COMPANY CONTACT:
Checkpoint Systems, Inc.
Craig Burns
Executive Vice President,
Chief Financial Officer, Finance
and Operations
(856) 848-1800
INVESTOR RELATIONS CONTACTS:
Christine Mohrmann, Lindsay Hatton
Financial Dynamics
(212) 850-5600
For Immediate Release
Checkpoint Systems, Inc. Announces Fourth Quarter and Year 2003 Results
THOROFARE, N.J.--(BUSINESS WIRE)--Feb. 10, 2004--Checkpoint Systems, Inc.
(NYSE: CKP) today reported financial
results for the fourth quarter and year ended December 28, 2003.
The Company's fourth quarter 2003 net earnings were $4.8 million, or $0.14 per
diluted 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 and asset impairment charges of $5.8 million
net of tax, or $0.14 per diluted share. Included in the fourth quarter of 2002
were restructuring charges 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 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) business in the United States and our electronic article
surveillance (EAS) 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 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 restructuring program. Included in SG&A in the
fourth quarter of 2002 were $0.5 million of restructuring charges.
Operating income 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 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 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 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 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
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.
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 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 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 Statement
This press release may include information that could constitute
forward-looking statements made pursuant to the safe harbor provision of the
Private Securities Litigation Reform Act 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.
<Page>
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
<Page>
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
(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
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: Statements in this press release regarding Checkpoint Systems's business
which are not historical facts are "forward-looking statements" that involve
risks and uncertainties. For a discussion of such risks and uncertainties, which
could cause actual results to differ from those contained in the forward-looking
statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for
the most recently ended fiscal year.