SUMMARY OF SIGNIFICANT ACCOUNTING POLICES

Restatement of Previously Reported Consolidated Financial Statements

We determined that we incorrectly applied accounting guidance related to the calculation of our interim effective tax rate for the exclusion of earnings (losses) before income taxes for jurisdictions with deferred income tax valuation allowances and the related entity has either a full year projected loss or a year to date actual loss and no tax benefit can be realized. The most significant error related to the calculation for the United States.

We assessed the impact of this error on our prior interim financial statements and concluded that the impact of this error was material to the unaudited consolidated financial statements for each of the quarters ended March 29, 2015 and June 28, 2015 and year-to-date period ended June 28, 2015,which resulted in the restatement of our unaudited consolidated financial statements for the quarters ended March 29, 2015 and June 28, 2015 and the year-to-date period ended June 28, 2015. We concluded that the impacts of the error on interim and year-to-date periods within our 2014 fiscal year were not material. There is no impact of the error on our consolidated financial statements for the year ended December 28, 2014.

In addition to the restatement of our unaudited consolidated financial statements for the quarterly period ended March 29, 2015, we also recorded an out of period adjustment to the valuation allowance of a non U.S. entity with a deferred tax liability related to an indefinite lived intangible pertaining to the third quarter ended September 28, 2014. The total impact of the adjustment on the first quarter of 2015 and year-to-date periods within 2015 is a reduction in income tax expense of $1.0 million and a reduction in net loss of $1.0 million. This adjustment was not material to any previously issued interim or annual financial statements or to the 2015 interim consolidated financial statements, and is not expected to be material to the full year 2015 consolidated financial statements.

The following schedules reconcile the amounts as previously reported in the applicable financial statement to the corresponding restated amounts:

CHECKPOINT SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)



	March 29, 2015
(amounts in thousands)	As Previously Reported			Restatement Adjustments			As Restated
Other current assets	$	21,245		$	(2,781	)	$	18,464
Total current assets	347,035			(2,781		)	344,254
Total assets	679,437			(2,781		)	676,656
Other current liabilities	16,058			(345		)	15,713
Total current liabilities	147,133			(345		)	146,788
Deferred income taxes	15,120			(622		)	14,498
Accumulated deficit	(13,076		)	(1,814		)	(14,890		)
Total stockholders' equity	295,807			(1,814		)	293,993
Total liabilities and stockholders' equity	679,437			(2,781		)	676,656

CHECKPOINT SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



	Quarter (13 Weeks) Ended
	March 29, 2015
(amounts in thousands)	As Previously Reported			Restatement Adjustments			As Restated
Income tax expense	$	71		$	1,814		$	1,885
Net loss	(745		)	(1,814		)	(2,559		)
Basic loss per share	(0.02		)	(0.04		)	(0.06		)
Diluted loss per share	(0.02		)	(0.04		)	(0.06		)

CHECKPOINT SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)



	Quarter (13 Weeks) Ended
	March 29, 2015
(amounts in thousands)	As Previously Reported			Restatement Adjustments			As Restated
Net loss	$	(745	)	$	(1,814	)	$	(2,559	)
Comprehensive loss	(11,213		)	(1,814		)	(13,027		)

CHECKPOINT SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)



	March 29, 2015
(amounts in thousands)	As Previously Reported			Restatement Adjustments			As Restated
Net loss	$	(745	)	$	(1,814	)	$	(2,559	)
Accumulated deficit balance, March 29, 2015	(13,076		)	(1,814		)	(14,890		)
Total equity	295,807			(1,814		)	293,993

CHECKPOINT SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Quarter (13 Weeks) Ended
	March 29, 2015
(amounts in thousands)	As Previously Reported			Restatement Adjustments			As Restated
Net loss	$	(745	)	$	(1,814	)	$	(2,559	)
Deferred taxes	(41		)	(967		)	(1,008		)
Other assets	3,856			2,781			6,637

The Consolidated Financial Statements include the accounts of Checkpoint Systems, Inc. and its majority-owned subsidiaries (collectively, the “Company”). All inter-company transactions are eliminated in consolidation. The Consolidated Financial Statements and related notes are unaudited and do not contain all disclosures required by generally accepted accounting principles in annual financial statements. The Consolidated Balance Sheet as of December 28, 2014 is derived from the Company's audited Consolidated Financial Statements at December 28, 2014. Refer to our Annual Report on Form 10-K for the fiscal year ended December 28, 2014 for the most recent disclosure of our accounting policies.

The Consolidated Financial Statements include all adjustments, consisting of normal recurring adjustments, necessary to state fairly our financial position at March 29, 2015 and December 28, 2014 and our results of operations for the thirteen weeks ended March 29, 2015 and March 30, 2014 and changes in cash flows for the thirteen weeks ended March 29, 2015 and March 30, 2014. The results of operations for the interim period should not be considered indicative of results to be expected for the full year.

Reclassifications

Certain reclassifications have been made to prior period information to conform to the current period presentation.

Customer Rebates

We record estimated reductions to revenue for customer incentive offerings, including volume-based incentives and rebates. The accrual for these incentives and rebates, which is included in the Other Accrued Expenses section of our Consolidated Balance Sheets, was $10.5 million and $12.5 million as of March 29, 2015 and December 28, 2014, respectively. We record revenues net of an allowance for estimated return activities. Return activity was immaterial to revenue and results of operations for all periods presented.

Warranty Reserves

We provide product warranties for our various products. These warranties vary in length depending on product and geographical region. We establish our warranty reserves based on historical data of warranty transactions.

The following table sets forth the movement in the warranty reserve which is located in the Other Accrued Expenses section of our Consolidated Balance Sheets:



(amounts in thousands)
Three months ended	March 29, 2015			March 30, 2014
Balance at beginning of year	$	4,379		$	4,521
Accruals for warranties issued, net	597			810
Settlements made	(887		)	(962		)
Foreign currency translation adjustment	(200		)	13
Balance at end of period	$	3,889		$	4,382

Accumulated Other Comprehensive Income (Loss)

The components of Accumulated Other Comprehensive Income (Loss), net of tax, for the three months ended March 29, 2015 were as follows:



(amounts in thousands)	Pension plan			Foreign currency translation adjustment			Total accumulated other comprehensive income
Balance, December 28, 2014	$	(35,036	)	$	352		$	(34,684	)
Foreign currency translation adjustment	3,678			(14,899		)	(11,221		)
Amounts reclassified from other comprehensive income	753			—			753
Net other comprehensive income	4,431			(14,899		)	(10,468		)
Balance, March 29, 2015	$	(30,605	)	$	(14,547	)	$	(45,152	)

The significant items reclassified from each component of other comprehensive income (loss) for the three months ended March 29, 2015 and March 30, 2014 were as follows:



(amounts in thousands)	March 29, 2015				March 30, 2014
Details about accumulated other comprehensive income (loss) components	Amount reclassified from accumulated other comprehensive income (loss)			Affected line item in the statement where net loss is presented	Amount reclassified from accumulated other comprehensive income (loss)			Affected line item in the statement where net loss is presented
Amortization of pension plan items
Actuarial loss ⁽¹⁾	$	(750	)		$	(385	)
Prior service cost ⁽¹⁾	(6		)		(3		)
	(756		)	Total before tax	(388		)	Total before tax
	3			Tax benefit	110			Tax benefit
Total reclassifications for the period	$	(753	)	Net of tax	$	(278	)	Net of tax


⁽¹⁾	These accumulated other comprehensive income components are included in the computation of net periodic pension costs. Refer to Note 9 of the Consolidated Financial Statements.

Dividend

On March 5, 2015, we declared a special dividend (the Dividend) of $0.50 per outstanding common share for all shareholders of record as of March 20, 2015. This Dividend reflects our commitment to building shareholder value through the execution of our strategic plan and a disciplined approach to capital allocation. After the Dividend, we believe we have the appropriate level of liquidity both to fund our internal initiatives and act quickly on any strategic opportunities.

The dividend was payable on April 10, 2015. Dividend distributions to shareholders are recognized as a liability in the period in which the dividend is formally approved by our Board of Directors and communicated to shareholders. As of March 29, 2015, we have a liability of $21.4 million recorded as Dividend Payable on the Consolidated Balance Sheets. The dividend was recorded as a reduction of Additional Capital in Stockholders' Equity.

The dividend does not provide any cash payment or benefit to stock options, restricted stock units, or performance shares, and instead only applies to the outstanding common stock and as outlined in the executive and director deferred compensation plans. We have recorded a non-cash liability of $0.4 million included in Dividend Payable on the Consolidated Balance Sheets for the amounts credited to the executive and director deferred compensation plan accounts on April 10, 2015.

Subsequent Events

We perform a review of subsequent events in connection with the preparation of our financial statements. The accounting for and disclosure of events that occur after the balance sheet date, but before our financial statements are issued, are reflected where appropriate or required in our financial statements. Refer to Note 14 of the Consolidated Financial Statements.

Recently Adopted Accounting Standards

In April 2014, the FASB issued ASU 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity," (ASU 2014-08). Under ASU 2014-08, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. Additionally, ASU 2014-08 requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations, including disclosure of pretax profit or loss of an individually significant component of an entity that does not qualify for discontinued operations reporting. ASU 2014-08 was effective for fiscal and interim periods beginning on or after December 15, 2014, which for us was December 29, 2014, the first day of our 2015 fiscal year. The adoption of this standard has not had a material effect on our consolidated results of operations and financial condition.

New Accounting Pronouncements and Other Standards

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” (ASU 2014-09), which creates a new Topic, Accounting Standards Codification Topic 606. The standard is principle-based and provides a five-step model to determine when and how revenue is recognized. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The accounting standard is effective for annual and interim periods beginning after December 15, 2016, which for us is December 26, 2016, the first day of our 2017 fiscal year. Early adoption is not permitted. We are currently evaluating the impact of adopting this guidance. On April 1, 2015, the FASB board voted to propose having ASU 2014-09 take effect for reporting periods beginning after December 15, 2017. Under the proposal, early adoption would be allowed as of the original effective date for public companies. The public will have 30 days to comment, after which the FASB board will decide whether formally enact this proposal.

In June 2014, the FASB issued ASU 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period,” (ASU 2014-12). ASU 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendments in ASU 2014-12 are effective for annual periods and interim periods beginning after December 15, 2015, which for us is December 28, 2015, the first day of our 2016 fiscal year. Early adoption is permitted. We have not early adopted ASU 2014-12. Entities may apply the amendments in ASU 2014-12 either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of this standard is not expected to have a material effect on our consolidated results of operations and financial condition.

In August 2014, the FASB issued ASU 2014-15, "Preparation of Financial Statements - Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern," (ASU 2014-15). Continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity’s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, "Presentation of Financial Statements-Liquidation Basis of Accounting". Even when an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the new criteria in ASU 2014-15 should be followed to determine whether to disclose information about the relevant conditions and events. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. We have not early adopted ASU 2014-15. We are in the process of evaluating the adoption of this ASU, and currently do not expect this to have a material effect on our consolidated results of operations and financial condition.

In January 2015, the FASB issued ASU 2015-01, "Income Statement—Extraordinary and Unusual Items (Subtopic 225-20)," (ASU 2015-01). The amendments in ASU 2015-01 eliminate from GAAP the concept of extraordinary items. Although the amendments will eliminate the requirements in Subtopic 225-20 for reporting entities to consider whether an underlying event or transaction is extraordinary, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. ASU 2015-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, which for us is December 28, 2015, the first day of our 2016 fiscal year. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We have not early adopted ASU 2015-01. The adoption of this standard is not expected to have a material effect on our consolidated results of operations and financial condition.

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810) - Amendments to the Consolidation Analysis,” (ASU 2015-02). ASU 2015-02 modifies existing consolidation guidance related to (i) limited partnerships and similar legal entities, (ii) the evaluation of variable interests for fees paid to decision makers or service providers, (iii) the effect of fee arrangements and related parties on the primary beneficiary determination, and (iv) certain investment funds. These changes reduce the number of consolidation models from four to two and place more emphasis on the risk of loss when determining a controlling financial interest. This guidance is effective for public companies for fiscal years beginning after December 15, 2015, which for us is December 28, 2015, the first day of our 2016 fiscal year. The adoption of this standard is not expected to have a material effect on our consolidated results of operations and financial condition.

In April 2015, the FASB issued ASU 2015-03, “Interest—Imputation of Interest (Subtopic 835-30),” (ASU 2015-03). The amendments in ASU 2015-03 change the presentation of debt issuance costs in financial statements requiring an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. ASU 2015-03 is effective for annual reporting periods beginning after December 15, 2016, which for us is December 26, 2016, the first day of our 2017 fiscal year. Early adoption is permitted. We have not early adopted ASU 2015-03. The new guidance will be applied retrospectively to each prior period presented. The adoption of this standard is not expected to have a material effect on our consolidated results of operations and financial condition.

In April 2015, the FASB issued ASU 2015-04, “Compensation—Retirement Benefits (Topic 715),” (ASU 2015-04). The amendments in ASU 2015-04 provide a practical expedient for employers with fiscal year-ends that do not fall on a month-end by permitting those employers to measure defined benefit plan assets and obligations as of the month-end that is closest to the entity's fiscal year-end. ASU 2015-04 is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2015, which for us is December 28, 2015, the first day of our 2016 fiscal year. Early adoption is permitted. We have not early adopted ASU 2015-04. The adoption of this standard is not expected to have a material effect on our consolidated results of operations and financial condition.

In April 2015, the FASB issued ASU 2015-05, “Intangibles—Goodwill and Other-Internal-Use Software (Subtopic 350-40),” (ASU 2015-05). The amendments in ASU 2015-05 help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement by providing guidance as to whether an arrangement includes the sale or license of software. ASU 2015-05 is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2015, which for us is December 28, 2015, the first day of our 2016 fiscal year. Early adoption is permitted. We have not early adopted ASU 2015-05. The adoption of this standard is not expected to have a material effect on our consolidated results of operations and financial condition.