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GOLDMAN
SACHS HIGH YIELD RESEARCH
Plastipak Reports Impressive Results
Joe Stivaletti
Goldman Sachs High Yield Research
March 16, 2005
Plastipak hit the ball out of the park
for its fiscal 2005 first quarter, which ended on January
29, 2005. EBITDA jumped 76.1%, to $33.1 million for
the period. This was close to the record quarterly EBITDA
for Plastipak, despite the fact that the first fiscal
quarter is typically the seasonal trough. Interest coverage
for the period was a solid 3.4x.
Plastipak's revenues jumped 24.1%
in the first quarter, to $280.5 million. Unit sales
were up 7.2%, while the pass-through of higher resin
costs also accounted for a major portion of the revenue
spike. The company experienced impressive revenue growth
in all five product categories, with the largest growth
coming from the food and juice category. Revenues in
Brazil increased 44.0% in the period, while unit sales
in the country were flat. Overall, Plastipak's EBITDA
margin expanded to 11.8% from 8.3% one year earlier.
As EBITDA has grown, Plastipak's
leverage has come down. Net debt / EBITDA stood at 2.9x
as of January 29, 2005, down noticeably from 4.0x one
year earlier. The company's liquidity remained good,
with cash of $9.3 million and revolver availability
of $239.6 million.
Our rating on the Plastipak bonds
is Outperform. The company has delivered on all fronts
since it issued its bonds back in 2001, experiencing
rapid growth while improving its credit statistics.
The company is a formidable competitor in the plastic
container industry. We look for continued EBITDA growth
as fiscal 2005 progresses, especially in light of the
major capital investments that the company has made
during the past two years. The bonds represent attractive
short-term paper, as we expect Plastipak to refinance
the bonds between now and the first call date of September
1, 2006.
Joe
Stivaletti
Goldman, Sachs, & Co.
High Yield Research
85 Broad Street, 29th floor
New York, NY 10004
(212) 902-3299
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