Checkpoint Systems Inc. reported financial results for the first quarter ended March 25, 2012.
Selected analysis and discussion for the first quarter 2012:
• Net revenues decreased 10.8%. This decrease was principally due to a decline in organic growth of 14.7%, driven by the Shrink Management Solutions segment, notably the Alpha, CheckView, and Hard Tag xSource businesses, and the Apparel Labeling Solutions segment. Foreign currency effects resulted in a 1.4% net revenues decrease driven principally by the strengthened dollar versus the euro. These declines were partially offset by acquisition growth of 5.3% resulting from the acquisition of Shore to Shore, Inc.
• Gross profit margin was 34.7% compared to 38.5% for the first quarter 2011. The decrease was principally due to lower gross margins in the Apparel Labeling Solutions segment.
• Selling, general and administrative (SG&A) expenses were $69.0 million compared to $72.3 million for the first quarter 2011. The first quarter 2012 included savings totaling $5.9 million from the expanded global restructuring plan.
• GAAP operating loss was $19.6 million compared to a loss of $9.0 million for the first quarter 2011. Non-GAAP operating loss excluding restructuring expenses and other items was $17.2 million, or 10.6% of net revenues. Non-GAAP operating loss for the first quarter 2011 was $7.2 million, or 4.0% of net revenues.
• Restructuring expense was $1.7 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 $39.2 million since inception.
• Effective tax rate was 48.4% compared to 14.3% for the first quarter 2011.
• Cash flow provided by operating activities was $6.5 million compared to cash flow provided by operating activities of $12.1 million for the first quarter 2011.
• At March 25, 2012, cash and cash equivalents were $93.3 million compared to $93.5 million at December 25, 2011, and total debt was $145.6 million compared to $150.5 million at December 25, 2011. Capital expenditures were $5.4 million for the first quarter 2012.
Mr. Antle said, "The Board's top priority is returning Checkpoint to profitable growth and the changes we announced put the Company in a position to improve operational performance and focus on the future. To this end, George and I will form a Special Committee to lead a new turnaround initiative at Checkpoint centered on a thorough strategic review of each of the Company's business units. We are committed to this effort and to generating greater shareholder value."
Mr. Babich said, "As we take this thorough look at our business units to determine how to get them on the right path, my priorities will be to continue our aggressive focus on reducing operating costs, and strengthen our already solid cash position.
