<PAGE>   1
 
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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
 
                            ------------------------
 
                                   FORM 10-K
 
(MARK ONE)
      [X]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, OR
 
      [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
            OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
 
COMMISSION FILE NUMBER 1-9335
 
                                  SCHAWK, INC.
             (Exact name of Registrant as specified in its charter)
 
                                    DELAWARE
                        (State or other jurisdiction of
                         incorporation or organization)
                                   36-2545354
                                (I.R.S. Employer
                              Identification No.)
 
                     1695 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:
 
<TABLE>
<CAPTION>
                                                              NAME OF EXCHANGE
             TITLE OF EACH CLASS                            ON WHICH REGISTERED
             -------------------                            -------------------
<S>                                            <C>
    Class A Common Stock, $.008 par value                 New York Stock Exchange
</TABLE>
 
     Indicated 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 [X]  No [ ]
 
     Indicated 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.  [X]
 
     The aggregate market value on March 15, 1999, of the voting stock held by
non-affiliates of the Registrants was approximately $84,621,477.
     The number of shares outstanding of each of the issuer's classes of common
stock as of March 15, 1999, are: 21,763,024 shares, Class A Common Stock, $.008
par value
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
<TABLE>
<CAPTION>
                  DOCUMENT                       PART AND ITEM NUMBER OF FORM 10-K INTO WHICH INCORPORATED.
                  --------                       ----------------------------------------------------------
<S>                                              <C>
1. Proxy Statement for the 1998 Annual           Part III, Items 10, 11, 12 and 13.
   Meeting of Stockholders to be held May 26,
   1999 (the "Proxy Statement").
</TABLE>
 
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<PAGE>   2

                                  SCHAWK, INC.

                             FORM 10-K ANNUAL REPORT

                                TABLE OF CONTENTS

                                DECEMBER 31, 1998

<TABLE>
<CAPTION>
PART   I                                                                                         PAGE
<S>      <C>                                                                                     <C>
         Item  1. Business                                                                          2
         Item  2. Properties                                                                       12
         Item  3. Legal Proceedings                                                                13
         Item  4. Submission of Matters to a Vote of Security Holders                              13


PART  II

         Item  5. Market for the Registrants'                                                      14
                  Common Stock and Related Stockholder Matters
         Item  6. Selected Financial Data                                                          15
         Item  7. Management's Discussion and
                  Analysis of Financial Condition and Results of Operations                        16
         Item 7a. Quantitative and Qualitative Disclosures about market Risk                       22
         Item  8. Financial Statements and Supplementary Data                                      22
         Item  9. Changes in and Disagreements with Accountants on Accounting
                  and Financial Disclosures                                                        42

PART III

         Item 10. Directors and Executive Officers of the Registrant                               42
         Item 11. Executive Compensation                                                           42
         Item 12. Security Ownership of Certain Beneficial Owners and Management                   42
         Item 13. Certain Transactions                                                             42

PART  IV

         Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K                  43
</TABLE>








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                                     PART I

ITEM 1.  BUSINESS

 THE COMPANY

         Schawk, Inc. ("Schawk" or the "Company") has one current operating
business segment, Digital Imaging Graphics Arts for consumer products packaging
and advertising and promotional applications. Prior to February 7, 1997, the
Company also operated a second segment, the Plastics Business Segment (the
"Discontinued Operations").
The Company is incorporated under the laws of the State of Delaware.

                                    BUSINESS
GENERAL

         The Company is the largest independent provider of digital imaging
prepress services to the consumer products packaging market in North America.
The Company's facilities produce conventional, electronic and desktop color
separations, creative design, art production, electronic retouching, platemaking
and digital press proofs for the three main printing processes used in the
graphic arts industry: lithography, flexography and gravure. The Company's
services also include both digital and analog image database archival and
management as well as digital photography and various related outsourcing
services. These services require skilled, highly trained technicians applying
various computerized design, manipulation and assembly techniques. The
preparation of film, digital tape and press proofs for lithography, flexography
and other printing processes related to packaging accounted over 70% net sales
during 1998, 1997 and 1996. The balance of the Company's business consists of
the production of similar, advertising and promotional applications.

         The Company has particular expertise in preparing color images for high
volume print production runs of consumer products packaging. The Company
functions as a vital interface between its Fortune 1000 consumer products
clients, their creative designers and their converters or printers in assuring
the production of consistent, high quality packaging materials in increasingly
shorter turnaround and delivery times. The Company's ability to provide high
quality, customized prepress services quickly makes it a valued player in new
product introduction and promotional activity.

         The Company maintains both digital and analog data archives of product
package layouts and designs as a value-added service which improves the
Company's efficiency in accommodating clients' rapidly changing packaging design
modifications and product line extensions. By continuing to provide such
high-end, value-added services, the Company commands a significant share of the
market for prepress services for the food and beverage industry, which uniquely
positions it to benefit from positive industry trends.

         The Company believes that its clients have increasingly chosen to
outsource their imaging needs to the Company because of its: (i) high quality
customized imaging capabilities; (ii) rapid turnaround and delivery times; (iii)
up-to-date knowledge of the printing press specifications of converters and
printers located throughout the United States and Canada; (iv) digital imaging
asset management; (v) art production; and (vi) ability to service its clients'
global prepress requirements through the Company's North American facilities and
international alliance partners.

PREPRESS SERVICES INDUSTRY

         "Prepress services" are the tasks involved in preparing 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
materials. Packaging for consumer products encompasses folding cartons, boxes,
trays, cans, containers, packaging labels and wrap. While prepress work
represents 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 prepress work.




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         Prepress services do not entail the actual printing or production of
such packaging materials, but rather include the various preparatory steps such
as art production design, digital photography, retouching, color separation and
other platemaking services, for use in lithography, flexography and gravure.
"Color separation" refers to preparing color images, text and layout for the
printing process. Prepress services such as color separation work have
traditionally been performed by skilled craftspersons almost entirely by hand,
using what is known as the "conventional" method. With the development of
digital technology, prepress firms such as the Company have become almost
totally computerized, relying instead on digital imaging, in which digitized
images and text are manipulated according to client and converter
specifications. On an increasing basis, clients supply material to the Company
in a digitized format on a variety of media, including tape, floppy disk, CD-ROM
and via the Internet.

         The prepress industry in North America has over 1,300 market
participants, principally independent color separators, such as the Company,
converters, printers and consumer products companies that perform these services
in-house. The majority of prepress providers specialize in high volume,
commodity-oriented publication work that includes textbooks, advertising,
catalogs, newspapers and magazines. The Company's target market, however, is the
consumer products industry. The North American market for prepress services to
the consumer products industry is estimated by the Company to range from $1.1
billion to $1.4 billion, while the worldwide market is estimated by the Company
to be as high as $6.0 billion. The consumer products prepress industry is highly
fragmented with hundreds of market participants, only a small number of which
have annual revenues exceeding $30.0 million. The Company believes that the
number of participants in the North American prepress market for the consumer
products industry will diminish due to consolidation and attrition caused by
competitive forces such as accelerating technological requirements for advanced
systems, equipment and highly skilled personnel and the growing demands of
clients for full-service global capabilities.

         The rapid development of lower-cost, faster desktop publishing software
systems has increased the potential for competition in the prepress industry by
lowering barriers to entry relating to equipment costs. However, this
development has also resulted in the proliferation of software systems, many of
which have created training issues. Frequent changes in software necessitates
continuous training and education and investment in faster equipment. It has
also created the demand from clients for increasingly faster turnaround and
delivery times. As technology advances in the imaging industry, speed has become
and continues to be a significant differentiator between the Company and its
competition.

         The Company focuses on three primary markets: consumer product
packaging, advertising agencies, and promotion. The food and beverage segment of
the consumer products industry has packaging requirements that are complex and
demanding due to variations in packaging materials, shapes and sizes, custom
colors, varying storage conditions and marketing enhancements. Product
extensions and frequent packaging redesigns have resulted in an increasing
volume of color separation and related work in the consumer products industry
and in particular for the food and beverage segment. Additional industry trends
include: (i) the shorter turnaround and delivery time requirements from the
creative design phase to final distribution of the packaged product; (ii) an
increasing number of SKUs competing for shelf space and market share; (iii) the
increasing importance of package appearance and promotions due to demonstrated
point-of-sale consumer purchasing behavior; and (iv) the increasing requirements
for worldwide quality and consistency in packaging as companies attempt to build
global brand name recognition. Increasingly, the advertising and promotion
markets require coordination of these efforts, with the initiatives coming from
advertising agencies. The Company's expansion into these markets strengthens and
enhances the overall service offering to the unified marketing approach of our
clients.

         Meeting the requirements of the advertising and promotional business
demands production of work under extremely short timelines, usually in under 12
hours. Creative retouching, color correction and composition in multiple file
formats are produced to meet requirements of the printers. The Company is a
leader in conventional, computer to plate and digital ad delivery to
publications.



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<PAGE>   5



THE COMPANY'S GROWTH STRATEGY

         The Company's primary goal is to enhance its leadership positions in
the prepress imaging market serving the consumer products, advertising and
promotion markets. Key aspects of the Company's business strategy to achieve
this goal include the following:

         -        Growth Through Acquisitions and Start-up Operations. The
                  Company's profitability and ready access to capital have
                  enabled it to make strategic acquisitions of companies that
                  range in size from $2 million to $20 million. In its 45-year
                  business history, the Company has integrated more than 35
                  prepress and imaging businesses into its operations while
                  streamlining overhead and improving margins. The Company
                  acquired five businesses in 1998 with combined annual revenues
                  of approximately $40 million. These acquisitions are part of
                  the Company's growth strategy to acquire market niche
                  companies with Fortune 1000 client lists, excellent client
                  service or proprietary products and solid management who will
                  continue to operate the business after the acquisition. These
                  managers of acquired businesses receive performance incentives
                  to continue to profitably grow the business.

                  The Company intends to continue expanding through acquisitions
                  of well-managed companies with solid market positions a
                  reputation for quality work and established client lists.
                  Schawk believes that an emphasis on complementary acquisitions
                  of companies serving targeted markets will allow it to broaden
                  its service offerings and provide single source prepress and
                  imaging and image database services.

                  The Company believes it has greater versatility in meeting the
                  various requirements of its clients than smaller, less
                  integrated competitors lacking technical expertise, and that
                  this versatility will result in greater opportunities for
                  internal growth as well as enhancing the Company's image as an
                  attractive purchaser for potential consolidation candidates.
                  Schawk believes that there will continue to be a number of
                  attractive acquisition candidates in the fragmented and
                  consolidating industry in which it operates. The Company
                  expects to strengthen its market position by applying its
                  management and operational philosophies and practices, which
                  have been successful in its graphic arts businesses, to newly
                  acquired businesses.

                  The Company also has been successful in establishing start-up
                  operations in response to client and market requirements.
                  Schawk intends to continue this strategy as opportunities
                  warrant. See "--Acquisitions and Start-up Operations."

         -        Exploitation of Industry Trends; Outsourcing. The Company has
                  historically attempted to strengthen its market position by
                  identifying and exploiting industry trends. As a consequence,
                  the Company has been uniquely positioned to benefit as
                  consumer products companies continue to reduce both their
                  prepress staffs and total number of suppliers. The Company's
                  on-site strategy developed as clients outsourced imaging
                  functions in an attempt to cut costs and improve turnaround
                  and delivery times. The Company intends to expand this effort
                  as clients increasingly require on-site service. As of
                  December 31, 1998 the Company had 31 on-site locations staffed
                  by over 100 Schawk employees. Further, the Company believes
                  that its commitment to client service and its broad array of
                  premium service offerings position the Company as a cost
                  effective, value-added supplier of prepress services. As
                  clients continue to cut their staffing levels, they are
                  expanding the number of services required of their prepress
                  suppliers. As a result, fewer of the Company's competitors
                  have the full complement of capabilities required in the
                  marketplace. The Company believes outsourcing trends will
                  continue.

                  The Company has also expanded its imaging operations in
                  Cincinnati, Ohio. The Company is currently on-site in a client
                  location in Cincinnati and believes that by locating a
                  facility there, turnaround and delivery time for its existing
                  clients and access to new client relationships will be

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<PAGE>   6
 
                  strongly enhanced. The Company has also formed a start-up
                  operation for a client located in Queretaro, Mexico.

         -        Exploitation of Technology Advancements. The Company is
                  dedicated to keeping abreast of and initiating technological
                  process developments in its industry. To build upon its
                  leadership position, the Company actively evaluates systems
                  and software products of various computer and software
                  manufacturers and also independently develops software for
                  implementation at its operating facilities. The Company
                  continually invests in new technology designed to support its
                  high quality prepress services. The Company concentrates its
                  efforts on understanding the 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.

MANAGEMENT PHILOSOPHY

         The Company believes that by adhering to its management philosophy, the
Company has gained in market share and improved margin performance in its core
business. The Company's management philosophy incorporates the following key
concepts:

         Total Quality Management. A cornerstone of the Company's management
philosophy is its emphasis on high quality. The Company is committed to the
principles of "Total Quality Management" ("TQM") and stresses to all employees,
regardless of level, the importance of striving to meet or exceed client
expectations. Historically, the Company has been committed to employee training
and technological improvements to achieve this level of performance. Through the
Company's application of TQM, employees have adopted the necessary commitment to
client service that is essential to quick turnaround and consistent delivery of
high quality services and products. Such increased quality results in decreased
costs to clients and the Company in the long run. The Company views itself as a
service provider to its clients. Understanding the needs of its clients and
customizing its services and products is part of the TQM process that has helped
the Company differentiate itself from the competition. Consequently, the Company
makes the necessary investments to ensure that these services continue to meet
the highest quality standards and needs of its clients.

         Client Service. Another key component of the Company's management
philosophy has been its commitment to client service. The Company believes that
this commitment has contributed to the confidence and loyalty its clients have
shown. Because of the increasingly competitive markets faced by its clients, the
Company must be flexible enough to modify its operations in order to meet the
specialized needs of its clients. The Company's emphasis on on-site client
representatives and operations addresses this requirement and has further
solidified existing client relationships.

         Employee Training and Investment in Equipment. The Company believes
that its most valuable assets are its employees because its ability to provide
clients with high quality services and products depends upon their dedication
and expertise. The Company provides extensive and continuous training to keep
its employees abreast of the latest technological developments and the
particular needs of its clients. Providing its employees with the latest
equipment, software and training are fundamental to the Company's philosophy.

         Technical Expertise. The Company is able to provide its clients with
high quality services and products and quick response time because of its
efficient utilization of state-of-the-art equipment software, digital server,
storage technology and telecommunication systems. As part of its commitment to
maintain its technological expertise, the Company has historically worked with
software developers to create software that fully addresses the Company's and
its clients' needs. The Company acts as a test site for numerous hardware and
software products. In order to facilitate the exchange of information among its
various facilities, in 1991, the Company established the Schawk Technical
Advisory Board for the purpose of coordinating the research and evaluation of
new technologies in the graphic arts industry. This group continues to be
recognized for its efforts and has been invited to lecture at numerous national
and international symposiums and conferences.

SERVICES

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<PAGE>   7

         The Company offers comprehensive, high quality prepress services. The
Company's facilities produce conventional, electronic and desktop color
separations, electronic production design, film preparation, platemaking and
press proofs for lithography, flexography and gravure. The Company's services
also include both digital and analog image database archival and management as
well creative design, as art production and various related outsourcing
services.

         The Company interfaces between consumer products manufacturers and the
creative designers and converters used by those businesses to produce packaging,
such as folding cartons, boxes, trays, cans, containers, packaging labels and
wrap and related point-of-sale and promotional materials. The Company's services
consist principally of the electronic and digital production of art design,
color separations and color proofs to client and converter specifications and
imaging asset management. These services are an intermediate step between
creative artwork and the actual printing of graphic materials. The production of
color separations requires well-trained and highly skilled technicians applying
various digital and analog image manipulation, assembly and color management
techniques in order to preserve the integrity of the original image when
translated into print and to ensure consistency of the printed materials.

         The Company specializes in prepress services relating to the packaging
and promotional needs of clients in the consumer products industry and in the
advertising and promotion markets. The Company serves Fortune 1000 companies and
their advertising agencies to ensure worldwide quality and consistency in the
packaging and related imagery of their products with the wide array of consumer
products in the marketplace. Because there is no consistent size, shape, color
or packaging material, the Company functions as a network of custom job shops
taking advantage of its size for technical expertise while being able to respond
quickly to the varying needs of global clients.

         Image quality and consistency and ever-shortening response and delivery
times are becoming increasingly important to consumer products manufacturers as
packaging assumes a greater role in promotion. While prepress work represents a
relatively small percentage of overall packaging costs, the visual impact and
effectiveness of product packaging is largely dependent upon the quality of the
prepress work.

         The Company's clients typically outsource their prepress requirements
and assign the Company the responsibility of interfacing with the clients'
designated graphic designers, who design the packaging and the converters or
printers who print and produce the packaging and related materials. The Company
competes on the basis of offering its multi-national client base: (i) high
quality customized imaging; (ii) rapid turnaround and delivery times; (iii)
up-to-date knowledge of the printing press specifications of converters and
printers located throughout the United States and Canada; (iv) digital imaging
asset management; (v) art production; and (vi) the ability to service its
clients' global prepress requirements through the Company's North American
facilities and international alliance partners.

         As technology has created opportunities for quicker production
turnarounds and deliveries, most of the Company's Fortune 1000 consumer products
clients have capitalized on the opportunity to modify their packaging more
frequently in order to customize their promotional activities on a regional,
seasonal or sporting event basis. This activity has greatly increased the
importance of maintaining the integrity of the digital and analog image design
and text data for each package variation.

         With its expansion into electronic art production design, the Company
is utilizing its technical expertise to serve clients' requirements in a variety
of outsourcing services including image database archiving, telecommunication
and trafficking. The Company has the capacity to archive and manage past,
current and future package design data and, accordingly, serves as a quick
access library of accurate file data for its clients. The Company is
continuously updating and improving its imaging database management system,
called PaRTsTM (Packaging and Resource Tracking system). The Company believes
that PaRTsTM enhances a client's ability to manage its imaging assets more
efficiently and with reduced time commitments. When compared to other database
management systems available in the market place, the Company believes that
PaRTsTM contributes to the Company's ability to meet its clients' quick
turnaround and delivery times and quality standards.

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         The Company has also developed a customized client electronic
communication system called CLICkTM (Client Linked Information Centers) for its
authorized clients, designated converters and other authorized personnel.
Compatible with all major platforms and operating systems, CLICkTM allows
clients to efficiently communicate with the Company and others on the system
using telephone lines and/or the Internet.

         Given the increased computerization of the prepress services industry,
highly trained technicians are essential to the quality of the end product.
Requirements of turnaround speed without a reduction in quality are increasing
as clients strive for differentiation and customization of their products and
brands. Schawk has met these requirements by continuously reinvesting in
technology, training its personnel and establishing numerous satellite on-site
operations to complement its main operating facilities.

         To capitalize on market trends, management believes that the Company
must continue to be able to provide clients the ability to make numerous changes
and enhancements with shorter turnaround times than ever before. Accordingly,
over the past two years the Company has focused 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 clients on the
opportunities and complexities of state-of-the-art equipment and software. The
Company believes that its ability to provide quick turnaround 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.

         The Company's services are distinguished by its ability to complete
prepress services for packaging designs in increasingly short time frames and
with high standards of quality. In order to satisfy client requirements, the
Company is frequently required to provide services in as little as 24 hours. The
following core competencies of the Company are described in more detail below:

         -        Technical Expertise. The Company places an emphasis on
                  investment in state-of-the-art systems and equipment and the
                  need for continual training and development of its employees
                  through programs offered at the Company-owned training center
                  and operating facilities and on-site at client locations. The
                  Company has had success in elevating its employees' competency
                  and its clients' standards to levels requiring the superior
                  technical expertise and capabilities that distinguish the
                  Company's services.

         -        On-Site Personnel. The Company has placed over 100 employees
                  on-site at or near 31 client locations in an effort to further
                  integrate its prepress services directly with the client
                  operations. This facilitates faster turnaround and delivery
                  times and fosters stronger client relationships.

         -        Strong Relationships with Converters and Printers. As each
                  client selects its own converter(s) and/or printer(s) the
                  Company coordinates extensively with the converter to ensure
                  uniformity in color and appearance of the printed product
                  packages. Each client generally selects its printing services
                  on a bid basis. By using the Company as its imaging
                  specialist, the print/read imagery information is not captive
                  at any one printer or converter. This affords each client
                  consistent image replication at any printing site because the
                  Company can supply any printer or converter with film
                  customized for its printing press. Additionally, this allows
                  the client to reproduce its image consistently across many
                  printing sources and it also provides the client with
                  information as to location and cost of its press runs.

                  Over the course of its 45-year business history, the Company
                  has developed strong relationships with many of the major
                  converters and printers in the United States and Canada and,
                  as a result, has extensive knowledge of their equipment,
                  thereby enabling the Company 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 its color separation work to 



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<PAGE>   9

                  account for irregularities or idiosyncrasies in the printing
                  presses of each of its clients' converters. 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 needs, all aimed at
                  ensuring that the color quality, accuracy and consistency of a
                  client's printed matter are maintained.

         -        Imaging Asset Management. The Company maintains and manages a
                  database for its clients' images and package designs. Once an
                  image is in the Company's database, the client can make
                  frequent regional, seasonal or event-related adjustments to
                  the file image prior to printing. The Company's ability to
                  quickly manipulate digital images enables its clients to
                  deliver their products to the market faster. The Company's
                  capabilities also allow it to send an image for output and
                  printing virtually anywhere in the world. As more and more
                  multi-national consumer products companies strengthen their
                  international packaging quality control to reflect their
                  global brand image, they are requiring a more consistent
                  worldwide image. In response to this trend, the Company is
                  playing an increasing role in ensuring that its clients'
                  images are satisfactory and consistent both domestically and
                  internationally.

ACQUISITIONS AND START-UP OPERATIONS

         The Company has acquired and integrated more than 35 prepress and
imaging businesses into its operations since the business was founded in 1953.
Throughout its history, the Company has successfully identified acquisition
candidates that represent market niche companies with Fortune 1000 client lists,
excellent client service or proprietary products and solid management. The
Company favors businesses with management teams that will continue to operate
the businesses as autonomous units. The Company has also commenced a number of
start-up operations over the years when client servicing requirements or market
conditions warranted.

         During 1998, the Company made five acquisitions: Horan Imaging
Solutions Inc. and Chromart Corporation in New York City, Herzig Sommerville
Limited and Design Partners, Inc. in Toronto Canada, and S&M Rotogravure
Services, Inc. near Milwaukee, Wisconsin.

         On March 2, 1998, the Company completed the acquisition of S&M
Rotogravure Service, Inc. ("S&M"). S&M, located in suburban, Milwaukee,
Wisconsin, specializes in products and services for the packaging segment of the
imaging industry. S&M, which services a number of Fortune 500 companies, had
1997 revenues in excess of $6 million.

         These five acquisitions are expected to add over $40 million in
revenues in 1999. Horan and Chromart are leading suppliers of the consumer
products and advertising agencies in the New York market. Herzig Sommerville is
a leading Canadian provider of prepress services to both consumer products
companies and advertising agencies. Design Partners specializes in creative
design for packaging applications for leading consumer products companies in the
United States and Canada. S&M Rotogravure specializes in products and services
to the packaging segment of Fortune 500 consumers products companies. Each of
these companies have solid market positions and established blue chip customers
relationships.

         The Company intends to continue expanding through acquisitions of
well-managed companies with solid market positions and established client lists.
The Company believes that emphasis on complementary acquisitions of businesses
serving targeted markets will allow it to broaden its product offerings and
provide its clients with a single source for imaging and image database
services. The Company will also continue to analyze and investigate start-up
operations on an ongoing basis.

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 packaging. To build upon its leadership position, 



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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 prepress 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. PaRTs(TM) and CLICk(TM) are examples of the Company's
commitment to systems development.

         As an integral part of its commitment to research and development, the
Company has established the Schawk Technical Advisory Board for the purpose of
researching and evaluating new technologies in the graphic arts and
telecommunications industries. The Advisory Board meets formally, at least
quarterly, to review new equipment and programs, then disseminates the
information to the entire Company and to clients wherever appropriate.

MARKETING AND DISTRIBUTION

         The Company markets its services nationally and internationally through
seminars, newsletters and training sessions targeted at existing and potential
clients. The Company sells its services through a group of approximately 105
direct salespersons and 125 client service technicians who call on consumer
products manufacturers, including those in the food and beverage, home products,
pharmaceutical and cosmetics industries and direct mail. The Company has adopted
a team approach to marketing, reflective of its TQM philosophy. Both the
Company's salespersons and the Company's client service technicians share
responsibility for marketing the Company's offerings to existing and potential
clients, thereby fostering long-term institutional relationships with its
clients.

         In addition to its operations in the United States and Canada, the
Company has an on-site location in Mexico, a network of global afflications in
Australia, Europe and Asia, and a recently established on-site location in
Japan.

CLIENTS

         The Company's clients consist of direct purchasers of color
separations, including end-use consumer products manufacturers and direct
mailers, converters and advertising agencies. Many of the Company's clients, a
large percentage of which 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 the
Company to establish closer and more stable relationships with these clients.
Converters also have a great deal of confidence in the quality of the Company's
services and have worked closely with the Company to reduce the converters'
required lead time, thereby lowering their costs. End-use clients often select
and utilize the Company to ensure better control of their packaging or other
needs and depend upon the Company to act as their agent to ensure quality
management of data along with consistency among numerous converters and
packaging media. The Company has established 31 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 its on-site services to its client base.

         Many of the Company's clients place orders on a daily and weekly basis
and work closely with the Company 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 prepress 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), prompting such
manufacturers to redesign their packages more frequently. This has resulted 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 the Company's business. In
addition, consumer products 



                                       9
<PAGE>   11

manufacturers have a tendency to single-source their prepress 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 has developed a base of steady
clients in the food and beverage industry. During 1998, no single client
accounted for more than 7% of the Company's net sales, and the 10 largest
clients in the aggregate accounted for approximately 36% of net sales.

COMPETITION

         The Company's competition comes primarily from other independent color
separators and converters and printers that have prepress service capabilities.
Independent color separators are companies whose business is performing prepress
services for one or more of the principal printing processes. The Company
believes that only two firms, Wace Group U.S.A., a subsidiary of Wace P.L.C.,
and Southern Graphics, a subsidiary of Reynolds Metals, compete with Schawk on a
national basis. The remaining independent color separators are regional or local
firms that compete in specific markets. To remain competitive, each firm must
maintain client relationships and recognize, develop and exploit
state-of-the-art technology and contend with the increasing demands for speed.
         Some converters with prepress service capabilities compete with the
Company by performing such services in connection with printing work.
Independent color separators such as the Company, however, may offer greater
technical capabilities, image quality control and speed of delivery. In
addition, converters often utilize the services of the Company 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
prepress technology.

         As requirements of speed continue to be critical, along with the
recognition of the importance of focusing on their core competencies, clients
have increasingly recognized that the Company provides services at a rate and
cost that makes outsourcing more cost effective and efficient.

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. Materials and
supplies account for only a small portion of the Company's cost of production,
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
suppliers.

INTELLECTUAL PROPERTY

         The Company owns no significant patents. The trademarks "Schawk,"
"Clockface and Creole," "CLICk" and "PaRTs" and the trade names "Amber Design,"
"Color Data East," "Schawkgraphics," "Schawk Client Services Group," "Schawk
Prep," "Lincoln Graphics," "Litho Colorplate," "LSI/Atlanta," "LSI/Kala,"
"Process Color Plate," "Total Reproductions," "Weston Engraving," "The Palm
Group," "Stebbins Photography," "Blue Barrel," "StanMont," "PrinterNet,"
"CyberImages," "Batten Graphics," "Fishbowl" and "XZact" are the most
significant trademarks and trade names used by the Company.

EMPLOYEES

         As of December 31, 1998, the Company had approximately 1,200 full-time
employees. Of this number, approximately 35% are production employees
represented by local units of the Graphic Arts International Union and by local
units of the Toronto Typographical Union. The Company's union employees are
vital to its operations. Collective bargaining agreements covering the Company's
union employees in four facilities are subject to renegotiation. Three are
subject to renegotiation during 1999-2000. The Company considers its
relationships with its employees and unions to be good.

BACKLOG

                                       10
<PAGE>   12

         The Company does not have or keep backlog figures as projects or orders
are generally in and out of the facilities within five to seven days. Generally,
the Company does not have contracts with its clients, but maintains client
relationships by delivering timely prepress services, providing technology
enhancements to make the process more efficient and bringing extensive
experience with and knowledge of printers and converters.

DISCONTINUED OPERATIONS

         In 1992, Schawk acquired controlling interest in Filtertek, Inc.
("Filtertek"), a New York Stock Exchange listed company. Effective December 30,
1994, the corporation previously known as Schawk, Inc. ("Old Schawk") and
certain affiliated corporations (collectively with Old Schawk, the "Old Schawk
Companies") were merged into Filtertek in a transaction accounted for as a
purchase transaction (the "Merger"). The surviving corporation in the Merger was
Filtertek, which then changed its name to Schawk, Inc.; however, under
applicable accounting rules the historical financial statements of the Old
Schawk Companies, rather than the Filtertek statements, are treated as the
financial statements of the Company. The Plastics Business Segment was comprised
primarily of what had been the business of Filtertek prior to the Merger, and
the Imaging Group is comprised primarily of what had been the business of the
Old Schawk Companies.

         During 1996, the Company adopted a plan to discontinue the operation of
its Plastics Business Segment. On December 19, 1996, the Company announced the
sale of the remaining Plastics Business Segment to the ESCO Electronics
Corporation of St. Louis, Missouri. This sale transaction closed on February 7,
1997. As a result of the February 7, 1997 sale, the Company recorded a fourth
quarter 1996 charge of $33 million ($1.67 loss per share) to write-down assets
to estimated net realizable value and provide for income taxes and other costs
of disposing of this business. The financial information with respect to
discontinued operations is presented in Note 15 to the Consolidated Financial
Statements.




                                       11
<PAGE>   13



ITEM 2.  PROPERTIES

FACILITIES

         The Company owns or leases the following office and operating
facilities:

<TABLE>
<CAPTION>
                                                                             LEASE
                                 SQUARE     OWNED/                         EXPIRATION
     LOCATION                     FEET      LEASED        PURPOSE             DATE             DIVISION
     --------                    ------     ------        -------          ----------          --------
                              (APPROXIMATE)
<S>                             <C>        <C>       <C>                  <C>               <C>
Armonk, New York                10,000     Leased    General Offices,     Month to          Color Data East
                                                     Operating Facility   month

Cherry Hill, New Jersey         35,000     Owned     General Offices,     N/A               Lincoln Graphics
                                                     Operating Facility

Chicago, Illinois               42,000     Leased    General Offices,     June 2002         Process Color Plate Co.
                                                     Operating Facility

Cincinnati, Ohio                 4,754     Leased    Client Services      October 2000      Schawk Cincinnati

Costa Mesa, California           1,625     Leased    General Offices,     April 2001        929 Design
                                                     Operating Facility

Des Plaines, Illinois           20,000     Owned     Executive Offices    N/A               Corporate

Des Plaines, Illinois           60,000     Leased    General Offices,     N/A               Schawkgraphics
                                                     Operating Facility

Hackettstown, New Jersey         3,000     Leased    General Offices,     December 2000     Amber Design
                                                     Operating Facility                     Associates

Kalamazoo, Michigan             67,000     Owned     General Offices,     N/A               LSI/Kala
                                                     Operating Facility

Minneapolis, Minnesota          31,000     Owned     General Offices,     N/A               Weston Engraving
                                                     Operating Facility                     Company, Inc.
                                                                                            Litho Colorplate, Inc.
                                                                                            The Palm Group
                                                                                            Stebbins Photography

Montreal, Quebec, Canada         5,000     Leased    General Offices,     September 2004    StanMont, Inc.
                                                     Operating Facility

Montreal, Quebec, Canada        30,000     Owned     General Offices,     N/A               StanMont, Inc.
                                                     Operating Facility                     XZact

New Berlin, Wisconsin           43,000     Owned     General Offices,     N/A               S&M Rotogravure
                                                     Operating Facility

New York, New York               2,000     Leased    General Offices,     June 1999         Chromart
                                                     Operating Facility

New York, New York              31,000     Leased    General Offices,     April 2003        Horan Imaging
                                                     Operating Facility                     Solutions
</TABLE>

                                       12
<PAGE>   14


<TABLE>
<CAPTION>
<S>                             <C>        <C>       <C>                  <C>               <C>
Roseville, Minnesota            16,000     Leased    General Offices,     May 2004          Dimension Imaging
                                                     Operating Facility

Smyrna, Georgia                 20,000     Leased    General Offices,     October 2003      LSI/Atlanta
                                                     Operating Facility                     Converterscan

Toronto, Ontario, Canada        30,000     Leased    General Offices,     December 2004     Batten Graphics
                                                     Operating Facility                     CyberImages
                                                                                            Fishbowl

Toronto, Ontario, Canada         6,000     Leased    General Offices,     October 2003      Design Partners
                                                     Operating Facility

Toronto, Ontario, Canada        53,000     Leased    General Offices,     October 2003      Herzig Sommerville
                                                     Operating Facility
</TABLE>


ITEM 3.  LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

         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.

         As a part of the final settlement of certain stockholders' litigation
against the Company and its directors relating to the Merger, Clarence W. Schawk
and David A. Schawk transferred 159,521 shares of Class A Common Stock to a
settlement fund for the benefit of settlement class members. The shares are
subject to a put agreement whereby the class members may require the Company to
purchase the shares at a price ranging from $7.00 to $9.50 per share. The actual
price depends upon the time of exercise over the exercise period which begins on
the final settlement date and ends on the later of the second anniversary of the
final court approval of the settlement agreement (which occurred on May 21,
1997) or 180 days after the shares are distributed to class members. Shares were
distributed to class members in March, 1999.

         The settlement involves no expenditure or payment by Schawk other than
the $80,000 for expenses and possible contingent expenditures by Schawk in
respect to any stock buybacks. There also is no issuance of capital stock by
Schawk, however, current accounting rules and SEC regulations require Schawk to
take a nonoperating charge in connection with this settlement in the amount of
approximately $1.4 million. This amount is included in the discontinued
operations charge taken by Schawk during 1996, in connection with the sale by
Schawk of its Plastics Group.


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

         No items were submitted to a vote of security holders for the three
months ended December 31, 1998.




                                       13
<PAGE>   15



                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER 
MATTERS                                                     

SCHAWK, INC. SUPPLEMENTAL STOCKHOLDER INFORMATION
QUARTERLY FINANCIAL DATA

<TABLE>
<CAPTION>
                                         (In Thousands, Except Per Share Amounts)
----------------------------------------------------------------------------------------------------------------------------------
                              March 31,  June 30,   September 30, December 31, March 31,   June 30,   September 30,   December 31,
                                1997      1997           1997        1997       1998        1998         1998            1998
----------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>        <C>           <C>         <C>        <C>         <C>          <C>             <C>    
Net sales (a)                 $26,192    $29,397       $29,568     $30,896    $31,011     $34,050      $37,692         $42,636
Cost of sales (a)              15,163     16,167        16,523      17,391     16,352      18,334       20,577          23,841
                              ----------------------------------------------------------------------------------------------------
Gross Profit                   11,029     13,230        13,045      13,505     14,659      15,716       17,115          18,795
Income from continuing                                                                              
   operations                   1,890      3,017         3,312       3,930      3,952       5,019        4,285           4,442
Net income (loss)               1,890      3,017         3,312       3,930      3,952       5,019        4,285           4,442
Earnings per share from
   continuing operations (b)
   Basic                         0.08       0.14          0.15        0.18       0.45        0.23         0.19            0.20
   Diluted                       0.08       0.14          0.15        0.18       0.45        0.22         0.19            0.20
Earnings per share
   Basic                         0.08       0.14          0.15        0.18       0.45        0.23         0.19            0.20
   Diluted                       0.08       0.14          0.15        0.18       0.45        0.22         0.19            0.20
</TABLE>

(a)  On February 7, 1997, the Company sold the plastics business segment for
     $93,485 plus working capital adjustments. Sales and cost of sales have been
     restated to exclude the plastics segment.

(b)  Included in earnings per share for the quarter ended March 31, 1998 is
     $0.27 for the discount on redemption of preferred stock.


<TABLE>
<CAPTION>
DIVIDENDS DECLARED
--------------------------------------------------------------------------------------------
                                                                    Per Class A Common Share
Quarter Ended:                                                       1998              1997
--------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>        
March 31                                                       $     0.065       $     0.065
June 30                                                              0.065             0.065
September 30                                                         0.065             0.065
December 31                                                          0.065             0.065
                                                               -----------       -----------

     Total                                                     $     0.260       $     0.260
                                                               ===========       ===========
</TABLE>

<TABLE>
<CAPTION>
STOCK PRICES
-----------------------------------------------------------------------------------------------------------

Quarter Ended:                                                 1998 High/Low               1997 High/Low
-----------------------------------------------------------------------------------------------------------
<S>   <C>                                                      <C>                     <C>  
March 31                                                       $12 7/8  -  9 3/8       $  9 7/8  -   7 5/8
June 30                                                         17 3/8 -  12              9 1/8  -   7 3/4
September 30                                                    16 1/2 -  13 1/4         11 716  -   8
December 31                                                     15 3/8 -  12 7/8         12 5/8  -  10 3/8
</TABLE>


The Registrant's stock is listed on the NYSE. The Registrant has approximately
1,089 stockholders as of March 1, 1999.




                                       14
<PAGE>   16
ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
Year Ended December 31,                             1998          1997          1996           1995       1994 Pro        1994
(In Thousands, Except Per Share Amounts)         Historical    Historical    Historical     Historical    Forma (c)    Historical
                                                 --------------------------------------------------------------------------------
<S>                                              <C>           <C>           <C>            <C>           <C>          <C>     
CONSOLIDATED INCOME STATEMENT INFORMATION (A)                                
   Net Sales                                     $ 145,389     $ 116,053     $  90,763      $ 87,204      $ 103,889    $103,889
   Operating Income                                 28,308        19,865        13,373        11,022         22,689      20,309
   Income From Continuing Operations Before                    
     Income Taxes                                   29,748        20,446         9,056         7,243         18,372      15,991
   Income Taxes                                     12,050         8,297         3,530           945 (b)      6,944       3,722 (d)
   Income From Continuing Operations                17,698        12,149         5,526         6,298         11,428      12,269
   Income From Continuing Operations Per                                                                               
     Common Share (f)(g)                                                                                               
     Basic                                       $    1.07     $    0.56     $    0.22      $   0.26             --          --
     Diluted                                          1.06          0.55          0.22          0.26             --          --

PRO FORMA INFORMATION
(CONTINUING OPERATIONS)
   Pro Forma Income Taxes (e)                           --            --            --            --             --       6,396
   Pro Forma Net Income Adjusted Only for
     Income Taxes (e)                                   --            --            --            --             --       9,595
   Pro Forma Net Income Per Share From                                                      
     Continuing Operations                              --            --            --            --      $    0.51          --

CONSOLIDATED BALANCE SHEET INFORMATION (G) (H)
   Working Capital                               $  35,453     $  26,283     $  21,881      $ 26,875             --    $ 25,753
   Total Assets                                    138,510       126,923       160,840       184,463             --     193,925
   Long-Term Debt, Capital Lease Obligations                                                                           
     and Redeemable Preferred Stock                 39,619        44,854        67,785        75,582             --      81,090
   Stockholders' Equity                             65,023        55,908        48,926        76,429             --      75,590

OTHER  DATA
   Cash Dividends per Common Share (f)           $    0.26     $    0.26     $    0.26      $   0.26      $            $     --
                                                                                                                 --
   Depreciation and Amortization (h)                 7,741         6,949        15,435        16,219             --      14,866
   Capital Expenditures (h)                          9,508         7,148        16,823        11,027             --      13,882
</TABLE>


(a)  On February 7, 1997, the Company sold the plastics business segment for
     $93,485 plus working capital adjustments. The consolidated income statement
     information has been restated to exclude discontinued operations.

(b)  Income taxes in 1995 includes a credit of $1,632 for net operating loss
     carryforwards not previously recorded.

(c)  Pro forma net income for 1994 includes adjustments for the merger, purchase
     accounting and income taxes, related to the merger with Filtertek in
     December 1994.

(d)  Includes a one-time deferred tax charge of $3,000 for the termination of S
     Corporation tax election.

(e)  The Company was taxed as an S Corporation for 1994. Pro forma information
     is presented to reflect income tax expense at a normal corporate rate for
     those years.

(f)  Because of the limited number of stockholders prior to December 30, 1994,
     dividends per share and income per share data is not meaningful and has not
     been presented for 1994.

(g)  1998 earning per share includes $0.27 for the discount on redemption of
     preferred stock

(h) Includes data from the discontinued Plastics Group from 1994-1996.



                                       15
<PAGE>   17

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


RESULTS OF OPERATIONS

         Statements contained herein that relate to the Company's beliefs or
expectations as to future events relating to, among other things, the
anticipated revenues from recent acquisitions, the success of the Company's
growth strategy, the ability of the Company to exploit industry trends, such as
outsourcing, the Company's exploitation of technological advancements in the
imaging industry and the effectiveness of the Company's compliance review and
implementation plan to identify and resolve year 2000 issues, 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 and are
subject to the "Safe Harbor" created thereby. 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 that the assumptions will prove to have been correct.
Important factors that could cause actual results to differ materially and
adversely from the Company's expectations and beliefs include the level of
business activity at the Company's clients, the ability of the Company to
implement its growth strategy, to identify and exploit industry trends and to
exploit technological advances in the imaging industry.

GENERAL

         In 1992, the company previously known as Schawk, Inc. ("Old Schawk")
and affiliated companies controlled by the Schawk Family (such companies
collectively referred to with Old Schawk as the "Old Schawk Companies") acquired
a controlling interest in Filtertek, Inc., a New York Stock Exchange listed
company ("Filtertek"). Effective December 30, 1994, the Old Schawk Companies
were merged into Filtertek (the "Merger") in a transaction accounted for as a
purchase transaction. The surviving corporation in the Merger was Filtertek,
which then changed its name to Schawk, Inc.; however, under applicable
accounting rules the historical financial statements of the Old Schawk
Companies, rather than the Filtertek statements, are treated as the financial
statements of the Company. The Filtertek business and certain related plastics
businesses constituted what had been the Plastics Business Segment of the
Company prior to the Merger.

         During 1996, the Company adopted a plan to discontinue the operation of
its Plastics Business Segment. The Company concluded that its managerial and
financial resources could be more productively invested in the Company's primary
competency, prepress and digital imaging services. On December 19, 1996, the
Company announced the sale of the Plastics Business Segment to ESCO Electronics
Corporation. This sale transaction closed on February 7, 1997. As a result of
the February 7, 1997 sale, the Company recorded a 1996 fourth quarter charge of
$33.0 million ($1.67 loss per share) to write-down assets of the Plastics
Business Segment to estimated net realizable value and provide for income taxes
and other costs of disposing of this business. The financial information with
respect to discontinued operations is presented in Note 15 to the Consolidated
Financial Statements.

         As a result of the sale of the entire Plastics Business Segment in
1996, the Company, comprised primarily of what had been the business of the Old
Schawk Companies, is now strategically focused on its prepress and digital
imaging business. Accordingly, the Company has restated its financial statements
to reflect discontinued operations accounting treatment with respect to the
Plastics Business Segment. Sales, cost of sales and operating income for all
years presented reflect the actual financial information for the continuing
operations only of the Company's prepress and digital imaging business and may
be used as a basis of comparison with the 1998 consolidated financial
statements.





                                       16
<PAGE>   18



RESULTS OF OPERATIONS

         The following table sets forth, for the periods indicated, the
percentage relationship to net sales of selected items in the Company's
consolidated income statement for continuing operations:

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                 ------------------------------------------------
                                                     1996            1997             1998
                                                 ------------------------------------------------
<S>                                                  <C>             <C>             <C>   
Net sales                                            100.0%          100.0%          100.0%
Cost of sales                                         56.4            56.2            54.4
Gross profit                                          43.6            43.8            45.6
Selling, general and administrative                   27.8            26.7            26.1
Write-off of equipment                                 1.1              --              --
Operating income                                      14.7            17.1            19.5
Income from continuing operations
  before income taxes                                 10.0            17.6            20.5
Income from continuing operations                      6.1            10.5            12.2
Net income (loss)                                    (27.5)%          10.5%           12.2%
</TABLE>

1998 COMPARED TO 1997

Net sales. Net sales from continuing operations for 1998 increased 25.3% to
$145.4 million from $116.1 million in 1997. The increase in sales is
attributable to internal revenue growth of approximately 11.3% and revenue
growth from acquisitions of approximately 14.0%. The internal growth was due to
increased demands related to promotional activities by clients, the continuing
trend by our clients toward consolidating suppliers which has resulted in
additional business for Schawk, and new customers won through ongoing sales and
marketing programs.

Operating income. Operating income increased 42.5% to $28.3 million in 1998 from
$19.9 million in 1997 due to increased sales volume and increased operating
efficiency. Cost of sales for 1998 decreased as a percent of sales to 54.4% from
56.2% for 1997 as the increased sales volume resulted in increased operating
efficiency. Selling, general and administrative expenses increased $7.0 million
or 22.7% but decreased as a percent of net sales from 26.7% to 26.1% as the
Company was able to leverage the increased sales volume against the
administrative cost structure.

Income from continuing operations before income taxes. Income from continuing
operations before income taxes for 1998 increased 45.5% to $29.7 million from
$20.5 in 1997. The pretax income margin for 1998 was 19.5% compared with 17.1%
in 1997. The improvement in pretax income margin was primarily due to increased
sales volume, the resulting increased operating efficiencies, and the gain on
the sale of investments during the year. The Company had gains on the sale of
investments in 1998 of $2.5 million compared with $1.3 million in 1997. Interest
expense, net of interest income increased by $.3 million from 1997 to 1998 as
the Company's investment portfolio was sold to provide cash for acquisitions.

Income from continuing operations and net income. Income from continuing
operations and net income increased 45.7% to $17.7 million for 1998 from $12.1
for 1997 for the reasons previously discussed.

Earnings per share. Basic and diluted earnings per share increased to $1.07 and
$1.06, respectively for 1998 from $.56 and $.55 respectively in 1997. A discount
on the redemption of preferred stock increased earnings per share by $0.27 in
1998. Preferred dividends reduced earnings per share by $0.0 in 1998 and $0.06
in 1997.

                                       17
<PAGE>   19

1997 COMPARED TO 1996

Net sales. Net sales from continuing operations for 1997 increased 27.9% to
$116.1 million from $90.8 million for 1996. The increase in net sales is
attributable to internal revenue growth of approximately 14.8% and revenue
growth from acquisitions of approximately 13.1%. The internal growth was due to
increased demands related to promotional activities by clients, the continued
trend by our clients toward consolidating suppliers which has resulted in
additional business for Schawk, and new customers won through marketing efforts.

Operating income. Operating income increased 48.5% to $19.9 million in 1997 from
$13.4 million in 1996 due to increased sales volume and increased operating
efficiency (a 37.7% increase including the write off of obsolete equipment of
$1,050 in 1996). Additionally, cost of sales for 1997 decreased as a percent of
net sales to 56.2% from 56.4% of net sales for 1996 due to increased sales
volume and improved operating efficiency. Selling, general and administrative
expenses increased $5.7 million or 22.9% primarily from increased sales
commissions paid, but decreased as a percent of net sales from 27.8% to 26.7% as
the Company was able to leverage the increased sales volume against its cost
structure.

Income from continuing operations before income taxes. Income from continuing
operations before income taxes for 1997 increased 125.8% to $20.4 million, from
$9.1 million in 1996. The pretax income margin for 1997 was 17.6% versus 10.0%
for 1996. The improvement in pretax income during 1997 was due to the increased
sales volume, greater operating efficiencies and investment income on proceeds
from the sale of the Plastics Business Segment. The Company experienced growth
in interest income during 1997 to $3.0 million from $0.3 million for 1996 due to
an increase in invested balances relating to the receipt of proceeds from the
sale of the Plastics Business Segment. Additionally, interest expense decreased
for 1997 to $3.7 million from $4.7 million in 1996 as a result of lower overall
borrowings due to the retirement or cancellation of certain of the Company's
indebtedness with proceeds from the sale of the Plastics Business Segment. Other
income of $1.3 million for 1997 is primarily due to gain on the sale of
investments as the Company liquidated a portion of the equity portfolio acquired
with proceeds of the sale of the Plastics Business Segment and received a year
end capital gain distribution from the equity fund investment.

Income from continuing operations. Income from continuing operations increased
119.9% to $12.1 million for 1997 versus $5.5 for 1996 for the reasons previously
discussed. The provision for income taxes was 40.6% of pre-tax income for 1997
and 39.0% in 1996.

Net income. Net income increased to $12.1 million for 1997 from a loss of $25.0
million for 1996, which included income of $2.5 million from the discontinued
Plastics Business Segment and a loss of $33.0 million on the disposal of the
Segment.

LIQUIDITY AND CAPITAL RESOURCES

         The Company presently finances its business from available cash and
from cash generated from operations. The Company maintains a $10.0 million
unsecured credit facility and its consolidated Canadian subsidiary maintains a
Cdn $10.0 million unsecured working capital facility. Both facilities are due on
demand. The domestic credit facility was unused at December 31, 1998 and the
Canadian credit facility had approximately U.S. $3.63 million available at
December 31, 1998.

         Long-term debt and capital lease obligations decreased to $39.6 million
at December 31, 1998 from $44.9 million at December 31, 1997 as $5.0 of the
Company's long term debt was reclassified as a current liability.

         The Company held invested balances of $16.1 million in bond mutual
funds and U.S. Treasury and U.S. Government notes at December 31, 1998. These
funds are available for sale to provide for acquisitions and corporate
requirements.

                                       18
<PAGE>   20

         At December 31, 1998, outstanding debt of the Company consisted of: (i)
unsecured notes issued pursuant to a Note Purchase Agreement dated August 18,
1995, for $40.0 million with terms ranging from 1999 through 2005 (averaging
seven years) at an average interest rate of 6.88%; and (ii) US $2.9 million of
borrowings under the Company's Canadian subsidiary's working capital 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 growth, either through currently available cash, through cash generated from
future operations or through short-term financing.

         The Company had capital expenditures from continuing operations in 1998
of $9.5 million, in 1997 of $7.1 million, and in 1996 of $9.0 million. Capital
expenditures were made in 1998 and 1997 for machinery, equipment and automation
to expand production facilities and improve productivity. Capital expenditures
in 1996 were for the purchase of new equipment and building renovations.

         Combined depreciation and amortization from continuing operations at
Schawk was $7.7 million for 1998, $6.9 million in 1997, and $7.4 million in
1996.

         Acquisition costs, including liabilities assumed and common stock
issued, were $48.1 during 1998, negligible in 1997 and $19.6 in 1996.

         The Company repurchased $8.1 million of Class A Common Stock during
1998, $1.8 million during 1997 and $1.4 million during 1996 under a share
repurchase program approved by the Board of Directors.

YEAR 2000 COMPLIANCE

GENERAL DESCRIPTION OF THE ISSUE

The "Year 2000 issue" is the result of computer programs being written using two
digits rather than four to define the applicable year. If not corrected, many
computer applications could fail or create erroneous results. As required by
recent guidance from the Securities and Exchange Commission (SEC) applicable to
all public companies, the following disclosure provides more detail regarding
the Company's Year 2000 compliance than previous reports filed by the Company.

STATUS OF PROGRESS IN YEAR 2000 COMPLIANCE

The Company's plan to resolve the Year 2000 issue involves the following four
phases: assessment, remediation, testing, and implementation. To date, the
Company has substantially completed its assessment of all internal information,
production, and manufacturing systems that could be significantly affected by
the Year 2000. The assessment indicated that although the information technology
systems for most of the Company's operations are not at risk, certain of the
Company's operations which have been acquired during the last few years have
information technology systems that are not Year 2000 compliant. That assessment
also indicated that software and hardware (embedded chips) used in production
and manufacturing systems "operating equipment", are not significantly at risk.
The Company believes that it does not have a material exposure for Year 2000 as
it relates to its products. The assessment of building systems, equipment at
properties which make use of embedded computer chips, such as elevators,
security systems, telecommunications equipment, and HVAC equipment, has not yet
been completed. It is expected that the assessment of building systems will be
completed by June 30, 1999. The Company has not completed its assessment with
regard to Year 2000 compliance status of its significant suppliers. It is
expected that this assessment will be completed by June 30, 1999.

Based on recent assessments, the Company has determined that it will be required
to modify or replace portions of its software and certain hardware at those
divisions that have noncompliant systems so that those systems will properly
utilize dates beyond December 31, 1999. The Company presently believes that with
modifications or replacements of existing software and certain hardware, the
Year 2000 issue can be mitigated. However, if such 



                                       19
<PAGE>   21

modifications and replacements are not made, or are not completed timely, the
Year 2000 issue could have a material impact on the operations of the Company.

For the divisions at risk for information technology problems, to date the
Company is 90% complete on the remediation phase. The remediation phase involves
primarily the purchase of software and hardware that has already been verified
as Year 2000 compliant. The Company installed a new Year 2000 compliant
accounting and financial software system effective January 1, 1999 at a majority
of its operations. The Company's remaining operations will implement the new
accounting software by June 30, 1999.

THIRD PARTY EXPOSURE

The Company's accounts payable, purchasing and accounts receivable information
technology systems do not interface directly with third parties. The Company has
not yet completed its query of these third parties with regard to whether their
systems are Year 2000 compliant. This is expected to be completed by the end of
the second quarter 1999. The inability of these third parties to complete their
Year 2000 compliance process in a timely fashion could materially impact the
Company.

COSTS

The Company had previously planned and/or begun implementing several system
replacement projects to modernize and improve its systems. The Year 2000 problem
heightened the need for the timely completion and some project schedules have
been accelerated. These project costs have been included in the Company's
budgeting process and its internal forecasts, and already form part of the
Company's financial plans. It is not expected that these costs will be material
to the Company's financial statements. The actual costs to be incurred by the
Company depend on a number of factors which cannot be accurately predicted,
including the extent and difficulty of the remediation and other work to be
done, the availability and cost of consultants, and the extent of testing
required to demonstrate Year 2000 compliance.

RISKS

Based on current information, the Company believes that the Year 2000 problem
will not have a material adverse effect on the Company, its business or its
financial condition. There can, however, be no assurances that Year 2000
remediation by the Company or third parties will be properly and timely
completed, and failure to do so could have a material adverse effect on the
Company, its business and its financial condition. The Company cannot predict
the actual effects to it of the Year 2000 problem, which depends on numerous
uncertainties such as the factors listed above under Costs, whether significant
third parties properly and timely address the Year 2000 issue, whether broad
based or systemic economic failures may occur, and the severity and duration of
such failures, which could include disruptions in transportation systems
generally, loss of utility and/or telecommunications services, and errors or
failures in financial transactions or payment processing systems and whether the
Company becomes the subject of litigation or other proceedings regarding any
Year 2000 related events and the outcome of any such litigation or proceedings.

As part of its contingency planning, the Company is analyzing the most
reasonably likely worst case scenarios that could result from failing to
complete all necessary phases of the Year 2000 program in a timely manner. In
the event the Company does not complete any additional phases, the Company may
experience difficulty in producing, shipping and billing orders in the event of
the failure of building systems, may experience difficulty in producing timely
and accurate financial data for certain of its divisions, and will be
susceptible to significant disruption in its business due to failures of third
parties previously described. Additionally, broad based and systemic economic
failures could have a materially adverse effect on the Company. The amount of
potential liability or lost revenue from these factors cannot be reasonably
estimated at this time.

The Company has contingency plans for certain critical applications and is
working on such plans for others. These contingency plans involve, among other
actions, manual workarounds, reallocating work among its 



                                       20
<PAGE>   22

divisions, increasing inventories, and adjusting staffing strategies. There can
be no assurance, however, that these plans would mitigate all of the effects
previously described.

STOCK OFFERING

         In February 1998, the company issued 1,950,000 shares of Class A Common
Stock in an underwritten public offering at a price of $9.00 per share. The
proceeds from the sale of the stock net of underwriting discounts, commissions
and estimated expenses, were approximately $16.3 million. Proceeds from the sale
of the stock were used to repurchase 15,400 shares of Series A Preferred Stock
of the Company and 5,207 shares of Series B Preferred Stock of the Company.

SEASONALITY

         Historically, the Company has experienced lower revenues in the first
and fourth quarters due to the seasonal trends of its clients and lower overall
economic activity.

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.









                                       21
<PAGE>   23



ITEM  7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

Not applicable to the Registrant for the reporting period.



ITEM  8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                 

     Index to Financial Statements Covered by Reports of Independent Auditors

                                                                           Page

Management's Responsibilities for Financial Reporting                        23
Report of Independent Auditors                                               24


FINANCIAL STATEMENTS

Consolidated Balance Sheets --
                 December 31, 1998 and 1997                                  25

Consolidated Statements of Operations --Years Ended
                 December 31, 1998, 1997 and 1996                            26

Consolidated Statements of Stockholders' Equity --Years Ended
                 December 31, 1996, 1997, and 1998                           27

Consolidated Statements of Cash Flows --Years Ended
                 December 31, 1998, 1997 and 1996                            28

Notes to Consolidated Financial Statements                                   29


FINANCIAL STATEMENT SCHEDULES

SCHEDULE II -- Valuation Reserves                                            46








                                       22
<PAGE>   24

MANAGEMENT'S RESPONSIBILITIES FOR FINANCIAL REPORTING

         The management of Schawk, Inc. is responsible for the preparation and
integrity of all financial statements and other information contained in the
Schawk, Inc. Form 10-K Annual Report. The consolidated financial statements have
been prepared in conformity with generally accepted accounting principles and
necessarily include amounts based on judgments and estimates by management
giving due consideration to materiality. The Company maintains internal control
systems designed to provide reasonable assurance that the Company's financial
records reflect the transactions of the Company and that its assets are
protected from loss or unauthorized use.

         The Company's financial statements have been audited by Ernst & Young
LLP, independent auditors, whose report thereon follows. As part of their audit
of the Company's financial statements, Ernst & Young LLP considered the
Company's system of internal control to the extent they deemed necessary to
determine the nature, timing and extent of their audit tests. Management has
made available to Ernst & Young LLP the Company's financial records and related
data.

         The Audit Committee of the Board of Directors is responsible for
reviewing and evaluating the overall performance of the Company's financial
reporting and accounting practices. The Committee meets periodically and
independently with management and the independent auditors to discuss the
Company's internal accounting controls, auditing and financial reporting
matters. The independent auditors have unrestricted access to the Audit
Committee.








/s/ David A. Schawk                               /s/ James J. Patterson
-------------------------------------             ------------------------------
David A. Schawk                                   James J. Patterson
President and Chief Executive Officer             Senior Vice President and
Principal Executive Officer                         Chief Financial Officer
                                                  Principal Financial Officer



/s/ Dennis D. Wilson                        
-------------------------------------
Dennis D. Wilson
Director of Financial Reporting and
  Chief Accounting Officer
Principal Accounting Officer





                                       23
<PAGE>   25



                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Schawk, Inc.

We have audited the accompanying consolidated balance sheets of Schawk, Inc. as
of December 31, 1998 and 1997, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1998. Our audits also included the financial
statement schedule listed in the index at item 8. These financial statements and
schedule are the responsibility of Schawk, Inc. 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 generally accepted auditing
standards. 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Schawk,
Inc. at December 31, 1998 and 1997, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with 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.



Chicago, Illinois
February 15, 1999                                            Ernst & Young LLP















                                       24
<PAGE>   26



                                  Schawk, Inc.
                           Consolidated Balance Sheets
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                           DECEMBER
                                                                             -----------------------------------
                                                                                1998                       1997
                                                                             -----------------------------------
<S>                                                                          <C>                      <C>       
ASSETS
Current assets:
   Cash and cash equivalents                                                 $  2,226                 $    4,022
   Short term investments                                                      16,137                     12,250
   Trade accounts receivable, less allowance for doubtful accounts
     of  $730 in 1998 and $464 in 1997                                         34,426                     22,884
   Inventories                                                                  5,948                      4,464
   Prepaid expenses and other                                                   3,456                      2,817
    Refundable income taxes                                                     1,475                         --
   Deferred income taxes                                                          830                        543
                                                                             -----------------------------------
Total current assets                                                           64,498                     46,980

Marketable securities                                                              --                     33,917
Property and equipment, net                                                    36,421                     30,147
Excess of cost over net assets acquired, less accumulated amortization
   of $5,236 in 1998 and $4,207 in 1997                                        34,913                     12,713
Other assets                                                                    2,678                      3,166
                                                                             ===================================
Total assets                                                                 $138,510                   $126,923
                                                                             ===================================

LIABILITIES AND STOCKHOLDERS' EQUITY 
   Current liabilities:
   Trade accounts payable                                                    $  6,143                 $    3,393
   Accrued expenses                                                            11,691                      8,128
   Income taxes payable                                                         2,660                      4,061
   Notes payable to banks                                                       2,941                      4,685
   Current portion of long-term debt and capital lease obligations              5,610                        430
                                                                             -----------------------------------
Total current liabilities                                                      29,045                     20,697

Long-term debt                                                                 35,000                     40,000
Capital lease obligations                                                       4,619                      4,854
Other                                                                           1,174                      1,308
Deferred income taxes                                                           3,649                      4,156

STOCKHOLDERS' EQUITY:
   Common stock                                                                   181                        160
   Preferred stock                                                                 --                         --
   Additional paid-in capital                                                  80,262                     79,243
   Accumulated deficit                                                         (3,503)                   (21,140)
   Accumulated comprehensive income (loss), net                                  (491)                       965
                                                                             -----------------------------------
                                                                               76,449                     59,228
   Treasury stock, at cost                                                    (11,426)                    (3,320)
                                                                             -----------------------------------
Total stockholders' equity                                                     65,023                     55,908
                                                                             -----------------------------------
Total liabilities and stockholders' equity                                   $138,510                   $126,923
                                                                             ===================================
</TABLE>

See accompanying notes.




                                       25
<PAGE>   27



                                  Schawk, Inc.
                      Consolidated Statements of Operations
                    (In Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                                                      YEAR ENDED DECEMBER 31
                                                                                1998              1997               1996
                                                                              --------------------------------------------

<S>                                                                           <C>              <C>               <C>      
Net sales                                                                     $145,389         $116,053          $  90,763
Cost of sales                                                                   79,104           65,244             51,153
Selling, general, and administrative expenses                                   37,977           30,944             25,187
Write-off of equipment                                                              --               --              1,050
                                                                              --------------------------------------------
Operating income                                                                28,308           19,865             13,373

Other income (expense):
Interest and dividend income                                                     2,627            2,980                340
Interest expense                                                                (3,598)          (3,688)            (4,657)
Other income                                                                     2,411            1,289                 --
                                                                              --------------------------------------------
                                                                                 1,440              581             (4,317)
                                                                              --------------------------------------------

Income from continuing operations before income taxes                           29,748           20,446              9,056

Income tax provision                                                            12,050            8,297              3,530

                                                                              --------------------------------------------

Income from continuing operations                                               17,698           12,149              5,526

Income (loss) from discontinued operations:
Income from discontinued operations                                                 --               --              2,490
Loss on disposal of discontinued operations                                         --               --            (33,000)
                                                                              --------------------------------------------

Net income (loss)                                                             $ 17,698         $ 12,149          $ (24,984)
                                                                              ============================================





Earnings (loss) per share:
Basic -  Continuing operations                                                $  1.07          $   0.56          $    0.22
         Discontinued operations                                                   --                --              (1.57)
                                                                              ============================================
                                                                              $  1.07          $   0.56          $   (1.35)
                                                                              ============================================

Diluted - Continuing operations                                               $  1.06          $   0.55          $    0.22
         Discontinued operations                                                   --                --              (1.56)
                                                                              ============================================
                                                                              $  1.06          $   0.55          $   (1.34)
                                                                              ============================================

Dividends per Class A common share                                            $  0.26          $   0.26          $   0.26
</TABLE>

See accompanying notes.



                                       26
<PAGE>   28



                                  Schawk, Inc.
                 Consolidated Statements of Stockholders' Equity
                  Years Ended December 31, 1996 1997, and 1998
                                 (In Thousands)

<TABLE>
<CAPTION>
                                           CLASS A    CLASS B    SERIES A    SERIES B   ADDITIONAL                          
                                           COMMON      COMMON    PREFERRED  PREFERRED    PAID-IN   ACCUMULATED   TREASURY  
                                            STOCK      STOCK       STOCK      STOCK      CAPITAL     DEFICIT       STOCK   
                                           -------------------------------------------------------------------------------
<S>                                        <C>      <C>          <C>        <C>         <C>         <C>          <C>       
Balance at December 31, 1995               $  156   $      9     $    --    $    --     $  75,506   $  4,573     $ (2,695) 
Net loss                                       --         --          --         --            --    (24,984)          --   
Sale of Class A and B common stock             --         --          --         --            60         --           57   
Purchase of Class A and B treasury stock       --         --          --         --            --         --       (1,492)  
Foreign currency translation adjustment        --         --          --         --            --         --           --   
Conversion of Series A preferred stock          1         --          --         --            (1)        --           --   
Issuance of Class A stock in connection 
   with purchase of Converterscan               2         --          --         --         2,363         --           --   
Issuance of Class A common stock under 
   dividend reinvestment program               --         --          --         --            --     (2,607)       2,607   
Cash dividends                                 --         --          --         --            --     (3,969)          --   
Write-off of foreign currency adjustment to
   discontinued operations                     --         --          --         --            --         --           --   
                                           ------------------------------------------------------------------------------
Balance at December 31, 1996                  159          9          --         --        77,928    (26,987)      (1,523)  
Net income                                     --         --          --         --            --     12,149           --   
Cancellation of Class B Common stock in 
   connection with sale of Plastics Group      --         (9)         --         --             9         --           --   
Cancellation of notes receivable from 
   employees in connection with sale of 
   Plastics Group                              --         --          --         --            --         --           --   
Cash dividends                                 --         --          --         --            --     (6,295)          --   
Foreign currency translation adjustment        --         --          --         --            --         --           --   
Conversion of Series A preferred stock          1         --          --         --            (1)        --           --   
Issuance of Class A common stock               --         --          --         --         1,307         --           --   
Purchase of Class A treasury stock             --         --          --         --            --         --       (1,804)  
Issuance of Class A Common stock under 
   dividend reinvestment plan                  --         --          --         --            --         (7)           7   
Unrealized appreciation on marketable 
   securities                                  --         --          --         --            --         --           --   
                                           ------------------------------------------------------------------------------
Balance at December 31, 1997               $  160   $     --     $    --    $    --     $  79,243   $(21,140)    $ (3,320) 
Net income                                     --         --          --         --            --     17,698           --   
Sale of Class A common stock                   16         --          --         --        16,137         --           --   
Purchase of Class A treasury stock             --         --          --         --            --         --       (8,127)  
Foreign currency translation adjustment        --         --          --         --            --         --           --   
Decrease in unrealized appreciation of 
   marketable securities                       --         --          --         --            --         --           --   
   
Issuance of Class A Common stock under 
   dividend reinvestment plan                  --         --          --         --            --         --           21   
Redemption of preferred stock                  --         --          --         --       (20,607)     5,832           --   
Issuance of Class A common stock for 
   acquisitions                                 5         --          --         --         5,012         --           --   
Issuance of Class A restricted shares 
   to employees                                --         --          --         --           118         --           --   
Stock options issued in acquisitions           --         --          --         --           324         --           --   
Cash dividends                                 --         --          --         --            --     (5,893)          --   
Other                                          --         --          --         --            35         --           --   
                                           ==============================================================================
Balance at December 31, 1998               $  181   $     --     $    --    $    --     $  80,262   $  3,503     $(11,426)  
                                           ==============================================================================
</TABLE>

<TABLE>
<CAPTION>
                                           NOTES RECEIVABLE   ACCUMULATED   
                                            FROM EMPLOYEES   COMPREHENSIVE  
                                                                INCOME      
                                           ------------------------------- 
<S>                                        <C>                   <C>          
Balance at December 31, 1995               $     (670)           $  (450)     
Net loss                                           --                 --      
Sale of Class A and B common stock                (57)                --      
Purchase of Class A and B treasury stock           67                 --      
Foreign currency translation adjustment            --               (233)     
Conversion of Series A preferred stock             --                 --      
Issuance of Class A stock in connection                                     
   with purchase of Converterscan                  --                 --      
Issuance of Class A common stock under                                      
   dividend reinvestment program                   --                 --      
Cash dividends                                     --                 --      
Write-off of foreign currency adjustment to                                 
   discontinued operations                         --                683      
                                           -----------------------------
Balance at December 31, 1996                     (660)                --      
Net income                                         --                 --      
Cancellation of Class B Common stock in                                     
   connection with sale of Plastics Group          --                 --      
Cancellation of notes receivable from                                       
   employees in connection with sale of                                     
   Plastics Group                                 660                 --      
Cash dividends                                     --                 --      
Foreign currency translation adjustment            --               (309)     
Conversion of Series A preferred stock             --                 --      
Issuance of Class A common stock                   --                 --      
Purchase of Class A treasury stock                 --                 --      
Issuance of Class A Common stock under                                      
   dividend reinvestment plan                      --                 --      
Unrealized appreciation on marketable                                       
   securities                                      --              1,274      
                                           -------------------------------- 
Balance at December 31, 1997               $       --            $   965      
Net income                                         --                 --      
Sale of Class A common stock                       --                 --      
Purchase of Class A treasury stock                 --                 --      
Foreign currency translation adjustment            --               (246)     
Decrease in unrealized appreciation of                                      
   marketable securities                           --             (1,210)     
                                                                            
Issuance of Class A Common stock under                                      
   dividend reinvestment plan                      --                 --      
Redemption of preferred stock                      --                 --      
Issuance of Class A common stock for                                        
   acquisitions                                    --                 --      
Issuance of Class A restricted shares                                       
   to employees                                    --                 --      
Stock options issued in acquisitions               --                 --      
Cash dividends                                     --                 --      
Other                                              --                 --      
                                           ================================ 
Balance at December 31, 1998               $       --            $  (491)     
                                           ================================ 
</TABLE>
                                           
See accompanying notes.



                                       27
<PAGE>   29





                                  Schawk, Inc.
                      Consolidated Statements of Cash Flows
                                 (In Thousands)
<TABLE>
<CAPTION>
                                                                                     Years Ended December 31
                                                                               1998         1997           1996
                                                                            -------------------------------------
<S>                                                                         <C>           <C>           <C>       
OPERATING ACTIVITIES
Net income (loss)                                                           $  17,698     $   12,149    $ (24,984)
Adjustments to reconcile net income (loss) to cash provided by
   (used in) operating activities:
     Depreciation and amortization                                              7,741          6,949       15,435
     Deferred income taxes                                                     (1,031)         1,104         (762)
     Deferred income taxes of Plastics business for sale                           --             --        3,811
     Other                                                                         --             --        1,378
     Loss on disposal of discontinued operations                                   --             --       33,000
     Loss on write-off of equipment                                                --             --        1,050
     Gain realized on sale of marketable securities                            (2,504)        (1,316)          --
     Changes in operating assets and liabilities, net of effects from
       acquisitions:
         Trade accounts receivable                                             (1,445)        (3,590)      13,219
         Inventories                                                             (249)          (789)      11,520
         Prepaid expenses and other                                                47          3,441       (2,279)
         Trade accounts payable and accrued expenses                              295         (1,381)     (12,197)
         Income taxes refundable/payable                                       (3,083)         4,061           --
         Current assets of Plastics Business held for sale                         --             --      (27,495)
         Current liabilities of Plastics Business held for sale                    --             --        7,270
                                                                            -------------------------------------
Net cash provided by (used in) operating activities                            17,469         20,628       18,966
INVESTING ACTIVITIES
Proceeds from sale of division                                                     --         93,485        5,000
Income taxes paid on sale of division                                              --        (16,729)          --
Costs related to sale of division                                                  --         (4,068)          --
Proceeds from sale of marketable securities                                    47,108         12,803           --
Proceeds from disposal of property and equipment                                   --            478          477
Purchase of marketable securities                                             (14,574)       (55,513)          --
Purchases of property and equipment                                            (9,508)        (7,148)     (16,823)
Acquisitions, net of cash acquired                                            (28,607)            --       (6,282)
Proceeds of long-term note collected                                               --             --        4,034
Other                                                                           1,163            (46)       1,353
                                                                            -------------------------------------
Net cash provided by (used in) investing activities                            (4,418)        23,262      (12,241)
FINANCING ACTIVITIES
Proceeds from debt                                                                 --             --        3,860
Issuance of common stock                                                       16,153          1,306           60
Redemption of preferred stock                                                 (14,715)            --           --
Principal payments on debt                                                     (1,911)       (27,401)      (6,732)
Principal payments on capital lease obligations                                  (493)          (392)        (402)
Principal payments on notes payable to stockholders                                --         (5,765)          --
Cash dividends                                                                 (5,893)        (6,295)      (3,969)
Purchase of common stock                                                       (8,127)        (1,804)      (1,427)
Other                                                                             139             --          451
                                                                            -------------------------------------
Net cash provided by (used in) financing activities                           (14,847)       (40,351)      (8,159)
                                                                            -------------------------------------
Net increase (decrease)  in cash and cash equivalents                          (1,796)         3,539       (1,434)
Cash and cash equivalents beginning of period                                   4,022            483        1,917
                                                                            =====================================
Cash and cash equivalents end of period                                     $   2,226     $    4,022    $     483
                                                                            =====================================
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Stock issued in connection with acquisitions                                $   5,017   $         --    $   2,365
Stock options issued in connection with acquisitions                              324             --           --
Dividends issued in the form of Class A common stock                               21              7        2,349
Cash paid for interest                                                          3,023          3,847        4,561
Cash paid for income taxes                                                     15,400         18,365        3,702
Note received for sale of operating division                                       --             --        2,619
</TABLE>


See accompanying notes.



                                       28
<PAGE>   30



                                  Schawk, Inc.
                   Notes to Consolidated Financial Statements
                    (In Thousands, Except Per Share Amounts)

NOTE 1.  BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

Schawk, Inc. (the Company) is a leading provider of digital imaging prepress
services for the consumer products industry in North America. The Company
focuses on providing these services to multi-national clients in three primary
markets: consumer products packaging, advertising agencies and promotion. Until
the sale of the Plastics business segment on February 7, 1997, the Company
operated in two business segments, Imaging and Information Technologies and
Plastics. The Plastics business segment has been reflected in these financial
statements as discontinued operations (see Note 15). All significant
intercompany balances and transactions have been eliminated.

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH EQUIVALENTS

Cash equivalents include highly liquid debt instruments and time deposits with
an original maturity of three months or less. Cash equivalents are stated at
cost, which approximates market.

INVENTORIES

Inventories are stated at the lower of cost or market. Certain inventories,
which approximate 47% of total inventories in 1998 and 34% in 1997 are
determined on the last in, first out (LIFO) cost basis. The remaining
inventories are determined on the first in, first out (FIFO) cost basis.

INVESTMENTS

Investments are recorded in accordance with Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," which requires that investments in debt securities and marketable
equity securities be designated as trading, held-to-maturity or
available-for-sale. Management determines the appropriate classification of its
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. All of the Company's investments were designated as
available-for-sale at December 31, 1998. Available-for-sale securities are
carried at fair value, with unrealized gains and losses, net of income taxes,
reported in a separate component of stockholders' equity. Realized gains and
losses and declines in value judged to be other than temporary are included in
investment income. The cost of securities sold is determined by the specific
identification method. Interest and dividends on available-for-sale securities
are included in investment income.

PROPERTY AND EQUIPMENT

Property and equipment, including capitalized leases, are stated at cost, less
accumulated depreciation and amortization and are 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 40 years.

EXCESS OF COST OVER NET ASSETS ACQUIRED

Excess of cost over net assets acquired (goodwill) is being amortized using the
straight-line method over periods with an average life of 40 years. The Company
continually evaluates the existence of goodwill impairment on the basis of
whether the goodwill is fully recoverable from projected, undiscounted net cash
flows of the related business unit.


                                       29
<PAGE>   31



                                  Schawk, Inc.
                   Notes to Consolidated Financial Statements
                    (In Thousands, Except Per Share Amounts)

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 year-end and income and expenses amounts are
translated at the average of the monthly exchange rates. Adjustments resulting
from the translation of foreign currency financial statements are included in
accumulated comprehensive income (loss) as a component of stockholders' equity.

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
enacted 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.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles 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.

COMPREHENSIVE INCOME

As of January 1, 1998 the Company adopted Statement of Financial Accounting
Standards (SFAS 130) No. 130, "Reporting Comprehensive Income." SFAS 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of SFAS 130 had no impact on the Company's
net income or shareholder's equity. SFAS 130 requires unrealized gains and
losses on the Company's available-for-sale securities and foreign currency
translation adjustments to be included in comprehensive income. Prior year
financial statements have been reclassified to conform to the requirements of
SFAS 130.

The components of comprehensive income (loss), net of related tax, for the years
ended December 31, 1998 and 1997 and 1996 are as follows:


<TABLE>
<CAPTION>
                                                      1998            1997         1997
                                                   ---------------------------------------
<S>                                                <C>              <C>          <C>       
Net income (loss)                                  $   17,698       $12,149      $(124,984)
Increase (decrease) in unrealized
appreciation of available-for-sale securities          (1,210)        1,274              0
   
Foreign currency translation adjustments                 (247)         (309)             0
                                                   =======================================
Comprehensive income (loss)                        $   16,241       $13,114      $(124,984)
                                                   =======================================
</TABLE>



                                       30
<PAGE>   32



                                  Schawk, Inc.
                   Notes to Consolidated Financial Statements
                    (In Thousands, Except Per Share Amounts)

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The components of accumulated comprehensive income (loss), net of related tax,
at December 31, 1998 and 1997 are as follows:


<TABLE>
<CAPTION>
                                                       1998            1997
                                                    ------------------------
<S>                                                 <C>               <C>   
Unrealized appreciation of investments              $       64        $1,274
Foreign currency translation adjustments                  (555)         (309)
                                                    ========================
Accumulated comprehensive income (loss)             $     (491)          965
                                                    ======================== 
</TABLE>

NOTE 3.  ACQUISITIONS

The following acquisitions made during 1996 and 1998 have been accounted for
using the purchase method of accounting (no acquisitions were made during 1997).
Accordingly, the purchase price has been allocated to the respective net assets
acquired based on the fair value of such assets, including certain noncompete
agreements and liabilities as of the date of the acquisitions, and the results
of operations have been included in the accompanying consolidated statements of
operations from the effective date of the acquisitions. Pro-forma financial
information has not been presented because the effects of the operations of the
acquired companies prior to the date of acquisition were not significant.

<TABLE>
<CAPTION>
                                                   1998           1996
                                                 -------        --------
<S>                                              <C>            <C>     
Fair  value of assets  acquired,  net of cash
   acquired of $2,230 in 1998 and $84 in 1996    $18,109        $  9,490

Cost in excess of net assets acquired             22,904          10,134

Liability assumed                                 (7,066)        (10,977)

Stock  options  issued  in  connection   with
   acquisition                                      (324)              0

Class A common  stock  issued  (395 shares in
   1998 and 305 shares in 1996)                   (5,016)         (2,365)
                                                 -----------------------

Cash paid, net of cash acquired                  $28,607        $  6,282
                                                 =======================
</TABLE>

NOTE 4.  RELATED PARTY TRANSACTIONS

Included in prepaid expenses and other at December 31, 1998 and 1997, was
approximately $369 and $781, respectively, of advances to Geneva Waterfront,
Inc., which is owned by a stockholder of the Company. Interest is charged on
these balances at the prime rate.

The Company had approximately $5,765 in notes payable to certain stockholders at
December 31, 1996, payable with interest at 5%. Interest expense related to
these notes was $0, $32 and $288 for 1998, 1997 and 1996, respectively. These
notes were paid on February 7, 1997.

The Company also leases land and a building from a related party, see Note 12.


                                       31
<PAGE>   33

                                  Schawk, Inc.
                   Notes to Consolidated Financial Statements
                    (In Thousands, Except Per Share Amounts)

NOTE 5.  INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                         1998              1997
                                                     ---------------------------
<S>                                                  <C>                  <C>   
                 Raw materials                       $   1,429            $1,239
                 Work in process                         5,706             4,130
                                                     ---------------------------
                                                         7,135             5,369
                 Less:  LIFO reserve                    (1,187)             (905)
                                                     ---------------------------
                                                     $   5,948            $4,464
                                                     ===========================
</TABLE>

NOTE 6.  PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>

                                                                                  DECEMBER 31,
                                                                             1998            1997
                                                                         ---------------------------
<S>                                                                      <C>                <C>     
                 Land and improvements                                   $   1,125          $    520
                 Buildings and improvements                                  7,850             7,872
                 Machinery and equipment                                    60,241            49,567
                 Leasehold improvements                                      5,054             3,998
                 Building and improvements under capital leases              7,500             7,500
                                                                         ---------------------------
                                                                            81,770            69,457
                 Accumulated depreciation and amortization                 (45,349)          (39,310)
                                                                         ===========================
                                                                         $  36,421          $ 30,147
                                                                         ===========================
</TABLE>

Accumulated depreciation and amortization includes $3,161 and $2,746 for
building and improvements under capital leases at December 31, 1998 and 1997,
respectively. Depreciation and amortization expense for property and equipment
was $6,723, $5,976 and $6,407 in 1998, 1997 and 1996, respectively (1996
represents continuing operations only).

NOTE 7. INVESTMENTS

At December 31, 1998 and 1997 all of the Company's securities were classified as
available for sale. Unrealized appreciation on these securities totaled $107 and
$2,124 ($64 and $1,274 net of tax effect) at December 31, 1998 and 1997,
respectively, and is included in accumulated comprehensive income (loss) in
stockholders' equity.






                                       32
<PAGE>   34




                                  Schawk, Inc.
                   Notes to Consolidated Financial Statements
                    (In Thousands, Except Per Share Amounts)

NOTE 7. INVESTMENTS (CONTINUED)

The following table summarizes available-for-sale securities at December 31,
1998 and 1997:

<TABLE>
<CAPTION>
                                                                    1998
                                             ---------------------------------------------------
                                                 Cost        Gross Unrealized     Estimated Fair
                                                                   Gains                Value
                                                                 (Losses)
                                             ---------------------------------------------------
<S>                                          <C>                <C>               <C>         
Equity securities and equity mutual funds    $        58        $     (31)        $         27
U.S. Treasury and U.S. Government notes                0                0                    0
Corporate bonds                                        0                0                    0
Bond mutual funds                                 15,972              138               16,110
                                             -------------------------------------------------
                                             $    16,030        $     107         $     16,137
                                             =================================================

<CAPTION>
                                                                    1997
                                             ---------------------------------------------------
                                                   Cost      Gross Unrealized  Estimated Fair
                                                                   Gains            Value
                                             ---------------------------------------------------
<S>                                          <C>                <C>               <C>      
Equity securities and equity mutual funds    $     8,923        $   1,642         $  10,565
U.S. Treasury and U.S. Government notes            5,446               39             5,485
Corporate bonds                                    4,263               26             4,289
Bond mutual funds                                 25,411              417            25,828
                                             ---------------------------------------------------
                                             $    44,043        $   2,124         $  46,167
                                             ===================================================
</TABLE>


During the years ended December 31, 1998 and 1997, marketable equity securities
were sold with a gross realized gains of $2,504 and $1,316 respectively which is
included in other income in the accompanying consolidated statement of
operations.

The following table is a summary of available-for-sale securities at December
31, 1998 and 1997 by maturity date:

<TABLE>
<CAPTION>
                                                                  1998
                                             --------------------------------------------------
                                                   Cost                    Estimated Fair Value
                                             --------------------------------------------------
<S>                                          <C>                                  <C>      
Due in one year or less                      $    12,344                          $  12,586
Due after one year through five years              3,628                              3,524
Due after five years through ten years                 0                                  0
                                             --------------------------------------------------
Total debt securities                             15,972                             16,110
Equity securities                                     58                                 27
                                             ==================================================
                                             $    16,030                          $  16,137
                                             ==================================================

<CAPTION>
                                                                    1997
                                             --------------------------------------------------
                                                   Cost                    Estimated Fair Value
                                             --------------------------------------------------
<S>                                          <C>                                  <C>      
Due in one year or less                      $    12,907                          $  13,026
Due after one year through five years             21,498                             21,853
Due after five years through ten years               715                                723
                                             --------------------------------------------------
Total debt securities                             35,120                             35,602
Equity securities                                  8,923                             10,565
                                             ==================================================
                                             $    44,043                          $  46,167
                                             ==================================================
</TABLE>


                                       33
<PAGE>   35

                                  Schawk, Inc.
                   Notes to Consolidated Financial Statements
                    (In Thousands, Except Per Share Amounts)

NOTE 8.  ACCRUED EXPENSES

Accrued expenses consist of the following:



<TABLE>
<CAPTION>
                                                                                DECEMBER 31,     
                                                                           1998             1997 
                                                                        -------------------------
<S>                                                                     <C>                <C>   
                           Accrued compensation and payroll taxes       $  6,558           $5,215
                           Other                                           5,133            2,913
                                                                        -------------------------
                                                                        $ 11,691           $8,128
                                                                        =========================
</TABLE>                   

NOTE 9.  LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                  DECEMBER 31,
                                                                              1998          1997
                                                                        -------------------------

<S>                                                                     <C>               <C>    
                           Series A senior note payable                 $ 10,000          $10,000
                           Series B senior note payable                   30,000           30,000
                                                                        -------------------------
                                                                          40,000           40,000
                           Loss amounts due in one year or less           (5,000)              --
                                                                        -------------------------
                                                                        $ 35,000          $40,000
                                                                        =========================
</TABLE>

The Company entered into a senior note agreement for $10,000 Series A senior
notes and $30,000 Series B senior notes. The Series A notes bear interest at
6.58% and are payable in annual installments of $5 million in 1999 and 2000. The
Series B notes bear interest at 6.98% and are payable in annual installments of
$6 million from 2001 to 2005. The notes may be prepaid in whole or in part at
any time. Borrowings under the Series A and B senior notes are unsecured but are
subject to certain restrictive covenants. In addition, the agreement requires
the Company to maintain certain net worth and other financial ratio
requirements. The fair value of the senior notes approximates carrying value at
December 31, 1998 and 1997.

Annual maturities of long-term debt at December 31, 1998 are as follows:

<TABLE>
<CAPTION>
<C>                                                        <C>     
2000                                                       $  5,000
2001                                                          6,000
2002                                                          6,000
2003                                                          6,000
2004                                                          6,000
Thereafter                                                    6,000
                                                           --------
                                                           $ 35,000
                                                           ========
</TABLE>

The Company has an unsecured $10 million line of credit with a bank in the
United States and unsecured Cdn$10.0 million line of credit with a bank in
Canada to provide financing and working capital flexibility. Advances under the
Canadian line of credit bear interest at either the Canadian prime rate or the
bank's cost of funds plus 0.625% at the option of the Company and is due on
demand. The interest rate on the Canadian advances at December 31, 1998 was
6.05%. At December 31, 1998, the Company had $2,941 outstanding under the
Canadian line of credit and no amounts outstanding under the United States line
of credit.

                                       34
<PAGE>   36

                                  Schawk, Inc.
                   Notes to Consolidated Financial Statements
                    (In Thousands, Except Per Share Amounts)

NOTE 10.  STOCKHOLDERS' EQUITY

Stockholders' equity includes the following:

<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,
                                                                                  1998               1997
                                                                               --------------------------
<S>                                                                            <C>                <C>    
Common stock:
Class A voting, $0.008 par value, 40,000,000 shares authorized; 22,709,594 and
   20,353,291 shares issued at December 31, 1998 and 1997, respectively;
   21,871,458 and 19,915,693 shares outstanding at
   December 31, 1998 and 1997, respectively                                    $   181            $   160
                                                                               ==========================

Preferred stock, 1,000,000 shares authorized:
Series A, $0.01 par value, 0 and 15,400 shares issued and outstanding at
   December 31, 1998 and 1997, respectively                                    $    --            $    --
Series B, $0.01 par value, 0 and 5,207 shares issued and outstanding at
   December 31, 1998 and 1997                                                       --                 --
                                                                               --------------------------
                                                                               $    --            $    --
                                                                               ==========================
Treasury stock:
   898,136 and 313,197 shares of Class A common stock at December 31,
   1998 and 1997, respectively                                                 $11,426            $ 3,320
                                                                               ==========================
</TABLE>

NOTE 11.  INCOME TAXES

The provision (credit) for income taxes for continuing operations is comprised
of the following:

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                         1998             1997             1996
                                                   ---------------------------------------------
<S>                                                <C>                 <C>               <C>    
                  Current:
                     Federal                       $       9,571       $   6,217         $   102
                     State                                 1,520             759             376
                     Foreign                                 666             216              (5)
                                                   ---------------------------------------------
                                                          11,757           7,192             473

                  Deferred:
                     Federal                                 165             978           2,767
                     State                                    26             120              18
                     Foreign                                 102               7             272
                                                   ---------------------------------------------
                                                             293           1,105           3,057
                                                   ---------------------------------------------
                     Total                         $      12,050          $8,297         $ 3,530
                                                   =============================================
</TABLE>





                                       35
<PAGE>   37




                                  Schawk, Inc.
                   Notes to Consolidated Financial Statements
                    (In Thousands, Except Per Share Amounts)

NOTE 11.  INCOME TAXES (CONTINUED)

Components of deferred income tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                                                                 DECEMBER 31,
                                                                           1998               1997
                                                                        ----------------------------
<S>                                                                     <C>                 <C>     
     Current deferred income taxes:
        Inventory                                                       $     215           $     51
        Accruals and reserves not currently deductible                        604                353
        Foreign taxes                                                          11                139
                                                                        ----------------------------
     Net current asset                                                  $     830           $    543
                                                                        ============================
                                                                                      

     Noncurrent deferred income taxes:
        Depreciation                                                    $     331           $    187
        Property and equipment acquisition
           basis differences                                               (1,618)            (1,585)
        Unrealized gains on marketable securities                             (43)              (850)
        Other                                                              (2,319)            (1,908)
                                                                        ----------------------------
      Net noncurrent liability                                          $  (3,649)          $ (4,156)
                                                                        ============================
</TABLE>

A 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:

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                              1998              1997             1996
                                                                        ---------------------------------------------
<S>                                                                           <C>              <C>               <C>  
         Income taxes at statutory rate                                       35.0%            35.0%             34.0%
         Nondeductible expenses                                                1.1              --                1.7
         State income taxes                                                    4.8              4.3               4.4
         Other                                                                (0.4)             1.3              (1.1)
                                                                        ---------------------------------------------
                                                                              40.5%            40.6%             39.0%
                                                                        =============================================
</TABLE>

The undistributed earnings of foreign subsidiaries were approximately $1,043 and
$737 at December 31, 1998 and 1997, respectively. No income taxes are provided
on the undistributed earnings because they are considered permanently invested.
The foreign component of income before income taxes was $1,810 for 1998 and $556
for 1997 and $669 for 1996.

NOTE 12.  LEASES AND COMMITMENTS

The Company leases land and a building from an unrelated party. This lease
requires monthly installments of approximately $57 through January 2010. A
related party has an option to purchase the land and building in January 2000.

The Company also leases land and a building from a related party, with monthly
installments of approximately $32 through June 2002. The agreement contains an
option to purchase the land and building at the end of the lease for 90% of fair
market value at the end of the lease. The Company is required to pay utilities,
real estate taxes, and insurance on the property on both leases. Both of these
land and building leases are recorded as capital leases.

                                       36
<PAGE>   38

                                  Schawk, Inc.
                   Notes to Consolidated Financial Statements
                    (In Thousands, Except Per Share Amounts)

NOTE 12.  LEASES AND COMMITMENTS (CONTINUED)

The Company also leases various plant facilities and equipment under
noncancellable operating leases that expire at various dates through February
2010. Total rent expense incurred under all operating leases was approximately
$1,389, $971 and $660 for the years ended December 31, 1998, 1997 and 1996,
respectively.

Future minimum payments under leases with terms of one year or more are as
follows at December 31, 1998:

<TABLE>
<CAPTION>
                                                          CAPITAL             OPERATING 
                                                           LEASES              LEASES
                                                     ----------------------------------
<C>                                                  <C>                     <C>       
1999                                                 $        1,128          $    1,615
2000                                                          1,110               1,759
2001                                                          1,052               1,545
2002                                                            790               1,582
2003                                                            579               1,139
Thereafter                                                    3,510                 190
                                                     ----------------------------------
                                                              8,169         $     7,830
                                                                            ===========

Less:  Amounts representing interest                          2,940
                                                     --------------
                                                              5,229
Less:  Current portion                                          610
                                                     --------------
                                                     
                                                     $        4,619
                                                     ==============
</TABLE>

NOTE 13.  EMPLOYEE BENEFIT PLANS

The Company has various defined-contribution plans for the benefit of its
employees. The plans provide a 100% match of employee contributions based on a
discretionary percentage determined by management. The matching percentage of
wages (as defined) was 5% in 1998 4% in 1997 and 2% in 1996. Contributions to
the plans were $1,357, $987 and $435 in 1998, 1997 and 1996 (continuing
operations in 1997 and 1996), respectively.

The Company is required to contribute to certain defined benefit union pension
plans under various labor contracts covering union employees. Pension expense
related to the union plans of continuing operations, which is determined based
upon payroll data, was approximately $1,036, $777 and $545 in 1998, 1997 and
1996, respectively.

NOTE 14.  STOCK/EQUITY OPTION PLANS

The Company has an Equity Option Plan that provides for the granting of options
to purchase up to 2,252 shares of Class A common stock to key employees. The
Company has 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 these plans 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 and vest over a
three-year period.



                                       37
<PAGE>   39




                                  Schawk, Inc.
                   Notes to Consolidated Financial Statements
                    (In Thousands, Except Per Share Amounts)


NOTE 14.  STOCK/EQUITY OPTION PLANS (CONTINUED)

A summary of options outstanding at each of the three years ended December 31,
1998, 1997 and 1996, and other data for the three years then ended under all
option plans is as follows:

<TABLE>
<CAPTION>
                                                 Outstanding options
                                                  of Class A Common   Weighted average
                                                        stock          exercise price
                                                 -------------------------------------
<S>                                                       <C>                 <C> 
Balance, December 31, 1995                                1,050               9.11
Granted                                                     185               7.14
Exercised                                                   (10)              6.00
Cancelled                                                   (53)              9.47
                                                 --------------

Balance, December 31, 1996                                1,172               8.80

Granted                                                     269               8.04
Exercised                                                  (160)              8.18
Cancelled                                                  (622)              7.75
                                                 --------------

Balance, December 31, 1997                                  659               8.80

Granted                                                     172              11.88
Exercised                                                   (18)              8.00
Cancelled                                                  (124)             14.87
                                                 --------------
Balance, December 31, 1998                                  689               9.29
                                                 ==============
</TABLE>

The following table summarizes information concerning outstanding and
exercisable options at December 31, 1998:

<TABLE>
<CAPTION>
                            Options Outstanding                                          Options Exercisable
-----------------------------------------------------------------------------    ------------------------------------
    Range of                          Weighted average     Weighted average                        Weighted average
 exercise price       Number       remaining contractual    exercise price           Number         of exercisable
                    outstanding         life (years)                               exercisable          price
----------------- ---------------- ----------------------- ------------------    ---------------- -------------------
<S>               <C>                        <C>           <C>                   <C>              <C>       
   $6 - $9               356                 7.6           $      7.85                  270       $       7.86
    9 - 12               313                 7.3                 10.56                  210              10.12
   12 - 15                20                 9.4                 14.66                    7              14.66
                  ----------------                                               ----------------
                         689                                                            487
                  ================                                               ================
</TABLE>

Options available for grant under the plans were 1,563, 1,717 and 588 at
December 31, 1998, 1997 and 1996, respectively. Options exercisable under the
plans were 460 in 1997 and 1,009 in 1996.

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25), in accounting for its
employee stock options because, as discussed below, the alternative fair value
accounting provided for under Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation (Statement 123)," requires the use
of option-valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the number of shares is fixed and the
exercise price of the Company's employee stock options approximates the market
price of the underlying stock on the date of grant, no compensation is
recognized.



                                       38
<PAGE>   40



                                  Schawk, Inc.
                   Notes to Consolidated Financial Statements
                    (In Thousands, Except Per Share Amounts)

NOTE 14.  STOCK/EQUITY OPTION PLANS (CONTINUED)

Pro forma information regarding net income and earnings per share is required by
Statement 123 as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1994, under the fair value method of that
Statement. For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the vesting period.

The Company's pro forma information follows:

<TABLE>
<CAPTION>
                                                                   1998             1997              1996
                                                               --------------------------------------------
<S>                                                            <C>               <C>              <C>      
       Income from continuing operations                       $  17,698         $  12,149        $   5,526
       Pro forma income from continuing operations                17,426            11,912            5,397
       Earnings per share from continuing operations
          Basic                                                $    1.07         $    0.56        $    0.22
          Diluted                                              $    1.06         $    0.55        $    0.22
       Pro forma earnings per share from continuing
          Operations
          Basic                                                $    1.05         $    0.54        $    0.21
          Diluted                                              $    1.04         $    0.54        $    0.21
</TABLE>

The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option valuation model with the following assumptions:

<TABLE>
<CAPTION>
                                                            1998             1997              1996
                                                          ---------------------------------------------
<S>                                                         <C>               <C>              <C> 
Expected dividend yield                                     3.0%              3.0%             3.0%
Expected stock price volatility                            33.94%            25.7%            39.7%
Risk-free interest rate range                             5.6%-5.8%         5.8%-6.7%       5.5% - 6.6%
Weighted-average expected life of options                  7 years           7 years          7 years
</TABLE>

Option valuation models require the input of highly subjective assumptions.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate in management's
opinion, the existing method does not necessarily provide a reliable single
measure of the fair value of its employee stock options.

In March 1997, the Company paid $794 to Plastics business segment employees and
cancelled 610 options in connection with the sale of the Plastics Group. The
cash paid was included in the loss on disposal of discontinued operations
presented in the statement of operations for the year ended December 31, 1996.

NOTE 15.  DISCONTINUED OPERATIONS

On February 7, 1997, the Company sold its Plastics business segment for cash
proceeds of $93 million plus working capital adjustments. The Company recorded a
loss in the 1996 statement of operations of $33 million to adjust the carrying
value of the net assets of this business to net realizable value at December 31,
1996, and to reflect the related settlement of shareholder litigation. The
assets, liabilities and results of operations of the Plastics business segment
are classified as discontinued operations.



                                       39
<PAGE>   41



                                  Schawk, Inc.
                   Notes to Consolidated Financial Statements
                    (In Thousands, Except Per Share Amounts)

NOTE 15.  DISCONTINUED OPERATIONS (CONTINUED)

The following is a summary of the Plastics business segment historical results
for 1996:

<TABLE>
<CAPTION>
<S>                                                           <C>    
Net sales                                                     $77,752
Operating income                                                3,572
Income taxes                                                      118
Income from discontinued operations                             2,490
</TABLE>

The difference between the income tax expense of the Plastics business segment
at the federal statutory rate and the actual rate is due to nondeductible
amortization and depreciation of purchase accounting adjustments and the lower
tax rates of its Puerto Rico and European divisions.

NOTE 16.  EARNINGS PER SHARE

Basic earnings per share and diluted earnings per share are shown on the face of
the statement of operations. Basic earnings per share is computed by dividing
net income less preferred dividends by the weighted average shares outstanding
for the year. Diluted earnings per share is computed by dividing net income less
preferred dividends by weighted average number of common shares and common stock
equivalent shares outstanding (stock options) for the year.

The following table sets forth the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>
                                                           1998                    1997                   1996
                                                       --------------------------------------------------------
<S>                                                    <C>                      <C>                   <C>      
Income from continuing operations                      $    17,698              $  12,149             $   5,526
Preferred stock dividends                                     (114)                (1,140)               (1,250)
Discount on redemption of preferred stock                    5,832                     --                    --
                                                       --------------------------------------------------------

Income available for common shareholders               $    23,416              $  11,009             $   4,276
                                                       ========================================================
(Loss) income from discontinued operations                      --                     --             $ (30,510)
                                                       ========================================================

Weighted average shares                                     21,924                 19,815                19,469
Effect of dilutive employee stock options                      235                     96                    76
                                                       --------------------------------------------------------
Adjusted weighted average shares and
   assumed conversions                                      22,159                 19,911                19,545
                                                       ========================================================

Basic earnings per share- continuing
   operations                                          $      1.07              $    0.56                 $0.22
                                                       ========================================================
Basic earnings (loss) per share- discontinued
   operations                                                   --                     --             $   (1.57)
                                                       ========================================================
Diluted earnings per share- continuing
   operations                                                $1.06              $    0.55             $    0.22
                                                       ========================================================
Diluted earnings (loss) per share- discontinued
   operations                                                   --                     --             $   (1.56)
                                                       ========================================================
</TABLE>



                                       40
<PAGE>   42



                                  Schawk, Inc.
                   Notes to Consolidated Financial Statements
                    (In Thousands, Except Per Share Amounts)

NOTE 16.  EARNINGS PER SHARE (CONTINUED)

Options to purchase 232 shares of Class A common stock at exercise prices
ranging from $9.75-$15 per share were outstanding at December 31, 1997 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 December
16, 2007.

Options to purchase 681 shares of Class A common stock at exercise prices
ranging from $8.18-$15 per share were outstanding at December 31, 1996 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 May 17,
2005.

NOTE 17. SEGMENT REPORTING

Since the disposal of the Plastics business segment on February 7, 1997, the
Company has operated only a single business segment, Imaging and Information
Technologies. Since September 1, 1996 the Company has operated primarily in two
geographic areas, the United States and Canada. Summary financial information
for continuing operations by geographic area for 1998 , 1997 and 1996 is as
follows:

<TABLE>
<CAPTION>
                                      United States        Canada          Total
                                     --------------------------------------------
<S>                                     <C>                <C>            <C>    
1998
Sales                                   123,096            22,293         145,389
Operating income                         25,718             2,590          28,308
Identifiable assets                     119,802            18,708         138,510

1997
Sales                                   $97,964           $18,089        $116,053
Operating income                         19,076               789          19,865
Identifiable assets                     113,166            13,757         126,923

1996
Sales                                    84,588             6,175          90,763
Operating income                         12,612               761          13,373
Identifiable assets                     148,615            12,225         160,840
</TABLE>

Operating income is comprised of total revenues less operating expenses but
before interest, investment income and income taxes. Identifiable assets are
those assets that are identified with the operations in each geographic area and
include cash and marketable securities held at those locations.





                                       41
<PAGE>   43



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

          The Company has no items to report under item 9 of this Annual Report
on Form 10-K.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information regarding directors and persons nominated to become
directors and information regarding executive officers of the Registrant is
included in the Proxy Statement for the Annual Meeting of Stockholders to be
held Wednesday, May 26, 1999, and is to be filed with the Securities and
Exchange Commission on or before April 30, 1999 ("the Proxy Statement"), and
such information is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

         Information with respect to this item is included in the Proxy
Statement under the heading "Executive Compensation" and "Proposal 1; Election
of Directors" and is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information with respect to this item is included in the Proxy
Statement under the heading of "Security Ownership of Certain Beneficial Owners
and Management" and is incorporated herein by reference.

ITEM 13.  CERTAIN TRANSACTIONS                  

         Information with respect to this item is included in the Proxy
Statement under the heading of "Certain Transactions" and is incorporated herein
by reference.


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      The following financial statements are included in Item 8:

         1.  All financial statements

             Reports of independent auditors and independent public accountants

             FINANCIAL STATEMENTS:

             Consolidated Balance Sheets--Years Ended
                      December 31, 1998 and 1997
             Consolidated Statements of Operations--Years Ended
                      December 31, 1998, 1997 and 1996
             Consolidated Statements of Cash Flows--Years Ended
                      December 31, 1998, 1997 and 1996
             Consolidated Statements of Stockholders' Equity--Years Ended
                      December 31, 1996, 1997 and 1998
             Notes to Consolidated Financial Statements


                                       42
<PAGE>   44


         2.  The following financial schedules for the years 1998, 1997 and 
             1996 are submitted herewith:

             SCHEDULE II--Valuation Reserves


 (b)     Reports on Form 8-K

                  The following reports on Form 8-K were filed by the Registrant
         for the fourth quarter of 1998 through the filing date of this
         document:

                  Form 8-K, dated January 28, 1999 Form 8-K, dated March 17,
                  1999

(c)      Exhibits

<TABLE>
<CAPTION>
<S>               <C>                                                                  <C>
                                                                                            INCORPORATED
3.1               Certificate of Incorporation of Schawk, Inc., as amended.            Registration Statement
                                                                                            No. 33-85152
3.3               By-Laws of Schawk, Inc., as amended.                                 Registration Statement
                                                                                            No. 333-39113
4.1               Specimen Class A Common Stock Certificate.                           Registration Statement
                                                                                            No. 33-85152
10.12*            Schawk, Inc. 1988 Equity Option Plan.                                       1988 10-K
10.13a*           First Amendment to Schawk, Inc. 1988 Equity Option Plan.                    1992 10-K
10.13b*           Second Amendment to Schawk, Inc. 1988 Equity Option Plan.            Registration Statement
                                                                                            No. 33-85152
10.22             Lease Agreement dated as of July 1, 1987, and between Process        Registration Statement
                  Color Plate, a division of Schawk, Inc. and The Clarence W.               No. 33-85152
                  Schawk 1979 Children's Trust.
10.23             Lease Agreement dated as of June 1, 1989, by and between             Registration Statement
                  Schawk Graphics, Inc., a division of Schawk, Inc. and C.W.                No. 33-85152
                  Properties.
10.26*            Schawk, Inc. 1991 Outside Directors' Formula Stock Option            Registration Statement
                  Plan, as amended.                                                         No. 33-85152
10.27*            Form of Clarence W. Schawk Amended and Restated Employment           Registration Statement
                  Agreement between Clarence W. Schawk and Schawk, Inc.                     No. 33-85152
10.28*            Form of David A. Schawk Amended and Restated Employment              Registration Statement
                  Agreement between David A. Schawk and Schawk, Inc.                        No. 33-85152
10.31             Form of Registration Rights Agreement dated December 30,             Registration Statement
                  1994, by and among Schawk, Inc. and certain investors.                    No. 33-85152
10.32             Money Market Demand Note dated February 7, 1997 from Schawk,         Registration Statement
                  Inc., borrower, to the Northern Trust Company, lender.                    No. 333-39113
10.33             Demand Note Agreement dated September 12, 1996 between Schawk        Registration Statement
</TABLE>


                                       43
<PAGE>   45
<TABLE>
<CAPTION>
<S>               <C>                                                                  <C>
                                                                                            INCORPORATED
                  Canada, Inc. and First Chicago NBD Canada and related                     No. 33-39113
                  continuing Guaranty of Schawk, Inc.
10.35             Letter of Agreement dated September 21, 1992, by and between         Registration Statement
                  Schawk, Inc. and Judith W. McCue.                                         No. 33-85152
10.37 *           Schawk, Inc. Retirement Trust effective January 1, 1996.                    1996 10-K
10.38 *           Schawk, Inc. Retirement Plan for Imaging Employees Amended                  1996 10-K
                  and Restated effective January 1, 1996.
10.42             Schawk, Inc. Note Agreement dated as of August 18, 1995.                    1996 10-K
10.43             Stockholder Investment Program dated July 28, 1995.                  Registration Statement
                                                                                            No. 33-61375
10.44a            Credit Agreement dated January 23, 1999 by and between                   Form 8-K dated
                  Schawk, Inc. and The First National Bank of Chicago                     January 28, 1999
10.44b            Amendment No. 1 to Credit Agreement dated March 15, 1999 by              Form 8-K dated
                  and between Schawk, Inc. and The First National Bank of                  March 17, 1999
                  Chicago
10.45 *           Schawk, Inc. Employee Stock Purchase Plan effective January          Registration Statement
                  1, 1999                                                                   No. 333-68521
21                List of Subsidiaries.                                                Registration Statement
                                                                                            No. 33-85152
23a               Consent of Expert.
27                Financial Data Schedule - 1998
</TABLE>

* Represents management contract or compensation plan or arrangement required to
be filed pursuant to Item 14
(c)
   of Regulation S-K.



                                       44
<PAGE>   46



Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrants have duly caused this report to be signed on their
behalf by the undersigned, thereunto duly authorized, in Cook County, State of
Illinois, on the 26th day of March, 1999.

Schawk, Inc.

By:  /s/Clarence W. Schawk       
    ------------------------
    Clarence W. Schawk
    Chairman of the Board

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 26th day of March, 1999.


/s/Clarence W. Schawk              Chairman of the Board and Director
--------------------------
Clarence W. Schawk

/s/David A. Schawk                 President, Chief Executive Officer, and 
--------------------------         Director
David A. Schawk

/s/A. Alex Sarkisian, Esq.         Executive Vice President,  Corporate 
--------------------------         Secretary and Director
A. Alex Sarkisian, Esq.

/s/James J. Patterson              Chief Financial Officer, Senior Vice 
--------------------------         President
James J. Patterson

/s/Dennis D. Wilson                Chief Accounting Officer and Director of 
--------------------------         Financial Reporting
Dennis D. Wilson

/s/John T. McEnroe, Esq.           General Counsel,  Assistant Secretary, and 
--------------------------         Director
John T. McEnroe, Esq.

/s/Judith W. McCue, Esq.           Director
--------------------------
Judith W. McCue, Esq.

/s/Robert F. Meinken               Director
--------------------------
Robert F. Meinken

/s/Hollis W. Rademacher            Director
--------------------------
Hollis W. Rademacher




                                       45
<PAGE>   47




                                  Schawk, Inc.

                        SCHEDULE II --VALUATION RESERVES

                         ALLOWANCE FOR DOUBTFUL ACCOUNTS

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                           --------------------------------------------------------------
                                                              1998                     1997                     1996
                                                              ----                     ----                     ----
                                                                                   (In thousands)
<S>                                                        <C>                     <C>                       <C>    
Balance beginning of year                                  $   464                 $    760                  $   984
Provision                                                      266                      (45)                    (153)
Deductions                                                      --                     (251) (1)                 (71) (1)
                                                           --------------------------------------------------------------
Balance end of year                                        $   730                 $    464                  $   760
</TABLE>

(1) Uncollectible accounts written off, net of recoveries.

                         INCOME TAX VALUATION ALLOWANCE

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                           --------------------------------------------------------------
                                                              1998                     1997                     1996
                                                              ----                     ----                     ----
                                                                                   (In thousands)

<S>                                                        <C>                     <C>                       <C>    
Balance beginning of year                                  $     0                 $      0                  $   550
Provision                                                       --                       --                       --
Deduction                                                       --                       --                     (550)
Other                                                           --                       --                       --
                                                           --------------------------------------------------------------
Balance end of year                                        $     0                 $      0                  $     0

</TABLE>

(1) Includes effect of foreign currency fluctuations and utilization of net
operating losses.






                                       46