Business News

Intertape Polymer Group Reports First Quarter 2009 Results

Wednesday 22. April 2009 - Intertape Polymer Group Inc. (TSX:ITP)(NYSE:ITP) - - EBITDA of $6.7 million - Company sees results of cost reductions - Debt reduced by $15.5 million

Intertape Polymer Group Inc. (TSX:ITP)(NYSE:ITP) (“Intertape” or the “Company”) today released results for the first quarter ended March 31, 2009. All dollar amounts are US denominated unless otherwise indicated.

“The Company took considerable costs out of its operations during the quarter. Staffing and third party expenses were reduced by over $3 million compared to the third quarter of 2008. It is also progressing well in its goal to achieve productivity improvements of $23 million on an annualized basis. The first quarter is traditionally the Company’s slowest and we anticipate improvement through the rest of this year. I am also pleased that, in this economic environment, the Company was able to reduce its debt by $15.5 million,” stated Intertape Chairman, Eric E. Baker.

Net loss for the first quarter of 2009 was $6.7 million or $0.11 per share, both basic and diluted, compared to a loss of $1.9 million or $0.03 per share both basic and diluted for the same period last year. The difference reflects lower gross profits, offset by the absence of $6.0 million in refinancing expense and increased cost reductions.

First quarter sales were down 24.6% to $139.1 million, compared to sales of $184.5 million in the first quarter of 2008 reflecting a 22.4% decrease in sales for the T&F Division and a 33.8% drop in sales for the ECP Division (please refer to Segmented Information below). Overall, sales volume was down 20.3% and selling prices declined 4.3%.

Gross profit for the first quarter totaled $14.8 million, compared to $28.2 million a year ago, reflecting an $11.1 million reduction in the T&F Division and a $2.3 million decrease in the ECP Division. The gross margin decreased to 10.7%, from 15.3% in the first quarter of 2008.

Compared to the fourth quarter of 2008, gross profit increased by $20.3 million primarily because the $16.6 million in gross margin compression in the fourth quarter of 2008 did not repeat in the first quarter of 2009 although contributing adverse market conditions continued to prevail during the period. The remainder of the first quarter improvement was the result of cost reduction initiatives implemented by the Company.

Selling, general and administrative (“SG&A”) expenses totaled $15.4 million for the first quarter of 2009, $2.2 million lower than the $17.6 million for the first quarter of 2008, mainly due to lower professional fees and reduced staffing costs.

First quarter EBITDA was $6.7 million compared to EBITDA of $17.5 million for the first quarter in 2008.

The Company generated cash flows from operating activities in the first quarter of 2009 of $11.9 million compared to cash usage of $2.8 million in the first quarter of 2008. The change was due to working capital providing $10.5 million of cash in the first quarter of 2009 compared to working capital cash use of $12.3 million in the first quarter of 2008. Over the quarter, the Company reduced its outstanding debt by $15.5 million. As at March 31, 2009, the Company had cash on hand and unused availability under its $200.0 million asset based loan (“ABL”) totaling $38.5 million. The ABL has one financial covenant, a fixed charge ratio, the target for which is 1.0 to 1.0. The financial covenant becomes effective only when unused availability drops below $25.0 million. While the Company did not meet the ratio as at March 31, 2009, this covenant was not in effect as unused availability was in excess of $25.0 million and measured at $32.5 million. To date in the second quarter of 2009, the Company has maintained availability in excess of $25.0 million. It is the Company’s intention to remain above the $25.0 million threshold of unused availability during 2009.

Segmented Information

Tapes & Films (“T&F”) Division

Sales for the T&F Division for the first quarter totalled $115.4 million, representing a 22.4% decrease compared to $148.7 million for the first quarter of 2008. Sales volume decreased 18.0% compared to the first quarter of 2008. Lower sales and volumes were a reflection of the global economic downturn and significant inventory destocking in the supply chain. The destocking abated in the latter part of the first quarter. Selling prices for 2009 were 4.4% lower than in the first quarter of 2008 due to the decline in the cost of resin-based raw materials.

On a sequential basis, sales volume was essentially unchanged from the fourth quarter of 2008.

First quarter gross profits for the T&F Division totalled $12.7 million at a gross margin of 11.0% compared to $23.8 million at a gross margin of 16.0% for the first quarter of 2008. These declines, compared to the first quarter of 2008, reflect the lower sales and the related impact of an increase in unabsorbed fixed manufacturing overhead costs in the current year.

T & F Division’s EBITDA was $6.5 million compared to $16.1 million for the comparable period a year ago.



Tapes and Films Division EBITDA Reconciliation to Net Earnings (Loss)
(in millions of US dollars)


For the three months ended March 31, 2009 2008
————————————————————————–
$ $
Divisional net earnings (loss)
before income taxes (recovery) (0.8) 8.7


Depreciation and amortization 7.3 7.4


EBITDA 6.5 16.1


EBITDA margin 5.6% 10.8%





Engineered Coated Products (“ECP”) Division

Sales for the ECP Division for the first quarter were $23.7 million, representing a 33.8% decrease when compared to $35.8 million for the first quarter a year ago. Sales volume decreased 29.9% for the first quarter of 2009 compared to the first quarter of 2008. The sales volume decline is attributable to the global economic downturn. The sales volume decline was accompanied by selling price decreases due to the decline in the cost of resin-based raw materials.

Gross profits for the ECP Division for the first quarter totalled $2.1 million at a gross margin of 8.8%, compared to $4.4 million at a gross margin of 12.3% for the first quarter of 2008, reflecting lower sales and continued softness in the residential construction market.

ECP Division EBITDA for the first quarter was $0.8 million compared to $2.2 million for the same quarter of 2008.



ECP Division EBITDA Reconciliation to Net Earnings (Loss)
(in millions of US dollars)


For the three months ended March 31, 2009 2008
————————————————————————–
$ $
Divisional net earnings (loss)
before income taxes (recovery) (0.8) 0.7


Depreciation and amortization 1.6 1.5


EBITDA 0.8 2.2


EBITDA margin 3.4% 6.1%





Outlook

“Demand continues to be weak in the current economy, however, we are seeing some traction in our new products. Furthermore, we believe that by the end of the first quarter of 2009, inventory destocking in the supply chain of T&F Division customers had for the most part ended. We are managing our cash well, which is a key element in our strategy in this difficult economy,” concluded Intertape Executive Director, Melbourne F. Yull.

Non-GAAP Information

This release contains a non-GAAP financial measure, EBITDA. The Company believes the inclusion of such a non-GAAP financial measure improves the transparency of the Company’s disclosure, and is used by management and the Company’s investors in evaluating the Company’s performance. The Company has provided a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measures.

A reconciliation of the Company’s EBITDA to GAAP net loss is set out in the EBITDA reconciliation table below. EBITDA should not be construed as net earnings (loss) before income taxes, net earnings (loss) or cash from operating activities as determined by GAAP. The Company defines EBITDA as net loss before (i) income taxes (recovery); (ii) financial expenses, net of amortization; (iii) refinancing expense net of amortization; (iv) amortization of other intangibles and capitalized software costs; and (v) 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 flows from operating activities or as an alternative to net earnings (loss) as indicators of the Company’s operating performance or any other measure of performance derived in accordance with GAAP. The Company has included this non-GAAP financial measure because it is used by management in evaluating the Company’s performance.



EBITDA Reconciliation to Net Loss
(in millions of US dollars)


For the three months ended March 31, 2009 2008
————————————————————————–
$ $
Net loss – as reported (6.7) (1.9)
Add back (deduct):
Financial expenses,
net of amortization 4.4 4.9
Refinancing expense
net of amortization 2.9
Income taxes recovery (0.2) (0.8)
Depreciation and amortization 9.2 12.4
————————————————————————–
EBITDA 6.7 17.5
————————————————————————–
————————————————————————–





(All figures in US Dollars, unless otherwise stated; March 31, 2009 exchange rate: Cdn 1.2590 equals U.S. $1.00)