<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
<TABLE>
<S> <C>
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
</TABLE>
0-14450
Commission file number
------------------------
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 Identification
incorporation or organization) No.)
125 PHILLIPS AVENUE 07606
SOUTH HACKENSACK, NEW JERSEY (Zip Code)
(Address of principal executive offices)
</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 AT
CLASS OF COMMON STOCK SEPTEMBER 2,1997
- ---------------------- -----------------
<S> <C>
$.01 Par Value 7,205,287
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AEP INDUSTRIES INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1997 1996
----------- -----------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................................................... $ 4,729,000 $12,067,000
Marketable securities.............................................................. -- 2,070,000
Accounts receivable, less allowance of $5,036,000 in 1997 and $4,217,000 in 1996
for doubtful accounts............................................................ 111,851,000 104,302,000
Inventories, net................................................................... 90,720,000 94,336,000
Net assets held for sale........................................................... 15,492,000 49,570,000
Other current assets............................................................... 12,084,000 14,694,000
Deferred income tax benefit........................................................ 7,363,000 1,633,000
----------- -----------
Total current assets........................................................... 242,239,000 278,672,000
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated depreciation and
amortization of $134,740,000 in 1997 and $120,725,000 in 1996...................... 291,002,000 290,316,000
GOODWILL, net........................................................................ 34,155,000 32,580,000
INVESTMENT IN JOINT VENTURE.......................................................... 15,249,000 15,028,000
OTHER ASSETS......................................................................... 11,060,000 9,313,000
----------- -----------
TOTAL ASSETS................................................................... $593,705,000 $625,909,000
----------- -----------
----------- -----------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt.................................................. $95,297,000 $51,019,000
Accounts payable................................................................... 66,736,000 75,252,000
Accrued expenses................................................................... 34,639,000 56,451,000
----------- -----------
----------- -----------
Total current liabilities...................................................... 196,672,000 182,722,000
LONG-TERM DEBT....................................................................... 286,196,000 325,438,000
OTHER LONG TERM LIABILITIES.......................................................... 3,578,000 7,041,000
DEFERRED FEDERAL INCOME TAXES........................................................ 15,645,000 15,575,000
----------- -----------
----------- -----------
Total liabilities.............................................................. 502,091,000 530,776,000
SHAREHOLDERS' EQUITY:
Preferred stock--$1.00 par value, 1,000,000 shares authorized; none outstanding.... -- --
Common stock--$.01 par value, 30,000,000 shares and 20,000,000 shares authorized in
1997 and 1996, respectively; 9,984,680 and 9,931,303 shares issued and
outstanding in 1997 and 1996, respectively....................................... 100,000 99,000
Additional paid-in capital......................................................... 89,632,000 88,052,000
Treasury stock--common stock; at cost, 2,783,181 and 2,801,000 in 1997 and 1996,
respectively..................................................................... (61,747,000) (62,142,000)
Retained earnings.................................................................. 78,369,000 70,108,000
Cumulative translation adjustment.................................................. (14,740,000) (1,283,000)
Net unrealized investment gain, net of taxes....................................... -- 299,000
----------- -----------
----------- -----------
Total shareholders' equity..................................................... 91,614,000 95,133,000
----------- -----------
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..................................... $593,705,000 $625,909,000
----------- -----------
----------- -----------
</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 NINE MONTHS ENDED
JULY 31, JULY 31,
----------------------------- ------------------------------
1997 1996 1997 1996
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
NET SALES........................................ $ 198,031,000 $ 63,907,000 $ 570,019,000 $ 174,498,000
COST OF SALES.................................... 158,323,000 48,288,000 451,771,000 127,547,000
-------------- ------------- -------------- --------------
Gross profit............................... 39,708,000 15,619,000 118,248,000 46,951,000
-------------- ------------- -------------- --------------
OPERATING EXPENSES
Delivery and Warehousing....................... 10,592,000 5,230,000 33,207,000 14,131,000
Selling........................................ 11,182,000 3,398,000 32,598,000 10,181,000
General and Administrative..................... 7,257,000 1,318,000 22,201,000 4,051,000
-------------- ------------- -------------- --------------
Total operating expenses................... 29,031,000 9,946,000 88,006,000 28,363,000
-------------- ------------- -------------- --------------
10,677,000 5,673,000 30,242,000 18,588,000
-------------- ------------- -------------- --------------
OTHER INCOME (EXPENSE):
Interest expense............................... (6,893,000) (2,048,000) (19,923,000) (5,885,000)
Other, net..................................... 338,000 122,000 2,498,000 261,000
-------------- ------------- -------------- --------------
(6,555,000) (1,926,000) (17,425,000) (5,624,000)
Income before provision for income taxes... 4,122,000 3,747,000 12,817,000 12,964,000
PROVISION FOR INCOME TAXES....................... 1,908,000 1,442,000 4,556,000 4,990,000
-------------- ------------- -------------- --------------
Net income................................. 2,214,000 2,305,000 8,261,000 7,974,000
Retained earnings, beginning of period........... 76,155,000 73,224,000 70,108,000 67,555,000
Retained earnings, end of period................. $ 78,369,000 $ 75,529,000 $ 78,369,000 $ 75,529,000
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Net income per share of common stock............. $ 0.30 $ 0.47 $ 1.11 $ 1.61
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
</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 NINE MONTHS
ENDED JULY 31,
----------------------------
<S> <C> <C>
1997 1996
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................ $ 8,261,000 $ 7,974,000
Adjustments to reconcile net income to net
cash provided by (used in) operating activities -
Depreciation and amortization................................................... 24,162,000 8,279,000
Net (gain)/loss on sale of securities........................................... (416,000) --
Net (gain)/loss on sale of equipment............................................ (235,000) --
Provision for losses on accounts receivable and inventory....................... 1,304,000 245,000
(Increase) in accounts receivable............................................... (7,549,000) (1,944,000)
Decrease (increase) in inventories.............................................. 3,616,000 (10,156,000)
Decrease in net assets held for sale............................................ 15,551,000 --
(Increase) decrease in other current assets..................................... 2,610,000 (45,000)
(Increase) in intangible assets................................................. (2,058,000) --
(Increase) in other assets...................................................... (1,747,000) (25,000)
(Decrease) in accounts payable.................................................. (8,516,000) (10,063,000)
Increase (decrease) in accrued expenses......................................... (3,285,000) 513,000
Increase in deferred income taxes............................................... (5,660,000) 654,000
Decrease in other long term liabilities......................................... (3,463,000) --
------------- -------------
Net cash provided by (used in) operating activities........................... 22,575,000 (4,568,000)
------------- -------------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Capital expenditures.............................................................. (34,638,000) (8,207,000)
Sales and retirements of property, plant and equipment, net....................... 298,000 17,000
(Purchase) sale of marketable securities.......................................... 2,486,000 (83,000)
Net cash (used in) investing activities....................................... (31,854,000) (8,273,000)
------------- -------------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving credit facility....................... (10,000,000) 19,429,000
Net borrowings (repayments) on long-term debt..................................... 15,036,000 (3,063,000)
Purchase of treasury stock........................................................ -- (3,838,000)
Proceeds from issuance of common stock............................................ 1,976,000 408,000
Net cash provided by financing activities..................................... 7,012,000 12,936,000
------------- -------------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH............................................ (5,071,000) --
------------- -------------
NET (DECREASE) INCREASE IN CASH:.................................................... (7,338,000) 95,000
CASH AT BEGINNING OF PERIOD:........................................................ 12,067,000 329,000
------------- -------------
CASH AT END OF PERIOD:.............................................................. $ 4,729,000 $ 424,000
------------- -------------
------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for--interest......................................... $ 16,770,000 $ 5,376,000
------------- -------------
Cash paid during the period for--income taxes..................................... $ 2,204,000 $ 3,916,000
------------- -------------
</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 the 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,
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 common stock equivalents (stock
options) outstanding during each period. The number of shares used in such
computation for the three months ended July 31, 1997, and 1996 were 7,434,457
and 4,945,917, respectively. The number of shares used in such computation for
the nine months ended July 31, 1997, and 1996 were 7,439,781 and 4,942,418,
respectively.
Statement of Financial Accounting Standards No. 128, "Earnings per Share",
which becomes effective for AEP's fiscal year beginning November 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 are comprised of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
JULY 31, 1997 1996
------------- ---------------
<S> <C> <C>
Raw Materials.................................................................... $ 24,689,000 $ 27,452,000
Finished Goods................................................................... 64,226,000 66,005,000
Supplies......................................................................... 3,068,000 2,689,000
------------- ---------------
91,981,000 96,146,000
Less: Inventory Reserve.......................................................... 1,263,000 1,810,000
------------- ---------------
Total Inventories, Net........................................................... $ 90,720,000 $ 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 56% and
50% of total inventories at July 31, 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 NINE
FOR THE THREE MONTHS
MONTHS ENDED ENDED
JULY 31, 1996 JULY 31, 1996
-------------- ------------------
<S> <C> <C>
Net Sales.................................................................... $ 189,222,000 $ 565,253,000
-------------- ------------------
Operating Income............................................................. 11,624,000 36,824,000
-------------- ------------------
Net Income................................................................... 2,148,000 9,406,000
-------------- ------------------
Earnings Per Share........................................................... $ 0.29 $ 1.28
-------------- ------------------
</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 considered core businesses 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 it would 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. The carrying value at July 31, 1997 represents the
Company's best estimate as to the fair market value based on recent market
information.
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 Financial Statements for both the quarter ended and the nine months ended
July 31, 1996.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1997 AS COMPARED TO THREE MONTHS ENDED JULY 31,
1996
NET SALES AND GROSS PROFIT
Net sales for the third quarter ended July 31, 1997, were $198,031,000, an
increase of $134,124,000 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 $60,775,000, in Europe of $54,677,000
and in Asia-Pacific of $18,672,000. The Company on a worldwide basis had a
slight increase in average unit selling prices in all businesses when compared
to the first two quarters of 1997 except for the North America pallet wrap
business, which had an approximate 3% increase in their unit selling prices
which was partially offset by a decrease of 2% in sales volume from the second
quarter of 1997. The European and Asia-Pacific operations had a slight decrease
in sales volume when compared to the prior quarters average volume. This
reduction was due to planned vacation shutdowns.
Gross profit for the third quarter of Fiscal 1997 amounted to $39,708,000
compared to $15,619,000 for the third quarter of Fiscal 1996. This increase in
gross profit resulted from the Acquisition and consisted of increased gross
profit in North America of $10,708,000, Europe of $10,067,000 and Asia-Pacific
of $3,314,000. Even though there was an overall increase in gross profit for the
period, the North America region still 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. These additional manufacturing costs were partially offset by a reduction
in raw material cost for the period. The European operations had a slight
decrease in gross profit for the quarter because of increased raw material costs
which were still being passed through to customers during the third quarter of
Fiscal 1997 and due to the various shutdowns noted above.
OPERATING EXPENSES
Operating expenses for the three months ended July 31 1997 were $29,031,000
as compared to $9,946,000 over the same period in the prior fiscal year. This
increase of $19,085,000 in operating expenses can be attributed to the
businesses acquired from Borden and the operating expenses associated with them.
The current period operating expenses decreased by $1,439,000 when compared to
the prior quarter which can be attributed to a reduction in delivery costs due
to the efficiencies realized in its North America operations.
INTEREST EXPENSE
Interest expense for the three months ended July 31, 1997, amounted to
$6,893,000, an increase of $4,845,000 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 BGP business
7
<PAGE>
OTHER INCOME (EXPENSE)
Other income for the three months ended July 31, 1997, amounted to $338,000.
This amount includes $213,000 in interest income, and income from investment in
a joint venture of $73,000. Also included in other income were gains on sales of
machinery and equipment and other miscellaneous income earned for the period.
NINE MONTHS ENDED JULY 31, 1997 AS COMPARED TO NINE MONTHS ENDED JULY 31,
1996
NET SALES AND GROSS PROFIT
Net sales for the nine months ended July 31, 1997, were $570,019,000, an
increase of $395,521,000 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 $174,059,000, in Europe of $163,143,000
and in Asia-Pacific of $58,319,000. 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 nine months of Fiscal 1997 amounted to
$118,248,000 compared to $46,951,000 for the same period in Fiscal 1996. This
increase in gross profit resulted from the Acquisition and consisted of
increased gross profit in North America of $27,600,000, Europe of $33,024,000
and Asia-Pacific of $10,673,000. 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 nine months ended July 31 1997 were $88,006,000
as compared to $28,363,000 over the same period in the prior fiscal year. This
increase of $59,643,000 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 nine months ended July 31, 1997, amounted to
$19,923,000, an increase of $14,038,000 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 nine months ended July 31, 1997, amounted to
$2,498,000. This amount includes $860,000 in interest income, $339,000 in
foreign currency exchange gains realized during the period, $280,000 in gain
from sale of securities and income from investment in a joint venture of
$221,000. Also included in other income were $225,000 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 $45,467,000 at July 31,1997,
compared to $95,950,000 at October 31, 1996 after reclassification of net assets
held for sale. This decrease of $50,483,000 in working capital is primarily
attributable to maturities of long term debt and the strengthening of the US
dollar during the first nine 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.
8
<PAGE>
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.
As of July 31, 1997, there was $320,0000,000 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 $7,338,000 for the nine
months ended July 31, 1997. Cash flow from operating activities of $22,575,000
was offset by funds used in investing activities, primarily the net investment
in capital expenditures of $34,340,000. The Company's cash flow was increased
during the period by net borrowings of long term debt of $5,036,000. 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.
<TABLE>
<S> <C>
AEP INDUSTRIES INC.
Date: September 12, 1997 s/a J. BRENDAN BARBA
-------------------------------------------
J. Brendan Barba
Chairman of the Board, President
and Chief Executive Officer
Date: September 12, 1997 s/a PAUL M. FEENEY
-------------------------------------------
Paul M. Feeney
Executive Vice President-Finance
Principal Financial and Accounting Officer
</TABLE>
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 financial position or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11-Computation of weighted average number of shares
outstanding. Page 13.
(b) No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended July 31, 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 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 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>
12
<PAGE>
EXHIBIT 11
AEP INDUSTRIES INC.
COMPUTATION OF THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
FOR THE THREE AND NINE MONTHS ENDED JULY 31, 1997
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JULY 31,
----------------------------------------
NUMBER OF WEIGHTED AVERAGE
SHARES OF DAYS DAYS IN NUMBER OF SHARES
1997 COMMON STOCK OUTSTANDING PERIOD OUTSTANDING
- ------------------------------- ------------ ----------- ------- ----------------
<S> <C> <C> <C> <C>
November 1-October 31.......... 7,130,303 7,130,303
Shares Issued:
5-Nov-96.................... 1,600 92 92 1,600
7-Nov-96.................... 200 92 92 200
8-Nov-96.................... 200 92 92 200
11-Nov-96.................... 500 92 92 500
12-Nov-96.................... 600 92 92 600
14-Nov-96.................... 400 92 92 400
18-Nov-96.................... 400 92 92 400
20-Nov-96.................... 60 92 92 60
26-Nov-96.................... 400 92 92 400
9-Dec-96.................... 460 92 92 460
13-Dec-96.................... 350 92 92 350
26-Dec-96.................... 1,000 92 92 1,000
27-Dec-96.................... 200 92 92 200
1-Jan-97.................... 4,553 92 92 4,553
2-Jan-97.................... 500 92 92 500
3-Jan-97.................... 600 92 92 600
6-Jan-97.................... 1,600 92 92 1,600
8-Jan-97.................... 800 92 92 800
13-Jan-97.................... 1,300 92 92 1,300
14-Jan-97.................... 3,200 92 92 3,200
15-Jan-97.................... 600 92 92 600
20-Jan-97.................... 200 92 92 200
21-Jan-97.................... 400 92 92 400
27-Jan-97.................... 300 92 92 300
7-Feb-97.................... 400 92 92 400
13-Feb-97.................... 4,200 92 92 4,200
18-Feb-97.................... 200 92 92 200
20-Feb-97.................... 400 92 92 400
27-Feb-97.................... 400 92 92 400
5-Mar-97.................... 1,000 92 92 1,000
27-Mar-97.................... 300 92 92 300
17-Apr-97.................... 700 92 92 700
22-Apr-97.................... 200 92 92 200
23-Apr-97.................... 500 92 92 500
25-Apr-97.................... 200 92 92 200
29-Apr-97.................... 700 92 92 700
5-May-97.................... 800 88 92 765
6-May-97.................... 800 87 92 757
8-May-97.................... 200 85 92 185
13-May-97.................... 800 80 92 696
15-May-97.................... 18,019 78 92 15,277
19-May-97.................... 825 74 92 664
20-May-97.................... 11,450 73 92 9,085
20-May-97.................... (1,450) 73 92 (1,151)
23-May-97.................... 200 70 92 152
28-May-97.................... 200 65 92 141
2-Jun-97.................... 200 60 92 130
3-Jun-97.................... 600 59 92 385
4-Jun-97.................... 400 58 92 252
5-Jun-97.................... 300 57 92 186
6-Jun-97.................... 100 56 92 61
18-Jun-97.................... 400 44 92 191
23-Jun-97.................... 1,600 39 92 678
1-Jul-97.................... 6,129 31 92 2,065
------------ ----------------
Total Weighted Average
Shares....................... 7,201,499 7,190,446
Total Dilutive Stock options... -- 244,011
------------ ----------------
Total Shares................... 7,201,499 7,434,457
------------ ----------------
------------ ----------------
<CAPTION>
FOR THE NINE MONTHS ENDED JULY 31,
----------------------------------------
NUMBER OF WEIGHTED AVERAGE
DAYS DAYS IN NUMBER OF SHARES
1997 OUTSTANDING PERIOD OUTSTANDING
- ------------------------------- ----------- ------- ----------------
<S> <C> <C> <C>
November 1-October 31.......... 7,130,303
Shares Issued:
5-Nov-96.................... 269 273 1,577
7-Nov-96.................... 267 273 196
8-Nov-96.................... 266 273 195
11-Nov-96.................... 263 273 482
12-Nov-96.................... 262 273 576
14-Nov-96.................... 260 273 381
18-Nov-96.................... 256 273 375
20-Nov-96.................... 254 273 56
26-Nov-96.................... 248 273 363
9-Dec-96.................... 235 273 396
13-Dec-96.................... 231 273 296
26-Dec-96.................... 216 273 799
27-Dec-96.................... 217 273 159
1-Jan-97.................... 212 273 3,536
2-Jan-97.................... 211 273 386
3-Jan-97.................... 210 273 462
6-Jan-97.................... 207 273 1,213
8-Jan-97.................... 205 273 601
13-Jan-97.................... 200 273 952
14-Jan-97.................... 199 273 2,333
15-Jan-97.................... 198 273 435
20-Jan-97.................... 193 273 141
21-Jan-97.................... 192 273 281
27-Jan-97.................... 186 273 204
7-Feb-97.................... 175 273 256
13-Feb-97.................... 169 273 2,600
18-Feb-97.................... 164 273 120
20-Feb-97.................... 162 273 237
27-Feb-97.................... 155 273 227
5-Mar-97.................... 149 273 546
27-Mar-97.................... 127 273 140
17-Apr-97.................... 106 273 272
22-Apr-97.................... 101 273 74
23-Apr-97.................... 100 273 183
25-Apr-97.................... 98 273 72
29-Apr-97.................... 94 273 241
5-May-97.................... 88 273 247
6-May-97.................... 87 273 241
8-May-97.................... 85 273 58
13-May-97.................... 80 273 204
15-May-97.................... 78 273 4,365
19-May-97.................... 74 273 180
20-May-97.................... 73 273 2,429
20-May-97.................... 73 273 (308)
23-May-97.................... 70 273 39
28-May-97.................... 65 273 34
2-Jun-97.................... 60 273 29
3-Jun-97.................... 59 273 83
4-Jun-97.................... 58 273 54
5-Jun-97.................... 57 273 39
6-Jun-97.................... 56 273 12
18-Jun-97.................... 44 273 31
23-Jun-97.................... 39 273 97
1-Jul-97.................... 31 273 235
----------------
Total Weighted Average
Shares....................... 7,159,265
Total Dilutive Stock options... 280,516
----------------
Total Shares................... 7,439,781
----------------
----------------
</TABLE>
13
<PAGE>
EXHIBIT 11
(CONTINUED)
AEP INDUSTRIES INC.
COMPUTATION OF THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
FOR THE THREE AND NINE MONTHS ENDED JULY 31, 1997
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JULY 31,
----------------------------------------
<S> <C> <C> <C> <C>
NUMBER OF WEIGHTED AVERAGE
SHARES OF DAYS DAYS IN NUMBER OF SHARES
1996 COMMON STOCK OUTSTANDING PERIOD OUTSTANDING
- ------------------------------- ------------ ----------- ------- ----------------
November 1--July 31............ 4,804,225 4,804,225
Shares Issued:
14-Nov-95...................... 450 92 92 450
31-Dec-95...................... 8,265 92 92 8,265
05-Jan-96...................... 225 92 92 225
15-Feb-96...................... 450 92 92 450
01-Mar-96...................... 900 92 92 900
04-Mar-96...................... 1,500 92 92 1,500
15-Mar-96...................... 9,038 92 92 9,038
18-Mar-96...................... (168,000) 92 92 (168,000)
06-Apr-96...................... 8,848 92 92 8,848
4-Apr-96....................... 200 92 92 200
12-Apr-96...................... 100 92 92 100
17-Apr-96...................... 900 92 92 900
10-May-96...................... 200 83 92 180
15-May-96...................... 600 78 92 509
20-Jun-96...................... 600 42 92 274
25-Jun-96...................... 1,150 37 92 463
30-Jun-96...................... 6,750 32 92 2,348
30-Jun-96...................... (1,203) 32 92 (418)
1-Jul-96....................... 6,911 31 92 2,329
2-Jul-96....................... 200 30 92 65
8-Jul-96....................... 700 24 92 183
10-Jul-96...................... 200 22 92 48
23-Jul-96...................... 300 9 92 29
-- --
------------ ----------------
Total Weighted Average
Shares....................... 4,683,509 4,673,110
Total Dilutive Stock options... -- 272,807
------------ ----------------
------------ ----------------
Total Shares................... 4,683,509 4,945,917
------------ ----------------
------------ ----------------
<CAPTION>
FOR THE NINE MONTHS ENDED JULY 31,
----------------------------------------
<S> <C> <C> <C>
NUMBER OF WEIGHTED AVERAGE
DAYS DAYS IN NUMBER OF SHARES
1996 OUTSTANDING PERIOD OUTSTANDING
- ------------------------------- ----------- ------- ----------------
November 1--July 31............ 4,804,225
Shares Issued:
14-Nov-95...................... 261 274 429
31-Dec-95...................... 214 274 6,455
05-Jan-96...................... 209 274 172
15-Feb-96...................... 168 274 276
01-Mar-96...................... 153 274 503
04-Mar-96...................... 150 274 821
15-Mar-96...................... 139 274 4,585
18-Mar-96...................... 136 274 (83,387)
06-Apr-96...................... 117 274 3,778
4-Apr-96....................... 119 274 87
12-Apr-96...................... 111 274 41
17-Apr-96...................... 106 274 348
10-May-96...................... 83 274 61
15-May-96...................... 78 274 171
20-Jun-96...................... 42 274 92
25-Jun-96...................... 37 274 155
30-Jun-96...................... 32 274 788
30-Jun-96...................... 32 274 (140)
1-Jul-96....................... 31 274 782
2-Jul-96....................... 30 274 22
8-Jul-96....................... 24 274 61
10-Jul-96...................... 22 274 16
23-Jul-96...................... 9 274 10
--- ------- ----------------
Total Weighted Average
Shares....................... 4,740,349
Total Dilutive Stock options... 202,069
----------------
----------------
Total Shares................... 4,942,418
----------------
----------------
</TABLE>
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AEP
INDUSTRIES INC. FORM 10-Q FOR THE NINE MONTHS ENDED JULY-31-1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 4,729
<SECURITIES> 0
<RECEIVABLES> 116,887
<ALLOWANCES> 5,036
<INVENTORY> 90,720
<CURRENT-ASSETS> 242,239
<PP&E> 425,742
<DEPRECIATION> 134,740
<TOTAL-ASSETS> 593,705
<CURRENT-LIABILITIES> 196,672
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 91,614
<TOTAL-LIABILITY-AND-EQUITY> 593,705
<SALES> 570,019
<TOTAL-REVENUES> 572,517
<CGS> 451,771
<TOTAL-COSTS> 451,771
<OTHER-EXPENSES> 86,702
<LOSS-PROVISION> 1,304
<INTEREST-EXPENSE> 19,923
<INCOME-PRETAX> 12,817
<INCOME-TAX> 4,556
<INCOME-CONTINUING> 8,261
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,261
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11
</TABLE>
