6-K 1 financialstatements63019q2.htm 6-K Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM 6-K
________________________________________
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of August, 2019
Commission File Number 1-10928
________________________________________
INTERTAPE POLYMER GROUP INC.
________________________________________
9999 Cavendish Blvd., Suite 200, Ville St. Laurent, Quebec, Canada, H4M 2X5
________________________________________
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F  x            Form 40-F  ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨
 
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
INTERTAPE POLYMER GROUP INC.
 
 
 
Date: August 8, 2019
By:
 
/s/ Jeffrey Crystal
 
 
 
Jeffrey Crystal, Chief Financial Officer
















Intertape Polymer Group Inc.
Unaudited Interim Condensed Consolidated Financial Statements
June 30, 2019




 
 
Unaudited Interim Condensed Consolidated Financial Statements
 
 
 
 
 
 
 
Consolidated Changes in Equity
4 to 5
 
 
6 to 7
 
 
 
 
Notes to Unaudited Interim Condensed Consolidated Financial Statements
9 to 21



Intertape Polymer Group Inc.
Consolidated Earnings
Periods ended June 30,
(In thousands of US dollars, except per share amounts)
(Unaudited)
 
 
 
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

The accompanying notes are an integral part of the interim condensed consolidated financial statements. Note 3 presents additional information on consolidated earnings.


2

Intertape Polymer Group Inc.
Consolidated Comprehensive Income
Periods ended June 30,
(In thousands of US dollars)
(Unaudited)
 
 
 
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.
The accompanying notes are an integral part of the interim condensed consolidated financial statements.


3

Intertape Polymer Group Inc.
Consolidated Changes in Equity
Six months ended June 30, 2018
(In thousands of US dollars, except for number of common shares)
(Unaudited)
 
 
 
 
 
 
 
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.
The accompanying notes are an integral part of the interim condensed consolidated financial statements.

4

Intertape Polymer Group Inc.
Consolidated Changes in Equity
Six months ended June 30, 2019
(In thousands of US dollars, except for number of common shares)
(Unaudited)
 
 
 
 
 
 
 
 
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.

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

5

Intertape Polymer Group Inc.
Consolidated Cash Flows
Periods ended June 30,
(In thousands of US dollars)
(Unaudited)
 
 
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
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

6

 
 
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

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

7

Intertape Polymer Group Inc.
Consolidated Balance Sheets
As of
(In thousands of US dollars)
 
 
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

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

8

Intertape Polymer Group Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
June 30, 2019
(In US dollars, tabular amounts in thousands, except per share data and as otherwise noted)
(Unaudited)
1 - GENERAL BUSINESS DESCRIPTION
Intertape Polymer Group Inc. (the “Parent Company”), incorporated under the Canada Business Corporations Act, has its principal administrative offices in Montreal, Québec, Canada and in Sarasota, Florida, U.S.A. The address of the Parent Company’s registered office is 800 Place Victoria, Suite 3700, Montreal, Québec H4Z 1E9, c/o Fasken Martineau DuMoulin LLP. The Parent Company’s common shares are listed on the Toronto Stock Exchange (“TSX”) in Canada.
The Parent Company and its subsidiaries (together referred to as the “Company”) develop, manufacture and sell a variety of paper-and-film based pressure sensitive and water-activated tapes, polyethylene and specialized polyolefin films, protective packaging, engineered coated products and complementary packaging systems for industrial and retail use.
Intertape Polymer Group Inc. is the Company’s ultimate parent.
2 - ACCOUNTING POLICIES
Basis of Presentation and Statement of Compliance
The unaudited interim condensed consolidated financial statements (“financial statements”) present the Company’s consolidated balance sheets as of June 30, 2019 and December 31, 2018, as well as its consolidated earnings, comprehensive income and cash flows for the three and six months ended June 30, 2019 and 2018 and the changes in equity for the six months ended June 30, 2019 and 2018.
These financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34 – Interim Financial Reporting and are expressed in United States (“US”) dollars. Accordingly, certain information and footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), have been omitted or condensed. These financial statements use the same accounting policies, except for the adoption of the new standard described below, and use the same methods of computation as compared with the Company’s most recent annual audited consolidated financial statements, except for (i) the estimate of the provision for income taxes, which is determined in these financial statements using the estimated weighted average annual effective income tax rate applied to the earnings before income tax expense of the interim period, which may have to be adjusted in a subsequent interim period of the financial year if the estimate of the annual income tax rate changes, and (ii) the re-measurement of the defined benefit liability, which is required at year-end and if triggered by plan amendment or settlement during interim periods.
These financial statements reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the results for these interim periods. These adjustments are of a normal recurring nature.
These financial statements were authorized for issuance by the Company’s Board of Directors on August 7, 2019.
Critical Accounting Judgments, Estimates and Assumptions
The preparation of these financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Significant changes in the underlying assumptions could result in significant changes to these estimates. Consequently, management reviews these estimates on a regular basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. The judgments, estimates and assumptions applied in these financial statements were the same as those applied in the Company’s most recent annual audited consolidated financial statements other than (as noted above) the accounting policies and methods of computation for the estimate of the provision for income taxes, the re-measurement of the defined benefit liability, and the measurement of lease liabilities under IFRS 16 - Leases, discussed below, which requires judgment as to the certainty of renewal options to be exercised and the discount rates applied.

9

New Standards Adopted as of January 1, 2019

IFRS 16 - Leases ("IFRS 16"), which replaced IAS 17 - Leases along with three Interpretations (IFRIC 4 ‘Determining whether an Arrangement contains a Lease’, SIC 15 ‘Operating Leases-Incentives’ and SIC 27 ‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’), introduced a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees, as well as new disclosure requirements. IFRS 16 became effective for annual reporting periods beginning on or after January 1, 2019. The new standard has been applied using the modified retrospective approach and as a result, prior periods have not been restated. The Company has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease and the definition of a lease in accordance with IAS 17 and IFRIC 4 will continue to apply to those leases entered or modified before January 1, 2019 ("the date of initial application"). For those leases previously classified as finance leases, the right-of-use asset and lease liability are measured at the date of initial application at the same amounts as under IAS 17 immediately before the date of initial application. The Company has applied recognition exemptions across its complete portfolio of leased assets for short-term leases and leases of low value items. Furthermore, the Company has used certain relevant practical expedients available under the modified retrospective approach. Specifically, these include (i) applying a single discount rate to a portfolio of leases with reasonably similar characteristics, (ii) relying on the assessment of whether leases are onerous applying IAS 37 Provisions, Contingent Liabilities and Contingent Assets immediately before the date of initial application as an alternative to performing an impairment review, (iii) excluding leases for which the lease term ends within 12 months of the date of initial application, (iv) excluding initial direct costs from the measurement of the right-of-use asset at the date of initial application, and (v) using hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease. The Company has also elected to measure the right-of-use assets at an amount equal to the lease liability adjusted for any prepaid or accrued lease payments that existed at the date of initial application.

The adoption of this new guidance resulted in changes to the balance sheet as of January 1, 2019, including (i) recognition of $31.1 million in right-of-use assets included in property, plant and equipment, (ii) the recognition of $31.5 million in lease liabilities included in borrowings, current and non-current, (iii) decrease of $0.1 million in accounts payable and accrued liabilities and (iv) decrease of $0.3 million in other liabilities.

On transition to IFRS 16 the weighted average incremental borrowing rate applied to lease liabilities recognized was 6.6%. These rates are based on market rates as of January 1, 2019 for a BB- rated industrial company issuing debt for maturities ranging from 3 months to 10 years.

The following is a reconciliation of total operating lease commitments as of December 31, 2018 to the lease liabilities recognized as of January 1, 2019:
 
 
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


10

Lease liabilities are presented in the consolidated balance sheet under the caption borrowings as follows:
 
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


Rent expense relating to payments not included in the measurement of a lease liability was approximately $1.2 million and $2.6 million for the three and six months ended June 30, 2019.

Included in the net carrying amount of property, plant and equipment presented in the consolidated balance sheet are right-of-use assets as follows:
 
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


Accounting policy applicable from January 1, 2019

Contracts entered into on or after January 1, 2019 that meet the definition of a lease are recognized on the balance sheet as a right-of-use asset and a lease liability, unless they are determined to be low value or short-term leases. At the lease commencement date, the lease liability is measured at the present value of the lease payments unpaid at that date, including non-lease components, discounted using the interest rate implicit in the lease if that rate is readily available or the Company’s incremental borrowing rate. Lease payments are apportioned between the finance cost and the liability. The finance charge is recognized in earnings in finance costs and is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

At the lease commencement date, the right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). Right-of-use assets are depreciated on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.

The lease liability is remeasured to reflect any reassessment or modification and the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already fully depreciated.

The classification of a short-term lease is re-assessed if the terms of the lease are changed. Lease payments related to low value and short-term leases are recognized in earnings on a straight-line basis over the lease term.

Other pronouncements and amendments

In the current year, the Company has applied a number of other amendments to IFRS Standards and Interpretations issued by the IASB that are effective for an annual period that begins on or after January 1, 2019. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.


11

New Standards and Interpretations Issued but Not Yet Effective

Certain new standards, amendments and interpretations, and improvements to existing standards have been published by the IASB but are not yet effective and have not been adopted early by the Company. Management anticipates that all the relevant pronouncements will be adopted in the first reporting period following the date of application. Information on new standards, amendments and interpretations, and improvements to existing standards, which could potentially impact the Company’s financial statements, are detailed as follows:

On March 29, 2018, the IASB issued its revised Conceptual Framework for Financial Reporting ("Conceptual Framework"). This replaces the previous version of the Conceptual Framework issued in 2010. The revised Conceptual Framework will be effective on November 1, 2020. Management is currently assessing but has not yet determined the impact of the Conceptual Framework on the Company’s financial statements.

Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Company’s financial statements.

3 - INFORMATION INCLUDED IN CONSOLIDATED EARNINGS
The following table describes the charges incurred by the Company which are included in the Company’s consolidated earnings:
 
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





12

4 - MANUFACTURING FACILITY CLOSURES, RESTRUCTURING AND OTHER CHARGES (RECOVERIES)

As part of a plan to realize operational synergies gained from the acquisition of Canadian Technical Tape Ltd., which was completed in July 2017, the Company closed its Johnson City, Tennessee manufacturing facility at the end of 2018 and subsequently sold the facility in June 2019. In April 2019, the Company announced that it will close its Montreal, Quebec manufacturing facility and expects to transfer production to its other existing manufacturing facilities by the end of 2019. The charges incurred in the three and six months ended June 30, 2019 totalled $3.9 million and $4.2 million, respectively, and were primarily due to charges incurred in the second quarter for non-cash impairments of inventory and property, plant and equipment related to both facilities totalling $2.3 million, as well as cash costs of $1.1 million mainly for termination benefits related to the Montreal, Quebec manufacturing facility.

The recoveries incurred in the three and six months ended June 30, 2018 totalled $0.4 million and $0.3 million, respectively, and were primarily due to a reduction in the environmental provision related to the Columbia, South Carolina manufacturing facility.

5 - INCOME TAXES
The calculation of the Company’s effective tax rate is as follows:
 
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
%

The increase in the effective tax rate in the three and six months ended June 30, 2019, as compared to the same periods in 2018 was primarily due to a proposed state income tax assessment recognized in the second quarter of 2019 related to net operating losses generated in tax years 2000-2006 and the elimination of certain tax benefits as a result of the Tax Cuts and Jobs Act related to intercompany debt.

6 - EARNINGS PER SHARE
The weighted average number of common shares outstanding is as follows:
 
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


For the three and six months ended June 30, 2019 and 2018, the number of stock options that were anti-dilutive and not included in diluted earnings per share calculations were 242,918 for all periods.

7 - COMMITMENTS
The following table summarizes information related to commitments to purchase machinery and equipment:
 
 
June 30,
2019
 
December 31, 2018
Commitments to purchase machinery and equipment
 
$
13,090

 
$
16,256


13

8 - CAPITAL STOCK
Common Shares
The Company’s common shares outstanding as of June 30, 2019 and December 31, 2018 were 58,877,185 and 58,650,310, respectively.
Dividends
The cash dividends paid during the period were as follows:
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.
Share Repurchases
Under the Company’s normal course issuer bid (“NCIB”), the Company has the ability to repurchase for cancellation up to 4,000,000 common shares of the Company at prevailing market prices over the twelve-month period ended July 22, 2019.
There were no shares repurchased during the three and six months ended June 30, 2019 and 2018. As of June 30, 2019 and 2018, there were 3,782,900 and 3,512,700 shares, respectively, available for repurchase under the NCIB.
The NCIB which expired on July 22, 2019 was renewed for a twelve-month period starting July 23, 2019. There were no shares repurchased under the renewed NCIB as of August 7, 2019.

Stock Options

The following tables summarize information related to stock options (in Canadian dollars ("CDN") where indicated):
 
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



14

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

Restricted Share Units

The following tables summarize information related to restricted share units ("RSUs"):
 
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


Deferred Share Units

The following tables summarize information related to DSUs:
 
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

 




15

Performance Share Units

The following table summarizes information about performance share units ("PSUs") during the period:
 
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.
The weighted average fair value of PSUs granted was estimated based on a Monte Carlo simulation model, considering the following weighted average assumptions:
 
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.


16

The following table summarizes information about PSUs outstanding as of:
 
June 30,
2019
PSUs outstanding
954,986

Weighted average fair value per PSU outstanding
$
12.62

Based on the Company’s current performance adjustment factors, the number of PSUs earned if all of the outstanding PSUs were to be settled at June 30, 2019 would be as follows:
Grant Date
 
Performance
December 20, 2016
 
0
%
March 20, 2017
 
50
%
March 21, 2018
 
124
%
March 21, 2019
 
82
%

Stock Appreciation Rights
There were no stock appreciation rights (“SARs”) outstanding as of June 30, 2019 and there was no activity during the six months ended June 30, 2019. The following tables summarize SARs activity during the three and six months ended June 30, 2018:
 
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

Summary of Share-based Compensation Expense and Share-based Compensation Liabilities
The following table summarizes share-based compensation expense (benefit) recorded in earnings in selling, general and administrative expense:
 
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
)

17


The following table summarizes share-based compensation liabilities, including dividend equivalents accrued, recorded in the consolidated balance sheets as of:
 
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.

9 - FINANCIAL INSTRUMENTS
Classification and Fair Value of Financial Instruments
The carrying amounts of the following financial assets and liabilities are considered a reasonable approximation of fair value given their short maturity periods:
•
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.
Borrowings

The fair value of the Company's $250 million senior unsecured notes issued in October 2018 ("Senior Unsecured Notes") is based on the trading levels and bid/offer prices observed by a market participant. As of June 30, 2019 and December 31, 2018, the Senior Unsecured Notes had a carrying value, including unamortized debt issuance costs, of $245.4 million and 245.3 million, respectively, and a fair value of $258.3 million and $248.7 million, respectively.

The Company's borrowings, other than the Senior Unsecured Notes, consist primarily of variable rate debt. The corresponding fair values are estimated using observable market interest rates of similar variable rate loans with similar risk and credit standing. Accordingly, the carrying amounts are considered to be a reasonable approximation of the fair values.

As of June 30, 2019, and December 31, 2018, the Company categorizes its borrowings as Level 2 on the three-level fair value hierarchy.

18

Interest Rate Swaps
The Company measures the fair value of its interest rate swap agreements using discounted cash flows. Future cash flows are estimated based on forward interest rates (from observable yield curves at the end of a reporting period) and contract interest rates, discounted as a rate that reflects the credit risk of various counterparties.
As of June 30, 2019, and December 31, 2018, the Company categorizes its interest rate swaps as Level 2 on the three-level fair value hierarchy, meaning that the fair value is estimated using a valuation technique based on unobservable market data, either directly or indirectly.
Non-Controlling Interest Put Options
In connection with the acquisition of Airtrax on May 11, 2018, the Company, through its partially owned subsidiary, Capstone, is party to a shareholders’ agreement that contains put options, which provide each of the non-controlling interest shareholders of Capstone with the right to require the Company to purchase their retained interest at a variable purchase price following a five-year lock-in period following the date of acquisition. The agreed-upon purchase price is equal to the fair market valuation as determined through a future negotiation or, as needed, a valuation to be performed by an independent and qualified expert at the time of exercise. During the six months ended June 30, 2019, the obligation was remeasured due to changes in exchange rates resulting in a $0.1 million increase in the liability and a corresponding loss recorded in finance costs in other expense, net. As of June 30, 2019 and December 31, 2018, the amount recorded on the consolidated balance sheet for this obligation is $10.6 million and 10.5 million, respectively.
The Company categorizes its non-controlling interest put options as Level 3 of the fair value hierarchy, meaning that the fair value is estimated using a valuation technique based on unobservable market data. Details of inputs used in this valuation technique have been disclosed in the Company's audited consolidated financial statements and notes thereto as of December 31, 2018.
A reconciliation of the carrying amount of financial instruments classified within Level 3 follows for the years ended:
 
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

Interest Rate Swap Agreements
The Company is exposed to a risk of change in cash flows due to the fluctuations in interest rates on its variable rate borrowings. To minimize the potential long-term cost of floating rate borrowings, the Company entered into interest rate swap agreements.
The terms of the interest rate swap agreements are as follows as of June 30, 2019:
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.


19

The following tables summarize information regarding interest rate swap agreements designated as hedging instruments:
 
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

Hedge of net investment in foreign operations
A foreign currency exposure arises from the Parent Company's net investment in its USD functional currency subsidiary, IPG (US) Holdings Inc. The risk arises from the fluctuations in the USD and Canadian dollar current exchange rate, which causes the amount of the net investment in IPG (US) Holdings Inc. to vary. The Company currently uses its Senior Unsecured Notes to hedge the Company’s exposure to the USD foreign exchange risk on this investment.
The changes in value related to the Senior Unsecured Notes designated as a hedging instrument, in the hedge of a net investment, are as follows for the three and six months ended June 30, 2019 (nil for the three and six months ended June 30, 2018):
 
 
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



20

The notional and carrying amounts of the Senior Unsecured Notes are as follows:
 
June 30,
2019
 
December 31, 2018
 
$
 
$
Notional amount
250,000

 
250,000

Carrying amount
245,386

 
245,252


The amounts related to the net investment in IPG (US) Holdings, Inc., designated as the hedged item in the hedge of a net investment, are as follows for the three and six months ended June 30, 2019 (nil for the three and six months ended June 30, 2018):

 
Three months ended
June 30,
 
Six months ended
June 30,
 
2019
 
2019
 
$
 
 
Decrease in value used for calculating hedge ineffectiveness
3,927

 
8,608


The cumulative amounts included in the foreign currency translation reserve related to the net investment in IPG (US) Holdings, Inc., designated as the hedged item in the hedge of a net investment, is as follows:
 
June 30,
2019
 
December 31, 2018
 
$
 
$
Debit balance included in foreign currency translation reserve in OCI
(813
)
 
(9,421
)

10 - POST REPORTING EVENTS
Non-Adjusting Events
•
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.
No other significant adjusting or non-adjusting events have occurred between the reporting date of these financial statements and the date of authorization.

21

Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Gregory A.C. Yull, Chief Executive Officer of INTERTAPE POLYMER GROUP INC./LE GROUPE INTERTAPE POLYMER INC., certify the following:
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:
(i) N/A;
(ii) N/A; or
(iii) a business that the issuer acquired not more than 365 days before the last day of the period covered by the interim filings;
(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.


DATED the 8th day of August, 2019.

By: /s/ Gregory A.C. Yull
Gregory A.C. Yull
Chief Executive Officer


Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Jeffrey Crystal, Chief Financial Officer of INTERTAPE POLYMER GROUP INC./LE GROUPE INTERTAPE POLYMER INC., certify the following:
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).
5.2ICFR – 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:
(i) N/A;
(ii) N/A; or
(iii) a business that the issuer acquired not more than 365 days before the last day of the period covered by the interim filings;
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.

DATED the 8th day of August, 2019.

By: /s/ Jeffrey Crystal
Jeffrey Crystal
Chief Financial Officer