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, 2006
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 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 1, 2006
By: /a/Andrew M. Archibald___________________
Andrew M. Archibald, C.A., CFO and Secretary
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NYSE SYMBOL: ITP
TSX SYMBOL: ITP
Intertape Polymer Group Inc. Announces 2006 Second Quarter Results
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Recorded $32.4 million in restructuring and other charges
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Sales increase 16.7% over previous year
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SG&A reduced for second consecutive quarter
Montréal, Québec and Bradenton, Florida – August 1, 2006 – Intertape Polymer Group Inc. (NYSE, TSX: ITP) today released results for the second quarter ended June 30, 2006. All dollar amounts are in US dollars unless otherwise indicated.
The Company recorded a net loss per share of $0.44 for the second quarter of 2006, compared to earnings of $0.13 per share for the same period last year. Adjusted net earnings were reduced to $0.08 for the second quarter of 2006 from $0.15 for the corresponding quarter last year, mainly due to the impact of a higher effective income tax rate in 2006, coupled with higher year-over-year selling, general and administrative (“SG&A”) expenses attributable to the October 2005 Flexia acquisition, research and development (“R&D”) expenses and financial expenses.
“While year-over-year adjusted net earnings were down, the second quarter showed improvement over Q1. Progress in this year’s second quarter was due primarily to improvements in sales volumes, and continued aggressive cost reductions,” stated Intertape Polymer Group Inc. (“IPG” or the “Company”) Interim CEO, Dale McSween.
Sales for the second quarter of 2006 were up 16.7% to $222.1 million compared to the second quarter of 2005. Excluding revenues related to the October 2005 Flexia acquisition, sales increased 5.2%, of which 3.5% was related to higher selling prices and 1.7% was due to increased sales volumes. Volume growth was driven by tape and film products.
“Sales volumes in tapes and films were up 6.5% compared to the first quarter of 2006, primarily in resin-based products, as customers in some of the Company’s markets were back acquiring product after drawing down their existing inventories in the first quarter. However, overall demand for the Company’s products was uneven. There was softening in demand for products related to residential construction, a key market for the Company’s coated products operation,” said Mr. McSween.
Gross profit for the quarter was $39.6 million, up slightly from $39.4 million recorded for the corresponding quarter last year, while gross margin for the second quarter was 17.8% compared to 20.7% for the same quarter last year. The margin decline was due to the Flexia acquisition, which has a lower gross margin structure, decreasing sales prices in the second quarter of 2006, and changes in product mix. Excluding the impact of the Flexia acquisition, the gross margin would have been 18.5%.
Cost reduction efforts yield results
SG&A expenses were $26.0 million in the second quarter of 2006, compared to $24.8 million a year ago. Much of the increase was attributable to the SG&A costs of Flexia. Excluding Flexia, SG&A expenses would have been approximately $24.5 million. “While SG&A expenses increased compared to the same period last year, as a percent of sales for the quarter, they were down to 11.7% for this quarter compared to 13.1% for the second quarter of 2005, reflecting our focused efforts to reduce costs in this area,” said IPG’s Chief Financial Officer, Andrew M. Archibald, C.A. “Over the past two quarters in particular, we have succeeded in bringing SG&A expenses down from $30.1 million in the fourth quarter of 2005 to $26.0 million.” Compliance with the requirements of the Sarbanes-Oxley Act of 2002 cost the Company approximately $0.7 million for the second quarter of 2006. The Company did not experience significant Sarbanes-Oxley Act costs in the second quarter of 2005.
Costs relating to manufacturing facility closures, restructuring and other charges were $32.4 million in the second quarter of 2006 compared to $1.1 million for the same quarter last year. Of the $32.4 million in 2006 costs, $1.7 million related to manufacturing facility closure costs, while the remainder of $30.7 million pertained to restructuring and other charges.
For the second quarter of 2006, the estimated effective tax rate was 33.7% compared to an estimated effective tax rate of 6.8% for the second quarter of 2005. The 2005 effective tax rate included the impact of certain non-recurring tax adjustments.
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EBITDA for the second quarter of 2006 was negative $12.9 million compared to $19.6 million for the same quarter last year, due mainly to costs relating to manufacturing facility closures, restructuring and other charges. Excluding these items, adjusted EBITDA was $19.5 million compared to $20.7 million for the same period last year.
From a cash perspective, the Company generated $6.5 million of free cash flow in the second quarter compared to $0.3 million in the first quarter of 2006. Total debt was also reduced over the course of the second quarter by $5.9 million.
Due to certain covenant restrictions, as of June 30, 2006, the Company had access to $55.4 million of its $75.0 million revolving credit facility. As of June 30, 2006, the Company had cash, cash equivalents, and credit availability of $49.7 million. At the end of the quarter, certain covenants in the credit facilities were amended to accommodate the charges associated with previously-announced cost savings initiatives.
Non-GAAP Information
This release contains certain non-GAAP financial measures as defined under SEC rules, including adjusted net earnings, EBITDA, adjusted EBITDA, and free cash flow. The Company believes such non-GAAP financial measures improve the transparency of the Company's disclosure, provide a meaningful presentation of the Company's results from its core business operations by excluding the impact of items not related to the Company's ongoing core business operations, improve the period-to-period comparability of the Company's results from its core business operations, and are used by management and the Company’s investors in evaluating the Company’s performance. In particular, the Company’s covenants contained in the loan agreement with its lenders require certain debt to Adjusted EBITDA ratios be maintained. As required by SEC rules, the Company has provided reconciliations of those measures to the most directly comparable GAAP measures.
“Adjusted net earnings” does not have any standardized meaning prescribed by Canadian or U.S. GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers. Adjusted net earnings are defined by the Company as net earnings (as reported) plus manufacturing facility closures, restructuring and other charges (on a net of tax basis). A reconciliation of adjusted net earnings to GAAP net earnings is set forth below.
Reconciliation of Net Earnings to Adjusted Net Earnings
Periods ended June 30, (in millions of US dollars) |
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| Three months |
| Six months |
| ||||
|
| 2006 |
| 2005 |
| 2006 |
| 2005 |
|
|
| $ |
| $ |
| $ |
| $ |
|
Net earnings (loss) – as reported |
| (18.2) |
| 5.4 |
| (28.2) |
| 11.5 |
|
Add back: |
|
|
|
|
|
|
|
|
|
Manufacturing facility closures, restructuring and other charges |
| 32.4 |
| 1.1 |
| 49.9 |
| 1.8 |
|
Income taxes (recovery) |
| (9.3) |
| 0.4 |
| (15.0) |
| 1.7 |
|
Adjusted pre-tax earnings |
| 4.9 |
| 6.9 |
| 6.7 |
| 15.0 |
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Subtract: |
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|
|
|
|
|
|
|
|
Income taxes - at effective tax rate (i) |
| 1.8 |
| 0.8 |
| 2.5 |
| 2.4 |
|
Adjusted net earnings |
| 3.1 |
| 6.1 |
| 4.2 |
| 12.6 |
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(i) Effective income tax rate |
| 37.6% |
| 11.6% |
| 37.6% |
| 16.0% |
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(in US dollars per share – diluted) |
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Net earnings (loss) – as reported |
| (0.44) |
| 0.13 |
| (0.69) |
| 0.28 |
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Adjusted net earnings |
| 0.08 |
| 0.15 |
| 0.10 |
| 0.30 |
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The terms EBITDA and Adjusted EBITDA do not have any standardized meanings prescribed by Canadian or U.S. GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. The Company defines EBITDA as earnings before interest, taxes, depreciation and amortization, and Adjusted EBITDA as EBITDA plus manufacturing facility closure costs. A reconciliation of the Company’s EBITDA and Adjusted EBITDA, non-GAAP financial measures, to GAAP net earnings (loss) is set out in the EBITDA and Adjusted EBITDA reconciliation table below.
EBITDA and Adjusted EBITDA Reconciliation to Net Earnings
Free cash flow does not have any standardized meaning prescribed by Canadian or U.S. GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers. A reconciliation of free cash flow to cash flows from operating activities, the most directly comparable GAAP measure, is set forth below.
Reconciliation of Cash Flows from Operating Activities to Free Cash Flow
Periods ended June 30, |
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(in millions of US dollars) |
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| Three months |
| Six months |
| ||||
|
| 2006 |
| 2005 |
| 2006 |
| 2005 |
|
|
| $ |
| $ |
| $ |
| $ |
|
Cash flows from operating activities – as reported |
| 14.5 |
| 11.7 |
| 20.8 |
| 9.9 |
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Subtract: |
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Property, plant and equipment expenditures |
| 8.0 |
| 4.1 |
| 14.0 |
| 9.1 |
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Free cash flow |
| 6.5 |
| 7.6 |
| 6.8 |
| 0.8 |
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Outlook
“With much of our restructuring efforts accomplished, Management is now focused on improving the overall profitability of our core businesses,” concluded Mr. McSween.
(All figures in U.S. dollars, unless otherwise stated; June 30, 2006, exchange rate: Cdn $1.1159 = U.S.$1.00)
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Conference Call
A conference call to discuss IPG’s second quarter results will be held Wednesday, August 2, 2006 at 10:00 A.M. Eastern Time. Participants may dial 1-888-639-6205 (U.S. and Canada) and 1-703-925-2608 (International). The conference call will also be simultaneously webcast on the Company’s website at http://www.intertapepolymer.com.
You may access a replay of the call by dialing 1-800-475-6701 (U.S. and Canada), or 1-320-365-3844 (International), and entering the passcode 837952. The recording will be available from Wednesday, August 2, 2006 at 3:15 P.M. until Wednesday, August 9, 2006 at 11:59 P.M, Eastern Time.
About Intertape Polymer Group
Intertape Polymer Group is a recognized leader in the development and manufacture of specialized polyolefin plastic and paper based packaging products and complementary packaging systems for industrial and retail use. Headquartered in Montreal, Quebec and Sarasota/Bradenton, Florida, the Company employs approximately 2,700 employees with operations in 19 locations, including 14 manufacturing facilities in North America and one in Europe.
Safe Harbor Statement
Certain statements and information included in this release 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. 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. The Company undertakes no duty to update its forward-looking statements, including its earnings outlook.
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Selected Financial Information
Intertape Polymer Group Inc.
Consolidated Earnings
Periods ended June 30,
(In thousands of US dollars,
except per share amounts)
(Unaudited)
-----------------------------------------------------------------
Three months Six months
-----------------------------------------------------------------
2006 2005 2006 2005
-----------------------------------------------------------------
$ $ $ $
Sales 222,144 190,282 439,055 377,979
Cost of sales 182,534 150,895 360,656 299,469
-----------------------------------------------------------------
Gross profit 39,610 39,387 78,399 78,510
-----------------------------------------------------------------
Selling, general and
administrative expenses 25,982 24,844 54,035 48,761
Stock-based compensation
expense 590 483 1,115 938
Research and development 1,662 1,224 3,342 2,235
Financial expenses 6,396 5,918 13,113 11,567
Manufacturing facility
closures, restructuring
and other charges 32,423 1,087 49,925 1,806
-----------------------------------------------------------------
67,053 33,556 121,530 65,307
-----------------------------------------------------------------
Earnings (loss) before
income taxes (27,443) 5,831 (43,131) 13,203
Income taxes (recovery) (9,260) 399 (14,959) 1,738
-----------------------------------------------------------------
Net earnings (loss) (18,183) 5,432 (28,172) 11,465
-----------------------------------------------------------------
-----------------------------------------------------------------
Earnings (loss) per share
Basic (0.44) 0.13 (0.69) 0.28
-----------------------------------------------------------------
-----------------------------------------------------------------
Diluted (0.44) 0.13 (0.69) 0.28
-----------------------------------------------------------------
-----------------------------------------------------------------
Consolidated Retained Earnings
Periods ended June 30,
(In thousands of US dollars)
(Unaudited)
-------------------------------------------------------------------
Three months Six months
-------------------------------------------------------------------
2006 2005 2006 2005
-------------------------------------------------------------------
$ $ $ $
Balance, beginning of
period 97,172 85,642 107,161 79,609
Net earnings (loss) (18,183) 5,432 (28,172) 11,465
-------------------------------------------------------------------
78,989 91,074 78,989 91,074
Premium on purchase for
cancellation of common
shares 11 11
-------------------------------------------------------------------
Balance, end of
period 78,989 91,063 78,989 91,063
-------------------------------------------------------------------
-------------------------------------------------------------------
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Common shares
Average number
of shares
outstanding
Cdn GAAP - Basic 40,985,440 41,214,969 40,975,035 41,226,215
Cdn GAAP - Diluted 40,985,440 41,550,160 40,975,035 41,493,093
US GAAP - Basic 40,985,440 41,214,969 40,975,035 41,226,215
US GAAP - Diluted 40,985,440 41,550,160 40,975,035 41,493,093
Intertape Polymer Group Inc.
Consolidated Balance Sheets
As at
(In thousands of US dollars)
-------------------------------------------------------------
June 30, 2006 December 31, 2005
(Unaudited) (Audited)
-------------------------------------------------------------
$ $
ASSETS
Current assets
Cash and cash equivalents 8,019 10,134
Trade receivables, net of
allowance for doubtful
accounts of $6,832 ($7,574
at December 31, 2005) 126,188 124,440
Other assets and receivables 11,752 17,125
Inventories 99,706 105,565
Parts and supplies 13,942 14,836
Prepaid expenses 5,358 8,406
Future income taxes 16,142 16,142
-------------------------------------------------------------
281,107 296,648
Property, plant and
equipment 341,055 362,827
Other assets 18,036 21,071
Future income taxes 41,209 24,014
Goodwill 186,714 184,756
-------------------------------------------------------------
868,121 889,316
-------------------------------------------------------------
-------------------------------------------------------------
LIABILITIES
Current liabilities
Bank indebtedness 10,000 15,000
Accounts payable and accrued
liabilities 101,787 104,256
Installments on long-term
debt 3,331 2,784
-------------------------------------------------------------
115,118 122,040
Long-term debt 327,692 328,113
Pension and post-retirement
benefits 7,241 4,313
Other liabilities 435 435
-------------------------------------------------------------
450,486 454,901
-------------------------------------------------------------
SHAREHOLDERS' EQUITY
Capital stock 287,317 287,187
Contributed surplus 8,879 6,237
Retained earnings 78,989 107,161
Accumulated currency
translation adjustments 42,450 33,830
-------------------------------------------------------------
417,635 434,415
-------------------------------------------------------------
868,121 889,316
-------------------------------------------------------------
-------------------------------------------------------------
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Intertape Polymer Group Inc.
Consolidated Cash Flows
Periods ended June 30,
(In thousands of US dollars)
(Unaudited)
--------------------------------------------------------------------
Three months Six months
2006 2005 2006 2005
--------------------------------------------------------------------
$ $ $ $
OPERATING ACTIVITIES
Net earnings (loss) (18,183) 5,432 (28,172) 11,465
Non-cash items
Depreciation and
amortization 8,634 8,234 17,483 16,142
Loss on disposal of
property, plant and
equipment 165 165
Other non-cash charges in
connection with facility closures
and restructuring 19,547 81 35,664 127
Future income taxes (9,555) 203 (15,470) 1,372
Stock-based compensation
expense 590 483 1,115 938
Pension and post-retirement
benefits funding in excess of
amounts expensed (474) (60) (474) (120)
--------------------------------------------------------------------
Cash flows from operations
before changes in non-cash working
capital items 724 14,373 10,311 29,924
--------------------------------------------------------------------
Changes in non-cash working
capital items
Trade receivables (5,682) 2,801 (596) (9,100)
Other assets and
receivables 4,265 2,082 5,464 2,017
Inventories 10,027 (6,338) 5,520 (9,535)
Parts and supplies (177) (96) (447) (409)
Prepaid expenses 2,941 449 3,088 132
Accounts payable and accrued
liabilities 1,900 (1,616) (3,044) (3,285)
--------------------------------------------------------------------
13,274 (2,718) 9,985 (20,180)
--------------------------------------------------------------------
Cash flows from operating
activities 13,998 11,655 20,296 9,744
--------------------------------------------------------------------
INVESTING ACTIVITIES
Property, plant and
equipment (7,974) (4,069) (14,011) (9,058)
Proceeds on sale of property,
plant and equipment 2,086 2,086
Other assets (4,334) (740) (4,013) (1,601)
Goodwill (156) (454) (300)
--------------------------------------------------------------------
Cash flows from investing
activities (10,378) (4,809) (16,392) (10,959)
--------------------------------------------------------------------
FINANCING ACTIVITIES
Net change in bank
indebtedness (5,000) (5,000) 5,000
Repayment of long-term debt (855) (1,164) (1,539) (1,703)
Issue of common shares 2 68 130 71
Common shares purchased for
cancellation (340) (340)
--------------------------------------------------------------------
9
Cash flows from financing
activities (5,853) (1,436) (6,409) 3,028
--------------------------------------------------------------------
Net increase (decrease) in
cash position (2,233) 5,410 (2,505) 1,813
Effect of currency
translation adjustments 364 (246) 390 (448)
Cash, beginning of
period 9,888 18,083 10,134 21,882
--------------------------------------------------------------------
Cash, end of period 8,019 23,247 8,019 23,247
--------------------------------------------------------------------
--------------------------------------------------------------------
FOR INFORMATION CONTACT:
Dale McSween
Interim Chief Executive Officer
Intertape Polymer Group Inc.
Tel.: 866-202-4713
E-mail: itp$info@itape.com
Web: www.intertapepolymer.com
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