Upload
others
View
1
Download
0
Embed Size (px)
Citation preview
Investor Presentation
January 2015
Investor Presentation – January 2015
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 vision and strengths, the Company's growth strategies, the Company's strategies to improve gross margins, including the Company's gross margin target for 2015, and the Company's goals to reduce manufacturing costs and leverage capacity, the Company's expected annualized saving from manufacturing rationalization projects, the Company's expected income tax benefit from the Legal Entity Reorganization, income tax expense for the fourth quarter of 2014, cash taxes for 2014, timing for fully utilizing its NOLs, and effective income tax rate for the fourth quarter of 2014 and for 2015, and the Company's fourth quarter 2014, full year 2014 and full year 2015 outlook, 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 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 savings from the Company's manufacturing plant rationalization initiatives; 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, 2013 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 http://www.intertapepolymer.com under “Investor Relations” and “Financial 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.
Safe Harbor Statement
2
Investor Presentation – January 2015
• The second largest tape manufacturer in North America
• Tapes (65% of 2013 sales)
• Films (19% of 2013 sales)
• Woven and other products (16% of 2013 sales)
• Employs ~1,850 people with 10 manufacturing facilities in North America and one in Europe
• 2013 revenue of $781.5 million
• 2014 Q3 YTD revenue of $612.0 million
Profile
3
Investor Presentation – January 2015
Strategically located in order to expedite customer service
Our Locations
4
Investor Presentation – January 2015 5
IPG At-A-Glance
Investor Presentation – January 2015
Market Leadership Positions in Core Products
• Approximately 61% of 2014 Q3 YTD sales from products with a top 2 market position
North American Market Position #1 #2
Carton Sealing Tapes
Hot Melt
Natural Rubber
Water-Activated
Industrial & Specialty Tapes
Paper
Flatback
Filament
Stencil
North American Market Position #1 #2
Building & Construction
Lumber Wrap
Fiberglass Sleeves
Agro-Environmental
Structure Fabrics
Hay Cover Fabrics
Poultry Fabrics
Woven Coated Geo Membrane
6
Investor Presentation – January 2015
Vision• To become an indispensable supplier to our customers, exceeding
expectations in quality, delivery, and cost through continuous improvement, innovation, and customer interaction.
Strengths• Focus on efficiencies and economies of scale
• Wide breadth of products
• Proven management team
• Established relationships with customers
• Strong financial position and profitability
• Well positioned to invest in strategic opportunities
Vision and Strengths
7
Investor Presentation – January 2015
• Corporate Accounts
• Industrial and MRO(1) Channels
• New Products(2)
• Market Development Directors
– Focused on market segmentation
and growth strategies
• Strategic M&A
Growth
8
(1) Maintenance, Repair and Operations(2) New products include all products introduced over the previous five years
Investor Presentation – January 2015
• Market Pricing Dynamics
– Internal
– External• Mix
– Focus on a portfolio of higher margin products
– Launch of new products
– New markets• Cost Reduction and Leverage
– Manufacturing cost reduction programs– Leverage existing resources
Target Gross Margin of 22-24%(1)
(1) Expected on an annualized basis once the savings related to the South Carolina Project have been realized.
Gross Margin Focus Components of Improvement
9
Investor Presentation – January 2015
Initiatives:
• Plant consolidations• Material productivity gains• Labor and energy saving measures
• EPA 2014 ENERGY STAR Partner of the Year
Manufacturing Cost Reductions Achieved:
• Greater than $17 million for 2012• Approximately $14 million for 2013
Manufacturing Cost Reductions Projected:
• $14 to $16 million for 2014 (approximately $11 million achieved 2014 Q3 YTD)
• At least $13 million per year for the South Carolina Project• Full annualized benefit to be realized after completion
of the project
Reduce Manufacturing Costs and Leverage Capacity
10
Investor Presentation – January 2015
Manufacturing Rationalization ProjectsCompleted and in Progress
11
Investor Presentation – January 2015
2014 Q3 Results: Year-Over-Year
• Gross margin decreased slightly from 20.0% to 19.4% primarily due to the non-cash Brantford Pension Charge ($1.3 million) and the South Carolina Duplicate Overhead Costs ($1.1 million)
• Adjusted EBITDA Margin decreased from 13.4% to 13.0% primarily due to the South Carolina Duplicate Overhead Costs ($0.9 million impacting Adjusted EBITDA)
• The decrease in adjusted net earnings was primarily due to higher non-cash income tax expense, particularly due to the utilization of US deferred tax assets that were previously derecognized until Q4 2013 and $2.5 million upfront income tax expense related to the Legal Entity Reorganization
12
in millions US $(except per share amounts)
Revenue $209.1 $199.9 4.6%Gross Profit $40.7 $40.0 1.7%Adj EBITDA $27.1 $26.8 1.4%Net Earnings $6.0 $14.4 (58.3%)Adj Net Earnings $14.3 $17.5 (18.3%)EPS, Fully Diluted $0.10 $0.23 (58.6%)Adj EPS, Fully Diluted $0.23 $0.28 (18.8%)
Q3 2013 Change %Q3 2014
Investor Presentation – January 2015
2014 Q3 Results: Sequential
• Gross margin decreased from 21.7% to 19.4% primarily due to the planned annual maintenance across the Company’s major manufacturing facilities, and the Brantford Pension Charge ($1.3 million)
• Adjusted EBITDA Margin decreased from 14.5% to 13.0% primarily due to lower gross margin
• The decrease in adjusted net earnings compared to Q2 2014 was primarily due to a decrease in gross profit
13
in millions US $(except per share amounts)
Revenue $209.1 $202.9 3.0%Gross Profit $40.7 $44.1 (7.7%)Adj EBITDA $27.1 $29.5 (7.9%)Net Earnings $6.0 $12.1 (50.4%)Adj Net Earnings $14.3 $14.5 (1.4%)EPS, Fully Diluted $0.10 $0.19 (50.3%)Adj EPS, Fully Diluted $0.23 $0.23 (1.2%)
Q3 2014 Q2 2014 Change %
Investor Presentation – January 2015
2014 Q3 Results: Year-to-Date
• Gross margin increased from 20.4% to 20.8%• Adjusted EBITDA Margin increased from 13.4% to 13.6%• The decrease in adjusted net earnings was primarily due to higher non-cash
income tax expense, particularly due to the utilization of US deferred tax assets that were previously derecognized until Q4 2013 and $2.5 million upfront income tax expense related to the Legal Entity Reorganization, partially offset by an increase in gross profit
14
in millions US $(except per share amounts)
Revenue $612.0 $590.0 3.7%Gross Profit $127.4 $120.5 5.7%Adj EBITDA $83.3 $79.1 5.3%Net Earnings $29.8 $13.7 116.7%Adj Net Earnings $40.6 $50.9 (20.1%)EPS, Fully Diluted $0.48 $0.22 115.1%Adj EPS, Fully Diluted $0.66 $0.83 (20.7%)
2014 Q3 YTD
2013 Q3 YTD Change %
Investor Presentation – January 2015
Quarterly Adjusted EBITDA
$US
milli
ons
15
Investor Presentation – January 2015
Total Debt
16
Total Debt to TTM Adjusted EBITDA
Investor Presentation – January 2015
Average Cost of Debt (1)
17
(1) At quarter end.
• Percent of floating debt was approximately 82% as of September 30, 2014
Investor Presentation – January 2015
Transitioned from an Asset-Based Loan to a Cash Flow-Based Loan Facility
18
Benefits ABL ‐ old Cash Flow ‐ newIncreased Liquidity
• $200MM• Liquidity limited by a
borrowing base
• $300MM with $150MM accordion• Liquidity governed by leverage ratio
Better Pricing
• LIBOR + 200 bps (current pricing)
• Pricing grid increases based on usage of line
• LIBOR + 125 bps (initial pricing)• Pricing grid increases based on leverage ratio
only
Increased Flexibility
• Stricter financial covenants and restricted payment limitations
• More flexibility with acquisitions and restricted payments (e.g., dividends, share repurchases)
*The transition from the Asset-Based Loan to the Cash Flow-Based Loan facility occurred on November 18th, 2014.
Investor Presentation – January 2015
Legal Entity Reorganization• On October 30, 2014, the Company completed the final steps of a multi-step plan
to reorganize the capital structure of several of its legal entities (“Legal Entity Reorganization”) in order to more efficiently manage its intercompany debt
• $2.5 million upfront income tax expense incurred in Q3 2014, $0.3 million expected in Q4 2014
• $7 million annualized income tax benefit expected beginning on October 30, 2014• Cash taxes still expected to be less than $5 million for 2014
Net Operating Losses• Net Operating Losses (“NOL”) available for use (as of December 31, 2013)
• $90.0 million of US NOL• $41.3 million of Canadian NOL• Expect to fully utilize US net operating losses towards the end of 2015
Effective Tax Rate(1)
• Q4 2014 expected to be approximately 35% to 38%• 2015 expected to be approximately 30% to 35%
Tax Position
19
(1) Assuming the geographic distribution of earnings is consistent with 2014.
Investor Presentation – January 2015
Q4 Outlook Revised on January 26, 2015
Financial Metric OutlookQ4 2014 Revenue Growth Approximately $201 million(1)
Q4 2014 Gross Margin Approximately 18%(2)
Q4 2014 Adjusted EBITDA $20.5 million(3)
Q4 2014 Effective Tax Rate 35%-38%
20
(1) Which is in line with the 3%-6% revenue growth range provided in the Company's prior outlook.
(2) Includes anticipated South Carolina Duplicate Overhead Costs of approximately $1.6 million and an additional Brantford Pension Charge of up to $0.7 million.
(3) Includes cash charges for anticipated South Carolina Duplicate Overhead Costs of approximately $1.3 million. The Brantford Pension Charge will not impact adjusted EBITDA.
Investor Presentation – January 2015
Financial Metric OutlookFull Year 2014 Cash Taxes Less than $5 million (unchanged)(1)
Full Year 2014 Effective Tax Rate Approximately 42% (up from 40%)
Full Year 2014 Capital Expenditures $39-$44 million (unchanged)(1)
Full Year 2014 Manufacturing Cost Reductions $14-$16 million (unchanged)(1)
Total South Carolina Duplicate Overhead Costs $4-$7 million (unchanged)(1)
Full Year 2015 Income Taxes 30%-35% effective tax rate(2) and full utilization of US net operating losses towards the end of 2015
Full Year 2015 Capital Expenditures Approximately $30 million(3)
Outlook
21
(1) Unchanged from guidance provided in the Company’s 2014 Second Quarterly Report.(2) Assumes the geographic distribution of earnings is consistent with 2014. (3) Excludes any potential additional high-return projects identified throughout 2015.
Investor Presentation – January 2015
Thank You!
22