Composites Solutions - Intertape Polymer Group relations...Title Composites Solutions Author Drew Clemens Created Date 6/9/2016 1:37:26 PM

IPG Investor Presentation

Scotiabank

Spring Growth ConferenceJune 2016

2IPG Investor Presentation

Safe Harbor StatementCertain 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 allocation priorities, including its investment strategies and acquisition strategies, the

Company's capital expenditures, including its cost and yield expectations, the expected financial performance of certain recently-acquired operations, the effective tax rate, expected

income tax expense and expected cash taxes paid for 2016, the expected NOL utilization, expected insurance settlement claim proceeds, the update on the South Carolina Project,

including the expected cost savings and the expected capital expenditures for the project, and the Company's second quarter and full year 2016 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; changes in general

economic, political, social, fiscal or other conditions in any of the countries where the Company operates; 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; the Company's ability to continue to control costs; movements in the prices of key inputs such as raw material, energy and

labor; government policies, including those specifically regarding the manufacturing industry, such as industrial licensing, environmental regulations, safety regulations, import

restrictions and duties, excise duties, sales taxes, and value added taxes; accidents and natural disasters; changes to accounting rules and standards; 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,

2015 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, EBITDA margin, Adjusted EBITDA

Margin, Adjusted Net Earnings, Adjusted Earnings per Share, Trailing Twelve Month (“TTM”) Adjusted EBITDA, and Debt to TTM Adjusted EBITDA. 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 “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.

IPG Investor Presentation3

Company Profile

• The second largest tape manufacturer in North

America

• Employs ~2,000 people

• Approximately 63% of sales from products with

a Top 2 market position in North America


66%

19%

15%Tapes

Films

Woven& Other

2015$781.9 million

Net Sales

Our Locations

• 12 Manufacturing Facilities in

North America

• 1 Manufacturing Facility in

Europe


Tapes At-A-Glance #1 or #2 Market Leadership

Position in North America


Carton Sealing Tapes

Hot Melt

Natural Rubber

Water-Activated

Water-Activated Machine Dispensers

Industrial & Specialty Tapes

Paper

Flatback

Filament

Stencil

6

Films At-A-Glance


Films

Stretch

Shrink

Woven & Other At-A-Glance


Agro-Environmental

Structure Fabrics

Woven Coated Geomembrane

Hay Cover Fabrics

Poultry Fabrics

Building & Construction

Lumber Wrap

Fiberglass Sleeves

#1 or #2 Market

Leadership Position

in North America

8

Key Raw Materials

• Raw material inputs:

– Resin

– Adhesive

– Paper

– Other (2)

(1) Based on usage of raw materials in 2015.

(2) Other includes but not limited to Latex, Fiberglass and Starch.


36%

22%

20%

22%

Raw Materials(1)

Resin

Adhesive

Paper

Other

Strengths

Wide breadth of products

Proven management

team

Established relationships

with customers

Strong financial

position and profitability

Well positioned to invest in

strategic opportunities to

create shareholder

value


Continued investment to grow our business

• Strategic high-return projects

• Capacity expansion

• R&D investment

• New distribution channels and market verticals

Acquisitions

• Potential focus areas include:

• Expansion in tape, woven and packaging adjacencies and

• Geographic expansion

• Acquisition ofBetter Packages on April 7, 2015

• Acquisition of TaraTape on November 2, 2015

Dividends

• Reinstated a dividend policy on Aug. 14, 2012

• Annualized dividend of $0.52 per share

• Dividend yield of 3.3% as of June 7, 2016 (1)

• Since Aug. 2012, the Company has paid $80.7 million in cumulative dividends, of which $29.7 million was paid in 2015

Share repurchases

• Repurchased ~2.5 million shares in 2015 under the NCIB for a total price of $30 million

• As of Mar. 31, 2016, approximately 2.3 million shares remained available for repurchase under the NCIB


Capital Allocation Priorities

(1) Source: Bloomberg


Capital Expenditures• Capacity expansion:

– Water-Activated Tapes

• Construction of a greenfield

manufacturing facility in Cabarrus

County, NC

• Estimated total project spend

~$44-$49MM

– Shrink film


~$11MM

• Product expansion:

– Specialty Tape


~$10MM

• Maintenance CapEx expected to be

between $8 and $12 million in 2016

• Projects expected to yield after-tax

returns of at least 15%

(In millions of US dollars)

Expected range

Acquisitions• The Company acquired RJM

Manufacturing, Inc. (“TaraTape”) on

November 2, 2015

– Manufacturer of filament and pressure

sensitive tapes

– Purchase price of $11.0 million

– Opportunity to realize synergies

between $2 and $4 million in additional

adjusted EBITDA by the end of 2017

– The company expects approximately

$20 million in revenue and EBITDA

margin(1) of slightly below 10%

(excluding synergies) in 2016


• The Company acquired BP Acquisition

Corporation (“Better Packages”) on April

7, 2015

– Better Packages is a leading

supplier of water-activated tape

dispensers

– Purchase price of $15.9 million

– The company expects approx. $18

million in annual revenue with over

15% EBITDA margin in 2016

(1) EBITDA as a percentage of revenue


• Cash Flow Based Loan Facility of $300 million negotiated in November 2014

• As of March 31, 2016:

– Total cash and loan availability was $161 million

– Leverage 1.7x debt to TTM adjusted EBITDA

• Option to raise equity if needed

• For the quarter ending March 31, 2016, the average-total cost of funds(1) for the Cash Flow Based Loan Facility was 2.95%

Source of Funds

Cash Flow Based Loan Facility (2)

Key Terms

Facility $300 million Revolving Credit Facility

Incremental Facility (Accordion Feature)

$150 million

Pricing LIBOR + Spread (1.25% to 2.25%)

Key Financial Covenants(1) Leverage < 3.25(2) Debt Service Coverage Ratio > 1.5(3) Capex < $50MM + carry-forward

Maturity November 18, 2019

(1) Includes unused line fees, letters of credit and USD fixed interest rate swap costs(2) The transition from an Asset-Based Loan to the Cash Flow-Based Loan facility occurred on November 18, 2014

• Gross margin increased to 21.5% from 19.6% primarily due to an increase in the spread between selling prices and raw material

costs

• Net earnings decreased primarily due to increases in SG&A, manufacturing facility closures, restructuring and other related

charges, and finance costs

• Adjusted net earnings increased primarily due to an increase in gross profit, additional adjusted net earnings in 2016 derived from

the Better Packages and TaraTape acquisitions and a decrease in income tax expense

• Adjusted EBITDA Margin(1) increased from 12.5% to 12.6% primarily due to an increase in gross profit partially offset by an

increase in SG&A relating to variable compensation expense

2016 Q1 Results: Year-Over-Year


in millions US $Q1 2016 Q1 2015 Change %

(except per share amounts)

Revenue $190.8 $189.0 1.0%

Gross profit $41.1 $37.0 11.0%

Net earnings $9.5 $11.8 (19.1%)

Adj Net Earnings $14.0 $12.6 10.8%

Adj EBITDA $24.0 $23.5 2.0%

EPS, fully diluted $0.16 $0.19 (16.2%)

Adj EPS, fully diluted $0.23 $0.20 14.8%

(1) Adjusted EBITDA as a percentage of revenue

• Gross margin increased to 21.5% from 20.1% primarily due to an increase in the spread between selling prices and raw material

costs

• Net earnings increased primarily due to a significant reduction in the effective tax rate due mainly to a favourable change in the mix

of earnings between jurisdictions and the recognition of previously derecognized Canadian deferred tax assets

• Adjusted net earnings increased primarily due to the recognition of previously derecognized Canadian deferred tax assets and

decreases in finance costs and variable compensation expenses, partially offset by a decrease in gross profit and an increase in

certain other SG&A expenses

• Adjusted EBITDA Margin(1) increased from 12.8% to 13.0% primarily due to a decrease in variable compensation expense and

gross margin expansion partially offset by an increase in research expenses primarily associated with the South Carolina Project

2015 Results: Full Year


in millions US $2015 2014 Change %

(except per share amounts)

Revenue $781.9 $812.7 (3.8%)

Gross profit $168.0 $163.6 2.7%

Net earnings $56.7 $35.8 58.2%

Adj Net Earnings $58.6 $52.4 11.9%

Adj EBITDA $102.0 $103.9 (1.8%)

EPS, fully diluted $0.93 $0.58 60.7%

Adj EPS, fully diluted $0.96 $0.84 13.6%

(1) Adjusted EBITDA as a percentage of revenue


• Permanent shutdown of the Columbia, SC facility due to significant flood damage 8 to 9

months in advance of the planned shutdown by the end of Q2 2016

• The Company believes that it has sufficient property and business interruption insurance

coverage, and expects that the losses exceeding the $0.5 million deductible will be

substantially covered by those insurance policies

Columbia, SC Flood on October 4, 2015

*Recorded in manufacturing facility closures, restructuring and other related charges. Partially offsetting charges related to

damage to real and personal property as well as subsequent clean-up and idle facility costs.

**Reflects lost gross profit on lost sales as well as incremental costs from alternative product sourcing, partially offset by the

reduction in South Carolina Duplicate Overhead Costs associated with the unexpected, permanent shut down of the Columbia, SC

manufacturing facility.

Impacts to Results Q1 2016 Q4 2015

Manufacturing facility closures, restructuring and other related charges

$1.5MM $6.5MM

Insurance settlement claim proceeds* Nil $5.0MM

Estimated revenue reduction ~$5MM ~$9MM

Estimated gross profit, net earnings and adjusted EBITDA reduction** ~$3MM ~$3MM


Update on South Carolina Project

Actual Project Results Q1 2016 Q4 2015 FY2015

South Carolina Commissioning Revenue Reduction$4.3MMmasking

$0.5MMmasking

$11MM

Net positive (negative) impact on gross profit and adjusted EBITDA*

$1.3MM <($0.1)MM $6.2MM

* Adjusted EBITDA excludes the impact of non-cash South Carolina Duplicate Overhead Costs.

• Expected cost savings from the South Carolina Project remain unchanged with impacts on gross

profit and Adjusted EBITDA as follows:

– A significant net positive impact is expected in 2016 compared to 2015

– Full realization of the expected $13 million annual cost savings by beginning of 2017

• Total project capital expenditures, from inception, are now expected to be approximately $60MM


Outlook• The Company expects gross margin for 2016 to be between 22% and 24% and to

reach the upper end of this range by the fourth quarter

• Adjusted EBITDA for 2016 is expected to be $117 to $123 million, excluding the impact of the South Carolina Flood. While South Carolina Flood costs and lost sales are expected to be substantially offset by insurance proceeds, the timing of the recovery of the insurance proceeds is uncertain

• Manufacturing cost reductions for 2016 are expected to be between $8 and $11 million excluding any cost savings related to the South Carolina Project

• Total capital expenditures for 2016 are expected to be between $55 and $65 million

• The Company still expects a 25% to 30% effective tax rate for 2016. Cash taxes paid in 2016 are expected to be approximately half of the income tax expense in 2016

• Excluding the potential impact of South Carolina commissioning accounting adjustments, the Company expects revenue, gross margin and adjusted EBITDA in the second quarter of 2016 to be greater than in the second quarter of 2015

Thank You!


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Composites Solutions - Intertape Polymer Group relations...Title Composites Solutions Author Drew Clemens Created Date 6/9/2016 1:37:26 PM