Note 7 – Acquisitions

Lipson Associates, Inc. and Laga, Inc.

Effective October 19, 2011, the Company acquired substantially all of the domestic assets and assumed certain trade account and business related liabilities of Lipson Associates, Inc. and Laga, Inc., as well as the stock of their foreign operations. Lipson Associates, Inc. and Laga, Inc. does business as Brandimage – Desgrippes & Laga ("Brandimage").

Brandimage is a leading branding and design network specializing in providing services that seek to engage and enhance the brand experience, including brand positioning and strategy, product development and structural design, package design and environmental design. Brandimage has operations in Chicago, Cincinnati, Paris, Brussels, Shanghai, Seoul and Hong Kong. The Brandimage business was acquired to enhance the Company's service offerings related to branding and design and operates in conjunction with Schawk's legacy brand development capabilities, which are performed under its Anthem Worldwide brand.

The purchase price of $24,427 consisted of $27,011 paid in cash at closing, less $2,584 accrued as a receivable for a net working capital adjustment. The Company funded the purchase price through a draw from its existing credit facility. The Company recorded a preliminary purchase price allocation at September 30, 2012. A fair value appraisal is being performed by an independent consulting company and the Company expects to finalize the purchase price allocation in the fourth quarter of 2012 once the final valuations have been established. During the first nine months of 2012, the Company adjusted its preliminary purchase price allocation based on a preliminary fair value appraisal performed by an independent consulting company. The additional purchase accounting adjustments in the first nine months of 2012 principally reflect an increase in goodwill and a decrease in customer relationships as a result of the preliminary valuation, as well as reductions to the net working capital adjustment reflecting pre-acquisition liabilities to be retained by the sellers and other changes in the acquisition date net working capital. The goodwill ascribed to this acquisition consists largely of expected profitability from future services and is deductible for tax purposes.

A summary of the estimated preliminary fair values assigned to the acquired assets is as follows:

Accounts receivable	$	4,939
Inventory		4,117
Prepaid expenses and other current assets		3,949
Income tax receivable		8
Property and equipment		482
Goodwill		18,590
Customer relationships		5,894
Trade name		741
Other assets		241
Trade accounts payable		(3,247	)
Accrued expenses		(6,317	)
Notes payable		(23	)
Deferred income taxes		(385	)
Other long term liabilities		(3,939	)

Cash paid at closing, net of $1,961 cash acquired	$	25,050

The weighted average amortization periods of the customer relationships intangible asset and the trade name intangibles asset is 8.0 years and 5.0 years, respectively. The intangible asset amortization expense for the customer relationships intangible asset and the trade name intangible asset will be approximately $737 and $148, respectively, on an annual basis. The intangible asset amortization expense related to the customer relationships intangible asset and the trade name intangible asset was $217 and $582 for the three and nine-month periods ended September 30, 2012, respectively.

Real Branding LLC

Effective November 10, 2010, the Company acquired 100 percent of the equity of Real Branding LLC ("Real Branding"), a United States - based digital marketing agency. Real Branding provides digital marketing services to consumer product and entertainment clients through its locations in San Francisco and New York. This business was acquired to strengthen the Company's ability to offer integrated strategic, creative and executional services in the digital media marketplace in the Americas operating segment.

The purchase price of $9,590 consisted of $6,000 paid in cash at closing, $182 paid for a net working capital adjustment in the first quarter of 2011, and $3,408 recorded as an estimated liability to the sellers for contingent consideration based on future performance of the business. Under the acquisition agreement, the purchase price may be increased by up to $6,000 if a specified target of earnings before interest, taxes, depreciation and amortization is achieved for the years 2011 through 2014 and is payable periodically during 2012 through 2015, based on actual future performance. Based on performance projections available at the date of the acquisition, the Company originally recorded estimated contingent consideration of $3,958, less a present value discount of $550. During the fourth quarter of 2011, it became apparent that the original performance projections would not be achieved and the Company reevaluated the estimated contingent consideration payable based on current expectations of the performance of the Real Branding business during 2012 through 2014. As a result of the reevaluation, the Company reduced the estimated contingent consideration payable as of December 31, 2011 to $264, less a present value discount of $25, resulting in a net reduction in the estimated contingent consideration payable of $3,320.

During the third quarter of 2012, the Company initiated a restructuring program for the Real Branding locations and reevaluated its future performance projections for the business. As a result of the reevaluation, the Company now believes that the performance thresholds will not be met for any of the years 2012 through 2014 and no contingent consideration will be paid. Accordingly, the remaining contingent consideration liability of $264, less a present value discount of $19, was written off as a credit to Selling, general and administrative expenses in the Consolidated Statement of Operations during the third quarter of 2012.

In addition, as a result of the restructuring program initiated in the third quarter of 2012 and the reevaluation of the Real Branding business, the Company analyzed the recoverability of the remaining book value of the customer relationship intangible asset related to the Real Branding acquisition and determined that the projected cash flows did not support the carrying value of the asset. Accordingly, in the third quarter of 2012, the Company recorded an impairment charge of $2,350 to write-down the book value of the customer relationship intangible asset to its estimated fair value of $544. The impairment charge is included in Impairment of long-lived assets in the Consolidated Statement of Operations.

Exit Reserves from Prior Acquisitions

The Company recorded exit reserves related to its acquisitions of Weir Holdings Limited and Seven Worldwide Holdings, Inc., which occurred in 2004 and 2005, respectively. The major expenses included in the exit reserves were employee severance and lease termination expenses. The exit reserve balances related to employee severance were paid in prior years. The exit reserves related to the facility closures are being paid over the term of the leases, with the longest lease expiring in 2015. The remaining reserve balance of $489 is included on the Consolidated Balance Sheets as of September 30, 2012 as follows: $248 is included in Accrued expenses and $241 is included in Other long-term liabilities.

The following table summarizes the reserve activity from December 31, 2011 through September 30, 2012 for facility closure costs:

	Beginning of							End of
	Period		Adjustments		Payments			Period

First quarter	$	367	$	27	$	(38	)	$	356
Second quarter	$	356	$	71	$	(7	)	$	420
Third quarter	$	420	$	90	$	(21	)	$	489