40-F

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 40-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12

OF THE SECURITIES EXCHANGE ACT OF 1934

ý ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year ended December 31, 2006

Commission file number: 1-10928

INTERTAPE POLYMER GROUP INC.

(Exact name of Registrant as specified in its charter)

Canada

(Jurisdiction of incorporation or organization)

Not Applicable

(I.R.S. Employer Identification Number)

Primary Standard Industrial Classification Code Number: 2670

9999 Cavendish Blvd., Suite 200, Ville St. Laurent, Quebec, Canada H4M 2X5 (514) 731-7591

(Address and telephone number of Registrant’s principal executive offices)

Burgess H. Hildreth, 3647 Cortez Road West, Bradenton, Florida, 34219 (941) 739-7500

(Name, address and telephone number of Agent for service in the United States)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Name of each Exchange on which registered:
Common Shares, without nominal or par value	New York Stock Exchange Toronto Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Not Applicable

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

Not Applicable

For annual reports, indicate by check mark the information filed with this form:

ý Annual Information Form  ý Audited Annual Financial Statements

The number of outstanding shares of each of the issuer's classes of capital stock as of December 31, 2006 is:

40,986,940 Common Shares

 -0- Preferred Shares

Indicate by check mark whether the registrant by filing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the “Exchange Act”).  If “Yes” is marked, indicate the file number assigned to the registrant in connection with such rule.

Yes ¨  No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý  No ¨

The information contained in this 40-F and the exhibits attached hereto are incorporated by reference into Registration Statement No. 333-109944.

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Controls and Procedures

Disclosure Controls and Procedures.  Intertape Polymer Group Inc. maintains disclosure controls and procedures designed to ensure not only that information required to be disclosed in its reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, but also that information required to be disclosed by Intertape Polymer Group Inc. is accumulated and communicated to management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.  Based on the annual evaluation made by management as of December 31, 2006 of Intertape Polymer Group Inc.’s disclosure controls and procedures, with the participation of the principal executive officer and principal financial officer, the princi pal executive officer and principal financial officer have concluded that Intertape Polymer Group Inc.’s disclosure controls and procedures were adequate and effective to accomplish the purposes for which they were designed.

Internal Control Over Financial Reporting.  Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting as well as the preparation of financial statements for external reporting purposes in accordance with Canadian generally accepted accounting principles, including a reconciliation of accounting principles generally accepted in the United States of America.  Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect the Company’s transactions; providing reasonable assurance that transactions are recorded as necessary for the preparation of the Company’s financial statements; providing reasonabl e assurance that receipts and expenditures of the Company are made under the authorization of management and directors of the Company; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on the Company’s financial statements would be prevented or detected on a timely basis.  Management, with the participation of the principal executive officer and principal financial officer, conducted an annual evaluation of the effectiveness of the Company’s internal control over financial reporting as at December 31, 2006 based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as at December 31, 2006.  Further, it was concluded that there have been no changes in Intertape Polymer Grou p Inc.’s internal controls over financial reporting that occurred during 2006 that has materially affected, or is reasonably likely to materially affect, Intertape Polymer Group Inc.’s internal control over financial reporting.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements, and even when determined to be effective, can only provide reasonable assurance with respect to financial statements preparation and presentation. Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of completeness with policies or procedures may deteriorate.

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Blackout Period Notices

During 2006, Intertape Polymer Group Inc. was not required to send its directors and executive officers notices pursuant to Rule 104 of Regulation BTR concerning any equity security subject to a blackout period under Rule 101 of Regulation BTR.  Intertape Polymer Group Inc.’s blackout periods are regularly scheduled and a description of such periods, including their frequency and duration and plan transactions to be suspended or affected are included in the documents under which Intertape Polymer Group Inc.’s plans operate and is disclosed to employees before enrollment or within thirty (30) days thereafter.

Audit Committee Financial Expert

The Board of Directors of Intertape Polymer Group Inc. has determined that it has at least one audit committee financial expert serving on its audit committee.  Mr. John E. Richardson, having been a senior partner of Clarkson Gordon & Co. (now Ernest & Young), and having the attributes set forth in Paragraph 8(b) of General Instruction B to Form 40-F, has been determined to be an audit committee financial expert.  Further, Mr. Richardson is “independent” as that term is defined by the New York Stock Exchange’s corporate governance standards applicable to Intertape Polymer Group Inc.

The Securities and Exchange Commission has stated that the designation of Mr. Richardson as an audit committee financial expert does not make him an “expert” for any purpose, including, without limitation, for purposes of Section 11 of the Securities Act of 1933.  Further, such designation does not impose any duties, obligations or liability on Mr. Richardson greater than those imposed on members of the audit committee and Board of Directors not designated as an audit committee financial expert, nor does it affect the duties, obligations or liability of any other member of the audit committee or Board of Directors.

Code of Ethics

Intertape Polymer Group Inc. has adopted a code of ethics entitled “Intertape Polymer Group Inc. Code of Business Conduct and Ethics”, which is applicable to all of its employees, including its principal executive officer, principal financial officer, principal accounting officer or controller, and all persons performing similar functions.  During the 2006 fiscal year, Intertape Polymer Group Inc. did not amend its Code of Business Conduct and Ethics and did not grant a waiver from any provision of its Code of Business Conduct and Ethics.  Intertape Polymer Group Inc. will provide, without charge, to any person upon written or oral request, a copy of its Code of Business Conduct and Ethics.  Requests should be directed to Burgess H. Hildreth, Intertape Polymer Group Inc., 3647 Cortez Road West, Bradenton, Florida 34210.  Mr. Hildreth may be reached by telephone at (941) 739-7500.

Principal Accountant Fees and Services

A table setting forth the fees billed for professional services rendered by Raymond Chabot Grant Thornton LLP, Chartered Accountants, Intertape Polymer Group’s principal

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accountant, for the fiscal years ended December 31, 2006 and December 31, 2005, is set forth in Item 17.5 of Intertape Polymer Group’s Annual Information Form attached hereto as Exhibit 1.

Intertape Polymer Group Inc.’s Audit Committee pre-approves all audit engagement fees and terms of all significant permissible non-audit services provided by independent auditors. With respect to services other than audit, review or attest services set forth in the table referenced above, none were approved pursuant to the de minimus exception provided by paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

Off-Balance Sheet Arrangements

Through June 2005, Intertape Polymer Group Inc. maintained no off-balance sheet arrangements, except for certain letters of credit issued and outstanding.  As of December 31, 2006 and 2005, the Company had $2.5 million and $7.0 million, respectively, of outstanding letters of credit, which decrease the available balance under the Company’s credit facility.  In June 2005, Intertape Polymer Group Inc. entered into an interest rate swap agreement for a notional principal amount of $50.0 million maturing in June 2010.  In July 2005, Intertape Polymer Group Inc. entered into a second interest rate swap agreement for a notional principal amount of $25.0 million maturing in July 2010.  Under the terms of these interest rate swap agreements, the Company receives, on a quarterly basis, a variable interest rate and pays a fixed interest rate of 4.27% and 4.29%, respectively, plus the premium of 2.75% (2.25% prior to November 8, 2006 and in 2005) applicable on its term loan.  The increase in the premium rate is as a result of the November, 2006 Amendment to the Company’s Credit Agreement.  As of December 31, 2006, the effective interest rate on $75,000,000 was 7.03%, (6.53% in 2005), and the effective interest rate on the excess was 8.04% (6.74% in 2005).

Tabular Disclosure of Contractual Obligations

The information required by Paragraph (12) of General Instruction B to Form 40-F is located on Page 21 of Management’s Discussion and Analysis for 2006 attached hereto as Exhibit 2 and made a part hereof by this reference.

Identification of the Audit Committee

Intertape Polymer Group Inc. has a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act.  The Audit Committee is comprised of four of the seven directors of Intertape Polymer Group Inc.:  John E. Richardson, L. Robbie Shaw, Gordon R. Cunningham, and Thomas E. Costello.  For additional information with respect to the Company’s Audit Committee, see Item 17 of the Company’s Annual Information Form attached hereto as Exhibit 1.

Undertaking

Intertape Polymer Group Inc. undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Securities and Exchange Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating

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to the securities in relation to which the obligation to file an annual report on Form 40-F arises, or transactions in said securities.

[SIGNATURE ON FOLLOWING PAGE]

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Signature

Pursuant to the requirements of the Exchange Act, Intertape Polymer Group Inc. certifies that it meets all of the requirements for filing on Form 40-F, and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereto duly authorized.

INTERTAPE POLYMER GROUP INC.

(Registrant)

By:/s/ Andrew M. Archibald

(Signature)

Name:

Andrew M. Archibald, C.A.

Title:

Chief Financial Officer

Date: April 2, 2007

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EXHIBIT INDEX

Exhibit No.	Description	Page No.
1	Annual Information Form dated April 2, 2007	9
2	Management’s Discussion and Analysis for 2006 Audited Annual Consolidated Financial Statements	60
3	Consent of Independent Registered Chartered Accountants	61
4	Certifications pursuant to Rule 13a-14(a) or Rule 15d-14(a), pursuant to Section 302 of the U.S. Sarbanes-Oxley Act of 2002	62
5	Certification pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the U.S. Sarbanes-Oxley Act of 2002	66

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EXHIBIT 1

Item 1.

INTERTAPE POLYMER GROUP INC.

ANNUAL INFORMATION FORM

For the Year ended December 31, 2006

Dated: April 2, 2007

9

INTERTAPE POLYMER GROUP INC.

ANNUAL INFORMATION FORM

Table of Contents

Page

Item 1.

Cover Page

9

Item 2.

Corporate Structure

12

2.1

Name, Address and Incorporation

12

2.2

Intercorporate Relationships

12

Item 3.

General Development of the Business

13

3.1

General Three Year History

13

3.2

Credit/Debt Information

17

3.3

Significant Acquisitions

18

Item 4.

Narrative Description of the Business

20

4.1

General

20

4.2

Products, Markets and Distribution

20

4.3

Sales and Marketing

27

4.4

Manufacturing and Quality Control

27

4.5

Equipment and Raw Materials

28

4.6

Research and Development and New Products

29

4.7

Trademarks and Patents

29

4.8

Competition

30

4.9

Environmental Regulation

30

4.10

Employees

32

Item 5.

Cautionary Statements and Risk Factors

32

5.1

Forward-Looking Statements

32

5.2

Risk Factors

34

Item 6.

Dividends

43

Item 7.

General Description of Capital Structure

44

7.1

General Description of Capital Structure

44

7.2

Ratings

44

10

Item 8.

Market For Securities

45

8.1

Trading Prices and Volume on the Toronto Stock Exchange

45

8.2

Trading Prices and Volume on the New York Stock Exchange

46

Item 9.

Escrowed Securities

46

Item 10.

Directors and Officers

46

Item 11.

Legal Proceedings

49

Item 12.

Interest of Management and Others in Material Transactions

49

Item 13.

Transfer Agents and Registrars

50

Item 14.

Material Contracts

50

Item 15.

Experts

52

15.1

Name of Experts

52

15.2

Interests of Experts

53

Item 16.

Additional Information

53

Item 17.

Audit Committee

53

17.1

Audit Committee Charter

53

17.2

Composition of the Audit Committee

53

17.3

Relevant Education and Experience

53

17.4

Pre-Approved Policies and Procedures

54

17.5

External Auditor Services Fees

54

Exhibit A

Audit Committee Charter

56

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Item 2.

 Corporate Structure

2.1

Name, Address and Incorporation

The business of Intertape Polymer Group Inc. (“Intertape Polymer Group” or the “Company”) was established when Intertape Systems Inc., a predecessor of the Company, established a pressure-sensitive tape manufacturing facility in Montreal.  Intertape Polymer Group was incorporated under the Canada Business Corporations Act on December 22, 1989 under the name “171695 Canada Inc.”  On October 8, 1991, the Company filed a Certificate of Amendment changing its name to “Intertape Polymer Group Inc.”  A Certificate of Amalgamation was filed by the Company on August 31, 1993, at which time the Company was amalgamated with EBAC Holdings Inc.  The shareholders, at the Company’s June 11, 2003 annual and special meeting voted on the replacement of the Company’s By-Law No. 1 with a new General By-Law 2003-1. The intent of the replacement by-law was to conform the Company’s general by-laws with amendments that were made to the Canada Business Corporations Act since the adoption of the general by-laws and to simplify certain aspects of the governance of the Company.  On August 6, 2006, the Company filed a Certificate of Amendment to permit the Board of Directors of the Company to appoint one or more additional Directors to hold office for a term expiring not later than the close of the next annual meeting of the Company’s Shareholders, so long as the total number of Directors so appointed does not exceed one-third of the number of Directors elected at the previous annual meeting of the Shareholders of the Company.

Intertape Polymer Group’s corporate headquarters is located at 9999 Cavendish Blvd., Suite 200, Ville St. Laurent, Quebec, Canada  H4M 2X5 and the address of its registered office is 1155 René-Lévesque Blvd. West, Suite 4000, Montreal, Quebec, Canada  H3B 3V2, c/o Stikeman Elliott LLP.

2.2

Intercorporate Relationships

Intertape Polymer Group is a holding company which owns various operating companies in the United States and Canada.  Intertape Polymer Inc., incorporated under the Canada Business Corporations Act, is the principal operating company for the Company’s Canadian operations.  Intertape Polymer Corp., a Delaware corporation, is the principal operating company for the Company’s United States and international operations.

The table below lists for each of the subsidiaries of the Company their respective place of incorporation or constitution, as the case may be, and the percentage of voting securities beneficially owned or over which control or direction is exercised directly or indirectly by Intertape Polymer Group.  Certain subsidiaries, each of which represents not more than ten percent of consolidated assets and not more than ten percent of consolidated sales and operating revenues of the Company, and all of which, in the aggregate, represent not more than twenty percent of total consolidated assets and total consolidated sales and operating revenues of the Company at December 31, 2006, have been omitted.

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Corporation	Place of Incorporation or Constitution	Percentage of Ownership or Control
Intertape Polymer Group Inc.	Canada	Parent
Intertape Polymer Inc.	Canada	100%
ECP GP II Inc.	Canada	100%
ECP L.P.	Province of Ontario	100%
Spuntech Fabrics Inc.	Canada	100%
IPG Financial Services Inc.	Delaware	100%
IPG Holding Company of Nova Scotia	Nova Scotia	100%
Intertape Polymer Corp.	Delaware	100%
Intertape Woven Products Services S.A. de C.V.	Mexico	100%
IPG Holdings LP	Delaware	100%
Polymer International Corp.	Virginia	100%
IPG (US) Inc.	Delaware	100%
IPG (US) Holdings Inc.	Delaware	100%
Intertape Polymer US Inc.	Delaware	100%
Fibope Portuguesa-Filmes Biorientados S.A.	Portugal	100%

Item 3.

 General Development of the Business

3.1

General Three Year History

Overview of prior periods

The Company commenced operations in 1981 and since has evolved into a recognized leader in North America in the development and manufacture of tapes, films and engineered coated and laminated products.  Intertape Polymer Group is the second largest tape manufacturer in North America, the leader in the markets for many engineered coated products, and a significant producer of films in the North American industry.  For several years, Intertape Polymer Group’s business strategy was primarily one of growth.  Commencing in the mid-1990’s, the Company made several strategically important acquisitions to further its business plan to either develop or acquire new products to complete the “basket of products” approach to the Company’s markets.

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Following this period of rapid expansion through acquisitions, the Company entered a period of integration, cost reduction, and facility consolidation. The Company focused on implementing improvements aimed both at realizing the benefits of past acquisitions and optimizing the Company’s cost base, the quality of its products and the cost and effectiveness of its supply chain operations.  As part of its supply chain optimization, the Company announced in 2003 that it would consolidate three Regional Distribution Centers (“RDCs”) into a new facility adjacent to its existing manufacturing operations in Danville, Virginia.  

2004-2005

The new RDC became operational in February 2004 and the continuous improvement of this operation has allowed the Company to lower warehousing costs and enhance service levels to its customers.  In 2006, the Company established a dedicated consumer products distribution center in Columbia, South Carolina, utilizing a third party provider.  This RDC will improve service to this customer base.

Over the last three years, the Company has invested approximately $69.5 million in capital expenditures principally to purchase more efficient production equipment, expand capacity and permit the manufacture of new product offerings, and to enhance information systems capabilities.  One of the benefits of these investments has been the Company’s ability to reduce the number of its production and distribution facilities, while maintaining its existing capacities.  In the fourth quarter of 2004, as part of the Company’s ongoing review of the efficiency and effectiveness of its production and distribution network, the Company announced and substantially completed the closure of two of its manufacturing facilities, one in Cumming, Georgia and the second in Montreal, Quebec, as well as the closure of its distribution center in Cumming, Georgia.

Beginning in 2004, the Company, along with the industry, has experienced rising raw material costs. In 2005, not only was the Company, as well as the industry, faced again with rising raw material costs, certain key raw materials also became in short supply.  In the first half of 2005, the shortage was in synthetic rubber, an essential ingredient in the formulation of certain of the Company’s tape adhesives.  After two major hurricanes hit the Gulf Coast of Louisiana and Texas during the third quarter, prices for petroleum-based resins, which are key raw materials for several of the Company’s products, rose dramatically.  However, as a result of the creation of smaller business teams within the Company and a global sourcing group, the Company was able to manage the rising raw material costs through a series of timely sales price increases to its industrial and specialty distributors, and to a less er extent, its retail customers, and was able to aggressively pursue and secure resin supplies from worldwide sources.  

During 2005, in response to increasing sales prices and product shortages that were negatively impacting Intertape Polymer Group’s customer profitability, Intertape Polymer Group implemented its “Full Truck” concept which was and is designed to allow the Company’s customers to consolidate their purchases through the ordering of multiple products in single shipments.  Under the “Full Truck” strategy, customers are offered truckload pricing being

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required to purchase full truckloads of each product line.  This inventory management system is designed to permit the Company’s customers to operate their businesses with a lower cash investment.  The “Full Truck” concept is an extension of Intertape Polymer Group’s “basket of products” strategy which provides the Company’s customers with a “one-stop shopping” opportunity, and which is an essential element of Intertape Polymer Group’s value proposition to its customers.  The Company’s value proposition is meant to provide economic benefit for customers in these ways:

1.

Inventory optimization achieved through more frequent inventory turns.

2.

New business development resulting from Intertape Polymer Group’s field sales force making end-user calls with distributors.

3.

Business growth through the Company’s National Accounts Program.

In December, 2005, the Company announced it was investigating the possibility of selling a portion of its interest in the combined engineered coated products operations and FIBC business through an initial public offering of the combined business using a Canadian Income Trust.  On May 24, 2006 the Company announced that it had indefinitely deferred the decision to proceed with this offering.  

2006

In May of 2006, it was announced that Mr. Melbourne F. Yull, the Company’s founder Chairman and CEO would retire effective on June 14, 2006. In connection with Mr. Yull’s retirement, the Company recorded charges totaling $9.9 million (predominantly in the second quarter of 2006), including $1.5 million in stock-based compensation expense and $2.4 million related to the recognition of the balance of Mr. Yull’s pension.

Following Mr. Yull’s retirement, Mr. Michael Richards was elected as the non-executive Chairman of the Board. The Board of Director’s also appointed Mr. Dale McSween as Interim CEO until such time as a successor to Mr. Yull is appointed. As discussed in further detail below, due to the Company’s on-going strategic alternatives process, the appointment of a new CEO has been put on hold.

During the first quarter of 2006, petroleum-based resin prices started decreasing.  Accordingly, in order to remain competitive, the Company reduced sales prices for certain of its products.  This, combined with inventories of higher cost raw materials purchased in the fourth quarter of 2005, resulted in a decrease in the Company’s gross margin for the first quarter of 2006.  Demand for the Company’s products remained relatively weak throughout 2006 and consequently the margin decline continued during the remaining quarters of 2006.

During 2006, the Company also was successful in reducing the amount of working capital required to run its business by $44 million as a result of reducing inventories and improving terms and collections in the area of accounts receivable. The Company also invested in manufacturing equipment and IT infrastructure to add capacity, improve productivity and to expand certain of its operations  The capital investment program for 2006 included adding three

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film lines for expanded production of heat shrinkable films and stretch wrap.  These lines were installed in the Danville, Virginia, Tremonton, Utah, and Porto, Portugal plants.  The Company also successfully improved inventory management through investment in third party inventory planning software.  

2006-2007

The Company’s business underwent significant change in 2006 necessitating, in Management’s view, making several revisions to its business model.  In spring 2006, the Company began importing general purpose acrylic tape for sale to its distributors though it continues to manufacture more value-added acrylic tape products. In March 2006, the Company closed its FIBCs manufacturing facility in Piedras Negras, Mexico, substantially reducing its manufacturing capacity for this product group. The Company’s revised business model also includes its almost exclusive reliance on imported bags to meet customers’ demand except for a limited manufacturing capability in the Company’s Hawkesbury, Ontario facility where the Company manufactures specialty bags and provides customers with emergency product fulfillment.  

2006 was also marked by declining sales volumes and narrower gross margins as compared to 2005.  As discussed below, there were a variety of factors contributing to both the sales volume decline and the narrowing of gross margins, but one of the most significant factors was the Company’s customer account rationalization process, which accounted for approximately forty percent of the sales volume decline experienced by the Company in 2006.  The Company exited several unprofitable customer accounts and streamlined its product offering, particularly with respect to products sold to its consumer accounts.  

While some of the sales volume decline was the result of deliberate account rationalization, and other factors were temporary in nature, markets for several of the Company’s products did demonstrate sustained gross margin compression during 2006. In recognition of changes in the underlying business, the Company conducted an interim test of its goodwill for possible impairment as at September 30, 2006.  As a result of the impairment test, the Company recorded an impairment of goodwill charge in the amount of $120.0 million.  The Company performed its annual impairment test at December 31, 2006 and concluded that no additional impairment charge was necessary.

Throughout 2006, the Company continually sought ways to restructure its business and reduce costs to levels more commensurate with near term anticipated sales volumes and gross margins. The Company estimates that through certain cost-cutting measures it implemented in 2006, it has reduced its annual operating costs by approximately $28.0 million. Many of the cost reduction measures undertaken by the Company required the recognition of significant one-time costs.  Details of the Company’s reductions of annual operating costs in 2006, as well as the significant one-time costs incurred by the Company in connection therewith, are described in more detail in Management’s Discussion & Analysis incorporated herein by reference

In 2006, the Company closed its Piedras Negras, Mexico, Brighton, Colorado, and Cap-de-la Madeleine, Quebec plants. The facility in Piedras Negras, Mexico was closed as the

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Company changed its FIBC business model, eliminating most domestic manufacturing and relying almost exclusively on import fulfillment.  Though the implementation of the import sourcing model resulted in a reduction in revenue, it permitted the Company to increase gross margins and improve profitability in its FIBC product line.

Production from the Company’s Brighton, Colorado plant was shifted late in 2006 to the Company’s Danville, Virginia, and Richmond, Kentucky facilities.  This consolidation was made possible by productivity increases at the Danville, Virginia facility and the commercialization of a new rubber compounding technology at the Richmond, Kentucky facility. Additionally in 2006, the Company transferred the production at its Cap-de-la Madeleine facility to its Brantford, Ontario facility. The consolidation of a large percentage of the Company’s paper packaging products provided a base for the Company’s investment in a ten color printing press for its Brantford, Ontario facility.

Lastly, as previously announced, during 2006 TD Securities Inc. was engaged to work with management in order to carry out a detailed financial and operational review of the Company. Additionally, in October 2006, the Board of Directors decided to explore what strategic alternatives may be available to the Company to enhance shareholder value.  TD Securities Inc. was also engaged to work with the Board and management in this strategic alternatives review process.  This process is continuing.

3.2

Credit/Debt Information

Indebtedness

Intertape Polymer Group reduced indebtedness associated with long-term debt instruments by $50.2 million during 2002, and a further $64.3 million during 2003. Long-term debt increased during 2004 as a result of the capital lease entered into at that time for the new RDC in Danville, Virginia, and by the $325.0 million that was borrowed by the Company in connection with the refinancing completed in August 2004.  

In 2005, the Company’s indebtedness increased by $10.0 million due to the Company’s borrowing in connection with its acquisition of Flexia Corporation and Fib-Pak Industries, Inc.  This was offset by a reduction in long-term debt of $3.0 million in accordance with the Company’s debt amortization schedule.  In 2006, the Company reduced its long-term debt by an additional $3.0 million and its revolving credit facility by $15.0 million.

Credit Agreements and Notes

On July 28, 2004, the Company entered into a new senior secured credit facility consisting of a US$200.0 million seven-year delayed draw Term Loan B facility, a US$65.0 million five-year revolving credit facility, and a US$10.0 million five-year revolving credit facility to be issued in Canadian dollars.  The credit facility is secured by a first priority security interest in substantially all of the tangible and intangible assets of, and is guaranteed by, the Company and substantially all of its subsidiaries.  Further, on July 28, 2004, the Company completed an offering of US$125.0 million 8-½% Senior Subordinated Notes due 2014.  The

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proceeds from the refinancing were used to repay the Company’s then existing bank credit facility, redeem all three series of its then existing senior secured notes, pay related make-whole premiums, accrued interest and transaction fees and provide cash for general working capital purposes.

The credit agreement governing the senior secured credit facility and the indenture governing the outstanding Senior Subordinated Notes each contain restrictive covenants that, among other things, limit the Company’s ability to incur additional indebtedness, make restricted payments, make loans or advances to subsidiaries and other entities, invest in capital expenditures, sell its assets or declare dividends. In addition, under its Senior Secured Credit Facility, the Company is required to maintain certain financial ratios, including a maximum total leverage ratio, a minimum interest coverage ratio and a minimum fixed charge ratio.  

In 2006, the Company amended its credit agreement on two occasions, the first being in the second quarter to obtain a waiver for certain non-recurring costs, and the second in the fourth quarter to amend the financial covenants in the agreements due to the changes in the Company’s business model.

For additional information regarding the Company’s Senior Secured Credit Facility and Senior Subordinated Notes, see Item 14, “Material Contracts”.

3.3

Significant Acquisitions

While the Company made no acquisitions in 2006, historically acquisitions have played a significant role in the Company’s strategy for growth and entry into new product markets.  

In June 2003, the Company acquired the remaining fifty percent of the issued and outstanding common shares of Fibope Portuguesa-Filmes Biorientados S.A. (“Fibope”).  Intertape Polymer Group acquired Fibope in order to provide a viable platform from which to introduce its North American made products into European markets.  In 2006, the Company completed a building expansion and added a third extrusion line and associated converting equipment to the Fibope facility.

In February 2004, the Company completed the purchase for a cash consideration of $5.5 million plus contingent consideration (dependent on business retention), of the assets relating to the masking and duct tape operations of tesa tape, inc.  The Company also finalized a three-year agreement to supply duct tape and masking tape to tesa.  The production of the acquired business was integrated into the Company’s Columbia, South Carolina manufacturing facility.  This acquisition provided the Company’s retail business with access to several large retail chains not previously serviced by the Company.

The Company’s last significant acquisition was closed on October 5, 2005, when Intertape Polymer Group’s wholly owned subsidiary, Intertape Polymer Inc., for an aggregate consideration of approximately $30.0 million (after purchase price adjustments which occurred in 2006), acquired all of the issued and outstanding shares of Flexia Corporation Ltd., being the body corporate that resulted from the amalgamation of Flexia Corporation and Fib-Pak

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Industries, Inc. These companies produce a wide range of engineered coated and laminated products, and polypropylene fabrics, and this production was complementary to the Company’s existing coated products business based in Truro, Nova Scotia, as well as its FIBC business. The Company believes that this acquisition increased its market share in certain product groups and provided the Company with an enhanced geographic proximity to its customers and suppliers.

The Company has integrated Flexia and Fib-Pak and their operations are now organized and operated under a wholly-owned limited partnership, ECP L.P. The combination of ECP L.P. operations along with  the Company’s existing coated products business based in Truro, Nova Scotia, has resulted in certain synergies and cost savings to the Company as a result of head count reductions, purchasing cost reductions, manufacturing cost reductions and global sourcing opportunities.

The Flexia and Fib-Pak acquisition met the definition of a “significant acquisition”, as that term is understood with reference to Part 8 of the Canadian National Instrument 51-102-Continuous Disclosure Obligations.  A Business Acquisition Report on Form 51-102F4 was filed by the Company on December 20, 2005, and is incorporated herein by reference.

Set forth below is a summary of the Company’s acquisitions since 1996.

Completed Acquisitions
Year	Annual Cost of Acquisitions	Company	Location	Products
	(US$ in millions)
1996	$5.3	Tape, Inc.	Green Bay, Wisconsin	Water-activated packaging tapes
1997	$42.9	American Tape Co.	Marysville, Michigan Richmond, Kentucky	Pressure-sensitive tapes, masking tapes
1998	$103.9	Anchor Continental, Inc.	Columbia, South Carolina	Pressure-sensitive tapes, masking and duct tapes
1998	$9.3	Rexford Paper Company	Milwaukee, Wisconsin	Pressure-sensitive and water-activated tapes
1999	$111.3	Central Products Company             and Spinnaker Electrical Tape Company	Menasha, Wisconsin Brighton, Colorado Carbondale, Illinois	Pressure-sensitive and water-activated carton sealing tapes Pressure-sensitive electrical tapes
2000	$38.4	Olympian Tape Sales, Inc.	Cumming, Georgia	Distribution of packaging products

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2003	$7.2	Fibope Portuguesa-Filmes Biorientados S.A.	Portugal	Manufacture and distribution of shrink film
2004	$5.5	tesa tape inc.	Columbia, South Carolina	Masking and duct tape
2005	$30.0	Flexia Corporation Ltd. (now operating as ECP L.P.)	Brantford, Ontario Hawkesbury, Ontario Langley, British Columbia	Engineered coated products, polyethylene scrims, polypropylene fabrics and FIBCs

Item 4.

 Narrative Description of the Business

4.1

General

Intertape Polymer Group is a leader in the specialty packaging industry.  Management believes the Company is the second largest manufacturer of tape products in North America and is recognized for its development, manufacture and sale of adhesive tapes, specialty tapes, plastic packaging films, and engineered coated products for use in industrial and retail applications.  The Company’s products include carton sealing tapes, including Intertape® pressure-sensitive and water-activated tapes; industrial and performance specialty tapes, including masking, duct, electrical and reinforced filament tapes; Exlfilm® shrink film; Stretchflex® stretch wrap, and engineered coated fabric products.

The Company has approximately 2,100 employees with operations in 17 locations, including 14 manufacturing facilities in North America and one in Europe.

Intertape Polymer Group has assembled a broad range of products by leveraging its manufacturing technologies, its research and development capabilities, global sourcing expertise and its strategic acquisition program.  Since 1995, the Company has made a number of strategic acquisitions in order to offer a broader range of products to better serve its markets.  The Company’s extensive product line permits Intertape Polymer Group to offer tailored solutions to a wide range of end-markets including food and beverage, consumer, industrial, building and construction, oil and gas, water supply, automotive, medical, agriculture, aerospace and military applications.

4.2

Products, Markets and Distribution

The Company manufactures a variety of specialized polyolefin plastic and paper based products, as well as complementary packaging systems for use in industrial and retail applications. These products include Intertape^® pressure sensitive and Central™ water-activated

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carton sealing tapes; industrial and performance specialty tapes including paper, duct, electrical and reinforced filament tapes; Exlfilm^® shrink film and StretchFLEX^® stretch wrap.  The Company’s products are manufactured and sold under the Intertape^® family of brands to industrial distributors, retailers and to third parties under private brands.  For the years ending December 31, 2006, and December 31, 2005, tapes and films accounted for 77% and 83%, respectively, of the Company’s sales.

The Company’s tape and film products are manufactured and sold under Intertape brands including Intertape®, Central™, Exlfilm® and StretchFLEX® to industrial distributors and retailers, and are manufactured for sale to third parties under private brands.

The Company is a North American leader in the development and manufacture of innovative industrial packaging, protective covering, barrier and liner products utilizing engineered coated polyolefin fabrics, paper and other laminated materials.  Its products are sold primarily direct to end-users in a wide number of industries including lumber, construction, food, paper, and agriculture.

On October 5, 2005, Intertape Polymer Inc., a subsidiary of the Company, acquired all of the issued and outstanding shares of Flexia Corporation Ltd., being the body corporate that resulted from the amalgamation of Flexia Corporation and Fib-Pak Industries, Inc.  The businesses of such companies are now operating under a wholly-owned limited partnership, ECP L.P.  ECP L.P. is a producer of a wide range of engineered coated and laminated products with facilities located in Langley, British Columbia, Brantford, Ontario, and Hawkesbury, Ontario.  

The Company’s tape and film products consist of four main product groups:  (A) Carton Sealing Tapes, (B) Industrial & Specialty Tapes, (C) Films and (D) Protective Packaging.

The Company’s engineered coated products are categorized in six markets:  (E) Building and Construction, (F) Agro-Environmental, (G) Consumer Packaging, (H) Specialty Fabrics, (I) Industrial Packaging, and (J) FIBCs.  For the years ended December 31, 2006 and December 31, 2005, engineered coated products accounted for 23% and 17%, respectively, of the Company’s sales.  

A.

Carton Sealing Tapes

Carton sealing tapes are sold primarily under the Intertape^® and Central™ brands to industrial distributors and leading retailers, as well as to third parties under private brands. Management believes Intertape is the only company worldwide that produces carton sealing tapes using all four adhesive technologies: hot melt, acrylic, natural rubber and water-activated. The Company also sells the application equipment required for the dispensing of its carton sealing tapes.

Hot Melt Tape

Hot melt carton sealing tape is a polypropylene film coated with a synthetic rubber adhesive which offers a wide range of application flexibility and is typically used in carton

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sealing applications.  Primary competitors are 3M Co., Shurtape Technologies LLC and Vibac Group.

Acrylic Tape

Acrylic carton sealing tape is a polypropylene film coated with an aqueous, pressure sensitive acrylic adhesive which is best suited for applications where performance is required within a broad range of temperatures from less than 40^oF to greater than 120^oF.  Primary competitors are 3M Co. and Sekisui TA Industries Inc.

Natural Rubber Tape

Natural rubber carton sealing tape is a polypropylene film coated with natural rubber adhesive and is unique among the carton sealing tapes because of its aggressive adhesion properties.  This tape is ideally suited for conditions involving hot, dusty, humid or cold environments.  Typical uses include moving and storage industry applications, as well as packaging and shipping.  The primary competitor is Evotape SpA of Italy.

Water Activated Tape

Water-activated carton sealing tape is typically manufactured using a filament reinforced kraft paper substrate and a starch based adhesive that is activated by water. Water-activated tape is used primarily in applications where a strong mechanical bond or tamper evidence is required. Typical end-use markets include fulfillment centers, mail order operations, furniture manufacturers and the apparel industry.  Primary competitors are The Crowell Corp., and Holland Manufacturing Co. Inc.

B.

Industrial & Specialty Tapes

The Company produces seven primary industrial and specialty products: Paper Tape, Flatback Tape, Duct Tape, Filament Tape, Stencil Products, Electrical Tape, and Double-Coated Tape.

Paper Tape

Paper tape is manufactured from a crepe paper substrate coated with a natural rubber or a synthetic rubber adhesive. Paper tape is used for a variety of performance and general purpose end-use applications. Product applications include paint masking (consumer, contractor, automotive, aerospace and marine), splicing, bundling/packaging, and general light duty applications.  Primary competitors of the Company for this product are 3M Co., Shurtape Technologies, LLC, and tesa tape inc.

Flatback Tape

Flatback tape is manufactured using a smooth kraft paper substrate coated with a natural rubber/SIS blended adhesive. Flatback tape is designed with low elongation and is widely used in applications such as splicing where the tape should not be distorted.  Typical applications for

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flatback tape include printable identification tapes, label products and carton closure.  Primary competitors of the Company for this product are Shurtape Technologies, LLC, and 3M Co.

Duct Tape

Duct tape is manufactured from a polyethylene film that has been reinforced with scrim and coated with natural/synthetic rubber blend adhesive or speciality polymer adhesives. Duct tape is primarily used by general consumers for a wide range of applications. Duct tapes are also used in maintenance, repair and operations, in the heating, ventilation and air conditioning  markets, construction and in the convention and entertainment industries.  Primary competitors of the Company for this product are Covalence Specialty Materials Corp., 3M Co. and Shurtape Technologies, LLC.

Filament Tape

Filament tape is a film or paper adhesive tape with fiberglass strands or polyester fibers embedded in the adhesive to provide high tensile strength. Primary applications for filament tape include appliance packing, bundling and unitizing, and agricultural applications.  Primary competitors of the Company for this product are 3M Co., TaraTape, Inc. and Shurtape Technologies, LLC.

Stencil Products

Stencil products are manufactured from a calendared natural/synthetic rubber blended substrate with an acrylic adhesive. Stencil products are used in applications within the sign and monument manufacturing markets to protect a surface where sandblasting is required.  The Company’s primary competitor for this product is 3M Co.

Electrical and Electronic Tapes

Electrical and electronic tapes are manufactured from a number of different substrates, including paper, polyester, glass cloth and a variety of adhesive systems that include rubber, acrylic and silicone adhesives. Electrical and electronic tapes are Underwriters Laboratories (UL) approved and engineered to meet stringent application specifications.  Primary competitors of the Company for this product are 3M Co., Permacel, and Saint-Gobain Performance Plastics.

Double-Coated Tapes

Double-coated tapes are manufactured from a paper, foam, or film substrate and are coated on both sides with a variety of adhesive systems. Double-coated tapes also use a release liner made from paper or film, that prevents the tape from sticking to itself. Double-coated tapes are typically used to join two dissimilar surfaces.  The Company’s double-coated tape products are used in the manufacture and regripping of golf clubs, with smaller sales to the carpet installation and the graphics industries.  Primary competitors of the Company for this product are 3M Co., Avery Dennison Corp., tesa tape, inc., and Scapa Group plc.

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C.

Films

The Company primarily produces two film product lines: Exlfilm® Shrink Film and StretchFLEX® Stretch Wrap.

Exlfilm® Shrink Film

Exlfilm® shrink film is a specialty plastic film which shrinks under controlled heat to conform to a package’s shape. The process permits the over-wrapping of a vast array of products of varying sizes and dimensions with a single packaging line. Exfilm® is used to package paper products, consumer products such as bottled water, toys, games, sporting goods, hardware and housewares and a variety of other products.  Primary competitors of the Company for this product are Sealed Air Corp. and Bemis Co. Inc.

StretchFLEX® Stretch Wrap

Stretch wrap is a single or multi-layer plastic film that can be stretched without application of heat. It is used industrially to wrap pallets of various products ensuring a solid load for shipping.

The Company uses state-of-the-art multi-layer technology for the manufacturing of  its StretchFLEX® stretch wrap. This technology has allowed the Company to focus on the introduction of a high performance product while reducing manufacturing costs. The Company introduced Genesys™ in 2005, which is a light gauge high performance film created for wrapping irregularly shaped packages.  Primary competitors of the Company for this product include Sigma Plastics Group, Covalence Specialty Materials Corp., Atlantis Plastics Inc., Pliant Corp. and AEP Industries, Inc.

Intertape Polymer Group entered the European shrink film market through its investment in Fibope in April 1995. The Company initially purchased a 50% equity interest in Fibope, acquiring the remaining 50% equity stake in July 2003 to serve as a platform to penetrate European and African markets with other Intertape products. Fibope operates as an autonomous unit within Intertape Polymer Group.

Fibope produces a full range of shrink film products for sale in the European community. Raw materials are primarily sourced within Europe, with multiple sources utilized to ensure stability of supply and a competitive price environment.

D.

Protective Packaging

Air Pillows

Air pillows are manufactured by the Company from polyethylene film and are inflated at the point of use with an air pillow machine. Air pillows are used as packaging material for void fill and cushioning applications.  Typical end-use markets for air pillows include fulfillment houses, contract packagers, and mail order pharmacies.  Primary competitors of the Company for

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this product are Pregis Corp., Sealed Air Corp., Storopack, Inc., Free-Flow Packaging International Inc. and Polyair Inter Pack Inc.

E.

Building and Construction Products

The Company’s building and construction product group includes protective wrap for kiln dried lumber and a variety of other membrane barrier products such as house wrap, window and door flashing and insulation facing, which are used directly in residential and commercial construction.  The Company also supplies packaging over-wrap sleeves for unitizing multiple bags of fiberglass insulation.    Intertape’s lumber wrap is used to package, unitize, protect and brand lumber during transportation and storage. The product is available in polyethylene or polypropylene coated fabrics and polyethylene films printed to customer specifications.  Lumber wrap is produced at the Company’s plants in Langley, British Columbia; Brantford, Ontario; and Truro, Nova Scotia.

F.

Agro-Environmental Products

The Company has developed a range of Agro-Environmental products, including membrane structure fabrics, bags for packaging processed cotton, fabrics designed for conversion into hay covers, grain covers, landfill covers, oil field membranes, and canal and pond liners. These fabrics are intended to provide protection during transit and storage and to line waterways and ponds to prevent loss of water and other liquids.

NovaShield™ Membrane Structure Fabrics

NovaShield™ is a lightweight, wide-width, and durable polyolefin fabric used as the outer skin layer for flexible membrane structures.  The introduction and continuous improvement of the NovaShield™ fabric in the membrane structure market enabled membrane structure manufacturers to expand the use of this product beyond agricultural applications such as agriculture barns into larger structures for human occupancy such as amphitheaters, recreational facilities, trade show pavilions, aircraft hangers, and casinos.  Developments in the product line include the patented stacked weave, and AmorKote™ co-extrusion coating. The Company sells the NovaShield™ fabrics to membrane structure manufacturers who design, fabricate, and install the structures.  The Company’s main competitor is Fabrene Inc. and a number of polyvinyl chloride producers.  The Company produces these products pri marily at its plant in Truro, Nova Scotia.

AquaMaster® Geomembrane Fabrics

The Company’s AquaMaster® line of geomembrane fabrics is used as an irrigation canal liner, golf course and aquascape pond liner, and in aquaculture operations.  Primary competitors of the Company for this product include Gundle/SLT Environmental, Inc., Poly-America LP and Firestone Building Products.

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Poultry Fabrics

Woven coated polyolefin fabrics are used in the construction of poultry houses in the southern United States.  Materials with high ultraviolet resistance are fabricated into side curtains that regulate ventilation and temperature in buildings. Other materials are used in ceiling construction.  Primary competitors of the Company for this product are Fabrene Inc. and Mai Weave LLC. These products are primarily produced at the Company’s plant in Truro, Nova Scotia.

G.

Consumer Packaging Products

The Company’s consumer packaging products include ream wrap, form, fill & seal packaging, deli wrap, and other coated and laminated products.

The Company competes with a number of local and multinational companies in this market. These products are primarily produced at the Company’s plants in Brantford, Ontario and Langley, British Columbia.

H.

Specialty Fabrics

The Company’s specialty fabric product category is comprised of a variety of specialty materials custom designed for unique applications or specific customers.  The Company’s ability to provide polyolefin fabrics in a variety of weights, widths, colors and styles, and to slit, print and perform various other conversion steps, allows it to provide an array of coated products designed to meet the specific needs of its customers.

Products and applications in this segment include fabrics designed for conversion into pool covers, field covers, disaster relief materials, protective covers and construction sheeting, brattice cloth for mine ventilation, underground marking tapes, salt pile covers and industrial packaging.

Primary competitors of the Company for this product include Fabrene Inc., Mai Weave LLC and, at the low end of the product range, producers from China and Korea. The Company primarily produces these products at its Truro, Nova Scotia, plant.

I.

Industrial Packaging Products

The Company’s metal wrap is used to protect large coils of steel and aluminum during transit and storage.  Primary competitors of the Company for this product include Interwrap Inc. and Covalence Specialty Materials Corp.

The Company also manufactures paper mill roll wrap for newsprint, specialty, and fine papers and custom designed fabrics for dunnage bags, which are used to fill space in a shipping container or to position the contents in a container.  Dunnage bag fabrics are primarily produced

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at the Company’s Hawkesbury, Ontario, facility while paper packaging products are produced at the Company’s Brantford, Ontario and Langley, British Columbia, facilities.

J.

FIBC Products

FIBCs are flexible, semi-bulk containers generally designed to carry and discharge 1,500 to 3,500 pounds of dry flowable products such as chemicals, minerals and dry food ingredients. The market for FIBC’s is highly fragmented.  The Company has established proven supply lines with integrated bag manufacturers in India and China and maintains a small custom manufacturing presence in Hawkesbury, Ontario for domestic specialty bags and for customers wanting small quantities and quick delivery.

4.3

Sales and Marketing

As of December 31, 2006, the Company had a sales force of 101 personnel. The Company participates in industry trade shows and uses trade advertising as part of its marketing efforts.  The Company’s overall customer base is diverse, with no single customer accounting for more than 5% of total sales in 2006.  Sales from facilities located in the United States and Canada accounted for approximately 80% and 15% of total sales, respectively, in 2006, 85% and 10% in 2005, and 85% and 10% in 2004.  Export sales represented 5% of the Company’s total sales in 2006, 2005, and 2004.

The Company’s sales are primarily focused on distribution products and engineered fabric products. Distribution products go to market through a network of paper and packaging distributors throughout North America. Products sold into this segment include carton sealing, masking, duct and reinforced tapes, Exlfilm® and Stretchflex®. In order to enhance sales of the Company’s pressure-sensitive carton sealing tape, it also sells carton closing systems, including automatic and semi-automatic carton sealing equipment. The Company’s Exlfilm® and Stretchflex® products are sold through an existing industrial distribution base primarily to manufacturers of packaged goods and printing and paper products which package their products internally. The industrial electrical tapes are sold to the electronics and electrical industries.

The Company’s engineered fabric products are sold directly to end-users. The Company offers a line of lumberwrap, valve bags, FIBCs and specialty fabrics manufactured from plastic resins. The Company’s engineered fabric products are marketed throughout North America.

4.4

Manufacturing and Quality Control

Intertape Polymer Group’s philosophy is to manufacture those products that are efficient for it from a cost and customer-service perspective. In cases in which the Company manufactures its own products, the Company seeks to do so utilizing the lowest cost raw material and add value to such products by vertical integration. The majority of the Company’s products are manufactured through a process which starts with a variety of polyolefin resins which are extruded into film for further processing. Wide width biaxially oriented polypropylene film is extruded in the Company’s facilities and this film is then coated in high-speed equipment with in-house-produced adhesive and cut to various widths and lengths for carton sealing tape. The

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same basic process applies for reinforced filament tape, which also uses polypropylene film and adhesive but has fiberglass strands inserted between the layers. Specific markets demand different adhesives and the Company manufactures acrylic solvent based rubber, “hot melt,” aqueous acrylic, solvent acrylic, silicone and water-activated adhesives to respond to all demands. Masking tapes utilize the same process with paper as the coating substrate. Duct tapes utilize a similar process with either polyethylene or aluminum foil type coated cloth.

The Company is the only North American manufacturer of all four technologies of carton sealing tape: hot melt, acrylic, water-activated and natural rubber. Further, the Company is the largest United States manufacturer of natural rubber carton sealing tape. This broad family of carton sealing tapes is further enhanced by the Company’s tape application equipment which is based in Florida.

The Company has utilized its technology for basic film extrusion, essential to the low cost production of pressure-sensitive tape products, to expand its product line.  Extrusion of up to seven layers of various resins is done in four of the Company’s plants. These high value added films service the shrink and stretch wrap markets.

Coated fabrics are manufactured in a multi step operation comprised of slit filament extrusion, traditional scrim manufacturing, coating and laminating and finishing or converting processes. Conversion and value-added processes consist of slitting, rewinding, printing and converting materials into finished products.

The Company maintains at each of its manufacturing facilities a quality control laboratory and a process control program on a 24-hour basis to monitor the quality of all packaging and engineered fabric products it manufactures.  At the end of 2006, ten of the Company’s plants were certified under the ISO-9001:2000 quality standards program.

4.5

Equipment and Raw Materials

Intertape Polymer Group purchases mostly custom designed manufacturing equipment, including extruders, coaters, finishing equipment, looms, printers, bag manufacturing machines and injection molds, from manufacturers located in the United States and Western Europe, and participates in the design and upgrading of such equipment. The Company is not dependent on any one manufacturer for its equipment.  

Polyolefin resins are a widely produced petrochemical product and are available from a variety of sources worldwide.  Historically, fluctuations in raw material prices experienced by the Company have been passed on to its customers over time. However, the timing and extent of recent price increases have made it difficult for the Company to pass the full impact of such increases on to customers.  (Please refer to Section 3.1 for a discussion on raw material pricing.)

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4.6

Research and Development and New Products

Intertape Polymer Group’s strategy is to create growth opportunities through enhancements of existing products and the introduction of new products.  The Company’s research and development efforts continue to focus on new products, technology developments, new product processes and formulations.

The Company introduced Exlfilmplus™ and a new family of polyethylene display film (“PE display film”) under Clarity™ and Adverpak™ brands. Exlfilmplus™ is a higher performance product than its predecessors given its superior sealing, shrinking and toughness characteristics. PE display film is used in applications where the display of multi-pack or bundled products is required using clear or printed film for retail presentation. These films enable manufacturers, and contract packagers to create durable, standalone multi-packs of products.

In September 2006, the Company introduced its iCushion™ Protective Packaging Inflatable Air Pillow System.  A complete standard system consists of a AP-8000C air pillow machine, cart with storage bin, transfer stand and on-demand photo eye.  iCushion™ Air Pillows are lightweight, perforated for easy separation and made of clear, non-abrasive poly which will not scratch the product’s surface.  The Company’s air pillows come in four different sizes ranging from 8” x 4” to 8” x 10”, are reusable and recyclable, with disposal requiring a low volume in landfills when deflated.

The research and development group for coated products has recently developed, and received building code approvals for, a new woven, coated, printed and perforated product that is being sold to third parties under private brands and under the FlexGard® brand.  In addition, the Company has improved its NovaShield™ fabric, to expand its use and increase the demand for the product.  Further developments in the product line are the patented stacked weave and AmorKote™ co-extrusion coating.  

The Company’s research and development expenses in 2004, 2005 and 2006 totaled $4.2 million, $4.7 million, and $6.3 million, respectively.

4.7

Trademarks and Patents

Intertape Polymer Group markets its tape products under the trademarks Intertape® and Central™, and various private labels.  The Company’s shrink wrap is sold under the registered trademark Exlfilm®.  Its stretch films are sold under the registered trademark Stretchflex®.  The Company markets its valve or open mouth bags under the registered trademark Nova-Pac®.  The other key ECP products are sold under the registered trademarks Nova-Thene Haymaster®, AquaMaster®, NovaShield™, NovaSeal™, NovaWrap™ and FlexGard®.  Its engineered fabric polyolefin fabrics are sold under the registered trademark Nova-Thene®.  FIBC's are sold under the registered trademark Cajun® bags.  The Company has approximately 146 active registered trademarks, 51 in the United States, 34 in Canada, and 61 foreign, which include trademarks acqui red from American Tape, Anchor, Rexford Paper Company, Central Products Company,

29

and Flexia.  The Company currently has 17 pending trademark applications in the United States and 4 in Canada.  It does not have, nor does management believe it important to the Company’s business to have, patent protection for its carton sealing tape products. However, the Company has pursued patents in select areas where unique products offer a competitive advantage in profitable markets, primarily in engineered coated products for which the Company has 6 patents and 4 patents pending, film for which it has 9 patents and 1 patent pending, tape products for which it has 5 patents and 7 patents pending, adhesive products for which it has 2 patents and 1 patent pending, container products for which it has 1 patent, and retail for which it has 2 patents pending.

4.8

Competition

The Company competes with other manufacturers of plastic packaging products as well as manufacturers of alternative packaging products, such as paper, cardboard and paper-plastic combinations. Some of these competitors are larger companies with greater financial resources than the Company.  Management believes that competition, while primarily based on price and quality, is also based on other factors, including product performance characteristics and service. No statistics, however, on the packaging market as a whole are currently publicly available.  Please refer to Section 4.2 above for a discussion of the Company’s main competitors by product.

The Company believes that significant barriers to entry exist in the packaging market. Management considers the principal barriers to be the high cost of vertical integration which is necessary to operate competitively, the significant number of patents which already have been issued in respect of various processes and equipment, and the difficulties and expense of developing an adequate distribution network.

4.9

Environmental Regulation

Intertape Polymer Group’s operations are subject to extensive environmental regulation in each of the countries in which it maintains facilities. For example, United States (federal, state and local) and Canadian (federal, provincial and local) environmental laws applicable to the Company include statutes and regulations intended to (i) impose certain obligations with respect to site contamination and to allocate the cost of investigating, monitoring and remedying soil and groundwater contamination among specifically identified parties, (ii) prevent future soil and groundwater contamination; (iii) impose national ambient standards and, in some cases, emission standards, for air pollutants which present a risk to public health, welfare or the natural environment; (iv) govern the handling, management, treatment, storage and disposal of hazardous wastes and substances; and (v) regulate the discharge of pollutants into w aterways.

The Company’s use of hazardous substances in its manufacturing processes and the generation of hazardous wastes not only by the Company, but by prior occupants of its facilities, suggest that hazardous substances may be present at or near certain of the Company’s facilities or may come to be located there in the future. Consequently, the Company is required to monitor closely its compliance under all the various environmental laws and regulations applicable to the

30

Company. In addition, the Company arranges for the off-site disposal of hazardous substances generated in the ordinary course of its business.

Intertape Polymer Group obtains Phase I or similar environmental site assessments, and Phase II environmental site assessments, if necessary, for most of the manufacturing facilities it owns or leases at the time the Company either acquires or leases such facilities. These assessments typically include general inspections and may involve soil sampling and/or ground water analysis. The assessments have not revealed any environmental liability that, based on current information, the Company believes will have a material adverse effect on the Company. Nevertheless, these assessments may not reveal all potential environmental liabilities and current assessments are not available for all facilities. Consequently, there may be material environmental liabilities that the Company is not aware of. In addition, ongoing clean up and containment operations may not be adequate for purposes of future laws and regulations. The condition s of the Company’s properties could also be affected in the future by neighboring operations or the conditions of the land in the vicinity of the Company’s properties. These developments and others, such as increasingly stringent environmental laws and regulations, increasingly strict enforcement of environmental laws and regulations, or claims for damage to property or injury to persons resulting from the environmental, health or safety impact of the Company’s operations, may cause it to incur significant costs and liabilities that could have a material adverse effect on the Company.

Except as described below, the Company believes that all of its facilities are in material compliance with applicable environmental laws and regulations, and that the Company has obtained, and is in material compliance with, all material permits required under environmental laws and regulations.  

The Company is currently remediating contamination at its Columbia, South Carolina plant.  Intertape Polymer Group completed its remediation of its Montreal manufacturing facility during the third quarter of 2006, sold the property to a third party, and has no residual environmental liability related to the site.  As a result of the acquisition of all of the shares of Flexia, the Company inherited limited soil contamination resulting from historical activities at Flexia’s facility located in Trois-Rivières (formerly the city of Cap-de-la-Madeleine), Québec.  The Company received a letter from the Ministry of Sustainable Development, Environment and Parks confirming that the activities carried out at the Trois-Rivières facility at the time the Company closed the facility were not activities designated under the Land Protection and Rehabilitation Regulation, thus no remediation was necessa ry at the facility as a result of ceasing its activities.  The Company has completed remediation activities at its Marysville, Michigan facility and has requested final approval of the remediation from the State of Michigan.  In addition, although certain of the Company’s facilities emit regulated pollutants into the air, the emissions are within current permitted limitations, including applicable Maximum Achievable Control Technology (“MACT”) requirements.  The Company believes that the ultimate resolution of these matters should not have a material adverse effect on its financial condition or results of operations.

Intertape Polymer Group and its operating subsidiaries are required to maintain numerous environmental permits and governmental approvals for its operations. Some of the environmental

31

permits and governmental approvals that have been issued to the Company or its operating subsidiaries contain conditions and restrictions, including restrictions or limits on emissions and discharges of pollutants and contaminants, or may have limited terms. If the Company or any of its operating subsidiaries fails to satisfy these conditions or to comply with these restrictions, it may become subject to enforcement action and the operation of the relevant facilities could be adversely affected. The Company may also be subject to fines, penalties or additional costs. The Company or its operating subsidiaries may not be able to renew, maintain or obtain all environmental permits and governmental approvals required for the continued operation or further development of its facilities, as a result of which the operation of its facilities may be limited or suspended.

4.10

Employees

As of December 31, 2006, Intertape Polymer Group employed approximately 2,133 people, 164 of whom held either sales-related or administrative positions and 1,969 of whom were employed in operations.  Approximately 153 hourly employees at the Company’s Marysville plant are unionized and subject to a collective bargaining agreement which expires on April 29, 2007. Approximately 168 hourly employees at the Company’s Menasha plant are unionized and subject to a collective bargaining agreement which expires on July 31, 2008. Approximately 27 employees at the Piedras Negras, Mexico facility were unionized and subject to a collective bargaining agreement dated January 1, 2007.  Approximately 39 hourly employees at the Company’s Carbondale plant are unionized and subject to a collective bargaining agreement which expires on March 4, 2009.  The Company’s fabric plant in Hawkesbury, Ontario, has 5 8 unionized employees whose agreement expires October 10, 2008.  The bag plant in Hawkesbury, Ontario, is also unionized, having 12 members whose collective bargaining agreement expires on May 15, 2008.  In Langley, British Columbia, 50 employees are unionized and their collective bargaining agreement expires on March 31, 2010.  The collective bargaining agreement which covers 93 employees at the Company’s Brantford, Ontario plant expires on February 28, 2008.  Finally, the Company’s plant at Trois-Rivières (formerly the city of Cap-de la-Madeleine), Québec, had 36 employees whose collective bargaining agreement was to expire on March 31, 2010.  Upon the closing of the plant, the employees were terminated in accordance with the terms of the agreement and the agreement cancelled.  The Company has never experienced a work stoppage and it considers its employee relations to be satisfactory.

Item 5. Cautionary Statements and Risk Factors

5.1

Forward-Looking Statements

This Annual Information Form, including the Management’s Discussion & Analysis incorporated herein by reference, contains certain "forward-looking statements" concerning, among other things, discussions of the business strategy of Intertape Polymer Group and expectations concerning the Company’s future operations, liquidity and capital resources.  When used in this Annual Information Form, the words "anticipate", "believe", "estimate", “intends”, "expect" and similar expressions are generally intended to identify forward-looking statements.  Such forward-looking statements, including statements regarding intent, belief or current expectations of the Company or its management, are not guarantees of future performance and

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involve risks and uncertainties.  All statements other than statements of historical fact made in this Annual Information Form or in any document incorporated herein by reference are forward-looking statements.  In particular, the statements regarding industry prospects and the Company’s future results of operations or financial position are forward-looking statements.  Forward-looking statements reflect the Company’s current expectations and are inherently uncertain.  Actual results may differ materially from those in the forward-looking statements as a result of various factors, including those factors set forth below and other factors discussed elsewhere in this Annual Information Form and in the Management’s Discussion & Analysis for 2006.  In addition to the other information contained in this Annual Information Form, readers should carefully consider the above cautionary statements as well as the risk factors set forth below.  The Company undertakes no duty to update its forward-looking statements, including its earnings outlook.

Although the Company believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect the Company’s actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements.  These factors include, among other things, the results of the review of strategic alternatives by the Company and whether any transaction will be completed as a result thereof, disruption of normal management and business operations as a result of these activities; reliance on key personnel who may leave the Company due to general attrition or due to uncertainties created by these activities, whether a new Chief Executive Officer will be identified and appointed; the Company’s significant indebtedness and ability to incur substantially more debt; restrictions and limitations contained in the agreements governing the Company’s debt; the Company’s substantial leverage and ability to generate sufficient cash to service its debt; fluctuations in the cost of the Company’s principal raw materials; availability of raw materials; the effects of acquisitions the Company might make; the timing and market acceptance of the Company’s new products; the Company’s ability to achieve anticipated cost savings from its corporate initiatives; competition in the industry and markets in which the Company operates; the Company’s ability to comply with applicable environmental laws; potential litigation relating to the Company’s intellectual property rights; the loss of, or deterioration of the Company’s relationship with, any significant customers; changes in operating expenses or the need for additional capital expenditures; changes in the Company’s strategy; and general economic conditions.

In light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking statements contained in this Annual Information Form and in the Management’s Discussion and Analysis will in fact transpire.

The Management’s Discussion and Analysis for 2006 incorporated herein by reference contain certain non-GAAP financial measures as defined under SEC rules, including adjusted net earnings, operating profit, free cash flow, EBITDA, and adjusted EBITDA.  The Company believes such non-GAAP financial measures improve the transparency of the Company's disclosure, provide a meaningful presentation of the Company's results from its core business operations, excluding the impact of items not related to the Company's ongoing core business operations, and improve the period-to-period comparability of the Company's results from its core business operations. As required by SEC rules, the Company has provided in its

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Management Discussion and Analysis for 2006 reconciliations of those measures to the most directly comparable GAAP measures.

In addition to the other information contained in this Annual Information Form, readers should carefully consider the above cautionary statements as well as the risk factors set forth below.

5.2

Risk Factors

The Company’s Senior Secured Credit Facility contains certain financial covenants which if not met, will result in an event of default.

The Company’s Senior Secured Credit Facility requires it to maintain certain financial ratios and meet other financial tests. The Company’s failure to comply with these covenants could result in an event of default, which, if not cured or waived, could result in the Company being required to repay these borrowings before their scheduled due date. If the Company were unable to make this repayment or otherwise refinance these borrowings, the lenders under the Senior Secured Credit Facility could elect to declare all amounts borrowed under the Company’s Senior Secured Credit Facility, together with accrued interest, to be due and payable, which, in some instances, would be an event of default under the indenture governing the Senior Subordinated Notes. In addition, these lenders could foreclose on the Company’s assets. If the Company was unable to refinance these borrowings on favorable terms, the Company ’s results of operations and financial condition could be adversely impacted by increased costs and less favorable terms, including interest rates and covenants. Any future refinancing of the Company’s Senior Secured Credit Facility is likely to contain similar restrictive covenants and financial tests.

The Company may not be able to generate sufficient cash flow to meet its debt service obligations.

The Company’s ability to generate sufficient cash flows from operations to make scheduled payments on its debt obligations will depend on its future financial performance, which will be affected by a range of economic, competitive, regulatory, legislative and business factors, many of which are outside of the Company’s control. If the Company does not generate sufficient cash flows from operations to satisfy its debt obligations, the Company may have to undertake alternative financing plans, such as refinancing or restructuring its debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. The Company cannot assure that any refinancing would be possible or that any assets could be sold on acceptable terms or otherwise. The Company’s inability to generate sufficient cash flows to satisfy its debt obligations, or to refinance its obligations on commercially reasonab le terms, would have an adverse effect on the Company’s business, financial condition and results of operations. In addition, any refinancing of the Company’s debt could be at higher interest rates and may require the Company to comply with more onerous covenants, which could further restrict its business operations.

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The Company’s substantial debt could adversely affect its financial condition and prevent it from fulfilling its obligations under its Senior Secured Credit Facility or Senior Subordinated Notes.

The Company has a significant amount of indebtedness.  As of December 31, 2006, the Company had outstanding debt of approximately $330 million, which represented 55% of its total capitalization.  Of such total debt, approximately $205 million, or all of the Company’s outstanding senior debt, was secured.  Furthermore, an additional $72.5 million (net of $2.5 million in outstanding letters of credit) in loans available under the Company’s Senior Credit Facility, subject to certain restrictive covenants, also would be secured, if drawn upon.  Of the $72.5 million available at December 31, 2006, $24.0 million was accessible after covenant restrictions and outstanding letters of credit.

The Company’s substantial indebtedness could adversely affect its financial condition and make it more difficult for the Company to satisfy its obligations with respect to the Senior Subordinated Notes, as well as its obligations under its Senior Secured Credit Facility.  The Company’s substantial indebtedness could also increase its vulnerability to adverse general economic and industry conditions; require the Company to dedicate a substantial portion of its cash flows from operations to payments on its indebtedness, thereby reducing the availability of the Company’s cash flows to fund working capital, capital expenditures, research and development efforts and other general corporate purposes; limit the Company’s flexibility in planning for, or reacting to, changes in its business and the industry in which it operates; place the Company at a competitive disadvantage compared to its competitors th at have less debt; and limit the Company’s ability to borrow additional funds on terms that are satisfactory to it or at all.

Despite the Company’s level of indebtedness, it will be able to incur substantially more debt. Incurring such debt could further exacerbate the risks to the Company’s financial condition described above.

The Company will be able to incur significant additional indebtedness in the future. Although the indenture governing the Senior Subordinated Notes and the credit agreement governing the Senior Secured Credit Facility each contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and the indebtedness incurred in compliance with these restrictions could be substantial. The restrictions also do not prevent the Company from incurring obligations that do not constitute indebtedness. To the extent new debt is added to the Company’s currently anticipated debt levels, the substantial leverage risks described above would increase.

The Company’s Senior Subordinated Notes and Senior Secured Credit Facility contain covenants that limit its flexibility and prevents the Company from taking certain actions.

The indenture governing the Company’s Senior Subordinated Notes and the credit agreement governing the Company’s Senior Secured Credit Facility include a number of significant restrictive covenants. These covenants could adversely limit the Company’s ability to plan for or react to market conditions, meet its capital needs and execute its business strategy.

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These covenants, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to incur additional debt; pay dividends and make other restricted payments; create or permit certain liens; issue or sell capital stock of restricted subsidiaries; use the proceeds from sales of assets; make certain investments; create or permit restrictions on the ability of the guarantors to pay dividends or to make other distributions to the Company; enter into certain types of transactions with affiliates; engage in unrelated businesses; enter into sale and leaseback transactions; and consolidate or merge or sell the Company’s assets substantially as an entirety.

The Company’s Senior Secured Credit Facility includes other and more restrictive covenants and prohibits the Company from prepaying its other debt, including the Senior Subordinated Notes, while borrowings under the Company’s Senior Secured Credit Facility are outstanding.  

Fluctuations in raw material costs or the unavailability of raw materials may adversely affect the Company’s profitability.

Intertape Polymer Group has historically been able to pass on significant raw material cost increases through price increases to its customers.  Nevertheless, the Company’s results of operations for individual quarters can and have been negatively impacted by raw material cost increases and decreases.  For example, during the last quarter of 2005, there was a sharp increase in raw material costs, especially polyethylene, due to damage to Gulf Coast refineries as a result of hurricanes.  Starting late in the first quarter of 2006 and throughout the second quarter, the Company had to reduce its selling prices for resin-based film products several times as a result of resin price decreases.  These fluctuations adversely affected the Company’s profitability.  As a result of raw material cost fluctuations, the Company has to either hold prices firm which results in a reduced market share or d ecrease prices which compresses the Company’s gross margins. The Company’s profitability in the future may be adversely affected due to continuing fluctuations in raw material prices.  Additionally, the Company relies on its suppliers for deliveries of raw materials.  If any of its suppliers were unable to deliver raw materials to the Company for an extended period of time, there is no assurance that the Company’s raw material requirements would be met by other suppliers on acceptable terms, or at all, which could have a material adverse effect on the Company’s results of operations.

The Company’s efforts to review strategic alternatives may or may not result in a transaction and disrupts normal management and business operations.

The Company has initiated a process to explore and evaluate various strategic and financial alternatives that may be available to enhance shareholder value.  This ongoing process disrupts normal management and business operations.  Further, as a result of the uncertainty created by these activities, key personnel may leave the Company.  To mitigate this risk the Company entered into retention compensation agreements with selected key personnel payable June 14, 2007.  There is no guarantee that a transaction will result from this process.

The Company is operating with an Interim Chief Executive Officer which may create an atmosphere of uncertainty within the Company, its customers, suppliers, and its employees.

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Melbourne F. Yull, Intertape Polymer Group’s former Chief Executive Officer and Chairman retired following the Company’s annual shareholders’ meeting on June 14, 2006.  H. Dale McSween was subsequently appointed as the Company’s Interim Chief Executive Officer.  As a result of the Company’s continuing strategic alternatives process, the Company has suspended efforts to hire a CEO.  The foregoing may cause an atmosphere of uncertainty within the Company which may negatively impact the perception of the Company by its customers and/or suppliers, and which may affect the Company’s relationship with its employees.

The Company’s ability to achieve its growth objectives depends in part on the timing and market acceptance of its new products.

Intertape Polymer Group’s business plan involves the introduction of new products, which are both developed internally and obtained through acquisitions. The Company’s ability to introduce these products successfully depends on the demand for the products, as well as their price and quality. In the event the market does not accept these products or competitors introduce similar products, the Company’s ability to expand its markets and generate organic growth could be negatively impacted which could have an adverse affect on its operating results.

The Company faces significant competition.

The markets for Intertape Polymer Group’s products are highly competitive. Competition in its markets is primarily based upon the quality, breadth and performance characteristics of its products, customer service and price. The Company’s ability to compete successfully depends upon a variety of factors, including its ability to maintain high plant efficiencies and operating rates and low manufacturing costs, as well as its access to quality, low-cost raw materials.

Some of the Company’s competitors outside of North America may, at times, have lower raw material, energy and labor costs and less restrictive environmental and governmental regulations to comply with than the Company does. Other competitors may be larger in size or scope than is the Company, which may allow them to achieve greater economies of scale on a global basis or allow them to better withstand periods of declining prices and adverse operating conditions.

In addition, there has been an increasing trend among the Company’s customers towards consolidation. With fewer customers in the market for its products, the strength of the Company’s negotiating position with these customers could be weakened, which could have an adverse effect on its pricing, margins and profitability.

Intertape Polymer Group faces risks related to its international operations.

The Company has customers and operations located outside the United States and Canada. In 2006, sales to customers located outside the United States and Canada represented approximately 5% of its sales. The Company’s international operations present it with a number of risks and challenges, including the effective marketing of the Company’s products in other countries; tariffs and other trade barriers; and different regulatory schemes and political

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environments applicable to its operations in these areas, such as environmental and health and safety compliance.

In addition, the Company’s financial statements are reported in U.S. dollars while a portion of its sales is made in other currencies, primarily the Canadian dollar and the Euro. A portion of the Company’s debt is also denominated in currencies other than the U.S. dollar. As a result, fluctuations in exchange rates between the U.S. dollar and foreign currencies can have a negative impact on the Company’s reported operating results and financial condition. Moreover, in some cases, the currency of the Company’s sales does not match the currency in which it incurs costs, which can negatively affect its profitability. Fluctuations in exchange rates can also affect the relative competitive position of a particular facility where the facility faces competition from non-local producers, as well as the Company’s ability to successfully market its products in export markets.

The Company’s operations are subject to comprehensive environmental regulation and involve expenditures which may be material in relation to its operating cash flow.

The Company’s operations are subject to extensive environmental regulation in each of the countries in which it maintains facilities. For example, United States (Federal, state and local) and Canadian (Federal, provincial and local) environmental laws applicable to the Company include statutes and regulations intended to impose certain obligations with respect to site contamination and to allocate the cost of investigating, monitoring and remedying soil and groundwater contamination among specifically identified parties, as well as to prevent future soil and groundwater contamination; imposing national ambient standards and, in some cases, emission standards, for air pollutants which present a risk to public health, welfare or the natural environment; governing the handling, management, treatment, storage and disposal of hazardous wastes and substances; and regulating the discharge of pollutants into waterways.

The Company’s use of hazardous substances in its manufacturing processes and the generation of hazardous wastes not only by the Company, but by prior occupants of its facilities suggest that hazardous substances may be present at or near certain of the Company’s facilities or may come to be located there in the future. Consequently, the Company is required to monitor closely its compliance under all the various environmental laws and regulations applicable to it. In addition, the Company arranges for the off-site disposal of hazardous substances generated in the ordinary course of its business.

The Company obtains Phase I or similar environmental site assessments, and Phase II environmental site assessments, if necessary, for most of the manufacturing facilities it owns or leases at the time it either acquires or leases such facilities. These assessments typically include general inspections and may involve soil sampling and/or ground water analysis. The assessments have not revealed any environmental liability that, based on current information, the Company believes will have a material adverse effect on it. Nevertheless, these assessments may not reveal all potential environmental liabilities and current assessments are not available for all facilities. Consequently, there may be material environmental liabilities that the Company is not aware of. In addition, ongoing clean up and containment operations may not be adequate for purposes of future laws and regulations. The conditions of the Company’s proper ties could also

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be affected in the future by neighboring operations or the conditions of the land in the vicinity of its properties. These developments and others, such as increasingly stringent environmental laws and regulations, increasingly strict enforcement of environmental laws and regulations, or claims for damage to property or injury to persons resulting from the environmental, health or safety impact of its operations, may cause the Company to incur significant costs and liabilities that could have a material adverse effect on it.

Except as described below, the Company believes that all of its facilities are in material compliance with applicable environmental laws and regulations and that it has obtained, and is in material compliance with, all material permits required under environmental laws. The Company is currently remediating contamination at its Columbia, South Carolina plant.  As a result of the acquisition of all of the shares of Flexia, the Company has inherited limited soil contamination resulting from historical activities at Flexia’s facility located in Trois-Rivières (formerly the city of Cap-de-la-Madeleine), Québec.  The Company received a letter from the Ministry of Sustainable Development, Environment and Parks confirming that the activities carried out at the Trois-Rivières facility at the time the Company closed the facility were not activities designated under the Land Protection and Rehabi litation Regulation, thus no remediation was necessary at the facility as a result of ceasing its activities.  The Company has completed remediation activities at its Marysville, Michigan facility and has requested final approval of the remediation from the State of Michigan.  In addition, although certain of the Company’s facilities emit toluene and other pollutants into the air, these emissions are within current permitted limitations.  The Company believes that these emissions from its U.S. facilities will meet the applicable future federal Maximum Available Control Technology ("MACT") requirements, although additional testing or modifications at the facilities may be required.  Currently, the Company estimates the cost of additional testing or modification at the facilities to comply with MACT requirements will be less than $350 thousand in 2007.  The Company believes that the ultimate resolution of these matters should not have a material adverse effect on its fin ancial condition or results of operations.

The Company’s facilities are required to maintain numerous environmental permits and governmental approvals for its operations. Some of the environmental permits and governmental approvals that have been issued to the Company or to its facilities contain conditions and restrictions, including restrictions or limits on emissions and discharges of pollutants and contaminants, or may have limited terms. If the Company fails to satisfy these conditions or to comply with these restrictions, it may become subject to enforcement actions and the operation of the relevant facilities could be adversely affected. The Company may also be subject to fines, penalties or additional costs. The Company may not be able to renew, maintain or obtain all environmental permits and governmental approvals required for the continued operation or further development of the facilities, as a result of which the operation of the facilities may b e limited or suspended.

The Company may become involved in litigation relating to its intellectual property rights, which could have an adverse impact on its business.

Intertape Polymer Group relies on patent protection, as well as a combination of copyright, trade secret and trademark laws, nondisclosure and confidentiality agreements and

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other contractual restrictions to protect its proprietary technology. Litigation may be necessary to enforce these rights, which could result in substantial costs to the Company and a substantial diversion of management attention. If the Company does not adequately protect its intellectual property, its competitors or other parties could use the intellectual property that the Company has developed to enhance their products or make products similar to the Company’s and compete more efficiently with it, which could result in a decrease in the Company’s market share.

While the Company has attempted to ensure that its products and the operations of its business do not infringe other parties' patents and proprietary rights, its competitors or other parties may assert that the Company’s products and operations may be covered by patents held by them. In addition, because patent applications can take many years to issue, there may be applications now pending of which the Company is unaware, which may later result in issued patents which the Company’s products may infringe. If any of the Company’s products infringe a valid patent, it could be prevented from selling them unless the Company can obtain a license or redesign the products to avoid infringement. A license may not always be available or may require the Company to pay substantial royalties. The Company may not be successful in any attempt to redesign any of its products to avoid any infringement. Infringement or othe r intellectual property claims, regardless of merit or ultimate outcome, can be expensive and time-consuming and can divert management's attention from the Company’s core business.

The Company may become involved in labor disputes or employees could form or join unions increasing the Company’s costs to do business.

Some of Intertape Polymer Group's employees are subject to collective bargaining agreements. Other employees are not part of a union and there are no assurances that such employees will not form or joint a union. Any attempt by employees to form or join a union could result in increased labor costs and adversely affect the Company’s business, its financial condition and/or results of operations.

The Company has never experienced any work stoppages due to employee related disputes. Management believes that it has a good relationship with is employees. There can be no assurance that work stoppages, or other labor disturbances will not occur in the future. Such occurrences could adversely affect Intertape Polymer Group's business, financial condition and/or results of operations.

The Company may become involved in litigation which could have an adverse impact on its business.

Intertape Polymer Group, like other manufacturers and sellers, is subject to potential liabilities connected with its business operations, including potential liabilities and expenses associated with product defects, performance, reliability or delivery delays. Intertape Polymer Group is threatened from time to time with, or is named as a defendant in, legal proceedings, including lawsuits based upon product liability, personal injury, breach of contract and lost profits or other consequential damages claims, in the ordinary course of conducting its business. A significant judgment against Intertape Polymer Group, or the imposition of a significant fine or penalty, as a result of a finding that the Company failed to comply with laws or regulations, or

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being named as a defendant on multiple claims could adversely affect the Company's business, financial condition and/or results of operations.

Uninsured and underinsured losses and rising insurance costs could adversely affect the Company’s business.

Intertape Polymer Group maintains property, general liability and business interruption insurance and directors and officers liability insurance on such terms as it deems appropriate. This may result in insurance coverage that, in the event of a substantial loss, would not be sufficient to pay for the full current market value or current replacement cost of the Company's lost investment.  Not all risks are covered by insurance.

Intertape Polymer Group's cost of maintaining property general liability and business interruption insurance and director and officer liability insurance is significant. The Company could experience higher insurance premiums as a result of adverse claims experience or because of general increases in premiums by insurance carriers for reasons unrelated to its own claims experience. Generally, the Company's insurance policies must be renewed annually. Intertape Polymer Group's ability to continue to obtain insurance at affordable premiums also depends upon its ability to continue to operate with an acceptable claims record. A significant increase in the number of claims against the Company, the assertion of one or more claims in excess of its policy limits or the inability to obtain adequate insurance coverage at acceptable rates, or at all, could adversely affect the Company's business, financial condition and/or results o f operations.

Product liability could adversely affect the Company’s business.

Difficulties in product design, performance and reliability could result in lost sales, delays in customer acceptance of Intertape Polymer Group's products and lawsuits and would be detrimental to the Company's market reputation. Intertape Polymer Group's products and the products supplied by third parties, on behalf of the Company, are not error free. Undetected errors or performance problems may be discovered in the future. The Company may not be able to successfully complete the development of planned or future products in a timely manner or to adequately address product defects, which could harm the Company's business and prospects. In addition, product defects may expose Intertape Polymer Group to product liability claims, for which it may not have sufficient product liability insurance. Difficulties in product design, performance and reliability or product liability claims could adversely affect Intertape Polymer Gr oup's business, financial condition and/or results of operations.

Acquisitions have been a substantial part of the Company’s growth strategy, which could expose it to significant business risks.

An important aspect of Intertape Polymer Group’s business strategy was to make strategic acquisitions that would complement its existing products, expand its customer base and markets, improve distribution efficiencies and enhance its technological capabilities. Financial risks from these acquisitions include the use of the Company’s cash resources and incurring additional debt and liabilities. Further, there are possible operational risks including difficulties in assimilating and integrating the operations, products, technology, information systems and

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personnel of acquired companies; the loss of key personnel of acquired entities; the entry into markets in which the Company has no or limited prior experience; and difficulties honoring commitments made to customers of the acquired companies prior to the acquisition. The failure to adequately address these risks could adversely affect the Company’s business.

Although the Company performs due diligence investigations of the businesses or assets that it acquires, and anticipates continuing to do so for future acquisitions, there may be liabilities related to the acquired business or assets that the Company fails to, or is unable to, uncover during its due diligence investigation and for which the Company, as a successor owner, may be responsible. When feasible, the Company seeks to minimize the impact of these types of potential liabilities by obtaining indemnities and warranties from the seller, which may in some instances be supported by deferring payment of a portion of the purchase price. However, these indemnities and warranties, if obtained, may not fully cover the liabilities because of their limited scope, amount or duration, the financial resources of the indemnitor or warrantor or other reasons.

Because Intertape Polymer Group is a Canadian company, it may be difficult to enforce rights under U.S. bankruptcy laws.

Intertape Polymer Group and certain of its subsidiaries are incorporated under the laws of Canada and a substantial amount of its assets are located outside of the United States. Under bankruptcy laws in the United States, courts typically assert jurisdiction over a debtor's property, wherever located, including property situated in other countries. However, courts outside of the United States may not recognize the United States bankruptcy court's jurisdiction over property located outside of the territorial limits of the United States. Accordingly, difficulties may arise in administering a United States bankruptcy case involving a Canadian debtor with property located outside of the United States, and any orders or judgments of a bankruptcy court in the United States may not be enforceable outside the territorial limits of the United States.

It may be difficult for investors to enforce civil liabilities against Intertape Polymer Group under U.S. federal and state securities laws.

Intertape Polymer Group and certain of its subsidiaries are incorporated under the laws of Canada.  Certain of their directors and executive officers are residents of Canada and a portion of their assets are located outside of the United States. In addition, certain subsidiaries are located in other foreign jurisdictions.  As a result, it may be difficult or impossible for U.S. investors to effect service of process within the United States upon Intertape Polymer Group, its Canadian subsidiaries, or its other foreign subsidiaries, or those directors and officers or to realize against them upon judgments of courts of the United States predicated upon the civil liability provisions of U.S. federal securities laws or securities or blue sky laws of any state within the United States.  The Company believes that a judgment of a U.S. court predicated solely upon the civil liability provisions of the Securities Act and/or the Exchange Act would likely be enforceable in Canada if the U.S. court in which the judgment was obtained had a basis for jurisdiction in the matter that was recognized by a Canadian court for such purposes. The Company cannot assure that this will be the case.  There is substantial doubt whether an action could be brought in Canada in the first instance on the basis of liability predicated solely upon such laws.

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Anti-takeover provisions in the Company’s Shareholder Protection Rights Plan may prevent an acquisition.  

Intertape Polymer Group has a Shareholder Protection Rights Plan (the “Plan”) which will remain in effect through the date immediately following the date of the Company’s 2009 annual shareholders’ meeting.  The effect of the Plan is to currently require anyone who seeks to acquire 20% or more of Intertape Polymer Group’s voting shares to make a bid complying with specific provisions of the Plan.  Thus, the provisions of the Plan could prevent or delay the acquisition of the Company by means of a tender offer, a proxy contest, or otherwise, in which shareholders might receive a premium over the then current market price of the Company’s common shares.

The Company’s exemptions under the Securities Exchange Act of 1934 (“Exchange Act”) as a foreign private issuer limits the protections and information afforded investors.  

Intertape Polymer Group is a foreign private issuer within the meaning of the rules promulgated under the Exchange Act.  As such, it is exempt from certain provisions applicable to United States companies with securities registered under the Exchange Act, including: the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission of quarterly reports on Form 10-Q or current reports on Form 8-K; the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing insider liability for profits realized from any "short-swing" trading transaction (i.e., a purchase and sale, or sale and purchase, of the issuer's equity securities within a period of less than six months).  Because of these exemptions, purchasers of Intertape Polymer Group's securities are not afforded the same protections or information generally available to investors in public companies organized in the United States.  Intertape Polymer Group previously filed its annual reports on Form 20-F.  Commencing with the year ended December 31, 2000, the Company files its annual report on Form 40-F.  Intertape Polymer Group reports on Form 6-K with the Commission and publicly releases quarterly financial reports.

Item 6.

 Dividends

The Company has no written policy for the payment of dividends.  So long as the payment would not result in a violation of the Company’s covenants with its lenders and noteholders, there are no other restrictions that would prevent the Company from paying dividends.  However, the Company has not paid dividends in the past three years and has no current intention to pay dividends in the upcoming fiscal year.  For details regarding the Company’s covenants with its lenders and noteholders please refer to the Registration Statement filed on www.sedar.com in Canada and www.sec.gov in the U.S. on October 26, 2004 as Registration No. 333-119982, as amended.

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Item 7.

 General Description of Capital Structure

7.1

General Description of Capital Structure

Intertape Polymer Group has authorized an unlimited number of voting common shares without par value.  The Company also has authorized an unlimited number of non-voting Class A preferred shares issuable in a series, ranking in priority to the common shares with respect to dividends and return of capital on dissolution.  The Board of Directors is authorized to fix, before issuance, the designation, rights, privileges, restrictions and conditions attached to the shares of each series of Class A preferred shares.  As of December 31, 2006, there were 40,986,940 issued and outstanding common shares and no issued and outstanding preferred shares of the Company. As of March 19, 2007, there were 40,986,940 issued and outstanding common shares of the Company.  No preferred shares of the Company are issued and outstanding.

7.2

Ratings  

Intertape Polymer US Inc., a finance subsidiary of Intertape Polymer Group, has issued, in the aggregate, $125 million Senior Subordinate Notes that bear interest at 8-½% per annum and that will mature August 1, 2014.

Moody Investor Service, Inc. (“Moody”) last rated the Senior Subordinate Notes on March 26, 2007 and rated them Caa2, negative outlook, and placed the rating under review.  Standard & Poor’s (“S&P”) last rated the Senior Subordinated Notes on November 20, 2006 and rated them CCC/Watch, negative.

The credit ratings provided by S&P and Moody’s (collectively “Rating Agencies”) are not recommendations to buy, hold or sell the securities, as such ratings do not comment on the market price or suitability of the securities for a particular investor.  There is no assurance that any rating will remain in effect for any given period of time or that any rating will not be revised or withdrawn entirely by a Rating Agency in the future if in its judgment circumstances so warrant.

Credit ratings are intended to provide investors with an independent measure of credit quality of an issue of securities.  Ratings for debt instruments are presented in ranges by each of the Rating Agencies.  The highest quality of securities are rated AAA, in the case of S&P and Aaa, in the case of Moody’s.  The lowest quality of securities are rated D, in the case of S&P and C, in the case of Moody’s.

Pursuant to Moody’s rating system, notes which are rated Caa are considered to be of poor standing and are subject to a very high credit risk.  Moody appends numerical modifiers from 1 to 3 on its long-term debt ratings which indicate where the obligation ranks in its rating category, with 1 being the highest.  Moody’s outlook is its assessment regarding the likely direction of the ratings over the medium term, 18 to 36 months.  Moody’s rating action reflects the Company’s financial performance in 2006 and concern over its ability to meaningfully improve credit metrics over the intermediate term.  The negative outlook reflects the limited room under financial covenants in its secured facilities and the lack of definitive information

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with respect to the CEO succession plan or the outcome of the Board’s review process concerning various strategic and financial alternatives.

According to the S&P rating system, debt securities rated CCC are judged to be vulnerable to nonpayment, and are dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.  In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.  CreditWatch highlights the potential direction of a short- or long-term rating.  It focuses on identifiable events and short-term trends that cause ratings to be placed under special surveillance by S&P’s analytical staff.  These may include mergers, recapitalizations, voter referendums, regulatory action, or anticipated operating developments.  Ratings appear on CreditWatch when such an event or a deviation from an expected trend occurs and additional information is nece ssary to evaluate the current rating.  A listing, however, does not mean a rating change is inevitable, and whenever possible, a range of alternative ratings will be shown.  CreditWatch is not intended to include all ratings under review, and rating changes may occur without the ratings having first appeared on CreditWatch.  The “negative” means a rating may be lowered.

Item 8.

 Market for Securities

8.1

Trading Prices and Volume on the Toronto Stock Exchange

The Company’s common shares are traded on the Toronto Stock Exchange under the symbol “ITP”.  Set forth below is the price range and volume traded on the Toronto Stock Exchange for each month of 2006.

Month	Price Range (CDN$)	Total Volume Traded
January	$9.44 – 10.40	1,137,200
February	9.26 – 10.00	734,900
March	9.47 – 10.10	2,281,100
April	9.53 – 10.44	1,029,200
May	6.74 – 9.92	1,268,300
June	7.25 – 7.87	2,499,000
July	7.04 – 7.89	1,287,100
August	7.30 – 7.95	549,300
September	7.46 – 9.18	1,011,700
October	5.53 – 8.46	2,312,900
November	5.61 – 6.75	1,171,100
December	4.63 – 6.19	1,970,300

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8.2

Trading Prices and Volume on the New York Stock Exchange

The Company’s common shares are also traded on the New York Stock Exchange under the symbol “ITP”.  Set forth below is the price range and volume traded on the New York Stock Exchange for each month of 2006:

Month	Price Range (US$)	Total Volume Traded
January	$8.19 – 9.01	1,260,500
February	8.07 – 8.75	1,166,300
March	8.17 – 8.70	2,752,900
April	8.39 – 9.20	2,833,500
May	5.99 – 8.89	2,237,000
June	6.45 – 7.14	1,356,500
July	6.27 – 7.04	1,376,600
August	6.49 – 7.04	1,203,100
September	6.66 – 8.16	1,288,100
October	4.95 – 7.61	1,978,500
November	4.90 – 5.95	1,743,700
December	4.01 – 5.30	2,669,300

Item 9.

 Escrowed Securities

None of the Company’s common shares are currently held in escrow.

Item 10. Directors and Officers

The following table sets forth the name, residence, position, and principal occupations for the last five (5) years of each Director of the Company as of the date hereof, as well as the date upon which each Director was first elected.  Each Director is elected for a term of one year and may be nominated for re-election at the Company’s following annual shareholders’ meeting.  The next annual shareholders’ meeting is scheduled to be held on June 26, 2007, at which time the current term of each Director will expire.  It is contemplated that each Director will be nominated for re-election at the upcoming annual meeting, except for John Richardson who is not standing for re-election.

Name and City of Residence	Position and Occupation	First Year as Director
Michael L. Richards Westmount, Quebec	Director, Chairman of the Board Attorney, Senior Partner, Stikeman Elliott LLP	1989

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Ben J. Davenport, Jr. Chatham, Virginia	Director CEO, Chatham Oil Company, a distributor of oil, gasoline and propane; Chairman & CEO, First Piedmont Corporation, a waste hauling business	1994
L. Robbie Shaw Halifax, Nova Scotia	Director President, IWK Health Centre Foundation Former Vice President, Nova Scotia Community College	1994
Gordon R. Cunningham Toronto, Ontario	Director President, Cumberland Private Wealth Management Inc., a discretionary investment management firm	1998
John E. Richardson, C.A. Toronto, Ontario	Director Chairman, Ontario Pension Board; Chairman, Boiler Inspection and Insurance Company of Canada; Director, Research in Motion; Trustee, Armtec Limited Income Trust; Trustee, Resolve Business Outsourcing Income Fund; former Deputy Chairman of London Insurance Group Inc.; former Chairman, President and CEO of Wellington Insurance Co.; former President of Great Lakes Power; former senior partner of Clarkson Gordon & Co. (now Ernst &Young)	2005
Thomas E. Costello Longboat Key, Florida	Director Former CEO of xpedx , a subsidiary of International Paper Company, from 1991 to 2002 (Since Retired)	2002
H. Dale McSween Sarasota, Florida	Director Interim Chief Executive Officer, Secretary  since June, 2006; President ECP Division since 2005; President, Distribution Products 1999 to 2005	2006

The following table sets forth the name, residence and position of each executive officer of the Company as of the date hereof, as well as the date upon which each executive officer was first elected:

Name and City of Residence	Position and Occupation	First Elected To Office
H. Dale McSween Sarasota, Florida	Interim Chief Executive Officer, Secretary	2006
	President, ECP Division	2005
Andrew M. Archibald, C.A. Sarasota, Florida	Chief Financial Officer	1995
Burgess H. Hildreth Sarasota, Florida	Vice President, Human Resources	1998
Gregory A. Yull Sarasota, Florida	President, Distribution Products	2005

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Jim Bob Carpenter Sarasota, Florida	Executive Vice President, Global Sourcing	2004
Victor DiTommaso, CPA Sarasota, Florida	Vice President, Finance	2003
	Treasurer	2005

The principal occupations of each executive officer for the last five (5) years is as follows:

H. Dale McSween was appointed Interim Chief Executive Officer in May 2006 while concurrently serving as President of ECP Division, having been appointed that position in October 2005.  He was Executive Vice President, Operations and Supply Chain since January 2005 and President, Distribution Products, from December 1999 to January 2005.  Prior to that, he was the Chief Operations Officer from 1995 to 1999 and from 1990 to 1995, he served as Vice President/General Manager of the Woven Products Division (ECP).

Andrew M. Archibald has been Chief Financial Officer since May 1995.  He was Vice President Administration and Secretary from May 1995 through January 2005.  He was Vice President Finance from May 1995, to January 15, 1999.  Prior thereto he served as Vice-President, Finance and Secretary of the Company since 1989.

Burgess H. Hildreth has been Vice President, Human Resources, since October, 1998.  Prior to that he had been the Vice President Administration of Anchor Continental, Inc. since June, 1996.

Gregory A. Yull was appointed President, Distribution Products (Tapes & Films), in October, 2005.  Prior to that he served as Executive Vice President, Industrial Business Unit (for tapes and films) since November 2004, and prior to that was President, Film Products, since June, 1999.  Prior to that he was Products Manager - Films since 1995.

Jim Bob Carpenter was appointed Executive Vice President, Global Sourcing in January, 2005.  Prior to that he served as the President, Woven Products (now ECP), since 1998 and prior to that, he was the General Manager of Polypropylene Resin Division of Fina Oil & Chemical Co.

Victor DiTommaso was appointed Vice President, Finance on April 24, 2003.  He was also appointed Treasurer on May 25, 2005.  Prior to that he had served as the Senior Vice President of Information Technology of Walls Industries, Inc. since July, 2000, and Senior Vice President of Finance since July, 1998.

As of March 19, 2007, the directors and executive officers of the Company as a group owned beneficially, directly or indirectly, or exercised control or direction over, 317,382 common shares, representing approximately 0.8% of all common shares outstanding.  In addition, the directors and executive officers as a group have 1,455,208 options to purchase common shares of the Company.

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The Board of Directors has established three committees, the Audit Committee, the Compensation Committee, and the Nominating & Governance Committee to facilitate the carrying out of its duties and responsibilities and to meet applicable statutory requirements.  Canadian Multilateral Instrument 52-110-Audit Committees, requires, inter alia, that all members of the Audit Committee be directors of the Company, be independent of the Company, be financially literate, and that the Audit Committee be comprised of at least three members.  The Company’s Audit Committee complies with Canadian Multilateral Instrument 52-110-Audit Committees as it is composed of four independent, financially literate directors, namely L. Robbie Shaw, Gordon R. Cunningham, Thomas E. Costello, and John E. Richardson.  Further details regarding the Company’s Audit Committee are provided in Item 17 hereof .  

The Compensation Committee, as presently constituted, has one related director and three unrelated directors, namely Michael L. Richards, L. Robbie Shaw, Ben J. Davenport, Jr., and Gordon R. Cunningham (as such terms are defined in the Toronto Stock Exchange Company Manual).  Mr. Richards is deemed to be a related director, inasmuch as the law firm of Stikeman Elliott LLP, of which he is a senior partner, provides legal services to the Company on a regular basis.  However, the Company believes that its relationship with Stikeman Elliott LLP does not inhibit Mr. Richards’ ability to act impartially, nor his ability to act independently of the views of the management of the Company.  

The Nominating & Governance Committee is composed of all of the members of the Board, the majority of whom are unrelated directors (as such term is defined in the Toronto Stock Exchange Company Manual).

Item 11. Legal Proceedings

The Company and its subsidiaries are not currently party to any proceedings or legal claim, nor does it have any knowledge of any potential proceeding or legal claim, that involves or would involve a claim for damages that exceeds ten percent of the current assets of the Company on a consolidated basis.  While the Company or its subsidiaries are parties to various legal actions, the Company is of the view that such actions are ordinary in nature and incidental to the operation of its business and that the outcome of these actions are not likely to have a material adverse effect upon the Company.

Item 12. Interest of Management and Others in Material Transactions

The Company is unaware of any material interest of any of its directors or officers or of any person who beneficially owns or exercises control or direction over shares carrying more than ten percent of the voting rights attached to the Company’s shares, or any associate or affiliate of any such person, in any transaction since the beginning of the last completed financial year or in any proposed transactions that has materially affected or will materially affect the Company or any of its affiliates.

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Prior to July 31, 2002, the Company made certain interest-free loans payable on demand to certain of its directors and officers.  The balances of such loans as of March 30, 2007, are set forth in the table below:

Name and Principal Position	Loan Balance as of March 30, 2007
G. A. Yull President - Film Products	US$107,500.00
H. D. McSween President - Distribution Products	US$26,676.00

Item 13. Transfer Agents and Registrars

Set forth below are the Company’s transfer agents and registrars with respect to its common shares, who also maintain the registers of the transfers of the stock of the Company:

In Canada:

CIBC Mellon Trust Company

2001 University Street, 16^th Floor

Montreal, Quebec, Canada  H3A 4L8

In the U.S.:

Mellon Investor Services L.L.C.

85 Challenger Road, 2^nd Floor

Ridgefield Park, New Jersey

U.S.A.  07660

Wilmington Trust Company, Corporate Capital Markets, 1100 North Market Street, Wilmington, DE 19890-1626, is the Trustee under the Indenture with respect to the Company’s registered 8-½ % Senior Subordinated Notes due 2014.

Item 14. Material Contracts

The following is a description of the material contracts that are currently in effect regardless of when they were initially entered into by Intertape Polymer Group, either directly or through one of its subsidiaries, and that are not in the ordinary course of the Company’s business:

·

an Employment Agreement dated June 30, 2006, as amended by Amendment dated March 22, 2007, between Intertape Polymer Corp. (successor by merger to Intertape Polymer Management Corp.), subsidiaries of Intertape Polymer Group, and Andrew M. Archibald, the principal terms of which are:  an annual salary of $294,500; a bonus equal to 50% of his annual salary upon transition of his duties as Chief Financial Officer; and $1,000,000 payable over twenty-four months commencing thirty days after termination of his employment.

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·

an Employment Agreement dated August 2, 2006, between Intertape Polymer Corp. (successor by merger to Intertape Polymer Management Corp.), subsidiaries of Intertape Polymer Group, and Gregory A. Yull, the principal terms of which are:  an annual salary of $340,000; upon termination employee shall continue to receive his annual salary for twenty-four months plus an amount not to be less than his average bonus percentage for the years 2005 and 2006, but in no event, when combined with the salary payments, more than $952,000 in the aggregate.

·

an Amended and Restated Shareholder Protection Rights Plan Agreement adopted by the shareholders of the Company on June 11, 2003, amending and restating the Shareholder Protection Rights Plan originally entered into on August 24, 1993, as first amended on May 21, 1998.  The 2003 Amended and Restated Plan, among other things, extended the Plan through the date immediately following the date of the Company’s 2006 annual Shareholders’ meeting.  The 2009 Amended and Restated Plan extended the Plan through the date immediately following the date of the Company’s 2009 annual shareholders’ meeting.  

The effect of the Plan is to require anyone who seeks to acquire 20% or more of Intertape Polymer Group’s voting shares to make a bid complying with specific provisions of the Plan.  Thus, the provisions of the Plan could prevent or delay the acquisition of the Company by means of a tender offer, a proxy contest, or otherwise, in which shareholders might receive a premium over the then current market price of the Company’s common shares.

·

an Amended Executive Stock Option Plan as amended and consolidated to June 2, 2004.  The Plan was established by Intertape Polymer Group in 1992 and has been amended from time to time.  The Plan is administered by the Board of Directors.  The shares offered under the Plan are common shares of the Company.

The purpose of the Plan is to promote a proprietary interest in the Company among the executives, the key employees and the non-management directors of the Company and its subsidiaries, in order to both encourage such persons to further the development of the Company and to assist the Company in attracting and retaining key personnel necessary for the Company’s long term success. The Board of Directors designates from time to time from the eligible executives those executives to whom options are to be granted and determines the number of shares covered by such options. Generally, participation in the Plan is limited to persons holding positions that can have an impact on the Company’s long-term results.

The number of common shares to which the options relate are determined by taking into account, among other things, the market price of the common shares and each optionee's base salary. The exercise price payable for each common share covered by an option is determined by the Board of Directors but will not be less than the market value of the underlying common shares on the day preceding the effective date of the grant. The Plan provides that options issued thereunder shall vest 25% per year over four years. Currently the maximum number of common shares that may be issued under the Plan is 4,094,538.

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·

a Credit Agreement dated as of July 28, 2004, as amended by First Amendment dated as of December 17, 2004, Second Amendment dated September 26, 2005, Third Amendment dated as of June 28, 2006, and Fourth Amendment dated as of November 7, 2006, among the Company and certain of its subsidiaries, the Lenders referred to therein, Citigroup Global Markets Inc., as Sole Lead Arranger and Sole Bookrunner, Citicorp North America, Inc., as Administrative Agent, The Toronto-Dominion Bank, as Syndication Agent, and Comerica Bank and HSBC Bank USA, National Association, as Co-Documentation Agents.  The Credit Agreement represents the Senior Secured Credit Facility entered into by the Company and its subsidiaries.  The initial funding under the new Senior Secured Credit Facility occurred on August 4, 2004.  The Company’s Senior Secured Credit Facility consists of a US$200 .0 million seven-year delayed draw Term B facility to be made available in U.S. Dollars; a US$65.0 million five-year revolving credit facility to be made available in U.S. Dollars; and a US$10.0 million five-year revolving credit facility to be made available in Canadian Dollars.  The Company and substantially all of its subsidiaries guaranteed the Senior Secured Credit Facility.  Further, the Senior Secured Credit Facility is secured by a first priority perfected security interest in substantially all tangible and intangible assets of the Company and its subsidiaries.

·

a Purchase Agreement, Registration Rights Agreement and Indenture each dated as of July 28, 2004, in connection with the issuance by Intertape Polymer US Inc., a finance subsidiary of Intertape Polymer Group, of the aggregate principal amount of US$125.0 million of 8-½% Senior Subordinated Notes due 2014.  The Notes were offered to institutional investors and are guaranteed on a senior subordinated basis by the Company and substantially all of its subsidiaries.  Interest will accrue and be payable on the Notes semi-annually in arrears on February 1 and August 1.  For a copy of the Purchase Agreement, Registration Rights Agreement, and Indenture, as well as details of the terms of the Senior Subordinated Notes, see the Registration Statement filed on October 26, 2004 as Registration No. 333-119982 as amended on www.sec.gov in the United States.

A copy of all of the foregoing contracts, except as otherwise noted, are available on www.sedar.com and on www.sec.gov.

Item 15. Experts

15.1

Name of Experts

The following are the names of each person or company who has prepared or certified a statement, report or valuation described or included in a filing, or referred to in a filing made by Intertape Polymer Group during 2006:

Raymond Chabot Grant Thornton LLP; Montreal, Quebec

Ernst & Young; Montreal, Quebec

Avalon Actuarial Consulting Inc.; Toronto, Ontario

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15.2

Interests of Experts

None of the experts set forth in Item 15.1 above directly or indirectly, held at the time their statement, report or valuation was prepared; received after their statement, report or valuation was prepared; or shall receive, any registered or beneficial interest in any securities or other property of Intertape Polymer Group or any of its subsidiaries.

Item 16. Additional Information

Additional information with respect to the Company, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities, and securities authorized for issuance under equity compensation plans is contained in the Company’s information circular for its most recent annual meeting of security holders that involved the election of directors.  Additional financial information is provided in the Company’s Consolidated Financial Statements and Management’s Discussion and Analysis for the fiscal year ended December 31, 2006.  All of this information, as well as additional information, may be found on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.

Item 17. Audit Committee  (The following information is required to be included herein pursuant to Canadian Form 52-110F1.)

17.1

Audit Committee Charter

The text of the Audit Committee’s Charter is attached hereto as Exhibit “A”.

17.2

Composition of the Audit Committee

The members of the Audit Committee of Intertape Polymer Group are Thomas J. Costello, Gordon R. Cunningham, John E. Richardson, and L. Robbie Shaw.  Each of the Audit Committee members are independent and financially literate as such terms are defined by Canadian Multilateral Instrument 52-110-Audit Committees.

17.3

Relevant Education and Experience

Mr. Costello earned a Bachelor of Science in Business and an MBA from Indiana University Kelly School of Business.  He was the Chief Executive Officer of xpedx, a subsidiary of International Paper Company, from 1991 until his retirement in 2002.

Mr. Cunningham earned a Bachelor of Arts and an SJD from the University of Toronto.  He was awarded an honorary LLD from the University of Victoria.  Mr. Cunningham is the President of Cumberland Private Wealth Management Inc., a discretionary investment management firm.  Previously, Mr. Cunningham served as the President and Chief Executive Officer of London Life Insurance Company, one of Canada’s largest life insurers.

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Mr. Richardson earned a Bachelor of Commerce from the University of Toronto, and received an M.B.A. from the Harvard Business School, and is a fellow of the Institute of Chartered Accountants of Ontario.  Mr. Richardson is currently the Chairman of the Ontario Pension Board, the Chairman of the Boiler Inspection and Insurance Company of Canada, as well as a Director of Research in Motion, a Trustee of Armtec Limited Income Trust, and a Trustee of Resolve Business Outsourcing Income Fund.  Mr. Richardson previously served as the Deputy Chairman of London Insurance Group Inc., the Chairman, President and CEO of Wellington Insurance Co. and President of Great Lakes Power, and prior to that, he had been a senior partner of Clarkson Gordon & Co. (now Ernest & Young).

Mr. Shaw earned a Bachelor of Arts in Politics and History from Queens University and an LLB from Dalhousie Law School.  Currently, Mr. Shaw serves as President of the IWK Health Centre Foundation.  Until the acquisition of Meloche Monnex Inc. by Toronto Dominion Bank in 2003, Mr. Shaw was the Chair of its Audit Committee.  He has also held several executive positions, including the Vice President of Finance and Administration of Dalhousie University, the operating head of the Canadian Business Unit of National Sea Products, and the Vice President of the Nova Scotia Community College.

17.4

Pre-Approval Policies and Procedures

Intertape Polymer Group’s Audit Committee pre-approves all audit engagement fees and the terms of all significant permissible non-audit services provided by independent auditors.

17.5

External Auditor Service Fees

The following table sets forth the fees billed for professional services rendered by Raymond Chabot Grant Thornton LLP, Chartered Accountants, Intertape Polymer Group’s principal auditor, for the fiscal years ended December 31, 2006 and December 31, 2005:

	Year ended December 31,
	2006	2005
Audit Fees	US$1,615,392	US$891,985
Audit-Related Fees	$64,559
Tax Fees	$227,059	89,762
All Other Fees		3,935
Total Fees	$1,907,010	$985,682

Audit Fees.  Audit fees were for professional services rendered for the audits of Intertape Polymer Group’s consolidated financial statements, assisting its Audit Committee in discharging its responsibilities for the review of the Company’s interim consolidated financial statements and services that generally only the independent auditor can reasonably provide, such as comfort letters, consents and assistance and review of documents filed with the Securities and Exchange Commission and Canadian securities regulatory authorities.  The audit fees also include

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professional services rendered in connection with the proposed Canadian Income Trust of US$768,830.

Audit-Related Fees.  Audit-related fees were for assurance and related services that are reasonably related to the performance of the audit or review of Intertape Polymer Group’s consolidated financial statements and are not reported under Audit Fees above.  These services included consultations concerning financial accounting and reporting standards, as well as due diligence services.

Tax Fees.  Tax fees were for tax compliance, tax advice and tax planning.  These services included the preparation of the Canadian subsidiaries’ income tax returns, the preparation of information returns for foreign affiliates, assistance with questions regarding tax audits and tax planning relating to common forms of domestic and international taxation (i.e. income tax, capital tax and excise tax) and advisory services regarding restructurings.

All Other Fees.  All other fees were for services provided other than the audit fees, audit-related fees and tax fees described above.  These services consisted mainly of miscellaneous corporate reporting and advisory services.

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EXHIBIT “A” to AIF

INTERTAPE POLYMER GROUP INC.

AUDIT COMMITTEE CHARTER

CHARTER

The Audit Committee of the Board of Directors (the "Board") of Intertape Polymer Group Inc. (the "Corporation") will be responsible for assisting the Board in carrying out its duties and responsibilities relating to corporate accounting policies, financial reporting and procedures, and the quality and integrity of the financial reports of the Corporation.  The external auditors are ultimately accountable to the Board and the Audit Committee, as representatives of the shareholders.  The Audit Committee, subject to any action that may be taken by the Board, shall have the ultimate authority and responsibility to select and nominate for shareholder approval, evaluate and, as deemed appropriate, recommend to the shareholders the removal of the external auditors.  The Audit Committee shall be responsible for overseeing the independence of the external auditors.

In discharging its role, the Audit Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Corporation.  The Audit Committee shall have the authority to retain special legal, accounting or other consultants to advise the Audit Committee for this purpose.

COMMITTEE MEMBERSHIP

The Audit Committee shall consist of no fewer than three directors.  The members of the Audit Committee shall meet the independence and experience requirements of the Sarbanes-Oxley Act, the New York Stock Exchange, and The Toronto Stock Exchange.

The members of the Audit Committee shall be appointed annually by the Board on the recommendation of the Nominating & Governance Committee.  Audit Committee members may be replaced by the Board.

COMMITTEE AUTHORITY AND RESPONSIBILITIES

The Audit Committee shall have the sole authority to recommend to the shareholders the appointment or replacement of the external auditors, and shall approve all audit engagement fees and terms and all significant non-audit engagements with the external auditors. The Audit Committee shall consult with management but shall not delegate these responsibilities.

The Audit Committee shall meet as often as it determines, but not less frequently than quarterly. The Audit Committee may form and delegate authority to subcommittees when appropriate.

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The Audit Committee shall have the authority, to the extent it deems necessary or appropriate, to retain special legal, accounting or other consultants to advise the Committee. The Audit Committee may request any officer or employee of the Corporation or the Corporation's legal counsel or external auditors to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee. The Audit Committee shall meet with management and the external auditors in separate executive sessions at least quarterly.

The Audit Committee shall make regular reports to the Board. The Audit Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval. The Audit Committee shall annually review the Audit Committee's own performance.

The Audit Committee, to the extent it deems necessary or appropriate, shall:

Financial Statement and Disclosure Matters

1.

Review and discuss with management and the external auditors the annual audited financial statements, including disclosures made in management's discussion and analysis, and recommend to the Board whether the audited financial statements should be included in the Corporation's Form 40-F and Annual Report to Shareholders.

2.

Review and discuss with management and the external auditors the Corporation's quarterly financial statements prior to their filing and publication, including the results of the external auditors' reviews of the quarterly financial statements.

3.

Discuss with management and the external auditors significant financial reporting issues and judgments made in connection with the preparation of the Corporation's financial statements, including any significant changes in the Corporation's selection or application of accounting principles, any major issues as to the adequacy of the Corporation's internal controls, the development, selection and disclosure of critical accounting estimates, and analyses of the effect of alternative assumptions, estimates or GAAP methods on the Corporation's financial statements.

4.

Discuss with management the Corporation's earnings press releases, including the use of "pro forma" or "adjusted" non-GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies.

5.

Discuss with management and the external auditors the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Corporation's financial statements.

6.

Discuss with management the Corporation's major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Corporation's risk assessment and risk management policies.

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7.

Discuss with the external auditors the matters required to be discussed by auditing standards relating to the conduct of the audit.  In particular, discuss:

(a)

The adoption of, or changes to, the Corporation's significant auditing and accounting principles and practices as suggested by the external auditors or management.

(b)

The management letter provided by the external auditors and the Corporation's response to that letter.

(c)

Any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to requested information, and any significant disagreements with management

Oversight of the Corporation's Relationship with the External Auditors

8.

Review the experience and qualifications of the senior members of the external auditors’ team.

9.

Obtain and review a report from the external auditors at least annually regarding (a) the auditors' internal quality-control procedures, (b) any material issues raised by the most recent quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, (c) any steps taken to deal with any such issues, and (d) all relationships between the external auditors and the Corporation. Evaluate the qualifications, performance and independence of the external auditors, including considering whether the auditor's quality controls are adequate and the provision of non-audit services is compatible with maintaining the auditors' independence, and taking into account the opinions of management. The Audit Committee shall present its conclusions to the Board and, if so determ ined by the Audit Committee, recommend that the Board take additional action to satisfy itself of the qualifications, performance and independence of the auditors.

10.

Consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the lead audit partner or even the external auditing firm itself on a regular basis.

11.

Recommend to the Board policies for the Corporation's hiring of employees or former employees of the external auditors who were engaged on the Corporation's account.

12.

Determine from the audit team of the external auditors any professional matters dealt with at the national office level of the external auditors.

13.

Meet with the external auditors prior to the audit to discuss the planning and staffing of the audit.

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Oversight of the Corporation's Internal Audit Function

14.

Review and discuss with management and the external auditors the appropriateness of having a senior internal auditing executive.

15.

If a senior internal auditing executive is appointed, review the significant reports to management prepared by the internal auditing department and management's responses.

Compliance Oversight Responsibilities

17.

Obtain from the external auditors assurance that Section 10A of the Securities Exchange Act of 1934 has been complied with.

18.

Obtain reports from management, the Corporation's senior internal auditing executive if one is appointed and the external auditors that the Corporation and its subsidiary/foreign affiliated entities are in conformity with applicable legal requirements and the Corporation's Code of Business Conduct and Ethics. Review reports and disclosures of insider and affiliated party transactions. Advise the Board with respect to the Corporation's policies and procedures regarding compliance with applicable laws and regulations and with the Corporation's Code of Business Conduct and Ethics.

19.

Discuss with management and the external auditors any correspondence with regulators or governmental agencies and any employee complaints or published reports, which raise material issues regarding the Corporation's financial statements or accounting policies.

20.

Discuss with the Corporation's legal counsel matters that may have a material impact on the financial statements or the Corporation's compliance policies.

LIMITATION OF AUDIT COMMITTEE'S ROLE

While the Audit Committee has the responsibilities and powers set forth herein, it is not the duty of the Committee to prepare the Corporation's financial statements, to plan or conduct audits of those financial statements, or to determine that those financial statements are complete and accurate and in accordance with generally accepted accounting principles in Canada or any other country.  This is the responsibility of the Corporation's management and the external auditors.  Nor is it the duty of the Audit Committee to conduct investigations, to resolve disagreements, if any, between management and the external auditors or to assure compliance with applicable laws and regulations.

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Exhibit 2

MANAGEMENT’S DISCUSSION AND ANALYSIS FOR 2006 AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

(SEE SEPARATE DOCUMENT)

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Exhibit 3

CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS

We have issued our report dated March 17, 2007, accompanying the consolidated financial statements included in the Annual Report of Intertape Polymer Group Inc. on Form 40-F for the year ended December 31, 2006.  We consent to the use of the aforementioned report in the Form 40-F, and to the use of our name as it appears under the caption “Experts.”

/s/ Raymond Chabot Grant Thornton LLP

Raymond Chabot Grant Thornton LLP

Chartered Accountants

Montréal, Canada

April 2, 2007

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Exhibit 4

CERTIFICATIONS

I, H. Dale McSween, Interim Chief Executive Officer of Intertape Polymer Group Inc., certify that:

1.

I have reviewed this annual report on Form 40-F of Intertape Polymer Group Inc.;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;

4.

The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures [as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] and internal control over financial reporting [as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)] for the Registrant and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b.

Designed such internal control over financing reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

d.

Disclosed in this annual report any change in the Registrant’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

62

5.

The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date:  April 2, 2007

/s/ H. Dale McSween

H. Dale McSween, Interim Chief

Executive Officer

63

I, Andrew M. Archibald, Chief Financial Officer of Intertape Polymer Group Inc., certify that:

1.

I have reviewed this annual report on Form 40-F of Intertape Polymer Group Inc.;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;

4.

The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures [as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] and internal control over financial reporting [as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)] for the Registrant and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b.

Designed such internal control over financing reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

d.

Disclosed in this annual report any change in the Registrant’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.

The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

64

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date:  April 2, 2007

/s/ Andrew M. Archibald

Andrew M. Archibald, C.A.,

Chief Financial Officer

65

Exhibit 5

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED PURSUANT

TO SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002

The undersigned, H. Dale McSween, Interim Chief Executive Officer, and Andrew M. Archibald, C.A., Chief Financial Officer, hereby certify that this report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in this report fairly presents in all material respects the financial condition and results of operations of Intertape Polymer Group Inc. as of and for the periods presented in this report.

Date: April 2, 2007

/s/ H. Dale McSween

H. Dale McSween,

Interim Chief Executive Officer

Date: April 2, 2007

/s/ Andrew M. Archibald

Andrew M. Archibald, C.A.,

Chief Financial Officer

66

CERTIFIED EXTRACT OF RESOLUTIONS OF THE BOARD OF DIRECTORS

OF

INTERTAPE POLYMER GROUP INC.

ADOPTED ON APRIL 2, 2007

"APPROVAL OF ANNUAL INFORMATION FORM

WHEREAS the Chairman presented to the meeting a draft of an annual information form of the Corporation to be dated April 2, 2007.

WHEREAS the Chairman informed the meeting that the Corporation proposes to file the annual information form with the securities commissions and other appropriate regulatory authorities in each of the provinces and territories of Canada.

WHEREAS the Chairman informed the meeting that the Corporation proposes to file with the United States Securities and Exchange Commission an Annual Report on Form 40-F.

BE IT RESOLVED THAT:

1.

the annual information form ("AIF") of the Corporation to be dated April 2, 2007, substantially in the form of the document presented to this meeting, be and the same is hereby approved, subject to such additions, deletions and changes therein as may be consented to by any one director or officer of the Corporation;

2.

the Corporation be and it is hereby authorized to file the English and French (when and if available) language versions of the AIF, as the same may be amended from time to time, with the securities commissions and appropriate regulatory authorities in each of the provinces and territories of Canada;

3.

any one director or officer of the Corporation be, and he is, hereby authorized and directed, for and on behalf of the Corporation, to file or cause to be filed the English and French (when and if available) language versions of the AIF under the securities legislation of any of the provinces and territories of Canada and to file such other documents and to do such other things as he may, in his sole discretion, consider necessary, appropriate or useful in connection with, or to carry out the provisions of this resolution;

4.

the Corporation be and it is hereby authorized to file with the United States Securities and Exchange Commission an Annual Report on Form 40-F (the "Form 40-F") covering the Corporation's fiscal year ended December 31, 2006, such Form 40-F to be substantially in the form of the draft presented to the Board of Directors, and which includes the AIF as an exhibit thereto, together with such changes or modifications as may be deemed necessary or appropriate by any director or officer of the Corporation with and upon the advice of counsel, and any director or officer of the Corporation be, and he is, hereby authorized, empowered and directed to execute in the name and on behalf of the

67

Corporation, to procure all other necessary signatures to, and to file with the United States Securities and Exchange Commission, the Form 40-F and any all amendments or supplements thereto;

5.

any director or officer of the Corporation be, and he is, hereby authorized and directed for and on behalf of the Corporation, to execute, whether under the corporate seal of the Corporation or otherwise, and to deliver all such certificates, undertakings and other documents and to do all such other acts and things as he may, in his sole discretion, consider necessary or advisable in connection with or to carry out the provisions of this resolution."

I, the undersigned, H. Dale McSween, Chief Executive Officer and Secretary of Intertape Polymer Group Inc., hereby certify that the foregoing resolutions were duly adopted by the Board of Directors of Intertape Polymer Group Inc. on April 2, 2007 and that the said resolutions are, as of the date hereof, in full force and effect and have not been amended.

IN WITNESS WHEREOF, I HAVE SIGNED in, Bradenton, Florida, this 2nd day of April, 2007.

/s/ H. Dale McSween

H. Dale McSween,

Chief Executive Officer and Secretary

68

EX-2

Intertape Polymer Group Inc.

Consolidated Financial Statements

December 31^st, 2006, 2005 and 2004

Including Management’s Discussion and Analysis

2

March 22, 2007

This Management’s Discussion and Analysis (“MD&A”) supplements the consolidated financial statements and related notes for the year ended December 31, 2006. 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.

FINANCIAL HIGHLIGHTS

(In thousands of US dollars except per share data, selected ratios, stock and trading volume information.)

	2006	2005	2004
Operations	$	$	$
Consolidated sales	812,285	776,015	668,175
Net earnings (loss) Cdn GAAP	(166,693)	27,791	11,358
Net earnings (loss) US GAAP	(166,693)	28,056	12,739
Cash flows from operations before changes in non-cash working capital items	9,366	57,688	26,864

	2006	2005	2004
Per Common Share
Net earnings (loss) Cdn GAAP – basic	(4.07)	0.67	0.28
Net earnings (loss) US GAAP – basic	(4.07)	0.68	0.31
Net earnings (loss) Cdn GAAP – diluted	(4.07)	0.67	0.27
Net earnings (loss) US GAAP – diluted	(4.07)	0.68	0.31
Cash flows from operations before changes in non-cash working capital items	.23	1.41	0.65
Book value Cdn GAAP	6.68	10.61	9.80
Book value US GAAP	6.48	10.40	9.60

	2006	2005	2004
Financial Position
Working capital	120,258	166,993	146,833
Total assets Cdn GAAP	692,386	889,316	840,900
Total assets US GAAP	692,127	897,382	848,020
Total long-term debt	330,477	330,897	334,127
Shareholders’ equity Cdn GAAP	273,718	434,415	404,300
Shareholders’ equity US GAAP	265,558	425,968	396,183

3

	2006	2005	2004
Selected Ratios
Working capital	2.19	2.37	2.41
Debt/capital employed Cdn GAAP	0.55	0.44	0.45
Debt/capital employed US GAAP	0.55	0.45	0.46
Return on equity Cdn GAAP	na	6.4%	2.8%
Return on equity US GAAP	na	6.6%	3.2%

	2006	2005	2004
Stock Information
Weighted average shares outstanding (Cdn GAAP) - basic +	40,981	41,174	41,186
Weighted average shares outstanding (US GAAP) -  basic +	40,981	41,174	41,186
Weighted average shares outstanding (Cdn GAAP) - diluted +	40,981	41,309	41,446
Weighted average shares outstanding (US GAAP) - diluted +	40,981	41,309	41,446
Shares outstanding as at December 31 +	40,987	40,958	41,237

	2006	2005	2004
The Toronto Stock Exchange (CA$)
Market price as at December 31	6.19	10.37	10.90
High: 52 weeks	10.44	13.68	16.93
Low: 52 weeks	4.63	7.57	8.59
Volume: 52 weeks+	17,252	18,208	20,790

	2006	2005	2004
New York Stock Exchange
Market price as at December 31	5.28	8.97	9.11
High: 52 weeks	9.20	11.17	13.34
Low: 52 weeks	4.01	6.37	6.30
Volume: 52 weeks+	21,860	18,354	13,843

4

	High	Low	Close	ADV*
The Toronto Stock Exchange(CA$)
Q1	10.40	9.26	9.97	64,894
Q2	10.44	6.74	7.58	76,135
Q3	9.18	7.04	8.62	45,937
Q4	8.46	4.63	6.19	87,973

	High	Low	Close	ADV*
New York Stock Exchange
Q1	9.01	8.07	8.60	83,450
Q2	9.20	5.99	6.81	102,016
Q3	8.16	6.27	7.70	61,394
Q4	7.61	4.01	5.28	101,452

* Average daily volume

+In thousands

5

Management’s Discussion and Analysis

CONSOLIDATED QUARTERLY STATEMENTS OF EARNINGS

(In thousands of US dollars, except as otherwise noted)

(Unaudited)

	1st Quarter			2nd Quarter
	2006	2005	2004	2006	2005	2004
	$	$	$	$	$	$
Sales (i)	212,108	182,255	156,750	217,687	184,168	166,308
Cost of sales	178,122	148,574	129,986	182,534	150,895	134,097
Gross Profit	33,986	33,681	26,764	35,153	33,273	32,211
Selling, general and administrative expenses (i)	23,250	18,475	16,957	21,525	18,730	17,167
Stock-based compensation expense	525	455	70	590	483	351
Research and development	1,680	1,011	962	1,662	1,224	1,153
Financial expenses	6,717	5,649	6,768	6,396	5,918	7,235
Refinancing expense
Manufacturing facility closures, restructuring and other charges	17,502	719		32,423	1,087
Impairment of goodwill
	49,674	26,309	24,757	62,596	27,442	25,906
Earnings (loss) before income taxes	(15,688)	7,372	2,007	(27,443)	5,831	6,305
Income taxes (recovery)	(5,699)	1,339	(284)	(9,260)	399	654
Net earnings (loss)	(9,989)	6,033	2,291	(18,183)	5,432	5,651
Earnings (loss) per share
Cdn GAAP - Basic - US $	(0.24)	0.15	0.06	(0.44)	0.13	0.14
Cdn GAAP - Diluted - US $	(0.24)	0.15	0.06	(0.44)	0.13	0.14
US GAAP - Basic - US $	(0.24)	0.15	0.06	(0.44)	0.13	0.14
US GAAP - Diluted - US $	(0.24)	0.15	0.06	(0.44)	0.13	0.14
Weighted average number of common shares outstanding
Cdn GAAP - Basic	40,964,630	41,237,461	40,971,739	40,985,440	41,214,969	41,215,111
Cdn GAAP - Diluted	40,964,630	41,444,870	41,528,581	40,985,440	41,550,160	41,396,403
US GAAP - Basic	40,964,630	41,237,461	40,971,739	40,985,440	41,214,969	41,215,111
US GAAP - Diluted	40,964,630	41,444,870	41,528,581	40,985,440	41,550,160	41,396,403

(i) Sales and selling, general and administrative expenses have been reclassified as a result of the Company adopting EIC Abstract 156 during the year ended December 31, 2006.

6

Management’s Discussion and Analysis

CONSOLIDATED QUARTERLY STATEMENTS OF EARNINGS

(In thousands of US dollars, except as otherwise noted)

(Unaudited)

	3rd Quarter			4th  Quarter
	2006	2005	2004	2006	2005	2004
	$	$	$	$	$	$
Sales (i)	195,120	194,480	171,338	187,370	215,112	173,779
Cost of Sales	169,433	159,449	140,480	164,604	176,927	144,689
Gross Profit	25,687	35,031	30,858	22,766	38,185	29,090
Selling, general and administrative expenses (i)	21,399	19,273	16,994	18,729	22,507	18,834
Stock-based compensations expense	453	485	270	454	488	355
Research and Development	1,523	1,233	1,121	1,406	1,257	997
Financial expenses	6,762	5,577	5,948	5,871	6,655	4,302
Refinancing Expense			30,444
Manufacturing facility closures, restructuring and other charges	16,037	385		10,095	(760)	7,386
Impairment of goodwill	120,000
	166,174	26,953	54,777	36,555	30,147	31,874
Earnings (loss) before income taxes	(140,487)	8,078	(23,919)	(13,789)	8,038	(2,784)
Income taxes (recovery)	(17,154)	1,479	(9,664)	1,399	(1,689)	(20,455)
Net earnings (loss)	(123,333)	6,599	(14,255)	(15,188)	9,727	17,671
Earnings (loss) per share
Cdn GAAP – Basic – S$	(3.01)	0.16	(0.35)	(0.37)	0.24	0.43
Cdn GAAP – Diluted-US$	(3.01)	0.16	(0.35)	(0.37)	0.24	0.43
US GAAP – Basic- US$	(3.01)	0.16	(0.35)	(0.37)	0.24	0.43
US GAAP – Diluted-US$	(3.01)	0.16	(0.35)	(0.37)	0.24	0.43
Weighted average number of common shares outstanding
Cdn GAAP – Basic	40,986,057	41,205,555	41,285,161	40,986,057	41,039,278	41,273,840
Cdn GAAP – Diluted	40,986,057	41,337,378	41,285,161	40,986,057	41,157,568	41,468,992
US GAAP – Basic	40,986,057	41,205,555	41,285,161	40,986,057	41,039,278	41,273,840
US GAAP - Diluted	40,986,057	41,337,378	41,285,161	40,986,057	41,157,568	41,468,992

7

Management’s Discussion and Analysis

ADJUSTED CONSOLIDATED EARNINGS

Adjustments for non-recurring items; impairment of goodwill, manufacturing facility closures, restructuring and other charges.

Years Ended December 31,

(In millions of US dollars, except per share amounts)

As Reported	2006	2005	2004
	$	$	$
Sales	812.3	776.0	668.2
Cost of sales	694.7	635.8	549.2
Gross profit	117.6	140.2	119.0
Selling, general and administrative expenses	84.9	79.0	70.0
Stock-based compensation expense	2.0	1.9	1.0
Research and development	6.3	4.8	4.2
Financial expenses	25.7	23.8	24.3
Refinancing expense			30.4
Manufacturing facility closures, restructuring and other charges	76.1	1.4	7.4
Impairment of goodwill	120.0
	315.0	110.9	137.3
Earnings (loss) before income taxes	(197.4)	29.3	(18.3)
Income taxes (recovery)	(30.7)	1.5	(29.7)
Net earnings	(166.7)	27.8	11.4

Earnings per share – As Reported	2006	2005	2004
Basic	(4.07)	0.67	0.28
Diluted	(4.07)	0.67	0.27

Adjustments for non-recurring items	2006	2005	2004
Refinancing Expense			30.4

Impairment of goodwill	2006	2005	2004
	120.0

Adjustments for Manufacturing Facility Closures, Restructuring and Other Charges	2006	2005	2004
	76.1	1.4	7.4

8

ADJUSTED CONSOLIDATED EARNINGS

Adjustments for non-recurring items; impairment of goodwill, manufacturing facility closures, restructuring and other charges.

Years Ended December 31,

(In millions of US dollars, except per share amounts)

As Adjusted	2006	2005	2004
	$	$	$
Sales	812.3	776.0	668.2
Cost of sales	694.7	635.8	549.2
Gross profit	117.6	140.2	119.0
Selling, general and administrative expenses	84.9	79.0	70.0
Stock-based compensation expense	2.0	1.9	1.0
Research and development	6.3	4.8	4.2
Financial expenses	25.7	23.8	24.3
	118.9	109.5	99.5
Earnings before income taxes	(1.3)	30.7	19.5
Income taxes (recovery)	5.6	2.0	(16.5)
Net earnings (loss)	(6.9)	28.7	36.0
Earnings (loss) per Share - As Adjusted
Basic	(0.17)	0.70	0.87
Diluted	(0.17)	0.69	0.87

Note: These tables reconcile consolidated earnings (loss) as reported in the accompanying consolidated financial statements to adjusted consolidated earnings (loss) after the elimination of non-recurring items and manufacturing facility closures, restructuring and other charges. The Company has included these non-GAAP financial measures because it believes the measures permit more meaningful comparisons of its performance between the periods presented.

9

MANAGEMENT'S DISCUSSION & ANALYSIS

Business Overview

Intertape Polymer Group Inc. (“IPG” or the “Company”) was founded in 1981 and is a recognized leader in the specialty packaging industry in North America. IPG develops, manufactures and sells a variety of specialized polyolefin films, paper and film pressure sensitive tapes and complementary packaging systems for use in industrial and retail applications. IPG’s products include carton sealing tapes, including Intertape® pressure-sensitive and water-activated tapes; industrial and performance specialty tapes, including masking, duct, electrical and reinforced filament tapes; ExIFilm® shrink film; Stretchflex® stretch wrap; engineered coated fabric products; and flexible intermediate bulk containers (“FIBCs”). The Company designs its specialty products for aerospace, automotive and industrial applications. IPG’s specialty products are sold to a broad range of industrial and s pecialty distributors, consumer outlets and large end-users in diverse markets.

The Company’s business underwent significant change in 2006 including making several revisions to its business model.  In spring 2006, the Company began importing general purpose acrylic tape for sale to its distributors though it continues to manufacture more value-added acrylic tape products. In March 2006, the Company closed its FIBCs manufacturing facility in Piedras Negras, Mexico, substantially reducing its manufacturing capacity for this product group. The revised business model also includes the Company’s almost exclusive reliance on imported bags to meet customers’ demand except for a limited manufacturing capability in the Company’s Hawkesbury, Ontario facility where the Company manufactures specialty bags and provides customers with emergency product fulfillment.  The year was also marked by declining sales volumes and narrower gross margins as compared to 2005.  As discussed below, there were a variety of factors contributing to both the sales volume decline and the narrowing of gross margins, but one of the most significant factors was the Company’s customer account rationalization process, which accounted for approximately forty percent of the sales volume decline.  The Company exited several unprofitable customer accounts and streamlined its product offering, particularly with respect to products sold to its consumer accounts.  

While some of the sales volume decline was the result of deliberate account rationalization, and other factors were temporary in nature, markets for several of the Company’s products did demonstrate sustained gross margin compression during 2006. In recognition of changes in the underlying business, the Company conducted an interim test of its goodwill for possible impairment as at September 30, 2006.  As a result of the impairment test, the Company recorded an impairment of goodwill charge in the amount of $120.0 million.

The Company also improved its working capital management in 2006, decreasing non-cash working capital by $44.2 million, including $17.5 million in the fourth quarter alone. As detailed below, the Company reduced costs substantially in 2006 and expects to continue to benefit from these cost reductions as well as the business model changes in 2007 and in future periods.

As described above, throughout 2006, the Company continually sought ways to restructure its business and reduce costs to levels more commensurate with near term anticipated sales volumes and gross margins. The Company estimates that through the measures described below it has reduced its annual operating costs by approximately $27.5 million. Many of the cost reduction measures undertaken by the Company required the recognition of significant one-time costs.  The following is a description of the significant one-time costs incurred by the Company in 2006 in connection with its restructuring efforts, included in the Company’s consolidated statement of earnings under the caption “Manufacturing facility closures, restructuring and other charges”:

The Company closed its manufacturing facility in Brighton, Colorado in early November 2006.  The closure is expected to provide annual cost savings of approximately $8.9 million.  The total cash costs for severance, equipment relocation and facility site restoration recorded in 2006 related to the closure were approximately $2.1 million, with an additional $2.4 million accrued at December 31, 2006 as part of accounts payable and accrued liabilities.  The Company also expects to record additional cash charges related to the facility closure of approximately $2.5 million in future periods. The Company recorded $25.7 million in non-cash charges for the adjustment to estimated fair value of the machinery and equipment located in Brighton which was idled upon the closure of the facility.

In the first quarter of 2006 the Company closed its flexible intermediate bulk container manufacturing facility in Piedras Negras, Mexico.  The total charge for closing this facility was $3.2 million, of which, $2.4 million was non-cash charges resulting from the adjustment recorded in connection with the fair value of the machinery and equipment and inventories located in Piedras Negras which were idled upon closure of the facility.

The Company recorded fixed asset impairment charges totaling $8.0 million in 2006 related to efforts to streamline manufacturing operations through the elimination of redundant capacity as well as ongoing revisions to product marketing strategies.

In June and July 2006, the Company sold two previously closed facilities in Edmunston, New Brunswick and Green Bay, Wisconsin.  The Company realized net cash proceeds of approximately $2.5 million and recorded a loss of approximately $0.9 million.

10

In an effort to improve its customer service levels and reduce related service costs, the Company implemented changes in the manner in which it handles packaging, sales and delivery of products to retail customers in its consumer business. These changes required the closing of the Company’s repackaging facility in Gretna, Virginia. The cost to close the facility and redesign the Company’s consumer business model totaled $3.2 million including $2.6 million of non-cash charges related to adjusting inventories to estimated net realizable value and retiring information technology systems.

The Company has made significant reductions in its staffing levels beginning in the second quarter of 2006 and continuing through the end of the year.  These staffing adjustments coupled with CEO succession planning resulted in one-time restructuring charges of approximately $7.3 million.  

In June 2006, the Company decided to exit its corporate aircraft lease, resulting in a charge of $2.5 million. The Company successfully exited the corporate aircraft lease in the fourth quarter of 2006.

In addition to the one-time costs associated with the restructuring activities described above, the Company also incurred the following one-time costs in 2006:

Melbourne F. Yull, CEO and Chairman of the Board of Directors of the Company retired at the Company’s annual shareholders’ meeting on June 14, 2006.  In connection with Mr. Yull’s retirement, the Company recorded charges totaling $9.9 million (predominantly in the second quarter of 2006) including $1.5 million in stock-based compensation expense and $2.4 million related to the recognition of the balance of Mr. Yull’s pension.

As originally announced in December 2005, the Company investigated the possibility of selling a portion of its interest in the combined coated products operation and FIBC business through an initial public offering of the combined business using a Canadian Income Trust.  On May 24, 2006, the Company announced that it had indefinitely deferred the decision to proceed with this offering.  Accordingly, during the second and third quarters of 2006, the Company recorded a net charge of $3.9 million representing the write-off of the fees and expenses incurred in connection with the deferred sale.  Such fees and expenses were previously recorded in other assets on the Company’s balance sheet.

In the second quarter of 2006, the Company recorded $1.5 million in additional remediation expenses at its Montreal manufacturing facility that was closed in December 2004.  The Company had originally estimated that the cost of environmental remediation at the facility would be approximately $0.5 million.  When remediation activities commenced in April 2006, the Company was notified that excavation had uncovered additional soil contamination requiring remediation in excess of the original estimate.  The remediation was completed during the third quarter and in October 2006, the Company sold the property to a third party and has no residual environmental liability related to this site.

During the second quarter of 2006, the Company reassessed the recoverability of certain legal costs incurred in defense of a lawsuit begun in 2003 alleging trademark infringement and concluded that the costs did not remain recoverable. Accordingly, in the second quarter of 2006 the Company wrote-off approximately $1.9 million in legal costs related to the litigation.

In April 2006, the U.S. District Court for the Middle District of Florida entered judgment against the Company in a patent infringement lawsuit brought against the Company by LINQ Industrial Fabrics, Inc (“Linq”). The case deals with Linq's allegations that the Company’s patented NovaStat™, static dissipative FIBC's, infringe three Linq patents. In February 2007, the Company was denied its appeal of the judgement.  While the Company continues to pursue re-examination of the three Linq patents by the United States Patent Office, the Company wrote-off approximately $1.0 million of legal costs in the fourth quarter that it had incurred in defense of its NovaStat™ patent. Sales of this product represent less than one quarter of one percent of IPG's sales.  The Company does not expect the ultimate resolution of this litigation to have a material impact on its financial position.

Twice during 2006 the Company amended its credit facilities. The first amendment was in the second quarter and was to accommodate many of the one-time costs discussed herein. The second amendment completed on November 8, 2006 was to accommodate the changes in the Company’s business including the $120.0 million goodwill impairment charge recorded as at September 30, 2006.  The amendment provided accommodation for additional one-time costs related to restructuring activities in the fourth quarter of 2006 and the first quarter of 2007 and for relaxation to the covenant target ratios for September 30, 2006 and for up to two years thereafter.  Included in one-time costs are $0.4 million and $1.5 million in loan amendment fees for the second and fourth quarter of 2006, respectively.

On October 2, 2006, the Company announced that its Board of Directors was initiating a process to explore and evaluate various strategic and financial alternatives available to enhance shareholder value.  The process is on-going and during the fourth quarter of 2006, the Company incurred costs related to this process of $0.6 million.

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Facility Closure

At the end of March 2006, the Company closed a manufacturing facility located in Cap-de-la Madeleine, Quebec that had been acquired in the Flexia acquisition. This closure was identified and planned for during the evaluation of the Flexia acquisition and the costs of the closure have been accrued for as part of the cost of the acquisition. Accordingly, there was no additional charge to the Company’s operating results related to this facility closure in 2006.

Results of Operations

The Company’s consolidated financial statements are prepared in accordance with Canadian GAAP with US dollars as the reporting currency. Note 19 to the consolidated financial statements provides a summary of significant differences between Canadian GAAP and US GAAP. During the year ended December 31, 2006, the Company adopted the Canadian Institute of Chartered Accountants (“CICA”) Emerging Issues Committee (“EIC”) Abstract 156 “Accounting by a vendor for considerations given to a customer (including a reseller of the vendor’s products)”.  This EIC requires that consideration given to a customer by a vendor be classified as a reduction of revenue when recognized in the vendor’s income statement.  Consideration refers to sales incentives, discounts, coupons, rebates and price reductions amongst others.  As a result, the Company retroactively reclassified $19.5 million, $25.8 million and $24.3 million of rebates, discounts and allowances historically included with selling, general and administrative expenses as a reduction to sales for the years ended December 31, 2006, 2005 and 2004 respectively. This MD&A has been updated for the comparative periods discussed to reflect the reclassification.

The following discussion and analysis of operating results includes adjusted financial results for the three years ended December 31, 2006. A reconciliation from the operating results found in the consolidated financial statements to the adjusted operating results discussed herein, can be found in the tables appearing on pages 7 and 8 hereof.

Included in this MD&A are references to events and circumstances which have influenced the Company’s quarterly operating results presented in the table of Consolidated Quarterly Statements of Earnings appearing on pages 5 and 6 hereof.

Sales

IPG’s consolidated annual sales for 2006 were $812.3 million, an increase of 4.7% compared to $776.0 million for 2005.  Consolidated annual sales for 2005 were $776.0 million, an increase of 16.1% compared to $668.2 million in 2004. Fluctuating foreign exchange rates did not have a significant impact on the Company’s 2006, 2005 or 2004 sales.

The sales increase for 2006 is attributable to the sales associated with the Flexia acquisition in early October 2005.  Excluding revenues related to the Flexia acquisition, sales decreased by about 3.9% from $754.2 million in 2005 to approximately $724.9 million in 2006.  The sales increase for 2005 also includes the sales associated with the Flexia acquisition in the fourth quarter of 2005. Excluding revenues related to the Flexia acquisition, sales were increased by about 12.9% from $668.2 million in 2004 to approximately $754.2 million in 2005.  

In 2006, the Company had a sales volume (units) decrease of approximately 8.1% excluding the sales volume associated with the Flexia acquisition.  In 2005, the Company had a sales volume (units) decrease of approximately 0.4%, excluding the fourth quarter sales volume increase associated with the Flexia acquisition.  

The sales volume decline experienced in 2006 compared to 2005 was due to three primary factors, customer account rationalization, particularly in the Company’s consumer business, declines in the Company’s ECP product line including the discontinuance of FIBCs manufacturing in Piedras Mexico, and declines in sales of tapes and stretch film within the North American tapes and films product lines.  

During 2006, as previously discussed, the Company made changes to its consumer business model, including a significant rationalization of unprofitable or marginally profitable accounts.  To a lesser extent, there was a similar rationalization performed within the industrial tapes and films product lines. Approximately 40% of the sales volume decline in 2006 was related to the rationalization of unprofitable or marginally profitable business.  A significant portion of the rationalized business was serviced with resale items that the Company purchased from third parties.

Excluding the acquired Flexia accounts, ECP sales volumes declined 19.7% in 2006 compared to 2005 and FIBCs sales volumes declined 14.3% in 2006.  These product sales volume declines accounts for approximately one quarter of the Company’s 2006 volume decline. The largest market for ECP products is North American residential construction, which experienced a slowdown starting in the summer of 2006. Additionally, the sale of ECP products into agriculture related markets experienced weakness in 2006. The Company’s decision to close its Piedras Negras, Mexico FIBCs manufacturing operation resulted in lost sales from certain accounts that required North American sourcing.  

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The balance of the sales volume decline in 2006 compared to 2005 was in the tapes and films product lines. The Company experienced a decline in demand for most of its tape products as well as stretch film.  A portion of the decline, particularly as it relates to stretch film was due to customer buying patterns in 2006 compared to 2005.  A rapid increase in raw material costs, particularly for polyethylene occurred in late 2005 due to damage to Gulf Coast refineries from Hurricanes Katrina and Rita.  The rising cost environment, coupled with limited supplies of polyethylene in North America drove unusually high demand for stretch film in late 2005 as customers built up inventories.  Using its global sourcing capabilities, the Company was able to acquire and secure resin supplies and satisfy much of its customer demand.  In the first quarter of 2006, as Gulf Coast refinery produc tion came back on line, raw material costs began to decline significantly.  In this declining cost environment, customers worked their inventories down to low levels and maintained them at lower than normal levels.  A similar buying pattern occurred in the fourth quarter of 2006 as declining polyethylene prices again caused customers to reduce inventories.  

In response to rising raw material costs, the Company instituted substantial selling price increases beginning in the second quarter of 2004. The rate of selling price increases accelerated throughout the year and continued though the first quarter of 2005.  After a brief pause in the summer of 2005, selling prices were increased again in the fall of 2005 and continued to increase through the balance of the year. With the decline in raw material costs in early 2006, product selling prices declined from the late 2005 peaks.  However, overall 2006, average selling prices were higher than those achieved in 2005.

Gross Profit and Gross Margin

Gross profit totaled $117.6 million in 2006, a decrease of 16.1% from 2005. Gross profit totaled $140.2 million in 2005, an increase of 17.8% from 2004 gross profit of $118.9 million. Gross margin represented 14.5% of sales in 2006, 18.1% in 2005, and 17.8% in 2004.  

In the first quarter of 2006, the Company began to experience gross margin compression with the sale of products manufactured with high cost resins carried over from the fourth quarter of 2005. In the first quarter of 2006, the Company also lost market share in tapes and films as it held its selling prices firm, even though resin costs were declining, in order to offset high cost resin used in its manufacturing process.   

Starting late in the first quarter of 2006, the Company began reducing selling prices in both tapes and films and continued to do so in the second quarter. The Company had to reduce selling prices for resin-based film products several times during the second quarter of 2006 as a result of resin price declines.  The falling selling prices compressed margins and also created a “holding” loss on film inventories on hand at the time of each selling price decrease.  During the second quarter of 2006, the cost of resin-based tapes increased slightly from the first quarter. Gross margins were compressed by the higher costs and declining selling prices.  The Company had to reduce selling prices to recapture market share lost in the first quarter of 2006.

By the end of the second quarter of 2006, the Company believed that it had recaptured much of its lost market share in tape and film products but at lower than historical margins.  The gross margin for ECP products was also beginning to decline due to softness in the residential housing market.  In the third quarter of 2006, ECP sales volumes declined substantially from the second quarter, resulting in a significant decline in gross profit.  Tape and film sales volumes also experienced significant declines in the third quarter of 2006 while margins remained at depressed levels.  Gross margins also declined in the third and fourth quarter due to unabsorbed manufacturing costs.  The lower sales volumes required the Company to reduce its production of products, resulting in unabsorbed fixed manufacturing costs.

The fourth quarter of 2006 was similar to the third quarter in terms of sales volumes and gross margins.  The Company did begin to reduce manufacturing overheads in response to declining production levels, however, production levels were further reduced to support the Company’s working capital initiative of decreasing inventories by year-end. The Company was able to successfully reduce its inventories in the fourth quarter, thereby improving its liquidity. In the first quarter of 2007, the Company resumed production schedules designed to match sales demand. Resin costs began to decline during the fourth quarter, depressing demand for stretch film and resulting in a pattern of selling price reductions and inventory “holding” losses on this product similar to what occurred in the second quarter of 2006.  Tape and film products also experienced their highest raw material costs of 2006 in the products sold during the fourth quarter. Selling price increases were achieved in some markets but competitive conditions limited the Company’s ability to recover the higher material costs.  Raw material costs began to decline during the fourth quarter of 2006 and are expected to contribute to improved gross margins in the first quarter of 2007 when the Company sells products manufactured with these lower cost raw materials.

During 2004, the dollar impact of raw material cost increases grew substantially.  The Company was able to raise its selling prices, and increase its gross profit dollars.  Raw material costs continued to increase through the first quarter of 2005 and then, after a pause, began to rise again in the fall of 2005 and continued throughout the rest of the year.  Due to a series of timely sales price increases, the Company was able to once again increase its gross profit dollars.  Selling price increases in excess of raw material cost increases, along with cost savings arising from fourth quarter 2004 facility rationalizations, are the key reasons for the Company’s $21.2 million growth in gross profit dollars between 2004 and 2005.  This includes inventory “holding” gains experienced in the fourth quarter of 2005 related to stretch film.  

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The “holding” gains were the result of rapidly rising polyethylene prices driving up stretch film selling prices several times during the quarter, allowing the Company to earn additional margin on the inventories it had already purchased at lower costs.

The acquisition of Flexia contributed much of the gross profit improvement for the fourth quarter of 2005 compared to the third quarter of 2005.  However, the lower gross margin of the Flexia product mix resulted in the Company’s overall gross margin declining to 17.8% for the fourth quarter of 2005 compared to the same period the prior year.

There were several significant events in the fourth quarter of 2005. The Company recorded a $2.0 million reduction to cost of sales related to the insurance claim on the boiler explosion earlier in the year.  The Company also recorded a $2.8 million increase in its allowance for doubtful accounts as a reduction to sales to reflect outstanding claims and short payments by existing customers, principally in the retail distribution channel. Selected customers have the contractual right to perform post-audits on prior year’s sales and related incentive activities.  Included in the $2.8 million of additional allowance for doubtful accounts are customer post-audit claims submitted to the Company in 2005 for periods as far back as 2000.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A) for the year ended December 31, 2006 totaled $84.9 million, an increase of $5.9 million from the $79.0 million incurred for the year ended December 31, 2005. The 2005 SG&A expenses were up $9.0 million from $70.0 million in 2004. As a percentage of sales, SG&A expenses were 10.5%, 10.2% and 10.5% for 2006, 2005 and 2004, respectively.

The Company made significant staffing reductions during the course of 2006. The Company also exited its aircraft lease in 2006.  While SG&A expenses increased in 2006 compared to 2005 levels, the Company was able to reduce the SG&A quarterly run rate so that by the fourth quarter of 2006, annualized SG&A expenses were approximately $10.0 million below the actual 2006 expense level.  The cost trend by quarter is more pronounced, with the fourth quarter 2006 SG&A being $3.8 million lower than SG&A for the fourth quarter of 2005.  During 2006, the Company also incurred incremental SG&A costs of approximately $1.5 million to permit initial certification of internal controls over financial reporting as required under the Sarbanes-Oxley Act of 2002. Additionally, the Flexia acquisition in the fourth quarter of 2005 resulted in increased SG&A of approximately $3.5 million in 2006 compared to 2005.

SG&A increased in 2005 compared to 2004 as staffing was increased in 2005 to support smaller business teams that operated closer to the customer. Due to the October 2005 Flexia acquisition, the Company also incurred additional SG&A expenses in the fourth quarter of 2005 associated with the Flexia business. The Company began increasing its staffing level during the first quarter of 2005 in order to support the smaller business teams established at the beginning of that year and maintained those higher staffing levels for the balance of the year.  In addition to the increased salaries and benefits related to the staffing increases, SG&A for 2005 also includes approximately $1.0 million in recruiting fees and relocation costs in excess of normal spending levels. Additionally, external sales commissions are based on sales dollar growth and therefore, the Company’s higher sales prices in 2005 resulted in increa sed commissions expense. Internal sales incentives are driven by margin improvement, which occurred in several of the Company’s distributor-based markets in 2005.

SG&A in the fourth quarter of 2005 increased by $3.2 million in comparison to the third quarter of 2005.  A portion of the increase was attributable to the acquisition of Flexia. The Company also settled a 2002 dispute with a supplier over defective raw material that resulted in a gain of approximately $0.9 million reflected as a reduction of SG&A.  As a percentage of sales, SG&A for the fourth quarter of 2005 was 10.5% compared to 10.8% for the fourth quarter of 2004.

Stock-Based Compensation

For 2006, 2005 and 2004, the Company recorded approximately $2.0 million, $1.9 million and $1.0 million, respectively, in stock-based compensation expense related to options granted to employees. The year over year expense increase in each of the last two years is due to the larger number of stock option grants being expensed in accordance with the fair value based method of accounting.  

Operating Profit

This discussion presents the Company’s operating profit for 2006, 2005 and 2004. “Operating profit” does not have a standardized meaning prescribed by GAAP in Canada or the United States but is included herein as the Company’s management uses “operating profit” to measure and evaluate the profit contributions of the Company’s product offerings as well as the contribution by channel of distribution.

Because “operating profit” is a non-GAAP financial measure, other companies may present similar titled items determined with differing adjustments.  Presented below is a table reconciling this non-GAAP financial measure with gross profit being the most comparable GAAP measurement.  The reader is encouraged to review this reconciliation. Operating profit is defined by the Company as gross profit less SG&A and stock-based compensation expense.

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OPERATING PROFIT RECONCILIATION

(In millions of US dollars)

	Three months ended December 31, (Unaudited)		Year ended December 31,
	2006	2005	2006	2005	2004
	$	$	$	$	$
Gross Profit	22.8	38.2	117.6	140.2	119.0
Less: SG&A Expenses	18.7	22.5	84.9	79.0	70.0
Less: Stock-Based Compensation	.5	0.5	2.0	1.9	1.0
Operating Profit	3.6	15.2	30.7	59.3	48.0

Operating profit for 2006 amounted to $30.7 million compared to $59.3 million for 2005 and $48.0 million for 2004.  Operating profits decreased by $28.6 million in 2006 compared to 2005 due to the decline in gross profits and the increase in SG&A expenses. Operating profits increased $11.3 million in 2005 compared to 2004 due to the improvement in gross profits of $21.2 million.  Just over half of the improved gross profits in 2005 was realized in operating profits with the other half of the improved gross profits offsetting increased SG&A and stock-based compensation expense.  

The Company’s operating profit for the fourth quarter of 2006 was $3.6 million compared to $15.2 million for the fourth quarter of 2005. The decline in operating profit was the result of the lower gross profits in 2006, offset by a $3.8 million reduction in SG&A.

Impairment of Goodwill

In accordance with the requirements of the Canadian Institute of Chartered Accountants (“CICA”), which are substantively equivalent to the applicable US standards, the Company normally performs an annual goodwill impairment test as at December 31. As previously discussed, the Company conducted a goodwill impairment test at the interim date of September 30, 2006 due to the underlying changes in its business, resulting in a $120.0 million goodwill impairment charge. The Company performed its annual impairment test at December 31, 2006 and concluded that no additional impairment charge was necessary. No goodwill impairment charges were required by IPG for the years 2004 or 2005.

For purposes of the impairment test, based on the specific requirements of the accounting pronouncements, the Company determined that it was a single reporting unit. The Company calculated the fair value of this reporting unit using the discounted cash flow method, and compared it with other methods including multiples of sales and earnings before interest, income taxes, depreciation and amortization, and with historical transactions where appropriate.

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Research and Development

Research and development (“R&D”) remains an important function within the Company. Taken as a percentage of sales, R&D was 0.8% for 2006 and 0.6% for 2005 and 2004.  The Company continues to focus its R&D efforts on new products, new technology developments, new product processes and formulations.  

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 GAAP.  The Company defines EBITDA as net earnings (loss) before (i) income taxes; (ii) financial expenses, net of amortization; (iii) refinancing expense; (iv) amortization of other intangibles and capitalized software costs; and (v) depreciation.  Adjusted EBITDA is defined as EBITDA before manufacturing facility closures, restructuring and other charges and impairment of goodwill charges. The terms “EBITDA” and “Adjusted EBITDA” do not have any standardized meanings prescribed by GAAP in Canada or the United States and are therefore unlikely to be comparable to similar measures presented by other issuers. EBITDA and Adjusted EBITDA are not measurements of financial performance under GAAP and should not be considered as alternatives to cash flows from operating activities or as alternatives to net earnings as indicators of IPG’s operating performance or any other measures of performance derived in accordance with GAAP. The Company has included these non-GAAP financial measures because it believes that it permits investors to make a more meaningful comparison of IPG’s performance between periods presented. In addition, the Company’s covenants contained in the loan agreement with its lenders require certain debt to Adjusted EBITDA ratios be maintained, thus EBITDA and Adjusted EBITDA are used by Management and the Company’s lenders in evaluating the Company’s performance.

EBITDA RECONCILIATION TO NET EARNINGS

(In millions of US dollars)  

	Three months ended December 31, (Unaudited)		Year ended December 31,
	2006	2005	2006	2005	2004
	$	$	$	$	$
Net Earnings (loss) – As Reported	(15.2)	9.7	(166.7)	27.8	11.4
Add Back:
Financial Expenses, net of amortization	5.5	6.3	24.4	22.4	23.0
Refinancing Expense					30.4
Income Taxes (recovery)	1.4	(1.7)	(30.7)	1.5	(29.7)
Depreciation & Amortization	9.4	7.5	36.6	31.1	29.9
EBITDA	1.1	21.8	(136.4)	82.8	65.0
Manufacturing facility closures, restructuring and other charges	10.1	(0.8)	76.1	1.4	7.4
Impairment of Goodwill			120.0
Adjusted EBITDA	11.2	21.0	59.7	84.2	72.4

EBITDA was $(136.4) million for 2006, $82.8 million for 2005, and $65.0 million for 2004.  Adjusted EBITDA was $59.7 million, $84.2 million, and $72.4 million for the years 2006, 2005 and 2004 respectively.

The Company’s EBITDA for the fourth quarter of 2006 was $1.1 million compared to $21.8 million for the fourth quarter of 2005. The Adjusted EBITDA was $11.2 million in the fourth quarter of 2006 as compared to $21.0 million in the fourth quarter of 2005.

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Financial Expenses

Financial expenses increased 8.0% to $25.7 million for 2006 as compared to $23.8 million for 2005. Financial expenses decreased 1.9% to $23.8 million for 2005 as compared to $24.3 million for 2004.  

The increased financial expense in 2006 compared to 2005 was the result of the September 2005 borrowings to fund the Flexia acquisition and higher interest rates on the floating rate debt as compared to the interest rate levels experienced in 2005.  Finally, as part of the loan amendment process completed on November 8, 2006, the interest rate margin on the floating rate term debt was increased by 50 basis points.

The decrease in financial expenses for 2005 as compared to 2004, reflects the full year benefit of the third quarter 2004 refinancing described below. However, during 2005, interest rates rose steadily throughout the year, reducing the benefit of the refinancing on the floating rate $275.0 million senior secured credit facility. In response to the rising interest rate environment, in June and July 2005, the Company entered into interest-rate swap agreements that effectively fixed the interest rate on $75.0 million of bank debt at approximately 4.28% plus the applicable premium.

Financial expenses for the fourth quarter of 2006 totaled $5.9 million, an 11.9% decrease from financial expenses in the fourth quarter of 2005. The decrease was due to lower outstanding borrowings under the Company’s revolving credit facility.  The Company had increased its borrowings at the end of September 2005 in order to fund the acquisition of Flexia. Financial expenses for the fourth quarter of 2005 totaled $6.7 million, a 54.7% increase compared to $4.3 million for the fourth quarter of 2004. The increase is principally due to the higher interest rates in the fourth quarter of 2005 compared to the fourth quarter of 2004 and the increase in borrowings related to the Flexia acquisition.

Refinancing Expense

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 proceeds from the refinancing were used to repay the then existing bank credit facility, redeem all three series of the Company’s then existing senior secured notes, pay related make-whole premiums, accrued interest and transaction fees and provide cash for general corporate purposes.  

In the third quarter of 2004, the Company recorded a one-time pretax charge of approximately $30.4 million ($19.9 million net of related tax benefits) associated with the refinancing transaction.

Income Taxes

In the past three years, the Company’s statutory income tax rate has been influenced primarily by a lower rate on foreign-based income, manufacturing and processing deductions, transactions that resulted in permanent differences and changes in the valuation allowance.  

As at December 31, 2006, the Company had approximately $78.6 million in Canadian operating loss carry-forwards for tax purposes expiring from 2007 through 2026, and $180.8 million in US federal and state operating losses for tax purposes expiring from 2018 through 2025. In assessing the valuation of future income tax assets, management considers whether it is more likely than not that some portion or all of the future income tax assets will not be realized.  Management considers the scheduled reversal of future income tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company expects the future income tax assets to be realized, net of the valuation allowance at December 31, 2006, as a result of the reversal of existing taxable temporary differences. Based on management’s assessment, a $12.4 million valuation allowance was established as at December 31, 2006, unc hanged from December 31, 2005.

Net Earnings – Canadian and US GAAP

For 2006, the Company posted a net loss of $166.7 million as compared to net earnings of $27.8 million in 2005 and $11.4 million in 2004.  

The Company had a net loss of $15.2 million for the fourth quarter of 2006 as compared to net earnings for the fourth quarter of 2005 totaling $9.7 million.  Excluding manufacturing facility closure, restructuring and other charges, the pretax loss for the fourth quarter of 2006 was $3.7 million.  This compares to pretax profits for the fourth quarter of 2005 on a comparable basis of $7.3 million.  The decline in pretax profit improvement is due to lower gross profits in the fourth quarter of 2006. The fourth quarter of 2005 pretax profits of $7.3 million represents a 58.1% improvement over the 2004 amount of $4.6 million.  The fourth quarter 2005 pretax profit improvement is attributable to the increase in gross profits.

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Adjusted net earnings, a non-GAAP financial measure (see table on pages 7 an 8) amounted to a net loss of $6.9 million for 2006, net earnings of $28.7 million for 2005 and net earnings of $36.0 million for 2004. The Company is including adjusted net earnings here because it believes it provides a better comparison of results for the periods presented since it does not take into account non-recurring items, manufacturing facility closure and restructuring costs in each period.

Adjusted net earnings does not have any standardized meaning prescribed by GAAP in Canada or the United States and is therefore unlikely to be comparable to similar measures presented by other issuers. A reconciliation of adjusted net earnings to net earnings, being the most comparable measurement under GAAP, is set forth on pages 7 and 8. The reader is encouraged to review this reconciliation.

Net earnings reported in accordance with Canadian GAAP conforms in all material respects to amounts that would have to be reported had the financial statements been prepared under US GAAP, except for the effect of variable accounting for stock options, which would result in an increase in net earnings of approximately $0.3 million in 2005 and $1.4 million in 2004 (nil for 2006). Consequently, in accordance with US GAAP, net earnings in 2006 would be a net loss of approximately $166.7 million, net earnings of $28.0 million in 2005 and $12.7 million in 2004.  For further details, see Note 19 to the consolidated financial statements.

In the case of IPG, net earnings are equal to earnings from continuing operations, as the Company had no discontinued operations, extraordinary items, or changes in accounting principles that resulted in a charge against earnings for these periods.

Earnings Per Share – Canadian and US GAAP

Basic and diluted net earnings per share reported in accordance with Canadian GAAP conforms in all material respects to amounts that would have been reported had the financial statements been prepared under US GAAP, except for the impact of variable accounting for stock options previously discussed under the caption “Net earnings – Canadian and US GAAP”. Consequently, in accordance with US GAAP, basic and diluted loss per share would be $4.07 in 2006 compared to net earnings per share of $0.68 in 2005 and $0.31 in 2004.

The Company reported a loss per share of $4.07 both basic and diluted for 2006 as compared to earnings per share of $0.67 both basic and diluted for 2005 and earnings per share of $0.28 basic and $0.27 diluted for 2004. The weighted-average number of common shares outstanding for the purpose of the basic and diluted EPS calculation was 41.0 million for 2006 (41.0 million diluted), 41.2 million (41.3 million diluted) for 2005 and 41.2 million (41.4 million diluted) for 2004.

The adjusted EPS (see table on pages 7 and 8) for 2006 was a loss of $0.17 both basic and diluted, compared to earnings per share of $0.70 basic and $0.69 diluted for 2005, and to $0.87 both basic and diluted for 2004.  

Off-Balance Sheet Arrangements and Related Party Transactions

The Company maintains no off-balance sheet arrangements except for the interest rate swap agreements and letters of credit issued and outstanding discussed in the section entitled “Bank Indebtedness and Credit Facilities” and in Notes 13 and 14 to the consolidated financial statements. The Company is not a party to any material related party transactions.

Liquidity and Capital Resources

Cash Flow

In 2006, the Company generated cash flows from operating activities of $53.6 million. In 2005, the Company generated cash flows from operating activities of $32.4 million.  In 2004, the Company used cash of $4.1 million in operating activities.  In the fourth quarter of 2006, the Company generated cash flows from operating activities of $15.6 million compared to $11.9 million for the fourth quarter of 2005.

Cash from operations before changes in non-cash working capital items decreased in 2006 to $9.4 million from $57.7 million in 2005. Cash from operations before changes in non-cash working capital items increased in 2005 by $30.8 million to $57.7 million from $26.9 million in 2004. The decrease in 2006 was due to lower earnings including approximately $19.5 million in cash charges for facility closures, restructuring and other charges. The increase in 2005 was due to improved profitability and the absence of a $21.9 million make-whole payment to the Company’s previous noteholders, which occurred in the third quarter of 2004 as part of the refinancing.  Cash used in operations before changes in non-cash working capital for the fourth quarter of 2006 was $2.0 million compared to cash from operations before changes in non-cash working capital of $12.0 million in the fourth quarter of 2005.  The decrease is due to low er profitability including $6.4 million in cash charges for facility closures, restructuring and other charges and increased pension plan contributions. For the fourth quarter of 2005, cash from operations before changes in non-cash working capital was $12.0 million compared to $9.4 million in the fourth quarter of 2004.  The improvement in 2005 is the result of improved profitability compared to the fourth quarter of 2004.

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In 2006, non-cash working capital items provided $44.2 million in net cash flow, including $17.5 million provided in the fourth quarter.  The decrease in working capital both for the year and the fourth quarter was driven by declines in trade accounts receivables and inventories and partially offset with declines in accounts payable and accrued liabilities.  The lower trade accounts receivable is the result of improved collection efforts, a change in payment terms for a large segment of the Company’s customer base and lower sales. The Company has been working on decreasing its inventory investment since the second quarter of 2006, with demonstrated success in the second quarter.  In the third quarter, the Company was successful at continuing to decrease units but higher raw material costs resulted in the unit decline being masked as at September 30, 2006.  In the fourth quarter , the Company was able to substantially reduce inventories.  A portion of the inventory reduction was due to declining raw material costs but most of the decline was in on-hand quantities of all classes of inventory.  The finished goods inventory decline of approximately $12.0 million was achieved through a substantial reduction in production levels.  As explained in the section entitled “Gross Profit and Gross Margin”, this reduction in production levels resulted in additional unabsorbed manufacturing overhead costs for the fourth quarter of 2006.

In 2005, non-cash working capital items used $25.3 million in net cash flow, including $0.1 million used in the fourth quarter.  Most of the increase in working capital was in trade and other receivables of $10.2 million and accounts payable and accrued liabilities of $12.5 million.  Due to the two major Gulf Coast hurricanes late in the third quarter of 2005, resin prices increased substantially, resulting in higher working capital investments in the fourth quarter for both inventories and trade receivables.   The increased inventories investment resulting from higher material costs was substantially offset by the Company’s ability to substantially reduce inventory units, particularly in raw materials.  The decrease in accounts payable and accrued liabilities was due to lack of inventory pre-buying at December 31, 2005 compared to December 31, 2004 and the fact that the Company was taking increase d advantage of prompt pay discounts offered by suppliers at the end of 2005.

In 2004, non-cash working capital items used $30.9 million in net cash flow, of which $7.6 million was used in the fourth quarter.  An increase in trade and other receivables of $12.7 million and an increase in inventories of $20.1 million accounted for the use of working capital.  As in 2005, rapidly rising raw material costs over the course of the year consumed cash in the form of higher inventory investments. Also impacting inventories was the Company’s practice of pre-buying raw materials in anticipation of future raw material costs increases. The tesa acquisition in February 2004 increased working capital requirements for inventories and trade accounts receivable to accommodate the acquired customers.  Increases in unit sales prices also increased the balance of trade accounts receivable owed by customers.  

Cash flows used in investing activities was $29.6 million for 2006 as compared to $55.8 million for 2005 and $37.6 million for 2004.  These investing activities include an increase in property, plant and equipment of $27.1 million for 2006, $24.0 million for 2005 and $18.4 million for 2004.  In the fourth quarter of 2005, the Company used cash of $28.1 million to acquire Flexia and in the first quarter of 2004 the Company purchased the duct and masking tape operations of tesa for $5.5 million.  Other assets increased $5.4 million during 2006, $3.9 million during 2005 and $13.2 million in 2004. The increase in 2004 includes $10.5 million incurred for debt issuance costs associated with the refinancing.  Cash flows used in investing activities was $3.4 million for the fourth quarter of 2006 compared to $36.4 million for the fourth quarter of 2005, a decrease of $33.0 million.  Most of the decrease was due to the Flexia acquisition in 2005 and lower spending on capital assets.

Cash flows used in financing activities amounted to $17.0 million in 2006.  Cash flows provided by financing activities totaled $11.7 million in 2005 and $63.2 million in 2004. On the last business day of the third quarter of 2005, the Company borrowed $23.5 million under its revolving credit facilities to fund the Flexia acquisition which closed on October 5, 2005.  This increased IPG’s total outstanding balance under its revolving credit facilities to $28.5 million.  During the fourth quarter of 2005, the Company was able to reduce its revolving credit facilities by a total of $13.5 million to $15.0 million at December 31, 2005. The Company was able to repay the $15.0 million during 2006, including $10.0 million in the fourth quarter. During the third quarter of 2004, the Company borrowed $325.0 million to refinance substantially all of its bank indebtedness and long-term debt.  During 2004, the Compa ny issued approximately 345,000 shares for a consideration of $2.7 million to fund its contributions to various pension funds and for the exercise of employees’ stock options.

Free cash flow, a non-GAAP measurement that is defined by the Company as cash flows from operating activities less property, plant and equipment expenditures and dividends was $26.5 million in 2006 an improvement of $18.1 million from the 2005 level of $8.4 million.  The improvement was due to the substantial decrease in non-cash working capital items for 2006. The 2005 free cash flow of $8.4 million was an improvement of $30.9 million from 2004, which was negative $22.5 million.  The 2005 improvement was due to the absence in 2005 of the $21.9 million make-whole payment discussed above and improved profitability.  The Company is including free cash flow because it is used by Management and the Company’s investors in evaluating the Company’s performance and liquidity.  Free cash flow does not have any standardized meaning prescribed by GAAP in Canada or the United States and is therefore, unlikely to be comparable to similar measures presented by other issuers. A reconciliation of free cash flow to cash flow from operating activities, the most directly comparable GAAP measure, is set forth below. The reader is encouraged to review this reconciliation.

FREE CASH FLOW RECONCILIATION

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(In millions of US dollars)

	2006	2005	2004
Cash Flows From Operating Activities	53.6	32.4	(4.1)
Less: Capital Expenditures	27.1	24.0	18.4
Free Cash Flow	26.5	8.4	(22.5)

Liquidity

As at December 31, 2006, working capital stood at $120.3 million as compared to $167.0 million as at December 31, 2005. The decrease of $46.7 million is due to the net decrease in receivables and inventories and accounts payable and accrued liabilities previously discussed, a $15.0 million decrease in bank indebtedness, a $7.6 million decrease in other receivables primarily due to the collection of an insurance claim outstanding at December 31, 2005 and an increase of $17.0 million in current installments on long-term debt as discussed below. The Company believes that it has sufficient working capital and access to credit facilities to meet the requirements of its day-to-day operations, given its operating margins and projected budgets.

Quick assets, which are the Company’s total current assets excluding prepaid expenses and future income taxes, decreased by $60.6 million during 2006 to a level of $203.9 million, and increased by $22.8 million during 2005 to a level of $264.4 million. The 2006 decrease was primarily due to the decline in trade accounts receivables, inventories and other receivables. The 2005 increase was due to increased investments in inventories and trade receivables triggered by the higher cost of raw materials.

The Company’s cash liquidity is influenced by several factors, the most significant of which are the Company’s profitability and its level of inventory investment. Historically, the Company has periodically increased its inventory levels when business conditions suggest that it is in the Company’s interest to do so, such as buying opportunities to mitigate the impact of rising raw material costs. The Company expects to continue this practice when circumstances suggest that it is appropriate and when the Company believes it has adequate cash and credit availability to support such strategies.

Days outstanding in trade receivables were 43.7 days at the end of 2006 as compared to 58.5 days at the end of 2005. Inventory turnover (cost of sales divided by inventories) improved to 9.2 times in 2006 compared to 6.0 times in 2005.

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 Company’s 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.

Capital Expenditures

Total property, plant and equipment expenditures were $27.1 million, $24.0 million and $18.4 million for the years 2006, 2005 and 2004 respectively.

Based on current volume and anticipated market demand, the Company believes it has sufficient capacity available to accommodate increases in volumes in most products without additional capital expenditure.  In addition, Management believes the Company is positioned to take advantage of opportunities that may arise to grow its market share in existing products, expand its product offerings or expand its market.

Bank Indebtedness and Credit Facilities

The Company has a US$65.0 million five-year revolving credit facility and a US$10.0 million five-year revolving credit facility available in Canadian dollars.  As at December 31, 2006, the Company had no outstanding draws under these facilities and $2.5 million in outstanding letters of credit. As at the end of 2005, the Company had $15.0 in outstanding draws under these facilities and $7.0 million in outstanding letters of credit.  The facilities are part of the $275.0 million Senior Secured Credit Facility described in more detail below. The Senior Secured Credit Facility, along with the issuance of Senior Subordinated Notes also described below, allowed the Company to refinance substantially all of its bank indebtedness and long-term debt including its previously existing $50.0 million revolving line of credit.  When combined with on-hand cash and cash equivalents and temporary investments, the Company had tot al cash and credit availability, subject to covenant restrictions, of $41.3 million as at December 31, 2006 and $66.8 million as at December 31, 2005.  The decrease between December 31, 2005 and December 31, 2006 is due to restrictions placed on the Company’s credit availability under its financial ratios, specifically its maximum total leverage ratio discussed below.

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Long-Term Debt

The Company has a $275.0 million Senior Secured Credit Facility, consisting of a $200.0 million term loan and a total of $75.0 million in revolving credit facilities along with $125.0 million of Senior Subordinated Notes due 2014.

The Senior Secured Credit Facility is guaranteed by the Company and substantially all of its subsidiaries and is secured by a first priority perfected security interest in substantially all tangible and intangible assets owned by the Company and substantially all of its subsidiaries, subject to certain customary exceptions.

In 2006 and 2005, the Company reduced its indebtedness associated with its long-term debt instruments by $2.9 million and $3.0 million, respectively in accordance with its debt amortization schedule.

At December 31, 2006, the current installments on long-term debt were $19.7 million. The increase in current installments over recent levels reflects a $15.6 million principal payment due March 30, 2007 under the Company’s Senior Secured Credit Facility.  Under the credit facility, a portion of “excess cash flow” as defined must be used to reduce the principal outstanding on the $200.0 million term loan within 90 days of year-end. The payment is the result of the Company’s improved cash flows in 2006.

Twice during 2006, the Company amended its credit facilities. The first amendment was in the second quarter and was to accommodate many of the one-time costs discussed previously.  The second amendment completed on November 8, 2006 was to accommodate the changes in the Company’s business including the $120.0 million goodwill impairment charge recorded as at September 30, 2006.  The amendment provided accommodation for additional one-time costs related to restructuring activities in the fourth quarter of 2006 and the first quarter of 2007 and for adjustments to the covenant target ratios for September 30, 2006 and for up to two years thereafter.  Included in one-time costs for the second quarter of 2006 is $0.4 million in loan amendment fees.  Included in one-time costs for the fourth quarter of 2006 is $1.5 million in loan amendment fees.

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Tabular Disclosure of Contractual Obligations

The Company’s principal contractual obligations and commercial commitments relate to its outstanding debt and its operating lease obligations. The following table summarizes these obligations as of December 31, 2006:

	Payments Due by Period
Contractual Obligations  (in millions of US dollars)	Total	Less than 1 year	1-3 years	4-5 years	After 5 years
	$	$	$	$	$
Long-Term Debt	322.3	19.0	4.3	174.0	125.0
Capital (Finance) Lease Obligations	11.7	1.4	1.8	1.2	7.3
Operating Lease Obligations	14.6	4.5	6.1	2.7	1.3
Purchase Obligations
Other Long-Term Liabilities Reflected on Balance Sheet under GAAP of the primary financial statements
Total	348.6	24.9	12.2	177.9	133.6

IPG anticipates that funds generated by its operations and funds available to it under its Senior Secured Credit Facility will be sufficient to meet working capital requirements and anticipated obligations under its Senior Secured Credit Facility and the Senior Subordinated Notes and to finance capital expenditures for the foreseeable future. The Company has experienced, and expects to continue to experience in the future, fluctuations in its quarterly results of operations. IPG’s ability to make scheduled payments of principal or interest on, or to make other payments on and refinance, its indebtedness, or to fund planned capital expenditures and existing capital commitments, will depend on IPG’s future performance, which is subject to general economic conditions, the competitive environment and other factors, a number of which are outside of the Company’s control.

The credit agreement governing the Senior Secured Credit Facility and the indenture governing the outstanding Senior Subordinated Notes each contain restrictive covenants that, among other things, limit the Company’s ability to incur additional indebtedness, make restricted payments, make loans or advances to subsidiaries and other entities, invest in capital expenditures, sell its assets or declare dividends. In addition, under its Senior Secured Credit Facility, the Company is required to maintain certain financial ratios, including a maximum total leverage ratio, a minimum interest coverage ratio and a minimum fixed charge ratio.  The Company was in compliance with its financial covenants as at December 31, 2006.

Capital Stock

As at March 19, 2007 there were 40,986,940 common shares of the Company outstanding.

In 2006, 2005, and 2004, employees exercised stock options worth $0.1 million, $0.1 million and $1.0 million respectively. Further, in 2004, $1.7 million worth of shares were issued in relation to funding the Company’s US employee stock ownership retirement savings plan.  

In the fourth quarter of 2005, the Company reacquired and cancelled 250,587 common shares of the Company as part of a settlement with the former owner of a business the Company had previously acquired.

On March 13, 2006, the Company announced the effectiveness of a new Normal Course Issuer Bid (“NCIB”) in Canada, pursuant to which the Company could, over a 12-month period, repurchase at prevailing market prices, up to a maximum of 2,047,903 of its common shares.  The bid commenced on March 16, 2006 and the bid remained in effect until March 15, 2007. No shares were purchased under the NCIB. The Company believes that the purchase of its own common shares may, in appropriate circumstances, be a responsible investment of available funds on hand.

During November 2004, the Company announced that it had registered an NCIB in Canada, under which the Company was authorized to repurchase up to 5.0% of its outstanding common shares. In the fourth quarter of 2004, there were 53,200 shares purchased for cancellation at a cost to the Company of $0.4 million.  In the second quarter of 2005, there were 46,300 shares purchased for cancellation at a cost to the Company of $0.3 million. The NCIB expired on November 8, 2005.  

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Accumulated Currency Translation Adjustments

Accumulated currency translation adjustments increased $2.3 million from $33.8 million as at December 31, 2005 to $36.1 million as at December 31, 2006. In 2005, the increase was $2.6 million, from $31.2 million as at December 31, 2004 to $33.8 million as at December 31, 2005. The increase in 2006 was due to strengthening of the Euro relative to the US dollar.  The Canadian dollar was substantially unchanged between December 31, 2005 and December 31, 2006. In 2005, the Canadian dollar strengthened relative to the US dollar while the Euro weakened relative to the US dollar.

Business Acquisitions

In October 2005, the Company, through a wholly-owned Canadian subsidiary, acquired all of the outstanding capital stock of Flexia Corporation Ltd., being the successor entity to Flexia Corporation and Fib-Pak Industries Inc. for an aggregate consideration of approximately $30.0 million after purchase price adjustments. Flexia produces a wide range of engineered coated products, polyethylene scrims and polypropylene fabrics.

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.  At the same time, the Company finalized its three-year agreement to supply duct tape and masking tape to tesa. The acquisition has been accounted for using the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets and liabilities based on their estimated fair values as at the date of the acquisition.

Pension and Post-Retirement Benefit Plans

IPG’s pension benefit plans are currently showing an unfunded deficit of $14.3 million at the end of 2006 as compared to $18.1 million at the end of 2005. For 2006 and 2005, the Company contributed $6.0 million and $2.3 million, respectively to its plans. The Company may need to divert some of its resources in the future in order to resolve this funding deficit but expects to meet its pension benefit plan funding obligations in 2007 through cash flows from operations.

Dividend on Common Shares

No dividends were declared on the Company’s stock in 2006, 2005 or 2004.

Critical Accounting Estimates

The preparation of financial statements in conformity with Canadian GAAP requires Management to make estimates and assumptions that affect the recorded amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the recorded amounts of revenues and expenses during the reporting period. On an on-going basis Management reviews its estimates, including those relating to the allowance for doubtful accounts, reserve for slow moving and unmarketable inventories, future and current income taxes and impairment of long-lived assets and goodwill based on currently available information. Actual results may differ from those estimates.

The allowance for doubtful accounts is based on reserves for specific accounts which Management believes may not be fully recoverable combined with an overall reserve reflective of the Company’s historical bad debt experience and current economic conditions.

Establishing and updating the reserve for slow moving and unmarketable inventories starts with an evaluation of the inventory on hand as compared to historical and expected future sales of the products. For items identified as slow-moving or unmarketable; the cost of products is compared with their estimated net realizable values and a valuation reserve is established when the cost exceeds the estimated net realizable value.

The Company assesses the recoverability of its fixed assets using projected future undiscounted cash flows and comparing those cash flows to the net book value of the fixed assets when changes in events and circumstances indicate a possible impairment of certain assets or group of assets.  

In accordance with the requirements of the Canadian Institute of Chartered Accountants (“CICA”), which are substantively equivalent to the applicable US standards, the Company performs an annual goodwill impairment test as at December 31. For purposes of the impairment test, based on the specific requirements of the accounting pronouncements, the Company determined that it was a single reporting unit. The Company calculates the fair value of this reporting unit using the discounted cash flow method. As occurred in 2006, the Company

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performs goodwill impairment tests at interim dates when changes in the underlying business of the Company suggest that a possible impairment has occurred.

In assessing the realizability of future income tax assets, Management considers whether it is more likely than not that some portion or all of the future income tax assets will not be realized. Management considers the scheduled reversal of future income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

Changes in Accounting Policies

Accounting by a vendor for considerations given to a customer

During the year ended December 31, 2006, the Company adopted the Canadian Institute of Chartered Accountants (“CICA”) Emerging Issues Committee (“EIC”) Abstract 156 “Accounting by a vendor for considerations given to a customer (including a reseller of the vendor’s products)”. This EIC requires that consideration given to a customer by a vendor be classified as a reduction of revenue when recognized in the vendor’s income statement. Consideration refers to sales incentives, discounts, coupons, rebates and price reductions amongst others. As a result, the Company retroactively reclassified $19.5 million, $25.8 million and $24.3 million of rebates, discounts and allowances historically included with selling, general and administrative expenses as a reduction to sales for the years ended December 31, 2006, 2005 and 2004, respectively.

Impact of Accounting Pronouncements Not Yet Implemented

Canadian GAAP

Financial instruments - recognition and measurement

In January 2005, the CICA issued Handbook section 3855, “Financial Instruments - Recognition and Measurement.” The section is effective for annual and interim periods beginning on or after October 1, 2006. It describes the standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. This section requires that i) all financial assets be measured at fair value, with some exceptions such as loans and investments that are classified as held-to-maturity, ii) all financial liabilities be measured at fair value when they are derivatives or classified as held for trading purposes (other financial liabilities are measured at their carrying value), and iii) all derivative financial instruments be measured at fair value, even when they are part of a hedging relationship. The Company has concluded on the classification of the applicable financial instrumen ts in accordance with the section and has determined this section to have an impact on the consolidated financial statements. The valuation of such impact on the consolidated financial statements is currently under review.

Hedges

In January 2005, the CICA also issued Handbook section 3865, “Hedges.” The section is effective for annual and interim periods beginning on or after October 1, 2006. It describes when and how hedge accounting may be applied. Hedging is an activity used by a company to change an exposure to one or more risks by creating an offset between changes in the fair value of a hedged item and a hedging item, changes in the cash flows attributable to a hedged item and a hedging item, or changes resulting from a risk exposure relating to a hedged item and a hedging item. Hedge accounting changes the normal basis for recording the gains, losses, revenues and expenses associated with a hedged item or a hedging item in a company’s statements of earnings. It ensures that all offsetting gains, losses, revenues and expenses are recorded in the same period. The Company has concluded on the classification of the applicable financial instruments in accordance with the section and has determined this section to have an impact on the consolidated financial statements. The valuation of such impact on the consolidated financial statements is currently under review.

Comprehensive income

In January 2005, the CICA also issued Handbook section 1530, “Comprehensive Income.” The section is effective for annual and interim periods beginning on or after October 1, 2006. It describes how to report and disclose comprehensive income and its components.  Comprehensive income is the change in a company’s net assets that results from transactions, events and circumstances from sources other than the company’s shareholders. It includes items that would be excluded from net earnings, such as changes in the currency translation adjustment relating to self-sustaining foreign operations, the unrealized gains or losses on available-for-sale investments and the unrealized gains or losses on hedging items. The application of this new Handbook section will not have an effect on the Company’s financial position, earnings or cash flows, but will require the Company to present a new statement en titled “Comprehensive Income”.

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Accounting changes

In July 2006, the CICA issued a new version of section 1506, of the CICA Handbook entitled, Accounting Changes. This new standard establishes criteria for changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies and estimates, and correction of errors. The amended section applies to annual and interim periods beginning on or after January 1, 2007.

US GAAP

Accounting for uncertainty in income taxes

In July 2006, the Financial Accounting Standard Board (“FASB”) issued interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes – an interpretation of FASB statement No. 109, in June 2006. This interpretation clarifies the accounting for uncertainty clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. It prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of an income tax position taken or expected to be taken in an income tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company is currently evaluating the impact of this interpretation.

Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurement. SFAS No. 157 replaces the different definitions of fair value in accounting literature with a single definition. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 is effective for fair value measurements already required or permitted by other standards for financial statements issued for fiscal years after November 15, 2007 and interim periods within those fiscal years.  The Company is evaluating the impact SFAS No. 157 will have on its financial statements.

Disclosure Controls and Procedures

The Interim Chief Executive Officer and Chief Financial Officer of the Company conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2006 as required by Multilateral Instrument 52-109 Certification of Disclosure in Issuer’s Annual and Interim Filings. They concluded based on such evaluation that, as at December 31, 2006, the Company’s disclosure controls and procedures were effective in ensuring that material information regarding this MD&A and other required filings were made known to them on a timely basis.

Internal Control over Financial Reporting

The Interim Chief Executive Officer and Chief Financial Officer have also reviewed whether any change in the Company’s internal control over financial reporting occurred during 2006 that materially affected, or was reasonably likely to materially affect, the Company’s internal controls over financial reporting and concluded that there was none.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitation, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Disclosure Required by the NYSE

A summary of the significant ways that the corporate governance practices of the Company differs from that of a US Company is available on the Company’s website:  www.intertapepolymer.com under “Investor Relations”.

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 US.

25

	Intertape Polymer Group Inc. Consolidated Financial Statements December 31, 2006, 2005 and 2004
Management’s Responsibility for Financial Statements		26-27
Management’s Annual Report on Internal Control Over Financial Reporting		28-29
Auditors’ Report		30
Financial Statements
Consolidated Earnings		31
Consolidated Retained Earnings (Deficit)		32
Consolidated Cash Flows		33
Consolidated Balance Sheets		34
Notes to Consolidated Financial Statements		35-78

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Management’s Responsibility for Financial Statements

The consolidated financial statements of Intertape Polymer Group Inc. and the other financial information are the responsibility of the Company’s Management and have been examined and approved by its Board of Directors. These consolidated financial statements have been prepared by Management in accordance with Canadian generally accepted accounting principles and include some amounts that are based on Management’s best estimates and judgments. The selection of accounting principles and methods is Management’s responsibility.

The Company maintains internal control systems designed to ensure that the financial information produced is relevant and reliable.

Management recognizes its responsibility for conducting the Company’s affairs in a manner to comply with the requirements of applicable laws and established financial standards and principles, and for maintaining proper standards of conduct in its activities.

The Board of Directors assigns its responsibility for the financial statements and other financial information to the Audit Committee, all of whom are non-management and unrelated directors.

The Audit Committee’s role is to examine the financial statements and annual report and recommend that the Board of Directors approve them, to examine the internal control and information protection systems and all other matters relating to the Company’s accounting and finances. In order to do so, the Audit Committee meets periodically with external auditors to review their audit plans and discuss the results of their examination. This committee is responsible for recommending the appointment of the external auditors or the renewal of their engagement.

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The Company’s external auditors, Raymond Chabot Grant Thornton LLP appointed by the shareholders at the Annual and Special Meeting on June 14, 2006, have audited the Company’s consolidated financial statements and their report indicating the scope of their audit and their opinion on the consolidated financial statements follows.

/s/ H. Dale McSween

H. Dale McSween
Interim Chief Executive Officer

/s/ Andrew M. Archibald

Andrew M. Archibald
Chief Financial Officer


Sarasota/Bradenton, Florida and Montreal, Canada
March 17, 2007

28

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting as well as the preparation of financial statements for external reporting purposes in accordance with Canadian generally accepted accounting principles, including a reconciliation of accounting principles generally accepted in the United States of America.

Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect the Company’s transactions; providing reasonable assurance that transactions are recorded as necessary for the preparation of the Company’s financial statements; providing reasonable assurance that receipts and expenditures of the Company are made under the authorization of management and directors of the Company; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on the Company’s financial statements would be prevented or detected on a timely basis.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective can only provide reasonable assurance with respect to financial statements preparation and presentation. Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of completeness with policies or procedures may deteriorate.

29

Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as at December 31, 2006 based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as at December 31, 2006.

/s/ H. Dale McSween

H. Dale McSween
Interim Chief Executive Officer

/s/ Andrew M. Archibald

Andrew M. Archibald
Chief Financial Officer


Sarasota/Bradenton, Florida and Montreal, Canada
March 22, 2007

Raymond Chabot Grant Thornton

Auditors’ Report

To the Shareholders of

We have audited the consolidated balance sheets of Intertape Polymer Group Inc. as at December 31, 2006 and 2005 and the consolidated statements of earnings, retained earnings (deficit) and cash flows for each of the years in the three-year period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2006 and 2005 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2006 in accordance with Canadian generally accepted accounting principles.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Raymond Chabot Grant Thornton LLP

Chartered Accountants

Montréal, Canada
March 17, 2007

www.rcgt.com

Member of Grant Thornton International

Consolidated Earnings

Years Ended December 31,

(In thousands of US dollars, except per share amounts)

	2006	2005	2004
	$	$	$
Sales	812,285	776,015	668,174
Cost of sales	694,693	635,845	549,252
Gross profit	117,592	140,170	118,922
Selling, general and administrative expenses	84,903	78,985	69,951
Stock-based compensation expense	2,022	1,911	1,046
Research and development	6,271	4,725	4,233
Financial expenses (Note 4)	25,746	23,799	24,253
Refinancing expense			30,444
Manufacturing facility closures, restructuring and other  charges (Note 3)	76,057	1,431	7,386
Impairment of goodwill (Note 12)	120,000
	314,999	110,851	137,313
Earnings (loss) before income taxes	(197,407)	29,319	(18,391)
Income taxes (recovery) (Note 5)	(30,714)	1,528	(29,749)
Net earnings (loss)	(166,693)	27,791	11,358
Earnings (loss) per share (Note 6)
Basic	(4.07)	0.67	0.28
Diluted	(4.07)	0.67	0.27

The accompanying notes are an integral part of the consolidated financial statements and Note 4 presents additional information on the consolidated earnings.

32

Consolidated Retained Earnings (Deficit)

Years Ended December 31,

(In thousands of US dollars)

	2006	2005	2004
	$	$	$
Balance, beginning of year	107,161	79,609	68,291
Net earnings (loss)	(166,693)	27,791	11,358
	(59,532)	107,400	79,649
Premium on purchase for cancellation of common shares		239	40
Balance, end of year	(59,532)	107,161	79,609

The accompanying notes are an integral part of the consolidated financial statements.

33

Consolidated Cash Flows

Years Ended December 31,

(In thousands of US dollars)

	2006	2005	2004
OPERATING ACTIVITIES	$	$	$
Net earnings (loss)	(166,693)	27,791	11,358
Non-cash items
Depreciation and amortization	36,622	31,131	29,889
Impairment of goodwill	120,000
Loss on disposal of property, plant and equipment	925
Property, plant and equipment impairment and other non-cash charges in  connection with facility closures, restructuring and other charges	49,382	299	5,848
Future income taxes	(32,262)	714	(28,806)
Insurance claim		(3,679)
Write-off of debt issue expenses			8,482
Stock-based compensation expense	2,022	1,911	1,046
Pension and post-retirement benefits funding in excess of amounts  expensed	(195)	(479)	(858)
Other non-cash items	(435)		(95)
Cash flows from operations before changes in non-cash working capital  items	9,366	57,688	26,864
Changes in non-cash working capital items
Trade receivables	27,725	(10,750)	(11,345)
Other assets and receivables	7,667	535	(1,308)
Inventories	27,783	(1,366)	(20,115)
Parts and supplies	(770)	(1,145)	(266)
Prepaid expenses	4,514	(95)	202
Accounts payable and accrued liabilities	(22,676)	(12,500)	1,909
	44,243	(25,321)	(30,923)
Cash flows from operating activities	53,609	32,367	(4,059)
INVESTING ACTIVITIES
Temporary investment		489	(497)
Property, plant and equipment	(27,090)	(24,026)	(18,408)
Proceeds on sale of property, plant and equipment	3,447
Business acquisitions (Note 7)	(167)	(28,118)	(5,500)
Other assets	(5,448)	(3,852)	(13,178)
Goodwill	(298)	(300)
Cash flows from investing activities	(29,556)	(55,807)	(37,583)
FINANCING ACTIVITIES
Net change in bank indebtedness	(15,000)	15,000	(13,967)
Long-term debt	792		325,787
Repayment of long-term debt	(2,920)	(3,032)	(250,936)
Issue of common shares	136	89	2,717
Common shares purchased for cancellation		(340)	(418)
Cash flows from financing activities	(16,992)	11,717	63,183
Net increase (decrease) in cash and cash equivalents	7,061	(11,723)	21,541
Effect of foreign currency translation adjustments	104	(25)	341
Cash and cash equivalents, beginning of year	10,134	21,882
Cash and cash equivalents, end of year	17,299	10,134	21,882
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid	26,209	22,510	22,258
Income taxes paid	1,877	1,446	2,004

The accompanying notes are an integral part of the consolidated financial statements.

34

Consolidated Balance Sheets

December 31,

(In thousands of US dollars)

	2006	2005
	$	$
ASSETS
Current assets
Cash and cash equivalents	17,299	10,134
Trade receivables (net of allowance for doubtful accounts of $6,457;  $7,574 in 2005)	97,199	124,440
Other assets and receivables (Note 8)	1,900	9,510
Inventories (Note 9)	75,379	105,565
Parts and supplies	12,090	14,836
Prepaid expenses	3,912	8,406
Future income taxes (Note 5)	13,689	16,142
	221,468	289,033
Property, plant and equipment (Note 10)	322,867	362,827
Other assets (Note 11)	26,901	28,686
Future income taxes (Note 5)	57,404	24,014
Goodwill (Note 12)	63,746	184,756
	692,386	889,316
LIABILITIES
Current liabilities
Bank indebtedness (Note 13)		15,000
Accounts payable and accrued liabilities	81,467	104,256
Installments on long-term debt	19,743	2,784
	101,210	122,040
Long-term debt (Note 14)	310,734	328,113
Pension and post-retirement benefits (Note 17)	6,724	4,313
Other liabilities		435
	418,668	454,901
SHAREHOLDERS’ EQUITY
Capital stock (Note 15)	287,323	287,187
Contributed surplus (Note 15)	9,786	6,237
Retained earnings (deficit)	(59,532)	107,161
Accumulated currency translation adjustments	36,141	33,830
	273,718	434,415
	692,386	889,316

The accompanying notes are an integral part of the consolidated financial statements.

On behalf of the Board,
John Richardson, FCA, Director	Gordon Cunningham, Director

35

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

GOVERNING STATUTES AND NATURE OF OPERATIONS

Intertape Polymer Group Inc. (the “Company”), incorporated under the Canada Business Corporations Act, is based in Montreal, Canada and in Sarasota/Bradenton, Florida and develops, manufactures and sells a variety of specialized polyolefin films, paper and film pressure sensitive tapes and complimentary packaging systems for use in industrial and retail applications.

The common shares of the Company are listed on the New York Stock Exchange in the United States of America (“United States” or “US”) and on the Toronto Stock Exchange in Canada.

ACCOUNTING POLICIES

The consolidated financial statements are expressed in US dollars and were prepared in accordance with Canadian generally accepted accounting principles (“GAAP”), which, in certain respects, differ from the accounting principles generally accepted in the United States, as shown in Note 19.

Reclassification

Certain amounts have been reclassified from prior years to conform to the current year presentation.

Accounting Changes

Year ended December 31, 2006

Accounting by a vendor for considerations given to a customer

During the year ended December 31, 2006, the Company adopted the Canadian Institute of Chartered Accountants (“CICA”) Emerging Issues Committee (“EIC”) Abstract 156 “Accounting by a vendor for considerations given to a customer (including a reseller of the vendor’s products)”. This EIC requires that consideration given to a customer by a vendor be classified as a reduction of revenue when recognized in the vendor’s income statement. Consideration refers to sales incentives, discounts, coupons, rebates and price reductions amongst others. As a result, the Company retroactively reclassified $19.5 million, $25.8 million and $24.3 million of rebates, discounts and allowances historically included with selling, general and administrative expenses as a reduction to sales for the years ended December 31, 2006, 2005 and 2004, respectively.

Year ended December 31, 2005

Consolidation of variable interest entities

In June 2003, the CICA issued Accounting Guideline 15 (AcG-15), “Consolidation of Variable Interests Entities.” This guideline clarifies and addresses the application of consolidation guidance to those entities defined as variable interest entities (VIEs), which are entities that are subject to control on a basis other than voting interest. Such entities should be consolidated by the primary beneficiary, which is the entity that will absorb the majority of the VIEs expected losses or will receive a majority of its expected residual returns, or both. This guideline is required for annual and interim periods beginning on or after November 1, 2004. The application of AcG-15 had no impact on the Company’s consolidated financial statements.

36

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 - ACCOUNTING POLICIES (Continued)

Year ended December 31, 2004

Employee future benefits

On January 1, 2004, the CICA amended Handbook Section 3461, “Employee Future Benefits.” Section 3461 requires additional disclosures about the assets, cash flows and net periodic benefit cost of defined benefit pension plans and other employee future benefit plans. The new annual disclosures are effective for years ending on or after June 30, 2004, and new interim disclosures were effective for periods ending on or after that date. As at June 30, 2004, the Company adopted the new disclosure requirements of Section 3461 and provided the additional disclosures of the defined benefit pension plans and other employee future benefit plans in Note 17.

Impairment of long-lived assets

Effective January 1, 2004, the Company adopted, on a prospective basis, the new recommendations of CICA Handbook Section 3063, “Impairment of Long-lived Assets.” This new Section provides guidance on the recognition, measurement and disclosure of the impairment of long-lived assets. It replaces the write-down provisions in Property, Plant and Equipment, Section 3061. The Section requires an impairment loss for a long-lived asset held and used to be recognized when its carrying amount exceeds the sum of the undiscounted cash flows expected from its use and eventual disposition. An impairment loss for a long-lived asset held and used should be measured as the amount by which its carrying amount exceeds its fair value. At the time of adoption, this change in accounting policy did not result in any adjustment to the carrying value of the Company’s property, plant and equipment.

Asset retirement obligations

In March 2003, the CICA issued Handbook Section 3110, “Asset Retirement Obligations,” which replaces the limited guidance on future removal and site restoration costs previously provided in Section 3061, “Property, Plant and Equipment.” It establishes standards for recognition, measurement and disclosure of a liability for an asset retirement obligation and the associated asset retirement cost. The section provides for an initial recognition of the fair value of a liability for an asset retirement obligation in the period in which it is incurred, when a reasonable estimate of fair value can be made. The asset retirement obligation is recorded as a liability with a corresponding increase to the carrying amount of the related long-lived asset. Subsequently, the asset retirement cost is allocated to expenses using a systematic and rational allocation method and is adjusted to reflect period-to-period changes in the liability resulting from passage of time and revisions to either timing or the amount of the original estimate of the undiscounted cash flow. The Company adopted Section 3110 prospectively on January 1, 2004 and the application of this standard did not have a material impact on either results of operations for the year ended December 31, 2004 or the financial position as at December 31, 2004.

37

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 - ACCOUNTING POLICIES (Continued)

Accounting Estimates

The preparation of the consolidated financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the recorded amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the recorded amount of revenues and expenses during the reporting period. On an ongoing basis, management reviews its estimates based on currently available information. Actual results may differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All intercompany accounts and transactions have been eliminated.

Fair Value of Financial Instruments

The fair value of cash and cash equivalents, trade receivables, other assets and receivables excluding income and other taxes, bank indebtedness as well as accounts payable and accrued liabilities is equivalent to carrying amounts, given the short maturity period of such financial instruments.

The fair values of long-term debt and the interest rate swap agreements were established as described in Note 14.

Derivative Financial Instruments

Derivative financial instruments are utilized by the Company to reduce interest rate risk on its debt. The Company does not enter into financial instruments for trading or speculative purposes.

The Company’s policy is to formally designate each derivative financial instrument as a hedge of a specifically identified debt instrument. The Company believes that the derivative financial instruments are effective as hedges, both at inception and over the term of the instrument, as the term to maturity, the principal amount and the interest rate basis in the instruments all match the terms of the debt instrument being hedged.

Interest rate swap agreements are used as part of the Company’s program to manage the floating interest rate mix of the Company’s total debt portfolio and related overall cost of borrowing. The interest rate swap agreements involve the periodic exchange of payments without the exchange of the notional principal amount upon which the payments are based, and are recorded as an adjustment of interest expense on the hedged debt instrument. The related amount payable to or receivable from counterparties is included as an adjustment to accrued interest.

38

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 - ACCOUNTING POLICIES (Continued)

Gains and losses on terminations of interest rate swap agreements are deferred under other current, or non-current, assets or liabilities on the balance sheet and amortized as an adjustment to interest expense related to the obligation over the remaining term of the original contract life of the terminated swap agreement. In the event of early extinguishment of the debt obligation, any realized or unrealized gain or loss from the swap would be recognized in the consolidated statement of earnings at the time of extinguishment.

Foreign Currency Translation

Reporting currency

The accounts of the Company’s operations having a functional currency other than the US dollar have been translated into the reporting currency using the current rate method as follows: assets and liabilities have been translated at the exchange rate in effect at year-end and revenues and expenses have been translated at the average rate during the year. All translation gains or losses of the Company’s net equity investments in these operations have been included in the accumulated currency translation adjustments account in shareholders’ equity. Changes in this account for all periods presented, result solely from the application of this translation method.

Foreign currency translation

Transactions denominated in currencies other than the functional currency have been translated into the functional currency as follows: monetary assets and liabilities have been translated at the exchange rate in effect at the end of each year and revenues and expenses have been translated at the average exchange rate for each year, except for depreciation and amortization which are translated at the historical rate; non-monetary assets and liabilities have been translated at the rates prevailing at the transaction dates. Exchange gains and losses arising from such transactions are included in earnings.

Revenue Recognition

Revenue from product sales is recognized when there is persuasive evidence of an arrangement, the amount is fixed or determinable, delivery of the product to the customer has occurred, there are no uncertainties surrounding product acceptance and collection of the amount is considered probable. Title to the product generally passes upon shipment of the product. Sales returns and allowances are treated as reductions to sales and are provided for based on historical experience and current estimates.

Research and Development

Research and development expenses are expensed as they are incurred, net of any related investment tax credits, unless the criteria for capitalization of development expenses in accordance with Canadian GAAP are met.

39

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 - ACCOUNTING POLICIES (Continued)

Stock Option Plan

The Company has a stock-based compensation plan that grants stock options to employees. Stock-based compensation expense is recognized over the vesting period of the options granted. Any consideration paid by employees on exercise of stock options is credited to capital stock together with any related stock-based compensation expense recorded in contributed surplus.

Earnings per Share

Basic earnings per share are calculated using the weighted average number of common shares outstanding during the year. Diluted earnings per share are calculated using the treasury stock method giving effect to the exercise of options. The treasury stock method assumes that any proceeds that could be obtained upon the exercise of options would be used to repurchase common shares at the average market price during the year.

Cash and Cash Equivalents

The Company’s policy is to present cash and temporary investments having a term of three months or less, from the date of purchase, with cash and cash equivalents.

Accounts Receivable

Credit is extended based on evaluation of a customer’s financial condition and generally, collateral is not required. Accounts receivable are stated at amounts due from customers based on agreed upon payment terms net of an allowance for doubtful accounts. Accounts outstanding longer than the agreed upon payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the customer’s current ability to pay its obligation to the Company and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they are determined to be uncollectible and any payments subsequently received on such receivable are credited to the allowance for doubtful accounts.

Inventories and Parts and Supplies Valuation

Raw materials are valued at the lower of cost and replacement cost. Work in process and finished goods are valued at the lower of cost and net realizable value. Cost is principally determined by the first in, first out method. The cost of work in process and finished goods includes the cost of raw materials, direct labor and manufacturing overhead.

Parts and supplies are valued at the lower of cost and replacement cost.

40

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 - ACCOUNTING POLICIES (Continued)

Property, Plant and Equipment

Property, plant and equipment are stated at cost less applicable investment tax credits and government grants earned and are depreciated over their estimated useful lives principally as follows:

	Methods	Rates and Periods
Buildings and building under capital lease	Diminishing balance or straight-line	5% or 15 to 40 years
Manufacturing equipment	Straight-line	5 to 20 years
Furniture, office and computer equipment, computer equipment under capital lease, software and other	Diminishing balance or straight-line	20% or 3 to 10 years

The Company follows the policy of capitalizing interest during the construction and preproduction periods as part of the cost of property, plant and equipment. Normal repairs and maintenance are expensed as incurred. Expenditures which materially increase values, change capacities or extend useful lives of property, plant and equipment are capitalized. Depreciation is not charged on new property, plant and equipment until they become operative.

Impairment of Long-lived Assets

Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances indicating that the carrying amount of the assets may not be recoverable, as measured by comparing their carrying amount to the estimated undiscounted cash flows generated by their use. When the carrying amount of the assets exceed their fair value, an impairment loss is recognized in an amount equal to the excess. Fair value is calculated using discounted cash flows.

Deferred Charges

Debt issue expenses are deferred and amortized on a straight-line basis over the term of the related debt. Other deferred charges are amortized on a straight-line basis over the period benefited varying from 1 to 5 years.

Goodwill

Goodwill is the excess of the cost of acquired businesses over the net of the amounts assigned to assets acquired and liabilities assumed. Goodwill is not amortized. It is tested for impairment annually or more frequently if events or changes in circumstances indicate that it is impaired. Any potential goodwill impairment is identified by comparing the carrying amount of a reporting unit with its fair value. If any potential impairment is identified, it is quantified by comparing the carrying amount of goodwill to its fair value. When the carrying amount of goodwill exceeds the fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess. The fair value is calculated as described in Note 12.

41

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 - ACCOUNTING POLICIES (Continued)

Environmental Costs

The Company expenses, on a current basis, recurring costs associated with managing hazardous substances and pollution in ongoing operations. The Company also accrues for the fair value of a liability for costs associated with the remediation of environmental pollution in the period in which it is incurred and when a reasonable estimate of the obligation’s fair value can be made.

Pension and Post-retirement Benefit Plans

The Company has defined benefit and defined contribution pension plans and other post-retirement benefit plans for its Canadian and American employees.

The following policies are used with respect to the accounting for the defined benefit and other post-retirement benefit plans:

–

The cost of pensions and other post-retirement benefits earned by employees is actuarially determined using the projected benefit method prorated on service and is charged to earnings as services are provided by the employees. The calculations take into account management’s best estimate of expected plan investment performance, salary escalation, retirement ages of employees, participants’ mortality rates and expected health care costs;

–

For the purpose of calculating the expected return on plan assets, those assets are valued at the market-related value for certain plans and, for other plans, at fair value;

–

Past service costs from plan amendments are amortized on a straight-line basis over the average remaining service period of employees who are active at the date of amendment;

–

Actuarial gains (losses) arise from the difference between actual long-term rate of return on plan assets for a period and the expected long-term rate of return on plan assets for that period from changes in actuarial assumptions used to determine the accrued benefit obligation. The excess of the net actuarial gains (losses) over 10% of the greater of the benefit obligation and the market-related value or the fair value of plan assets is amortized over the average remaining service period of active employees;

–

On January 1, 2000, the Company adopted the new accounting standard on employee future benefits using the prospective application method. The Company is amortizing the transitional obligations on a straight-line basis over the average remaining service periods of employees expected to receive benefits under the benefit plans as of January 1, 2000.

–

When the restructuring of a benefit plan gives rise to both a curtailment and a settlement of obligations, the curtailment is accounted for prior to the settlement;

Defined contribution plan accounting is applied to a multiemployer defined benefit plans for which the Company has insufficient information to apply defined benefit plan accounting.

42

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 - ACCOUNTING POLICIES (Continued)

Income Taxes

The Company provides for income taxes using the liability method of tax allocation. Under this method, future income tax assets and liabilities are determined based on deductible or taxable temporary differences between the financial statement values and tax values of assets and liabilities, using substantially enacted income tax rates expected to be in effect for the year in which the differences are expected to reverse. A valuation allowance is recognized to the extent the recoverability of future income tax assets is not considered to be more likely than not.

New Accounting Pronouncements

Financial instruments - recognition and measurement

In January 2005, the CICA issued Handbook section 3855, “Financial Instruments - Recognition and Measurement.” The section is effective for annual and interim periods beginning on or after October 1, 2006. It describes the standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. This section requires that i) all financial assets be measured at fair value, with some exceptions such as loans and investments that are classified as held-to-maturity, ii) all financial liabilities be measured at fair value when they are derivatives or classified as held for trading purposes (other financial liabilities are measured at their carrying value), and iii) all derivative financial instruments be measured at fair value, even when they are part of a hedging relationship. The Company has concluded on the classification of the applicable financial instru ments in accordance with this section and has determined this section to have an impact on the consolidated financial statements. The valuation of such impact on the consolidated financial statements is currently under review.

Hedges

In January 2005, the CICA also issued Handbook section 3865, “Hedges.” The section is effective for annual and interim periods beginning on or after October 1, 2006. It describes when and how hedge accounting may be applied. Hedging is an activity used by a company to change an exposure to one or more risks by creating an offset between changes in the fair value of a hedged item and a hedging item, changes in the cash flows attributable to a hedged item and a hedging item, or changes resulting from a risk exposure relating to a hedged item and a hedging item. Hedge accounting changes the normal basis for recording the gains, losses, revenues and expenses associated with a hedged item or a hedging item in a company’s statements of earnings. It ensures that all offsetting gains, losses, revenues and expenses are recorded in the same period. The Company has concluded on the classification of the applica ble financial instruments in accordance with this section and has determined this section to have an impact on the consolidated financial statements. The valuation of such impact on the consolidated financial statements is currently under review.

43

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 - ACCOUNTING POLICIES (Continued)

Comprehensive income

In January 2005, the CICA also issued Handbook section 1530, “Comprehensive Income.” The section is effective for annual and interim periods beginning on or after October 1, 2006. It describes how to report and disclose comprehensive income and its components. Comprehensive income is the change in a company’s net assets that results from transactions, events and circumstances from sources other than the company’s shareholders. It includes items that would be excluded from net earnings, such as changes in the currency translation adjustment relating to self-sustaining foreign operations, the unrealized gains or losses on available-for-sale investments and the unrealized gains or losses on hedging items. The application of this new Handbook section will not have an effect on the Company’s financial position, earnings or cash flows, but will require the Company to present a new statement entit led “Comprehensive Income”.

Accounting changes

In July 2006, the CICA issued a new version of section 1506 of the CICA Handbook entitled, “Accounting Changes”. This new standard establishes criteria for changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies and estimates, and correction of errors. The amended section applies to annual and interim periods beginning on or after January 1, 2007.

44

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

MANUFACTURING FACILITY CLOSURES, Restructuring and other charges

Year ended December 31, 2006

The following table describes the significant charges incurred by the Company in 2006 in connection with its restructuring efforts, included in the Company’s consolidated statement of earnings for the year ended December 31, 2006 under the caption “Manufacturing facility closures, restructuring and other charges”.

		Manufacturing Facility Closures
		Impairment of long-lived assets	Severance and other labor related costs	Site Resto­ration	Inventory	Other	Restruc­turing	Other Charges	Total
		$	$	$	$	$	$	$	$
Balance as at January 1, 2006 included in accounts payable and accrued liabilities			1,227						1,227
Piedras Negras, Mexico facility closure	(a)	961	519		1,403	326			3,209
Brighton, Colorado facility closure	(b)	22,131	1,292	2,583	3,524	649			30,179
Retirement of CEO	(c)							9,900	9,900
Canadian income trust project	(d)							3,940	3,940
Staffing reductions and CEO succession   planning	(e)						6,005	1,289	7,294
Termination of corporate aircraft lease	(f)						2,515		2,515
Credit facilities amendments	(g)							1,908	1,908
Environmental remediation	(h)					1,480			1,480
Facilities sale	(i)					925		14	939
Impairment of long-lived assets	(j)						7,851	176	8,027
Patent litigations	(k)							2,873	2,873
Gretna, Virginia facility closure	(l)	1,225	42		1,515	402			3,184
Strategic alternatives process	(m)							609	609
		24,317	1,853	2,583	6,442	3,782	16,371	20,709	76,057
Cash payments			1,581	189		2,857	5,358	9,487	19,472
Non-cash charges		24,317			6,442	925	7,851	10,887	50,422
Balance as at December 31, 2006 included in accounts payable and accrued liabilities			1,499	2,394			3,162	335	7,390

45

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

3 –

MANUFACTURING FACILITY CLOSURES, RESTRUCTURING AND OTHER CHARGES (Continued)

(a)

In the first quarter of 2006, the Company closed its flexible intermediate bulk container (FIBC) manufacturing facility in Piedras Negras, Mexico. The total charge for closing this facility was $3.2 million, of which, $2.4 million was non-cash charges resulting from the impairment charge recorded to reflect the fair value of the machinery and equipment and inventories located in Piedras Negras, which were idled upon closure of the facility.

(b)

The Company closed its manufacturing facility in Brighton, Colorado in early November 2006. The total cash costs for severance, equipment relocation and facility restoration recorded in 2006 were approximately $2.1 million, with an additional $2.4 million accrued in accounts payable and accrued liabilities. The Company also expects to record additional cash charges related to the facility closure of approximately $2.5 million in future periods. The Company recorded $25.7 million in non-cash charges as an impairment to reflect the estimated fair value of the machinery and equipment located in Brighton, which was idled upon the closure of the facility.

(c)

The Chief Executive officer and Chairman of the Board of Directors of the Company retired at the Company’s annual shareholders’ meeting on June 14, 2006. In connection with the retirement, the Company recorded charges totaling $9.9 million including $6.0 million in cash compensation, $1.5 million in stock-based compensation expense and $2.4 million related to the recognition of the balance of his pension obligation.

(d)

As originally announced in December 2005, the Company investigated the possibility of selling a portion of its interest in the combined coated products operation and FIBC business through an initial public offering of the combined business using a Canadian Income Trust. On May 24, 2006, the Company announced that it had indefinitely deferred the decision to proceed with this offering. Accordingly, during the second and third quarters of 2006, the Company recorded a net charge of $3.9 million representing the write-off of the fees and expenses incurred in connection with the deferred sale. Such fees and expenses were previously recorded in other assets on the Company’s consolidated balance sheet.

(e)

The Company has made significant reductions in its staffing levels beginning in the second quarter of 2006 and continuing through the remainder of the year. These staffing adjustments and related severance, coupled with CEO succession planning costs, resulted in restructuring and other charges of approximately $7.3 million.

(f)

In June 2006, the Company decided to exit its corporate aircraft lease, resulting in a charge of $2.5 million. The Company successfully exited the lease in the fourth quarter of 2006.

(g)

During the year ended December 31, 2006, the Company amended its credit facilities twice in order to accommodate the various charges discussed herein, to allow for the goodwill impairment charge discussed in Note 12 and to provide for the relaxation of the credit facilities’ covenants. As a result, the Company incurred approximately $1.9 million in amendment fees.

46

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

3 –

MANUFACTURING FACILITY CLOSURES, RESTRUCTURING AND OTHER CHARGES (Continued)

(h)

In the second quarter of 2006, the Company recorded $1.5 million in additional remediation expenses at its Montreal manufacturing facility that was closed in December 2004. The Company had originally estimated the cost of the environmental remediation to be approximately $0.5 million. When remediation activities commenced in April 2006, the Company was notified that excavation had uncovered additional soil contamination requiring remediation in excess of the original estimate. The remediation was completed during the third quarter and in October 2006, the Company sold the property to a third party and has no residual environmental liability related to this site.

(i)

In June and July 2006, the Company sold the properties of two previously closed manufacturing facilities in Edmunston, New Brunswick and Green Bay, Wisconsin. The Company realized net cash proceeds of approximately $2.5 million and recorded a loss on disposition of approximately $0.9 million.

(j)

The Company recorded property, plant and equipment impairment charges totaling $8.0 million in 2006 related to efforts to streamline manufacturing operations through the elimination of redundant capacity as well as ongoing revisions to product marketing strategies.

(k)

During the second quarter of 2006, the Company reassessed the recoverability of certain legal costs incurred in defense of lawsuits alleging trademark infringement and concluded that the costs did not remain recoverable. Accordingly, in the second quarter of 2006 the Company wrote-off approximately $2.9 million in legal costs related to the litigations.

(l)

In an effort to improve its customer service levels and reduce related service costs, during 2006 the Company implemented changes in the manner in which it handles packaging, sales and delivery of products to retail customers in its consumer business. These changes required the closing of the Company’s repackaging facility in Gretna, Virginia. The cost to close the facility totaled $3.2 million including $2.6 million of non-cash charges related to adjusting inventories to estimated net realizable value and retiring information technology systems.

(m)

On October 2, 2006, the Company announced that its Board of Directors was initiating a process to explore and evaluate various strategic and financial alternatives available to enhance shareholder value. The process is on-going and during the fourth quarter of 2006, the Company incurred costs of approximately $0.6 million in connection with this process.

47

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

3 –

MANUFACTURING FACILITY CLOSURES, RESTRUCTURING AND OTHER CHARGES (Continued)

Year ended December 31, 2005

Facility closures

During the year ended December 31, 2005, the Company completed the closure of its Cumming, Georgia and Montreal, Quebec manufacturing facilities incurring approximately $1.4 million of additional plant closure costs. The additional costs include an amount of $0.1 million of termination related benefits, an amount of $0.3 million related to impairment of property, plant and equipment and $1.0 million for other facility related closure costs including relocating equipment and inventory to other facilities. As at December 31, 2005, there were no amounts payable relating to the closures of the Cumming, Georgia and Montreal, Quebec facilities.

Industrial accident

During the year ended December 31, 2005, an explosion occurred at one of the Company’s plants resulting in damage to the facility’s structure and assets. The Company recorded a total insurance claim of $5.2 million in 2005 including $1.8 million related to reimbursable damages and expenses incurred and $3.4 million related to the replacement of the boilers destroyed in the explosion. The Company received $1.5 million of the insurance claim during 2005 and the balance was received in 2006.

An amount of $0.9 million of the insurance claim has been recorded on the consolidated earnings line captioned “Manufacturing facility closures, restructuring and other charges” against $0.9 million of insurance deductibles and non-insurance expenses recorded on that same line. The remaining $4.3 million of the insurance claim is recorded as a reduction to the cost of sales against the remaining costs incurred, the write-off of the boilers amounting to $0.5 million and other assets damaged in the explosion.

Year ended December 31, 2004

During 2004, the Company announced the closure of its Cumming, Georgia and Montreal, Quebec, manufacturing locations pursuant to its ongoing plan to lower costs, enhance customer order fulfillment and effectively optimize inventory investments. Approximately thirty-seven and eighty employees were affected at Cumming and Montreal, respectively. The total charge related to this plan amounted to approximately $7.4 million of which $5.8 million was non-cash. The total charge included an amount of $0.5 million of termination-related benefits, an amount of $4.5 million related to impairment of property, plant and equipment and $2.4 million for other facility related closure costs. As at December 31, 2004, a balance of $2.2 million was included in accounts payable and accrued liabilities, which was paid in 2005.

48

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

INFORMATION INCLUDED IN THE CONSOLIDATED STATEMENTS OF EARNINGS

	2006	2005	2004
	$	$	$
Depreciation of property, plant and equipment	34,934	29,519	28,621
Amortization of other deferred charges	328	248	3
Amortization of debt issue expenses included in financial  expenses below	1,360	1,364	1,265
Write-off of debt issue expenses			8,482
Financial expenses
Interest on long-term debt	25,930	22,897	22,340
Interest on credit facilities	459	360	830
Interest income and other	450	1,577	2,045
Interest capitalized to property, plant and equipment	(1,093)	(1,035)	(962)
	25,746	23,799	24,253
Impairment of property, plant and equipment	32,168	483	4,539
Loss on disposal of property, plant and equipment	925
Foreign exchange loss (gain)	(553)	250	16
Investment tax credits recorded as a reduction of  research and development expenses		91	435

INCOME TAXES

The provision for income taxes consists of the following:

	2006	2005	2004
	$	$	$
Current	1,548	814	(943)
Future	(32,262)	714	(28,806)
	(30,714)	1,528	(29,749)

The reconciliation of the combined federal and provincial statutory income tax rate to the Company’s effective income tax rate is detailed as follows:

	2006	2005	2004
	%	%	%
Combined federal and provincial income tax rate	36.2	35.7	33.6
Foreign losses recovered (foreign income taxed) at lower  rates	0.4	(0.1)	(12.8)
Impairment of goodwill	(17.2)
Impact of other differences	(3.8)	(16.5)	61.4
Change in valuation allowance		(13.9)	79.6
Effective income tax rate	15.6	5.2	161.8

49

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

5 - INCOME TAXES (Continued)

The net future income tax assets are detailed as follows:

	2006	2005
	$	$
Future income tax assets
Trade and other receivables	2,344	2,029
Inventories	2,934	320
Property, plant and equipment	4,885	8,055
Accounts payable and accrued liabilities	2,387	346
Tax credits, loss carry-forwards and other tax deductions	119,597	111,975
Pension and post-retirement benefits	785	277
Other	9,064
Valuation allowance	(12,446)	(12,446)
	129,550	110,556
Future income tax liabilities
Property, plant and equipment	58,457	69,707
Other		693
	58,457	70,400
Total net future income tax assets	71,093	40,156
Net current future income tax assets	13,689	16,142
Net long-term future income tax assets	57,404	24,014
Total net future income tax assets	71,093	40,156

As at December 31, 2006, the Company has $78.6 million of Canadian operating loss carry-forwards expiring 2007 through 2026 and $180.8 million of US federal and state operating losses expiring 2018 through 2025.

In assessing the realizability of future income tax assets, management considers whether it is more likely than not that some portion or all of the future income tax assets will not be realized. Management considers the scheduled reversal of future income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company expects the future income tax assets, net of the valuation allowance, as at December 31, 2006, to be realized as a result of the reversal of existing taxable temporary differences.

As part of the above analysis, the valuation allowance was unchanged for the year ended December 31, 2006 and decreased by $4.1 million for the year ended December 31, 2005. The decrease in valuation allowance resulted in an additional income tax benefit of $4.1 million in 2005.

50

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

EARNINGS PER SHARE

	2006	2005	2004
	$	$	$
Net earnings (loss)	(166,693)	27,791	11,358
Weighted average number of common shares   outstanding	40,980,939	41,174,316	41,186,143
Effect of dilutive stock options (a)		134,602	259,721
Weighted average number of diluted common shares   outstanding	40,980,939	41,308,918	41,445,864
Basic earnings (loss) per share	(4.07)	0.67	0.28
Diluted earnings (loss) per share	(4.07)	0.67	0.27

(a)

The following number of options were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented:

	2006	2005	2004
Options	3,154,028	3,231,251	2,328,773

BUSINESS ACQUISITIONS

During the year ended December 31, 2006, the Company finalized the allocation of the purchase price paid in connection with the acquisition of Flexia Corporation Ltd. (“Flexia”). The final allocation resulted in a decrease in the value of goodwill recoded on the acquisition in the amount of approximately $1.5 million, a decrease in the value of current liabilities in the amount of approximately $2.5 million, a decrease in the value of future income tax assets in the amount of approximately $1.3 million and a decrease in the value of pension and post-retirement benefits in the amount of approximately $0.3 million.

The preliminary allocation of purchase price is described below.

On October 5, 2005, the Company, through a wholly-owned Canadian subsidiary, acquired all of the outstanding stock of Flexia, being the successor entity to Flexia Corporation and Fib-Pak Industries Inc. for a total consideration of approximately $29.7 (CDN$34.8 million), of which $28.1 million was paid in cash and the balance was included in accounts payable and accrued liabilities. Flexia produces a wide range of engineered coated products, polyethylene scrims and polypropylene fabrics. The acquisition was funded from the Company’s cash on-hand and available credit facilities. The acquisition was accounted for using the purchase method of accounting. The operating results of Flexia have been included in the consolidated statement of earnings of the Company from October 5, 2005.

51

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

7 - BUSINESS ACQUISITIONS (Continued)

The net assets acquired are detailed as follows:

	2005
	$
Current assets	26,260
Property, plant and equipment	16,322
Future income tax assets	1,369
Goodwill (a)	2,530
Total assets acquired	46,481
Current liabilities	13,348
Pension and post-retirement benefits	3,425
Total liabilities assumed	16,773
Net assets acquired	29,708
Purchase price	29,708
Balance of purchase price payable	1,590
Net cash paid for business acquisition	28,118

(a)

Goodwill is not deductible for income tax purposes.

In November 2005, the Company reacquired and cancelled 250,587 common shares held in escrow pursuant to an escrow agreement created during the acquisition on September 1, 2000 of Olympian Tape Sales, Inc. d/b/a United Tape Company (“UTC”). The shares had been held in escrow pending the resolution of certain third party legal claims arising from the acquisition.  As a result of the resolution of such claims and the related expense incurred in connection therewith, the Company became entitled to reacquire the escrowed shares. Pursuant to the transaction, an amount of $1.8 million was accounted for as a reduction of the capital stock; an amount of $0.2 million was accounted for as a decrease of retained earnings as a premium on the purchase for cancellation of common shares; an amount of $0.9 million was accounted for as an increase of goodwill representing expenses not reimbursed from amounts available under the escrow agreement; and an amount of $2.9 million was accounted for as a reduction of other assets.

In February 2004, the Company purchased for a cash consideration of $5.5 million plus acquisition costs and 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 included $0.9 million of equipment and $4.6 million of goodwill. The goodwill is deductible over 15 years for income tax purposes. Any contingent consideration paid will be recorded as an increase in goodwill. During the year ended December 31, 2006 and 2005, the Company recorded $0.3 million of contingent consideration paid in each year.

52

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

OTHER ASSETS AND RECEIVABLES

	2006	2005
	$	$
Income and other taxes	769	1,109
Rebates receivable	412	1,348
Sales taxes	260	923
Insurance claim		3,400
Other	459	2,730
	1,900	9,510

INVENTORIES

	2006	2005
	$	$
Raw materials	20,766	37,662
Work in process	12,206	16,205
Finished goods	42,407	51,698
	75,379	105,565

PROPERTY, PLANT AND EQUIPMENT

			2006
	Cost	Accumulated depreciation	Net
	$	$	$
Land	3,835		3,835
Buildings	73,064	31,519	41,545
Manufacturing equipment	460,011	229,818	230,193
Furniture, office and computer equipment, software and  other	65,585	40,387	25,198
Manufacturing equipment under construction and  software projects under development	22,096		22,096
	624,591	301,724	322,867
			2005
	Cost	Accumulated depreciation	Net
	$	$	$
Land	3,423		3,423
Buildings	80,262	31,903	48,359
Manufacturing equipment	454,793	194,947	259,846
Furniture, office and computer equipment, software and  other	68,458	35,999	32,459
Manufacturing equipment under construction and  software projects under development	18,740		18,740
	625,676	262,849	362,827

53

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

10 - PROPERTY, PLANT AND EQUIPMENT (Continued)

Included in property, plant and equipment are assets under capital leases (primarily a building and computer equipment) with a cost and accumulated depreciation of $11,267 and $2,912 respectively ($7,214 and $614 in 2005).

OTHER ASSETS

	2006	2005
	$	$
Debt issue expenses and other deferred charges, at amortized cost	8,660	11,681
Loans to officers and directors without interest, various repayment terms	295	924
Pension plan prepaid benefits	7,146	5,107
Other receivables	3,492	1,292
Income tax credits	6,390	7,615
Other, at cost	918	2,067
	26,901	28,686

GOODWILL

In accordance with the specific requirements of the CICA Handbook, section 3062, “Goodwill and Other Intangible Assets”, the Company performs an annual goodwill impairment test as at December 31. Also in accordance with the specific requirements of this section, the Company determined that it had one reporting unit. The Company calculates the fair value of this reporting unit using the discounted cash flows method.

During the three months ended September 30, 2006, the Company performed a comprehensive assessment of its business and operating plans, in light of the significant changes to the underlying business. As a result of this assessment, and the resulting changes to the operating market and industry, management revised its estimates of growth and future business activities. Consequently, the Company conducted a goodwill impairment test at the interim date of September 30, 2006. This resulted in a charge to operating expenses of $120.0 million in the three months ended September 30, 2006. No further impairment was required as at December 31, 2006. There was no goodwill impairment charge incurred by the Company for the years 2004 or 2005.

The changes in the carrying amount of goodwill are as follows:

	2006	2005
	$	$
Balance as at January 1	184,756	179,958
Business acquisition (Note 7)	167	2,530
Adjustment to purchase price (Note 7)	(1,491)
Escrow shares reacquired		921
Contingent consideration	298	300
Impairment	(120,000)
Foreign exchange impact	16	1,047
Balance as at December 31	63,746	184,756

54

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

BANK INDEBTEDNESS

Bank Indebtedness

The bank indebtedness consists of the utilized portion of the short-term revolving bank credit facilities.

As at December 31, 2006, the Company had bank loans available under a US$75.0 million Revolving Credit Facility with a five-year term. The loan bears interest at various interest-rates including US prime rate plus a premium varying between 100 and 200 basis points, Canadian prime rate plus a premium varying between 100 and 200 basis points and LIBOR plus a premium varying between 200 and 300 basis points. As at December 31, 2006, the credit facility availability, as a result of covenant restrictions, was $24.0 million, after outstanding letters of credit of $2.5 million. As at December 31, 2005, the credit facility had been drawn by US$15.0 million having an effective interest rate of 7.39%. An amount of $53.0 million remained available, after covenant restrictions, the outstanding draw and outstanding letters of credit of $7.0 million.

The credit facility has been guaranteed by the Company and substantially all of its subsidiaries and secured by a first lien on all assets of the Company and substantially all of its subsidiaries.

The credit facility contains certain financial covenants, including interest expense coverage, debt leverage and fixed charge coverage ratios, all of which were respected as at December 31, 2006.

Refinancing

On July 28, 2004, the Company completed the offering of $125.0 million of Senior Subordinated Notes due 2014 as described in Note 14. On August 4, 2004, the Company established a new $275.0 million Senior Secured Credit Facility, consisting of a $200.0 million Term Loan, described in Note 14, and the $75.0 million Revolving Credit Facility referred to above. The proceeds from the refinancing were used to repay the existing bank credit facility, redeem three series of secured notes, pay related make-whole premiums, accrued interest and transaction fees and provide cash for general working capital purposes.

As a result of the refinancing, the Company recorded a one-time pre-tax charge of approximately $30.4 million. The principal elements of the one-time charge are a make-whole payment of approximately $21.9 million and the write-off of deferred financing costs of $8.5 million attributable to the debt that was refinanced.

55

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

LONG-TERM DEBT

Long-term debt consists of the following:

	2006	2005
	$	$
US$125,000,000 Senior Subordinated Notes (a)	125,000	125,000
US$200,000,000 Term Loan (b)	195,500	197,500
Obligations under capital leases (c)	8,174	6,982
Other debt (d)	1,803	1,415
	330,477	330,897
Less: Current portion of long-term debt	19,743	2,784
	310,734	328,113

(a)

Senior Subordinated Notes

Senior Subordinated Notes bearing interest at 8.5%, payable semi-annually on February 1 and August 1. All principal is due on August 1, 2014.

Senior Subordinated Notes are guaranteed on an unsecured senior subordinated basis by the Company and substantially all of its existing subsidiaries.

(b)

Term Loan

Term Loan bearing interest at LIBOR plus a premium varying between 200 and 300 basis points, payable in quarterly installments of $0.5 million starting on December 31, 2004 until June 30, 2010, followed by four quarterly installments of $47.125 million thereafter and maturing on July 28, 2011. In addition to the quarterly installments of $0.5 million through June 30, 2010, the term loan requires annual mandatory principal prepayments 90 days after year-end based on a percentage of “Excess Cash Flow” as defined in the Senior Secured Credit Facility. At March 30, 2007, the Company will be required to make a mandatory principal prepayment of $15.6 million, being 50% of the Excess Cash Flow for the year ended December 31, 2006. This amount is reflected in current installments on long-term debt at December 31, 2006.

The Term Loan is guaranteed by the Company and each of its material subsidiaries. The Term Loan is also secured by a first priority perfected security interest in substantially all of the tangible and intangible assets of the Company and each of its material subsidiaries, subject to certain customary exceptions.

In June 2005, the Company entered into an interest rate swap agreement for a notional principal amount of $50.0 million maturing in June 2010. In July 2005, the Company entered into a second interest rate swap agreement for a notional principal amount of $25.0 million maturing in July 2010. Under the terms of these interest rate swap agreements, the Company receives, on a quarterly basis, a variable interest rate and pays a fixed interest rate of 4.27% and 4.29% respectively, plus the premium of 2.75% (2.25% prior to November 8, 2006) applicable on its term loan. As at December 31, 2006, the effective interest rate on $75.0 million was 7.03% (6.53% in 2005) and the effective interest rate on the excess was 8.04% (6.74% in 2005).

56

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

14 - LONG-TERM DEBT (Continued)

(c)

Obligations under Capital Leases

The Company has obligations under capital leases for the rental of a building and computer equipment, bearing interest at rates varying between 0.60% to 5.10%, payable in monthly installments ranging from $320 to $47,817, including interest and maturing on various dates until the year 2024.

(d)

Other Debt

Other debt consisting of government loans, mortgage loans and other loans at fixed and variable interest rates ranging from interest-free to 9.03% and requiring periodic principal repayments through 2010.

The Company has complied with the maintenance of financial ratios and with other conditions that are stipulated in the covenants pertaining to the various loan agreements.

Long-term debt repayments are due as follows:

	Obligations under capital leases	Other long-term loans
	$	$
2007	1,446	19,033
2008	1,109	2,130
2009	721	2,139
2010	574	95,376
2011	574	78,625
Thereafter	7,267	125,000
Total minimum lease payments	11,691	322,303
Interest expense included in minimum lease payments	3,517
Total	8,174	322,303

Fair Value

For all debts with fixed interest rates, the fair value has been determined based on the discounted value of cash flows under the existing contracts using rates representing those which the Company could currently obtain for loans with similar terms, conditions and maturity dates. For the debts with floating interest rates, the fair value is closely equivalent to their carrying amounts.

The carrying amounts and fair values of the Company’s long-term debt as at December 31, 2006 and 2005 are as follows:

		2006		2005
	Fair value	Carrying amount	Fair value	Carrying amount
	$	$	$	$
Long-term debt	318,211	330,477	328,897	330,897

57

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

14 - LONG-TERM DEBT (Continued)

The fair value of the interest rate swap agreements generally reflect the estimated amounts that the Company would receive (favorable) or pay (unfavorable) to settle these agreements at the reporting date and is estimated by obtaining quotes (marked to market) from the Company's principal lender. As at December 31, 2006, the Company's favorable position was approximately $1.8 million ($1.5 million in 2005).

CAPITAL STOCK

Capital stock – authorized

Unlimited number of shares without par value

Common shares, voting and participating

Class “A” preferred shares, issuable in series, ranking in priority to the common shares with respect to dividends and return of capital on dissolution. The Board of Directors is authorized to fix, before issuance, the designation, rights, privileges, restrictions and conditions attached to the shares of each series.

58

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

15 - CAPITAL STOCK (Continued)

Capital stock – issued and fully paid

The changes in the number of outstanding common shares and their aggregate stated value from January 1, 2004 to December 31, 2006 were as follows:

		2006		2005		2004
	Number of shares	Stated value	Number of shares	Stated value	Number of shares	Stated value
		$		$		$
Balance, beginning of year	40,957,574	287,187	41,236,961	289,180	40,944,876	286,841
Shares issued to the USA Employees’ Stock Ownership   and Retirement Savings Plan					225,160	1,727
Escrow shares reacquired (Note 7)			(250,587)	(1,757)
Shares purchased for cancellation			(46,300)	(324)	(53,200)	(378)
Shares issued for cash upon exercise of stock options	29,366	136	17,500	88	120,125	990
Balance, end of year	40,986,940	287,323	40,957,574	287,187	41,236,961	289,180

During the year ended December 31, 2005, the Company redeemed 46,300 common shares for a cash consideration of $340,000. An amount of $324,000 was accounted for as a reduction of the capital stock and an amount of $16,000 was accounted for as a decrease of the retained earnings as a premium on the purchase for cancellation of common shares.

During the year ended December 31, 2004, the Company redeemed 53,200 common shares for a cash consideration of $418,000. An amount of $378,000 was accounted for as a reduction of the capital stock and an amount of $40,000 was accounted for as a decrease of the retained earnings as a premium on the purchase for cancellation of common shares.

59

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

15 - CAPITAL STOCK (Continued)

Contributed Surplus

	2006	2005
	$	$
Balance, beginning of year	6,237	4,326
Stock-based compensation expense	2,022	1,911
Other charges for accelerated vesting of stock options (Note 3 (c))	1,527
Balance, end of year	9,786	6,237

Shareholder’s Protection Rights Plan

This agreement was adopted by the shareholders of the Company on June 11, 2003, amending and restating the Shareholder Protection Rights Plan originally entered into on August 24, 1993, as first amended on May 21, 1998. The 2003 Amended and Restated Plan, among other things, extended the Plan through the date immediately following the date of the Company's 2006 annual Shareholders' meeting. The Shareholders at their June 14, 2006 meeting voted on the adoption of an Amended and Restated Plan, which, among other things, extended the Plan through the date immediately following the date of the Company's 2009 annual Shareholders' meeting. The effect of the Plan is to require anyone who seeks to acquire 20% or more of Intertape Polymer Group's voting shares to make a bid complying with specific provisions of the plan.

Stock Options

Under the Company's amended executive stock option plan, options may be granted to the Company's executives, directors and employees for the purchase of up to 4,094,538 shares of common stock. Options expire no later than 10 years after the date of granting. The plan provides that such options granted to employees and executives will vest and may be exercisable 25% per year over four years. The options granted to directors who are not officers of the Company will vest and may be exercisable 25% on the effective dates of the grant, and a further 25% will vest and may be exercisable per year over three years.

All options were granted at a price equal to the respective closing market values of the day the options were granted.

60

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

15 - CAPITAL STOCK (Continued)

The changes in number of options outstanding were as follows:

		2006		2005		2004
	Weighted average exercise price	Number of options	Weighted average exercise price	Number of options	Weighted average exercise price	Number of options
	$		$		$
Balance, beginning of the year	9.18	3,919,251	9.37	3,772,155	9.52	3,165,716
Granted	8.15	549,000	8.15	526,378	10.26	921,750
Exercised	4.54	(29,366)	4.73	(17,500)	8.24	(120,125)
Cancelled	10.57	(1,284,857)	10.07	(361,782)	13.01	(195,186)
Balance, end of year	8.74	3,154,028	9.18	3,919,251	9.37	3,772,155
Options exercisable at the end of the year		1,811,132		2,431,686		2,068,655

The following table summarizes information about options outstanding and exercisable at December 31, 2006:

	Options outstanding			Options exercisable
	Number	Weighted average contractual life(in years)	Weighted average exercise price	Number	Weighted average exercise price
Range of exercise prices			$		$
$3.90 to $5.32	266,500	2.1	4.13	204,875	4.13
$6.60 to $9.10	1,660,278	3.9	8.02	608,382	7.99
$9.80 to $13.49	1,212,250	1.9	10.66	982,875	10.58
$15.70	15,000	0.4	15.70	15,000	15.70
	3,154,028	3.0	8.74	1,811,132	9.04

61

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

15 - CAPITAL STOCK (Continued)

On January 10, 2001, the Company repriced 474,163 of unexercised stock options held by employees, other than directors and executive officers. The repriced options had exercise prices ranging from US$16.30 to US$23.26 (CA$26.01 to CA$37.11) and expiry dates in 2003 and 2006. The revised exercise price was set at US$8.28 (CA$13.21) being the average of the closing price on the Toronto Stock Exchange and the New York Stock Exchange on January 9, 2001. All other terms and conditions of the respective options, including the percentage vesting and the vesting and expiry dates, remained unchanged.

In January 2003, the Company adopted the fair value based method of accounting for stock-based compensation and other stock-based payments. Accordingly the Company recorded a pre-tax stock-based compensation expense of approximately $2.0 million in 2006, $1.9 million in 2005 and $1.0 million in 2004.

For stock options granted during the year ended December 31, 2002, the company is required to make pro forma disclosures of net earnings (loss) and basic and diluted earnings (loss) per share as if the fair value based method of accounting had been applied.

Accordingly, the Company’s net earnings (loss) and basic and diluted earnings (loss) per share would have been increased or decreased to the pro forma amounts indicated in the following table:

	2006	2005	2004
	$	$	$
Net earnings (loss) - as reported	(166,693)	27,791	11,358
Add: Stock-based employee compensation expense   included in reported net earnings (loss)	2,022	1,911	1,046
Deduct: Total stock-based employee compensation   expense determined under fair value based method	(2,163)	(2,665)	(1,800)
Pro forma net earning (loss)	(166,834)	27,037	10,604
Earnings (loss) per share:
Basic - as reported	(4.07)	0.67	0.28
Basic - pro forma	(4.07)	0.66	0.26
Diluted - as reported	(4.07)	0.67	0.27
Diluted - pro forma	(4.07)	0.65	0.26

The pro forma effect on net earnings (loss) and earnings (loss) per share is not representative of the pro forma effect on net earnings (loss) and earnings (loss) per share of future years because it does not take into consideration the pro forma compensation cost related to options awarded prior to January 1, 2002.

62

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

15 - CAPITAL STOCK (Continued)

The fair value of options granted was estimated using the Black-Scholes option-pricing model, taking into account the following weighted average assumptions:

	2006	2005	2004
Expected life	5.5 years	5 years	5 years
Expected volatility	55%	55%	55%
Risk-free interest rate	4.80%	4.12%	3.14%
Expected dividends	$0.00	$0.00	$0.00

The weighted average fair value per share of options granted is:

2006	2005	2004
$	$	$
4.49	4.21	5.29

COMMITMENTS AND CONTINGENCIES

Commitments

As at December 31, 2006, the Company had commitments aggregating approximately $14.6 million through the year 2014 for the rental of offices, warehouse space, manufacturing equipment, automobiles, computer equipment and other assets.

Future minimum lease payments are $4.5 million in 2007, $3.5 million in 2008, $2.6 million in 2009, $1.7 million in 2010, $1.0 million in 2011 and $1.3 million thereafter.

Contingencies

In April 2006, the U.S. District Court for the Middle District of Florida entered judgment against the Company in a patent infringement lawsuit brought by LINQ Industrial Fabrics, Inc. (“Linq”). The case deals with Linq’s allegations that the Company’s patented NovaStat™, static dissipative FIBCs, infringe three Linq patents. In February 2007, the Company was denied its appeal of the judgement. The Company does not expect the ultimate resolution of this litigation to have a material impact on its financial position or earnings.

The Company is also a party to other claims and lawsuits, which are being contested. In the opinion of management, the outcome of such claims and lawsuits will not have a material adverse effect on the Company.

63

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

PENSION AND POST-RETIREMENT BENEFIT PLANS

The Company has several defined contribution plans and defined benefit plans for substantially all its employees in both Canada and the United States. These plans are generally contributory in Canada and non-contributory in the United States.

Total Cash Payments

Total cash payments for employee future benefits for 2006, consisting of cash contributed by the Company to its funded pension plans, cash payments directly to beneficiaries for its unfunded other benefit plans, cash contributed to its defined contribution plans and cash contributed to its multi-employer defined benefit plans were $8.7 million ($4.2 million in 2005 and $4.1 million in 2004).

Defined Contribution Plans

In the United States, the Company maintains a savings retirement plan (401 (k) Plan) for the benefit of certain employees who have been employed for at least 90 days. Contribution to this plan is at the discretion of the Company.

The Company contributes as well to multi-employer plans for employees covered by collective bargaining agreements.

In Canada, the Company maintains defined contribution pension plans for its salaried employees and contributes amounts equal to 4% of each participant's eligible salary.

The Company has expensed $2.3 million for these plans for the year ended December 31, 2006 ($2.1 million and $0.9 million in 2005 and 2004, respectively).

Defined Benefit Plans

The Company has, in the United States, two defined benefit plans (hourly and salaried). Benefits for employees are based on compensation and years of service for salaried employees and fixed benefits per month for each year of service for hourly employees.

In Canada, certain non-union hourly employees of the Company are covered by a plan which provides a fixed benefit of $17.15 in 2006 and 2005 and $14.60 in 2004 per month for each year of service. In addition, the Company maintains a defined benefit plan, which provides for a fixed benefit at a rate ranging from 50% to 62.5% (50% to 110% in 2005 and 2004) of the employee contributions, depending on the participation start date.

In the United States, the Company provides group health care and life insurance benefits to certain retirees.

In Canada, the Company provides group health care, dental and life insurance benefits for eligible retired employees.

64

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

Acquisition and Plan Termination

The Company acquired Flexia in October 2005 (Note 7) including its pension and post-retirement benefits plans. As a result, the Company accounted for $9.8 million and $8.4 million of accrued benefit obligations and plan assets related to two pension plans and $2.0 million of accrued benefit obligations related to the post-retirement benefit plans. One of the pension plans acquired with the Flexia acquisition was terminated in 2006 with the termination of employees due to the closure of one of the facilities purchased. This termination was taken into account at the time of the acquisition in the valuation of the accrued benefit obligations. The termination resulted in a curtailment gain of $0.15 million and a settlement loss of $0.5 million.

Investment Policy

The Company's Investment Committee, comprised of the Company’s Chief Financial Officer, Vice President, Finance and Treasurer and Vice President, Human Resources, established a target mix of equities and bonds of 70% equities and 30% bonds over time. In January of 2003, the Committee determined, with assistance from the investment manager and trustee, to temporarily increase the allocation for the US plans to 80% equity and 20% bonds due to the performance, current and expected, in the bond market and the expected appreciation in the small and midcap equity markets. The increased investment in those markets was 7.5% target in small cap and 2.5% in mid cap. That direction was reviewed with the same advisors, and the Committee determined to continue this approach at its meetings in 2004 and 2005. In February 2006, the Committee revised the target mix back to 70% equity and 30% bonds. The relatively heavy emphasis on equities is due to the better performance over time in equities versus bonds and the fact that the Company's pension funds do not have a large number of current recipients. In Canada, the funds of the non-union plans are split evenly between two balanced mutual funds, thus, over time, achieving the target mix of 70% equities and 30% bonds. The funds of the union plans have a target equity weighing ranging from 45% to 65%.

The rate of return decision is a function of advice from the Company's actuaries and their review of current holdings, general market trends, and common levels used by other employers.

Measurement Date and Date of Actuarial Valuations

The Company measures its plan assets and accrued benefit obligations for accounting purposes as at December 31 of each year.

The most recent actuarial valuations for funding purposes were October 1, 2005 and January 1, 2006 for the US plans and October 2, 2005, January 1, 2006 and September 30, 2006 for the Canadian plans.

The next valuation dates for actuarial valuations to be used for funding purposes are October 1, 2006 and January 1, 2007 for the US plans and September 30, 2006, December 31, 2007 and January 1, 2009 for the Canadian plans.

65

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

Information relating to the various plans is as follows:

		Pension plans		Other plans
	2006	2005	2006	2005
	$	$	$	$
Accrued benefit obligations
Balance, beginning of year	49,812	35,895	3,128	1,021
Acquisition		9,786		2,034
Current service cost	1,430	1,055	75	19
Interest cost	2,887	2,198	171	84
Benefits paid	(1,616)	(1,075)	(61)	(64)
Actuarial (gains) losses	1,823	1,720	(42)	19
Decrease in liability due to curtailment	(150)
Settlement	(3,192)
Foreign exchange rate adjustment	54	233	(4)	15
Balance, end of year	51,048	49,812	3,267	3,128
Plans assets
Balance, beginning of year	34,879	23,467
Acquisition		8,396
Actual return on plan assets	4,109	1,594
Employer contributions	5,998	2,330
Plan participants' contributions	141
Benefits paid	(1,616)	(1,075)
Settlement	(3,636)
Foreign exchange rate adjustment	103	167
Balance, end of year	39,978	34,879	–	–
Funded status - deficit	11,070	14,933	3,267	3,128
Unamortized past service costs	(3,241)	(3,632)	(7)	(7)
Unamortized net actuarial losses	(11,550)	(14,413)	(35)	(78)
Unamortized transition assets   (obligation)	97	102	(23)	(27)
Accrued benefit liability (prepaid benefit)	(3,624)	(3,010)	3,202	3,016

Weighted average plan assets allocations as at December 31:

		Pension Plans
	2006	2005
Asset category	%	%
Equity securities	70	77
Debt securities	28	22
Other	2	1
Total	100	100

66

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

The accrued benefit liability (prepaid benefit) is included in the Company’s balance sheets as follows:

		Pension plans		Other plans		Total plans
	2006	2005	2006	2005	2006	2005
	$	$	$	$	$	$
Other assets (Note 11)	(7,146)	(5,107)			(7,146)	(5,107)
Accounts payable and accrued liabilities		800				800
Pension and post-retirement benefits	3,522	1,297	3,202	3,016	6,724	4,313
	(3,624)	(3,010)	3,202	3,016	(422)	6

67

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

Net Benefit Cost

			Pension plans			Other plans
	2006	2005	2004	2006	2005	2004
	$	$	$	$	$	$
Current service cost	1,289	1,055	654	75	19	15
Interest cost	2,887	2,198	1,853	171	85	56
Actual return on plan assets	(4,109)	(1,594)	(2,074)
Actuarial (gains) losses	1,823	1,720	2,354	(42)	19	103
Curtailment gain	(150)
Settlement loss	529
Plan amendments			34
Elements of employee future benefit costs before  adjustments to recognize the long-term nature of  employee future benefit costs	2,269	3,379	2,821	204	123	174
Adjustments to recognize the long-term nature of employee  future benefit costs:
Difference between expected return and actual return on  plan assets for year	1,148	(598)	264
Difference between actuarial loss recognized for the year  and actual actuarial loss (gain) on accrued benefit  obligations	1,532	(930)	(1,791)	43	(18)	(103)
Difference between amortization of past service costs for  the year and actual plan amendments for the year	392	294	189
Amortization of transition obligations (assets)	(5)	(5)	(5)	4	4	4
	3,067	(1,239)	(1,343)	47	(14)	(99)
Net benefit cost for the year	5,336	2,140	1,478	251	109	75

68

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

The average remaining service period of the active employees covered by the pension plans ranges from 11.20 to 24.70 years for 2006 and from 11.70 to 25.80 years for 2005.

The significant assumptions which management considers the most likely and which were used to measure its accrued benefit obligations and net periodic benefit costs are as follows:

Weighted-average assumption used to determine benefit obligations as at December 31:

		Pension plans		Other plans
	2006	2005	2006	2005
Discount rate
US plans	5.80%	5.75%	5.65%	5.75%
Canadian plans	5.25% and 5.35%	5.25%	5.25%	5.25%
Compensation increase	3.25%

69

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

Weighted-average assumption used to determine net benefit cost for the years ended December 31:

			Pension plans			Other plans
	2006	2005	2004	2006	2005	2004
Discount rate
US plans	5.75%	5.75%	6.25%	5.75%	5.75%	6.25%
Canadian plans	5.25%	5.25% and 5.75%	6.25%	5.25%	5.25% and 7.00%
Compensation increase	3.25%
Expected long term return on plan assets
US plans	8.50%	8.50%	8.50%
Canadian plans	7.00%	7.00%	7.00%

70

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

For measurement purposes, a 10% annual rate increase in the per capita cost of covered health care benefits for U.S. plans was assumed for 2006 (10.0% in 2005 and 11.0% in 2004). The assumed rate is expected to decrease to 5% by 2011. For the Canadian plans, the annual trend rate is 8.0% for the next ten years and 5% thereafter. An increase or decrease of 1% of these rates would have the following impact:

	Increase of 1%	Decrease of 1%
	$	$
Impact on net periodic cost	37	(29)
Impact on accrued benefit obligation	414	(331)

The Company expects to contribute $4.3 million to its defined benefit pension plans and $0.1 million to its health and welfare plans in 2007.

SEGMENT DISCLOSURES

The Company manufactures and sells an extensive range of specialized polyolefin plastic packaging products primarily in Canada and the United States. Management has considered all products to be part of one reporting segment since they are made from similar extrusion processes and differ only in the final stages of manufacturing. A vast majority of the Company's products, while brought to market through various distribution channels, generally have similar economic characteristics. The substantial increase in sales in Canada in 2006 compared to 2005 is due to the October 2005 acquisition of Flexia, a business based in Canada.

The following table presents sales attributed to countries based on the location of external customers.

	2006	2005	2004
	$	$	$
Canada	114,715	83,279	63,498
United States	651,289	650,844	562,455
Other	46,281	41,892	42,221
Total sales	812,285	776,015	668,174

The following table presents property, plant and equipment and goodwill by country based on the locations of assets:

	2006	2005	2004
	$	$	$
Property, plant and equipment, net
Canada	56,308	64,780	54,128
United States	248,280	286,414	287,104
Other	18,279	11,633	11,378
Total property, plant and equipment, net	322,867	362,827	352,610

71

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

18 - SEGMENT DISCLOSURES (Continued)

	2006	2005	2004
	$	$	$
Goodwill
Canada	27,187	28,495	24,917
United States	33,192	152,894	151,674
Other	3,367	3,367	3,367
Total goodwill	63,746	184,756	179,958

DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA

The consolidated financial statements have been prepared in accordance with Canadian GAAP, which differ in certain material respects from those principles that the Company would have followed had its consolidated financial statements been prepared in accordance with US GAAP.

(a)

Net earnings (loss) and earnings (loss) per share

The adjustment to comply with US GAAP would be as follows:

	2006	2005	2004
	$	$	$
Net earnings (loss) as per Canadian GAAP	(166,693)	27,791	11,358
Variable accounting (Note 19 (d))		265	1,381
Net earnings (loss) as per US GAAP	(166,693)	28,056	12,739
Earnings (loss) per share as per US GAAP
Basic	(4.07)	0.68	0.31
Diluted	(4.07)	0.68	0.31

72

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

19 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (Continued)

(b)

Consolidated balance sheets

The adjustments, as described in notes (e) and (f) herein, to comply with US GAAP would be as follows:

				2006				2005
	As per Canadian GAAP	Adjustments		As per US GAAP	As per Canadian GAAP	Adjustments		As per US GAAP
	$	$		$	$	$		$
Assets
Other assets	26,901	(6,858)	(e)	21,850	28,686	1,625	(e)	31,790
		1,807	(f)			1,479	(f)
Future income tax assets	57,404	5,461	(e)	62,196	24,014	5,509	(e)	28,976
		(669)	(f)			(547)	(f)
Liabilities
Pension and post-retirement benefits	6,724	7,901	(e)	14,625	4,313	16,513	(e)	20,826
Shareholders’ equity
Accumulated other comprehensive income		(9,298)	(e)	(8,160)		(9,379)	(e)	(8,447)
		1,138	(f)			932	(f)

The other differences in presentation that would be required under US GAAP to the consolidated balance sheets, other than as disclosed below, are not viewed as significant enough to require further disclosure.

73

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

19 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (Continued)

(c)

Consolidated cash flows

Canadian GAAP permits the disclosure of a subtotal of the amount of funds provided by operations before changes in non-cash working capital items to be included in the consolidated statements of cash flows. US GAAP does not permit this subtotal to be presented.

(d)

Accounting for compensation programs

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standard (“SFAS”) 123 (Revised). This standard amends SFAS 123, Accounting for Stock-Based Compensation and supersedes SFAS 148, Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123. The principal amendments relate to the requirement to use a fair value method to record stock-based compensation, to the measurement methodology to evaluate equity instruments such as options and to the financial statement disclosure requirements. The measurement methodology must specifically provide for an estimation of forfeitures of employee stock awards, and compensation cost shall only include cost for awards expected to vest. As the fair value provisions of SFAS No. 123 (R) are consistent with the Company’s stock-based compensation plan, the application of this standard has not had significant impacts on its consolidated financial statements.

Effective January 1, 2003, for US GAAP purposes, the Company adopted the fair value based method of accounting for stock-based compensation granted to employees on a prospective basis in accordance with SFAS No. 148, Accounting for Stock-Based Compensation, Transition and Disclosure, an amendment of FASB Statement No. 123. Under the prospective method, the Company is required to recognize compensation costs for all employee awards granted, modified, or settled since January 1, 2003.

Under Canadian GAAP, the Company adopted the recommendations of Section 3870 of the Handbook, Stock-Based Compensation and Other Stock-Based Payments effective January 1, 2003, which also states that a fair value based measurement must be used. The recommendations were applied prospectively for all stock options granted since January 1, 2003.

Consequently, under US GAAP, there is no difference in the compensation expense for 2006, 2005 and 2004.

For stock options granted prior to January 1, 2003, the Company includes pro forma disclosures of net earnings (loss) and basic and diluted earnings (loss) per share as if the fair value based method of accounting had been applied.

74

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

19 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (Continued)

(d)

Accounting for compensation programs (continued)

Accordingly, the Company’s net earnings (loss) and earnings (loss) per share would have been increased or decreased to the pro forma amounts indicated in the following table:

	2006	2005	2004
	$	$	$
Net earnings (loss) in accordance with US GAAP – as reported	(166,693)	28,056	12,739
Add: Stock-based employee compensation expense   included in reported net earnings (loss)	2,022	1,911	1,046
Deduct: Total stock-based employee compensation   expense determined under fair value based method	(2,261)	(2,915)	(2,245)
Pro forma net earnings (loss)	(166,932)	27,052	11,540
Earnings (loss) per share as per US GAAP:
Basic – as reported	(4.07)	0.68	0.31
Basic – pro forma	(4.07)	0.66	0.28
Diluted – as reported	(4.07)	0.68	0.31
Diluted – pro forma	(4.07)	0.65	0.28

Through December 31, 2002, the Company chose to continue to measure compensation costs related to awards of stock options using the intrinsic value based method of accounting. In March 2000, the FASB issued Interpretation No. 44 (“FIN 44”), which became effective on July 1, 2000, requiring that the cancellation of outstanding stock options by the Company and the granting of new options with a lower exercise price (the replacement options) be considered as an indirect reduction of the exercise price of the stock options. Under FIN 44, the replacement options and any repriced options are subject to variable accounting from the cancellation date or date of grant, depending on which stock options were identified as the replacement options. Using variable accounting, the Company is required to recognize, at each reporting date, compensation expense for the excess of the quoted market price of the stock over the exercise prices of the replacement or repriced options until such time as the replacement options are exercised, forfeited or expire. The prospective adoption of the fair value based method for recognition of compensation costs did not change the accounting for the replacement and repriced options as they will continue to be accounted for by the intrinsic value method and be subject to the variable accounting until they are exercised, forfeited, modified or expire.

The impact on the Company’s financial results of variable accounting will depend on the fluctuations in the Company’s stock price and the dates of the exercises, forfeitures or cancellations of the stock options.

75

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

19 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (Continued)

(d)

Accounting for compensation programs (continued)

In November 2000, 300,000 and 50,000 replacement options were issued at exercise prices of US$10.13 (CA$15.50) and US$14.71 (CA$21.94) respectively, and in May and August 2001, 54,000 and 40,000 replacement options were issued for US$11.92 (CA$18.80) and US$9.00 (CA$13.80), respectively. In addition, in January 2001, 474,163 options were repriced at US$8.28 (CA$12.40) (see Note 15).

There is no impact from variable accounting for 2006 under US GAAP. The impact of variable accounting for 2005 and 2004 would be a reduction of the compensation expense of approximately $0.3 million and $1.4 million, respectively under US GAAP.

(e)

Employee future benefits

Effective December 31, 2006, the Company adopted SFAS 158, Accounting for defined benefit plans and other post-retirement benefits – an amendment of FASB Statements No. 87, 88, 106 and 132 (R). This standard requires an employer to recognize the over-funded or under-funded status of defined benefit post-retirement plans as an asset or liability in its balance sheet and to recognize changes in that status in the year in which the change occurs through “Other comprehensive income (loss). The standard does not change the accounting for the Company’s defined contribution plans. The company currently measures its plan assets and benefit obligations as of December 31, each year.

76

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

19 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (Continued)

(e)

Employee future benefits (continued)

The following table presents the incremental effect of applying this statement on individual line items in the consolidated balance sheet as at December 31, 2006:

	As per Canadian GAAP	Minimum liability adjustments	SFAS No. 158 adjustment	Total adjustments	As per US GAAP
	$	$	$	$	$
Other assets	26,901	(3,827)	(3,031)	(6,858)	20,043
Future income taxes	57,404	4,333	1,128	5,461	62,865
Total assets	692,386	506	(1,903)	(1,397)	690,989
Pension and post-retirement benefits	6,724	7,883	18	7,901	14,625
Accumulated other comprehensive income		(7,377)	(1,921)	(9,298)	(9,298)
Total liabilities and shareholder’s equity	692,386	506	(1,903)	(1,397)	690,989

Until the adoption of SFAS 158, the provisions of SFAS 87, Employers’ Accounting for Pensions required the Company to record an additional minimum pension liability for plans where the accumulated benefit obligation exceeded plan assets’ fair value. With regards to these plans, an intangible asset was recorded up to the extent of unrecognized past service costs. The balance was recorded net of income tax in “Other comprehensive income (loss). There were no such requirements under Canadian GAAP.

77

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

19 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (Continued)

(f)

Interest rate swap agreements

The Company has outstanding interest rate swap agreements, which it designates as a fair value hedge related to variations of the fair value of its long-term debt due to change in interest rates. Under Canadian GAAP, an outstanding interest rate swap contract’s fair value is not recognized on the balance sheets. In US GAAP under SFAS 133, when an interest rate swap contract is designated as an effective fair value hedge of the debt, the swap is measured at fair value on the balance sheets and the corresponding amount in comprehensive income.

(g)

Consolidated comprehensive income

As required under US GAAP, the Company would have reported the following consolidated comprehensive income (loss):

	2006	2005	2004
	$	$	$
Net earnings (loss) in accordance with US GAAP	(166,693)	28,056	12,739
Currency translation adjustments	2,311	2,645	11,957
Minimum pension liability adjustment, net of tax  (Note 19 (e))	2,002	(1,262)	(1,041)
Adjustments for fair value of interest rate swap  agreements, net of tax (Note 19(f))	206	932
Consolidated comprehensive income	(162,174)	30,371	23,655

SIGNIFICANT NEW ACCOUNTING PRONOUNCEMENTS UNDER US GAAP

Accounting for uncertainty in income taxes

In July 2006, the Financial Accounting Standard Board (“FASB”) issued interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes – an interpretation of FASB statement No. 109, in June 2006. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. It prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of an income tax position taken or expected to be taken in an income tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company is currently evaluating the impact of this interpretation.

78

Notes to Consolidated Financial Statements

(In US dollars; tabular amounts in thousands, except as otherwise noted)

20 - SIGNIFICANT NEW ACCOUNTING PRONOUNCEMENTS UNDER US GAAP (Continued)

Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurement. SFAS No. 157 replaces the different definitions of fair value in accounting literature with a single definition. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 is effective for fair value measurements already required or permitted by other standards for financial statements issued for fiscal years after November 15, 2007 and interim periods within those fiscal years. The Company is evaluating the impact SFAS 157 will have on its financial statements.

Endnotes

­

31

EX-7

Form 52-109F1 – Certification of Annual Filings

I, H. Dale McSween, Interim Chief Executive Officer of INTERTAPE POLYMER GROUP INC./LE GROUPE INTERTAPE POLYMER INC., certify that:

1.

I have reviewed the annual 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 period ending December 31, 2006;

2.

Based on my knowledge, the annual 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 annual filings;

3.

Based on my knowledge, the annual financial statements together with the other financial information included in the annual 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 annual filings;

4.

The Issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the Issuer, and we have:

(a)

designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the Issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the annual filings are being prepared;

(b)

designed such internal control over financial reporting, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Issuer's GAAP; and

(c)

evaluated the effectiveness of the Issuer's disclosure controls and procedures as of the end of the period covered by the annual filings and have caused the Issuer to disclose in the annual MD&A our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by the annual filings based on such evaluation; and

5.

I have caused the Issuer to disclose in the annual MD&A any change in the Issuer's internal control over financial reporting that occurred during the Issuer's most recent interim period that has materially affected, or is reasonably likely to materially affect, the Issuer's internal control over financial reporting.

Date:  April 2, 2007
Signed: H. Dale McSween
Interim Chief Executive Officer

Form 52-109F1 – Certification of Annual Filings

I, Andrew M. Archibald, Chief Financial Officer of INTERTAPE POLYMER GROUP INC./LE GROUPE INTERTAPE POLYMER INC., certify that:

5.

I have reviewed the annual 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 period ending December 31, 2006;

6.

Based on my knowledge, the annual 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 annual filings;

7.

Based on my knowledge, the annual financial statements together with the other financial information included in the annual 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 annual filings;

8.

The Issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the Issuer, and we have:

(a)

designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the Issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the annual filings are being prepared;

(b)

designed such internal control over financial reporting, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Issuer's GAAP; and

(c)

evaluated the effectiveness of the Issuer's disclosure controls and procedures as of the end of the period covered by the annual filings and have caused the Issuer to disclose in the annual MD&A our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by the annual filings based on such evaluation; and

5.

I have caused the Issuer to disclose in the annual MD&A any change in the Issuer's internal control over financial reporting that occurred during the Issuer's most recent interim period that has materially affected, or is reasonably likely to materially affect, the Issuer's internal control over financial reporting.

Date:  April 2, 2007
Signed: Andrew M. Archibald
Chief Financial Officer

Endnotes