AEP
Industries Inc. Reports 2007 Second Quarter
Results
SOUTH HACKENSACK, N.J., June 11
/PRNewswire-FirstCall/ -- AEP Industries Inc. (Nasdaq: AEPI) (the "Company")
today reported financial results for its fiscal second quarter ended April 30, 2007.
Net sales decreased 3% in the second
quarter of fiscal 2007 to $187.8 million compared with $193.3 million in the second
quarter of fiscal 2006, despite a 9% increase in sales volume. The decrease is primarily the result of a 12%
decrease in average selling prices, driven by lower resin costs. The effect of foreign exchange on net sales in the
2007 period was a net positive $2.6 million, primarily reflecting the impact of the
strengthened Euro.
For the first six months of fiscal
2007, net sales decreased $18.9 million or 5% to $367.1 million compared with $386.0
million in the same period last year. The
decrease in net sales was the result of a 13% selling price decrease resulting from resin
price decreases mitigated by a sales volume increase of 8% combined with the net positive
impact of foreign exchange of $5.0 million, primarily reflecting the impact of the
strengthened Euro.
Gross profit for the second quarter of
fiscal 2007 decreased $7.0 million to $36.1 million as compared to $43.1 million in the
same quarter of the prior year. The decrease
in gross profit for the second quarter of fiscal 2007 was primarily due to an
approximately $6.3 million increase in LIFO inventory reserves during the second quarter
of fiscal 2007 as compared to a $10.1 million decrease in LIFO inventory reserves during
the second quarter of fiscal 2006. The effect
of foreign exchange on gross profit in the 2007 period was a net positive $0.3 million.
For the first six months of fiscal
2007, gross profit decreased $0.8 million or 1% to $80.2 million from $81.0 million
recorded in the first half of fiscal 2006. The
decrease in gross profit is primarily due to a delayed sales price response during the
second quarter to rising resin costs and $0.4 million additional charge related to
share-based compensation. The net effect of
foreign exchange on gross profit in the first half of 2007 was a positive $0.5 million.
Operating expenses for the three and
six months ended April 30, 2007, increased $1.4 million to $22.8 million and $2.1 million
to $45.4 million, respectively. These
increases are primarily due to the negative effect of foreign exchange, increased
compensation costs recorded in accordance with SFAS 123R for stock options and performance
units and increased selling and delivery costs resulting from higher volumes sold in the
2007 periods.
Other operating income consists of
gains resulting from the routine disposition of assets.
In the first quarter of the prior year, a gain of $1.4 million resulted from the
sale of our FIAP land and building.
Interest expense for the three and six
months ended April 30, 2007 decreased $0.2 million in each period to $3.9 million and $7.9
million, respectively. This decrease is the
result of a reduction in borrowings offset by an increase in interest rates.
Other, net expenses in the 2006
year-to-date period includes the non cash write-off of accumulated foreign currency
translation losses applicable to FIAP of $8.0 million.
"We are pleased to note that
year-to-date income from continuing operations improved an impressive $3.6 million over
the prior year, sales volume increased a substantial 8% and basic earnings per share from
continuing operations increased $0.59 over the prior year to $2.13 per share," stated
Brendan Barba, Chairman and Chief Executive Officer of the Company.
"Our confidence in and commitment
to our Company and its future remains strong and are evidenced by our continuing purchases
of our own stock."
Net income for the three months ended
April 30, 2007 was $6.2 million or $0.77 per diluted share as compared to $18.2 million or
$2.08 per diluted share in the second quarter of 2006.
Net income for the six months ended April 30, 2007 was $16.8 million or $2.09 per
diluted share as compared to $18.4 million or $2.12 per diluted share in 2006.
Adjusted EBITDA was $25.4 million in
the current quarter, an increase of $9.3 million over the second quarter of 2006. Adjusted EBITDA for the six months ended April 30,
2007 was $45.9 million, an increase of $8.3 million over the first half of 2006.
Reconciliation of Non-GAAP Measures to
GAAP
The Company defines Adjusted EBITDA as
net income before discontinued operations, interest expense, income taxes, depreciation
and amortization, changes in LIFO reserve, non-operating income (expense), non-cash
share-based compensation expense and non-cash employee stock ownership plan
("ESOP") expense. The Company
believes Adjusted EBITDA is an important measure of operating performance because it
allows management, investors and others to evaluate and compare its core operating
results, including its return on capital and operating efficiencies, from period to period
by removing the impact of its capital structure (interest expense from its outstanding
debt), asset base (depreciation and amortization), tax consequences, changes in LIFO
reserve (a non-cash charge/benefit to its consolidated statements of operations),
non-operating items and non-cash share-based compensation and non-cash ESOP charges. In addition to its use by management, the Company
also believes Adjusted EBITDA is a measure widely used by securities analysts, investors
and others to evaluate the financial performance of the Company and other companies in the
plastic films industry. Other companies may
calculate Adjusted EBITDA differently, and therefore the Company's Adjusted EBITDA may not
be comparable to similarly titled measures of other companies. Furthermore, management
uses Adjusted EBITDA for business planning purposes and to evaluate and price potential
acquisitions.
Adjusted EBITDA is not a measure of
financial performance under generally accepted accounting principles (GAAP), and should
not be considered in isolation or as an alternative to net income, cash flows from
operating activities and other measures determined in accordance with GAAP. Items excluded from Adjusted EBITDA are
significant and necessary components to the operations of the Company's business, and,
therefore, Adjusted EBITDA should only be used as a supplemental measure of the Company's
operating performance.
The following is a reconciliation of
the Company's Adjusted EBITDA to net income, the most directly comparable GAAP financial
measure:
Reconciliation of Net Income to
Adjusted EBITDA
Second
Second
Quarter April YTD Quarter April YTD
Fiscal Fiscal
Fiscal Fiscal
2007 2007 2006 2006
(in (in (in (in
thousands)thousands)thousands)thousands)
Net income
$6,153 $16,845 $18,173 $18,429
Income from discontinued operations 50 31 5,907
5,199
Income from continuing operations 6,103 16,814
12,266 13,230
Provision for
taxes
3,381 10,281 5,938
10,913
Interest
expense
3,919 7,917 4,150
8,152
Depreciation
and amortization
expense
4,897 9,798 3,979
7,722
Write off FIAP
CTA
- - - 7,986
Gain on sale
of FIAP land and
building
- - - (1,442)
Increase
(decrease) in LIFO
reserve
6,280 (605) (10,145) (9,241)
Other
non-operating income
(152) (228) (648)
(1,094)
Non-cash
share-based compensation 1,020 1,963
223 468
Non-cash ESOP
expense - - 394 946
Adjusted EBITDA $25,448 $45,940 $16,157 $37,640
The Company invites all interested
parties to listen to its second quarter conference call live over the Internet at
www.aepinc.com on June 12, 2007 at 10.00 a.m. EDT. An
archived version of the call will be made available after the call is concluded.
AEP Industries Inc. manufactures,
markets, and distributes an extensive range of plastic packaging products for the
food/beverage, industrial and agricultural markets. The
Company has operations in three countries in North America and Europe.
Except for historical information
contained herein, statements in this release are forward-looking statements that are made
pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements involve
known and unknown risks and uncertainties which may cause the Company's actual results in
future periods to differ materially from forecasted results. Those risks include, but are not limited to, risks
associated with pricing, volume, cash flow guidance and market conditions. Those and other risks are described in the
Company' annual report on Form 10-K for the year ended October 31, 2006 and subsequent
filings with the Securities and Exchange Commission (SEC), copies of which are available
from the SEC or may be obtained from the Company. Except
as required by law, the Company assumes no obligation to update the forward-looking
statements, even if new information become available in the future.
AEP
INDUSTRIES INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
(in
thousands, except per share data)
For the Three For
the Six
Months Ended Months
Ended
April 30,
April 30,
2007 2006 2007 2006
NET SALES
$187,791
$193,251 $367,126 $386,011
COST OF SALES
151,713 150,181 286,935
305,012
Gross profit
36,078 43,070 80,191
80,999
OPERATING EXPENSES:
Delivery
8,750 8,209 17,182
16,152
Selling
8,456 7,631 16,809
15,245
General and administrative 5,625 5,568
11,420 11,886
Total
operating expenses
22,831 21,408 45,411
43,283
OTHER OPERATING INCOME:
Gain on sales of property,
plant
and equipment, net
4 44 4 1,471
Operating
income
13,251 21,706 34,784
39,187
OTHER INCOME (EXPENSE):
Interest expense
(3,919) (4,150) (7,917)
(8,152)
Other, net
152 648 228 (6,892)
Income from continuing operations
before provision for income
taxes 9,484 18,204
27,095 24,143
PROVISION FOR INCOME TAXES 3,381 5,938
10,281 10,913
Income from continuing
operations 6,103 12,266
16,814 13,230
DISCONTINUED OPERATIONS:
Pre-tax income (loss) from
discontinued
operations
50 (70) 31 (758)
Loss from disposition
- (43) - (43)
Income tax benefit
- (6,020) - (6,000)
Income from
discontinued
operations
50 5,907 31 5,199
Net income
$6,153 $18,173 $16,845
$18,429
BASIC EARNINGS PER COMMON SHARE:
Income from continuing
operations $0.77 $1.42
$2.13 $1.54
Income from discontinued
operations
$0.01 $0.68 $0.00 $0.60
Net income per common
share $0.78 $2.10
$2.13 $2.14
DILUTED EARNINGS PER COMMON SHARE:
Income from continuing
operations $0.76 $1.40
$2.09 $1.52
Income from discontinued
operations
$0.01 $0.68 $0.00 $0.60
Net income per common
share $0.77 $2.08
$2.09 $2.12
SOURCE AEP Industries Inc.
-0-
06/11/2007
/CONTACT: Paul
Feeney, Executive Vice President and Chief Financial Officer of AEP Industries Inc.,
+1-201-807-2330, feeneyp@aepinc.com/
/Web site: http://www.aepinc.com
/
(AEPI)