and $52 of acquisition-related professional fees. The Company recorded a purchase price allocation based upon a tangible and intangible asset fair

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Notes to Consolidated Financial Statements — (Continued)

value appraisal provided by an independent consulting firm. The purchase agreement provides for potential increases to the purchase price if certain earning thresholds are exceeded for the years 2006 through 2009. No earn-out was due for 2006 because the earning threshold was not met. The Company paid $943 in the first quarter of 2008 to the former owner of WBK, Inc. for the earn-out due for the year 2007. The additional purchase price was allocated to goodwill in the first quarter of 2008. No earn-out is due for the year 2008 because the sales and earnings thresholds were not achieved. If the sales and earnings thresholds are achieved for the year 2009, the purchase price allocation will be adjusted to reflect the additional purchase price due.

Anthem York

In January 2006, the Company acquired certain operating assets of the internal design agency operation of a UK consumer products company and entered into a design services agreement with this client. This operation is known as Anthem York. The primary reason for the acquisition was to acquire an established work force in the creative design business as it relates specifically to food and beverage and consumer packaging customers in Europe. The Company had a desire to have design services in Europe to service its multinational and European clients. Anthem York was the first design firm in Europe acquired by the Company. This resulted in the recognition of goodwill in the Company’s consolidated financial statements. The goodwill is deductible as an operating expense for tax purposes.

The purchase price of $2,197 consisted of $618 paid in cash to the seller, $460 of acquisition-related professional fees and $1,119 paid for severance to terminated employees. The Company recorded a purchase price allocation based upon an internal tangible and intangible asset fair value appraisal.

Seven Worldwide Holdings, Inc.

On January 31, 2005, the Company acquired 100 percent of the outstanding stock of Seven Worldwide Holdings, Inc. (“Seven Worldwide”). The purchase price of $210,568 consisted of $135,566 paid in cash at closing, $4,482 of acquisition-related professional fees and the issuance of 4,000 shares of the Company’s Class A common stock with a value of $70,520. A primary reason for the acquisition was to acquire a graphic services company with an established, knowledgeable work force in the retail, advertising and pharmaceutical markets. Seven Worldwide Holdings, Inc. also had an established work force and presence in the United Kingdom and Australia with consumer packaging companies, and the Company was seeking to expand its presence in these regions. This resulted in the recognition of goodwill in the Company’s consolidated financial statements.

During the 12 months ended January 31, 2006, management of the Company completed its assessment of the combined operations of the Company and Seven Worldwide and implemented its plan to exit certain facilities of the acquired company. During 2005, the Company closed seven facilities in the US and the UK and downsized several others. Two additional facilities were closed in early 2006 in accordance with the Company’s exit plan. A total of 712 employees were terminated during 2005 and in early 2006. In addition, the Company’s management decided to market the Book and Publishing operations of the acquired company, since this business was outside the core business of the Company. Effective as of February 28, 2006, the Company sold substantially all of the operating assets of its Book and Publishing operations. See Note 4 — Discontinued Operations.

The Company recorded an estimated exit reserve at January 31, 2005 in the amount of $12,775. The major expenses included in the exit reserve were employee severance and lease termination expenses. As management of the Company completed its assessment of the acquired operations, additional amounts were added to the initial reserve estimate. The initial reserve and subsequent reserve modifications were recorded as adjustments to goodwill in accordance with Emerging Issues Task Force No. 95-3 “Recognition of Liabilities in Connection with a Purchase Business Combination.” (“EITF No. 95-3”) and as adjustments to current and non-current liabilities. The reserve balance related to facility closings will be paid over the term of the leases of the closed facilities, with the longest lease expiring in 2015. The remaining reserve balance of $1,874 is included in Accrued expenses and Other non-current liabilities on the Consolidated Balance Sheet as of December 31, 2008.

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Notes to Consolidated Financial Statements — (Continued)

The following table summarizes the reserve recorded at January 31, 2005 and the activity through December 31, 2008:

	Balance							Balance
	January 31,							December 31,
	2005		Adjustments		Payments			2005
Employee severance	$	7,075	$	5,092	$	(6,721	)	$	5,446
Facility closure cost		5,700		5,171		(1,223	)		9,648
Total	$	12,775	$	10,263	$	(7,944	)	$	15,094

	Balance							Balance
	December 31,							December 31,
	2005		Adjustments		Payments			2006
Employee severance	$	5,446	$	155	$	(5,263	)	$	338
Facility closure cost		9,648		1,873		(2,930	)		8,591
Total	$	15,094	$	2,028	$	(8,193	)	$	8,929

	Balance								Balance
	December 31,								December 31,
	2006		Adjustments			Payments			2007
Employee severance	$	338	$	(81	)	$	(187	)	$	70
Facility closure cost		8,591		(3,183	)	$	(1,557	)		3,851
Total	$	8,929	$	(3,264	)	$	(1,744	)	$	3,921

	Balance								Balance
	December 31,								December 31,
	2007		Adjustments			Payments			2008
Employee severance	$	70	$	(70	)	$	—		$	—
Facility closure cost		3,851		(1,052	)	$	(925	)	$	1,874
Total	$	3,921	$	(1,122	)	$	(925	)	$	1,874

The adjustment to exit reserves in 2008 was the result of changes in sublet assumptions relating to an exited facility and the reversal of unneeded reserves related to severance pay and facility closure costs, as well as foreign currency translation changes.

Weir Holdings Limited

On December 31, 2004, the Company acquired the operating assets and assumed certain liabilities of Weir Holdings Limited, a company registered under the laws of England, and its subsidiaries. Weir Holdings, which operates under the trade name “Winnetts”, is one of the leading providers of graphic services to consumer products companies, retailers and major print groups in the United Kingdom and European markets. The primary reason for this acquisition was to expand the Company’s graphic services offering into Europe. Weir Holdings was an established graphic services company with a knowledgeable work force and was the first graphic services acquisition in Europe by the Company. This resulted in the recognition of goodwill in the Company’s consolidated financial statements.

In connection with its acquisition of the assets of Winnetts, the Company established a facility exit reserve at December 31, 2004 in the amount of $2,500, primarily for employee severance and lease abandonment expenses. During 2005, the management of the Company completed its assessment of the acquired operations and implemented its plan to exit certain of the facilities of the acquired company. During 2005, the Company closed one

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facility in the UK and downsized several others. A total of 39 employees were terminated. The exit reserve balance related to employee severance was paid during 2006. The exit reserve related to the facility closure will be paid over the term of the lease, which expires in 2014. The initial reserve and subsequent reserve modifications were recorded as adjustments to goodwill in accordance with Emerging Issues Task Force No. 95-3 “Recognition of Liabilities in Connection with a Purchase Business Combination” (“EITF No. 95-3”) and as adjustments to current and non-current liabilities. The remaining reserve balance of $309 is included in accrued expenses and other non-current liabilities on the Consolidated Balance Sheet as of December 31, 2008.

The following table summarizes the reserve recorded at December 31, 2004 and the activity through December 31, 2008:

	Balance							Balance
	December 31,							December 31,
	2004		Adjustments		Payments			2005
Employee severance	$	1,254	$	65	$	(902	)	$	417
Facility closure cost		1,246		718		(632	)		1,332
Total	$	2,500	$	783	$	(1,534	)	$	1,749

	Balance								Balance
	December 31,								December 31,
	2005		Adjustments			Payments			2006
Employee severance	$	417	$	—		$	(417	)	$	—
Facility closure cost		1,332		(686	)		(245	)		401
Total	$	1,749	$	(686	)	$	(662	)	$	401

	Balance							Balance
	December 31,							December 31,
	2006		Adjustments		Payments			2007
Facility closure cost	$	401	$	24	$	(16	)	$	409
Total	$	401	$	24	$	(16	)	$	409

	Balance								Balance
	December 31,								December 31,
	2007		Adjustments			Payments			2008
Facility closure cost	$	409	$	(72	)	$	(28	)	$	309
Total	$	409	$	(72	)	$	(28	)	$	309

In addition to the exit reserves discussed above, the Company recorded certain other integration and restructuring related reserves intended to stream line operations and to right-size the business. See Note 6- Acquisition Integration and Restructuring for further discussion.

Other acquisitions

During the years ended December 31, 2007 and December 31, 2006, the Company paid $668 and $688, respectively, primarily for additional consideration to the former owners of certain companies acquired in 2003 and 2004. The additional consideration was paid pursuant to the contingency provisions of the purchase agreements and was allocated to goodwill.

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Notes to Consolidated Financial Statements — (Continued)

NOTE 4.   Discontinued Operations

During the third quarter of 2008, the Company made a decision to sell its large format printing operation located in Toronto, Canada, and began actively marketing the business to potential buyers. At September 30, 2008, the Company had received an offer from a qualified buyer and expected to complete a sale of the business during the fourth quarter of 2008. In accordance with Statement of Financial Accounting Standards No. “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), the assets and liabilities of the business for sale were disaggregated as assets and liabilities of discontinued operations in the Consolidated Balance Sheet in the Form 10-Q filed for the quarter ended September 30, 2008. The results of operations of the business for sale were also classified as discontinued operations in the Consolidated Statement of Operations in the Form 10-Q filed for the quarter ended September 30, 2008.

The Company recorded an impairment loss of $468 to write-down the net assets of the business to its estimated fair value. This charge is included in Impairment of long-lived assets in the Consolidated Statement of Operations for the year-ended December 31, 2008.

The anticipated sale did not close during the fourth quarter and, in December 2008, the Company reassessed the likelihood of completing the sale of the business within a one year time period and determined that it could no longer meet the requirements of SFAS No. 144 for classifying the business as held for sale and therefore as a discontinued operation. Accordingly, in this Form 10-K, the large format printing operation has been included in continuing operations. The assets and liabilities of the business, which had been disaggregated as assets and liabilities of discontinued operations in the Form 10-Q filed for the quarter ended September 30, 2008, have been reclassified to assets and liabilities of continuing operations and the results of operations of the business has similarly been included in continuing operations in this Form 10-K.

A restatement of the results of operations for the quarter ended September 30, 2008, showing the Consolidated Statement of Operations as filed in Form 10-Q, including the business for sale as a discontinued operation, compared to the Consolidated Statement of Operations for the quarter ended September 30, 2008 including the business for sale in continuing operations, has been included in Note 20 — Quarterly Financial Data.

Effective February 28, 2006, the Company sold certain operations including substantially all of the assets of its Book and Publishing operations, most of which were acquired as part of the Seven Worldwide acquisition in 2005. The operations were sold because they were considered to be outside of the Company’s core business. Proceeds from the sale were $28,184. No gain or loss was recorded as a result of the sale.

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In accordance with SFAS No. 144, “Accounting for the Impairment of Long-Lived Assets”, (“SFAS No. 144”), the Book and Publishing operations were accounted for as discontinued operations and, accordingly, its operating results are segregated and reported as discontinued operations in the accompanying Consolidated Statement of Operations for 2006. The results of operations of the Book and Publishing operations for the year ended December 31, 2006, is as follows:

	2006
Net sales	$	8,137
Cost of sales		6,980
Gross profit		1,157
Selling, general and administrative expenses		3,145
Operating loss		(1,988	)
Interest expense		195
Loss before income taxes		(2,183	)
Income tax benefit		(851	)
Net loss	$	(1,332	)

NOTE 5.   Reserve Reversal from Litigation Settlements

Included in the operating expense section of the Consolidated Statement of Operations for the year ended December 31, 2006, is $6,871 representing reserve reversals. In the second quarter of 2006, the Company settled a lawsuit with an equipment manufacturer related to pre-acquisition activities of Seven Worldwide. A pre-acquisition contingent liability reserve in the amount of $2,120, previously recorded for this item, was no longer needed and was reversed.

In February 2007, the Company executed a settlement agreement with Rhodes, Inc. (“Rhodes”). Rhodes was a customer of Seven Worldwide and had filed for bankruptcy in November 2004, prior to the Company’s acquisition of Seven Worldwide on January 31, 2005. In September of 2006, Rhodes filed a claim against the Company, seeking the return of $6,527 of preferential payments made to Seven Worldwide prior to the Rhodes’ bankruptcy filing. The settlement agreement provided for a payment by the Company to Rhodes in the amount of $1,100 in full settlement of all claims. Pre-acquisition liabilities totaling $5,851 had been recorded on the purchase date balance sheet of Seven Worldwide to provide for an estimated settlement of this claim and other liabilities. An adjustment in the amount of $3,000 was recorded as of December 31, 2006 to reverse a portion of the reserve that was no longer needed. In addition, an adjustment in the amount of $1,751 was initially recorded as of March 31, 2007 to reverse the remaining unneeded liabilities. In connection with the Company’s financial statement restatement, this adjustment has been recorded as of December 31, 2006. See Note 1-Basis of Presentation, Restatement of Previously Issued Financial Statements and Description of Business for further discussion. The total of these adjustments, $4,751, is included in the reserve reversal line of the Consolidated Statement of Operations.

NOTE 6.   Acquisition Integration and Restructuring

2008 Restructuring and Cost Reduction Plan

Beginning in the second quarter of 2008, the Company incurred 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 the year ended December 31, 2008, including fixed asset impairment charges related to the Company’s cost reduction plan, was $10,390. The costs associated with these actions are covered under Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”

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(“SFAS No. 146”) and Statement of Financial Accounting Standards No. 112, “Employers’ Accounting for Postemployment Benefits” (“SFAS No. 112”).

The following table summarizes the expense recorded and the cash payments for the year ended December 31, 2008. The remaining reserve balance of $5,384 is included in accrued expenses and other current liabilities on the Consolidated Balance Sheet at December 31, 2008.

							Other
	Employee			Lease			Related
	Terminations			Obligations			Costs			Total
Expense recorded	$	4,552		$	4,315		$	895		$	9,762
Cash payments		(3,259	)		(224	)		(895	)		(4,378	)
Liability balance December 31, 2008	$	1,293		$	4,091		$	—		$	5,384

In addition to the expense shown in the table above, the Company recorded fixed asset impairment charges related to its cost reduction plan in the amount of $628 for the year ended December 31, 2008. The total expense of $10,390 recorded in the year ended December 31, 2008 is presented as Acquisition integration and restructuring expense in the Consolidated Statement of Operations, of which $4,833 was recorded in the United States and Mexico segment, $3,431 was recorded in the Europe segment, $1,237 was recorded in the Other operating segment and $889 was recorded in Corporate.

2006 Restructuring

During 2006, the Company recorded $2,085 of restructuring charges for the cost of severance, employee benefits, and outplacement services related to the termination of 100 employees located in the United Kingdom and Europe due to the consolidation and relocation of production functions from our London office to our Leeds and Manchester offices in the United Kingdom and a relocation of certain production functions from our London office to offices in Asia. The restructuring charge is included in acquisition integration and restructuring expenses on the Consolidated Statement of Operations. The Company made payments of approximately $980 in 2006 and $1,105 in 2007. There was no reserve balance remaining as of December 31, 2007.

Since the acquisitions of Seven Worldwide and Winnetts, one of the Company’s priorities has been the integration of the acquired businesses into the Company’s combined operations. This has involved planning and executing the consolidation of duplicate facilities in locations served by separate facilities of the pre-acquisition businesses as well as elimination of duplicate administrative functions. During the year ended December 31, 2006, the Company recorded acquisition integration expenses of $1,848 which are included in the Acquisition integration and restructuring expense line in the operating expense section of the Consolidated Statement of Operations. The major items included in this expense in 2006 are exit costs relating to the shut-down of the Company’s existing Birmingham UK operating facility in February 2006, including retention pay for key employees whose services were necessary during a transition period, travel expenses related to the planning and execution of facility consolidations, professional fees for accounting, human resource, and integration planning advice and costs related to the shut-down of the Company’s East Coast operating facility in June 2006.

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Notes to Consolidated Financial Statements — (Continued)

NOTE 7.   Inventories

Inventories consist of the following:

	December 31,
	2008			2007
Raw materials	$	2,994		$	3,393
Work in process		18,487			16,497
Finished goods		3,066			2,969
		24,547			22,859
Less: LIFO reserve		(930	)		(957	)
	$	23,617		$	21,902

The Company recorded a LIFO layer liquidation in 2007, resulting in the reflection of $104 of income.

NOTE 8.   Property and Equipment

Property and equipment consists of the following:

	Estimated		December 31,
	Useful Life		2008			2007
Land and improvements		10-15 years	$	5,201		$	10,602
Buildings and improvements		15-30 years		14,120			18,755
Machinery and equipment		3-7 years		92,735			98,553
Leasehold improvements		Life of lease		19,630			18,452
Computer software and licenses		3-7 years		19,222			26,904
				150,908			173,266
Accumulated depreciation and amortization				(92,583	)		(96,183	)
			$	58,325		$	77,083

NOTE 9.   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 SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). Under SFAS No. 142, the Company’s goodwill is not amortized throughout the period, but is subject to an annual impairment test. The Company historically performed an annual impairment test as of December 31 each year, or when events or changes in business circumstances indicate that the carrying value may not be recoverable; however, in the fourth quarter of 2008, the Company changed its annual test date to October 1, commencing with the test for 2008, in order to have the required testing completed prior to its year-end closing activities. This change did not delay, accelerate or avoid any impairment charge. Accordingly the Company believes that this accounting change is preferable in its circumstances. This change constitutes a change in accounting principle under SFAS No. 154, “Accounting Changes and Error Corrections, (“SFAS No. 154”), a replacement of APB opinion No. 20 and FASB Statement No. 3”.

The Company performed the required impairment test as of October 1, 2008. In accordance with SFAS No. 142, the Company assigned its goodwill to multiple reporting units, mainly on a geographic basis at a level below the operating segments. 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 a potential impairment of the goodwill assigned to the Company’s European

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and Anthem reporting units. The Company then prepared a step two valuation of the European and Anthem reporting units and concluded, after assigning fair values to all assets and liabilities of these reporting units in a manner similar to a purchase price allocation, that goodwill for the European and Anthem reporting units was impaired by $30,657 and $17,384, respectively, as of October 1, 2008, which was recorded in the fourth quarter of 2008. The goodwill impairment reflects the decline in global economic conditions and general reduction in consumer and business confidence experienced during the fourth quarter of 2008.

In the first quarter of 2009, the Company’s market capitalization decreased due to a decline in the trading price of its common stock. Accordingly, the Company’s has commenced a review for potential impairment, which could result in additional goodwill impairment charges in 2009.

The Company performed the required impairment test of goodwill in 2007 and 2006. No impairment charge was recorded for these years.

In May 2008, as part of a strategic review, the Company discovered an error in its accounting for the goodwill associated with one of its Canadian operating units, Cactus, which is a large-format print producer acquired by the Company in 1999. For purposes of goodwill testing, this operation had been incorrectly aggregated with the Company’s broader Canadian reporting unit at December 31, 2007 and 2006, and with all operating units of the Company for fiscal years 2002 through 2005. At December 31, 2007 and in previous fiscal years, however, Cactus should have been treated as a separate reporting unit because it is a dissimilar business and met the requirements of a separate reporting unit under Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). Because Cactus should have been treated as a separate reporting unit, its goodwill should have been tested for impairment on a stand-alone basis.

Treating Cactus as a separate reporting unit, the Company performed a discounted cash flow analysis using historical and projected financial performance of Cactus and determined that the goodwill associated with Cactus was impaired by approximately $2,191 as of December 31, 2002. The Company has presented restated consolidated balance sheet information for all periods presented in this Form 10-K to reflect changes in the amounts of previously reported goodwill, retained earnings and accumulated comprehensive income, to reflect the correction of this error. The restatement has resulted in a decrease of goodwill in the amount of $3,527 and $2,967 as of December 31, 2007 and December 31, 2006, respectively. See Note 1 for further discussion of this restatement.

The changes in the carrying amount of goodwill by operating segment during the years ended December 31, 2008 and 2007 were as follows:

	United States
	and Mexico			Europe			Other			Total
Balance at December 31, 2006 (restated)	$	169,002		$	39,056		$	25,947		$	234,005
Acquisitions		577			—			11,328			11,905
Additional purchase accounting adjustments		2,533			(3,659	)		250			(876	)
Adjustments to exit reserves		(625	)		(2,615	)		—			(3,240	)
Adjustments to exit reserve present value		5			638			—			643
Foreign currency translation		—			531			3,400			3,931
Balance at December 31, 2007 (restated)		171,492			33,951			40,925			246,368
Acquisitions		—			—			7,687			7,687
Additional purchase accounting adjustments		(14,209	)		(113	)		1,470			(12,852	)
Adjustments to exit reserves		(950	)		(188	)		(113	)		(1,251	)
Adjustments to exit reserve present value		53			78			19			150
Goodwill impairment		—			(30,657	)		(17,384	)		(48,041	)
Foreign currency translation		—			(3,071	)		(4,953	)		(8,024	)
Balance at December 31, 2008	$	156,386		$	—		$	27,651		$	184,037

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Notes to Consolidated Financial Statements — (Continued)

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

			December 31, 2008
	Weighted				Accumulated
	Average Life		Cost		Amortization			Net
Customer relationships		14.2 years	$	50,411	$	(12,251	)	$	38,160
Digital images		5.0 years		890		(675	)		215
Developed technologies		3.0 years		712		(712	)		—
Non-compete agreements		3.4 years		1,210		(919	)		291
Patents		20.0 years		84		(84	)		—
Trade names		2.6 years		703		(504	)		199
Contract acquisition cost		3.0 years		935		(675	)		260
		13.3 years	$	54,945	$	(15,820	)	$	39,125

			December 31, 2007
	Weighted				Accumulated
	Average Life		Cost		Amortization			Net
Customer relationships		15.0 years	$	49,722	$	(10,013	)	$	39,709
Digital images		5.0 years		935		(493	)		442
Developed technologies		3.0 years		712		(687	)		25
Non-compete agreements		3.4 years		1,201		(717	)		484
Patents		20.0 years		326		(326	)		—
Trade names		2.2 years		658		(361	)		297
Contract acquisition cost		3.0 years		935		(364	)		571
		14.1 years	$	54,489	$	(12,961	)	$	41,528

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 our experience that customers are reluctant to change suppliers. Amortization expense related to the other intangible assets totaled $4,058, $3,779 and $3,466 in 2008, 2007 and 2006, respectively. The Company recorded an impairment write-down of $161 in the fourth quarter of 2008, for a customer relationship asset for which future cash flows did not support the carrying value. The impairment write-down is included in the Company’s Other operating segment in selling, general and administrative expenses in the Consolidated Statement of Operations. In 2007, the Company recorded $1,197 of impairment charges, primarily for a customer relationship asset for which future estimated cash flows did not support the carrying value. The 2007 impairment charge was recorded in the Other operating segment. Amortization expense for each of the next five years is expected to be approximately $4,555 for 2009, $3,977 for 2010, $3,719 for 2011, $3,692 for 2012 and $3,685 for 2013.

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Notes to Consolidated Financial Statements — (Continued)

NOTE 10.   Accrued Expenses

Accrued expenses consist of the following:

	December 31,
	2008		2007
Accrued compensation and payroll taxes	$	16,946	$	26,466
Deferred revenue		8,217		4,817
Deferred lease costs		3,992		2,885
Accrued professional fees		3,665		2,968
Restructuring reserves		3,456		—
Vacant property reserve		2,243		3,085
Accrued customer rebates		1,498		1,340
Facility exit reserve		1,309		2,303
Accrued sales & use tax		1,227		608
Accrued property taxes		920		1,293
Accrued interest		721		651
Other		7,822		6,004
	$	52,016	$	52,420

NOTE 11.   Other Long-Term Liabilities

Other long-term liabilities consist of the following:

	December 31,
	2008		2007
Multiemployer pension withdrawal liability	$	7,410	$	694
FIN48 reserves		7,343		8,425
Vacant property reserve		4,080		8,321
Deferred revenue		2,543		1,815
Employment tax reserve		2,396		—
Restructuring reserve		1,928		—
Facility exit reserve		1,300		2,364
Other		2,137		2,928
	$	29,137	$	24,547

During 2008 and 2007, 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 new sublease agreements executed and other changes in future cost and sublease income assumptions. Adjustments totaling $1,101 and $2,597,were recorded to facility exit reserves as credits to goodwill during 2008 and 2007, respectively, as the affected reserves were initially recorded as exit reserves in connection with the acquisition of Seven in accordance with Emerging Issues Task Force No. 95-3 “Recognition of Liabilities in Connection with a Purchase Business Combination.” (“EITF No. 95-3”). Adjustments totaling $102 and $1,575 were recorded as credits to income during 2008 and 2007, respectively, as the affected reserves were related to acquired vacant properties.

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Notes to Consolidated Financial Statements — (Continued)

NOTE 12.   Debt

Debt obligations consist of the following:

	December 31,
	2008			2007
Revolving credit agreement	$	66,250		$	36,655
Series A senior note payable — Tranche A		10,714			12,857
Series A senior note payable — Tranche B		8,572			10,000
Series C senior note payable		10,000			10,000
Series D senior note payable		20,000			20,000
Series E senior note payable		20,000			20,000
Canadian bank credit line		—			851
Other		291			12
		135,827			110,375
Less amounts due in one year or less		(23,563	)		(4,433	)
	$	112,264		$	105,942

Annual maturities of debt obligations at December 31, 2008, based on the June 2009 refinancing discussed below, are as follows:

2009	$	23,563
2010		67,406
2011		20,278
2012		20,278
2013		3,073
Thereafter		1,229
	$	135,827

Revolving Credit Facility, Note Purchase Agreements and Other Debt Arrangements

In January 2005, the Company entered into a five year unsecured revolving credit facility credit agreement with JPMorgan Chase Bank, N.A. At December 31, 2008, $66,250 was outstanding under the agreement. 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. Specifically, the amendment increased the aggregate dollar amount of restricted payments that the Company may make from $15,000 to $45,000 annually, increased the Company’s allowable maximum acquisition amount from $50,000 to $75,000 annually and increased the Company’s permitted foreign subsidiary investment amount from $60,000 to $120,000. The increase in the restricted payment covenant was designed primarily to allow for greater share repurchases. This facility was further amended in June 2009. Pursuant to the 2009 amendment, $7,889 of the outstanding revolving credit balance at December 31, 2008 was paid at closing and $2,630 will be paid on or before September 30, 2009. See “2009 Amendments to Revolving Credit Facility and Note Purchase Agreements” below. The total balance outstanding under the revolving credit agreement, $66,250, is included on the December 31, 2008 Consolidated Balance Sheet as follows: $10,519 is included in Current maturities of long-term debt and $55,731 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

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Notes to Consolidated Financial Statements — (Continued)

of three Senior Notes. The first note, in the original principal amount of $10,000, will mature in 2010. The second and third notes, each in the original principal amount of $20,000, mature in 2011 and 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 will be paid on or before September 30, 2009, with the payments being applied on a prorata basis to reduce the original maturity amounts shown above. Under the revised payment schedule, $8,603 will mature in 2010, and $17,206 will mature in both 2011 and 2012. Additionally as amended, the first, second and third notes will bear interest at 8.81 percent, 8.99 percent and 9.17 percent, respectively. The total of these notes, $50,000, is included on the December 31, 2008 Consolidated Balance Sheet as follows: $6,986 is included in Current maturities of long-term debt and $43,014 is included in Long-term debt.

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, pursuant to an exception from the registration requirements of the Securities Act of 1933, of two series of notes: Tranche A, for $15,000 and Tranche B, for $10,000. 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 will be paid on or before September 30, 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 will be payable in annual installments of $1,843 from 2009 to 2013, and the remaining balance of the Tranche B note will be payable in annual installments of $1,229 from 2010 to 2014, provided that upon the Company obtaining a consolidated leverage ratio of 2.75 to 1 and the refinancing of the Company’s revolving credit facility, principal installments due under the 2003 Private Placement will return to the pre-2009 amendment levels ($2,143 on each December 31 and $1,429 on each April 1). The originally scheduled Tranche B installment payment of $1,429 was paid when due in April 2009. As amended, the Tranche A and Tranche B notes bear interest at 8.90 percent and 8.98 percent, respectively. The combined balance of the of the Tranche A and Tranche B notes, $19,286, is included on the December 31, 2008 Consolidated Balance Sheet as follows: $5,767 is included in Current maturities of long-term debt and $13,519 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 line at December 31, 2008.

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. In June 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 $32,500, from $115,000 (expandable to $125,000) to $82,500;

•  after the payment of $2,630 on or before September 30, 2009, the size of the Company’s revolving credit facility will be 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;

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•  amended the credit facility’s pricing terms, including the interest rate margin applicable on the revolving credit facility indebtedness to a variable rate of LIBOR plus 300 to 450 basis points (“bps”), 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 bps per year;

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

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

•  prohibit the Company from repurchasing its shares without lender consent and restrict future dividend payments by the Company (beginning with the first dividend declared after March, 2009) to an aggregate $300 per fiscal quarter, or approximately $.01 per share based on the number of shares of common stock currently outstanding;

•  require 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

•  provide a waiver for any noncompliance with certain financial covenants, as well as with covenants relating to (i) the reduction of indebtedness within prescribed time periods using the proceeds of a previously completed asset sale, (ii) the payment of dividends, and (iii) the delivery of the Company’s annual and quarterly financial statements for the periods ended December 31, 2008 and March 31, 2009, respectively, within prescribed time periods.

In addition, all amounts due under the credit facility and the outstanding notes are now 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 are the same as or substantially equivalent to the revised financial and other covenants under the amended credit facility.

NOTE 13.   Income Taxes

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

	Year Ended December 31,
	2008			2007		2006
						(Restated)
United States	$	(23,450	)	$	33,034	$	39,210
Foreign		(39,666	)		18,222		5,552
Total	$	(63,116	)	$	51,256	$	44,762

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Notes to Consolidated Financial Statements — (Continued)

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

	Years Ended December 31,
	2008			2007			2006
							(Restated)
Current:
Federal	$	1,219		$	12,433		$	16,409
State		887			3,199			3,934
Foreign		3,236			3,703			8,296
		5,342			19,335			28,639
Deferred:
Federal		(6,104	)		(264	)		(4,380	)
State		(1,768	)		(154	)		(386	)
Foreign		(580	)		1,741			(5,060	)
		(8,452	)		1,323			(9,826	)
Total	$	(3,110	)	$	20,658		$	18,813

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

	December 31,
	2008			2007
Deferred income tax assets:
Operating loss carryforwards	$	17,870		$	14,088
Capital loss carryforwards		6,604			9,182
Income tax credits		4,996			6,162
Restructuring reserves		4,364			5,204
Multiemployer pension withdrawal liability		2,939			—
Accruals and reserves not currently deductible		3,403			5,540
Other		7,444			3,487
Deferred income tax assets before valuation allowances		47,620			43,663
Valuation allowances		(28,619	)		(27,346	)
Deferred income tax assets	$	19,001		$	16,317
Deferred income tax liabilities:
Depreciation and amortization	$	(1,643	)	$	(3,372	)
Intangible assets		(3,232	)		(12,980	)
Domestic subsidiary stock		(8,553	)		(9,790	)
Other		(1,997	)		(1,234	)
Deferred income tax liabilities	$	(15,425	)	$	(27,376	)

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Notes to Consolidated Financial Statements — (Continued)

Reconciliation between the provision for income taxes for continuing operations computed by applying the federal statutory tax rate to income before incomes taxes and the actual provision is as follows:

	Year Ended December 31,
	2008			2007			2006
							(Restated)
Income taxes at statutory rate		35.0	%		35.0	%		35.0	%
Nondeductible expenses		3.0			0.8			1.7
State income taxes		2.0			3.6			4.7
Foreign rate differential		(1.1	)		(0.7	)		1.5
Income tax reserve adjustments		(7.1	)		1.8			(0.1	)
Deferred tax asset valuation allowance		(10.8	)		(0.9	)		4.3
Remediation adjustments		0.8			0.0			0.0
Nondeductible impairment charges		(16.6	)		0.0			0.0
Other, net		(0.3	)		0.7			(5.1	)
		4.9	%		40.3	%		42.0	%

The Company’s effective tax rate for the year ended December 31, 2008 is 4.9 percent on a pre-tax loss of $63.1 million. This reduction in the expected tax benefit of the losses incurred for the year relates primarily to non-deductibility of the goodwill impairments recorded with respect to the Company’s European and Anthem operations of $10,477. The goodwill impairment is generally not deductible for local income tax purposes. In addition to the goodwill impairment, the Company has provided an increase in the deferred tax asset valuation allowance of $6,832, and income tax reserve increases of $4,488 which has further reduced the overall effective tax rate benefit of the current year financial statement losses.

As of December 31, 2008, the Company has U.S. Federal and State net operating loss carry forwards of approximately $8,036 and $79,368, respectively, $32,444 of foreign net operating loss carry forwards, $23,532 of foreign capital loss carry forwards, and U.S. and Foreign income tax credit carry forwards of approximately $700 and $4,297, respectively, which will be available to offset future income tax liabilities. If not used, $8,036 of the net operating loss carry forwards will expire in 2024 and 2025 while the remainder has no expiration period. Certain of these carry forwards are subject to limitations on use due to tax rules affecting acquired tax attributes and business continuation, and therefore the Company has established tax-effected valuation allowances against these tax benefits in the amount of $28,619 at December 31, 2008. Included in this total are valuation allowances of $18,573 related to pre-acquisition deferred tax assets which were established in prior years as an adjustment to goodwill. With the adoption of SFAS No. 141(R), effective January 1, 2009, changes to valuation allowances established in purchase accounting after December 31, 2008 will be recorded as part of the income tax provision as opposed to goodwill.

As discussed in the Form 10-K for the year ended December 31, 2007, the Company reported a material weakness in internal controls relating to income taxes as of December 31, 2007. In 2008, the Company reviewed significant tax balances on a substantive basis as a result of its material weakness in controls relating to income taxes. In 2008, the Company reflected income tax adjustments related to these remediation efforts, resulting in a $9,288 increase in Deferred Tax Assets, net of Deferred Tax Liabilities, a $6,410 increase in Valuation Allowances, a $2,223 decrease to Goodwill, and a $474 decrease to Income Tax Expense, primarily related to purchase accounting, which should have been recorded in 2007 or prior. These adjustments were recorded in 2008 since the corrections are considered immaterial to both the 2008 and 2007 Consolidated Balance Sheets and Consolidated Statements of Operations. The $6,268 deferred tax asset adjustment and the related valuation allowance were reversed upon settlement of intercompany transactions in the fourth quarter of 2008.

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Notes to Consolidated Financial Statements — (Continued)

The undistributed earnings of foreign subsidiaries were approximately $32,801, and $33,925 at December 31, 2008 and 2007, respectively. No income taxes are provided on the undistributed earnings because they are considered permanently reinvested.

The Company received a return of capital distribution of $13,729 from its Canadian operations during 2006. This distribution has been accounted for as a distribution from earnings and profits for U.S. income tax purposes. The distribution generated a foreign tax credit of $7,209 of which the Company utilized $7,071 in 2006. The Company has total foreign tax credit carryforwards of $474 and recorded a valuation allowance of $308 against these credits during 2008 due to the Company’s projections of its ability to use these credits against future taxable income prior to their expiration in 2017. 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 $166 assumes that a deduction would be claimed instead of a tax credit.

In June 2006, the Financial Accounting Standards Board issued FIN 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109, Accounting for Income Taxes” ( “FIN 48”). The Interpretation 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 FIN 48, 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. FIN 48 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.

The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, the Company recorded a $2,209 increase in the liability for unrecognized tax benefits which is offset by a reduction of deferred tax liability of $110, an increase in goodwill of $981, a decrease to additional paid in capital of $53 and a reduction in current taxes payable of $362, resulting in a net decrease to the January 1, 2007 retained earnings balance of $703.

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 $1,000 to $2,000. If the maximum expected amounts materialize, the Company projects that $289 would reduce the effective tax rate. With the adoption of SFAS 141(R), 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 subsidiaries are closed through 2006. In the first quarter of 2008, the Company agreed to a settlement with the IRS related to the Seven Consolidated Group 1996 to 2003 tax returns and has fully settled its federal and state tax liability. The stock purchase agreement entered into between the Company and the sellers provides for an indemnification by sellers of tax liabilities and the Company believes it should recover these payments out of the escrow account (See Note 21 — Contingencies.) In addition, the former Seven Consolidated Group was examined for the year 2004 and Schawk, Inc. and subsidiaries for years 2005 and 2006, resulting in no changes to either audit cycle. The Company has been notified by the Canadian Revenue Authority that a Canadian affiliate will be subjected to an examination for tax years 2006 to 2007.

State income tax returns are generally subject to examination for a period of 3-5 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, 2008 and 2007, the Company recognized a reduction of approximately $48 and an increase of approximately $719, respectively, in

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Notes to Consolidated Financial Statements — (Continued)

interest expense. The Company had approximately $1,055 and $4,342 of accrued interest expense and penalties for December 31, 2008, and 2007, respectively.

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

	2008			2007
Balance at January 1, 2008	$	13,597		$	13,550
Additions related to tax positions in prior years		2,854			805
Reductions for tax positions in prior years		(8,150	)		(764	)
Foreign currency translation		(107	)		6
Balance at December 31, 2008	$	8,194		$	13,597

NOTE 14.   Related Party Transactions

During 2006, the Company paid $622 to Cochran, Caronia & Co. for investment banking advisory services in connection with the sale of its Book and Publishing operations — See Note 4 — Discontinued Operations. Leonard S. Caronia, who is a director of Schawk, Inc., is a partner of Cochran, Caronia & Co. (now known as Fox-Pitt Kelton Cochran Caronia Waller.)

The Company also leases land and a building from a related party. See Note 15 — Leases and Commitments.

NOTE 15.   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 $725 in 2008, $704 in 2007 and $696 in 2006.

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 $16,003, $16,535 and $16,028, for the years ended December 31, 2008, 2007 and 2006, respectively.

Future minimum payments under leases with terms of one year or more are as follows at December 31, 2008:

	Operating Leases
	Gross Rents		Subleases			Net Rents
2009	$	14,292	$	(1,647	)	$	12,645
2010		11,957		(1,904	)		10,053
2011		8,923		(1,176	)		7,747
2012		8,761		(854	)		7,907
2013		4,645		(625	)		4,020
Thereafter		10,416		(1,816	)		8,600
	$	58,994	$	(8,022	)	$	50,972

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, 2008 and December 31, 2007, which is included in Other

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Notes to Consolidated Financial Statements — (Continued)

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 $981, and $1,102, respectively, at December 31, 2008 and December 31, 2007 and is included in Other long-term liabilities on the Consolidated Balance Sheets.

NOTE 16.   Employee Benefit Plans

The Company has various defined contribution plans for the benefit of its employees. The plans provide a match of employee contributions based on a discretionary percentage determined by management. The matching percentage of wages was 5.0 percent in 2008, 2007, and 2006. Contributions to the plans were $4,473, $4,260 and $4,070 in 2008, 2007 and 2006, respectively. In addition, the Company’s European subsidiaries contributed $695, $739 and $811 to several defined-contribution plans for their employees in 2008, 2007 and 2006, 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 $1,391, $1,430 and $1,543 in 2008, 2007 and 2006, 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 facility in Minneapolis, MN. 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 SRDF for employees of their Minneapolis, MN facility 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 this facility to the union’s plan. In accordance with ERISA Section 4203 (a), 29 U.S. C. Section 1383, the Company’s decision triggers the assumption of the partial termination withdrawal liability. The Company recorded a liability as of December 31, 2008, net of discount, for $7,254 to reflect this obligation, which is included in Other long-term liabilities on the Consolidated Balance Sheet.

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 60 in 2008, 48 in 2007, and 54 in 2006. 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 $41 in 2008, $45 in 2007 and $54 in 2006.

The Company has collective bargaining agreements with production employees representing approximately 13 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 2008 through 2011. One collective bargaining agreement expired in 2007, but negotiations to renew began in 2008. The percentage of employees covered by contracts expiring within one year is approximately 5 percent.

NOTE 17.   Stock Based Compensation

Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), “Share-Based Payments,” (“SFAS 123(R)”), which requires the measurement and recognition of compensation expense for all share-based payment awards to employees and directors based on estimated

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Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

fair values. SFAS 123(R) supersedes the Company’s previous accounting methodology using the intrinsic value method under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). 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 SFAS 123(R) 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 SFAS 123 and using an accelerated expense attribution method. Compensation expense during the three years ended December 31, 2008 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 SFAS 123(R) 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 SFAS 123(R).

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 1,274, as of December 31, 2008. No additional shares have been reserved for issuance under the 2006 Plan.

During the years ended December 31, 2008, 2007 and 2006, the Company issued 189, 155 and 119 stock options, respectively, as well as 66, 35 and 25 restricted shares, 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.

During 2008, 2007 and 2006, the Company issued 15, 35 and 25 stock options, respectively, to its directors under the Outside Directors Stock Option Plan.

The Company recorded $866, $721 and $1,003 of compensation expense relating to outstanding options during the years ended December 31, 2008 and 2007, and 2006, 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.

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Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

The following assumptions were used to estimate the fair value of options granted during the years ended December 31, 2008, 2007, and 2006, using the Black-Scholes option-pricing model:

	2008	2007	2006
Expected dividend yield	0.81% - 0.83%	0.63% - 0.71%	0.70% - 0.76%
Expected stock price volatility	31.5% - 34.8%	28.24% - 29.97%	27.33% - 27.40%
Risk-free interest rate range	2.98% - 3.75%	3.96% - 4.54%	4.28% - 4.83%
Weighted-average expected life	6.5 - 7.5 years	5.5 - 6 years	6 years
Forfeiture rate	1.0% to 2.0%	2.72%	2.65%
Total fair value of options granted	$1,174	$1,216	$870

The following table summarizes the Company’s activities with respect to its stock option plans for 2008, 2007 and 2006 (in thousands, except price per share and contractual term):

						Weighted
				Weighted Average		Average
	Number of			Exercise Price		Remaining		Aggregate
	Shares			per Share		Term		Intrinsic Value
Outstanding December 31, 2005		3,333		$	11.73
Granted		144		$	17.75
Exercised		(326	)	$	9.84
Outstanding December 31, 2006		3,151		$	12.11
Granted		190		$	18.70
Exercised		(313	)	$	10.44
Cancelled		(55	)	$	18.51
Outstanding December 31, 2007		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
Vested at December 31, 2008		2,595		$	12.41		3.53	$	3,374
Exercisable at December 31, 2008		2,595		$	12.41		3.53	$	3,374

The weighted-average grant-date fair value of options granted during the years ended December 31, 2008, 2007 and 2006 was $5.76, $6.38 and $6.02, respectively. The total intrinsic value for options exercised during the years ended December 31, 2008, 2007 and 2006, respectively, was $456, $2,856 and $4,193.

Cash received from option exercises under all plans for the years ended December 31, 2008, 2007 and 2006 was approximately $1,432, $3,269 and $3,175, respectively. The actual tax benefit realized for the tax deductions from option exercises under all plans totaled approximately $100, $608 and $1,662, respectively, for the years ended December 31, 2008, 2007 and 2006.

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Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

The following table summarizes information concerning outstanding and exercisable options at December 31, 2008:

Options Outstanding							Options Exercisable
			Weighted Average
			Remaining		Weighted				Weighted
Range of	Number		Contractual Life		Average Exercise		Number		Average Exercise
Exercise Price	Outstanding		(Years)		Price		Exercisable		Price
$ 6.20 - $ 8.26		162		1.1	$	7.70		162	$	7.70
8.26 - 10.33		1,259		2.4	$	9.29		1,259	$	9.29
10.33 - 12.39		55		2.9	$	10.91		55	$	10.91
12.39 - 14.45		494		4.5	$	14.20		494	$	14.20
14.45 - 16.52		204		9.3	$	15.87		5	$	15.62
16.52 - 18.58		229		7.5	$	18.03		116	$	17.87
18.58 - 20.65		511		5.6	$	18.87		501	$	18.86
20.65 - 21.08		5		8.9	$	21.08		3	$	21.08
		2,919						2,595

As of December 31, 2008, 2007 and 2006 there was $1,311, $1,169 and $808, 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, 2008, 2007 and 2006 is as follows (in thousands, except price per share and contractual term):

				Weighted
				Average
				Grant Date
	Number of			Fair Value
	Shares			per Share
Nonvested at January 1, 2006		570		$	4.85
Granted		144		$	6.02
Vested		(388	)	$	4.58
Nonvested at December 31, 2006		326		$	5.70
Granted		191		$	6.38
Vested		(232	)	$	5.65
Forfeited		(30	)	$	6.55
Nonvested at December 31, 2007		255		$	6.25
Granted		204		$	5.76
Vested		(107	)	$	6.23
Forfeited		(28	)	$	6.15
Nonvested at December 31, 2008		324		$	5.95

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.

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Notes to Consolidated Financial Statements — (Continued)

The Company recorded $519, $290 and $56 of compensation expense relating to restricted stock during years ended December 31, 2008, 2007 and 2006, respectively.

A summary of the restricted share activity for the years ended December 31, 2008, 2007 and 2006 is presented below:

				Weighted Average
	Number of			Grant Date
	Shares			Fair Value
Outstanding at January 1, 2006		—			—
Granted		25		$	17.43
Outstanding at December 31, 2006		25		$	17.43
Granted		35		$	18.47
Forfeited		(2	)	$	17.93
Outstanding at December 31, 2007		58		$	18.04
Granted		66		$	15.90
Forfeited		(6	)	$	18.32
Outstanding at December 31, 2008		118		$	16.84

As of December 31, 2008, 2007 and 2006, there was $1,086, $669 and $365, respectively, of total unrecognized compensation cost related to the outstanding restricted shares that will be recognized over a weighted average period of 2 years.

Employee Share-Based Compensation Expense

The table below shows the amounts recognized in the financial statements for the three years ended December 31, 2008 for share-based compensation related to employees. The expense is included in selling, general and administrative expenses in the Consolidated Statement of Operations.

	2008			2007			2006
Total cost of share-based compensation	$	1,385		$	1,011		$	1,059
Income tax		(263	)		(287	)		(387	)
Amount charged against income	$	1,122		$	724		$	672
Impact on net income per common share:
Basic	$	0.04		$	0.03		$	0.03
Diluted	$	0.04		$	0.03		$	0.02

There were no amounts related to employee share-based compensation capitalized as assets during the three years ended December 31, 2008.

NOTE 18.   Earnings Per Share

Basic earnings per share and diluted earnings per share are shown on the Consolidated Statements of Operations. Basic earnings per share are computed by dividing net income by the weighted average shares outstanding for the period. Diluted earnings per share are 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 to arrive at income available to common stockholders.

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Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

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:

	2008		2007		2006
Weighted average shares-Basic		26,739		26,869		26,393
Effect of dilutive stock options		—		832		1,002
Weighted average shares-Diluted		26,739		27,701		27,395

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.

Options to purchase 304 shares of Class A common stock at an exercise price from $17.43 — $20.65 per share were outstanding at December 31, 2007 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 November 6, 2017.

Options to purchase 20 shares of Class A common stock at an exercise price of $20.65 per share were outstanding at December 31, 2006 but were not included in the computation of diluted earnings per share because the options were anti-dilutive. The options expire on May 17, 2015.

NOTE 19.   Segment and Geographic Reporting

The Company organizes and manages its operations primarily by geographic area and measures profit or loss of its segments based on operating income. The accounting policies used to measure operating income of the segments are the same as those outlined in Note 2 — Significant Accounting Policies. The Company aggregates its operations in the United States and Mexico into one reportable operating segment (United States and Mexico) since they have similar economic characteristics. Europe, which was grouped with North America in 2007 and prior years, is now a separate operating segment since its economic characteristics have varied from prior years. The Company’s other operations in Asia and Australia, its creative design operation (Anthem), Canada (previously grouped with North America and Europe), Cactus in Canada, and its digital solutions business are grouped together into one reportable segment (Other operating segment) for purposes of disclosing segment information as they do not meet the quantitative thresholds for separate disclosure in accordance with the relevant provisions of Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS No. 131”). Anthem has creative design operations in the United States, Canada, Europe and Asia and the Digital Solutions business has operations in the United States and Europe.

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 earnings (loss). This is the measure of profitability used by the company’s chief operating decision maker and is consistent with the presentation of profitability reported within the condensed consolidated financial statements.

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Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

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

	2008			2007			2006
Sales to external customers:
United States and Mexico	$	337,965		$	382,985		$	407,818
Europe		64,108			71,830			79,344
Other		122,652			126,637			97,284
Intercompany sales elimination		(30,541	)		(37,043	)		(38,328	)
Total	$	494,184		$	544,409		$	546,118
Operating segment income (loss):
United States and Mexico	$	36,233		$	58,874		$	65,741
Europe		(34,028	)(1)		7,262			(1,484	)
Other		(14,316	)(2)		12,485			6,444
Corporate		(44,444	)(3)		(18,448	)		(15,789	)
Operating income (loss)		(56,555	)		60,173			54,912
Interest expense-net		(6,561	)		(8,917	)		(10,150	)
Income (loss) from continuing operations before income taxes	$	(63,116	)	$	51,256		$	44,762
Depreciation and amortization expenses:
United States and Mexico	$	9,308		$	9,864		$	13,923
Europe		3,175			3,767			3,659
Other		4,421			3,666			1,272
Corporate		3,847			4,056			3,663
Total	$	20,751		$	21,353		$	22,517

(1)	Includes $30,657 impairment of goodwill for Europe reporting unit
(2)	Includes $17,354 impairment of goodwill for Anthem reporting unit
(3)	Includes $7,254 of multiemployer pension withdrawal expense, $6,800 of expenses related to remediation of material weaknesses and SEC investigation and $2,336 of long lived asset impairments

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Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

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

	2008		2007
			(Restated)
Total Assets:
United States and Mexico	$	285,797	$	315,712
Europe		30,265		74,091
Other		85,433		103,119
Corporate		38,858		42,065
Total	$	440,353	$	534,987
Expenditures for long-lived assets:
United States and Mexico	$	7,185	$	5,407
Europe		2,163		765
Other		4,714		5,126
Corporate		850		6,823
Total	$	14,912	$	18,121

Summary financial information for continuing operations by country for 2008, 2007 (Restated) and 2006 (Restated) is as follows:

							Other
	United States		Canada		Europe		Foreign		Total
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
2007
Sales	$	388,051	$	44,054	$	80,055	$	32,249	$	544,409
Long-lived assets		65,117		5,589		7,292		3,943		81,941
2006
Sales	$	405,360	$	34,533	$	81,102	$	25,123	$	546,118
Long-lived assets		63,148		4,597		8,900		3,716		80,361

Sales are attributed to countries based on the point of origin of the sale. Approximately 9 percent of total revenues came from the Company’s largest single client for the year ended December 31, 2008.

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 20.   Quarterly Financial Data (unaudited)

Unaudited quarterly data for 2007 and 2008 is presented below. The information related to the quarter ended September 30, 2008 is presented as “previously reported” and “disaggregated.” This reflects the Company’s decision to reclassify its large format printing operation, originally presented as discontinued operations in its Form 10-Q for the quarter ended September 30, 2008 as continuing operations in its year-end 2008 financial statements. See Note 4 — Discontinued Operations for more information regarding the change in presentation.

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Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

The reported information presented for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007 reflects the restatement adjustments reported in Form 10-K for the year ended December 31, 2007. See Note 1 — Basis of Presentation, Restatement of Previously Issued Financial Statements and Description of Business for more information regarding the restatement.

	March 31,			June 30,			September 30,			December 31,
	2007			2007			2007			2007
	(In thousands, except per share amounts)
Net sales	$	129,624		$	142,740		$	130,789		$	141,256
Cost of sales		84,602			91,337			84,394			91,682
Gross profit		45,022			51,403			46,395			49,574
Selling, general, and administrative expenses		32,863			32,909			32,966			32,286
Impairment of long-lived assets		—			—			—			1,197
Operating income		12,159			18,494			13,429			16,091
Other income (expense):
Interest income		90			—			85			122
Interest expense		(2,398	)		(2,382	)		(2,278	)		(2,156	)
		(2,308	)		(2,382	)		(2,193	)		(2,034	)
Income before income taxes		9,851			16,112			11,236			14,057
Income tax provision		3,839			6,170			4,390			6,259
Net income	$	6,012		$	9,942		$	6,846		$	7,798
Net earnings per share:
Basic	$	0.23		$	0.37		$	0.25		$	0.29
Diluted	$	0.22		$	0.36		$	0.25		$	0.28

	March 31,			June 30,
	2008			2008
	(In thousands, except per share amounts)
Net sales	$	126,407		$	133,436
Cost of sales		83,440			86,650
Gross profit		42,967			46,786
Selling, general, and administrative expenses		36,271			36,104
Acquisition integration and restructuring expense		—			3,174
Impairment of long-lived assets		—			2,184
Operating income		6,696			5,324
Other income (expense):
Interest income		74			64
Interest expense		(1,778	)		(1,696	)
		(1,704	)		(1,632	)
Income before income taxes		4,992			3,692
Income tax provision		732			2,916
Net income	$	4,260		$	776
Net earnings per share:
Basic	$	0.16		$	0.03
Diluted	$	0.15		$	0.03

87

Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

	September 30, 2008(1)
	Previously						December 31,
	Reported			Reclassified			2008(2)
	(In thousands, except per share amounts)
Net sales	$	124,167		$	125,446		$	108,895
Cost of sales		81,300			82,279			77,445
Gross profit		42,867			43,167			31,450
Selling, general, and administrative expenses		36,869			37,203			39,018
Impairment of goodwill		—			—			48,041
Multiemployer pension withdrawal expense		—			—			7,254
Acquisition integration and restructuring expense		1,942			1,942			5,274
Impairment of long-lived assets		3,451			4,073			387
Operating income (loss)		605			(51	)		(68,524	)
Other income (expense):
Interest income		63			63			90
Interest expense		(1,625	)		(1,625	)		(1,753	)
		(1,562	)		(1,562	)		(1,663	)
Loss from continuing operations before income taxes		(957	)		(1,613	)		(70,187	)
Income tax provision (benefit)		5,280			5,063			(11,821	)
Loss from continuing operations		(6,237	)		(6,676	)		(58,366	)
Loss from discontinued operations, net of tax		(439	)		—			—
Net loss	$	(6,676	)	$	(6,676	)	$	(58,366	)
Loss per share from continuing operations:
Basic	$	(0.23	)	$	—		$	—
Diluted	$	(0.23	)	$	—		$	—
Loss per share from discontinued operations:
Basic	$	(0.02	)	$	—		$	—
Diluted	$	(0.02	)	$	—		$	—
Net loss per share:
Basic	$	(0.25	)	$	(0.25	)	$	(2.27	)
Diluted	$	(0.25	)	$	(0.25	)	$	(2.27	)

(1)

During the fourth quarter of 2008, the Company reassessed the likelihood of completing the sale of its large format printing operation within one year and determined that it could no longer meet the requirements of SFAS No. 144 for classifying the business as held for sale. Accordingly, in this Form 10-K, the business previously reported in the third quarter 2008 Form 10-Q as discontinued operations has been reclassified as continuing operations. See Note 4 — Discontinued Operations for further information.

(2)

Results for the fourth quarter of 2008 include $48,041 of pretax goodwill impairment charges, a pretax charge of $7,254 for withdrawal from a multiemployer pension plan and a pretax charge of $5,274 for acquisition integration and restructuring expense. See Note 9 — Goodwill and Intangible Assets, Note 16 — Employee Benefit Plans and Note 6 — Acquisition Integration and Restructuring for further information.

88

Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

NOTE 21.   Contingencies

Kohlberg & Company Indemnity

The stock purchase agreement entered into by the Company with Kohlberg & Company, L.L.C. (“Kohlberg”) to acquire Seven Worldwide provided for a payment of $10,000 into an escrow account. The escrow was established to insure that funds were available to pay Schawk, Inc. 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 has 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 has denied that it has any indemnity obligations to the Company. On April 9, 2009, the court entered an order denying both parties’ cross-motions for summary judgment. At December 31, 2008, the Company had recorded a receivable from Kohlberg on its Consolidated Balance Sheet in the amount of $3,787, 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. During the third quarter ended September 30, 2008, the Company paid interest of $964 in final settlement of Internal Revenue Service audits of Seven Worldwide, Inc. for the years 1996-2003. Additionally during the third quarter, 2008, the Company paid $619 as a partial settlement of state taxes with the filing of amended returns reflecting internal audit adjustments. The Company believes it is entitled to indemnification for these amounts under the terms of the stock purchase agreement and that recoverability is likely.

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 22.   Impairment of Long-lived Assets

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 based on the properties’ estimated fair values, less anticipated costs to sell, of $6,555. The $3,470 charge is included in Impairment of long-lived assets in the Consolidated Statement of Operations. The expense was recorded in the United States and Mexico segment. The Company has engaged a real estate broker to market the properties and expects a sale to occur within the next twelve months. In accordance with SFAS No. 144, the $6,555 adjusted carrying value of the land and buildings is classified as “Assets held for sale”, on the Consolidated Balance Sheet at December 31, 2008. In March 2009, the sale of one of the properties classified as “held for sale” at December 31, 2008 was completed, with a selling price approximately equal to its carrying value.

During 2008, software that had been capitalized by the Company in accordance with the AICPA Statement of Position No. 98-1 “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use” (“SOP No. 98-1”) 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

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Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

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 has written 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.

The Company also recorded a $468 impairment charge to write-down the net assets of its large format print operation to fair value. The Company had been marketing this business for sale during the third quarter of 2008 and had received an offer for the sale of the net assets, which was expected to close during the fourth quarter of 2008. The sale failed to close in the fourth quarter and the Company has discontinued its plan to sell the large format operation. See Note 4 — Discontinued Operations for more information. The expense was recorded in the Other segment.

Also, included in the Impairment of long-lived assets in the Consolidated Statement of Operations, is $209 of additional fixed asset impairments recorded in 2008, 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 United States and Mexico 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 Other operating segment. In 2007, the Company recorded $1,197 of impairment charges, primarily for a customer relationship asset for which future estimated cash flows did not support the carrying value. The 2007 impairment charge was recorded in the Other operating segment.

Additionally, the Company incurred $628 of fixed asset impairments relating to its 2008 restructuring and cost reduction plan, included in Acquisition integration and restructuring expense in the Consolidated Statement of Operations. Refer to Note 6 — Acquisition Integration and Restructuring for further information.

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ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.

None.

ITEM 9A.   CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company conducted an evaluation of the effectiveness of the design and operation 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 controls evaluation was conducted under the supervision of the Audit Committee, and with the participation of management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as a result of the identification of the material weaknesses identified below, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective.

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 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.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008, based on the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework. Based on its assessment, management has concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2008 due to the material weaknesses in the Company’s internal controls identified below.

A material weakness is a deficiency or combination of deficiencies, in internal controls over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following material weaknesses in internal control over financial reporting as of December 31, 2008:

Revenue Recognition

As disclosed in the Company’s Form 10-K for the year ended December 31, 2007, the Company previously determined that it had a material weakness in internal control over revenue recognition as of December 31, 2007. As of December 31, 2008, management concluded that the Company’s revenue recognition controls remained ineffective. During 2008, management commenced enhancing the design and effectiveness of controls related to revenue recognition; however, key transaction level controls over revenue recognition were implemented in December 2008, which provided insufficient time to effectively train the global organization for consistent application of the controls, which resulted in additional control failures.

91

Work-in-Process Inventory

The Company did not have adequate policies and procedures to provide assurance that work-in-process inventory is properly stated for financial reporting purposes. Specifically, manual processes, supported by weak and disparate information technology systems, create the opportunity for errors in the financial statements. Certain assumptions with respect to the calculation and inclusion of certain overhead costs and employee utilization add to risk of errors and potential for inventory misstatement. The Company evaluated alternatives to its method of inventory accounting to determine if a preferable inventory accounting method was available that would better align with the company’s increasing emphasis on strategic and creative services, in line with the Company’s introduction of Brand Point Management in 2008. Due to the expectation that its inventory method would change in 2008, the Company did not invest significantly in the remediation of its work-in-process inventory accounting internal controls and procedures under the Company’s existing accounting method.

Entity- Level Controls

As disclosed in the Company’s Form 10-K for the year ended December 31, 2007, the Company previously determined that it had a material weakness in entity-level controls as of December 31, 2007. As of December 31, 2008, management concluded that the Company’s entity-level controls remained ineffective. During 2008, the Company took significant measures to strengthen its entity-level controls. Executive management has emphasized the importance of internal controls at all levels of the Company’s organization. The Company has taken measures to institutionalize a stronger commitment to internal controls and verified that process owners are involved with the performance of internal controls. Due to the nature and number of control deficiencies and post-close adjusting entries identified, the Company concluded that its entity-level controls were not effective in the areas of control environment and control activities. In particular, in certain areas the Company did not maintain a sufficient complement of personnel with the appropriate level of knowledge, experience and training in the application of U.S. GAAP and in internal control over financial reporting. In addition, the Company lacked robust forecasting and review processes and effective communications between operations management and finance and accounting personnel to appropriately verify financial statement risks resulting in adjustments across multiple accounts.

The effectiveness of our internal control over financial reporting as of December 31, 2008 was audited by Ernst & Young LLP, our independent registered public accounting firm as stated in their report, which report is included in this Item 9A of this Annual Report on Form 10-K.

Remediation of Certain Previously Identified Material Weaknesses

As disclosed in the Company’s Form 10-K for the year ended December 31, 2007 (“2007 Form 10-K”), the Company concluded that as of December 31, 2007, there were the following material weaknesses in the Company’s internal control over financial reporting:

•  Revenue recognition;

•  Accounting for capitalized software costs;

•  Accounting for income taxes; and,

•  Entity-level controls.

In response to the above and related matters, the Company completed the following major actions in fiscal 2008:

•  Reviewed and redesigned the Company’s Sarbanes-Oxley Section 404 documentation and related controls, including a revised comprehensive business risk assessment.

•  With respect to the aforementioned material weaknesses from 2007, the Company identified and implemented specific plans with respect to the remediation thereof.

•  Testing of these revised controls began in the fourth quarter of 2008, with the assistance of a global accounting firm.

•  Added experienced financial personnel to the Company’s accounting staff, in order to provide for strengthened analysis and review of financial results.

92

•  Strengthened the Company’s internal audit function by outsourcing certain of the Sarbanes-Oxley services and internal auditing to a global accounting firm.

•  Engaged a global accounting firm to assist the Company in completing an accounting review of its significant income tax balances.

During and following the fourth quarter, management completed testing to assess the effectiveness of its internal controls over financial reporting and related remediations and, based on that testing, concluded as of the fourth quarter that two of the material weaknesses reported in the Company’s 2007 Form 10-K - accounting for capitalized software costs and accounting for income taxes — no longer constituted material weaknesses in the Company’s internal controls as of December 31, 2008, as more fully described below.

Accounting for Capitalized Software Costs

Software developed for sale to third parties.  The Company conducted training for the accounting personnel responsible for the software revenue accounting on the principles of AICPA Statement of Position No. 97-2 “Software Revenue Recognition” (“SOP No. 97-2”), Statement of Position No. 98-9 “Software Revenue Recognition (“SOP No. 98-9”), with Respect to Certain Transactions” and Emerging Issues Task Force No. 00-21 “Revenue Arrangements with Multiple Deliverables” (“EITF No. 00-21”), and added detailed accounts to the general ledger to improve the accounting for deferred revenues and costs. A subsequent review by internal audit of software revenue and related costs indicated compliance with current accounting guidance. In conjunction with the Company’s Sarbanes-Oxley Section 404 efforts, additional controls were implemented and documented.

Software developed for internal use.  The Company developed controls to ensure that project plans clearly delineate activities relating to planning, application development and post implementation/support, minor upgrades and enhancements are expensed as incurred and employees are educated with respect to the requirements of AICPA Statement of Position No. 98-1 “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use” (“SOP No. 98-1”). In conjunction with the Company’s Sarbanes-Oxley Section 404 efforts, additional controls were implemented and documented.

Accounting for Income Taxes

During 2008, the Company took significant measures to strengthen its accounting for income taxes, including engaging the assistance of a global accounting firm, redesigning its processes and controls, providing training for the finance team and outside service provider and conducting a substantive review of all significant tax balances. Specifically, we:

•  reviewed and validated significant income tax balances, which included analyzing prior year tax returns and opening balance sheets, reconciling current and deferred balances and assessing FIN 48 liabilities;

•  implemented revised income tax accounting processes, including converting its UK subsidiaries to its common general ledger system, which allows its Corporate tax function access to US GAAP-based financial information by legal entity;

•  provided SFAS 109 training to both its global finance team and local service providers;

•  filed delinquent foreign tax returns and statutory accounts; and

•  strengthened procedures to improve oversight of income tax returns and statutory accounts filings.

Remediation Plan Related to 2008 Material Weaknesses

The Company has not fully remediated the material weakness from 2007 relating to revenue recognition. The Company is committed to improving the internal control over financial reporting to remediate this material weakness and ensuring compensating controls are in place, where necessary. With the oversight of its Audit Committee, the Company implemented the following corrective actions and plan to adopt certain additional measures to remediate our material weakness in revenue recognition:

•  implemented additional transaction level controls for revenue recognition.

•  instituted a worldwide training program and monthly test of documentation per location to train employees on proper revenue recognition.

93

Additionally, the Company’s plan to remediate the material weakness relating to accounting for revenue recognition includes assessing the effectiveness of the transaction level controls during 2009 and remediating any issues that may arise.

As discussed above, management identified, for the year ended December 31, 2008, a material weakness in internal control over our financial reporting related to work-in-process inventory. With the oversight of its Audit Committee, the Company plans to adopt the following measures:

•  The Company will identify and then implement a consistent and reviewable process to ensure an accurate work-in-process inventory amount. Such a process will include clearer instructions, reporting and reviews with respect to the inventory calculations, as well as identification of service revenue streams and related costs.

•  Until such a revised process is in place, the Company will employ a substantive review methodology to mitigate the risk of errors.

The Company has not fully remediated the material weakness from 2007 relating to entity-level controls. The Company is committed to improving the internal control over financial reporting to remediate this material weakness and ensuring compensating controls are in place, where necessary. With the oversight of its Audit Committee, the Company has implemented the following corrective actions and plans to adopt certain additional measures to remediate its material weakness in entity-level controls:

•  provided training to process owners on the appropriate requirements to document and perform internal control procedures.

•  developed and implemented additional formal policies and procedures, enhanced the formalized review of its internal controls and significant accounting procedures and added experienced financial management with the requisite areas of expertise to strengthen proper accounting and reporting.

•  strengthened the Company’s internal audit function by outsourcing certain functions and internal auditing to a global accounting firm.

•  augmented its analysis and review of financial results at an entity level.

Additionally, the Company’s plan to further remediate the material weakness related to entity-level controls includes the following measures:

•  Stronger communication protocols and relationships between operations management and finance and accounting personnel will be established to ensure transactions are identified for proper accounting analysis and treatment.

•  The Company will formalize the review process for all contracts.

•  The structure of finance and accounting teams will be assessed and, as necessary, additional US GAAP trained finance and accounting personnel will be hired.

•  The Company will continue to improve the Sarbanes-Oxley Section 404 controls implemented in the fourth quarter of 2008 and will provide additional training for applicable personnel to ensure compliance with these controls.

•  The role of the Disclosure Committee will be enhanced to provide improved oversight of the accuracy and timeliness of disclosures made by the Company.

•  More precise monitoring controls will be implemented at both operating unit and corporate levels.

Changes in Internal Control Over Financial Reporting

Other than the changes noted above, there have been no changes to the Company’s internal control over financial reporting during the quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

94

Report of Independent Registered Public Accounting Firm
on Internal Control over Financial Reporting

Board of Directors and Shareholders of

Schawk, Inc.

We have audited Schawk, Inc.’s internal control over financial reporting as of December 31, 2008 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.

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.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment:

1. Inadequate entity-level controls, primarily in the areas of (i) the control environment as it relates to insufficient technical accounting knowledge, training and resources; (ii) control activities as it relates to ineffective supervision and review of contracts, account analyses and transactions; and (iii) ineffective communication, monitoring and analysis of budgets, forecasts and other key performance indicators sufficient to appropriately mitigate the risk of errors across multiple accounts and to ensure timely preparation of financial statements and related SEC filings.

2. Inadequate operation of revenue recognition procedures and controls, sufficient to ensure revenue is recorded in the appropriate period at the correct amounts.

95

3. Inadequate design and operation of work-in-process inventory valuation procedures and controls, sufficient to insure that inventory is appropriately stated for financial reporting purposes, including the exclusion of non-inventoriable costs and proper matching of costs against revenue transactions.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2008 financial statements, and this report does not affect our report dated June 11, 2009 on those financial statements.

In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, Schawk, Inc. has not maintained effective internal control over financial reporting as of December 31, 2008, based on the COSO criteria.

/s/ ERNST & YOUNG LLP

Chicago, Illinois

June 11, 2009

ITEM 9B.   OTHER INFORMATION.

None.

PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information 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” contained in Exhibit 99.1 to this Form 10-K 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 2008 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 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” contained in Exhibit 99.1 to this Form 10-K 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 under the caption “Security Ownership of Certain Beneficial Owners and Management” contained in Exhibit 99.1 to this Form 10-K is incorporated herein by reference. The information regarding securities authorized for issuance under our equity compensation plans is incorporated herein by reference to Part II,

96

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 under the caption “Transactions with Related Persons” and the information related to director independence under the caption “Corporate Governance” contained in Exhibit 99.1 to this Form 10-K is incorporated herein by reference.

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information under the caption “Independent Public Accountants” contained in Exhibit 99.1 to this Form 10-K is incorporated herein by reference.

PART IV

ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(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
		Consolidated Balance Sheets — Years Ended December 31, 2008 and 2007
		Consolidated Statements of Operations — Years Ended December 31, 2008, 2007, and 2006
		Consolidated Statements of Cash Flows — Years Ended December 31, 2008, 2007, and 2006
		Consolidated Statements of Stockholders’ Equity — Years Ended December 31, 2008, 2007, and 2006
		Notes to Consolidated Financial Statements — December 31, 2008
	2.	Financial statement schedules required to be filed by Item 8 of this form, and by Item 15(d) below:
		Schedule II — Valuation and qualifying accounts.
	3.	Exhibits

Exhibit
Number			Description	Incorporated Herein by Reference to:(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, 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.*	Appendix C to Proxy Statement for the 2001 Annual Meeting of Stockholders
	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

97

Exhibit
Number			Description	Incorporated Herein by Reference to:(1)
	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 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	Credit Agreement dated June 11, 2004 by and between Schawk Inc. and Bank One, N. A.	Exhibit 10.1 to Form 8-K filed with the SEC on June 16, 2004
	10	.13	Schawk, Inc. 2001 Equity Option Plan	Appendix B to Proxy Statement for the 2001 Annual Meeting of Stockholders
	10	.14	Schawk, Inc. 2003 Equity Option Plan	Appendix A to Proxy Statement for the 2003 Annual Meeting of Stockholders (File No. 001
	10	.15	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	.16	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	.17	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	.18	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	.19	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	.20	First Amendment to Note Purchase Agreement, dated as of January 28, 2005, among Schawk, Inc. and the institutional purchasers party thereto.	Exhibit 10.6 to Form 8-K filed with the SEC on February 2, 2005
	10	.21	Description of executive compensation arrangements	Form 8-K filed with the SEC on June 6, 2005

98

Exhibit
Number			Description	Incorporated Herein by Reference to:(1)
	10	.22	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	.23	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	.24	Description of executive equity awards	Form 8-K filed with the SEC on June 6, 2005
	10	.25	Amendment No. 1, dated 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., as agent.	Exhibit 10.1 to Registrant’s Form 8-K filed with the SEC on March 5, 2008
	10	.26	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	.27	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
	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**
	32		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**
	99	.1	Information responsive to Items 10-14 of Part III of the Registrant’s Form 10-K**

(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.

99

Schawk, Inc.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

			Provision
	Balance at		Charged to			Write-offs/			Other
Allowances for	Beginning		Costs and			Allowances			Additions			Balance at
Losses on Receivables	of Year		Expenses			Taken(1)			(Deductions)(2)			End of Year
	(In thousands)
2008	$	2,063	$	1,834		$	(519	)	$	(240	)	$	3,138
2007	$	2,255	$	515		$	(879	)	$	172		$	2,063
2006	$	5,940	$	(180	)	$	(3,618	)	$	113		$	2,255

			Provision
	Balance at		Charged to		Write-offs/		Other
Deferred Tax Asset	Beginning		Costs and		Allowances		Additions			Balance at
Valuation Allowance	of Year		Expenses		Taken(1)		(Deductions)(2)			End of Year
2008	$	27,346	$	7,471		—	$	(6,198	)	$	28,619
2007	$	24,492	$	1,210		—	$	1,644		$	27,346
2006	$	20,116	$	2,891		—	$	1,485		$	24,492

(1)	Net of collections on accounts previously written off.
(2)	Other Additions (Deductions) consists principally of adjustments related to foreign exchange.

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 11th day of June 2009.

Schawk, Inc.

By:  /s/  David A. Schawk

David A. Schawk

Chief Executive Officer

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 11th day of June 2009.

/s/  Clarence W. Schawk Clarence W. Schawk	Chairman of the Board and Director
/s/  David A. Schawk David A. Schawk	President, Chief Executive Officer, and Director (Principal Executive Officer)
/s/  A. Alex Sarkisian, Esq. A. Alex Sarkisian	Executive Vice President, Chief Operating Officer and Director
/s/  Timothy J. Cunningham Timothy J. Cunningham	Executive Vice President, Chief Financial Officer and Chief Accounting Officer
/s/  John T. McEnroe, Esq. John T. McEnroe, Esq.	Director and Assistant Secretary
/s/  Leonard S. Caronia Leonard S. Caronia	Director
/s/  Judith W. McCue, Esq. Judith W. McCue, Esq.	Director
/s/  Hollis W. Rademacher Hollis W. Rademacher	Director
/s/  Michael G. O’Rourke Michael G. O’Rourke	Director
/s/  Stanley N. Logan Stanley N. Logan	Director

101

EX-21

Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

	Jurisdiction of
	Incorporation or
	Organization
Schawk Worldwide Holdings Inc.	United States
Schawk Holdings, Inc.	United States
Seven Seattle, Inc.	United States
Schawk USA Inc.	United States
Kedzie Aircraft LLC
Schawk LLC	United States
Schawk de Mexico SRL de CV	Mexico
Schawk Servicios Administrativos SRL de CV	Mexico
Miramar Equipment, Inc.	United States
Schawk Digital Solutions Inc.	United States
Seven Worldwide UK Ltd.	United Kingdom
Winnetts UK Ltd.	United Kingdom
Schawk Wace Group	United Kingdom
Schawk UK Holdings Ltd	United Kingdom
Seven Worldwide Ltd	United Kingdom
Schawk UK Ltd	United Kingdom
Wace Wiltshire Ltd.	United Kingdom
Gallions Estates Ltd	United Kingdom
Schawk UK Corporate Packaging Ltd.	United Kingdom
Schawk UK Overseas Investments Ltd.	United Kingdom
Ripley Group Ltd.	United Kingdom
Clyde Gravure Ltd.	United Kingdom
Riddington and Co. Ltd.	United Kingdom
Ripley and Co. Ltd	United Kingdom
Ripley Roll Lable Ltd.	United Kingdom
Scrutton Speed Ltd.	United Kingdom
Dulip Ltd	United Kingdom
Schawk Germany GMBH	Germany
Schawk Canada, Inc.	Canada
Protopak Innovations, Inc.	Canada
Schawk Belgium BVBA	Belgium
Schawk Poland Sp z.o.o.	Poland
Brandmark International Holding B.V.	Netherlands
DJPA Partnership B.V.	Netherlands
DJPA Partnership Ltd	United Kingdom
Schawk Spain, SL	Spain
Schawk Thailand Ltd.	Thailand
Anthem Design & Consulting (Shenzhen) Co. Ltd.	China
Schawk Japan, Ltd.	Japan
Schawk India Pty. Ltd.	India
Schawk Holdings Australia Pty Ltd.	Australia
Schawk Australia Pty. Ltd.	Australia
Anthem! Design Pty Ltd.	Australia
Marque Brand Consultants Pty Ltd.	Australia
Schawk Asia Pacific Pte. Ltd.	Singapore
Anthem Design Singapore Pte. Ltd.	Singapore
Schawk Labuan, Inc.	Malaysia
Schawk BVI Services, Inc.	British Virgin Islands
Schawk BVI Holdings, Inc.	British Virgin Islands
Schawk Imaging Sdn. Bhd.	Malaysia
Schawk Kuala Lumpur Sdn. Bhd.	Malaysia
Schawk Penang Sdn. Bhd.	Malaysia
Schawk Imaging (Shanghai) Co. Ltd.	China
Laserscan Technology (M) Sdn. Bhd.	Malaysia

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Forms S-8 No. 333-68521, 333-72254, 333-67438 and 333-143811) pertaining to the Schawk, Inc. Employee Stock Purchase Plan, the 1991 Outside Directors’ Formula Stock Option Plan, the 2003 Equity Option Plan (formerly, the 2001 Equity Option Plan) and the 2006 Long-Term Incentive Plan, respectively, of our reports dated June 11, 2009, with respect to the consolidated financial statements and schedule of Schawk, Inc., and the effectiveness of internal control over financial reporting of Schawk, Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 2008.

/s/  Ernst & Young LLP

Chicago, Illinois

June 11, 2009

EX-31.1

Exhibit 31.1

CERTIFICATION

I, David A. Schawk, Chief Executive Officer of Schawk Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Schawk Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  David A. Schawk

David A. Schawk

Date: June 11, 2009

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Timothy J. Cunningham, Chief Financial Officer of Schawk Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Schawk Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Timothy J. Cunningham

Timothy J. Cunningham

Date: June 11, 2009

EX-32

Exhibit 32

CERTIFICATION

In connection with the Annual Report of Schawk, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Chief Executive Officer and Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Annual Report on Form 10-K for the period ended December 31, 2008 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  David A. Schawk

David A. Schawk

President and Chief Executive Officer

/s/  Timothy J. Cunningham

Timothy J. Cunningham

Executive Vice President, Chief Financial Officer

and Chief Accounting Officer

June 11, 2009

EX-99.1

Exhibit 99.1

INFORMATION REQUIRED BY PART III OF
FORM 10-K of Schawk, inc.
FOR THE YEAR ENDED
DECEMBER 31, 2008

DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is a biographical statement for each of members of the Board of Directors of Schawk, Inc. (the “Company”)

Clarence W. Schawk has been Chairman of the Board of the Company since September 1992, when he was also appointed to the Executive Committee. He served as Chief Executive Officer of Filtertek Inc., the Company’s predecessor (“Filtertek”), from September 1992 until February 1993. Clarence W. Schawk also served as Chairman of the Board of the corporation previously known as Schawk, Inc. (“Old Schawk”) from 1953 until the merger (the “Merger”) of Old Schawk and affiliated companies into Filtertek in 1994 and served as Chief Executive Officer until June 1994. He is the father of David A. Schawk, President and Chief Executive Officer of the Company. Clarence W. Schawk previously served as President and a Director of the International Prepress Association. Mr. Schawk also served as a Director of Old Schawk until the Merger. Age: 83

David A. Schawk was appointed Chief Executive Officer and President in February 1993. He served as Chief Operating Officer of the Company from September 1992 through February 2004. He was appointed to the Board of Directors in September 1992 and currently serves on its Executive Committee. David A. Schawk served as the President of Old Schawk from 1987 until the Merger. David A. Schawk serves on the Company’s Executive Committee. David A. Schawk is the son of Clarence W. Schawk. David A. Schawk currently serves as a Director of the International Prepress Association. Mr. Schawk also served as a Director of Old Schawk until the Merger. Age: 53

A. Alex Sarkisian, Esq., was appointed Chief Operating Officer in March 2004 and was appointed Executive Vice President in 1994. Mr. Sarkisian has served on the Company’s Board of Directors and as Corporate Secretary since September 1992. Mr. Sarkisian was the Executive Vice President and Secretary of Old Schawk from 1988 and 1986, respectively, until the Merger. Mr. Sarkisian also served as a Director of Old Schawk until the Merger. He is a member of the Executive Committee. Age: 57

Judith W. McCue, Esq., has been a partner with McDermott Will & Emery LLP since 1995. Prior thereto, Ms. McCue was a partner with Keck, Mahin & Cate where she practiced from 1972 to 1995. Ms. McCue was appointed Director of the Company in September 1992 and is a member of the Audit and Option/Compensation Committees. Age: 61

John T. McEnroe, Esq., has been a shareholder with the law firm of Vedder Price P.C., counsel to the Company, since May 1992. Prior to this position, he was a partner with the law firm of Keck, Mahin & Cate where he practiced from 1976 to 1992. Mr. McEnroe was appointed a Director of the Company in September 1992 and is a member of the Executive and Option/Compensation Committees. Age: 57

Hollis W. Rademacher was appointed a Director of the Company in 1994 and is a member of the Executive and Option/Compensation Committees and serves as Chairman of the Audit Committee. He held various positions with Continental Bank, N.A., Chicago, Illinois, from 1957 to 1993 and was Chief Financial Officer of Continental Bank Corporation, Chicago, Illinois, from 1988 to 1993. Mr. Rademacher is currently self-employed in the fields of consulting and investments in Chicago, Illinois. Mr. Rademacher also serves as a director of Wintrust Financial Corporation (NasdaqGS: WTFC) and First Mercury Financial (NYSE: FMR), together with several other privately held companies. Age: 73

Leonard S. Caronia was appointed a Director of the Company in October 2000. Mr. Caronia currently serves as a Chairman of Fox-Pitt Kelton Cochran Caronia Waller, an investment banking firm, and was a co founder and Managing Director of Cochran Caronia Waller prior to its merger with Fox-Pitt, Kelton in September 2007. Prior to forming his company in 1997, Mr. Caronia served as Managing Director of Coopers & Lybrand Securities, LLC. Prior to that, Mr. Caronia was employed at First Chicago Corporation from 1980 until 1993 and was Corporate

Senior Vice President and Head of Investment Banking. He is also a member of the Option/Compensation Committee. Age: 57

Michael G. O’Rourke was appointed a Director on February 12, 2007 and is a member of the Audit Committee. Mr. O’Rourke currently serves as President and Chief Executive Officer of Signature Bank located in Chicago, Illinois. He previously served as Executive Vice President and Manager of Commercial Lending and Commercial Real Estate at Associated Bank Chicago from 2001 until 2005, when he left to organize Signature Bank. Age: 40

Stanley N. Logan was appointed a Director on November 6, 2007 and is a member of the Audit Committee. Mr. Logan currently serves as a vice president of Huron Consulting Group (NasdaqGS: HURON) and heads Huron’s Western Region and Japan. Prior to joining Huron, Mr. Logan was most recently managing partner of KPMG’s Chicago office. He also served as National Sector Leader for Consumer Products at KPMG. Before joining KPMG in 2002, Mr. Logan held a number of significant client and leadership roles at Arthur Andersen in Chicago. He has held audit and nonaudit lead partner roles with large corporations in the consumer, retail and industrial spaces throughout his career at both KPMG and Arthur Andersen. Age: 54

The size of the Company’s Board of Directors has been fixed at nine members in accordance with the Company’s By-laws.

The following is a brief biographical statement of Timothy J. Cunningham, the Chief Financial Officer of the Company:

Timothy J. Cunningham was appointed Executive Vice President and Chief Financial Officer of the Company in September 2008. Mr. Cunningham joined the Company in March as an advisor to the Chief Executive Officer, was appointed Vice President, Finance in April 2008, and served as the Company’s Interim Chief Financial Officer and Chief Accounting Officer from June 2008 until September 2008. He previously served as chief financial officer of Pregis Corporation, a packaging solutions company, from May 2006 until September 2007, and in a transitional role with Pregis until December 2007. Prior to joining Pregis, Mr. Cunningham served as the interim chief financial officer of a $1.4 billion division of a $12 billion food company from February 2005 to April 2006. From November 1999 though January 2005, he was with eLoyalty Corporation, an enterprise customer relationship management services and solutions company, serving most recently as vice president and chief financial officer. Mr. Cunningham formerly was a partner with Tatum LLC, a consulting and executive services firm, from February 2005 until April 2006 and from January 2008 until September 2008. He is a member of the American Institute of Certified Public Accountants and the Illinois CPA Society, and has a BBA in Accountancy from the University of Notre Dame and a Master of Business Management from Northwestern University, Kellogg Graduate School of Management. Age: 55

Officers are elected by the Board of Directors at the first meeting of the newly elected Board of Directors held after each Annual Meeting. Officers hold office for a term of one year and until a successor has been duly elected and qualified.

CORPORATE GOVERNANCE

Meetings of the Board of Directors

The Board of Directors is responsible for the overall affairs of the Company. The Board of Directors held six meetings in 2008. Each member of the Board of Directors attended at least 75% of the total number of meetings of the Board of Directors and of all committees of the Board of Directors on which such Director served, except Clarence Schawk. The Board of Directors has a policy requiring director attendance at the annual meeting of stockholders. All members of the Board of Directors attended the 2008 Annual Meeting.

Executive Sessions. Meetings of non-employee directors are held in which such directors meet without management participation. Non-employee directors include all independent directors as well as any other directors who are not officers of the Company, whether or not “independent” by virtue of a material relationship with the Company or otherwise. John T. McEnroe presides over any meetings of non-employee directors. Interested parties may communicate directly with Mr. McEnroe, or with the non-employee directors as a group, by writing to them c/o Schawk, Inc., 1695 South River Road, Des Plaines, Illinois 60018.

Director Independence

The Board of Directors of the Company has determined that Judith W. McCue, Hollis W. Rademacher, Michael G. O’Rourke and Stanley N. Logan are “independent directors”. The Board of Directors has affirmatively determined that none of the current independent directors has a material relationship with the Company (either directly as a partner, stockholder or officer of an organization that has a relationship with the Company). In making such a determination the Board of Directors applied the standards set forth in Rule 303A.02(b) of the New York Stock Exchange Listed Company Manual and those set forth in the Company’s Corporate Governance Guidelines, a copy of which is available on the Company’s website at www.schawk.com. The remaining members of the Board of Directors are not considered independent.

In reaching the Board’s independence determinations, each director’s background is reviewed for any possible material affiliations with, or any compensation received (other than compensation for service on the Company’s Board of Directors or committees thereof) from, the Company, including those affiliations described under “Transactions with Related Persons” in this document. In addition, in assessing the independence of Mr. O’Rourke, the Board considered the equity investments made by certain members of the Company’s executive management in Signature Bank, for which Mr. O’Rourke serves as chief executive officer. The Board of Directors determined that all of the independent directors were “independent” for purposes of the New York Stock Exchange listing standards and the Company’s Corporate Governance Guidelines because, during the past three years, no independent director (or any member of an independent director’s immediate family) has:

•  been employed by the Company or any subsidiary;

•  accepted direct compensation from the Company or any subsidiary in excess of $120,000 during any of the last three fiscal years, or plans to accept such payments in the current fiscal year (other than compensation for board or committee service and pension or other forms of deferred compensation for prior service);

•  been affiliated with or employed by an auditor (present or former) of the Company or an affiliate of the Company;

•  been employed as an executive officer of another entity where at any time during the past three years any of the Company’s executive officers served on that entity’s compensation committee; or

•  been employed as an executive officer of an entity (including charitable organizations) that made payments to, or received payments from, the Company for property or services in the current or any of the past three fiscal years that exceed the greater of $1 million or 2% of such other entity’s consolidated gross revenues for that year.

The Board of Directors has determined that the Company is a “controlled company,” as defined by the NYSE listing standards, as more than 50% of the voting power of the Company’s Class A Common Stock is held by members of the Schawk family and in trusts for the benefit of Schawk family members. As a result, the Company is exempt from certain requirements of the listing standards, including the requirement to maintain a majority of independent directors on the Company’s Board of Directors and the requirements regarding the determination of compensation of executive officers and the nomination of directors by independent directors.

Committees

The Board of Directors currently has an Executive Committee, an Audit Committee, and an Option/Compensation Committee, whose members are directors appointed by the Board of Directors. The Board of Directors has determined that because it is a controlled company, it is not necessary to have a standing Nominating Committee and the entire Board of Directors acts in this capacity.

Executive Committee.  The present members of the Executive Committee are: Clarence W. Schawk, David A. Schawk, A. Alex Sarkisian, John T. McEnroe and Hollis W. Rademacher. The Executive Committee is authorized to act on behalf of the Board of Directors in the management of the business and the affairs of the Company.

Audit Committee.  Hollis W. Rademacher, Stanley N. Logan, Judith W. McCue and Michael G. O’Rourke currently serve as members of the Audit Committee. The Audit Committee, which operates under a written charter, recommends the selection of the Company’s independent public accountants, reviews and approves their fee arrangements, examines their detailed findings and reviews areas of possible conflicts of interest and sensitive payments. The

Board of Directors has adopted a written charter for the Audit Committee that outlines the responsibilities and processes of the Audit Committee, a copy of which is available on the Company’s website. The Board of Directors has determined that the members of the Audit Committee are “independent” directors as such term is defined in the NYSE’s listing standards, as currently in effect, and each member meets the SEC’s heightened independence requirements for audit committee members. The Board of Directors has determined that Mr. Rademacher and Mr. Logan each is an “audit committee financial expert” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K under the Securities Act. The designation of an “audit committee financial expert” does not impose on Mr. Rademacher or Mr. Logan any duties, obligations or liability greater than those that are generally imposed on them as members of the Audit Committee and of the Board of Directors. The Audit Committee met in person or telephonically 14 times in 2008.

Option/Compensation Committee.  The Option/Compensation Committee members are Judith W. McCue, Hollis W. Rademacher, John T. McEnroe and Leonard S. Caronia. The Compensation Committee is responsible for reviewing and recommending the compensation of the Company’s officers, including the Chief Executive Officer, and reviewing and recommending director compensation. The Option/Compensation Committee evaluates the performance of key personnel and makes incentive awards in the form of stock options and other equity and cash-based long-term incentive awards under the Company’s incentive plan. The Compensation Committee also advises and assists management in formulating policies regarding compensation and submits its Compensation Discussion and Analysis included elsewhere in this document and in the Company’s proxy statement for its annual meeting of stockholders. The Compensation Committee currently does not operate under a written charter. The Option/Compensation Committee met twice in 2008.

Director Compensation

Each non-executive member of the Board (except for Mr. McEnroe) is entitled to receive an annual retainer of $20,000, a fee of $1,150 for attendance at each board meeting and a fee of $600 for attendance at each meeting of a committee of the Board on which such director serves. All directors are also reimbursed for ordinary and necessary expenses incurred in attending Board or committee meetings.

The Company’s Outside Directors’ Plan, as amended, provides that each “outside director” (defined in the Outside Directors’ Plan as any director who is not a compensated employee of the Company) receive a nonqualified stock option to purchase shares of Company common stock upon his or her election, and any subsequent reelection, to the Board of Directors at an exercise price equal to the fair value of such shares on the date of election or reelection as a director. Beginning with the annual grant for 2008, the number of shares subject to options granted to each director upon reelection (or to any non-director nominee upon election) was reduced from 5,000 shares to 2,500 shares. Only the number of shares specified by the formula under the Outside Directors’ Plan is eligible for grant under the Outside Directors’ Plan. The options granted to the outside directors are exercisable for a term of 10 years from the date of grant and vest in one-third increments on the date of grant and on the first and second anniversaries of the date of grant.

The following table sets forth information regarding the fees paid to the Company’s directors in 2008 (other than directors who are also named executive officers) and option expense incurred by the Company in connection with their service as directors during 2008.

	Fees Earned or Paid		Option
	in Cash		Awards(1)		Total
Name	($)		($)		($)
Clarence W. Schawk		—		—		—
Judith W. McCue		27,000		23,034		50,034
John T. McEnroe		—		23,034		23,034
Hollis W. Rademacher		27,000		23,034		50,034
Leonard S. Caronia		24,600		23,034		47,634
Michael G. O’Rourke		27,000		29,635		56,635
Stanley N. Logan		27,000		19,578		46,578

(1) Represents the dollar amount of expense recognized for financial statement reporting purposes with respect to 2008 attributable to stock options in accordance with SFAS 123R but with no discount for estimated forfeitures.

The grant date fair value of option awards granted in 2008 was $89,892. The following table shows the aggregate number of option awards outstanding to the directors shown above as of December 31, 2008:

Name	Outstanding Option Awards
Clarence W. Schawk		100,000
Judith W. McCue		47,500
John T. McEnroe		42,500
Hollis W. Rademacher		47,500
Leonard S. Caronia		42,500
Michael G. O’Rourke		12,500
Stanley N. Logan		7,500

COMPENSATION DISCUSSION AND ANALYSIS

Objectives of Schawk’s Compensation Program

Schawk’s compensation program seeks to enhance the profitability of the Company, and thus stockholder value, by aligning the financial interests of the Company’s senior executive officers with those of its stockholders. It is designed to reward superior performance by linking a significant portion of each senior executive officer’s compensation to the achievement of the Company’s financial and performance goals. In addition to these goals, the Company’s compensation program seeks to attract and retain highly qualified senior officers and other key employees.

Overview of the Compensation Program

The Option/Compensation Committee (referred to in this discussion as the “Committee”) of the Board of Directors of the Company has the responsibility for establishing and monitoring the compensation and benefit programs of the Company and ensuring adherence with the Company’s compensation objectives. The Committee has the authority to review, determine and, at its discretion, adjust the annual compensation, including base salary and bonuses, for the senior executive officers of the Company, including the named executive officers for 2008: David A. Schawk, President and Chief Executive Officer; A. Alex Sarkisian, Executive Vice President and Chief Operating Officer; Timothy J. Cunningham, who commenced service with the Company as its Executive Vice President and Chief Financial Officer in September 18, 2008; and James J. Patterson, the Company’s former Senior Vice President and Chief Financial Officer who resigned from this position as of May 31, 2008. The Committee also has the authority to make grants of long-term incentive awards to senior executive officers under the Company’s incentive plan. In performing its duties and determining compensation for the senior officers, including the named executive officers, the Committee considers the recommendations and input of the Company’s Chief Executive Officer, Chief Operating Officer, and Vice President, Global Human Resources, with respect to the Company’s executive compensation program and arrangements.

As part of a three-year plan that began in 2005 to bring the total compensation of its senior executives to more market-competitive levels, the Committee has sought to establish compensation levels of its senior officers, in the aggregate and for each principal component of compensation, at or slightly below the median compensation of senior executives of comparable companies comprising a peer group. The Committee believes that these target levels allow the Company to remain competitive in recruiting and retaining talent while still providing an effective link between compensation and achievement of the Company’s financial and performance goals.

In 2008, to update its comparable executive compensation data and information, the Company retained Towers Perrin, a third-party compensation consultant, to provide an update on the analysis of the competitiveness of the Company’s compensation arrangements. In preparing its analysis, Towers Perrin compared the principal components of compensation of each of the Company’s named executive officers — base salary, target bonus, target total cash compensation (base salary plus target annual incentives), long-term incentives, and total compensation — against these elements of compensation paid to similarly positioned officers of companies of a general industry reference group. This reference group is comprised of approximately 200 private and public companies among various industries with 2007 revenues under $1 billion (the “Reference Group”). Companies classified as media, information or entertainment companies comprised the largest industry component at 40% of the Reference Group.

Companies classified as financial services and banking firms comprised the second largest industry component at 11.5% of the Reference Group, and companies classified as energy and energy services firms comprised the third largest industry component at 11% of the Reference Group. In evaluating compensation levels for the named executive officers, Towers Perrin also provided the Committee with summarized compensation data from a general professional services/advertising industry reference group comprised of the approximately 270 companies and divisions of the Watson Wyatt Services Companies survey and approximately 150 companies and firms (and in some cases multiple divisions of the same company or firm) of the William M. Mercer Professional Services Companies survey. In performing its analysis, Towers Perrin used compensation data from its own proprietary databases and surveys as well as published compensation surveys prepared by other firms.

For 2008, consistent with prior years’ practice of targeting total compensation and each material element of compensation near the median compensation of the Reference Group, the base salary, target annual cash bonus and long-term incentive compensation (“LTI”) for each of the named executive officers (other than Mr. Cunningham) placed them at or slightly below the median of the base salary, target cash bonus and LTI, respectively, paid by the Reference Group companies. Mr. Cunningham’s annualized 2008 compensation placed him slightly above the median for each principal component of compensation of the Reference Group, other than for target annual cash bonus. In determining compensation, the Committee also takes into account other factors, such as individual performance, the weighting of each component of compensation and the compensation history of the individual and the Company, as well as management’s recommendations and internal data, when setting compensation levels. Accordingly, the Committee may deviate from its general practice of seeking to target compensation at or near the median compensation of the Reference Group in light of other factors; however, for 2008, no such adjustments were made except with respect to Mr. Cunningham as described more fully in this discussion.

In determining 2009 compensation, no adjustments were made to the companies that make up the Reference Group. The Committee in prior years has factored in an approximately 3% upwards adjustment per year from the date of the peer or reference group data to account for annual increases in compensation expected to occur among the companies comprising Reference Group. In setting 2009 compensation, however, in light of the probable effects of the deterioration in economic and business conditions that have occurred across a number of industries in which the Reference Group companies operate, no upward adjustments were made.

Overview of the Principal Elements of the Company’s Senior Executive Compensation

To meet its objectives, Schawk has designed a total compensation package for senior executive officers that includes:

•  base salary

•  annual cash bonus

•  long-term incentives, comprised of three components:

stock options

restricted stock

performance awards

The Committee also considers income deferral, life insurance, and retirement and post-employment benefits as important facets of its compensation package.

The Committee believes that each of these principal elements of total compensation contributes to one or more of the goals the Committee seeks to achieve through its compensation program:

•  Base salaries.  The Company provides the opportunity for the senior executive officers to earn a market competitive annual base salary in order to attract and retain highly qualified individuals and to provide a base wage that is not subject to Company-performance risk.

•  Annual and long-term incentive awards.  The Company relies to a large degree on an annual bonus, if any, and long-term equity and cash incentives to attract and retain its senior executive officers and key employees. The Committee also uses these awards to motivate its senior officers, on an individual basis and collectively as a team, to achieve annual financial goals and longer term Company performance goals.

Both annual and long-term incentive compensation is closely tied to the performance of the Company and the individual in a manner that the Committee believes encourages a sharp and continuing focus on building profitability and improving the opportunities for greater stockholder value.

•  Other benefits.  Providing retirement benefits, income deferral and other benefits is consistent with Schawk’s desire and ability to attract and retain skilled executives and recognizes that similar benefits are commonly provided at other companies that it competes with for talent.

Principal Elements of Compensation

Base Salary

In setting annual base salaries and in determining the basis for any base salary increases, the Committee reviews benchmark data and considers individual and Company performance and the recommendations submitted by the Chief Executive Officer and other members of management. For the named executive officers, base salaries reflect the Committee’s desire to establish salaries at or near the median of the base salary range for the Reference Group companies.

The table below reflects base salaries and percentage increases in base salary for the Company’s named executive officers in 2008.

	Base Salary
Name	2007		2008		Percentage Increase
David A. Schawk	$	575,000	$	595,000		3.5	%
A. Alex Sarkisian		415,000		440,000		6.0
James J. Patterson		295,000		295,000		0.0
Timothy J. Cunningham		—		375,000		N/A

The 2008 base salaries were at or slightly below the median base salaries of similar executives in the comparable companies comprising the Reference Group with the exception of Mr. Cunningham, who was appointed Executive Vice President and Chief Financial Officer in September 2008. In determining Mr. Cunningham’s base salary, the Committee took into consideration his experience with public companies and accounting background, his several months of prior service with the Company as interim Chief Financial Officer, the need to quickly retain a permanent chief financial officer in light of Mr. Patterson’s resignation as well as the special circumstances under which he would be serving as chief financial officer. In particular, the Company’s then-recent financial restatements and ongoing remediation of internal control material weaknesses would require Mr. Cunningham to devote additional efforts and time to his duties as Chief Financial Officer. In light of these factors, Mr. Cunningham’s 2008 salary on an annualized basis was set slightly above the median base salary of similarly situated executives at companies comprising the Reference Group.

Effective February 4, 2009, new base salaries were approved for Messrs. Schawk, Sarkisian and Cunningham of $535,500 and $418,000, and $356,250 respectively. The 2009 base salaries represent a 10% decrease for Mr. Schawk and a 5% decrease each for Messrs. Sarkisian and Cunningham, from each officer’s 2008 base salary on an annualized basis. The Committee made these reductions as part of the Company’s overall commitment to reduce costs in light of the current and foreseeable adverse economic conditions affecting the Company.

Annual Bonus

As part each named executive officer’s compensation package, the Company provides them with an incentive to maintain high performance and to achieve certain Company financial goals through opportunities to earn annual cash bonuses. For the 2008 annual award opportunities, the committee chose achievement of targeted levels of consolidated operating income (“COI”) as the performance measure by which awards may be earned. The Committee determined that COI is a good indicator of enhanced shareholder value. Each named executive officer’s bonus opportunity amount is based on a percentage of his annual base salary (other than, with respect to 2008, Mr. Cunningham, who was not eligible to participate in the 2008 annual bonus opportunity as described below). Depending on the level of achievement of the established COI target, each named executive officer is eligible to earn a threshold, target or maximum level of bonus award. Upon achievement of a threshold level of COI of approximately $51.0 million, Mr. Schawk was eligible to receive a payout equal to 45% of his base salary, and upon

achievement of the target or maximum level of COI of approximately $53.8 million and $76.6 million, respectively, Mr. Schawk was eligible to receive 75% and 100%, respectively, of his base salary. For Messrs. Sarkisian and Patterson, the amount payable upon achieving the threshold, target or maximum COI level was 40%, 60% and 90%, respectively, of base salary. The higher level of bonus opportunity as a percentage of base salary for Mr. Schawk in comparison to Messrs. Sarkisian and Patterson reflects consistency with the allocations among the Reference Group companies and the Committee’s determination that a higher percentage of performance-based compensation relative to base salary should be attributed to Mr. Schawk.

The committee has the discretion to adjust annual incentive amounts and targets though no such adjustments were made with respect to 2008 bonus opportunity. In 2008, because the Company did not achieve the threshold COI, no annual bonuses were earned or paid to the named executive officers in 2008.

Because Mr. Cunningham joined the Company as chief financial officer in September 2008, he was not eligible to participate in the 2008 annual award opportunity. However, pursuant to the terms of his employment agreement, he was eligible to receive a cash bonus of $125,000 for 2008 performance based on the achievement of certain performance goals and objectives mutually agreed to by Mr. Cunningham and Mr. Schawk. As established, these goals and objectives related to Mr. Cunningham achieving progress toward restructuring and strengthening the Company’s internal audit function, facilitating the Company’s response to SEC inquiries concerning prior restatements, and remediating weaknesses in the Company’s internal controls, all of which the Committee believes are critical to the success of the Company. In January 2009, Mr. Cunningham received 100% of his bonus upon a determination that the established goals and objectives had been achieved.

For 2009, the Committee approved the annual performance targets to be used for the 2009 annual bonus opportunity. As in 2008, the key performance measurement will be COI. The percentage of base salary of comprising the threshold, target and maximum award levels remained the same as for 2008.

Long-Term Incentives

The following discussion contains statements regarding future individual and Company performance targets and goals. These targets and goals are disclosed in the limited context of the Company’s compensation programs and should not be viewed as statements of management’s expectations concerning the Company’s future results, or as earnings or other financial guidance. We specifically caution investors not to apply these statements to other contexts.

General.  Each fiscal year, the committee considers the desirability of granting senior executive officers and other key employees of the Company equity-based and other long-term awards. The Committee considers the overall performance of the Company and individual performance in determining the amounts to be granted. In addition, the Committee typically receives and considers compensation recommendations from the Chief Executive Officer, who evaluates market data and reviews performance for all senior executive officers. The Committee believes its pattern of awards focuses the Company’s senior executive officers and other key employees on building profitability and stockholder value. The purpose of these awards is to reward such officers for their performance toward meeting the Company’s financial and business goals, to give officers a stake in the Company’s future, which is directly aligned with the creation of stockholder value, and to provide incentives for continued service with the Company.

The Company’s long-term compensation goals for each named executive officer are fulfilled through awards, under the Company’s incentive plan, of stock options and restricted stock as well as cash-based performance awards that represent opportunities to earn cash payments. These components of the long-term incentive awards were selected as the most appropriate incentive mix to link compensation to increased profitability and increased stockholder value. The mix of these components can vary for each executive based on factors such as alignment with stockholders’ interests, retention objectives, internal performance measures and tax, accounting and dilution considerations. The mix of 2008 long-term incentives for Messrs. Schawk, Sarkisian, and Cunningham, based on the economic value of each component, were as set forth below. For 2008, Mr. Patterson did not receive a grant of long-term incentive awards

Name	Award Type	2008 Proportion
David A. Schawk	Cash Performance Awards		50.0	%
	Stock Options		12.5
	Restricted Stock		37.5
A. Alex Sarkisian	Cash Performance Awards		25.0
	Stock Options		50.0
	Restricted Stock		25.0
Timothy J. Cunningham	Cash Performance Awards		0.0
	Stock Options		50.0
	Restricted Stock		50.0

Beginning with LTI awards made in 2008, in an effort to improve the competitiveness of the Company’s executive compensation, the Committee determined to adjust upwards the aggregate value of the LTI awards as the Committee believed that the LTI component of senior officers’ compensation was below market, particularly when viewed against the LTI median value of the Reference Group. For Mr. Schawk, in light of his significant equity ownership in the Company, the allocation of long-term incentives was more heavily weighted towards cash-based performance awards than the other named executive officers. Mr. Sarkisian’s long-term mix was weighted more toward equity to encourage company ownership and retention objectives. Mr. Cunningham’s 2008 LTI award mix is comprised entirely of equity in an effort to rapidly promote company ownership and retention objectives given his recent hiring. He did not receive any cash performance awards, on a pro rata basis or otherwise, in 2008. For 2009, these allocations were adjusted as more fully described below.

For 2009, the Compensation Committee determined to decrease the aggregate target value of the LTI awards for each officer by 15%, from approximately $800,000 to $680,000 for Mr. Schawk, and from approximately $350,000 to $297,500 for Mr Sarkisian and Mr. Cunningham, which placed the LTI component of each named executive officer below the LTI median of the Reference Group. The Committee believed that the target goals for the performance award component provided more opportunity for achievement than the goals previously established for the performance cycles that were then in-process. That consideration, in addition to the Committee’s belief that the market value of the Company’s stock reflected a depressed value, drove the decision to reduce the aggregate value of the LTI component. In addition, the Committee changed the LTI allocation among stock options, restricted stock and performance awards. For Messrs. Sarkisian and Cunningham, the allocation was modified to reduce the value of the stock option component from 50% of the total award to 30% of the total award, which increased each of the restricted stock and performance award components to 35% of the total award. For Mr. Schawk the allocation did not change since his allocation is already more heavily weighted towards cash-based performance awards. The Committee made this change to limit possible excess benefits in the future that could be derived considering, in the Committee’s view, the Company’s low stock price prior to and at the time of the awards, which the Committee believed did not reflect the true value and prospects of the Company.

Stock Options.  Awards of stock options, when granted, will generally vest in three equal annual installments beginning on the first anniversary of the grant date. The exercise price for each stock option grant is determined by the committee in its sole discretion and is specified in the applicable award agreement; provided, however, the exercise price on the date of grant shall be at least equal to 100% of the fair market value of the shares on the date of grant, which in past practice has been the closing price of the Company’s common stock on the date of grant as reported by the New York Stock Exchange.

Detail concerning awards granted in 2008 can be found under “Executive Compensation — Plan-Based Award Grants in Last Fiscal Year.” In connection with Mr. Cunningham’s hiring, he received options to purchase 12,500 shares of common stock at an exercise price of $16.14 per share. The higher number of options in comparison to Mr. Sarkisian’s 2008 grant reflects the greater weighting of options in the case of Mr. Cunningham, coupled with increased value attributable to the option award component due to the Committee’s desire to enhance retention and stock ownership goals for Mr. Cunningham.

For 2009 Mr. Schawk received options to purchase 28,220 shares of common stock at an exercise price of $6.94 per share. Messrs. Sarkisian and Cunningham received options to purchase 29,631 and 29,630 shares of common stock, respectively, at an exercise price of $6.94 per share. The value of these awards on the grant date reflects the change in LTI mix described above and the overall reduction in the aggregate value of LTI awards.

Restricted Stock.  Restricted stock that may be awarded generally will cliff vest on the third anniversary of the grant date. Each award represents a grant of a fixed number of shares of common stock of the Company that are subject to forfeiture (i.e., vesting) restrictions. Upon vesting, the shares become unrestricted and nonforfeitable.

Detail concerning awards of restricted stock granted in 2008 can be found under “Executive Compensation — Plan-Based Award Grants in Last Fiscal Year.” In connection with Mr. Cunningham’s hiring, he received an award of 31,250 shares of restricted stock. The greater number of shares of restricted stock granted to Mr. Cunningham in comparison to Mr. Sarkisian’s 2008 grant reflects the greater weighting of restricted stock in the case of Mr. Cunningham, coupled with increased value attributable to the restricted award component due to the Committee’s desire to enhance retention and stock ownership goals for Mr. Cunningham.

For 2009, Mr. Schawk received an award of 42,477 shares of restricted stock and Mr. Sarkisian and Mr. Cunningham received an award of 17,345 and 17,344 shares of restricted stock, respectively. The grant date value of these awards reflect the change in LTI mix as described above and the overall reduction in the aggregate value of LTI awards.

Performance Awards.  The long-term cash performance awards granted to senior executives represent an opportunity to receive cash at the end of a specified performance period that is contingent on the achievement of specified performance or other objectives during the performance period. Currently under the Company’s incentive plan, four performance periods, or cycles, are active or were completed in 2008: fiscal years 2006-2008, 2007-2009, 2008-2010 and 2009-2011. The value of the performance awards for all cycles are measured by the Company’s cumulative earnings per share (“EPS”) and consolidated operating income (“COI”). Goals based on the Company’s EPS and COI were chosen as the best indicators of long-term performance that effectively enhance shareholder value. These award parameters were set as part of a 2005 compensation study performed by the Company’s prior compensation consultant and, for more recent awards, using the updated executive compensation data from the Towers Perrin. For each cycle, other than 2009-2011, the value of the awards was set as part of the Committee’s overall desire to target the median compensation of the Reference Group. A discussion of the currently ongoing performance periods and performance periods with respect to which action was taken in 2008 and 2009 follows below.

For the 2006 to 2008 performance period, which began January 1, 2006 and ended December 31, 2008, Mr. Schawk received an award that provided him with an opportunity to receive $625,000 at target level of achievement, and Messrs. Sarkisian and Patterson received an award providing an opportunity to receive $86,800 at target level of achievement. Because the Company’s actual performance was less than the threshold level to be attained for COI (70% of the target cumulative COI of $246.6 million over the performance period) and for cumulative EPS (70% of the target cumulative EPS of $5.19 per share over the performance period), no awards were earned by the named executive officers at the end of the performance period.

In March 2007, the Committee approved the 2007 to 2009 three-year performance period, which began on January 1, 2007 and ends December 31, 2009. In order to receive 100% of the payout opportunity under the award, the Company must meet previously approved target levels for cumulative EPS of $4.48 per share and COI of approximately $221.69 million over the three-year performance period. Under this performance period, Mr. Schawk is entitled to receive $625,000 if the target level of performance is achieved. Mr. Sarkisian is entitled to receive $86,800 if the target level of performance is achieved.

In March 2008, the Committee approved a new three-year performance period, which will run from January 1, 2008 through December 31, 2010. In order to receive 100% of the payout opportunity under the award, the Company must meet target levels for cumulative EPS over the three-year period of $4.17 per share and COI over the three-year period of approximately $211 million. Mr. Schawk is entitled to receive $588,000 if the target level of performance is achieved. Mr. Sarkisian is entitled to receive $128,000 if the target level of performance is achieved.

In March 2009, the Committee approved a new three-year performance period, which will run from January 1, 2009 through December 31, 2011. In order to receive 100% of the payout opportunity under the award, the Company must meet target levels for cumulative EPS over the three-year period of $2.17 per share and COI over the three-year period of approximately $115 million. Mr. Schawk is entitled to receive $496,000 if the target level of performance is achieved. Messrs. Sarkisian and Cunningham are entitled to receive $152,000 if the target level of performance is achieved. The reduction of target levels for cumulative EPS and COI for the performance period ending in 2011 as compared to prior periods reflect the Committee’s consideration of the effect of recent economic

market conditions on the ability to meet the historically higher-targeted EPS and COI. The increase in the amount of the target payouts for Mr. Sarkisian and Mr. Cunningham in comparison to the target payout for the prior year’s cycle for their positions reflect the adjustment of the LTI mix to increase the performance award component weighting, partially offset by the overall reduction in value of the LTI component.

Other Compensation and Benefit Arrangements

Retirement Plans

The Company offers a tax qualified 401(k) retirement savings plan to which all U.S. based employees are eligible to participate, including senior executive officers, but excluding members of a collective bargaining unit. Employees may contribute up to 100% of annual salary subject to the limits prescribed by the Internal Revenue Service (IRS). The Company match for 2008 was 100% of the first 5% contributed by the employee. The match is discretionary and subject to change in subsequent years. There is a six-year graduated vesting schedule whereby the matching contributions are fully vested following six years of service. As members of the highly compensated group, to satisfy applicable tax-qualified nondiscrimination tests, the senior executives are generally limited to a 7% deferral and a maximum match of $11,500.

Effective January 1, 2009 the discretionary match was reduced from 100% of the first 5% contributed by the employee to 100% of the first 2% contributed by the employee. On March 23, 2009 the discretionary match was suspended as part of the Company’s efforts to reduce costs in light of the Company’s difficult operating environment.

Income Deferral Plan

To provide a comprehensive and competitive total rewards package, Schawk also offers a non-qualified retirement plan to highly compensated employees (as defined by the IRS). Because of certain 401(k) limits imposed by the Internal Revenue Code, the plan allows eligible participants to defer up to $25,000 annually on a tax-deferred basis irrespective of the 401(k) limitations. The plan was administered to meet the provisions of the American Jobs Creation Act of 2004 including Section 409A compliance. None of the currently serving named executive officers presently participate in this plan.

Life Insurance

The Company maintains life insurance policies for Messrs. Schawk and Sarkisian. These policies are designed to encourage these executives to remain in the service of the Company. The policies provide each executive’s beneficiary with a cash payment in the event the executive terminates service as a result of his death. For each policy, the portion of the annual premium due under the policy that can be attributed to benefits payable to a beneficiary designated by the executive is treated as taxable compensation by the executive. As of December 31, 2008, under the policies, Mr. Schawk’s beneficiary would be entitled to an estimated death benefit of $2,443,525 and Mr. Sarkisian’s beneficiary would be entitled to receive an estimated death benefit of $618,446.

Arrangements upon Termination of Service

The Company provides a severance pay plan for all U.S. based full time employees, including senior executive officers, but excluding members of a collective bargaining unit. Under the terms of the Company’s incentive plan, the terms of the agreements underlying awards made to named executive officers and, with respect to Mr. Cunningham, his employment agreement, outstanding stock options, restricted stock and performance awards may become exercisable, vested or payable in the event of death, disability, retirement and certain other terminations of service, as well as in the event of a change in control. In addition, Mr. Schawk and Mr. Cunningham (and/or each officer’s respective beneficiaries) are entitled to certain payments upon death, disability or in an event of a change in control under each officer’s employment agreement. Please refer to “Executive Compensation — Potential Payments Upon Termination or Change in Control” and the related tables and footnotes for additional information concerning severance arrangements.

The Company provides severance and retirement benefits to facilitate the Company’s ability to attract and retain executives as the Company competes for talent in a marketplace where such protections are commonly offered. The Committee believes that the provision of severance arrangements under its incentive plan with

change-in-control compensation protection provisions encourages employees to remain focused on the Company’s business in the event of rumored or actual fundamental corporate changes.

As of May 31, 2008, the Company and Mr. Patterson entered into a separation agreement in connection with Mr. Patterson’s resignation as Chief Financial Officer. The material terms of the separation agreement are provided under “Executive Compensation — Employment Agreements.” In light of prior service to the Company, Mr. Patterson received a cash severance amount in excess of what he would have been entitled to under the Company’s severance pay plan. The terms of Mr. Patterson’s severance agreement governing the treatment of his unvested, outstanding LTI awards were consistent with terms of those awards, which by their terms were forfeited upon separation from the Company, and no discretion was exercised by the Committee with respect to Mr. Patterson’s outstanding awards except with respect to 4,100 shares of restricted stock, which were permitted to continue to remain outstanding and will vest on August 8, 2009.

Accounting and Tax Considerations

The Company believes it has structured its compensation program to comply with Internal Revenue Code Sections 162(m) and 409A as currently in effect.

Compensation Committee Report

The Option/Compensation Committee of the Board of Directors of the Company oversees the Company’s compensation program on behalf of the Board. In fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with management the Compensation Discussion and Analysis set forth in this document and to be included in the Company’s proxy statement for its annual meeting of stockholders.

In reliance on the review and discussions referred to above, the Option/Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s proxy statement in connection with the Company’s 2009 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission.

This report is submitted by the members of the Company’s Option/Compensation Committee.

Judith W. McCue
John T. McEnroe
Hollis W. Rademacher
Leonard S. Caronia

The Compensation Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this document into any filing under the Securities Act of 1933, as amended (the “Securities Act”) or under the Exchange Act except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

EXECUTIVE COMPENSATION

Summary Compensation Table

The table below sets forth certain information for fiscal years 2006, 2007 and 2008 with respect to the annual cash and non-cash compensation earned by: (i) the President and Chief Executive Officer (the principal executive officer); (ii) individuals who served as the Company’s Chief Financial Officer during 2008 (each a principal financial officer); and (iii) other executive officers of the Company who were the most highly compensated executive officers of the Company as of the end of 2008 (collectively, the “named executive officers”) for services rendered in all capacities to the Company.

Summary Compensation Table

															Change in
															Pension Value
															&
															Nonqualified
													Non-Equity		Deferred		All Other
							Stock			Option			Incentive Plan		Compensation		Compen-
Name and					Bonus(1)		Awards(2)			Awards(3)			Compensation(4)		Earnings		sation(5)			Total
Principal Position	Year		Salary ($)		($)		($)			($)			($)		($)		($)			($)
David A. Schawk		2008		595,000		—		204,352			76,800			—		—		28,477			904,629
President and CEO		2007		575,000		258,750		94,404			96,929			343,800		—		27,576			1,396,459
		2006		575,000		258,750		11,369			167,452			434,760		—		26,709			1,474,040
A. Alex Sarkisian		2008		440,000		—		73,748			130,342			—		—		24,871			668,961
Executive Vice President		2007		415,000		166,000		41,948			108,791			47,750		—		24,318			803,807
and Chief Operating Officer		2006		390,000		156,000		9,507			121,537			60,383		—		23,705			761,132
James J. Patterson		2008		173,354		—		5,672	(7)		(5,233	)(8)		—		—		97,088	(9)		270,881
Former Senior Vice		2007		295,000		118,000		41,948			108,791			47,750		—		21,450			632,939
President and Chief		2006		286,384		114,554		9,507			121,537			60,383				21,200			613,565
Financial Officer(6)
Timothy J. Cunningham		2008		281,935		156,170		19,328			19,766			—		—		—			477,199
Executive Vice President and Chief Financial Officer (10)

(1)	See “Compensation Discussion and Analysis — Principal Elements of the Company’s Senior Executive Compensation — Annual Bonus” for a description of the Company’s annual bonus award opportunity. For Mr. Cunningham, bonus includes a $125,000 cash award earned in 2008 pursuant to the terms of his employment agreement that was paid in January 2009. See “Compensation Discussion and Analysis — Annual Bonus” for a discussion of this award. The remaining amount for Mr. Cunningham consists of bonus amounts earned prior to his appointment as Executive Vice President and Chief Financial Officer.
(2)	Represents the dollar amount of expense recognized for financial statement reporting purposes in each year, as applicable, attributable to restricted stock grants in accordance with SFAS 123R but with no discount for estimated forfeitures. Stock awards are valued using the closing market price of our common stock on the grant date. Assumptions used in the calculation of these amounts are included in Note 17 to the Company’s audited financial statements in its Form 10-K for each of the fiscal years ended December 31, 2008, 2007 and 2006.
(3)	Represents the dollar amount of expense recognized for financial statement reporting purposes in each year, as applicable, attributable to stock options in accordance with SFAS 123R but with no discount for estimated forfeitures. Assumptions used in the calculation of these amounts are included in Note 17 to the Company’s audited financial statements in its Form 10-K for each of the fiscal years ended December 31, 2008, 2007 and 2006.
(4)	Represents cash settlement of long-term performance awards following the completion of the applicable performance period. For the 2006 award amounts shown, the performance period commenced on July 1, 2005 and ended on December 31, 2006. For the 2007 award amounts shown, the performance period commenced on July 1, 2005 and ended on December 31, 2007. For the 2008 award amounts shown, the performance period commenced on January 1, 2006 and ended on December 31, 2008. See “Compensation Discussion and

	Analysis — Principal Elements of Compensation — Long-Term Incentives — Performance Awards” for a description of the terms and calculation methodology for these awards.
(5)	For 2008 for Messrs. Schawk and Sarkisian, these amounts represent the actual costs paid for the following: auto allowance ($10,200), matching contributions to the Company’s 401(k) plan ($11,500) and life insurance premiums ($6,777 for Mr. Schawk and $3,171 for Mr. Sarkisian). No amounts have been included for personal use of corporate aircraft during 2008 for which the Company received full reimbursement. The Company has a fractional interest in a corporate aircraft for business purposes. The Company allows limited personal use of the aircraft by certain named executive officers and directors so long as such use does not interfere with the availability and use of the aircraft for business purposes, and in each case so long as all incremental costs of such personal use are borne by the executive.
(6)	Mr. Patterson resigned as Senior Vice President and Chief Financial Officer effective May 31, 2008. A portion of the salary earned in 2008 represents payments to Mr. Patterson under a consulting arrangement following his resignation. See “Employment Agreements — Separation Agreement with James Patterson” below.
(7)	In accordance with Mr. Patterson’s separation agreement, unvested options to purchase an aggregate 28,667 shares of common stock were forfeited as of May 31, 2008.
(8)	In accordance with Mr. Patterson’s separation agreement, 3,800 shares of restricted stock were forfeited as of May 31, 2008.
(9)	Amount shown for Mr. Patterson under “All Other Compensation” includes severance of $73,750, 401(k) matching contributions of $11,500, amounts paid in respect of an auto allowance, and outplacement services and certain medical benefits pursuant to Mr. Patterson’s severance agreement.
(10)	Mr. Cunningham commenced service with the Company on March 28, 2008 and was appointed Executive Vice President and Chief Financial Officer on September 18, 2008. The compensation disclosed for Mr. Cunningham includes amounts earned since March 28, 2008.

Plan-Based Award Grants in Last Fiscal Year

The following table provides information regarding stock, option and cash-based awards made to each named executive officer in 2008.

									All Other		All Other
									Stock		Option						Grant
									Awards:		Awards:		Exercise		Closing		Date Fair
			Estimated Future Payouts Under						Number of		Number of		or Base		Market		Value of
			Non-Equity Incentive Plan						Shares of		Securities		Price of		Price on		Stock and
			Awards(1)						Stock or		Underlying		Option		Grant		Option
	Grant		Threshold		Target		Maximum		Units(2)		Options		Awards		Date		Awards
Name	Date		($)		($)		($)		(#)		(#)		($/Sh)		($/Sh)		($)
David A. Schawk		3/20/2008		147,000		588,000		882,000		21,895		16,499		15.84		15.84		438,667
A. Alex Sarkisian		3/20/2008		32,000		128,000		192,000		6,386		28,874		15.84		15.84		261,895
Timothy J. Cunningham		9/18/2008		—		—		—		12,500		31,250		16.14		16.14		408,065
James J. Patterson		—		—		—		—		—		—		—		—		—

(1)

These values represent estimated possible payouts under cash-based performance awards for the 2008-2010 performance period. See “Compensation Discussion and Analysis — Principal Elements of Compensation — Long-Term Incentives” and “Compensation Discussion and Analysis — Other Compensation and Benefit Arrangements — Arrangements upon Termination of Service” for a discussion of the terms of these awards.

(2)

Shares under this column represent shares of restricted stock that cliff-vest three years from the date of grant. See “Compensation Discussion and Analysis — Principal Elements of Compensation — Long-Term Incentives” and “Compensation Discussion and Analysis — Other Compensation and Benefit Arrangements — Arrangements upon Termination of Service” for a discussion of the terms of the restricted stock.

Outstanding Equity Awards at Fiscal Year End

The following table summarizes for each named executive officer the number of shares of common stock subject to outstanding equity awards and the value of such awards that were unexercised or that have not vested at December 31, 2008.

Outstanding Equity Awards as of December 31, 2008

Option Awards									Stock Awards
											Market
	Number of		Number of						Number of		Value of
	Securities		Securities						Shares or		Shares or
	Underlying		Underlying						Units of		Units of
	Unexercised		Unexercised		Option				Stock that		Stock that
	Options		Options		Exercise		Option		Have Not		Have Not
	(#)		(#)		Price		Expiration		Vested		Vested
Name	Exercisable		Unexercisable(1)(2)		($)		Date		(#)(1)(3)(4)		($)
David A. Schawk		14,477		—		9.4375		02/23/2009
		30,719		—		7.6250		02/22/2010
		100,000		—		8.9000		02/27/2011
		120,000		—		9.6100		03/05/2012
		160,000		—		9.2200		02/27/2013
		170,000		—		14.2500		03/02/2014
		100,000		—		18.7250		04/07/2015
		8,133		4,067		17.4300		08/08/2016		4,900		56,154
		4,500		9,000		18.4700		03/23/2017		13,800		158,148
		—		16,499		15.8400		03/20/2018		21,895		250,917
A. Alex Sarkisian		27,176		—		9.4375		02/23/2009
		13,072		—		7.6250		02/22/2010
		45,000		—		8.9000		02/27/2011
		60,000		—		9.6100		03/05/2012
		60,000		—		9.2200		02/27/2013
		70,000		—		14.2500		03/02/2014
		70,000		—		18.7250		04/07/2015
		13,600		6,800		17.4300		08/08/2016		4,100		46,986
		7,533		15,067		18.4700		03/23/2017		3,800		43,548
		—		28,874		15.8400		03/20/2018		6,386		73,184
James J. Patterson		23,700				9.4375		02/23/2009
		19,200				7.6250		02/22/2010
		35,000				8.9000		02/27/2011
		50,000				9.6100		03/05/2012
		50,000				9.2200		02/27/2013
		70,000				14.2500		03/02/2014
		70,000				18.7250		04/07/2015
		6,800				17.4300		08/08/2016		4,100		46,986
		7,533				18.4700		03/23/2017
Timothy J. Cunningham		—		31,250		16.1400		09/18/2018		12,500		143,250

(1)	See “Compensation Discussion and Analysis — Principal Elements of Compensation — Long-Term Incentives” for a discussion of vesting schedules and other terms of restricted stock awards and stock options.
(2)	The vesting dates of the respective stock options held at December 31, 2008 that were unexercisable are summarized as follows: (i) for the remaining unvested options from the grant that expires on August 8, 2016, all

	will vest on August 8, 2009, (ii) for the remaining unvested options from the grant that expires on March 23, 2017, approximately 50% vest on March 23, 2009 and 50% vest on March 23, 2010, (iii) for the options that expire on March 20, 2018, 33% vest on March 20, 2009, 33% vest on March 20, 2010 and 34% vest on March 20, 2011 and (iv) for the options that expire on September 18, 2018, 33% vest on September 18, 2009, 33% vest on September 18, 2010 and 34% vest on September 18, 2011.
(3)	The vesting dates of the respective unvested stock awards held at December 31, 2007 are summarized as follows: For Mr. Schawk, 4,900 shares cliff-vest on August 8, 2009, 13,800 shares cliff-vest March 23, 2010 and 21,895 shares cliff-vest on March 20, 2011; for Mr. Sarkisian, 4,100 shares cliff-vest on August 8, 2009, 3,800 shares cliff-vest on March 23, 2010 and 6,386 shares cliff-vest on March 20, 2011; for Mr. Patterson, 4,100 shares cliff-vest on August 8, 2009; and for Mr. Cunningham, 12,500 shares cliff-vest on September 18, 2011.
(4)	Holders of unvested restricted stock awards accrue dividends and may exercise voting rights as if the underlying shares were beneficially owned by the named executive officer.

2008 Option Exercises and Stock Vested

The following table shows the number of stock option awards exercised by each named executive officer in 2008 and the value realized on exercise.

	Option Awards				Stock Awards
	Number of				Number of Shares
	Shares Acquired		Value Realized on		Acquired on		Value Realized on
	on Exercise		Exercise(1)		Vesting		Vesting
Name	(#)		($)		(#)		($)
David A. Schawk		19,690		63,040		—		—
A. Alex Sarkisian		5,824		18,826		—		—
Timothy J. Cunningham		—		—		—		—
James J. Patterson		7,100		40,275		—		—

(1) Represents the aggregate dollar amount realized by the named executive officer upon exercise of one or more stock options during 2008. The dollar amount reported represents the number of shares acquired on exercise multiplied by the difference between the market closing price of our common stock on the exercise date and the exercise price of the option.

2008 Non-Qualified Deferred Compensation

The following table summarizes information about non-qualified deferred compensation contributions and distributions made during 2008 with respect to the Company’s named executive officers:

	Executive				Aggregate
	Contributions in		Registrant		Earnings			Aggregate		Aggregate Balance
	Last Fiscal		Contributions in		in Last			Withdrawals /		at Last Fiscal
	Year(1)		Last Fiscal Year		Fiscal Year			Distributions		Year-End
Name	($)		($)		($)			($)		($)
James J. Patterson		21,654	$	0		(46,357	)	$	0		75,253

(1) See “Compensation Discussion and Analysis — Other Compensation and Benefit Arrangements — Income Deferral Plan” for a description of the terms of Company’s income deferral plan for executive officers. Mr. Patterson is entitled to distribution of the aggregate balance under the plan as of June 30, 2009 on July 31, 2009.

Employment Agreements

None of the Company’s named executive officer’s employment is subject to a written employment agreement, except David A. Schawk and Timothy J. Cunningham.

Agreements with David Schawk and Clarence Schawk.  The Company is party to amended and restated employment agreement, effective as of October 1, 1994, with David A. Schawk, which provides for an initial employment term of 10 years (through December 31, 2004), with one-year extensions thereafter unless terminated

by either the Company or the executive. The employment agreement provides for an annual salary, cash bonus and an annual grant of stock options. The terms governing the annual salary, bonus and equity compensation amounts in the employment agreement for Mr. Schawk have been superseded by the new compensation parameters adopted in 2005 as further described under “Compensation Discussion and Analysis.”

Clarence W. Schawk and the Company also are party to an employment agreement with terms similar to the agreement with David A. Schawk. Clarence W. Schawk elected to receive a base salary of $50,000 for the calendar year 2008 although his employment agreement permits a higher annual base salary amount. Additionally, for 2008, Clarence Schawk waived receipt of the cash and stock option bonus amounts to which he was entitled under the terms of his agreement. The Company has a deferred compensation agreement with Clarence Schawk dated June 1, 1983, which was ratified in his restated employment agreement. No amounts currently are being deferred. The Company had deferred compensation liability equal to $815,000 at December 31, 2008 and December 31, 2007.

The agreements permit termination by the Company “for cause,” as defined in the agreements, at any time prior to a change in control. Under the terms of the employment agreements, if the Company chooses to terminate either executive without cause (as defined in the agreements) prior to a change in control (as defined in the agreements), he will be entitled to receive severance in the amount of his base salary provided for in the agreement for four years following termination. Following a change in control, each agreement provides that the Company shall have no further right to terminate either executive’s employment without cause.

Each agreement also contains certain noncompetition and nonsolicitation provisions that prohibit the executive from soliciting or rendering services to clients of the Company or rendering services to certain competitors of the Company for a two-year period after termination without the consent of the Company.

Employment Agreement with Timothy Cunningham.  In connection with Mr. Cunningham’s appointment, the Company entered into an employment agreement with Mr. Cunningham, effective as of September 18, 2008. The terms of the agreement provide for an annual base salary of $375,000, which may be increased from time to time; an award of 12,500 shares of restricted common stock and options to purchase 31,250 shares of common stock, each of which cliff-vest three years from the effective date of the agreement; and the opportunity to earn a cash bonus of $125,000, payable in January 2009, upon the achievement of certain performance goals and objectives mutually agreed to by Mr. Cunningham and the Company. In addition, effective January 1, 2009, Mr. Cunningham was eligible to participate in the Company’s existing annual and long-term incentive programs, including awards of cash and equity that may be granted from time-to-time under the Company’s long-term incentive plan.

Under the agreement, Mr. Cunningham’s employment may be terminated by the Company at any time with or without “cause,” as defined in the agreement, upon his death or upon his “disability,” as defined in the agreement, and may be terminated by Mr. Cunningham upon his resignation with or without “good reason,” as defined in the agreement. In the event the Company terminates Mr. Cunningham for cause, or if he resigns without good reason, he would be entitled to earned but unpaid salary and certain benefits accrued during the term of his employment. If Mr. Cunningham chooses to resign with good reason, or if the Company terminates his employment without cause, he also will be entitled to receive an amount equal to one times his then-current base annual salary; a pro rata bonus based on the target bonus amount for the year in which the termination occurs; immediate accelerated vesting of unvested equity and other awards issued under the Company’s long-term incentive plan; and continuation of certain health benefits for up to one year. In the event of Mr. Cunningham’s death or disability, he or his estate will be entitled to earned but unpaid salary and certain benefits accrued during the term of his employment; a pro rata bonus based on the target bonus amount for the year in which the termination occurs; immediate accelerated vesting of unvested equity and other awards issued under the Company’s long-term incentive plan; and continuation of certain health benefits for up to one year.

The agreement contains certain non-competition and nonsolicitation provisions that, subject to certain exceptions, prohibit Mr. Cunningham from becoming involved in any business that competes with the Company or provides similar products and services, and from soliciting any clients or employees of the Company. These non-competition and nonsolicitation provisions remain in effect during the term of the agreement and for a period of one year after the termination of his employment.

Separation Agreement with James Patterson.  Pursuant to the terms of a Separation Agreement and General Release entered into between Mr. Patterson and the Company on May 31, 2008, Mr. Patterson agreed to continue to serve the Company in a consulting capacity to assist with the transition of his responsibilities following his

resignation through December 31, 2008. During this transition period, Mr. Patterson was paid a weekly salary of $1,200 and was eligible to participate in the Company’s medical, dental and vision plans. Mr. Patterson also received a severance payment equal to 13 weeks of base salary totaling $73,750 that was payable weekly in equal installments during the transition period. All equity awards that were unvested as of the separation date were forfeited by Mr. Patterson other than 4,100 shares of restricted stock, which will vest on August 8, 2009 as if Mr. Patterson were employed by the Company at that time. The agreement also provides for the reimbursement or payment by the Company for certain outplacement services and medical benefits. As a condition to receipt of the payments under the agreement, Mr. Patterson agreed to certain covenants in connection with the termination of his employment, including non-solicitation provisions for a period of one-year from his termination date.

Compensation Committee Interlocks and Insider Participation

Decisions regarding the cash compensation paid to the Company’s named executive officers, David A. Schawk, Mr. Sarkisian, Mr. Cunningham and Mr. Patterson, were made by the Option/Compensation Committee of the Board of Directors for fiscal year 2008. Awards under the stock incentive plan are administered by the Option/Compensation Committee, which is comprised of Judith W. McCue, John T. McEnroe, Hollis W. Rademacher and Leonard S. Caronia. Mr. McEnroe does not receive cash compensation for services provided as a director of the Company. Messrs. David A. Schawk and Sarkisian participated in the deliberations of the Option/Compensation Committee with regard to the compensation of executive officers other than themselves.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires Directors, certain officers and certain other owners to periodically file notices of changes in beneficial ownership of the Company’s Class A Common Stock with the Securities and Exchange Commission. To the best of the Company’s knowledge, during 2008 all required reports of beneficial ownership were timely submitted, except for a Form 4 filed on May 16, 2008 on behalf of Hollis Rademacher to report an exercise of options on May 13, 2000, as well as beneficial ownership reports required to report certain gifts made by Clarence Schawk and David Schawk to trusts and charitable foundations.

Deductibility of Executive Compensation

The Internal Revenue Code limits the allowable tax deduction that may be taken by the Company for compensation paid to the Chief Executive Officer and the other highest paid executive officers required to be named in the “Summary Compensation Table.” The limit is $1 million per executive per year, although compensation payable solely based on attaining performance goals is excluded from the limitation. The Company believes that all 2008 compensation of executive officers is fully tax deductible by the Company.

Potential Payments upon Termination or Change in Control

The Company has employment agreements with Mr. David A. Schawk and Mr. Cunningham and maintains a severance plan and an incentive plan covering named executive officers that will require the Company to provide incremental compensation in the event of involuntary termination of employment, retirement or a change in control of the Company.

Overview

Employment Agreements.  The Company is party to an amended and restated employment agreement with David A. Schawk and an employment agreement with Mr. Cunningham. See “Executive Compensation — Employment Agreements” for a description of the material terms of the employment agreements. Under each employment agreement, these executives and/or their beneficiaries are entitled to certain payments upon death, disability, termination without cause or in an event of a change in control as further described below. No other named executive officer has a written employment contract with the Company that contains provisions regarding potential payments upon termination or a change in control of the Company.

Severance Pay Plan.  The Company provides a Severance Pay Plan for all U.S.-based full-time employees, including the named executive officers, but excluding members of a collective bargaining unit. The plan allows for

three days of severance per year of service up to a maximum of eight weeks severance. Under one year of service equates to five days of severance.

Equity and Cash-based Awards.  Under the terms of the Company’s incentive plan and the terms of the agreements underlying awards made to named executive officers, outstanding stock options, restricted stock and cash-based performance awards (collectively referred to as “LTI awards”) may become exercisable, vested or payable in the event of death, disability, retirement and other terminations of service, as well as in the event of a change in control. These provisions apply to all outstanding LTI awards of the named executive officers except, with respect to Mr. Cunningham, to the extent the employment agreement with Mr. Cunningham provides for different terms. The provisions of the Company’s incentive plan and award agreements with respect to LTI awards are summarized below.

Stock Options.  If a named executive officer terminates employment with the Company for any reason other than “for cause” (as defined in the incentive plan), he forfeits any options that are not yet vested. If employment is terminated for cause, he forfeits all outstanding options. In the event of death during employment, a named executive’s estate can exercise outstanding options to the extent exercisable within three months after his death. In the event of a change in control of the Company, all outstanding options become immediately fully vested and exercisable.

Restricted Stock.  If a named executive’s employment with the Company terminates for any reason, other than for death, disability, or retirement, or in connection with a change in control of the Company, before the third anniversary of the date of grant, shares of restricted stock granted will be forfeited and transferred to the Company. If a named executive’s employment with the Company terminates because of death, disability or retirement, shares of restricted stock will become 100% vested and unrestricted, provided that the executive has continued in the employment of the Company through the occurrence of such event. In the event of a change in control, shares of restricted stock immediately vest and become payable in a prorated amount equal to the portion of the vesting period elapsed through the date of the change in control.

Cash-based Performance Awards.  The treatment of outstanding cash-based performance awards in the event of death, disability, retirement or upon a change in control is described under each such termination scenario below. Termination of employment for any reason other than death, disability, retirement, or upon a change in control of the Company during the performance period or prior to payout of an incentive award will result in forfeiture of the award with no payment to the executive, subject to the discretion of the Option/Compensation Committee.

The following discussion takes each termination of employment scenario — voluntary resignation or retirement, death or disability, termination for cause, termination without cause and a change in control of the Company — and describes the additional amounts, if any, that the Company would pay or provide to each named executive officer or his beneficiaries as a result. Because Mr. Patterson resigned from the Company as a named executive officer in May 2008, no amounts are shown for Mr. Patterson other than under “Voluntary Resignation and Retirement.” The discussion below and the amounts shown reflect certain assumptions made in accordance with SEC rules. These assumptions are that the termination of employment or change in control occurred on December 31, 2008 and that the value of a share of the Company’s common stock on that day was $11.46, the closing price on the New York Stock Exchange on December 31, 2008, the last trading day of 2008.

In addition, in keeping with SEC rules, the following discussion and amounts do not include payments and benefits that are not enhanced by the termination of employment or change in control. These payments and benefits include:

•  benefits accrued under the Company’s tax-qualified 401(k) Plan in which all employees participate;

•  accrued vacation pay, health plan continuation and other similar amounts payable when employment terminates under programs applicable to the Company’s salaried employees generally;

•  account balances held under the Income Deferral Plan described under “Compensation Discussion and Analysis”; and

•  stock options, restricted stock and performance awards that have vested and become exercisable or non-forfeitable, as applicable, prior to the employment termination or change in control.

The payments and benefits described above are referred to in the following discussion as the executive officer’s “vested benefits.”

Voluntary Resignation and Retirement

Resignation.  The Company is not obligated to pay amounts over and above vested benefits in the event of employment termination due to voluntary resignation, unless the executive’s age and years of service qualify for special provisions applicable for retirement. In connection with Mr. Patterson’s resignation as Chief Financial Officer as of May 31, 2008, the Company entered into a severance agreement that provided Mr. Patterson with benefits and payments in excess of what he would have been entitled to under the Company’s severance plan. These amounts are included as part of the compensation disclosed in the Summary Compensation Table for Mr. Patterson. See also “Executive Compensation — Employment Agreements” for a description of the severance agreement.

Retirement.  The Company is not obligated to pay amounts over and above vested benefits in the event of retirement other than with respect to outstanding LTI awards. The treatment of options and restricted stock upon retirement is discussed above under “Overview — Treatment of Equity and Cash-based Awards.” With respect to outstanding cash-based performance awards, if a named executive officer retires during a performance period after turning 55 and completing ten complete years of service, he will receive the amount he would have been eligible to receive had he remained employed through the end of the applicable performance period based on the actual performance results of the Company during the performance period but as prorated through the date employment terminated. If a named executive retires after turning 65 and completing twenty-five complete years of service, he will receive the entire amount of the award he would have been eligible to receive had he remained employed through the end of the performance period based on the actual performance results of the Company during the performance period.

None of the Company’s named executive officers qualified under any special retirement provisions of any outstanding long-term incentive awards as of December 31, 2008 except Mr. Sarkisian. If Mr. Sarkisian had retired as of December 31, 2008, under the terms of his performance award and restricted stock award agreements, he would be entitled to the following amounts:

	Performance Award Periods						Restricted Stock
	2006-				2008-		Number of				Total
Name	2008(1)		2007-2009(2)		2010(2)		Shares(3)		Value		Value
A. Alex Sarkisian		—	$	57,867	$	42,667		14,286	$	163,718	$	264,252

(1)	Amount represents the value that would be payable based on the Company’s actual performance results at the end of this performance period. No award was payable for the 2006-2008 performance period due to performance below the minimum threshold level of achievement. See “Compensation Discussion and Analysis — Long-Term Incentives — Performance Awards” for further detail of these amounts.
(2)	Amounts represent the potential value that would be payable based on the Company meeting the target level of achievement at the end of each applicable performance period, as prorated from the beginning of the performance period through December 31, 2008, the assumed date of retirement. In the event of retirement, the terms of the award require payout based on the actual performance results of the Company at the end of the performance period. For purposes of this calculation, Company performance at target level of achievement is assumed.
(3)	Upon retirement, all outstanding shares of restricted stock become 100% vested and unrestricted.

Death or Disability

David Schawk.  Under the terms of Mr. Schawk’s employment agreement, in the event of Mr. Schawk’s death, the Company is obligated to pay to his beneficiaries an amount equal to his annual salary each year for a period of ten years measured from the date of death. As of December 31, 2008, based on Mr. Schawk’s 2008 base salary, this amount would be $595,000 per year. Mr. Schawk or his beneficiaries also would be entitled to amounts under “Life Insurance” and “Treatment of LTI Awards” below.

In the event Mr. Schawk becomes totally and permanently disabled, the Company may determine the amount of disability income to pay Mr. Schawk and the duration of the payments, provided that the amount and duration of the disability payments is not less than 50% of his monthly base salary prior to becoming disabled per month for the

remainder of his life. Based on Mr. Schawk’s 2008 base salary, this amount would be a minimum of approximately $24,792 per month. Mr. Schawk or his beneficiaries also would be entitled to certain amounts under “Treatment of LTI Awards” below.

In the event Mr. Schawk is unable to perform his duties under the employment agreement due to an extended illness or disability (other than a total and permanent disability) that continues uninterrupted for more than 24 months, the Company may terminate Mr. Schawk. In such an event, the Company has agreed to pay Mr. Schawk an amount not less than his last monthly base salary prior to termination for a period of 24 months. Based on Mr. Schawk’s 2008 base salary, this amount would be approximately $49,583 per month.

Timothy Cunningham.  Under the terms of the Mr. Cunningham’s employment agreement, in the event Mr. Cunningham dies or his employment terminates due to a disability, Mr. Cunningham would be entitled to receive (i) a pro-rata portion of his target annual bonus, if any, for the year in which his termination occurs and (ii) immediate vesting of unvested equity and other awards as described under “Treatment of LTI Awards” below. In addition, if COBRA continuation coverage is elected, the Company would be obligated to pay the full cost of his and his dependents’ health insurance premiums for one year following the termination date. Mr. Cunningham did not participate in the Company’s annual bonus program for 2008. The approximate value of the COBRA benefit for 2009 would be $15,523.

Life Insurance.  The Company provides its employees, including its named executive officers, with group life, accidental death and dismemberment, and disability insurance coverage. In addition, the Company maintains life insurance policies for Messrs. Schawk and Sarkisian. The policies provide each executive’s beneficiary with a cash payment in the event the executive terminates service as a result of his death. As of December 31, 2008, under the policies, Mr. Schawk’s beneficiary would be entitled to an estimated death benefit of $2,443,525 and Mr. Sarkisian’s beneficiary would be entitled to receive an estimated death benefit of $618,446.

Treatment of LTI Awards.

Options.  Under the award agreements underlying long-term incentive awards made under the Company’s incentive plan, in the event a named executive officer dies, his vested stock options would remain exercisable for three months following his death but not beyond the original term of the option, except that under the terms of Mr. Cunningham’s employment agreement, vested stock options would remain exercisable for 120 days following his death but not beyond the original term of the option. Additionally, pursuant to the terms of Mr. Cunningham’s employment agreement, any unvested stock option awards would become fully vested and immediately exercisable in the event of his death or disability. At December 31, 2008, Mr. Cunningham had unvested options to purchase 31,250 shares of common stock at an exercise price in excess of the closing price of the Company’s common stock on December 31, 2008.

Restricted stock.  In the event of death or disability of a named executive officer, his unvested restricted stock awards will vest at that time provided that he has continued in the employment of the Company through the date of death or disability. The following table reflects the value of those awards for each of the named executive officers assuming death or disability as of December 31, 2008.

	Unvested Restricted Stock Awards
	Total
	Number		Value
Name	of Shares		($)
David A. Schawk		40,595		465,219
A. Alex Sarkisian		14,286		163,718
Timothy J. Cunningham		12,500		143,250

Performance awards.  In the event of the death of a named executive officer during a performance period (other than Mr. Cunningham), his estate will be entitled to a pro rata portion of each outstanding performance award assuming target level of achievement. In the event of disability of an named executive officer (other than Mr. Cunningham), he will receive the amount, if any, based on the actual performance results of the Company for each applicable performance period but as prorated through the date employment terminated. In the event of Mr. Cunningham’s death or disability during a performance period, the terms of his employment agreement provide

that he would be entitled to 100% of the award assuming target level of achievement. The following tables reflect the value of those awards for each named executive officer assuming death or disability as of December 31, 2008.

	Performance Award Periods(1)
	(Death)
Name	2006-2008		2007-2009		2008-2010		Total Value
David A. Schawk	$	625,000	$	416,666	$	196,000	$	1,237,666
A. Alex Sarkisian		86,800		57,866		42,666		187,332
Timothy J. Cunningham(2)				—		—		—

(1)

The amounts in this table represent the potential amounts payable under each outstanding cash-based performance award based on the Company meeting the target level of achievement at the end of each applicable performance period, as prorated from the beginning of the performance period through December 31, 2008, the assumed date of death. Payment upon death requires a prorated payout based on the assumption that target level of achievement has been achieved.

(2)

No cash-based performance awards were outstanding for Mr. Cunningham at December 31, 2008.

	Performance Award Periods(1)
	(Disability)
Name	2006-2008(2)		2007-2009		2008-2010		Total Value
David A. Schawk		—	$	416,666	$	196,000	$	612,666
A. Alex Sarkisian		—		57,866		42,666		100,532
Timothy J. Cunningham(3)		—		—		—		—

(1)	Except as disclosed in footnote (2) with respect to the 2006-2008 performance period, amounts in this table represent the potential amounts payable under each outstanding cash-based performance award based on the Company meeting the target level of achievement at the end of each applicable performance period, as prorated from the beginning of the performance period through December 31, 2008, the assumed date of disability. In the event of disability, the terms of the awards require payout based on the actual performance results of the Company at the end of the performance period. For purposes of disability, this table assumes Company performance at target level of achievement.
(2)	Amounts in this column represent potential amounts payable based on the Company’s actual performance results at the end of this performance period, which were below the threshold level of achievement and resulted in no payments to the named executive officers. See “Compensation Discussion and Analysis — Long-Term Incentives — Performance Awards” for further detail of these amounts.
(3)	No cash-based performance awards were outstanding for Mr. Cunningham at December 31, 2008.

Termination for Cause

The Company is not obligated to pay amounts over and above vested benefits if a named executive officer’s employment terminates because of a termination for cause. A named executive officer’s right to exercise vested options expires upon termination for cause. Generally, under the terms of award agreements underlying currently outstanding options, “cause” means, as determined by the Option/Compensation Committee, commission of a felony; dishonesty, misrepresentation or serious misconduct in the performance of the executive’s responsibilities to the Company; unauthorized use of Company trade secrets or confidential information; or aiding a competitor of the Company.

Termination Without Cause

The Company provides a severance plan for all U.S.-based full time employees, including named executive officers, but excluding members of a collective bargaining unit. The plan allows for severance equal to three days pay per year of service to a maximum of eight weeks severance, unless further extended at the Company’s discretion. If Mr. Sarkisian was terminated without cause as of December 31, 2008, the amount payable by the Company would be $40,615. Messrs. Schawk and Cunningham would not receive any amounts under the severance plan upon termination without cause because, in the case of Mr. Schawk, the amount he would be eligible to receive under his employment agreement exceeds his potential severance plan payment amount and, in the case of

Mr. Cunningham, the payments and benefits he would be entitled to pursuant to the terms of his employment agreement supercede the amounts payable under the severance plan.

The employment agreement with Mr. Schawk obligates the Company to pay severance benefits if his employment is terminated by the Company without cause at any time prior to a change in control, as defined in Mr. Schawk’s employment agreement. The Company’s primary obligation under these circumstances would be to provide compensation for a 48-month continuation period based on Mr. Schawk’s base salary. Using Mr. Schawk’s 2008 base salary, Mr. Schawk would be entitled to 48 monthly payments of approximately $49,583 each.

The employment agreement with Mr. Cunningham obligates the Company to pay severance benefits if his employment is terminated by the Company without cause or if Mr. Cunningham resigns with “good reason.” If Mr. Cunningham’s employment terminated as of December 31, 2008 under either event, he would have been entitled to receive (i) severance pay equal to one year of his base salary ($375,000 as of December 31, 2008), (ii) a pro-rata bonus (based on the number of days elapsed in the current bonus measurement period) based on his target bonus for the year in which his termination occurs ($125,000 as of December 31, 2008), (iii) immediate vesting of any then unvested equity and other awards, as described below, and (iv) if COBRA continuation coverage is elected, the Company would be obligated to pay the full cost of his and his dependents’ health insurance premiums for one year following the termination date ($15,523 at 2009 rates). Mr. Cunningham did not participate in the Company’s annual bonus program for 2008.

Other than with respect to Mr. Cunningham, no additional or accelerated vesting of outstanding stock options or restricted stock awards would occur in the event of a termination without cause for any of the named executive officers, nor would any payouts occur under performance awards for which the applicable performance period had not yet completed. The following table reflects the value of Mr. Cunningham’s unvested awards outstanding as of December 31, 2008 that would immediately vest under the terms of his employment agreement if he had been terminated without cause as of December 31, 2008:

	Equity Awards
	Options				Restricted Stock
Name	Number		Value		Number		Value		Total Value
Timothy J. Cunningham		31,250	$	0		12,500	$	143,250	$	143,250

Change in Control

Following a change in control, Mr. Schawk’s agreement provides that the Company shall have no further right to terminate his employment without cause. For purposes of Mr. Schawk’s employment agreement, a change in control generally would occur if any person or group (other than a Schawk family member) directly or indirectly acquired ownership of a majority of the voting power of Company’s common stock, or if a majority of the Company’s board of directors ceases to consist of members recommended or approved by the board of directors.

With respect to all named executive officers other than Mr. Cunningham, in the event of a change in control of the Company (as described below):

•  all outstanding options become immediately fully vested and exercisable;

•  all shares of restricted stock immediately vest and become payable in a prorated amount equal to the portion of the vesting period elapsed through the date of the change in control; and

•  the performance period for each performance award outstanding will lapse and the performance goals associated with a performance award will be deemed to have been met at the maximum level of achievement, and the award will be immediately vested and payable in a prorated amount equal to the portion of the performance period elapsed through the date of the change in control; provided, the committee may determine in connection with the grant of an award as reflected in the applicable award agreement that vesting more favorable to the executive should apply.

With respect to Mr. Cunningham, in the event of a change in control of the Company (as described below):

•  all outstanding options become immediately fully vested and exercisable;

•  all shares of restricted stock immediately vest and become payable; and

•  the performance period for each performance award outstanding will lapse and the performance goals associated with a performance award will be deemed to have been met at the target level of achievement, and 100% of the award will be immediately vested and payable.

The table below summarizes the additional payments the Company would be obligated to make pursuant to outstanding awards made under the Company’s incentive plan if a change in control occurred as of December 31, 2008.

	Performance Awards						Equity Awards
							Options				Restricted Stock
Name	2006-2008(1)		2007-2009		2008-2010		Number(2)		Value(3)		Number(4)		Value(5)		Total Value
David A. Schawk	$	0	$	625,000	$	294,000		29,566	$	0		17,787	$	203,839	$	1,122,839
A. Alex Sarkisian		0		86,800		64,000		50,741		0		7,190		82,392		233,192
Timothy J. Cunningham		—		—		—		31,250		0		12,500		143,250		143,250

(1)	Amounts in this column represent potential amounts payable based on the Company’s actual performance results at the end of this performance period, which were below the threshold level of achievement and resulted in no payments to the named executive officers. See “Compensation Discussion and Analysis — Long-Term Incentives — Performance Awards” for further detail of these amounts.
(2)	Total number of unvested options as of December 31, 2008.
(3)	Difference between $11.46, the closing stock price on December 31, 2008, and the exercise price of each unvested option.
(4)	Prorated number of unvested restricted shares as of December 31, 2008.
(5)	Value of shares based on $11.46, the closing stock price on December 31, 2008.

For purposes of outstanding awards made under the Company’s incentive plan, a change in control would occur upon any of the following events:

•  a person or group acquires 30% or more of the combined voting power of the Company’s common stock, subject to certain exceptions including acquisitions by persons or groups who were holders of 30% or more of the outstanding common stock of the Company as of May 17, 2006;

•  the board of directors ceases to be comprised of at least a majority of the members of the board of directors serving at May 17, 2006 and who joined the board subsequent to that date with the board’s approval or recommendation;

•  upon the consummation of a reorganization, merger or consolidation of the Company, or the sale of substantially all of the Company’s assets, other than transactions in which specified requirements of equity ownership in the successor corporation and in its board composition are met;

•  a transaction that results in the Company or its successor no longer being registered under the Securities Act of 1933; or

•  a complete liquidation or dissolution of the Company.

Unless the named executive officer is terminated without cause in connection with a change in control, no other amounts would have been payable upon a change of control as of December 31, 2008.

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the shares beneficially owned as of April 30, 2009 (i) by each person who is known by the Company to own beneficially more than 5% of the outstanding shares of the Company’s common stock; (ii) by each of the Company’s directors; (iii) by each of the Company’s named executive officers; and (iv) by all directors and executive officers as a group. All information with respect to beneficial ownership has been furnished or made available to us by the respective stockholders.

	Outstanding
	Shares			Currently					Percentage of
	Beneficially			Exercisable					Class
Name	Owned(1)***			Options(2)		Total			Outstanding
Directors and Named Executive Officers
Clarence W. Schawk		7,414,766	(4)		100,000		7,514,766			30.0	%
Marilyn G. Schawk(3)		7,414,766			—		7,514,766	(5)		30.0
A. Alex Sarkisian**		3,254,603	(6)		356,362		3,610,965			14.3
David A. Schawk(3)**		1,410,016	(7)		703,351		2,113,367			8.2
Timothy J. Cunningham		29,844			—		29,844			*
John T. McEnroe		52,237	(9)		41,650		93,887			*
Judith W. McCue		20,454	(10)		46,650		67,104			*
Hollis W. Rademacher		16,000			46,650		62,650			*
Leonard S. Caronia		4,000			41,650		45,650			*
Michael G. O’Rourke		1,000			11,650		12,650			*
Stanley N. Logan		—			6,650		6,650			*
Other 5% or Greater Stockholders
Rutabaga Capital Management		1,550,710	(11)		—		1,550,710			6.2	%
Cathy Ann Schawk(3)(8)		1,915,466			—		1,915,466			7.7
Executive officers and directors as a group (10 persons)		12,194,920			1,354,613		13,549,533			51.5	%

*	Less than 1%
**	Denotes a person who serves as a director and who is also a named executive officer.
***	Beneficial ownership is determined in accordance with SEC Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended. At April 30, 2009, the Company had 24,934,265 shares of common stock outstanding.
(1)	Unless otherwise indicated, beneficial ownership is direct and the person indicated has sole voting and investment power.
(2)	Represents options exercisable within 60 days of April 30, 2009.
(3)	The address for each of the Schawk family members is c/o Schawk, Inc., 1695 South River Road, Des Plaines, Illinois 60018.
(4)	Includes 1,536,348 shares held directly by Mr. Schawk’s wife, Marilyn Schawk; 367,253 shares held by The Clarence & Marilyn Schawk Family Foundation, with respect to which Mr. Schawk or his wife has voting and/or investment power; and 3,336,188 shares held in trusts for the benefit of children of Mr. Schawk with respect to which Mr. Schawk’s wife serves as trustee with voting and investment power. Does not include shares beneficially owned by Mr. Schawk’s children, David A. Schawk, Cathy Ann Schawk, Judith Lynn Gallo and Lisa Beth Stearns, or held in family trusts for the benefit of certain of his grandchildren for which neither Mr. Schawk or his spouse serve as trustee.
(5)	Includes 2,274,977 shares (including currently exercisable options to purchase 100,000 shares) held directly by Mrs. Schawk’s husband, Clarence Schawk, and through the Clarence W. Schawk 1998 Revocable Trust, with respect to which Mr. Schawk has sole voting power and investment power; 367,253 shares held by The Clarence & Marilyn Schawk Family Foundation, with respect to which Mrs. Schawk or her husband has voting and/or investment power; and 3,336,188 shares held in trusts for the benefit of children of Mrs. Schawk

	for which she serves as trustee. Does not include shares beneficially owned by Mrs. Schawk’s children, David A. Schawk, Cathy Ann Schawk, Judith Lynn Gallo and Lisa Beth Stearns, or held in family trusts for the benefit of certain of her grandchildren for which neither Mrs. Schawk nor her spouse serve as trustee.
(6)	Includes 3,184,990 shares held by various Schawk family trusts for the benefit of certain of Clarence W. Schawk’s grandchildren, for which Mr. Sarkisian serves as the trustee, or custodian, with voting and investment power over the shares.
(7)	Includes 58,800 shares held in the David and Teryl Schawk Family Foundation; 475 shares held as custodian; 198,000 shares held in the Teryl Alyson Schawk 1998 Trust; and 804,837 shares held in the David A. Schawk 1998 Trust for which David Schawk serves as trustee with voting and investment power over these shares.
(8)	Ms. Schawk is the daughter of Clarence W. Schawk and sister of David A. Schawk.
(9)	Includes 51,236 shares owned indirectly through his spouse and 1,001 shares held in a retirement trust account.
(10)	Includes indirect ownership of 10,000 shares held in retirement trust accounts.
(11)	Based on information disclosed in a Schedule 13G filed by Rutabaga Capital Management with the Securities and Exchange Commission on February 9, 2009. The mailing address of Rutabaga Capital Management is 64 Broad Street, 3rd floor, Boston, MA 02109.

TRANSACTIONS WITH RELATED PERSONS

Because of the heightened risk of conflicts of interest and the potential, whether real or perceived, for improper valuation, the Company has a policy that the Audit Committee of the Board of Directors approve or disapprove in advance material transactions between the Company and related persons or parties. Related persons or parties include senior officers, directors, director nominees, significant stockholders of the Company, immediate family members of these persons and entities in which one of these persons has a direct or indirect material interest. Material transactions requiring pre-approval by the Audit Committee are those transactions that would be required to be disclosed in the Company’s annual report or proxy statement for the Company’s annual stockholder meetings in accordance with Securities and Exchange Commission rules, though other transactions and conflicts of interest apart from those that require disclosure may, in the best interests of the Company, be determined to require review and approval by the Audit Committee.

The Company’s facility at 1600 East Sherwin Avenue, Des Plaines, Illinois is leased from Graphics IV, Ltd., an Illinois limited partnership, whose partners are the children of Clarence W. Schawk. The amount paid in 2008 under the current lease was approximately $725,000.

During 2008, the Company retained the law firm of Vedder Price P.C., to perform various legal services. John T. McEnroe, one of the Company’s Directors, is a shareholder of that firm. During 2008, McDermott Will & Emery LLP, a law firm in which Ms. McCue, one of the Company’s Directors, is a partner, provided estate planning legal services for certain members of the Schawk family.

The Company is party to an amended and restated registration rights agreement, dated January 31, 2005, with certain Schawk family members and related trusts (collectively, “Schawk Family Holders”). The agreement grants demand registration rights for the shares held by the Schawk Family Holders.

INDEPENDENT PUBLIC ACCOUNTANTS

The Company’s independent registered public accountant for the fiscal year ended December 31, 2008 was Ernst & Young, LLP. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will be available to respond to any appropriate questions raised at the meeting and to make a statement if such representatives so wish. The Audit Committee has not yet selected a firm to serve as the Company’s independent public accountant for the fiscal year ending December 31, 2009, but will do so later this year as the meeting at which such selection takes place has not yet occurred.

Fees for Services Provided by Independent Public Accountants

Fees for all services provided by Ernst & Young LLP for the fiscal years ended December 31, 2008 and 2007 are as follows:

Audit Fees.  Audit fees for 2008 and 2007 related to the audit of the financial statements contained in the Company’s Annual Report on Form 10-K and the Company’s internal controls over financial reporting, reviews of quarterly financial statements contained in the Company’s quarterly reports on Form 10-Q and statutory audits of various subsidiaries totaled approximately $4,009,000 and $3,295,000, respectively.

Audit-Related Fees.  There were no fees for audit-related services in 2008 or 2007.

Tax Fees.  There were no fees for tax services in 2008 or 2007.

All Other Fees.  Other fees for 2008 related to the Company’s ongoing investigation by the SEC and totaled approximately $49,000. There were no fees for other services for 2007.

The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. For each proposed service, the independent auditors must provide detailed back-up documentation at the time of approval. The Audit Committee may delegate pre-approval authority to one or more of its members. Such member must report any decisions to the Audit Committee at the next scheduled meeting. The Audit Committee may not delegate to management its responsibilities to pre-approve services performed by the independent auditors.

All of the services provided by the independent auditors described above were pre-approved by the Audit Committee.

* * * * *

The Company’s Form 10-K for the year ended December 31, 2008 (excluding exhibits unless specifically incorporated by reference therein) and the Company’s Audit Committee Charter, Code of Ethics and Corporate Governance Guidelines are available free of charge on the Company’s website at www.schawk.com or upon request to A. Alex Sarkisian, Esq., Corporate Secretary, at Schawk, Inc., 1695 South River Road, Des Plaines, Illinois 60018, (847) 827-9494.