News

Archive for January, 2003

AEP INDUSTRIES REPORTS FISCAL 2002 FOURTH QUARTER AND YEAR END RESULTS

Monday, January 13th, 2003

Contact: Paul Feeney
Executive Vice President
and Chief Financial Officer
AEP Industries
(201) 807-2330
feeneyp@aepinc.com

South Hackensack, NJ, January 13, 2003 – AEP Industries Inc. (Nasdaq:AEPI, the “Company”) today reported financial results for its fiscal fourth quarter and fiscal year ended October 31, 2002.

Net sales for the fourth quarter were $177,345,000, a 10.1 percent increase from $161,113,000 in the same quarter last year. For the full year, net sales increased 3.3 percent to $660,578,000 in 2002 from $639,700,000 in 2001. The improvement in 2002 sales resulted primarily from a 6.4 percent and 8.4 percent increase in sales volume for the fourth quarter and full year, respectively, offset
by decreases in average selling price.

Gross margin for the fourth quarter of fiscal 2002 decreased to 14.3 percent from 20.6 percent in the same quarter last year. The full-year gross margin decreased to 18.5 percent compared with 19.0 percent in the prior fiscal year. The decline in gross margins in 2002 was primarily due to higher raw material costs and highly competitive market conditions in North America. Charges of approximately $1,000,000 and $4,000,000 in the current and year-to-date periods, respectively, resulted from the Company’s last-in first-out (LIFO) method of inventory valuation. This charge will reverse as resin prices decline.

The Company incurred a net loss from operations of $2,691,000 in the 2002 fourth quarter compared with income from operations of $6,750,000 in the prior year’s period. For the full year 2002, income from operations declined to $18,808,000 from $22,527,000 for full year 2001.

The net loss for the fourth quarter of fiscal 2002 was $7,117,000, or $0.90 per share (diluted), compared with net income of $281,000, or $0.04 per share (diluted), in the prior year’s fourth quarter. The 2001 fourth quarter includes a restructuring charge of $422,000 related to the closedown of various facilities in the United Kingdom.

For fiscal 2002, AEP reported a net loss of $1,769,000, or $0.23 per share (diluted), compared with a net loss of $4,364,000, or $0.57 per share (diluted), in the prior year. The 2002 period includes a $6,824,000 gain from the sale of a 50 percent interest in the Company’s Australasia “bag in box” operations during the first quarter of 2002. The 2001 net loss included $3,198,000 in restructuring charges related to the closedown of various facilities in the United Kingdom and Australia, a $6,515,000 loss on the sale of the Hitachi Filtec joint venture interest, and a gain of $2,494,000 from the sale of its former New Jersey operating facility.

“In many ways, 2002 was a very good year for our Company. In Australasia, we completed the operational integration of a newly acquired business, significantly improved current profitability as well as the future profit making potential of this business, secured our #1 and #2 positions in the New Zealand and Australia flexible packaging sectors and increased volume in those businesses by more
than 36 percent. Our European businesses have been downsized and made more efficient. Our North American business has increased overall sales volume almost nine percent with most of this increase representing improved market penetration as opposed to market expansion. Finally, we reduced cost per pound in virtually all of the Company’s cost categories worldwide,” commented
Brendan Barba, Chairman and Chief Executive Officer of AEP Industries. “The poor bottom line results in the fourth quarter were due, almost exclusively, to higher than expected raw material cost increases in North America, which we and our competition were unable to pass through to our customers. Since our year-end, global political and economic events, particularly the possibility of a war in Iraq, create an environment that is full of uncertainty. As always, we are focused on the long-term strategic direction of the Company as we continue to deliver a quality product to our customers.”

The Company invites all interested parties to listen to its fourth quarter conference call live over the Internet at www.aepinc.com on Tuesday, January 14, 2003 at 10:00 a.m. EDT, an archived version of the call will be made available after the call is concluded.

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 ten countries throughout North America, Europe and Australasia.

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 Private 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, EBITDA guidance 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 from the Company.

AEP INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)

For the Three Months Ended
October 31,
For the Year Ended
October 31,
2002 2001 2002 2001
NET SALES $ 177,345 $ 161,113 $ 660,578 $ 639,700
COST OF SALES 152,007 127,572 538,041 514,808
RESTRUCTURING CHARGE - 422 51 3,198
Gross profit 25,338 33,119 122,486 121,694
OPERATING EXPENSES
Delivery 9,698 8,952 35,897 33,770
Selling 10,746 9,663 40,757 38,175
General and Administrative 7,585 7,754 27,024 27,222
Total operating expenses 28,029 26,369 103,678 99,167
Income from operations (2,691) 6,750 18,808 22,527
OTHER INCOME (EXPENSE):
Interest expense, net (6,300) (6,433) (25,238) (28,210)
Gain on sale of interest in subsidiary - - 6,824 -
Loss in sale of joint venture - - - (6,515)
Other, net (43) 415 (1,598) 5,057
(6,343) (6,018) (20,012) (29,668)
Income (loss) before provision for income taxes (9,034) 732 (1,204) (7,141)
PROVISION FOR INCOME TAXES (1,917) 451 565 (2,777)
Net income (loss) $ (7,117) $ 281 $ (1,769) $ (4,364)
EARNINGS (LOSS) PER SHARE – Basic and Diluted: $ (0.90) $ 0.04 $ (0.23) $ (0.57)

In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangibles”. Under the provisions of SFAS No. 142, goodwill and intangible assets with indefinite lives are not amortized, but tested for impairment annually, or whenever there is an impairment indicator.

The Company elected to adopt the provisions of SFAS No. 142 on November 1, 2001. As required by SFAS 142, the Company performed an assessment of whether there was an indication that goodwill was impaired at the date of adoption.

The following table sets forth the reconciliation of basic and diluted earnings per common share computations for the three and twelve months ended October 31, 2001 as if SFAS No. 142 was adopted as of November 1, 2000:

(In thousands, except share and per share data)

For the three months ended
October 31, 2001
For the twelve months ended
October 31, 2001
As Reported Add Back:
Goodwill
Amortization
Net of tax
As Adjusted As Reported Add Back:
Goodwill
Amortization
Net of tax
As Adjusted
Basic and Diluted EPS:
Numerator
Net Income (Loss)
$281 $112 $393 ($4,364) $510 ($3,854)
Denominator
Weighted average
common
shares outstanding –
basic and diluted
7,805,643 - - 7,805,643 7,717,028 - - 7,717,028
Basic and Diluted
earnings (loss) per
common share
$.04 $.01 $.05 ($.57) $.07 ($.50)

As a result of the loss incurred for the twelve months ended October 31, 2001, no equivalent shares attributable to options were considered in computing diluted EPS, as such options would be anti-dilutive.