Applied Extrusion Technologies, Inc. Announces Third Quarter Results; Profitability Continues to Improve; Outlook for Strong Earnings Growth Confirmed.

Business Editors

BOSTON--(BUSINESS WIRE)--July 24, 2001

Applied Extrusion Technologies, Inc. (NASDAQ NMS: AETC) today announced financial results for its third fiscal quarter ended June 30, 2001.

HIGHLIGHTS

- $150,000,000 to redeem AET's 11-1/2% Senior Notes due 2002,

- $9,000,000 to fund a portion of the purchase price of the acquisition of the
assets of QPF, L.L.C.,

- $73,000,000 to repay outstanding borrowings under AET's Bank Credit Facility,
and

- Added approximately $20,000,000 to the Company's cash position.

THIRD QUARTER AND YEAR-TO-DATE RESULTS

Net income for the quarter was $1,644,000, or $.13 per share before acquisition and refinancing related charges compared with $21,000, or $.00 per share, in the third quarter of fiscal 2000. Gross profit increased to $17,306,000, or 23.9 percent of sales for the quarter, compared with $14,302,000, or 19.4 percent of sales in the third quarter of fiscal 2000. Sales for the quarter were $72,414,000 compared with $73,700,000 in the same quarter of 2000. This quarter continues a trend of improving earnings.

                     Gross           Gross     Operating     Operating
Quarter Ended (*)    Profit          Margin    Profit        Margin
-----------------    ------------    -------   -----------   ---------
September 30, 2000   $  9,554,000    14.5 %    $ 1,308,000    2.0 %
December 31, 2000    $ 11,378,000    18.1 %    $ 2,453,000    4.1 %
March 31, 2001       $ 15,097,000    20.7 %    $ 6,454,000    8.8 %
June 30, 2001        $ 17,306,000    23.9 %    $ 8,884,000   12.0 %

(*) Excludes $2,400,000 of costs associated with a temporary shutdown
    of certain manufacturing plants in September 2000; excludes
    $861,000 of non-cash charges related to the share incentive plan
    for non-executive employees in December 2000; and excludes
    $2,548,000 of QPF transaction costs in June 2001.

Sales for the first nine months of 2001 increased 2.7 percent to $208,127,000 primarily due to higher average selling prices. Gross profit decreased to $43,781,000, or 21.0 percent of sales, for the first nine months of 2001 compared with $45,965,000, or 22.7 percent of sales, in 2000. Operating profit for the first nine months of fiscal 2001 was $17,020,000, exclusive of QPF acquisition costs, compared with $20,300,000 for the first nine months of 2000. Early in the year the Company experienced increased raw material costs resulting in a decline in profitability compared with the first nine months of 2000. Net loss for the nine months ended June 30, 2001, was $161,000 or $.01 per share, before acquisition and refinancing related charges, compared with net income of $2,982,000, or $.25 per share, for the first nine months of 2000. Including acquisition and refinancing charges, net loss for the nine months ended June 30, 2001 was $4,025,000 or $.32 per share.

"This has been an exceptional quarter for the Company. We completed the QPF acquisition, refinanced our indebtedness and continued to improve our operating results," commented Thomas E. Williams, President and Chief Executive Officer. "In addition to continuing growth in demand for OPP films, we are improving both our sales mix and manufacturing efficiencies. These factors, combined with declining raw material costs and continued tightening of industry capacity, have driven sequential growth in profitability in each of the past three quarters."

STRATEGIC ACQUISITION COMPLETED

On June 30, 2001 the Company completed its acquisition of certain assets of QPF, LLC, the OPP films business of Hood Companies. Assets acquired include: machinery and equipment, which we are in the process of dismantling; intellectual property; intangibles; and inventory of the business. The purchase price for the QPF assets was $21,744,000, of which $15,000,000 was paid in cash using some of the proceeds from the Company's recent bond offering, and the remainder was paid with an inventory note. In conjunction with the QPF acquisition the Company incurred certain costs which were written off as an operating expense during the quarter.

"This transaction provides an excellent opportunity for AET to leverage its highly efficient manufacturing assets, unparalleled product line breadth and premier sales force," continued Williams. "Capitalizing on these strengths, we intend to supply QPF's customers from our existing highly efficient assets, with only minimal incremental fixed costs."

Hood Companies permanently closed the QPF production facility on June 29, 2001. QPF, located in Streamwood, Illinois, had approximately 40 million pounds of OPP film production capacity. "Hood's decision to exit the OPP films business and close their plant eliminates a significant portion of the excess capacity in the market," said Williams. "Utilization levels are expected to tighten further as a result of the continuation of the historical 6 percent average annual growth in OPP films demand combined with minimal announced capacity expansions. Since a $50,000,000 to $60,000,000 capital investment and two years are required to build a new line, plus another six months for ramp up, we expect tight industry capacity for at least the next four years."

IMPROVED LIQUIDITY

On June 19, 2001 the Company issued $275,000,000 of 10-3/4% Senior Notes due 2011. The Notes are unsecured senior obligations of AET. The issue price of each Senior Note was $984.94 per $1,000 principal amount at maturity, and each Senior Note carries a yield to maturity of 11%. In conjunction with the redemption of the $150,000,000 11-1/2% Senior Notes due 2002, the Company recorded a loss on the early extinguishment of debt of $1,977,000, or $.15 per share, net of taxes. The Company used the proceeds as follows:

- $150,000,000 to redeem AET's 11-1/2% Senior Notes due 2002,

- $9,000,000 to fund a portion of the purchase price of the acquisition of the
assets of QPF, L.L.C.,

- $73,000,000 to repay outstanding borrowings under AET's Bank Credit Facility,
and

- Added approximately $20,000,000 to the Company's cash position.

As a result of this transaction, the Company has liquidity of over $100,000,000, comprised of an $80,000,0000 Revolving Credit Facility and over $20,000,000 of cash. In addition, aside from the $6,500,000 Industrial Revenue Bonds due November 2004, the Company has no long-term debt maturing for ten years.

OUTLOOK

"AET's superior market position, combined with improved industry dynamics, will drive strong earnings growth and superior financial returns over the next several years. We expect EBITDA will nearly double from approximately $45 million in fiscal 2001 to approximately $80 million by fiscal 2003. Even with higher interest expense, earnings per share should increase from breakeven this year to approximately $1.30 per share in fiscal 2003," concluded Williams.

Applied Extrusion Technologies, Inc. is a leading developer and manufacturer of highly specialized plastic films used primarily in consumer products labeling and flexible packaging applications. Through its technological innovations, AET is a leader in the North American oriented polypropylene and apertured films markets.

Except for the historical information contained herein, the matters discussed in this report are forward-looking statements that involve risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements, including those risks related to the timely development and acceptance of new products, fluctuations in raw materials and other production costs, the ability to satisfy our debt service requirements, the loss of one or more significant customers, the impact of competitive products and pricing, the timely completion of capital projects, the success of the Company's efforts to access capital markets on satisfactory terms, and to acquire, integrate, and operate new businesses and expand into new markets, as well as other risks detailed in Exhibit 99 of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2000 and from time to time in the Company's other reports filed with the Securities and Exchange Commission.

                 APPLIED EXTRUSION TECHNOLOGIES, INC.
                         Statements of Income
                 (In thousands, except per share data)
                              (Unaudited)


                              Three Months Ended     Nine Months Ended
                            --------------------  --------------------
                              June 30    June 30    June 30    June 30
                                2001       2000       2001       2000
                                ----       ----       ----       ----

Sales                       $  72,414  $  73,700  $ 208,127  $ 202,596
Cost of sales                  55,108     59,398    164,346    156,631
                            ---------  ---------  ---------  ---------

Gross profit                   17,306     14,302     43,781     45,965

Operating expenses:
  Selling, general and
   administrative               6,925      7,029     21,142     20,492
  Research and development      1,497      1,779      4,758      5,173
  Share incentive plan              -          -        861          -
  QPF acquisition costs         2,548          -      2,548          -
                            ---------  ---------  ---------  ---------
       Total operating
        expenses               10,970      8,808     29,309     25,665

Operating profit                6,336      5,494     14,472     20,300

Non operating expenses:
     Interest expense, net      6,315      5,461     17,672     15,641
                            ---------  ---------  ---------  ---------

Income (loss) before
 income taxes                      21         33     (3,200)     4,659
Income tax expense
 (benefit)                          7         12     (1,152)     1,677
                            ---------  ---------  ---------  ---------
Income (loss) before
 extraordinary item         $      14  $      21  $  (2,048) $   2,982

Extraordinary item (1)          1,977          -      1,977          -
                            ---------  ---------  ---------  ---------

Net income (loss)           $  (1,963) $      21  $  (4,025) $   2,982
                            =========  =========  =========  =========

Earnings (loss) per
 common share before QPF
 acquisition costs and
 extraordinary item         $    0.13  $    0.00  $   (0.03) $    0.25
                            =========  =========  =========  =========

Earnings (loss) per
 common share before
 extraordinary item         $    0.00  $    0.00  $   (0.16) $    0.25
                            =========  =========  =========  =========

Earnings (loss) per
 common share               $   (0.15) $    0.00  $   (0.32) $    0.25
                            =========  =========  =========  =========

Average common shares
 outstanding                   12,851     11,938     12,454     11,982
                            =========  =========  =========  =========

(1) Represents loss on early extinguishment of debt, net of related
    taxes