SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Restatement of Previously Issued Consolidated Financial Statements

We are restating herein our previously issued consolidated financial statements and the related disclosures for the years ended December 30, 2012 and December 25, 2011 and unaudited interim financial information for each of the quarters in the year ended December 30, 2012 and for the first three quarters in the fiscal year ended December 29, 2013 (the "Restated Periods").

The restatement is the result of our corrections for the effect of financial statement errors attributable to the accounting for the future extension of a sales-type lease arrangement in Spain during the second quarter ended June 26, 2011 (“Spain transaction”). The sale of the underlying customer receivables to a financial institution qualified as a legal sale and we recognized the proceeds net of amounts deferred for future deliverables of $17.4 million in other operating income in the second quarter ended June 26, 2011. During the review of the fourth quarter of 2013, we discovered that the 2011 extension arrangement represented the execution of forward starting leases. The recognition of a lease receivable is not permitted until such time as the commencement of a lease or the sale of an unrecognized financial asset (i.e. a right to future income). Accordingly, we reversed the other operating income recognized in fiscal 2011 related to this transaction and recorded other necessary adjustments in the interim and annual periods from the second quarter ended June 26, 2011 through the third quarter ended September 29, 2013.

The aggregate impacts of correcting the errors relating to the Spain transaction as of and for the years ended December 30, 2012 and December 25, 2011 were as follows:



(amounts in millions)	Restatement Adjustments to Previously Reported Income Statement - Income/(Expense)
For the Years ended	December 30, 2012			December 25, 2011
Net revenues	$	(1.6	)	$	(5.6	)
Cost of revenues	0.1			0.9
Other operating income	—			(17.4		)
Operating income	(1.5		)	(22.1		)
Interest expense	(1.9		)	(1.0		)
Income taxes expense	1.0			6.9
Net loss	(2.4		)	(16.2		)

	Restatement Adjustments to Previously Reported Balance Sheet - Increase/(Decrease)
(amounts in millions)	December 30, 2012			December 25, 2011
Deferred income taxes	$	7.6		$	6.5
Other assets	1.0			1.0
Unearned revenues	(0.6		)	(1.1		)
Other current liabilities	—			0.1
Financing liability	31.6			29.3
Other long-term liabilities	(4.6		)	(5.6		)

The correction of the Spain transaction errors in the statement of cash flows for the year ended December 25, 2011 results in a decrease of $30.3 million in cash flows from operating activities and an increase of $31.4 million in cash provided by financing activities, with the remainder as an adjustment to the effect of foreign currency rate fluctuations on cash and cash equivalents.

We assessed the impact of these errors, including the impact of the previously disclosed out-of-period adjustments on our prior interim and annual financial statements and concluded that the combined impact of these errors was material to these financial statements. Consequently, we have restated the prior period financial statements identified above. All amounts in our consolidated financial statements in this Annual Report affected by the restatement adjustments reflect such amounts as restated.

In addition to the Spain transaction resulting in the restatement of our previously issued consolidated financial statements, we also recorded certain other immaterial errors affecting the consolidated financial statements as of and for the years ended December 30, 2012 and December 25, 2011 that we included in our restatement adjustments:


•	Income tax adjustments - We corrected out of period income tax adjustments which had the combined effect of increasing net loss and decreasing total assets in fiscal 2011 by $0.2 million and decreasing net loss and retained earnings in fiscal 2012 by $0.2 million.

•

Balance sheet reclassifications - We recorded balance sheet classification adjustments which had the combined effect of decreasing total current liabilities by $6.8 million in fiscal 2012, increasing other long-term liabilities by $5.2 million, increasing accrued pension by $2.4 million, decreasing accumulated other comprehensive income by $1.7 million and decreasing total assets by $0.9 million. The largest single contributor to these adjustments was a correction of the gross-up of balance sheet accounts as of December 30, 2012 related to a transaction that should have been recorded during the first quarter of 2013. The impact of this adjustment was a decrease in accounts receivable and unearned revenues of $5.6 million and a decrease in accounts payable and other current assets of $4.9 million.

•

Other out of period adjustments - We recorded certain other out of period errors which were not individually material to the financial statements which had the combined effect in fiscal 2011 of increasing net loss by $0.6 million. In fiscal 2012, these adjustments had the combined effect of decreasing net loss by $1.6 million, increasing total assets by $1.6 million, increasing total current liabilities by $1.1 million and increasing long-term liabilities by $4.3 million. The cumulative impact of these adjustments in prior periods resulted in an adjustment to reduce the retained earnings beginning balance by $5.4 million in fiscal 2012. The largest single contributor to these adjustments was a correction of our deferred maintenance balances in certain European countries which increased unearned revenues by $2.2 million and increased other long-term liabilities by $4.3 million as of December 30, 2012. The impacts of this adjustment were decreases in net loss of $0.5 million and $47 thousand in fiscal 2012 and fiscal 2011, respectively.

The restatement adjustments related to the years prior to fiscal 2011 are reflected as an adjustment to the beginning retained earnings for fiscal 2011. The cumulative impact of these adjusting entries decreased retained earnings by $5.2 million, net of tax, as of the beginning of fiscal 2011.

The effect of the restatement on previously issued annual financial information as of and for the years ended December 30, 2012 and December 25, 2011 is set forth in this footnote. The effect of the restatement on the previously filed interim financial information is set forth in Note 20.

Comparison of restated financial statements to financial statements as previously reported

The following tables compare our previously reported Consolidated Balance Sheet as of December 30, 2012 and the previously reported Consolidated Statements of Operations, Stockholders’ Equity, Comprehensive Income (Loss), and Cash Flows for the fiscal years ended December 30, 2012 and December 25, 2011 to the corresponding financial statements for those years as restated.

CHECKPOINT SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS



	December 30, 2012
(amounts in thousands)	As Previously Reported			Restatement Adjustments			As Restated in this Annual Report on Form 10-K
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	118,829		$	—		$	118,829
Accounts receivable, net of allowance of $13,242	177,173			(2,032		)	175,141
Inventories	82,154			71			82,225
Other current assets	36,147			(2,712		)	33,435
Deferred income taxes	8,930			367			9,297
Assets of discontinued operations held for sale	29,864			—			29,864
Total Current Assets	453,097			(4,306		)	448,791
REVENUE EQUIPMENT ON OPERATING LEASE, net	1,748			—			1,748
PROPERTY, PLANT, AND EQUIPMENT, net	107,184			—			88,044
GOODWILL	182,741			—			182,741
OTHER INTANGIBLES, net	74,950			—			94,090
DEFERRED INCOME TAXES	26,843			14,714			41,557
OTHER ASSETS	13,246			(1,102		)	12,144
TOTAL ASSETS	$	859,809		$	9,306		$	869,115
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current portion of long-term debt	$	4,367		$	—		$	4,367
Accounts payable	68,929			(4,947		)	63,982
Accrued compensation and related taxes	28,258			(780		)	27,478
Other accrued expenses	54,425			920			55,345
Income taxes	2,560			—			2,560
Unearned revenues	17,035			(1,505		)	15,530
Restructuring reserve	9,579			—			9,579
Accrued pensions — current	4,687			—			4,687
Other current liabilities	25,855			—			25,855
Liabilities of discontinued operations held for sale	9,688			—			9,688
Total Current Liabilities	225,383			(6,312		)	219,071
LONG-TERM DEBT, LESS CURRENT MATURITIES	108,921			—			108,921
FINANCING LIABILITY	—			31,621			31,621
ACCRUED PENSIONS	95,839			2,350			98,189
OTHER LONG-TERM LIABILITIES	36,540			4,884			41,424
DEFERRED INCOME TAXES	15,580			—			15,580
COMMITMENTS AND CONTINGENCIES				—
CHECKPOINT SYSTEMS, INC. STOCKHOLDERS’ EQUITY:
Preferred stock, no par value, 500,000 shares authorized, none issued	—			—			—
Common stock, par value $.10 per share, 100,000,000 shares authorized, issued 44,763,404 shares	4,476			—			4,476
Additional capital	424,715			—			424,715
Retained earnings	18,392			(22,748		)	(4,356		)
Common stock in treasury, at cost, 4,035,912 shares	(71,520		)	—			(71,520		)
Accumulated other comprehensive income, net of tax	795			(489		)	306
TOTAL CHECKPOINT SYSTEMS, INC. STOCKHOLDERS’ EQUITY	376,858			(23,237		)	353,621
NON-CONTROLLING INTERESTS	688			—			688
TOTAL EQUITY	377,546			(23,237		)	354,309
TOTAL LIABILITIES AND EQUITY	$	859,809		$	9,306		$	869,115

CHECKPOINT SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS



(amounts in thousands, except per share data)	December 30, 2012
For the Years ended	As Previously Reported			Restatement Adjustments			As Restated in this Annual Report on Form 10-K
Net revenues	$	690,789		$	(869	)	$	689,920
Cost of revenues	419,947			137			420,084
Gross profit	270,842			(1,006		)	269,836
Selling, general, and administrative expenses	249,089			(982		)	248,107
Research and development	16,400			—			16,400
Restructuring expenses	28,422			16			28,438
Goodwill impairment	102,715			—			102,715
Litigation settlement	295			—			295
Acquisition costs	332			—			332
Other (income) expense	(3,907		)	—			(3,907		)
Other operating income	(2,043		)	—			(2,043		)
Operating (loss) income	(120,461		)	(40		)	(120,501		)
Interest income	1,757			—			1,757
Interest expense	10,647			1,893			12,540
Other gain (loss), net	(1,731		)	—			(1,731		)
Net loss from continuing operations before income taxes	(131,082		)	(1,933		)	(133,015		)
Income taxes expense	7,364			(1,359		)	6,005
Net loss from continuing operations	(138,446		)	(574		)	(139,020		)
Loss from discontinued operations, net of tax expense of $247	(7,959		)	—			(7,959		)
Net loss	(146,405		)	(574		)	(146,979		)
Less: loss attributable to non-controlling interests	(529		)	—			(529		)
Net loss attributable to Checkpoint Systems, Inc.	$	(145,876	)	$	(574	)	$	(146,450	)

Basic loss attributable to Checkpoint Systems, Inc. per share:
Loss from continuing operations	$	(3.36	)	$	(0.01	)	$	(3.37	)
Loss from discontinued operations, net of tax	$	(0.20	)	$	—		$	(0.20	)
Basic loss attributable to Checkpoint Systems, Inc. per share	$	(3.56	)	$	(0.01	)	$	(3.57	)
Diluted loss attributable to Checkpoint Systems, Inc. per share:
Loss from continuing operations	$	(3.36	)	$	(0.01	)	$	(3.37	)
Loss from discontinued operations, net of tax	$	(0.20	)	$	—		$	(0.20	)
Diluted loss attributable to Checkpoint Systems, Inc. per share	$	(3.56	)	$	(0.01	)	$	(3.57	)

CHECKPOINT SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS



(amounts in thousands, except per share data)	December 25, 2011
For the Years ended	As Previously Reported			Restatement Adjustments			As Restated in this Annual Report on Form 10-K
Net revenues	$	763,749		$	(5,349	)	$	758,400
Cost of revenues	451,459			(951		)	450,508
Gross profit	312,290			(4,398		)	307,892
Selling, general, and administrative expenses	279,791			345			280,136
Research and development	19,269			—			19,269
Restructuring expenses	28,640			—			28,640
Asset impairment	592			—			592
Litigation settlement	943			—			943
Acquisition costs	2,319			—			2,319
Other (income) expense	(179		)	—			(179		)
Other operating income	(19,262		)	17,435			(1,827		)
Operating (loss) income	177			(22,178		)	(22,001		)
Interest income	3,381			—			3,381
Interest expense	7,923			977			8,900
Other gain (loss), net	(1,523		)	—			(1,523		)
Net loss from continuing operations before income taxes	(5,888		)	(23,155		)	(29,043		)
Income taxes expense	59,573			(6,220		)	53,353
Net loss from continuing operations	(65,461		)	(16,935		)	(82,396		)
Loss from discontinued operations, net of tax benefit of $378	(1,165		)	—			(1,165		)
Net loss	(66,626		)	(16,935		)	(83,561		)
Less: loss attributable to non-controlling interests	(57		)	—			(57		)
Net loss attributable to Checkpoint Systems, Inc.	$	(66,569	)	$	(16,935	)	$	(83,504	)

Basic loss attributable to Checkpoint Systems, Inc. per share:
Loss from continuing operations	$	(1.61	)	$	(0.42	)	$	(2.03	)
Loss from discontinued operations, net of tax	$	(0.03	)	$	—		$	(0.03	)
Basic loss attributable to Checkpoint Systems, Inc. per share	$	(1.64	)	$	(0.42	)	$	(2.06	)
Diluted loss attributable to Checkpoint Systems, Inc. per share:
Loss from continuing operations	$	(1.61	)	$	(0.42	)	$	(2.03	)
Loss from discontinued operations, net of tax	$	(0.03	)	$	—		$	(0.03	)
Diluted loss attributable to Checkpoint Systems, Inc. per share	$	(1.64	)	$	(0.42	)	$	(2.06	)

CHECKPOINT SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF EQUITY



	Retained Earnings						Accumulated Other Comprehensive Income						Total Equity
(amounts in thousands)	As Previously Reported			As Restated in this Annual Report on Form 10-K			As Previously Reported			As Restated in this Annual Report on Form 10-K			As Previously Reported			As Restated in this Annual Report on Form 10-K
Balance, December 26, 2010	$	230,837		$	225,598		$	10,470		$	10,869		$	581,554		$	576,714
Net loss	(66,569		)	(83,504		)							(66,626		)	(83,561		)
Exercise of stock-based compensation and awards released													2,210			2,210
Tax benefit of stock-based compensation													77			77
Stock-based compensation expense													7,408			7,408
Deferred compensation plan													1,173			1,173
Non-controlling interest of acquired entities													1,271			1,271
Amortization of pension plan actuarial losses, net of tax							137			137			137			137
Change in realized and unrealized gains on derivative hedges, net of tax							1,165			1,165			1,165			1,165
Recognized loss on pension, net of tax							(2,571		)	(2,571		)	(2,571		)	(2,571		)
Foreign currency translation adjustment							3,540			4,620			3,542			$	4,622
Balance, December 25, 2011	$	164,268		$	142,094		$	12,741		$	14,220		$	529,340		$	508,645
Net loss	(145,876		)	(146,450		)							(146,405		)	(146,979		)
Exercise of stock-based compensation and awards released													1,160			1,160
Tax benefit on stock-based compensation													(306		)	(306		)
Stock-based compensation expense													4,837			4,837
Deferred compensation plan													865			865
Amortization of pension plan actuarial losses, net of tax							218			218			218			218
Change in realized and unrealized loss on derivative hedges, net of tax							(1,521		)	(1,521		)	(1,521		)	(1,521		)
Recognized loss on pension, net of tax							(11,176		)	(12,797		)	(11,176		)	(12,797		)
Foreign currency translation adjustment							533			186			534			187
Balance, December 30, 2012	$	18,392		$	(4,356	)	$	795		$	306		$	377,546		$	354,309

CHECKPOINT SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)



(amounts in thousands)	December 30, 2012									December 25, 2011
Year ended	As Previously Reported			Restatement Adjustments			As Restated in this Annual Report on Form 10-K			As Previously Reported			Restatement Adjustments			As Restated in this Annual Report on Form 10-K
Net loss	$	(146,405	)	$	(574	)	$	(146,979	)	$	(66,626	)	$	(16,935	)	$	(83,561	)
Other comprehensive income (loss), net of tax:
Amortization of pension plan actuarial income, net of tax expense of $65 and $63	218			—			218			137			—			137
Change in realized and unrealized (losses) gains on derivative hedges, net of tax (benefit) expense of ($71) and $31	(1,521		)	—			(1,521		)	1,165			—			1,165
Recognized loss on pension, net of tax benefit of $4,410 and $1,029	(11,176		)	(1,621		)	(12,797		)	(2,571		)	—			(2,571		)
Foreign currency translation adjustment	534			(347		)	187			3,542			1,080			4,622
Total other comprehensive income (loss), net of tax	(11,945		)	(1,968		)	(13,913		)	2,273			1,080			$	3,353
Comprehensive loss	(158,350		)	(2,542		)	(160,892		)	(64,353		)	(15,855		)	$	(80,208	)
Less: comprehensive loss attributable to non-controlling interests	(528		)	—			(528		)	(55		)	—			(55		)
Comprehensive loss attributable to Checkpoint Systems, Inc.	$	(157,822	)	$	(2,542	)	$	(160,364	)	$	(64,298	)	$	(15,855	)	$	(80,153	)

CHECKPOINT SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



(amounts in thousands)	December 30, 2012
Year ended	As Previously Reported			Restatement Adjustments			As Restated in this Annual Report on Form 10-K
Cash flows from operating activities:
Net loss	$	(146,405	)	(574		)	$	(146,979	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	32,714			—			30,369
Amortization of debt issuance costs	—			—			2,345
Interest on financing liability	—			1,893			1,893
Deferred taxes	(2,075		)	(855		)	(2,930		)
Stock-based compensation	4,753			—			4,753
Provision for losses on accounts receivable	3,024			—			3,024
Excess tax benefit on stock compensation	(98		)	—			(98		)
Gain on disposal of fixed assets	(1,326		)	—			(1,326		)
Litigation settlement	—			—			295
Asset impairment	1,771			—			1,771
Goodwill impairment	106,348			—			106,348
Gain on sale of subsidiary	(1,657		)	—			(1,657		)
Loss on sale of discontinued operations	15			—			15
Restructuring-related asset impairment	6,506			—			6,506
Decrease in operating assets, net of the effects of acquired companies:
Accounts receivable	22,105			4,212			26,317
Inventories	37,748			199			37,947
Other current assets	5,357			2,471			7,828
Increase (decrease) in operating liabilities, net of the effects of acquired companies:
Accounts payable	2,631			(4,816		)	(2,185		)
Income taxes	(1,502		)	—			(1,502		)
Unearned revenues - current	(4,393		)	(2,530		)	(6,923		)
Restructuring reserve	(8,178		)	—			(8,178		)
Other liabilities	4,875			152			4,732
Net cash provided by operating activities	62,213			152			62,365
Cash flows from investing activities:
Acquisition of property, plant, and equipment and intangibles	(12,401		)	—			(12,401		)
Change in restricted cash	291			—			291
Proceeds from sale of real estate	4,560			—			4,560
Net cash proceeds from the sale of discontinued operations	1,180			—			1,180
Net cash proceeds from the sale of subsidiary	2,250			—			2,250
Other investing activities	1,671			—			1,671
Net cash used in investing activities	(2,449		)	—			(2,449		)
Cash flows from financing activities:
Proceeds from stock issuances	1,653			—			1,653
Excess tax benefit on stock compensation	98			—			98
Proceeds from short-term debt	3,467			—			3,467
Payment of short-term debt	(11,869		)	—			(11,869		)
Net change in factoring and bank overdrafts	(8,932		)	—			(8,932		)
Proceeds from long-term debt	3,000			—			3,000
Payment of long-term debt	(20,498		)	—			(20,498		)
Debt issuance costs	(2,085		)	—			(2,085		)
Net cash used in financing activities	(35,166		)	—			(35,166		)
Effect of foreign currency rate fluctuations on cash and cash equivalents	750			(3		)	747
Net increase in cash and cash equivalents	25,348			149			25,497
Cash and cash equivalents:
Beginning of year	93,481			(149		)	93,332
End of year	$	118,829		$	—		$	118,829

CHECKPOINT SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



(amounts in thousands)	December 25, 2011
Year ended	As Previously Reported			Restatement Adjustments			As Restated in this Annual Report on Form 10-K
Cash flows from operating activities:
Net loss	$	(66,626	)	$	(16,935	)	$	(83,561	)
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization	37,348			—			36,278
Amortization of debt issuance costs	—			—			1,070
Interest on financing liability	—			977			977
Deferred taxes	47,612			(6,724		)	40,888
Stock-based compensation	7,408			—			7,408
Provision for losses on accounts receivable	3,765			—			3,765
Excess tax benefit on stock compensation	(634		)	—			(634		)
Loss on disposal of fixed assets	106			—			106
Litigation settlement	—			—			943
Asset impairment	3,373			—			3,373
Goodwill impairment	3,411			—			3,411
Restructuring-related asset impairment	7,843			—			7,843
(Increase) in operating assets, net of the effects of acquired companies:
Accounts receivable	(25,567		)	(190		)	(25,757		)
Inventories	(23,821		)	(126		)	(23,947		)
Other current assets	(14,065		)	(950		)	(15,015		)
Increase (decrease) in operating liabilities, net of the effects of acquired companies:
Accounts payable	1,064			—			1,064
Income taxes	(506		)	—			(506		)
Unearned revenues - current	10,780			(1,429		)	9,351
Restructuring reserve	10,544			—			10,544
Other liabilities	8,350			(5,081		)	2,326
Net cash provided by (used in) operating activities	10,385			(30,458		)	(20,073		)
Cash flows from investing activities:
Acquisition of property, plant, and equipment and intangibles	(22,981		)	—			(22,981		)
Acquisitions of businesses, net of cash acquired	(75,937		)	—			(75,937		)
Change in restricted cash	15			—			15
Other investing activities	623			—			623
Net cash used in investing activities	(98,280		)	—			(98,280		)
Cash flows from financing activities:
Proceeds from stock issuances	2,210			—			2,210
Excess tax benefit on stock compensation	634			—			634
Proceeds from short-term debt	8,565			—			8,565
Payment of short-term debt	(7,895		)	—			(7,895		)
Net change in factoring and bank overdrafts	(4,364		)	—			(4,364		)
Proceeds from long-term debt	74,117			—			74,117
Payment of long-term debt	(67,370		)	—			(67,370		)
Proceeds from financing liability	—			31,407			31,407
Net cash provided by financing activities	5,897			31,407			37,304
Effect of foreign currency rate fluctuations on cash and cash equivalents	3,006			(1,098		)	1,908
Net decrease in cash and cash equivalents	(78,992		)	(149		)	(79,141		)
Cash and cash equivalents:
Beginning of year	172,473			—			172,473
End of year	$	93,481		$	(149	)	$	93,332

Nature of Operations

We are a leading global manufacturer and provider of technology-driven, loss prevention, inventory management and labeling solutions to the retail and apparel industry. We provide integrated inventory management solutions to brand, track, and secure goods for retailers and consumer product manufacturers worldwide. We are a leading provider of, and earn revenues primarily from the sale of Merchandise Availability, Apparel Labeling and Retail Merchandising Solutions. Merchandise Availability Solutions consists of electronic article surveillance (EAS) systems, EAS consumables, Alpha^® solutions, store security system installations and monitoring solutions (CheckView^®), and radio frequency identification (RFID) systems, software, tags and labels. Apparel Labeling Solutions includes our web-based data management service and network of service bureaus to manage the printing of variable information on price and promotional tickets, adhesive labels, fabric and woven tags and labels, and apparel branding tags. Retail Merchandising Solutions consists of hand-held labeling systems (HLS) and retail display systems (RDS). Applications of these products include primarily retail security, asset and merchandise visibility, automatic identification, and pricing and promotional labels and signage. Operating directly in 28 countries, we have a global network of subsidiaries and distributors, and provide customer service and technical support around the world.

Other Income

In December of 2011, we identified errors in our financial statements resulting from improper and fraudulent activities of a certain former employee of our Canada sales subsidiary as part of the transition of our Canadian operations into our shared service environment in North America. In the period from 2005 through the fourth quarter of 2011, the then Controller of our Canadian operations was able to misappropriate cash through various schemes. The defalcation of cash was concealed by overriding internal controls at the subsidiary which had the effect of misstating certain accounts including cash, accounts receivable, and inventories as well as income taxes and non-income taxes payable and operating expenses.

The total cumulative gross financial statement impact of the improper and fraudulent activities was approximately $5.2 million and impacted fiscal years 2005 through 2011 of which $1.1 million was recovered by us from the perpetrator during the fourth quarter of 2011, resulting in a net cumulative financial statement impact of $4.1 million. The fiscal year 2011 financial statement impact was $0.2 million income due to the recovery of $1.1 million offset by expense of $0.9 million. We incurred additional expenses related to the improper and fraudulent activities of $0.7 million during 2012. The financial statement impacts of the improper and fraudulent Canadian activities have been included in other income in the Consolidated Statements of Operations. We filed a claim during the second quarter of 2012 with our insurance provider for the unrecovered amount of the loss. On October 10, 2012, we received compensation of $4.7 million for the financial impact of the fraudulent Canadian activities from our insurance provider.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of Checkpoint Systems, Inc. and its majority-owned subsidiaries (Company). All inter-company transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fiscal Year

Our fiscal year is the 52 or 53 week period ending the last Sunday of December. References to 2013 and 2011 are for the 52 weeks ended December 29, 2013 and December 25, 2011, respectively; while references to 2012 are for the 53 weeks ended December 30, 2012.

Reclassifications

Certain reclassifications and retrospective adjustments have been made to prior period information to conform to the current period presentation. In order to conform to the current period presentation, the As Restated amounts in this Annual Report include a balance sheet reclassification of internal-use software from property, plant and equipment to other intangibles and also include a statement of cash flows reclassification of amortization of debt issuance costs from depreciation and amortization.

Discontinued Operations

We evaluate our businesses and product lines periodically for their strategic fit within our operations. In December 2011, we began actively marketing our Banking Security Systems Integration business unit and we completed its sale in October 2012. In December 2012, our U.S. and Canada based CheckView^® business met held for sale reporting criteria. In connection with our decisions to sell these businesses, for all periods presented, the operating results associated with these businesses have been reclassified into earnings from discontinued operations, net of tax in the Consolidated Statements of Operations. The assets and liabilities associated with the U.S. and Canada based CheckView^® business were adjusted to fair value, less costs to sell, and reclassified into assets of discontinued operations, net of tax and liabilities of discontinued operations, net of tax, as appropriate, in the Consolidated Balance Sheets. In April 2013, we completed the sale of our U.S and Canada based CheckView^® business unit. Refer to Note 19 of the Consolidated Financial Statements.

Assets Held For Sale

As a result of our restructuring plans, certain long-lived assets of our manufacturing facilities met held for sale criteria during the second quarter ended June 24, 2012 and $3.7 million of property, plant, and equipment, net was reclassified into other current assets on the Consolidated Balance Sheet. In the third quarter ended September 23, 2012, these long-lived assets of our manufacturing facilities were sold, resulting in a gain on sale of $0.8 million that was recognized in other exit costs within restructuring expenses on the Consolidated Statement of Operations.

Sale of Subsidiary

On November 15, 2012, we sold our Suzhou, China subsidiary, resulting in a gain on sale of $1.7 million that was recognized in other operating income on the Consolidated Statement of Operations.

Non-controlling Interests

On May 16, 2011, Checkpoint Holland Holding B.V., a wholly-owned subsidiary, acquired 51% of the outstanding voting shares of Shore to Shore PVT Ltd. (Sri Lanka) in exchange for $1.7 million in cash.

In January 2013, we entered into an agreement to sell our 51% interest in Sri Lanka to the unrelated party holding the non-controlling interest. On June 24, 2013, we completed the sale of our 51% interest for which we received cash proceeds of $0.2 million (net of a stamp duty). The gain on sale of $0.2 million is recorded within other operating income on the Consolidated Statement of Operations.

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 or available to be issued are reflected where appropriate or required in our financial statements.

Cash and Cash Equivalents

Cash in excess of operating requirements is invested in short-term, income-producing instruments or used to pay down debt. Cash equivalents include commercial paper and other securities with original maturities of three months or less at the time of purchase. Book value approximates fair value because of the short maturity of those instruments.

Accounts Receivable

Accounts receivables are recorded at net realizable values. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. These allowances are based on specific facts and circumstances surrounding individual customers as well as our historical experience. Provisions for the losses on receivables are charged to income to maintain the allowance at a level considered adequate to cover losses. Receivables are charged off against the reserve when they are deemed uncollectible. From time to time, we sell customer related receivables to third party financial institutions and evaluate these transactions to determine if they meet the criteria for sale accounting treatment. If it is determined that the criteria for sale treatment is met, the receivables are removed from the Consolidated Balance Sheet and earnings are reported on the Consolidated Statement of Operations. If it is determined that the criteria for sale accounting treatment are not met, the receivables remain on the Consolidated Balance Sheet and the transaction is treated as a secured financing.

Cash proceeds from the sale of accounts receivable related to sales-type leases with customers to third party financial institutions totaled $29.3 million, $23.4 million, and $84.8 million for the years ended December 29, 2013, December 30, 2012 and December 25, 2011, respectively. Proceeds from the initial sale of the accounts receivables are used to fund operations. This transaction meets the criteria for sale accounting treatment. We have presented the earnings of $0.4 million and $0.2 million recognized on the sale of the receivables separately in other operating income on the Consolidated Statements of Operations for the years ended December 29, 2013 and December 25, 2011, respectively. There was no comparable earnings for the year ended December 30, 2012.

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market. A provision is made to reduce excess or obsolete inventory to its net realizable value.

Revenue Equipment on Operating Lease

The cost of the equipment leased to customers under operating leases is depreciated on a straight-line basis over the lesser of the length of the contract or estimated useful life of the asset, which is usually between three and five years.

Property, Plant, and Equipment

Property, plant, and equipment is carried at cost less accumulated depreciation. Maintenance, repairs, and minor renewals are expensed as incurred. Additions, improvements, and major renewals are capitalized. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets. Assets subject to capital leases are depreciated over the lesser of the estimated useful life of the asset or length of the contract. Buildings, equipment rented to customers, and leased equipment on capitalized leases use the following estimated useful lives of fifteen to thirty years, three to five years, and five years, respectively. Machinery and equipment estimated useful lives range from three to ten years. Leasehold improvement useful lives are the lesser of the minimum lease term or the useful life of the item. The cost and accumulated depreciation applicable to assets retired are removed from the accounts and the gain or loss on disposition is included in income.

We review our property, plant, and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If it is determined that an impairment, based on expected future undiscounted cash flows, exists, then the loss is recognized on the Consolidated Statements of Operations. The amount of the impairment is the excess of the carrying amount of the impaired asset over its fair value.

Internal-Use Software

Included in intangible assets is the capitalized cost of internal-use software. We capitalize costs incurred during the application development stage of internal-use software and amortize these costs over their estimated useful lives, which generally range from three to seven years. Costs incurred related to design or maintenance of internal-use software is expensed as incurred.

During 2009, we announced that we were in the initial stages of implementing a company-wide ERP system to handle the business and finance processes within our operations and corporate functions. As of December 29, 2013 and December 30, 2012, $11.0 million and $18.3 million, respectively, were recorded in intangibles related to portions of the ERP system that were placed in service. In the fourth quarter of 2013, through the budgeting process, working capital prioritization activities, and other strategic direction reviews, it was determined that our European ERP system implementation was no longer a strategic priority for 2014 through 2016. Therefore, during the fourth quarter of 2013, we recorded an impairment of the $4.7 million in internal-use software related to the European ERP system implementation. The impairment charge was recorded in asset impairment expense in the Consolidated Statement of Operations. We plan to implement our South China ALS ERP system by the end of 2016.

Goodwill

Goodwill is carried at cost and is not amortized. We test goodwill for impairment on an annual basis as of fiscal month end October of each fiscal year, relying on a number of factors including operating results, business plans and anticipated future cash flows. Company management uses its judgment in assessing whether goodwill has become impaired between annual impairment tests. Reporting units are primarily determined as the geographic areas comprising our business segments, except in situations when aggregation of the reporting units is appropriate. Recoverability of goodwill is evaluated using a two-step process when we conclude a qualitative analysis is not sufficient. The first step involves a comparison of the fair value of a reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds its fair value, then the second step of the process involves a comparison of the implied fair value and carrying value of the goodwill of that reporting unit. If the carrying value of the goodwill of a reporting unit exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess. The nonrecurring fair value measurement of goodwill is developed using significant unobservable inputs (Level 3). We considered whether applying a purely qualitative assessment of goodwill would be sufficient (i.e. a qualitative assessment without quantitative support and bypassing Step 1). Due to an impairment resulting from our most recent goodwill impairment test, we decided to proceed to Step 1 for all reporting units.

The fair value of our reporting units is dependent upon our estimate of future discounted cash flows and other factors. Our estimates of future cash flows include assumptions concerning future operating performance and economic conditions and may differ from actual future cash flows. Estimated future cash flows are adjusted by an appropriate discount rate derived from our market capitalization plus a suitable control premium at the date of evaluation. The financial and credit market volatility directly impacts our fair value measurement through our weighted average cost of capital that we use to determine our discount rate and through our stock price that we use to determine our market capitalization. Therefore, changes in the stock price may also affect the amount of impairment recorded. Market capitalization is determined by multiplying the shares outstanding on the assessment date by the average market price of our common stock over a 30-day period before each assessment date. We use this 30-day duration to consider inherent market fluctuations that may affect any individual closing price. We believe that our market capitalization alone does not fully capture the fair value of our business as a whole, or the substantial value that an acquirer would obtain from its ability to obtain control of our business. As such, in determining fair value, we add a control premium to our market capitalization. To estimate the control premium, we considered our unique competitive advantages that would likely provide synergies to a market participant. In addition, we considered external market factors which we believe contributed to the decline and volatility in our stock price that did not reflect our underlying fair value. Refer to Note 5 of the Consolidated Financial Statements.

Other Intangibles

Indefinite-lived intangible assets are carried at cost and are not amortized, but are subject to tests for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

Definite-lived intangibles are amortized on a straight-line basis over their useful lives (or legal lives if shorter). We review our other intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

If it is determined that an impairment, based on expected future cash flows, exists, then the loss is recognized on the Consolidated Statements of Operations. The amount of the impairment is the excess of the carrying amount of the impaired asset over the fair value of the asset. The fair value represents expected future cash flows from the use of the assets, discounted at the rate used to evaluate potential investments. Refer to Note 5 of the Consolidated Financial Statements.

Other Assets

Included in other assets are $3.5 million and $6.0 million of net long-term customer-based receivables at December 29, 2013 and December 30, 2012, respectively.

Deferred Financing Costs

Financing costs are capitalized and amortized to interest expense over the life of the debt. The net deferred financing costs at December 29, 2013 and December 30, 2012 were $2.1 million and $2.6 million, respectively. The financing cost amortization expense was $2.2 million, $2.3 million, and $1.1 million, for 2013, 2012, and 2011, respectively.

Revenue Recognition

We recognize revenue when revenue is realized or realizable and earned. Revenue is realized or realizable and earned when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the price to the buyer is fixed or determinable; and collectability is reasonably assured.

We enter into contracts to sell our products and services, and, while the majority of our sales agreements contain standard terms and conditions, there are agreements that contain multiple elements or non-standard terms and conditions. As a result, significant contract interpretation is sometimes required to determine the appropriate accounting, including whether the deliverables specified in a multiple element arrangement should be treated as separate units of accounting for revenue recognition purposes, and, if so, how the selling price should be allocated among the elements and when to recognize revenue for each element.

For arrangements with multiple elements, we allocate total arrangement consideration to all deliverables based on their relative selling price using a specific hierarchy and recognize revenue when each element’s revenue recognition criteria are met. The hierarchy is as follows: vendor-specific objective evidence (“VSOE”), third-party evidence of selling price (“TPE”) or best estimate of selling price (“BESP”). VSOE of fair value for each element is established based on the price charged when the same element is sold separately. We recognize revenue when installation is complete or other post-shipment obligations have been satisfied. Unearned revenue is recorded when payments are received in advance of performing our service obligations and is recognized over the service period.

Products leased to customers under sales-type leases are accounted for as the equivalent of a sale. The present value of such lease revenues is recorded as net revenues, and the related cost of the products is charged to cost of revenues. The deferred finance charges applicable to these leases are recognized over the terms of the leases. Rental revenue from products under operating leases is recognized over the term of the lease. Installation revenue from SMS EAS products is recognized when the systems are installed. Service revenue is recognized, for service contracts, on a straight-line basis over the contractual period, and, for non-contract work, as services are performed.

Revenues from software license agreements are recognized when persuasive evidence of an agreement exists, delivery of the product has occurred, no significant vendor obligations are remaining to be fulfilled, the fee is fixed or determinable, and collection is probable. Revenue from software contracts for both licenses and professional services that require significant production, modification, customization, or implementation are recognized together using the percentage of completion method based upon the ratio of labor incurred to total estimated labor to complete each contract. In instances where there is a term license combined with services, revenue is recognized ratably over the term.

We record estimated reductions to revenue for customer incentive offerings, including volume-based incentives and rebates. The accrual for these incentives and rebates, which are included in the Other Accrued Expenses section of our Consolidated Balance Sheet, was $11.1 million and $15.2 million as of December 29, 2013 and December 30, 2012, respectively. We record revenues net of an allowance for estimated return activities and pricing adjustments. Return activity was immaterial to revenue and results of operations for all periods presented.

Shipping and Handling Fees and Costs

Shipping and handling fees charged to our customers are accounted for in net revenues and shipping and handling costs in cost of revenues.

Cost of Revenues

The principal elements of cost of revenues are product cost, field service and installation cost, freight, and product royalties paid to third parties.

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 Sheet:



(amounts in thousands)	December 29, 2013			December 30, 2012
Balance at beginning of year	$	3,995		$	5,857
Accruals for warranties issued	4,665			5,205
Settlements made	(4,148		)	(5,429		)
Adjustment for discontinued operations	—			(1,668		)
Foreign currency translation adjustment	9			30
Balance at end of period	$	4,521		$	3,995

Royalty Expense

Royalty expenses related to security products approximated $0.6 million, $0.2 million, and $0.2 million, in 2013, 2012, and 2011, respectively. These expenses are included as part of cost of revenues.

Research and Development Costs

Research and development costs are expensed as incurred and consist of development work associated with our existing and potential products and processes. Our research and development expenses relate primarily to payroll costs for engineering personnel, costs associated with various projects, including testing, developing prototypes and related expenses.

Stock Options

We recognize stock-based compensation expense for all share-based payments net of an estimated forfeiture rate and only recognize compensation cost for those shares expected to vest. Stock compensation expense is recognized for all share-based payments on a straight-line basis over the requisite service period of the award.

We use the Black-Scholes option pricing model to value all stock options. The table below presents the weighted average expected life in years. The expected life computation is based on historical exercise patterns and post-vesting termination behavior. Volatility is determined using changes in historical stock prices. The interest rate for periods within the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of grant.

The fair value of share-based payment units was estimated using the Black-Scholes option pricing model with the following assumptions and weighted average fair values as follows:



Year Ended	December 29, 2013			December 30, 2012			December 25, 2011
Weighted-average fair value of grants	$	5.46		$	4.38		$	9.74
Valuation assumptions:
Expected dividend yield	0.00		%	0.00		%	0.00		%
Expected volatility	50.79		%	52.08		%	49.91		%
Expected life (in years)	5.08			5.06			4.98
Risk-free interest rate	0.835		%	0.750		%	2.138		%

Refer to Note 8 of the Consolidated Financial Statements.

Income Taxes

Deferred tax liabilities and assets are determined based on the difference between the financial statement basis and the tax basis of assets and liabilities, using enacted statutory tax rates in effect at the balance sheet date. Changes in enacted tax rates are reflected in the tax provision as they occur. A valuation allowance is recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted.

We utilize a two-step approach to recognizing and measuring uncertain tax positions (tax contingencies). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We include interest and penalties related to our tax contingencies in income tax expense.

Sales and Value Added Taxes Collected from Customers

Sales and value added taxes collected from customers are excluded from revenues. The obligation is included in other current liabilities until the taxes are remitted to the appropriate taxing authorities.

Foreign Currency Translation and Transactions

Our balance sheet accounts of foreign subsidiaries are translated into U.S. dollars at the rate of exchange in effect at the balance sheet dates. Revenues, costs, and expenses of our foreign subsidiaries are translated into U.S. dollars at the year-to-date average rate of exchange. The resulting translation adjustments are recorded as a separate component of shareholders’ equity. Gains or losses on certain long-term inter-company transactions are excluded from the net earnings (loss) and accumulated in the cumulative translation adjustment as a separate component of Consolidated Stockholders’ Equity. All other foreign currency transaction gains and losses are included in net earnings (loss) on our Consolidated Statement of Operations.

Accounting for Hedging Activities

We enter into certain foreign exchange forward contracts in order to hedge anticipated rate fluctuations in Western Europe, Canada, Japan and Australia. Transaction gains or losses resulting from these contracts are recognized at the end of each reporting period. We use the fair value method of accounting, recording realized and unrealized gains and losses on these contracts. These gains and losses are included in other gain (loss), net on our Consolidated Statements of Operations.

We enter into various foreign currency contracts to reduce our exposure to forecasted Euro-denominated inter-company revenues. These cash flow hedging instruments are marked to market and the changes are recorded in other comprehensive income. Amounts recorded in other comprehensive income are recognized in cost of goods sold as the inventory is sold to external parties. Any hedge ineffectiveness is charged to other gain (loss), net on our Consolidated Statements of Operations.

We enter, on occasion, into interest rate swaps to reduce the risk of significant interest rate increases in connection with floating rate debt. This cash flow hedging instrument is marked to market and the changes are recorded in other comprehensive income. Any hedge ineffectiveness is charged to interest expense. Refer to Note 14 of the Consolidated Financial Statements.

Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss), net of tax, for the year ended December 29, 2013 were as follows:



(amounts in thousands)	Pension Plan			Changes in realized and unrealized gains (losses) on derivative hedges			Foreign currency translation adjustment		Total accumulated other comprehensive income
Balance, December 30, 2012 (As Restated)	$	(19,431	)	$	21		$	19,716	$	306
Other comprehensive (loss) income before reclassifications	538			—			182		720
Amounts reclassified from other comprehensive income (loss)	1,120			(21		)	120		1,219
Net other comprehensive income (loss)	1,658			(21		)	302		1,939
Balance, December 29, 2013	$	(17,773	)	$	—		$	20,018	$	2,245

The significant items reclassified from each component of other comprehensive income (loss) for the year ended December 29, 2013 were as follows:



(amounts in thousands)
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
Amortization of pension plan items
Actuarial loss ⁽¹⁾	$	(1,567	)
Prior service cost ⁽¹⁾	(2		)
	(1,569		)	Total before tax
	449			Tax benefit
	$	(1,120	)	Net of tax

Gains and (losses) on cash flow hedges
Foreign currency revenue forecast contracts	$	160		Cost of revenues
	160			Total before tax
	(139		)	Tax expense
	$	21		Net of tax

Non-controlling interest
Sale of 51% interest in Sri Lanka subsidiary	$	(120	)	Other operating income
	(120		)	Total before tax
	—			Tax expense
	$	(120	)	Net of tax

Total reclassifications for the period	$	(1,219	)

⁽¹⁾These accumulated other comprehensive income components are included in the computation of net periodic pension costs. Refer to Note 13 of the Annual Report.

Recently Adopted Accounting Standards

In July 2012, the FASB issued ASU 2012-02, "Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment," (ASU 2012-02). ASU 2012-02 amends the guidance in ASC 350-30 on testing indefinite-lived intangible assets, other than goodwill, for impairment by allowing an entity to perform a qualitative impairment assessment before proceeding to the two-step impairment test. If the entity determines, on the basis of qualitative factors, that the fair value of the indefinite-lived intangible asset is not more likely than not (i.e., a likelihood of more than 50 percent) impaired, the entity would not need to calculate the fair value of the asset. In addition, the ASU does not amend the requirement to test these assets for impairment between annual tests if there is a change in events or circumstances; however, it does revise the examples of events and circumstances that an entity should consider in interim periods. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, which for us was December 31, 2012, the first day of our 2013 fiscal year. The adoption of this standard has not had a material effect on our Consolidated Results of Operations and Financial Condition.

In October 2012, the FASB issued ASU 2012-04, "Technical Corrections and Improvements," (ASU 2012-04). ASU 2012-04 amends current guidance by clarifying the FASB Accountings Standards Codification (Codification), correcting unintended application of guidance, or making minor improvements to the Codification. These amendments are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. Additionally, the amendments included in ASU 2012-04 intend to make the Codification easier to understand and the fair value measurement guidance easier to apply by eliminating inconsistencies and providing needed clarifications. The amendments in ASU 2012-04 that will not have transition guidance were effective upon issuance. For public entities, the amendments that are subject to the transition guidance were effective for fiscal periods beginning after December 15, 2012, which for us was December 31, 2012, the first day of our 2013 fiscal year. The adoption of this standard has not had a material effect on our Consolidated Results of Operations and Financial Condition.

In February 2013, the FASB issued ASU 2013-02, "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income," (ASU 2013-12) which requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail on these amounts. This ASU is effective prospectively for reporting periods beginning after December 15, 2012, which for us was December 31, 2012, the first day of our 2013 fiscal year. Any required changes in presentation requirements and disclosures have been included in our Consolidated Financial Statements beginning with the first quarter ended March 31, 2013. The adoption of this standard has not had a material effect on our Consolidated Results of Operations and Financial Condition.

In July 2013, the FASB issued ASU 2013-10, “Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes,” (ASU 2013-10). The update permits the use of the Fed Funds Effective Swap Rate to be used as a U.S. benchmark interest rate for hedge accounting purposes under FASB ASC Topic 815, in addition to the interest rates on direct Treasury obligations of the U.S. government (UST) and the London Interbank Offered Rate (LIBOR). The update also removes the restriction on using different benchmark rates for similar hedges. This ASU is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of this standard has not had a material effect on our Consolidated Results of Operations and Financial Condition.

In July 2013, the FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” (ASU 2013-11). The amendments in ASU 2013-11 provide guidance on the financial statement presentation of unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This ASU is effective for annual and interim periods beginning after December 15, 2013. Early adoption is permitted. Our early adoption of ASU 2013-11 on a prospective basis as of December 29, 2013 resulted in a decrease to deferred tax assets and a decrease to other long-term liabilities. Refer to Note 12 of the Annual Report.

In December 2013, the FASB issued ASU 2013-12, "Definition of a Public Business Entity – An Addition to the Master Glossary," (ASU 2013-12). The amendment provides a single definition of public business entity for use in future financial accounting and reporting guidance. There is no actual effective date for the amendment, however, the term public business entity will be used in future ASUs. The adoption of this standard is not expected to have a significant effect on our Consolidated Results of Operations and Financial Condition since we continue to be considered a public business entity.

New Accounting Pronouncements and Other Standards

In December 2011, the FASB issued ASU 2011-11, "Balance Sheet – Disclosures about Offsetting Assets and Liabilities (Topic 210-20)," (ASU 2011-11). ASU 2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. ASU 2011-11 is effective for fiscal years beginning on or after January 1, 2013, with retrospective application for all comparable periods presented. The adoption of this standard will not have a material effect on our Consolidated Results of Operations and Financial Condition.

In February 2013, the FASB issued ASU 2013-04, “Obligations Resulting From Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date,” (ASU 2013-04). The update requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed as of the reporting date as the sum of the obligation the entity agreed to pay among its co-obligors and any additional amount the entity expects to pay on behalf of its co-obligors. This ASU is effective for annual and interim periods beginning after December 15, 2013 and is required to be applied retrospectively to all prior periods presented for those obligations that existed upon adoption of the ASU. The adoption of this standard is not expected to have a material effect on our Consolidated Results of Operations and Financial Condition.

In March 2013, the FASB issued ASU 2013-05, “Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity,” (ASU 2013-05). The update clarifies that complete or substantially complete liquidation of a foreign entity is required to release the cumulative translation adjustment (CTA) for transactions occurring within a foreign entity. However, transactions impacting investments in a foreign entity may result in a full or partial release of CTA even though complete or substantially complete liquidation of the foreign entity has not occurred. Furthermore, for transactions involving step acquisitions, the CTA associated with the previous equity-method investment will be fully released when control is obtained and consolidation occurs. This ASU is effective for fiscal years beginning after December 15, 2013. We will apply the guidance prospectively to derecognition events occurring after the effective date. The adoption of this standard is not expected to have a material effect on our Consolidated Results of Operations and Financial Condition.

In April 2013, the FASB issued ASU 2013-07, “Liquidation Basis of Accounting,” (ASU 2013-07). The objective of ASU 2013-07 is to clarify when an entity should apply the liquidation basis of accounting and to provide principles for the measurement of assets and liabilities under the liquidation basis of accounting, as well as any required disclosures. The ASU is effective prospectively for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. The adoption of this standard is not expected to have a material effect on our Consolidated Results of Operations and Financial Condition.