AEP Industries' fiscal 2013 net income falls 53.6% year-over-year to US$10.7M due primarily to delays in transitioning recently acquired Webster and Transco companies; net sales down 0.75% to US$1.14B

Elyse Blye

MONTVALE, New Jersey , January 14, 2014 (press release) –

AEP Industries Inc. (Nasdaq: AEPI, the "Company" or “AEP”) today reported financial results for its fiscal year ended October 31, 2013.

Net sales for fiscal 2013 decreased $8.6 million, or (0.8)%, to $1,143.9 million from $1,152.5 million for fiscal 2012. The decrease was the result of a 1% decrease in sales volume partially offset by an increase in average selling prices compared to the prior year. The sales volume in fiscal 2013 was negatively impacted primarily by disruptions resulting from the movement and installation of equipment related to the Company’s Webster and Transco acquisitions.

Gross profit for fiscal 2013 was $154.5 million, a decrease of $28.3 million, or 15.5%, compared to the prior fiscal year. Excluding the impact of the LIFO reserve change of $11.1 million during the periods and an increase in depreciation expense of $5.1 million, gross profit decreased $12.1 million resulting primarily from decreased volumes sold and from increased manufacturing costs, including costs incurred as the Company realigned its plants to better align with market demand and increase manufacturing capabilities.

Operating expenses for fiscal 2013 were $121.1 million, a decrease of $5.7 million, or 4.5%, compared to the prior fiscal year. Included in the prior fiscal year was $0.6 million of acquisition-related fees associated with the Webster acquisition. Excluding such fees, operating expenses decreased $5.1 million primarily due to a decrease in share-based compensation costs associated with the Company’s stock option and performance units, a decrease in provisions related to employee cash performance incentives and lower professional fees, partially offset by severance costs associated with the Company’s Webster operations and an increase in delivery expenses primarily due to higher fuel costs and a temporary increase in inter-plant transportation costs incurred to maintain traditional customer service levels as manufacturing sites were realigned.

“During fiscal 2013, we executed on a balanced strategy of implementing operational initiatives to enhance efficiency, while strengthening our capacity through the integration of Webster and Transco,” said Brendan Barba, Chairman, President and Chief Executive Officer of the Company. “While delays in transitioning these businesses impacted our results, we are confident that our efforts position AEP to continue delivering strong and stable volumes, improving margins and driving solid cash flow. We believe AEP is entering fiscal 2014 poised for continued growth and success, and we look forward to continuing to generate value for our shareholders.”

Interest expense for fiscal 2013 was $18.7 million, a decrease of $0.4 million as compared to the prior fiscal year resulting primarily from lower average borrowings under the Company’s credit facility and an unrealized gain on the Company’s interest rate swap, partially offset by additional interest expense on new capital leases and interest expense on the Company’s mortgage note which was entered into on July 25, 2012.

Net income for fiscal 2013 was $10.7 million, or $1.92 per diluted share, as compared to $23.2 million, or $4.16 per diluted share in fiscal 2012. Fiscal 2013 included a gain on bargain purchase of the Transco business of $1.0 million.

Adjusted EBITDA (defined below) was $75.9 million in fiscal 2013 as compared to $84.2 million in fiscal 2012.

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