-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q4q/Q+nIwm0zAJqTjfm0ZmERlPYTW9Mb36Z49DBC1EP87typrPqSKFvHRsmIbjoG IHOHDSB3e+7nrYDfcKQtpg== 0000880224-04-000025.txt : 20040816 0000880224-04-000025.hdr.sgml : 20040816 20040816120513 ACCESSION NUMBER: 0000880224-04-000025 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20040812 FILED AS OF DATE: 20040816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERTAPE POLYMER GROUP INC CENTRAL INDEX KEY: 0000880224 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 000000000 STATE OF INCORPORATION: A8 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10928 FILM NUMBER: 04977107 BUSINESS ADDRESS: STREET 1: 110E MONTEE DE LIESSE STREET 2: ST LAURENT CITY: QUEBEC H4T 1N4 CANAD STATE: A8 BUSINESS PHONE: 5147310731 MAIL ADDRESS: STREET 1: 110 E MONTEE LIESSE CITY: ST LAURENT STATE: A8 ZIP: 00000 6-K 1 secondquarter2004.txt 2004 SECOND QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 6-K Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the month of August, 2004 Commission File Number 1-10928 INTERTAPE POLMER GROUP INC. 110E Montee de Liesse, St. Laurent, Quebec, Canada, H4T 1N4 Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F Form 40-F X Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): __________ Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): __________ Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes No X If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-______ The Information contained in this Report is incorporated by reference into Registration Statement No. 333-109944 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INTERTAPE POLYMER GROUP INC. Date: August 12, 2004 By: /s/Andrew M. Archibald Andrew M. Archibald, C.A., CFO, Secretary, Vice President Administration 2004 SECOND QUARTERLY REPORT INTERTAPE POLYMER GROUP (TM) (LOGO) August 12, 2004 This Management's Discussion and Analysis ("MD&A") supplements the consolidated financial statements and related notes for the three months and six months ended June 30, 2004. Except where otherwise indicated, all financial information reflected herein is prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and is expressed in US dollars. OVERVIEW Intertape Polymer Group Inc. ("the Company" or "IPG") achieved a 14.4% increase in sales for the three months ended June 30, 2004 as compared to the corresponding period in 2003. Sales increased 6.1% for the three months ended June 30, 2004 compared to the three months ended March 31, 2004. Earnings for the three months ended June 30, 2004 were $0.14 per share, both basic and diluted, as compared to earnings of $0.12 per share, both basic and diluted, for the same period in 2003 and $0.06 per share both basic and diluted for the three months ended March 31, 2004. Several factors contributed to the earnings improvement between the first quarter and second quarter of 2004. Sales volumes increased between the first quarter and the second quarter, with the second quarter being the first full quarter of operations after the tesa tape, inc. ("tesa tape") acquisition. Gross margin and gross profit also improved in the second quarter of 2004 compared to the first quarter of 2004 due to the cost effective integration of the tesa tape acquisition into the Company's Columbia, South Carolina manufacturing facility and the realization of savings under the Company's cost reduction program. Gross margin and gross profit also improved in the second quarter compared to the first quarter of 2004 because of sales price increases achieved in the second quarter. Competitive pressures prevented the Company from achieving satisfactory price increases for selected products and channels of distribution, however, the Company mitigated the impact of these pricing constraints by increasing prices for selected products where the Company possesses greater pricing power. The Company had experienced rising raw material costs in the first quarter of 2004 but was unable to fully recover the cost increases through selling price increases during that same quarter due to the time lag between incurring raw material cost increases and passing the increases on to customers in the form of higher sales prices. Raw material costs continued to rise in the second quarter, exceeding the cost increases experienced in the first quarter of 2004. The selling price increases for the second quarter covered all of the additional rise in raw material costs that occurred in the second quarter as well as approximately $0.75 million of the $2.0 million in quarterly raw material cost increases that initially arose in the first quarter. Subsequent to June 30, 2004, the Company has experienced additional increases in costs for key raw materials such as polypropylene and polyethylene and is anticipating further increases during the third quarter of 2004. The Company has announced additional sales price increases in the third quarter of 2004 however, due to the timing constraints described above, the Company may not fully recover the additional cost increases within the quarter. It is uncertain whether the Company can continue achieving sales price increases sufficient to completely recover rising raw material costs. Except as discussed above and under the caption "Gross Profit and Gross Margin" below, general economic and industrial factors during the first half of 2004 were, in management's view, substantially unchanged from December 31, 2003. Also, in management's view, there are no general seasonal aspects of the Company's business that affect its financial condition or results. RECENT DEVELOPMENT Subsequent to June 30, 2004, the Company completed a refinancing of all of its bank indebtedness and virtually all of its long- term debt. On July 28, 2004, the Company completed the offering of $125.0 million of senior subordinated notes. On August 4, 2004 the Company borrowed the $200.0 million term loan portion of a new $275.0 million senior secured credit facility. The Company has not drawn on the $75.0 million revolving credit facility. The proceeds from the refinancing were used to repay the existing bank credit facility, redeem all three series of existing senior secured notes, pay related make-whole premiums, accrued interest and transaction fees and provide cash for working capital purposes. In the third quarter of 2004, the Company will record a one-time pretax charge of approximately $31.0 million associated with the refinancing transaction. The refinancing will benefit the Company though lower interest costs of approximately $7.0 million annually, increased working capital flexibility and a schedule of principal repayments that provides greater opportunity for reinvestment in the business over the next several years. Scheduled principal payments over the next 18 months have been reduced from $84.0 million to $2.0 million due to the refinancing. See Note 7 to the accompanying consolidated financial statements for further discussion of the refinancing. RESULTS OF OPERATIONS SALES Sales for the second quarter of 2004 were $171.9 million, an increase of 14.4% over the second quarter of 2003 sales of $150.2 million. The increase includes revenues associated with the February 2004 acquisition of the duct and masking tape operations of tesa tape and the incremental sales associated with acquiring the remaining 50% interest in the Company's Portuguese joint venture in late June 2003. Selling prices in the second quarter of 2004 were also higher than the second quarter of 2003. Sales for the first six months of 2004 were $334.0 compared to $303.8 for the same period in 2003, a 9.9% increase. The increase is attributable to the two acquisitions discussed above as well as higher overall selling prices and sales volumes in 2004 compared to 2003. Including the revenues associated with the above acquisitions, the Company believes that it can achieve 10% annual sales growth for calendar 2004. GROSS PROFIT AND GROSS MARGIN Gross profit for the second quarter of 2004 totaled $37.8 million at a gross margin of 22.0%, as compared to gross profit of $34.1 million for the second quarter of 2003 at a gross margin of 22.7%. Although sales price increases for the second quarter of 2004 exceeded new raw material cost increases for the second quarter, the sales price increases only partially offset earlier raw material cost increases. Consequently, the gross margin for the second quarter of 2004 is higher than the 19.8% gross margin experienced in the first quarter of 2004 but lower than the 22.7% gross margin experienced in the second quarter of 2003. Gross profit for the six months ended June 30, 2004 totaled $70.0 million at a gross margin of 20.9%. Gross profit for the six months ended June 30, 2003 totaled $67.9 million at a gross margin of 22.3%. The margin decline in the first half of 2004 as compared to the first half of 2003 was due to several factors including raw material cost increases in both the first and second quarters of 2004, and in the first quarter of 2004 production interruptions at the Truro, Nova Scotia manufacturing facility, unanticipated integration costs at the Columbia facility related to the acquired duct and masking tape operations of tesa tape and changes in product mix. SELLING, GENERAL AND ADMINSTRATIVE EXPENSES Selling, general and administrative expenses were $22.8 million for the second quarter of 2004 (13.3% of sales), compared to $20.8 million for the second quarter of 2003 (13.9% of sales). The increase in expense reflects the effects of including the remaining 50% interest in the Portuguese joint venture that was acquired at the end of June 2003 as well as the increase in selling expenses attributable to the accounts acquired in the tesa tape acquisition. The selling, general and administrative expenses for the six months ended June 30, 2004 totaled $45.1 million (13.5% of sales) compared to $42.8 million for the six months ended June 30, 2003 (14.1% of sales). The 2004 increase is the result of the additional costs arising from the two acquisitions discussed above. OPERATING PROFIT Operating profit is not a financial measure under GAAP in Canada or the United States. The Company's management uses operating profit to measure and evaluate the profit contributions of the Company's product offerings as well as the profit contribution by channel of distribution. Operating profit (defined as gross profit less selling, general and administrative expenses and stock-based compensation expense) was $14.7 million for the second quarter of 2004, compared to $13.3 million for the second quarter of 2003. The 10.9% increase in the second quarter of 2004 over the corresponding amount in 2003 was the result of the higher sales in 2004. Operating profit for the six months ended June 30, 2004 totaled $24.4 million compared to $25.1 million for the six months ended June 30, 2003. Gross profit increased by $2.1 million for the first six months of 2004 compared to the first six months of 2003. The selling, general and administrative expenses for the first six months of 2004 increased by $2.3 million over the amounts for the first six months of 2003. Additionally, operating profits for the first six months of 2004 reflect $0.4 million of stock-based compensation expense due to the change in accounting adopted by the Company in the fourth quarter of 2003. FINANCIAL EXPENSES Financial expenses for the second quarter of 2004 were $7.2 million compared to $7.8 million in the second quarter of 2003. Financial expenses for the six months ended June 30, 2004 totaled $14.0 million compared to $15.5 million for the six months ended June 30, 2003. The six month period to period decrease in financial expenses is the result of substantial debt repayments in the second and third quarters of 2003. The common stock issuance in late September 2003 allowed the Company to repay $40.8 million in debt at the end of the third quarter of 2003. The increase in financial expenses in the second quarter of 2004 compared to the $6.8 million in the first quarter of 2004 is due to higher levels of borrowings under the revolving credit facility during the second quarter as well as foreign exchange losses incurred in the second quarter. EBITDA A reconciliation of the Company's EBITDA, a non-GAAP financial measure, to GAAP net earnings is set out in the EBITDA reconciliation table below. EBITDA should not be construed as earnings before income taxes, net earnings or cash from operating activities as determined by generally accepted accounting principles. The Company defines EBITDA as net income before (i) income taxes; (ii) financial expense; (iii) amortization of intangibles and capitalized software costs; and (iv) depreciation. Other companies in our industry may calculate EBITDA differently than we do. EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to cash flow from operating activities or as an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with GAAP. The Company has included this non-GAAP financial measure because management believes that it permits investors to make a more meaningful comparison of the Company's performance between periods presented. In addition, the Company's covenants contained in the loan agreements with its lenders and noteholders require certain debt to EBITDA ratios be maintained, thus EBITDA is used by management and the Company's lenders and noteholders in evaluating the Companys performance. EBITDA Reconciliation to Net Earnings (in millions of US dollars) Three Months Six Months Periods ended June 30, 2004 2003 2004 2003 _____________________________ ______ _____ _____ _____ $ $ $ $ Net Earnings 5.7 3.9 7.9 6.8 Add back Financial expenses, net of amortization 7.0 7.2 13.3 14.3 Income taxes 0.7 0.4 0.4 0.8 Depreciation and amortization 7.5 6.7 14.6 13.4 ______ _____ _____ _____ EBITDA 20.9 18.2 36.2 35.3 ______ _____ _____ _____ ______ _____ _____ _____ NET EARNINGS Net earnings for the second quarter of 2004 were $5.7 million or $0.14 per share, both basic and diluted, compared to net earnings of $3.9 million or $0.12 per share, both basic and diluted for the second quarter of 2003. Net earnings for the six months ended June 30, 2004 were $7.9 million or $0.19 per share, both basic and diluted, compared to net earnings for the six months ended June 30, 2003 of $6.8 million or $0.20 per share, both basic and diluted. There was a substantial increase in weighted average number of basic and diluted common shares outstanding at June 30, 2004 as compared to June 30, 2003 due to a public offering of 5,750,000 common shares in September 2003. FINANCIAL POSITION Trade receivables increased $11.9 million between December 31, 2003 and June 30, 2004. The increase is primarily due to the higher level of sales for the three months ended June 2004 compared to the three months ended December 2003. Aside from the trade receivables, other current assets were substantially unchanged between December 31, 2003 and June 30, 2004, with increased inventories offset by decreases in prepaid expenses. Inventories have risen in part to accommodate the requirements of the customer accounts obtained in the tesa tape acquisition. Inventories have also increased due to the higher cost of raw materials increasing valuations and because the Company has pre-bought selected raw materials in advance of price increases announced by suppliers. Current liabilities decreased by $32.4 million between December 31, 2003 and June 30, 2004. As explained in Note 7 to the accompanying consolidated financial statements, most of the Company's bank indebtedness and long-term debt was refinanced subsequent to June 30, 2004 and, accordingly, is reflected as non-current at June 30, 2004. The consolidated balance sheet at June 30, 2003 is included in the accompanying consolidated financial statements for additional information. Property, plant and equipment, net of accumulated depreciation and amortization, increased by $2.6 million between December 31, 2003 and June 30, 2004 due to $9.9 million of capital expenditures and $7.2 million associated with the capital lease described in "Liquidity and Capital Resources" below. Goodwill increased $4.0 million during the first quarter of 2004 due to the tesa tape acquisition. OFF-BALANCE SHEET ARRANGEMENTS AND RELATED PARTY TRANSACTIONS The Company maintains no off-balance sheet arrangements and is not a party to any related party transactions. LIQUIDITY AND CAPITAL RESOURCES Cash from operations before changes in non-cash working capital items was $13.8 million and $22.4 million, respectively, for the three and six months ended June 30, 2004 compared to $11.1 million and $20.9 million for the three and six months ended June 30, 2003. Changes in non-cash working capital items required $14.3 million and $16.6 million respectively, in cash flows for the three months and six months ended June 30, 2004 compared to using $0.1 million and $9.8 million, respectively in cash during the same periods in 2003. A substantial portion of the cash flow generated in the second quarter of 2004 was used to pay down payables to vendors, which had grown substantially in the first quarter of 2004. Cash flows used in investing activities was $4.6 million and $16.5 million respectively, in the three months and six months ended June 30, 2004 compared to using $1.3 million and $5.7 million respectively, in cash in the three months and six months ended June 30, 2003. The increase in cash required for investing activities in 2004 was due to increased capital spending and the $5.5 million used to acquire the duct and masking tape operations of tesa tape. The Company increased cash flows from financing activities during the three months and six months ended June 30, 2004 by $14.8 million and $21.5 million to finance investing activities in excess of cash flows from operations. Additional bank indebtedness has provided most of the cash flows from financing activities in 2004. Total cash flows from financing activities decreased for the three months ended June 30, 2003 by $9.5 million as $15.9 million of long-term debt was repaid in part from cash flows from operations. In the first quarter of 2003 the Company had increased cash flows from financing activities of $3.6 million which was used to fund capital expenditures. In 2003, the Company entered into a twenty year capital lease for the new Regional Distribution Center in Danville, Virginia. The lease commenced in January 2004. This non-cash transaction was valued at $7.2 million and is reflected in the June 30, 2004 consolidated balance sheet as an increase in property, plant and equipment and long-term debt. BANK INDEBTEDNESS AND CREDIT FACILITIES Before the refinancing, the Company maintained a $50.0 million revolving line of credit facility. When added with the cash on-hand and cash equivalents, cash and available credit totaled $25.4 million at June, 2004 compared to $32.6 million at December 31, 2003. CURRENCY RISK The Company is subject to currency risks through its Canadian and European operations. Changes in the exchange rates may result in decreases or increases in the foreign exchange gains or losses. The Company does not use derivative instruments to reduce its exposure to foreign currency risk, as historically these risks have not been significant. CHANGES IN ACCOUNTING POLICIES In the fourth quarter of 2003, the Company adopted the fair value- based approach of the CICA's Handbook Section 3870 "Stock-based Compensation and Other Stock-based Payments." The Company adopted the new accounting rules effective January 1, 2003 on a prospective basis for options granted for years beginning in 2003. The three months and six months ended June 30, 2004 include $351,000 and $421,000 respectively of stock-based compensation expense, compared to none in the corresponding periods of 2003. SUMMARY OF QUARTERLY RESULTS A table of Consolidated Quarterly Statements of Earnings for the eight most recent quarters can be found at the end of this MD&A. ADDITIONAL INFORMATION Additional information relating to IPG, including its Annual Information Form is filed on SEDAR at www.sedar.com in Canada and on EDGAR at www.sec.gov in the U.S. FORWARD-LOOKING STATEMENTS Certain statements and information set forth in this Quarterly Report, including statements regarding the business and anticipated financial performance of the Company, constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied in such forward- looking statements. Among the factors that could cause actual results to differ from the forward-looking statements include, but are not limited to, inflation and general economic conditions, changes in the level of demand for the Company's products, competitive pricing pressures, general market trends, failure to achieve planned cost savings, restrictions and limitations placed on the Company by its debt instruments, international risks including exchange rate fluctuations, trade disruptions, and political instability of foreign markets that the Company produces in or purchase materials from, and the availability and price of raw materials. Additional discussion of factors that could cause actual results to differ materially from management's projections, estimates and expectations is contained in the Company's SEC filings. These and other factors should be considered carefully and undue reliance should not be placed on forward-looking statements. The Company undertakes no duty to update its forward-looking statements, including its sales outlook. This Quarterly Report contains certain non-GAAP financial measures, including operating profit and EBITDA. The Company has included these non-GAAP financial measures because management believes they provide investors with a more meaningful period-to-period comparison of the Company's performance. Further, EBITDA is used by IPG's management, lenders and noteholders to evaluate the Company's performance. IPG has included in this Quarterly Report reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures. Intertape Polymer Group Inc. Conslidated Quarterly Statements of Earnings Three month periods ended (In thousands of US dollars, except per share amounts) (Unaudited)
------------ ----------- ------------- ------------- June 30, March 31, December 31, September 30, 2004 2004 2003 2003 ------------ ----------- ------------- ------------- $ $ $ $ Sales 171,934 162,100 157,682 159,798 Cost of sales 134,097 129,986 122,975 123,489 ------------ ----------- ------------- ----------- Gross profit 37,837 32,114 34,707 36,309 ------------ ----------- ------------- ----------- Selling, general and administrative expenses 22,793 22,307 24,843 22,264 Stock-based compensation expense 351 70 130 Impairment of goodwill Research and development 1,153 962 212 1,080 Financial expenses 7,235 6,768 5,587 7,409 Manufacturing facility closure costs 3,005 ------------ ----------- ------------- ----------- 31,532 30,107 33,777 30,753 ------------ ----------- ------------- ----------- Earnings (loss) before income taxes 6,305 2,007 930 5,556 Income taxes (recovery) 654 (284) (4,244) (643) ------------ ----------- ------------- ----------- Net earnings (loss) 5,651 2,291 5,174 6,199 ------------ ----------- ------------- ----------- ------------ ----------- ------------- ----------- Earnings (loss) per share Cdn GAAP - Basic - US $ 0.14 0.06 0.13 0.18 Cdn GAAP - Diluted - US $ 0.14 0.06 0.13 0.18 US GAAP - Basic - US $ 0.14 0.06 0.13 0.18 US GAAP - Diluted - US $ 0.14 0.06 0.13 0.18
Weighted average number of shares outstanding Cdn GAAP - Basic 41,215,111 40,971,739 40,870,426 35,302,174 Cdn GAAP - Diluted 41,396,403 41,528,581 41,225,776 35,397,800 U.S. GAAP - Basic 41,215,111 40,971,739 40.870,426 35,302,174 U.S. GAAP - Diluted 41,396,403 41,528,581 41,225,776 35,397,800
------------ ----------- ------------- ------------- June 30, March 31, December 31, September 30, 2003 2003 2002 2002 ------------ ----------- ------------- ------------- $ $ $ $ Sales 150,249 153,592 151,261 149,920 Cost of sales 116,166 119,793 121,764 120,632 ------------ ----------- ------------- ----------- Gross profit 34,083 33,799 29,497 29,288 ------------ ----------- ------------- ----------- Selling, general and administrative expenses 20,830 21,982 23,462 21,109 Stock-based compensation expense Impairment of goodwill 70,000 Research and development 1,086 894 480 926 Financial expenses 7,825 7,700 7,621 8,297 Manufacturing facility closure costs 2,100 ------------ ----------- ------------- ----------- 29,741 30,576 101,563 32,432 ------------ ----------- ------------- ----------- Earnings (loss) before income taxes 4,342 3,223 (72,066) (3,144) Income taxes (recovery) 439 322 (13,292) (357) ------------ ----------- ------------- ----------- Net earnings (loss) 3,903 2,901 (58,774) (2,787) ------------ ----------- ------------- ----------- ------------ ----------- ------------- ----------- Earnings (loss) per share Cdn GAAP - Basic - US $ 0.12 0.09 (1.74) (0.08) Cdn GAAP - Diluted - US $ 0.12 0.09 (1.74) (0.08) US GAAP - Basic - US $ 0.12 0.09 (1.74) (0.08) US GAAP - Diluted - US $ 0.12 0.09 (1.74) (0.08)
Weighted average number of shares outstanding Cdn GAAP - Basic 33,832,527 33,821,074 33,821,074 33,701,307 Cdn GAAP - Diluted 33,912,232 33,821,497 33,821,074 33,701,307 U.S. GAAP - Basic 33,832,527 33,821,074 33,821,074 33,701,307 U.S. GAAP - Diluted 33,912,232 33,821,497 33,821,074 33,701,307
Intertape Polymer Group Inc. Consolidated Earnings Periods ended June 30, (In thousands of US dollars, except per share amounts) (Unaudited)
------------------------------------------------------- Three months Six months ------------ ----------- ------------- ----------- 2004 2003 2004 2003 ------------ ----------- ------------- ----------- $ $ $ $ Sales 171,934 150,249 334,034 303,841 Cost of sales 134,097 116,166 264,083 235,959 ------------ ----------- ------------- ----------- Gross profit 37,837 34,083 69,951 67,882 ------------ ----------- ------------- ----------- Selling, general and administrative expenses 22,793 20,830 45,100 42,812 Stock-based compensation expense 351 421 Research and development 1,153 1,086 2,115 1,980 Financial expenses 7,235 7,825 14,003 15,525 ------------ ----------- ------------- ----------- 31,532 29,741 61,639 60,317 ------------ ----------- ------------- ----------- Earnings before income taxes 6,305 4,342 8,312 7,565 Income taxes 654 439 370 761 ------------ ----------- ------------- ----------- Net earnings 5,651 3,903 7,942 6,804 ------------ ----------- ------------- ----------- ------------ ----------- ------------- ----------- Earnings per share Basic 0.14 0.12 0.19 0.20 ------------ ----------- ------------- ----------- ------------ ----------- ------------- ----------- Diluted 0.14 0.12 0.19 0.20 ------------ ----------- ------------- ----------- ------------ ----------- ------------- -----------
Consolidated Retained Earnings Periods ended June 30, (In thousands of US dollars) (Unaudited)
------------------------------------------------------- Three months Six months ------------------------- ------------- ----------- 2004 2003 2004 2003 ------------ ----------- ------------- ----------- $ $ $ $ Balance, beginning of period 70,582 53,015 68,291 50,114 Net earnings 5,651 3,903 7,942 6,804 ------------ ----------- ------------- ----------- Balance, end of period 76,233 56,918 76,233 56,918 ------------ ----------- ------------- ----------- ------------ ----------- ------------- -----------
The accompanying notes are an integral part of the consolidated financial statements. Intertape Polymer Group Inc. Consolidated Balance Sheets As at (In thousands of US dollars) June 30, June 30, December 31, 2004 2003 2003 (Unaudited) (Unaudited) (Audited) ________ _________ ________ $ $ $ ASSETS Current assets Cash 9,488 Trade receivables, net of allowance for doubtful accounts of $4,037 ($3,640 in June 2003, $3,911 in December 2003) 101,201 91,514 89,297 Other receivables 11,353 10,357 11,852 Inventories 73,213 71,896 69,956 Parts and supplies 13,301 12,837 13,153 Prepaid expenses 5,761 6,139 7,924 Future income tax 2,682 2,397 2,682 ________ _________ ________ 216,999 195,140 194,864 Property, plant and equipment 357,227 357,447 354,627 Other assets 13,181 14,014 12,886 Future income taxes 4,457 3,812 Goodwill 176,231 165,633 173,056 ________ _________ ________ 768,095 732,234 739,245 ________ _________ ________ ________ _________ ________ LIABILITIES Current liabilities Bank indebtedness 25,391 13,944 Accounts payable and accrued liabilities 91,834 83,799 95,270 Instalments on long-term debt 1,958 20,300 16,925 ________ _________ ________ 93,792 129,490 126,139 Long-term debt 290,240 274,152 235,066 Other liabilities 530 3,530 530 Future income taxes 5,164 ________ _________ ________ 384,562 412,336 361,735 _________ ________ _______ SHAREHOLDERS' EQUITY Capital stock and share purchase warrants 289,219 246,362 286,841 Contributed surplus 3,701 3,150 Retained earnings 76,233 56,918 68,291 Accumulated currency translation adjustments 14,380 16,618 19,228 ________ _________ ________ 383,533 319,898 377,510 ________ _________ ________ 768,095 732,234 739,245 ________ _________ ________ ________ _________ ________ The accompanying notes are an integral part of the consolidated financial statements. Intertape Polymer Group Inc. Consolidated Cash Flows Periods ended June 30, (In thousands of US dollars) (Unaudited)
------------------------------------------------------- Three months Six months ------------------------- ------------- ----------- 2004 2003 2004 2003 ------------ ----------- ------------- ----------- $ $ $ $ OPERATING ACTIVITIES Net earnings 5,651 3,903 7,942 6,804 Non-cash items Depreciation and amortization 7,514 6,724 14,637 13,363 Stock-based compensation expense 351 421 Future income taxes 310 439 (586) 760 ------------ ----------- ------------- ----------- Cash from operations before changes in non-cash working capital items 13,826 11,066 22,414 20,927 ------------ ----------- ------------- ----------- Changes in non-cash working capital items Trade receivables (2,163) 3,649 (12,248) (2,722) Other receivables 334 487 116 Inventories (3,366) (4,300) (3,878) (8,147) Parts and supplies 43 (224) (148) (124) Prepaid expenses 1,039 698 2,140 1,845 Accounts payable and accrued liabilities (9,935) (286) (2,997) (808) ------------ ----------- ------------- ----------- (14,382) (129) (16,644) (9,840) ------------ ----------- ------------- ----------- Cash flows from operating activities (556) 10,937 5,770 11,087 ------------ ----------- ------------- ----------- INVESTING ACTIVITIES Property, plant and equipment (4,055) (2,629) (9,875) (5,080) Business acquisition (5,500) Goodwill (58) (58) Other assets (501) 1,345 (1,064) (608) ------------ ----------- ------------- ----------- Cash flows from investing activities (4,614) (1,284) (16,497) (5,688) ------------ ----------- ------------- ----------- FINANCING ACTIVITIES Net change in bank indebtedness 15,907 6,343 20,840 15,175 Issue of long-term debt 787 Repayment of long-term debt (2,477) (15,852) (2,477) (21,117) Issue of common shares 1,408 2,378 ------------ ----------- ------------- ----------- Cash flows from financing activities 14,838 (9,509) 21,528 (5,942) ------------ ----------- ------------- ----------- Net increase (decrease) in cash position 9,668 144 10,801 (543) Effect of currency translation adjustments (180) (144) (1,313) 543 Cash position, beginning of period ------------ ----------- ------------- ----------- Cash position, end of period 9,488 9,488 ------------ ----------- ------------- ----------- ------------ ----------- ------------- -----------
The accompanying notes are an integral part of the consolidated financial statements. NOTE 1. Basis of Presentation In the opinion of Management the accompanying unaudited interim consolidated financial statements, prepared in accordance with Canadian generally accepted accounting principles, contain all adjustments necessary to present fairly Intertape Polymer Group Inc.'s ("IPG" or the "Company") financial position as at June 30, 2004 and 2003 and December 31, 2003 as well as its results of operations and its cash flows for the three and six months ended June 30, 2004 and 2003. These unaudited interim consolidated financial statements and notes should be read in conjunction with IPG's annual consolidated financial statements. These unaudited interim consolidated financial statements and notes follow the same accounting policies as the most recent annual consolidated financial statements. NOTE 2. Earnings per Share The following table provides a reconciliation between basic and diluted earnings per share: In thousands of US dollars (Except per share amounts) Three Months Six Months Period ended June 30, 2004 2003 2004 2003 ___________________________ ________________ ________________ $ $ $ $ Net earnings applicable to common shares 5,651 3,903 7,942 6,804 Weighted average number of common shares outstanding 41,215 33,833 41,093 33,827 Effective of dilutive stock options and warrants (a) 181 79 336 58 ___________________________ ________________ ________________ Weighted average number of diluted common shares outstanding 41,396 33,912 41,429 33,885 ______ ______ ______ ______ ______ ______ ______ ______ Basic earnings per share 0.14 0.12 0.19 0.20 Diluted earnings per share 0.14 0.12 0.19 0.20 (a) Diluted earnings per share is calculated by adjusting outstanding shares, assuming any dilutive effects of stock options and warrants. NOTE 3. Accounting for Compensation Programs As at June 30, 2004 the Company had a stock-based compensation plan, which is described in the 2003 Annual Report. Under the transitional provisions prescribed by the Canadian Institute of Chartered Accountants ("CICA"), the Company is prospectively applying the recognition provisions to stock options issued in 2003 and thereafter. The transitional provisions of the CICA are similar to those of the US Financial Accounting Standards Board ("FASB"). To determine the compensation cost, the fair value of stock options is recognized on a straight-line basis over the vesting periods. For stock options granted since January 1, 2002, the Company is required to make pro forma disclosures of net earnings and basic and diluted earnings per share as if the fair value based method of accounting had been applied. Accordingly, the Company's net earnings and basic and diluted earnings per share for the periods ended June 30, 2004 and 2003 would have been decreased to the pro forma amounts indicated in the following table: In thousands of US dollars (Except per share amounts)
Three months Six months Periods ended June 30, 2004 2003 2004 2003 ________________________________________ _________________ ________________ $ $ $ $ Net earnings 5,651 3,903 7,942 6,804 Add (deduct): Stock-based employee compensation expense included in reported net earnings 351 - 421 - Total stock-based employee compensation expense determined under fair value based method (534) (207) (797) (414) _________________ _______________ Pro Forma net earnings 5,468 3,696 7,566 6,390 _________________ _______________ _________________ _______________ Earnings per share: Basic - as reported 0.14 0.11 0.19 0.19 Based - pro forma 0.13 0.11 0.18 0.19 Diluted - as reported 0.14 0.11 0.19 0.19 Diluted - pro forma 0.13 0.11 0.18 0.19
NOTE 4. Capital Stock In May 2004, the Company issued 225,160 common shares to the USA Employees Stock Ownership and Retirement Savings Plan at a value of $1,408,000. During the three months ended March 31, 2004, 115,125 common shares at a value of $970,000 were issued to employees who exercised stock options. In June 2003, the Company issued 1,030,767 common shares to acquire the remaining 50% common equity interest in Fibope Portuguesa Filmes Biorientados S.A., a manufacturer and distributor of film products in Portugal. The Company's shares outstanding as at June 30, 2004, December 31, 2003 and June 30, 2003 were 41,285,161, 40,944,876 and 34,851,841 respectively. Weighted average number of common shares outstanding
Periods ended Three Months Six Months June 30, 2004 2003 2004 2003 ________________________ _______________________ _______________________ CDN GAAP - Basic 41,215,111 33,832,527 41,092,785 33,826,800 CDN GAAP - Diluted 41,396,403 33,912,232 41,429,232 33,885,377 U.S. GAAP - Basic 41,215,111 33,832,527 41,092,785 33,826,800 U.S. GAAP - Diluted 41,396,403 33,912,232 41,429,232 33,885,377
The Company did not declare or pay dividends during the six months ended June 30, 2004 or the six months ended June 30, 2003. NOTE 5. Financial Expenses In thousands of US dollars
Periods ended Three Months Six Months June 30, 2004 2003 2004 2003 ________________________ _______________________ _______________________ $ $ $ $ Interest on long-term debt 5,910 6,981 11,821 14,035 Interest on credit facilities 700 547 1,071 765 Other 775 447 1,411 1,025 Interest capitalized to property, plant and equipment (150) (150) (300) (300) _______________________ _______________________ 7,235 7,825 14,003 15,525 _______________________ _______________________ _______________________ _______________________
NOTE 6. Business Acquisition In February 2004, the Company purchased for a cash consideration of $5.5 million plus contingent consideration (dependent on business retention), assets relating to the masking and duct tape operations of tesa tape, inc. ("tesa tape"). At the same time, the Company finalized its three- year agreement to supply duct tape and masking tape to tesa tape. The purchase was accounted for as a business combination and, accordingly, the purchase method of accounting was used. The purchase price was allocated to the assets purchased based on their estimated fair values as at the date of acquisition and includes $4.0 million of goodwill. Any contingent consideration paid will be recorded as an increase in goodwill. NOTE 7. Subsequent Event-Refinancing On July 28, 2004 the Company completed the offering of $125.0 million of senior subordinated notes due 2014. On August 4, 2004 the Company established a new $275.0 million senior secured credit facility, consisting of a $200.0 million term loan and a $75.0 million revolving credit facility. The proceeds from the refinancing were used to repay the existing bank credit facility, redeem all three series of existing senior secured notes, pay related make-whole premiums, accrued interest and transaction fees and provide cash for general working capital purposes. The $125.0 million senior subordinated notes bear interest at an annual interest rate of 8.50% payable semi-annually on February 1 and August 1. All principal is due on August 1, 2014. The term loan pays interest at a floating rate tied to either an alternate base rate (plus 1.25%) or LIBOR (plus 2.25%). The revolving credit facility is a five year commitment at floating rates tied to either an alternate base rate (plus 1.75%), Canadian prime rate (plus 1.75%) or LIBOR (plus 2.75%). The revolving credit facility interest rate spreads are determined by a pricing grid based on the achievement of certain leverage ratios. The Company will also pay an annual 0.50% commitment fee on the unused portion of the revolving credit facility. The term loan includes scheduled quarterly repayments of $500,000 commencing December 31, 2004 though June 30, 2010. Beginning September 30, 2010 the Company has four final quarterly principal repayments of $47.125 million each. The loan agreement also requires an annual excess cash flow calculation that can result in accelerated principal repayments from excess cash flow as defined in the agreement. The senior secured credit facility is guaranteed by, and secured by a first lien on the assets of the Company, including substantially all of its subsidiaries. Both the senior subordinated notes and the senior secured credit facility require the Company to meet certain financial covenants on an ongoing basis, including a maximum leverage ratio and minimum interest and fixed charges coverage ratios. As a result of the refinancing, the Company will record in the third quarter of 2004, a one-time pretax charge of approximately $31.0 million. The principal elements of the one-time charge are a make-whole premium of approximately $21.9 million and the write-off of deferred financing costs of approximately $8.5 million attributable to the debt that was refinanced. NOTE 7 (continued) Subsequent Event-Refinancing As a result of the refinancing, that portion of the refinanced debt comprising bank indebtedness in the amount of $34.7 million and the current instalments of the existing senior notes amounting to $54.2 million have been reclassified to non-current as at June 30, 2004 except for the amount due within one year of $1.5 million. Information Request Form I would like to o receive or o continue receiving financial information on Intertape Polymer Group. Name: ____________________________________________________ Title: ____________________________________________________ Firm: ____________________________________________________ Address: ____________________________________________________ Province/State: ____________________________________________________ Postal Code/Zip: ____________________________________________________ Telephone: ____________________________________________________ Fax: ____________________________________________________ E-mail: ____________________________________________________ Please send me now on a regular basis. (Please indicate number of copies requested) o Annual Reports Quantity:________________________ o Fax Updates (Press releases only) Quantity:________________________ Please indicate your occupation: o Invesment Dealer o Analyst o Institution/Corporation o Journalist o Institutional Broker o Retail Broker o Institutional Investor o Shareholder o Investment Banker o Other Please Fax a copy of this page to: The Secretary Intertape Polymer Group Inc. Fax: 941-727-3798 110E Montee de Liesse Montreal Quebec Canada, H4T 1N4 Investor Relations Toll Free: 866-202-4713 www.intertapepolymer.com itp$info@intertapeipg.com Form 52-109FT2 - Certification of Interim Filings during Transition Period I, Melbourne F. Yull, Chairman of the Board and Chief Executive Officer of INTERTAPE POLYMER GROUP INC./LE GROUPE INTERTAPE POLYMER INC. certify that: 1. I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) of INTERTAPE POLYMER GROUP INC./LE GROUPE INTERTAPE POLYMER INC., (the "issuer") for the interim period ending June 30, 2004; 2. Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; and 3. Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings. Date: August 12, 2004 /s/Melbourne F. Yull Melbourne F. Yull Chairman of the Board and Chief Executive Officer Form 52-109FT2 - Certification of Interim Filings during Transition Period I, Andrew M. Archibald, Chief Financial Officer, Secretary and Vice President Administration of INTERTAPE POLYMER GROUP INC./LE GROUPE INTERTAPE POLYMER INC. certify that: 1. I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) of INTERTAPE POLYMER GROUP INC./LE GROUPE INTERTAPE POLYMER INC., (the "issuer") for the interim period ending June 30, 2004; 2. Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; and 3. Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the Issuer, as of the date and for the periods presented in the interim filings. Date: August 12, 2004 /s/Andrew M. Archibald Andrew M. Archibald Chief Financial Officer, Secretary and Vice President Administration -----END PRIVACY-ENHANCED MESSAGE-----