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MARCH 28, 2000 NYSE SYMBOL: ITP
T.S.E. SYMBOL: ITP
INTERTAPE POLYMER GROUP INC. ANNOUNCES
DECEMBER 1999 4TH QUARTER & ANNUAL RESULTS
(stated in U.S. dollars)
(reported using Cdn GAAP other than noted)
Montreal, Quebec, Canada - March 28, 2000 - Intertape Polymer Group Inc., (NYSE
and TSE: ITP) announced today its results for its fourth quarter and fiscal year
ending December 31, 1999.
As previously announced on March 10, 2000 the Company had expected to incur a
loss for the fourth quarter ended December 31,1999. Melbourne F. Yull,
Intertape's Chairman and Chief Executive Officer had stated at that time: "Sales
in the fourth quarter were adversely affected by difficulties encountered in the
implementation of our new business systems which negatively impacted customer
service, warehousing and order fulfillment." In addition, Mr. Yull stated "the
loss will include substantial charges related to integration, transition and
other costs in connection with business acquisitions and to asset impairment and
other non-recurring expenses. As a result, the Company would miss on the
earnings per share (EPS) expectations for the 1999 fiscal year."
The detail of the quarterly and annual results are as follows:
Sales for the fourth quarter of 1999 were $153.8 million as compared to $121.6
million for the same period in 1998; and as compared to $161.5 million reported
for the third quarter of 1999. The third quarter sales included two months
derived from the acquisition of Central Products Corporation (CPC). Had that
acquisition been completed at the beginning of the third quarter, sales would
have been approximately $171.0 million for the third quarter of 1999.
Sales for the year 1999 were $570.0 million compared to $378.0 million for 1998,
an increase of 51.0%. This increase was derived from businesses acquired of
approximately $140.0 million or 37.3%, and organic growth despite some
reductions in unit selling prices. Organic growth for the year was $52.0 million
or 13.7%.
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Mr. Yull stated: "Fourth quarter sales were negatively impacted by issues
related to the total integration of our new enterprise-wide resource planning
system and the reorganization of customer service." IPG consolidated four
separate non-Y2K compliant legacy systems from the acquisitions of Tape, Inc.,
American Tape Corporation (ATC), Anchor Continental, Inc. (Anchor) and Rexford
Paper Company (Rexford), as well as an older in-house system. This complex
system integration contributed to significant inaccuracies in unit of measure
and pricing history files, order fulfillment and tracking routines.
The reorganization of customer service which was completed during the fourth
quarter should have been positive for our customers as methods were installed to
facilitate a "one order for all products" process. However, complications with
the new phone systems combined with the aforementioned MIS issues, caused order
placement obstacles for our customers resulting in a slow-down in orders during
December. Consequently, there was a decline of $17.0 million in sales for the
fourth quarter as compared to the third quarter on a performa basis. This
equates to approximately an $8.5 million loss in gross profits. Corresponding
cost reductions were not feasible during this period. Additionally, adverse
market conditions in stretch wrap reduced gross margins by approximately $3.0
million compared to the previous quarter.
Unit of measure and pricing inaccuracies created inventory build-up and
valuations that did not reflect the realities of the market nor the proper
warehouse locations. These inaccuracies have been corrected and a non-recurring
write-down of inventory and logistics expenses approximately of $9.7 million has
been recorded within cost of sales in the fourth quarter.
IPG purchased ATC, Rexford, Anchor, CPC and Spinnaker Electrical Tape Company
(SETco) in the past 3 years, with a purchase price in excess of $350.0 million.
The integration of these individual entities has not produced the expected
synergies as quickly as forecasted. Higher than anticipated costs were incurred
due to extended lead times for equipment to automate certain operations as well
to reduce waste. The costs of rationalizing plants, products and brands were
higher than expected due to process changes and increased R&D expenditures.
Finally, the acquisition of CPC postponed the Company's fourth quarter plans to
eliminate duplicate warehouses until a full assessment of plant rationalization
and markets were completed. The net result is a further non-recurring charge of
$ 9.8 million against cost of sales in the fourth quarter.
An evaluation has been done to assess the value of the MIS system as well as the
quality of the account receivables due to pricing and unit of measure issues
which had a negative impact. This has resulted in an increase in the reserve for
doubtful accounts as well as a reduction in the carrying cost of the MIS. The
combined total of these non-recurring costs is $8.5 million and has been charged
against SG&A in the fourth quarter.
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During the last three fiscal years, IPG has been active in pursuing and
acquiring suitable companies in line with its strategy to maintain a leading
position in the industry. The costs related to acquisitions that had been
previously pursued and abandoned during the fourth quarter; as well as the
finalization of the costs incurred to relocate senior management to IPG's
corporate office in Sarasota, Florida has resulted in a further non-recurring
charge of $3.1 million against SG&A for the fourth quarter.
Even though the Company has sustained a significant loss for the fourth quarter
of 1999, the Company did not incur any defaults under its various loan
covenants. In addition, the Company currently has unused lines of credit of more
than $80.0 million.
"The issues involving our MIS system in regards to pricing and unit of measure
have been addressed with the identified problems resolved. Customer service has
improved to a level where the Company's bookings in the last half of the first
quarter have improved to the extent that sales will be as estimated for the
first quarter 2000. The combined on-going cost reductions, new products and
improved customer relations will provide the Company with the means of meeting
its 2000 objectives", stated Mr. Yull.
For the fourth quarter of 1999 the Company recorded a net loss of $20.0 million
as compared to net earnings of $7.9 million for the same quarter last year, and
as compared to net earnings of $10.2 million for the third quarter of 1999. For
the years 1999 and 1998, net earnings were $8.1 million and $28.8 million
respectively.
Under both US and Canadian GAAP, fourth quarter 1999 earnings per share (EPS)
decreased to ($0.70) as compared to $ 0.31 for the fourth quarter ended December
1998. On a fully diluted basis, EPS were ($0.70) under both US and Canadian
GAAP.
EPS for the twelve-month period ending December 1999, under both US and Canadian
GAAP, decreased to $0.29 as compared to $1.14 for the same period ending 1998.
On a fully diluted basis, EPS under Cdn GAAP was $ 0.29 and under US GAAP was
$0.28 compared to $1.10 for both Cdn and US GAAP in the same period last year.
The exchange rate at December 30, 1999 was Cdn. $1.4525 = U.S. $1.00.
Intertape Polymer Group Inc. develops, manufacturers and markets a wide variety
of specialized polyolefin plastic and paper based packaging products and systems
for industrial uses. The Company is based in Montreal, Quebec and Sarasota,
Florida with manufacturing facilities in seventeen North American and European
locations.
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FOR FURTHER INFORMATION CONTACT: Melbourne F. Yull
Chairman and Chief Executive Officer
Intertape Polymer Group Inc.
Tel: (514) 731-0731
E-mail: [email protected]
Web: www.intertapepolymer.com
THIS RELEASE CONTAINS STATEMENTS THAT ARE FORWARD-LOOKING WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. 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 OR FORWARD-LOOKING
39STATEMENTS. THOSE RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO:
- - RISKS ASSOCIATED WITH PRICING, VOLUME AND CONTINUED STRENGTH OF MARKETS
WHERE THE COMPANY'S PRODUCTS ARE SOLD.
- - ACTIONS OF COMPETITORS AS ARE DESCRIBED IN THE COMPANY'S FILINGS WITH
THE SECURITIES AND EXCHANGE COMMISSION (SEC) OVER THE LAST TWELVE
MONTHS.
- - THE COMPANY'S ABILITY TO SUCCESSFULLY INTEGRATE THE OPERATIONS AND
INFORMATION SYSTEMS OF ACQUIRED COMPANIES WITH ITS EXISTING OPERATIONS,
AND INFORMATION SYSTEM, INCLUDING RISKS AND UNCERTAINTIES RELATING TO
ITS ABILITY TO ACHIEVE PROJECTED EARNINGS ESTIMATES, ACHIEVE
ADMINISTRATIVE AND OPERATING COST SAVINGS AND ANTICIPATE SYNERGIES.
- - THE EFFECT OF COMPETITION ON THE COMPANY'S ABILITY TO MAINTAIN MARGINS
ON EXISTING OR ACQUIRED OPERATIONS.
THE COMPANY DOES NOT UNDERTAKE TO PUBLICLY UPDATE OR REVISE ITS FORWARD-LOOKING
STATEMENTS EVEN IF EXPERIENCE OR FUTURE CHANGES MAKE IT CLEAR THAT ANY PROJECTED
RESULTS EXPRESSED OR IMPLIED THEREIN WILL NOT BE REALIZED.
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INTERTAPE POLYMER GROUP INC.
CONSOLIDATED EARNINGS
(Unaudited)
In thousands of US dollars, using Canadian GAAP
<TABLE>
<CAPTION>
For the three months For the three months For the period For the period
ended Dec. 31, ended Dec. 31, ended Dec. 31, ended Dec. 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Sales 153,773 121,597 569,947 378,030
Cost of sales ( note 1 ) 143,125 88,341 445,322 271,972
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Gross profit 10,648 33,256 124,625 106,058
Selling, general and administrative expenses ( note 1) 33,354 15,478 85,330 46,747
Research and development 1,320 870 3,901 3,059
Amortization of goodwill 1,535 1,149 5,451 3,330
Financial expenses 6,193 4,553 22,149 12,428
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42,402 22,050 116,831 65,564
Earnings before income taxes (31,754) 11,206 7,794 40,494
Income taxes (11,773) 3,278 (304) 11,743
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Net earnings for the period (19,981) 7,926 8,098 28,751
Retained earnings - beginning of period 113,404 77,258 88,318 58,563
Dividend - - (2,993) (2,130)
Retained earnings - end of period 93,423 85,184 93,423 85,184
EARNINGS PER SHARE - CDN GAAP (0.70) 0.31 0.29 1.14
EARNINGS PER SHARE - CDN GAAP FULLY DILUTED (0.70) 0.31 0.29 1.10
EARNINGS PER SHARE - U.S. GAAP (0.70) 0.31 0.29 1.14
EARNINGS PER SHARE - US GAAP FULLY DILUTED (0.70) 0.31 0.28 1.10
</TABLE>
( Note 1 )
Included in cost of sales and SG&A are integration, transition, asset
write-downs and other non-recurring costs incurred in conjunction with recent
business acquisitions and with the implementation of a new, enterprise-wide MIS
system
