<PAGE>
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ___________
Commission file number 0-14450
AEP INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
Delaware 22-1916107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 Phillips Avenue
South Hackensack, New Jersey 07606
(Address of principal executive offices) (Zip Code)
(201) 641-6600
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares
Outstanding At
Class of Common Stock May 31, 1996
--------------------- ------------
$.01 Par Value 4,667,901
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- -------------------------------
AEP INDUSTRIES INC.
BALANCE SHEETS
--------------
UNAUDITED
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
-------------- --------------
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 703,000 $ 329,000
Marketable securities 1,771,000 1,718,000
Accounts receivable, less allowance of $1,529,000
in 1996 and $1,421,000 in 1995 for doubtful accounts 24,095,000 26,333,000
Inventories 20,995,000 20,021,000
Other current assets 965,000 972,000
Deferred federal income tax benefit 750,000 846,000
-------------- --------------
Total current assets 49,279,000 50,219,000
-------------- --------------
PROPERTY, PLANT AND EQUIPMENT, at cost, less
accumulated depreciation and amortization of $57,912,000
in 1996 and $52,838,000 in 1995 92,245,000 90,244,000
-------------- --------------
OTHER ASSETS 2,773,000 2,824,000
-------------- --------------
TOTAL ASSETS $ 144,297,000 $ 143,287,000
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 5,216,000 $ 3,477,000
Accounts payable 14,927,000 27,678,000
Accrued expenses 4,160,000 4,034,000
-------------- --------------
Total current liabilities 24,303,000 35,189,000
LONG-TERM DEBT 92,045,000 82,523,000
DEFERRED FEDERAL INCOME TAXES - LONG TERM 9,107,000 8,767,000
-------------- --------------
Total liabilities 125,455,000 126,479,000
-------------- --------------
SHAREHOLDERS' EQUITY:
Preferred stock -- $1.00 par value, 1,000,000 shares
authorized; none outstanding - -
Common stock - $.01 par value, 20,000,000 shares
authorized; 4,667,101 and 7,406,373 shares issued
and outstanding in 1996 and 1995, respectively 75,000 74,000
Additional paid-in capital 7,685,000 7,483,000
Treasury stock -- common stock; at cost, 2,801,000 and 2,633,000
in 1996 and 1995, respectively (62,142,000) (58,304,000)
Retained earnings 73,224,000 67,555,000
-------------- --------------
Total shareholders' equity 18,842,000 16,808,000
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 144,297,000 $ 143,287,000
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes to financial statements are an integral part of
these balance sheets
2
<PAGE>
AEP INDUSTRIES INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
UNAUDITED
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
April 30, April 30,
------------------------------- -------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 55,821,000 $ 58,347,000 $ 110,591,000 $ 117,034,000
COST OF SALES 40,724,000 45,638,000 79,259,000 88,189,000
------------- ------------- ------------- -------------
Gross profit 15,097,000 12,709,000 31,332,000 28,845,000
------------- ------------- ------------- -------------
OPERATING EXPENSES
Delivery and Warehousing 4,546,000 3,846,000 8,901,000 8,243,000
Selling 3,411,000 3,000,000 6,783,000 6,344,000
General and Administrative 1,414,000 1,216,000 2,933,000 2,638,000
------------- ------------- ------------- -------------
Total operating expenses 9,371,000 8,062,000 18,617,000 17,225,000
------------- ------------- ------------- -------------
5,726,000 4,647,000 12,715,000 11,620,000
------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest expense (1,748,000) (425,000) (3,637,000) (828,000)
Other, net 27,000 448,000 139,000 511,000
------------- ------------- ------------- -------------
(1,721,000) 23,000 (3,498,000) (317,000)
------------- ------------- ------------- -------------
Income before provision for income taxes 4,005,000 4,670,000 9,217,000 11,303,000
PROVISION FOR INCOME TAXES 1,541,000 1,796,000 3,548,000 4,370,000
------------- ------------- ------------- -------------
Net income 2,464,000 2,874,000 5,669,000 6,933,000
Retained earnings, beginning of period 70,760,000 58,617,000 67,555,000 54,706,000
Cash dividends paid - 184,000 - 332,000
------------- ------------- ------------- -------------
Retained earnings, end of period $ 73,224,000 $ 61,307,000 $ 73,224,000 61,307,000
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net income per share of common stock $0.50 $0.39 $1.15 $0.94
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The accompanying notes to financial statements are an integral part of
these statements.
3
<PAGE>
AEP INDUSTRIES INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
For the Six Months
Ended April 30,
------------------------------
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,669,000 $ 6,933,000
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation and amortization 5,356,000 4,641,000
Provision for losses on accounts receivable 110,000 320,000
Decrease (Increase) in accounts receivable 2,128,000 (2,657,000)
Decrease in deferred Federal Income Tax benefit 96,000
Increase in inventories (975,000) (8,034,000)
Decrease (Increase) in other current assets 7,000 (100,000)
Increase in marketable securities (53,000) -
Decrease (Increase) in other assets 52,000 (46,000)
Increase (decrease) in accounts payable (12,750,000) 5,836,000
Increase (decrease) in accrued expenses 126,000 (2,277,000)
Increase in deferred federal income taxes 340,000 436,000
----------- -----------
Net cash provided by
operating activities 106,000 5,052,000
----------- -----------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Capital expenditures (7,372,000) (11,846,000)
Sales and retirements of property, plant and
equipment, net 16,000 4,000
Sale of marketable securities - 2,036,000
----------- -----------
Net cash provided by (used
in) investing activities (7,356,000) (9,806,000)
----------- -----------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving credit facility 13,455,000 4,800,000
Net repayments on long-term debt (2,194,000) (75,000)
Purchase of treasury stock (3,839,000) -
Proceeds from issuance of common stock 202,000 260,000
Payment of cash dividends - (332,000)
----------- -----------
Net cash provided by (used
in) financing activities 7,624,000 4,653,000
----------- -----------
NET INCREASE (DECREASE) IN CASH: 374,000 (101,000)
CASH AT BEGINNING OF PERIOD: 329,000 258,000
----------- -----------
CASH AT END OF PERIOD: $ 703,000 $ 157,000
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for - interest $ 3,605,000 $ 869,000
----------- -----------
Cash paid during the period for - income taxes $ 3,222,000 $ 3,228,000
----------- -----------
</TABLE>
The accompanying notes to financial statement are an integral part of these
statements.
4
<PAGE>
AEP INDUSTRIES INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial information included herein has been prepared by the Company
without audit, for filing with the Securities and Exchange Commission
pursuant to the rules and regulations of said Commission. The financial
information presented herein, while not necessarily indicative of results
to be expected for the year, reflects all adjustments (which include only
normal recurring adjustments) which in the opinion of the Company are
necessary for a fair presentation of the results for the periods
indicated.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report
to Shareholders for the fiscal year ended October 31, 1995.
(2) NET INCOME PER SHARE OF COMMON STOCK
Net income per share of common stock is calculated using the
weighted average number of shares of common stock and common stock
equivalents (stock options) outstanding during each period. The
number of shares used in such computation for the three months ended
April 30, 1996, and 1995 were 4,906,366 and 7,388,895 respectively.
The number of shares used in such computation for the six months
ended April 30, 1996, and 1995 were 4,930,639 and 7,380,616
respectively.
During 1995 and 1996, the Company acquired 2,801,000 shares of its
own common stock, the purchase of which has been reflected in the
computation of earnings per share on the basis of the weighted
shares outstanding. Had the shares been purchased at the beginning
of Fiscal 1995 and had the debt, the proceeds from which the
purchase was made, been outstanding since that date, earnings per
share for the three months and six months ended April 30, 1995 would
have been increased by $.09 and $.21 per share respectively.
(3) INVENTORIES
Inventories are comprised of the following:
April 30, 1996 October 31, 1995
-------------- ----------------
Raw Materials $ 6,498,000 $ 8,010,000
Finished Goods 13,866,000 11,380,000
Supplies 631,000 631,000
-------------- ----------------
$20,995,000 $20,021,000
-------------- ----------------
The Company uses the last-in, first-out (LIFO) method to price
substantially all of the raw materials and finished goods inventory.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1996 AS COMPARED TO THE THREE MONTHS ENDED
APRIL 30, 1995
NET SALES AND GROSS PROFIT
Net sales during the second quarter ended April 30, 1996, decreased 4% or
$2,526,000 to $55,347,000 compared to the same period in the prior year. This
decrease in net sales is a result of a 27% decrease in unit selling prices
partially offset by a 31% increase in sales volume.
The Company's gross profit for the second quarter of Fiscal 1996 amounted to
$15,097,000, a 19% increase from $12,709,000 in the prior fiscal year. The
gross profit improvement resulted from the 31% increase in sales volume, which
reduced per unit manufacturing costs, which was offset by increases in raw
material costs combined with additional manufacturing costs of approximately
$550,000 incurred by the simultaneous start-up of the Company's Pennsylvania
facility and close down of its New Jersey plant. The Company increased its
total plant manufacturing capacity by 17% from the same quarter in the prior
fiscal year, and such plants operated at 74% of total capacity.
OPERATING EXPENSES
Operating expenses for the second quarter ended April 30, 1996 increased by
$1,309,000 to $9,371,000 as compared to the same period in the prior fiscal
year. This 16% increase can be primarily attributed to the 31% increase in
sales volume during the period which resulted in increased selling, delivery and
warehousing costs of approximately $750,000. Additional costs of approximately
$250,000 were incurred during the period in the relocation of inventory from the
Company's New Jersey warehouse to its new facility in Pennsylvania. The increase
general and administrative expenses for the current period can be primarily
attributed to the amortization of loan fees attributable to the Company's new
credit facilities entered into in Fiscal 1995.
INTEREST EXPENSE
Interest expense for the three months ended April 30, 1996, amounted to
$1,748,000, an increase of $1,323,000 from the same period in the prior year.
This increase in interest expense is due to the Company's new credit facility,
which replaced existing credit facilities and was used to finance the purchase
of shares of Common Stock for its treasury from its stockholders and its Chief
Executive Officer. These purchases were completed during the fourth quarter of
Fiscal 1995
OTHER INCOME
Other income for the three months ended April 30, 1996 amounted to $27,000. The
amount includes $12,000 in gains on sale of machinery and equipment and $15,000
of interest income earned for the period on corporate investments.
SIX MONTHS ENDED APRIL 30, 1996 AS COMPARED TO SIX MONTHS ENDED APRIL 30, 1995
NET SALES AND GROSS PROFIT
Net sales for the six months ended April 30, 1996 were $110,591,000, an decrease
of $6,443000 or 6% under the same period in the prior year. This decrease in
net sales is primarily the result of a 22% decrease in unit selling prices
offset by a 21% increase in sales volume.
The gross profit for the current six month period increased by $2,487,000 or 9%
to $31,332,000. The improvement in gross profit is primarily attributed to the
21% increase in sales volume offset by
6
<PAGE>
additional manufacturing costs relating to the start-up of the Company's
Pennsylvania facility and close down of its New Jersey plant. The Company
increased its total plant manufacturing capacity by 34% during the current six
month period when compared to the same period in the prior year. The Company
operated its plants at 73% of its capacity during the current period as compared
with 78% in the same period in the prior year.
OPERATING EXPENSES
Operating expenses for the current period increased 8%, or $1,392,000, to
$18,617,000 as compared to the same period in 1995. This increase can be
attributed to the 21% increase in the Company's sales volume for the period
which resulted in increased sales commissions earned and shipping and
warehousing charges incurred during the period. In addition the general and
administrative expenses increased during the period can be directly attributed
to amortization of loan fees in connection with the Company's new credit
facilities entered into in the fourth quarter of Fiscal 1995.
INTEREST EXPENSE
Interest expense for the six months ended April 30, 1996, amounted to
$3,637,000, an increase of $2,809,000 from the same period in the prior year.
This increase in interest expense is due to the Company's new credit facility,
which replaced existing credit facilities and was used to finance the purchase
of shares of Common Stock for its treasury from its stockholders and its Chief
Executive Officer. These purchases were completed during the fourth quarter of
Fiscal 1995.
OTHER INCOME
Other income for the six months ended April 30, 1996 amounted to $139,000. The
amount includes $56,000 in gains on sale of machinery and equipment and $83,000
of interest and dividend income earned for the period on corporate investments.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital amounted to $24,976,000 at April 30, 1996, as
compared to $15,030,000 at October 31, 1995. The increase in working capital
of $9,946,000 at April 30, 1996 can be primarily attributed to the reduction
in accounts payable which was funded by internally generated cash flow and
increased long-term debt. The remaining increases and decreases in
components of the Company's financial position reflect normal operating
activity.
The Company's future capital requirements relate principally to upgrading
existing equipment and facilities and promoting new and existing products in the
polyethylene film market. The Company will receive financing from the State of
Pennsylvania for its newly constructed facility in Wright Township, Pennsylvania
and believes that this borrowing combined with internally generated cash flow
plus the availability of the Company's credit facilities are sufficient to meet
its normal and additional capital requirements for the foreseeable future.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AEP INDUSTRIES INC.
Date: June 11, 1996 S/A J. Brendan Barba
----------------------------------
J. Brendan Barba
Chairman of the Board, President
and Chief Executive Officer
Date: June 11, 1996 S/A Paul M. Feeney
----------------------------------
Paul M. Feeney
Executive Vice President-Finance
Principal Financial and Accounting
Officer
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in routine litigation in the normal course of its
business. The proceedings are not expected to have a material adverse impact on
the Company's results of operations or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of AEP Industries Inc. was held on
April 9, 1996, for the purpose of electing two Class A directors and approving
the appointment of auditors. Proxies for the Meeting were solicited pursuant to
Section 14(A) of the Securities and Exchange Act of 1934 and there was no
solicitation in opposition to management's solicitations.
1. Management's nominees for Class A directors as listed in the Proxy
Statement were elected with the following vote:
Shares Voted Shares Shares Not
"For" Withheld Voted
Kenneth Avia 4,271,379 39,026 502,760
Paul E. Gelbard 4,271,315 39,090 502,760
2. The appointment of Arthur Andersen LLP as independent auditors was
approved by the following vote:
Shares Voted Shares Voted Shares Shares Not
"For" "Against" "Abstaining" Voted
4,306,148 503 3,754 502,760
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11 - Computation of weighted average number of shares
outstanding. Page 11.
(b) No reports on Form 8-K were filed during the quarter ended April 30,
1996.
27. Financial Data Schedule (for electronic submission only).
9
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description of Exhibit Page
- -------------- -------------------------------------------------------- ----
3(a)(1) Composite Certificate of Incorporation of the Company as
amended through May 3, 1995
3(a)(2) Amendment to the Certificate of Incorporation of the
Company as filed May 3, 1995
3(b) By-Laws of the Company (incorporated by reference to
Exhibit 3(b) to Registration Statement on Form
S-1No. 33-2242)
10(a) 1985 Stock Option Plan of the Company (incorporated by
reference to Exhibit 10(mm) to Amendment No. 2 to
Registration Statement on Form S-1 No. 33-2242)
10(b) 1985 Employee Stock Purchase Plan of the Company as
amended April 11, 1989 (incorporated by reference to
Exhibit 10(aa) to the Annual Report on Form 10-K for the
year ended October 31, 1989)
10(c) The Employee Profit Sharing and 401(k) Retirement Plan
and Trust as adopted March 3, 1993 (incorporated by
reference to Exhibit 10(g) to Registrant's Quarterly
Report on Form 10-Q for the period ended January 31, 1993)
10(d) Lease dated as of March 20, 1990 between the Company and
Phillips and Huyler Assoc., L.P.(incorporated by reference
to Exhibit 10(aa) to the October 31, 1990 Form 10-K)
10(e) 1995 Stock Option Plan of the Company (incorporated by
reference to Exhibit 4 to the Registration Statement
No. 33-58747 on Form S-8)
10(f) 1995 Employee Stock Purchase Plan of the Company
(incorporated by reference to Exhibit 4 to the
Registration Statement No. 33-58743 on Form S-8)
10(g) Tender Offer to Purchase, dated as of August 10, 1995,
(incorporated by reference to Exhibit (a)(1) as filed on
August 10, 1995 with Schedule 13E-4)
10(h) Stock Purchase Agreement, dated as of August 2, 1995
between the Company and J. Brendan Barba (incorporated by
reference to Exhibit (c) as filed on August 10, 1995 with
Schedule 13E-4)
10(i) Credit Agreement, dated as of August 3, 1995, among the
Company, the Chase Manhattan Bank (National Association),
as Administrative Agent and Mellon Bank, N.A. as
Documentation Agent and the lenders party thereto
(incorporated by reference to Exhibit (b) as filed on
August 10, 1995 with Schedule 13E-4)
10(j) Amendment No. 1, dated as of October 20, 1995, to the 12
Credit Agreement, dated as of August 3, 1995, among the
Company, The Chase Manhattan Bank (National Association),
as Administrative Agent and Mellon Bank, N.A., as
Documentation Agent and the lenders party thereto.
10(k) Amendment No. 2, dated as of March 22, 1996, to the Credit 15
Agreement, dated as of August 3, 1995, among the Company,
The Chase Manhattan Bank (National Association), as
Administrative Agent and Mellon Bank, N.A., as
Documentation Agent and the lenders party thereto.
10
<PAGE>
Amendment No. 1
AMENDMENT NO.1 dated as of October 20, 1995 between: AEP INDUSTRIES INC.
(the "COMPANY"), the lenders party thereto (the "LENDERS"), THE CHASE MANHATTAN
BANK (NATIONAL ASSOCIATION), as administrative agent for the Lenders (in such
capacity, the "ADMINISTRATIVE AGENT") and MELLON BANK, N.A., as documentation
agent for the Lenders (in such capacity, the "DOCUMENTATION AGENT" and, together
with the Administrative Agent, the "AGENTS").
The Company, the Lenders and the Agents are parties to a Credit Agreement
dated as of August 3, 1995 (as heretofore modified and supplemented and in
effect on the date hereof, the "CREDIT AGREEMENT"), providing, subject to the
terms and conditions thereof, for credit facilities by the Lenders to the
Company in an aggregate principal or face amount of $140,000,000. The Company
has requested that the Lenders modify Section 8.06 of the Credit Agreement to
authorize the granting of certain liens upon its property in Mountain Top,
Pennsylvania and that the Lenders waive the conditions under Section 6.03 of the
Credit Agreement with respect to such property. Accordingly, the parties hereto
hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this Amendment
No. 1, terms defined in the Credit Agreement are used herein as defined therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the conditions
precedent specified in Section 5 below, but effective as of the date hereof, the
Credit Agreement shall be amended as follows:
A. References in the Credit Agreement (including references to the Credit
Agreement as amended hereby) to "this Agreement" (and indirect references such
as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be
references to the Credit Agreement as amended hereby.
B. Section 8.06 of the Credit Agreement is hereby amended by (i) deleting
the word "and" at the end of clause (g) thereof, (ii) changing the period at the
end of clause (h) thereof to a semicolon and (iii) inserting a new clause (i) at
the end of said Section 8.06 to read as follows:
"(i) Liens upon real and/or personal Property located at the
Company's facility at Crestwood Industrial Park, Mountain Top,
Pennsylvania (as identified in Schedule IV hereto) securing the Loans
permitted under Section 8.07(e) hereof."
Section 3. WAIVER. Subject to the satisfaction of the conditions
precedent specified in Section 5 below, but effective as of the date hereof, the
Lenders hereby agree to waive satisfaction by the Company of the conditions
under Section 6.03 of the Credit Agreement relating to the real Property located
at Crestwood Industrial Park, Mountain Top, Pennsylvania (as identified in
Schedule IV thereto) (the "PENNSYLVANIA PROPERTY"); PROVIDED that, if the loans
permitted under Section 8.07(e) of the Credit Agreement from the Pennsylvania
Industrial Development Authority and the Pennsylvania Department of Commerce
Sunny Day Loan Fund shall not be secured by a mortgage Lien on the Pennsylvania
Property, the Company shall, within 30 days following such failure to so secure
such loans, comply with each of such conditions under said Section 6.03 with
respect to the Pennsylvania Property.
Section 4. REPRESENTATIONS AND WARRANTIES. The Company hereby represents
and warrants to the Lenders and the Agents that (a) the representations and
warranties in Section 7 of the Credit Agreement are true and correct on the date
hereof as if made on and as of the date hereof and as if each reference in said
Section 7 to "this Agreement" included reference to this Amendment No. 1 and (b)
no Default has occurred and is continuing as of the date hereof.
12
<PAGE>
Section 5. CONDITIONS PRECEDENT. As provided in Sections 2 and 3 hereof,
the amendments to the Credit Agreement set forth in said Section 2 and the
waiver set forth in said Section 3 shall become effective, as of the date
hereof, upon execution and delivery of one or more counterparts of this
Amendment No. 1 by each of the parties hereto.
Section 6. MISCELLANEOUS. Except as expressly provided herein, the
Credit Agreement shall remain unmodified and in full force and effect. This
Amendment No. 1 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Amendment No. 1 by signing any such counterpart.
This Amendment No. 1 shall be governed by, and construed in accordance with, the
law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed and delivered as of the day and year first above written.
AEP INDUSTRIES INC.
s/a Paul M. Feeney
---------------------
LENDERS
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCATION)
---------------------
MELLON BANK, N.A.
---------------------
UNITED JERSEY BANK
---------------------
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
---------------------
THE BANK OF NEW YORK (NJ)
---------------------
EUROPEAN AMERICAN BANK
---------------------
THE DAIWA BANK, LIMITED
---------------------
13
<PAGE>
RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS B.V.
By its Portfolio Advisor,
CHANCELLOR SENIOR SECURED
MANAGEMENT, INC.
---------------------
CERES FINANCE LTD.
by its Financial Manager,
CHANCELLOR SENIOR SECURED
MANAGEMENT, INC.
---------------------
STRATA FUNDING LIMITED
by its Financial Manager,
CHANCELLOR SENIOR SECURED
MANAGEMENT, INC.
---------------------
KEYPORT LIFE INSURANCE COMPANY
---------------------
ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Administrative Agent
---------------------
DOCUMENTATION AGENT
MELLON BANK, N.A.
as Documentation Agent
---------------------
14
<PAGE>
Amendment No. 2
AMENDMENT NO. 2 dated as of March 22, 1996 between AEP INDUSTRIES INC.
(the "COMPANY"), the lenders party thereto (the "LENDERS"), THE CHASE MANHATTAN
BANK (NATIONAL ASSOCIATION), as administrative agent for the Lenders (in such
capacity, the "ADMINISTRATIVE AGENT") and MELLON BANK, N.A., as documentation
agent for the Lenders (in such capacity, the "DOCUMENTATION AGENT" and, together
with the Administrative Agent, the "AGENTS").
The Company, the Lenders and the Agents are parties to a Credit Agreement
dated as of August 3, 1995 (as heretofore modified and supplemented and in
effect on the date hereof, the "CREDIT AGREEMENT"), providing, subject to the
terms and conditions thereof, for credit facilities by the Lenders to the
Company in an aggregate principal or face amount of $140,000,000. The Company
has requested that the Lenders modify the definitions of "Applicable Commitment
Fee Rate" and "Applicable Margin" in Section 1.01 of the Credit Agreement and
that the Lenders waive the restrictions under the Credit Agreement in order to
permit the Company to make certain additional purchases of its own stock.
Accordingly, the parties hereto agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this Amendment
No. 2, terms defined in the Credit Agreement are used herein as defined therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the conditions
precedent in Section 4 below, but effective as of March 31, 1996, the Credit
Agreement shall be amended as follows:
A. References in the Credit Agreement (including references to the Credit
Agreement as amended hereby) to "this Agreement" (and indirect references such
as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be
references to the Credit Agreement as amended hereby.
B. The definitions of "Applicable Commitment Fee Rate" in Section 1.01 of
the Credit Agreement is hereby amended by replacing the ratio of "2.40:1" with
the ratio of "3.00:1" in both places where such ratio appears under the heading
"Range of Leverage Ratio."
C. The definition of "Applicable Margin" in Section 1.01 of the Credit
Agreement is hereby amended (i) by deleting the words "with respect to the
Revolving Credit Loans," in the sixth line thereof and (ii) by replacing the
pricing grid contained therein with the following:
Applicable Margin (% p.a.)
--------------------------
"Range of Leverage
Ratios Base Rate Loans Eurodollar Loans
- ------------------------------- --------------- ----------------
Less than 2.01:1 0% 0.75%
Equal to or greater than 2.01:1 0% 1.25%
but less than 2.50:1
Equal to or greater than 2.50:1 0.50% 1.75%
but less than 3.00:1
Equal to or greater than 3:00:1" 1.0% 2.25%
15
<PAGE>
Section 3. REPRESENTATIONS AND WARRANTIES. The Company hereby represents
and warrants to the Lenders and the Agents that (a) the representations and
warranties in Section 7 of the Credit Agreement are true and correct on the date
hereof as if made on and as of the date hereof and as if each reference in said
Section 7 to "this Agreement" included reference to this Amendment No. 2 and
(b) no Default has occurred and is continuing as of the date hereof.
Section 4. CONDITIONS PRECEDENT. As provided in Section 2, the
amendments to the Credit Agreement set forth in said Section 2 shall become
effective as of the date hereof, upon execution and delivery of one or more
counterparts of this Amendment No. 2 by each of the parties hereto.
Section 5. MISCELLANEOUS. Except as expressly provided herein, the
Credit Agreement shall remain unmodified and in full force and effect. This
Amendment No. 2 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Amendment No. 2 by signing any such counterpart.
This Amendment No. 2 shall be governed by, and construed in accordance with, the
law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
be duly executed and delivered as of the day and year first above written.
AEP INDUSTRIES INC.
s/a Paul M. Feeney
------------------------
Executive Vice President
LENDERS
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCATION)
------------------------
MELLON BANK, N.A.
------------------------
UNITED JERSEY BANK
------------------------
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
------------------------
THE BANK OF NEW YORK (NJ)
------------------------
EUROPEAN AMERICAN BANK
------------------------
THE SUMITOMO BANK, LIMITED
------------------------
16
<PAGE>
Exhibit 11
AEP INDUSTRIES INC.
COMPUTATION OF THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
For the Three and Six Months Ended April 30, 1996
<TABLE>
<CAPTION>
For the Three Months Ended April 30, 1996 For the Six Months Ended April 30, 1996
----------------------------------------- -----------------------------------------
Number of Weighted Average Number of Weighted Average
Shares of Days Days in Number of Shares Days Days in Number of Shares
Common Stock Outstanding Period Outstanding Outstanding Period Outstanding
------------ ----------- ------- ---------------- ----------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996
- -----------------------
November 1 - January 31 4,804,225 4,804,225 4,804,225
Shares Issued:
November 14 450 90 90 450 169 182 418
December 31 8,265 90 90 8,265 122 182 5,540
January 5 225 90 90 225 117 182 145
February 15 450 76 90 380 76 182 188
March 1 900 61 90 610 61 182 302
March 4 1,500 58 90 967 58 182 478
March 15 9,038 47 90 4,720 47 182 2,334
March 18 (168,000) 44 90 (82,133) 44 182 (40,615)
April 6 8,848 25 90 2,458 25 182 1,215
April 8 200 23 90 51 23 182 25
April 12 100 19 90 21 19 182 10
April 17 900 14 90 140 14 182 69
--------- --------- ---------
Total Weighted Average Shares 4,667,101 4,740,378 4,774,334
Total Dilutive Stock options - 165,988 156,305
--------- --------- ---------
Total Shares 4,667,101 4,906,366 4,930,639
--------- --------- ---------
--------- --------- ---------
1995
- -----------------------
November 1 - April 30 7,367,921 7,367,921 7,367,921
Shares Issued:
December 7, 1994 2,400 89 89 2,400 175 181 2,320
December 19, 1994 600 89 89 600 163 181 540
January 1, 1995 4,652 89 89 4,652 120 181 3,084
January 24, 1995 3,000 89 89 3,000 97 181 1,608
January 24, 1995 1,500 89 89 1,500 97 181 804
February 15, 1995 600 75 89 506 75 181 249
March 1, 1995 600 61 89 411 61 181 202
March 15, 1995 2,400 47 89 1,267 47 181 623
March 15, 1995 2,000 47 89 1,056 47 181 519
March 16, 1995 4,500 46 89 2,326 46 181 1,144
April 12, 1995 10,000 19 89 2,135 19 181 1,050
Arpil 12, 1995 200 19 89 43 19 181 21
April 13, 1995 3,000 18 89 607 18 181 298
April 17, 1995 3,000 14 89 472 14 181 232
--------- --------- ---------
7,406,373 7,388,895 7,380,616
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AEP
INDUSTRIES INC. FORM 10-Q FOR THE SIX MONTHS ENDED APRIL-30-1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> APR-30-1996
<CASH> 703
<SECURITIES> 1,771
<RECEIVABLES> 25,624
<ALLOWANCES> 1,529
<INVENTORY> 20,995
<CURRENT-ASSETS> 49,279
<PP&E> 150,157
<DEPRECIATION> 57,912
<TOTAL-ASSETS> 144,297
<CURRENT-LIABILITIES> 24,303
<BONDS> 0
0
0
<COMMON> 75
<OTHER-SE> 18,767
<TOTAL-LIABILITY-AND-EQUITY> 144,297
<SALES> 110,591
<TOTAL-REVENUES> 110,730
<CGS> 79,259
<TOTAL-COSTS> 79,259
<OTHER-EXPENSES> 18,507
<LOSS-PROVISION> 110
<INTEREST-EXPENSE> 3,637
<INCOME-PRETAX> 9,217
<INCOME-TAX> 3,548
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,669
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.15
</TABLE>
