EXHIBIT 99.1
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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 2009 SECOND QUARTER AND
YEAR-TO-DATE RESULTS
South Hackensack, NJ, June 9, 2009 - AEP Industries Inc. (Nasdaq: AEPI, the
"Company" or "AEP") today reported financial results for its second quarter
ended April 30, 2009.
On October 30, 2008, the Company completed the acquisition of substantially all
of the assets of the Plastic Films division of Atlantis Plastics, Inc.
("Atlantis"). AEP and Atlantis were significant competitors in the plastic films
industry for many years, competing to sell similar products to a similar
customer base. One of the primary factors in AEP's determination to pursue and
consummate the Atlantis acquisition was the potential realization of synergistic
benefits derived from SKU consolidation, logistical savings, resin cost savings
and product cost efficiencies. Immediately upon the completion of the
acquisition, AEP began the process of reducing and combining SKU's,
reformulating common products to their most effective common denominator and
changing the manufacturing location of certain products to maximize operating
and logistical efficiencies. The Company expects to devote significant time and
effort throughout fiscal 2009 to achieve these synergistic benefits. However, as
a result of the foregoing, no meaningful operational or financial information
exists subsequent to the acquisition that segregates the impact of Atlantis from
AEP as a whole. Therefore, although the Atlantis acquisition materially impacted
AEP's net sales and results of operations for the three and six months ended
April 30, 2009, the following discussion does not include any separate
information regarding Atlantis.
Net sales for the second quarter of fiscal 2009 increased $1.4 million, or 0.8%,
to $182.6 million from $181.2 million for the second quarter of fiscal 2008. Net
sales for the six months ended April 30, 2009 increased $7.9 million, or 2.2%,
to $362.8 million from $354.9 million in the same period of the prior fiscal
year. This is the result of an increase in sales volume, driven by the Atlantis
acquisition, partially offset by decreases in average selling prices resulting
from a decrease in resin costs from the prior year periods. The Company noted
that sales volume recovered in the second quarter of fiscal 2009 as customers
began to restock following the first quarter of customers' normal destocking
activities, but the Company continued to experience the adverse effects of the
economic recession, causing total volume to be below management's expectations.
The effect of foreign exchange on net sales during the three and six months
ended April 30, 2009 was a negative impact of $3.1 million and $5.7 million,
respectively, relating to the Company's Canadian operations.
Gross profit for the second quarter of fiscal 2009 increased $19.3 million to
$41.7 million from $22.4 million in the same quarter of the prior fiscal year.
The improvement in gross profit is primarily due to increased volume combined
with cost saving programs including the shut down of the Fontana, California
plant, and internal initiatives designed to align production with demand at the
Company's manufacturing facilities. There was also an improvement in material
margin resulting from the pre-buying of inventory before the January resin cost
increase and negotiated settlements with suppliers of prior period pricing
differences. The second quarter of fiscal 2009 also included $0.5 million of
negative impact of foreign exchange relating to the Company's Canadian
operations.
Gross profit for the first six months of fiscal 2009 increased $39.6 million to
$89.8 million from $50.2 million in the same period in the prior fiscal year.
The increase in gross profit was primarily due to higher sales volume, combined
with a $26.4 million decrease in the LIFO reserve during the current period
resulting from a decrease in resin prices during the first six months of fiscal
2009. The first six months of fiscal 2009 also included $0.9 million of negative
impact of foreign exchange relating to the Company's Canadian operations.
Operating expenses for the second quarter of fiscal 2009 increased $1.0 million,
or 4.2%, to $24.1 million, and for the six months ended April 30, 2009 increased
$3.1 million, or 6.9%, to $47.6 million, as compared to the same periods of the
prior fiscal year. The increase is primarily due to higher delivery and selling
expenses resulting from greater volumes sold in the respective periods and an
increase in compensation costs recorded in accordance with SFAS 123R for the
Company's stock options and performance units. Adjusting for a payment during
the three and six months ended April 30, 2008 of approximately $1.6 million,
excluding professional fees, related to a commercial dispute, general and
administrative expenses increased from the respective comparable periods in the
prior year primarily from transitional services associated with Atlantis,
partially offset by a decrease in bad debt expense. Operating expenses for the
three and six months ended April 30, 2009 includes a $0.4 million and $0.8
million favorable effect of foreign exchange, respectively, decreasing total
operating expenses.
"Our previously announced efforts to maximize synergies of our 2008 acquisition
of Atlantis Plastics, right-size our operations to mitigate effects of the
economic recession and pay down debt have resulted in first and second quarter
earnings surpassing management expectations." said Brendan Barba, Chairman and
Chief Executive Officer of the Company. "Though we continue to experience
adverse effects of the economy, we are actively and successfully implementing
our plan, which includes a combination of additional cost-reduction efforts and
debt repayment to navigate these challenging times. To date we have shut down
our plant in Fontana, California, notified employees of a shut down of our plant
in Cartersville, Georgia, and reduced headcount. Further, we have reduced debt
from approximately $250 million to approximately $190 million."
Mr. Barba continued, "While we expect the remainder of 2009 to continue to be
challenging, we expect volumes to modestly increase from existing levels, to
realize additional synergies from the Atlantis acquisition, and to further
reduce debt levels. We do not expect further plant closings."
On April 1, 2009, AEP repurchased and retired $14.8 million (principal amount)
of the Company's Senior Notes due March 2013 ("2013 Notes") at a price of 62.8%
of par ("2013 Notes partial extinguishment"). The cash paid was $9.4 million,
which included $0.1 million of accrued interest. In connection with the 2013
Notes partial extinguishment, the Company recognized a $5.3 million gain on
extinguishment of debt, net of the write-off of deferred debt issuance costs.
For tax purposes, the gain will be recognized as taxable income in the Company's
Federal tax return ratably over the fiscal years beginning October 31, 2014
through October 31, 2018.
Interest expense for the three months ended April 30, 2009 decreased $0.2
million to $3.9 million from $4.1 million in the prior year period, resulting
primarily from lower interest rates on Credit Facility borrowings and lower
interest expense on AEP's 2013 Notes as a result of the 2013 Notes partial
extinguishment, partially offset by higher average borrowings on the Company's
Credit Facility during the three months ended April 30, 2009 as compared to the
same period in the prior fiscal year. Interest expense for the six months ended
April 30, 2009 increased $0.2 million to $8.3 million from $8.1 million in the
prior period, resulting primarily from higher average borrowings on the
Company's Credit Facility during the six months ended April 30, 2009 as compared
to the same period in the prior fiscal year, partially offset by lower interest
rates on Credit Facility borrowings and lower interest expense on the Company's
2013 Notes as a result of the 2013 Notes partial extinguishment.
Net income for the three and six months ended April 30, 2009 was $11.6 million
or $1.71 per diluted share and $23.7 million or $3.49 per diluted share,
respectively. Net income for the three and six months ended April 30, 2008 was
$5.5 million or $0.81 per diluted share and $7.5 million or $1.10 per diluted
share, respectively. Included in the net income of the prior year periods is an
after-tax gain of $7.9 million related to the sale of the Company's Netherlands
operation.
Adjusted EBITDA was $26.9 million in the current quarter as compared to $2.9
million for the three months ended April 30, 2008. Adjusted EBITDA for the six
months ended April 30, 2009 was $26.3 million, as compared to $20.4 million for
the six months ended April 30, 2008.
Reconciliation of Non-GAAP Measures to GAAP
- -------------------------------------------
The Company defines Adjusted EBITDA as income before discontinued operations,
interest expense, income taxes, depreciation and amortization, changes in LIFO
reserve, non-operating income (expense) and 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 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 U.S. 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, the most directly
comparable GAAP financial measure, to Adjusted EBITDA:
Second Qtr. April YTD Second Qtr. April YTD
Fiscal 2009 Fiscal 2009 Fiscal 2008 Fiscal 2008
-------------- -------------- -------------- --------------
(in thousands) (in thousands) (in thousands) (in thousands)
Net income $ 11,570 $ 23,695 $ 5,523 $ 7,503
Income from discontinued operations - - 8,810 9,169
-------------- -------------- -------------- --------------
Income (loss) from continuing operations 11,570 23,695 (3,287) (1,666)
Provision (benefit) for taxes 7,192 15,084 (1,905) (804)
Interest expense 3,945 8,293 4,093 8,139
Depreciation and amortization expense 4,740 9,364 3,448 6,816
Increase (decrease) in LIFO reserve 3,387 (26,361) 112 7,906
Other non-operating income (5,137) (4,933) (129) (495)
Share-based compensation 1,173 1,147 586 544
-------------- -------------- -------------- --------------
Adjusted EBITDA $ 26,870 $ 26,289 $ 2,918 $ 20,440
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The Company invites all interested parties to listen to its second quarter
conference call live over the Internet at www.aepinc.com on June 10, 2009, at
10:00 a.m. EDT or by dialing 888-802-8577 for domestic participants or
404-665-9928 for international participants and referencing passcode 12493336.
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 consumer, 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,
including the ongoing U.S. recession and the global credit and financial crisis.
Those and other risks are described in the Company' annual report on Form 10-K
for the year ended October 31, 2008 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
(UNAUDITED)
(in thousands, except per share data)
For the Three For the Six
Months Ended Months Ended
April 30, April 30,
---------------------------- ----------------------------
2009 2008 2009 2008
------------ ------------ ------------ ------------
NET SALES $ 182,567 $ 181,203 $ 362,779 $ 354,901
COST OF SALES 140,886 158,862 273,014 304,722
------------ ------------ ------------ ------------
Gross profit 41,681 22,341 89,765 50,179
OPERATING EXPENSES:
Delivery 9,357 8,695 18,465 17,225
Selling 9,549 8,092 18,583 16,074
General and administrative 5,209 6,348 10,582 11,272
------------ ------------ ------------ ------------
Total operating expenses 24,115 23,135 47,630 44,571
OTHER OPERATING INCOME (EXPENSE):
Gain (loss) on sales of property,
plant and equipment, net 4 (434) 4 (434)
------------ ------------ ------------ ------------
Operating income (loss) 17,570 (1,228) 42,139 5,174
OTHER INCOME (EXPENSE):
Interest expense (3,945) (4,093) (8,293) (8,139)
Gain on extinguishment of debt 5,285 -- 5,285 --
Other, net (148) 129 (352) 495
------------ ------------ ------------ ------------
Income (loss) from continuing operations before
(provision) benefit for income taxes 18,762 (5,192) 38,779 (2,470)
(PROVISION) BENEFIT FOR INCOME TAXES (7,192) 1,905 (15,084) 804
------------ ------------ ------------ ------------
Income (loss) from continuing operations 11,570 (3,287) 23,695 (1,666)
DISCONTINUED OPERATIONS:
Income from discontinued operations -- 880 -- 1,239
Gain from disposition -- 10,708 -- 10,708
Provision for income taxes -- (2,778) -- (2,778)
------------ ------------ ------------ ------------
Income from discontinued operations -- 8,810 -- 9,169
------------ ------------ ------------ ------------
Net income $ 11,570 $ 5,523 $ 23,695 $ 7,503
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BASIC EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) from continuing operations $ 1.71 $ (0.48) $ 3.50 $ (0.24)
============ ============ ============ ============
Income from discontinued operations $ -- $ 1.29 $ -- $ 1.34
============ ============ ============ ============
Net income per common share $ 1.71 $ 0.81 $ 3.50 $ 1.10
============ ============ ============ ============
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) from continuing operations $ 1.71 $ (0.48) $ 3.49 $ (0.24)
============ ============ ============ ============
Income from discontinued operations $ -- $ 1.29 $ -- $ 1.34
============ ============ ============ ============
Net income per common share $ 1.71 $ 0.81 $ 3.49 $ 1.10
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