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Checkpoint Systems Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 2, 2012 07:24PM

Checkpoint Systems Inc. (CKP) filed Quarterly Report for the period ended 2012-06-24. Checkpoint Systems, Inc. has a market cap of $310 million; its shares were traded at around $6.69 with a P/E ratio of 20.2 and P/S ratio of 0.4.



Highlight of Business Operations:

Beginning in the second quarter of 2008, we entered into various foreign currency contracts to reduce our exposure to forecasted Euro-denominated inter-company revenues. These contracts were designated as cash flow hedges. The foreign currency contracts mature at various dates from July 2012 to March 2013. The purpose of these cash flow hedges is to eliminate the currency risk associated with Euro-denominated forecasted inter-company revenues due to changes in exchange rates. These cash flow hedging instruments are marked to market and the changes are recorded in other comprehensive income. Amounts recorded in other comprehensive income are recognized in cost of goods sold as the inventory is sold to external parties. Any hedge ineffectiveness is charged to other gain (loss), net on our Consolidated Statements of Operations. As of June 24, 2012, the fair value of these cash flow hedges were reflected as a $0.9 million asset and is included in other current assets in the accompanying Consolidated Balance Sheets. The total notional amount of these hedges is $13.5 million (€10.0 million) and the unrealized loss recorded in other comprehensive income was $1.7 million (net of taxes of $82 thousand), of which $1.7 million (net of taxes of $82 thousand) is expected to be reclassified to earnings over the next twelve months. During the three and six months ended June 24, 2012, a $0.4 million and $0.8 million expense related to these foreign currency hedges was recorded to cost of goods sold as the inventory was sold to external parties, respectively. The Company recognized $40 thousand of hedge ineffectiveness during the six months ended June 24, 2012.

Revenues for the second quarter of 2012 compared to the second quarter of 2011 decreased $18.4 million, or 8.5%, from $216.8 million to $198.4 million. Foreign currency translation had a negative impact on revenues of approximately $9.7 million, or 4.5%, in the second quarter of 2012 as compared to the second quarter of 2011.

Shrink Management Solutions (SMS) revenues decreased $11.1 million, or 7.6%, during the second quarter of 2012 compared to the second quarter of 2011. Foreign currency translation had a negative impact of approximately $6.1 million. The remaining decrease of $5.0 million in Shrink Management Solutions was due to organic declines in EAS consumables, CheckView®, and EAS systems. These decreases were partially offset by increases in Merchandise Visibility (RFID) and Alpha®.

Shrink Management Solutions (SMS) revenues decreased $27.7 million, or 10.3%, during the first six months of 2012 compared to the first six months of 2011. Foreign currency translation had a negative impact of approximately $7.6 million. The remaining decrease of $20.1 million in Shrink Management Solutions was due to declines in organic growth in EAS consumables, CheckView®, and Alpha®. These decreases were partially offset by an increase in Merchandise Visibility (RFID).

During the first six months of 2012, gross profit decreased $25.9 million, or 16.7%, from $155.1 million to $129.2 million. The negative impact of foreign currency translation on gross profit was approximately $3.6 million. Gross profit, as a percentage of net revenues, decreased from 38.9% to 35.8%.

Read the The complete Report



Stocks Discussed: CKP,
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