<PAGE>
INTERTAPE POLYMER GROUP INC.
1999 3RD QUARTERLY REPORT
MESSAGE TO SHAREHOLDERS
Dear Shareholders,
Intertape's third quarter produced yet another record performance, with
significant growth in revenue during the period. Contributing to this were
both increased sales throughout all product lines, as well as the sales
resulting from the finalization of the recent acquisitions. The achievements
of IPG's third quarter confirm the continued strength of the Company. They
are as follows:
- Sales: Increased 72.7% to $ 161.5 MM
- Gross Margins: Were 26.4%
- Net Earnings: Up 36.0% to $10.2MM
- Earnings Per Share: Increased by 20.0% to $0.36
In the beginning of the quarter, Intertape completed the acquisitions of both
Central Products Company (CPC) and the purchase of all the assets of
Spinnaker Electrical Tape Company (SETco). The addition of the CPC and SETco
product lines of industrial and specialty tapes, will further allow IPG to
enhance its existing product lines, and realize potential in exciting new
businesses, while strengthening Intertape's presence in the packaging market.
While continuing to trade on the Toronto Stock Exchange (TSE), the Company
de-listed its shares on the American Stock Exchange (AMEX) on August 16th,
and began trading on the New York Stock Exchange (NYSE). The move is part of
the Company's strategic plan to expand IPG's worldwide presence, and gain a
higher profile within the financial community. Further enhancing the
shareholders' value though these many avenues of growth is a major focus for
IPG.
A second major focus is to achieve a true operating excellence in all of our
facilities. The Company recently implemented a previously announced $17
million plan to provide additional plant improvements in Truro, Nova Scotia.
Our timing to considerably increase capacity by 30% at the Truro plant has
proven to be impeccable. Sales of Woven Coated Products have never been at
such a strong level. The same can be said for Stretch Wrap and Shrink Films.
In both cases we brought 25% more manufacturing capabilities on stream, which
will take care of our customers' increased needs throughout 2000.
This years capital investments have increased capacity and improved service
levels, which assure that IPG remains the industry low cost producer. This is
critical as our "Basket-of-Products" Program expands during 2000. We are in
excellent shape in this regard and I expect our capital expenditure
requirements to be substantially reduced from this year.
Selling, General & Administrative (SG&A) costs have risen slightly to
approximately 12.3% of sales, as a result of the combination of multiple
acquisitions plus continued internal growth. Beginning with the completion of
our IS systems, we fully expect to reduce SG&A costs in the upcoming months.
Our two-year target is 10% of sales.
Plastic raw material costs have increased steadily. However, the combination
of cost reduction programs in operations and higher selling prices, will
enable the Company to maintain its strong gross margins as a percent of sales.
In conclusion, Intertape's record performance over the last nine years has
been accomplished by being in key markets, with a clear and focused strategy,
and sound execution. We intend to remain on that course. As always, your
confidence and continued support as an Intertape shareholder is instrumental
to our success.
Melbourne F. Yull
Chairman and Chief Executive Officer
November 1, 1999
<PAGE>
CONSOLIDATED EARNINGS
(Unaudited)
In thousands of U.S. dollars, except per share amounts,
Using Canadian GAAP (Note 1)
<TABLE>
<CAPTION>
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For the Period ended September 30, Three Months Nine Months
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
SALES $ 161, 470 $ 93, 447 $ 416,174 $ 256,433
Cost of sales 118,893 67,228 302,197 183,631
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GROSS PROFIT $ 42,577 $ 26,219 $ 113,977 $ 72,802
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Selling, general and administrative expenses 19,918 11,007 51,975 31,270
Amortization of goodwill 1,436 727 3,916 2,181
Research and development 1,003 730 2,582 2,189
Financial expenses 5,806 3,128 15,956 7,875
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$ 28,163 $ 15,592 $ 74,429 $ 43,515
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Earnings before income taxes 14,414 10,627 39,548 29,287
Income taxes 4,180 3,087 11,469 8,465
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NET EARNINGS FOR THE PERIOD $ 10,234 $ 7,540 $ 28,079 $ 20,822
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Retained earnings - beginning of period 103,170 69,715 88,318 58,563
Dividend - - (2,993) (2,130)
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RETAINED EARNINGS - END OF PERIOD $ 113,404 $ 77,255 $ 113,404 $ 77,255
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Earnings per Share Three Months Nine Months
1999 1998 1999 1998
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Cdn GAAP - US $ $ 0.36 $ 0.30 $ 1.02 $ 0.83
Cdn GAAP - Fully diluted - US $ $ 0.35 $ 0.29 $ 0.98 $ 0.80
U.S. GAAP - US $ $ 0.36 $ 0.30 $ 1.02 $ 0.83
U.S. GAAP - Fully diluted - US $ $ 0.35 $ 0.29 $ 0.99 $ 0.80
- ----------------------------------------------------------------------------------------------------------------------
Cdn GAAP - CDN $ $ 0.53 $ 0.46 $ 1.52 $ 1.27
Cdn GAAP - Fully diluted - CDN $ $ 0.51 $ 0.44 $ 1.45 $ 1.22
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</TABLE>
Except for historical information contained herein, statements in the release
are forward-looking statements that are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties,
which may cause the Company's actual results in future periods to differ
materially from forecasted results. Those risks include, but are not limited
to, risks associated with pricing, volume and conditions of markets. Those
and other risks are described in the Company's filings with the Securities
and Exchange Commission (SEC) over the last twelve months, copies of which
are available from the SEC or may be obtained upon request from the Company.
NOTE 1. CHANGE OF REPORTING CURRENCY
The financial statements of the Company were presented in Canadian dollars up
to December 31, 1998. As a result of its increasing U.S. activities, the
Company adopted the U.S. dollar as its reporting currency commencing January
1, 1999. The Canadian self-sustained operations of the Company have been
translated using the current rate method.
The prior years' financial statements have been converted in accordance with
the Translation of Convenience Method using the closing exchange rate at
December 31, 1998 of Cdn$1.5305 for US$1.00.
<PAGE>
THIRD QUARTER HIGHLIGHTS
Sales
In millions of US $
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
56.5 64.0 82.8 109.4 126.6 168.7 256.5 416.2 9 months ended September
17.9 22.4 29.3 37.2 47.6 58.3 93.4 161.5 3 months ended September
1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
Gross Profit
In millions of US $
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
14.6 17.4 23.6 31.8 37.9 46.4 72.8 114 9 months ended September
4.6 6.2 8.6 11.1 13.7 16.1 26.2 42.6 3 months ended September
1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
Gross Margin
As a percentage of sales
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
25.8% 27.2% 28.5% 29.0% 29.9% 27.5% 28.4% 27.4% 9 months ended September
25.8% 27.7% 29.1% 29.9% 28.8% 27.7% 28.0% 26.4% 3 months ended September
1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
Net Earnings (CDN GAAP)
In millions of US $
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2.7 4.4 6.5 10.1 13.7 15.3 20.8 28.1 9 months ended September
0.9 1.8 2.5 3.6 4.8 5.4 7.5 10.2 3 months ended September
1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
Earnings per share (CDN GAAP)
In US dollars
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.14 0.22 0.32 0.50 0.56 0.62 0.83 1.02 9 months ended September
0.05 0.09 0.12 0.18 0.20 0.22 0.30 0.36 3 months ended September
1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
Book value per share
In US dollars
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3.0 3.1 3.5 4.0 5.9 6.7 7.3 10.7 For the period ending September
1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
<PAGE>
CONSOLIDATED CHANGES IN CASH RESOURCES
(Unaudited)
In thousands of U.S. dollars,
Using Canadian GAAP (Note 1)
<TABLE>
<CAPTION>
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For the Period ended September 30, Three Months Nine Months
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
OPERATIONS
Net earnings for the period $ 10,234 $ 7,540 $ 28,079 $ 20,822
Non-cash items
Depreciation and amortization 9,089 5,156 23,775 13,839
Deferred income taxes 2,926 - 5,826 -
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Cash from operations before funding of changes
in non-cash working capital items 22,249 12,696 57,680 34,661
Changes in non-cash working capital items (2,650) 3,366 (19,647) (25,257)
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SOURCE OF CASH DURING THE PERIOD $ 19,599 $ 16,062 $ 38,033 $ 9,404
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FINANCING
Net change in bank indebtedness (46,757) 109,537 (72,692) 127,240
Issue of long-term debt 181,980 1,288 181,980 131,038
Repayment of long-term debt (24,459) (2,045) (59,324) (116,675)
Issue of common shares 218 169 79,021 913
Dividend - - (2,993) (2,130)
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SOURCE OF CASH DURING THE PERIOD $ 110,982 $ 108,949 $ 125,992 $ 140,386
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INVESTMENT
Business acquisitions (110,242) (105,110) (110,242) (105,110)
Capital assets (18,227) (10,753) (45,758) (32,396)
Other assets (6,800) (2,455) (16,871) (6,237)
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USE OF CASH DURING THE PERIOD $ (135,269) $ (118,318) $ (172,871) $ (143,743)
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INCREASE (DECREASE) IN CASH DURING THE PERIOD (4,688) 6,693 (8,846) 6,047
Effect of foreign currency translation adjustments 4,202 (6,495) 8,360 (5,849)
Cash (bank indebtedness) assumed on
business acquisitions 486 (198) 486 (198)
Cash, beginning of period - - - -
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CASH, END OF PERIOD $ - $ - $ - $ -
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</TABLE>
<PAGE>
CONSOLIDATED BALANCE SHEET
(Unaudited)
In thousands of U.S. dollars,
Using Canadian GAAP (Note 1)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
As at September 30, 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets $ 222,624 $ 154,811
Capital assets 358,372 245,761
Goodwill and other assets, at amortized cost 254,922 183,945
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TOTAL ASSETS $ 835,918 $ 584,517
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LIABILITES
Current liabilities $ 150,342 $ 216,794
Long-term debt and other 381,214 184,444
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TOTAL LIABILITIES $ 531,556 $ 401,238
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SHAREHOLDERS' EQUITY 304,362 183,279
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Total liabilities and shareholders' equity $ 835,918 $ 584,517
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</TABLE>
COMMON SHARES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Average number of shares outstanding 3 Months Ended 9 Months Ended
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Canadian GAAP 28,531,518 25,155,000 27,510,433 25,106,400
Canadian GAAP - Fully diluted 30,938,028 27,170,820 29,823,446 27,122,220
U.S. GAAP 28,531,518 25,155,000 27,510,433 25,106,400
U.S. GAAP - Fully diluted 29,560,516 26,243,032 28,454,004 26,153,892
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</TABLE>
