<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1997
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)
<TABLE>
<S> <C>
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)
</TABLE>
(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.
<TABLE>
<CAPTION>
SHARES OUTSTANDING
CLASS OF COMMON STOCK AT MAY 30, 1997
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
$.01 Par Value 7,209,589
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AEP INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................ $ 4,411,000 $ 12,067,000
Marketable securities................................ -- 2,070,000
Accounts receivable, less allowance of $4,958,000 in
1997 and $4,217,000 in 1996 for doubtful
accounts........................................... 103,551,000 104,302,000
Inventories, net..................................... 86,288,000 94,336,000
Net assets held for sale............................. 47,714,000 49,570,000
Other current assets................................. 12,896,000 14,694,000
Deferred federal income tax benefit.................. 7,566,000 1,633,000
------------ ------------
Total current assets............................... 262,426,000 278,672,000
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost, less
accumulated depreciation and amortization of
$130,288,000 in 1997 and $120,725,000 in 1996........ 291,378,000 290,316,000
------------ ------------
INTANGIBLE ASSETS...................................... 27,730,000 32,580,000
INVESTMENT IN JOINT VENTURE............................ 15,176,000 15,028,000
OTHER ASSETS........................................... 11,021,000 9,313,000
------------ ------------
TOTAL ASSETS....................................... $607,731,000 $625,909,000
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt.................... $ 78,311,000 $ 51,019,000
Accounts payable..................................... 62,492,000 75,252,000
Accrued expenses..................................... 52,954,000 56,451,000
------------ ------------
Total current liabilities.......................... 193,757,000 182,722,000
LONG-TERM DEBT......................................... 295,917,000 325,438,000
OTHER LONG TERM LIABILITIES............................ 4,077,000 7,041,000
DEFERRED FEDERAL INCOME TAXES.......................... 15,785,000 15,575,000
------------ ------------
Total liabilities.................................. 509,536,000 530,776,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock--$1.00 par value, 1,000,000 shares
authorized; none outstanding....................... -- --
Common stock--$.01 par value, 30,000,000 and
20,000,000 shares authorized in 1997 and 1996,
respectively; 9,960,926 and 9,931,303 shares issued
and outstanding in 1997 and 1996, respectively..... 100,000 99,000
Additional paid-in capital........................... 88,662,000 88,052,000
Treasury stock--common stock; at cost, 2,801,000
shares in 1997 and 1996............................ (62,142,000) (62,142,000)
Retained earnings.................................... 76,155,000 70,108,000
Cumulative translation adjustment.................... (4,580,000) (1,283,000)
Net unealized investment gain, net of taxes.......... -- 299,000
------------ ------------
Total shareholders' equity......................... 98,195,000 95,133,000
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......... $607,731,000 $625,909,000
------------ ------------
------------ ------------
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets
2
<PAGE>
AEP INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
UNAUDITED
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
APRIL 30, APRIL 30,
----------------------------- ------------------------------
1997 1996 1997 1996
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
NET SALES........................................ $ 190,302,000 $ 55,821,000 $ 371,988,000 $ 110,591,000
COST OF SALES.................................... 151,237,000 40,724,000 293,448,000 79,259,000
-------------- ------------- -------------- --------------
Gross profit................................. 39,065,000 15,097,000 78,540,000 31,332,000
-------------- ------------- -------------- --------------
OPERATING EXPENSES
Delivery and Warehousing....................... 12,411,000 4,546,000 22,615,000 8,901,000
Selling........................................ 10,869,000 3,411,000 21,416,000 6,783,000
General and Administrative..................... 7,190,000 1,314,000 14,944,000 2,733,000
-------------- ------------- -------------- --------------
Total operating expenses..................... 30,470,000 9,271,000 58,975,000 18,417,000
-------------- ------------- -------------- --------------
8,595,000 5,826,000 19,565,000 12,915,000
-------------- ------------- -------------- --------------
OTHER INCOME (EXPENSE):
Interest expense, net.......................... (6,452,000) (1,848,000) (13,030,000) (3,837,000)
Other, net..................................... 1,098,000 27,000 2,160,000 139,000
-------------- ------------- -------------- --------------
(5,354,000) (1,821,000) (10,870,000) (3,698,000)
-------------- ------------- -------------- --------------
Income before provision for income taxes..... 3,241,000 4,005,000 8,695,000 9,217,000
PROVISION FOR INCOME TAXES....................... 1,250,000 1,541,000 2,648,000 3,548,000
-------------- ------------- -------------- --------------
Net income................................... 1,991,000 2,464,000 6,047,000 5,669,000
Retained earnings, beginning of period........... 74,164,000 70,760,000 70,108,000 67,555,000
Retained earnings, end of period................. $ 76,155,000 $ 73,224,000 $ 76,155,000 $ 73,224,000
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Net income per share of common stock............. $ 0.27 $ 0.50 $ 0.81 $ 1.15
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
3
<PAGE>
AEP INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED APRIL 30,
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................................... $ 6,047,000 $ 5,669,000
Adjustments to reconcile net income to net cash provided by operating
activities--
Depreciation and amortization............................................... 15,530,000 5,356,000
Net (gain)/loss on sale of securities....................................... (416,000) --
Net (gain)/loss on sale of equipment........................................ (127,000) --
Provision for losses on accounts receivable................................. 597,000 110,000
Minority interest income.................................................... 148,000 --
Decrease (Increase) in accounts receivable.................................. 154,000 2,128,000
Decrease (Increase) in inventories.......................................... 8,048,000 (975,000)
Decrease (Increase) in other current assets................................. 1,798,000 7,000
Decrease (Increase) in marketable securities................................ -- (53,000)
Decrease in net assets held for sale........................................ 1,856,000 --
Decrease (Increase) in other assets......................................... (1,708,000) 52,000
Decrease in intangible assets............................................... 4,850,000 --
Increase (decrease) in accounts payable..................................... (12,760,000) (12,750,000)
Increase (decrease) in accrued expenses..................................... (3,497,000) 126,000
(Decrease) in other long term liabilities................................... (2,964,000) --
Increase in deferred federal income taxes................................... (5,723,000) 340,000
-------------- --------------
Net cash provided by operating activities................................. 11,833,000 10,000
-------------- --------------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Capital expenditures............................................................ (22,276,000) (7,372,000)
Proceeds from sales of securities............................................... 2,486,000 --
Sales and retirements of property, plant and equipment, net..................... 1,763,000 16,000
-------------- --------------
Net cash provided by (used in) investing activities....................... 18,027,000 (7,356,000)
-------------- --------------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving credit facility..................... (10,000,000) 13,455,000
Net repayments on long-term debt................................................ 7,771,000 (2,194,000)
Proceeds from issuance of common stock.......................................... 611,000 202,000
Purchase of treasury stock...................................................... -- (3,839,000)
-------------- --------------
Net cash provided by (used in) financing activities....................... (1,618,000) 7,624,000
-------------- --------------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH.......................................... 156,000 --
-------------- --------------
NET INCREASE (DECREASE) IN CASH:.................................................. (7,656,000) 278,000
CASH AT BEGINNING OF PERIOD:...................................................... 12,067,000 329,000
-------------- --------------
CASH AT END OF PERIOD:............................................................ $ 4,411,000 $ 607,000
-------------- --------------
-------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for--interest....................................... $ 11,184,000 $ 3,605,000
-------------- --------------
Cash paid during the period for--income taxes................................... $ 427,000 $ 3,222,000
-------------- --------------
</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 on Form 10-K for the fiscal year ended October 31, 1996.
Certain prior period amounts have been reclassified in order to conform with
the current quarter's presentation.
(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 (where dilutive) common stock
equivalents (stock options) outstanding during each period. The number of shares
used in such computation for the three months ended April 30, 1997, and 1996
were 7,476,631 and 4,906,366 respectively. The number of shares used in such
computation for the six months ended April 30, 1997, and 1996 were 7,470,249 and
4,930,639 respectively. Statement of Financial Accounting Standards No. 128,
"Earnings per Share" which becomes effective for the fiscal year beginning
October 1, 1997, establishes new standards for computing and presenting earnings
per share (EPS). The new standard requires the presentation of basic EPS and
diluted EPS. Basic EPS is calculated by dividing income available to common
shareholders by the weighted average number of shares of common stock
outstanding during the period. Diluted EPS is calculated by dividing income
available to common shareholders by the weighted average number of common shares
outstanding adjusted to reflect potentially dilutive securities. Previously
reported EPS amounts must be restated under the new standard when it becomes
effective.
(3) INVENTORIES
Inventories, stated at the lower of cost (last-in, first-out (LIFO) method
for domestic operations and first-in, first-out (FIFO) method for foreign
operations and for supplies) or market, include material, labor and
manufacturing overhead costs and are comprised of the following:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Raw Materials.................................................. $ 25,309,000 $ 27,452,000
Finished Goods................................................. 58,596,000 66,005,000
Supplies....................................................... 3,910,000 2,689,000
------------- -------------
87,815,000 96,146,000
Less: Inventory Reserve........................................ 1,527,000 1,810,000
------------- -------------
Total Inventories, net......................................... $ 86,288,000 $ 94,336,000
------------- -------------
------------- -------------
</TABLE>
5
<PAGE>
AEP INDUSTRIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(3) INVENTORIES (CONTINUED)
The LIFO method was used for determining the cost of approximately 53% and
50% of total inventories at April 30, 1997 and October 31, 1996, respectively.
(4) PRO-FORMA RESULTS OF OPERATIONS
The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company and the Global Packaging
Business of Borden, Inc. ("BGP"), acquired on October 11, 1996, as if the
acquisition had occurred on November 1, 1995, with pro forma adjustments to give
effect to amortization of goodwill, interest expense on acquisition debt and
certain other adjustments, together with related income tax effects.
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS MONTHS
ENDED ENDED
APRIL 30, 1996 APRIL 30, 1996
------------------- -----------------
<S> <C> <C>
Net Sales............................................ $ 178,241,000 $ 376,031,000
------------------- -----------------
Operating Income..................................... 10,425,000 24,870,000
------------------- -----------------
Net Income........................................... 1,872,000 7,254,000
------------------- -----------------
Earnings per Share................................... $ 0.26 $ 0.99
------------------- -----------------
</TABLE>
(5) DISCONTINUED OPERATIONS
At the time of the Company's acquisition of BGP, management decided not to
retain the rigids' businesses of BGP. The rigids' businesses manufacture, market
and distribute wet food containers, dry food trays and disposable food service
products. These businesses are not core and the Company has offered these
businesses for sale with the intention that they would be sold within one year
from the date of the acquisition and use the proceeds from the sale to pay down
its debt. Accordingly the Company has classified the net assets of such
businesses as Net assets held for sale in the accompanying Consolidated Balance
Sheets.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On October 11, 1996, the Company acquired the Borden Global Packaging
business (the "Acquisition"). This Acquisition was accounted for using the
purchase method of accounting. Prior year amounts do not include the results of
the Acquisition. As a result quarter to quarter and year to date comparisons
between fiscal 1997 and fiscal 1996 are not meaningful due to the significant
increase in the Company's size as a result of the Acquisition. A summary of
unaudited pro forma consolidated results of the Company as if the Acquisition
had occurred on November 1,1995, has been presented in Note 4 of the Notes to
the Consolidated Financial Statements for both the quarter ended and the six
months ended April 30, 1997.
RESULTS OF OPERATIONS
NET SALES AND GROSS PROFIT
Net sales for the second quarter ended April 30, 1997, were $190,302,000, an
increase of $134,481,000 from the same period in the prior year. This increase
in net sales is the result of the aforementioned Acquisition which resulted in
increased net sales in North America of $39,366,000, in Europe of $74,963,000
and in Asia-Pacific of $20,152,000. The Company on a worldwide basis maintained
its average unit selling prices in all businesses from the first quarter of 1997
except for the North America pallet wrap business, which had an approximate 5%
decrease which was partially offset by an increase of 15% in sales volume from
the first quarter of 1997. The European and Asia-Pacific operations had a slight
increase in sales volume when compared to the prior quarter.
Gross profit for the second quarter of Fiscal 1997 amounted to $39,065,000
compared to $15,097,000 for the second quarter of Fiscal 1996. This increase in
gross profit resulted from the Acquisition and consisted of increased gross
profit in North America of $5,098,000, Europe of $15,107,000 and Asia-Pacific of
$3,763,000. Even though there was an overall increase in gross profit for the
period, the North America region absorbed additional manufacturing costs related
to the underutilization of plant facilities, which can be directly related to
the overall industry pressures in the pallet wrap business taken as a whole. The
European operations had a slight decrease in gross profit for the quarter
because of increased raw material costs which will be passed through to
customers during the third quarter of 1997.
OPERATING EXPENSES
Operating expenses for the three months ended April 30, 1997 were
$30,470,000 as compared to $9,271,000 over the same period in the prior fiscal
year. This increase of $21,199,000 in operating expenses can be attributed to
the businesses acquired from Borden and the operating expenses associated with
them. The current period operating expenses increased by approximately
$2,000,000 when compared to the first quarter of 1997. This increase can be
directly attributed to the 10% increased sales volume in its North America
operations during the second quarter of 1997.
INTEREST EXPENSE
Interest expense for the three months ended April 30, 1997, amounted to
$6,452,000, an increase of $4,604,000 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 in October 1996 and was used to
finance a portion of the acquisition of the Borden business.
OTHER INCOME (EXPENSE)
Other income for the three months ended April 30, 1997, amounted to
$1,098,000. This amount includes $491,000 in interest income, $236,000 in
foreign currency exchange gains realized during the period and income from
investment in a joint venture of $46,000. Also included in other income were
gains on sales of machinery and equipment and other miscellaneous income earned
for the period.
7
<PAGE>
SIX MONTHS ENDED APRIL 30, 1997 AS COMPARED TO SIX MONTHS ENDED APRIL 30, 1996
NET SALES AND GROSS PROFIT
Net sales for the six months ended April 30, 1997, were $371,988,000, an
increase of $261,397,000 from the same period in the prior year. This increase
in net sales is the result of the aforementioned Acquisition which resulted in
increased net sales in North America of $113,284,000, in Europe of $108,466,000
and in Asia-Pacific of $39,647,000. The Company on a worldwide basis maintained
its average unit selling prices in all businesses from the first quarter of 1997
except for the North America pallet wrap business. Sales volume on a worldwide
basis decreased slightly when compared to pro forma consolidated results for the
same period in the prior year.
Gross profit for the first six months of Fiscal 1997 amounted to $78,540,000
compared to $31,332,000 for the second quarter of Fiscal 1996. This increase in
gross profit resulted from the Acquisition and consisted of increased gross
profit in North America of $16,462,000, Europe of $23,387,000 and Asia-Pacific
of $7,359,000. Even though there was an overall increase in gross profit for the
period, the North America region absorbed additional manufacturing costs related
to the underutilization of plant facilities, which can be directly related to
the overall industry pressures in the pallet wrap business taken as a whole.
OPERATING EXPENSES
Operating expenses for the six months ended April 30, 1997 were $58,975,000
as compared to $18,417,000 over the same period in the prior fiscal year. This
increase of $40,558,000 in operating expenses can be attributed to the
businesses acquired from Borden and the operating expenses associated with them.
INTEREST EXPENSE
Interest expense for the three months ended April 30, 1997, amounted to
$13,030,000, an increase of $9,193,000 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 in October 1996 and was used to
finance a portion of the acquisition of the Borden business.
OTHER INCOME (EXPENSE)
Other income for the six months ended April 30, 1997, amounted to
$2,160,000. This amount includes $647,000 in interest income, $384,000 in
foreign currency exchange gains realized during the period, $416,000 in gain
from sale of securities and income from investment in a joint venture of
$148,000. Also included in other income were gains on sales of machinery and
equipment and other miscellaneous income earned for the period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital amounted to $68,669,000 at April 30, 1997,
compared to $95,950,000 at October 31, 1996 after reclassification of net assets
held for sale. This decrease of $27,281,000 in working capital is primarily
attributable to net repayment of long term debt and the strengthening of the US
dollar during the first six months of the period, thereby reducing the
translation of working capital balances of foreign subsidiaries. The remaining
increases and decreases in components of the Company's financial position
reflect normal operating activity.
On October 11, 1996, the Company entered into a Credit Agreement ( the
"Credit Agreement") with Morgan Guaranty Trust Company, as Agent, and banks
party thereto. The Credit Agreement provided the Company with two credit
facilities, consisting of a term credit facility in the amount of $350,000,000
and a revolving credit facility for an amount up to $100,000,000.
8
<PAGE>
As of April 30, 1997, there was $330,0000,000 outstanding under the term
credit facility. The Company had no outstanding borrowings under its revolving
credit facility.
The Company's cash and cash equivalents decreased by $7,656,000 for the six
months ended April 30, 1997. Cash flow from operating activities of $11,833,000
was offset by funds used in investing activities, primarily the net investment
in capital expenditures of $22,276,000. The Company's cash flow was further
decreased during the period by net repayments of long term debt of $2,229,000.
The remaining increases and decreases in the components of the Company's
financial position reflect normal operating activity.
The Company's future capital requirements relate principally to purchasing
new equipment, upgrading existing equipment and facilities, and promoting new
and existing products. The Company believes that internally generated cash flow
combined with the availability of funds under the Company's credit agreement are
sufficient to meet its normal and additional capital and debt requirements for
the foreseeable future.
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains "Forward Looking Statements" about the Company's prospects
for the future such as its ability to generate sufficient working capital, its
ability to continue to maintain sales and profits and the ability to generate
sufficient funds to meet its cash requirements. Such statements are subject to
certain risks and uncertainties which can cause actual results to differ
materially from those projected, including availability of raw materials,
ability to pass raw material price increases to customers in a timely fashion,
the potential of technological changes which would adversely affect the needs
for the Company's products and price fluctuations which could adversely impact
the Company's inventory. Parties are cautioned not to rely on any such forward
looking beliefs or judgments in this section and in other parts of this
quarterly report.
9
<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.
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ J. BRENDAN BARBA Chairman of the Board,
- ------------------------------ President and Chief June 13, 1997
J. Brendan Barba Executive Officer
/s/ PAUL M. FEENEY Executive Vice President
- ------------------------------ Principal Financial and June 13, 1997
Paul M. Feeney Accounting Officer
10
<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
8, 1997, 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 nominee's for Class B directors as listed in the Proxy
Statement were elected with the following vote:
<TABLE>
<CAPTION>
SHARES VOTED SHARES SHARES NOT
"FOR" WITHHELD VOTED
------------ --------- -----------
<S> <C> <C> <C>
William H. Carter....................................... 6,711,976 254,813
Paul M. Feeney.......................................... 6,708,582 258,207
Clifton S. Robbins...................................... 6,712,426 254,363
</TABLE>
2. An amendment to the Company's Certificate of Incorporation to add an Article
containing provisions regarding corporate governance was approved by the
following vote:
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES SHARES NOT
"FOR" "AGAINST" "ABSTAINING" VOTED
- ------------ ------------ ------------ -----------
<S> <C> <C> <C>
5,494,322 664,793 6,238 801,436
</TABLE>
3. An amendment to the Company's Certificate of Incorporation to increase the
number of the Company's authorized shares of Common Stock from 20,000,000 to
30,000,000 was approved by the following vote:
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES SHARES NOT
"FOR" "AGAINST" "ABSTAINING" VOTED
- ------------ ------------ ------------ -----------
<S> <C> <C> <C>
6,928,793 31,252 6,744
</TABLE>
4. The appointment of Arthur Andersen LLP as independent auditors was approved
by the following vote:
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES SHARES NOT
"FOR" "AGAINST" "ABSTAINING" VOTED
- ------------ ------------ ------------ -----------
<S> <C> <C> <C>
6,964,021 0 2,768
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11--Computation of weighted average number of shares
outstanding. Page 13-14.
(b) No reports on Form 8-K were filed during the quarter ended April 30,
1997.
27. Financial Data Schedule (for electronic submission only).
11
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------------- ------------------------------------------------------------------------------------------------------
<C> <S>
3(a) Restated Certificate of Incorporation of the Company as filed April 11, 1997.
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) 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(c) 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(d) 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(e) Lease dates as of March 20, 1990, between the Company and Phillips and Huyler Assoc., L.P.
(incorporated by reference to Exhibit 10(aa) to the Annual Report on Form 10-K for the year ended
October 31, 1990)
10(f) Credit Agreement dated as of October 11, 1996, among the Company, the Morgan Guaranty Trust Company,
as Agent, and the banks party thereto (incorporated by reference to Exhibit 3 to Registrant's report
on Form 8-K, dated October 11, 1996)
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)(1) Purchase Agreement, dated as of June 20, 1996, without exhibits between the Company and Borden, Inc.
(incorporated by reference to Exhibit C-1 to Registrant's report on Form 8-K, dated June 20, 1996)
10(i)(2) Amendment No. 1, dated as of October 11, 1996, to the Purchase Agreement, dated as of June 20, 1996,
between the Company and Borden, Inc. (incorporated by reference to Exhibit 1(b) to Registrant's
report on Form 8-K dated October 11, 1996)
10(i)(3) Combined Financial Statements of Borden Global Packaging Operations as of December 31, 1995 and 1994
and for each of the three years in the period ended December 31, 1995 (incorporated by reference to
Annex f to Registrant's Proxy Statement, dated September 11,1996)
10(j)(1) Governance Agreement, dated as of June 20, 1996, without exhibits, between the Company and Borden,
Inc. (incorporated by reference to Exhibit C-2 to Registrant's report on Form 8-K, dated June 20,
1996)
10(j)(2) Amendment No. 1, dated as of October 11, 1996, to the Governance Agreement dated as of June 20, 1996,
between the Company and Borden, Inc. (incorporated by reference to Exhibit 2(b) to Registrant's
report on Form 8-K dated October 11, 1996)
10(k) Employment Agreement dated as of October 11, 1996, between the Company and J. Brendan Barba
(incorporated by reference to Exhibit 10(k) to Registrant's Annual Report on Form 10-K for the year
ended October 31, 1996)
10(l) Employment Agreement dated as of October 11, 1996, between the Company and Paul M. Feeney
(incorporated by reference to Exhibit 10(k) to Registrant's Annual Report on Form 10-K for the year
ended October 31, 1996)
</TABLE>
<PAGE>
EXHIBIT 11
AEP INDUSTRIES INC.
COMPUTATION OF THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 1997
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FOR THE THREE MONTHS ENDED APRIL 30, APRIL 30,
-------------------------------------------------- ---------------
NUMBER OF WEIGHTED AVERAGE NUMBER OF
SHARES OF DAYS DAYS IN NUMBER OF SHARES DAYS
1997 COMMON STOCK OUTSTANDING PERIOD OUTSTANDING OUTSTANDING
- ------------------------------------- -------------- ----------------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
November 1 - October 31.............. 7,130,303 7,130,303
Shares Issued:
November 5, 1996..................... 1,600 89 89 1,600 177
November 7, 1996..................... 200 89 89 200 175
November 8, 1996..................... 200 89 89 200 174
November 11, 1996.................... 500 89 89 500 171
November 12, 1996.................... 600 89 89 600 170
November 14, 1996.................... 400 89 89 400 168
November 18, q1996................... 400 89 89 400 164
November 20, 1996.................... 60 89 89 60 162
November 26, 1996.................... 400 89 89 400 156
December 9, 1996..................... 460 89 89 460 143
December 13, 1996.................... 350 89 89 350 139
December 26, 1996.................... 1,000 89 89 1,000 126
December 27, 1996.................... 200 89 89 200 125
January 1, 1997...................... 4,553 89 89 4,553 120
January 2, 1997...................... 500 89 89 500 119
January 3, 1997...................... 600 89 89 600 118
January 6, 1997...................... 1,600 89 89 1,600 115
January 8, 1997...................... 800 89 89 800 113
January 13, 1997..................... 1,300 89 89 1,300 108
January 14, 1997..................... 3,200 89 89 3,200 107
January 15, 1997..................... 600 89 89 600 106
January 20, 1997..................... 200 89 89 200 101
January 21, 1997..................... 400 89 89 400 100
January 27, 1997..................... 300 89 89 300 94
February 7, 1997..................... 400 83 89 373 83
February 13, 1997.................... 4200 77 89 3,634 77
February 18, 1997.................... 200 72 89 162 72
February 20, 1997.................... 400 70 89 315 70
February 27, 1997.................... 400 63 89 283 63
March 5, 1997........................ 1000 57 89 640 57
March 27, 1997....................... 300 35 89 118 35
April 17, 1997....................... 700 14 89 110 14
April 22, 1997....................... 200 9 89 20 9
April 23, 1997....................... 500 8 89 45 8
April 25, 1997....................... 200 6 89 13 6
April 29, 1997....................... 700 2 89 16 2
-------------- ----------------
Total Weighted Average Shares........ 7,159,926 7,156,455
Total Dilutive Stock options....... -- 320,176
-------------- ----------------
Total Shares..................... 7,159,926 7,476,631
-------------- ----------------
-------------- ----------------
<CAPTION>
WEIGHTED AVERAGE
DAYS IN NUMBER OF SHARES
1997 PERIOD OUTSTANDING
- ------------------------------------- ----------- ----------------
<S> <C> <C>
November 1 - October 31.............. 7,130,303
Shares Issued:
November 5, 1996..................... 181 1,565
November 7, 1996..................... 181 193
November 8, 1996..................... 181 192
November 11, 1996.................... 181 472
November 12, 1996.................... 181 564
November 14, 1996.................... 181 371
November 18, q1996................... 181 362
November 20, 1996.................... 181 54
November 26, 1996.................... 181 345
December 9, 1996..................... 181 363
December 13, 1996.................... 181 269
December 26, 1996.................... 181 696
December 27, 1996.................... 181 138
January 1, 1997...................... 181 3,019
January 2, 1997...................... 181 329
January 3, 1997...................... 181 391
January 6, 1997...................... 181 1,017
January 8, 1997...................... 181 499
January 13, 1997..................... 181 776
January 14, 1997..................... 181 1,892
January 15, 1997..................... 181 351
January 20, 1997..................... 181 112
January 21, 1997..................... 181 221
January 27, 1997..................... 181 156
February 7, 1997..................... 181 183
February 13, 1997.................... 181 1,787
February 18, 1997.................... 181 80
February 20, 1997.................... 181 155
February 27, 1997.................... 181 139
March 5, 1997........................ 181 315
March 27, 1997....................... 181 58
April 17, 1997....................... 181 54
April 22, 1997....................... 181 10
April 23, 1997....................... 181 22
April 25, 1997....................... 181 7
April 29, 1997....................... 181 8
----------------
Total Weighted Average Shares........ 7,147,468
Total Dilutive Stock options....... 322,781
----------------
Total Shares..................... 7,470,249
----------------
----------------
</TABLE>
<PAGE>
EXHIBIT 11
(CONT'D)
AEP INDUSTRIES INC.
COMPUTATION OF THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 1997
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FOR THE THREE MONTHS ENDED APRIL 30, APRIL 30,
-------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C>
NUMBER OF WEIGHTED AVERAGE NUMBER OF
SHARES OF DAYS DAYS IN NUMBER OF SHARES DAYS
1996 COMMON STOCK OUTSTANDING PERIOD OUTSTANDING OUTSTANDING
- ------------------------------------- -------------- ----------------- ------------- ---------------- ---------------
November 1 - January 31.............. 4,804,225 4,804,225
Shares Issued:
November 14, 1996.................... 450 90 90 450 169
December 31, 1996.................... 8,265 90 90 8,265 122
January 5, 1997...................... 225 90 90 225 117
February 15, 1997.................... 450 76 90 380 76
March 1, 1997........................ 900 61 90 610 61
March 4, 1997........................ 1,500 58 90 967 58
March 15, 1997....................... 9,038 47 90 4,720 47
March 18, 1997....................... (168,000) 44 90 (82,133) 44
April 6, 1997........................ 8,848 25 90 2,458 25
April 8, 1997........................ 200 23 90 51 23
April 12, 1997....................... 100 19 90 21 19
April 17, 1997....................... 900 14 90 140 14
-------------- ----------------
Total Weighted Average Shares........ 4,667,101 4,740,378
Total Dilutive Stock options....... -- 165,988
-------------- ----------------
Total Shares..................... 4,667,101 4,906,366
-------------- ----------------
-------------- ----------------
<CAPTION>
<S> <C> <C>
WEIGHTED AVERAGE
DAYS IN NUMBER OF SHARES
1996 PERIOD OUTSTANDING
- ------------------------------------- ----------- ----------------
November 1 - January 31.............. 4,804,225
Shares Issued:
November 14, 1996.................... 182 418
December 31, 1996.................... 182 5,540
January 5, 1997...................... 182 145
February 15, 1997.................... 182 188
March 1, 1997........................ 182 302
March 4, 1997........................ 182 478
March 15, 1997....................... 182 2,334
March 18, 1997....................... 182 (40,615)
April 6, 1997........................ 182 1,215
April 8, 1997........................ 182 25
April 12, 1997....................... 182 10
April 17, 1997....................... 182 69
----------------
Total Weighted Average Shares........ 4,774,334
Total Dilutive Stock options....... 156,305
----------------
Total Shares..................... 4,930,639
----------------
----------------
</TABLE>
<PAGE>
EXHIBIT 3(A)
RESTATED CERTIFICATE OF INCORPORATION
OF
AEP INDUSTRIES INC.
It is hereby certified that:
1. The present name of the corporation (hereinafter called the
"Corporation") is AEP Industries Inc., which is the name under which the
Corporation was originally incorporated; and the date of filing of the original
Certificate of Incorporation of the Corporation with the Secretary of State of
the State of Delaware is November 13, 1985.
2. The provisions of the Certificate of Incorporation of the Corporation as
heretofore amended and/or supplemented, are hereby restated and integrated into
the single instrument which is hereinafter set forth and which is entitled
Restated Certificate of Incorporation of AEP Industries Inc., without any
further amendment and without any discrepancy between the provisions of the
Certificate of Incorporation as heretofore amended and supplemented and the
provisions of the said single instrument hereinafter set forth.
3. The Board of Directors of the Corporation has duly adopted this Restated
Certificate of Incorporation pursuant to the provisions of Section 245 of the
General Corporation Law of the State of Delaware in the form set forth as
follows:
1
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
AEP INDUSTRIES INC.
THE UNDERSIGNED, for the purpose of forming a corporation pursuant to the
provisions of the
General Corporation Law of the State of Delaware, does hereby certify as
follows:
FIRST: The name of the Corporation is AEP Industries Inc. (the
"Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, Wilmington, New Castle County, Delaware
19805-1297, and the name of the Corporation's registered agent at such address
is Corporation Service Company.
THIRD: The purpose for which the Corporation is organized is to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of Capital Stock which the Corporation
shall have authority to issue is 1,000,000 shares of Preferred Stock, $1.00 par
value ("Preferred Stock") and 30,000,000 shares of Common Stock, $.01 par value
("Common Stock"). The powers, designations, preferences and relative,
participating, optional or other special rights, qualifications, limitation or
restrictions of the Preferred stock shall be as follows:
1. (a) The Preferred Stock may be issued from time to time as shares of
one or more series of Preferred Stock, and in the resolution or resolutions
providing for the issue of shares of each particular series, before issuance,
the Board of Directors of the Corporation is expressly authorized to fix:
(i) the distinctive designation of such series and the number of
shares which shall constitute such series, which number may be increased
(except where otherwise provided by the Board of Directors in creating
such series) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(ii) the rate of dividends payable on such series, whether or not
dividends shall be cumulative, the date or dates from which dividends
shall accrue and, if cumulative, shall be cumulative and the relationship
which such dividends shall bear to dividends payable on any other series;
(iii) whether or not the shares of such series shall be subject to
redemption by the Corporation and, if so, the times, prices and other
terms and conditions of such redemption;
(iv) whether or not the shares of such series shall be subject to
the operation of a sinking fund or a fund of similar nature and, if so,
the terms thereof;
(v) the rights of the shares of each series in case of liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, or upon any distribution of its assets;
(vi) whether or not the shares of such series shall be convertible
into or exchangeable for shares of any other series or class of stock of
the Corporation and, if so, the terms of conversion or exchange;
(vii) whether or not the shares of such series shall have voting
rights in addition to the voting rights provided by law and in paragraph
5 below and, if so, the nature and extent thereof; and
(viii) the consideration to be received by the Corporation for the
shares of such series.
(b) The shares of the Preferred Stock of any one series shall be
identical with each other in all respects except as to the dates from which
dividends thereon shall accrue or be cumulative.
2
<PAGE>
(c) In case the stated dividends and the amounts, if any, payable on
liquidation, dissolution or winding up of the Corporation are not paid in
full, the shares of each series of the Preferred Stock, after the payment in
full of such dividends and amounts to all series of the Preferred Stock
ranking senior to such series and before any payment to any series ranking
junior thereto, shall share ratably in the payment of dividends, including
accumulations, if any, in accordance with the sums which would be payable on
said shares if all dividends were declared and paid in full, and in any
distribution of assets other than by way of dividends, in accordance with
the sums which would be payable on such distribution if all sums payable
were discharged in full.
(d) Upon the issuance of any series of Preferred Stock, a certificate
setting forth the resolution or resolutions (including the designation,
description and terms of such series) adopted by the Board of Directors with
respect to such series shall be made and filed in accordance with the then
applicable requirements, if any, of the laws of the State of Delaware, or,
if no certificate is then so required, such certificates shall be signed and
acknowledged on behalf of the Corporation by its President or a Vice
President, and its corporate seal shall be affixed thereto and attested by
its Secretary or an Assistant Secretary, and such certificate shall be filed
and kept on file at the principal office of the Corporation in the State of
Delaware or at such other place or places as the Board of Directors shall
designate.
2. The holders of each series of the Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, but only out of funds
of the Corporation legally available for the payment of dividends, dividends in
cash at the annual rate for such series provided by the Board of Directors in
the certificate made pursuant to subparagraph (d) of paragraph 1 with respect to
such series, before any dividends shall be declared and paid upon or set apart
for the holders of any series of Preferred Stock ranking junior to such series
as to dividends or of any junior stock, payable in respect of each calendar
quarter on a date, which shall be provided by the Board of Directors in such
certificate with respect to such series, within fifty (50) days following the
end of the such quarter. Such dividends on the Preferred Stock shall be payable
to holders of such series of record on the date, not exceeding fifty (50) days
preceding the dividend payment date, fixed for such purpose by the Board of
Directors with respect to such series in advance of the payment of each
particular dividend.
3. If so provided by the Board of Directors in the certificate made
pursuant to subparagraph (d) of paragraph 1, the Corporation, at the option of
the Board of Directors (or in accordance with the requirements of any sinking
fund for any one or more series of Preferred Stock established by the Board of
Directors), may redeem the whole or any part of the Preferred Stock at any time
outstanding, or the whole or any part of any series thereof, at such time or
times and from time to time and at such redemption price or prices as may be
provided by the Board of Directors in such certificate together in each case
with all dividends accrued and accumulated but unpaid (other than non-cumulative
dividends from past dividend periods), but computed without interest, and
otherwise upon the terms and conditions fixed by the Board of Directors for any
such redemptions.
4. In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of each series of the
Preferred Stock then outstanding shall be entitled to receive, after the payment
in full of all amounts to which the holders of all series of the Preferred Stock
ranking senior thereto are entitled, out of the assets of the Corporation,
before any distribution or payment shall be made to the holders of any series of
the Preferred Stock ranking junior to such series upon liquidation, dissolution
or winding up of the Corporation or of any junior stock, the amount, if any, for
each share provided by the Board of Directors in the certificate made pursuant
to subparagraph (d) of paragraph 1, plus, in respect or each such share, all
dividends accrued and accumulated but unpaid (other than non-cumulative
dividends from past dividend periods), but computed without interest. If payment
shall have been made in full to the holders of each series of the Preferred
Stock, the remaining shares of the Corporation shall be distributed among the
holders of the junior stock, according to their respective rights and
preferences and pro rata in accordance with their respective holdings.
3
<PAGE>
5. On all matters with respect to which holders of the Preferred Stock or
of certain series thereof are entitled to vote as a single class, each holder of
Preferred Stock afforded such class voting right shall be entitled to one vote
for each share held.
6. For purpose of this Article FOURTH, the terms "junior stock" shall mean
the Common Stock and any other class of stock of the Corporation hereafter
authorized which shall rank junior to all series of the Preferred Stock as to
all dividends or preference on dissolution, liquidation or winding up of the
Corporation.
FIFTH: The number of directors of the Corporation shall be fixed as
provided in the by-laws of the Corporation (the "By-laws"). The directors shall
be divided into three classes, each class to contain as near as possible to
one-third (1/3) of the total number of directors of the Board of Directors so
fixed in the By-laws, and, except as otherwise provided by statute, in the case
of any increase in the number of directors fixed in the By-laws, such increase
shall be apportioned among the classes of directors so as to maintain each class
as near as possible to one-third of the total number of directors as so
increased. The initial term of office for members of the first class shall
expire at the annual meeting of stockholders next following; the initial term
for members of the second class shall expire at the annual meeting of
stockholders one year thereafter; and the initial term for members of the third
class shall expire at the annual meeting of stockholders two years thereafter.
At the expiration of the initial term, and of each succeeding term of each
class, the directors of each class shall be elected to serve for a term of three
years. The By-laws may contain any provision regarding classification not
inconsistent with the terms hereof.
SIXTH: The Corporation shall indemnify and hold harmless any director,
officer, employee or agent of the Corporation from and against any and all
expenses and liabilities that may be imposed upon or incurred by him in
connection with, or as result of, any proceeding in which he may become
involved, as a party or otherwise, by reason of the fact that he is or was such
a director, officer, employee or agent of the Corporation, whether or not he
continues to be such at the time such expenses and liabilities shall have been
imposed or incurred, to the extent permitted by the laws of the State of
Delaware, as they may be amended from time to time.
SEVENTH: In furtherance and not in limitation of the general powers
conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized to make, alter or repeal the By-laws of the Corporation,
except as specifically stated therein.
EIGHTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and it stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said Court directs. If a majority in
number representing three-fourth in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the Court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders of this Corporation, as the case may be,
and also on this Corporation.
NINTH: Except as otherwise required by the laws of the State of Delaware,
the stockholders and Directors shall have the power to hold their meetings and
to keep the books, documents and papers of the Corporation outside of the State
of Delaware, and the Corporation shall have the power to have one or more
officers within or without the state of Delaware, at such places as may be from
time to time
4
<PAGE>
designated by the By-laws or by resolution of the stockholders or Directors.
Elections of Directors need not be by ballot unless the By-laws of the
Corporation shall so provide.
TENTH: Subject to the terms of Article FOURTEEN hereof, the Corporation
reserves the right to amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation.
ELEVENTH: The affirmative vote of the holders of not less than eighty
percent (80%) of the outstanding shares of "Voting Stock" (as hereinafter
defined) of the Corporation shall be required for the approval or authorization
of any "Business Combination" (as hereinafter defined); provided, however, that
the eighty percent (80%) voting requirement referred to above shall not be
applicable if:
1. The Board of Directors of the Corporation by a vote of not less than a
majority of the directors then holding office (a) expressly approved in advance
the acquisition of outstanding shares of Voting Stock of the Corporation that
resulted in any "Related Person" (as hereinafter defined) becoming a Related
Person or (b) expressly approved the Business Combination prior to the Related
Person involved in the Business Combination having become a Related Person;
2. The Business Combination is solely between the Corporation and another
Corporation, one hundred percent (100%) of the Voting Stock of which is owned
directly or indirectly by the Corporation; or
3. All of the following conditions have been met or have been waived by a
vote of not less than a majority of the "Continuing Directors" (as hereinafter
defined): (a) The Business Combination is a merger or consolidation proposed to
be consummated within one year after the date of the transaction pursuant to
which such Related Person became a Related Person, and the cash or fair market
value of the property, securities or other considerations are received per share
by holders of Common Stock in the Business Combination is not less than the
highest per share price (with appropriate adjustments for recapitalizations,
reclassifications, stock splits, reverse stock splits and stock dividends) paid
by the Related Person in acquiring any of its holdings of Common Stock; (b) the
consideration to be received by such holders is either cash or, if the Related
Person acquired the majority of its holdings of Common Stock for a form of
consideration other than cash, in the same form of consideration; (c) after such
Related Person has become a Related Person and prior to consummation of such
Business Combination: (i) there shall have been no failure to declare and pay at
the regular date therefor any full quarterly dividends (whether or not
cumulative) on any outstanding shares of Preferred Stock, (ii) there shall have
been no reduction in the dividends paid per share on the Common Stock (adjusted
as appropriate for recapitalizations, reclassifications, stock splits, reverse
stock splits and stock dividends), (iii) such Related Person shall not have
become the "Beneficial Owner" (as hereinafter defined) of any additional shares
of Voting Stock of the Corporation except as part of the transaction that
results in such Related Person becoming a Related Person, and (iv) such Related
Person shall not have received any benefit directly or indirectly (except
proportionately as a stockholder) of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax advantages provided
by the Corporation, whether in anticipation of or in connection with such
Business Combination or otherwise; and (d) a proxy statement in compliance with
the requirements of the Exchange Act (as hereinafter defined) and the rules and
regulations promulgated thereunder (or any subsequent provisions replacing the
Exchange Act, rules or regulations) shall be mailed to the public stockholders
of the Corporation at least forty (40) days prior to the consummation of the
Business Combination for the purpose of soliciting stockholder approval of the
Business Combination, and shall contain at the front thereof in a prominent
place any recommendations as to the advisability or inadvisability of the
Business Combination that the Continuing Directors or any of them may choose to
state and an opinion of a reputable investment banking firm as to the fairness
(or otherwise) of the terms of such Business Combination from the point of view
of the remaining public stockholders of the Corporation (such investment banking
firm to be selected by a majority of the Continuing Directors and to be paid a
reasonable fee for its services by the Corporation).
5
<PAGE>
For the purposes of this Article and Article TWELFTH:
(i) The term Business Combination" shall mean (a) any merger or
consolidation of the Corporation or a subsidiary of the Corporation with or
into a Related Person, (b) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of all or any "Substantial part" (as
hereinafter defined) of the assets either of the Corporation (including,
without limitation, any voting securities of a subsidiary) or of a
subsidiary, to or with a Related Person, (c) any sale, lease, exchange,
transfer or other disposition of assets having a fair market value of
$2,000,000 or more of a Related Person to the Corporation or a subsidiary of
the Corporation, (d) the issuance or transfer by the Corporation or a
subsidiary (other than by way of a pro rata distribution to all
stockholders) of any securities of the Corporation or a subsidiary of the
Corporation to a Related Person, (e) any reclassification of securities
(including any reserve stock split) or recapitalization by the Corporation,
the effect of which would be to increase the voting power (whether or not
then exercisable) of a Related Person, (f) the adoption of any plan or
proposal for the liquidation or dissolution of the Corporation proposed by
or on behalf of a Related Person, (g) any series or combination of
transactions directly or indirectly having the same effect as any of the
foregoing and (h) any agreement, contract or other arrangement providing
directly or indirectly for any of the foregoing.
(ii) The term "Continuing Director" shall mean any member of the Board
of Directors who is not affiliated with a Related Person and who was a
member of the Board of Directors immediately prior to the time that the
Related Person became a Related Person, and any successor to a Continuing
Director who is not affiliated with the Related Person and is recommended to
succeed a Continuing Director by a majority of Continuing Directors who are
then member of the Board of Directors.
(iii) The term "Related Person" shall mean and include any individual,
corporation, partnership or other "person" or "group" of persons or entities
(as such terms are used on January 1, 1985 in Rule 13d under the Securities
Exchange Act of 1934 (the "Exchange Act")), and the "Affiliates" and
"Associates" (as such terms are defined on January 1, 1985 in Rule 12b-2
under the Exchange Act) of any such individual, corporation, partnership or
other person or group of persons, other than the Corporation or any employee
benefit plan or plans sponsored by the Corporation, that individually or
together constitute the "Beneficial Owner" (as defined on January 1, 1985 in
Rule 13d-3 and Rule 14d-1(b)(4) under the Exchange Act) of an aggregate of
twenty percent (20%) or more of the outstanding Voting Stock of the
Corporation.
(iv) The term "Substantial Part" shall mean more than five percent (5%)
of the book value of the total assets of the subject entity as of the end of
the fiscal year ending prior to the time of the determination of, in the
case of Voting Stock of a subsidiary of the Corporation, twenty percent
(20%) or more of the outstanding shares of such subsidiary's Voting Stock.
(v) Any person or group that has the right to acquire any shares of
Voting Stock of the Corporation pursuant to any agreement, or upon the
exercise of conversion rights, warrants or options, or otherwise shall be
deemed a Beneficial Owner for purposes of determining whether such person or
group, individually or together with its Affiliates and Associates, is a
Related Person.
(vi) For purposes of subparagraph (3) of this Article ELEVENTH, the
expression "other considerations to be received" shall include, without
limitation, Common Stock retained by the Corporation's existing public
stockholders in the event of a Business Combination in which the Corporation
is the surviving corporation.
(vii) The term "Voting Stock" shall mean all outstanding shares of
capital stock of the Corporation or other corporation entitled to vote
generally in the election of directors, and each reference to a proportion
of shares of Voting Stock shall refer to shares having such proportion of
the number of shares entitled to be cast.
6
<PAGE>
TWELFTH: Except as approved by a vote of not less than a majority of the
directors of the Corporation then holding office (or, in the event that the
Corporation at the time has a Related Person, then by a vote of not less than a
majority of the Continuing Directors), no action shall be taken by the
stockholders of the Corporation except at an annual or special meeting with
prior notice and a vote; provided, however, that holders of the Preferred Stock
may act by written consent to the extent provided in the resolution or
resolutions referred to in Article FOURTH hereof. Except as provided herein
above, no action shall be taken by the stockholders by written consent.
THIRTEENTH: The stockholders shall not make, repeal, alter, amend or
rescind the By-laws except by the vote of the holders of not less than eighty
percent (80%) of the total voting power of all shares of stock of the
Corporation entitled to vote in the election of directors, considered for
purposes of this Article THIRTEENTH as one class.
FOURTEENTH: Articles FIFTH, SIXTH, ELEVENTH, TWELFTH and THIRTEENTH hereof
and this Article FOURTEENTH may not be amended, altered, changed, repealed or
rescinded in any respect unless such action is approved by the affirmative vote
of the holders of not less than eighty percent (80%) of the outstanding shares
of stock of the Corporation entitled to vote in the election of directors,
considered for purposes of this Article FOURTEENTH as one class. The voting
requirements contained in this Article FOURTEENTH and in Articles ELEVENTH and
THIRTEENTH hereof shall be in addition to voting requirements imposed by law or
other provisions of this Certificate of Incorporation or any designation of
preferences in favor of certain classes or series of classes of shares of
capital stock of the Corporation.
FIFTEENTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for the unlawful payment of dividends or unlawful stock
purchases under Section 174 of the General Corporation Law of Delaware, or (iv)
for any transaction from which the director derived any improper personal
benefit. If after approval by the stockholders of this provision the General
Corporation Law of Delaware is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of Delaware, as so amended. Any
repeal or modification of this Article by the stockholders of the Corporation
shall be by the affirmative vote of the holders of not less than eighty percent
(80%) of the outstanding shares of stock of the Corporation entitled to vote in
the election of Directors, considered for the purposes of this Article FIFTEENTH
as one class, shall be prospective only and shall not adversely affect any right
or protection of a director of the Corporation existing at the time of such
repeal or modification.
SIXTEENTH: The foregoing provisions with respect to the number of
directors, their powers and the votes required shall be subject to the terms of
the Governance Agreement, dated as of June 20, 1996, as amended by Amendment No.
1 thereto, dated October 11, 1996, between Borden, Inc. and AEP Industries Inc.,
as it may be further amended and/or restated from time to time (collectively,
the "Governance Agreement"). Notwithstanding any other provision of this
Certificate of Incorporation, any conflict between (a) any action taken by this
Corporation or the Board of Directors, or any provision of this Certificate of
Incorporation or the By-laws of this Corporation, as each may be amended and/or
restated from time to time, on the one hand, and (b) the terms of the Governance
Agreement on the other, shall be resolved in favor of the terms of the
Governance Agreement as the terms thereof may be applicable during the time
period therein set forth unless otherwise agreed to in writing by Borden, Inc.
Any amendment or repeal of this Article SIXTEENTH shall require the affirmative
vote of the holders of more than 66- 2/3% of the Common Stock voting at a
meeting called for such purpose.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned does hereby execute this Amended and
Restated Certificate of Incorporation this 9th day of April, 1997.
AEP INDUSTRIES INC.
By: /s/ PAUL M. FEENEY
--------------------------------------
Paul M. Feeney
EXECUTIVE VICE-PRESIDENT
Attest:
/s/ LAWRENCE R. NOLL
---------------------------------------------
Lawrence R. Noll
SECRETARY
8
<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-30-1997 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-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<CASH> 4,411
<SECURITIES> 0
<RECEIVABLES> 108,509
<ALLOWANCES> 4,958
<INVENTORY> 86,288
<CURRENT-ASSETS> 262,426
<PP&E> 421,666
<DEPRECIATION> 130,288
<TOTAL-ASSETS> 607,731
<CURRENT-LIABILITIES> 193,757
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 98,095
<TOTAL-LIABILITY-AND-EQUITY> 607,731
<SALES> 371,988
<TOTAL-REVENUES> 374,148
<CGS> 293,448
<TOTAL-COSTS> 293,448
<OTHER-EXPENSES> 58,378
<LOSS-PROVISION> 597
<INTEREST-EXPENSE> 13,030
<INCOME-PRETAX> 8,695
<INCOME-TAX> 2,648
<INCOME-CONTINUING> 6,047
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,047
<EPS-PRIMARY> .81
<EPS-DILUTED> .81
</TABLE>
