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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
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 59-3417812
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Anchor Plaza, 4343 Anchor Plaza Parkway, Tampa, FL 33634-7513
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 813-884-0000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
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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 | |.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|
Number of shares outstanding of common stock at March 20, 2003:
9,000,000 shares
DOCUMENTS INCORPORATED BY REFERENCE
None
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
This report of Anchor Glass Container Corporation ("Anchor" or the
"Company") includes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
include, without limitation, any statement that may predict, forecast, indicate
or imply future results, performance or achievements, and may contain the words
"believe," "anticipate," "expect," "estimate," "intend," "project," "will be,"
"will likely continue," "will likely result," or words or phrases of similar
meaning including, among other things, statements concerning:
- the Company's liquidity and capital resources;
- competitive pressures and trends in the glass container or food and
beverage industries;
- prevailing interest rates;
- prices for energy, particularly natural gas, and other raw
materials;
- legal proceedings and regulatory matters; and
- general economic conditions.
Forward-looking statements involve risks and uncertainties,
including, but not limited to, economic, competitive, governmental and
technological factors outside the control of the Company, that may cause actual
results to differ materially from the forward-looking statements. These risks
and uncertainties may include the highly competitive nature of the glass
container industry and the intense competition from makers of alternative forms
of packaging; the fluctuation in the price of natural gas; the Company's focus
on the beer industry and its dependence on certain key customers; the seasonal
nature of brewing and other beverage industries; volatility in the demand of
emerging new markets; the Company's dependence on certain executive officers;
and changes in environmental and other government regulations. The Company
operates in a changing environment in which new risk factors can emerge from
time to time. It is not possible for management to predict all of these risks,
nor can it assess the extent to which any factor, or a combination of factors,
may cause actual results to differ materially from those contained in
forward-looking statements. Given these risks and uncertainties, readers are
cautioned not to place undue reliance on forward-looking statements.
i
PART I
ITEM 1. BUSINESS.
COMPANY OVERVIEW
The Company is the third largest manufacturer of glass containers in
the United States. Anchor has nine strategically located facilities where it
produces a diverse line of flint (clear), amber, green and other colored glass
containers for the beer, beverage, food, liquor and flavored alcoholic beverage
markets.
On August 30, 2002, Anchor consummated a significant restructuring
of its existing debt and equity securities pursuant to a plan of reorganization
(the "Plan") through a Chapter 11 reorganization (the "Reorganization"). As part
of the Reorganization, Cerberus Capital Management, L.P. ("Cerberus"), a leading
New York investment management firm, through certain Cerberus-affiliated funds
and managed accounts, invested $80.0 million of new equity capital into the
Company, acquiring 100% of the series C participating preferred stock for $75.0
million and 100% of the common stock for $5.0 million. In addition, Anchor
obtained a $20.0 million term loan facility from Ableco Finance LLC (the "Term
Loan"). In connection with the Reorganization, Anchor also obtained a new $100.0
million revolving credit facility from various financial institutions (the
"Revolving Credit Facility"). In addition, Anchor repaid its 9.875% Senior Notes
due 2008, aggregate principal amount of $50.0 million (the "Senior Notes").
Anchor also retired its old common stock and its mandatorily redeemable 10%
cumulative convertible preferred stock ("Series A Preferred Stock") and canceled
its redeemable 8% cumulative convertible preferred stock (the "Series B
Preferred Stock"). In connection with the Reorganization, the Company's 11.25%
First Mortgage Notes due 2005, aggregate principal amount of $150.0 million (the
"First Mortgage Notes"), were left unimpaired and remained outstanding. All of
Anchor's other unaffiliated creditors, including trade creditors, were
unimpaired and have been or will be paid in the ordinary course.
Some of the benefits from the Reorganization include:
- Strong equity sponsorship from Cerberus that has provided Anchor
with $80.0 million of new equity capital.
- Execution of an agreement with the Pension Benefit Guaranty
Corporation ("PBGC"), which eliminated all past-service pension
liabilities, replaced by a one-time payment of $20.75 million and a
$10.0 million per year fixed payment obligation to the PBGC for ten
years (the "PBGC Agreement").
- Consummation of an agreement with Anchor's union employees, which
allowed Anchor to enter into multiemployer pension plans that
provide for benefits for future service only (at a current cost of
approximately $5.0 million per year), so that the benefit obligation
is now a fixed contribution obligation rather than a fixed benefit
obligation, thereby eliminating market risk.
- Elimination of related party and third party claims, various
contracts and the settlement of a shareholder derivative lawsuit and
other disputes.
RECENT DEVELOPMENTS
On February 7, 2003, the Company completed an offering of $300.0
million aggregate principal amount of 11% Senior Secured Notes due 2013 (the
"Senior Secured Notes"). The Senior Secured Notes are senior secured obligations
of the Company, ranking equal in right of payment with all existing and future
unsubordinated indebtedness of the Company and senior in right of payment to all
future subordinated indebtedness of the Company. The Senior Secured Notes are
secured by a first priority lien, subject to certain permitted encumbrances, on
substantially all of Anchor's existing real property, equipment and other fixed
assets relating to Anchor's nine operating glass container manufacturing
facilities.
Proceeds from the issuance of the Senior Secured Notes, net of fees,
were approximately $289.0 million and were used to repay 100% of the principal
amount outstanding under the First Mortgage Notes plus accrued interest thereon
(approximately $156.3 million), 100% of the principal amount outstanding under
the Term Loan
($20.0 million) plus accrued interest thereon and a prepayment fee
(approximately $0.4 million) and advances outstanding under the Revolving Credit
Facility (approximately $66.9 million), which includes funds for certain of the
Company's capital improvement projects. The remaining proceeds of approximately
$45.0 million are being used to terminate certain equipment leases by purchasing
from the lessors the equipment leased thereunder.
PRODUCTS, MARKETS AND CUSTOMERS
The Company produces glass containers for the beverage and food
industries in the United States. Substantially all of the Company's glass
containers are produced to customer specifications. In addition, most of the
Company's sales are pursuant to customer contracts with average terms of three
to five years from inception. The table below provides a summary of net sales
and the approximate percentage of net sales by product group for each of the
three years ended December 31, 2002.
Years ended December 31,
-----------------------------------------------------------
Products 2002 2001 2000
------------------------------------ ----------------- ----------------- -----------------
Beer/Flavored Alcoholic Beverages .. $ 419.1 58.6% $ 375.4 53.4% $ 291.4 46.3%
Beverages .......................... 100.6 14.1 108.6 15.5 108.3 17.2
Food ............................... 79.4 11.1 90.3 12.9 87.7 13.9
Liquor ............................. 83.5 11.6 89.6 12.7 96.8 15.4
Other .............................. 33.0 4.6 38.3 5.5 45.3 7.2
------- ------- ------- ------- ------- -------
Total ......................... $ 715.6 100.0% $ 702.2 100.0% $ 629.5 100.0%
======= ======= ======= ======= ======= =======
There can be no assurance that the information provided in the
preceding table will be indicative of the glass container product mix of the
Company for 2003 or in subsequent years. Management's strategy is to focus on
shifting its product mix towards those products management believes likely to
improve operating results.
The Company's ten largest customers accounted for approximately
75.4% of its net sales for the twelve months ended December 31, 2002. The loss
of a number of these customers, a significant reduction in sales to these
customers or a significant change in the commercial terms of our relationship
with these customers could have a material adverse effect on the Company's
business, financial condition and results of operations. In 2002, the Company
lost a customer responsible for approximately 3.9% of its 2001 net sales;
although the Company was able to replace these sales, there can be no assurance
that it would be able to replace sales to other lost customers in the future.
The Company's largest customer, Anheuser-Busch Companies, Inc.
("Anheuser-Busch"), accounted for approximately 43.6% of its net sales for the
twelve months ended December 31, 2002. The Company has two dedicated facilities
in Florida and Georgia that provide two Anheuser-Busch breweries with glass
containers. The Southeast Contract covering these facilities extends through
2005. The remainder of the Company's sales to Anheuser-Busch are governed by a
separate agreement which also extends through 2005.
MANUFACTURING
Manufacturing
The Company's manufacturing facilities are generally located in
geographic proximity to its customers due to the significant cost of
transportation and the importance of prompt delivery to customers. Most of the
Company's production is shipped by common carrier to customers generally within
a 150-mile radius of the plant in which it is produced.
The glass container manufacturing process involves a high percentage
of fixed costs. Standard input costs are similar among manufacturers and include
soda ash, sand, limestone and energy costs. The Company conducts regular
maintenance on all of its operating equipment. The Company, from time to time,
may experience
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unplanned plant downtime at its operating facilities due to the extreme
operating conditions inherent in some of the Company's manufacturing processes.
3
Raw Materials and Suppliers
Sand, soda ash, limestone, cullet (reclaimed glass), corrugated
packaging materials and energy, primarily natural gas, are the principal raw
materials that are used in the Company's manufacturing operations. All of these
materials are available from a number of suppliers and the Company is not
dependent upon any single supplier for any of these materials. The Company
believes that adequate quantities of these materials are, and will continue to
be, available from various suppliers. However, if temporary shortages due to
disruptions in supply caused by weather, transportation, production delays or
other factors require the Company to secure its raw materials from sources other
than its current suppliers, the Company cannot be assured that it will be able
to do so on terms as favorable as its current terms or at all. In addition,
material increases in the cost of any of these items on an industry-wide basis
could have a material adverse effect on the Company's business, financial
condition and results of operations if it is unable to pass these costs along to
its customers.
All of the Company's glass melting furnaces are equipped to burn
natural gas, which is the primary fuel used at the Company's manufacturing
facilities. Backup systems are in place at some facilities to permit the use of
fuel oil or propane, to the extent cost effective and permitted by applicable
laws and regulations. Electricity is used in certain instances for enhanced
melting.
Prices for natural gas have fluctuated significantly in recent
years. As such, they remain one of the largest and the most volatile cost
components of the Company's operations. Because of the Company's previous
financial constraints, the Company has historically participated in very limited
hedging activities. The Company's current strategy is to enter into hedging
transactions from time to time on an opportunistic basis. The Company has hedged
certain of its estimated natural gas purchases, typically over a maximum of six
to twelve months, through the purchase of natural gas futures. The Company does
not enter into hedging transactions for speculative trading purposes, but rather
to lock in energy prices. Also, the Company has entered, from time to time, into
put and call options for purchases of natural gas.
Increases in the price of natural gas adversely affect the Company's
costs and margins. Over the last three years, closing prices for natural gas
prices have fluctuated significantly from a low of $1.830 per million BTUs, or
MMBTU, in October 2001 to a high of $9.978 per MMBTU in January 2001, compared
to an average price of $2.238 per MMBTU from 1995 through 1999. Since the 2001
price peak, natural gas prices have remained volatile. For March 2003, natural
gas prices ranged from approximately $5.60 to $11.90 per MMBTU and closed at
$9.133 per MMBTU. To date, natural gas prices for April 2003 have ranged from
approximately $6.80 to $8.10 MMBTU. Although certain of the Company's contracts
with its customers incorporate price adjustments based on changes in the cost of
natural gas, the change in pricing lags behind the cost the Company incurs to
obtain natural gas. A material increase in the price of natural gas would have a
material adverse effect on the Company's results of operations and financial
condition.
Quality Control
The Company maintains a program of quality control with respect to
suppliers, line performance and packaging integrity for glass containers. The
Company's production lines are equipped with a variety of automatic and
electronic devices that inspect containers for dimensional conformity, flaws in
the glass and various other performance attributes. Additionally, products are
sample inspected and tested by Company employees on the production line for
dimensions and performance and are also inspected and audited after packaging.
Containers that do not meet quality standards are crushed and recycled as
cullet. The Company has not experienced any significant quality control issues
in recent years.
The Company monitors and updates its inspection programs to keep
pace with technology and customer demands. Samples of glass and raw materials
from its plants are routinely chemically and electronically analyzed to monitor
compliance with quality standards. Laboratories are also maintained at each
manufacturing facility to test various physical characteristics of products.
SEASONALITY
4
Due principally to the seasonal nature of the brewing, iced tea and
some other segments of the beverage industry, in which demand is stronger during
the summer months, the Company's shipment volume is typically higher in the
second and third quarters. Consequently, the Company has historically built
inventory during the fourth and first quarters in anticipation of seasonal
demands during the second and third quarters. However, due to increased demand
at the end of 2001 and the beginning of 2002, the Company shipped more than
usual and built up less inventory in those periods.
In addition, although the Company seeks to minimize downtime, it has
historically scheduled shutdowns of its plants for furnace rebuilds and machine
repairs in the fourth and first quarters of the year to coincide with scheduled
holiday and vacation time under its labor union contracts. These shutdowns
normally adversely affect profitability during the fourth and first quarters.
CUSTOMER SERVICE
The Company has customer service managers responsible for
scheduling, sales forecasting and coordinating the various aspects of delivering
product to the customer. The Company maintains both low-capacity and
high-capacity forming equipment, which allows it to be more flexible and
responsive to changes in its customers' product mix and shipment location
requests. The Company's equipment mix also enables it to produce both
high-volume products and products that require shorter production runs, such as
new product introductions or specialty niche products, enhancing its
responsiveness and flexibility as a supplier.
ENVIRONMENTAL AND OTHER GOVERNMENTAL REGULATIONS
Environmental Regulation and Compliance
The Company's operations are subject to Federal, state and local
environmental laws and regulations including, but not limited to, the Federal
Water Pollution Control Act of 1972, the Federal Clean Air Act and the Federal
Resource Conservation and Recovery Act and the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"). Among
the activities subject to environmental regulation are the disposal of checker
slag (furnace residue usually removed during furnace rebuilds), the disposal of
furnace bricks containing chromium, the disposal of waste, the discharge of
water used to clean machines and cooling water, dust emissions produced by the
batch mixing process, maintenance of underground and above ground storage tanks
and air emissions produced by furnaces. In addition, the Company is required to
obtain and maintain environmental permits in connection with its operations.
Many environmental laws and regulations provide for substantial fines and
criminal sanctions for violations. While there can be no assurance that material
costs or liabilities will not be incurred, the Company believes it is in
material compliance with applicable environmental laws and regulations.
Certain environmental laws, such as CERCLA, or Superfund, and
analogous state laws, provide for strict, and under certain circumstances, joint
and several liability for investigation and remediation of releases of hazardous
substances into the environment including soil and groundwater. These laws may
apply to properties presently or formerly owned or operated by an entity or its
predecessors, as well as to conditions at properties at which wastes
attributable to an entity or its predecessors were disposed. The Company is
conducting remediation of soil and groundwater at certain of its facilities, and
in light of historical practices, may in the future be required to perform
additional corrective actions. The Company is defending a limited number of
legal proceedings where third parties are asserting that it is responsible for
costs related to the disposal of wastes under CERCLA or analogous state laws.
The Company does not believe that the resolution of any of these legal
proceedings will have a material adverse effect on its financial condition, but
the Company cannot be assured that it or entities for which it may be
responsible will not incur future environmental liability, as a result of these
or other proceedings, that could have a material adverse effect on its financial
condition or results of operations.
Capital expenditures required for environmental compliance were
approximately $0.5 million in each of 2001 and 2002 and are anticipated to be
approximately the same in 2003. The Company anticipates that environmental
compliance will continue to require increased capital expenditures over time.
Future changes in such laws or regulations or interpretations thereof or the
nature of the Company's operations may require it to make significant additional
capital expenditures to ensure compliance in the future. The Company has
established
5
a reserve for environmental matters, including known or projected remediation
projects and projected exposure at third-party sites, in the amount of
approximately $10.0 million.
The Company does not believe that its environmental exposure is in
excess of the reserves reflected on its balance sheet. In addition to its
environmental reserves, the Company also maintains an environmental impairment
liability insurance policy to address certain potential future environmental
liabilities at both identified operating and non-operating sites. However there
can be no assurance that any future liability, particularly any arising from
presently unknown conditions, will not exceed the reserves or available
insurance coverage and have an adverse impact on the Company's operations or
financial condition.
Employee Health and Safety Regulations
The Company's operations are also subject to a variety of worker
safety laws. The Occupational Safety and Health Act of 1970, the United States
Department of Labor Occupational Health Administration Regulations and analogous
state laws mandate general requirements for safe workplaces for all employees.
The Company believes that it is operating in material compliance with applicable
employee health and safety laws.
Deposit and Recycling Legislation
Over the years, legislation has been introduced at the Federal,
state and local levels requiring a deposit or tax, or imposing other
restrictions, on the sale or use of certain containers, particularly beer and
carbonated soft drink containers. Several states have enacted some form of
deposit legislation, and others may in the future. The enactment of additional
deposit laws or laws, such as mandatory recycling rate requirements, that affect
the cost structure of a particular segment or all of the packaging industry
could have a material adverse effect on our business, results of operations and
financial condition.
COMPETITION
The glass container industry in the United States is a mature
industry. The Company and the other glass container manufacturers compete on the
basis of price, quality, reliability of delivery and general customer service.
The industry is highly concentrated with three producers, including the Company,
estimated by the Company to have accounted for over 90% of 2002 domestic volume.
The Company's principal competitors are Owens-Brockway Glass
Container Inc. ("Owens-Illinois"), a wholly owned subsidiary of Owens-Illinois
Group, Inc., and Saint-Gobain Containers Co., a wholly owned subsidiary of
Compagnie de Saint-Gobain. These competitors are larger and have greater
financial and other resources than the Company. Owens-Illinois has a relatively
large research and development staff and has in place numerous technology
licensing agreements with other glass producers, including the Company.
In addition to competing directly with Owens-Illinois and
Saint-Gobain in the glass container segment of the rigid packaging industry, the
Company also competes indirectly with manufacturers of other forms of rigid
packaging, such as aluminum cans and plastic containers. These other forms of
rigid packaging compete with glass containers principally on the basis of
quality, price, availability and consumer preference.
INTELLECTUAL PROPERTY RIGHTS
The Company operates under a ten-year contract with Heye-Glas
International, expiring December 31, 2011, that provides it with heat extraction
technology for its forming machines.
The Company also has a limited license with Owens-Illinois entitling
the Company to use certain existing patents, trade secrets and other technical
information of Owens-Illinois relating to glass manufacturing technology. The
Company will have the right to use technology in place through 2005 in exchange
for license fees and thereafter will have a perpetual paid-up license.
While the Company holds various patents, trademarks and copyrights
of its own, it believes its business is not dependent upon any one of these.
6
EMPLOYEES
As of February 28, 2003, the Company employed approximately 3,030
persons on a full-time basis. Approximately 540 of these employees are salaried
office, supervisory and sales personnel. The remaining employees are represented
principally by two unions, the Glass Molders, Pottery, Plastics and Allied
Workers and the American Flint Glass Workers Union. The Company's two labor
contracts with the Glass Molders, Pottery, Plastics and Allied Workers and its
two labor contracts with the American Flint Glass Workers Union expire on March
31, 2005 and August 31, 2005, respectively.
The Company has not experienced any significant work stoppages or
employee-related problems that had a material impact on its operations. The
Company considers its relationship with its employees to be good.
ITEM 2. PROPERTIES.
The Company's administrative and executive offices are located in
Tampa, Florida. The Company entered into a lease in January 1998 pursuant to
which it leases a portion of the headquarters facility for an initial term of
ten years.
The Company owns and operates nine glass container manufacturing
plants. The Company also leases a building located in Streator, Illinois, that
is used as a machine shop to rebuild glass-forming related machinery and a mold
shop located in Zanesville, Ohio, as well as additional warehouses for finished
products in various cities throughout the United States. Substantially all of
the Company's owned properties and equipment at its nine operating glass
container manufacturing facilities are pledged as collateral securing the
Company's obligations under the Senior Secured Notes and the related indenture.
The following table sets forth certain information concerning the
Company's manufacturing facilities. In addition to these locations, the Company
owns plants at Keyser, West Virginia, Cliffwood, New Jersey, Royersford,
Pennsylvania, Chattanooga, Tennessee and Dayville, Connecticut that have been
closed and owns land in Gas City, Indiana.
NUMBER OF NUMBER OF BUILDING AREA
LOCATION FURNACES MACHINES (SQUARE FEET)
---------------------------------- ------------ ------------ -------------
Jacksonville, Florida 2 4 624,000
Warner Robins, Georgia 2 8 864,000
Lawrenceburg, Indiana 1 4 504,000
Winchester, Indiana 2 6 627,000
Shakopee, Minnesota 2 6 360,000
Salem, New Jersey (1) 3 6 733,000
Elmira, New York 2 6 912,000
Henryetta, Oklahoma 2 6 664,000
Connellsville, Pennsylvania 2 4 624,000
- ----------
(1) A portion of the site on which this facility is located is leased pursuant
to several long-term leases.
ITEM 3. LEGAL PROCEEDINGS.
In September 2001, The National Bank of Canada, acting on its own
behalf and on behalf of PNC Bank, filed a complaint against Anchor, GGC, L.L.C.
("GGC") a former affiliate of Anchor, Consumers U.S., Inc., ("Consumers U.S.")
(the former parent company of Anchor) and certain other of Anchor's former
affiliates. The complaint alleged, among other things, fraudulent conveyances
made by GGC to Anchor and tortious interference by Anchor with the contractual
relationship between the bank and GGC. The action will be heard in the United
States Bankruptcy Court for the Middle District of Florida. A trial date is
scheduled in September 2003.
The Company's operations are subject to Federal, state and local
requirements that are designed to protect the environment. Such requirements
have in the past resulted in the Company becoming involved in related legal
proceedings, claims and remediation obligations. In addition, the Company is,
and from time to time may be, a
7
party to routine legal proceedings incidental to the operation of its business.
The outcome of any pending or threatened proceedings is not expected to have a
material adverse effect on the Company's financial condition or operating
results, based on its current understanding of the relevant facts.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were brought to a vote of security holders in the fourth
quarter of 2002.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
RECENT SALES OF UNREGISTERED SECURITIES
In February 2003, the Company issued $300.0 million aggregate
principal amount of its Senior Secured Notes to a group of "qualified
institutional buyers" (as such term is used in Rule 144A under the Securities
Act). The Senior Secured Notes were issued in reliance on the exemptions from
the registration requirements of the Securities Act provided by Rule 144A and
Regulation S under the Securities Act. The initial purchasers were "accredited
investors" as that term is defined in Regulation D of the Securities Act. The
sale and issuance of these securities was exempt from the registration of the
Securities Act pursuant to Rule 506 Regulation D promulgated thereunder.
On August 30, 2002, the Company sold and issued to Anchor Glass
Container Holding L.L.C. ("AGC Holding"), a Cerberus affiliate, 75,000 shares of
Series C Preferred Stock for $75.0 million and 9,000,000 shares of Common Stock
for $5.0 million. These shares were issued in an offering not involving a public
offering pursuant to Section 4(2) of the Securities Act. As a condition to the
issuance, the purchasers consented to placement of a restrictive legend on the
certificates representing the securities. The Company has not paid dividends on
its Common Stock and currently has no intention to do so in the future. The
holders of the Series C Preferred Stock are entitled to receive, when and as
declared by the Board of Directors of the Company out of legally available
funds, cumulative dividends, payable quarterly in cash, at a rate per annum
equal to 12%.
On August 30, 2002, in connection with the PBGC Agreement, the
Company granted the PBGC a warrant for the purchase of 5% of the Common Stock of
Anchor, with an exercise price of $5.27 per share and term of ten years.
As of February 28, 2003, there was one registered holder of 75,000
shares of Series C Preferred Stock, five registered holders of Common Stock and
one registered holder of warrants for the purchase of Common Stock.
Under the terms of the Plan, the holders of Anchor's First Mortgage
Notes retained their outstanding $150.0 million of First Mortgage Notes and
received a consent fee for the waiver of the change-in-control provisions, the
elimination of pre-payment provisions and other non-financial changes to the
terms of the First Mortgage Notes (including the release of Consumers U.S. as a
guarantor). The holders of Anchor's Senior Notes were repaid in cash at 100% of
their principal amount. The holders of Anchor's Series A Preferred Stock are
entitled to receive a cash distribution of $22.5 million (of which approximately
$21.0 million has been paid through February 28, 2003) and the Series A
Preferred Stock was cancelled. Anchor's Series B Preferred Stock and common
stock and warrants were cancelled and the holders received no distribution under
the Plan. The holders of the First Mortgage Notes were repaid with proceeds from
the issuance of the Senior Secured Notes.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth certain historical financial
information of the Company. The selected financial data as of December 31, 2002
and December 31, 2001 and for the four months ended December 31, 2002, the eight
months ended August 31, 2002 and the two years ended December 31, 2001 and 2000
have been derived from the Company's audited financial statements included
elsewhere in this Annual Report on Form 10-K. The selected financial data as of
December 31, 2000, 1999 and 1998 and for the three years ended December 31,
2000, 1999 and 1998 has been derived from the Company's financial statements
which had previously been audited by
8
Arthur Andersen LLP. Arthur Andersen has not reissued its report for purposes of
this Annual Report on Form 10-K. The following information should be read in
conjunction with the Company's financial statements and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
The financial statements as of and for periods subsequent to August
31, 2002 are referred to as the "Reorganized Company" statements. The financial
statements prior to that date are referred to as "Predecessor Company"
statements. The financial statements for the eight months ended August 31, 2002
give effect to the restructuring and reorganization adjustments and the
implementation of fresh start accounting. The financial results for the year
ended December 31, 2002 include two different bases of accounting and,
consequently, after giving effect to the reorganization and fresh start
adjustments, the financial statements of the Reorganized Company are not
comparable to those of the Predecessor Company. Accordingly, the operating
results of the Reorganized Company and the Predecessor Company have been
separately disclosed.
REORGANIZED
COMPANY PREDECESSOR COMPANY
------------ -----------------------------------------------------------------------
FOUR MONTHS EIGHT MONTHS
ENDED ENDED YEARS ENDED DECEMBER 31,
DECEMBER 31, AUGUST 31, ------------------------------------------------------
2002 2002 2001 2000 1999 1998
------------ ------------ --------- --------- --------- ---------
(dollars in thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
Net sales $ 211,379 $ 504,195 $ 702,209 $ 629,548 $ 628,728 $ 643,318
Cost of products sold 192,434 451,619 658,641 603,061 582,975 594,256
Selling and administrative expenses 9,683 19,262 28,462 33,222 28,465 30,246
Restructuring, net (1) -- (395) -- -- -- 4,400
Related party provisions and charges (2) -- -- 35,668 -- 9,600 --
--------- --------- --------- --------- --------- ---------
Income (loss) from operations 9,262 33,709 (20,562) (6,735) 7,688 14,416
Reorganization items, net (3) -- 47,389 -- -- -- --
Other income (expense), net 450 673 106 5,504 2,080 2,384
Interest expense (10,381) (17,948) (30,612) (31,035) (27,279) (26,570)
--------- --------- --------- --------- --------- ---------
Net income (loss) $ (669) $ 63,823 $ (51,068) $ (32,266) $ (17,511) $ (9,770)
========= ========= ========= ========= ========= =========
Series A and B Preferred Stock dividends $ (4,100) $ (14,057) $ (14,057) $ (13,650) $ (13,037)
========= ========= ========= ========= =========
Income (loss) applicable to common stock $ 59,723 $ (65,125) $ (46,323) $ (31,161) $ (22,807)
========= ========= ========= ========= =========
Basic net income (loss) per share
applicable to common stock $ 11.37 $ (12.40) $ (8.82) $ (5.93) $ (5.12)
========= ========= ========= ========= =========
Diluted net income (loss) per share
applicable to common stock $ 1.89 $ (12.40) $ (8.82) $ (5.93) $ (5.12)
========= ========= ========= ========= =========
OTHER FINANCIAL DATA:
Depreciation and amortization $ 18,011 $ 35,721 $ 54,024 $ 54,900 $ 51,942 $ 52,155
Capital expenditures 28,666 42,654 41,952 39,805 53,963 42,297
REORGANIZED COMPANY PREDECESSOR COMPANY
------------------------ ------------------------------------------------------
BALANCE SHEET DATA (at end of period):
Accounts receivable $ 42,070 $ 53,646 $ 43,182 $ 55,818 $ 53,556 $ 86,846
Inventories 102,149 87,235 105,573 125,521 106,977 104,329
Total assets 556,397 546,235 530,584 620,807 613,037 640,962
Total long-term debt including capital
leases 298,801 274,738 259,435 269,279 253,132 253,922
Redeemable preferred stock -- -- 82,026 76,428 70,830 66,643
Total stockholders' equity (deficit) 76,499 80,000 (124,041) (4,626) 46,187 67,938
- ----------
(1) The Company recorded a net gain for restructuring of $395 for the eight
months ended August 31, 2002. The significant components of this net gain
included: professional fees of $10,068; direct costs of the restructuring,
net of $8,344; savings attributable to the retiree benefit plan
modification of ($24,432); and first mortgage note holder consent fee of
$5,625. The Company recorded a restructuring charge in 1998 as a result of
one furnace and one machine being removed from service.
9
(2) For the year ended December 31 2001, represents the write-off of a
receivable from Consumers Packaging Inc. ("Consumers") and affiliates of
$18,221 and the write-off of an advance to G&G Investments, Inc. of
$17,447. For the year ended December 31, 1999, represents the Company's
allocable portion of the write-off of costs relating to a software system.
(3) Reorganization items, net consist of a net gain for fresh start
adjustments of $49,908 and expenses incurred in the Chapter 11 proceedings
of $2,519, comprised of: $2,450 of debtor-in-possession facility fees;
$1,687 of professional fees; $1,276 of deferred financing fees written off
relating to the Senior Notes; and a credit of $2,894 for the reversal of
interest expense relating to the Senior Notes.
10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Company Background
The Company is the third largest manufacturer of glass containers in
the United States, focused solely on this packaging industry segment. The
Company has nine strategically located facilities where it produces a diverse
line of flint (clear), amber, green and other colored glass containers of
various types, designs and sizes for the beer, flavored alcoholic beverages,
non-alcoholic beverages, liquor and food markets. The Company manufactures and
sells its products to many of the leading producers of products in these
categories.
Senior Secured Notes Offering
On February 7, 2003, the Company completed an offering of $300.0
million aggregate principal amount of 11% Senior Secured Notes due 2013, issued
under an indenture dated as of February 7, 2003, among the Company and The Bank
of New York, as Trustee (the "Indenture"). The Senior Secured Notes are senior
secured obligations of the Company, ranking equal in right of payment with all
existing and future unsubordinated indebtedness of the Company and senior in
right of payment to all future subordinated indebtedness of the Company. The
Senior Secured Notes are secured by a first priority lien, subject to certain
permitted encumbrances, on substantially all of Anchor's existing real property,
equipment and other fixed assets relating to Anchor's nine operating glass
container manufacturing facilities.
Proceeds from the issuance of the Senior Secured Notes, net of fees,
were approximately $289.0 million and were used to repay 100% of the principal
amount outstanding under the First Mortgage Notes plus accrued interest thereon
(approximately $156.3 million), 100% of the principal amount outstanding under
the Term Loan plus accrued interest thereon and a prepayment fee (approximately
$20.4 million) and advances outstanding under the Revolving Credit Facility
(approximately $66.9 million), which includes funds for certain of the Company's
capital improvement projects. The remaining proceeds of approximately $45.0
million are being used to terminate certain equipment leases by purchasing from
the lessors the equipment leased thereunder.
Reorganization
On August 30, 2002, Anchor consummated a significant restructuring
of its existing debt and equity securities through a Chapter 11 reorganization.
As part of this Reorganization, Cerberus, through certain Cerberus-affiliated
funds and managed accounts, invested $80.0 million of new equity capital into
Anchor, acquiring 100% of Anchor's Series C Participating Preferred Stock for
$75.0 million and 100% of Anchor's Common Stock for $5.0 million. In addition,
Anchor arranged for a $20.0 million Term Loan from Ableco Finance LLC, an
affiliate of Cerberus. In connection with the restructuring, Anchor also put in
place a new $100.0 million Revolving Credit Facility. In addition, Anchor
settled various lawsuits, eliminated certain related party claims and contracts,
reduced retiree medical obligations by more than $20.0 million and entered into
an agreement with the PBGC settling Anchor's outstanding pension liability.
In connection with the Reorganization, Anchor repaid $50.0 million
aggregate principal amount of Senior Notes. Anchor also retired its old common
stock and Series A Preferred Stock and canceled its Series B Preferred Stock. In
connection with the Reorganization, the First Mortgage Notes, aggregate
principal amount of $150.0 million, were left unimpaired and remained
outstanding and were repaid with proceeds from the issuance of the Senior
Secured Notes.
The Reorganization was consummated on August 30, 2002; however, for
accounting purposes, the Company has accounted for the reorganization and fresh
start adjustments as of August 31, 2002, to coincide with its normal financial
closing for the month of August. The Company's financial statements as of and
for periods subsequent to August 31, 2002 are referred to as the "Reorganized
Company" statements. All financial statements prior to that date are referred to
as "Predecessor Company" statements. The financial statements for the eight
11
months ended August 31, 2002 give effect to the restructuring and reorganization
adjustments and the implementation of fresh start accounting.
Pension Plan
Effective December 31, 2001, the Glass Companies Multiemployer Pension
Plan was established, created from the merger of Anchor's defined benefit
pension plan and GGC's defined benefit plan for hourly employees. Anchor, GGC,
the Board of Trustees of the Glass Companies Multiemployer Pension Plan and the
unions representing certain employees at Anchor and at GGC participating in the
plan considered the Glass Companies Multiemployer Pension Plan to be a
multiemployer pension plan.
In July 2002, the United States Department of Labor notified the
Company that it had determined that the Glass Companies Multiemployer Pension
Plan did not meet the definition of a multiemployer plan for purposes of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Effective
July 31, 2002, the Company entered into the PBGC Agreement to settle its
outstanding pension liability. Pursuant to the PBGC Agreement, and collective
bargaining agreements with the unions representing its employees, the Company
withdrew from the Glass Companies Multiemployer Pension Plan on July 31, 2002.
The PBGC partitioned the assets and liabilities of the Glass Companies
Multiemployer Pension Plan into two parts, one part attributable to Anchor
employees and former employees, and one part attributable to the employees and
former employees of GGC and terminated the Anchor portion. The termination was
effective July 31, 2002.
Anchor settled the PBGC termination claim as follows: (1) pursuant to
the PBGC Agreement, on August 30, 2002, Anchor made a payment of $20.75 million
to the PBGC with proceeds from the Reorganization; (2) for a period of 120
months, commencing September 2002, Anchor is required to make monthly payments
to the PBGC in the amount of $833,333.33; and (3) on August 30, 2002, Anchor
granted the PBGC a warrant for the purchase of 5% of its common stock, with an
exercise price of $5.27 per share and term of ten years. Anchor amended its
labor union contracts and, effective August 1, 2002, commenced contributing to
the Glass Molders, Pottery, Plastics and Allied Workers and Employees Pension
Fund and the Steelworkers Pension Trust for the future service benefits of the
Company's hourly employees.
RESULTS OF OPERATIONS
Historical results for the year ended December 31, 2002 contain two
different bases of accounting and, consequently, after giving effect to the
Reorganization and fresh start adjustments, the historical financial statements
of the Reorganized Company are not comparable to those of the Predecessor
Company and have been separately disclosed.
FOUR MONTHS ENDED DECEMBER 31, 2002 AND EIGHT MONTHS ENDED AUGUST 31, 2002
COMPARED TO YEAR ENDED DECEMBER 31, 2001
NET SALES. Net sales for the four months ended December 31, 2002
were $211.4 million and net sales for the eight months August 31, 2002 were
$504.2 million, compared to $702.2 million in the year ended December 31, 2001.
The increase in net sales of approximately $13.4 million was principally a
result of general price increases and a shift in product mix from food and
beverages to beer/flavored alcoholic beverages. Net sales and sales volume in
2002 were negatively impacted by unplanned downtime due to emergency furnace
repairs at two of the Company's operating facilities, which resulted in lower
shipment volume in September 2002. These repairs were completed in September
2002 and the furnaces are currently operating.
COST OF PRODUCTS SOLD. Cost of products sold in the four months
ended December 31, 2002 was $192.4 million, or 91.0% of net sales, and cost of
products sold in the eight months ended August 31, 2002 was $451.6 million, or
89.6% of net sales, while the cost of products sold for the year ended December
31, 2001 was $658.6 million, or 93.8% of net sales. This improvement in margin
in 2002 principally reflects the decline in the cost of natural gas, the
principal fuel for manufacturing glass, of approximately $14.0 million. The
decline in the price of natural gas in 2002, as compared with 2001, resulted in
net margin improvement of approximately $3.8 million, net of the energy price
recovery program. Additional manufacturing efficiencies, due to the Company's
cost reduction efforts, and lower inventory storage costs, resulting from the
lower levels of inventory, also favorably
12
impacted cost of products sold. These improvements were partially offset by
increases in other costs, such as insurance, fringe benefits and costs
associated with downtime during the modernization project at the Elmira, New
York facility. In addition, the furnace disruption discussed above resulted in
extra costs incurred in the four months ended December 31, 2002 of approximately
$1.8 million. With the implementation of SFAS 142, effective as of January 1,
2002, goodwill is no longer amortized. Goodwill amortization expense was $3.0
million in the year ended December 31, 2001.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative
expenses for the four months ended December 31, 2002 were $9.7 million, or 4.6%
of net sales, selling and administrative expenses for the eight months ended
August 31, 2002 were $19.3 million, or 3.8% of net sales, while selling and
administrative expenses for the year ended December 31, 2001 were $28.5 million,
or 4.0% of net sales.
RESTRUCTURING, NET AND REORGANIZATION ITEMS, NET. On August 30,
2003, the effective date of the Plan, the Company adopted fresh start reporting
pursuant to the American Institute of Certified Public Accountants Statement of
Position 90-7 "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code". The adoption of fresh start reporting results in the Company
revaluing its balance sheet to fair value based on the reorganization value of
the Company. Reorganization costs for the eight months ended August 31, 2002
consisted of a net gain for fresh start adjustments of $49.9 million and
expenses incurred in the Chapter 11 proceedings of $2.5 million.
On August 30, 2002, the Company completed the Reorganization and
recorded a net gain for restructuring of $0.4 million during the eight months
ended August 31, 2002. The significant components of this net gain include:
professional fees - $10.1 million; direct costs of the restructuring - $7.9
million; First Mortgage Note holder consent fee - $5.6 million; monetization of
assets - $4.5 million; other fees - $3.9 million; net cost of derivative
settlement - $0.2 million; retiree benefit plan modification - ($24.4 million);
and adjustment to pension liabilities - ($8.2 million).
INTEREST EXPENSE. Interest expense for the four months ended
December 31, 2002 was $10.4 million and interest expense for the eight months
ended August 31, 2002 was $17.9 million, compared to $30.6 million for the year
ended December 31, 2001, a decrease of $2.3 million. There was no accrual of
interest on the Senior Notes from April 15, 2002, the petition date, through
August 30, 2002, the date of the repayment of the principal amount of the Senior
Notes, resulting in a year over year reduction of $3.5 million in interest
expense. Interest expense was also reduced due to lower average interest rates
and lower average borrowings outstanding under the Company's revolving credit
facilities in 2002, offset by interest expense related to the PBGC Agreement and
the Term Loan.
NET INCOME (LOSS). The Company recorded a net loss of $0.6 million
and net income of $63.8 million in the four months ended December 31, 2002 and
the eight months ended August 31, 2002, respectively. The restructuring and
reorganization items were $47.8 million, leaving income of $15.4 million
attributable to all other operations. The Company recorded a net loss of $51.1
million in the year ended December 31, 2001. The related party provision and
charges were $35.7 million, leaving a loss of approximately $15.4 million in
2001 attributable to all other operations. The improvement in earnings results
for 2002 was due to general price increases, increased sales volume and a
favorable mix of business opportunities.
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000
NET SALES. Net sales for 2001 were $702.2 million compared to $629.5
million for 2000. This $72.7 million, or 11.5%, increase in net sales was
principally a result of the 12.0% increase in shipment volume, particularly in
the beer product line, primarily associated with (i) the Company's agreement
with Anheuser-Busch to provide all the bottles for the Anheuser-Busch
Jacksonville, Florida and Cartersville, Georgia breweries, beginning in 2001,
(ii) the natural gas related price recovery program discussed below and (iii)
general price increases. Net sales in the first six months of 2001 were
negatively impacted by $23.8 million due to a change in the way certain
packaging materials were sold to one of the Company's customers. This change
resulted in a comparable reduction in cost of products sold in 2001.
COST OF PRODUCTS SOLD. Cost of products sold for 2001 was $658.6
million, or 93.8% of net sales, while the cost of products sold for 2000 was
$603.0 million, or 95.8% of net sales. This increase in the cost of products
sold
13
principally reflects the increases in net sales noted above. Productivity
improvements of approximately $7.0 million were offset by increases in other
costs, including raw material and labor costs of approximately $5.4 million. In
addition, the Company continued to experience significant increases in the cost
of natural gas as compared to the preceding year. These increased prices for
natural gas, the principal fuel for manufacturing glass, increased costs by
approximately $12.5 million compared to 2000. Energy costs declined in the
second half of 2001 and at year-end were in line with historical levels. In the
second half of 2000, the Company initiated a price recovery program for the
escalating natural gas costs incurred. Approximately $21.5 million was recovered
through this program in 2001 and is included in net sales.
RELATED PARTY PROVISIONS AND CHARGES. Prior to the Reorganization,
Consumers, Anchor's former indirect parent, indirectly owned, on a fully-diluted
basis, approximately 59.0% of Anchor's capital stock. In August 2001, Consumers
and Owens-Illinois announced an agreement whereby Owens-Illinois was to acquire
Consumers glass-producing assets as well as Anchor's capital stock held by
Consumers. The stock sale never materialized. However, as a result of this
announcement and Consumers bankruptcy in Canada, the Company recorded a charge
to earnings during 2001 of $18.2 million ($25.0 million in receivables and a
$1.8 million investment in common shares of Consumers, net of $8.6 million in
payables). The Company also recorded a provision of $17.4 million against an
advance from an affiliate as a related party provision on the statement of
operations.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative
expenses for 2001 were $28.5 million and for 2000 were approximately $33.2
million. This decrease was attributable to a focus on overall cost reduction,
including reducing personnel related costs, data processing costs and support
costs of related parties, including fees under the management agreement with G&G
Investments, Inc., offset by increased legal and professional fees.
OTHER INCOME, NET. Other income, net decreased to $0.1 million in
2001 from $5.5 million in 2000. Other income for 2000 included the gain on the
sale (of approximately $6.1 million) of the Company's previously closed Houston,
Texas glass container manufacturing facility and certain related operating
rights to Anheuser-Busch, offset by the write down of approximately $1.2 million
on 1,842,000 shares of Consumers' common stock to reflect the investment at fair
value.
INTEREST EXPENSE. Interest expense for 2001 was approximately $30.6
million, compared to $31.0 million in 2000, a decrease of 1.4%. Interest expense
in 2000 included the write-off of certain financing fees of $1.3 million.
Excluding this item, interest increased primarily due to interest on higher
average outstanding borrowings under the revolving credit facility at the time,
offset by lower interest rates and less net interest incurred on related party
liabilities.
NET LOSS. The Company had a net loss in 2001 of approximately $51.1
million compared to a net loss in 2000 of approximately $32.3 million. The
related party provision and charges was $35.7 million, leaving a loss of
approximately $15.4 million in 2001 attributable to all other operations. The
results of 2000 included a gain on the sale of the previously closed Houston,
Texas glass container manufacturing facility of approximately $4.1 million and a
gain of approximately $2.0 million on the sale of certain operating rights
related to the Houston, Texas facility, both included in "Other income, net"
above. The 2000 results also included approximately $5.4 million of unabsorbed
expenses associated with extended year-end shutdown period in 2000, a $1.2
million write down on shares of Consumers' common stock to reflect the
investment at fair value and a write-off of $1.3 million related to the
refinancing of a former credit facility.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are funds derived from
operations and borrowings under the Revolving Credit Facility, as well as the
lease facility described below. The Company believes that cash flows from
operating activities combined with funds from the issuance of the Senior Secured
Notes and available borrowings under the Revolving Credit Facility and the
master lease agreement will be sufficient to support its operations and
liquidity requirements for the foreseeable future, although the Company cannot
be assured that this will be the case. Peak operating needs are in the spring,
at which time working capital borrowings are significantly higher than at other
times of the year.
14
Senior Secured Notes Offering
On February 7, 2003, the Company completed an offering of $300.0
million aggregate principal amount of 11% Senior Secured Notes due 2013. The
Senior Secured Notes are redeemable, in whole or in part, at the Company's
option on or after February 15, 2008, at redemption prices defined in the
Indenture. The Indenture provides that upon the occurrence of a change of
control, the Company will be required to offer to purchase all of the Senior
Secured Notes at a purchase price equal to 101% of the principal amount thereof
plus accrued interest to the date of purchase.
The Indenture governing the Senior Secured Notes, subject to certain
exceptions, restricts the Company from taking various actions, including, but
not limited to, subject to specified exceptions, the incurrence of additional
indebtedness, the payment of dividends and other restricted payments, the
granting of additional liens, mergers, consolidations and sale of assets and
transactions with affiliates.
The Company entered into a Registration Rights Agreement on February
7, 2003. Under the Registration Rights Agreement, the Company will use its
reasonable best efforts to register with the Securities and Exchange Commission,
exchange notes having substantially identical terms as the Senior Secured Notes.
Reorganization
As part of the Reorganization:
- The holders of the First Mortgage Notes retained their outstanding
$150.0 million of First Mortgage Notes and received a consent fee of
$5.6 million for the waiver of the change-in-control provisions, the
elimination of pre-payment premiums and certain non-financial
changes to the terms of the First Mortgage Notes, including the
release of Consumers U.S. as a guarantor. The First Mortgage Notes
were repaid in cash with proceeds of the Senior Secured Notes.
- The Senior Notes were repaid in cash at 100% of their principal
amount of $50.0 million.
- The holders of the Series A preferred stock (which had a then
current accrued liquidation value of approximately $83.6 million)
were entitled to receive a cash distribution of $22.5 million in
exchange for their shares, of which $21.0 million was paid through
February 28, 2003 (and the remainder of which is expected to be paid
in 2003), and the Series A Preferred Stock was canceled.
- The Series B Preferred Stock (which had a then current accrued
liquidation value of approximately $105.7 million) and common stock
and warrants were canceled and the holders received no distribution
under the Plan.
- The Company entered into the PBGC Agreement, whereby the PBGC
proceeded in accordance with procedures under ERISA, to partition
the assets and liabilities of the Glass Companies Multiemployer
Pension Plan and terminate the Anchor portion. At August 30, 2002,
Anchor paid $20.75 million to the PBGC and entered into a ten-year
payment obligation.
- All of the Company's other unaffiliated creditors, including trade
creditors, were unimpaired and have been or will be paid in the
ordinary course.
Cash Flows
Operating Activities. Operating activities provided $23.1 million in
cash in the four months ended December 31, 2002 and $53.1 million in the eight
months ended August 31, 2002, as compared to cash provided of $37.5 million in
the year ended December 31, 2001. This increase in cash provided reflects an
improvement in earnings of approximately $30.8 million and changes in working
capital items. Accounts receivable and inventory levels decreased approximately
$3.6 million and $3.4 million, respectively, in 2002. As a result of lower
natural gas prices, net cash outlays for natural gas purchases in the twelve
months ended December 31, 2002 decreased approximately $3.8 million as compared
to the year ended December 31, 2001. Anchor contributed approximately $7.6
million to the multiemployer pension plans in 2002, compared to $7.4 million
contributed to the prior benefit pension plan in 2001.
15
Investing Activities. Cash consumed in investing activities was
$18.1 million in the four months ended December 31, 2002 and $49.5 million in
the eight months ended August 31, 2002, as compared to $30.9 million in the year
ended December 31, 2001. Capital expenditures were $28.7 million in the four
months ended December 31, 2002 and $42.6 million in the eight months ended
August 31, 2002, as compared to $42.0 million in the year ended December 31,
2001. The Company invested approximately $31.0 million in the now completed
modernization project at the Elmira, New York facility, of which $18.6 million
was invested in 2002. To fund capital expenditures as provided for under the
terms of the indentures outstanding at the time, the Company applied cash
deposited into escrow of $10.0 million and $13.3 million, respectively, in 2002
and 2001, which represented the proceeds of leasing and sale-leaseback
transactions.
Financing Activities. Net cash consumed in financing activities was
$5.0 million in the four months ended December 31, 2002 and $3.7 million in the
eight months ended August 31, 2002, as compared to $10.7 million in the year
ended December 31, 2001. The net financing activities in 2002 principally
reflect the Reorganization transactions, consisting of $80.0 million of proceeds
from the issuance of capital stock, $20.0 million of proceeds from the issuance
of the Term Loan, repayment of the principal balance of $50.0 million on the
Senior Notes, payment of $20.75 million under the PBGC Agreement and repayment
of the advances outstanding under the former debtor-in-possession facility of
approximately $47.9 million.
Debt and Other Contractual Obligations
Under the Company's new master lease, entered into in December 2002,
the Company can lease equipment from time to time until March 31, 2003, in an
amount not to exceed $20.0 million in the aggregate. The master lease agreement
is structured as a capital lease under GAAP. For each group of equipment items
the Company agrees to lease, it will enter into an equipment schedule that will
apply the terms of the master lease to such equipment. The Company financed
$10.0 million of equipment in December 2002 under a lease term of five years.
The Company intends to finance an additional $10.0 million of equipment in late
March 2003.
In August 2002, the Company entered into a ten-year payment
obligation under the PBGC Agreement. The present value of this obligation,
approximately $65.0 million at December 31, 2002, was determined by applying a
discount rate of 8.9%. See "--Overview--Pension Plan."
Commitments for the principal payments and interest required on
long-term debt, including capital leases and other contractual obligations, are
as follows:
2007 and
2003 2004 2005 2006 thereafter
--------- -------- -------- --------- -----------
(dollars in thousands)
Long-term debt (1) $ -- $ -- $ -- $ -- $ 300,000
Capital leases (2) 2,611 2,599 2,098 2,108 2,241
Interest on above obligations 30,436 33,800 33,789 33,778 202,898
Payments under PBGC Agreement (3) 10,000 10,000 10,000 10,000 57,500
Operating leases 9,476 4,005 3,232 3,015 12,165
Series A Preferred Stock (4) 5,091 -- -- -- --
--------- -------- -------- --------- -----------
$ 57,614 $ 50,404 $ 49,119 $ 48,901 $ 574,804
========= ======== ======== ========= ===========
(1) Includes the obligations under the Senior Secured Notes due 2013.
(2) Includes the capital lease obligation under the new master lease.
(3) The Company is required to make monthly payments to the PBGC in the
amount of $833,333.33.
(4) Includes the remaining balance of the settlement of the Series A
Preferred Stock ($22.5 million) under the Plan.
In addition to the above, the Company is obligated to pay
approximately $2.9 million annually (in aggregate approximately $43.7 million)
related to its post-retirement benefit plan and approximately $5.0 million
annually to multiemployer plans for the future service benefits of its hourly
employees.
16
The obligations under the Revolving Credit Facility are secured on a
first priority security interest in, a lien upon, and a right of set off against
all of the Company's inventories, receivables, general intangibles and proceeds
therefrom. In addition, the Revolving Credit Facility contains customary
negative covenants and restrictions for transactions, including, without
limitation, restrictions on indebtedness, liens, investments, fundamental
business changes, asset dispositions outside of the ordinary course of business,
certain junior payments, transactions with affiliates and changes relating to
indebtedness. In addition, the Revolving Credit Facility requires that the
Company meet a quarterly fixed charge coverage test, unless minimum availability
declines below $10.0 million in which case the Company must meet a monthly fixed
charge coverage test.
As of March 4, 2003, advances outstanding under the Revolving Credit
Facility were approximately $3.0 million, borrowing availability was
approximately $74.1 million and outstanding letters of credit on this facility
were approximately $4.2 million.
In addition, the letters of credit outstanding under the prior
debtor-in-possession facility are currently in the process of being transitioned
to the Revolving Credit Facility. As of March 4, 2003, outstanding letters of
credit under this facility are approximately $3.7 million and are collateralized
by a cash deposit, recorded as restricted cash on the balance sheet. The
transition of the letters of credit to the Revolving Credit Facility and the
return of the cash deposit are expected to occur by the end of the first quarter
of 2003.
Capital Expenditures
Capital expenditures were approximately $71.3 million in 2002 and
are expected to be approximately $72.0 million in 2003, which includes
approximately $22.5 million of expenditures for certain capital improvement
projects at the Company's Henryetta, Oklahoma and Warner Robins, Georgia
facilities.
Off-Balance Sheet Arrangements
Except for operating lease commitments as disclosed in the table of
contractual obligations above, the Company is not party to off-balance sheet
arrangements.
IMPACT OF INFLATION
The impact of inflation on the Company's costs, 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 relatively low, the Company has experienced significant cost increases
in specific materials and energy and has not been fully able to pass on these
cost increases to its customers for several years, although the Company did
realize some price increases in 2001 and 2002, primarily due to the abnormally
high energy costs experienced in 2001. Over the last three years, closing prices
for natural gas prices have fluctuated significantly from a low of $1.830 per
MMBTU in October 2001 to a high of $9.978 per MMBTU in January 2001, compared to
an average price of $2.238 per MMBTU from 1995 through 1999. Since the 2001
price peak, natural gas prices have remained volatile. For March 2003, natural
gas prices ranged from $5.60 to $11.90 per MMBTU and closed at $9.133 per MMBTU.
To date, natural gas prices for April 2003 have ranged from $6.80 to $8.10
MMBTU. A material increase in the price of natural gas would have a material
adverse effect on the Company's results of operations and financial condition.
SEASONALITY
Due principally to the seasonal nature of the brewing, iced tea and
some other segments of the beverage industry, in which demand is stronger during
the summer months, the Company's shipment volume is typically higher in the
second and third quarters. Consequently, the Company has historically built
inventory during the fourth and first quarters in anticipation of seasonal
demands during the second and third quarters. However, due to increased demand
at the end of 2001 and the beginning of 2002, the Company shipped more than
usual and built up less inventory in those periods.
17
In addition, although the Company seeks to minimize downtime, it has
historically scheduled shutdowns of its plants for furnace rebuilds and machine
repairs in the fourth and first quarters of the year to coincide with scheduled
holiday and vacation time under its labor union contracts. These shutdowns
normally adversely affect profitability during the fourth and first quarters.
NEW ACCOUNTING STANDARDS
Effective January 1, 2002, the Company adopted Statement of
Financial Accounting Standards No. 142--Goodwill and Other Intangible Assets.
SFAS No. 142 addresses financial accounting and reporting for intangible assets
acquired individually or with a group of other assets at acquisition. SFAS No.
142 also addresses financial accounting and reporting for goodwill and other
intangible assets subsequent to their acquisition. SFAS No. 142 provides that
goodwill and intangible assets that have indefinite useful lives will not be
amortized but rather will be tested at least annually for impairment. It also
provides that intangible assets that have finite useful lives will continue to
be amortized over their useful lives, but those lives will no longer be limited
to forty years. For the financial statements of the Predecessor Company, it was
determined that the Company's fair value was greater than the carrying amount of
its net assets and no goodwill impairment has resulted from the adoption of SFAS
No. 142.
Effective January 1, 2002, the Company adopted Statement of
Financial Accounting Standards No. 144--Accounting for the Impairment or
Disposal of Long-Lived Assets, that addresses financial reporting for the
impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No.
121 and the reporting provisions of Accounting Principles Board Opinion No.
30--Reporting the Results of Operations, for the disposal of a segment of a
business. The Company has determined that the impact of adopting SFAS No. 144 is
not material. Assets previously held for sale have been reclassified as
operating property, plant and equipment as required by SFAS No. 144.
In August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 143--Accounting for Asset
Retirement Obligations, that addresses the accounting for the recognition of
liabilities associated with the retirement of long-lived assets. The Company
adopted the requirements of SFAS No. 143 concurrent with fresh start accounting
and has determined that the impact of adopting SFAS No. 143 is not material.
In April 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 145--Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections regarding the accounting of gains and losses from the extinguishment
of debt and to eliminate an inconsistency between the accounting for
sale-leaseback transactions and certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. SFAS No. 145 is
effective for transactions occurring after May 15, 2002. The Company adopted the
requirements of SFAS No. 145 concurrent with fresh start reporting. As a result,
$1.3 million was reclassified from extraordinary item to interest expense for
the year ended December 31, 2000.
In June 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 146--Accounting for Exit or
Disposal Activities. SFAS No. 146 addresses significant issues regarding the
recognition, measurement, and reporting of costs that are associated with exit
and disposal activities, including restructuring activities that are currently
accounted for pursuant to the guidance that the EITF has set forth in EITF Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." The Company has adopted the requirements of SFAS No. 146
concurrent with fresh start accounting and has determined that the impact of
adopting SFAS No. 146 is not material.
In December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 148 - Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of Statement No. 123
("SFAS 148"). SFAS 148 amends Statement No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"), to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure requirements
of SFAS 123 to require prominent disclosures in both annual and interim
financial statements about
18
the method of accounting for stock-based employee compensation and the effect of
the method used on reported results. The Company has currently adopted the
disclosure requirements of SFAS 148.
FORMER USE OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS
In June 2002, Arthur Andersen was convicted of federal obstruction
of justice charges. As a result of Arthur Andersen's conviction, Arthur Andersen
is no longer in a position to reissue their audit reports or to provide consents
to include financial statements reported on by them in this annual report.
The report covering our financial statements for the 2000 fiscal
year was previously issued by Arthur Andersen and has not been reissued by them.
Accordingly, the Company is unable to obtain a consent from Arthur Andersen. The
Company believes that it is unlikely that damages, if any, could be recovered
from Arthur Andersen for any claim against them.
The SEC has provided temporary regulatory relief designed to allow
companies that file reports with the SEC to dispense with the requirement to
file a consent of Arthur Andersen in certain circumstances. There is no
assurance that the Company will be able to continue to rely on the temporary
relief granted by the SEC.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The significant accounting policies of the Company are disclosed in
Note 1 and other notes to the annual financial statements included herein. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates. The most significant accounting
estimates inherent in the preparation of the Anchor financial statements form
the basis for reserves with respect to areas such as, post-retirement benefits,
environmental reserves, product liability and insurance reserves and valuation
allowances to reduce deferred tax assets. Estimates and judgments are based on
historical experience and other factors believed to be reasonable in the
circumstances. Management continually reviews its accounting policies for
application and disclosure in the financial statements.
Post-retirement benefits - Post-retirement benefit obligations are
based on various assumptions including, discount rate, health care cost trend
rates retirement and mortality rates and other factors. Actual results that
differ from the assumptions affect future expenses and obligations.
Environmental reserves - Reserves have been established for
potential environmental liabilities, including known or projected remediation
projects and projected exposure at third-party sites. These reserves require
that the Company make significant estimates. Changes in facts and
circumstances could result in changes to environmental liabilities.
Product liability and insurance reserves - These reserves are
determined based upon reported claims in process and actuarial estimates for
losses incurred but not reported.
Deferred tax assets - The Company uses the liability method
accounting for income taxes. If, on the basis of available evidence, it is more
likely than not that all or a portion of the deferred tax asset will not be
realized, the asset must be reduced by a valuation allowance. Since realization
is not assured as of December 31, 2002, management has deemed it appropriate to
establish a valuation allowance against the net deferred tax assets.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Revolving Credit Facility is subject to interest rates based on
a floating benchmark rate (the prime rate or eurodollar rate), plus an
applicable margin. The applicable margin was fixed through February 2003, and
thereafter becomes a fixed spread based on the Company's level of excess
availability. A change in interest rates under the Revolving Credit Facility
could have an impact on results of operations. A change of 10.0% in the market
rate of interest would impact interest expense by approximately $0.3 million,
based on average borrowings outstanding during 2002. The Company's long-term
debt instruments are subject to fixed interest rates and, in addition, the
amount of principal to be repaid at maturity is also fixed. Therefore, the
Company is not subject to market risk from its long-term debt instruments. Fewer
than 1.0% of the Company's net sales are denominated in currencies other than
the U.S. dollar, and the Company does not believe its total exposure to currency
fluctuations to be significant. The Company has hedged certain of its estimated
natural gas purchases, typically over a maximum of six to twelve months, through
the purchase of natural gas futures. The Company does not enter into such
hedging transactions for speculative trading purposes but rather to lock in
energy prices. Also, the Company has entered into put and call options for
purchases of natural gas. Accounting for these derivatives may increase
volatility in earnings.
19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PAGE
----
Reports of Independent Certified Public Accountants F-2
Statements of Operations and Comprehensive Income (Loss) -
Four Months Ended December 31, 2002 (Reorganized Company),
Eight Months Ended August 31, 2002 and
Two Years Ended December 31, 2001 and 2000 (Predecessor Company) F-5
Balance Sheets -
December 31, 2002 (Reorganized Company) and
December 31, 2001 (Predecessor Company) F-6
Statements of Cash Flows -
Four Months Ended December 31, 2002 (Reorganized Company),
Eight Months Ended August 31, 2002 and
Two Years Ended December 31, 2001 and 2000 (Predecessor Company) F-8
Statements of Stockholders' Equity (Deficit) -
Four Months Ended December 31, 2002 (Reorganized Company),
Eight Months Ended August 31, 2002 and
Two Years Ended December 31, 2001 and 2000 (Predecessor Company) F-10
Notes to Financial Statements F-12
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Directors and Executive Officers. The following table sets forth
certain information regarding each of the Company's directors and executive
officers.
NAME AGE POSITION
----------------------------- --- ----------------------------------------------
Richard M. Deneau............ 56 President and Chief Executive Officer and
Director
Darrin J. Campbell........... 38 Chief Financial Officer and Executive Vice
President - Sales and Asset Management
Roger L. Erb................. 60 Executive Vice President - Operations and
Engineering
Richard A. Kabaker........... 59 Vice President, General Counsel and Secretary
Joel A. Asen................. 52 Director
James N. Chapman............. 40 Director
Jonathan Gallen.............. 42 Director
George Hamilton.............. 46 Director
Timothy F. Price............. 48 Director
Alan H. Schumacher........... 56 Director
Lenard B. Tessler............ 50 Director
Director and Executive Officers' Terms of Office. Each officer
serves at the discretion of the Board and until such officer's successor is
chosen and qualified. Directors are elected at the annual meeting of the
stockholders and hold office until their successors are elected and qualified.
RICHARD M. DENEAU assumed his duties as the Company's President and
Chief Operating Officer in July 1997 and as a director in June 1998. In August
2002, he became the Company's Chief Executive Officer. From January 1996 to June
1997, Mr. Deneau was Senior Vice President and Chief Operating Officer of
Ball-Foster Glass Container Co. From October 1992 to January 1996, he was Senior
Vice President and General Manager of Beverage Can Operations at American
National Can Company. Prior to October 1992, Mr. Deneau was Senior Vice
President of Sales at American National Can Company's Foster-Forbes Glass
Company Division, a predecessor of Ball-Foster Glass Container Co.
DARRIN J. CAMPBELL joined the Company as Vice President, Pricing and
Business Development in September 2000, became Executive Vice President--Sales
and Asset Management in September 2001 and became the Company's Chief Financial
Officer in November 2002. Mr. Campbell was Chief Operating Officer of Pabst
Brewing from May 1999 to August 2000 and Chief Financial Officer from September
1996 to April 1999.
ROGER L. ERB became the Company's Senior Vice President-Operations
in October 1997 and Executive Vice President--Operations and Engineering in
September 2001. From September 1995 to June 1997, Mr. Erb was Senior Vice
President of Technical Services at Ball-Foster Glass Container Co. Prior
thereto, he was employed at American National Can Company's Foster-Forbes Glass
Company Division, serving as Senior Vice President of Technical Services from
June 1994 to September 1995, Senior Vice President of Operations from January
1993 to June 1994 and, prior to this time, as Vice President of Technical
Services.
RICHARD A. KABAKER became the Company's Vice President and General
Counsel in December 2002 and became the Company's Secretary in January 2003.
From August 2001 to November 2002, Mr. Kabaker was in private practice. From
September 2000 to August 2001, he was Vice President, Legal Affairs and General
Counsel of Rexam Beverage Can Company, the successor company to American
National Can Company. From 1996 to 2000, he served as Vice President, Legal
Affairs of American National Can Company. Prior thereto, he held various
positions in the law department of American National Can Company and its
predecessor companies.
21
JOEL A. ASEN joined the Company in December 2002 as a director. Mr.
Asen has been the President of Asen Advisory since 1992, which provides
strategic and financial advisory services. He was Managing Director at Whitehead
Sterling from 1991 to 1992, at Paine Webber, Inc. from 1990 to 1991 and at
Drexel Burnham Lambert Incorporated from 1988 to 1990. From 1985 to 1988, he was
a Senior Vice President at GAF Corporation. Prior to that time, Mr. Asen was a
Manager of Business Development at GE and Manager of Marketing and Business
Development at GECC. Mr. Asen is also a Director of Resolution Performance
Products, LLC and Compass Minerals Group, LLC.
JAMES N. CHAPMAN joined the Company in December 2002 as a director.
Mr. Chapman is associated with Regiment Capital Advisors, LLC, which he joined
in January 2003. Prior to joining Regiment, Mr. Chapman acted as a capital
markets and strategic planning consultant with private and public companies as
well as hedge funds across a range of industries. Prior to establishing an
independent consulting practice, Mr. Chapman worked for The Renco Group, Inc.
from December 1996 to December 2001. Prior to joining Renco, Mr. Chapman was a
founding principal of Fieldstone Private Capital Group in August 1990. Prior to
joining Fieldstone, Mr. Chapman worked for Bankers Trust Company from July 1985
to August 1990, most recently in the BT Securities capital markets area. Mr.
Chapman serves as a member of the board of directors of Coinmach Corporation,
Davel Communications, Inc., Meridian Rail LLC and Southwest Royalties, Inc.
JONATHAN GALLEN joined the Company in August 2002 as a director. Mr.
Gallen is sole managing member of Pequod LLC, the general partner of Ahab
Partners, L.P., a distressed securities fund which invests in publicly traded
debt, private debt, trade claims, large and middle-market bank loans, distressed
real estate and public and private equity. Mr. Gallen is also the President of
Ahab Capital Management, Inc. (formerly known as Pequod Capital, Inc.)., the
investment manager to Ahab International, Ltd., an unregistered investment
corporation that develops and manages a diversified portfolio of distressed
investments as well as invests and trades in a wide variety of securities. Prior
to forming Ahab Capital Management, Mr. Gallen worked with Stephen A. Feinberg
at the time of Cerberus' formation, developing investment strategies, techniques
and procedures of distressed investing. From 1990 through 1993, Mr. Gallen
founded and operated Gallen Sports Productions, Inc., a sports marketing and
merchandising company, and prior thereto, he practiced law at Pircher, Nichols,
& Meeks, a law firm specializing in real estate. Mr. Gallen has served as a
director of Wherehouse Entertainment, Inc., Harvest Foods and Fruehauf Trailer
Corporation.
GEORGE HAMILTON joined the Company in August 2002 as a director.
Prior to establishing an independent consulting practice in 2001, Mr. Hamilton
served as President of several consumer goods companies within the Newell
Rubbermaid Company, including Rubbermaid Europe s.a., Lee Rowan Company and
Anchor Hocking Specialty Glass, from 1996 through 2001. From 1984 to 1996, Mr.
Hamilton served as Vice-President Controller at Newell Rubbermaid in a number of
companies, both domestic and international, including Anchor Hocking Corp., from
1990 through 1993. From 1979 through 1984, Mr. Hamilton worked with Ernst &
Young in Canada, Mr. Hamilton serves on the Board of Airway Industries Inc.,
Strategic Sourcing Services, Inc. and Wamnet, Inc.
TIMOTHY F. PRICE joined the Company in August 2002 as a director.
Mr. Price is managing member of Communications Advisory Group, LLC. Mr. Price is
the former President and Chief Operating Officer of MCI Communications. In his
15-year history with MCI, Mr. Price held senior staff, line, field and
headquarters positions. As President, Mr. Price was responsible for all of MCI's
core communications businesses, including its units serving residential and
business customers, domestically and globally, as well as network operations and
information systems. Mr. Price serves on the board of ICG and the advisory board
of C&T Access Ventures and has served on the boards of MCI, SHL Systemhouse, the
National Alliance of Business, the Woodruff Foundation and the Corporate 100 of
the John F. Kennedy Center for the Performing Arts.
ALAN H. SCHUMACHER joined the Company in December 2002 as a
director. Mr. Schumacher is a member of the Federal Accounting Standards
Advisory Board and has 23 years experience working in various positions at
American National Can Group. From 1997 to 2000, Mr. Schumacher served as
Executive Vice President and Chief Financial Officer. From January 1988 through
June 1997, he held the positions of Vice President, Controller and Chief
Accounting Officer. Positions held prior to 1988 include Assistant Corporate
Controller and Manager of Corporate Accounting. Prior to joining American
National Can Group, Mr. Schumacher was employed as a Senior Auditor at Price
Waterhouse and Company.
22
LENARD B. TESSLER joined the Company in August 2002 as a director.
Mr. Tessler is a Managing Director of Cerberus, which he joined in May 2001.
Prior to joining Cerberus, he was a founding partner of TGV Partners, a private
investment partnership formed in April 1990. Mr. Tessler served as Chairman of
the Board of Empire Kosher Poultry from 1994 to 1997, after serving as its
President and Chief Executive Officer from 1992 to 1994. Before founding TGV
Partners, Mr. Tessler was a founding partner of Levine, Tessler, Leichtman &
Co., a leveraged buyout firm formed in 1987. Mr. Tessler serves as a member of
the board of directors of Garfield & Marks Designs, Ltd., Opinion Research
Corporation, Meridian Rail LLC, Renaissance Mark, Inc. and G+G Retail.
COMPENSATION OF DIRECTORS
The Company's non-employee directors (other than Messrs. Tessler and
Gallen) are entitled to receive an annual director's fee of $35,000. The
chairman of the audit committee and the chairman of other board committees are
entitled to receive an annual fee of $10,000 and $5,000, respectively. In
addition, a fee of $1,250 is paid to non-employee directors (other than Messrs.
Tessler and Gallen) for each directors' meeting attended and $1,000 for each
audit or other committee meeting attended. Directors who are also the Company's
employees or employees of Cerberus do not receive additional consideration for
serving as directors, except that all directors are entitled to reimbursement
for travel and out-of-pocket expenses in connection with their attendance at
board and committee meetings.
EMPLOYMENT AGREEMENTS
General
Messrs. Deneau, Campbell and Erb have employment agreements that
extend until August 30, 2005. Their agreements provide for an annual base
salary, $350,040 for Mr. Deneau and $250,080 for each of Mr. Campbell and Mr.
Erb, an annual bonus pursuant to the Management Incentive Plan, as described
below, eligibility for the grant of stock options and participation in all
benefit plans offered to other senior executive officers. The Company's board of
directors has recently approved an increase in the annual base salary for each
of Messrs. Deneau, Campbell and Erb of 5.0% for 2003.
Termination Provisions
If Mr. Deneau is terminated by the Company without "cause" or
terminates his employment for "good reason," in each case, as these terms are
defined in the employment agreements, Mr. Deneau will receive his base salary
until August 30, 2005 and the annual bonus that would have been paid had he
continued his employment until August 30, 2005 (paid in a lump sum no later than
10 days after termination), continuation of medical and dental plans until
August 30, 2005 (provided that such benefits will terminate if Mr. Deneau is
eligible for such benefits under another employer-provided plan) and continued
vesting of any outstanding stock options or other equity-based compensation
awards as if Mr. Deneau had remained employed until August 30, 2005.
If Mr. Campbell or Mr. Erb is terminated by the Company without
"cause" or terminates his employment for "good reason," in each case, as these
terms are defined in the employment agreements, he will receive his base salary
for one year after termination of employment and the annual bonus that would
have been paid had he continued his employment for one year after termination
(paid in a lump sum no later than 10 days after termination), continuation of
medical and dental plans for one year after termination (provided that such
benefits will terminate if he is eligible for such benefits under another
employer-provided plan) and continued vesting of any outstanding stock options
or other equity-based compensation awards as if he had remained employed for one
year after termination.
The employment agreements also provide that for so long as Messrs.
Deneau, Campbell or Erb (as applicable) are receiving post-termination payments
or for one year after a termination with "cause", they shall not, without the
Company's written consent, participate or engage in, directly or indirectly, any
business that is competitive with the glass container manufacturing business
conducted by the Company within the United States as of the date of the
termination of employment. In addition, during such period they shall not,
without the Company's consent, solicit the Company's employees, customers or
suppliers.
23
Mr. Buckwalter, the Company's Executive Vice President and Chief
Financial Officer until November 2002, entered into an employment and consulting
agreement that provides that, after Mr. Campbell became the Company's Chief
Financial Officer, Mr. Buckwalter will be retained by the Company as a
consultant until December 31, 2003. As a consultant, Mr. Buckwalter receives a
fee at a monthly rate of $20,840 and reimbursement of COBRA premiums if COBRA
coverage is selected. With respect to 2002, Mr. Buckwalter shall receive a
payment pursuant to the Management Incentive Plan. If the Company terminates Mr.
Buckwalter's status as a consultant prior to December 31, 2003, he will be
entitled to receive fees until December 31, 2003. The employment and consulting
agreement also provides that for so long as Mr. Buckwalter is an employee and
for one year after a termination as an employee with "cause", he shall not,
without the Company's consent, participate or engage in, directly or indirectly,
any business that is competitive with the glass container manufacturing business
conducted by the Company as of the date of the termination of employment within
the United States. In addition, during such period, he shall not, without the
Company's consent, solicit the Company's employees, customers or suppliers.
EMPLOYMENT PLANS
Equity Incentive Plan
The equity incentive plan is designed to motivate and retain
individuals who are responsible for the attainment of the Company's primary
long-term performance goals and covers employees, directors or consultants. The
plan provides for the grant of nonqualified stock options, incentive stock
options and restricted stock for shares of the Company's common stock to
participants of the plan selected by the board or a committee of the board (the
"Administrator"). One million shares of common stock have been reserved under
the plan. The terms and conditions of awards are determined by the Administrator
for each grant, except that, unless otherwise determined by the Administrator,
options vest and become exercisable as follows: 50.0% of an option grant vests
1/3 on the first anniversary of the grant date, 1/3 on the second anniversary of
the grant date and 1/3 on the third anniversary of the grant date; and the
remaining 50.0% of the option grant vests in three tranches of equal amounts if
the Company attains certain performance targets established by the board.
Upon a "Liquidity Event," all unvested awards will become
immediately exercisable and the Administrator may determine the treatment of all
vested awards at the time of the Liquidity Event. A "Liquidity Event" is defined
as (1) an event in which any person who is not the Company's affiliate becomes
the beneficial owner, directly or indirectly, of 50.0% or more of the combined
voting power of the Company's then outstanding securities, (2) the sale,
transfer or other disposition of all or substantially all of the Company's
business, whether by sale of assets, merger or otherwise to a person other than
Cerberus, (3) if specified by the Company's board of directors in an award at
the time of grant, the consummation of an initial public offering of common
equity securities or (4) the Company's dissolution and liquidation.
Management Incentive Plan
The Anchor Glass Container Corporation Management Incentive Plan is
designed to compensate the Company's salaried employees for performance with
respect to planned business objectives. Participants are compensated based on
the achievement of EBITDA targets or such other goals as determined by the
compensation committee. Plan participation is limited to salaried employees
within the organization. Eligible participants are designated at the beginning
of each year as approved by the compensation committee. As of December 31, 2002,
no payments have been made pursuant to this plan during the calendar year 2002.
Employee Retention Plan
The Anchor Glass Container Corporation Executive/Key Employee
Retention Plan covers approximately 47 employees, at the vice president or
director levels. Under this plan, upon a "change in control," if a participating
employee is terminated by the Company "without cause" or terminates his or her
employment with the Company for "good reason" (such as a reduction in base
salary, a material change in position, duties or responsibilities, or a material
change in job location) (in each case, as these terms are defined in the plan),
the Company is obligated to pay a severance benefit to the employee. If all
participating employees were to be
24
terminated by the Company without cause and/or were to terminate their
employment with the Company for good reason, the aggregate amount of severance
benefits payable by the Company under this plan would be approximately $3.4
million. This plan expires October 2004.
The Company made no grants of equity compensation awards under any
of the foregoing plans to the Company's executives for the year ended December
31, 2002.
25
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding compensation
awarded to, earned by or paid, during the three years ended December 31, 2002,
to the Company's Chief Executive Officer and each of the three other most highly
compensated executive officers at the end of 2002.
ANNUAL COMPENSATION
-----------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) COMPENSATION(3)
- ------------------------------------- ------ ----------- ----------- --------------- ---------------
Richard M. Deneau .................. 2002 $ 350,040 $ 350,000 $ -- $ 12,000
President and Chief Executive 2001 350,040 -- -- 10,200
Officer 2000 350,040 -- 92,413 8,500
Darrin J. Campbell(4)............... 2002 $ 250,080 $ 250,000 $ -- $ 11,000
Chief Financial Officer and 2001 210,452 -- -- 49,496
Executive Vice President - 2000 -- -- -- --
Sales and Asset Management
Roger L. Erb........................ 2002 $ 250,080 $ 250,000 $ -- $ 12,000
Executive Vice President - 2001 250,080 -- -- 9,646
Operations and Engineering 2000 242,580 -- 92,413 8,500
Dale A. Buckwalter(5) .............. 2002 $ 250,080 $ 250,000 $ -- $ --
Executive Vice President and 2001 217,550 -- -- --
Chief Financial Officer, until 2000 69,757 -- 25,553 --
November 2002
- -------------
(1) Includes restructuring bonus paid in 2002. Excludes bonuses pursuant to
the Management Incentive Plan for 2002, to be paid in 2003.
(2) For 2000 includes (i) compensation associated with the 1999 Officer Stock
Purchase Plan for: Mr. Deneau - $66,861 and Mr. Erb - $66,861 and (ii)
compensation associated with the 2000 Executive Stock Purchase Plan for:
Mr. Deneau - $25,552, Mr. Erb - $25,552 and Mr. Buckwalter - $25,552.
(3) For 2002, includes the Company's contributions under the Company's 401(k)
plan for: Mr. Deneau - $12,000, Mr. Campbell - $11,000 and Mr. Erb -
$12,000. For 2001, includes (i) the Company's contributions under the
Company's 401(k) plan for: Mr. Deneau - $10,200 and Mr. Erb - $9,646 and
(ii) moving expenses paid by the Company for: Mr. Campbell - $49,496. For
2000, includes the Company's contributions under the Company's 401(k) plan
for: Mr. Deneau - $8,500 and Mr. Erb - $8,500.
(4) Mr. Campbell joined the Company in 2000 and became the Company's Chief
Financial Officer in November 2002.
(5) Mr. Buckwalter joined the Company in 2000 and served as the Company's
Chief Financial Officer until November 2002.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
26
The Compensation Committee is comprised of Messrs. Gallen, Hamilton,
Price and Tessler. Mr. Tessler is a Managing Director of Cerberus.
27
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information with respect to the
beneficial ownership of the Company's Common Stock and the Company's Series C
Participating Preferred Stock as of February 28, 2003 by:
- each person who is known by us to beneficially own 5% or more of the
Common Stock or Series C Participating Preferred Stock;
- each of the Company's directors; and
- the Company's executive officers named in the Summary Compensation
Table and all of the Company's current directors and executive
officers as a group.
Unless otherwise indicated in the footnotes to the table, each
stockholder has sole voting and investment power with respect to shares
beneficially owned and all addresses are in care of the Company. All primary
share amounts and percentages reflect beneficial ownership determined pursuant
to Rule 13d-3 under the Securities and Exchange Act, and assume, on a
stockholder by stockholder basis, that each stockholder has converted all
securities owned by such stockholder that are convertible into common stock at
the option of the holder currently or within 60 days of February 28, 2003 and
that no other stockholder so converts.
NUMBER OF PERCENTAGE OF
SHARES OF TOTAL SERIES C
NUMBER OF PERCENTAGE OF SERIES C PARTICIPATING
SHARES OF TOTAL COMMON PARTICIPATING PREFERRED STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK STOCK (%) PREFERRED STOCK (%)
- --------------------------------------- ------------ -------------- --------------- ----------------
AGC Holding (1)(2) 8,514,000 94.60% (3) 75,000 100.0%
Pension Benefit Guaranty
Corporation (4) 474,000 (5) 5.00% (6) -- --
Richard M. Deneau (7) 229,500 2.55% -- --
Darrin J. Campbell (8) 121,500 1.35% -- --
Roger L. Erb (9) 121,500 1.35% -- --
Dale A. Buckwalter (10) 13,500 0.15% -- --
Directors and executive officers as a
group (4 persons, including those
listed above) 486,000 5.40% -- --
- ----------
(1) Stephen Feinberg, in his capacity as the managing member of Cerberus
Associates, L.L.C., the general partner of Cerberus Partners, L.P., which
is the managing member of AGC Holding, exercises sole voting and sole
investment control over all securities of the Company held by AGC Holding.
Thus, pursuant to Rule 13d-3 under the Securities and Exchange Act,
Stephen Feinberg is deemed to beneficially own all such securities of the
Company held by AGC Holding.
(2) The address for AGC Holding is c/o Cerberus Capital Partners, L.P., 450
Park Avenue, 28th Floor, New York, New York 10022.
(3) This percentage is based on the number of shares of common stock
outstanding as of December 31, 2002 and is not calculated on a
fully-diluted basis. On a fully-diluted basis, AGC Holding would own
approximately 89.4% of the Company's common stock.
(4) The address for the PBGC is 1200 K Street N.W., Washington, D.C.
20005-4026.
(5) Includes shares of common stock issuable upon exercise of the common stock
warrant granted to the PBGC on August 30, 2002 in connection with the
Company's Reorganization.
(6) For the purposes of computing the percentage of outstanding common stock
of the PBGC, the 474,000 shares of common stock issuable upon exercise of
the warrant granted to the PBGC were deemed to be outstanding. Such shares
were not deemed to be outstanding for the purpose of computing the
percentage of outstanding common stock of any other beneficial owner.
28
(7) On August 30, 2002, Mr. Deneau acquired 229,500 shares of common stock
from Cerberus at a purchase price of $127,500.
(8) On August 30, 2002, Mr. Campbell acquired 121,500 shares of common stock
from Cerberus at a purchase price of $67,500.
(9) On August 30, 2002, Mr. Erb acquired 121,500 shares of common stock from
Cerberus at a purchase price of $67,500.
(10) On December 2, 2002, Mr. Buckwalter acquired 13,500 shares of common stock
from Cerberus at a purchase price of $7,500.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
CONTROLLING STOCKHOLDER
As part of the Company's Reorganization, certain Cerberus-affiliated
funds and managed accounts invested $80.0 million of new equity capital into the
Company, acquiring 100% of the Company's Series C Participating Preferred Stock
for $75.0 million and 100% of the Company's Common Stock for $5.0 million. In
addition, the Company arranged for a $20.0 million Term Loan from Ableco Finance
LLC, an affiliate of Cerberus, which was repaid with a portion of the proceeds
from the Senior Secured Notes.
STOCKHOLDERS' AGREEMENT
On August 30, 2002, the Company entered into a Stockholders'
Agreement with AGC Holding, the Company's majority stockholder, the PBGC, Mr.
Deneau, the Company's Chief Executive Officer and one of the Company's
directors, Mr. Campbell, the Company's then Executive Vice President of Sales
and Asset Management, Mr. Erb, the Company's Executive Vice President of
Operations and Engineering and Mr. Buckwalter, the Company's former Executive
Vice President and Chief Financial Officer.
Demand Registration Rights. AGC Holding has certain demand
registration rights, subject to the following limitations: (i) in no event is
the Company required to effect a demand registration until the earlier of (a) an
initial public offering of equity securities and (b) the first anniversary of
the Stockholders' Agreement; (ii) in no event is the Company required to effect
a demand registration unless the aggregate offering price, net of underwriting
discounts and commissions, is at least $1,000,000; provided, however, that the
Company is required to effect a demand registration regardless of the aggregate
offering price in the event that AGC Holding is disposing of all of the
registrable securities held by it; and (iii) subject to certain requirements
pursuant to the Stockholders' Agreement, in no event is the Company required to
effect, in the aggregate, more than four demand registrations. In addition, if
AGC Holding requests that the Company file a registration statement on Form S-3
for a public offering of all or any portion of its shares of registrable
securities, the reasonably anticipated aggregate price to the public of which
would exceed $1,000,000, the Company is required to use its best efforts to
register for public sale the registrable securities specified in such request.
Incidental Registration Rights. If, after an initial public offering
of equity securities, the Company proposes to register any of the Company's
securities under the Securities Act of 1933 (other than in a registration on
Form S-4 or S-8 and other than pursuant to the preceding paragraph), the Company
will notify all holders of registrable securities of the Company's intention and
upon the request of any holder, subject to certain restrictions, effect the
registration of all securities requested by holders to be so registered.
Subject to the Stockholders' Agreement, the Company will pay all
registration expenses and indemnify each holder of registrable securities with
respect to each registration which has been effected.
Restrictions on Transfers. Subject to the Stockholders' Agreement,
if the other stockholders party to the Stockholders' Agreement wish to transfer
all or any portion of their shares of the Company's common stock pursuant to the
terms of a bona fide offer received from a third party, such other stockholders
must first submit to AGC Holding such offer to sell such shares on the same
terms and conditions. If AGC Holding wishes to transfer
29
any shares owned by it to any other person or entity in one or more transactions
and, immediately after giving effect to such transaction(s), AGC Holding and its
transferees, successors and assigns in the aggregate will own less than 51% of
the outstanding shares of the Company's common stock, pursuant to the terms of a
bona fide offer received from a third party, AGC Holding must first submit to
the other stockholders such offer to sell such shares on the same terms and
conditions.
INTERCOMPANY AGREEMENTS
Prior to the Company's Reorganization, it was a party to several
agreements with the Company's former affiliates. These agreements included (i)
an agreement pursuant to which the Company filled orders for customers of
affiliated glass manufacturers and affiliated glass manufacturers filled orders
for the Company's customers and (ii) a management agreement pursuant to which
the Company's former affiliate provided specified managerial services for the
Company. In conjunction with the Company's Reorganization, all of the Company's
intercompany agreements, with the exception of the agreement with GGC discussed
below, were either canceled or terminated.
AGREEMENT WITH GGC
In February 2002, prior to the Company's Reorganization, Mr. J.
Ghaznavi, the Company's former chief executive officer and director, purchased
GGC, the Company's former affiliate, from Consumers, the Company's former
majority stockholder. In connection with a proposed settlement of litigation
commenced by the National Bank of Canada against Anchor and certain other
affiliates, Anchor and GGC have entered into a services agreement, whereby
Anchor will assist GGC in certain functions, including information systems,
through 2004. GGC will pay a fee to Anchor of $0.5 million, plus a percentage of
GGC's cash flows, as determined in accordance with the services agreement, for
each year of the agreement, payable in three annual installments commencing on
April 30, 2005.
OTHER
Prior to the Company's Reorganization, Anchor and certain of its
former affiliates from time to time engaged the law firm of Eckert Seamans
Cherin and Mellot, LLC to represent them on a variety of matters. C. Kent May,
one of the Company's former executive officers and directors, and Jonathan K.
Hergert, one of the Company's former directors, are members of such law firm.
30
PART IV
ITEM 14. CONTROLS AND PROCEDURES.
An evaluation was carried out, within the 90 days prior to the
filing of this report, under the supervision of the Chief Executive Officer and
the Chief Financial Officer of the effectiveness of the design and operation of
the Company's disclosure controls and procedures pursuant to Exchange Act Rules
13a-14 and 15d-14. Based on that evaluation, Anchor's Chief Executive Officer
and Chief Financial Officer have concluded that the Company's disclosure
controls and procedures are effective.
There were no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date their evaluation and there were no corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements, Schedules and Exhibits
1. Financial Statements. The Financial Statements of Anchor Glass
Container Corporation and the Reports of Independent Certified
Public Accountants are included beginning at page F-1 of this
Annual Report on Form 10-K. See the index included on page 18.
2. Financial Statement Schedules. The following Financial
Statement Schedule is filed as part of this Annual Report on
Form 10-K and should be read in conjunction with the Financial
Statements of Anchor Glass Container Corporation.
SCHEDULE II
ANCHOR GLASS CONTAINER CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FOUR MONTHS ENDED DECEMBER 31, 2002,
EIGHT MONTHS ENDED AUGUST 31, 2002 AND
TWO YEARS ENDED DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- -------------------------------------- ---------- ---------- ----------- ---------- ----------
Four months ended December 31, 2002
Allowance for doubtful accounts $ 645 $ -- $ -- $ 84(A) $ 561
Eight months ended August 31, 2002
Allowance for doubtful accounts $ 1,000 $ (75) $ 285 $ (5)(A) $ 645
Year ended December 31, 2001 Allowance
for doubtful accounts $ 1,100 $ -- $ -- $ 100(A) $ 1,000
Year ended December 31, 2000 Allowance
for doubtful accounts $ 1,100 $ 285 $ -- $ 285(A) $ 1,100
- ---------
(A) Accounts written off
31
3. Exhibits
EXHIBIT
NUMBER ITEM
------ ----
3.1 Amended and Restated Certificate of Incorporation of (C)
Anchor
3.2 Certificate of Amendment of Amended and Restated (C)
Certificate of Incorporation of Anchor
3.3 Amended and Restated By-Laws of Anchor (C)
3.4 Certificate of Designation of Series C Participating (C)
Preferred Stock
3.5 Certificate of Amendment of Amended and Restated (C)
Certificate of Incorporation of Anchor
3.6 Certificate of Amendment of The Certificate of
Designation
4.1 Stockholders' Agreement, dated August 30, 2002, by and (C)
among Anchor, the Investors and the Other Stockholders
4.2 Indenture dated as of February 7, 2003 among Anchor,
as Issuer and The Bank of New York, as Trustee
4.3 Collateral Access and Intercreditor Agreement, dated
February 7, 2003, by and among Congress Financial
Corporation (Central), in its capacity as collateral
agent, and The Bank of New York, in its capacity as
trustee and collateral agent
4.4 Registration Rights Agreement, dated February 7, 2003,
among Anchor and the Initial Purchasers
10.1+ Southeast Glass Bottle Supply Agreement between
Anheuser-Busch, Incorporated and Anchor (B)
10.2+ Glass Bottle Agreement between Anheuser-Busch,
Incorporated and Anchor
10.3 Limited License Agreement, dated March 8, 2002 between (C)
Owens Brockway Glass Container Inc. and Anchor
10.4 Loan and Security Agreement by and among Anchor, as (C)
Borrower, and Congress Financial Corporation
(Central), as Administrative and Collateral Agent,
Bank of America, N.A., as Documentation Agent, and the
Financial Institutions Named Therein, as Lenders,
dated August 30, 2002
10.5 Term Loan Agreement by and among Anchor, as Borrower, (C)
the financial institutions from time to time party
thereto, as Lenders, and Ableco Finance LLC, as Agent,
dated August 30, 2002
10.6 Security Agreement, made by Anchor in favor of Ableco (C)
Finance LLC, dated August 30, 2002
10.7 Pledge Agreement, made by Anchor in favor of Ableco (C)
Finance LLC, dated August 30, 2002
10.8 Collateral Agency and Intercreditor Agreement dated (C)
August 30, 2002 between Congress Financial
Corporation (Central) and Ableco Finance, LLC
10.9 Amendment No. 1 to Loan and Security Agreement by and
among Anchor, as Borrower, the financial institutions
from time to time parties to the Loan Agreement, as
Lenders, and Congress Financial Corporation (Central),
as Agent, dated December 31, 2002
10.10 Amendment No. 2 to Loan and Security Agreement by and
among Anchor, as Borrower, and Congress Financial
Corporation (Central), as Agent for the financial
institutions from time to time parties to the Loan
Agreement, as Lenders, dated February 7, 2003
10.11 Termination and Release Agreement between Anchor and
Ableco Finance LLC, dated February 7, 2003
32
EXHIBIT
NUMBER ITEM
------ ----
12.1 Statement re: computation of ratio of earnings to
fixed charges for the four months ended December 31,
2002, the eight months ended August 31, 2002 and the
years ended December 31, 2001, 2000, 1999 and 1998
21.1 List of subsidiaries of the Company (A)
+ Portions of this document have been omitted and filed separately
with the Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
(A) Previously filed as an exhibit to the Company's Registration
Statement on Form S-4 (Reg. No. 333-31363) originally filed with
the Securities and Exchange Commission on July 16, 1997.
(B) Previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1999 and
incorporated herein by reference.
(C) Previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 2002 and
incorporated herein by reference.
All other exhibits filed herewith.
(b) Reports on Form 8-K
None.
33
ANCHOR GLASS CONTAINER CORPORATION
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Reports of Independent Certified Public Accountants F-2
Statements of Operations and Comprehensive Income (Loss) -
Four Months Ended December 31, 2002 (Reorganized Company),
Eight Months Ended August 31, 2002 and
Two Years Ended December 31, 2001 and 2000 (Predecessor Company) F-5
Balance Sheets -
December 31, 2002 (Reorganized Company) and
December 31, 2001 (Predecessor Company) F-6
Statements of Cash Flows -
Four Months Ended December 31, 2002 (Reorganized Company),
Eight Months Ended August 31, 2002 and
Two Years Ended December 31, 2001 and 2000 (Predecessor Company) F-8
Statements of Stockholders' Equity (Deficit) -
Four Months Ended December 31, 2002 (Reorganized Company),
Eight Months Ended August 31, 2002 and
Two Years Ended December 31, 2001 and 2000 (Predecessor Company) F-10
Notes to Financial Statements F-12
F-1
THE FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR
ANDERSEN LLP. THIS REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN
LLP.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Anchor Glass Container Corporation:
We have audited the accompanying balance sheets of Anchor Glass Container
Corporation (a Delaware corporation) as of December 31, 2001* and 2000*, and the
related statements of operations and other comprehensive loss, cash flows and
stockholders' equity (deficit) for each of the three years in the period ended
December 31, 2001*. These financial statements and Schedule II* are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Anchor Glass Container
Corporation as of December 31, 2001* and 2000*, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2001*, in conformity with accounting principles generally accepted
in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 15* to the
financial statements, the Company is currently facing significant uncertainties
regarding the acceleration provisions in its financing agreements that 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 15*. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II* listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. Schedule II* has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Tampa, Florida,
March 15, 2002
* Subsequent to the date of this report, the balance sheet as of December 31,
2001 and the related statements of operations and other comprehensive loss,
stockholders' equity and cash flows and financial statement schedule
information for the year then ended were audited by PricewaterhouseCoopers
LLP whose report appears on page F-3 of this Annual Report on Form 10-K.
See Note 1 to the financial statements under the sub-headings Goodwill and
New Accounting Standards for a discussion of changes made to the original
2000 financial statements, with respect to which Arthur Andersen LLP did
not audit the changes. Note 15 to the original notes to financial
statements, which discussed a going concern qualification and management's
plans with respect thereto, has not been reproduced as a result of the
Company's reorganization discussed in Note 3 to the financial statements.
The financial statements and financial statement schedule information as of
December 31, 2000 and for the year ended December 31, 1999 are not
presented in this Annual Report on Form 10-K.
F-2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Anchor Glass Container
Corporation:
In our opinion, the accompanying balance sheet as of December 31, 2001 and the
related statements of operations and comprehensive income (loss), stockholders'
equity and cash flows present fairly, in all material respects, the financial
position of Anchor Glass Container Corporation at December 31, 2001, and the
results of its operations and cash flows for the eight-month period ended August
31, 2002 and the year ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America. In addition, in
our opinion, the financial statement schedule listed in the index appearing
under Item 15(a) presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related financial statements.
These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion. The financial statements of the Company for
the year ended December 31, 2000, before the revisions described in Note 1, were
audited by other independent accountants who have ceased operations. Those
independent accountants expressed an unqualified opinion on those financial
statements in their report dated March 15, 2002, which contained an explanatory
paragraph surrounding the Company's ability to continue as a going concern.
The Company's plan of reorganization became effective on August 30, 2002. As
discussed in Notes 2 and 3 to the financial statements, the Company adopted
"Fresh-Start Reporting" principles in accordance with the American Institute of
Certified Public Accountant's Statement of Position 90-7, "Financial Reporting
by Entities in Reorganization under the Bankruptcy Code." As a result of the
reorganization and the adoption of Fresh-Start Reporting, the Company's August
31, 2002 statements of operations and comprehensive income, of stockholders'
equity and of cash flows are not comparable to the Company's December 31, 2001
statements of operations and comprehensive loss, of stockholders' equity and of
cash flows.
As discussed in Note 1 to the financial statements, the Company adopted
Statement of Financial Accounting Standards (FASB Statement) No. 142, "Goodwill
and Other Intangible Assets," on January 1, 2002.
As discussed above, the financial statements of Anchor Glass Container
Corporation for the year ended December 31, 2000 were audited by other
independent accountants who have ceased operations. As described in Note 1,
these financial statements have been revised to reflect the adoption of FASB
Statement No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment
of FASB Statement No. 13, and Technical Corrections," which was adopted by the
Company upon adoption of Fresh-Start Reporting. Additionally, as described in
Note 1, these financial statements have been revised to include the transitional
disclosures required by FASB Statement No. 142. We audited the adjustments that
were applied to revise the 2000 financial statements for the adoption of FASB
Statement No. 145 and the transitional disclosures required by FASB Statement
No. 142, both of which are described in Note 1. In our opinion, the adjustments
for the adoption of FASB Statement No. 145 are appropriate and have been
properly applied, and the transitional disclosures for 2000 related to the
adoption of FASB Statement No. 142 are appropriate. However, we were not engaged
to audit, review, or apply any procedures to the 2000 financial statements of
the Company other than with respect to such adjustments and transitional
disclosures, and, accordingly, we do not express an opinion or any other form of
assurance on the 2000 financial statements taken as a whole.
PRICEWATERHOUSECOOPERS LLP
Tampa, Florida
November 22, 2002
F-3
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Anchor Glass Container
Corporation:
In our opinion, the accompanying balance sheet and the related statements of
operations and comprehensive income (loss), stockholders' equity, and cash flows
present fairly, in all material respects, the financial position of Anchor Glass
Container Corporation at December 31, 2002, and the results of its operations
and cash flows for the four months ended December 31, 2002 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 15(a) presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audit. We conducted our audit of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Tampa, Florida
February 28, 2003
F-4
ANCHOR GLASS CONTAINER CORPORATION
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Reorganized Predecessor Company
Company -------------------------------------------
Four Months Eight Months
Ended Ended Years Ended December 31,
December 31, August 31, --------------------------
2002 2002 2001 2000
------------ ------------- ----------- ----------
Net sales......................................... $ 211,379 $ 504,195 $ 702,209 $ 629,548
Costs and expenses:
Cost of products sold........................... 192,434 451,619 658,641 603,061
Selling and administrative expenses............. 9,683 19,262 28,462 33,222
Restructuring, net.............................. -- (395) -- --
Related party provisions and charges........... -- -- 35,668 --
----------- ----------- ----------- ----------
Income (loss) from operations.................... 9,262 33,709 (20,562) (6,735)
Reorganization items, net........................ -- 47,389 -- --
Other income, net................................ 450 673 106 5,504
Interest expense................................. (10,381) (17,948) (30,612) (31,035)
----------- ----------- ----------- ----------
Net income (loss)................................ $ (669) $ 63,823 $ (51,068) $ (32,266)
=========== =========== =========== ==========
Series A and B preferred stock dividends......... $ (4,100) $ (14,057) $ (14,057)
=========== =========== ==========
Income (loss) applicable to common stock......... $ 59,723 $ (65,125) $ (46,323)
=========== =========== ==========
Basic net income (loss) per share applicable to
common stock................................. $ 11.37 $ (12.40) $ (8.82)
=========== =========== ==========
Basic weighted average number of common shares
outstanding.................................. 5,251,356 5,251,356 5,251,356
=========== =========== ==========
Diluted net income (loss) per share applicable to
common stock................................. $ 1.89 $ (12.40) $ (8.82)
=========== =========== ==========
Diluted weighted average number of common shares
outstanding.................................. 33,805,651 5,251,356 5,251,356
=========== =========== ==========
Comprehensive income (loss):
Net income (loss)............................ $ (669) $ 63,823 $ (51,068) $ (32,266)
Other comprehensive income (loss):
Minimum pension liability adjustment....... -- -- (62,468) (13,000)
Derivative income (loss)................... 190 531 (531) --
----------- ----------- ----------- ----------
Comprehensive income (loss)...................... $ (479) $ 64,354 $ (114,067) $ (45,266)
=========== =========== =========== ==========
See Notes to Financial Statements.
F-5
ANCHOR GLASS CONTAINER CORPORATION
BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Reorganized Predecessor
Company Company
------------ ------------
December 31, December 31,
Assets 2002 2001
------------ ------------
Current assets:
Cash and cash equivalents ........................................ $ 351 $ 416
Restricted cash .................................................. 4,387 --
Accounts receivable, less allowance for doubtful accounts of
$561 and $1,000, respectively ............................... 42,070 43,182
Related party receivables, less allowance for doubtful accounts of
$24,979 in 2001 ............................................. -- 1,020
Inventories ...................................................... 102,149 105,573
Other current assets ............................................. 8,603 7,087
Total current assets ...................................... 157,560 157,278
------------ ------------
Property, plant and equipment:
Land and land improvements .................................. 11,694 6,622
Buildings ................................................... 67,004 62,995
Machinery, equipment and molds .............................. 322,565 430,185
Less accumulated depreciation and amortization .............. (16,877) (219,949)
384,386 279,853
------------ ------------
Other assets ..................................................... 6,815 26,042
Intangible assets, net of accumulated amortization of $264 ....... 7,636 --
Intangible pension asset ......................................... -- 22,559
Goodwill, net of accumulated amortization of $14,553 in 2001 ..... -- 44,852
------------ ------------
$ 556,397 $ 530,584
============ ============
See Notes to Financial Statements.
F-6
ANCHOR GLASS CONTAINER CORPORATION
BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Reorganized Predecessor
Company Company
------------ ------------
December 31, December 31,
Liabilities and Stockholders' Equity (Deficit) 2002 2001
------------ ------------
Current liabilities:
Borrowings under revolving credit facility ......................... $ 47,413 $ 50,981
Current maturities of long-term debt ............................... 8,315 822
Long-term debt classified as current ............................... -- 206,091
Accounts payable ................................................... 46,969 44,673
Related party payables ............................................. -- 4,943
Accrued expenses ................................................... 35,314 20,836
Accrued interest ................................................... 5,167 5,686
Accrued compensation and employee benefits ......................... 26,331 24,581
------------ ------------
Total current liabilities ................................... 169,509 358,613
Bonds and long-term capital leases ................................. 182,433 1,541
Long-term obligation to PBGC ....................................... 60,640 --
------------ ------------
Long-term debt ................................................. 243,073 1,541
Long-term pension liabilities ...................................... -- 122,541
Long-term post-retirement liabilities .............................. 40,342 63,255
Other long-term liabilities ........................................ 26,974 26,649
310,389 213,986
------------ ------------
Commitments and contingencies
Mandatorily redeemable preferred stock, Series A, $0.01 par value;
2001 - authorized, issued and outstanding 2,239,320 shares ..... -- 82,026
------------ ------------
Stockholders' equity (deficit):
Redeemable preferred stock, Series C, $0.01 par value; 100,000 shares
authorized; 75,000 shares issued and outstanding ($78,022
liquidation preference) ........................................ 1 --
Redeemable preferred stock, Series B, $0.01 par value; 2001 -
5,000,000 shares authorized; 3,360,000 shares issued and
outstanding .................................................... -- 34
Issuable preferred stock; 2001 - 869,235 shares at $25 per share -- 21,731
Common stock, $0.10 par value; 21,000,000 shares authorized;
9,000,000 shares issued and outstanding ........................ 900 --
Common stock, $0.10 par value; (2001 - authorized 50,000,000 shares;
shares issued and outstanding 3,357,825) ....................... -- 336
Warrants; issued and outstanding (2001-1,893,531) .................. -- 9,446
Participation component of Series C preferred stock ................ 750 --
Capital in excess of par value ..................................... 78,349 104,520
Accumulated deficit ................................................ (3,691) (184,109)
Accumulated other comprehensive income (loss):
Derivative income (loss) ...................................... 190 (531)
Additional minimum pension liability .......................... -- (75,468)
------------ ------------
76,499 (124,041)
------------ ------------
$ 556,397 $ 530,584
============ ============
See Notes to Financial Statements.
F-7
ANCHOR GLASS CONTAINER CORPORATION
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Reorganized
Company Predecessor Company
------------ ------------------------------------------------
Four Months Eight Months
Ended Ended Years Ended December 31,
December 31, August 31, ------------------------------
2002 2002 2001 2000
------------ ------------ ------------ ------------
Cash flows from operating activities:
Net income (loss) ................................... $ (669) $ 63,823 $ (51,068) $ (32,266)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization of property and
equipment ...................................... 17,747 35,721 50,748 49,651
Other amortization ................................ 887 1,609 5,665 7,608
Restructuring, net ................................ -- (395) -- --
Reorganization items, net ......................... -- (47,389) -- --
Restructuring and reorganization payments ......... (3,644) (4,835) -- --
Related party provisions and charges .............. -- -- 35,668 --
(Gain) loss on sale of property and equipment ..... (7) 90 (495) (4,161)
Other ............................................. (125) (329) (118) 2,164
Increase (decrease) in cash resulting from changes in
assets and liabilities ............................ 8,936 4,819 (2,919) (12,953)
------------ ------------ ------------ ------------
23,125 53,114 37,481 10,043
------------ ------------ ------------ ------------
Cash flows from investing activities:
Expenditures for property, plant and equipment .... (28,666) (42,654) (41,952) (39,805)
Proceeds from sale of property and equipment ...... 10,026 47 14,812 12,382
Deposit of sale proceeds into escrow account ...... (10,000) -- (13,379) (14,205)
Withdrawal of funds from escrow account ........... 10,000 -- 13,348 22,463
Change in restricted cash ......................... 1,548 (5,935) -- --
Payments of strategic alliances with customers .... -- (1,266) (1,824) (1,800)
Other ............................................. (996) 265 (1,879) (2,757)
------------ ------------ ------------ ------------
(18,088) (49,543) (30,874) (23,722)
------------ ------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt .......... -- 20,000 -- --
Principal payments of long-term debt .............. (736) (51,416) (1,937) (2,058)
Net draws on Revolving Credit Facility ............ 15,817 31,596 -- --
Net draws (repayments) on prior revolving credit
facilities ..................................... -- (50,981) (7,976) 18,062
Proceeds from issuance of preferred stock ......... -- 75,000 -- --
Proceeds form issuance of common stock ............ -- 5,000 -- --
Payments made under the PBGC Agreement ............ (1,038) (20,750) -- --
Restructuring and reorganization payments ......... (1,056) (10,727) -- --
Plan distributions to Series A preferred stock .... (17,409) -- -- --
Other, primarily financing fees ................... (573) (1,400) (810) (3,071)
------------ ------------ ------------ ------------
(4,995) (3,678) (10,723) 12,933
------------ ------------ ------------ ------------
Cash and cash equivalents:
Increase (decrease) in cash and cash equivalents .. 42 (107) (4,116) (746)
Balance, beginning of period ...................... 309 416 4,532 5,278
------------ ------------ ------------ ------------
Balance, end of period ............................ $ 351 $ 309 $ 416 $ 4,532
============ ============ ============ ============
See Notes to Financial Statements.
F-8
ANCHOR GLASS CONTAINER CORPORATION
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Reorganized
Company Predecessor Company
------------ ------------------------------------------------
Four Months Eight Months
Ended Ended Years Ended December 31,
December 31, August 31, ------------------------------
2002 2002 2001 2000
------------ ------------ ------------ ------------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ................................. $ 11,638 $ 12,081 $ 28,223 $ 27,657
============ ============ ============ ============
Increase (decrease) in cash resulting from
changes in assets and liabilities:
Accounts receivable ...................... $ 5,976 $ (2,342) $ (2,084) $ 10,607
Accounts receivable, related party ....... -- -- (5,441) (13,203)
Inventories .............................. (14,914) 18,338 19,948 (18,544)
Other current assets ..................... 1,230 533 974 (2,455)
Accounts payable, accrued expenses and
other current liabilities .............. 11,359 (6,956) (25,199) (1,783)
Other, net ............................... 5,285 (4,754) 8,883 12,425
------------ ------------ ------------ ------------
$ 8,936 $ 4,819 $ (2,919) $ (12,953)
============ ============ ============ ============
Supplemental noncash activities:
Non-cash equipment financing ............... $ 10,000 $ -- $ -- $ --
============ ============ ============ ============
Non-cash compensation ...................... $ -- $ -- $ -- $ 828
============ ============ ============ ============
The Company considers short-term investments with original maturities of ninety
days or less at the date of purchase to be cash equivalents.
F-9
ANCHOR GLASS CONTAINER CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
Accumulated
Capital other Total
Series B Issuable in excess compre- stockholders'
preferred preferred Common of par Accumulated hensive equity
stock stock stock Warrants value deficit loss (deficit)
---------- ----------- ------- --------- ----------- ----------- ------------ -------------
Balance, January 1, 2000 .. $ 34 $ 21,731 $ 216 $ 15,445 $ 98,340 $ (89,579) $ -- $ 46,187
Warrants exercised ........ -- -- -- (12) 12 -- -- --
Contribution from
shareholder related to
profit on intercompany
sales .................. -- -- -- -- 51 -- -- 51
Dividends accrued on Series
A Preferred Stock ...... -- -- -- -- -- (5,598) -- (5,598)
Net loss .................. -- -- -- -- -- (32,266) -- (32,266)
Amount related to minimum
pension liability ...... -- -- -- -- -- -- (13,000) (13,000)
----------- ----------- -------- --------- ----------- ----------- ----------- -----------
Balance, December 31, 2000 34 21,731 216 15,433 98,403 (127,443) (13,000) (4,626)
Warrants exercised ........ -- -- 120 (5,987) 5,867 -- -- --
Contribution from
shareholder related to
profit on intercompany
sales .................. -- -- -- -- 250 -- -- 250
Dividends accrued on Series
A Preferred Stock ...... -- -- -- -- -- (5,598) -- (5,598)
Net loss .................. -- -- -- -- -- (51,068) -- (51,068)
Derivative loss ........... -- -- -- -- -- -- (531) (531)
Amount related to minimum
pension liability ...... -- -- -- -- -- -- (62,468) (62,468)
----------- ----------- -------- --------- ----------- ----------- ----------- -----------
Balance, December 31, 2001 $ 34 $ 21,731 $ 336 $ 9,446 $ 104,520 $ (184,109) $ (75,999) $ (124,041)
----------- ----------- -------- --------- ----------- ----------- ----------- -----------
See Notes to Financial Statements.
F-10
ANCHOR GLASS CONTAINER CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
Accumu-
Partici- lated
pation other Total
component Capital compre- stock-
Series B Series C of pre- in excess Accumu- hensive holders'
preferred preferred Common ferred of par lated income equity
stock stock stock Warrants stock value deficit (loss) (deficit)
---------- ---------- ------- -------- ------------ --------- --------- --------- ---------
Predecessor Company
Balance, January 1, 2002 .. $ 21,765 $ -- $ 336 $ 9,446 $ -- $ 104,520 $(184,109) $ (75,999) $(124,041)
Dividends accrued on Series
A preferred stock ...... -- -- -- -- -- -- (1,633) -- (1,633)
Net income ................ -- -- -- -- -- -- 63,823 -- 63,823
Derivative income ......... -- -- -- -- -- -- -- 531 531
Reorganization adjustments,
net .................... (21,765) -- (336) (9,446) -- (104,520) 121,919 75,468 61,320
Issuance of 75,000 shares
of Series C preferred
stock .................. -- 1 -- -- 750 74,249 -- -- 75,000
Issuance of 9,000,000
shares of common stock . -- -- 900 -- -- 4,100 -- -- 5,000
---------- ---------- ------- ------- ------------ --------- --------- --------- ---------
Reorganized Company
Balance, August 31, 2002 .. -- 1 900 -- 750 78,349 -- -- 80,000
Dividends accrued on Series
C preferred stock ...... -- -- -- -- -- -- (3,022) -- (3,022)
Net loss .................. -- -- -- -- -- -- (669) -- (669)
Derivative income ......... -- -- -- -- -- -- -- 190 190
---------- ---------- ------- ------- ------------ --------- --------- --------- ---------
Balance, December 31, 2002 $ -- $ 1 $ 900 $ -- $ 750 $ 78,349 $ (3,691) $ 190 $ 76,499
========== ========== ======= ======= ============ ========= ========= ========= =========
See Notes to Financial Statements.
F-11
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization of the Company
On August 30, 2002, Anchor Glass Container Corporation (the
"Company" or "Anchor"), a Delaware corporation, completed a restructuring of its
existing debt and equity securities pursuant to a plan of reorganization (the
"Plan") under Chapter 11 of the United States Bankruptcy Code. Certain
investment funds and managed accounts affiliated with Cerberus Capital
Management, L.P. ("Cerberus"), acquired all of the outstanding capital stock of
Anchor through their investment in Anchor Glass Container Holding L.L.C. ("AGC
Holding"), a Delaware limited liability company formed in August 2002 and the
parent company of Anchor. As of December 31, 2002, AGC Holding owns
approximately 95% of the outstanding common stock and 100% of the outstanding
Series C Participating Preferred Stock of Anchor. The remaining outstanding
shares of common stock of Anchor are held by certain officers of Anchor.
The financial statements of the Company as of and for periods
subsequent to August 31, 2002 are referred to as the "Reorganized Company"
statements. All financial statements prior to that date are referred to as the
"Predecessor Company" statements. The financial statements for the eight months
ended August 31, 2002 give effect to the restructuring and reorganization
adjustments and the implementation of fresh start accounting. The effective date
of the Company's Plan was August 30, 2002 (the "Effective Date"); however, for
accounting purposes, the Company has accounted for the reorganization and fresh
start adjustments on August 31, 2002, to coincide with the Company's normal
financial closing for the month of August.
Business Segment
The Company operates as one reportable segment and is engaged in the
manufacture and sale of a diverse line of clear, amber, green and other color
glass containers of various types, designs and sizes to customers principally in
the beer, beverage, food, and liquor industries. The Company markets its
products throughout the United States. The Company's international and export
sales are insignificant. Sales to Anheuser-Busch Companies, Inc.
("Anheuser-Busch") represented approximately 46.1%, 42.5%, 36.3% and 32.7%,
respectively, of net sales for the four months ended December 31, 2002, the
eight months ended August 31, 2002 and the two years ended December 31, 2001 and
2000. The loss of Anheuser-Busch or another significant customer, unless
replaced, could have a material adverse effect on the Company's business.
Revenue Recognition
Revenues are recognized as product is shipped to customers, net of
applicable rebates and discounts. The Company may invoice customers to recover
certain cost increases, recognizing these amounts as revenue in net sales.
Accounting for Derivative Instruments and Hedging Activities
Effective January 1, 2001, the Company adopted Statement of
Financial Accounting Standards No. 133 - Accounting for Derivative Instruments
and Hedging Activities, as amended by SFAS 137 and SFAS 138 ("SFAS 133"). SFAS
133 establishes accounting and reporting standards requiring every derivative
instrument (including certain derivative instruments embedded in other
contracts) to be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS 133 requires that changes in the derivative
fair values that are designated effective and qualify as cash flow hedges will
be deferred and recorded as a component of accumulated other comprehensive
income until the hedged transactions occur and are recognized in earnings. The
ineffective portion of a hedging derivative's change in fair value will be
immediately recognized in earnings. For derivative instruments that do not
qualify as cash flow hedges, SFAS 133 requires that changes in the derivative
fair values be recognized in earnings in the period of change.
F-12
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Inventories
Inventories are stated at the lower of cost or market. The cost of
substantially all inventories of raw materials and finished products is
determined on the first-in, first-out method. Manufacturing supplies and certain
other inventories are valued at weighted average costs. Freight costs of
delivery of inventories to customers are included in cost of products sold on
the statement of operations. Inventories are comprised of:
Reorganized Predecessor
Company Company
------------ ------------
December 31, December 31,
2002 2001
------------ ------------
Raw materials and manufacturing supplies ......... $ 22,796 $ 22,171
Finished products ................................ 79,353 83,402
------------ ------------
$ 102,149 $ 105,573
============ ============
Property, Plant and Equipment
Property, plant and equipment expenditures, including furnace
rebuilds which extend useful lives and expenditures for glass forming machine
molds, are capitalized and recorded at cost. For financial statement purposes,
these assets are depreciated using the straight-line method over the estimated
useful lives of the assets, except for molds which are depreciated on a unit of
production method based on units of glass produced, supplemented by a net
realizable formula to cover technical obsolescence. Generally, annual
depreciation lives are 40 years for buildings and range from 5 to 12 years for
machinery and equipment. Furnace and machine rebuilds, which are recurring in
nature and which extend the lives of the related assets, are capitalized and
depreciated over the period of extension, generally 4 to 5 years, based on the
type and extent of these rebuilds. Depreciation of leased property recorded as
capital assets is computed on a straight-line basis over the estimated useful
lives of the assets or the life of the lease, if shorter. Maintenance and
repairs are charged directly to expense as incurred. Construction in progress,
included in machinery and equipment, at December 31, 2002 and 2001, was
approximately $12,750 and $26,300, respectively. Interest costs on construction
projects are not capitalized due to the short duration and recurring nature of
the projects.
Goodwill
Effective January 1, 2002, the Company adopted Statement of
Financial Accounting Standards No. 142 - Goodwill and Other Intangible Assets
("SFAS 142"), that addresses financial accounting and reporting for intangible
assets acquired individually or with a group of other assets at acquisition.
SFAS 142 also addresses financial accounting and reporting for goodwill and
other intangible assets subsequent to their acquisition. SFAS 142 provides that
goodwill and intangible assets that have indefinite useful lives will not be
amortized but rather will be tested at least annually for impairment. It also
provides that intangible assets that have finite useful lives will continue to
be amortized over their useful lives, but those lives will no longer be limited
to forty years. For the financial statements of the Predecessor Company, it was
determined that the fair value of the Company was greater than the carrying
amount of the net assets and no goodwill impairment resulted from the adoption
SFAS 142.
F-13
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table reconciles the Company's net loss in the years
ended December 31, 2001 and 2000, adjusted to exclude goodwill amortization, to
amounts previously reported:
Years Ended December 31,
--------------------------
2001 2000
---------- ----------
Net loss, as reported ........................ $ (51,068) $ (32,266)
Goodwill amortization ........................ 2,976 2,976
---------- ----------
Net loss, as adjusted ........................ $ (48,092) $ (29,290)
========== ==========
Basic and diluted net income (loss) per share
applicable to common stock, as reported .... $ (12.40) $ (8.82)
========== ==========
Basic and diluted net income (loss) per share
applicable to common stock, as adjusted . $ (11.83) $ (8.25)
========== ==========
Goodwill represented the excess of the 1997 purchase price over the
estimated fair value of net assets then acquired and was amortized on a
straight-line basis over a twenty-year period. Amortization expense was $2,976
in each of the two years ended December 31, 2001 and 2000.
Intangible assets
Intangible assets at August 31, 2002 have been valued at fair market
value by independent appraisers. These assets are attributable to long-term
customer relationships and are being amortized on a straight-line basis over a
period of ten years, which represents the estimated economic useful lives of
these relationships. Amortization expense was $264 in the four months ended
December 31, 2002. The Company estimates annual amortization expense of $790 in
each of the next five years.
Impairment of Long-Lived Assets
Effective January 1, 2002, the Company adopted Statement of
Financial Accounting Standards No. 144 - Accounting for the Impairment or
Disposal of Long-Lived Assets ("SFAS 144"), that addresses financial reporting
for the impairment or disposal of long-lived assets. SFAS 144 supersedes
Statement of Financial Accounting Standards No. 121 - Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
("SFAS 121") and the reporting provisions of Accounting Principles Board Opinion
No. 30 - Reporting the Results of Operations, for the disposal of a segment of a
business. SFAS 121 established the recognition and measurement standards related
to the impairment of long-lived assets. The Company evaluates the recoverability
of its long-lived assets whenever adverse events or changes in business climate
indicate that the expected undiscounted future cash flows from the related asset
may be less than previously anticipated. If the net book value of the related
asset exceeds the undiscounted future cash flows of the asset, the carrying
amount would be reduced to the present value of its expected future cash flows
and an impairment loss would be recognized. The Company concluded that no
impairment exists as of December 31, 2002. SFAS 121 did not have a material
effect on the Company's results of operations or financial position for the two
years ended December 31, 2001. Assets previously held for sale have been
reclassified as operating property, plant and equipment as required by SFAS 144.
Strategic Alliances with Customers
The Company had entered into long-term agreements with several
customers. Payments made to these customers are being amortized as a component
of net sales on the statement of operations over the term of the
F-14
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
related supply contract, which range between 3 and 5 years. The remaining
unamortized balances of these agreements are not material and have been
reclassified into other assets.
Income Taxes
The Company applied Statement of Financial Accounting Standards No.
109 - Accounting for Income Taxes ("SFAS 109") which establishes financial
accounting and reporting standards for the effects of income taxes which result
from a company's activities during the current and preceding years. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial statement carrying
amounts of assets and liabilities and their respective tax bases. Deferred tax
assets also are recognized for credit carryforwards. Deferred tax assets and
liabilities are measured using the enacted rates applicable to taxable income in
the years in which the temporary differences are expected to reverse and the
credits are expected to be used. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. An assessment is made as to whether or not a
valuation allowance is required to offset deferred tax assets. This assessment
includes anticipating future taxable income and the Company's tax planning
strategies and is made on an ongoing basis. Consequently, future material
changes in the valuation allowance are possible.
Accounts Payable
Accounts payable includes checks issued and outstanding of
approximately $13,683 and $13,000, respectively, at December 31, 2002 and 2001.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 - Disclosures
about Fair Value of Financial Instruments requires disclosure of the estimated
fair values of certain financial instruments. The estimated fair value amounts
have been determined using available market information or other appropriate
valuation methodologies that require considerable judgment in interpreting
market data and developing estimates. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the estimated fair
value amounts. Long-term debt is estimated to have a fair value equal to its
carrying value at December 31, 2002. Long-term debt was estimated to have a fair
value of approximately $163,000 at December 31, 2001 based on the then available
market information. The carrying amount of other financial instruments, except
for the natural gas futures discussed in Note 6, approximate their estimated
fair values.
The fair value information presented herein is based on information
available to management as of December 31, 2002. Although management is not
aware of any factors that would significantly affect the estimated value
amounts, such amounts have not been comprehensively revalued for purposes of
these financial statements since that date and, therefore, the current estimates
of fair value may differ significantly from the amounts presented herein.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from estimates.
Income (Loss) per Share
F-15
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Basic and diluted net income (loss) per common share was computed by
dividing income (loss) applicable to common stock by the weighted-average number
of common shares and contingently issuable shares outstanding during the period.
Warrants outstanding were contingently issuable shares as the stock underlying
the warrants were issuable for no additional consideration and the conditions
necessary for share exercise had been met. As applicable, there was no effect
given for the assumed conversion of 6,468,555 shares of preferred stock for the
two years ended December 31, 2001 and 2000, as the conversion would have been
anti-dilutive.
The computation of basic and diluted net income (loss) per share is
as follows (dollars in thousands, except per share data):
Eight Months
Ended Years Ended December 31,
August 31, ------------------------------
2002 2001 2000
------------ ------------ ------------
Basic net income (loss) per share:
Income (loss) applicable to common stock ......... $ 59,723 $ (65,125) $ (46,323)
Divided by the sum of:
Weighted average shares outstanding ........... 3,357,825 2,772,212 2,158,431
Weighted average warrants outstanding ......... 1,893,531 2,479,144 3,092,925
------------ ------------ ------------
5,251,356 5,251,356 5,251,356
------------ ------------ ------------
Basic net income (loss) per share applicable to
common stock ..................................... $ 11.37 $ (12.40) $ (8.82)
============ ============ ============
Diluted net income (loss) per share:
Income (loss) applicable to common stock ......... $ 59,723 $ (65,125) $ (46,323)
Effect of dilutive securities - Dividends on
Series A and B preferred stock ................ 4,100 -- --
------------ ------------ ------------
63,823 (65,125) (46,323)
------------ ------------ ------------
Divided by the sum of:
Weighted average shares outstanding ........... 3,357,825 2,772,212 2,158,431
Weighted average warrants outstanding ......... 1,893,531 2,479,144 3,092,925
Dilutive potential common shares - Series A
and B preferred stock ..................... 28,554,295 -- --
------------ ------------ ------------
33,805,651 5,251,356 5,251,356
------------ ------------ ------------
Diluted net income (loss) per share applicable to
common stock ..................................... $ 1.89 $ (12.40) $ (8.82)
============ ============ ============
Stock Option Plan - Consumers Plan
Salaried employees of the Company participated in the Director and
Employee Incentive Stock Option Plan, 1996 of Consumers Packaging Inc.
("Consumers"), Anchor's former indirect parent. Consumers requested the Toronto
Stock Exchange (the "TSE") to suspend trading of Consumers common stock and
effective December 31, 2001, the TSE issued a trading halt. The closing price at
the time of the trading halt was Cdn.$0.015 per share.
These options, which have been cancelled, generally had a life of 10
years and vested ratably over three years. The Company elected to follow
Accounting Principles Board Opinion No. 25 - Accounting for Stock Issued to
Employees ("APB 25"). Under APB 25, because the exercise price of employee stock
options equals or exceeds the market price of the stock on the date of the
grant, no compensation expense is recorded. The Company adopted the disclosure
only provisions of Statement of Financial Accounting Standards No. 123 -
Accounting for Stock-Based Compensation ("SFAS 123").
F-16
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The Company applied APB 25 in accounting for these stock options and
accordingly, no compensation cost had been reported in the financial statements
for the eight months ended August 31, 2002 and the two years ended December 31,
2001. In accordance with SFAS 123, the fair value of option grants was estimated
on the date of grant using the Black-Scholes option pricing model with the
following assumptions for pro forma footnote purposes: (i) risk-free interest
rate ranging from 5.50% to 5.99%, (ii) expected option life of 4 years, (iii)
expected volatility of 41.51% and (iv) no expected dividend yield.
Had the Company determined compensation cost based on the fair value at
the grant date for these options under SFAS 123, the Company's net income (loss)
would have increased to the pro forma amounts indicated below:
Eight Months
Ended Years Ended December 31,
August 31, ----------------------------
2002 2001 2000
------------ ------------ ------------
Net income (loss)
As reported ................................. $ 63,823 $ (51,068) $ (32,266)
Pro forma ................................... 63,767 (51,575) (33,131)
Income (loss) applicable to common stock
As reported ................................. $ 59,723 $ (65,125) $ (46,323)
Pro forma ................................... 59,667 (65,632) (47,188)
Basic net income (loss) per share applicable to
common stock
As reported ................................. $ 11.37 $ (12.40) $ (8.82)
Pro forma ................................... 11.36 (12.50) (8.99)
Diluted net income (loss) per share applicable to
common stock
As reported ................................. $ 1.89 $ (12.40) $ (8.82)
Pro forma ................................... 1.89 (12.50) (8.99)
New Accounting Standards
In August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 143 - Accounting for Asset
Retirement Obligation ("SFAS 143"), that addresses the accounting for the
recognition of liabilities associated with the retirement of long-lived assets.
The Company has adopted the requirements of SFAS 143 concurrent with fresh start
reporting (see Note 3) and has determined that the impact of adopting SFAS 143
was not material.
In April 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 145 - Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections ("SFAS 145") regarding the accounting for gains and losses from the
extinguishment of debt and to eliminate an inconsistency between the accounting
for sale-leaseback transactions and certain lease modifications that have
economic effects that are similar to sale-leaseback transactions. SFAS 145 is
effective for transactions occurring after May 15, 2002. The Company has adopted
the requirements of SFAS 145 concurrent with fresh start reporting (see Note 3).
As a result, $1,285 was reclassified from extraordinary item to interest expense
for the year ended December 31, 2000.
In June 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 146 - Accounting for Exit or
Disposal Activities ("SFAS 146"). SFAS 146 addresses significant issues
regarding the recognition, measurement, and reporting of costs that are
associated with exit and disposal
F-17
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
activities, including restructuring activities that are currently accounted for
pursuant to the guidance that the Emerging Issues Task Force ("EITF") has set
forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring". The Company has adopted the requirements of
SFAS 146 concurrent with fresh start reporting and has determined that the
impact of adopting SFAS 146 was not material.
In December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 148 - Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of Statement No. 123
("SFAS 148"). SFAS 148 amends SFAS 123, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statement about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company has currently adopted the disclosure requirements of SFAS
148.
Reclassifications
Certain reclassifications, not considered material individually or
in the aggregate, were made to the balance sheet as of December 31, 2001. These
reclassifications had no effect on amounts reported in the statements of
operations, stockholders' equity or cash flows for the year ended December 31,
2001. These items include reclassifying (i) pallet assets from other assets to
property, plant and equipment, (ii) strategic alliances with customers to other
assets and (iii) lock box cash receipts from cash to borrowings under revolving
credit facility.
NOTE 2 - PLAN OF REORGANIZATION AND LIQUIDITY
On August 30, 2002, Anchor consummated a significant restructuring
of its existing debt and equity securities through a Chapter 11 reorganization
(the "Reorganization") and a voluntary bankruptcy petition had been filed on
April 15, 2002 (the "Petition Date"). As part of this restructuring, AGC Holding
acquired 75,000 shares of newly authorized Series C Participating Preferred
Stock for $75,000 and 9,000,000 shares of newly authorized common stock for
$5,000 (see Note 7). Ableco Finance LLC, an affiliate of Cerberus, provided
Anchor with a new $20,000 term loan (see Note 5). In connection with the
Reorganization, Anchor entered into a new $100,000 credit facility (the
"Revolving Credit Facility") (see Note 4).
Under the terms of the Plan, the holders of Anchor's 11.25% First
Mortgage Notes due 2005, aggregate principal amount of $150,000 (the "First
Mortgage Notes"), retained their outstanding $150,000 of First Mortgage Notes
and received a consent fee of $5,625 for the waiver of the change-in-control
provisions, the elimination of the pre-payment provisions and other
non-financial changes to the terms of the First Mortgage Notes (including the
release of Consumers U.S., Inc. ("Consumers U.S.") as a guarantor). Consumers
U.S. was the former parent company of Anchor. The holders of Anchor's 9.875%
Senior Notes due 2008, aggregate principal amount of $50,000 (the "Senior
Notes"), were repaid in cash at 100% of their principal amount. Holders of
Anchor's mandatorily redeemable 10% cumulative convertible preferred stock
("Series A Preferred Stock") (having an accrued liquidation value of
approximately $83,600) are entitled to receive a cash distribution of $22,500 in
exchange for their shares and the Series A Preferred Stock was cancelled. Of
this amount, $17,409 has been paid through December 31, 2002 and the remaining
liability is included in accrued expenses on the balance sheet. Anchor's
redeemable 8% cumulative convertible preferred stock (the "Series B Preferred
Stock") (having an accrued liquidation value of approximately $105,700) and
common stock and warrants were cancelled and the holders received no
distribution under the Plan.
In connection with the Reorganization, Anchor settled a shareholder
derivative action that had been pending in Delaware Chancery Court. The
litigation was settled for total consideration to the Company of approximately
$9,000, of which approximately $6,300 was in cash, the exchange of mutual
releases by the parties and payment by Anchor of certain legal fees. The
settlement of the shareholder derivative action was approved by the Delaware
Chancery Court and was recorded in August 2002 as a component of restructuring,
net, in the
F-18
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
accompanying financial statements of Anchor. Implementation of the settlement
was completed in the fourth quarter of 2002.
Anchor also entered into an agreement with the Pension Benefit
Guaranty Corporation ("PBGC"). At the Effective Date, Anchor paid $20,750 to the
PBGC and entered into a ten-year payment obligation (see Note 10).
All of Anchor's other unaffiliated creditors, including trade
creditors, were unimpaired and have been or will be paid in the ordinary course.
In connection with the Reorganization, Anchor did not make the
interest payment on its Senior Notes due March 15, 2002 or a timely interest
payment on its First Mortgage Notes due April 1, 2002. In July 2002, Anchor paid
the interest payment on its First Mortgage Notes that was due April 1, 2002 and
has paid subsequent interest payments when due. Because of the Chapter 11
proceedings, there was no accrual of interest on the unsecured Senior Notes
after the Petition Date. If accrued through the Effective Date, interest expense
would have increased by $1,852 during the eight months ended August 31, 2002. In
addition, effective as of the Petition Date, Anchor ceased accruing dividends on
the Series A and Series B preferred stock. The filing of the voluntary petition
and the nonpayment of interest was a default under the indentures governing the
First Mortgage Notes and the Senior Notes (the "Indentures") and certain
equipment related leases, for which leases the Company received waivers.
Reorganization costs for the eight months ended August 31, 2002
consist of a net gain for fresh start adjustments of $49,908 and expenses
incurred in the Chapter 11 proceedings of $2,519, comprised of: $2,450 of DIP
Facility fees; $1,687 of professional fees; $1,276 of Senior Note deferred
financing fees written off; and a credit of $2,894 for the reversal of the
accrued interest expense for the Senior Notes.
The Company recorded a net gain for restructuring of $395 during the
eight months ended August 31, 2002. The significant components of this net gain
include: professional fees - $10,068; direct costs of the restructuring -
$7,953; First Mortgage Note holder consent fee - $5,625; monetization of assets
- - $4,473; other fees - $3,900; net cost of derivative settlement - $251; retiree
benefit plan modification - ($24,432); and adjustment to pension liabilities -
($8,233).
NOTE 3 - FRESH START REPORTING
Upon the Effective Date, Anchor adopted fresh start reporting
pursuant to the American Institute of Certified Public Accountants Statement of
Position 90-7 "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOP 90-7"). The adoption of fresh start reporting results in
Anchor revaluing its balance sheet to fair value based on the reorganization
value of the Company. The reorganization value of an entity approximates the
fair value of the entity before considering liabilities and approximates the
amount a willing buyer would pay for the assets immediately after restructuring.
The reorganization value was determined by the negotiated total enterprise value
for Anchor reflected in the Plan and the Reorganization, which was the product
of a six month solicitation of proposals conducted by the prior Board of
Directors and a nationally recognized investment banking firm. The
reorganization value of the entity was allocated to assets based on the relative
fair values of the assets. Liabilities at plan consummation date are stated at
the present value of amounts to be paid. The fair values of substantially all of
the property, plant and equipment, identifiable intangible assets and
outstanding debt and equity securities of the Company were determined by
independent appraisers.
The Reorganization and adoption of fresh start reporting resulted in
the following adjustments to the condensed balance sheet of Anchor as of August
31, 2002:
F-19
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Predecessor Reorganized
Company at Reorganization Fresh Start Company at
August 31, 2002 Adjustments Adjustments August 31, 2002
--------------- -------------- ----------- ---------------
Current assets.............. $ 118,438 $ 34,810 (a), (b), (c) $ -- $ 153,248
Property, plant and equipment 285,630 -- 86,860 (e) 372,490
Other asset................. 11,189 1,408 (a), (c) -- 12,597
Goodwill and intangible (d),
assets................... 44,852 -- (36,952) (e) 7,900
------------- ---------- --------- -------------
$ 460,109 $ 36,218 $ 49,908 $ 546,235
============= ========== ========= =============
Current liabilities......... $ 155,656 $ 8,718 (b), (c) $ 93 $ 164,467
Long-term debt.............. 266,886 (30,000) (a), (b) -- 236,886
Long-term post-retirement
liabilities.............. 39,910 -- -- 39,910
Other long-term liabilities. 24,972 -- -- 24,972
------------- ---------- --------- -------------
487,424 (21,282) 93 (d) 466,235
Redeemable preferred stock.. 83,659 (22,500) (b) (61,159) (d) --
Stockholders' equity
(deficit)................ (110,974) 80,000 (a), (b) 110,974 (d) 80,000
------------- ---------- --------- -------------
$ 460,109 $ 36,218 $ 49,908 $ 546,235
============= ========== ========= =============
(a) Reflects the proceeds from the issuance of 75,000 shares of Series C
Preferred Stock ($75,000), 9,000,000 shares of Common Stock
($5,000), proceeds from the issuance of the Term Loan ($20,000) and
payment of financing fees.
(b) Reflects the distributions under the Plan to repay the Senior Notes
($50,000) and the accrual of the final distribution to the holders
of the Series A preferred stock ($22,500).
(c) Reflects the payoff of the DIP Facility, the proceeds under the
Revolving Credit Facility and the payment of financing fees. (See
Note 3.)
(d) Reflects the cancellation of the remaining value of the Series A
preferred stock ($61,159), the cancellation of the Series B
preferred stock ($105,731), the cancellation of the common stock
($20,890) and warrants ($9,446) and other accumulated deficit items
($247,041) of the Predecessor Company.
(e) Reflects the write off of goodwill ($44,852) and the revaluation of
Company's property, plant and equipment ($86,860) and identifiable
intangible assets ($7,900) based upon an independent appraisal.
NOTE 4 - REVOLVING CREDIT FACILITY
On August 30, 2002, Anchor entered into a loan and security
agreement with various financial institutions as lenders, Congress Financial
Corporation (Central), as administrative agent and collateral agent for the
lenders, and Bank of America, N.A., as documentation agent, to provide the
Revolving Credit Facility. The Revolving Credit Facility permits drawings of up
to $100,000 in the aggregate and includes a $15,000 subfacility for letters of
credit. The Revolving Credit Facility matures on August 30, 2006.
Availability under the Revolving Credit Facility is restricted to
the lesser of (i) $100,000 and (ii) the borrowing base amount. The borrowing
base amount is defined as the amount equal to (A) the lesser of (i) the amount
equal to (a) eighty-five (85%) percent of the net amount of eligible accounts
plus (b) the lesser of (1) $60,000 or (2) sixty (60%) percent multiplied by the
value of the eligible inventory or (ii) $100,000; minus (B) reserves in such
amounts as the agent may from time to time establish. Advances under the
Revolving Credit Facility may be made as prime rate loans or eurodollar rate
loans at the Company's election. Interest rates payable upon such advances are
based upon the prime rate or eurodollar rate depending on the type of loan, plus
an applicable margin. The applicable margin for all loans for the first six
months following August 30, 2002 is 0.50% for prime rate loans, 2.25% for
eurodollar rate loans and 2.00% for letters of credit. Thereafter, these rates
can increase up to 1.00% for prime rate loans, 2.75% for eurodollar rate loans
and 2.50% for letters of credit if availability is less than $20,000. The loan
and security agreement contains certain fees, including closing fees, servicing
fees, unused line fees and early termination fees.
F-20
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Loans made pursuant to the Revolving Credit Facility are secured by
a first priority security interest in, a lien upon, and a right of set off
against all of the Company's inventories, receivables, general intangibles and
proceeds therefrom. All cash collections are accounted for as reductions of
advances outstanding under the Revolving Credit Facility.
The Revolving Credit Facility contains customary negative covenants
and restrictions for transactions, including, without limitation, restrictions
on indebtedness, liens, investments, fundamental business changes, asset
dispositions outside of the ordinary course of business, subsidiary stock
dispositions, restricted junior payments, transactions with affiliates and
changes relating to indebtedness. In addition, the Revolving Credit Facility
requires that the Company meet a quarterly fixed charge coverage test unless
minimum availability declines below $10,000, in which case the Company must meet
a monthly fixed charge coverage test. The Revolving Credit Facility contains
customary events of default, including, without limitation, non-payment of
principal, interest or fees, violation of certain covenants, inaccuracy of
representations and warranties in any material respect, and cross defaults with
certain other indebtedness and agreements, including, without limitation, the
First Mortgage Note indenture and the PBGC settlement agreement.
At December 31, 2002, advances outstanding under the Revolving
Credit Facility were $47,413, borrowing availability was $28,129 and outstanding
letters of credit on this facility were $1,000. At December 31, 2002, the
weighted average interest rate on borrowings outstanding was 4.09%. During the
four months ended December 31, 2002, average advances outstanding were
approximately $53,486, the average interest rate was 5.04% and the highest
month-end advance was $56,939. At August 31, 2002, the weighted average interest
rate on borrowings outstanding was 3.78%. During the eight months ended August
31, 2002, average advances outstanding were approximately $57,554, the average
interest rate was 6.01% and the highest month-end advance was $62,108.
In connection with the Plan, Anchor entered into an agreement with
Bank of America, N.A., Congress Financial Corporation and Ableco Finance LLC,
who together provided a $100,00 debtor-in-possession secured financing facility
under a new loan agreement (the "DIP Facility"), with Bank of America, N.A., as
agent. The DIP Facility consisted of an $80,000 revolving credit facility,
including a letter of credit sub-facility, and a $20,000 term loan facility.
Advances under the DIP facility bore interest at an average rate of 7.0%.
Borrowings under the DIP Facility were repaid with proceeds from the Revolving
Credit Facility and the DIP Facility was cancelled.
The letters of credit outstanding under the DIP Facility are
currently in the process of being transitioned to the Revolving Credit Facility.
As a result, outstanding letters of credit under the DIP Facility, which were
approximately $3,998 at December 31, 2002, are collateralized by a cash deposit,
recorded as restricted cash on the balance sheet. The transition of the letters
of credit to the Revolving Credit Facility and the return of the cash deposit
are expected to occur in the first quarter of 2003.
In conjunction with the 1997 acquisition of Anchor, the Company
entered into a credit agreement providing for a $110,000 revolving credit
facility (the "Original Credit Facility"). In October 2000, the Company replaced
the Original Credit Facility with a credit facility under a Loan and Security
Agreement dated as of October 16, 2000, with Bank of America, National
Association, as agent (the "Loan and Security Agreement"), to provide a $100,000
senior secured revolving credit facility (the "Replacement Credit Facility").
Borrowings under the Replacement Credit Facility were repaid with proceeds of
the DIP Facility and the Loan and Security Agreement and the Replacement Credit
Facility were cancelled.
The Company's obligations under the Loan and Security Agreement were
secured by a first priority lien on all of the Company's inventories and
accounts receivable and related collateral and a second priority pledge of all
of the issued and issuable Series B Preferred Stock of the Company and 902,615
shares of the Company's Common Stock. In addition, the Company's obligations
under the Loan and Security Agreement were guaranteed by Consumers U.S., the
holder of the outstanding Series B Preferred Stock of the Company and 902,615
shares of the Company's Common Stock.
F-21
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
At December 31, 2001, advances outstanding under the Replacement
Credit Facility were $50,981 and the borrowing availability was $20,669. The
total outstanding letters of credit on this facility were $6,720. At December
31, 2001, the weighted average interest rate on borrowings outstanding was
4.75%. During 2001, average advances outstanding were approximately $62,323, the
average interest rate was 7.16% and the highest month-end advance was $77,341.
The Company capitalizes financing fees related to obtaining its debt
commitments and amortizes these costs over the term of the related debt. As a
result of the refinancing of the Original Credit Facility, deferred financing
fees of $1,285 were written off in the fourth quarter of 2000.
F-22
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
Reorganized Predecessor
Company Company
------------ ------------
December 31, December 31,
2002 2001
------------ ------------
$150,000 First Mortgage Notes, interest at 11 1/4% due 2005 $ 150,000 $ 150,000
$20,000 Term Loan, interest at 14% due 2005 ................. 20,000 --
$50,000 Senior Notes, interest at 9 7/8% due 2008 ........... -- 50,000
Capital lease obligations ................................... 16,359 8,454
------------ ------------
186,359 208,454
PBGC obligation ............................................. 65,029 --
------------ ------------
251,388 208,454
Less:
Long-term debt classified as current .................. -- (206,091)
Current maturities .................................... (8,315) (822)
------------ ------------
$ 243,073 $ 1,541
============ ============
On December 26, 2002, Anchor entered in a master lease agreement
with a major lessor. The master lease agreement is structured as a capital
lease. Equipment leases pursuant to the master lease will be secured by a first
priority lien on such assets. Under this agreement, in December 2002, the
Company financed approximately $10,000 of equipment. The lease agreement has a
term of five years and contains, among other things, a fixed charge coverage
test.
On August 30, 2002, Anchor entered into a term loan agreement with
Ableco Finance LLC, as agent for the lenders, to provide for a senior secured
term loan in the amount of $20,000 (the "Term Loan"). The full amount of the
loan was drawn down on August 30, 2002, and bears interest at 14% per annum,
payable monthly in arrears. The Term Loan matures on March 31, 2005. An
anniversary fee equal to $200 will be payable on each anniversary date until
maturity, beginning on August 30, 2003.
The Term Loan is secured by a second priority security interest in,
a lien upon, and a right of set off against the collateral that secures the
Revolving Credit Facility. In addition, AGC Holding has pledged its ownership
interests in Anchor to Ableco Finance LLC as additional security for the
obligations created under the agreement.
Anchor may prepay the Term Loan, in full or in part, on the
following terms: (i) if paid within the first 18 months, upon payment of a fee
equal to 1.5% of the amount of principal so prepaid and (ii) thereafter, without
premium or penalty. In addition, Anchor must prepay all or a portion of the
outstanding principal amount of the Term Loan, with the proceeds received, in
the event that (i) the Revolving Credit Facility obligations becoming due and
payable or the revolving commitments are terminated or the loan and security
agreement is terminated, (ii) the receipt of cash outside of the ordinary course
of business if more than $100, (iii) any disposition by Anchor not used to repay
or redeem the First Mortgage Notes, or (iv) any indebtedness or sale or issuance
of capital stock by Anchor.
The Term Loan contains customary negative covenants and restrictions
on transactions, including, without limitation, restrictions on indebtedness,
liens, investments, fundamental business changes, asset dispositions outside of
the ordinary course of business, subsidiary stock dispositions, restricted
junior payments,
F-23
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
transactions with affiliates and changes relating to indebtedness. In addition,
the Term Loan requires that Anchor meet a fixed charge coverage test and
maintain minimum EBITDA (earnings before interest, taxes, depreciation and
amortization), for any four consecutive quarters, of $70,000. The Term Loan
contains customary events of default, including, without limitation, non-payment
of principal, interest or fees, violation of certain covenants, inaccuracy of
representations and warranties in any material respect and cross defaults under
certain other indebtedness and agreements.
Effective April 17, 1997, the Company completed an offering of the
First Mortgage Notes, issued under an indenture dated as of April 17, 1997,
among the Company, Consumers U.S. and The Bank of New York, as Trustee. The
First Mortgage Notes are senior secured obligations of the Company, ranking
senior in right of payment to all existing and future subordinate indebtedness
of the Company and equal with all existing and future senior indebtedness of the
Company.
Effective August 30, 2002, Anchor entered into a supplemental
indenture with the holders of the First Mortgage Notes to provide for the waiver
of the change-in-control provisions, the elimination of pre-payment provisions
and other non-financial changes to the terms of the First Mortgage Notes.
Additionally, Consumers U.S. was released as a guarantor of the First Mortgage
Notes.
The Company entered into a Registration Rights Agreement on April
17, 1997. Following the issuance of the First Mortgage Notes, the Company filed
with the Securities and Exchange Commission an exchange offer registration
statement, declared effective on February 12, 1998, with respect to an issue of
11 1/4% First Mortgage Notes, due 2005, identical in all material respects to
the First Mortgage Notes, except that the new First Mortgage Notes would not
bear legends restricting the transfer thereof. In March 1998, the Company
completed an offer to the holders of the First Mortgage Notes to exchange their
First Mortgage Notes for a like principal amount of new First Mortgage Notes.
Interest on the First Mortgage Notes accrues at 11 1/4% per annum
and is payable semiannually on each April 1 and October 1 to registered holders
of the First Mortgage Notes at the close of business on the March 15 and
September 15 immediately preceding the applicable interest payment date.
The First Mortgage Notes are redeemable, in whole or in part, at the
Company's option on or after April 1, 2001, at par. The indenture provides that
upon the occurrence of a change in control, the Company will be required to
offer to repurchase all of the First Mortgage Notes at a purchase price in cash
equal to 101% of the principal amount plus interest accrued to the date of
purchase.
All of the obligations of the Company under the First Mortgage Notes
and the indenture are secured by a first priority perfected security interest in
substantially all of the existing and future real property, personal property
and other assets of the Company other than inventories and receivables.
Effective March 16, 1998, the Company completed an offering of the
Senior Notes issued under an indenture dated as of March 16, 1998, among the
Company, Consumers U.S. and The Bank of New York, as Trustee. The Senior Notes
were unsecured obligations of the Company ranking equal in right of payment with
all existing and future senior indebtedness of the Company and senior in right
of payment to all existing and future subordinated indebtedness of the Company.
Under the terms of the Plan, the holders of the Senior Notes were repaid in cash
at 100% of their principal amount.
The indenture governing the First Mortgage Notes, subject to certain
exceptions, restricts the Company from taking various actions, including, but
not limited to, subject to specified exceptions, the incurrence of additional
indebtedness, the granting of additional liens, the payment of dividends and
other restricted payments, mergers, acquisitions and transactions with
affiliates.
All of the Company's debt agreements contain cross-default
provisions.
F-24
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Other long-term debt includes capital leases, which have imputed
interest rates ranging from 6.0% to 9.0%. Imputed interest on capital leases as
of December 31, 2002 and 2001 was $4,854 and $2,596, respectively. Property,
plant and equipment under capital lease obligations approximated $20,300 at
December 31, 2002.
The Company capitalizes financing fees related to obtaining its debt
commitments and amortizes these costs over the term of the related debt.
As a result of the matters discussed below, the Company classified
its long-term debt as current liabilities in the balance sheet at December 31,
2001.
On May 23, 2001, Consumers filed for protection under the Canadian
Companies' Creditors Arrangement Act ("CCAA"). On August 3, 2001, Consumers and
Owens-Brockway Glass Container Inc. (together with its affiliates "O-I")
announced an agreement whereby O-I would acquire Consumers' Canadian glass
producing assets as well as the stock of Consumers U.S. Management of Anchor
believed that the Reorganization or the acquisition of the stock of Consumers
U.S. by O-I would have triggered a "change in control" as defined in the
Indentures. Upon a "change in control" as defined in the Indentures, Anchor
would have been required to make an offer to repurchase all of the First
Mortgage Notes and the Senior Notes at 101% of the outstanding principal amount
plus accrued and unpaid interest. Anchor did not have the cash or liquidity
available to make this repurchase offer. The failure to make the offer would
have resulted in an event of default under the Indentures that would have given
the noteholders the right to accelerate the debt and would also have been a
default under Anchor's credit facility at the time and would have been an event
of default under various equipment leases.
NOTE 6 - ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company hedges certain of its estimated natural gas purchases,
typically over a maximum of six to twelve months, through the purchase of
natural gas futures and options. At August 31, 2002, the Company acquired
futures to hedge gas purchases from September 2002 through December 2002 that
qualify for cash flow hedge treatment under SFAS 133. During the four months
ended December 31, 2002, income of $617 was recognized in cost of products sold
related to gas futures. During the eight months ended August 31, 2002, a loss of
$2,159 was recognized in cost of products sold related to gas futures. There
were no outstanding futures as of December 31, 2002.
In the four months ended December 31, 2002 and the eight months
ended August 31, 2002, the Company entered into put and call options for
purchases of natural gas. The fair value of these options at December 31, 2002
was $680 and is recorded in other current assets. These options do not qualify
as an effective cash flow hedge for natural gas purchases. As a result of these
contracts, the Company recognized derivative income of $71 and $562,
respectively, in the four months ended December 31, 2002 and the eight months
ended August 31, 2002.
The Company had no gas futures or options outstanding at January 1,
2001. During the year ended December 31, 2001, a loss of $3,950 was recognized
in cost of products sold related to futures. Futures outstanding at December 31,
2001 were acquired to hedge gas purchases from January 2002 through March 2002.
The Company recorded the fair market value of the outstanding futures,
approximately $531, in accrued expenses and accumulated comprehensive income on
the balance sheet as of December 31, 2001.
In the year ended December 31, 2001, the Company entered into put
and call options for purchases of natural gas. The fair value of these options
at December 31, 2001 was $536 and is recorded in accrued expenses. These options
do not qualify as an effective cash flow hedge for natural gas purchases. As a
result of these contracts, the Company recognized a derivative loss of $334 in
the year ended December 31, 2001.
In August 2001, Anchor entered into an interest rate cap instrument
with Bank of America, National Association. The fair value of this interest rate
cap, approximately $72, was recorded in other assets on the accompanying balance
sheet at December 31, 2001. During the eight months ended August 31, 2002 and
the year
F-25
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ended December 31, 2001, losses of $72 and $253, respectively, were recognized
in other income, net related to this instrument.
NOTE 7 - CAPITAL STOCK
At August 31, 2002, the authorized capital stock of Anchor consists
of 21,000,000 shares of common stock, par value $0.10 per share, of which
9,000,000 shares are issued and outstanding, and 100,000 shares of preferred
stock, par value $0.01 per share. Of the amount of authorized preferred stock,
75,000 shares of preferred stock are designated Series C Participating Preferred
Stock, of which 75,000 shares are issued and outstanding.
Preferred Stock
The Anchor Board of Directors has the authority, by adopting
resolutions, to issue shares of preferred stock in one or more series, with the
designations and preferences for each series set forth in the adopting
resolutions. The certificate of incorporation authorizes the Board of Directors
to determine, among other things, the rights, preferences and limitations
pertaining to each series of preferred stock.
The holders of the Series C Participating Preferred Stock are
entitled to vote as a single class on all actions to be taken by Anchor
stockholders, together with all other classes and series of Anchor's stock. The
holders of the Series C Participating Preferred Stock will have full voting
rights and powers equal to the voting rights and powers of the holders of
Anchor's common stock. The votes of the holders of Series C Participating
Preferred Stock, in the aggregate, will constitute 15% of the total aggregate
votes entitled to vote on any such action.
The Series C Participating Preferred Stock is entitled to receive
dividends, at a rate per annum equal to 12%, prior to and in preference to any
declaration or payment of any dividend on any junior securities. Dividends are
payable quarterly in cash, if and when declared by the Board of Directors and,
to the extent not paid currently with respect to any quarterly period, will
accrue and compound quarterly. Unpaid dividends of $3,022 ($40.29 per share) as
of December 31, 2002 were accrued and included in other long-term liabilities in
the accompanying balance sheet. In addition, the Series C Participating
Preferred Stock is entitled to receive dividends and distributions equal to 15%
of the amount of dividends paid on the outstanding shares of common stock.
The Series C Participating Preferred Stock is subject to
redemption at the Company's option at any time in whole but not in part at a
redemption price equal to the sum of (i) $1,000 per share plus all accrued and
unpaid dividends on such share computed to the date of redemption and (ii) 15%
of the fair market value of all of the outstanding shares of common stock
divided by the number of outstanding shares of Series C Participating Preferred
Stock. The portion of the redemption price specified in clause (ii) of the
preceding sentence will, at the option of the Company, be payable either in cash
or in shares of common stock. Additionally, the portion of the redemption price
specified in clause (ii) qualifies as an embedded derivative, the fair value of
which is $750 as reflected in stockholders' equity in the accompanying balance
sheet.
In the event of Anchor's liquidation, dissolution or winding up (or
certain other circumstances which shall be deemed a liquidation), the holders of
the Series C Participating Preferred Stock will be entitled to receive, prior to
and in preference to the holders of the common stock, an amount equal to $1,000
per share plus all accrued and unpaid dividends on such share computed to the
date of redemption. If upon the liquidation event the available assets are
insufficient to permit the payment of those amounts, then the entire assets and
funds will be distributed to the holders of the Series C Participating Preferred
Stock. After the liquidation preference has been paid to the holders of the
Series C Participating Preferred Stock, remaining assets will be distributed 85%
to holders of the common stock and 15% to the holders of the Series C
Participating Preferred Stock.
Capital Stock of the Predecessor Company
F-26
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Prior to the Reorganization, the Company had designated 2,239,320
shares as Series A Preferred Stock and 5,000,000 shares as Series B Preferred
Stock. The holders of Series A Preferred Stock were entitled to receive, when
and as declared by the Board of Directors of the Company, cumulative dividends,
payable quarterly in cash, at an annual rate of 10%. Unpaid dividends of $26,043
($11.63 per share) as of December 31, 2001 were accrued and included with the
value of the related preferred stock on the balance sheet. The Company paid one
quarterly dividend in 1999 of approximately $1,411. The Series A Preferred Stock
had a liquidation and redemption value of $25.00 per share, plus accrued
dividends. The Company would have been required to redeem all outstanding shares
of the Series A Preferred Stock on January 31, 2009 and, on or after February 5,
2000, could have, at its option, redeemed outstanding shares of Series A
Preferred Stock at a price of $25.00 per share, if the trading price of the
common stock equaled or exceeded $6.00 per share. Shares of Series A Preferred
Stock were convertible into shares of common stock, at the option of the holder,
at a ratio determined by dividing the liquidation value of the Series A
Preferred Stock of $25.00 by $6.00 and such ratio was subject to adjustment from
time to time.
The holders of Series B Preferred Stock were entitled to receive
cumulative dividends, payable quarterly at an annual rate of 8%. Cumulative and
unpaid dividends at December 31, 2001 were approximately $16,900 ($4.00 per
share). During the period from February 5, 1997 through and including December
31, 1999, the dividend was payable in additional shares of Series B Preferred
Stock. The Series B Preferred Stock had a liquidation and redemption value of
$25.00 per share, plus accrued dividends. Shares of Series B Preferred Stock
were not subject to mandatory redemption. On or after February 5, 2000, the
Company could have, at its option, redeemed outstanding shares of Series B
Preferred Stock at a price of $25.00 per share, if the trading price of the
common stock equaled or exceeded $5.50 per share. Shares of Series B Preferred
Stock were convertible into shares of common stock, at the option of the holder,
at a ratio determined by dividing the liquidation value of the Series B
Preferred Stock of $25.00 by $5.50 and such ratio was subject to adjustment from
time to time.
For the period from February 5, 1997 to February 5, 2000, the common
stock of Anchor was divided into three classes, Class A and Class B, which were
voting, and Class C, which was non-voting. On February 5, 2000, the three
classes of common stock were consolidated into one single class of common stock
with identical rights. At December 31, 2001, the Company had outstanding
warrants exercisable for 1,893,531 shares of common stock. None of the warrants
required any payment upon exercise. During 2001, certain Anchor warrant holders
exercised 1,197,338 warrants and acquired 1,197,338 shares of common stock of
Anchor. Until the Reorganization, Consumers U.S. owned approximately 59.5% of
Anchor's equity on a fully diluted basis (approximately 26.9% of the outstanding
common stock at December 31, 2001), giving effect to the exercise of all
warrants and the conversion of Anchor's convertible preferred stock.
On September 26, 2001, the former Board of Directors of Anchor
adopted a Stockholder Rights Plan (the "Rights Plan"). Under the Rights Plan,
stock purchase rights ("Rights") would have been distributed as a dividend to
all stockholders at the rate of one Right for each share of Anchor common stock
held of record as of the close of business on September 26, 2001. Each Right had
entitled the registered holder, upon the occurrence of certain events, to
purchase from Anchor one one-thousandth of a share of Series C Junior
Participating Preferred Stock , at a price of $0.01 per one one-thousandth of a
share, subject to adjustment. The Rights were not exercisable until the
distribution date, as defined. The Rights Plan terminated upon the
Reorganization.
On October 5, 2001, an action was filed by Consumers U.S., against
Anchor and certain members of its former Board of Directors. The action alleged,
among other things, that the Rights Plan adopted by the Anchor Board of
Directors was unlawful. On October 11, 2001 O-I filed a similar action, which
alleged, among other things, that the Rights Plan adopted by the former Anchor
Board of Directors was unlawful. The actions were dismissed.
Under the terms of the Plan, Series A Preferred Stock, the Series B
Preferred Stock, common stock and warrants of Anchor outstanding at August 30,
2002 were cancelled.
NOTE 8 - EQUITY INCENTIVE PLAN
F-27
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
In October 2002, the Board of Directors of Anchor approved the
equity incentive plan, designed to motivate and retain individuals who are
responsible for the attainment of the Company's primary long-term performance
goals and covers employees, directors or consultants. The plan provides for the
grant of nonqualified stock options, incentive stock options and restricted
stock for shares of Anchor common stock to participants of the plan selected by
the board or a committee of the board (the "Administrator"). One million shares
of common stock have been reserved under the plan. The terms and conditions of
awards are determined by the Administrator for each grant, except that, unless
otherwise determined by the Administrator, options vest and become exercisable
as follows: 50% of an option grant vests 1/3 on the first anniversary of the
grant date, 1/3 on the second anniversary of the grant date and 1/3 on the third
anniversary of the grant date; and the remaining 50% of the option grant vests
in three tranches of equal amount if the Company attains certain performance
targets established by the Board of Directors. There were no grants under this
plan in 2002.
Upon a "Liquidity Event," all unvested awards will become
immediately exercisable and the Administrator may determine the treatment of all
vested awards at the time of the Liquidity Event. A "Liquidity Event" is defined
as an event in which (1) any person who is not an affiliate becomes the
beneficial owner, directly or indirectly, of 50% or more of the combined voting
power of Anchor's then outstanding securities, (2) the sale, transfer or other
disposition of all or substantially all of Anchor's business and, whether by
sale of assets, merger or otherwise to a person other than Cerberus, (3) if
specified by our Board of Directors in an award at the time of grant, the
consummation of an initial public offering of common equity securities or (4)
dissolution and liquidation of the Company.
NOTE 9 - RELATED PARTY INFORMATION
On February 5, 1997, pursuant to an asset purchase agreement dated
December 18, 1996, Consumers acquired substantially all of the assets, and
assumed certain liabilities, of the former Anchor Glass Container Corporation.
From 1997 until the latter part of 2001, the Company was part of a
group of glass manufacturing companies with Consumers and GGC, L.L.C. ("GGC")
each of which was controlled through G&G Investments, Inc. ("G&G")..
The Company had, in the past, engaged in a variety of transactions
(including joint purchasing, engineering, utilization of the Company's mold and
repair shops and management information systems) with Consumers and GGC. On
October 1, 2001, Consumers completed the sale of its Canadian glass producing
assets to a subsidiary of O-I. In February 2002, Mr. J. Ghaznavi, one of the
Company's former directors, purchased GGC from Consumers. Following these
events, Anchor separated activities related to these functions, with Consumers
as of October 1, 2001, and with GGC as of February 2002, with Anchor and GGC
entering into the agreement described below. GGC is currently a competitor of
Anchor.
In connection with a proposed settlement of litigation commenced by
The National Bank of Canada against Anchor and certain other former affiliates,
Anchor and GGC entered into a services agreement, as amended to delineate the
transitional nature of the services to be provided by Anchor, whereby Anchor
assists GGC in certain functions, including information systems, through 2004.
GGC will pay a fee to Anchor of $500 for each year of the agreement, plus a
percentage of GGC's cash flows, as determined in accordance with the services
agreement, payable in three annual installments commencing on April 30, 2005.
This agreement is subject to termination by Anchor or GGC, with notice, after
June 30, 2002. Anchor has fully reserved the $439 of receivables under the
agreement as of December 31, 2002.
In 2000, the Company had entered into a Restated Intercompany
Agreement (the "Intercompany Agreement") with G&G, Consumers, Consumers U.S.,
Consumers International Inc., GGC, Hillsboro Glass Company ("Hillsboro"),
I.M.T.E.C. Enterprises, Inc., a machinery manufacturer majority-owned by G&G,
and certain related companies, which established standards for certain
intercompany transactions. With the events
F-28
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
described above, transactions carried out under the Intercompany Agreement were
significantly reduced in the latter part of 2001 and eliminated in 2002.
Historically, pursuant to the Intercompany Agreement, the Company
may have, from time to time, filled orders for customers of affiliated glass
manufacturers and affiliated glass manufacturers may have, from time to time
filled orders for customers of the Company. Through 2000, in such case where the
customer was not a common customer, the manufacturing company paid a market
commission, up to 5% of the invoiced amount, to the company that referred the
customer. In the event of a transfer of a customer to the Company by an
affiliated glass manufacturer or to an affiliated glass manufacturer by the
Company, the transfer was treated as though the transferee had filled the orders
for the transferred customer. The commission program was replaced with a cost
sharing arrangement in 2001 that was subsequently discontinued as a result of
the sale of Consumers' Canadian glass producing assets and the service agreement
entered into with GGC.
Historically, pursuant to the Intercompany Agreement, in connection
with any bulk purchasing of raw materials, packaging materials, machinery,
insurance, maintenance services, environmental services, design and
implementation of certain software systems and other items and services used in
this business, each of the affiliated glass manufacturers shared out-of-pocket
costs of the purchasing activities without payment of commissions. Similarly, in
connection with the provision of technical, engineering or mold design services,
the company providing the services received reasonable per diem fees and costs
for the employees provided. For services such as the provision of molds, the
company providing the service received cost plus a reasonable market mark-up.
G&G Investments, Inc.
The Company was party to a management agreement with G&G, in which
G&G was to provide specified managerial services for the Company. The Company
notified G&G that the agreement was terminated as of the beginning of January
2001. In the fourth quarter of 2001, the Company reversed fees previously
accrued of $1,875 to selling and administrative expenses in the statement of
operations.
For these services, G&G was entitled to receive an annual management
fee of up to $3,000, subject to limitations, and reimbursement of its
out-of-pocket costs. The Company recorded a management fee expense of $1,500,
for this agreement for the year ended December 31, 2000. Out-of-pocket costs for
the year ended December 31, 2000 were approximately $250. No costs were accrued
in 2001.
In September 1998, G&G entered into an agreement to purchase a
controlling interest in a European glass manufacturer and advanced approximately
$17,300 toward that end. This amount was funded by G&G through a loan from the
Company of approximately $17,300 in September 1998 (the "G&G Loan"). The funds
for the G&G Loan were obtained through a borrowing under the Original Credit
Facility. The G&G Loan was evidenced by a promissory note that originally
matured in January 1999. The transaction did not close and, in March 2000, G&G
commenced an arbitration proceeding against the principal owners of the European
glass manufacturer in accordance with the terms of the agreement to secure a
return of the advance. Arbitration hearings were held in 2001. A decision was
rendered in the fourth quarter of 2001 in favor of the principal owners of the
European glass manufacturer. As a result of the decision and questions regarding
the collectibility of the G&G Loan, Anchor recorded a provision of $17,447 (the
advance of $17,330 and other costs of $117), as a related party provision on the
statement of operations in 2001. Anchor pursued collection of these amounts and
filed an action in the Federal District Court for the Indiana Fort Wayne
Division, against certain principal owners of the European glass manufacturer.
Pursuant to the settlement with Mr. J. Ghaznavi and G&G, all rights, title and
interest to the claim have been assigned to a designate of Mr. J. Ghaznavi.
In connection with the pledge by Anchor of the note issued pursuant
to the G&G Loan to Bank of America, National Association, as agent under the
Loan and Security Agreement, the original promissory note issued pursuant to the
G&G Loan was replaced by a new promissory note (the "Replacement Note"). G&G
provided security against the Replacement Note to Bank of America, National
Association, as agent under the Loan and Security Agreement. The maturity date
of the Replacement Note was October 31, 2003. Interest on the
F-29
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Replacement Note was payable at the interest rate payable by the Company on
advances under the Loan and Security Agreement plus 0.5% and was paid through
September 2000. As a result of the arbitration ruling, in the fourth quarter of
2001, Anchor reversed the accrual for the unpaid interest receivable of $1,766,
for the period October 1, 2000 through December 31, 2001, through a charge to
interest expense.
During the years 1997, 1998, 1999 and 2000, the Company participated
in bulk purchases of supplies for the Company and certain of its affiliates,
including Consumers, with vendors that were unrelated to the Company and
Consumers. The bulk purchases were negotiated by a sister company to G&G. The
sister company received rebates from these unrelated vendors. The rebates
attributable to purchases by the Company totaled no less than $711 over the
four-year period. When this practice became known, the Company took steps to
ensure that the practice was discontinued.
During the year 1997, the Company participated in bulk purchases of
soda ash for the Company and certain of its affiliates, including Consumers,
with vendors that were unrelated to the Company and Consumers. The bulk
purchases were negotiated by a subsidiary of G&G. The subsidiary received
rebates from the unrelated vendors. The rebates attributable to purchases by the
Company totaled no less than $547. This practice was discontinued at the end of
1997.
A special committee of the former Board of Anchor was appointed to
review these transactions. The special committee had issued a demand letter to
G&G and certain affiliates of G&G, requesting reimbursement to Anchor of the
amounts paid as rebates.
In September 1997, Hillsboro, a glass-manufacturing plant owned by
G&G, discontinued manufacturing. All of Hillsboro's rights and obligations to
fill orders under a supply contract between Consumers and one of its major
customers was purchased by Consumers and the Company effective December 31,
1997. The purchase price of the Company's portion of this contract was $12,525,
of which $11,725 had been paid through 2001. The outstanding balance was
eliminated in the Reorganization.
Related party transactions with affiliates of G&G, including
Interstate Express for freight purchases, are summarized as follows:
Eight Months
Ended Years Ended December 31,
August 31, ---------------------------
2002 2001 2000
------------ ------------ ------------
Purchases of freight ................................ $ 1,009 $ 2,228 $ 3,078
Payable for freight ................................. -- 66 456
Purchases of inventory and other .................... -- 31 89
Payable for inventory and other ..................... -- 173 27
Allocation of aircraft charges ...................... -- 189 797
Interest income on advance to affiliate ............. -- -- 1,829
Interest receivable on advance to affiliate ......... -- -- 457
Sales of inventory and allocation of expenses ....... -- -- --
Receivable from sales of inventory and allocations .. -- -- 342
Advance to affiliate ................................ -- -- 17,330
In connection with the Reorganization, the Company entered into a
settlement agreement with Mr. J. Ghaznavi and G&G, concluding the issues noted
above.
F-30
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Consumers and affiliates
At December 31, 2001, before the provision noted below, G&G,
Consumers and their affiliates owed Anchor approximately $17,400, (including an
offset of approximately $8,600 related to the allocation of the write-off of
certain software costs) in addition to the advance to affiliate receivable of
approximately $17,300, while Anchor owed G&G, Consumers and their affiliates
approximately $4,900. Additionally, Anchor held an investment in 1,842,000
common shares of Consumers.
In 1999, management approved the purchase of 1,842,000 shares of
Consumers common stock for $3,000. These shares were held pending government
approval for contribution into the Company's defined benefit pension plan. As of
December 31, 2000, the Company recorded a write down for a non-temporary decline
in market value, of approximately $1,158, to reflect the investment at then fair
value. During 2001, the remaining balance of $1,842 was recorded as a related
party provision.
As a result of Consumers' announcement of its intention to sell its
Canadian glass producing assets to O-I and Consumers' filing under the Canadian
Companies' Creditors Arrangement Act ("CCAA"), Anchor recorded a charge to
earnings during 2001 of $18,221 ($24,979 receivables and $1,842 investment in
common shares of Consumers, net of $8,600 payables). This amount was recorded as
a related party provision on the statement of operations.
Of the total of approximately $6,300 cash settlement of the
shareholder derivative action, as discussed in Note 2, the Company received
approximately $2,000 in cash from Consumers in the fourth quarter of 2002.
The Company recorded a write-off in 1999 of its allocable share of
parent company software costs. Consumers implemented the SAP based software
system with the intention that all affiliated companies would adopt that system
and share ratably in the initial design, reengineering and implementation
originated by Consumers. The SAP based system had proven to be a complicated
system requiring extensive and expensive maintenance. With the objective of
having one operating system, Consumers converted to a JDEdwards based system,
currently in place at Anchor. As authorized by the Intercompany Agreement,
Consumers allocated $9,600 to Anchor (of which $1,000 had been paid)
representing Anchor's pro rata share of the original implementation costs based
upon number of plants, number of licensed users and sales.
Related party transactions with Consumers and its affiliates are
summarized as follows (there were no comparable transactions in 2002):
Years Ended
December 31,
--------------------------
2001 2000
----------- ------------
Purchases of inventory and other................... $ 348 $ 1,811
Payable for inventory and other.................... 3,948 1,402
Sales of molds and inventory....................... 4,828 12,038
Receivable from sales of molds and inventory....... 1,020 6,413
Allocation of expenses and other................... 6,878 14,133
Receivable from allocation of expenses and other... -- 13,346
Payable for allocable portion of software.......... -- 9,315
The sale of molds to Consumers was invoiced at cost plus a profit
mark-up. The amounts of these mark-ups, $250 and $51, respectively, for the
years ended December 31, 2001 and 2000, have been recorded as contributions from
shareholder and included in capital in excess of par value.
F-31
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Stock Purchase Plans
Under the 2000 Executive Stock Purchase Plan, executives of Anchor
participated in the purchase of shares of Consumers common stock. Anchor made
loans to plan participants to finance the purchase of an aggregate of 332,998
shares. The loans had a term of ten years, were secured by a pledge of the
shares purchased with the loan proceeds and required that a percentage of future
management incentive awards be applied against outstanding loan balances. The
plan terminated on December 28, 2000. The Board approved bonus compensation
repaying aggregate indebtedness of approximately $476. Under the 1999 Officer
Stock Purchase Plan, certain officers of Anchor participated in the purchase of
shares of Consumers common stock. Anchor made loans to plan participants to
finance the purchase of an aggregate of 183,250 shares. The loans had a term of
ten years and were secured by a pledge of the shares purchased with the loan
proceeds. On June 30, 2000, management authorized bonus compensation repaying
aggregate indebtedness of approximately $280. There were no loans outstanding
under these plans at December 31, 2002 and 2001.
Other
The Company has employee receivables of $30 and $115 outstanding, as
of December 31, 2002 and 2001, respectively.
Stock Option Plan - Consumers Plan
Salaried employees of the Company participated in the Director and
Employee Incentive Stock Option Plan, 1996 of Consumers. Consumers requested the
Toronto Stock Exchange (the "TSE") to suspend trading of Consumers common stock
and effective December 31, 2001, the TSE issued a trading halt. The closing
price at the time of the trading halt was Cdn.$0.015 per share.
At the Annual Shareholders Meeting of Consumers in June 1999, the
Director and Employee Incentive Stock Option Plan was amended whereby the
exercise price of certain outstanding stock options issued under the plan for
which the current exercise price exceeded Cdn.$8.00 was reduced to an exercise
price of Cdn.$8.00. Pursuant to SFAS 123, incremental compensation expense was
to be recognized on a pro forma basis between 1999 and 2003 in the amount of
$961, related to the amended exercise price.
Information related to stock options for the eight months ended
August 31, 2002 and the two years ended December 31, 2001 is as follows:
Weighted Weighted
Number Average Average
of Exercise Fair
Shares Price (Cdn$) Value (Cdn$)
---------- ------------ ------------
Options outstanding, January 1, 2000...... 1,101,500 7.78
Granted.............................. 144,500 5.00 $4.47
Forfeited............................ (162,500) 8.00 $4.91
---------- --------
Options outstanding, December 31, 2000.... 1,083,500 7.33
Granted.............................. -- -- $ --
Forfeited............................ (275,000) 7.77 $4.80
---------- --------
Options outstanding, December 31, 2001.... 808,500 7.18
Cancelled............................ (808,500) (7.18)
---------- --------
Options outstanding, August 31, 2002...... -- --
========== ========
Approximately 680,000 of the options were exercisable at December
31, 2001 and the weighted average remaining contractual life of the options was
6.6 years.
F-32
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 10 - PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS
Effective December 31, 2001, Anchor entered the Glass Companies
Multiemployer Pension Plan (the "MEPP"), created from the merger of the Anchor
defined benefit pension plan and the GGC defined benefit plan for hourly
employees. Anchor, GGC, the Board of Trustees of the MEPP and the unions
representing certain employees at Anchor and GGC considered the MEPP to be a
multiemployer pension plan.
In July 2002, the United States Department of Labor notified Anchor
that it determined that the MEPP did not meet the definition of a multiemployer
plan under the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
Effective July 31, 2002, Anchor and the PBGC entered into an
agreement to govern the dissolution of the Anchor portion of the MEPP (the "PBGC
Agreement"). Pursuant to the PBGC Agreement and collective bargaining agreements
with the unions representing participants under the MEPP, Anchor withdrew from
the MEPP on July 31, 2002. The PBGC has proceeded in accordance with procedures
under ERISA to partition the assets and liabilities of the MEPP into two parts,
one part attributable to Anchor employees and former employees and one part
attributable to GGC employees and former employees and terminate the Anchor
portion. The termination was effective as of July 31, 2002.
In accordance with the PBGC Agreement, on the Effective Date, Anchor
paid $20,750 to the PBGC (with proceeds from the Reorganization). Additionally,
Anchor granted the PBGC a warrant for the purchase of 5% of the common stock of
Anchor, with an exercise price of $5.27 per share and term of ten years. No
value has been attributed to this warrant as of August 31, 2002 because the
exercise price is in excess of the fair value of common stock. Anchor
renegotiated its labor union contracts and, effective August 1, 2002, began
contributing to other multiemployer plans for the future service benefits of its
hourly employees. These contributions are expensed monthly.
In accordance with the PBGC Agreement, Anchor has begun making
monthly payments to the PBGC of $833 for a period of one hundred twenty (120)
months. The present value of this obligation at August 31, 2002, $66,066
recorded as long-term debt (less current maturities), was determined by applying
a discount rate of 8.9%. The rate was determined by management and reviewed by
independent appraisers. The Company adjusted previously recorded pension
liabilities to amounts required under the PBGC Agreement, resulting in a gain of
$8,233, included as a reduction of the cost of the restructuring.
The Anchor defined benefit plan covered salaried and hourly-paid
employees. Benefits were calculated on a service-based formula for hourly
participants. Benefits were calculated on a salary-based formula for salaried
participants and were frozen in 1994.
The Company provides other post-retirement benefits to substantially
certain salaried and hourly employees and former employees. The Company accrues
post-retirement benefits (such as healthcare benefits) during the years an
employee provides services. Currently, the Company funds these healthcare
benefits on a pay-as-you-go basis. As part of the Reorganization, the Company
implemented modifications to its current post-retirement benefits program,
resulting in a reduction of long-term post retirement liabilities of $24,432.
Statement of Financial Accounting Standards No. 87 - Employers'
Accounting for Pensions defines a multiemployer plan to be a pension plan to
which two or more unrelated employers contribute. Since Anchor and Glenshaw were
defined as related parties at December 31, 2001, the MEPP did not meet the
definition of a multiemployer plan for generally accepted accounting principles,
and the accounting followed by Anchor, and the disclosures here, reflected the
plan as if it were a single employer plan. The components of net periodic
benefit costs follows:
F-33
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Pensions Post-retirement
-------------------- --------------------------------------------------
Four Months Eight
Years Ended Ended Months Years Ended
December 31, December 31, Ended December 31,
-------------------- August 31, --------------------
2001 2000 2002 2002 2001 2000
-------- -------- --------- --------- -------- --------
Service cost-benefits earned
during the year............. $ 4,600 $ 4,414 $ 134 $ 671 $ 910 $ 1,110
Interest cost on projected
benefit obligation.......... 33,706 33,521 1,002 2,700 4,297 4,087
Return on plan assets.......... (35,460) (39,145) -- -- -- --
Amortization of:
Actuarial gains............. -- -- -- (511) (378) (758)
Prior service cost.......... 3,263 3,263 -- 292 438 438
-------- -------- --------- --------- -------- --------
Total periodic benefit cost.... $ 6,109 $ 2,053 $ 1,136 $ 3,152 $ 5,267 $ 4,877
======== ======== ========= ========= ======== ========
Significant assumptions used in determining net periodic benefit
cost and related obligations for the plans are as follows:
Pensions Post-retirement
-------------------- ---------------------------------------------------
Four Months Eight
Years Ended Ended Months Years Ended
December 31, December 31, Ended December 31,
----------- -------- August 31, --------------------
2001 2000 2002 2002 2001 2000
-------- -------- ------------ --------- -------- --------
Discount rate.................. 7.25% 7.625% 6.75% 7.00% 7.25% 7.625%
Expected long-term rate of
return on plan assets...... 9.50 9.50 -- -- -- --
During the four months ended December 31, 2002, the Company
contributed $1,615 to the multiemployer pension plans in which it participates.
During the eight months ended August 31, 2002, the Company contributed $6,001 to
the MEPP and the other multiemployer plans. These amounts are expensed as
incurred.
The funded status of the Company's pension and post-retirement plans
are as follows:
Pensions Post-retirement
---------- -------------------------------------------
Year December 31, August 31, Year
2001 2002 2002 2001
---------- ----------- ---------- ----------
Change in benefit obligation:
Benefit obligation at beginning of period..... $ 455,187 $ 43,510 $ 61,449 $ 55,497
Service cost............................. 4,600 134 671 910
Interest cost............................ 33,706 1,002 2,700 4,297
Plan modifications....................... -- -- (24,432) --
Plan participants' contributions......... -- 140 334 577
Actuarial (gain) loss.................... 16,215 621 5,188 3,664
Benefits paid............................ (34,745) (1,044) (2,400) (3,496)
---------- ---------- ---------- ----------
Benefit obligation at end of period........... 474,963 44,363 43,510 61,449
---------- ---------- ---------- ----------
Change in plan assets:
Fair value of plan assets at beginning of period 390,154 -- -- --
Actual return on plan assets............. (8,188) -- -- --
F-34
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Employer contributions................... 7,801 904 2,066 2,919
Plan participants' contributions......... -- 140 334 577
Benefits and expenses paid............... (37,345) (1,044) (2,400) (3,496)
---------- ---------- ---------- ----------
Fair value of plan assets at end of period.... 352,422 -- -- --
---------- ---------- ---------- ----------
Funded status................................... (122,541) (44,363) (43,510) (61,449)
Unrecognized actuarial (gain) loss....... 75,468 621 -- (7,812)
Unrecognized prior service cost.......... 22,559 -- -- 2,406
---------- ---------- ---------- ----------
Net amount recognized........................... (24,514) (43,742) (43,510) (66,855)
---------- ---------- ---------- ----------
Amounts recognized in the balance sheet consists of:
Accrued benefit liability...................... (24,514) (43,742) (43,510) (66,855)
Additional minimum pension liability........... (98,027) -- -- --
Intangible pension asset....................... 22,559 -- -- --
Accumulated other comprehensive loss........... 75,468 -- -- --
---------- ---------- ---------- ----------
Net amount recognized........................... $ (24,514) $ (43,742) $ (43,510) $ (66,855)
========== ========== ========== ==========
The Company recognized an additional minimum liability that was
equal to the difference between the accumulated benefit obligation over plan
assets in excess of accrued pension cost. A corresponding amount is recognized
as either an intangible asset or a reduction of equity. Pursuant to this
requirement, the Company recorded, as of December 31, 2001, an additional
liability of $98,027, an intangible asset of $22,559 and accumulated other
comprehensive loss of $75,468.
Pension plan assets were held by an independent trustee and
consisted primarily of investments in equities, fixed income, government
securities and 360,000 shares of Series A Preferred Stock.
Prior to the PBGC Agreement, the Company had unfunded obligations
related to its employee pension plans. The Retirement Protection Act of 1994
required the Company to make significant additional funding contributions into
its underfunded defined benefit retirement plans, under certain conditions, and
increased the premiums paid to the PBGC. There were no required pension
contributions in the three years ended December 31, 2001 with respect to either
current funding or past underfundings. Excluding payments made as part of the
1997 acquisition of Anchor, the Company funded contributions of approximately
$7,400, $10,800, $10,900 and $20,000, respectively, in 2001, 1999, 1998 and
1997. The 2001 and 1999 contributions of $7,400 and $10,800, respectively,
represented voluntary contributions, the effect of which was to limit
contributions in the immediate future.
As part of the 1997 acquisition of Anchor, the PBGC reached an
agreement with Vitro, S.A., the parent of Old Anchor, in which Vitro, S.A.
agreed to provide a limited guaranty to the PBGC with respect to the unfunded
benefit liabilities of the Company's defined benefit plans, if the plans, or any
one of them, are terminated before August 1, 2006.
The assumed healthcare cost trend used in measuring the accumulated
post-retirement benefit obligation as of December 31, 2002 was 10.0% declining
gradually to 4.0% by the year 2008, after which it remains constant. A one
percentage point increase in the assumed healthcare cost trend rate for each
year would increase the accumulated post-retirement benefit obligation as of
December 31, 2002 by approximately $3,545 and the net post-retirement healthcare
cost for the four months ended December 31, 2002 by approximately $294. A one
percentage point decrease in the assumed healthcare cost trend rate for each
year would decrease the accumulated post-retirement benefit obligation as of
December 31, 2002 by approximately $3,107 and the net post-retirement healthcare
cost for the four months ended December 31, 2002 by approximately $255.
The Company also contributes to a multi-employer trust that provides
certain other post-retirement benefits to retired hourly employees, recognizing
the required annual contribution as an additional benefit cost.
F-35
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Expenses under this program for the four months ended December 31, 2002, the
eight months ended August 31, 2002 and the years ended December 31, 2001 and
2000 were $1,283, $2,631, $3,906 and $4,035, respectively.
The Company continues to maintain a separate non-qualified benefit
plan covering certain former salaried employees of the former Anchor Glass. The
benefit obligation at December 31, 2002 was $4,268 and periodic benefit cost for
the four months ended December 31, 2002 and the eight months ended August 31,
2002 was $100 and $200, respectively. The benefit obligation is recorded in
other long-term liabilities at December 31, 2002. Amounts related to this plan
for 2001 and prior periods are included in the table above.
The Company also sponsors two defined contribution plans covering
substantially all salaried and hourly employees. The Company matches 100% of
employee contributions, not to exceed 6% of participant eligible compensation or
25% of employee contributions, not to exceed 10% of participant eligible
compensation. Expenses under the savings programs for the four months ended
December 31, 2002, the eight months ended August 31, 2002 and the years ended
December 31, 2001 and 2000 were approximately $874, $1,759, $2,572 and $2,318,
respectively.
In the 1987 acquisition of Diamond-Bathurst, Inc., Anchor assumed the
liabilities under a deferred compensation arrangement with certain employees of
the acquired company. Under this plan, Anchor funds certain benefits to the
participants and will be reimbursed through proceeds received on life insurance
policies carried on all participants. Plan assets of approximately $1,427 are
included in other assets and plan liabilities of approximately $2,419 are
included in liabilities.
F-36
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 11 - INCOME TAXES
The Company applies SFAS 109 under which the liability method is
used in accounting for income taxes. Under SFAS 109, if on the basis of
available evidence, it is more likely than not that all or a portion of the
deferred tax asset will not be realized, the asset must be reduced by a
valuation allowance. Since realization is not assured as of December 31, 2002,
management has deemed it appropriate to establish a valuation allowance against
the net deferred tax assets.
The significant components of the deferred tax assets and
liabilities are as follows:
Reorganized Predecessor
Company Company
------------ -------------
December 31, December 31,
2002 2001
------------ -------------
Deferred tax assets:
Reserves and allowances....................... $ 14,600 $ 23,900
Pension and post-retirement liabilities....... 41,900 9,600
Inventory uniform capitalization.............. 400 1,900
Tax loss carryforwards........................ 51,300 58,200
----------- -----------
108,200 93,600
Deferred tax liabilities:
Accumulated depreciation and amortization..... 57,100 17,700
Other current assets.......................... 900 1,200
----------- -----------
58,000 18,900
----------- -----------
Net deferred tax assets.......................... 50,200 74,700
Valuation allowance.............................. (50,200) (74,700)
----------- -----------
Net deferred tax assets after valuation allowance $ -- $ --
=========== ===========
The effective tax rate reconciliation is as follows:
Reorganized
Company Predecessor Company
------------ ----------------------------------------
Four Months Eight Months Years Ended
Ended Ended December 31,
December 31, August 31, -----------------------
2002 2002 2001 2000
------------ ------------ ---------- ----------
Federal rate........................... (34)% 34% (34)% (34)%
State rate............................. ( 5) 5 ( 5) (5)
Non-deductible goodwill write-off...... -- 27 -- --
Non-deductible professional fees....... -- 6 -- --
Other permanent differences............ 15 1 3 5
---- ---- ---- ----
(24) 73 (36) (34)
Valuation allowance.................... 24 (73) 36 34
---- ---- ---- ----
Effective rate......................... --% --% --% --%
==== ==== ==== ====
For tax reporting purposes, the consummation of the Company's Plan
did not create a new tax reporting entity. However, as a result of the
consummation of the Plan, the Company has undergone a change in ownership. Due
to this change in ownership, Section 382 of the Internal Revenue Code will
significantly limit the Company's net operating loss carryforwards. In
accordance with SOP 90-7, these net operating loss carryforwards and related
F-37
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
valuation allowances have been revalued. Any tax benefit derived from the
release of the valuation allowances will be accounted for as a credit to
intangible assets, and then additional paid in capital.
The Company has approximately $131,500 of unused net operating loss
carryforwards expiring at various dates between 2013 through 2022; however, due
to the Section 382 limitations, the Company believes only $75,900 can be
utilized.
NOTE 12 - MANUFACTURING FACILITIES
In March 2000, Anheuser-Busch purchased the Company's previously closed
Houston, Texas glass container manufacturing facility and certain related
operating rights. The Company received proceeds of $10,000 from the sale. Under
an agreement with Anheuser-Busch, the Company provides engineering and
production consulting services, relating to the Houston Facility, for a fee.
In 1998, formal plans were approved to remove from service one furnace and
one machine at the Jacksonville, Florida manufacturing facility. Of the total
charge, $3,640 related to operating lease exit costs and closing and other
costs. As of December 31, 2002, the spending against this liability was
completed.
NOTE 13 - LEASES
The Company leases distribution and office facilities (including its
headquarters facility), machinery, transportation, data processing and office
equipment under non-cancelable leases that expire at various dates through 2008.
These leases generally provide for fixed rental payments and include renewal and
purchase options at amounts that are generally based on fair market value at
expiration of the lease. The Company includes capital leases in other long-term
debt (see Note 5).
Future minimum lease payments under non-cancelable operating leases, after
giving effect to the termination of certain leases by purchasing from the
lessors the equipment leased thereunder (see Note 15), are as follows:
2003............................................. $ 9,476
2004............................................. 4,005
2005............................................. 3,232
2006............................................. 3,015
2007............................................. 2,967
After 2007....................................... 9,198
--------
$ 31,893
========
Rental expense for all operating leases for the four months ended
December 31, 2002, the eight months ended August 31, 2002 and the years ended
December 31, 2001 and 2000 were $5,429, $11,060, $15,400 and $13,000,
respectively.
NOTE 14 - COMMITMENTS AND CONTINGENCIES
On October 13, 2000, certain former stockholders of the Company,
consisting of CoMac Partners, L.P., CoMac Endowment Fund, L.P., CoMac
Opportunities Fund, L.P., CoMac International, N.V., Carl Marks Strategic
Investments, LP, Carl Marks Strategic Investments II, LP, Varde Partners, L.P.,
Varde Fund (Cayman) Ltd., Pequod Investments, L.P., Pequod International Ltd.,
Cerberus Partners L.P. and Cerberus International Ltd. (collectively, the
"Plaintiffs"), commenced a shareholder derivative action against certain of the
Company's directors and officers and related entities in The Court of Chancery
of the State of Delaware. The litigation was settled for total consideration to
the Company of approximately $9,000, of which approximately $6,300 was in cash,
the exchange of mutual releases by the parties and payment by Anchor of certain
legal fees. The settlement
F-38
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
of the shareholder derivative action was approved by the Bankruptcy Court and
the Delaware Chancery Court. Implementation of the settlement was completed in
the fourth quarter of 2002.
In September 2001, The National Bank of Canada, acting on its own
behalf and on behalf of PNC Bank, filed a complaint, in Allegheny Common Pleas
Court, against Anchor, GGC, Consumers U.S. and certain other former affiliates
of Anchor. The complaint alleged, among other things, fraudulent conveyances
made by GGC to Anchor and tortious interference with the contractual
relationship between the bank and GGC. The action will be heard in the United
States Bankruptcy Court for the Middle District of Florida. A trial date is
scheduled in September 2003.
On April 15, 2002, Anchor filed a voluntary petition for relief
under Chapter 11 of the U.S. Bankruptcy Code in connection with the
Reorganization. The Plan was confirmed by the Court at a hearing held on August
8, 2002 and became effective on August 30, 2002.
Certain environmental laws, such as CERCLA or Superfund and
analogous state laws, provide for strict, under certain circumstances, joint and
several liability for investigation and remediation of releases of hazardous
substances into the environment. Such laws may apply to properties presently or
formerly owned or operated by an entity or its predecessors, as well as to
conditions at properties at which wastes attributable to an entity or its
predecessors were disposed. The Company is engaged in investigation and
remediation projects at plants currently being operated and at closed
facilities. In addition, Anchor has been identified as a potentially responsible
party (a "PRP") under CERCLA with respect to two sites. While the Company may be
jointly and severally liable for costs related to these sites, it is only one of
a number of PRP's who also may be jointly and severally liable. The Company has
established reserves for environmental costs which it believes are adequate to
address the anticipated costs of remediation of these operating and closed
facilities and its liability as a PRP under CERCLA. The timing and magnitude of
such costs cannot always be determined with certainty due to, among other
things, incomplete information with respect to environmental conditions at
certain sites, new and amended environmental laws and regulations, and
uncertainties regarding the timing of remedial expenditures.
The Company's operations are subject to federal, state and local
requirements that are designed to protect the environment. Such requirements
have resulted in the Company being involved in related legal proceedings, claims
and remediation obligations. Based on the Company's current understanding of the
relevant facts, the Company does not believe that its environmental exposure is
in excess of the reserves reflected on the balance sheet, although there can be
no assurance that this will be the case. The Company maintains environmental
reserves of approximately $10,000. In addition to the environmental reserves,
the Company an environmental impairment liability insurance policy (expiring
August 30, 2007) to address certain potential future environmental liabilities
at identified operating and non-operating sites. There can be no assurance,
however, that insurance will be available or adequate to cover future
liabilities. Average annual spending on remediation issues in recent years
approximated $500.
In addition, the Company is, and from time to time may be, a party
to routine legal proceedings incidental to the operation of its business. The
outcome of any pending or threatened proceedings is not expected to have a
material adverse effect on the financial condition, operating results or cash
flows of the Company, based on the Company's current understanding of the
relevant facts. Legal expenses incurred related to these contingencies are
generally expensed as incurred.
In 2000, the Company signed an agreement with Anheuser-Busch to
provide all the bottles for the Anheuser-Busch Jacksonville, Florida and
Cartersville, Georgia breweries, beginning in 2001 (the "Southeast Agreement").
To meet the expanded demand from the supply contract and improve manufacturing
efficiency, the Company invested approximately $18,000 in new equipment in 2000
for its Jacksonville plant, funded through the proceeds from the sale of the
Houston plant, certain capital and operating lease transactions and internal
cash flows. In December 1999, the Company entered into an agreement with a major
lessor for $30,000 of lease transactions. Under this agreement, in December
1999, December 2000, March 2001 and April 2001, the Company financed
approximately $8,200, $4,200, $7,800 and $5,400, respectively, of the expansion
through sale
F-39
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
leaseback arrangements. These lease agreements have terms of five to six years.
The lease agreements contain, among other things, a fixed charge coverage test.
See Note 15.
NOTE 15 - SUBSEQUENT EVENT
Effective February 7, 2003, the Company completed an offering of the
11% Senior Secured Notes due 2013, aggregate principal amount of $300,000 (the
"Senior Secured Notes"), issued under an indenture dated as of February 7, 2003,
among the Company and The Bank of New York, as Trustee (the "Indenture"). The
Senior Secured Notes are senior secured obligations of the Company, ranking
equal in right of payment with all existing and future unsubordinated
indebtedness of the Company and senior in right of payment to all future
subordinated indebtedness of the Company. The Senior Secured Notes are secured
by a first priority lien, subject to certain permitted encumbrances, on
substantially all of Anchor's existing real property, equipment and other fixed
assets relating to Anchor's nine operating glass container manufacturing
facilities.
Proceeds from the issuance of the Senior Secured Notes, net of fees,
were approximately $289,000 and were used to repay 100% of the principal amount
outstanding under the First Mortgage Notes plus accrued interest thereon
($156,256), 100% of the principal amount outstanding under the Term Loan plus
accrued interest thereon and a prepayment fee ($20,354) and advances outstanding
under the Revolving Credit Facility ($66,886), which includes funds for certain
of the Company's capital improvement projects. The remaining proceeds of
approximately $45,000 are being used to terminate certain equipment leases by
purchasing from the lessors the equipment leased thereunder.
The Senior Secured Notes are redeemable, in whole or in part, at the
Company's option on or after February 15, 2008, at redemption prices defined in
the Indenture. The Indenture provides that upon the occurrence of a change of
control, the Company will be required to offer to purchase all of the Senior
Secured Notes at a purchase price equal to 101% of the principal amount thereof
plus accrued interest to the date of purchase.
The indenture governing the Senior Secured Notes, subject to certain
exceptions, restricts the Company from taking various actions, including, but
not limited to, subject to specified exceptions, the incurrence of additional
indebtedness, the payment of dividends and other restricted payments, the
granting of additional liens, mergers, consolidations and sale of assets and
transactions with affiliates.
The Company entered into a Registration Rights Agreement on February
7, 2003. Under the Registration Rights Agreement, the Company will use its
reasonable best efforts to register with the Securities and Exchange Commission,
exchange notes having substantially identical terms as the Senior Secured Notes.
Principal payments required on long-term debt, including payments
made under the PBGC obligation, and after taking into effect the above are
$7,000 in 2003, $7,394 in 2004, $7,338 in 2005, $7,834 in 2006 and $8,377 in
2007. Payments to be made in 2008 and thereafter are $338,743.
F-40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 20, 2003 By: /s/ Darrin J. Campbell
-----------------------------
Darrin J. Campbell
Chief Financial Officer and
Executive Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Joel A. Asen
--------------------------
Joel A. Asen
Director March 20, 2003
/s/ James N. Chapman
--------------------------
James N. Chapman
Director March 20, 2003
/s/ Richard M. Deneau
--------------------------
Richard M. Deneau
Director
Chief Executive Officer March 20, 2003
/s/ Jonathan Gallen
--------------------------
Jonathan Gallen
Director March 20, 2003
/s/ George Hamilton
--------------------------
George Hamilton
Director March 20, 2003
/s/ Timothy F. Price
--------------------------
Timothy F. Price
Director March 20, 2003
/s/ Alan H. Schumacher
--------------------------
Alan H. Schumacher
Director March 20, 2003
/s/ Lenard B. Tessler
--------------------------
Lenard B. Tessler
Director March 20, 2003
CERTIFICATIONS
CERTIFICATION ACCOMPANYING PERIODIC REPORT PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Section 1350)
I, Richard M. Deneau, President and Chief Executive Officer, certify that:
1. I have reviewed this annual report on Form 10-K of Anchor Glass
Container Corporation;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: March 20, 2003
/s/ Richard M. Deneau
- ---------------------------------
Name: Richard M. Deneau
Title: President and Chief Executive Officer
CERTIFICATION ACCOMPANYING PERIODIC REPORT PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Section 1350)
I, Darrin J. Campbell, Executive Vice President and Chief Financial Officer,
certify that:
1. I have reviewed this annual report on Form 10-K of Anchor Glass
Container Corporation;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: March 20, 2003
/s/ Darrin J. Campbell
- ---------------------------------
Name: Darrin J. Campbell
Title: Executive Vice President and Chief Financial Officer
CERTIFICATION ACCOMPANYING PERIODIC REPORT PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Section 1350)
I, Richard M. Deneau, President and Chief Executive Officer of Anchor
Glass Container Corporation, hereby certify that:
1. The annual report of the registrant on Form 10-K for the year
ended December 31, 2002 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the annual report fairly presents,
in all material respects, the financial condition and results of operations of
the registrant as of the dates and for the periods expressed in the annual
report.
Date: March 20, 2003
/s/ Richard M. Deneau
- ---------------------------------
Name: Richard M. Deneau
Title: President and Chief Executive Officer
CERTIFICATION ACCOMPANYING PERIODIC REPORT PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Section 1350)
I, Darrin J. Campbell, Executive Vice President and Chief Financial Officer of
Anchor Glass Container Corporation, hereby certify that:
1. The annual report of the registrant on Form 10-K for the year
ended December 31, 2002 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the annual report fairly presents,
in all material respects, the financial condition and results of operations of
the registrant as of the dates and for the periods expressed in the annual
report.
Date: March 20, 2003
/s/ Darrin J. Campbell
- ---------------------------------
Name: Darrin J. Campbell
Title: Executive Vice President and Chief Financial Officer