Business News

Intertape Polymer Group Reports Second Quarter 2009 Results

Thursday 30. July 2009 - Intertape Polymer Group Inc. (TSX:ITP) (NYSE:ITP) ("Intertape" or the "Company") today released results for the three months and six months ended June 30, 2009. All dollar amounts are US denominated unless otherwise indicated.

“While Intertape sales continue to be affected by the global economic situation, various initiatives undertaken by the Company over the last two quarters, including cost reduction measures, opening of new market channels and new product commercializations, have enabled the Company to somewhat mitigate the impact of external factors. The industry challenges we have faced persist and we must continue to deal proactively with this reality,” stated Intertape Chairman, Eric E. Baker.

Net loss for the second quarter of 2009 was $1.2 million or $0.02 per share, both basic and diluted, compared to net earnings of $4.6 million or $0.08 per share both basic and diluted for the same period last year. Both of the Company’s Divisions experienced declines, however, the Engineered Coated Products (“ECP”) Division was harder hit as demand in its largest market, the North American residential housing market, continued to be soft. Net loss for the first six months of 2009 totaled $7.8 million ($0.13 per share, basic and diluted) compared to net earnings of $2.8 million ($0.05 per share, basic and diluted) for the same period in 2008.

Second quarter sales were down 23.1% to $151.9 million, compared to sales of $197.5 million in the second quarter of 2008, reflecting a 20.3% decrease in sales for the Tapes & Films (“T&F”) Division and a 34.6% reduction for the ECP Division. Sales for the first six months of 2009 were $291.0 million compared to $382.0 million for the same period in 2008, a decrease of 23.8%.

Gross profit for the second quarter totaled $21.5 million, compared to $26.4 million a year ago, reflecting decreases in both the T&F and ECP Divisions. The gross margin increased to 14.2%, from 13.3% in the second quarter of 2008, reflecting an increase in the gross margin of the T&F Division, partially offset by a decline in the ECP Division’s gross margin. Gross profit and gross margin for the first six months of 2009 were $36.3 million and 12.5% respectively, compared to $54.5 million and 14.3% for the first six months of 2008.

Selling, general and administrative (“SG&A”) expenses totaled $16.6 million for the second quarter of 2009, $0.6 million lower than the $17.2 million for the second quarter of 2008. For the first six months of 2009, SG&A expenses were $32.0 million compared to $34.8 million for the same period in 2008. SG&A expenses for 2009 reflect the cost reduction initiatives implemented by the Company in the fourth quarter of 2008 and the first quarter of 2009.

Second quarter 2009 EBITDA was $12.4 million compared to $16.0 million for the second quarter in 2008. For the first six months of 2009, EBITDA was $19.1 million compared to $33.5 million for the same period in 2008. Reduced sales, resulting in lower gross profits in both Divisions were the main reason for lower EBITDA in both the second quarter and first six months of 2009.

The Company generated cash flows from operating activities in the second quarter of 2009 of $8.8 million compared to $2.3 million in the second quarter of 2008. The higher level of cash generation in 2009 was due to lower raw material inventory costs and an increased focus on cash management. For the first six months of 2009, the Company generated cash flows from operating activities of $20.7 million compared to cash usage of $0.6 million for the same period of 2008.

Over the quarter, the Company reduced its outstanding debt by $3.6 million, for a total debt reduction of $19.1 million over the first six months of 2009. 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 June 30, 2009, this covenant was not in effect as unused availability was in excess of $25.0 million and measured at $42.4 million. To date in the third 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 the remainder of 2009.

Segmented Information

Tapes & Films (“T&F”) Division

Sales for the T&F Division for the second quarter were $127.0 million, representing a 20.3% decrease compared to $159.5 million for the second quarter of 2008. Sales volumes decreased 16.1% mainly due to the impact of the global economic downturn that began in the fourth quarter of 2008 and continues. The lower sales volumes have been mitigated in part by the growth in new products and markets. Selling prices for the second quarter of 2009 were 4.3% lower than in the second quarter of 2008 as selling prices have tracked the decline in resin-based raw material costs. Sales for the T&F Division for the first six months of 2009 totaled $242.4 million compared to $308.2 million for the first six months of 2008, a 21.4% decrease. Sales volumes for the first six months of 2009 declined 17.0% compared to the first six months of 2008.

Second quarter gross profits for the T&F Division totaled $20.6 million compared to $22.8 million for the second quarter of 2008 primarily due to lower sales volumes, offset partially by cost reductions resulting from Company initiatives implemented in the fourth quarter of 2008 and the first quarter of 2009. Gross margins increased to 16.2% from 14.3% a year ago as 2009 selling prices were at levels that better reflected costs than in 2008 when there was a rapid unprecedented increase in resin-based raw material costs, which the Division could not fully recover. T&F Division gross profits and gross margins for the first six months of 2009 and 2008 were $33.3 million (13.7%) and $46.6 million (15.1%) respectively.

T&F Division’s EBITDA for the second quarter was $13.6 million compared to $15.2 million for the comparable period a year ago. For the first six months of 2009 and 2008, the T&F Division’s EBITDA was $20.2 million and $31.3 million respectively.



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


Three months Six months
————————————————————————–
For the periods ended June 30, 2009 2008 2009 2008
————————————————————————–
$ $ $ $


Divisional net earnings (loss)
before income taxes 6.1 8.0 5.4 16.7
Depreciation and amortization 7.5 7.2 14.8 14.6
————————————————————————–
EBITDA 13.6 15.2 20.2 31.3
————————————————————————–
————————————————————————–
EBITDA margin 10.7% 9.5% 8.3% 10.2%
————————————————————————–
————————————————————————–





Engineered Coated Products (“ECP”) Division

Sales for the ECP Division for the second quarter were $24.9 million, representing a 34.6% decrease compared to $38.0 million for the second quarter a year ago. Year-over-year sales volumes decreased 27.1%. The volume decline was accompanied by selling price decreases due to the decline in resin-based raw material costs and competitive pressures within the markets served. Product demand was significantly impacted by the continued weakness in the residential housing market. The supply chain supporting this market is carrying significant excess inventories. Consequently, there continues to be destocking of on-hand inventories by customers within the Division’s largest market. New product sales growth within the residential construction market has helped to mitigate some of the decline in existing product sales. Six month sales for the ECP Division totaled $48.6 million compared to $73.9 million for the same period of 2008, a 34.2% decrease. Sales volumes for the first six months of 2009 declined 20.1% compared to the first six months of 2008.

Gross profits for the ECP Division for the second quarter totaled $1.0 million, representing a gross margin of 3.8%, compared to $3.5 million and a gross margin of 9.2% for the second quarter of 2008. The gross profit and gross margin decreases are the result of declining trading margins, as depressed customer demand in the current environment limits the Division’s ability to maintain selling prices. ECP Division gross profits and gross margins for the first six months of 2009 and 2008 were $3.0 million (6.2%) and $7.9 million (10.7%) respectively.

ECP Division EBITDA for the second quarter was negative $0.3 million compared to $1.5 million for the same quarter of 2008. For the first six months of 2009 and 2008, the ECP Division’s EBITDA was $0.6 million and $3.7 million, respectively.



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


Three months Six months
————————————————————————–
For the periods ended June 30, 2009 2008 2009 2008
————————————————————————–
$ $ $ $


Divisional net earnings (loss)
before income taxes (1.9) 0.0 (2.5) 0.8
Depreciation and amortization 1.6 1.5 3.1 2.9
————————————————————————–
EBITDA (0.3) 1.5 0.6 3.7
————————————————————————–
————————————————————————–
EBITDA margin (1.2)% 3.9% 1.2% 5.0%
————————————————————————–
————————————————————————–





Outlook

“Sales are down due to the weak economy; however, our new products are beginning to attract attention in the market. Our focus continues to be on the things we can control, in particular cash management, which is of utmost importance in this difficult economy,” concluded Intertape Executive Director, Melbourne F. Yull.