Checkpoint Systems, Inc. Announces Fourth Quarter and Year 2001 Results.Business Editors THOROFARE, N.J.--(BUSINESS WIRE)--Feb. 12, 2002 Checkpoint (programming) checkpoint - Saving the current state of a program and its data, including intermediate results, to disk or other non-volatile storage, so that if interrupted the program could be restarted at the point at which the last checkpoint occurred. Systems, Inc. (NYSE NYSE See: New York Stock Exchange : CKP CKP Checkpoint CKP Crankshaft Position CKP Chandraseniya Kayastha Prabhu (caste of Maharastra, India) CKP Chris Key Players (band) CKP Concept Knowledge Processing ) today reported financial results for the fourth quarter and year ended December 30, 2001. The 2001 results are based on a 13 week fourth quarter and a 52 week year as compared to a 14 week fourth quarter and a 53 week year for 2000. Revenue for the 2001 fourth quarter was $177.3 million versus $188.3 million for the fourth quarter of 2000, a decrease of 5.8%. Foreign exchange had no impact on the revenue for the fourth quarter of 2001 compared to the prior year period. For the fourth quarter 2001, excluding restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and one-time charges, net income was $6.4 million or $0.19 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. This compares to $9.5 million or $0.28 per diluted share, excluding restructuring and one-time charges, in the prior year period. The reported net loss including restructuring and one-time charges was $7.5 million or $0.24 per diluted share for the fourth quarter 2001 and $3.3 million or $0.11 per diluted share in the prior year period. In the fourth quarter of 2001, the Company recorded restructuring and one-time charges totaling $19.3 million related to the consolidation of some of its U.S. and Caribbean manufacturing facilities and the rationalization rationalization, in psychology: see defense mechanism. of certain under-performing sales offices. Included in the charges are severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and post-employment costs ($10.9 million), building exit costs ($1.3 million), and the write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of manufacturing facilities and machinery ($7.1 million). The Company will reduce global headcount by 342 employees (or 8% of the total workforce), including 122 employees in the selling, general, and administrative functions, and 220 employees located in the manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. . The Company expects these actions to be completed by the end of 2002. Gross profit for the fourth quarter of 2001 was $71.4 million or 40.3% of revenue, excluding pre-tax restructuring of $11.4 million. Gross profit was $78.3 million or 41.6% of revenue for the fourth quarter of 2000, excluding pre-tax restructuring and one-time charges of $12.7 million. During the fourth quarter, the Company reduced production volumes to lower inventory levels and generate additional cash flow. The resulting underabsorption of manufacturing overhead combined with higher field service costs negatively impacted gross margins. Selling, general and administrative expenses (SG&A), excluding restructuring and one-time charges of $7.9 million, were $57.7 million or 32.5% of revenue for the fourth quarter of 2001, compared to $56.9 million or 30.2%, excluding restructuring and one-time charges of $7.0 million, for the comparable period last year. During the fourth quarter of 2001, the Company recorded an increase in the reserve for accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying of $1.2 million related to its Argentina operation. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , excluding restructuring and one-time charges, was $13.7 million in the fourth quarter of 2001, as compared to operating income in the fourth quarter of 2000 of $21.4 million, excluding restructuring and one-time charges. Earnings before interest, taxes, depreciation, and amortization Earnings before interest, taxes, depreciation, and amortization (EBITDA) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) before restructuring and one-time charges was $24.6 million in the fourth quarter of 2001, compared to EBITDA, before restructuring and one-time charges, of $32.5 million in the fourth quarter of 2000. As of December 30, 2001, cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments were $43.7 million, working capital was $128.0 million and total long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. was $293.5 million. Capital expenditures in the fourth quarter of 2001 were $1.9 million. Mr. Michael E. Smith, President and Chief Executive Officer of Checkpoint Systems, commented on the quarter, "As we had expected, the continuing soft US apparel and South American retail markets impacted our sales and profitability for the quarter. However, our US EAS (Electronic Article Surveillance) A security system for preventing theft in retail stores that uses disposable label tags or reusable hard tags attached to the merchandise. business and European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. hand-held labeling businesses continued to show strong profitability. Our hand-held labeling business continued to benefit from the Euro conversion that took effect on January 1st." Mr. Smith further commented, "At the start of 2001, one of our stated goals was to maximize cash flow and reduce our debt levels, and we have been very successful on this front. Due to our disciplined working capital management, we generated significant cash flow and repaid $44 million of long-term debt in the quarter. For the year 2001, we generated in excess of $102 million in cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses and repaid $77 million of long-term debt, exceeding our debt reduction goal by over 50%. We achieved these results by reducing our inventory by $26 million and customer receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed by $19 million in 2001." Revenue for 2001 was $658.5 million compared to $690.8 million in 2000. Excluding the impact of foreign exchange of $18.3 million, revenue for 2001 decreased 2.0% compared to 2000. For the full year 2001, excluding restructuring and one-time charges, net income was $21.5 million or $0.66 per diluted share. This compares to $20.2 million or $0.64 per diluted share, excluding restructuring and one-time charges, in 2000. For 2001, the reported net income including restructuring and one-time charges was $6.6 million or $0.21 per diluted share. This compares to a reported net loss, including restructuring, one-time charges and the cumulative effect of change in accounting principle, of $2.8 million or $0.09 per diluted share in 2000. Operating income was $54.4 million, excluding restructuring and one-time charges, for 2001 versus operating income of $56.2 million, excluding restructuring and one-time charges in 2000. Mr. Smith stated, "From a marketplace perspective in 2002, we look forward to building upon our leadership within the security and labeling industries. We are working toward expanding our customer base and providing additional services to current customers across all of our businesses, with particular emphasis on the apparel market. This vertical market represents a significant opportunity for Checkpoint Systems as apparel companies seek to control shrink shrink Vox populi noun A psychiatrist and improve inventory management. Our integrated product offerings within our labeling services segment give us a competitive advantage." Mr. Smith continued, "From a financial perspective in 2002, we intend to concentrate on improving gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. , reducing operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , and generating internal efficiencies. Also throughout 2002, we will maintain our focus on managing working capital to maximize cash flow and pay down debt. Additionally, we intend to leverage our recent product introductions and those scheduled for 2002 to drive growth in 2003." Mr. Smith concluded, "Based on current economic conditions and foreign exchange rates, we expect earnings for the first quarter of 2002 in the range of $0.12 to 0.14 per diluted share (including approximately $0.06 per diluted share benefit from adopting the new accounting pronouncement that discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: the amortization of goodwill) on sales of between $148 million and $152 million. For the year, we project earnings in the range of $0.90 to $1.00 per diluted share (including approximately $0.26 per diluted share benefit from adopting the new accounting pronouncement that discontinued the amortization of goodwill) on sales of between $650 million and $660 million." Checkpoint Systems will host a conference call today, February 12, 2002, at 10:00 a.m. Eastern Time, to discuss its fourth quarter and year 2001 results. The conference call will be simultaneously broadcast live over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . Listeners may access the live webcast at the Company's homepage, www.checkpointsystems.com, by clicking on the "Conference Calls" link or entering the "Investors" section of this site. Please allow 15 minutes prior to the call to visit the site and download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and install any necessary audio software. The webcast will be archived at the Company's homepage beginning approximately 90 minutes after the call ends until the next quarterly conference call. Checkpoint Systems, Inc. is a multinational company that manufactures and markets labeling systems designed to improve efficiency, reduce costs and provide value-added label solutions for customers across many markets and industries. Checkpoint is a leading provider of EAS and RFID (Radio Frequency IDentification) A data collection technology that uses electronic tags for storing data. The tag, also known as an "electronic label," "transponder" or "code plate," is made up of an RFID chip attached to an antenna. systems, source tagging, barcode labeling systems, hand-held labeling systems and retail merchandising merchandising Element of marketing concerned especially with the sale of goods and services to customers. One aspect of merchandising is advertising, which aims to capture the interest of the segment of the population most likely to buy the product. systems. Applications include automatic identification, retail security and pricing and promotional labels. Operating directly in 30 countries, Checkpoint has a global network of subsidiaries and provides professional customer service and technical support around the world. Checkpoint Systems, Inc.'s web site is located at www.checkpointsystems.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement This presentation may include information that could constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Any such forward-looking statements may involve risk and uncertainties that could cause actual results to differ materially from any future results encompassed within the forward-looking statements. Factors that could cause or contribute to such differences include those matters disclosed in the Company's Security and Exchange Commission filings.
Checkpoint Systems, Inc.
Consolidated Statements of Income
(Thousands except per share amounts)
(unaudited)
Quarter Ended Twelve Months Ended
(13 weeks) (14 weeks) (52 Weeks) (53Weeks)
Dec. 30, Dec. 31, Dec. 30, Dec. 31,
2001 2000 2001 2000
---- ---- ---- ----
Net revenues $177,303 $188,271 $658,535 $690,811
Cost of revenues 105,887 109,951 390,887 405,263
Other cost of revenues 11,364 12,700 11,364 12,700
------ ------ ------ ------
Gross profit 60,052 65,620 256,284 272,848
Selling, general
and administrative
expenses 57,685 56,897 213,245 229,390
Other operating
expenses 7,923 6,989 9,530 15,651
----- ----- ----- ------
Operating (loss)/income (5,556) 1,734 33,509 27,807
Interest income 643 865 2,742 4,257
Interest expense 4,751 6,113 21,841 24,093
Other income/
(expense), net 93 (236) (694) (2,524)
------ ------ ------ ------
(Loss)/earnings
before income taxes (9,571) (3,750) 13,716 5,447
Income tax
(benefit)/expense (2,225) (565) 6,857 3,115
Minority interest (111) (81) (224) (78)
------ ------ ------ ------
(Loss)/earnings before
cumulative effect (7,457) (3,266) 6,635 2,254
Cumulative effect
of change in
accounting principle - - - - - - (5,020)
------ ------ ------ ------
Net (loss)/earnings $ (7,457) $ (3,266) $ 6,635 $ (2,766)
======== ========= ========= ========
Earnings per share
before restructuring
and one-time charges
and the cumulative
effect of change in
accounting principle:
Basic $ 0.20 $ 0.31 $ 0.69 $ 0.67
Diluted $ 0.19 $ 0.28 $ 0.66 $ 0.64
(Loss)/earnings per
share before
cumulative effect of
change in
accounting principle:
Basic $ (0.24) $ (0.11) $ 0.21 $ 0.07
Diluted $ (0.24) $ (0.11) $ 0.21 $ 0.07
Earnings per share:
Basic $ (0.24) $ (0.11) $ 0.21 $ (0.09)
Diluted $ (0.24) $ (0.11) $ 0.21 $ (0.09)
Checkpoint Systems, Inc.
Summary Balance Sheet
(Thousands)
December 30, December 31,
2001 2000
---- ----
(unaudited)
preliminary
Cash and Short-term Investments $ 43,698 $ 28,121
Working Capital $ 127,989 $ 153,074
Current Assets $ 311,362 $ 371,155
Long-term Debt (including
current portion) $ 293,511 $ 379,840
Shareholders' Equity $ 240,335 $ 237,679
Total Assets $ 750,379 $ 872,005
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