IPG Investor Presentation

Transcription

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2 IPG Investor Presentation May

3 Safe Harbor Statement Certain statements and information included in this presentation constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (collectively, "forward-looking statements"), which are made in reliance upon the protections provided by such legislation for forward-looking statements. All statements other than statements of historical facts included in this presentation, including statements regarding the Company's strengths, the Company's strategy and priorities, including its investments in growing its business, its acquisition strategy, its dividends and share repurchases, expectations regarding the financial impact from Better Packages, the Company's projected cost reductions, the Company's expected annualized saving from, and timing for completion of, manufacturing rationalization projects, the Company's expected income tax benefit from the Legal Entity Reorganization, timing for fully utilizing its NOLs, and effective income tax rate for 2015, and the Company's outlook on certain financial metrics for the second quarter of 2015 and full year 2015, may constitute forward-looking statements. These forward-looking statements are based on current beliefs, assumptions, expectations, estimates, forecasts and projections made by the Company's management. Words such as "may," "will," "should," "expect," "continue," "intend," "estimate," "anticipate," "plan," "foresee," "believe" or "seek" or the negatives of these terms or variations of them or similar terminology are intended to identify such forward-looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, these statements, by their nature, involve risks and uncertainties and are not guarantees of future performance. Such statements are also subject to assumptions concerning, among other things: business conditions and growth or declines in the Company's industry, the Company's customers' industries and the general economy; the anticipated benefits from the Company's manufacturing facility closures and other restructuring efforts; the quality, and market reception, of the Company's products; the Company's anticipated business strategies; risks and costs inherent in litigation; the Company s ability to maintain and improve quality and customer service; anticipated trends in the Company s business; anticipated cash flows from the Company s operations; availability of funds under the Company s Credit Facility; and the Company's ability to continue to control costs. The Company can give no assurance that these statements and expectations will prove to have been correct. Actual outcomes and results may, and often do, differ from what is expressed, implied or projected in such forward-looking statements, and such differences may be material. You are cautioned not to place undue reliance on any forward-looking statement. For additional information regarding some important factors that could cause actual results to differ materially from those expressed in these forward-looking statements and other risks and uncertainties, and the assumptions underlying the forward-looking statements, you are encouraged to read "Item 3. Key Information - Risk Factors," "Item 5. Operating and Financial Review and Prospects (Management's Discussion & Analysis)" and statements located elsewhere in the Company's Annual Report on Form 20-F for the year ended December 31, 2014 and the other statements and factors contained in the Company's filings with the Canadian securities regulators and the US Securities and Exchange Commission. Each of these forward-looking statements speaks only as of the date of this presentation. The Company will not update these statements unless applicable securities laws require it to do so. This presentation contains certain non-gaap financial measures as defined under applicable securities legislation including Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Earnings, and Adjusted Earnings per Share. The Company believes such non-gaap financial measures improve the transparency of the Company s disclosures, and improves the period-to-period comparability of the Company s results from its core business operations. As required by applicable securities legislation, the Company has provided definitions of these non-gaap measures contained in this presentation, as well as a reconciliation of each of them to the most directly comparable GAAP measure, on its website at under Investor Relations and Events and Presentations and Investor Presentations. You are encouraged to review the related GAAP financial measures and the reconciliation of non-gaap measures to their most directly comparable GAAP measures set forth on the website and should consider non-gaap measures only as a supplement to, not as a substitute for or as a superior measure to, measures of financial performance prepared in accordance with GAAP. 3

4 Company Profile The second largest tape manufacturer in North America Employs ~1,950 people Approximately 61% of sales from products with a Top 2 market position in North America Tapes 16% Films Woven & Other 19% 2014 $812.7 million Net Sales 65% 4

5 Our Locations 11 Manufacturing Facilities in North America 1 Manufacturing Facility in Europe 5

6 Tapes At-A-Glance #1 or #2 Market Leadership Position in North America Carton Sealing Tapes Hot Melt (#2) Natural Rubber (#1) Water-Activated (#1) Water-Activated Machine Dispensers (#1) Industrial & Specialty Tapes Paper (#2) Flatback (#1) Filament (#2) Stencil (#1) 6

7 Woven & Other At-A-Glance #1 or #2 Market Leadership Position in North America Agro-Environmental Structure Fabrics (#1) Woven Coated Geomembrane (#1) Hay Cover Fabrics (#1) Poultry Fabrics (#1) Building & Construction Lumber Wrap (#2) Fiberglass Sleeves (#1) 7

8 Films At-A-Glance 8

9 Key Raw Materials Raw material inputs: Resin Adhesive Paper Other (2) Raw Materials (1) 16% 17% 47% 20% Resin Adhesive Paper Other (1) Based on usage of raw materials in (2) Other includes but not limited to Latex, Fiberglass and Starch. 9

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11 Strengths Wide breadth of products Proven management team Established relationships with customers Strong financial position and profitability Well positioned to invest in strategic opportunities 11

12 Strategy and Priorities Continued investment to grow our business Strategic highreturn projects R&D investment New distribution channels and market verticals Acquisitions Potential focus areas include: Expansion in tape, woven and packaging adjacencies and Additional geographic expansion Dividends Current annualized dividend amount is $0.48 per share Share repurchases Total repurchased: 1,466,388 common shares for $19.9 million as of April 30, 2015 Normal course issuer bid expires on July 9,

13 Source of Funds Cash Flow Based Loan Facility of $300 million negotiated in November 2014 As of March 31, 2015 Total cash and loan availability was $184 million Leverage was 1.6x debt to TTM adjusted EBITDA Option to raise equity if needed Cash Flow Based Loan Facility (1) - Key Terms Facility Incremental Facility (Accordion Feature) $300 million Revolving Credit Facility $150 million $198 $206 $160 $184 Cash Availability Pricing LIBOR + Spread (1.25% to 2.25%) Loan Availability Key Financial Covenants (1) Leverage < 3.25 (2) Debt Service Coverage Ratio > 1.5 Maturity November 18, 2019 $8 $24 Cash and Loan Availability 31-Dec Mar-15 In millions (1) The transition from an Asset-Based Loan to the Cash Flow-Based Loan facility occurred on November 18,

14 Average Cost of Debt (1) On March 18, 2015, the Company entered into an interest rate swap agreement to fix the floating rate 30-day LIBOR benchmark interest rate on $40 million of its debt at 1.61% through November 18, Percent of floating debt was approximately 60% as of March 31, 2015 which includes the impact of the interest rate swap agreement (1) At quarter end. 14

15 Acquisition of Better Packages The Company acquired BP Acquisition Corporation ( Better Packages ) on April 7, 2015 Better Packages is a leading supplier of water-activated tape dispensers and extends the Company s product offering and global presence The Company paid a purchase price of $16.0 million in cash, subject to a post-closing working capital adjustment Current expectations of approximately $18 million in annual revenue with over 15% Adjusted EBITDA margin 15

16 Reduce Manufacturing Costs and Leverage Capacity Key Initiatives 1) Plant consolidations 2) Material productivity gains 3) Labor and energy savings measures EPA 2014 and 2015 ENERGY STAR Partner of the Year Cost Reductions Achieved 2012 : ~ $17 million 2013 : ~ $14 million 2014 : ~ $14 million Cost Reductions Projected $13 to $16 million for 2015 which includes South Carolina Project savings At least $13 million per year for the South Carolina Project (1) Manufacturing Rationalization Projects Completed and in Progress Brantford (Ont) Completed 2011 $4 million Carbondale (IL), Richmond (KY), Tremonton (UT) & Truro (NS) Completed 2013 $6 million Columbia (SC) Announced: Q Expected to be completed: Q At least $13 million (1) $23 million in total annualized savings (2) (1) Savings expected to start in 2015 with the first full year benefits of at least $13 million expected to start in (2) On an annualized basis when in full effect. 16

17 Tax Position Effective Tax Rate Decreased from 39.0% in Q to 27.2% in Q Decrease is primarily due to a change in the mix of earnings between jurisdictions as a result of the 2014 legal entity reorganization (1) which will yield greater than $7 million annualized income tax benefit Full year 2015 is expected to be approximately 25% to 30% (2) Net Operating Losses Net Operating Losses ( NOL ) available for use (as of December 31, 2014) $50.7 million of US NOL $20.6 million of Canadian NOL Expect to fully utilize US NOL during 2015 (1) Effective October 30, 2014 (2) Assuming the geographic distribution of earnings is consistent with Q

18 Results & Outlook 18

19 2015 Q1 Results: Year-Over-Year in millions US $ Q Q Change % (except per share amounts) Revenue $189.0 $199.9 (5.5%) Gross profit $37.0 $42.7 (13.3%) Net earnings $11.8 $ % Adj Net Earnings $12.6 $ % Adj EBITDA $23.5 $26.7 (11.7%) EPS, fully diluted $0.19 $ % Adj EPS, fully diluted $0.20 $ % Gross margin decreased from 21.4% to 19.6% primarily due to the South Carolina Duplicate Overhead Costs and an unfavourable product mix variance Net earnings and adjusted net earnings increases were primarily due to a decrease in income tax expense, variable compensation expense and finance costs, partially offset by a decrease in gross profit Adjusted EBITDA Margin decreased from 13.3% to 12.5% primarily due to a decrease in gross profit, partially offset by a decrease in variable compensation expense 19

20 2015 Q1 Results: Sequential in millions US $ Q Q Change % (except per share amounts) Revenue $189.0 $200.8 (5.8%) Gross profit $37.0 $ % Net earnings $11.8 $6.1 94% Adj Net Earnings $12.6 $ % Adj EBITDA $23.5 $ % EPS, fully diluted $0.19 $ % Adj EPS, fully diluted $0.20 $ % Gross margin increased from 18.0% to 19.6% primarily due to manufacturing cost reduction programs and improved manufacturing performance compared to the fourth quarter of 2014 partially offset by incremental South Carolina Duplicate Costs Net earnings and adjusted net earnings compared to Q increased primarily due to a decrease in SG&A and finance costs partially offset by an increase in income tax expense Adjusted EBITDA Margin increased from 10.3% to 12.5% primarily due a decrease in SG&A 20

21 2014 Results: Full Year in millions US $ Change % (except per share amounts) Revenue $812.7 $ % Gross profit $163.6 $ % Net earnings $35.8 $67.4 (46.8%) Adj Net Earnings $52.4 $103.4 (49.4%) Adj EBITDA $103.9 $ % EPS, fully diluted $0.58 $1.09 (47.2%) Adj EPS, fully diluted $0.84 $1.68 (49.7%) Gross margin decreased slightly from 20.3% to 20.1% primarily due to the South Carolina Duplicate Overhead Costs, an unfavourable product mix variance and the non-cash Brantford Pension Charge, partially offset by an increase in the spread between selling prices and higher raw material costs and net manufacturing cost reductions The decrease in net earnings and adjusted net earnings was primarily due to the non-recurrence of the $43.0 million tax benefit recorded during the year ended December 31, 2013 to recognize the previously derecognized US deferred tax assets and the partial utilization of such deferred tax assets during the year ended December 31, 2014 Adjusted EBITDA margin slightly decreased from 13.2% to 12.8% primarily due to increased SG&A and R&D partially offset by higher gross profit 21

22 $US millions Quarterly Gross Profit 22

23 $US millions Quarterly Net Earnings and Adjusted EBITDA Margins 23

24 Outlook Q revenue is anticipated to be higher compared to Q primarily due to Company s belief that the majority of the de-stocking by customers during the end of 2014 and into Q is completed Q gross margin is anticipated to be significantly higher compared to Q primarily due to: Lower petroleum-based raw material costs being realized in Q Reduction in South Carolina Duplicate Overhead Costs Q Adjusted EBITDA is anticipated to be significantly higher compared to Q primarily due to: Lower petroleum-based raw material costs being realized in Q Increased revenue Reduction in South Carolina Duplicate Overhead Costs 24

25 Outlook South Carolina Duplicate Overhead Costs of approximately $5 million for full year 2015 Manufacturing cost reductions for full year 2015 are expected to be between $13 and $16 million Includes the expected savings of $4 to $5 million from the South Carolina Project Assuming there are no material changes to the Company s expected results and geographic source of earnings, the Company expects its effective tax rate for Q and full year 2015 to be approximately 25% to 30% 25

26 Thank You! 26