INTERTAPE POLYMER GROUP INC.
NYSE : ITP
TSX : ITP

INTERTAPE POLYMER GROUP INC.

October 17, 2005 17:51 ET

Intertape Polymer Group Inc. Announces Third Quarter Results

MONTREAL, QUEBEC and BRADENTON, FLORIDA--(CCNMatthews - Oct. 17, 2005) -



- Sales up 13.2% compared to last year
- Adjusted net earnings up 21.4% compared to last year


Intertape Polymer Group Inc. (TSX:ITP)NYSE:ITP) today released results for its third quarter ended September 30, 2005.

Sales for the third quarter were $201.2 million, up 13.2% from $177.7 million for the same quarter of 2004, while the Company reported net earnings of $6.6 million or $0.16 per share (basic and diluted) compared to a net loss of $14.3 million or $0.35 per share (basic and diluted) for the same period last year, and adjusted net earnings of $6.8 million or $0.17 per share (basic and diluted) compared to $5.6 million or $0.14 per share (basic and diluted) for the same period last year.

"Sales growth in the third quarter was primarily driven by sales price increases," said Intertape Polymer Group Inc. ("IPG") Chairman and Chief Executive Officer, Melbourne F. Yull. "While raw material and energy costs continued to make markets challenging, the organizational realignment that we implemented at the end of 2004 enabled us to react quickly and respond effectively to the changes in the marketplace. In the face of these cost pressures, our gross profit for the third quarter of 2005 increased $4.5 million or 12.2% compared to the third quarter of 2004."

"Despite raw material cost increases and supply shortages, the Company did not have to cut back its production as some competitors have had to do," commented Mr. Yull. "We have even seen a number of competitors declaring force majeure." The Company has been able to maintain its operating levels and fulfill its contracts because of its global sourcing efforts, which have allowed the Company to maintain adequate supplies from multiple sources, pre-buying of raw material inventories prior to supply constraints occurring, and reduced consumption of some raw materials by modifying certain formulations.

Net earnings for the third quarter of 2005 were up significantly over the third quarter of last year because of $30.4 million of refinancing expense that was incurred last year as part of a major debt refinancing. Third quarter 2005 results included $0.4 million of manufacturing facility closure and industrial accident costs. Excluding refinancing expense, manufacturing facility closure and industrial accident costs, and related tax benefits, adjusted net earnings for the third quarter of 2005 were $6.8 million or $0.17 per share (basic and diluted) compared to $5.6 million or $0.14 per share (basic and diluted) for the same quarter last year. The improvement in adjusted net earnings resulted from the increase in gross profit partly offset by higher selling expenses, reflecting increased rebate levels for consumer products, higher staffing levels and activities to generate growth, and higher variable compensation costs as a result of higher sales. The Company is including adjusted net earnings, a non-GAAP financial measure, because it believes the measure permits more meaningful comparisons of its core business performance between the periods presented. A reconciliation of adjusted net earnings to GAAP net earnings is set forth below.

"Decreased financial expenses continue to have a positive impact on our net earnings as they were down 6.2% in the third quarter of 2005 compared to the third quarter last year, reflecting the benefits of the refinancing undertaken in the third quarter of last year," said IPG's Chief Financial Officer, Andrew M. Archibald, C.A.

From a cash perspective, the Company generated $3.7 million of free cash flow in the quarter, resulting in $4.5 million for the year to date. "Our cash flow has been adversely affected by the impact of rising raw material costs on our working capital," commented Mr. Archibald. "We estimate the net impact on accounts receivable, inventories and accounts payable to have been approximately $23.0 million for the first nine months of the year. Nonetheless, over the past two quarters the Company has generated a total of $11.4 million in free cash flow and expects to continue generating positive free cash flow in the coming quarters." Free cash flow is defined as cash flows from operating activities less expenditures for plant, property and equipment (capital expenditures). The Company is including free cash flow, a non-GAAP financial measure, because it is used by management and the Company's investors in evaluating the Company's performance. A reconciliation of free cash flow to cash flows from operating activities, the most directly comparable GAAP measure, is set forth below.

The Company is also including earnings before interest, taxes, depreciation and amortization ("EBITDA") and Adjusted EBITDA, both non-GAAP financial measures, because these measures are used by management and the Company's lenders in evaluating the Company's performance. A reconciliation of the Company's EBITDA and Adjusted EBITDA, both non-GAAP financial measures, to GAAP net earnings is set forth in the EBITDA reconciliation table below. The Company's EBITDA for the third quarter of 2005 was $20.9 million compared to $19.6 million for the third quarter of 2004. The adjusted EBITDA was $21.3 million in the third quarter of 2005 as compared to $19.6 million in the third quarter of 2004.

Sales for the first nine months of 2005 were $579.2 million, up 13.2% from $511.7 million for the same period in 2004. Net earnings for the first nine months of 2005 were $18.1 million or $0.44 per share (basic and diluted) compared to a net loss of $6.3 million or $0.15 per share (basic and diluted) for the same period of the preceding year.

Following the end of the quarter, the Company, through a wholly-owned Canadian subsidiary, acquired Flexia Corporation and Fib-Pak Industries Inc. The acquisition of these companies is expected to enable IPG to increase its market size in certain products, broaden its product portfolio, leverage Flexia's market leading global sourcing program, increase the proximity of manufacturing facilities to the customer base and provide a west coast presence which can facilitate import and export activity with Asia.

The Company's most recent sales guidance for 2005 was a range of $755 million to $775 million. "Not including additional fourth quarter 2005 sales resulting from the October 5, 2005 acquisition, the Company should be at the high end of the range if anticipated raw material supplies are not disrupted," noted Mr. Yull.



Reconciliation of Net Earnings to Adjusted Net Earnings

---------------------------------------------------------------------
(in millions of US dollars)
For the three For the nine
months ended months ended
September 30 September 30
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $
Net earnings (loss)
- as reported 6.6 (14.3) 18.1 (6.3)
Add back:
Refinancing expense (after-tax) 19.9 19.9
Manufacturing facility
closure and industrial
accident costs (after-tax) 0.2 1.3
---------------------------------------------------------------------
Adjusted net earnings 6.8 5.6 19.4 13.6
---------------------------------------------------------------------
---------------------------------------------------------------------

(in US dollars per share
- basic and diluted)

Net earnings (loss)
- as reported 0.16 (0.35) 0.44 (0.15)
---------------------------------------------------------------------
---------------------------------------------------------------------
Adjusted net earnings 0.17 0.14 0.47 0.33
---------------------------------------------------------------------
---------------------------------------------------------------------


Reconciliation of Net Earnings to EBITDA and Adjusted EBITDA
---------------------------------------------------------------------
(in millions of US dollars)
For the three For the nine
months ended months ended
September 30 September 30
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $
Net earnings (loss)
- as reported 6.6 (14.3) 18.1 (6.3)
Add back:
Financial expenses,
net of amortization 5.3 5.7 16.1 19.0
Refinancing expense 30.4 30.4
Income taxes 1.5 (9.7) 3.2 (9.3)
Depreciation and amortization 7.5 7.5 23.6 22.1
---------------------------------------------------------------------
EBITDA 20.9 19.6 61.0 55.9
Add back:
Manufacturing facility
closure and industrial
accident costs 0.4 2.2
---------------------------------------------------------------------
Adjusted EBITDA 21.3 19.6 63.2 55.9
---------------------------------------------------------------------
---------------------------------------------------------------------


Reconciliation of Cash Flows from Operating Activities to Free Cash
Flow

---------------------------------------------------------------------
(in millions of US dollars)
For the three For the nine
months ended months ended
September 30 September 30
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $
Cash flows from (used in)
operating activities
- as reported 10.6 (11.5) 20.4 (5.8)
Subtract:
Property, plant and
equipment expenditures 6.9 3.7 15.9 13.5
---------------------------------------------------------------------
Free cash flow 3.7 (15.2) 4.5 (19.3)
---------------------------------------------------------------------
---------------------------------------------------------------------

(All figures in U.S. dollars, unless otherwise stated; September 30,
2005, exchange rate: Cdn $1.1725 equals U.S.$1.00)


Conference Call

A conference call to discuss IPG's 2005 third quarter results will be held Tuesday, October 18, 2005 at 10:00 A.M. Eastern Standard Time. Participants may dial 1-888-428-4474 (U.S. and Canada) and 1-612-288-0329 (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 799080. The recording will be available from Tuesday, October 18, 2005 at 4:45 P.M. until Tuesday, October 25, 2005 at 11:59 P.M., Eastern Standard 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 3,000 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. This release contains certain non-GAAP financial measures as defined under SEC rules, including adjusted net earnings, EBITDA and adjusted EBITDA. 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, excluding the impact of items not related to the Company's ongoing core business operations, and improve the period-to-period comparability of the Company's results from its core business operations. As required by SEC rules, the Company has provided reconciliations of non-GAAP measures to the most directly comparable GAAP measures.



Selected Financial Information

Intertape Polymer Group Inc.
Consolidated Earnings
Periods ended September 30,
(In thousands of US dollars, except per share amounts)
(Unaudited)
---------------------------------------------------------------------
Three months Nine months
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $

Sales 201,177 177,671 579,156 511,705
Cost of sales 159,449 140,480 458,918 404,563
---------------------------------------------------------------------
Gross profit 41,728 37,191 120,238 107,142
---------------------------------------------------------------------

Selling, general and
administrative expenses 25,970 23,327 74,731 68,427
Stock-based
compensation expense 485 270 1,423 691
Research and development 1,233 1,121 3,468 3,236
Financial expenses 5,577 5,948 17,144 19,951
Refinancing expense 30,444 30,444
Manufacturing facility
closure and industrial
accident costs 385 2,191
---------------------------------------------------------------------
33,650 61,110 98,957 122,749
---------------------------------------------------------------------
Earnings (loss)
before income taxes 8,078 (23,919) 21,281 (15,607)
Income taxes (recovery) 1,479 (9,664) 3,217 (9,294)
---------------------------------------------------------------------
Net earnings (loss) 6,599 (14,255) 18,064 (6,313)
---------------------------------------------------------------------
---------------------------------------------------------------------

Earnings (loss) per share
Basic 0.16 (0.35) 0.44 (0.15)
---------------------------------------------------------------------
---------------------------------------------------------------------

Diluted 0.16 (0.35) 0.44 (0.15)
---------------------------------------------------------------------
---------------------------------------------------------------------


Intertape Polymer Group Inc.
Consolidated Retained Earnings
Periods ended September 30,
(In thousands of US dollars)
(Unaudited)
---------------------------------------------------------------------
Three months Nine months
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $
Balance, beginning
of period 91,058 76,233 79,609 68,291
Net earnings (loss) 6,599 (14,255) 18,064 (6,313)
---------------------------------------------------------------------
97,657 61,978 97,673 61,978
Premium on purchase for
cancellation of
common shares 16
---------------------------------------------------------------------
Balance, end of period 97,657 61,978 97,657 61,978
---------------------------------------------------------------------
---------------------------------------------------------------------

Common shares
Average number of shares outstanding

CDN GAAP - Basic 41,205,555 41,285,161 41,219,329 41,156,911
CDN GAAP - Diluted 41,337,378 41,285,161 41,362,491 41,156,911
U.S. GAAP - Basic 41,205,555 41,285,161 41,219,329 41,156,911
U.S. GAAP - Diluted 41,337,378 41,285,161 41,362,491 41,156,911



Intertape Polymer Group Inc.
Consolidated Balance Sheets
As at
(In thousands of US dollars)
---------------------------------------------------------------------
September 30, September 30, December 31,
2005 2004 2004
---------------------------------------------------------------------
(Unaudited) (Unaudited) (Audited)
---------------------------------------------------------------------
$ $ $
ASSETS
Current assets
Cash 48,759 27,868 21,882
Temporary investment 497
Trade receivables,
net of allowance
for doubtful accounts
of $4,211
($3,959 in September 2004,
$4,065 in December 2004) 122,217 106,436 101,628
Other receivables 10,008 12,764 13,381
Inventories 92,297 78,451 90,677
Parts and supplies 14,271 13,641 13,618
Prepaid expenses 5,444 4,013 7,788
Future income taxes 1,509 2,682 1,509
---------------------------------------------------------------------
294,505 245,855 250,980
Property, plant and equipment 345,417 356,680 352,610
Other assets 18,815 15,341 16,474
Future income taxes 35,323 11,593 36,689
Goodwill 181,117 177,780 179,958
---------------------------------------------------------------------
875,177 807,249 836,711
---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES
Current liabilities
Bank indebtedness 28,529 179
Accounts payable and
accrued liabilities 89,340 94,591 97,849
Installments on long-term debt 2,781 2,700 3,032
---------------------------------------------------------------------
120,650 97,470 100,881
Long-term debt 328,898 332,539 331,095
Other liabilities 435 530 435
---------------------------------------------------------------------
449,983 430,539 432,411
---------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Capital stock 288,930 289,538 289,180
Contributed surplus 5,749 3,971 4,326
Retained earnings 97,657 61,978 79,609
Accumulated currency
translation adjustments 32,858 21,223 31,185
---------------------------------------------------------------------
425,194 376,710 404,300
---------------------------------------------------------------------
875,177 807,249 836,711
---------------------------------------------------------------------
---------------------------------------------------------------------



Intertape Polymer Group Inc.
Consolidated Cash Flows
Periods ended September 30,
(In thousands of US dollars)
(Unaudited)
---------------------------------------------------------------------
Three months Nine months
2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $
OPERATING ACTIVITIES
Net earnings (loss) 6,599 (14,255) 18,064 (6,313)
Non-cash items
Depreciation and
amortization 7,496 7,482 23,638 22,119
Write-off of deferred
debt issue expenses 8,482 8,482
Other non-cash charges
in connection with
facility closures 73 200
Future income taxes 1,020 (6,879) 2,392 (7,465)
Stock-based
compensation expense 485 270 1,423 691
---------------------------------------------------------------------
Cash flows from
operations before changes
in non-cash working
capital items 15,673 (4,900) 45,717 17,514
---------------------------------------------------------------------
Changes in non-cash
working capital items
Trade receivables (11,524) (4,599) (20,624) (16,847)
Other receivables 1,274 (1,351) 3,291 (864)
Inventories 8,544 (4,125) (991) (8,003)
Parts and supplies (190) (340) (599) (488)
Prepaid expenses 2,236 1,772 2,368 3,912
Accounts payable and
accrued liabilities (5,400) 2,007 (8,685) (990)
---------------------------------------------------------------------
(5,060) (6,636) (25,240) (23,280)
---------------------------------------------------------------------
Cash flows from
operating activities 10,613 (11,536) 20,477 (5,766)
---------------------------------------------------------------------
INVESTING ACTIVITIES
Temporary investment 489 489
Property, plant
and equipment (6,887) (3,664) (15,945) (13,539)
Business acquisition (5,500)
Other assets (1,921) (10,786) (3,642) (11,850)
Goodwill 58 (300)
---------------------------------------------------------------------
Cash flows from
investing activities (8,319) (14,392) (19,398) (30,889)
---------------------------------------------------------------------
FINANCING ACTIVITIES
Net change in bank
indebtedness 23,529 (34,509) 28,529 (13,669)
Issue of long-term debt 325,000 325,787
Repayment of long-term debt (661) (248,051) (2,364) (250,528)
Issue of common shares 4 319 75 2,697
Common shares purchased
for cancellation (340)
---------------------------------------------------------------------
Cash flows from
financing activities 22,872 42,759 25,900 64,287
---------------------------------------------------------------------
Net increase in
cash position 25,166 16,831 26,979 27,632
Effect of currency
translation adjustments 346 1,549 (102) 236
Cash and cash equivalents,
beginning of period 23,247 9,488 21,882
---------------------------------------------------------------------
Cash and cash equivalents,
end of period 48,759 27,868 48,759 27,868
---------------------------------------------------------------------
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