<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1999
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 Identification No.)
incorporation or organization)
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 MAY 24,
CLASS OF COMMON STOCK 1999
- ------------------------------- -------------------------------
<S> <C>
$.01 Par Value 7,352,688
</TABLE>
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AEP INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30 OCTOBER 31,
1999 1998
----------- -----------
<S> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................................... $ 3,746,000 $ 3,994,000
Accounts receivable, less allowance of $5,093,000 in 1999 and $4,686,000 in 1998 for
doubtful accounts................................................................. 94,735,000 98,656,000
Inventories, net.................................................................... 84,852,000 80,836,000
Net assets of discontinued operations............................................... 4,532,000 45,146,000
Other current assets................................................................ 17,069,000 16,458,000
----------- -----------
Total current assets............................................................ 204,934,000 245,090,000
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated depreciation and amortization
of $120,931,000 in 1999 and $110,515,000 in 1998.................................... 243,124,000 250,032,000
GOODWILL less accumulated amortization of $3,267,000 in 1999 and $2,629,000 in 1998... 41,808,000 40,817,000
INVESTMENT IN JOINT VENTURE........................................................... 15,802,000 15,597,000
OTHER ASSETS.......................................................................... 53,169,000 40,950,000
----------- -----------
TOTAL ASSETS.................................................................... $558,837,000 $592,486,000
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings............................................................... $22,611,000 $30,968,000
Accounts payable.................................................................... 87,299,000 87,893,000
Accrued expenses.................................................................... 39,344,000 44,621,000
----------- -----------
Total current liabilities....................................................... 149,254,000 163,482,000
LONG-TERM DEBT........................................................................ 297,803,000 301,817,000
OTHER LONG TERM LIABILITIES........................................................... 6,202,000 6,440,000
DEFERRED INCOME TAXES................................................................. 34,814,000 34,446,000
----------- -----------
Total liabilities............................................................... 488,073,000 506,185,000
----------- -----------
SHAREHOLDERS' EQUITY:
Preferred stock--$1.00 par value, 1,000,000 shares authorized; none outstanding..... -- --
Common stock--$.01 par value, 30,000,000 shares authorized; 10,040,388 and
10,022,301 shares, issued in 1999 and 1998, respectively.......................... 100,000 100,000
Additional paid-in capital.......................................................... 91,588,000 91,324,000
Treasury stock--common stock; at cost, 2,696,380 and 2,744,600 shares in 1999 and
1998, respectively................................................................ (59,892,000) (60,963,000)
Retained earnings................................................................... 64,454,000 78,942,000
Accumulated other comprehensive income (loss)....................................... (25,486,000) (23,102,000)
----------- -----------
Total shareholders' equity...................................................... 70,764,000 86,301,000
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...................................... $558,837,000 $592,486,000
----------- -----------
----------- -----------
</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 FOR THE
MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
------------------------ ------------------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
----------- ----------- ----------- -----------
NET SALES................................................. $165,754,000 $169,667,000 $317,652,000 $338,045,000
COST OF SALES............................................. 123,376,000 131,703,000 238,008,000 261,663,000
RESTRUCTURING CHARGE...................................... 1,457,000 -- 1,457,000 --
----------- ----------- ----------- -----------
Gross profit........................................ 40,921,000 37,964,000 78,187,000 76,382,000
----------- ----------- ----------- -----------
OPERATING EXPENSES
Delivery and Warehousing................................ 12,659,000 10,972,000 23,891,000 22,113,000
Selling................................................. 10,046,000 9,508,000 19,162,000 18,875,000
General and Administrative.............................. 7,243,000 6,853,000 13,581,000 14,035,000
----------- ----------- ----------- -----------
Total operating expenses............................ 29,948,000 27,333,000 56,634,000 55,023,000
----------- ----------- ----------- -----------
Income from operations.............................. 10,973,000 10,631,000 21,553,000 21,359,000
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense, net................................... (7,977,000) (8,434,000) (16,268,000) (16,585,000)
Other, net.............................................. 443,000 (61,000) 1,196,000 255,000
----------- ----------- ----------- -----------
(7,534,000) (8,495,000) (15,072,000) (16,330,000)
----------- ----------- ----------- -----------
Income before provision for income taxes............ 3,439,000 2,136,000 6,481,000 5,029,000
PROVISION FOR INCOME TAXES................................ 1,368,000 949,000 2,575,000 1,958,000
----------- ----------- ----------- -----------
Income from continuing operations................... 2,071,000 1,187,000 3,906,000 3,071,000
DISCONTINUED OPERATIONS
(Loss) from operation of discontinued businesses (less
applicable income tax benefit of $972,000 for the
three months ended April 30, 1998 and $770,000 and
$1,379,000 for the six months ended April 30, 1999 and
1998.................................................. -- (1,757,000) (1,205,000) (2,387,000)
Loss on disposal of discontinued Proponite operations,
including provision for operating losses through
disposal date, (less applicable income tax benefit of
$507,000 and $10,989,000)............................. (793,000) -- (17,189,000) --
----------- ----------- ----------- -----------
Loss from discontinued operations....................... (793,000) (1,757,000) (18,394,000) (2,387,000)
Net income (loss)................................... 1,278,000 (570,000) (14,488,000) 684,000
Retained earnings, beginning of period.................... 63,176,000 79,933,000 78,942,000 78,679,000
----------- ----------- ----------- -----------
Retained earnings, end of period.......................... $64,454,000 $79,363,000 $64,454,000 $79,363,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
EARNINGS PER SHARE--Basic and Diluted:
Income from continuing operations....................... $ 0.28 $ 0.16 $ 0.54 $ 0.42
Loss from discontinued operations....................... $ (0.11) $ (0.24) $ (2.53) $ (0.33)
----------- ----------- ----------- -----------
Basic and Diluted net income (loss)................. $ 0.17 $ (0.08) $ (1.99) $ 0.09
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
--------------------- -----------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 1999 1998 1999 1998
- --------------------------------------------------------------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net Income (Loss).............................................. $1,278,000 $ (570,000) $(14,488,000) $ 684,000
Other comprehensive income:
Unrealized foreign currency translation adjustments........ 1,577,000 (2,790,000) (2,384,000) (3,109,000)
--------- ---------- ----------- ----------
Comprehensive (loss) income.................................. $2,855,000 $(3,360,000) $(16,872,000) $(2,425,000)
--------- ---------- ----------- ----------
--------- ---------- ----------- ----------
</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,
-----------------------------
<S> <C> <C>
1999 1998
------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................................... (14,488,000) $ 684,000
Adjustments to reconcile net income to net cash provided by operating
activities--
Loss from discontinued Proponite operations.................................... 1,205,000 2,387,000
Estimated loss on disposal..................................................... 17,189,000 --
Depreciation and amortization.................................................. 15,900,000 14,859,000
Net (gain) on sale of equipment................................................ (223,000) (93,000)
Provision for losses on accounts receivable.................................... 1,030,000 815,000
Joint venture income........................................................... (205,000) (89,000)
Decrease (Increase) in accounts receivable..................................... 3,159,000 5,422,000
Decrease (Increase) in inventories............................................. (4,132,000) (4,100,000)
Decrease (Increase) in other current assets.................................... (931,000) (2,503,000)
Decrease (Increase) in net assets held for sale................................ 8,904,000 (3,540,000)
Decrease (Increase) in other assets............................................ (12,219,000) (11,412,000)
Increase (decrease) in accounts payable........................................ (684,000) (7,337,000)
Increase (decrease) in accrued expenses........................................ (5,410,000) 1,858,000
Increase (decrease) in other long term liabilities............................. 130,000 631,000
------------- --------------
Net cash provided by (used in) operating activities.......................... 9,225,000 (2,418,000)
------------- --------------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Capital expenditures............................................................. (14,362,000) (11,211,000)
Sales and retirements of property, plant and equipment, net...................... 315,000 122,000
Acquisition of subsidiary........................................................ (1,948,000) --
Proceeds from sale of businesses................................................. 13,316,000 2,284,000
------------- --------------
Net cash provided by (used in) investing activities.......................... (2,679,000) (8,805,000)
------------- --------------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from issuance of Subordinated Notes..................................... -- 198,500,000
Repayments of Term Loan.......................................................... -- (196,591,000)
Net borrowings (repayments)...................................................... (12,371,000) 10,563,000
Issuance of common stock related to ESOP......................................... 1,071,000 1,265,000
Proceeds from issuance of common stock........................................... 363,000 368,000
------------- --------------
Net cash provided by (used in) financing activities.......................... (10,937,000) 14,105,000
------------- --------------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH........................................... 4,143,000 (3,802,000)
------------- --------------
NET INCREASE (DECREASE) IN CASH:................................................... (248,000) (920,000)
CASH AT BEGINNING OF PERIOD:....................................................... 3,994,000 4,143,000
------------- --------------
CASH AT END OF PERIOD:............................................................. $ 3,746,000 $ 3,223,000
------------- --------------
------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for--interest........................................ $ 15,737,000 $ 10,119,000
------------- --------------
Cash paid during the period for--income taxes.................................... $ 1,338,000 $ 2,404,000
------------- --------------
</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 10K for the fiscal year ended October 31, 1998.
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
Basic Earnings Per Share is calculated by dividing income available to
common shareholders by the weighted average number of shares of common stock
outstanding during the period. The number of shares used in such computation for
the three months ended April 30, 1999, and 1998 were 7,293,743 and 7,250,405,
respectively. The number of shares used in such computation for the six months
ended April 30, 1999, and 1998 were 7,287,019 and 7,229,368, respectively.
Diluted Earnings Per Share is calculated by dividing income available to common
shareholders by the weighted average number of common shares outstanding,
adjusted to reflect potentially dilutive securities (options). The number of
shares used in such computation for the three months ended April 30, 1999, and
1998 were 7,451,401 and 7,471,306, respectively. The number of shares used in
such computation for the six months ended April 30, 1999, and 1998 were
7,444,677 and 7,440,257, respectively. The above computation excludes 485,590
and 43,430 options for the three months ended April 30, 1999, and 1998,
respectively, and 485,590 and 55,930 options for the six months ended April 30,
1999 and 1998, respectively which were anti dilutive.
(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,
1999 1998
------------- ---------------
<S> <C> <C>
Raw Materials................................................ $ 23,317,000 $ 19,684,000
Finished Goods............................................... 58,615,000 57,952,000
Supplies..................................................... 4,317,000 4,618,000
------------- ---------------
86,249,000 82,254,000
Less: Inventory Reserve...................................... (1,397,000) (1,418,000)
------------- ---------------
Total Inventories, Net....................................... $ 84,852,000 $ 80,836,000
------------- ---------------
------------- ---------------
</TABLE>
The (LIFO) method was used for determining the cost of approximately 55% and
47% of total inventories at April 30, 1999 and October 31, 1998, respectively.
(4) DISCONTINUED OPERATIONS
In February 1999, the Company's management, with the concurrence of its
Board of Directors, approved a formal plan to dispose of its Proponite business.
On April 30,1999, the Company sold certain
5
<PAGE>
AEP INDUSTRIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(4) DISCONTINUED OPERATIONS (CONTINUED)
assets of the Proponite division to Applied Extrusion Technologies Inc. pursuant
to a sales agreement dated March 4, 1999. The Company will wind down this
non-core business during the current fiscal year.
The disposal of the Proponite business has been accounted for as a
discontinued operation and, accordingly, its net assets (liabilities) have been
segregated from continuing operations in the accompanying consolidated balance
sheets, and its operating results are segregated and reported as discontinued
operations in the accompanying consolidated statements of income and cash flows.
The estimated loss on disposal includes the writedown of property, plant and
equipment, inventory and other assets, closedown expenses, and losses of the
Proponite business through the date of disposal. In April 1999, the Company
revised its estimate of the net realizable value of the Proponite inventory on
hand and charged an additional loss on disposal of assets of $793,000 net of tax
benefits.
Condensed financial information relating to the discontinued operations of
Proponite is as follows:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1999 1998
------------- ---------------
<S> <C> <C>
Net assets of discontinued operations:
Current assets............................................. $ 8,120,000 $ 13,882,000
Property, plant and equipment-net.......................... 6,534,000 34,976,000
------------- ---------------
Total assets........................................... 14,654,000 48,858,000
Current liabilities (including provision for disposal in
1999).................................................... 10,122,000 3,712,000
------------- ---------------
Net assets of discontinued operations........................ $ 4,532,000 $ 45,146,000
------------- ---------------
------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED
APRIL 30, APRIL 30, APRIL 30,
1999 1998 1998
------------- ------------- -------------
<S> <C> <C> <C>
Results of Operations:
Net sales..................................... $ 6,633,000 $ 9,390,000 $ 19,304,000
------------- ------------- -------------
Gross profit (loss)........................... (873,000) 782,000 2,111,000
------------- ------------- -------------
Net loss...................................... $(1,205,000) $ (525,000) $ (552,000)
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
At the time of the Company's acquisition of Borden Global Packaging (BGP),
management decided not to retain the Rigids' businesses of BGP. The Rigids'
businesses manufactured, marketed and distributed wet food containers, dry food
trays and disposable food service products. These businesses were not core and
were sold by the Company in the prior fiscal year. Beginning November 1, 1997,
the Company began recording these businesses as discontinued operations and for
the three months and six months ended April 30, 1998 recorded a net loss from
these discontinued operations of $1,232,000 and $1,835,000, respectively.
(5) RESTRUCTURING CHARGE
During the second quarter of 1999, management and the Belgian Workers'
Council approved a plan to eliminate 17 manufacturing positions in the Company's
Belgium operations. As a result, a restructuring charge of $1,457,0000 for
severance was recorded in cost of sales section of the income statement. At
April 30, 1999, $400,000 had been paid in termination benefits with the Company
anticipating the remaining $1.1 million to be fully paid by October 31, 1999.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF CONTINUING OPERATIONS
THREE MONTHS ENDED APRIL 30, 1999 AS COMPARED TO THREE MONTHS ENDED APRIL 30,
1998
NET SALES AND GROSS PROFIT
Net sales for the three months ended April 30, 1999 decreased by $3.9
million, or 2.3%, to $165.8 million from $169.7 million for the three months
ended April 30, 1998. Net sales in North America decreased to $99.3 million
during the 1999 period from $99.4 million during the 1998 period. This nominal
decrease was primarily due to a 7.5% decrease in per unit selling prices as a
result of a change in product mix and lower raw material costs which were passed
through to our customers. These reductions in selling prices were offset by a
8.0% increase in sales volume. Net sales in Europe decreased 5.0% to $47.8
million for the second three months of fiscal 1999 from $50.3 million for the
second three months of fiscal 1998 primarily due to a 19.1% decrease in average
selling prices, offset by a 17.3% volume increase. Net sales in Asia/Pacific
decreased 6.6% to $18.7 million during the 1999 period from $20.0 million for
the 1998 period, primarily due to a 6.5% sales volume decrease and a nominal
decrease in average selling prices which resulted from the economic pressures of
the region.
Gross profit for the three months ended April 30, 1999 was $40.9 million
compared to $38.0 million for the three months ended April 30, 1998. Gross
profit in North America increased 16.7% to $28.5 million for the three months
ended April 30, 1999 due to increased sales volume, which lowered fixed overhead
costs per unit, a change in product mix and reduced raw material costs. Gross
profit in Europe decreased 5.7% to $18.2 million for the three months ended
April 30, 1999 primarily due to a restructuring charge at our Belgian operations
of approximately $1.5 million relating to employee severance. This charge was
partially offset by additional gross profit realized from the 17.3% increase in
sales volume in spite of continuing general economic pressures in Eastern
Europe, which resulted in lower average selling prices and lower margins.
Asia/Pacific gross profit for the three months ended April 30, 1999 decreased by
$532,000 or 16.2%, due to a 6.5% decrease in volume and lower average per unit
selling prices which resulted from the economic pressures of the region. In
addition, we incurred certain costs associated with the shut down and
consolidation of a plant in Australia.
OPERATING EXPENSES
Operating expenses for the three months ended April 30, 1999 increased $2.6
million, or 9.6%, to $29.9 million from $27.3 million for the three months ended
April 30, 1998. This increase is attributable to a worldwide increase in sales
volume of 8.8% which increased warehousing and delivery costs by $1.7 million
and increased selling expenses by $538,000. Selling expenses related primarily
to commissions paid. Worldwide general and administrative costs increased
$390,000 for the period with no major increase in one area.
INTEREST EXPENSE
Interest expense for the three months ended April 30, 1999 was $8.0 million
compared to $8.4 million for the three months ended April 30, 1998. This
decrease in interest expense resulted from lower average debt outstanding for
the period.
OTHER INCOME (EXPENSE)
Other income (expense) for the three months ended April 30, 1999 amounted to
$443,000.. This amount included foreign currency exchange gains realized during
the period, gains on sales of machinery and equipment, interest income earned
for the period and income from investment in a joint venture.
7
<PAGE>
DISCONTINUED OPERATIONS
In April, 1999, the Company revised its estimate of the net realizable value
of the Proponite inventory on hand and charged an additional loss on disposal of
assets for $793,000 net of tax benefits.
The Company's second quarter 1998 included a net loss from discontinued
operations of the Rigids businesses of $1,232,000. The sale of these businesses
was completed by October 31, 1998.
NET INCOME FROM CONTINUING OPERATIONS
Net income from continuing operations for the three months ended April 30,
1999 increased 74.5% to $2.1 million from $1.2 million for the three months
ended April 30, 1998. This increase was due to increased sales volume and an
overall increase in gross profit margins.
RESULTS OF CONTINUING OPERATIONS
SIX MONTHS ENDED APRIL 30, 1999 AS COMPARED TO SIX MONTHS ENDED APRIL 30, 1998
NET SALES AND GROSS PROFIT
Net sales for the six months ended April 30, 1999 decreased by $20.3
million, or 6.0%, to $317.7 million from $338.0 million for the six months ended
April 30, 1998. Net sales in North America decreased 5% to $186.8 million during
the 1999 period from $197.2 million during the 1998 period. This decrease was
primarily due to a 9% decrease in per unit selling prices as a result of a
change in product mix and lower raw material costs which were passed through to
our customers. These reductions in selling prices were offset by a 4% increase
in sales volume. Net sales in Europe decreased 5% to $93.1 million for the first
six months of fiscal 1999 from $98.5 million for the first six months of fiscal
1998 primarily due to a 16% decrease in average selling prices, offset by a 12%
volume increase. Net sales in Asia/Pacific decreased 11% to $37.8 million during
the 1999 period from $42.3 million for the 1998 period, primarily due to a 5%
sales volume decrease and a 6% decrease in average selling prices which resulted
from the economic pressures of the region.
Gross profit for the six months ended April 30, 1999 was $78.2 million
compared to $76.4 million for the six months ended April 30, 1998. Gross profit
in North America increased 9% to $4.6 million for the six months ended June 30,
1999 due to increased sales volume, which lowered fixed overhead costs per unit,
a change in product mix and reduced raw material costs. Gross profit in Europe
decreased 7% to $1.4 million for the six months ended April 30, 1999 primarily
due to a restructuring charge at our Belgian operations of approximately $1.5
million relating to employee severance. This charge was partially offset by
additional gross profit realized from the 13% increase in sales volume in spite
of continuing general economic pressures in Eastern Europe, which resulted in
lower average selling prices and lower margins. Asia/Pacific gross profit for
the six months ended April 30, 1999 decreased by $1.4 million, or 20%, due to a
6% decrease in volume and lower average per unit selling prices which resulted
from the economic pressures of the region. In addition, we incurred certain
costs associated with the shut down and consolidation of a plant in Australia.
OPERATING EXPENSES
Operating expenses for the six months ended April 30, 1999 increased $1.6
million, or 2.9%, to $56.6 million from $55.0 million for the six months ended
April 30, 1998. This increase is attributable to a worldwide increase in sales
volume of 5% which increased warehousing and delivery costs by $1.8 million and
increased selling expenses by $287,000. Selling expenses related primarily to
commissions paid. This was partially offset by a reduction in worldwide general
and administrative costs of $454,000.
8
<PAGE>
INTEREST EXPENSE
Interest expense for the six months ended April 30, 1999 was $16.3 million
compared to $16.6 million for the six months ended April 30, 1998. This decrease
in interest expense resulted from lower average debt outstanding for the period,
slightly offset by higher interest rates paid in the first quarter 1999.
OTHER INCOME (EXPENSE)
Other income (expense) for the six months ended April 30, 1999 increased
369% to $1.2 million from $255,000 for the period ended April 30, 1998. This
amount included foreign currency exchange gains realized during the period,
gains on sales of machinery and equipment, interest income earned for the period
and income from investment in a joint venture.
NET INCOME FROM CONTINUING OPERATIONS
Net income from continuing operations for the six months ended April 30,
1999 increased 25.8% to $3.9 million from $3.1 million for the six months ended
April 30, 1998. This increase was due to increased sales volume and an overall
increase in gross profit margins.
DISCONTINUED OPERATIONS
The loss from discontinued operations for the six months ended April 30,
1999 of $18.4 million includes the net losses of the Proponite business of $1.2
million for the period ended January 31, 1999. This loss also consists of an
after tax reserve of $17.2 million, established to write down property, plant
and equipment, inventory and other assets and to provide for closedown expenses
and the net losses for the period ended April 30, 1999.
The loss from discontinued operations for the six months ended April 30,
1998 of $2.4 million includes the net losses of the Proponite business of
$552,000 and net losses of the Rigids businesses of $1,835,000. The sale of the
Rigids businesses was completed by October 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
We have historically financed our operations through cash flow generated
from operations and borrowings by us or our subsidiaries under various credit
facilities. Our principal uses of cash have been to fund working capital,
including operating expenses, debt service and capital expenditures.
Our working capital was $55.7 million at April 30, 1999, compared to $81.6
million at October 31, 1998. This decrease of $25.9 million in working capital
is primarily the result of a non-cash provision for disposal of net assets of
the discontinued Proponite business, including a reserve for operating losses
through the disposal date of $28.2 million, and the strengthening of the United
States dollar during fiscal 1998 which further reduced translated working
capital balances. The remaining increases and decreases in components of our
financial position reflect normal operating activity.
On October 11, 1996, we entered into the Credit Agreement with the Morgan
Guaranty Trust Company, as Agent. The Credit Agreement provided us with two
credit facilities consisting of a term credit facility in the amount of $350.0
million and a revolving credit facility for an amount up to $100.0 million. The
proceeds borrowed under the Credit Agreement were used to pay the $263.0 million
cash portion of the purchase price for the Borden packaging acquisition, to
repay the $95.4 million balance under the then existing term credit and
revolving credit obligations and to pay the expenses and related costs of the
acquisition. After the initial drawdown, no further borrowings are permitted
under the term loan. As of April 30, 1999, there was $104.5 million outstanding
under the term credit facility which bears interest at a rate of 6.63% per
annum. There are no outstanding borrowings under the revolving credit facility.
The Credit Agreement, as amended, contains financial covenants, the most
significant of which are a cash flow ratio and a fixed charge coverage ratio.
For the period from May 1, 1999 through July 31, 1999, the cash flow ratio may
not exceed 4.50:1. The fixed charge coverage ratio may not be less than 1.6:1
for
9
<PAGE>
the same period. The Indenture pursuant to which the 9.875% Senior Subordinated
Notes were issued also contains customary covenants including limitations on the
incurrence of debt, the disposition of assets and the making of restricted
payments. We are currently in compliance with all of these covenants. We do not
foresee any problems in the near future in remaining in compliance with these
covenants.
On November 19, 1997, we completed an offering of 9.875% Senior Subordinated
Notes due November 15, 2007 in the aggregate principal amount of $200.0 million.
The net proceeds from the Notes have been used to repay a portion of the
indebtedness then outstanding under our Credit Agreement.
We also have a $10.0 million unsecured revolving credit facility available
for working capital purposes. As of April 30, 1999, there was no outstanding
borrowing under this credit facility.
We maintain various unsecured short-term credit facilities at our foreign
subsidiaries. At April 30, 1999, our aggregate amount outstanding under these
facilities was approximately $12.0 million and approximately $55.0 million was
available for borrowing. Borrowings from these facilities are used to support
operations at such subsidiaries and are generally serviced by cash flow from
operations at such subsidiaries.
Our cash and cash equivalents were $3.7 million at April 30, 1999, as
compared to $4.0 million at October 31, 1998. Net cash provided by operating
activities during the six months ended April 30, 1999, was $9.2 million,
primarily due to depreciation and amortization expense of $15.9 million and net
income from continuing operations of $3.9 million, offset by a reduction in
trade accounts payable and accrued expenses of $6.1 million and net decreases in
other operating assets and liabilities of $4.5 million. In each period, the net
decreases in other operating assets and liabilities reflect normal operating
activity.
Net cash used in investing activities during the six months ended April 30,
1999 was $2.7 million, resulting primarily from the net investment in capital
expenditures of $14.4 million and the acquisition of the Thermofilm subsidiary
for $1.9 million, which was offset by proceeds received from the sales of
machinery and equipment in the period of $315,000.
In March 1999, we announced that we would discontinue operations at our
Proponite facility and entered into an agreement to sell certain assets of this
division. The sale was closed on April 30, 1999 and we received payment of $13.3
million for these assets. We estimate that net proceeds of approximately $4.5
million should be realized during the final wind down of this non-core business.
Net cash used in financing activities for the six months ended April 30,
1999 was $10.9 million, reflecting net repayments of $12.4 million on current
credit facilities and proceeds from stock issuances of $1.4 million.
The remaining increases and decreases in the components of our financial
position reflect normal operating activity.
We believe that net proceeds from the sale and wind down of the Proponite
operations and our cash flow from operations, combined with the availability of
funds under the Credit Agreement and credit lines available to our foreign
subsidiaries for local currency borrowings, will be sufficient to meet our
working capital, capital expenditure and debt service requirements for the
foreseeable future.
EFFECTS OF INFLATION
Inflation is not expected to have significant impact on our business.
YEAR 2000
We are currently undertaking a systems readiness review that will help
mitigate the risks associated with the Year 2000 issue. The Year 2000 issue
refers to programs that were written to store only two digits of the year
portion of date-related information in order to more efficiently handle and
store data. These programs are unable to properly distinguish between the year
1900 and the year 2000. Our review addresses: (a) our application software and
hardware and related operating systems; (b) embedded
10
<PAGE>
technology in production equipment; and (c) Year 2000 compliance by third
parties, principally suppliers and customers. In fiscal 1997, we initiated
programs to upgrade and enhance our domestic and international business systems
in order to replace aging technologies and provide infrastructural support to
these businesses. In connection with these upgrades and enhancements, we have
installed new systems which are designed to be Year 2000 compliant in most of
our facilities, and we are in the process of finalizing these installations. The
domestic businesses application software and hardware have been inventoried,
modified or upgraded, and where appropriate, replaced, to assure Year 2000
compliance. We expect to complete all systems installations in our international
facilities by September 1999 to assure compliance.
We have completed our inventories and assessments in regard to embedded
technology, such as microcontrollers in our production equipment, at each of our
worldwide businesses. We expect that all required upgrades will be completed by
June 30, 1999 at our domestic facilities and by September 30, 1999 at our
international facilities.
In evaluating the impact on us of Year 2000 compliance by significant third
parties, each of our business locations has identified and contacted each
significant third party to ascertain such third party's Year 2000 readiness. All
critical suppliers will be continued to be contacted telephonically to ascertain
any changes in their Year 2000 projects. Key customers have been identified and
contacted. The failure of any one customer to complete a sale as a result of its
failure to be Year 2000 compliant will not have an adverse effect on the
financial condition of the Company.
We consider the reasonable worst case scenario to be a disruption in the
resin supply for our PVC business. In order to avoid such problems we intend to
maintain larger than normal inventories of raw materials and commodity
manufactured products at our various facilities. In addition, should the
electricity supply be disrupted we will be prepared to transfer production from
a facility that may be affected by such a power disruption to a facility that is
operational. This should enable us to substantially maintain production and
sales.
Once Year 2000 compliance areas are reviewed and necessary upgrades are
completed, we plan to test systems to verify that compliance has been achieved.
The target completion date for system testing is October 31, 1999. We estimate
the total cost associated with Year 2000 compliance activities, including
upgrades of the international business systems will be approximately $7.2
million, of which $6.0 million has been incurred through April 30, 1999. Cash
flow from operations has funded this project to date and is expected to fund the
balance of the project.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect our results of
operations, liquidity, and financial condition. Because of the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of Year 2000 readiness of third party suppliers and customers, we
are unable to determine at this time whether the consequences of Year 2000
failures will have a material impact on our results of operations, liquidity,
and financial condition.
FORWARD LOOKING STATEMENTS
Management's Discussion and Analysis of Financial Condition and the Results
of Operations and other sections of this report contain "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 of its operations and its ability to generate sufficient funds to
meet its cash requirements. The Company wishes to caution readers that the
assumptions which form the basis for forward-looking statements with respect to
or that may impact earnings for the year ending October 31, 1999, include many
factors that are beyond the Company's ability to control or estimate precisely.
These risks and uncertainties include, but are not limited to, 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 need for the Company's products, price fluctuations which could
adversely impact the Company's inventory and changes in United States or
international economic or political conditions, such as inflation or
fluctuations in interest or foreign exchange rates. Parties are cautioned not to
rely on any such forward looking benefits or judgments in this section and in
other parts of this report.
11
<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.
<TABLE>
<S> <C>
Date: June 3, 1999 /s/ J. BRENDAN BARBA
---------------------------------------------
J. Brendan Barba
Chairman of the Board, President
and Chief Executive Officer
Date: June 3, 1999 /s/ PAUL M. FEENEY
---------------------------------------------
Paul M. Feeney
Executive Vice President
Principal Financial and Accounting
Officer
</TABLE>
12
<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
13, 1999, for the purpose of electing three Class A directors and approving
amendments to the 1995 Stock option plan and 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 A 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>
Kenneth Avia............................................ 6,092,461 14,320 1,183,307
Paul E. Gelbard......................................... 6,092,011 14,770 1,183,307
Scott M. Stuart......................................... 6,092,204 14,577 1,183,307
</TABLE>
2. The amendments to the 1995 Stock Option Plan was approved by the
following vote:
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES SHARES NOT
"FOR" "AGAINST" "ABSTAINING" VOTED
- ------------ ------------ ------------- ----------
<S> <C> <C> <C>
4,931,979 197,909 21,659 955,234
</TABLE>
3. 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>
6,093,053 2,419 11,309 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11--Computation of weighted average number of shares
outstanding. Page 16
(b) There were no current reports on Form 8-K filed during the quarter ended
April 30, 1999.
13
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- ------------------- -------------------------------------------------------------------------------------------
<C> <S>
3(a) Restated Certificate of Incorporation of theCompany as filed April 11, 1997 (incorporated
by reference to Exhibit 3(a) to the Quarterly Report on 10-Q for the quarter ended July 31,
1997)
3(b) Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 4 to
Registrant's report on Form 8-K, dated October 11, 1996)
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)(1) 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(f)(2) Amendment No. 1, dated as of October 24, 1997, to the 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 10(f)(2) to the Annual Report on Form 10-K
for the year ended October 31, 1997)
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)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- ------------------- -------------------------------------------------------------------------------------------
<C> <S>
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 the Annual Report on Form 10-K for the
year ended October 31, 1997)
10(l) Employment Agreement, dated as of October 11, 1996, between the Company and Paul M. Feeney
(incorporated by reference to Exhibit 10(l) to the Annual Report on Form 10-K for the year
ended October 31, 1997)
10(m) Purchase Agreement, dated November 14, 1997, among Registrant and J.P. Morgan Securities,
Inc., Morgan Stanley & Co. Incorporated and Salomon Brothers Inc (incorporated by reference
to Exhibit 1 to Registrant's report on Form 8-K, dated November 19, 1997)
10(n) Registration Rights Agreement, dated as of November 19, 1997, among Registrant and J.P.
Morgan Securities, Inc., Morgan Stanley & Co. Incorporated and Salomon Brothers, Inc
(incorporated by reference to Exhibit 1 to Registrant's report on Form 8-K, dated November
19, 1997)
10(o) Indenture, dated as of November 19, 1997, between the Registrant and The Bank of New York,
as Trustee (incorporated by reference to Exhibit 1 to Registrant's report on Form 8-K,
dated November 19, 1997)
10(p) Agreement for Sale of Business, dated July 18, 1997, between ICI Australia Limited and ICI
Australia Operations PTY Limited as Seller, and Registrant's subsidiary AEP Industries
(Australia) PTY Limited, as Purchaser (incorporated by Reference to Exhibit 10(p) to the
Annual Report on Form 10-K for the year ended October 31, 1997)
27 Financial Data Schedule
</TABLE>
15
<PAGE>
EXHIBIT 11
AEP INDUSTRIES INC.
COMPUTATION OF THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 1999
<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 DAYS IN
1999 COMMON STOCK OUTSTANDING PERIOD OUTSTANDING OUTSTANDING PERIOD
- ----------------------------- -------------- ----------- --------- ---------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 1--October 31....... 7,277,701 7,277,701
Shares Issued:
November 4, 1998............. 400 89 89 400 178 181
November 18, 1998............ 1,800 89 89 1,800 164 181
January 4, 1999.............. 10,187 89 89 10,187 117 181
January 29, 1999............. 600 89 89 600 92 181
March 5, 1999................ 1,800 57 89 1,153 57 181
April 19, 1999............... 900 12 89 121 12 181
April 23, 1999............... 1,400 8 89 126 8 181
April 27, 1999............... 200 4 89 9 4 181
April 28, 1999............... 48,420 3 89 1,632 3 181
April 29, 1999............... 200 2 89 4 2 181
April 29, 1999............... 400 2 89 9 2 181
-------------- ----------------
Total Weighted Average
Shares..................... 7,344,008 7,293,743
Total Dilutive Stock
options.................... -- 157,658
-------------- ----------------
Total Shares........... 7,344,008 7,451,401
-------------- ----------------
-------------- ----------------
<CAPTION>
1998
- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
November 1--October 31....... 7,206,787 7,206,787
Shares Issued:
November 18, 1997............ 60 89 89 60 164 181
December 3, 1997............. 400 89 89 400 149 181
December 9, 1997............. 100 89 89 100 143 181
December 15, 1997............ 200 89 89 200 137 181
December 18, 1997............ 1,900 89 89 1,900 134 181
December 19, 1997............ 1,000 89 89 1,000 133 181
January 16, 1998............. 800 89 89 800 105 181
January 20, 1998............. 200 89 89 200 101 181
January 27, 1998............. 600 89 89 600 94 181
January 30, 1998............. 6,950 89 89 6,950 91 181
February 6, 1998............. 200 84 89 189 84 181
February 9, 1998............. 200 81 89 182 81 181
February 11, 1998............ 2,000 79 89 1,775 79 181
February 12, 1998............ 4,500 78 89 3,944 78 181
February 19, 1998............ 2,900 71 89 2,313 71 181
February 19, 1998............ (861) 71 89 (687) 71 181
February 26, 1998............ 217 64 89 156 64 181
March 5, 1998................ 36,071 57 89 23,102 57 181
March 26, 1998............... 200 36 89 81 36 181
April 1, 1998................ 400 30 89 135 30 181
April 6, 1998................ 400 25 89 112 25 181
April 20, 1998............... 200 11 89 25 11 181
April 21, 1998............... 200 10 89 22 10 181
April 23, 1998............... 600 8 89 54 8 181
April 29, 1998............... 200 2 89 4 2 181
-------------- ----------------
Total Weighted Average
Shares..................... 7,266,424 7,250,405
Total Dilutive Stock
options.................... -- 220,901
-------------- ----------------
Total Shares........... 7,266,424 7,471,306
-------------- ----------------
-------------- ----------------
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF SHARES
1999 OUTSTANDING
- ----------------------------- ----------------
<S> <C>
November 1--October 31....... 7,277,701
Shares Issued:
November 4, 1998............. 393
November 18, 1998............ 1,631
January 4, 1999.............. 6,585
January 29, 1999............. 305
March 5, 1999................ 363
April 19, 1999............... 8
April 23, 1999............... 6
April 27, 1999............... 0
April 28, 1999............... 27
April 29, 1999............... 0
April 29, 1999............... 0
----------------
Total Weighted Average
Shares..................... 7,287,019
Total Dilutive Stock
options.................... 157,658
----------------
Total Shares........... 7,444,677
----------------
----------------
1998
- -----------------------------
<S> <C>
November 1--October 31....... 7,206,787
Shares Issued:
November 18, 1997............ 54
December 3, 1997............. 329
December 9, 1997............. 79
December 15, 1997............ 151
December 18, 1997............ 1,407
December 19, 1997............ 735
January 16, 1998............. 464
January 20, 1998............. 112
January 27, 1998............. 312
January 30, 1998............. 3,494
February 6, 1998............. 93
February 9, 1998............. 90
February 11, 1998............ 873
February 12, 1998............ 1,939
February 19, 1998............ 1,138
February 19, 1998............ (338)
February 26, 1998............ 77
March 5, 1998................ 11,359
March 26, 1998............... 40
April 1, 1998................ 66
April 6, 1998................ 55
April 20, 1998............... 12
April 21, 1998............... 11
April 23, 1998............... 27
April 29, 1998............... 2
----------------
Total Weighted Average
Shares..................... 7,229,368
Total Dilutive Stock
options.................... 210,889
----------------
Total Shares........... 7,440,207
----------------
----------------
</TABLE>
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AEP
INDUSTRIES INC. FORM 10-Q FOR THE THREE MONTHS ENDED APR 30 1999 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-31-1999
<PERIOD-START> NOV-1-1998
<PERIOD-END> APR-30-1999
<CASH> 3,746
<SECURITIES> 0
<RECEIVABLES> 99,828
<ALLOWANCES> 5,093
<INVENTORY> 84,852
<CURRENT-ASSETS> 204,934
<PP&E> 364,055
<DEPRECIATION> 120,931
<TOTAL-ASSETS> 558,837
<CURRENT-LIABILITIES> 149,254
<BONDS> 0
100
0
<COMMON> 0
<OTHER-SE> 70,664
<TOTAL-LIABILITY-AND-EQUITY> 558,837
<SALES> 317,652
<TOTAL-REVENUES> 318,848
<CGS> 238,008
<TOTAL-COSTS> 239,465
<OTHER-EXPENSES> 55,604
<LOSS-PROVISION> 1,030
<INTEREST-EXPENSE> 16,268
<INCOME-PRETAX> 6,481
<INCOME-TAX> 2,575
<INCOME-CONTINUING> 3,906
<DISCONTINUED> (18,394)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,488)
<EPS-BASIC> (1.99)
<EPS-DILUTED> (1.99)
</TABLE>
