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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION  FORM 10-Q (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 ANCHOR GLASS CONTAINER CORPORATION 
  0-23359 
  Delaware
    
    59-3417812(State or other jurisdiction of
    
    (I.R.S. Employerincorporation 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 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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]. 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 October 29, 2004 was 24,623,843.




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ANCHOR GLASS CONTAINER CORPORATION FORM 10-Q For the Quarterly Period Ended September 30, 2004 INDEX Page No.PART I - FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed Statements of Operations and Comprehensive Income (Loss) -
Three and Nine Months Ended September 30, 2004 and 2003
    
    
    3Condensed Balance Sheets -
September 30, 2004 and December 31, 2003
    
    
    4Condensed Statements of Cash Flows -
Nine Months Ended September 30, 2004 and 2003
    
    
    5Notes to Condensed Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    9Item 3. Quantitative and Qualitative Disclosures About
Market Risk
    
    
    14Item 4. Controls and Procedures
    
    
    14PART II - OTHER INFORMATION
    
    
    15Item 1. Legal Proceedings
    
    
    15Item 2. Changes in Securities and Use of Proceeds
    
    
    15Item 3. Defaults Upon Senior Securities
    
    
    15Item 4. Submission of Matters to a Vote of Security Holders
    
    
    15Item 5. Other Information
    
    
    15Item 6. Exhibits and Reports on Form 8-K
    
    
    15SIGNATURES
    
    
    16Ex-10.14 Amended and Restated Southeast Glass Bottle Supply AgreementEx-10.15 Richard M. Deneau Employment AgreementEx-10.16 Darrin J. Campbell Employment AgreementEx-10.17 Roger L. Erb Employment AgreementEx-31.1 Section 302 CEO CertificationEx-31.2 Section 302 CFO CertificationEx-32 Section 906 CFO Certification
 2




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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)
 Nine Months Ended
    
    Three Months EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003Net sales
    
    $
    589,836
    
    
    $
    542,771
    
    
    $
    186,224
    
    
    $
    193,546Costs and expenses:Cost of products sold
    
    
    543,625
    
    
    
    499,688
    
    
    
    174,367
    
    
    
    178,407Gain on sale of non-operating
properties
    
    
    (3,823
    )
    
    
    
    
    
    
    
    
    
    
    Selling and administrative expenses
    
    
    20,141
    
    
    
    20,093
    
    
    
    6,832
    
    
    
    6,627Income from operations
    
    
    29,893
    
    
    
    22,990
    
    
    
    5,025
    
    
    
    8,512Other income (expense), net
    
    
    1,542
    
    
    
    (1,029
    )
    
    
    1,143
    
    
    
    (1,097
    )Interest expense
    
    
    (36,210
    )
    
    
    (36,805
    )
    
    
    (12,049
    )
    
    
    (11,667
    )Net loss
    
    $
    (4,775
    )
    
    $
    (14,844
    )
    
    $
    (5,881
    )
    
    $
    (4,252
    )Preferred stock dividends
    
    $
    
    
    
    $
    (7,263
    )
    
    $
    
    
    
    $
    (2,512
    )Excess fair value of consideration
transferred over carrying value of
Series C preferred stock upon
redemption
    
    $
    
    
    
    $
    (38,118
    )
    
    $
    
    
    
    $
    (38,118
    )Loss applicable to common stock
    
    $
    (4,775
    )
    
    $
    (60,225
    )
    
    $
    (5,881
    )
    
    $
    (44,882
    )Basic and diluted net loss per share
applicable to common stock
    
    $
    (0.19
    )
    
    $
    (4.40
    )
    
    $
    (0.24
    )
    
    $
    (3.20
    )Basic and diluted weighted average
number of common shares outstanding
    
    
    24,562,215
    
    
    
    13,673,557
    
    
    
    24,614,973
    
    
    
    14,015,021Dividends per common share
    
    $
    0.12
    
    
    $
    
    
    
    $
    0.04
    
    
    $
    Comprehensive income (loss):Net loss
    
    $
    (4,775
    )
    
    $
    (14,844
    )
    
    $
    (5,881
    )
    
    $
    (4,252
    )Other comprehensive income
(loss):Derivative income (loss)
    
    
    1,559
    
    
    
    (434
    )
    
    
    (196
    )
    
    
    (1,141
    )Comprehensive loss
    
    $
    (3,216
    )
    
    $
    (15,278
    )
    
    $
    (6,077
    )
    
    $
    (5,393
    )
 See Notes to Condensed Financial Statements. 3




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ANCHOR GLASS CONTAINER CORPORATION 
 CONDENSED BALANCE SHEETS
 (dollars in thousands)
 September 30, 2004(unaudited)
    
    December 31, 2003ASSETSCurrent assets:Cash and cash equivalents
    
    $
    158
    
    
    $
    23,083Accounts receivable
    
    
    48,685
    
    
    
    36,674Inventories:Raw materials and manufacturing supplies
    
    
    31,182
    
    
    
    28,144Finished products
    
    
    106,297
    
    
    
    108,640Other current assets
    
    
    11,257
    
    
    
    11,230Total current assets
    
    
    197,579
    
    
    
    207,771Property, plant and equipment, net
    
    
    479,778
    
    
    
    477,253Other assets
    
    
    14,381
    
    
    
    14,674Intangible assets
    
    
    6,252
    
    
    
    6,846$
    697,990
    
    
    $
    706,544LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Borrowings under revolving credit facility
    
    $
    29,921
    
    
    $
    Current maturities of long-term debt
    
    
    9,221
    
    
    
    8,895Accounts payable
    
    
    46,166
    
    
    
    55,000Accrued expenses
    
    
    15,413
    
    
    
    17,004Accrued interest
    
    
    5,384
    
    
    
    14,900Accrued compensation and employee benefits
    
    
    25,792
    
    
    
    31,271Total current liabilities
    
    
    131,897
    
    
    
    127,070Long-term debt
    
    
    414,953
    
    
    
    422,881Long-term post-retirement liabilities
    
    
    42,012
    
    
    
    40,197Other long-term liabilities
    
    
    18,949
    
    
    
    20,833475,914
    
    
    
    483,911Commitments and contingenciesStockholders equity:Common stock
    
    
    2,462
    
    
    
    2,451Capital in excess of par value
    
    
    127,370
    
    
    
    129,549Accumulated deficit
    
    
    (43,356
    )
    
    
    (38,581
    )Accumulated other comprehensive income
    
    
    3,703
    
    
    
    2,14490,179
    
    
    
    95,563$
    697,990
    
    
    $
    706,544
 See Notes to Condensed Financial Statements. 4




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ANCHOR GLASS CONTAINER CORPORATION 
 CONDENSED STATEMENTS OF CASH FLOWS
 (unaudited)
 (dollars in thousands)
 Nine Months EndedSeptember 30,2004
    
    2003Cash flows from operating activities:Net loss
    
    $
    (4,775
    )
    
    $
    (14,844
    )Adjustments to reconcile net loss to cash provided by (used in)
operating activities:Depreciation
    
    
    46,865
    
    
    
    49,453Amortization
    
    
    3,580
    
    
    
    2,263Amortization of financing fees
    
    
    1,328
    
    
    
    4,846(Gain) loss on fixed asset sales
    
    
    (3,843
    )
    
    
    387Other
    
    
    (1,012
    )
    
    
    (148
    )Decrease in cash resulting from changes in assets and liabilities
    
    
    (40,885
    )
    
    
    (49,993
    )1,258
    
    
    
    (8,036
    )Cash flows from investing activities:Expenditures for property, plant and equipment
    
    
    (48,928
    )
    
    
    (80,437
    )Purchase of equipment under leases
    
    
    
    
    
    
    (39,217
    )Proceeds from sale of property and equipment
    
    
    5,688
    
    
    
    10,590Change in restricted cash
    
    
    
    
    
    
    4,387Other
    
    
    (3,449
    )
    
    
    (2,391
    )(46,689
    )
    
    
    (107,068
    )Cash flows from financing activities:Proceeds from issuance of long-term debt
    
    
    
    
    
    
    353,750Principal payments of long-term debt
    
    
    (7,306
    )
    
    
    (176,004
    )Dividends paid on common stock
    
    
    (2,948
    )
    
    
    Net draws (repayments) on revolving credit facility
    
    
    29,921
    
    
    
    (47,413
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    111,000Redemption of Series C preferred stock, including dividends
    
    
    
    
    
    
    (85,285
    )Payment of capital lease obligations for assets purchased
    
    
    
    
    
    
    (5,539
    )Plan distributions to Series A preferred stock
    
    
    
    
    
    
    (3,680
    )Repurchase of warrants
    
    
    
    
    
    
    (1,500
    )Other
    
    
    2,839
    
    
    
    (15,724
    )22,506
    
    
    
    129,605Cash and cash equivalents:Increase (decrease) in cash and cash equivalents
    
    
    (22,925
    )
    
    
    14,501Balance, beginning of period
    
    
    23,083
    
    
    
    351Balance, end of period
    
    $
    158
    
    
    $
    14,852Supplemental noncash activities:Non-cash equipment financing
    
    $
    
    
    
    $
    10,000
 See Notes to Condensed Financial Statements. 5




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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 September
30, 2004 and the results of operations for the three and nine months ended
September 30, 2004 and 2003 and cash flows for the nine months then ended
September 30, 2004 and 2003. 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, 2003. 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: Nine Months Ended
    
    Three Months EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003Service cost-benefits earned
during the period
    
    $
    345
    
    
    $
    347
    
    
    $
    113
    
    
    $
    116Interest cost on projected
benefit obligation
    
    
    2,446
    
    
    
    2,706
    
    
    
    775
    
    
    
    902Amortization of actuarial
losses (gains)
    
    
    335
    
    
    
    397
    
    
    
    (13
    )
    
    
    132Total net periodic benefit cost
    
    $
    3,126
    
    
    $
    3,450
    
    
    $
    875
    
    
    $
    1,150
 In December 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the Medicare Act) was signed into law. The
Medicare Act introduces a prescription drug benefit under Medicare as well as a
federal subsidy to sponsors of retiree health care benefit plans that provide a
benefit that is at least actuarially equivalent to Medicare Part D. In May
2004, the Financial Accounting Standards Board issued FSP No. FAS 106-2 -
Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 (FSP FAS 106-2). FSP FAS
106-2 provides guidance on accounting for the effects of the Medicare Act for
employers that sponsor postretirement health care plans that provide
prescription drug benefits and is effective for interim periods beginning after
June 15, 2004. The Company has determined that the plan is
actuarially equivalent to Medicare Part D and has adopted the provisions of FSP
FAS 106-2. Estimated pending final Medicare regulations, the accumulated post-retirement benefit obligation decreased approximately $5,000 and
the net periodic benefit cost above decreased $250. 6




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ANCHOR GLASS CONTAINER CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands) Capital Stock In the nine months ended September 30, 2004, the Company declared and paid
cash dividends on its common stock of $2,948, recorded stock option
compensation expense of $509 and received the proceeds from the exercise of
stock options of $271. Reclassifications Certain reclassifications have been made to the statements of operations
and cash flows for the periods prior to the nine months ended September 30,
2004 to conform to the current period presentation. NOTE 2  Property, Plant and Equipment In the second quarter of 2004, the Company sold three previously closed
facilities located at Cliffwood, New Jersey, Royersford, Pennsylvania and
Chattanooga, Tennessee. The Company received proceeds from these sales of
$5,469. Included on the accompanying condensed statement of operations is a
gain of $2,848 and the associated release of a non-cash reserve of $975 as a
result of the sale. Effective January 1, 2004, the Company implemented the results of an
independent appraisal to update the depreciable lives of its property, plant
and equipment, and accordingly, calculated depreciation expense for the first
nine months of 2004 using the updated lives, resulting in a reduction in the
amount of depreciation that would have been otherwise expensed. Depreciation
and amortization recorded in the three and nine months ended September 30, 2004
were $16,592 and $50,445, respectively. On a pro forma basis, without the
update to depreciable lives, depreciation and amortization expense in the three
months and nine months ended September 30, 2004 would have been greater by
$4,481 and $10,857, respectively. NOTE 3  Commitments and Contingencies 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. Legal expenses incurred related to these contingencies are generally
expensed as incurred. 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 4  Subsequent Events Restructuring and other charges At a meeting held November 4, 2004, the board of directors of Anchor (the
Board) decided to close the 624,000 square foot Connellsville, Pennsylvania
facility. Production was terminated effective as of the close of business on
November 4. The Company expects to complete plant closure activities within
twelve months. Approximately 300 employees will be affected. The Board made this decision taking into consideration the excess supply
conditions currently prevailing in the glass container industry and the
Companys analysis of the economics of each Anchor 7




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ANCHOR GLASS CONTAINER CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands) facility. This analysis is part of an ongoing and comprehensive
operational review, begun in the third quarter, to increase the Companys asset
productivity and free cash flow. The Company will record restructuring expenses and other related charges
that will, in total, approximate $47,000 to $57,000. These charges include approximately $2,000 for a company-wide reduction in force, in addition
to Connellsville, as a result of managements evaluation of personnel costs. Of this total, $44,000 to $51,000 will be
recorded in the fourth quarter of 2004. The major types of costs to be incurred are (dollars in millions): Employee termination benefits
    
    $
    13
    
    
    to
    
    $
    14Other facility exit costs
    
    
    5
    
    
    to
    
    
    8Charges that will result in future cash expenditures
    
    
    18
    
    
    to
    
    
    22Noncash write down of property and equipment
    
    
    25
    
    
    to
    
    
    25Noncash write down of inventories
    
    
    4
    
    
    to
    
    
    10Total expected charges
    
    $
    47
    
    
    to
    
    $
    57
 The
    cash requirements of the restructuring will be funded through operations and
    borrowings under Anchors revolving credit facility (defined below). Anchor expects the timing of cash requirements to approximate
    (dollars in millions): 2004 fourth quarter
    
    $
    5
    
    
    to
    
    $
    72005 first quarter
    
    
    7
    
    
    to
    
    
    82005 second quarter
    
    
    3
    
    
    to
    
    
    4Thereafter
    
    
    3
    
    
    to
    
    
    3
 Revolving Credit Facility On
    November 4, 2004, Anchor reached an agreement with its primary lender
    to modify the terms of its revolving credit facility (the Revolving
    Credit Facility). This modification expands the maximum borrowing availability
    under the facility to $115,000 from $100,000, increases the borrowing base
    and extends the term to August 30, 2007. Additionally, the fixed charge
    coverage ratio covenant is eased beginning in the fourth quarter of 2004 to
    account for the impact of the above described restructuring charges. Other On November 4, 2004, the Board suspended the common stock quarterly
dividend in view of the Companys efforts to improve cash flow. 8




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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 third quarter of 2004 were $186.2 million
compared to $193.5 million for the third quarter of 2003, a decrease of $7.3
million, or 3.8%. Net sales for the first nine months of 2004 were $589.8
million and $542.8 million for the comparable period of 2003, an increase of
$47.0 million, or 8.7%. The change in net sales was principally the result of a
decrease in unit shipments of 4.1% in the three months ended September 30, 2004
as compared with the same period of 2003, and an increase in unit shipments of
approximately 10.6% in the nine months ended September 30, 2004 as compared
with the same period of 2003. Sales in the third quarter declined from the third quarter of 2003
reflecting the softer beer and consumer products volumes and a
weaker-than-expected performance in the ready-to-drink category. This decline
was partially offset by solid increases in non-beer volumes, which were driven
by new business gains since last year. Sales in the nine months ended September 30, 2004, reflect solid new
business sales gains noted above as well as core beer category sales increases.
New business volumes and higher shipments in the beer category were partially
offset by the declines in the ready-to-drink category. The growth in unit
shipments exceeded the growth in sales dollars, 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. Cost of products sold.The Companys cost of products sold in the third
quarter and the first nine months of 2004 was $174.4 million and $543.6
million, respectively (or 93.6% and 92.2% of net sales), while the cost of
products sold for the third quarter and first nine months of 2003 was $178.4
million and $499.7 million, respectively (or 92.2% and 92.1% of net sales).
Included in margin results for the third quarter of 2004 were higher energy
costs that could not be passed through to customers of $6.1 million, which
includes higher natural gas costs, higher transportation and raw material costs
due to rising fuel prices and lower energy recoveries from its customers, an
unfavorable volume impact of $0.8 million and higher warehousing costs of $0.4
million. These were partially offset by a favorable improvement in production
and reduced spending of $3.3 million and a more favorable price and mix of $0.7
million. Effective January 1, 2004, the Company implemented the results of an
independent appraisal to update the depreciable lives of its property, plant
and equipment, and accordingly, calculated depreciation expense for the first
nine months of 2004 using the updated lives, resulting in a reduction in the
amount of depreciation that would have been otherwise expensed. Depreciation
and amortization expense is comparable period over period as a result of the
combination of lower expense from the update of depreciable lives and higher
expense from the significant capital improvement projects in 2003 and 2004. Gain on sale of non-operating properties. In the second quarter of 2004,
the Company sold three previously closed facilities located at Cliffwood, New
Jersey, Royersford, Pennsylvania and Chattanooga, Tennessee. The Company
received proceeds from these sales of $5.5 million. Included in gain on sale of
non-operating properties is a gain of $2.8 million and the associated release
of a non-cash reserve of $1.0 million as a result of the sale. 9




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Selling and administrative expenses.Selling and administrative expenses
for the three months and nine months ended September 30, 2004 were $6.8 million
and $20.1 million, respectively, or 3.7% and 3.4% of net sales, while selling
and administrative expenses for the three months and nine months ended
September 30, 2003 were $6.6 million and $20.1 million, respectively, or 3.4%
and 3.7% of net sales. The net increase in selling and administrative expenses
resulted from higher professional fees, particularly for Sarbanes-Oxley
compliance and higher stock option compensation expense partially offset by the
benefits of renegotiated corporate headquarters lease. Other income (expense), net.Other income was $1.1 million and $1.5
million, respectively in the three months and nine months ended September 30,
2004, primarily resulting from the gain on extinguishment of a $1.2 million
predecessor Series A preferred stock liability. Interest expense.Interest expense for the third quarter of 2004 was $12.0
million compared to $11.7 million for the third quarter of 2003, an increase of
$0.4 million. Interest expense for the first nine months of 2004 was $36.2
million compared to $36.8 million for the first nine months of 2003, a decrease
of $0.6 million. Interest expense in the first nine months of 2003 included a
charge of $4.3 million for the noncash write-off of deferred fees of $3.6
million and related payments of $0.7 million, related to debt repaid with the
proceeds from the issuance of the 11% Senior Secured Notes due 2013, aggregate
principal amount of $350.0 million (the Senior Secured Notes). Cash interest
expense increased $0.4 million in the third quarter of 2004 and increased $3.7
million in the first nine months of 2004 as a result of higher outstanding debt
levels in 2004 as compared with 2003. Net income (loss).The Company recorded a net loss of $5.9 million for the
third quarter of 2004 as compared to a net loss of $4.3 million for the third
quarter of 2003. The Company recorded a net loss of $4.8 million in the first
nine months of 2004 as compared to a net loss of $14.8 million for the first
nine months of 2003. The decline in earnings quarter over quarter of $1.6
million and the improvement year over year of $10.0 million, were primarily due
to the factors noted above. Liquidity and Capital Resources The Companys principal sources of liquidity are funds derived from
operations and borrowings under the Companys Revolving Credit Facility. The
Company believes that cash flows from operating activities, combined with
available borrowings under the amended Revolving Credit Facility, 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. For a discussion of Anchors anticipated capital expenditures for the remainder of 2004
and for 2005 see Capital Expenditures. Peak
operating needs are in the spring, at which time working capital borrowings are
significantly higher than at other times of the year. Anchor has reached an
agreement with its primary lender to modify the terms of its Revolving Credit
Facility including terms that have a positive impact on liquidity. For a more detailed discussion of these modifications see Debt
and Other Contractual Obligations. The Company has
also commenced negotiations with the lessor of certain of its equipment to modify certain terms of its equipment lease agreement (including easing the fixed charge coverage ratio covenant to
account for the impact of the restructuring charges discussed below) in a manner
comparable to modifications received from its primary lender under the Revolving Credit Facility. There
can be no assurance that the Company will be able to consummate such an amendment. Cash Flows Operating Activities.Operating activities provided $1.3 million in cash
in the first nine months of 2004, as compared to cash consumed of $8.0 million
in the first nine months of 2003. This overall improvement in cash provided
reflects the changes in working capital items and the improvement in earnings.
Accounts receivable levels increased in 2004, using $11.8 million in cash.
Inventory levels declined, providing cash of $3.3 million. Cash used in the
reduction of current liabilities was $18.6 million. Cash interest payments in the first nine months of 2004 were $13.0 million
greater than payments made in the first nine months of 2003. Investing Activities.Cash consumed in investing activities was $46.7
million in the first nine months of 2004, as compared to $107.1 million in the
same period of 2003. Capital expenditures were $48.9 million in the first nine
months of 2004, as compared to $80.4 million in the first nine months of 2003. See Capital Expenditures.
In the second quarter of 2004, the Company received proceeds of $5.5 million
from the sale of three previously closed facilities. In the first quarter of
2003, the Company used $45.0 million of the proceeds from the offering of the
Senior Secured Notes to terminate certain equipment leases and purchased the 10




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equipment leased thereunder (of which $39.2 million was included in
investing activities and $5.5 million was included in financing activities). Financing Activities.Net cash provided for financing activities was $22.5
million in the nine months ended September 30, 2004, as compared to $129.6
million in the nine months ended September 30, 2003. The net financing
activities in 2004 principally reflect borrowings under the Revolving Credit
Facility. The Company paid approximately $2.9 million in cash dividends on its
common stock. The net financing activities in 2003 principally reflect the
proceeds of the offering of the Senior Secured Notes of $289.0 million and the
use of a portion of these proceeds for the repayment of debt then outstanding. Restructuring and other charges At a meeting held November 4, 2004, the Board decided to close the 624,000
square foot Connellsville, Pennsylvania facility. Production was terminated
effective as of the close of business on November 4. The Company expects to
complete plant closure activities within twelve months. Approximately 300
employees will be affected. The Board made this decision taking into consideration 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, to increase the Companys asset productivity and free cash flow. The Company will record restructuring expenses and other related charges
that will, in total, approximate $47 to $57 million. These charges include approximately $2 million for a company-wide reduction in force, in addition
to Connellsville, as a result of managements evaluation of personnel costs. Of this total, $44 to $51 million will be
recorded in the fourth quarter of 2004. The major types of costs to be incurred are (dollars in millions): Employee termination benefits
    
    $
    13
    
    
    to
    
    $
    14Other facility exit costs
    
    
    5
    
    
    to
    
    
    8Charges that will result in future cash expenditures
    
    
    18
    
    
    to
    
    
    22Noncash write down of property and equipment
    
    
    25
    
    
    to
    
    
    25Noncash write down of inventories
    
    
    4
    
    
    to
    
    
    10Total expected charges
    
    $
    47
    
    
    to
    
    $
    57
 The cash requirements of the restructuring will be funded through
operations and borrowings under Anchors Revolving Credit Facility. Anchor
expects the timing of cash requirements to approximate (dollars in millions): 2004 fourth quarter
    
    $
    5
    
    
    to
    
    $
    72005 first quarter
    
    
    7
    
    
    to
    
    
    82005 second quarter
    
    
    3
    
    
    to
    
    
    4Thereafter
    
    
    3
    
    
    to
    
    
    3
 In order to enter 2005 with lower inventory levels and to better align
production with customer requirements, Anchor plans to curtail production
selectively during the fourth quarter. The Company anticipates that this
temporary production curtailment will negatively impact fourth quarter earnings
by $4-6 million. (See Capital Expenditures.) Debt and Other Contractual Obligations The Company has aggregate indebtedness of $350.0 million under its Senior
Secured Notes. 11




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##### Table of Contents



As of September 30, 2004, advances outstanding under the Revolving Credit
Facility were $29.9 million, borrowing availability was $50.5 million and
outstanding letters of credit on this facility were $10.9 million. Availability
under the Revolving Credit Facility was $44.6 million as of November 5, 2004. 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 September 30, 2004, $13.3 million was outstanding under this lease agreement. The Company has commenced negotiations with
the lessor to modify certain terms of this equipment lease agreement
(including easing the fixed charge coverage ratio covenant to account for
the impact of the restructuring charges discussed above) in a manner comparable to modifications received from its primary lender under the Revolving Credit Facility. There can be no
assurance that the Company will be able to consummate such an amendment. In August 2002, in connection with its reorganization, the Company entered
into a ten-year payment obligation under an agreement with the Pension Benefit
Guaranty Corporation (PBGC). The present value of this obligation was $57.1
million at September 30, 2004. 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.
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. Anchor reached an agreement with its primary lender to modify the terms of
its Revolving Credit Facility. This modification expands the maximum borrowing
availability under the facility to $115 million from $100 million, increases
the borrowing base and extends the term to August 30, 2007. Additionally, the
fixed charge coverage ratio covenant is eased beginning in the fourth quarter
of 2004 to account for the impact of the above described restructuring charges. In addition to the restructuring cash requirements noted above, the
Company anticipates expenditures in the remainder of 2004 of $16 to $20 million
for capital expenditures (see below), $2.5 million of payments under the
agreement with the PBGC and $2.6 million of payments under operating and
capital leases. In addition, the Company is obligated to pay approximately $4.0 million
annually related to its post-retirement benefit plan and approximately $5.2
million annually to multiemployer pension plans for the future service benefits
of its hourly employees. On November 4, 2004, the Board suspended the common stock quarterly
dividend in view of the Companys efforts to improve cash flow. Capital Expenditures Capital expenditures were $6.5 million in the third quarter primarily
associated with maintenance and molds to support production, and $48.9 million
in the first nine months of 2004, including a major reconstruction on a furnace
at the Companys Shakopee, Minnesota facility. During the fourth quarter of
2004, the Company plans to allocate capital spending for maintenance repairs on
temporarily idled furnaces that had previously been planned to occur in 2005.
As a result, for the full year of 2004, capital expenditures are now
anticipated to be $65 to $69 million, above the previous plans of $55 to $59
million. Capital spending in 2005 is planned to be approximately $30 to $35
million, reflecting the revised 2004 plans and lower ongoing maintenance
requirements resulting from the Connellsville plant closure. The Companys
principal sources of liquidity for the funding of the 2004 capital expenditures
are expected to be from operations and borrowings under the Revolving Credit
Facility. The Company believes that cash flows from operating activities, combined with available borrowings under the amended Revolving Credit Facility, will
be sufficient to support its operations, including capital expenditures, restructuring charge payments and other liquidity requirements, for the foreseeable future, although
the Company cannot be assured that this will be the case. Off-Balance Sheet Arrangements The Company is not party to off-balance sheet arrangements. 12




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##### Table of Contents



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. In the second
and third quarters of 2004, the Company was not able to realize timely relief
of its high energy costs through cost pass-throughs to its customers. 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. In 2003, natural gas prices have closed at between $4.430 and $9.133
per MMBTU, with the low being October 2003 and the high being March 2003. The
natural gas price for November 2004 closed at $7.625 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, could adversely impact the Companys margins and operating
performance. Seasonality Demand for beer, iced tea and other beverages is 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 as a
result of first quarter 2004 shipment levels, inventory declined slightly in
the 2004 first quarter. Inventory levels have been impacted by the softer than
normal seasonal pattern in the latter part of the 2004 third quarter as
consumption was affected by severe southeast weather. In order to enter 2005
with lower inventory levels and to better align production with customer
requirements, Anchor plans to curtail 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 its liquidity on a seasonal basis. New Accounting Standards In December 2003, the Medicare Act was signed into law. The Medicare Act
introduces a prescription drug benefit under Medicare as well as a federal
subsidy to sponsors of retiree health care benefit plans that provide a benefit
that is at least actuarially equivalent to Medicare Part D. In May 2004, the
Financial Accounting Standards Board issued FSP FAS 106-2 which provides
guidance on accounting for the effects of the Medicare Act for employers that
sponsor postretirement health care plans that provide prescription drug
benefits and is effective for interim periods beginning after June 15, 2004.
The Company has determined that the plan is actuarially
equivalent to Medicare Part D and has adopted the provisions of FSP FAS 106-2.
Estimated pending final Medicare regulations, the accumulated
post-retirement benefit obligation decreased approximately $5.0 million and the net periodic
benefit cost decreased $0.3 million. 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; 13




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
    
    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 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. A change in interest rates under the Revolving Credit Facility 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 2004. 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. 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. 
 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 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 Rules 13a-14 and
15d-14 of the Securities Exchange Act of 1934, as amended. 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 of their evaluation and there were no corrective actions with regard to
significant deficiencies and material weaknesses. 14




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##### Table of Contents



PART II - OTHER INFORMATION 
 Item 1. Legal Proceedings. 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. Legal expenses incurred related to these contingencies are generally
expensed as incurred. 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. Changes in 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. (a.)  Exhibits Exhibit 10.14
    
    Amended and Restated Southeast Glass Bottle Supply
Agreement between Anheuser-Busch, Incorporated and Anchor Glass
Container Corporation. Portions of this document have been
omitted and filed separately with the Commission pursuant to a
request for confidential treatment in accordance with Rule 24b-2
of the Exchange Act.Exhibit 10.15
    
    Employment Agreement between Anchor Glass Container
Corporation and Richard M. Deneau, dated August 30, 2002.Exhibit 10.16
    
    Employment Agreement between Anchor Glass Container
Corporation and Darrin J. Campbell, dated August 30, 2002.Exhibit 10.17
    
    Employment Agreement between Anchor Glass Container
Corporation and Roger L. Erb, dated August 30, 2002.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
 15




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##### 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: November 12, 2004
    /s/ Peter T. RenoPeter T. RenoVice President and Interim Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer) 16