Checkpoint Systems' (CKP) CEO George Babich on Q2 2014 Results - Earnings Call Transcript

Aug. 4.14 | About: Checkpoint Systems (CKP)

Checkpoint Systems, Inc. (NYSE:CKP)

Q2 2014 Earnings Conference Call

August 4, 2014 17:00 ET

Executives

Jeff Richard - Executive Vice President and Chief Financial Officer

George Babich - President and Chief Executive Officer

Analysts

Jeffrey Kessler - Imperial Capital

Chris McGinnis - Sidoti & Company

Operator

Greetings, ladies and gentlemen and welcome to the Checkpoint Systems Second Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions)

I would now like to introduce your host, Mr. Jeff Richard, Executive Vice President and CFO. Please go ahead sir.

Jeff Richard - Executive Vice President and Chief Financial Officer

Thanks, Jen. Hey, good afternoon and welcome to Checkpoint Systems second quarter 2014 conference call. I am stepping in for Jim Lucania today to kick this call off as he enjoys his honeymoon. With me today is George Babich, President and Chief Executive Officer.

Please note, unless otherwise stated, today’s discussion will be on Checkpoint’s continuing operations. Additionally, non-GAAP measures discussed on this call are defined and reconciled with GAAP on statements attached to our earnings release. The release is available on our Investor Relations website.

We remind you that during the call, we may make certain forward-looking statements. These are subject to the caution regarding forward-looking statements included in today’s earnings release. A replay of this call will be made available on our website shortly after the call.

Now, I will turn the call over to George.

George Babich - President and Chief Executive Officer

Okay. Thanks, Jeff. Good morning and thank you for joining us today. We appreciate you being with us and trust that you had an opportunity to read our second quarter earnings release, which was issued just after the market closed. This afternoon, I will give an overview of our second quarter performance and then I will turn the call back over to Jeff to walk through the financial details. I will follow up with the discussion about our strategic initiatives before we open the call to your questions.

Regarding the quarter, we built on the positive momentum from the first quarter and I am pleased to report that Checkpoint’s strongest first half operating income margin since before 2008 and highest earnings performance since 2010. While net revenues were down 0.8% in the quarter when normalizing for the exit of Sri Lanka and other business rationalizations, revenues in the second quarter were effectively flat which was in line with our expectations. In addition, I am very pleased to report the gross profit margins improved by almost 200 basis points. This improvement in gross profit coupled with continued SG&A reductions from our global restructuring plan and continued tight expense control drove a $4.1 million or 44.5% increase year-over-year in our non-GAAP operating income. Non-GAAP earnings per share were $0.25 versus $0.11 in the second quarter of 2013.

Turning to the businesses, MAS delivered another solid quarter, essentially flat on the top line even after absorbing the planned wind down of our library in Asia-Pac CCTV businesses, as well as the tough comparisons for EAS hardware due to the two large European rollouts completed last year. Continued growth in the EAS Consumables, Alpha and Hard Tag @ Source reflect our recent market share wins and a continued turnaround in the performance of those core product lines. MAS gross profit margins increased by over 80 basis points to 46%. Margins were up across nearly all core product categories reflecting manufacturing cost reductions, freight efficiencies, better field service utilization, improved product mix as well as the impact of other new margin initiatives.

Moving on to Apparel Labeling Solutions, ALS reported a strong quarter despite revenue decreasing 1.6%. After adjusting for the exit of our Sri Lanka joint venture, ALS revenue grew 0.5% organically. RFID label sales grew by a factor of more than 10 times reflecting the recurring portion of our recent RFID system rollouts in the U.S. and Europe more than offsetting a sales decline in our legacy ticket and tag business. Gross margins increased by 620 basis points to 36.2% as ALS continues to benefit from our LEAN initiatives, manufacturing efficiencies and favorable customer mix.

Now to Retail Merchandising Solutions, RMS revenues decreased 3.7% as this business continues to face retail headwinds and competitive pressures in Europe. Segment gross profit margins declined by 640 basis points primarily due to pricing pressures and under absorption of fixed manufacturing costs.

At this time, I will turn the call back over to Jeff.

Jeff Richard - Executive Vice President and Chief Financial Officer

Thanks, George. Good afternoon, everybody. As a reminder, all of my references today will relate to second quarter activity from continuing operations unless I state otherwise. Continuing operations excluded the results of the U.S. and Canada-based CheckView business sold on April 29, 2013.

Second quarter revenue was $170.9 million, a decrease of 0.8% over last year. Foreign currency translation effects resulted in a 0.6% increase in net revenues offsetting a 1.4% organic revenue decline. Gross profit was $72.5 million, $2.6 million more than last year’s second quarter. The gross profit margin was 42.4% compared with 40.6% last year. Strong margin performance across the Board together with continuing tight expense control helped to deliver non-GAAP operating income of $13.3 million compared with $9.2 million in second quarter of 2013. Adjusted EBITDA in the quarter was $21 million, $3.1 million greater than in the second quarter of 2013.

Now, I will break these results down into more detail by segment. MAS revenues were effectively flat at $111.5 million. EAS label revenues increased 7.2% year-over-year as we continue to benefit from the recurring component of our recent market share wins. Hard Tag @ Source and Alpha continued to grow more modestly at 2.6% and 4.0% respectively. Offsetting these gains was a 3.5% decline in EAS systems revenues reflecting a difficult comparison with last year’s second quarter when large rollouts were taking place in Europe. The hardware and services portion of our merchandise visibility business was down $1.3 million year-over-year reflecting the impact of the cold RFID rollout during the second quarter of 2013. The wind down of our library, EAS business and our remaining Asia-Pac CheckView business contributed a $0.4 million decline.

Gross profit margins for the segment increased from 45.2% to 46%. We achieved higher margins in nearly all core products and our product mix shifted slightly toward higher margin products. Margins improved through manufacturing cost reductions, favorable manufacturing variances, favorable freight variances and better field service utilization, many which can be attributed to the second phase projects that focused on profitability.

Now to ALS, revenues increased $0.8 million or 1.6% to $47.7 million. Revenue grew $0.3 million or 0.7% when adjusted for the exit of our Sri Lanka joint venture. Strong sales growth in RFID labels was offset by decline in our legacy tickets and tag business. Segment gross profit margins improved from 30% to 36.2% as ALS continues to benefit from our LEAN and profit improvement initiatives. A greater portion of RFID labels put pressure on overall ALS margins.

Now, to RMS, revenues decreased 3.7% to $11.8 million reflecting ongoing industry headwinds in Europe. Segment gross profit margins declined from 40.3% to 33.9% principally due to the market pricing pressures and lower volumes driving overhead under absorption.

On to SG&A, expenses for the second quarter declined $1.8 million from $57.2 million in 2013 to $55.4 million in 2014 reflecting further progress in our cost reduction efforts. Our restructuring plan lowered cost in the second quarter by an additional $2.4 million, $1.6 million of the reduction was attributed to SG&A. As we have discussed for several quarters now, we have continued to develop additional margin enhancement initiatives over and above those in the restructuring plan. As we are slightly ahead of schedule on the execution of these projects, the value of these initiatives is now expected to be $12 million to $15 million by the end of 2014 with a still annualized benefit of $15 million to $20 million.

Now regarding EPS, non-GAAP diluted earnings per share was $0.25 compared to $0.11 in 2013. Cash flow provided by operations was $12.7 million compared with $3.9 million in the same period last year and CapEx and free cash flow were $3.5 million and $9.3 million in the second quarter of ‘14 compared to $1.9 million and $2.0 million in the same quarter 2013.

Now on the guidance, we are increasing our 2014 earnings guidance previously issued on May 5. We expect net revenues in the range of $675 million to $715 million, EBITDA in the range of $70 million to $80 million and non-GAAP diluted net earnings per share in the range of $0.65 to $0.75.

Now I will turn the call back over to George.

George Babich - President and Chief Executive Officer

Okay. Thanks Jeff. Regarding our strategic initiatives if you recall last quarter, I announced that we were entering Phase 3 of our three year plan that was announced in August 2012. I am pleased to report that after two years of intense internal focus, we exceeded our year one goals and we are ahead of pace as Jeff mentioned on our year two goals. In year one, we exceeded our goal to right-size our cost structure. And as we have reported expect more than $108 million in cost reductions. We also exceeded our goal to improve our balance sheet, improving working capital by more than $75 million as compared to our goal of $50 million to $60 million. At the end of the year two, we are ahead of plan to drive margin improvement through business process improvements as was reflected in the increase in gross profit margins of almost 200 basis points in the second quarter we just reported.

Now, heading into year three as planned, we are shifting our focus to driving long-term profitable growth at Checkpoint. Last week after three months of intense work with outside consultants, management reviewed a number of strategic and operational initiatives with our Board through the lens of optimizing long-term shareholder returns. This strategic review focused on our core businesses as well as close adjacencies, to explore opportunities to leverage our core competencies.

We believe these initiatives some organic and some inorganic will position Checkpoint to deliver sustainable top and bottom line growth for our stakeholders. As a result of that work, in the near-term, we will be investing capital dollars to ensure our manufacturing footprint is optimized and our core capabilities remain second to none. Investing in the R&D to maintain our position as the innovational leader and supporting the retail industry as they strive to improve profitability. Investing strategically in the necessary resources to target untapped markets and explore new verticals and investing in tuck-in acquisitions and strategic partnerships to round out our portfolio of products and services.

While we expect operating expenses will tick up beginning in the second half of this year to fund longer term growth, we are confident these investments will drive strong long-term returns for our shareholders. We have clear direction and now we are aligning the team and resources to move quickly with precise execution to once again exceed our goals.

With that Jen, I will now turn the call back over to you to open it up for question.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from the line of Jeffrey Kessler with Imperial Capital. Please proceed with your question.

Jeffrey Kessler - Imperial Capital

Thank you. Obviously, it’s somewhat surprising how much cost we were able to take out of the quarter, it’s – in fact it’s amazing, I haven’t seen this in quite a while and so congratulations, I never say that on a conference call.

George Babich

Thank you.

Jeffrey Kessler - Imperial Capital

I am wondering if you could, talk to me about two things, the first is, you have talked about obviously there is a Six Sigma very black belt Lean going on here, can you talk about business process improvement, get a little more down in the ways as to exactly what you were doing to get the gross margin down. And then can you talk about whether or not you obviously feel you haven’t cut, there is still more to cut, are there areas where you are getting close to the bone because this was a fairly deep drop in operating expense ratios?

George Babich

Well, Jeff why don’t I – why don’t we start with maybe Jeff talking a little bit here about what we are doing in Six Sigma lean and then we can talk about where maybe we are getting close to the bone and where we have some additional opportunities.

Jeff Richard

Yes. Hey Jeff.

Jeffrey Kessler - Imperial Capital

Hi, Jeff.

Jeff Richard

So I mean our – as we said all along that Phase 1 was the cost out, that was the kind of getting the machete out and there was a lot of SG&A coming out. Phase 2 is more process improvement and what we would call margin enhancement. So a lot of it’s not cost out, we are working hard improving the process around value selling. Our sales folks are kind of relooking at the way they go to market as far as selling value, selling solution to customers. And as I mentioned to you before starting at the beginning of the year we also were able to carve up our reporting to show profitability and give that visibility for the first time to the next layer down and then we were able to tie a compensation to that as well. So all those things although its hard to predict how much traction you get from those activities that was one that’s been fairly successful for us so far this year.

Some of the other things we mentioned that are getting good traction is just, we built a little bit of inventory to offset some air freight and different things along that line. And we are seeing year-over-year good benefits in that area and it’s just the supply chain where we have a long way to go on that work, but we are kind of seeing successes, pieces at a time there. We are going to focus on a bigger supply chain project in the second half of this year where we will bring some outside help to look at that. So that – we are just we are into the plants where we manufacture, our manufacturing team is very focused on being a low cost producer and never stopping in that arena as well. So this year the difference is we are still focusing on that, we have always focused on that and probably stepping it up a little bit. We are looking at supply chain and then just the solution sales are some of the big ones that we are working on and that gives you a little bit more flavor.

Jeffrey Kessler - Imperial Capital

Okay. Thank you.

George Babich

Jeff, I guess I would also add, I think Jeff just covered pretty much everything. The manufacturing efficiencies in particular in ALS where continuous improvement continues, that was a massive increase in the margins in ALS. And over the past almost two years we have upgraded more than 20 senior management positions in that business in addition to everything that we have done in the way of cost cutting. So these new people coming in and as they get their feet on the ground and begin to have an impact really make a difference. In addition, we have made some improvements in our systems and basic business processes that are having a benefit in taking cost out as well. So, those two things are very significant. The focus is just set on taking strategic investments in inventory to reduce air freight, was a big positive for us. So, there is a lot of things that are going on, but I think the point I would make is that we see a big impact here 12 to 24 months later in ALS after we started the changes.

So, it does take some time for these things to mature and before you realized the kind of the full benefits of it, it’s hard to predict that timing obviously and we are pleasantly surprised by and/or very pleased by I should say, the pace of which we are achieving this. I will say the same thing go on some of the other initiatives that Jeff mentioned solution sales, approach – value selling approach, P&Ls for our managers, which we have talked about numerous times, so they can run their business as well as getting the compensation tied to profitability. Those things too have only begun this fiscal year, so they will take time as well and the pace at which we will realize benefits again is somewhat unknown, so a lot of moving pieces here, but very pleased with the progress we are making thus far.

Jeffrey Kessler - Imperial Capital

Alright. Just one quick follow-up question and that is on you mentioned solution selling and I call it value proposition selling, value selling. When you go up against – when you are going up against other providers whether it’s Sensormatic or your good friends at AllTag or Nedap, are you able to now get the conversation going that you can provide a solution with your combination of technologies that perhaps either the others can’t or they can’t do it as efficiently, so that you are able to get the margin that you want for those products that you weren’t getting before?

George Babich

That’s a good point. And we are just at the beginning of that whole process, because it’s a as you realize it’s a customer by customer sales rep by sales rep conversation and those conversations maybe began at the beginning of this year, but there may not be a significant new deal on the table where we can realize the benefits, but we are definitely beginning to feel that, the conversation feels like it’s changing. We have conducted numerous training sessions here at the center for voice of customer, for instance, value, selling and pricing, thought processes. So, we have made some investments at the beginning of this year as I said earlier that allow us to have these conversations, but I think we will play out over a period of time here certainly through next year before I think – before it runs out of legs if it does run out of legs.

Jeffrey Kessler - Imperial Capital

So, hopefully your sales will be running by then, I mean those legs begin to get short okay?

George Babich

Yes. It’s a great point. I will take the opportunity in the event that it doesn’t get asked, but I mentioned in my comments about our strategic review that we conducted. And that as a part of that what we have concluded is that consistent with the original three-year plan, we are launching our growth initiative, this is year three literally tomorrow anniversary is the two-year anniversary we are launching year three on growth initiatives and we had to do first things first, I am a firm believer in that. So, we had to take the cost out, we had to get those process improvements going. And now, we are in a position where we have got the balance sheet and that we have cash in our revolver, in the accordion on the revolver to make some strategic investments and both in people internally to drive some initiatives in certain verticals and adjacent opportunities that we think we have, it will drive SG&A up and beginning in the third quarter.

In R&D, we added new Head of Innovation as you know Uwe Sydon and we are bringing a new product management in as we speak and we will be making investments there to accelerate our R&D to get those two things targeted, getting kind of the internal growth going, but we have also got the balance sheet to handle the M&A opportunities as we see them. And as I mentioned, Farrokh Abadi is now as he has handed off the innovation has at least half of his time dedicated to looking at these opportunities that will stimulate growth. So, we – I haven’t been through this before. I realized that you got to sequence these types of turnarounds and that what we believe is going to happen is that we will make these investments beginning this – the third quarter of this year and by a year from now, some of these seeds that we have planted will begin to blossom, but between now and a year from now and now and through next year, we think we have enough of the margin enhancement, process improvement, Six Sigma, LEAN, Black Belt types of initiatives to drive profitability while these growth initiatives do take root.

Having said that, I will also tell you that I think the thinking by the three analysts – the sell-side analyst that cover us regarding 2015 doesn’t necessarily in my view, while I am not giving guidance on 2015, I just don’t think it contemplates the investment that we are making. And if you look at the, where those numbers are, they are pretty aggressive for 2015. So, we certainly have had good traction 2013 over ‘12 and now ‘14 over ‘13 and it can’t stay in that trajectory forever, but we feel like we are positioned so that we don’t take a dip from a profitability standpoint. While we as you just stated, we get the growth of the top line growth going to drive the bottom line in the future.

Jeffrey Kessler - Imperial Capital

Okay, thank you very much.

George Babich

You are welcome.

Jeff Richard

Thanks Jeff.

Operator

Thank you. Our next question comes from the line of Chris McGinnis with Sidoti & Company. Please proceed with your question.

Chris McGinnis - Sidoti & Company

Afternoon George and Jeff. Thanks for taking my questions.

George Babich

Hi Chris.

Jeff Richard

Hi, Chris.

Chris McGinnis - Sidoti & Company

So being one of those analysts, just to walk through the guidance for the remainder of the year, I guess the midpoint of both the EPS and the EBITDA expected or at least your forecast averages about where you are at in Q2, is – my thought is that things should do a little bit better in the back half of the year and is that because of the SG&A investment you are talking about now?

Jeff Richard

Well, couple of things going on I think. At least I would say there is three things going on. We have relatively long memories regarding what happened last year at the end of the year with some of the government business and other related asset tracking business being pulled back out from underneath us with the sequester and everything that was going on at the time. So, we do – we still feel little raw from that. So, sticking our neck out too far is I don’t see a lot of benefit, number one.

Number two is I would say that we have maintained our revenue guidance for the year. And I think there is a little bit of a mix going on with revenue. If you go back to February when we gave the revenue guidance, we are trying to predict what was going to happen almost a year later and then particular in our fourth quarter, where lot of our business occur, it’s our biggest quarter as you know. And you try to predict not only the level of revenue, but the mix by line of business and by product line within line of business and they all have a wide range of margin. And you try to predict what the economy is going to be doing, consumer is going to be doing, retail as you know all of the whole thing. So, we are pleased that we can confirm the guidance, although the mix is changing a little bit. For instance, we have done much better in the RFID recurring consumable business than we expected and we have done not as well on the legacy ALS ticket and tag business.

So, and there is – so as mix shifts like that that are going on that have an impact on margin. In addition Chris, I guess the third point I would make is that there are yet year-to-year as you suggested we will be making some SG&A investments in the back half of the year. We were cautious in the first two quarters not to over spend on the SG&A, be comfortable releasing it and we feel even more comfortable after having gone through the strategic review that we concluded that these are wise, these are solid investments that should deliver profitable growth in the future. So it’s a combination of those three factors.

But generally as you said we have a tough time, but let me say this first. As I said last year when we got surprised by the revenue being – the contracts being pulled back by some customers, I talked about the vagaries of the end customer and it was this little company relatively small company that we have really large end customers the retailers, the U.S. government, etcetera. So every quarter can be choppy. And I continued to encourage investors and analysts to look at the long-term trend. So sometimes it’s up, sometimes it’s down. Our objective is to improve upon the profitability each and every quarter year-over-year. And at this point, I don’t see anything. I don’t see any single event that’s going to cause – that’s causing us stress over the – an event that might negatively impact what we want to accomplish in the third and fourth quarters of the year. So it’s more about just being prudent and trying to manage this so that each and every quarter we can report positive results.

Chris McGinnis - Sidoti & Company

Thank you for that. One quick question Jeff, I think this it was probably for you, but you talked about the tax valuation, are you – in the release, is that meaning that there is, you are at this level for the remainder of the year, can you maybe just talk a little bit about what was in the guidance for EPS or for income taxes?

Jeff Richard

Yes. Look, we never really give details, but it’s kind of panning out kind of how we expected, each quarter is different, it really depends on the mix where our revenue and profit is. So far it’s kind of – it’s kind of how we planned it, so we don’t expect anything different. We don’t see anything ahead that would make me want to change anything so.

George Babich

Really, different than last year’s, kind of in line with last year.

Jeff Richard

Yes.

Chris McGinnis - Sidoti & Company

Alright. Thanks. And then but I guess just going back to the guidance, so is it more about maybe the change in mix for the back half of the year, I don’t mean to push too much on this just it seems like a lay up for the back half of the year and I am just trying to get maybe the other perspective of that just sitting might…?

George Babich

I would say there is a – again there is a little bit of mix, there is a little bit of investment in R&D, a little bit of investment in SG&A, there is the battle scars and wounds from last year being surprised by our customers. And quite frankly, the guidance is important, but again the long-term trend that sort of thing is I think what’s really important. So we do want to make some investments. And we will continue to do that, because I believe it’s in the best interest for long-term growth. So it’s, but it’s a combination of all those factors Chris it’s…

Chris McGinnis - Sidoti & Company

Enough that’s fine. I don’t mean to push too much. And then I guess just you touched on the change, you did make a change just before last quarter, I know it’s early, it sounds like you are seeing maybe to start to invest in some of these growth initiatives, can you maybe just outline, you may have outlined them, I apologize, you were cutting in and out, but can you maybe just talk about what you are seeing at least for the top line and what’s making you positive and making you want to invest at this point?

George Babich

Sure. Well, first of all I think the – while retailers have been somewhat slow to adopt the RFID solution if you will, those that have had adopted have been moving relatively quickly. And we have gotten some good traction with the recurring revenue associated with that. We continue to believe that that’s a very robust market that’s going to be growing significantly over the next 10 years when we looked at it during our strategic review. We think that we have the whole solution if you will as far as the software, the ability to provide hardware, the professional services organization and the ability to provide the consumable RFID tags. So we have got a good number of tests going, so we are feeling pretty good about that and our ability to grow that business going forward. So we will be investing more in software, more in professional services, more in equipment in our plants to continue to improve upon the margins associated with the consumable products and RFID. So that’s a real growth situation.

The retailers have reported you have seen it, others in the space have reported. It’s not a real – again it’s not a robust end market, so that hasn’t changed. But what we do like is that we have made some traction and continuing with these, what we call swap outs from our competitors and where they have been maybe using our competitors product for the last decade and we have now been able to continue that trend of swapping them to our product. And we will continue to see good leading indicators as we look at other opportunities. So that deal is good, we will continue to make investments in R&D to revitalize and continue to revitalize our whole Alpha product line.

We think we have a distinct competitive advantage there. It’s a great brand with the best products in the marketplace. We are the market leaders. So I think that for us is going to be an investment we feel pretty good about after having tested that in the marketplace. And the possibility for us to add to our portfolio of products through some adjacent or Bolt-on opportunities are really I think things that we feel good about that will help not only allow us to continue to be the innovator in the space, but allow us to have a differentiation when we do speak to the customers when they think about EAS RF-based EAS and transitioning to RFID passive, transitioning to RFID active. And whatever it might be we are going to continue to build on that whole technology platform. So that positions us as the best partner for them as they look for different ways to manage their inventory. So we – there is some caution obviously because of the end markets, but we feel pretty good coming out of our strategic review that there is some opportunity is there for us.

Chris McGinnis - Sidoti & Company

Okay. Thank you. And nice quarter.

George Babich

Thank you.

Jeff Richard

Thank you.

Operator

Thank you. Our next question is a follow-up from the line of Jeffrey Kessler with Imperial Capital. Please proceed with your question.

Jeffrey Kessler - Imperial Capital

I am just wondering you have talked about better than expected margin mix in RFID and obviously I think if I heard it right you are 10 times last year’s quarter although clearly that’s from a very low base. My question to you is as you begin to try to bring down the price of passive RFID and try to move in the next couple of years to active for inventory management, are you still getting pushback on pricing in the actual – in the passive RFID area, which has been kind of the bugaboo of ROI for getting these systems in. Are their clients that are less and more aggressive with you when it comes to that?

George Babich

Hey, Jeff. I guess, my comment just to make sure I was clear is that there is a couple of things going on. One is in the second half of the year if we have more RFID consumable business than we expected and less legacy that will be a negative on margins. With respect to going forward, we will be making – continue to make investments in particular in equipment to help drive down the cost of that RFID consumable product, because to your point absolutely customers are looking at it. And as I view it as a consumable, they pit all of us against one another in trying to drive down the price there. So, what is I think an advantage to us is that we have got a full solution offering. So, if we got a little pressure here maybe we have got a little opportunity somewhere else and we can between professional services and the installation part of the business and our software, our own proprietary hardware etcetera that on balance, so that’s a better go-to-market strategy, but you are absolutely right that consumable piece continues to get pressure from the customer.

Jeffrey Kessler - Imperial Capital

Okay, thank you very much.

Jeff Richard

You bet. Thanks, Jeff.

George Babich

You are welcome.

Operator

Thank you. (Operator Instructions) It appears there are no further questions at this time. And I would like to turn the call back over to management for closing comments.

George Babich - President and Chief Executive Officer

Okay, thanks Jen. I guess the last thing I would like to say is I would like to first of all thank everyone for joining us today, but more importantly as always I would like to thank all of my Checkpoint colleagues from around the world for their continued efforts as we continue to drive the lean, strong and focused Checkpoint. Thanks, everyone and have a great day.

Operator

Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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