Intertape Polymer Group Inc. (NYSE, TSX: ITP) today released results for the first quarter ended March 31, 2004. “While we experienced solid sales growth, we encountered difficulties in passing along rapidly increasing raw material prices, as well as incurring increases in manufacturing costs,” said Intertape Polymer Group Inc. (IPG) Chairman and Chief Executive Officer, Melbourne F. Yull.
Operating Results
First quarter net income was $2.3 million, or $0.06 per share (basic and diluted), compared to $2.9 million or $0.09 per share (basic and diluted) for the first quarter of 2003. The decrease in net income was primarily attributable to higher cost of sales, as reflected in this quarter’s lower gross margin.
Sales for the first quarter were $162.1 million, up 5.5% compared to the corresponding quarter last year. “We are encouraged by the success of our marketing and sales initiatives and, with the momentum that was building up in the latter part of the first quarter, we believe that our annual revenue growth target of 10% remains achievable,” said Mr. Yull.
Gross margin for the first quarter decreased to 19.8% from 22.0% in the corresponding quarter last year due to several factors, including delays in passing through some raw material cost increases related to polypropylene and natural rubber, changes in product mix, production problems in the Truro plant, and unanticipated integration costs at the Columbia plant relating to the acquisition of assets from tesa tape, inc. Mr. Yull remarked, “We are currently achieving some price increases and should see the impact of these in our second quarter results.”
Selling, general and administrative expenses were $22.4 million in the first quarter of 2004, compared to $22.0 for the first quarter of 2003. “New expenses related to stock-based compensation and the acquisition of our partner’s 50% interest in Fibope in mid-2003 were offset by cost reductions in other areas,” noted IPG’s Chief Financial Officer, Andrew M. Archibald, C.A. “The first quarter was at the lower end of our expected run rate for SG&A expenses of $22.5 million to $23.5 million per quarter for 2004.”
Financial expenses in the first quarter were $6.8 million, compared to $7.7 million for the first quarter last year. The lower financial expenses reflect primarily the impact of debt reduction since the end of the first quarter of 2003, more specifically, $59.0 million of debt reduction over the latter three quarters of 2003. In addition, the Company was able to obtain a reduction in its Facility A interest rate of 100 basis points late last year that also contributed to lower interest costs during the quarter.
Mr. Archibald commented, “Our expenses below the gross profit line were down 1.5% compared to the same period last year, and below the fourth quarter 2003 total, even if we exclude the one-time charges of $3.0 million relating to the closure of the Green Bay plant.”
For the first quarter the Company recorded a net deferred income tax benefit of $0.3 million, compared to income tax expense of $0.3 million in the first quarter of 2003.
Liquidity and Capital Resources
Cash flows from operating activities were $6.3 million for the first quarter 2004, compared to $0.2 million for the first quarter 2003, mainly as a result of improvements in working capital management.
Cash used for investing activities was $11.9 million for the first quarter 2004, compared to $4.4 million for the first quarter 2003, the difference being attributable primarily to the acquisition of assets from, and finalization of the supply agreements with, tesa tape, inc. during the quarter.
Cash used for investing activities exceeded cash flows from operating activities by $5.6 million in the quarter. This cash shortfall was funded by an increase of $5.7 million in debt during the quarter. Compared to last year, total debt was down $46.0 million reflecting the debt reductions that occurred during the latter three quarters of 2003. “Although an increase in debt was anticipated in our plans for 2004, our cash flow from operating activities was lower than expected,” said Mr. Archibald.
Mr. Archibald also noted, “The Company reached an agreement with its Noteholders to amend the fixed charge coverage covenant to reduce the required ratio during 2004 and the first two quarters of 2005, and with the amendment the Company is in compliance with all of its financial covenants for the first quarter of 2004.”
(All figures in U.S. dollars, unless otherwise stated; March 31, 2004, exchange rate: Cdn $1.3079 =U.S.$1.00)
Click link below to view the March 31, 2004 Selected Financial Information
1st Quarter 2004 Financials
Conference Call
A conference call to discuss IPG’s first quarter results will be held Tuesday, April 27, 2004 at 10:00 A.M. Eastern Daylight Time. Participants may dial 1-888-423-3276 (U.S. and Canada) and 1-612-332-0345 (International). The conference call will also be simultaneously webcast on the Company’s website at http://www.intertapepolymer.com.
You may access a replay of the call by dialing 1-800-475-6701 (U.S. and Canada); 1-320-365-3844 (International) and entering the pass code 729159. The recording will be available from Tuesday, April 27, 2004 at 5:00 P.M. until Tuesday, May 4, 2004 at 11:59 P.M, Eastern Daylight Time.