##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q (Mark one) þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
   o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 ANCHOR GLASS CONTAINER CORPORATION   0-23359
Commission file number Delaware
    
    59-3417812(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
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 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
þ No o. Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). Yes þ No
o. Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date. The number of shares of Anchor Glass Container Corporation, common stock, $.10 par value,
outstanding at April 29, 2005 was 24,680,843.




---



ANCHOR GLASS CONTAINER CORPORATION FORM 10-Q For the Quarterly Period Ended March 31, 2005 INDEX Page No.PART I - FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed Statements of Operations and Comprehensive Income (Loss) -
Three Months Ended March 31, 2005 and 2004
    
    
    3Condensed Balance Sheets -
March 31, 2005 and December 31, 2004
    
    
    4Condensed Statements of Cash Flows -
Three Months Ended March 31, 2005 and 2004
    
    
    5Notes to Condensed Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About
Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    21PART II - OTHER INFORMATION
    
    
    22Item 1. Legal Proceedings
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults Upon Senior Securities
    
    
    23Item 4. Submission of Matters to a Vote of Security Holders
    
    
    23Item 5. Other Information
    
    
    23Item 6. Exhibits
    
    
    23SIGNATURES
    
    
    24EX-31.1: SECTION 302 CERTIFICATION OF CEOEX-31.2: SECTION 302 CERTIFICATION OF CFOEX-32: 906 CERTIFICATIONS OF CEO OND CFO
  2




---



##### Table of Contents



PART I  FINANCIAL INFORMATION 
 Item 1. Financial Statements. ANCHOR GLASS CONTAINER CORPORATION 
 CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(unaudited)
(dollars in thousands, except per share data)
 Three Months Ended March 31,2005
    
    
    2004Net sales
    
    $
    179,322
    
    
    $
    189,561Costs and expenses:Cost of products sold
    
    
    175,906
    
    
    
    174,995Restructuring charges
    
    
    1,413
    
    
    
    Selling and administrative expenses
    
    
    7,055
    
    
    
    7,091Gain on sale of non-operating property
    
    
    (3,117
    )
    
    
    Income (loss) from operations
    
    
    (1,935
    )
    
    
    7,475Other income, net
    
    
    1,841
    
    
    
    396Interest expense
    
    
    (12,661
    )
    
    
    (12,141
    )Net loss
    
    $
    (12,755
    )
    
    $
    (4,270
    )Basic and diluted net loss per share
    
    $
    (0.52
    )
    
    $
    (0.17
    )Basic and diluted weighted average number of
common shares outstanding
    
    
    24,673,838
    
    
    
    24,516,244Comprehensive loss:Net loss
    
    $
    (12,755
    )
    
    $
    (4,270
    )Other comprehensive income (loss):Derivative income
    
    
    3,338
    
    
    
    2,014Comprehensive loss
    
    $
    (9,417
    )
    
    $
    (2,256
    )
 See Notes to Condensed Financial Statements. 3




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION 
 CONDENSED BALANCE SHEETS
(unaudited)
(dollars in thousands)
 March 31, 2005
    
    
    December 31, 2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    127
    
    
    $
    111Accounts receivable
    
    
    49,539
    
    
    
    35,601Inventories:Raw materials and manufacturing supplies
    
    
    27,356
    
    
    
    25,747Finished products
    
    
    98,208
    
    
    
    100,263Other current assets
    
    
    12,255
    
    
    
    11,993Total current assets
    
    
    187,485
    
    
    
    173,715Property, plant and equipment, net
    
    
    453,971
    
    
    
    463,682Other assets
    
    
    14,226
    
    
    
    13,742Intangible assets
    
    
    5,858
    
    
    
    6,056$
    661,540
    
    
    $
    657,195LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Borrowings under revolving credit facilities
    
    $
    71,242
    
    
    $
    50,880Current maturities of long-term debt
    
    
    9,458
    
    
    
    9,338Accounts payable
    
    
    61,217
    
    
    
    49,091Accrued expenses
    
    
    23,796
    
    
    
    30,884Accrued interest
    
    
    5,533
    
    
    
    15,079Accrued compensation and employee benefits
    
    
    26,280
    
    
    
    25,604Total current liabilities
    
    
    197,526
    
    
    
    180,876Long-term debt
    
    
    409,966
    
    
    
    412,475Long-term post-retirement liabilities
    
    
    40,942
    
    
    
    41,145Other long-term liabilities
    
    
    18,128
    
    
    
    18,409469,036
    
    
    
    472,029Commitments and contingenciesStockholders equity (deficit):Common stock
    
    
    2,468
    
    
    
    2,466Capital in excess of par value
    
    
    127,721
    
    
    
    127,618Accumulated deficit
    
    
    (137,484
    )
    
    
    (124,729
    )Accumulated other comprehensive income (loss)
    
    
    2,273
    
    
    
    (1,065
    )(5,022
    )
    
    
    4,290$
    661,540
    
    
    $
    657,195
 See Notes to Condensed Financial Statements. 4




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION 
 CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
 Three Months Ended March 31,2005
    
    
    2004Cash flows from operating activities:Net loss
    
    $
    (12,755
    )
    
    $
    (4,270
    )Adjustments to reconcile net loss to cash
used in operating activities:Depreciation
    
    
    15,988
    
    
    
    16,627Amortization
    
    
    1,068
    
    
    
    969Amortization of financing fees
    
    
    464
    
    
    
    435Restructuring charges
    
    
    1,413
    
    
    
    Gain on sale of non-operating property
    
    
    (3,117
    )
    
    
    Gain on sale of property and equipment
    
    
    (191
    )
    
    
    (1
    )Other
    
    
    (46
    )
    
    
    71Restructuring payments
    
    
    (7,104
    )
    
    
    Principal payments under the PBGC Agreement
    
    
    (1,268
    )
    
    
    (1,159
    )Decrease in cash resulting from changes in
assets and liabilities
    
    
    (7,767
    )
    
    
    (40,292
    )(13,315
    )
    
    
    (27,620
    )Cash flows from investing activities:Expenditures for property, plant and equipment
    
    
    (8,893
    )
    
    
    (20,912
    )Proceeds from sale of property and equipment
    
    
    6,472
    
    
    
    Other
    
    
    (1,037
    )
    
    
    (1,844
    )(3,458
    )
    
    
    (22,756
    )Cash flows from financing activities:Principal payments of long-term debt
    
    
    (1,023
    )
    
    
    (1,706
    )Dividends paid on common stock
    
    
    
    
    
    
    (981
    )Net draws on Revolving Credit Facility
    
    
    10,276
    
    
    
    27,965Net draws on Revolving B Loan
    
    
    10,000
    
    
    
    Other
    
    
    (2,464
    )
    
    
    2,11516,789
    
    
    
    27,393Cash and
cash equivalents:Increase (decrease) in cash and cash equivalents
    
    
    16
    
    
    
    (22,983
    )Balance, beginning of period
    
    
    111
    
    
    
    23,083Balance, end of period
    
    $
    127
    
    
    $
    100
 See Notes to Condensed Financial Statements. 5




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands)
 NOTE 1  Basis of Presentation  Management Responsibility In the opinion of management, the accompanying condensed financial statements contain all
adjustments, consisting only of normal recurring adjustments, that are necessary to present fairly
the financial position of Anchor Glass Container Corporation (the Company or Anchor) as of
March 31, 2005 and the results of operations and cash flows for the three months then ended. Certain information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed financial statements be read in conjunction with the
financial statements of Anchor included in the Companys annual report on Form 10-K for the year
ended December 31, 2004. The results of operations for the interim periods are not necessarily
indicative of the results of the full fiscal year.  Post-retirement Benefits The Company provides post-retirement benefits to 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. The components of the net periodic benefit cost are: Three Months Ended March 31,2005
    
    
    2004Service cost-benefits earned during the period
    
    $
    68
    
    
    $
    116Interest cost on projected benefit obligation
    
    
    699
    
    
    
    835Amortization of actuarial losses
    
    
    52
    
    
    
    174Total net periodic benefit cost
    
    $
    819
    
    
    $
    1,125
  Capital Stock In the three months ended March 31, 2005, the Company recorded stock option compensation
expense of $53 and received proceeds from the exercise of stock options of $52. In the three months ended March 31, 2004, the Company paid a dividend of $0.04 per share of
common stock.  Liquidity The Companys operating results and operating cash flows during fiscal 2004 were negatively
impacted by the closure of the Connellsville plant (see Note 4), the continuing high costs of
energy and its direct and indirect effect on other costs and manufacturing expenses, softer sales
volumes in the second half of 2004, the excess supply conditions currently prevailing in the glass
container industry, the effect of fourth quarter curtailments (furnace downtime) and the
acceleration of certain capital projects into 2004 from 2005. As a result of the above factors,
the Companys availability under its $115,000 revolving credit facility (the Revolving Credit
Facility) declined and the Company was unable to meet its fixed charge coverage ratio covenant at
December 31, 2004. 6




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands) As further described in Note 3, on February 14, 2005, the Company entered into a $20,000
revolving credit facility (the Revolving B Loan) with Madeleine L.L.C., an affiliate of its
largest stockholders, funds and accounts managed by Cerberus Capital Management, L.P. (Cerberus)
and its affiliates. Additionally, the lenders under the Revolving Credit Facility modified the
fixed charge coverage ratio covenant for 2005 and waived the Companys failure to comply with its
fixed charge coverage ratio covenant as of December 31, 2004. The Company also entered into a
similar agreement and waiver with its lender under its capital lease arrangements, which had an
outstanding balance of $11,300 at March 31, 2005. Under the modified covenant, the required minimum fixed charge coverage ratio for 2005 and
thereafter is determined on a monthly basis, beginning on January 1, 2005. The monthly calculation
is determined on cumulative year to date results through the measurement date. The cumulative
aspect of the calculation allows for any excess or deficit coverage in prior months to be
incorporated into the current month calculation. Prior to this modification, the Revolving Credit
Facility required that the Company meet a quarterly fixed charge coverage test, determined
cumulatively for the four calendar quarters ending on the measurement date, unless minimum
availability declined below $10,000, in which case the Company would have been required to meet a
monthly fixed charge coverage test determined cumulatively for the twelve calendar months ending on
the measurement date. Minimum fixed charge coverage ratios under the Revolving Credit Facility are
reflected in the table below. March
    
    .29:1.0
    
    June
    
    .58:1.0
    
    September
    
    .76:1.0
    
    December
    
    .75:1.0April
    
    .40:1.0
    
    July
    
    .66:1.0
    
    October
    
    .79:1.0May
    
    .50:1.0
    
    August
    
    .71:1.0
    
    November
    
    .80:1.0
 The actual fixed charge coverage ratio for March 2005 was .44:1.0. The Revolving B Loan and
the master lease agreement contain the same fixed charge coverage ratio covenant. The fixed charge coverage ratio is calculated by dividing Adjusted EBITDA by fixed charges (as
those terms are defined in the related debt agreements). Adjusted EBITDA is an amount equal to net
income (loss) plus interest expense, income taxes, depreciation and amortization, restructuring
charges, (gain)/loss on the sale of fixed assets and other non-cash items. Adjusted EBITDA is not
a presentation made in accordance with generally accepted accounting principles (GAAP) and is not
intended to present a superior measure of financial condition or profitability from those
determined under GAAP. Adjusted EBITDA is a primary component of the fixed charge coverage
financial covenant under the Companys revolving credit facilities and master lease agreement.
Fixed charges include, among other things, cash interest expense, capital expenditures, cash
dividends, payments made under the agreement with the Pension Benefit Guaranty Corporation
(PBGC), regularly scheduled principal payments of indebtedness, restructuring expenditures, taxes
paid in cash and management fees, as defined. The Company has made various operational improvements and implemented cost savings programs
which management believes will assist in its ability to meet this fixed charge coverage ratio
covenant on a monthly basis. Although the Company anticipates the ability to meet this covenant,
due to the cumulative year to date by month nature of the covenant calculations, combined with
operational variability in a manufacturing environment, there can be no assurance that activities
outside of the Companys control may impact its ability to meet these covenants. The Companys
principal sources of liquidity are funds derived from operations and borrowings under the Revolving
Credit Facility and the Revolving B Loan. At March 31, 2005 combined availability under these facilities was $28,300. The Company believes
that cash flows from operating activities, combined with available borrowings under its two
revolving credit facilities, will be sufficient to support its operations and fund its capital
expenditure 7




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands) requirements, scheduled payments of interest and principal (interest on the Senior Secured
Notes is due August 15 and February 15), restructuring payments and other liquidity needs for the
foreseeable future, although the Company cannot be assured that this will be the case. The
Companys ability to fund operations, make scheduled payments of interest and principal on its
indebtedness and maintain compliance with the terms of its revolving credit facilities and master
lease agreement, including its fixed charge coverage ratio covenant, depends on the Companys
future operating performance, which is subject to economic, financial, competitive and other
factors beyond the Companys control. If the Company is unable to generate sufficient cash flows from operations to meet its
financial obligations and achieve compliance with its debt covenant, there may be a material
adverse effect on the Companys business, financial condition and results of operations.
Management is continuing to explore alternatives to provide additional liquidity. These
alternatives include:  
    formulating plans to maintain capital expenditures at reduced levels needed for routine
maintenance and providing molds to support production, following the past two years of
significant furnace rebuilds and other improvement projects;
    implementing continued cost reduction and efficiency programs to improve results;
    continuing to reduce inventories in 2005 based upon a better balance of capacity and
demand; and
    actively pursuing sales of non-performing assets. There can be no assurance that the Company will be successful in these alternatives. Failure
to comply with financial covenants will cause default under the Revolving Credit Facility and may
cause the Companys long term capital leases and other long term debt agreements to become
currently due, as a result of cross default provisions.  New Accounting Standards In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standard No. 123R  Share-Based Payments (SFAS 123R), a revision of
Statement of Financial Accounting Standards No. 123  Accounting for Stock-Based Compensation
(SFAS 123). Under a recently released Securities and Exchange Commission rule, for companies
with a December 31 year end, SFAS 123R is effective for the first annual reporting period that
begins after December 31, 2005. The Company adopted the requirements of SFAS 123 effective January
1, 2003. The adoption of SFAS 123R is not expected to impact the Companys financial position or
results of operations. In November 2004, the FASB issued Statement of Financial Accounting Standard No. 151 
Inventory Costs, an amendment of ARB No. 43, Chapter 4 (SFAS 151), that is effective for
inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of SFAS
151 is not expected to impact the Companys financial position or results of operations. The American Jobs Creation Act of 2004 was signed into law in October 2004 and has provisions
that may impact the Companys income taxes in the future, including, but not limited to a deduction
related to qualified production activities taxable income. The FASB proposed the qualified
production activities deduction is a special deduction and will have no impact on deferred taxes
existing at the enactment date. Rather, the impact of this deduction will be reported in the period
in which the deduction is claimed on the Companys tax return. The Company is evaluating the
impact of the FASB guidance related to qualified production activities on its effective tax rate in
future periods; however, no deduction will be recorded until all available loss carryforwards are
exhausted. 8




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands)  Revision The Company revised its condensed statements of cash flows by $1,159 for the three months
ended March 31, 2004 to reflect the principal payments under its agreement with the PBGC as cash
outflows from operating activities instead of cash outflows from financing activities. This
revision had no impact on the Companys balance sheets or statements of operations. This revision had the impact of reducing cash flows from operating activities from $(26,461)
to $(27,620) for the three months ended March 31, 2004. The revision also had the impact of
increasing cash flows from financing activities from $26,234 to $27,393 for the three months ended
March 31, 2004. NOTE 2  Property, Plant and Equipment In the first quarter of 2005, the Company sold a previously closed facility located at
Dayville, Connecticut. The Company received proceeds from the sale of $6,472. Included on the
accompanying condensed statement of operations is a gain of $3,117, including the associated
release of an environmental reserve of $250 as a result of the sale. NOTE 3  Revolving Credit Facilities On February 14, 2005, the Company entered into a $20,000 Revolving B Loan with Madeleine
L.L.C., an affiliate of its largest stockholders, funds and accounts managed by Cerberus and its
affiliates. As availability under the Revolving B Loan is not subject to a borrowing base, the new
facility provides the Company with liquidity in excess of that provided by the Revolving Credit
Facility. As of March 31, 2005, advances outstanding under the Revolving B Loan were $10,000. The Revolving B Loan matures on August 30, 2007, contemporaneously with the maturity of the
Revolving Credit Facility, and bears interest on drawn portions thereof at LIBOR plus 8% (10.72% at
March 31, 2005), payable quarterly. Interest on the new facility is payable in kind through June
30, 2005 and thereafter if availability under the Revolving Credit Facility is less than an agreed
upon threshold. Advances under the Revolving B Loan are to be drawn in a minimum amount of $5,000.
Under the terms of the Revolving Credit Facility, advances are to be drawn from the Revolving B
Loan if excess availability as defined in the Revolving Credit Facility is equal to or less than
$3,000. Repayments of advances outstanding under the Revolving B Loan may not be made if
availability under the terms of the Revolving Credit Facility is less than an agreed upon
threshold. The Revolving B Loan is secured by a second lien on the Companys inventory,
receivables and general intangibles. The Revolving B Loan requires the Company to meet the same
monthly fixed charge coverage test as under the Revolving Credit Facility. 9




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands) NOTE 4  Restructuring, Impairment and Other Charges and Inventory Loss In November 2004, the Company closed its Connellsville, Pennsylvania manufacturing facility
(the Restructuring). The Company expects to complete the Connellsville facility closure
activities by December 2005 (the Restructuring Period). This decision was based on a number of
considerations, including the excess supply conditions currently prevailing in the glass container
industry and the Companys analysis of the economics of each Anchor facility. This analysis is
part of an ongoing and comprehensive operational review, begun in the third quarter of 2004, to
increase the Companys asset productivity and improve cash flow. During the Restructuring Period, the Company will record restructuring expenses and other
related charges that will, in total, approximate $51,800 to $53,000. These charges include
approximately $1,500 for a company-wide reduction in force, in addition to Connellsville, as a
result of managements evaluation of personnel costs. The major types of costs incurred and to be
incurred are: CumulativeExpenseExpense
    
    
    RecordedRecorded in
    
    
    throughTotal Expense Expected to be
    
    
    the First
    
    
    the FirstIncurred During the
    
    
    Quarter of
    
    
    Quarter ofRestructuring Period
    
    
    2005
    
    
    2005Employee termination benefits
    
    $
    12,800
    
    
    to
    
    $
    12,800
    
    
    $
    
    
    
    $
    12,799Other facility exit costs
    
    
    4,200
    
    
    to
    
    
    5,400
    
    
    
    1,413
    
    
    
    2,591Charges resulting in cash expenditures
    
    
    17,000
    
    
    to
    
    
    18,200
    
    
    
    1,413
    
    
    
    15,390Asset impairment of property and equipment
    
    
    25,800
    
    
    to
    
    
    25,800
    
    
    
    
    
    
    
    25,758Restructuring, impairment and other charges
    
    
    42,800
    
    
    to
    
    
    44,000
    
    
    
    1,413
    
    
    
    41,148Noncash write down of inventories
    
    
    9,000
    
    
    to
    
    
    9,000
    
    
    
    
    
    
    
    8,963Total plant closure related charges
    
    $
    51,800
    
    
    to
    
    $
    53,000
    
    
    $
    1,413
    
    
    $
    50,111
 Other facility exit costs primarily consist of charges that do not meet the initial
recognition requirements as of the restructuring date and are charged to expense as incurred. The
Company recorded the $25,758 asset impairment charge in the fourth quarter of 2004 to reduce this
property and equipment to its estimated salvage value, as determined based on the Companys best
estimate of recoverable value for these assets based on expected discounted future cash flows.
This property and equipment is currently classified as held for use and is recorded at its disposal
value. The Company had taken a charge of $8,963 for an inventory write-down in the fourth quarter of
2004, of which $1,100 pertained to unusable supplies and raw materials and $7,900 pertained to
finished goods related write downs and charges. A substantial amount of the finished product
inventory on location at this facility was manufactured for a few specific customers. At times,
glass container customers require discounts to purchase products manufactured at closed facilities.
Based upon the negotiations with its customers, the Company recorded a write-down of finished
product inventory to values supported by written agreements with these customers. The Company has
valued and recorded this inventory at its negotiated selling price. 10




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands) A reconciliation of the Restructuring liability, recorded in accrued expenses on the
accompanying balance sheet, is as follows: RestructuringLiabilityBalance, December 31, 2004
    
    $
    11,509Costs incurred and charged to expense
    
    
    1,413Costs paid in the 2005 first quarter
    
    
    (7,104
    )Balance, March 31, 2005
    
    $
    5,818
 The cash requirements of the Restructuring are and will be funded through operations and
borrowings under Anchors Revolving Credit Facility and Revolving B Loan. Anchor expects the
timing of cash requirements to approximate: Remaining Amounts Expectedto be Paid2005 second quarter
    
    $
    3,500
    
    
    to
    
    $
    4,100Thereafter
    
    
    3,900
    
    
    to
    
    
    4,500
 In the second quarter of 2005, the Company implemented a reduction in force at its
corporate facility. See Note 6  Subsequent Event. NOTE 5  Commitments and Contingencies On April 20, 2005, a consolidated amended class action complaint was filed in the United
States District Court for the Middle District of Florida, Tampa Division entitled Davidco
Investors, LLC, individually and on behalf of all others similarly situated v. Anchor Glass
Container Corporation, Darrin J. Campbell, Richard M. Deneau, Peter T. Reno, Joel A. Asen, James N.
Chapman, Jonathan Gallen, George Hamilton, Timothy F. Price, Alan H. Schumacher, Lenard B. Tessler,
Credit Suisse First Boston, Merrill Lynch & Co., Lehman Brothers, PricewaterhouseCoopers, LLC,
Cerberus Capital Management, L.P., Cerberus International, Ltd., Cerberus Institutional Partners,
L.P., Cerberus Institutional Partners (America), L.P. and Stephen A. Feinberg, Case Number
8:04-cv-2561-T- 24EAJ. Darrin J. Campbell was the Companys former Chief Executive Officer and a
former member of the Companys Board of Directors. Richard M. Deneau was the Companys former Chief
Executive Officer and a former member of the Companys Board of Directors. Peter T. Reno is the
Companys Vice President and Interim Operating Committee Chairman. Alan H. Schumacher, James N.
Chapman, Jonathan Gallen, Timothy F. Price and Lenard B. Tessler are members of the Companys Board
of Directors. Joel A. Asen and George Hamilton previously were members of the Companys Board of
Directors. PricewaterhouseCoopers LLP is the Companys independent registered public accounting
firm. Credit Suisse First Boston, Merrill Lynch & Co. and Lehman Brothers were underwriters of the
Companys initial public offering of common stock. Cerberus is a New York investment management
firm. Cerberus International, Ltd., Cerberus Institutional Partners, L.P. and Cerberus
Institutional Partners (America), L.P. own shares of the Companys common stock. Stephen Feinberg
exercises voting and investment authority over all securities of the Company owned by Cerberus
International, Ltd., Cerberus Institutional Partners, L.P., Cerberus Institutional Partners
(America), L.P., and certain private investment funds and managed accounts. The consolidated amended complaint was filed to amend the complaint filed by Davidco
Investors, LLC previously disclosed in the Companys Form 8-K dated December 10, 2004. Four
securities class action lawsuits brought against the Company have now been merged into this case.
The lawsuit seeks to have the court determine recognition of a class action brought on behalf of
all persons who purchased the Companys securities between September 25, 2003 and November 4, 2004
and alleges violations of Sections 11 and 15 of the Securities Act of 1933 (the Securities Act)
and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the Exchange Act) and Rule
10b-5 thereunder. 11




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands) On February 10, 2005, a complaint was filed in the United States District Court for the Middle
District of Florida, Tampa Division, entitled Christopher Carmona, derivatively on behalf of Anchor
Glass Container Corporation v. Richard M. Deneau, Darrin J. Campbell, Peter T. Reno, Alan H.
Schumacher, James N. Chapman, Jonathan Gallen, Timothy F. Price, Alexander Wolf, Joel A. Asen
and George Hamilton, as defendants, and Anchor Glass Container Corporation, as nominal defendant. The lawsuit is a derivative action brought by a shareholder of the Company on behalf of the
Company against certain of its officers and directors alleging violations of state law, including
breaches of fiduciary duties for insider selling and misappropriation of information, abuse of
control, gross mismanagement, waste of corporate assets and unjust enrichment between September
2003 and the present that allegedly have caused substantial losses and other damages to the
Company, such as to its reputation and goodwill. Although the ultimate outcome of the above-described matters cannot be determined with
certainty, the Company believes that the complaints are without merit and it and the individual
defendants intend to vigorously defend the lawsuits. 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 such 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. The Companys operations are subject to various 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. The Company does not believe
that its environmental exposure is in excess of the reserves reflected on its balance sheet,
although there can be no assurance that this will continue to be the case. NOTE 6  Subsequent Event In the second quarter of 2005, as part of a comprehensive operational review, the Company
implemented a reduction in force at its corporate facility. As a result of this action, the
Company will record a charge of approximately $800 in the second quarter of 2005. The Company
anticipates that total restructuring charges associated with its operational review will
approximate $52,600 to $54,000. 12




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. 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 eight 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, beverage, food, liquor and flavored
alcoholic beverage markets. The Company manufactures and sells its products to many of the leading
producers of products in these categories. Results of Operations Net sales.Net sales for the first quarter of 2005 were $179.3 million compared to $189.6
million for the first quarter of 2004. The decrease in net sales of $10.3 million, or 5.4%, was
principally the result of a decrease in unit shipments of 5.0% reflecting the softer beer volumes
and a weaker-than-expected performance in the ready-to-drink category, offset by higher shipments
in the liquor category where the Company experienced year-over-year gains. Decline in beer
shipments reflects continuing reduced market place demand; the ready-to-drink decrease is a result
of the absence of last years non-contracted volume shipments. Liquor sales showed strong
year-over-year improvements as new business shipments have ramped to full rate levels. The decline in sales dollars exceeded the decline in unit shipments, reflecting in part, the
planned changes in sales mix attributable to current customer contracts and the Companys inability
to fully pass through the high cost of energy to its customers. The Company was able to mitigate
some of the impact of higher energy costs (see below), as recent contract changes took effect in
2005, allowing the Company to pass on a portion of higher natural gas penalties to certain
customers. Cost of products sold.The Companys cost of products sold in the first quarter of 2005 was
$175.9 million, or 98.1% of net sales, while the cost of products sold for the first quarter of
2004 was $175.0 million, or 92.3% of net sales. Included in the 2005 first quarter results were
higher energy costs that were not able to be passed through to customers of $6.6 million, which
includes higher natural gas costs, higher transportation and raw material costs due to rising fuel
prices, and higher costs for electricity. A portion of these costs, primarily the portion related
to natural gas, will be partially recovered in second quarter 2005 based upon the contracted
pricing formulas in place with certain customers. The decline in margin includes $5.5 million
primarily due to lower volumes (as discussed above) and higher
freight, increased costs of raw
materials, primarily soda ash, of $1.0 million and costs
associated with unplanned downtime due to a weahter-related power
loss at our Winchester, Indiana glass container facility totaling
$0.9 million, which is partially offset by an accrual for insurance
recoveries of $0.6 million. Partially offsetting these increases are favorable
productivity improvements and efficiencies of $1.7 million, before giving effect to unplanned
downtime at a facility due to a weather-related power loss, a one-time gain of $0.8 million from a
legal settlement related to vendor pricing, and lower depreciation expense of $0.5 million. Restructuring, impairment and other charges, net and inventory loss.In November 2004, the
Company closed its Connellsville, Pennsylvania manufacturing facility (the Restructuring.) The
Company expects to complete the Connellsville facility closure activities by December 2005 (the
Restructuring Period). This decision was based on a number of considerations, including the excess supply conditions
currently prevailing in the glass container industry and the Companys analysis of the economics of
each Anchor facility. This analysis is part of an ongoing and comprehensive operational review,
begun in the third quarter of 2004, to increase the Companys asset productivity and improve cash
flow. During the Restructuring Period, the Company will record restructuring expenses and other
related charges that will, in total, approximate $51.8 million to $53.0 million. These charges
include approximately $1.5 million for a company-wide reduction in force, in addition to
Connellsville, as a result of managements evaluation of personnel costs. 13




---



##### Table of Contents



The major types of costs incurred and to be incurred are: CumulativeExpenseExpense
    
    
    RecordedRecorded in
    
    
    throughTotal Expense Expected to be
    
    
    the First
    
    
    the FirstIncurred During the
    
    
    Quarter of
    
    
    Quarter ofRestructuring Period
    
    
    2005
    
    
    2005Employee termination benefits
    
    $
    12.8
    
    
    to
    
    $
    12.8
    
    
    $
    
    
    
    $
    12.8Other facility exit costs
    
    
    4.2
    
    
    to
    
    
    5.4
    
    
    
    1.4
    
    
    
    2.5Charges resulting in cash expenditures
    
    
    17.0
    
    
    to
    
    
    18.2
    
    
    
    1.4
    
    
    
    15.3Asset impairment of property and equipment
    
    
    25.8
    
    
    to
    
    
    25.8
    
    
    
    
    
    
    
    25.8Restructuring, impairment and other
charges
    
    
    42.8
    
    
    to
    
    
    44.0
    
    
    
    1.4
    
    
    
    41.1Noncash write down of inventories
    
    
    9.0
    
    
    to
    
    
    9.0
    
    
    
    
    
    
    
    9.0Total plant closure related charges
    
    $
    51.8
    
    
    to
    
    $
    53.0
    
    
    $
    1.4
    
    
    $
    50.1
 Other facility exit costs primarily consist of charges that do not meet the initial
recognition requirements as of the restructuring date and are charged to expense as incurred. The
Company recorded the $25.8 million asset impairment charge in the fourth quarter of 2004 to reduce
this property and equipment to its estimated salvage value, as determined based on the Companys
best estimate of recoverable value for these assets based on expected discounted future cash flows.
This property and equipment is currently classified as held for use and is recorded at its
disposal value. The Company has taken a charge of $9.0 million for an inventory write-down in the fourth
quarter of 2004, of which $1.1 million pertained to unusable supplies and raw materials and $7.9
million pertained to finished goods related write downs and charges. A substantial amount of the
finished product inventory on location at this facility was manufactured for a few specific
customers. At times, glass container customers require discounts to purchase products manufactured
at closed facilities. Based upon the negotiations with its customers, the Company recorded a
write-down of finished product inventory to values supported by written agreements with these
customers. The Company has valued and recorded this inventory at its negotiated selling price. The cash requirements of the Restructuring are and will be funded through operations and
borrowings under Anchors Revolving Credit Facility and Revolving B Loan. Anchor expects the
timing of cash requirements to approximate: Remaining Amounts Expectedto be Paid2005 second quarter
    
    $
    3.5
    
    
    to
    
    $
    4.1Thereafter
    
    
    3.9

    
    
    to
    
    
    4.5
 Benefits of the Restructuring include productivity gains of producing volumes that meet
current customer demand at eight glass container manufacturing facilities and overhead savings from
the company-wide reduction in force. In the second quarter of 2005, as part of a comprehensive operational review, the Company
implemented a reduction in force at its corporate facility. As a result of this action, the
Company will record a charge of approximately $800 in the second quarter of 2005. The Company
anticipates that total restructuring charges associated with its operational review will
approximate $52.6 to $54.0 million. Selling and administrative expenses.Selling and administrative expenses for the three months
ended March 31, 2005 and 2004 were unchanged at $7.1 million, or 3.9 % and 3.7%, respectively, of
net sales. Selling and administrative expenses included higher costs for professional fees, offset
by lower personnel and benefit costs. 14




---



##### Table of Contents



Gain on sale of non-operating property. In the first quarter of 2005, the Company sold a
previously closed facility located at Dayville, Connecticut. The Company received proceeds from
the sale of $6.5 million. Included on the accompanying condensed statement of operations is a gain
of $3.1 million including the associated release of an environmental reserve of $0.25 million as a
result of the sale. Other income, (net).Other income, net was $1.8 million and $0.4 million, respectively, for
the three months ended March 31, 2005 and 2004. This increase of $1.4 million reflects the change
in the mark-to-market gain on certain natural gas derivatives. Interest expense.Interest expense for the first quarter of 2005 was $12.6 million compared
to $12.1 million for the first quarter of 2004, an increase of $0.5 million as a result of higher
outstanding debt levels in 2005 as compared with the first quarter of 2004 and higher average
interest rates on revolving credit facility advances. Net loss.The Company recorded a net loss of $12.8 million in the first quarter of 2005
compared to a net loss of $4.3 million in the first quarter of 2004. The increase in net loss
quarter over quarter of $8.5 million was primarily due to the factors noted above. Liquidity and Capital Resources The Companys operating results and operating cash flows during fiscal 2004 were negatively
impacted by the Restructuring, the continuing high costs of energy and its direct and indirect
effect on other costs and manufacturing expenses, softer sales volumes in the second half of 2004,
the excess supply conditions currently prevailing in the glass container industry, the effect of
fourth quarter curtailments (furnace downtime) and the acceleration of certain capital projects
into 2004 from 2005. As a result of the above factors, the Companys availability under its
Revolving Credit Facility declined and the Company was unable to meet its fixed charge coverage
ratio covenant at December 31, 2004. As discussed below, on February 14, 2005 the Company entered into a $20 million Revolving B
Loan with Madeleine L.L.C., an affiliate of its largest stockholders, funds and accounts managed by
Cerberus and its affiliates. Additionally, the lenders under the Revolving Credit Facility
modified the fixed charge coverage ratio covenant for 2005 and waived the Companys failure to
comply with its fixed charge coverage ratio covenant as of December 31, 2004. The Company also
entered into a similar agreement and waiver with its lender under its capital lease arrangements. Under the modified covenant, the required minimum fixed charge coverage ratio for 2005 and
thereafter, is determined on a monthly basis, beginning on January 1, 2005. The monthly
calculation is determined on cumulative year to date results through the measurement date. The
cumulative aspect of the calculation allows for any excess or deficit coverage in prior months to
be incorporated into the current month calculation. Prior to this modification, the Revolving
Credit Facility required that the Company meet a quarterly fixed charge coverage test, determined
cumulatively for the four calendar quarters ending on the measurement date, unless minimum
availability declined below $10 million, in which case the Company would have been required to meet
a monthly fixed charge coverage test determined cumulatively for the twelve calendar months ending
on the measurement date. Minimum fixed charge coverage ratios under the Revolving Credit Facility
are reflected in the table below. March
    
    .29:1.0
    
    June
    
    .58:1.0
    
    September
    
    .76:1.0
    
    December
    
    .75:1.0April
    
    .40:1.0
    
    July
    
    .66:1.0
    
    October
    
    .79:1.0May
    
    .50:1.0
    
    August
    
    .71:1.0
    
    November
    
    .80:1.0
 The actual fixed charge coverage ratio for March 2005 was .44:1.0. The Revolving B Loan and
the master lease agreement contain the same fixed charge coverage ratio covenant. The fixed charge coverage ratio is calculated by dividing Adjusted EBITDA by fixed charges (as
those terms are defined in the related debt agreements). Adjusted EBITDA is an amount equal to net 15




---



##### Table of Contents



income (loss) plus interest expense, income taxes, depreciation and amortization,
restructuring charges, (gain)/loss on the sale of fixed assets and other non-cash items. Adjusted
EBITDA is not a presentation made in accordance with generally accepted accounting principles
(GAAP) and is not intended to present a superior measure of financial condition or profitability
from those determined under GAAP. Adjusted EBITDA is a primary component of the fixed charge
coverage financial covenant under the Companys revolving credit facilities and master lease
agreement. Fixed charges include, among other things, cash interest expense, capital expenditures,
cash dividends, payments made under the agreement with the PBGC, regularly scheduled principal
payments of indebtedness, restructuring expenditures, taxes paid in cash and management fees, as
defined. Peak operating needs are in the fourth and first quarters of the year, at which time working
capital borrowings are significantly higher than at other times of the year. The Company has made
various operational improvements and implemented cost savings programs which management believes
will assist in its ability to meet this fixed charge coverage ratio covenant on a monthly basis.
Although the Company anticipates the ability to meet this covenant, due to the cumulative year to
date by month nature of the covenant calculations, combined with operational variability in a
manufacturing environment, there can be no assurance that activities outside of the Companys
control may impact its ability to meet these covenants. The Companys principal sources of
liquidity are funds derived from operations and borrowings under the Revolving Credit Facility and
the Revolving B Loan. The Company believes that cash flows from operating activities, combined with available
borrowings under its two revolving credit facilities, will be sufficient to support its operations
and fund its capital expenditure requirements, scheduled payments of interest and principal
(interest on the Senior Secured Notes is due August 15 and February 15), Restructuring payments,
and other liquidity needs for the foreseeable future, although the Company cannot be assured that
this will be the case. The Companys ability to fund operations, make scheduled payments of
interest and principal on its indebtedness and maintain compliance with the terms of its revolving
credit facilities and master lease agreement, including its fixed charge coverage ratio covenant,
depends on the Companys future operating performance, which is subject to economic, financial,
competitive and other factors beyond the Companys control. If the Company is unable to generate sufficient cash flows from operations to meet its
financial obligations and achieve compliance with its debt covenant, there may be a material
adverse effect on the Companys business, financial condition and results of operations.
Management is continuing to explore alternatives to provide additional liquidity. These
alternatives include:  
    formulating plans to maintain capital expenditures at reduced levels needed for
routine maintenance and providing molds to support production, following the past two
years of significant furnace rebuilds and other improvement projects;
    implementing continued cost reduction and efficiency programs to improve results;
    continuing to reduce inventories in 2005 based upon a better balance of capacity and
demand; and
    actively pursuing sales of non-performing assets. There can be no assurance that the Company will be successful in these alternatives. Failure
to comply with financial covenants will cause default under the Revolving Credit Facility and, may
cause the Companys long term capital leases and other long term debt agreements to become
currently due, as a result of cross default provisions. 16




---



##### Table of Contents



Cash Flows Operating Activities.Operating activities consumed $13.3 million in cash in the three months
ended March 31, 2005, as compared to cash used of $27.6 million in the three months ended March 31,
2004. This overall decline in cash used from operations reflects the decline in earnings and the
changes in working capital items, reconciled as follows: Net loss
    
    $
    (12.8
    )Noncash charges
    
    
    15.6Net change in cash earnings
    
    
    2.8Change in working capital components:Accounts receivable
    
    
    (13.9
    )Inventories
    
    
    0.4Liabilities (other than current and long-term debt)
    
    
    (3.7
    )Principal payments under the PBGC Agreement
    
    
    (1.3
    )Other changes
    
    
    2.4Operating cash flows
    
    $
    (13.3
    )
 See   Results of Operations for a discussion of the decline in earnings. Accounts
receivable increased $13.9 million. The balance in accounts receivable and its cash flow effect
are primarily driven by the Companys sales within thirty days of period end; sales in March 2005
exceeded sales in December 2005 by $15 million as a result of lower sales in the fourth quarter due
to lower seasonal sales and the overall softness in volumes in that quarter. Overall inventory
levels are flat as compared to year end. Historically, the Company has built inventory in the
first quarter in anticipation of seasonal demands. However, as a result of operating eight
facilities in 2005, as compared to nine facilities in 2004, finished product inventory levels
declined slightly. Net current liabilities have declined from the
year end due to the payment of the semi-annual interest on the Senior
Secured Notes offset by increases following the curtailment of
production in the 2004 fourth quarter. Investing Activities.Cash consumed in investing activities was $3.5 million in the first
quarter 2005, as compared to $22.7 million in the first quarter of 2004. Capital expenditures were
$8.9 million and $20.9 million, respectively in 2005 and 2004. See Capital expenditures. In
the first quarter of 2005, the Company received proceeds of $6.5 million from the sale of a
previously closed facility. Financing Activities.Net cash provided in financing activities was $16.8 million in the
first quarter 2005, as compared to cash provided of $27.4 million in first quarter of 2004. The
net financing activities in 2005 and 2004 principally reflect borrowings under the Revolving Credit
Facility and in 2005 also reflects borrowings under the Revolving B Loan. A cash dividend payment
on the Companys common stock, paid in the first quarter of 2004, was approximately $1.0 million.  Debt and Other Contractual Obligations The Company has aggregate indebtedness of $350.0 million under its Senior Secured Notes.
Semi-annual interest payments of $19.3 million are due each August 15 and February 15. As of March 31, 2005, advances outstanding under the Revolving Credit Facility were $61.2
million and outstanding letters of credit on this facility were $9.3 million. Advances outstanding
under the Revolving B Loan were $10.0 million; combined borrowing availability was $28.3 million.
As of April 28, 2005, advances outstanding under the Revolving Credit Facility and the Revolving B
Loan were $65.9 million and $10.0 million, respectively, and combined availability under the both
facilities was $22.2 million. The Companys obligations under the Revolving Credit Facility are secured by a first priority
security interest in 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. 17




---



##### Table of Contents



On February 14, 2005, the Company reached an agreement with its lenders under Revolving Credit
Facility to modify the fixed charge coverage ratio covenant under the facility for the 2005. In
addition, the lenders waived the Companys failure to comply with its fixed charge coverage ratio
covenant as of December 31, 2004. The Company also entered into a similar agreement and waiver
with its lender under its master lease agreement. At March 31, 2005, the Company was required to
maintain a fixed charge coverage ratio of .29:1.0. The actual fixed charge coverage ratio for
March 2005 was .44.0:1.0 and the Company is in compliance with this covenant as of March 31, 2005. Under a master lease agreement entered into in December 2002, the Company leased equipment
under a lease term of five years. The master lease agreement is structured as a capital lease
under generally accepted accounting principles. For each group of equipment items the Company
agreed to lease, it entered into an equipment schedule that applied the terms of the master lease
to such equipment. As of March 31, 2005, $11.3 million was outstanding under this lease agreement.
On February 14, 2005, the Company and the lessor entered into an agreement and waiver, similar to
that entered into with the lenders of the Revolving Credit Facility, with respect to the fixed
charge coverage test as of December 31, 2004 and the monthly periods of 2005. On February 14, 2005, the Company entered into the Revolving B Loan. As availability under
the Revolving B Loan is not subject to a borrowing base, the new facility provides the Company with
liquidity in excess of that provided by the Revolving Credit Facility. The Revolving B Loan
matures on August 30, 2007, contemporaneously with the maturity of the Revolving Credit Facility,
and bears interest on drawn portions thereof at LIBOR plus 8% (10.72% at March 31, 2005), payable
quarterly. Interest on the new facility is payable in kind through June 30, 2005 and thereafter if
availability under the Revolving Credit Facility is less than an agreed upon threshold. Advances
under the Revolving B Loan are to be drawn in a minimum amount of $5.0 million. Under the terms of
the Revolving Credit Facility, advances are to be drawn from the Revolving B Loan if excess
availability as defined in the Revolving Credit Facility is equal to or less than $3.0 million.
Repayments of advances outstanding under the Revolving B Loan may not be made if availability under
the terms of the Revolving Credit Facility is less than an agreed upon threshold. The Revolving B
Loan is secured by a second lien on the Companys inventory, receivables and general intangibles.
The Revolving B Loan requires the Company to meet the same monthly fixed charge coverage test as
under the Revolving Credit Facility. In August 2002, in connection with its reorganization, the Company entered into a ten-year
payment obligation under an agreement with the PBGC. The present value of this obligation was
$54.5 million at March 31, 2005. The Company anticipates expenditures in the remainder of 2005 of $21 to $26 million for
capital expenditures, $19 million for interest on the Senior Secured Notes, $8 to $9.5 million for
Restructuring payments and $7 million for operating and capital leases. In addition, the Company is obligated to pay approximately $4.2 million annually related to
its post-retirement benefit plan and $6.2 million annually to multiemployer pension plans for the
future service benefits of its hourly employees.  Capital Expenditures Capital expenditures were $8.9 million in the first quarter of 2005 as compared to $20.9
million in the first quarter of 2004, which included a major reconstruction on a furnace at its
Shakopee, Minnesota facility. Capital spending for the remainder of 2005 is planned to be
approximately $21 to $26 million primarily for maintenance and molds to support production; no
significant improvement projects are planned for 2005. This lower capital spending reflects the
revised 2004 plans which accelerated certain projects from 2005 into 2004 and lower ongoing
maintenance requirements resulting from the Connellsville plant closure. The Companys principal
sources of liquidity for the funding of the 2005 capital expenditures are expected to be from
operations and borrowings under the Revolving Credit Facility and the Revolving B Loan. 18




---



##### Table of Contents



The Company believes that cash flows from operating activities, combined with available
borrowings under the Revolving Credit Facility and the Revolving B Loan, will be sufficient to
support its operations, including capital expenditures, scheduled payments of interest and
principal (interest on the Senior Secured Notes is due August 15 and February 15), Restructuring
payments and other liquidity requirements, for the foreseeable future, although the Company cannot
be assured that this will be the case. 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. The Company has
experienced significant cost increases in energy, materials and services impacted by energy, such
as freight, and has not been fully able to pass on these cost increases to its customers. During
2004 and the first quarter of 2005, the Company was unable to fully pass through cost increases to
customers; although certain of the Companys contracts with its customers incorporate price
adjustments based on changes in the costs, the change in pricing may lag behind the cost incurred
to obtain these cost components. Since 2000, closing prices for natural gas 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. The annual average closing prices of natural gas for 2004, 2003 and 2002
were $6.138, $5.388 and $3.221, per MMBTU, respectively. The natural gas price for May 2005
closed at $6.748 per MMBTU. The Company has no way of predicting to what extent natural gas prices
will fluctuate in the future. Any significant increase, or the inability to pass on those costs to
customers, would adversely impact the Companys margins and operating performance. Seasonality Demand for beer, iced tea and other beverages is typically stronger during the summer months.
Because the Companys shipment volume is typically higher in the second and third quarters, the
Company usually builds inventory during the fourth and first quarters in anticipation of seasonal
demands. Although the Company anticipates some increased seasonal volumes in the summer months,
the 2005 summer season is expected to be impacted by softer consumer
demand in the beer category. Finished product inventory levels in the first quarter of 2005, however, declined slightly as
a result of Connellsville manufacturing facility closure in the fourth quarter of 2004. Inventory
levels were impacted in the latter part of 2004 by the softer than normal seasonal sales pattern as
consumption was affected by severe weather in the southeastern U.S. In order to enter 2005 with
lower inventory levels and to better align production with customer requirements, Anchor curtailed
production selectively during the fourth quarter. 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 consume working capital and
adversely affect the Companys liquidity on a seasonal basis. New Accounting Standards In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standard No. 123R  Share-Based Payments (SFAS 123R), a revision of
Statement of Financial Accounting Standards No. 123  Accounting for Stock-Based Compensation
(SFAS 123). Under a recently released Securities and Exchange Commission rule, for companies
with a December 31 year end, SFAS 123R is effective for the first annual reporting period that
begins after December 31, 2005. The Company adopted the requirements of SFAS 123 effective January
1, 2003. The adoption of SFAS 123R is not expected to not impact the Companys financial position
or results of operations. 19




---



##### Table of Contents



In November 2004, the FASB issued Statement of Financial Accounting Standard No. 151 
Inventory Costs, an amendment of ARB No. 43, Chapter 4 (SFAS 151), that is effective for
inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of SFAS
151 is not expected to impact the Companys financial position or results of operations. The American Jobs Creation Act of 2004 was signed into law in October 2004 and has provisions
that may impact the Companys income taxes in the future, including, but not limited to a deduction
related to qualified production activities taxable income. The FASB proposed the qualified
production activities deduction is a special deduction and will have no impact on deferred taxes
existing at the enactment date. Rather, the impact of this deduction will be reported in the period
in which the deduction is claimed on the Companys tax return. The Company is evaluating the
impact of the FASB guidance related to qualified production activities on its effective tax rate in
future periods; however, no deduction will be recorded until all available loss carryforwards are
exhausted. Information Concerning Forward-Looking Statements This report includes forward-looking statements. 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 beverage and food industries;
    prevailing interest rates;
    prices for energy, particularly natural gas, other raw materials and freight;
    legal proceedings and regulatory matters; and
    general economic conditions. Forward-looking statements involve risks and uncertainties faced by the Company 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;
fluctuations 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 demand from 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. All forward-looking statements are subject to risks and uncertainties,
including without limitation those identified in the Companys annual report on Form 10-K, which
could cause actual results to differ from those projected. The Company disclaims any obligation to
update any forward-looking statements. 
 Item 3. 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 and the Revolving B Loan is subject
to interest rates based on a floating benchmark rate, the LIBOR rate. A change in interest rates
under the Revolving Credit Facility or the Revolving B Loan could adversely impact results of
operations. A 50 basis point fluctuation in the market rate of interest would impact annual
interest expense by approximately $0.2 million, based on average borrowings outstanding during
2005. The Companys long-term debt instruments are subject to fixed interest rates and, in
addition, the amount of principal to be repaid at 20




---



##### Table of Contents



maturity is also fixed. Therefore, the Company is not subject to market risk from its
long-term debt instruments. Less than 1% 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. Through the purchase of natural gas futures, the Company has hedged certain of its
estimated natural gas purchases, typically over a period of nine to twelve months. 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. See Managements
Discussion and Analysis of Financial Condition and Results of Operations  Impact of Inflation. 
 Item 4. Controls and Procedures. An evaluation was carried out, as of the end of the period covered by this report, under the
supervision of the persons performing the function of 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 Rule 13a-15 of the Securities Exchange Act of 1934, as amended.
Based on that evaluation, the persons performing the function of chief executive officer and chief
financial officer have concluded that the Companys disclosure controls and procedures are
effective. There were no changes in the Companys internal controls over financial reporting during the
first quarter of 2005 that materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting. 21




---



##### Table of Contents



PART II - OTHER INFORMATION 
 Item 1. Legal Proceedings. On April 20, 2005, a consolidated amended class action complaint was filed in the United
States District Court for the Middle District of Florida, Tampa Division entitled Davidco
Investors, LLC, individually and on behalf of all others similarly situated v. Anchor Glass
Container Corporation, Darrin J. Campbell, Richard M. Deneau, Peter T. Reno, Joel A. Asen, James N.
Chapman, Jonathan Gallen, George Hamilton, Timothy F. Price, Alan H. Schumacher, Lenard B. Tessler,
Credit Suisse First Boston, Merrill Lynch & Co., Lehman Brothers, PricewaterhouseCoopers, LLC,
Cerberus Capital Management, L.P., Cerberus International, Ltd., Cerberus Institutional Partners,
L.P., Cerberus Institutional Partners (America), L.P. and Stephen A. Feinberg, Case Number
8:04-cv-2561-T- 24EAJ. Darrin J. Campbell was the Companys former Chief Executive Officer and a
former member of the Companys Board of Directors. Richard M. Deneau was the Companys former
Chief Executive Officer and a former member of the Companys Board of Directors. Peter T. Reno is
the Companys Vice President and Interim Operating Committee Chairman. Alan H. Schumacher, James N.
Chapman, Jonathan Gallen, Timothy F. Price and Lenard B. Tessler are members of the Companys Board
of Directors. Joel A. Asen and George Hamilton previously were members of the Companys Board of
Directors. PricewaterhouseCoopers LLP is the Companys independent registered public accounting
firm. Credit Suisse First Boston, Merrill Lynch & Co. and Lehman Brothers were underwriters of the
Companys initial public offering of common stock. Cerberus is a New York investment management
firm. Cerberus International, Ltd., Cerberus Institutional Partners, L.P. and Cerberus
Institutional Partners (America), L.P. own shares of the Companys common stock. Stephen Feinberg
exercises voting and investment authority over all securities of the Company owned by Cerberus
International, Ltd., Cerberus Institutional Partners, L.P., Cerberus Institutional Partners
(America), L.P., and certain private investment funds and managed accounts. The consolidated amended complaint was filed to amend the complaint filed by Davidco
Investors, LLC previously disclosed in the Companys Form 8-K dated December 10, 2004. Four
securities class action lawsuits brought against the Company have now been merged into this case.
The lawsuit seeks to have the court determine recognition of a class action brought on behalf of
all persons who purchased the Companys securities between September 25, 2003 and November 4, 2004
and alleges violations of Sections 11 and 15 of the Securities Act of 1933 (the Securities Act)
and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the Exchange Act) and Rule
10b-5 thereunder. On February 10, 2005, a complaint was filed in the United States District Court for the Middle
District of Florida, Tampa Division, entitled Christopher Carmona, derivatively on behalf of Anchor
Glass Container Corporation v. Richard M. Deneau, Darrin J. Campbell, Peter T. Reno, Alan H.
Schumacher, James N. Chapman, Jonathan Gallen, Timothy F. Price, Alexander Wolf, Joel A. Asen and
George Hamilton, as defendants, and Anchor Glass Container Corporation, as nominal defendant. The lawsuit is a derivative action brought by a shareholder of the Company on behalf of the
Company against certain of its officers and directors alleging violations of state law, including
breaches of fiduciary duties for insider selling and misappropriation of information, abuse of
control, gross mismanagement, waste of corporate assets and unjust enrichment between September
2003 and the present that allegedly have caused substantial losses and other damages to the
Company, such as to its reputation and goodwill. Although the ultimate outcome of the above-described matters cannot be determined with
certainty, the Company believes that the complaints are without merit and it and the individual
defendants intend to vigorously defend the lawsuits. 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 such 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. 22




---



##### Table of Contents



The Companys operations are subject to various 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. The Company does not believe
that its environmental exposure is in excess of the reserves reflected on its balance sheet,
although there can be no assurance that this will continue to be the case. 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None 
 Item 3. Defaults Upon Senior Securities. None 
 Item 4. Submission of Matters to a Vote of Security Holders. None 
 Item 5. Other Information. None 
 Item 6. Exhibits. Exhibit 31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive OfficerExhibit 31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial OfficerExhibit 32
    
    Section 1350 Certifications
 23




---



##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized. ANCHOR GLASS CONTAINER CORPORATIONDate:  May 10, 2005
    /s/ Peter T. RenoPeter T. RenoVice President and
Interim Operating Committee Chairman
(Principal Financial Officer and
Duly Authorized Officer) 24