For the first nine months of fiscal 2007, gross profit decreased $5.7 million, or 5%, to $115.8 million from $121.5 million recorded in the same period of fiscal 2006. The decrease in gross profit is primarily due to a cumulative increase in LIFO reserves of $10.4 million between the periods combined with reduced material margins partially offset by the positive effect of a 6% sales volume increase.  The effect of foreign exchange on gross profit for the first nine months of 2007 was a positive $0.9 million.

    Operating expenses for the three and nine months ended July 31, 2007 increased $1.1 million to $25.1 million and $3.2 million to $70.6 million, respectively.  These increases are primarily due to increased selling and delivery costs resulting from higher volumes sold in the 2007 periods, the negative effect of foreign exchange, and increased compensation costs recorded in accordance with SFAS 123R for stock options and performance units.

    Other operating income consists of gains or losses 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 months ended July 31, 2007 increased $0.1 million to $4.2 million primarily as a result of increased borrowings under our Credit Facility during the fiscal 2007 period.  Interest expense decreased $0.1 million to $12.1 million for the nine months ended July 31, 2007 as a result of a reduction in average borrowings, which was partially offset by an increase in interest rates during the nine month period.

    Other, net expenses in the fiscal 2006 nine-month period includes the non cash write-off of accumulated foreign currency translation losses applicable to FIAP of $8.0 million.

    "The single most important metric we use in evaluating our Company's performance is Adjusted EBITDA, which we are pleased to report for the first nine months of this year is ahead of our internal forecast and guidance, beating our prior year by $3.8 million," stated Brendan Barba, Chairman and Chief Executive Officer of the Company.

    "Throughout 2007 increased sales volumes have largely offset the negative declines in material margins," Mr. Barba continued.  "In the coming periods we expect we will continue to have some difficulty catching up with resin cost increases. However, we expect volume increases will continue and, as a result, expect our cash flow goals will continue to be met and possibly exceeded."

    Net income for the three and nine months ended July 31, 2007 was $4.8 million or $0.63 per diluted share and $21.6 million or $2.75 per diluted share, respectively.  Net income for the three and nine months ended July 31, 2006 was $20.1 million or $2.28 per diluted share and $38.5 million or $4.41 per diluted share, respectively.  Net income for the three and nine months ended July 31, 2006 includes income tax benefits totaling $12.5 million and $18.5 million, respectively, related to our FIAP operation and worthless stock deductions of certain discontinued operations.

    Adjusted EBITDA was $21.8 million in the current quarter as compared to $26.3 million for the three months ended July 31, 2006.   Adjusted EBITDA for the nine months ended July 31, 2007 was $67.8 million, an increase of $3.8 million over the first nine months of fiscal 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:

    AEP INDUSTRIES

    Adjusted EBITDA Calculation

    Reconciliation of Net Income to Adjusted EBITDA

                                      Third                 Third 

                                     Quarter    July YTD   Quarter    July YTD

                                      Fiscal     Fiscal     Fiscal     Fiscal

                                       2007       2007       2006       2006

                                       (in        (in        (in        (in  

                                    thousands) thousands) thousands) thousands

    Net income                        $4,777     $21,622   $20,096    $38,525

    Income from discontinued

     operations                            -          31     7,320     12,519

    Income from continuing

     operations                        4,777      21,591    12,776     26,006

        Provision (benefit)

         for income taxes              2,466      12,747      (559)    10,354

        Interest expense               4,149      12,066     4,056     12,208

        Depreciation and

         amortization expense          4,648      14,446     4,347     12,069

        Write off FIAP CTA                 -           -         -      7,986

        Gain on sale of FIAP

         land and building                 -           -         -     (1,442)

        Increase (decrease)

         in LIFO reserve               6,050       5,445     4,255     (4,986)

        Other non-operating

         (income) expense               (914)     (1,142)       12     (1,082)

        Non-cash share-based

         compensation                    652       2,615       908      1,376

        Non-cash ESOP expense              -           -       495      1,441

                 Adjusted EBITDA     $21,828     $67,768   $26,290    $63,930

    The Company invites all interested parties to listen to its second quarter conference call live over the Internet at http://www.aepinc.com on September 11, 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.

    Contact:  Paul Feeney

              Executive Vice President

              and Chief Financial Officer

              AEP Industries Inc.

              (201) 807-2330

              feeneyp@aepinc.com

AEP INDUSTRIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

                                    For the Three Months  For the Nine Months

                                        Ended July 31,        Ended July 31,

                                       2007       2006       2007       2006

    NET SALES                       $204,965   $208,925   $572,091   $594,936

    COST OF SALES                    169,358    168,452    456,293    473,464

      Gross profit                    35,607     40,473    115,798    121,472

    OPERATING EXPENSES:

      Delivery                        10,409      9,972     27,591     26,124

      Selling                          8,921      8,459     25,730     23,704

      General and administrative       5,814      5,628     17,234     17,514

        Total operating expenses      25,144     24,059     70,555     67,342

    OTHER OPERATING INCOME:

      Gain (loss) on sales of

       property, plant and

       equipment, net                     15       (129)        19      1,342

        Operating income              10,478     16,285     45,262     55,472

    OTHER INCOME (EXPENSE):

      Interest expense                (4,149)    (4,056)   (12,066)   (12,208)

      Other, net                         914        (12)     1,142     (6,904)

    Income from continuing

     operations before provision

     for income taxes                  7,243     12,217     34,338     36,360

    PROVISION (BENEFIT)

     FOR INCOME TAXES                  2,466       (559)    12,747     10,354

      Income from continuing

       operations                      4,777     12,776     21,591     26,006

    DISCONTINUED OPERATIONS:

      Pre-tax income (loss) from

       discontinued operations             -       (310)        31     (1,068)

      Gain from disposition                -        124          -         81

      Income tax benefit                   -      7,506          -     13,506

        Income from discontinued

         operations                        -      7,320         31     12,519

    Net income                        $4,777    $20,096    $21,622    $38,525

    BASIC EARNINGS PER COMMON SHARE:

      Income from continuing

       operations                      $0.65      $1.47      $2.79      $3.02

      Income from discontinued

       operations                      $0.00      $0.84      $0.00      $1.45

      Net income per common share      $0.65      $2.32      $2.80      $4.47

    DILUTED EARNINGS PER COMMON SHARE:

      Income from continuing

       operations                      $0.63      $1.45      $2.74      $2.98

      Income from discontinued

       operations                      $0.00      $0.83      $0.00      $1.43

      Net income per common share      $0.63      $2.28      $2.75      $4.41

SOURCE  AEP Industries Inc.

    -0-                             09/10/2007

    /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)