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 May, 2017
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 ☒ 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: May 9, 2017 |
By: | /s/ Jeffrey Crystal | ||||
Jeffrey Crystal, Chief Financial Officer |
Interim Condensed Consolidated Financial Statements
March 31, 2017
Unaudited Interim Condensed Consolidated Financial Statements |
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2 | ||||
3 | ||||
4 to 5 | ||||
6 | ||||
7 | ||||
Notes to Interim Condensed Consolidated Financial Statements |
8 to 16 |
Intertape Polymer Group Inc.
Periods ended March 31,
(In thousands of US dollars, except per share amounts)
(Unaudited)
Three months ended March 31, |
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2017 | 2016 | |||||||
$ | $ | |||||||
Revenue |
207,120 | 190,816 | ||||||
Cost of sales |
157,980 | 149,720 | ||||||
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Gross profit |
49,140 | 41,096 | ||||||
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Selling, general and administrative expenses |
25,974 | 23,384 | ||||||
Research expenses |
2,978 | 2,542 | ||||||
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28,952 | 25,926 | |||||||
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Operating profit before manufacturing facility closures, restructuring and other related charges |
20,188 | 15,170 | ||||||
Manufacturing facility closures, restructuring and other related charges (Note 4) |
267 | 1,733 | ||||||
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Operating profit |
19,921 | 13,437 | ||||||
Finance costs (income) (Note 3) |
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Interest |
1,148 | 982 | ||||||
Other expense (income), net |
428 | (91 | ) | |||||
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1,576 | 891 | |||||||
Earnings before income tax expense |
18,345 | 12,546 | ||||||
Income tax expense (Note 5) |
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Current |
2,693 | 2,076 | ||||||
Deferred |
2,219 | 940 | ||||||
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4,912 | 3,016 | |||||||
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Net earnings |
13,433 | 9,530 | ||||||
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Net earnings (loss) attributable to: |
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Company shareholders |
13,462 | 9,530 | ||||||
Non-controlling interest |
(29 | ) | | |||||
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13,433 | 9,530 | |||||||
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Earnings per share attributable to |
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Company shareholders (Note 6) |
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Basic |
0.23 | 0.16 | ||||||
Diluted |
0.22 | 0.16 |
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 March 31,
(In thousands of US dollars)
(Unaudited)
Three months ended March 31, |
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2017 | 2016 | |||||||
$ | $ | |||||||
Net earnings |
13,433 | 9,530 | ||||||
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Other comprehensive income (loss) |
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Change in fair value of interest rate swap agreements designated as cash flow hedges (net of the deferred tax expense (benefit) of $114 and ($495) for the three months ended March 31, 2017 and 2016, respectively) |
186 | (808 | ) | |||||
Change in cumulative translation adjustments |
2,437 | 4,682 | ||||||
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Items that will be subsequently reclassified to net earnings |
2,623 | 3,874 | ||||||
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Comprehensive income for the period |
16,056 | 13,404 | ||||||
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Comprehensive income for the period attributable to: |
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Company shareholders |
15,774 | 13,404 | ||||||
Non-controlling interest |
282 | | ||||||
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16,056 | 13,404 | |||||||
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The accompanying notes are an integral part of the interim condensed consolidated financial statements.
3
Intertape Polymer Group Inc.
Consolidated Changes in Equity
Three months ended March 31, 2016
(In thousands of US dollars, except for number of common shares)
(Unaudited)
Accumulated other comprehensive loss | ||||||||||||||||||||||||||||||||
Contributed surplus |
Cumulative translation adjustment account |
Reserve for cash flow hedge |
Total | Deficit | Equity attributable to Company shareholders and total equity |
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Capital stock | ||||||||||||||||||||||||||||||||
Number | Amount | |||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
Balance as of December 31, 2015 |
58,667,535 | 347,325 | 23,298 | (20,407 | ) | (272 | ) | (20,679 | ) | (133,216 | ) | 216,728 | ||||||||||||||||||||
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Transactions with owners |
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Exercise of stock options (Note 6) |
22,300 | 115 | 115 | |||||||||||||||||||||||||||||
Change in excess tax benefit on exercised share-based awards |
17 | (17 | ) | | ||||||||||||||||||||||||||||
Change in excess tax benefit on outstanding share-based awards |
156 | 156 | ||||||||||||||||||||||||||||||
Share-based compensation (Note 6) |
1,005 | 1,005 | ||||||||||||||||||||||||||||||
Share-based compensation expense credited to capital on options exercised (Note 6) |
37 | (37 | ) | | ||||||||||||||||||||||||||||
Repurchases of common shares (Note 6) |
(147,200 | ) | (862 | ) | (835 | ) | (1,697 | ) | ||||||||||||||||||||||||
Dividends on common shares (Note 6) |
(7,608 | ) | (7,608 | ) | ||||||||||||||||||||||||||||
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(124,900 | ) | (693 | ) | 1,107 | (8,443 | ) | (8,029 | ) | ||||||||||||||||||||||||
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Net earnings |
9,530 | 9,530 | ||||||||||||||||||||||||||||||
Other comprehensive income |
||||||||||||||||||||||||||||||||
Change in fair value of interest rate swap agreements designated as cash flow hedges (net of the deferred income tax benefit of $495) (Note 8) |
(808 | ) | (808 | ) | (808 | ) | ||||||||||||||||||||||||||
Change in cumulative translation adjustments |
4,682 | 4,682 | 4,682 | |||||||||||||||||||||||||||||
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4,682 | (808 | ) | 3,874 | | 3,874 | |||||||||||||||||||||||||||
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Comprehensive income for the period |
4,682 | (808 | ) | 3,874 | 9,530 | 13,404 | ||||||||||||||||||||||||||
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Balance as of March 31, 2016 |
58,542,635 | 346,632 | 24,405 | (15,725 | ) | (1,080 | ) | (16,805 | ) | (132,129 | ) | 222,103 | ||||||||||||||||||||
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The accompanying notes are an integral part of the interim condensed consolidated financial statements.
4
Intertape Polymer Group Inc.
Consolidated Changes in Equity
Three months ended March 31, 2017
(In thousands of US dollars, except for number of common shares)
(Unaudited)
Accumulated other comprehensive loss | ||||||||||||||||||||||||||||||||||||||||
Contributed surplus |
Cumulative translation adjustment account |
Reserve for cash flow hedge |
Total | Deficit | Total equity attributable to Company shareholders |
Non- controlling interest |
Total equity |
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Capital stock | ||||||||||||||||||||||||||||||||||||||||
Number | Amount | |||||||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
Balance as of December 31, 2016 |
59,060,335 | 351,203 | 29,585 | (19,511 | ) | (136 | ) | (19,647 | ) | (124,605 | ) | 236,536 | 6,407 | 242,943 | ||||||||||||||||||||||||||
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Transactions with owners |
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Exercise of stock options (Note 6) |
65,000 | 106 | 106 | 106 | ||||||||||||||||||||||||||||||||||||
Change in excess tax benefit on exercised share-based awards |
338 | (338 | ) | | | |||||||||||||||||||||||||||||||||||
Change in excess tax benefit on outstanding share-based awards |
(2,524 | ) | 1,442 | (1,082 | ) | (1,082 | ) | |||||||||||||||||||||||||||||||||
Share-based compensation (Note 6) |
(7,920 | ) | (4,256 | ) | (12,176 | ) | (12,176 | ) | ||||||||||||||||||||||||||||||||
Share-based compensation expense credited to capital on options exercised (Note 6) |
59 | (59 | ) | | | |||||||||||||||||||||||||||||||||||
Dividends on common shares (Note 6) |
(8,268 | ) | (8,268 | ) | (8,268 | ) | ||||||||||||||||||||||||||||||||||
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65,000 | 503 | (10,841 | ) | (11,082 | ) | (21,420 | ) | (21,420 | ) | |||||||||||||||||||||||||||||||
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Net earnings (loss) |
13,462 | 13,462 | (29 | ) | 13,433 | |||||||||||||||||||||||||||||||||||
Other comprehensive income |
||||||||||||||||||||||||||||||||||||||||
Change in fair value of interest rate swap agreements designated as cash flow hedges (net of the deferred income tax expense of $114) (Note 8) |
186 | 186 | 186 | 186 | ||||||||||||||||||||||||||||||||||||
Change in cumulative translation adjustments |
2,126 | 2,126 | 2,126 | 311 | 2,437 | |||||||||||||||||||||||||||||||||||
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2,126 | 186 | 2,312 | | 2,312 | 311 | 2,623 | ||||||||||||||||||||||||||||||||||
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Comprehensive income for the period |
2,126 | 186 | 2,312 | 13,462 | 15,774 | 282 | 16,056 | |||||||||||||||||||||||||||||||||
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Balance as of March 31, 2017 |
59,125,335 | 351,706 | 18,744 | (17,385 | ) | 50 | (17,335 | ) | (122,225 | ) | 230,890 | 6,689 | 237,579 | |||||||||||||||||||||||||||
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The accompanying notes are an integral part of the interim condensed consolidated financial statements.
5
Intertape Polymer Group Inc.
Periods ended March 31,
(In thousands of US dollars)
(Unaudited)
Three months ended March 31, |
||||||||
2017 | 2016 | |||||||
$ | $ | |||||||
OPERATING ACTIVITIES |
||||||||
Net earnings |
13,433 | 9,530 | ||||||
Adjustments to net earnings |
||||||||
Depreciation and amortization |
8,275 | 7,235 | ||||||
Income tax expense |
4,912 | 3,016 | ||||||
Interest expense |
1,148 | 982 | ||||||
Non-cash (recoveries) charges in connection with manufacturing facility closures, restructuring and other related charges |
(298 | ) | 528 | |||||
(Reversal of impairment) impairment of inventories |
(43 | ) | 424 | |||||
Share-based compensation expense |
1,188 | 1,594 | ||||||
Pension, post-retirement and other long-term employee benefits |
685 | 707 | ||||||
Loss (gain) on foreign exchange |
191 | (328 | ) | |||||
Other adjustments for non-cash items |
(17 | ) | 122 | |||||
Income taxes paid, net |
(301 | ) | (199 | ) | ||||
Contributions to defined benefit plans |
(593 | ) | (178 | ) | ||||
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Cash flows from operating activities before changes in working capital items |
28,580 | 23,433 | ||||||
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Changes in working capital items |
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Trade receivables |
(2,230 | ) | (6,541 | ) | ||||
Inventories |
(9,428 | ) | (11,116 | ) | ||||
Parts and supplies |
(607 | ) | (464 | ) | ||||
Other current assets |
2,445 | 2,456 | ||||||
Accounts payable and accrued liabilities |
(28,459 | ) | (9,114 | ) | ||||
Provisions |
(879 | ) | 22 | |||||
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(39,158 | ) | (24,757 | ) | |||||
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Cash flows from operating activities |
(10,578 | ) | (1,324 | ) | ||||
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INVESTING ACTIVITIES |
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Purchases of property, plant and equipment |
(22,124 | ) | (9,494 | ) | ||||
Other investing activities |
19 | (50 | ) | |||||
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Cash flows from investing activities |
(22,105 | ) | (9,544 | ) | ||||
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FINANCING ACTIVITIES |
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Proceeds from borrowings |
39,511 | 64,635 | ||||||
Repayment of borrowings |
(14,208 | ) | (47,363 | ) | ||||
Interest paid |
(1,208 | ) | (815 | ) | ||||
Repurchases of common shares |
| (1,697 | ) | |||||
Dividends paid |
(8,316 | ) | (7,509 | ) | ||||
Other financing activities |
14 | 115 | ||||||
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Cash flows from financing activities |
15,793 | 7,366 | ||||||
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Net decrease in cash |
(16,890 | ) | (3,502 | ) | ||||
Effect of foreign exchange differences on cash |
40 | 160 | ||||||
Cash, beginning of period |
20,956 | 17,615 | ||||||
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Cash, end of period |
4,106 | 14,273 | ||||||
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The accompanying notes are an integral part of the interim condensed consolidated financial statements.
6
Intertape Polymer Group Inc.
As of
(In thousands of US dollars)
March 31, 2017 (Unaudited) |
December 31, 2016 (Audited) |
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$ | $ | |||||||
ASSETS |
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Current assets |
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Cash |
4,106 | 20,956 | ||||||
Trade receivables |
92,025 | 90,122 | ||||||
Inventories |
113,335 | 103,470 | ||||||
Parts and supplies |
16,990 | 16,368 | ||||||
Other current assets |
9,072 | 11,321 | ||||||
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235,528 | 242,237 | |||||||
Property, plant and equipment |
247,285 | 233,478 | ||||||
Goodwill |
31,574 | 30,841 | ||||||
Intangible assets |
34,303 | 34,050 | ||||||
Deferred tax assets |
33,087 | 36,611 | ||||||
Other assets |
3,896 | 3,380 | ||||||
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Total assets |
585,673 | 580,597 | ||||||
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LIABILITIES |
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Current liabilities |
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Accounts payable and accrued liabilities |
74,826 | 100,216 | ||||||
Provisions, current |
2,123 | 3,851 | ||||||
Borrowings, current |
7,757 | 7,604 | ||||||
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84,706 | 111,671 | |||||||
Borrowings, non-current |
197,589 | 172,221 | ||||||
Pension, post-retirement and other long-term employee benefits |
30,955 | 30,832 | ||||||
Long-term share-based compensation liabilities (Note 6) |
10,355 | 296 | ||||||
Non-controlling interest put options (Note 8) |
10,500 | 10,020 | ||||||
Deferred tax liabilities |
9,720 | 9,332 | ||||||
Provisions, non-current |
2,695 | 2,040 | ||||||
Other liabilities |
1,574 | 1,242 | ||||||
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348,094 | 337,654 | |||||||
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EQUITY |
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Capital stock (Note 6) |
351,706 | 351,203 | ||||||
Contributed surplus |
18,744 | 29,585 | ||||||
Deficit |
(122,225 | ) | (124,605 | ) | ||||
Accumulated other comprehensive loss |
(17,335 | ) | (19,647 | ) | ||||
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Total equity attributable to Company shareholders |
230,890 | 236,536 | ||||||
Non-controlling interest (Note 7) |
6,689 | 6,407 | ||||||
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Total equity |
237,579 | 242,943 | ||||||
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Total liabilities and equity |
585,673 | 580,597 | ||||||
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The accompanying notes are an integral part of the interim condensed consolidated financial statements.
7
Intertape Polymer Group Inc.
Notes to Interim Condensed Consolidated Financial Statements
March 31, 2017
(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 Companys registered office is 800 Place Victoria, Suite 3700, Montreal, Québec H4Z 1E9, c/o Fasken Martineau DuMoulin LLP. The Parent Companys 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, woven coated fabrics and complementary packaging systems for industrial and retail use.
Intertape Polymer Group Inc. is the Companys ultimate parent.
2 - ACCOUNTING POLICIES
Basis of Presentation and Statement of Compliance
The unaudited interim condensed consolidated financial statements (Financial Statements) present the Companys consolidated balance sheets as of March 31, 2017 and December 31, 2016, as well as its consolidated earnings, comprehensive income, changes in equity and cash flows for the three months ended March 31, 2017 and 2016.
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 and methods of computation as compared with the Companys 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 (benefit) 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 Companys Board of Directors on May 8, 2017.
8
Critical Accounting Judgments, Estimates and Assumptions
The preparation of these Financial Statements in conformity with IFRS 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 Companys 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 and the re-measurement of the defined benefit liability.
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 Companys consolidated financial statements, are detailed as follows:
IFRS 15 - Revenue from Contracts with Customers replaces IAS 18 - Revenue, IAS 11 - Construction Contracts and some revenue related interpretations. IFRS 15 establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized at a point in time or over time, provides new and more detailed guidance on specific topics and expands and improves disclosures about revenue. IFRS 15 is effective for annual reporting periods beginning on or after January 1, 2018. Management has performed a preliminary review of the new guidance as compared to its current accounting policies, and began a review of its sales contracts. Based on its initial evaluation, management does not expect the new guidance to materially impact the Companys consolidated financial statements. Management plans to finalize its review and determine the method of adoption in the current year.
IFRS 9 (2014) - Financial Instruments was issued in July 2014 and differs in some regards from IFRS 9 (2013) which the Company adopted effective January 1, 2015. IFRS 9 (2014) includes updated guidance on the classification and measurement of financial assets. The final standard also amends the impairment model by introducing a new expected credit loss model for calculating impairment. The mandatory effective date of IFRS 9 (2014) is for annual periods beginning on or after January 1, 2018 and must be applied retrospectively with some exemptions. Early adoption is permitted. Based on its initial evaluation, management does not expect the new guidance to materially impact the Companys consolidated financial statements. Management plans to finalize its review and determine the method of adoption in the current year.
IFRS 16 - Leases which will replace IAS 17 - Leases was issued in January 2016. IFRS 16 eliminates the classification of an operating lease and requires lessees to recognize a right-of-use asset and a lease liability in the statement of financial position for all leases with exemptions permitted for short-term leases and leases of low value assets. In addition, IFRS 16 changes the definition of a lease; sets requirements on how to account for the asset and liability, including complexities such as non-lease elements, variable lease payments and option periods; changes the accounting for sale and leaseback arrangements; largely retains IAS 17s approach to lessor accounting and introduces new disclosure requirements. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019 with early adoption permitted in certain circumstances. Management is currently assessing but has not yet determined the impact of this new standard on the Companys consolidated financial statements.
Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Companys consolidated financial statements.
9
3 - INFORMATION INCLUDED IN CONSOLIDATED EARNINGS
The following table describes the charges incurred by the Company which are included in the Companys consolidated earnings:
Three months ended March 31, |
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2017 | 2016 | |||||||
$ | $ | |||||||
Employee benefit expense |
||||||||
Wages, salaries and other short-term benefits |
40,024 | 39,595 | ||||||
Termination benefits |
159 | 141 | ||||||
Share-based compensation expense |
1,188 | 1,594 | ||||||
Pension, post-retirement and other long-term employee benefit plans: |
||||||||
Defined benefit plans |
706 | 730 | ||||||
Defined contributions plans |
1,305 | 1,285 | ||||||
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|
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43,382 | 43,345 | |||||||
|
|
|
|
|||||
Finance costs - Interest |
||||||||
Interest on borrowings |
1,272 | 1,092 | ||||||
Amortization of debt issue costs on borrowings |
129 | 108 | ||||||
Interest capitalized to property, plant and equipment |
(253 | ) | (218 | ) | ||||
|
|
|
|
|||||
1,148 | 982 | |||||||
|
|
|
|
|||||
Finance costs - Other expense (income), net |
||||||||
Foreign exchange loss (gain) |
191 | (336 | ) | |||||
Other costs, net |
237 | 245 | ||||||
|
|
|
|
|||||
428 | (91 | ) | ||||||
|
|
|
|
|||||
Additional information |
||||||||
Depreciation of property, plant and equipment |
7,426 | 6,931 | ||||||
Amortization of intangible assets |
849 | 304 | ||||||
(Reversal of impairment) impairment of assets |
(143 | ) | 979 |
4 - MANUFACTURING FACILITY CLOSURES, RESTRUCTURING AND OTHER RELATED CHARGES
In the three months ended March 31, 2017 and 2016 the Company incurred $0.3 million and $1.7 million, respectively, in manufacturing facility closure, restructuring and other related charges. The costs incurred in the three months ended March 31, 2016 were primarily related to the South Carolina manufacturing facility that was damaged by significant rainfall and subsequent severe flooding in October 2015, resulting in its permanent shutdown. These costs included impairment of property, plant and equipment and subsequent site clean-up and insurance claim preparation costs.
10
5 - INCOME TAXES
The calculation of the Companys effective tax rate is as follows:
Three months ended March 31, |
||||||||
2017 | 2016 | |||||||
Income tax expense |
$ | 4,912 | $ | 3,016 | ||||
Earnings before income tax expense |
$ | 18,345 | $ | 12,546 | ||||
Effective tax rate |
26.8% | 24.0% |
6 - CAPITAL STOCK AND EARNINGS PER SHARE
Common Shares
The Companys common shares outstanding as of March 31, 2017 and December 31, 2016 were 59,125,335 and 59,060,335, 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 8, 2017 |
March 31, 2017 | $ | 0.14 | March 21, 2017 | 59,110,335 | $ | 8,316 |
(1) | Aggregate dividend payment amount presented in the table above is adjusted for the impact of foreign exchange rates on cash payments to shareholders. |
Share Repurchases
On July 10, 2015, the Company entered into a normal course issuer bid (NCIB) to repurchase for cancellation up to 4,000,000 of the Companys common shares. The NCIB which was scheduled to expire on July 9, 2016, was renewed for a twelve-month period starting July 14, 2016. This renewed NCIB expires on July 13, 2017. As of March 31, 2017, 4,000,000 shares remained available for repurchase under the NCIB.
There were no share repurchases during the three months ended March 31, 2017. For the three months ended March 31, 2016, the Company repurchased 147,200 shares at an average purchase price of CDN$15.77, resulting in a total purchase price of $1.7 million. The excess of the purchase price paid over the carrying value of the common shares repurchased is recorded in deficit in the consolidated balance sheet and in the statement of consolidated changes in equity.
11
Earnings Per Share
The weighted average number of common shares outstanding is as follows:
Three months ended March 31, |
||||||||
2017 | 2016 | |||||||
Basic |
59,134,017 | 58,655,667 | ||||||
Effect of stock options |
485,266 | 778,289 | ||||||
Effect of performance share units |
582,864 | 601,711 | ||||||
|
|
|
|
|||||
Diluted |
60,202,147 | 60,035,667 | ||||||
|
|
|
|
There were no stock options that were anti-dilutive and excluded from the diluted earnings per share calculations for the periods ended March 31, 2017 and 2016.
The effect of performance share units (PSUs) included in the calculation of weighted average diluted shares outstanding includes the following:
Three months ended March 31, |
||||||||
2017 | 2016 | |||||||
PSUs which met the performance criteria(1) |
855,718 | 890,612 |
(1) | See section entitled Performance Share Unit Plan for additional information regarding PSU performance. |
Stock Options
The following tables summarize information related to stock options:
Three months ended March 31, |
||||||||
2017 | 2016 | |||||||
Stock options exercised |
65,000 | 22,300 | ||||||
Weighted average exercise price |
CDN$2.19 | CDN$6.84 | ||||||
Cash proceeds |
$106 | $115 | ||||||
March 31, 2017 | ||||||||
Stock options outstanding |
996,250 | |||||||
Weighted average exercise price per stock option outstanding |
CDN$11.98 | |||||||
Weighted average fair value at grant date per stock option outstanding |
$3.42 |
Performance Share Unit Plan
On February 17, 2017, the Board of Directors approved an amendment to the PSU Plan to provide for only cash settlement of PSU awards. As a result of the amendment, the Company remeasured the fair value of the PSU awards on the amendment date and will continue to do so, prospectively and until award settlement, at each reporting period end date. There was no incremental fair value granted as a result of those modifications. The fair value of the PSUs is based on the Monte Carlo valuation model at each reporting period multiplied by the percentage vested. As a result, the amount of expense recognized can vary due to changes in the model variables from period to period until the PSUs are settled, expire or are otherwise cancelled. The corresponding liability is recorded on the Companys consolidated balance sheet under the caption accounts payable and accrued liabilities for amounts expected to settle in the next twelve months and long-term share-based compensation liabilities for amounts expected to settle in more than twelve months.
12
The following tables summarize information about PSUs:
Three months ended March 31, |
||||||||
2017 | 2016 | |||||||
PSUs granted |
358,377 | 392,572 | ||||||
Weighted average fair value per PSU granted |
$16.15 | $13.52 | ||||||
PSUs forfeited |
6,198 | | ||||||
Expense recorded in earnings in selling, general and administrative expenses |
$1,279 | $802 | ||||||
March 31, 2017 | ||||||||
PSUs outstanding |
1,244,256 | |||||||
Weighted average fair value per PSU outstanding |
$18.36 | |||||||
Outstanding amounts recorded in the consolidated balance sheets in accounts payable and accrued liabilities |
$3,280 | |||||||
Outstanding amounts recorded in the consolidated balance sheets in long-term share-based compensation liabilities |
$7,672 |
The PSUs are earned over a three-year period with vesting at the third anniversary of the grant date unless vesting is accelerated based on retirement eligibility, death or disability. The number of shares earned can range from 0% to 150% of the grant amount based on the total shareholder return (TSR) ranking versus a specified peer group of companies. Based on the Companys TSR ranking as of March 31, 2017, the number of shares earned if all of the outstanding awards were to be settled at March 31, 2017, would be as follows:
Grant Date |
Performance | |||
June 11, 2014 |
150% | |||
March 13, 2015 |
150% | |||
May 14, 2015 |
150% | |||
May 20, 2015 |
100% | |||
March 21, 2016 |
100% | |||
December 20, 2016 |
0% | |||
March 20, 2017 |
150% |
The weighted average fair value of PSUs granted was estimated based on a Monte Carlo simulation model, considering the following weighted average assumptions:
Three months ended March 31, |
||||||||
2017 | 2016 | |||||||
Expected life |
3 years | 3 years | ||||||
Expected volatility(1) |
34% | 36% | ||||||
Risk-free interest rate |
1.57% | 1.05% | ||||||
Expected dividends(2) |
0.00% | 0.00% | ||||||
Performance period starting price(3) |
CDN$22.26 | CDN$18.49 | ||||||
Closing stock price on TSX as of the estimation date |
CDN$21.94 | CDN$18.44 |
(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 will receive 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. As of March 31, 2017, the Company accrued in the consolidated balance sheets in accounts payable and accrued liabilities $0.3 million ($0.2 as of December 31, 2016) for dividend equivalent payments expected in the next twelve months and $0.4 million ($0.3 million as of December 31, 2016) in long-term share-based liabilities for payments expected in more than twelve months. |
13
(3) | The performance period starting price is measured as the five-day volume weighted average trading price (VWAP) for the common shares of the Company on the TSX on the grant date. |
Deferred Share Unit Plan
On February 17, 2017, the Board of Directors approved an amendment to the Deferred Share Unit (DSU) Plan to provide for only cash settlement of DSU awards. As a result of the amendment, the Company remeasured the fair value of the DSU awards on the amendment date and will continue to do so, prospectively and until award settlement, at each reporting period end date. There was no incremental fair value granted as a result of those modifications. The fair value of DSUs is based on the five trading days VWAP of the Companys common shares on the TSX at the end of each reporting period. As a result, the amount of expense recognized can vary due to changes in the stock price from period to period until the DSUs are settled, expire, or are otherwise cancelled. The corresponding liability is recorded on the Companys consolidated balance sheet under the caption long-term share-based compensation.
The following tables summarize information related to DSUs:
Three months ended March 31, |
||||||||
2017 | 2016 | |||||||
DSUs granted |
7,962 | 11,714 | ||||||
Weighted average fair value per DSU granted |
$17.18 | $14.29 | ||||||
Expense recorded in earnings in selling, general and administrative expenses |
$21 | $87 | ||||||
March 31, 2017 | ||||||||
DSUs outstanding |
127,210 | |||||||
Weighted average fair value per DSU outstanding |
$17.31 | |||||||
Outstanding amounts recorded in the consolidated balance sheets in long-term share-based compensation liabilities |
$2,202 |
Stock Appreciation Rights
The following tables summarize information regarding stock appreciation rights (SARs):
Three months ended March 31, |
||||||||
2017 | 2016 | |||||||
(Income) expense recorded in earnings in selling, general and administrative expenses |
($187 | ) | $536 | |||||
SARs exercised |
13,250 | 141,477 | ||||||
Base price |
CDN$7.56 | CDN$7.56 | ||||||
Amounts accrued for exercised but not yet paid(1) |
$38 | $82 | ||||||
Cash payments on exercise, including awards exercised but not yet paid |
$155 | $1,198 |
(1) | Recorded in accounts payable and accrued liabilities in the consolidated balance sheets. |
March 31, 2017 |
December 31, 2016 |
|||||||
$ | $ | |||||||
Outstanding amounts vested recorded in the consolidated balance sheets in accounts payable and accrued liabilities |
1,664 | 1,989 | ||||||
Aggregate intrinsic value of outstanding vested awards |
1,756 | 2,110 |
14
7- NON-CONTROLLING INTEREST
The Company includes one subsidiary, Powerband Industries Private Limited (Powerband), with material non-controlling interests:
March 31, 2017 |
||||
$ | ||||
Balance at the beginning of the period |
6,407 | |||
Share of comprehensive income for the period |
282 | |||
|
|
|||
Balance at end of the period |
6,689 | |||
|
|
8 - FINANCIAL INSTRUMENTS
Classification and Fair Value of Financial Instruments
The carrying amount of the financial assets and liabilities classified as measured at amortized cost is considered a reasonable approximation of fair value.
The Company categorizes long-term borrowings and interest rate swaps as Level 2 of the fair value hierarchy. 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.
The following tables summarize information regarding interest swap agreements designated as cash flow hedges:
Effective Date |
Maturity | Notional amount |
Settlement | Fixed interest rate paid |
||||||||||
March 18, 2015 |
November 18, 2019 | $ | 40,000 | Monthly | 1.610% | |||||||||
August 18, 2015 |
August 20, 2018 | $ | 60,000 | Monthly | 1.197% |
Three months ended March 31, |
||||||||
2017 | 2016 | |||||||
Increase (decrease) in fair value of the derivatives used for calculating hedge effectiveness |
$ | 300 | ($ | 1,303 | ) |
As of March 31, 2017, the carrying amount and fair value of the interest rate swap agreements was an asset included in other assets in the consolidated balance sheet, amounting to $0.1 million. As of December 31, 2016, the carrying amount and fair value was a liability included in other liabilities in the consolidated balance sheet amounting to $0.2 million.
The Company categorizes its non-controlling interest put options in Powerband as Level 3 of the fair value hierarchy. The Company measures the fair value of its non-controlling interest put options in Powerband by estimating the present value of future net cash inflows from earnings associated with the proportionate shares that are subject to sale to the Company pursuant to an exercise event. This estimation is intended to approximate the redemption value of the options as indicated in the shareholders agreement. The calculation is made using significant unobservable inputs including estimations of undiscounted annual future cash inflows ranging between $4.5 million and $7.5 million, and a discount rate of 12.7%, which the Company believes to be commensurate with the risks inherent in the ownership interest. The fair value of the liability is sensitive to changes in projected earnings and thereby, future cash inflows, and the discount rate applied to those future cash inflows, which could result in a higher or lower fair value measurement.
15
The reconciliation of the carrying amount of financial instruments classified within Level 3 is as follows:
March 31, 2017 |
December 31, 2016 |
|||||||
$ | $ | |||||||
Non-controlling interest put options resulting from the acquisition |
||||||||
Balance at the beginning of the period |
10,020 | | ||||||
Additions as a result of acquisition |
| 10,181 | ||||||
Net foreign exchange differences |
480 | (161 | ) | |||||
|
|
|
|
|||||
Balance at end of the year |
10,500 | 10,020 | ||||||
|
|
|
|
9 - COMMITMENTS
The following table summarizes information related to commitments to purchase machinery and equipment:
March 31, 2017 |
December 31, 2016 |
|||||||
$ | $ | |||||||
Commitments to purchase machinery and equipment |
32,724 | 32,375 |
10 - POST REPORTING EVENTS
Non-Adjusting Events
| On May 8, 2017, the Company declared a quarterly cash dividend of $0.14 per common share payable on June 30, 2017 to shareholders of record at the close of business on June 15, 2017. The estimated amount of this dividend payment is $8.3 million based on 59,125,335 of the Companys common shares issued and outstanding as of May 8, 2017. |
No other significant adjusting or non-adjusting events have occurred between the reporting date of these Financial Statements and the date of authorization.
16
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 March 31, 2017. |
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 Issuers 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 5.1 and 5.2, the Issuers 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 |
(i) | 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 |
(ii) | 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 Issuers GAAP. |
5.1 | Control framework: The control framework the Issuers other certifying officer(s) and I used to design the Issuers ICFR is the 2013 Internal Control Integrated Framework published by the Committee of Sponsoring Organization of the Treadway Commission (COSO). |
5.2 | N/A |
5.3 | N/A |
6. | Reporting changes in ICFR: The Issuer has disclosed in the interim MD&A any change in the Issuers ICFR that occurred during the period beginning on January 1, 2017 and ended on March 31, 2017 that has materially affected, or is reasonably likely to materially affect, the Issuers ICFR. |
DATED the 9th day of May, 2017
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 March 31, 2017. |
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 Issuers 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 Issuers 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 |
(i) | 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 |
(ii) | 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 Issuers GAAP. |
5.1 | Control framework: The control framework the Issuers other certifying officer(s) and I used to design the Issuers ICFR is the 2013 Internal Control Integrated Framework published by the Committee of Sponsoring Organization of the Treadway Commission (COSO). |
5.2 | N/A |
5.3 | N/A |
6. | Reporting changes in ICFR: The Issuer has disclosed in the interim MD&A any change in the Issuers ICFR that occurred during the period beginning on January 1, 2017 and ended on March 31, 2017 that has materially affected, or is reasonably likely to materially affect, the Issuers ICFR. |
DATED the 9th day of May, 2017.
By: |
/s/ Jeffrey Crystal | |
Jeffrey Crystal | ||
Chief Financial Officer |