Intertape Polymer swings to Q3 net income of US$2.8M from loss of US$2.7M in year-ago period; revenues up 7.6% to US$201.4M with increased prices, improved product mix partially offset by lower volumes
Kendall Sinclair
MONTREAL, Quebec, and BRADENTON, Florida
,
November 9, 2011
(press release)
–
Intertape Polymer Group Inc. ("Intertape" or the "Company") today released results for the third quarter ended September 30, 2011. All dollar amounts are US denominated unless otherwise indicated.
Third Quarter Highlights:
-- Revenue increased 7.6% over last year to $201.4 million
-- Gross margin increased to 15.1% from 10.9% last year
-- Adjusted EBITDA of $17.5 million increased 59.3% over last year
-- EPS of $0.05 compared to loss of ($0.05) last year
-- Adjusted EPS of $0.06 compared to a loss of ($0.03) last year
-- Total debt reduced by $18.1 million from Q2 2011
-- Cash flow from operations after changes in working capital was $27.3
million
"While our customers remain extremely cautious due to ongoing economic concerns, results for the quarter were in line with our expectations and represented another solid quarter with adjusted EBITDA increasing 59.3% over the same quarter last year. We are particularly pleased by the debt reduction of $18.1 million during the quarter, supporting one of our key corporate objectives," stated Intertape President and Chief Executive Officer, Greg Yull.
Third quarter revenue increased 7.6% to $201.4 million, compared to $187.1 million for the third quarter of 2010 and was down 4.0% sequentially from $209.7 million for the second quarter of 2011. Sales volume decreased approximately 11% compared to the third quarter of 2010 and approximately 10% compared to the second quarter of 2011.
The sales volume decrease, both year-over-year and sequentially, would be approximately 8% after adjusting for the closure of the Brantford facility completed during the second quarter of 2011. The decrease in volume was primarily due to the Company's progress toward reducing sales of low-margin products. The Company believes sales volume may also have been adversely impacted to some extent by certain customers increasing their inventories in the second quarter of 2011 in anticipation of price increases.
Selling prices, including the impact of product mix, increased approximately 19% in the third quarter of 2011 compared to the third quarter of 2010 after adjusting for the closure of the Brantford facility. The improved pricing environment was the primary reason for the increase, followed by a more favourable mix of products driven by a greater focus on selling higher margin products and by the progress made toward reducing sales of low-margin products.
Gross profit for the third quarter totalled $30.3 million, compared to $20.4 million a year ago and $32.7 million for the second quarter of 2011. Third quarter gross margin was 15.1% compared to 10.9% for the prior year and 15.6% for the second quarter of 2011. When compared to the third quarter of 2010, gross profit and gross margin were higher due to higher selling prices and improved product mix. The modest sequential decline in the gross margin over the second quarter of 2011 reflects lower sales volume. The spread between selling prices and raw material costs remains compressed when compared to periods prior to 2010.
Adjusted EBITDA for the third quarter was $17.5 million compared to $11.0 million for the third quarter of 2010 and $18.5 million for the second quarter of 2011. The higher adjusted EBITDA when compared to the third quarter of 2010 reflects higher revenue and gross margin. The sequential decline in adjusted EBITDA is attributable to lower revenue and gross margin partially offset by lower selling, general, and administrative expenses.
Adjusted net earnings were $3.8 million for the third quarter of 2011 as compared to an adjusted net loss of $2.0 million for the third quarter of 2010 and adjusted net earnings of $6.3 million in the second quarter of 2011. Adjusted earnings per share for the third quarter of 2011 was $0.06 compared with a loss per share of $0.03 for the same period last year and adjusted earnings per share of $0.11 for the second quarter of 2011.
EBITDA, Adjusted EBITDA, Adjusted Net Earnings (Loss) and Adjusted Earnings (Loss) Per Share are not generally accepted accounting principle ("GAAP") measures. Whenever Intertape uses such non-GAAP measures, it will provide a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors and other readers are encouraged to review the related GAAP financial measures and the reconciliation of non-GAAP measures to their most closely applicable GAAP measure set forth below and should consider non-GAAP measures only as a supplement to, not as a substitute for or as a superior measure to, measures of financial performance prepared in accordance with GAAP.
The Company generated cash flows from operating activities before changes in working capital items for the third quarter of $14.0 million compared to $12.3 million in the same period last year. The increase was primarily due to Intertape's improved net earnings. Cash flows from operating activities increased in the third quarter of 2011 by $10.4 million to $27.3 million with changes in working capital items providing a net source of funds of $13.4 million.
During the third quarter of 2011, the Company reduced total indebtedness by $18.1 million from the second quarter of 2011. As of September 30, 2011, the Company had cash and unused availability under its Asset-based loan ("ABL") totalling $56.1 million. As of November 7, 2011, the Company had cash and unused availability under its ABL exceeding $66 million.
As a result of the Company's structural, operational, management and reporting realignments during the third quarter of 2010, the Company no longer has operating divisions and now operates as a single segment. The Company is no longer required to present operating results at a divisional level; however, in the interest of historical reporting consistency, the results discussed below are as per the previously-defined divisions.
Tapes & Films ("T&F") Business Third Quarter Highlights
-- Revenue increased 10.8% over last year
-- Sales volume decreased approximately 8%
-- Selling prices, including the impact of product mix, increased approximately 21%
-- Gross margin increased to 14.9% compared to 11.7% last year
-- Adjusted EBITDA of $14.2 million increased 23.1% over last year
T&F BUSINESS RESULTS AND ADJUSTED EBITDA RECONCILIATION TO EARNINGS BEFORE INCOME TAXES
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(in millions of US
dollars)
-------------------------
(Unaudited)
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Three months ended Nine months ended
--------------------------------------------------
Sept 30, Sept 30, June 30, Sept 30, Sept 30,
2011 2010 2011 2011 2010
---------------------------------------------------------------------------
$ $ $ $ $
---------------------------------------------------------------------------
Revenue 169.5 152.9 178.5 510.3 448.1
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Gross profit 25.3 17.9 28.9 75.3 56.2
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Earnings before income
taxes 8.0 4.4 10.7 23.7 9.0
---------------------------------------------------------------------------
Depreciation,
amortization and foreign
exchange gains (losses) 6.1 7.1 6.6 19.1 21.7
---------------------------------------------------------------------------
EBITDA 14.2 11.5 17.3 42.7 30.6
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Adjusted EBITDA 14.2 11.5 17.3 42.7 30.6
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Engineered Coated Products ("ECP") Business Third Quarter Highlights
-- Revenue increased 0.9% over last year after adjusting for the Brantford facility closure
-- Sales volume decreased approximately 7% after adjusting for the Brantford facility closure
-- Selling prices, including the impact of product mix, increased approximately 8% after adjusting for the Brantford facility closure
-- Gross margin increased to 15.8% compared to 7.3% last year
-- Adjusted EBITDA of $3.9 million increased $3.7 million over last year
ECP BUSINESS RESULTS AND ADJUSTED EBITDA RECONCILIATION TO EARNINGS (LOSS) BEFORE INCOME TAXES
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-----
(in millions of US
dollars)
-----------------------
(Unaudited)
----------------------------------------------------------------------------
Three months ended Nine months ended
-----------------------------------------------------
Sept 30, Sept 30, June 30, Sept 30, Sept 30,
2011 2010 2011 2011 2010
----------------------------------------------------------------------------
$ $ $ $ $
----------------------------------------------------------------------------
Revenue 31.9 34.1 31.3 93.4 92.4
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Gross profit 5.0 2.5 3.8 11.5 6.9
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Earnings (loss) before
income taxes 1.7 (1.2) (1.1) 0.2 (3.0)
----------------------------------------------------------------------------
Depreciation,
amortization and
foreign exchange gains
(losses) 1.2 1.4 1.5 4.4 3.8
----------------------------------------------------------------------------
EBITDA 2.9 0.2 0.4 4.6 0.7
----------------------------------------------------------------------------
Manufacturing facility
closures,
restructuring and
other charges 1.0 0.1 1.5 2.5 0.1
----------------------------------------------------------------------------
Adjusted EBITDA 3.9 0.2 2.0 7.1 0.8
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Outlook
"A more favourable pricing environment combined with our internal initiatives and programs to reduce costs and improve margins generated solid results for the quarter," said Mr. Yull. "While some raw material costs have been trending downward in recent months, we expect prices to remain volatile as we enter 2012.
"The Company has no significant debt maturities until March 2013 at which time the ABL will mature. However, we expect to be successful in replacing or extending the ABL in the first half of 2012. The Company also anticipates that cash flows from operating activities during the fourth quarter of 2011 will allow debt to be further reduced.
"The Company anticipates sequentially lower revenue and lower adjusted EBITDA in the fourth quarter of 2011 which is reflective of normal seasonality. However, both revenue and adjusted EBITDA for the fourth quarter of 2011 are expected to be significantly higher than the fourth quarter of 2010. Gross margins for the next two quarters are expected to be similar to the third quarter of 2011," concluded Mr. Yull.
EBITDA
A reconciliation of the Company's EBITDA, a non-GAAP financial measure, to GAAP net earnings (loss) is set out in the EBITDA reconciliation table below. EBITDA should not be construed as earnings (loss) before income taxes, net earnings (loss) or cash flows from operating activities as determined by GAAP. The Company defines EBITDA as net earnings (loss) before (i) income taxes (recovery); (ii) interest and other (income) expense; (iii) refinancing expense, net of amortization; (iv) amortization of debt issue expenses; (v) amortization of intangibles assets and deferred charges; and (vi) depreciation of property, plant and equipment. Adjusted EBITDA is defined as EBITDA before (i) manufacturing facility closures, restructuring and other charges; (ii) impairment of goodwill; (iii) impairment of long-lived assets and other assets; (iv) write-down on assets classified as held-for-sale; and (v) other items as disclosed. The terms "EBITDA" and "adjusted EBITDA" do not have any standardized meanings prescribed by GAAP in Canada and are therefore unlikely to be comparable to similar measures presented by other issuers. EBITDA and adjusted EBITDA are not measurements of financial performance under GAAP and should not be considered as alternatives to cash flows from operating activities or as alternatives to net earnings (loss) as indicators of the Company's operating performance or any other measures of performance derived in accordance with GAAP. The Company has included these non-GAAP financial measures because it believes that it permits investors to make a more meaningful comparison of the Company's performance between periods presented. In addition, EBITDA and adjusted EBITDA are used by management and the Company's lenders in evaluating the Company's performance.
ADJUSTED EBITDA RECONCILIATION TO NET EARNINGS (LOSS)
-----------------------------------------------------------------------
----
(in millions of US
dollars)
-------------------------
(Unaudited)
---------------------------------------------------------------------------
Three months ended Nine months ended
--------------------------------------------------
Sept 30, Sept 30, June 30, Sept 30, Sept 30,
2011 2010 2011 2011 2010
---------------------------------------------------------------------------
$ $ $ $ $
---------------------------------------------------------------------------
Net earnings (loss) 2.8 (2.7) 3.8 6.6 (10.0)
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Add back:
Interest and other
(income) expense 5.5 4.4 4.1 13.4 12.7
---------------------------------------------------------------------------
Income taxes 0.7 0.3 0.2 1.2 1.1
---------------------------------------------------------------------------
Depreciation and
amortization 7.5 8.4 7.8 23.2 25.2
---------------------------------------------------------------------------
EBITDA 16.6 10.3 16.0 44.4 29.0
---------------------------------------------------------------------------
Manufacturing facility
closures, restructuring
and other charges 1.0 0.7 1.5 2.5 0.7
---------------------------------------------------------------------------
ITI litigation settlement - - 1.0 1.0 -
---------------------------------------------------------------------------
Adjusted EBITDA 17.5 11.0 18.5 47.9 29.7
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Conference Call
A conference call to discuss Intertape's 2011 third quarter results will be held November 9, 2011, at 10 A.M. Eastern Time. Participants may dial 800-954-0684 (U.S. and Canada) and 212-231-2904 (International).
You may access a replay of the call by dialing 800-633-8284 (U.S. and Canada) or 1-402-977-9140 (International) and entering the Access Code 21544426. The recording will be available from, November 9, 2011 at 12:00 P.M. until December 9, 2011 at 11:59 P.M., Eastern Time.
About Intertape Polymer Group Inc.
Intertape Polymer Group Inc. is a recognized leader in the development and manufacture of specialized polyolefin plastic and paper based packaging products and complementary packaging systems for industrial and retail use. Headquartered in Montreal, Quebec and Bradenton, Florida, the Company employs approximately 2,000 employees with operations in 16 locations, including 11 manufacturing facilities in North America and one in Europe.
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