CHECKPOINT SYSTEMS, INC.
101 Wolf Drive, P.O. Box 188
Thorofare, NJ 08086
800 257 5540 Toll Free
856 848 1800 Phone
856 848 0937 Fax
www.checkpointsystems.com
Checkpoint(R)
______________(logo omitted)
NEWS
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
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CHECKPOINT SYSTEMS, INC. ANNOUNCES 2004 SECOND QUARTER RESULTS
THOROFARE, NEW JERSEY, JULY 27, 2004 - CHECKPOINT SYSTEMS, INC. (NYSE: CKP)
today reported financial results for the second quarter ended June 27, 2004.
The Company's second quarter 2004 net earnings were $8.4 million, or $0.22 per
diluted share, compared to net earnings of $10.7 million, or $0.29 per diluted
share, in the second quarter 2003. During the quarter, the company increased its
research and development expenses by $3.9 million and selling and marketing
expenses by $3.9 million, as compared to the second quarter of 2003.
Revenue for the second quarter 2004 was $189.3 million versus $175.7 million for
the second quarter 2003, an increase of 7.7%. Foreign exchange had a positive
impact on revenue of approximately $7.6 million or 4.3% in the second quarter
2004, as compared to the second quarter 2003.
"Checkpoint made good progress in the second quarter of 2004," commented George
Off, Chairman and Chief Executive Officer of Checkpoint. "Revenue for the second
quarter increased approximately 3.4% on a constant currency basis over the prior
year period, as a result of growth in each of our business segments. Much of our
growth continues to be driven by the ongoing strength of our security business,
led by our closed circuit television (CCTV) business in North America and Japan.
Our labeling services and retail merchandising segments also generated revenue
growth during the quarter, with particularly strong results from our CheckNet
service bureau business and retail display systems in Europe. However, our
European Electronic Article Surveillance (EAS) and Barcode Systems (BCS)
businesses continued to experience softness in the second quarter."
CHECKPOINT SYSTEMS, INC. ANNOUNCES 2004 SECOND QUARTER RESULTS PAGE 2
Mr. Off continued, "During the quarter, we also maintained our ongoing
commitment to investing in research and development and sales and marketing.
While these investments may have a negative near-term margin impact, we believe
they are crucial elements of our strategies for future growth. In addition, we
are encouraged that product margins remained consistent during the quarter,
indicating the strength and leverage of our overall operating model."
Gross profit for the second quarter 2004 was $77.1 million, or 40.7% of revenue,
compared to $75.6 million, or 43.0% of revenue, for the second quarter 2003.
Research and development expenses, which are included in gross profit, were 3.6%
of revenue in the second quarter 2004, compared to 1.7% of revenue in the second
quarter of 2003.
Selling, general, and administrative expenses (SG&A) were $63.6 million, or
33.6% of revenue, for the second quarter 2004, compared to $56.6 million, or
32.2% of revenues, in the same period last year. Foreign exchange contributed
$2.5 million to the increase in SG&A expenses when compared to prior year.
Operating income was $13.5 million in the second quarter 2004, or 7.1% of
revenue, compared to operating income of $19.0 million, or 10.8% of revenue, in
the second quarter 2003.
Cash flow from operations for the second quarter 2004 was negative $1.4 million
versus $20.9 million in the second quarter 2003.
As of June 27, 2004, cash and cash equivalents were $68.5 million, working
capital was $139.0 million and total debt was $79.5 million. Capital
expenditures in the second quarter were $2.1 million.
Craig Burns, Executive Vice President, Chief Financial Officer and Treasurer,
commented, "We ended the second quarter with a strong balance sheet, as we
continued to focus on improving our financial flexibility to support our growth
initiatives. Cash flow from operations in the second quarter of 2004 was
impacted by a build-up in inventory in advance of expected demand and declines
in accrued compensation and unearned revenues. We expect inventory to come down
in the third and fourth quarters and we continue to expect cash flow from
operations for the full year 2004 to be in the range of $60 million to $70
million."
Mr. Off concluded, "In the first half of fiscal 2004, we maintained our focus on
ensuring the continued growth and profitability of our business. An important
step in this regard was the recently announced agreement with CVS, which will
allow Checkpoint to outfit all 5,300 CVS stores with our industry-leading RF EAS
technology. While the ongoing weakness in the European marketplace gives us
reason for caution, we continue to expect year-over-year sales growth of between
1% and 3% on a constant currency basis, and earnings growth of between 10% and
15% for the full year 2004."
For the six months ended June 27, 2004, the Company reported revenue of $369.9
million, compared to $332.1 million in the same period of 2003, an increase of
11.4%. Foreign exchange had a positive impact on revenue of approximately $23.1
million or 7.0% for the first six months of 2004, compared to 2003.
CHECKPOINT SYSTEMS, INC. ANNOUNCES 2004 SECOND QUARTER RESULTS PAGE 3
Operating income was $22.8 million for the first six months of 2004, compared to
$27.2 million for the same period of 2003. Net income was $13.9 million, or
$0.37 per diluted share, for the first half of fiscal 2004, compared to a net
income of $14.8 million, or $0.42 per diluted share, for the first six months of
2003. For the first half of fiscal 2004, the company spent $12.4 million or 3.3%
of revenue on research and development, compared to $5.4 million or 1.6% of
revenue for the first six months of the prior year. The company also increased
its selling and marketing expenses by $7.4 million in the first half of 2004,
compared to the first half of fiscal year 2003.
Checkpoint Systems will host a conference call today, July 27, 2004, at 5 p.m.
Eastern Time, to discuss its second 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
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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. ANNOUNCES 2004 SECOND QUARTER RESULTS PAGE 4
CHECKPOINT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
QUARTER ENDED SIX MONTHS ENDED
(13 WEEKS) (26 WEEKS)
JUNE 27, JUNE 29, JUNE 27, JUNE 29,
2004 2003(1) 2004 2003(1)
-------- -------- -------- --------
Net revenues $189,270 $175,720 $369,916 $332,137
Cost of revenues 112,220 100,109 221,659 193,377
-------- -------- -------- --------
Gross profit 77,050 75,611 148,257 138,760
Selling, general, and administrative expenses 63,558 56,623 125,435 111,520
-------- -------- -------- --------
Operating income 13,492 18,988 22,822 27,240
Interest income 332 385 785 724
Interest expense 1,473 2,928 3,653 5,971
Other (loss)/gain, net (169) (209) (113) 539
-------- -------- -------- --------
Earnings before income taxes and minority interest 12,182 16,236 19,841 22,532
Income taxes 3,732 5,542 5,953 7,691
Minority interest 24 17 33 34
-------- -------- -------- --------
Net earnings $ 8,426 $ 10,677 $ 13,855 $ 14,807
======== ======== ======== ========
Net earnings per share:
Basic $ 0.22 $ 0.33 $ 0.38 $ 0.45
Diluted $ 0.22 $ 0.29 $ 0.37 $ 0.42
Weighted average common stock outstanding 37,576 32,762 36,271 32,743
Weighted average common stock and
dilutive stock outstanding 39,679 39,791 40,124 39,567
(1) Restated. See Note 23 of Form 10-K/A filed with the Securities and Exchange
Commission on May 21, 2004.
(CONTINUED)
CHECKPOINT SYSTEMS, INC. ANNOUNCES 2004 SECOND QUARTER RESULTS PAGE 5
CHECKPOINT SYSTEMS, INC.
SUMMARY CONSOLIDATED BALANCE SHEET
(THOUSANDS)
JUNE 27, DECEMBER 28,
2004 2003(1)
----------- -----------
(unaudited)
Cash and Cash Equivalents $ 68,452 $110,376
Working Capital $138,987 $ 76,890
Current Assets $345,767 $374,102
Total Debt $ 79,500 $145,791
Shareholders' Equity $384,093 $323,290
Total Assets $730,947 $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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