Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM 6-K
________________________________________
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of November, 2018
Commission File Number 1-10928
________________________________________
INTERTAPE POLYMER GROUP INC.
________________________________________
9999 Cavendish Blvd., Suite 200, Ville St. Laurent, Quebec, Canada, H4M 2X5
________________________________________
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F  x            Form 40-F  ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨
 


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
INTERTAPE POLYMER GROUP INC.
 
 
 
Date: November 8, 2018
By:
 
/s/ Jeffrey Crystal
 
 
 
Jeffrey Crystal, Chief Financial Officer
















Intertape Polymer Group Inc.
Unaudited Interim Condensed Consolidated Financial Statements
September 30, 2018




 
 
Unaudited Interim Condensed Consolidated Financial Statements
 
 
 
 
 
 
 
Consolidated Changes in Equity
4 to 5
 
 
6 to 7
 
 
 
 
Notes to Unaudited Interim Condensed Consolidated Financial Statements
9 to 27



Intertape Polymer Group Inc.
Consolidated Earnings
Periods ended September 30,
(In thousands of US dollars, except per share amounts)
(Unaudited)
 
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
$
 
$
 
$
 
$
Revenue
 
279,062

 
243,444

 
765,364

 
660,722

Cost of sales
 
220,140

 
192,575

 
601,541

 
513,339

Gross profit
 
58,922

 
50,869

 
163,823

 
147,383

Selling, general and administrative expenses
 
33,446

 
18,776

 
90,222

 
73,466

Research expenses
 
2,926

 
3,091

 
9,381

 
8,713

 
 
36,372

 
21,867

 
99,603

 
82,179

Operating profit before manufacturing facility closures, restructuring and other related charges
 
22,550

 
29,002

 
64,220

 
65,204

Manufacturing facility closures, restructuring and other related charges (Note 4)
 
5,777

 
216

 
5,476

 
893

Operating profit
 
16,773

 
28,786

 
58,744

 
64,311

Finance costs (Note 3)
 
 
 
 
 
 
 
 
Interest
 
3,952

 
2,290

 
10,359

 
4,721

Other (income) expense, net
 
(1,477
)
 
593

 
977

 
1,294

 
 
2,475

 
2,883

 
11,336

 
6,015

Earnings before income tax expense (benefit)
 
14,298

 
25,903

 
47,408

 
58,296

Income tax expense (benefit) (Note 5)
 
 
 
 
 
 
 
 
Current
 
(496
)
 
2,253

 
1,257

 
7,699

Deferred
 
2,742

 
4,378

 
7,775

 
7,819

 
 
2,246

 
6,631

 
9,032

 
15,518

Net earnings
 
12,052

 
19,272

 
38,376

 
42,778

 
 
 
 
 
 
 
 
 
Net earnings (loss) attributable to:
 
 
 
 
 
 
 
 
Company shareholders
 
12,006

 
19,244

 
38,463

 
42,905

Non-controlling interests
 
46

 
28

 
(87
)
 
(127
)
 
 
12,052

 
19,272

 
38,376

 
42,778

Earnings per share attributable to Company shareholders (Note 6)
 
 
 
 
 
 
 
 
Basic
 
0.20

 
0.33

 
0.65

 
0.73

Diluted
 
0.20

 
0.32

 
0.65

 
0.72

The accompanying notes are an integral part of the interim condensed consolidated financial statements. Note 3 presents additional information on consolidated earnings.


2

Intertape Polymer Group Inc.
Consolidated Comprehensive Income
Periods ended September 30,
(In thousands of US dollars)
(Unaudited)
 
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
$
 
$
 
$
 
$
Net earnings
 
12,052

 
19,272

 
38,376

 
42,778

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
Change in fair value of interest rate swap agreements designated as cash flow hedges (1)
 
1,071

 
613

 
3,318

 
886

Less: reclassification adjustments for amounts recognized in profit or loss related to interest rate swap agreements
 
(190
)
 
—

 
(190
)
 
—

Change in cumulative translation adjustments
 
(3,154
)
 
1,718

 
(7,525
)
 
6,630

Items that will be subsequently reclassified to net earnings
 
(2,273
)
 
2,331

 
(4,397
)
 
7,516

Comprehensive income for the period
 
9,779

 
21,603

 
33,979

 
50,294

 
 
 
 
 
 
 
 
 
Comprehensive income (loss) for the period attributable to:
 
 
 
 
 
 
 
 
Company shareholders
 
10,168

 
21,644

 
34,963

 
50,167

Non-controlling interests
 
(389
)
 
(41
)
 
(984
)
 
127

 
 
9,779

 
21,603

 
33,979

 
50,294

 
(1) 
Presented net of deferred income tax expense (benefit) of $(274) and $136 for the three and nine months ended September 30, 2018, respectively, and $(39) and $128 for the three and nine months ended September 30, 2017, respectively. Refer to Note 10 for additional information on the Company’s cash flow hedges.
The accompanying notes are an integral part of the interim condensed consolidated financial statements.


3

Intertape Polymer Group Inc.
Consolidated Changes in Equity
Nine months ended September 30, 2017
(In thousands of US dollars, except for number of common shares)
(Unaudited)
 
 
 
 
 
 
 
Accumulated other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative translation adjustment account
 
Reserve for cash flow hedges
 
 
 
 
 
Total equity attributable to Company shareholders
 
Non-controlling interests
 
 
 
Capital stock
 
Contributed surplus
 
 
 
 
 
 
 
 
 
Total equity
 
Number
 
Amount
 
 
 
 
Total
 
Deficit
 
 
 
 
 
 
$
 
$
 
$
 
$
 
$
 
$
 
$
 
$
 
$
Balance as of December 31, 2016
59,060,335

 
351,203

 
29,585

 
(19,511
)
 
(136
)
 
(19,647
)
 
(124,605
)
 
236,536

 
6,407

 
242,943

Transactions with owners
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise of stock options (Note 9)
226,875

 
1,362

 
 
 
 
 
 
 
 
 
 
 
1,362

 
 
 
1,362

Change in excess tax benefit on exercised share-based awards
 
 
493

 
(493
)
 
 
 
 
 
 
 
 
 
—

 
 
 
—

Change in excess tax benefit on outstanding share-based awards
 
 
 
 
(3,615
)
 
 
 
 
 
 
 

 
(3,615
)
 
 
 
(3,615
)
Share-based compensation (Note 9)
 
 
 
 
(7,850
)
 
 
 
 
 
 
 
(3,595
)
(1) 
(11,445
)
 
 
 
(11,445
)
Share-based compensation expense credited to capital on options exercised
 
 
495

 
(495
)
 
 
 
 
 
 
 
 
 
—

 
 
 
—

Repurchases of common shares (Note 9)
(415,500
)
 
(2,463
)
 
 
 
 
 
 
 
 
 
(3,974
)
 
(6,437
)
 
 
 
(6,437
)
Dividends on common shares (Note 9)
 
 
 
 
 
 
 
 
 
 
 
 
(24,811
)
 
(24,811
)
 
 
 
(24,811
)
 
(188,625
)
 
(113
)
 
(12,453
)
 
 
 
 
 
 
 
(32,380
)
 
(44,946
)
 
 
 
(44,946
)
Net earnings (loss)
 
 
 
 
 
 
 
 
 
 
 
 
42,905

 
42,905

 
(127
)
 
42,778

Other comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in fair value of interest rate swap agreements designated as cash flow hedges (2) (Note 10)
 
 
 
 
 
 
 
 
886

 
886

 
 
 
886

 
 
 
886

Change in cumulative translation adjustments
 
 
 
 
 
 
6,376

 
 
 
6,376

 
 
 
6,376

 
254

 
6,630

 
 
 
 
 
 
 
6,376

 
886

 
7,262

 


 
7,262

 
254

 
7,516

Comprehensive income for the period
 
 
 
 
 
 
6,376

 
886

 
7,262

 
42,905

 
50,167

 
127

 
50,294

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-controlling interest arising from investment in Capstone(3)
(Note 11) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15

 
15

Capital transactions with non-controlling shareholders of Capstone (Note 11)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
153

 
153

Balance as of September 30, 2017
58,871,710

 
351,090

 
17,132

 
(13,135
)
 
750

 
(12,385
)
 
(114,080
)
 
241,757

 
6,702

 
248,459


(1) 
Presented net of income tax benefit of $1,925 for the nine months ended September 30, 2017.
(2) 
Presented net of deferred income tax expense of $128 for the nine months ended September 30, 2017.
(3) 
Refers to the purchase by the Company of shares in Capstone Polyweave Private Limited, a newly-formed enterprise in India (d/b/a "Capstone"), on June 23, 2017. Refer to Note 11 for additional information on Capstone.
The accompanying notes are an integral part of the interim condensed consolidated financial statements.

4

Intertape Polymer Group Inc.
Consolidated Changes in Equity
Nine months ended September 30, 2018
(In thousands of US dollars, except for number of common shares)
(Unaudited)
 
 
 
 
 
 
 
 
Accumulated other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative translation adjustment account
 
Reserve for cash flow hedges
 
 
 
 
 
Total equity attributable to Company shareholders
 
Non-controlling interests
 
 
 
Capital stock
 
Contributed surplus
 
 
 
 
 
 
 
 
 
Total equity
 
Number
 
Amount
 
 
 
 
Total
 
Deficit
 
 
 
 
 
 
$
 
$
 
$
 
$
 
$
 
$
 
$
 
$
 
$
Balance as of December 31, 2017
58,799,910

 
350,759

 
17,530

 
(15,057
)
 
1,588

 
(13,469
)
 
(106,687
)
 
248,133

 
6,589

 
254,722

Transactions with owners
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise of stock options (Note 9)
17,500

 
163

 
 
 
 
 
 
 
 
 
 
 
163

 
 
 
163

Change in excess tax benefit on exercised share-based awards
 
 
7

 
(7
)
 
 
 
 
 
 
 
 
 
—

 
 
 
—

Change in excess tax benefit on outstanding share-based awards
 
 
 
 
(389
)
 
 
 
 
 
 
 


 
(389
)
 
 
 
(389
)
Share-based compensation (Note 9)
 
 
 
 
331

 
 
 
 
 
 
 
(357
)
(1) 
(26
)
 
 
 
(26
)
Share-based compensation expense credited to capital on options exercised
 
 
48

 
(48
)
 
 
 
 
 
 
 
 
 
—

 
 
 
—

Dividends on common shares (Note 9)
 
 
 
 
 
 
 
 
 
 
 
 
(24,702
)
 
(24,702
)
 
 
 
(24,702
)
 
17,500

 
218

 
(113
)
 
 
 
 
 
 
 
(25,059
)
 
(24,954
)
 
 
 
(24,954
)
Net earnings (loss)
 
 
 
 
 
 
 
 
 
 
 
 
38,463

 
38,463

 
(87
)
 
38,376

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in fair value of interest rate swap agreements designated as cash flow hedges (2) (Note 10)
 
 
 
 
 
 
 
 
3,318

 
3,318

 
 
 
3,318

 
 
 
3,318

Less: Reclassification adjustments for amounts recognized in profit or loss (Note 10)
 
 
 
 
 
 
 
 
(190
)
 
(190
)
 
 
 
(190
)
 
 
 
(190
)
Change in cumulative translation adjustments
 
 
 
 
 
 
(6,628
)
 
 
 
(6,628
)
 
 
 
(6,628
)
 
(897
)
 
(7,525
)
 
 
 
 
 
 
 
(6,628
)
 
3,128

 
(3,500
)
 
 
 
(3,500
)
 
(897
)
 
(4,397
)
Comprehensive income for the period
 
 
 
 
 
 
(6,628
)
 
3,128

 
(3,500
)
 
38,463

 
34,963

 
(984
)
 
33,979

Non-controlling interest arising from investment in Polyair (3) (Note 11)



















203


203

Recognition of non-controlling interest put options arising from the Capstone Acquisition (Note 10)
 
 
 
 
 
 
 
 
 
 
 
 
(10,888
)
 
(10,888
)
 
 
 
(10,888
)
Capital transactions with non-controlling shareholders of Capstone (Note 11)
 
 
 
 
 
 
 
 
 
 
 
 


 
—

 
10,699

 
10,699

Balance as of September 30, 2018
58,817,410

 
350,977

 
17,417

 
(21,685
)
 
4,716

 
(16,969
)
 
(104,171
)
 
247,254

 
16,507

 
263,761


(1) 
Presented net of income tax benefit of $120 for the nine months ended September 30, 2018.
(2) 
Presented net of deferred income tax expense of $136 for the nine months ended September 30, 2018.
(3) 
Refers to the purchase by the Company of 100% of the outstanding equity value in Polyair Inter Pack Inc. (“Polyair”), on August 3, 2018. Refer to Note 11 for additional information on Polyair.
The accompanying notes are an integral part of the interim condensed consolidated financial statements.

5

Intertape Polymer Group Inc.
Consolidated Cash Flows
Periods ended September 30,
(In thousands of US dollars)
(Unaudited)
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
$
 
$
 
$
 
$
OPERATING ACTIVITIES
 
 
 
 
 
 
 
 
Net earnings
 
12,052

 
19,272

 
38,376

 
42,778

Adjustments to net earnings
 
 
 
 
 
 
 
 
Depreciation and amortization
 
10,420

 
9,633

 
30,471

 
26,271

Income tax expense
 
2,246

 
6,631

 
9,032

 
15,518

Interest expense
 
3,952

 
2,290

 
10,359

 
4,721

Non-cash charges (recoveries) in connection with manufacturing facility closures, restructuring and other related charges
 
5,237

 
73

 
5,235

 
(16
)
Share-based compensation expense (benefit)
 
1,847

 
(8,231
)
 
1,543

 
(3,067
)
(Gain) Loss on foreign exchange
 
(1,964
)
 
332

 
(274
)
 
525

Pension and other post-retirement expense related to defined benefit plans
 
589

 
692

 
2,015

 
2,075

Other adjustments for non-cash items
 
305

 
219

 
1,225

 
(437
)
Income taxes paid, net
 
(702
)
 
(3,254
)
 
(339
)
 
(6,016
)
Contributions to defined benefit plans
 
(11,958
)
 
(799
)
 
(13,474
)
 
(3,228
)
Cash flows from operating activities before changes in working capital items
 
22,024

 
26,858

 
84,169

 
79,124

Changes in working capital items
 
 
 
 
 
 
 
 
Trade receivables
 
(14,739
)
 
(12,859
)
 
(20,575
)
 
(16,265
)
Inventories
 
(1,316
)
 
3,607

 
(24,893
)
 
(8,748
)
Parts and supplies
 
(47
)
 
(498
)
 
(1,232
)
 
(1,662
)
Other current assets
 
(2,012
)
 
(405
)
 
(3,698
)
 
840

Accounts payable and accrued liabilities and share-based compensation liabilities, current
 
9,480

 
7,363

 
(11,991
)
 
(18,900
)
Provisions
 
853

 
(202
)
 
28

 
(1,513
)
 
 
(7,781
)
 
(2,994
)
 
(62,361
)
 
(46,248
)
Cash flows from operating activities
 
14,243

 
23,864

 
21,808

 
32,876

 
 
 
 
 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
Acquisition of subsidiaries, net of cash acquired
 
(145,962
)
 
(67,043
)
 
(145,962
)
 
(67,027
)
Purchases of property, plant and equipment
 
(23,068
)
 
(28,836
)
 
(57,816
)
 
(71,352
)
Restricted cash (1)
 
—

 
71,785

 
—

 
—

Cash outflow from capital transactions with non-controlling interest in Capstone (Note 11)
 
(2,630
)
 
—

 
(2,630
)
 
—

Other investing activities
 
(281
)
 
973

 
(636
)
 
990

Cash flows from investing activities
 
(171,941
)
 
(23,121
)
 
(207,044
)
 
(137,389
)

(1)  
Restricted cash activity for the three months ended September 30, 2017 consists of cash transferred during the second quarter of 2017 into a third-party trust account as part of the Company’s acquisition of Canadian Technical Tape Ltd. The funds were released from the trust account following the acquisition closing on July 1, 2017.


6

Intertape Polymer Group Inc.
Consolidated Cash Flows- Continued
Periods ended September 30,
(In thousands of US dollars)
(Unaudited)
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
$
 
$
 
$
 
$
FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
Proceeds from borrowings
 
206,113

 
63,966

 
679,828

 
217,443

Repayment of borrowings
 
(38,051
)
 
(38,242
)
 
(454,000
)
 
(79,531
)
Payments of debt issue costs
 
(143
)
 
—

 
(2,761
)
 
—

Interest paid
 
(3,542
)
 
(1,955
)
 
(8,071
)
 
(4,554
)
Proceeds from exercise of stock options
 
—

 
—

 
163

 
1,362

Repurchases of common shares
 
—

 
(6,437
)
 
—

 
(6,437
)
Dividends paid
 
(8,214
)
 
(8,150
)
 
(24,687
)
 
(24,831
)
Other financing activities
 
182

 
124

 
182

 
(514
)
Cash flows from financing activities
 
156,345

 
9,306

 
190,654

 
102,938

 
 
 
 
 
 
 
 
 
Net (decrease) increase in cash
 
(1,353
)
 
10,049

 
5,418

 
(1,575
)
Effect of foreign exchange differences on cash
 
60

 
10

 
(1,874
)
 
1,403

Cash, beginning of period
 
13,930

 
10,725

 
9,093

 
20,956

Cash, end of period
 
12,637

 
20,784

 
12,637

 
20,784


The accompanying notes are an integral part of the interim condensed consolidated financial statements.

7

Intertape Polymer Group Inc.
Consolidated Balance Sheets
As of
(In thousands of US dollars)
 
 
September 30,
2018
 
December 31, 2017
 
 
(Unaudited)
 
(Audited)
 
 
$
 
$
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash
 
12,637

 
9,093

Trade receivables
 
138,240

 
106,634

Inventories
 
161,416

 
128,233

Parts and supplies
 
19,805

 
18,571

Other current assets
 
20,510

 
16,188

 
 
352,608

 
278,719

Property, plant and equipment
 
345,592

 
313,520

Goodwill (Note 11)
 
176,271

 
41,690

Intangible assets
 
43,485

 
47,318

Deferred tax assets (Note 5)
 
26,950

 
27,627

Other assets
 
12,407

 
6,998

Total assets
 
957,313

 
715,872

 
 
 
 
 
LIABILITIES
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable and accrued liabilities
 
113,084

 
104,812

Share-based compensation liabilities, current (Note 9)
 
5,711

 
10,265

Call option redemption liability (Note 10)
 
11,203

 
12,725

Provisions, current
 
1,193

 
657

Borrowings, current (Note 8)
 
13,639

 
14,979

 
 
144,830

 
143,438

Borrowings, non-current (Note 8)
 
487,956

 
264,484

Pension, post-retirement and other long-term employee benefits
 
17,738

 
29,298

Share-based compensation liabilities, non-current (Note 9)
 
3,292

 
4,984

Non-controlling interest put options (Note 10)
 
10,124

 
—

Deferred tax liabilities (Note 5)
 
23,204

 
13,769

Provisions, non-current
 
2,692

 
3,221

Other liabilities
 
3,716

 
1,956

Total liabilities
 
693,552

 
461,150

 
 
 
 
 
EQUITY
 
 
 
 
Capital stock (Note 9)
 
350,977

 
350,759

Contributed surplus
 
17,417

 
17,530

Deficit
 
(104,171
)
 
(106,687
)
Accumulated other comprehensive loss
 
(16,969
)
 
(13,469
)
Total equity attributable to Company shareholders
 
247,254

 
248,133

Non-controlling interests
 
16,507

 
6,589

Total equity
 
263,761

 
254,722

Total liabilities and equity
 
957,313

 
715,872

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

8

Intertape Polymer Group Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
September 30, 2018
(In US dollars, tabular amounts in thousands, except per share data and as otherwise noted)
(Unaudited)
1 - GENERAL BUSINESS DESCRIPTION
Intertape Polymer Group Inc. (the “Parent Company”), incorporated under the Canada Business Corporations Act, has its principal administrative offices in Montreal, Québec, Canada and in Sarasota, Florida, U.S.A. The address of the Parent Company’s registered office is 800 Place Victoria, Suite 3700, Montreal, Québec H4Z 1E9, c/o Fasken Martineau DuMoulin LLP. The Parent Company’s common shares are listed on the Toronto Stock Exchange (“TSX”) in Canada.
The Parent Company and its subsidiaries (together referred to as the “Company”) develop, manufacture and sell a variety of paper and film based pressure sensitive and water activated tapes, polyethylene and specialized polyolefin films, protective packaging, woven coated fabrics and complementary packaging systems for industrial and retail use.
Intertape Polymer Group Inc. is the Company’s ultimate parent.
2 - ACCOUNTING POLICIES
Basis of Presentation and Statement of Compliance
The unaudited interim condensed consolidated financial statements (“financial statements”) present the Company’s consolidated balance sheets as of September 30, 2018 and December 31, 2017, as well as its consolidated earnings, comprehensive income and cash flows for the three and nine months ended September 30, 2018 and 2017 and the changes in equity for the nine months ended September 30, 2018 and 2017.
These financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34 – Interim Financial Reporting and are expressed in United States (“US”) dollars. Accordingly, certain information and footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), have been omitted or condensed. These financial statements use the same accounting policies, except for the adoption of the new standards described below, and use the same methods of computation as compared with the Company’s most recent annual audited consolidated financial statements, except for (i) the estimate of the provision for income taxes, which is determined in these financial statements using the estimated weighted average annual effective income tax rate applied to the earnings before income tax expense of the interim period, which may have to be adjusted in a subsequent interim period of the financial year if the estimate of the annual income tax rate changes, and (ii) the re-measurement of the defined benefit liability, which is required at year-end and if triggered by plan amendment or settlement during interim periods.
These financial statements reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the results for these interim periods. These adjustments are of a normal recurring nature.
These financial statements were authorized for issuance by the Company’s Board of Directors on November 7, 2018.
Critical Accounting Judgments, Estimates and Assumptions
The preparation of these financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Significant changes in the underlying assumptions could result in significant changes to these estimates. Consequently, management reviews these estimates on a regular basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. The judgments, estimates and assumptions applied in these financial statements were the same as those applied in the Company’s most recent annual audited consolidated financial statements other than (as noted above) the accounting policies and methods of computation for the estimate of the provision for income taxes and the re-measurement of the defined benefit liability.

9

New Standards Adopted as of January 1, 2018
IFRS 15 – Revenue from Contracts with Customers replaces IAS 18 – Revenue, IAS 11 – Construction Contracts and some revenue related interpretations. IFRS 15 establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized at a point in time or over time, provides new and more detailed guidance on specific topics and expands and improves disclosures about revenue. IFRS 15 is effective for annual reporting periods beginning on or after January 1, 2018. Management has chosen the modified retrospective method of adoption, and as a result, the 2017 comparative period has not been restated to conform to the new IFRS 15 requirements. There was no material impact to the Company’s financial statements as a result of adopting IFRS 15.
The Company adopted IFRS 9 (2013) - Financial Instruments effective January 1, 2015. IFRS 9 (2014) - Financial Instruments differs in some regards from IFRS 9 (2013). IFRS 9 (2014) includes updated guidance on the classification and measurement of financial assets. The final standard also amends the impairment model by introducing a new expected credit loss model for calculating impairment. The mandatory effective date of IFRS 9 (2014) is for annual periods beginning on or after January 1, 2018 and must be applied retrospectively with some exceptions. The Company adopted IFRS 9 (2014) on January 1, 2018 and the new guidance resulted in enhancements to the Company's model that calculates the allowance for doubtful accounts on trade receivables for expected credit losses. There was no material impact to the Company’s financial statements as a result of adopting IFRS 9 (2014) and the 2017 comparative period has not been restated.
New Standards and Interpretations Issued but Not Yet Effective
Certain new standards, amendments and interpretations, and improvements to existing standards have been published by the IASB but are not yet effective and have not been adopted early by the Company. Management anticipates that all the relevant pronouncements will be adopted in the first reporting period following the date of application. Information on new standards, amendments and interpretations, and improvements to existing standards, which could potentially impact the Company’s financial statements, are detailed as follows:
IFRS 16 - Leases, which will replace IAS 17 - Leases, introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees, as well as new disclosure requirements. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019. The Company will adopt IFRS 16 effective January 1, 2019. The Company is acting as a lessee for its leases. Management has performed a review of the new guidance as compared to the Company's current accounting policies, including a review of the various practical expedients and other elections available under the new guidance, an analysis of the Company's significant existing leases for treatment under the new guidance and an analysis estimating the potential impact on the financial statements. Management continues to review these impacts in more detail and will finalize decisions on the adoption method during the fourth quarter of 2018. Based on the Company's current portfolio of leases, management expects:
•
an increase in long-term assets and liabilities, due to the new requirements to record right-of-use assets and related liabilities for operating leases by lessees;
•
an increase in cash flows from operating activities and a decrease in cash flows from financing activities, as operating lease payments will be reclassified to financing cash flows as components of interest and lease obligations; and
•
an insignificant change to net earnings, but with reclassification of amounts between costs within operating profit and finance costs as operating lease costs are reclassified into amortization of the right-of-use asset and interest expense on the related lease obligation.
Management will continue to refine its models and assumptions in 2018 for these calculations, develop reporting processes to meet the new disclosure requirements, and analyze any new leases or changes to the Company's current lease portfolio.
On March 29, 2018, the IASB issued its revised Conceptual Framework for Financial Reporting ("Conceptual Framework"). This replaces the previous version of the Conceptual Framework issued in 2010. The revised Conceptual Framework will be effective on November 1, 2020. Management is currently assessing but has not yet determined the impact of this new standard on the Company’s financial statements.
Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Company’s financial statements.

10

3 - INFORMATION INCLUDED IN CONSOLIDATED EARNINGS
The following table describes the charges incurred by the Company which are included in the Company’s consolidated earnings:
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
$
 
$
 
$
 
$
Employee benefit expense
 
 
 
 
 
 
 
 
Wages, salaries and other short-term benefits
 
51,376

 
45,982

 
144,348

 
125,743

Share-based compensation expense (benefit) (Note 9)
 
1,847

 
(8,231
)
 
1,543

 
(3,067
)
Pension, post-retirement and other long-term employee benefit plans:
 
 
 
 
 
 
 
 
Defined benefit plans
 
606

 
711

 
2,070

 
2,136

Defined contributions plans
 
1,389

 
1,204

 
4,403

 
3,762

 
 
55,218

 
39,666

 
152,364

 
128,574

 
 
 
 
 
 
 
 
 
Finance costs - Interest
 
 
 
 
 
 
 
 
Interest on borrowings
 
4,436

 
2,511

 
10,200

 
5,280

Amortization and write-off of debt issue costs on borrowings
 
139

 
187

 
1,608

 
463

Interest capitalized to property, plant and equipment
 
(623
)
 
(408
)
 
(1,449
)
 
(1,022
)
 
 
3,952

 
2,290

 
10,359

 
4,721

 
 
 
 
 
 
 
 
 
Finance costs - Other (income) expense, net
 
 
 
 
 
 
 
 
Foreign exchange (gain) loss
 
(1,961
)
 
304

 
(276
)
 
496

Other costs, net
 
484

 
289

 
1,253

 
798

 
 
(1,477
)
 
593

 
977

 
1,294

 
 
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
 
 
 
Depreciation of property, plant and equipment
 
9,358

 
8,618

 
27,339

 
23,526

Amortization of intangible assets
 
1,062

 
1,015

 
3,132

 
2,745

Impairment of assets
 
5,685

 
109

 
6,238

 
326




11

4 - MANUFACTURING FACILITY CLOSURES, RESTRUCTURING AND OTHER RELATED CHARGES

The following table describes the charges incurred by the Company which are included in the Company’s consolidated earnings
under the caption manufacturing facility closures, restructuring and other related charges:

 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
$
 
$
 
$
 
$
Impairment of property, plant and equipment
 
3,938

 
—

 
3,938

 
289

Equipment relocation
 
—

 
24

 
—

 
147

Revaluation and impairment of inventories
 
1,299

 
(2
)
 
1,297

 
14

Termination benefits and other labor related costs (recoveries)
 
401

 
62

 
444

 
(34
)
Environmental costs (recoveries)
 
100

 
—

 
(406
)
 
—

Restoration and idle facility costs
 
39

 
106

 
192

 
139

Professional fees
 
—

 
26

 
24

 
67

Other (recoveries) costs
 
—

 
—

 
(13
)
 
271

 
 
5,777

 
216

 
5,476

 
893


The charges incurred in the three and nine months ended September 30, 2018 were primarily due to non-cash impairments of property, plant and equipment and inventory related to the Johnson City, Tennessee manufacturing facility. In order to further expand on operational synergies gained from the Canadian Technical Tape Ltd. acquisition, which was completed in July 2017, the Company will close its Johnson City, Tennessee manufacturing facility and transfer production to other existing manufacturing facilities. The Johnson City manufacturing facility, which primarily produces carton sealing tape, is expected to transfer substantially all of its production by the end of 2018.

The charges incurred in the three and nine months ended September 30, 2017 were primarily related to the post-closure activities of the Columbia, South Carolina manufacturing facility.
5 - INCOME TAXES
The calculation of the Company’s effective tax rate is as follows:
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
Income tax expense
 
$
2,246

 
$
6,631

 
$
9,032

 
$
15,518

Earnings before income tax expense
 
$
14,298

 
$
25,903

 
$
47,408

 
$
58,296

Effective tax rate
 
15.7
%
 
25.6
%
 
19.1
%
 
26.6
%

The decrease in the effective tax rate in the three months ended September 30, 2018 as compared to the same period in 2017 was primarily due to (i) the reduction in the US statutory corporate tax rate as a result of the Tax Cuts and Jobs Act ("TCJA"), (ii) a net tax benefit recognized for an $11.3 million discretionary pension contribution deducted on the 2017 tax return at the higher 2017 US corporate tax rate, partially offset by a reversal of the related deferred tax asset recorded using the lower US corporate tax rate provided under TCJA and (iii) a favourable change in the mix of earnings between jurisdictions, partially offset by the elimination and limitation of certain deductions in the US as a result of the TCJA. The decrease in the effective tax rate in the nine months ended September 30, 2018 as compared to the same period in 2017 was primarily due to the reduction in the US statutory corporate tax rate as a result of the TCJA and the net tax benefit recognized for an $11.3 million discretionary pension contribution discussed above, partially offset by the elimination and limitation of certain deductions in the US as a result of the TCJA.


12

The following table outlines the deferred tax assets and liabilities:

 
 
September 30, 2018
 
December 31, 2017
 
 
$
 
$
Deferred tax assets
 
26,950

 
27,627

Deferred tax liabilities
 
23,204

 
13,769

Net deferred tax assets
 
3,746

 
13,858


The decrease in the net deferred tax assets recorded at September 30, 2018 as compared to the net deferred tax assets recorded at December 31, 2017 is primarily due to the utilization of tax credits, the acceleration of certain tax deductions in the US, and the deferred tax liabilities recorded as a result of purchase price allocation in connection with the acquisition of substantially all of the assets and certain liabilities of Airtrax Polymers Private Limited ("Airtrax"), as part of a larger transaction involving the Company's controlled subsidiary, Capstone, on May 11, 2018 as discussed in Note 11.
6 - EARNINGS PER SHARE
The weighted average number of common shares outstanding is as follows:
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
Basic
 
58,817,410

 
59,171,255

 
58,810,166

 
59,153,200

Effect of stock options
 
263,883

 
356,568

 
300,999

 
386,083

Effect of performance share units
 
—

 
—

 
—

 
192,152

Diluted
 
59,081,293

 
59,527,823

 
59,111,165

 
59,731,435

 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
Stock options that were anti-dilutive and not included in diluted earnings per share
 
242,918

 
—
 
242,918

 
—
The performance share unit ("PSU") plan was amended on February 17, 2017 to provide for only cash settlement of awards. Prior to the amendment, PSUs were to be settled in common shares of the Company and were included in the calculation of weighted average diluted common shares, to the extent they were dilutive, when the applicable performance conditions had been satisfied. Subsequent to amendment, there is no impact of PSUs in the calculation of weighted average diluted common shares. For the three and nine months ended September 30, 2017 there were nil and 885,879 PSUs, respectively, which met the performance criteria and were included in the calculation of weighted average diluted shares outstanding.
7 - COMMITMENTS
The following table summarizes information related to commitments to purchase machinery and equipment:
 
 
September 30, 2018
 
December 31, 2017
Commitments to purchase machinery and equipment
 
$
22,134

 
$
29,281



13

8 - BORROWINGS

Borrowings are comprised of the following:
 
 
September 30, 2018
 
December 31, 2017
 
 
$
 
$
2018 Credit Facility (1)
 
474,585

 
—

2014 Revolving Credit Facility (2)
 
—

 
254,773

2018 Powerband Credit Facility (3)
 
12,273

 
—

Powerband Revolving Line of Credit
 
—

 
9,563

Finance lease liabilities
 
5,612

 
8,817

Forgivable government loan (4)
 
5,630

 
4,660

Other loans
 
3,495

 
1,650

 
 
501,595

 
279,463

Less: current borrowings
 
13,639

 
14,979

 
 
487,956

 
264,484

(1) 
The 2018 Credit Facility is presented net of unamortized related debt issue costs, amounting to $2.5 million as of September 30, 2018.
(2) 
The 2014 Revolving Credit Facility is presented net of unamortized related debt issue costs, amounting to $1.4 million as of December 31, 2017.
(3) 
The 2018 Powerband Credit Facility is presented net of unamortized related debt issue costs, amounting to $0.1million as of September 30, 2018.
(4) 
The forgivable government loan is shown net of imputed interest amounting to $0.3 million as of September 30, 2018 and December 31, 2017.
2018 Credit Facility
On June 14, 2018, the Company entered into a new five-year, $600.0 million credit facility (“2018 Credit Facility”) with a syndicated lending group, refinancing and replacing the Company's previous $450.0 million credit facility that was due to mature in November 2019 ("2014 Revolving Credit Facility").
The 2014 Revolving Credit Facility's outstanding balance of $304.7 million was repaid in full and a corresponding write-off of debt issue costs of $1.0 million was recorded as interest expense under the caption finance costs in earnings. In securing the 2018 Credit Facility, the Company incurred debt issue costs amounting to $2.7 million which were capitalized and are being amortized using the straight-line method over the five-year term.
The 2018 Credit Facility consists of a $200.0 million term loan (“2018 Term Loan”) and a $400.0 million revolving credit facility (“2018 Revolving Credit Facility”) with the 2018 Term Loan amortizing 35% over five years. The 2018 Credit Facility also includes an incremental accordion feature of $200.0 million, which would enable the Company to increase the limit of this facility (subject to the credit agreement's terms and lender approval) to $800.0 million if needed. The 2018 Credit Facility matures on June 14, 2023 and bears an interest rate based, at the Company’s option, on the London Inter-bank Offered Rate, the Federal Funds Rate, or Bank of America’s prime rate, plus a spread varying between 25 and 250 basis points (200 basis points as of September 30, 2018) depending on the debt instrument's benchmark interest rate and the consolidated secured net leverage ratio.
As of September 30, 2018, the 2018 Term Loan's outstanding principal balance amounted to $197.5 million and the 2018 Revolving Credit Facility’s outstanding principal balance amounted to $279.6 million, for a total outstanding principal balance under the 2018 Credit Facility of $477.1 million ($474.6 million, net of $2.5 million in unamortized debt issue costs). Including $21.8 million in standby letters of credit, total utilization under the 2018 Credit Facility amounted to $498.9 million. Accordingly, the Company’s unused availability as of September 30, 2018 amounted to $98.6 million.
The 2018 Credit Facility is secured by a first priority lien on all personal property of the Company and all current and future material subsidiaries.
The 2018 Credit Facility has two financial covenants, a consolidated secured net leverage ratio not to be more than 3.50 to 1.00, with an allowable temporary increase to 4.00 to 1.00 for the quarter in which the Company consummates an acquisition with a price not less than $50 million and the following three quarters, and a consolidated interest coverage ratio not to be less than 3.00

14

to 1.00. The Company was in compliance with the consolidated secured net leverage ratio and consolidated interest coverage ratio, which were 3.28 and 8.29 respectively, as of September 30, 2018. In addition, the 2018 Credit Facility has certain non-financial covenants, such as covenants regarding indebtedness, investments, and asset dispositions. The Company was in compliance with all covenants as of September 30, 2018.
2018 Powerband Credit Facility
On July 4, 2018, Powerband Industries Private Limited ("Powerband"), one of the Company's majority owned subsidiaries, entered into a new $19.0 million (INR 1,300.0 million, in Indian Rupee ("INR") where noted) credit facility (“2018 Powerband Credit Facility”) subsequently replacing Powerband's previous outstanding debt consisting of a term loan and revolving line of credit ("Powerband Revolving Line of Credit"). The 2018 Powerband Credit Facility is guaranteed by the Parent Company and is otherwise unsecured. Powerband is prohibited from granting liens on its assets without the consent of the lender under the 2018 Powerband Credit Facility.
The 2018 Powerband Credit Facility consists of:

•
$14.0 million (INR 960.0 million) demand term loan (“2018 Powerband Demand Term Loan”) restricted for capital projects with a bullet repayment after five years and bears interest at the prevailing Indian Marginal Cost-Lending Rate ("IMCLR");
•
$1.2 million (INR 80.0 million) term loan ("2018 Powerband Term Loan") restricted for capital projects, payable in monthly installments over four years and bears interest at the prevailing IMCLR; and

•
$3.8 million (INR 260.0 million) working capital loan facility (“2018 Powerband Working Capital Loan Facility”) that renews annually and bears interest at the prevailing IMCLR.

As of September 30, 2018, the 2018 Powerband Demand Term Loan's outstanding balance amounted to $11.5 million (INR 830.0 million), the 2018 Powerband Term Loan's outstanding balance amounted to $0.9 million (INR 66.1 million) and the 2018 Powerband Working Capital Loan Facility’s outstanding balance was nil, for a total outstanding balance under the 2018 Powerband Credit Facility of $12.4 million (INR 896.1 million); net of $0.1 million unamortized debt issue costs, the 2018 Powerband Credit Facility outstanding balance was $12.3 million (INR 890.0 million). As of September 30, 2018, the unused availability under the 2018 Powerband Credit Facility amounted to $5.6 million (INR 403.9 million).
Reconciliation of liabilities arising from financing activities
The changes in the Company’s liabilities arising from financing activities can be classified as follows:
 
Borrowings, non-current (excluding finance lease liabilities)
 
Borrowings, current (excluding finance lease liabilities)
 
Finance lease liabilities
 
Total
 
$
 
$
 
$
 
$
Balance as of December 31, 2017
260,300

 
10,346

 
8,817

 
279,463

Cash flows:
 
 
 
 
 
 
 
Proceeds
654,049

 
25,779

 
—

 
679,828

Repayments
(415,123
)
 
(35,345
)
 
(3,532
)
 
(454,000
)
Debt issuance costs
(2,761
)
 
—

 
—

 
(2,761
)
Non-cash:
 
 
 
 
 
 
 
New finance leases
—

 
—

 
137

 
137

Additions through business acquisitions (Note 11)
346

 
728

 
200

 
1,274

Amortization of debt issuance costs
564

 
—

 
—

 
564

Write-off of debt issuance costs
1,044

 
—

 
—

 
1,044

Foreign exchange and other
(3,417
)
 
(527
)
 
(10
)
 
(3,954
)
Reclassification
(10,682
)
 
10,682

 
—

 
—

Balance as of September 30, 2018
484,320

 
11,663

 
5,612

 
501,595


15

9 - CAPITAL STOCK
Common Shares
The Company’s common shares outstanding as of September 30, 2018 and December 31, 2017 were 58,817,410 and 58,799,910, respectively.
Dividends
The cash dividends paid during the period were as follows:
Declared Date
 
Paid date
 
Per common
share amount
 
Shareholder
record date
 
Common shares
issued and
outstanding
 
Aggregate payment (1)
March 7, 2018
 
March 30, 2018
 
$0.14
 
March 20, 2018
 
58,807,410
 
$
8,333

May 9, 2018
 
June 29, 2018
 
$0.14
 
June 15, 2018
 
58,817,410
 
$
8,140

August 10, 2018
 
September 28, 2018
 
$0.14
 
September 14, 2018
 
58,817,410
 
$
8,214


(1) 
The aggregate dividend payment amount presented in the table above has been adjusted for the impact of foreign exchange rates on cash payments to shareholders.
Share Repurchases
Under the Company’s normal course issuer bid (“NCIB”), the Company has the ability to repurchase for cancellation up to 4,000,000 common shares of the Company at prevailing market prices.
There were no shares repurchased under the NCIB during the three and nine months ended September 30, 2018. The following table summarizes repurchases under the NCIB during 2017 (in Canadian dollars ("CDN") where noted):
 
 
Three and nine months ended September 30,
 
 
2017
Common shares repurchased
 
415,500

Average price per common share including commissions
 
CDN$19.05

Total purchase price including commissions
 
$
6,437

Carrying value of the common shares repurchased
 
$
2,463

Share repurchase premium (1)
 
$
3,974


(1) 
The excess of the purchase price paid over the carrying value of the common shares repurchased is recorded in deficit in the consolidated balance sheet and in the statement of consolidated changes in equity.
The NCIB which expired on July 16, 2018 was renewed for a twelve-month period starting July 23, 2018. There were no shares repurchased under the renewed NCIB as of November 7, 2018.

16

Stock Options

There were no stock options granted, exercised or forfeited during the three months ended September 30, 2018 and 2017. The following tables summarize information related to stock options :
 
 
Nine months ended
September 30,
 
 
2018
 
2017
Stock options granted
 
242,918

 
—

Weighted average exercise price per stock option granted
 
CDN$21.76

 
—

Stock options exercised
 
17,500

 
226,875

Weighted average exercise price per stock option exercised
 
CDN$12.04

 
CDN$8.00

 
 
September 30, 2018
Stock options outstanding
 
1,059,793

Weighted average exercise price per stock option outstanding
 
CDN$14.46

During the nine months ended September 30, 2018, the weighted average fair value of stock options granted was estimated using the Black-Scholes option pricing model, taking into account the following weighted average assumptions:
 
Nine months ended
September 30, 2018
Expected life
 4.8 years
Expected volatility(1)
32.09%
Risk-free interest rate
2.05%
Expected dividends
3.30%
Stock price at grant date
CDN$21.76
Exercise price of awards
CDN$21.76
Foreign exchange rate USD to CDN
1.2809

(1) 
Expected volatility was calculated by applying a weighted average of the daily closing price change on the TSX for a term commensurate with the expected life of each grant.
Restricted Share Units
On March 7, 2018, the Board of Directors approved the addition of restricted share units ("RSUs") as an available cash-settled award type. An RSU, as defined by the Amended and Restated PSU and RSU Plan, is a right to receive a cash payment equal to the five trading days volume weighted average price ("VWAP") of a common share of the Company on the TSX upon completion of time-based vesting conditions. Grants of RSUs to employees of the Company are on a discretionary basis and subject to the Board of Directors’ approval. The purpose of an RSU is to provide award holders with a proprietary interest in the Company to: (a) increase the incentives of those award holders who share primary responsibility for the management, growth and protection of the business of the Company; (b) furnish an incentive to such award holders to continue their services for the Company; and (c) provide a means through which the Company may attract potential employees. The fair value of RSUs is based on the five trading days VWAP of the Company’s common shares on the TSX at the end of each reporting period. The RSUs are expensed over the vesting period beginning from the date of grant through February 15th of the fourth calendar year following the date of grant, unless vesting is accelerated based on retirement eligibility, death or disability. On March 21, 2018, 113,047 RSUs were granted at a weighted average fair value of $16.29. As of September 30, 2018 the Company has not granted any other RSUs. During the three months ended September 30, 2018, 1,228 RSUs were forfeited. As of September 30, 2018, there were 111,819 RSUs outstanding at a weighted average fair value of $14.84.

17

Deferred Share Units

The following table summarizes information related to deferred share units ("DSUs"):
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
DSUs granted
 
—

 
7,937

 
43,203

 
48,179

Weighted average fair value per DSU granted
 
—

 
$
15.18

 
$
14.94

 
$
17.79

DSUs settled
 
—

 
—

 
37,668

 
—

Weighted average fair value per DSU settled
 
—

 
—

 
$
14.50

 
—

Cash payments on DSUs settled
 
—

 
—

 
$
546

 
—


 
September 30, 2018
DSUs outstanding
172,962

Weighted average fair value per DSU outstanding
$
14.84


Performance Share Units

The following table summarizes information about PSUs during the period:
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
PSUs granted
 
—

 
—

 
284,571

 
358,377

Weighted average fair value per PSU granted
 
—

 
—

 
$
17.84

 
$
16.15

PSU forfeited
 
14,540

 
—

 
16,053

 
6,198

PSUs (cancelled)/added by performance factor (1)
 
—

 
—

 
(2,125
)
 
69,600

PSUs settled (1)
 
—

 
—

 
335,465

 
208,800

Weighted average fair value per PSU settled
 
—

 
—

 
$
15.87

 
$
18.49

Cash payments on PSUs settled(2)
 
—

 
—

 
$
5,863

 
$
4,174


(1) 
The following table provides further information regarding the PSUs settled included in the table above. The number of "Target Shares" reflects 100% of the PSUs granted and the number of PSUs settled reflects the performance adjustments to the Target Shares.
Grant Date
Date Settled
Target Shares

Performance

PSUs settled

June 11, 2014
June 22, 2017
139,200

150
%
208,800

March 14, 2015
March 21, 2018
217,860

100
%
217,860

May 14, 2015
May 22, 2018
115,480

100
%
115,480

May 20, 2015
May 28, 2018
4,250

50
%
2,125


(2) 
Cash payments on PSUs settled includes the fair value of the PSUs plus the cash dividends per common share declared and paid by the Company from the date of grant of the PSUs to the settlement date.

18

The weighted average fair value of PSUs granted was estimated based on a Monte Carlo simulation model, considering the following weighted average assumptions:
 
Nine months ended
September 30,
 
2018
 
2017
Expected life
3 years

 
3 years

Expected volatility(1)
30
%
 
34
%
US risk-free interest rate
2.43
%
 
1.57
%
Canadian risk-free interest rate
1.96
%
 
N/A

Expected dividends(2)
0
%
 
0
%
Performance period starting price(3)
CDN$21.13

 
CDN$22.26

Closing stock price on TSX as of the estimation date
CDN$20.59

 
CDN$21.94

 
(1) 
Expected volatility was calculated based on the daily dividend adjusted closing price change on the TSX for a term commensurate with the expected life of the grant.
(2) 
A participant will receive a cash payment from the Company upon PSU settlement that is equivalent to the number of settled PSUs multiplied by the amount of cash dividends per share declared by the Company between the date of grant and the settlement date. As such, there is no impact from expected future dividends in the Monte Carlo simulation model.
(3) 
The performance period starting price is measured as the VWAP for the common shares of the Company on the TSX on the grant date.
The following table summarizes information about PSUs outstanding as of:
 
September 30, 2018
PSUs outstanding
1,034,239

Weighted average fair value per PSU outstanding
$
10.18


Based on the Company’s performance adjustment factors (see additional information below), the number of PSUs earned if all of the outstanding PSUs were to be settled at September 30, 2018 would be as follows:
 
Grant Date
 
Performance
March 21, 2016
 
50
%
December 20, 2016
 
0
%
March 20, 2017
 
0
%
March 21, 2018
 
95
%
Grant details for PSUs granted prior to December 31, 2017:
The number of PSUs which will be eligible to vest can range from 0% to 150% of the Target Shares based on the Company's total shareholder return ("TSR") ranking relative to a specified peer group of companies ("Peer Group") over the measurement period as outlined in the table below:
TSR Ranking Relative to the Peer Group
 
Percent of Target Shares Vested
76th percentile or higher
 
150
%
51st-75th percentile
 
100
%
25th-50th percentile
 
50
%
Less than the 25th percentile
 
0
%
The performance and vesting period is the period from the date of grant through the third anniversary of the date of grant. The PSUs are expensed over the vesting period.

19

Grant details for PSUs granted subsequent to December 31, 2017:
The number of PSUs which will be eligible to vest is determined by multiplying the number of PSUs awarded by the adjustment factors as follows:
•
50% based on the Company's TSR ranking relative to the Peer Group over the measurement period as set out in the table below; and
•
50% based on the Company's average return on invested capital over the measurement period as compared to internally developed thresholds (the “ROIC Performance”) as set out in the table below.
The relative TSR performance adjustment factor is determined as follows:
TSR Ranking Relative to the Peer Group
 
Percent of Target Shares Vested
90th percentile or higher
 
200
%
75th percentile
 
150
%
50th percentile
 
100
%
25th percentile
 
50
%
Less than the 25th percentile
 
0
%
The ROIC Performance adjustment factor is determined as follows:
ROIC Performance
 
Percent of Target Shares Vested
1st Tier
 
0