Mr. Greg Yull reports

INTERTAPE POLYMER GROUP REPORTS IMPROVED 2013 FOURTH QUARTER AND ANNUAL RESULTS

Intertape Polymer Group Inc. has released results for the fourth quarter and year ended Dec. 31, 2013. All amounts are denominated in United States dollars unless otherwise indicated and all percentages are calculated on unrounded numbers.

Fiscal year 2013 highlights

• Gross margin increased to 20.3 per cent from 17.7 per cent last year.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased 20.4 per cent to $103.1-million.
• Cash flows from operating activities before changes in working capital were $90.8-million compared with $78.7-million last year.
• The company redeemed the remaining $38.7-million of senior subordinated notes.
• Total debt was reduced by $21.5-million.
• Adjusted fully diluted EPS (earnings per share) was $1.68 (includes 62 cents per share of positive impact from the recognition of deferred tax assets -- more details below) compared with 65 cents last year.

Other announcements:

• On Feb. 6, 2014, the board of directors declared a quarterly dividend of eight cents per common share.

"Despite a slow economic recovery in North America, we achieved adjusted EBITDA of $103.1-million for 2013, which marks the third year of improving performance for the company. Our success in improving our mix of products and executing our manufacturing cost reduction initiatives is well reflected in our gross margin of 20.3 per cent for 2013 compared with 17.7 per cent last year," stated Intertape president and chief executive officer, Greg Yull.

"We achieved manufacturing cost reductions of approximately $14-million during the year, of which approximately $3.2-million was related to the Richmond facility closure and the consolidation of shrink film in Tremonton. We continue to focus a significant amount of resources on executing the South Carolina project which remains on target for completion in the first half of 2015.

"Our operating cash flows allowed us to commit significant investments in capital projects, to redeem the remaining 8.5-per-cent notes and to pay dividends, all of which we believe are important to the future of the company and its stakeholders," concluded Mr. Yull.

On Feb. 6, 2014, the board of directors declared a dividend of eight cents per common share payable on March 31, 2014, to shareholders of record at the close of business March 19, 2014. These dividends will be designated by the company as eligible dividends as defined in Subsection 89(1) of the Income Tax Act (Canada).

Revenue for the year ending Dec. 31, 2013, was $781.5-million, a decrease of 0.4 per cent compared with $784.4-million for 2012. For 2013, selling prices, including the impact of product mix, increased approximately 2 per cent and sales volume decreased approximately 3 per cent. Revenue for the fourth quarter of 2013 was $191.5-million, an increase of 1.2 per cent compared with $189.3-million for the fourth quarter of 2012. For the fourth quarter of 2013, selling prices, including the impact of product mix, increased approximately 5 per cent and sales volume decreased approximately 4 per cent. In both periods, the company believes it benefited from a favourable pricing environment and continued to improve its product mix by de-emphasizing the sales of lower margin products.

Versus the third quarter of 2013, revenue for the fourth quarter of 2013 decreased 4.2 per cent from $199.9-million to $191.5-million. Sales volume decreased approximately 4 per cent primarily due to normal seasonality.

Gross profit for the year ended Dec. 31, 2013, totalled $158.5-million, a 14.2-per-cent increase from $138.7-million in 2012. Gross margin was 20.3 per cent and 17.7 per cent in 2013 and 2012, respectively. Gross profit totalled $37.9-million in the fourth quarter of 2013, a 7.7-per-cent increase from $35.2-million in 2012. Gross margin was 19.8 per cent in the fourth quarter of 2013 and 18.6 per cent, in the fourth quarter of 2012. In both periods, the company believes, the improvement was due to a favourable pricing environment and product mix, combined with the company's continued success in executing manufacturing cost reduction initiatives.

Gross profit totalled $37.9-million in the fourth quarter of 2013, a decrease of 5.1 per cent from $40.0-million in the third quarter of 2013. Gross margin was 20.0 per cent for the third quarter of 2013. Gross profit primarily decreased due to lower sales volume.

Selling, general and administrative expenses (SG&A) for the year ended Dec. 31, 2013, totalled $82.7-million, a 4.5-per-cent increase from $79.1-million in 2012. As a percentage of revenue, SG&A increased slightly from 10.1 per cent in 2012 to 10.6 per cent in 2013 primarily due to an increase in stock appreciation rights (SAR) expense related to the impact of award vesting and an increase in the company's share price.

SG&A totalled $19.0-million for the fourth quarter of 2013 compared with $20.8-million in the fourth quarter of 2012 and $20.5-million in the third quarter of 2013. As a percentage of revenue, SG&A was 9.9 per cent, 11.0 per cent and 10.3 per cent for the fourth quarter of 2013, the fourth quarter of 2012 and the third quarter of 2013, respectively. When compared with the fourth quarter of 2012, SG&A decreased primarily due to lower SAR and variable compensation expense. When compared with the third quarter of 2013, SG&A decreased primarily due to lower SAR expense.

Adjusted EBITDA for the year ended Dec. 31, 2013, totalled $103.1-million, a 20.4-per-cent increase from $85.6-million in 2012. Adjusted EBITDA for the fourth quarter of 2013 totalled $24.0-million, a 12.3-per-cent increase from $21.4-million for the fourth quarter of 2012 and a 10.4-per-cent decrease from $26.8-million for the third quarter of 2013. These changes in adjusted EBITDA were primarily due to the changes in gross profit.

During the fourth quarter of 2013, the company recognized $47.8-million of its U.S. deferred tax assets, all of which was previously derecognized as of Dec. 31, 2010. Of this $47.8-million, $43.0-million impacted net earnings while the remaining impacted shareholder equity. This increase in net earnings of $43.0-million was partially offset by the derecognition of $4.6-million of deferred tax assets in the Canadian jurisdiction, resulting in a net positive impact to net earnings of $38.4-million.

Net earnings for the year ended Dec. 31, 2013, totalled $67.4-million or $1.09 per share fully diluted, a 231-per-cent increase from $20.4-million or 34 cents per share fully diluted in 2012.

Net earnings for the fourth quarter of 2013 totalled $53.6-million or 86 cents per share fully diluted compared with $5.7-million or nine cents per share for the fourth quarter of 2012 and $14.4-million or 23 cents per share fully diluted for the third quarter of 2013.

Adjusted net earnings for the year ended Dec. 31, 2013, totalled $103.3-million or $1.68 per share fully diluted, a 161-per-cent increase from $39.6-million or 65 cents per share fully diluted in 2012. Adjusted net earnings totalled $52.5-million or 84 cents per share fully diluted for the fourth quarter of 2013 compared with $10.0-million or 16 cents per share fully diluted for the fourth quarter of 2012 and $17.5-million or 28 cents per share fully diluted for the third quarter of 2013.

Cash flows from operations before changes in working capital items for the year ended Dec. 31, 2013, increased 15.4 per cent to $90.8-million from $78.7-million in 2012. The increase was primarily due to higher gross profit partially offset by an increase in cash costs related to manufacturing facility closures, restructuring and other related charges.

Cash flows from operations before changes in working capital items in the fourth quarter of 2013 increased 8.0 per cent to $21.0-million from $19.4-million in the fourth quarter of 2012 and decreased 16.0 per cent from $25.0-million in the third quarter of 2013. When compared with the fourth quarter of 2012, the increase was primarily due to an increase in adjusted EBITDA partially offset by income taxes paid.

The company had total cash and loan availability of $50.3-million as of Dec. 31, 2013, $44.5-million as of Sept. 30, 2013, and $54.7-million as of Dec. 31, 2012. The company had cash and loan availability under its ABL facility exceeding $57-million as of March 11, 2014.

Total debt as of Dec. 31, 2013, was $129.8-million, a decrease of $21.5-million from Dec. 31, 2012. The ratio of debt to trailing 12 month adjusted EBITDA was 1.3 as of Dec. 31, 2013.

Outlook

For 2014, the company anticipates moderate revenue growth similar to the forecasted North American economic growth, while continuing to improve product mix. The company will continue to focus on executing on the previously announced relocation and modernization of its Columbia, S.C., manufacturing operation to a new facility in Blythewood, S.C., and on reducing variable manufacturing costs.

The company's financial projections include the following:

• Revenue for the first quarter of 2014 is expected to be greater than the fourth quarter of 2013, which is reflective of normal seasonality. Revenue is expected to be approximately the same or slightly higher than the first quarter of 2013.
• Gross margin for 2014 as well as for the first quarter of 2014 is expected to be in the range of 20 per cent to 22 per cent.
• After the South Carolina project has been completed and start-up inefficiencies have been resolved, the company expects overall gross margin to be between 22 per cent and 24 per cent.
• Adjusted EBITDA for the first quarter of 2014 is expected to be slightly higher compared with both the fourth quarter of 2013 and the first quarter of 2013.
• Cash flows from operations in the first quarter of 2014 are expected to be lower than the fourth quarter of 2013 primarily due to seasonal first quarter working capital requirements and is also expected to be lower than the first quarter of 2013.
• Cash income taxes paid in 2014 are expected to be less than $5-million and the effective income tax rate is expected to be approximately 40 per cent.
• Capital expenditures are expected to be $10-million to $14-million and $31-million to $35-million in the first quarter and full year 2014, respectively.
• Manufacturing cost reductions are expected to total $16-million to $20-million in 2014, which includes an incremental $3-million as compared with 2013 for expected savings relating to the Kentucky plant closure and the shrink film consolidation.
• The South Carolina project is expected to result in total annual cash savings in excess of $13-million starting in the first half of 2015 with the first full-year effects in 2016 and total charges of $5-million to $7-million between 2014 and 2015.

Conference call

A conference call to discuss Intertape's 2013 fourth quarter and annual results will be held Wednesday, March 12, 2014, at 10 a.m. Eastern Time. Participants may dial 877-223-4471 (United States and Canada) and 647-788-4922 (international).

You may access a replay of the call by dialling 800-585-8367 (U.S. and Canada) or 416-621-4642 (international) and entering the access code 63095699. The recording will be available from March 12, 2014, at 1 p.m. until April 11, 2014, at 11:59 p.m. Eastern Time.

                                            
                           CONSOLIDATED EARNINGS 
            (In thousands of dollars, except per share amounts)                      

                                               Three months             12 months
                                             ended Dec. 31,        ended Dec. 31,
                                            2013       2012       2013       2012

Revenue                                 $191,490   $189,291   $781,500   $784,430
Cost of sales                            153,543    154,048    623,006    645,681
Gross profit                              37,947     35,243    158,494    138,749
Selling, general and
administrative
expenses                                  18,968     20,849     82,682     79,135
Research expenses                          2,008      1,528      6,900      6,227
                                          20,976     22,377     89,582     85,362
Operating profit before
manufacturing
facility closures,
restructuring and
other related charges                     16,971     12,866     68,912     53,387
Manufacturing facility
closures,
restructuring and
other related
charges                                    1,647      3,172     30,706     18,257
Operating profit                          15,324      9,694     38,206     35,130
Finance costs
Interest                                     847      3,147      5,707     13,233
Other expense                                159        355        946      1,303
                                           1,006      3,502      6,653     14,536
Earnings before income
tax expense
(benefit)                                 14,318      6,192     31,553     20,594
Income tax expense (benefit)
Current                                      233        969      3,622        927
Deferred (benefit)                      (39,540)      (464)   (39,426)      (714)
                                        (39,307)        505   (35,804)        213
Net earnings                              53,625      5,687     67,357     20,381
Earnings per share
Basic                                       0.88       0.10       1.12       0.35
Diluted                                     0.86       0.09       1.09       0.34
   

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