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, 2004
Commission File Number 1-10928
INTERTAPE POLMER GROUP INC.
110E Montee de Liesse, St. Laurent, Quebec, Canada, H4T 1N4
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 X
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): __________
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-______
The Information contained in this Report is incorporated by reference into
Registration Statement No. 333-109944
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 12, 2004 By: /s/Andrew M. Archibald
Andrew M. Archibald, C.A., CFO,
Secretary, Vice President
Administration
2004 SECOND QUARTERLY REPORT
INTERTAPE POLYMER GROUP (TM)
(LOGO)
August 12, 2004
This Management's Discussion and Analysis ("MD&A") supplements the
consolidated financial statements and related notes for the three
months and six months ended June 30, 2004. Except where otherwise
indicated, all financial information reflected herein is prepared
in accordance with Canadian generally accepted accounting principles
("GAAP") and is expressed in US dollars.
OVERVIEW
Intertape Polymer Group Inc. ("the Company" or "IPG") achieved a
14.4% increase in sales for the three months ended June 30, 2004
as compared to the corresponding period in 2003. Sales increased
6.1% for the three months ended June 30, 2004 compared to the
three months ended March 31, 2004.
Earnings for the three months ended June 30, 2004 were $0.14 per
share, both basic and diluted, as compared to earnings of $0.12
per share, both basic and diluted, for the same period in 2003
and $0.06 per share both basic and diluted for the three months
ended March 31, 2004.
Several factors contributed to the earnings improvement between
the first quarter and second quarter of 2004. Sales volumes
increased between the first quarter and the second quarter, with
the second quarter being the first full quarter of operations
after the tesa tape, inc. ("tesa tape") acquisition. Gross margin
and gross profit also improved in the second quarter of 2004
compared to the first quarter of 2004 due to the cost effective
integration of the tesa tape acquisition into the Company's
Columbia, South Carolina manufacturing facility and the realization
of savings under the Company's cost reduction program.
Gross margin and gross profit also improved in the second
quarter compared to the first quarter of 2004 because of sales
price increases achieved in the second quarter. Competitive
pressures prevented the Company from achieving satisfactory price
increases for selected products and channels of distribution,
however, the Company mitigated the impact of these pricing
constraints by increasing prices for selected products where the
Company possesses greater pricing power. The Company had
experienced rising raw material costs in the first quarter of
2004 but was unable to fully recover the cost increases through
selling price increases during that same quarter due to the time
lag between incurring raw material cost increases and passing the
increases on to customers in the form of higher sales prices.
Raw material costs continued to rise in the second quarter,
exceeding the cost increases experienced in the first quarter of
2004. The selling price increases for the second quarter covered
all of the additional rise in raw material costs that occurred in
the second quarter as well as approximately $0.75 million of the
$2.0 million in quarterly raw material cost increases that
initially arose in the first quarter.
Subsequent to June 30, 2004, the Company has experienced
additional increases in costs for key raw materials such as
polypropylene and polyethylene and is anticipating further
increases during the third quarter of 2004. The Company has
announced additional sales price increases in the third quarter of
2004 however, due to the timing constraints described above, the
Company may not fully recover the additional cost increases within
the quarter. It is uncertain whether the Company can continue
achieving sales price increases sufficient to completely recover
rising raw material costs.
Except as discussed above and under the caption "Gross Profit and
Gross Margin" below, general economic and industrial factors
during the first half of 2004 were, in management's view,
substantially unchanged from December 31, 2003.
Also, in management's view, there are no general seasonal aspects
of the Company's business that affect its financial condition or
results.
RECENT DEVELOPMENT
Subsequent to June 30, 2004, the Company completed a refinancing
of all of its bank indebtedness and virtually all of its long-
term debt. On July 28, 2004, the Company completed the offering
of $125.0 million of senior subordinated notes. On August 4, 2004
the Company borrowed the $200.0 million term loan portion of a
new $275.0 million senior secured credit facility. The Company has
not drawn on the $75.0 million revolving credit facility.
The proceeds from the refinancing were used to repay the existing
bank credit facility, redeem all three series of existing senior
secured notes, pay related make-whole premiums, accrued interest
and transaction fees and provide cash for working capital purposes.
In the third quarter of 2004, the Company will record a one-time
pretax charge of approximately $31.0 million associated with the
refinancing transaction.
The refinancing will benefit the Company though lower interest
costs of approximately $7.0 million annually, increased working
capital flexibility and a schedule of principal repayments that
provides greater opportunity for reinvestment in the business over
the next several years. Scheduled principal payments over the next
18 months have been reduced from $84.0 million to $2.0 million due
to the refinancing.
See Note 7 to the accompanying consolidated financial statements for
further discussion of the refinancing.
RESULTS OF OPERATIONS
SALES
Sales for the second quarter of 2004 were $171.9 million, an increase
of 14.4% over the second quarter of 2003 sales of $150.2 million.
The increase includes revenues associated with the February 2004
acquisition of the duct and masking tape operations of tesa tape and
the incremental sales associated with acquiring the remaining 50%
interest in the Company's Portuguese joint venture in late June 2003.
Selling prices in the second quarter of 2004 were also higher than
the second quarter of 2003.
Sales for the first six months of 2004 were $334.0 compared to
$303.8 for the same period in 2003, a 9.9% increase. The increase
is attributable to the two acquisitions discussed above as well
as higher overall selling prices and sales volumes in 2004 compared
to 2003.
Including the revenues associated with the above acquisitions, the
Company believes that it can achieve 10% annual sales growth for
calendar 2004.
GROSS PROFIT AND GROSS MARGIN
Gross profit for the second quarter of 2004 totaled $37.8 million at
a gross margin of 22.0%, as compared to gross profit of $34.1 million
for the second quarter of 2003 at a gross margin of 22.7%.
Although sales price increases for the second quarter of 2004 exceeded
new raw material cost increases for the second quarter, the sales
price increases only partially offset earlier raw material cost
increases. Consequently, the gross margin for the second quarter of
2004 is higher than the 19.8% gross margin experienced in the first
quarter of 2004 but lower than the 22.7% gross margin experienced in
the second quarter of 2003.
Gross profit for the six months ended June 30, 2004 totaled $70.0
million at a gross margin of 20.9%. Gross profit for the six months
ended June 30, 2003 totaled $67.9 million at a gross margin of 22.3%.
The margin decline in the first half of 2004 as compared to the first
half of 2003 was due to several factors including raw material cost
increases in both the first and second quarters of 2004, and in the
first quarter of 2004 production interruptions at the Truro, Nova
Scotia manufacturing facility, unanticipated integration costs at the
Columbia facility related to the acquired duct and masking tape
operations of tesa tape and changes in product mix.
SELLING, GENERAL AND ADMINSTRATIVE EXPENSES
Selling, general and administrative expenses were $22.8 million for
the second quarter of 2004 (13.3% of sales), compared to $20.8 million
for the second quarter of 2003 (13.9% of sales). The increase in
expense reflects the effects of including the remaining 50% interest
in the Portuguese joint venture that was acquired at the end of June
2003 as well as the increase in selling expenses attributable to the
accounts acquired in the tesa tape acquisition.
The selling, general and administrative expenses for the six months
ended June 30, 2004 totaled $45.1 million (13.5% of sales) compared
to $42.8 million for the six months ended June 30, 2003 (14.1% of sales).
The 2004 increase is the result of the additional costs arising from
the two acquisitions discussed above.
OPERATING PROFIT
Operating profit is not a financial measure under GAAP in Canada or
the United States. The Company's management uses operating profit to
measure and evaluate the profit contributions of the Company's
product offerings as well as the profit contribution by channel of
distribution.
Operating profit (defined as gross profit less selling, general and
administrative expenses and stock-based compensation expense) was
$14.7 million for the second quarter of 2004, compared to $13.3
million for the second quarter of 2003. The 10.9% increase in the
second quarter of 2004 over the corresponding amount in 2003 was the
result of the higher sales in 2004.
Operating profit for the six months ended June 30, 2004 totaled
$24.4 million compared to $25.1 million for the six months ended
June 30, 2003. Gross profit increased by $2.1 million for the first
six months of 2004 compared to the first six months of 2003. The
selling, general and administrative expenses for the first six months
of 2004 increased by $2.3 million over the amounts for the first six
months of 2003. Additionally, operating profits for the first six
months of 2004 reflect $0.4 million of stock-based compensation
expense due to the change in accounting adopted by the Company in
the fourth quarter of 2003.
FINANCIAL EXPENSES
Financial expenses for the second quarter of 2004 were $7.2 million
compared to $7.8 million in the second quarter of 2003. Financial
expenses for the six months ended June 30, 2004 totaled $14.0
million compared to $15.5 million for the six months ended June 30,
2003. The six month period to period decrease in financial expenses
is the result of substantial debt repayments in the second and third
quarters of 2003. The common stock issuance in late September 2003
allowed the Company to repay $40.8 million in debt at the end of the
third quarter of 2003. The increase in financial expenses in the
second quarter of 2004 compared to the $6.8 million in the first
quarter of 2004 is due to higher levels of borrowings under the
revolving credit facility during the second quarter as well as
foreign exchange losses incurred in the second quarter.
EBITDA
A reconciliation of the Company's EBITDA, a non-GAAP financial
measure, to GAAP net earnings is set out in the EBITDA reconciliation
table below. EBITDA should not be construed as earnings before income
taxes, net earnings or cash from operating activities as determined
by generally accepted accounting principles.
The Company defines EBITDA as net income before (i) income taxes;
(ii) financial expense; (iii) amortization of intangibles and
capitalized software costs; and (iv) depreciation. Other companies
in our industry may calculate EBITDA differently than we do. EBITDA
is not a measurement of financial performance under GAAP and should
not be considered as an alternative to cash flow from operating
activities or as an alternative to net income as indicators of our
operating performance or any other measures of performance derived
in accordance with GAAP. The Company has included this non-GAAP
financial measure because management believes that it permits
investors to make a more meaningful comparison of the Company's
performance between periods presented. In addition, the Company's
covenants contained in the loan agreements with its lenders and
noteholders require certain debt to EBITDA ratios be maintained,
thus EBITDA is used by management and the Company's lenders and
noteholders in evaluating the Companys performance.
EBITDA Reconciliation to Net Earnings
(in millions of US dollars)
Three Months Six Months
Periods ended June 30, 2004 2003 2004 2003
_____________________________ ______ _____ _____ _____
$ $ $ $
Net Earnings 5.7 3.9 7.9 6.8
Add back
Financial expenses,
net of amortization 7.0 7.2 13.3 14.3
Income taxes 0.7 0.4 0.4 0.8
Depreciation and amortization 7.5 6.7 14.6 13.4
______ _____ _____ _____
EBITDA 20.9 18.2 36.2 35.3
______ _____ _____ _____
______ _____ _____ _____
NET EARNINGS
Net earnings for the second quarter of 2004 were $5.7 million or
$0.14 per share, both basic and diluted, compared to net earnings
of $3.9 million or $0.12 per share, both basic and diluted for the
second quarter of 2003.
Net earnings for the six months ended June 30, 2004 were $7.9
million or $0.19 per share, both basic and diluted, compared to net
earnings for the six months ended June 30, 2003 of $6.8 million or
$0.20 per share, both basic and diluted.
There was a substantial increase in weighted average number of basic
and diluted common shares outstanding at June 30, 2004 as compared
to June 30, 2003 due to a public offering of 5,750,000 common
shares in September 2003.
FINANCIAL POSITION
Trade receivables increased $11.9 million between December 31,
2003 and June 30, 2004. The increase is primarily due to the higher
level of sales for the three months ended June 2004 compared to
the three months ended December 2003. Aside from the trade
receivables, other current assets were substantially unchanged between
December 31, 2003 and June 30, 2004, with increased inventories
offset by decreases in prepaid expenses. Inventories have risen in
part to accommodate the requirements of the customer accounts obtained
in the tesa tape acquisition. Inventories have also increased due to
the higher cost of raw materials increasing valuations and because
the Company has pre-bought selected raw materials in advance of price
increases announced by suppliers.
Current liabilities decreased by $32.4 million between December 31,
2003 and June 30, 2004. As explained in Note 7 to the accompanying
consolidated financial statements, most of the Company's bank
indebtedness and long-term debt was refinanced subsequent to June 30,
2004 and, accordingly, is reflected as non-current at June 30, 2004.
The consolidated balance sheet at June 30, 2003 is included in the
accompanying consolidated financial statements for additional
information.
Property, plant and equipment, net of accumulated depreciation and
amortization, increased by $2.6 million between December 31, 2003
and June 30, 2004 due to $9.9 million of capital expenditures and
$7.2 million associated with the capital lease described in
"Liquidity and Capital Resources" below. Goodwill increased $4.0
million during the first quarter of 2004 due to the tesa tape acquisition.
OFF-BALANCE SHEET ARRANGEMENTS AND RELATED PARTY TRANSACTIONS
The Company maintains no off-balance sheet arrangements and is not
a party to any related party transactions.
LIQUIDITY AND CAPITAL RESOURCES
Cash from operations before changes in non-cash working capital
items was $13.8 million and $22.4 million, respectively, for the
three and six months ended June 30, 2004 compared to $11.1 million
and $20.9 million for the three and six months ended June 30, 2003.
Changes in non-cash working capital items required $14.3 million and
$16.6 million respectively, in cash flows for the three months and
six months ended June 30, 2004 compared to using $0.1 million and
$9.8 million, respectively in cash during the same periods in 2003.
A substantial portion of the cash flow generated in the second quarter
of 2004 was used to pay down payables to vendors, which had grown
substantially in the first quarter of 2004.
Cash flows used in investing activities was $4.6 million and $16.5
million respectively, in the three months and six months ended June
30, 2004 compared to using $1.3 million and $5.7 million
respectively, in cash in the three months and six months ended June
30, 2003. The increase in cash required for investing activities in
2004 was due to increased capital spending and the $5.5 million used
to acquire the duct and masking tape operations of tesa tape.
The Company increased cash flows from financing activities during the
three months and six months ended June 30, 2004 by $14.8 million and
$21.5 million to finance investing activities in excess of cash flows
from operations. Additional bank indebtedness has provided most of
the cash flows from financing activities in 2004. Total cash flows from
financing activities decreased for the three months ended June 30,
2003 by $9.5 million as $15.9 million of long-term debt was repaid in
part from cash flows from operations. In the first quarter of 2003 the
Company had increased cash flows from financing activities of $3.6
million which was used to fund capital expenditures.
In 2003, the Company entered into a twenty year capital lease for the
new Regional Distribution Center in Danville, Virginia. The lease
commenced in January 2004. This non-cash transaction was valued at $7.2
million and is reflected in the June 30, 2004 consolidated balance
sheet as an increase in property, plant and equipment and long-term debt.
BANK INDEBTEDNESS AND CREDIT FACILITIES
Before the refinancing, the Company maintained a $50.0 million
revolving line of credit facility. When added with the cash on-hand
and cash equivalents, cash and available credit totaled $25.4 million
at June, 2004 compared to $32.6 million at December 31, 2003.
CURRENCY RISK
The Company is subject to currency risks through its Canadian and
European operations. Changes in the exchange rates may result in
decreases or increases in the foreign exchange gains or losses.
The Company does not use derivative instruments to reduce its exposure
to foreign currency risk, as historically these risks have not been
significant.
CHANGES IN ACCOUNTING POLICIES
In the fourth quarter of 2003, the Company adopted the fair value-
based approach of the CICA's Handbook Section 3870 "Stock-based
Compensation and Other Stock-based Payments." The Company adopted
the new accounting rules effective January 1, 2003 on a prospective
basis for options granted for years beginning in 2003. The three
months and six months ended June 30, 2004 include $351,000 and $421,000
respectively of stock-based compensation expense, compared to none
in the corresponding periods of 2003.
SUMMARY OF QUARTERLY RESULTS
A table of Consolidated Quarterly Statements of Earnings for the
eight most recent quarters can be found at the end of this MD&A.
ADDITIONAL INFORMATION
Additional information relating to IPG, including its Annual
Information Form is filed on SEDAR at www.sedar.com in Canada and
on EDGAR at www.sec.gov in the U.S.
FORWARD-LOOKING STATEMENTS
Certain statements and information set forth in this Quarterly
Report, including statements regarding the business and anticipated
financial performance of the Company, constitute "forward-looking
statements" within the meaning of the Federal Private Securities
Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of
the Company to be materially different from any future results,
performance or achievements expressed or implied in such forward-
looking statements.
Among the factors that could cause actual results to differ from
the forward-looking statements include, but are not limited to,
inflation and general economic conditions, changes in the level
of demand for the Company's products, competitive pricing
pressures, general market trends, failure to achieve planned cost
savings, restrictions and limitations placed on the Company by
its debt instruments, international risks including exchange rate
fluctuations, trade disruptions, and political instability of
foreign markets that the Company produces in or purchase materials
from, and the availability and price of raw materials.
Additional discussion of factors that could cause actual results
to differ materially from management's projections, estimates
and expectations is contained in the Company's SEC filings. These
and other factors should be considered carefully and undue
reliance should not be placed on forward-looking statements. The
Company undertakes no duty to update its forward-looking statements,
including its sales outlook.
This Quarterly Report contains certain non-GAAP financial measures,
including operating profit and EBITDA. The Company has included
these non-GAAP financial measures because management believes they
provide investors with a more meaningful period-to-period
comparison of the Company's performance. Further, EBITDA is used by
IPG's management, lenders and noteholders to evaluate the Company's
performance. IPG has included in this Quarterly Report reconciliations
of the non-GAAP financial measures to the most directly comparable
GAAP measures.
Intertape Polymer Group Inc.
Conslidated Quarterly Statements of Earnings
Three month periods ended
(In thousands of US dollars, except per share amounts)
(Unaudited)
------------ ----------- ------------- -------------
June 30, March 31, December 31, September 30,
2004 2004 2003 2003
------------ ----------- ------------- -------------
$ $ $ $
Sales 171,934 162,100 157,682 159,798
Cost of sales 134,097 129,986 122,975 123,489
------------ ----------- ------------- -----------
Gross profit 37,837 32,114 34,707 36,309
------------ ----------- ------------- -----------
Selling, general and
administrative expenses 22,793 22,307 24,843 22,264
Stock-based compensation expense 351 70 130
Impairment of goodwill
Research and development 1,153 962 212 1,080
Financial expenses 7,235 6,768 5,587 7,409
Manufacturing facility closure
costs 3,005
------------ ----------- ------------- -----------
31,532 30,107 33,777 30,753
------------ ----------- ------------- -----------
Earnings (loss) before income
taxes 6,305 2,007 930 5,556
Income taxes (recovery) 654 (284) (4,244) (643)
------------ ----------- ------------- -----------
Net earnings (loss) 5,651 2,291 5,174 6,199
------------ ----------- ------------- -----------
------------ ----------- ------------- -----------
Earnings (loss) per share
Cdn GAAP - Basic - US $ 0.14 0.06 0.13 0.18
Cdn GAAP - Diluted - US $ 0.14 0.06 0.13 0.18
US GAAP - Basic - US $ 0.14 0.06 0.13 0.18
US GAAP - Diluted - US $ 0.14 0.06 0.13 0.18
Weighted average number of
shares outstanding
Cdn GAAP - Basic 41,215,111 40,971,739 40,870,426 35,302,174
Cdn GAAP - Diluted 41,396,403 41,528,581 41,225,776 35,397,800
U.S. GAAP - Basic 41,215,111 40,971,739 40.870,426 35,302,174
U.S. GAAP - Diluted 41,396,403 41,528,581 41,225,776 35,397,800
------------ ----------- ------------- -------------
June 30, March 31, December 31, September 30,
2003 2003 2002 2002
------------ ----------- ------------- -------------
$ $ $ $
Sales 150,249 153,592 151,261 149,920
Cost of sales 116,166 119,793 121,764 120,632
------------ ----------- ------------- -----------
Gross profit 34,083 33,799 29,497 29,288
------------ ----------- ------------- -----------
Selling, general and
administrative expenses 20,830 21,982 23,462 21,109
Stock-based compensation expense
Impairment of goodwill 70,000
Research and development 1,086 894 480 926
Financial expenses 7,825 7,700 7,621 8,297
Manufacturing facility closure
costs 2,100
------------ ----------- ------------- -----------
29,741 30,576 101,563 32,432
------------ ----------- ------------- -----------
Earnings (loss) before income
taxes 4,342 3,223 (72,066) (3,144)
Income taxes (recovery) 439 322 (13,292) (357)
------------ ----------- ------------- -----------
Net earnings (loss) 3,903 2,901 (58,774) (2,787)
------------ ----------- ------------- -----------
------------ ----------- ------------- -----------
Earnings (loss) per share
Cdn GAAP - Basic - US $ 0.12 0.09 (1.74) (0.08)
Cdn GAAP - Diluted - US $ 0.12 0.09 (1.74) (0.08)
US GAAP - Basic - US $ 0.12 0.09 (1.74) (0.08)
US GAAP - Diluted - US $ 0.12 0.09 (1.74) (0.08)
Weighted average number of
shares outstanding
Cdn GAAP - Basic 33,832,527 33,821,074 33,821,074 33,701,307
Cdn GAAP - Diluted 33,912,232 33,821,497 33,821,074 33,701,307
U.S. GAAP - Basic 33,832,527 33,821,074 33,821,074 33,701,307
U.S. GAAP - Diluted 33,912,232 33,821,497 33,821,074 33,701,307
Intertape Polymer Group Inc.
Consolidated Earnings
Periods ended June 30,
(In thousands of US dollars, except per share amounts)
(Unaudited)
-------------------------------------------------------
Three months Six months
------------ ----------- ------------- -----------
2004 2003 2004 2003
------------ ----------- ------------- -----------
$ $ $ $
Sales 171,934 150,249 334,034 303,841
Cost of sales 134,097 116,166 264,083 235,959
------------ ----------- ------------- -----------
Gross profit 37,837 34,083 69,951 67,882
------------ ----------- ------------- -----------
Selling, general and
administrative expenses 22,793 20,830 45,100 42,812
Stock-based compensation expense 351 421
Research and development 1,153 1,086 2,115 1,980
Financial expenses 7,235 7,825 14,003 15,525
------------ ----------- ------------- -----------
31,532 29,741 61,639 60,317
------------ ----------- ------------- -----------
Earnings before income taxes 6,305 4,342 8,312 7,565
Income taxes 654 439 370 761
------------ ----------- ------------- -----------
Net earnings 5,651 3,903 7,942 6,804
------------ ----------- ------------- -----------
------------ ----------- ------------- -----------
Earnings per share
Basic 0.14 0.12 0.19 0.20
------------ ----------- ------------- -----------
------------ ----------- ------------- -----------
Diluted 0.14 0.12 0.19 0.20
------------ ----------- ------------- -----------
------------ ----------- ------------- -----------
Consolidated Retained Earnings
Periods ended June 30,
(In thousands of US dollars)
(Unaudited)
-------------------------------------------------------
Three months Six months
------------------------- ------------- -----------
2004 2003 2004 2003
------------ ----------- ------------- -----------
$ $ $ $
Balance, beginning of period 70,582 53,015 68,291 50,114
Net earnings 5,651 3,903 7,942 6,804
------------ ----------- ------------- -----------
Balance, end of period 76,233 56,918 76,233 56,918
------------ ----------- ------------- -----------
------------ ----------- ------------- -----------
The accompanying notes are an integral part of the consolidated
financial statements.
Intertape Polymer Group Inc.
Consolidated Balance Sheets
As at
(In thousands of US dollars)
June 30, June 30, December 31,
2004 2003 2003
(Unaudited) (Unaudited) (Audited)
________ _________ ________
$ $ $
ASSETS
Current assets
Cash 9,488
Trade receivables,
net of allowance for
doubtful accounts of $4,037
($3,640 in June 2003,
$3,911 in December 2003) 101,201 91,514 89,297
Other receivables 11,353 10,357 11,852
Inventories 73,213 71,896 69,956
Parts and supplies 13,301 12,837 13,153
Prepaid expenses 5,761 6,139 7,924
Future income tax 2,682 2,397 2,682
________ _________ ________
216,999 195,140 194,864
Property, plant and equipment 357,227 357,447 354,627
Other assets 13,181 14,014 12,886
Future income taxes 4,457 3,812
Goodwill 176,231 165,633 173,056
________ _________ ________
768,095 732,234 739,245
________ _________ ________
________ _________ ________
LIABILITIES
Current liabilities
Bank indebtedness 25,391 13,944
Accounts payable and
accrued liabilities 91,834 83,799 95,270
Instalments on long-term debt 1,958 20,300 16,925
________ _________ ________
93,792 129,490 126,139
Long-term debt 290,240 274,152 235,066
Other liabilities 530 3,530 530
Future income taxes 5,164
________ _________ ________
384,562 412,336 361,735
_________ ________ _______
SHAREHOLDERS' EQUITY
Capital stock and share
purchase warrants 289,219 246,362 286,841
Contributed surplus 3,701 3,150
Retained earnings 76,233 56,918 68,291
Accumulated currency
translation adjustments 14,380 16,618 19,228
________ _________ ________
383,533 319,898 377,510
________ _________ ________
768,095 732,234 739,245
________ _________ ________
________ _________ ________
The accompanying notes are an integral part of the consolidated
financial statements.
Intertape Polymer Group Inc.
Consolidated Cash Flows
Periods ended June 30,
(In thousands of US dollars)
(Unaudited)
-------------------------------------------------------
Three months Six months
------------------------- ------------- -----------
2004 2003 2004 2003
------------ ----------- ------------- -----------
$ $ $ $
OPERATING ACTIVITIES
Net earnings 5,651 3,903 7,942 6,804
Non-cash items
Depreciation and amortization 7,514 6,724 14,637 13,363
Stock-based compensation expense 351 421
Future income taxes 310 439 (586) 760
------------ ----------- ------------- -----------
Cash from operations
before changes in non-cash
working capital items 13,826 11,066 22,414 20,927
------------ ----------- ------------- -----------
Changes in non-cash working
capital items
Trade receivables (2,163) 3,649 (12,248) (2,722)
Other receivables 334 487 116
Inventories (3,366) (4,300) (3,878) (8,147)
Parts and supplies 43 (224) (148) (124)
Prepaid expenses 1,039 698 2,140 1,845
Accounts payable and accrued
liabilities (9,935) (286) (2,997) (808)
------------ ----------- ------------- -----------
(14,382) (129) (16,644) (9,840)
------------ ----------- ------------- -----------
Cash flows from operating
activities (556) 10,937 5,770 11,087
------------ ----------- ------------- -----------
INVESTING ACTIVITIES
Property, plant and equipment (4,055) (2,629) (9,875) (5,080)
Business acquisition (5,500)
Goodwill (58) (58)
Other assets (501) 1,345 (1,064) (608)
------------ ----------- ------------- -----------
Cash flows from investing
activities (4,614) (1,284) (16,497) (5,688)
------------ ----------- ------------- -----------
FINANCING ACTIVITIES
Net change in bank indebtedness 15,907 6,343 20,840 15,175
Issue of long-term debt 787
Repayment of long-term debt (2,477) (15,852) (2,477) (21,117)
Issue of common shares 1,408 2,378
------------ ----------- ------------- -----------
Cash flows from financing
activities 14,838 (9,509) 21,528 (5,942)
------------ ----------- ------------- -----------
Net increase (decrease)
in cash position 9,668 144 10,801 (543)
Effect of currency translation
adjustments (180) (144) (1,313) 543
Cash position, beginning of period
------------ ----------- ------------- -----------
Cash position, end of period 9,488 9,488
------------ ----------- ------------- -----------
------------ ----------- ------------- -----------
The accompanying notes are an integral part of the
consolidated financial statements.
NOTE 1.
Basis of Presentation
In the opinion of Management the accompanying unaudited interim consolidated
financial statements, prepared in accordance with Canadian generally
accepted accounting principles, contain all adjustments necessary to present
fairly Intertape Polymer Group Inc.'s ("IPG" or the "Company") financial
position as at June 30, 2004 and 2003 and December 31, 2003 as well as its
results of operations and its cash flows for the three and six months ended
June 30, 2004 and 2003.
These unaudited interim consolidated financial statements and notes
should be read in conjunction with IPG's annual consolidated financial
statements.
These unaudited interim consolidated financial statements and notes
follow the same accounting policies as the most recent annual
consolidated financial statements.
NOTE 2.
Earnings per Share
The following table provides a reconciliation between basic and
diluted earnings per share:
In thousands of US dollars
(Except per share amounts)
Three Months Six Months
Period ended June 30, 2004 2003 2004 2003
___________________________ ________________ ________________
$ $ $ $
Net earnings applicable
to common shares 5,651 3,903 7,942 6,804
Weighted average
number of common shares
outstanding 41,215 33,833 41,093 33,827
Effective of dilutive
stock options and
warrants (a) 181 79 336 58
___________________________ ________________ ________________
Weighted average number of
diluted common shares
outstanding 41,396 33,912 41,429 33,885
______ ______ ______ ______
______ ______ ______ ______
Basic earnings per share 0.14 0.12 0.19 0.20
Diluted earnings per share 0.14 0.12 0.19 0.20
(a) Diluted earnings per share is calculated by adjusting outstanding
shares, assuming any dilutive effects of stock options and warrants.
NOTE 3.
Accounting for Compensation Programs
As at June 30, 2004 the Company had a stock-based compensation plan,
which is described in the 2003 Annual Report. Under the transitional
provisions prescribed by the Canadian Institute of Chartered
Accountants ("CICA"), the Company is prospectively applying the
recognition provisions to stock options issued in 2003 and thereafter.
The transitional provisions of the CICA are similar to those of the
US Financial Accounting Standards Board ("FASB"). To determine the
compensation cost, the fair value of stock options is recognized on
a straight-line basis over the vesting periods. For stock options
granted since January 1, 2002, the Company is required to make pro
forma disclosures of net earnings and basic and diluted earnings per
share as if the fair value based method of accounting had been applied.
Accordingly, the Company's net earnings and basic and diluted earnings
per share for the periods ended June 30, 2004 and 2003 would have
been decreased to the pro forma amounts indicated in the following table:
In thousands of US dollars
(Except per share amounts)
Three months Six months
Periods ended June 30, 2004 2003 2004 2003
________________________________________ _________________ ________________
$ $ $ $
Net earnings 5,651 3,903 7,942 6,804
Add (deduct): Stock-based employee
compensation expense included in
reported net earnings 351 - 421 -
Total stock-based employee compensation
expense determined under fair value
based method (534) (207) (797) (414)
_________________ _______________
Pro Forma net earnings 5,468 3,696 7,566 6,390
_________________ _______________
_________________ _______________
Earnings per share:
Basic - as reported 0.14 0.11 0.19 0.19
Based - pro forma 0.13 0.11 0.18 0.19
Diluted - as reported 0.14 0.11 0.19 0.19
Diluted - pro forma 0.13 0.11 0.18 0.19
NOTE 4.
Capital Stock
In May 2004, the Company issued 225,160 common shares to the USA Employees
Stock Ownership and Retirement Savings Plan at a value of $1,408,000.
During the three months ended March 31, 2004, 115,125 common shares at
a value of $970,000 were issued to employees who exercised stock options.
In June 2003, the Company issued 1,030,767 common shares to acquire the
remaining 50% common equity interest in Fibope Portuguesa Filmes Biorientados
S.A., a manufacturer and distributor of film products in Portugal.
The Company's shares outstanding as at June 30, 2004, December 31, 2003 and
June 30, 2003 were 41,285,161, 40,944,876 and 34,851,841 respectively.
Weighted average number of common shares outstanding
Periods ended Three Months Six Months
June 30, 2004 2003 2004 2003
________________________ _______________________ _______________________
CDN GAAP - Basic 41,215,111 33,832,527 41,092,785 33,826,800
CDN GAAP - Diluted 41,396,403 33,912,232 41,429,232 33,885,377
U.S. GAAP - Basic 41,215,111 33,832,527 41,092,785 33,826,800
U.S. GAAP - Diluted 41,396,403 33,912,232 41,429,232 33,885,377
The Company did not declare or pay dividends during the six months ended
June 30, 2004 or the six months ended June 30, 2003.
NOTE 5.
Financial Expenses
In thousands of US dollars
Periods ended Three Months Six Months
June 30, 2004 2003 2004 2003
________________________ _______________________ _______________________
$ $ $ $
Interest on long-term debt 5,910 6,981 11,821 14,035
Interest on credit facilities 700 547 1,071 765
Other 775 447 1,411 1,025
Interest capitalized to
property, plant and
equipment (150) (150) (300) (300)
_______________________ _______________________
7,235 7,825 14,003 15,525
_______________________ _______________________
_______________________ _______________________
NOTE 6.
Business Acquisition
In February 2004, the Company purchased for a cash consideration of $5.5
million plus contingent consideration (dependent on business retention),
assets relating to the masking and duct tape operations of tesa tape,
inc. ("tesa tape"). At the same time, the Company finalized its three-
year agreement to supply duct tape and masking tape to tesa tape.
The purchase was accounted for as a business combination and,
accordingly, the purchase method of accounting was used. The purchase
price was allocated to the assets purchased based on their estimated
fair values as at the date of acquisition and includes $4.0 million of
goodwill. Any contingent consideration paid will be recorded as an
increase in goodwill.
NOTE 7.
Subsequent Event-Refinancing
On July 28, 2004 the Company completed the offering of $125.0 million
of senior subordinated notes due 2014. On August 4, 2004 the Company
established a new $275.0 million senior secured credit facility,
consisting of a $200.0 million term loan and a $75.0 million revolving
credit facility. The proceeds from the refinancing were used to repay
the existing bank credit facility, redeem all three series of existing
senior secured notes, pay related make-whole premiums, accrued interest
and transaction fees and provide cash for general working capital
purposes.
The $125.0 million senior subordinated notes bear interest at an annual
interest rate of 8.50% payable semi-annually on February 1 and August
1. All principal is due on August 1, 2014.
The term loan pays interest at a floating rate tied to either an
alternate base rate (plus 1.25%) or LIBOR (plus 2.25%). The revolving
credit facility is a five year commitment at floating rates tied to
either an alternate base rate (plus 1.75%), Canadian prime rate
(plus 1.75%) or LIBOR (plus 2.75%). The revolving credit facility
interest rate spreads are determined by a pricing grid based on the
achievement of certain leverage ratios. The Company will also pay an
annual 0.50% commitment fee on the unused portion of the revolving
credit facility.
The term loan includes scheduled quarterly repayments of $500,000
commencing December 31, 2004 though June 30, 2010. Beginning September
30, 2010 the Company has four final quarterly principal repayments of
$47.125 million each. The loan agreement also requires an annual
excess cash flow calculation that can result in accelerated principal
repayments from excess cash flow as defined in the agreement.
The senior secured credit facility is guaranteed by, and secured by
a first lien on the assets of the Company, including substantially
all of its subsidiaries.
Both the senior subordinated notes and the senior secured credit
facility require the Company to meet certain financial covenants on
an ongoing basis, including a maximum leverage ratio and minimum
interest and fixed charges coverage ratios.
As a result of the refinancing, the Company will record in the third
quarter of 2004, a one-time pretax charge of approximately $31.0
million. The principal elements of the one-time charge are a make-whole
premium of approximately $21.9 million and the write-off of deferred
financing costs of approximately $8.5 million attributable to the
debt that was refinanced.
NOTE 7 (continued)
Subsequent Event-Refinancing
As a result of the refinancing, that portion of the refinanced
debt comprising bank indebtedness in the amount of $34.7 million
and the current instalments of the existing senior notes amounting
to $54.2 million have been reclassified to non-current as at June
30, 2004 except for the amount due within one year of $1.5 million.
Information Request Form
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Intertape Polymer Group.
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Please Fax a copy of this page to:
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Intertape Polymer Group Inc.
Fax: 941-727-3798
110E Montee de Liesse
Montreal Quebec
Canada, H4T 1N4
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www.intertapepolymer.com
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Form 52-109FT2 - Certification of Interim Filings during Transition Period
I, Melbourne F. Yull, Chairman of the Board and Chief Executive Officer of
INTERTAPE POLYMER GROUP INC./LE GROUPE INTERTAPE POLYMER INC. certify that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings) of INTERTAPE POLYMER GROUP INC./LE GROUPE
INTERTAPE POLYMER INC., (the "issuer") for the interim period ending
June 30, 2004;
2. Based on my knowledge, 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; and
3. Based on my knowledge, the interim financial statements together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, results of
operations and cash flows of the issuer, as of the date and for the
periods presented in the interim filings.
Date: August 12, 2004
/s/Melbourne F. Yull
Melbourne F. Yull
Chairman of the Board and Chief Executive Officer
Form 52-109FT2 - Certification of Interim Filings during Transition Period
I, Andrew M. Archibald, Chief Financial Officer, Secretary and Vice President
Administration of INTERTAPE POLYMER GROUP INC./LE GROUPE INTERTAPE POLYMER
INC. certify that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings) of INTERTAPE POLYMER GROUP INC./LE GROUPE
INTERTAPE POLYMER INC., (the "issuer") for the interim period ending
June 30, 2004;
2. Based on my knowledge, 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; and
3. Based on my knowledge, the interim financial statements together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, results of
operations and cash flows of the Issuer, as of the date and for the
periods presented in the interim filings.
Date: August 12, 2004
/s/Andrew M. Archibald
Andrew M. Archibald
Chief Financial Officer,
Secretary and Vice President Administration