| Summary Of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Restatement of Previously Reported Consolidated Financial Statements We determined that we incorrectly applied accounting guidance related to the calculation of our interim effective tax rate for the exclusion of earnings (losses) before income taxes for jurisdictions with deferred income tax valuation allowances and the related entity has either a full year projected loss or a year to date actual loss and no tax benefit can be realized. The most significant error related to the calculation for the United States. We assessed the impact of this error on our prior interim financial statements and concluded that the combined impact of this error was material to the unaudited consolidated financial statements for each of the quarters ended March 29, 2015 and June 28, 2015 and year-to-date period ended June 28, 2015, which resulted in the restatement of our unaudited consolidated financial statements for the quarters ended March 29, 2015 and June 28, 2015 and the year-to-date period ended June 28, 2015. We concluded that the impacts of the error on interim and year-to-date periods within our 2014 fiscal year were not material. There is no impact of the error on our consolidated financial statements for the year ended December 28, 2014. Nature of Operations We are a leading global manufacturer and provider of technology-driven, loss prevention, inventory management and labeling solutions to the retail and apparel industry. We provide integrated inventory management solutions to brand, track, and secure goods for retailers and consumer product manufacturers worldwide. We are a leading provider of, and earn revenues primarily from the sale of Merchandise Availability Solutions (MAS), Apparel Labeling Solutions (ALS), and Retail Merchandising Solutions (RMS). Merchandise Availability Solutions consists of electronic article surveillance (EAS) systems, EAS consumables, Alpha ® high-theft solutions, store security system installations and monitoring solutions (CheckView ® ) in Asia, and radio frequency identification (RFID) systems, software, and tags. Apparel Labeling Solutions includes the results of our RFID labels business, coupled with our data management network of service bureaus that manage the printing of variable information on apparel labels and tags. Retail Merchandising Solutions consists of hand-held labeling systems (HLS) and retail display systems (RDS). Applications of these products include primarily retail security, asset and merchandise visibility, automatic identification, and pricing and promotional labels and signage. Operating directly in 28 countries, we have a global network of subsidiaries and distributors, and provide customer service and technical support around the world. Principles of Consolidation The Consolidated Financial Statements include the accounts of Checkpoint Systems, Inc. and its majority-owned subsidiaries (Company). All inter-company transactions are eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent 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. Fiscal Year Our fiscal year is the 52 or 53 week period ending the last Sunday of December. References to 2015 , 2014 , and 2013 are for the 52 weeks ended December 27, 2015 , December 28, 2014 , and December 29, 2013 , respectively. Out of Period Adjustments During the fourth quarter of 2015, we recorded an out of period adjustment related to income tax expense for stock-based compensation for the period from 2011 through 2014, offset by adjustments to a rebate accrual for the period from 2013 through 2014 and accounts payable from 2013. These adjustments had a net impact of an increase in revenues of $0.2 million , an increase in gross profit of $0.4 million , an increase in income tax expense of $0.4 million and no net impact on net loss. These adjustments were not material to any previously issued interim or annual financial statements, to the fourth quarter or full year 2015 consolidated financial statements. During the first quarter of 2015, we recorded an out of period adjustment to the valuation allowance of a non U.S. entity with a deferred tax liability related to an indefinite lived intangible pertaining to the third quarter of 2014. The total impact of the adjustment on the first quarter of 2015 and year-to-date periods within 2015 is a reduction in income tax expense of $1.0 million and a reduction in net loss of $1.0 million . This adjustment was not material to any previously issued interim or annual financial statements or to the 2015 interim or annual consolidated financial statements. During the third quarter of 2014, we recorded adjustments related to a maintenance agreement for the period from 2009 through 2014 and a revenue cut-off error in the second quarter of 2014, offset by certain adjustments to accrued expenses. These had a net impact of a reduction in revenues of $1.8 million , a decrease in gross profit of $0.6 million and a reduction in operating expenses of $1.1 million . These adjustments were not material to any previously issued interim or annual financial statements, to the third quarter or full year 2014 consolidated financial statements. During the fourth quarter of 2014, we recorded out of period adjustments related to maintenance agreements for the second and third quarters of 2014 and credit memo adjustments relating to the first and second quarters of 2014. These were offset by adjustments to 2012 and 2013 inventory reserves, accounts payable adjustments related to costing errors in the first three quarters of 2014 and accrual adjustments recognized during 2012 and 2013. These adjustments had a net impact on our fourth quarter results of a reduction in revenues of $0.5 million , a reduction in cost of goods sold of $1.0 million and a reduction in operating expenses of $0.5 million . These adjustments, together with the third quarter of 2014 out of period adjustments, were not material to any previously issued interim or annual financial statements, to the fourth quarter or full year of our fiscal 2014 consolidated financial statements. Discontinued Operations We evaluate our businesses and product lines periodically for their strategic fit within our operations. In December 2011, we began actively marketing our Banking Security Systems Integration business unit and we completed its sale in October 2012. In December 2012, our U.S. and Canada based CheckView ® business met held for sale reporting criteria. In connection with our decisions to sell these businesses, for all periods presented, the operating results associated with these businesses have been reclassified into earnings from discontinued operations, net of tax in the Consolidated Statements of Operations. The assets and liabilities associated with the U.S. and Canada based CheckView ® business were adjusted to fair value, less costs to sell, and reclassified into assets of discontinued operations, net of tax and liabilities of discontinued operations, net of tax, as appropriate, in the Consolidated Balance Sheets. In April 2013, we completed the sale of our U.S and Canada based CheckView ® business unit. Refer to Note 19 of the Consolidated Financial Statements. Assets Held For Sale As a result of our plans to consolidate manufacturing facilities, certain long-lived assets met held for sale criteria during the fourth quarter ended December 27, 2015 and $0.2 million of property, plant, and equipment, net was reclassified into other current assets on the Consolidated Balance Sheet. Non-controlling Interests On May 16, 2011, Checkpoint Holland Holding B.V., a wholly-owned subsidiary, acquired 51% of the outstanding voting shares of Shore to Shore PVT Ltd. (Sri Lanka) in exchange for $1.7 million in cash. In January 2013, we entered into an agreement to sell our 51% interest in Sri Lanka to the unrelated party holding the non-controlling interest. On June 24, 2013, we completed the sale of our 51% interest for which we received cash proceeds of $0.2 million (net of a stamp duty). The gain on sale of $0.2 million is recorded within other operating income on the Consolidated Statement of Operations. Cash and Cash Equivalents Cash in excess of operating requirements is invested in short-term, income-producing instruments or used to pay down debt. Cash equivalents include commercial paper and other securities with original maturities of three months or less at the time of purchase. Book value approximates fair value because of the short maturity of those instruments. Accounts Receivable Accounts receivables are recorded at net realizable values. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. These allowances are based on specific facts and circumstances surrounding individual customers as well as our historical experience. Provisions for the losses on receivables are charged to income to maintain the allowance at a level considered adequate to cover losses. Receivables are charged off against the reserve when they are deemed uncollectible. From time to time, we sell customer related receivables to third party financial institutions and evaluate these transactions to determine if they meet the criteria for sale accounting treatment. If it is determined that the criteria for sale treatment is met, the receivables are removed from the Consolidated Balance Sheet and earnings are reported on the Consolidated Statement of Operations. If it is determined that the criteria for sale accounting treatment are not met, the receivables remain on the Consolidated Balance Sheet and the transaction is treated as a secured financing. Cash proceeds from the sale of accounts receivable related to sales-type leases with customers to third party financial institutions totaled $26.1 million , $17.4 million , and $29.3 million for the years ended December 27, 2015 , December 28, 2014 and December 29, 2013 , respectively. Proceeds from the initial sale of the accounts receivables are used to fund operations. These transactions meet the criteria for sale accounting treatment. We have presented the earnings of $0.5 million and $0.4 million recognized on the sale of the receivables separately in other operating income on the Consolidated Statements of Operations for the year ended December 27, 2015 and December 29, 2013. There was no comparable earnings for the years ended December 28, 2014. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or market. A provision is made to reduce excess or obsolete inventory to its net realizable value. Revenue Equipment on Operating Lease The cost of the equipment leased to customers under operating leases is depreciated on a straight-line basis over the lesser of the length of the contract or estimated useful life of the asset, which is usually between three and five years. Property, Plant, and Equipment Property, plant, and equipment is carried at cost less accumulated depreciation. Maintenance, repairs, and minor renewals are expensed as incurred. Additions, improvements, and major renewals are capitalized. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets. Assets subject to capital leases are depreciated over the lesser of the estimated useful life of the asset or length of the contract. Buildings, equipment rented to customers, and leased equipment on capitalized leases use the following estimated useful lives of fifteen to thirty years, three to five years, and five years, respectively. Machinery and equipment estimated useful lives range from three to ten years. Leasehold improvement useful lives are the lesser of the minimum lease term or the useful life of the item. The cost and accumulated depreciation applicable to assets retired are removed from the accounts and the gain or loss on disposition is included in income. We review our property, plant, and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If it is determined that an impairment, based on expected future undiscounted cash flows, exists, then the loss is recognized on the Consolidated Statements of Operations. The amount of the impairment is the excess of the carrying amount of the impaired asset over its fair value. Internal-Use Software Included in intangible assets is the capitalized cost of internal-use software. We capitalize costs incurred during the application development stage of internal-use software and amortize these costs over their estimated useful lives, which generally range from three to seven years. Costs incurred related to planning, maintenance, training, and ongoing support of internal-use software is expensed as incurred. During 2009, we announced that we were in the initial stages of implementing a company-wide ERP system to handle the business and finance processes within our operations and corporate functions. As of December 27, 2015 and December 28, 2014 , $6.6 million and $8.5 million , respectively, were recorded in intangibles related to portions of the ERP system that were placed in service. In the fourth quarter of 2013, through the budgeting process, working capital prioritization activities, and other strategic direction reviews, it was determined that our European ERP system implementation was no longer a strategic priority for 2014 through 2016. Therefore, during the fourth quarter of 2013, we recorded an impairment of the $4.7 million in internal-use software related to the European ERP system implementation. The impairment charge was recorded in asset impairment expense in the Consolidated Statement of Operations. We have completed installations in Vietnam and Korea but our remaining installations for Europe and Asia have been postponed for an unknown period of time. Costs of Software to Be Sold Internal costs incurred to create computer software are charged to expense when incurred until technological feasibility has been established for the product. After technological feasibility is established, costs of coding and testing and other costs of producing product masters that are material in nature are capitalized. Cost capitalization ceases when the product is available for general release to customers. Capitalized software costs are amortized on a product-by-product basis, starting when the product is available for general release to customers. Annual amortization is the greater of straight-line over the product's estimated useful life or the percent of the product's current-year revenues as compared to the product's anticipated future revenues. Goodwill Goodwill is carried at cost and is not amortized. We test goodwill for impairment on an annual basis as of fiscal month end October of each fiscal year, relying on a number of factors including operating results, business plans and anticipated future cash flows. Company management uses its judgment in assessing whether goodwill has become impaired between annual impairment tests. Reporting units are primarily determined as the geographic areas comprising our business segments, except in situations when aggregation of the reporting units is appropriate. Recoverability of goodwill is evaluated using a two-step process when we conclude a qualitative analysis is not sufficient. We decided not to perform a qualitative assessment of goodwill and proceed to Step 1 for all reporting units. The first step involves a comparison of the fair value of a reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds its fair value, then the second step of the process involves a comparison of the implied fair value and carrying value of the goodwill of that reporting unit. If the carrying value of the goodwill of a reporting unit exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess. The nonrecurring fair value measurement of goodwill is developed using significant unobservable inputs (Level 3). The fair value of our reporting units is dependent upon our estimate of future discounted cash flows and other factors. Our estimates of future cash flows include assumptions concerning future operating performance and economic conditions and may differ from actual future cash flows. Estimated future cash flows are adjusted by an appropriate discount rate derived from our market capitalization plus a suitable control premium at the date of evaluation. The financial and credit market volatility directly impacts our fair value measurement through our weighted average cost of capital that we use to determine our discount rate and through our stock price that we use to determine our market capitalization. Therefore, changes in the stock price may also affect the amount of impairment recorded. Market capitalization is determined by multiplying the shares outstanding on the assessment date by the average market price of our common stock over a 30-day period before each assessment date. We use this 30-day duration to consider inherent market fluctuations that may affect any individual closing price. We believe that our market capitalization alone does not fully capture the fair value of our business as a whole, or the substantial value that an acquirer would obtain from its ability to obtain control of our business. As such, in determining fair value, we add a control premium to our market capitalization. To estimate the control premium, we considered our unique competitive advantages that would likely provide synergies to a market participant. In addition, we considered external market factors which we believe contributed to the decline and volatility in our stock price that did not reflect our underlying fair value. Refer to Note 5 of the Consolidated Financial Statements. Other Intangibles Indefinite-lived intangible assets are carried at cost and are not amortized, but are subject to tests for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Definite-lived intangibles are amortized on a straight-line basis over their useful lives (or legal lives if shorter). We review our other intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If it is determined that an impairment, based on expected future cash flows, exists, then the loss is recognized on the Consolidated Statements of Operations. The amount of the impairment is the excess of the carrying amount of the impaired asset over the fair value of the asset. The fair value represents expected future cash flows from the use of the assets, discounted at the rate used to evaluate potential investments. Refer to Note 5 of the Consolidated Financial Statements. Other Assets Included in other assets are $0.3 million and $1.4 million of net long-term customer-based receivables at December 27, 2015 and December 28, 2014 , respectively. Deferred Financing Costs Financing costs are capitalized and amortized to interest expense over the life of the debt. The net deferred financing costs at December 27, 2015 and December 28, 2014 were $1.3 million and $1.7 million , respectively. The financing cost amortization expense was $0.4 million , $0.4 million , and $2.2 million , for 2015 , 2014 , and 2013 , respectively. Revenue Recognition We recognize revenue when revenue is realized or realizable and earned. Revenue is realized or realizable and earned when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the price to the buyer is fixed or determinable; and collectability is reasonably assured. We enter into contracts to sell our products and services, and, while the majority of our sales agreements contain standard terms and conditions, there are agreements that contain multiple elements or non-standard terms and conditions. As a result, significant contract interpretation is sometimes required to determine the appropriate accounting, including whether the deliverables specified in a multiple element arrangement should be treated as separate units of accounting for revenue recognition purposes, and, if so, how the selling price should be allocated among the elements and when to recognize revenue for each element. For arrangements with multiple elements, we allocate total arrangement consideration to all deliverables based on their relative selling price using a specific hierarchy and recognize revenue when each element’s revenue recognition criteria are met. The hierarchy is as follows: vendor-specific objective evidence (“VSOE”), third-party evidence of selling price (“TPE”) or best estimate of selling price (“BESP”). VSOE of fair value for each element is established based on the price charged when the same element is sold separately. We recognize revenue when installation is complete or other post-shipment obligations have been satisfied. Unearned revenue is recorded when payments are received in advance of performing our service obligations and is recognized over the service period. Products leased to customers under sales-type leases are accounted for as the equivalent of a sale. The present value of such lease revenues is recorded as net revenues, and the related cost of the products is charged to cost of revenues. The deferred finance charges applicable to these leases are recognized over the terms of the leases. Rental revenue from products under operating leases is recognized over the term of the lease. Installation revenue from SMS EAS products is recognized when the systems are installed. Service revenue is recognized, for service contracts, on a straight-line basis over the contractual period, and, for non-contract work, as services are performed. Revenues from software license agreements are recognized when persuasive evidence of an agreement exists, delivery of the product has occurred, no significant vendor obligations are remaining to be fulfilled, the fee is fixed or determinable, and collection is probable. Revenue from software contracts for both licenses and professional services that require significant production, modification, customization, or implementation are recognized together using the percentage of completion method based upon the ratio of labor incurred to total estimated labor to complete each contract. In instances where there is a term license combined with services, revenue is recognized ratably over the term. We record estimated reductions to revenue for customer incentive offerings, including volume-based incentives and rebates. The accrual for these incentives and rebates, which are included in the other accrued expenses section of our Consolidated Balance Sheet, was $10.5 million , and $12.5 million as of December 27, 2015 and December 28, 2014 , respectively. We record revenues net of an allowance for estimated return activities and pricing adjustments. Return activity was immaterial to revenue and results of operations for all periods presented. Shipping and Handling Fees and Costs Shipping and handling fees charged to our customers are accounted for in net revenues and shipping and handling costs in cost of revenues. Cost of Revenues The principal elements of cost of revenues are product cost, field service and installation cost, freight, and product royalties paid to third parties. Warranty Reserves We provide product warranties for our various products. These warranties vary in length depending on product and geographical region. We establish our warranty reserves based on historical data of warranty transactions. The following table sets forth the movement in the warranty reserve which is located in the other accrued expenses section of our Consolidated Balance Sheet: (amounts in thousands) December 27, 2015 December 28, 2014 Balance at beginning of year $ 4,379 $ 4,521 Accruals for warranties issued 2,459 4,044 Settlements made (3,205 ) (3,867 ) Foreign currency translation adjustment (223 ) (319 ) Balance at end of period $ 3,410 $ 4,379 Royalty Expense Royalty expenses related to security products approximated $0.3 million , $0.8 million , and $0.6 million , in 2015 , 2014 , and 2013 , respectively. These expenses are included as part of cost of revenues. Research and Development Costs Research and development costs are expensed as incurred and consist of development work associated with our existing and potential products and processes. Our research and development expenses relate primarily to payroll costs for engineering personnel, costs associated with various projects, including testing, developing prototypes and related expenses. Stock Options We recognize stock-based compensation expense for the grant date fair value of all share-based payments net of an estimated forfeiture rate. Stock compensation expense is recognized for all share-based payments on a straight-line basis over the requisite service period of the award. We use the Black-Scholes option pricing model to value all stock options. The table below presents the weighted average expected life in years. The expected life computation is based on historical exercise patterns and post-vesting termination behavior. The expected dividend yield is based on the estimate of annual dividends expected to be paid at the time of the grant. Volatility is determined using changes in historical stock prices. The interest rate for periods within the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The weighted-average fair values and assumptions were as follows: Year Ended December 27, 2015 December 28, 2014 December 29, 2013 Weighted-average fair value of grants $ 4.65 $ 6.41 $ 5.46 Valuation assumptions: Expected life (in years) 5.42 5.12 5.08 Expected dividend yield 0.00 % 0.00 % 0.00 % Expected volatility 45.39 % 48.09 % 50.79 % Risk-free interest rate 1.584 % 1.465 % 0.835 % Refer to Note 8 of the Consolidated Financial Statements. Income Taxes Deferred tax liabilities and assets are determined based on the difference between the financial statement basis and the tax basis of assets and liabilities, using enacted statutory tax rates in effect at the balance sheet date. Changes in enacted tax rates are reflected in the tax provision as they occur. A valuation allowance is recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. We utilize a two-step approach to recognizing and measuring uncertain tax positions (tax contingencies). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We include interest and penalties related to our tax contingencies in income tax expense. Sales and Value Added Taxes Collected from Customers Sales and value added taxes collected from customers are excluded from revenues. The obligation is included in other current liabilities until the taxes are remitted to the appropriate taxing authorities. Foreign Currency Translation and Transactions Our balance sheet accounts of foreign subsidiaries are translated into U.S. dollars at the rate of exchange in effect at the balance sheet dates. Revenues, costs, and expenses of our foreign subsidiaries are translated into U.S. dollars at the year-to-date average rate of exchange. The resulting translation adjustments are recorded as a separate component of shareholders’ equity. Gains or losses on certain long-term inter-company transactions are excluded from the net earnings (loss) and accumulated in the cumulative translation adjustment as a separate component of Consolidated Stockholders’ Equity. All other foreign currency transaction gains and losses are included in net earnings (loss) on our Consolidated Statement of Operations. Accounting for Hedging Activities We enter into certain foreign exchange forward contracts in order to hedge anticipated rate fluctuations in Western Europe, Canada, Japan and Australia. Transaction gains or losses resulting from these contracts are recognized at the end of each reporting period. We use the fair value method of accounting, recording realized and unrealized gains and losses on these contracts. These gains and losses are included in other gain (loss), net on our Consolidated Statements of Operations. We enter into various foreign currency contracts to reduce our exposure to forecasted Euro-denominated inter-company revenues. These cash flow hedging instruments are marked to market and the changes are recorded in other comprehensive income. Amounts recorded in other comprehensive income are recognized in cost of goods sold as the inventory is sold to external parties. Any hedge ineffectiveness is charged to other gain (loss), net on our Consolidated Statements of Operations. We enter, on occasion, into interest rate swaps to reduce the risk of significant interest rate increases in connection with floating rate debt. This cash flow hedging instrument is marked to market and the changes are recorded in other comprehensive income. Any hedge ineffectiveness is charged to interest expense. Refer to Note 14 of the Consolidated Financial Statements. Accumulated Other Comprehensive Income (Loss) The components of accumulated other comprehensive income (loss), net of tax, for the year ended December 27, 2015 were as follows: (amounts in thousands) Pension plan Other postretirement benefit plan Changes in realized and unrealized gains (losses) on derivative hedges Foreign currency translation adjustment Total accumulated other comprehensive income Balance, December 28, 2014 $ (35,036 ) $ — $ — $ 352 $ (34,684 ) Other comprehensive income (loss) before reclassifications 13,844 (1,014 ) (125 ) (21,208 ) (8,503 ) Amounts reclassified from other comprehensive income (loss) 2,960 — — — 2,960 Net other comprehensive income (loss) 16,804 (1,014 ) (125 ) (21,208 ) (5,543 ) Balance, December 27, 2015 $ (18,232 ) $ (1,014 ) $ (125 ) $ (20,856 ) $ (40,227 ) The significant items reclassified from each component of other comprehensive income (loss) for the year ended December 27, 2015 were as follows: (amounts in thousands) Details about accumulated other comprehensive income (loss) components Amount reclassified from accumulated other comprehensive income (loss) Affected line item in the statement where net loss is presented Amortization of pension plan items Actuarial loss (1) $ (2,947 ) Prior service cost (1) (26 ) (2,973 ) Total before tax 13 Tax expense $ (2,960 ) Net of tax Total reclassifications for the period $ (2,960 ) (1) These accumulated other comprehensive income components are included in the computation of net periodic pension costs. Refer to Note 13 of the Consolidated Financial Statements. Dividend On March 5, 2015, we declared a special dividend (the Dividend) of $0.50 per outstanding common share for all shareholders of record as of March 20, 2015. This Dividend reflects our commitment to building shareholder value through the execution of our strategic plan and a disciplined approach to capital allocation. After the Dividend, we believe we have the appropriate level of liquidity both to fund our internal initiatives and act quickly on any strategic opportunities. The cash dividend of $21.0 million was paid to common shareholders on April 10, 2015. Dividend distributions to shareholders are recognized as a liability in the period in which the dividend is formally approved by our Board of Directors and communicated to shareholders. The Dividend was recorded as a reduction of additional capital in Stockholders' Equity. The Dividend did not provide any cash payment or benefit to stock options, restricted stock units, or pe |
