PART I

Item 1:

Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2:

Offer Statistics and Expected Timetable

Not applicable.6

Item 3:

Key Information

6

A.

SELECTED FINANCIAL DATASelected Financial Data

6

The selected financial data presented belowB.

Capitalization And Indebtedness

6

C.

Reason for the five years ended December 31, 2008 is presented in U.S. dollarsOffer and is derived from Intertape Polymer Group Inc.’s (“Intertape”, “Intertape Polymer Group”, or the “Company”) consolidated financial statements in U.S. dollars and prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).  The information set forth below was extracted from the consolidated financial statements and related notes included in this annual report and annual reports previously filed and should be read in conjunction with such consolidated financial statements.Use of Proceeds

B.

CAPITALIZATION AND INDEBTEDNESS

Not applicable.

C.

REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

6

D.

RISK FACTORSRisk Factors

Current economic conditions and uncertain economic forecast adversely affect the Company’s results of operations and financial conditions.

Unfavorable changes in the global economy has affected the demand for the Company’s products.  Adverse economic conditions could also increase the likelihood of customer delinquencies.  A prolonged period of economic decline would have a material adverse effect on the results of operations, gross margins, and the overall financial condition of the Company, as well as exacerbate the other risk factors set forth below.

Fluctuations in the amount of available funds under the Company’s New Asset Based Loan would restrict the Company’s ability to borrow under its revolving loan.

The Company’s new credit facility is an asset-backed loan.  A reduction in the eligible assets and receivables included in the borrowing base or an increase in the required reserves will reduce the Company’s available credit under the Asset Based Loan (“ABL”).  A decline in the borrowing base could also require an unscheduled repayment of funds already advanced in excess of the available credit amount.

The Company’s Asset Based Loan contains a financial covenant which if not met, will result in an event of default.

The Company’s ABL requires a fixed charge financial ratio which becomes effective only when unused availability under the borrowing base drops below $25 million.  The Company’s failure to comply with this covenant could result in an event of default, which, if not cured or waived, could result in the Company being required to repay these borrowings before their scheduled due date. If the Company were unable to make this repayment or otherwise refinance these borrowings, the lenders under the ABL could elect to declare all amounts borrowed under the Company’s ABL, together with accrued interest, to be due and payable, which, in some instances, would be an event of default under the Indenture governing the Senior Subordinated Notes. In addition, these lenders could foreclose on the Company’s assets. If the Company was unable to refinance these borrowings on favorable terms, the Company’s results of ope rations and financial condition could be adversely impacted by increased costs and less favorable terms, including interest rates and covenants. Any future refinancing of the Company’s ABL is likely to contain similar restrictive covenants and financial tests.

The failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could cause the Company’s stock price to decline.

Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the Securities and Exchange Commission require annual management assessments of the effectiveness of the Company’s internal control over financial reporting and a report by the Company’s independent registered public accounting firm attesting to and reporting on these assessments.  If the Company fails to maintain effective internal control over financial reporting, as such standards are modified, supplemented or amended from time to time, the Company may not be able to conclude that it has effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the Securities and Exchange Commission.  For the fiscal year ended December 31, 2008, the Company identified a material weakness in the controls pertaining to the recording of freigh t invoices and the related accrual and expense.  As a result, Management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2008.  If the Company cannot in the future favorably assess, or the Company’s independent registered public accounting firm is unable to provide an unqualified attestation report on the Company’s assessment of, the effectiveness of its internal control over financial reporting, investors may lose confidence in the reliability of the Company’s financial reports, which could cause the Company’s stock price to decline.

The Company may not be able to generate sufficient cash flow to meet its debt service obligations.

The Company’s ability to generate sufficient cash flows from operations to make scheduled payments on its debt obligations will depend on its future financial performance, which will be affected by a range of economic, competitive, regulatory, legislative and business factors, many of which are outside of the Company’s control. If the Company does not generate sufficient cash flows from operations to satisfy its debt obligations, the Company may have to undertake alternative financing plans, such as refinancing or restructuring its debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. The Company cannot assure that any refinancing would be possible or that any assets could be sold on acceptable terms or otherwise. The Company’s inability to generate sufficient cash flows to satisfy its debt obligations, or to refinance its obligations on commercially reasonable terms , would have an adverse effect on the Company’s business, financial condition and results of operations. In addition, any refinancing of the Company’s debt could be at higher interest rates and may require the Company to comply with more onerous covenants, which could further restrict its business operations.

The Company’s substantial debt could adversely affect its financial condition and prevent it from fulfilling its obligations under its ABL or Senior Subordinated Notes.

The Company has a significant amount of indebtedness.  As of December 31, 2008, the Company had outstanding debt of approximately $250 million, which represented 51% of its total capitalization.  Of such total debt, approximately $235 million, or all of the Company’s outstanding senior debt, was secured.  

The Company’s substantial indebtedness could adversely affect its financial condition and make it more difficult for the Company to satisfy its obligations with respect to the Senior Subordinated Notes, as well as its obligations under its ABL.  The Company’s substantial indebtedness could also increase its vulnerability to adverse general economic and industry conditions; require the Company to dedicate a substantial portion of its cash flows from operations to payments on its indebtedness, thereby reducing the availability of the Company’s cash flows to fund working capital, capital expenditures, research and development efforts and other general corporate purposes; limit the Company’s flexibility in planning for, or reacting to, changes in its business and the industry in which it operates; place the Company at a competitive disadvantage compared to its competitors that have less debt; and limit the Co mpany’s ability to borrow additional funds on terms that are satisfactory to it or at all.

Fluctuations in raw material costs or the unavailability of raw materials may adversely affect the Company’s profitability.

Intertape Polymer Group has historically been able to pass on significant raw material cost increases through price increases to its customers.  Nevertheless, the Company’s results of operations for 2008 and certain individual quarters in prior years can and have been negatively impacted by raw material cost increases and decreases.  These fluctuations adversely affected the Company’s profitability.  As a result of raw material cost fluctuations, the Company has to either hold prices firm which results in a reduced market share or decrease prices which compresses the Company’s gross margins. The Company’s profitability in the future may be adversely affected due to continuing fluctuations in raw material prices.  Additionally, the Company relies on its suppliers for deliveries of raw materials.  If any of its suppliers were unable to deliver raw materials to the Company for an extended period of time, there is no assurance that the Company’s raw material requirements would be met by other suppliers on acceptable terms, or at all, which could have a material adverse effect on the Company’s results of operations.

Despite the Company’s level of indebtedness, it will be able to incur substantially more debt. Incurring such debt could further exacerbate the risks to the Company’s financial condition described above.

The Company will be able to incur significant additional indebtedness in the future. Although the Indenture governing the Senior Subordinated Notes and the loan and security agreement governing the ABL each contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and the indebtedness incurred in compliance with these restrictions could be substantial. The restrictions also do not prevent the Company from incurring obligations that do not constitute indebtedness. To the extent new debt is added to the Company’s currently anticipated debt levels, the substantial leverage risks described above would increase.

The Company’s Senior Subordinated Notes and ABL contain covenants that limit its flexibility and prevents the Company from taking certain actions.

The Indenture governing the Company’s Senior Subordinated Notes and the loan and security agreement governing the Company’s ABL include a number of significant restrictive covenants. These covenants could adversely limit the Company’s ability to plan for or react to market conditions, meet its capital needs and execute its business strategy. These covenants, among other things, limit the Company’s ability and the ability of its subsidiaries to incur additional debt; pay dividends and make other restricted payments; create or permit certain liens; issue or sell capital stock of restricted subsidiaries; use the proceeds from sales of assets; make certain investments; create or permit restrictions on the ability of the guarantors to pay dividends or to make other distributions to the Company; enter into certain types of transactions with affiliates; engage in unrelated businesses; enter into sale and leaseback tr ansactions; and consolidate or merge or sell the Company’s assets substantially as an entirety.

The Company’s ABL includes other and more restrictive covenants which can restrict the Company’s ability to prepay its other debt.  

The Company’s ability to achieve its growth objectives depends in part on the timing and market acceptance of its new products.

Intertape Polymer Group’s business plan involves the introduction of new products, which are both developed internally and obtained through acquisitions. The Company’s ability to introduce these products successfully depends on the demand for the products, as well as their price and quality. In the event the market does not accept these products or competitors introduce similar products, the Company’s ability to expand its markets and generate organic growth could be negatively impacted which could have an adverse affect on its operating results.

The Company faces significant competition.

The markets for Intertape Polymer Group’s products are highly competitive. Competition in its markets is primarily based upon the quality, breadth and performance characteristics of its products, customer service and price. The Company’s ability to compete successfully depends upon a variety of factors, including its ability to maintain high plant efficiencies and operating rates and low manufacturing costs, as well as its access to quality, low-cost raw materials.

Some of the Company’s competitors outside of North America may, at times, have lower raw material, energy and labor costs and less restrictive environmental and governmental regulations to comply with than the Company does. Other competitors may be larger in size or scope than is the Company, which may allow them to achieve greater economies of scale on a global basis or allow them to better withstand periods of declining prices and adverse operating conditions.

In addition, there has been an increasing trend among the Company’s customers towards consolidation. With fewer customers in the market for its products, the strength of the Company’s negotiating position with these customers could be weakened, which could have an adverse effect on its pricing, margins and profitability.

Intertape Polymer Group faces risks related to its international operations.

The Company has customers and operations located outside the United States and Canada. In 2008, sales to customers located outside the United States and Canada represented approximately 8% of its sales. The Company’s international operations present it with a number of risks and challenges, including the effective marketing of the Company’s products in other countries; tariffs and other trade barriers; and different regulatory schemes and political environments applicable to its operations in these areas, such as environmental and health and safety compliance.

In addition, the Company’s financial statements are reported in U.S. dollars while a portion of its sales is made in other currencies, primarily the Canadian dollar and the Euro. A portion of the Company’s debt is also denominated in currencies other than the U.S. dollar. As a result, fluctuations in exchange rates between the U.S. dollar and foreign currencies can have a negative impact on the Company’s reported operating results and financial condition. Moreover, in some cases, the currency of the Company’s sales does not match the currency in which it incurs costs, which can negatively affect its profitability. Fluctuations in exchange rates can also affect the relative competitive position of a particular facility where the facility faces competition from non-local producers, as well as the Company’s ability to successfully market its products in export markets.

The Company’s operations are subject to comprehensive environmental regulation and involve expenditures which may be material in relation to its operating cash flow.

The Company’s operations are subject to extensive environmental regulation in each of the countries in which it maintains facilities. For example, United States (Federal, state and local) and Canadian (Federal, provincial and local) environmental laws applicable to the Company include statutes and regulations intended to impose certain obligations with respect to site contamination and to allocate the cost of investigating, monitoring and remedying soil and groundwater contamination among specifically identified parties, as well as to prevent future soil and groundwater contamination; imposing national ambient standards and, in some cases, emission standards, for air pollutants which present a risk to public health, welfare or the natural environment; governing the handling, management, treatment, storage and disposal of hazardous wastes and substances; and regulating the discharge of pollutants into waterways.

The Company’s use of hazardous substances in its manufacturing processes and the generation of hazardous wastes not only by the Company, but by prior occupants of its facilities suggest that hazardous substances may be present at or near certain of the Company’s facilities or may come to be located there in the future. Consequently, the Company is required to

monitor closely its compliance under all the various environmental laws and regulations applicable to it. In addition, the Company arranges for the off-site disposal of hazardous substances generated in the ordinary course of its business.

The Company obtains Phase I or similar environmental site assessments, and Phase II environmental site assessments, if necessary, for most of the manufacturing facilities it owns or leases at the time it either acquires or leases such facilities. These assessments typically include general inspections and may involve soil sampling and/or ground water analysis. The assessments have not revealed any environmental liability that, based on current information, the Company believes will have a material adverse effect on it. Nevertheless, these assessments may not reveal all potential environmental liabilities and current assessments are not available for all facilities. Consequently, there may be material environmental liabilities that the Company is not aware of. In addition, ongoing clean up and containment operations may not be adequate for purposes of future laws and regulations. The conditions of the Company’s properties cou ld also be affected in the future by neighboring operations or the conditions of the land in the vicinity of its properties. These developments and others, such as increasingly stringent environmental laws and regulations, increasingly strict enforcement of environmental laws and regulations, or claims for damage to property or injury to persons resulting from the environmental, health or safety impact of its operations, may cause the Company to incur significant costs and liabilities that could have a material adverse effect on it.

Except as described in Item 4B(8) below, the Company believes that all of its facilities are in material compliance with applicable environmental laws and regulations and that it has obtained, and is in material compliance with, all material permits required under environmental laws.  Although certain of the Company’s facilities emit toluene and other pollutants into the air, these emissions are within current permitted limitations.  The Company believes that these emissions from its U.S. facilities will meet the applicable future federal Maximum Available Control Technology ("MACT") requirements, although additional testing or modifications at the facilities may be required.  The Company believes that the ultimate resolution of these matters should not have a material adverse effect on its financial condition or results of operations.4:

The Company’s facilities are required to maintain numerous environmental permits and governmental approvals for its operations. Some of the environmental permits and governmental approvals that have been issued to the Company or to its facilities contain conditions and restrictions, including restrictions or limits on emissions and discharges of pollutants and contaminants, or may have limited terms. If the Company fails to satisfy these conditions or to comply with these restrictions, it may become subject to enforcement actions and the operation of the relevant facilities could be adversely affected. The Company may also be subject to fines, penalties or additional costs. The Company may not be able to renew, maintain or obtain all environmental permits and governmental approvals required for the continued operation or further development of the facilities, as a result of which the operation of the facilities may be limite d or suspended.

The Company may become involved in litigation relating to its intellectual property rights, which could have an adverse impact on its business.

Intertape Polymer Group relies on patent protection, as well as a combination of copyright, trade secret and trademark laws, nondisclosure and confidentiality agreements and other contractual restrictions to protect its proprietary technology. Litigation may be necessary to enforce these rights, which could result in substantial costs to the Company and a substantial diversion of management attention. If the Company does not adequately protect its intellectual property, its competitors or other parties could use the intellectual property that the Company has developed to enhance their products or make products similar to the Company’s and compete more efficiently with it, which could result in a decrease in the Company’s market share.

While the Company has attempted to ensure that its products and the operations of its business do not infringe other parties patents and proprietary rights, its competitors or other parties may assert that the Company’s products and operations may be covered by patents held by them. In addition, because patent applications can take many years to issue, there may be applications now pending of which the Company is unaware, which may later result in issued patents which the Company’s products may infringe. If any of the Company’s products infringe a valid patent, it could be prevented from selling them unless the Company can obtain a license or redesign the products to avoid infringement. A license may not always be available or may require the Company to pay substantial royalties. The Company may not be successful in any attempt to redesign any of its products to avoid any infringement. Infringement or other intelle ctual property claims, regardless of merit or ultimate outcome, can be expensive and time-consuming and can divert management's attention from the Company’s core business.

The Company may become involved in labor disputes or employees could form or join unions increasing the Company’s costs to do business.

Some of Intertape Polymer Group’s employees are subject to collective bargaining agreements. Other employees are not part of a union and there are no assurances that such employees will not form or join a union. Any attempt by employees to form or join a union could result in increased labor costs and adversely affect the Company’s business, its financial condition and/or results of operations.

Except for the current strike at the Company’s Brantford, Ontario plant, the Company has never experienced any work stoppages due to employee related disputes. Management believes that it has a good relationship with its employees. There can be no assurance that work stoppages, or other labor disturbances will not occur in the future. Such occurrences could adversely affect Intertape Polymer Group’s business, financial condition and/or results of operations.

The Company may become involved in litigation which could have an adverse impact on its business.

Intertape Polymer Group, like other manufacturers and sellers, is subject to potential liabilities connected with its business operations, including potential liabilities and expenses associated with product defects, performance, reliability or delivery delays. Intertape Polymer Group is threatened from time to time with, or is named as a defendant in, legal proceedings, including lawsuits based upon product liability, personal injury, breach of contract and lost profits or other consequential damages claims, in the ordinary course of conducting its business. A significant judgment against Intertape Polymer Group, or the imposition of a significant fine or penalty, as a result of a finding that the Company failed to comply with laws or regulations, or being named as a defendant on multiple claims could adversely affect the Company’s business, financial condition and/or results of operations.

Uninsured and underinsured losses and rising insurance costs could adversely affect the Company’s business.

Intertape Polymer Group maintains property, general liability and business interruption insurance and directors and officers liability insurance on such terms as it deems appropriate. This may result in insurance coverage that, in the event of a substantial loss, would not be sufficient to pay for the full current market value or current replacement cost of the Company’s lost investment.  Not all risks are covered by insurance.

Intertape Polymer Group’s cost of maintaining property general liability and business interruption insurance and director and officer liability insurance is significant. The Company could experience higher insurance premiums as a result of adverse claims experience or because of general increases in premiums by insurance carriers for reasons unrelated to its own claims experience. Generally, the Company’s insurance policies must be renewed annually. Intertape Polymer Group’s ability to continue to obtain insurance at affordable premiums also depends upon its ability to continue to operate with an acceptable claims record. A significant increase in the number of claims against the Company, the assertion of one or more claims in excess of its policy limits or the inability to obtain adequate insurance coverage at acceptable rates, or at all, could adversely affect the Company’s business, financial condition and/ or results of operations.

Product liability could adversely affect the Company’s business.

Difficulties in product design, performance and reliability could result in lost sales, delays in customer acceptance of Intertape Polymer Group’s products and lawsuits and would be detrimental to the Company’s market reputation. Intertape Polymer Group’s products and the products supplied by third parties, on behalf of the Company, are not error free. Undetected errors or performance problems may be discovered in the future. The Company may not be able to successfully complete the development of planned or future products in a timely manner or to adequately address product defects, which could harm the Company’s business and prospects. In addition, product defects may expose Intertape Polymer Group to product liability claims, for which it may not have sufficient product liability insurance. Difficulties in product design, performance and reliability or product liability claims could adversely affect Intertap e Polymer Group's business, financial condition and/or results of operations.

Acquisitions have been a substantial part of the Company’s growth strategy, which could expose it to significant business risks.

An important aspect of Intertape Polymer Group’s business strategy was to make strategic acquisitions that would complement its existing products, expand its customer base and markets, improve distribution efficiencies and enhance its technological capabilities. Financial risks from these acquisitions include the use of the Company’s cash resources and incurring additional debt and liabilities. Further, there are possible operational risks including difficulties in assimilating and integrating the

operations, products, technology, information systems and personnel of acquired companies; the loss of key personnel of acquired entities; the entry into markets in which the Company has no or limited prior experience; and difficulties honoring commitments made to customers of the acquired companies prior to the acquisition. The failure to adequately address these risks could adversely affect the Company’s business.

Although the Company performs due diligence investigations of the businesses or assets that it acquires, and anticipates continuing to do so for future acquisitions, there may be liabilities related to the acquired business or assets that the Company fails to, or is unable to, uncover during its due diligence investigation and for which the Company, as a successor owner, may be responsible. When feasible, the Company seeks to minimize the impact of these types of potential liabilities by obtaining indemnities and warranties from the seller, which may in some instances be supported by deferring payment of a portion of the purchase price. However, these indemnities and warranties, if obtained, may not fully cover the liabilities because of their limited scope, amount or duration, the financial resources of the indemnitor or warrantor or other reasons.

Because Intertape Polymer Group is a Canadian company, it may be difficult to enforce rights under U.S. bankruptcy laws.

Intertape Polymer Group and certain of its subsidiaries are incorporated under the laws of Canada and a substantial amount of its assets are located outside of the United States. Under bankruptcy laws in the United States, courts typically assert jurisdiction over a debtor's property, wherever located, including property situated in other countries. However, courts outside of the United States may not recognize the United States bankruptcy court's jurisdiction over property located outside of the territorial limits of the United States. Accordingly, difficulties may arise in administering a United States bankruptcy case involving a Canadian debtor with property located outside of the United States, and any orders or judgments of a bankruptcy court in the United States may not be enforceable outside the territorial limits of the United States.

It may be difficult for investors to enforce civil liabilities against Intertape Polymer Group under U.S. federal and state securities laws.

Intertape Polymer Group and certain of its subsidiaries are incorporated under the laws of Canada.  Certain of their directors and executive officers are residents of Canada and a portion of their assets are located outside of the United States. In addition, certain subsidiaries are located in other foreign jurisdictions.  As a result, it may be difficult or impossible for U.S. investors to effect service of process within the United States upon Intertape Polymer Group, its Canadian subsidiaries, or its other foreign subsidiaries, or those directors and officers or to realize against them upon judgments of courts of the United States predicated upon the civil liability provisions of U.S. federal securities laws or securities or blue sky laws of any state within the United States.  The Company believes that a judgment of a U.S. court predicated solely upon the civil liability provisions of the Securities Act of 1933 , as amended and/or the Exchange Act of 1934, as amended (“Exchange Act”) would likely be enforceable in Canada if the U.S. court in which the judgment was obtained had a basis for jurisdiction in the matter that was recognized by a Canadian court for such purposes. The Company cannot assure that this will be the case.  There is substantial doubt whether an action could be brought in Canada in the first instance on the basis of liability predicated solely upon such laws.

Anti-takeover provisions in the Company’s Shareholder Protection Rights Plan may prevent an acquisition.

Intertape Polymer Group has a Shareholder Protection Rights Plan (the “Plan”) which will remain in effect through the date immediately following the date of the Company’s 2009 annual shareholders’ meeting.  The effect of the Plan is to currently require anyone who seeks to acquire 20% or more of Intertape Polymer Group’s voting shares to make a bid complying with specific provisions of the Plan.  Thus, the provisions of the Plan could prevent or delay the acquisition of the Company by means of a take-over bid, a tender offer, a proxy contest, or otherwise, in which shareholders might receive a premium over the then current market price of the Company’s common shares.

The Company’s exemptions under the Securities Exchange Act of 1934, as amended, as a foreign private issuer limits the protections and information afforded investors.

Intertape Polymer Group is a foreign private issuer within the meaning of the rules promulgated under the Exchange Act.  As such, it is exempt from certain provisions applicable to United States companies with securities registered under the Exchange Act, including: the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission of quarterly reports on Form 10-Q or current reports on Form 8-K; the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and the sections of the Exchange

Act requiring insiders to file public reports of their stock ownership and trading activities and establishing insider liability for profits realized from any "short-swing" trading transaction (i.e., a purchase and sale, or sale and purchase, of the issuers’ equity securities within a period of less than six months).  Because of these exemptions, purchasers of Intertape Polymer Groups’ securities are not afforded the same protections or information generally available to investors in public companies organized in the United States.  Prior to December 31, 2000, the Company filed its reports on Form 20-F.  Commencing with the year ended December 31, 2000, the Company filed its annual report on Form 40-F.  This year Intertape Polymer Group will again file its annual report on Form 20-F.  Intertape Polymer Group reports on Form 6-K with the United States Securities and Exchang e Commission and publicly releases quarterly financial reports.

Item 4.

Information on the Company

14

A.

History and Development of the Company

14

B.

Business Overview

14

(1)  Products, Markets & Distribution

17

(2)  Sales and Marketing

23

(3)  Manufacturing and Quality Control

23

(4)  Equipment and Raw Material

23

(5)  Research and Development and New Products

24

(6)  Trademarks & Patents

25

(7)  Competition

25

(8)  Environmental Initiatives & Regulation

26

C.

Organizational Structure

27

D.

Property, Plants and Equipment

28

Item 4A:

Unresolved Staff Comments

30

Item 5:

Operating and Financial Review and Prospects (Management’s Discussion & Analysis)

30

Business Overview

30

Liquidity

32

Outlook

33

Results of Operation

33

Sales

33

Gross Profit and Gross Margin

33

Selling, General and Administrative Expenses

34

Stock-Based Compensation

34

Operating Profit

34

Manufacturing Facility Closures, Restructuring and Other Charges

35

Impairment of Goodwill

35

Research and Development

36

EBITDA

36

Financial Expenses

37

Income Taxes

38

Net Loss

38

Loss Per Share

39

Comprehensive Income (Loss)

39

Results of Operations by Division

39

Results of Operations - Tapes & Film Division

39

Results of Operations - ECP Division

40

Results of Operations – Corporate

41

Off-Balance Sheet Arrangements

41

Related Party Transactions

41

3

Liquidity and Capital Resources

42

(i)

Cash Flow

42

(ii)

Working Capital

43

(iii)

Financial Risk Management, Objectives and Policies

44

(iv)

Capital Expenditures

45

Long-Term Debt and Financial Derivatives

45

Contractual Obligations

46

Capital Stock & Dividends

46

Distribution Rights Purchase Agreement

46

Pension and Post-Retirement Benefit Plans

47

Critical Accounting Estimates

47

International Financial Reporting Standards (“IFRS)

48

IFRS Adoption

48

IFRS Optional Exceptions

48

IFRS Mandatory Exceptions

49

Significant Changes in Accounting Policies upon Conversion to IFRS

49

Impact of Adoption of IFRS on our Company

51

Disclosure Controls and Internal Control over Financing Reporting

51

Additional Information

52

Forward Looking Statements

52

Item 6:

Directors, Senior Management and Employees

52

A.

Directors and Senior Management

52

B.

Compensation

54

C.

Board Practices

59

D.

Employees

61

E.

Share Ownership

62

62

62

Item 7:

Major Shareholders and Related Party Transactions

62

63

A.

Major Shareholders

62

63

B.

Related Party Transactions

63

C.

Interests of Experts and Counsel

63

Item 8:

Financial Information

64

A.

Consolidated Statements and Other Financial Information

64

B.

Significant Changes

65

Item 9:

The Offer and Listing

65

A.

Offer and Listing Details

65

B.

Plan of Distribution

66

C.

Markets

66

D.

Selling Shareholders

66

E.

Dilution

66

F.

Expenses of the Issue

66

Item 10:

Additional Information

66

A.

Share Capital

66

B.

Memorandum and Articles of Association

66

C.

Material Contracts

68

D.

Exchange Controls

68

E.

Taxation

69

F.

Dividends and Paying Agents

74

G.

Statement by Experts

74

H.

Documents on Display

74

I.

Subsidiary Information

Item 11:

Quantitative and Qualitative Disclosures about Market Risk

74

4

Item 12:

Description of Securities Other than Equity Securities

74

PART II

Item 13:

Defaults, Dividend Arrearages and Delinquencies

74

Item 14:

Material Modifications to the Rights of Security Holders and Use of Proceeds

74

Item 15:

Controls and Procedures

74

Item 16:

Reserved

75

Item 16A:

Audit Committee Financial Expert

75

Item 16B:

Code of Ethics

75

Item 16C:

Principal Accountant Fees and Services

75

Item 16D:

Exemptions from the Listing Standards for Audit Committees

76

Item 16E:

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

76

Item 16F:

Change in Registrant’s Certifying Accountant

76

Item 16G:

Corporate Governance

76

PART III

Item 17:

Financial Statements

87

Item 18:

Financial Statements

87

Item 19:

Exhibits

87

Signatures

89

5

PART I

Item 1:

Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2:

Offer Statistics and Expected Timetable

Not applicable.

Item 3:

Key Information

A.

SELECTED FINANCIAL DATA

The selected financial data presented below for the five years ended December 31, 2010 is presented in U.S. dollars and is derived from Intertape Polymer Group Inc.’s (“Intertape”, “Intertape Polymer Group”, or the “Company”) consolidated financial statements in U.S. dollars and prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).  The information set forth below was extracted from the consolidated financial statements and related notes included in this annual report and annual reports previously filed and should be read in conjunction with such consolidated financial statements.

B.

CAPITALIZATION AND INDEBTEDNESS

Not applicable.

C.

REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

6

D.

RISK FACTORS

Current economic conditions and uncertain economic forecast adversely affect the Company’s results of operations and financial conditions.

Unfavorable changes in the global economy have affected the demand for the Company’s products.  Adverse economic conditions could also increase the likelihood of customer delinquencies.  A prolonged period of economic decline would have a material adverse effect on the results of operations, gross margins, and the overall financial condition of the Company, as well as exacerbate the other risk factors set forth below.

Fluctuations in the amount of available funds under the Company’s Asset Based Loan would restrict the Company’s ability to borrow under its revolving loan.

The Company’s credit facility is an asset-backed loan.  A reduction in the eligible assets and receivables included in the borrowing base or an increase in the required reserves will reduce the Company’s available credit under the Asset Based Loan (“ABL”).  A decline in the borrowing base could also require an unscheduled repayment of funds already advanced in excess of the available credit amount.

The Company’s Asset Based Loan contains a financial covenant which if not met, will result in an event of default.

The Company’s ABL contains a fixed charge ratio which becomes effective only when unused availability under the borrowing base drops below $25 million.  The Company’s failure to comply with this covenant could result in an event of default, which, if not cured or waived, could result in the Company being required to repay these borrowings before their scheduled due date. If the Company were unable to make this repayment or otherwise refinance these borrowings, the lenders under the ABL could elect to declare all amounts borrowed under the Company’s ABL, together with accrued interest, to be due and payable, which, in some instances, would be an event of default under the Indenture governing the Senior Subordinated Notes. In addition, these lenders could foreclose on the Company’s assets. If the Company were unable to refinance these borrowings on favorable terms, the Company’s results of operations and financial condition could be adversely impacted by increased costs and less favorable terms, including interest rates and covenants. Any future refinancing of the Company’s ABL is likely to contain similar or more restrictive covenants and financial tests.

The Company may not be able to generate sufficient cash flow to meet its debt service obligations.

The Company’s ability to generate sufficient cash flows from operations to make scheduled payments on its debt obligations will depend on its future financial performance, which will be affected by a range of economic, competitive, regulatory, legislative and business factors, many of which are outside of the Company’s control. If the Company does not generate sufficient cash flows from operations to satisfy its debt obligations, the Company may have to undertake alternative financing plans, such as refinancing or restructuring its debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. The Company cannot assure that any refinancing would be possible or that any assets could be sold on acceptable terms or otherwise. The Company’s inability to generate sufficient cash flows to satisfy its debt obligations, or to refinance its obligations on commercially reasonable terms, would have an adverse effect on the Company’s business, financial condition and results of operations. In addition, any refinancing of the Company’s debt could be at higher interest rates and may require the Company to comply with more onerous covenants, which could further restrict its business operations.

The Company’s substantial debt could adversely affect its financial condition and prevent it from fulfilling its obligations under its ABL or Senior Subordinated Notes.

The Company has a significant amount of indebtedness.  As of December 31, 2010, the Company had outstanding debt of approximately $221 million, which represented 55% of its total capitalization.  Of such total debt, approximately $92.6 million, or all of the Company’s outstanding senior debt, was secured.  

The Company’s substantial indebtedness could adversely affect its financial condition and make it more difficult for the Company to satisfy its obligations with respect to the Senior Subordinated Notes, as well as its obligations under its ABL.  The Company’s substantial indebtedness could also increase its vulnerability to adverse general economic and industry conditions; require the Company to dedicate a substantial portion of its cash flows from operations to payments on its indebtedness, thereby

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reducing the availability of the Company’s cash flows to fund working capital, capital expenditures, research and development efforts and other general corporate purposes; limit the Company’s flexibility in planning for, or reacting to, changes in its business and the industry in which it operates; place the Company at a competitive disadvantage compared to its competitors that have less debt; and limit the Company’s ability to borrow additional funds on terms that are satisfactory to it or at all.

Fluctuations in raw material costs or the unavailability of raw materials may adversely affect the Company’s profitability.

Intertape Polymer Group has historically been able to pass on significant raw material cost increases through price increases to its customers.  Nevertheless, the Company’s results of operations for 2010 and certain individual quarters in prior years can and have been negatively impacted by raw material cost increases and decreases.  These fluctuations adversely affected the Company’s profitability.  As a result of raw material cost fluctuations, the Company has to either hold prices firm which results in a reduced market share or decrease prices which compresses the Company’s gross margins. The Company’s profitability in the future may be adversely affected due to continuing fluctuations in raw material prices.  Additionally, the Company relies on its suppliers for deliveries of raw materials.  If any of its suppliers were unable to deliver raw materials to the Company for an extended period of time, there is no assurance that the Company’s raw material requirements would be met by other suppliers on acceptable terms, or at all, which could have a material adverse effect on the Company’s results of operations.

Despite the Company’s level of indebtedness, it will be able to incur substantially more debt. Incurring such debt could further exacerbate the risks to the Company’s financial condition described above.

The Company will be able to incur significant additional indebtedness in the future. Although the Indenture governing the Senior Subordinated Notes and the loan and security agreement governing the ABL each contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and the indebtedness incurred in compliance with these restrictions could be substantial. The restrictions also do not prevent the Company from incurring obligations that do not constitute indebtedness. To the extent new debt is added to the Company’s currently anticipated debt levels, the substantial leverage risks described above would increase.

The Company’s Senior Subordinated Notes and ABL contain covenants that limit its flexibility and prevents the Company from taking certain actions.

The Indenture governing the Company’s Senior Subordinated Notes and the loan and security agreement governing the Company’s ABL include a number of significant restrictive covenants. These covenants could adversely limit the Company’s ability to plan for or react to market conditions, meet its capital needs and execute its business strategy. These covenants, among other things, limit the Company’s ability and the ability of its subsidiaries to incur additional debt; pay dividends and make other restricted payments; create or permit certain liens; issue or sell capital stock of restricted subsidiaries; use the proceeds from sales of assets; make certain investments; create or permit restrictions on the ability of the guarantors to pay dividends or to make other distributions to the Company; enter into certain types of transactions with affiliates; engage in unrelated businesses; enter into sale and leaseback transactions; and consolidate or merge or sell the Company’s assets substantially as an entirety.

The Company’s ABL includes other and more restrictive covenants, some of which can restrict the Company’s ability to prepay its other debt.  

The Company’s litigation with Inspired Technologies, Inc. (“ITI”) could result in a significant verdict against the Company.

In December 2010, the United States District Court for the Middle District of Florida granted the Company’s post trial motion and reduced the amount of the initial jury award from $13,150,000 to $3,000,000 plus interest, costs and attorneys’ fees for a total of $3,382,775.  Instead of accepting the remitted judgment offered by the Court, ITI requested a new trial.  The second jury award entered a verdict of $700,000.  ITI is now seeking an award of attorneys’ fees, costs, and interest.  In its post-trial motions, ITI is also seeking reinstatement of the original jury award or the remitted judgment amount or, in the alternative, a new trial.  It is also possible that the reduced jury award may be set aside on appeal.  The Company may incur a loss as a result of the litigation; however, the amount of the contingent loss cannot be reasonably estimated at this time.  A significant judgment against the Company would adversely affect the Company’s business, financial condition and/or results of operations.  (For a full description of the pending ITI litigation, please see the “Litigation” section under “Consolidated Statements and Other Financial Information”.)

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The Company may incur higher and/or additional charges and costs than anticipated in connection with the closing of its Brantford, Ontario manufacturing facility.

The Company has decided to close its Brantford, Ontario manufacturing facility due to the financial impact of the ongoing strike of the unionized employees at the facility.  The non-cash charges may be higher than anticipated by the Company, there may be additional non-cash charges not foreseen, and the estimated amount of projected cash costs associated with the shutdown may be too low.  Further, the anticipated positive impact the shutdown will have on the Company’s overall financial position may not be as great as forecasted.

A downgrade of the Company’s credit ratings would have a negative impact on the Company’s ability to obtain credit and on the trading price of its common shares.

The Company’s Senior Subordinated Notes are currently rated Caa1 by Moody Investor Services, Inc. and CCC- by Standard & Poor’s Financial Services, LLC.  These ratings are considered below investment grade.  In the event the Company’s credit ratings are downgraded, it would adversely affect the Company’s cost of borrowing, access to capital markets and trading price of its common shares.

The failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could cause the Company’s stock price to decline.

Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the Securities and Exchange Commission, as well as applicable Canadian securities laws require annual management assessments of the effectiveness of the Company’s internal control over financial reporting and a report by the Company’s independent registered public accounting firm attesting to and reporting on these assessments.  If the Company fails to maintain effective internal control over financial reporting, as such standards are modified, supplemented or amended from time to time, the Company may not be able to conclude that it has effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the Securities and Exchange Commission or applicable Canadian securities laws.  For the fiscal year ended December 31, 2010 the Chief Executive Officer and Chief Financial Officer concluded that the Company’s internal control over financial reporting was effective as of December 31, 2010.  If the Company cannot in the future favorably assess, or the Company’s independent registered public accounting firm is unable to provide an unqualified attestation report on the Company’s assessment of, the effectiveness of its internal control over financial reporting, investors may lose confidence in the reliability of the Company’s financial reports, which could cause the Company’s stock price to decline.

The Company’s pension and post-retirement benefit plans are unfunded which could require Company contributions.

The Company’s pension and post-retirement benefit plans currently have an unfunded deficit of $22.8 million as of December 31, 2010 as compared to $21.0 million at the end of 2009.  For 2010 and 2009, the Company contributed $4.7 million and $3.4 million, respectively, to its funded pension plans and to beneficiaries for its unfunded other benefit plans.  The Company may need to divert certain of its resources in the future in order to resolve this funding deficit.  In addition, the Company cannot predict whether a change in factors such as pension asset performance or interest rates, will require the Company to make a contribution in excess of its current expectations.  Further, the Company may not have the funds necessary to meet future minimum pension funding requirements or be able to meet its pension benefit plan funding obligation through cash flows from operations.

The Company’s ability to achieve its growth objectives depends in part on the timing and market acceptance of its new products.

Intertape Polymer Group’s business plan involves the introduction of new products, which are both developed internally and obtained through acquisitions. The Company’s ability to introduce these products successfully depends on the demand for the products, as well as their price and quality. In the event the market does not accept these products or competitors introduce similar products, the Company’s ability to expand its markets and generate organic growth could be negatively impacted which could have an adverse affect on its operating results.

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The Company’s competition and customer preferences could impact the Company’s profitability.

The markets for Intertape Polymer Group’s products are highly competitive. Competition in its markets is primarily based upon the quality, breadth and performance characteristics of its products, customer service and price. The Company’s ability to compete successfully depends upon a variety of factors, including its ability to maintain high plant efficiencies and operating rates and low manufacturing costs, as well as its access to quality, low-cost raw materials.

Some of the Company’s competitors may, at times, have lower raw material, energy and labor costs and less restrictive environmental and governmental regulations to comply with than the Company does.  Other competitors may be larger in size or scope than the Company, which may allow them to achieve greater economies of scale on a global basis or allow them to better withstand periods of declining prices and adverse operating conditions.

Demand for the Company’s products and, in turn, its revenue and profit margins, are affected by customer preferences and changes in customer ordering patterns which occur as a result of changes in inventory levels and timing of purchases which may be triggered by price changes and incentive programs.

The Company’s customer contracts contain termination provisions that could decrease our future revenues and earnings.

Most of the Company’s customer contracts can be terminated by the customer on short notice without penalty.  The Company’s customers are, therefore, not contractually obligated to continue to do business with us in the future.  This creates uncertainty with respect to the revenues and earnings the Company may recognize with respect to its customer contracts.

Intertape Polymer Group faces risks related to its international operations.

The Company has customers and operations located outside the United States and Canada. In 2010, sales to customers located outside the United States and Canada represented approximately 10% of its sales. The Company’s international operations present it with a number of risks and challenges, including the effective marketing of the Company’s products in other countries; tariffs and other trade barriers; and different regulatory schemes and political environments applicable to its operations in these areas, such as environmental and health and safety compliance.

In addition, the Company’s financial statements are reported in U.S. dollars while a portion of its sales is made in other currencies, primarily the Canadian dollar and the Euro. A portion of the Company’s debt is also denominated in currencies other than the U.S. dollar. As a result, fluctuations in exchange rates between the U.S. dollar and foreign currencies can have a negative impact on the Company’s reported operating results and financial condition. Moreover, in some cases, the currency of the Company’s sales does not match the currency in which it incurs costs, which can negatively affect its profitability. Fluctuations in exchange rates can also affect the relative competitive position of a particular facility where the facility faces competition from non-local producers, as well as the Company’s ability to successfully market its products in export markets.

The Company’s operations are subject to comprehensive environmental regulation and involve expenditures which may be material in relation to its operating cash flow.

The Company’s operations are subject to extensive environmental regulation in each of the countries in which it maintains facilities. For example, United States (Federal, state and local) and Canadian (Federal, provincial and local) environmental laws applicable to the Company include statutes and regulations intended to impose certain obligations with respect to site contamination and to allocate the cost of investigating, monitoring and remedying soil and groundwater contamination among specifically identified parties, as well as to prevent future soil and groundwater contamination; imposing national ambient standards and, in some cases, emission standards, for air pollutants which present a risk to public health, welfare or the natural environment; governing the handling, management, treatment, storage and disposal of hazardous wastes and substances; and regulating the discharge of pollutants into waterways.

The Company’s use of hazardous substances in its manufacturing processes and the generation of hazardous wastes not only by the Company, but by prior occupants of its facilities suggest that hazardous substances may be present at or near certain of the Company’s facilities or may come to be located there in the future. Consequently, the Company is required to monitor closely its compliance under all the various environmental laws and regulations applicable to it. In addition, the Company arranges for the off-site disposal of hazardous substances generated in the ordinary course of its business.

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The Company obtains Phase I or similar environmental site assessments, and Phase II environmental site assessments, if necessary, for most of the manufacturing facilities it owns or leases at the time it either acquires or leases such facilities. These assessments typically include general inspections and may involve soil sampling and/or ground water analysis. The assessments have not revealed any environmental liability that, based on current information, the Company believes will have a material adverse effect on it. Nevertheless, these assessments may not reveal all potential environmental liabilities and current assessments are not available for all facilities. Consequently, there may be material environmental liabilities that the Company is not aware of. In addition, ongoing clean up and containment operations may not be adequate for purposes of future laws and regulations. The conditions of the Company’s properties could also be affected in the future by neighboring operations or the conditions of the land in the vicinity of its properties. These developments and others, such as increasingly stringent environmental laws and regulations, increasingly strict enforcement of environmental laws and regulations, or claims for damage to property or injury to persons resulting from the environmental, health or safety impact of its operations, may cause the Company to incur significant costs and liabilities that could have a material adverse effect on it.

Except as described in Item 4B(8) below, the Company believes that all of its facilities are in material compliance with applicable environmental laws and regulations and that it has obtained, and is in material compliance with, all material permits required under environmental laws and regulations.  Although certain of the Company’s facilities emit toluene and other pollutants into the air, these emissions are within current permitted limitations.  The Company believes that these emissions from its U.S. facilities will meet the applicable future federal Maximum Available Control Technology ("MACT") requirements, although additional testing or modifications at the facilities may be required.  The Company believes that the ultimate resolution of these matters should not have a material adverse effect on its financial condition or results of operations.

The Company’s facilities are required to maintain numerous environmental permits and governmental approvals for its operations. Some of the environmental permits and governmental approvals that have been issued to the Company or to its facilities contain conditions and restrictions, including restrictions or limits on emissions and discharges of pollutants and contaminants, or may have limited terms. If the Company fails to satisfy these conditions or to comply with these restrictions, it may become subject to enforcement actions and the operation of the relevant facilities could be adversely affected. The Company may also be subject to fines, penalties or additional costs. The Company may not be able to renew, maintain or obtain all environmental permits and governmental approvals required for the continued operation or further development of the facilities, as a result of which the operation of the facilities may be limited or suspended.

The Company may become involved in litigation relating to its intellectual property rights, which could have an adverse impact on its business.

Intertape Polymer Group relies on patent protection, as well as a combination of copyright, trade secret and trademark laws, nondisclosure and confidentiality agreements and other contractual restrictions to protect its proprietary technology. Litigation may be necessary to enforce these rights, which could result in substantial costs to the Company and a substantial diversion of management attention. If the Company does not adequately protect its intellectual property, its competitors or other parties could use the intellectual property that the Company has developed to enhance their products or make products similar to the Company’s and compete more efficiently with it, which could result in a decrease in the Company’s market share.

While the Company has attempted to ensure that its products and the operations of its business do not infringe other parties patents and proprietary rights, its competitors or other parties may assert that the Company’s products and operations may be covered by patents held by them. In addition, because patent applications can take many years to issue, there may be applications now pending of which the Company is unaware, which may later result in issued patents which the Company’s products may infringe. If any of the Company’s products infringe a valid patent, it could be prevented from selling them unless the Company can obtain a license or redesign the products to avoid infringement. A license may not always be available or may require the Company to pay substantial royalties. The Company may not be successful in any attempt to redesign any of its products to avoid any infringement. Infringement or other intellectual property claims, regardless of merit or ultimate outcome, can be expensive and time-consuming and can divert management's attention from the Company’s core business.

The Company may become involved in labor disputes or employees could form or join unions increasing the Company’s costs to do business.

Some of Intertape Polymer Group’s employees are subject to collective bargaining agreements. Other employees are not part of a union and there are no assurances that such employees will not form or join a union. Any attempt by employees to

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form or join a union could result in increased labor costs and adversely affect the Company’s business, its financial condition and/or results of operations.

Except for the current strike at the Company’s Brantford, Ontario plant, the Company has never experienced any work stoppages due to employee related disputes. Management believes that it has a good relationship with its employees. There can be no assurance that work stoppages, or other labor disturbances will not occur in the future. Such occurrences could adversely affect Intertape Polymer Group’s business, financial condition and/or results of operations.

The Company may become involved in litigation which could have an adverse impact on its business.

Intertape Polymer Group, like other manufacturers and sellers, is subject to potential liabilities connected with its business operations, including potential liabilities and expenses associated with product defects, performance, reliability or delivery delays. Intertape Polymer Group is threatened from time to time with, or is named as a defendant in, legal proceedings, including lawsuits based upon product liability, personal injury, breach of contract and lost profits or other consequential damages claims, in the ordinary course of conducting its business. A significant judgment against Intertape Polymer Group, or the imposition of a significant fine or penalty, as a result of a finding that the Company failed to comply with laws or regulations, or being named as a defendant on multiple claims could adversely affect the Company’s business, financial condition and/or results of operations.

Uninsured and underinsured losses and rising insurance costs could adversely affect the Company’s business.

Intertape Polymer Group maintains property, general liability and business interruption insurance and directors and officers liability insurance on such terms as it deems appropriate. This may result in insurance coverage that, in the event of a substantial loss, would not be sufficient to pay for the full current market value or current replacement cost of the Company’s lost investment.  Not all risks are covered by insurance.

Intertape Polymer Group’s cost of maintaining property general liability and business interruption insurance and director and officer liability insurance is significant. The Company could experience higher insurance premiums as a result of adverse claims experience or because of general increases in premiums by insurance carriers for reasons unrelated to its own claims experience. Generally, the Company’s insurance policies must be renewed annually. Intertape Polymer Group’s ability to continue to obtain insurance at affordable premiums also depends upon its ability to continue to operate with an acceptable claims record. A significant increase in the number of claims against the Company, the assertion of one or more claims in excess of its policy limits or the inability to obtain adequate insurance coverage at acceptable rates, or at all, could adversely affect the Company’s business, financial condition and/or results of operations.

Product liability could adversely affect the Company’s business.

Difficulties in product design, performance and reliability could result in lost sales, delays in customer acceptance of Intertape Polymer Group’s products and lawsuits and would be detrimental to the Company’s market reputation. Intertape Polymer Group’s products and the products supplied by third parties, on behalf of the Company, are not error free. Undetected errors or performance problems may be discovered in the future. The Company may not be able to successfully complete the development of planned or future products in a timely manner or to adequately address product defects, which could harm the Company’s business and prospects. In addition, product defects may expose Intertape Polymer Group to product liability claims, for which it may not have sufficient product liability insurance. Difficulties in product design, performance and reliability or product liability claims could adversely affect Intertape Polymer Group's business, financial condition and/or results of operations.

Acquisitions have been a substantial part of the Company’s growth strategy, which could expose it to significant business risks.

An important aspect of Intertape Polymer Group’s business strategy was to make strategic acquisitions that would complement its existing products, expand its customer base and markets, improve distribution efficiencies and enhance its technological capabilities. Financial risks from these acquisitions include the use of the Company’s cash resources and incurring additional debt and liabilities. Further, there are possible operational risks including difficulties in assimilating and integrating the operations, products, technology, information systems and personnel of acquired companies; the loss of key personnel of acquired entities; the entry into markets in which the Company has no or limited prior experience; and difficulties honoring

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commitments made to customers of the acquired companies prior to the acquisition. The failure to adequately address these risks could adversely affect the Company’s business.

Although the Company performs due diligence investigations of the businesses or assets that it acquires, and anticipates continuing to do so for future acquisitions, there may be liabilities related to the acquired business or assets that the Company fails to, or is unable to, uncover during its due diligence investigation and for which the Company, as a successor owner, may be responsible. When feasible, the Company seeks to minimize the impact of these types of potential liabilities by obtaining indemnities and warranties from the seller, which may in some instances be supported by deferring payment of a portion of the purchase price. However, these indemnities and warranties, if obtained, may not fully cover the liabilities because of their limited scope, amount or duration, the financial resources of the indemnitor or warrantor or other reasons.

Because Intertape Polymer Group is a Canadian company, it may be difficult to enforce rights under U.S. bankruptcy laws.

Intertape Polymer Group and certain of its subsidiaries are incorporated under the laws of Canada and a substantial amount of its assets are located outside of the United States. Under bankruptcy laws in the United States, courts typically assert jurisdiction over a debtor's property, wherever located, including property situated in other countries. However, courts outside of the United States may not recognize the United States bankruptcy court's jurisdiction over property located outside of the territorial limits of the United States. Accordingly, difficulties may arise in administering a United States bankruptcy case involving a Canadian debtor with property located outside of the United States, and any orders or judgments of a bankruptcy court in the United States may not be enforceable outside the territorial limits of the United States.

It may be difficult for investors to enforce civil liabilities against Intertape Polymer Group under U.S. federal and state securities laws.

Intertape Polymer Group and certain of its subsidiaries are incorporated under the laws of Canada.  Certain of their directors and executive officers are residents of Canada and a portion of their assets are located outside of the United States. In addition, certain subsidiaries are located in other foreign jurisdictions.  As a result, it may be difficult or impossible for U.S. investors to effect service of process within the United States upon Intertape Polymer Group, its Canadian subsidiaries, or its other foreign subsidiaries, or those directors and officers or to realize against them upon judgments of courts of the United States predicated upon the civil liability provisions of U.S. federal securities laws or securities or blue sky laws of any state within the United States.  The Company believes that a judgment of a U.S. court predicated solely upon the civil liability provisions of the Securities Act of 1933, as amended and/or the Exchange Act of 1934, as amended (“Exchange Act”) would likely be enforceable in Canada if the U.S. court in which the judgment was obtained had a basis for jurisdiction in the matter that was recognized by a Canadian court for such purposes. The Company cannot assure that this will be the case.  There is substantial doubt whether an action could be brought in Canada in the first instance on the basis of liability predicated solely upon such laws.

The Company’s exemptions under the Securities Exchange Act of 1934, as amended, as a foreign private issuer limits the protections and information afforded investors.

Intertape Polymer Group is a foreign private issuer within the meaning of the rules promulgated under the Exchange Act.  As such, it is exempt from certain provisions applicable to United States companies with securities registered under the Exchange Act, including: the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission of quarterly reports on Form 10-Q or current reports on Form 8-K; the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing insider liability for profits realized from any "short-swing" trading transaction (i.e., a purchase and sale, or sale and purchase, of the issuers’ equity securities within a period of less than six months).  Because of these exemptions, purchasers of Intertape Polymer Group’s securities are not afforded the same protections or information generally available to investors in public companies organized in the United States.  Prior to December 31, 2000, the Company filed its annual reports on Form 20-F.  Commencing with the year ended December 31, 2000 through December 31, 2007, and again for the year ended December 31, 2009, the Company filed its annual reports on Form 40-F.  For the year ended December 31, 2008, and again this year, Intertape Polymer Group will file its annual report on Form 20-F.  Intertape Polymer Group reports on Form 6-K with the United States Securities and Exchange Commission and publicly releases quarterly financial reports.

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Item 4.

Information on the Company

A.

HISTORY AND DEVELOPMENT OF THE COMPANY

The business of Intertape was established when Intertape Systems Inc., a predecessor of the Company, established a pressure-sensitive tape manufacturing facility in Montreal.  Intertape Polymer Group was incorporated under theCanada Business Corporations Act on December 22, 1989 under the name “171695 Canada Inc.”  On October 8, 1991, the Company filed a Certificate of Amendment changing its name to “Intertape Polymer Group Inc.”  A Certificate of Amalgamation was filed by the Company on August 31, 1993, at which time the Company was amalgamated with EBAC Holdings Inc.  The Shareholders, at the Company’s June 11, 2003 annual and special meeting, voted on the replacement of the Company’s By-Law No. 1 with a new General By-Law 2003-1. The intent of the replacement by-law was to conform the Company’s general by-laws with amendments that were made to theCanada Busines sBusiness Corporations Act since the adoption of the general by-laws and to simplify certain aspects of the governance of the Company.  On August 6, 2006, the Company filed a Certificate of Amendment to permit the Board of Directors of the Company to appoint one or more additional Directors to hold office for a term expiring not later than the close of the next annual meeting of the Company’s Shareholders, so long as the total number of Directors so appointed does not exceed one-third of the number of Directors elected at the previous annual meeting of the Shareholders of the Company.

Intertape Polymer Group’s corporate headquarters is located at 9999 Cavendish Blvd., Suite 200, Ville St. Laurent, Quebec, Canada H4M 2X5 and the address of its registered office is 1250 René-Lévesque Blvd. West, Suite 2500, Montreal, Quebec, Canada H3B 4Y1, c/o Heenan Blaikie LLP.

During the third quarter of 2010, the Company realigned its organizational, operational and related internal reporting structures combining its Tapes and Films and Engineered Coated Products operations which were previously considered as two separate operating segments, into one segment.  The change to a single operating segment was as a result of various factors including changes in the Company’s management structure, the implementation of a strategic initiative plan and the objective to be able to make more informed decisions with respect to the Company has made no significant capital expenditures or divestitures during the last three fiscal years ending December 31, 2008 and has none in progress.as a whole.

The Company has restructured its subsidiaries over the courseoperates in various geographic locations and develops, manufactures and sells a variety of the last few years.  Set forth below isspecialized polyolefin films, paper and film pressure sensitive tapes and complimentary packaging systems to a table of the merger historydiverse customer base.  Most of the Company’s significant subsidiaries:

There havehas not been any indicationsindication of any public takeover offers by third parties in respect of the Company’s shares or by the Company in respect of other companies’ shares during the last and current fiscal year.

B.

BUSINESS OVERVIEW

Intertape Polymer Group is a leader in the specialty packaging industry.  Management believes the Company is the second largest manufacturer of tape products in North America and is recognized for its development, manufacture and sale of adhesive tapes, specialty tapes, plastic packaging films, and engineered coated products for use in industrial and retail applications.  The Company’s products include carton sealing tapes, including Intertape® pressure-sensitive and water-activated tapes; industrial and performance specialty tapes, including masking, duct, electrical and reinforced filament tapes; Exlfilm® shrink film; Stretchflex® stretch wrap,  and engineered coated fabric products.products, and flexible intermediate bulk containers.

The Company has approximately 2,1302,000 employees with operations in 17 locations, including 1312 manufacturing facilities in North America and one in Europe.

Intertape Polymer Group has assembled a broad range of products by leveraging its manufacturing technologies, its research and development capabilities, global sourcing expertise and its strategic acquisition program.  Since 1995,Over the years, the Company has made a number of strategic acquisitions in order to offer a broader range of products to better serve its markets.  

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The Company’s extensive product line permits Intertape Polymer Group to offer tailored solutions to a wide range of end-markets including food and beverage, consumer, industrial, building and construction, oil and gas, water supply, automotive, medical, agriculture, aerospace and military applications.

Overview of Periods

2008

As a result of the downturn in the economy during 2008, the Company made several strategic moves so it would be positioned to effectively deal with the economic uncertainty.  In the short term, the Company was proactive and implemented several cost savings measures, including reductions in workforce, reductions in pay for salaried employees, shortened work weeks for hourly employees, streamlining plant operations, and eliminating third-party service providers.  The Company also developed a strategic long term plan which it believed would permit the Company to withstand the downturn of the economy.

As a first step, with a view towards reducing financial expenses, on March 27, 2008 the Company successfully refinanced its existing Senior Secured Credit Facility (“Facility”) with a $200.0 million Asset-Based Loan (“ABL”) entered into with a syndicate of financial institutions.  The amount of borrowings available to the Company under the ABL is determined by its applicable borrowing base from time to time.  The borrowing base is determined by calculating a percentage of eligible trade accounts receivable, inventories, machinery and equipment.  At closing, after repaying the remaining balance of the Facility, the Company had cash and undrawn revolver of approximately $35.4 million.  The ABL is priced at libor plus a loan margin determined from a pricing grid. The loan margin declines as unused availability increases.  The loan margin ranges from 1.50% to 2.25%, however, through September 2008, the applicable loan margin was fixed at 1.75%.  Unlike the Facility, the ABL contains only one financial covenant, a fixed charge ratio of 1.0 to 1.0, which becomes effective only when unused availability drops below $25.0 million.  Under the refinancing agreement, the Company’s unencumbered real estate is subject to a negative pledge in favour of the ABL lenders; however, the Company retains the ability to secure financing on all or a portion of its owned real estate and have the negative pledge of the ABL lenders subordinated to up to $35.0 million of real estate mortgage financing.  The Company also settled two interest rate swaps that the Company entered into in June and July 2005 hedging interest rates for the Facility.  Financial expenses for 2008 were $19.8 million, a decline of 42% from 2007.

On September 29, 2008, the Company obtained a $1.8 million mortgage loan on its real estate located in Bradenton, Florida.  The mortgage is for a period of 20 years bearing interest at a rate of 7.96%, adjusting every three years to a 3.55% spread over the 10-year Interest Rate Swap published in the Daily Release of the Federal Reserve.  

In September and October, 2008, to hedge interest rates for the ABL, the Company entered into interest rate swap agreements for a notional amount of $40 million maturing in September 2011, and $30 million which matured in October 2009.  Under the terms of these interest rate swap agreements, the Company receives (or received) on a monthly basis, a variable interest rate and pays (or paid) a fixed interest rate of 3.35% and 2.89%, respectively, plus the applicable premium on its ABL.

Prior to 2008, the Company did not use derivative financial instruments to reduce its exposure to foreign currency risks as historically these risks were not significant.  In accordance with the Company’s foreign exchange rate risk policy, in November 2008, the Company entered into a series of thirty-six monthly forward foreign exchange rates contracts to purchase an aggregate CDN$40.0 million which began in February 2009 at fixed exchange rates ranging from CDN$1.1826 to CDN$1.12808 to the U.S. Dollar.

In August, 2008, Intertape Polymer Group announced that the Toronto Stock Exchange (“TSX”) had approved the Company’s normal course issuer bid pursuant to which the Company was entitled to repurchase for cancellation up to 2,947,817 common shares over the twelve-month period commencing August 28, 2008 and ending on August 27, 2009.  The Company repurchased 5,298 common shares pursuant to the normal course issuer bid, which were canceled.

During the third quarter of 2008, the Company’s wholly-owned Portuguese subsidiary, Fibope Portuguesa-Filmes Biorientados S.A. (“Fibope”), entered into a long-term loan bearing interest at a rate of Euribor plus a premium of 125 basis points, increased to 175 basis points on December 31, 2010.  Payments of interest only are due for the first two years followed by eight semi-annual principal payments commencing on January 2010 and November 2010, respectively.  As of December 31, 2008, $7.7 million had been borrowed.  As of December 31, 2010, approximately $6.0 million remained outstanding.

15

2009

During 2009, the Company implemented its long term strategic plan in an effort to mitigate the impact of the global economic downturn on the Company.  The Company’s strategy was to deal with the situation proactively by continuing and expanding its several cost reduction measures, opening new market channels, the development and sales of new products, and productivity improvements.  In addition, a key element of the Company’s strategy was and continues to be cash management.

The challenges to the industry persisted throughout 2009.  Raw material prices fluctuated with propylene-related raw material costs rising significantly and resin based raw material costs dropping, both of which resulted in intense pricing pressure, no pricing power and significantly impacted selling prices.  Also, the North American residential housing market remained soft throughout the year which caused the supply chain supporting this market to carry excess inventories significantly reducing product demand.

Although the struggling economy affected sales, the initiatives taken by the Company throughout 2009 enabled the Company to somewhat soften its impact.  The Company’s new products attracted attention in the market.  An increased focus on cash management was a factor in increased cash flows.  Also, as a part of the Company’s objectives to lower costs, enhance customer order fulfillment and optimize inventory investment, during the fourth quarter, the Company made the decision to consolidate the operations of its manufacturing facility located in Hawkesbury, Ontario, into the Company’s manufacturing facility located in Truro, Nova Scotia, and to sell the buildings.  The buildings were not sold as of December 31, 2010.  Subsequent to December 31, 2010, a sales contract was entered into to sell one of the buildings and the transaction is expected to be completed during the second quarter of 2011.

In January 2009, the Company received a notice from the New York Stock Exchange (the “Exchange”) that it was not in compliance with the Exchange’s listing standards because the 30-trading day average closing price of the Company’s common shares dropped below $1.00, which the Company believes was as a result of several factors, most of which were related to the downturn in the economy.  The Company had six months to cure the deficiency, however due to the then current economic conditions, the Exchange temporarily suspended its $1.00 minimum price requirement.  The Company notified the Exchange that it intended to cure the deficiency and, in fact, the price of the Company’s common stock rose above $1.00 and continued to trade above $1.00 per share until the Company’s common shares were voluntarily delisted from the Exchange.  The Company, however, concluded that the overall trading volume of the Company’s common shares was not sufficient to justify listing on two exchanges so the Company delisted its stock from the Exchange effective December 3, 2009.  The delisting from the Exchange did not constitute a default under the Company’s ABL or Indenture governing the Company’s Senior Subordinated Notes and did not affect the Company’s operations or change its reporting requirements with the U.S. Securities and Exchange Commission.  The Company’s shares of common stock continue to be traded on the TSX.  The Company continues to be subject to the federal laws of Canada, the jurisdiction in which the Company is incorporated, as well as Canadian and U.S. securities laws and corporate governance rules applicable to Canadian publicly listed companies, including the rules of the TSX.

On November 12, 2009, the Company named Bernard J. Pitz as its Chief Financial Officer.  Mr. Pitz brought with him almost twenty years of experience serving as a Chief Financial Officer and in other executive capacities.  He holds a B.S. and M.B.A. from Northern Illinois University and University of Chicago, respectively.

During the fourth quarter of 2009, the Company repurchased certain of its Senior Subordinated Notes with a face value of $6.3 million resulting in the reduction of the total face value of outstanding Senior Subordinated Notes governed by the Company’s Indenture from $125.0 million to $118.7 million.  The repurchase also reduced the Company’s annual interest expense by $0.5 million.

2010

During 2010, the Company remained in prudent management mode focusing on cost and debt reductions while making productivity improvements, introducing new products, and opening new market channels.

On June 8, 2010, Gregory A. Yull was named President and Chief Executive Officer of the Company. and was appointed to the Board on August 2, 2010.  Mr. Yull has been with the Company many years and brings with him extensive industry knowledge, hands-on experience and a full understanding of the Company’s objectives.

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In May 2010, the Company announced that the Toronto Stock Exchange had approved the Company’s normal course issuer bid pursuant to which the Company was entitled to repurchase for cancellation up to 2,947,552 common shares over the twelve-month period commencing May 26, 2010 and ending on May 25, 2011.  The Company has two operating segments that are reportable segments as those terms are usednot yet repurchased any common shares pursuant to the normal course issuer bid.

In October 2010 the Company obtained a $3 million mortgage loan on its owned real estate located in Danville, Virginia.  The mortgage is for a term of 32 months bearing interest at an annual rate of 10%.  The mortgage requires monthly payments of principal and interest in the Canadian Instituteamount of Chartered Accountants Handbook, Tapes$63,741 with a lump sum payment of all remaining unpaid principal and Filmsaccrued interest due on July 1, 2013.

The Company has had a sales presence in Europe for many years with supply and Engineered Coated Products.services coming from the United States.  In December 2010, the Company established a local facility near Flensburg, Germany, to support the Company’s increased focus in Europe with expansion into several different market segments through an increased sales force.  The new facility will allow the Company to service its customers with pressure sensitive tapes including the following Intertape® branded products:  masking tapes, flatback tapes, aluminum foil tapes, double coated tapes, cloth duct tapes as well as several electrical and electronic grade tapes.  In addition, Central® Brands of water activated tapes will be stocked in the distribution center.  This new facility will help service the Company’s European customers with faster deliveries and smaller minimum order quantities and increase the Company’s brand recognition in Europe.

During the last quarter of 2010, the Company made the decision to terminate operations at its Brantford, Ontario manufacturing facility.  The facility is scheduled to be closed by June of 2011.  This is as a result of the economic consequences of the continuing strike of its unionized workers.  While some of the Brantford production will be transferred internally to other facilities, the Company has decided to discontinue certain non-core product lines.

In August 2008, the Company acquired the exclusive North American rights to a pending patent with respect to an automatic wrapping system.  The system is designed to automate the process of wrapping packages of up to 60 feet in length.  The technology targets industries such as wood products, which are traditionally manually wrapped.  Along with the distribution rights, the Company acquired wrapping machines and existing customer contracts for a total consideration of CDN$5.5 million.  As part of acquiring the distribution rights, the Company also made future performance commitments, which required additional considerations or penalties if these commitments were not met.  However, within the first two years of the purchase agreement, the automatic wrapping system had to achieve certain market acceptance parameters or the Company had the right to renegotiate the future performance commitments with the vendor and if such renegotiation was not concluded on terms satisfactory to the Company, then the future performance commitments would not be binding on the Company.  Effective September 30, 2009 and due to the adverse economic conditions impacting the lumber wrap film market targeted under the Asset Purchase Agreement, the Company did not meet the performance criteria included in the first milestone of the Asset Purchase Agreement.  The performance agreements have been amended, most recently on April 9, 2010.

(1)

Products, Markets and Distribution

(a)

Tapes and Films Division

The Company manufactures a variety of specialized polyolefin plastic and paper based products, as well as complementary packaging systems for use in industrial and retail applications. These products include Intertape^® pressure sensitive and Central™ water-activated carton sealing tapes; industrial and performance specialty tapes including paper, duct, electrical and reinforced filament tapes; Exlfilm^® shrink film and StretchFLEX^® stretch wrap.

The Company’s tape and film products are manufactured and sold under Intertape brands including Intertape®, Central™, Exlfilm® and StretchFLEX® to industrial distributors and retailers, and are manufactured for sale to third parties under private brands.

The Company introduced its new line of Intertape® brand Double-Coated Tapes in phases, the first of which began in June 2010 which introduced three double-coated tissue tapes and three double-coated polyester tapes.  These high-performance technical products are used in a number of applications including corrugated splicing, gasket attachment, plastic housing and component assembly, nameplates, interior and exterior trim attachments and lens bonding.  The Company’s products are also convertible for a wide variety of applications requiring die cuts and custom parts.

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In December 2010, the Company established a local distribution facility near Flensburg, Germany, to service its customers with pressure sensitive tapes including the following Intertape® branded products: masking tapes, filament tapes, flatback tapes, aluminum foil tapes, double coated tapes, cloth duct tapes, as well as several electrical and electronic grade tapes.  In addition, Central® brands of water activated tapes will be stocked in the distribution center.  

During August 2009, the Company reaffirmed its commitment to the alternative energy industry by announcing plans to continue the development of additional products for its current portfolio designed for wind, solar, geothermal and biofuel generation markets.  The Company’s stated goal continues to be single source dedicated to the ongoing development of performance tapes and films that are an integral part of powering the alternative energy market.

During September 2009, the Company announced the launch of a new product line of aluminum foil tapes to address the industrial, HVAC, aerospace, appliance, and transportation industries, the most significant markets in this category.  This product line aligns with the strategic direction of the Company to leverage its expertise at the operations and customer level.

In September 2008, the Company reopened its Brighton, Colorado, facility which is the site of the Company’s new in-house solvent coater.  The coater will supportsupports the low cost manufacture of products.  The added capacity will permitpermitted growth of existing products and increaseincreased the Company’s ability to rapidly and cost-effectively bring to market new products developed by the Company.

During the third quarter of 2008, the Company introduced the first product in its low environmental impact line (“LILI™”), a biodegradable film for its iCusion™ Air Pillow Protective Packaging product.  The goal of LILI™ is to reduce the impact of Intertape Polymer Group and its customers on the environment.

For the years ending December 31, 2008,2010, and December 31, 2007,2009, tapes and films accounted for 80% and 79%, respectively,83% of the Company’s sales.

The Company’s tape and film products consist of four main product groups:  (A) Carton Sealing Tapes, (B) Industrial & Specialty Tapes, (C) Films and (D) Protective Packaging.

Carton Sealing Tapes

Carton sealing tapes are sold primarily under the Intertape^® and Central™ brands to industrial distributors and leading retailers, as well as to third parties under private brands. Management believes Intertape is the only company worldwide that produces carton sealing tapes using all four adhesive technologies: hot melt, acrylic, natural rubber and water-activated. The Company also sells the application equipment required for the dispensing of its carton sealing tapes.

Hot Melt Tape

Hot melt carton sealing tape is a polypropylene film coated with a synthetic rubber adhesive which offers a wide range of application flexibility and is typically used in carton sealing applications.  Primary competitors are 3M Co., Shurtape Technologies LLC and Vibac Group.

Acrylic Tape

Acrylic carton sealing tape is a polypropylene film coated with an aqueous, pressure sensitive acrylic adhesive which is best suited for applications where performance is required within a broad range of temperatures from less than 40^oF(4°C) to greater than 120^oF(49°C).  Primary competitors are 3M Co. and Sekisui TA Industries Inc.

Natural Rubber Tape

Natural rubber carton sealing tape is a polypropylene film coated with natural rubber adhesive and is unique among the carton sealing tapes because of its aggressive adhesion properties.  This tape is ideally suited for conditions involving hot, dusty, humid or cold environments.  Typical uses include moving and storage industry applications, as well as packaging and shipping.  The primary competitors are Evotape SpA of Italy and Monta of Germany.

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Water Activated Tape

Water-activated carton sealing tape is typically manufactured using a filament reinforced kraft paper substrate and a starch based adhesive that is activated by water. Water-activated tape is used primarily in applications where a strong mechanical bond or tamper evidence is required. Typical end-use markets include fulfillment centers, mail order operations, furniture manufacturers and the apparel industry.  Primary competitors are The Crowell Corp. andOur primary competitor is Holland Manufacturing Co. Inc.

Industrial & Specialty Tapes

The Company produces seveneight primary industrial and specialty products: Paper Tape, Flatback Tape, Duct Tape, Filament Tape, Stencil Products, Electrical Tape,paper tape, flatback tape, duct tape, filament tape, stencil products, electrical tape, double-coated tape, and Double-Coated Tape.foil tape.

Paper Tape

Paper tape is manufactured from a crepe paper substrate coated with a natural rubber or a synthetic rubber adhesive. Paper tape is used for a variety of performance and general purpose end-use applications. Product applications include paint masking (consumer, contractor, automotive, aerospace and marine), splicing, bundling/packaging, and general light duty applications.  Primary competitors of the Company for this product are 3M Co., Shurtape Technologies, LLC, and tesa tape inc.

Flatback Tape

Flatback tape is manufactured using a smooth kraft paper substrate coated with a natural rubber/SIS blended adhesive. Flatback tape is designed with low elongation and is widely used in applications such as splicing where the tape should not be distorted.  Typical applications for flatback tape include printable identification tapes, label products and carton closure.  Primary competitors of the Company for this product are Shurtape Technologies, LLC, and 3M Co.

Duct Tape

Duct tape is manufactured from a polyethylene film that has been reinforced with scrim and coated with natural/synthetic rubber blend adhesive or speciality polymer adhesives. Duct tape is primarily used by general consumers for a wide range of applications. Duct tapes are also used in maintenance, repair and operations, in the heating, ventilation and air conditioning  markets, construction and in the convention and entertainment industries.  Primary competitors of the Company for this product are Berry Plastics Corp., 3M Co. and Shurtape Technologies, LLC.

Filament Tape

Filament tape is a film or paper adhesive tape with fiberglass strands or polyester fibers embedded in the adhesive to provide high tensile strength. Primary applications for filament tape include appliance packing, bundling and unitizing, and agricultural applications.  Primary competitors of the Company for this product are 3M Co., TaraTape, Inc. and Shurtape Technologies, LLC.

Stencil Products

Stencil products are manufactured from a calendared natural/synthetic rubber blended substrate with an acrylic adhesive. Stencil products are used in applications within the sign and monument manufacturing markets to protect a surface where sandblasting is required.  The Company’s primary competitor for this product is 3M Co.

Electrical and Electronic Tapes

Electrical and electronic tapes are manufactured from a number of different substrates, including paper, polyester, glass cloth and a variety of adhesive systems that include rubber, acrylic and silicone adhesives. Electrical and electronic tapes are Underwriters Laboratories (UL) approved and engineered to meet stringent application specifications.  Primary competitors of the Company for this product are 3M Co., Permacel, and Saint-Gobain Performance Plastics.

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Double-Coated Tapes

Double-coated tapes are manufactured from a paper, foam, or film substrate and are coated on both sides with a variety of adhesive systems. Double-coated tapes also use a release liner made from paper or film that prevents the tape from sticking to itself. Double-coated tapes are typically used to join two dissimilar surfaces.  The Company’s double-coated tape products are used in the manufacture and regripping of golf clubs, with smaller sales to the carpet installation and the graphics industries.  Primary competitors of the Company for this product are 3M Co., Avery Dennison Corp., tesa tape, inc., and Scapa Group plc.

Foil Tapes

Foil tapes are manufactured using aluminum and a variety of adhesive systems.  The shiny, UV resistant foil backing offers an enhanced appearance, excellent reflective and flame retardant properties, and remains flexible to resist cracking and lifting around irregular or curved surfaces.  These tapes have application in various industries including aerospace, transportation, HVAC and industrial.  Primary competitors of the Company for this product are 3M Co., Berry Plastics and Avery Dennison Corp.

Films

The Company primarily produces two film product lines: Exlfilm® Shrink Film and StretchFLEX® Stretch Wrap.

Exlfilm® Shrink Film

Exlfilm® shrink film is a specialty plastic film which shrinks under controlled heat to conform to a package’s shape. The process permits the over-wrapping of a vast array of products of varying sizes and dimensions with a single packaging line. Exfilm® is used to package paper products, consumer products such as bottled water, toys, games, sporting goods, hardware and housewares and a variety of other products.  In 2009, the Company introduced Exlfilm™OXO, an oxo-biodegradable shrink film.  Primary competitors of the Company for this product are Sealed Air Corp. and Bemis Co. Inc.

Intertape Polymer Group entered the European shrink film market through its investment in Fibope in April 1995. The Company initially purchased a 50% equity interest in Fibope, acquiring the remaining 50% equity stake in July 2003 to serve as a platform to penetrate European and African markets with other Intertape products.products of the Company.  Fibope operates as an autonomous unit within Intertape Polymer Group.

Fibope produces a full range of shrink film products for sale in the European Community. Raw materials are primarily sourced within Europe, with multiple sources utilized to ensure stability of supply and a competitive price environment.

StretchFLEX® Stretch Wrap

Stretch wrap is a single or multi-layer plastic film that can be stretched without application of heat. It is used industrially to wrap pallets of various products ensuring a solid load for shipping.

The Company uses state-of-the-art multi-layer technology for the manufacturing of its StretchFLEX® stretch wrap. This technology has allowed the Company to focus on the introduction of a high performance product while reducing manufacturing costs. The Company introduced Genesys™ in 2005, Fortress™ in 2007, and Prolite™ in 2008, which are light gauge high performance films created for wrapping irregularly shaped packages.  In 2009, the Company introduced StretchFLEX®.  Primary competitors of the Company for this productthese products include Sigma Plastics Group, Berry Plastics Corp., Pliant Corp. and AEP Industries, Inc.

Protective Packaging

Air Pillows

Air pillows are manufactured by the Company from polyethylene film and are inflated at the point of use with an air pillow machine.  The Company markets both traditional polyethylene, as well as oxo-biodegradable, air pillow products.  Also, as mentioned above, the Company has added a biodegradable film to its iCusion™ Air Pillow Protective Packagingair pillow protective packaging products.  Air pillows are used as

20

packaging material for void fill and cushioning applications.  Typical end-use markets for air pillows include fulfillment houses, contract packagers, and mail order pharmacies.  Primary competitors of the Company for this product are Pregis Corp., Sealed Air Corp., Storopack, Inc., Free-Flow Packaging International Inc. and Polyair Inter Pack Inc.

Flashpac™

In the last quarter of 2008, Intertape Polymer Group introduced Flashpac™, which is a foam-in-bag protective cushion that produces a form fitting protective packaging material.  Each Flashpac™ bag contains chemicals that are activated manually and when mixed, form liquid polyurethane which quickly expands and solidifies to create custom fit protection for a wide range of products.  The primary competitor for this product is Sealed Air Corp.

(b)

Engineered Coated Products Division

The Company is a North American leader in the development and manufacture of innovative industrial packaging, protective covering, barrier and liner products utilizing engineered coated polyolefin fabrics, paper and other laminated materials.  Its products are sold primarily direct to end-users in a wide number of industries including lumber, construction, food, paper, and agriculture.

On October 5, 2005, Intertape Polymer Inc., a subsidiary of the Company, acquired all of the issued and outstanding shares of Flexia Corporation Ltd., being the body corporate that resulted from the amalgamation of Flexia Corporation and Fib-Pak Industries, Inc.  The businesses of such companies are now operating under a wholly-owned limited partnership,Canadian corporation, ECP L.P.GP II Inc.  ECP L.P.GP II Inc. is a producer of a wide range of engineered coated and laminated products with facilities currently located in Langley, British Columbia, and Brantford, Ontario, and Hawkesbury, Ontario.  however, as discussed in the Business Overview section above, the Company is scheduled to close its Brantford facility by June 2011.

The Company’s engineered coated products are categorized in six markets:  (A) Buildingbuilding and Construction,construction, (B) Agro-Environmental,agro-environmental, (C) Consumer Packaging,consumer packaging, (D) Specialty Fabrics,specialty fabrics, (E) Industrial Packaging,industrial packaging, and (F) FIBCs.  For the years ended December 31, 20082010 and December 31, 2007,2009, engineered coated products accounted for 20%approximately 17% and 21%20%, respectively, of the Company’s sales.  

Building and Construction Products

The Company’s building and construction product group includes protective wrap for kiln dried lumber and a variety of other membrane barrier products such as roof underlayment, house wrap, window and door flashing and insulation facing, which are used directly in residential and commercial construction.  The Company also supplies packaging over-wrap sleeves for unitizing multiple bags of fiberglass insulation.  Intertape’s lumber wrap is used to package, unitize, protect and brand lumber during transportation and storage. The product is available in polyethylene or polypropylene coated fabrics and polyethylene films printed to customer specifications.  Lumber wrap is produced at the Company’s plants in Langley, British Columbia; Brantford, Ontario;Columbia, and Truro, Nova Scotia.  Primary competitors of the Company for this product rangethese products include Interwrap, Inc., Fabrene Inc., Mai Weave LLC and various producers from China and Kor ea.Korea.

Agro-Environmental Products

The Company has developed a range of Agro-Environmental products, including membrane structure fabrics, bags for packaging processed cotton, fabrics designed for conversion into hay covers, grain covers, landfill covers, oil field membranes, and canal and pond liners. These fabrics are intended to provide protection during transit and storage and to line waterways and ponds to prevent loss of water and other liquids.

NovaShield™NovaShield® Membrane Structure Fabrics

NovaShield™ is a lightweight, wide-width, and durable polyolefin fabric used as the outer skin layer for flexible membrane structures.  The introduction and continuous improvement of the NovaShield™NovaShield® fabric in the membrane structure market enabled membrane structure manufacturers to expand the use of this product beyond agricultural applications such as agriculture barns into larger structures for human occupancy such as amphitheaters, recreational facilities, trade show pavilions, aircraft hangers, and casinos.  Developments in the product line include the patented stacked weave, and AmorKote™ coatings. The Company sells the NovaShield™ fabrics to membrane structure manufacturers who design, fabricate, and install the structures.  The Company’s main competitors are Fabrene Inc. and a number of polyvinyl chloride producers.  The Company produces these products primarily at its plant in Truro, Nova Scotia.

Nova-Seal®II and Nova-Seal® Premium

The Company began commercial production of Nova-Seal®II at its Truro, Nova Scotia facility in August, 2008.  It is a new roof underlay that is lighter and easier to install than standard #30 building felt and costs less.  In November 2010, the Company

21

introduced new product names for its roof underlayment to insure consistency across products and will help customers distinguish among levels of product performance so they may specify and use the best solution for their particular application.  Primary competitors in this market are Interwrap, W.R. Grace and a variety of #30 felt producers.

AquaMaster® Geomembrane Fabrics

The Company’s AquaMaster® line of oil pit linens and geomembrane fabrics is used as an irrigation canal liner,liners, golf course and aquascape pond liners, and in aquaculture operations.  Primary competitors of the Company for this product include Gundle/SLT Environmental, Inc., Poly-America LP and Firestone Building Products.

Poultry Fabrics

Woven coated polyolefin fabrics are used in the construction of poultry houses in the southern United States.  Materials with high ultraviolet resistance are fabricated into side curtains that regulate ventilation and temperature in buildings. Other materials are used in ceiling construction.  Primary competitors of the Company for this product are Fabrene Inc. and Mai Weave LLC. These products are primarily produced at the Company’s plant in Truro, Nova Scotia.

Consumer Packaging Products

The Company’s consumer packaging products include ream wrap, form, fill & seal packaging, deli wrap, and other coated and laminated products.

The Company competes with a number of local and multinational companies in this market. These products are primarily produced at the Company’s plantsplant in Brantford, Ontario and Langley, British Columbia.

Specialty Fabrics

The Company’s specialty fabric product category is comprised of a variety of specialty materials custom designed for unique applications or specific customers.  The Company’s ability to provide polyolefin fabrics in a variety of weights, widths, colors and styles, and to slit, print and perform various other conversion steps, allows it to provide an array of coated products designed to meet the specific needs of its customers.

Products and applications in this segmentof specialty fabrics include fabrics designed for conversion into pool covers, field covers, disaster relief materials, protective covers and construction sheeting, brattice cloth for mine ventilation, underground marking tapes, salt pile covers and industrial packaging.

Primary competitors of the Company for this product include Fabrene Inc., Mai Weave LLC and producers from China and Korea. The Company primarily produces these products at its Truro, Nova Scotia, plant.

Industrial Packaging Products

The Company’s metal wrap is used to protect large coils of steel and aluminum during transit and storage.  Primary competitors of the Company for this product include Interwrap Inc. and Covalence Specialty Materials Corp.

The Company also manufactures paper mill roll wrap for newsprint, specialty, and fine papers and custom designed fabrics for dunnage bags, which are used to fill space in a shipping container or to position the contents in a container.  DunnageThe production of the dunnage bag fabrics are primarily produced at the Company’s Hawkesbury, Ontario,Truro, Nova Scotia, facility while paper packaging products are produced at the Company’s Brantford, Ontario and Langley, British Columbia, facilities.facility.

FIBC Products

FIBCs are flexible, semi-bulk containers generally designed to carry and discharge 1,500 to 3,500 pounds of dry flowable products such as chemicals, minerals and dry food ingredients. The market for FIBC’s is highly fragmented.  The Company has established proven supply lines with integrated bag manufacturers in India, and China and maintains a small custom manufacturing presence in Hawkesbury, Ontario for domestic specialty bags and for customers wanting small quantities and quick delivery.Mexico.

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(2)

Sales and Marketing

(a)

Tapes and Films Division

As of December 31, 2008,2010, the Company’s Tapes and Films DivisionCompany had a199 sales force of 230 personnel.personnel, including manufacturer representatives.  The Company participates in industry trade shows and uses trade advertising as part of its marketing efforts.  The Company’s customer base for tapes and films is diverse, with no single customer accounting for more than 5%4% of total sales in 2008.2010.  Sales of tapes and filmsproducts from facilities located in the United States, Canada and Europe accounted for approximately 95%80%, 2%17% and 3% of total tapes and films sales, respectively, in 2008; 95%2010; 81%, 2%17% and 3% in 2007,2009, and 96%78%, 2% and 2% in 2006.  Export sales of tapes and films represented 6% of the Company’s total tapes and film sales in 200820% and 3% in 2007 and 2% in 2006.2008.  

Distribution products go to market through a network of paper and packaging distributors throughout North America. Products sold intodistributed in this segmentmanner include carton sealing, masking, duct and reinforced tapes, Exlfilm® and Stretchflex®. In order to enhance sales of the Company’s pressure-sensitive carton sealing tape, it also sells carton closing systems, including automatic and semi-automatic carton sealing equipment. The Company’s Exlfilm® and Stretchflex® products are sold through an existing industrial distribution base primarily to manufacturers of packaged goods and printing and paper products which package their products internally. The industrial electrical tapes are sold to the electronics and electrical industries.

(b)

Engineered Coated Products Division

As of December 31, 2008, the Company’s Engineered Coated Products Division had 67 sales personnel, including manufacturer representatives.  The Company’s marketing strategy includes participation in industry trade shows and trade advertising.  The Company’s customer base for engineered coated products is diverse, with no single customer accounting for more than 6% of total sales in 2008.  Sales of engineered coated products from facilities located in the United States and

Canada accounted for approximately 97% of total engineered coated products sales in 2008, 100% in 2007, and 94% in 2006.  Export sales of engineered coated products represented 2% of total sales in 2008 and 2% of sales in 2007.

The Company’s engineered coated products are primarily sold directly to end-users. The Company offers a line of lumberwrap, FIBCs, and specialty fabrics manufactured from plastic resins. The Company’s engineered coated products are marketed throughout North America.

(3)

Manufacturing and Quality Control

Intertape Polymer Group’s philosophy is to manufacture those products that are efficient for it from a cost and customer-service perspective. In cases in which the Company manufactures its own products, the Company seeks to do so utilizing the lowest cost raw material and add value to such products by vertical integration.

The Company maintains at each of its manufacturing facilities in both segments a quality control laboratory and a process control program on a 24-hour basis to monitor the quality of all packaging and engineered fabric products it manufactures.  At the end of 2008, ten2010, eleven of the Company’s plants were certified under the ISO-9001:2000 quality standards program.

(a)

Tapes and Films Division

The majority of the Company’s products are manufactured through a process which starts with a variety of polyolefin resins which are extruded into film for further processing. Wide width biaxially oriented polypropylene film is extruded in the Company’s facilities and this film is then coated in high-speed equipment with in-house-produced or purchased adhesives and cut to various widths and lengths for carton sealing tape. The same basic process applies for reinforced filament tape, which also uses polypropylene film and adhesive but has fiberglass strands inserted between the layers. Specific markets demand different adhesives and the Company compounds natural rubber, “hot melt,” and water-activated adhesives to respond to its customer demands. Masking tapes utilize the same process with paper as the coating substrate. Duct tapes utilize a similar process with polyethylene coated cloth.

The Company is the only North American manufacturer of all four technologies of carton sealing tape: hot melt, acrylic, water-activated and natural rubber. This broad family of carton sealing tapes is further enhanced by the Company’s tape application equipment which is based in Florida.

The Company has utilized its technology for basic film extrusion, essential to the low cost production of pressure-sensitive tape products, to expand its product line.  Extrusion of up to seven layers of various resins is done in fourfive of the Company’s plants. These high value added films service the shrink and stretch wrap markets.

(b)

Engineered Coated Products Division

Coated fabrics are manufactured in a multi-step operation comprised of slit filament extrusion, traditional scrim manufacturing, coating and laminating and finishing or converting processes. Conversion and value-added processes consist of slit tape extrusion, weaving extrusion coating, slitting, rewinding, printing and converting materials into finished products.

(4)

Equipment and Raw Materials

Intertape Polymer Group purchases mostly custom designed manufacturing equipment, including extruders, coaters, finishing equipment, looms, printers, bag manufacturing machines and injection molds, from manufacturers located in the United States and Western Europe, and participates in the design and upgrading of such equipment. The Company is not dependent on any one manufacturer for its equipment.  

(a)

Tapes and Films Division23

The major raw materials purchased for ourthe Company’s tape products are polypropylene resin, synthetic rubber, hydrocarbon resin, and paper (crepe and kraft).  The resins and synthetic rubber are generated from petrochemicals which are by productsby-products of crude oil and natural gas.  Almost all of these products are sourced from North American manufacturers. The paper products are produced by North American paper manufacturers and are derived from the North American pulp and paper industry.

The major raw material used in our film products is polyethylene resin.  Polyethylene is a derivative of crude oil and/or natural gas petrochemical by products.  

Historically, as a result of global sourcing, the Company was able to manage rising raw material costs through a series of timely sales price increases to its industrial and specialty distributors, and to a lesser extent, its retail customers, and was able to aggressively pursue and secure resin supplies from worldwide sources.  

During the first three quarters of 2008 however, resin-based raw material costs increased significantly, peaking in August.  This, coupled with the economic weakness in the United States and competitive pressures, limited the Company’s Tapes & Film Division’s ability to increase selling prices.  Commencing in September, 2008, resin-based raw material costs decreased sharply depressing selling prices during the fourth quarter.  The lower selling prices resulted in selected products which had been manufactured with higher cost raw materials being sold at a loss.

(b)

Engineered Coated Products Division

The major raw materials used to produce our engineered coated products are polyethylene and polypropylene resins.  Both of these products are petrochemical based products derived from crude oil and/or natural gas.  These products are predominantly sourced from North American petrochemical manufacturers.  The Company’s ECP Division experienced the same

During 2010 resin-based, paper and adhesive raw material costs significantly increased and the Company was unable to pass on a portion of the cost fluctuations asincreases to its customers due to pricing pressure.  During the Tapes & Film Division also resulting in selected ECP Division products which had been manufactured with higher costperiod 2009 throught 2010, raw materials being sold at a loss.material costs increased by more than 30% for resin-based items, 15% for adhesive, and 30% for paper.

(5)

Research and Development and New Products

Intertape Polymer Group’s strategy is to create growth opportunities through enhancements of existing products and the introduction of new products.  The Company’s research and development efforts continue to focus on new products, technology developments, new product processes and formulations.  The new in-house coater at the Brighton, Colorado, facility will make the introduction of new products more cost-effective and will decrease the time it takes to get new products to market.  As described in the sections that follow, the Company introduced several new high margin products in 20082010 and havehas several more to be launched in 2009.2011.

(a)

TapesDuring 2010, Intertape introduced its new line of Intertape® brand double-coated tapes.  These high-performance technical products are used in a number of applications including corrugated splicing, gasket attachment, plastic housing and Films Divisioncomponent assembly, nameplates, interior and exterior trim attachments, and lens bonding.  The double-coated tapes are also convertible for a wide variety of applications requiring die cuts and custom parts.

In 2008, Films2009, Research and Development (“R&D”) introduced a line of filament tapes targeted for use in various appliance manufacturing applications.  These filament tapes are high margin, high performance products which are manufactured at the Company’s Richmond, Kentucky, Marysville, Michigan and Carbondale, Illinois facilities.

Intertape Polymer Group also entered the foil tape market with a full line of aluminum foil tapes manufactured at its Carbondale, Illinois facility.  These tapes have application in various industries including aerospace, transportation, HVAC and industrial.  The product line offers performance ranges within a variety of foil thicknesses and adhesive systems.  The shiny, UV resistant foil backing offers an enhanced appearance, excellent reflective and flame retardant properties, and remains flexible to resist cracking and lifting around irregular or curved surfaces.  The Company’s foil products include linered, self-wound, FSK, ASJ, foil barrier laminates and metalized films.

In 2009, the Company also worked to introduce new high margin products.  It developed a new 5x5 Nova-Seal®I product to strengthen the Company’s position and entry into roofing distribution channels which was renamed in 2010, Nova-Seal®.  The Company’s line of Nova-Seal® underlayment is waterproof, wind resistant and has a patent pending anti-slip surface that is effective in both wet and dry weather.  The Company also introduced a new woven product for waste containment which complements its existing AquaMaster® line.

Intertape also created a new technology called “roll edge face coated” which creates cleaner sharper paint lines with the Company’s newly introduced BLOC-IT™ painters tape.

The Company also introduced PROLITE™, a lightweight clear film which offers superior load retention at a lower wrap cost per load.  The film resists punctures and tears and has a lower reduction in width as it is stretched, thus allowing for narrower initial film widths and a reduced number of wraps to cover a load.

In 2008, R&D developed a biodegradable air pillowspillow which iswas the first product in the Company’s new low environmental impact line (LILI™(Lili™).  It also introduced Flashpac™.  Each Flashpac™ bag contains chemicals which, when mixed, form liquid polyurethane which quickly expands and solidifies to create custom fit protection.  Flashpac™ bags expand up to 70 times their original volume and are generally lighter than other paper and foam packaging.

24

During the year, Tape R&D continuedworked to develop new paint masking tapes that effect crisp lines of demarcation for the paint contractor and do-it-yourself (“DIY”) segments.  Development work also included products with superior, water-white color and clarity to serve packaging segments.

Additionally, Tapethe Company’s R&D is continuingworked to develop foil protective products to support military maintenance programs, as well as filament reinforced products for spoolable, unbonded pipelines for the oil and gas industry.  Lastly, high-temperature, solvent-resistant, double-coated tapes are beingwere developed for the electrical OEM segment, novel masking products are beingwere developed for OEM boat manufacturers and new, light-weight stencil products are beingwere developed for international monument carving accounts.

In 2007, the research and development group for tape products focused on developing products targeting consumer markets.  Specifically, masking products for paint contractors and DIY segments, and superior-strength duct tapes for hardware segments.

During 2007,2008, the Company introduced Fortress™ film to the stretch film market, a new lightweight, high stiffness blown film hand wrap film that has shown excellent performance in the market.  Using unique raw material combinations, this new hand wrap film has shown superior load retention and pallet performance.  

In 2006, the Company finalized the introduction of Genesys™ high performance machine wrap stretch film.  It has been successful in replacing not only competitive films, but also as a high performance product that can be sold into difficult applications as well as in thinner gauges to provide yield savings to the customer.  The material has been very successful, and has become the Company’s premium performance film.  The formulation for Genesys™ Film forms the foundation for prestretch hand wrap, roll wrap, and metal coil wrap.

High Performance Exlfilm® Plus, a significantly improved version of the standard irradiated Exlfilm® Plus shrink film has been successful in securing the Company’s position in the shrink film market.  After extensive resin construction, film formulation, and process development, the Exlfilm® plus was tested in all gauges and was commercialized from the Truro plant in 2006 and 2007.  The film displays significantly improved clarity and gloss, a water-white appearance and improved shrink force and shrink degree.

The Company’s research and development expenses for tapes and films in 2006, 2007, and 2008 totaled $5.0 million, $3.3 million, and $4.3 million, respectively.

(b)

Engineered Coated Products Division

In 2008, ECP R&D worked to introduce new high margin products.  It developedNova-Seal®II which is a new generation of roof underlay that is lighter and easier to install than #30 building felt.felt and is now called Nova-Seal®II is waterproof, wind-resistant and has a patent pending anti-slip surface that is effective in both wet and dry weather.

In 2007, the research and development group for coated products developed, and received building code approvals for, a new woven, coated, printed and perforated house wrap product that is being sold to third parties under private brands and under the FlexGard® brand as well as a first generation premium roofing underlayment that was sold under private label agreements and the NovaSeal® brand.  The Company has also developed and received code approval for an unperforated, non-woven product targeted at the premium segment of the house wrap market.  In addition, the Company has improved its NovaShield™ fabric, to expand its use and increase the ability of the material to further displace PVC fabrics in high end membrane structure applications.  

The Division also expanded their successful AquaMaster® line of geomembrane products to include the first available polyester reinforced polyethylene geomembranes in the industry.  This material is showing early promise in displacing currently employed materials such as PVC and reinforced polypropylene in decorative pond lining, irrigation canals and animal waste lagoon markets. Premium.  

The Company’s research and developmentR&D expenses for engineered coated products in 2006, 20072010, 2009, and 2008 totaled $1.2$6.3 million, $0.8$5.6 million, and $1.3$5.6 million, respectively.

(6)

Trademarks and Patents

Intertape has embarked on a new corporate branding strategy.  The Company intendsstrategy during 2009 to create and communicate overall consistency and simplicity to its markets by adoptingmarkets.  The Company adopted a new look to its corporate logo and redoingredid its sub-brand logos which will beare clearer and will help identify the individual product lines.  The Company believes this will create unique identities and positions associated with Intertape Polymer Group and will build and maintain strong, positive customer perceptions.

Intertape Polymer Group markets its tape products under the trademarks Intertape® and Central™, and various private labels.  The Company’s shrink wrap is sold under the registered trademark Exlfilm®.  Its stretch films are sold under the registered trademark Stretchflex®.  

The Company markets its open mouth bags under the registered trademark Nova-Pac®.  The other key ECPengineered coated products are sold under the registered trademarks Nova-Thene Haymaster®, AquaMaster®, NovaShield™, NovaSeal™,NovaSeal® and NovaWrap™, FlexGard®, and Flexgard®Aspire..  Its engineered fabric polyolefin fabrics are sold under the registered trademark Nova-Thene®.  FIBC's are sold under the registered trademark Cajun® bags.  The Company has approximately 113158 active registered trademarks, 5368 in the United States, 3238 in Canada, and 2852 foreign, which include trademarks acquired from American Tape, Anchor, Rexford Paper Company, Central Products Company, and Flexia.  The Company currently has 159 pending trademark applications in the United States 3 in Canada, and 105 foreign.  

Intertape Polymer Group does not have, nor does management believe it important to the Company’s business to have, patent protection for its carton sealing tape products. However, the Company has pursued patents in select areas where unique products offer a competitive advantage in profitable markets, primarily in engineered coated products for which the Company has 78 patents and 53 patents pending, film for which it has 9 patents and no patents pending, tape products for which it has 57 patents and 53 patents pending, adhesive products for which it has 2 patents1 patent and 24 patents pending, container products for which it has no patents, and retail for which it has 1 patent2 patents pending.

(7)

Competition

The Company competes with other manufacturers of plastic packaging products as well as manufacturers of alternative packaging products, such as paper, cardboard and paper-plastic combinations. Some of these competitors are larger companies with greater financial resources than the Company.  Management believes that competition, while primarily based on price and quality, is also based on other factors, including product performance characteristics and service. No statistics, however, on the packaging market as a whole are currently publicly available.  Please refer to Section B(1) above for a discussion of the Company’s main competitors by product.

The Company believes that significant barriers to entry exist in the packaging market. Management considers the principal barriers to be the high cost of vertical integration which is necessary to operate competitively, the significant number of patents which already have been issued in respect of various processes and equipment, and the difficulties and expense of developing an adequate distribution network.

25

(8)

Environmental Initiatives and Regulation

(a)

Initiatives

Intertape Polymer Group has and continues to be focused on reducing waste and minimizing any harmful environmental impact throughout its manufacturing process, or footprint left behind by the line of products manufactured and marketed by the Company.  Lili™ is the Company’s environmental stewardship program and stands for “low environmental impact line from Intertape”, however it is more than just the growing number of environmentally preferred products that the Company has and continues to develop, but is also a commitment by management and employees of the Company to continually look for opportunities to lower the Company’s environmental impact.  Intertape Polymer Group has and continues to implement activities, changes and programs that are designed to reduce waste in the manufacturing process; reduce the footprint left behind by its products, processes and employees; increase the recycle ability of products through mainstream recycling; provide an alternative solution to a less environmentally friendly product or application; reduces consumption of raw materials, fuel and other energy sources; reduces pollutants released through air, water and waste; and improves the safety and health of employees.

The Company’s latest environmental initiative has been to focus on energy savings.  In August 2009, the Company became an Energy Star® Partner, which is a voluntary partnership with the U.S. Environmental Protection Agency to improve energy efficiency and fight global warming.  Intertape Polymer Group as an Energy Star® Partner joined the fight against global warming by improving the efficiency of its buildings and facilities.  Products and buildings that have earned the Energy Star® designation prevent greenhouse gas emissions by meeting strict energy efficiency specifications set by the government.

(b)

Regulation

Intertape Polymer Group’s operations are subject to extensive environmental regulation in each of the countries in which it maintains facilities. For example, United States (federal, state and local) and Canadian (federal, provincial and local)municipal) environmental laws applicable to the Company include statutes and regulations intended to (i) impose certain obligations with respect to site contamination and to allocate the cost of investigating, monitoring and remedying soil and groundwater contamination among specifically identified parties, (ii) prevent future soil and groundwater contamination; (iii) impose national ambient standards and, in some cases, emission standards, for air pollutants which present a risk to public health, welfare or the natural environment; (iv) govern the handling, management, treatment, storage and disposal of hazardous wastes and substances; and (v) regulate the discharge of pollutants into waterways .waterways.

The Company’s use of hazardous substances in its manufacturing processes and the generation of hazardous wastes not only by the Company, but by prior occupants of its facilities, suggest that hazardous substances may be present at or near certain of the Company’s facilities or may come to be located there in the future. Consequently, the Company is required to monitor closely its compliance under all the various environmental laws and regulations applicable to the Company. In addition, the Company arranges for the off-site disposal of hazardous substances generated in the ordinary course of its business.

Intertape Polymer Group obtains Phase I or similar environmental site assessments, and Phase II environmental site assessments, if necessary, for most of the manufacturing facilities it owns or leases at the time the Company either acquires or leases such facilities. These assessments typically include general inspections and may involve soil sampling and/or ground water analysis. The assessments have not revealed any environmental liability that, based on current information, the Company believes will have a material adverse effect on the Company. Nevertheless, these assessments may not reveal all potential environmental liabilities and current assessments are not available for all facilities. Consequently, there may be material environmental liabilities that the Company is not aware of. In addition, ongoing clean up and containment operations may not be adequate for purposes of future laws and regulations. The conditions of the Company’s properties could also be affected in the future by neighboring operations or the conditions of the land in the vicinity of the Company’s properties. These developments and others, such as increasingly stringent environmental laws and regulations, increasingly strict enforcement of environmental laws and regulations, or claims for damage to property or injury to persons resulting from the environmental, health or safety impact of the Company’s operations, may cause it to incur significant costs and liabilities that could have a material adverse effect on the Company.

Except as described below, the Company believes that all of its facilities are in material compliance with applicable environmental laws and regulations, and that the Company has obtained, and is in material compliance with, all material permits required under environmental laws and regulations.  

The Company is currently remediating contamination at its Columbia, South Carolina plant.  Intertape Polymer Group completed its remediation of its Montreal manufacturing facility during the third quarter of 2006, sold the property to a third party, and has no residual environmental liability related to the site.  As a result of the acquisition of all of the shares of Flexia Corporation Ltd., the Company inherited limited soil contamination resulting from historical activities at Flexia’s facility located in Trois-Rivières (formerly the city of Cap-de-la-Madeleine), Québec.  The Company received a letter from the Ministry of Sustainable Development, Environment and Parks confirming that the activities carried out at the Trois-Rivières facility at the time the Company closed the facility were not activities designated under the Land Protection and Rehabilitation Regulation, thus no remediation was necessary at the facility as a result of ceasing its activities.  The Trois-Rivières facility has been sold with no residual environmental liability to the Company.  The Company has completed remediation activities at its Marysville, Michigan facility and received final approval of the remediation from the State of Michigan.  In addition, although certain of the Company’s facilities emit regulated pollutants into the air, the emissions are within current permitted limitations, including applicable Maximum Achievable Control Technology (“MACT”) requirements.  The Company believes that the ultimate resolution of these matters should not have a material adverse effect on its financial condition or results of operations.

Intertape Polymer Group and its operating subsidiaries are required to maintain numerous environmental permits and governmental approvals for itstheir operations. Some of the environmental permits and governmental approvals that have been issued to the Company or its operating subsidiaries contain conditions and restrictions, including restrictions or limits on emissions and discharges of pollutants and contaminants, or may have limited terms. If the Company or any of its operating subsidiaries fails to satisfy these conditions or to comply with these restrictions, it may become subject to enforcement action and the operation of the relevant facilities could be adversely affected. The Company may also be subject to fines, penalties or additional costs. The Company or its operating subsidiaries may not be able to renew, maintain or obtain all environmental permits and governmental approvals required for the continued operation or furth erfurther development of its facilities, as a result of which the operation of its facilities may be limited or suspended.

C.

ORGANIZATIONAL STRUCTURE

Intertape Polymer Group is a holding company which owns various operating companies in the United States, Canada and Canada.internationally.  ECP L.P.GP II Inc., an Ontario limited partnership,a Canadian corporation, is the principal operating company for the Company’s Canadian operations.  Intertape Polymer Corp., a Delaware corporation, is the principal operating company for the Company’s United States and international operations.

The table below lists for each of the subsidiaries of the Company their respective place of incorporation or constitution, as the case may be, and the percentage of voting securities beneficially owned or over which control or direction is exercised directly or indirectly by Intertape Polymer Group.  Certain subsidiaries, each of which represents not more than ten percent of consolidated assets and not more than ten percent of consolidated sales and operating revenues of the Company, and all of which, in the aggregate, represent not more than twenty percent of total consolidated assets and total consolidated sales and operating revenues of the Company at December 31, 2008, have been omitted.

* Dormant

D.

PROPERTY, PLANTS AND EQUIPMENT

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29

Item 4A.

Unresolved Staff Comments

Not applicable.Applicable.

Item 5.

Operating and Financial Review and Prospects (Management’s Discussion & Analysis)

A.

BUSINESS OVERVIEWBusiness Overview

The CompanyIntertape Polymer Group Inc. (“IPG” or the “Company” as to this Item 5 only) was founded in 1981 and is a recognized leader in the specialty packaging industry in North America. TheAs a result of the Company’s structural, operational, management and reporting realignments during the third quarter of 2010, the Company no longer has two operating divisions, Tapes and Films Division (“T&F Division”) and Engineered Coated Products Division (“ECP Division”).  The T&F DivisionCompany believes that this change is significantly improving organizational effectiveness and maximizing the benefits of the Company’s supply chain, operational, sales and marketing resources.  The Company develops, manufactures and sells a variety of specialized polyolefin films, paper and film pressure sensitive tapes and complementary packaging systems for use in industrial and retail applications. The T&F DivisionCompany designs its specialty products for aerospace, automotive and industrial applications. The T&F DivisionCompany’s tape and film products are sold to a broad range of industrial and specialty distributors, consumer outlets and large end-users in diverse markets. T&F DivisionOther tape products include carton sealing tapes, including Intertape® pressure-sensitive and water-activated tapes; industrial and performance specialty tapes, inc ludingincluding masking, duct, electrical and reinforced filament tapes; ExIFilm® shrink film; and Stretchflex® stretch wrap. The ECP DivisionCompany also manufactures engineered coated fabrics and flexible intermediate bulk containers (“FIBCs”FIBC”). ECP DivisionThese products are sold through a variety of industrial and specialty distributors with a focus on sales to the construction and agricultural markets as well as the flexible packaging market.

What began as a global financial crisis in mid-September 2008 has broadened into a deep economic downturn that is affecting many industries and businesses throughout the world includingDuring 2010, the Company increased sales by 17.1%.  However, significant raw material cost increases occurred that the Company was not able to entirely pass along to customers due to competitive pressures.  This contributed to a 2.5% deterioration of gross margin from 2009 to 2010.  From 2009 to 2010, raw material costs increased by more than: 30%, 15% and 30% for resin-based items, adhesives and paper, respectively.    

The Company decided to close its industry.  The Company’sBrantford, Ontario, Canada manufacturing facility due to the economic consequences of the continuing strike of its unionized workers.  As a result of this plant closure, a charge of $7.4 million was recorded in the fourth quarter 2008 financial results were adversely impactedrelated to property, plant and equipment, severance, inventory and parts and supplies.  Various other expenses of between $1.0 million and $1.5 million are expected to be recorded when incurred throughout 2011.  While some of the Brantford production will be transferred internally to other facilities, the Company has decided to discontinue certain non-core product lines.  The closure of the Brantford, Ontario facility is expected to result in an annualized increase in EBITDA (as such non-GAAP term is defined in the “EBITDA” section below) of approximately $4 million, even though it is expected to negatively impact annualized sales by a significant decline in customer demandabout $10 million.

30

The Company continued to place concerted sales and marketing effort to focus on higher margin products which include recently launched products and a rapid decline inportfolio of existing products.  Manufacturing cost reduction programs, which included productivity improvements, waste reduction and energy conservation, were implemented during 2010 and totalled approximately $15 million.    

For the price of resin-based raw materials and other selected raw materials. As a consequence of the collective impact of these developments,fiscal year 2010, the Company recordedreported a $66.7 million impairment of its goodwill as of the end of the year.  For the full year of 2008, the Company is reporting anet loss of $92.8$56.4 million ($1.570.96 per share, both basic and diluted) compared to a net loss of $8.4$14.4 million ($0.190.24 per share, both basic and diluted) for 2007.  2009.  The significant increase in net loss for the year ended December 31, 2010 in comparison to 2009 is mainly due to:

The Company’s financial results through the first nine months of 2008 reflected the benefits of business model revisions, capital structure improvements, new product introductions and·

Gross margin compression resulting from raw material cost reduction measures undertakenincreases;

·

A change in the past several years. Despite the fact that the United States economy entered into recessionvaluation allowance of future tax assets of $37.8 million, which included a $31.9 million increase in the fourth quarter with respect to the US jurisdiction;

·

Facility closure costs of 2007, profits for$8.1 million, including $7.4 million related to the first nine monthsBrantford, Ontario manufacturing facility closure; and

·

Asset impairments of 2008 totalled $7.0$4.0 million, ($0.12 per share, both basicincluding $3.9 million related to the lumber film automatic wrapping machines and diluted), comparedrelated assets.

Manufacturing cost reductions are expected to a losstotal $15 to $18 million in 2011.  Some of $7.7 million ($0.19 per share, both basic and diluted) for the first nine months of 2007.  These results were also accomplished during a period of sharp and rapid increasesthese cost savings will be offset by continued pricing pressures in the cost of resin-based raw materials.marketplace as well as rising input costs. New product sales and penetration into new markets are also expected to continue in 2011.  Furthermore, additional leverage is expected to be realized on fixed costs.  The Company was successful in recovering a portioncombination of these higherfactors, together with the positive impact from the Brantford, Ontario facility closure and expected improvement in the spread between raw material costs throughand selling price increasesprices are projected to contribute to increased gross margin in 2011.  The Company continues to maintain a longer-term target gross margin of 18% to 19%.  Gross margin expansion combined with sales growth is expected to generate cash flows from operations sufficient to reduce debt during this period. In addition2011.

A focus on making only essential capital expenditures and managing working capital, combined with an increase in cash flows from operations before changes in working capital items, allowed the Company to limit the increase in debt to 1.8% despite an increase in sales of 17.1%, significant gross margin compression and the requirement to post a bond related to the profit improvement,Inspired Technologies, Inc. (“ITI”) litigation.  Capital expenditures decreased by 34.4% from $13.1 million for the year 2009 to $8.6 million for the year 2010.  Capital expenditures are expected to increase in 2011 to between $15 and $18 million, which includes some projects which were deferred in 2010.

In 2009, the Company was able to refinance its Senior Secured Credit Facility (the “Facility”)filed a complaint in the first quarterU.S. District Court for the Middle District of 2008, replacing itFlorida against ITI alleging that ITI had breached its obligations under a supply agreement between the Company and ITI.  The supply agreement provided that the Company would manufacture and supply certain products to ITI, and ITI would purchase such products exclusively from the Company.  The Company alleged that ITI breached this agreement by licensing a third party to manufacture and sell the products.

ITI filed a counterclaim against the Company alleging that the Company had breached its obligations under the agreements between the parties.  ITI also alleged that the Company had engaged in trademark infringement, false advertising, deceptive trade practices, unfair competition and consumer fraud.

On July 14, 2010, the Court granted a motion for summary judgment in favour of the Company on the issue of whether the Company had engaged in trademark infringement, false advertising, deceptive trade practices, unfair competition and consumer fraud.  On September 13, 2010, the Court on its own motion determined that the licensing by ITI of its technology to another manufacturer did not violate the supply agreement.  It also ordered that the position of the parties be reversed, with the Company being positioned as the defendant.

On September 22, 2010, a five-year asset-based loan (“ABL”).jury trial was held on the remaining issues.  The jury concluded that the Company had breached certain obligations under the supply agreement and the confidentiality agreements, and awarded ITI approximately $13.2 million as compensation for its damages.

TheOn October 27, 2010, the Company is reportingfiled its post-trial motions with the trial court requesting a $99.8 million loss ($1.69 per share, both basic and diluted)judgment as a matter of law, new trial, or remittitur.  On December 17, 2010, the Court granted Intertape’s alternative motion for remittitur.  In its order, the fourth quarter of 2008 including approximately $89.0 million of non-cash charges, compared to a loss of $0.7 million ($0.01 per share, both basic and diluted) for the fourth quarter of 2007.  Adjusted EBITDA for the fourth quarter of 2008 was $3.1 million compared to $18.1 million in the fourth quarter of 2007. A reconciliation of adjusted EBITDA between 2007 and 2008 is as follows:Court

offered Plaintiff ITI the choice between accepting a remitted judgment amount of $3.4 million (which included a principal amount of $3.0 million plus prejudgment interest and attorneys’ fees) or electing a new trial on damages.  On January 5, 2011, ITI filed a notice stating that it had chosen a new trial on damages.  On January 6, 2011, the Court set February 9, 2011 as the date for a new trial and a trial was held on the issue of damages.  On February 11, 2011, the jury returned a verdict against the Company in the amount of $0.7 million.

Adjusted EBITDA Reconciliation

2007 to 2008

(In millionsThe execution of US dollars)

(Unaudited)

Sales declined 20.0%the judgment will be stayed during the period required for the fourth quarterCourt to rule on the post-trial motions and appeal.  At December 31, 2010, the Company had posted an appellate bond of 2008 compared$13.2 million related to the fourth quarteroriginal judgment (the “Bond”) plus required post judgment interest.  The Bond was secured with an $8.0 million letter of 2007, including a 22.4% decline in sales volume (units).  The unit volume decline accelerated duringcredit and $5.2 million of cash, which is shown as restricted cash on the quarter asDecember 31, 2010 balance sheet.  Both the holiday season approached, resulting in the Company extending its year-end holiday shutdown into early January at many of its manufacturing facilities.  The sales volume decline was a combination of both weaker end-user demand as well as inventory destocking by both end-usersrestricted cash and the Company’s distributor customer base.  The volume decline adversely impactedletter of credit reduced the Company’s profitability in two significant respects.  The decline in sales volume resulted in lower gross profit dollars being generated fromavailability under the saleAsset Based Loan (“ABL”) as of products.  The decline in sales volume also requiredDecember 31, 2010.  Subsequent to December 31, 2010, the Company to scale back its production operations includingBond was adjusted by the extended holiday shutdown.  The reducti on in production levels resulted in unabsorbed manufacturing overhead costs being charged directly to expense.  The lower sales volumes forCourt based upon the fourth quarteroutcome of 2008 compared to the fourth quarternew trial.  As of 2007 depressed gross profits by approximately $17.3March 10, 2011, the amount of the bond is $1.0 million, on a year over year basis, including $11.0which includes $0.7 million in higher unabsorbed fixed manufacturing overhead costs on a year over year basis.of damages and $0.3 million of anticipated legal fees and pre-judgment interest.

The CompanyCompany’s management has concluded that although it is subject to normal fluctuationspossible that it will incur a loss as a result of the ITI litigation, as of December 31, 2010, the amount of the contingent loss cannot be reasonably estimated.  In reaching this conclusion, the Company’s management considered, among others, the nature and merits of the claims made by parties in its gross profit margins between periods due to the timing of raw material cost changeslitigation; the appellate process, and the related changes in Company selling prices.  However,current procedural status of the case.  Accordingly, the Company experienced significant gross margin compression during the fourth quarter as rapidly falling raw material costs (resin-based raw materials declined approximately 60.0% between October 2008 and December 2008); coupleddid not record an accrual in connection with steady weakening in end-user demand, put pressure on selling prices.  Because of the steep decline in end-user demand and the destocking of inventories by the Company’s distributor customer base, the Company was unable to sell all of its higher cost inventories into the market before the selling price declines.  As a consequence, the Company adjusted its year-end inventory values down to net realizable value for select product lines and also recorded the expected lo ss on the outstanding raw material purchase commitments that go into the production of these products.  The gross profit decline during the fourth quarter of 2008 related to the above-described gross margin compression totalled approximately $16.6 million when compared to the fourth quarter of 2007. Included in the gross margin compression was a $7.7 million non-cash charge to write down inventories to net realizable value.  The Company has added this gross margin compression back when computing adjusted EBITDA due to the unprecedented nature of the events giving rise to the compression.  The fourth quarter 2008 gross margin compression is not indicative of the gross profit margin fluctuations the Company normally experiences.contingent loss.

The Company has taken several measures in response to the challenges presented by this deep economic downturn.  In November 2008, the Company reduced staff and eliminated many third party service providers.  These cost reduction efforts are expected to save the Company an estimated $7.0 million a year in operating expenses.  In mid-January 2009, the Company announced a temporary compensation reduction for salaried employees totalling approximately $3.5 million annually.  In addition, the Company expects to continue to reduce costs throughout 2009 by approximately $23.0 million as part of its ongoing

productivity improvement programs.  Not all of the 2009 improvements are expected to contribute to an increase in the Company’s earnings.  Some of these cost savings are necessary to offset the increased economic costs of the Company’s manufacturing operations, as well as to remain competitive in the marketplace. The Company introduced several new products in 2008 and began pursuing new markets as well and expects new product sales and new market penetrations to contribute significantly to the Company’s profits in 2009. During early 2009, the Company has restructured some of its sales and marketing organization to dedicate increased resources to these product and market initiatives. The Company has also placed significant focus on cash management, including planned reductions to its property, plant and equipment purchases.

B.

LIQUIDITYLiquidity

On March 27, 2008, the Company successfully refinanced theits Senior Secured Credit Facility (“Facility”) with a $200.0 million asset based loan, (“ABL”)ABL entered into with a syndicate of financial institutions.  The amount of borrowings available to the Company under the ABL is determined by its applicable borrowing base from time to time.  The borrowing base is determined by calculating a percentage of eligible trade accounts receivable, inventories and machineryproperty, plant, and equipment.  The ABL is priced at libor plus a loan margin determined from a pricing grid. The loan margin declines as unused availability increases.  The pricingloan grid ranges from 1.50% to 2.25%. Unencumbered real estate is subject to a negative pledge in favour of the ABL lenders.  However, the Company retains the ability to secure financing on all or a portion of its owned real estate and have the negati venegative pledge of the ABL lenders subordinated to up to $35.0 million of real estate mortgage financing.  AtAs of December 31, 2008,2010, the Company had secured real estate mortgage financing of $1.8$4.6 million, leaving the Company the ability to obtain an additional $33.2$30.4 million of real estate mortgage financing. The Company reported a refinancing expense in the first quarter of 2008 for approximately $6.0 million and included the accelerated amortization of the debt issue expenses on the existing debt.  The Company also settled two interest rate swaps that the Company entered into in June and July 2005 hedging interest rates for its Facility at a cost of $2.9 million which was also included in the refinancing expense.  

With the March 2008 refinancing of the Facility, the Company has no significant debt maturities until March 2013, when the ABL matures.  The Company’s $125.0remaining $118.7 million Senior Subordinated Notes mature in August 2014.

The ABL has a financial covenant, a fixed charge ratio of 1.0 to 1.0. The ratio compares EBITDA (as defined in the ABL agreement) less capital expenditures and pension plan payments in excess of pension plan expense to the sum of debt service and the amortization of the value of machinery and equipment included in the borrowing base. The financial covenant becomes effective only when unused availability drops below $25.0 million.  Although not in effect, the Company was in compliance with the fixed charge ratio covenant as of December 31, 2010.  As of December 31, 2010 the fixed charge ratio was 1.16. To date in the first quarter of 2011, the Company has maintained availability in excess of $25.0 million and believes it will remain above the $25.0 million threshold of unused availability during 2011.

The Company relies upon the funds generated from operations and funds available to it under its ABL to meet working capital requirements and anticipated obligations under its ABL and the Senior Subordinated Notes and to finance capital expenditures for the foreseeable future. As atThe amount of borrowings under the Company’s ABL increased by $2.6 million from $85.4 million as of December 31, 2008,2009 to $88.0 million as of December 31, 2010.   As of December 31, 2010, the Company had cash and unused availability under its ABL totalling $50.7 million.  

The ABL has$43.0 million, the amount of which would have been $56.2 million if the Company had not been required to post a financial covenant,bond of $13.2 million related to the ITI litigation discussed above.  Due to a fixed charge ratio,reduced verdict, subsequent to December 31, 2010, the target for which is 1.0bond related to 1.0. The ratio compares EBITDA (as definedthe ITI litigation was replaced with a bond in the ABL) less capital expenditures and pension plan payments in excessamount of pension plan expense to the sum$1.0 million.  As of debt service and the amortization of the value of equipment in the borrowing base. The financial covenant becomes effective only when unused availability drops below $25.0 million.  While the Company did not meet the ratio at December 31, 2008, it was not in effect asMarch 21, 2011 cash and unused availability was in excess of $50 million.  To date in the first quarter of 2009, the Company has maintained availability in excess of $25.0 million despite having capital expenditures and a semi-annual interest payment on the Senior Subordinated Notes totalling approximately $11.0 million. In addition, the Company has paid down its outstanding borrowings under the ABL by approximate ly $12.0exceeded $44 million, in the first two monthsamount of 2009. It iswhich would have exceeded $45 million if the Company’s intentionCompany had not been required to remain abovepost a bond of $1.0 million related to the $25.0 million threshold of unused availability during 2009.ITI litigation.  

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C.

OUTLOOK

Outlook

The Company anticipates earning positivesequentially slightly higher sales and sequentially higher Adjusted EBITDA in the first quarter of 2009.  The most significant improvements expected in the first quarter of 20092011 compared to the fourth quarter of 20082010.  Sales and Adjusted EBITDA are the absence of the $16.6 million in gross margin compression and the $66.7 million goodwill impairment that were recorded in the fourth quarter of 2008.  Higher sales volumes within the T & F Division and the benefits of the expense reduction initiatives discussed above are alsoboth expected to contribute to a substantial sequential quarterly improvementbe higher in the EBITDA of the Company.

By the end of the first quarter of 2009,2011 compared to the Company will have satisfied the majority of its significant outstanding commitments for capital projects. The Company expects to satisfy the balance in the secondfirst quarter of 2009.  Once2010.  The closure of the Brantford, Ontario facility is expected to result in an annualized increase in EBITDA of about $4 million once this facility is closed, even though it is expected to negatively impact annualized sales by about $10 million.  Please see the section entitled “EBITDA” below for the Company’s definition of EBITDA and Adjusted EBITDA and a reconciliation of these outstanding commitments have been satisfied, the Company intends to limit its capital spending to only maintenance items until

the Company experiences a substantial and enduring improvement in its operating results. The Company estimates that its maintenance capital expenditures approximate $8.0 million a year.

D.

RESULTS OF OPERATIONSResults of Operations

The following discussion and analysis of operating results includes adjusted financial results for the three years ended December 31, 2008.2010.  A reconciliation from the operating results found in the consolidated financial statements to the adjusted operating results discussed herein, a non-GAAP financial measure, can be found in the Adjusted Consolidated Earnings (Loss) tables appearing on pages 31set forth above.

Included in this MD&A are references to events and 32 hereof.circumstances which have influenced the Company’s quarterly operating results presented in the table of Consolidated Quarterly Statements of Earnings set forth above.  

The net loss for 20082010 was $92.8$56.4 million compared to a net loss of $8.4$14.4 million for 2007.2009.  The net loss for 2010 includes:

·

Gross margin compression resulting from raw material cost increases;

·

A change in the valuation allowance of future tax assets of $37.8 million, which included a $31.9 million increase in the fourth quarter with respect to the US jurisdiction;

·

Facility closure costs of $8.1 million, including $7.4 million related to the Brantford, Ontario manufacturing facility closure; and

·

Asset impairments of $4.0 million, including $3.9 million related to the lumber film automatic wrapping machines and related assets.

The net loss for 2009 was $14.4 million compared to a net loss for 2008 of $92.8 million.  The net loss for 2009 includes a $1.1 million charge for the closure of the Company’s manufacturing facility in Hawkesbury, Ontario, Canada.  The net loss for 2008 includes a $66.7 million impairment of goodwill and a $6.0 million of refinancing expense related to the refinancing of the Company’s Facility with the ABL. The net loss for 2007 was $8.4 million compared to a net loss for 2006 of $166.7 million.  The net loss for 2007 includes $8.1 million of manufacturing facility closures, restructuring, strategic alternatives and other charges, compared to similar charges in 2006 of $76.1 million. In 2008, the Company reported a loss before income taxes of $89.4 million, $16.7 million exclusive of impairment of goodwill and refinancing expense.  The Company’s net loss for 2007 is primarily as a result of $12.3 million of income tax expense, including $11.4 million of non-cash deferred income tax charges.  In 2007, the Company reported $ 3.9 million of earnings before income taxes, $12.0 million exclusive of manufacturing facility closures, restructuring, strategic alternatives and other charges.  In 2006, the Company reported a loss before income taxes of $197.4 million, $1.3 million exclusive of impairment of goodwill and manufacturing facility closures, restructuring, strategic alternatives and other charges

E.

SALESSales

The Company’s sales for 20082010 were $737.2$720.5 million, a 3.9%17.1% increase compared to $615.5 million for 2009.  Sales for 2009 were $615.5 million, a 16.5% decrease compared to $767.3$737.2 million for 2007. Intertape’s consolidated annual sales for 2007 were $767.3 million, a decrease of 5.5%2008.  Sales volume increased approximately 9% and selling prices increased approximately 8% during the year 2010 compared to $812.3 million for 2006.the year 2009.

Sales for the fourth quarter of 20082010 totalled $153.1$180.1 million, a 20.0% decrease12.0% increase compared to $191.5$160.8 million for the fourth quarter of 2007.2009.  Sales volumes (units) decreased 22.4%volume increased approximately 1% and selling prices increased approximately 11% during the fourth quarter of 20082010 compared to the fourth quarter of 2007.2009. The increase in sales was primarily attributable to higher selling prices which partially recovered raw material cost increases incurred during the latter half of 2010.

F.

GROSS PROFIT AND GROSS MARGINGross Profit and Gross Margin

Gross profit totalled $78.3$79.6 million in 2008,2010, a decrease of 32.7%4.0% from 2007. The gross2009.  Gross profit decline through the first nine monthstotalled $82.9 million in 2009, an increase of 2008 was $4.2 million compared to 2007 due to slightly lower sales volumes during that period.  Most of the 2008 decline in gross profits occurred in the fourth quarter of6.0% from 2008.  Gross margin representedwas 11.0% in 2010, 13.5% in 2009 and 10.6% of sales in 2008, 15.2% in 2007 and 14.6% in 2006.  Gross profit totalled $116.3 million in 2007, a2008.  The decrease of 1.8% from 2006. While margins improved slightly in 2007 compared to 2006, there was a substantial change in the business in the second half of 2006, as described below, that resulted in gross margins for the second half of 2006 of 12.8% and annualized gross profits of $98.0 million.  The improvement in 2007 in both gross profitsprofit and gross margins comparedmargin from 2009 to 2010 was due to higher resin-based, adhesive and paper raw material costs and a total of $4.0 million of asset impairments, including $3.9 million related to the second half of 2006 levels was primarily the result of the cost reductions implemented b y the Company in late 2006lumber film automatic wrapping machines and early 2007. While sales volumes declined 5.5% for 2007, manufacturing expenses for 2007 declined 8.9%.

related assets.  Gross profitsprofit for the fourth quarter of 2008 were a negative $5.52010 was $19.0 million compared to a gross profitsprofit of $28.4$20.2 million in the fourth quarter of 2007.2009.

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Gross margin was 10.6% in the fourth quarter of 2010 and 12.5% in the fourth quarter of 2009.  The significant decline in gross profits for the fourth quarter includes approximately $17.3 million attributable to lower sales volumes and $16.6 million due to gross margin compression. Gross profitsprofit for the fourth quarter of 2007 totalled $28.42010 as compared to the fourth quarter of 2009 is primarily attributable to a $3.9 million at a gross margin of 14.9%.asset impairment related to the lumber film automatic wrapping machines and related assets.

G.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSESSelling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A”) for the year ended December 31, 20082010 totalled $68.2$72.5 million, a decreasean increase of $3.0$2.7 million from the $71.2$69.8 million incurred for the year ended December 31, 2007.2009. The 20072009 SG&A expenses were down $13.7up $1.6 million from $84.9$68.2 million in 2006.2008. As a percentage of sales, SG&A expenses were 9.3%10.1%, 11.3% and 9.3% for 2010, 2009 and 10.4% for 2008, 2007 and 2006, respectively.

The 2008 reductionincrease in SG&A for 2010 as compared to 2009 was primarily due to higher sales, partially offset by the resultnon-recurrence of lower professional fees paidadjustments made in 2009 with respect to accounting for trade receivables and the medical claim liability.

The increase in SG&A for 2009 as compared to 2008 was primarily due to adjustments made in 2009 with respect to accounting for trade receivables and the medical claim liability.

SG&A expenses totalled $18.6 million (10.4% of sales), $20.0 million (12.5% of sales) and $17.1 million (9.1% of sales), for the fourth quarter of 2010, fourth quarter of 2009, and third parties.quarter of 2010, respectively.  The Company benefiteddecrease from the fourth quarter of 2009 to the fourth quarter of 2010 was primarily related to the non-recurrence of adjustments made with respect to amounts for trade receivables and the medical claim liability.  The increase in 2007SG&A from significant staffing reductions.  the third quarter of 2010 to the fourth quarter of 2010 was due to merchandising costs in the consumer channel and higher selling expenses related to annual incentive plans.

Included in SG&A expenses are the costs the Company incurs as a consequence of being a public company.  These costs totalled $1.3$1.5 million, $2.4$1.8 million and $3.6$1.3 million for the three years ended December 31, 2008, 2007 and 2006.  The high level of public company costs for 2006 compared to 20072010, 2009 and 2008, is due to high initial cost in 2006 of complying with Section 404 of the Sarbanes-Oxley Act of 2002, which included the documentation and certification of internal control over financial reporting by management.respectively.   

SG&A expenses were $15.9 million (10.4% of sales) for the fourth quarter, compared to $18.7 million (9.8% of sales) a year ago. The fourth quarter 2008 reduction in SG&A was primarily the result of lower professional fees paid to third parties.

H.

STOCK-BASED COMPENSATIONStock-Based Compensation

For 2008, 20072010, 2009 and 2006,2008, the Company recorded approximately $1.3$1.0 million, $1.8$1.0 million and $2.0$1.3 million, respectively, in stock-based compensation expense related to options granted to employees.

I.

OPERATING PROFITOperating Profit

This discussion presents the Company’s operating profit for 2008, 20072010, 2009 and 2006.2008. “Operating profit” does not have a standardized meaning prescribed by GAAP in Canada or in the United States but is included herein as the Company’s management uses “operating profit”operating profit to measure and evaluate the profit contributions of the Company’s product offerings as well as the contribution by channel of distribution.

Because “operating profit”operating profit is a non-GAAP financial measure, other companies may present similar titled items determined with differing adjustments.  Presented below is a table reconciling this non-GAAP financial measure with gross profit being the most comparable GAAP measurement.  The reader is encouraged to review this reconciliation. Operating profit is defined by the Company as gross profit less SG&A and stock-based compensation expense.

34

OPERATING PROFIT RECONCILIATION

(In millions of US dollars)

(Unaudited)

Operating profit for 20082010 amounted to $8.8$6.2 million compared to $43.3$12.1 million for 20072009 and $31.6$8.8 million for 2006.2008.  The 2008 decline2010 decrease in operating profitsprofit compared to 20072009 is primarily due to gross margin compression related to the lower gross profits.increased cost of resin-based, adhesive and paper raw materials and to asset impairments of $4.0 million, including $3.9 million related to the lumber film automatic wrapping machines and related assets.  Operating profitsprofit increased in 20072009 compared to 20062008 by $11.7$3.3 million primarily due to a $13.7 million reduction in SG&A expenses, offset in part by lowerhigher gross profit resulting from the non-recurrence of the unprecedented gross margin compression in the ECP Division.fourth quarter of 2008.

The Company’s operating profit for the fourth quarter of 20082010 was $0.2 million compared to a loss of $21.6 million compared to $8.8$0.1 million for the fourth quarter of 2007.2009.

J.

MANUFACTURING FACILITY CLOSURES, RESTRUCTURING, STRATEGIC ALTERNATIVES AND OTHER CHARGESThe Company has decided to terminate the operations of its manufacturing facility located in Brantford, Ontario, Canada.  The facility is scheduled to be closed by June 2011 due to the economic consequences of the continuing strike of its unionized workers.  As a result of this facility closure, a charge of $7.4 million was recorded in the fourth quarter of 2010 related to property, plant and equipment, severance, inventory and spare parts and supplies.  Various other expenses of between $1.0 million and $1.5 million are expected to be recorded when incurred throughout 2011.

During 2008,Effective November 10, 2009, the Company did not incur any such charges.  

During 2007,decided to terminate the operations of its manufacturing facility located in Hawkesbury, Ontario, Canada (the “Closure”) as part of its ongoing efforts and objectives to lower costs, enhance customer order fulfillment and effectively optimize inventory investment. The terminated operations were transferred and consolidated into the Company’s manufacturing facility located in Truro, Nova Scotia, Canada in the early part of 2010. In connection with this Closure, the Company recorded manufacturing facility closures, restructuring, strategic alternativesa severance charge, property, plant and other chargesequipment impairments and inventory write-downs totalling $8.1 million including approximately $1.3$1.1 million in severance costs associated with the cost reduction initiatives announced by the Company in 2006 and $6.8 million in costs supporting the strategic alternatives process.fourth quarter of 2009.

During 2006,The Hawkesbury manufacturing operations were shut down at the Company recorded manufacturing facility closures, restructuring, strategic alternatives and other chargesend of $76.1 million2009.  The buildings were not sold as of which $36.7 million relatedDecember 31, 2010.  Subsequent to plant closures including, (i) $30.2 million for the closureDecember 31, 2010, a sales contract was entered into to sell one of the Brighton, Colorado facility, (ii)$9.9 millionbuildings and new market information became available related to the retirementother building.  The sale of Mr. Melbourne F. Yull, (iii) $9.8the building under contract is expected to be completed during the second quarter of 2011.  Accordingly, an additional impairment of $0.7 million relatedwas recorded in the period to cost reductions initiatives, (iv) $8.0 million relatedreduce the carrying value of these assets to the impairment of certain manufacturing equipment, (v) $3.9 million related to a Canadian income trust project that was cancelled, (vi) $2.9 million in legal costs related to certain patent and trademark disputes, (vii) $2.4 million related to real estate remediation and disposals,  (viii) $1.9 million for a loan amendment fee and (ix) $0.6 million related to the strategic alternatives processfair market value less estimated selling costs.

K.

IMPAIRMENT OF GOODWILLImpairment of Goodwill

In accordance with the requirements of the Canadian Institute of Chartered Accountants (“CICA”), which are substantively equivalent to the applicable US standards, in past years the Company normally performsperformed an annual goodwill impairment test as atof December 31.

The Company conducted its annual impairment test at December 31, 2008 and concluded that the goodwill attributable to both reporting units as then existing was fully impaired due to the recent adverse changes in the economic environment

35

in existence at that time and the expectation that many of these factors willwould not improve in the near-term.  The goodwill impairment charge at December 31, 2008 totalled $66.7 million, including $56.5 million related to the T&F Division and $10.2 million related to the ECP Division.  No goodwill impairment charge was required by Intertape for 2007. The Company conducted a goodwill impairment test at the interim date of September 30, 2006 due to the underlying changes in its business, resulting in a $120.0 million goodwill impairment charge. The Company subsequently performed its annual impairment test at December 31, 2006 and concluded that no additional impairment charge was necessary.

In 2007, as a result of the business structure changes made byAccordingly, the Company for purposes ofwrote-off the impairment test, based on the specific requirements of the accounting pronouncements, the Company determined that it had two reporting units, the T&F Division and the ECP Division. Previously, the Company had a single reporting unit.  The Company allocated the recorded goodwill between the two reporting units based on their relative fair values at December 31, 2007. The Company calculated the fair value of these reporting units using the discounted cash flow method, and compared it with other methods including multiples of sales and earnings before interest, income taxes, depreciation and amortization, and with historical transactions where appropriate.

L.

RESEARCH AND DEVELOPMENT

Research and development (“R&D”) remains an important function within the Company. Taken as a percentage of sales, R&D was 0.8% for 2008, 0.5% for 2007 and 0.8% for 2006.  The Company continues to focus its R&D efforts on new products, new technology developments, new processes and formulations for existing products.  

M.

EBITDA

A reconciliation of the Company’s EBITDA, a non-GAAP financial measure, to GAAP net earnings is set out in the EBITDA reconciliation table below.  EBITDA should not be construed as earnings before income taxes, net earnings or cash from operating activities as determined by GAAP.  The Company defines EBITDA as net earnings (loss) before (i) income taxes (recovery); (ii) financial expenses, net of amortization; (iii) refinancing expense, net of amortization; (iv) amortization of other intangibles and capitalized software costs; and (v) depreciation.  Adjusted EBITDA is defined as EBITDA before manufacturing

facility closures, restructuring, strategic alternatives and other charges, impairment of property, plant and equipment, impairment of goodwill charges and unprecedented gross profit margin compression. The terms “EBITDA” and “Adjusted EBITDA” do not have any standardized meanings prescribed by GAAP in Canada or the United States 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 as indicators of Intertape’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 compa rison of Intertape’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.

EBITDA RECONCILIATION TO NET EARNINGS

(In millions of US dollars)  

(Unaudited)

EBITDA was ($28.2) million for 2008, $66.7 million for 2007, and ($135.5) million for 2006.  Adjusted EBITDA was $55.5 million, $74.8 million, and $60.6 million for the years 2008, 2007 and 2006 respectively.  The Company’s EBITDA for the fourth quarter of 2008 was ($80.6) million compared to $18.1 million for the fourth quarter of 2007. The Adjusted EBITDA was $3.1 million in the fourth quarter of 2008 as compared to $18.1 million in the fourth quarter of 2007. The lower adjusted EBITDA for 2008 and in the fourth quarter of 2008 compared to 2007 and to the fourth quarter of 2007 is the result of lower gross profits.

N.

FINANCIAL EXPENSES

Financial expenses decreased 5.1% to $25.8 million from $27.2 million for 2007.  Financial expenses increased 2.3% to $27.2 million for 2007 as compared to $26.6 million for 2006.

The decrease in interest expense of $9.1 million or 33.2% was the direct result of the refinancing of the Facility and the repayment of the Term Loan B at the end of March, with the contracting of the ABL.  As a result the ABL has lower margins compared to the term Loan B.  In addition, lower libor rates impacted both the hedged and unhedged portions of the ABL.  The increase in other financial expenses was mainly due to foreign exchange losses in 2008 totalling $0.8 million compared to foreign exchange gains in 2007 totalling $1.0 million.

Included in the first quarter of 2008 is a $6.0 million refinancing expense related to the refinancing of the Facility.  The refinancing expense includes a $2.9 million loss on the settlement of two interest rate swap agreements.  This loss was

reclassified from other comprehensive income (loss) as a result of the discontinuance of the cash flow hedge since the debt being hedged was refinanced and the hedging relationship was thereby terminated.  Also included in refinancing expense is $3.1 million of accelerated amortization of debt issue expense incurred in connection with securing the Facility in 2004.

The increase in financial expense in 2007 was as a result of higher interest rates on the Term Loan B due to increased loan margins imposed by the November 8, 2006 and August 8, 2007 loan amendments and higher libor rates impacting the unhedged portion of the Term Loan B. The impact of the higher interest rates was substantially mitigated by the Term Loan B debt repayments made by the Company during 2007, including the $15.6 million excess cash flow payment in March 2007 and the application of the proceeds of the rights offering during the period September through November 2007 reducing the principal balance by $60.9 million.

Financial expenses for the fourth quarter of 2008 totalled $5.8 million, a 9.4% increase from financial expenses in the fourth quarter of 2007. The increase was due to foreign exchange losses in the fourth quarter of 2008 totalling $1.4 million.  

O.

INCOME TAXES

In the past three years, the Company’s statutory income tax rate has been influenced primarily by a lower rate on foreign-based income, manufacturing and processing deductions, transactions that resulted in permanent differences and changes in the valuation allowance.  

As at December 31, 2008, the Company had approximately $39.6 million in Canadian operating loss carry-forwards for tax purposes expiring from 2009 through 2028, and $221.6 million in US federal and state operating losses for tax purposes expiring from 2010 through 2028. In assessing the valuation of future income tax assets, management considers whether it is more likely than not that some portion or all of the future income tax assets will not be realized.  Management considers the scheduled reversal of future income tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company expects the future income tax assets to be realized, net of the valuation allowance at December 31, 2008 as a result of the reversal of existing taxable temporary differences. During the year ended December 31, 2008, the Company’s management revised its assessment of the recoverability of the Company’s future income tax assets. Accordingly, the Company’s  future income tax expense for 2008 includes a $17.2 million increase to the future income tax assets' valuation allowance. Included in deferred income tax expense for 2007 is a $2.6 million of increases to the valuation allowance.

In December 2007, the Canadian Federal government reduced future Federal income tax rates. As a result of the tax rate reductions, the Company recorded $4.3 million of deferred income tax expense in the fourth quarter of 2007 to reflect the decreased value of the Company’s deferred tax assets.

P.

NET EARNINGS – CANADIAN AND US GAAP

For 2008, the Company posted a net loss of $92.8 million as compared to a net loss of $8.4 million in 2007 and $166.7 million in 2006.  

The Company reported a net loss of $99.8 million for the fourth quarter of 2008 as compared to a net loss of $0.7 million for the fourth quarter of 2007.  The increase in net loss for the fourth quarter of 2008 compared to the fourth quarter of 2007 was due to the decrease in gross profits and the impairment of goodwill.

Adjusted net earnings, a non-GAAP financial measure (see tables below) amounted to a net loss of $3.1 million for 2008, a net loss of $2.2 million for 2007, and a net loss of $6.9 million for 2006. The Company is including adjusted net earnings here because it believes that adjusted net earnings provides a better comparison of results for the periods presented since it does not take into account impairment of goodwill, impairment of property, plant and equipment, unprecedented gross margin compression, refinancing expense and manufacturing facility closure, restructuring, strategic alternatives and other costs in each period.

Adjusted net earnings does not have any standardized meaning prescribed by GAAP in Canada or the United States and is therefore unlikely to be comparable to similar measures presented by other issuers. A reconciliation of adjusted net

earnings to net earnings, being the most comparable measurement under GAAP, is set forth below.  The reader is encouraged to review this reconciliation.

Net earnings reported in accordance with Canadian GAAP conforms in all material respects to amounts that would have to be reported had the financial statements been prepared under US GAAP, with the exception that US GAAP does not permit recognition of foreign exchange gains or losses as a result of a partial reduction in foreign self-sustaining operations.  Consequently, in accordance with US GAAP, net earnings in 2008 would be a net loss of approximately $93.7 million, a net loss of $8.4 million in 2007 and a net loss of $166.7 million in 2006.  For further details, see Note 22 to the 2008 audited consolidated financial statements.

In the case of Intertape, net earnings are equal to earnings from continuing operations, as the Company had no discontinued operations, extraordinary items, or changes in accounting principles that resulted in a charge against earnings for these periods.

ADJUSTED CONSOLIDATED EARNINGS

Adjustments for impairment of goodwill, impairment of property, plant and equipment, gross profit margin compression, refinancing expense and manufacturing facility closures, restructuring, strategic alternatives and other charges.

Years Ended December 31,

(In millions of US dollars, except per share amounts)

(Unaudited)

Adjustments for impairment of goodwill and manufacturing facility closures, strategic alternatives and other charges.

Years Ended December 31,

(In millions of US dollars, except per share amounts)

(Unaudited)

Note: These tables reconcile consolidated earnings (loss) as reported in the accompanying consolidated financial statements to adjusted consolidated earnings (loss) after the elimination of impairment of goodwill, impairment of property, plant and equipment, unprecedented gross margin compression, refinancing expense and manufacturing facility closures, strategic alternatives and other charges. The Company has included these non-GAAP financial measures because it believes the measures permit more meaningful comparisons of its performance between the periods presented.

Q.

EARNINGS PER SHARE – CANADIAN AND US GAAP

Basic and diluted net earnings per share reported in accordance with Canadian GAAP conform in all material respects to amounts that would have been reported had the financial statements been prepared under US GAAP, with the exception that US GAAP does not permit recognition of foreign exchange gains or losses as a result of a partial reduction in foreign self-sustaining operations.. Consequently, in accordance with US GAAP, basic and diluted loss per share would be $1.59 in 2008 compared to basic and diluted loss per share of $0.19 in 2007 and $4.07 in 2006.

The Company reported a loss per share of $1.57 both basic and diluted for 2008 as compared to a loss per share of $0.19 both basic and diluted for 2007. The 2007 loss per share compares to a loss per share of $4.07 both basic and diluted for 2006. The weighted-average number of common shares outstanding for the purpose of the basic and diluted EPS calculation was 59.0 million for 2008 (59.0 million diluted), 45.3 million (45.3 million diluted) for 2007 and 41.2 million (41.2 million diluted) for 2006.

The adjusted EPS for 2008 was a loss per share of $0.05 both basic and diluted compared to a loss per share of $0.05 both basic and diluted for 2007 and to a loss per share of $0.17 both basic and diluted for 2006.  

R.

COMPREHENSIVE INCOME

Comprehensive income is comprised of net earnings and other comprehensive income.  For the years ended December 31, 2008, 2007 and 2006, comprehensive income was a loss of $127.7 million, income of $21.8 million and a loss of $164.4 million, respectively.  Comprehensive income for the fourth quarter of 2008 and the fourth quarter of 2007 was a loss of $124.9 million and income of $3.2 million, respectively.  The unfavourable change in accumulated currency translation adjustments is attributable to the weakening of the Canadian dollar relative to the U.S. dollar in 2008.  The decline in the fair market value of the interest rate swap agreements for the three months and year ended December 31, 2008 reflects the actual and expected decline in short-term interest rates during the year.

S.

RESULTS OF OPERATIONS-TAPES AND FILMS DIVISION

Summarized below is a reconciliation of adjusted EBITDA for the Tapes and Films Division between 2007 and 2008 as follows:

Adjusted EBITDA Reconciliation

2007 to 2008

(In millions of US dollars)

(Unaudited)

Sales for the T&F Division for 2008 were $592.2 million, a decrease of 2.2% compared to $605.7 million for 2007.  Sales for 2007 were $605.7 million, a decrease of 3.3% compared to $626.5 million for 2006. The T & F Division had a sales volume (unit) decrease of 7.9% for 2008 and 2.7% for 2007. The sales volume decline in both 2008 and 2007 was not limited to particular product lines or channels of distribution.   Approximately half of the 2008 sales volume decline occurred in the fourth quarter.

In response to rising raw material costs, the T&F Division instituted substantial selling price increases during the first nine months of 2008.  During the fourth quarter of 2008, selling prices declined as raw material costs decreased.  Average selling prices for the T&F Division declined less than 1.0% in 2007, with selling prices increasing in the fourth quarter as noted below.

Sales for the T&F Division for the fourth quarter of 2008 totalled $122.6 million, an 18.8% decrease from sales in the fourth quarter of 2007 of $151.0 million.  Sales volumes (units) decreased 21.9% during the fourth quarter of 2008 compared to the prior year.  The decrease in sales volume was across substantially all product lines and reflected the deep economic downturn that impacted the global economy as a whole and the packaging industry in particular.

Gross profit for the T&F Division totalled $67.4 million in 2008, a decrease of 32.0% from 2007 gross profit of $99.1 million. Gross profit totalled $99.1 million in 2007, an increase of 7.5% from $92.2 million in 2006. Gross margin represented 11.4% of sales in 2008, 16.4% in 2007 and 14.7% in 2006.  Gross profit declined for the first nine months of 2008 compared to the same period in 2007 by $4.3 million due to the decline in sales volumes and the compression of gross margins.  Gross margins for the first nine months of 2008 were 15.0% compared to 16.4% for the first nine months of 2007.  The decline in gross margins during the first nine months of 2008 reflected the inability at various points in time to fully recover cost increases through selling price increases.  Additionally, the T&F Division has not always been able to earn additional margin on the higher costs. Most of the decline in gross profit for 2008 occurred in the fourth quarter due to substantially lower sales volumes and gross margin compression. For 2007, gross profit and gross margins both improved over 2006 performance but particularly when compared to the levels in the second half of 2006. The improved results were attributable to the cost reductions implemented by the Division in late 2006 and early 2007.  

T&F Division gross profit for the fourth quarter of 2008 totalled negative $2.8 million at a gross margin of (2.3)% compared to $24.5 million at a gross margin of 16.2% for the fourth quarter of 2007.  The gross profit decline during the fourth quarter of 2008 was due to a substantial decline in sales volumes (units) as discussed above and gross margin compression.  The sales volume decline resulted in lost profits on less sales as well as an increase in the amount of unabsorbed manufacturing overhead costs expensed directly to operations.  The impact of the decline in sales volumes was a decrease in gross profit of $13.5 million compared to the fourth quarter of 2007.  The balance of the gross profit decline in the fourth quarter of 2008 compared to the fourth quarter of 2007 was attributable to gross margin compression.  The rapid decline in the cost of raw materials during the f ourth quarter of 2008 began to depress selling prices in December 2008 carrying into early 2009.  The lower selling prices resulted in selected T&F Division products, which had been manufactured with higher cost raw materials, being sold at a loss.  Additionally, at December 31, 2008, the T&F Division reduced the carrying value of its on-hand inventories by $1.5 million to reflect net realizable value.  The T&F Division also recorded a $1.9 million non-cash charge at December 31, 2008, representing the expected loss arising from outstanding raw material purchase commitments that are at above market price levels and that the Division does not expect to be able to recover through selling price increase in 2009.

T&F DIVISION EBITDA RECONCILIATION TO NET EARNINGS

(in millions of US dollars)

(Unaudited)

EBITDA for the T&F Division for 2008, 2007 and 2006 was $38.1 million, $69.3 million and $50.5 million, respectively.  The improvement in EBITDA in 2007 compared to 2006 is due to the improved gross profits for the Division and reductions in SG&A

expenses.  The T&F Division’s EBITDA for the fourth quarter of 2008 was negative $9.0 million compared to $16.9 million for the fourth quarter of 2007. The decline in EBITDA in the fourth quarter of 2008 compared to the fourth quarter of 2007 is the result of a decrease in gross profits.  The adjusted EBITDA for 2008 was $52.0 million and for the fourth quarter of 2008 was $4.9 million.  Adjusted EBITDA for 2008 removes the impact on the fourth quarter of 2008 gross margin compression described above as well as in Section 4.B above.  

T.

RESULTS OF OPERATIONS-ECP DIVISION

Summarized below is a reconciliation of adjusted EBITDA for the ECP Division between 2007 and 2008 as follows:

Adjusted EBITDA Reconciliation

2007 to 2008

(In millions of US dollars)

(Unaudited)