Intertape Polymer Group Inc. is a recognized leader in the development, manufacture and sale of a variety of paper and film based pressure sensitive and water activated tapes, polyethylene and specialized polyolefin films, woven coated fabrics and complementary packaging systems for industrial and retail use. Headquartered in Montreal, Quebec and Sarasota, Florida, the Company employs approximately 2,200 employees with operations in 18 locations, including 12 manufacturing facilities in North America, one in Europe, and one in India.
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Third Quarter 2016 Highlights (as compared to third quarter 2015)
- Revenue increased 3.0% to $206.6 million primarily due to the non-recurrence of the South Carolina Commissioning Revenue Reduction(1) and additional revenue from the TaraTape acquisition, partially offset by a decrease in average selling price, including the impact of product mix. The Company estimates that its revenue was negatively impacted by the South Carolina Flood(2) by approximately $9.9 million, which is embedded in the changes in product mix and sales volume.
- Gross margin increased to 21.7% from 21.3% primarily due to the favourable impact of the Company’s manufacturing cost reduction programs and an increase in the spread between selling prices and raw material costs, partially offset by the negative impact of the South Carolina Flood which the Company estimates to be approximately $7.0 million.
- Selling, general and administrative expenses ("SG&A") increased $9.4 million to $27.3 million primarily due to an increase in stock-based and variable compensation expense and a provision for the settlement of an outstanding litigation recorded in the third quarter of 2016.
- Net earnings decreased $9.4 million to $6.3 million primarily due to increases in SG&A and manufacturing facility closure charges, partially offset by a decrease in income tax expense and an increase in gross profit. The Company estimates that its net earnings for the third quarter of 2016 were negatively impacted by the South Carolina Flood by approximately $5.0 million.
- Adjusted net earnings* increased $7.0 million to $19.9 million primarily due to a decrease in income tax expense and an increase in gross profit, partially offset by an increase in SG&A. The Company estimates that its adjusted net earnings for the third quarter of 2016 were negatively impacted by the South Carolina Flood by approximately $4.3 million.
- Adjusted EBITDA* increased 1.6% to $27.2 million primarily due to an increase in gross profit, partially offset by an increase in SG&A. The Company estimates that its adjusted EBITDA for the third quarter of 2016 was negatively impacted by the South Carolina Flood by approximately $6.9 million.
- Cash flows from operating activities decreased by $12.1 million to $21.7 million and free cash flows* decreased by $14.0 million to $9.2 million. These decreases are primarily due to an increase in inventory mainly due to raw material purchases, and an increase in federal income taxes paid.
*Non-GAAP financial measure. As required by applicable securities legislation, the Company has provided definitions of these non-GAAP measures, as well as a reconciliation of each of them to the most directly comparable GAAP measure, on this website under “Investor Relations” and “Events and Presentations” and "Investor Presentations".
(1) "South Carolina Flood" refers to significant rainfall and subsequent severe flooding on October 4, 2015 that resulted in considerable damage to and the permanent closure of the Columbia, South Carolina manufacturing facility eight to nine months in advance of the planned shut down.
(2) "South Carolina Commissioning Revenue Reduction" refers to the sales attributed to the commissioning efforts of the production lines that were accounted for as a reduction of revenue and a corresponding reduction of the cost of the South Carolina Project. "South Carolina Project" refers to the previously announced relocation and modernization of the Company's Columbia, South Carolina manufacturing operation. This project primarily involves moving the Company's duct tape and masking tape production to a new state-of-the-art facility in Blythewood, South Carolina as well as moving flatback tape production to the Company's existing facility in Marysville, Michigan.
- On September 16, 2016, the Company completed the purchase of 74% of the issued and outstanding shares in Powerband Industries Private Limited (“Powerband”), a global supplier of acrylic adhesive-based carton sealing tapes and stretch films located in Daman, India. The remaining 26% will continue to be held by the Desai family which founded the Company in 1994. The Powerband acquisition is intended to further extend the Company’s product offering and presence in the global packaging market. Powerband generated approximately $32 million of revenue in its most recently completed fiscal year and it is expected that these acquired operations will be accretive to the Company’s net earnings. The Company paid in cash, funded primarily from the Company’s Revolving Credit Facility, a purchase price of $43.4 million, subject to a post-closing working capital adjustment.
- On October 19, 2016, the Company and its insurers reached a settlement for the outstanding property and business interruption insurance claims. Total proceeds, net of the applicable deductible, amount to approximately $29.5 million, of which the Company received $10.0 million to date. These proceeds cover substantially all of the claimed losses and are expected to result in a payment of $19.5 million to the Company in the fourth quarter of 2016, which will have a significant positive impact on net earnings.
- On November 10, 2016, the Board of Directors declared a quarterly cash dividend of $0.14 per common share payable on December 30, 2016 to shareholders of record at the close of business on December 15, 2016. These dividends will be designated by the Company as "eligible dividends" as defined in Subsection 89(1) of the Income Tax Act (Canada).
Foward Looking Statement
Certain statements and information included on this website constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (collectively, "forward-looking statements"), which are made in reliance upon the protections provided by such legislation for forward-looking statements. All statements other than statements of historical facts included on this website, including statements regarding the dividends, the South Carolina Project, including the related production improvements, net savings, and technological capability and capacity improvements; the closure of the TaraTape facility and related transfer of production, including the expected synergies from such TaraTape transaction; the Company’s expectations for the Powerband Acquisition and related expansion projects; the catalysts of growth, the achievement of our long-term strategic goals and creation of shareholder value; the Company’s fourth quarter and full year 2016 outlook, including Adjusted EBITDA, gross margin, manufacturing cost reductions, capital expenditures, effective tax rate and income tax expenses and revenue; may constitute forward-looking statements. These forward-looking statements are based on current beliefs, assumptions, expectations, estimates, forecasts and projections made by the Company’s management. Words such as "may," "will," "should," "expect," "continue," "intend," "estimate," "anticipate," "plan," "foresee," "believe" or "seek" or the negatives of these terms or variations of them or similar terminology are intended to identify such forward-looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, these statements, by their nature, involve risks and uncertainties and are not guarantees of future performance. Such statements are also subject to assumptions concerning, among other things: business conditions and growth or declines in the Company’s industry, the Company’s customers’ industries and the general economy; the anticipated benefits from the Company’s manufacturing facility closures and other restructuring efforts; the anticipated benefits from the Company’s acquisitions; the anticipated benefits from the Company’s capital expenditures; the quality, and market reception, of the Company’s products; the Company’s anticipated business strategies; risks and costs inherent in litigation; the Company’s ability to maintain and improve quality and customer service; anticipated trends in the Company’s business; anticipated cash flows from the Company’s operations; availability of funds under the Company’s Revolving Credit Facility; and the Company’s ability to continue to control costs. The Company can give no assurance that these estimates and expectations will prove to have been correct. Actual outcomes and results may, and often do, differ from what is expressed, implied or projected in such forward-looking statements, and such differences may be material. Readers are cautioned not to place undue reliance on any forward-looking statement. For additional information regarding important factors that could cause actual results to differ materially from those expressed in these forward-looking statements and other risks and uncertainties, and the assumptions underlying the forward-looking statements, you are encouraged to read "Item 3 Key Information - Risk Factors,” “Item 5 Operating and Financial Review and Prospects (Management’s Discussion & Analysis)” and statements located elsewhere in the Company’s annual report on Form 20-F for the year ended December 31, 2015 and the other statements and factors contained in the Company’s filings with the Canadian securities regulators and the US Securities and Exchange Commission. Each of these forward-looking statements speaks only as of the date of the issuance of such report. The Company will not update these statements unless applicable securities laws require it to do so.