Intertape Polymer Group Inc.

Thank you, operator, and good morning, everyone. Welcome to IPG's 2019 second quarter conference call.

Joining me is Jeff Crystal, our CFO. After our comments, Jeff and I will be happy to answer any questions you may have.

During the call we will make reference to our earnings presentation that you can download from the Investor Relations section of our website. It was another strong quarter.

Revenue was up nearly 19%, adjusted EBITDA increased nearly 28% to $44.2 million, and our adjusted EBITDA margin reached 14.9%. We generated these results primarily due to the operating performance of our world-class low cost asset base, disciplined management of the spread between selling prices and raw material input costs, and margin and operational improvements within our recent acquisitions as we work to integrate them into the business and move them closer to IPG's historical margin standard; and we believe there is more runway ahead of us on that front.

We are seeing growth in the areas where we have recently invested; specifically films, water-activated and other carbon ceiling tapes, and woven products. Our focus remains unchanged.

Strengthening our unique product bundle and efficiently operating our world-class low cost asset base in order to deliver quality, value and service to our customers; that's what we deliver. Now how does that relate to growth?

We've defined three priorities for the business. First, is our e-commerce strategy.

Our primary product category and e-commerce is water-activated tape. On a macro level, recent reports show consumption for corrugate for containerboard is under pressure and that production levels for containerboard are down.

Despite these pressures, we continue to experience strong demand within the e-commerce market for water-activated tape, and more broadly, across the market for carbon sealing tapes. Based on those results, we believe we continue to grow our share within the overall carbon sealing tapes market.

Leading e-commerce retailers continue to pursue initiatives to reduce their expenditures on packaging, including right sized boxes and shipping your own container programs and replacing boxes with mailers in certain situations. The breadth of our product bundle and our existing relationships with e-commerce retailers provide a great opportunity for us to take advantage of these changes.

On the packaging front, we've built out our water-activated tape capacity with the second line at the Midland facility. We offer quality and value products in the acrylic and hot-melt categories for pressure sensitive part sealing tapes.

Our Polyair acquisitions strengthened our product bundle with protective packaging solutions, including mailers, bubble cushions, air pillows, and we recently added paper void fill. We have also invested in or stretch-film capacity for packaging, and our shrink-film meets the requirements for the ship and own container programs.

Our bundle provides a wide range of complementary products for e-commerce retailers, short of the corrugate itself. A significant priority of ours is to track our e-commerce customers as they grow domestically and international with our unique product bundle.

Another major priority is the efficient startup and run rate optimization of our greenfield investments we made through our CapEx program in 2017 and 2018. We are tracking on-budget to deploy $45 million to $55 million in capital expenditures this year, down from the $80 million we averaged in the preceding two years.

Our new woven facility in India was commissioned earlier this year. Our base loading case for this facility includes selling into our legacy North American woven customer base, and a recently acquired Maiweave business; as well as producing lower cost, less complex product lines that were previously being sourced primarily from high cost Asian suppliers.

We are on plan with our Indian woven production, and as we mentioned on our first quarter call, the facility did not make any material contribution to our results during the second quarter. This effect was expected and is primarily a function of long supply chains, with 60 days of production out of India on the water at any one-time, plus the time to sell that product in North America.

In addition, we continue to work through the high cost material from our Chinese supplier. Note that, as planned we buffered our inventory with this third-party material supply in order to ensure that we did not run into any quality or service issues with our customers while we started up operations in our new woven production facility.

We expect to see EBITDA contribution from this new facility in our third quarter with even more in the fourth quarter as we work through the higher cost inventory and transition to the lower cost material from our Indian facility. We have two profit centers within this business related to our woven products from India; 55% of the profit and the partnership in India itself, plus 100% of the savings realized from backwards integrating into the cost competitive supplier versus higher cost third-party suppliers from Asia.

Our second major investment in India was in the carton sealing tapes category. That facility is now producing commercial tapes and we are in the process of building our order book for it's production.

However, this is an interesting case study and it's a two-sided coin. Our Indian tapes facility is performing to plan at present, but the schedule production ramp has been more gradual than our woven facility as we enter the second half of 2019 and then growing into 2020.

The slower growth plan was due to the longer than anticipated time to commissioning all manufacturing activities, less base loading opportunity and a gradual ramping up of the sales from the European market. However, the pricing spread on our primary raw material, polypropylene, between the Asian market and the North American market has narrowed more recently.

Historically, Asian polypropylene prices are typically more competitive due to the different type of feedstock being used in the energy industry in Asia versus North America. At the current polypropylene pricing levels, the contribution to North American sales volume we originally expected from the Indian current ceiling tape facility will be challenging to deliver.

But the other side of the coin is highly favorable. Our Danville, Virginia plant that produces the same current ceiling tape is performing well above our expectation, both because of significant improvements in plant efficiency, and as well as the previously mentioned advantage to know arbitrage opportunity on Asian polypropylene, which means there is less opportunity for base loading the Indian plant.

Production in this category from our Danville facility is well ahead of plan in the first half of 2019, and we expect that trend to continue. We've invested capital for carton sealing tapes in India, and we want to ensure that investment is a success, but the incremental contribution delivered in this category from North American positions us further ahead, than if India performed to plan and North American production will return to it's earlier level.

Assuming polypropylene prices in Asia remain in line with North American prices in the near-term, this could minimize the contribution of the Indian facility in 2020 on a standalone basis. But as I mentioned, there should be more than offset by the benefit realized in our North American operation.

So in summary, the priority is to strive to effectively base load our greenfield facilities and optimize the run rates, including the Indian facilities, and the second line at our Midland, North Carolina facility. Our final priority for growth is completing the integration of our recent acquisitions and delivering on our cost and revenue synergy targets in each case.

Let's start with Cantech. Our cost savings program is tracking on target with the closure of Johnson City, Tennessee, last year; and the Montreal, Quebec facility announced earlier this year.

We estimated a run rate of total annual synergies of -- between $3.5 million to $6 million by the end of 2019 from Cantech, and we remain confident in that target. As part of the closure, we reported non-cash impairments of inventory, property and equipment related to both facilities of $2.3 million and cash costs of $1.1 million for termination benefits related to the Montreal closure.

The charges were primarily booked in the second quarter and we expect additional cash charges of approximately $1.4 million in the remainder of 2019. Moving to Polyair; we are targeting revenue and cost synergies that combine to deliver adjusted EBITDA of between $20 million to $22 million in 2021 from a base of $13 million in 2018.

Halfway through the year, Polyair is ahead of it's 2018 results and we are confident in meeting our plan. You're seeing the impact from the leading e-commerce retailer initiatives to rightsize boxes on certain product categories like air pillows but we are also uncovering additional opportunities to reduce or eliminate costs that we previously did not anticipate.

As part of our strategy, we've integrated the leadership of the Polyair sales force within IPG; this change is meant to ensure the team is better positioned with the technical expertise on specific product lines to effectively market and serve our existing customers, as well as new prospects. A second part of the Polyair of our Polyair integration strategy is backward integrating raw material inputs.

We believe additional opportunities exist to deliver material savings on an annualized basis that will support our cost synergy targets as we have already seen strong progress in this area. Finally, as I mentioned earlier, protective packaging solutions are an important element of our product bundle for e-commerce retailers.

We believe opportunities exist for us to use our existing relationships with retailers to provide them with a broader bundle. This includes protective packaging solutions, which as a standalone entity of insignificant scale Polyair could not do as effectively as we can.

We are seeing early progress on revenue synergies but we have lots of runway ahead of us based on where Polyair started. Moving onto Maiweave; we are seeing great results.

We have already achieved adjusted EBITDA contribution from the business in the first six months of 2019 that is in line with what the business delivered in all of 2018. This result is primarily due to operational improvements at the plant level, as well as both revenue and other cost synergies, and we've achieved these results without a significant benefit of lower cost raw materials from backwards integrating into our Indian woven facility.

Maiweave is a great example of an acquisition that fits within our portfolio and can benefit from our scale. Three years ago, we established ambitious targets of $1.5 billion in revenue, $225 million in adjusted EBITDA, and 15% adjusted EBITDA margin by 2022.

As we close in on that timeframe, you can see the progress we are making on adjusted EBITDA margin nearing the 15% level in the second quarter. No journey is a straight line, but we are seeing an improvement in this area and we are confident in our ability to deliver on our margin target.

Based on our current run rate, the revenue and adjusted EBITDA targets would require two or three bolt-on acquisitions depending on their scale and timing; but let me be clear, we will not transact to reach arbitrary targets. Based on the acquisition values we continue to see in the market, private equity investors are bidding up assets to levels where public companies that trade within a peer group range cannot compete.

With this in mind, we will continue to pursue opportunities that are a strategic fit and accretive to earnings. We are frequently asked by investors what we are seeing on the demand side of the market and how effectively we are positioned for an economic downturn.

While we've benefited from a year-over-year softening in our primary raw material input costs, recent independent report suggests they should remain relatively flat through the end of 2019. But here's what I know.

Our results this morning speak for themselves. We're seeing organic growth at a range above our peer group and we are better positioned as a company than ever before to face whatever future headwind or conversely, be optimistic and take advantage of potential tailwinds that we may encounter.

We've established clear priorities and in my view, it's a matter of executing. We are focused on blocking and tackling to deliver returns to shareholders.

Based on our improving results, sustainable cash flow generation and our outlook, the Board of Directors declared an increase of 5.4% to the third quarter dividend. The new annualized dividend is $0.59 per common share.

Given we have completed our 2 year CapEx program investments and the new Greenfield facilities are starting up and working towards their optimal run rate. As we generate increased free cash flow from these investments and our acquisitions, our first priority for it is debt repayment.

However, we felt a dividend increase at this state was appropriate given our ability to also make debt payments with our improved cash flow. I'm excited for the next phase of growth.

I'd like to take a moment to mention the high level of dedication commitment of our 3,500 person workforce and how important their work is to us meeting our targets. Our improved plant performance, the efficiency of our back offices and the results of our sales and customer service teams is because of their hard work.

At this point, I'll turn the call over to Jeff, who will provide you with additional insight into the financial results. Jeff?

Thank you, Greg. On Slide 9 of the presentation, we present an analysis for the second quarter.

Revenue increased almost 19% to $295.6 million compared to the same period of 2018. A $46.5 million increase was primarily due to a $40.8 million impact from the Polyair, Maiweave and Airtrax acquisitions.

Volume and mix changes resulted in revenue increasing by 2.4% or $6 million. Price effect increased 0.5% or $1.1 million and foreign exchange negatively impacted the top line by minus 0.6% or $1.5 million.

Overall, after we see the impact of our recent acquisitions and CapEx investments, we describe our growth outlook as a GDP plus story. With 2.4% volume mix growth in the quarter that is a touch behind our expectations.

But it is clearly higher growth than we are seeing among our peers in the industry based on the Q2 reporting season. The great news is that we are seeing strong growth in the areas of the business where we have made strategic investments, specifically films and carton sealing tapes, including water activated tapes.

We believe our investments in these product categories will continue to deliver positive momentum. At the same time we continue to see weakness in a retail product line, which I mentioned on our first quarter call as well as certain industrial tapes.

In both instances, the product categories driving growth and a select underperforming categories we expect the same general trends to continue through the end of the year. It's the benefit and the curse of a highly diversified product portfolio.

You don't always derive all the benefit from the high growth, but you also offset the underperformers. Turning to Slide 10, gross margin was unchanged in the second quarter at 21.9% compared to the same period in 2018.

Gross margin was unchanged primarily because the increase in spread between selling prices and combined raw materials and freight costs was offset by the dilutive impact of the Polyair, Airtrax and Maiweave acquisitions, which we acquired at lower margin profiles than the IPG based business. Adjusted EBITDA increased by nearly 28% to $44.2 million in the second quarter compared to the same period in 2018.

The improvement was primarily due to the Polyair and Maiweave acquisitions, organic growth and gross profit and the favorable impact of operating lease payments totaling $1.8 that were capitalized in the second quarter of 2019 in accordance with new lease accounting guidance implemented on January 1, 2019. The effective tax rate was 46.2% for the second quarter, compared to 19.6% in the same period in 2018.

The change is primarily due to a proposed state tax assessment and the related interest expense recorded in the second quarter of 2019 totaling $2.3 million as a result of the denial of the utilization of certain net operating losses generated in the tax years from 2000 through 2006. The change also includes the elimination of certain tax benefits as a result of the U.S.

Tax Cuts and Jobs Act related to intercompany debt. Excluding the proposed state tax assessment our effective tax rate would have been 28.7% which is in line with our expectations and guidance going forward.

Cash flows from operating activities improved by $4.2 million to $31.9 million in the second quarter compared to the same period in 2018. The improvement was primarily the result of higher gross profit, partially offset by an increase in income taxes paid.

As a reminder, our business has a natural seasonality as we build inventory in the first half of the year in advance of both the higher volume, third and fourth quarter periods from a retail activity perspective, as well as our planned factory maintenance schedule, which occurs primarily at midyear. In the fourth quarter, that build unravels with the seasonal nature of higher retail activity.

Free cash flows improved by $9.1 million to $20.5 million in the second quarter compared to the same period in 2018. The improvement was primarily due to the decrease in capital expenditures, which Greg referenced earlier as our strategic CapEx program winds down and an increase in cash flows from operating activities.

Also included in free cash flow is the favorable impact of operating lease payments totaling $1.8 million that I referenced earlier in accordance with new lease accounting guidance implemented on January 1, 2019. Online secured senior note offering in late 2018 enabled us to lower our secured net leverage ratio, which remains at 1.9x from the sequential period.

The secured net leverage ratio is an important ratio that is relevant to our covenants. Therefore, we view it as the highest priority.

In July, we amended our credit facility to, among other things, revise the secured net leverage ratio and interest coverage ratio covenant thresholds to account for the associated impact of new lease accounting guidance implemented on January 1, 2019, requiring operating leases to be accounted for as debt with corresponding interest payments. The amendment increased the secured net leverage ratio covenant threshold 20 basis points to 3.7x and decreased the interest coverage ratio covenant threshold 25 basis points to 2.75x.

Our total leverage ratio, including the unsecured debt, is 3.5x also unchanged from the sequential period. Given the normal seasonality of working capital within the business that I just referenced, we expect the leverage ratio to move lower in the second half of the year as the working capital naturally unwinds.

As Greg mentioned earlier, our highest priority for capital allocation at this stage remains debt repayment. We expect to see a significant year-over-year reduction in capital expenditures in 2019 to a range of approximately $45 million to $55 million.

As you can see on Slide 12, we expect this to significantly improve our ability to generate free cash flow compared to 2017 and 2018. And we intend to prioritize a portion of that cash towards the repayment of debt, which would further lower our leverage ratio.

The company had cash and loan availability of $342.4 million as of June 30, 2019, compared to $393.9 million as of December 31, 2018. The decrease in cash and loan availability is mainly due to additional borrowings to support the company's seasonal working capital increase.

Greg will now provide the company's outlook. Greg?

Thanks, Jeff. With this morning's earnings report, we are reconfirming our outlook for 2019 revenue and adjusted EBITDA.

Based on our second quarter results we remain on track to achieve our targeted 2019 revenue, which we believe will be between $1.18 billion and $1.22 billion, representing growth of 14% at the midpoint of the range. We are also on track to achieve our targeted 2019 adjusted EBITDA, which we believe will be between $164 million and $174 million.

In closing, we continue to execute on our vision to be a global leader in packaging and protective solutions. We are investing in our world-class, low-cost asset base and driving efficiencies in our business.

We have strengthened our unique product bundle and improved our competitive position. We are executing a strategy to deliver long term value for our shareholders.

On that note, during the second quarter we issued our first ever sustainability report. If you haven't had a chance to review it, I encourage you to access it from our website.

It highlights how we've approached sustainability as a normal course of operating our business. It's a record that we are proud of.

Managing our environmental footprint is sound business in and of itself but it also positions us to exceed our customers’ expectations as they choose to make more sustainable choices in their supply chain. You should expect us to communicate more on this topic as we continue to develop our sustainability strategy.

With that, I'll turn the call back to the operator to open up the question and answer period. Thank you.

Good morning. Congratulations on the results.

I just had a first question model related. Gross margin year-over-year changed despite the dilutive impact of acquisitions.

Can you sort of at least qualitatively suggest what you expect into the second half of the year and into 2020 and sort of how do costs depend on that and just elaborate a little bit more?

So Ben, we haven't given any guidance on the gross margin in particular. At this point I mean certainly as we've discussed of some big reasons why we've seen gross margin do well despite the dilutive impact of the acquisitions have been due to the strong maintenance in our spread.

So that's been a question of lower raw materials, making sure that we're disciplined on price. And then you have the operational performance of our plants.

It's certainly been strong. So certainly if that continues, I would expect the trends to continue.

We have also discussed the fact that we are still in the process of picking out costs and increasing efficiency in our acquisitions. So as we move toward the end of the year, this year we have the target for our CapEx synergy.

So certainly we expect that to improve as we move through the year. And the same thing in India we have our woven facility and we've basically had no benefit of the woven facility generating lower cost inputs into our North American business in the first half of the year.

So we would expect to see incremental savings as a result of that new Greenfield facility in the second half. So what I would say is all else being equal, we should see some tailwind going into the second half but again, a lot of that depends on the market overall in terms of price and cost of sales.

Okay, great. And then the second question is, if you can just remind us -- you're indicating here that secured net leverage ratio of 1.9 and 3.5 is total leverage ratio.

Can you just clarify quickly what is on the secured side? And how did that change with the covenant adjustments that you did in July?

So on the secured side basically, that includes all our secured debt. So essentially the biggest item we would exclude would be our unsecured notes, the bonds that we issued last year.

So that's the big difference between the 2. And in terms of the lease accounting -- so the reason we had to make changes is because with the new lease accounting, essentially it was adding debt onto our balance sheet, which we had to make sure was incorporated into those leverage covenants.

So that's just resulted in that call it 20, 25 basis point change you saw in those two covenants to just account for the new accounting under international financial reporting standards. So really there should be no impact on our covenants related to those -- that new lease accounting.

Okay, perfect, thank you. Great quarter, guys.

Thank you.

Good morning. So I just wanted to circle around the Polyair integration you discussed a bit in your prepared comments about efforts that are underway to get to 2021 EBITDA goal of $20 million to $22 million and that's a pretty big increase over the $13 million in 2018.

So I'm wondering where we're at today in terms of what synergies you've actually gotten to date. And then how you expect the cadence to go to get here and go in a couple years' time?

So I think on the cost side, just to start with that -- I mean, we've made some good headway there simply on the raw material purchasing side. As we've mentioned in prior calls, we've also backwards integrated some film production where Polyair were sourcing that film from an outside vendor.

We brought that production in-house and that should affect our P&L on a go forward basis as we move into the second half of this year. So on the cost side, it's been very good.

We've been implementing our interstate performance system at the operational level, at our plants and driving those results and those cadences and metrics throughout the plant. And that takes a while but certainly we've seen progress in the plants on an operational standpoint.

On the top line, we've seen some cases in the Polyair business go backwards. We called out specifically in the Air pillow side that has gone backwards from a top line perspective as e-commerce retailers have focused a lot on right sizing, packaging and boxes.

And I think that's just an industry phenomenon. We've had good success on the cross-selling side, both at the distribution level.

I feel really good about our access to distribution and what Intertape has been able to bring to the Polyair portfolio as it relates to the Intertape legacy distribution base. And also on top of that from a bundle of products in my conference call where notes I made reference to the fact that we've been successful in getting those product lines and leveraging them within our relationships with e-commerce; so certainly I feel good about it.

Certainly, there is some headwinds on the top line, namely around air pillows. But I think we've found other opportunities to make up for that and certainly that guide on $20 million to $22 million of EBITDA we feel concerned about on a go forward basis.

Okay, are you able to share what you've achieved in terms of a dollar run-rate synergies so far?

No.

Okay. And then with regards to the comments you made around the current ceiling tape facility in India, where polypropylene spreads between Asia and North America have narrowed.

Can you just extrapolate a bit on that? What's the history between that started relationship?

The reason for that is it just global commodity prices in the energy market or is it something different regarding supply? And then with all of that in mind, do you still view it as possible for that facility to meet your 15% return on invested capital hurdle in a reasonable amount of time?

Yes. So to start with on a polypropylene side, over the past 10, 15, 20 years as North American production -- energy production has reached further in the natural gas.

The arbitrage on polypropylene in North America has been significant to Asia due to the fact that propylene comes a lot from the utilization of NAFTA. So that has evolved over the past 10 to 20 years.

We have seen periods of time, like isolated periods of time where the arbitrage will get down to a narrow range, which is kind of where we are now. We do believe historically or on a go forward basis but that arbitrage will increase from the Asian perspective to North America.

So we still believe that having assets in Asia, producing products based on polypropylene is a long term strategic advantage. And we still see a tremendous benefit within our woven products, plants making polypropylene products there currently.

As it relates to the 15% hurdle rate with that facility at this point, I don't think we will hit that 15%. And we'll update you on a go forward basis.

But I think it's important to realize that, when we think of the production increases that we've had in North America and the cash flow generation out of the superior performance out of our assets, I think when we look at it as a whole, we are meeting or exceeding our cash flow objectives on a consolidated basis in those 2 facilities.

Okay. Thank you very much.

That's all for me if I have any more questions I'll queue up again.

Thanks, Maggie.

Good morning. Can you frame your current price cost spread versus the historical performance-price positive in the quarter?

I know paper prices were a bit presumably the overall input costs were down. So I guess the question is, is this increased price cost spread reflecting in catch up versus last year?

And maybe if you can tie up any sort of conversation around the competitive dynamics and what's facilitating your spread recapture?

Yes, there's certainly an element of catch up in the sense that as you know, last year and 2018 we were facing a rising raw material environment and we had multiple price increases throughout the year with some towards the beginning of the year. I believe we had one sort of midway through the year.

So there is an element of those prices somewhat holding from last year into this year. So yes, on that question, I can't quantify that for you but there's some piece of that.

And in terms of why it's holding, I mean, basically, again, it's a question of the competitive environment. And it's a question of what's happening currently with raw materials because we've seen some level of some small amounts of volatility.

We've seen some upward pressure again, very small in polyethylene, which has helped. It's helped in a sense, kind of hold those prices with the customers.

But of course, at the end of the day, it all depends on what your competitors are doing. So, again, as we mentioned in the past, with a lot of consolidation in the industry, with a lot of public large competitors, especially in areas where -- which are more price sensitive, like in films you certainly see a lot of more discipline there and a lot more effort in order to maintain that spread.

Okay, that's helpful. Thanks, Jeff.

And just turning to the woven business, presumably, you're going to get a sizable margin bomb from the lower cost production facility in India versus reselling third-party vendor materials. Could you give us a sense for how much of the production as a percentage of your woven business will be coming from the new facility?

I just want to try to get a sense for the magnitude of the potential margin pickup in the second half?

We've always said it's definitely a material percentage of that woven business but it's certainly not far from all of it. So, I mean you can't look at the whole thing and expect a margin pick up on that whole thing.

But I would tell you that it's a significant percentage. But again, you're going to see that ramp up through Q3 because we're still working through some higher-cost material.

And then you'll certainly see a lot more impact of that towards the end of Q3 and Q4.

Are you comfortable putting a percentage to it just in terms of -- I mean is that 50% of the production of the woven business plus or minus or?

I would go a little minus on that but it's material.

Okay, thanks. That's helpful.

On inventories, the day's inventory were up 20%. A large part of that, I think was explained just as inventory build as it relates to the ramp-up and some of the plant transitions.

So presumably this is just a temporary dynamic. Can you give us a sense for when inventory levels should normalize near you?

So definitely touched on a couple of big reasons so that's certainly accurate. As we've said in the past and even said in the call is that typical working capital build is in the first half of the year.

So it's somewhat natural as well. But then you do have the added impact for these plant closures if the Indian supply chain changes and so forth.

I mean, there's no question there is an impact there. And I would expect that to unravel, as we get through somewhat in Q3.

But I'd say the biggest unraveling you're going to see is in Q4. So I would expect that to get more in line.

And maybe just one more. I'd like to get your thoughts on the dividend increase.

Now it's good to see the dividend increase based on a more favorable outlook and the investment cycle pretty much wrapped up and this business should become a solid free cash flow generator, right? I get that.

And look, maybe I might be out a consensus here but I just want to get your view on the buyback and whether the dividend increase here precludes you from doing that. Your 2022 targets are quite sizable as you said.

I think you'll only need a couple of tuck-ins to get there. That implies pretty decent organic growth levels from here.

So why not invest more in your business and get more aggressive on the buyback? Thanks.

Look, I think like any company, any Board of Directors would try and find a balance between dividend investing in the business. And look we feel really good about the prospects of the business.

We feel very good about the free cash flow generation of the business. It's not a huge magnitude of dollars when you think of the dollar impact but we look at it and say, we're trying to strike that balance between all of those initiatives.

Our balance sheet is in very good shape with the secured leverage less in two. I think we feel really confident better on a go-forward basis.

Thank you, Good morning. I just wanted to circle around here just on the organic growth performance in the quarter and the expectation.

Could you just talk a little bit about -- you mentioned, I think, Jeff, in your prepared remarks around the GDP type growth outlook. Were you characterizing the organic growth for the entire business?

Is that or was that for a specific piece of the business?

No, that's the entire business. Like we've said in the past we basically have pockets growing at higher than that.

Certainly when we think of our product lines going into e-commerce, we're seeing higher growth there. We're also seeing higher growth in product lines where we've been making investments.

So we're certainly seeing well above GDP growth in those areas as well.

Okay, thank you. And then another thing I notice in the quarters is SG&A's sort of ticked a little bit higher, particularly as a percent of sales.

Is that a year-over-year phenomenon related to last year being relatively low or how do you see that evolving through the balance of the year?

It certainly has some share based comp playing into that. I'm going to bring up my numbers here but basically, that sort of wreaked some havoc with our SG&A.

That's only a piece of it.

Okay, that's great. And then just finally, Greg, you talked a little bit about the air pillow headwind that you're seeing on the e-commerce side.

Could you just talk a little bit about -- is that phenomenon relatively new or is that something that's been around for a while and maybe it's just accelerated more recently? Just wonder if can give some historical color and context around that?

So we've seen a lot of movement there within the last 6 to kind of 9 months, that kind of timeframe. So that is relatively new and we believe at least on the air pillow side, that worst is behind us, so to speak.

But again, there's a lot of focus on making sure from a packaging perspective that the package is right-sized for the product and we're being very efficient or our customers are being very efficient in the packaging requirements that you would utilize. So we believe that that's something that's fairly recent last 6, 9 months.

Okay, and can you talk a little bit about some of the right sizing that's being done on the e-commerce side in terms of packaging?

Well, when you think of just on the collegiate side, specifically e-commerce customers have added what they call box suites. And the box suites include more box opportunities to again, right size those boxes.

That's been an initiative within the industry for the past, I would say 18 months. A lot of that driven by dimensional weight costing on shipping.

But certainly packaging playing a role in that as well. So that has been an active measure going on for the past 12 to 18 months.

Specifically around dim weight costing for shipping.

Okay, that's helpful, thank you.

Thanks. Good morning, guys.

Congratulations again. On the subject of acquisitions, you were talking about valuations being driven up by the more private equity guys going out there and this is not a new problem.

You've mentioned this before. Would you say the situation is worse or better the same as, say, last year this time?

About the same.

Okay, are you seeing any difference, though, in the acquisitions that you might be looking at based on the size of the acquisition or the geography, if you're looking at anything, say, outside North America?

Well, I wouldn't say that it has changed. I've said it before that I still believe even with those high valuations, I still believe there is opportunities for us to execute on acquisitions that drive significant shareholder value.

I mean, if you take a look at the Maiweave acquisition that we did at the latter part of last year, I mean, certainly that's performing very well. I think there is opportunities of that magnitude out there.

Primarily, we're focused still in North America from a geographical perspective, so that really hasn't changed over the past year.

Okay, fair enough. And on your 2020 targets, the 15% EBITDA margin that we've talked about; if you're looking at -- I'm trying to figure out if you don't do the acquisition, so you don't hit the revenue targets, would you still expect to be able to -- would you be able to beat that EBITDA margin number but on a lower revenue if you don't have to take on any acquisitions that you might have to get some synergies out of?

So that would be conservative [ph].

I'm not going to say conservative but yes, we can beat that.

Okay. And then on the bundling of products that you've been doing, it looks like you made a lot of progress, you did get some benefits.

Do you basically have everything bundled that you need to at this point or do you think there is still some more progress you can make on that?

Well, I think from a customer facing perspective there is a lot of work going on as I mentioned, as we integrate the Polyair sales force into the Intertape sales force, both at end user level and distribution. So certainly, there is a lot of leverage that can happen or that will happen on a go-forward basis there.

As it relates to product line, because I'm not sure if you're referring to kind of the customer-facing on the product line side but on the product line side, I do feel like we have a pretty wide product offering. Certainly, there are some areas there that we would be interested in; but a lot of that would be around consolidation of the product lines that we're currently selling into the channel.

Okay, that's good. Thanks a lot.

Thank you.

Hi, good morning. I've got a few questions on the 1.8% organic growth rate in the first half.

First, do you have a same-store sales growth figure that includes the 2018 acquisitions?

No, no, we don't disclose that.

Okay. And second, can you break it down between e-commerce and more traditional products?

No, we won't break that down with numbers. But like I said, when e-commerce certainly would see a higher growth in that; no question about it, within water-activated tapes, we've got film products going to e-commerce and you've got machines and so forth that you would see a higher growth rate in those areas.

And also, I just want to comment that for us to get a clean shot at a clean number going into e-commerce is hard to do. While many of our relationships are direct, some are not.

And we don't have visibility of actually what ends up at e-commerce, specifically, when it goes through our distribution base.

Right. So I suppose you don't have a percentage of e-commerce sales?

We don't disclose that.

Okay, thanks very much.

Thank you.

Good morning and congrats on the quarter. So just calling back to the polypropylene spread between North America and Asia, the difference in delivered cost between the rest of the network and the new Indian facilities; if that spread is completely gone is there still a cost benefit to the new facilities?

Yes. So when we talk about on the tape side, this is the issue, right.

So there isn't necessarily an advantage and that's why Greg was referring to earlier that in fact what's happened is it's advantage for our Danville, Virginia, our U.S. operations.

So with the lower polypropylene or the lack of arbitrage between the two geographies, we're actually producing it basically at the same cost in the U.S. as we could on a landed basis from India.

So there we're actually at batches making it here, which -- like you mentioned, is actually generating more cash flow than we would have generated over there. So it's pretty -- it's almost a good news story from a certain perspective on a consolidated basis.

On the Woven side, it's certainly -- there is a landed cost, but again, the costs are so high here to produce that and a lot of that had been offered anyway, as a result of that. So it just was not economical to make that in North America and have been sourced from Asian supplier, which again was at a high cost.

So really what's there what you're talking about is the difference between the third-party costs from that Asian to both Asian suppliers versus what we can do to make it ourselves. So again, there is a huge savings of Delta between the two.

Yes, and on the woven plant. I mean our business case is completely intact at this point, even with the arbitrage or lack of arbitrage polypropylene.

That's really helpful, thanks. Last one, you mentioned the pockets of higher growth products; the E-commerce, for example.

Can you give us an example of a lower growth pocket that access in offset and gets the entire business to the GDP plus level?

Yes. So we called out a couple in our disclosures.

So you know, one of them -- one I mentioned last quarter which is somewhat fleeting but we did have some significant volumes related to a retail product in our volumes last year which we've seen drop off this year. So that's been somewhat of a headwind and that's somewhat expected because it's the type of product which we expected to see high growth and then sort of a curve downwards once the demand level is stabilized.

And then we have also seen our industrial tapes, we've seen some pockets like a masking tape, for example; some softness there are related to some auto aftermarket, some macroeconomic events. So, again, we are seeing some slower growth in some of those areas that's offsetting some of the high growth areas.

Thank you. I'll turn it over.

Thanks, good morning. Just back on the water-activated tapes, I guess despite the decline in containerboard that you referenced, you're making good gains in that -- on that product line.

Do you have a sense of how much more switching there is to be had to water activity or sort of what inning we're in or any sort of market color you can give there?

Yes, I think in North America, certainly a lot of that has happened. I mean, there are some pockets of opportunity there but we think internationally we see some bigger opportunities in relation to actually switching from -- let's say, plastic curtain sealing tapes to water-activated, so we've been working with, of course, some large international customers on that and have been making some headway in regards to servicing them around the world.

And that is, for the most part, replacing other types of closure methods.

And those markets on a combined basis would be -- how would they compare in size to the North American market?

Not comparable at this point.

Yes, nothing like the U.S. market.

Okay Thanks.

Thank you.

Thank you for participating in today's call. We look forward to speaking with you again following the release of our third quarter 2019 results in November.

Thank you.