Exhibit 99.1
COMPANY CONTACT:
Checkpoint Systems, Inc.
Craig Burns
Executive Vice President,
Chief Financial Officer and Treasurer
(856) 848-1800
INVESTOR RELATIONS CONTACTS:
Christine Mohrmann, Jim Olecki
Financial Dynamics
(212) 850-5600
FOR IMMEDIATE RELEASE
Checkpoint Systems, Inc. announces 2004 Third Quarter Results
Thorofare, New Jersey, October 26, 2004 - Checkpoint Systems, Inc. (NYSE: CKP)
today reported financial results for the third quarter ended September 26, 2004.
The Company's third quarter 2004 net earnings were $10.1 million, or $0.26 per
diluted share, compared to net earnings of $9.9 million, or $0.27 per diluted
share, in the third quarter 2003.
Revenue for the third quarter 2004 was $192.3 million versus $177.2 million for
the third quarter 2003, an increase of 8.5%. Foreign exchange had a positive
impact on revenue of approximately $8.7 million or 4.9% in the third quarter
2004, as compared to the third quarter 2003.
"Checkpoint continued to generate top-line growth in the third quarter of 2004,"
commented George Off, Chairman and Chief Executive Officer of Checkpoint. "On a
constant currency basis, revenue increased approximately 3.6% over the prior
year period, as a result of the ongoing strength in our security business. In
line with the trends we experienced in the first half of 2004, our closed
circuit television (CCTV) and electronic article surveillance (EAS) businesses
continued to perform well in North America and Japan, while our EAS and barcode
systems (BCS) businesses in Europe were impacted by the continued difficult
market conditions in this region. During the quarter, we continued our
investments in research and development, RFID initiatives, management
development and personnel changes, and new manufacturing techniques. We believe
these investments will strengthen the company in the long-term."
Gross profit for the third quarter 2004 was $78.6 million, or 40.9% of revenue,
compared to $73.2 million, or 41.3% of revenue, for the third quarter 2003.
Research and development expenses, which are included in gross profit, were 3.0%
of revenue in the third quarter 2004, compared to 2.3% of revenue in the third
quarter 2003.
Selling, general, and administrative expenses (SG&A) were $61.8 million, or
32.1% of revenue, for the third quarter 2004, compared to $56.1 million, or
31.7% of revenues, in the same period last year. Foreign exchange contributed
$2.8 million to the increase in SG&A expenses when compared to prior year.
Operating income was $16.8 million in the third quarter 2004, or 8.7% of
revenue, compared to operating income of $17.1 million, or 9.6% of revenue, in
the third quarter 2003.
Cash flow from operations for the third quarter 2004 was negative $9.9 million
versus $4.8 million in the third quarter 2003. Included in the cash flow from
operations in the third quarter 2004 was the payment of $19.95 million in
connection with the settlement of the ID Security Systems Canada Inc. (ID
Systems) litigation.
As of September 26, 2004, cash and cash equivalents were $67.3 million, working
capital was $124.1 million and total debt was $90.0 million. Capital
expenditures in the third quarter were $3.1 million.
In addition, as previously announced during the third quarter, the Company will
redeem the remaining aggregate principal amount of the outstanding 5 1/4%
convertible subordinated debentures due November 2005. The redemption, in the
amount of $23.257 million, will take place on December 14, 2004. The Company
will use cash flow from operations in addition to borrowings under its revolving
credit facility to fund the pending redemption.
Craig Burns, Executive Vice President, Chief Financial Officer and Treasurer,
commented, "We are pleased to have the ID Systems case behind us and can now
focus on executing our strategy with the financial flexibility needed to pursue
our growth initiatives. We are encouraged that gross margins have remained
consistent throughout the year despite the higher level of technology spending.
As a result of investments in working capital to support large account activity,
we now expect cash flow from operations for the full year, excluding the payment
to ID Systems, to be in the range of $40 million to $50 million."
Mr. Off concluded, "We continue to focus on positioning Checkpoint for long-term
growth and profitability. The nationwide roll out of our RF EAS technology with
CVS is in full swing and we are pleased with the progress we are making. We now
expect revenue for the full year 2004 to be between $765 million and $775
million. We expect earnings to be between $0.54 and $0.59 per diluted share for
the full year. This reflects constant dollar revenue growth of 1% to 3% and
earnings growth, before the impact of the ID Systems litigation, of 13% to 20%.
During the fourth quarter, we will conduct our annual assessment of goodwill,
and our guidance for the full fiscal year excludes any impairment charge that
may be incurred."
For the nine months ended September 26, 2004, the Company reported revenue of
$562.3 million, compared to $509.4 million in the same period of 2003, an
increase of 10.4%. Foreign exchange had a positive impact on revenue of
approximately $31.8 million or 6.2% for the first nine months of 2004, compared
to 2003.
Operating income was $19.7 million for the first nine months of 2004, compared
to $44.3 million for the same period of 2003. Included in operating income for
2004 is $19.95 million related to the settlement of the ID Systems litigation.
Net income was $9.1 million, or $0.24 per diluted share, for the first nine
months of fiscal 2004, compared to a net income of $24.7 million, or $0.69 per
diluted share, for the first nine months of 2003. Included in the current year
net income is $14.87 million, after-tax, or $0.39 per diluted share related to
the settlement of the ID Systems litigation. For the first nine months of fiscal
2004, the company spent $18.2 million or 3.2% of revenue on research and
development, compared to $9.4 million or 1.9% of revenue for the first nine
months of the prior year.
Checkpoint Systems will host a conference call today, October 26, 2004, at 10
a.m. Eastern Time, to discuss its third quarter 2004 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 website 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.
(Two Tables Follow)
Checkpoint Systems, Inc.
Consolidated Statements of Operations
(Thousands except per share amounts)
(unaudited)
Quarter Ended Nine Months Ended
(13 Weeks) (39 Weeks)
Sept. 26, Sept. 28, Sept. 26, Sept. 28,
2004 2003(1) 2004 2003(1)
--------- --------- --------- ---------
Net revenues $192,344 $177,229 $562,260 $509,366
Cost of revenues 113,728 104,039 335,387 297,416
------- ------- ------- -------
Gross profit 78,616 73,190 226,873 211,950
Selling, general,
and administrative expenses 61,817 56,118 187,252 167,638
Other operating expense - - 19,950 -
------- ------- ------- --------
Operating income 16,799 17,072 19,671 44,312
Interest income 395 307 1,180 1,031
Interest expense 1,914 2,632 5,567 8,603
Other (loss)/gain, net (50) 271 (163) 810
------- ------- -------- -------
Earnings before
income taxes and
minority interest 15,230 15,018 15,121 37,550
Income taxes 5,061 5,126 5,932 12,817
Minority interest 52 40 85 74
------- ------- ------- -------
Net earnings $ 10,117 $ 9,852 $ 9,104 $ 24,659
======= ======= ======= =======
Net earnings per share:
Basic $ 0.27 $ 0.30 $ 0.25 $ 0.75
Diluted $ 0.26 $ 0.27 $ 0.24 $ 0.69
Weighted average
common stock outstanding 37,622 32,847 36,722 32,777
Weighted average
common stock and
dilutive stock outstanding 39,606 40,178 37,595 (2) 39,770
(1) Restated. See Note 23 of Form 10-K/A filed with the Securities and Exchange
Commission on May 21, 2004.
(2) The assumed conversion of 2,357 common shares
from the subordinated debentures is not included as it is anti-dilutive.
(CONTINUED)
Checkpoint Systems, Inc.
Summary Consolidated Balance Sheet
(Thousands)
September 26, December 28,
2004 2003(1)
------------- ------------
(unaudited)
(preliminary)
Cash and Cash Equivalents $ 67,337 $110,376
Working Capital $124,133 $ 76,890
Current Assets $355,806 $374,102
Total Debt $ 90,031 $145,791
Shareholders' Equity $382,054 $323,290
Total Assets $740,067 $773,322
(1) Restated. See Note 23 of Form 10-K/A filed with the Securities and Exchange
Commission on May 21, 2004.
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