AEP INDUSTRIES INC, S-3, 1999-06-04

AEP INDUSTRIES INC
S-3, 1999-06-04
UNSUPPORTED PLASTICS FILM & SHEET

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1999

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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REGISTRATION STATEMENT ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
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AEP INDUSTRIES INC.
(Exact name of registrant as specified in its charter)

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DELAWARE 22-1916107
(State or other jurisdiction of Incorporation) (I.R.S. Employer ID No.)
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125 PHILLIPS AVENUE
SOUTH HACKENSACK, NEW JERSEY 07606-1546
(201) 641-6600
(Address and telephone number of registrant's principal executive offices)

PAUL M. FEENEY
CHIEF FINANCIAL OFFICER
125 PHILLIPS AVENUE
SOUTH HACKENSACK, NEW JERSEY 07606-1546
(201) 641-6600
(Address and telephone number of agent for service)
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COPIES TO:

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PAUL E. GELBARD, ESQ. WINTHROP B. CONRAD, JR.
BACHNER, TALLY, POLEVOY & MISHER LLP DAVIS POLK & WARDWELL
380 MADISON AVENUE 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10017
(212) 687-7000 (212) 450-4000
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APPROXIMATE DATE OF PROPOSED COMMENCEMENT OF SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. / /

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
registration statement for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration for the same
offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

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PROPOSED
MAXIMUM AGGREGATE PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SECURITY(2) OFFERING PRICE REGISTRATION FEE
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Common Stock, $.01 par value...................... 2,774,741 shares $37.1875 $103,185,680.94 $28,685.62
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(1) Includes 361,923 shares to cover the Underwriters' over-allotment option.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act of 1933, as amended, based on the
average of the high and low price of the common stock on the Nasdaq National
Market on June 1, 1999.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
PROSPECTUS

SUBJECT TO COMPLETION
DATED JUNE 4, 1999

2,412,818 SHARES

[LOGO]

COMMON STOCK

Borden, Inc., the selling stockholder, is offering all of the shares of our
common stock offered hereby and will receive all of the proceeds of this
offering.

Our common stock is quoted on the Nasdaq National Market under the symbol
"AEPI." On June 1, 1999, the reported last sale price for the common stock on
Nasdaq was $36.625 per share.

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 4.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT BORDEN, INC.
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Per Share $ $ $
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Total $ $ $
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We have granted the underwriters the right to purchase from us up to an
additional 361,923 shares of common stock to cover over-allotments. If the
over-allotment option is exercised in full, we will receive proceeds of $ .

J.P. MORGAN & CO. LEHMAN BROTHERS

, 1999
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You should rely only on the information contained or incorporated by reference
in this prospectus. We have not authorized anyone to provide you with
information different from that contained or incorporated by reference in this
prospectus. This prospectus is an offer to sell, or a solicitation of offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.

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TABLE OF CONTENTS
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PAGE
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Prospectus Summary............................. 1
Risk Factors................................... 4
Use of Proceeds................................ 8
Price Range of Common Stock.................... 8
Dividend Policy................................ 8
Capitalization................................. 9
Selected Consolidated Financial Data........... 10
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 12

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PAGE
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Business....................................... 18
Management..................................... 25
Selling Stockholder............................ 25
Description of Capital Stock................... 26
Underwriting................................... 28
Legal Matters.................................. 30
Experts........................................ 30
Incorporation of Certain Documents by
Reference.................................... 30
Where You Can Find More Information............ 31
</TABLE>

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PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS SOME OF THE INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. TO UNDERSTAND THIS OFFERING FULLY, YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY, INCLUDING THE RISK FACTORS AND THE INFORMATION
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, INCLUDING THE FINANCIAL DATA AND
THE NOTES THERETO.

THE COMPANY

AEP Industries is a leading worldwide manufacturer of plastic packaging films.
We manufacture both commodity films, which are made to general specifications,
and specialty films, which are made to customer specifications. The films are
used in the packaging, transportation, food, automotive, pharmaceutical,
chemical, electronic, construction, agriculture and textile industries. Our
manufacturing operations are located in eleven countries in North America,
Europe and the Asia/Pacific Region.

Our products include:

- Polyvinyl chloride, or PVC, wrap for use as meat and food wrap,
institutional film and twist wrap. This product line represented 30% of
fiscal 1998 revenues;

- Industrial films made of polyethylene and polypropylene for use as drum,
box, carton and pail liners, cheese films, barrier films, freezer films,
bags for furniture and mattresses, films to cover high value products and
agricultural films. This product line represented 27% of fiscal 1998
revenues;

- Stretch (pallet) wrap made of polyethylene for use as pallet wrap. This
product line represented 25% of fiscal 1998 revenues;

- Printed and converted films, primarily of polyethylene, for use as
printed, laminated and/or converted films providing flexible packaging for
consumer products. This product line represented 12% of fiscal 1998
revenues; and

- Other products, which consist of specialty films made of various thermal
plastics and customized machinery for sale or resale into the flexible
packaging markets. This product line represented 6% of fiscal 1998
revenues.

COMPETITIVE STRENGTHS

We believe that our competitive strengths include the following:

LEADING MARKET SHARES; BROAD PRODUCT LINES

With approximately 30 years of industry experience, we are a market leader in
most of our core product lines. We believe we hold the number one market share,
on a worldwide basis, in stretch wrap and polyvinyl chloride food wrap and the
number two market share position for industrial films in North America. We also
are a market leader in Europe for processed cheese films and twist wrap. Our
diverse range of high quality products and high level of customer service have
enabled us to develop long-standing relationships with our customers.

LOW COST PRODUCER

We believe that our production costs are among the lowest in the industry. Our
favorable cost position is the result of several important factors. Our position
as the world's largest manufacturer of PVC films and stretch wrap and North
America's second largest manufacturer of industrial films, coupled with our
long-standing relationships with our suppliers, has enabled us to negotiate
favorable resin prices. Since resin typically comprises approximately 60% of a
manufacturer's cost of goods sold, our purchasing leverage ensures that we are
able to offer competitive pricing. In addition, we use highly automated
manufacturing equipment and continually seek to consolidate less efficient
operations and allocate production among our plants in order to maximize
capacity utilization. These efforts have enabled us to significantly reduce
labor costs, waste and production time.

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STRATEGICALLY LOCATED, FLEXIBLE MANUFACTURING BASE

Our plants are equipped to produce multiple products and are strategically
located. This enables us to reduce transportation and warehousing costs. The
proximity of our manufacturing sites to major markets allows us to respond
rapidly to changing customer needs and market conditions. Because of our plant
and machine configurations, we are able to target capacity to a variety of end
markets. This flexibility allows us to optimize our production capacity to take
advantage of the highest margin markets available at any given time.

BROAD GEOGRAPHIC EXPOSURE

Approximately 29% of our sales are in Europe and 12% are in the Asia/Pacific
region. This diversity ensures that we are not dependent on any one geographic
area and allows for greater sales and operating performance opportunities as
economic conditions in those regions improve. Additionally, our various
international operations enable us to address the global packaging needs of our
customers.

STRONG CONSOLIDATION EXPERIENCE

The Borden packaging acquisition, which we completed in October 1996, added
$490.0 million to our annual sales. Since this acquisition, we have achieved
synergies of over $25.0 million by rationalizing costs, selling non-core assets,
including all of our South African, rigid plastics and oriented polypropylene
businesses, and consolidating production facilities. We have also made several
smaller acquisitions to augment our product line and diversify geographically.

THE OFFERING

The following information is based on 7,353,488 shares of common stock
outstanding on May 31, 1999. This number excludes 881,490 shares of common stock
issuable upon the exercise of stock options outstanding on May 31, 1999 at a
weighted average exercise price of $25.94 per share. It also excludes an
additional shares of common stock reserved for future issuance under our
employee benefit plans.

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COMMON STOCK OFFERED BY BORDEN........... 2,412,818 shares of common stock

COMMON STOCK OUTSTANDING AFTER THE 7,353,488 shares of common stock; 7,715,411
OFFERING............................... shares if the entire over-allotment option is
exercised

OVER-ALLOTMENT OPTION.................... 361,923 shares of common stock from AEP
Industries

USE OF PROCEEDS.......................... We will not receive any proceeds from the sale
of shares of common stock in this offering by
Borden. Any proceeds that we receive from the
sale of shares of common stock upon exercise of
the underwriters' over-allotment option will be
used for the retirement of various short-term
credit facilities at our foreign subsidiaries
and general corporate purposes.

DIVIDEND POLICY.......................... We do not intend to pay cash dividends on our
common stock. We plan to retain any earnings for
use in the operation of our business.

NASDAQ NATIONAL MARKET SYMBOL............ "AEPI"
</TABLE>

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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

The following data has been derived from our audited and unaudited consolidated
financial statements and should be read in conjunction with those statements,
which are incorporated by reference in this prospectus.

EBITDA is defined as income from continuing operations before interest expense,
income taxes, depreciation and amortization. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to incur and service
debt. However, EBITDA should not be considered in isolation as a substitute for
net income or cash flow data determined in accordance with generally accepted
accounting principles or as a measure of our profitability or liquidity. In
addition, this measure of EBITDA may not be comparable to similar measures
reported by other companies. EBITDA margin is calculated as the ratio of EBITDA
to net sales for the period.

Data for fiscal 1996 includes the results of operations for the 20 day period
following the Borden packaging acquisition. Gross profit for the six months
ended April 30, 1999 reflects a restructuring charge of $1.5 million for
employee severance at our Belgian operations.

Consolidated financial data for the years ended October 31, 1997 and 1998 and
for the six months ended April 30, 1998 have been reclassified to reflect the
discontinuance of the Proponite business, which has been accounted for as a
discontinued operation.
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<S> <C> <C> <C> <C> <C>
YEARS ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
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IN THOUSANDS, EXCEPT PER SHARE DATA 1996 1997 1998 1998 1999
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(UNAUDITED)
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STATEMENT OF OPERATIONS DATA:
Net sales...................................... $270,534 $709,072 $666,556 $338,045 $317,652
Gross profit................................... 59,770 152,483 155,629 76,382 78,187
Income from operations......................... 15,538 38,006 42,047 21,359 21,553
Interest (expense)............................. (11,517) (30,061) (33,780) (16,585) (16,268)
Other income (expense)......................... 390 3,285 1,465 255 1,196
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Pre-tax income................................. 4,411 11,230 9,732 5,029 6,481
Income tax provision........................... 1,858 3,901 3,961 1,958 2,575
------------ ------------ ------------ ------------ ------------
Income from continuing operations.............. 2,553 7,329 5,771 3,071 3,906
Income (loss) from discontinued operations..... -- 1,242 (5,508) (2,387) (18,394)
------------ ------------ ------------ ------------ ------------
Net income (loss).............................. $2,553 $8,571 $263 $684 $(14,488)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Basic net income (loss) per share:
Basic income from continuing operations...... $0.52 $1.02 $0.79 $0.42 0.54
Basic income (loss) from discontinued
operations................................. -- 0.17 (0.75) (0.33) (2.53)
------------ ------------ ------------ ------------ ------------
Basic net income (loss) $0.52 $1.19 $0.04 $0.09 $(1.99)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Diluted net income (loss) per share:
Diluted income from continuing operations.... $0.49 $0.98 $0.78 $0.42 $0.54
Diluted income (loss) from discontinued
operations................................. -- 0.17 (0.75) (0.33) (2.53)
------------ ------------ ------------ ------------ ------------
Diluted net income (loss).................... $0.49 $1.15 $0.03 $0.09 $(1.99)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------

OTHER FINANCIAL DATA:
EBITDA......................................... $28,462 $70,101 $73,890 $36,473 $38,649
EBITDA margin.................................. 10.5% 9.9% 11.1% 10.8% 12.2%
Depreciation and amortization.................. $12,534 $28,810 $30,378 $14,859 $15,900
Capital expenditures........................... 14,040 37,614 24,444 11,211 14,362
</TABLE>
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AT APRIL
30, 1999
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(UNAUDITED)
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BALANCE SHEET DATA:
Working capital................................................................. $ 55,680
Total assets.................................................................... 558,837
Total debt (including current portion).......................................... 320,414
Shareholders' equity............................................................ 70,764
</TABLE>

3
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RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND
THE OTHER INFORMATION IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE BEFORE
DECIDING TO INVEST IN SHARES OF OUR COMMON STOCK. THESE ARE NOT THE ONLY RISKS
AND UNCERTAINTIES THAT WE FACE. ADDITIONAL RISKS AND UNCERTAINTIES THAT WE DO
NOT CURRENTLY KNOW ABOUT OR THAT WE CURRENTLY BELIEVE ARE IMMATERIAL MAY ALSO
HARM OUR BUSINESS OPERATIONS. IF ANY OF THESE RISKS OR UNCERTAINTIES ACTUALLY
OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR OPERATING RESULTS COULD BE
MATERIALLY HARMED. IN THAT CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD
DECLINE AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.

INDUSTRY RISKS

OUR BUSINESS IS DEPENDENT ON THE AVAILABILITY OF RAW MATERIALS AND OUR ABILITY
TO PASS ON PRICE INCREASES TO OUR CUSTOMERS

Our ability to maintain profitability is heavily dependent upon our ability to
pass through to our customers the full amount of any increase in raw material
costs. The principal raw materials which we use in our products are
polyethylene, polypropylene and polyvinyl chloride resins. Our ability to
operate profitably is dependent, in large part, on the market for these resins.
The supply and demand for these resins and the petro-chemical intermediates from
which they are produced are subject to substantial price fluctuations and market
disturbances, including occasional shortages of supply. Prices fluctuate as a
result of changes in natural gas and oil prices and the capacity of the
companies which produce these products.

If there is overcapacity in the production of any specific product which we
manufacture and sell, we frequently are not able to pass through the full amount
of any raw material increase. If resin prices increase and we are not able to
fully pass on the increases to our customers, our profits and our financial
condition will be adversely affected.

INTENSE COMPETITION IN THE FLEXIBLE PACKAGING MARKETS MAY ADVERSELY AFFECT OUR
OPERATING RESULTS

The business of supplying plastic packaging products is extremely competitive.
We believe that there are few barriers to entry into many of our markets. As a
result, we have experienced, and may continue to experience, competition
resulting from new manufacturers of various types of film in our product line.
Also, when new manufacturers enter the market for a product or existing
manufacturers increase capacity, they frequently reduce prices to achieve market
share. Companies can also develop products which have superior performance
characteristics to our products. Any of these actions by our competitors can
adversely affect our sales.

In addition, we face competition from a substantial number of companies which
sell similar and substitute packaging products. Some of these competitors are
subsidiaries or divisions of large international diversified companies with
extensive production facilities, well developed sales and marketing staffs and
substantial financial resources. Competitive products are also available from a
number of local manufacturers. This results in competition which is highly price
sensitive. We also compete on the basis of quality, service, timely delivery and
differentiation of product properties.

An increase in competition could result in material selling price reductions or
loss of our market share. This could materially adversely affect our operations
and financial condition.

WE ARE SUBJECT TO VARIOUS ENVIRONMENTAL LAWS AND REGULATIONS WHICH GOVERN OUR
OPERATIONS AND WHICH MAY RESULT IN POTENTIAL LIABILITY

Our operations are subject to various federal, state, local and foreign
environmental laws and regulations which govern:

- discharges into the air and water;

- the storage, handling and disposal of solid and hazardous waste;

- the remediation of soil and ground water contaminated by petroleum
products or hazardous substances or waste; and

- the health and safety of our employees.

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Future compliance with these laws and regulations may require material
expenditures by us. In addition, the nature of our current and former operations
and the history of industrial uses at some of our manufacturing facilities
expose us to the risk of liabilities or claims with respect to environmental and
worker health and safety matters. We may also be exposed to claims for
violations of environmental laws and regulations by previous owners or operators
of our property. In addition, the presence of, or failure to remediate,
hazardous substances or waste may adversely affect our ability to sell or rent
any property or to use it as collateral for a loan. We may also be liable for
costs relating to the investigation, remediation or removal of hazardous waste
and substances from a disposal or treatment facility to which we or our
predecessors sent waste or materials.

COMPANY RISKS

WE EXPERIENCE FLUCTUATIONS IN OPERATING RESULTS, WHICH MAY CAUSE OUR STOCK PRICE
TO FLUCTUATE

Our operating results have been subject to significant quarterly and annual
fluctuations. These fluctuations can be caused by:

- global economic conditions, such as the current financial crises in East
Asia and Eastern Europe;

- acquisitions;

- asset sales;

- business restructuring initiatives;

- seasonality; and

- foreign currency fluctuations.

These fluctuations make it more difficult for investors to compare our operating
results to corresponding prior year periods. These fluctuations may also cause
our stock price to fluctuate. You should not rely on our results of operations
for any particular quarter or year as indicative of our results for a full year
or any other quarter.

BECAUSE WE HAVE LIMITED CONTRACTUAL RELATIONSHIPS WITH OUR CUSTOMERS, OUR
CUSTOMERS MAY UNILATERALLY REDUCE THE PURCHASE OF OUR PRODUCTS

We generally do not enter into long-term contractual relationships with our
customers. As a result, our customers may unilaterally reduce the purchase of
our products or, in certain cases, terminate existing orders for which we may
have incurred significant production costs.

OUR BUSINESS MAY BE ADVERSELY AFFECTED BY RISKS ASSOCIATED WITH FOREIGN
OPERATIONS

Approximately 41% of our revenues are generated from operations conducted
outside North America. Conducting an international business inherently involves
a number of difficulties and risks, including the following:

- currency fluctuations;

- inflation;

- export restrictions;

- compliance with existing and changing regulatory requirements;

- tariffs and other trade barriers;

- difficulties in staffing and managing international operations;

- difficulties in shifting production between different facilities;

- longer payment cycles;

- problems in collecting accounts receivable;

- political instability and economic downturns;

- seasonal reductions in business activity in Europe during the summer
months; and

- potentially adverse tax consequences.

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We have experienced and may continue to experience any or all of these risks.
Any of these factors may materially adversely affect our sales, profits, cash
flow and financial position, which could adversely affect our stock price.

WE MAY, FROM TIME TO TIME, EXPERIENCE PROBLEMS IN OUR LABOR RELATIONS

Of our employees in North America, 314 are represented by unions under three
collective bargaining agreements. One of these agreements has expired and is
currently under negotiation. The remaining contracts will expire in 2001. A
significant change in contract terms could adversely affect us.

In many foreign countries, the majority of our employees are covered by
country-wide collective bargaining agreements. Changes in these agreements, over
which we have no control, could adversely affect us.

OUR RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED BY TRANSITION TO THE EURO

On January 1, 1999, certain members of the European Union introduced a single
currency, the Euro. During the transition period ending January 1, 2002,
European Monetary Union (EMU) countries will have the option of settling
transactions in local currencies or in the Euro. We have not yet determined
whether we intend to transact business in Euros. The conversion to the Euro
would result in:

- increased costs to us related to updating operating systems to convert to
the Euro;

- review of the effect of the Euro on our contracts; and

- updating catalogues and sales material for our products.

In addition, there are significant legal, practical and regulatory uncertainties
associated with the introduction of the Euro. Adoption of the Euro by us or
third parties with whom we transact business could adversely affect our
contracts and operations and could result in unforeseen risks. In addition,
adoption of the Euro will limit the ability of an individual EMU country to
manage fluctuations in the business cycles through monetary policy.

OUR BUSINESS MAY BE ADVERSELY AFFECTED BY RESULTS OF ONGOING HEALTH AND SAFETY
STUDIES ON PLASTICS AND RESINS

Continuing studies of the potential effect on health and safety of various
resins and plastics, including polyvinyl chlorides, are being conducted by
industry groups, government agencies and others. The results of these studies,
along with the development of any other new information, may adversely affect
our ability to market and sell certain of our products or may give rise to
claims for damages from persons who believe they have been injured by such
products, any of which could adversely affect our profits and financial
condition.

OUR BUSINESS MAY BE ADVERSELY AFFECTED IF OUR SYSTEMS OR PRODUCTS ARE NOT YEAR
2000 COMPLIANT

Computer software and other equipment utilizing microprocessors that use only
two digits to identify a year in a date field may be unable to process
accurately certain date-based information at or after the year 2000. This is
commonly referred to as the "Year 2000 issue."

We are in the process of upgrading our information technology and
non-information technology systems. The failure to correct a material Year 2000
issue 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 issue, 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.

ANTI-TAKEOVER AND CHANGE OF CONTROL PROVISIONS MAY ADVERSELY AFFECT OUR
STOCKHOLDERS

Our directors are elected for three year terms, so approximately one-third of
the board is elected each year. We are subject to a Delaware statute regulating
business combinations. These factors could discourage, hinder or preclude an
unsolicited acquisition of our company and could make it less likely that
stockholders receive a premium for their shares as a result of any such attempt.
In addition, our Board of Directors may issue, without stockholder approval,
shares of preferred stock. The preferred stock could have voting, liquidation,
dividend or other rights superior to those of the common stock. Therefore, if we
issue preferred stock, your rights as a common stockholder may be adversely
affected.

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In connection with our 1998 Senior Subordinated Notes offering, we entered into
an Indenture which requires us, upon a change of control, to offer to purchase
the outstanding Senior Subordinated Notes. If a change of control were to occur
and we could not obtain a waiver or if we do not have the funds to make the
purchase, we would be in default under the Senior Subordinated Notes, which
could depress our stock price.

FINANCIAL RISKS

WE HAVE A HIGH LEVEL OF DEBT RELATIVE TO OUR EQUITY, WHICH REDUCES CASH
AVAILABLE FOR OUR BUSINESS, MAY ADVERSELY AFFECT OUR ABILITY TO OBTAIN
ADDITIONAL FUNDS AND INCREASES OUR VULNERABILITY TO ECONOMIC OR BUSINESS
DOWNTURNS

We are highly leveraged and our operations are subject to restrictions imposed
by the terms of our indebtedness. As of April 30, 1999, our total consolidated
indebtedness, including short-term borrowings, was approximately $320.4 million
and our total shareholders' equity was approximately $70.8 million. Total
indebtedness represented 82% of the total capitalization.

Accordingly, we are subject to all of the risks associated with substantial
indebtedness, including:

- a substantial portion of our cash flow from operations will be used to
service our indebtedness;

- we will have reduced funds available for operations, future business
opportunities and other purposes;

- our ability to obtain additional financing for acquisitions, working
capital, capital expenditures, general corporate or other purposes may be
impaired;

- we are more vulnerable to economic downturns and less able to withstand
competitive pressures and react to changes in our industry and general
economic conditions.

In addition, the Indenture under which our $200.0 million outstanding Senior
Subordinated Notes were issued and the Credit Agreement under which a major
portion of our other borrowings were made contain covenants which may limit our
operating flexibility with respect to certain business matters.

IF WE FAIL TO MEET OUR SCHEDULED DEBT SERVICE REQUIREMENTS, WE MAY NEED TO
REFINANCE OUR INDEBTEDNESS OR SELL MATERIAL ASSETS

If we are unable to meet our future debt service requirements from our cash
flow, we will be required to adopt one or more alternatives such as refinancing
or restructuring our indebtedness, selling material assets or operations or
seeking to raise additional debt or equity capital. There can be no assurance
that any of these actions could be taken on a timely basis or on satisfactory
terms or that we will be able to satisfy our additional capital requirements. In
addition, the terms of the Indenture and the Credit Agreement may prohibit us
from adopting any of one or more of the alternatives which might otherwise be
available.

------------------------

THIS PROSPECTUS ALSO CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. THESE STATEMENTS RELATE TO OUR FUTURE PLANS,
OBJECTIVES, EXPECTATIONS AND INTENTIONS. THESE STATEMENTS MAY BE IDENTIFIED BY
THE USE OF WORDS SUCH AS "EXPECTS," "ANTICIPATES," "INTENDS," "PLANS" AND
SIMILAR EXPRESSIONS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED IN THESE STATEMENTS. FACTORS THAT COULD CONTRIBUTE TO SUCH
DIFFERENCES, INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED ABOVE AND
ELSEWHERE IN THIS PROSPECTUS.

7
<PAGE>
USE OF PROCEEDS

We will not receive any proceeds from the common stock sold by Borden. If the
underwriters exercise their over-allotment option in full, we estimate that our
proceeds from the exercise of such option will be approximately $12.2 million
after deducting underwriting discounts and other expenses of this offering.

We intend to use any proceeds received by us from this offering primarily for
the retirement of various short-term credit facilities at our foreign
subsidiaries and general corporate purposes.

PRICE RANGE OF COMMON STOCK

Our common stock is quoted on the Nasdaq National Market under the symbol
"AEPI." The high and low closing sale prices for our common stock, as reported
by Nasdaq, for the two fiscal years ended October 31, 1998, for the two quarters
ended April 30, 1999 and for the current period are as follows:

<TABLE>
<CAPTION>
----------------------
<S> <C> <C>
FISCAL YEAR AND PERIOD HIGH LOW
---------- ----------

1997:
First quarter....................................................... $56.500 $48.000
Second quarter...................................................... 60.000 42.500
Third quarter....................................................... 50.000 24.000
Fourth quarter...................................................... 38.250 24.000

1998:
First quarter....................................................... $33.250 $27.375
Second quarter...................................................... 38.500 33.500
Third quarter....................................................... 34.500 20.375
Fourth quarter...................................................... 21.500 16.000

1999:
First quarter....................................................... $24.000 $20.875
Second quarter...................................................... 31.125 18.000
Third quarter (through June 1, 1999)................................ 37.500 31.250
</TABLE>

On June 1, 1999, the closing price for a share of our common stock, as reported
by Nasdaq, was $36.625.

DIVIDEND POLICY

No dividends have been paid to stockholders since December 1995. We paid cash
dividends to our stockholders each fiscal quarter during the period from May 1,
1993 through October 31, 1995. In December 1995, the Board of Directors
announced that future dividends would be suspended and that otherwise available
funds would be reinvested in our business. The payment of future dividends is
within the discretion of the Board of Directors and will depend upon business
conditions, our earnings and financial condition and other relevant factors. We
are subject to a number of covenants under the term loan and revolving credit
facility and the indenture pursuant to which our 9.875% Senior Subordinated
Notes were issued, including restrictions on the amount of dividends that may be
paid.

8
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of April 30, 1999:

<TABLE>
<CAPTION>
----------
<S> <C>
AT APRIL
IN THOUSANDS, EXCEPT PER SHARE DATA 30, 1999
----------
Short-term debt:
Short-term debt............................................................... $10,647
Current portion of long-term debt............................................. 11,964
----------
Total short-term debt....................................................... 22,611
----------
Long-term debt (less current portion):
Term loan portion of Credit Agreement......................................... 93,250
Revolving credit portion of Credit Agreement.................................. --
Senior Subordinated Notes (less unamortized discount of $1,293)............... 198,707
Other......................................................................... 5,846
----------
Total long-term debt........................................................ 297,803
----------

Shareholders' equity:
Common stock, $0.01 par value; 30,000 shares authorized; 10,040 shares
issued...................................................................... 100
Additional paid-in capital.................................................... 91,588
Common stock held in treasury at cost, 2,696 shares........................... (59,892)
Retained earnings............................................................. 64,454
Accumulated other comprehensive income (loss)................................. (25,486)
----------
Total shareholders' equity.................................................. 70,764
----------
Total capitalization (including short-term debt).......................... $391,178
----------
----------
</TABLE>

9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The following tables set forth certain selected historical consolidated
financial data, which should be read in connection with our Consolidated
Financial Statements and the Notes which accompany the financial statements
incorporated by reference into this prospectus and with "Management's Discussion
and Analysis of Financial Condition and Results of Operations." The selected
balance sheet data as of October 31, 1994, 1995 and 1996 and statement of
operations data for the years ended October 31, 1994 and 1995 have been derived
from our audited financial statements. The selected balance sheet data as of
October 31, 1997 and 1998 and the statement of operations data for the years
ended October 31, 1996, 1997 and 1998 have been derived from our audited
financial statements incorporated by reference into this prospectus. The
selected consolidated financial data presented below as of and for the six
months ended April 30, 1998 and 1999 are derived from our unaudited consolidated
financial statements incorporated by reference into this prospectus. The
unaudited financial statements include all adjustments, consisting only of
normal recurring adjustments, which we consider necessary for a fair
presentation of our financial position and results of operations for these
periods. Operating results for the six months ended April 30, 1999 are not
necessarily indicative of future results.

For purposes of the ratio of earnings to fixed charges, earnings are calculated
as our pre-tax income from continuing operations plus fixed charges. Fixed
charges include interest expense on all indebtedness (including amortization of
deferred financing costs) and the component of operating lease rental expense
that we believe is representative of the interest component of rent expense. For
fiscal 1997, interest expense included $3.3 million related to the write-off of
prior unamortized debt costs.

Selected consolidated financial data for the years ended October 31, 1997 and
1998 and for the six months ended April 30, 1998 have been reclassified to
reflect the discontinuance of the Proponite business, which has been accounted
for as a discontinued operation.

10
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED
YEARS ENDED OCTOBER 31, APRIL 30,
--------------------------------------------------------------- ------------------------
IN THOUSANDS, EXCEPT PER SHARE
DATA 1994 1995 1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ----------- ----------- -----------

<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................... $184,669 $242,886 $270,534 $709,072 $666,556 $338,045 $317,652
Gross profit...................... 54,068 60,373 59,770 152,483 155,629 76,382 78,187
Income from operations............ 19,734 25,224 15,538 38,006 42,047 21,359 21,553
Interest (expense)................ (1,456) (3,209) (11,517) (30,061) (33,780) (16,585) (16,268)
Other income (expense)............ 523 384 390 3,285 1,465 255 1,196
----------- ----------- ----------- ----------- ----------- ----------- -----------
Pre-tax income.................... 18,801 22,399 4,411 11,230 9,732 5,029 6,481
Income tax provision.............. 7,397 8,723 1,858 3,901 3,961 1,958 2,575
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income from continuing
operations...................... 11,404 13,676 2,553 7,329 5,771 3,071 3,906
Extraordinary (loss).............. -- (190) -- -- -- -- --
Income (loss) from discontinued
operations...................... -- -- -- 1,242 (5,508) (2,387) (18,394)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)................. $11,404 $13,486 $2,553 $8,571 $263 $684 $(14,488)
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Basic net income (loss) per
share:
Basic income from continuing
operations.................... $1.55 $1.99 $0.52 $1.02 $0.79 $0.42 $0.54
Basic income (loss) from
discontinued operations and
extraordinary (loss).......... -- (0.03) -- 0.17 (0.75) (0.33) (2.53)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Basic net income (loss)......... $1.55 $1.96 $0.52 $1.19 $0.04 $0.09 $(1.99)
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------

Diluted net income (loss) per
share:
Diluted income from continuing
operations.................... $1.53 $1.95 $0.49 $0.98 $0.78 $0.42 $0.54
Diluted income (loss) from
discontinued operations and
extraordinary (loss).......... -- (0.03) -- 0.17 (0.75) (0.33) (2.53)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Diluted net income (loss) $1.53 $1.92 $0.49 $1.15 $0.03 $0.09 ($1.99)
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------

OTHER FINANCIAL DATA:
EBITDA............................ $28,537 $35,430 $28,462 $70,101 $73,890 $36,473 $38,649
EBITDA margin..................... 15.5% 14.6% 10.5% 9.9% 11.1% 10.8% 12.2%
Depreciation and amortization..... $ 8,280 $ 9,822 $12,534 $28,810 $30,378 $14,859 $15,900
Capital expenditures.............. 28,007 28,402 14,040 37,614 24,444 11,211 14,362

RATIOS:
Ratio of earnings to fixed
charges......................... 9.56 6.49 1.36 1.35 1.27 1.29 1.38
Ratio of EBITDA to interest
expense......................... 19.60 11.04 2.47 2.33 2.19 2.20 2.38
<CAPTION>
-----------------------------------------------------------------------------------------
OCTOBER 31, APRIL 30,
--------------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
IN THOUSANDS 1994 1995 1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>

BALANCE SHEET DATA:
Working capital................... $ 20,592 $ 15,030 $ 75,624 $ 56,044 $ 81,608 $ 84,139 $ 55,680
Total assets...................... 118,496 143,287 611,665 609,280 592,486 612,228 558,837
Total debt (including current
portion)........................ 23,595 86,000 376,457 377,006 332,785 388,302 320,414
Shareholders' equity.............. 61,789 16,808 95,133 87,982 86,301 87,190 70,764
</TABLE>

11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Our primary business is the manufacture and marketing of plastic films for use
in the packaging, transportation, beverage, food, automotive, pharmaceuticals,
chemical, electronics, construction, agricultural and textile industries. We
currently have manufacturing operations located in 11 countries in North
America, Europe and the Asia/Pacific region. We manufacture plastic films
principally from resins blended with other raw materials, using both cast and
blown extrusion processes. We may either sell the film after the extrusion
processes or further process the film by metallizing, printing, laminating,
slitting or converting it. Our processing technologies enable us to create a
variety of value-added products according to the specifications of our
customers.

Resin costs generally constitute approximately 60% of our cost of goods sold.
Since resin costs typically fluctuate, selling prices are generally determined
as a "spread" over resin costs, usually expressed as cents per pound.
Accordingly, costs and profits are most often expressed in cents per pound, and,
with limited exceptions, the historical increases and decreases in resin costs
have generally been reflected in the sales prices of the products on a penny for
penny basis. Assuming a constant volume of sales, an increase in resin costs
should, therefore, result in increased sales revenues but lower gross profit as
a percentage of sales, or gross profit margin, while a decrease in resin costs
should result in lower sales revenues with higher gross profit margins.

On October 11, 1996, we acquired the global packaging operations of Borden,
which we sometimes refer to as the Borden packaging acquisition. The purchase
price was approximately $280.0 million, including the assumption of certain
indebtedness and other purchase price adjustments, and 2.4 million shares of our
common stock. During fiscal 1998, we sold our South African and all five of the
rigid plastics businesses we acquired from Borden. After giving effect to
working capital adjustments and costs, net proceeds of these sales amounted to
approximately $16.3 million. Net losses from the rigids businesses are reflected
in discontinued operations.

In February 1999, we decided not to retain the Proponite business acquired from
Borden and, on March 4, 1999, we entered into an agreement to sell the business
and some of its assets. The sale was closed on April 30, 1999. Net losses from
the Proponite business are reflected in discontinued operations.

RESULTS OF CONTINUING OPERATIONS

SIX MONTHS ENDED APRIL 30, 1999 AS COMPARED TO SIX MONTHS ENDED APRIL 30, 1998

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 5.4% to $186.8 million during the
1999 period from $197.2 million during the 1998 period. This decrease was
primarily due to a 9.3% 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 4.3% increase
in sales volume. Net sales in Europe decreased 5.4% 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 16.2% decrease in average selling prices, offset
by a 12.2% volume increase. Net sales in Asia/Pacific decreased 10.5% to $37.8
million during the 1999 period from $42.3 million for the 1998 period, primarily
due to a 5.4% sales volume decrease and a 5.5% decrease in average selling
prices which resulted from economic pressures in 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 9.1% to $54.5 million for the six months ended April 30, 1999
due to increased sales volume, which lowered fixed overhead costs per unit, a
change in product mix and lower raw material costs. Gross profit in Europe
decreased 7.0% to $18.2 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 12.9% 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

12
<PAGE>
ended April 30, 1999 decreased by $1.4 million, or 20.2%, due to a 5.4% decrease
in volume and lower average per unit selling prices which resulted from the
economic pressures in the region. In addition, we incurred certain costs
associated with the shut down and consolidation of a plant in Australia.

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 5.3% 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.

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) for the six months ended April 30, 1999 increased 369.0%
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 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.

The loss from discontinued operations for the six months ended April 30, 1999 of
$18.4 million included the net losses of the Proponite business of $1.2 million
with respect to the period ended January 31, 1999. This loss also included an
after tax reserve of $17.2 million established to write down property, plant and
equipment, inventory and other assets and to provide for close down 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 included the
net losses of the Proponite business of $552,000 and net losses of the rigids
businesses of $1.8 million. The sale of the rigids businesses was completed by
October 31, 1998.

YEAR ENDED OCTOBER 31, 1998 AS COMPARED TO YEAR ENDED OCTOBER 31, 1997

Net sales in fiscal 1998 were $666.6 million, a decrease of $42.5 million, or
6.0%, from fiscal 1997. Net sales in North America decreased to $396.3 million
in fiscal 1998 from $419.5 million for fiscal 1997, or 5.5%, primarily due to a
9% decrease in per unit selling prices as a result of lower raw material costs,
which reductions were passed though to customers. This decrease in selling
prices was partially offset by an increase in sales volume of 4.0% in North
America. Net sales in Europe decreased to $192.2 million in fiscal 1998 from
$194.1 million in fiscal 1997, or 1.0%, primarily due to an 7.0% decrease in
selling prices (local currency) partially offset by a 6.4% increase in sales
volume. Net sales in Asia/Pacific decreased to $78.0 million in fiscal 1998 from
$80.6 million in fiscal 1997, or 3.2%. The Asia/Pacific region had a 22.2% sales
volume increase as a result of our acquisition of certain businesses during the
prior year, offset by a decrease of 20.8% in average selling prices (local
currency) because of the change in the product mix as a result of the
acquisitions described above, average lower selling prices and economic
pressures in the region. Our net sales for fiscal 1997 included net sales of
$14.8 million from our South African operation, which was sold November 1, 1997.

Gross profit for fiscal 1998 was $155.6 million, as compared to $152.5 million
in fiscal 1997, a decrease of $3.1 million. North America experienced an
increase in gross profit of $9.2 million, or 9.6%, for fiscal 1998 as a result
of increased utilization of plant facilities, increased sales volume and reduced
raw material costs. Gross profit in Europe increased by $482,000 for fiscal 1998
when compared to fiscal 1997. This increase was primarily due to increased sales
volume in spite of market conditions which prevented the timely passing through
of increased raw material costs to customers during the first six months of
fiscal 1998. This volume increase also helped increase utilization of
manufacturing facilities. Gross profit for the Asia/Pacific region decreased
$2.7 million in fiscal 1998 when compared to fiscal 1997. This decrease in gross
profit is a result of economic pressures in the Asia/Pacific region, which
caused depressed unit selling prices, of approximately 20.8% as compared to the
prior year, and reduced plant utilization for the first half of fiscal 1998. Our
gross profit for fiscal 1997 included $3.8 million from our South African
operation, which was sold November 1, 1997.

13
<PAGE>
Operating expenses for fiscal 1998 were $113.6 million, as compared to $114.5
million in fiscal 1997. This net decrease of $895,000 is attributable to a
reduction in selling expenses of $2.0 million as a result of the realignment of
our worldwide sales force at the beginning of fiscal 1998. This reduction in
selling expenses was offset by an increase of $4.4 million in warehousing and
delivery costs resulting from increased sales volume and increased costs
incurred in the implementation of new delivery systems during the fiscal year.
Our general and administrative expenses for fiscal 1998 increased by $601,000
with no major increase in any one area. The operating expenses for fiscal 1997
included $3.9 million related to our South African operation, which was sold
November 1, 1997.

Interest expense for fiscal 1998 was $33.8 million, an increase of $3.7 million
from the prior year. This increase in interest expense resulted from our
issuance of $200.0 million of 9.875% Senior Subordinated Notes in November 1997,
which resulted in higher average interest rates for the fiscal year, partially
offset by lower average debt outstanding for fiscal 1998.

Other income for fiscal 1998 amounted to $1.5 million, which includes foreign
currency exchange and hedge gains of $778,000, interest income of $419,000 and
income from investment in a joint venture of $252,000. Also included in other
income were $133,000 in gains on sales of machinery and equipment, $325,000 in
rental income and $243,000 in other miscellaneous net expenses.

Net income from continuing operations for fiscal 1998 decreased by 21.3% to $5.8
million from $7.3 million in fiscal 1997. This decrease was due primarily to the
reduction in gross profit realized in our Asia/Pacific market place, as well as
increased interest expense and a reduction in other income from the prior year.

YEAR ENDED OCTOBER 31, 1997 AS COMPARED TO YEAR ENDED OCTOBER 31, 1996

Net sales for fiscal 1997 increased by 162.1% to $709.1 million from $270.5
million during fiscal 1996. This increase in net sales reflects the Borden
packaging acquisition, which resulted in increased net sales in North America of
$149.1 million, in Europe of $208.9 million and in the Asia/Pacific region of
$80.6 million. Sales during fiscal 1997 were negatively impacted by volume and
price reductions in the overall North America stretch wrap business due to
overcapacity, which was partially offset by volume increases in our other
product lines. Europe and Asia/Pacific had an increase in sales volume, which
was offset by a decrease in average selling prices.

Gross profit for fiscal 1997 increased by 155.0% to $152.5 million from $59.8
million during the same period in fiscal 1996. This increase in gross profit
resulted from the Borden packaging acquisition and consisted of increased gross
profit in North America of $36.3 million, in Europe of $41.8 million and in the
Asia/Pacific region of $14.6 million. Gross profit as a percentage of sales
during fiscal 1997 declined to 21.0% from 22.1% during fiscal 1996, primarily as
a result of overcapacity and intense competition in the North America stretch
wrap business, which was partially offset by cost savings associated with the
Borden packaging acquisition. This overcapacity resulted in reduced sales volume
and underutilization of plant facilities, each of which negatively impacted
margins as labor and other fixed costs were spread over fewer sales. Europe had
a slight increase in gross margins, due to increased sales volumes, which
lowered production costs by increasing plant efficiencies. Asia/Pacific had
decreased gross profit margins because of the general economic conditions in the
regions, which resulted in lower average selling prices.

Operating expenses for fiscal 1997 increased 159.0% to $114.5 million from $44.2
million during fiscal 1996. This increase of $70.3 million in operating expenses
is attributable to the businesses acquired from Borden and the operating
expenses associated with them. Operating expenses as a percentage of sales
during fiscal 1997 decreased slightly to 15.8% from 16.3% during fiscal 1996.
Operating expenses in fiscal 1997 reflect certain synergies achieved as a result
of the Borden packaging acquisition through the consolidation of administrative
and sales personnel and warehouse facilities, partially offset by higher than
expected costs associated with closing operations at a North Andover plant and
relocating certain of those operations to our Griffin, Georgia plant. We
incurred increased warehouse and delivery costs during fiscal 1997 due to the
installation of new delivery systems to accommodate this consolidation.

14
<PAGE>
Interest expense for fiscal 1997 increased by 161.7% to $30.1 million from $11.5
million during fiscal 1996. This increase in interest expense is primarily due
to increased borrowings used to finance the Borden packaging acquisition, loan
origination fees applicable to the credit facility amendment and additional
interest expense arising from the issuance of $200.0 million of 9.875% Senior
Subordinated Notes. This was partially offset by a decline in interest rates
during fiscal 1997. Interest expense as a percentage of sales during the fiscal
1997 decreased slightly to 4.0% from 4.3% during fiscal 1996.

Other income for fiscal 1997 increased to $3.3 million from $390,000 in fiscal
1996. The amount for fiscal 1997 includes $1.3 million in interest income,
$198,000 in foreign currency exchange gains realized during the period, $416,000
in gain from sale of securities and $317,000 in income from an investment in a
joint venture. Also included in other income for fiscal 1997 were $243,000 in
gains on sales of machinery and equipment and $121,000 in rental income and
other miscellaneous income earned for the period.

Net income from continuing operations for fiscal 1997 increased by 180.8% to
$7.3 million from $2.6 million in fiscal 1996. This increase was due primarily
to additional sales volume attributable to the Borden packaging acquisition,
offset by the aforementioned overcapacity in the stretch wrap business, as well
as increased interest expense.

LIQUIDITY AND CAPITAL RESOURCES

We have historically financed our operations through cash flow generated from
operations and borrowings 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
was 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.

On November 19, 1997, we completed an offering of Senior Subordinated Notes due
November 15, 2007 in the aggregate principal amount of $200.0 million bearing
interest at 9.875% per annum. The net proceeds from the Notes were used to repay
a portion of the indebtedness then outstanding under our Credit Agreement.

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 the same period. The Indenture pursuant to which the 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.

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.

15
<PAGE>
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 Termofilm 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
business. The sale was closed on April 30, 1999 and we received cash 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 a 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 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.

16
<PAGE>
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. We
will continue to contact all critical suppliers by telephone 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 our
financial condition.

Our reasonable worst case scenario would be a disruption in the resin supply in
general and for our PVC business in particular. In order to avoid such problems
and other shortages 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 at any facility we will be
prepared to transfer production 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.

17
<PAGE>
BUSINESS

We are a leading worldwide manufacturer of plastic packaging films. We
manufacture and market an extensive and diverse line of polyethylene, polyvinyl
chloride and polypropylene flexible packaging products, with consumer,
industrial and agricultural applications. Flexible packaging and film products
are thin, ductile bags, sacks, labels and films for food and non-food consumer,
agricultural and industrial items. Flexible packaging containers not only
protect their contents, they are also cost-effective, space-saving, lightweight,
tamper-evident, convenient and often recyclable. The flexible packaging and film
products manufactured by us are used in a variety of industries, including the
packaging, transportation, beverage, food, automotive, pharmaceuticals,
chemical, electronics, construction, agricultural and textile industries.

The following table summarizes our product lines:

<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
PRODUCT LOCATION MATERIAL USES
- --------------------- --------------------- --------------------- ---------------------

polyvinyl chloride North America, polyvinyl chloride meat and food wrap,
wrap Europe, Asia/Pacific institutional films
and twist wrap

industrial films United States, Europe polyethylene drum, box, carton,
Asia/Pacific polypropylene and pail liners; bags
for furniture and
mattresses; films to
cover high value
products; barrier
films; cheese films
and freezer wraps

stretch (pallet) wrap North America, Europe polyethylene pallet wrap
Asia/Pacific

printed and converted Europe, Asia/Pacific primarily printed, laminated
films polyethylene and/or converted
films providing
flexible packaging to
consumer markets

other products and North America, various manufactured and
specialty films Europe, Asia/Pacific thermoplastics and resale items used in
machinery packaging
</TABLE>

We currently have manufacturing operations located in 11 countries in North
America, Europe and the Asia/ Pacific region. We divide our operations
geographically into three parts, North America, Europe and Asia/Pacific.
Currently, North America, Europe and Asia/Pacific represent 59%, 29% and 12%,
respectively, of our sales.

NORTH AMERICAN OPERATIONS

RESINITE (POLYVINYL CHLORIDE)

We manufacture polyvinyl chloride food wrap for the supermarket, consumer,
institutional and industrial markets in North America, offering a broad range of
products with approximately 45 different formulations. These films are used for
packaging of fresh red meats, poultry, fish, fruits and vegetables and bakery
products.

Our resinite facility also manufactures dispenser (cutter) boxes containing
polyvinyl chloride food wrap for sales to consumers and institutions, including
restaurants, schools, hospitals and penitentiaries. Our most popular

18
<PAGE>
branded institutional polyvinyl chloride food wrap is marketed under the SEAL
WRAP name. A substantial part of this product is sold to large paper and food
distributors, with the rest sold directly to supermarket chains.

INDUSTRIAL FILMS

We manufacture a broad range of industrial films which are generally custom
designed, including sheeting, tubing and bags. Bags are usually cut, rolled or
perforated drum, box, carton and pail liners. These bags can be utilized to
package specialty items such as furniture and mattresses. We also manufacture
films to protect items stored outdoors or in transit, such as boats and cars,
and a wide array of shrink films, barrier films and overwrap films. We sell the
majority of our industrial film output directly to customers on a national
account basis, with approximately 20% sold through distributors.

Most of the industrial films manufactured by us, which may be as many as 20,000
separate and distinct products in any given year, are custom designed to meet
the specific needs of our customers.

We believe that the strength of our industrial film operations lies in our
technologically superior products, high quality control standards, well-trained
and knowledgeable sales force and commitment to customer service. Our sales
force has expertise in packaging systems, provides technical support to our
distribution network and focuses on product knowledge and customer relations.

The industrial films market is comprised of a large number of smaller
manufacturers who together constitute approximately two-thirds of all sales,
with the remainder of the market represented by a few large manufacturers. Our
research and development team continually improves applications and creates new
industrial film products. This has established us as one of the largest
producers in this fragmented market. We believe we can continue to expand our
share of the industrial films market through our ability to offer a broad range
of industrial as well as other packaging films, including stretch wrap, thereby
offering our customers one-stop shopping.

STRETCH WRAP

We manufacture a family of high performance stretch wrap for wrapping and
securing palletized products for shipping. We also market a wide variety of
stretch wrap designed for commodity and specialty uses. We sell approximately
90% of our stretch wrap through distributors. The remainder of our output is
sold directly to customers on a national account basis.

We have reduced our stretch wrap capacity to an aggregate of 240 million pounds
through a combination of permanently eliminating, temporarily idling and
reallocating our capacity. In connection with the Borden packaging acquisition,
we identified and consolidated less efficient stretch wrap operations, thereby
reducing our stretch wrap capacity by approximately 58 million pounds. In
addition, as a result of industry-wide overcapacity in the stretch wrap market,
we reduced our stretch wrap capacity by an additional 45 million pounds. Our
capacity reductions, coupled with sales force rationalization, consolidation of
distribution activities and reformulation of certain stretch products, have
enabled us to realize significant cost reductions.

EUROPEAN OPERATIONS

EUROPEAN RESINITE (POLYVINYL CHLORIDE)

Through our European resinite division, we manufacture polyvinyl chloride food
wrap in cutter boxes and perforated rolls which are primarily sold to
restaurants and food service establishments. European resinite sells films
across Europe, with the exception of Italy, which is covered by FIAP, and sells
most of its film directly to end-users. We are rationalizing our labor force and
believe that this will have a positive impact on our operating results.

The market for polyvinyl chloride food wrap is relatively mature in Northern
Europe and is intensely competitive. We expect that growth in Europe will be
driven by developing catering, food service and volume feeding markets in
Eastern Europe and by developing food distribution markets in Southern and
Eastern Europe. In some European markets, a tax is levied on packaging materials
based on weight which has led to a demand for thinner

19
<PAGE>
but stronger meat films. We have the technology to deliver films with such
properties at a low price. We believe this to be a competitive advantage over
our packaging competition.

EUROPEAN FLEXIBLES

Our European Flexibles division manufactures flexible packaging and converted
films used in the food processing and pharmaceutical industries, including
freezer film, processed cheese innerwrap and tamper-evident seals. European
Flexibles also manufactures and sells polyethylene-based stretch wrap for
wrapping and securing pallet loads. European Flexibles sells 55% of its stretch
wrap to distributors and 45% directly to end-users.

FIAP

Through Fabbrica Italiana Articoli Plastici, or FIAP, we manufacture polyvinyl
chloride food wrap, unplasticized polyvinyl chloride twist wrap, and converted
and printed films. FIAP is known as a specialist in unplasticized polyvinyl
chloride twist wrap which is used to wrap candles, candies and similar products.
This product has similar performance characteristics as cellophane and is
emerging as a low cost substitute for cellophane. We believe unplasticized
polyvinyl chloride, because of its performance characteristics, has significant
growth potential as a replacement for cellophane. In addition, we believe new
uses for this wrap, such as battery covers and credit card laminates, are
emerging.

Films manufactured by FIAP are sold in the United States, Europe, Africa and the
Middle East, mostly through an internal sales force directly to end-users.

ASIA/PACIFIC OPERATIONS

We are a major manufacturer of industrial films, PVC films and printed and
converted products in Australia and New Zealand. Our operations in the
Asia/Pacific region resemble our North American and European operations with the
same variety of films. Our position as a major supplier of industrial films is
the result of our August 1997 acquisition of ICI's Visqueen operations.

We sell the majority of the products we manufacture in Australia and New Zealand
to end-users and the remainder to distributors.

The markets for plastic packaging products in Australia and New Zealand are
relatively small, offering limited growth opportunities. However, since New
Zealand and Australia are significant exporters of high protein products, we
expect to participate in the growing market for packaging materials for protein
rich products for exports to China and Southeast Asia.

We also have a 50% interest in a joint venture in Japan with Hitachi Chemical
Co., Ltd. The joint venture, known as Hitachi Chemical Filtec, Inc., supplies
polyvinyl chloride food wrap to the Japanese market. We account for the joint
venture on an equity basis.

MANUFACTURING

We manufacture both industrial grade products, which are manufactured to an
industry specification or for distribution from stock, and specialty products,
which are manufactured under more exacting standards to assure that their
chemical and physical properties meet the particular requirements of the
customer or the specialized application appropriate to its intended market.
Specialty products generally sell at higher margins than industrial grade
products.

We manufacture PVC films in North America, Europe and Asia/Pacific. We
manufacture stretch wrap and industrial films at several large geographically
dispersed, integrated extrusion facilities located throughout the world, which
also have the ability to produce other products. The size and location of those
facilities, as well as their capacity to manufacture multiple types of flexible
packaging products and to re-orient equipment as market conditions warrant,
enable us to achieve savings and minimize overhead and transportation costs.

At the FIAP facilities located in Europe, we manufacture polyvinyl chloride food
wrap, unplasticized polyvinyl chloride twist wrap and converted and printed
films. We manufacture flexible packaging and converted films in

20
<PAGE>
Europe at facilities strategically located in Holland and Belgium. We have just
completed the installation of efficient pallet wrap equipment at these
facilities which we believe will increase our market presence in Europe in this
product. We also manufacture industrial films and flexible packaging and
converted films at our facilities located in Australia and New Zealand.

PRODUCTION

In the film manufacturing process, resins with various properties are blended
with chemicals and other concentrates to achieve a wide range of specified
product characteristics, such as color, clarity, tensile strength, toughness,
thickness, shrinkability, surface friction, transparency, sealability and
permeability. The gauges of our products range from less than one mil (.001
inches) to more than 20 mils. Our extrusion equipment can produce printed
products and film up to 40 feet wide. The blending of various kinds of resin
combined with chemical and color additives is computer controlled to avoid waste
and to maximize product consistency. The blended mixture is melted by a
combination of applied heat and friction under pressure and then is mechanically
mixed. The mixture is then forced through a die, at which point it is expanded
into a flat sheet or a vertical tubular column of film and cooled. The cooled
film can then be shipped to a customer or can be further processed and then
shipped. Generally, our manufacturing plants operate 24 hours a day, seven days
a week, except for plants located in areas where hours of operation are limited
by law, local custom or in cases when 24 hour operations are not economically
advantageous.

We have regularly upgraded or replaced older equipment in order to keep abreast
of technological advances and to maximize production efficiencies by reducing
labor costs, waste and production time. During the past five fiscal years, we
made several capital improvements, which included the construction of new
manufacturing, warehouse and sales facilities, the purchase of new
state-of-the-art extrusion equipment and the upgrading of older equipment. We
have shifted production among our plants to improve efficiency and cost savings
and are upgrading and replacing equipment at certain of these facilities in
order to increase production capacity and enhance efficiency. We will continue
to upgrade or replace equipment as we deem appropriate.

QUALITY CONTROL

We believe that maintaining the highest standards of quality in all aspects of
our manufacturing operations plays an important part in our ability to maintain
our competitive position. To that end, we have adopted strict quality control
systems and procedures designed to test the mechanical properties of our
products, such as strength, puncture resistance, elasticity, abrasion
characteristics and sealability, which we regularly review and update, and
modify as appropriate. These quality control systems and procedures have been
implemented in the manufacturing facilities acquired as part of the Borden
packaging acquisition.

RAW MATERIALS

We manufacture film products primarily from polyethylene, polypropylene and
polyvinyl chloride resins, all of which are available from a number of domestic
and foreign suppliers. We select our suppliers based on the price, quality and
characteristics of the resins they produce. As a result of the Borden packaging
acquisition, we have been able to achieve economies of scale by reason of
increased purchasing power for our worldwide requirements. Most of our purchases
of resin in fiscal 1998 were from 18 of the 20 international resin suppliers,
none of which accounted for more than 16% of our requirements. We believe that
the loss of any resin supplier would not have a materially adverse effect on us.

The resins used by us are produced from petroleum and natural gas. Instability
in the world markets for petroleum and natural gas could adversely affect the
prices of our raw materials and their general availability, and this could have
an adverse effect on our profitability if the increased costs could not be
passed on to customers. The cost of resin typically comprises approximately 60%
of a manufacturer's cost of goods sold. With limited exceptions, we have
historically been able to pass on substantially all of the price increases in
raw materials to our customers on a penny for penny basis, although there can be
no assurance that we will be able

21
<PAGE>
to do so in the future. We generally maintain a resin inventory of less than one
month's requirements and have not experienced any difficulty in maintaining our
supply. Other raw materials, principally chemical colorings and other
concentrates, are available from many sources.

MARKETING AND SALES

We believe that our ability to continue to provide superior customer service
will be critical to our success. Even in those markets where our products are
considered commodities and price is the single most important factor, we believe
that our sales and marketing capabilities and our ability to timely deliver
products can be a competitive advantage. To that end, we have established good
relations with our suppliers and have long-standing relationships with most of
our customers, which we attribute to our ability to consistently manufacture
high-quality products and provide timely delivery and superior customer service.

We believe that our research and development efforts, our high efficiency
equipment, which is both automated and microprocessor-controlled, and the
technical training given to our sales personnel enhance our ability to expand
our sales in all of our product lines. An important component of our marketing
philosophy is the ability of our sales personnel to provide technical assistance
to customers. Our sales force regularly consults with customers with respect to
performance of our products and the customers' particular needs and communicates
with appropriate research and development staff regarding these matters. In
conjunction with the research and development staff, sales personnel are often
able to recommend a product or suggest a resin blend to produce the product with
the characteristics/properties which best suit the customers' requirements.

We market our industrial products in North America principally through our own
sales force under the supervision of national and regional managers. We
generally sell either directly to customers who are end-users of the products or
to distributors for resale to end-users.

We market our polyvinyl chloride and our stretch film products in North America
primarily through large distributors. Because we have expanded, and continue to
expand, our product lines, sales persons are able to offer a broad line of
products to our customers.

During fiscal 1997 and fiscal 1998, approximately 45.8% and 48.3%, respectively,
of our sales in North America were made directly to end-users with the balance
representing sales to distributors or representatives. We serve approximately
16,000 customers, none of which account for more than 5% of our net sales.

Sales and marketing efforts in Europe and in the Asia/Pacific region are
primarily by our sales force to end-users, although distributors are used in
cases where the distributor adds value to the customer.

DISTRIBUTION

We believe that the timely delivery to customers of our products is a critical
factor in our ability to maintain our market position. Domestically, in order to
ensure timely delivery, we use both internal and external sources of
distribution. We maintain a fleet of 28 trucks, most of which we lease, for the
delivery to customers of approximately 15% of our products. We use dedicated
service haulers, contract carriers and common carriers for the remainder of our
deliveries. This combination enables us to control the distribution process and
thereby insure priority handling and direct transportation of products to our
customers, thus improving the speed, reliability and efficiency of delivery.

Because of the geographic dispersion of our plants, we are able to deliver most
of our products within a 500 mile radius of our plants. This enables us to
reduce our use of warehouses to store products. However, we also ship products
great distances when necessary and export to other countries.

Internationally, we use common and contract carriers to deliver most of our
products, both in the country of origin and for export. We do not deliver our
own products to an appreciable degree.

22
<PAGE>
RESEARCH AND DEVELOPMENT

We have a research and development department with a staff of approximately 20
persons. In addition, from time to time, other members of management and
supervisory personnel devote substantial amounts of time to research and
development activities. The principal efforts of the research and development
department are directed at maintaining and improving quality control in our
manufacturing operations, assisting sales personnel in designing specialty
products to meet individual customer's needs, developing new products and
reformulating existing products to improve quality and/or reduce production
costs. During fiscal 1998, we focused a significant portion of our research and
development efforts on co-extruded, high barrier and MAPAC-TM-, modified
atmosphere packaging, designed to either contain gases or allow the migration
thereof, technologies.

Our research and development department has developed a number of products with
unique properties which we consider proprietary, certain of which are protected
by patent.

During fiscal 1998, we spent approximately $1.5 million for research and
development activities with respect to our continuing operations. For fiscal
1997, we incurred expenses for research and development activities of $1.9
million for our continuing operations.

COMPETITION

The business of supplying plastic packaging products is extremely competitive,
and we face competition from a substantial number of companies which sell
similar and substitute packaging products. Some of these competitors are
subsidiaries or divisions of large international, diversified companies with
extensive production facilities, well developed sales and marketing staffs and
substantial financial resources.

We compete principally with (i) local manufacturers, who compete with us in
specific geographic areas, generally within a 500 mile radius of their plants,
(ii) companies which specialize in the extrusion of a limited group of products
which they market nationally, and (iii) a limited number of manufacturers of
flexible packaging products who offer a broad range of products and maintain
production and marketing facilities domestically and internationally.

Because many of our products are available from a number of local and national
manufacturers, competition is highly price sensitive and margins are relatively
low. We believe that all of our products require efficient, low cost and high
speed production to remain competitive. We believe that we also compete on the
basis of quality, service and product differentiation.

We believe that there are few barriers to entry into many of our markets,
enabling new and existing competitors to rapidly affect market conditions. As a
result, we may experience increased competition resulting from the introduction
of products by new manufacturers. In addition, in several of our markets,
products are generally regarded as a commodity. As a result, competition in such
markets is based almost entirely on price and service.

ENVIRONMENTAL MATTERS

Our operations are subject to various federal, state, local and foreign
environmental laws and regulations, which govern discharges into the air and
water, the storage, handling and disposal of solid and hazardous waste, the
remediation of soil and ground water contaminated by petroleum products or
hazardous substances or waste, and the health and safety of employees.
Compliance with environmental laws may require material expenditures by us. The
nature of our current and former operations and the history of industrial uses
at some of our facilities expose us to the risk of liabilities or claims with
respect to environmental and worker health and safety matters.

In addition, under certain environmental laws, a current or previous owner or
operator of property may be jointly and severally liable for the costs of
investigation, removal or remediation of certain substances on, under or in such
property, without regard to negligence or fault. The presence of, or failure to
remediate properly, such substances may adversely affect the ability to sell or
rent such property or to borrow using such property as collateral. In addition,
persons who generate, arrange for the disposal or treatment of hazardous
substances may

23
<PAGE>
be jointly and severally liable for the costs of investigation, remediation or
removal of hazardous substances at or from the disposal or treatment facility,
regardless of whether the facility is owned or operated by such person.
Responsible parties also may be subject to common law claims by third parties
based on damages and costs resulting from environmental contamination emanating
from a site. We believe that there are no current environmental matters which
would have a material adverse effect on our financial position or results of
operations.

EMPLOYEES

At April 30, 1999, we had approximately 3,300 employees worldwide, including
officers and administrative personnel. In North America, we have three
collective bargaining agreements covering 314 employees. One of the agreements
expired in March 1999 and is subject to ongoing negotiations, and the other two
expire in February 2001. Further, we have collective bargaining agreements at 16
international facilities covering substantially all of the hourly employees at
these facilities. As is common in many foreign jurisdictions, substantially all
of our employees in these foreign jurisdictions are covered by country-wide
collective bargaining agreements. While we believe that our relations with
employees are satisfactory, a dispute between us and our employees could have a
material adverse effect on our company.

PROPERTIES

Our principal executive and administrative offices are located in a leased
building in South Hackensack, New Jersey.

We own and lease numerous manufacturing facilities in the ordinary course of
business. Currently, these properties are located as follows:

- ten in the United States and Canada, having approximately 1.9 million
square feet in the aggregate;

- eight in Europe, having approximately 990,000 square feet in the
aggregate;

- five in Australia and New Zealand, having approximately 496,000 square
feet in the aggregate; and

- one in Japan, pursuant to a joint venture with Hitachi, having
approximately 69,000 square feet.

We are currently attempting to dispose of properties located in Toronto, Canada,
North Andover, Massachusetts and Les Ulis, France.

Sales offices are assigned to each of our plants.

We believe that all of our properties are well-maintained and in good condition
and that the current operating facilities are adequate for our present and
immediate future business needs. However, we are in the process of increasing
capacity and automating some manufacturing operations in Europe and relocating
and consolidating some manufacturing operations in North America.

24
<PAGE>
MANAGEMENT

The name, age and position of each of AEP Industries' executive officers and
directors as of May 31, 1999 are set forth below:

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
NAME AGE POSITION
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
J. Brendan Barba.................. 58 Chairman of the Board, President and CEO
Paul M. Feeney.................... 56 Executive Vice President, Finance and CFO and
Director
John J. Powers.................... 34 Executive Vice President, Sales and Marketing
David J. Cron..................... 44 Executive Vice President, Manufacturing
Lawrence R. Noll.................. 50 Vice President, Controller and Director
James B. Rafferty................. 46 Vice President and Treasurer
Jean L'Allier..................... 44 Vice President, Secretary, and General Counsel
Cheryl Kent....................... 36 Vice President, Logistics
Edgar Reich....................... 56 Vice President, International
Paul C. Vegliante................. 33 Vice President, Operations
Kenneth Avia...................... 56 Director
William H. Carter................. 45 Director
Paul E. Gelbard................... 68 Director
C. Robert Kidder.................. 54 Director
Clifton S. Robbins................ 40 Director
Lee C. Stewart.................... 50 Director
Scott M. Stuart................... 39 Director
</TABLE>

Messrs. Carter, Kidder, Robbins and Stuart, the directors designated by Borden,
are expected to resign upon completion of this offering. Upon these
resignations, the ratio of representation of management to outside directors on
our Board will be 1:1. We plan to maintain this ratio of representation. We are
currently in the process of identifying additional independent directors.

John J. Powers and Paul C. Vegliante are sons-in-law of J. Brendan Barba. In
addition, David J. Cron is a first cousin of Mr. Barba.

SELLING STOCKHOLDER

Borden holds 2,412,818 shares of our common stock, which represents 33.1% of our
outstanding shares. All of these shares are being offered to the public by
Borden through the underwriters.

The selling stockholder received registration rights in connection with its
acquisition of the common stock in 1996. We are required to pay all fees and
expenses incident to the registration of the shares, except the fees and
disbursements of counsel to the selling stockholder. We have agreed to indemnify
the selling stockholder against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act. The selling stockholder has
agreed to indemnify the underwriters against certain liabilities, including
liabilities arising under the Securities Act, but only with reference to
information relating to the selling stockholder furnished in writing by or on
behalf of the selling stockholder. We will not receive any proceeds from the
sale of shares by the selling stockholder.

In connection with the Borden packaging acquisition in 1996, we entered into a
Governance Agreement with Borden. This agreement gave Borden (1) specified
preemptive rights to purchase our common stock; (2) the right to designate four
members of our Board of Directors and specified committee members; and (3) the
right to participate in the selection of one independent director. These
provisions will terminate upon completion of this offering.

25
<PAGE>
DESCRIPTION OF CAPITAL STOCK

GENERAL

We are authorized to issue 30,000,000 shares of common stock, par value $0.01
per share, and 1,000,000 shares of preferred stock, par value $1.00 per share.
All outstanding shares of common stock are fully paid and non-assessable. As of
May 31, 1999, 7,353,488 shares of common stock were outstanding.

COMMON STOCK

The holders of the common stock are entitled to receive dividends from legally
available funds when they are declared by the Board of Directors, subject to the
rights of the holders of preferred stock, and are entitled upon liquidation to
share on a proportionate basis in all assets of our company after claims of
creditors and holders of any preferred stock have been satisfied.

The holders of the common stock are entitled to one vote for each share held on
all matters which stockholders are entitled to vote upon. The holders of the
common stock do not have cumulative voting rights, any preferential or
preemptive right with respect to any securities of our company, or any
conversion rights. The common stock is not subject to redemption.

The common stock is listed on the Nasdaq National Market. The transfer agent for
the common stock is American Stock Transfer Company.

PREFERRED STOCK

We are authorized to issue 1,000,000 shares of preferred stock in one or more
series. Our Board of Directors can fix the rights, preferences and limitations
of each series. If any particular issue of preferred stock has the right to
receive dividends before the common stock, any payments to satisfy those
dividend preferences would reduce the amount of funds available for the payment
of dividends on common stock. Also, holders of preferred stock would normally be
entitled to receive a preference payment before any payment is made to holders
of common stock in the event of any liquidation, dissolution or winding-up of
our company. As of the date of this prospectus, no shares of preferred stock are
issued or outstanding.

CLASSIFIED BOARD

Our restated certificate of incorporation provides for a classified board of
directors divided into three classes. All classes are to be as nearly equal in
number as possible and no class may include fewer than two directors, with one
class of directors to be elected each year for a three-year term.

We believe that the classified board is desirable to assure continuity in board
membership and in policy formulated by the board. This provision is expected to
moderate the pace of any change in control of our company by extending the time
required to elect a majority of the directors and to better enable the board to
protect the interests of stockholders in the event that any person or
corporation should attempt to obtain control of our company.

DIRECTORS' LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our restated certificate of incorporation provides that no director of our
company will be held personally liable to us or our stockholders for monetary
damages of any kind for breach of fiduciary duty as a director, except for
liability:

- for any breach of the director's duty of loyalty to our company or our
stockholders;

- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

- in respect of certain unlawful dividend payments or stock redemptions or
repurchases in violation of Section 174 of the Delaware General
Corporation Law ("DGCL"); or

- for any transaction from which the director derived an improper personal
benefit.

26
<PAGE>
The effect of these provisions in the restated certificate of incorporation is
to eliminate our rights and the rights of our stockholders, including through
stockholders' derivative suits on behalf of us, to recover monetary damages
against a director for breach of fiduciary duty as a director, including
breaches resulting from negligent or grossly negligent behavior, except in the
four situations described above.

Our by-laws provide that each person who was or is made a party or is threatened
to be made a party to or is involved in any actual or threatened action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person is or was a director or officer of our company or
is or was serving at our request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
whether the basis of such proceeding is alleged action in an official capacity
as a director, officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, is indemnified and held harmless by
us to the fullest extent authorized by the DGCL. This right to indemnification
also includes the right to have us pay the expenses incurred in connection with
any such proceeding in advance of its final disposition to the fullest extent
authorized by the DGCL. This right to indemnification is a contract right. We
may, by action of the Board of Directors, provide indemnification to such of our
employees and agents to such extent and to such effect as the Board of Directors
determines to be appropriate and authorized by the DGCL.

We have obtained officers and directors liability insurance for our protection
and the protection of our officers and directors.

DELAWARE TAKEOVER STATUTE

We are subject to the provisions of Section 203 of the DGCL. Subject to certain
sections, Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with "interested stockholder" for a certain
period of time. That period of time is three years after the date of the
transaction in which the person became an interested stockholder unless the
interested stockholder obtained that status with the approval of the Board of
Directors or unless the business combination is approved in a prescribed manner.
A business combination includes certain mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to certain exceptions, an interested stockholder is a person who
together with his or her affiliates and associates owns or owned within three
years prior 15% or more of the corporation's voting stock.

CHANGE OF CONTROL

If there is a change of control of our company, the Stock Option Committee of
the Board of Directors may cause all outstanding stock options to become
immediately vested. As of May 31, 1999, there were 881,490 stock options
outstanding. A change of control occurs when:

- a person or group becomes the beneficial owner of 20% or more of our
outstanding shares;

- the persons who were a majority of the Board of Directors cease to be a
majority as a result of a tender or exchange offer, merger, business
combination, sale of assets or contested election;

- we are not the surviving corporation of a merger or consolidation;

- the stock of our company is exchanged for stock of another corporation; or

- we sell 50% or more of our assets or earning power.

GOVERNANCE AGREEMENT

In connection with the Borden packaging acquisition, we entered into a
Governance Agreement, dated as of June 20, 1996, with Borden with respect to
certain matters relating to the corporate governance of our company. The
governance provisions of this agreement will terminate upon the closing of this
offering.

27
<PAGE>
UNDERWRITING

The underwriters named below, for whom J.P. Morgan Securities Inc. and Lehman
Brothers Inc. are acting as representatives, have severally agreed, subject to
the terms and conditions set forth in the underwriting agreement among us,
Borden and the underwriters, to purchase from Borden, and Borden has agreed to
sell to the underwriters, the respective number of shares of common stock set
forth opposite their names below:

<TABLE>
<CAPTION>
----------
<S> <C>
NUMBER OF
UNDERWRITERS SHARES
----------
J.P. Morgan Securities Inc......................................................
Lehman Brothers Inc.............................................................

----------
Total........................................................................... 2,412,818
----------
----------
</TABLE>

The underwriters are offering the shares of common stock subject to their
acceptance of the shares from Borden and subject to prior sale. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of common stock offered hereby are subject to
the approval of certain legal matters by their counsel and to certain other
conditions. The underwriters are obligated to take and pay for all of the shares
of common stock offered hereby, excluding shares covered by the over-allotment
option granted to the underwriters, if any such shares are taken.

The underwriters initially propose to offer part of the shares of common stock
directly to the public at the public offering price set forth on the cover page
hereof and part to certain dealers at a price that represents a concession not
in excess of $ a share under the public offering price. Any underwriter may
allow, and such dealers may reallow, a concession not in excess of $ a
share to other underwriters or to certain dealers. After the initial offering of
the shares of common stock, the offering price and other selling terms may from
time to time be varied by the representatives.

We have granted the underwriters an option, exercisable for 30 days from the
date of this prospectus, to purchase up to 361,923 additional shares of common
stock at the same price per share to be paid by the underwriters for the other
shares offered hereby. If the underwriters purchase any such additional shares
pursuant to the option, each of the underwriters will be committed to purchase
such additional shares in approximately the same proportion as set forth in the
above table. The underwriters may exercise the option only to cover
over-allotments, if any, made in connection with the distribution of the common
stock offered hereby.

The following table shows the per share and total underwriting discounts to be
paid to the underwriters by Borden. The table also shows per share and total
underwriting discounts to be paid by us if the underwriters' over-allotment
option is exercised.

<TABLE>
<CAPTION>
----------------------
<S> <C> <C>
NO FULL
EXERCISE EXERCISE
---------- ----------
By Borden
Per share.........................................................
Total.............................................................

By AEP
Per share.........................................................
Total.............................................................
</TABLE>

28
<PAGE>
We and certain of our directors, officers, stockholders and Borden, have agreed
that, without the prior written consent of the representatives, on behalf of the
underwriters, we will not, during the period ending 90 days after the date of
this prospectus:

(1) offer, pledge, announce the intention to sell, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of, directly or indirectly, any shares of
common stock or other securities of our company that are convertible into
or exchangeable for common stock or

(2) enter into any swap, option, future, forward or other ownership
arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the common stock, whether any such
transaction described in clause (1) above or this clause (2) is to be
settled by delivery of common stock or such other securities, in cash or
otherwise, without the prior written consent of J.P. Morgan Securities
Inc.

In order to facilitate the offering of the common stock, the underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the common stock. Specifically, the underwriters may overallot in connection
with the offering, creating a short position in the common stock for their own
account. In addition, to cover over-allotments or syndicate short positions or
to stabilize the price of the common stock, the underwriters may bid for and
purchase shares of common stock in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an underwriter or a dealer
for distributing the common stock in the offering, if the syndicate repurchases
previously distributed common stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities
and may end any of these activities at any time.

We have agreed to indemnify the underwriters against certain liabilities, losses
and expenses, including liabilities under the Securities Act, or to contribute
to payments that the underwriters may be required to make in respect thereof.

In the ordinary course of their respective businesses, certain of the
underwriters and their affiliates have engaged, are engaging and may in the
future engage in commercial banking, financial advisory and/or investment
banking transactions with us and our affiliates for which they have received or
will receive customary compensation.

29
<PAGE>
LEGAL MATTERS

The validity of the common stock offered hereby has been passed upon for us by
Bachner, Tally, Polevoy & Misher LLP, New York, New York. Paul E. Gelbard, of
counsel to Bachner Tally, is a director and shareholder of the company. Various
legal matters will be passed upon for the underwriters by Davis Polk & Wardwell,
New York, New York.

EXPERTS

The financial statements and schedules incorporated by reference in this
prospectus and elsewhere in the registration statement, to the extent and for
the periods indicated in their reports, have been audited by Arthur Andersen
LLP, independent public accountants and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

AEP Industries Inc. has filed with the Securities and Exchange Commission,
Washington, D.C., a registration statement on Form S-3 under the Securities Act
of 1933, covering the securities offered by this prospectus. This prospectus
does not contain all of the information that you can find in our registration
statement and the exhibits to the registration statement. Statements contained
in this prospectus as to the contents of any contract or other document referred
to are not necessarily complete, and in each instance such statement is
qualified by reference to each such contract or document filed or incorporated
by reference as an exhibit to the registration statement.

The Commission allows us to "incorporate by reference" the information we file
with them. This means that we can disclose important information to you by
referring you to other documents that are lega lly considered to be part of this
prospectus, and later information that we file with the Commission will
automatically update and supersede the information in this prospectus and the
documents listed below. We incorporate by reference the documents listed below
and any future filings made with the Commission under Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 until all of the shares offered
hereby are sold.

1. Our Annual Report on Form 10-K for the fiscal year ended October 31,
1998;

2. Our Quarterly Reports on Form 10-Q for the quarters ended January 31,
1999 and April 30, 1999;

3. Our Definitive Proxy Statement, dated February 28, 1999;

4. Our Current Report on Form 8-K, dated June 3, 1999;

5. All documents filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this prospectus and prior
to the termination of this offering.

You may request a copy of these filings, other than the exhibits, by writing or
telephoning us at AEP Industries Inc., 125 Phillips Avenue, South Hackensack,
New Jersey 07606-1546, telephone (201) 641-6600.

Prospective investors may rely only on the information contained in this
prospectus. We have not authorized anyone to provide prospective investors with
information different from that contained in this prospectus. This prospectus is
not an offer to sell nor is it seeking an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted. The information contained
in this prospectus is correct only as of the date of this prospectus, regardless
of the time of the delivery of this prospectus or any sale of these securities.

30
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION

We are subject to the informational requirements of the Securities Exchange Act
of 1934 and we file reports and other information with the Commission.

You can read reports and other information filed by us with the Commission
without charge and copy such reports and information at the public reference
facilities maintained by the Commission at the following addresses:

- New York Regional Office, Seven World Trade Center, New York, New York
10048; and

- Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511.

You may read and copy any of the reports, statements, or other information we
file with the Commission at the Commission's Public Reference Section at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Information on
the operation of the Public Reference Room may be obtained by calling the
Commission at 1-800-SEC-0330. The Commission maintains a Web site at
http://www.sec.gov that contains reports, proxy statements and other information
regarding issuers that file electronically with the Commission. You can also
obtain certain information, reports and proxy statements of AEP Industries Inc.
from Nasdaq National Market Reports Section, 1735 K Street, N.W., Washington,
D.C. 20006.

31
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.

The estimated expenses payable by the Registrant in connection with the issuance
and distribution of the securities being registered are as follows:

<TABLE>
<S> <C>
SEC Registration Fee............................................................ $28,685.62
Accounting Fees and Expenses.................................................... *
Legal Fees and Expenses......................................................... *
NASD filing fee................................................................. 10,818.57
Printing........................................................................ *
Miscellaneous Expenses.......................................................... *
---------
Total........................................................................... $ *
---------
---------
</TABLE>

- ------------------------

* To be filed by amendment.

Item 15. Indemnification of Directors and Officers.

The Certificate of Incorporation and By-Laws of Registrant provide that
Registrant shall indemnify its officers and directors to the full extent
permitted by the Delaware General Corporation Law.

Reference is hereby made to Section 145 of the Delaware General Corporation Law
relating to the indemnification of officers and directors, which Section is
hereby incorporated herein by reference.

The Registrant also has officers and directors liability insurance covering its
officers and directors.

Item 16. Exhibits.

1.1 - Form of Underwriting Agrement*

5.1 - Opinion of Bachner, Tally, Polevoy & Misher LLP*

10.(j)(1) - Governance Agreement, dated as of June 20, 1996, without exhibits,
between Registrant and Borden, Inc.(1)

10.(j)(2) - Amendment No. 1, dated as of October 11, 1996, to the Governance
Agreement, dated as of June 20, 1996, between the Registrant and Borden, Inc.(2)

23.1 - Consent of Arthur Andersen LLP

23.2 - Consent of Bachner, Tally, Polevoy & Misher LLP--included in Exhibit 5.1

24 - Power of Attorney--included on II-3

- ------------------------

* To be filed by amendment.

(1) Incorporated by reference to Exhibit C-2 to Registrant's report on Form 8-K,
dated June 20, 1996.

(2) Incorporated by reference to Exhibit 2(b) to Registrant's report on Form
8-K, dated October 11, 1996.

Item 17. Undertakings

Undertaking Required by Regulation S-K, Item 512(a).

II-1
<PAGE>
The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement;

(2) That, for the purpose of determining any liability under the Securities Act
of 1933, as amended (the "Act"), each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.

Undertaking Required by Regulation S-K, Item 512(b).

The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be initial
bona fide offering thereof. Undertaking required by Regulation S-K, Item 512(h).

Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or controlling persons pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

II-2
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York on the 4th day of June, 1999.

AEP INDUSTRIES INC.

By: /s/ J. BRENDAN BARBA
-----------------------------------------
J. Brendan Barba
CHAIRMAN OF THE BOARD, PRESIDENT AND
PRINCIPAL EXECUTIVE OFFICER

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
under the heading "Signature" constitutes and appoints J. Brendan Barba and Paul
M. Feeney, or either of them, his true and lawful attorney-in-fact and agent
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities to sign any or all amendments
(including post-effective amendments) to this Registration Statement and any
related Registration Statement filed under Rule 462(b), and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully for all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.

SIGNATURES

Pursuant to the requirements of the Securities Act, this Registration Statement
or amendment thereto has been signed by the following persons in the capacities
and on the dates indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ J. BRENDAN BARBA Chairman of the Board,
- ------------------------------ President and Principal June 4, 1999
J. Brendan Barba Executive Officer

/s/ PAUL M. FEENEY Executive Vice President,
- ------------------------------ Principal Financial June 4, 1999
Paul M. Feeney Officer and Director

/s/ LAWRENCE R. NOLL Controller, Principal
- ------------------------------ Accounting Officer and June 4, 1999
Lawrence R. Noll Director

/s/ KENNETH AVIA Director
- ------------------------------ June 4, 1999
Kenneth Avia
</TABLE>

II-3
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ WILLIAM CARTER Director
- ------------------------------ June 4, 1999
William Carter

/s/ PAUL E. GELBARD Director
- ------------------------------ June 4, 1999
Paul E. Gelbard

/s/ C. ROBERT KIDDER Director
- ------------------------------ June 4, 1999
C. Robert Kidder

/s/ CLIFTON S. ROBBINS Director
- ------------------------------ June 4, 1999
Clifton S. Robbins

/s/ LEE STEWART Director
- ------------------------------ June 4, 1999
Lee Stewart

/s/ SCOTT A. STUART Director
- ------------------------------ June 4, 1999
Scott A. Stuart
</TABLE>

II-4

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
dated June 3, 1999, incorporated by reference in this registration statement,
and to all references to our firm included in this registration statement on
Form S-3. Our report dated December 17, 1998 included in AEP Industries Inc.'s
Form 10-K for the year ended October 31, 1998 is no longer appropriate since
reclassified financial statements giving effect to the discontinued operations
of the Proponite business have been filed with the Securities and Exchange
Commission in the Registrant's Form 8-K, dated June 3, 1999.

ARTHUR ANDERSEN LLP

Roseland, New Jersey

June 3, 1999