<PAGE>   1
 
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                            ------------------------
 
     (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, 1997 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)
 
<TABLE>
<S>                                                         <C>
                      DELAWARE                                                   36-2545354
           (State or other jurisdiction of                                    (I.R.S. Employer
           incorporation or organization)                                    Identification No.)
       1695 RIVER ROAD, DES PLAINES, ILLINOIS                 60018
       (Address of principal executive office)             (Zip Code)
</TABLE>
 
Registrant's telephone number, including area code:        (847) 827-9494
 
Securities registered pursuant to Section 12 (b) of the Act:
 
<TABLE>
<CAPTION>
                 TITLE OF EACH CLASS                                NAME OF EXCHANGE ON WHICH REGISTERED
                 -------------------                                ------------------------------------
<S>                                                         <C>
        Class A Common Stock, $.008 par value                              New York Stock Exchange
</TABLE>
 
     INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.       YES 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 12, 1998, OF THE VOTING STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANTS WAS APPROXIMATELY $108,829,000.
 
THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK
                           AS OF MARCH 12, 1998, ARE:
 
            22,268,401 SHARES, CLASS A COMMON STOCK, $.008 PAR VALUE
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
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<CAPTION>
                                                                       PART AND ITEM NUMBER OF
                          DOCUMENT                                FORM 10-K INTO WHICH INCORPORATED
                          --------                                ---------------------------------
<S>                                                             <C>
1. Proxy Statement for the 1998 Annual Meeting of
   Stockholders to be held May 27, 1998 (the "Proxy
   Statement")..............................................    Part III, Items 10, 11, 12 and 13.
</TABLE>
 
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                                SCHAWK, INC.

                           FORM 10-K ANNUAL REPORT

                              TABLE OF CONTENTS

                              DECEMBER 31, 1997


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<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          21
       Item 8. Financial Statements and Supplementary Data                         21
       Item 9. Changes in and Disagreements with Accountants on Accounting           
               and Financial Disclosures                                           44
                                                                                     
PART III                                                                             
                                                                                     
       Item 10.Directors and Executive Officers of the Registrant                  44
       Item 11.Executive Compensation                                              44
       Item 12.Security Ownership of Certain Beneficial Owners and Management      44
       Item 13.Certain Transactions                                                44
                                                                                     
PART IV                                                                              
                                                                                     
       Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K     44
</TABLE>
<PAGE>   3

                                    PART I

ITEM 1.  BUSINESS

 THE COMPANY

         Schawk, Inc. ("Schawk" or the "Company") has one current operating
business segment, the Imaging and Information Technologies Group (the "Imaging
Group"). 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 a leading provider of digital imaging prepress services
for the consumer products industry in the United States and Canada. The
Company's facilities produce conventional, electronic and desktop color
separations, electronic production design, film preparation, platemaking and
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, art production 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 1997, 1996 and 1995. The balance of the Company's business consists of
the production of similar services for point-of-sale, advertising and direct
mail.

         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 prepress 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 increasingly
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 and CD-ROM.

         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 $1.0 billion to $1.3 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 $50.0 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 primarily on the food and beverage segment of the
consumer products industry, where packaging requirements are more 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.

THE COMPANY'S GROWTH STRATEGY

         The Company's primary goal is to enhance its leadership positions in
the prepress imaging market for the consumer products industry.  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 44-year
                 business history, the Company has integrated more than 25
                 prepress and imaging businesses into its operations while
                 streamlining overhead and improving margins. 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
        




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<PAGE>   5

                 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 and
                 established client lists and/or new technologies. 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, particularly in
                 the packaging and image database management markets. 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. 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 following is a partial listing of the
                 Company's on-site locations:

                                        Brachs & Brock Confections, Inc.
                                        Campbell Soup Company
                                        International Home Foods
                                        The Keebler Company
                                        Nabisco Foods Group
                                        Pepsico, Inc.
                                        Pillsbury, Inc.
                                        The Quaker Oats Company
                                        Stouffer Foods Corporation

                 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
                 strongly enhanced. The Company has also formed a start-up
                 operation for a client located in Queretaro, Mexico (near
                 Mexico City).

         -       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,
        




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                 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

         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 as art production and various related outsourcing services.





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<PAGE>   7


         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,
particularly Fortune 1000 clients who need to ensure worldwide quality and
consistency in the packaging and related imagery of their products. Consumer
products have no consistent size, shape, color or packaging material. To
achieve its clients' varying requirements, 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 increasingly global needs of particular
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.

         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





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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 60 employees 
                 on-site at or near 23 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 
                 clients elects 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 44-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 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





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<PAGE>   9

                 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 both
                 domestically and internationally.
        
ACQUISITIONS AND START-UP OPERATIONS

         The Company has acquired and integrated more than 25 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 1996, the Company made three acquisitions: Converterscan,
StanMont, Inc., and Stebbins Photography. Converterscan, previously based in
Stamford, Connecticut, and Atlanta, Georgia, has expertise in digital imaging
and a strong client base. Its two operating facilities and production and sales
organization have been consolidated with the Company's LSI/Atlanta operation in
Georgia. StanMont, Inc. is based in Montreal, Quebec and has five operating
entities or divisions: CyberImages (Toronto), Batten Graphics (Toronto),
PrinterNet (Toronto), Fishbowl Productions (Toronto) and XZact (Montreal) which
will continue as freestanding facilities. StanMont has a Canadian presence with
a strong client base as well as operations with which to serve the imaging
needs of Schawk's consumer products clients in Canada. StanMont and Batten
Graphics/CyberImages currently have significant relationships with advertising
and catalog clients, and offer further growth opportunities in the packaging
market. Stebbins Photography is a digital photography studio in Minneapolis,
Minnesota. Stebbins Photography has a strong reputation in the emerging digital
photography area. The Converterscan, StanMont and Stebbins acquisitions were
made to expand the client base, enhance the Company's technical capabilities
and services and increase its geographic presence with its multi-national
client base.

         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.

         The Company intends to continue expanding through acquisitions of
well-managed companies with solid market positions and established client lists
and/or new technologies. 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, 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.





                                      8
<PAGE>   10

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 92 direct salespersons and 118 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 considers its start-up prepress and imaging operation in Mexico and
alliance agreements with servicing partners in Europe, the Far East and
Australia unique and increasingly important aspects of its marketing and
distribution capabilities.

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 23 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 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 1997, 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 from three sources: other independent
color separators; converters and printers that have prepress service
capabilities; and consumer products companies who are able to use developing
technologies to execute these services in-house.

         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





                                      9
<PAGE>   11

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.

         In the past, the Company has faced competition from clients who have
sought to reduce costs by performing color separation services in-house.
However, 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, 1997, the Company had approximately 890 full-time
employees. Of this number, approximately 36% 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. One
is subject to renegotiation in 1998 and three are subject to renegotiation
during 1999-2000. The Company considers its relationships with its employees
and unions to be good.

BACKLOG

         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")





                                      10
<PAGE>   12

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. The Company concluded that its managerial and
financial resources could be more productively invested in the Company's
primary competency, imaging technologies.

         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.

         Plastic Molded Concepts (PMC) of Eagle, Wisconsin was sold on May 1,
1996, to a management buyout group.

         As a result of the sale of the entire Plastics Business Segment in
1996, the Company has now strategically focused in one product segment, imaging
and information technologies.





                                      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

Carmel, Indiana                782   Leased   Sales and Service      October 1998      Weston Engraving
                                              Office                                   Company, Inc.

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

Covington, Kentucky            200   Leased   Sales Offices          Month to month    LSI/Kala

Rosemont, Illinois           3,500   Leased   Warehouse              March 1998        Corporate

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

Roseville, Minnesota        16,000   Leased   General Offices,       May 1997          Dimension Imaging
                                              Operating Facility
</TABLE>



                                      12
<PAGE>   14


<TABLE>
<S>                            <C>       <C>     <C>                      <C>              <C>          
Smyrna, Georgia                 20,000    Leased    General Offices,       October 1998     LSI/Atlanta
                                                    Operating Facility                      Converterscan

Toronto, Ontario, Canada        30,000    Leased    General Offices,       December 2004    Batten Graphics
                                                    Operating Facility                      CyberImages
                                                                                            Fishbowl
                                                                                            PrinterNet
</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 (which is not anticipated to occur prior to May 1, 1998).


     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, 1997.





                                      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,
                                1996      1996        1996            1996          1997       1997          1997           1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>        <C>         <C>           <C>            <C>          <C>          <C>          <C>
Net sales (a)                  $19,280    $21,629     $22,972       $26,882        $26,192      $29,397      $29,568       $30,896
Cost of sales (a)               11,453     11,900      13,045        14,755         15,163       16,167       16,523        17,391
                               -----------------------------------------------------------------------------------------------------
Gross Profit                     7,827      9,729       9,927        12,127         11,029       13,230       13,045        13,505

Income from continuing
  operations                     1,001      1,510       1,644         1,371          1,890        3,017        3,312         3,930
Net income (loss) (b)            1,588      2,211       2,221       (31,004)         1,890        3,017        3,312         3,930
Earnings per share from
  continuing operations
  Basic                           0.04       0.06        0.07          0.05           0.08         0.14         0.15          0.18
  Diluted                         0.04       0.06        0.07          0.05           0.08         0.14         0.15          0.18
Earnings per share            
  Basic                           0.07       0.10        0.10         (1.58)          0.08         0.14         0.15          0.18
  Diluted                         0.07       0.10        0.10         (1.58)          0.08         0.14         0.15          0.18
</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)  A charge of $33,000 was taken in the fourth quarter of 1996 related to
     the sale of the plastics business segment and the related settlement of
     shareholder litigation. Also included is a charge of $1,050 for the
     write-off of obsolete equipment ($630 after taxes).


<TABLE>
<CAPTION>
DIVIDENDS DECLARED
------------------------------------------------------------------------------------------------------------------------------------
                                                                 Per Class A Common Share
Quarter Ended:                                                     1997          1996
------------------------------------------------------------------------------------------------------------------------------------
<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:                                                   1997 High/Low       1996 High/Low
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                    <C>
March 31                                                    $      9  -  7 5/8     $9 3/8  -  6 3/4
June 30                                                        9 1/8  -  7 3/4      9 1/4  -  7 5/8
September 30                                                 11 7/16  -  8          8 3/4  -  7 1/8
December 31                                                   12 5/8  - 10 3/8      8 7/8  -  6 5/8
</TABLE>


The Registrant's stock is listed on the NYSE. The Registrant has approximately 
2,500 stockholders as of March 12, 1998.






                                      14
<PAGE>   16

ITEM 6.  SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>
Year Ended December 31,                          1997        1996         1995         1994 Pro     1994        1993
(In Thousands, Except Per Share Amounts)       Historical  Historical    Historical    Forma (c)  Historical  Historical
                                              ----------------------------------------------------------------------------
<S>                                           <C>          <C>         <C>             <C>        <C>         <C>
CONSOLIDATED INCOME STATEMENT
INFORMATION (A)
  Net Sales                                    $116,053    $ 90,763     $ 87,204       $103,889    $103,889    $ 95,809
  Operating Income                               19,865      13,373       11,022         22,689      20,309      16,276
  Income From Continuing Operations Before 
    Income Taxes                                 20,446       9,056        7,243         18,372      15,991      12,680
  Income Taxes                                    8,297       3,530          945 (b)      6,944       3,722 (d)     601
  Income From Continuing Operations              12,149       5,526        6,298         11,428      12,269      12,079
  Income From Continuing Operations Per
    Common Share (f)
    Basic                                      $   0.56    $   0.22     $   0.26             --          --          --
    Diluted                                        0.55        0.22         0.26             --          --          --

PRO FORMA INFORMATION
(CONTINUING OPERATIONS)
  Pro Forma Income Taxes (e)                         --          --           --             --       6,396       5,072
  Pro Forma Net Income Adjusted Only for
    Income Taxes (e)                                 --          --           --             --       9,595       7,608
  Pro Forma Net Income Per Share From
    Continuing Operations                            --          --           --       $   0.51          --          --

CONSOLIDATED BALANCE SHEET 
INFORMATION (G)
  Working Capital                              $ 26,283    $ 21,881     $ 26,875             --    $ 25,753    $ 30,049
  Total Assets                                  126,923     160,840      184,463             --     193,925     180,193
  Long-Term Debt, Capital Lease Obligations 
    and Redeemable Preferred Stock               44,854      67,785       75,582             --      81,090      83,271
  Stockholders' Equity                           55,908      48,926       76,429             --      75,590      51,119

OTHER  DATA
  Cash Dividends per Common Share (f)          $   0.26    $   0.26     $   0.26             --          --          --
  Depreciation and Amortization (g)               6,949      15,435       16,219             --    $ 14,866    $ 15,336
  Capital Expenditures (g)                        7,148      16,823       11,027             --      13,882      19,066
</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 1993-1994. 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 the Merger on
     December 30, 1994, dividends per share and income per share data is not
     meaningful and has not been presented for 1994 and prior.

(g)  Includes data from the discontinued Plastics Group from 1993-1996.




                                      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 success
of the Company's growth strategy, the ability of the Company to exploit
industry trends, such as outsourcing, and the Company's exploitation of
technological advancements in the imaging industry, 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 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. Plastic Molded
Concepts, a division of the Plastics Business Segment located in Eagle,
Wisconsin, was sold on May 1, 1996, to a management buyout group. On December
19, 1996, the Company announced the sale of the remaining 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 1997 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,
                                      ------------------------------    
                                        1995      1996      1997
                                      ------------------------------    
<S>                                    <C>       <C>       <C>
Net sales                               100.0%    100.0%    100.0%
Cost of sales                            58.6      56.4      56.2
Gross profit                             41.4      43.6      43.8
Selling, general and administrative      28.8      27.8      26.7
Write-off of equipment                     --       1.1        --
Operating income                         12.6      14.7      17.1
Income from continuing operations
before income taxes                       8.3      10.0      17.6
Income from continuing operations         7.2       6.1      10.5
Net income (loss)                         8.0%    (27.5)%    10.5%
</TABLE>

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% 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 the application
of the proceeds of 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 a $30.5 million loss from the Plastics
Business Segment.






                                      17
<PAGE>   19

1996 COMPARED TO 1995

     Net Sales.  Sales for 1996 were $90.8 million, up 4.1% over 1995 sales of
$87.2 million. Sales increased primarily as a result of the acquisition of
Converterscan of Stamford, Connecticut and Atlanta, Georgia (August 1996) and
StanMont Inc. of Montreal, Quebec and Toronto, Ontario (September 1996). These
acquisitions were included in the Company's results during the third quarter
and increased sales in the fourth quarter of 1996 by 32% from $20.3 million in
sales during the fourth quarter of 1995 to $26.9 million for the comparable
quarter of 1996.

     Internal growth, which was negative during the first six months of 1996,
increased in the last half of 1996 as new projects and promotions came on
stream with the Company's pre-existing consumer products clients.

     Operating Income.  Operating income for 1996 was $13.4 million, a gain of
21.3% as compared to 1995 operating income of $11.0 million. The operating
margin in 1996 of 14.7% increased over 1995 operating margin of 12.6%. The
operating gain was due to improved operating efficiencies in the Company's
plants as capacity utilization on new and existing electronic equipment
improved and the Company was able to hold selling, general and administrative
costs flat when compared with 1995.

     Additionally, the Company made a decision to write off approximately $1.1
million of obsolete electronic equipment that was taken out of service in
several plants due to newer, more efficient equipment going on-line. Without
the write-off, operating income would have been $14.4 million in 1996, a gain
of 30.9% over 1995 operating income of $11.0 million. The operating margin
comparison without the write-off for obsolete equipment for 1996 would have
been 15.9% versus 1995 operating margin of 12.6%.

     Income from Continuing Operations Before Income Taxes.  Income from
continuing operations before income taxes for 1996 was $9.1 million, a gain of
25.0% over 1995 income of $7.2 million. This is a pretax income margin for 1996
of 10% versus the 1995 pretax income margin of 8.3%. Interest expense in 1996
was 8.2% higher than 1995, increasing from $4.3 million in 1995 to $4.7 million
in 1996 due to increased borrowings from acquisition-related debt. Without the
write-off of obsolete equipment of approximately $1.1 million, pretax income
for 1996 would have been $10.1 million, a gain of 39.5% over 1995 pretax income
of $7.2 million. The pretax margin without the write-off for obsolete equipment
for 1996 would have been 11.1% as compared to 1995 margin of 8.3%.

     Income from Continuing Operations.  Income from continuing operations for
1996 was $5.5 million as compared to $6.3 million in 1995. Excluding the
write-off of obsolete equipment in 1996, income from continuing operations
would have been $6.6 million, an increase of 4.4% compared to 1995 income of
$6.3 million. Excluding the write-off of equipment in 1996 and the benefit of
net operating loss carryforwards in 1995, income from continuing operations in
1996 would have been $6.6 million, an increase of 40.9%, compared to 1995
income of $4.7 million.

     Net Income (Loss).  Net loss for 1996 of $25.0 million contains a $33.0
million loss ($1.67 loss per share) on the disposal of the Plastics Business
Segment and the related stockholder litigation settlement. The 1996 loss on the
disposal of discontinued operations contains a write-down of assets to
estimated net realizable value and provides for income taxes and other costs of
disposing of this business.

LIQUIDITY AND CAPITAL RESOURCES

     The Company presently finances its business from available cash held by
the Company 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, 1997 and the Canadian credit facility had approximately U.S. $2.3
million available at December 31, 1997.

     On February 7, 1997, the Company received proceeds from the sale of the
Plastics Business Segment of $93.5 million plus working capital adjustments.
Long-term debt and capital lease obligations decreased to $44.9 million at
December 31, 1997 from $67.8 million at December 31, 1996 as the Company repaid
debt with proceeds from the sale of the Plastics Business Segment. The Company
had $16.3 million of available cash and short-term investments at December 31,
1997.





                                      18
<PAGE>   20

     The Company held invested balances (including $12 classified as short-term
investments) of $46.2 million in bond mutual funds, equity mutual funds, U.S.
Treasury and U.S. Government notes, corporate bonds and equity securities.
These funds are available for sale to provide for acquisitions and corporate
requirements. Unrealized appreciation on these investments of $2.1 million
($1.3 million net of tax effects) at December 31, 1997, has been excluded from
earnings in the Company's consolidated statement of operations and has been
included as a separate component of stockholders' equity.  In January 1998, the
Company entered into a 90 day options collar agreement to hedge the impact of
market volatility in the investment in equity mutual funds.  The cost of the
contract was $17 and it limits the Company's losses on its equity mutual fund
to $148 over the life of the contract.

     The Company repaid on or about February 7, 1997, the following debts out
of a portion of the proceeds of the sale of the Plastics Business Segment: (i)
the balance outstanding on a $55.0 million multi-currency Revolving Credit
Agreement was paid in-full and the agreement was canceled; (ii) the interest
rate swap agreement (floating to fixed) was made whole and canceled; and (iii)
all notes payable related to unpaid 1994 S corporation dividends were paid in
full and the notes were canceled.

     At December 31, 1997, 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 $4.7 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 1997 of
$7.1 million, in 1996 of $9.0 million, and in 1995 of $5.4 million. Capital
expenditures were made in 1997 and 1995 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 $6.9 million for 1997, $7.4 million in 1996, and  $7.5 million in
1995.

     Acquisition costs, including liabilities assumed and common stock issued,
during 1996 were $19.6 and were negligible in 1997 and 1995.

     The Company repurchased $1.8 million of Class A Common Stock during 1997,
$1.4 million during 1996 and $1.7 million during 1995 under a share repurchase
program approved by the Board of Directors.

YEAR 2000 COMPLIANCE

     The Company has upgraded or replaced its computer software applications
and systems which the Company believes accommodates the "Year 2000" dating
changes necessary to permit correct recording of year dates for 2000 and later
years.  The Company does not expect that additional costs with regard to year
2000 compliance will be material to its financial condition or results of
operations.  The Company does not currently anticipate any material disruption
in its operations as the result of any failure by the Company to be in
compliance.  The Company does not currently have any information concerning the
compliance status of its suppliers and customers.

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 $16.2 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.




                                      19
<PAGE>   21

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. However, this did not occur during the fourth quarter of
1997 and the Company believes that this seasonal effect on the Company's
revenues will be less pronounced in the future as a result of frequent
redesigns of packaging for promotional and other reasons.

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.











                                      20
<PAGE>   22

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             22
Report of Independent Auditors                                    23


FINANCIAL STATEMENTS

Consolidated Balance Sheets --
               December 31, 1997 and 1996                         24

Consolidated Statements of Operations -- Years Ended
               December 31, 1997, 1996 and 1995                   25

Consolidated Statements of Stockholders' Equity -- Years Ended
               December 31, 1995, 1996, and 1997                  26

Consolidated Statements of Cash Flows -- Years Ended
               December 31, 1997, 1996 and 1995                   27

Notes to Consolidated Financial Statements                        29


FINANCIAL STATEMENT SCHEDULES

SCHEDULE II -- Valuation Reserves                                 48
                                                                  




                                      21
<PAGE>   23

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.




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




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








                                      22
<PAGE>   24

                         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, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997. 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, 1997 and 1996, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997, 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 13, 1998                                             Ernst & Young LLP













                                      23
<PAGE>   25


                                  Schawk, Inc.
                          Consolidated Balance Sheets
                           (In Thousands of Dollars)


<TABLE>
<CAPTION>
                                                                              DECEMBER 31
                                                                            1997        1996
                                                                        -----------------------
<S>                                                                     <C>         <C>
ASSETS
Current assets:
   Cash and cash equivalents                                              $  4,022    $    483
   Short term investments                                                   12,250          --
   Trade accounts receivable, less allowance for doubtful accounts       
     of $464 in 1997 and $760 in 1996                                       22,884      19,294
   Inventories                                                               4,464       3,675
   Prepaid expenses and other                                                2,817       6,258
   Current assets of Plastics business held for sale                            --      27,495
   Deferred income taxes                                                       543         590
                                                                          --------------------  
Total current assets                                                        46,980      57,795

Marketable securities                                                       33,917          --
Property and equipment, net                                                 30,147      27,453
Property and equipment of Plastics business held for sale                       --      48,788
Excess of cost over net assets acquired, less accumulated amortization
   of $4,207 in 1997 and $3,449 in 1996                                     12,713      13,158
Other assets of Plastics business held for sale                                 --       9,593
Other assets                                                                 3,166       4,053
                                                                          --------------------  
Total assets                                                              $126,923    $160,840
                                                                          ====================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Trade accounts payable                                                 $  3,393    $  4,116
   Accrued expenses                                                          8,128       8,786
   Income taxes payable                                                      4,061          --
   Notes payable to stockholders                                                --       5,765
   Current liabilities of Plastics business held for sale                       --       7,270
   Notes payable to banks                                                    4,685       9,586
   Current portion of long-term debt and capital lease obligations             430         391
                                                                          --------------------  
Total current liabilities                                                   20,697      35,914


Long-term debt                                                              40,000      62,500
Capital lease obligations                                                    4,854       5,285
Other                                                                        1,308       1,217
Deferred income taxes                                                        4,156       3,187
Deferred income taxes of Plastics business held for sale                        --       3,811

STOCKHOLDERS' EQUITY:
   Common stock                                                                160         168
   Preferred stock                                                              --          --
   Additional paid-in capital                                               79,243      77,928
   Accumulated deficit                                                     (21,140)    (26,987)
   Unrealized gain on available for sale securities                          1,274          --
   Cumulative foreign currency translation adjustment                         (309)         --
                                                                          --------------------  
                                                                            59,228      51,109
   Treasury stock, at cost                                                  (3,320)     (1,523)
   Notes receivable from employees                                              --        (660)
                                                                          --------------------  
                                                                            55,908      48,926
                                                                          --------------------  
   Total liabilities and stockholders' equity                             $126,923    $160,840
                                                                          ====================          
</TABLE>

See accompanying notes.

<PAGE>   26

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


<TABLE>
<CAPTION>

                                                                       YEAR ENDED DECEMBER 31
                                                                     1997       1996        1995
                                                             ------------------------------------------ 
<S>                                                               <C>        <C>          <C>
Net sales                                                          $116,053   $ 90,763     $87,204
Cost of sales                                                        65,244     51,153      51,066
Selling, general, and administrative expenses                        30,944     25,187      25,116
Write-off of equipment                                                   --      1,050          --
                                                                 ---------------------------------              
Operating income                                                     19,865     13,373      11,022

Other income (expense):
  Interest and dividend income                                        2,980        340         532
  Interest expense                                                   (3,688)    (4,657)     (4,306)
  Other income (expense)                                              1,289         --          (5)
                                                                 ---------------------------------              
                                                                        581     (4,317)     (3,779)
                                                                 ---------------------------------              

Income from continuing operations before income taxes                20,446      9,056       7,243

Income tax provision before net operating loss carryforwards          8,297      3,530       2,577
Benefit of net operating loss carryforwards                              --         --      (1,632)
                                                                 ---------------------------------              

Income from continuing operations                                    12,149      5,526       6,298

Income (loss) from discontinued operations:
  Income from discontinued operations                                    --      2,490         638
  Loss on disposal of discontinued operations                            --    (33,000)         --
                                                                 ---------------------------------              

Net income (loss)                                                  $ 12,149   $(24,984)    $ 6,936
                                                                 =================================

Earnings (loss) per share:
  Basic - Continuing operations                                    $   0.56   $   0.22     $  0.26
          Discontinued operations                                        --      (1.57)       0.03
                                                                 ---------------------------------              
                                                                   $   0.56   $  (1.35)    $  0.29
                                                                 =================================
  Diluted - Continuing operations                                  $   0.55   $   0.22     $  0.26
            Discontinued operations                                      --      (1.56)       0.03
                                                                 ---------------------------------              
                                                                   $   0.55   $  (1.34)    $  0.29
                                                                 =================================
Dividends per Class A common share                                 $   0.26   $   0.26     $  0.26
</TABLE>



See accompanying notes.

                                                                             


                                      25

<PAGE>   27

                                 Schawk, Inc.
               Consolidated Statements of Stockholders' Equity
                Years Ended December 31, 1995, 1996, and 1997
                          (In Thousands of Dollars)




<TABLE>
<CAPTION>
                                                       CLASS A  CLASS B   SERIES A   SERIES B   ADDITIONAL                   
                                                       COMMON   COMMON   PREFERRED  PREFERRED    PAID-IN   ACCUMULATED       
                                                        STOCK    STOCK      STOCK      STOCK     CAPITAL    DEFICIT          
                                                    -----------------------------------------------------------------------
<S>                                                    <C>      <C>       <C>        <C>      <C>        <C>                 
Balance at December 31, 1994                            $155     $ 9        $--        $--     $75,412    $  3,971
Net income                                                --      --         --         --          --       6,936
Sale of Class A and B common stock                        --      --         --         --          95          --
Purchase of Class A and B treasury stock                  --      --         --         --          --          --
Cumulative foreign currency translation adjustment        --      --         --         --          --          --
Conversion of Series A preferred stock                     1      --         --         --          (1)         --
Issuance of Class A common stock under dividend
  reinvestment program                                    --      --         --         --          --      (1,333)
Cash dividends                                            --      --         --         --          --      (5,001)
                                                        ----------------------------------------------------------
Balance at December 31, 1995                             156       9         --         --      75,506       4,573
Net loss                                                  --      --         --         --          --     (24,984)
Sale of Class A and B common stock                        --      --         --         --          60          --
Purchase of Class A and B treasury stock                  --      --         --         --          --          --
Cumulative 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)
Cash dividends                                            --      --         --         --          --      (3,969)    
Write-off of foreign currency adjustment to
  discontinued operations                                 --      --         --         --          --          --
                                                        ----------------------------------------------------------
Balance at December 31, 1996                             159       9         --         --      77,928     (26,987)
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)
Cumulative 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                        --      --         --         --          --          --
Issuance of Class A Common stock under dividend
  reinvestment plan                                       --      --         --         --          --          (7)
Unrealized appreciation on marketable securities          --      --         --         --          --          --
                                                        ----------------------------------------------------------
Balance at December 31, 1997                            $160     $--        $--        $--     $79,243    $(21,140)
                                                        ==========================================================



<CAPTION>
                                                                 UNREALIZED   CUMULATIVE               
                                                                  GAIN ON      FOREIGN                    NOTES 
                                                                 AVAILABLE-    CURRENCY                 RECEIVABLE
                                                                 FOR-SALE     TRANSLATION  TREASURY       FROM
                                                                SECURITIES     ADJUSTMENT   STOCK       EMPLOYEES
                                                               --------------------------------------------------------
<S>                                                            <C>          <C>           <C>            <C>               
Balance at December 31, 1994                                    $   --        $(947)       $(2,325)        $(685)
Net income                                                          --           --             --            --
Sale of Class A and B common stock                                  --           --            130          (130)
Purchase of Class A and B treasury stock                            --           --         (1,833)          145
Cumulative foreign currency translation adjustment                  --          497             --            --
Conversion of Series A preferred stock                              --           --             --            --
Issuance of Class A common stock under dividend           
  reinvestment program                                              --           --          1,333            --
Cash dividends                                                      --           --             --            --
                                                                ------------------------------------------------
Balance at December 31, 1995                                        --         (450)        (2,695)         (670)
Net loss                                                            --           --             --            --
Sale of Class A and B common stock                                  --           --             57           (57)
Purchase of Class A and B treasury stock                            --           --         (1,492)           67
Cumulative 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                                              --           --          2,607            --
Cash dividends                                                      --           --             --            --
Write-off of foreign currency adjustment to               
  discontinued operations                                           --          683             --            --
                                                                ------------------------------------------------
Balance at December 31, 1996                                        --           --         (1,523)         (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                                                      --           --             --            --
Cumulative foreign currency translation adjustment                  --         (309)            --            --
Conversion of Series A preferred stock                              --           --             --            --
Issuance of Class A common stock                                    --           --             --            --
Purchase of Class A treasury stock                                  --           --         (1,804)           --
Issuance of Class A Common stock under dividend           
  reinvestment plan                                                 --           --              7            --
Unrealized appreciation on marketable securities                 1,274           --             --            --
                                                                ------------------------------------------------
Balance at December 31, 1997                                    $1,274        $(309)       $(3,320)        $  --
                                                                ================================================
</TABLE>

See accompanying notes.




                                      26
<PAGE>   28
                                  Schawk, Inc.
                      Consolidated Statements of Cash Flows
                            (In Thousands of Dollars)

<TABLE>
<CAPTION>

                                                                                        YEAR ENDED DECEMBER 31
                                                                                 1997             1996             1995
                                                                       ----------------------------------------------------

<S>                                                                             <C>             <C>               <C>
   OPERATING ACTIVITIES
   Net income (loss)                                                             $12,149         $ (24,984)        $  6,936
   Adjustments to reconcile net income (loss) to cash provided by 
     operating activities:
       Depreciation and amortization                                               6,949            15,435           16,219
       Deferred income taxes                                                       1,104              (762)            (138)
       Deferred income taxes of Plastics business held for sale                       --             3,811               --
       Other                                                                          --             1,378              243
       Loss on disposal of discontinued operations                                    --            33,000               --
       Loss on write-off of equipment                                                 --             1,050               --
       Gain realized on sale of marketable securities                             (1,316)               --               --
       Changes in operating assets and liabilities, net of effects 
         from acquisitions:
           Trade accounts receivable                                              (3,590)           13,219            1,356
           Inventories                                                              (789)           11,520            2,272
           Prepaid expenses and other                                              3,441            (2,279)               1
           Trade accounts payable and accrued expenses                            (1,381)          (12,197)            (934)
           Income taxes payable                                                    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 operating activities                                      20,628            18,966           25,955

   INVESTING ACTIVITIES
   Purchase of marketable securities                                             (55,513)               --               --
   Proceeds from sale of investments                                              12,803                --               --
   Purchases of property and equipment                                            (7,148)          (16,823)         (11,027)
   Cash proceeds from disposals of property and equipment                            478               477               96
   Acquisitions, net of cash acquired                                                 --            (6,282)            (395)
   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 of long term note collected                                               --             4,034               --
   Other                                                                             (46)            1,353              475
                                                                       ----------------------------------------------------
   Net cash provided by (used in) investing activities                            23,262           (12,241)         (10,851)
</TABLE>



   (CONTINUED ON NEXT PAGE)


                                       27

<PAGE>   29
                                  Schawk, Inc.
                      Consolidated Statements of Cash Flows
                            (In Thousands of Dollars)
                         (Continued from previous page)

<TABLE>
<CAPTION>


                                                                                       YEAR ENDED DECEMBER 31
                                                                               1997              1996            1995
                                                                    ----------------------------------------------------

<S>                                                                          <C>            <C>                <C>
FINANCING ACTIVITIES                                                                                               
Proceeds from debt                                                                 --             3,860           44,500
Principal payments on debt                                                    (27,401)           (6,732)         (50,538)
Principal payments on capital lease obligations                                  (392)             (402)            (323)
Principal payments on notes payable to stockholders                            (5,765)               --           (3,015)
Cash dividends                                                                 (6,295)           (3,969)          (5,002)
Purchase of common stock                                                       (1,804)           (1,427)          (1,688)
Issuance of common stock                                                        1,306                60               94
Other                                                                              --               451              497
                                                                    ----------------------------------------------------
Net cash used in financing activities                                         (40,351)           (8,159)         (15,475)
                                                                    ----------------------------------------------------
Net increase (decrease) in cash and cash equivalents                            3,539            (1,434)            (371)
Cash and cash equivalents beginning of year                                       483             1,917            2,288
                                                                    ----------------------------------------------------
Cash and cash equivalents end of year                                        $  4,022       $       483        $   1,917
                                                                    ====================================================

SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Issuance of note in connection with acquisition                              $     --       $        --        $     807
Dividends issued in the form of Class A common stock                                7             2,349            1,333
Stock issued in connection with acquisition                                        --             2,365               --
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 the United States and Canada. The
Company offers a complete line of prepress services, digital image management,
art production, digital photography and products for the production of consumer
product packaging and related marketing and advertising materials. 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 34% of total inventories in 1997 and 1996 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, 1997. 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 ranging from 10 to 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. Gains and losses
resulting from the translation of foreign currency financial statements are
deferred and classified as a separate 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.

EARNINGS PER SHARE

The Company adopted Statement of Financial Accounting Standards Board No. 128,
"Earnings Per Share" (SFAS 128) which required that the Company change the
method used to compute earnings per share and to restate all prior periods. The
calculation of earnings per share under SFAS 128 is disclosed in Note 16. SFAS
128 did not have a material effect on the earnings per share previously
disclosed in the Company's financial statements in 1995 or 1996 or for any of
the quarters of 1997.

NOTE 3.  ACQUISITIONS

The following acquisitions have been accounted for using the purchase method of
accounting. 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 income 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.




                                       30


<PAGE>   32





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


NOTE 3.  ACQUISITIONS (CONTINUED)

STANMONT

Effective September 1, 1996, the Company acquired all of the stock of Stanmont
Inc., which has operations in Montreal and Toronto, Canada. The following
summarizes the purchase price allocation and cash paid.

<TABLE>
<S>                                                                   <C>
   Fair value of assets acquired, net of cash acquired of $74            $7,569
   Cost in excess of net assets acquired                                  4,552
   Liabilities assumed                                                   (7,762)
                                                                      ---------
   Cash paid, net of cash acquired                                       $4,359
                                                                      =========
</TABLE>

CONVERTERSCAN

Effective August 1, 1996, the Company acquired all of the stock of
Converterscan, Inc., which has operations in Stamford, Connecticut, and Atlanta,
Georgia. The following summarizes the purchase price allocation and cash paid.

<TABLE>
<S>                                                                  <C>
   Fair value of assets acquired, net of cash acquired of $10            $1,921
   Cost in excess of net assets acquired                                  5,582
   Liabilities assumed                                                   (3,215)
   Class A common stock issued (305 shares)                              (2,365)
                                                                     ----------
   Cash paid, net of cash acquired                                       $1,923
                                                                     ==========
</TABLE>

NOTE 4.  RELATED PARTY TRANSACTIONS

Included in prepaid expenses and other at December 31, 1997 and 1996, was
approximately $781 and $747, 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.

Stockholders' equity at December 31, 1996 was reduced by approximately $660 for
notes receivable from employees of the discontinued Plastics Group which was
sold on February 7, 1997. The notes were noninterest-bearing demand notes and
were collateralized by Class B common stock. Both the notes receivables and the
Class B common stock were cancelled in connection with the sale.

The Company had approximately $5,765 in notes payable at December 31, 1996,
payable to certain stockholders with interest at 5%. Interest expense related to
these notes was $32, $288 and $328 for 1997, 1996 and 1995, 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,
                                                                  1997           1996
                                                     -------------------------------------

<S>                                                              <C>              <C>
Raw materials                                                    $1,239           $1,512
Work in process                                                   4,130            2,898
                                                     -------------------------------------
                                                                  5,369            4,410
Less:  LIFO reserve                                                (905)            (735)
                                                     -------------------------------------
                                                                 $4,464           $3,675
                                                     =====================================

</TABLE>

NOTE 6.  PROPERTY AND EQUIPMENT

Property and equipment consists of the following:


<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                                 1997              1996
                                                     --------------------------------------

<S>                                                          <C>              <C>
   Land and improvements                                     $      520       $      522
   Buildings and improvements                                     7,872            7,794
   Machinery and equipment                                       49,567           47,370
   Leasehold improvements                                         3,998            3,209
   Building and improvements under capital leases                 7,500            7,500
                                                     --------------------------------------
                                                                 69,457           66,395
   Accumulated depreciation and amortization                    (39,310)         (38,942)
                                                     --------------------------------------
                                                               $ 30,147         $ 27,453
                                                     ======================================
</TABLE>

Accumulated depreciation and amortization includes $2,746 and $2,331 for
building and improvements under capital leases at December 31, 1997 and 1996,
respectively. Depreciation and amortization expense for property and equipment
was $5,976, $6,407 and $13,937 in 1997, 1996 and 1995, respectively (1997 and
1996 represent continuing operations only).

NOTE 7. INVESTMENTS

At December 31, 1997 all of the Company's securities were classified as
available for sale (the Company had no marketable securities at December 31,
1996). Unrealized appreciation on these securities totaled $2,124 ($1,274 net of
tax effect) at December 31, 1997 and is included as a separate component of
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,
1997 

<TABLE> 
<CAPTION>


                                                       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 year ended December 31, 1997, marketable equity securities were sold
with a gross realized gain of $1,316 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, 1997 by maturity date:

<TABLE>
<CAPTION>

                                                             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>

On January 5, 1998 the Company entered into a 90 day options collar agreement to
hedge the impact of market volatility on its investment in equity mutual funds.
The cost of the contract was $17 and it limits the Company's losses on its
equity mutual funds to $148 over the life of the contract.


NOTE 8. ACCRUED EXPENSES

Accrued expenses consist of the following:


<TABLE>
<CAPTION>



                                                                       DECEMBER 31,
                                                                   1997              1996
                                                     -----------------------------------------

<S>                                                             <C>              <C>
   Accrued compensation and payroll taxes                        $5,215           $3,629
   Other                                                          2,913            5,157
                                                     -----------------------------------------
                                                                 $8,128           $8,786
                                                     =========================================
</TABLE>

                                       33


<PAGE>   35




                                  Schawk, Inc.

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


NOTE 9. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>

                                                                    DECEMBER 31,
                                                                1997             1996
                                                     ----------------------------------
<S>                                                           <C>               <C>
Revolving credit facility                                      $    --          $22,500
Series A senior note payable                                    10,000           10,000
Series B senior note payable                                    30,000           30,000
                                                     ----------------------------------
                                                               $40,000          $62,500
                                                     ==================================
</TABLE>

The revolving credit facility was repaid in its entirety (and the credit
facility cancelled) on February 7, 1997 from the proceeds of the sale of the
Plastics business segment.


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 installments of $5 million in 1999 and 2000. The Series
B notes bear interest at 6.98% and are payable in 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 the carrying value at December
31, 1997.

Interest paid on debt during the years ended December 31, 1997, 1996 and 1995
was approximately $3,847, $4,561, $5,071 and respectively.

Annual maturities of long-term debt at December 31, 1997 are as follows:

<TABLE>
<S>                                                         <C>
1998                                                            $    --
1999                                                              5,000
2000                                                              5,000
2001                                                              6,000
2002                                                              6,000
Thereafter                                                       18,000
                                                            -----------
                                                                $40,000
                                                            ===========
</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 rates on the Canadian advances at December 31, 1997 ranged
from 4.7% to 5.0% . At December 31, 1997, the Company had $4,685 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,
                                                                                      1997           1996
                                                                              ---------------------------------


<S>                                                                                <C>              <C>
   Common stock:
   Class A voting, $0.008 par value, 40,000,000 shares authorized; 
     20,353,291 and 20,034,030 shares issued at December 31, 1997 
     and 1996, respectively; 20,040,094 and 19,915,693 shares 
     outstanding at December 31, 1997 and 1996, respectively                        $  160           $  159


   Class B nonvoting, $0.05 par value, 200,000 shares authorized; 172,281 
     shares issued at December 31, 1996; 133,324 shares outstanding at
     December 31, 1996                                                                  --                9
                                                                             ---------------------------------
                                                                                    $  160           $  168
                                                                             =================================
   Preferred stock, 1,000,000 shares authorized:
   Series A, $0.01 par value, 15,400 and 17,600 shares issued and
     outstanding at December 31, 1997 and 1996, respectively                        $   --           $   --
   Series B, $0.01 par value, 5,207 shares issued and outstanding at                    --               --
     December 31, 1997 and 1996
                                                                             ---------------------------------
                                                                                    $   --           $   --
                                                                             =================================

   Treasury stock:
     313,197 and 118,337 shares Class A at December 31, 1997 and 1996,
     respectively, and 38,957 shares Class B at December 31, 1996, at cost          $3,320           $1,523
                                                                             =================================
</TABLE>

The Series A preferred shares are mandatorily redeemable by the Company on
December 31, 2004, or, at the option of the Board, on any December 31, through
December 31, 2003, by issuing to the holder the number of shares of Class A
common stock equal to the sum of $1,000 plus an amount equal to all accumulated
and unpaid dividends per share divided by $13.80, or cash in the amount of the
fair market value, as defined, of the number of shares of Class A common stock.
On December 30, 1997 and 1996, the Company issued 159,420 Class A common shares
in exchange for 2,200 shares of Series A preferred stock. The Series B preferred
shares are mandatorily redeemable by the Company on December 31, 1999, under the
same redemption formula as Series A. The Series B shares are also mandatorily
redeemable on the date of the consummation of any offering or private placement
of the Company's debt or equity the gross proceeds of which exceed $25,000. The
Company shall redeem all outstanding shares of Series B preferred stock with
respect to each such share $1,000 in cash plus all accumulated and unpaid
dividends per share. Dividends shall accrue on each share of preferred stock at
the rate of 5.0% per year and are payable quarterly. Holders of preferred shares
are entitled to limited voting rights.

In the event of liquidation, dissolution or winding up of the Company, the
holders of Series A preferred stock are entitled to be paid out of the assets of
the Company available for distribution to its stockholders before any payment to
any holders of common stock or any holders of Series B preferred stock an amount
equal to $1,000 per share plus all accumulated and unpaid dividends.



                                       35

<PAGE>   37



                                  Schawk, Inc.

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


NOTE 10.  STOCKHOLDERS' EQUITY (CONTINUED)

Upon the liquidation, dissolution or winding up of the Company, the holders of
Class A common stock are entitled to receive ratably the net assets of the
Company available after the payment of all debts and other liabilities and
subject to the prior rights of any outstanding preferred stock. Thereafter, all
distributions shall be made for the benefit of the holders of Class A common
stock. Subsequent to December 31, 1997 the Company completed an offering of its
Class A common stock and the proceeds were used to redeem all of the Series A
and Series B preferred stock (see Note 18).

The Class B common stock was cancelled in connection with the sale of the
Plastics business segment on February 7, 1997.

NOTE 11.  INCOME TAXES

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

<TABLE>
<CAPTION>

                                                                 YEAR ENDED DECEMBER 31,
                                                          1997              1996          1995
                                               --------------------------------------------------
<S>                                                    <C>              <C>             <C>
Current:
     Federal                                              $6,217          $   102          $1,445
     State                                                   759              376             255
     Foreign                                                 216              (5)              --
                                               --------------------------------------------------
                                                           7,192              473           1,700

Deferred:
     Federal                                                 978            2,767            (642)
     State                                                   120               18            (113)
     Foreign                                                   7              272              --
                                               --------------------------------------------------
                                                           1,105            3,057            (755)
                                               --------------------------------------------------
   Total                                                  $8,297           $3,530         $   945
                                               ==================================================
</TABLE>

The 1995 income tax provision includes a benefit of $1,632 for utilization of
net operating loss carryforwards for which no tax benefit was previously
recorded.











                                       36


<PAGE>   38
                                   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,
                                                                                1997              1996
                                                                       -----------------------------------
<S>                                                                           <C>              <C>
Current deferred income taxes:
     Inventory                                                                  $     51          $     51
     Accruals and reserves not currently deductible                                  353               539
     Foreign taxes                                                                   139                --
                                                                       -----------------------------------
Net current asset                                                               $    543          $    590
                                                                       ===================================

Noncurrent deferred income taxes:
   Depreciation                                                                 $    187          $    667
   Property and equipment acquisition
      basis differences                                                           (1,585)           (1,537)
   Unrealized gains on marketable securities                                        (850)               --
   Other                                                                          (1,908)           (2,317)
                                                                       -----------------------------------
 Net noncurrent liability                                                       $ (4,156)         $ (3,187)
                                                                       ===================================
</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,
                                                                            1997             1996           1995
                                                              -----------------------------------------------------

<S>                                                                        <C>              <C>               <C>
     Income taxes at statutory rate                                         35.0%            34.0%            34.0%
     Net operating loss carryforward not previously benefited                 --               --            (22.5)
     Nondeductible expenses                                                   --              1.7               --
     State income taxes                                                      4.3              4.4              2.3
     Other                                                                   1.3             (1.1)            (0.8)
                                                              -----------------------------------------------------
                                                                            40.6%            39.0%            13.0%
                                                              =====================================================
</TABLE>

The undistributed earnings of foreign subsidiaries were approximately $737 and
$402 at December 31, 1997 and 1996, 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 $556 for 1997 and $669
for 1996 (there was no foreign component of income before income taxes in 1995.)

Income taxes paid during the years ended December 31, 1997, 1996 and 1995 were
approximately $18,365, $3,702, and $1,379, respectively.


                                       37


<PAGE>   39





                                  Schawk, Inc.

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


NOTE 12.  LEASES AND COMMITMENTS

The Company leases land and a building from an unrelated party. This lease
requires monthly installments of approximately $48 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.

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
$971, $660, and $1,076 for the years ended December 31, 1997, 1996 and 1995,
respectively.

Future minimum payments under leases with terms of one year or more are as
follows at December 31, 1997:

<TABLE>
<CAPTION>

                                                             CAPITAL          OPERATING
                                                              LEASES           LEASES
                                                     -----------------------------------

<S>                                                          <C>          <C>
1998                                                           $    959           $  607
1999                                                                959              268
2000                                                                959              268
2001                                                                959              161
2002                                                                767              161
Thereafter                                                        4,093              318
                                                     ------------------------------------
                                                                  8,696           $1,783
                                                                          ===============

Less:  Amounts representing interest                              3,412
                                                     ------------------
                                                                  5,284
Less:  Current portion                                              430
                                                     ------------------
                                                               $  4,854
                                                     ==================

</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 4% in 1997, 2% in 1996 and 5% in 1995. Contributions to
the plans were $987, $435 and $1,534 in 1997, 1996 and 1995 (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 $777, $545, and $566 in 1997, 1996 and
1995, respectively.



                                       38


<PAGE>   40


                                  Schawk, Inc.

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


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. In addition, options totaling 124 shares are
outstanding which were granted to former employees. 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.

A summary of options outstanding at each of the three years ended December 31,
1997, 1996 and 1995, and other data for the three years then ended under all
option plans is as follows:

<TABLE>
<CAPTION>


                                                     Outstanding
                                                  options of Class A    Weighted average
                                                     Common stock        exercise price
                                                 -----------------------------------------

<S>                                              <C>                   <C>
Balance, December 31, 1994                                    931              $9.37
Granted                                                       146               7.82
Exercised                                                      --                 --
Cancelled                                                     (27)              9.78
                                                 ----------------
                                                      
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               9.66
                                                 ================

</TABLE>


                                       39


<PAGE>   41





                                  Schawk, Inc.

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


NOTE 14.  STOCK/EQUITY OPTION PLANS (CONTINUED)

The following table summarizes information concerning outstanding and
exercisable options at December 31, 1997:

<TABLE>
<CAPTION>

                            Options Outstanding                                           Options Exercisable
--------------------------------------------------------------------------------     -----------------------------------------

    Range of                           Weighted average           Weighted                                   Weighted
    exercise          Number        remaining contractual     average exercise            Number            average of
     price          outstanding          life (years)              price                exercisable     exercisable price
---------------- ---------------------------------------------------------------     -----------------------------------------
<S>                     <C>                  <C>                 <C>                        <C>              <C>
   $6 - $9              369                  8.3                 $ 7.86                     180              $ 7.94
    9 - 12              166                  6.6                   9.74                     156                9.66
   12 - 15              124                  2.6                  14.87                     124               14.87
                 -----------------                                                   -----------------
                        659                                                                 460
                 =================                                                   =================
</TABLE>

Options available for grant under the plans were 1,717, 588, and 773, at
December 31, 1997, 1996 and 1995, respectively.

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 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. 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>

                                                                   1997              1996
                                                          ----------------------------------------

<S>                                                             <C>                   <C>
Income from continuing operations                               $12,149               $ 5,526
Pro forma income from continuing operations                     $11,912               $ 5,397
Basic earnings per share from continuing operations             $  0.56               $  0.22
Diluted earnings per share from continuing                      $  0.55               $  0.22
  operations
Pro forma basic and diluted earnings per share from
continuing operations                                           $  0.54               $  0.21

</TABLE>



                                       40


<PAGE>   42
                                  Schawk, Inc.

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


NOTE 14.  STOCK/EQUITY OPTION PLANS (CONTINUED)

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>

                                                            1997             1996
                                                     -----------------------------------
<S>                                                    <C>              <C>
Expected dividend yield                                     3.0%             3.0%
Expected stock price volatility                            25.7%             39.7%
Risk-free interest rate range                            5.8%-6.7%        5.5% - 6.6%
Weighted-average expected life of options                 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.

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

<TABLE>
<CAPTION>

                                                    1996                    1995
                                               -------------------------------------
<S>                                               <C>                    <C>
Net sales                                          $77,752                $85,086
Operating income                                     3,572                  2,615
Income taxes                                           118                    209
Income from discontinued operations                  2,490                    638
</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.




                                       41

<PAGE>   43



                                  Schawk, Inc.

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


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>

                                                                  1997                    1996                    1995
                                                  -----------------------------------------------------------------------

<S>                                                          <C>                      <C>                     <C>
Income from continuing operations                                 $12,149                $  5,526                  $6,298
Preferred stock dividends                                          (1,140)                 (1,250)                 (1,360)
                                                  -----------------------------------------------------------------------

Income available for common shareholders                          $11,009                $  4,276                  $4,938
                                                  =======================================================================
(Loss) income from discontinued operations                             --                $(30,510)                 $  638
                                                  =======================================================================

Weighted average shares                                            19,815                  19,469                  19,138
Effect of dilutive employee stock options                              96                      76                      65
                                                  -----------------------------------------------------------------------
Adjusted weighted average shares and
       assumed conversions                                         19,911                  19,545                  19,203
                                                  =======================================================================

Basic earnings per share- continuing
       operations                                                   $0.56                   $0.22                   $0.26
                                                  =======================================================================
Basic earnings (loss) per share- discontinued                                            
       operations                                                      --                  $(1.57)                  $0.03
                                                  =======================================================================
Diluted earnings per share- continuing
       operations                                                   $0.55                   $0.22                   $0.26
                                                  =======================================================================
Diluted earnings (loss) per share- discontinued
       operations                                                      --                  $(1.56)                  $0.03
                                                  =======================================================================
</TABLE>

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.

Options to purchase 712 shares of Class A common stock at exercise prices
ranging from $8.18 - $15 per share were outstanding at December 31, 1995 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
17, 2005.



                                       42


<PAGE>   44


                                  Schawk, Inc.

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


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 the acquisition of Stanmont, Inc. on 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 1996 and 1997 is as follows:

<TABLE>
<CAPTION>

                                                               United States       Canada            Total
                                                     ---------------------------------------------------------
<S>                                                            <C>              <C>             <C>
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.

NOTE 18. SUBSEQUENT EVENT

In February 1998 the Company completed a public offering of 3,450 shares of
Class A common stock. The Company issued 1,950 of the shares and certain
stockholders of the Company sold the remaining 1,500 shares. The Company did not
receive any of the proceeds from the sale of stock by the participating
stockholders. The estimated proceeds of the offering to the Company after
deducting estimated underwriting discounts and commissions but before deducting
estimated expenses of the offering of $325 were $16,497,000. The proceeds were
used to redeem all of the Company's outstanding Series A and Series B preferred
stock. The preferred stock was redeemed at a discount of $6,035 from its
liquidation value of $20,607. This discount will be recorded as additional
income (after net income) available to common shareholders in the first quarter
of 1998.

                                       43


<PAGE>   45

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 27, 1998, and is to be filed with the Securities and
Exchange Commission on or before April 30, 1998 ("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 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, 1997 and 1996
                  Consolidated Statements of Operations--Years Ended
                           December 31, 1997, 1996 and 1995
                  Consolidated Statements of Cash Flows--Years Ended
                           December 31, 1997, 1996 and 1995
                  Consolidated Statements of Stockholders' Equity--Years Ended
                           December 31, 1995, 1996 and 1997
                  Notes to Consolidated Financial Statements


                                       44


<PAGE>   46








2.             The following financial schedules for the years 1997, 1996 and 
         1995 are submitted herewith:

               SCHEDULE II--Valuation Reserves


 (b)     Reports on Form 8-K

               No reports on Form 8-K were filed by the Registrant through the
         last quarter of 1997 and first quarter of 1998.

(c)      Exhibits

<TABLE>
                                                                                              INCORPORATED
                                                                                              ------------
<S>              <C>                                                                  <C>
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                        No. 33-85152
                 C.W. 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                         Registration Statement
                 Employment Agreement between Clarence W. Schawk and                          No. 33-85152
                 Schawk, Inc.

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                    Registration Statement
                 Schawk, Inc., borrower, to the Northern Trust Company, lender.               No. 333-39113

10.33            Demand Note Agreement dated September 12, 1996 between                  Registration Statement
                 Schawk 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

</TABLE>



                                       45


<PAGE>   47

<TABLE>
<S>              <C>                                                                    <C>
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

21               List of Subsidiaries.                                                   Registration Statement
                                                                                              No. 33-85152
23a              Consent of Expert.

27               Financial Data Schedule - 1997.

27a              Financial Data Schedule - 1996 Restated
</TABLE>

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


                                       46



<PAGE>   48





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 27th day of March, 1998.

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 27th day of March, 1998.

<TABLE>
<S>                                      <C>
/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.                  President, Imaging Group, 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
</TABLE>


                                       47

<PAGE>   49







                                  Schawk, Inc.

                         SCHEDULE II --VALUATION RESERVES

                         ALLOWANCE FOR DOUBTFUL ACCOUNTS


<TABLE>
<CAPTION>

                                                                               YEAR ENDED DECEMBER 31,
                                                     ---------------------------------------------------------------------------
                                                               1997                       1996                      1995
                                                               ----                       ----                      ----
                                                                                    (In thousands)
<S>                                                            <C>                        <C>                       <C>
Balance beginning of year                                      $760                       $984                      $947
Provision                                                       (45)                      (153)                      217
Deductions                                                     (251)(1)                    (71)(1)                  (180)(1)
                                                     ---------------------------------------------------------------------------
Balance end of year                                            $464                       $760                      $984
</TABLE>

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



                         INCOME TAX VALUATION ALLOWANCE



<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER 31,
                                                     ---------------------------------------------------------------------------
                                                               1997                       1996                      1995
                                                               ----                       ----                      ----
                                                                                    (In thousands)
<S>                                                          <C>                        <C>                      <C>
Balance beginning of year                                    $    0                      $ 550                    $ 4,680
Provision                                                        --                         --                         --
Deduction                                                        --                       (550)                    (1,632)(1)
Other                                                            --                         --                     (2,498)
                                                     ---------------------------------------------------------------------------
Balance end of year                                          $    0                      $   0                    $   550
</TABLE>

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


                                       48