##### 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 31, 2006
 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)
 856-848-1800
   Name of each exchange on whichTitle of each class to be so registered
    
    each class is to be registeredCommon Stock Purchase Rights
    
    New York Stock Exchange
  Common
Stock, Par Value $.10 Per Share
  o þ
  o þ
  o þ
 þ
  þ o o
  o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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RESTATEMENT
 Overview
   Increase (Decrease) by Periods
 Net Income
    
    
    Diluted EPS(dollar amounts in thousands, except per share information)
    
    Adjustment
    
    
    AdjustmentCumulative adjustment as of December 31, 2001
    
    
    42
    
    
    
    N/A2002
    
    
    (318
    )
    
    
    (0.01
    )2003
    
    
    (308
    )
    
    
    (0.01
    )2004
    
    
    1,567
    
    
    
    0.0420051Q05
    
    
    (249
    )
    
    
    (0.01
    )2Q05
    
    
    (281
    )
    
    
    (0.01
    )3Q05
    
    
    173
    
    
    
    0.004Q05
    
    
    (2,527
    )
    
    
    (0.06
    )Year
    
    
    (2,884
    )
    
    
    (0.07
    )20061Q06
    
    
    (882
    )
    
    
    (0.02
    )2Q06
    
    
    (571
    )
    
    
    (0.01
    )3Q06
    
    
    (419
    )
    
    
    (0.01
    )Nine months ending September 24, 2006
    
    
    (1,872
    )
    
    
    (0.05
    )Total
    
    
    (3,773
    )
    
    
    (0.10
    )
  PART II.Item 6.
    
    Selected Financial Data
    
    
    19Item 7.
    
    Managements Discussion and Analysis of
Financial Condition and Results of
Operations
    
    
    21Item 8.
    
    Financial Statements and Supplementary Data
    
    
    39Item 9A.
    
    Controls and Procedures
    
    
    100
 2




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##### 



CHECKPOINT SYSTEMS, INC.
 FORM 10-K
 Table of Contents
 PagePART I.Item 1.
    
    Business
    
    
    4Item 1A.
    
    Risk Factors Related to Our Business
    
    
    13Item 1B.
    
    Unresolved Staff Comments
    
    
    15Item 2.
    
    Properties
    
    
    15Item 3.
    
    Legal Proceedings
    
    
    15Item 4.
    
    Submission of Matters to Vote of Stockholders
    
    
    15PART II.Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    16Item 6.
    
    Selected Financial Data
    
    
    19Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    21Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    37Item 8.
    
    Financial Statements and Supplementary Data
    
    
    39Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    100Item 9A.
    
    Controls and Procedures
    
    
    100Item 9B.
    
    Other Information
    
    
    102PART III.Item 10.
    
    Directors and Executive Officers and Corporate Governance
    
    
    102Item 11.
    
    Executive Compensation
    
    
    102Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder
    
    
    102Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    102Item 14.
    
    Principal Accounting Fees and Services
    
    
    102PART IV.Item 15.
    
    Exhibits and Financial Statement Schedules
    
    
    102SIGNATURES
    
    
    104INDEX TO EXHIBITS
    
    
    105SCHEDULE II  Valuation and Qualifying Accounts
    
    
    107Ratio of Earnings to Fixed ChargesSubsidiaries of RegistrantConsent of Independent Registered Public Accounting FirmCertification of the Chief Executive OfficerCertification of the Chief Financial OfficerCertification of the CEO and the CFO
  3




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PART I
 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
  
 Item 1. BUSINESS
    COMPANY HISTORY
   4




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®
 Products and Offerings
  SECURITY
   Electronic Article Surveillance
   CCTV, Fire and Intrusion Systems
  5




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Access Control Systems
  LABELING SERVICES
  Check-Net® (Service Bureau)
    Intelligent Library Systems
  RFID Tags and Labels
  6




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RETAIL MERCHANDISING
  Hand-held Labeling Systems
  Retail Display Systems
  BUSINESS STRATEGY
    Principal Markets and Marketing Strategy
   7




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
    
    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
Electronic Product Code (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.
  
    
    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.
 8




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Manufacturing, Raw Materials, and Inventory
 Electronic Article Surveillance
   CCTV, Fire and Intrusion Systems
  Labeling Services and Retail Merchandising
  DISTRIBUTION
  Electronic Article Surveillance
   9




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CCTV, Fire and Intrusion Systems
  Labeling Services and Retail Merchandising
   BACKLOG
  TECHNOLOGY
  Patents & Licensing
   Labeling Services and Retail Merchandising
  SEASONALITY
  10




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COMPETITION
 Electronic Article Surveillance
    CCTV, Fire and Intrusion Systems
  Global Labeling Services
  Retail Merchandising
  OTHER MATTERS
 Research and Development
    11




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Employees
  Financial Information About Geographic and Business Segments
  Available Information
   Executive Officers of the Company
  Tenurewith
    
    Position with the Company andName
    
    Age
    
    Company
    
    Date of Election to Position onGeorge W. Off
    
    
    60
    
    
    4 years
    
    Chairman of the Board Directors, President and Chief Executive
Officer since June 2002W. Craig Burns
    
    
    47
    
    
    11 years
    
    Executive Vice President, Chief Financial Officer and Treasurer
since March 2001John E. Davies, Jr.
    
    
    49
    
    
    15 years
    
    President, Intelligent Labeling Solutions since March 2006Per H. Levin
    
    
    49
    
    
    12 years
    
    Worldwide President, SMMS since March 2006John R. Van Zile
    
    
    54
    
    
    3 years
    
    Senior Vice President, General Counsel and Secretary since June 2003Raymond Andrews
    
    
    54
    
    
    1 year
    
    Vice President, Chief Accounting Officer since August 2005
   12




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##### Table of Contents



Item 1A. RISK FACTORS RELATED TO OUR BUSINESS
  (1)
    
    changes in international business conditions;We are a multinational manufacturer and marketer of integrated system solutions for retail
security, labeling, and merchandising. Our international operations account for approximately
63% of our revenues. Our results of operations could be affected by material adverse changes
in foreign economic conditions generally or in markets served.(2)
    
    foreign currency exchange rate and interest rate fluctuations;Economic factors, including inflation and fluctuations in foreign currency exchange rates and
interest rates, and competitive factors in the countries in which we operate, could affect our
revenues, expenses and results of operations.(3)
    
    lower than anticipated demand by retailers and other customers for our products, particularly
in the current economic environment;Our business is heavily dependent on the retail marketplace. Changes to the economic
environment or reductions in retailer spending could adversely affect our revenues and results
of operations.(4)
    
    slower commitments of retail customers to chain-wide installations and/or source tagging
adoption or expansion;Our revenues are dependent on our ability to maintain and increase our system installation
base. The system installation base leads to additional revenues, which we term as recurring
revenues, through the sale of tags and maintenance services. In addition, we partner with
manufacturers to include our sensor tags into the product during manufacturing.
 13




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If the commitment for chain-wide installation declines or the
adoption or expansion of our source tag program does not occur, it could have an adverse
affect on our revenues and results of operations.(5)
    
    possible increases in per unit product manufacturing costs due to less than full utilization
of manufacturing capacity as a result of slowing economic conditions or other factors;Our manufacturing capacity is designed to meet our current and future anticipated demands. If
our product demand decreases as a result of economic conditions and other factors, it could
increase our cost per unit and affect our cost of sales and results of operations.(6)
    
    our ability to provide and market innovative and cost-effective products;We operate in competitive markets which are sensitive to price. Our ability to provide
cost-effective products could affect our customer demand.(7)
    
    the development of new competitive technologies;Our long term success will depend on transitioning from existing technologies into the next
generation of technology. While we are investigating and investing in potential replacement
technologies such as radio frequency identification, there is no guarantee that we will be
successful in maintaining our current market position in the future.(8)
    
    our ability to maintain our intellectual property;We have a number of patents that will be expiring in the next several years. The expiration of
these patents will reduce the barriers to entry into our existing lines of business and may
result in loss of market share.(9)
    
    competitive pricing pressures causing profit erosion;We operate in highly competitive business segments. If pricing in any of these segments were
to decrease due to competitive pressures, it could have an adverse affect on our results of
operations.(10)
    
    the availability and pricing of component parts and raw materials;Our ability to grow earnings will be affected by increases in the cost of component parts and
raw materials, including electronic components, circuit boards, aluminum foil, resins, paper,
and ferric chloride solutions. We may not be able to offset fully the effects of higher
component parts and raw material costs through price increases, productivity improvements or
cost reduction programs.(11)
    
    possible increases in the payment time for receivables as a result of economic conditions or
other market factors;The majority of our customer base is in the retail marketplace. A material change in the
economic condition of this sector or other sectors served by us could have a material effect
on our results from operations and anticipated cash from operations.(12)
    
    changes in regulations or standards applicable to our products;Our EAS products are subject to FCC regulation and equivalent regulatory oversight in Europe.
While we continually monitor potential changes, any change could affect our ability to compete
in that market.(13)
    
    the ability to implement cost reduction in field service, sales, and general and
administrative expense, and our manufacturing and supply chain operations without
significantly impacting revenue and profits; andWe are in the process of taking actions to rationalize our field service, improve our sales
productivity, reduce our general and administrative expenses, and reconfigure our
manufacturing and supply chain operations. While we will monitor the progress, our ability to
execute the changes to these areas could have an impact on future revenues and profits.(14)
    
    material weaknesses or deficiencies in our internal control over financial reporting could
harm stockholder and business confidence in our financial reporting, and other aspects of our
business.
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The maintenance of an effective system of internal control over financial reporting is
necessary for us to provide reliable financial reports. In March 2007, we restated our
consolidated financial statements for the years ended 2004 and 2005, and the four quarterly
periods in 2005 and the first three quarters in 2006. We identified a material weakness in
our internal control over financial reporting that is described in Item 9A of this report. As
a result of this material weakness, managements assessment concluded that our internal
control over financial reporting was ineffective. The material weakness has not been fully
addressed. It is also possible that additional material weaknesses will be identified in the
future. Until we complete the remediation of the material weakness, we risk material
misstatements to the annual or interim financial statements that are not prevented or detected
on a timely basis. The current material weakness or any future weaknesses or internal control
deficiencies could hurt confidence in our business and consolidated financial statements,
impacting our ability to do business with customers, investors, securities analysts, investors
and others.
 
 Item 1B. UNRESOLVED STAFF COMMENTS
  
 Item 2. PROPERTIES
  
 Item 3. LEGAL PROCEEDINGS
  Matters related to ID Security Systems Canada Inc. versus Checkpoint Systems, Inc.
  All-Tag Security S.A., et al
  
 Item 4. SUBMISSION OF MATTERS TO VOTE OF STOCKHOLDERS
  15




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PART II
 
 Item 5.
    
    MARKET FOR THE REGISTRANTS COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
  Market Price Per ShareHigh
    
    LowFiscal year ended December 31, 2006First Quarter
    
    $
    29.91
    
    
    $
    24.13Second Quarter
    
    $
    27.55
    
    
    $
    19.63Third Quarter
    
    $
    22.28
    
    
    $
    15.37Fourth Quarter
    
    $
    20.60
    
    
    $
    16.41Fiscal year ended December 25, 2005First Quarter
    
    $
    19.35
    
    
    $
    15.14Second Quarter
    
    $
    18.11
    
    
    $
    15.49Third Quarter
    
    $
    23.83
    
    
    $
    16.91Fourth Quarter
    
    $
    25.43
    
    
    $
    21.40
 Holders of Record
  Dividends
  Issuer Purchases of Equity Securities
  Recent Sales of Unregistered Securities
  16




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Equity Compensation Plans
  EquityEquity
    
    
    compensationcompensation
    
    
    plans notplans approved
    
    
    approved byby shareholders
    
    
    shareholders
    
    
    TotalNumber of securities to be issued upon exercise
of outstanding options
    
    
    3,021,183
    (1)
    
    
    133,334
    (2)
    
    
    3,154,517Weighted average exercise price of outstanding options
    
    $
    16.22
    
    
    $
    17.74
    
    
    $
    16.28Number of securities remaining available for future
issuance under equity compensation plans (excluding
securities reflected above)
    
    
    2,266,442
    
    
    
    
    
    
    
    2,266,442
 (1)
    
    Includes Stock Options and performance based restricted stock units.(2)
    
    Inducement options granted to the former President of North America in connection with his
hire in fiscal 2004.
  17




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STOCK PERFORMANCE GRAPH
  NASDAQElectronicCheckpoint
    
    NYSE/AMEX/NASDAQ
    
    Components AndYear
    
    Systems, Inc.
    
    Stock Market Index
    
    Accessories Index2001
    
    100
    
    100
    
    1002002
    
    77.2
    
    79.4
    
    53.52003
    
    141.1
    
    104.6
    
    103.02004
    
    134.7
    
    117.5
    
    81.52005
    
    184.0
    
    124.7
    
    80.72006
    
    150.7
    
    144.6
    
    88.8
  
 18




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Item 6. SELECTED FINANCIAL DATA
  (dollar amounts are in thousands except per share amounts)
 Dec. 31,
    
    
    Dec. 25,
    
    
    Dec. 26,
    
    
    Dec. 28,
    
    
    Dec. 29,Year ended
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(As Restated)
    
    
    (As Restated )
    
    
    (As Restated)
    
    
    (As Restated)STATEMENT OF OPERATIONS DATANet revenues
    
    $
    687,775
    
    
    $
    717,992
    
    
    $
    670,453
    
    
    $
    615,998
    
    
    $
    535,804Earnings from continuing
operations before income taxes
    
    $
    41,975
    
    
    $
    40,127
    
    
    $
    21,031
    
    
    $
    29,443
    
    
    $
    22,801Income taxes
    
    $
    6,987
    
    
    $
    11,661
    
    
    $
    2,064
    
    
    $
    10,069
    
    
    $
    10,533Earnings from continuing operations
    
    $
    35,019
    
    
    $
    28,413
    
    
    $
    18,823
    
    
    $
    19,186
    
    
    $
    12,123Discontinued operations, net of tax
    
    $
    903
    
    
    $
    8,108
    
    
    $
    (37,448
    )
    
    $
    9,659
    
    
    $
    9,596Cumulative effect of change in
accounting principle, net of tax
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (72,861
    )Net earnings (loss)
    
    $
    35,922
    (1)
    
    $
    36,521
    (2)
    
    $
    (18,625
    )(3)
    
    $
    28,845
    (4)
    
    $
    (51,142
    )(5)Earnings (loss) per share from
continuing operations before
cumulative effect of change in
accounting principle:Basic
    
    $
    .89
    
    
    $
    .75
    
    
    $
    .51
    
    
    $
    .58
    
    
    $
    .37Diluted
    
    $
    .87
    
    
    $
    .72
    
    
    $
    .50
    
    
    $
    .57
    
    
    $
    .37Net earnings (loss) per share:Basic
    
    $
    .91
    
    
    $
    .96
    
    
    $
    (.51
    )
    
    $
    .87
    
    
    $
    (1.58
    )Diluted
    
    $
    .89
    
    
    $
    .93
    
    
    $
    (.50
    )
    
    $
    .85
    
    
    $
    (1.56
    )Depreciation and amortization
    
    $
    19,504
    
    
    $
    22,539
    
    
    $
    26,316
    
    
    $
    31,281
    
    
    $
    30,932
 (1)
    
    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 bar-code business.(2)
    
    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.(3)
    
    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.(4)
    
    Includes a $7.5 million ($5.0 million, net of tax) restructuring charge, a $1.5 million ($1.0
million, net of tax) asset impairment, and a $0.3 million ($0.2 million, net of tax)
restructuring charge reversal related to fourth quarter 2001 and 2002 restructuring programs.(5)
    
    Includes a non-cash reduction in net earnings of $72.9 million resulting from the adoption of
Statement of Financial Accounting Standards No. 142, (SFAS 142) Goodwill and Other Intangible
Assets, a $1.5 million restructuring charge (net of tax), a $0.3 million asset impairment
(net of tax), and a $1.7 million restructuring charge reversal (net of tax), as a result of
changes in estimates.
 19




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SELECTED FINANCIAL DATA (continued)
 (dollar amounts are in thousands)
 Dec. 31,
    
    Dec. 25,
    
    Dec. 26,
    
    Dec. 28,
    
    Dec. 29,2006
    
    2005
    
    2004
    
    2003
    
    2002(As Restated)
    
    (As Restated)
    
    (As Restated)
    
    (As Restated)AT YEAR ENDWorking capital
    
    $
    254,024
    
    
    $
    208,255
    
    
    $
    168,382
    
    
    $
    77,172
    
    
    $
    108,855Total debt
    
    $
    16,534
    
    
    $
    39,745
    
    
    $
    73,998
    
    
    $
    146,507
    
    
    $
    209,974Stockholders equity
    
    $
    473,581
    
    
    $
    396,420
    
    
    $
    379,645
    
    
    $
    322,660
    
    
    $
    221,447Total assets
    
    $
    781,191
    
    
    $
    739,245
    
    
    $
    769,685
    
    
    $
    773,087
    
    
    $
    680,479FOR THE YEAR ENDEDCapital expenditures
    
    $
    11,520
    
    
    $
    10,846
    
    
    $
    11,342
    
    
    $
    12,714
    
    
    $
    7,449Cash provided by operating activities
    
    $
    22,386
    
    
    $
    44,618
    
    
    $
    23,280
    
    
    $
    101,796
    
    
    $
    110,059Cash provided by (used in) investing activities
    
    $
    7,963
    
    
    $
    (8,521
    )
    
    $
    (10,338
    )
    
    $
    (11,698
    )
    
    $
    (7,018
    )Cash used in financing activities
    
    $
    (6,945
    )
    
    $
    (18,283
    )
    
    $
    (24,503
    )
    
    $
    (39,197
    )
    
    $
    (95,524
    )RATIOSReturn on net sales (a)
    
    
    5.22
    %
    
    
    5.09
    %
    
    
    (2.78
    %)
    
    
    4.68
    %
    
    
    (9.54
    %)Return on average equity (b)
    
    
    8.26
    %
    
    
    9.41
    %
    
    
    (5.30
    %)
    
    
    10.60
    %
    
    
    (22.15
    %)Return on average assets (c)
    
    
    4.73
    %
    
    
    4.84
    %
    
    
    (2.41
    %)
    
    
    3.97
    %
    
    
    (7.14
    %)Current ratio (d)
    
    
    2.31
    
    
    
    1.99
    
    
    
    1.72
    
    
    
    1.26
    
    
    
    1.57Percent of total debt to capital (e)
    
    
    3.37
    %
    
    
    9.11
    %
    
    
    16.31
    %
    
    
    31.23
    %
    
    
    48.67
    %
 (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.
 (amounts are in thousands, except employee data)
 Dec. 31,
    
    
    Dec. 25,
    
    
    Dec. 26,
    
    
    Dec. 28,
    
    
    Dec. 29,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Other InformationWeighted average number of sharesOutstanding  diluted
    
    
    40,233
    
    
    
    39,075
    
    
    
    37,604
    (1)
    
    
    33,747
    (2)
    
    
    32,785
    (3)Number of employees
    
    
    3,213
    
    
    
    3,955
    
    
    
    4,260
    
    
    
    4,042
    
    
    
    3,930Backlog
    
    $
    54,899
    
    
    $
    52,234
    
    
    $
    63,026
    
    
    $
    52,703
    
    
    $
    38,955
 (1)
    
    Excludes 2,187 common shares from the assumed conversion of the subordinated debentures as
it is anti-dilutive.(2)
    
    Excludes 6,189 common shares from the assumed conversion of the subordinated debentures as it
is anti-dilutive.(3)
    
    Excludes 6,528 common shares from the assumed conversion of the subordinated debentures as it
is anti-dilutive.
 20




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##### Table of Contents



Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Restatement of Financial Statements
    Overview
     21




---



##### Table of Contents



®
    Critical Accounting Estimates
  22




---



##### Table of Contents



Revenue Recognition .
  Allowance for Doubtful Accounts .
 Inventory Valuation .
 Valuation of Long-lived Assets.
 23




---



##### Table of Contents



Income Taxes .
   Pension Plans.
 Stock Compensation .
 24




---



##### Table of Contents



Liquidity and Capital Resources
          25




---



##### Table of Contents



Quarterly Liquidity Analysis
  Off-Balance Sheet Arrangements
  Contractual Obligations
  Due in less
    
    
    Due in
    
    
    Due in
    
    
    Due afterContractual Obligation
    
    Total
    
    
    than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 years(dollar amounts in thousands)Long-term debt(1)
    
    $
    9,433
    
    
    $
    115
    
    
    $
    231
    
    
    $
    9,087
    
    
    $
    Capital leases(2)
    
    
    1,779
    
    
    
    1,059
    
    
    
    706
    
    
    
    14
    
    
    
    Operating leases
    
    
    36,800
    
    
    
    12,917
    
    
    
    15,440
    
    
    
    7,186
    
    
    
    1,257Pension obligations(3)
    
    
    48,503
    
    
    
    3,865
    
    
    
    8,093
    
    
    
    8,916
    
    
    
    27,629Inventory purchase commitments(4)
    
    
    7,366
    
    
    
    7,366
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    103,881
    
    
    $
    25,322
    
    
    $
    24,470
    
    
    $
    25,203
    
    
    $
    28,886
 Due in less
    
    
    Due in
    
    
    Due in
    
    
    Due afterCommercial Commitments
    
    Total
    
    
    than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 years(dollar amounts in thousands)Standby letters of credit
    
    $
    1,620
    
    
    $
    1,620
    
    
    $
    
    
    
    $
    
    
    
    $
    Surety bonds
    
    
    1,522
    
    
    
    766
    
    
    
    756
    
    
    
    
    
    
    
    Total commercial commitments
    
    $
    3,142
    
    
    $
    2,386
    
    
    $
    756
    
    
    $
    
    
    
    $
    
 (1)
    
    Includes interest payments through maturity of $366.(2)
    
    Includes interest payments through maturity of $124.(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 2006 and include benefits
attributable to estimated future employee service of current employees.(4)
    
    Inventory purchase commitments represent the Companys legally binding agreements to purchase
fixed or minimum quantities of goods at determinable prices.
 26




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##### Table of Contents



Pension Plans
    Exposure to Foreign Currency
     27




---



##### Table of Contents



Provision for Restructuring
 2005 Restructuring Plan
      Fiscal 2006
 (dollar amounts are in thousands)
 Accrual at
    
    
    
    
    
    
    ChargeBeginning
    
    
    Charged to
    
    
    Reversed to
    
    
    Cash
    
    
    Exchange
    
    
    Accrual atof Year
    
    
    Earnings
    
    
    Earnings
    
    
    Payments
    
    
    Rate Changes
    
    
    12/31/06Severance and
other
employee-related
charges
    
    $
    10,121
    
    
    $
    9,140
    
    
    $
    (1,225
    )
    
    $
    (11,989
    )
    
    $
    739
    
    
    $
    6,786
  Fiscal 2005
 (dollar amounts are in thousands)
 Accrual at
    
    
    
    
    
    
    ChargeBeginning
    
    
    Charged to
    
    
    Reversed to
    
    
    Cash
    
    
    Exchange
    
    
    Accrual atof Year
    
    
    Earnings
    
    
    Earnings
    
    
    Payments
    
    
    Rate Changes
    
    
    12/25/05Severance and
other
employee-related
charges
    
    $
    
    
    
    $
    16,911
    
    
    $
    (957
    )
    
    $
    (5,357
    )
    
    $
    (476
    )
    
    $
    10,121
 28




---



##### Table of Contents



2003 Restructuring Plan
   Goodwill and Asset Impairments
 ®
   Results of Operations
 (All comparisons are with the previous year, unless otherwise stated.)
 Net Revenues
   29




---



##### Table of Contents



Analysis of Statement of Operations
  Percentage ChangePercentage of Total Revenues
    
    
    In Dollar AmountDecember 31,
    
    
    December 25,
    
    
    December 26,
    
    
    Fiscal 2006
    
    
    Fiscal 20052006
    
    
    2005
    
    
    2004
    
    
    vs.
    
    
    vs.Year ended
    
    (Fiscal 2006)
    
    
    (Fiscal 2005)
    
    
    (Fiscal 2004)
    
    
    Fiscal 2005
    
    
    Fiscal 2004(As Restated)
    
    
    (As Restated)Net revenuesSecurity
    
    
    72.7
    %
    
    
    76.7
    %
    
    
    75.8
    %
    
    
    (9.2
    )%
    
    
    8.3
    %Labeling services
    
    
    14.9
    
    
    
    10.6
    
    
    
    9.8
    
    
    
    34.5
    
    
    
    15.8Retail merchandising
    
    
    12.4
    
    
    
    12.7
    
    
    
    14.4
    
    
    
    (6.4
    )
    
    
    (5.3
    )Net revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    (4.2
    )
    
    
    7.1Cost of revenues
    
    
    57.6
    
    
    
    56.6
    
    
    
    53.8
    
    
    
    (2.6
    )
    
    
    12.6Total gross profit
    
    
    42.4
    
    
    
    43.4
    
    
    
    46.2
    
    
    
    (6.4
    )
    
    
    0.7Selling, general, and
administrative expenses
    
    
    33.0
    
    
    
    33.1
    
    
    
    35.2
    
    
    
    (4.5
    )
    
    
    0.8Research and development
    
    
    2.8
    
    
    
    2.7
    
    
    
    4.2
    
    
    
    1.6
    
    
    
    (33.0
    )Asset impairments
    
    
    
    
    
    
    0.2
    
    
    
    0.3
    
    
    
    N/A
    
    
    
    (29.1
    )Restructuring expenses
    
    
    1.0
    
    
    
    1.7
    
    
    
    (0.4
    )
    
    
    (44.3
    )
    
    
    N/ALitigation settlement
    
    
    0.3
    
    
    
    
    
    
    
    3.0
    
    
    
    N/A
    
    
    
    N/AOther operating income
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/AOperating income
    
    
    5.5
    
    
    
    5.7
    
    
    
    3.9
    
    
    
    6.7
    
    
    
    55.5Interest income
    
    
    0.7
    
    
    
    0.3
    
    
    
    0.2
    
    
    
    N/A
    
    
    
    49.2Interest expense
    
    
    0.3
    
    
    
    0.4
    
    
    
    1.0
    
    
    
    (24.7
    )
    
    
    (59.1
    )Other gain (loss), net
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/AEarnings from continuing
operations before income taxes and
minority interest
    
    
    6.1
    
    
    
    5.6
    
    
    
    3.1
    
    
    
    4.6
    
    
    
    90.8Income taxes
    
    
    1.0
    
    
    
    1.6
    
    
    
    0.3
    
    
    
    (40.1
    )
    
    
    N/AMinority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    63.2Earnings from continuing operations
    
    
    5.1
    
    
    
    4.0
    
    
    
    2.8
    
    
    
    23.2
    
    
    
    50.9Earnings (loss) from discontinued
operations, net of tax
    
    
    0.1
    
    
    
    1.1
    
    
    
    (5.6
    )
    
    
    (88.9
    )
    
    
    N/ANet earnings (loss)
    
    
    5.2
    %
    
    
    5.1
    %
    
    
    (2.8
    )%
    
    
    (1.6
    )%
    
    
    N/A
    %
 N/A  Comparative percentages are not meaningful.
 30




---



##### Table of Contents



Fiscal 2006 compared to Fiscal 2005
 Net Revenues
  (dollar amounts in millions)
 Dollar Amount
    
    
    PercentageDecember 31,
    
    
    December 25,
    
    
    Change Fiscal
    
    
    Change2006
    
    
    2005
    
    
    2006
    
    
    Fiscal 2006Year ended
    
    (Fiscal 2006)
    
    
    (Fiscal 2005)
    
    
    vs. Fiscal 2005
    
    
    vs. Fiscal 2005(As Restated)Net revenues:Security
    
    $
    499.8
    
    
    $
    550.4
    
    
    $
    (50.6
    )
    
    
    (9.2
    )%Labeling Services
    
    
    102.6
    
    
    
    76.3
    
    
    
    26.3
    
    
    
    34.5Retail Merchandising
    
    
    85.4
    
    
    
    91.3
    
    
    
    (5.9
    )
    
    
    (6.4
    )Net revenues
    
    $
    687.8
    
    
    $
    718.0
    
    
    $
    (30.2
    )
    
    
    (4.2
    )%
    Gross Profit
   31




---



##### Table of Contents



Selling, General, and Administrative Expenses
  Asset Impairments
  Restructuring Expenses
  Litigation Settlement
  Other Operating Income
  Interest Income and Interest Expense
  Other Gain (Loss), net
  Income Taxes
  32




---



##### Table of Contents



Earning from Discontinued Operations, Net of Tax
  Net Earnings
  Quarterly Analysis
 ®
 ®
  Fiscal 2005 compared to Fiscal 2004
 Net Revenues
  (dollar amounts in millions)
 Dollar Amount
    
    
    PercentageDecember 25,
    
    
    December 26,
    
    
    Change Fiscal
    
    
    Change2005
    
    
    2004
    
    
    2005
    
    
    Fiscal 2005Year ended
    
    (Fiscal 2005)
    
    
    (Fiscal 2004)
    
    
    vs. Fiscal 2004
    
    
    vs. Fiscal 2004(As Restated)
    
    
    (As Restated)Net revenues:Security
    
    $
    550.4
    
    
    $
    508.2
    
    
    $
    42.2
    
    
    
    8.3
    %Labeling Services
    
    
    76.3
    
    
    
    65.8
    
    
    
    10.4
    
    
    
    15.8Retail Merchandising
    
    
    91.3
    
    
    
    96.4
    
    
    
    (5.1
    )
    
    
    (5.3
    )Net revenues
    
    $
    718.0
    
    
    $
    670.5
    
    
    $
    47.5
    
    
    
    7.1
    %
  ® ®
  33




---



##### Table of Contents



Gross Profit
      Selling, General, and Administrative Expenses
  Research and Development Expenses
  Asset Impairments
   Restructuring Expenses
   Litigation Settlement
   34




---



##### Table of Contents



Interest Income and Interest Expense
  Other (Loss) Gain, net
  Income Taxes
   Earning from Discontinued Operations, Net of Tax
  Net Earnings
  Quarterly Analysis
   Other Matters
 Recently Adopted Accounting Standards
   35




---



##### Table of Contents



36




---



##### Table of Contents



(dollar
amounts in thousands)
 As of December 31, 2006Effect ofPrior to adoption
    
    
    adoptingof Statement 158
    
    
    Statement 158
    
    
    After AdoptionNon-current Deferred income tax assets
    
    $
    29,818
    
    
    $
    1,598
    
    
    $
    31,416Total assets
    
    
    779,593
    
    
    
    1,598
    
    
    
    781,191Accrued pensions  current
    
    
    
    
    
    
    3,730
    
    
    
    3,730Accrued pensions
    
    
    81,991
    
    
    
    611
    
    
    
    82,602Accumulated other comprehensive income
    
    
    950
    
    
    
    (2,743
    )
    
    
    (1,793
    )Total stockholders equity
    
    $
    476,555
    
    
    $
    (2,743
    )
    
    $
    473,812
  New Accounting Pronouncements and Other Standards
    
 Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Market Risk Factors
  37




---



##### Table of Contents



38




---



##### Table of Contents



Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Index to Consolidated Financial Statements
 Report of Independent Registered Public Accounting Firm
    
    
    40Consolidated Balance Sheets as of December 31, 2006 and December 25, 2005
    
    
    42Consolidated Statements of Operations for each of the years in the three-year
period ended December 31, 2006
    
    
    43Consolidated Statements of Stockholders Equity for each of the years in the
three-year period ended December 31, 2006
    
    
    44Consolidated Statements of Comprehensive Income (Loss) for each of the years
in the three-year period ended December 31, 2006
    
    
    45Consolidated Statements of Cash Flows for each of the years in the three-year
period ended December 31, 2006
    
    
    46Notes to Consolidated Financial Statements
    

47-98Financial
Statement Schedules, Schedule II  Valuation and Qualifying Accounts
    
    
    107
 39




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
  Consolidated financial statements and financial statement schedule
 
   Internal control over financial reporting
 Internal Control  Integrated Framework
  40




---



##### Table of Contents



Internal Control  Integrated Framework
  Internal Control  Integrated Framework Internal Control  Integrated Framework
 
 41




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##### Table of Contents



CHECKPOINT SYSTEMS, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (dollar amounts in thousands)
 December 31,
    
    
    December 25,2006
    
    
    2005(As Restated)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    143,394
    
    
    $
    113,223Restricted cash
    
    
    2,121
    
    
    
    Accounts receivable, net of allowance of $12,417 and $11,174
    
    
    160,463
    
    
    
    139,480Inventories
    
    
    94,562
    
    
    
    80,740Other current assets
    
    
    36,199
    
    
    
    38,746Deferred income taxes
    
    
    10,858
    
    
    
    12,950Assets of discontinued operations held for sale
    
    
    
    
    
    
    34,254Total Current Assets
    
    
    447,597
    
    
    
    419,393REVENUE EQUIPMENT ON OPERATING LEASE, net
    
    
    4,325
    
    
    
    4,169PROPERTY, PLANT, AND EQUIPMENT, net
    
    
    67,717
    
    
    
    72,377GOODWILL
    
    
    187,288
    
    
    
    165,313OTHER INTANGIBLES, net
    
    
    33,143
    
    
    
    33,263DEFERRED INCOME TAXES
    
    
    31,416
    
    
    
    31,509OTHER ASSETS
    
    
    9,705
    
    
    
    13,221TOTAL ASSETS
    
    $
    781,191
    
    
    $
    739,245LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Short-term borrowings and current portion of long-term debt
    
    $
    6,810
    
    
    $
    4,391Accounts payable
    
    
    49,521
    
    
    
    61,485Accrued compensation and related taxes
    
    
    27,712
    
    
    
    34,547Other accrued expenses
    
    
    33,557
    
    
    
    27,294Income taxes
    
    
    27,811
    
    
    
    25,567Unearned revenues
    
    
    21,634
    
    
    
    23,650Restructuring reserve
    
    
    6,786
    
    
    
    11,715Accrued pensions  current
    
    
    3,730
    
    
    
    Other current liabilities
    
    
    16,012
    
    
    
    16,031Liabilities of discontinued operations held for sale
    
    
    
    
    
    
    6,458Total Current Liabilities
    
    
    193,573
    
    
    
    211,138LONG-TERM DEBT, LESS CURRENT MATURITIES
    
    
    9,724
    
    
    
    35,354ACCRUED PENSIONS
    
    
    82,602
    
    
    
    71,194OTHER LONG-TERM LIABILITIES
    
    
    4,125
    
    
    
    4,349DEFERRED INCOME TAXES
    
    
    16,630
    
    
    
    19,588MINORITY INTEREST
    
    
    956
    
    
    
    1,202COMMITMENTS 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 41,315,581 and 40,737,110
    
    
    4,131
    
    
    
    4,073Additional capital
    
    
    345,206
    
    
    
    326,950Retained earnings
    
    
    146,658
    
    
    
    110,736Common stock in treasury, at cost, 2,035,912 shares
    
    
    (20,621
    )
    
    
    (20,621
    )Accumulated other comprehensive loss
    
    
    (1,793
    )
    
    
    (24,718
    )TOTAL STOCKHOLDERS EQUITY
    
    
    473,581
    
    
    
    396,420TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    781,191
    
    
    $
    739,245
  42




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##### Table of Contents



CHECKPOINT SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (dollar amounts in thousands, except per share data)
 December 31,
    
    
    December 25,
    
    
    December 26,Year ended
    
    2006
    
    
    2005
    
    
    2004(As Restated)
    
    
    (As Restated)Net revenues
    
    $
    687,775
    
    
    $
    717,992
    
    
    $
    670,453Cost of revenues
    
    
    396,084
    
    
    
    406,462
    
    
    
    360,981Gross profit
    
    
    291,691
    
    
    
    311,530
    
    
    
    309,472Selling, general, and administrative expenses
    
    
    226,958
    
    
    
    237,654
    
    
    
    235,798Research and development
    
    
    19,417
    
    
    
    19,108
    
    
    
    28,525Asset impairments
    
    
    
    
    
    
    1,396
    
    
    
    1,968Restructuring expenses
    
    
    7,007
    
    
    
    12,570
    
    
    
    (3,016
    )Litigation settlement
    
    
    2,251
    
    
    
    
    
    
    
    19,950Other operating income
    
    
    2,025
    
    
    
    
    
    
    
    Operating income
    
    
    38,083
    
    
    
    40,802
    
    
    
    26,247Interest income
    
    
    4,906
    
    
    
    2,338
    
    
    
    1,567Interest expense
    
    
    2,155
    
    
    
    2,862
    
    
    
    7,002Other gain (loss), net
    
    
    1,141
    
    
    
    (151
    )
    
    
    219Earnings from continuing operations before income taxes
and minority interest
    
    
    41,975
    
    
    
    40,127
    
    
    
    21,031Income taxes
    
    
    6,987
    
    
    
    11,661
    
    
    
    2,064Minority interest
    
    
    (31
    )
    
    
    53
    
    
    
    144Earnings from continuing operations
    
    
    35,019
    
    
    
    28,413
    
    
    
    18,823Earnings (loss) from discontinued operations, net of
tax of $1,059, $3,820, and ($1,692)
    
    
    903
    
    
    
    8,108
    
    
    
    (37,448
    )Net earnings (loss)
    
    $
    35,922
    
    
    $
    36,521
    
    
    $
    (18,625
    )Basic Earnings (Loss) Per Share:Earnings from continuing operations
    
    $
    .89
    
    
    $
    .75
    
    
    $
    .51Earnings (loss) from discontinued operations, net of tax
    
    
    .02
    
    
    
    .21
    
    
    
    (1.02
    )Basic Earnings (Loss) Per Share
    
    $
    .91
    
    
    $
    .96
    
    
    $
    (.51
    )Diluted Earnings (Loss) Per Share:Earnings from continuing operations
    
    $
    .87
    
    
    $
    .72
    
    
    $
    .50Earnings (loss) from discontinued operations, net of tax
    
    
    .02
    
    
    
    .21
    
    
    
    (1.00
    )Diluted Earnings (Loss) Per Share
    
    $
    .89
    
    
    $
    .93
    
    
    $
    (.50
    )
  43




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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, Dec. 28,
2003 (As Restated)
    
    
    39,479
    
    
    $
    3,948
    
    
    $
    282,529
    
    
    $
    92,840
    
    
    
    4,641
    
    
    $
    (47,003
    )
    
    $
    (9,654
    )
    
    $
    322,660Net loss (As Restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,625
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,625
    )Exercise of stock options
and related tax benefit
    
    
    362
    
    
    
    36
    
    
    
    4,663
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,699Net gain on interest rate
swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    826
    
    
    
    826Treasury stock issued
upon conversion of
subordinated debentures
    
    
    
    
    
    
    
    
    
    
    22,311
    
    
    
    
    
    
    
    (2,599
    )
    
    
    26,325
    
    
    
    
    
    
    
    48,636Minimum pension liability
adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,521
    )
    
    
    (2,521
    )Foreign currency
translation adjustment (As Restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,970
    
    
    
    23,970Balance, Dec. 26, 2004
(As Restated)
    
    
    39,841
    
    
    
    3,984
    
    
    
    309,503
    
    
    
    74,215
    
    
    
    2,042
    
    
    
    (20,678
    )
    
    
    12,621
    
    
    
    379,645Net earnings (As Restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,521
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,521Exercise of stock options
and related tax benefit
    
    
    871
    
    
    
    86
    
    
    
    13,448
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,534Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    788
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    788Deferred compensation plan
    
    
    25
    
    
    
    3
    
    
    
    3,211
    
    
    
    
    
    
    
    (6
    )
    
    
    57
    
    
    
    
    
    
    
    3,271Minimum pension liability
adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,840
    )
    
    
    (3,840
    )Foreign currency
translation adjustment (As Restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,499
    )
    
    
    (33,499
    )Balance, Dec. 25, 2005
(As Restated)
    
    
    40,737
    
    
    
    4,073
    
    
    
    326,950
    
    
    
    110,736
    
    
    
    2,036
    
    
    
    (20,621
    )
    
    
    (24,718
    )
    
    
    396,420Net earnings (As Restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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 (As Restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,789
    
    
    
    25,789Balance, Dec. 31, 2006
    
    
    41,315
    
    
    $
    4,131
    
    
    $
    345,206
    
    
    $
    146,658
    
    
    
    2,036
    
    
    $
    (20,621
    )
    
    $
    (1,793
    )
    
    $
    473,581
  44




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##### Table of Contents



CHECKPOINT SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 (dollar amounts in thousands)
 December 31,
    
    
    December 25,
    
    
    December 26,Year ended
    
    2006
    
    
    2005
    
    
    2004(As Restated)
    
    
    (As Restated)Net earnings (loss)
    
    $
    35,922
    
    
    $
    36,521
    
    
    $
    (18,625
    )Net gain on interest rate swap, net of tax
    
    
    
    
    
    
    
    
    
    
    826Minimum pension liability, net of tax
    
    
    (121
    )
    
    
    (3,840
    )
    
    
    (2,521
    )Foreign currency translation adjustment
    
    
    25,789
    
    
    
    (33,499
    )
    
    
    23,970Comprehensive income (loss)
    
    $
    61,590
    
    
    $
    (818
    )
    
    $
    3,650
  45




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##### Table of Contents



CHECKPOINT SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (dollars amounts in thousands)
 December 31,
    
    
    December 25,
    
    
    December 26,Year ended
    
    2006
    
    
    2005
    
    
    2004(As Restated)
    
    
    (As Restated)Cash flows from operating activities:Net earnings (loss)
    
    $
    35,922
    
    
    $
    36,521
    
    
    $
    (18,625
    )Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities:Depreciation and amortization
    
    
    19,504
    
    
    
    22,539
    
    
    
    26,316Deferred taxes
    
    
    281
    
    
    
    (4,226
    )
    
    
    (7,287
    )Stock-based compensation
    
    
    5,710
    
    
    
    788
    
    
    
    Excess tax benefit on stock compensation
    
    
    (1,685
    )
    
    
    
    
    
    
    Provision for losses on accounts receivable
    
    
    2,442
    
    
    
    2,574
    
    
    
    1,673Gain on sublease settlement
    
    
    (1,777
    )
    
    
    
    
    
    
    Gain on sale of discontinued operations
    
    
    (1,299
    )
    
    
    
    
    
    
    Loss (gain) on disposal of fixed assets
    
    
    262
    
    
    
    (1,627
    )
    
    
    139Impairments of goodwill and long-lived assets
    
    
    
    
    
    
    2,060
    
    
    
    51,444(Increase) decrease in current assets, net of the effects of acquired
companies:Accounts receivable
    
    
    (3,977
    )
    
    
    (8,228
    )
    
    
    (9,682
    )Inventories
    
    
    (8,299
    )
    
    
    (5,526
    )
    
    
    (6,295
    )Other current assets
    
    
    6,207
    
    
    
    (10,929
    )
    
    
    3,896Increase (decrease) in current liabilities, net of the effects of
acquired companies:Accounts payable
    
    
    (18,358
    )
    
    
    (1,062
    )
    
    
    951Income taxes
    
    
    4,904
    
    
    
    2,454
    
    
    
    (11,227
    )Unearned revenues
    
    
    (3,930
    )
    
    
    (1,797
    )
    
    
    (1,088
    )Restructuring reserve
    
    
    (5,668
    )
    
    
    7,932
    
    
    
    (6,138
    )Other current and accrued liabilities
    
    
    (7,853
    )
    
    
    3,145
    
    
    
    (797
    )Net cash provided by operating activities
    
    
    22,386
    
    
    
    44,618
    
    
    
    23,280Cash flows from investing activities:Acquisition of property, plant, and equipment
    
    
    (11,520
    )
    
    
    (10,846
    )
    
    
    (11,342
    )Proceeds from the sale of discontinued operations
    
    
    26,904
    
    
    
    
    
    
    
    Acquisitions of businesses, net of cash acquired
    
    
    (7,353
    )
    
    
    (2,026
    )
    
    
    (155
    )Other investing activities
    
    
    (68
    )
    
    
    4,351
    
    
    
    1,159Net cash provided by (used in) investing activities
    
    
    7,963
    
    
    
    (8,521
    )
    
    
    (10,338
    )Cash flows from financing activities:Proceeds from stock issuances
    
    
    8,691
    
    
    
    11,356
    
    
    
    3,950Excess tax benefit on stock compensation
    
    
    1,685
    
    
    
    
    
    
    
    Proceeds of short-term debt
    
    
    14,200
    
    
    
    
    
    
    
    Payment of short-term debt
    
    
    (9,873
    )
    
    
    
    
    
    
    Net change in factoring and bank overdrafts
    
    
    (3,293
    )
    
    
    1,612
    
    
    
    376Proceeds of long-term debt
    
    
    
    
    
    
    51,776
    
    
    
    25,000Payment of long-term debt
    
    
    (18,355
    )
    
    
    (83,027
    )
    
    
    (53,829
    )Net cash used in financing activities
    
    
    (6,945
    )
    
    
    (18,283
    )
    
    
    (24,503
    )Effect of foreign currency rate fluctuations on cash and cash equivalents
    
    
    6,767
    
    
    
    (7,285
    )
    
    
    3,879Net increase (decrease) in cash and cash equivalents
    
    
    30,171
    
    
    
    10,529
    
    
    
    (7,682
    )Cash and cash equivalents:Beginning of year
    
    
    113,223
    
    
    
    102,694
    
    
    
    110,376End of year
    
    $
    143,394
    
    
    $
    113,223
    
    
    $
    102,694
  46




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##### Table of Contents



CHECKPOINT SYSTEMS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. RESTATEMENT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Restatement
  Description of Restatement Adjustments
  Overstatement of revenue and other financial statement errors due to the improper activities of
certain former employees of the Companys Japanese sales subsidiary
   Income tax adjustments recorded in 2004 and the fourth quarter of 2005 that related to prior years
 Overstatement of revenue due to errors in the timing of recognition of revenue for certain
transactions in the Companys CheckNet® business
 47




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##### Table of Contents



Other
  December 25, 2005
    
    
    December 26, 2004Basic
    
    
    Diluted
    
    
    Basic
    
    
    DilutedEPS
    
    
    EPS
    
    
    EPS
    
    
    EPSAs Previously Reported
    












    $
    1.03
    
    
    $
    1.01
    
    
    $
    (.55
    )
    
    $
    (.54
    )Restatement Adjustments:CheckNet® Revenue Adjustments
    












    
    (.01
    )
    
    
    (.01
    )
    
    
    
    
    
    
    Japan Revenue Adjustments
    












    
    (.01
    )
    
    
    (.01
    )
    
    
    
    
    
    
    Other Japan Adjustments
    












    
    (.01
    )
    
    
    (.01
    )
    
    
    
    
    
    
    Income Tax Adjustments
    












    
    (.04
    )
    
    
    (.04
    )
    
    
    .04
    
    
    
    .04Other Adjustments
    












    
    (.01
    )
    
    
    (.01
    )
    
    
    .01
    
    
    
    .01As Restated
    












    $
    .96
    
    
    $
    .93
    
    
    $
    (.51
    )
    
    $
    (.50
    )Retained
    
    
    Net Earnings
    
    
    Earnings from Continuing Operations
    
    
    Income TaxesEarnings as of
    
    
    Dec. 25,
    
    
    Dec. 26,
    
    
    Dec. 25,
    
    
    Dec. 26,
    
    
    Dec. 25,
    
    
    Dec. 26,Dec. 29, 2003
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004As Previously Reported
    
    $
    93,422
    
    
    $
    39,405
    
    
    $
    (20,192
    )
    
    $
    31,297
    
    
    $
    17,256
    
    
    $
    10,970
    
    
    $
    3,515Restatement Adjustments:CheckNet® Revenue
Adjustments
    
    
    (189
    )
    
    
    (276
    )
    
    
    (174
    )
    
    
    (276
    )
    
    
    (174
    )
    
    
    (127
    )
    
    
    (73
    )Japan Revenue Adjustments
    
    
    
    
    
    
    (408
    )
    
    
    (77
    )
    
    
    (408
    )
    
    
    (77
    )
    
    
    (370
    )
    
    
    (70
    )Other Japan Adjustments
    
    
    
    
    
    
    (215
    )
    
    
    (26
    )
    
    
    (215
    )
    
    
    (26
    )
    
    
    (183
    )
    
    
    (19
    )Income Tax Adjustments
    
    
    43
    
    
    
    (1,561
    )
    
    
    1,518
    
    
    
    (1,561
    )
    
    
    1,518
    
    
    
    1,561
    
    
    
    (1,518
    )Other Adjustments
    
    
    (436
    )
    
    
    (424
    )
    
    
    326
    
    
    
    (424
    )
    
    
    326
    
    
    
    (190
    )
    
    
    229As Restated
    
    $
    92,840
    
    
    $
    36,521
    
    
    $
    (18,625
    )
    
    $
    28,413
    
    
    $
    18,823
    
    
    $
    11,661
    
    
    $
    2,064Operating Income
    
    
    Gross Profit
    
    
    Net RevenuesDec. 25,
    
    
    Dec. 26,
    
    
    Dec. 25,
    
    
    Dec. 26,
    
    
    Dec. 25,
    
    
    Dec. 26,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004As Previously Reported
    




    $
    43,027
    
    
    $
    26,055
    
    
    $
    313,437
    
    
    $
    309,918
    
    
    $
    721,018
    
    
    $
    671,558Restatement Adjustments:CheckNet® Revenue
Adjustments
    




    
    (403
    )
    
    
    (247
    )
    
    
    (403
    )
    
    
    (247
    )
    
    
    (597
    )
    
    
    (293
    )Japan Revenue Adjustments
    




    
    (880
    )
    
    
    (166
    )
    
    
    (880
    )
    
    
    (166
    )
    
    
    (1,722
    )
    
    
    (433
    )Other Japan Adjustments
    




    
    (418
    )
    
    
    (23
    )
    
    
    (100
    )
    
    
    (23
    )
    
    
    
    
    
    
    Other Adjustments
    




    
    (524
    )
    
    
    628
    
    
    
    (524
    )
    
    
    (10
    )
    
    
    (707
    )
    
    
    (379
    )As Restated
    




    $
    40,802
    
    
    $
    26,247
    
    
    $
    311,530
    
    
    $
    309,472
    
    
    $
    717,992
    
    
    $
    670,453
 Comparison of restated financial statements to financial statements as originally reported
  48




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##### Table of Contents



Consolidated Balance Sheets
 (dollar amounts in thousands)
 December 25, 2005As Previously
    
    
    AsReported
    
    
    RestatedASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    113,223
    
    
    $
    113,223Accounts receivable, net of allowance of $11,174
    
    
    138,871
    
    
    
    139,480Inventories
    
    
    79,528
    
    
    
    80,740Other current assets
    
    
    38,344
    
    
    
    38,746Deferred income taxes
    
    
    11,747
    
    
    
    12,950Assets of discontinued operations held for sale
    
    
    34,254
    
    
    
    34,254Total Current Assets
    
    
    415,967
    
    
    
    419,393REVENUE EQUIPMENT ON OPERATING LEASE, net
    
    
    4,699
    
    
    
    4,169PROPERTY, PLANT, AND EQUIPMENT, net
    
    
    72,377
    
    
    
    72,377GOODWILL
    
    
    165,313
    
    
    
    165,313OTHER INTANGIBLES, net
    
    
    33,263
    
    
    
    33,263DEFERRED INCOME TAXES
    
    
    31,509
    
    
    
    31,509OTHER ASSETS
    
    
    13,240
    
    
    
    13,221TOTAL ASSETS
    
    $
    736,368
    
    
    $
    739,245LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Short-term borrowings and current portion of long-term debt
    
    $
    1,776
    
    
    $
    4,391Accounts payable
    
    
    61,006
    
    
    
    61,485Accrued compensation and related taxes
    
    
    34,547
    
    
    
    34,547Other accrued expenses
    
    
    27,294
    
    
    
    27,294Income taxes
    
    
    25,567
    
    
    
    25,567Unearned revenues
    
    
    22,047
    
    
    
    23,650Restructuring reserve
    
    
    11,715
    
    
    
    11,715Other current liabilities
    
    
    16,031
    
    
    
    16,031Liabilities of discontinued operations held for sale
    
    
    6,458
    
    
    
    6,458Total Current Liabilities
    
    
    206,441
    
    
    
    211,138LONG-TERM DEBT, LESS CURRENT MATURITIES
    
    
    35,354
    
    
    
    35,354ACCRUED PENSIONS
    
    
    71,194
    
    
    
    71,194OTHER LONG-TERM LIABILITIES
    
    
    4,349
    
    
    
    4,349DEFERRED INCOME TAXES
    
    
    19,588
    
    
    
    19,588MINORITY INTEREST
    
    
    1,120
    
    
    
    1,202COMMITMENTS 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 40,737,110
    
    
    4,073
    
    
    
    4,073Additional capital
    
    
    326,950
    
    
    
    326,950Retained earnings
    
    
    112,635
    
    
    
    110,736Common stock in treasury, at cost, 2,035,912 shares
    
    
    (20,621
    )
    
    
    (20,621
    )Accumulated other comprehensive (loss) income
    
    
    (24,715
    )
    
    
    (24,718
    )TOTAL STOCKHOLDERS EQUITY
    
    
    398,322
    
    
    
    396,420TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    736,368
    
    
    $
    739,245
 49




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##### Table of Contents



Consolidated Statements of Operations
For the Years Ended
(dollar amounts in thousands, except per share data)
 December 25, 2005
    
    
    December 26, 2004As Previously
    
    
    As
    
    
    As Previously
    
    
    AsReported
    
    
    Restated
    
    
    Reported
    
    
    RestatedNet revenues
    
    $
    721,018
    
    
    $
    717,992
    
    
    $
    671,558
    
    
    $
    670,453Cost of revenues
    
    
    407,581
    
    
    
    406,462
    
    
    
    361,640
    
    
    
    360,981Gross profit
    
    
    313,437
    
    
    
    311,530
    
    
    
    309,918
    
    
    
    309,472Selling, general, and administrative expenses
    
    
    237,654
    
    
    
    237,654
    
    
    
    236,436
    
    
    
    235,798Research and development
    
    
    18,790
    
    
    
    19,108
    
    
    
    28,525
    
    
    
    28,525Asset impairment
    
    
    1,396
    
    
    
    1,396
    
    
    
    1,968
    
    
    
    1,968Restructuring expense
    
    
    12,570
    
    
    
    12,570
    
    
    
    (3,016
    )
    
    
    (3,016
    )Litigation settlement
    
    
    
    
    
    
    
    
    
    
    19,950
    
    
    
    19,950Operating income
    
    
    43,027
    
    
    
    40,802
    
    
    
    26,055
    
    
    
    26,247Interest income
    
    
    2,338
    
    
    
    2,338
    
    
    
    1,567
    
    
    
    1,567Interest expense
    
    
    2,844
    
    
    
    2,862
    
    
    
    6,980
    
    
    
    7,002Other (loss) gain, net
    
    
    (151
    )
    
    
    (151
    )
    
    
    219
    
    
    
    219Earnings from continuing operations before
income taxes and minority interest
    
    
    42,370
    
    
    
    40,127
    
    
    
    20,861
    
    
    
    21,031Income taxes
    
    
    10,970
    
    
    
    11,661
    
    
    
    3,515
    
    
    
    2,064Minority interest
    
    
    103
    
    
    
    53
    
    
    
    90
    
    
    
    144Earnings from continuing operations
    
    
    31,297
    
    
    
    28,413
    
    
    
    17,256
    
    
    
    18,823Earnings (loss) from discontinued
operations, net of tax
    
    
    8,108
    
    
    
    8,108
    
    
    
    (37,448
    )
    
    
    (37,448
    )Net earnings (loss)
    
    $
    39,405
    
    
    $
    36,521
    
    
    $
    (20,192
    )
    
    $
    (18,625
    )Basic Earnings per Share:Earnings from continuing operations
    
    $
    .82
    
    
    $
    .75
    
    
    $
    .47
    
    
    $
    .51Earnings (loss) from discontinued
operations, net of tax
    
    
    .21
    
    
    
    .21
    
    
    
    (1.02
    )
    
    
    (1.02
    )Basic Earnings (Loss) per Share
    
    $
    1.03
    
    
    $
    .96
    
    
    $
    (.55
    )
    
    $
    (.51
    )Diluted Earnings per Share:Earnings from continuing operations
    
    $
    .80
    
    
    $
    .72
    
    
    $
    .46
    
    
    $
    .50Earnings (loss) from discontinued
operations, net of tax
    
    
    .21
    
    
    
    .21
    
    
    
    (1.00
    )
    
    
    (1.00
    )Diluted Earnings (Loss) per Share
    
    $
    1.01
    
    
    $
    .93
    
    
    $
    (.54
    )
    
    $
    (.50
    )
 50




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Consolidated Statements Of Stockholders Equity
 (dollar amounts in thousands)
 Accumulated Other ComprehensiveRetained Earnings
    
    
    Income (Loss)
    
    
    Total Stockholders EquityAs
    
    
    
    
    
    
    As
    
    
    
    
    
    
    AsPreviously
    
    
    As
    
    
    Previously
    
    
    As
    
    
    Previously
    
    
    AsReported
    
    
    Restated
    
    
    Reported
    
    
    Restated
    
    
    Reported
    
    
    RestatedBalance, Dec. 28, 2003
    
    $
    93,422
    
    
    $
    92,840
    
    
    $
    (9,606
    )
    
    $
    (9,654
    )
    
    $
    323,290
    
    
    $
    322,660Net loss
    
    
    (20,192
    )
    
    
    (18,625
    )
    
    
    
    
    
    
    
    
    
    
    (20,192
    )
    
    
    (18,625
    )Exercise of stock options and
related tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,699
    
    
    
    4,699Net gain on interest rate swap
    
    
    
    
    
    
    
    
    
    
    826
    
    
    
    826
    
    
    
    826
    
    
    
    826Treasury stock issued upon
conversion of subordinated
debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,636
    
    
    
    48,636Minimum pension liability
adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    (2,521
    )
    
    
    (2,521
    )
    
    
    (2,521
    )
    
    
    (2,521
    )Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    24,025
    
    
    
    23,970
    
    
    
    24,025
    
    
    
    23,970Balance, Dec. 26, 2004
    
    $
    73,230
    
    
    $
    74,215
    
    
    $
    12,724
    
    
    $
    12,621
    
    
    $
    378,763
    
    
    $
    379,645Net earnings
    
    
    39,405
    
    
    
    36,521
    
    
    
    
    
    
    
    
    
    
    
    39,405
    
    
    
    36,521Exercise of stock options and
related tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,534
    
    
    
    13,534Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    788
    
    
    
    788Deferred compensation plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,271
    
    
    
    3,271Minimum pension liability
adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    (3,840
    )
    
    
    (3,840
    )
    
    
    (3,840
    )
    
    
    (3,840
    )Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    (33,599
    )
    
    
    (33,499
    )
    
    
    (33,599
    )
    
    
    (33,499
    )Balance, Dec. 25, 2005
    
    $
    112,635
    
    
    $
    110,736
    
    
    $
    (24,715
    )
    
    $
    (24,718
    )
    
    $
    398,322
    
    
    $
    396,420
 51




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##### Table of Contents



Consolidated Statements of Comprehensive Income (Loss)
 (dollar amounts in thousands)
 December 25, 2005
    
    
    December 26, 2004As Previously
    
    
    As
    
    
    As Previously
    
    
    AsReported
    
    
    Restated
    
    
    Reported
    
    
    RestatedNet earnings (loss)
    
    $
    39,405
    
    
    $
    36,521
    
    
    $
    (20,192
    )
    
    $
    (18,625
    )Net gain on interest rate swap, net of tax
    
    
    
    
    
    
    
    
    
    
    826
    
    
    
    826Minimum pension liability, net of tax
    
    
    (3,840
    )
    
    
    (3,840
    )
    
    
    (2,521
    )
    
    
    (2,521
    )Foreign currency translation adjustment
    
    
    (33,599
    )
    
    
    (33,499
    )
    
    
    24,025
    
    
    
    23,970Comprehensive
income (loss)
    
    $
    1,966
    
    
    $
    (818
    )
    
    $
    2,138
    
    
    $
    3,650
 52




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##### Table of Contents



Consolidated Statements of Cash Flows
 (dollar amounts in thousands)
 Year Ended
    
    
    Year EndedDecember 25, 2005
    
    
    December 26, 2004As
    
    
    
    
    
    
    AsPreviously
    
    
    
    
    
    
    PreviouslyReported
    
    
    Restated
    
    
    Reported
    
    
    RestatedCash flows from operating activities:Net earnings (loss)
    
    $
    39,405
    
    
    $
    36,521
    
    
    $
    (20,192
    )
    
    $
    (18,625
    )Adjustments to reconcile net earnings
(loss) to net cash provided by operating
activities:Depreciation and amortization
    
    
    22,730
    
    
    
    22,539
    
    
    
    26,538
    
    
    
    26,316Deferred taxes
    
    
    (4,917
    )
    
    
    (4,226
    )
    
    
    (5,836
    )
    
    
    (7,287
    )Stock-based compensation
    
    
    788
    
    
    
    788
    
    
    
    
    
    
    
    Provision for losses on accounts receivable
    
    
    2,574
    
    
    
    2,574
    
    
    
    1,673
    
    
    
    1,673(Gain) loss on disposal of fixed assets
    
    
    (1,627
    )
    
    
    (1,627
    )
    
    
    139
    
    
    
    139Impairments of goodwill and long-lived assets
    
    
    2,060
    
    
    
    2,060
    
    
    
    51,444
    
    
    
    51,444(Increase) decrease in current assets, net of
the effects of acquired companies:Accounts receivable
    
    
    (8,316
    )
    
    
    (8,228
    )
    
    
    (8,938
    )
    
    
    (9,682
    )Inventories
    
    
    (4,860
    )
    
    
    (5,526
    )
    
    
    (7,090
    )
    
    
    (6,295
    )Other current assets
    
    
    (10,553
    )
    
    
    (10,929
    )
    
    
    4,210
    
    
    
    3,896Increase (decrease) in current liabilities, net
of the effects of acquired companies:Accounts payable
    
    
    (1,844
    )
    
    
    (1,062
    )
    
    
    870
    
    
    
    951Income taxes
    
    
    2,454
    
    
    
    2,454
    
    
    
    (11,227
    )
    
    
    (11,227
    )Unearned revenues
    
    
    (2,791
    )
    
    
    (1,797
    )
    
    
    (1,381
    )
    
    
    (1,088
    )Restructuring reserve
    
    
    7,932
    
    
    
    7,932
    
    
    
    (6,138
    )
    
    
    (6,138
    )Other current and accrued liabilities
    
    
    3,195
    
    
    
    3,145
    
    
    
    (324
    )
    
    
    (797
    )Net cash provided by operating activities
    
    
    46,230
    
    
    
    44,618
    
    
    
    23,748
    
    
    
    23,280Cash flows from investing activities:Acquisition of property, plant, and equipment
    
    
    (10,846
    )
    
    
    (10,846
    )
    
    
    (11,342
    )
    
    
    (11,342
    )Acquisitions of businesses, net of cash acquired
    
    
    (2,026
    )
    
    
    (2,026
    )
    
    
    (155
    )
    
    
    (155
    )Other investing activities
    
    
    4,351
    
    
    
    4,351
    
    
    
    1,159
    
    
    
    1,159Net cash used in investing activities
    
    
    (8,521
    )
    
    
    (8,521
    )
    
    
    (10,338
    )
    
    
    (10,338
    )Cash flows from financing activities:Proceeds from stock issuances
    
    
    11,356
    
    
    
    11,356
    
    
    
    3,950
    
    
    
    3,950Net change in short-term debt
    
    
    
    
    
    
    1,612
    
    
    
    (92
    )
    
    
    376Proceeds of long-term debt
    
    
    51,776
    
    
    
    51,776
    
    
    
    25,000
    
    
    
    25,000Payment of long-term debt
    
    
    (83,027
    )
    
    
    (83,027
    )
    
    
    (53,829
    )
    
    
    (53,829
    )Net cash used in financing activities
    
    
    (19,895
    )
    
    
    (18,283
    )
    
    
    (24,971
    )
    
    
    (24,503
    )Effect of foreign currency rate
fluctuations on cash and cash equivalents
    
    
    (7,285
    )
    
    
    (7,285
    )
    
    
    3,879
    
    
    
    3,879Net increase (decrease) in cash and cash
equivalents
    
    
    10,529
    
    
    
    10,529
    
    
    
    (7,682
    )
    
    
    (7,682
    )Cash and cash equivalents:Beginning of year
    
    
    102,694
    
    
    
    102,694
    
    
    
    110,376
    
    
    
    110,376End of year
    
    $
    113,223
    
    
    $
    113,223
    
    
    $
    102,694
    
    
    $
    102,694
 53




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##### Table of Contents



Nature of Operations
  Principles of Consolidation
  Use of Estimates
  Fiscal Year
  Cash and Cash Equivalents
  Restricted Cash
 ®
 Accounts Receivable
  Inventories
  Revenue Equipment on Operating Lease
  54




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##### Table of Contents



Property, Plant, and Equipment
   Goodwill
  Other Intangibles
  Other Assets
  Deferred Financing Costs
  Revenue Recognition
  55




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##### Table of Contents



Shipping and Handling Fees and Costs
  Cost of Revenues
  Warranty Reserves
  December 31,
    
    
    December 25,2006
    
    
    2005(dollar amounts in thousands)Balance at beginning of year
    
    $
    5,211
    
    
    $
    5,171Accruals for warranties issued
    
    
    3,909
    
    
    
    3,784Accruals related to pre-existing warranties, including changes in estimate
    
    
    865
    
    
    
    Total accruals
    
    
    4,774
    
    
    
    3,784Settlement made
    
    
    (4,580
    )
    
    
    (3,404
    )Divestiture
    
    
    (236
    )
    
    
    Foreign currency translation adjustment
    
    
    330
    
    
    
    (340
    )Balance at end of year
    
    $
    5,499
    
    
    $
    5,211
 Royalty Expense
  Research and Development Costs
  Stock Options
   56




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##### Table of Contents



Year ended,
    
    
    Year ended,
    
    
    Year ended,December 31,
    
    
    December 25,
    
    
    December 26,2006
    
    
    2005
    
    
    2004Weighted average fair value of grants
    
    $
    11.47
    
    
    $
    4.99
    
    
    $
    5.34Valuation assumptions:Expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility
    
    
    .4135
    
    
    
    .3209
    
    
    
    .261Expected life (in years)
    
    
    4.54
    
    
    
    3.4
    
    
    
    3.2Risk-free interest rate
    
    
    4.55  5.07
    %
    
    
    2.8  4.6
    %
    
    
    2.9
    %
  (dollar amounts in thousands, except per share amounts)
 Year ended,
    
    
    Year ended,December 25,
    
    
    December 26,2005
    
    
    2004(As Restated)
    
    
    (As Restated)Net earnings (loss), as reported
    
    $
    36,521
    
    
    $
    (18,625
    )Add: Stock-based compensation
recorded under the instrinsic method,
net of tax
    
    
    271
    
    
    
    Less: Stock-based compensation
expenses determined under the
fair-value method, net of tax
    
    
    (2,124
    )
    
    
    (2,564
    )Pro forma net earnings (loss)
    
    $
    34,668
    
    
    $
    (21,189
    )Basic net earnings (loss) per share:As reported
    
    $
    .96
    
    
    $
    (.51
    )Pro forma
    
    $
    .91
    
    
    $
    (.58
    )Diluted net earnings (loss) per share:As reported
    
    $
    .93
    
    
    $
    (.50
    )Pro forma
    
    $
    .88
    
    
    $
    (.56
    )
  Income Taxes
  Taxes Collected from Customers
  Foreign Currency Translation and Transactions
  57




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##### Table of Contents



Accounting for Hedging Activities
   Recently Adopted Accounting Standards
    EITF 06-03
  58




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##### Table of Contents



(dollar
amounts in thousands)
 As of December 31, 2006Effect ofPrior to adoption
    
    
    adoptingof Statement 158
    
    
    Statement 158
    
    
    After adoptionNon-current deferred income tax assets
    
    $
    29,818
    
    
    $
    1,598
    
    
    $
    31,416Total assets
    
    
    779,593
    
    
    
    1,598
    
    
    
    781,191Accrued pensions  current
    
    
    
    
    
    
    3,730
    
    
    
    3,730Accrued pensions
    
    
    81,991
    
    
    
    611
    
    
    
    82,602Accumulated other comprehensive income
    
    
    950
    
    
    
    (2,743
    )
    
    
    (1,793
    )Total stockholders equity
    
    $
    476,555
    
    
    $
    (2,743
    )
    
    $
    473,812
  New Accounting Pronouncements and Other Standards
    Note 2. VARIABLE INTEREST ENTITY
  59




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##### Table of Contents



Note 3. INVENTORIES
  (dollar amounts in thousands)
 December 31,
    
    
    December 25,2006
    
    
    2005(As Restated)Raw materials
    
    $
    14,420
    
    
    $
    10,643Work-in-process
    
    
    4,467
    
    
    
    4,351Finished goods
    
    
    75,675
    
    
    
    65,746Total
    
    $
    94,562
    
    
    $
    80,740
 Note 4. REVENUE EQUIPMENT ON OPERATING LEASE AND PROPERTY, PLANT, AND EQUIPMENT
  (dollar amounts in thousands)
 December 31,
    
    
    December 25,2006
    
    
    2005(As Restated)Revenue equipment on operating leaseEquipment rented to customers
    
    $
    29,331
    
    
    $
    47,693Accumulated depreciation
    
    
    (25,006
    )
    
    
    (43,524
    )Total revenue equipment on operating lease
    
    $
    4,325
    
    
    $
    4,169Property, plant, and equipmentLand
    
    $
    8,011
    
    
    $
    8,045Buildings
    
    
    46,538
    
    
    
    56,441Machinery and equipment
    
    
    126,084
    
    
    
    108,558Leasehold improvements
    
    
    10,684
    
    
    
    10,546Construction in progress
    
    
    5,389
    
    
    
    4,846196,706
    
    
    
    188,436Accumulated depreciation
    
    
    (128,989
    )
    
    
    (116,059
    )Total property, plant, and equipment
    
    $
    67,717
    
    
    $
    72,377
      60




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##### Table of Contents



Note 5. GOODWILL AND OTHER INTANGIBLE ASSETS
   December 31, 2006
    
    
    December 25, 2005Amortizable
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossLife
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Accumulated(years)
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amortization(dollar amounts in thousands)Customer lists
    
    
    20
    
    
    $
    32,583
    
    
    $
    22,116
    
    
    $
    29,093
    
    
    $
    18,822Trade name
    
    
    30
    
    
    
    28,625
    
    
    
    13,587
    
    
    
    26,106
    
    
    
    11,936Patents, license agreements
    
    
    5 to 14
    
    
    
    40,060
    
    
    
    32,761
    
    
    
    36,978
    
    
    
    28,561Other
    
    
    3 to 6
    
    
    
    921
    
    
    
    582
    
    
    
    902
    
    
    
    497Total
    
    
    
    
    
    $
    102,189
    
    
    $
    69,046
    
    
    $
    93,079
    
    
    $
    59,816
   (dollar amountsin thousands)2007
    
    $
    3,2772008
    
    $
    3,1822009
    
    $
    2,8322010
    
    $
    2,3942011
    
    $
    2,247
  Labeling
    
    
    RetailSecurity
    
    
    Services
    
    
    Merchandising
    
    
    Total(dollar amounts in thousands)Balance as of December 26, 2004
    
    $
    114,237
    
    
    $
    3,944
    
    
    $
    73,124
    
    
    $
    191,305Acquired during the year
    
    
    760
    
    
    
    
    
    
    
    
    
    
    
    760Impairment
    
    
    
    
    
    
    (664
    )
    
    
    
    
    
    
    (664
    )Translation adjustment and other
    
    
    (13,699
    )
    
    
    (1,555
    )
    
    
    (9,358
    )
    
    
    (24,612
    )Discontinued operations
    
    
    
    
    
    
    (1,335
    )
    
    
    (141
    )
    
    
    (1,476
    )Balance as of December 25, 2005
    
    
    101,298
    
    
    
    390
    
    
    
    63,625
    
    
    
    165,313Acquired during the year
    
    
    
    
    
    
    5,714
    
    
    
    
    
    
    
    5,714Translation adjustment and other
    
    
    9,433
    
    
    
    274
    
    
    
    6,554
    
    
    
    16,261Balance as of December 31, 2006
    
    $
    110,731
    
    
    $
    6,378
    
    
    $
    70,179
    
    
    $
    187,288
  ®
  61




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Note 6. SHORT-TERM BORROWINGS AND CURRENT PORTION OF LONG-TERM DEBT
  (dollar amounts in thousands)
 December 31,
    
    
    December 25,2006
    
    
    2005(As Restated)Overdraft facilities and lines of credit with interest
rates raging from 1.50% to 1.75%(1)
    
    $
    5,038
    
    
    $
    858Full recourse factoring liabilities
    
    
    774
    
    
    
    2,615Current portion of long-term debt
    
    
    998
    
    
    
    918Total short-term borrowings and current portion of long-term debt
    
    $
    6,810
    
    
    $
    4,391
 (1)
    
    The weighted average interest rates for 2006 and 2005 were 1.69% and 1.44%, respectively.   62




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##### Table of Contents



Note 7. LONG-TERM DEBT
  December 31,
    
    
    December 25,2006
    
    
    2005(dollar amounts in thousands)Senior unsecured credit facility:$150 million variable interest rate revolving credit facility maturing in 2010
    
    $
    9,067
    
    
    $
    25,4219.5 million capital lease maturing in 2021
    
    
    
    
    
    
    9,5902.7 million capital lease maturing in 2007
    
    
    469
    
    
    
    831Other capital leases with maturities through 2010
    
    
    1,186
    
    
    
    430Total(1)
    
    
    10,722
    
    
    
    36,272Less current portion
    
    
    998
    
    
    
    918Total long-term portion
    
    $
    9,724
    
    
    $
    35,354
 (1)
    
    The weighted average interest rates for 2006 and 2005 were 1.8% and 3.16%, respectively.      Capital
    
    
    TotalDebt
    
    
    Leases
    
    
    Debt(dollar amounts in thousands)2007
    
    $
    
    
    
    $
    998
    
    
    $
    9982008
    
    
    
    
    
    
    434
    
    
    
    4342009
    
    
    
    
    
    
    209
    
    
    
    2092010
    
    
    9,067
    
    
    
    14
    
    
    
    9,0812011
    
    
    
    
    
    
    
    
    
    
    Thereafter
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    9,067
    
    
    $
    1,655
    
    
    $
    10,722
 63




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##### Table of Contents



Note 8. STOCK-BASED COMPENSATION
   Stock Plans
      64




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##### Table of Contents



Stock Options
  WeightedAverageWeighted-
    
    
    Remaining
    
    
    AggregateAverage
    
    
    Contractual
    
    
    IntrinsicExercise
    
    
    Term
    
    
    ValueShares
    
    
    Price
    
    
    (in years)
    
    
    (in thousands)Outstanding at December 25, 2005
    
    
    3,693,361
    
    
    $
    15.68Granted
    
    
    320,262
    
    
    
    28.33Exercised
    
    
    (532,731
    )
    
    
    15.08Forfeited or expired
    
    
    (326,375
    )
    
    
    23.22Outstanding at December 31, 2006
    
    
    3,154,517
    
    
    $
    16.28
    
    
    
    6.03
    
    
    $
    15,274Vested and expected to vest at December 31, 2006
    
    
    3,059,222
    
    
    $
    16.06
    
    
    
    5.96
    
    
    $
    15,144Exercisable at December 31, 2006
    
    
    2,466,100
    
    
    $
    14.74
    
    
    
    5.38
    
    
    $
    14,175
    65




---



##### Table of Contents



Restricted Stock Units
   Weighted-Number of
    
    
    Average Vest
    
    
    Weighted-Shares
    
    
    Date
    
    
    Average Grant(in thousands)
    
    
    (in years)
    
    
    Date Fair ValueNonvested at December 25, 2005
    
    
    
    
    
    
    
    
    
    $
    Granted
    
    
    203,486
    
    
    
    
    
    
    $
    26.32Vested
    
    
    
    
    
    
    
    
    
    $
    Forfeited
    
    
    (5,814
    )
    
    
    
    
    
    $
    28.89Nonvested at December 31, 2006
    
    
    197,672
    
    
    
    1.37
    
    
    $
    26.24Vested and expected to vest at December 31, 2006
    
    
    157,881
    
    
    
    1.19Vested at December 31, 2006
    
    
    
    
    
    
    
  Note 9. SUPPLEMENTAL CASH FLOW INFORMATION
   Note 10. STOCKHOLDERS EQUITY
   66




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(dollar amounts in thousands)
 2006
    
    
    2005(As Restated)Actuarial losses on pension plans
    
    $
    (9,225
    )
    
    $
    Minimum pension liability adjustment, net of tax
    
    
    
    
    
    
    (6,361
    )Foreign currency translation adjustment
    
    
    7,432
    
    
    
    (18,357
    )Total
    
    $
    (1,793
    )
    
    $
    (24,718
    )
 Note 11. EARNINGS PER SHARE
  (amounts in thousands, except per share data)
 December 31,
    
    
    December 25,
    
    
    December 26,2006
    
    
    2005
    
    
    2004(As Restated)
    
    
    (As Restated)Basic earnings available to common stockholders:Net earnings available to common stockholders from continuing
operations
    
    $
    35,019
    
    
    $
    28,413
    
    
    $
    18,823Diluted earnings available to common stockholders from
continuing operations
    
    $
    35,019
    
    
    $
    28,413
    
    
    $
    18,823Shares:Weighted average number of common shares outstanding
    
    
    39,136
    
    
    
    38,072
    
    
    
    36,823Shares issuable under deferred compensation agreements
    
    
    240
    
    
    
    157
    
    
    
    Basic weighted average number of common shares outstanding
    
    
    39,376
    
    
    
    38,229
    
    
    
    36,823Common shares assumed upon exercise of stock options and awards
    
    
    839
    
    
    
    832
    
    
    
    781Shares issuable under deferred compensation arrangements
    
    
    18
    
    
    
    14
    
    
    
    Dilutive weighted average number of common shares outstanding
    
    
    40,233
    
    
    
    39,075
    
    
    
    37,604Basic Earnings (Loss) per Share:Earnings from continuing operations
    
    $
    .89
    
    
    $
    .75
    
    
    $
    .51Earnings (loss) from discontinued operations, net of tax
    
    $
    .02
    
    
    $
    .21
    
    
    $
    (1.02
    )Basic earnings (loss) per share
    
    $
    .91
    
    
    $
    .96
    
    
    $
    (.51
    )Diluted Earnings (Loss) per Share:Earnings from continuing operations
    
    $
    .87
    
    
    $
    .72
    
    
    $
    .50Earnings (loss) from discontinued operations, net of tax
    
    $
    .02
    
    
    $
    .21
    
    
    $
    (1.00
    )Diluted earnings (loss) per share
    
    $
    .89
    
    
    $
    .93
    
    
    $
    (.50
    )
   December 31,
    
    
    December 25,
    
    
    December 26,2006
    
    
    2005
    
    
    2004Weighted average
common share
equivalents
associated with
anti-dilutive stock
options and
restricted stock
units excluded from
the computation of
diluted EPS:
    
    
    540,675
    
    
    
    422,586
    
    
    
    1,214,000
 67




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##### Table of Contents



Note 12. DISCONTINUED OPERATIONS
   (dollar amounts in thousands)
 December 31,
    
    
    December 25,
    
    
    December 26,2006
    
    
    2005
    
    
    2004Net revenue
    
    $
    7,446
    
    
    $
    98,118
    
    
    $
    107,121Gross profit
    
    
    1,433
    
    
    
    26,908
    
    
    
    27,682Selling, general, & administrative expense
    
    
    2,239
    
    
    
    13,901
    
    
    
    16,909Research and development
    
    
    
    
    
    
    415
    
    
    
    437Asset impairment
    
    
    
    
    
    
    
    
    
    
    14,780Goodwill impairment
    
    
    
    
    
    
    664
    
    
    
    34,696Operating (loss) income
    
    
    (806
    )
    
    
    11,928
    
    
    
    (39,140
    )Gain on disposal
    
    
    2,768
    
    
    
    
    
    
    
    Earnings (loss) from discontinued operations before income taxes
    
    
    1,962
    
    
    
    11,928
    
    
    
    (39,140
    )Income taxes
    
    
    1,059
    
    
    
    3,820
    
    
    
    (1,692
    )Earnings (loss) from discontinued operations, net of tax
    
    $
    903
    
    
    $
    8,108
    
    
    $
    (37,448
    )
 68




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##### Table of Contents



(dollar amounts in thousands)
 December 25,2005Accounts receivables, net
    
    $
    16,191Inventories
    
    
    10,421Property,
plant and equipment, net
    
    
    3,366Goodwill
    
    
    1,476Other intangibles, net
    
    
    932Deferred income taxes
    
    
    1,551Other assets
    
    
    317Assets of
discontinued operations held for disposal
    
    $
    34,254Accrued compensation and related taxes
    
    $
    1,271Other accrued expenses
    
    
    233Accrued pensions
    
    
    3,861Deferred income taxes
    
    
    312Other liabilities
    
    
    781Liabilities
of discontinued operations held for disposal
    
    $
    6,458
 Note 13. INCOME TAXES
  (dollar amounts in thousands)
 2006
    
    
    2005
    
    
    2004(As Restated)
    
    
    (As Restated)Domestic(1)
    
    $
    (778
    )
    
    $
    24,877
    
    
    $
    6,525Foreign
    
    
    42,753
    
    
    
    15,250
    
    
    
    14,506Total
    
    $
    41,975
    
    
    $
    40,127
    
    
    $
    21,031
 (1)
    
    The domestic component includes the earnings of our operations in Puerto Rico for 2005 and
2004. 69




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##### Table of Contents



(dollar amounts in thousands)
 2006
    
    
    2005
    
    
    2004(As Restated)
    
    
    (As Restated)Currently payableFederal
    
    $
    (760
    )
    
    $
    6,292
    
    
    $
    (223
    )State
    
    
    582
    
    
    
    921
    
    
    
    454Puerto Rico
    
    
    (58
    )
    
    
    (636
    )
    
    
    423Foreign
    
    
    7,645
    
    
    
    9,310
    
    
    
    2,763Total currently payable
    
    
    7,409
    
    
    
    15,887
    
    
    
    3,417DeferredFederal
    
    
    1,315
    
    
    
    (1,370
    )
    
    
    (1,025
    )State
    
    
    
    
    
    
    
    
    
    
    Puerto Rico
    
    
    (121
    )
    
    
    171
    
    
    
    (235
    )Foreign
    
    
    (1,616
    )
    
    
    (3,027
    )
    
    
    (93
    )Total deferred
    
    
    (422
    )
    
    
    (4,226
    )
    
    
    (1,353
    )Total provision
    
    $
    6,987
    
    
    $
    11,661
    
    
    $
    2,064
  (dollar amounts in thousands)
 December 31,
    
    
    December 25,2006
    
    
    2005(As Restated)Inventory
    
    $
    5,475
    
    
    $
    5,956Accounts receivable
    
    
    2,804
    
    
    
    1,968Net operating loss and foreign tax credit carryforwards
    
    
    51,782
    
    
    
    43,707Restructuring
    
    
    268
    
    
    
    192Deferred revenue
    
    
    665
    
    
    
    1,434Pension
    
    
    10,748
    
    
    
    8,480Warranty
    
    
    1,007
    
    
    
    904Deferred compensation
    
    
    1,358
    
    
    
    515Stock based compensation
    
    
    1,293
    
    
    
    Valuation allowance
    
    
    (34,510
    )
    
    
    (26,477
    )Deferred tax assets
    
    
    40,890
    
    
    
    36,679Depreciation
    
    
    1,529
    
    
    
    1,694Intangibles
    
    
    12,168
    
    
    
    11,306Other
    
    
    2,481
    
    
    
    1,178Withholding tax liabilities
    
    
    1,031
    
    
    
    2,124Deferred tax liabilities
    
    
    17,209
    
    
    
    16,302Net deferred tax asset
    
    $
    23,681
    
    
    $
    20,377
   70




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(dollar amounts in thousands)
 2006
    
    
    2005
    
    
    2004(As Restated)
    
    
    (As Restated)Tax provision at the statutory Federal income tax rate
    
    $
    14,692
    
    
    $
    14,044
    
    
    $
    7,362Tax exempt earnings of subsidiary in Puerto Rico
    
    
    
    
    
    
    (1,467
    )
    
    
    (1,467
    )Non-deductible permanent items
    
    
    260
    
    
    
    485
    
    
    
    375State and local income taxes, net of Federal benefit
    
    
    186
    
    
    
    599
    
    
    
    311Benefit from extraterritorial income
    
    
    (70
    )
    
    
    (619
    )
    
    
    (848
    )Foreign losses for which no tax benefit recognized
    
    
    801
    
    
    
    626
    
    
    
    482Foreign rate differentials
    
    
    (6,982
    )
    
    
    (3,744
    )
    
    
    (3,620
    )Research and development credits
    
    
    
    
    
    
    
    
    
    
    (637
    )Tax settlements
    
    
    
    
    
    
    (452
    )
    
    
    783Potential tax contingencies
    
    
    (1,528
    )
    
    
    179
    
    
    
    (577
    )Change in valuation allowance
    
    
    (453
    )
    
    
    180
    
    
    
    234Tax restructuring and AJCA repatriation
    
    
    
    
    
    
    2,039
    
    
    
    Stock based compensation
    
    
    308
    
    
    
    
    
    
    
    Other
    
    
    (227
    )
    
    
    (209
    )
    
    
    (334
    )Tax provision at the effective tax rate
    
    $
    6,987
    
    
    $
    11,661
    
    
    $
    2,064
 Note 14. EMPLOYEE BENEFIT PLANS
   71




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Pension Plans
   72




---



##### Table of Contents



(dollar amounts in thousands)Transition obligation
    
    $
    691Prior service costs
    
    
    26Actuarial losses
    
    
    13,976Total
    
    
    14,693Deferred tax
    
    
    (5,468
    )Net
    
    $
    9,225
  (dollar amounts in thousands)Transition obligation
    
    $
    123Prior service costs
    
    
    2Actuarial losses
    
    
    460Total
    
    $
    585
   2006
    
    
    2005
    
    
    2004(dollar amounts in thousands)Service cost
    
    $
    1,350
    
    
    $
    1,380
    
    
    $
    1,308Interest cost
    
    
    3,505
    
    
    
    3,837
    
    
    
    3,861Expected return on plan assets
    
    
    (144
    )
    
    
    (4
    )
    
    
    (4
    )Amortization of actuarial loss (gain)
    
    
    569
    
    
    
    32
    
    
    
    (38
    )Amortization of transition obligation
    
    
    117
    
    
    
    116
    
    
    
    115Amortization of prior service costs
    
    
    2
    
    
    
    2
    
    
    
    2Net periodic pension cost
    
    
    5,399
    
    
    
    5,363
    
    
    
    5,244Settlement loss
    
    
    736
    
    
    
    
    
    
    
    Special termination benefit recognized
    
    
    226
    
    
    
    
    
    
    
    Curtailment gain
    
    
    (337
    )
    
    
    (664
    )
    
    
    Total pension expense
    
    $
    6,024
    
    
    $
    4,699
    
    
    $
    5,244
 73




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##### Table of Contents



December 31,
    
    
    December 25,2006
    
    
    2005(dollar amounts in thousands)Change in benefit obligationNet benefit obligation at beginning of year
    
    $
    83,312
    
    
    $
    85,379Service cost
    
    
    1,350
    
    
    
    1,380Interest cost
    
    
    3,505
    
    
    
    3,837Actuarial loss (gain)
    
    
    (274
    )
    
    
    7,230Gross benefits paid
    
    
    (3,570
    )
    
    
    (3,102
    )Plan settlements
    
    
    (3,849
    )
    
    
    Curtailment gain
    
    
    (337
    )
    
    
    (641
    )Special termination benefits
    
    
    226
    
    
    
    Foreign currency exchange rate changes
    
    
    9,203
    
    
    
    (10,771
    )Net benefit obligation at end of year
    
    $
    89,566
    
    
    $
    83,312Change in plan assetsFair value of plan assets at beginning of year
    
    $
    3,440
    
    
    $
    3,091Actual return on assets
    
    
    (202
    )
    
    
    194Employer contributions
    
    
    7,058
    
    
    
    3,638Gross benefits paid
    
    
    (3,570
    )
    
    
    (3,102
    )Plan settlements
    
    
    (3,849
    )
    
    
    Foreign currency exchange rate changes
    
    
    357
    
    
    
    (381
    )Fair value of plan assets at end of year
    
    $
    3,234
    
    
    $
    3,440Reconciliation of funded statusFunded status at end of year
    
    $
    (86,332
    )
    
    $
    (79,872
    )Unrecognized actuarial loss
    
    
    
    
    
    
    13,732Unrecognized transition obligation
    
    
    
    
    
    
    731Unrecognized prior service cost
    
    
    
    
    
    
    25Net amount recognized at end of year
    
    $
    (86,332
    )
    
    $
    (65,384
    )
 December 31,
    
    
    December 25,2006
    
    
    2005(dollar amounts in thousands)Amounts recognized in accrued benefit consist of:Accrued pensions  current
    
    $
    3,730
    
    
    $
    Accrued pensions
    
    
    82,602
    
    
    
    65,384Net amount recognized at end of year
    
    $
    86,332
    
    
    $
    65,384Other comprehensive income attributable to change in
additional minimum liability recognition
    
    $
    681
    
    
    $
    5,625Accumulated benefit obligation at end of year
    
    $
    83,768
    
    
    $
    77,809
 74




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##### Table of Contents



December 31,
    
    
    December 25,2006
    
    
    2005(dollar amounts in thousands)Projected benefit obligation
    
    $
    88,682
    
    
    $
    83,312Accumulated benefit obligation
    
    $
    83,768
    
    
    $
    77,809Fair value of plan assets
    
    $
    3,234
    
    
    $
    3,440
  December 31,
    
    December 25,2006
    
    2005Weighted average assumptions for year-end benefit
obligations:Discount rate(1)
    
    
    4.50
    %
    
    
    4.25
    %Expected rate of increase in future compensation levels
    
    
    2.50
    %
    
    
    2.50
    %Weighted average assumptions for net periodic benefit
cost development:Discount rate(1)
    
    
    4.25
    %
    
    
    5.00
    %Expected rate of return on plan assets
    
    
    3.80
    %
    
    
    3.75
    %Expected rate of increase in future compensation levels
    
    
    2.50
    %
    
    
    2.50
    %Measurement Date:
    
    December 31, 2006
    
    
    December 31, 2005
 (1)
    
    Represents the weighted average rate for all pension plans.    (dollar amounts inthousands)2007
    
    $
    3,8652008
    
    
    4,0022009
    
    
    4,0912010
    
    
    4,2822011
    
    
    4,6342012 through 2016
    
    $
    27,629
 75




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##### Table of Contents



Note 15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
  Foreign Exchange Risk Management
    Fair Values
  December 31, 2006
    
    
    December 25, 2005Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair Value(dollar amounts in thousands)Long-term debt
(including current
maturities and
excluding capital
leases)(1)
    
    $
    9,067
    
    
    $
    9,067
    
    
    $
    25,421
    
    
    $
    25,421
 
 (1)
    
    The carrying amounts are reported on the balance sheet under the indicated captions.   76




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Note 16. PROVISION FOR RESTRUCTURING
 2005 Restructuring Plan
      Fiscal 2006
 (dollar amounts are in thousands)
 Accrual at
    
    
    
    
    
    
    ChargeBeginning
    
    
    Charged to
    
    
    Reversed to
    
    
    Cash
    
    
    Exchange
    
    
    Accrual atof Year
    
    
    Earnings
    
    
    Earnings
    
    
    Payments
    
    
    Rate Changes
    
    
    12/31/06Severance and
other
employee-related
charges
    
    $
    10,121
    
    
    $
    9,140
    
    
    $
    (1,225
    )
    
    $
    (11,989
    )
    
    $
    739
    
    
    $
    6,786
  Fiscal 2005
 (dollar
amounts are in thousands)
 Accrual at
    
    
    
    
    
    
    ChargeBeginning
    
    
    Charged to
    
    
    Reversed to
    
    
    Cash
    
    
    Exchange
    
    
    Accrual atof Year
    
    
    Earnings
    
    
    Earnings
    
    
    Payments
    
    
    Rate Changes
    
    
    12/25/05Severance and
other
employee-related
charges
    
    $
    
    
    
    $
    16,911
    
    
    $
    (957
    )
    
    $
    (5,357
    )
    
    $
    (476
    )
    
    $
    10,121
 77




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##### Table of Contents



2003 Restructuring Plan
   Note 17. COMMITMENTS AND CONTINGENCIES
   Capital
    
    
    OperatingLeases
    
    
    Leases
    
    
    Total(dollar amounts in thousands)2007
    
    $
    1,059
    
    
    $
    12,917
    
    
    $
    13,9762008
    
    
    469
    
    
    
    8,947
    
    
    
    9,4162009
    
    
    237
    
    
    
    6,493
    
    
    
    6,7302010
    
    
    14
    
    
    
    4,404
    
    
    
    4,4182011
    
    
    
    
    
    
    2,782
    
    
    
    2,782Thereafter
    
    
    
    
    
    
    1,257
    
    
    
    1,257Total minimum lease payments
    
    
    1,779
    
    
    $
    36,800
    
    
    $
    38,579Less: amounts representing interest
    
    
    124Present value of minimum lease payments
    
    $
    1,655
 Contingencies
  Matters related to ID Security Systems Canada Inc. versus Checkpoint Systems, Inc.
  All-Tag Security S.A., et al
  78




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##### Table of Contents



Note 18. CONCENTRATION OF CREDIT RISK
  Note 19. ACQUISITIONS
   79




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##### Table of Contents



Note 20. BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION
  i
    
    Security  includes electronic article surveillance (EAS) systems, access control
systems, closed-circuit television (CCTV) systems, and fire and intrusion systems.ii
    
    Labeling Services  includes service bureau (Check-Net), and radio frequency
identification (RFID) systems.iii
    
    Retail Merchandising  includes hand-held labeling systems (HLS) and retail display
systems (RDS).
   (A) Business Segments
 (dollar amounts in thousands)
 2006
    
    
    2005
    
    
    2004(As Restated)
    
    
    (As Restated)Business segment net revenue:Security
    
    $
    499,835
    
    
    $
    550,440
    
    
    $
    508,227Labeling Services
    
    
    102,525
    
    
    
    76,254
    
    
    
    65,830Retail Merchandising
    
    
    85,415
    
    
    
    91,298
    
    
    
    96,396Total
    
    $
    687,775
    
    
    $
    717,992
    
    
    $
    670,453Business segment gross profit:Security
    
    $
    215,495
    
    
    $
    239,186
    
    
    $
    235,224Labeling Services
    
    
    34,496
    
    
    
    24,021
    
    
    
    22,586Retail Merchandising
    
    
    41,700
    
    
    
    48,323
    
    
    
    51,662Total gross profit
    
    
    291,691
    
    
    
    311,530
    
    
    
    309,472Operating expenses
    
    
    253,608
    (1)
    
    
    270,728
    (2)
    
    
    283,225
    (3)Interest income (expense), net
    
    
    2,751
    
    
    
    (524
    )
    
    
    (5,435
    )Other gain (loss), net
    
    
    1,141
    
    
    
    (151
    )
    
    
    219Earnings from continuing
operations before income taxes
and minority interest
    
    $
    41,975
    
    
    $
    40,127
    
    
    $
    21,031Business segment total assets:Security
    
    $
    540,411
    
    
    $
    491,730Labeling Services
    
    
    102,639
    
    
    
    81,323Retail Merchandising
    
    
    138,141
    
    
    
    131,938Total
    
    $
    781,191
    
    
    $
    704,991
    (4)
 
 (1)
    
    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.(2)
    
    Includes $12.6 million restructuring charge and a $1.4 million impairment charge.(3)
    
    Includes a $3.0 million restructuring charge reversal, a $20.0 million litigation settlement
and a $2.0 million impairment charge.(4)
    
    Fiscal year 2005 excludes assets held for disposal related to discontinued operations. (B) Geographic Information
  80




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United Statesand
    
    
    
    
    
    
    International
    
    
    AsiaPuerto Rico
    
    
    Europe
    
    
    Americas
    
    
    Pacific
    
    
    Total(dollar amounts in thousands)2006Net revenues from unaffiliated customers
    
    $
    237,108
    
    
    $
    340,171
    
    
    $
    31,048
    
    
    $
    79,448
    
    
    $
    687,775Gross profit
    
    
    102,987
    
    
    
    136,534
    
    
    
    12,269
    
    
    
    39,901
    
    
    
    291,691Long-lived assets
    
    $
    42,809
    
    
    $
    215,907
    
    
    $
    5,549
    
    
    $
    28,208
    
    
    $
    292,4732005 (As Restated)Net revenues from unaffiliated customers
    
    $
    270,174
    
    
    $
    346,513
    
    
    $
    29,885
    
    
    $
    71,420
    
    
    $
    717,992Gross profit
    
    
    113,460
    
    
    
    155,799
    
    
    
    9,612
    
    
    
    32,659
    
    
    
    311,530Long-lived assets
    
    $
    44,668
    
    
    $
    197,805
    
    
    $
    5,669
    
    
    $
    26,980
    
    
    $
    275,1222004 (As Restated)Net revenues from unaffiliated customers
    
    $
    233,636
    
    
    $
    335,515
    
    
    $
    31,215
    
    
    $
    70,087
    
    
    $
    670,453Gross profit
    
    $
    112,529
    
    
    $
    155,677
    
    
    $
    11,055
    
    
    $
    30,211
    
    
    $
    309,472
 Note 21. MINORITY INTEREST
    81




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##### Table of Contents



Note 22. QUARTERLY INFORMATION (UNAUDITED)
   Net IncomeSept. 24,
    
    
    June 25,
    
    
    Mar. 26,
    
    
    Sept. 25,
    
    
    June 26,
    
    
    Mar. 27,2006
    
    
    2006
    
    
    2006
    
    
    2005
    
    
    2005
    
    
    2005As previously Reported
    
    $
    12,119
    
    
    $
    5,190
    
    
    $
    2,485
    
    
    $
    14,220
    
    
    $
    9,501
    
    
    $
    3,831Restatement Adjustments:CheckNet® Revenue
Adjustments
    
    
    (135
    )
    
    
    113
    
    
    
    63
    
    
    
    41
    
    
    
    (5
    )
    
    
    (66
    )Japan Revenue Adjustments
    
    
    (50
    )
    
    
    (400
    )
    
    
    (350
    )
    
    
    (115
    )
    
    
    (8
    )
    
    
    (141
    )Other Japan Adjustments
    
    
    47
    
    
    
    (43
    )
    
    
    (244
    )
    
    
    (104
    )
    
    
    (8
    )
    
    
    (29
    )Income Tax Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    486
    
    
    
    (208
    )
    
    
    Other Adjustments
    
    
    (281
    )
    
    
    (241
    )
    
    
    (351
    )
    
    
    (135
    )
    
    
    (52
    )
    
    
    (13
    )As Restated
    
    $
    11,700
    
    
    $
    4,619
    
    
    $
    1,603
    
    
    $
    14,393
    
    
    $
    9,220
    
    
    $
    3,582
 Operating IncomeSept. 24,
    
    
    June 25,
    
    
    Mar. 26,
    
    
    Sept. 25,
    
    
    June 26,
    
    
    Mar. 27,2006
    
    
    2006
    
    
    2006
    
    
    2005
    
    
    2005
    
    
    2005As previously Reported
    
    $
    11,115
    
    
    $
    6,119
    
    
    $
    129
    
    
    $
    16,267
    
    
    $
    10,931
    
    
    $
    2,560Restatement Adjustments:CheckNet® Revenue
Adjustments
    
    
    (192
    )
    
    
    160
    
    
    
    90
    
    
    
    58
    
    
    
    (8
    )
    
    
    (93
    )Japan Revenue Adjustments
    
    
    (101
    )
    
    
    (812
    )
    
    
    (732
    )
    
    
    (247
    )
    
    
    (18
    )
    
    
    (305
    )Other Japan Adjustments
    
    
    88
    
    
    
    (78
    )
    
    
    (442
    )
    
    
    (198
    )
    
    
    (12
    )
    
    
    (49
    )Other Adjustments
    
    
    (356
    )
    
    
    46
    
    
    
    (173
    )
    
    
    (179
    )
    
    
    (88
    )
    
    
    30As Restated
    
    $
    10,554
    
    
    $
    5,435
    
    
    $
    (1,128
    )
    
    $
    15,701
    
    
    $
    10,805
    
    
    $
    2,143
 Net RevenuesSept. 24,
    
    
    June 25,
    
    
    Mar. 26,
    
    
    Sept. 25,
    
    
    June 26,
    
    
    Mar. 27,2006
    
    
    2006
    
    
    2006
    
    
    2005
    
    
    2005
    
    
    2005As previously Reported
    
    $
    167,799
    
    
    $
    165,001
    
    
    $
    142,219
    
    
    $
    185,555
    
    
    $
    185,635
    
    
    $
    156,388Restatement Adjustments:CheckNet® Revenue
Adjustments
    
    
    (312
    )
    
    
    226
    
    
    
    193
    
    
    
    48
    
    
    
    (8
    )
    
    
    (104
    )Japan Revenue Adjustments
    
    
    198
    
    
    
    (966
    )
    
    
    (2,171
    )
    
    
    (770
    )
    
    
    (107
    )
    
    
    (671
    )Other Adjustments
    
    
    (63
    )
    
    
    (398
    )
    
    
    (248
    )
    
    
    (134
    )
    
    
    (212
    )
    
    
    (105
    )As Restated
    
    $
    167,622
    
    
    $
    163,863
    
    
    $
    139,993
    
    
    $
    184,699
    
    
    $
    185,308
    
    
    $
    155,508
 Comparison of restated financial data to financial data as originally reported
  82




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CONSOLIDATED BALANCE SHEETS (unaudited)
 (dollar amounts in thousands)
 Period Ended
    
    
    Period EndedSeptember 24, 2006
    
    
    June 25, 2006As
    
    
    
    
    
    
    AsPreviously
    
    
    As
    
    
    Previously
    
    
    AsReported
    
    
    Restated
    
    
    Reported
    
    
    RestatedASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    121,431
    
    
    $
    121,431
    
    
    $
    116,405
    
    
    $
    116,405Restricted cash
    
    
    2,093
    
    
    
    2,093
    
    
    
    2,057
    
    
    
    2,057Accounts receivable, net of allowance of
$11,176 and $11,670
    
    
    151,868
    
    
    
    148,195
    
    
    
    137,604
    
    
    
    134,365Inventories
    
    
    98,544
    
    
    
    100,084
    
    
    
    92,708
    
    
    
    94,558Other current assets
    
    
    30,730
    
    
    
    30,428
    
    
    
    39,266
    
    
    
    39,241Deferred income taxes
    
    
    11,584
    
    
    
    13,845
    
    
    
    12,948
    
    
    
    15,001Total Current Assets
    
    
    416,250
    
    
    
    416,076
    
    
    
    400,988
    
    
    
    400,100REVENUE EQUIPMENT ON OPERATING LEASE, net
    
    
    5,371
    
    
    
    4,672
    
    
    
    4,822
    
    
    
    4,187PROPERTY, PLANT, AND EQUIPMENT, net
    
    
    72,568
    
    
    
    72,568
    
    
    
    72,336
    
    
    
    72,336GOODWILL
    
    
    176,507
    
    
    
    176,507
    
    
    
    173,169
    
    
    
    173,169OTHER INTANGIBLES, net
    
    
    33,019
    
    
    
    33,019
    
    
    
    33,216
    
    
    
    33,216DEFERRED INCOME TAXES
    
    
    34,296
    
    
    
    34,296
    
    
    
    33,256
    
    
    
    33,256OTHER ASSETS
    
    
    10,077
    
    
    
    10,056
    
    
    
    11,873
    
    
    
    11,853TOTAL ASSETS
    
    $
    748,088
    
    
    $
    747,194
    
    
    $
    729,660
    
    
    $
    728,117LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Short-term borrowings and current portion of
long-term debt
    
    $
    5,270
    
    
    $
    5,848
    
    
    $
    4,378
    
    
    $
    5,671Accounts payable
    
    
    47,885
    
    
    
    47,871
    
    
    
    44,476
    
    
    
    44,647Accrued compensation and related taxes
    
    
    27,904
    
    
    
    27,904
    
    
    
    27,789
    
    
    
    27,789Other accrued expenses
    
    
    29,700
    
    
    
    29,712
    
    
    
    29,389
    
    
    
    29,401Income taxes
    
    
    20,971
    
    
    
    21,442
    
    
    
    25,163
    
    
    
    25,619Unearned revenues
    
    
    19,520
    
    
    
    21,426
    
    
    
    19,653
    
    
    
    21,127Restructuring reserve
    
    
    3,315
    
    
    
    3,315
    
    
    
    3,332
    
    
    
    3,332Other current liabilities
    
    
    17,103
    
    
    
    17,104
    
    
    
    16,567
    
    
    
    16,566Total Current Liabilities
    
    
    171,668
    
    
    
    174,622
    
    
    
    170,747
    
    
    
    172,625LONG-TERM DEBT, LESS CURRENT MATURITIES
    
    
    21,797
    
    
    
    21,797
    
    
    
    26,831
    
    
    
    26,831ACCRUED PENSIONS
    
    
    78,117
    
    
    
    78,117
    
    
    
    76,056
    
    
    
    76,056DEFERRED INCOME TAXES
    
    
    19,908
    
    
    
    19,908
    
    
    
    19,923
    
    
    
    19,923OTHER LONG-TERM LIABILITIES
    
    
    4,139
    
    
    
    4,139
    
    
    
    4,079
    
    
    
    4,079MINORITY INTEREST
    
    
    1,053
    
    
    
    1,044
    
    
    
    1,002
    
    
    
    961COMMITMENTS 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
41,294,984 and 41,265,294
    
    
    4,129
    
    
    
    4,129
    
    
    
    4,126
    
    
    
    4,126Additional capital
    
    
    343,132
    
    
    
    343,132
    
    
    
    340,792
    
    
    
    340,792Retained earnings
    
    
    132,429
    
    
    
    128,658
    
    
    
    120,310
    
    
    
    116,958Common stock in treasury, at cost, 2,035,912
shares and 2,035,912 shares
    
    
    (20,621
    )
    
    
    (20,621
    )
    
    
    (20,621
    )
    
    
    (20,621
    )Accumulated other comprehensive (loss) income
    
    
    (7,663
    )
    
    
    (7,731
    )
    
    
    (13,585
    )
    
    
    (13,613
    )TOTAL STOCKHOLDERS EQUITY
    
    
    451,406
    
    
    
    447,567
    
    
    
    431,022
    
    
    
    427,642TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    748,088
    
    
    $
    747,194
    
    
    $
    729,660
    
    
    $
    728,117
 83




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CONSOLIDATED BALANCE SHEETS (unaudited)
 (dollar amounts in thousands)
 Period EndedMarch 26, 2006AsPreviously
    
    
    AsReported
    
    
    RestatedASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    123,738
    
    
    $
    123,738Restricted cash
    
    
    2,025
    
    
    
    2,025Accounts receivable, net of allowance of $11,323
    
    
    131,736
    
    
    
    129,478Inventories
    
    
    85,722
    
    
    
    87,592Other current assets
    
    
    38,520
    
    
    
    38,915Deferred income taxes
    
    
    12,719
    
    
    
    14,455Assets of discontinued operations held for sale
    
    
    
    
    
    
    Total Current Assets
    
    
    394,460
    
    
    
    396,203REVENUE EQUIPMENT ON OPERATING LEASE, net
    
    
    4,732
    
    
    
    4,175PROPERTY, PLANT, AND EQUIPMENT, net
    
    
    71,571
    
    
    
    71,571GOODWILL
    
    
    167,405
    
    
    
    167,405OTHER INTANGIBLES, net
    
    
    32,915
    
    
    
    32,915DEFERRED INCOME TAXES
    
    
    32,246
    
    
    
    32,246OTHER ASSETS
    
    
    12,797
    
    
    
    12,779TOTAL ASSETS
    
    $
    716,126
    
    
    $
    717,294LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Short-term borrowings and current portion of long-term debt
    
    $
    4,768
    
    
    $
    6,177Accounts payable
    
    
    42,245
    
    
    
    42,998Accrued compensation and related taxes
    
    
    28,402
    
    
    
    28,402Other accrued expenses
    
    
    26,417
    
    
    
    26,424Income taxes
    
    
    23,736
    
    
    
    23,957Unearned revenues
    
    
    19,095
    
    
    
    20,650Restructuring reserve
    
    
    7,012
    
    
    
    7,012Accrued pensions  current
    
    
    
    
    
    
    Other current liabilities
    
    
    18,527
    
    
    
    18,528Liabilities of discontinued operations held for sale
    
    
    
    
    
    
    Total Current Liabilities
    
    
    170,202
    
    
    
    174,148LONG-TERM DEBT, LESS CURRENT MATURITIES
    
    
    35,331
    
    
    
    35,331ACCRUED PENSIONS
    
    
    72,768
    
    
    
    72,768OTHER LONG-TERM LIABILITIES
    
    
    4,076
    
    
    
    4,076DEFERRED INCOME TAXES
    
    
    19,865
    
    
    
    19,865MINORITY INTEREST
    
    
    965
    
    
    
    975COMMITMENTS 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 41,162,607
    
    
    4,116
    
    
    
    4,116Additional capital
    
    
    337,114
    
    
    
    337,114Retained earnings
    
    
    115,120
    
    
    
    112,339Common stock in treasury, at cost, 2,035,912 shares
    
    
    (20,621
    )
    
    
    (20,621
    )Accumulated other comprehensive (loss) income
    
    
    (22,810
    )
    
    
    (22,817
    )TOTAL STOCKHOLDERS EQUITY
    
    
    412,919
    
    
    
    410,131TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    716,126
    
    
    $
    717,294
 84




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##### Table of Contents



CONSOLIDATED BALANCE SHEETS (unaudited)
 (dollar amounts in thousands)
 Period Ended
    
    
    Period EndedSeptember 25, 2005
    
    
    June 26, 2005As
    
    
    
    
    
    
    AsPreviously
    
    
    As
    
    
    Previously
    
    
    AsReported
    
    
    Restated
    
    
    Reported
    
    
    RestatedASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    75,259
    
    
    $
    75,259
    
    
    $
    73,797
    
    
    $
    73,063Accounts receivable, net of allowance of $11,814
and $12,022
    
    
    151,964
    
    
    
    152,245
    
    
    
    162,207
    
    
    
    162,480Inventories
    
    
    84,561
    
    
    
    85,556
    
    
    
    96,784
    
    
    
    97,540Other current assets
    
    
    26,002
    
    
    
    26,236
    
    
    
    29,614
    
    
    
    29,688Deferred income taxes
    
    
    17,812
    
    
    
    20,468
    
    
    
    18,296
    
    
    
    20,243Assets of discontinued operations held for sale
    
    
    36,920
    
    
    
    36,920
    
    
    
    
    
    
    
    Total Current Assets
    
    
    392,518
    
    
    
    396,684
    
    
    
    380,698
    
    
    
    383,014REVENUE EQUIPMENT ON OPERATING LEASE, net
    
    
    5,141
    
    
    
    4,668
    
    
    
    4,718
    
    
    
    4,267PROPERTY, PLANT, AND EQUIPMENT, net
    
    
    76,586
    
    
    
    76,586
    
    
    
    84,681
    
    
    
    84,681GOODWILL
    
    
    167,684
    
    
    
    167,684
    
    
    
    170,419
    
    
    
    170,419OTHER INTANGIBLES, net
    
    
    34,702
    
    
    
    34,702
    
    
    
    36,481
    
    
    
    36,481DEFERRED INCOME TAXES
    
    
    19,993
    
    
    
    19,993
    
    
    
    20,435
    
    
    
    20,435OTHER ASSETS
    
    
    15,643
    
    
    
    15,624
    
    
    
    15,548
    
    
    
    15,532TOTAL ASSETS
    
    $
    712,267
    
    
    $
    715,941
    
    
    $
    712,980
    
    
    $
    714,829LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Short-term borrowings and current portion of
long-term debt
    
    $
    4,566
    
    
    $
    6,681
    
    
    $
    3,759
    
    
    $
    4,495Accounts payable
    
    
    41,255
    
    
    
    41,352
    
    
    
    52,136
    
    
    
    51,979Accrued compensation and related taxes
    
    
    30,251
    
    
    
    30,251
    
    
    
    29,621
    
    
    
    29,621Other accrued expenses
    
    
    32,117
    
    
    
    32,117
    
    
    
    33,288
    
    
    
    33,288Income taxes
    
    
    17,546
    
    
    
    17,521
    
    
    
    16,529
    
    
    
    16,524Unearned revenues
    
    
    21,857
    
    
    
    22,651
    
    
    
    25,131
    
    
    
    25,897Restructuring reserve
    
    
    11,641
    
    
    
    11,641
    
    
    
    8,650
    
    
    
    8,650Other current liabilities
    
    
    14,581
    
    
    
    14,581
    
    
    
    13,604
    
    
    
    13,604Liabilities of discontinued operations held for sale
    
    
    11,400
    
    
    
    11,400
    
    
    
    
    
    
    
    Total Current Liabilities
    
    
    185,214
    
    
    
    188,195
    
    
    
    182,718
    
    
    
    184,058LONG-TERM DEBT, LESS CURRENT MATURITIES
    
    
    48,981
    
    
    
    48,981
    
    
    
    63,756
    
    
    
    63,756ACCRUED PENSIONS
    
    
    66,449
    
    
    
    66,449
    
    
    
    70,230
    
    
    
    70,230OTHER LONG-TERM LIABILITIES
    
    
    4,292
    
    
    
    4,292
    
    
    
    4,195
    
    
    
    4,195DEFERRED INCOME TAXES
    
    
    17,677
    
    
    
    17,677
    
    
    
    21,846
    
    
    
    21,846MINORITY INTEREST
    
    
    1,166
    
    
    
    1,286
    
    
    
    1,145
    
    
    
    1,263COMMITMENTS 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 40,430,797 and
39,940,022
    
    
    4,043
    
    
    
    4,043
    
    
    
    3,994
    
    
    
    3,994Additional capital
    
    
    320,904
    
    
    
    320,904
    
    
    
    313,448
    
    
    
    313,448Retained earnings
    
    
    100,782
    
    
    
    101,410
    
    
    
    86,562
    
    
    
    87,017Common stock in treasury, at cost, 2,035,912 shares
and 2,041,519 shares
    
    
    (20,621
    )
    
    
    (20,621
    )
    
    
    (20,678
    )
    
    
    (20,678
    )Accumulated other comprehensive (loss) income
    
    
    (16,620
    )
    
    
    (16,675
    )
    
    
    (14,236
    )
    
    
    (14,300
    )TOTAL STOCKHOLDERS EQUITY
    
    
    388,488
    
    
    
    389,061
    
    
    
    369,090
    
    
    
    369,481TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    712,267
    
    
    $
    715,941
    
    
    $
    712,980
    
    
    $
    714,829
 85




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##### Table of Contents



CONSOLIDATED BALANCE SHEETS (unaudited)
 (dollar amounts in thousands)
 Period EndedMarch 27, 2005AsPreviously
    
    
    AsReported
    
    
    RestatedASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    76,253
    
    
    $
    75,407Accounts receivable, net of allowance of $12,007
    
    
    155,084
    
    
    
    155,087Inventories
    
    
    96,758
    
    
    
    97,462Other current assets
    
    
    30,178
    
    
    
    30,257Deferred income taxes
    
    
    17,194
    
    
    
    19,320Total Current Assets
    
    
    375,467
    
    
    
    377,533REVENUE EQUIPMENT ON OPERATING LEASE, net
    
    
    4,640
    
    
    
    4,203PROPERTY, PLANT, AND EQUIPMENT, net
    
    
    88,541
    
    
    
    88,541GOODWILL
    
    
    184,221
    
    
    
    184,221OTHER INTANGIBLES, net
    
    
    37,681
    
    
    
    37,681DEFERRED INCOME TAXES
    
    
    19,160
    
    
    
    19,160OTHER ASSETS
    
    
    18,516
    
    
    
    18,494TOTAL ASSETS
    
    $
    728,226
    
    
    $
    729,833LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Short-term borrowings and current portion of
long-term debt
    
    $
    5,108
    
    
    $
    5,393Accounts payable
    
    
    46,554
    
    
    
    46,304Accrued compensation and related taxes
    
    
    35,029
    
    
    
    35,029Other accrued expenses
    
    
    26,143
    
    
    
    26,143Income taxes
    
    
    17,650
    
    
    
    17,666Unearned revenues
    
    
    29,007
    
    
    
    29,802Restructuring reserve
    
    
    3,539
    
    
    
    3,539Other current liabilities
    
    
    18,600
    
    
    
    18,600Total Current Liabilities
    
    
    181,630
    
    
    
    182,476LONG-TERM DEBT, LESS CURRENT MATURITIES
    
    
    71,134
    
    
    
    71,134ACCRUED PENSIONS
    
    
    74,749
    
    
    
    74,749OTHER LONG-TERM LIABILITIES
    
    
    6,168
    
    
    
    6,168DEFERRED INCOME TAXES
    
    
    20,427
    
    
    
    20,427MINORITY INTEREST
    
    
    1,134
    
    
    
    1,236COMMITMENTS 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 39,875,379
    
    
    3,987
    
    
    
    3,987Additional capital
    
    
    310,061
    
    
    
    310,061Retained earnings
    
    
    77,061
    
    
    
    77,797Common stock in treasury, at cost, 2,041,519 shares
    
    
    (20,678
    )
    
    
    (20,678
    )Accumulated other comprehensive (loss) income
    
    
    2,553
    
    
    
    2,476TOTAL STOCKHOLDERS EQUITY
    
    
    372,984
    
    
    
    373,643TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    728,226
    
    
    $
    729,833
 86




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##### Table of Contents



CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
 (dollar amounts in thousands, except per share data)
 13 Weeks EndedSeptember 24, 2006
    
    
    June 25, 2006As Previously
    
    
    As
    
    
    As Previously
    
    
    AsReported
    
    
    Restated
    
    
    Reported
    
    
    RestatedNet revenues
    
    $
    167,799
    
    
    $
    167,622
    
    
    $
    165,001
    
    
    $
    163,863Cost of revenues
    
    
    95,834
    
    
    
    96,026
    
    
    
    94,927
    
    
    
    94,217Gross profit
    
    
    71,965
    
    
    
    71,596
    
    
    
    70,074
    
    
    
    69,646Selling, general, and administrative expenses
    
    
    54,373
    
    
    
    54,373
    
    
    
    56,351
    
    
    
    56,351Research and development
    
    
    4,865
    
    
    
    5,057
    
    
    
    4,744
    
    
    
    5,000Restructuring expense
    
    
    1,612
    
    
    
    1,612
    
    
    
    609
    
    
    
    609Litigation settlement
    
    
    
    
    
    
    
    
    
    
    2,251
    
    
    
    2,251Operating income
    
    
    11,115
    
    
    
    10,554
    
    
    
    6,119
    
    
    
    5,435Interest income
    
    
    1,264
    
    
    
    1,264
    
    
    
    1,149
    
    
    
    1,149Interest expense
    
    
    447
    
    
    
    449
    
    
    
    552
    
    
    
    555Other gain, net
    
    
    300
    
    
    
    300
    
    
    
    44
    
    
    
    44Earnings from continuing operations before
income taxes and minority interest
    
    
    12,232
    
    
    
    11,669
    
    
    
    6,760
    
    
    
    6,073Income taxes
    
    
    49
    
    
    
    (127
    )
    
    
    1,482
    
    
    
    1,417Minority interest
    
    
    52
    
    
    
    84
    
    
    
    33
    
    
    
    (18
    )Net earnings from continuing operations
    
    
    12,131
    
    
    
    11,712
    
    
    
    5,245
    
    
    
    4,674Loss from discontinued operations, net of tax
    
    
    (12
    )
    
    
    (12
    )
    
    
    (55
    )
    
    
    (55
    )Net earnings
    
    $
    12,119
    
    
    $
    11,700
    
    
    $
    5,190
    
    
    $
    4,619Basic Earnings per Share:Earnings from continuing operations
    
    $
    .31
    
    
    $
    .30
    
    
    $
    .13
    
    
    $
    .12Earnings from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Basic Earnings per Share
    
    $
    .31
    
    
    $
    .30
    
    
    $
    .13
    
    
    $
    .12Diluted Earnings per Share:Earnings from continuing operations
    
    $
    .30
    
    
    $
    .29
    
    
    $
    .13
    
    
    $
    .11Earnings from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted Earnings per Share
    
    $
    .30
    
    
    $
    .29
    
    
    $
    .13
    
    
    $
    .11
 87




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##### Table of Contents



CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
 (dollar amounts in thousands, except per share data)
 13 Weeks EndedMarch 25, 2006As Previously
    
    
    AsReported
    
    
    RestatedNet revenues
    
    $
    142,219
    
    
    $
    139,993Cost of revenues
    
    
    84,963
    
    
    
    83,635Gross profit
    
    
    57,256
    
    
    
    56,358Selling, general, and administrative expenses
    
    
    52,871
    
    
    
    52,871Research and development
    
    
    4,009
    
    
    
    4,368Restructuring expense
    
    
    247
    
    
    
    247Operating income
    
    
    129
    
    
    
    (1,128
    )Interest income
    
    
    1,125
    
    
    
    1,125Interest expense
    
    
    403
    
    
    
    414Other gain, net
    
    
    372
    
    
    
    372Earnings from continuing operations before income taxes and minority interest
    
    
    1,223
    
    
    
    (45
    )Income taxes
    
    
    289
    
    
    
    (24
    )Minority interest
    
    
    22
    
    
    
    (51
    )Net earnings from continuing operations
    
    
    912
    
    
    
    30Earnings from discontinued operations, net of tax
    
    
    1,573
    
    
    
    1,573Net earnings
    
    $
    2,485
    
    
    $
    1,603Basic Earnings per Share:Earnings from continuing operations
    
    $
    .02
    
    
    $
    Earnings from discontinued operations, net of tax
    
    
    .04
    
    
    
    .04Basic Earnings per Share
    
    $
    .06
    
    
    $
    .04Diluted Earnings per Share:Earnings from continuing operations
    
    $
    .02
    
    
    $
    Earnings from discontinued operations, net of tax
    
    
    .04
    
    
    
    .04Diluted Earnings per Share
    
    $
    .06
    
    
    $
    .04
 88




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##### Table of Contents



CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
 (dollar amounts in thousands, except per share data)
 13 Weeks EndedDecember 25, 2005
    
    
    September 25, 2005As Previously
    
    
    As
    
    
    As Previously
    
    
    AsReported
    
    
    Restated
    
    
    Reported
    
    
    RestatedNet revenues
    
    $
    193,440
    
    
    $
    192,477
    
    
    $
    185,555
    
    
    $
    184,699Cost of revenues
    
    
    110,168
    
    
    
    110,133
    
    
    
    105,529
    
    
    
    105,109Gross profit
    
    
    83,272
    
    
    
    82,344
    
    
    
    80,026
    
    
    
    79,590Selling, general, and administrative expenses
    
    
    60,971
    
    
    
    60,971
    
    
    
    55,811
    
    
    
    55,811Research and development
    
    
    4,838
    
    
    
    5,026
    
    
    
    4,450
    
    
    
    4,580Asset impairment
    
    
    1,396
    
    
    
    1,396
    
    
    
    
    
    
    
    Restructuring expense
    
    
    2,798
    
    
    
    2,798
    
    
    
    3,498
    
    
    
    3,498Operating income
    
    
    13,269
    
    
    
    12,153
    
    
    
    16,267
    
    
    
    15,701Interest income
    
    
    687
    
    
    
    687
    
    
    
    582
    
    
    
    582Interest expense
    
    
    246
    
    
    
    254
    
    
    
    717
    
    
    
    724Other (loss) gain, net
    
    
    (349
    )
    
    
    (349
    )
    
    
    67
    
    
    
    67Earnings from continuing operations before
income taxes and minority interest
    
    
    13,361
    
    
    
    12,237
    
    
    
    16,199
    
    
    
    15,626Income taxes
    
    
    4,276
    
    
    
    5,723
    
    
    
    3,260
    
    
    
    2,515Minority interest
    
    
    15
    
    
    
    (29
    )
    
    
    39
    
    
    
    38Earnings from continuing operations
    
    
    9,070
    
    
    
    6,543
    
    
    
    12,900
    
    
    
    13,073Earnings from discontinued operations, net of tax
    
    
    2,783
    
    
    
    2,783
    
    
    
    1,320
    
    
    
    1,320Net earnings
    
    $
    11,853
    
    
    $
    9,326
    
    
    $
    14,220
    
    
    $
    14,393Basic Earnings per Share:Earnings from continuing operations
    
    $
    .24
    
    
    $
    .17
    
    
    $
    .34
    
    
    $
    .34Earnings from discontinued operations, net of tax
    
    
    .07
    
    
    
    .07
    
    
    
    .03
    
    
    
    .04Basic Earnings per Share
    
    $
    .31
    
    
    $
    .24
    
    
    $
    .37
    
    
    $
    .38Diluted Earnings per Share:Earnings from continuing operations
    
    $
    .23
    
    
    $
    .16
    
    
    $
    .33
    
    
    $
    .33Earnings from discontinued operations, net of tax
    
    
    .07
    
    
    
    .07
    
    
    
    .03
    
    
    
    .04Diluted Earnings per Share
    
    $
    .30
    
    
    $
    .23
    
    
    $
    .36
    
    
    $
    .37
 89




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##### Table of Contents



CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
 (dollar amounts in thousands, except per share data)
 13 Weeks EndedJune 26, 2005
    
    
    March 27, 2005As Previously
    
    
    As
    
    
    As Previously
    
    
    AsReported
    
    
    Restated
    
    
    Reported
    
    
    RestatedNet revenues
    
    $
    185,635
    
    
    $
    185,308
    
    
    $
    156,388
    
    
    $
    155,508Cost of revenues
    
    
    103,621
    
    
    
    103,420
    
    
    
    88,263
    
    
    
    87,800Gross profit
    
    
    82,014
    
    
    
    81,888
    
    
    
    68,125
    
    
    
    67,708Selling, general, and administrative expenses
    
    
    60,086
    
    
    
    60,086
    
    
    
    60,786
    
    
    
    60,786Research and development
    
    
    4,723
    
    
    
    4,723
    
    
    
    4,779
    
    
    
    4,779Restructuring expense
    
    
    6,274
    
    
    
    6,274
    
    
    
    
    
    
    
    Operating income
    
    
    10,931
    
    
    
    10,805
    
    
    
    2,560
    
    
    
    2,143Interest income
    
    
    483
    
    
    
    483
    
    
    
    586
    
    
    
    586Interest expense
    
    
    908
    
    
    
    910
    
    
    
    973
    
    
    
    974Other (loss) gain, net
    
    
    (47
    )
    
    
    (47
    )
    
    
    178
    
    
    
    178Earnings from continuing operations before
income taxes and minority interest
    
    
    10,459
    
    
    
    10,331
    
    
    
    2,351
    
    
    
    1,933Income taxes
    
    
    2,895
    
    
    
    3,033
    
    
    
    539
    
    
    
    390Minority interest
    
    
    26
    
    
    
    41
    
    
    
    23
    
    
    
    3Net earnings from continuing operations
    
    
    7,538
    
    
    
    7,257
    
    
    
    1,789
    
    
    
    1,540Earnings from discontinued operations, net of tax
    
    
    1,963
    
    
    
    1,963
    
    
    
    2,042
    
    
    
    2,042Net earnings
    
    $
    9,501
    
    
    $
    9,220
    
    
    $
    3,831
    
    
    $
    3,582Basic Earnings per Share:Earnings from continuing operations
    
    $
    .20
    
    
    $
    .19
    
    
    $
    .05
    
    
    $
    .04Earnings from discontinued operations, net of tax
    
    
    .05
    
    
    
    .05
    
    
    
    .05
    
    
    
    .05Basic Earnings per Share
    
    $
    .25
    
    
    $
    .24
    
    
    $
    .10
    
    
    $
    .09Diluted Earnings per Share:Earnings from continuing operations
    
    $
    .20
    
    
    $
    .19
    
    
    $
    .05
    
    
    $
    .04Earnings from discontinued operations, net of tax
    
    
    .05
    
    
    
    .05
    
    
    
    .05
    
    
    
    .05Diluted Earnings per Share
    
    $
    .25
    
    
    $
    .24
    
    
    $
    .10
    
    
    $
    .09
 90




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##### Table of Contents



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY  FOR THREE, SIX AND NINE MONTHS IN 2006 (unaudited)
 (dollar amounts in thousands)
 Accumulated OtherRetained Earnings
    
    
    Comprehensive Income (Loss)
    
    
    Total Stockholders EquityAs
    
    
    
    
    
    
    As
    
    
    
    
    
    
    AsPreviously
    
    
    As
    
    
    Previously
    
    
    As
    
    
    Previously
    
    
    AsReported
    
    
    Restated
    
    
    Reported
    
    
    Restated
    
    
    Reported
    
    
    RestatedBalance, Dec. 25, 2005
    
    $
    112,635
    
    
    $
    110,736
    
    
    $
    (24,715
    )
    
    $
    (24,718
    )
    
    $
    398,322
    
    
    $
    396,420Net earnings
    
    
    2,485
    
    
    
    1,603
    
    
    
    
    
    
    
    
    
    
    
    2,485
    
    
    
    1,603Exercise of stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,489
    
    
    
    6,489Tax benefit on stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,069
    
    
    
    1,069Stock-based compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,472
    
    
    
    1,472Deferred compensation plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,177
    
    
    
    1,177Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    1,905
    
    
    
    1,901
    
    
    
    1,905
    
    
    
    1,901Balance, March 26, 2006
    
    $
    115,120
    
    
    $
    112,339
    
    
    $
    (22,810
    )
    
    $
    (22,817
    )
    
    $
    412,919
    
    
    $
    410,131Balance, Dec. 25, 2005
    
    $
    112,635
    
    
    $
    110,736
    
    
    $
    (24,715
    )
    
    $
    (24,718
    )
    
    $
    398,322
    
    
    $
    396,420Net earnings
    
    
    7,675
    
    
    
    6,222
    
    
    
    
    
    
    
    
    
    
    
    7,675
    
    
    
    6,222Exercise of stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,986
    
    
    
    7,986Tax benefit on stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,412
    
    
    
    1,412Stock-based compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,890
    
    
    
    2,890Deferred
compensation plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,607
    
    
    
    1,607Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    11,130
    
    
    
    11,105
    
    
    
    11,130
    
    
    
    11,105Balance, June 25, 2006
    
    $
    120,310
    
    
    $
    116,958
    
    
    $
    (13,585
    )
    
    $
    (13,613
    )
    
    $
    431,022
    
    
    $
    427,642Balance, Dec. 25, 2005
    
    $
    112,635
    
    
    $
    110,736
    
    
    $
    (24,715
    )
    
    $
    (24,718
    )
    
    $
    398,322
    
    
    $
    396,420Net earnings
    
    
    19,794
    
    
    
    17,922
    
    
    
    
    
    
    
    
    
    
    
    19,794
    
    
    
    17,922Exercise of stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,397
    
    
    
    8,397Tax benefit on stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,460
    
    
    
    1,460Stock-based compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,577
    
    
    
    4,577Deferred compensation plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,804
    
    
    
    1,804Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    17,052
    
    
    
    16,987
    
    
    
    17,052
    
    
    
    16,987Balance, September 24, 2006
    
    $
    132,429
    
    
    $
    128,658
    
    
    $
    (7,663
    )
    
    $
    (7,731
    )
    
    $
    451,406
    
    
    $
    447,567
 91




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##### Table of Contents



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY  FOR THREE, SIX, AND NINE MONTHS IN 2005 (unaudited)
 (dollar amounts in thousands)
 Accumulated OtherRetained Earnings
    
    
    Comprehensive Income (Loss)
    
    
    Total Stockholders EquityAs
    
    
    
    
    
    
    As
    
    
    
    
    
    
    AsPreviously
    
    
    As
    
    
    Previously
    
    
    As
    
    
    Previously
    
    
    AsReported
    
    
    Restated
    
    
    Reported
    
    
    Restated
    
    
    Reported
    
    
    RestatedBalance, Dec. 26, 2004
    
    $
    73,230
    
    
    $
    74,215
    
    
    $
    12,724
    
    
    $
    12,621
    
    
    $
    378,763
    
    
    $
    379,645Net earnings
    
    
    3,831
    
    
    
    3,582
    
    
    
    
    
    
    
    
    
    
    
    3,831
    
    
    
    3,582Proceeds from the exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    364
    
    
    
    364Tax benefit related to
stock option
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87
    
    
    
    87Non-employee stock
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    110Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    (10,171
    )
    
    
    (10,145
    )
    
    
    (10,171
    )
    
    
    (10,145
    )Balance, March 27, 2005
    
    $
    77,061
    
    
    $
    77,797
    
    
    $
    2,553
    
    
    $
    2,476
    
    
    $
    372,984
    
    
    $
    373,643Balance, Dec. 26, 2004
    
    $
    73,230
    
    
    $
    74,215
    
    
    $
    12,724
    
    
    $
    12,621
    
    
    $
    378,763
    
    
    $
    379,645Net earnings
    
    
    13,332
    
    
    
    12,802
    
    
    
    
    
    
    
    
    
    
    
    13,332
    
    
    
    12,802Proceeds from the exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,088
    
    
    
    1,088Tax benefit related to
stock option
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    208
    
    
    
    208Non-employee stock
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    177
    
    
    
    177Deferred compensation plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,482
    
    
    
    2,482Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    (26,960
    )
    
    
    (26,921
    )
    
    
    (26,960
    )
    
    
    (26,921
    )Balance, June 26, 2005
    
    $
    86,562
    
    
    $
    87,017
    
    
    $
    (14,236
    )
    
    $
    (14,300
    )
    
    $
    369,090
    
    
    $
    369,481Balance, Dec. 26, 2004
    
    $
    73,230
    
    
    $
    74,215
    
    
    $
    12,724
    
    
    $
    12,621
    
    
    $
    378,763
    
    
    $
    379,645Net earnings
    
    
    27,552
    
    
    
    27,195
    
    
    
    
    
    
    
    
    
    
    
    27,552
    
    
    
    27,195Proceeds from the exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,887
    
    
    
    6,887Tax benefit related to
stock option
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,312
    
    
    
    1,312Non-employee stock
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    284
    
    
    
    284Deferred compensation plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,034
    
    
    
    3,034Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    (29,344
    )
    
    
    (29,296
    )
    
    
    (29,344
    )
    
    
    (29,296
    )Balance, September 25, 2005
    
    $
    100,782
    
    
    $
    101,410
    
    
    $
    (16,620
    )
    
    $
    (16,675
    )
    
    $
    388,488
    
    
    $
    389,061
 92




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##### Table of Contents



CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(unaudited)
 (dollar amounts in thousands)
 13 Weeks EndedSeptember 24, 2006
    
    
    June 25, 2006As Previously
    
    
    As
    
    
    As Previously
    
    
    AsReported
    
    
    Restated
    
    
    Reported
    
    
    RestatedNet earnings
    
    $
    12,119
    
    
    $
    11,700
    
    
    $
    5,190
    
    
    $
    4,619Foreign currency translation adjustment
    
    
    5,922
    
    
    
    5,882
    
    
    
    9,225
    
    
    
    9,204Comprehensive income
    
    $
    18,041
    
    
    $
    17,522
    
    
    $
    14,415
    
    
    $
    13,823
 13 Weeks EndedMarch 26, 2006As Previously
    
    
    AsReported
    
    
    RestatedNet earnings
    
    $
    2,485
    
    
    $
    1,603Foreign currency translation adjustment
    
    
    1,905
    
    
    
    1,901Comprehensive income
    
    $
    4,390
    
    
    $
    3,504
 93




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##### Table of Contents



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 (unaudited)
 (dollar amounts in thousands)
 13 Weeks EndedSeptember 25, 2005
    
    
    June 26, 2005As Previously
    
    
    As
    
    
    As Previously
    
    
    AsReported
    
    
    Restated
    
    
    Reported
    
    
    RestatedNet earnings
    
    $
    14,220
    
    
    $
    14,393
    
    
    $
    9,501
    
    
    $
    9,220Foreign currency translation adjustment
    
    
    (2,385
    )
    
    
    (2,375
    )
    
    
    (16,789
    )
    
    
    (16,776
    )Comprehensive income (loss)
    
    $
    11,835
    
    
    $
    12,018
    
    
    $
    (7,288
    )
    
    $
    (7,556
    )
 13 Weeks EndedMarch 27, 2005As Previously
    
    
    AsReported
    
    
    RestatedNet earnings
    
    $
    3,831
    
    
    $
    3,582Foreign currency translation adjustment
    
    
    (10,171
    )
    
    
    (10,145
    )Comprehensive loss
    
    $
    (6,340
    )
    
    $
    (6,563
    )
 94




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
 (dollar amounts in thousands)
 Nine Months Ended
    
    
    Six Months EndedSeptember 24, 2006
    
    
    June 25, 2006As Previously
    
    
    As
    
    
    As Previously
    
    
    AsReported
    
    
    Restated
    
    
    Reported
    
    
    RestatedCash flows from operating activities:Net earnings
    
    $
    19,794
    
    
    $
    17,922
    
    
    $
    7,675
    
    
    $
    6,222Adjustments to reconcile net earnings to net cash
provided by operating activities:Depreciation and amortization
    
    
    14,329
    
    
    
    14,183
    
    
    
    9,783
    
    
    
    9,692Deferred taxes
    
    
    826
    
    
    
    (199
    )
    
    
    
    
    
    
    (833
    )Stock-based compensation
    
    
    4,577
    
    
    
    4,577
    
    
    
    2,890
    
    
    
    2,890Provision for losses on accounts receivable
    
    
    1,599
    
    
    
    1,599
    
    
    
    1,335
    
    
    
    1,335Excess tax benefit on stock compensation
    
    
    (1,313
    )
    
    
    (1,313
    )
    
    
    (1,275
    )
    
    
    (1,275
    )Gain on sale of discontinued operations
    
    
    (1,299
    )
    
    
    (1,299
    )
    
    
    (1,299
    )
    
    
    (1,299
    )Loss on disposal of fixed assets
    
    
    4
    
    
    
    4
    
    
    
    4
    
    
    
    4(Increase) decrease in current assets, net of the
effects of acquired companies:Accounts receivable
    
    
    (4,905
    )
    
    
    (594
    )
    
    
    6,621
    
    
    
    10,499Inventories
    
    
    (18,096
    )
    
    
    (18,101
    )
    
    
    (12,632
    )
    
    
    (13,058
    )Other current assets
    
    
    10,369
    
    
    
    11,068
    
    
    
    343
    
    
    
    766Increase (decrease) in current liabilities, net of
the effects of acquired companies:Accounts payable
    
    
    (15,010
    )
    
    
    (15,526
    )
    
    
    (17,823
    )
    
    
    (18,148
    )Income taxes
    
    
    (5,846
    )
    
    
    (5,375
    )
    
    
    (1,556
    )
    
    
    (1,100
    )Unearned revenues
    
    
    (3,752
    )
    
    
    (3,539
    )
    
    
    (3,252
    )
    
    
    (3,438
    )Restructuring reserve
    
    
    (8,887
    )
    
    
    (8,887
    )
    
    
    (8,752
    )
    
    
    (8,752
    )Other current and accrued liabilities
    
    
    (9,189
    )
    
    
    (9,269
    )
    
    
    (9,650
    )
    
    
    (9,761
    )Net cash used in operating activities
    
    
    (16,799
    )
    
    
    (14,749
    )
    
    
    (27,588
    )
    
    
    (26,256
    )Cash flows from investing activities:Acquisition of property, plant, and equipment
    
    
    (8,311
    )
    
    
    (8,311
    )
    
    
    (5,420
    )
    
    
    (5,420
    )Proceeds from the sales of discontinued operations
    
    
    31,859
    
    
    
    31,859
    
    
    
    32,058
    
    
    
    32,058Other investing activities
    
    
    174
    
    
    
    174
    
    
    
    54
    
    
    
    54Net cash provided by investing activities
    
    
    23,722
    
    
    
    23,722
    
    
    
    26,692
    
    
    
    26,692Cash flows from financing activities:Proceeds from stock issuances
    
    
    8,397
    
    
    
    8,397
    
    
    
    7,986
    
    
    
    7,986Excess tax benefit on stock compensation
    
    
    1,313
    
    
    
    1,313
    
    
    
    1,275
    
    
    
    1,275Net change in short-term debt
    
    
    3,430
    
    
    
    1,380
    
    
    
    2,541
    
    
    
    1,208Increase in overdraft borrowings
    
    
    
    
    
    
    
    
    
    
    397
    
    
    
    397Repayment of long-term debt
    
    
    (15,281
    )
    
    
    (15,281
    )
    
    
    (9,917
    )
    
    
    (9,916
    )Net cash (used in) provided by financing activities
    
    
    (2,141
    )
    
    
    (4,191
    )
    
    
    2,282
    
    
    
    950Effect of foreign currency rate fluctuations on
cash and cash equivalents
    
    
    3,426
    
    
    
    3,426
    
    
    
    1,796
    
    
    
    1,796Net increase in cash and cash equivalents
    
    
    8,208
    
    
    
    8,208
    
    
    
    3,182
    
    
    
    3,182Cash and cash equivalents:Beginning of year
    
    
    113,223
    
    
    
    113,223
    
    
    
    113,223
    
    
    
    113,223End of year
    
    $
    121,431
    
    
    $
    121,431
    
    
    $
    116,405
    
    
    $
    116,405
 95




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
 (dollar amounts in thousands)
 Three Months EndedMarch 26, 2006As Previously
    
    
    AsReported
    
    
    RestatedCash flows from operating activities:Net earnings (loss)
    
    $
    2,485
    
    
    $
    1,603Adjustments to reconcile net earnings (loss) to net cash provided by operating
activities:Revenue equipment under operating lease
    
    
    
    
    
    
    Depreciation and amortization
    
    
    4,642
    
    
    
    4,597Deferred taxes
    
    
    
    
    
    
    (534
    )Stock-based compensation
    
    
    1,472
    
    
    
    1,472Provision for losses on accounts receivable
    
    
    612
    
    
    
    612Excess tax benefit on stock compensation
    
    
    (969
    )
    
    
    (969
    )Gain on sale of discontinued operations
    
    
    (1,299
    )
    
    
    (1,299
    )Gain on disposal of fixed assets
    
    
    (4
    )
    
    
    (4
    )(Increase) decrease in current assets, net of the effects of acquired companies:Accounts receivable
    
    
    8,700
    
    
    
    11,577Inventories
    
    
    (6,370
    )
    
    
    (6,963
    )Other current assets
    
    
    (153
    )
    
    
    (148
    )Increase (decrease) in current liabilities, net of the effects of acquired companies:Accounts payable
    
    
    (19,002
    )
    
    
    (18,731
    )Income taxes
    
    
    (2,504
    )
    
    
    (2,283
    )Unearned revenues
    
    
    (3,175
    )
    
    
    (3,237
    )Restructuring reserve
    
    
    (4,848
    )
    
    
    (4,848
    )Other current and accrued liabilities
    
    
    (11,305
    )
    
    
    (11,371
    )Net cash used in operating activities
    
    
    (31,718
    )
    
    
    (30,526
    )Cash flows from investing activities:Acquisition of property, plant, and equipment
    
    
    (2,189
    )
    
    
    (2,189
    )Acquisitions of businesses, net of cash acquired
    
    
    (31
    )
    
    
    (31
    )Proceeds from sale of discontinued operations
    
    
    33,466
    
    
    
    33,466Net cash provided by investing activities
    
    
    31,246
    
    
    
    31,246Cash flows from financing activities:Proceeds from stock issuances
    
    
    6,489
    
    
    
    6,489Excess tax benefit on stock compensation
    
    
    969
    
    
    
    969Net change in short-term debt
    
    
    2,979
    
    
    
    1,787Increase in overdraft borrowings
    
    
    795
    
    
    
    795Payment of long-term debt
    
    
    (218
    )
    
    
    (218
    )Net cash provided by financing activities
    
    
    11,014
    
    
    
    9,822Effect of foreign currency rate fluctuations on cash and cash equivalents
    
    
    (27
    )
    
    
    (27
    )Net increase in cash and cash equivalents
    
    
    10,515
    
    
    
    10,515Cash and cash equivalents:Beginning of year
    
    
    113,223
    
    
    
    113,223End of period
    
    $
    123,738
    
    
    $
    123,738
 96




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
 (dollar amounts in thousands)
 Nine Months Ended
    
    
    Six Months EndedSeptember 25, 2005
    
    
    June 26, 2005As Previously
    
    
    As
    
    
    As Previously
    
    
    AsReported
    
    
    Restated
    
    
    Reported
    
    
    RestatedCash flows from operating activities:Net earnings
    
    $
    27,552
    
    
    $
    27,195
    
    
    $
    13,332
    
    
    $
    12,802Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:Depreciation and amortization
    
    
    17,643
    
    
    
    17,498
    
    
    
    12,145
    
    
    
    12,050Deferred taxes
    
    
    (4,701
    )
    
    
    (5,432
    )
    
    
    
    
    
    
    (7
    )Stock-based compensation
    
    
    284
    
    
    
    284
    
    
    
    177
    
    
    
    177Provision for losses on accounts receivable
    
    
    1,816
    
    
    
    1,816
    
    
    
    1,153
    
    
    
    1,153Loss on disposal of fixed assets
    
    
    206
    
    
    
    206
    
    
    
    37
    
    
    
    37Impairments of goodwill and long-lived assets
    
    
    1,078
    
    
    
    1,078
    
    
    
    
    
    
    
    (Increase) decrease in current assets, net of
the effects of acquired companies:Accounts receivable
    
    
    (22,501
    )
    
    
    (22,044
    )
    
    
    (13,209
    )
    
    
    (12,728
    )Inventories
    
    
    (11,285
    )
    
    
    (11,812
    )
    
    
    (10,075
    )
    
    
    (10,406
    )Other current assets
    
    
    2,421
    
    
    
    2,226
    
    
    
    (1,699
    )
    
    
    (1,726
    )Increase (decrease) in current liabilities, net
of the effects of acquired companies:Accounts payable
    
    
    (15,844
    )
    
    
    (15,469
    )
    
    
    (11,391
    )
    
    
    (11,282
    )Income taxes
    
    
    (4,101
    )
    
    
    (4,126
    )
    
    
    (6,780
    )
    
    
    (6,784
    )Unearned revenues
    
    
    (3,560
    )
    
    
    (3,432
    )
    
    
    (708
    )
    
    
    (609
    )Restructuring reserve
    
    
    7,760
    
    
    
    7,760
    
    
    
    4,710
    
    
    
    4,710Other current and accrued liabilities
    
    
    382
    
    
    
    376
    
    
    
    (1,007
    )
    
    
    (1,012
    )Net cash used in operating activities
    
    
    (2,850
    )
    
    
    (3,876
    )
    
    
    (13,315
    )
    
    
    (13,625
    )Cash flows from investing activities:Acquisition of property, plant, and equipment
    
    
    (7,796
    )
    
    
    (7,796
    )
    
    
    (6,850
    )
    
    
    (6,850
    )Acquisitions of businesses, net of cash acquired
    
    
    (1,989
    )
    
    
    (1,989
    )
    
    
    (1,976
    )
    
    
    (1,976
    )Other investing activities
    
    
    295
    
    
    
    295
    
    
    
    610
    
    
    
    610Net cash used in investing activities
    
    
    (9,490
    )
    
    
    (9,490
    )
    
    
    (8,216
    )
    
    
    (8,216
    )Cash flows from financing activities:Proceeds from stock issuances
    
    
    6,887
    
    
    
    6,887
    
    
    
    1,088
    
    
    
    1,088Net change in short-term debt
    
    
    2,664
    
    
    
    3,690
    
    
    
    1,834
    
    
    
    1,387Proceeds of long-term debt
    
    
    40,000
    
    
    
    40,000
    
    
    
    40,000
    
    
    
    40,000Payment of long-term debt
    
    
    (58,207
    )
    
    
    (58,207
    )
    
    
    (43,989
    )
    
    
    (43,989
    )Net cash used in financing activities
    
    
    (8,656
    )
    
    
    (7,630
    )
    
    
    (1,067
    )
    
    
    (1,514
    )Effect of foreign currency rate fluctuations on
cash and cash equivalents
    
    
    (6,439
    )
    
    
    (6,439
    )
    
    
    (6,299
    )
    
    
    (6,276
    )Net decrease in cash and cash equivalents
    
    
    (27,435
    )
    
    
    (27,435
    )
    
    
    (28,897
    )
    
    
    (29,631
    )Cash and cash equivalents:Beginning of year
    
    
    102,694
    
    
    
    102,694
    
    
    
    102,694
    
    
    
    102,694End of period
    
    $
    75,259
    
    
    $
    75,259
    
    
    $
    73,797
    
    
    $
    73,063
 97




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
 (dollar amounts in thousands)
 Three Months EndedMarch 27, 2005As Previously
    
    
    AsReported
    
    
    RestatedCash flows from operating activities:Net earnings (loss)
    
    $
    3,831
    
    
    $
    3,582Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:Depreciation and amortization
    
    
    6,322
    
    
    
    6,275Deferred taxes
    
    
    
    
    
    
    (166
    )Stock-based compensation
    
    
    110
    
    
    
    110Provision for losses on accounts receivable
    
    
    362
    
    
    
    362Loss on disposal of fixed assets
    
    
    42
    
    
    
    42(Increase) decrease in current assets, net of the effects of acquired companies:Accounts receivable
    
    
    (2,370
    )
    
    
    (1,599
    )Inventories
    
    
    (6,533
    )
    
    
    (6,820
    )Other current assets
    
    
    (1,503
    )
    
    
    (1,531
    )Increase (decrease) in current liabilities, net of the effects of acquired companies:Accounts payable
    
    
    (17,520
    )
    
    
    (17,513
    )Income taxes
    
    
    (2,709
    )
    
    
    (2,693
    )Unearned revenues
    
    
    2,091
    
    
    
    2,164Restructuring reserve
    
    
    (951
    )
    
    
    (951
    )Other current and accrued liabilities
    
    
    (6,891
    )
    
    
    (6,911
    )Net cash used in operating activities
    
    
    (25,719
    )
    
    
    (25,649
    )Cash flows from investing activities:Acquisition of property, plant, and equipment
    
    
    (3,458
    )
    
    
    (3,458
    )Other investing activities
    
    
    235
    
    
    
    235Net cash used in investing activities
    
    
    (3,223
    )
    
    
    (3,223
    )Cash flows from financing activities:Proceeds from stock based compensation
    
    
    364
    
    
    
    364Net change in short-term debt
    
    
    3,102
    
    
    
    2,169Proceeds of long-term debt
    
    
    35,000
    
    
    
    35,000Payment of long-term debt
    
    
    (32,804
    )
    
    
    (32,804
    )Net cash provided by financing activities
    
    
    5,662
    
    
    
    4,729Effect of foreign currency rate fluctuations on cash and cash equivalents
    
    
    (3,161
    )
    
    
    (3,144
    )Net decrease in cash and cash equivalents
    
    
    (26,441
    )
    
    
    (27,287
    )Cash and cash equivalents:Beginning of year
    
    
    102,694
    
    
    
    102,694End of period
    
    $
    76,253
    
    
    $
    75,407
 98




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##### Table of Contents



SELECTED QUARTERLY FINANCIAL DATA
 QUARTERS (unaudited)
 (dollar amounts are in thousands, except per share data)
 First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    Year(As Restated)
    
    
    (As Restated)
    
    
    (As Restated)2006Net revenues
    
    $
    139,993
    
    
    $
    163,863
    
    
    $
    167,622
    
    
    $
    216,297
    
    
    $
    687,775Gross profit
    
    $
    56,358
    
    
    $
    69,646
    
    
    $
    71,596
    
    
    $
    94,091
    
    
    $
    291,691Earnings from continuing operations
    
    
    30
    (1)
    
    
    4,674
    (3)
    
    
    11,712
    (4)
    
    
    18,603
    (5)
    
    
    35,019Net earnings
    
    
    1,603
    (2)
    
    
    4,619
    (3)
    
    
    11,700
    (4)
    
    
    18,000
    (5)
    
    
    35,922Earnings per share from continuing operations:Basic
    
    $
    
    
    
    $
    .12
    
    
    $
    .30
    
    
    $
    .47
    
    
    $
    .89Diluted
    
    $
    
    
    
    $
    .11
    
    
    $
    .29
    
    
    $
    .46
    
    
    $
    .87Net earnings per share:Basic
    
    $
    .04
    
    
    $
    .12
    
    
    $
    .30
    
    
    $
    .46
    
    
    $
    .91Diluted
    
    $
    .04
    
    
    $
    .11
    
    
    $
    .29
    
    
    $
    .45
    
    
    $
    .89
 (dollar amounts are in thousands, except per share data)
 First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    Year(As Restated)
    
    
    (As Restated)
    
    
    (As Restated)
    
    
    (As Restated)
    
    
    (As Restated)2005Net revenues
    
    $
    155,508
    
    
    $
    185,308
    
    
    $
    184,699
    
    
    $
    192,477
    
    
    $
    717,992Gross profit
    
    $
    67,708
    
    
    $
    81,888
    
    
    $
    79,590
    
    
    $
    82,344
    
    
    $
    311,530Earnings from continuing operations
    
    
    1,540
    
    
    
    7,257
    (6)
    
    
    13,073
    (7)
    
    
    6,543
    
    
    
    28,413Net earnings
    
    
    3,582
    
    
    
    9,220
    (6)
    
    
    14,393
    (8)
    
    
    9,326
    (9)
    
    
    36,521Earnings per share from continuing operations:Basic
    
    $
    .04
    
    
    $
    .19
    
    
    $
    .34
    
    
    $
    .17
    
    
    $
    .75Diluted
    
    $
    .04
    
    
    $
    .19
    
    
    $
    .33
    
    
    $
    .16
    
    
    $
    .72Net earnings per share:Basic
    
    $
    .09
    
    
    $
    .24
    
    
    $
    .38
    
    
    $
    .24
    
    
    $
    .96Diluted
    
    $
    .09
    
    
    $
    .24
    
    
    $
    .37
    
    
    $
    .23
    
    
    $
    .93
 
 (1)
    
    Includes a $0.1 million restructuring charge (net of tax).(2)
    
    Includes a $1.4 million (net of tax) gain from the disposal of our bar-code business.(3)
    
    Includes a $0.4 million restructuring charge (net of tax) and a $1.5 million litigation
settlement charge (net of tax).(4)
    
    Includes a $1.2 million restructuring charge (net of tax).(5)
    
    Includes a $3.1 million restructuring charge (net of tax) and $1.1 million (net of tax) gain
from the settlement of a capital lease.(6)
    
    Includes a $4.4 million restructuring charge (net of tax).(7)
    
    Includes a $2.2 million restructuring charge (net of tax) and a $0.4 million impairment
charge (net of tax).(8)
    
    Includes a $2.2 million restructuring charge (net of tax) and a $1.0 million impairment
charge (net of tax).(9)
    
    Includes a $1.8 million restructuring charge (net of tax) and a $1.0 million impairment
charge (net of tax). 99




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##### Table of Contents



Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  
 Item 9A. DISCLOSURE CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Inherent Limitations on Effectiveness of Controls
  Managements Report on Internal Control Over Financial Reporting
  (i)
    
    pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of Checkpoints assets;(ii)
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that Checkpoints receipts and expenditures are being made only in
accordance with authorizations of Checkpoints management and directors; and(iii)
    
    provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of Checkpoints assets that could have a
material effect on the financial statements.
 Internal
ControlIntegrated Framework
 100




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##### Table of Contents



Plan for Remediation of the Material Weakness
   Changes in Internal Control over Financial Reporting
  101




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##### Table of Contents



Item 9B. OTHER INFORMATION
  
 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
  
 PART IV
 
 Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  102




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##### Table of Contents



1.
    
    The following consolidated financial statements of Checkpoint Systems, Inc. were included in Item 8.Consolidated Balance Sheets as of December 31, 2006 and December 25, 2005
    
    
    42Consolidated Statements of Operations for each of the years in the three-year period ended December
31, 2006
    
    
    43Consolidated Statements of Stockholders Equity for each of the years in the three-year period
ended December 31, 2006
    
    
    44Consolidated
Statements of Comprehensive Income (Loss) for each of the years in the three-year
period ended December 31, 2006
    
    
    45Consolidated Statements of Cash Flows for each of the years in the three-year period ended December
31, 2006
    
    
    46Notes to Consolidated Financial Statements
    
    47-822.
    
    The following consolidated financial statements schedules of Checkpoint Systems, Inc. is included.Financial Statement Schedule, Schedule II  Valuation and Qualifying Accounts
    
    
    107
 103




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##### Table of Contents



SIGNATURES
    /s/
George W. Off
  SIGNATURE
    
    TITLE
    
    DATE/s/ George W. Off
    
    Chairman of the Board of Directors,
President and Chief Executive Officer
    
    March 30, 2007/s/ W. Craig Burns
    
    Executive Vice President, Chief
Financial Officer, Treasurer
    
    March 30, 2007/s/ Raymond Andrews
    
    Vice President, Chief Accounting Officer
    
    March 30, 2007/s/ William S. Antle III
    
    Director
    
    March 30, 2007/s/ George Babich, Jr.
    
    Director
    
    March 30, 2007David W. Clark, Jr.
    
    Director
    
    March 30, 2007/s/ Harold Einsmann
    
    Director
    
    March 30, 2007/s/ R. Keith Elliott
    
    Director
    
    March 30, 2007/s/ Alan R. Hirsig
    
    Director
    
    March 30, 2007/s/ Jack W. Partridge
    
    Director
    
    March 30, 2007/s/ Sally Pearson
    
    Director
    
    March 30, 2007
 104




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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 to Exhibit 3.2 of the Registrants Current
Report on Form 8-K filed with the SEC on February 22, 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*
    
    Amended and Restated Employee Stock Purchase Plan as
Appendix A to the Companys Definitive Proxy Statement,
filed with the SEC on March 22, 1996, is incorporated by
reference.Exhibit 10.4
    
    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 10.5*
    
    Employment Agreement with George W. Off is incorporated by
reference to Item 6(a), Exhibit 10.1 of the Registrants
Form 10-Q filed on November 12, 2002.Exhibit 10.6*
    
    Employment Agreement with W. Craig Burns is incorporated
herein by reference to Item 6(a), Exhibit 10.1 of the
Registrants Form 10-Q filed on May 13, 2004.Exhibit 10.7*
    
    Employment Agreement with John E. Davies, Jr. is
incorporated herein by reference to Item 6(a), Exhibit 10.2
of the Registrants Form 10-Q filed on May 13, 2004.Exhibit 10.8*
    
    First Amendment to Employment Agreement with John E.
Davies, Jr. is incorporated by reference to Item 6(a),
Exhibit 10.3 of the Registrants Form 10-Q filed on May 13,
2004.Exhibit 10.9*
    
    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.
 105




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##### Table of Contents



Exhibit 10.10*
    
    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 10.11*
    
    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 10.12*
    
    Employment Agreement with David C. Donnan is Incorporated
by reference to Item 6(a), Exhibit 10.1 of the Registrants
Form 10-Q filed on November 5, 2004.Exhibit 10.13*
    
    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 10.14*
    
    423 Employee Stock Purchase Plan as Appendix A to the
Companys Definitive Proxy Statement, filed with the SEC on
March 22, 1996, is incorporated by reference.Exhibit 10.15*
    
    Amended and Restated Employment Agreement by and between
George Off and Checkpoint Systems, Inc. dated December 7,
2005 is hereby incorporated by reference to Item 1.01 of
the Registrants Form 8-K filed on December 12, 2005.Exhibit 12
    
    Ratio of Earnings to Fixed Charges.Exhibit 21
    
    Subsidiaries of Registrant.Exhibit 23
    
    Consent of Independent Registered Public Accounting Firm.Exhibit 24
    
    Power of Attorney, contained in Signature Page.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. 106




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##### Table of Contents



SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
 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 Year(dollar amounts in thousands)2006
    
    $
    11,823
    
    
    $
    
    
    
    $
    2,442
    
    
    $
    (1,848
    )
    
    $
    12,4172005
    
    $
    12,647
    
    
    $
    
    
    
    $
    2,573
    
    
    $
    (3,397
    )
    
    $
    11,8232004
    
    $
    12,003
    
    
    $
    
    
    
    $
    1,673
    
    
    $
    (1,029
    )
    
    $
    12,647Deferred Tax Valuation AllowanceRelease ofAllowance
    
    
    
    
    
    
    allowance onBalance at
    
    
    Additions
    
    
    Recorded on
    
    
    Release of
    
    
    LossesBeginning
    
    
    Through
    
    
    Current Year
    
    
    Allowance on
    
    
    Expired or
    
    
    Balance atYear
    
    of Year
    
    
    Acquisition
    
    
    Losses
    
    
    End of Year
    
    
    Revalued
    
    
    End of Year(dollar amounts in thousands)2006
    
    $
    26,477
    
    
    $
    
    
    
    $
    801
    
    
    $
    (151
    )
    
    $
    7,383
    
    
    $
    34,5102005
    
    $
    31,275
    
    
    $
    
    
    
    $
    626
    
    
    $
    (384
    )
    
    $
    (5,040
    )
    
    $
    26,4772004
    
    $
    32,650
    
    
    $
    
    
    
    $
    779
    
    
    $
    
    
    
    $
    (2,154
    )
    
    $
    31,275
 107