Checkpoint Systems, Inc. Announces Second Quarter 2008 Results

- Net revenues increased 20.7%

- Integration of OATSystems progressing as planned

- Company announces global restructuring program
THOROFARE, N.J.--(Business Wire)--
Checkpoint Systems, Inc. (NYSE: CKP) today reported financial
results for the second quarter ended June 29, 2008.

Net revenues for the second quarter of 2008 were $236.2 million,
an increase of 20.7%, compared to net revenues of $195.7 million in
the second quarter of 2007. Net earnings from continuing operations
for the second quarter were $14.4 million, or $0.36 per diluted share,
compared to net earnings from continuing operations of $14.6 million,
or $0.36 per diluted share, in the second quarter of 2007. Non-GAAP
net earnings from continuing operations excluding restructuring
expense and the impact of a change in valuation allowance for the
second quarter of 2008 were $11.6 million, or $0.29 per diluted share.
Non-GAAP net earnings from continuing operations excluding
restructuring expense were $14.8 million, or $0.36 per diluted share,
in the second quarter of 2007. Net earnings for the second quarter of
2008 were $14.4 million, or $0.36 per diluted share, compared to net
earnings of $15.1 million, or $0.37 per diluted share, in the second
quarter of 2007.

Net revenues for the first six months of 2008 were $445.8 million,
an increase of 21.5%, compared to net revenues of $366.9 million for
the first six months of 2007. Net earnings from continuing operations
for the first six months of 2008 were $19.2 million, or $0.47 per
diluted share, compared to net earnings from continuing operations of
$19.5 million, or $0.48 per diluted share, in the first six months of
2007. Non-GAAP net earnings from continuing operations excluding
restructuring expense, a deferred compensation expense adjustment, and
a valuation allowance adjustment for the first six months of 2008 were
$18.0 million, or $0.44 per diluted share. Non-GAAP net earnings from
continuing operations excluding restructuring expense were $20.0
million, or $0.50 per diluted share, for the first six months of 2007.
Net earnings for the first six months of 2008 were $19.2 million, or
$0.47 per diluted share, compared to net earnings of $20.1 million, or
$0.50 per diluted share, in the first six months of 2007.

Net revenues in the second quarter of 2008 reflected organic
growth of 0.8% primarily due to the CheckNet(R) business, acquisition
growth of 10.3% primarily from the Alpha, SIDEP and Asialco
businesses, and foreign currency effects of 9.6%.

"We are pleased with our top-line second quarter performance given
this weak global economic environment," said Rob van der Merwe,
President and Chief Executive Officer of Checkpoint. "We are
particularly pleased with the organic growth in our CheckNet(R)
business. Additionally, we experienced the strong sequential growth we
anticipated from Alpha, and our Evolve family of RF and RFID-enabled
products continued to exceed our expectations. For the second half of
the year we expect this growth, particularly the historically strong
second half performance of Alpha, to continue on an accelerating basis
and contribute significant improvement to the bottom-line compared to
the first half of this year."

"The decline in second quarter gross margins when compared to the
same period in 2007 resulted from increasing raw material and energy
costs across our business lines and production issues that are being
addressed. Although we were not pleased with the impact of the
production issues to our quarterly earnings, we believe these are now
largely behind us," continued Mr. van der Merwe.

The Company is announcing a manufacturing and supply chain
restructuring program designed to accelerate profitable growth in
Checkpoint's CheckNet(R) business and to support incremental
improvements in its EAS Hardware and Labels businesses. Through this
program, the Company expects to incur total after-tax restructuring
charges in 2008 of approximately $5 million, or $0.12 per diluted
share. Implementation of this plan is expected to be complete in 2010
and to result in annualized cost savings of approximately $6 million.
Through the first six months of 2008, the Company has incurred total
charges relating to this program of $0.5 million, or $0.01 per diluted
share. In addition to the restructuring charges, implementation of
this program is expected to require operating expenditures of
approximately $0.04 to $0.06 per diluted share in the second half of
2008 and includes actions to expand capacity.

Commenting on the restructuring program, Mr. van der Merwe stated,
"Checkpoint has developed a strong global organization that provides a
solid foundation for us to execute on our plans for profitable growth.
We expect that this restructuring program will enhance our ability to
grow by creating a more streamlined organization and expanding
capacity while maintaining the advantages of our global reach."

Commenting on the Company's developing strategy, Mr. van der Merwe
stated, "Supporting our customers with products and solutions that
anticipate and address their changing needs is a key focus for the
Company. Our Evolve RF and RFID-enabled product line continues to be
well received by our customers and is gaining traction in the
marketplace. The addition of OATSystems puts key aspects of
Checkpoint's developing strategy for RFID EAS in place as the
combination of Checkpoint and OATSystems uniquely positions us as a
one-stop-shop for solutions that enable retailers and their supply
chains to gain deeper inventory visibility, further reducing shrink
and increasing bottom-line profits by enhancing on-shelf merchandise
availability for consumers."

Selected financial highlights for the second quarter of 2008 are
detailed below:

-- Gross profit was $97.9 million, or 41.5% of revenue, compared
to $83.0 million, or 42.4% of revenue, for the second quarter
of 2007.

-- Operating income was $13.2 million for the second quarter of
2008, compared to $18.7 million in 2007. Non-GAAP operating
income excluding restructuring expense for the second quarter
of 2008 was $16.3 million, or 6.9% of revenue. Non-GAAP
operating income excluding restructuring expense for the
second quarter of 2007 was $19.0 million, or 9.7% of revenue.
(See accompanying "Reconciliation of GAAP to Non-GAAP
Measures".)

-- Our effective tax rate for the second quarter of 2008 was
negative 8.4% as compared to 26.1% for the second quarter of
2007. The second quarter effective tax rate was impacted by a
$4.8 million benefit relating to the release of a valuation
allowance as a result of strategic decisions related to
foreign operations in the second quarter and the related
impact on assumptions of future taxable income.

-- Net earnings for the second quarter of 2008 were $14.4
million, or $0.36 per diluted share, compared to net earnings
of $15.1 million, or $0.37 per diluted share, for the second
quarter of 2007. Net earnings for the second quarter of 2007
included $0.5 million, or $0.01 per diluted share, of income
from discontinued operations due to post closing adjustments
from the 2006 sale of the barcode systems business.

-- Non-GAAP net earnings from continuing operations excluding
restructuring expense and the valuation allowance adjustment
for the second quarter of 2008 were $11.6 million, or $0.29
per diluted share. Non-GAAP net earnings from continuing
operations excluding restructuring expense for the second
quarter of 2007 were $14.8 million, or $0.36 per diluted
share. (See accompanying "Reconciliation of GAAP to Non-GAAP
Measures".)

-- Cash flow from operations was $25.4 million for the second
quarter of 2008 compared to $14.0 million for the second
quarter of 2007.

-- At June 29, 2008, cash and cash equivalents were $95.5
million, working capital was $275.9 million and long-term debt
was $143.9 million. Capital expenditures for the quarter were
$5.2 million.

-- During the second quarter of 2008, the Company repurchased 1.3
million shares of its common stock at an average cost of
$25.31, spending a total of $33.6 million. This completed the
repurchase of shares under the company's repurchase
authorization that was put in place during the fourth quarter
of 2006.

Mr. van der Merwe concluded, "Looking forward, we continue to be
in a strong position to grow our business. Our recent acquisitions are
enabling us to expand our offering of new products that meet the
evolving needs of our customers. We are already seeing the positive
impact of the Alpha product line and our new Evolve platform and
expect both to contribute to our expected strong performance for
second half 2008. We are managing our business globally, and we
continue to carefully manage costs to mitigate the effects of
challenging economic conditions on our business, all the while taking
actions required to improve Checkpoint operations and competiveness."

Outlook for 2008

Based on an assessment of current market conditions and the
assumption that market conditions will not change significantly for
the remainder of the year, Checkpoint updated its guidance for its
2008 full year financial results. This guidance includes the expected
contributions of previously announced acquisitions:

-- Net revenues, at current exchange rates, are expected to be in
the range of $970 million to $990 million.

-- Non-GAAP diluted net earnings per share from continuing
operations for the full year 2008, excluding restructuring and
other unusual items, are expected to be:

-0-
*T
Range of Non-GAAP
Diluted Net
Earnings Per Share
------------------

Outlook before including the impact of the
OATSystems acquisition and the restructuring
program $1.62 to $1.70

Dilutive impact of the OATSystems acquisition ($0.10) to ($0.08)

Impact of operational expenses associated with the
implementation of the restructuring program ($0.06) to ($0.04)
------------------

Outlook after including the impact of the
OATSystems acquisition and the restructuring
program $1.46 to $1.58
==================
*T

-- An annualized tax rate of approximately 24%.

-- Free cash flow (cash flow from operations less capital
expenditures) is expected to be in the range of $45 million to
$55 million, excluding the impact of future restructuring
charges.

This guidance does not include the impact of unusual charges, such
as additional restructuring charges, that the Company may incur during
the year, and assumes a continuation of current exchange rates.

Checkpoint Systems will host a conference call today, August 5,
2008, at 10:00 AM Eastern Time, to discuss its 2008 second quarter
results. The conference call will be simultaneously broadcast live
over the Internet. Listeners may access the live webcast at the
Company's homepage, www.checkpointsystems.com, by clicking on the
"Conference Calls" link or entering the "Investors" section of this
site. Please allow 15 minutes prior to the call to visit the site and
download and install any necessary audio software. The webcast will be
archived at the Company's homepage beginning approximately 90 minutes
after the call ends until the next quarterly conference call.

Checkpoint Systems, Inc.

Checkpoint Systems, Inc. is the leading supplier of retail shrink
management solutions. Checkpoint's global team helps retailers - and
their suppliers - reduce theft, increase inventory visibility and
provide consumers with greater merchandise availability through the
company's rapidly evolving RF technology, expanding shrink management
offerings and Check-Net labeling solutions. Checkpoint has more than
one million RF devices installed in stores today and has secured more
than 100 billion products. Scaling cost efficiently, Checkpoint's
solutions provide increased revenues and profits to a fast-growing
community of successful retailers and a superior experience for their
consumers. Listed on the NYSE (NYSE:CKP), Checkpoint operates in every
major geographic market and employs more than 3,900 people worldwide.
For more information, visit www.checkpointsystems.com.

Caution Regarding Forward-Looking Statements

This press release includes information that constitutes
forward-looking statements. Forward-looking statements often address
our expected future business and financial performance, and often
contain words such as "expect," "anticipate," "intend," "plan,"
believe," "seek," or "will." By their nature, forward-looking
statements address matters that are subject to risks and
uncertainties. Any such forward-looking statements may involve risk
and uncertainties that could cause actual results to differ materially
from any future results encompassed within the forward-looking
statements. Factors that could cause or contribute to such differences
include: our ability to integrate the acquisition of the Alpha S3
business and to achieve our financial and operational goals for Alpha
S3; changes in international business conditions; foreign currency
exchange rate and interest rate fluctuations; lower than anticipated
demand by retailers and other customers for our products; slower
commitments of retail customers to chain-wide installations and/or
source tagging adoption or expansion; 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 ability to provide and market innovative and
cost-effective products; the development of new competitive
technologies; our ability to maintain our intellectual property;
competitive pricing pressures causing profit erosion; the availability
and pricing of component parts and raw materials; possible increases
in the payment time for receivables as a result of economic conditions
or other market factors; changes in regulations or standards
applicable to our products; 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; our ability to maintain effective
internal control over financial reporting; and additional matters
disclosed in our Securities and Exchange Commission filings. We do not
undertake to update our forward-looking statements, except as required
by applicable securities laws.

-0-
*T
Checkpoint Systems, Inc.
Consolidated Statements of Operations
(Thousands except per share amounts)
(unaudited)

Quarter Six Months
(13 Weeks Ended) (26 Weeks Ended)
----------------- -----------------
June 29, July 1, June 29, July 1,
2008 2007 2008 2007
----------------------------------------------------------------------

Net revenues $ 236,200 $195,702 $ 445,820 $366,904
Cost of revenues 138,259 112,707 261,400 213,630
---------------------------------------------------------------------

Gross profit 97,941 82,995 184,420 153,274

Selling, general, and
administrative expenses 75,943 59,947 149,830 119,748
Research and development 5,739 4,060 10,970 8,048
Restructuring Expense 3,021 329 4,000 654
---------------------------------------------------------------------

Operating income 13,238 18,659 19,620 24,824

Interest income 657 1,210 1,298 2,392
Interest expense 1,192 270 2,486 601
Other gain (loss), net 558 131 (606) (393)
---------------------------------------------------------------------

Earnings from operations before
income taxes and minority
interest 13,261 19,730 17,826 26,222

Income taxes (1,112) 5,158 (1,221) 6,745
Minority interest 17 (2) (107) (63)
---------------------------------------------------------------------

Earnings from continuing
operations 14, 356 14,574 19,154 19,540
Earnings from discontinued
operations, net of tax - 523 - 523
---------------------------------------------------------------------

Net earnings $ 14,356 $ 15,097 $ 19,154 $ 20,063
=====================================================================

Basic Earning per Share:
Earnings from continuing
operations $ 0.36 $ 0.37 $ 0.48 $ 0.49
Earnings from discontinued
operations, net of tax - 0.01 - 0.02
---------------------------------------------------------------------

Basic earnings per share $ 0.36 $ 0.38 $ 0.48 $ 0.51
=====================================================================

Diluted Earnings per Share:
Earnings from continuing
operations $ 0.36 $ 0.36 $ 0.47 $ 0.48
Earnings from discontinued
operations, net of tax - 0.01 - 0.02
---------------------------------------------------------------------

Diluted earnings per share $ 0.36 $ 0.37 $ 0.47 $ 0.50
=====================================================================
*T

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*T
Checkpoint Systems, Inc.
Summary Consolidated Balance Sheet
(Thousands)

June 29, December 30,
2008 2007
------------ ------------
(unaudited)

Cash and Cash Equivalents $ 95,485 $ 118,271
Working Capital $ 275,876 $ 282,095
Current Assets $ 478,397 $ 506,910
Total Debt $ 143,902 $ 95,512
Shareholders' Equity $ 596,286 $ 588,328
Total Assets $ 1,068,703 $ 1,031,044
*T

Reconciliation of Non-GAAP Financial Measures in Accordance with
SEC Regulation G

Checkpoint Systems, Inc. reports financial results in accordance
with U.S. GAAP and herein provides some Non-GAAP measures. These
Non-GAAP measures are not in accordance with, nor are they a
substitute for, GAAP measures. These Non-GAAP measures are intended to
supplement the Company's presentation of its financial results that
are prepared in accordance with GAAP. The Company uses the Non-GAAP
measures presented to evaluate and manage the Company's operations
internally. The Company is also providing this information to assist
investors in performing additional financial analysis that is
consistent with financial models developed by research analysts who
follow the Company.

Set forth below is a reconciliation of the Non-GAAP financial
measures used in this release to the most directly comparable measures
based on GAAP.

-0-
*T
Checkpoint Systems, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Thousands)
(unaudited)

Quarter Six Months
(13 Weeks Ended) (26 Weeks Ended)
----------------- -----------------
Reconciliation of GAAP to Non- June 29, July 1, June 29, July 1,
GAAP Operating Income: 2008 2007 2008 2007
---------------------------------------------------------------------

Net revenues $236,200 $195,702 $445,820 $366,904
=====================================================================

GAAP operating income 13,238 18,659 19,620 24,824

Non-GAAP adjustments:

Restructuring expense 3,021 329 4,000 654

Deferred compensation expense
adjustment - - 1,381 -
---------------------------------------------------------------------

Adjusted Non-GAAP operating
income $16,259 $18,988 $25,001 $25,478
=====================================================================

GAAP operating margin 5.6% 9.5% 4.4% 6.8%
Adjusted Non-GAAP operating
margin 6.9% 9.7% 5.6% 6.9%
*T

-0-
*T
Checkpoint Systems, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures continued
(Thousands except per share amounts)
(unaudited)

Quarter Six Months
(13 Weeks Ended) (26 Weeks Ended)
------------------ -----------------
Reconciliation of GAAP to Non-
GAAP Earnings from Continuing June 29, July 1, June 29, July 1,
Operations: 2008 2007 2008 2007
----------------------------------------------------------------------

Earnings from continuing
operations, as reported $ 14,356 $ 14,574 $ 19,154 $19,540
======================================================================

Non-GAAP adjustments:

Restructuring expense, net of tax 2,076 246 2,785 507

Deferred compensation expense
adjustment, net of tax - - 849 -

Valuation allowance adjustment (4,812) - (4,812) -
----------------------------------------------------------------------

Adjusted net earnings $ 11,620 $ 14,820 $ 17,976 $20,047
======================================================================

Reported diluted shares 40,274 40,704 40,630 40,464

Adjusted diluted shares 40,274 40,704 40,630 40,464

Reported net earnings per share -
diluted $ 0.36 $ 0.36 $ 0.47 $ 0.48

Adjusted net earnings per share -
diluted $ 0.29 $ 0.36 $ 0.44 $ 0.50
*T

Checkpoint Systems, Inc.
Ray Andrews
Senior Vice President and Chief Financial Officer
Bob Powers
Vice President Investor Relations
856-848-1800
or
FD
Eric Boyriven / Bob Joyce, 212-850-5600

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