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AEP Industries (AEPI)’s Fourth Quarter Fiscal Year 2014 Earnings Call Transcript

Below is transcript of the AEP Industries (NASDAQ:AEPI)’s Fourth Quarter Fiscal Year 2014 Earnings Call, held on January 15, 2015, at 10:00 a.m. EST. Ksa Capital Management, Nokomis Capital and Renaissance Technologies was among AEP Industries (NASDAQ:AEPIshareholders at the end of the third quarter.




AEP Industries (NASDAQ:AEPIis a manufacturer of plastic packaging films in North America. The manufacture and market a diverse line of polyethylene and polyvinyl chloride flexible packaging products, with consumer, industrial and agricultural applications. The Company’s plastic packaging films are used in the packaging, transportation, beverage, food, automotive, pharmaceutical, chemical, electronics, construction, agriculture and textile industries.


Nick Lamplough – Director, AEP Industries Inc.


Company Representatives:
Brendan Barba – Chairman, President and Chief Executive Officer, AEP Industries Inc.
Paul Feeney Executive Vice President Finance and Chief Financial Officer, AEP Industries Inc.



Richard Kus  –  Jefferies
Scott Gessner – Barclays
Dan Khoshaba – KSA Capital
Matt Sherwood – Cooper Creek Partner.


Operator:  Good Morning. My name is Lorie and I will be your conference operator today. At this time I would like to welcome everyone to the AEC industries incorporated fiscal year 2014 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. If you like to ask a question during this time simply press *1 on your telephone keypad. If your question has been answered and you wish to remove yourself from the queue press the pound key. Thank you. Mr. Lamplough you may begin your conference.

Nick Lamplough: Thank you. Before we get started I would like to remark briefly about forward looking statements.  Except for historical information mentioned during the conference call, statements made by the management AEP industries are forward-looking statements that are made pursuant to the safe harbor provisions of the private security litigation reform act of 1995. Forward-looking statements involve known and unknown risks and uncertainties which may cause the company’s actual results and future periods to differ materially from forecasted results. Those risks included but are not limited to risks associated with pricing, volume and conditions of the markets. Those and other risks are described in the company’s filings with the SEC over the last 12 months, copies of which are available from SEC or may be obtained from the company.

During this call we will also discuss a Nine GAP Financial Measure.  Please refer to the table included in our press release for reconciliation of this 9 gap measure to the comparable GAP measure and related discussion thereof. Today’s format will be as follows:

Brendan Barba Chairman, President and CEO will discuss operations and then Paul Feeney Executive Vice President Finance and CFO will discuss the financial results. After the prepared remarks Brendan and Paul will be available for questions. So without further delay I would like to turn the call over to Mr. Barba. Brendan.

Brendan: Thank you Nick. Good morning everyone. Welcome to 2014 year end conference call. I am sure you all had a chance to read our release and clearly results for the year were disappointing we might even add very disappointing. The single biggest issue that we faced and it was a huge issue for the company was twenty six months of continuous resin increases and all the years I have been in the business I have never seen that happened before. There is always some increases and they usually offset during the same year with price decreases that just didn’t happened for two years. We had 23 cents in increases which is approximately $220 million a year of increases that we have to pass on to customers and clearly we are unable to pass all of it along. Our increases are always subject to contractual legs, portion of all businesses contractually, contractual transactional legs we move with the competition it just that simple, we can’t be raising prices until the competition does. We certainly had customer’s resistance when you have multiple increases, increase after increase after increase, customers push back and sometimes you lose business because of that type of activity and the net result is we suffered from severe margin compression.

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