Published: August 02, 2011
Checkpoint Systems, Inc. Announces Second Quarter 2011 Results
PHILADELPHIA - (BUSINESS WIRE) - Checkpoint Systems, Inc. (NYSE: CKP) today reported financial
results for the second quarter ended June 26, 2011.
Net revenues for the second quarter of 2011 were $219.9 million compared
to net revenues for the second quarter of 2010 of $208.2 million. Net
earnings attributable to Checkpoint Systems, Inc. for the second quarter
of 2011 were $9.5 million, or $0.23 per diluted share, compared to net
earnings for the second quarter of 2010 of $9.0 million, or $0.22 per
diluted share. Non-GAAP net earnings attributable to Checkpoint Systems,
Inc. for the second quarter of 2011 excluding restructuring expenses and
acquisition costs were $12.6 million, or $0.31 per diluted share,
compared to $10.0 million, or $0.25 per diluted share in the second
quarter of 2010. (See accompanying Reconciliation of GAAP to Non-GAAP
Financial Measures.)
Rob van der Merwe, Chairman, President and Chief Executive Officer of
Checkpoint Systems, said, "With a foreign exchange tailwind and
acquisition growth, Checkpoint's revenues increased by 5.6% in the
second quarter. Organic revenues declined 3.1% as customers in our end
markets, particularly in Europe, remained cautious about any economic
recovery. While our revenues increase was driven in large part by the
strong euro, foreign exchange had little economic impact as increased
costs related to foreign currencies largely offset the positive impact
on revenues."
Mr. van der Merwe continued, "We continued to take aggressive actions in
the second quarter to increase our gross margins and reduce our expense
base, and will continue to do so over the remainder of the year. Gross
margin, as anticipated, was below the comparable quarter last year but
up sequentially as we addressed the production issues that hampered us
in the first quarter, and we expect continued improvement through the
remainder of 2011. Apparel Labeling Solutions negatively impacted gross
margin versus last year due to weaker execution at certain Asian
facilities and the initial impact of the Shore to Shore acquisition.
Additionally, SG&A expenses were higher in the second quarter as we
continued to incur costs associated with the necessary initiatives,
including our ERP system implementation, needed to position the Company
for meaningful SG&A reductions in the second half of 2011 and into next
year. We believe the Company has the right plan in place to improve our
financial performance in the second half of 2011 and into 2012, even in
the face of a difficult economic environment."
Mr. van der Merwe concluded, "During the second quarter, we benefited
from a considerable extension and renewal of sales type lease
arrangements. These transactions, which have an immediate positive
impact on our cash flow and increase customer retention for Checkpoint
longer term, provide further evidence of the value we provide to our end
users. Although we expect continued cautiousness within our end user
markets over the near term, we believe the converging fields of shrink
management, merchandise visibility and apparel labeling present a
compelling market opportunity for Checkpoint to create significant value
for our shareholders over the longer term."
Selected analysis and discussion for the second quarter of 2011:
-
Net revenues increased 5.6%. Foreign currency effects resulted in a
5.9% net revenues increase driven principally by the stronger euro. An
organic net revenues decline of 3.1% was driven principally by the
Shrink Management Solutions business segment, notably EAS consumables.
Acquisition growth contributed 2.8% of the increase resulting from the
acquisition of Shore to Shore, Inc.
-
Gross profit margin was 38.9% compared to 43.6% for the second quarter
of 2010. The decrease was principally due to lower gross margins in
the Apparel Labeling Solutions and CheckView businesses.
-
Selling, general and administrative (SG&A) expenses were $80.7 million
compared to $70.2 million for the second quarter of 2010. The increase
was due primarily to costs associated with building internal
capabilities prior to implementing our company-wide ERP system and
associated SG&A restructuring initiatives and the impact of foreign
currency translation.
-
GAAP operating income was $12.6 million compared to $14.1 million for
the second quarter of 2010. Non-GAAP operating income excluding
restructuring expense and acquisition costs was $16.1 million, or 7.3%
of net revenues. Non-GAAP operating income for the second quarter of
2010 was $15.3 million, or 7.4% of net revenues. The impact of foreign
currency translation on revenues and gross profit was largely offset
by the impact on SG&A expenses. (See accompanying Reconciliation of
GAAP to Non-GAAP Financial Measures.)
-
Restructuring expense was $1.5 million due to the selling, general,
and administrative restructuring plan.
-
Effective tax rate was 13.8% compared to 24.3% for the second quarter
of 2010.
-
Cash flow provided by operating activities was $22.2 million compared
to cash flow provided by operating activities of $13.6 million for the
second quarter of 2010. The renewal and extension of sales type lease
arrangements coupled with bank financing contributes to our cash flow
growth while solidifying our long term relationships with key
customers.
-
At June 26, 2011, cash and cash equivalents were $183.8 million
compared to $173.8 million at December 26, 2010, and total debt was
$173.1 million compared to $141.9 million at December 26, 2010 with
the acquisition of Shore to Shore contributing to our increased debt
levels. Capital expenditures were $5.1 million for the second quarter
of 2011.
Outlook for 2011
Based on an assessment of current market conditions, Checkpoint has
updated guidance for 2011. This guidance does not include the impact of
unusual charges, such as additional restructuring expense, that the
Company may incur during the year and assumes a continuation of current
exchange rates.
-
Net revenues are expected to be in the range of $920 million to $940
million.
-
Non-GAAP diluted net earnings per share attributable to Checkpoint
Systems, Inc. are expected to be in the range of $1.24 to $1.34.
-
Non-GAAP operating income margin is expected to be in the range of
7.4% to 7.8%.
-
An annualized tax rate is expected to be in the range of 20% to 23%.
-
Free cash flow (cash flow from operations less capital expenditures)
is expected to be in the range of $45 million to $55 million.
Checkpoint Systems will host a conference call today, August 2, 2011, at
11:00 AM Eastern Time, to discuss its 2011 second quarter results. The
conference call will be simultaneously broadcast live over the Internet.
Listeners may access the webcast at http://ir.checkpointsystems.com.
A replay will be available following the event.
Checkpoint Systems, Inc.
Checkpoint Systems is a global leader in shrink management, merchandise
visibility and apparel labeling solutions. Checkpoint enables retailers
and their suppliers to reduce shrink, improve shelf availability and
leverage real-time data to achieve operational excellence. Checkpoint
solutions are built upon 40 years of RF technology expertise, diverse
shrink management offerings, a broad portfolio of apparel labeling
solutions, market-leading RFID applications, innovative high-theft
solutions and its Web-based Check-Net data management
platform. As a result, Checkpoint customers enjoy increased sales and
profits by improving supply-chain efficiencies, by facilitating
on-demand label printing and by providing a secure open-merchandising
environment enhancing the consumer's shopping experience. For more
information, visit www.checkpointsystems.com.
Caution Regarding Forward-Looking Statements
This press release includes information that constitutes
forward-looking statements. Forward-looking statements often
address our expected future business and financial performance, and
often contain words such as "expect," "anticipate," "intend," "plan,"
"believe," "seek," or "will." By their nature, forward-looking
statements address matters that are subject to risks and uncertainties.
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:
our ability to integrate the Shore To Shore acquisition we acquired last
quarter and other prior acquisitions and to achieve our financial and
operational goals for our acquisitions; changes in international
business conditions; foreign currency exchange rate and interest rate
fluctuations; lower than anticipated demand by retailers and other
customers for our products; slower commitments of retail customers to
chain-wide installations and/or source tagging adoption or expansion;
possible increases in per unit product manufacturing costs due to less
than full utilization of manufacturing capacity as a result of slowing
economic conditions or other factors; our ability to provide and market
innovative and cost-effective products; the development of new
competitive technologies; our ability to maintain our intellectual
property; competitive pricing pressures causing profit erosion; the
availability and pricing of component parts and raw materials; possible
increases in the payment time for receivables as a result of economic
conditions or other market factors; changes in regulations or standards
applicable to our products; the ability to implement cost reduction in
field service, sales, and general and administrative expense, and our
manufacturing and supply chain operations without significantly
impacting revenue and profits; our ability to maintain effective
internal control over financial reporting; risks generally associated
with our company-wide implementation of an enterprise resource planning
(ERP) system and additional matters disclosed in our Securities and
Exchange Commission filings. We do not undertake to update our
forward-looking statements, except as required by applicable securities
laws.
|
Checkpoint Systems, Inc.
Consolidated Statements of Operations
(amounts in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
Quarter
(13 weeks) Ended
|
|
Six Months
(26 weeks) Ended
|
|
|
|
June 26,
2011
|
|
June 27,
2010
|
|
June 26,
2011
|
|
June 27,
2010
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
219,931
|
|
|
$
|
208,176
|
|
|
$
|
404,604
|
|
|
$
|
395,632
|
|
|
Cost of revenues
|
|
|
134,439
|
|
|
|
117,412
|
|
|
|
248,738
|
|
|
|
224,317
|
|
|
Gross profit
|
|
|
85,492
|
|
|
|
90,764
|
|
|
|
155,866
|
|
|
|
171,315
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and administrative expenses
|
|
|
80,695
|
|
|
|
70,233
|
|
|
|
155,078
|
|
|
|
140,035
|
|
|
Research and development
|
|
|
5,347
|
|
|
|
5,216
|
|
|
|
10,136
|
|
|
|
9,908
|
|
|
Restructuring expenses
|
|
|
1,495
|
|
|
|
1,199
|
|
|
|
3,092
|
|
|
|
1,635
|
|
|
Acquisition costs
|
|
|
2,017
|
|
|
|
-
|
|
|
|
2,203
|
|
|
|
-
|
|
|
Other operating income
|
|
|
16,672
|
|
|
|
-
|
|
|
|
16,672
|
|
|
|
-
|
|
|
Operating income
|
|
|
12,610
|
|
|
|
14,116
|
|
|
|
2,029
|
|
|
|
19,737
|
|
|
Interest income
|
|
|
727
|
|
|
|
698
|
|
|
|
1,693
|
|
|
|
1,366
|
|
|
Interest expense
|
|
|
1,918
|
|
|
|
1,421
|
|
|
|
3,560
|
|
|
|
3,021
|
|
|
Other gain (loss), net
|
|
|
(376
|
)
|
|
|
(1,462
|
)
|
|
|
(266
|
)
|
|
|
(1,196
|
)
|
|
Earnings (loss) before income taxes
|
|
|
11,043
|
|
|
|
11,931
|
|
|
|
(104
|
)
|
|
|
16,886
|
|
|
Income taxes
|
|
|
1,521
|
|
|
|
2,898
|
|
|
|
(315
|
)
|
|
|
4,416
|
|
|
Net earnings
|
|
|
9,522
|
|
|
|
9,033
|
|
|
|
211
|
|
|
|
12,470
|
|
|
Less: income (loss) attributable to non-controlling interests
|
|
|
2
|
|
|
|
(7
|
)
|
|
|
2
|
|
|
|
(76
|
)
|
|
Net earnings attributable to Checkpoint Systems, Inc.
|
|
$
|
9,520
|
|
|
$
|
9,040
|
|
|
$
|
209
|
|
|
$
|
12,546
|
|
|
Net earnings attributable to Checkpoint Systems, Inc., per Common
Shares:
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.23
|
|
|
$
|
0.23
|
|
|
$
|
0.01
|
|
|
$
|
0.32
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.23
|
|
|
$
|
0.22
|
|
|
$
|
0.01
|
|
|
$
|
0.31
|
|
|
Checkpoint Systems, Inc.
Summary Consolidated Balance Sheet
(amounts in thousands)
|
|
|
|
|
|
June 26,
2011
|
|
December 26,
2010
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
183,831
|
|
$
|
173,802
|
|
Working Capital
|
|
$
|
273,355
|
|
$
|
298,794
|
|
Current Assets
|
|
$
|
580,696
|
|
$
|
512,829
|
|
Total Debt
|
|
$
|
173,071
|
|
$
|
141,949
|
|
Total Equity
|
|
$
|
612,641
|
|
$
|
584,291
|
|
Total Assets
|
|
$
|
1,191,960
|
|
$
|
1,035,273
|
Reconciliation of Non-GAAP Financial Measures in Accordance with SEC
Regulation G
Checkpoint Systems, Inc. reports financial results in accordance with
U.S. GAAP and herein provides some Non-GAAP measures. These Non-GAAP
measures are not in accordance with, nor are they a substitute for, GAAP
measures. These Non-GAAP measures are intended to supplement the
Company's presentation of its financial results that are prepared in
accordance with GAAP. The Company uses the Non-GAAP measures presented
to evaluate and manage the Company's operations internally. The Company
is also providing this information to assist investors in performing
additional financial analysis that is consistent with financial models
developed by research analysts who follow the Company.
Set forth below is a reconciliation of the Non-GAAP financial measures
used in this release to the most directly comparable measures based on
GAAP.
|
Checkpoint Systems, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(amounts in thousands, except percents)
(unaudited)
|
|
|
|
|
|
Quarter
(13 weeks) Ended
|
|
Six Months
(26 weeks) Ended
|
|
Reconciliation of GAAP to Non-GAAP Operating Income:
|
|
June 26,
2011
|
|
June 27,
2010
|
|
June 26,
2011
|
|
June 27,
2010
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
219,931
|
|
|
$
|
208,176
|
|
|
$
|
404,604
|
|
|
$
|
395,632
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating income
|
|
|
12,610
|
|
|
|
14,116
|
|
|
|
2,029
|
|
|
|
19,737
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring expenses
|
|
|
1,495
|
|
|
|
1,199
|
|
|
|
3,092
|
|
|
|
1,635
|
|
|
Acquisition costs
|
|
|
2,017
|
|
|
|
-
|
|
|
|
2,203
|
|
|
|
-
|
|
|
Adjusted Non-GAAP operating income
|
|
$
|
16,122
|
|
|
$
|
15,315
|
|
|
$
|
7,324
|
|
|
$
|
21,372
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating margin
|
|
|
5.7
|
%
|
|
|
6.8
|
%
|
|
|
0.5
|
%
|
|
|
5.0
|
%
|
|
Adjusted Non-GAAP operating margin
|
|
|
7.3
|
%
|
|
|
7.4
|
%
|
|
|
1.8
|
%
|
|
|
5.4
|
%
|
|
Checkpoint Systems, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures continued
(amounts in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
Quarter
(13 weeks) Ended
|
|
Six Months
(26 weeks) Ended
|
|
Reconciliation of GAAP to Non-GAAP Earnings attributable to
Checkpoint Systems, Inc.:
|
|
June 26,
2011
|
|
June 27,
2010
|
|
June 26,
2011
|
|
June 27,
2010
|
|
|
|
|
|
|
|
|
|
|
|
Earnings attributable to Checkpoint Systems, Inc., as reported
|
|
$
|
9,520
|
|
$
|
9,040
|
|
$
|
209
|
|
$
|
12,546
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring expenses, net of tax
|
|
|
1,073
|
|
|
935
|
|
|
2,217
|
|
|
1,383
|
|
Acquisition costs, net of tax
|
|
|
1,975
|
|
|
-
|
|
|
2,157
|
|
|
-
|
|
Adjusted net earnings attributable to Checkpoint Systems, Inc.
|
|
$
|
12,568
|
|
$
|
9,975
|
|
$
|
4,583
|
|
$
|
13,929
|
|
|
|
|
|
|
|
|
|
|
|
Reported diluted shares
|
|
|
40,914
|
|
|
40,510
|
|
|
40,903
|
|
|
40,301
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted diluted shares
|
|
|
40,914
|
|
|
40,510
|
|
|
40,903
|
|
|
40,301
|
|
|
|
|
|
|
|
|
|
|
|
Reported net earnings attributable to Checkpoint Systems, Inc., per
share - diluted
|
|
$
|
0.23
|
|
$
|
0.22
|
|
$
|
0.01
|
|
$
|
0.31
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net earnings attributable to Checkpoint Systems, Inc., per
share - diluted
|
|
$
|
0.31
|
|
$
|
0.25
|
|
$
|
0.11
|
|
$
|
0.35
|
Checkpoint Systems, Inc.
Bob Powers, 215.553.8323
Vice
President Investor Relations
Copyright © 2012, Business Wire, Inc., All rights reserved. Copyright © 2012, NewsBlaze, Daily News
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