AEP INDUSTRIES INC - FORM 10-Q

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file	filename
EXCEL - IDEA: XBRL DOCUMENT - AEP INDUSTRIES INC	Financial_Report.xls
EX-31.2 - EX-31.2 - AEP INDUSTRIES INC	d660545dex312.htm
EX-32.2 - EX-32.2 - AEP INDUSTRIES INC	d660545dex322.htm
EX-32.1 - EX-32.1 - AEP INDUSTRIES INC	d660545dex321.htm
EX-31.1 - EX-31.1 - AEP INDUSTRIES INC	d660545dex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended January 31, 2014

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35117

AEP Industries Inc.

(Exact name of registrant as specified in its charter)


Delaware		22-1916107
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

95 Chestnut Ridge Road Montvale, New Jersey		07645
(Address of principal executive offices)		(Zip code)

(201) 641-6600

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of outstanding shares of the registrant’s common stock, $0.01 par value, as of March 7, 2014 was 5,602,333.

AEP INDUSTRIES INC.

TABLE OF CONTENTS


		Page Number
PART I	FINANCIAL INFORMATION

ITEM 1:	Financial Statements		3

	Consolidated Balance Sheets at January 31, 2014 (unaudited) and October 31, 2013		3

	Consolidated Statements of Operations for the three months ended January 31, 2014 and 2013 (unaudited)		4

	Consolidated Statements of Comprehensive (Loss) Income for the three months ended January 31, 2014 and 2013 (unaudited)		5

	Consolidated Statements of Cash Flows for the three months ended January 31, 2014 and 2013 (unaudited)		6

	Notes to Consolidated Financial Statements (unaudited)		7

ITEM 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22

ITEM 3:	Quantitative and Qualitative Disclosures About Market Risk		30

ITEM 4:	Controls and Procedures		31

PART II	OTHER INFORMATION

ITEM 1:	Legal Proceedings		32

ITEM 1A:	Risk Factors		32

ITEM 2:	Unregistered Sales of Equity Securities and Use of Proceeds		32

ITEM 3:	Defaults Upon Senior Securities		32

ITEM 4:	Mine Safety Disclosures		32

ITEM 5:	Other Information		32

ITEM 6:	Exhibits		32

	Signatures		33

PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

AEP INDUSTRIES INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)


	January 31, 2014			October 31, 2013
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,406		$	13,319
Accounts receivable, less allowance for doubtful accounts of $2,802 and $2,992 in 2014 and 2013, respectively		105,744			112,605
Inventories, net		106,296			97,091
Deferred income taxes		9,008			6,300
Other current assets		5,918			5,389

Total current assets		228,372			234,704

PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated depreciation and amortization of $355,335 and $348,519 in 2014 and 2013, respectively		222,529			220,314
GOODWILL		6,871			6,871
INTANGIBLE ASSETS, net of accumulated amortization of $2,023 and $1,894 in 2014 and 2013, respectively		4,389			4,518
OTHER ASSETS		4,985			5,156

Total assets	$	467,146		$	471,563

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Bank borrowings, including current portion of long-term debt	$	3,544		$	3,335
Accounts payable		89,859			80,579
Accrued expenses		29,070			32,144

Total current liabilities		122,473			116,058
LONG-TERM DEBT		234,767			238,931
DEFERRED INCOME TAXES		25,542			25,610
OTHER LONG-TERM LIABILITIES		3,723			5,551

Total liabilities		386,505			386,150

COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Preferred stock, $1.00 par value; 970,000 shares authorized; none issued		—			—
Series A junior participating preferred stock, $1.00 par value; 30,000 shares authorized; none issued		—			—
Common stock, $0.01 par value; 30,000,000 shares authorized; 11,207,662 and 11,207,049 shares issued in 2014 and 2013, respectively		112			112
Additional paid-in capital		112,673			112,527
Treasury stock at cost, 5,605,783 shares in 2014 and 2013, respectively		(169,826	)		(169,826	)
Retained earnings		138,337			142,064
Accumulated other comprehensive (loss) income		(655	)		536

Total shareholders’ equity		80,641			85,413

Total liabilities and shareholders’ equity	$	467,146		$	471,563

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

AEP INDUSTRIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share data)


	For the Three Months Ended January 31,
	2014			2013
NET SALES	$	272,517		$	267,142
COST OF SALES		247,933			224,708

Gross profit		24,584			42,434
OPERATING EXPENSES:
Delivery		12,018			12,366
Selling		8,658			9,498
General and administrative		5,576			6,889

Total operating expenses		26,252			28,753

Operating (loss) income		(1,668	)		13,681
OTHER INCOME (EXPENSE):
Interest expense		(4,783	)		(4,566	)
Gain on bargain purchase of a business		—			1,001
Other, net		87			69

(Loss) income before benefit (provision) for income taxes		(6,364	)		10,185
BENEFIT (PROVISION) FOR INCOME TAXES		2,637			(3,275	)

Net (loss) income	$	(3,727	)	$	6,910

BASIC (LOSS) EARNINGS PER COMMON SHARE:
Net (loss) income per common share	$	(0.67	)	$	1.25

DILUTED (LOSS) EARNINGS PER COMMON SHARE:
Net (loss) income per common share	$	(0.67	)	$	1.23

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

AEP INDUSTRIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

(in thousands)


	For the Three Months Ended January 31,
	2014			2013
Net (loss) income	$	(3,727	)	$	6,910
Other comprehensive (loss) income:
Foreign currency translation adjustments		(1,224	)		33
Amortization of prior service cost and actuarial net loss, net of tax of $11 and $16 for 2014 and 2013, respectively		33			46

Total other comprehensive (loss) income		(1,191	)		79

Comprehensive (loss) income	$	(4,918	)	$	6,989

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

AEP INDUSTRIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	For the Three Months Ended January 31,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(3,727	)	$	6,910
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		7,776			6,001
Gain on bargain purchase of a business		—			(1,001	)
Change in LIFO reserve		1,874			(3,066	)
Amortization of debt fees		239			239
Provision for losses on accounts receivable and inventories		26			20
(Benefit) provision for deferred income taxes		(2,671	)		598
Share-based compensation (income) expense		(450	)		1,269
Other		(13	)		(11	)
Changes in operating assets and liabilities:
Decrease in accounts receivable		6,404			7,066
Increase in inventories		(11,278	)		(12,466	)
Increase in other current assets		(503	)		(858	)
Increase in other assets		(68	)		(93	)
Increase in accounts payable		9,445			10,283
Decrease in accrued expenses		(3,355	)		(6,358	)
Increase in other long-term liabilities		15			35

Net cash provided by operating activities		3,714			8,568

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(9,306	)		(14,482	)
Net proceeds from dispositions of property, plant and equipment		20			124

Net cash used in investing activities		(9,286	)		(14,358	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings from credit facility		(4,700	)		2,897
Proceeds from capital lease obligations		658			4,134
Repayments of Pennsylvania Industrial Loans		(27	)		(37	)
Principal payments on capital lease obligations		(773	)		(573	)
Principal payments on mortgage loan note		(30	)		(29	)
Proceeds from exercise of stock options		—			16
Excess tax benefit from stock option exercises		—			21
Payments of withholding taxes on performance units		(698	)		(644	)

Net cash (used in) provided by financing activities		(5,570	)		5,785

EFFECTS OF EXCHANGE RATE CHANGES ON CASH		(771	)		36

Net (decrease) increase in cash		(11,913	)		31
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		13,319			2,807

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,406		$	2,838

SUPPLEMENTAL CASH FLOW DISCLOSURE:
Equipment financed through capital lease obligation	$	917		$	1,107

Cash paid during the period for interest	$	412		$	286

Cash paid during the period for income taxes	$	453		$	480

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

AEP INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of AEP Industries Inc. and all of its subsidiaries (the “Company”). 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 January 31, 2014, and the consolidated results of operations, consolidated comprehensive (loss) income and consolidated cash flows for the three months ended January 31, 2014 and 2013, respectively, have been made. The consolidated results of operations for the three months ended January 31, 2014 are not necessarily indicative of the results to be expected for the full fiscal year.

The consolidated financial information included herein has been prepared by the Company, without audit, for filing with the U.S. Securities and Exchange Commission (the “Commission”) pursuant to the rules and regulations of the Commission. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to product returns, customer rebates and incentives, doubtful accounts, inventories, including LIFO inventory valuations, acquisitions, pension obligations, incurred but not reported medical and workers’ compensation claims, litigation and contingency accruals, income taxes, including valuation of deferred taxes, share-based compensation and impairment of long-lived assets and intangibles, including goodwill. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Certain information and footnote disclosures normally included in audited annual consolidated 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 audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended October 31, 2013, filed with the Commission on January 14, 2014.

The Company evaluates all subsequent events prior to filing and has implemented all new accounting pronouncements that are in effect and that may materially impact its financial statements, and the Company does not believe that there are any other new accounting pronouncements that have been issued that would be expected to have a material impact on its financial position, results of operations or cash flows.

(2) EARNINGS PER SHARE

Basic (loss) earnings per share (“EPS”) is calculated by dividing net (loss) income by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is calculated by dividing net (loss) income by the weighted average number of common shares outstanding, adjusted to reflect potentially dilutive securities (options) using the treasury stock method, except when the effect would be anti-dilutive.

AEP INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(2) EARNINGS PER SHARE (Continued)

The number of shares used in calculating basic and diluted earnings per share is as follows:


	For the Three Months Ended January 31,
	2014		2013
Weighted average common shares outstanding:
Basic		5,601,326		5,531,355
Effect of dilutive securities:
Options to purchase shares of common stock		—		80,634

Diluted		5,601,326		5,611,989

For each of the three month periods ended January 31, 2014 and 2013, the Company had zero stock options outstanding that could potentially dilute earnings per share in future periods but were excluded from the computation of diluted EPS because their exercise price was higher than the Company’s average stock price during the respective periods. For the three months ended January 31, 2014, the Company had 25,587 stock options outstanding that could potentially dilute earnings per share in future periods that were excluded from the computation of diluted EPS because their effect would have been anti-dilutive given the net loss during such quarter.

(3) ACQUISITIONS

Transco Plastics Industries Ltd.

On November 8, 2012, the Company completed its purchase of certain machinery and equipment and related assets necessary to manufacture printed, converted and custom films of Transco Plastics Industries Ltd. (“Transco”), a Quebec company, for a purchase price of $5.3 million (deposit was made and included in other assets at October 31, 2012), excluding a one-year commission and transition service costs. The Company financed the transaction through a combination of cash on hand and availability under its credit facility.

The Transco acquisition expanded the Company’s presence in the plastic packaging industry and enhanced the Company’s suite of products. The acquisition resulted in a gain on bargain purchase as the seller was motivated to sell these assets since they were no longer a part of the seller’s intended ongoing business and the seller was under a time constraint to vacate the building in which these assets were located.

AEP INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(3) ACQUISITIONS (Continued)

The Company concluded that the Transco acquisition represented a business because it is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return to the Company and its shareholders. As such, the acquisition has been accounted for using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the acquisition date.


	Allocation At October 31, 2013
	(in thousands)
Property, plant and equipment	$	5,380
Intangible asset (customer relationships)		1,500

Total identifiable assets acquired		6,880

Deferred income tax liability		579

Total liabilities assumed		579

Net identifiable assets acquired		6,301
Purchase price		5,300


Gain on bargain purchase	$	1,001

Upon the determination that the Company was going to recognize a gain related to the bargain purchase of Transco, the Company reassessed its assumptions and measurement of identifiable assets acquired and liabilities assumed, and concluded that the valuation procedures and resulting measures were appropriate. As a result, the Company determined that the fair values of assets acquired and liabilities assumed exceeded the purchase price by approximately $1.0 million, which was recorded as a gain on bargain purchase in its consolidated statement of operations for the three months ended January 31, 2013.

The intangible asset is being amortized over a straight-line basis over ten years.

The Company incurred $0.1 million of acquisition-related costs during the quarter ended January 31, 2013. These costs were expensed when incurred and are recorded in general and administrative expenses in the consolidated statement of operations for the quarter ended January 31, 2013.

The results of operations for Transco have been included in all periods presented.

(4) INVENTORIES

Inventories, stated at the lower of cost (last-in, first-out method (“LIFO”) for the U.S. operations, and the first-in, first-out method (“FIFO”) for the Canadian operation, supplies and printed and converted finished goods for the U.S. operation, and certain Webster finished goods) or market, include material, labor and manufacturing overhead costs, less vendor rebates. The Company establishes a reserve in those situations in which cost exceeds market value.

AEP INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(4) INVENTORIES (Continued)

Inventories are comprised of the following:


	January 31, 2014			October 31, 2013
	(in thousands)
Raw materials	$	49,883		$	48,467
Finished goods		93,483			83,363
Supplies		5,865			6,322

		149,231			138,152
Less: LIFO reserve		(42,935	)		(41,061	)

Inventories, net	$	106,296		$	97,091

The LIFO method was used for determining the cost of approximately 86% and 85% of total inventories at January 31, 2014 and October 31, 2013, respectively. Since the actual valuation of inventory under the LIFO method can only be made at the end of the fiscal year based on inventory levels and costs at that time, the interim LIFO calculations are based on management’s best estimate of expected fiscal year-end inventory levels and costs. Due to the volatility of resin pricing, the Company consistently uses current pricing as its estimate of fiscal year-end costs. Therefore, interim LIFO calculations are subject to the final fiscal year-end LIFO inventory valuation. Because of the Company’s continuous manufacturing process, there is no significant work in process at any point in time.

(5) DEBT

A summary of the components of debt is as follows:


	January 31, 2014		October 31, 2013
	(in thousands)
Credit facility (a)	$	20,900	$	25,600
8.25% senior notes due 2019 (b)		200,000		200,000
Pennsylvania industrial loan (c)		1,029		1,056
Mortgage loan note (d)		3,193		3,223
Capital leases (e)		13,189		12,387
Foreign bank borrowings (f)		—		—

Total debt		238,311		242,266
Less: current portion		3,544		3,335

Long-term debt	$	234,767	$	238,931

(a)

Credit Facility

The Company is party to the Second Amended and Restated Loan and Security Agreement (the “credit facility”), dated February 22, 2012, with Wells Fargo Bank National Association (“Wells Fargo”), successor to Wachovia Bank N.A., as a lender thereunder and as agent for the secured parties thereunder. The maximum borrowing amount under the credit facility is $150.0 million with a maximum for letters of credit of $20.0 million. The credit facility’s maturity date is February 21, 2017.

AEP INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(5) DEBT (Continued)

The Company utilizes the credit facility to provide funding for operations and other corporate purposes through daily bank borrowings and/or cash repayments to ensure sufficient operating liquidity and efficient cash management. The Company had weighted average borrowings under the credit facility of $33.4 million and $13.5 million, with a weighted average interest rate of 3.2% and 3.3% during the three months ended January 31, 2014 and 2013, respectively. Under the credit facility, interest rates are based upon the Quarterly Average Excess Availability (as defined therein) at a margin of the prime rate (defined as the greater of Wells Fargo’s prime rate or the Federal Funds rate plus 0.5%) plus 0% to 0.25% or LIBOR plus 1.75% to 2.50%.

Borrowings and letters of credit available under the credit facility are limited to a borrowing base based upon specific advance percentage rates on eligible accounts receivable and inventory, subject, in the case of inventory, to amount limitations. The sum of the eligible assets at January 31, 2014 and October 31, 2013 supported a borrowing base of $148.6 million and $150.0 million, respectively. Availability was reduced by the aggregate amount of letters of credit outstanding totaling $2.2 million and $1.1 million at January 31, 2014 and October 31, 2013, respectively. Availability at January 31, 2014 and October 31, 2013 under the credit facility was $125.5 million and $123.3 million, respectively. The credit facility is secured by liens on most of the Company’s domestic assets (other than real property and equipment) and on 66% of the Company’s ownership interest in certain foreign subsidiaries.

The credit facility provides for events of default. If an event of default occurs and is continuing, amounts due under the credit facility may be accelerated and the commitments to extend credit thereunder terminated, and the rights and remedies of the lenders may be exercised including rights with respect to the collateral securing the obligations under the credit facility. The credit facility also contains covenants, including, but not limited to, limitations on the incurrence of debt and liens, the disposition and acquisition of assets, and the making of investments and restricted payments, including the payment of cash dividends. The credit facility has a fixed charge coverage ratio test of 1.0x, which test is triggered when Excess Availability is below $22.5 million for the immediately preceding fiscal quarter.

In addition, if Excess Availability under the credit facility is less than $25.0 million, a springing cash dominion is activated and all remittances received from customers in the United States will automatically be applied to repay the balance outstanding. The automatic repayments through the springing cash dominion remain in place until Excess Availability exceeds $25.0 million, and no other event of default has occurred and is continuing, in each case for 30 consecutive days. Excess Availability under the credit facility ranged from $85.1 million to $137.8 million during the three months ended January 31, 2014 and from $115.4 million to $150.0 million during the three months ended January 31, 2013.

During fiscal 2012, the Company capitalized $1.3 million of fees related to the credit facility. These fees, along with the unamortized fees of $0.4 million related to the prior credit facility, are being amortized on a straight line basis over 60 months, the term of the credit facility.

The Company was in compliance with the financial covenants at January 31, 2014 and October 31, 2013.

(b)

8.25% Senior Notes due 2019

The Company has $200 million aggregate principal amount of 8.25% senior notes due 2019 (the “2019 notes”).

AEP INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(5) DEBT (Continued)

The 2019 notes mature on April 15, 2019, and the indenture governing the 2019 notes contains certain customary covenants that, among other things, limit the Company’s ability and the ability of its subsidiaries to incur additional indebtedness, declare or pay dividends, purchase or redeem its capital stock, make investments, sell assets, merge or consolidate, guarantee or pledge any assets or create liens. The Company was in compliance with all of these covenants at January 31, 2014 and October 31, 2013.

The 2019 notes do not have any sinking fund requirements. If the Company experiences certain changes in control, it must offer to repurchase all of the 2019 notes at a price equal to 101% of the principal amount, plus accrued and unpaid interest. In addition, if the Company sells certain assets, under certain circumstances, it must offer to repurchase the 2019 notes pro rata up to a maximum amount equal to the proceeds of such sale at 100% of the principal amount, plus accrued and unpaid interest.

The 2019 notes are redeemable at the option of the Company, in whole or in part, at any time on or after April 15, 2014 and prior to maturity at certain fixed redemption prices plus accrued and unpaid interest. The 2019 notes may be redeemed, in whole or in part, at any time prior to April 15, 2014 at a redemption price equal to 100% of the principal amount of the 2019 notes plus a make-whole premium, as defined, together with accrued and unpaid interest. In addition, the Company may redeem up to 35% of the 2019 notes prior to April 15, 2014, using net proceeds from certain equity offerings.

Interest is paid semi-annually on April 15 and October 15 of each year.

The Company capitalized $4.9 million of fees related to the issuance of the 2019 notes. These fees are being amortized on a straight line basis over eight years, the term of the 2019 notes.

(c)

Pennsylvania Industrial Loan

The Company has an amortizing fixed rate term loan in connection with the expansion in fiscal 2008 of its Wright Township, Pennsylvania manufacturing facility, due November 1, 2023, with an interest rate of 4.75%. This financing arrangement is secured by the real property of the manufacturing facility located in Wright Township, Pennsylvania, which had a net carrying value of $10.9 million at January 31, 2014.

(d)

Mortgage loan note

On July 25, 2012, concurrent with the purchase of the Company’s new corporate headquarters building in Montvale, New Jersey, the Company entered into a mortgage loan note (the “mortgage note”) having a principal amount of $3,360,000 with TD Bank, N.A. The mortgage note bears interest at a rate equal to one-month LIBOR plus 1.75% and matures on August 1, 2022. Interest is paid monthly. The mortgage note is secured by the Montvale building.

In connection with the mortgage note, the Company also entered into a ten-year floating-to-fixed interest rate swap agreement with TD Bank, N.A. with a notional value of $3,360,000, the then outstanding principal balance on the mortgage note. The interest rate swap fixes the interest rate at 3.52% per year and matures on July 25, 2022 (see Note 9 for further discussion).

AEP INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(5) DEBT (Continued)

(e)

Capital leases

From time to time, the Company enters into capital leases for certain of its machinery and equipment. The interest rates on the capital leases range from 3.5% to 8.5%, with a weighted average interest rate of 4.4%. As a result of the capital lease treatment, the equipment remains as a component of property, plant and equipment in the Company’s consolidated balance sheet and is depreciated in accordance with the Company’s depreciation policy.

Under the terms of the capital leases, the payments are as follows:


For the years ending October 31,	Capital Leases
	(in thousands)
2014	$	2,848
2015		2,798
2016		2,091
2017		2,092
2018		2,092
Thereafter		2,625

Total minimum lease payments		14,546
Less: Amounts representing interest		1,357

Present value of minimum lease payments		13,189
Less: Current portion of obligations under capital leases		3,336

Long-term portion of obligations under capital leases	$	9,853

(f)

Foreign bank borrowings

In addition to the amounts available under the credit facility, the Company also maintains a secured credit facility at its Canadian subsidiary, used to support operations, which is generally serviced by local cash flows from operations. There was zero outstanding under this arrangement at January 31, 2014 and October 31, 2013. Availability under the Canadian credit facility at January 31, 2014 and October 31, 2013 was $5.0 million in Canadian dollars or US$4.5 million and US$4.8 million, respectively.

Principal payments required on all debt outstanding during each of the next five fiscal years are as follows:


	(in thousands)
	Debt		Capital leases		Total
2014	$	155	$	2,499	$	2,654
2015		214		2,457		2,671
2016		222		1,825		2,047
2017		21,132		1,892		23,024
2018		242		1,960		2,202
Thereafter		203,157		2,556		205,713

	$	225,122	$	13,189	$	238,311

AEP INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(6) ACCRUED EXPENSES

At January 31, 2014 and October 31, 2013, accrued expenses consist of the following:


	January 31, 2014		October 31, 2013
	(in thousands)
Payroll and employee related	$	8,098	$	10,072
Customer rebates		4,998		7,733
Interest		4,913		762
Accrual for performance units		2,870		4,037
Other (A)		8,191		9,540

Accrued expenses	$	29,070	$	32,144

(A)	No individual item exceeded 5% of current liabilities.

(7) SHAREHOLDERS’ EQUITY

Share-Based Compensation

The Company has a share-based plan which provides for the granting of stock options, restricted stock, performance units and other awards to officers, directors and key employees of the Company. Total share-based compensation (income) expense related to the Company’s share-based plans is recorded in the consolidated statements of operations as follows:


	For the Three Months Ended January 31,
	2014			2013
	(in thousands)
Cost of sales	$	(103	)	$	232
Selling expense		(111	)		248
General and administrative expense		(236	)		789

Total	$	(450	)	$	1,269

Share-Based Plans

At the annual meeting of shareholders of the Company on April 9, 2013, shareholders approved the AEP Industries Inc. 2013 Omnibus Incentive Plan (the “2013 Plan”). The 2013 Plan provides for the award to non-employee directors and key employees of the Company of options, restricted stock, restricted stock units, stock appreciation rights, performance awards (which may take the form of performance units or performance shares) and other awards to acquire up to an aggregate of 375,000 shares of the Company’s common stock. These shares of common stock may be made available from authorized but unissued common stock, from treasury shares or from shares purchased on the open market. The issuance of common stock resulting from the exercise of stock options and settlement of the vesting of performance units (for those employees who elected shares) during fiscal 2014 and 2013 was made from new shares.

As a result of stockholder approval of the 2013 Plan, all awards of stock and stock unit awards subsequent to April 9, 2013 have been granted under the 2013 Plan and no new awards have been made after such date under the AEP Industries Inc. 2005 Stock Option Plan (the “2005 Option Plan”), which expired in October 2013 except as to awards previously granted prior to that date.

AEP INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(7) SHAREHOLDERS’ EQUITY (Continued)

Each non-employee director received a fixed annual grant of 2,000 stock options as of the date of the annual meeting of shareholders under the 2005 Option Plan, and in accordance with the fiscal 2012 director compensation program. On April 12, 2013, each non-employee director was granted an annual restricted stock award with a grant date fair value of $55,000, or 783 shares (4,698 shares in the aggregate), under the 2013 Plan and in accordance with the fiscal 2013 director compensation program. Future annual grants of restricted stock to non-employee directors will be made as of the date of the annual meeting of shareholders. At January 31, 2014, 317,406 shares were available to be issued under the 2013 Plan.

Stock Options

The fair value of options granted is estimated on the date of grant using a Black-Scholes options pricing model. Expected volatilities are calculated based on the historical volatility of the Company’s stock. Management monitors stock option exercise and employee termination patterns to estimate forfeitures rates within the valuation model. Separate groups of employees, including executive officers and directors, that have similar historical exercise behavior are considered separately for valuation purposes. The expected holding period of stock options represents the period of time that stock options granted are expected to be outstanding. The risk-free interest rate is based on the Treasury note interest rate in effect on the date of grant for the expected term of the stock option.

There were no options granted during the three months ended January 31, 2014 or 2013.

The following table summarizes the Company’s stock option plan as of January 31, 2014, and changes during the three months ended January 31, 2014:


	2005 Option Plan		Weighted Average Exercise Price per Option		Option Price Per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value $(000)
Options outstanding at October 31, 2013 (50,846 options exercisable)		72,446	$	29.62	$	17.07-42.60		4.5	$	2,159
Granted		—		—		—
Exercised		—		—		—
Forfeited/Cancelled		—		—		—
Expired		—		—		—

Options outstanding at January 31, 2014		72,446	$	29.62	$	17.07-42.60		4.3	$	1,045

Vested and expected to vest at January 31, 2014		72,446	$	29.62				4.3	$	1,045

Exercisable at January 31, 2014		50,846	$	29.71				3.5	$	729

AEP INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(7) SHAREHOLDERS’ EQUITY (Continued)

The table below presents information related to stock option activity for the three months ended January 31, 2014 and 2013:


	For the Three Months Ended January 31,
	2014		2013
	(in thousands)
Total intrinsic value of stock options exercised	$	—	$	76
Total fair value of stock options vested	$	—	$	59

The fair value of the options, less expected forfeitures, is amortized over five years on a straight-line basis. Share-based compensation expense related to the Company’s stock options recorded in the consolidated statements of operations for the three months ended January 31, 2014 and 2013 was approximately $30,000 and $38,000, respectively. No compensation cost related to stock options was capitalized in inventory or any other assets for the three months ended January 31, 2014 and 2013, respectively. For the three months ended January 31, 2014 and 2013 there was zero and $21,000 in excess tax benefits recognized resulting from share-based compensation awards, which reduced taxes otherwise payable. For fiscal 2012, there was $1.3 million in excess tax benefits recognized resulting from share-based compensation awards, which reduced taxes otherwise payable, and is included in additional paid in capital at January 31, 2014 and October 31, 2013, respectively.

As of January 31, 2014, there was $0.2 million of total unrecognized compensation cost related to non-vested stock options granted under the plans. That cost is expected to be recognized over a weighted-average period of 2.5 years.

Non-vested Stock Options

A summary of the Company’s non-vested stock options at January 31, 2014 and changes during the three months ended January 31, 2014 are presented below:


Non-vested stock options	Shares		Weighted Average Grant Date Fair Value
Non-vested at October 31, 2013		21,600	$	14.86
Granted		—		—
Vested		—		—
Forfeited		—		—

Non-vested at January 31, 2014		21,600	$	14.86

Performance Units

The 2013 Plan provides for, and the 2005 Option Plan provided for, the granting of Board approved performance units (“Units”). Outstanding Units are subject to forfeiture based on an annual Adjusted EBITDA performance goal, as determined and adjusted by the Board. If the Company’s Adjusted EBITDA equals or exceeds the performance goal, no Units will be forfeited. If the Company’s Adjusted EBITDA is between 80% and less than 100% of the performance goal, such employee will forfeit such number of Units equal to (a) the

AEP INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(7) SHAREHOLDERS’ EQUITY (Continued)

Units granted multiplied by (b) the percentage Adjusted EBITDA is less than the performance goal. If Adjusted EBITDA is below 80% of the performance goal, the employee will forfeit all Units. Subsequent to the satisfaction of the performance goal, the vesting of the Units will occur equally over five years on the first through the fifth anniversaries of the grant date, provided that such person continues to be employed by the Company on such respective dates. For each Unit, upon vesting and the satisfaction of any required tax withholding obligation, the employee has the option to receive one share of the Company’s common stock, the equivalent cash value or a combination of both.

Due to the cash settlement feature, the Units are liability classified and are recognized at fair value, depending on the percentage of requisite service rendered at the reporting date, and are remeasured at each balance sheet date to the market value of the Company’s common stock at the reporting date.

As the Units contain both a performance and service condition, the Units have been treated as a series of separate awards or tranches for purposes of recognizing compensation expense. The Company recognizes compensation expense on a tranche-by-tranche basis, recognizing the expense as the employee works over the requisite service period for that specific tranche. The Company has applied the same assumption for forfeitures as employed in the Company’s stock option plans, discussed above.

Total share-based compensation (income) expense related to the Units was $(0.6) million and $1.2 million for the three months ended January 31, 2014 and 2013, respectively. At January 31, 2014 and October 31, 2013, there was $2.9 million and $4.0 million in accrued expenses, respectively, and $1.6 million and $3.4 million in long-term liabilities, respectively, related to outstanding Units.

The following table summarizes the Units as of January 31, 2014, and changes during the three months ended January 31, 2014:


	2005 Option Plan			2013 Option Plan		Total Number Of Units			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value $(000)
Units outstanding at October 31, 2013		204,161			—		204,161		$	0.00		1.5	$	12,134
Units granted		—			52,896		52,896		$	0.00
Units exercised		(72,900	)		—		(72,900	)	$	0.00			$	3,853
Units forfeited or cancelled		—			—		—

Units outstanding at January 31, 2014		131,261			52,896		184,157		$	0.00		2.2	$	8,117

Vested and expected to vest at January 31, 2014		127,661			52,896		180,557		$	0.00		2.2	$	7,958

Exercisable at January 31, 2014		250	(A)		—		250						$	18

(A)	These units immediately vested during the third quarter of 2013 due to the death of an employee. The Company is awaiting payout of units to the estate.

AEP INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(7) SHAREHOLDERS’ EQUITY (Continued)

During the three months ended January 31, 2014, the Company paid $1.5 million in cash and issued 613 shares of its common stock (issued from new shares), in each case net of withholdings, in settlement of the vesting of certain Units occurring during the first quarter of fiscal 2014. Subsequent to the first quarter, in February 2014, the Company paid $0.9 million in cash and issued 454 shares of its common stock (issued from new shares), in each case net of withholdings, in settlement of the vesting of the remaining Units occurring during the first quarter of 2014. During the three months ended January 31, 2013, the Company paid $1.4 million in cash and issued 262 shares of its common stock (issued from new shares), in each case net of withholdings, in settlement of the vesting of certain Units occurring during the first quarter of 2013. Subsequent to the first quarter of the prior year, in February 2013, the Company paid $1.1 million in cash and issued 495 shares of its common stock (issued from new shares), in each case net of withholdings, in settlement of the vesting of the remaining Units occurring during the first quarter of 2013.

Restricted Stock

On April 12, 2013, each non-employee director received an annual restricted stock award with a grant date fair value of $55,000, or 783 shares (4,698 shares in the aggregate). The restricted stock may be forfeited in the event of termination of service as a non-employee director of the Company prior to the first anniversary of the grant date, subject to the Compensation Committee’s right to accelerate the vesting of all or a portion of the restricted stock at any time. During the restricted period, the restricted stock entitles the participant to all of the rights of a stockholder, including the right to vote the shares and the right to receive any dividends thereon. Prior to the end of the restricted period, restricted stock generally may not be sold, assigned, pledged, or otherwise disposed of or hypothecated by participants.

The share-based compensation expense associated with the restricted stock is based on the quoted market price of the Company’s common stock on the date of grant. The Company recognizes share-based compensation associated with the restricted stock on a straight-line basis over the term which is one year. Total share-based compensation expense related to the restricted stock recorded in the consolidated statements of operations for the three months ended January 31, 2014 was $0.1 million. As of January 31, 2014, there was $0.1 million of total unrecognized compensation cost related to restricted stock. That cost is expected to be recognized over two months.

Treasury Shares

On January 21, 2013, the Company’s Board terminated the September 2010 Stock Repurchase Program (which had $1.0 million remaining as of such date). There was no stock repurchase activity during the 3 months ended January 31, 2014 or fiscal 2013. See Note 11, “Subsequent Event” for a discussion of the February 2014 stock repurchase program.

Preferred Shares

The Board may direct the issuance of up to one million shares of the Company’s $1.00 par value Preferred Stock and may, at the time of issuance, determine the rights, preferences and limitations of each series.

On March 31, 2011, the Company adopted a stockholder rights plan (the “Rights Plan”), which entitles the holders of the rights to purchase from the Company 1/1,000^th of a share of Series A Junior Participating Preferred Stock, par value $1.00 per share, at a purchase price of $150.00 per share, as adjusted ( a “Right”), upon certain

AEP INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(7) SHAREHOLDERS’ EQUITY (Continued)

trigger events. The Company’s Board declared a dividend of one Right per each share of common stock of the Company outstanding as of April 11, 2011. Each 1/1,000^th of a share of Series A Junior Participating Preferred Stock has terms that are substantially the economic and voting equivalent of one share of the Company’s common stock. However, until a Right is exercised or exchanged in accordance with the provisions of the Rights Plan, the holder thereof will have no rights as a stockholder of the Company. The Rights Plan has a three-year term and the Board may terminate the Rights Plan at any time (subject to the redemption of the Rights for a nominal value). The Rights may cause substantial dilution to a person or group (together with all affiliates and associates of such person or group and any person or group of persons acting in concert therewith) that acquires beneficial ownership of 15% or more of the Company’s stock on terms not approved by the Board or takes other specified actions.

(8) SEGMENT AND GEOGRAPHIC INFORMATION

The Company’s operations are conducted within one business segment—the production, manufacture and distribution of plastic packaging products, primarily for the food/beverage, industrial and agricultural markets. The Company operates in the United States and Canada.

Operating (loss) income includes all costs and expenses directly related to the geographical area.


	For the Three Months Ended January 31, 2014
	United States			Canada		Total
	(in thousands)
Sales—external customers	$	255,525		$	16,992	$	272,517
Intercompany sales		10,079			—		10,079
Gross profit		22,032			2,552		24,584
Operating (loss) income		(2,342	)		674		(1,668	)


	For the Three Months Ended January 31, 2013
	United States		Canada		Total
	(in thousands)
Sales—external customers	$	251,144	$	15,998	$	267,142
Intercompany sales		7,333		—		7,333
Gross profit		38,729		3,705		42,434
Operating income		12,086		1,595		13,681

AEP INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(8) SEGMENT AND GEOGRAPHIC INFORMATION (Continued)

Net sales by product line are as follows:


	For the Three Months Ended January 31,
	2014		2013
	(in thousands)
Custom films	$	84,668	$	78,612
Stretch (pallet) wrap		84,500		83,264
Food contact		45,034		43,960
Canliners		28,817		30,397
PROformance Films^®		14,201		17,603
Printed and converted films		5,788		4,261
Other products and specialty films		9,509		9,045

Total	$	272,517	$	267,142

(9) FAIR VALUE MEASUREMENTS

Fair Value Measurements

The carrying amount reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, inventories, other current assets, accounts payable and accrued expenses approximates fair value because of the short-term nature of these assets and liabilities. The fair value of the Company’s variable rate debt (credit facility) approximates fair value due to the availability and floating rate for similar instruments.

The carrying value and fair value of the Company’s fixed rate debt at January 31, 2014 and October 31, 2013 are as follows:


	January 31, 2014				October 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
2019 notes	$	200,000	$	214,376	$	200,000	$	216,626
Mortgage loan note (a)		3,193		3,193		3,223		3,223
Pennsylvania industrial loans		1,029		1,029		1,056		1,056
Capital leases		13,189		13,189		12,387		12,387

Total	$	217,411	$	231,787	$	216,666	$	233,292

(a)	The Company entered into an interest rate swap fixing the variable rate loan to a fixed rate loan at an interest rate of 3.52% per year.

The fair value of the 2019 notes and the mortgage note are based on quoted market rates (Level 1). The Company derives its fair value estimates of the Pennsylvania industrial loans and the capital leases based on observable inputs (Level 2). Observable market inputs used in the calculation of the fair value of the Pennsylvania industrial loans and the capital leases include evaluating the nature and terms of each instrument, considering prevailing economic and market conditions, and examining the cost of similar debt offered at the balance sheet date.

AEP INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(9) FAIR VALUE MEASUREMENTS (Continued)

The interest rate swap is recorded at fair value on the Company’s consolidated balance sheets using an income approach valuation technique based on observable market inputs (Level 2). Observable market inputs used in the calculation of the fair value of interest rate swaps include pricing data from counterparties to these swaps.

As of January 31, 2014, the notional amount and the fair value of the interest rate swap were $3,192,862, and an asset of $110,279, respectively. As of October 31, 2013, the notional amount and the fair value of the interest rate swap were $3,222,790, and an asset of $94,519, respectively. The Company recorded a gain of $15,760 and $65,256 on the mark-to-market on the interest rate swap in interest expense in the consolidated statement of operations for the three months ended January 31, 2014 and 2013, respectively.

(10) COMMITMENTS AND CONTINGENCIES

The Company and its subsidiaries are subject to claims and lawsuits which arise in the ordinary course of business. On the basis of information presently available and advice received from counsel representing the Company and its subsidiaries, it is the opinion of management that the disposition or ultimate determination of such claims and lawsuits against the Company will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity.

(11) SUBSEQUENT EVENT

In February 2014 the Company’s Board authorized a stock repurchase program under which the Company may purchase up to $10.0 million of the Company’s common stock. Repurchases may be made in the open market, in privately negotiated transactions or by other means, from time to time, subject to market conditions, applicable legal requirements and other factors, including the limitations set forth in the Company’s debt covenants. The program does not obligate the Company to acquire any particular amount of common stock and the program may be suspended at any time at the Company’s discretion.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Forward-Looking Statements

Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this report contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent our goals, beliefs, plans and expectations about our prospects for the future and other future events, such as our ability to generate sufficient working capital, the amount of availability under our credit facility, the anticipated pricing in resin markets, our ability to continue to maintain sales and profits of our operations, and the sufficiency of our cash balances and cash generated from operating, investing, and financing activities for our future liquidity and capital resource needs. Forward-looking statements include all statements that are not historical fact and can be identified by terms such as “may,” “intend,” “might,” “will,” “should,” “could,” “would,” “anticipate,” “expect,” “believe,” “estimate,” “plan,” “project,” “predict,” “potential,” or the negative of these terms. Although these forward-looking statements reflect our good-faith belief and reasonable judgment based on current information, these statements are qualified by important factors, many of which are beyond our control, that could cause our actual results to differ materially from those in the forward-looking statements, including, but not limited to: the availability of raw materials; the ability to pass raw material price increases to customers in a timely fashion; the continuing impact of the U.S. recession and the global credit and financial environment and other changes in the United States or international economic or political conditions; the integration of Transco Plastics Industries; the potential of technological changes that would adversely affect the need for our products; price fluctuations which could adversely impact our inventory; and other factors described from time to time in our reports filed or furnished with the U.S. Securities and Exchange Commission (the “SEC”), and in particular those factors set forth in Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended October 31, 2013 and other reports subsequently filed with the SEC. Given these uncertainties, you should not place undue reliance on any such forward-looking statements. The forward-looking statements included in this report are made as of the date hereof or the date specified herein, based on information available to us as of such date. Except as required by law, we assume no obligation to update these forward-looking statements, even if new information becomes available in the future.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of our financial statements with a narrative explanation from the perspective of our management on our business, financial condition, results of operations, and cash flows. Our MD&A is presented in six sections:

•

Overview

•

Results of Operations

•

Liquidity and Capital Resources

•

Contractual Obligations and Off-Balance-Sheet Arrangements

•

Critical Accounting Policies

•

New Accounting Pronouncements

Investors should review this MD&A in conjunction with the consolidated financial statements and related notes included in this report under Item 1, our Annual Report on Form 10-K for the fiscal year ended October 31, 2013 and reports filed thereafter with the SEC, and other publicly available information.

Company Overview

AEP Industries Inc. is a leading manufacturer of plastic packaging films. We manufacture and market an extensive and diverse line of polyethylene and polyvinyl chloride flexible packaging products, with consumer, industrial and agricultural applications. Our plastic packaging films are used in the packaging, transportation, beverage, food, automotive, pharmaceutical, chemical, electronics, construction, agriculture, carpeting, furniture and textile industries.

We manufacture plastic films, principally from resins blended with other raw materials, which we either sell or further process by printing, laminating, slitting or converting. Our processing technologies enable us to create a variety of value-added products according to the specifications of our customers. Our manufacturing operations are located in the United States and Canada.

The primary raw materials used in the manufacture of our products are polyethylene and polyvinyl chloride resins. The prices of these materials are primarily a function of the price of petroleum and natural gas, and therefore typically are volatile. Since resin costs fluctuate, selling prices are generally determined as a “spread” over resin costs, usually expressed as cents per pound. Consequently, we review and manage our operating revenues and expenses on a per pound basis. The historical increases and decreases in resin costs have generally been reflected over a period of time in the sales prices of the products on a penny-for-penny basis. Assuming a constant volume of sales, an increase in resin costs would, 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 would result in lower sales revenues with higher gross profit margins. Further, the gap between the time at which an order is taken, resin is purchased, production occurs and shipment is made, has an impact on our financial results and our working capital needs. In a period of rising resin prices, this impact is generally negative to operating results and in periods of declining resin prices, the impact is generally positive to operating results.

Market Conditions

As discussed above, the primary raw materials used in the manufacture of our products are polyethylene and polyvinyl chloride resins. In recent years, the market for resins has been extremely volatile. Average resin costs during the three months ended January 31, 2014 were 19% or $0.12 per pound higher than the average resin costs during the three months ended January 31, 2013. We believe that resin prices will remain volatile throughout the remainder of fiscal 2014 with continued uncertainty in resin price trending. In order to maintain margins, it is essential that resin cost increases be matched by selling price adjustments. Although we have made progress in shortening the time lag in adjusting sell prices, we still have customers whose prices adjust quarterly or are index price based. There can be no assurance that we will be able to pass on resin price increases on a penny-for-penny basis on a timely basis, shorten the time lag in adjusting sell prices or will be able to continue to secure sufficient supply.

The marketplace in which we sell our products remains very competitive, and has been further complicated in recent years by adverse economic circumstances affecting many of our customers, distributors and suppliers. Although there have been some positive signs of stabilization, the impact of the recession continues in certain of our markets. It is, however, difficult to predict the continuing pace of marketplace consolidation or the impact of current and future economic circumstances on our business. The economy may continue to strain the resources of our customers, distributors and suppliers and negatively impact our businesses and operations.

In recent years, we have implemented cost-reduction initiatives and invested in machinery and equipment to increase efficiency to meet the challenges of a volatile economic environment, as well as take advantage of opportunities in the marketplace. We are limited, however, in our ability to reduce costs to offset the results of a prolonged or severe downturn given the fixed cost nature of our business combined with our long term business strategy which demands that we remain in a position to respond when market conditions improve. We believe the implementation of these cost-reduction initiatives, as well as our recent capital expenditures, will minimize the impact of any adverse economic or financial conditions.

Defined Terms

The following table illustrates the primary costs classified in each major operating expense category:


Cost of Sales:		Materials, including packaging
		Fixed manufacturing costs
		Labor, direct and indirect
		Depreciation
		Inbound freight charges, including intercompany transfer freight charges
		Utility costs used in the manufacturing process
		Research and development costs
		Quality control costs
		Purchasing and receiving costs
		Any inventory adjustments, including LIFO adjustments,
		Warehousing costs

Delivery Expenses:		All costs related to shipping and handling of products to customers, including transportation costs by third party providers

Selling, General and Administrative Expenses:		Personnel costs, including salaries, bonuses, commissions and employee benefits
		Facilities and equipment costs
		Insurance
		Professional fees, including audit and Sarbanes-Oxley compliance

Our gross profit may not be comparable to that of other companies, since some companies include all the costs related to their distribution network in cost of sales and others, like us, include costs related to the shipping and handling of products to customers in delivery expenses, which is not a component of our cost of sales.

Results of Operations—First Quarter of Fiscal 2014 Compared to First Quarter of Fiscal 2013

The following table presents unaudited selected financial data for the three months ended January 31, 2014 and 2013 (dollars per lb. sold is calculated by dividing the applicable consolidated statements of operations category by pounds sold in the period):


	For the Three Months Ended								% increase/			$ increase/ (decrease)
	January 31, 2014				January 31, 2013				% increase/
	$		$ Per lb. sold		$		$ Per lb. sold		(decrease) of $
	(in thousands, except for per pound data)
Net sales	$	272,517	$	1.24	$	267,142	$	1.16		2.0	%	$	5,375
Gross profit		24,584		0.11		42,434		0.18		(42.1	)%		(17,850	)
Operating expenses:
Delivery		12,018		0.05		12,366		0.06		(2.8	)%		(348	)
Selling		8,658		0.04		9,498		0.04		(8.8	)%		(840	)
General and administrative		5,576		0.03		6,889		0.03		(19.1	)%		(1,313	)

Total operating expenses	$	26,252	$	0.12	$	28,753	$	0.13		(8.7	)%	$	(2,501	)

Pounds sold				219,969 lbs.				229,516 lbs.

Net Sales

The increase in net sales for the three months ended January 31, 2014 was the result of a 7% increase in average selling prices, primarily attributable to the pass-through of higher resin costs to customers during the comparable periods, positively affecting net sales by $18.6 million, partially offset by a 4% decrease in sales volume negatively affecting net sales by $11.9 million. The volume decrease was primarily attributed to soft customer demand in most of our product lines. The first quarter of 2014 also included a $1.3 million negative impact of foreign exchange relating to our Canadian operations.

Gross Profit

There was a $1.9 million increase in the LIFO reserve during the first quarter of fiscal 2014 versus a $3.1 million decrease in the LIFO reserve during the first quarter of fiscal 2013, representing an increase of $5.0 million year-over-year. Excluding the impact of the LIFO reserve change during the quarter and an increase in depreciation expense of $2.1 million, gross profit decreased $10.8 million resulting primarily from our inability to completely pass through the entirety of increased resin costs to our customers, decreased volumes sold and underabsorbed manufacturing costs.

Operating Expenses

Operating expenses decreased $2.5 million during the first quarter of fiscal 2014 versus the first quarter of fiscal 2013 primarily due to a $1.4 million decrease in share-based compensation costs associated with our stock options and performance units, a decrease in delivery and selling expenses primarily due to lower volumes sold ($0.6 million) and a decrease of $0.4 million related to Webster salaries and severance.

Interest Expense

Interest expense for the three months ended January 31, 2014 increased $0.2 million as compared to the prior year period resulting primarily from higher average borrowings on our credit facility during the quarter.

Gain On Bargain Purchase of a Business

Gain on bargain purchase of $1.0 million during the quarter ended January 31, 2013 resulted from the fair value of the identifiable assets acquired in the Transco acquisition exceeding the purchase price (see Note 3).

Income Tax Provision

The benefit for income taxes for the three months ended January 31, 2014 was $2.6 million on a loss before the benefit for income taxes of $6.4 million. The difference between our effective tax rate of 41.4 percent for the three months ended January 31, 2014 and the U.S. statutory tax rate of 35.0 percent, primarily relates to the benefit for state taxes in the United States, net of federal (+4.2%) and the remaining (+2.2%) resulted from net permanent differences, the differential in the U.S and Canadian statutory rates and the benefit from foreign withholding taxes paid.

The provision for income taxes for the three months ended January 31, 2013 was $3.3 million on income before the provision for income taxes of $10.2 million, which includes the gain on bargain purchase of $1.0 million which is non-taxable. The effective tax rate including the gain on bargain purchase is 32.2 percent. The difference between our effective tax rate of 32.2 percent for the three months ended January 31, 2013 and the U.S. statutory tax rate of 35.0 percent, primarily related to the non-taxable gain on the bargain purchase (-3.4%), the differential in the U.S. and Canadian statutory rates (-1.1%) and net permanent difference relating to our Section 199 manufacturing deduction (-2.1%), partially offset by a foreign withholding taxes paid and provision for state taxes in the United States, net of federal benefit (+3.8%).

Reconciliation of Non-GAAP Measures to GAAP

We define Adjusted EBITDA as net income (loss) before discontinued operations, interest expense, income taxes, depreciation and amortization, changes in LIFO reserve, other non-operating income (expense) and share-based compensation expense (income). We believe Adjusted EBITDA is an important measure of operating performance because it allows management, investors and others to evaluate and compare our core operating results, including our return on capital and operating efficiencies, from period to period by removing the impact of our capital structure (interest expense from our outstanding debt), asset base (depreciation and amortization), tax consequences, changes in LIFO reserve (a non-cash charge/benefit to our consolidated statements of operations), other non-operating items and share-based compensation. Furthermore, we use Adjusted EBITDA for business planning purposes and to evaluate and price potential acquisitions. In addition to its use by management, we also believe Adjusted EBITDA is a measure widely used by securities analysts, investors and others to evaluate the financial performance of our company and other companies in the plastic films industry. Other companies may calculate Adjusted EBITDA differently, and therefore our Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

Adjusted EBITDA is not a measure of financial performance under U.S. generally accepted accounting principles (GAAP), and should not be considered in isolation or as an alternative to net income (loss), 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 our business, and, therefore, Adjusted EBITDA should only be used as a supplemental measure of our operating performance.

The following is a reconciliation of our net (loss) income, the most directly comparable GAAP financial measure, to Adjusted EBITDA:


	First Quarter Fiscal 2014			First Quarter Fiscal 2013
	(in thousands)			(in thousands)
Net (loss) income	$	(3,727	)	$	6,910
(Benefit) provision for income taxes		(2,637	)		3,275
Interest expense		4,783			4,566
Depreciation and amortization expense		7,776			6,001
Increase (decrease) in LIFO reserve		1,874			(3,066	)
Gain on bargain purchase of a business		—			(1,001	)
Other non-operating income		(87	)		(69	)
Share-based compensation		(450	)		1,269

Adjusted EBITDA	$	7,532		$	17,885

Liquidity and Capital Resources

Summary

We have historically financed our operations through cash flows generated from operations and borrowings by us and our subsidiaries under various credit facilities. Our principal uses of cash have been to fund working capital, including operating expenses, debt service and capital expenditures. In addition, we evaluate acquisitions of businesses or assets and repurchases of our equity and debt from time to time. Generally, our need to access the capital markets is limited to refinancing debt obligations and funding significant acquisitions. Market conditions may limit our sources of funds and the terms for these financing activities. As market conditions change, we continue to monitor our liquidity position.

We continue to maintain what we believe to be a strong balance sheet and sufficient liquidity to provide us with financial flexibility. As of January 31, 2014, we had a net debt position (current bank borrowings plus long term debt less cash and cash equivalents) of $236.9 million, compared with $228.9 million at the end of fiscal 2013. Availability under our credit facility and credit line available to our Canadian subsidiary for local currency borrowings was an aggregate of $130.0 million at January 31, 2014.

Our working capital amounted to $105.9 million at January 31, 2014 compared to $118.6 million at October 31, 2013. We used the LIFO method for determining the cost of approximately 86% of our total inventories at January 31, 2014. Under LIFO, the units remaining in ending inventory are valued at the oldest unit costs and the units sold in cost of sales are valued at the most recent unit costs. If the FIFO method for valuing inventory had been used exclusively, working capital would have been $148.8 million and $159.7 million at January 31, 2014 and October 31, 2013, respectively. During the three months ended January 31, 2014, the LIFO reserve increased $1.9 million to $42.9 million primarily as a result of increased inventory levels. Despite the possible negative effects on our results of operations and our financial position (an increase to cost of sales of $1.9 million for the three months ended January 31, 2014 and a reduction of inventory of $42.9 million at January 31, 2014), we believe the use of LIFO maximizes our after tax cash flow from operations.

We believe that our expected cash flows from operations, assuming no material adverse change, combined with the availability of funds under our worldwide credit facilities, will be sufficient to meet our working capital and debt service requirements and planned capital expenditures for at least the next 12 months.

Cash Flows

The following table summarizes our cash flows from operating, investing, and financing of our operations for each of the three months ended January 31, 2014 and 2013:


	For the Three Months Ended January 31,
	2014			2013
	(in thousands)
Total cash provided by (used in):
Operating activities	$	3,714		$	8,568
Investing activities		(9,286	)		(14,358	)
Financing activities		(5,570	)		5,785
Effect of exchange rate changes on cash		(771	)		36

(Decrease) increase in cash and cash equivalents	$	(11,913	)	$	31

Note:

See consolidated statements of cash flows included in Item 1, Financial Statements, of this Form 10-Q for additional information.

Operating Activities

Our cash and cash equivalents were $1.4 million at January 31, 2014, as compared to $13.3 million at October 31, 2013. Cash provided by operating activities during the three months ended January 31, 2014 was $3.7 million, which includes a net loss of $3.7 million adjusted for non-cash items totaling $6.8 million primarily related to depreciation and amortization of $7.8 million and an increase in LIFO reserve of $1.9 million, partially offset by a $2.7 million benefit for deferred taxes. Cash provided by operating activities also includes a $6.4 million decrease in accounts receivable primarily due to lower sales in the first quarter of fiscal 2014 as compared to the fourth quarter of 2013 and a $9.4 million increase in accounts payable primarily due to higher resin purchases in the month of January 2014. Cash used by operating activities primarily includes an $11.3 million increase in inventories, excluding the non-cash effects of LIFO, due to our increased investment in inventory during the quarter and a $3.4 million decrease in accrued expenses, primarily as a result of bonus payments accrued at October 31, 2013 and paid during the first quarter of fiscal 2014.

Investing Activities

Net cash used in investing activities during the three months ended January 31, 2014 was $9.3 million, resulting from capital expenditures during the period primarily in our food bag, retail canliner and custom product lines.

Financing Activities

Net cash used in financing activities during the three months ended January 31, 2014 was $5.6 million, resulting primarily from $4.7 million in repayments of borrowings under our credit facility.

Sources and Uses of Liquidity

Credit Facility

We maintain a credit facility with Wells Fargo. The credit facility matures on February 21, 2017 and has a maximum borrowing amount of $150.0 million with a maximum for letters of credit of $20.0 million. The credit facility is secured by liens on most of our domestic assets (other than real property and equipment) and on 66% of our ownership interest in certain foreign subsidiaries.

We utilize the credit facility to provide funding for operations and other corporate purposes through daily bank borrowings and/or cash repayments to ensure sufficient operating liquidity and efficient cash management. Availability at January 31, 2014 and October 31, 2013 under the credit facility was $125.5 million and $123.3 million, respectively.

In addition to the amounts available under the credit facility, we also maintain a credit facility at our Canadian subsidiary which is used to support operations and is serviced by local cash flows from operations. There were no borrowings outstanding under the Canadian credit facility at January 31, 2014 and October 31, 2013. Availability under the Canadian credit facility at January 31, 2014 and October 31, 2013 was $5.0 million Canadian dollars (US$4.5 million and US$4.8 million, respectively).

Please refer to Note 5 of the consolidated financial statements for further discussion of our debt.

Contractual Obligations and Off-Balance-Sheet Arrangements

Contractual Obligations and Commercial Commitments

Our contractual obligations and commercial commitments as of January 31, 2014 are as follows:


	For the Years Ending October 31,
	Borrowings (1) (2) (3) (4)		Interest on Fixed Rate Borrowings (5)		Capital Leases, Including Amounts Representing Interest		Operating Leases		Total Commitments
	(in thousands)
Remainder of 2014	$	155	$	16,620	$	2,848	$	5,971	$	25,594
2015		214		16,653		2,798		6,252		25,917
2016		222		16,644		2,091		4,313		23,270
2017		21,132		16,634		2,092		2,941		42,799
2018		242		16,625		2,092		1,341		20,300
Thereafter		203,157		8,776		2,625		811		215,369

Total	$	225,122	$	91,952	$	14,546	$	21,629	$	353,249

(1)	Borrowings include $20.9 million under our credit facility maturing on February 21, 2017. See Note 5 of the consolidated financial statements for further discussion of our debt.

(2)	Borrowings include $200.0 million aggregate principal amount of 2019 Notes. See Note 5 of the consolidated financial statements for further discussion of our debt.

(3)	Includes a $3.2 million ten-year mortgage note due July 2022 related to the purchase of the Company’s new corporate headquarters.

(4)	Includes $1.0 million of a Pennsylvania Industrial loan.

(5)	In connection with the mortgage note on the Company’s new corporate headquarters, we entered into a ten-year floating-to-fixed interest rate swap agreement with TD Bank, N.A that fixes the interest rate at 3.52% per year and matures on July 25, 2022.

In addition to the amounts reflected in the table above:

We expect to incur approximately $25 million of capital expenditures during the remainder of fiscal 2014. The capital expenditures will primarily focus on our food bag, retail canliner and custom product lines.

With regards to the AEP Industries Inc. 401(k) Savings Plan (“401(k) Plan”), we estimate contributing $3.1 million in cash in March 2014 to the 401(k) Plan effective for the 2013 year contributions.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet financing arrangements with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Effects of Inflation

Inflation is not expected to have a significant impact on our business.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to product returns, customer rebates and incentives, doubtful accounts, inventories, including LIFO inventory valuations, acquisitions, pension obligations, incurred but not reported medical and workers’ compensation claims, litigation and contingency accruals, income taxes, including valuation of deferred taxes, share-based compensation, and impairment of long-lived assets and intangibles, including goodwill. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies are described in detail in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the notes to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended October 31, 2013, filed with the U.S. Securities and Exchange Commission on January 14, 2014.

There were no material changes to our critical accounting policies during the three months ended January 31, 2014.

New Accounting Pronouncements

We have implemented all new accounting pronouncements that are in effect and that may impact our financial statements and do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position, results of operations or cash flows.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk from changes in interest rates and foreign currency exchange rates, which may adversely affect our results of operations and financial condition. We seek to minimize these risks through operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. We do not purchase, hold or sell derivative financial instruments for trading purposes.

Interest Rates

The fair value of our fixed interest rate debt varies with changes in interest rates. Generally, the fair value of fixed rate debt will increase as interest rates fall and decrease as interest rates rise. At January 31, 2014, the carrying value of our total debt was $238.3 million of which $217.4 million was fixed rate debt (2019 notes, mortgage note, capital leases and the Pennsylvania industrial loan). As of January 31, 2014, the estimated fair value of our 2019 notes, which had a carrying value of $200.0 million, was $214.4 million. As of January 31, 2014, the carrying value of our mortgage note, capital leases and the Pennsylvania industrial loan was $17.4 million which approximates fair value because the interest rates on these debt instruments approximate market yields for similar debt instruments.

In order to manage the exposure to interest rate risks inherent in variable rate debt, as is the case in the mortgage note, we entered into a floating-to-fixed interest rate swap agreement with TD Bank, N.A. with a notional value of $3,360,000, the then outstanding principal balance on the mortgage note. The interest rate swap fixed the interest rate at 3.52% per year and matures on July 25, 2022. The notional amount and fair value at January 31, 2014 of the interest rate swap was $3,192,862 and an asset of $110,279 respectively.

Floating rate debt at January 31, 2014 and October 31, 2013 totaled $20.9 million and $25.6 million, respectively. Based on the average floating rate debt outstanding during the three months ended January 31, 2014 (our credit facility), a one-percent increase or decrease in the average interest rate during the period would have resulted in a change to interest expense of $0.1 million for the three months ended January 31, 2014.

Foreign Exchange

We enter into derivative financial instruments (principally foreign exchange forward contracts) primarily to hedge intercompany transactions, trade sales and forecasted purchases. Foreign currency forward contracts reduce our exposure to the risk that the eventual cash inflows and outflows, resulting from these intercompany and third party trade transactions denominated in a currency other than the functional currency, will be adversely affected by changes in exchange rates.

We do not use foreign currency forward contracts for speculative or trading purposes. We enter into foreign exchange forward contracts with financial institutions and have not experienced nonperformance by counterparties. We anticipate performance by all counterparties to such agreements.

The gain (loss) on the fair value for these foreign exchange forward contracts is recognized in other, net in the consolidated statement of operations and amounted to approximately $32,000 and $(20,000) for the three months ended January 31, 2014 and 2013, respectively, with a total notional value of $10.8 million and $0.8 million at January 31, 2014 and October 31, 2013, respectively. The fair value of these contracts was immaterial at January 31, 2014. Based on the average forward exchange contracts outstanding during the three months ended January 31, 2014, a one-percent increase or decrease in the foreign exchange rate during the period would have resulted in a change to other, net of approximately $0.1 for the three months ended January 31, 2014.

Commodities

We use commodity raw materials, primarily resin, and energy products in conjunction with our manufacturing process. Generally, we acquire such components at market prices and do not use financial instruments to hedge commodity prices. As a result, we are exposed to market risks related to changes in commodity prices in connection with these components.

We are exposed to market risk from changes in resin prices that could impact our results of operations and financial condition. Our resin purchasing strategy is to deal with only high-quality, dependable suppliers. We believe that we have maintained strong relationships with these key suppliers and expect that such relationships will continue into the foreseeable future. The resin market is a global market and, based on our experience, we believe that adequate quantities of plastic resins will be available to us at market prices, but we can give no assurances as to such availability or the prices thereof. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Market Conditions” for further discussion of market risks related to resin prices.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

As of January 31, 2014, the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including the Certifying Officers, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their stated objectives and our Certifying Officers concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of January 31, 2014.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the three months ended January 31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings

We are involved in routine litigation in the normal course of our business. The proceedings are not expected to have a material adverse impact on our results of operations, financial position or liquidity.

Item 1A.

Risk Factors

You should carefully consider the risks and uncertainties we describe in our Annual Report on Form 10-K for the fiscal year ended October 31, 2013, and in other reports filed thereafter with the SEC, before deciding to invest in or retain shares of our common stock. We do not believe there are any material changes to the risk factors discussed in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended October 31, 2013.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.

Defaults Upon Senior Securities

None

Item 4.

Mine Safety Disclosures

None

Item 5.

Other Information

None

Item 6.

Exhibits


Exhibit #		Description

31.1*		Certification of the Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of the Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**		Certification of the Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**		Certification of the Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith

**	Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	AEP Industries Inc.

Dated: March 12, 2014	By:	/S/ J. BRENDAN BARBA J. Brendan Barba Chairman of the Board, President and Chief Executive Officer (principal executive officer)

Dated: March 12, 2014	By:	/S/ PAUL M. FEENEY Paul M. Feeney Executive Vice President, Finance and Chief Financial Officer (principal financial officer)

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