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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission file number 0-14450

AEP Industries Inc.
(Exact name of registrant as specified in its charter)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

        Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

PART I—FINANCIAL INFORMATION

Item 1.    Financial Statements

AEP INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
(UNAUDITED)

The accompanying notes to the consolidated financial statements are an integral part of these statements.

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AEP INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND OTHER COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in thousands, except per share data)

The accompanying notes to consolidated financial statements are an integral part of these statements.

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AEP INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)

The accompanying notes to consolidated financial statements are an integral part of these statements

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AEP INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1)    Summary of Significant Accounting Policies

        The consolidated financial information included herein has been prepared by the Company without audit, for filing with the U.S. Securities and Exchange Commission pursuant to the rules and regulations of the Commission.

        The consolidated financial statements include the accounts of AEP Industries Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In management's opinion, all adjustments necessary for the fair presentation of the consolidated financial position as of April 30, 2005, the results of operations for the three and six months ended April 30, 2005 and 2004, and cash flows for the six months ended April 30, 2005 and 2004, have been made. The results of operations for the six months ended April 30, 2005, are not necessarily indicative of the results to be expected for the full year.

        Certain prior period amounts related to the discontinued operations of the Company's Spanish, Termofilm (Italy), French, Australian, New Zealand and Bordex (Holland) operations (see Note 13) have been reclassified to conform to the current period's presentation.

        Certain information and footnote disclosures normally included in consolidated annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended October 31, 2004, filed with the U.S. Securities and Exchange Commission on January 31, 2005.

(2)    Earnings Per Share (EPS)

        Basic earnings per share ("EPS") are calculated by dividing income (loss) by the weighted average number of shares of common stock outstanding during the period. The number of shares used in such computation for the three months ended April 30, 2005 and 2004, was 8,508,376 and 8,338,986, respectively. The number of shares used in such computation for the six months ended April 30, 2005 and 2004, was 8,459,639 and 8,263,273, respectively. Diluted EPS is calculated by dividing income (loss) by the weighted average number of common shares outstanding, adjusted to reflect potentially dilutive securities (options) using the treasury stock method. Because of the losses from continuing operations for the three months and six months ended April 30, 2005, the assumed net exercise of stock options in those periods was excluded, as the effect would have been anti-dilutive. The computation of diluted EPS for the three months and six months ended April 30, 2004, includes 46,587 and 23,606 of incremental shares for options outstanding, respectively. At April 30, 2005 and 2004, the Company had 535,407 and 580,812 stock options outstanding, respectively that could potentially dilute basic earnings per share in future periods.

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(3)    Inventories

        Inventories are stated at the lower of cost (last-in, first-out method for domestic operations and first-in, first-out method for foreign operations and for supplies) or market, and include material, labor and manufacturing overhead costs, less vendor rebates, and are comprised of the following:

        The last-in, first-out (LIFO) method was used for determining the cost of approximately 72% and 71% of total inventories at April 30, 2005 and October 31, 2004, respectively. Inventories would have been increased by $18.3 million and $10.7 million at April 30, 2005 and October 31, 2004, respectively, if the first-in first-out (FIFO) method had been used exclusively. Because of the Company's continuous manufacturing process, there is no significant work in process at any point in time.

(4)    DEBT

        A summary of the components of debt is as follows:

(a)    Senior Credit Facility

        On November 20, 2001, we entered into a Loan and Security Agreement with Congress Financial Corporation which has been succeeded by merger by Wachovia Bank N.A. as initial lender thereunder and as agent for the financial institutions that would from time to time be lenders thereunder. Under this agreement the Lenders provided a maximum credit facility of $85 million, including a letter of credit facility of up to $20 million. The senior credit facility had an initial three-year term with an

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option held by us to extend prior to the end of year three for an additional year and, if so extended, at the end of year four for an additional year, in each case subject to the satisfaction of certain conditions, including the payment of an extension fee of 0.25% of the maximum amount of borrowings under the senior credit facility. The term of the senior credit facility has been extended to November 19, 2005, and may be extended to November 19, 2006. We expect to refinance the senior credit facility prior to that time. However, any extension of the maturity of the senior credit facility is subject to certain conditions and, under certain circumstances, the lenders under the senior credit facility may elect to not permit us to renew the senior credit facility.

        Amounts available for borrowing are based upon the sum of eligible accounts receivable and inventories, determined on a monthly basis, and the aggregate value of eligible buildings and equipment. The senior credit facility is secured by mortgages and liens on our domestic assets and on 66% of our equity ownership in certain foreign subsidiaries. The agreement contains customary bank covenants, including limitations on the incurrence of debt, the disposition of assets, the making of restricted payments and the payment of cash dividends. At any time if Excess Availability, as defined by the senior credit facility, is less than $20.0 million, a minimum EBITDA covenant becomes applicable and a springing lock-box becomes activated; at any time Excess Availability is less than $10.0 million, we also become subject to further restrictions, including limitations on inter-company funding. When the springing lock-box is activated, all remittances received from customers in the United States automatically repay the balance outstanding under the senior credit facility. The automatic repayments through the lock-box remain in place until the Excess Availability exceeds $20.0 million for 30 consecutive days. During the period in which the lock-box is activated, all debt outstanding under the senior credit facility is classified as a current liability, which may materially affect our working capital ratio. During the first six months of fiscal 2005 the Excess Availability under our senior credit facility ranged from $33.2 million to $66.5 million. Our Excess Availability under this facility was $53.4 million at April 30, 2005. We currently project that our Excess Availability under this facility will exceed $20.0 million through October 31, 2005, at a minimum, based upon budgeted financial statements and budgeted cash requirements. Interest rates under the senior credit facility range from, in the case of loans based on the prime rate, the prime rate plus 0.25% to 1.00% or, in the case of loans based on LIBOR, LIBOR plus 2.25% to 3.00%, in each case depending on (i) Excess Availability and (ii) our leverage. We are obligated to pay an unused line fee on the excess of the maximum credit facility amount over the average daily usage of the senior credit facility at a rate equal to 0.375% or 0.5%, depending upon (i) Excess Availability and (ii) our leverage. As of April 30, 2005, there was $46.0 million outstanding at a weighted average interest rate of 6.00% under this senior credit facility.

        On February 10, 2005, we entered into an amendment to the senior credit facility increasing our maximum borrowings under the existing senior credit facility from $85.0 million to $100.0 million. In addition, on February 25, 2005, we further amended and obtained consent under the senior credit facility to permit the tender offer and consent solicitation for our Senior Subordinated Notes described below and increased the annual permitted amount for certain repayments of indebtedness and repurchases of our securities and for certain investments from $25.0 million to $50.0 million.

(b)    9.875% Senior Subordinated Notes—2007

        On March 18, 2005, the Company completed its tender offer and consent solicitation related to $166.9 million of its $200 million 9.875% Senior Subordinated Notes due November 15, 2007 ("2007

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Notes"). Under the tender offer (the "Offer), the Company accepted all validly tendered 2007 Notes for payment under the Offer, and accordingly paid approximately $166.9 million to the 2007 Note holders plus a $3.6 million cash premium. Additionally, $5.6 million of accrued interest was paid to the Note holders.

        In connection with the early extinguishment of the 2007 Notes, the Company recorded a $6.2 charge in interest expense in the consolidated statements of operations. The charge included a $3.6 million cash premium paid to acquire the 2007 Notes, as discussed above, as well as a write-off of approximately $2.6 million representing the unamortized portion of debt issuance costs associated with the original issuance.

        On May 17, 2005, we completed our call redemption on the remaining $33.1 million aggregate principal amount of 2007 Notes. We paid approximately $33.7 million to purchase $33.1 million of the 2007 Notes from Note holders. Additionally, we paid $1.7 million of accrued interest to the Note holders. The Company recognized a charge of $0.6 million for the cash premium paid to acquire these Notes in its interest expense for the three months ended April 30, 2005. The Company will write off the remaining debt issuance costs associated with the original issuance during the third quarter of fiscal 2005.

        The 2007 Notes contain certain customary representations, warranties, covenants and conditions such as, but not limited to, cash flow ratio and certain restrictions on, but not limited to, dividends, consolidations and certain asset sales and additional indebtedness. We were in compliance with all of these covenants at April 30, 2005.

(c)    7.875% Senior Notes—2013

        On March 18, 2005, the Company completed the sale of $175 million aggregate principal amount of 7.875% Senior Notes due March 15, 2013 ("2013 Notes") through a private offering.

        The 2013 Notes mature on March 15, 2013, and contain certain customary representations, warranties, covenants and conditions such as, but not limited to, cash flow ratio and certain restrictions on, but not limited to, dividends, consolidations and certain asset sales and additional indebtedness. We were in compliance with all of these covenants at April 30, 2005.

        The notes are subject to redemption, at the option of the Company, in whole or in part, at any time on or after March 31, 2009 and prior to maturity at certain fixed redemption prices plus accrued interest. In addition, prior to March 15, 2008, the Company may redeem up to 35% of the notes with the net cash proceeds received by the Company from one or more Equity Offerings, at a redemption value equal to 107.875% of the principal amount plus accrued interest, provided that at least 65% of the aggregate principal amount of notes remain outstanding immediately after any such redemption. The Company may also call for redemption up to $25 million of the notes prior to September 15, 2005 with the cash proceeds received by the Company from the sale of the pacific operations at a redemption price equal to 101% plus accrued interest. The notes will not have the benefit of any sinking fund.

        Interest is paid semi-annually on every March 15^th and September 15^th.

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(d)    Pennsylvania Industrial Loans

        The Company put in place certain amortizing fixed rate 2% term loans in connection with the construction of its Wright Township, Pennsylvania manufacturing facility in fiscal 1995. These financing arrangements are secured by the real property of the manufacturing facility located in Wright Township, Pennsylvania with a net carrying value of $10.3 million at April 30, 2005.

(e)    Foreign Borrowings

        We maintain various credit facilities at our foreign subsidiaries. At April 30, 2005, the aggregate amount outstanding under such facilities was $13.5 million, all of which is secured by various assets of the foreign subsidiaries, and which may include accounts receivable, inventories, property and machinery, equipment and real estate. The carrying amount of the collateral at April 30, 2005, was $30.1 million. There was $7.5 million additional availability under these facilities at April 30, 2005. We guarantee certain of the debt of our foreign subsidiaries through corporate guarantees aggregating approximately $8.7 million at April 30, 2005. There are no existing events of default that would require us to satisfy these guarantees. Borrowings under these facilities are used to support operations at such subsidiaries and are generally serviced by local cash flow from operations.

(5)    Other Income (Expense)

        For the three and six months ended April 30, 2005 and 2004, other income (expense), net in the consolidated statements of operations consists of the following:

(6)    Supplemental Cash Flow Disclosure