INTERTAPE POLYMER GROUP INC. | |||
Date: August 8, 2019 | By: | /s/ Jeffrey Crystal | |
Jeffrey Crystal, Chief Financial Officer |
Three months ended June 30, | Six months ended June 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
$ | $ | $ | $ | |||||||||
Revenue | 295,609 | 249,072 | 573,432 | 486,301 | ||||||||
Cost of sales | 230,915 | 194,625 | 450,942 | 381,400 | ||||||||
Gross profit | 64,694 | 54,447 | 122,490 | 104,901 | ||||||||
Selling, general and administrative expenses | 36,433 | 27,653 | 69,116 | 56,776 | ||||||||
Research expenses | 3,023 | 3,233 | 6,192 | 6,454 | ||||||||
39,456 | 30,886 | 75,308 | 63,230 | |||||||||
Operating profit before manufacturing facility closures, restructuring and other related charges (recoveries) | 25,238 | 23,561 | 47,182 | 41,671 | ||||||||
Manufacturing facility closures, restructuring and other related charges (recoveries) (Note 4) | 3,875 | (407 | ) | 4,179 | (300 | ) | ||||||
Operating profit | 21,363 | 23,968 | 43,003 | 41,971 | ||||||||
Finance costs (Note 3) | ||||||||||||
Interest | 8,565 | 3,945 | 16,258 | 6,407 | ||||||||
Other expense, net | 798 | 1,328 | 143 | 2,453 | ||||||||
9,363 | 5,273 | 16,401 | 8,860 | |||||||||
Earnings before income tax expense | 12,000 | 18,695 | 26,602 | 33,111 | ||||||||
Income tax expense (benefit) (Note 5) | ||||||||||||
Current | 5,977 | 765 | 7,152 | 1,753 | ||||||||
Deferred | (439 | ) | 2,901 | 2,457 | 5,033 | |||||||
5,538 | 3,666 | 9,609 | 6,786 | |||||||||
Net earnings | 6,462 | 15,029 | 16,993 | 26,325 | ||||||||
Net earnings (loss) attributable to: | ||||||||||||
Company shareholders | 6,566 | 15,097 | 17,056 | 26,458 | ||||||||
Non-controlling interests | (104 | ) | (68 | ) | (63 | ) | (133 | ) | ||||
6,462 | 15,029 | 16,993 | 26,325 | |||||||||
Earnings per share attributable to Company shareholders (Note 6) | ||||||||||||
Basic | 0.11 | 0.26 | 0.29 | 0.45 | ||||||||
Diluted | 0.11 | 0.26 | 0.29 | 0.45 |
Three months ended June 30, | Six months ended June 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
$ | $ | $ | $ | |||||||||
Net earnings | 6,462 | 15,029 | 16,993 | 26,325 | ||||||||
Other comprehensive income (loss) | ||||||||||||
Items that will be subsequently reclassified to net earnings: | ||||||||||||
Change in fair value of interest rate swap agreements designated as cash flow hedges (1) (Note 9) | (2,058 | ) | 515 | (3,161 | ) | 2,247 | ||||||
Reclassification adjustments for amounts recognized in earnings related to interest rate swap agreements (Note 9) | (86 | ) | — | (171 | ) | — | ||||||
Change in cumulative translation adjustments | (1,004 | ) | (3,781 | ) | (4,649 | ) | (4,367 | ) | ||||
Net gain arising from hedge of a net investment in foreign operations (Note 9) | 3,927 | — | 8,608 | — | ||||||||
Total other comprehensive income (loss) | 779 | (3,266 | ) | 627 | (2,120 | ) | ||||||
Comprehensive income for the period | 7,241 | 11,763 | 17,620 | 24,205 | ||||||||
Comprehensive income (loss) for the period attributable to: | ||||||||||||
Company shareholders | 7,283 | 12,289 | 17,610 | 24,797 | ||||||||
Non-controlling interests | (42 | ) | (526 | ) | 10 | (592 | ) | |||||
7,241 | 11,763 | 17,620 | 24,205 |
(1) | Presented net of deferred income tax benefit of $78 and $357 for the three and six months ended June 30, 2019, respectively, and deferred income tax expense of $53 and $345 for the three and six months ended June 30, 2018, respectively. Refer to Note 9 for additional information on the Company’s cash flow hedges. |
Accumulated other comprehensive loss | |||||||||||||||||||||||||||||
Cumulative translation adjustment account | Reserve for cash flow hedges | Total equity attributable to Company shareholders | Non-controlling interests | ||||||||||||||||||||||||||
Capital stock | Contributed surplus | Total equity | |||||||||||||||||||||||||||
Number | Amount | Total | Deficit | ||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Balance as of December 31, 2017 | 58,799,910 | 350,759 | 17,530 | (15,057 | ) | 1,588 | (13,469 | ) | (106,687 | ) | 248,133 | 6,589 | 254,722 | ||||||||||||||||
Transactions with owners | |||||||||||||||||||||||||||||
Exercise of stock options (Note 8) | 17,500 | 163 | 163 | 163 | |||||||||||||||||||||||||
Change in excess tax benefit on exercised share-based awards | 7 | (7 | ) | — | — | ||||||||||||||||||||||||
Change in excess tax benefit on outstanding share-based awards | (568 | ) | (568 | ) | (568 | ) | |||||||||||||||||||||||
Share-based compensation (Note 8) | 195 | (284 | ) | (1) | (89 | ) | (89 | ) | |||||||||||||||||||||
Share-based compensation expense credited to capital on options exercised (Note 8) | 48 | (48 | ) | — | — | ||||||||||||||||||||||||
Dividends on common shares (Note 8) | (16,467 | ) | (16,467 | ) | (16,467 | ) | |||||||||||||||||||||||
17,500 | 218 | (428 | ) | (16,751 | ) | (16,961 | ) | (16,961 | ) | ||||||||||||||||||||
Net earnings (loss) | 26,458 | 26,458 | (133 | ) | 26,325 | ||||||||||||||||||||||||
Other comprehensive income (loss) | |||||||||||||||||||||||||||||
Change in fair value of interest rate swap agreements designated as cash flow hedges (2) (Note 9) | 2,247 | 2,247 | 2,247 | 2,247 | |||||||||||||||||||||||||
Change in cumulative translation adjustments | (3,908 | ) | (3,908 | ) | (3,908 | ) | (459 | ) | (4,367 | ) | |||||||||||||||||||
(3,908 | ) | 2,247 | (1,661 | ) | (1,661 | ) | (459 | ) | (2,120 | ) | |||||||||||||||||||
Comprehensive income (loss) for the period | (3,908 | ) | 2,247 | (1,661 | ) | 26,458 | 24,797 | (592 | ) | 24,205 | |||||||||||||||||||
Capital transactions with non-controlling shareholders of Capstone (3) | 2,485 | 2,485 | 10,915 | 13,400 | |||||||||||||||||||||||||
Balance as of June 30, 2018 | 58,817,410 | 350,977 | 17,102 | (18,965 | ) | 3,835 | (15,130 | ) | (94,495 | ) | 258,454 | 16,912 | 275,366 |
(1) | Presented net of income tax benefit of $96 for the six months ended June 30, 2018. |
(2) | Presented net of deferred income tax expense of $345 for the six months ended June 30, 2018. |
(3) | As part of the acquisition of Airtrax Polymers Private Limited ("Airtrax") through the Company's controlled subsidiary, Capstone Polyweave Private Limited ("Capstone"), the minority shareholders of Capstone contributed in kind certain assets and liabilities valued at approximately $13 million that were formerly attributed to Airtrax’s woven product manufacturing operations in exchange for newly-issued shares of Capstone. As a result of the in-kind contribution, the Company recorded a $10.9 million increase to equity attributable to non-controlling interest as well as a $2.5 million credit to deficit in the consolidated changes in equity for the six months ended June 30, 2018. |
Accumulated other comprehensive loss | |||||||||||||||||||||||||||||
Cumulative translation adjustment account | Reserve for cash flow hedges | Total equity attributable to Company shareholders | Non-controlling interests | ||||||||||||||||||||||||||
Capital stock | Contributed surplus | Total equity | |||||||||||||||||||||||||||
Number | Amount | Total | Deficit | ||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Balance as of December 31, 2018 | 58,650,310 | 350,267 | 17,074 | (24,170 | ) | 2,490 | (21,680 | ) | (95,814 | ) | 249,847 | 11,581 | 261,428 | ||||||||||||||||
Transactions with owners | |||||||||||||||||||||||||||||
Exercise of stock options (Note 8) | 226,875 | 2,063 | 2,063 | 2,063 | |||||||||||||||||||||||||
Change in excess tax benefit on exercised share-based awards | 42 | (42 | ) | — | — | ||||||||||||||||||||||||
Change in excess tax benefit on outstanding share-based awards | 202 | 202 | 202 | ||||||||||||||||||||||||||
Share-based compensation (Note 8) | 387 | (50 | ) | (1) | 337 | 337 | |||||||||||||||||||||||
Share-based compensation expense credited to capital on options exercised (Note 8) | 599 | (599 | ) | — | — | ||||||||||||||||||||||||
Dividends on common shares (Note 8) | (16,456 | ) | (16,456 | ) | (16,456 | ) | |||||||||||||||||||||||
226,875 | 2,704 | (52 | ) | (16,506 | ) | (13,854 | ) | (13,854 | ) | ||||||||||||||||||||
Net earnings (loss) | 17,056 | 17,056 | (63 | ) | 16,993 | ||||||||||||||||||||||||
Other comprehensive income (loss) | |||||||||||||||||||||||||||||
Change in fair value of interest rate swap agreements designated as cash flow hedges (2) (Note 9) | (3,161 | ) | (3,161 | ) | (3,161 | ) | (3,161 | ) | |||||||||||||||||||||
Reclassification adjustments for amounts recognized in earnings related to interest rate swap agreements (Note 9) | (171 | ) | (171 | ) | (171 | ) | (171 | ) | |||||||||||||||||||||
Change in cumulative translation adjustments | (4,722 | ) | (4,722 | ) | (4,722 | ) | 73 | (4,649 | ) | ||||||||||||||||||||
Net gain arising from hedge of a net investment in foreign operations (Note 9) | 8,608 | 8,608 | 8,608 | — | 8,608 | ||||||||||||||||||||||||
3,886 | (3,332 | ) | 554 | 554 | 73 | 627 | |||||||||||||||||||||||
Comprehensive income (loss) for the period | 3,886 | (3,332 | ) | 554 | 17,056 | 17,610 | 10 | 17,620 | |||||||||||||||||||||
Balance as of June 30, 2019 | 58,877,185 | 352,971 | 17,022 | (20,284 | ) | (842 | ) | (21,126 | ) | (95,264 | ) | 253,603 | 11,591 | 265,194 |
(1) | Presented net of income tax benefit of $18 for the six months ended June 30, 2019. |
(2) | Presented net of deferred income tax benefit of $357 for the six months ended June 30, 2019. |
Three months ended June 30, | Six months ended June 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
$ | $ | $ | $ | |||||||||
OPERATING ACTIVITIES | ||||||||||||
Net earnings | 6,462 | 15,029 | 16,993 | 26,325 | ||||||||
Adjustments to net earnings | ||||||||||||
Depreciation and amortization | 14,872 | 9,992 | 29,541 | 20,051 | ||||||||
Income tax expense | 5,538 | 3,666 | 9,609 | 6,786 | ||||||||
Interest expense | 8,565 | 3,945 | 16,258 | 6,407 | ||||||||
Non-cash charges (recoveries) in connection with manufacturing facility closures, restructuring and other related charges | 2,257 | (1 | ) | 2,009 | (2 | ) | ||||||
Share-based compensation expense (benefit) | 3,022 | (714 | ) | 1,586 | (304 | ) | ||||||
Loss (gain) on foreign exchange | 558 | 921 | (642 | ) | 1,690 | |||||||
Pension and other post-retirement expense related to defined benefit plans | 525 | 700 | 1,041 | 1,426 | ||||||||
Other adjustments for non-cash items | 178 | 256 | 588 | 920 | ||||||||
Income taxes (paid) received, net | (3,486 | ) | 385 | (3,973 | ) | 363 | ||||||
Contributions to defined benefit plans | (447 | ) | (1,004 | ) | (747 | ) | (1,516 | ) | ||||
Cash flows from operating activities before changes in working capital items | 38,044 | 33,175 | 72,263 | 62,146 | ||||||||
Changes in working capital items | ||||||||||||
Trade receivables | (9,866 | ) | (1,025 | ) | (14,490 | ) | (5,836 | ) | ||||
Inventories | 4,379 | (1,432 | ) | (10,479 | ) | (24,762 | ) | |||||
Other current assets | 5,840 | (1,604 | ) | 8,273 | (1,686 | ) | ||||||
Accounts payable and accrued liabilities and share-based compensation liabilities, current | (6,480 | ) | (676 | ) | (41,691 | ) | (21,471 | ) | ||||
Provisions | (36 | ) | (743 | ) | (494 | ) | (825 | ) | ||||
(6,163 | ) | (5,480 | ) | (58,881 | ) | (54,580 | ) | |||||
Cash flows from operating activities | 31,881 | 27,695 | 13,382 | 7,566 | ||||||||
INVESTING ACTIVITIES | ||||||||||||
Purchases of property, plant and equipment | (11,394 | ) | (16,352 | ) | (29,244 | ) | (34,748 | ) | ||||
Other investing activities | 743 | (199 | ) | 147 | (355 | ) | ||||||
Cash flows from investing activities | (10,651 | ) | (16,551 | ) | (29,097 | ) | (35,103 | ) | ||||
Three months ended June 30, | Six months ended June 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
$ | $ | $ | $ | |||||||||
FINANCING ACTIVITIES | ||||||||||||
Proceeds from borrowings | 39,970 | 372,392 | 114,769 | 473,715 | ||||||||
Repayment of borrowings | (40,910 | ) | (360,712 | ) | (74,325 | ) | (415,949 | ) | ||||
Payments of debt issue costs | — | (2,618 | ) | — | (2,618 | ) | ||||||
Interest paid | (13,282 | ) | (2,179 | ) | (17,259 | ) | (4,529 | ) | ||||
Proceeds from exercise of stock options | 1,904 | 93 | 2,063 | 163 | ||||||||
Dividends paid | (8,352 | ) | (8,140 | ) | (16,541 | ) | (16,473 | ) | ||||
Other financing activities | 88 | — | (154 | ) | 1 | |||||||
Cash flows from financing activities | (20,582 | ) | (1,164 | ) | 8,553 | 34,310 | ||||||
Net increase (decrease) in cash | 648 | 9,980 | (7,162 | ) | 6,773 | |||||||
Effect of foreign exchange differences on cash | 1,067 | (1,127 | ) | 1,107 | (1,935 | ) | ||||||
Cash, beginning of period | 10,881 | 5,078 | 18,651 | 9,093 | ||||||||
Cash, end of period | 12,596 | 13,931 | 12,596 | 13,931 |
June 30, 2019 | December 31, 2018 | |||||
(Unaudited) | (Audited) | |||||
$ | $ | |||||
ASSETS | ||||||
Current assets | ||||||
Cash | 12,596 | 18,651 | ||||
Trade receivables | 143,720 | 129,285 | ||||
Inventories | 200,659 | 190,675 | ||||
Other current assets | 18,228 | 24,395 | ||||
375,203 | 363,006 | |||||
Property, plant and equipment | 424,782 | 377,076 | ||||
Goodwill | 108,560 | 107,714 | ||||
Intangible assets | 119,601 | 122,389 | ||||
Deferred tax assets (Note 5) | 27,056 | 25,069 | ||||
Other assets | 8,081 | 9,586 | ||||
Total assets | 1,063,283 | 1,004,840 | ||||
LIABILITIES | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | 118,062 | 154,838 | ||||
Share-based compensation liabilities, current (Note 8) | 7,229 | 5,066 | ||||
Provisions, current | 1,999 | 2,262 | ||||
Borrowings, current | 21,775 | 14,389 | ||||
149,065 | 176,555 | |||||
Borrowings, non-current | 562,318 | 485,596 | ||||
Pension, post-retirement and other long-term employee benefits | 15,281 | 14,898 | ||||
Share-based compensation liabilities, non-current (Note 8) | 3,357 | 4,125 | ||||
Non-controlling interest put options (Note 9) | 10,648 | 10,499 | ||||
Deferred tax liabilities (Note 5) | 45,361 | 42,321 | ||||
Provisions, non-current | 4,013 | 4,194 | ||||
Other liabilities | 8,046 | 5,224 | ||||
Total liabilities | 798,089 | 743,412 | ||||
EQUITY | ||||||
Capital stock (Note 8) | 352,971 | 350,267 | ||||
Contributed surplus | 17,022 | 17,074 | ||||
Deficit | (95,264 | ) | (95,814 | ) | ||
Accumulated other comprehensive loss | (21,126 | ) | (21,680 | ) | ||
Total equity attributable to Company shareholders | 253,603 | 249,847 | ||||
Non-controlling interests | 11,591 | 11,581 | ||||
Total equity | 265,194 | 261,428 | ||||
Total liabilities and equity | 1,063,283 | 1,004,840 |
Lease details | |||
$ | |||
Total operating lease commitments disclosed as of December 31, 2018 | 35,544 | ||
Recognition exemptions: | |||
Leases of low value assets | (226 | ) | |
Leases with remaining lease term of less than 12 months | (2,093 | ) | |
Other minor adjustments relating to commitment disclosures | (670 | ) | |
Operating lease liabilities before discounting | 32,555 | ||
Discounted using incremental borrowing rate | (5,754 | ) | |
Reasonably certain extension options | 4,683 | ||
Operating lease liabilities recognized under IFRS 16 as of January 1, 2019 | 31,484 | ||
Finance lease liabilities | 5,712 | ||
Total lease liabilities recognized under IFRS 16 as of January 1, 2019 | 37,196 |
June 30, 2019 | December 31, 2018 | ||||
$ | $ | ||||
Lease liabilities (current) | 5,800 | 1,441 | |||
Lease liabilities (non-current) | 40,961 | 4,271 | |||
46,761 | 5,712 |
June 30, 2019 | January 1, 2019 | ||||
$ | $ | ||||
Buildings | 37,376 | 27,960 | |||
Manufacturing equipment | 2,583 | 1,914 | |||
Furniture, office equipment and other | 1,046 | 1,180 | |||
Right-of-use assets | 41,005 | 31,054 |
Three months ended June 30, | Six months ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
$ | $ | $ | $ | ||||||||
Employee benefit expense | |||||||||||
Wages, salaries and other short-term benefits | 56,740 | 46,271 | 111,124 | 92,972 | |||||||
Share-based compensation expense (benefit) (Note 8) | 3,022 | (714 | ) | 1,586 | (304 | ) | |||||
Pension, post-retirement and other long-term employee benefit plans: | |||||||||||
Defined benefit plans | 541 | 719 | 1,075 | 1,464 | |||||||
Defined contributions plans | 1,636 | 1,253 | 4,054 | 3,014 | |||||||
61,939 | 47,529 | 117,839 | 97,146 | ||||||||
Finance costs - Interest | |||||||||||
Interest on borrowings | 8,794 | 3,280 | 16,946 | 5,764 | |||||||
Amortization of debt issue costs on borrowings | 289 | 1,279 | 587 | 1,469 | |||||||
Interest capitalized to property, plant and equipment | (518 | ) | (614 | ) | (1,275 | ) | (826 | ) | |||
8,565 | 3,945 | 16,258 | 6,407 | ||||||||
Finance costs - Other expense, net | |||||||||||
Foreign exchange loss (gain) | 558 | 921 | (642 | ) | 1,690 | ||||||
Other costs, net | 240 | 407 | 785 | 763 | |||||||
798 | 1,328 | 143 | 2,453 | ||||||||
Additional information | |||||||||||
Depreciation of property, plant and equipment | 12,330 | 8,953 | 24,465 | 17,980 | |||||||
Amortization of intangible assets | 2,542 | 1,039 | 5,076 | 2,071 | |||||||
Impairment of assets | 2,446 | 207 | 2,657 | 553 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Income tax expense | $ | 5,538 | $ | 3,666 | $ | 9,609 | $ | 6,786 | |||||||
Earnings before income tax expense | $ | 12,000 | $ | 18,695 | $ | 26,602 | $ | 33,111 | |||||||
Effective tax rate | 46.2 | % | 19.6 | % | 36.1 | % | 20.5 | % |
Three months ended June 30, | Six months ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Basic | 58,760,473 | 58,811,586 | 58,706,718 | 58,806,485 | |||||||
Effect of stock options | 195,170 | 292,313 | 196,112 | 317,492 | |||||||
Diluted | 58,955,643 | 59,103,899 | 58,902,830 | 59,123,977 |
June 30, 2019 | December 31, 2018 | |||||||
Commitments to purchase machinery and equipment | $ | 13,090 | $ | 16,256 |
Declared Date | Paid date | Per common share amount | Shareholder record date | Common shares issued and outstanding | Aggregate payment (1) | |||||||
March 12, 2019 | March 29, 2019 | $0.14 | March 22, 2019 | 58,665,310 | $ | 8,189 | ||||||
May 8, 2019 | June 28, 2019 | $0.14 | June 14, 2019 | 58,877,185 | $ | 8,352 |
(1) | The aggregate dividend payment amount presented in the table above has been adjusted for the impact of foreign exchange rates on cash payments to shareholders. |
Three months ended June 30, | Six months ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Stock options granted (1) | — | — | 392,986 | 242,918 | |||||||
Weighted average exercise price per stock option granted | — | — | CDN$17.54 | CDN$21.76 | |||||||
Stock options exercised | (209,375 | ) | (10,000 | ) | (226,875 | ) | (17,500 | ) | |||
Weighted average exercise price per stock option exercised | CDN$12.23 | CDN$12.04 | CDN$12.22 | CDN$12.04 | |||||||
Stock options cancelled | (10,000 | ) | — | (10,000 | ) | — | |||||
Weighted average exercise price per stock option cancelled | CDN$12.04 | — | CDN$12.04 | — |
(1) | The Company's prior Executive Stock Option Plan ("ESOP"), which was adopted in 1992 and last ratified on June 4, 2015, elapsed on June 4, 2018. No further grants of stock options have been made under the ESOP since June 4, 2018. On March 12, 2019, the Board of Directors adopted a new Executive Stock Option Plan ("2019 ESOP") and on June 6, 2019, shareholders approved the 2019 ESOP at the Company's Annual Meeting of Shareholders. |
June 30, 2019 | ||
Stock options outstanding | 1,165,904 | |
Weighted average exercise price per stock option outstanding | CDN$16.07 |
Six months ended June 30, | |||
2019 | 2018 | ||
Expected life | 4.9 years | 4.8 years | |
Expected volatility (1) | 29.79% | 32.09% | |
Risk-free interest rate | 1.44% | 2.05% | |
Expected dividends | 4.27% | 3.30% | |
Stock price at grant date | CDN$17.54 | CDN$21.76 | |
Exercise price of awards | CDN$17.54 | CDN$21.76 | |
Foreign exchange rate USD to CDN | 1.3380 | 1.2809 |
(1) | Expected volatility was calculated by applying a weighted average of the daily closing price change on the TSX for a term commensurate with the expected life of each grant. |
Three months ended June 30, | Six months ended June 30, | ||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||
RSUs granted | — | — | 120,197 | 113,047 | |||||||||
Weighted average fair value per RSU granted | — | — | $ | 13.74 | $ | 16.29 |
June 30, 2019 | |||
RSUs outstanding | 232,016 | ||
Weighted average fair value per RSU outstanding | $ | 13.66 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||
DSUs granted | 60,764 | 36,204 | 60,764 | 43,203 | ||||||||||
Weighted average fair value per DSU granted | $ | 14.01 | $14.50 | $ | 14.01 | $ | 14.94 | |||||||
DSUs settled | — | (37,668) | — | (37,668) | ||||||||||
Weighted average fair value per DSU settled | — | $14.50 | — | $14.50 | ||||||||||
Cash payments on DSUs settled | — | $546 | — | $546 |
June 30, 2019 | |||
DSUs outstanding | 259,757 | ||
Weighted average fair value per DSU outstanding | $ | 13.66 |
Three months ended June 30, | Six months ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
PSUs granted | — | — | 291,905 | 284,571 | |||||||
Weighted average fair value per PSU granted | — | — | $14.28 | $17.84 | |||||||
PSUs forfeited/cancelled | — | (1,513 | ) | — | (1,513 | ) | |||||
PSUs cancelled by performance factor (1) | — | (2,125 | ) | (371,158 | ) | (2,125 | ) | ||||
PSUs settled (1) | — | (117,605 | ) | — | (335,465 | ) | |||||
Weighted average fair value per PSU settled | — | $14.50 | — | $15.87 | |||||||
Cash payments on PSUs settled (2) | — | $1,895 | — | $5,863 |
(1) | The following table provides further information regarding the PSUs settled and adjusted by performance factor included in the table above. The number of "Target Shares" reflects 100% of the PSUs granted and the number of PSUs settled reflects the performance adjustments to the Target Shares. |
Grant Date | Date Settled | Target Shares | Performance | PSUs settled | |||
March 14, 2015 | March 21, 2018 | 217,860 | 100 | % | 217,860 | ||
May 14, 2015 | May 22, 2018 | 115,480 | 100 | % | 115,480 | ||
May 20, 2015 | May 28, 2018 | 4,250 | 50 | % | 2,125 | ||
March 21, 2016 | March 21, 2019 | 371,158 | — | % | — |
(2) | Cash payments on PSUs settled include the fair value of the PSUs plus the cash dividends per common share declared and paid by the Company from the date of grant of the PSUs to the settlement date. |
Six months ended June 30, | |||||
2019 | 2018 | ||||
Expected life | 3 years | 3 years | |||
Expected volatility(1) | 25 | % | 30 | % | |
US risk-free interest rate | 2.36 | % | 2.43 | % | |
Canadian risk-free interest rate | 1.60 | % | 1.96 | % | |
Expected dividends(2) | 0 | % | 0 | % | |
Performance period starting price(3) | CDN$16.36 | CDN$21.13 | |||
Closing stock price on TSX as of the estimation date | CDN$18.06 | CDN$20.59 |
(1) | Expected volatility was calculated based on the daily dividend adjusted closing price change on the TSX for a term commensurate with the expected life of the grant. |
(2) | A participant receives a cash payment from the Company upon PSU settlement that is equivalent to the number of settled PSUs multiplied by the amount of cash dividends per share declared by the Company between the date of grant and the settlement date. As such, there is no impact from expected future dividends in the Monte Carlo simulation model. |
(3) | The performance period starting price is measured as the VWAP for the common shares of the Company on the TSX on the grant date. |
June 30, 2019 | |||
PSUs outstanding | 954,986 | ||
Weighted average fair value per PSU outstanding | $ | 12.62 |
Grant Date | Performance | ||
December 20, 2016 | 0 | % | |
March 20, 2017 | 50 | % | |
March 21, 2018 | 124 | % | |
March 21, 2019 | 82 | % |
Three months ended June 30, | Six months ended June 30, | ||||
2018 | 2018 | ||||
SARs exercised | 40,000 | 147,500 | |||
Base price | CDN$7.56 | CDN$7.56 | |||
Cash payments on exercise, including awards exercised but not yet paid | $323 | $1,481 |
Three months ended June 30, | Six months ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
$ | $ | $ | $ | ||||||||
Stock options | 277 | 135 | 387 | 195 | |||||||
PSUs | 1,615 | (1,122 | ) | (374 | ) | (750 | ) | ||||
RSUs | 309 | 162 | 539 | 221 | |||||||
DSUs | 821 | 184 | 1,034 | 127 | |||||||
SARs | — | (73 | ) | — | (97 | ) | |||||
3,022 | (714 | ) | 1,586 | (304 | ) |
June 30, 2019 | December 31, 2018 | |||
$ | $ | |||
Share-based compensation liabilities, current | ||||
PSUs(1) | 3,496 | 2,563 | ||
RSUs(1) | 173 | 86 | ||
DSUs(2) | 3,560 | 2,417 | ||
Total share-based compensation liabilities, current | 7,229 | 5,066 | ||
Share-based compensation liabilities, non-current | ||||
PSUs(1) | 2,542 | 3,764 | ||
RSUs(1) | 815 | 361 | ||
Total share-based compensation liabilities, non-current | 3,357 | 4,125 |
(1) | Includes dividend equivalents accrued. |
(2) | Includes dividend equivalent grants and effect of DSUs received in lieu of cash for directors' fees not yet granted. |
• | cash |
• | trade receivables |
• | supplier rebates and other receivables |
• | accounts payable and accrued liabilities |
• | call option redemption liability |
• | Amounts due to former shareholders of Polyair(1) included in other liabilities |
(1) | Represents amounts payable to the former shareholders of Polyair Inter Pack, Inc. ("Polyair") relating to estimated income tax benefits as a result of the Company's payment of certain deal-related costs on behalf of Polyair. |
Non-controlling interest put options | ||
$ | ||
Balance as of December 31, 2018 | 10,499 | |
Net foreign exchange differences | 149 | |
Balance as of June 30, 2019 | 10,648 |
Effective Date | Maturity | Notional Amount $ | Settlement | Fixed interest rate paid % | |||||
Qualifying cash flow hedges: | |||||||||
June 8, 2017 | June 20, 2022 | 40,000 | Monthly | 1.7900 | |||||
July 21, 2017 | July 18, 2022 | CDN$36,000 (1) | Monthly | 1.6825 | |||||
August 20, 2018 | August 18, 2023 | 60,000 | Monthly | 2.0450 | |||||
Non-qualifying cash flow hedges: | |||||||||
March 18, 2015 | November 18, 2019 | 40,000 | Monthly | 1.6100 |
(1) | The notional amount will decrease by CDN$18.0 million on July 18, 2021 and 2022. |
Three months ended June 30, | Six months ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
$ | $ | ||||||||||
(Decrease)/increase in fair value of the hedging instrument recognized in OCI (1) | (2,136 | ) | 568 | (3,518 | ) | 2,592 | |||||
Decrease/(increase) in deferred tax expense recognized in OCI | 78 | (53 | ) | 357 | (345 | ) | |||||
Amounts reclassified from cash flow hedging reserve to earnings (2) | (86 | ) | — | (171 | ) | — |
(1) | The hedging (loss)/gain recognized in other comprehensive income ("OCI") before tax is equal to the change in fair value used for measuring effectiveness. There is no ineffectiveness recognized in earnings. |
(2) | Reclassification of unrealized gains from OCI as a result of the discontinuation of hedge accounting for the interest rate swap agreement not qualifying as a cash flow hedge are included in interest expense under the caption finance costs in earnings. |
June 30, 2019 | December 31, 2018 | ||||
$ | $ | ||||
Carrying amount included in other assets | 22 | 2,266 | |||
Carrying amount included in other liabilities | 1,275 | — | |||
(Debit)/credit balance in cash flow hedge reserve, included in OCI, for continuing hedges | (984 | ) | 2,177 | ||
Credit balance remaining in cash flow hedge reserve, included in OCI, from hedging relationship for which hedge accounting no longer applies | 142 | 313 |
Three months ended June 30, | Six months ended June 30, | |||||
2019 | 2019 | |||||
$ | ||||||
Gains from decrease in value of hedging instrument used for calculating hedge ineffectiveness | 4,490 | 9,830 | ||||
Gains from hedging instrument recognized in OCI | 3,927 | 8,608 | ||||
Gains from hedge ineffectiveness recognized in earnings in finance costs in other expense, net | 552 | 1,199 | ||||
Foreign exchange gains recognized in cumulative translation adjustments in the statement of changes in equity | 11 | 23 |
June 30, 2019 | December 31, 2018 | ||||
$ | $ | ||||
Notional amount | 250,000 | 250,000 | |||
Carrying amount | 245,386 | 245,252 |
Three months ended June 30, | Six months ended June 30, | ||||
2019 | 2019 | ||||
$ | |||||
Decrease in value used for calculating hedge ineffectiveness | 3,927 | 8,608 |
June 30, 2019 | December 31, 2018 | ||||
$ | $ | ||||
Debit balance included in foreign currency translation reserve in OCI | (813 | ) | (9,421 | ) |
• | On July 18, 2019, the Company and its syndicated lending group, led by Bank of America, N.A., amended the Company's five-year $600.0 million credit facility agreement, dated June 14, 2018, to, among other things, revise the two financial covenant thresholds to account for the associated impacts of new lease accounting guidance implemented on January 1, 2019 requiring operating leases to be accounted for as debt (with corresponding interest payments). The amendment provides that the consolidated secured net leverage ratio must not be more than 3.70 to 1.00 (previously 3.50 to 1.00), with an allowable temporary increase to 4.20 to 1.00 (previously 4.00 to 1.00) for the quarter in which the Company consummates an acquisition with a price not less than $50 million and the following three quarters, and the consolidated interest coverage ratio must not be less than 2.75 to 1.00 (previously 3.00 to 1.00). |
• | On August 7, 2019, the Board of Directors amended the Company's quarterly policy to increase the annualized dividend by 5.4% from $0.56 to $0.59 per common share. The Board's decision to increase the dividend was based on the Company's strong financial position and positive outlook. Accordingly, on August 7, 2019, the Company declared a quarterly cash dividend of $0.1475 per common share payable on September 30, 2019 to shareholders of record at the close of business on September 16, 2019. The estimated amount of this dividend payment is $8.7 million based on 58,877,185 of the Company’s common shares issued and outstanding as of August 7, 2019. |
1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of INTERTAPE POLYMER GROUP INC./LE GROUPE INTERTAPE POLYMER INC. (the “Issuer”) for the interim period ended June 30, 2019. |
2. | No misrepresentation: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the Issuer, as of the date and for the periods presented in the interim filings. |
4. | Responsibility: The Issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52 - 109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the Issuer. |
5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the Issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings: |
(a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
(a) | material information relating to the Issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
(b) | information required to be disclosed by the Issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
(b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Issuer’s GAAP. |
5.1 | Control framework: The control framework the Issuer’s other certifying officer(s) and I used to design the Issuer’s ICFR is the 2013 Internal Control – Integrated Framework published by the Committee of Sponsoring Organization of the Treadway Commission (COSO). |
5.2 | ICFR – material weakness relating to design: N/A |
5.3 | Limitation on scope of design: The issuer has disclosed in its interim MD&A |
(a) | the fact that the issuer’s other certifying officer(s) and I have limited the scope of our design of DC&P and ICFR to exclude controls, policies and procedures of: |
(b) | summary financial information about business that the issuer acquired that has been consolidated in the issuer’s financial statements. |
6. | Reporting changes in ICFR: The Issuer has disclosed in the interim MD&A any change in the Issuer’s ICFR that occurred during the period beginning on April 1, 2019 and ended on June 30, 2019 that has materially affected, or is reasonably likely to materially affect, the Issuer’s ICFR. |
1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of INTERTAPE POLYMER GROUP INC./LE GROUPE INTERTAPE POLYMER INC. (the “Issuer”) for the interim period ended June 30, 2019. |
2. | No misrepresentation: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the Issuer, as of the date and for the periods presented in the interim filings. |
4. | Responsibility: The Issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52 - 109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the Issuer. |
5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the Issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings: |
(a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
(a) | material information relating to the Issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
(b) | information required to be disclosed by the Issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
(b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Issuer’s GAAP. |
5.1 | Control framework: The control framework the Issuer’s other certifying officer(s) and I used to design the Issuer’s ICFR is the 2013 Internal Control – Integrated Framework published by the Committee of Sponsoring Organization of the Treadway Commission (COSO). |
5.3 | Limitation on scope of design: The issuer has disclosed in its interim MD&A |
a. | the fact that the issuer’s other certifying officer(s) and I have limited the scope of our design of DC&P and ICFR to exclude controls, policies and procedures of: |
b. | summary financial information about business that the issuer acquired that has been consolidated in the issuer’s financial statements. |
6. | Reporting changes in ICFR: The Issuer has disclosed in the interim MD&A any change in the Issuer’s ICFR that occurred during the period beginning on April 1, 2019 and ended on June 30, 2019 that has materially affected, or is reasonably likely to materially affect, the Issuer’s ICFR. |