Annual Shareholders' Meeting Presentation Toronto June 7, 2018 - - PowerPoint PPT Presentation

Annual Shareholders' Meeting Presentation

Toronto June 7, 2018

• A. C. Yull

President and

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Gregory A. C. Yull President and Chief Executive Officer

• A. C. Yull

President and

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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 capital allocation priorities, including its investment strategies, acquisition strategies, anticipated annualized dividends and share repurchases, the Company's capital expenditures, including its anticipated cost and return expectations, the Capstone Greenfield Project, including the goal of the project, the total cash consideration, and the timing of the project, the Powerband Greenfield Project, including the goal of the project, the total cash consideration, and the timing of the project, the Midland, North Carolina manufacturing facility expansion, including the total cash consideration and the timing of the project, the Company’s expected acquisition of Airtrax, and the Company's second quarter and full year 2018 outlook, including expected revenue growth, adjusted EBITDA, the effective tax rate and income tax expenses, 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 expansions, greenfield developments, manufacturing cost reduction programs and other restructuring efforts; the anticipated benefits from the Company’s acquisitions and partnerships; accounting adjustments; the anticipated benefits from the Company’s capital expenditures; the quality and market reception of the Company's products; the effective tax rate and income tax expenses; the Company's anticipated business strategies; risks and costs inherent in litigation; risks and costs inherent in the Company’s intellectual property; the Company’s ability to maintain and improve quality and customer service; the Company’s ability to retain, and adequately develop and incentivize, its management team and key employees; anticipated trends in the Company's business; anticipated cash flows from the Company’s operations; availability of funds under the Company’s Revolving Credit Facility; the Company's ability to continue to control costs; the impact of raw material price fluctuations; movements in the prices of key inputs such as raw material, freight, energy and labor; government policies, including those specifically regarding the manufacturing industry, such as industrial licensing, environmental regulations, labor and safety regulations, import restrictions and duties, intellectual property laws, excise duties, sales taxes, and value added taxes; accidents and natural disasters; changes to accounting rules and standards; expected strategic and financial benefits from the Company’s ongoing capital investment and mergers and acquisitions programs; and other factors beyond the Company's

• control. 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 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, 2017 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 and Adjusted EBITDA Margin. The Company has included these non-GAAP financial measures because it believes that they allow investors to make a more meaningful comparison between periods of the Company’s performance, underlying business trends and the Company’s ongoing operations. The Company further believes these measures may be useful in comparing its operating performance with the performance of other companies that may have different financing and capital structures, and tax rates. Adjusted EBITDA excludes costs that are not considered by management to be representative of the Company’s underlying core operating performance, including certain non-operating expenses, non-cash expenses and non-recurring expenses. In addition, adjusted EBITDA is used by management to set targets and is a metric that, among others, can be used by the Company’s Compensation Committee to establish performance bonus metrics and payout, and by the Company’s lenders and investors to evaluate the Company’s performance and ability to service its debt, finance capital expenditures and acquisitions, and provide for the payment of dividends to shareholders. 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 http://www.itape.com 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.

• A. C. Yull

President and

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IPG Investor Presentation

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• A. C. Yull

President and

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• Gross margin(1) decreased to 22.4% from 23.7% primarily due to a reduction in Insurance Proceeds(3)
• Net earnings attributable to Company shareholders ("IPG Net Earnings") increased primarily due to an

increase in gross profit and a decrease in income tax expense(4), partially offset by an increase in selling, general and administrative expenses ("SG&A")

• Adjusted EBITDA Margin(1)(2)(5) decreased to 14.4% from 15.1% primarily due to a reduction in Insurance

Proceeds

2017 Full Year Results

in millions US $ (except per share amounts)

2017 Full Year 2016 Full Year Change %

Revenue $898.1 $808.8 11.0% Gross profit(1) $201.4 $191.5 5.2% IPG Net Earnings $64.2 $51.1 25.6% Adj EBITDA(1)(2) $129.6 $122.0 6.2% IPG EPS, fully diluted $1.08 $0.85 27.3%

(1) Gross profit, gross margin, adjusted EBITDA, and adjusted EBITDA margin include $2.1 million and $12.6 million in Insurance Proceeds for the years ending December 31, 2017 and 2016, respectively. (2) Non-GAAP financial measure. Please see “Safe Harbor Statement” for an explanation of the Company’s use of this measure and a cross-reference to a reconciliation to its most directly comparable GAAP measure. (3) “Insurance Proceeds” refers to insurance proceeds received by the company related to rainfall and subsequent severe flooding on October 4, 2015 that resulted in considerable damage to, and permanent closure of, the Columbia, South Carolina facility eight to nine months in advance of the planned shut down. (4) Tax benefit recorded in the fourth quarter of 2017 mainly resulting from the remeasurement of the US net deferred tax liability using lower US corporate tax rate provided under the Tax Cuts and Job Act (“TCJA”) enacted into law on December 22, 2017. (5) Adjusted EBITDA as a percentage of revenue.

• A. C. Yull

President and

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• Gross margin(1) decreased to 21.3% from 23.7% primarily due to the non-recurrence of $2.1 million of Insurance Proceeds and an

increase in average freight costs

• IPG Net Earnings decreased primarily due to an increase in SG&A and finance costs, partially offset by a decrease in income tax

expense and an increase in gross profit

• Adjusted EBITDA Margin(1) decreased to 12.7% from 14.7% primarily due to the non-recurrence of Insurance Proceeds of $2.1

million realized in the first quarter of 2017 and an increase in SG&A

2018 Q1 Results: Year-Over-Year

in millions US $ (except per share amounts)

Q1 2018 Q1 2017 Change %

Revenue $237.2 $207.1 14.5% Gross profit(1) $50.5 $49.1 2.7% IPG Net Earnings $11.4 $13.5 (15.6%) Adj EBITDA(1) $30.2 $30.4 (0.6%) IPG EPS, fully diluted $0.19 $0.22 (14.1%)

(1) Gross profit, gross margin, adjusted EBITDA, and adjusted EBITDA margin in the first quarter of 2017 includes $2.1 million of Insurance Proceeds.

• A. C. Yull

President and

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Capital Allocation Priorities

(1) Source: Bloomberg, as of May 31, 2018

• A. C. Yull

President and

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Capital Expenditures

(In millions of US dollars)

(1) Amounts represent total expected costs. Timeline represents estimated completion. (2) “CST” = Carton Sealing Tape (3) “WAT” = Water-Activated Tape

• Ongoing initiatives(1):

H1/19 - Capstone woven greenfield ~ $28-32M H1/19 – Powerband CST(2) greenfield ~ $18-20M Q1/19 – North Carolina WAT(3) line ~ $14-16M Q4/18 - Utah shrink film line ~ $9-10M

• Recently completed:

Q1/18 – Specialty tape line ~$6M Q4/17 – North Carolina WAT greenfield ~ $48M Q4/17 – Virginia stretch film line ~ $11M Q2/17 - Portuguese shrink film line ~ $11M

• Normalized run-rate capital expenditures ~

$40-$60M per annum

• High-return projects expected to yield after-

tax returns of at least 15%

All strategic initiatives are progressing substantially as planned both in terms of timeline and expenditure levels.

• A. C. Yull

President and

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Midland, North Carolina

• Greenfield facility for water-activated

tape capacity expansion.

• Approximately $48 million total

spent to complete greenfield project.

• Completed on time and on budget in

Q4/17.

• Additional capacity planned and

estimated to be completed by the beginning of 2019.

• Expected additional investment
• f $14 to $16 million.

• A. C. Yull

President and

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Capstone Greenfield Project

• Greenfield facility for woven

products business in India.

• Objective to secure low-cost supply

for North American woven products market.

• Approximately $10.6 million total

project spend as of March 31, 2018.

• Expected total investment of

approximately $28 to $32 million.

• Commercial operations expected to

commence in the first half of 2019.

Karoli, India

• A. C. Yull

President and

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Powerband Greenfield Project

• Greenfield manufacturing facility to

manufacture carton sealing tapes in India.

• Approximately $7.6 million total project

spend as of March 31, 2018.

• Expected total investment between $18

and $20 million.

• Completion expected in the first half of

2019.

Dahej, India

• A. C. Yull

President and

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Business Acquisitions

Note: Amounts in USD Millions (1) IPG acquired 74% ownership stake in Powerband (2) For additional information regarding the timing and structure of this transaction, please refer to the Capstone Partnership section of the 2017 Annual Report

Strategic rationale Expansion: E-commerce Strengthen market position: Tape manufacturing Global expansion: Tape manufacturing Strengthen market position: Tape manufacturing Global expansion: Woven manufacturing Core competency Leading supplier

• f water-activated

tape dispensers Manufacturer of filament and pressure sensitive tapes Global supplier of acrylic tapes Manufacturer of industrial and specialty tapes Low-cost supplier

• f woven

products Purchase price $15.9MM $11.0MM $41.9MM $67.0MM ~$12MM Acquisition date April 7, 2015 November 2, 2015 September 16, 2016(1) July 1, 2017 Mid 2018 (expected) (2)

• A. C. Yull

President and

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Outlook

• Revenue and adjusted EBITDA in the second quarter of 2018 are expected to be

greater than in the second quarter of 2017

(1) Excluding the impact of any merger and acquisitions activity that takes place in 2018, and any significant fluctuations in selling prices caused by unforeseen variations in raw material prices. (2) As in previous years, the Company expects adjusted EBITDA to be proportionately higher in the second, third and fourth quarters of the year relative to the first quarter due to the effects of normal seasonality. (3) These expectations exclude the potential impact of changes in the mix of earnings between jurisdictions and any new guidance or legislative revisions made with respect to the TCJA enacted into law in the United States on December 22, 2017.

Fiscal Year 2018 Current Guidance

Revenue growth(1) Similar to 2017 Adjusted EBITDA(2) $135 to $145 million Total capital expenditures $80 to $90 million Effective tax rate(3) 18% to 23% Cash taxes paid(3) Less than 1/3rd of income tax expense

• A. C. Yull

President and

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Question and Answer Period