Checkpoint Systems, Inc. Announces Fourth Quarter and Year 2003 Results.Business Editors THOROFARE, N.J.--(BUSINESS WIRE)--Feb. 10, 2004 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 December: see month. 28, 2003. The Company's fourth quarter 2003 net earnings were $4.8 million, or $0.14 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, compared to net earnings of $9.1 million, or $0.26 per diluted share, in the fourth quarter 2002. Included in the results for the fourth quarter 2003 were 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 asset impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges of $5.8 million net of tax, or $0.14 per diluted share. Included in the fourth quarter of 2002 were restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $1.0 million, net of tax. Revenue for the fourth quarter 2003 was $213.9 million versus $176.3 million for the fourth quarter 2002, an increase of 21.3%. Foreign exchange had a positive impact on revenue of approximately $20.4 million or 11.6% in the fourth quarter 2003 as compared to the fourth quarter 2002. "Our results for the fourth quarter provided a strong finish to a very successful fiscal 2003," commented George George, river, c.345 mi (560 km) long, rising in a lake on the Quebec-Labrador boundary, E Canada. It flows N through Indian Lake (125 sq mi/324 sq km) to Ungava Bay (an arm of Hudson Strait). Off, Chairman and Chief Executive Officer of Checkpoint. "During the fourth quarter, revenue increased almost 10% on a constant currency basis over the prior year period. We are particularly pleased with the performance of our security business which grew 14% on a constant currency basis in the fourth quarter, led by our closed circuit television (CCTV CCTV abbr. closed-circuit television CCTV closed-circuit television ) business in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and our electronic article surveillance See EAS. (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. ) businesses in Asia Pacific and Europe. In the fourth quarter, we significantly increased our investments in research and development and marketing to support the emerging 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. initiatives in the retail supply chain." Gross profit for the fourth quarter 2003 was $84.0 million, or 39.3% of revenue, compared to $71.5 million, or 40.5% of revenue, for the fourth quarter 2002. Research and development expenses, which are included in gross profit, were 2.6% of revenue in the fourth quarter 2003 compared to 1.4% of revenue in the fourth quarter of 2002. Gross profit for the fourth quarter of 2003 included $1.5 million of asset impairment charges and $1.8 million of restructuring charges while the fourth quarter of 2002 included $0.9 million of restructuring charges. Selling, general, and administrative expenses (SG&A) were $75.7 million, or 35.4% of revenue, for the fourth quarter 2003, compared to $56.3 million, or 32.0% of revenues, in the same period last year. Included in SG&A expenses in the fourth quarter of 2003 were $5.3 million of restructuring costs, or 2.5% of revenue, related to a European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. restructuring program. Included in SG&A in the fourth quarter of 2002 were $0.5 million of restructuring charges. 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. was $8.4 million in the fourth quarter 2003, or 3.9% of revenue, compared to operating income of $15.1 million, or 8.6% of revenue, in the fourth quarter 2002. 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 for the fourth quarter 2003 was $73.3 million versus $51.3 million in the fourth quarter 2002. As of December 28, 2003, cash and cash equivalents were $110.4 million, working capital was $149.6 million and total debt was $145.8 million. Capital expenditures in the fourth quarter were $2.7 million. Craig Burns, Executive Vice President, Chief Financial Officer, Finance and Operations, commented, "During the fourth quarter, we strengthened our balance sheet as we further reduced debt by $44.1 million, including a redemption of our subordinated debentures subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before in the amount of $36.2 million. For the full year 2003 we reduced debt by $75.3 million, exceeding our initial full year target of $50.0 million. Our continued improvements in working capital, where we achieved historical lows in our days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). and days in inventory, allowed us to record our third consecutive year of cash flow from operations in excess of $100 million. In January 2004, we also announced our intention to redeem redeem v. to buy back, as when an owner who had mortgaged his/her real property pays off the debt. The term also refers to paying the amount due and all charges after a foreclosure (due to failure to make payments when due) has begun. an additional $60.0 million of our convertible subordinated debentures on April 13, 2004." Mr. Off stated, "We achieved a number of important goals in 2003. We recorded year-over-year sales growth on a constant currency basis, reduced product In model theory, a branch of mathematical logic, the reduced product is a construction that generalizes both direct product and ultraproduct. costs, increased investments in research, product development and marketing with a focus on RFID technologies, and further strengthened our balance sheet. I would also like to acknowledge the efforts of our employees worldwide throughout the past year. Our achievements are the results of the cumulative efforts of the entire Checkpoint team. I am confident that the same energy and passion will continue to contribute to our Company's performance in 2004." Mr. Off concluded, "Looking ahead, we expect sales in fiscal 2004 to show year-over-year growth of between 1% and 3% on a constant currency basis, with earnings growth of between 10% and 15%. In addition, we expect cash flow from operations to be in the range of $60 million to $70 million in fiscal 2004." For the full year 2003, the Company reported revenue of $723.3 million, compared to $639.5 million in the full year 2002. Foreign exchange had a positive impact on revenue of approximately $65.9 million for the full year 2003 compared to 2002. Operating income was $52.7 million for the full year 2003, compared to $50.0 million for the full year 2002. Net income was $29.9 million, or $0.84 per diluted share, for the full year 2003 compared to a net loss of $47.3 million or $1.10 per fully diluted share. Earnings before cumulative effect of change in accounting principle for 2002 were $25.6 million, or $0.75 per diluted share. Checkpoint Systems will host a conference call today, February 10, 2004, at 10:00 a.m. Eastern Time, to discuss its fourth quarter and year 2003 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 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 press release 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 Operations (Thousands except per share amounts) (unaudited)
Quarter Ended Twelve Months Ended
(13 Weeks) (52 Weeks)
Dec. 28, Dec. 29, Dec. 28, Dec. 29,
2003 2002 2003 2002
--------- --------- --------- ---------
Net revenues $213,896 $176,308 $723,262 $639,486
Cost of revenues 129,853 (1) 104,836 (2) 427,269 (1) 376,887 (3)
--------- --------- --------- ---------
Gross profit 84,043 71,472 295,993 262,599
Selling, general, and
administrative
expenses 70,338 55,829 237,976 212,965
Other operating
expenses 5,331 (4) 505 (5) 5,331 (4) (399)(6)
--------- --------- --------- ---------
Operating income 8,374 15,138 52,686 50,033
Interest income 456 548 1,487 1,861
Interest expense 2,473 3,678 11,076 15,141
Other gain, net 509 1,394 1,319 928
--------- --------- --------- ---------
Earnings before income
taxes 6,866 13,402 44,416 37,681
Income taxes 2,040 4,251 14,431 12,020
Minority interest 29 27 103 82
--------- --------- --------- ---------
Earnings before
cumulative effect of
change in accounting
principle 4,797 9,124 29,882 25,579
Cumulative effect of
change in
accounting principle - - - (72,861)
--------- --------- --------- ---------
Net earnings $4,797 $9,124 $29,882 $(47,282)
========= ========= ========= =========
Earnings per share
before cumulative
effect of
change in accounting
principle:
Basic $0.14 $0.28 $0.90 $0.79
Diluted $0.14 $0.26 $0.84 $0.75
Net earnings per
share:
Basic $0.14 $0.28 $0.90 $(1.46)
Diluted $0.14 $0.26 $0.84 $(1.10)
Weighted average
common stock
outstanding 34,244 32,613 33,142 32,298
Weighted average
common stock and
dilutive stock
outstanding 40,447 39,349 39,936 39,313
Footnotes: (1) Includes restructuring charges of $1,867 and asset impairment charges of $1,507 offset by a $73 restructuring charge reversal related to fourth quarter 2001 restructuring program. (2) Includes a $1,062 restructuring charge offset by a $135 restructuring charge reversal related to fourth quarter 2001 restructuring program. (3) Includes restructuring charges of $1,767 and an asset impairment charge of $466 offset by a $1,680 restructuring charge reversal related to fourth quarter 2001 restructuring program. (4) Includes restructuring charges of $5,587 offset by a $256 restructuring charge reversal related to fourth quarter 2001 and 2002 restructuring programs. (5) Includes a restructuring charge of $558 offset by a $53 restructuring charge reversal related to fourth quarter 2001 restructuring program. (6) Includes a restructuring charge of $558 offset by a $957 restructuring charge reversal related to fourth quarter 2001 restructuring program. Checkpoint Systems, Inc. Summary Consolidated Balance Sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. (Thousands)
December 28, December 29,
2003 2002
(unaudited)
preliminary
Cash and Cash Equivalents $110,376 $ 54,670
Working Capital $149,619 $111,187
Current Assets $380,815 $297,866
Total Debt $145,791 $209,325
Shareholders' Equity $327,561 $225,246
Total Assets $785,961 $678,382
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