PHILADELPHIA--(BUSINESS WIRE)--Checkpoint Systems, Inc. (NYSE: CKP) today reported financial results for the fourth quarter and full year ended December 25, 2011.
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Financial Summary (a) |
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| (amounts in millions, except per share data) | Fourth Quarter | Full Year | ||||||||||||||||||||||||||
| Dec. 25, | Dec. 26, | Dec. 25, | Dec. 26, | |||||||||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||||||
| Net revenues | $ | 251.6 | $ | 232.0 | $ | 865.3 | $ | 821.7 | ||||||||||||||||||||
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From Continuing
Operations |
From Discontinued
Operations |
Total Company | ||||||||||||||||||||||||||
| Dec. 25, | Dec. 26, | Dec. 25, | Dec. 26, | Dec. 25, | Dec. 26, | |||||||||||||||||||||||
| 2011 | 2010 (b) | 2011 | 2010 | 2011 | 2010 (b) | |||||||||||||||||||||||
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Fourth Quarter |
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| As Reported (GAAP) | ||||||||||||||||||||||||||||
| Net (loss) earnings (c) | $ | (13.4 | ) | $ | 7.7 | $ | (5.7 | ) | $ | (0.1 | ) | $ | (19.1 | ) | $ | 7.6 | ||||||||||||
| Diluted (loss) earnings per share (c) | $ | (0.33 | ) | $ | 0.19 | $ | (0.14 | ) | $ | — | $ | (0.47 | ) | $ | 0.19 | |||||||||||||
| Non-GAAP (d) | ||||||||||||||||||||||||||||
| Net (loss) earnings (c) | $ | (4.0 | ) | $ | 14.6 | $ | 0.2 | $ | (0.1 | ) | $ | (3.8 | ) | $ | 14.5 | |||||||||||||
| Diluted (loss) earnings per share (c) | $ | (0.10 | ) | $ | 0.36 | $ | 0.01 | $ | — | $ | (0.09 | ) | $ | 0.36 | ||||||||||||||
| Full Year | ||||||||||||||||||||||||||||
| As Reported (GAAP) | ||||||||||||||||||||||||||||
| Net (loss) earnings (c) | $ | (59.1 | ) | $ | 28.5 | $ | (7.5 | ) | $ | (0.8 | ) | $ | (66.6 | ) | $ | 27.7 | ||||||||||||
| Diluted (loss) earnings per share (c) | $ | (1.46 | ) | $ | 0.71 | $ | (0.18 | ) | $ | (0.02 | ) | $ | (1.64 | ) | $ | 0.69 | ||||||||||||
| Non-GAAP (d) | ||||||||||||||||||||||||||||
| Net earnings (loss) (c) | $ | 19.0 | $ | 42.7 | $ | (1.5 | ) | $ | (0.8 | ) | $ | 17.5 | $ | 41.9 | ||||||||||||||
| Diluted earnings (loss) per share (c) | $ | 0.47 | $ | 1.06 | $ | (0.04 | ) | $ | (0.02 | ) | $ | 0.43 | $ | 1.04 | ||||||||||||||
| (a) | See accompanying reconciliation of GAAP to Non-GAAP financial measures. | |
| (b) | 2010 revised for immaterial financial statement errors totaling, after tax, $(0.1) million for the fourth quarter and $0.4 million for the full year. | |
| (c) | Attributable to Checkpoint Systems, Inc. | |
| (d) | 2011 excludes restructuring expenses, litigation settlement expense, intangible asset impairment expense, acquisition costs, other expenses, a change in indefinite reversal assertion, and the impact of a change in valuation allowances. |
Rob van der Merwe, Chairman, President and Chief Executive Officer of Checkpoint Systems, said, “During the seasonally stronger fourth quarter we began to experience improved ordering from our customer base. While ongoing global economic uncertainty and unpredictable retailer behavior impacted our 2011 results and remains a concern near-term, we are taking the necessary actions to position Checkpoint for profitable growth.”
Mr. van der Merwe concluded, “For 2012, we remain committed to our stated strategy. We are aggressively adjusting our expense base through our wide-reaching expanded global restructuring plan, and remain on track to reduce costs by approximately $59 million annually by 2013. Our core businesses have maintained their relative market positions through this difficult period and we will continue to focus on right sizing the Company and investing in promising growth areas to ensure we remain well positioned in the marketplace. Through the introduction of new, innovative products to drive growth in our core businesses and the emerging merchandise visibility business we will continue to provide solutions that are critical to our customer base and build sustainable, long-term value for our shareholders.”
Selected analysis and discussion for the fourth quarter of 2011:
- Net revenues increased 8.5%. Acquisition growth contributed 7.6% of the increase resulting from the acquisition of Shore to Shore, Inc. Foreign currency effects resulted in a 0.5% net revenues increase. Organic net revenues contributed 0.4% of the remaining increase, driven principally by the Shrink Management Solutions business segment.
- Gross profit margin was 38.4% compared to 39.9% for the fourth quarter of 2010. The decrease was principally due to lower gross margins in the Apparel Labeling Solutions segment.
- Selling, general and administrative (SG&A) expenses were $74.2 million compared to $71.3 million for the fourth quarter of 2010. The fourth quarter of 2011 included savings totaling $7.2 million from the expanded global restructuring plan.
- GAAP operating income was $9.1 million compared to income of $9.8 million for the fourth quarter of 2010. Non-GAAP operating income excluding restructuring expense, intangible asset impairment expense, litigation settlement expense, and acquisition costs was $19.1 million, or 7.6% of net revenues. Non-GAAP operating income for the fourth quarter of 2010 was $16.3 million, or 7.0% of net revenues. (See accompanying Reconciliation of GAAP to Non-GAAP Financial Measures.)
- Restructuring expense was $8.3 million resulting from the implementation of the Global Restructuring Plan and continued efforts of the SG&A Restructuring Plan. Restructuring expense for the combined Global and SG&A Restructuring Plans totals $38.5 million since inception.
- Effective tax rate was 287% compared to 3.5% for the fourth quarter of 2010, due primarily to the impact of a tax valuation allowance adjustment. This tax valuation allowance adjustment resulted in the recognition of a tax benefit in the third quarter of 2011 that has been reversed in the fourth quarter of 2011.
- Cash flow provided by operating activities was $5.5 million compared to cash flow provided by operating activities of $19.0 million for the fourth quarter of 2010.
- At December 25, 2011, cash and cash equivalents were $93.5 million compared to $172.5 million at December 26, 2010, and total debt was $150.5 million compared to $141.9 million at December 26, 2010. Capital expenditures were $8.6 million for the fourth quarter of 2011.
Expanded Global Restructuring Plan
On October 18, 2011 the Company announced an expanded Global Restructuring Plan focused on further reducing overall operating expenses. The first phase of this plan was implemented in the third quarter of 2011 with the remaining phases expected to be substantially complete by the end of 2013.
By 2013, the combined Global and SG&A Restructuring Plans will produce annualized run rate savings of approximately $59 million with a cost of approximately $51 million, of which approximately $9 million is non-cash. In 2011, $17 million of the savings were realized; in 2012 approximately $29 million of the savings will be achieved with the remaining savings of approximately $13 million to be achieved in 2013. Remaining restructuring cost is approximately $13 million, with the majority of the expense expected to be recognized in 2012.
Outlook for 2012
Based on an assessment of current market conditions, Checkpoint is providing guidance for 2012. 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 $845 million to $875 million.
- Non-GAAP diluted net earnings per share attributable to Checkpoint Systems, Inc. are expected to be in the range of $0.55 to $0.76.
- Non-GAAP operating income margin is expected to be in the range of 5.2% to 6.2%.
- An annualized non-GAAP tax rate is expected to be in the range of 37% to 42%.
- Free cash flow (cash flow from operations less capital expenditures) is expected to be in the range of $40 million to $50 million.
Checkpoint Systems will host a conference call today, February 23, 2012, at 11:00 AM Eastern Time, to discuss its fourth quarter and full year 2011 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 in the second quarter of 2011 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 successfully implement global cost reductions in operating expenses including, 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.
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Checkpoint Systems, Inc. Consolidated Statements of Operations (amounts in thousands, except per share data) (unaudited) |
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Quarter
(13 weeks) Ended |
Twelve Months
(52 weeks) Ended |
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| December 25, | December 26, | December 25, | December 26, | ||||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||||||||
| (As Revised) | (As Revised) | ||||||||||||||||||||||
| Net revenues | $ | 251,598 | $ | 231,984 | $ | 865,343 | $ | 821,678 | |||||||||||||||
| Cost of revenues | 154,905 | 139,382 | 532,493 | 477,904 | |||||||||||||||||||
| Gross profit | 96,693 | 92,602 | 332,850 | 343,774 | |||||||||||||||||||
| Selling, general, and administrative expenses | 74,197 | 71,273 | 293,491 | 269,625 | |||||||||||||||||||
| Research and development | 4,201 | 5,731 | 19,813 | 20,507 | |||||||||||||||||||
| Restructuring expenses | 8,269 | 5,401 | 28,640 | 8,211 | |||||||||||||||||||
| Intangible asset impairment | 592 | — | 592 | — | |||||||||||||||||||
| Litigation settlement | 943 | — | 943 | — | |||||||||||||||||||
| Acquisition costs | 114 | 137 | 2,319 | 523 | |||||||||||||||||||
| Other expense (income) | (766 | ) | 245 | (179 | ) | 1,537 | |||||||||||||||||
| Other operating income | — | — | 19,262 | — | |||||||||||||||||||
| Operating income | 9,143 | 9,815 | 6,493 | 43,371 | |||||||||||||||||||
| Interest income | 704 | 910 | 3,381 | 3,118 | |||||||||||||||||||
| Interest expense | 2,142 | 1,782 | 7,923 | 6,507 | |||||||||||||||||||
| Other gain (loss), net | (474 | ) | (953 | ) | (1,523 | ) | (2,237 | ) | |||||||||||||||
| Earnings from continuing operations before income taxes | 7,231 | 7,990 | 428 | 37,745 | |||||||||||||||||||
| Income taxes expense | 20,752 | 283 | 59,540 | 9,358 | |||||||||||||||||||
| Net (loss) earnings from continuing operations | (13,521 | ) | 7,707 | (59,112 | ) | 28,387 | |||||||||||||||||
| Loss from discontinued operations, net of tax | (5,640 | ) | (75 | ) | (7,514 | ) | (773 | ) | |||||||||||||||
| Net (loss) earnings | (19,161 | ) | 7,632 | (66,626 | ) | 27,614 | |||||||||||||||||
| Less: loss attributable to non-controlling interests | (107 | ) | — | (57 | ) | (116 | ) | ||||||||||||||||
| Net (loss) earnings attributable to Checkpoint Systems, Inc. | $ | (19,054 | ) | $ | 7,632 | $ | (66,569 | ) | $ | 27,730 | |||||||||||||
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Basic (loss) earnings attributable to Checkpoint Systems, Inc. per share: |
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| (Loss) earnings from continuing operations | $ | (.33 | ) | $ | .19 | $ | (1.46 | ) | $ | .71 | |||||||||||||
| Loss from discontinued operations, net of tax | (.14 | ) | — | (.18 | ) | (.02 | ) | ||||||||||||||||
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Basic (loss) earnings attributable to Checkpoint Systems, Inc. per share |
$ | (.47 | ) | $ | .19 | $ | (1.64 | ) | $ | (.69 | ) | ||||||||||||
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Diluted (loss) earnings attributable to Checkpoint Systems, Inc. per share: |
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| (Loss) earnings from continuing operations | $ | (.33 | ) | $ | .19 | $ | (1.46 | ) | $ | .71 | |||||||||||||
| Loss from discontinued operations, net of tax | (.14 | ) | — | (.18 | ) | (.02 | ) | ||||||||||||||||
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Diluted (loss) earnings attributable to Checkpoint Systems, Inc. per share |
$ | (.47 | ) | $ | .19 | $ | (1.64 | ) | $ | .69 | |||||||||||||
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Checkpoint Systems, Inc. Summary Consolidated Balance Sheet (amounts in thousands) |
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| December 25, | December 26, | |||||||||||
| 2011 | 2010 | |||||||||||
| (Unaudited) | (As revised) | |||||||||||
| Cash and Cash Equivalents | $ | 93,481 | $ | 172,473 | ||||||||
| Working Capital | $ | 233,116 | $ | 295,138 | ||||||||
| Current Assets | $ | 492,236 | $ | 510,547 | ||||||||
| Total Debt | $ | 150,462 | $ | 141,949 | ||||||||
| Total Equity | $ | 529,340 | $ | 581,554 | ||||||||
| Total Assets | $ | 1,044,481 | $ | 1,033,910 | ||||||||
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.
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Checkpoint Systems, Inc. Reconciliation of GAAP to Non-GAAP Financial Measures (amounts in thousands, except percents) (unaudited) |
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Quarter
(13 weeks) Ended |
Twelve Months
(52 weeks) Ended |
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Reconciliation of GAAP to Non-GAAP Operating |
December 25, | December 26, | December 25, | December 26, | |||||||||||||||||||
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Income: |
2011 | 2010 | 2011 | 2010 | |||||||||||||||||||
| Net revenues | $ | 251,598 | $ | 231,984 | $ | 865,343 | $ | 821,678 | |||||||||||||||
| GAAP operating income | 9,143 | 9,815 | 6,493 | 43,371 | |||||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||
| Pre-acquisition reserve adjustment | — | 812 | — | 812 | |||||||||||||||||||
| Restructuring expenses | 8,269 | 5,401 | 28,640 | 8,211 | |||||||||||||||||||
| Intangible asset impairment | 592 | — | 592 | — | |||||||||||||||||||
| Litigation settlement | 943 | — | 943 | — | |||||||||||||||||||
| Acquisition costs | 114 | — | 2,319 | — | |||||||||||||||||||
| Other expenses | — | 245 | — | 1,537 | |||||||||||||||||||
| Adjusted Non-GAAP operating income | $ | 19,061 | $ | 16,273 | $ | 38,987 | $ | 53,931 | |||||||||||||||
| GAAP operating margin | 3.6 | % | 4.2 | % | 0.8 | % | 5.3 | % | |||||||||||||||
| Adjusted Non-GAAP operating margin | 7.6 | % | 7.0 | % | 4.5 | % | 6.6 | % | |||||||||||||||
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Checkpoint Systems, Inc. Reconciliation of GAAP to Non-GAAP Financial Measures continued (amounts in thousands, except per share data) (unaudited) |
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Quarter
(13 weeks) Ended |
Twelve Months
(52 weeks) Ended |
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| Reconciliation of GAAP to Non-GAAP (loss) | ||||||||||||||||||||
| earnings from continuing operations | December 25, | December 26, | December 25, | December 26, | ||||||||||||||||
| attributable to Checkpoint Systems, Inc.: | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
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(Loss) earnings from continuing operations attributable to Checkpoint Systems, Inc., as reported |
$ | (13,414 | ) | $ | 7,707 | $ | (59,055 | ) | $ | 28,503 | ||||||||||
| Non-GAAP adjustments: | ||||||||||||||||||||
| Pre-acquisition reserve adjustment, net of tax | — | 812 | — | 812 | ||||||||||||||||
| Restructuring expenses, net of tax | 7,016 | 4,174 | 25,828 | 6,204 | ||||||||||||||||
| Litigation settlement, net of tax | 943 | — | 943 | — | ||||||||||||||||
| Intangible asset impairment, net of tax | 406 | — | 406 | — | ||||||||||||||||
| Acquisition costs, net of tax | 112 | — | 2,271 | — | ||||||||||||||||
| Other expenses, net of tax | — | 190 | — | 1,192 | ||||||||||||||||
| Change in indefinite reversal assertion | 952 | — | 952 | — | ||||||||||||||||
| Pre-acquisition tax reserve adjustment | — | 1,730 | — | 1,730 | ||||||||||||||||
| Valuation allowance adjustment | — | — | 47,684 | 4,261 | ||||||||||||||||
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Adjusted net earnings from continuing operations attributable to Checkpoint Systems, Inc. |
$ | (3,985 | ) | $ | 14,613 | $ | 19,029 | $ | 42,702 | |||||||||||
| Reported diluted shares | 40,651 | 40,687 | 40,532 | 40,445 | ||||||||||||||||
| Adjusted diluted shares | 40,651 | 40,687 | 40,532 | 40,445 | ||||||||||||||||
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Reported net (loss) earnings from continuing operations attributable to Checkpoint Systems, Inc., per share – diluted |
$ | (0.33 | ) | $ | 0.19 | $ | (1.46 | ) | $ | 0.71 | ||||||||||
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Adjusted net earnings from continuing operations attributable to Checkpoint Systems, Inc., per share – diluted |
$ | (0.10 | ) | $ | 0.36 | $ | 0.47 | $ | 1.06 | |||||||||||