FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
For the quarter ended March 30, 1997
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-11257
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Checkpoint Systems, Inc.
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(Exact name of registrant as specified in its charter)
Pennsylvania 22-1895850
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Wolf Drive P.O. Box 188 Thorofare, New Jersey 08086
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(Address of principal executive offices) (Zip Code)
(609) 848-1800
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
As of May 2, 1997 there were 33,968,028 shares of the Common Stock
outstanding.
<PAGE 2>
CHECKPOINT SYSTEMS, INC.
FORM 10-Q
INDEX
Page No.
--------
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statement of Shareholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-13
Part II. OTHER INFORMATION
Item 1. Legal Proceeding 13
Item 4. Submission of matters to a vote of Security
Holders 13-14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 14
<PAGE> 3
CHECKPOINT SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 30, Dec. 29,
1997 1996
--------- --------
ASSETS
------ (Thousands)
CURRENT ASSETS
Cash and cash equivalents $168,846 $185,836
Accounts receivable, net of allowances
of $5,322,000 and $4,282,000 96,214 96,891
Inventories 54,096 53,073
Other current assets 14,284 9,608
Deferred income taxes 2,663 2,736
------- -------
Total current assets 336,103 348,144
REVENUE EQUIPMENT ON OPERATING LEASE, net 19,705 18,033
PROPERTY, PLANT AND EQUIPMENT, net 44,474 41,178
EXCESS OF PURCHASE PRICE OVER FAIR VALUE
OF NET ASSETS ACQUIRED 71,928 71,622
INTANGIBLES 15,830 15,572
OTHER ASSETS 30,082 27,104
------- -------
TOTAL ASSETS $518,122 $521,653
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 8,755 $ 12,677
Accrued compensation and related taxes 6,537 8,667
Income taxes 8,905 7,920
Unearned revenues 11,791 10,264
Other current liabilities 17,601 14,702
Short-term borrowings and current portion
of long-term debt 7,895 8,161
------- -------
Total current liabilities 61,484 62,391
LONG-TERM DEBT, LESS CURRENT MATURITIES 33,071 33,356
5 1/4% CONVERTIBLE SUBORDINATED DEBENTURES
WITH A SCHEDULED MATURITY IN 2005 120,000 120,000
DEFERRED INCOME TAXES 5,935 5,112
SHAREHOLDERS' EQUITY
Preferred Stock, no par value, authorized
500,000 shares, none issued
Common Stock, par value $.10 per share,
authorized 100,000 shares, issued
36,180,528 and 36,134,622 3,618 3,613
Additional capital 230,992 230,580
Retained earnings 81,080 78,645
Common stock in treasury, at cost,
1,598,000 shares (5,664) (5,664)
Foreign currency adjustments (12,394) (6,380)
------ -------
TOTAL SHAREHOLDERS' EQUITY 297,632 300,794
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $518,122 $521,653
======= =======
See accompanying notes to consolidated financial statements.
<PAGE> 4
CHECKPOINT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter (13 Weeks) Ended
------------------------
March 30, March 31,
1997 1996
----------- -----------
(Thousands, except per share data)
Net Revenues $68,178 $66,994
Cost of Revenues 40,141 39,556
------ ------
Gross Profit 28,037 27,438
Selling, General and Administrative
Expenses 26,697 22,259
------ ------
Operating Income 1,340 5,179
Interest Income 2,831 1,019
Interest Expense (2,449) (2,343)
Other Income, Net 1,888 478
----- ------
Earnings Before Income Taxes 3,610 4,333
Income Taxes 1,175 1,387
------ ------
Net Earnings $ 2,435 $ 2,946
====== ======
Net Earnings Per Share $ .07 $ .10
====== ======
See accompanying notes to Consolidated Financial Statements
<PAGE> 5
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
Three Months(13 Weeks) Ended March 30, 1997
---------------------------------------------------
Foreign
Common Additional Retained Treasury Currency
Stock Capital Earnings Stock Adjust. Total
------- ---------- -------- -------- -------- -----
(Thousands)
Balance,
December 29,
1996 $ 3,613 $230,580 $78,645 $(5,664) $(6,380) $300,794
Net Earnings 2,435 2,435
Exercise of Stock
Options 5 412 417
Foreign Currency
Adjustments (6,014) (6,014)
------ ------- ------ ------- ------- --------
Balance at
March 30, 1997 $ 3,618 $230,992 $81,080 $(5,664) $(12,394) $297,632
====== ======= ====== ====== ======= ========
See accompanying notes to Consolidated Financial Statements
<PAGE> 6
CHECKPOINT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months(13 Weeks) Ended
---------------------------
March 30, March 31,
1997 1996
--------- --------
(Thousands)
Cash inflow (outflow) from operating activities:
Net earnings $ 2,435 $2,946
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Net book value of rented equipment sold 265 210
Revenue Equipment placed under Operating Lease (4,259) (4,493)
Long-term customer contracts (1,763) (3,124)
Depreciation and amortization 3,840 4,291
Provision for losses on accounts receivable 215 432
(Increase) decrease in current assets:
Accounts receivable (1,868) 2,174
Inventories (1,349) 5,463
Other current assets (5,036) 153
Increase (decrease) in current liabilities:
Accounts payable (3,780) (5,786)
Accrued compensation and related taxes (1,930) (1,687)
Income taxes 1,181 (1,877)
Unearned revenues 1,771 1,080
Other current liabilities 2,473 (3,795)
------- -------
Net cash used by operating activities (7,805) (4,013)
------- -------
Cash inflow (outflow) from investing activities:
Acquisition of property, plant and equipment (5,046) (2,168)
Acquisition, net of cash acquired (1,820) -
Other investing activities (2,184) (3,686)
------- -------
Net cash used by investing activities (9,050) (5,854)
------- -------
Cash inflow (outflow) from financing activities:
Proceeds from stock options 417 5,128
Proceeds of debt 2,947 -
Payment of debt (3,499) (1,835)
------- -------
Net cash provided (used) by
financing activities (135) 3,293
------- -------
Net increase (decrease) in cash and cash
equivalents (16,990) (6,574)
Cash and cash equivalents:
Beginning of period 185,836 77,456
------- -------
End of period $168,846 $ 70,882
======= =======
See accompanying notes to consolidated financial statements.
<PAGE> 7
CHECKPOINT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF ACCOUNTING
The consolidated financial statements include the accounts of Checkpoint
Systems, Inc. and its wholly-owned subsidiaries ("Company"). All material
intercompany transactions are eliminated in consolidation. The
consolidated financial statements and related notes are unaudited and do
not contain all disclosures required by generally accepted accounting
principles. Refer to the Company's Annual Report on Form 10-K for the
fiscal year ended December 29, 1996 for the most recent disclosure of the
Company's accounting policies.
The consolidated financial statements include all adjustments, consisting
only of normal recurring accruals, necessary to present fairly the Company's
financial position at March 30, 1997 and December 29, 1996 and its results
of operations and changes in cash flows for the thirteen week periods ended
March 30, 1997 and March 31, 1996.
2. INVENTORIES
March 30, December 29,
1997 1996
----------- ------------
(Thousands)
Raw materials $12,034 $10,912
Work in process 1,227 1,106
Finished goods 40,835 41,055
------- -------
$54,096 $53,073
======= =======
Inventories are stated at the lower of cost (first-in, first-out method)
or market. Cost includes material, labor and applicable overhead.
3. INCOME TAXES
Income taxes are provided for on an interim basis at an estimated
effective annual tax rate. The Company's net earnings generated by the
operations of its Puerto Rico subsidiary are exempt from Federal income
taxes under Section 936 of the Internal Revenue Code (as amended under the
Small Business Job Protection Act of 1996) and substantially exempt from
Puerto Rico income taxes. Under Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes", deferred tax
liabilities and assets are determined based on the difference between
financial statement and tax basis of assets and liabilities using
enacted statutory tax rates in effect at the balance sheet date.
<PAGE> 8
CHECKPOINT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
4. PER SHARE DATA
Per share data is based on the weighted average number of common and
common equivalent shares (stock options) outstanding during the periods.
The number of shares used in the per share computations for the thirteen
week periods ended March 30, 1997 and March 31, 1996 were 36,108,000 (1997)
and 30,957,000 (1996), respectively.
5. SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for the thirteen week period ended March 30, 1997 and March
31, 1996, respectively, included interest payments of $876,000 (1997) and
$862,000 (1996), and income taxes paid of $496,000 (1997) and $3,566,000
(1996).
6. INTANGIBLES
Intangibles consist of patents, licenses, customer lists, and software
development costs. The costs relating to the acquisition of patents and
licenses are amortized on a straight-line basis over their economic/legal
useful lives, which range from five to ten years. Intangibles totaled
$10,638,000 and $11,061,000 as of March 30, 1997 and December 29, 1996,
respectively, net of accumulated amortization costs of $5,193,000 and
$4,511,000 at March 30,1997 and December 29, 1996, respectively.
The costs of internally developed software are expensed until the
technological feasibility of the software has been established.
Thereafter, all software development costs are capitalized and
subsequently reported at the lower of unamortized cost or net realizable
value. The costs of capitalized software are amortized over the products'
estimated useful lives or five years, whichever is shorter. Capitalized
software development costs totaled $3,031,000 and $2,977,000 as of March 30,
1997 and December 29, 1996, respectively, net of accumulated amortization
costs of $1,707,000 and $1,586,000 at March 30, 1997 and December 29,1996,
respectively.
7. MERGERS AND ACQUISITIONS
On March 11, 1997 the Company had announced that it had entered into a
definitive merger agreement with Ultrak, Inc. On April 3, 1997 the Company
announced that the merger agreement with Ultrak had been terminated by
mutual consent. Costs of $1.5 million associated with this transaction were
recorded in the first quarter of 1997 in Selling, General and Administrative
expenses. In addition, on January 31, 1997 the Company completed the
acquisition of 2M Security ApS ( 2M ) for approximately $2.3 million. 2M
had been the Company s exclusive distributor for retail security products
throughout Denmark since 1992.
<PAGE> 8
CHECKPOINT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
8. ACCOUNTING FOR FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
The Company's balance sheet accounts of foreign subsidiaries are
translated into U.S. dollars at the rate of exchange in effect at the
balance sheet dates. Revenues, costs and expenses of the Company's
foreign subsidiaries are translated into U.S. dollars at the average rate of
exchange in effect during each reporting period. The resulting
translation adjustment is recorded as a separate component of
stockholders' equity. In addition, gains or losses on long-term
intercompany transactions are excluded from the results of operations and
accumulated in the aforementioned separate component of consolidated
stockholders' equity. All other foreign transaction gains and losses are
included in the results of operations.
The Company has purchased certain foreign currency forward contracts in
order to hedge anticipated rate fluctuations in Europe and Canada.
Transaction gains or losses resulting from these contracts are recognized
over the contract period.
9. SUBSEQUENT EVENTS
Subsequent to the first quarter the Company announced that on April 8, 1997
the Board of Directors had approved the purchase of up to 10% or
approximately 3.5 million shares of the Company s outstanding common stock.
The stock will be repurchased in the open market or in other appropriate
transactions under applicable regulations. The timing of repurchases and
number of shares actually repurchased will depend on a variety of factors
including price. Based on a current stock price in the range of $13 to $14
per share this would represent a cash outlay between $45 to $49 million.
10. STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS NOT YET ADOPTED
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128 Earnings Per Share. This
Statement establishes standards for computing and presenting earnings per
share (EPS) and applies to entities with publicly held common stock or
potential common stock. This Statement is effective for financial
statements issued for periods ending after December 15, 1997, earlier
application is not permitted. This Statement requires restatement of all
prior-period EPS data presented. The Company is currently evaluating the
impact, if any, adoption of SFAS No. 128 will have on its financial
statements.
<PAGE> 9
CHECKPOINT SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
First Quarter 1997 Compared to First Quarter 1996
- ---------------------------------------------------
Overview
During the first quarter of 1997 revenues increased by approximately
$1.2 million (or 1.8%) over the first quarter of 1996. The increase
in revenues was due primarily from increased sales of the Company's CCTV
and Access Control product lines offset by reduced sales of the Company s
EAS product line. Cost of revenues were in line with last year s first
quarter as a percentage of sales (approximately 58.9%). Selling, general and
administrative ("SG&A") expenses increased $4.4 million and increased as a
percentage of revenues by 6.0% (from 33.2% to 39.2%). Income from
operations decreased $3.8 million (from $5.2 million to $1.3 million). Net
earnings for the first quarter of 1997 decreased $.5 million (from $2.9
million to $2.4 million) resulting in earnings per share of $.07 for the
first quarter of 1997 versus $.10 achieved in last year s first quarter.
Net Revenues
Net revenues for the first quarter of 1997 increased $1.2 million
million (or 1.8%) over the first quarter of 1996 (from $67.0 million to
$68.2 million). Domestic and international net revenues accounted for
approximately 48.0% and 52.0%, respectively, of total net revenues compared
to 44.8% and 55.2% for last year's similar quarter. Domestic retail
Electronic Article Surveillance ("EAS") net revenues decreased slightly
($.3 million) as the Company was not able to ship all the orders received
for its disposable labels due to capacity constraints. International EAS
net revenues decreased $2.1 million (or 6%) primarily resulting from: a
decline in sales to the Company s distributor in Spain, the loss of
inventory due to a fire at the Company s warehouse in France and the
strengthening of the U.S. dollar against certain foreign currencies,
primarily European, in which the Company operates. The effects of the fire
in France during the first quarter, are not expected to materially impact
future revenues. Currently, the Company has direct operations in 18
countries which contributed 45.2% of the first quarter 1997 revenues.
Sales to large Retailers continue to be the focus of the Company s marketing
plans. These sales often are under the Company s Comprehensive Tag
Program (where hardware is installed throughout the chain at a small cost
to the retailer in return for a long term, non-cancellable, label
commitment) thus, as this program gains momentum, increasing amounts of
hardware revenue will be deferred and recognized over the life of the
particular customer contracts (three to five years).
Sales of the Company's Security Systems Group products and related CCTV
product lines increased $2.6 million or 35.5% (from $7.2 million to $9.8
million) over the prior year's quarter. The Company's Access Control product
line had sales growth of 53.8% (from $1.5 million to $2.3 million) compared
to the prior year's first quarter.
<PAGE> 10
CHECKPOINT SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Cost of Revenues
Cost of revenues increased approximately $.6 million (or 1.5 %) over the
first quarter of 1996 (from $39.5 million to $40.1 million). As a percentage
of net revenues, cost of revenues was flat at 58.9% when compared to the
prior year's first quarter.
First Quarter 1997 Compared to First Quarter 1996
- ---------------------------------------------------
Selling, General and Administrative Expenses
SG&A expenses increased $4.4 million (or 20.0%) over the first quarter of
1996 (from $22.3 million to $26.7 million). As a percentage of net revenues
SG&A expenses increased by 6.0% (from 33.2% to 39.2%). The higher
expenses (in dollars) were due to: (i) approximately $2.0 million increase
in selling and marketing costs to support future anticipated increases in
revenues (ii) approximately $.9 million increase in general and
administrative costs, and (iii) a provision of $1.5 million related to the
costs associated with the terminated Ultrak merger which had been announced
during the first quarter of 1997.
Other Income and Expense
Other income and expense includes: a payment of $1.3 million received from
Mitsubishi Materials Corporation for the establishment of a joint product
research and development project dedicated to developing radio frequency
intelligent tagging solutions for retail and library applications, a $1.0
payment received relating to the loss of business income caused by a fire at
the Company s warehouse facility in France (previously discussed) and a
foreign exchange loss for the first quarter of 1997 totaling $.4 million.
Interest Expense and Interest Income
Interest expense for the first quarter of 1997 remained constant at
approximately $2.4 million. Interest income for the first quarter of 1997
increased by $1.8 million (from $1.0 million to $2.8 million) as a result of
the cash investment from the Company's equity offering completed during the
second quarter of 1996 which totaled approximately $136 million.
Income Taxes
The effective tax rate of 32.6% is slightly higher than the effective tax
rate during the first quarter of 1996 of 32.0%. This is primarily due to
higher taxable income attributable to foreign jurisdictions where tax rates
are marginally higher than the U.S. The Company anticipates an effective
tax rate approximating 33.0% for fiscal year 1997.
<PAGE> 11
CHECKPOINT SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Net Earnings
Net earnings were $2.4 million or $.07 per share versus $2.9 million or $.10
per share for the prior year's first quarter. The weighted average number of
common and common equivalent shares used in the earnings per share
computation for the first quarter of 1997 has increased substantially
compared to the prior year's first quarter (from 31.0 million to 36.1
million) primarily due to shares issued during the second quarter of 1996 in
connection with the Company's secondary equity offering previously mentioned
(4,600,000) combined with the exercise of stock options over the past year.
Exposure To International Operations
Approximately 88.6% of the Company's international sales during the first
quarter of 1997 were made in local currencies. Sales denominated in
currencies other than U.S. dollars increased the Company's potential
exposure to currency fluctuations which can affect results. During the
first quarter of 1997, currency exchange losses amounted to approximately
$.4 million compared to a gain of $.5 million in the first quarter of 1996.
Management cannot predict with any degree of certainty changes in currency
exchange rates and therefore, the future impact that it will have on its
operations.
Mergers and Acquisitions
On March 11, 1997 the Company had announced that it had entered into a
definitive merger agreement with Ultrak, Inc. On April 3, 1997 the Company
announced that the merger agreement with Ultrak had been terminated by
mutual consent. The primary reason for the termination was the perceived
channel (i.e. sales) conflict with Ultrak s distributor/dealer network.
Costs of $1.5 million associated with this transaction was recorded in the
first quarter of 1997 in Selling, General and Administrative expenses. In
addition, on January 31, 1997 the Company completed the acquisition of 2M
Security ApS ( 2M ) for approximately $2.3 million. 2M had been the
Company s exclusive distributor for retail security products throughout
Denmark since 1992.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's liquidity needs have related to, and are expected to continue
to relate to, capital investments, acquisitions and working capital
requirements. The Company has met its liquidity needs over the last three
years primarily through funds provided by long-term borrowings, and issuance
of convertible subordinated debt, as well as through two separate issuance
of Common Stock in underwritten public offerings.
The Company's operating activities during the first quarter of 1997 consumed
approximately $7.8 million compared to $4.0 million during the first quarter
of 1996. This use of cash was primarily the result of an expansion of the
Company s Comprehensive Tag Program which provides equipment financing to
retailers utilizing the Company s EAS systems in exchange for a multi-year
agreement to purchase disposable labels.
<PAGE> 12
CHECKPOINT SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES (CONT.)
- ---------------------------------------
The Company's capital expenditures during the first quarter of 1997 totaled
$5.0 million compared to $2.2 million during the first quarter of 1996.
This increase is primarily due to the current plant expansion at the
Company s main manufacturing facility located in Ponce, Puerto Rico which is
expected to be operational during the third quarter of 1997. The Company
expects to continue to make investments in property, plant and equipment at
levels higher than the last several years. These capital expenditures will
generally relate to expanding, improving and maintaining plant efficiency at
the Company's various production facilities located in the Caribbean. For
fiscal year 1997 the Company anticipates that its capital requirements will
approximate $20 million.
Subsequent to the first quarter the Company announced that on April 8, 1997
the Board of Directors had approved the purchase of up to 10% or
approximately 3.5 million shares of the Company s outstanding common stock.
The stock will be repurchased in the open market or in other appropriate
transactions under applicable regulations. The timing of repurchases and
number of shares actually repurchased will depend on a variety of factors
including price. Based on a current stock price in the range of $13 to $14
per share this would represent a cash outlay between $45 to $49 million.
Management believes that its anticipated cash needs for the foreseeable
future can be funded from cash and cash equivalents on hand and a currently
available and unused $60 million bank line of credit.
The Company exports products for international sales to its foreign
subsidiaries. The subsidiaries, in turn, sell these products to customers
in their respective geographic areas of operation, generally in local
currencies. This method of sale and resale gives rise to the risk of gains
or losses as a result of currency exchange rate fluctuations.
In order to reduce the Company's exposure resulting from currency
fluctuations the Company has been selectively purchasing currency exchange
forward contracts on a regular basis. These contracts guarantee a
predetermined exchange rate at the time the contract is purchased. This
allows the Company to shift the risk, whether positive or negative, of
currency fluctuations from the date of the contract to a third party. As of
March 30, 1997 the Company had currency exchange forward contracts totaling
approximately $27.4 million. The contracts are in the various local
currencies covering primarily the Company's Western European operations
along with the Company's Canadian operations. The Company's operations in
Argentina, Mexico, Australia, Brazil and Japan were not covered by currency
exchange forward contracts at March 30, 1997.
The Company is considering increasing the amount of currencies covered by
forward exchange contracts during fiscal 1997. The Company also holds a
series of put options denominated in German marks which gives the Company
the right but not the obligation to convert German marks at a specified
exchange rate into U.S. dollars. The Company will continue to evaluate the
use of currency options in order to reduce the impact that exchange rate
fluctuations have on the Company's gross margins for sales made by the
<PAGE> 13
CHECKPOINT SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES (CONT.)
- ---------------------------------------
Company's international operations. The combination of forward exchange
contracts and currency options could limit the Company's risks associated
with significant exchange rate fluctuations.
The Company has never paid a cash dividend and has no plans to do so in the
foreseeable future. Certain covenants in the Company's debt instruments
prohibit the amounts available for cash dividends.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On February 14, 1996, the United States Federal Trade Commission ( FTC )
began an investigation of the retail security systems industry. The probe
was launched under the premise of anticompetitive practices within the
industry whereby certain retail-trade groups limited the autonomy of smaller
retailers by support specific security systems. The Company, along with
Sensormatic Electronics Corporations, Minnesota Mining and Manufacturing,
and other industry participants, received subpoenas requesting certain
documents and communications necessary for the investigation. The Company
does not believe that any legal or regulatory infraction will be found on
its part.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
(a) An annual meeting of shareholders was held on April 23, 1997.
(c) Shareholders voted upon and approved the following matters.
(1) The election of Kevin P. Dowd, Raymond R. Martino, and Albert E.
Wolf as the Company s Class III directors to hold office until the 2000
Annual Shareholders Meeting. Shareholders voted as follows:
Kevin P. Dowd Raymond R. Martino Albert E. Wolf
- ------------------- ------------------- -------------------
For 28,243,783 For 28,241,183 For 28,242,885
Withheld 180,944 Withheld 183,544 Withheld 181,842
---------- ---------- ----------
Total 28,424,727 Total 28,424,727 Total 28,424,727
========== ========== ==========
<PAGE> 14
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS(Cont.)
(2) To amend the Company s Stock Option Plan (1992) to: (a) extend
the termination date of the Plan from May 17, 1997 to May 17, 2007; (b)
increase the number of shares issuable thereunder form 9,000,000 to
12,000,000; and (c) modify both the number of Options issuable to Non-
Employee Directors and the issuance date of such Options.
For Against Abstain
---------- --------- -------
16,035,483 1,617,573 245,509
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) During the Company s first quarter ended March 30, 1997, the Company
filed a Form 8-K on April 3, 1997, announcing that: (a) the Company entered
into a Termination Agreement with Ultrak, Inc.; (b) the Company had issued a
press release announcing that its first quarter and 1997 revenues and
earnings would not meet street expectations; and (c) that the Company
announced by way of a press release that its Board of Directors has
authorized the purchase of up to 10 percent of its outstanding common stock
in transactions intended to satisfy the requirements of SEC Rule 10b-18.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHECKPOINT SYSTEMS, INC.
/s/Jeffrey A. Reinhold
- ----------------------- May 13, 1997
Jeffrey A. Reinhold
Vice President - Finance,
Chief Financial Officer and Treasurer
/s/Mitchell T. Codkind
- ------------------------ May 13, 1997
Mitchell T. Codkind
Vice President, Corporate Controller
and Chief Accounting Officer
<PAGE> 15
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<COMMON> 3,618
<OTHER-SE> 294,014
<TOTAL-LIABILITY-AND-EQUITY> 518,122
<SALES> 68,178
<TOTAL-REVENUES> 68,178
<CGS> 40,141
<TOTAL-COSTS> 26,697
<OTHER-EXPENSES> (2,419)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,449
<INCOME-PRETAX> 3,610
<INCOME-TAX> 1,175
<INCOME-CONTINUING> 2,435
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,435
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
