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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 30, 2007
 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)
  (Registrants telephone number, including area code)
  Title of each class
    
    Name of each exchange on whichto be so registered
    
    each class is to be registeredCommon Stock Purchase Rights
    
    New York Stock Exchange
  Common Stock, Par Value $.10 Per Share
   o þ
  o þ
  þ o
 þ
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



CHECKPOINT SYSTEMS, INC.
 FORM 10-K
 Table of Contents
 PagePART I.Item 1. Business
    
    3-13Item 1A. Risk Factors Related to Our Business
    
    13-15Item 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
    
    16-18Item 6. Selected Financial Data
    
    19-20Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    21-36Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    36Item 8. Financial Statements and Supplementary Data
    
    37-72Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    73Item 9A. Controls and Procedures
    
    73Item 9B. Other Information
    
    73PART III.Item 10. Directors and Executive Officers and Corporate Governance
    
    73-74Item 11. Executive Compensation
    
    74Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
    
    74Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    74Item 14. Principal Accounting Fees and Services
    
    74PART IV.Item 15. Exhibits and Financial Statement Schedules
    
    74SIGNATURES
    
    75INDEX TO EXHIBITS
    
    76-77SCHEDULE II  Valuation and Qualifying Accounts
    
    78Termination AgreementEmployment AgreementRatio of Earnings to Fixed ChargesSubsidiaries of RegistrantConsent of Independent Registered Public Accounting FirmCertification of the Chief Executive Officer pursuant Rule 13a-14(a)Certification of the Chief Financial Officer pursuant Rule 13a-14(a)Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 1350
  2




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




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®
   Products and Offerings
   SHRINK MANAGEMENT SOLUTIONS
   4




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Electronic Article Surveillance
   CCTV, Fire and Intrusion Systems
    INTELLIGENT LABELS
 ® ®
 Electronic Article Surveillance Labels
  5




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##### Table of Contents



Check-Net® (Service Bureau)
  ® ® ®
  Intelligent Library Systems
  RFID Tags and Labels
  RETAIL MERCHANDISING
  Hand-held Labeling Systems
  Retail Display Systems
  BUSINESS STRATEGY
  6




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Principal Markets and Marketing Strategy
     
    
    open new, and expand existing retail accounts with new products that will increase
penetration through integrated value-added solutions for labeling, security, and
merchandising;
    
    establish business-to-business web-based capabilities to enable retailers and
manufacturers to initiate and track their orders through the supply chain on a global basis;
    
    expand market opportunities to manufacturers and distributors, including source tagging
and value-added labeling;
    
    continue to promote source tagging around the world with extensive integration and
automation capabilities using new EAS, RFID, and auto-ID technologies; and
    
    assist retailers in understanding the benefits and implementation of the new Electronic
Product Code (EPC) using RFID technology.
 7




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
    
    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.
 Manufacturing, Raw Materials, and Inventory
 Electronic Article Surveillance
   8




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CCTV, Fire and Intrusion Systems
  CheckNet® Service Bureau and Retail Merchandising
  DISTRIBUTION
  Electronic Article Surveillance
    CCTV, Fire and Intrusion Systems
  CheckNet® Service Bureau and Retail Merchandising
 ®
  9




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BACKLOG
  TECHNOLOGY
  Patents & Licensing
   CheckNet® Service Bureau and Retail Merchandising
  SEASONALITY
  COMPETITION
 Electronic Article Surveillance
   10




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CCTV, Fire and Intrusion Systems
  CheckNet® Service Bureau
 ®
 Retail Merchandising
  OTHER MATTERS
 Research and Development
    Employees
  Financial Information About Geographic and Business Segments
  11




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Available Information
   Executive Officers of the Company
  Tenurewith
    
    
    Position with the Company andName
    
    Age
    
    Company
    
    
    Date of Election to Position onRobert P. van der Merwe
    
    55
    
    1   year
    
    President and Chief Executive Officer since December 2007Raymond D. Andrews
    
    54
    
    2  years
    
    Senior Vice President and Chief Financial Officer since December 2007John E. Davies, Jr.
    
    50
    
    16 years
    
    Worldwide President, Intelligent Labels since March 2006Per H. Levin
    
    50
    
    13 years
    
    Worldwide President, SMS since March 2006Bernard Gremillet
    
    55
    
    4 years
    
    Executive Vice President, Geographies since August 2007John R. Van Zile
    
    55
    
    4 years
    
    Senior Vice President, General Counsel and Secretary since June 2003
    12




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##### Table of Contents



Item 1A. RISK FACTORS
  (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.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.
 13




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(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;We 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




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(14)
    
    our ability to integrate the acquisition of the Alpha S3 and SIDEP/Asialco businesses and to achieve our
financial and operational goals for these businesses; andWe are in the process of integrating these businesses into Checkpoint operations to take advantage of
opportunities with the Alpha S3 business to utilize our existing sales force to grow revenue and with the
SIDEP/Asialco business to optimize worldwide manufacturing capabilities and improve the quality and profitability
of the acquired product lines. Our ability to execute the integration plans could have an impact on future
revenues and profits.(15)
    
    the failure to effectively maintain and upgrade our information systems could adversely affect our business.Our business depends significantly on effective information systems, and we have many different information
systems for our various businesses. Our information systems require an ongoing commitment of significant
resources to maintain and enhance existing systems and develop new systems in order to keep pace with continuing
changes in information processing technology, evolving industry and regulatory standards, and changing customer
preferences. In addition, we may from time to time obtain significant portions of our systems-related or other
services or facilities from independent third parties, which may make our operations vulnerable to such third
parties failure to perform adequately. Our failure to maintain effective and efficient information systems, or
our failure to efficiently and effectively consolidate our information systems to eliminate redundant or obsolete
applications, could have a material adverse effect on our business, financial condition and results of
operations. Additionally, any disruption or failure of such networks, systems or other technology may disrupt our
operations, cause customer dissatisfaction, and loss of customer revenues.
 
 Item 1B. UNRESOLVED STAFF COMMENTS
  
 Item 2. PROPERTIES
  
 Item 3. LEGAL PROCEEDINGS
  Matters related to ID Security Systems Canada Inc. versus Checkpoint Systems, Inc.
   
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
  15




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PART II
 
 Item 5.
    
    MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
  Market Price Per ShareHigh
    
    LowFiscal year ended December 30, 2007First Quarter
    
    $
    23.66
    
    
    $
    18.43Second Quarter
    
    $
    26.48
    
    
    $
    21.99Third Quarter
    
    $
    29.00
    
    
    $
    23.06Fourth Quarter
    
    $
    30.25
    
    
    $
    21.56Fiscal year ended December 31, 2006First Quarter
    
    $
    29.91
    
    
    $
    24.13Second Quarter
    
    $
    27.55
    
    
    $
    19.63Third Quarter
    
    $
    22.28
    
    
    $
    15.37Fourth Quarter
    
    $
    20.60
    
    
    $
    16.41
 Holders of Record
  Dividends
  Issuer Purchases of Equity Securities
  Recent Sales of Unregistered Securities
  Equity Compensation Plans
  EquityEquity
    
    compensationcompensation
    
    plans notplans approved
    
    approved byby shareholders
    
    shareholders
    
    Total| | |Number of securities to be issued upon exercise of outstanding options
    
    
    3,135,902
    (1)
    
    
    270,000
    (2)
    
    
    3,405,902Weighted average exercise price of outstanding options
    
    $
    17.00
    
    
    $
    22.71
    
    
    $
    17.45Number of securities remaining available for future issuance under
equity compensation plans (excluding securities reflected above)
    
    
    1,625,808
    
    
    
    
    
    
    
    1,625,808
 
 (1)
    
    Includes stock options and performance based restricted stock units.(2)
    
    Inducement options granted to newly elected President and CEO of
Checkpoint in connection with his hire in fiscal 2007. 16




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STOCK PERFORMANCE GRAPH
  NASDAQElectronicCheckpoint
    
    NYSE/AMEX/NASDAQ
    
    Components AndYear
    
    Systems, Inc.
    
    Stock Market Index
    
    Accessories Index2002
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.02003
    
    
    191.5
    
    
    
    132.0
    
    
    
    192.52004
    
    
    178.2
    
    
    
    148.4
    
    
    
    152.02005
    
    
    244.1
    
    
    
    157.3
    
    
    
    150.82006
    
    
    200.0
    
    
    
    182.4
    
    
    
    165.82007
    
    
    263.4
    
    
    
    193.1
    
    
    
    187.6
  17




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18




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Item 6. SELECTED FINANCIAL DATA
  (dollar amounts are in thousands except per share amounts)
 Dec. 30,
    
    Dec. 31,
    
    Dec. 25,
    
    Dec. 26,
    
    Dec. 28,Year ended
    
    2007
    
    2006
    
    2005
    
    2004
    
    2003STATEMENT OF OPERATIONS DATANet revenues
    
    $
    834,156
    
    
    $
    687,775
    
    
    $
    717,992
    
    
    $
    670,453
    
    
    $
    615,998Earnings from continuing
operations before income taxes
    
    $
    70,576
    
    
    $
    41,975
    
    
    $
    40,127
    
    
    $
    21,031
    
    
    $
    29,443Income taxes
    
    $
    12,174
    
    
    $
    6,987
    
    
    $
    11,661
    
    
    $
    2,064
    
    
    $
    10,069Earnings from continuing operations
    
    $
    58,409
    
    
    $
    35,019
    
    
    $
    28,413
    
    
    $
    18,823
    
    
    $
    19,186Discontinued operations, net of tax
    
    $
    359
    
    
    $
    903
    
    
    $
    8,108
    
    
    $
    (37,448
    )
    
    $
    9,659Net earnings (loss)
    
    $
    58,768
    (1)
    
    $
    35,922
    (2)
    
    $
    36,521
    (3)
    
    $
    (18,625
    )(4)
    
    $
    28,845
    (5)Earnings per share from continuing
operations before cumulative
effect of change in accounting
principle:Basic
    
    $
    1.46
    
    
    $
    .89
    
    
    $
    .75
    
    
    $
    .51
    
    
    $
    .58Diluted
    
    $
    1.43
    
    
    $
    .87
    
    
    $
    .72
    
    
    $
    .50
    
    
    $
    .57Earnings (loss) per share:Basic
    
    $
    1.47
    
    
    $
    .91
    
    
    $
    .96
    
    
    $
    (.51
    )
    
    $
    .87Diluted
    
    $
    1.44
    
    
    $
    .89
    
    
    $
    .93
    
    
    $
    (.50
    )
    
    $
    .85Depreciation and amortization
    
    $
    21,059
    
    
    $
    19,504
    
    
    $
    22,539
    
    
    $
    26,316
    
    
    $
    31,281
 
 (1)
    
    Includes a $2.7 million ($2.0  million, net of tax) restructuring
charge, a $4.4 million ($2.9 million, net of tax)charge related to the
CEO transition, and a $2.6 million ($2.5 million, net of tax) gain from
the sale of our Austria subsidiary.(2)
    
    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.(3)
    
    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.(4)
    
    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.(5)
    
    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. 19




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Dec. 30,
    
    Dec. 31,
    
    Dec. 25,
    
    Dec. 26,
    
    Dec. 28,(dollar amounts are in thousands)
    
    2007
    
    2006
    
    2005
    
    2004
    
    2003AT YEAR ENDWorking capital
    
    $
    282,095
    
    
    $
    254,024
    
    
    $
    208,255
    
    
    $
    168,382
    
    
    $
    77,172Total debt
    
    $
    95,512
    
    
    $
    16,534
    
    
    $
    39,745
    
    
    $
    73,998
    
    
    $
    146,507Stockholders equity
    
    $
    588,328
    
    
    $
    473,581
    
    
    $
    396,420
    
    
    $
    379,645
    
    
    $
    322,660Total assets
    
    $
    1,031,044
    
    
    $
    781,191
    
    
    $
    739,245
    
    
    $
    769,685
    
    
    $
    773,087FOR THE YEAR ENDEDCapital expenditures
    
    $
    13,363
    
    
    $
    11,520
    
    
    $
    10,846
    
    
    $
    11,342
    
    
    $
    12,714Cash provided by operating activities
    
    $
    66,971
    
    
    $
    22,386
    
    
    $
    44,618
    
    
    $
    23,280
    
    
    $
    101,796Cash (used in) provided by investing activities
    
    $
    (106,151
    )
    
    $
    7,963
    
    
    $
    (8,521
    )
    
    $
    (10,338
    )
    
    $
    (11,698
    )Cash provided by (used) in financing activities
    
    $
    7,164
    
    
    $
    (6,945
    )
    
    $
    (18,283
    )
    
    $
    (24,503
    )
    
    $
    (39,197
    )RATIOSReturn on net sales(a)
    
    
    7.05
    %
    
    
    5.22
    %
    
    
    5.09
    %
    
    
    (2.78
    )%
    
    
    4.68
    %Return on average equity(b)
    
    
    11.07
    %
    
    
    8.26
    %
    
    
    9.41
    %
    
    
    (5.30
    )%
    
    
    10.60
    %Return on average assets(c)
    
    
    6.49
    %
    
    
    4.73
    %
    
    
    4.84
    %
    
    
    (2.41
    )%
    
    
    3.97
    %Current ratio(d)
    
    
    2.25
    
    
    
    2.31
    
    
    
    1.99
    
    
    
    1.72
    
    
    
    1.26Percent of total debt to capital(e)
    
    
    13.97
    %
    
    
    3.37
    %
    
    
    9.11
    %
    
    
    16.31
    %
    
    
    31.23
    %
 
 (a)
    
    Return on net sales is calculated by dividing net earnings (loss) after the cumulative effect
of change in accounting principle by net sales.(b)
    
    Return on average equity is calculated by dividing net earnings (loss) after the cumulative
effect of change in accounting principle by average equity.(c)
    
    Return on average assets is calculated by dividing net earnings (loss) after the cumulative
effect of change in accounting principle by average assets.(d)
    
    Current ratio is calculated by dividing current assets by current liabilities.(e)
    
    Percent of total debt to capital is calculated by dividing total debt by total debt and equity. Dec. 30,
    
    Dec. 31,
    
    Dec. 25,
    
    Dec. 26,
    
    Dec. 28,(amounts are in thousands, except employee data)
    
    2007
    
    2006
    
    2005
    
    2004
    
    2003Other InformationWeighted average number of shares
Outstanding  diluted
    
    
    40,724
    
    
    
    40,233
    
    
    
    39,075
    
    
    
    37,604
    (1)
    
    
    33,747
    (2)Number of employees
    
    
    3,930
    
    
    
    3,213
    
    
    
    3,955
    
    
    
    4,260
    
    
    
    4,042Backlog
    
    $
    73,462
    
    
    $
    54,899
    
    
    $
    52,234
    
    
    $
    63,026
    
    
    $
    52,703
 
 (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. 20




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Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
  Overview
 ®
        21




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Critical Accounting Estimates
     Revenue Recognition.
  Allowance for Doubtful Accounts.
 22




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Inventory Valuation.
 Valuation of Long-lived Assets.
  Income Taxes.
   Pension Plans.
 23




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Stock Compensation.
  Liquidity and Capital Resources
      24




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
          25




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Off-Balance Sheet Arrangements
  Contractual Obligations
  Contractual Obligation
    
    
    
    
    
    Due in less

    
    
    Due in
    

    Due in
    

    Due after(dollar amounts in thousands)
    
    Total
    

    than 1 year
    

    1-3 years
    

    3-5 years
    

    5 yearsLong-term debt (1)
    
    $
    104,669
    
    
    $
    7,956
    
    
    $
    96,713
    
    
    $
    
    
    
    $
    Capital leases (2)
    
    
    676
    
    
    
    385
    
    
    
    276
    
    
    
    15
    
    
    
    Operating leases
    
    
    44,134
    
    
    
    12,970
    
    
    
    18,359
    
    
    
    7,644
    
    
    
    5,161Pension obligations (3)
    
    
    51,761
    
    
    
    4,391
    
    
    
    9,451
    
    
    
    10,326
    
    
    
    27,593Acquisition obligation (4)
    
    
    11,403
    
    
    
    4,644
    
    
    
    6,759
    
    
    
    
    
    
    
    Inventory purchase commitments (5)
    
    
    3,240
    
    
    
    1,620
    
    
    
    1,620
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    215,883
    
    
    $
    31,966
    
    
    $
    133,178
    
    
    $
    17,985
    
    
    $
    32,754Commercial Commitments
    
    
    
    
    
    Due in less
    
    
    Due in
    
    
    Due in
    
    
    Due after(dollar amounts in thousands)
    
    Total
    
    

    than 1 year
    
    
    1-2 years
    
    
    2-5 years
    
    
    5 yearsStandby letters of credit
    
    $
    1,242
    
    
    $
    1,242
    
    
    $
    
    
    
    $
    
    
    
    $
    Surety bonds
    
    
    1,594
    
    
    
    782
    
    
    
    812
    
    
    
    
    
    
    
    Total commercial commitments
    
    $
    2,836
    
    
    $
    2,024
    
    
    $
    812
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Includes interest payments through maturity of $9,755.(2)
    
    Includes interest payments through maturity of $78.(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 2007 and include benefits
attributable to estimated future employee service of current
employees.(4)
    
    The acquisition obligation represents $9.3 million of deferred
payments to the minority shareholders of Shanghai Asialco Electronics
Co., Ltd., a subsidiary of SIDEP coupled with a $2.1 million deferred
payment on a non-compete contract related to the acquisition.
Additionally, we have a contingent liability, not reflected in the
table, for a maximum of $8 million plus interest related to our
acquisition of the Alpha S3 business. This liability is contingent on
Alpha revenue exceeding $70 million in our fiscal 2008 with the $8
million maximum being achieved if the Alpha business exceeds $83
million.(5)
    
    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
       ChargeAccrual at
    
    Charged
    
    Reversed
    
    
    
    
    
    ExchangeBeginning
    
    to
    
    to
    
    Cash
    
    Rate
    
    Accrual at(dollar amounts are in thousands)
    
    of Year
    
    Earnings
    
    Earnings
    
    Payments
    
    Changes
    
    12/30/07Fiscal 2007Severance and other employee-related charges
    
    $
    6,786
    
    
    $
    2,096
    
    
    $
    (881
    )
    
    $
    (5,287
    )
    
    $
    301
    
    
    $
    3,015
 ChargeAccrual at
    
    Charged
    
    Reversed
    
    
    
    
    
    ExchangeBeginning
    
    to
    
    to
    
    Cash
    
    Rate
    
    Accrual at(dollar amounts are in thousands)
    
    of Year
    
    Earnings
    
    Earnings
    
    Payments
    
    Changes
    
    12/31/06Fiscal 2006Severance and other employee-related charges
    
    $
    10,121
    
    
    $
    9,140
    
    
    $
    (1,225
    )
    
    $
    (11,989
    )
    
    $
    739
    
    
    $
    6,786
  2003 Restructuring Plan
    Acquisition Restructuring
  28




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##### Table of Contents



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 30,
    
    December 31,
    
    December 25,
    
    Fiscal 2007
    
    Fiscal 20062007
    
    2006
    
    2005
    
    vs.
    
    vs.Year ended
    
    (Fiscal 2007)
    
    (Fiscal 2006)
    
    (Fiscal 2005)
    
    Fiscal 2006
    
    Fiscal 2005Net revenuesShrink Management Solutions
    
    
    57.4
    %
    
    
    55.8
    %
    
    
    59.5
    %
    
    
    24.6
    %
    
    
    (10.2)
    %Intelligent Labels
    
    
    31.1
    
    
    
    31.9
    
    
    
    28.0
    
    
    
    18.2
    
    
    
    9.3Retail Merchandising
    
    
    11.5
    
    
    
    12.3
    
    
    
    12.5
    
    
    
    14.1
    
    
    
    (6.0
    )Net revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    21.3
    
    
    
    (4.2
    )Cost of revenues
    
    
    58.5
    
    
    
    57.6
    
    
    
    56.6
    
    
    
    23.3
    
    
    
    (2.6
    )Total gross profit
    
    
    41.5
    
    
    
    42.4
    
    
    
    43.4
    
    
    
    18.6
    
    
    
    (6.4
    )Selling, general, and administrative expenses
    
    
    31.3
    
    
    
    33.0
    
    
    
    33.1
    
    
    
    14.9
    
    
    
    (4.5
    )Research and development
    
    
    2.2
    
    
    
    2.8
    
    
    
    2.7
    
    
    
    (6.4
    )
    
    
    1.6Asset impairments
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    N/A
    
    
    
    N/ARestructuring expenses
    
    
    0.3
    
    
    
    1.0
    
    
    
    1.7
    
    
    
    (61.5
    )
    
    
    (44.3
    )Litigation settlement
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    N/A
    
    
    
    N/AOther operating income
    
    
    0.3
    
    
    
    0.2
    
    
    
    
    
    
    
    27.0
    
    
    
    N/AOperating income
    
    
    8.0
    
    
    
    5.5
    
    
    
    5.7
    
    
    
    75.5
    
    
    
    6.7Interest income
    
    
    0.7
    
    
    
    0.7
    
    
    
    0.3
    
    
    
    10.9
    
    
    
    N/AInterest expense
    
    
    0.3
    
    
    
    0.3
    
    
    
    0.4
    
    
    
    8.9
    
    
    
    (24.7
    )Other gain (loss), net
    
    
    0.1
    
    
    
    0.2
    
    
    
    
    
    
    
    (42.0
    )
    
    
    N/AEarnings from continuing operations before
income taxes and minority interest
    
    
    8.5
    
    
    
    6.1
    
    
    
    5.6
    
    
    
    68.1
    
    
    
    4.6Income taxes
    
    
    1.5
    
    
    
    1.0
    
    
    
    1.6
    
    
    
    74.2
    
    
    
    (40.1
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/AEarnings from continuing operations
    
    
    7.0
    
    
    
    5.1
    
    
    
    4.0
    
    
    
    66.8
    
    
    
    23.2Earnings (loss) from discontinued
operations, net of tax
    
    
    
    
    
    
    0.1
    
    
    
    1.1
    
    
    
    (60.2
    )
    
    
    (88.9
    )Net earnings
    
    
    7.0
    %
    
    
    5.2
    %
    
    
    5.1
    %
    
    
    63.6
    %
    
    
    (1.6)
    %
  30




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##### Table of Contents



Fiscal 2007 compared to Fiscal 2006
 Net Revenues
  (dollar amounts in millions)
 Dollar Amount
    
    PercentageChange
    
    ChangeFiscal 2007
    
    Fiscal 2007December 30,
    
    December 31,
    
    vs.
    
    vs.Year ended
    
    2007
    
    2006
    
    Fiscal 2006
    
    Fiscal 2006(Fiscal 2007)
    
    (Fiscal 2006)Net revenues:Shrink Management Solutions
    
    $
    478.5
    
    
    $
    383.9
    
    
    $
    94.6
    
    
    
    24.6
    %Intelligent Labels
    
    
    259.3
    
    
    
    219.4
    
    
    
    39.9
    
    
    
    18.2Retail Merchandising
    
    
    96.4
    
    
    
    84.5
    
    
    
    11.9
    
    
    
    14.1Net revenues
    
    $
    834.2
    
    
    $
    687.8
    
    
    $
    146.4
    
    
    
    21.3
    %
  ® ®
  31




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##### Table of Contents



Gross Profit
   ® ®
  Selling, General, and Administrative Expenses
  Research and Development Expenses
  Restructuring Expenses
  Litigation Settlement
  Other Operating Income
   32




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##### Table of Contents



Interest Income and Interest Expense
  Other Gain (Loss), net
  Income Taxes
   Earning from Discontinued Operations, Net of Tax
  Net Earnings
  Fiscal 2006 compared to Fiscal 2005
 Net Revenues
  (dollar amounts in millions)
 Dollar Amount
    
    PercentageChange
    
    ChangeFiscal 2006
    
    Fiscal 2006December 31,
    
    December 25,
    
    vs.
    
    vs.Year ended
    
    2006
    
    2005
    
    Fiscal 2005
    
    Fiscal 2005(Fiscal 2006)
    
    (Fiscal 2005)Net revenues:Shrink Management Solutions
    
    $
    383.9
    
    
    $
    427.3
    
    
    $
    (43.4
    )
    
    
    (10.2)
    %Intelligent Labels
    
    
    219.4
    
    
    
    200.8
    
    
    
    18.6
    
    
    
    9.3Retail Merchandising
    
    
    84.5
    
    
    
    89.9
    
    
    
    (5.4
    )
    
    
    (6.0
    )Net revenues
    
    $
    687.8
    
    
    $
    718.0
    
    
    $
    (30.2
    )
    
    
    (4.2)
    %
  33




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##### Table of Contents



® ®
  Gross Profit
     Selling, General, and Administrative Expenses
  34




---



##### Table of Contents



Asset Impairments
  Restructuring Expenses
  Litigation Settlement
  Other Operating Income
  Interest Income and Interest Expense
  Other Gain (Loss), net
  Income Taxes
   Earning from Discontinued Operations, Net of Tax
  Net Earnings
  35




---



##### Table of Contents



Other Matters
 Recently Adopted Accounting Standards
  New Accounting Pronouncements and Other Standards
     
 Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Market Risk Factors
    36




---



##### Table of Contents



Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  Report of Independent Registered Public Accounting Firm
    
    38-39Consolidated Balance Sheets as of December 30, 2007 and December 31, 2006
    
    40Consolidated Statements of Operations for each of the years in the three-year period ended December 30, 2007
    
    41Consolidated Statements of Stockholders Equity for each of the years in the three-year period ended December 30, 2007
    
    42Consolidated Statements of Comprehensive Income (Loss) for each of the years in the three-year period ended
December 30, 2007
    
    43Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 30, 2007
    
    44Notes to Consolidated Financial Statements
    
    45-72Financial Statement Schedules, Schedule II  Valuation and Qualifying Accounts
    
    78
 37




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    38




---



##### Table of Contents



39




---



##### Table of Contents



CHECKPOINT SYSTEMS, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (dollar amounts in thousands)
 December 30,
    
    
    December 31,2007
    
    
    2006ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    118,271
    
    
    $
    143,394Restricted cash
    
    
    
    
    
    
    2,121Marketable securities
    
    
    29
    
    
    
    Accounts receivable, net of allowance of $15,839 and $12,417
    
    
    221,875
    
    
    
    160,463Inventories
    
    
    109,329
    
    
    
    94,562Other current assets
    
    
    42,914
    
    
    
    36,199Deferred income taxes
    
    
    14,492
    
    
    
    10,858Total Current Assets
    
    
    506,910
    
    
    
    447,597REVENUE EQUIPMENT ON OPERATING LEASE, net
    
    
    4,500
    
    
    
    4,325PROPERTY, PLANT, AND EQUIPMENT, net
    
    
    88,096
    
    
    
    67,717GOODWILL
    
    
    274,601
    
    
    
    187,288OTHER INTANGIBLES, net
    
    
    119,294
    
    
    
    33,143DEFERRED INCOME TAXES
    
    
    28,591
    
    
    
    31,416OTHER ASSETS
    
    
    9,052
    
    
    
    9,705TOTAL ASSETS
    
    $
    1,031,044
    
    
    $
    781,191LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Short-term borrowings and current portion of long-term debt
    
    $
    3,756
    
    
    $
    6,810Accounts payable
    
    
    76,404
    
    
    
    49,521Accrued compensation and related taxes
    
    
    38,821
    
    
    
    27,712Other accrued expenses
    
    
    43,469
    
    
    
    33,557Income taxes
    
    
    4,827
    
    
    
    27,811Unearned revenues
    
    
    28,576
    
    
    
    21,634Restructuring reserve
    
    
    4,224
    
    
    
    6,786Accrued pensions  current
    
    
    4,337
    
    
    
    3,730Other current liabilities
    
    
    20,401
    
    
    
    16,012Total Current Liabilities
    
    
    224,815
    
    
    
    193,573LONG-TERM DEBT, LESS CURRENT MATURITIES
    
    
    91,756
    
    
    
    9,724ACCRUED PENSIONS
    
    
    80,549
    
    
    
    82,602OTHER LONG-TERM LIABILITIES
    
    
    31,419
    
    
    
    4,125DEFERRED INCOME TAXES
    
    
    13,200
    
    
    
    16,630MINORITY INTEREST
    
    
    977
    
    
    
    956COMMITMENTS 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 41,837,525 and 41,315,581
    
    
    4,183
    
    
    
    4,131Additional capital
    
    
    360,684
    
    
    
    345,206Retained earnings
    
    
    203,717
    
    
    
    146,658Common stock in treasury, at cost, 2,035,912 shares
    
    
    (20,621
    )
    
    
    (20,621
    )Accumulated other comprehensive income (loss), net of tax
    
    
    40,365
    
    
    
    (1,793
    )TOTAL STOCKHOLDERS EQUITY
    
    
    588,328
    
    
    
    473,581TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    1,031,044
    
    
    $
    781,191
  40




---



##### Table of Contents



CHECKPOINT SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (dollar amounts in thousands, except per share data)
 December 30,
    
    
    December 31,
    
    
    December 25,Year ended
    
    2007
    
    
    2006
    
    
    2005Net revenues
    
    $
    834,156
    
    
    $
    687,775
    
    
    $
    717,992Cost of revenues
    
    
    488,184
    
    
    
    396,084
    
    
    
    406,462Gross profit
    
    
    345,972
    
    
    
    291,691
    
    
    
    311,530Selling, general, and administrative expenses
    
    
    260,854
    
    
    
    226,958
    
    
    
    237,654Research and development
    
    
    18,170
    
    
    
    19,417
    
    
    
    19,108Asset impairments
    
    
    
    
    
    
    
    
    
    
    1,396Restructuring expenses
    
    
    2,701
    
    
    
    7,007
    
    
    
    12,570Litigation settlement
    
    
    
    
    
    
    2,251
    
    
    
    Other operating income
    
    
    2,571
    
    
    
    2,025
    
    
    
    Operating income
    
    
    66,818
    
    
    
    38,083
    
    
    
    40,802Interest income
    
    
    5,443
    
    
    
    4,906
    
    
    
    2,338Interest expense
    
    
    2,347
    
    
    
    2,155
    
    
    
    2,862Other gain (loss), net
    
    
    662
    
    
    
    1,141
    
    
    
    (151
    )Earnings from continuing operations before income taxes and minority interest
    
    
    70,576
    
    
    
    41,975
    
    
    
    40,127Income taxes
    
    
    12,174
    
    
    
    6,987
    
    
    
    11,661Minority interest, net of tax
    
    
    (7
    )
    
    
    (31
    )
    
    
    53Earnings from continuing operations
    
    
    58,409
    
    
    
    35,019
    
    
    
    28,413Earnings from discontinued operations, net of tax of $351, $1,059, and $3,820
    
    
    359
    
    
    
    903
    
    
    
    8,108Net earnings
    
    $
    58,768
    
    
    $
    35,922
    
    
    $
    36,521Basic Earnings Per Share:Earnings from continuing operations
    
    $
    1.46
    
    
    $
    .89
    
    
    $
    .75Earnings from discontinued operations, net of tax
    
    
    .01
    
    
    
    .02
    
    
    
    .21Basic Earnings Per Share
    
    $
    1.47
    
    
    $
    .91
    
    
    $
    .96Diluted Earnings Per Share:Earnings from continuing operations
    
    $
    1.43
    
    
    $
    .87
    
    
    $
    .72Earnings from discontinued operations, net of tax
    
    
    .01
    
    
    
    .02
    
    
    
    .21Diluted Earnings Per Share
    
    $
    1.44
    
    
    $
    .89
    
    
    $
    .93
  41




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##### Table of Contents



CHECKPOINT SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 (dollar amounts in thousands)
 AccumulatedOther
    
    TotalCommon Stock
    
    Additional
    
    Retained
    
    Treasury Stock
    
    Comprehensive
    
    StockholdersShares
    
    Amount
    
    Capital
    
    Earnings
    
    Shares
    
    Amount
    
    Income (Loss)
    
    EquityBalance, December 26, 2004
    
    
    39,841
    
    
    
    3,984
    
    
    
    309,503
    
    
    
    74,215
    
    
    
    2,042
    
    
    
    (20,678
    )
    
    
    12,621
    
    
    
    379,645Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,499
    )
    
    
    (33,499
    )Balance, December 25, 2005
    
    
    40,737
    
    
    
    4,073
    
    
    
    326,950
    
    
    
    110,736
    
    
    
    2,036
    
    
    
    (20,621
    )
    
    
    (24,718
    )
    
    
    396,420Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,922
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,922Exercise of stock-based compensation
    
    
    578
    
    
    
    58
    
    
    
    8,633
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,691Tax benefit on stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,836
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,836Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    5,710
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,710Deferred compensation plan
    
    
    
    
    
    
    
    
    
    
    2,077
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,077Adoption of SFAS 158, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,743
    )
    
    
    (2,743
    )Minimum pension liability adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (121
    )
    
    
    (121
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,789
    
    
    
    25,789Balance, December 31, 2006
    
    
    41,315
    
    
    
    4,131
    
    
    
    345,206
    
    
    
    146,658
    
    
    
    2,036
    
    
    
    (20,621
    )
    
    
    (1,793
    )
    
    
    473,581Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,768
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,768Exercise of stock-based compensation
    
    
    522
    
    
    
    52
    
    
    
    6,670
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,722Tax benefit on stock-based compensation
    
    
    
    
    
    
    
    
    
    
    881
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    881Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    6,518
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,518Deferred compensation plan
    
    
    
    
    
    
    
    
    
    
    1,409
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,409Cumulative effect of adopting a change in
accounting for uncertainties in income taxes
(FIN 48)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,709
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,709
    )Amortization of pension plan actuarial losses,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130
    
    
    
    130Unrealized gain adjustment on marketable
securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    16Recognized gain on pension, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,755
    
    
    
    6,755Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,257
    
    
    
    35,257Balance, December 30, 2007
    
    
    41,837
    
    
    $
    4,183
    
    
    $
    360,684
    
    
    $
    203,717
    
    
    
    2,036
    
    
    $
    (20,621
    )
    
    $
    40,365
    
    
    $
    588,328
  42




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##### Table of Contents



CHECKPOINT SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 (dollar amounts in thousands)
 December 30,
    
    
    December 31,
    
    
    December 25,Year ended
    
    2007
    
    
    2006
    
    
    2005Net earnings
    
    $
    58,768
    
    
    $
    35,922
    
    
    $
    36,521Amortization of pension plan actuarial losses, net of tax
    
    
    130
    
    
    
    
    
    
    
    Unrealized gain adjustment on marketable securities, net of tax
    
    
    16
    
    
    
    
    
    
    
    Recognized gain on pension, net of tax
    
    
    6,755
    
    
    
    
    
    
    
    Minimum pension liability adjustment, net of tax
    
    
    
    
    
    
    (121
    )
    
    
    (3,840
    )Foreign currency translation adjustment
    
    
    35,257
    
    
    
    25,789
    
    
    
    (33,499
    )Comprehensive income (loss)
    
    $
    100,926
    
    
    $
    61,590
    
    
    $
    (818
    )
  43




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##### Table of Contents



CHECKPOINT SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (dollar amounts in thousands)
 December 30,
    
    
    December 31,
    
    
    December 25,Year ended
    
    2007
    
    
    2006
    
    
    2005Cash flows from operating activities:Net earnings
    
    $
    58,768
    
    
    $
    35,922
    
    
    $
    36,521Adjustments to reconcile net earnings to net cash provided by operating
activities:Depreciation and amortization
    
    
    21,059
    
    
    
    19,504
    
    
    
    22,539Deferred taxes
    
    
    (7,486
    )
    
    
    281
    
    
    
    (4,226
    )Stock-based compensation
    
    
    6,518
    
    
    
    5,710
    
    
    
    788Excess tax benefit on stock compensation
    
    
    (755
    )
    
    
    (1,685
    )
    
    
    Provision for losses on accounts receivable
    
    
    1,846
    
    
    
    2,442
    
    
    
    2,574Gain on sublease settlement
    
    
    
    
    
    
    (1,777
    )
    
    
    Gain on sale of discontinued operations
    
    
    (359
    )
    
    
    (1,299
    )
    
    
    Gain on sale of Austria subsidiary
    
    
    (2,523
    )
    
    
    
    
    
    
    (Gain) loss on disposal of fixed assets
    
    
    (193
    )
    
    
    262
    
    
    
    (1,627
    )Impairments of goodwill and long-lived assets
    
    
    
    
    
    
    
    
    
    
    2,060(Increase) decrease in current assets, net of the effects of acquired companies:Accounts receivable
    
    
    (34,186
    )
    
    
    (3,977
    )
    
    
    (8,228
    )Inventories
    
    
    2,186
    
    
    
    (8,299
    )
    
    
    (5,526
    )Other current assets
    
    
    (2,496
    )
    
    
    6,207
    
    
    
    (10,929
    )Increase (decrease) in current liabilities, net of the effects of acquired
companies:Accounts payable
    
    
    17,958
    
    
    
    (18,358
    )
    
    
    (1,062
    )Income taxes
    
    
    (9,144
    )
    
    
    4,904
    
    
    
    2,454Unearned revenues
    
    
    4,229
    
    
    
    (3,930
    )
    
    
    (1,797
    )Restructuring reserve
    
    
    (2,958
    )
    
    
    (5,668
    )
    
    
    7,932Other current and accrued liabilities
    
    
    14,507
    
    
    
    (7,853
    )
    
    
    3,145Net cash provided by operating activities
    
    
    66,971
    
    
    
    22,386
    
    
    
    44,618Cash flows from investing activities:Acquisition of property, plant, and equipment
    
    
    (13,363
    )
    
    
    (11,520
    )
    
    
    (10,846
    )Net cash (outflow) proceeds from the sale of discontinued operations
    
    
    (2,159
    )
    
    
    26,904
    
    
    
    Acquisitions of businesses, net of cash acquired
    
    
    (94,522
    )
    
    
    (7,353
    )
    
    
    (2,026
    )Decrease in restricted cash
    
    
    2,121
    
    
    
    
    
    
    
    Other investing activities
    
    
    1,772
    
    
    
    (68
    )
    
    
    4,351Net cash (used in) provided by investing activities
    
    
    (106,151
    )
    
    
    7,963
    
    
    
    (8,521
    )Cash flows from financing activities:Proceeds from stock issuances
    
    
    7,174
    
    
    
    8,691
    
    
    
    11,356Excess tax benefit on stock compensation
    
    
    755
    
    
    
    1,685
    
    
    
    Proceeds of short-term debt
    
    
    2,899
    
    
    
    14,200
    
    
    
    Payment of short-term debt
    
    
    (8,950
    )
    
    
    (9,873
    )
    
    
    Net change in factoring and bank overdrafts
    
    
    
    
    
    
    (3,293
    )
    
    
    1,612Proceeds of long-term debt
    
    
    6,177
    
    
    
    
    
    
    
    51,776Payment of long-term debt
    
    
    (891
    )
    
    
    (18,355
    )
    
    
    (83,027
    )Net cash provided by (used in) financing activities
    
    
    7,164
    
    
    
    (6,945
    )
    
    
    (18,283
    )Effect of foreign currency rate fluctuations on cash and cash equivalents
    
    
    6,893
    
    
    
    6,767
    
    
    
    (7,285
    )Net (decrease) increase in cash and cash equivalents
    
    
    (25,123
    )
    
    
    30,171
    
    
    
    10,529Cash and cash equivalents:Beginning of year
    
    
    143,394
    
    
    
    113,223
    
    
    
    102,694End of year
    
    $
    118,271
    
    
    $
    143,394
    
    
    $
    113,223
  44




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##### Table of Contents



CHECKPOINT SYSTEMS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Operations
 ®
 Out of
Period Adjustments
  Principles of Consolidation
  Use of Estimates
  Fiscal Year
  Cash and Cash Equivalents
  Restricted Cash
 ®
 Accounts Receivable
  45




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##### Table of Contents



Inventories
  Revenue Equipment on Operating Lease
  Property, Plant, and Equipment
   Goodwill
  Other Intangibles
  Other Assets
  Deferred Financing Costs
  46




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##### Table of Contents



Revenue Recognition
  Shipping and Handling Fees and Costs
  Cost of Revenues
  Warranty Reserves
  December 30,
    
    
    December 31,(dollar amounts in thousands)
    
    2007
    
    
    2006Balance at beginning of year
    
    $
    5,499
    
    
    $
    5,211Accruals for warranties issued
    
    
    7,929
    
    
    
    3,909Accruals related to pre-existing warranties, including changes in estimate
    
    
    
    
    
    
    865Total accruals
    
    
    7,929
    
    
    
    4,774Settlement made
    
    
    (6,155
    )
    
    
    (4,580
    )Acquisitions / (Divestitures)
    
    
    309
    
    
    
    (236
    )Foreign currency translation adjustment
    
    
    526
    
    
    
    330Balance at end of year
    
    $
    8,108
    
    
    $
    5,499
 Royalty Expense
  Research and Development Costs
  Stock Options
  47




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##### Table of Contents



Year ended,
    
    
    Year ended,
    
    
    Year ended,December 30,
    
    
    December 31,
    
    
    December 25,2007
    
    
    2006
    
    
    2005Weighted average fair value of grants
    
    $
    8.88
    
    
    $
    11.47
    
    
    $
    4.99Valuation assumptions:Expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility
    
    
    .3659
    
    
    
    .4135
    
    
    
    .3209Expected life (in years)
    
    
    4.56
    
    
    
    4.54
    
    
    
    3.4Risk-free interest rate
    
    
    4.264
    %
    
    
    4.55  5.07
    %
    
    
    2.8  4.6
    %
  Year ended,December 25,(dollar amounts in thousands, except per share amounts)
    
    2005Net earnings, as reported
    
    $
    36,521Add: Stock-based compensation recorded under the instrinsic method, net of tax
    
    
    271Less: Stock-based compensation expenses determined under the fair-value method, net of tax
    
    
    (2,124
    )Pro forma net earnings
    
    $
    34,668Basic earnings per share:As reported
    
    $
    .96Pro forma
    
    $
    .91Diluted earnings per share:As reported
    
    $
    .93Pro forma
    
    $
    .88
  Income Taxes
   48




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##### Table of Contents



Taxes Collected from Customers
  Foreign Currency Translation and Transactions
  Accounting for Hedging Activities
   Recently Adopted Accounting Standards
  New Accounting Pronouncements and Other Standards
     49




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##### Table of Contents



Note 2. ACQUISITIONS
 Alpha Acquisition
    (dollar amounts in thousands)
 November 1,2007Cash
    
    $
    67,000Long-term debt
    
    
    75,000Purchase price (1)
    
    
    142,000Fair value of net assets acquired:Accounts receivable
    
    
    6,986Inventories
    
    
    7,007Other current assets
    
    
    73Property, plant, and equipment
    
    
    9,195Intangible assets (2)
    
    
    71,053Accounts payable
    
    
    (2,047
    )Accrued compensation and related taxes
    
    
    (810
    )Other accrued expenses
    
    
    (733
    )Fair value of the net assets acquired
    
    
    90,724Excess cost over net assets acquired
    
    
    51,276Adjustment to the realization of deferred tax assets for Checkpoint
    
    
    (59
    )Estimated acquisition costs
    
    
    568Goodwill (3)
    
    $
    51,785
 Notes:(1)
    
    Represents the cash and long-term debt used to finance the acquisition.(2)
    
    Intangible assets consist of customer relationships ($33.4 million),
trade names ($19.4 million), and developed technologies ($18.3
million). The weighted-average useful lives for the customer
relationships and developed technologies are approximately 10 years.
The intangible assets related to the trade name are deemed to have an
indefinite life. The amortization of definite life intangibles are
calculated on a straight-line basis.(3)
    
    Goodwill of $51.8 million was assigned to the Shrink Management
Solutions reporting segment. Of that total amount, $51.8 million is
expected to be deductible for tax purposes over a 15 year period.  50




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##### Table of Contents



Pro FormaDecember 30,
    
    
    December 31,Year ended
    
    2007
    
    
    2006(unaudited)
    
    
    (unaudited)Net revenues
    
    $
    880,790
    
    
    $
    739,033Earnings from continuing operations
    
    
    58,225
    
    
    
    34,920Earnings from discontinued operations, net of tax
    
    
    359
    
    
    
    903Net earnings
    
    $
    58,584
    
    
    $
    35,823Basic Earnings Per Share:Earnings from continuing operations
    
    $
    1.46
    
    
    $
    .89Earnings from discontinued operations, net of tax
    
    
    .01
    
    
    
    .02Basic Earnings Per Share
    
    $
    1.47
    
    
    $
    .91Diluted Earnings Per Share:Earnings from continuing operations
    
    $
    1.43
    
    
    $
    .87Earnings from discontinued operations, net of tax
    
    
    .01
    
    
    
    .02Diluted Earnings Per Share
    
    $
    1.44
    
    
    $
    .89
 Other Acquisitions in Fiscal 2007
   51




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##### Table of Contents



Other Acquisitions in Fiscal 2006
  Note 3. INVENTORIES
  December 30,
    
    December 31,(dollar amounts in thousands)
    
    2007
    
    
    2006Raw materials
    
    $
    16,352
    
    
    $
    14,420Work-in-process
    
    
    6,497
    
    
    
    4,467Finished goods
    
    
    86,480
    
    
    
    75,675Total
    
    $
    109,329
    
    
    $
    94,562
 Note 4. REVENUE EQUIPMENT ON OPERATING LEASE AND PROPERTY, PLANT, AND EQUIPMENT
  December 30,
    
    December 31,(dollar amounts in thousands)
    
    2007
    
    
    2006Revenue equipment on operating leaseEquipment rented to customers
    
    $
    31,290
    
    
    $
    29,331Accumulated depreciation
    
    
    (26,790
    )
    
    
    (25,006
    )Total revenue equipment on operating lease
    
    $
    4,500
    
    
    $
    4,325Property, plant, and equipmentLand
    
    $
    8,741
    
    
    $
    8,011Buildings
    
    
    59,463
    
    
    
    46,538Machinery and equipment
    
    
    140,982
    
    
    
    126,084Leasehold improvements
    
    
    11,938
    
    
    
    10,684Construction in progress
    
    
    4,672
    
    
    
    5,389225,796
    
    
    
    196,706Accumulated depreciation
    
    
    (137,700
    )
    
    
    (128,989
    )Total property, plant, and equipment
    
    $
    88,096
    
    
    $
    67,717
 
  52




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##### Table of Contents



Note 5. GOODWILL AND OTHER INTANGIBLE ASSETS
   December 30, 2007
    
    
    December 31, 2006Amortizable

        
    
    
    
    
    Gross
    
        
    
    
    
    
    GrossLife
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Accumulated(dollar amounts in thousands)
    
    (years)
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationCustomer lists
    
    
    20
    
    
    $
    80,104
    
    
    $
    26,535
    
    
    $
    32,583
    
    
    $
    22,116Trade name
    
    
    30
    
    
    
    52,212
    
    
    
    15,695
    
    
    
    28,625
    
    
    
    13,587Patents, license agreements
    
    
    5 to 14
    
    
    
    62,716
    
    
    
    38,076
    
    
    
    40,060
    
    
    
    32,761Other
    
    
    3 to 6
    
    
    
    5,890
    
    
    
    1,322
    
    
    
    921
    
    
    
    582Total
    
    
    
    
    
    $
    200,922
    
    
    $
    81,628
    
    
    $
    102,189
    
    
    $
    69,046
   (dollar amounts in thousands)2008
    
    $
    11,5952009
    
    $
    11,2082010
    
    $
    10,4532011
    
    $
    8,9212012
    
    $
    8,637
   ShrinkManagement
    
    
    Intelligent
    
    
    Retail(dollar amounts in thousands)
    
    Solutions
    
    
    Labels
    
    
    Merchandising
    
    
    TotalBalance as of December 25, 2005
    
    $
    63,429
    
    
    $
    38,259
    
    
    $
    63,625

    
    $
    165,313Acquired during the year
    
    
    11
    
    
    
    5,720
    
    
    
    

    
    
    5,731Translation adjustment and other
    
    
    5,895
    
    
    
    3,795
    
    
    
    6,554

    
    
    16,244Balance as of December 31, 2006
    
    
    69,335
    
    
    
    47,774
    
    
    
    70,179
    
    
    
    187,288Acquired during the year
    
    
    63,584
    
    
    
    6,446
    
    
    
    
    
    
    
    70,030Purchase accounting adjustments
    
    
    
    
    
    
    (2,687
    )
    
    
    
    
    
    
    (2,687
    )Translation adjustment and other
    
    
    7,025
    
    
    
    4,781
    
    
    
    8,164
    
    
    
    19,970Balance as of December 30, 2007
    
    $
    139,944
    
    
    $
    56,314
    
    
    $
    78,343
    
    
    $
    274,601
 53




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##### Table of Contents



Note 6. SHORT-TERM BORROWINGS AND CURRENT PORTION OF LONG-TERM DEBT
  December 30,
    
    
    December 31,(dollar amounts in thousands)
    
    2007
    
    
    2006Overdraft facilities and lines of credit with interest rates ranging from 1.50% to 1.75%(1)
    
    $
    
    
    
    $
    5,038Full recourse factoring liabilities
    
    
    
    
    
    
    774Current portion of long-term debt
    
    
    3,756
    
    
    
    998Total short-term borrowings and current portion of long-term debt
    
    $
    3,756
    
    
    $
    6,810
 (1)
    
    The weighted average interest rate for 2006 was 1.69%.   Note 7. LONG-TERM DEBT
  December 30,
    
    
    December 31,(dollar amounts in thousands)
    
    2007
    
    
    2006Senior unsecured credit facility:$150 million variable interest rate revolving credit facility maturing in 2010
    
    $
    91,496
    
    
    $
    9,067Asialco loans maturing in 2008
    
    
    3,418
    
    
    
    2.7 million capital lease maturing in 2007
    
    
    
    
    
    
    469Other capital leases with maturities through 2012
    
    
    598
    
    
    
    1,186Total(1)
    
    
    95,512
    
    
    
    10,722Less current portion
    
    
    3,756
    
    
    
    998Total long-term portion
    
    $
    91,756
    
    
    $
    9,724
 (1)
    
    The weighted average interest rates for 2007 and 2006 were 4.9% and 1.8%, respectively.  54




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##### Table of Contents



Capital
    
    Total(dollar amounts in thousands)
    
    Debt
    
    Leases
    
    Debt2008
    
    $
    3,418
    
    
    $
    338
    
    
    $
    3,7562009
    
    
    
    
    
    
    221
    
    
    
    2212010
    
    
    91,496
    
    
    
    24
    
    
    
    91,5202011
    
    
    
    
    
    
    11
    
    
    
    112012
    
    
    
    
    
    
    4
    
    
    
    4Thereafter
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    94,914
    
    
    $
    598
    
    
    $
    95,512
 Note 8. STOCK-BASED COMPENSATION
   55




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##### Table of Contents



Stock Plans
       56




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##### Table of Contents



Stock Options
  WeightedAverageWeighted-
    
    Remaining
    
    AggregateAverage
    
    Contractual
    
    IntrinsicExercise
    
    Term
    
    ValueShares
    
    Price
    
    (in years)
    
    (in thousands)Outstanding at December 31, 2006
    
    
    3,154,517
    
    
    $
    16.28
    
    
    
    6.03
    
    
    $
    15,274Granted
    
    
    836,526
    
    
    
    23.22Exercised
    
    
    (388,966
    )
    
    
    16.42Forfeited or expired
    
    
    (196,175
    )
    
    
    25.30Outstanding at December 30, 2007
    
    
    3,405,902
    
    
    
    17.45
    
    
    
    6.21
    
    
    
    28,950Vested and expected to vest at December 30, 2007
    
    
    2,925,521
    
    
    
    16.50
    
    
    
    5.71
    
    
    
    27,546Exercisable at December 30, 2007
    
    
    2,380,524
    
    
    
    15.02
    
    
    
    4.98
    
    
    
    25,797
  57




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##### 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 31, 2006
    
    
    197,672
    
    
    1.37

    
    $
    26.24Granted
    
    
    231,312

    
    
    
    
    
    $
    24.59Vested
    
    
    (29,637
    )
    
    
    
    
    $
    28.65Forfeited
    
    
    (22,961
    )
    
    

    
    
    $
    25.33Nonvested at December 30, 2007
    
    
    376,386

    
    
    1.48

    
    $
    32.70Vested and expected to vest at December 30, 2007
    
    
    184,794

    
    
    1.20Vested at December 30, 2007
    
    
    70,000

    
    
    
  Note 9. SUPPLEMENTAL CASH FLOW INFORMATION
   58




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##### Table of Contents



Business Acquisitions
 (dollar amounts in thousands)
 December 30,2007Fair value of tangible assets acquired, less cash acquired
    
    $
    45,883Goodwill and identified intangible assets
    
    
    155,239Liabilities assumed
    
    
    (31,601
    )Borrowings to fund debt
    
    
    (75,000
    )Cash paid for acquisitions
    
    $
    94,521
 Note 10. STOCKHOLDERS EQUITY
    (dollar amounts in thousands)
    
    2007
    
    
    2006Actuarial losses on pension plans, net of tax
    
    $
    (2,883
    )
    
    $
    (9,225
    )Unrealized gain adjustment on marketable securities, net of tax
    
    
    16
    
    
    
    Foreign currency translation adjustment
    
    
    43,232
    
    
    
    7,432Total
    
    $
    40,365
    
    
    $
    (1,793
    )
 Note 11. EARNINGS PER SHARE
  December 30,
    
    
    December 31,
    
    
    December 25,(Amounts in thousands, except per share data)
    
    2007
    
    
    2006
    
    
    2005Basic earnings available to common stockholders:Net earnings available to common stockholders from continuing operations
    
    $
    58,409
    
    
    $
    35,019
    
    
    $
    28,413Diluted earnings available to common stockholders from continuing operations
    
    $
    58,409
    
    
    $
    35,019
    
    
    $
    28,413Shares:Weighted average number of common shares outstanding
    
    
    39,550
    
    
    
    39,136
    
    
    
    38,072Shares issuable under deferred compensation agreements
    
    
    311
    
    
    
    240
    
    
    
    157Basic weighted average number of common shares Outstanding
    
    
    39,861
    
    
    
    39,376
    
    
    
    38,229Common shares assumed upon exercise of stock options and awards
    
    
    853
    
    
    
    839
    
    
    
    832Shares issuable under deferred compensation arrangements
    
    
    10
    
    
    
    18
    
    
    
    14Dilutive weighted average number of common shares outstanding
    
    
    40,724
    
    
    
    40,233
    
    
    
    39,075Basic Earnings per Share:Earnings from continuing operations
    
    $
    1.46
    
    
    $
    .89
    
    
    $
    .75Earnings from discontinued operations, net of tax
    
    
    .01
    
    
    $
    .02
    
    
    $
    .21Basic earnings per share
    
    $
    1.47
    
    
    $
    .91
    
    
    $
    .96Diluted Earnings per Share:Earnings from continuing operations
    
    $
    1.43
    
    
    $
    .87
    
    
    $
    .72Earnings from discontinued operations, net of tax
    
    
    .01
    
    
    $
    .02
    
    
    $
    .21Diluted earnings per share
    
    $
    1.44
    
    
    $
    .89
    
    
    $
    .93
 59




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##### Table of Contents



December 30,
    
    
    December 31,
    
    
    December 25,(Share amounts in thousands)
    
    2007
    
    
    2006
    
    
    2005Weighted average common
share equivalents
associated with
anti-dilutive stock options
and restricted stock units
excluded from the
computation of diluted EPS:
    
    
    524
    
    
    
    541
    
    
    
    423
 Note 12. DISCONTINUED OPERATIONS
 ®
 ®
 December 30,
    
    
    December 31,
    
    
    December 25,(dollar amounts in thousands)
    
    2007
    
    
    2006
    
    
    2005Net revenue
    
    $
    
    
    
    $
    7,446
    
    
    $
    98,118Gross profit
    
    
    
    
    
    
    1,433
    
    
    
    26,908Selling, general, & administrative expense
    
    
    
    
    
    
    2,239
    
    
    
    13,901Research and development
    
    
    
    
    
    
    
    
    
    
    415Asset impairment
    
    
    
    
    
    
    
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    664Operating (loss) income
    
    
    
    
    
    
    (806
    )
    
    
    11,928Gain on disposal
    
    
    710
    
    
    
    2,768
    
    
    
    Earnings from discontinued operations before income taxes
    
    
    710
    
    
    
    1,962
    
    
    
    11,928Income taxes
    
    
    351
    
    
    
    1,059
    
    
    
    3,820Earnings from discontinued operations, net of tax
    
    $
    359
    
    
    $
    903
    
    
    $
    8,108
 Note 13. INCOME TAXES
  (dollar amounts in thousands)
    
    2007
    
    
    2006
    
    
    2005Domestic(1)
    
    $
    4,730
    
    
    $
    (778
    )
    
    $
    24,877Foreign
    
    
    65,846
    
    
    
    42,753
    
    
    
    15,250Total
    
    $
    70,576
    
    
    $
    41,975
    
    
    $
    40,127
 (1)
    
    The domestic component includes the earnings of our operations in Puerto Rico in 2005. 60




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##### Table of Contents



(dollar amounts in thousands)
    
    2007
    
    
    2006
    
    
    2005Currently payableFederal
    
    $
    (1,240
    )
    
    $
    (760
    )
    
    $
    6,292State
    
    
    981
    
    
    
    582
    
    
    
    921Puerto Rico
    
    
    1,058
    
    
    
    (58
    )
    
    
    (636
    )Foreign
    
    
    18,255
    
    
    
    7,645
    
    
    
    9,310Total currently payable
    
    
    19,054
    
    
    
    7,409
    
    
    
    15,887DeferredFederal
    
    
    (80
    )
    
    
    1,315
    
    
    
    (1,370
    )State
    
    
    (5,493
    )
    
    
    
    
    
    
    Puerto Rico
    
    
    (9
    )
    
    
    (121
    )
    
    
    171Foreign
    
    
    (1,298
    )
    
    
    (1,616
    )
    
    
    (3,027
    )Total deferred
    
    
    (6,880
    )
    
    
    (422
    )
    
    
    (4,226
    )Total provision
    
    $
    12,174
    
    
    $
    6,987
    
    
    $
    11,661
  December 30,
    
    
    December 31,(dollar amounts in thousands)
    
    2007
    
    
    2006Inventory
    
    $
    7,963
    
    
    $
    5,475Accounts receivable
    
    
    3,305
    
    
    
    2,804Net operating loss and foreign tax credit carryforwards
    
    
    44,743
    
    
    
    51,782Restructuring
    
    
    350
    
    
    
    268Deferred revenue
    
    
    454
    
    
    
    665Pension
    
    
    6,401
    
    
    
    10,748Warranty
    
    
    1,529
    
    
    
    1,007Deferred compensation
    
    
    2,194
    
    
    
    1,358Stock based compensation
    
    
    2,647
    
    
    
    1,293Valuation allowance
    
    
    (27,572
    )
    
    
    (34,510
    )Deferred tax assets
    
    
    42,014
    
    
    
    40,890Depreciation
    
    
    (724
    )
    
    
    1,529Intangibles
    
    
    9,980
    
    
    
    12,168Other
    
    
    2,658
    
    
    
    2,481Withholding tax liabilities
    
    
    1,031
    
    
    
    1,031Deferred tax liabilities
    
    
    12,945
    
    
    
    17,209Net deferred tax asset
    
    $
    29,069
    
    
    $
    23,681
    61




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##### Table of Contents



(dollar amounts in thousands)
    
    2007
    
    
    2006
    
    
    2005Tax provision at the statutory Federal income tax rate
    
    $
    24,702
    
    
    $
    14,692
    
    
    $
    14,044Tax exempt earnings of subsidiary in Puerto Rico
    
    
    
    
    
    
    
    
    
    
    (1,467
    )Non-deductible permanent items
    
    
    (165
    )
    
    
    260
    
    
    
    485State and local income taxes, net of Federal benefit
    
    
    634
    
    
    
    186
    
    
    
    599Benefit from extraterritorial income
    
    
    
    
    
    
    (70
    )
    
    
    (619
    )Foreign losses for which no tax benefit recognized
    
    
    1,348
    
    
    
    801
    
    
    
    626Foreign rate differentials
    
    
    (12,028
    )
    
    
    (6,982
    )
    
    
    (3,744
    )Tax settlements
    
    
    
    
    
    
    
    
    
    
    (452
    )Potential tax contingencies
    
    
    1,984
    
    
    
    (1,528
    )
    
    
    179Change in valuation allowance
    
    
    (4,527
    )
    
    
    (453
    )
    
    
    180Tax restructuring and AJCA repatriation
    
    
    
    
    
    
    
    
    
    
    2,039Stock based compensation
    
    
    384
    
    
    
    308
    
    
    
    Other
    
    
    (158
    )
    
    
    (227
    )
    
    
    (209
    )Tax provision at the effective tax rate
    
    $
    12,174
    
    
    $
    6,987
    
    
    $
    11,661
  (dollar amounts in thousands)
    
    2007Gross unrecognized tax benefits at January 1, 2007
    
    $
    10,197Increases in tax positions for prior years
    
    
    384Decreases in tax positions for prior years
    
    
    Increases in tax positions for current year
    
    
    1,128Settlements
    
    
    Acquisition Reserves
    
    
    1,063Lapse in statute of limitations
    
    
    (58
    )Gross unrecognized tax benefits at December 31, 2007
    
    $
    12,714
   62




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Note 14. EMPLOYEE BENEFIT PLANS
      Pension Plans
   63




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December 30,
    
    
    December 31,(dollar amounts in thousands)
    
    2007
    
    
    2006Transition obligation
    
    $
    633
    
    
    $
    691Prior service costs
    
    
    26
    
    
    
    26Actuarial losses
    
    
    5,456
    
    
    
    13,976Total
    
    
    6,115
    
    
    
    14,693Deferred tax
    
    
    (3,232
    )
    
    
    (5,468
    )Net
    
    $
    2,883
    
    
    $
    9,225
  December 30,(dollar amounts in thousands)
    
    2007Transition obligation
    
    $
    137Prior service costs
    
    
    3Actuarial gain
    
    
    (43
    )Total
    
    $
    97
   (dollar amounts in thousands)
    
    2007
    
    
    2006
    
    
    2005Service cost
    
    $
    1,420
    
    
    $
    1,350
    
    
    $
    1,380Interest cost
    
    
    4,094
    
    
    
    3,505
    
    
    
    3,837Expected return on plan assets
    
    
    (144
    )
    
    
    (144
    )
    
    
    (4
    )Amortization of actuarial loss
    
    
    477
    
    
    
    569
    
    
    
    32Amortization of transition obligation
    
    
    128
    
    
    
    117
    
    
    
    116Amortization of prior service costs
    
    
    2
    
    
    
    2
    
    
    
    2Net periodic pension cost
    
    
    5,977
    
    
    
    5,399
    
    
    
    5,363Settlement
(gain) loss
    
    
    (462
    )
    
    
    736
    
    
    
    Special termination benefit recognized
    
    
    
    
    
    
    226
    
    
    
    Curtailment gain
    
    
    
    
    
    
    (337
    )
    
    
    (664
    )Total pension expense
    
    $
    5,515
    
    
    $
    6,024
    
    
    $
    4,699
  December 30,
    
    
    December 31,(dollar amounts in thousands)
    
    2007
    
    
    2006Change in benefit obligationNet benefit obligation at beginning of year
    
    $
    89,566
    
    
    $
    83,312Service cost
    
    
    1,420
    
    
    
    1,350Interest cost
    
    
    4,094
    
    
    
    3,505Actuarial (gain)
    
    
    (10,082
    )
    
    
    (274
    )Gross benefits paid
    
    
    (6,925
    )
    
    
    (3,570
    )Plan settlements
    
    
    (91
    )
    
    
    (3,849
    )Curtailment gain
    
    
    
    
    
    
    (337
    )Special termination benefits
    
    
    
    
    
    
    226Divestment
    
    
    (1,165
    )
    
    
    Acquisition
    
    
    118
    
    
    
    Foreign currency exchange rate changes
    
    
    9,405
    
    
    
    9,203Net benefit obligation at end of year
    
    $
    86,340
    
    
    $
    89,566Change in plan assetsFair value of plan assets at beginning of year
    
    $
    3,234
    
    
    $
    3,440Actual return on assets
    
    
    (613
    )
    
    
    (202
    )Employer contributions
    
    
    5,534
    
    
    
    7,058Gross benefits paid
    
    
    (6,925
    )
    
    
    (3,570
    )Plan settlements
    
    
    
    
    
    
    (3,849
    )Foreign currency exchange rate changes
    
    
    224
    
    
    
    357Fair value of plan assets at end of year
    
    $
    1,454
    
    
    $
    3,234Reconciliation of funded statusFunded status at end of year
    
    $
    (84,886
    )
    
    $
    (86,332
    )
 64




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##### Table of Contents



December 30,
    
    
    December 31,(dollar amounts in thousands)
    
    2007
    
    
    2006Amounts recognized in accrued benefit consist of:Accrued pensions  current
    
    $
    4,337
    
    
    $
    3,730Accrued pensions
    
    
    80,549
    
    
    
    82,602Net amount recognized at end of year
    
    $
    84,886
    
    
    $
    86,332Other comprehensive income attributable to change in additional minimum liability recognition
    
    
    
    
    
    $
    681Accumulated benefit obligation at end of year
    
    $
    81,824
    
    
    $
    83,768
  December 30,
    
    
    December 31,(dollar amounts in thousands)
    
    2007
    
    
    2006Projected benefit obligation
    
    $
    86,340
    
    
    $
    88,682Accumulated benefit obligation
    
    $
    81,824
    
    
    $
    83,768Fair value of plan assets
    
    $
    1,454
    
    
    $
    3,234
 65




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##### Table of Contents



December 30,
    
    
    December 31,2007
    
    
    2006Weighted average assumptions for year-end benefit obligations:Discount rate(1)
    
    
    5.50
    %
    
    
    4.50
    %Expected rate of increase in future compensation levels
    
    
    2.50
    %
    
    
    2.50
    %Weighted average assumptions for net periodic benefit cost development:Discount rate(1)
    
    
    4.50
    %
    
    
    4.25
    %Expected rate of return on plan assets
    
    
    3.80
    %
    
    
    3.80
    %Expected rate of increase in future compensation levels
    
    
    2.50
    %
    
    
    2.50
    %Measurement Date:
    
    December 30,
    
    
    December 31,2007
    
    
    2006
 (1)
    
    Represents the weighted average rate for all pension plans.    (dollar amounts in thousands)2008
    
    $
    4,3912009
    
    
    4,4542010
    
    
    4,9972011
    
    
    4,8022012
    
    
    5,5242013 through 2017
    
    $
    27,593
 Note 15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
  Foreign Exchange Risk Management
  66




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##### Table of Contents




   Fair Values
  December 30, 2007
    
    
    December 31, 2006Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    Estimated(dollar amounts in thousands)
    
    Amount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueLong-term debt (including
current maturities and
excluding capital leases)(1)
    
    $
    94,914
    
    
    $
    94,914
    
    
    $
    9,067
    
    
    $
    9,067
 (1)
    
    The carrying amounts are reported on the balance sheet under the indicated captions.   Note 16. PROVISION FOR RESTRUCTURING
 2005 Restructuring Plan
   67




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ChargeAccrual at
    
    Charged
    
    Reversed
    
    
    
    
    
    ExchangeBeginning
    
    to
    
    to
    
    Cash
    
    Rate
    
    Accrual at(dollar amounts are in thousands)
    
    of Year
    
    Earnings
    
    Earnings
    
    Payments
    
    Changes
    
    12/30/07Fiscal 2007Severance and other employee-related charges
    
    $
    6,786
    
    
    $
    2,096
    
    
    $
    (881
    )
    
    $
    (5,287
    )
    
    $
    301
    
    
    $
    3,015
 ChargeAccrual at
    
    Charged
    
    Reversed
    
    
    
    
    
    ExchangeBeginning
    
    to
    
    to
    
    Cash
    
    Rate
    
    Accrual at(dollar amounts are in thousands)
    
    of Year
    
    Earnings
    
    Earnings
    
    Payments
    
    Changes
    
    12/31/06Fiscal 2006Severance and other employee-related charges
    
    $
    10,121
    
    
    $
    9,140
    
    
    $
    (1,225
    )
    
    $
    (11,989
    )
    
    $
    739
    
    
    $
    6,786
  2003 Restructuring Plan
    Acquisition Restructuring
  68




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##### Table of Contents



Note 17. COMMITMENTS AND CONTINGENCIES
   Capital
    
    
    Operating(dollar amounts in thousands)
    
    Leases
    
    
    Leases
    
    
    Total2008
    
    $
    385
    
    
    $
    12,970
    
    
    $
    13,3552009
    
    
    251
    
    
    
    10,629
    
    
    
    10,8802010
    
    
    25
    
    
    
    7,730
    
    
    
    7,7552011
    
    
    11
    
    
    
    4,758
    
    
    
    4,7692012
    
    
    4
    
    
    
    2,886
    
    
    
    2,890Thereafter
    
    
    
    
    
    
    5,161
    
    
    
    5,161Total minimum lease payments
    
    
    676
    
    
    $
    44,134
    
    
    $
    44,810Less: amounts representing interest
    
    
    78Present value of minimum lease payments
    
    $
    598
 Contingencies
  Matters related to ID Security Systems Canada Inc. versus Checkpoint Systems, Inc.
  Note 18. CONCENTRATION OF CREDIT RISK
  69




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Note 19. BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION
   i
    
    Shrink Management Solutions  includes electronic article surveillance (EAS) systems,
closed-circuit television (CCTV) systems, and fire and intrusion systems.ii
    
    Intelligent Labels  includes electronic article surveillance labels, Check-Net® (service
bureau), intelligent library systems, and radio frequency identification (RFID) tags and
labels.iii
    
    Retail Merchandising  includes hand-held labeling systems (HLS) and retail display systems
(RDS).
   (A) Business Segments
 (dollar amounts in thousands)
    
    2007
    
    
    2006
    
    
    2005Business segment net revenue:Shrink Management Solutions
    
    $
    478,526
    
    
    $
    383,932
    
    
    $
    427,321Intelligent Labels
    
    
    259,282
    
    
    
    219,389
    
    
    
    200,786Retail Merchandising
    
    
    96,348
    
    
    
    84,454
    
    
    
    89,885Total
    
    $
    834,156
    
    
    $
    687,775
    
    
    $
    717,992Business segment gross profit:Shrink Management Solutions
    
    $
    190,379
    
    
    $
    149,505
    
    
    $
    168,820Intelligent Labels
    
    
    109,487
    
    
    
    100,654
    
    
    
    94,963Retail Merchandising
    
    
    46,106
    
    
    
    41,532
    
    
    
    47,747Total gross profit
    
    
    345,972
    
    
    
    291,691
    
    
    
    311,530Operating expenses
    
    
    279,154
    (1)
    
    
    253,608
    (2)
    
    
    270,728
    (3)Interest income (expense), net
    
    
    3,096
    
    
    
    2,751
    
    
    
    (524
    )Other gain (loss), net
    
    
    662
    
    
    
    1,141
    
    
    
    (151
    )Earnings from continuing operations before income taxes and minority interest
    
    $
    70,576
    
    
    $
    41,975
    
    
    $
    40,127Business segment total assets:Shrink Management Solutions
    
    $
    548,071
    
    
    $
    346,531Intelligent Labels
    
    
    334,865
    
    
    
    296,659Retail Merchandising
    
    
    148,108
    
    
    
    138,001Total
    
    $
    1,031,044
    
    
    $
    781,191
 
 (1)
    
    Includes a $2.7 million restructuring charge, a $4.4 million charge related to
our CEO transition, and a $2.6 million gain from the sale of our Austria
subsidiary.(2)
    
    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.(3)
    
    Includes $12.6 million restructuring charge and a $1.4 million impairment charge. (B) Geographic Information
  70




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United Statesand
    
    
    
    
    
    International
    
    Asia(dollar amounts in thousands)
    
    Puerto Rico
    
    Europe
    
    Americas
    
    Pacific
    
    Total2007Net revenues from unaffiliated customers
    
    $
    275,173
    
    
    $
    412,416
    
    
    $
    37,164
    
    
    $
    109,403
    
    
    $
    834,156Gross profit
    
    
    124,862
    
    
    
    161,457
    
    
    
    10,230
    
    
    
    49,423
    
    
    
    345,972Long-lived assets
    
    $
    156,502
    
    
    $
    262,377
    
    
    $
    8,646
    
    
    $
    58,966
    
    
    $
    486,4912006Net revenues from unaffiliated customers
    
    $
    237,108
    
    
    $
    340,171
    
    
    $
    31,048
    
    
    $
    79,448
    
    
    $
    687,775Gross profit
    
    
    102,987
    
    
    
    136,534
    
    
    
    12,269
    
    
    
    39,901
    
    
    
    291,691Long-lived assets
    
    $
    42,809
    
    
    $
    215,907
    
    
    $
    5,549
    
    
    $
    28,208
    
    
    $
    292,4732005Net revenues from unaffiliated customers
    
    $
    270,174
    
    
    $
    346,513
    
    
    $
    29,885
    
    
    $
    71,420
    
    
    $
    717,992Gross profit
    
    
    113,460
    
    
    
    155,799
    
    
    
    9,612
    
    
    
    32,659
    
    
    
    311,530
 Note 20. MINORITY INTEREST
    71




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Note 21. QUARTERLY INFORMATION (UNAUDITED)
 (dollar amounts in thousands, except per share data)
 QUARTERS (unaudited)
 First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    Year2007Net revenues
    
    $
    171,202
    
    
    $
    195,702
    
    
    $
    204,589
    
    
    $
    262,663
    
    
    $
    834,156Gross profit
    
    
    70,279
    
    
    
    82,995
    
    
    
    85,648
    
    
    
    107,050
    
    
    
    345,972Earnings from continuing operations
    
    
    4,966
    (1)
    
    
    14,574
    (2)
    
    
    14,347
    
    
    
    24,522
    (3)(4)
    
    
    58,409Net earnings
    
    
    4,966
    (1)
    
    
    15,097
    (2)
    
    
    14,338
    
    
    
    24,367
    (3)(4)
    
    
    58,768Earnings per share from continuing operations:Basic
    
    $
    .13
    
    
    $
    .37
    
    
    $
    .36
    
    
    $
    .61
    
    
    $
    1.46Diluted
    
    $
    .12
    
    
    $
    .36
    
    
    $
    .35
    
    
    $
    .60
    
    
    $
    1.43Net earnings per share:Basic
    
    $
    .13
    
    
    $
    .38
    
    
    $
    .36
    
    
    $
    .61
    
    
    $
    1.47Diluted
    
    $
    .12
    
    
    $
    .37
    
    
    $
    .35
    
    
    $
    .59
    
    
    $
    1.44
 First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    Year2006Net 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
    (5)
    
    
    4,674
    (7)
    
    
    11,712
    (8)
    
    
    18,603
    (9)
    
    
    35,019Net earnings
    
    
    1,603
    (6)
    
    
    4,619
    (7)
    
    
    11,700
    (8)
    
    
    18,000
    (9)
    
    
    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
 
 (1)
    
    Includes a $0.3 million restructuring charge (net of tax).(2)
    
    Includes a $0.2 million restructuring charge (net of tax).(3)
    
    Includes a $2.0 million restructuring charge (net of tax), a $2.9 million charge related to our CEO transition (net of
tax), and a $2.5 million gain from the sale of our Austria subsidiary (net of tax).(4)
    
    Includes a $2.1 million out of period adjustment
related to income taxes (see Note 1  Out of Period
Adjustments for more information).(5)
    
    Includes a $0.1 million restructuring charge (net of tax).(6)
    
    Includes a $1.4 million (net of tax) gain from the disposal of our bar-code business.(7)
    
    Includes a $0.4 million restructuring charge (net of tax) and a $1.5 million litigation settlement charge (net of tax).(8)
    
    Includes a $1.2 million restructuring charge (net of tax).(9)
    
    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. 72




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Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
  
 Item 9A. Controls and Procedures
 Disclosure Controls and Procedures
  Managements Annual Report On Internal Control Over Financial Reporting
 Internal ControlIntegrated
Framework
   Changes in Internal Control Over Financial Reporting
   
 Item 9B. OTHER INFORMATION
  
 PART III
 
 Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  73




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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
  1.
    
    The following consolidated financial statements of Checkpoint Systems, Inc. were included in Item 8Consolidated Balance Sheets as of December 30, 2007 and December 30, 2006Consolidated Statements of Operations for each of the years in the three-year period ended December 30, 2007Consolidated Statements of Stockholders Equity for each of the years in the three-year period ended
December 30, 2007Consolidated Statements of Comprehensive Income (Loss) for each of the years in the three-year period ended
December 30, 2007Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 30, 2007Notes to Consolidated Financial Statements2.
    
    The following consolidated financial statements schedules of Checkpoint Systems, Inc. is includedFinancial Statement Schedule, Schedule II  Valuation and Qualifying Accounts
 74




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##### Table of Contents



SIGNATURES
  CHECKPOINT SYSTEMS, INC./s/
Robert P. van der MerwePresident and Chief Executive Officer
  SIGNATURE
    
    TITLE
    
    DATE/s/ George W. Off
    
    Chairman of the Board of Directors
    
    February 28, 2008/s/
Robert P. van der Merwe
    
    President and Chief Executive Officer
    
    February 28, 2008/s/
Raymond D. Andrews
    
    Senior Vice President and Chief Financial Officer
    
    February 28, 2008/s/ William S. Antle, III
    
    Director
    
    February 28, 2008/s/ George Babich, Jr.
    
    Director
    
    February 28, 2008David W. Clark, Jr.
    
    Director
    
    February 28, 2008/s/ Harald Einsmann
    
    Director
    
    February 28, 2008/s/ R. Keith Elliott
    
    Director
    
    February 28, 2008/s/ Alan R. Hirsig
    
    Director
    
    February 28, 2008/s/ Jack W. Partridge
    
    Director
    
    February 28, 2008/s/ Sally Pearson
    
    Director
    
    February 28, 2008
 75




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3. Exhibits
 Exhibit 3.1
    
    Articles of Incorporation, as amended, are hereby
incorporated by reference to Item 14(a), Exhibit 3(i) of
the Registrants 1990 Form 10-K, filed with the SEC on
March 14, 1991.Exhibit 3.2
    
    By-Laws, as Amended and Restated, are hereby incorporated
by reference Item 5.03, Exhibit 3.2 of the Registrants
Current Report on Form 8-K filed with the SEC on December
28, 2007.Exhibit 3.3
    
    Articles of Amendment to the Articles of Incorporation are
hereby incorporated by reference to Item 5.03, Exhibit 3.1
of the Registrants Current Report on Form 8-K filed with
the SEC on December 28, 2007.Exhibit 4.1
    
    Rights Agreement by and between Registrant and American
Stock and Transfer and Trust Company dated as of March 10,
1997, is hereby incorporated by reference to Item 14(a),
Exhibit 4.1 of the Registrants 1996 Form 10-K filed with
the SEC on March 17, 1997.Exhibit 4.2
    
    Amendment No. 1 to Rights Agreement dated as of March 2,
2007 is hereby incorporated by reference to Exhibit 4.1 of
the Registrants Current Report on Form 8-K filed with the
SEC on March 8, 2007.Exhibit 10.1*
    
    Amended and Restated Stock Option Plan (1992) is hereby
incorporated by reference to Registrants Form 10-K for
1997 filed with the SEC on March 23, 1998.Exhibit 10.2
    
    Consulting and Deferred Compensation Agreement with Albert
E. Wolf, are incorporated by reference to Item(a),
Exhibit 10(c) of the Registrants 1994 Form 10-K.Exhibit 10.3*
    
    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.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*
    
    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.
 76




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##### Table of Contents



Exhibit 10.13*
    
    423 Employee Stock Purchase Plan as Appendix A to the
Companys Definitive Proxy Statement, filed with the SEC on
March 29, 2004, is incorporated by reference.Exhibit 10.14*
    
    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 10.15*
    
    Termination Agreement by and between George Off and
Checkpoint Systems, Inc. dated December 28, 2007.Exhibit 10.16*
    
    Employment Agreement by and between Robert P. van der Merwe
and Checkpoint Systems, Inc. dated December 27, 2007.Exhibit 12
    
    Ratio of Earnings to Fixed Charges.Exhibit 21
    
    Subsidiaries of Registrant.Exhibit 23
    
    Consent of Independent Registered Public Accounting Firm.Exhibit 31.1
    
    Certification of the Chief Executive Officer pursuant to
Rule 13a-14(a) of the Exchange Act, as enacted by
Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit 31.2
    
    Certification of the Chief Financial Officer pursuant to
Rule 13a-14(a) of the Exchange Act, as enacted by
Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit 32
    
    Certification of the Chief Executive Officer and the Chief
Financial Officer pursuant to 18 United States Code
Section 1350, as enacted by Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Management contract or compensatory plan or arrangement. 77




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SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(dollar amounts in thousands)
 Allowance For Doubtful Accounts
 Balance at
    
    Additions
    
    Charged to
    
    DeductionsBeginning
    
    Through
    
    Costs and
    
    (Write-Offs and
    
    Balance atYear
    
    of Year
    
    Acquisition
    
    Expenses
    
    Recoveries, net)
    
    End of Year2007
    
    $
    12,417
    
    
    $
    2,244
    
    
    $
    2,330
    
    
    $
    (1,152
    )
    
    $
    15,8392006
    
    $
    11,823
    
    
    $
    
    
    
    $
    2,442
    
    
    $
    (1,848
    )
    
    $
    12,4172005
    
    $
    12,647
    
    
    $
    
    
    
    $
    2,573
    
    
    $
    (3,397
    )
    
    $
    11,823
 Deferred Tax Valuation Allowance
 Release ofAllowance
    
    Release of
    
    Allowance onBalance at
    
    Additions
    
    Recorded on
    
    Allowance on
    
    LossesBeginning
    
    Through
    
    Current Year
    
    Current Year
    
    Expired or
    
    Balance atYear
    
    of Year
    
    Acquisition
    
    Losses
    
    Utilization
    
    Revalued
    
    End of Year2007
    
    $
    34,510
    
    
    $
    
    
    
    $
    1,563
    
    
    $
    854
    
    
    $
    (9,355
    )
    
    $
    27,5722006
    
    $
    26,477
    
    
    $
    
    
    
    $
    801
    
    
    $
    (151
    )
    
    $
    7,383
    
    
    $
    34,5102005
    
    $
    31,275
    
    
    $
    
    
    
    $
    626
    
    
    $
    (384
    )
    
    $
    (5,040
    )
    
    $
    26,477
 78