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Archive for September, 1998

AEP INDUSTRIES INC. ANNOUNCES THIRD QUARTER EARNINGS

Tuesday, September 8th, 1998

CONTACT: Paul Feeney
Executive Vice President and
Chief Financial Officer
(201) 807-2330
e-mail: feeneyp@aepinc.com

FOR IMMEDIATE RELEASE

SOUTH HACKENSACK, N.J., September 8, 1998 – AEP Industries Inc. (Nasdaq:AEPI) today announced the results for its third quarter ended July 31, 1998.

For the fiscal 1998 third quarter, net sales totaled $173,025,000 compared with $198,031,000 in the third quarter of fiscal 1997. Income from continuing operations during the third fiscal quarter of 1998 amounted to $510,000, or $0.07 per share. During the quarter, the Company reported a net loss from discontinued operations of $998,000, or $0.14 per diluted share, which included a loss of $196,000 resulting from the disposal of certain Rigids operations. Including these discontinued operations, and the disposal of the Rigids business, the Company reported a net loss for the quarter of $488,000 or $0.07 per diluted share, compared with net income of $2,214,000 or $0.30 per diluted share in the fiscal 1997 third quarter.

Net sales for the first nine months for fiscal 1998 were $530,373,000 versus $570,019,000 for the first nine months of fiscal 1997. Income from continuing operations for the nine month period ending July 31, 1998 was $3,029,000, or $0.42 per diluted share. The Company reported a net loss from discontinued operations for the same nine month period of $2,833,000, or $0.39 per diluted share, which included a loss of $196,000 resulting from the disposal of certain Rigids operations. Including the results from the discontinued operations, net income for the first nine months of the 1998 fiscal year totaled $196,000, or $0.03 per diluted share, versus $8,261,000, or $1.11 per diluted share for the same period a year ago.

The quarterly and nine month results were negatively effected by a declining PVC resin market in the United States and Europe, excess capacity in the domestic oriented polypropylene market, delayed start up of certain capital projects and the severe economic problems of South East Asia.

Commenting on the quarter, Chairman and Chief Executive Officer Brendan Barba stated, “This quarter was disappointing, as we came in below our estimates; however, we firmly believe that the Company is poised to achieve strong improvement in operating results. Our objective remains focused on returning margins to historic levels and reducing our debt.”

AEP management and its Board of Directors are working together on strategies to enhance shareholder value. Some of the options being reviewed include merger, acquisitions and divestitures. In addition, certain members of the management team are planning to purchase shares in the open market.

Brendan Barba, Chairman of the Board, commented, “We are all disappointed with AEP’s current valuation and believe it does not reflect the intrinsic value of the Company or our position as a worldwide leader in the rapidly growing flexible packaging industry. The Company has worked hard over the past two years at integrating Borden Packaging with AEP Industries, and we now expect to fully benefit from the programs that we put together and executed. We are confident that we have implemented the right strategies to achieve success worldwide despite a difficult economic environment.”

Some of the Company’s accomplishments in 1998 include:

1. Completed the sale of several non-core businesses, including South Africa, four Rigid plastic businesses (the fifth business is expected to be sold during the Company’s fourth quarter) and a small business involved in distributing printed and converted products. Collectively these businesses lost approximately $2,600,000 (after taxes) as of July 31, 1998. Proceeds of these transactions (combined with debt assumptions by the buyers) approximate $18,100,000. Interest saving resulting from these transactions should exceed $1,300,000 pretax in fiscal 1999.
2. Employment levels at fiscal 1998 year end are expected to approximate 3400, down from 4600 at the beginning of fiscal 1997. We expect to continue to reduce our headcount costs in fiscal 1999, albeit at a much lower rate, as we strive to enhance our low-cost producer position.
3. Free cash flow for the nine months ended July 31, 1998, from continuing operations exceeds $13,600,000, and has been used essentially to reduce debt levels.
4. During fiscal 1998 the Company experienced several delays in the installation and start-up of a number of projects that were expected to contribute significantly to fiscal 1998 earnings. Management is committed to completing these projects as quickly as possible and anticipates these projects will be accretive to earnings in fiscal 1999; however, variances to plan as of July 31, 1998, totaled approximately $4,000,000 (before taxes).

AEP has not been immune to the economic problems in the Asia/Pacific region. Profits in the region through July 31, 1998, were $1,200,000 (before taxes) below plan but are quite satisfactory, all things considered. Nevertheless, we view Asia as a tremendous growth opportunity for the flexible packaging business, and we will continue to focus our efforts on transforming our operations in Australia and New Zealand into low-cost world class facilities.

Our planning anticipates a neutral effect of foreign exchange. It is noted that the effect on foreign profits before taxes through July 31, 1998, results as compared to plan is a negative $1,000,000.

Brendan Barba, Chairman of the Board, stated “Our Company is sound, and we will look to closing the gap between the Company’s market value, and what we believe is its true value.

“Third quarter and year-to-date results are below plan; however, we are optimistic that for all of the previously stated actions, profitability has bottomed and will improve significantly over the next fiscal year.” AEP Industries Inc. manufactures, markets, and distributes an extensive range of plastic packaging products for the food/beverage, industrial and agricultural markets. The Company has operations in 11 countries throughout North America, Europe and Asia/Pacific.

Except for historical information contained herein, statements in the release are forward-looking statements that are made pursuant to the safe harbor provisions of the Privates Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties which may cause the Company’s actual results in future periods to differ materially from forecasted results. Those risks include, but are not limited to, risks associated with pricing, volume and conditions of markets. Those and other risks are described in the Company’s filings with the Securities and Exchange Commission (SEC) over the last 12 months, copies of which are available from the SEC or may be obtained upon request from the Company.