<PAGE> 1
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 September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
ANCHOR GLASS CONTAINER CORPORATION
----------------------------------
(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
-----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
813-884-0000
------------
(Registrant's telephone number, including area code)
None
- --------------------------------------------------------------------------------
(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 .
----- -----
Number of shares of common stock, $.10 par value, outstanding at November 21,
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 18
<PAGE> 2
ANCHOR GLASS CONTAINER CORPORATION
(DEBTOR-IN-POSSESSION-NOTE 2)
FORM 10-Q
For the Quarter Ended September 30, 1996
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements:
Independent Accountants' Report 3
Condensed Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 1996 and 1995 5
Condensed Consolidated Balance Sheets -
September 30, 1996 and December 31, 1995 6
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996 and 1995 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 13
PART II - OTHER INFORMATION 17
</TABLE>
2
<PAGE> 3
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 (Debtor-in-Possession) (the
"Company") as of September 30, 1996, and the related condensed consolidated
statements of operations for the three-month and nine-month periods ended
September 30, 1996 and 1995 and cash flows for the nine-month periods ended
September 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.
As discussed in Note 2 to the condensed consolidated financial statements, the
Company has filed for reorganization under Chapter 11 of the Federal Bankruptcy
Code. The accompanying condensed consolidated financial statements do not
purport to reflect or provide for the consequences of the bankruptcy
proceedings. In particular, such condensed consolidated financial statements
do not purport to show (a) as to assets, their realizable value on a
liquidation basis or their availability to satisfy liabilities; (b) as to
prepetition liabilities, the amounts that may be allowed for claims or
contingencies, or the status and priority thereof; (c) as to stockholder
accounts, the effect of any changes that may be made in the capitalization of
the Company; or (d) as to operations, the effect of any changes that may be
made in its business.
3
<PAGE> 4
The accompanying condensed consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Notes 2 and 3 to the condensed consolidated financial statements, certain
conditions including the potential sale of substantially all of the Company's
assets, 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 regards to these matters are also described in
Note 3 to the condensed consolidated financial statements.
Based on our review, because of the possible material effects of the
uncertainties discussed in the two preceding paragraphs, we do not express any
form of assurance on the accompanying 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
November 21, 1996
4
<PAGE> 5
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANCHOR GLASS CONTAINER CORPORATION
(DEBTOR-IN-POSSESSION-NOTE 2)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
----------------- ------------------
1996 1995 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 640,049 $ 750,978 $ 211,128 $ 248,693
Costs and expenses:
Cost of products sold 636,917 696,147 213,943 233,746
Selling and administrative expenses 30,736 34,867 10,122 11,361
Restructuring charges 49,973 10,267 - -
Income (loss) from operations (77,579) 9,697 (12,937) 3,586
Reorganization expenses (1,576) - (1,576) -
Other income (expense), net (3,379) 341 (3,007) 1,777
Interest expense (42,160) (42,461) (13,053) (13,858)
--------- --------- --------- ---------
Loss before income taxes and
extraordinary item (124,692) (32,423) (30,573) (8,495)
Income taxes 1,825 - 1,825 -
--------- --------- --------- ---------
Loss before extraordinary item (126,517) (32,423) (32,398) (8,495)
Extraordinary item - write-off
of deferred financing fees (2,336) - - -
--------- --------- --------- ---------
Net loss $(128,853) $ (32,423)$ (32,398)$ (8,495)
========= ========= ========= =========
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
ANCHOR GLASS CONTAINER CORPORATION
(DEBTOR-IN-POSSESSION-NOTE 2)
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
September 30, December 31,
1996 1995
(Unaudited)
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and equivalents $ 4,343 $ 18,315
Accounts receivable, net 85,130 40,965
Inventories:
Raw materials and manufacturing supplies 35,523 39,036
Semi-finished and finished products 131,004 141,538
Other current assets 18,179 14,982
---------- ----------
Total current assets 274,179 254,836
Property, plant and equipment, net 343,084 398,847
Other assets 55,604 38,742
Intangible pension asset 21,773 21,773
Deferred taxes - 2,367
Investment in joint venture 40,249 20,631
Excess of cost over fair value of net assets
acquired 460,712 471,152
---------- ----------
$1,195,601 $1,208,348
========== ==========
- --------------------------------------------------------------------------------
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
Current liabilities:
DIP Facility/Credit Facility advances $ 113,312 $ 3,000
Current maturities of long-term debt - 1,770
Accounts payable 12,721 74,120
Accrued expenses 19,608 32,648
Accrued interest 979 11,246
Accrued compensation and employee benefits 27,204 55,869
---------- ----------
Total current liabilities 173,824 178,653
Other long-term liabilities 35,459 552,680
Prepetition liabilities
not subject to compromise 158,683 68,260
Prepetition liabilities
subject to compromise 574,401 119,152
---------- ----------
Total liabilities 942,367 918,745
Commitments and contingencies - -
Stockholder's equity:
Common stock - $.10 par value - -
Capital in excess of par value 576,300 483,816
Accumulated deficit (296,226) (167,373)
Amount related to minimum pension liability (26,840) (26,840)
---------- ----------
Total stockholder's equity 253,234 289,603
---------- ----------
$1,195,601 $1,208,348
========== ==========
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE> 7
ANCHOR GLASS CONTAINER CORPORATION
(DEBTOR-IN POSSESSION-NOTE 2)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Nine Months Ended September 30,
-------------------------------
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Loss before extraordinary item $(126,517) $ (32,423)
Adjustments to reconcile loss before
extraordinary item to net cash used in
operating activities:
Deferred taxes 1,825
Restructuring charges 49,973 10,267
Depreciation and amortization 75,239 77,379
Other 882 488
Decrease in cash resulting
from changes in assets and liabilities (60,148) (59,803)
--------- ---------
(58,746) (4,092)
- -------------------------------------------------------------------------------
Cash flows from investing activities:
Expenditures for property, plant
and equipment (36,144) (51,555)
Investment in joint venture (22,210) (5,094)
Proceeds from sales of property, plant and
equipment 11,776 48,375
Other (10,438) (5,507)
--------- ---------
(57,016) (13,781)
- -------------------------------------------------------------------------------
Cash flows from financing activities:
Capital contribution from Vitro, S.A. 92,484 50,000
Net draws (repayments) on DIP/Credit Facility 30,313 (30,000)
Principal payments on long-term debt (92,126) (239)
Proceeds from issuance of long-term debt 80,000 -
Other (8,881) (437)
--------- ---------
101,790 19,324
- -------------------------------------------------------------------------------
Cash and equivalents:
Increase (decrease) in net cash position (13,972) 1,451
Balance, beginning of year 18,315 14,187
--------- ---------
Balance, end of period $ 4,343 $ 15,638
========= =========
- -------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Interest payments, net $ 44,860 $ 35,215
========= =========
Income tax payments (refunds), net $ (170) $ (90)
========= =========
- -------------------------------------------------------------------------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
7
<PAGE> 8
ANCHOR GLASS CONTAINER CORPORATION
(DEBTOR-IN-POSSESSION-NOTE 2)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
NOTE 1 - MANAGEMENT'S RESPONSIBILITY
The accompanying condensed consolidated financial statements have been prepared
on a going concern basis, which contemplates continuity of operations,
realization of assets and liquidation of liabilities in the ordinary course of
business. Under the reorganization and anticipated sale of assets discussed in
Notes 2 and 3 below, the Company will sell or otherwise realize assets, and
liquidate or settle liabilities, for amounts substantially less than those
reflected in the condensed consolidated financial statements. Due to the
pervasive nature of the uncertainties regarding the ultimate outcome of the
reorganization, which may include the sale of substantially all of the
Company's assets as discussed in Notes 2 and 3, the Company cannot reasonably
estimate the related impairment to the reported assets and the amount of
liabilities as of November 21, 1996. Therefore, the amounts reported in the
condensed consolidated financial statements do not give effect to the
adjustments to the carrying value of assets or amounts and classifications of
liabilities that will be necessary pursuant to a plan of reorganization and
sale of substantially all of the Company's assets.
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 and information contained in the filings on Form 8-K listed
herein in Item 6. The results of operations for the interim periods are not
necessarily indicative of the results of the full fiscal year.
NOTE 2 - BANKRUPTCY PROCEEDINGS
The Company incurred a loss of $128,853 for the nine months ending September
30, 1996 and has an accumulated deficit of $296,226 at September 30, 1996. As
a result of the continued decline in the Company's results of operations from
the effect of the highly competitive glass container market and the Company's
high debt level, on September 13, 1996 (the "Petition Date"), the Company filed
a voluntary petition for reorganization under Chapter 11 of the United States
Bankruptcy Code ("Chapter 11") in the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"). On September 30, 1996, Anchor
Recycling Corporation, a wholly-owned subsidiary of the Company, also filed a
voluntary petition to reorganize under Chapter 11 in the same court. The
Chapter 11 proceedings are being jointly administered, with the Company
managing the business in the ordinary course as a
8
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debtor-in-possession under the supervision of the Bankruptcy Court. The
Company concluded that the Chapter 11 filing was necessary in order to preserve
the value of its assets and to ensure that the business has sufficient cash
resources to continue operations while it completed the sale of the business
discussed in Note 3.
Under Chapter 11 proceedings, litigation and actions by creditors to collect
certain claims existing at the Petition Date are stayed, without specific
Bankruptcy Court authorization to pay such claims. The Company has received
authorization, pursuant to first day orders, to pay certain claims related to
wages, salaries, vacation, sick pay and other claims. As a
debtor-in-possession, the Company has the right, subject to Bankruptcy Court
approval, and certain other limitations, to assume or reject certain executory
contracts, including unexpired leases. Any claim for damages resulting from
the rejection of an executory contract or an unexpired lease is treated as a
general unsecured claim in the Chapter 11 proceedings.
On September 26, 1996 the United States Trustee appointed a single unsecured
creditors' committee (the "Creditors Committee"). The Creditors' Committee has
the right to review and object to certain business transactions and is expected
to participate in the negotiation of the Company's plan of reorganization. The
Creditors' Committee has retained the firm of Wachtell, Lipton, Rosen & Katz as
its counsel and Smith Barney Inc. as financial advisors.
The Company has obtained debtor-in-possession ("DIP") financing from Foothill
Capital Corporation, as agent and Congress Financial Corporation, as co-agent,
(the "Lender Group") which provides for a $130,000 DIP Credit Facility (the
"DIP Facility"), which was approved by the Bankruptcy Court on November 15,
1996. The DIP Facility, which expires September 30, 1997, provides up to
$130,000 under a borrowing base formula, less prepetition advances under the
Company's then existing New Senior Credit Facility (the "Prepetition Credit
Facility") with the Lender Group, on terms substantially the same as the
Prepetition Credit Facility.
The DIP Facility and prepetition secured claims are collateralized by
substantially all of the assets of the Company including accounts receivable,
inventories and property, plant and equipment. The Company has continued to
accrue interest on its prepetition secured debt obligations. Because of the
Chapter 11 filing, there has been no accrual of interest on prepetition
unsecured debt subsequent to the Petition Date.
Without the timely completion of the sale of the Company's assets discussed in
Note 3 the factors described above raise substantial doubt about the ability of
the Company to continue as a going concern and there can be no assurance that
the Company can continue to generate sufficient cash flow to maintain
operations. These financial statements do not include any adjustments that
might be necessary should the Company be unable to continue as a going concern.
9
<PAGE> 10
NOTE 3 - ASSET PURCHASE AGREEMENT
On October 4, 1996, the Company entered into an asset purchase agreement (the
"Agreement") with Ball-Foster Glass Container Co. L.L.C., ("Ball-Foster") a
limited liability company organized under the laws of the State of Delaware.
Pursuant to the Agreement, Ball-Foster will acquire substantially all of the
assets of the Company for $365 million in cash at closing, subject to
adjustment, which may be substantial, as set forth in the Agreement. In
addition, Ball-Foster will assume specified liabilities of the Company.
Payment of the purchase price is guaranteed by Saint-Gobain Corporation, parent
company of Ball-Foster. Closing under the Agreement is subject to several
conditions, including compliance with the Hart-Scott-Rodino Antitrust
Improvements Act, approval by the United States Bankruptcy Court for the State
of Delaware as a sale free and clear of liens, and a closing prior to December
31, 1996. On November 13, 1996 filings under Hart-Scott-Rodino were made with
the Federal Trade Commission and the Department of Justice with requests for
early termination of the 30 day waiting period.
Also on October 4, 1996, the Company filed a motion with the Bankruptcy Court
seeking an order (i) authorizing the sale to Ball-Foster, subject to higher and
better bids, of substantially all of the Company's assets free and clear of
certain liens, claims and encumbrances and (ii) authorizing assumption and
assignment of certain unexpired leases and executory contracts (the "Sale
Motion"). The Court has entered several amended scheduling orders which
establish the following timetable for the sale process. The deadline for
submissions of higher and better bids is December 2, 1996 at 3:00 pm Eastern
Standard Time. If other bids are submitted, an auction will be held on
December 4, 1996 at the offices of Stroock & Stroock & Lavan, counsel to the
Company. The sale hearing itself is scheduled for December 9, 1996 at 3:00 pm.
Other adjourned dates have been set for certain objections to the sale and
responses to objections. A number of objections have been filed in connection
with the Sale Motion, some of which assert that the sale cannot proceed without
the consent of the objecting parties, notably Owens-Brockway Glass Container,
Inc., a party to a technology license agreement with the Company and Coors
Brewing Company, a customer and joint venture partner with the Company in the
Rocky Mountain Bottle Company joint venture. Another party claiming to be a
potential bidder for the assets of the Company, Consumers Packaging, Inc.
("Consumers"), has filed an objection alleging that the Ball-Foster deal cannot
be consummated. To date, Consumers has not submitted a bid to the Company.
Based on the pervasive nature of the uncertainties that exist around the
ultimate resolution of the bankruptcy proceedings discussed in Note 2, which
may include the sale of the Company's assets, management can not determine the
extent to which the Company's assets have been impaired. Accordingly, no
provision for loss has been reflected in the accompanying condensed
consolidated financial statements for asset impairment.
10
<PAGE> 11
The Company is actively engaged, together with its Creditors' Committee,
Ball-Foster and other interested parties, in reviewing the objections filed and
negotiating with the significant objectors in an effort to consensually
resolve all objections. The Company believes all interested parties are
working to resolve objections and meet the deadline of a year-end closing as
set forth in the Agreement. However, there can be no assurance that such
objections will be resolved or that certain conditions to closing will be
satisfied or waived.
NOTE 4 - INCOME TAXES
As a result of continuing losses, management has determined it was no longer
more likely than not that the value of the remaining deferred tax asset would
be realized. As a result, the Company recorded an additional valuation
allowance of $1,825, which is reflected as a provision for income taxes in the
consolidated statement of operations for the quarter ended September 30, 1996.
NOTE 5 - RESTRUCTURING AND OTHER CHARGES
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 September 30, 1996
---------- ------------------
1996 RESTRUCTURING PLAN
- -----------------------
<S> <C> <C>
Plant shutdown costs, including severance
costs and pension curtailment losses $25,100 $13,100
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 33,500
Writedown of certain manufacturing assets to
net realizable value 36,600 12,000
Writedown of previously shutdown
manufacturing facilities to net realizable
value 14,000 500
</TABLE>
11
<PAGE> 12
NOTE 6 - PREPETITION LIABILITIES
Prepetition liabilities subject to compromise at September 30, 1996 include the
following:
<TABLE>
<S> <C>
$100,000 10.25% Senior Notes $100,000
$200,000 9.875% Senior Subordinated Debentures 200,000
Insurance related liabilities 93,189
Pension related liabilities 82,487
Trade payables 60,946
Other miscellaneous claims 21,242
Vacation and severance 9,628
Accrued interest 6,909
--------
$574,401
========
</TABLE>
Prepetition liabilities not subject to compromise at September 30, 1996 include
the following:
<TABLE>
<S> <C>
Senior Secured Notes $158,025
Accrued interest 658
========
$158,683
</TABLE>
Because of the Chapter 11 proceedings, there has been no accrual of interest on
the $100,000 10.25% Senior Unsecured Notes or the $200,000 9.875% Senior
Subordinated Notes since September 12, 1996. If accrued, interest expense
would have increased $1,500 during the nine months ended September 30, 1996.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As a result of the continued decline in the Company's results of operations
from the effect of the highly competitive glass container market, and the
Company's high debt level, on September 13, 1996 (the "Petition Date"), the
Company filed a voluntary petition for reorganization under Chapter 11 of the
United States Bankruptcy Code ("Chapter 11") in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"). On September 30,
1996, Anchor Recycling Corporation, a wholly-owned subsidiary of the Company,
also filed a voluntary petition to reorganize under Chapter 11 in the same
court. The Chapter 11 proceedings are being jointly administered, with the
Company managing the business in the ordinary course as a debtor-in-possession
under the supervision of the Bankruptcy Court. The Company concluded that the
Chapter 11 filing was necessary in order to preserve the value of its assets
and to ensure that the business has sufficient cash resources to continue
operations while it completed the sale of the business discussed in Note 3 to
the condensed consolidated financial statements.
The Company has obtained debtor-in-possession ("DIP") financing from Foothill
Capital Corporation, as agent and Congress Financial Corporation, as co-agent,
(the "Lender Group") to provide for a $130 million DIP Credit Facility (the
"DIP Facility"), which was approved by the Bankruptcy Court on November 15,
1996. The DIP Facility, which expires September 30, 1997, provides up to $130
million under a borrowing base formula, less prepetition advances under the
Company's then existing Prepetition Credit Facility with the Lender Group, on
terms substantially the same as the Prepetition Credit Facility.
The Company's principal sources of liquidity through 1996 are expected to be
funds derived from operations and borrowings under the DIP 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 Prepetition Credit Facility, and amended by the DIP Facility.
At November 20, 1996, the Company's available borrowing base, as defined under
the DIP Facility, was approximately $129.6 million against which $90.5 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 DIP Facility is
payable monthly. The DIP Facility expires September 30, 1997. However,
without the timely completion of the sale process discussed in Note 3 to the
condensed consolidated financial statements there can be no assurance that such
sources will be sufficient to enable the Company to meet its short-term
liquidity requirements. Due to the Chapter 11 filing, most vendors of the
Company have demanded shorter payment terms. If the Company is unable to secure
more favorable payment terms from many of these vendors or Company operations
further deteriorate from, among other things, the potential future loss of
volume from the Company's customers base, the Company may be unable to comply
with the DIP Facility's financial covenants and its short-term cash resources
may be adversely affected.
13
<PAGE> 14
The Company's financing requirements post 1996, future capital expenditures and
debt service cannot be determined until a plan of reorganization is developed
and confirmed by the Bankruptcy Court.
In the nine months ended September 30, 1996, operating activities consumed
$58.7 million in cash compared to $4.1 million in the corresponding period of
1995. This increase in cash consumed reflects the increase in losses and the
changes in working capital items during the periods compared.
Capital expenditures in the first nine months of 1996 were $36.1 million
compared to $51.6 million in 1995. In addition, in 1996 the Company invested
approximately $22.2 million in the joint venture with Coors Brewing Company
("Coors"). Capital expenditures in 1996 are expected to approximate $53
million, plus approximately $25 million related to the joint venture with
Coors.
Cash flows from financing activities for the nine months ended September 30,
1996 and 1995 were $101.8 million and $19.3 million, respectively. The 1996
cash flows from financing activities principally reflects a $92.5 million
capital contribution received from Vitro and borrowings under the Prepetition
Credit Facility, modified by the DIP Facility.
As a result of the Company's Chapter 11 filing, the Company is in default of
various covenants relating to the Company's outstanding prepetition debt.
However, under Chapter 11 proceedings, litigation or actions by creditors
related to these defaults are stayed. In addition, the DIP Facility
requires that the Company's Borrowing Base and Availability, as defined,
cannot be less than a specified amount and the outstanding Advances under the
credit facility cannot be more than a specified amount as measured on a rolling
four-week period throughout the term of the DIP Facility. The Company
continues to be in full compliance with these covenants.
In April 1996, Vitro renewed the $20,000 letter of credit facility provided on
behalf of the Company. This facility currently remains in place.
RESULTS OF OPERATIONS
The net loss recorded in the 1996 third quarter was $32.4 million compared to a
net loss of $8.5 million for 1995. The net loss recorded in the first nine
months of the year was $128.8 million compared to a net loss of $32.4 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. Excluding the effect of these items, net loss would
have been $78.8 million in 1996 compared to $22.1 million for the same period
of 1995.
The Company's year to date operating results continue to be negatively impacted
by industry-wide volume declines. Net sales for the third quarter
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<PAGE> 15
decreased 15.1% compared to the 1995 third quarter, on a volume decline of
approximately 17.5%, primarily in the iced tea, beer, food and soft drink
markets. As an example, the Company's 1996 volume allocation from its largest
customer, Anheuser-Busch, (which accounted for approximately 24% of the
Company's sales in 1995), has been significantly reduced. 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.
NET SALES
Net sales for the third quarter of 1996 were $211.1 million, a decrease of
15.1% compared to $248.7 million for the comparable period of 1995. Net sales
for the nine months ended September 30, 1996 were $640.0 million compared to
$751.0 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 101.3% and 99.5%,
respectively, for the three and nine months ended September 30, 1996 compared
to 94.0% and 92.7%, 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 $4.1 million, or 11.8%, in 1996
compared to 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.
15
<PAGE> 16
REORGANIZATION EXPENSES
Reorganization expenses are comprised of items incurred by the Company as a
result of reorganization under Chapter 11. Such items totaled $1.6 million for
the three month period ended September 30, 1996 and consisted primarily of paid
and accrued professional fees.
INTEREST EXPENSE, NET
Interest expense was $42.2 million compared to $42.5 million for the nine
months ended September 30, 1996 and 1995, respectively. Because of the Chapter
11 proceedings, there has been no accrual of interest on the $100,000 10.25%
Senior Unsecured Notes or the $200,000 9.875% Senior Subordinated Notes since
September 12, 1996. If accrued, interest expense would have increased $1,500
during the nine months ended September 30, 1996.
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, industry patterns existing over the last 18 months have
altered the normal seasonal trends. 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.
16
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 13, 1996, the Company filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code
in the United States Bankruptcy Court for the District of Delaware.
On September 30, 1996, Anchor Recycling Corporation, a wholly-owned
subsidiary of the Company, also filed a voluntary petition to
reorganize under Chapter 11 in the same court. The Chapter 11
proceedings are being jointly administered, with the Company managing
the business in the ordinary course as a debtor-in-possession under
the supervision of the Bankruptcy Court.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
As a result of the Company's Chapter 11 filing, the Company is in
default of various covenants relating to the Company's outstanding
prepetition debt. However, under Chapter 11 proceedings, litigation
or actions by creditors related to these defaults are stayed.
ITEM 5. OTHER INFORMATION
Effective October 4, 1996, Alfonso Gomez Palacio resigned as
President and Chief Executive Officer of the Company. Concurrently,
James R. Malone, Chairman of the Board of Directors, assumed the role
of Acting President.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
EX-27 Financial Data Schedule (For SEC use only)
None
B. REPORTS ON FORM 8-K
Form 8-K - dated September 13, 1996 announcing filing of Chapter 11
petition in the U.S. Bankruptcy Court and Letter of Intent with
Ball-Foster Glass Container, Co. L.L.C.
Form 8-K - dated October 4, 1996 announcing the Asset Purchase
Agreement between the Company and Ball-Foster Glass Container, Co.
L.L.C.
17
<PAGE> 18
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
(Debtor-In-Possession)
Date: November 21, 1996 /s/ Mark A. Kirk
-------------------------------------
Mark A. Kirk, Senior Vice President
and Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
18
<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 SEPTEMBER 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 SEPTEMBER 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 4,343
<SECURITIES> 0
<RECEIVABLES> 85,130
<ALLOWANCES> 2,660
<INVENTORY> 166,527
<CURRENT-ASSETS> 274,179
<PP&E> 710,514
<DEPRECIATION> 367,430
<TOTAL-ASSETS> 1,195,601
<CURRENT-LIABILITIES> 173,824
<BONDS> 453,923
0
0
<COMMON> 0
<OTHER-SE> 253,234
<TOTAL-LIABILITY-AND-EQUITY> 1,195,601
<SALES> 640,049
<TOTAL-REVENUES> 640,049
<CGS> 636,917
<TOTAL-COSTS> 686,890<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 792
<INTEREST-EXPENSE> 42,160
<INCOME-PRETAX> (124,692)
<INCOME-TAX> 1,825
<INCOME-CONTINUING> (126,517)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,336)
<CHANGES> 0
<NET-INCOME> (128,853)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> INCLUDES A RESTRUCTURING CHARGE OF $49,973.
</FN>
</TABLE>
