##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 28, 2008
Commission File No. 1-11257
 CHECKPOINT SYSTEMS, INC.
  Pennsylvania
    
    22-1895850(State of Incorporation)
    
    (IRS Employer Identification No.)101 Wolf Drive, PO Box 188, 
Thorofare, New Jersey
    
    08086(Address of principal executive offices)
    
    (Zip Code)
 
  Title of each class
    
    Name of each exchange on whichto be so registered
    
    each class is to be registeredCommon Stock Purchase Rights
    
    New York Stock Exchange
 
  o þ
  o þ
  þ o
 þ
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



CHECKPOINT SYSTEMS, INC.
 FORM 10-K
 Table of Contents
 PagePART I.Item 1.
    
    Business
    
    
    3-13Item 1A.
    
    Risk Factors Related to Our Business
    
    
    13-18Item 1B.
    
    Unresolved Staff Comments
    
    
    18Item 2.
    
    Properties
    
    
    18Item 3.
    
    Legal Proceedings
    
    
    18Item 4.
    
    Submission of Matters to Vote of Stockholders
    
    
    19PART II.Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    19-21Item 6.
    
    Selected Financial Data
    
    
    22-23Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24-44Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    44Item 8.
    
    Financial Statements and Supplementary Data
    
    
    45-83Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    84Item 9A.
    
    Controls and Procedures
    
    
    84Item 9B.
    
    Other Information
    
    
    84PART III.Item 10.
    
    Directors and Executive Officers and Corporate Governance
    
    
    85Item 11.
    
    Executive Compensation
    
    
    85Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
    
    
    85Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    85Item 14.
    
    Principal Accounting Fees and Services
    
    
    85PART IV.Item 15.
    
    Exhibits and Financial Statement Schedules
    
    
    86SIGNATURES
    
    
    87INDEX TO EXHIBITS
    
    
    88SCHEDULE II  Valuation and Qualifying Accounts
    
    
    89EX-12EX-21EX-23EX-31.1EX-31.2EX-32
  2




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PART I
 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
  
 Item 1.
    
    BUSINESS
    COMPANY HISTORY
   3




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®
    TM
 Products and Offerings
   SHRINK MANAGEMENT SOLUTIONS
   4




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Electronic Article Surveillance
  TM TM
  CheckView  CCTV, Fire and Intrusion Systems
    INTELLIGENT LABELS
 ® ®
 5




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Electronic Article Surveillance Labels
  Check-Net ®
 ®
 ®
  Intelligent Library Systems
  RFID Tags and Labels
  RETAIL MERCHANDISING
  Hand-held Labeling Systems
  Retail Display Systems
  6




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##### Table of Contents



BUSINESS STRATEGY
    Principal Markets and Marketing Strategy
     
    
    open new, and expand existing retail accounts with new products that will increase
penetration through integrated value-added solutions for labeling, security, and
merchandising;
    
    establish business-to-business web-based capabilities to enable retailers and
manufacturers to initiate and track their orders through the supply chain on a global basis;
    
    expand market opportunities to manufacturers and distributors, including source tagging
and value-added labeling;
    
    continue to promote source tagging around the world with extensive integration and
automation capabilities using new EAS, RFID, and auto-ID technologies; and
    
    assist retailers in understanding the benefits and implementation of the new EPC using
RFID technology.
  
    
    by providing total loss prevention solutions to the retailer;
    
    by helping retailers sell more merchandise by avoiding stock-outs and making merchandise
available to consumers;
    
    by serving as a single point of contact for auto-ID and EAS labeling and ticketing needs;
    
    through direct sales efforts and targeted trade show participation;
 
    
    through superior service and support capabilities; and
    
    by emphasizing source tagging benefits.
 7




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##### Table of Contents




    
    increase installation of EAS equipment on a chain-wide basis with leading retailers
around the world;
    
    offer integrated tag solutions, including custom tag conversion that addresses the needs
of branding, tracking, and loss prevention;
    
    assist retailers in promoting source tagging with vendors;
    
    broaden penetration of existing accounts by promoting our in-house printing, global
service bureau network (Check-Net®), and labeling solution capabilities;
 
    
    support manufacturers and suppliers to speed implementation;
    
    expand RF tag technologies and products to accommodate the needs of the packaging
industry; and
 
    
    develop compatibility with EPC/RFID technologies.
 MANUFACTURING, RAW MATERIALS, AND INVENTORY
 Electronic Article Surveillance
   CheckView  CCTV, Fire and Intrusion Systems
  Check-Net® and Retail Merchandising
  8




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DISTRIBUTION
  Electronic Article Surveillance
    CheckView  CCTV, Fire and Intrusion Systems
  Check-Net® and Retail Merchandising
 ®
  BACKLOG
  TECHNOLOGY
  PATENTS & LICENSING
   9




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Check-Net® and Retail Merchandising
  SEASONALITY
  COMPETITION
 Electronic Article Surveillance
    CheckView  CCTV, Fire and Intrusion Systems
  Check-Net ®
 ®
 Retail Merchandising
  10




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OTHER MATTERS
 Research and Development
     Employees
  Financial Information About Geographic and Business Segments
  Available Information
   11




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Executive Officers of the Company
  Tenurewith
    
    Position with the Company andName
    
    Age
    
    Company
    
    Date of Election to Position onRobert P. van der Merwe
    
    
    56
    
    
    2 years
    
    Chairman since December 2008, President and Chief Executive Officer
since December 2007Raymond D. Andrews
    
    
    55
    
    
    3 years
    
    Senior Vice President and Chief Financial Officer since December 2007Per H. Levin
    
    
    51
    
    
    14 years
    
    President, Shrink Management and Merchandise Visibility Solutions
since March 2006Bernard Gremillet
    
    
    56
    
    
    5 years
    
    Executive Vice President, Global Customer Management since August
2007John R. Van Zile
    
    
    56
    
    
    5 years
    
    Senior Vice President, General Counsel and Secretary since June 2003Farrokh
K. Abadi
    
    
    47
    
    
    5 years
    
    Senior Vice President, and Chief
Innovation Officer since April 2008Steven Davidson
    
    
    51
    
    
    1 year
    
    President, Global Apparel Labeling Solutions since October 2008
       12




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Item 1A. RISK FACTORS
  Current
economic conditions could adversely impact our business and results of operations.
  We have significant foreign operations, which are subject to political, economic and other risks
inherent in operating in foreign countries.
  
    
    the difficulty in enforcing agreements, collecting receivables and protecting
assets through foreign legal systems;
    
    trade protection measures and import or export licensing requirements;
    
    difficulty in staffing and managing widespread operations and the application
of foreign labor regulations;
    
    compliance with a variety of foreign laws and regulations;
    
    changes in the general political and economic conditions in the countries
where we operate, particularly in emerging markets;
    
    the threat of nationalization and expropriation;
    
    increased costs and risks of doing business in a number of foreign
jurisdictions;
    
    changes in enacted tax laws;
 
    
    limitations on repatriation of earnings; and
    
    fluctuations in equity and revenues due to changes in foreign currency
exchange rates.
  13




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Volatility in currency exchange rates and interest rates may adversely affect our financial
condition, results of operations or cash flows.
    Our business could be materially adversely affected as a result of lower than anticipated demand by
retailers and other customers for our products, particularly in the current economic environment.
  Our business could be materially adversely affected as a result of slower commitments of retail
customers to chain-wide installations and/or source tagging adoption or expansion.
   The markets we serve are highly competitive and we may be unable to compete effectively if we are
unable to provide and market innovative and cost-effective products at competitive prices.
 ®
  14




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Our long term success is largely dependent upon our ability to develop new technologies, and if we
are unable to successfully develop those technologies, our business could be materially adversely
affected.
  
    
    develop and fund technological innovations, such as those related to our next
generation EAS product solutions, continued investment in evolving RFID technologies, and
other innovative security device, software, and systems initiatives;
    
    receive and maintain necessary patent and trademark protection; and
 
    
    successfully anticipate customer needs and preferences.
  An inability to acquire, protect or maintain our intellectual property and patents could harm our
ability to compete or grow.
  Our business could be materially adversely affected as a result of possible increases in per unit
product manufacturing costs as a result of slowing economic conditions or other factors.
  If we cannot obtain sufficient quantities of raw materials and component parts required for our
manufacturing activities at competitive prices and quality and on a timely basis, our financial
condition, results of operations or cash flows may suffer.
  15




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Possible increases in the payment time for receivables as a result of economic conditions or other
market factors could have a material effect on our results from operations and anticipated cash
from operating activities.
  Changes in legislation or governmental regulations, policies or standards applicable to our
products may have a significant impact on our ability to compete in our target markets.
  Our ability to implement cost reductions in field services, selling, general and administrative
expenses, and our manufacturing and supply chain operations may have a significant impact on our
business and future revenues and profits.
  Our ability to integrate the acquisitions of the Alpha S3, SIDEP/Asialco, and OATSystems businesses
and to achieve our financial and operational goals for these businesses could have an impact on
future revenues and profits.
   16




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##### Table of Contents



If we fail to manage our growth effectively, our business could be harmed.
  An impairment in the carrying value of goodwill or other assets could negatively affect our
consolidated results of operations and net worth.
   The Companys future results may be affected by various legal and regulatory proceedings.
  The failure to effectively maintain and upgrade our information systems could adversely affect our
business.
  17




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##### Table of Contents



As a global business, we have a relatively complex tax structure, and there is a risk that tax
authorities will disagree with our tax positions.
   
 Item 1B. UNRESOLVED STAFF COMMENTS
  
 Item 2.
    
    PROPERTIES
  
 Item 3.
    
    LEGAL PROCEEDINGS
  Matters related to ID Security Systems Canada Inc. versus Checkpoint Systems, Inc.
   Matter related to All-Tag Security S.A., et al
  18




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##### Table of Contents



Item 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
  
 PART II
 
 Item 5.
    
    MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
  Market Price PerShareHigh
    
    
    LowFiscal year ended December 28, 2008First Quarter
    
    $
    28.38
    
    
    $
    21.49Second Quarter
    
    $
    28.10
    
    
    $
    20.80Third Quarter
    
    $
    23.43
    
    
    $
    17.32Fourth Quarter
    
    $
    18.99
    
    
    $
    9.01Fiscal year ended December 30, 2007First Quarter
    
    $
    23.74
    
    
    $
    18.19Second Quarter
    
    $
    28.00
    
    
    $
    21.70Third Quarter
    
    $
    29.91
    
    
    $
    22.47Fourth Quarter
    
    $
    30.50
    
    
    $
    21.24
 Holders of Record
  Dividends
  19




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Issuer Purchases of Equity Securities
  Maximum Number ofTotal Number of
    
    
    Shares that May YetTotal Number of
    
    
    Average Price
    
    
    Shares Purchased
    
    
    Be Purchased UnderPeriod
    
    Shares Purchased
    
    
    Paid per Share
    
    
    Under the Plan (A)
    
    
    the ProgramDecember 31, 2007  January 27, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    2,000,000January 28, 2008  February 24, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000,000February 25, 2008  March 30, 2008
    
    
    673,067
    
    
    
    25.63
    
    
    
    673,067
    
    
    
    1,326,933March 31, 2008  April 27, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,326,933April 28, 2008  May 25, 2008
    
    
    863,218
    
    
    
    25.11
    
    
    
    1,536,285
    
    
    
    463,715May 26, 2008  June 29, 2008
    
    
    463,715
    
    
    
    25.68
    
    
    
    2,000,000
    
    
    
    June 30, 2008  July 27, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    July 28, 2008  August 24, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    August 25, 2008  September 28, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    September 29, 2008  October 26, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    October 27, 2008  November 23, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    November 24, 2008  December 28, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    2,000,000
    
    
    $
    25.42
    
    
    
    2,000,000
    
    
    
    
  Recent Sales of Unregistered Securities
  Equity Compensation Plan Information
  EquityEquity
    
    
    compensationcompensation
    
    
    plans notplans approved
    
    
    approved byby shareholders
    
    
    shareholders
    
    
    TotalNumber of securities to be issued upon exercise of outstanding options
    
    
    2,610,326
    (1)
    
    
    270,000
    (2)
    
    
    2,880,326Weighted average exercise price of outstanding options
    
    $
    18.45
    
    
    $
    22.71
    
    
    $
    18.85Number of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected above)
    
    
    1,573,746
    
    
    
    
    
    
    
    1,573,746
 (1)
    
    Includes stock options and performance based restricted stock units.(2)
    
    Inducement options granted to newly elected President and CEO of Checkpoint in connection with his hire in fiscal 2007.
 20




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STOCK PERFORMANCE GRAPH
  NASDAQElectronicCheckpoint
    
    
    NYSE/AMEX/NASDAQ Stock
    
    
    Components AndYear
    
    Systems, Inc.
    
    
    Market Index
    
    
    Accessories Index2003
    
    
    100.00
    
    
    
    100.00
    
    
    
    100.002004
    
    
    95.45
    
    
    
    112.29
    
    
    
    79.112005
    
    
    130.34
    
    
    
    119.19
    
    
    
    82.752006
    
    
    106.82
    
    
    
    138.24
    
    
    
    78.742007
    
    
    137.40
    
    
    
    145.43
    
    
    
    91.432008
    
    
    52.03
    
    
    
    87.10
    
    
    
    46.66
  Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
December 2008
 
 Notes:
 A.
    
    Note: Data complete through last fiscal year.B.
    
    Note: Corporate Performance Graph with peer group uses peer group only performance (excludes only company).C.
    
    Note: Peer group indices use beginning of period market capitalization weighting.D.
    
    Note: Data and graph are calculated from CRSP Total Return Index for the NYSE/AMEX/NASDAQ Stock Market
(U.S. Companies), Center for Research in Security Prices (CRSP), Graduate School of Business, The
University of Chicago.
 21




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##### Table of Contents



Item 6.
    
    SELECTED FINANCIAL DATA
  (dollar amounts are in thousands except per share amounts)
 Dec. 28,
    
    
    Dec. 30,
    
    
    Dec. 31,
    
    
    Dec. 25,
    
    
    Dec. 26,Year ended
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004STATEMENT OF OPERATIONS DATANet revenues
    
    $
    917,082
    
    
    $
    834,156
    
    
    $
    687,775
    
    
    $
    717,992
    
    
    $
    670,453(Loss) earnings from continuing operations before income
taxes
    
    $
    (29,209
    )
    
    $
    70,576
    
    
    $
    41,975
    
    
    $
    40,127
    
    
    $
    21,031Income taxes
    
    $
    719
    
    
    $
    12,174
    
    
    $
    6,987
    
    
    $
    11,661
    
    
    $
    2,064(Loss) earnings from continuing operations
    
    $
    (29,805
    )
    
    $
    58,409
    
    
    $
    35,019
    
    
    $
    28,413
    
    
    $
    18,823Discontinued operations, net of tax
    
    $
    
    
    
    $
    359
    
    
    $
    903
    
    
    $
    8,108
    
    
    $
    (37,448
    )Net (loss) earnings
    
    $
    (29,805
    ) (1)
    
    $
    58,768
    (2)
    
    $
    35,922
    (3)
    
    $
    36,521
    (4)
    
    $
    (18,625
    ) (5)(Loss) earnings per share from continuing operations:Basic
    
    $
    (.76
    )
    
    $
    1.46
    
    
    $
    .89
    
    
    $
    .75
    
    
    $
    .51Diluted
    
    $
    (.76
    )
    
    $
    1.43
    
    
    $
    .87
    
    
    $
    .72
    
    
    $
    .50(Loss) earnings per share:Basic
    
    $
    (.76
    )
    
    $
    1.47
    
    
    $
    .91
    
    
    $
    .96
    
    
    $
    (.51
    )Diluted
    
    $
    (.76
    )
    
    $
    1.44
    
    
    $
    .89
    
    
    $
    .93
    
    
    $
    (.50
    )Depreciation and amortization
    
    $
    30,788
    
    
    $
    21,059
    
    
    $
    19,504
    
    
    $
    22,539
    
    
    $
    26,316
 (1)
    
    Includes a $59.6 million goodwill impairment charge
($58.5 million,
net of tax), a $6.4 million restructuring charge ($4.6 million, net of
tax), a $6.2 million litigation settlement charge ($3.8 million, net
of tax), a $3.0 million intangible asset impairment charge ($2.2
million, net of tax), a $1.5 million fixed asset impairment charge
($1.1 million, net of tax), and a $1.0 million gain from the sale of
our Czech subsidiary ($1.0 million, net of tax).(2)
    
    Includes a $2.7 million ($2.0 million, net of tax) restructuring
charge, a $4.4 million ($2.9 million, net of tax) charge related to
the CEO transition, and a $2.6 million ($2.5 million, net of tax) gain
from the sale of our Austrian subsidiary.(3)
    
    Includes a $7.0 million ($4.8 million, net of tax) restructuring
charge, a $2.3 million ($1.5 million, net of tax) litigation
settlement charge, and a $1.8 million ($1.1 million, net of tax) gain
from the settlement of a capital lease. Also included in discontinued
operations is a $2.8 million ($1.4 million, net of tax) gain on the
divestment of our barcode business.(4)
    
    Includes a $12.6 million ($8.5 million, net of tax) restructuring
charge, a $1.4 million ($1.4 million, net of tax) asset impairment
charge, $2.0 million of additional tax expense related to our tax
restructuring and dividend repatriation under the American Jobs
Creation Act, and a $0.7 million ($0.7 million, net of tax) goodwill
impairment charge.(5)
    
    Includes a $34.7 million ($34.7 million, net of tax) goodwill
impairment, a $20.0 million ($13.0 million, net of tax) litigation
settlement, $16.7 million ($10.3 million, net of tax) asset
impairment, and a $3.0 million ($2.0 million, net of tax)
restructuring charge reversal.
 22




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Dec. 28,
    
    
    Dec. 30,
    
    
    Dec. 31,
    
    
    Dec. 25,
    
    
    Dec. 26,(dollar amounts are in thousands)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004AT YEAR ENDWorking capital
    
    $
    282,752
    
    
    $
    297,056
    
    
    $
    254,024
    
    
    $
    208,255
    
    
    $
    168,382Total debt
    
    $
    145,286
    
    
    $
    95,512
    
    
    $
    16,534
    
    
    $
    39,745
    
    
    $
    73,998Stockholders equity
    
    $
    504,314
    
    
    $
    588,328
    
    
    $
    473,581
    
    
    $
    396,420
    
    
    $
    379,645Total assets
    
    $
    985,716
    
    
    $
    1,031,044
    
    
    $
    781,191
    
    
    $
    739,245
    
    
    $
    769,685FOR THE YEAR ENDEDCapital expenditures
    
    $
    15,217
    
    
    $
    13,363
    
    
    $
    11,520
    
    
    $
    10,846
    
    
    $
    11,342Cash provided by operating activities
    
    $
    77,206
    
    
    $
    66,971
    
    
    $
    22,386
    
    
    $
    44,618
    
    
    $
    23,280Cash (used in) provided by investing activities
    
    $
    (54,704
    )
    
    $
    (106,151
    )
    
    $
    7,963
    
    
    $
    (8,521
    )
    
    $
    (10,338
    )Cash
(used in) provided by financing activities
    
    $
    (4,460
    )
    
    $
    7,164
    
    
    $
    (6,945
    )
    
    $
    (18,283
    )
    
    $
    (24,503
    )RATIOSReturn on net sales(a)
    
    
    (3.25
    )%
    
    
    7.05
    %
    
    
    5.22
    %
    
    
    5.09
    %
    
    
    (2.78
    )%Return on average equity(b)
    
    
    (5.46
    )%
    
    
    11.07
    %
    
    
    8.26
    %
    
    
    9.41
    %
    
    
    (5.30
    )%Return on average assets(c)
    
    
    (2.96
    )%
    
    
    6.49
    %
    
    
    4.73
    %
    
    
    4.84
    %
    
    
    (2.41
    )%Current ratio(d)
    
    
    2.34
    
    
    
    2.42
    
    
    
    2.31
    
    
    
    1.99
    
    
    
    1.72Percent of total debt to capital(e)
    
    
    22.37
    %
    
    
    13.97
    %
    
    
    3.37
    %
    
    
    9.11
    %
    
    
    16.31
    %
 (a)
    
    Return on net sales is calculated by dividing net earnings (loss) after the cumulative effect
of change in accounting principle by net sales.(b)
    
    Return on average equity is calculated by dividing net earnings (loss) after the cumulative
effect of change in accounting principle by average equity.(c)
    
    Return on average assets is calculated by dividing net earnings (loss) after the cumulative
effect of change in accounting principle by average assets.(d)
    
    Current ratio is calculated by dividing current assets by current liabilities.(e)
    
    Percent of total debt to capital is calculated by dividing total debt by total debt and equity.
 Dec. 28,
    
    
    Dec. 30,
    
    
    Dec. 31,
    
    
    Dec. 25,
    
    
    Dec. 26,(amounts are in thousands, except employee data)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Other InformationWeighted average number of shares outstanding  diluted
    
    
    39,408
    (1)
    
    
    40,724
    
    
    
    40,233
    
    
    
    39,075
    
    
    
    37,604
    (2)Number of employees
    
    
    3,878
    
    
    
    3,930
    
    
    
    3,213
    
    
    
    3,955
    
    
    
    4,260Backlog
    
    $
    51,799
    
    
    $
    73,462
    
    
    $
    54,899
    
    
    $
    52,234
    
    
    $
    63,026
 (1)
    
    Excludes 518 common shares from stock options and awards
and 22 common shares from deferred compensation arrangements as they
are anti-dilutive due to our net loss for the year.(2)
    
    Excludes 2,187 common shares from the assumed conversion of the subordinated debentures as it is anti-dilutive.
 23




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##### Table of Contents



Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
  Overview
 ®
     TM
   24




---



##### Table of Contents



®
   Critical Accounting Policies and Estimates
     Revenue Recognition.
  25




---



##### Table of Contents



Allowance for Doubtful Accounts.
 Inventory Valuation.
 Valuation of Long-lived Assets.
    26




---



##### Table of Contents



Income Taxes.
   Pension Plans.
 Stock Compensation.
  27




---



##### Table of Contents



Liquidity and Capital Resources
          28




---



##### Table of Contents



29




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Contractual Obligations
  Contractual Obligation
    
    
    
    
    
    Due in less
    
    
    Due in
    
    
    Due in
    
    
    Due after(dollar amounts in thousands)
    
    Total
    
    
    than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsLong-term debt (1)
    
    $
    138,400
    
    
    $
    4,098
    
    
    $
    134,302
    
    
    $
    
    
    
    $
    Capital leases (2)
    
    
    372
    
    
    
    258
    
    
    
    98
    
    
    
    16
    
    
    
    Operating leases
    
    
    42,723
    
    
    
    14,613
    
    
    
    17,288
    
    
    
    7,721
    
    
    
    3,101Pension obligations (3)
    
    
    50,793
    
    
    
    4,375
    
    
    
    9,420
    
    
    
    10,136
    
    
    
    26,862Acquisition obligation (4)
    
    
    14,216
    
    
    
    9,476
    
    
    
    4,740
    
    
    
    
    
    
    
    Inventory purchase commitments (5)
    
    
    10,241
    
    
    
    6,421
    
    
    
    3,799
    
    
    
    21
    
    
    
    Total contractual cash obligations
    
    $
    256,745
    
    
    $
    39,241
    
    
    $
    169,647
    
    
    $
    17,894
    
    
    $
    29,963Commercial Commitments
    
    
    
    
    
    Due in less
    
    
    Due in
    
    
    Due in
    
    
    Due after(dollar amounts in thousands)
    
    Total
    
    
    than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsStandby letters of credit
    
    $
    1,181
    
    
    $
    1,181
    
    
    $
    
    
    
    $
    
    
    
    $
    Surety bonds
    
    
    2,387
    
    
    
    2,285
    
    
    
    102
    
    
    
    
    
    
    
    Total commercial commitments
    
    $
    3,568
    
    
    $
    3,466
    
    
    $
    102
    
    
    $
    
    
    
    $
    
 (1)
    
    Includes interest payments through maturity of $4,804.(2)
    
    Includes interest payments through maturity of $34.(3)
    
    Amounts represent undiscounted projected benefit payments to our
unfunded plans over the next 10 years. The expected benefit payments
are estimated based on the same assumptions used to measure our
accumulated benefit obligation at the end of 2008 and include benefits
attributable to estimated future employee service of current
employees.(4)
    
    The acquisition obligation represents $5.4 million of deferred
payments to the minority shareholders of Shanghai Asialco Electronics
Co., Ltd., a subsidiary of SIDEP coupled with a $2.0 million deferred
payment on a non-compete contract related to the acquisition.
Additionally, the acquisition obligation includes the $6.8 million
contingent liability related to our acquisition of the Alpha S3
business.(5)
    
    Inventory purchase commitments represent the Companys legally binding
agreements to purchase fixed or minimum quantities of goods at
determinable prices.
  30




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##### Table of Contents



Pension Plans
    Exposure to Foreign Currency
   
 31




---



##### Table of Contents



Hedging Activity
 
  Provision for Restructuring
  (dollar amounts are in thousands)
 December 28,
    
    
    December 30,
    
    
    December 31,Fiscal 2008
    
    2008
    
    
    2007
    
    
    2006Manufacturing Restructuring PlanSeverance and other employee-related charges
    
    $
    699
    
    
    $
    
    
    
    $
    Consulting fees
    
    
    838
    
    
    
    
    
    
    
    2005 Restructuring PlanSeverance and other employee-related charges
    
    
    4,563
    
    
    
    1,215
    
    
    
    7,915Acquisition integration costs
    
    
    519
    
    
    
    
    
    
    
    Pension curtailment
    
    
    
    
    
    
    (420
    )
    
    
    (339
    )Pension termination benefit expense
    
    
    
    
    
    
    
    
    
    
    226Lease termination costs
    
    
    
    
    
    
    2,051
    
    
    
    2003 Restructuring PlanSeverance and other employee-related charges
    
    
    (253
    )
    
    
    (145
    )
    
    
    (409
    )Lease termination costs
    
    
    76
    
    
    
    
    
    
    
    (386
    )Total
    
    $
    6,442
    
    
    $
    2,701
    
    
    $
    7,007
  (dollar amounts are in thousands)
 ChargeAccrual at
    
    
    Charged
    
    
    Reversed
    
    
    
    
    
    
    ExchangeBeginning
    
    
    to
    
    
    to
    
    
    Cash
    
    
    Rate
    
    
    Accrual atFiscal 2008
    
    of Year
    
    
    Earnings
    
    
    Earnings
    
    
    Payments
    
    
    Changes
    
    
    12/28/08Manufacturing Restructuring PlanSeverance and other employee-related charges
    
    $
    
    
    
    $
    701
    
    
    $
    (2
    )
    
    $
    (37
    )
    
    $
    (10)
    
    
    $
    6522005 Restructuring PlanSeverance and other employee-related charges
    
    
    3,015
    
    
    
    5,362
    
    
    
    (799
    )
    
    
    (4,141
    )
    
    
    (135
    )
    
    
    3,302Acquisition restructuring costs
    
    
    1,209
    
    
    
    
    
    
    
    
    
    
    
    (612
    )
    
    
    (29
    )
    
    
    568Total
    
    $
    4,224
    
    
    $
    6,063
    
    
    $
    (801
    )
    
    $
    (4,790
    )
    
    $
    (174
    )
    
    $
    4,522
 32




---



##### Table of Contents



ChargeAccrual at
    
    
    
    
    
    
    Charged
    
    
    Reversed
    
    
    
    
    
    
    ExchangeBeginning
    
    
    Acquisition
    
    
    to
    
    
    to
    
    
    Cash
    
    
    Rate
    
    
    Accrual atFiscal 2007
    
    of Year
    
    
    Restructuring
    
    
    Earnings
    
    
    Earnings
    
    
    Payments
    
    
    Changes
    
    
    12/30/072005 Restructuring PlanSeverance and other employee-related charges
    
    $
    6,786
    
    
    $
    
    
    
    $
    2,096
    
    
    $
    (881
    )
    
    $
    (5,287
    )
    
    $
    301
    
    
    $
    3,015Acquisition restructuring costs (1)
    
    
    
    
    
    
    1,125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84
    
    
    
    1,209Total
    
    $
    6,786
    
    
    $
    1,125
    
    
    $
    2,096
    
    
    $
    (881
    )
    
    $
    (5,287
    )
    
    $
    385
    
    
    $
    4,224
 (1)
    
    During 2007, restructuring costs of $1.2 million included as a
cost of the SIDEP acquisition ($1.1 million related to employee
severance and $0.1 million related to the cost to abandon
facilities) were accounted for under Emerging Issues Task Force
Issue No. 95-3 Recognition of Liabilities in Connection with
Purchase Business Combinations. These costs were recognized as an
assumed liability in the acquisition and were included in the
purchase price allocation at November 9, 2007.
 Manufacturing Restructuring Plan
 ®
   2005 Restructuring Plan
      33




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##### Table of Contents



2003 Restructuring Plan
    Goodwill Impairments
   Asset Impairments
     Results of Operations
 (All comparisons are with the previous year, unless otherwise stated.)
 Net Revenues
   34




---



##### Table of Contents



Analysis of Statement of Operations
  Percentage ChangePercentage of Total Revenues
    
    
    In Dollar AmountDecember 28,
    
    
    December 30,
    
    
    December 31,
    
    
    Fiscal 2008
    
    
    Fiscal 20072008
    
    
    2007
    
    
    2006
    
    
    vs.
    
    
    vs.Year ended
    
    (Fiscal 2008)
    
    
    (Fiscal 2007)
    
    
    (Fiscal 2006)
    
    
    Fiscal 2007
    
    
    Fiscal 2006Net revenuesShrink Management Solutions
    
    
    61.6
    %
    
    
    57.4
    %
    
    
    55.8
    %
    
    
    18.1
    %
    
    
    24.6
    %Intelligent Labels
    
    
    28.1
    
    
    
    31.1
    
    
    
    31.9
    
    
    
    (0.6
    )
    
    
    18.2Retail Merchandising
    
    
    10.3
    
    
    
    11.5
    
    
    
    12.3
    
    
    
    (2.0
    )
    
    
    14.1Net revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    9.9
    
    
    
    21.3Cost of revenues
    
    
    58.8
    
    
    
    58.5
    
    
    
    57.6
    
    
    
    10.4
    
    
    
    23.3Total gross profit
    
    
    41.2
    
    
    
    41.5
    
    
    
    42.4
    
    
    
    9.3
    
    
    
    18.6Selling, general, and administrative expenses
    
    
    32.4
    
    
    
    31.3
    
    
    
    33.0
    
    
    
    13.8
    
    
    
    14.9Research and development
    
    
    2.5
    
    
    
    2.2
    
    
    
    2.8
    
    
    
    24.4
    
    
    
    (6.4
    )Restructuring expenses
    
    
    0.7
    
    
    
    0.3
    
    
    
    1.0
    
    
    
    138.5
    
    
    
    (61.5
    )Asset impairment
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/AGoodwill impairment
    
    
    6.5
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/ALitigation settlement
    
    
    0.6
    
    
    
    
    
    
    
    0.3
    
    
    
    N/A
    
    
    
    N/AOther operating income
    
    
    0.1
    
    
    
    0.3
    
    
    
    0.2
    
    
    
    (62.3
    )
    
    
    27.0Operating (loss) income
    
    
    (1.9
    )
    
    
    8.0
    
    
    
    5.5
    
    
    
    (125.7
    )
    
    
    75.5Interest income
    
    
    0.3
    
    
    
    0.7
    
    
    
    0.7
    
    
    
    (51.1
    )
    
    
    10.9Interest expense
    
    
    0.6
    
    
    
    0.3
    
    
    
    0.3
    
    
    
    (145.8
    )
    
    
    8.9Other (loss) gain, net
    
    
    (0.9
    )
    
    
    0.1
    
    
    
    0.2
    
    
    
    N/A
    
    
    
    (42.0
    )(Loss) earnings from continuing operations
before income taxes and minority interest
    
    
    (3.1
    )
    
    
    8.5
    
    
    
    6.1
    
    
    
    (141.4
    )
    
    
    68.1Income taxes
    
    
    0.1
    
    
    
    1.5
    
    
    
    1.0
    
    
    
    (94.1
    )
    
    
    74.2Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/A(Loss) earnings from continuing operations
    
    
    (3.2
    )
    
    
    7.0
    
    
    
    5.1
    
    
    
    (151.0
    )
    
    
    66.8Earnings from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    N/A
    
    
    
    (60.2
    )Net (loss) earnings
    
    
    (3.2
    )%
    
    
    7.0
    %
    
    
    5.2
    %
    
    
    (150.7
    )%
    
    
    63.6
    %
  35




---



##### Table of Contents



Fiscal 2008 compared to Fiscal 2007
 Net Revenues
  (dollar amounts in millions)
 Dollar Amount
    
    
    PercentageChange
    
    
    ChangeDecember 28,
    
    
    December 30,
    
    
    Fiscal 2008
    
    
    Fiscal 20082008
    
    
    2007
    
    
    vs.
    
    
    vs.Year ended
    
    (Fiscal 2008)
    
    
    (Fiscal 2007)
    
    
    Fiscal 2007
    
    
    Fiscal 2007Net revenues:Shrink Management Solutions
    
    $
    565.1
    
    
    $
    478.5
    
    
    $
    86.6
    
    
    
    18.1
    %Intelligent Labels
    
    
    257.6
    
    
    
    259.3
    
    
    
    (1.7
    )
    
    
    (0.6
    )Retail Merchandising
    
    
    94.4
    
    
    
    96.4
    
    
    
    (2.0
    )
    
    
    (2.0
    )Net revenues
    
    $
    917.1
    
    
    $
    834.2
    
    
    $
    82.9
    
    
    
    9.9
    %
 Shrink Management Solutions
   TM
 Intelligent Labels
 ® ® ® ®
 36




---



##### Table of Contents



Retail Merchandising
  Gross Profit
  Shrink Management Solutions
  Intelligent Labels
 ®
  Retail Merchandising
  Selling, General, and Administrative Expenses
  37




---



##### Table of Contents



Research and Development Expenses
  Restructuring Expenses
  Goodwill Impairment
  Asset Impairment
  Litigation Settlement
  Other Operating Income
   Interest Income and Interest Expense
   Other Gain (Loss), net
  Income Taxes
  38




---



##### Table of Contents



Earnings from Discontinued Operations, Net of Tax
  Net
(Loss) Earnings
  Fiscal 2007 compared to Fiscal 2006
 Net Revenues
  (dollar amounts in millions)
 Dollar Amount
    
    
    PercentageChange
    
    
    ChangeDecember 30,
    

    
    December 31,
    
    
    Fiscal 2007
    

    
    Fiscal 20072007
    
    
    2006
    
    
    vs.
    
    
    vs.Year ended
    
    (Fiscal 2007)
    
    
    (Fiscal 2006)
    
    
    Fiscal 2006
    
    
    Fiscal 2006Net revenues:Shrink Management Solutions
    
    $
    478.5
    
    
    $
    383.9
    
    
    $
    94.6
    
    
    
    24.6
    %Intelligent Labels
    
    
    259.3
    
    
    
    219.4
    
    
    
    39.9
    
    
    
    18.2Retail Merchandising
    
    
    96.4
    
    
    
    84.5
    
    
    
    11.9
    
    
    
    14.1Net revenues
    
    $
    834.2
    
    
    $
    687.8
    
    
    $
    146.4
    
    
    
    21.3
    %
 Shrink Management Solutions
  Intelligent Labels
 ® ®
 39




---



##### Table of Contents



Retail Merchandising
  Gross Profit
  Shrink Management Solutions
  Intelligent Labels
 ® ®
 Retail Merchandising
  Selling, General, and Administrative Expenses
  Research and Development Expenses
  Restructuring Expenses
  Litigation Settlement
  40




---



##### Table of Contents



Other Operating Income
   Interest Income and Interest Expense
  Other Gain (Loss), net
  Income Taxes
   Earnings from Discontinued Operations, Net of Tax
  Net Earnings
  41




---



##### Table of Contents



Other Matters
 Recently Adopted Accounting Standards
     New Accounting Pronouncements and Other Standards
  42




---



##### Table of Contents



43




---



##### Table of Contents



Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Market Risk Factors
    44




---



##### Table of Contents



Item 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  Report of Independent Registered Public Accounting Firm
    
    
    46Consolidated Balance Sheets as of December 28, 2008 and December 30, 2007
    
    
    47Consolidated Statements of Operations for each of the years in the three-year period ended December 28, 2008
    
    
    48Consolidated Statements of Stockholders Equity for each of the years in the three-year period ended December 28, 2008
    
    
    49Consolidated Statements of Comprehensive (Loss) Income for each of the years in the three-year period ended December
28, 2008
    
    
    50Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 28, 2008
    
    
    51Notes to Consolidated Financial Statements
    
    
    52-83Financial Statement Schedules, Schedule II  Valuation and Qualifying Accounts
    
    
    89
 45




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 
 46




---



##### Table of Contents



CHECKPOINT
SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
 December 28,
    
    
    December 30,2008
    
    
    2007ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    132,222
    
    
    $
    118,271Marketable securities
    
    
    
    
    
    
    29Accounts receivable, net of allowance of $18,414 and $15,839
    
    
    196,664
    
    
    
    221,875Inventories
    
    
    102,122
    
    
    
    109,329Other current assets
    
    
    41,224
    
    
    
    42,914Deferred income taxes
    
    
    22,078
    
    
    
    14,492Total Current Assets
    
    
    494,310
    
    
    
    506,910REVENUE EQUIPMENT ON OPERATING LEASE, net
    
    
    2,040
    
    
    
    4,500PROPERTY, PLANT, AND EQUIPMENT, net
    
    
    86,735
    
    
    
    88,096GOODWILL
    
    
    235,532
    
    
    
    274,601OTHER INTANGIBLES, net
    
    
    113,755
    
    
    
    119,294DEFERRED INCOME TAXES
    
    
    36,182
    
    
    
    28,591OTHER ASSETS
    
    
    17,162
    
    
    
    9,052TOTAL ASSETS
    
    $
    985,716
    
    
    $
    1,031,044LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Short-term borrowings and current portion of long-term debt
    
    $
    11,582
    
    
    $
    3,756Accounts payable
    
    
    63,872
    
    
    
    76,404Accrued compensation and related taxes
    
    
    32,056
    
    
    
    38,821Other accrued expenses
    
    
    54,123
    
    
    
    43,469Income taxes
    
    
    8,066
    
    
    
    4,827Unearned revenues
    
    
    11,005
    
    
    
    13,615Restructuring reserve
    
    
    4,522
    
    
    
    4,224Accrued pensions  current
    
    
    4,305
    
    
    
    4,337Other current liabilities
    
    
    22,027
    
    
    
    20,401Total Current Liabilities
    
    
    211,558
    
    
    
    209,854LONG-TERM DEBT, LESS CURRENT MATURITIES
    
    
    133,704
    
    
    
    91,756ACCRUED PENSIONS
    
    
    77,623
    
    
    
    80,549OTHER LONG-TERM LIABILITIES
    
    
    47,928
    
    
    
    46,380DEFERRED INCOME TAXES
    
    
    9,665
    
    
    
    13,200MINORITY INTEREST
    
    
    924
    
    
    
    977COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock, no par value, authorized 500,000 shares, none issued
    
    
    
    
    
    
    Common stock, par value $.10 per share, authorized 100,000,000 shares,
issued 42,747,808 and 41,837,525
    
    
    4,274
    
    
    
    4,183Additional capital
    
    
    381,498
    
    
    
    360,684Retained earnings
    
    
    173,912
    
    
    
    203,717Common stock in treasury, at cost, 4,035,912 shares and 2,035,912 shares
    
    
    (71,520
    )
    
    
    (20,621
    )Accumulated other comprehensive income, net of tax
    
    
    16,150
    
    
    
    40,365TOTAL STOCKHOLDERS EQUITY
    
    
    504,314
    
    
    
    588,328TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    985,716
    
    
    $
    1,031,044
  47




---



##### Table of Contents



CHECKPOINT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollar amounts in thousands, except per share data)
 December 28,
    
    
    December 30,
    
    
    December 31,Year ended
    
    2008
    
    
    2007
    
    
    2006Net revenues
    
    $
    917,082
    
    
    $
    834,156
    
    
    $
    687,775Cost of revenues
    
    
    538,983
    
    
    
    488,184
    
    
    
    396,084Gross profit
    
    
    378,099
    
    
    
    345,972
    
    
    
    291,691Selling, general, and administrative expenses
    
    
    296,935
    
    
    
    260,854
    
    
    
    226,958Research and development
    
    
    22,607
    
    
    
    18,170
    
    
    
    19,417Restructuring expenses
    
    
    6,442
    
    
    
    2,701
    
    
    
    7,007Asset impairment
    
    
    4,510
    
    
    
    
    
    
    
    Goodwill impairment
    
    
    59,583
    
    
    
    
    
    
    
    Litigation settlement
    
    
    6,167
    
    
    
    
    
    
    
    2,251Other operating income
    
    
    968
    
    
    
    2,571
    
    
    
    2,025Operating (loss) income
    
    
    (17,177
    )
    
    
    66,818
    
    
    
    38,083Interest income
    
    
    2,660
    
    
    
    5,443
    
    
    
    4,906Interest expense
    
    
    5,768
    
    
    
    2,347
    
    
    
    2,155Other (loss) gain, net
    
    
    (8,924
    )
    
    
    662
    
    
    
    1,141(Loss) earnings from continuing operations before income taxes and
minority interest
    
    
    (29,209
    )
    
    
    70,576
    
    
    
    41,975Income taxes expense
    
    
    719
    
    
    
    12,174
    
    
    
    6,987Minority interest, net of tax
    
    
    (123
    )
    
    
    (7
    )
    
    
    (31
    )(Loss) earnings from continuing operations
    
    
    (29,805
    )
    
    
    58,409
    
    
    
    35,019Earnings from discontinued operations, net of tax of $0, $351, and $1,059
    
    
    
    
    
    
    359
    
    
    
    903Net (loss) earnings
    
    $
    (29,805
    )
    
    $
    58,768
    
    
    $
    35,922Basic (Loss) Earnings Per Share:(Loss) earnings from continuing operations
    
    $
    (.76
    )
    
    $
    1.46
    
    
    $
    .89Earnings from discontinued operations, net of tax
    
    
    
    
    
    
    .01
    
    
    
    .02Basic (Loss) Earnings Per Share
    
    $
    (.76
    )
    
    $
    1.47
    
    
    $
    .91Diluted (Loss) Earnings Per Share:(Loss) earnings from continuing operations
    
    $
    (.76
    )
    
    $
    1.43
    
    
    $
    .87Earnings from discontinued operations, net of tax
    
    
    
    
    
    
    .01
    
    
    
    .02Diluted (Loss) Earnings Per Share
    
    $
    (.76
    )
    
    $
    1.44
    
    
    $
    .89
  48




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##### Table of Contents



CHECKPOINT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(dollar amounts in thousands)
 AccumulatedOther
    
    TotalCommon Stock
    
    Additional
    
    Retained
    
    Treasury Stock
    
    Comprehensive
    
    StockholdersShares
    
    Amount
    
    Capital
    
    Earnings
    
    Shares
    
    Amount
    
    Income (Loss)
    
    EquityBalance, December 25, 2005
    
    
    40,737
    
    
    $
    4,073
    
    
    $
    326,950
    
    
    $
    110,736
    
    
    
    2,036
    
    
    $
    (20,621
    )
    
    $
    (24,718
    )
    
    $
    396,420Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,922
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,922Exercise of stock-based
compensation
    
    
    578
    
    
    
    58
    
    
    
    8,633
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,691Tax benefit on stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    1,836
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,836Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    5,710
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,710Deferred compensation plan
    
    
    
    
    
    
    
    
    
    
    2,077
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,077Adoption of SFAS 158, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,743
    )
    
    
    (2,743
    )Minimum pension liability
adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (121
    )
    
    
    (121
    )Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,789
    
    
    
    25,789Balance, December 31, 2006
    
    
    41,315
    
    
    
    4,131
    
    
    
    345,206
    
    
    
    146,658
    
    
    
    2,036
    
    
    
    (20,621
    )
    
    
    (1,793
    )
    
    
    473,581Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,768
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,768Exercise of stock-based
compensation
    
    
    522
    
    
    
    52
    
    
    
    6,670
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,722Tax benefit on stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    881
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    881Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    6,518
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,518Deferred compensation plan
    
    
    
    
    
    
    
    
    
    
    1,409
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,409Cumulative effect of adopting a
change in accounting for
uncertainties in income taxes
(FIN 48)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,709
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,709
    )Amortization of pension plan
actuarial losses, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130
    
    
    
    130Unrealized gain adjustment on
marketable securities, net of
tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    16Recognized gain on pension, net
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,755
    
    
    
    6,755Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,257
    
    
    
    35,257Balance, December 30, 2007
    
    
    41,837
    
    
    
    4,183
    
    
    
    360,684
    
    
    
    203,717
    
    
    
    2,036
    
    
    
    (20,621
    )
    
    
    40,365
    
    
    
    588,328Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,805
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,805
    )Exercise of stock-based
compensation
    
    
    911
    
    
    
    91
    
    
    
    8,914
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,005Tax benefit on stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    2,121
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,121Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    7,096
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,096Deferred compensation plan
    
    
    
    
    
    
    
    
    
    
    2,683
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,683Repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    (50,899
    )
    
    
    
    
    
    
    (50,899
    )Amortization of pension plan
actuarial losses, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    72Change in realized and
unrealized gains on derivative
hedges, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    880
    
    
    
    880Unrealized gain adjustment on
marketable securities, net of
tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    (16
    )Recognized loss on pension, net
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (169
    )
    
    
    (169
    )Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,982
    )
    
    
    (24,982
    )Balance, December 28, 2008
    
    
    42,748
    
    
    $
    4,274
    
    
    $
    381,498
    
    
    $
    173,912
    
    
    
    4,036
    
    
    $
    (71,520
    )
    
    $
    16,150
    
    
    $
    504,314
  49




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##### Table of Contents



CHECKPOINT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(dollar amounts in thousands)
 December 28,
    
    
    December 30,
    
    
    December 31,Year ended
    
    2008
    
    
    2007
    
    
    2006Net (loss) earnings
    
    $
    (29,805
    )
    
    $
    58,768
    
    
    $
    35,922Amortization of pension plan actuarial losses, net of tax
    
    
    72
    
    
    
    130
    
    
    
    Change in realized and unrealized gains on derivative hedges, net of tax
    
    
    880
    
    
    
    
    
    
    
    Unrealized gain adjustment on marketable securities, net of tax
    
    
    (16
    )
    
    
    16
    
    
    
    Recognized (loss) gain on pension, net of tax
    
    
    (169
    )
    
    
    6,755
    
    
    
    Minimum pension liability adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    (121
    )Foreign currency translation adjustment
    
    
    (24,982
    )
    
    
    35,257
    
    
    
    25,789Comprehensive (loss) income
    
    $
    (54,020
    )
    
    $
    100,926
    
    
    $
    61,590
  50




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##### Table of Contents



CHECKPOINT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
 December 28,
    
    
    December 30,
    
    
    December 31,Year ended
    
    2008
    
    
    2007
    
    
    2006Cash flows from operating activities:Net earnings
    
    $
    (29,805
    )
    
    $
    58,768
    
    
    $
    35,922Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation and amortization
    
    
    30,788
    
    
    
    21,059
    
    
    
    19,504Deferred taxes
    
    
    (13,716
    )
    
    
    (7,486
    )
    
    
    281Stock-based compensation
    
    
    7,096
    
    
    
    6,518
    
    
    
    5,710Excess tax benefit on stock compensation
    
    
    (2,229
    )
    
    
    (755
    )
    
    
    (1,685
    )Provision for losses on accounts receivable
    
    
    5,810
    
    
    
    1,846
    
    
    
    2,442Gain on sublease settlement
    
    
    
    
    
    
    
    
    
    
    (1,777
    )Gain on sale of discontinued operations
    
    
    
    
    
    
    (359
    )
    
    
    (1,299
    )Gain on sale of subsidiaries
    
    
    (968
    )
    
    
    (2,523
    )
    
    
    Loss (gain) on disposal of fixed assets
    
    
    276
    
    
    
    (193
    )
    
    
    262Goodwill impairment
    
    
    59,583
    
    
    
    
    
    
    
    Asset impairment
    
    
    4,510
    
    
    
    
    
    
    
    (Increase) decrease in current assets, net of the effects of acquired companies:Accounts receivable
    
    
    (215
    )
    
    
    (34,186
    )
    
    
    (3,977
    )Inventories
    
    
    5,469
    
    
    
    2,186
    
    
    
    (8,299
    )Other current assets
    
    
    3,920
    
    
    
    (2,496
    )
    
    
    6,207Increase (decrease) in current liabilities, net of the effects of acquired companies:Accounts payable
    
    
    (12,278
    )
    
    
    17,958
    
    
    
    (18,358
    )Income taxes
    
    
    5,951
    
    
    
    (9,144
    )
    
    
    4,904Unearned revenues
    
    
    (3,208
    )
    
    
    4,229
    
    
    
    (3,930
    )Restructuring reserve
    
    
    546
    
    
    
    (2,958
    )
    
    
    (5,668
    )Other current and accrued liabilities
    
    
    15,676
    
    
    
    14,507
    
    
    
    (7,853
    )Net cash provided by operating activities
    
    
    77,206
    
    
    
    66,971
    
    
    
    22,386Cash flows from investing activities:Acquisition of property, plant, and equipment
    
    
    (15,217
    )
    
    
    (13,363
    )
    
    
    (11,520
    )Net cash (outflow) proceeds from the sale of discontinued operations
    
    
    
    
    
    
    (2,159
    )
    
    
    26,904Acquisitions of businesses, net of cash acquired
    
    
    (39,629
    )
    
    
    (94,522
    )
    
    
    (7,353
    )Decrease in restricted cash
    
    
    
    
    
    
    2,121
    
    
    
    Other investing activities
    
    
    142
    
    
    
    1,772
    
    
    
    (68
    )Net cash (used in) provided by investing activities
    
    
    (54,704
    )
    
    
    (106,151
    )
    
    
    7,963Cash flows from financing activities:Proceeds from stock issuances
    
    
    9,005
    
    
    
    7,174
    
    
    
    8,691Excess tax benefit on stock compensation
    
    
    2,229
    
    
    
    755
    
    
    
    1,685Proceeds of short-term debt
    
    
    3,582
    
    
    
    2,899
    
    
    
    14,200Payment of short-term debt
    
    
    (3,596
    )
    
    
    (8,950
    )
    
    
    (9,873
    )Net change in factoring and bank overdrafts
    
    
    
    
    
    
    
    
    
    
    (3,293
    )Proceeds of long-term debt
    
    
    105,898
    
    
    
    6,177
    
    
    
    Payment of long-term debt
    
    
    (65,813
    )
    
    
    (891
    )
    
    
    (18,355
    )Payment of
notes payable
    
    
    (4,866
    )
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (50,899
    )
    
    
    
    
    
    
    Net cash
(used in) provided by financing activities
    
    
    (4,460
    )
    
    
    7,164
    
    
    
    (6,945
    )Effect of foreign currency rate fluctuations on cash and cash equivalents
    
    
    (4,091
    )
    
    
    6,893
    
    
    
    6,767Net increase (decrease) in cash and cash equivalents
    
    
    13,951
    
    
    
    (25,123
    )
    
    
    30,171Cash and cash equivalents:Beginning of year
    
    
    118,271
    
    
    
    143,394
    
    
    
    113,223End of year
    
    $
    132,222
    
    
    $
    118,271
    
    
    $
    143,394
  51




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##### Table of Contents



CHECKPOINT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Operations
 ®
 Out of Period Adjustments
    Principles of Consolidation
  Use of Estimates
  Fiscal Year
  52




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##### Table of Contents



Reclassifications
  Cash and Cash Equivalents
  Accounts Receivable
  Inventories
  Revenue Equipment on Operating Lease
  Property, Plant, and Equipment
   Internal-Use Software
  Goodwill
  53




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##### Table of Contents



Other Intangibles
    Other Assets
  Deferred Financing Costs
  Revenue Recognition
  54




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##### Table of Contents



Shipping and Handling Fees and Costs
  Cost of Revenues
  Warranty Reserves
  December 28,
    
    
    December 30,(dollar amounts in thousands)
    
    2008
    
    
    2007Balance at beginning of year
    
    $
    8,108
    
    
    $
    5,499Accruals for warranties issued
    
    
    6,388
    
    
    
    7,929Settlement made
    
    
    (5,882
    )
    
    
    (6,155
    )Acquisitions/(Divestitures)
    
    
    89
    
    
    
    309Foreign currency translation adjustment
    
    
    (300
    )
    
    
    526Balance at end of year
    
    $
    8,403
    
    
    $
    8,108
 Royalty Expense
  Research and Development Costs
  Stock Options
  55




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##### Table of Contents



Year Ended,
    
    
    Year Ended,
    
    
    Year Ended,December 28,
    
    
    December 30,
    
    
    December 31,2008
    
    
    2007
    
    
    2006Weighted average fair value of grants
    
    $
    8.04
    
    
    $
    8.88
    
    
    $
    11.47Valuation assumptions:Expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility
    
    
    .3883
    
    
    
    .3659
    
    
    
    .4135Expected life (in years)
    
    
    4.84
    
    
    
    4.56
    
    
    
    4.54Risk-free interest rate
    
    
    2.450
    %
    
    
    4.264
    %
    
    
    4.55 - 5.07
    %
  Income Taxes
   Taxes
and Value Added Collected from Customers
  Foreign Currency Translation and Transactions
  Accounting for Hedging Activities
   56




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##### Table of Contents



Recently Adopted Accounting Standards
     57




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##### Table of Contents



New Accounting Pronouncements and Other Standards
       58




---



##### Table of Contents



Note 2. ACQUISITIONS
   59




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##### Table of Contents



November 1,(dollar amounts in thousands)
    
    2007Cash
    
    $
    67,000Long-term debt
    
    
    75,000Contingent payment
    
    
    6,796Purchase price (1)
    
    
    148,796Fair value of net assets acquired:Accounts receivable
    
    
    6,986Inventories
    
    
    6,882Other current assets
    
    
    73Property, plant, and equipment
    
    
    9,148Intangible assets (2)
    
    
    71,053Accounts payable
    
    
    (2,526
    )Accrued compensation and related taxes
    
    
    (810
    )Other accrued expenses
    
    
    (799
    )Fair value of the net assets acquired
    
    
    90,007Excess cost over net assets acquired
    
    
    58,789Adjustment to the realization of deferred tax assets for Checkpoint
    
    
    (59
    )Estimated acquisition costs
    
    
    648Goodwill (3)
    
    $
    59,378
 Notes:
 (1)
    
    Represents the cash, long-term debt, and contingent payment used to finance the acquisition.(2)
    
    Intangible assets consist of customer relationships ($33.4 million), trade names ($19.4
million), and developed technologies ($18.3 million). The weighted-average useful lives for
the customer relationships and developed technologies are approximately 10 years. The
intangible assets related to the trade name are deemed to have an indefinite life. The
amortization of definite life intangibles are calculated on a straight-line basis.(3)
    
    Goodwill of $59.4 million was assigned to the Shrink Management Solutions reporting
segment. Of that total amount, $59.4 million is expected to be deductible for tax purposes
over a 15 year period.
  60




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##### Table of Contents



Pro FormaDecember 30,
    
    
    December 31,Year ended
    
    2007
    
    
    2006(Unaudited)
    
    
    (Unaudited)Net revenues
    
    $
    880,790
    
    
    $
    739,033Earnings from continuing operations
    
    
    58,225
    
    
    
    34,920Earnings from discontinued operations, net of tax
    
    
    359
    
    
    
    903Net earnings
    
    $
    58,584
    
    
    $
    35,823Basic Earnings Per Share:Earnings from continuing operations
    
    $
    1.46
    
    
    $
    .89Earnings from discontinued operations, net of tax
    
    
    .01
    
    
    
    .02Basic Earnings Per Share
    
    $
    1.47
    
    
    $
    .91Diluted Earnings Per Share:Earnings from continuing operations
    
    $
    1.43
    
    
    $
    .87Earnings from discontinued operations, net of tax
    
    
    .01
    
    
    
    .02Diluted Earnings Per Share
    
    $
    1.44
    
    
    $
    .89
 Other Acquisitions in Fiscal 2008
  
   Other Acquisitions in Fiscal 2007
   61




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##### Table of Contents



Other Acquisitions in Fiscal 2006
  Note 3. INVENTORIES
  December 28,
    
    
    December 30,(dollar amounts in thousands)
    
    2008
    
    
    2007Raw materials
    
    $
    16,287
    
    
    $
    16,352Work-in-process
    
    
    6,100
    
    
    
    6,497Finished goods
    
    
    79,735
    
    
    
    86,480Total
    
    $
    102,122
    
    
    $
    109,329
 62




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Note 4. REVENUE EQUIPMENT ON OPERATING LEASE AND PROPERTY, PLANT, AND EQUIPMENT
  December 28,
    
    
    December 30,(dollar amounts in thousands)
    
    2008
    
    
    2007Revenue equipment on operating leaseEquipment rented to customers
    
    $
    22,795
    
    
    $
    31,290Accumulated depreciation
    
    
    (20,755
    )
    
    
    (26,790
    )Total revenue equipment on operating lease
    
    $
    2,040
    
    
    $
    4,500Property, plant, and equipmentLand
    
    $
    9,809
    
    
    $
    8,741Buildings
    
    
    56,014
    
    
    
    59,463Machinery and equipment
    
    
    144,717
    
    
    
    140,982Leasehold improvements
    
    
    13,385
    
    
    
    11,938Construction in progress
    
    
    3,429
    
    
    
    4,672227,354
    
    
    
    225,796Accumulated depreciation
    
    
    (140,619
    )
    
    
    (137,700
    )Total property, plant, and equipment
    
    $
    86,735
    
    
    $
    88,096
      Note 5. GOODWILL AND OTHER INTANGIBLE ASSETS
   December 28, 2008
    
    
    December 30, 2007Amortizable
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossLife
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Accumulated(dollar amounts in thousands)
    
    (years)
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationFinite-lived intangible assets:Customer lists
    
    
    20
    
    
    $
    81,037
    
    
    $
    31,184
    
    
    $
    80,104
    
    
    $
    26,535Trade name
    
    
    30
    
    
    
    30,610
    
    
    
    16,107
    
    
    
    31,662
    
    
    
    15,695Patents, license agreements
    
    
    5 to 14
    
    
    
    60,986
    
    
    
    40,277
    
    
    
    62,716
    
    
    
    38,076Other
    
    
    3 to 6
    
    
    
    9,700
    
    
    
    3,140
    
    
    
    5,890
    
    
    
    1,322Total amortized finite-lived intangible assets
    
    
    
    
    
    
    182,333
    
    
    
    90,708
    
    
    
    180,372
    
    
    
    81,628Indefinite-lived intangible assets:Trade name
    
    
    
    
    
    
    22,130
    
    
    
    
    
    
    
    20,550
    
    
    
    Total identifiable intangible assets
    
    
    
    
    
    $
    204,463
    
    
    $
    90,708
    
    
    $
    200,922
    
    
    $
    81,628
 63




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##### Table of Contents



(dollar amounts in thousands)2009
    
    $
    12,4702010
    
    $
    11,8742011
    
    $
    10,4282012
    
    $
    9,6222013
    
    $
    8,429
  ShrinkManagement
    
    
    Intelligent
    
    
    Retail(dollar amounts in thousands)
    
    Solutions
    
    
    Labels
    
    
    Merchandising
    
    
    TotalBalance as of December 31, 2006
    
    $
    69,335
    
    
    $
    47,774
    
    
    $
    70,179
    
    
    $
    187,288Acquired during the year
    
    
    63,584
    
    
    
    6,446
    
    
    
    
    
    
    
    70,030Purchase accounting adjustments
    
    
    
    
    
    
    (2,687
    )
    
    
    
    
    
    
    (2,687
    )Translation adjustment and other
    
    
    7,025
    
    
    
    4,781
    
    
    
    8,164
    
    
    
    19,970Balance as of December 30, 2007
    
    $
    139,944
    
    
    $
    56,314
    
    
    $
    78,343
    
    
    $
    274,601Acquired during the year
    
    
    24,130
    
    
    
    
    
    
    
    
    
    
    
    24,130Purchase accounting adjustments
    
    
    7,697
    
    
    
    1,429
    
    
    
    
    
    
    
    9,126Impairment losses
    
    
    
    
    
    
    (51,770
    )
    
    
    (7,813
    )
    
    
    (59,583
    )Translation adjustment and other
    
    
    (2,278
    )
    
    
    (5,973
    )
    
    
    (4,491
    )
    
    
    (12,742
    )Balance as of December 28, 2008
    
    $
    169,493
    
    
    $
    
    
    
    $
    66,039
    
    
    $
    235,532
     64




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##### Table of Contents



Note 6. SHORT-TERM BORROWINGS AND CURRENT PORTION OF LONG-TERM DEBT
  December 28,
    
    
    December 30,(dollar amounts in thousands)
    
    2008
    
    
    2007Lines of credit with interest rates ranging from 1.43% to 1.47% (1)
    
    $
    7,707
    
    
    $
    Asialco loans
    
    
    3,645
    
    
    
    3,418Current portion of long-term debt
    
    
    230
    
    
    
    338Total short-term borrowings and current portion of long-term debt
    
    $
    11,582
    
    
    $
    3,756
 (1)
    
    The weighted average interest rate for 2008 was 1.45%.
   Note 7. LONG-TERM DEBT
  December 28,
    
    
    December 30,(dollar amounts in thousands)
    
    2008
    
    
    2007Senior unsecured credit facility:$150 million variable interest rate revolving credit facility maturing in 2010
    
    $
    133,596
    
    
    $
    91,496Other capital leases with maturities through 2013
    
    
    338
    
    
    
    598Total(1)
    
    
    133,934
    
    
    
    92,094Less current portion
    
    
    230
    
    
    
    338Total long-term portion
    
    $
    133,704
    
    
    $
    91,756
 (1)
    
    The weighted average interest rates for 2008 and 2007 were 3.0% and 4.9%, respectively.
    
  65




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##### Table of Contents



Capital
    
    
    Total(dollar amounts in thousands)
    
    Debt
    
    
    Leases
    
    
    Debt2009
    
    $
    
    
    
    $
    230
    
    
    $
    2302010
    
    
    133,596
    
    
    
    68
    
    
    
    133,6642011
    
    
    
    
    
    
    24
    
    
    
    242012
    
    
    
    
    
    
    13
    
    
    
    132013
    
    
    
    
    
    
    3
    
    
    
    3Thereafter
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    133,596
    
    
    $
    338
    
    
    $
    133,934
 Note 8. STOCK-BASED COMPENSATION
    Stock Plans
  
   66




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##### Table of Contents



Stock Options
  WeightedAverageWeighted-
    
    
    Remaining
    
    
    AggregateAverage
    
    
    Contractual
    
    
    IntrinsicExercise
    
    
    Term
    
    
    ValueShares
    
    
    Price
    
    
    (in years)
    
    
    (in thousands)Outstanding at December 30, 2007
    
    
    3,405,902
    
    
    $
    17.45
    
    
    
    6.21
    
    
    $
    28,950Granted
    
    
    328,481
    
    
    
    21.82Exercised
    
    
    (687,504
    )
    
    
    12.42Forfeited or expired
    
    
    (166,553
    )
    
    
    22.60Outstanding at December 28, 2008
    
    
    2,880,326
    
    
    $
    18.85
    
    
    
    6.42
    
    
    $
    25,079Vested and expected to vest at December 28, 2008
    
    
    2,691,674
    
    
    $
    18.60
    
    
    
    6.24
    
    
    $
    25,079Exercisable at December 28, 2008
    
    
    1,866,847
    
    
    $
    16.60
    
    
    
    5.13
    
    
    $
    25,079
 
  67




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##### Table of Contents



Restricted Stock Units
   Weighted-Average Vest
    
    
    Weighted-Date
    
    
    Average GrantShares
    
    
    (in years)
    
    
    Date Fair ValueNonvested at December 30, 2007
    
    
    376,386
    
    
    
    1.48
    
    
    $
    32.70Granted
    
    
    280,074
    
    
    
    
    
    
    
    19.63Vested
    
    
    (85,483
    )
    
    
    
    
    
    
    21.77Forfeited
    
    
    (17,992
    )
    
    
    
    
    
    
    27.40Nonvested at December 28, 2008
    
    
    552,985
    
    
    
    1.34
    
    
    $
    36.45Vested and expected to vest at December 28, 2008
    
    
    456,684
    
    
    
    1.13Vested at December 28, 2008
    
    
    8,400
    
    
    
    
  Note 9. SUPPLEMENTAL CASH FLOW INFORMATION
   Business Acquisitions
 December 28,
    
    
    December 30,
    
    
    December 31,(dollar amounts in thousands)
    
    2008
    
    
    2007
    
    
    2006Fair value of tangible assets acquired, less cash acquired
    
    $
    12,492
    
    
    $
    45,883
    
    
    $
    10,755Goodwill and identified intangible assets
    
    
    44,246
    
    
    
    155,239
    
    
    
    5,733Liabilities assumed
    
    
    (17,109
    )
    
    
    (31,600
    )
    
    
    (9,135
    )Borrowings to fund acquisition
    
    
    
    
    
    
    (75,000
    )
    
    
    Cash paid for acquisitions
    
    $
    39,629
    
    
    $
    94,522
    
    
    $
    7,353
 68




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##### Table of Contents



Note 10. STOCKHOLDERS EQUITY
     (dollar amounts in thousands)
    
    2008
    
    
    2007Actuarial losses on pension plans, net of tax
    
    $
    (2,862
    )
    
    $
    (2,883
    )Unrealized gain adjustment on marketable securities, net of tax
    
    
    
    
    
    
    16Derivative hedge contracts, net of tax


    880



    Foreign currency translation adjustment
    
    
    18,132
    
    
    
    43,232Total
    
    $
    16,150
    
    
    $
    40,365
 Note 11. EARNINGS PER SHARE
  December 28,
    
    
    December 30,
    
    
    December 31,(Amounts in thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2006Basic earnings available to common stockholders:Net (loss) earnings available to common stockholders from continuing operations
    
    $
    (29,805
    )
    
    $
    58,409
    
    
    $
    35,019Diluted (loss) earnings available to common stockholders from continuing operations
    
    $
    (29,805
    )
    
    $
    58,409
    
    
    $
    35,019Shares:Weighted average number of common shares outstanding
    
    
    39,071
    
    
    
    39,550
    
    
    
    39,136Shares issuable under deferred compensation agreements
    
    
    337
    
    
    
    311
    
    
    
    240Basic weighted average number of common shares Outstanding
    
    
    39,408
    
    
    
    39,861
    
    
    
    39,376Common shares assumed upon exercise of stock options and awards
    
    
    
    
    
    
    853
    
    
    
    839Shares issuable under deferred compensation arrangements
    
    
    
    
    
    
    10
    
    
    
    18Dilutive weighted average number of common shares outstanding
    
    
    39,408
    
    
    
    40,724
    
    
    
    40,233Basic (Loss) Earnings per Share:(Loss) earnings from continuing operations
    
    $
    (.76
    )
    
    $
    1.46
    
    
    $
    .89Earnings from discontinued operations, net of tax
    
    
    
    
    
    
    .01
    
    
    
    .02Basic (loss) earnings per share
    
    $
    (.76
    )
    
    $
    1.47
    
    
    $
    .91Diluted (Loss) Earnings per Share:(Loss) earnings from continuing operations
    
    $
    (.76
    )
    
    $
    1.43
    
    
    $
    .87Earnings from discontinued operations, net of tax
    
    
    
    
    
    
    .01
    
    
    
    .02Diluted (loss) earnings per share
    
    $
    (.76
    )
    
    $
    1.44
    
    
    $
    .89
   December 28,
    
    
    December 30,
    
    
    December 31,(share amounts in thousands)
    
    2008
    
    
    2007
    
    
    2006Weighted average
common share equivalents
associated with
anti-dilutive stock options
and restricted stock units
excluded from the
computation of diluted EPS (1):
    
    
    2,151
    
    
    
    524
    
    
    
    541
  69




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##### Table of Contents



Note 12. DISCONTINUED OPERATIONS
 ®
 ®
 December 30,
    
    
    December 31,(dollar amounts in thousands)
    
    2007
    
    
    2006Net revenue
    
    $
    
    
    
    $
    7,446Gross profit
    
    
    
    
    
    
    1,433Selling,
general, & administrative expenses
    
    
    
    
    
    
    2,239Operating (loss)
    
    
    
    
    
    
    (806
    )Gain on disposal
    
    
    710
    
    
    
    2,768Earnings from discontinued operations before income taxes
    
    
    710
    
    
    
    1,962Income taxes
    
    
    351
    
    
    
    1,059Earnings from discontinued operations, net of tax
    
    $
    359
    
    
    $
    903
 Note 13. INCOME TAXES
  (dollar amounts in thousands)
    
    2008
    
    2007
    
    2006Domestic
    
    $
    (16,448
    )
    
    $
    4,730
    
    
    $
    (778
    )Foreign
    
    
    (12,761
    )
    
    
    65,846
    
    
    
    42,753Total
    
    $
    (29,209
    )
    
    $
    70,576
    
    
    $
    41,975
  (dollar amounts in thousands)
    
    2008
    
    2007
    
    2006Currently payableFederal
    
    $
    36
    
    
    $
    (1,240
    )
    
    $
    (760
    )State
    
    
    12
    
    
    
    981
    
    
    
    582Puerto Rico
    
    
    243
    
    
    
    1,058
    
    
    
    (58
    )Foreign
    
    
    11,826
    
    
    
    18,255
    
    
    
    7,645Total currently payable
    
    
    12,117
    
    
    
    19,054
    
    
    
    7,409DeferredFederal
    
    
    (4,259
    )
    
    
    (80
    )
    
    
    1,315State
    
    
    902
    
    
    
    (5,493
    )
    
    
    Puerto Rico
    
    
    12
    
    
    
    (9
    )
    
    
    (121
    )Foreign
    
    
    (8,053
    )
    
    
    (1,298
    )
    
    
    (1,616
    )Total deferred
    
    
    (11,398
    )
    
    
    (6,880
    )
    
    
    (422
    )Total provision
    
    $
    719
    
    
    $
    12,174
    
    
    $
    6,987
 70




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##### Table of Contents



December 28,
    
    
    December 30,(dollar amounts in thousands)
    
    2008
    
    
    2007Inventory
    
    $
    6,650
    
    
    $
    7,963Accounts receivable
    
    
    2,158
    
    
    
    3,305Capitalized research and development costs
    
    
    3,161
    
    
    
    Net operating loss and foreign tax credit carryforwards
    
    
    53,635
    
    
    
    44,743Restructuring
    
    
    31
    
    
    
    350Deferred revenue
    
    
    1,345
    
    
    
    454Pension
    
    
    6,555
    
    
    
    6,401Warranty
    
    
    2,171
    
    
    
    1,529Deferred compensation
    
    
    1,712
    
    
    
    2,194Stock based compensation
    
    
    3,885
    
    
    
    2,647Valuation allowance
    
    
    (22,717
    )
    
    
    (27,572
    )Deferred tax assets
    
    
    58,586
    
    
    
    42,014Depreciation
    
    
    (28
    )
    
    
    (724
    )Intangibles
    
    
    10,993
    
    
    
    9,980Other
    
    
    (1,095
    )
    
    
    2,658Withholding tax liabilities
    
    
    945
    
    
    
    1,031Deferred tax liabilities
    
    
    10,815
    
    
    
    12,945Net deferred
tax assets
    
    $
    47,771
    
    
    $
    29,069
  Expiration
    
    Federal
    
    
    State
    
    
    International
    
    
    Total2009  2015
    
    $
    
    
    
    $
    3,172
    
    
    $
    1,459
    
    
    $
    4,6312016  2022
    
    
    
    
    
    
    2,127
    
    
    
    35
    
    
    
    2,1622023  2029
    
    
    7,160
    
    
    
    2,125
    
    
    
    
    
    
    
    9,285Indefinite life
    
    
    
    
    
    
    
    
    
    
    27,808
    
    
    
    27,808Deferred tax asset
    
    
    7,160
    
    
    
    7,424
    
    
    
    29,302
    
    
    
    43,886Valuation allowance
    
    
    
    
    
    
    (3,240
    )
    
    
    (18,018
    )
    
    
    (21,258
    )Net deferred position
    
    $
    7,160
    
    
    $
    4,184
    
    
    $
    11,284
    
    
    $
    22,628
      71




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##### Table of Contents



(dollar amounts in thousands)
    
    2008
    
    2007
    
    2006Tax provision at the statutory Federal income tax rate
    
    $
    (10,222
    )
    
    $
    24,702
    
    
    $
    14,692Non-deductible goodwill
    
    
    20,994
    
    
    
    
    
    
    
    Non-deductible permanent items
    
    
    1,258
    
    
    
    (165
    )
    
    
    260State and local income taxes, net of Federal benefit
    
    
    207
    
    
    
    634
    
    
    
    186Benefit from extraterritorial income
    
    
    
    
    
    
    
    
    
    
    (70
    )Foreign losses for which no tax benefit recognized
    
    
    3,122
    
    
    
    1,348
    
    
    
    801Foreign rate differentials
    
    
    (13,356
    )
    
    
    (12,028
    )
    
    
    (6,982
    )Tax settlements
    
    
    730
    
    
    
    
    
    
    
    Potential tax contingencies
    
    
    1,214
    
    
    
    1,984
    
    
    
    (1,528
    )Change in valuation allowance
    
    
    (3,574
    )
    
    
    (4,527
    )
    
    
    (453
    )Stock based compensation
    
    
    365
    
    
    
    384
    
    
    
    308Other
    
    
    (19
    )
    
    
    (158
    )
    
    
    (227
    )Tax provision at the effective tax rate
    
    $
    719
    
    
    $
    12,174
    
    
    $
    6,987
  December 28,
    
    
    December 30,(dollar amounts in thousands)
    
    2008
    
    
    2007Gross unrecognized tax benefits
    
    $
    12,714
    
    
    $
    10,197Increases in tax positions for prior years
    
    
    
    
    
    
    384Decreases in tax positions for prior years
    
    
    (966
    )
    
    
    Increases in tax positions for current year
    
    
    1,843
    
    
    
    1,128Settlements
    
    
    (965
    )
    
    
    Acquisition reserves
    
    
    
    
    
    
    1,063Lapse in statute of limitations
    
    
    (106
    )
    
    
    (58
    )Gross unrecognized tax benefits
    
    $
    12,520
    
    
    $
    12,714
    Note 14. EMPLOYEE BENEFIT PLANS
    72




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##### Table of Contents



Pension Plans
    December 28,
    
    
    December 30,(dollar amounts in thousands)
    
    2008
    
    
    2007Transition obligation
    
    $
    473
    
    
    $
    633Prior service costs
    
    
    23
    
    
    
    26Actuarial losses
    
    
    5,441
    
    
    
    5,456Total
    
    
    5,937
    
    
    
    6,115Deferred tax
    
    
    (3,075
    )
    
    
    (3,232
    )Net
    
    $
    2,862
    
    
    $
    2,883
 73




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##### Table of Contents



December 29,(dollar amounts in thousands)
    
    2009Transition obligation
    
    $
    130Prior service costs
    
    
    3Actuarial gain
    
    
    (10
    )Total
    
    $
    123
    (dollar amounts in thousands)
    
    2008
    
    2007
    
    2006Service cost
    
    $
    1,088
    
    
    $
    1,420
    
    
    $
    1,350Interest cost
    
    
    4,623
    
    
    
    4,094
    
    
    
    3,505Expected return on plan assets
    
    
    (72
    )
    
    
    (144
    )
    
    
    (144
    )Amortization of actuarial loss
    
    
    (44
    )
    
    
    477
    
    
    
    569Amortization of transition obligation
    
    
    137
    
    
    
    128
    
    
    
    117Amortization of prior service costs
    
    
    2
    
    
    
    2
    
    
    
    2Net periodic pension cost
    
    
    5,734
    
    
    
    5,977
    
    
    
    5,399Settlement (gain) loss
    
    
    (37
    )
    
    
    (462
    )
    
    
    736Special termination benefit recognized
    
    
    
    
    
    
    
    
    
    
    226Curtailment gain
    
    
    
    
    
    
    
    
    
    
    (337
    )Total pension expense
    
    $
    5,697
    
    
    $
    5,515
    
    
    $
    6,024
  December 28,
    
    
    December 30,(dollar amounts in thousands)
    
    2008
    
    
    2007Change in benefit obligationNet benefit obligation at beginning of year
    
    $
    86,340
    
    
    $
    89,566Service cost
    
    
    1,088
    
    
    
    1,420Interest cost
    
    
    4,623
    
    
    
    4,094Actuarial (gain)
    
    
    (60
    )
    
    
    (10,082
    )Gross benefits paid
    
    
    (4,366
    )
    
    
    (6,925
    )Plan settlements
    
    
    (37
    )
    
    
    (91
    )Divestment
    
    
    
    
    
    
    (1,165
    )Acquisition
    
    
    
    
    
    
    118Foreign currency exchange rate changes
    
    
    (4,110
    )
    
    
    9,405Net benefit obligation at end of year
    
    $
    83,478
    
    
    $
    86,340Change in plan assetsFair value of plan assets at beginning of year
    
    $
    1,454
    
    
    $
    3,234Actual return on assets
    
    
    (196
    )
    
    
    (613
    )Employer contributions
    
    
    4,734
    
    
    
    5,534Gross benefits paid
    
    
    (4,366
    )
    
    
    (6,925
    )Foreign currency exchange rate changes
    
    
    (76
    )
    
    
    224Fair value of plan assets at end of year
    
    $
    1,550
    
    
    $
    1,454Reconciliation of funded statusFunded status at end of year
    
    $
    (81,928
    )
    
    $
    (84,886
    )
 74




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December 28,
    
    
    December 30,(dollar amounts in thousands)
    
    2008
    
    
    2007Amounts recognized in accrued benefit consist of:Accrued pensions  current
    
    $
    4,305
    
    
    $
    4,337Accrued pensions
    
    
    77,623
    
    
    
    80,549Net amount recognized at end of year
    
    $
    81,928
    
    
    $
    84,886Other comprehensive income attributable to change in additional minimum liability recognition
    
    $
    
    
    
    $
    Accumulated benefit obligation at end of year
    
    $
    79,165
    
    
    $
    81,824
  December 28,
    
    
    December 30,(dollar amounts in thousands)
    
    2008
    
    
    2007Projected benefit obligation
    
    $
    83,478
    
    
    $
    86,340Accumulated benefit obligation
    
    $
    79,165
    
    
    $
    81,824Fair value of plan assets
    
    $
    1,550
    
    
    $
    1,454
  December 28,
    
    
    December 30,2008
    
    
    2007Weighted average assumptions for year-end benefit obligations:Discount
rate (1)
    
    
    5.75
    %
    
    
    5.50
    %Expected rate of increase in future compensation levels
    
    
    2.77
    %
    
    
    2.50
    %Weighted average assumptions for net periodic benefit cost development:Discount
rate (1)
    
    
    5.50
    %
    
    
    4.50
    %Expected rate of return on plan assets
    
    
    4.25
    %
    
    
    3.80
    %Expected rate of increase in future compensation levels
    
    
    2.52
    %
    
    
    2.50
    %Measurement Date:
    
    December 28, 2008
    
    December 30, 2007
 (1)
    
    Represents the weighted average rate for all pension plans.
    (dollar amounts in thousands)2009
    
    $
    4,3572010
    
    
    4,5952011
    
    
    4,8252012
    
    
    4,8792013
    
    
    5,2572014 through 2017
    
    $
    26,862
 75




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Note 15. FAIR VALUE MEASUREMENT FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
 Fair Value Measurement
    Level 1
    
    -
    
    Inputs are quoted prices in active markets for identical assets or liabilities.Level 2
    
    -
    
    Inputs are quoted prices for similar assets or liabilities in an active
market, quoted prices for identical or similar assets or liabilities in
markets that are not active, inputs other than quoted prices that are
observable and market-corroborated inputs which are derived principally from
or corroborated by observable market data.Level 3
    
    -
    
    Inputs are derived from valuation techniques in which one or more significant
inputs or value drivers are unobservable.
   Total Fair Value
    
    
    Quoted Prices inMeasurement
    
    
    Active Markets for
    
    
    Significant Other
    
    
    SignificantDecember 28,
    
    
    Identical Asset
    
    
    Observable Inputs
    
    
    Unobservable Inputs(dollar amounts in thousands)
    
    2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Foreign currency forward exchange contracts
    
    $
    901
    
    
    $
    
    
    
    $
    901
    
    
    $
    Foreign currency revenue forecast contracts
    
    
    48
    
    
    
    
    
    
    
    48
    
    
    
    Interest rate swap
    
    
    916
    
    
    
    
    
    
    
    916
    
    
    
    Total liabilities
    
    $
    1,865
    
    
    $
    
    
    
    $
    1,865
    
    
    $
    
  December 28,
    
    
    December 30,(dollar amounts in thousands)
    
    2008
    
    
    2007Beginning balance, net of tax
    
    $
    
    
    
    $
    Changes in fair value gain, net of tax
    
    
    1,508
    
    
    
    Reclass to earnings, net of tax
    
    
    (628
    )
    
    
    Ending balance, net of tax
    
    $
    880
    
    
    $
    
 76




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December 28, 2008
    
    
    December 30, 2007Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    Estimated(dollar amounts in thousands)
    
    Amount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueLong-term debt (including current maturities and excluding capital leases) (1)
    
    $
    133,596
    
    
    $
    133,596
    
    
    $
    94,914
    
    
    $
    94,914
 (1)
    
    The carrying amounts are reported on the balance sheet under the indicated captions.
   Financial Instruments and Risk Management
     
  77




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
   Note 16. PROVISION FOR RESTRUCTURING
  (dollar amounts are in thousands)
 December 28,
    
    
    December 30,
    
    
    December 31,Fiscal 2008
    
    2008
    
    
    2007
    
    
    2006Manufacturing Restructuring PlanSeverance and other employee-related charges
    
    $
    699
    
    
    $
    
    
    
    $
    Consulting fees
    
    
    838
    
    
    
    
    
    
    
    2005 Restructuring PlanSeverance and other employee-related charges
    
    
    4,563
    
    
    
    1,215
    
    
    
    7,915Acquisition integration costs
    
    
    519
    
    
    
    
    
    
    
    Pension curtailment
    
    
    
    
    
    
    (420
    )
    
    
    (339
    )Pension termination benefit expense
    
    
    
    
    
    
    
    
    
    
    226Lease termination costs
    
    
    
    
    
    
    2,051
    
    
    
    2003 Restructuring PlanSeverance and other employee-related charges
    
    
    (253
    )
    
    
    (145
    )
    
    
    (409
    )Lease termination costs
    
    
    76
    
    
    
    
    
    
    
    (386
    )Total
    
    $
    6,442
    
    
    $
    2,701
    
    
    $
    7,007
  (dollar amounts are in thousands)
 ChargeAccrual at
    
    
    Charged
    
    
    Reversed
    
    
    
    
    
    
    ExchangeBeginning
    
    
    to
    
    
    to
    
    
    Cash
    
    
    Rate
    
    
    Accrual atFiscal 2008
    
    of Year
    
    
    Earnings
    
    
    Earnings
    
    
    Payments
    
    
    Changes
    
    
    12/28/08Manufacturing Restructuring PlanSeverance and other employee-related charges
    
    $
    
    
    
    $
    701
    
    
    $
    (2
    )
    
    $
    (37
    )
    
    $
    (10
    )
    
    $
    6522005 Restructuring PlanSeverance and other employee-related charges
    
    
    3,015
    
    
    
    5,362
    
    
    
    (799
    )
    
    
    (4,141
    )
    
    
    (135
    )
    
    
    3,302Acquisition restructuring costs
    
    
    1,209
    
    
    
    
    
    
    
    
    
    
    
    (612
    )
    
    
    (29
    )
    
    
    568Total
    
    $
    4,224
    
    
    $
    6,063
    
    
    $
    (801
    )
    
    $
    (4,790
    )
    
    $
    (174
    )
    
    $
    4,522
 ChargeAccrual at
    
    
    
    
    
    
    Charged
    
    
    Reversed
    
    
    
    
    
    
    ExchangeBeginning
    
    
    Acquisition
    
    
    to
    
    
    to
    
    
    Cash
    
    
    Rate
    
    
    Accrual atFiscal 2007
    
    of Year
    
    
    Restructuring
    
    
    Earnings
    
    
    Earnings
    
    
    Payments
    
    
    Changes
    
    
    12/30/072005 Restructuring PlanSeverance and other employee-related charges
    
    $
    6,786
    
    
    $
    
    
    
    $
    2,096
    
    
    $
    (881
    )
    
    $
    (5,287
    )
    
    $
    301
    
    
    $
    3,015Acquisition restructuring costs (1)
    
    
    
    
    
    
    1,125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84
    
    
    
    1,209Total
    
    $
    6,786
    
    
    $
    1,125
    
    
    $
    2,096
    
    
    $
    (881
    )
    
    $
    (5,287
    )
    
    $
    385
    
    
    $
    4,224
 (1)
    
    During 2007, restructuring costs of $1.2 million included as a
cost of the SIDEP acquisition ($1.1 million related to employee
severance and $0.1 million related to the cost to abandon
facilities) were accounted for under Emerging Issues Task Force
Issue No. 95-3 Recognition of Liabilities in Connection with
Purchase Business Combinations. These costs were recognized as an
assumed liability in the acquisition and were included in the
purchase price allocation at November 9, 2007.
 78




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Manufacturing Restructuring Plan
 ®
   2005 Restructuring Plan
      2003 Restructuring Plan
    79




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##### Table of Contents



Note 17. COMMITMENTS AND CONTINGENCIES
   Capital
    
    
    Operating(dollar amounts in thousands)
    
    Leases
    
    
    Leases
    
    
    Total2009
    
    $
    258
    
    
    $
    14,613
    
    
    $
    14,8712010
    
    
    72
    
    
    
    10,602
    
    
    
    10,6742011
    
    
    26
    
    
    
    6,686
    
    
    
    6,7122012
    
    
    13
    
    
    
    4,944
    
    
    
    4,9572013
    
    
    3
    
    
    
    2,777
    
    
    
    2,780Thereafter
    
    
    
    
    
    
    3,101
    
    
    
    3,101Total minimum lease payments
    
    
    372
    
    
    $
    42,723
    
    
    $
    43,095Less: amounts representing interest
    
    
    34Present value of minimum lease payments
    
    $
    338
 Contingencies
  Matters related to ID Security Systems Canada Inc. versus Checkpoint Systems, Inc.
  Matter related to All-Tag Security S.A., et al
  Note 18. CONCENTRATION OF CREDIT RISK
  80




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Note 19. BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION
   i
    
    Shrink Management Solutions  includes electronic article surveillance (EAS) systems,
closed-circuit television (CCTV) systems, and fire and intrusion systems.ii
    
    Intelligent Labels  includes electronic article surveillance labels,
Check-Net® (service bureau), intelligent library systems, and radio frequency
identification (RFID) tags and labels.
 iii
    
    Retail Merchandising  includes hand-held labeling systems (HLS) and retail display
systems (RDS).
   (A)
    
    Business Segments
 (dollar amounts in thousands)
    
    2008
    
    
    2007
    
    
    2006Business segment net revenue:Shrink Management Solutions
    
    $
    565,067
    
    
    $
    478,526
    
    
    $
    383,932Intelligent Labels
    
    
    257,635
    
    
    
    259,282
    
    
    
    219,389Retail Merchandising
    
    
    94,380
    
    
    
    96,348
    
    
    
    84,454Total
    
    $
    917,082
    
    
    $
    834,156
    
    
    $
    687,775Business segment gross profit:Shrink Management Solutions
    
    $
    230,453
    
    
    $
    190,379
    
    
    $
    149,505Intelligent Labels
    
    
    100,983
    
    
    
    109,487
    
    
    
    100,654Retail Merchandising
    
    
    46,663
    
    
    
    46,106
    
    
    
    41,532Total gross profit
    
    
    378,099
    
    
    
    345,972
    
    
    
    291,691Operating expenses
    
    
    395,276
    (1)
    
    
    279,154
    (2)
    
    
    253,608
    (3)Interest (expense) income, net
    
    
    (3,108
    )
    
    
    3,096
    
    
    
    2,751Other (loss) gain, net
    
    
    (8,924
    )
    
    
    662
    
    
    
    1,141(Loss) earnings from continuing
operations before income taxes and
minority interest
    
    $
    (29,209
    )
    
    $
    70,576
    
    
    $
    41,975Business segment total assets:Shrink Management Solutions
    
    $
    495,187
    
    
    $
    548,071Intelligent Labels
    
    
    421,239
    
    
    
    334,865Retail Merchandising
    
    
    69,290
    
    
    
    148,108Total
    
    $
    985,716
    
    
    $
    1,031,044
 (1)
    
    Includes a $59.6 million goodwill impairment charge, $6.4 million
restructuring charge, a $6.2 million litigation settlement charge, a
$3.0 million intangible asset impairment charge, a $1.5 million fixed
asset impairment charge, and a $1.0 million gain from the sale of our
Czech subsidiary.(2)
    
    Includes a $2.7 million restructuring charge, a $4.4 million charge
related to our CEO transition, and a $2.6 million gain from the sale
of our Austria subsidiary.(3)
    
    Includes a $7.0 million restructuring charge, a $2.3 million
litigation settlement charge, and a $2.0 million gain from the
settlement of a capital lease.
 (B)
    
    Geographic Information
  81




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United States,Puerto Rico, &
    
    
    
    
    
    International
    
    
    Asia(dollar amounts in thousands)
    Dominican Republic
    
    
    Europe
    
    Americas
    
    
    Pacific
    
    
    Total2008Net revenues from unaffiliated customers
    
    $
    319,929
    
    
    $
    438,011
    
    
    $
    35,433
    
    
    $
    123,709
    
    
    $
    917,082Gross profit
    
    
    143,795
    
    
    
    168,013
    
    
    
    14,529
    
    
    
    51,762
    
    
    
    378,099Long-lived assets
    
    $
    196,241
    
    
    $
    192,627
    
    
    $
    3,286
    
    
    $
    45,908
    
    
    $
    438,0622007Net revenues from unaffiliated customers
    
    $
    275,212
    
    
    $
    412,416
    
    
    $
    37,125
    
    
    $
    109,403
    
    
    $
    834,156Gross profit
    
    
    122,630
    
    
    
    161,457
    
    
    
    12,462
    
    
    
    49,423
    
    
    
    345,972Long-lived assets
    
    $
    158,127
    
    
    $
    262,377
    
    
    $
    7,021
    
    
    $
    58,966
    
    
    $
    486,4912006Net revenues from unaffiliated customers
    
    $
    237,108
    
    
    $
    340,171
    
    
    $
    31,048
    
    
    $
    79,448
    
    
    $
    687,775Gross profit
    
    $
    102,987
    
    
    $
    136,534
    
    
    $
    12,269
    
    
    $
    39,901
    
    
    $
    291,691
 Note 20. MINORITY INTEREST
    82




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Note 21. QUARTERLY INFORMATION (UNAUDITED)
 QUARTERS (unaudited)
 (dollar amounts in thousands, except per share data)
    
    First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    Year2008Net revenues
    
    $
    209,620
    
    
    $
    236,200
    
    
    $
    233,995
    
    
    $
    237,267
    
    
    $
    917,082Gross profit
    
    
    86,479
    
    
    
    97,941
    
    
    
    97,631
    
    
    
    96,048
    
    
    
    378,099Earnings (loss) from continuing operations
    
    
    4,798
    (1)
    
    
    14,356
    (2)
    
    
    12,776
    (3)
    
    
    (61,735)
    (4) (5)
    
    
    (29,805
    )Net earnings
    
    
    4,798
    (1)
    
    
    14,356
    (2)
    
    
    12,776
    (3)
    
    
    (61,735)
    (4) (5)
    
    
    (29,805
    )Earnings
(loss) per share from continuing operations:Basic
    
    $
    .12
    
    
    $
    .36
    
    
    $
    .33
    
    
    $
    (1.58
    )
    
    $
    (.76
    )Diluted
    
    $
    .12
    
    
    $
    .36
    
    
    $
    .33
    
    
    $
    (1.58
    )
    
    $
    (.76
    )Net
earnings (loss) per share:Basic
    
    $
    .12
    
    
    $
    .36
    
    
    $
    .32
    
    
    $
    (1.58
    )
    
    $
    (.76
    )Diluted
    
    $
    .12
    
    
    $
    .36
    
    
    $
    .32
    
    
    $
    (1.58
    )
    
    $
    (.76
    )First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    Year2007Net revenues
    
    $
    171,202
    
    
    $
    195,702
    
    
    $
    204,589
    
    
    $
    262,663
    
    
    $
    834,156Gross profit
    
    
    70,279
    
    
    
    82,995
    
    
    
    85,648
    
    
    
    107,050
    
    
    
    345,972Earnings from continuing operations
    
    
    4,966
    (6)
    
    
    14,574
    (7)
    
    
    14,347
    
    
    
    24,522
    (8) (9)
    
    
    58,409Net earnings
    
    
    4,966
    (6)
    
    
    15,097
    (7)
    
    
    14,338
    
    
    
    24,367
    (8) (9)
    
    
    58,768Earnings per share from continuing operations:Basic
    
    $
    .13
    
    
    $
    .37
    
    
    $
    .36
    
    
    $
    .61
    
    
    $
    1.46Diluted
    
    $
    .12
    
    
    $
    .36
    
    
    $
    .35
    
    
    $
    .60
    
    
    $
    1.43Net earnings per share:Basic
    
    $
    .13
    
    
    $
    .38
    
    
    $
    .36
    
    
    $
    .61
    
    
    $
    1.47Diluted
    
    $
    .12
    
    
    $
    .37
    
    
    $
    .35
    
    
    $
    .59
    
    
    $
    1.44
 (1)
    
    Includes a $0.7 million restructuring charge (net of tax) and a $0.8 deferred compensation adjustment (net
of tax) from prior periods (see Note 1  Out of Period Adjustments for additional information).(2)
    
    Includes a $2.1 million restructuring charge (net of tax) and a $4.8 million valuation allowance adjustment.(3)
    
    Includes a $0.5 million restructuring charge (net of tax), $0.3 million litigation settlement expense (net
of tax), and a $1.0 million gain from the sale of the Czech Republic subsidiary (net of tax).(4)
    
    Includes a $58.5 million goodwill impairment charge (net of tax), a $3.5 million litigation settlement
charge (net of tax), a $2.2 million intangible asset impairment charge (net of tax), a $1.6 million
restructuring charge (net of tax), and a $0.8 million fixed asset impairment charge (net of tax).(5)
    
    Includes a $0.8 million out of period adjustment related to the accounting for a building
impairment in France (see Note 1  Out of Period
Adjustments for additional information).(6)
    
    Includes a $0.3 million restructuring charge (net of tax).(7)
    
    Includes a $0.2 million restructuring charge (net of tax).(8)
    
    Includes a $2.0 million restructuring charge (net of tax), a $2.9 million charge related to our CEO
transition (net of tax), and a $2.5 million gain from the sale of our Austrian subsidiary (net of tax).(9)
    
    Includes a $2.1 million out of period adjustment related to income taxes (see Note 1  Out of Period
Adjustments for additional information).
 83




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Item 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 Item 9A. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Managements Annual Report On Internal Control Over Financial Reporting
 Internal Control  Integrated
Framework
   Changes in Internal Control Over Financial Reporting
  
 Item 9B. OTHER INFORMATION
  84




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PART III
 
 Item 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
   
 Item 11.
    
    EXECUTIVE COMPENSATION
   
 Item 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  
 Item 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 Item 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
  85




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PART IV
 
 Item 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  1.
    
    The following consolidated financial statements of Checkpoint Systems, Inc. were included in Item 8Consolidated Balance Sheets as of December 28, 2008 and December 30, 2007
    47Consolidated Statements of Operations for each of the years in the three-year period ended December 28, 2008
    48Consolidated Statements of Stockholders Equity for each of the years in the three-year period ended
December 28, 2008
    49Consolidated Statements of Comprehensive (Loss) Income for each of the years in the three-year period ended
December 28, 2008
    50Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 28, 2008
    51Notes to Consolidated Financial Statements
    52-832.
    
    The following consolidated financial statements schedules of Checkpoint Systems, Inc. is included
Financial Statement Schedule, Schedule II  Valuation and Qualifying Accounts
    89
 86




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##### Table of Contents



SIGNATURES
  CHECKPOINT SYSTEMS, INC./s/  Robert P. van der MerweChairman of the Board of Directors,President and Chief Executive Officer  SIGNATURE
    
    TITLE
    
    DATE/s/ Robert P. van der Merwe
    
    Chairman of the Board of Directors, President
and Chief Executive Officer
    
    February 26, 2009/s/ Raymond D. Andrews
    
    Senior Vice President and Chief Financial Officer
    
    February 26, 2009/s/ William S. Antle, III
    
    Director
    
    February 26, 2009/s/ George Babich, Jr.
    
    Director
    
    February 26, 2009/s/ Harald Einsmann
    
    Director
    
    February 26, 2009/s/ R. Keith Elliott
    
    Director
    
    February 26, 2009/s/ Alan R. Hirsig
    
    Director
    
    February 26, 2009/s/ George W. Off
    
    Director
    
    February 26, 2009/s/ Jack W. Partridge
    
    Director
    
    February 26, 2009/s/ Sally Pearson
    
    Director
    
    February 26, 2009/s/ Robert N. Wildrick
    
    Director
    
    February 26, 2009
 87




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##### Table of Contents



3. Exhibits
 Exhibit 3.1
    
    Articles of Incorporation, as amended, are hereby
incorporated by reference to Item 14(a), Exhibit 3(i) of the
Registrants 1990 Form 10-K, filed with the SEC on March 14,
1991.Exhibit 3.2
    
    By-Laws, as Amended and Restated, are hereby incorporated by
reference Item 5.03, Exhibit 3.2 of the Registrants Current
Report on Form 8-K filed with the SEC on December 28, 2007.Exhibit 3.3
    
    Articles of Amendment to the Articles of Incorporation are
hereby incorporated by reference to Item 5.03, Exhibit 3.1
of the Registrants Current Report on Form 8-K filed with
the SEC on December 28, 2007.Exhibit 4.1
    
    Rights Agreement by and between Registrant and American
Stock and Transfer and Trust Company dated as of March 10,
1997, is hereby incorporated by reference to Item 14(a),
Exhibit 4.1 of the Registrants 1996 Form 10-K filed with
the SEC on March 17, 1997.Exhibit 4.2
    
    Amendment No. 1 to Rights Agreement dated as of March 2,
2007 is hereby incorporated by reference to Exhibit 4.1 of
the Registrants Current Report on Form 8-K filed with the
SEC on March 8, 2007.Exhibit 10.1*
    
    Amended and Restated Stock Option Plan (1992) is hereby
incorporated by reference to Registrants Form 10-K for 1997
filed with the SEC on March 23, 1998.Exhibit 10.2
    
    Consulting and Deferred Compensation Agreement with Albert
E. Wolf, are incorporated by reference to Item(a), Exhibit
10(c) of the Registrants 1994 Form 10-K.Exhibit 10.3
    
    Credit Agreement dated March 4, 2005, by and among
Registrant, Wachovia Bank N.A., as Administrative Agent, and
the lenders named therein, is incorporated herein by
reference to Exhibit 99.1 of the Registrants Form 8-K filed
on March 9, 2005.Exhibit 10.4*
    
    Employment Agreement with Per Harold Levin is incorporated
by reference to Item 6(a), Exhibit 10.4 of the Registrants
Form 10-Q filed on May 13, 2004.Exhibit 10.5*
    
    Amendment to Employment Agreement with Per Harold Levin is
incorporated by reference to Item 6(a), Exhibit 10.5 of the
Registrants Form 10-Q filed on May 13, 2004.Exhibit 10.6*
    
    Employment Agreement with John R. Van Zile is Incorporated
by reference to Item 6(a), Exhibit 10.7 of the Registrants
Form 10-Q filed on May 13, 2004.Exhibit 10.7*
    
    2004 Omnibus Incentive Compensation Plan as Appendix A to
the Companys Definitive Proxy Statement, filed with the SEC
on March 29, 2004, is incorporated by reference.Exhibit 10.8*
    
    423 Employee Stock Purchase Plan as Appendix A to the
Companys Definitive Proxy Statement, filed with the SEC on
March 29, 2004, is incorporated by reference.Exhibit 10.9*
    
    Employment Agreement by and between Robert P. van der Merwe
and Checkpoint Systems, Inc. dated December 27, 2007 is
incorporated by reference to Registrants Form 10-K for 2007
filed with the SEC on February 28, 2008.Exhibit 12
    
    Ratio of Earnings to Fixed Charges.Exhibit 21
    
    Subsidiaries of Registrant.Exhibit 23
    
    Consent of Independent Registered Public Accounting Firm.Exhibit 31.1
    
    Certification of the Chief Executive Officer pursuant to
Rule 13a-14(a) of the Exchange Act, as enacted by Section
302 of the Sarbanes-Oxley Act of 2002.Exhibit 31.2
    
    Certification of the Chief Financial Officer pursuant to
Rule 13a-14(a) of the Exchange Act, as enacted by Section
302 of the Sarbanes-Oxley Act of 2002.Exhibit 32
    
    Certification of the Chief Executive Officer and the Chief
Financial Officer pursuant to 18 United States Code Section
1350, as enacted by Section 906 of the Sarbanes-Oxley Act of
2002.
 *
    
    Management contract or compensatory plan or arrangement.
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##### Table of Contents



SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

(dollar amounts in thousands)
 Allowance For Doubtful Accounts
 Balance at
    
    
    Additions
    
    
    Charged to
    
    
    DeductionsBeginning
    
    
    Through
    
    
    Costs and
    
    
    (Write-Offs and
    
    
    Balance atYear
    
    of Year
    
    
    Acquisition
    
    
    Expenses
    
    
    Recoveries, net)
    
    
    End of Year2008
    
    $
    15,839
    
    
    $
    27
    
    
    $
    5,783
    
    
    $
    (3,235
    )
    
    $
    18,4142007
    
    $
    12,417
    
    
    $
    2,244
    
    
    $
    2,330
    
    
    $
    (1,152
    )
    
    $
    15,8392006
    
    $
    11,823
    
    
    $
    
    
    
    $
    2,442
    
    
    $
    (1,848
    )
    
    $
    12,417
 Deferred Tax Valuation Allowance
 Release ofAllowance
    
    
    Release of
    
    
    Allowance onBalance at
    
    
    Additions
    
    
    Recorded on
    
    
    Allowance on
    
    
    LossesBeginning
    
    
    Through
    
    
    Current Year
    
    
    Current Year
    
    
    Expired or
    
    
    Balance atYear
    
    of Year
    
    
    Acquisition
    
    
    Losses
    
    
    Utilization
    
    
    Revalued
    
    
    End of Year2008
    
    $
    27,572
    
    
    $
    1,449
    
    
    $
    3,122
    
    
    $
    (697
    )
    
    $
    (8,729
    )
    
    $
    22,7172007
    
    $
    34,510
    
    
    $
    
    
    
    $
    1,563
    
    
    $
    854
    
    
    $
    (9,355
    )
    
    $
    27,5722006
    
    $
    26,477
    
    
    $
    
    
    
    $
    801
    
    
    $
    (151
    )
    
    $
    7,383
    
    
    $
    34,510
 89