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<FILING-DATE>20010502
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<CONFORMED-NAME>APPLIED EXTRUSION TECHNOLOGIES INC /DE
<CIK>0000874389
<ASSIGNED-SIC>3081
<IRS-NUMBER>510295865
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>0930
</COMPANY-DATA>
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<FILE-NUMBER>000-19188
<FILM-NUMBER>1619385
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<STREET1>3 CENTENNIAL DRIVE
<CITY>PEABODY
<STATE>MA
<ZIP>01960
<PHONE>9785381500
</BUSINESS-ADDRESS>
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<CITY>PEABODY
<STATE>MA
<ZIP>01960
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<DESCRIPTION>10-Q
<TEXT>

<PAGE>


================================================================================


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                             ----------------------

                                    FORM 10-Q

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

                      FOR THE QUARTER ENDED MARCH 31, 2001

                              --------------------

                                     0-19188
                              (Commission File No.)


                      APPLIED EXTRUSION TECHNOLOGIES, INC.
             (Exact Name of Registrant as Specified in Its Charter)


      DELAWARE                                            51-0295865
(State of Incorporation)                      (IRS Employer Identification No.)


                               3 CENTENNIAL DRIVE
                          PEABODY, MASSACHUSETTS 01960
                    (Address of Principal Executive Offices)


                                 (978) 538-1500
              (Registrant's Telephone Number, Including Area Code)


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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  YES [X]  NO [ ].

The number of shares of the Registrant's Common Stock, $.01 par value per share,
outstanding as of April 30, 2001 was 12,597,403.

================================================================================

<PAGE>


                         PART I - FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS


                      APPLIED EXTRUSION TECHNOLOGIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                  MARCH 31,      SEPTEMBER 30,
                                                                                    2001              2000
                                                                                    ----              ----
<S>                                                                                <C>              <C>
ASSETS
Current assets:
    Cash and cash equivalents...................................................    $ 2,139         $  3,265
    Accounts receivable, net of allowance for doubtful accounts of $2,012
        at March 31, 2001 and $1,856 at September 30, 2000, respectively........     45,788           43,131
    Inventory...................................................................     41,383           43,059
    Prepaid expenses............................................................      3,573            3,124
    Deferred taxes..............................................................      5,889            5,889
                                                                                   --------         --------
            Total current assets................................................   $ 98,772         $ 98,468

Property, plant and equipment, net..............................................    278,207          280,300
Intangibles and deferred finance charges, net...................................      1,935            2,372
Long-term note receivable and other assets......................................      9,603            8,110
                                                                                   --------         --------
                                                                                   $388,517         $389,250
                                                                                   ========         ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable............................................................   $ 18,206         $ 17,862
    Accrued expenses and other current liabilities..............................     25,848           27,216
    Accrued interest............................................................     10,080            9,971
    Current portion of long-term debt...........................................     61,000               --
                                                                                   --------         --------
            Total current liabilities...........................................    115,134           55,049

Long-term debt..................................................................    156,500          209,500
Deferred taxes..................................................................      1,764            2,922
Long-term liabilities and other credits.........................................     17,243           21,866
Commitments and contingencies...................................................

Stockholders' equity:
Preferred stock, $.01 par value; authorized, 1,000 shares, of which 300
        are designated Junior Preferred Stock; no stock outstanding.............         --               --
Common stock, $.01 par value; 30,000 shares authorized; 12,780 and
        12,019 shares issued at March 31, 2001 and September 30, 2000,
        respectively............................................................        128              120
Additional paid-in capital......................................................    101,468          100,266
Retained earnings...............................................................      1,998            4,060
Accumulated comprehensive loss..................................................     (3,469)          (2,277)
                                                                                   --------         --------
                                                                                    100,125          102,169
Treasury stock, at cost, and other, 252 and 248 shares at March 31, 2001
        and September 30, 2000, respectively....................................     (2,249)          (2,256)
                                                                                   --------         --------
            Total stockholders' equity .........................................     97,876           99,913
                                                                                   --------         --------
                                                                                   $388,517         $389,250
                                                                                   =========        ========
</TABLE>

See notes to condensed consolidated financial statements.


                                       2
<PAGE>


                      APPLIED EXTRUSION TECHNOLOGIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   THREE MONTHS ENDED MARCH 31, 2001 AND 2000
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                                   2001          2000
                                                                                   ----          ----
<S>                                                                               <C>           <C>
SALES...........................................................................  $72,989       $68,745
Cost of sales...................................................................   57,892        51,958
                                                                                  -------       -------
GROSS PROFIT....................................................................   15,097        16,787

OPERATING EXPENSES:
    Selling, general and administrative.........................................    7,012         6,994
    Research and development....................................................    1,631         1,793
                                                                                  -------       -------
        Total operating expenses................................................    8,643         8,787
                                                                                  -------       -------
OPERATING PROFIT................................................................    6,454         8,000

NON-OPERATING EXPENSES:
    Interest expense, net.......................................................    5,465         5,183
                                                                                  -------       -------
Income before income taxes......................................................      989         2,817
Income tax expense..............................................................      356         1,014
                                                                                  -------       -------
NET INCOME......................................................................  $   633       $ 1,803
                                                                                  =======       =======

BASIC AND DILUTED EARNINGS PER COMMON SHARE.....................................  $  0.05       $  0.15
                                                                                  =======       =======

WEIGHTED AVERAGE SHARES OUTSTANDING:
    Basic.......................................................................   12,591        11,774
    Diluted.....................................................................   12,679        12,195
</TABLE>


                        CONDENSED CONSOLIDATED STATEMENTS
                           OF COMPREHENSIVE OPERATIONS
                   THREE MONTHS ENDED MARCH 31, 2001 AND 2000
                                 (IN THOUSANDS)


<TABLE>
<S>                                                                               <C>            <C>
Net income......................................................................  $   633        $1,803
Exchange rate changes ..........................................................   (1,200)           18
                                                                                  -------        ------
COMPREHENSIVE INCOME (LOSS).....................................................  $  (567)       $1,821
                                                                                  =======        ======
</TABLE>

See notes to condensed consolidated financial statements.


                                       3
<PAGE>


                      APPLIED EXTRUSION TECHNOLOGIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    SIX MONTHS ENDED MARCH 31, 2001 AND 2000
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                                     2001          2000
                                                                                     ----          ----
<S>                                                                                <C>           <C>
SALES...........................................................................   $135,713      $128,896
Cost of sales...................................................................    109,238        97,233
                                                                                   --------      --------
GROSS PROFIT....................................................................     26,475        31,663

OPERATING EXPENSES:
    Selling, general and administrative.........................................     14,217        13,463
    Research and development....................................................      3,261         3,394
    Share incentive plan........................................................        861            --
                                                                                   --------      --------
        Total operating expenses................................................     18,339        16,857
                                                                                   --------      --------

OPERATING PROFIT................................................................      8,136        14,806

NON-OPERATING EXPENSES:
    Interest expense, net.......................................................     11,357        10,180
                                                                                   --------      --------

Income (loss) before income taxes...............................................     (3,221)        4,626
Income tax expense (benefit)....................................................     (1,159)        1,665
                                                                                   --------      --------
NET INCOME (LOSS)...............................................................   $ (2,062)     $  2,961
                                                                                   ========      ========

EARNINGS (LOSS) PER COMMON SHARE:
    Basic.......................................................................   $  (0.17)     $   0.26
    Diluted.....................................................................      (0.17)         0.25
WEIGHTED AVERAGE SHARES OUTSTANDING:
    Basic.......................................................................     12,241        11,594
    Diluted.....................................................................     12,276        11,858
</TABLE>


                        CONDENSED CONSOLIDATED STATEMENTS
                           OF COMPREHENSIVE OPERATIONS
                    SIX MONTHS ENDED MARCH 31, 2001 AND 2000
                                 (IN THOUSANDS)

<TABLE>
<S>                                                                                <C>           <C>
Net income (loss)...............................................................   $ (2,062)      $ 2,961
Exchange rate changes...........................................................     (1,192)          153
                                                                                   --------       -------
COMPREHENSIVE INCOME (LOSS).....................................................   $ (3,254)      $ 3,114
                                                                                   ========       =======
</TABLE>

See notes to condensed consolidated financial statements.


                                       4
<PAGE>


                      APPLIED EXTRUSION TECHNOLOGIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                    SIX MONTHS ENDED MARCH 31, 2001 AND 2000
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                     2001             2000
                                                                                     ----             ----
<S>                                                                                <C>             <C>
OPERATING ACTIVITIES:
    Net income (loss) ..........................................................   $ (2,062)       $  2,961
    Adjustments to reconcile net income (loss) to net cash used in operating
      activities:
        Provision for doubtful accounts.........................................        203             186
        Depreciation and amortization...........................................     11,678          10,609
        Deferred taxes and other credits........................................     (4,944)         (2,214)
        Stock issued for share incentive plan...................................        861              --
        Changes in assets and liabilities which used cash:
            Prepaid expenses and other current assets...........................     (2,370)           (319)
            Accounts payable and accrued expenses...............................       (627)         (5,724)
            Accounts receivable and inventory...................................     (1,823)        (17,907)
                                                                                   --------        --------
                Net cash provided by (used in) operating activities.............        916         (12,408)

INVESTING ACTIVITIES:
    Additions to property, plant and equipment..................................    (10,340)         (9,031)

FINANCING ACTIVITIES:
    Borrowings under line of credit agreement, net..............................      8,000          19,000
    Proceeds from issuance of stock, net........................................        356           2,337
                                                                                   --------        --------
                Net cash provided by financing activities.......................      8,356          21,337

    Effect of exchange rate changes on cash.....................................        (58)            153
                                                                                   --------        --------
    Increase (decrease) in cash and cash equivalents, net.......................     (1,126)             51
    Cash and cash equivalents, beginning........................................      3,265           5,323
                                                                                   --------        --------
    Cash and cash equivalents, ending...........................................   $  2,139        $  5,374
                                                                                   ========        ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the period for:
        Interest, including capitalized interest of $1,189 and $1,190,
          respectively..........................................................   $ 12,607        $ 10,170
        Income taxes............................................................         95              --
</TABLE>

See notes to condensed consolidated financial statements.


                                       5
<PAGE>


                      APPLIED EXTRUSION TECHNOLOGIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                   THREE MONTHS ENDED MARCH 31, 2001 AND 2000
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


1.  BASIS OF PRESENTATION

The information set forth in these statements is unaudited and may be subject to
normal year-end adjustments. The information reflects all adjustments that, in
the opinion of management, are necessary to present a fair statement of the
results of operations of Applied Extrusion Technologies, Inc. (the "Company" or
"AET") for the periods indicated. Results of operations for the interim period
ended March 31, 2001 are not necessarily indicative of the results of operations
for the full fiscal year.

Certain information in footnote disclosures normally included in financial
statements has been condensed or omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. These statements should
be read in conjunction with the Company's Annual Report on Form 10-K for the
year ended September 30, 2000, filed with the Securities and Exchange
Commission.


2.  INVENTORIES

Inventories are valued at the lower of cost or market, with cost determined
using an average-cost method. Inventories consisted of the following on March
31, 2001 and September 30, 2000:

                                           MARCH 2001    SEPTEMBER 2000

                  Raw materials            $ 8,454          $ 9,336
                  Finished goods            32,929           33,723
                                           -------          -------
                  Total                    $41,383          $43,059
                                           =======          =======


3.  SHARE INCENTIVE PLAN

In the first quarter of fiscal 2001, the Company recorded a one-time, non-cash
charge of $861 for shares issued to non-executive employees as part of an
incentive and retention program. Under this program the Company issued
approximately 600,000 shares of stock to its top 125 non-executive managers in
exchange for 1,200,000 of their vested and unvested stock options. These new
shares vest over two years and were granted in lieu of annual incentive bonuses
for these managers for fiscal 2000 and 2001.


                                       6
<PAGE>


ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
            AND RESULTS OF OPERATIONS

COMPARATIVE RESULTS OF OPERATIONS FOR THE QUARTER AND SIX MONTHS ENDED
MARCH 31, 2001 WITH THE QUARTER AND SIX MONTHS ENDED MARCH 31, 2000

INTRODUCTION

The Company is a leading North American developer and manufacturer of highly
specialized oriented polypropylene ("OPP") films in North America used in
consumer product labeling, flexible packaging and overwrap applications. End
users of AET's films are consumer products companies whose labels and packages
require special attributes such as vivid graphics, exceptional clarity and
moisture barriers to preserve freshness. The Company generally sells its film
products to converters, which are companies specializing in processes such as
laminating multiple films or other materials together and printing text and
graphics to form the final label or packaging material for end-users.

For the purposes of this discussion and analysis, the three-month periods ended
March 31, 2001 and 2000 are referred to as the second quarters of 2001 and 2000,
respectively. All dollar amounts are in thousands.


RESULTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                       THREE MONTHS             SIX MONTHS
                                                       ENDED MARCH 31,         ENDED MARCH 31,
                                                       2001        2000        2001       2000
    <S>                                               <C>         <C>         <C>        <C>
    Sales.........................................    100.0%      100.0%      100.0%     100.0%
    Cost of sales.................................     79.3        75.6        80.5       75.4
    Gross profit..................................     20.7        24.4        19.5       24.6
    Selling, general and administrative...........      9.6        10.2        10.5       10.4
    Research and development......................      2.2         2.6         2.4        2.6
    Operating profit..............................      8.8        11.6         6.0       11.5
    Interest expense, net.........................      7.5         7.5         8.4        7.9
    Net income (loss).............................      0.9         2.6        (1.5)       2.3
</TABLE>

The Company reported second quarter sales of $72,989, an increase of $4,244, or
6.2 percent, over the same quarter in 2000 and $10,265, or 16.4 percent, over
the first fiscal quarter of 2001. This increase was driven by continued growth
in sales volume of OPP films and slightly higher selling prices as the Company
passed on to its customers a portion of the increase in raw material costs which
spiked late in fiscal 2000. With OPP films industry demand growth continuing at
its historical average of 6.0 percent annually, capacity utilization in the
market continues to strengthen, driving increased volumes. This trend is
expected to continue as the minimal capacity expansion underway will not keep
pace with market growth. Sales in the first six months of fiscal 2001 increased
to $135,713 compared with $128,896 in the same period of fiscal 2000, an
increase of 5.3 percent. Sales outside the United States were 17.3 and 18.3
percent of sales for the six months ended March 31, 2001 and 2000, respectively,
and generated an operating loss of 2.6 percent and profit of 6.9 percent of
total operating profit in those same periods. Sales outside the United States
generated a loss in the six months ended March 31, 2001 due to an increase in
lower margin sales in order to reduce inventories and maximize cash generation.
This level of lower margin sales is not expected to recur for the remainder of
the year.

Gross profit in the second quarter of fiscal 2001 was $15,097, or 20.7 percent
of sales, compared with $16,787, or 24.4 percent of sales, in the second quarter
of fiscal 2000. For the six months ended March 31, 2001, gross profit was
$26,475, or 19.5 percent of sales, compared with $31,663, or 24.6 percent of
sales, in the same period of fiscal 2000. The decline in gross profit is due to
the spike in raw material costs experienced late in fiscal 2000 resulting in
higher-cost material purchases and inventory values for products sold in fiscal
2001. Most of these cost increases were not passed on to customers in the form
of price increases due to the excess capacity that exists in the OPP films
industry. Capacity utilization is expected to continue to strengthen and reach
levels in the next twelve months to support significant increases in
profitability throughout the industry.


                                       7
<PAGE>


Raw material costs are now declining due largely to the introduction of new
polypropylene resin capacity and are expected to decline further by the end of
the fiscal year. These raw material cost declines, in conjunction with the
tightening capacity utilization in the OPP films industry, have begun to result
in profitability improvements over the past six months, as follows:

<TABLE>
<CAPTION>

                                                                       OPERATING         OPERATING
     QUARTER ENDED                GROSS PROFIT      GROSS MARGIN        PROFIT            MARGIN
     -------------                ------------      ------------        ------            ------
     <S>                             <C>               <C>              <C>                <C>
     September 30, 2000(*)           $ 9,554           14.5%            $1,308             2.0%
     December 31, 2000(**)           $11,378           18.1%            $2,543             4.1%
     March 31, 2001                  $15,097           20.7%            $6,454             8.8%
</TABLE>

(*)      EXCLUDES $2,400 OF COSTS ASSOCIATED WITH A TEMPORARY SHUTDOWN OF
         CERTAIN MANUFACTURING PLANTS IN SEPTEMBER 2000
(**)     EXCLUDES $861 OF NON-CASH CHARGES RELATED TO THE SHARE INCENTIVE PLAN
         FOR NON-EXECUTIVE EMPLOYEES

Margin expansion is expected to continue due to the further declines predicted
for resin costs, ongoing improvement in sales mix, and further tightening of
industry capacity utilization driven by continuing 6.0 percent demand growth for
OPP films.

Total operating expenses of $8,643 for the second fiscal quarter of 2001 were
reduced slightly from $8,787 in the same quarter of fiscal 2000. For the six
months ended March 31, 2001, operating expenses increased $1,482 to $18,339 as
compared to $16,857 for the six months ended March 31, 2000, due primarily to
the non-cash charge recorded in the first quarter of fiscal 2001 related to the
share incentive plan for non-executive employees.

Net interest expense for the second quarter of fiscal 2001 of $5,465 was $282
higher than interest in the second quarter of fiscal 2000 due to a higher
average debt balance and higher interest rates on the Revolving Credit Facility
in the second quarter of fiscal 2001.

Income tax as a percent of income before income taxes was 36 percent for the
three and six months ended March 31, 2001 and March 31, 2000.


LIQUIDITY AND CAPITAL RESOURCES

AET maintains a credit agreement with a group of lenders whereby the Company has
a $90,000 revolving credit facility (the "Credit Facility") with a final
maturity on the earlier of (i) November 1, 2001, if the Senior Notes (as defined
hereinafter) are not refinanced prior to such date, or (ii) January 29, 2003.
The Credit Facility is secured by all the assets of AET. It includes covenants
which limit borrowings based on certain asset levels, require AET to maintain a
minimum tangible net worth and specified interest coverage and leverage ratios,
restrict payment of cash dividends to stockholders and establish maximum capital
expenditure levels. It also contains other covenants customary in transactions
of this type. During the second quarter of fiscal 2001, the Company paid down
$3,000 on its Credit Facility. The balance of the Credit Facility was $61,000 at
March 31, 2001 with another $12,435 in Letters of Credit outstanding, leaving
$16,565 available for borrowing. The Company also has $6,500 of revenue bonds
outstanding, which are due November 4, 2004.

The Company currently plans to refinance the $150,000 Senior Notes which mature
on April 7, 2002 late in fiscal 2001 or early fiscal 2002 (the "Senior Notes").
If the Senior Notes are not refinanced by November 1, 2001, the $90,000 Credit
Facility matures. If AET refinances the Senior Notes on terms and conditions
acceptable to the group of lenders providing the Credit Facility prior to
November 1, 2001 and the amount outstanding under the Credit Facility is not in
excess of $80,000 after refinancing the Notes, then the Credit Facility will
mature on January 29, 2003. An inability to refinance the Senior Notes prior to
November 1, 2001 would have a materially adverse effect on the financial
condition and liquidity of the Company. There can be no assurance that the
Company will be successful in this effort.

Operating activities for the six months ended March 31, 2001 provided $916 of
cash, which was the result of net income before depreciation and amortization
and other non-cash expenditures of $5,736, offset by an increase in working
capital of $4,820. The net working capital increase was primarily the result of
decreases in accounts payable and accrued expenses of $627, a decrease in
inventory of $1,540, and an increase in prepaid expenses and


                                       8
<PAGE>


other current assets, and accounts receivable of $2,370 and $3,363,
respectively. Inventory decreased due to the sale of inventory built up in the
first quarter, accounting for the increase in accounts receivable. Accounts
payable and accrued expenses decreased primarily due to payment of the Company's
semi-annual interest on its Senior Notes, as well as its annual contributions to
employee benefit plans. During the quarter, payments against restructuring
reserves reduced such accounts by $225 to a balance of $9,337 at March 31, 2001.


INFLATION

Management regularly reviews the prices charged for its products. When market
conditions allow, price adjustments are made to reflect changes in demand or
product costs due to fluctuations in the cost of materials, labor and inflation.
The costs of raw materials make up a significant portion of AET's costs and have
historically fluctuated. There can be no assurance, however, that future market
conditions will support any correlation between raw material cost fluctuations
and finished product films pricing.


SEASONAL NATURE OF CERTAIN OPP MARKETS

Certain of the end-use markets for the Company's OPP films are seasonal. For
example, demand in the snack food, soft drink and candy markets is generally
higher in the spring and summer. As a result, sales and net income are generally
higher in those periods, although actual results can be influenced by numerous
factors, such as raw material costs, competitive prices and other matters
discussed in this report.


ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

SHORT-TERM AND LONG-TERM DEBT

The Company is exposed to interest rate risk primarily through its borrowing
activities. The Company's policy has been to utilize United States dollar
denominated borrowings to fund its working capital and investment needs.
Short-term debt, if required, is used to meet working capital requirements,
while long-term debt is generally used to finance long-term investments. There
is inherent rollover risk for borrowings as they mature and are renewed at
current market rates. The extent of this risk is not quantifiable or predictable
because of the variability of future interest rates and the Company's future
financing requirements. At March 31, 2001, the Company had short-term debt
outstanding of $61,000 and had long-term debt outstanding of $156,500. The
short-term debt consists of the amount outstanding on the Credit Facility which
has a variable interest rate, based on either LIBOR or prime rates. If interest
rates increased or decreased by 10 percent from the interest rates in place at
March 31, 2001, interest expense incurred on the Credit Facility would change by
approximately $489.

The Company does not enter into financial instrument transactions for trading or
other speculative purposes or to manage interest rate exposure.

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 RELATED TO THE TIMELY DEVELOPMENT
AND ACCEPTANCE OF NEW PRODUCTS, FLUCTUATIONS IN RAW MATERIALS AND OTHER
PRODUCTION COSTS, 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 EXPAND INTO NEW MARKETS AND OTHER RISKS
DETAILED IN EXHIBIT 99 OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED SEPTEMBER 30, 2000 AND FROM TIME TO TIME IN THE COMPANY'S OTHER REPORTS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.


                                       9

<PAGE>


                           PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

The Company is subject to legal proceedings and claims that have arisen in the
ordinary course of its business and have not been fully adjudicated. These
actions, when ultimately concluded and determined, will not, in the opinion of
management, have a material adverse effect upon the financial position or
results of operations of the Company.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual Meeting of Stockholders of the Company was held on January 31, 2001
(the "Annual Meeting"). Proxies for the Annual Meeting were solicited pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as amended. A total
of 10,664,550 shares of common stock were represented at the meeting by proxy.

At the Annual Meeting, Messrs. Richard G. Hamermesh and Joseph J. O'Donnell were
elected as Class III Directors of the Company for a term of three years expiring
at the Company's 2004 Annual Meeting. In the case of Mr. Hamermesh, 8,311,075
shares were voted in favor of his election and 2,353,475 votes were withheld;
and in the case of Mr. O'Donnell, 8,311,075 shares were voted in favor of his
election and 2,353,475 votes were withheld. The following directors' terms
continued after the Annual Meeting: Messrs. Amin J. Khoury, Thomas E. Williams,
Mark M. Harmeling, Nader A. Golestaneh and Paul W. Marshall. Subsequent to the
Annual Meeting, Paul W. Marshall resigned as a member of the Board of Directors.

The Company's 2001 Stock Option Plan for Directors (the "Directors' Plan") was
also approved at this meeting. The voting for the Directors' Plan was as
follows: 5,140,464 shares in favor; 4,897,227 votes opposed; and 626,859
abstained.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

A.  EXHIBITS

99(a)    Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
         the Private Securities Litigation Reform Act of 1995.
10.1*    2001 Stock Option Plan for Directors.

--------------

(a)   Contained in Exhibits to the Registrant's Form 10-K for the fiscal year
      ended September 30, 2000.
*     Filed herewith.

The above referenced exhibits are, as indicated, either filed herewith or have
heretofore been filed with the Commission under the Securities Act and the
Exchange Act and are referred to and incorporated herein by reference to such
filings.

B.  REPORTS ON FORM 8-K

None.



                                       10
<PAGE>


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.

                                           APPLIED EXTRUSION TECHNOLOGIES, INC.
                                                       (Registrant)

                                           By: /s/ Anthony J. Allott
                                               --------------------------------
                                               Anthony J. Allott
                                               Senior Vice President and
                                               Chief Financial Officer
                                               May 2, 2001



                                       11
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>a2046243zex-10_1.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>

<PAGE>

                                                                   Exhibit 10.1

                                   APPENDIX B

                      APPLIED EXTRUSION TECHNOLOGIES, INC
                      2001 STOCK OPTION PLAN FOR DIRECTORS

    1.  PURPOSE

    The purpose of this 2001 Stock Option Plan for Directors (the "Plan") is to
advance the interest of Applied Extrusion Technologies, Inc. (the "Company") by
enhancing the ability of the Company to attract and retain non-employee
directors who are in a position to make significant contributions to the success
of the Company and to reward directors for such contributions through ownership
of shares of the Company's common stock (the "Stock").

    2.  ADMINISTRATION

    The Plan shall be administered by a committee (the "Committee") of the Board
of Directors (the "Board") of the Company designated by the Board for that
purpose. Unless and until a Committee is appointed the Plan shall be
administered by the entire Board, and references in the Plan to the "Committee"
shall be deemed references to the Board. The Committee shall have authority, not
inconsistent with the express provisions of the Plan, (a) to grant options in
accordance with the Plan to such directors as are eligible to receive options;
(b) to prescribe the form or forms of instruments evidencing options and any
other instruments required under the Plan and to change such forms from time to
time; (c) to adopt, amend and rescind rules and regulations for the
administration of the Plan; and (d) to interpret the Plan and to decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Such determinations of the Committee shall be conclusive and
shall bind all parties. Subject to Section 8, the Committee shall also have the
authority, both generally and in particular instances, to waive compliance by a
director with any obligation to be performed by him or her under an option and
to waive any condition or provision of an option.

    3.  EFFECTIVE DATE AND TERM OF PLAN

    The Plan shall become effective on the date on which the Plan is approved by
the Board of Directors of the Company, but the Plan and any options granted
pursuant to the Plan shall be subject to the later approval thereof by the
shareholders of the Company. No option shall be granted under the Plan after the
completion of ten years from the date on which the Plan was adopted by the
Board, but options previously granted may extend beyond that date.

    4.  SHARES SUBJECT TO THE PLAN

    (a) NUMBER OF SHARES. Subject to adjustment as provided in Section 4(c), the
aggregate number of shares of Stock that may be delivered upon the exercise of
options granted under the Plan shall be 500,000.

    (b) SHARES TO BE DELIVERED. Shares delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.

    (c) CHANGES IN STOCK. In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in the Company's capital
stock, the number and kind of shares of stock or securities of the Company
subject to options then outstanding or subsequently granted under the Plan, the
maximum number of shares or securities that may be delivered under the Plan, the
exercise price, and other relevant provisions shall be appropriately adjusted by
the Committee, whose determination shall be binding on all persons.
<PAGE>
    5.  ELIGIBILITY FOR OPTIONS.

    Directors eligible to receive options under the Plan ("Eligible Directors")
shall be any director who is not an employee of the Company.

    6.  TERMS AND CONDITIONS OF OPTIONS.

    (a) NUMBER OF OPTIONS.

    Each Eligible Director who has served as a Director of the Company for not
less than ten years (measured as of the date of the Board's adoption of the
Plan) shall be awarded an option covering 25,000 shares of Stock on June 30,
2001 (a "Service Grant"). In addition, each Eligible Director, excluding those
who are directors on the date of adoption of the Plan, shall be awarded an
initial grant governing 25,000 shares of Stock on the date of his or her first
election (an "Initial Grant"). Each Eligible Director that is a director of the
Company on each June 30 commencing June 30, 2001 shall be awarded on such
June 30 an option covering 10,000 shares of Stock (an "Annual Grant"); provided,
that if such Eligible Director has received an Initial Grant in the twelve
months preceeding such June 30, then such Eligible Director shall not be
entitled to the Annual Grant on such June 30.

    (b) EXERCISE PRICE. The exercise price of each option shall be 100% of the
fair market value per share of the Stock at the time the option is granted, but
not less, in the case of an original issue of authorized stock, than par value
per share.

    (c) DURATION OF OPTIONS. The latest date on which an option may be exercised
(the "Final Exercise Date") shall be the date which is ten years from the date
the option was granted.

    (d) EXERCISE OF OPTIONS.

    (1) The awards of options granted under this Plan shall become exercisable
       in the following manner: Each Service Grant, Annual Grant and Initial
       Grant shall become exercisable as to twenty-five percent (25%) of the
       shares covered thereby on each of the first, second, third and fourth
       anniversaries of the date of such grant.

    (2) Any exercise of an option shall be in writing, signed by the proper
       person and delivered or mailed to the Company, accompanied by (a) the
       option certificate and any other documents required by the Committee and
       (b) payment in full for the number of shares for which the option is
       exercised.

    (3) To the extent the Company must satisfy any federal, state or local
       withholding tax requirement in connection with an individual exercising
       an option, upon such exercise the Company shall withhold from the shares
       of stock to be delivered upon the exercise of the option the number of
       shares of stock having a fair market value equal to such withholding
       obligation.

    (4) If an option is exercised by the executor or administrator of a deceased
       director, or by the person or person to whom the option has been
       transferred by the director's will or the application laws of descent and
       distribution, the Company shall be under no obligation to deliver Stock
       pursuant to such exercise until the Company is satisfied as to the
       authority of the person or persons exercising the option.

    (e) PAYMENT FOR AND DELIVERY OF STOCK. Stock purchased under the Plan shall
be paid for as follows: (i) in cash or by check (acceptable to the Company in
accordance with the guidelines established for this purpose), bank draft or
money order payable to the order of the Company or (ii) if so permitted by the
original terms of the option or by the Committee after grant of the option,
(A) through the

                                       2
<PAGE>
delivery of shares of Stock (which, in the case of shares of Stock acquired from
the Company, have been outstanding for at lease six months) having a fair market
value on the last business day preceding the date of exercise equal to the
purchase price or (B) by having the Company hold back from the shares
transferred upon exercise Stock having a fair market value on the last business
day preceding the date of exercise equal to the purchase price or (C) by
delivery of a promissory note of the option holder to the Company, such note to
be payable on such terms as are specified or (D) by delivery of an unconditional
and irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the exercise price or (E) by any combination of the
permissible forms of payment; PROVIDED, that if the Stock delivered upon
exercise of the option is an original issue of authorized Stock, at least so
much of the exercise price as represents the par value of such Stock shall be
paid other than with a personal check or promissory note of the option holder.

    An option holder shall not have the rights of a shareholder with regard to
awards under the Plan except as to Stock actually received by him or her under
the Plan.

    The Company shall not be obligated to deliver any shares of Stock
(a) until, in the opinion of the Company's counsel, all applicable federal and
state laws and regulations have been complied with, and (b) if the outstanding
Stock is at the time listed on any stock exchange, until the shares to be
delivered have been listed or authorized to be listed on such exchange upon
official notice of issuance, and (c) until all other legal matters in connection
with the issuance and delivery of such shares have been approved by the
Company's counsel. If the sale of Stock has not been registered under the
Securities Act of 1933, as amended, the Company may require, as a condition to
exercise of the option, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of such Act and may require
that the certificates evidencing such Stock bear an appropriate legend
restricting transfer.

    (f) LIMITED TRANSFERABILITY OF OPTIONS. No option may be transferred, except
(i) by will or by the laws of descent and distribution or (ii) to parties that
are eligible to have such transferred options and the underlying securities
registered on the Plan's existing Form S-8 Registration Statements, such
eligibility to be determined in accordance with the General Instructions to
Form S-8 and other rulings and pronouncements of the Securities and Exchange
Commission as may be in effect from time to time.

    (g) DEATH. Upon the death of any Eligible Director granted options under
this Plan, all options not then exercisable shall terminate. All options held by
the director that are exercisable immediately prior to death may be exercised by
his or her executor or administrator, or by the person or persons to whom the
option is transferred by will or the applicable laws of descent and
distribution, at any time within six months after the director's death (subject,
however, to the limitations of Section 6(c) regarding the maximum exercise
period for such option). After completion of that six-month period, such options
shall terminate to the extent not previously exercised.

    (h) OTHER TERMINATION OF STATUS OF DIRECTOR. If a director's service with
the Company terminates for any reason other than death, all options held by the
director that are not then exercisable shall terminate. Options that are
exercisable on the date of termination shall continue to be exercisable for a
period of three months (subject to Section 6(c)), but shall terminate
immediately if the director was removed for cause or resigned under
circumstances which in the opinion of the Committee casts such discredit on him
or her as to justify termination of his or her options. After completion of that
three-month period, such options shall terminate to the extent not previously
exercised, expired or terminated.

                                       3
<PAGE>
    (i) MERGERS, ETC. Subject to Section 7, in the event of any merger or
consolidation involving the Company, any sale of substantially all of the
Company's assets or stock or a dissolution or liquidation of the Company, all
options hereunder will terminate, but at least 20 days prior to the effective
date of any such merger, sale, dissolution, or liquidation, the Committee shall
make all options outstanding hereunder immediately exercisable, provided that,
unless the event will give rise to a Change of Control (as hereinafter defined)
or it is anticipated that a Change of Control will coincide with or follow the
event, the Committee may instead arrange that the successor or surviving
corporation, if any, grant replacement options.

    7.  CHANGE OF CONTROL

    Notwithstanding any other provision of this Plan, in the event of a Change
of Control of the Company as defined in Exhibit A hereto each option held by
each Eligible Director will immediately become fully exercisable.

    8.  EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT, TERMINATION AND
       EFFECTIVENESS

    Neither adoption of the Plan nor the grant of options to a director shall
affect the Company's right to grant to such director options that are not
subject to the Plan, to issue to such directors Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
directors.

    The Committee may at any time discontinue granting options under the Plan.
The Committee may at any time or times amend the Plan for the purpose of
satisfying any changes in applicable laws or regulations or for any other
purpose which may at the time be permitted by law, or may at any time terminate
the Plan as to any further grants of options, provided that (except to the
extent expressly required or permitted herein above) no such amendment shall,
without the approval of the shareholders of the Company, (a) increase the
maximum number of shares available under the Plan, (b) increase the number of
options granted to Eligible Directors, (c) amend the definition of Eligible
Director so as to enlarge the group of directors eligible to receive options
under the Plan, (d) reduce the price at which options may be granted,
(e) change or extend the times at which options may be granted, or (f) amend the
provisions of this Section 8, and no such amendment shall adversely affect the
rights of any director (without his or her consent) under any option previously
granted.

                                       4
<PAGE>
                                   EXHIBIT A

    A Change of Control will occur for purposes of this Plan if (i) any
individual, corporation, partnership, company or other entity (including a
"group" of the type referred to in Rule 13d-5 under the Securities Exchange Act
of 1934, as amended (the "Act"), (a "Person") becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act) of securities of the Company representing
more than 30% of the combined voting power of the Company's then-outstanding
securities (other than as a result of acquisitions of such securities from the
Company), (ii) there is a change of control of the Company of a kind which would
be required to be reported under Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Act (or a similar item in a similar schedule or form),
whether or not the Company is then subject to such reporting requirement,
(iii) the Company is a party to, or the stockholders approve, a merger,
consolidation, or other reorganization (other than (a) a merger, consolidation
or other reorganization which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent, either by
remaining outstanding or by being converted into voting securities of the
surviving entity, more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger, consolidation, or other reorganization, or (b) a merger,
consolidation, or other reorganization effected to implement a recapitalization
of the Company, or similar transaction, in which no Person acquires more than
20% of the combined voting power of the Company's then outstanding securities),
a sale of all or substantially all assets, or a plan of liquidation, or
(iv) individuals who, at the date hereof, constitute the Board cease for any
reason to constitute a majority thereof; PROVIDED, HOWEVER, that any director
who is not in office at the date hereof but whose election by the Board or whose
nomination for election by the Company's shareholders was approved by a vote of
at least a majority of the directors then still in office who either were
directors at the date hereof or whose election or nomination for election was
previously so approved (other than an election or nomination of an individual
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the Company) shall
be deemed to have been in office at the date hereof for purposes of this
definition.

    Notwithstanding the foregoing provisions of this Exhibit A, a "Change of
Control" will not be deemed to have occurred solely because of the acquisition
of securities of the Company (or any reporting requirements under the Act
relating thereto) by an employment benefit plan maintained by the Company for
its employees.

                                       5
</TEXT>
</DOCUMENT>
</SUBMISSION>
