Footnotes

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lkha6pc8y5SN8wKhwsewKFqxhEc2h2zNmFFcB4YTIbbdjLSDv4RXJf6XdjhAjZpP tChlP1W7JMCiBnGwnynX/w== 0000880224-10-000002.txt : 20100329 0000880224-10-000002.hdr.sgml : 20100329 20100329082654 ACCESSION NUMBER: 0000880224-10-000002 CONFORMED SUBMISSION TYPE: 40-F PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20091231 FILED AS OF DATE: 20100329 DATE AS OF CHANGE: 20100329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERTAPE POLYMER GROUP INC CENTRAL INDEX KEY: 0000880224 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 000000000 STATE OF INCORPORATION: A8 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 40-F SEC ACT: 1934 Act SEC FILE NUMBER: 001-10928 FILM NUMBER: 10709298 BUSINESS ADDRESS: STREET 1: 9999 CAVENDISH BOULEVARD, STE. 200 CITY: VILLE ST LAURENT STATE: A8 ZIP: H4M 2X5 BUSINESS PHONE: 941-739-7500 MAIL ADDRESS: STREET 1: 9999 CAVENDISH BOULEVARD, STE. 200 CITY: VILLE ST LAURENT STATE: A8 ZIP: H4M 2X5 40-F 1 f200940f.htm 40-F FOR THE YEAR ENDED 12/31/09 UNITED STATES SECURITIES AND EXCHANGE COMMISSION

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, 2009

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

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, 2009 is:

58,951,050 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, as amended (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 Exchange Act 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 ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

Yes ¨ No ¨

Controls and Procedures

Disclosure Controls and Procedures. Intertape Polymer Group Inc. (“Intertape Polymer Group” or the “Company”) maintains disclosure controls and procedures designed to ensure not only that information required to be disclosed in its reports filed under the Exchange Act 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 is accumulated and communicated to management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The Executive Director and Chief Financial Officer of Intertape Polymer Group conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures and internal control over financial report ing as of December 31, 2009. They concluded based on such evaluation that the Company’s disclosure controls and procedures were effective.

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 those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements.

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.

Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as at December 31, 2009 based on the criteria etablished in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management has concluded that the Company’s internal control over financial reporting was effective as at December 31, 2009 based on those criteria.

Changes in Internal Control Over Financial Reporting. There have been no changes in Intertape Polymer Group’s internal controls over financial reporting that occurred during 2009 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Blackout Period Notices

During 2009, Intertape Polymer Group 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’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’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 has determined that it has at least one audit committee financial expert serving on its audit committee. Mr. George J. Bunze, having been the Chief Financial Officer of Kruger Inc., 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. Bunze is “independent” as that term is defined in Canadian National Instrument 52-110 – Audit Committees.

The Securities and Exchange Commission has stated that the designation of Mr. Bunze 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. Bunze 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 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 2009 fiscal year, Intertape Polymer Group 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 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 accountant, for the fiscal years ended December 31, 2009 and December 31, 2008, is set forth in Item 17.5 of Intertape Polymer Group’s Annual Information Form attached hereto as Exhibit 1.

Intertape Polymer Group’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

The Company maintains no off-balance sheet arrangements except for the interest rate swap agreements, forward foreign exchange contracts and letters of credit issued and outstanding discussed in the sections entitled “Long-Term Debt” and “Bank Indebtedness and Credit Facilities” and in Notes 13 and 21 to the 2009 audited consolidated financial statements.

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 2009 attached hereto as Exhibit 2 and made a part hereof by this reference.

Identification of the Audit Committee

Intertape Polymer Group 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 three of the six directors of Intertape Polymer Group Inc.: George J. Bunze, Allan H. Cohen, Ph.D., and Torsten A. Schermer. 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 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 to the securities in relation to which the obligation to file an annual report on Form 40-F arises.

[SIGNATURE ON FOLLOWING PAGE]

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/ Bernard J. Pitz

(Signature)

Name:

Bernard J. Pitz

Title:

Chief Financial Officer

Date: March 26, 2010

EXHIBIT INDEX


Exhibit No.	Description	Page No.
1	Annual Information Form dated March 26, 2010	8
2	Management’s Discussion and Analysis for 2009 Audited Annual Consolidated Financial Statements	9
3	Consent of Independent Registered Chartered Accountants	10
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	11
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	15

Exhibit 1

ANNUAL INFORMATION FORM

(SEE SEPARATE DOCUMENT)

Exhibit 2

MANAGEMENT’S DISCUSSION AND ANALYSIS FOR 2009

AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

(SEE SEPARATE DOCUMENT)

Exhibit 3

CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS

We have issued our report dated March 26, 2010, with respect to the consolidated financial statements in the Annual Report of Intertape Polymer Group Inc. (the “Company”) on Form 40-F for the year ended December 31, 2009. We hereby consent to the incorporation of said report in the Form 40-F, and to the incorporation by reference on Forms S-8 (File No. 333-67732, effective August 16, 2001; File No. 333-97961, effective August 12, 2002; File No. 333-108077, effective August 19, 2003 and File No. 333-114954 effective August 28, 2004).

/s/ Raymond Chabot Grant Thornton LLP

Raymond Chabot Grant Thornton LLP

Chartered Accountants

Montréal, Canada

March 26, 2010

Exhibit 4

CERTIFICATIONS

I, Melbourne F. Yull, certify that:

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

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;

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 Issuer as of, and for, the periods presented in this annual report;

The Issuer’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 Issuer and have:

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 Issuer, 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;

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;

Evaluated the effectiveness of the Issuer’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

Disclosed in this annual report any change in the Issuer’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 Issuer’s internal control over financial reporting; and

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

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 Issuer’s ability to record, process, summarize and report financial information; and

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

Date: March 26, 2010

/s/ Melbourne F. Yull

Melbourne F. Yull,

Executive Director

I, Bernard J. Pitz, certify that:

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

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

Date: March 26, 2010

/s/ Bernard J. Pitz

Bernard J. Pitz,

Chief Financial Officer

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, Melbourne F. Yull, Executive Director, and Bernard J. Pitz, 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: March 26, 2010

/s/ Melbourne F. Yull

Melbourne F. Yull,

Executive Director

Date: March 26, 2010

/s/ Bernard J. Pitz

Bernard J. Pitz,

Chief Financial Officer

CERTIFIED EXTRACT OF RESOLUTIONS OF THE BOARD OF DIRECTORS

INTERTAPE POLYMER GROUP INC.

ADOPTED ON MARCH 26, 2010

"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 March 26, 2010.

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:

the annual information form ("AIF") of the Corporation to be dated March 26, 2010, 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;

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;

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;

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, 2009, 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

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;

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, Melbourne F. Yull, Executive Director of Intertape Polymer Group Inc., hereby certifies that the foregoing resolutions were duly adopted by the Board of Directors of Intertape Polymer Group Inc. on March 26, 2010 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 26^th day of March 2010.

/s/ Melbourne F. Yull

Melbourne F. Yull,

Executive Director

ORLDOCS 11778360 3

EX-1 2 aif2009.htm 2009 ANNUAL INFORMATION FORM XP Image Normal

INTERTAPE POLYMER GROUP INC.

ANNUAL INFORMATION FORM

For the Year ended December 31, 2009

Dated: March 26, 2010

INTERTAPE POLYMER GROUP INC.

ANNUAL INFORMATION FORM

Table of Contents

Page

Item 1.

Corporate Structure

1.1

Date of Information

1.2

Currency

1.3

Name, Address and Incorporation

1.4

Intercorporate Relationships

Item 2.

General Development of the Business

2.1

General Three Year History

2.2

Credit/Debt Information

2.3

Significant Acquisitions

Item 3.

Narrative Description of the Business

3.1

General

3.2

Products, Markets and Distribution

3.2.1

Tapes and Films Division

3.2.2

Engineered Coated Products Division

3.3

Sales and Marketing

3.3.1

Tapes and Films Division

3.3.2

Engineered Coated Products Division

3.4

Manufacturing and Quality Control

3.4.1

Tapes and Films Division

3.4.2

Engineered Coated Products Division

3.5

Equipment and Raw Materials

3.5.1

Tapes and Films Division

3.5.2

Engineered Coated Products Division

3.6

Research and Development and New Products

3.6.1

Tapes and Films Division

3.6.2

Engineered Coated Products Division

3.7

Trademarks and Patents

3.8

Competition

3.9

Environmental Initiatives and Regulation

3.9.1

Initiatives

3.9.2

Regulations

3.10

Employees

Item 4.

Cautionary Statements and Risk Factors

-2-

4.1

Forward-Looking Statements

4.2

Risk Factors

Item 5.

Dividends

Item 6.

General Description of Capital Structure

6.1

General Description of Capital Structure

6.2

Ratings

Item 7.

Market For Securities

7.1

Trading Prices and Volume on the Toronto Stock Exchange

7.2

Trading Prices and Volume on the New York Stock Exchange

Item 8.

Escrowed Securities

Item 9.

Directors and Officers

9.1

Name, Occupation and Security Holding

9.2

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

Item 10.

Legal Proceedings

Item 11.

Interest of Management and Others in Material Transactions

Item 12.

Transfer Agents and Registrars

Item 13.

Material Contracts

Item 14.

Experts

14.1

Name of Experts

14.2

Interests of Experts

Item 15.

Additional Information

Item 16.

Audit Committee

16.1

Audit Committee Charter

16.2

Composition of the Audit Committee

16.3

Relevant Education and Experience

16.4

Pre-Approved Policies and Procedures

16.5

External Auditor Services Fees

Exhibit “A”

Audit Committee Charter

-3-

Item 1. Corporate Structure

1.1

Date of Information

The information provided herein is as of December 31, 2009, unless indicated otherwise.

1.2

Currency

All dollar amounts contained herein are stated in U.S. dollars unless designated otherwise.

1.3

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 confor m 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 are located at 9999 Cavendish Blvd., Suite 200, Ville St. Laurent, Québec, Canada H4M 2X5 and the address of its registered office is 1250 René-Lévesque Blvd. West, Suite 2500, Montreal, Québec, Canada H3B 4Y1, c/o Heenan Blaikie LLP.

1.4

Intercorporate Relationships

Intertape Polymer Group is a holding company which owns various operating companies in the United States, Canada, and internationally. ECP L.P., an Ontario limited partnership, 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.

-4-

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.


Corporation	Place of Incorporation or Constitution	Percentage of Ownership or Control
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%
Intertape Polymer Corp.	State of Delaware	100%
Intertape Woven Products, S.A. de C.V.	Mexico	100%
Intertape Woven Products Services S.A. de C.V.	Mexico	100%
IPG Holdings LP*	State of Delaware	100%
Polymer International Corp.*	Virginia	100%
IPG (US) Inc.	State of Delaware	100%
IPG (US) Holdings Inc.	State of Delaware	100%
Intertape Polymer US Inc.	State of Delaware	100%
Fibope Portuguesa-Filmes Biorientados S.A.	Portugal	100%

Dormant

Dormant/Dissolved effective 12/31/2009

Unless the context otherwise indicates, the “Company” or “Intertape Polymer Group” include all of the subsidiaries of the Company.

-5-

Item 2.

General Development of the Business

2.1

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.

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.

2007

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 engaged to work with the Board of Directors and Management in this strategic alternatives review process. As a result, in May 2007, the Company announced that it had entered into an agreement for an indirect wholly-owned subsidiary of Littlejohn Fund III, L.P. to acquire all of Intertape Polymer Group’s outstanding common shares (the “Arrangement”). At the annual and special meeting of shareholders, the Arrangement was rejected by the shareholders of the Company by a vote of almost seventy percent. In addition, the shareholders elected a new Board of Directors, which included the Company’s founder, Melbourne F. Yull, who had retired the year before, and a former director of the Company, Eric Baker, who was nam ed Chairman. Mr. Yull was named Executive Director.

On August 8, 2007, the Company successfully amended its Senior Secured Credit Facility (“Facility”) to accommodate the costs of the strategic alternatives review process in the calculation of its financial covenants. The amendment reduced the maximum amount the Company could borrow under the revolving credit line under the Facility (“Revolving Credit Facility”) from $75.0 million to $60.0 million and increased the loan margin under the entire Facility, both the Term Loan B and the Revolving Credit Facility by 150 basis points to a range of 325 to 425 basis points determined by a pricing grid. Additionally, the Company paid an amendment fee to its lenders of approximately $2.3 million to be amortized over the remaining term of the Facility.

-6-

In furtherance of the new Board of Directors’ plan to strengthen the financial position of Intertape Polymer Group, the Company made a rights offering to its shareholders under which each shareholder of record at the close of business on August 23, 2007 was entitled to one right for every common share then held. 1.6 rights entitled the holder to purchase one common share of the Company at a price of CDN$3.61, or for subscribers resident in the United States, US$3.44. In connection with the rights offering, Intertape Polymer Group also entered into Standby Purchase Agreements with three of its principal shareholders and four of its senior officers and one former officer, pursuant to which each agreed to exercise all of their rights and to purchase certain of the common shares that were not otherwise subscribed for in the rights offering. The Company raised total proceeds of approximately US$62.9 mill ion in its rights offering and issued 17,969,388 common shares. Intertape used the net proceeds of US$60.9 million to reduce its Term Loan B bank debt.

2008

As a result of the downturn in the economy during 2008, the Company made several strategic moves so it would be positioned to effectively deal with the economic uncertainty. In the short term, the Company was proactive and implemented several cost savings measures, including reductions in workforce, reductions in pay for salaried employees, shortened work weeks for hourly employees, streamlining plant operations, and eliminating third-party service providers. The Company also developed a strategic long term plan which it believed would permit the Company to withstand the downturn of the economy.

As a first step, with a view towards reducing financial expenses, on March 27, 2008 the Company successfully refinanced its existing Facility with a $200.0 million Asset-Based Loan (“ABL”) entered into with a syndicate of financial institutions. The amount of borrowings available to the Company under the ABL is determined by its applicable borrowing base from time to time. The borrowing base is determined by calculating a percentage of eligible trade accounts receivable, inventories, machinery and equipment. At closing, after repaying the remaining balance of the Facility, the Company had cash and undrawn revolver of approximately $35.4 million. The ABL is priced at libor plus a loan margin determined from a pricing grid. The loan margin declines as unused availability increases. The loan margin ranges from 1.50% to 2.25%, however, through September 2008, the applicable loan margi n was fixed at 1.75%. Unlike the Facility, the ABL contains only one financial covenant, a fixed charge coverage ratio of 1.0 to 1.0, which becomes effective only when unused availability drops below $25.0 million. Under the refinancing agreement, the Company’s unencumbered real estate is subject to a negative pledge in favour of the ABL lenders; however, the Company retains the ability to secure financing on all or a portion of its owned real estate and have the negative pledge of the ABL lenders subordinated to up to $35.0 million of real estate mortgage financing. The Company also settled two interest rate swaps that the Company entered into in June and July 2005 hedging interest rates for the Facility. Financial expenses for 2008 were $19.8 million, a decline of 42% from 2007.

On September 29, 2008, the Company obtained a $1.8 million mortgage loan on its real estate located in Bradenton, Florida. The mortgage is for a period of 20 years bearing interest at a rate of 7.96%, adjusting every three years to a 3.55% spread over the 10-year Interest Rate

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Swap published in the Daily Release of the Federal Reserve. All of the Company’s other real estate is presently unencumbered.

In September and October, 2008, to hedge interest rates for the ABL, the Company entered into interest rate swap agreements for a notational amount of $40 million maturing in September 2011, and $30 million which matured in October 2009. Under the terms of these interest rate swap agreements, the Company receives (or received) on a monthly basis, a variable interest rate and pays (or paid) a fixed interest rate of 3.35% and 2.89%, respectively, plus the applicable premium on its ABL.

Prior to 2008, the Company did not use derivative financial instruments to reduce its exposure to foreign currency risks as historically these risks have not been significant. In accordance with the Company’s foreign exchange rate risk policy, in November 2008, the Company entered into a series of thirty-six monthly forward foreign exchange rates contracts to purchase an aggregate CDN$40.0 million which began in February 2009 at fixed exchange rates ranging from CDN$1.1826 to CDN$1.12808 to the U.S. Dollar.

In August, 2008, Intertape Polymer Group announced that the Toronto Stock Exchange (“TSX”) had approved the Company’s normal course issuer bid pursuant to which the Company was entitled to repurchase for cancellation up to 2,947,817 common shares over the twelve-month period commencing August 28, 2008 and ending on August 27, 2009. The Company repurchased 5,298 common shares pursuant to the normal course issuer bid, which were canceled.

In September 2008, the Company acquired the exclusive North American rights to a pending patent with respect to an automatic wrapping system. The system is designed to automate the process of wrapping packages of up to 60 feet in length. The technology targets industries such as wood products, which are traditionally wrapped manually due to the unique and varied size requirements. In addition to the distribution rights, the Company also acquired wrapping machines and existing customer contracts for a total consideration of $5.5 million. In connection with the distribution rights, the Company committed to distribute and sell manufacturing machines and technology and attain specific thresholds over a 61-month period terminating in September 2013. However, if the machines do not attain certain market acceptance parameters, the Company has the right to renegotiate its commitment on terms acceptab le to it, or the commitment will be released. Distributions and sales have been below expectations but Management believes this is as a result of the economic slowdown.

During the third quarter of 2008, the Company’s wholly-owned Portuguese subsidiary, Fibope Portuguesa-Filmes Biorientados S.A. (“Fibope”), entered into a long-term loan bearing interest at a rate of Euribor plus a premium of 125 basis points. Payments of interest only are due for the first two years followed by eight semi-annual principal payments. As of December 31, 2008, $7.7 million had been borrowed.

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2009

During 2009, the Company implemented its long term strategic plan in an effort to mitigate the impact of the global economic downturn on the Company. The Company’s strategy was to deal with the situation proactively by taking several cost reduction measures, opening new market channels, the development and sales of new products, and productivity improvements. In addition, a key element of the Company’s strategy was and continues to be cash management.

The challenges to the industry persisted throughout 2009. Raw material prices fluctuated with propylene-related raw material costs rising significantly and resin based raw material costs dropping, both of which resulted in intense pricing pressure, no pricing power and significantly impacted selling prices. Also, the North American residential housing market remained soft throughout the year which caused the supply chain supporting this market to carry excess inventories significantly reducing product demand.

Although the struggling economy has affected sales, the initiatives taken by the Company throughout 2009 have enabled the Company to somewhat soften its impact. The Company’s new products are attracting attention in the market. An increased focus on cash management has been a factor in increased cash flows. Also, as a part of the Company’s objectives to lower costs, enhance customer order fulfillment and optimize inventory investment, during the fourth quarter, the Company made the decision to consolidate the operations of its manufacturing facility located in Hawkesbury, Ontario, into the Company’s manufacturing facility located in Truro, Nova Scotia.

In January 2009, the Company received a notice from the New York Stock Exchange (the “Exchange”) that it was not in compliance with the Exchange’s listing standards because the 30-trading day average closing price of the Company’s common shares dropped below $1.00, which the Company believes was as a result of several factors, most of which were related to the downturn in the economy. The Company had six months to cure the deficiency, however due to the then current economic conditions, the Exchange temporarily suspended its $1.00 minimum price requirement. The Company notified the Exchange that it intended to cure the deficiency and, in fact, the price of the Company’s common stock rose above $1.00 and continued to trade above $1.00 per share until the Company’s common shares were voluntarily delisted from the Exchange. The Company, however, concluded that the overall tradi ng volume of the Company’s common shares was not sufficient to justify listing on two exchanges so the Company delisted its stock from the Exchange effective December 3, 2009. The delisting from the Exchange did not constitute a default under the Company’s ABL or Indenture governing the Company’s Senior Subordinated Notes and did not affect the Company’s operations or change its reporting requirements with the U.S. Securities and Exchange Commission. The Company’s shares of common stock continue to be traded on the TSX. The Company continues to be subject to the federal laws of Canada, the jurisdiction in which the Company is incorporated, as well as Canadian securities laws and corporate governance rules applicable to Canadian publicly listed companies, including the rules of the TSX.

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On November 12, 2009, the Company named Bernard J. Pitz as its new Chief Financial Officer. Mr. Pitz brings with him almost twenty years of experience serving as a Chief Financial Officer and in other executive capacities. He holds a B.S. and M.B.A. from Northern Illinois University and University of Chicago, respectively.

During the fourth quarter of 2009, the Company repurchased certain of its Senior Subordinated Notes with a face value of $6.3 million resulting in the reduction of the total face value of outstanding Senior Subordinated Notes governed by the Company’s Indenture from $125.0 million to $118.7 million. The repurchase also reduced the Company’s annual interest expense by $0.5 million.

The Company utilizes significant net assets in its Canadian operations and to a lesser degree, in its European self-sustaining foreign operations. Changes in the exchange rates between the respective functional currencies of these operations and the Company’s U.S. Dollar reporting currency will result in significant fluctuations in the net assets of these operations in U.S. Dollar terms. Further, the Company is subject to foreign exchange rate risk through transactions conducted by its Canadian, U.S. and European operations, which are conducted in currencies other than the functional currency of the entities earning the revenues or incurring the expenses. Accordingly, in November and December 2008, pursuant to the Company’s foreign exchange rate risk policy, the Company entered into a series of 36 monthly forward foreign exchange rate contracts to purchase an aggregate CDN$40.0 million beginnin g in February 2009, at fixed foreign exchange rates ranging from CDN$1.1826 to CDN$1.2808 to the U.S. Dollar. In September 2009, the Company executed a series of twelve new monthly forward foreign exchange rate contracts to purchase an aggregate CDN$20.0 million beginning in February 2010, at fixed foreign exchange rates ranging from CDN$1.0934 to CDN$1.0952 to the U.S. Dollar. It is believed that these twelve contracts will mitigate the Company’s foreign exchange rate risk associated with a portion of anticipated monthly inventory purchases of the Company’s U.S. self-sustaining foreign operations that are to be settled in Canadian dollars. The Company continues to evaluate the use of similar forward foreign exchange rate contracts to cover additional inventory purchases undertaken by the Company’s U.S. self-sustaining foreign operations.

In addition, the Company is exposed to interest rate risk primarily through its long-term debt. As indicated above, the Company entered into two interest rate swap agreements. The agreement with a notional value of $30.0 million matured in October 2009. The Company currently has approximately $80.0 million of floating long-term debt which it continues to evaluate as to whether converting all or a portion of this floating rate debt to fixed debt is in its best interest.

2.2

Credit/Debt Information

Indebtedness

During 2007, the Company reduced its long term debt by $76.5 million. The payments in 2007 included a $60.9 million reduction as a result of the application of the net proceeds of the rights offering and a $15.6 million principal payment from “2006 excess cash flow” as required

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under the Facility. As of December 31, 2007, the Company had no outstanding draws under its Revolving Credit Facility.

In 2008, the Company increased its total indebtedness by $8 million. The increase was primarily from $7.7 million in borrowings by Fibope, the Company’s Portuguese subsidiary, a portion of which was used to repay long-term notes the Company had made to Fibope.

In 2009, the Company reduced its total indebtedness by approximately $34.4 million. The decrease was as a result of effective working capital management which provided additional cash for debt repayments.

Facility and Senior Subordinated Notes

On July 28, 2004, the Company entered into the 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. Further, on July 28, 2004, the Company completed an offering of US$125.0 million 8-½% Senior Subordinated Notes due 2014.

The credit agreement governing the Facility and the Indenture governing the outstanding Senior Subordinated Notes each contain restrictive covenants that, among other things, limited 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 Facility, the Company was required to maintain certain financial ratios, including a maximum total leverage ratio, a minimum interest coverage ratio and a minimum fixed charge ratio.

In August, 2007, the Company amended its Facility to permit the add back of certain one-time charges incurred in connection with the proposed acquisition of all of the common shares of the Company by an indirectly wholly-owned subsidiary of Littlejohn Fund III, L.P., the strategic alternatives review process. The amendment also reduced the maximum amount the Company could borrow under the Revolving Credit Facility from $75 million to $60 million and increased the loan premium for both the Term B Loan and the Revolving Credit Facility by 150 basis points.

ABL

Intertape Polymer Group and certain of its subsidiaries refinanced its Facility on March 28, 2008. The Company’s ABL is an asset-based revolving loan not to exceed $200 million. The ABL 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 U.S. and Canadian subsidiaries. The proceeds from the refinancing were used to repay the Company’s existing Facility, accrued interest and transaction fees and provide cash for general working capital purposes. The Company’s Senior Subordinated Notes remain outstanding, except as noted above.

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For additional information regarding the Company’s ABL and Senior Subordinated Notes, see Item 13, “Material Contracts”.

2.3

Significant Acquisitions

The Company made no significant acquisitions during 2009 for which disclosure is required under Part 8 of National Instrument 51-102 – Continuous Disclosure Obligations. In September 2008 the Company acquired the exclusive North American rights to a pending patent with respect to an automatic wrapping system which is designed to automate the process of wrapping packages up to 60 feet in length. Along with the distribution rights, the Company also acquired wrapping machines and existing customer contracts for a total consideration of $5.5 million. The technology targets industries such as wood products and complements the Company’s products offerings and customer base as part of its Engineered Coated Products (“ECP”) Division. The system will offer substantial savings to many industries and the Company feels it now has the potential to expand its presence in these markets.

Historically, acquisitions have played a significant role in the Company’s strategy for growth and entry into new product markets. 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 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.

Item 3. Narrative Description of the Business

3.1

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 1,969 employees with operations in 16 locations, including 13 manufacturing facilities in North America and one in Europe.

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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.

The Company has two operating segments that are reportable segments as those terms are used in the Canadian Institute of Chartered Accountants Handbook, Tapes and Films and ECP.

3.2

Products, Markets and Distribution

3.2.1

Tapes and Films Division

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 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 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.

During August 2009, the Company reaffirmed its commitment to the alternative energy industry by announcing plans to continue the development of additional products for its current portfolio designed for wind, solar, geothermal and biofuel generation markets. The Company’s stated goal is to be single source dedicated to the ongoing development of performance tapes and films that are an integral part of powering the alternative energy market.

During September 2009, the Company announced the launch of a new product line of aluminum foil tapes to address the industrial, HVAC, aerospace, appliance, and transportation industries, the most significant markets in this category. This product line aligns with the strategic direction of the Company to leverage its expertise at the operations and customer level.

In September 2008, the Company reopened its Brighton, Colorado, facility which is the site of the Company’s new in-house solvent coater. The coater will support the low cost manufacture of products. The added capacity will permit growth of existing products and increase the Company’s ability to rapidly and cost-effectively bring to market new products developed by the Company.

During the third quarter of 2008, the Company introduced the first product in its low environmental impact line (“Lili™”), a biodegradable film for its iCusion™ air pillow protective

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packaging product. The goal of Lili™ is to reduce the impact of Intertape Polymer Group and its customers on the environment.

For the years ending December 31, 2009, and December 31, 2008, tapes and films accounted for 83% and 80%, respectively, of the Company’s sales.

The Company’s tape and film products consist of four main product groups: (A) carton sealing tapes, (B) industrial and specialty tapes, (C) films and (D) protective packaging.

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 Polymer Group 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 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(4°C) to greater than 120^oF(49°C). Primary competitors are 3M Co. and Sekisui TA Industries, LLC.

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 competitors are Evotape SpA of Italy and Monta of Germany.

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.

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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.

Industrial & Specialty Tapes

The Company produces eight primary industrial and specialty products: paper tape, flatback tape, duct tape, filament tape, stencil products, electrical tape, double-coated tape, and foil 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 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 Berry Plastics 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.

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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 these products 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.

Foil Tapes

Foil tapes are manufactured using aluminum and a variety of adhesive systems. The shiny, UV resistant foil backing offers an enhanced appearance, excellent reflective and flame retardant properties, and remains flexible to resist cracking and lifting around irregular or curved surfaces. These tapes have application in various industries including aerospace, transportation, HVAC and industrial. Primary competitors of the Company for this product are 3M Co., Berry Plastics and Avery Dennison Corp.

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. In 2009, the Company introduced Exlfilm™ OXO,

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an oxo-biodegradable shrink film. Primary competitors of the Company for this product are Sealed Air Corp. and Bemis Co. 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 products of the Company. 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.

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, Fortress™ in 2007, and Prolite™ in 2008, which are light gauge high performance films created for wrapping irregularly shaped packages. In 2009, the Company introduced StretchFlex® Primary competitors of the Company for these products include Sigma Plastics Group, Berry Plastics Corp., Pliant Corp. and AEP Industries, Inc.

Protective Packaging

Air Pillows

Air pillows are manufactured from polyethylene film and are inflated at the point of use with an air pillow machine. The Company markets both traditional polyethylene, as well as oxo-biodegradable, air pillow products. Also, as mentioned above, the Company has added a biodegradable film to its iCusion™ air pillow protective packaging products. 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 this product are Pregis Corp., Sealed Air Corp., Storopack, Inc., Free-Flow Packaging International Inc. and Polyair Inter Pack Inc.

3.2.2

Engineered Coated Products Division

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

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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, and Brantford, Ontario. Primary competitors of the Company for these products are Interwrap, Inc. and Alpha Pro Tech, Ltd.

The Company’s ECP are categorized in six markets: (A) building and construction, (B) agro-environmental, (C) consumer packaging, (D) specialty fabrics, (E) industrial packaging, and (F) FIBCs. For the years ended December 31, 2009 and December 31, 2008, ECP accounted for 17% and 20%, respectively, of the Company’s sales.

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 roof underlayment, 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. Primary competitors of the Company for these products include Interwrap, Inc., Fabrene Inc., Mai Weave L LC and various producers from China and Korea.

Nova-Shield® Membrane Structure Fabrics

Nova-Shield® 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 Nova-Shield® 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™ coatings. The Company sells the Nova-Shield® fabrics to membrane structure manufacturers who design, fabricate, and install the structures. The Company’s main competitors are Fabrene Inc. and a number of polyvinyl chloride producers. The Company produces these products primarily at i ts plant in Truro, Nova Scotia.

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Nova-Seal®II

The Company began commercial production of Nova-Seal®II at its Truro, Nova Scotia facility in August, 2008. It is a new roof underlay that is lighter and easier to install than standard #30 building felt and costs less. Primary competitors in this market are Interwrap, Inc., W.R. Grace & Co. and a variety of #30 felt producers.

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.

AquaMaster® Geomembrane Fabrics

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

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.

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.

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

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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 producers from China and Korea. The Company primarily produces these products at its Truro, Nova Scotia, plant.

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. The production of the dunnage bag fabrics has been moved to the Company’s Truro, Nova Scotia, Canada, facility while paper packaging products are produced at the Company’s Brantford, Ontario and Langley, British Columbia, facilities.

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, China and Mexico.

3.3

Sales and Marketing

3.3.1

Tapes and Films Division

As of December 31, 2009, the Company’s Tapes and Films Division had a sales force of 218 personnel. The Company participates in industry trade shows and uses trade advertising as part of its marketing efforts. The Company’s customer base for tapes and films is diverse, with no single customer accounting for more than 5% of total sales in 2009. Sales of tapes and films from facilities located in the United States, Canada and Europe accounted for approximately 90%, 5% and 5% of total tapes and films sales, respectively, in 2009; 95%, 2% and 3% in 2008; and 95%, 2% and 3% in 2007. Export sales of tapes and films represented 6% of the Company’s total tapes and film sales in 2009, 6% in 2008, and 3% in 2007.

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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.

3.3.2

Engineered Coated Products Division

As of December 31, 2009, the Company’s ECP Division had 28 sales personnel, including six manufacturer representatives. The Company’s marketing strategy includes participation in industry trade shows and trade advertising. The Company’s customer base for ECP is diverse, with no single customer accounting for more than 8% of total sales in 2009. Sales of ECP from facilities located in the United States and Canada accounted for approximately 98% of total ECP sales in 2009, 97% in 2008, and 100% in 2007. Export sales of ECP represented approximately 2% of total sales in 2009, and 2% of sales in both 2008 and 2007.

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

3.4

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 Company maintains at each of its manufacturing facilities in both segments 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 2009, eleven of the Company’s plants were certified under the ISO-9001:2000 quality standards program.

3.4.1

Tapes and Films Division

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 or purchased adhesives and cut to various widths and lengths for carton sealing tape. The 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 compounds natural rubber, “hot melt,” and water-activated adhesives to respond to its

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customer demands. Masking tapes utilize the same process with paper as the coating substrate. Duct tapes utilize a similar process with polyethylene 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. 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.

3.4.2

Engineered Coated Products Division

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 slit tape extrusion, weaving extrusion coating, slitting, rewinding, printing and converting materials into finished products.

3.5

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.

3.5.1

Tapes and Films Division

The major raw materials purchased for our tape products are polypropylene resin, synthetic rubber, hydrocarbon resin, and paper (crepe and kraft). The resins and synthetic rubber are generated from petrochemicals which are by-products of crude oil and natural gas. Almost all of these products are sourced from North American manufacturers. The paper products are produced by North American paper manufacturers and are derived from the North American pulp and paper industry.

The major raw material used in our film products is polyethylene resin. Polyethylene is a derivative of crude oil and/or natural gas petrochemical by-products.

Historically, as a result of global sourcing, the Company was able to manage rising raw material costs through a series of timely sales price increases to its industrial and specialty distributors, and to a lesser extent, its retail customers, and was able to aggressively pursue and secure resin supplies from worldwide sources.

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During 2008 however, resin-based raw material costs increased significantly, peaking in August. This, coupled with the economic weakness in the United States and competitive pressures, limited the Company’s Tapes & Film Division’s ability to increase selling prices. Commencing in September, 2008, resin-based raw material costs decreased sharply depressing selling prices during the fourth quarter. The lower selling prices resulted in selected products which had been manufactured with higher cost raw materials being sold at a loss.

In 2009, the sluggish economy continued and resin-based raw material costs increased once again. As a consequence of competitive pricing, the Company was unable to pass on the majority of the cost increases to its customers.

3.5.2

Engineered Coated Products Division

The major raw materials used to produce our ECP are polyethylene and polypropylene resins. Both of these products are petrochemical based products derived from crude oil and/or natural gas. These products are predominantly sourced from North American petrochemical manufacturers. The Company’s ECP Division experienced the same raw material cost fluctuations as the Tapes & Film Division also resulting in selected ECP Division products which had been manufactured with higher cost raw materials being sold at a loss.

3.6

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. As described in the sections that follow, the Company introduced several new high margin products in 2009 and intends to launch several more in 2010.

3.6.1

Tapes and Films Division

In 2009, Films Research and Development (“R&D”) introduced a line of filament tapes targeted for use in various appliance manufacturing applications. These filament tapes are high margin, high performance products which are manufactured at the Company’s Richmond, Kentucky, Marysville, Michigan and Carbondale, Illinois facilities.

Intertape Polymer Group also entered the foil tape market with a full line of aluminum foil tapes manufactured at its Carbondale, Illinois facility. These tapes have application in various industries including aerospace, transportation, HVAC and industrial. The product line offers performance ranges within a variety of foil thicknesses and adhesive systems. The shiny, UV resistant foil backing offers an enhanced appearance, excellent reflective and flame retardant properties, and remains flexible to resist cracking and lifting around irregular or curved surfaces. The Company’s foil products include linered, self-wound, FSK, ASJ, foil barrier laminates and metalized films.

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Tape R&D also created a new technology called “roll edge face coated” which creates cleaner sharper paint lines with the Company’s newly introduced BLOC-IT™ painters tape.

Films R&D introduced PROLITE™, a lightweight clear film which offers superior load retention at a lower wrap cost per load. The film resists punctures and tears and has a lower reduction in width as it is stretched, thus allowing for narrower initial film widths and a reduced number of wraps to cover a load.

In 2008, Films R&D developed a biodegradable air pillow which is the first product in the Company’s new low environmental impact line (Lili™).

During the year, Tape R&D worked to develop new paint masking tapes that effect crisp lines of demarcation for the paint contractor and do-it-yourself (“DIY”) segments. Development work also included products with superior, water-white color and clarity to serve packaging segments.

Additionally, Tape R&D worked to develop foil protective products to support military maintenance programs, as well as filament reinforced products for spoolable, unbonded pipelines for the oil and gas industry. Lastly, high-temperature, solvent-resistant, double-coated tapes were developed for the electrical OEM segment, novel masking products were developed for OEM boat manufacturers and new, light-weight stencil products were developed for international monument carving accounts.

In 2007, Tape R&D focused on developing products targeting consumer markets, specifically, masking products for paint contractors and DIY segments, and superior-strength duct tapes for hardware segments.

During 2007, the Company introduced Fortress™ film to the stretch film market, a new lightweight, high stiffness blown film hand wrap film that has shown excellent performance in the market. Using unique raw material combinations, this new hand wrap film has shown superior load retention and pallet performance.

In 2006, the Company finalized the introduction of Genesys™ high performance machine wrap stretch film. It has been successful in replacing not only competitive films, but also as a high performance product that can be sold into difficult applications as well as in thinner gauges to provide yield savings to the customer. The material has been very successful, and has become the Company’s premium performance film. The formulation for Genesys™ Film forms the foundation for prestretch hand wrap, roll wrap, and metal coil wrap.

High Performance Exlfilm® Plus, a significantly improved version of the standard irradiated Exlfilm® Plus shrink film has been successful in securing the Company’s position in the shrink film market. After extensive resin construction, film formulation, and process development, the Exlfilm® Plus was tested in all gauges and was commercialized from the Truro, Nova Scotia plant in 2006 and 2007. The film displays significantly improved clarity and gloss, a water-white appearance and improved shrink force and shrink degree.

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The Company’s R&D expenses for tapes and films in 2007, 2008, and 2009 totaled $3.3 million, $4.3 million, and $4.6 million, respectively.

3.6.2

Engineered Coated Products Division

In 2009, ECP R&D worked to introduce new high margin products. It developed a new 5x5 Nova-Seal®I product to strengthen the Company’s position and entry into roofing distribution channels. The Company’s line of Nova-Seal® underlayment is waterproof, wind resistant and has a patent pending anti-slip surface that is effective in both wet and dry weather. The Company also introduced a new woven product for waste containment which complements its existing AquaMaster® line.

In 2008, ECP R&D developed Nova-Seal®II which is a new generation of roof underlay that is lighter and easier to install than #30 building felt.

In 2007, the ECP R&D group developed, and received building code approvals for, a new woven, coated, printed and perforated house wrap product that is being sold to third parties under private brands and under the Flex-Gard® brand as well as a first generation premium roofing underlayment that was sold under private label agreements and the Nova-Seal® brand. The Company has also developed and received code approval for an unperforated, non-woven product targeted at the premium segment of the house wrap market. In addition, the Company has improved its Nova-Shield® fabric, to expand its use and increase the ability of the material to further displace PVC fabrics in high end membrane structure applications.

The ECP Division also expanded their successful AquaMaster® line of geomembrane products to include the first available polyester reinforced polyethylene geomembranes in the industry. This material is showing early promise in displacing currently employed materials such as PVC and reinforced polypropylene in decorative pond lining, irrigation canals and animal waste lagoon markets.

The Company’s R&D expenses for ECP in 2007, 2008, and 2009 totaled $0.8 million, $1.3 million, and $1.0 million, respectively.

3.7

Trademarks and Patents

Intertape Polymer Group embarked on a new corporate branding strategy during 2009 to create and communicate overall consistency and simplicity to its markets. The Company adopted a new look to its corporate logo and redid its sub-brand logos which are clearer and will help identify the individual product lines. The Company believes this will create unique identities and positions associated with Intertape Polymer Group and will build and maintain strong, positive customer perceptions.

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®.

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The Company markets its open mouth bags under the registered trademark Nova-Pac®. The other key ECP products are sold under the registered trademarks Nova-Thene Haymaster®, AquaMaster®, Nova-Shield®, Nova-Seal®, and Flex-Gard®. 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 122 active registered trademarks, 55 in the United States, 29 in Canada, 8 in Mexico, and 30 foreign, which include trademarks acquired from American Tape Co., Anchor Continental, Inc., Rexford Paper Company, Central Products Company, and Flexia Corporation Ltd.. The Company currently has 16 pending trademark applications in the United States, 4 in Canada, and 10 foreign.

Intertape Polymer Group 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 ECP for which the Company has 7 patents and 5 patents pending, film for which it has 9 patents and no patents pending, tape products for which it has 6 patents and 3 patents pending, adhesive products for which it has 1 patent and 2 patents pending, container products for which it has no patents, and retail for which it has 2 patents pending.

3.8

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 3.2 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.

3.9

Environmental Initiatives and Regulation

3.9.1

Initiatives

Intertape Polymer Group has and continues to be focused on reducing waste and minimizing any harmful environmental impact throughout its manufacturing process, or footprint left behind by the line of products manufactured and marketed by the Company. Lili™ is the Company’s environmental stewardship program and stands for “low environmental impact line from Intertape”, however it is more than just the growing number of environmentally preferred products that the Company has and continues to develop, but is also a commitment by

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management and employees of the Company to continually look for opportunities to lower the Company’s environmental impact. Intertape Polymer Group has and continues to implement activities, changes and programs that are designed to reduce waste in the manufacturing process; reduce the footprint left behind by its products, processes and employees; increase the recycle ability of products through mainstream recycling; provide an alternative solution to a less environmentally friendly product or application; reduces consumption of raw materials, fuel and other energy sources; reduces pollutants released through air, water and waste; and improves the safety and health of employees.

The Company’s latest environmental initiative has been to focus on energy savings. In August 2009, the Company became an Energy Star® Partner, which is a voluntary partnership with the U.S. Environmental Protection Agency to improve energy efficiency and fight global warming. Intertape Polymer Group as an Energy Star® Partner joined the fight against global warming by improving the efficiency of its buildings and facilities. Products and buildings that have earned the Energy Star® designation prevent greenhouse gas emissions by meeting strict energy efficiency specifications set by the government.

3.9.2

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 municipal) 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 in to 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 the 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

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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 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, Québec 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 Corporation Ltd., 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, t hus no remediation was necessary at the facility as a result of ceasing its activities. The Trois-Rivières facility has been sold with no residual environmental liability to the Company. The Company has completed remediation activities at its Marysville, Michigan facility and received 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 their operations. Some of the environmental 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 operatio n or further development of its facilities, as a result of which the operation of its facilities may be limited or suspended.

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3.10

Employees

As of December 31, 2009, the Tapes and Films Division of Intertape Polymer Group employed approximately 1,410 people, 218 of whom held either sales-related or administrative positions and 1,192 of whom were employed in operations. The ECP Division employed approximately 455 people, 58 of whom held either sales-related or administrative positions and 397 of whom were employed in operations. The Company’s Portuguese subsidiary had 53 employees, 3 in sales positions and the rest were employed in operations. The Company’s corporate segment employs 51 people, all of whom are in administrative positions. Approximately 116 hourly employees at the Company’s Marysville plant are unionized and subject to a collective bargaining agreement which expires on May 1, 2010. Negotiations of a new agreement are ongoing and the Company expects a favorable outcome. Approximately 152 hourly em ployees at the Company’s Menasha, Wisconsin, plant are unionized and subject to a collective bargaining agreement which expires on July 31, 2011. Approximately 38 hourly employees at the Company’s Carbondale, Illinois, plant are unionized and subject to a collective bargaining agreement which expires on March 4, 2012. In Langley, British Columbia, 43 employees are unionized and their collective bargaining agreement expires on March 31, 2010. Again, negotiations of a new agreement are ongoing and the Company expects a favorable outcome. The collective bargaining agreement which covered 56 employees at the Company’s Brantford, Ontario plant expired on February 28, 2008. The unionized employees commenced a strike in August 2008 and, at present, the Plant is being operated by a replacement workforce of 25 who are paid hourly. Other than the strike at its Brantford, Ontario plant, the Company has never experienced a work stoppage and it considers its labor relati ons to be satisfactory.

Item 4. Cautionary Statements and Risk Factors

4.1

Forward-Looking Statements

This Annual Information Form, including the Management’s Discussion & Analysis for fiscal year ended December 31, 2009, 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. 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. 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 involve risks and uncertainties. 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 the year ended December 31, 2009. In addition to the other information contained in this Annual Information Form, readers should carefully consider

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the above cautionary statements as well as the risk factors set forth below. Except as required by applicable law, the Company disclaims any intention or obligation to update or revise any forward-looking statements, including its earnings outlooks, whether as a result of new information, future events or otherwise.

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, general economic conditions; fluctuations in the amount of available funds under the Company’s ABL; the failure of the Company to meet its financial covenant contained in the ABL, the Company’s substantial leverage and ability to generate sufficient cash to service its debt; the Company’s significant indebtedness and ability to incur substantially more debt; restrictions and limitations contained in the agreements governing the Company’s debt; fluctuations in the cost of the Company’s principal raw materials; availability of raw materials; 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; and changes in the Company’s strategy.

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 & Analysis for the year ended December 31, 2009 will in fact transpire.

The Management’s Discussion & Analysis for the fiscal year ended December 31, 2009, some extracts of which are incorporated herein by reference, contain certain non-GAAP financial measures as defined under SEC rules, including adjusted net earnings, operating profit, 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 Management Discussion & Analysis for 2009 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.

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4.2

Risk Factors

Current economic conditions and an uncertain economic forecast adversely affect the Company’s results of operations and financial conditions.

Unfavorable changes in the global economy has affected the demand for the Company’s products. Adverse economic conditions could also increase the likelihood of customer delinquencies. A prolonged period of economic decline would have a material adverse effect on the results of operations, gross margins, and the overall financial condition of the Company, as well as exacerbate the other risk factors set forth below.

Fluctuations in the amount of available funds under the Company’s ABL would restrict the Company’s ability to borrow under its revolving loan.

The Company’s credit facility is an asset-backed loan. A reduction in the eligible assets and receivables included in the borrowing base or an increase in the required reserves will reduce the Company’s available credit under the ABL. A decline in the borrowing base could also require an unscheduled repayment of funds already advanced in excess of the available credit amount.

The Company’s ABL contains a financial covenant which, if not met, will result in an event of default.

The Company’s ABL requires a fixed charge coverage ratio which becomes effective only when unused availability under the borrowing base drops below $25 million. The Company’s failure to comply with this covenant 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 ABL could elect to declare all amounts borrowed under the Company’s ABL, 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 increased interest rates and restrictive covenants. Any future refinancing of the Company’s ABL is likely to contain similar restrictive covenants and financial tests.

The failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could cause the Company’s stock price to decline.

Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the Securities and Exchange Commission require annual management assessments of the effectiveness of the Company’s internal control over financial reporting. If the Company fails to maintain effective internal control over financial reporting, as such standards are modified,

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supplemented or amended from time to time, the Company may not be able to conclude that it has effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the Securities and Exchange Commission. For the fiscal year ended December 31, 2009, the Executive Director and the Chief Financial Officer of the Company have concluded that the Company’s internal control over financial reporting was effective as of December 31, 2009. If the Company cannot in the future favorably assess, or the Company’s independent registered public accounting firm is unable to provide an unqualified attestation report on the Company’s assessment of, the effectiveness of its internal control over financial reporting, investors may lose confidence in the reliability of the Company’s financial reports, which could cause the Company’s stoc k price to decline.

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.

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

The Company has a significant amount of indebtedness. As of December 31, 2009, the Company had outstanding debt of approximately $215 million, which represented 48% of its total capitalization. Of such total debt, approximately $202 million, or all of the Company’s outstanding senior debt, was secured.

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 ABL. 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

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disadvantage compared to its competitors that have less debt; and limit the Company’s ability to borrow additional funds on terms that are satisfactory to it or at all.

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 2008 and, to a lesser degree, 2009, and certain individual quarters in prior years, were negatively impacted by raw material cost increases and 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 decrease 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.

Despite the Company’s level of indebtedness, it believes it would 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 believes that it would be able to incur significant additional indebtedness in the future. Although the Indenture governing the Senior Subordinated Notes and the Loan and Security Agreement governing the ABL 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.

A downgrade of the Company’s credit ratings would have a negative impact on the Company’s ability to obtain credit and on the trading price of its common shares.

The Company’s Senior Subordinated Notes are currently rated Caa1 by Moody Investor Services, Inc. and CCC- by Standard & Poor’s Financial Services LLC. These ratings are considered below investment grade. In the event the Company’s credit ratings are downgraded, it would adversely affect the Company’s cost of borrowing, access to capital markets and trading price of its common shares.

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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’s competition and customer preferences could impact the Company’s profitability.

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.

Demand for the Company’s products and, in turn, its revenue and profit margins, are affected by customer preferences and changes in customer ordering patterns which occur as a result of changes in inventory levels and timing of purchases which may be triggered by price changes and incentive programs.

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 2009, sales to customers located outside the United States and Canada represented approximately 7.6% 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 environments applicable to its operations in these areas, such as environmental and health and safety compliance.

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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 municipal) 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 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

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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 in Section 3.9 above, 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 and regulations. 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. 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.

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 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

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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 other 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 join 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.

Except for the strike at the Company’s Brantford, Ontario plant, 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 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

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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 of 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 Group's business, financial condition and/or results of operations.

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 Portugal 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

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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 of 1933, as amended and/or the Securities Exchange Act of 1934, as amended (“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.

The Company’s exemptions under the 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 issuers’ equity securities within a perio d 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. Prior to fiscal year ended December 31, 2000, the Company filed its annual reports on Form 20-F. Commencing with the fiscal year ended December 31, 2000, the Company filed its annual report on Form 40-F. Intertape Polymer Group filed its 2008 annual report on Form 20-F and will file on Form 40-F for 2009. Intertape Polymer Group reports on Form 6-K with the United States Securities and Exchange Commission and publicly releases quarterly financial reports.

Item 5. 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. The Company has not paid dividends in the past three years. For details regarding the Company’s covenants with its lenders and noteholders please refer to the Registration Statement filed on www.sec.gov in the U.S. on October 26, 2004 as Registration No. 333-119982, as amended, and the Indenture and the ABL Loan and Security Agreement filed on www.sedar.com in Canada.

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Item 6. General Description of Capital Structure

6.1

General Description of Capital Structure

Intertape Polymer Group has authorized an unlimited number of common shares without par value. The Company has also 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 March 26, 2010, there were 58,951,050 issued and outstanding common shares of the Company. No preferred shares of the Company are issued and outstanding.

The following is a summary of the material provisions which attach to the common shares and Class A preferred shares, and is qualified by reference to the full text of the rights, privileges, restrictions and conditions of such shares.

Common Shares

Voting Rights

Each common share entitles the holder thereof to one vote at all meetings of the shareholders of the Company.

Payment of Dividends

The holders of the Company’s common shares are entitled to receive during each year, as and when declared by the Board of Directors, dividends payable in money, property or by the issue of fully-paid shares of the capital of the Company.

Distribution of Assets Upon Winding-Up

In the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or other distribution of assets of the Company among shareholders for the purpose of winding-up its affairs, the holders of the Company’s common shares are entitled to receive the remaining property of the Company.

Class A Preferred Shares

The Board of Directors may at any time and from time to time issue Class A preferred shares in one or more series, each series to consist of such number of shares as may, before the issuance thereof, be determined by the Board of Directors. The Class A preferred shares are entitled to preference over the common shares with respect to the payment of dividends. In the event of the liquidation, dissolution or winding-up of the Company or other distribution of assets of the Company among shareholders for the purpose of winding-up its affairs, the holders of the Class A preferred shares will, before any amount is paid to, or any property or assets of the Company

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distributed among, the holders of the common shares, be entitled to receive: (i) an amount equal to the amount paid-up on such shares together with, in the case of cumulative Class A preferred shares, all unpaid cumulative dividends and, in the case of non-cumulative Class A preferred shares, all declared and unpaid non-cumulative dividends; and (ii) if such liquidation, dissolution, winding-up or distribution is voluntary, an additional amount equal to the premium, if any, which would have been payable on the redemption of the Class A preferred shares if they had been called for redemption by the Company on the date of distribution.

6.2

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’s”) last rated the Senior Subordinate Notes on December 6, 2007, and rated them Caa1. Moody’s has nine ratings and “Caa” is the seventh. The “1” indicates it is at the high end of this rating. Standard & Poor’s Financial Services LLC (“S&P”) last rated the Senior Subordinated Notes on April 2, 2009 and rated them CCC–. S&P has ten ratings and CCC is seventh. The “–” indicates that it is at the low end of this rating.

The credit ratings provided by S&P and Moody’s (collectively the “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’s 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 2007 and concern over its ability to meaningfully improve credit metrics over the intermediate term. The negative outlook reflects, in part, the limited room under financial covenants in the Company’s previous secured facilities.

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

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to meet its financial commitment on the obligation. The “minus” is to show relative standing within the major rating categories.

Item 7. Market for Securities

7.1

Trading Prices and Volume on the Toronto Stock Exchange

The Company’s common shares are traded on the TSX under the symbol “ITP”. Set forth below is the price range and volume traded on the TSX for each month of 2009:


Month	Price Range (CDN$)	Total Volume Traded
January	.84 - 1.20	723,000
February	.53 - .92	235,700
March	.39 - .63	918,800
April	.50 - .73	636,500
May	.59 - 1.65	984,200
June	.88 - 1.47	1,200,100
July	.89 - 1.29	534,500
August	1.20 - 1.79	1,074,800
September	1.61 - 2.89	1,610,300
October	1.75 - 2.86	807,200
November	1.64 - 2.58	1,278,500
December	2.20 - 3.07	1,885,900

7.2

Trading Prices and Volume on the Exchange

The Company’s common shares were also traded on the Exchange under the symbol “ITP” through December 3, 2009, at which time the Company elected to delist from the Exchange. Set forth below is the price range and volume traded on the Exchange for each month of 2009:


Month	Price Range (US$)	Total Volume Traded
January	.62 - 1.04	438,400
February	.41 - .74	906,200
March	.26 - .56	1,160,100
April	.42- .61	1,477,600
May	.50 - 1.50	1,456,500
June	.75 - 1.33	1,467,300
July	.78 - 1.25	1,528,200
August	1.06 - 1.65	1,507,300

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September	1.50 - 2.70	2,052,000
October	1.61 - 2.66	1,237,500
November	1.56 - 2.45	3,461,500
December	2.04 - 2.90	1,933,500

Item 8. Escrowed Securities

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

Item 9. Directors and Officers

9.1

Name, Occupation and Security Holding

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 30, 2009, at which time the current term of each Director will expire.

Name and Residence

Position and Principal Occupations

First Year as

Director

Melbourne F. Yull

Florida, United States

Executive Director

June 2006 – June 2007 – Retired

Prior thereto he was Chairman of the Board of Directors and CEO of the Company

1989-2006

2007

Eric E. Baker

Ontario, Canada

Director

President, Altacap Investors Inc., a private equity manager

1989-2000

2007

Allan H. Cohen

Illinois, United States

Director

Co-Manager of the General Partner of the First Analysis, Private Equity Fund IV

2007

George J. Bunze

Québec, Canada

Director

Vice-Chairman, Kruger Inc., pulp and paper company

2007

Torsten A. Schermer

North Carolina, United States

Director

President, MESC Corporation, franchise development company; May 2005 to December 2006, pursued investment opportunities in the tape industry, manufacturing and franchise; July 2004 to May 2005 was the General Manager, Eastern Europe, of tesa tape Kft; and prior to that was the President and Chief Executive Officer of tesa tape inc.

2007

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Robert M. Beil

Arizona, United States

Director

September 2006 – Retired

Sales, Marketing, Business and Executive Management, the Dow Chemical Company, 1975 to September 2006

2007

Jorge N. Quintas

Portugal

Director

President, Nelson Quintas SGPS, SA, manufacturer of electrical and telecommunication cables

2009

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 Residence	Position and Occupation	First Elected To Office
Melbourne F. Yull Florida, United States	Executive Director	2007
Bernard J. Pitz Florida, United States	Chief Financial Officer	2009
Burgess H. Hildreth Florida, United States	Vice President, Human Resources	1998
Gregory A. Yull Florida, United States	President, Tapes & Films Division	2008
Jim Bob Carpenter Florida, United States	President, ECP Division and Executive Vice President, Global Sourcing	2008

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

Melbourne F. Yull was appointed Executive Director in June 2007. From June 14, 2006 to June 28, 2007 he was retired, and prior thereto he was Chairman of the Board of Directors and Chief Executive Officer of the Company.

Bernard J. Pitz was appointed Chief Financial Officer on November 12, 2009. Prior to that he served as the Chief Financial Officer of SonoSite Inc. from May 2008 to October 2008, and also served as its Senior Vice President since May 2008. Prior to that he served as Vice President of Finance, Chief Financial Officer and Treasurer at Sybron Dental Specialties, Inc. since May 11, 2005.

Burgess H. Hildreth has been Vice President, Human Resources, since October, 1998.

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Gregory A. Yull was appointed President, Tapes & Films, in 2008. Prior to that he was President, Distribution Products (Tapes & Films), since October, 2005. Prior to that he served as Executive Vice President, Industrial Business Unit (for tapes and films) since November 2004.

Jim Bob Carpenter was appointed President, ECP Division in 2008. Prior to that he was Executive Vice President, Global Sourcing since January, 2005. Prior to that he served as the President, Woven Products (now ECP), since 1998.

9.2

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

To the knowledge of the Company, no director or executive officer of the Company is, as at the date hereof, or has been within 10 years before the date hereof, a director, chief executive officer or chief financial officer of any company that was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under applicable securities legislation that was in effect for a period of more than 30 consecutive days (a) that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer, or (b) that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial off icer.

To the knowledge of the Company, no director or executive officer of the Company and no shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company: (a) is, as at the date hereof or has been within 10 years prior to the date hereof, a director or executive officer of any company that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets or (b) has, within the 10 years prior to the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or comp romise with creditors, or had a receiver, receiver manager or trustee appointed to hold its assets, except for: Allan H. Cohen, who, as a representative of First Analysis Private Equity Fund IV, was formerly a director of NanoOpto Corporation, an early-stage company which liquidated its assets as a result of a lack of sufficient funding; George J. Bunze, who, as a nominee of Kruger Inc., served as Vice-Chairman of Global Tissue LLC, a Delaware limited liability company acquired in 1999 by an indirect partially-owned subsidiary of Kruger Inc., and which commenced bankruptcy proceedings in 2000 before the U.S. Bankruptcy Court in Delaware; and Eric E. Baker, a former director of AldeaVision Solutions Inc., a company whose shares were listed on the TSX Venture Exchange and which in 2007 filed court proceedings before the Superior Court of Québec for protection under the Companies’ Creditors Arrangement Act (Canada).

Furthermore, to the knowledge of the Company, no director or executive officer of the Company and no shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company has been subject to (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered

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into a settlement agreement with a securities regulatory authority, or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.

As of March 26, 2010, the directors and executive officers of the Company as a group owned beneficially, directly or indirectly, or exercised control or direction over 7,733,004 common shares, representing approximately 7.62% of all common shares issued and outstanding. In addition, the directors and executive officers as a group beneficially own 1,712,346 options to purchase common shares of the Company.

The Board of Directors of the Company 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 National 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. As of the date hereof, the Company’s Audit Committee complies with Canadian National Instrument 52-110-Audit Committees as it is composed of three independent, financially literate directors, namely George J. Bunze, Allan H. Cohen, Ph.D., and Torsten A. Schermer. Further details regarding the Company’s Audit Committee are provided in Item 16 hereof.

The Compensation Committee, as presently constituted, is composed of two directors, namely Robert M. Beil and Torsten A. Schermer.

The Nominating & Governance Committee is composed of all of the members of the Board of Directors of the Company.

Item 10. 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 11. Interest of Management and Others in Material Transactions

The Company is unaware of any material interest of any of its directors or executive officers or of any person who beneficially owns or exercises control or direction over, directly or indirectly, 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 is reasonably expected to 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 executive officers. One loan remains outstanding to Gregory A. Yull, President of Tapes & Films. The balance of such loan as of March 26, 2010, was $107,500.00.

Item 12. 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, Québec, 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 13. 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:

a Loan and Security Agreement dated March 28, 2008, among certain subsidiaries of the Company, the Lenders referred to therein, Bank of America, N.A., as Agent, and Banc of America Securities LLC, as Sole Lead Arranger and Book Manager. For a description of the Loan and Security Agreement please see Item 2, “General Development of the Business”, hereof.

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 accrues and is 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

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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 14. Experts

14.1

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 2009:

Raymond Chabot Grant Thornton LLP; Montreal, Québec

Ernst & Young; Montreal, Québec

Eckler Consultants; Montreal, Québec

14.2

Interests of Experts

None of the experts set forth in Item 14.1 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 15. 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 management 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 & Analysis for the fiscal year ended December 31, 2009. 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 16. Audit Committee

16.1

Audit Committee Charter

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

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16.2

Composition of the Audit Committee

The members of the Audit Committee of Intertape Polymer Group are George J. Bunze, Allan H. Cohen, Ph.D., and Torsten Schermer. Each of the Audit Committee members are independent and financially literate as such terms are defined by Canadian National Instrument 52-110-Audit Committees.

16.3

Relevant Education and Experience

Mr. Bunze graduated from the commerce certification CMA program at McGill University, Montreal, Québec, and is a professional accountant and Certified Management Accountant. Mr. Bunze is the Vice-Chairman and Director and a member of the Executive Committee of Kruger Inc., one of the largest private pulp and paper companies in North America. He also served as the Chief Financial Officer of Kruger Inc. and its various subsidiaries from 1982 to 2003. Mr. Bunze is a Director of Stella-Jones Inc. and Chairman of its Audit Committee. He was previously a Director of B2B Trust Inc. and Chairman of its Audit Committee.

Dr. Cohen earned a Ph.D. in physical chemistry from Northwestern University of Evanston, Illinois, an MBA from the University of Chicago, and a Bachelor’s Degree in chemistry from the State University of New York at Buffalo. Until August 2007, Dr. Cohen was a Managing Director with First Analysis Corporation, a research driven investment organization, where he was employed for fifteen years. He continues to act as a co-manager of the general partner of The First Analysis Private Equity Fund IV, L.P. and on the Boards of two First Analysis private equity portfolio companies, MCubed Technologies, Inc. and Kelatron Corporation. He is also a Director of Doe and Ingalls Management LLC, Hercules Incorporated and IGI Holding Corporation.

Mr. Schermer earned a Bachelor of Arts Degree and an MBA from the University of Hamburg. Mr. Schermer was the General Manager, Eastern Europe, of tesa tape Kft. of Budapest, Hungary. Prior to that he was the President and Chief Executive Officer of tesa tape inc. In 2006, Mr. Schermer founded a franchise development company.

16.4

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.

16.5

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, 2009 and December 31, 2008:

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	Year ended December 31,
	2009	2008
Audit Fees	US$1,196,589	US$1,180,973
Audit-Related Fees	$ 129,515	$ 92,865
Tax Fees	$ 243,656	$ 264,862
All Other Fees	---	---
Total Fees	$1,569,760	$1,538,700

Audit Fees. Audit fees were for professional services rendered for the integrated audits of Intertape Polymer Group’s consolidated financial statements and internal control over financial reporting, 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 consents and assistance and review of documents filed with the Securities and Exchange Commission and Canadian securities regulatory authorities.

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 review and comment to the Company’s responses to inquiry letters received from the different securities commissions in the U.S. and Canada.

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, assistance with questions regarding tax audits from the various taxation authorities in Canada and tax planning relating to common forms of domestic and international taxation (i.e. income tax, capital tax and excise tax).

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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.

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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.

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

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 20-F and Annual Report to Shareholders.

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.

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.

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.

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.

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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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

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

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.

ORLDOCS 11753570 4

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EX-2 3 annualmda2009.htm MD&A FOR 2009 Course: How to File Electronically with the SEC (Basics Course)

Intertape Polymer Group Inc.

Consolidated Financial Statements

December 31^st, 2009, 2008 and 2007

Including Management’s Discussion and Analysis

March 29, 2010

This Management’s Discussion and Analysis (“MD&A”) supplements the consolidated financial statements and related notes for the year ended December 31, 2009. 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.)

(Unaudited)


	2009	2008	2007
Operations	$	$	$
Consolidated sales	615,462	737,155	767,272
Net loss Cdn GAAP	(14,389)	(92,799)	(8,393)
Net loss US GAAP	(14,468)	(93,698)	(8,393)
Cash flows from operations before changes in non-cash working capital items	26,983	25,131	43,205


	2009	2008	2007
Per Common Share
Net loss Cdn GAAP – basic	(0.24)	(1.57)	(0.19)
Net loss US GAAP – basic	(0.25)	(1.59)	(0.19)
Net loss Cdn GAAP – diluted	(0.24)	(1.57)	(0.19)
Net loss US GAAP – diluted	(0.25)	(1.59)	(0.19)
Cash flows from operations before changes in non-cash working capital items	0.46	0.43	0.95
Book value Cdn GAAP	4.03	3.96	6.11
Book value US GAAP	3.80	3.70	5.99


	2009	2008	2007
Financial Position
Working capital	122,279	133,144	145,577
Total assets Cdn GAAP	535,853	575,166	702,799
Total assets US GAAP	538,718	578,598	704,764
Total long-term debt Cdn GAAP	217,002	255,425	243,359
Total long-term debt US GAAP	220,103	255,241	250,180
Shareholders’ equity Cdn GAAP	237,803	233,317	360,010
Shareholders’ equity US GAAP	224,212	218,195	352,992


	2009	2008	2007
Selected Ratios
Working capital	2.75	2.69	2.58
Debt/capital employed Cdn GAAP	0.44	0.52	0.40
Debt/capital employed US GAAP	0.49	0.54	0.41
Return on equity Cdn GAAP	NA	NA	NA
Return on equity US GAAP	NA	NA	NA


	2009	2008	2007
Stock Information
Weighted average shares outstanding (Cdn GAAP) - basic ⁽²⁾	58,951	58,956	45,287
Weighted average shares outstanding (US GAAP) - basic ⁽²⁾	58,951	58,956	45,287
Weighted average shares outstanding (Cdn GAAP) - diluted ⁽²⁾	58,951	58,956	45,287
Weighted average shares outstanding (US GAAP) - diluted ⁽²⁾	58,951	58,956	45,287
Shares outstanding as at December 31 ⁽²⁾	58,951	58,956	58,956


	2009	2008	2007
The Toronto Stock Exchange (CA$)
Share price as at December 31	2.98	1.09	3.07
High: 52 weeks	3.00	3.59	6.40
Low: 52 weeks	0.39	0.67	2.49
Volume: 52 weeks⁽²⁾	11,890	8,665	8,219


	2009	2008	2007
New York Stock Exchange
Share price as at December 31⁽³⁾	2.84	0.73	3.14
High: 52 weeks	2.86	3.47	5.34
Low: 52 weeks	0.30	0.68	2.36
Volume: 52 weeks⁽²⁾	18,626	15,870	18,737


	High	Low	Close	ADV⁽¹⁾
The Toronto Stock Exchange(CA$)
Q1	1.20	0.39	0.49	30,282
Q2	1.35	0.52	1.05	44,775
Q3	2.86	0.90	2.85	51,105
Q4	3.00	1.81	2.98	63,041


	High	Low	Close	ADV⁽¹⁾
The New York Stock Exchange
Q1	1.00	0.30	0.42	41,061
Q2	1.30	0.42	0.90	69,863
Q3	2.65	0.80	2.65	79,492
Q4 ⁽³⁾	2.86	1.70	2.84	103,633

⁽¹⁾ Average daily volume

⁽²⁾In thousands

⁽³⁾ Effective December 3, 2009, the Company voluntarily delisted its shares of common stock from the New York Stock Exchange (the “NYSE”). The Company’s shares of common stock will continue to trade on the Toronto Stock Exchange (the “TSX”). The delisting of the Company’s common shares from the NYSE will not affect the listing of the Company’s shares of common stock on the TSX. The Company believes that the listing of its shares of common stock on the TSX provides shareholders sufficient liquidity and has concluded that the overall trading volume of the Company's shares is not sufficient to justify listing on two exchanges. The Q4 information is as of December 3, 2009.

Management’s Discussion and Analysis

CONSOLIDATED QUARTERLY STATEMENTS OF EARNINGS

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

(Unaudited)


	1st Quarter			2nd Quarter
	2009	2008	2007	2009	2008	2007
	$	$	$	$	$	$
Sales	139,068	184,501	186,835	151,912	197,534	187,109
Cost of sales	124,252	156,324	158,956	130,379	171,184	158,279
Gross Profit	14,816	28,177	27,879	21,533	26,350	28,830
Selling, general and administrative expenses	15,416	17,629	18,321	16,601	17,196	16,676
Stock-based compensation expense	258	421	454	254	329	533
Research and development expense	1,373	1,441	1,025	1,295	1,528	1,161
Financial expenses:
Interest	4,085	5,984	6,705	3,970	4,339	6,453
Other (i)	494	(648)	3	536	(681)	(98)
Refinancing expense		6,031
Manufacturing facility closures, restructuring, strategic alternatives and other charges			2,369			4,415
Impairment of goodwill
	21,626	30,858	28,877	22,656	22,711	29,140
Earnings (loss) before income taxes	(6,810)	(2,681)	(998)	(1,123)	3,639	(310)
Income taxes (recovery):
Current	9	240	174	385	83	463
Future	(167)	(1,058)	(602)	(313)	(1,082)	7,305
	(158)	(818)	(428)	72	(999)	7,768
Net earnings (loss)	(6,652)	(1,863)	(570)	(1,195)	4,638	(8,078)
Earnings (loss) per share
Cdn GAAP - Basic - US $	(0.11)	(0.03)	(0.01)	(0.02)	0.08	(0.20)
Cdn GAAP - Diluted - US $	(0.11)	(0.03)	(0.01)	(0.02)	0.08	(0.20)
US GAAP - Basic - US $	(0.11)	(0.03)	(0.01)	(0.02)	0.08	(0.20)
US GAAP - Diluted - US $	(0.11)	(0.03)	(0.01)	(0.02)	0.08	(0.20)
Weighted average number of common shares outstanding
Cdn GAAP – Basic	58,951,050	58,956,348	40,986,940	58,951,050	58,956,348	40,986,940
Cdn GAAP – Diluted	58,951,050	58,956,348	40,986,940	58,951,050	58,956,348	40,986,940
US GAAP – Basic	58,951,050	58,956,348	40,986,940	58,951,050	58,956,348	40,986,940
US GAAP – Diluted	58,951,050	58,956,348	40,986,940	58,951,050	58,956,348	40,986,940

Management’s Discussion and Analysis

CONSOLIDATED QUARTERLY STATEMENTS OF EARNINGS

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

(Unaudited)


	3rd Quarter			4th Quarter
	2009	2008	2007	2009	2008	2007
	$	$	$	$	$	$
Sales	163,688	201,978	201,875	160,794	153,142	191,453
Cost of Sales	137,295	172,772	170,686	140,617	158,620	163,010
Gross Profit	26,393	29,206	31,189	20,177	(5,478)	28,443
Selling, general and administrative expenses	17,756	17,490	17,508	20,047	15,874	18,664
Stock-based compensations expense	255	348	504	270	170	289
Research and Development	1,449	1,334	1,002	1,488	1,307	947
Financial expenses:
Interest	4,050	4,230	8,561	3,783	3,812	5,706
Other (i)	(525)	806	(316)	(653)	1,948	205
Manufacturing facility closures, restructuring, strategic alternatives and other charges			1,330	1,091
Impairment of goodwill					66,726
	22,985	24,208	28,589	26,026	89,837	25,811
Earnings (loss) before income taxes	3,408	4,998	2,600	(5,849)	(95,315)	2,632
Income taxes (recovery)
Current	155	(374)	353	182	(515)	(111)
Future	1,253	1,153	1,275	2,511	4,993	3,460
	1,408	779	1,628	2,693	4,478	3,349
Net earnings (loss)	2,000	4,219	972	(8,542)	(99,793)	(717)
Earnings (loss) per share
Cdn GAAP – Basic – S$	0.03	0.07	0.02	(0.14)	(1.69)	(0.01)
Cdn GAAP – Diluted-US$	0.03	0.07	0.02	(0.14)	(1.69)	(0.01)
US GAAP – Basic- US$	0.03	0.07	0.02	(0.14)	(1.69)	(0.01)
US GAAP – Diluted-US$	0.03	0.07	0.02	(0.14)	(1.69)	(0.01)
Weighted average number of common shares outstanding
Cdn GAAP – Basic	58,951,050	58,956,348	40,986,940	58,951,050	58,956,348	58,185,756
Cdn GAAP – Diluted	58,981,300	58,956,348	40,986,940	58,951,050	58,956,348	58,185,756
US GAAP – Basic	58,951,050	58,956,348	40,986,940	58,951,050	58,956,348	58,185,756
US GAAP – Diluted	58,381,300	58,956,348	40,986,940	58,951,050	58,956,348	58,185,756

(i) As explained below in the “Changes in Accounting” Policies section of Management’s Discussion and Analysis, prompt pay discounts to suppliers were reclassified from a reduction in other financial expenses to a reduction in cost of sales. The reclassification does not change the reported net earnings (loss) of the Company.

Management’s Discussion and Analysis

ADJUSTED CONSOLIDATED EARNINGS (LOSS)

Adjustments for impairment of goodwill, impairment of property, plant and equipment, unprecedented gross margin compression, refinancing expense and manufacturing facility closures, restructuring, strategic alternatives and other charges.

Years Ended December 31,

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

(Unaudited)


As Reported	2009	2008	2007
	$	$	$
Sales	615.5	737.2	767.3
Cost of sales	532.6	659.0	651.0
Gross profit	82.9	78.3	116.3
Selling, general and administrative expenses	69.8	68.2	71.2
Stock-based compensation expense	1.0	1.3	1.8
Research and development	5.6	5.6	4.1
Financial expenses	15.8	25.8	27.2
Manufacturing facility closures, restructuring, strategic alternatives and other charges	1.1		8.1
Impairment of goodwill		66.7
	93.3	167.6	112.4
Earnings (loss) before income taxes	(10.4)	(89.4)	3.9
Income taxes (recovery)	4.0	3.4	12.3
Net loss	(14.4)	(92.8)	(8.4)


Loss per share – As Reported	2009	2008	2007
Basic	(0.24)	(1.57)	(0.19)
Diluted	(0.24)	(1.57)	(0.19)


Adjustments	2009	2008	2007
Impairment of goodwill		66.7
Impairment of property, plant and equipment	0.1	0.4
Gross margin compression		16.6
Refinancing expense		6.0
Manufacturing Facility Closures, Restructuring, Strategic Alternatives and Other Charges	1.1		8.1

ADJUSTED CONSOLIDATED EARNINGS

Adjustments for impairment of goodwill and manufacturing facility closures, strategic alternatives and other charges.

Years Ended December 31,

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

(Unaudited)


As Adjusted	2009	2008	2007
	$	$	$
Sales	615.5	737.2	767.3
Cost of sales	532.5	642.0	651.0
Gross profit	83.0	95.2	116.3
Selling, general and administrative expenses	69.8	68.2	71.2
Stock-based compensation expense	1.0	1.3	1.8
Research and development expense	5.6	5.6	4.1
Financial expenses	15.8	19.8	27.2
	92.2	94.9	104.3
Earnings (loss) before income taxes	(9.2)	0.3	12.0
Income taxes	4.0	3.4	14.2
Net earnings (loss)	(13.2)	(3.1)	(2.2)
Earnings (loss) per Share - As Adjusted
Basic	(0.22)	(0.05)	(0.05)
Diluted	(0.22)	(0.05)	(0.05)

Note: These tables reconcile consolidated earnings (loss) as reported in the accompanying consolidated financial statements to adjusted consolidated earnings (loss) after the elimination of impairment of goodwill, impairment of property, plant and equipment, unprecedented gross margin compression, refinancing expense and manufacturing facility closures, restructuring, strategic alternatives 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.

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. The Company has two operating divisions, Tapes and Films (“T&F Division”) and Engineered Coated Products (“ECP Division”). The T&F Division 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. The T&F Division designs its specialty products for aerospace, automotive and industrial applications. The T&F Division products are sold to a broad range of industrial and specialty distributors, consumer outlets and large end-users in diverse markets. T&F Division products include carton sealing tapes, including Intertape® pressure-sensitive and water-activated tapes; ind ustrial and performance specialty tapes, including masking, duct, electrical and reinforced filament tapes; ExIFilm® shrink film; and Stretchflex® stretch wrap. The ECP Division manufactures engineered coated fabrics and flexible intermediate bulk containers (“FIBCs”). ECP Division products are sold through a variety of industrial and specialty distributors with a focus on sales to the construction and agricultural markets as well as the flexible packaging market.

During 2009 the Company achieved improved gross margins, and while still reporting a net loss, was able to substantially reduce debt. The global financial crisis and downturn that impacted the fourth quarter of 2008 continued to adversely affect sales especially in the construction and building markets and to a lesser extent the packaging markets. Gross profits and margins improved sequentially for the first three quarters of the year and sales for the fourth quarter of 2009, typically a seasonally lower period, were almost flat with the third quarter of 2009 and 5.0% higher than the fourth quarter of 2008.

Cost reductions, reduced capital expenditures, and more effective working capital management allowed the Company to repurchase a portion of its Senior Subordinate Notes and reduce borrowings under the asset-based loan (“ABL”), resulting in a reduction in financial expenses. The Company reported gross profits of $82.9 million for 2009, an increase of $4.6 million or 6% as compared to $78.3 million for 2008 despite sales decreasing by $121.7 million or 16.5%, from $737.2 in 2008 due to the continued impact of the economic downturn especially in the first half of 2009. Consequently, the Company was able to reduce its debt and current liabilities by $44.4 million in 2009.

As previously announced and as part of its ongoing efforts and objectives to lower costs, the Company decided to close its Hawkesbury, Ontario, Canada manufacturing facility and recorded a charge of $1.1 million in this period. These operations consequently have been transferred to the Truro, Nova Scotia facility in early 2010.

Also as part of its efforts to effectively manage its costs the Company, effective December 3, 2009, voluntarily delisted its shares of common stock from the NYSE. The Company’s shares will continue to trade on the TSX. The delisting of the Company’s common shares from the NYSE will not affect the listing of the Company’s shares on the TSX. The Company believes that the listing of its shares on the TSX provides shareholders sufficient liquidity and has concluded that the overall trading volume of the Company's shares is not sufficient to justify the cost of listing on two exchanges.

For the fiscal year 2009, the Company reported a net loss of $14.4 million ($0.24 per share, both basic and diluted) compared to a net loss of $92.8 million ($1.57 per share, both basic and diluted) for 2008. The significant reduction in net loss for the year ended December 31, 2009 in comparison to 2008 is mainly due to significant non-recurring charges recorded in the fourth quarter of 2008 including goodwill impairment, write-down of inventories to their net realizable value and refinancing expense amounting to $66.7 million, $7.7 million and $6.0 million, respectively.

Customers began moderate restocking initiatives during the fourth quarter of 2009. Accordingly, and with the success of new product offerings, and to a lesser extent, some improvement in the overall economy, the Company experienced growth in sales and made progress toward a return to traditional gross profit levels. Historically, due to seasonality and fewer business days, fourth quarter sales are generally lower than those of the year’s previous quarters, yet 2009 fourth quarter sales almost equaled those of this year’s third quarter. The Company reported a $8.5 million loss ($0.14 per share, both basic and diluted) for the fourth quarter of 2009. Results for the quarter were negatively impacted by several items including increases in resin-based raw materials and $3.4 million of other costs which were higher than normal, compared to a loss of $99.8 million ($1.69 per share, both basic and diluted) for th e fourth quarter of 2008. Adjusted EBITDA for the fourth quarter of 2009 was $7.9 million compared to $3.1 million in the fourth quarter of 2008.

The Company is subject to normal fluctuations in its gross profit margins between periods due to the timing of raw material cost changes and the related changes in Company selling prices. Raw material costs declined more than selling prices in 2009 when compared to 2008. For the first three quarters of 2009, raw material prices reduced more than selling prices relative to 2008.

During the fourth quarter of 2009, pricing pressure had a negative impact on gross margins as the Company was unable to pass on the majority of raw material cost increases to its customers.

The Company undertook several measures in response to the challenges presented by the deep economic downturn that began in 2008. These measures included a reduction in staff, reduction in outside services, and a temporary compensation reduction for salaried employees. The temporary compensation reduction is being reinstated as planned. The Company expects to continue to reduce costs throughout 2010 with its ongoing productivity improvement programs. Not all of the 2010 productivity improvements are expected to contribute to an increase in the Company’s earnings. Some of these cost savings will be offset by continued pricing pressure in the marketplace. The Company introduced several new products in 2009 and began expanding into new markets and expects the combination of new product sales and penetration into new markets to contribute to the Company’s profitability in 2010. The Company also expe cts to continue its debt reduction initiatives in 2010.

Debt Reduction

A focus on making only essential capital expenditures and working capital management, combined with an increase in cash flows from operations before changes in working capital items, allowed the Company to begin a debt reduction initiative. Capital expenditures decreased by 37.6% from $21.0 million for the year 2008 to $13.1 million for the year 2009. Cash flows from operations before changes in working capital items increased by 7.6% from $25.1 million for the year 2008 to $27.0 million for the year 2009. Days Inventory improved from 59 days in the fourth quarter of 2008 to 53 days in the fourth quarter of 2009. Days Sales Outstanding (“DSO’s”) improved from 45 days in the fourth quarter of 2008 to 42 days in the fourth quarter of 2009.

All of the above resulted in free cash flow of $21.8 million in 2009. Free cash flow is a non-GAAP measure which is defined in the reconciliation table below. A portion of this free cash flow was used to repurchase a notional amount of $6.3 million of Senior Subordinated Notes resulting in a reduction of the notional amount of Notes outstanding from $125.0 million to $118.7 million. A net gain of $0.8 million was recorded as a result of the Notes being repurchased at a discount. The future annual reduction in interest expense related to the notes repurchased is $0.5 million. The amount of borrowings under the Company’s asset-based loan decreased by $28.6 million from $114.0 million as of December 31, 2008 to $85.4 million as of December 31, 2009. Total debt decreased by $34.4 million, from $251.4 million as of December 31, 2008 to $217.0 million as of December 31, 2009.

Historical Debt Information

On March 27, 2008 the Company successfully refinanced its Senior Secured Credit Facility, (“Facility”) with a $200.0 million ABL entered into with a syndicate of financial institutions. The amount of borrowings available to the Company under the ABL is determined by its applicable borrowing base from time to time. The borrowing base is determined by calculating a percentage of eligible trade accounts receivable, inventories and property, plant, and equipment. The ABL is priced at libor plus a loan margin determined from a pricing grid. The loan margin declines as unused availability increases. The loan grid ranges from 1.50% to 2.25%. Unencumbered real estate is subject to a negative pledge in favour of the ABL lenders. However, the Company retains the ability to secure financing on all or a portion of its owned real estate and have the negative pledge of the ABL lenders subordinated up t o $35.0 million of real estate mortgage financing. As of December 31, 2009, the Company had secured real estate mortgage financing of $1.8 million, leaving the Company the ability to obtain an additional $33.2 million of real estate mortgage financing. In 2008, and in conjunction with this refinancing, the Company also settled two interest rate swap agreements at a cost of $2.9 million which was also included in the refinancing expense.

With the March 2008 refinancing of the Facility, the Company has no significant debt maturities until March 2013, when the ABL matures. The Company’s remaining $118.7 million Senior Subordinated Notes mature in August 2014.

The Company relies upon the funds generated from operations and funds available to it under its ABL to meet working capital requirements and anticipated obligations under its ABL and the Senior Subordinated Notes and to finance capital expenditures for the foreseeable future. As at December 31, 2009, the Company had cash and unused availability under its ABL totalling $45.1 million.

The ABL has a financial covenant, a fixed charge ratio of 1.0 to 1.0. The ratio compares EBITDA (as defined in the ABL) less capital expenditures and pension plan payments in excess of pension plan expense to the sum of debt service and the amortization of the value of equipment in the borrowing base. The financial covenant becomes effective only when unused availability drops below $25.0 million. Although not in effect, the Company was in compliance with the fixed charge ratio covenant as of December 31, 2009. As of December 31, 2009 the fixed charge coverage ratio was 1.38. To date in the first quarter of 2010, the Company has maintained availability in excess of $25.0 and believes it will remain above the $25.0 million threshold of unused availability during 2010.

Outlook

The Company anticipates sequentially higher EBITDA in the first quarter of 2010 compared to the fourth quarter of 2009. The most significant improvement the Company has seen in the first quarter of 2010 compared to the fourth quarter of 2009, is increased sales and improved product mix. Additionally, the fourth quarter of 2009 included $3.4 million of costs that should not reoccur in the first quarter of 2010

Results of Operations

The following discussion and analysis of operating results includes adjusted financial results for the three years ended December 31, 2009. A reconciliation from the operating results found in the consolidated financial statements to the adjusted operating results discussed herein, a non-GAAP financial measure, can be found in the tables appearing above.

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 6 and 7 hereof.

The net loss for 2009 was $14.4 million compared to a net loss of $92.8 million for 2008. The net loss for 2008 was $92.8 million compared to a net loss for 2007 of $8.4 million. The net loss for 2008 includes a $66.7 million impairment of goodwill and a $6.0 million refinancing expense related to the refinancing of the Company’s Facility with the ABL. In 2009, the Company reported a loss before income taxes of $10.4 million. In 2008, the Company reported a loss before income taxes of $89.4 million, $16.7 million loss exclusive of impairment of goodwill and refinancing expense. In 2007, the Company reported $3.9 million of earnings before income taxes, $12.0 million of earnings exclusive of manufacturing facility closures, restructuring, strategic alternatives and other charges.

Sales

The Company’s sales for 2009 were $615.5 million, a 16.5% decrease compared to $737.2 million for 2008. IPG’s sales for 2008 were $737.2 million, a decrease of 3.9% compared to $767.3 million for 2007. Sales volume (units) decreased approximately 7% and selling prices decreased approximately 6% during the year 2009 compared to the year 2008. Both the T&F and ECP Divisions had a decline in sales volume (units) and dollars from 2008 to 2009, however the ECP Division’s decline was larger than the T&F Division’s.

Sales for the fourth quarter of 2009 totaled $160.8 million, a 5.0% increase compared to $153.1 million for the fourth quarter of 2008. Sales volume (units) increased approximately 14% and selling prices decreased approximately 7% during the fourth quarter of 2009 compared to the fourth quarter of 2008. The increase in sales was attributable to sales volume (units) growth in the T&F division offset by lower average selling prices for both the T&F and ECP Divisions and lower sales volume (units) in the ECP Division. The lower average selling prices were primarily a result of lower market prices for resin based materials.

Gross Profit and Gross Margin

Gross profit totaled $82.9 million in 2009, an increase of 6.0% from 2008. Gross margin was 13.5% in 2009, 10.6% in 2008 and 15.2% in 2007. Gross profit totaled $78.3 million in 2008, a decrease of 32.7% from 2007. As compared to the fourth quarter of 2008, gross margin in the fourth quarter of 2009 was higher primarily as a result of gross margin compression in the fourth quarter of 2008 and higher sales volume (units) in the fourth quarter of 2009. Gross profit for the fourth quarter of 2009 was $20.2 million compared to a gross profit of negative $5.5 million in the fourth quarter of 2008. The significant decline in gross profit for the fourth quarter of 2008 is attributable to approximately $17.3 million in lower sales volumes and $16.6 million due to gross margin compression.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A”) for the year ended December 31, 2009 totaled $69.8 million, an increase of $1.6 million from the $68.2 million incurred for the year ended December 31, 2008. The 2008 SG&A expenses were down $3.0 million from $71.2 million in 2007. As a percentage of sales, SG&A expenses were 11.3%, 9.3% and 9.3% for 2009, 2008 and 2007, respectively.

The 2008 reduction in SG&A was primarily the result of lower professional fees paid to third parties. SG&A was lower in 2007 due to significant staffing reductions.

Included in SG&A expenses are the costs the Company incurs as a consequence of being a public company. These costs totaled $1.8 million, $1.3 million and $2.4 million for the three years ended December 31, 2009, 2008 and 2007.

SG&A expenses were $20.0 million (12.5% of sales) for the fourth quarter of 2009, compared to $15.9 million (10.4% of sales) for the fourth quarter of 2008. The fourth quarter 2009 increase in SG&A primarily related to an increase in selling costs related to higher sales.

Stock-Based Compensation

For 2009, 2008 and 2007, the Company recorded approximately $1.0 million, $1.3 million and $1.8 million, respectively, in stock-based compensation expense related to options granted to employees.

Operating Profit

This discussion presents the Company’s operating profit for 2009, 2008 and 2007. “Operating profit” does not have a standardized meaning prescribed by GAAP in Canada or in 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.

OPERATING PROFIT RECONCILIATION

(In millions of US dollars)

(Unaudited)


	Three months ended December 31,		Year ended December 31,
	2009	2008	2009	2008	2007
	$	$	$	$	$
Gross Profit	20.2	(5.5)	82.9	78.3	116.3
Less: SG&A expenses	20.0	15.9	69.8	68.2	71.2
Less: Stock-based compensation	0.3	0.2	1.0	1.3	1.8
Operating Profit	(0.1)	(21.6)	12.1	8.8	43.3

Operating profit for 2009 amounted to $12.1 million compared to $8.8 million for 2008 and $43.3 million for 2007. The 2009 increase in operating profit compared to 2008 is due to higher gross profit resulting from the non-recurrance of the unprecedented gross margin compression in the fourth quarter of 2008. Operating profit declined in 2008 compared to 2007 by $34.5 million due to lower gross profit.

The Company’s operating profit for the fourth quarter of 2009 was a loss of $0.1 million compared to a loss of $21.6 million for the fourth quarter of 2008.

Manufacturing Facility Closures, Restructuring, Strategic Alternatives and Other Charges

Effective November 10, 2009, the Company decided to terminate the operations of its manufacturing facility located in Hawkesbury, Ontario, Canada (the “Closure”) as part of its ongoing efforts and objectives to lower costs, enhance customer order fulfillment and effectively optimize inventory investment. The terminated operations will be transferred and consolidated into the Company’s manufacturing facility located in Truro, Nova Scotia, Canada in the early part of 2010. In connection with this Closure, the Company incurred severance and other related costs amounting to approximately $1.1 million. This charge was recorded in the Company’s consolidated earnings for the year under the caption manufacturing facility closures, restructuring, strategic alternatives and other charges. In addition, during the year ending December 31, 2010, the Company expects to incur additional charges in connection with this Closure, primarily consisting of site restoration and removal costs, in the amount of approximately $0.3 million.

During 2008, the Company did not incur any such charges.

During 2007, the Company recorded manufacturing facility closures, restructuring, strategic alternatives and other charges totalling $8.1 million including approximately $1.3 million in severance costs associated with the cost reduction initiatives announced by the Company in 2006 and $6.8 million in costs supporting the strategic alternatives review process.

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, in past years the Company performed an annual goodwill impairment test as at December 31. No goodwill impairment test was required as of December 31, 2009 since there was no longer a balance. The Company conducted its annual impairment test at December 31, 2008 and concluded that the goodwill attributable to both reporting units was fully impaired due to the adverse changes in the economic environment existing at that time and the expectation that many of these factors will not improve in the near-term. The goodwill impairment charge for the year ended December 31, 2008 totaled $66.7 million, including $56.5 million related to the T&F Division and $10.2 million related to the ECP Division.

Research and Development

Research and development (“R&D”) remains an important function within the Company. Taken as a percentage of sales, R&D expenses represented 0.9% for 2009, 0.8% for 2008 and 0.5% for 2007. The Company continues to focus its R&D efforts on new products, new technology developments, new processes and formulations for existing products.

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 (recovery); (ii) financial expenses, net of amortization; (iii) refinancing expense, net of amortization; (iv) amortization of other intangibles and capitalized software costs; and (v) depreciation. Adjusted EBITDA is defined as EBITDA before manufacturing facility closures, restructuring, strategic alternatives and other charges, impairment of property, plant and equipment, impairment of goodwill charges and unprecedented gross margin compression. The terms “EBITDA” and “Adjusted EBITDA” do not have any standardized meanings prescribed b y GAAP in Canada or in 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, 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)

(Unaudited)


	Three months ended December 31,		Year ended December 31,
	2009	2008	2009	2008	2007
	$	$	$	$	$
Net Loss – As Reported	(8.5)	(99.8)	(14.4)	(92.8)	(8.4)
Add back:
Financial expenses, net of amortization	2.8	5.6	14.6	18.7	23.9
Refinancing expense, net of amortization				2.9
Income taxes	2.7	4.4	4.0	3.4	12.3
Depreciation and amortization	9.7	9.2	37.7	39.6	38.9
EBITDA	6.7	(80.6)	41.9	(28.2)	66.7
Impairment of property, plant and equipment	0.1	0.4	0.1	0.4
Gross margin compression		16.6		16.6
Manufacturing facility closures, restructuring, strategic alternatives and other charges	1.1		1.1		8.1
Impairment of goodwill		66.7		66.7
Adjusted EBITDA	7.9	3.1	43.1	55.5	74.8

EBITDA was $41.9 million for 2009, ($28.2) million for 2008, and $66.7 million for 2007. Adjusted EBITDA was $43.1 million, $55.5 million, and $74.8 million for 2009, 2008 and 2007, respectively. The Company’s EBITDA for the fourth quarter of 2009 was $6.7 million compared to ($80.6) million for the fourth quarter of 2008. The Adjusted EBITDA was $7.9 million in the fourth quarter of 2009 as compared to $3.1 million in the fourth quarter of 2008. The higher adjusted EBITDA for the fourth quarter 2009 compared to the fourth quarter of 2008 is the result of higher gross profit associated with higher sales.

Financial Expenses

Financial expenses decreased 39.1% to $15.7 million in 2009 from $25.8 million for 2008. The decrease in financial expenses for 2009 was a result of $6.0 million of non-recurrence of refinancing costs, $2.5 million lower interest expense due to lower average borrowings under the asset-based loan, $1.0 million gain on sale of publically traded securities, and $0.8 million net gain related to the repurchase of Senior Subordinated Notes. The Notes had a notional value of $6.3 million and were purchased at a discount in the fourth quarter of 2009. Financial expenses decreased 5.1% to $25.8 million for 2008 as compared to $27.2 million for 2007.

Included in the first quarter of 2008 was a $6.0 million refinancing expense related to the refinancing of the Facility. The refinancing expense includes a $2.9 million loss on the settlement of two interest rate swap agreements. This loss was reclassified from accumulated other comprehensive income (loss) as a result of the discontinuance of the cash flow hedge since the debt being hedged was refinanced and the hedging relationship was thereby terminated. Also included in refinancing expense was $3.1 million of accelerated amortization of debt issue expense incurred in connection with securing the Facility in 2004.

Financial expenses for the fourth quarter of 2009 totaled $3.1 million, a $2.6 million decrease from financial expenses in the fourth quarter of 2008. The decrease was due in part to the net gain on the repurchase of Senior Subordinated Notes in the fourth quarter of 2009 totalling $0.8 million.

Effect of Correction of Prior Period Errors

In the process of preparing the consolidated financial statements for the year ended December 31, 2009, errors were identified in prior period financial statements related to the accounting for trade receivables, medical claims liability, various accruals and employee benefit liabilities, valuation of parts and supplies and accounting for plant maintenance. These items were corrected in the fourth quarter of 2009 and resulted in a charge of approximately $1.4 million. The corrections that most significantly affected the financial results for the fourth quarter of 2009 relate to accounting for trade receivables, which resulted in a charge of $0.8 million, and the increase of the medical claims liability, which resulted in a charge of $0.6 million. The Company concluded that these items were immaterial and did not warrant the restatement of prior periods because they did not materially change the total mix of information fo r the affected periods or materially affect financial trends, individually or in the aggregate.

Charges in the Fourth Quarter of 2009 That Were Higher Than Normal

Results for the fourth quarter of 2009 included $3.4 million of costs which were higher than normal. These costs included $1.4 million related to the correction of accounting errors discussed above, $1.1 million related to the closure of the Hawkesbury, Ontario operations, and other costs which were approximately $0.9 million higher than normal, including outside service fees, litigation, severance, and loss on the disposal of other assets. Approximately $0.3 million of additional costs related to the Hawkesbury closure are expected to be recognized in the first quarter of 2010; however, there are various other costs that are expected to decrease by approximately the same amount.

Income Taxes

In the past three years, the Company’s effective 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. Income tax expense for the fourth quarter of 2009 was a result of expiration of operating losses carry-forward in Canada, non-deductable expenses, and other differences.

As of December 31, 2009, the Company has $36.1 million (CAD$38.0 million) of Canadian operating losses carry-forward expiring in 2010 through 2029, of which $7.9 million (CAD$8.3 million) were not recognized as future income tax assets, and $207.1 million of US federal and state operating losses expiring in 2012 through 2028, of which $38.0 million were not recognized as future income tax assets. Management believes it is more likely than not that it will utilize these operating losses carry-forward before they expire.

Net Earnings (Loss)

For 2009, the Company posted a net loss of $14.4 million as compared to a net loss of $92.8 million in 2008 and $8.4 million in 2007. The significant reduction in net loss for the year ended December 31, 2009 in comparison to 2008 is mainly due to significant non-recurring charges recorded in the fourth quarter of 2008 including a goodwill impairment, write-down of inventories to their net realizable value and refinancing expense amounting to $66.7 million, $7.7 million and $6.0 million, respectively.

The Company reported a net loss of $8.5 million for the fourth quarter of 2009 as compared to a net loss of $99.8 million for the fourth quarter of 2008. The decrease in the net loss for the fourth quarter of 2009 compared to the fourth quarter of 2008 was primarily due to non-recurrence of goodwill impairment in 2009 and an increase in gross profit.

Adjusted net earnings, a non-GAAP financial measure (see table on page 8) amounted to a net loss of $13.2 million for 2009, a net loss of $3.1 million for 2008, and a net loss of $2.2 million for 2007. The Company is including adjusted net earnings here because it believes that adjusted net earnings provides a better comparison of results for the periods presented since it does not take into account impairment of goodwill, impairment of property, plant and equipment, unprecedented gross margin compression, refinancing expense and manufacturing facility closure, restructuring, strategic alternatives and other 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 page 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 in accordance with US GAAP, with the exception that US GAAP does not permit recognition of foreign exchange gains or losses as a result of a partial reduction in investment in foreign self-sustaining operations. Consequently, in accordance with US GAAP, net earnings in 2009 would be a net loss of approximately $14.5 million, a net loss of $93.7 million in 2008 and a net loss of $8.4 million in 2007.

Loss Per Share

Basic and diluted net earnings per share reported in accordance with Canadian GAAP conform in all material respects to amounts that would have been reported had the financial statements been prepared in accordance with US GAAP, with the exception that US GAAP does not permit recognition of foreign exchange gains or losses as a result of a partial reduction in investments in foreign self-sustaining operations. Consequently, in accordance with US GAAP, basic and diluted loss per share would be $0.25 in 2009 compared to basic and diluted loss per share of $1.59 in 2008 and $0.19 in 2007.

The Company reported a loss per share of $0.24 both basic and diluted for 2009 as compared to a loss per share of $1.57 both basic and diluted for 2008. The 2008 loss per share compares to a loss per share of $0.19 both basic and diluted for 2007. The weighted-average number of common shares outstanding for the purpose of the basic and diluted earnings per share calculations was 59.0 million for 2009, 59.0 million for 2008 and 45.3 million for 2007.

The adjusted earnings per share (see table on page 8) for 2009 was a loss per share of $0.22 both basic and diluted compared to a loss per share of $0.05 both basic and diluted for 2008 and to a loss per share of $0.05 both basic and diluted for 2007.

Comprehensive Income (Loss)

Comprehensive income is comprised of net earnings and other comprehensive income. For the years ended December 31, 2009, 2008 and 2007, comprehensive income was $3.5 million, a loss of $127.7 million and income of $21.8 million, respectively. The favorable change is mainly attributable to the strengthening of the Canadian dollar relative to the U.S. dollar in 2009.

Results of Operations-Tapes and Films Division

Sales for the T&F Division for 2009 were $512.8 million, a decrease of 13.4% compared to $592.2 million for 2008. Sales for 2008 were $592.2 million, a decrease of 2.2% compared to $605.7 million for 2007. The T&F Division had a sales volume (unit) decrease of approximately 5% for 2009 and a decrease of 7.9% for 2008. The remainder of the decline in 2009 was largely attributable to selling prices which were approximately 6% lower due to a decline in the market prices for resin based raw materials. The sales volume decrease in 2009 and 2008 were not limited to particular product lines or channels of distribution.

Sales grew sequentially in the second and third quarters of 2009 and were flat from the third quarter to the fourth quarter of 2009 instead of reflecting the usual seasonal decline.

In response to rising raw material costs, the T&F Division instituted substantial selling price increases during the first nine months of 2008. During the fourth quarter of 2008, selling prices declined as raw material costs decreased. Average selling prices for the T&F Division declined less than 1.0% in 2007.

Sales for the T&F Division for the fourth quarter of 2009 totaled $135.3 million, a 10.3% increase from sales in the fourth quarter of 2008 of $122.6 million. Sales volume (units) increased approximately 23% during the fourth quarter of 2009 compared to the prior year. The increase in sales volume was across substantially all product lines.

Gross profit for the T&F Division totaled $76.5 million in 2009, an increase of 13.5% from 2008 gross profit of $67.4 million. Gross profit totaled $67.4 million in 2008, a decrease of 32.0% from $99.1 million in 2007. Gross profit represented 14.9% of sales in 2009, 11.4% in 2008 and 16.4% in 2007.

T&F Division gross profit for the fourth quarter of 2009 totaled $18.8 million at a gross margin of 13.9% compared to ($2.8) million at a gross margin of (2.3%) for the fourth quarter of 2008 reflecting strong unit sales volumes and cost reduction initiatives which were partially offset by price increases of raw materials. The gross profit increase in the fourth quarter of 2009 was due to the increase in sales volume (units) as discussed above and was partially offset by raw material cost increases.


T&F DIVISION EBITDA RECONCILIATION TO NET EARNINGS
(in millions of US dollars)
(Unaudited)
	Three months ended December 31,		Year ended December 31,
	2009	2008	2009	2008	2007
	$	$	$	$	$
Divisional earnings before impairment of goodwill and income taxes	1.8	(16.5)	16.0	8.7	39.2
Depreciation and amortization	7.6	7.5	29.8	29.4	30.1
EBITDA	9.4	(9.0)	45.8	38.1	69.3
Add back gross margin compression in fourth quarter		13.9		13.9
Adjusted EBITDA	9.4	4.9	45.8	52.0	69.3

EBITDA for the T&F Division for 2009, 2008 and 2007 was $45.8 million, $38.1 million and $69.3 million, respectively. The T&F Division’s EBITDA for the fourth quarter of 2009 was $9.4 million compared to ($9.0) million for the fourth quarter of 2008. The increase in EBITDA in the fourth quarter of 2009 compared to the fourth quarter of 2008 is the result of an increase in gross profit to more historical levels. The adjusted EBITDA for 2009 was $45.8 million and for the fourth quarter of 2009 was $9.4 million.

Results of Operations-ECP Division

Sales for the ECP Division for the fourth quarter were $25.5 million, representing a 16.3% decrease compared to $30.5 million for the fourth quarter a year ago. Units and selling prices decreased approximately 13% and 6%, respectively when compared to the fourth quarter of 2008. Lower market prices for resin-based materials combined with pricing pressure continued to impact selling prices during the quarter. For the full-year 2009, sales for the ECP Division totaled $102.6 million compared to $144.9 million for 2008, a 29.2% decrease. Sales volumes for 2009 declined approximately 16% compared to 2008. The remainder of the decline was largely attributable to selling prices, which were approximately 7% lower due to lower market prices for resin-based materials. The launch of new products in the building and residential construction markets and in the waste containment and flexible packaging markets has helped to mitigate so me of the sales decline in existing product lines. The ECP Division had no or very limited presence in these new markets.

Gross profits for the ECP Division for the fourth quarter totaled $1.4 million, representing a gross margin of 5.5%, compared to negative $2.7 million and a gross margin of negative 8.7% for the fourth quarter of 2008 which was impacted by inventory impairment. ECP Division gross profits and gross margins for full-year 2009 and 2008 were $6.4 million (6.3%) and $10.9 million (7.5%), respectively. Gross profit and gross margin were negatively impacted in 2009 by both lower prices and lower volumes, as stated above.


ECP DIVISION RECONCILIATION TO NET EARNINGS
(in millions of US dollars)
(Unaudited)
	Three months ended December 31,		Year ended December 31,
	2009	2008	2009	2008	2007
	$	$	$	$	$
Divisional earnings before impairment of goodwill, one time charges, and income taxes	(2.8)	(5.9)	(6.1)	(2.8)	4.2
Depreciation and amortization	2.0	2.0	6.6	6.4	5.5
EBITDA	(0.8)	(3.9)	0.5	3.6	9.7
Impairment of property plant and equipment and intangible assets			0.1
Add back gross margin compression in fourth quarter		2.7		2.7
Adjusted EBITDA	(0.8)	(1.2)	0.6	6.3	9.7

EBITDA for the ECP Division for 2009, 2008 and 2007 was $0.5 million, $3.6 million and $9.7 million, respectively. The ECP Division’s EBITDA for the fourth quarter of 2009 was negative $0.8 million compared to negative $3.9 million for the fourth quarter of 2008. The adjusted EBITDA for 2009 was $0.6 million and for the fourth quarter of 2009 was negative $0.8 million. Adjusted EBITDA for 2008 removes the impact on the fourth quarter of 2008 gross margin compression.

Results of Operations-Corporate

The Company does not allocate the manufacturing facilities closure, restructuring, strategic alternatives or other charges to the two Divisions. These expenses are retained at the corporate level as are stock-based compensation financial expenses and the cost of being a public company. The unallocated corporate expenses for the three years ended December 31, 2009, 2008, and 2007 totaled $4.6 million, $2.6 million and $4.2 million, respectively.

Off-Balance Sheet Arrangements

The Company maintains no off-balance sheet arrangements except for the interest rate swap agreements, forward foreign exchange contracts and letters of credit issued and outstanding discussed in the sections herein entitled “Currency Risk” and “Bank Indebtedness and Credit Facilities” and in Notes 13 and 21 to the Company’s consolidated financial statements.

Related Party Transactions

Subsequent to the year ended December 31, 2009, the Company entered into agreements with companies controlled by two of the current members of the Board of Directors. These agreements replace the advisory services agreements noted below that expired on December 31, 2009. These agreements require the provision of support services that include the duties of Executive Director and Chairman of the Board and qualify as related party transactions in the normal course of operations, which are measured at the exchange amount.

The Executive Director support services agreement is effective through September 30, 2010 and provides for monthly compensation beginning January 2010 in the amount of $50,000. The Chairman of the Board support services agreement is effective through the earlier of June 30, 2011 or the termination of Mr. Eric Baker’s services as Chairman of the Board and provides for monthly compensation beginning January 2010 in the amount of CDN$25,000.

During the year ended December 31, 2007, the Company entered into three advisory services agreements, two with companies controlled by two current members of the Board of Directors and one with a company controlled by a former senior officer of the Company. The advisory services included business planning and corporate finance activities and qualified as related party transactions in the normal course of operations, which are measured at the exchange amount.

The agreements are with the companies controlled by the two current members of the Board of Directors were effective through December 31, 2009. The agreements provided for monthly compensation beginning January 2008 in the amounts of $75,000 and CDN$100,000 per month for a minimum of at least three months. Beginning April 1, 2008, the Company’s financial commitment relating to the services of two of the three companies was $50,000 and CAD$100,000 per month and remained in effect through December 31, 2009. Effective November 2008, the two companies controlled by the two current members of the Board of Directors each agreed to a 10% reduction in their monthly compensation. This reduction in compensation continued through November 2009.

In connection with these agreements, the Company recorded a charge amounting to approximately $1.7 million ($2.1 million in 2008, nil in 2007) in its consolidated earnings for the year ended December 31, 2009 included under the caption selling, general and administrative expenses.

In addition to the monthly advisory services described above, the agreements provided for a fee to be paid to each of the companies in connection with the Company’s concluded 2007 rights offering. The aggregate fee paid to the companies in connection with the rights offering was $1,050,000 during the year ended December 31, 2007.

Finally, the advisory services agreements provide for an aggregate performance fee payable on July 1, 2010 based on the difference between the average price of the Company’s common shares for the ten trading days prior to July 1, 2010 on the TSX (the “Average Price”) and the Canadian offering price included in the Company’s 2007 rights offering of CDN$3.61 multiplied by an aggregate of 2.2 million, provided that the Average Price exceeds CDN$4.76. This provision survives the expiration of the term of the agreement until July 1, 2010. As at December 31, 2009, the Company’s common share price on the TSX was CDN$2.98.

Effective December 31, 2008, the Company terminated the advisory service agreement with the company controlled by its former senior officer.

Liquidity and Capital Resources

Cash Flow

Cash flows from operations before changes in working capital items increased in 2009 by $1.9 million to $27.0 million from $25.1 million in 2008. Cash flows from operations before changes in working capital items decreased in 2008 to $25.1 million from $43.2 million in 2007. The decrease was due to lower profitability. Cash flows from operations before changes in working capital items for the fourth quarter of 2009 was $3.5 million compared to negative $11.3 million in the fourth quarter of 2008. The increase was due to the increase in profitability as previously discussed.

In 2009, the Company generated cash flows from operating activities of $34.9 million compared to cash flows from operating activities of $20.8 million in 2008. In 2007, the Company generated cash flows from operating activities of $37.8 million. The Company generated cash flows from operating activities in the fourth quarter of 2009 of $24.5 million compared to $12.2 million for the fourth quarter of 2008.

In 2009, changes in working capital items resulted in $7.9 million in net cash flow. For 2009, the most significant use of cash was a decrease in accounts payable and accrued liabilities by $11.7 million. The most significant source of cash was a $16.3 million decrease in inventories. Changes in working capital items resulted in $21.0 million in net cash flow in the fourth quarter of 2009. During the fourth quarter, trade accounts receivable provided $8.1 million of cash, inventories provided $4.0 million of cash and accounts payable and accrued liabilities provided $8.1 million of cash. There are changes in non-cash working capital items between the balance sheet dates that are not reflected in the cash flows. These changes are the impact of foreign currency translation adjustments between balance sheet dates and do not have an impact on changes in working capital items presented in the consolidated cash flow s statements.

In 2008, non-cash working capital items used $4.3 million in net cash flow. Trade receivables provided $12.3 million in net cash flow, $6.6 million was used in the building of inventories, and $7.7 million decrease in accounts payable and accrued liabilities.

Cash flows used in investing activities was $12.9 million for 2009 as compared to $21.8 million for 2008 and $18.7 million for 2007. These investing activities include a use of funds for property, plant and equipment of $13.1 million for 2009, $21.0 million for 2008 and $18.5 million for 2007. Other assets provided $0.1 million during 2009, and used $0.8 million during 2008 and $1.3 million in 2007. Cash flows used in investing activities was $3.2 million for the fourth quarter of 2009 compared to $3.7 million for the fourth quarter of 2008, a decrease of $0.5 million.

Cash flows used by financing activities totaled $34.3 million in 2009 due to repayment of long-term debt. Cash flows from financing activities provided $2.4 million in 2008 compared to $22.1 million used in 2007. The Company raised $60.9 million net of expense from the September 2007 rights offering. These funds were used to reduce long-term debt in the third and fourth quarters of 2007 by $60.9 million. The Company also made a $15.6 million principal payment in March 2007 in satisfaction of its 2006 “excess cash flow payment” obligation under its Facility.

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 was $21.8 million in 2009, compared to ($0.2) million in 2008. The increase in free cash flow in 2009 was primarily the result of the increase in profitability for the year. Free cash flow was ($0.2) million in 2008, a decline of $19.5 million from $19.3 million in 2007. The Company is including free cash flow because it is used by Management and 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 in 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 en couraged to review this reconciliation.

FREE CASH FLOW RECONCILIATION

(In millions of US dollars)


	2009	2008	2007
	$	$	$
Cash Flows From Operating Activities	34.9	20.8	37.8
Less: Capital Expenditures	13.1	21.0	18.5
Free Cash Flow	21.8	(0.2)	19.3

Working Capital

As at December 31, 2009, working capital stood at $122.3 million, as compared to $133.1 million as at December 31, 2008. The decrease of $10.8 million was primarily due to decreased cash and inventories offset by decreased accounts payable and accrued liabilities.

Quick assets, which are the Company’s total current assets excluding prepaid expenses, derivative financial instruments, assets held for sale, and future income taxes, decreased by $24.8 million during 2009 to a level of $175.1 million, and decreased by $22.9 million during 2008 to a level of $199.9 million. The 2009 as well as the 2008 decrease was primarily due to the decline in trade accounts receivables and inventories.

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. 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 the buying opportunities the Company took advantage of in the fourth quarter of 2009 and 2007 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. A significant amount of working capital is also held in trade receivables.

One of the metrics the Company uses to measure inventory performance is Days Inventory. One of the metrics the Company uses to measure trade receivables is DSO’s. Both Inventory Days and DSO’s improved in the fourth quarter of 2009 as compared to the fourth quarter of 2008. The calculations are shown in the following tables:


	For the Quarter Ended December 31			For the Quarter Ended December 31
	2009	2008		2009	2008
	$	$		$	$
Cost of Goods Sold	140.6	158.6	Sales	160.8	153.1
Days in Quarter	92	92	Days in Quarter	92	92
Cost of Goods Sold Per Day	1.53	1.72	Sales Per Day	1.75	1.66
Average Inventories	80.8	101.9	Trade Receivables	74.2	75.5
Days Inventory	53	59	DSO’s	42	45

Days Inventory is calculated as follows:

Cost of Goods Sold ÷Days in Quarter = Cost of Goods Sold Per Day

(Beginning Inventory + Ending Inventory) ÷ 2 = Average Inventory

Average inventory ÷ Cost of Goods Sold Per Day = Days Inventory

DSO’s is calculated as follows:

Sales ÷ Days in Quarter = Sales Per Day

Ending Balance of Trade Receivables ÷ Sales Per Day = DSO’s

Currency Risk

As disclosed in Note 21 to the accompanying consolidated financial statements, the Company employs significant net assets in its foreign Canadian self-sustaining operations and to a lesser degree in its foreign European self-sustaining operations. Accordingly, changes in the exchange rates between the respective functional currencies of these operations and the Company’s US dollar reporting currency will result in significant fluctuations in the net assets of these operations in US dollar terms. The effect of these fluctuations is reported in the Company’s consolidated other comprehensive income (loss).

In September 2009, the Company executed a series of twelve new monthly forward foreign exchange rate contracts to purchase an aggregate CDN$20.0 million beginning in February 2010, at fixed foreign exchange rates ranging from CDN$1.0934 to CDN$1.0952 to the US dollar. These contracts will mitigate the Company’s foreign exchange rate risk associated with a portion of anticipated monthly inventory purchases of the Company’s US self-sustaining foreign operations that are to be settled in Canadian dollars (the “Purchases”). The Company designated these contracts as cash flow hedges, effectively mitigating the cash flow risk associated with the settlement of the Purchases.

The Company settled contracts to purchase approximately CDN$40.0 million during the year ending December 31, 2009, resulting in a decrease of $1.8 and $2.6 million of cost of sales for the three months, and year ended December 31, 2009

Accordingly, included in the Company’s consolidated earnings for the year ending December 31, 2009 is $1.1 million under the caption cost of sales, representing the gain on these Terminated Contracts, which had been previously recognized in accumulated other comprehensive income as a result of applying hedge accounting and a loss of $0.1 million under the caption financial expenses – other, representing the change in fair value of these Terminated Contracts arising subsequent to the Company’s Management decision to terminate its designation of these specific hedging relationships.

Additionally, the Company is subject to foreign exchange rate risks through transactions conducted by its Canadian, US and European operations, which are conducted in currencies other than the functional currencies of the entities earning the revenues or

incurring the expenses. Changes in the exchange rates may result in decreases or increases in foreign exchange gains or losses recorded in the Company’s consolidated earnings (loss) for the year. In 2008, the Company executed a series of 36 monthly forward foreign exchange rates contracts to purchase an aggregate CDN$40.0 million beginning in February 2009, at fixed exchange rates ranging from CDN$1.1826 to CDN$1.2808 to the US dollar.

Capital Expenditures

Total property, plant and equipment expenditures were $13.1 million, $21.0 million and $18.5 million for the years 2009, 2008 and 2007, 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 and expand its markets.

Long-Term Debt and Financial Derivatives

As discussed under the section “Liquidity”, on March 27, 2008 the Company successfully refinanced its Facility with a $200.0 million ABL entered into with a syndicate of financial institutions. The amount of borrowings available to the Company under the ABL is determined by its applicable borrowing base from time to time. The borrowing base is determined by calculating a percentage of eligible trade accounts receivable, inventories and machinery and equipment. As at December 31, 2009, the Company had borrowed $88.0 million under its ABL, including $2.6 million in letters of credit. As at December 31, 2008, $118.3 million had been borrowed under the revolving line of credit portion of the ABL, including $4.3 million in letters of credit. When combined with on-hand cash and cash equivalents, the Company had total cash and credit availability of $45.1 million as at December 31, 2009 and $50.7 million as at December 31, 2008. The decrease in total cash and credit availability between December 31, 2009 and December 31, 2008 was primarily due to the decline in availability under the ABL at December 31, 2009 as a result of the cash used for the repurchase of some of the Senior Subordinated Notes in Q4 of 2009.

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, 2009:


	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	213.6	1.2	4.0	206.8	1.6
Capital (Finance) Lease Obligations	8.8	0.8	1.4	1.1	5.5
Operating Lease Obligations	10.6	2.5	4.3	3.2	0.6
Purchase Obligations
Other Long-Term Liabilities Reflected on Balance Sheet under GAAP of the primary financial statements	1.1		1.1
Total	234.1	4.5	10.8	211.1	7.7

Capital Stock

As at March 26, 2010 there were 58,951,050 common shares of the Company outstanding.

On August 26, 2008, the Company announced that the TSX had approved its 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 2,947,817 of its common shares. The NCIB commenced on August 28, 2008 and remained in effect until August 27, 2009. During the year ended December 31, 2008 and 2009, the Company’s common shares repurchased for cancellation under the NCIB were insignificant. The Company believes that the purchase of its own common shares may, in appropriate circumstances, be a responsible investment of available funds on hand.

Distribution Rights Purchase Agreement

As part of acquiring the distribution rights, the Company also made future performance commitments. Additional considerations or penalties are to be paid based on these commitments. However, within the first two years of the purchase agreement, the automatic wrapping system must achieve certain market acceptance parameters or the Company has the right to renegotiate the future performance commitments with the vendor and if such renegotiation is not concluded on terms satisfactory to the Company, then the future performance commitments will not be binding on the Company. As at December 31, 2009, the Company (i) was not in a position to determine, beyond a reasonable doubt, the outcome of its commitment and (ii) concluded that the vendor retains future performance obligations under the provisions of the agreement. Accordingly, the Company will account for these contingencies upon their resolution.

Pension and Post-Retirement Benefit Plans

IPG’s pension and post retirement benefit plans currently have an unfunded deficit of $21.0 million as of December 31, 2009 as compared to $20.9 million at the end of 2008. For 2009 and 2008, the Company contributed $3.4 million and $5.8 million, respectively to its funded pension plans and to beneficiaries for its unfunded other benefit plans. The Company may need to divert certain of its resources in the future in order to resolve this funding deficit but expects to meet its pension benefit plan funding obligations in 2010 through cash flows from operations.

Dividend on Common Shares

No dividends were declared on the Company’s stock in 2009, 2008 or 2007.

Critical Accounting Estimates

The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the recorded amounts of assets and liabilities and disclosure of contingent assets and liabilities as at the consolidated balance sheet date and the recorded amounts of revenues and expenses during the year then ended. On an ongoing basis, management reviews its estimates based on currently available information. Actual results may differ from those estimates.

Key areas of estimation, where management has made difficult, complex or subjective judgments, often as a result of matters that are inherently uncertain, are the allowance for doubtful accounts, the ability to use income tax losses and other future income tax assets, allowance for obsolete and slow moving inventories, net realizable value of inventories, useful lives of long-lived assets, the assumptions underlying the Company’s pension and post-retirement benefits, stock-based compensation fair value model, accounting for asset retirement obligation, the assumptions inherent in the determination of certain accrued liabilities, the estimated future cash flows and projections in connection with the impairment tests of intangible assets and property, plant and equipment and accounting for contingencies.

Significant changes in the underlying assumptions could result in significant changes to these 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 long lived assets using projected future undiscounted cash flows and comparing those cash flows to the net book value of these assets when changes in events and circumstances indicate a possible impairment of certain assets or group of assets.

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

On January 1, 2009, in accordance with the applicable transitional provisions, the Company adopted the new recommendations of the Canadian Institute of Chartered Accountants (“CICA”) Handbook Section 3064 “Goodwill and Intangible Assets”, Emerging Issues Committee Abstract No. 173 “Credit Risk and Fair Value of Financial Assets and Financial Liabilities” (“EIC-173”) and revision release No. 54, which, among others, contains several amendments to Sections 3862, “Financial Instruments – Disclosures”.

Goodwill and Intangible Assets

Section 3064, “Goodwill and Intangible Assets”, replaces Section 3062, “Goodwill and Other Intangible Assets” and Section 3450, “Research and Development Costs”. This Section establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets. The provisions of this Section, relating to the definition and initial recognition of intangible assets, are equivalent to the corresponding provisions under International Financial Reporting Standards (“IFRS”). Section 1000, “Financial Statement Concepts”, was also amended to provide consistency with this new Section. This Section applies to interim and annual consolidated financial statements relating to fiscal years beginning on or after October 1, 2008. The adoption of this Section had no material effect on the Company’s consolidated financial result and position. The additional di sclosures required by this new Section have been included in Note 11 to these consolidated financial statements.

Credit Risk and the Fair Value of Financial Assets and Financial Liabilities

EIC-173, “Credit Risk and the Fair Value of Financial Assets and Financial Liabilities” clarifies that an entity’s own credit risk and the credit risk of its counterparty should be taken into account in determining the fair value of financial assets and liabilities. EIC-173 applies to all financial assets and liabilities and derivative financial instruments measured at fair value in interim and annual consolidated financial statements for periods ending on or after January 20, 2009. The adoption of EIC-173 did not have a material impact on the Company’s consolidated financial statements or on the fair value determination of its financial assets and liabilities, including derivative financial instruments.

Financial Instruments Disclosures and Presentation

Revisions release No. 54, includes several amendments to Section 3862 “Financial Instruments - Disclosures”. This Section has been amended to primarily include additional disclosure requirements with respect to the fair value measurements of financial instruments and liquidity risk. The amendments to this Section apply to annual consolidated financial statements for fiscal years ending on or after September 30, 2009. The Company included the additional disclosures in Note 21 to these consolidated financial statements. Comparative disclosures were not included and are not required for the first year of adoption.

Impact of Accounting Pronouncements Not Yet Implemented

Business Combinations

Section 1582, “Business Combinations” replaces Section 1581 of the same title. This Section establishes new standards for the accounting for a business combination. This Section constitutes the GAAP equivalent to the corresponding IFRS. This Section shall be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011 and the Company will adopt this new Section as of such date upon its conversion to IFRS. Earlier adoption is permitted. The Company is currently evaluating the impact of adoption of this new Section on its consolidated financial statements and on future business combinations.

Consolidated Financial Statements

Section 1601, “Consolidated Financial Statements” and Section 1602, “Non-Controlling Interests” together replace Section 1600, “Consolidated Financial Statements”. Section 1601 establishes standards for the preparation of consolidated financial statements. Section 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in the consolidated financial statements subsequent to a business combination. These Sections constitute the GAAP equivalent to the corresponding IFRS. These Sections apply to interim and annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011 and the Company will adopt these new Sections as of such date upon its conversion to IFRS. Earlier adoption is permitted

as of the beginning of a fiscal year. The Company is currently evaluating the impact of adoption of these new Sections on its consolidated financial statements.

International Financial Reporting Standards (“IFRS”)

In 2008, the Canadian Accounting Standards Board (“AcSB”) announced that, as at January 1, 2011, publicly-accountable enterprises will be required to adopt IFRS. Accordingly, the Company will adopt these new standards during its fiscal year beginning on January 1, 2011. The AcSB also stated that, during the transition period, enterprises will be required to provide comparative IFRS information for the previous fiscal year.

The Company’s IFRS transition process consists of four principle phases as follows:

1- Preliminary Assessment and Planning

2- Detailed Evaluation

3- Defining the Solution

4- Implementation

The Company completed phase one in 2008 and has made progress on, and is in the process of finalizing, phase two of its transition plan, which involves evaluating the impact of the conversion, training key personnel, as well as, identifying the changes to the Company’s accounting policies, systems, processes and internal control over financial reporting. Initial work on phase three has begun concurrently and accordingly, the Company expects to meet all milestones required for the completion of the conversion to IFRS. The Company’s first consolidated financial statements in accordance with IFRS will be its interim consolidated financial statements as of March 31, 2011 and the three month period then ended, which will include the comparative period of 2010.

Although the Company completed its preliminary assessment of accounting and reporting differences and impact on processes and systems, it has yet to finalize this assessment. As this assessment is completed, additional disclosures will be included in future MD&A.

Set out below are the key areas where changes in accounting policies are expected and may possibly impact the Company’s consolidated financial statements. The list and any comments should not be regarded as all inclusive of the changes resulting from the IFRS transition since it is only intended to highlight areas of a significant impact.

Property, Plant and Equipment

First-time Adoption of International Financial Reporting Standards (IFRS 1) permits an entity to revalue any individual item of property, plant and equipment at fair value at the date of transition or account for property, plant and equipment as if the requirements of International Accounting Standards (IAS) 16 had always been applied. While the requirements under Canadian GAAP do not differ significantly from IAS 16, the company is currently evaluating IFRS requirements to calculate depreciation for each significant component of property, plant and equipment.

Capitalized Interest

IFRS 1 permits an entity to apply the transitional provisions of IAS 23 to capitalized borrowing costs related to all qualifying assets on or after the date of transition.

3 Pension Accounting

IFRS 1 permits an entity to elect to recognize all cumulative actuarial gains (losses) for all defined benefit plans.

Foreign Exchange

IFRS 1 permits an entity to reset to zero all cumulative translation differences arising on monetary items that form part of their net investment in a foreign operation. If this exemption is adopted, all cumulative translation gains and losses would be reset to zero at the transition date through an adjustment to opening retained earnings.

Disclosure Controls and Internal Control over Financing Reporting

The Executive Director and Chief Financial Officer of the Company conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting as of December 31, 2009. They concluded based on such evaluation that, as of December 31, 2009 the Company maintained in all material respects, effective disclosure controls

and procedures and internal control over financial reporting to ensure that material information regarding this MD&A and other required filings were made known to them on a timely basis.

The Executive Director and Chief Financial Officer have also reviewed whether any change in the Company’s internal control over financial reporting occurred during 2009 that materially affected, or was reasonably likely to materially affect, the Company’s internal control 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.

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.

Forward-Looking Statements

Certain statements and information included in this Management’s Discussion & Analysis constitute forward-looking information within the meaning of applicable Canadian securities legislation and the United States Federal Private Securities Litigation Reform Act of 1995.

Forward-looking statements may relate to the Company’s future outlook and anticipated events, the Company’s business, its operations, financial condition or results. Particularly, statements about the Company’s objectives and strategies to achieve those objectives are forward looking statements. While these statements are based on certain factors and assumptions which management considers to be reasonable based on information currently available to it, they may prove to be incorrect. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements. The risks include, but are not limited to, the factors contained in the Company’s filings with the Canadian securities regulators and the U.S. Securities and Exchange Commission. While the Company may elect to, it is under no obligation (and expressly disclaims any such obligation) and does not undertake to update or alter this information at any particular time. This Management’s Discussion & Analysis contains certain non-GAAP financial measures as defined under SEC rules, including adjusted net earnings, EBITDA, adjusted EBITDA, adjusted operating results and operating profit. The Company believes such non-GAAP financial measures improve the transparency of the Company’s disclosures, provide a meaningful presentation of the Company’s results from its core business operations, by 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 reconciliations of those measures to the most directly comparable GAAP measures.

EX-3 4 annual2009financialstatement.htm ANNUAL 2009 FINANCIAL STATEMENTS documents longs avec Long documents avec table des matières

Intertape Polymer Group Inc.

Consolidated Financial Statements
December 31, 2009 and 2008

Management’s Responsibility for Financial
Statements

2 – 3

Management’s Report on Internal Control over
Financial Reporting

4 – 5

Independent Auditors’ Report

6 – 7

Financial Statements

Consolidated Earnings

Consolidated Comprehensive Income (Loss)

Consolidated Shareholders’ Equity

10 – 11

Consolidated Cash Flows

Consolidated Balance Sheets

Notes to Consolidated Financial Statements

14 – 73

Management’s Responsibility for Financial Statements

The consolidated financial statements of Intertape Polymer Group Inc. and 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.

Management is responsible for the design, establishment and maintenance of appropriate internal control and procedures over financial reporting, to ensure that financial statements for external purposes are fairly presented in conformity with generally accepted accounting principles. Pursuant to these internal control and procedures, processes have been designed to ensure that the Company’s transactions are properly authorized, the Company’s assets are safeguarded against unauthorized or improper use, and the Company’s transactions are properly recorded and reported to permit the preparation of the Company’s consolidated financial statements in conformity with generally accepted accounting principles.

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 consolidated 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 consolidated financial statements and annual report and once approved, recommend that the Board of Directors approve them, examine internal control over financial reporting 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 the external auditors to review their audit plan and discuss the results of their examination. The Audit

Committee is also responsible for recommending the appointment of the external auditors or the renewal of their engagement.

The Company’s external independent auditors, Raymond Chabot Grant Thornton LLP were appointed by the shareholders at the Annual Meeting of Shareholders on June 29, 2009, to conduct the audit of the Company’s consolidated financial statements. Their report indicating the scope of their audit and their opinion on the consolidated financial statements follows.

/s/ Melbourne F. Yull

Melbourne F. Yull
Executive Director

/s/ Bernard J. Pitz

Bernard J. Pitz
Chief Financial Officer

Sarasota/Bradenton, Florida and Montreal, Canada
March 26, 2010

Management’s 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 to accounting principles generally accepted in the United States of America.

Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements.

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.

Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009 based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2009 based on those criteria.

The Company is not required to have, nor has engaged its external independent auditors, Raymond Chabot Grant Thornton LLP, to perform an audit of the Company’s internal control over financial reporting. Accordingly, the Company’s external independent auditors express no such opinion on the Company’s internal control over financial reporting as of December 31, 2009.

/s/ Melbourne F. Yull

Melbourne F. Yull
Executive Director

/s/ Bernard J. Pitz

Bernard J. Pitz
Chief Financial Officer

Sarasota/Bradenton, Florida and Montreal, Canada
March 26, 2010

Independent Auditors’ Report

To the Shareholders of
Intertape Polymer Group Inc.

We have audited the consolidated balance sheets of Intertape Polymer Group Inc. as at December 31, 2009 and 2008 and the consolidated statements of earnings, comprehensive income (loss), shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2009. 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.

With respect to the consolidated financial statements for the year ended December 31, 2009, we conducted our audit in accordance with Canadian generally accepted auditing standards. With respect to the consolidated financial statements for the years ended December 31, 2008 and 2007, we conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for t he purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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 financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2009 and 2008 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2009 in accordance with Canadian generally accepted accounting principles.

/s/ Raymond Chabot Grant Thornton LLP¹

Montreal, March 26, 2010

____________________________

¹ Chartered accountant auditor permit no. 20518

Intertape Polymer Group Inc.

Consolidated Earnings

Years ended December 31, 2009, 2008 and 2007
(in thousands of US dollars, except per share amounts)


	2009	2008	2007
	$	$	$
Sales	615,462	737,155	767,272
Cost of sales	532,543	658,900	650,931
Gross profit	82,919	78,255	116,341

Selling, general and administrative expenses	69,820	68,189	71,169
Stock-based compensation expense (Note 15)	1,037	1,268	1,780
Research and development expenses	5,605	5,610	4,135
Financial expenses
Interest	15,888	18,365	27,425
Other	(148)	1,425	(206)
Refinancing (Note 13)		6,031
Manufacturing facility closures, restructuring, strategic alternatives, and other charges (Note 4)	1,091		8,114
	93,293	100,888	112,417
Earnings (loss) before impairment of goodwill and income taxes	(10,374)	(22,633)	3,924
Impairment of goodwill (Note 12)		66,726
Earnings (loss) before income taxes	(10,374)	(89,359)	3,924
Income taxes (recovery) (Note 5)
Current	731	(566)	878
Future	3,284	4,006	11,439
	4,015	3,440	12,317
Net loss	(14,389)	(92,799)	(8,393)

Loss per share (Note 6)
Basic	(0.24)	(1.57)	(0.19)
Diluted	(0.24)	(1.57)	(0.19)

The accompanying notes are an integral part of the consolidated financial statements and Note 3 provides additional information on consolidated earnings.

Intertape Polymer Group Inc.

Consolidated Comprehensive Income (Loss)

Years ended December 31, 2009, 2008 and 2007
(in thousands of US dollars)


	2009	2008	2007
	$	$	$
Net loss	(14,389)	(92,799)	(8,393)
Other comprehensive income (loss)
Changes in fair value of interest rate swap agreements, designated as cash flow hedges (net of future income taxes of nil; $1,733 in 2008; 964 in 2007)	(1,747)	(2,950)	(1,641)
Settlement of interest rate swap agreements, recorded in the consolidated earnings (net of income taxes of nil; $1,080 in 2008)	1,812	1,840
Changes in fair value of investment in publicly traded securities designated as available-for-sale	1,044
Gain on sale of investment in publicly traded securities recorded in the consolidated earnings	(1,044)
Changes in fair value of forward foreign exchange rate contracts, designated as cash flow hedges (net of future income taxes of nil; $151 in 2008)	3,640	(257)
Settlement of forward foreign exchange rate contracts, recorded in the consolidated earnings (net of income taxes of nil)	(1,489)
Gain on forward foreign exchange rate contracts recorded in the consolidated earnings pursuant to recognition of the hedged item in cost of sales upon discontinuance of the related hedging relationships (net of income taxes of nil)	(1,103)
Reduction in net investment in a foreign subsidiary (Note 3)	(125)	(899)
Changes in accumulated currency translation adjustments	16,868	(32,644)	31,824
Other comprehensive income (loss)	17,856	(34,910)	30,183
Comprehensive income (loss) for the year	3,467	(127,709)	21,790

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

Intertape Polymer Group Inc.

Consolidated Shareholders’ Equity

Years ended December 31, 2009, 2008 and 2007
(in thousands of US dollars, except for number of common shares)


	Common shares
	Number	Amount	Contributed surplus	Deficit	Accumulated other comprehensive income	Total shareholders’ equity
		$	$	$	$	$
Balance as at December 31, 2006	40,986,940	287,323	9,786	(59,532)	36,141	273,718
Cumulative impact of accounting changes relating to financial instruments and hedges				443	1,138	1,581
Balance as at December 31, 2006, as restated	40,986,940	287,323	9,786	(59,089)	37,279	275,299
Shares issued pursuant to shareholders’ rights offering (Note 15)	17,969,408	60,851				60,851
Stock-based compensation expense			1,780			1,780
Accelerated vesting of stock options			290			290
Net loss				(8,393)		(8,393)
Changes in fair value of interest rate swap agreements, designated as cash flows hedges					(1,641)	(1,641)
Changes in accumulated currency translation adjustments					31,824	31,824
Balance as at December 31, 2007	58,956,348	348,174	11,856	(67,482)	67,462	360,010
Cumulative impact of accounting changes relating to inventories				(252)		(252)
Balance as at December 31, 2007, as restated	58,956,348	348,174	11,856	(67,734)	67,462	359,758
Stock-based compensation expense			1,268			1,268
Net loss				(92,799)		(92,799)
Changes in fair value of interest rate swap agreements, designated as cash flow hedges					(2,950)	(2,950)
Settlement of interest rate swap agreements, recorded in the consolidated earnings					1,840	1,840
Changes in fair value of forward foreign exchange rate contracts, designated as cash flow hedges					(257)	(257)
Reduction in net investment in a foreign subsidiary					(899)	(899)
Changes in accumulated currency translation adjustments					(32,644)	(32,644)
Balance as at December 31, 2008	58,956,348	348,174	13,124	(160,533)	32,552	233,317

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

Intertape Polymer Group Inc.

Consolidated Shareholders’ Equity

Years ended December 31, 2009, 2008 and 2007
(in thousands of US dollars, except for number of common shares)


	Common shares
	Number	Amount	Contributed surplus	Deficit	Accumulated other comprehensive income	Total shareholders’ equity
		$	$	$	$	$

Balance as at December 31, 2008 (balance carried forward)	58,956,348	348,174	13,124	(160,533)	32,552	233,317
Repurchase of common shares (Note 15)	(5,298)	(31)		13		(18)
Stock-based compensation expense			1,037			1,037
Net loss				(14,389)		(14,389)
Changes in fair value of interest rate swap agreements, designated as cash flow hedges					(1,747)	(1,747)
Settlement of interest rate swap agreements					1,812	1,812
Changes in fair value of investment in publicly traded securities designated as available-for-sale					1,044	1,044
Gain on sale of investment in publicly traded securities recorded in the consolidated earnings					(1,044)	(1,044)
Changes in fair value of forward foreign exchange rate contracts, designated as cash flow hedges					3,640	3,640
Settlement of forward foreign exchange rate contracts, recorded in the consolidated earnings					(1,489)	(1,489)
Gain on forward foreign exchange rate contracts recorded in the consolidated earnings pursuant to recognition of the hedged item in cost of sales					(1,103)	(1,103)
Reduction in a net investment in a foreign subsidiary					(125)	(125)
Changes in accumulated currency translation adjustments					16,868	16,868
Balance as at December 31, 2009	58,951,050	348,143	14,161	(174,909)	50,408	237,803

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

Intertape Polymer Group Inc.

Consolidated Cash Flows

Years ended December 31, 2009, 2008 and 2007
(in thousands of US dollars)


	2009	2008	2007
	$	$	$
*OPERATING ACTIVITIES*
Net loss	(14,389)	(92,799)	(8,393)
Non-cash items
Depreciation and amortization	37,486	36,538	38,902
Accretion expense – asset retirement obligation	40
Impairment of goodwill		66,726
Loss on disposal of property, plant and equipment	501	532	460
Property, plant and equipment impairment and other charges in connection with manufacturing facility closures, restructuring, strategic alternatives and other charges	1,091		1,373
Write-off of debt issue expenses in connection with debt refinancing		3,111
Write-down of inventories	1,105	7,703
Reversal of a portion of a write-down of inventories	(2,082)
Impairment of property, plant and equipment	94	424
Write-down on classification as asset held-for-sale	123
Impairment of intangible assets	32
Future income taxes	3,284	4,006	11,439
Stock-based compensation expense	1,037	1,268	1,780
Pension and post-retirement benefits funding in excess of amounts expensed	1,308	(1,479)	(2,356)
Gain on forward foreign exchange rate contracts	(650)
Changes in fair value of forward foreign exchange rate contracts upon discontinuance of the related hedging relationships	3
Unrealized foreign exchange loss	(76)
Gain on sale of publicly traded securities	(1,044)
Gain on repurchase of Senior Subordinated Notes	(818)
Foreign exchange gain resulting from the reduction in net investment in a foreign subsidiary	(125)	(899)
Other	63
Cash flows from operations before changes in working capital items	26,983	25,131	43,205
Changes in working capital items
Trade receivables	3,177	12,310	9,545
Other receivables	1,231	(1,491)	(791)
Inventories	16,272	(6,556)	(18,736)
Parts and supplies	(441)	(1,306)	(817)
Prepaid expenses	(606)	364	515
Accounts payable and accrued liabilities	(11,706)	(7,664)	4,835
	7,927	(4,343)	(5,449)
Cash flows from operating activities	34,910	20,788	37,756

*INVESTING ACTIVITIES*
Property, plant and equipment	(13,141)	(21,048)	(18,470)
Proceeds on the disposal of property, plant and equipment	18	3,202	1,376
Proceeds on disposal of investment in publicly traded securities	1,044
Other assets	125	(795)	(1,308)
Intangible assets	(939)	(3,207)
Goodwill			(300)
Cash flows from investing activities	(12,893)	(21,848)	(18,702)

*FINANCING ACTIVITIES*
Long-term debt	13,953	160,119	73
Repurchase of Senior Subordinated Notes and related expenses	(5,317)
Debt issue expenses		(2,777)	(2,269)
Repayment of long-term debt	(42,928)	(154,952)	(80,738)
Repurchase of common shares	(18)
Proceeds from shareholders’ rights offering			62,753
Shareholders’ rights offering costs			(1,902)
Cash flows from financing activities	(34,310)	2,390	(22,083)
Net increase (decrease) in cash	(12,293)	1,330	(3,029)
Effect of foreign currency translation adjustments	574	(1,469)	1,259
Cash, beginning of year	15,390	15,529	17,299
Cash, end of year	3,671	15,390	15,529

*SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION*
Interest paid	15,754	20,264	25,513
Income taxes paid	548	364	378

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

Intertape Polymer Group Inc.

Consolidated Balance Sheets

December 31, 2009 and 2008
(in thousands of US dollars)


	2009	2008
	$	$
*ASSETS*
Current assets
Cash	3,671	15,390
Trade receivables	74,161	75,467
Other receivables (Note 7)	3,052	4,093
Inventories (Note 8)	79,001	90,846
Parts and supplies	15,203	14,119
Prepaid expenses	3,693	3,037
Derivative financial instruments (Note 21)	1,438
Asset held-for-sale	149
Future income taxes (Note 5)	11,860	9,064
	192,228	212,016
Property, plant and equipment (Note 9)	274,470	289,763
Other assets (Note 10)	21,869	22,364
Intangible assets (Note 11)	3,550	3,956
Future income taxes (Note 5)	43,736	47,067
	535,853	575,166

*LIABILITIES*
Current liabilities
Accounts payable and accrued liabilities	68,228	78,249
Installments on long-term debt (Note 13)	1,721	623
	69,949	78,872
Long-term debt (Note 13)	215,281	250,802
Pension and post-retirement benefits (Note 17)	10,200	9,206
Derivative financial instruments (Note 21)	1,548	2,969
Other liabilities (Note 14)	1,072
	298,050	341,849
*SHAREHOLDERS’ EQUITY*
Capital stock (Note 15)	348,143	348,174
Contributed surplus	14,161	13,124

Deficit	(174,909)	(160,533)
Accumulated other comprehensive income (Note 16)	50,408	32,552
	(124,501)	(127,981)
	237,803	233,317
	535,853	575,166

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


On behalf of the Board of Directors,

/s/ George Bunze		/s/ Allan Cohen
George Bunze, Director		Allan Cohen, Director

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

1 –

GOVERNING STATUTES AND NATURE OF ACTIVITIES

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

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

On November 12, 2009, the Company delivered a notice to the NYSE that it intended to voluntarily delist its common shares trading thereon. Accordingly, the Company filed a notification on Form 25 with the US Securities and Exchange Commission (“SEC”). On December 3, 2009, the withdrawal of the Company’s common shares from listing on the NYSE became effective. The Company’s common shares continue to trade on the TSX.

The delisting from the NYSE did not affect the Company’s registration with the SEC. The Company will continue to file and furnish reports with the SEC.

The Company will continue to comply with, and be subject to, the federal laws of Canada, as well as the Canadian securities laws and corporate governance rules applicable to Canadian publicly listed companies, including the rules of the TSX.

2 –

ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements are expressed in US dollars and are 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 (“US GAAP”), as presented in Note 22.

Accounting Changes

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

2 –

ACCOUNTING POLICIES (Continued)

Goodwill and Intangible Assets

Section 3064, “Goodwill and Intangible Assets”, replaces Section 3062, “Goodwill and Other Intangible Assets” and Section 3450, “Research and Development Costs”. This Section establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets. The provisions of this Section, relating to the definition and initial recognition of intangible assets, are equivalent to the corresponding provisions under International Financial Reporting Standards (“IFRS”). Section 1000, “Financial Statement Concepts”, was also amended to provide consistency with this new Section. This Section applies to interim and annual consolidated financial statements relating to fiscal years beginning on or after October 1, 2008. The adoption of this Section had no material effect on the Company’s consolidated financial result and position. The additional disclosures required by this new Section have been included in Note 11 to these consolidated financial statements.

Credit Risk and the Fair Value of Financial Assets and Financial Liabilities

Financial Instruments Disclosures and Presentation

Accounting Estimates and Measurement Uncertainty

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

2 –

ACCOUNTING POLICIES (Continued)

Significant changes in the underlying assumptions could result in significant changes to these 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. Foreign exchange gains and losses in connection with intercompany transactions, which are not designated as part of the Company’s net investment in its self-sustaining foreign operations, are included in the determination of net earnings for the year.

Financial Assets and Liabilities

Financial instruments are measured at fair value on initial recognition. The measurement of financial instruments in subsequent periods depends on their classification. The classification of the Company’s financial instruments in the various classes is presented in the following table:


Class		Financial instruments
Assets held for trading		Cash
Loans and receivables		Trade receivables Other receivables ⁽¹⁾Loan to an officer
Other financial liabilities		Accounts payable Long-term debt

⁽¹⁾

Excluding income, sales and other taxes

Assets held for trading are recognized at fair value on the consolidated balance sheet.

Loans and receivables are recorded at amortized cost. Subsequent measurement of trade receivables are recorded at amortized cost, which usually corresponds to the amount initially recorded less any allowance for doubtful accounts. Subsequent measurement of other receivables is recorded at amortized cost using the effective interest method, including any impairment thereof.

Accounts payable are measured at amortized cost using the effective interest method and the gains and losses resulting from their subsequent measurement, at the end of each year, are recognized in net earnings.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

2 –

ACCOUNTING POLICIES (Continued)

Long-term debt is measured at amortized cost using the effective interest method. The amount recorded upon initial recognition corresponds to the notional amount of the long-term debt, representing its fair value, less the related debt issue expenses, with the exception of debt issue expenses incurred in connection with a line of credit or a revolving long-term credit agreement, such as the Company’s asset based loan (“ABL”), which are capitalized and amortized, using the straight-line method, over the term of the ABL.

Hierarchy of Financial Instruments

The Company categorizes its financial instruments, measured at fair value in the consolidated balance sheet, including its financial assets, financial liabilities and derivative financial instruments, into a three-level fair value measurement hierarchy as follows:

Level 1: The fair value is determined directly by reference to unadjusted quoted prices in active markets for identical assets and liabilities. The financial asset included in this level is cash.

Level 2: The fair value is estimated using a valuation technique based on observable market data, either directly or indirectly. This level includes the Company’s derivative financial instruments composed of its interest rate swap agreements and forward foreign exchange rate contracts, which are valued using a pricing model supported by market inputs.

Level 3: The fair value is estimated using a valuation technique based on unobservable data. As at December 31, 2009, the Company does not have any financial assets, financial liabilities or derivative financial instruments, which should be included in this level.

Derivative Financial Instruments

The Company uses derivative financial instruments to mitigate or eliminate the risks inherent in certain transactions and identifiable balances that arise in the normal course of business. Derivative financial instruments are primarily utilized by the Company to reduce interest rate risk on its long-term debt and foreign exchange risk on certain of its inventory purchases. The Company uses derivative financial instruments to ensure unfavourable fluctuations in cash flows are offset by changes in cash flows from derivative financial instruments. The Company does not enter into derivative 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 and inventory purchases, including the related settlement thereof. The Company believes that the derivative financial instruments are effective as cash flow hedges, both at inception and over the term of the instrument, since all critical terms in the derivative financial instruments match the terms of the debt instrument and inventory purchases, including the related settlement thereof, being hedged. The Company formally documents all relationships between the hedging items and the hedged items. The Company also assesses the effectiveness of the hedging relationships each quarter, both prospectively and retroactively.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

2 –

ACCOUNTING POLICIES (Continued)

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.

Forward foreign exchange rate contracts are used as part of the Company’s program to manage the exchange risk associated with certain monthly inventory purchases of the Company’s US self-sustaining foreign operations, which are settled in Canadian dollars. Foreign exchange rate gains and losses resulting from the updating of the accounts payable related to these purchases or the settlement thereof are included in the determination of net earnings for the year along with the corresponding amounts reclassified from accumulated other comprehensive income representing the changes in fair value of the related forward foreign exchange contracts. Upon the sale of the inventories, any remaining amounts in accumulated other comprehensive income relating to these purchases, are included in the determination of net earnings for the year as an increase or decrease to cost of sales.

The effective portion of changes in the fair value of a financial instrument designated as a hedge is recognized in other comprehensive income (loss) and gains and losses related to the ineffective portion, if any, are immediately recognized in net earnings with the related hedged item. Amounts previously included as part of other comprehensive income (loss) are reclassified to net earnings with the hedged item in the period during which the changes in cash flow of the hedged item impact net earnings. Hedge accounting is discontinued prospectively when a derivative instrument ceases to satisfy the conditions for hedge accounting, is sold or liquidated or the Company terminates the designation of the hedging relationship. If the hedged item ceases to exist, unrealized gains or losses recognized in other comprehensive income (loss) are reclassified to net earnings.

Embedded Derivatives

An embedded derivative that is not closely related to the host contract should be separated and classified as a financial instrument held for trading. It is recorded at fair value and subsequent changes in the fair value are recognized in consolidated earnings. As at December 31, 2009 and 2008, the Company does not have any hybrid instruments that include an embedded derivative to be separated from the host contract.

Comprehensive Income

Comprehensive income is the change in equity or net assets of the Company during the period from transactions and other instruments and circumstances from non-owner sources and comprises the Company’s net earnings and other comprehensive income. Other comprehensive income comprises items that are recognized in comprehensive income, but excluded from the determination of net earnings, primarily including exchange gains and losses on net investments in self-sustaining foreign operations and changes in the fair value of financial instruments designated as cash flow hedges. The components of comprehensive income are presented in consolidated comprehensive income (loss).

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

2 –

ACCOUNTING POLICIES (Continued)

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 the balance sheet date and revenues and expenses have been translated at the average rate during the year then ended. All translation gains or losses of the Company’s net equity investments in these operations have been included in accumulated other comprehensive income in the consolidated balance sheet.

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 rates 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 or losses on financial assets and liabilities are recognized in net earnings.

Revenue Recognition

Revenue from product sales is recognized when there is persuasive evidence of an arrangement (purchase order was received from the customer), the amount is fixed or determinable (pre-established price list with customers), delivery of the product to the customer has occurred (generally, FOB shipping point), there are no uncertainties surrounding product acceptance and collection of the amount is considered probable (credit worthiness of customers regularly evaluated). Title to the product 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 are met.

Stock Options

The Company has a stock-based compensation plan that grants stock options to employees and directors. Stock-based compensation expense is measured at fair value, as at the date of the grant, and is recognized over the vesting period of the options granted. Any consideration paid by employees and directors on exercise of stock options is credited to capital stock together with any related stock-based compensation expense originally recorded in contributed surplus. Forfeitures are estimated at the time of the grant and are subsequently adjusted to reflect actual events.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

2 –

ACCOUNTING POLICIES (Continued)

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 stock 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

Cash includes cash on account and demand deposits.

Accounts Receivable

Credit is extended based on evaluation of a customer’s financial condition. For certain customers, the Company may require a (i) cash on delivery arrangement or (ii) collateral. Accounts receivable are stated at amounts due from customers based on agreed upon payment terms, net of an allowance for doubtful accounts.

Inventories and Parts and Supplies

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

Parts and supplies are valued at the lower of cost and replacement cost, less any allowance for obsolescence.

Asset held-for-sale

Asset held-for-sale is presented at the lower of their carrying amount or fair value less cost to sell and are not depreciated or amortized.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated amortization and the applicable investment tax credits earned and are depreciated over their estimated useful lives or, if lower, over the terms of the related leases using the straight-line method over the following years:


				Years

Buildings and building under capital lease				15 to 40
Manufacturing equipment				5 to 20
Computer equipment and software				3 to 10
Furniture, office equipment and other				3 to 7

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

2 –

ACCOUNTING POLICIES (Continued)

The Company follows the policy of capitalizing interest during the construction and preproduction periods as part of the cost of significant property, plant and equipment. Normal repairs and maintenance are expensed as incurred. Expenditures constituting betterment to the assets by way of change in capacities or extension of useful lives are capitalized. Depreciation is not charged on new property, plant and equipment until they are placed into service.

Other Assets

Debt issue expenses, incurred in connection with the Company’s ABL, are capitalized and amortized, using the straight-line method, over the term of the ABL. Other deferred charges are amortized on a straight-line basis over the period of future benefit not exceeding 5 years as at December 31, 2009.

Intangible Assets

Intangible assets consist of distribution rights and customer contracts acquired through an asset acquisition. The Company amortizes these intangible assets over their estimated useful lives, of six years, using the straight-line method.

Impairment of Long-lived Assets

Long-lived assets, such as property, plant and equipment and intangible assets, subject to amortization, are tested for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. The carrying amount of a long-lived asset is not recoverable when it exceeds the sum of the undiscounted cash flows expected from its use and eventual disposal. In such a case, an impairment loss must be recognized and is equivalent to the excess of the carrying amount of a long-lived asset over its fair value.

Transaction Costs

Transaction costs with respect to financial instruments not classified as held-for-trading, with the exception of a line of credit or a revolving long-term credit agreement, are recorded as an adjustment to the cost of the underlying financial instruments, when they are recognized, and are amortized using the effective interest rate method.

Transaction costs incurred in connection with the securing of a line of credit or a revolving long-term credit agreement are capitalized as part of other assets, on the consolidated balance sheet, and subsequently amortized, using the straight-line method, over the term of the related long-term credit agreement.

Transaction costs with respect to equity instruments are recorded as a reduction of the proceeds received.

Environmental Costs

The Company expenses, as incurred, recurring costs associated with managing hazardous substances in ongoing operations.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

2 –

ACCOUNTING POLICIES (Continued)

Other Liabilities

An asset retirement obligation is recorded in connection with the estimated future costs to restore a leased property to the same condition, which existed at the inception of the lease agreement. These costs are based on the lease term, external quotes for similar removal activities and the lease conditions and requirements. A discounted liability is recorded representing the fair value of an asset retirement obligation with a corresponding increase to a long-lived asset. The liability and the corresponding long-lived asset are recorded on the Company’s consolidated balance sheet under the captions other liabilities and property, plant and equipment, respectively. The initial recorded asset retirement obligation, which has been discounted using the Company’s credit-adjusted risk free rate, are reviewed periodically to reflect the passage of time and changes in the estimated future costs u nderlying this liability. The Company amortizes the amount capitalized to property, plant and equipment on a straight-line basis over the lease term and recognizes accretion expense in connection with the discounted liability over the same period.

Pension and Post-Retirement Benefits

The Company has defined benefit and defined contribution pension plans and other post-retirement benefit plans for its employees in both Canada and the US.

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. Market-related value of assets as at December 31 is determined based on the assets’ market value adjusted by a certain percentage, ranging from 20% to 80%, of the assets gains (losses) from the prior four years, resulting in values within 80% to 120% of the assets actual market value. Assets gains (losses) represent the difference between the assets’ market value and their expected value. The assets’ expected value is determined as a function of the assets’ prior year’s market value adjusted for contributions, benefits paid and interest rate at the valuation date;

–

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 and from changes in actuarial assumptions used to determine the accrued benefit obligation. The excess of the net accumulated actuarial gains (losses) over 10% of the greater of the benefit obligations and the market-related value or the fair value of plan assets is amortized over the average remaining service period of active employees covered by the plans;

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

2 –

ACCOUNTING POLICIES (Continued)

–

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 at 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 plan for which the Company has insufficient information to apply defined benefit plan accounting.

Income Taxes

The Company accounts 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 Not Yet Implemented

As at March 26, 2010, certain new primary sources of GAAP (“standards”) have been published but are not yet in effect. The Company has not early adopted any of these standards. The new standards which could potentially impact the Company’s consolidated financial statements are detailed as follows:

–

Business Combinations

–

Consolidated Financial Statements

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

3 –

ADDITIONAL INFORMATION REGARDING CONSOLIDATED EARNINGS


	2009	2008	2007
	$	$	$
Interest
Interest on long-term debt	15,453	18,079	24,856
Amortization of debt issue expenses on long-term debt ⁽⁵⁾	1,094	934	2,646
Accretion expense	40
Interest on credit facilities	46	244	237
Amortization of debt issue expenses on credit facilities ⁽⁵⁾		141	698
Interest capitalized to property, plant and equipment	(745)	(1,033)	(1,012)
	15,888	18,365	27,425


Other
Foreign exchange gain resulting from the reduction in net investment in a foreign subsidiary ⁽¹⁾	(125)	(899)
Foreign exchange loss (gain)	(46)	1,689	(996)
Interest income and other financial expenses	1,644	635	790
Gain on sale of investment in publicly traded securities ⁽²⁾	(916)
Changes in fair value of forward foreign exchange rate contracts upon discontinuance of the related hedging relationships	113
Gain on repurchase of Senior Subordinated Notes (Note13)	(818)
	(148)	1,425	(206)


Depreciation of property, plant and equipment	35,570	35,174	35,313
Amortization of other deferred charges	106	117	245
Amortization of intangible assets	716	172
Impairment of property, plant and equipment ⁽⁶⁾	94	424
Write-down on classification as asset held-for-sale	123
Impairment of intangible assets ⁽⁶⁾	32
Loss on disposal of property, plant and equipment	501	532	460
Write-down of inventory to net realizable value ⁽³⁾	1,105	7,703
Reversal of a portion of a write-down of inventories to net realizable value, recognized as a reduction of cost of sales ⁽⁴⁾	(2,082)
Investment tax credits recorded as a reduction of research and development expenses	53	170	355

⁽¹⁾

The Company reclassified from consolidated accumulated other comprehensive income, a foreign exchange gain amounting to $0.1 million ($0.9 million in 2008) as a result of a partial repayment of notes previously advanced to one of the Company’s self-sustaining foreign operations (the “Subsidiary”). This repayment ultimately reduced the Company’s net investment in this Subsidiary.

⁽²⁾

In July 2009, the Company sold its investment in publicly traded securities, and accordingly, recorded in its consolidated earnings a non-cash gain amounting to approximately $1.0 million ($0.1 million was included under the caption cost of sales).

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

3 –

ADDITIONAL INFORMATION REGARDING CONSOLIDATED EARNINGS (Continued)

⁽³⁾

For the year ended December 31, 2008, this amount includes a write-down of raw material inventories to be purchased pursuant to unfavourable (onerous) firm purchase commitments entered into by the Company amounting to approximately $2.3 million (nil in 2009). The Company’s management determined that the cost of the related finished goods, in which such raw materials will be ultimately incorporated into upon their consumption in the production process, exceed their net realizable value and accordingly, warrant a write-down.

⁽⁴⁾

Representing the reversal of a portion of previously recorded write-down of inventories to net realizable value recognized as a reduction of costs of sales, including certain raw materials to be purchased by virtue of firm purchase commitments. The Company’s management determined that circumstances, prevailing as at December 31, 2008, ceased to exist during the year ended December 31, 2009, whereby, the subsequent sale of these inventories have demonstrated a sufficient level of profitability to warrant the reversal of a portion of the initial write-down to net realizable value. The increased profitability was primarily due to an improved relationship between selling prices and raw material costs.

⁽⁵⁾

The year ended December 31, 2007, includes amounts of approximately $1.2 million and $0.3 million representing the write-off of a portion of debt issue expenses as a result of a repayment of a portion of the initial term loan and a reduction in credit availability under the revolving credit facility, respectively. Both the term loan and the revolving credit facility were successfully refinanced in March 2008 as described in Note 13.

⁽⁶⁾

In the course of the year ended December 31, 2009, the Company recorded an impairment charge in connection with the properties located at its Hawkesbury, Ontario, Canada manufacturing facility, which was closed in the latter part of 2009. The Company obtained independent appraisals for these assets and accordingly concluded that an impairment charge amounting to approximately $0.1 million is warranted to reflect the expected salvage value, less the cost to sell, these assets. In addition, the Company recorded an impairment charge amounting to approximately $32,000 with respect to its customer contracts intangible asset due to the bankruptcy of the related customer.

4 –

MANUFACTURING FACILITY CLOSURES, RESTRUCTURING, STRATEGIC ALTERNATIVES AND OTHER CHARGES

Year ended December 31, 2009

Effective November 10, 2009, the Company decided to terminate the operations of its manufacturing facility located in Hawkesbury, Ontario, Canada (the “Closure”) as part of its ongoing efforts and objectives to lower costs, enhance customer order fulfillment and effectively optimize inventory investment. The terminated operations will be transferred and consolidated into the Company’s manufacturing facility located in Truro, Nova Scotia, Canada in the early part of 2010. In connection with this Closure, the Company incurred severance and other related costs amounting to approximately $1.1 million. This charge was recorded in the Company’s consolidated earnings for the year under the caption manufacturing facility closures, restructuring, strategic alternatives and other charges. In addition, during the year ending December 31, 2010, the Company expects to incur additional charges in c onnection with this Closure, primarily consisting of site restoration and removal costs, in the amount of approximately $0.3 million.

During the year ended December 31, 2009, the Company settled, in non-cash charges and cash payments, previously recorded obligations relating to such activities amounting to nil and $0.1 million, respectively.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

4 –

MANUFACTURING FACILITY CLOSURES, RESTRUCTURING, STRATEGIC ALTERNATIVES AND OTHER CHARGES (Continued)

As at December 31, 2009, the Company’s outstanding obligation in connection with its manufacturing facility closures, restructuring, strategic alternatives and other charges, included in accounts payable and accrued liabilities, on the Company’s consolidated balance sheet, amounted to approximately $1.2 million.

Year ended December 31, 2008

During the year ended December 31, 2008, the Company did not incur any additional costs in connection with its manufacturing facility closures, restructuring, strategic alternatives and other charges given that the Company had substantially completed all announced activities as at December 31, 2007.

During the year ended December 31, 2008, the Company settled, in non-cash charges and cash payments, previously recorded obligations relating to such activities amounting to approximately $0.5 million and $0.8 million, respectively. In addition, and based on newly available information, the Company revised its estimate regarding the site restoration obligation recorded in connection with the Brighton, Colorado manufacturing facility which closed in 2006. This estimate revision resulted in a reduction of the related obligation in the amount of $0.7 million.

As at December 31, 2008, the Company’s outstanding obligation in connection with its manufacturing facility closures, restructuring, strategic alternatives and other charges, included in accounts payable and accrued liabilities, on the Company’s consolidated balance sheet, amounted to approximately $0.4 million ($0.3 million and $0.1 million relating to site restoration and restructuring, respectively).

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

4 –

MANUFACTURING FACILITY CLOSURES, RESTRUCTURING, STRATEGIC ALTERNATIVES AND OTHER CHARGES (Continued)

Year ended December 31, 2007

The following table describes the significant charges incurred by the Company in connection with its strategic alternative and restructuring processes, included in the Company’s consolidated statement of earnings for the year ended December 31, 2007 under the caption manufacturing facility closures, restructuring, strategic alternatives and other charges.


		Manufacturing facility closures
		Severance and other labour related costs	Site restoration	Restructuring	Other charges	Total
		$	$	$	$	$
Balance as at January 1, 2007 included in accounts payable and accrued liabilities		272	2,394	3,162	335	6,163

Staffing reductions	(a)			1,327		1,327
Strategic alternatives process	(b)				6,787	6,787
				1,327	6,787	8,114

Cash payments		272	1,140	3,308	6,832	11,552
Non-cash payments					290	290
		272	1,140	3,308	7,122	11,842
Balance as at December 31, 2007 included in accounts payable and accrued liabilities			1,254	1,181		2,435

(a)

In connection with the cost reduction initiatives commenced in 2006, the Company recorded $1.3 million in severance and other labour related costs with respect to the staffing reductions undertaken by the Company. With respect to staffing reductions, the Company had incurred a total of $7.3 million as at December 31, 2007.

(b)

At the annual and special meeting of shareholders held on June 28, 2007, the Company’s shareholders rejected, by a vote of approximately 70%, a special resolution providing for the sale of all the outstanding common shares of the Company, thereby terminating the strategic alternative process, which commenced in the latter part of 2006. In connection with the strategic alternative process and the termination thereof, the Company recorded a charge of approximately $5.5 million, bringing the total related cost to approximately $6.1 million. The $5.5 million incurred in 2007 is comprised of a $1.8 million termination fee paid to the rejected acquirer and $3.7 million paid in professional fees and other charges incurred in connection with this process.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

4 –

MANUFACTURING FACILITY CLOSURES, RESTRUCTURING, STRATEGIC ALTERNATIVES AND OTHER CHARGES (Continued)

In addition, the Company’s Interim Chief Executive Officer retired in the second half of 2007. In connection with his retirement, the Company recorded a charge of approximately $1.1 million including $0.1 million in stock-based compensation expense and $1.0 million representing the recognition of the balance of his pension obligation. In addition, the Company’s Chief Financial Officer retired on June 30, 2007. With respect to his retirement, the Company recorded a charge of approximately $0.2 million in stock-based compensation expense.

The Company has substantively completed all announced restructurings and plant closures, as well as, strategic alternative activities.

5 –

INCOME TAXES

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


	2009	2008	2007
	%	%	%
Combined federal and provincial income tax rate	34.2	34.0	33.9
Foreign earnings taxed at higher income tax rates	(1.0)	1.4	4.0
Losses accounted for at lower income tax rates	(1.9)		3.7
Expiration of operating losses	(48.2)
Change in income tax rates			121.1
Impairment of goodwill		(19.0)
Non-deductible expenses	(6.5)		41.5
Impact of other differences	(18.8)	(0.9)	44.2
Change in valuation allowance	3.5	(19.3)	65.6
Effective income tax rate	(38.7)	(3.8)	314.0

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(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:


	2009	2008
	$	$
Future income tax assets
Trade and other receivables	335	61
Inventories	779	1,251
Property, plant and equipment	12,001	8,549
Accounts payable and accrued liabilities	1,725	1,358
Derivative financial instruments		1,099
Tax credits, losses carry-forward and other tax deductions	101,128	105,597
Pension and post-retirement benefits	676	275
Goodwill	11,373	12,339
Other	1,545	599
Valuation allowance	(24,633)	(24,295)
	104,929	106,833
Future income tax liabilities
Property, plant and equipment	48,658	50,448
Pension and post-retirement benefits	675	254
	49,333	50,702
Total net future income tax assets	55,596	56,131

Net current future income tax assets	11,860	9,064
Net long-term future income tax assets	43,736	47,067
Total net future income tax assets	55,596	56,131

As at December 31, 2009, the Company has $36.1 million (CAD$38.0 million) of Canadian operating losses carry-forward expiring in 2010 through 2029, of which $7.9 million (CAD$8.3 million) were not recognized as future income tax assets, and $207.1 million of US federal and state operating losses expiring in 2012 through 2028, of which $38.0 million were not recognized as future income tax assets.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

5 – INCOME TAXES (Continued)

The following table presents the year of expiration of the Company’s operating losses carried forward as at December 31, 2009:


	Canada		United States
	Federal	Provincial
	$	$	$
2010	7.8	7.8
2012			2.1
2014	1.4	1.4
2015	2.3	2.3
2018			4.6
2019			15.0
2020			11.9
2021			50.9
2022			33.9
2023			34.8
2024			9.1
2026	7.0	7.0	27.4
2027	5.0	5.0
2028	2.5	2.5	17.4
2029	10.1	10.1
	36.1	36.1	207.1

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, 2009, to be realized as a result of the reversal of existing taxable temporary differences, projections of taxable income and the implementation of tax planning strategies.

As at December 31, 2009, management concluded that no significant revisions were required with respect to its assessment of the recoverability of the Company’s future income tax assets and accordingly, there was no significant change to the valuation allowance.

These future income tax assets are available to the Company in order to reduce taxable income in future periods.

During the year ended December 31, 2008, the Company’s management revised its assessment of the recoverability of the Company’s future income tax assets. Accordingly, the Company recorded a $10.0 million net increase to its future income tax assets valuation allowance consisting primarily of the following: i) a $16.5 million increase with respect to the long-term uncertainties inherent in the worldwide credit crisis and economic slowdown existing at the end of 2008, ii) a $5.5 million decrease in connection with the improved financial performance of the Company’s Engineered Coated Products Division and management’s ability to take advantage of certain income tax planning strategies and iii) a $1.0 million decrease regarding the foreign exchange impact due to the significant weakening of the Canadian dollar.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

6 –

EARNINGS PER SHARE


	2009	2008	2007
	$	$	$
Net loss	(14,389)	(92,799)	(8,393)

Weighted average number of common shares outstanding	58,951,050	58,956,348	45,286,644

Loss per share
Basic	(0.24)	(1.57)	(0.19)
Diluted	(0.24)	(1.57)	(0.19)

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:

7 –

OTHER RECEIVABLES


	2009	2008
	$	$
Income and other taxes	268	390
Supplier rebates receivable	1,200	1,438
Sales taxes	870	827
Other	714	1,438
	3,052	4,093

8 –

INVENTORIES


	2009	2008
	$	$
Raw materials	23,713	23,645
Work in process	15,006	19,706
Finished goods	40,282	47,495
	79,001	90,846

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

9 –

PROPERTY, PLANT AND EQUIPMENT


	2009
	Cost	Accumulated depreciation	Net
	$	$	$
Land	3,900		3,900
Buildings	80,762	43,208	37,554
Manufacturing equipment	527,587	307,807	219,780
Computer equipment and software	68,732	59,059	9,673
Furniture, office equipment and other	2,855	2,719	136
Construction in progress	3,427		3,427
	687,263	412,793	274,470


	2008
	Cost	Accumulated depreciation	Net
	$	$	$
Land	3,708		3,708
Buildings	76,498	35,897	40,601
Manufacturing equipment	489,713	273,620	216,093
Computer equipment and software	66,850	52,088	14,762
Furniture, office equipment and other	2,687	2,579	108
Construction in progress	14,491		14,491
	653,947	364,184	289,763

Included in property, plant and equipment are assets under capital leases, primarily a building and computer hardware, with cost and accumulated amortization of $12,149 and $6,219, respectively ($11,782 and $5,269, respectively in 2008).

10 –

OTHER ASSETS


	2009	2008
	$	$
Debt issue expenses and other deferred charges, at amortized cost	2,011	3,115
Loan to an officer	108	108
Accrued pension benefit asset	10,808	10,866
Employees relocation program	60	91
Investment tax credits recoverable	6,291	5,621
Funds held in guarantor trust to satisfy future pension obligation	1,614	1,748
Other	977	815
	21,869	22,364

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

11 –

INTANGIBLE ASSETS

In 2008, the Company entered into an Asset Purchase Agreement (the “Agreement”). Under the Agreement, the Company acquired a group of assets (the “Group”) for total consideration of CAD$5.5 million (the “Purchase Price”). The Group comprised both tangible and intangible assets primarily consisting of machines, distribution rights and customer contracts. Under the distribution rights, the Company committed to distribute and sell specialized machines and technology and attain specific thresholds in this respect over a period of 61 months terminating in September 2013 (the “Commitment”). The assets acquired complemented the Company’s product offerings and customer base as part of its Engineered Coated Products Division.

The Purchase Price amounted to CAD$5.5 million, of which CAD$4.4 million (US$4.1 million) was paid in cash in 2008 and CAD$1.1 million (US$0.9 million) in 2009. The Purchase Price attributed to the machines acquired amounted to CAD$0.8 million (USD$0.7 million), and is included under the caption property, plant and equipment on the Company’s consolidated cash flows.

The Company determined the fair value of each of the assets acquired in the Group. The Purchase Price paid was then allocated to each asset acquired, on the basis, of the assets relative fair value.

The Agreement provides for additional consideration to be paid, annually through 2013, in connection with the Company’s Commitment. However, within the first two years of the Agreement, the machines acquired must attain certain market acceptance parameters or the Company has the right to renegotiate the Commitment with the vendor and if such renegotiation is not concluded on terms satisfactory to the Company, and if the vendor remains unable to resolve the issues to the satisfaction of the Company, then the Commitment will be relieved. Accordingly, as at December 31, 2009 and 2008, the Company i) was not in the position to determine, beyond a reasonable doubt, the outcome of its future Commitment and ii) concluded that the vendor retains future performance obligations under the provisions of the Agreement. Consequently, the Company will account for these contingencies upon their resolution as part of the cost of the machines acquired or as performance penalties to be charged to consolidated earnings.

As at December 31, 2009 and 2008, the Company’s intangible assets, all of which were originated from the asset purchase described above, including their cost and respective accumulated amortization are as follows:


	2009
	Cost	Accumulated amortization	Net
	$	$	$
Distribution rights	3,319	691	2,628
Customer contracts	1,204	282	922
	4,523	973	3,550

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

11 –

INTANGIBLE ASSETS (Continued)


	2008
	Cost	Accumulated amortization	Net
	$	$	$
Distribution rights	3,090	129	2,961
Customer contracts	1,038	43	995
	4,128	172	3,956

Effective September 30, 2009, and due to the adverse economic conditions impacting several of the Company’s key operating markets targeted under the Agreement, the Company did not fully meet the performance criteria included in the first milestone of the Agreement. Accordingly, the Company recorded in its consolidated earnings for the year ended December 31, 2009, a charge amounting to $0.4 million (CAD$0.5 million) representing the penalties due to the vendor.

As at December 31, 2009, and in light of the significant economic downturn, which adversely impacted the primary markets targeted by the Agreement, the Company’s management concluded that significant changes in events and circumstances have occurred. These changes warranted the examination of the related intangible assets for possible impairment. Accordingly, as at December 31, 2009, the Company’s management conducted such an impairment test. As part of this impairment test, the Company’s management revised and assessed its business plan and related cash flows expected in connection with the Agreement in light of the current and anticipated business environments. Consequently, the Company concluded that no impairment has occurred as at December 31, 2009.

12 –

GOODWILL

The Company performed an annual goodwill impairment test as at December 31, 2008. In accordance therewith, the goodwill was assigned to the Company’s two reporting units using a relative fair value allocation approach. The Company calculated the fair value of each reporting unit using the discounted cash flows method.

As at December 31, 2008, and in connection with the worldwide credit crisis and economic slowdown which unfolded during the latter part of the year, management revised its estimates of growth and future business activities. This revision included, among others, a detailed assessment of i) its operating markets, ii) operating plans and budgets and iii) other areas where the Company’s business might be adversely impacted by the changing operating environment. As a result of these assessments, management concluded that the Company’s future business activities and underlying markets have suffered adverse consequences in connection with the worldwide credit crisis and economic slowdown and consequently, reduced its related future cash flows and revenue projections. Accordingly, the Company recorded a goodwill impairment charge in its consolidated earnings in the amount of $66.7 million.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

12 – GOODWILL (Continued)

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


				2008
				$
Balance, beginning of year				70,250
Impairment				(66,726)
Foreign exchange impact				(3,524)
Balance, end of year

13 –

LONG-TERM DEBT

Long-term debt consists of the following:


	2009	2008
	$	$
Senior Subordinated Notes (b)⁽¹⁾	115,600	121,184
Asset-based loan (c)	85,389	114,000
Obligations under capital leases (d)	6,496	6,789
Term debt (e)	7,796	7,693
Mortgage loan (f)	1,721	1,759
	217,002	251,425
Less: Installments on long-term debt	1,721	623
	215,281	250,802

⁽¹⁾

The Senior Subordinated Notes are presented net of related debt issue expenses that are amortized using the effective interest rate method, as described in Note 2, amounting to $3.1 million ($3.8 million in 2008).

(a)

Refinancing

During the year ended December 31, 2008, the Company successfully refinanced its entire senior secured credit facility (the “Facility”), which included the Company’s revolving credit facility and term loan, with a five-year, $200.0 million ABL entered into with a syndicate of financial institutions.

In connection with this refinancing, the Company reported a refinancing charge amounting to $6.0 million, comprised of $3.1 million representing the write-off of debt issue expenses incurred in connection with the issuance and subsequent amendments of the Facility and $2.9 million representing the loss on settlement of the interest rate swap agreements, designated as cash flow hedges, on a portion of the term loan.

Finally, in securing the ABL the Company incurred debt issue expenses amounting to approximately $2.8 million, primarily comprised of $1.4 million paid to the primary lender and $1.4 million representing professional and other fees.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

13 -

LONG-TERM DEBT (Continued)

(b)

Senior Subordinated Notes

Senior Subordinated Notes bearing interest at 8.5%, payable semi-annually on February 1 and August 1. The principal is due on August 1, 2014. The effective interest rate of the Senior Subordinated Notes is 9.21%.

The Company and all of its subsidiaries, which are all wholly-owned directly or indirectly by the Company, other than the subsidiary issuer, have guaranteed the Senior Subordinated Notes. The Senior Subordinated Notes were issued and the guarantees executed pursuant to an indenture dated July 28, 2004. All of the guarantees are full, unconditional, joint and several. There are no significant restrictions on the ability of the Company or any guarantor to obtain funds from its subsidiaries by dividend or loan. The Company, on a non-consolidated basis, has no independent assets or operations. The subsidiary issuer is an indirectly wholly-owned subsidiary of the Company and has nominal assets and no operations.

Repurchase

In the latter part of 2009, the Company repurchased $6.3 million of its outstanding Senior Subordinated Notes. Accordingly, the Company recorded a gain on repurchase amounting to approximately $0.8 million in its consolidated earnings for the year ended December 31, 2009. The gain on repurchase was computed net of the proportionate amount of debt issue expenses incurred at the time the Senior Subordinated Notes were initially issued and the related repurchase fees amounting to $0.2 million.

(c)

Asset-Based Loan

Five-year, $200.0 million ABL bearing interest at LIBOR plus a premium varying between 150 and 225 basis points depending on the loan’s remaining availability (200 basis points as at December 31, 2009; 200 basis points in 2008). As at December 31, 2009, the effective interest rate on the ABL was 3.70% (4.13% in 2008), taking into account the effect of the interest rate swap agreements described in Note 21.

The amount of the borrowing available to the Company under the ABL is determined by its applicable borrowing base from time to time. The borrowing base is calculated as a function of a percentage of eligible trade receivables, inventories and property, plant and equipment as defined in the ABL agreement.

Under the ABL loan agreement, the Company’s remaining unencumbered real estate is subject to a negative pledge in favour of the ABL lenders. However, the Company retains the ability to secure financing, on all or a portion of, its owned real estate thereby subordinating the negative pledge to the ABL lenders up to an amount of $35.0 million. During the year ended December 31, 2008, the Company obtained a $1.8 million mortgage financing on its owned real estate located in Bradenton, Florida. As at December 31, 2009 and 2008, $33.2 million of real estate mortgage financing remains available to the Company.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

13 -

LONG-TERM DEBT (Continued)

As at December 31, 2009, the ABL’s borrowing base amounted to $129.4 million ($153.7 million in 2008) of which $88.0 million ($118.3 million in 2008) was drawn, including $2.6 million ($4.3 million in 2008) in letters of credit. Accordingly, the Company’s unused availability amounted to $41.4 million ($35.4 million in 2008).

The ABL is secured by a first priority lien on the Company’s, and substantially all of its subsidiaries’, trade receivables, inventories and property, plant and equipment, included in the determination of the ABL’s borrowing base, with a carrying amount of $74.2 million, $79.0 million and $274.5 million ($75.5 million, $90.8 million and $289.8 million, respectively in 2008), respectively as at December 31, 2009.

The ABL contains one financial covenant, described in Note 21, which becomes enforceable only when unused availability is under $25.0 million. As at December 31, 2009 and 2008, the Company’s availability on its ABL exceeded $25.0 million and accordingly, the related financial covenant was not applicable.

In line with the Company’s interest rate risk policy to mitigate the risk associated with its variable interest rate debt instruments, including its ABL, the Company contracted interest rate swap agreements designated as cash flow hedges. These interest rate swap agreements as well as the Company’s interest rate risk policy are described in Note 21.

(d)

Obligations under Capital Leases

The Company has obligations under capital leases for the rental of a building, computer hardware, shop equipment and office equipment, bearing interest at rates varying between 4.4% and 8.6% (5.1% to 8.6% as at December 31, 2008), payable in monthly instalments ranging from $90 to $46,320 ($867 to $47,817 in 2008), including interest and maturing on various dates until 2015.

(e)

Term debt

The Company’s wholly-owned subsidiary has a long-term loan agreement, containing two debt instruments, totalling approximately $7.6 million (€5.3 million), with each instrument bearing interest at a rate of Euribor (ranging between 1.02% and 1.16% in 2009; 2.97% as at December 31, 2008) plus a premium (125 basis points as at December 31, 2009 and 2008), which could, at the discretion of the lender, be increased semi-annually by 75 basis points. Under the terms of the agreement, only monthly interest payments are required for the first two years followed by eight equal semi-annual principal payments amounting to $0.3 million and $0.6 million for each of the instruments commencing on January 2010 and November 2010, respectively. The term debt is secured by a comfort letter issued to the lender by the Company in favour of its wholly-owned subsidiary.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

13 -

LONG-TERM DEBT (Continued)

(f)

Mortgage loan

The Company has a $1.8 million mortgage loan on its owned real estate located in Bradenton, Florida having a net book value of $0.7 million as at December 31, 2009 ($0.8 million in 2008). The mortgage is for a period of 20 years, bearing interest at 7.96%, and thereafter, the applicable interest rate will adjust every three years to a 355 basis point spread over the 10-year Interest Rate Swap published in the daily release of the Federal Reserve. The mortgage requires monthly payments of principal and interest in the amount of $14,723.

Long-term debt repayments are due as follows:


	Obligations under capital leases	Other long-term loans
	$	$
2010	825	1,193
2011	722	1,997
2012	612	2,001
2013	574	87,390
2014	565	119,382
Thereafter	5,465	1,643
Total payments	8,763	213,606
Interest expense included in minimum lease payments	2,267
Total	6,496	213,606

14 –

OTHER LIABILITIES

During the second quarter of 2009, the Company renegotiated the terms and conditions included in the Lease (the “Lease”) for its operating facility located in Langley, British Columbia, Canada. The Company’s primary intention in renegotiating this Lease was to extend its term.

As a result of the renegotiation, and in accordance with GAAP, the Company has concluded that it is subject to an asset retirement legal obligation, by virtue of a written contract, to restore the leased property to the same condition which existed at the time of the initial Lease. This asset retirement obligation (“ARO”) includes, among other costs, the permanent removal of the Company’s manufacturing equipment used in this facility.

The assumptions, on which the carrying amount of the ARO is based on, are as follows:


Undiscounted cash flows required to settle the obligation				$1.4 million
Timing of payment of the cash flows required to settle the obligation				19 months
Credit-adjusted risk-free rate				16.2%

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

15 –

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.

Share Repurchase

The Company announced a normal course issuer bid effective August 28, 2008. In connection with this normal course issuer bid, the Company was entitled to repurchase for cancellation up to 2,947,817 of its 58,956,348 common shares issued and outstanding, representing 5% of the Company’s common shares issued and outstanding as at that date.

The normal course issuer bid expired in August 2009.

The Company accounted for the share repurchase of 5,298 common shares, which resulted in a decrease of approximately $31,000 and $13,000 of the Company’s consolidated capital stock and deficit, respectively.

Rights Offering

During the year ended December 31, 2007, the Company completed a shareholder’s rights offering. The rights offering granted the shareholders the right to subscribe to one common share of the Company for each 1.6 rights held. The offering raised $60.9 million net of related expenses of $1.9 million. The proceeds were received from several major shareholders, directors and senior officers, including one former senior officer. In connection with the rights offering, the Company issued 17,969,408 common shares. Directors and senior officers of the Company subscribed to 1,508,304 common shares amounting to gross proceeds of $5.2 million.

Shareholder’s Protection Rights Plan

On June 29, 2009, the shareholders did not vote to extend the Shareholder’s Protection Rights Plan.

Stock Options

Under the Company’s executive stock option plan, options may be granted to the Company's executives, directors and key employees for the purchase of up to a total of 10% of the Company’s issued and outstanding common shares. Options expire no later than 10 years after the date of the grant. The plan provides that such options granted to key 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 grant date, and a further 25% will vest and may be exercisable per year over three years.

All options are granted at a price determined and approved by the Board of Directors, which cannot be less than the average of the closing price of the common shares on the TSX for the day immediately preceding the grant date.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

15 -

CAPITAL STOCK (Continued)

In connection with the Company’s delisting from the NYSE, as described in Note 1 to these consolidated financial statements, all stock options having a US dollar denominated exercise price were converted to the Canadian dollar exercise price on the TSX available at the time of the grant. This change did not have a significant impact on the Company’s accounting for stock options, including the related expense.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(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:


		2009		2008		2007
	Weighted average exercise price	Number of options	Weighted average exercise price	Number of options	Weighted average exercise price	Number of options
	CAD$ ⁽¹⁾		USD$		USD$
Balance, beginning of year	6.99	3,511,462	6.44	3,976,337	8.74	3,154,028
Granted	2.83	262,927	3.44	200,000	3.45	1,651,184
Forfeited	12.25	(11,000)	3.99	(163,250)	8.88	(485,125)
Expired	8.44	(445,336)	10.08	(501,625)	9.85	(343,750)
Balance, end of year	6.45	3,318,053	5.91	3,511,462	6.44	3,976,337

Options exercisable at the end of the year	7.92	2,121,909	7.26	1,997,680	8.43	1,909,364

The following table summarizes information about options outstanding and exercisable as at December 31, 2009:


	Options outstanding			Options exercisable
	Number	Weighted average contractual life (years)	Weighted average exercise price	Number	Weighted average exercise price
Range of exercise prices			CAD$⁽¹⁾		CAD$⁽¹⁾
$0.55 to $0.83	50,000	5.25	0.55	10,000	0.55
$1.84 to $2.76	30,000	5.87	1.84	7,500	1.84
$3.61 to $5.43	1,884,111	3.93	3.61	830,592	3.60
$7.50 to $11.25	908,950	1.37	9.28	828,825	9.31
$11.42	444,992	0.24	13.68	444,992	13.68
	3,318,053	1.66	6.45	2,121,909	7.92

⁽¹⁾

Please refer to the previous page, “Stock Options”.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

15 -

CAPITAL STOCK (Continued)

The Company uses the fair value based method of accounting for stock-based compensation expense and other stock-based payments. Accordingly, the Company recorded a pre-tax stock-based compensation expense of approximately $1.0 million in 2009, $1.3 million in 2008 and $1.8 million in 2007.

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


	2009	2008	2007

Expected life	5.9 years	5.5 years	5.2 years
Expected volatility	63%	50%	52%
Risk-free interest rate	2.67%	3.13%	3.27%
Expected dividends	$0.00	$0.00	$0.00

The weighted average fair value per option granted is:


2009	2008	2007
CAD$	USD$	USD$
0.92	1.14	3.27

During 2009, the following stock options were granted at exercise prices exceeding and equal to market prices at the date of the grant as follows:


No. of options	Exercise prices	Market prices
	CAD$	CAD$
40,000	0.55	0.55
10,000	0.55	0.55
30,000	1.84	1.84
182,927	3.62	2.23
262,927

During 2008, 200,000 stock options were granted at exercise prices exceeding the market price of the Company’s common shares at the date of the grant. The exercise price and fair value of these options were $3.44 and $1.14, respectively.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

16 –

ACCUMULATED OTHER COMPREHENSIVE INCOME

The components of other accumulated comprehensive income as at December 31, 2009 and 2008 are as follows:


	2009	2008
	$	$
Accumulated currency translation adjustments	51,165	34,422
Cumulative changes in fair value of interest rate swap agreements (net of future income taxes of nil, $948 in 2008)	(1,548)	(1,613)
Cumulative changes in fair value of forward foreign exchange rate contracts (net of future income taxes of nil, $151 in 2008)	791	(257)
	50,408	32,552

17 –

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 2009, 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 $3.4 million ($5.8 million in 2008 and $7.1 million in 2007).

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 also maintains 401(k) plans according to the terms of certain collective bargaining agreements.

The Company also contributes to its multi-employer plans for employees covered by certain 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 $0.8 million for these plans for the year ended December 31, 2009 ($2.8 million and $2.7 million in 2008 and 2007, respectively).

Defined Benefit Plans

The Company has, in the United States, three defined benefit pension 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.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

17 –

PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

In Canada, certain non-union hourly employees of the Company are covered by a plan which provides a fixed benefit of CAD$20.00 in 2009, 2008 and 2007 (USD$17.52 in 2009, USD$18.79 in 2008 and USD$20.44 in 2007) 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 40.0% to 62.5% (40.0% to 62.5% and 40.0% to 50.0% in 2008 and 2007, respectively) 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.

Supplementary Executive Retirement Plans

The Company has Supplementary Executive Retirement Plans (“SERPs”) to provide supplemental pension benefits to certain key executives. The SERPs are not funded and provide for an annual pension benefit, from retirement or termination date, in the amounts ranging from $0.2 million to $0.3 million, annually. The SERPs had accrued benefit liability as at December 31, 2009 of $4.8 million ($4.4 million in 2008).

In 2007, the Company recorded a charge of approximately $1.0 million representing the recognition of the balance of past service costs relating to a member of senior management’s pension obligation as described in Note 4.

Non-Routine Events

During the year ended December 31, 2009, and in connection with the closure of the Green Bay, Wisconsin manufacturing facility in 2003, the Company finalized the termination benefits to be paid to certain employees of this facility. Accordingly, the Company recorded an additional benefit cost, with respect to the related defined pension plan, amounting to approximately $0.6 million. The total agreed upon benefit, in the amount of $1.9 million, will be paid over a period of 15.5 years.

Investment Policy

The Company's Investment Committee comprised of the Company’s Chief Financial Officer and Vice President, Human Resources, established a target mix of equities and bonds of 70% equities and 30% bonds over time. 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.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

17 –

PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

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, 2009, January 1, 2009 and December 31, 2009 for the US plans and September 1, 2008 and December 31, 2009 for the Canadian plans.

The next valuation dates for actuarial valuations to be used for funding purposes are January 1, 2010 and October 1, 2010 for the US plans and September 1, 2011 for the Canadian plans.

Information relating to the various plans is as follows:


	Pension Plans			Other plans
	2009	2008	2009	2008
	$	$	$	$
Accrued benefit obligations
Balance, beginning of year	52,891	53,540	2,605	3,432
Current service cost	790	1,057	54	75
Plan participants’ contributions	3	100
Plan amendments		649		33
Interest cost	3,323	3,163	194	189
Benefits paid	(2,210)	(1,857)	(84)	(73)
Actuarial (gains) losses	4,142	(711)	587	(654)
Foreign exchange rate adjustment	1,636	(3,050)	281	(397)
Balance, end of year	60,575	52,891	3,637	2,605

Plans assets
Balance, beginning of year	34,580	46,576
Actual return on plans assets	6,200	(10,266)
Employer contributions	2,519	3,104
Plan participants' contributions	3	100
Benefits paid	(2,210)	(1,857)
Foreign exchange rate adjustment	2,155	(3,077)
Balance, end of year	43,247	34,580

Funded status – deficit	17,328	18,311	3,637	2,605
Unamortized past service costs	(1,995)	(2,730)	(35)	(39)
Unamortized net actuarial gains (losses)	(19,950)	(20,726)	328	852
Unamortized transition assets (obligation)	90	82	(11)	(15)
Accrued benefit liability (accrued pension benefit asset)	(4,527)	(5,063)	3,919	3,403

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

17 –

PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

Included in the above accrued benefit obligation and fair value of plan assets as at December 31, 2009 and 2008 are the following amounts in respect of plans that are not fully funded:


	Pension plans
	2009	2008
	$	$
Accrued benefit obligation	46,390	42,978
Fair value of plan assets	26,472	22,538
Funded status – plan deficit	19,918	20,440

Weighted average plan assets allocations as at December 31, 2009 and 2008:


	Pension Plans
	2009	2008
Asset category	%	%
Equity securities	68	55
Debt securities	28	35
Other	4	10
Total	100	100

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

17 -

PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

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


	Pension plans			Other plans		Total plans
	2009	2008	2009	2008	2009	2008
	$	$	$	$	$	$
Other assets (Note 10)	(10,808)	(10,866)			(10,808)	(10,866)
Pension and post-retirement benefits	6,281	5,803	3,919	3,403	10,200	9,206
	(4,527)	(5,063)	3,919	3,403	(608)	(1,660)

Net Benefit Cost


	Pension plans					Other plans
	2009	2008	2007	2009	2008	2007
	$	$	$	$	$	$
Current service cost	790	1,057	1,393	54	75	82
Interest cost	3,323	3,163	2,961	194	189	178
Actual return on plans assets	(6,200)	10,266	(1,691)
Plan amendments		649			33
Actuarial (gains) losses	4,142	(711)	(4,301)	587	(654)	(425)
Curtailment loss			1,083
Elements of employee future benefit costs before adjustments to recognize the long-term nature of employee future benefit costs	2,055	14,424	(555)	835	(357)	(165)
Adjustments to recognize the long-term nature of employee future benefit costs:
Difference between expected return and actual return on plan assets for the year	3,339	(13,929)	(1,694)
Difference between actuarial loss recognized for the year and actual actuarial loss (gain) on accrued benefit obligations for the year	(2,482)	1,029	4,959	(647)	626	411
Difference between amortization of past service costs for the year and actual plan amendments for the year	809	(350)	383	4	(33)	1
Amortization of transition obligations (assets)	(5)	(6)	(6)	4	4	4
	1,661	(13,256)	3,642	(639)	597	416
Net benefit cost for the year	3,716	1,168	3,087	196	240	251

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(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 9.4 to 24.0 years for 2009 and from 9.7 to 24.7 years for 2008.

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 assumptions used to determine benefit obligations as at December 31, 2009 and 2008:


	Pension plans			Other plans
	2009	2008	2009	2008
Discount rate
US plans	5.72%	6.20%	5.29%	6.33%
Canadian plans	6.50%	7.50%	6.50%	7.50%
Compensation increase	3.25%	3.25%

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

17 -

PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

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


	Pension plans					Other plans
	2009	2008	2007	2009	2008	2007
Discount rate
US plans	6.20%	6.40%	5.80%	6.33%	5.75%	5.65%
Canadian plans	7.50%	5.90%	5.30%	7.50%	5.90%	5.25%
Compensation increase	3.25%	3.25%	3.25%
Expected long term return on plan assets
US plans	8.50%	8.50%	8.50%
Canadian plans	7.25%	7.00%	7.00%

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

17 -

PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

For measurement purposes, a 7% annual rate increase in the per capita cost of covered health care benefits for the US plans was assumed for 2009 (9% in 2008 and 2007). The assumed rate is expected to decrease to 3.9% by 2099. For the Canadian plans, the annual trend rate is 10% for the next 5 years and 5% thereafter. An increase or decrease of 1% of these rates would have the following impacts:


	Increase of 1%	Decrease of 1%
	$	$
Impact on net periodic cost	26	(15)
Impact on accrued benefit liability	328	(263)

The Company expects to contribute $3.0 million to its defined benefit pension plans and $0.1 million to its health and welfare plans in 2010.

18 –

SEGMENT DISCLOSURES

The Company‘s organizational and related internal reporting structures, subsequent to the 2007 realignment, consist of two operating segments and a corporate segment. The two operating segments are the Tapes and Films Division (“T&F”) and the Engineered Coated Products Division (“ECP”), each with a President that is responsible for the performance of the respective division. Management has chosen to operate and evaluate the two divisions independently in order to provide increased focus on the business challenges and opportunities unique to each division.

T&F manufactures a variety of specialized polyolefin plastic and paper based products as well as complementary packaging systems for use in industrial and retail applications. Products include carton sealing tapes, industrial and performance speciality tapes, stretch film and shrink wrap. The products are manufactured and sold to industrial distributors and retailers, primarily under the Company’s brand names. T&F operates nine manufacturing facilities in North America and one in Portugal.

ECP is a leader in the development and manufacturing of innovative industrial, consumer packaging and protective covering products utilizing engineered coated polyolefin, paper and laminate materials. Products include lumber wrap, metal wrap, polyethylene membrane fabrics, cotton bags and roof underlayment. Products are manufactured in three manufacturing facilities and sold to both end users and distributors in a wide variety of industries including construction and agriculture.

The Company evaluates the performance of these segments and makes decisions regarding the allocation of resources to the segments based on earnings before financial expenses, income taxes, depreciation and amortization (“EBITDA”). Allocations of general and administrative expenses to the reportable segments are based on an analysis of services provided to each segment. Certain corporate expenses, stock-based compensation expense, financial expenses and manufacturing facility closures, restructuring, strategic alternatives and other charges, are not allocated to an operating segment. The accounting policies of the reportable segments are the same as those applied to the consolidated financial statements described in Note 2.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

18 -

SEGMENT DISCLOSURES (Continued)

All inter-segment transactions are recorded at the exchange amount and are eliminated upon consolidation.

Segment Information

The following tables set forth information by segment as at and for the years ended December 31:


			2009
	T&F	ECP	Total
	$	$	$
Sales from external customers	512,839	102,623	615,462
Costs of sales	436,360	96,183	532,543
Gross profit	76,479	6,440	82,919

EBITDA before unallocated expenses	45,841	605	46,446

Depreciation and amortization	29,770	6,622	36,392

Impairment of property, plant and equipment (Note 3)		94	94

Impairment of intangible assets (Note 3)		32	32

Write-down on classification as asset held-for-sale			123
Unallocated corporate expenses			2,311
Stock-based compensation expense			1,037
Manufacturing facility closures, restructuring, strategic alternatives and other charges			1,091
Financial expenses			15,740
Loss before income taxes			(10,374)

Total assets	422,495	113,358	535,853

Additions to property, plant and equipment	11,302	1,839	13,141

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

18 - SEGMENT DISCLOSURES (Continued)


			2008
	T&F	ECP	Total
	$	$	$
Sales from external customers	592,210	144,945	737,155
Costs of sales	524,820	134,080	658,900
Gross profit	67,390	10,865	78,255

EBITDA before unallocated expenses	38,085	3,607	41,692

Depreciation and amortization	29,485	5,978	35,463

Impairment of goodwill	56,559	10,167	66,726

Impairment of property, plant and equipment		424	424

Unallocated corporate expenses			1,349
Stock-based compensation expense			1,268
Financial expenses ⁽¹⁾			25,821
Loss before income taxes			(89,359)

Total assets	461,123	114,043	575,166

Additions to property, plant and equipment	18,961	2,087	21,048


			2007
	T&F	ECP	Total
	$	$	$
Sales from external customers	605,729	161,543	767,272
Costs of sales	506,635	144,296	650,931
Gross profit	99,094	17,247	116,341

EBITDA before unallocated expenses	69,294	9,672	78,966

Depreciation and amortization	30,079	5,479	35,558

Unallocated corporate expenses			2,372
Stock-based compensation expense			1,780
Financial expenses			27,218
Manufacturing facility closures, restructuring, strategic alternatives and other charges			8,114
Earnings before income taxes			3,924

Total assets	590,618	112,181	702,799

Additions to property, plant and equipment	14,621	3,849	18,470

⁽¹⁾

Financial expenses for the year ended December 31, 2008, include a refinancing expense amounting to approximately $6.0 million, primarily consisting of the write-off of debt issue expenses and the loss on settlement of the interest rate swap agreements as described under the caption refinancing in Note 13.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

18 -

SEGMENT DISCLOSURES (Continued)

Geographic Information

The following tables present geographic information about sales attributed to countries based on the location of external customers and about property, plant and equipment by country based on the location of the assets:


	2009	2008	2007
	$	$	$
Sales
Canada	74,822	98,447	104,417
United States	494,159	581,277	612,080
Other	46,481	57,431	50,775
Total sales	615,462	737,155	767,272

Property, plant and equipment, net
Canada	52,172	48,600
United States	206,658	224,406
Other	15,640	16,757
Total property, plant and equipment, net	274,470	289,763

19 –

RELATED PARTY TRANSACTIONS

In 2007, the Company entered into three advisory services agreements, two with companies controlled by two current members of the Board of Directors and one with a company controlled by a former senior officer of the Company. The advisory services include business planning and corporate finance activities, and qualify as related party transactions in the normal course of operations, which are measured at the exchange amount.

The terms of the agreements with the two companies controlled by two current members of the Board of Directors ended December 31, 2009. The agreements provided for monthly compensation beginning January 2008 in the amounts of $75,000 and CAD$100,000 per month for a minimum of at least three months. Beginning April 1, 2008, the Company’s financial commitment relating to the services of two of the three companies was $50,000 and CAD$100,000 per month and remained in effect through December 31, 2009. Effective November 2008, the two companies controlled by the two current members of the Board of Directors each agreed to a 10% reduction in their monthly compensation. Effective December 31, 2008, the Company terminated the advisory service agreement with the company controlled by its former senior officer.

In connection with these agreements, the Company recorded a charge amounting to approximately $1.7 million ($2.1 million and nil in 2008 and 2007, respectively) in its consolidated earnings for the year ended December 31, 2009 included under the caption selling, general and administrative expenses.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

19 –

RELATED PARTY TRANSACTIONS (Continued)

In addition to the monthly advisory services described above, the agreements provided for a fee to be paid to each of the companies in connection with the Company’s concluded 2007 shareholder rights offering. The aggregate fee paid to these companies, during the year ended December 31, 2007, in connection with the rights offering was $1,050,000.

Subsequent to the year ended December 31, 2009, the Company entered into agreements with companies controlled by two of the current members of the Board of Directors. These agreements replace the advisory services agreements noted above that expired on December 31, 2009. These agreements require the provision of support services that include the duties of Executive Director and Chairman of the Board.

The Executive Director support services agreement is effective through September 30, 2010 and provides for monthly compensation beginning January 2010 in the amount of $50,000. The Chairman of the Board support services agreement is effective through the earlier of June 30, 2011 or the termination of the latter duties as the Chairman of the Board and provides for monthly compensation beginning January 2010 in the amount of CAD$25,000.

Finally, the advisory services agreements provided for an aggregate performance fee payable on July 1, 2010 based on the difference between the average price of the Company’s common shares for the ten trading days prior to July 1, 2010 on the TSX (the “Average Price”) and the Canadian offering price included in the Company’s 2007 rights offering of CAD$3.61, multiplied by an aggregate of 2.2 million, provided that the Average Price exceeds CAD$4.76. As at December 31, 2009, the Company’s common share price on the TSX was CAD$2.98.

20 –

COMMITMENTS AND CONTINGENCIES

Commitments and Purchase Commitments

As at December 31, 2009, the Company had commitments aggregating to approximately $10.6 million through the year 2015 for the rental of offices, warehouse space, manufacturing equipment, automobiles, computer hardware and other assets. Minimum lease payments for the next five years are $2.5 million in 2010, $2.2 million in 2011, $2.1 million in 2012, $1.9 million in 2013, $1.3 million in 2014 and $0.6 million thereafter.

Furthermore, the Company is subject to several firm purchase commitments (the “Commitments”) for the purchase of raw material to be used and consumed in its various production processes. As at December 31, 2009, payments required in connection with these Commitments amounted to nil ($13.0 million in 2008). In accordance with GAAP, and since the Company did not enter into these Commitments for speculative purposes, these Commitments do not qualify as derivative financial instruments.

Contingencies

The Company is party to claims and lawsuits in the normal course of businesses, which are being contested. In the opinion of management, the outcome of such claims and lawsuits will not have a material effect on the Company’s financial results and position.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

21 –

FINANCIAL INSTRUMENTS

Financial Risk Management Objectives and Policies

The Company is exposed to various financial risks including: foreign exchange risk, interest rate risk, credit risk, liquidity risk and price risk resulting from its operations and business activities. The Company’s management is responsible for setting acceptable levels of risks and reviewing management activities as necessary.

The Company does not enter into financial instrument agreements, including derivative financial instruments, for speculative purposes.

Fair Value and Classification of Financial Instruments

As at December 31, 2009 and 2008, the classification of financial instruments, excluding derivative financial instruments designated as part of an effective hedging relationship, as well as their carrying amounts and respective fair values are as follows:


	2009
	Carrying amount
	Held for trading	Loans and receivables	Other liabilities	Fair value
	$	$	$	$
Financial assets
Cash	3,671			3,671
Trade receivables		74,161		74,161
Other receivables ⁽¹⁾		1,744		1,744
Loan to an officer		108		108
Total	3,671	76,013		79,684

Financial liabilities
Accounts payable and accrued liabilities			68,228	68,228
Senior Subordinated Notes			115,600	98,521
Other long-term debt			101,402	101,402
Total			285,230	268,151

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

21 –

FINANCIAL INSTRUMENTS (Continued)


	2008
	Carrying amount
	Held for trading	Loans and receivables	Other liabilities	Fair value
	$	$	$	$
Financial assets
Cash	15,390			15,390
Trade receivables		75,467		75,467
Other receivables ⁽¹⁾		2,876		2,876
Loan to an officer		108		108
Total	15,390	78,451		93,841

Financial liabilities
Accounts payable and accrued liabilities			78,249	78,249
Senior Subordinated Notes			121,184	81,875
Other long-term debt			130,241	130,241
Total			329,674	290,365

⁽¹⁾

Consists primarily of supplier rebates receivable.

The Company’s interest rate swap agreements and forward foreign exchange rate contracts carrying amounts and fair values were a liability and an asset amounting to $1.5 million and $1.4 million as at December 31, 2009, respectively (liabilities of $2.6 million and $0.4 million as at December 31, 2008).

The following methods and assumptions were used to determine the estimated fair value of each class of financial instruments:

–

The fair value of trade receivables, other receivables, excluding income, sales and other taxes, and accounts payable and accrued liabilities is comparable to their carrying amount, given their short maturity periods;

–

The fair value of the loan to an officer could not be determined since the Company could not locate a financial instrument on the market having substantially the same economic characteristics;

–

The fair value of the Senior Subordinated Notes has been determined based on available quoted market prices;

–

The fair value of other long-term debt, mainly bearing interest at variable rates, including primarily the Company’s ABL, is closely approximated by their carrying amounts.

–

The fair value of the interest rate swap agreements and the forward foreign exchange rate contracts are estimated using a valuation technique that maximizes the use of observable market inputs, including exchange rates and interest rates as a listed market price is not available.

The Company ensures, to the extent possible, that its valuation techniques and assumptions incorporate all factors that market participants would consider in setting a price and that it is consistent with accepted economic methods for pricing financial instruments.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

21 –

FINANCIAL INSTRUMENTS (Continued)

Income and expenses relating to financial assets and liabilities are as follows:


	Bad debt expense (recovery)
	2009	2008	2007
	$	$	$
Trade receivables	1,133	(118)	(6)


	Interest expense calculated using the effective interest rate method
	2009	2008	2007
	$	$	$
Long-term debt	16,547	19,013	27,502

As at December 31, 2009, the financial instruments presented at fair value on the Company’s consolidated balance sheet by level of the fair value hierarchy are as follows:


	Level 1	Level 2	Level 3	Total
	$	$	$	$
Financial assets
Cash	3,671			3,671
Forward foreign exchange rate contracts		1,438		1,438
Total	3,671	1,438		5,109

Financial liabilities
Interest rate swap agreements		1,548		1,548

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

21 –

FINANCIAL INSTRUMENTS (Continued)

Exchange Risk

The Company is exposed to exchange risk due to cash, trade receivables, accounts payable and accrued liabilities, and long-term debt dominated in a currency other than the functional currency of the operating unit incurring the cost or earning the revenues, primarily the Canadian dollar and the Euro. As at December 31, 2009 and 2008 financial assets and liabilities in foreign currency, translated into US dollars at the closing rate, are as follows:


	2009		2008
	Canadian dollar	Euro	Canadian dollar	Euro
	USD$	USD$	USD$	USD$
Cash	661	3,641	5,783	4,872
Trade receivables	11,611	5,042	12,495	4,620

Accounts payable and accrued liabilities	10,825	936	14,454	498
Long-term debt	43	7,661	96	7,558

The following table details the Company’s sensitivity to a 10% strengthening of the Canadian dollar and the Euro, against the US dollar, and the related impact on other comprehensive income (loss). For a 10% weakening of the Canadian dollar and the Euro against the US dollar, there would be an equal and opposite impact on other comprehensive income (loss). As at December 31, 2009 and 2008 everything else being equal, a 10% strengthening of the Canadian dollar and Euro, against the US dollar, would result as follows:


	2009		2008
	Canadian dollar	Euro	Canadian dollar	Euro
	USD$	USD$	USD$	USD$
Increase in other comprehensive income (loss)	10,403	1,491	13,107	1,862

Similar fluctuations in the Canadian dollar and the Euro, against the US dollar, would not materially impact the Company’s consolidated earnings for the year. Accordingly, a sensitivity analysis has not been provided.

In 2009, and in accordance with the Company’s foreign exchange rate risk policy, the Company executed a series of 12 monthly forward foreign exchange rate contracts to purchase an aggregate CAD$20.0 million beginning in February 2010, at fixed exchange rates ranging from CAD$1.0934 to CAD$1.0952 to the US dollar. The forward foreign exchange rate contracts will mitigate foreign exchange rate risk associated with a portion of anticipated monthly inventory purchases of the Company’s US self-sustaining foreign operations that are to be settled in Canadian dollars. The Company designated these forward foreign exchange rate contracts as cash flow hedges, effectively mitigating the cash flow risk associated with the settlement of the inventory purchases.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

21 –

FINANCIAL INSTRUMENTS (Continued)

In 2008, the Company executed a series of 36 monthly forward foreign exchange rate contracts to purchase an aggregate CAD$40.0 million beginning in February 2009, at fixed exchange rates ranging from CAD$1.1826 to CAD$1.2808 to the US dollar. The Company designated these forward foreign exchange rate contracts as cash flow hedges.

The details and conditions of these forward foreign exchange rate contracts and related anticipated purchases are as follows as at December 31, 2009 and 2008:


2009
Contract Series	Notional amount	Purchases’ amount	Settlement	Purchases’ period (month, 2010)	Foreign exchange rate (CAD$ to USD$)
	CAD$	CAD$	USD$		$
1	1,000,000	999,900	914,487	January	1.0934
2	1,444,500	1,444,300	1,320,805	February	1.0935
3	2,555,500	2,555,300	2,336,595	March	1.0936
4	1,000,000	999,900	914,236	April	1.0937
5	1,444,500	1,444,300	1,320,442	May	1.0938
6	2,555,500	2,555,300	2,335,740	June	1.0940
7	1,000,000	999,900	913,818	July	1.0942
8	1,444,500	1,444,300	1,319,839	August	1.0943
9	2,555,500	2,555,300	2,334,673	September	1.0945
10	1,000,000	999,900	913,317	October	1.0948
11	1,444,500	1,444,300	1,318,995	November	1.0950
12	2,555,500	2,555,300	2,333,181	December	1.0952

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

21 –

FINANCIAL INSTRUMENTS (Continued)


	2008
Contract Series	Notional amount	Purchases’ amount	Settlement	Purchases’ period (month, 2009)	Foreign exchange rate (CAD$ to USD$)
	CAD$	CAD$	USD$		$
1	1,000,000 500,000 500,000	999,900 499,950 499,950	843,157 390,342 403,772	January	1.1859 1.2808 1.2382
2	1,444,500 722,250 722,250	1,444,300 722,150 722,150	1,218,305 563,915 583,650	February	1.1855 1.2806 1.2373
3	2,555,500 1,277,750 1,277,750	2,555,300 1,277,650 1,277,650	2,156,371 997,930 1,033,446	March	1.1850 1.2803 1.2363
4	1,000,000 500,000 500,000	999,900 499,950 499,950	844,154 390,586 404,818	April	1.1845 1.2800 1.2350
5	1,444,500 722,250 722,250	1,444,300 722,150 722,150	1,219,642 564,356 585,306	May	1.1842 1.2796 1.2338
6	2,555,500 1,277,750 1,277,750	2,555,300 1,277,650 1,277,650	2,158,193 998,710 1,036,633	June	1.1840 1.2793 1.2325
7	1,000,000 500,000 500,000	999,900 499,950 499,950	844,724 390,922 406,067	July	1.1837 1.2789 1.2312
8	1,444,500 722,250 722,250	1,444,300 722,150 722,150	1,220,363 564,797 587,066	August	1.1835 1.2786 1.2301
9	2,555,500 1,277,750 1,277,750	2,555,300 1,277,650 1,277,650	2,159,469 999,492 1,039,416	September	1.1833 1.2783 1.2292
10	1,000,000 500,000 500,000	999,900 499,950 499,950	845,153 391,197 406,993	October	1.1831 1.2780 1.2284
11	1,444,500 722,250 722,250	1,444,300 722,150 722,150	1,220,982 565,151 588,262	November	1.1829 1.2778 1.2276
12	2,555,500 1,277,750 1,277,750	2,555,300 1,277,650 1,277,650	2,160,748 1,000,039 1,041,280	December	1.1826 1.2776 1.2270

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

21 –

FINANCIAL INSTRUMENTS (Continued)s

Execution and Settlement

During the year ended December 31, 2009, one of the Company’s US self-sustaining foreign operations (the “Subsidiary”) purchased an aggregate of CAD$40 million of inventories, previously designated as part of a hedging relationship using forward foreign exchange rate contracts (“Contracts”). These Contracts, used to reduce the exposure related to the Subsidiary’s anticipated inventory purchases during the period of January through November 2009, were settled during the period of February through December of the same year. All inventories purchased, and subject to the hedging relationship pursuant to these Contracts, were sold as at December 31, 2009.

For the year ended December 31, 2009, the cumulative change in these settled Contracts’ fair value was recognized in the consolidated earnings under the caption cost of sales in the amount of $2.6 million. In accordance with GAAP, the cumulative change in the Contracts’ fair value was recognized in consolidated earnings as a result of the following:

(a)

The Contracts have been settled, and

(b)

The hedging item (the Contracts) is recognized in consolidated earnings at the same period the hedged item (the inventories) is recognized in consolidated earnings.

Discontinuance of Hedging Relationships

During the year ended December 31, 2009, the Company’s management decided to discontinue hedge accounting for specific hedging relationships by terminating the designation of these relationships. The discontinued hedging relationships consisted of six forward foreign exchange rate contracts (the “Terminated Contracts”); three of which were settled in July 2009 and the other three are expected to settle in January 2010. The settlement of these Terminated Contracts generally does not result in a significant impact on the Company’s consolidated earnings. These Terminated Contracts represent the Company’s hedged inventory purchases and related accounts payable during the months of June and December 2009, respectively. All inventory purchases covered under these Terminated Contracts were sold and consequently were included in the determination of net earnings for the year ended Decemb er 31, 2009. Accordingly, included in the Company’s consolidated earnings for the year ended December 31, 2009 are $1.1 million ($0.5 million and $0.6 million for the June and December Terminated Contracts, respectively) under the caption cost of sales, representing the gain on these Terminated Contracts, which had been previously recognized in accumulated other comprehensive income as a result of applying hedge accounting and a loss of $0.1 million under the caption financial expenses – other, representing the change in fair value of these Terminated Contracts arising subsequent to the Company’s management decision to terminate its designation of these specific hedging relationships.

Interest Rate Risk

The Company is exposed to interest rate risk through its long-term debt. The Company’s policy, to the extent possible, is to maintain most of its borrowings at fixed interest rates using interest rate swap agreements, when necessary.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

21 –

FINANCIAL INSTRUMENTS (Continued)

The Company’s fixed rate Senior Subordinated Notes are exposed to a risk of change in fair value due to changes in the underlying interest rates. The Company does not currently hold any derivative financial instruments to mitigate this risk.

The Company is exposed to a risk of change in cash flows due to the fluctuations in interest rates applicable on its variable rate ABL. To mitigate this risk, the Company entered into two interest rate swap agreements (the “Agreements”), designated as cash flow hedges. The terms of these Agreements are as follows:


	Notional amount	Settlement	Fixed interest rate paid
	$		%
Agreement maturing in September 2011	40,000,000	Monthly	3.35
Agreement matured in October 2009	30,000,000	Monthly	2.89

As at December 31, 2009, the effective interest rate on the remaining $40.0 million ($70.0 million in 2008) hedged portion was 5.35% (5.15% in 2008) and the effective interest rate on the excess was 2.25% (5.50% in 2008).

The Company analyzes its interest rate exposure on an on-going basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Company calculates the impact on its consolidated earnings of a defined interest rate shift.

As at December 31, 2009, the impact on the Company’s consolidated earnings of a 1.0% shift in interest rates, assuming all other variables remained the same, would be an increase (decrease) of approximately $0.5 million (an increase (decrease) of $0.2 million in 2008). The Company’s interest rate swap agreements have been included in this calculation. Other comprehensive income (loss) would not materially change as a result of a similar shift in interest rates and consequently, no sensitivity analysis is provided.

Credit Risk

Credit risk results from the possibility that a loss may occur from the failure of another party to perform according to the terms of the contract. Generally, the carrying amount reported on the Company’s consolidated balance sheet for its financial assets exposed to credit risk, net of any applicable provisions for losses, represents the maximum amount exposed to credit risk.

Financial assets that potentially subject the Company to credit risk consist primarily of cash, trade receivables, other receivables, principally supplier rebates receivable, and derivative financial instruments.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

21 –

FINANCIAL INSTRUMENTS (Continued)

Cash

Credit risk associated with cash is substantiality mitigated by ensuring that these financial assets are placed with major financial institutions that have been accorded investment grade ratings by a primary rating agency and qualify as credit worthy counterparties. Furthermore, for cash account balances in excess of $250,000, the Company only deposited such funds with American financial institutions that participated in the Federal Deposit Insurance Corporation (“FDIC”) under the program entitled the “Transaction Account Guarantee Program”. This program ended on December 31, 2009. The Company performs an ongoing review and evaluation of the possible changes in the status and credit worthiness of its counterparties.

Derivative Financial Instruments

Credit risk related to derivative financial instruments is adequately controlled, as the Company enters into such agreements solely with large American financial institutions having suitable credit ratings and who demonstrate sufficient liquidity. The credit risk, which the Company is exposed to in respect of derivative financial instruments, is limited to the replacement costs of contracts at market prices and when these agreements result in a receivable from the financial institution in the event of a counterparty default.

Trade Receivables

Credit risk with respect to trade receivables is limited due to the Company’s credit evaluation process, reasonably short collection terms and the credit worthiness of its customers. The Company regularly monitors its credit risk exposures and takes steps to mitigate the likelihood of these exposures from resulting in actual losses. Allowance for doubtful accounts is maintained, consistent with credit risk, historical trends, general economic conditions and other information and is taken into account in the consolidated financial statements.

The following table presents an analysis of the age of trade receivables and related balance as at December 31, 2009 and 2008:


	2009	2008
	$	$
Current	73,653	74,749
30 – 60 days past due	341	683
61 – 90 days past due	223	306
Over 91 days past due	1,141	164
	75,358	75,902
Allowance for doubtful accounts	(1,197)	(435)
Balance	74,161	75,467

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

21 –

FINANCIAL INSTRUMENTS (Continued)

The Company makes estimates and assumptions in the process of determining an adequate allowance for doubtful accounts. Trade receivables 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 receivables are past due, the customer’s current ability to pay its obligation to the Company, historical results and the condition of the general economy and the industry as a whole. The Company writes-off trade receivables when they are determined to be uncollectible and any payments subsequently received on such trade receivables are credited to the allowance for doubtful accounts. The allowance for doubtful accounts is primarily calculated on a specific-identification of trade receivable accounts.

The following table presents a continuity summary of the Company’s allowance for doubtful accounts as at and for the year ended December 31, 2009 and 2008:


	2009	2008
	$	$
Balance, beginning of year	435	1,149
Additions (reversals)	769	(131)
Write-offs	(7)	(583)
Balance, end of year	1,197	435

Other Receivables

Credit risk associated with other receivables primarily relates to supplier rebates receivable. This risk is limited considering the Company’s diversified counterparties and geography.

As at December 31, 2009 and 2008, no single vendor accounted for over 5% of the Company’s total current assets. The Company does not believe it is subject to any significant concentration of credit risk.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial liabilities and obligations as they become due. The Company is exposed to this risk mainly through its long-term debt, accounts payable and accrued liabilities, derivative financial instruments (liabilities) and contractual commitments. The Company finances its operations through a combination of cash flows from operations and borrowings under its ABL.

Liquidity risk management serves to maintain a sufficient amount of cash and to ensure that the Company has financing sources for a sufficient authorized amount. The Company establishes budgets, cash estimates and cash management policies to ensure it has the necessary funds to fulfil its obligations for the foreseeable future.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

21 –

FINANCIAL INSTRUMENTS (Continued)

The following maturity analysis for derivatives and non-derivative financial liabilities is based on the remaining contractual maturities as at the balance sheet date. The amounts disclosed reflect the contractual undiscounted cash flows categorized by their earliest contractual maturity date on which the Company can be required to pay its obligation.

The maturity analysis for non-derivative financial liabilities is as follows as at December 31, 2009:



	Other long-term loans	Obligations under capital leases	Accounts payable and accrued liabilities	Total
	$	$	$	$
Current maturity	1,193	825	68,228	70,246
2011	1,997	722		2,719
2012	2,001	612		2,613
2013	87,390	574		87,964
2014	119,382	565		119,947
Thereafter	1,643	5,465		7,108
	213,606	8,763	68,228	290,597

The maturity analysis for derivatives financial liabilities includes only the maturities essential for an understanding of the timing of the cash flows. In connection with the Company’s derivative financial liabilities requiring settlement on a net basis, undiscounted net cash flows are presented.

The maturity analysis for derivative financial liabilities is as follows as at December 31, 2009:


	Less than 6 months	6 months to 1 year	Greater than 1 year	Total
	$	$	$	$
Interest rate swap agreements	616	499	433	1,548

Note 20 provides for additional information on the Company’s contractual commitments.

As at December 31, 2009, the Company’s unused availability under the ABL and available cash on hand amounted to $45.1 million ($50.7 million in 2008).

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

21 –

FINANCIAL INSTRUMENTS (Continued)

Price Risk

The Company‘s price risk arises from changes in its oil-derived raw material prices, which are significantly influenced by the fluctuating underlying crude oil markets. The Company’s objectives in managing its price risk are threefold: i) to protect its financial result for the period from significant fluctuations in raw material costs, ii) to anticipate, to the extent possible, and plan for significant changes in the raw material markets and iii) to ensure sufficient availability of raw material required to meet the Company’s manufacturing requirements. In order to manage its exposure to price risks, the Company closely monitors current and anticipated changes in market prices and develops pre-buying strategies and patterns, and seeks to adjust its selling prices when market conditions permit. Historical results indicate management’s ability to rapidly identify fluctuations in raw ma terial prices and, to the extent possible, incorporate such fluctuations in the Company’s selling prices.

As at December 31, 2009, all other parameters being equal, a hypothetical increase of 10% in the cost of raw materials, with no corresponding sales price adjustments, would result in an increase amounting to approximately $21.0 million (increase of approximately $26.0 million in 2008) of the Company’s net loss for the year. A similar decrease of 10% will have the opposite impact. No material impact is expected on other comprehensive income (loss) and accordingly, no sensitivity analysis is provided.

Capital Management

The Company’s primary objectives when managing capital are i) to provide adequate return to its shareholders, ii) minimize, to the extent possible, the risks associated with its shareholders’ investment in the Company, iii) safeguard the Company’s ability to continue as a going concern and iv) provide financial capacity and flexibility to meet strategic objectives and growth.

The capital structure of the Company consists of cash, debt and shareholders’ equity. A summary of the Company’s capital structure is as follows as at December 31, 2009 and 2008:


	2009	2008
	$	$
Cash	3,671	15,390
Debt	217,002	251,425
Shareholders’ equity	237,803	233,317

The Company manages its capital structure in accordance with its expected business growth, operational objectives and underlying industry, market and economic conditions. Consequently, the Company will determine, from time to time, its capital requirements and will develop accordingly a plan to be presented and approved by its Board of Directors. The plan may include the repurchase of shares, the issuance of shares, the payment of dividends and the issuance of new debt or the refinancing of existing debt agreements.

In meeting its principal objective to provide adequate return to its shareholders, the Company undertakes measures to maintain and grow its adjusted EBITDA over the years. Such measures include the introduction of new products and penetration into new markets and market niches.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

21 –

FINANCIAL INSTRUMENTS (Continued)

The Company monitors its capital by reviewing its credit ratings as determined by independent agencies and evaluating various financial metrics. These metrics, which are provided to and used by the Company’s key management personnel in their decision making process, consisted of the following for the trailing twelve months ended December 31:


	2009	2008
	$	$
Adjusted EBITDA	43,098	39,081
Interest expense	15,442	18,114
Debt	217,002	251,425

Internal financial ratios
Debt to adjusted EBITDA	5.04	6.43
Adjusted EBITDA to interest expense	2.79	2.16

Debt represents the Company’s long-term and related current portion borrowings. The Company defines adjusted EBITDA as net loss before: i) income taxes (recovery); ii) financial expenses, net of amortization; iii) refinancing expense, net of amortization; iv) amortization of other intangibles and capitalized software costs; v) depreciation; vi) manufacturing facility closures, restructuring, strategic alternatives and other charges; and vii) impairment of goodwill. Interest expense is defined as the total interest expense incurred net of any interest income earned during the year.

During 2009, the Company's strategy, which was unchanged from 2008, primarily consisted of maintaining a debt to adjusted EBITDA ratio not exceeding 4.0 to 1.0. The Company was not in compliance with this internal target and metric as at December 31, 2009 and 2008 mainly due to gross margin compression. The Company believes that the monitoring and evaluation of these internal metrics and ratios are consistent with its capital management objectives.

The Company is subject to an external covenant in connection with its ABL. Subject to the unused availability under the ABL declining below $25.0 million, the Company must remain in compliance with a fixed charge coverage ratio of at least 1.0 to 1.0 (the “Ratio”). The Ratio is computed as a function of EBITDA to Fixed charges as defined in the Company’s credit agreement as follows:

–

EBITDA is adjusted for cash and non-cash payments and expenses, regardless to their inclusion or omission from the determination of net earnings for the year in connection with pension and post-retirement benefits, environmental matters, capital expenditures, distributions, advisory services, taxes and intercompany investments and loans;

–

Fixed charges are defined as the aggregate of interest expense, principal repayments and amortization of the value assigned to machinery and equipment included in the borrowing base of the ABL.

As at December 31, 2009 and 2008, the Company was not required to comply with this Ratio given that the remaining availability on its ABL exceeded $25.0 million.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

21 –

FINANCIAL INSTRUMENTS (Continued)

The Company monitors its compliance with external covenants on an ongoing basis, which are reviewed quarterly with its Board of Directors.

The Company is not subject to any other externally imposed capital requirements.

22 –

DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA

The consolidated financial statements of the Company have been prepared in accordance with Canadian generally accepted accounting principles (“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. The differences relating to measurement and recognition are explained below, along with their effect on the Company’s consolidated earnings and balance sheets. Certain additional disclosures required under US GAAP have not been provided, as permitted by the United States Securities and Exchange Commission.

(a)

Net loss and loss per share

The adjustments necessary to comply with US GAAP would be as follows:


	2009	2008	2007
	$	$	$
Net loss in accordance with Canadian GAAP	(14,389)	(92,799)	(8,393)
Foreign exchange gain resulting from the reduction in net investment in a foreign subsidiary (Note 22(h))	(79)	(899)
Net loss in accordance with US GAAP	(14,468)	(93,698)	(8,393)

Loss per share in accordance with US GAAP
Basic	(0.25)	(1.59)	(0.19)
Diluted	(0.25)	(1.59)	(0.19)

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

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

(b)

Consolidated balance sheets

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

2009

2008

As per Canadian GAAP

Adjustments

As per
US GAAP

As per Canadian GAAP

Adjustments

As per
US GAAP

Assets

Other assets

21,869

(8,218)

(d)

16,752

22,364

(8,737)

(d)

17,443

3,101

(e)

3,816

(e)

Future income tax assets

43,736

7,982

(d)

51,718

47,067

8,353

(d)

55,420

Liabilities

Pension and post-retirement benefits

10,200

13,355

(d)

23,555

9,206

13,839

(d)

23,045

Long-term debt¹

217,002

3,101

(e)

220,103

251,425

3,816

(e)

255,241

Shareholders’ equity

Deficit

(174,909)

(79)

(h)

(174,988)

(160,533)

(899)

(h)

(161,432)

Accumulated other comprehensive income

50,408

(13,591)

(d)

32,552

(14,223)

(d)

(h)

36,896

899

(h)

19,228

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.

22 -

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 such subtotal to be presented.

(d)

Employee future benefits

Under US GAAP, an employer is required 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 post-retirement expenses are determined in the same manner as under Canadian GAAP.

The following table presents the effect of applying this statement on individual line items in the consolidated balance sheet as at December 31, 2009 and 2008:


	2009	2008
	$	$
Other assets	(8,218)	(8,737)
Future income tax assets	7,982	8,353
Total assets	(236)	(384)

Pension and post-retirement benefits	13,355	13,839
Accumulated other comprehensive income	(13,591)	(14,223)
Total liabilities and shareholders’ equity	(236)	(384)

(e)

Deferred debt issue expenses

In accordance with Canadian GAAP, and as described in Note 2, the debt issue expenses are classified against the related long-term debt, with the exception of debt issue expenses incurred in connection with a line of credit or a revolving credit agreement, such as the Company’s ABL, and are subsequently amortized using the effective interest method. Prior to January 1, 2008, the long-term debt was measured at cost and the related debt issue expenses were included in the Company’s consolidated balance sheets under the caption other assets and were amortized on a straight-line basis over the term of the related long-term debt. There was no significant difference in the amortization expense resulting from the application of the straight-line versus the effective interest methods prior to the application of the new standards on January 1, 2008 or subsequent thereto.

Under US GAAP, such costs are recorded separately within other assets on the Company’s consolidated balance sheets. Consequently, the debt issue expenses, incurred in connection with the Company’s Senior Subordinates Notes, have been reclassified to “other assets” for US GAAP purposes.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

22 -

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

(f)

Consolidated comprehensive income (loss)

The following table presents consolidated comprehensive income (loss) per US GAAP:


	2009	2008	2007
	$	$	$
Comprehensive income (loss) in accordance with Canadian GAAP	3,467	(127,709)	21,790
Pension and post-retirement benefits (Note 22 (d))	632	(7,648)	2,723
Consolidated comprehensive income (loss)	4,099	(135,357)	24,513

(g)

Accounting for Uncertainty in Income Tax Positions

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 “Accounting for Uncertainty in Income Tax Positions” (“FIN 48”) introducing recognition and measurement criteria for income tax positions. An income tax position is a position taken in a filed tax return or a position that will be taken in a future tax return which has been reflected in the recognition and measurement of income or deferred tax assets or liabilities. Under the provisions of FIN 48, a tax position must be evaluated using a more likely than not recognition threshold based on the technical merits of the position and can only be recognized if it is more likely than not that this position will be sustainable on an audit by the taxation authorities. If the position does not meet this threshold, no amount may be accrued. Additionally, the recogni zed tax position will be measured at the largest amount that is greater than 50% likely to be realized on settlement. FIN 48 has no impact on the Company’s consolidated financial statements.

(h)

Reduction in Net Investment of Foreign Subsidiary

In the course of the year ended December 31, 2009, and in accordance with Canadian GAAP, the Company reclassified, from “consolidated accumulated other comprehensive income” to its “consolidated earnings”, a foreign exchange gain amounting to $0.1 million ($0.9 million in 2008) as a result of the partial repayment of notes (the ”Notes”) previously advanced to one of the Company’s self-sustaining foreign operations (the “Subsidiary”). This repayment ultimately reduced the Company’s net investment in this Subsidiary. Initially, these Notes were designated as part of the Company’s net investment in this Subsidiary. Accordingly, related foreign exchange gains and losses were included as a separate component of “consolidated accumulated other comprehensive income”. In accordance with Canadian GAAP, and as a result of the partial repayment, a proportionate amount of the foreign exchange gains and losses accumulated in the separate component of “accumulated other comprehensive income” were recognized in the net loss for the year.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

22 -

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

Under US GAAP, similar recognition in consolidated earnings is only permitted upon the sale or complete or substantial liquidation of an entity’s investment in a subsidiary. Accordingly, under US GAAP the reclassification from “consolidated accumulated other comprehensive income” to “consolidated earnings” is reversed.

(i)

Accounting Changes

Fair value measurement

Effective January 1, 2009, the Company adopted Statement of FASB Accounting Standard Codification (“ASC”) 820-10 (formerly SFAS No. 157), “Fair Value Measurements”. FASB ASC 820-10 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This Statement is effective for fiscal years beginning after November 15, 2008 and to interim periods within those fiscal years.

Useful life of intangible assets

Effective January 1, 2009, the Company adopted FASB ASC 350 (formerly FASB Staff Position (“FSP”) No. 142-3),”Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”). FASB ASC 350 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset.

Hierarchy of GAAP

During the year ended December 31, 2009, the Company adopted changes issued by the FASB related to the authoritative hierarchy of GAAP. These changes establish the FASB ASC (“Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of SFAS, FSP or Emerging Issues Task Force Abstracts but instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. The Codification is effective for f inancial statements issued for interim and annual periods ending after September 15, 2009.

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007
(in US dollars, tabular amounts in thousands, except as otherwise noted)

22 -

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

Subsequent events

In May 2009, the FASB issued Statement No. 165 “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or available to be issued. This Statement sets forth: (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This Statement is effective for interim and annual periods ending after June 15, 2009.

The adoption of these standards did not have a significant impact on the Company’s consolidated financial statements.

ORLDOCS 11801085 1

Refinancing

Write-off of debt issue expenses in connection with debt refinancing

Loss on settlement of interest rate swap agreements

¹ Includes amount presented under the caption installments on long-term debt on the Company’s consolidated balance sheet as at December 31, 2009 and 2008.

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