EXHIBIT 99.1
[AEP INDUSTRIES LOGO]
FOR IMMEDIATE RELEASE Contact: Paul M. Feeney
Executive Vice President, Finance
and Chief Financial Officer
AEP Industries Inc.
(201) 807-2330
feeneyp@aepinc.com
AEP INDUSTRIES INC. REPORTS FISCAL 2008 THIRD QUARTER RESULTS
South Hackensack, NJ, September 8, 2008 - AEP Industries Inc. (Nasdaq: AEPI, the
"Company") today reported financial results for its fiscal third quarter ended
July 31, 2008.
Net sales increased $33.2 million, or 19%, in the third quarter of fiscal 2008
to $207.0 million compared with $173.8 million in the third quarter of fiscal
2007. For the first nine months of fiscal 2008, net sales increased $78.2
million, or 16%, to $561.9 million compared with $483.7 million in the same
period last year. The increases are primarily the result of increases in average
selling prices, driven by higher resin costs in the current period in comparison
to the same period of fiscal 2007, combined with increases in sales volume. The
effect of foreign exchange on net sales during the three and nine months ended
July 31, 2008 was a positive $1.3 million and $5.5 million, respectively,
reflecting the impact of the strengthened Canadian currency.
Gross profit for the third quarter of fiscal 2008 decreased $14.3 million to
$18.1 million as compared to $32.4 million in the prior year quarter. The
decrease in gross profit was largely due to a cumulative increase in LIFO
reserves of $8.8 million between the periods combined with current quarter
margin erosion resulting from lagging increases in selling prices. The effect of
foreign exchange on gross profit for the current quarter was a positive $0.1
million.
For the first nine months of fiscal 2008, gross profit decreased $38.6 million
to $68.2 million as compared to $106.8 million in the prior year nine-month
period. The decrease in gross profit was primarily due to a $17.3 million
cumulative gross profit impact related to the LIFO reserve combined with lagging
sales price increases partially offset by an increase of sales volume and a
positive foreign exchange effect of $0.9 million relating to the Company's
Canadian operations.
Operating expenses for the three months ended July 31, 2008, decreased $1.2
million to $21.9 million, and for the nine months ended July 31, 2008, increased
$1.8 million to $66.5 million, as compared to the same periods of the prior
fiscal year. The decrease for the three-month period is primarily due to a
decrease in the accrual for bonuses and a decrease in compensation costs
recorded in accordance with SFAS 123R for stock options and performance units,
partially offset by an increase in delivery expense resulting from higher fuel
costs. The increase for the nine-month period is primarily due to a payment of
approximately $1.6 million, excluding professional fees, related to a commercial
dispute, an increase in delivery and selling expenses resulting from higher
volumes sold, higher fuel costs, an increase in bad debt expense resulting from
a customer's bankruptcy and advisory costs incurred as a result of the
exploration of strategic alternatives related to the Company's April 2008 sale
of its AEP Industries Nederland B.V. ("AEP Netherlands") subsidiary, partially
mitigated by a decrease in bonus accruals and compensation costs recorded in
accordance with SFAS 123R for stock options and performance units.
"AEP continues to focus on strengthening its business during this period of
difficult economic conditions marked by unprecedented price increases in resin,"
said Brendan Barba, Chairman and Chief Executive Officer of the Company.
"Despite the challenges of the current market, we have made several strategic
decisions during the first nine months of this fiscal year, which we believe
will have a significant impact on our business operations. Most notably were our
sale of AEP Netherlands in April and our recently announced acquisition of the
Plastic Films segment of Atlantis Plastics, which we believe to be a compelling
strategic opportunity for AEP that is consistent with our efforts to create
additional long-term value for our shareholders."
Interest expense for the three and nine months ended July 31, 2008, decreased
$0.1 million to $3.8 million and increased $0.5 million to $11.9 million,
respectively, as compared to the same periods of the prior fiscal year. The
decrease for the three month period resulted primarily from lower average
borrowings on the Company's credit facility combined with lower interest rates
on these borrowings. The increase for the nine-month period resulted primarily
from higher average borrowings on the Company's credit facility, partially
offset by lower interest rates on these borrowings.
Net income (loss) for the three and nine months ended July 31, 2008 was a $4.8
million net loss or $(0.71) per diluted share and $2.7 million of net income or
$0.40 per diluted share, respectively. Net income for the three and nine months
ended July 31, 2007 was $4.8 million or $0.63 per diluted share and $21.6
million or $2.75 per diluted share, respectively.
On April 4, 2008, the Company completed the sale of AEP Netherlands, the last
remaining component of the Company's European segment that manufactured custom
films, stretch wrap and printed and converted films, to Euro-M Flexible
Packaging S.A. and Ghlin S.r.L, and received in cash approximately $26.8 million
(approximately $3.2 million for the shares of AEP Netherlands, net of closing
and other costs totaling $1.5 million, and approximately $23.6 million for the
settlement of all intercompany loans). In connection with the sale of AEP
Netherlands, the Company recorded a $10.7 million gain on disposition from
discontinued operations for the nine months ended July 31, 2008, including a
$1.5 million pre-tax gain on sale of shares of AEP Netherlands, $6.9 million of
realized foreign currency exchange gains ($4.1 million after tax) resulting from
the settlement of all intercompany loans, denominated in Euros ($5.1 million of
which had been previously recognized in accumulated other comprehensive income
at October 31, 2007) and the reclassification of AEP Netherlands' accumulated
foreign currency translation gains into income in the amount of $2.3 million.
Adjusted EBITDA was $13.8 million in the current quarter as compared to $19.3
million for the three months ended July 31, 2007. Adjusted EBITDA was negatively
impacted between three and four cents per pound in the current period resulting
from a delay in passing increased resin costs through to our market place.
Adjusted EBITDA for the nine months ended July 31, 2008 was $34.3 million, as
compared to $60.7 million for the nine months ended July 31, 2007. See
"Reconciliation of Non-GAAP Measures to GAAP" for reconciliation of adjusted
EBITDA and net income (loss).
On August 9, 2008, the Company entered into an Asset Purchase Agreement (the
"Atlantis Agreement") for the purchase of substantially all of the assets of the
stretch films, custom films and institutional products divisions of Atlantis
Plastics, Inc. (OTC: ATPL.PK) and certain of its subsidiaries ("Seller") for
$87.0 million in cash plus the assumption of certain liabilities (the "Atlantis
Acquisition"). On August 28, 2008, the United States Bankruptcy Court for the
Northern District of Georgia Court appointed the Company as the "stalking horse"
bidder for the Plastic Films assets. The "stalking horse" bid is subject to
higher and better offers at a Court sponsored auction, scheduled to be held on
October 2, 2008. In addition to the Seller not receiving a higher or better
offer from a qualified bidder, the transaction is subject to approval by the
Court and other customary closing conditions set forth in the Atlantis
Agreement. Either party may terminate the Atlantis Agreement by November 3, 2008
if the terminating party is not the primary cause of the closing not having
occurred by such date.
The Company believes that the Atlantis Plastic Films segment complements its
existing business portfolio and creates an even stronger suite of products and
services to meet the unique needs of both companies' customers.
Reconciliation of Non-GAAP Measures to GAAP
- -------------------------------------------
The Company defines Adjusted EBITDA as net income (loss) before discontinued
operations, interest expense, income taxes, depreciation and amortization,
changes in LIFO reserve, non-operating income (expense) and non-cash share-based
compensation expense (income). The Company believes Adjusted EBITDA is an
important measure of operating performance because it allows management,
investors and others to evaluate and compare its core operating results,
including its return on capital and operating efficiencies, from period to
period by removing the impact of its capital structure (interest expense from
its outstanding debt), asset base (depreciation and amortization), tax
consequences, changes in LIFO reserve (a non-cash charge/benefit to its
consolidated statements of operations), non-operating items and non-cash
share-based compensation. Furthermore, management uses Adjusted EBITDA for
business planning purposes and to evaluate and price potential acquisitions. In
addition to its use by management, the Company also believes Adjusted EBITDA is
a measure widely used by securities analysts, investors and others to evaluate
the financial performance of the Company and other companies in the plastic
films industry. Other companies may calculate Adjusted EBITDA differently, and
therefore the Company's Adjusted EBITDA may not be comparable to similarly
titled measures of other companies.
Adjusted EBITDA is not a measure of financial performance under generally
accepted accounting principles (GAAP), and should not be considered in isolation
or as an alternative to net income, cash flows from operating activities and
other measures determined in accordance with GAAP. Items excluded from Adjusted
EBITDA are significant and necessary components to the operations of the
Company's business, and, therefore, Adjusted EBITDA should only be used as a
supplemental measure of the Company's operating performance.
The following is a reconciliation of the Company's net income (loss), the most
directly comparable GAAP financial measure, to Adjusted EBITDA:
Third Quarter July YTD Third Quarter July YTD
Fiscal 2008 Fiscal 2008 Fiscal 2007 Fiscal 2007
--------------- --------------- --------------- -----------------
(in thousands) (in thousands) (in thousands) (in thousands)
Net income (loss) $ (4,772) $ 2,731 $ 4,777 $ 21,622
Income (loss) from discontinued operations (38) 9,131 1,103 2,697
-------------- --------------- --------------- -----------------
Income (loss) from continuing operations (4,734) (6,400) 3,674 18,925
(Benefit)/provision for taxes (2,547) (3,351) 2,466 12,747
Interest expense 3,772 11,911 3,918 11,380
Depreciation and amortization expense 3,370 10,186 3,343 10,514
Increase in LIFO reserve 14,851 22,757 6,050 5,445
Other non-operating income (237) (732) (766) (952)
Non-cash share-based compensation
(income)/expense (657) (113) 652 2,615
-------------- --------------- --------------- -----------------
Adjusted EBITDA $ 13,818 $ 34,258 $ 19,337 $ 60,674
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The Company invites all interested parties to listen to its third quarter
conference call live over the Internet at www.aepinc.com on September 10, 2008
at 10:00 a.m. EDT. An archived version of the call will be made available on the
Company's website after the call is concluded and will remain available for one
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 the United States and Canada.
Except for historical information contained herein, statements in this 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, cash flow guidance and market conditions.
Those and other risks are described in the Company' annual report on Form 10-K
for the year ended October 31, 2007 and subsequent reports filed with or
furnished to the Securities and Exchange Commission (SEC), copies of which are
available from the SEC or may be obtained from the Company. Except as required
by law, the Company assumes no obligation to update the forward-looking
statements, which are made as of the date hereof, even if new information become
available in the future.
AEP INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND OTHER COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in thousands, except per share data)
For the Three For the Nine
Months Ended Months Ended
July 31, July 31,
-------------------- -----------------
2008 2007 2008 2007
----------- -------- -------- --------
NET SALES $ 207,020 $173,812 $561,921 $483,693
COST OF SALES 188,959 141,405 493,681 376,922
----------- -------- -------- --------
Gross profit 18,061 32,407 68,240 106,771
OPERATING EXPENSES:
Delivery 10,340 9,699 27,565 25,511
Selling 7,981 8,237 24,055 23,677
General and administrative 3,584 5,194 14,856 15,502
----------- -------- -------- --------
Total operating expenses 21,905 23,130 66,476 64,690
OTHER OPERATING INCOME:
Gain (loss) on sales of property, plant and equipment, net 98 15 (336) 19
----------- -------- -------- --------
Operating income (loss) (3,746) 9,292 1,428 42,100
OTHER INCOME (EXPENSE):
Interest expense (3,772) (3,918) (11,911) (11,380)
Other, net 237 766 732 952
----------- -------- -------- --------
Income (loss) from continuing operations before benefit (provision) for
income taxes (7,281) 6,140 (9,751) 31,672
BENEFIT (PROVISION) FOR INCOME TAXES 2,547 (2,466) 3,351 (12,747)
----------- -------- -------- --------
Income (loss) from continuing operations (4,734) 3,674 (6,400) 18,925
DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations (38) 1,103 1,201 2,697
Gain from disposition -- -- 10,708 --
Provision for income taxes -- -- (2,778) --
----------- -------- -------- --------
Income (loss) from discontinued operations (38) 1,103 9,131 2,697
----------- -------- -------- --------
Net income (loss) $ (4,772) $ 4,777 $ 2,731 $ 21,622
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BASIC EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) from continuing operations $ (0.70) $ 0.50 $ (0.94) $ 2.45
=========== ======== ========= =========
Income (loss) from discontinued operations $ (0.01) $ 0.15 $ 1.34 $ 0.35
=========== ======== ========= =========
Net income (loss) per common share $ (0.71) $ 0.65 $ 0.40 $ 2.80
=========== ======== ========= =========
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) from continuing operations $ (0.70) $ 0.49 $ (0.94) $ 2.40
=========== ======== ========= =========
Income (loss) from discontinued operations $ (0.01) $ 0.15 $ 1.34 $ 0.34
=========== ======== ========= =========
Net income (loss) per common share $ (0.71) $ 0.63 $ 0.40 $ 2.75
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