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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 Quarter Ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
ANCHOR GLASS CONTAINER CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 22-2452609
- ----------------------------------- ------------- ---------------------
(State or other jurisdiction of Commission (I.R.S. Employer
incorporation or organization) file number Identification No.)
One Anchor Plaza, 4343 Anchor Plaza Parkway, Tampa, FL 33634-7513
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(Address of principal executive offices) (Zip Code)
813-884-0000
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(Registrant's telephone number, including area code)
None
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(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 (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 .
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Number of shares of common stock, $.10 par value, outstanding at August 13,
1996: 1 share (owned by parent - Container Holdings Corp., a Delaware
corporation and a direct subsidiary of Vitro, Sociedad Anonima). All voting
stock of the Registrant is held by an affiliate of the Registrant.
1 of 17
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ANCHOR GLASS CONTAINER CORPORATION
FORM 10-Q
For the Quarter Ended June 30, 1996
INDEX
<TABLE>
<CAPTION>
No. Page
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Independent Accountants' Report 3
Condensed Consolidated Statements of Operations -
Three and Six Months Ended June 30, 1996 and 1995 4
Condensed Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11
PART II - OTHER INFORMATION 16
</TABLE>
2
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INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors of
Anchor Glass Container Corporation
Tampa, Florida
We have reviewed the accompanying condensed consolidated balance sheet of
Anchor Glass Container Corporation and subsidiaries (the "Company") as of June
30, 1996, and the related condensed consolidated statements of operations for
the three-month and six-month periods ended June 30, 1996 and 1995 and cash
flows for the six-month periods ended June 30, 1996 and 1995. These financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
for them to be in conformity with generally accepted accounting principles.
The accompanying condensed consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 2 to the condensed consolidated financial statements, certain conditions
including continuing unfavorable operating results and liquidity needs of the
Company raise substantial doubt about its ability to continue as a going
concern. Management's Plans in regard to these matters are also described in
Note 2 to the condensed consolidated financial statements.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1995, and the
related consolidated statements of operations, stockholder's equity, and cash
flows for the year then ended (not presented herein); and in our report dated
February 23, 1996, we expressed an unqualified opinion on those financial
statements and included an explanatory paragraph concerning Vitro's
contributions of additional capital to the Company. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1995 is fairly stated in all material respects in relation
to the consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Tampa, Florida
August 13, 1996
3
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANCHOR GLASS CONTAINER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
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Six Months Ended Three Months Ended
June 30, June 30,
---------------------- ---------------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Net sales $ 428,921 $502,285 $228,013 $254,687
Costs and expenses:
Cost of products sold 422,974 462,401 221,245 230,111
Selling and administrative expenses 20,614 23,506 9,918 11,806
Restructuring charges 49,973 10,267 - -
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Income (loss) from operations (64,640) 6,111 (3,150) 12,770
Other income (expense), net (372) (1,436) 621 (874)
Interest expense (29,107) (28,603) (14,784) (14,349)
--------- -------- -------- --------
Loss before extraordinary item (94,119) (23,928) (17,313) (2,453)
Extraordinary item - write-off
of deferred financing fees (2,336) - - -
--------- -------- -------- --------
Net loss $ (96,455) $(23,928) $(17,313) $ (2,453)
========= ======== ======== ========
- ----------------------------------------------------------------------------------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
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ANCHOR GLASS CONTAINER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
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June 30,
1996 December 31,
(Unaudited) 1995
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<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 7,615 $ 18,315
Accounts receivable, net 82,841 40,965
Inventories:
Raw materials and manufacturing supplies 37,805 39,036
Semi-finished and finished products 135,763 141,538
Other current assets 19,175 14,982
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Total current assets 283,199 254,836
Property, plant and equipment, net 357,508 398,847
Other assets 58,150 38,742
Intangible pension asset 21,773 21,773
Deferred taxes 1,468 2,367
Investment in joint venture 32,472 20,631
Excess of cost over fair value of net assets
acquired 464,192 471,152
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$1,218,762 $1,208,348
========== ==========
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LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Credit Facility advances $ 32,127 $ 3,000
Current maturities of long-term debt 1,769 1,770
Accounts payable 73,346 74,120
Accrued expenses 43,597 32,648
Accrued interest 7,770 11,246
Accrued compensation and employee benefits 56,976 55,869
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Total current liabilities 215,585 178,653
Long-term debt 550,204 552,680
Pension liabilities 62,521 68,260
Other long-term liabilities 122,820 119,152
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Total long-term liabilities 735,545 740,092
Commitments and contingencies - -
Stockholder's equity:
Common stock - $.10 par value - -
Capital in excess of par value 558,300 483,816
Accumulated deficit (263,828) (167,373)
Amount related to minimum pension liability (26,840) (26,840)
---------- ----------
Total stockholder's equity 267,632 289,603
---------- ----------
$1,218,762 $1,208,348
========== ==========
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</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
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ANCHOR GLASS CONTAINER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
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Six Months Ended June 30,
-------------------------
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Loss before extraordinary item $ (94,119) $ (23,928)
Adjustments to reconcile loss before
extraordinary item to net cash used in
operating activities:
Restructuring charges 49,973 10,267
Depreciation and amortization 50,238 52,373
Other 557 281
Decrease in cash resulting
from changes in assets and liabilities (66,549) (57,631)
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(59,900) (18,638)
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Cash flows from investing activities:
Expenditures for property, plant
and equipment (25,578) (35,777)
Investment in joint venture (13,569) -
Proceeds from sales of property, plant and
equipment 3,715 6
Other (8,566) (3,593)
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(43,998) (39,364)
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Cash flows from financing activities:
Capital contribution from Vitro, S.A. 74,484 50,000
Net draws (repayments) on Credit Facility 29,127 10,000
Principal payments on long-term debt (82,546) (227)
Proceeds from issuance of long-term debt 80,000 -
Other (7,867) (401)
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93,198 59,372
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Cash and equivalents:
Increase (decrease) in net cash position (10,700) 1,370
Balance, beginning of year 18,315 14,187
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Balance, end of period $ 7,615 $15,557
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Supplemental disclosure of cash flow information:
Interest payments, net $ 32,583 $28,806
======== =======
Income tax payments (refunds), net $ (170) $ (100)
======== =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
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ANCHOR GLASS CONTAINER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
NOTE 1 - MANAGEMENT'S RESPONSIBILITY
In the opinion of Management, the accompanying condensed consolidated financial
statements contain all adjustments (consisting, other than the restructuring
charge and the extraordinary item, of only normal recurring adjustments)
necessary to present fairly the financial position as of June 30, 1996 and the
results of operations for the three-month and six-month periods ended June 30,
1996 and 1995 and cash flows for the six months ended June 30, 1996 and 1995.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the Consolidated
Financial Statements of Anchor Glass Container Corporation (the "Company")
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995. The results of operations for the interim periods are not
necessarily indicative of the results of the full fiscal year.
NOTE 2 - GOING CONCERN CONSIDERATIONS
The Company is a wholly-owned subsidiary of Container Holdings Corp. which is a
wholly-owned subsidiary of Vitro, Sociedad Anonima ("Vitro"), a limited
liability corporation incorporated under the laws of the United Mexican States.
Vitro has informed the Company that it has reviewed a number of strategic
alternatives relating to its investment in the Company in light of the
unfavorable operating results and liquidity needs of the Company. As a result
of its review of strategic alternatives, Vitro solicited offers to purchase the
Company and received proposals from three prospective purchasers. After
evaluating the proposals, discussions with two prospective purchasers were
commenced. As of August 13, 1996, Vitro and the Company are continuing such
discussions. It is expected that the completion of the sale of the Company, as
well as other alternatives, would require a restructuring of the Company's
existing indebtedness, with the holders of the Company's publicly-traded
unsecured notes and debentures receiving significantly less than the face
amount of such securities.
The Company's debt service, capital expenditures, pension and other obligations
are very substantial. Without additional contributions from Vitro, the Company
will not be able to meet, from its own resources, its liabilities as they
arise. The Company's ability to continue as a going concern with its current
scope of operations is critically dependent on additional funding from Vitro.
Vitro has informed the Company that it currently intends to continue to support
the Company's liquidity needs as long as Vitro believes that it is appropriate
to continue the sale process described in the preceding paragraph.
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The accompanying condensed consolidated financial statements have been prepared
assuming that the Company will continue as a going concern and do not include
any adjustments related to the recoverability and classification of reported
asset amounts and the amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
NOTE 3 - LONG-TERM DEBT
Effective January 12, 1996, the Company and the holders of the Senior Secured
Notes entered into a Noteholder Restructuring Agreement which provides for,
among other things, consent by the holders to the replacement of the then
current Credit Agreement with a new $130,000 credit facility and waiver by the
holders of identified defaults or events of default existing on the effective
date or which may occur during the waiver period which expires not later than
January 31, 1998. As a condition to closing, the Company made a mandatory
prepayment of $80,000 of Senior Secured Notes, received a $40,000 cash capital
contribution from Vitro and received a commitment from Vitro to contribute an
additional $25,000 on or before January 31, 1997. Additionally, Vitro, at that
time, indicated its intention to contribute up to $61,000 of additional capital
during the Restructuring Period (defined to terminate no later than June 30,
1998). As of August 13, 1996, the Company has received total capital
contributions of $89,500, satisfying Vitro's obligation to fund $65,000 prior
to January 31, 1997 and contributing $24,500 of additional capital beyond the
initially committed amount. As a result of the proposed sale of the Company
described in Note 2 above, Vitro has informed the Company that it currently
intends to continue to support the Company's liquidity needs as long as Vitro
believes that it is appropriate to continue the sale process.
During the Restructuring Period, the Series A and Series C Senior Secured Notes
bear a floating rate of interest at the one-month LIBOR rate, as defined, plus
2.0%. The interest rate is adjusted monthly. Interest on the Series B Notes
is fixed at 9.91% per annum. Interest during the Restructuring Period is
payable on the 15th of each month.
Effective January 12, 1996, and concurrent with the Noteholder Restructuring
Agreement, the Company entered into a Loan Agreement with Foothill Capital
Corporation, as agent, and Congress Financial Corporation, as co-agent, to
provide for a $130,000 senior secured revolving credit facility (the "New Senior
Credit Facility"). $80,000 of proceeds from the New Senior Credit Facility were
used at closing to make the mandatory prepayment of certain payments of the
Senior Secured Notes originally scheduled to be made in July 1996 and July 1997
and the remaining $50,000 is being used to finance working capital and other
general corporate requirements. The $80,000 of borrowings under the New Senior
Credit Facility, used to fund the mandatory prepayment of $80,000 of Senior
Secured Notes on January 12, 1996, is recorded as a long-term liability
reflecting the refinancing that took place on January 12, 1996 and is scheduled
for repayment in 1998 at the expiration of the New Senior Credit Facility.
Advances outstanding at any one time are not to exceed an amount equal to the
Borrowing Base, consisting of accounts receivable and finished product
inventory, as defined in the New Senior Credit Facility. Interest, at prime plus
1.125%, as defined, is payable monthly. A commitment fee of .5% of the unused
portion of the New Senior Credit Facility is payable monthly. The New Senior
Credit Facility expires on June 30, 1998.
8
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The agreements relating to the Company's outstanding debt include various
covenants that restrict its ability to incur additional indebtedness, sell or
transfer assets, make investments, enter into transactions with or make
distributions to affiliates and pay dividends or make other distributions in
respect of its capital stock, as well as require it to meet various financial
maintenance tests. The most restrictive financial maintenance tests are
contained in the agreements covering the Company's Senior Secured Notes and the
New Senior Credit Facility. Effective with the Noteholder Restructuring
Agreement, the holders of the Senior Secured Notes waived compliance with the
financial maintenance covenants through January 31, 1998. However, the Company
must maintain capital expenditures and net worth in amounts not less than that
defined in the Noteholder Restructuring Agreement.
In April 1996, Vitro renewed the $20,000 letter of credit facility provided on
behalf of the Company. This facility currently expires in April 1997.
9
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NOTE 4 - RESTRUCTURING AND OTHER CHARGES
In January 1996, formal plans were approved to further restructure certain of
the Company's operations to respond to the continued decline in the industry
sales volume combined with the loss of a significant portion of the business of
the Company's largest customer. A restructuring charge of approximately
$50,000 was recorded in the 1996 first quarter Statement of Operations for the
closure of the Cliffwood, New Jersey plant and other restructuring obligations.
The Company previously announced the closure of one additional furnace as part
of this plan; however, based on current business conditions, the 1996
restructuring plan does not include a furnace closure and the restructuring
charge has been revised accordingly. A summary of activity related to the
Company's 1996 and 1995 restructuring plans follows:
<TABLE>
<CAPTION>
Amount Charged
Against Liability
Restructuring as of
Liability June 30, 1996
--------- -------------
<S> <C> <C>
1996 RESTRUCTURING PLAN
Plant shutdown costs, including severance
costs and pension curtailment losses $25,100 10,100
Writedown of certain manufacturing assets to
net realizable value 24,900 -
1995 RESTRUCTURING PLAN
Plant shutdown costs, including severance
costs and pension curtailment losses 39,200 32,100
Writedown of certain manufacturing assets to
net realizable value 36,600 5,200
Writedown of previously shutdown
manufacturing facilities to net realizable value 14,000 500
</TABLE>
In January 1996, Vitro and the Company commenced plans to focus on
operationally integrating and streamlining the glass container operations of
Vitro Envases (Vitro's Mexican, South and Central American glass container
operation), Vitro Packaging, Inc. (Vitro Envases' U.S. trading company) and the
Company. However, if the discusions described in Note 2 above result in the
sale of the Company, the glass container operations of Vitro and the Company
are not expected to have any significant on-going relationship. In any event,
Vitro and the Company have functioned and will continue to function as separate
legal entities.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The effect of the highly competitive glass container market has negatively
impacted operating margins and cash flows of the Company. Vitro has informed
the Company that it has reviewed a number of strategic alternatives relating to
its investment in the Company in light of the unfavorable operating results and
liquidity needs of the Company. As a result of its review of strategic
alternatives, Vitro solicited offers to purchase the Company and received
proposals from three prospective purchasers. After evaluating the proposals,
discussions with two prospective purchasers were commenced. As of August 13,
1996, Vitro and the Company are continuing such discussions. It is expected
that the completion of the sale of the Company, as well as other alternatives,
would require a restructuring of the Company's existing indebtedness, with the
holders of the Company's publicly-traded unsecured notes and debentures
receiving significantly less than the face amount of such securities.
In the six months ended June 30, 1996, operating activities consumed $59.9
million in cash compared to $18.6 million in the corresponding period of 1995.
This increase in cash consumed principally reflects the increase in losses and
the changes in working capital items during the periods compared.
Capital expenditures in the first six months of 1996 were $25.6 million
compared to $35.8 million during the same period of 1995. In addition, in 1996,
the Company invested approximately $13.6 million in the joint venture with
Coors Brewing Company ("Coors"). Capital expenditures in 1996 are expected to
approximate $65 million, plus approximately $25 million related to the joint
venture with Coors. Additionally, the Company estimates that its pension plan
expense for calendar year 1996 will approximate $12 million and its pension
funding in excess of plan expense for calendar year 1996 will approximate $21
million resulting in total 1996 pension funding requirements of approximately
$33 million, of which $16.4 million has been provided to date. The Company's
principal sources of liquidity for these and other significant expenditures
(including debt service) are expected to be funded with cash generated from
operations, borrowings under the New Senior Credit Facility and capital
contributions from Vitro. Absent further capital contributions from Vitro, the
Company's sources to fund these expenditures will not be sufficient to satisfy
its liquidity requirements. Vitro has informed the Company that it currently
intends to continue to support the Company's liquidity needs as long as Vitro
believes that it is appropriate to continue the sale process described above.
The Company's ability to continue as a going concern with its current scope of
operations is critically dependent on additional funding from Vitro.
11
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Cash flows from financing activities for the six months ended June 30, 1996 and
1995 were $93.2 million and $59.4 million, respectively. The 1996 cash flows
from financing activities principally reflects a $74.5 million capital
contribution received from Vitro and borrowings under the New Senior Credit
Facility (discussed below).
Effective January 12, 1996, the Company and the holders of the Senior Secured
Notes entered into a Noteholder Restructuring Agreement which provides for,
among other things, consent by the holders to the replacement of the then
current Credit Agreement with a new $130 million credit facility and waiver by
the holders of identified defaults or events of default existing on the
effective date or which may occur during the waiver period which expires not
later than January 31, 1998. As a condition to closing, the Company made a
mandatory prepayment of $80 million of Senior Secured Notes, received a $40
million cash capital contribution from Vitro and received a commitment from
Vitro to contribute an additional $25 million on or before January 31, 1997.
Additionally, Vitro, at that time, indicated its intention to contribute up to
$61 million of additional capital during the Restructuring Period (defined to
terminate no later than June 30, 1998). As of August 13, 1996, the Company has
received total capital contributions of $89.5 million, satisfying Vitro's
obligation to fund $65 million prior to January 31, 1997 and contributing $24.5
million of additional capital beyond the initially committed amount. As a
result of the proposed sale of the Company described in Note 2 to the Notes to
Condensed Consolidated Financial Statements above, Vitro has informed the
Company that it currently intends to continue to support the Company's
liquidity needs as long as Vitro believes that it is appropriate to continue
the sale process.
Effective January 12, 1996, and concurrent with the Noteholder Restructuring
Agreement, the Company entered into a Loan Agreement with Foothill Capital
Corporation, as agent, and Congress Financial Corporation, as co-agent, to
provide for a $130 million senior secured revolving credit facility (the "New
Senior Credit Facility"). $80 million of proceeds from the New Senior Credit
Facility were used at closing to make the mandatory prepayment of certain
payments of the Senior Secured Notes originally scheduled to be made in July
1996 and July 1997 and the remaining $50 million is being used to finance
working capital and other general corporate requirements. The $80 million of
borrowings under the New Senior Credit Facility used to fund the mandatory
prepayment of $80 million of Senior Secured Notes on January 12, 1996, is
recorded as a long-term liability reflecting the refinancing that took place on
January 12, 1996 and is scheduled for repayment in 1998 at the expiration of
the New Senior Credit Facility. Advances outstanding at any one time are not
to exceed an amount equal to the Borrowing Base, consisting of accounts
receivable and finished product inventory, as defined in the New Senior Credit
Facility. At August 13, 1996 the Company's available Borrowing Base, as
defined, was $119.0 million against which $109.1 million was outstanding.
Interest, at prime plus 1.125%, as defined, is payable monthly. A commitment
fee of .5% of the unused portion of the New Senior Credit Facility is payable
monthly. The New Senior Credit Facility expires on June 30, 1998.
The agreements relating to the Company's outstanding debt include various
covenants that restrict its ability to incur additional indebtedness, sell or
transfer assets, make investments, enter into transactions with or make
distributions to affiliates and pay dividends or make other distributions in
respect of its capital stock, as
12
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well as require it to meet various financial maintenance tests. The most
restrictive financial maintenance tests are contained in the agreements covering
the Company's Senior Secured Notes and the New Senior Credit Facility.
Effective with the Noteholder Restructuring Agreement, the holders of the Senior
Secured Notes waived compliance with the financial maintenance covenants through
January 31, 1998. However, the Company must maintain capital expenditures and
net worth in amounts not less than that defined in the Noteholder Restructuring
Agreement.
RESULTS OF OPERATIONS
The loss from operations for the quarter ended June 30, 1996 was $3.2 million
compared to income from operations of $12.8 million for the same period of
1995. The net loss recorded in the 1996 second quarter was $17.3 million
compared to a net loss of $2.4 million for 1995.
The loss from operations for the six months ended June 30, 1996 was $64.7
million compared to income from operations of $6.1 million for the same period
of 1995. The net loss recorded in the first half of the year was $96.4 million
compared to a net loss of $23.9 million for 1995. Included in the 1996 and
1995 results were first quarter charges of $50.0 million and $10.3 million,
respectively, for the Company's 1996 and 1995 restructuring programs.
The Company's year to date operating results continue to be negatively impacted
by industry-wide volume declines. Net sales for the first six months of 1996
decreased 14.6% compared with 1995, on a volume decline of approximately 9.5%,
primarily in the iced tea, soft drink and beer markets. The softness in
overall industry volume shipments has led to severe competitive pricing
pressures, negatively impacting operating margins. In accordance with its
restructuring plans, the Company closed its Cliffwood, New Jersey plant in
January 1996, and closed its Waukegan, Illinois, Los Angeles, California and
Keyser, West Virginia plants in 1995.
In June 1996, the Company and The Stroh Brewery Company ("Stroh") entered into
a fifteen year exclusive supply agreement. This agreement creates a long-term
strategic alliance through which the Company will provide glass containers to
each of Stroh's 10 breweries and one beverage manufacturing facility.
Production will be phased in as existing supplier contracts with Stroh expire,
with the ultimate intention for the Company to become the sole supplier to
Stroh. The agreement provides for automatic 2-year extensions at the end of
the initial fifteen year term.
As a result of the current highly competitive environment, the Company was
informed in late 1995 by its largest customer, Anheuser-Busch, which accounted
for approximately 24% of the Company's sales in 1995, that the Company's 1996
volume allocation would be reduced by approximately 50%. Such a reduction has
negatively impacted the Company's 1996 total volume. However, the Company has
replaced a portion of this volume with new business.
13
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NET SALES
Net sales for the second quarter of 1996 were $228.0 million, a decrease of
10.5% compared to $254.7 million for the comparable period of 1995. Net sales
for the six months ended June 30, 1996 were $428.9 million compared to $502.3
million for 1995. The decrease in net sales principally reflects the softening
in 1996 of the year-to-year demand for glass containers in the iced tea, soft
drink and beer segments. The softness in demand has resulted in increased
competition for market share and lower pricing trends. In addition, as
described above, Anheuser-Busch has significantly reduced its purchases from
the Company.
COST OF PRODUCTS SOLD
Cost of products sold as a percentage of net sales was 97.0% and 98.6%,
respectively, for the three and six months ended June 30, 1996 compared to
90.3% and 92.1%, respectively, for the corresponding periods of 1995. This
increase principally reflects the impact of reduced shipping volumes and lower
pricing trends, as described above. Partially offsetting this increase is the
impact of the Company's strategic initiatives and cost savings derived from the
Company's restructuring plan and re-engineering program.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses declined $2.9 million, or 12.3%, in the six
months ended June 30, 1996 compared to the comparable period of 1995. This
decrease principally reflects lower personnel and fringe benefit costs as a
result of headcount reductions associated with the Company's re-engineering and
cost reduction programs.
RESTRUCTURING AND OTHER CHARGES
In January 1996, formal plans were approved to further restructure certain of
the Company's operations to respond to the continued decline in the industry
sales volume combined with the loss of a significant portion of the business of
the Company's largest customer. A restructuring charge of approximately $50.0
million has been recorded in the 1996 first quarter Statement of Operations for
the closure of the Cliffwood, New Jersey plant and other restructuring
obligations.
INTEREST EXPENSE, NET
Interest expense was $29.1 million compared to $28.6 million for the six months
ended June 30, 1996 and 1995, respectively.
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IMPACT OF INFLATION
The impact of inflation on the costs of the Company, and the ability to pass on
cost increases in the form of increased sales prices, is dependent upon market
conditions. While the general level of inflation in the domestic economy has
been at relatively low levels since the Company's formation in 1983, the
Company has generally been unable, since the end of 1991, to fully pass on
inflationary cost increases as a result of competitive pricing pressures, which
has negatively impacted the Company's operating results.
SEASONALITY
Due principally to the seasonal nature of the brewing, iced tea and soft drink
industries, in which demand is stronger during the summer months, the Company's
shipment volume is typically highest in the second and third quarters.
Consequently, the Company historically builds inventory during the first quarter
in anticipation of seasonal demands during the second and third quarters.
However, in the second quarter of 1995 and 1996 and the third quarter of 1995,
industry shipments declined significantly, resulting in lower net sales and
increased inventory levels, as compared to normal seasonal levels. In addition,
the Company generally schedules shutdowns of its plants for furnace rebuilds and
machine repairs in the first and fourth quarters of the year to coincide with
scheduled holiday and vacation time under its labor union contracts. These
shutdowns and seasonal sales patterns adversely affect profitability during the
first and fourth quarters, with the most significant impact typically occurring
in the first quarter.
15
<PAGE> 16
PART II - OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
EX 27 - Financial Data Schedule (for SEC use only)
b. Reports on Form 8-K
During the quarter for which this report is filed, no
reports on Form 8-K were filed.
16
<PAGE> 17
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.
ANCHOR GLASS CONTAINER CORPORATION
Date: August 13, 1996 /s/ Mark A. Kirk
-----------------------------------
Mark A. Kirk, Senior Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer and Duly
Authorized Officer)
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF ANCHOR GLASS CONTAINER
CORPORATION FOR THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN THE ANCHOR GLASS
CONTAINER CORPORATION FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 7,615
<SECURITIES> 0
<RECEIVABLES> 82,841
<ALLOWANCES> 2,326
<INVENTORY> 173,568
<CURRENT-ASSETS> 283,199
<PP&E> 709,507
<DEPRECIATION> 351,999
<TOTAL-ASSETS> 1,218,762
<CURRENT-LIABILITIES> 215,585
<BONDS> 550,204
0
0
<COMMON> 0
<OTHER-SE> 267,632
<TOTAL-LIABILITY-AND-EQUITY> 1,218,762
<SALES> 428,921
<TOTAL-REVENUES> 428,921
<CGS> 422,974
<TOTAL-COSTS> 472,947<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 459
<INTEREST-EXPENSE> 29,107
<INCOME-PRETAX> (94,119)
<INCOME-TAX> 0
<INCOME-CONTINUING> (94,119)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,336)
<CHANGES> 0
<NET-INCOME> (96,455)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES A RESTRUCTURING CHARGE OF $49,973
</FN>
</TABLE>
