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THIRD QUARTERLY REPORT
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1997
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2 3
MESSAGE TO SHAREHOLDERS
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Once again, we are pleased to report a continuance of our increase in sales.
This quarter boasts an increase of 23% over last year, representing an
additional $ 16.4 million in sales. Other related increases include:
- Gross profits: Up 18%, or $ 3.8MM
- Net earnings: Up 12%, or $ 0.9MM
- Earnings per share: Up 10%, or $ 0.03 to $ 0.33 under Canadian GAAP
Although we had projected a larger increase for our distribution products,
sales were affected by unpredictable factors: The prolonged UPS strike; and a
decrease in the cost of raw materials, which led customers to lower their
historic inventory levels in anticipation of lower costs. Tape and stretch
sales took the brunt of this impact, while our other products continued to
perform impressively, adding to our top line with consistent growth.
As part of our strategy to broaden our product offering, we signed a definitive
agreement to purchase the shares of American Tape Company from STC Corporation
of Korea. American Tape is a premier manufacturer of a variety of high-
performance pressure-sensitive tapes, as well as a number of general purpose
products. The addition of these products to our line puts us in a unique
position to provide a superior value-added service to our customers. This gives
us an advantage over our competitors, by being the only company to provide this
complete range of products.
This acquisition will also allow us to benefit from considerable cost savings
in raw materials, manufacturing costs, sales, administration and logistics.
It is an important acquisition on many levels.
Research and development have not been left behind - in the first quarter of
next year we will be introducing two new shrink films that will essentially
complete our line, enabling us to cover the entire market instead of our
previous 60% holding. The solid growth already established for shrink films
will be significantly boosted with these new products.
Our vinyl fabrics replacement program continues to show promise in a $ 300
million U.S. market. There are a large number of customers to reach; however
the many advantages of our new fabrics are easy to communicate and we expect
steady sales growth throughout 1998.
Last but not least, the Tremonton, Utah plant construction is right on
schedule, with a goal to being fully operational by the year's end. Looking
ahead, we have great expectations for the fourth quarter, and, of course, for
the year 1998.
/s/ Melbourne F. Yull
Melbourne F. Yull
Chairman and Chief Executive Officer
November 5, 1997
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4 5
CONSOLIDATED EARNINGS
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(Unaudited)
In thousands of Canadian dollars,
using Canadian GAAP
THREE MONTHS NINE MONTHS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997 1996 1997 1996
SALES $89,201 $72,790 $258,220 $193,758
Cost of sales 64,517 51,857 187,239 135,743
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GROSS PROFIT $24,684 $20,933 $ 70,981 $ 58,015
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Selling, general and administrative
expenses 10,551 8,823 30,951 23,976
Research and development 518 462 1,429 1,148
Amortization of goodwill 590 445 1,770 1,335
Financial expenses 953 433 2,975 950
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$12,612 $10,163 $37,125 $ 27,409
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Earnings before income taxes 12,072 10,770 33,856 30,606
Income taxes 3,800 3,415 10,450 9,715
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NET EARNINGS FOR THE PERIOD $ 8,272 $ 7,355 $23,406 $ 20,891
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Retained earnings - beginning of period 91,167 63,446 78,506 51,953
Dividend - - (2,473) (2,043)
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RETAINED EARNINGS - END OF PERIOD $99,439 $70,801 $99,439 $ 70,801
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EARNINGS PER SHARE FOR THE PERIOD ENDED THREE MONTHS NINE MONTHS
SEPTEMBER 30, 1997 1996 1997 1996
Cdn GAAP $ 0.33 $ 0.30 $ 0.95 $ 0.86
Cdn GAAP Fully diluted $ 0.32 $ 0.29 $ 0.91 $ 0.83
U.S. GAAP - Cdn$ $ 0.32 $ 0.29 $ 0.92 $ 0.84
U.S. GAAP - US$ $ 0.23 $ 0.22 $ 0.67 $ 0.61
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The Financial Accounting Standard Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) 128, EARNING PER SHARE, which requires
public companies to present basic earnings per share (EPS) and, if
applicable, diluted earnings per share, instead of primary and fully diluted
EPS. The Statement is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods. Early application
is not permitted. Restatement of all prior period EPS data presented will be
required in the fourth quarter.
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6 7
3RD QUARTER HIGHLIGHTS
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Sales - In millions of CDN $
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9 Months 3 MONTHS
Ended September ENDED SEPTEMBER
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1992 86.5 27.4
1993 98.0 34.2
1994 126.7 44.9
1995 167.5 56.9
1996 193.8 72.8
1997 258.2 89.2
Gross Profit - In millions of CDN $
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9 Months 3 MONTHS
Ended September ENDED SEPTEMBER
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1992 22.4 7.1
1993 26.7 9.5
1994 36.1 13.1
1995 48.6 17.0
1996 58.0 21.0
1997 71.0 24.7
Gross Margin - As a % of Sales
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9 Months 3 MONTHS
Ended September ENDED SEPTEMBER
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1992 25.8 25.8
1993 27.2 27.7
1994 28.5 29.1
1995 29.0 29.9
1996 29.9 28.8
1997 27.5 27.7
Working Capital - In millions of CDN $
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For the period
ending
September
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1992 19.4
1993 28.1
1994 44.1
1995 35.1
1996 90.5
1997 74.0
Net Earnings (CDN GAAP) - In millions of CDN $
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9 Months 3 MONTHS
Ended September ENDED SEPTEMBER
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1992* 4.2 1.4
1993 6.8 2.7
1994 10.0 3.9
1995 15.5 5.5
1996 20.9 7.4
1997 23.4 8.3
Earnings Per Share (CDN GAAP) - In CDN $
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9 Months 3 MONTHS
Ended September ENDED SEPTEMBER
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1992* .22 .07
1993 .34 .14
1994 .49 .19
1995 .76 .27
1996 .86 .30
1997 .95 .33
* BEFORE EXTRAORDINARY ITEM.
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8 9
CONSOLIDATED CHANGES
IN CASH RESOURCES
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(Unaudited)
In thousands of Canadian dollars,
using Canadian GAAP
THREE MONTHS NINE MONTHS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997 1996 1997 1996
OPERATIONS
Net earnings for the period $ 8,272 $ 7,355 $ 23,406 $ 20,891
Non-cash items
Depreciation and amortization 4,465 3,326 14,024 9,601
Deferred income taxes 33 66 433 300
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12,770 10,747 37,863 30,792
Changes in non-cash working capital items 11,825 (13,719) (13,590) (42,111)
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SOURCE (USE) OF CASH DURING THE PERIOD $ 24,595 $ (2,972) $ 24,273 $ (11,319)
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FINANCING
Issue of long-term debt 3,101 - 3,101 46,957
Repayment of long-term debt (1,199) (430) (7,661) (45,111)
Issue of common shares 1,453 113 4,427 974
Dividend paid - - (2,473) (2,043)
Other (1,700) - (1,700) -
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SOURCE (USE) OF CASH DURING THE PERIOD $ 1,655 $ (317) $ (4,306) $ 777
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INVESTMENT
Additions to fixed assets (18,380) (8,352) (36,338) (30,805)
Acquisitions of business - (5,060) - (5,060)
Increase in other assets (1,885) - (4,507) (65)
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USE OF CASH DURING THE PERIOD $(20,265) $(13,412) $(40,845) $(35,930)
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INCREASE (DECREASE) IN CASH DURING THE
PERIOD 5,985 (16,701) (20,878) (46,472)
Effect of foreign currency translation
adjustments (1,548) (113) (1,309) (345)
Cash (Bank Indebtedness), beginning of
period (22,944) 20,636 3,680 50,639
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CASH (BANK INDEBTEDNESS), END OF PERIOD $(18,507) $ 3,822 $(18,507) $ 3,822
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CONSOLIDATED BALANCE SHEET
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(Unaudited)
In thousands of Canadian dollars,
using Canadian GAAP
AS AT SEPTEMBER 30, 1997 1996
ASSETS
Current assets $ 131,261 $ 125,098
Fixed assets 180,315 135,149
Goodwill and other, at amortized cost 76,300 58,994
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TOTAL ASSETS $ 387,876 $ 319,241
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LIABILITIES
Current liabilities $ 57,284 $ 34,580
Long-term debt and other 73,192 67,376
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TOTAL LIABILITIES $ 130,476 $ 101,956
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SHAREHOLDERS' EQUITY 257,400 217,285
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 387,876 $ 319,241
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COMMON SHARES
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AVERAGE NUMBER OF SHARES
OUTSTANDING THREE MONTHS NINE MONTHS
DURING THE PERIOD ENDED 1997 1996 1997 1996
Canadian GAAP 24,898,000 24,206,000 24,749,000 24,158,000
Canadian GAAP - Fully diluted 26,557,600 25,997,000 26,381,900 25,930,000
U.S. GAAP 25,701,250 25,261,000 25,654,650 25,206,000
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INFORMATION REQUEST FORM
I WOULD LIKE TO RECEIVE OR CONTINUE RECEIVING FINANCIAL INFORMATION ON THE
COMPANY.
Name:
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Title:
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Firm:
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PLEASE SEND ME NOW AND ON A REGULAR BASIS
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PLEASE FAX A COPY OF THIS PAGE TO:
The Secretary-Treasurer
Intertape Polymer Group Inc.
514-731-5477
OR WRITE TO US AT:
110 E Montee de Liesse, St. Laurent,
Quebec, Canada H4T 1N4
OR CONTACT US VIA THE INTERNET:
Website: www.intertapepolymer.com
E-Mail: [email protected]
