##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C.
20549
 FORM 10-K (Mark one) þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2004 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-23359 ANCHOR GLASS CONTAINER CORPORATION 
  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 Securities registered pursuant to Section 12(b) of the Act:None Securities registered pursuant to Section 12(g) of the Act:Common Stock, par value $.10 per share
(Title of class) 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of the registrants knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. þ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). Yes þ No o Aggregate market value of voting and non-voting common equity held by non-affiliates at June 30,2004:
As of the most recently completed second quarter,
the aggregate market value for the registrants common stock was $120.9 million. The number of shares of Anchor Glass Container Corporation, common stock, $.10 par value,
outstanding at February 28, 2005 was 24,680,843. DOCUMENTS INCORPORATED BY REFERENCE
Portions of Item 10 and Items 11, 12, 13 and 14 are incorporated by reference from the definitive
Proxy Statement in connection with the Annual Meeting to be held June 15, 2005.




---



TABLE OF CONTENTS  PART IITEM 1. BusinessITEM 2. PropertiesITEM 3. Legal ProceedingsITEM 4. Submission of Matters to a Vote of Security HoldersPART IIITEM 5. Market for the Registrants Common Equity and Related Stockholder Matters and Issuer Purchases of Equity SecuritiesITEM 6. Selected Financial DataITEM 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsITEM 7A. Quantitative and Qualitative Disclosures about Market RiskITEM 8. Financial Statements and Supplementary DataITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureITEM 9A. Controls and ProceduresITEM 9B. Other InformationPART IIIITEM 10. Directors and Executive Officers of the RegistrantITEM 11. Executive CompensationITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersITEM 13. Certain Relationships and Related TransactionsITEM 14. Principal Accountant Fees and ServicesPART IVITEM 15. Exhibits and Financial Statement SchedulesSIGNATURESEx-10.20 December 26, 2002 Master Lease AgreementEx-10.21 Amended Equipment Schedule No.1Ex-10.22 February 14, 2005 Intercreditor AgreementEx-10.24 Director & Officer Indemnification AgreementEx-10.25 Director & Officer Indemnification AgreementEx-31.1 Section 302 CEO CertificationEx-31.2 Section 302 CFO CertificationEx-32 Section 906 CEO & Vice President/Interim CFO Certification    Table of Contents  
 PART I 
 ITEM 1. Business. Company Overview Anchor Glass Container Corporation (the Company or Anchor) is the third largest
manufacturer of glass containers in the United States. Anchor has eight strategically located
facilities where it produces a diverse line of flint (clear), amber, green and other colored glass
containers for the beer, beverage, food, liquor and flavored alcoholic beverage markets. The
Company revised its statements of cash flows in the financial
statements contained elsewhere herein, by $4.4 million, $1.0 million and $20.8
million, respectively, for the year ended December 31, 2003, the four
months ended December 31, 2002 and the eight months ended August 31,
2002 to reflect the principal payments under its agreement with the
Pension Benefit Guaranty Corporation (PBGC) as cash out flows
from operating activities instead of cash out flows from financing
activities. This revision had no impact on the Companys
balance sheets or statements of operations. Recent Developments Indebtedness under the Revolving B Loan Agreement On February 14, 2005, the Company entered into a $20 million 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. 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 borrowing base under Anchors
$115.0 million revolving credit facility (the Revolving Credit Facility). At March 1, 2005,
advances outstanding under the Revolving B Loan were $5.0 million. Combined availability under the
Revolving Credit Facility and the Revolving B Loan was $23.4 million at March 1, 2005. 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%, 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. 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. Amendment to Revolving Credit Facility and Master Lease Agreement On February 14, 2005, the Company entered into an amendment with its lenders under the
Revolving Credit Facility to modify the fixed charge coverage ratio covenant under the facility for
the remainder of 2005. In addition, the lenders waived the Companys failure to comply with its fixed charge coverage ratio covenant as of December 31, 2004, that resulted from the Companys
weaker than anticipated cash flows and operating results during the fourth quarter. See Managements Discussion and Analysis of Financial Condition and Results of Operations. The
required minimum fixed charge coverage ratios for 2005, based on a 2005 cumulative year to date calculation, range from 0.14:1.0 for January 2005 to 0.8:1.0 for November 2005 to 0.75:1.0 for
December 2005 and 1.0:1.0 for 2006 and thereafter. The actual fixed charge coverage ratio for January 2005 and February 2005 is .25:1.0 and .30:1.0, respectively, and the Company is in
compliance with this covenant as of February 28, 2005. The Company also entered into a similar agreement and waiver with its lender under its capital lease arrangements, which had an outstanding
balance of $11.7 million at February 28, 2005. Liquidity The Companys operating results and operating cash flows during fiscal 2004 were negatively
impacted by the closure of the Connellsville plant (see below), the continuing high costs of energy
and its direct and indirect effect on other costs and manufacturing expenses, softer sales volumes
than anticipated in the second half of 2004, 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 to $21.8
million at December 31, 2004, and it was unable to meet its fixed charge coverage ratio covenant
for the quarter ended December 31, 2004. As discussed above, 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




---



##### Table of Contents



the remainder of 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. January
    
    
    .14:1.0
    
    
    April
    
    
    .40:1.0
    
    
    July
    
    
    .66:1.0
    
    
    October
    
    
    .79:1.0February
    
    
    .19:1.0
    
    
    May
    
    
    .50:1.0
    
    
    August
    
    
    .71:1.0
    
    
    November
    
    
    .80:1.0March
    
    
    .29:1.0
    
    
    June
    
    
    .58:1.0
    
    
    September
    
    
    .76:1.0
    
    
    December
    
    
    .75:1.0
 The
actual fixed charge coverage ratio for January 2005 was .25:1.0
and for February 2005 was .30:1.0. 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 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 1, 2005 combined availability under these
facilities was $23.4 million. The Company believes that cash flows from operating activities,
combined with available borrowings under the its two revolving credit facilities, will be
sufficient to support its operations and fund its capital expenditure requirements, restructuring
payments and other liquidity needs for the next twelve months, 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;
    continuing the suspension of dividend payments on it common stock;
    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 2




---



##### Table of Contents




    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. Restructuring,
impairment and other charges In November 2004, the Board of Directors of Anchor (the Board) approved the Companys plan
to close the 624,000 square foot Connellsville, Pennsylvania manufacturing facility (the
Restructuring). Production at this facility was terminated effective as of the close of business
on November 4, 2004. The Company expects to complete the Connellsville facility closure activities
by December 2005 (the Restructuring Period). Approximately 300 employees were affected. 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 was 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. The Company will record restructuring, impairment and other related charges during the
Restructuring Period that will, in total, approximate $50.5 million to $53.5 million, of which
$39.7 million was recorded in the 2004 fourth quarter for asset impairment, employee termination
benefits and other facility exit costs and $9.0 million was recorded for inventory write downs.
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. The Company began implementing the results of its ongoing operational review announced in the
third quarter of 2004, closing the Connellsville facility, reducing corporate expenses, selectively
curtailing production to bring inventory in line with industry demand, and using this downtime to
make necessary repairs. Products, Markets and Customers The Company produces glass containers for the beverage and food industries in the United
States. Substantially all of the Companys glass containers are produced to customer
specifications. In addition, most of the Companys sales are pursuant to customer contracts with
average terms of three to five years from inception. The table below provides a summary of net
sales and the approximate percentage of net sales by product group for each of the three years
ended December 31, 2004. Years ended December 31,Products
    
    2004
    
    
    2003
    
    
    2002(dollars in millions)Beer/Flavored Alcoholic Beverages
    
    $
    412.6
    
    
    
    55.2
    %
    
    $
    441.1
    
    
    
    62.1
    %
    
    $
    419.1
    
    
    
    58.6
    %Beverages
    
    
    114.3
    
    
    
    15.3
    
    
    
    77.1
    
    
    
    10.9
    
    
    
    100.6
    
    
    
    14.1Liquor
    
    
    109.2
    
    
    
    14.6
    
    
    
    79.7
    
    
    
    11.2
    
    
    
    83.5
    
    
    
    11.6Food
    
    
    85.7
    
    
    
    11.5
    
    
    
    81.5
    
    
    
    11.5
    
    
    
    79.4
    
    
    
    11.1Other
    
    
    25.1
    
    
    
    3.4
    
    
    
    30.5
    
    
    
    4.3
    
    
    
    33.0
    
    
    
    4.6Total
    
    $
    746.9
    
    
    
    100.0
    %
    
    $
    709.9
    
    
    
    100.0
    %
    
    $
    715.6
    
    
    
    100.0
    %
 There can be no assurance that the information provided in the preceding table will be
indicative of the glass container product mix of the Company for 2005 or in subsequent years.
Managements strategy is to focus on shifting the Companys product mix, to the extent there is
available capacity, toward those products that management believes are likely to improve operating
results. For 2005, the Company expects to see a slight shift in its product mix from the
beer/flavored alcoholic beverage categories into beverage and liquor categories. Certain sectors of the glass container market, particularly the food sector, have experienced
conversion from glass packaging to plastic or other alternative forms. These conversions may
impact the overall supply/demand dynamics of the industry. 3




---



##### Table of Contents



The Companys largest customer, Anheuser-Busch Companies, Inc. (Anheuser-Busch), accounted
for 48.1% of its net sales for the year ended December 31, 2004. On January 1, 2004, the Company
began shipping under a multi-year supply agreement with Snapple Beverage Group, Inc. and Motts
Inc., affiliates of Cadbury Schweppes plc, to supply nearly 100% of their requirements for 16 oz.
Snapple bottles, Nantucket Nectars and Yoo-hoo bottles, as well as for several Motts items. Net
sales under this agreement accounted for 12.9% of the Companys net sales for the year ended
December 31, 2004. Manufacturing Manufacturing The Companys manufacturing facilities are generally located in geographic proximity to its
customers due to the significant cost of transportation and the importance of prompt delivery to
customers. Most of the Companys production is shipped by common carrier to customers generally
within a 150-mile radius of the plant in which it is produced, although the Company will ship
products longer distances to meet customer requirements. The glass container manufacturing process
involves a high percentage of fixed costs. Standard input costs are similar among manufacturers
and include soda ash, sand, limestone and energy costs. The Company conducts regular maintenance
on all of its operating equipment. Raw Materials and Suppliers Sand, soda ash, limestone, cullet (reclaimed glass), corrugated packaging materials and
energy, primarily natural gas, are the principal raw materials that are used in the Companys
manufacturing operations. All of these materials are available from a number of suppliers and the
Company is not dependent upon any single supplier for any of these materials. The Company believes
that adequate quantities of these materials are, and will continue to be, available from various
suppliers. Costs for certain of these raw materials increased significantly in 2004 and are
currently expected to continue to rise materially in 2005. Costs for certain other raw materials,
primarily soda ash, have risen significantly in 2005. All of the Companys glass melting furnaces are equipped to burn natural gas, which is the
primary fuel used at the Companys manufacturing facilities. Two of the Companys furnaces are
equipped to utilize oxygen in conjunction with the burning of natural gas, increasing the overall
efficiency of the furnace. Backup systems are in place at some facilities to permit the use of
fuel oil or propane, to the extent cost effective and permitted by applicable laws and regulations.
Electricity is used in certain instances for enhanced melting. Prices for natural gas have increased significantly in recent years. As such, it remains one
of the largest cost components of the Companys operations. The Companys current strategy is to
enter into hedging transactions from time to time on an opportunistic basis. The Company has
currently hedged certain of its estimated natural gas purchases extending through December 2005,
representing approximately 25% of its natural gas requirements, through the purchase of natural gas
futures. The Company also enters into put and call options for purchases of natural gas. In
addition, the Company may, from time to time, enter into hedging transactions requested by
customers that have surcharge recovery formulas in their contracts. The Company does not enter
into hedging transactions for speculative trading purposes, but rather to lock in energy prices. 4




---



##### Table of Contents



Increases in the price of natural gas adversely affect the Companys costs and margins. Since
2000, closing prices for natural gas have fluctuated significantly from a low of $1.830 per million
BTUs (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. During 2004, average natural gas prices were significantly higher
than in prior years. High, low and average annual closing prices for natural gas, per MMBTU, for
the three years ended 2004 were: AnnualHigh
    
    
    Low
    
    
    Average2002December; February
    
    $
    4.140
    
    
    $
    2.006
    
    
    $
    3.2212003March; October
    
    $
    9.133
    
    
    $
    4.430
    
    
    $
    5.3882004December; September
    
    $
    7.976
    
    
    $
    5.082
    
    
    $
    6.138
 The natural gas price for March 2005 closed at $6.304 per MMBTU. Quality Control The Company maintains a program of quality control with respect to suppliers, line performance
and packaging integrity for glass containers. The Companys production lines are equipped with a
variety of automatic and electronic devices that inspect containers for dimensional conformity,
flaws in the glass and various other performance attributes. Additionally, products are sample
inspected and tested by Company employees on the production line for dimensions and performance and
are also inspected and audited after packaging. Containers that do not meet quality standards are
crushed and recycled as cullet. The Company monitors and updates its inspection programs to keep pace with technology and
customer demands. Samples of glass and raw materials from its plants are routinely chemically and
electronically analyzed to monitor compliance with quality standards. Laboratories are also
maintained at each manufacturing facility to test various physical characteristics of products. Seasonality 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.
Inventory levels were impacted by the softer than normal seasonal pattern in the latter part of
2004 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 its liquidity on a seasonal basis. See Managements
Discussion and Analysis of Financial Condition and Results of Operations. Customer Service The Companys sales and marketing efforts are targeted primarily to established customers with
whom it enjoys long-standing relationships. Managements sales/marketing strategy also includes
focusing on product mix shifts, including identifying and securing new business relationships. An
important focus of the Companys sales and marketing is customer service, and it seeks to respond
quickly to customer needs. To this end, the Company has customer service managers responsible for
scheduling, sales forecasting and coordinating the various aspects of delivering product to its
customers. The Company maintains both low-capacity and high-capacity forming equipment, which allows it
to be more flexible and responsive to changes in its customers product mix and shipment location
requests. The Companys equipment mix also enables it to produce both high-volume products and
products that require shorter 5




---



##### Table of Contents



production runs, such as new product introductions or specialty niche products, enhancing its responsiveness and flexibility as a supplier. Environmental and Other Governmental Regulations Environmental Regulation and Compliance The Companys operations are subject to Federal, state and local environmental laws and
regulations including, but not limited to, the Federal Water Pollution Control Act of 1972, the
Federal Clean Air Act, the Federal Resource Conservation and Recovery Act and the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (CERCLA). Among the
activities subject to environmental regulation are the disposal of checker slag (furnace residue
usually removed during furnace rebuilds), the disposal of furnace bricks containing chromium, the
disposal of waste, the discharge of water used to clean machines and cooling water, dust emissions
produced by the batch mixing process, maintenance of underground and above ground storage tanks and
air emissions produced by furnaces. In addition, the Company is required to obtain and maintain
environmental permits in connection with its operations. Many environmental laws and regulations
provide for substantial fines and criminal sanctions for violations. While there can be no
assurance that material costs or liabilities will not be incurred, the Company believes it is in
material compliance with applicable environmental laws and regulations. Certain environmental laws, such as CERCLA, or Superfund, and analogous state laws, provide
for strict, and under certain circumstances, joint and several liability for investigation and
remediation of releases of hazardous substances into the environment including soil and
groundwater. These laws may apply to properties presently or formerly owned or operated by an
entity or its predecessors, as well as to conditions at properties at which wastes attributable to
an entity or its predecessors were disposed of. The Company is conducting remediation of soil and
groundwater at certain of its facilities, and in light of historical practices, may in the future
be required to perform additional corrective actions. The Company is participating in a limited
number of legal proceedings where third parties asserted that it is responsible for costs related
to the disposal of wastes under CERCLA or analogous state laws. The Company does not believe that
the resolution of any of these legal proceedings will have a material adverse effect on its
financial condition, but the Company cannot be assured that it or entities for which it may be
responsible will not incur future environmental liability, as a result of these or other
proceedings, that could have a material adverse effect on its financial condition or results of
operations. Capital expenditures required for environmental compliance were approximately $0.5 million in
each of the three years ended 2004 and are anticipated to be approximately the same in 2005. The
Company anticipates that environmental compliance will continue to require increased capital
expenditures over time as environmental laws or regulations or interpretations thereof or the
nature of the Companys operations may require it to make significant additional capital
expenditures to ensure compliance in the future. The Company has established a reserve for
environmental matters, including known or projected remediation projects and projected exposure at
third-party sites; the remaining balance of this reserve was $7.6 million as of December 31, 2004.
In 2004, the Company incurred $0.6 million in spending chargeable to the Companys environmental
reserve and reduced the reserve in the amount of approximately $1.0 million related to the sale of
three non-operating facilities in the second quarter of 2004. The Company does not believe that its environmental exposure is in excess of the reserves
reflected on its balance sheet. In addition to its environmental reserves, the Company also
maintains an environmental impairment liability insurance policy to address certain potential
future environmental liabilities at both identified operating and non-operating sites. The above
noted reserves are not net of any potential insurance proceeds. There can, however, be no
assurance that any future liability, particularly any arising from presently unknown conditions,
will not exceed the reserves or available insurance coverage and have an adverse impact on the
Companys operations or financial condition. Employee Health and Safety Regulations The Companys operations are also subject to a variety of worker safety laws. The
Occupational Safety and Health Act of 1970, the United States Department of Labor Occupational
Health Administration Regulations and analogous state laws and regulations mandate general
requirements for safe workplaces for all employees. The Company believes that it is operating in
material compliance with applicable employee health and safety laws. 6




---



##### Table of Contents



Competition The glass container industry in the United States is a mature industry. The Company and the
other glass container manufacturers compete on the basis of price, quality, reliability of delivery
and customer service. The industry is highly concentrated with three producers, including the
Company, estimated by the Company to have accounted for over 90% of 2004 domestic volume. The Companys principal competitors are Owens-Brockway Glass Container Inc.
(Owens-Illinois), a wholly owned subsidiary of Owens-Illinois Group, Inc., and Saint-Gobain
Containers Co. (Saint-Gobain), a wholly owned subsidiary of Compagnie de Saint-Gobain. Intellectual Property Rights The Company operates under a ten-year contract with Heye-Glas International, expiring December
31, 2011, that provides it with heat extraction technology for its forming machines. The Company also has a limited license with Owens-Illinois entitling the Company to use
certain existing patents, trade secrets and other technical information of Owens-Illinois relating
to glass manufacturing technology. Under this license, the Company has the right to use technology
in place in exchange for license fees payable through 2005 and thereafter will have a perpetual
paid-up license. While the Company holds various patents, trademarks and copyrights of its own, it believes its
business is not dependent upon any one of these. Employees As of February 28, 2005, the Company employed approximately 2,840 persons on a full-time
basis. Approximately 480 of these employees are salaried office, supervisory and sales personnel.
The remaining employees are represented principally by two unions, the Glass Molders, Pottery,
Plastics and Allied Workers (the GMP) and the United Steelworkers of America (the USWA). The Companys two labor contracts with the GMP and its two labor contracts with the USWA
expire on March 31, 2005 and August 31, 2005, respectively. Negotiations with the GMP for a
successor labor agreement commenced on March 14, 2005 for a
new three-year labor agreement with the GMP.  There can be no
assurance that the Company will enter into a new labor agreement by
March 31, 2005 or that a work stoppage will not occur. The Company expects to begin negotiations with the
USWA later in 2005. The Company has not experienced any significant work stoppages or employee-related problems
that had a material impact on its operations. The Company considers its relationship with its
employees to be good. 7




---



##### Table of Contents



ITEM 2. Properties. The Companys administrative and executive offices are located in Tampa, Florida. The Company
entered into a new lease covering this office space in January 2004 for an initial term of eight
years. The Company owns and operates eight glass container manufacturing facilities. The Company
also owns a building located in Streator, Illinois, that is used as a machine shop to rebuild
glass-forming and related machinery and leases a mold shop located in Zanesville, Ohio, as well as
additional warehouses for finished products in various cities throughout the United States. Substantially all of the Companys owned real properties and equipment at its eight operating
glass container manufacturing facilities are pledged as collateral securing the Companys
obligations under its 11% Senior Secured Notes due 2013, aggregate principal amount of $300.0
million (the Senior Secured Notes), its 11% Senior Secured Notes due 2013, aggregate principal
amount of $50.0 million (the Additional Notes) and the related indenture (the Indenture). The following table sets forth certain information concerning the Companys manufacturing
facilities. In addition to these locations, the Company owns plants at Connellsville, Pennsylvania
(closed November 2004), Keyser, West Virginia and Dayville, Connecticut that have been closed and
owns land in Gas City, Indiana. Number of
    
    Number of
    
    Building AreaLocation
    
    Furnaces
    
    Machines
    
    (Square Feet)Jacksonville, Florida.
    
    
    2
    
    
    
    4
    
    
    
    624,000Warner Robins, Georgia
    
    
    2
    
    
    
    8
    
    
    
    864,000Lawrenceburg, Indiana
    
    
    1
    
    
    
    4
    
    
    
    504,000Winchester, Indiana
    
    
    2
    
    
    
    6
    
    
    
    627,000Shakopee, Minnesota
    
    
    2
    
    
    
    6
    
    
    
    360,000Salem, New Jersey (1)
    
    
    3
    
    
    
    6
    
    
    
    733,000Elmira, New York
    
    
    2
    
    
    
    6
    
    
    
    912,000Henryetta, Oklahoma
    
    
    2
    
    
    
    6
    
    
    
    664,000
   (1)
    
    A portion of the site on which this facility is located is leased pursuant to
several long-term leases. 
 ITEM 3. Legal Proceedings. 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.
Richard M. Deneau was the Companys former Chief Executive Officer and a former member of the
Board. Darrin J. Campbell is the Companys Chief Executive Officer and a member of the Board.
Peter T. Reno is the Companys Vice President and Interim Chief Financial Officer. Alan H.
Schumacher, James N. Chapman, Jonathan Gallen, Timothy F. Price and Alexander Wolf are members of
the Board. Joel A. Asen and George Hamilton are former members of the Board. 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. On January 6, 2005, a complaint was filed in the United States District Court for the Middle
District of Florida, Tampa Division, entitled Todd Fener, individually and on behalf of all others
similarly situated v. Anchor Glass Container Corporation, Richard M. Deneau, Darrin J. Campbell,
Alan H. Schumacher and Peter T. Reno. 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 8




---



##### Table of Contents



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. The complaint seeks an unspecified amount of damages. On December 21, 2004, a complaint was filed in the United States District Court for the Middle
District of Florida, Tampa Division, entitled Robert Conte individually and on behalf of all others
similarly situated v. Anchor Glass Container Corporation, Darrin Campbell, Richard M. Deneau, 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. and Lehman Brothers. Lenard B.
Tessler is a member of the Board. Credit Suisse First Boston, Merrill Lynch & Co. and Lehman
Brothers were underwriters of the Companys initial public offering of common stock. 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 and Sections 10(b) and
20(a) of the Exchange Act and Rule 10b-5 thereunder. The complaint seeks an unspecified amount of
damages. On December 13, 2004, a complaint was filed in the United States District Court for the Middle
District of Florida, Tampa Division, entitled Matthew Bellefeuille individually and on behalf of
all others similarly situated v. Anchor Glass Container Corporation, Darrin Campbell, Richard M.
Deneau, 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. and Lehman Brothers. 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 and Sections 10(b) and
20(a) of the Exchange Act and Rule 10b-5 thereunder. On December 7, 2004, Anchor was served with a complaint 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 and Richard M. Deneau. 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 10(b) and 20(a) of the Exchange Act and Rule 10b-5
thereunder. 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. 
 ITEM 4. Submission of Matters to a Vote of Security Holders. No matters were brought to a vote of security holders in the fourth quarter of 2004. 9




---



##### Table of Contents



PART II 
 ITEM 5. Market for the Registrants Common Equity and Related Stockholder Matters and Issuer
Purchases of Equity Securities. In September 2003, the Company consummated an initial public offering of 8,625,000 shares of
its common stock (which includes 1,125,000 additional shares of common stock to cover
over-allotment of shares) (the Equity Offering). The Companys equity securities consist of one class of common stock. The common stock began
trading on September 25, 2003, the Equity Offering date. The common stock is traded on Nasdaq
under the symbol AGCC. The high and low sales prices quoted on Nasdaq for each of the quarters of
2004 and the fourth quarter of 2003 were as follows: High
    
    
    Low20034th Quarter
    
    $
    16.75
    
    
    $
    13.9020041st Quarter
    
    $
    17.97
    
    
    $
    14.012nd Quarter
    
    
    16.45
    
    
    
    10.893rd Quarter
    
    
    15.50
    
    
    
    7.254th Quarter
    
    
    8.87
    
    
    
    4.45
 The Company paid an initial cash dividend of $.04 per common share in the fourth quarter of
2003 and paid $.04 per common share in each of the first three quarters of 2004, or $.12 per common
share for the year ended December 31, 2004. The amount and timing of dividends payable on common
stock is within the sole discretion of the Board. On November 4, 2004, the Board suspended the
common stock quarterly dividend in an effort to improve the Companys cash flow. The instruments
governing the Companys indebtedness contain various covenants that limit payment of dividends and
dividends may not be paid if availability under the revolving credit facilities is below a certain
threshold. See Managements Discussion and Analysis of Financial Condition and Results of
Operations  Liquidity and Capital Resources. There are approximately 750 holders of the Companys common stock as of March 9, 2005. Recent Sales of Unregistered Securities On August 5, 2003, the Company issued the Additional Notes. The Additional Notes were
purchased by Deutsche Bank Securities and Credit Suisse First Boston. The Additional Notes were
issued in reliance on the exemptions from the registration requirements of the Securities Act
provided by Section 4(2) under the Securities Act. On February 7, 2003, the Company issued the Senior Secured Notes. The Senior Secured Notes
were purchased by Deutsche Bank Securities, Banc of America Securities LLC and Credit Suisse First
Boston. The Senior Secured Notes were issued in reliance on the exemptions from the registration
requirements of the Securities Act provided by Section 4(2) under the Securities Act. On August 30, 2002, Anchor consummated a significant restructuring of its existing debt and
equity securities pursuant to a plan of reorganization (the Plan) through a Chapter 11
reorganization (the Reorganization). As part of the Reorganization, the Company sold and issued
to Anchor Glass Container Holding LLC (AGC Holding), an affiliate of Cerberus, a leading New York
investment management firm, 75,000 shares of Companys Series C Participating Preferred Stock, par
value $.01 (the Series C Preferred Stock) for $75.0 million and 13,499,995 shares of common stock
for $5.0 million. These shares were issued in an offering not involving a public offering pursuant
to Section 4(2) of the Securities Act. As a condition to the issuance, the purchasers consented to placement of a restrictive legend on the certificates
representing the securities. The Series C Preferred Stock was redeemed with a portion of the
proceeds of the Equity Offering. Prior to redemption, the holders of the 10




---



##### Table of Contents



Series C Preferred Stock were entitled to receive, when and as declared by the Board out of legally available funds,
cumulative dividends, payable quarterly in cash, at a rate per annum equal to 12%. In connection with the Reorganization, the Company executed an agreement with the Pension
Benefit Guaranty Corporation (PBGC) that eliminated all past-service pension liabilities, and
provided for a one-time payment of $20.8 million and a $10.0 million per year fixed payment
obligation to the PBGC for ten years (the PBGC Agreement). On August 30, 2002, in connection
with the PBGC Agreement, the Company granted the PBGC a warrant for the purchase of 711,000 shares
of Anchors common stock, with an exercise price of $5.27 per share and term of ten years. In June
2003, the Company repurchased the outstanding warrant held by the PBGC for a negotiated price of
$1.5 million. Under the terms of the Plan, the holders of Anchors 11.25% First Mortgage Notes due 2005,
aggregate principal amount of $150.0 million (the First Mortgage Notes) retained their
outstanding $150.0 million of First Mortgage Notes and received a consent fee for the waiver of the
change-in-control provisions, the elimination of pre-payment provisions and other non-financial
changes to the terms of the First Mortgage Notes (including the release of Consumers U.S., Inc.,
the Companys former parent, as a guarantor). The holders of Anchors 9.875% Senior Notes due
2008, aggregate principal amount of $50.0 million (the Senior Notes) were repaid in cash at 100%
of their principal amount. The holders of Anchors mandatorily redeemable 10% cumulative
convertible preferred stock (the Series A Preferred Stock) were entitled to receive a cash
distribution of $22.5 million and the Series A Preferred Stock was cancelled. Anchors redeemable
8% cumulative convertible preferred stock (the Series B Preferred Stock) and common stock and
warrants were cancelled and the holders received no distribution under the Plan. The holders of
the First Mortgage Notes were repaid with proceeds from the issuance of the Senior Secured Notes. Equity Compensation Plan Information The following table presents information regarding securities authorized for issuance under
equity compensation plans as of December 31, 2004: Number of securitiesNumber of securities
    
    
    
    
    
    
    remaining available forto be issued upon
    
    
    Weighted-average
    
    
    future issuance under equityexercise of
    
    
    exercise price of
    
    
    compensation plansoutstanding options
    
    
    outstanding options
    
    
    (excluding securitiesPlan category
    
    (a)
    
    
    (b)
    
    
    reflected in column (a)) (c)Equity compensation
plans approved by
security holders
    
    
    921,259
    
    
    $
    13.23
    
    
    
    427,741Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    921,259
    
    
    $
    13.23
    
    
    
    427,741
 11




---



##### Table of Contents



ITEM 6. Selected Financial Data. The following table sets forth certain historical financial information of the Company. The
selected financial data as of December 31, 2004 and 2003 and for the two years ended December 31,
2004 and 2003, the four months ended December 31, 2002 and the eight months ended August 31, 2002
have been derived from the Companys audited financial statements included elsewhere in this Form
10-K. The selected financial data as of December 31, 2002, 2001 and 2000 and the years ended
December 31, 2001 and 2000 have been derived from the Companys audited financial statements. The
following information should be read in conjunction with the Companys financial statements and
Managements Discussion and Analysis of Financial Condition and Results of Operations. The financial statements as of and for periods subsequent to August 31, 2002 are referred to
as the Reorganized Company statements. The financial statements prior to that date are referred
to as Predecessor Company statements. The financial statements for the eight months ended August
31, 2002 give effect to the restructuring and reorganization adjustments and the implementation of
fresh start accounting. The financial results for the year ended December 31, 2002 include two
different bases of accounting and, consequently, after giving effect to the reorganization and
fresh start adjustments, the financial statements of the Reorganized Company are not comparable to
those of the Predecessor Company. Accordingly, the operating results of the Reorganized Company
and the Predecessor Company have been separately disclosed. Reorganized Company
    
    
    Predecessor CompanyFour
    
    
    EightYear
    
    
    Year
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    August 31,
    
    
    Years Ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2002
    
    
    2001
    
    
    2000(dollars in thousands, except per share data)Statement of Operations Data:Net sales
    
    $
    746,858
    
    
    $
    709,943
    
    
    $
    211,379
    
    
    $
    504,195
    
    
    $
    702,209
    
    
    $
    629,548Cost of products sold
    
    
    712,271
    
    
    
    660,781
    
    
    
    192,427
    
    
    
    451,709
    
    
    
    658,146
    
    
    
    598,900Inventory
loss - cost of products
sold(1)
    
    
    8,963
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restructuring, impairment and
other charges, net(2)
    
    
    39,735
    
    
    
    
    
    
    
    
    
    
    
    (395
    )
    
    
    
    
    
    
    Gain on sale of non-operating
properties
    
    
    (3,823
    )Selling and administrative expenses.
    
    
    27,121
    
    
    
    26,963
    
    
    
    9,683
    
    
    
    19,262
    
    
    
    28,462
    
    
    
    33,222Related party provisions and
charges (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,668
    
    
    
    Income (loss) from operations
    
    
    (37,409
    )
    
    
    22,199
    
    
    
    9,269
    
    
    
    33,619
    
    
    
    (20,067
    )
    
    
    (2,574
    )Reorganization items, net(4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,389
    
    
    
    
    
    
    
    Other income (expense), net
    
    
    (310
    )
    
    
    223
    
    
    
    443
    
    
    
    763
    
    
    
    (389
    )
    
    
    1,343Interest expense
    
    
    (48,429
    )
    
    
    (48,549
    )
    
    
    (10,381
    )
    
    
    (17,948
    )
    
    
    (30,612
    )
    
    
    (31,035
    )Net income (loss)
    
    
    (86,148
    )
    
    
    (26,127
    )
    
    
    (669
    )
    
    
    63,823
    
    
    
    (51,068
    )
    
    
    (32,266
    )Series C preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,263
    )
    
    
    (3,022
    )Excess fair value of consideration
transferred over carrying value of
preferred stock (5)
    
    
    
    
    
    
    (38,118
    )Series A and B preferred stock
dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,100
    )
    
    
    (14,057
    )
    
    
    (14,057
    )Income (loss) applicable to common
stock
    
    $
    (86,148
    )
    
    $
    (71,508
    )
    
    $
    (3,691
    )
    
    $
    59,723
    
    
    $
    (65,125
    )
    
    $
    (46,323
    )Basic net income (loss) per share
applicable to common stock
    
    $
    (3.50
    )
    
    $
    (4.37
    )
    
    $
    (0.27
    )
    
    $
    11.37
    
    
    $
    (12.40
    )
    
    $
    (8.82
    )Basic weighted average number of
common shares outstanding
    
    
    24,581,617
    
    
    
    16,364,196
    
    
    
    13,449,995
    
    
    
    5,251,356
    
    
    
    5,241,356
    
    
    
    5,241,356Diluted net income (loss) per share
applicable to common stock
    
    $
    (3.50
    )
    
    $
    (4.37
    )
    
    $
    (0.27
    )
    
    $
    1.89
    
    
    $
    (12.40
    )
    
    $
    (8.82
    )Diluted weighted average number of
common shares outstanding
    
    
    24,581,617
    
    
    
    16,364,196
    
    
    
    13,449,995
    
    
    
    33,805,651
    
    
    
    5,241,356
    
    
    
    5,241,356
 12




---



##### Table of Contents



Reorganized Company
    
    
    Predecessor CompanyFour
    
    
    EightYear
    
    
    Year
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    August 31,
    
    
    Years Ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2002
    
    
    2001
    
    
    2000(dollars in thousands, except per share data)Statement of Operations Data
(contd):Cash dividends declared per share of
common stock
    
    $
    0.12
    
    
    $
    0.04
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Other Financial Data:Depreciation and amortization
    
    $
    65,307
    
    
    $
    70,512
    
    
    $
    18,011
    
    
    $
    35,721
    
    
    $
    54,024
    
    
    $
    54,900Capital expenditures
    
    
    72,681
    
    
    
    119,115
    
    
    
    28,666
    
    
    
    42,654
    
    
    
    41,952
    
    
    
    39,805Balance Sheet Data
(at end of period):Accounts receivable
    
    $
    35,601
    
    
    $
    36,674
    
    
    $
    42,070
    
    
    
    
    
    
    $
    43,182
    
    
    $
    55,818Inventories
    
    
    126,010
    
    
    
    136,784
    
    
    
    102,149
    
    
    
    
    
    
    
    105,573
    
    
    
    125,521Total assets
    
    
    657,195
    
    
    
    706,544
    
    
    
    556,397
    
    
    
    
    
    
    
    530,584
    
    
    
    620,807Total long-term debt, including capital
leases and current portion
    
    
    472,693
    
    
    
    431,776
    
    
    
    298,801
    
    
    
    
    
    
    
    259,435
    
    
    
    269,279Redeemable preferred stock (5)
    
    
    
    
    
    
    
    
    
    
    78,022
    
    
    
    
    
    
    
    82,026
    
    
    
    76,428Total stockholders equity (deficit) (5)
    
    
    4,290
    
    
    
    95,563
    
    
    
    1,499
    
    
    
    
    
    
    
    (124,041
    )
    
    
    (4,626
    )
   (1)
    
    For the year ended December 31, 2004, the Company recorded a charge of $8,963 for a noncash
write down of inventories related to the Connellsville plant closure.(2)
    
    For the year ended December 31, 2004, the Company recorded Restructuring charges of $39,735.
The components of this charge included: asset impairment of property and equipment of $25,758;
employee termination benefits of $12,799; and other facility exit costs of $1,178. The
Company recorded a net gain for restructuring of $395 for the eight months ended August 31,
2002. The significant components of this net gain included: professional fees of $10,068;
direct costs of the restructuring, net of $8,344; savings attributable to the retiree benefit
plan modification of ($24,432); and a consent fee of $5,625 to the holders of the First
Mortgage Notes.(3)
    
    For the year ended December 31, 2001, represents the write-off of a receivable from Consumers
Packaging Inc. and affiliates of $18,221 and the write-off of an advance to G&G Investments,
Inc. of $17,447.(4)
    
    Reorganization items, net consist of a net gain for fresh start adjustments of $49,908 and
expenses incurred in the Chapter 11 proceedings of $2,519, comprised of: $2,450 of
debtor-in-possession facility fees; $1,687 of professional fees; $1,276 of deferred financing
fees written off relating to the Senior Notes; and a credit of $2,894 for the reversal of
interest expense relating to the Senior Notes.(5)
    
    In 2003, Anchor consummated the Equity Offering and received net proceeds therefrom of $127.7
million. Approximately $85.3 million of the net proceeds of the Equity Offering were used to
redeem all of the Series C Preferred Stock. A portion of the redemption price was paid
through the issuance of 2,382,348 shares of common stock (valued at $38.1 million based on the
initial public offering price of $16.00 per share). 13




---



##### Table of Contents



ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of Operations. Overview 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. The
Company revised its statements of cash flows in the financial
statements contained elsewhere herein, by $4.4 million, $1.0 million
and $20.8 million, respectively, for the year ended December 31,
2003, the four months ended December 31, 2002 and the eight months
ended August 31, 2002 to reflect the principal payments under its
agreement with the PBGC as cash out flows from operating activities
instead of cash out flows from financing activities. This
revision had
no impact on the Companys balance sheets or statements of
operations. Anchors 2004 results were adversely affected by continued rising energy prices resulting in
higher raw material costs, higher freight charges and higher production costs, which the Company
was unable to pass through to customers. In addition, beer and consumer product volumes were lower
than the seasonal pattern typical of the fourth quarter as several of the Companys customers
focused on optimizing year-end inventory levels. The Company began implementing the results of its
ongoing operational review announced in the third quarter of 2004, closing the Connellsville
facility, reducing corporate expenses, selectively curtailing production to bring inventory in line
with industry demand, and using this downtime to make necessary repairs. However, the production
curtailments in the fourth quarter impacted the Companys results more significantly than had been
originally anticipated. The Companys primary objective is improving cash flow generation. The Company believes it
has an opportunity to further reduce inventory in 2005 based upon a better balance of capacity and
demand. The Company also intends to implement further cost reduction and efficiency programs to
improve operations and to restrict its capital spending during 2005 to $30-35 million, a 50%
reduction from 2004, and reflecting the completion of the Companys furnace rebuilding initiatives
of the last two years. In November 2004, the Board approved the Companys plan to close the Connellsville,
Pennsylvania manufacturing facility. Production at this facility was terminated effective as of
the close of business on November 4, 2004. The Company will record restructuring, impairment and
other related charges during the Restructuring Period that will, in total, approximate $50.5
million to $53.5 million, of which $39.7 million was recorded in the 2004 fourth quarter for asset
impairment, employee termination benefits and other facility exit costs and $9.0 million was
recorded for inventory write downs. 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. Results of Operations The Companys financial statements as of and for periods subsequent to August 31, 2002 are
referred to as the Reorganized Company statements. All financial statements prior to that date
are referred to as the Predecessor Company statements. The financial statements for the eight
months ended August 31, 2002 give effect to the restructuring and reorganization adjustments and
the implementation of fresh start accounting. Historical results for the year ended December 31,
2002 contain two different bases of accounting and, consequently, after giving effect to the
Reorganization and fresh start adjustments, the historical financial statements of the Reorganized
Company are not comparable to those of the Predecessor Company and have been separately disclosed. Fourth Quarter 2004 Compared to Fourth Quarter 2003 Net sales for the three months ended December 31, 2004 were $157.0 million compared to net
sales of $167.2 million for the three months ended December 31, 2003, down $10.2 million, or 6.1%.
Unit shipments declined 7.3% in the 2004 fourth quarter compared to the fourth quarter 2003. Net
sales in the fourth quarter reflected lower beer and consumer product volumes than the seasonal
pattern typical of the fourth quarter, as several of the Companys customers focused on optimizing
year-end inventory levels. Improvements in shipments of liquor and beverage categories, which were
driven by new business gains since last year, were more than offset by declines in beer and
consumer product categories, as well as declines in ready-to-drink volumes. Declines in volume and price/mix changes negatively impacted income from operations by $3.6 million as
compared to the fourth quarter of 2003. 14




---



##### Table of Contents



The loss from operations was $67.3 million in the fourth quarter of 2004 as compared to the
loss from operations of $0.8 million in the comparable period of 2003. The $66.5 million increase
in loss from operations reflected the Restructuring, impairment and other charges and inventory
loss expenses recorded in the 2004 fourth quarter of $39.7 million and $9.0 million, respectively,
leaving a loss of $17.8 million attributable to all other operations. The impact to production
from the previously announced downtime for furnace maintenance and selected curtailment, while
effective in reducing overall inventory levels that would have otherwise been built in the fourth
quarter, negatively impacted operating results in the quarter by an estimated $ 9.0 million.
Included in the 2004 fourth quarter results were higher energy costs that were not able to be
passed through to customers of $6.5 million, which includes higher natural gas costs, higher
transportation and raw material costs due to rising fuel prices, and higher costs for electricity.
Costs related to inventory write-downs (other than for the Restructuring) and customer settlements
totaled $3.6 million. Unfavorable warehousing costs of $1.0 million
resulted from higher average inventory levels in 2004 as compared to 2003. Depreciation and
amortization declined $3.9 million, due to the change in estimated depreciation lives as discussed
below (reducing depreciation expense by $4.5 million), offset by the increased depreciation
associated with the significant capital improvement projects in 2003 and 2004. Anchor has
continued to realize productivity improvements at its manufacturing facilities, including
improvements from the furnace rebuilds at the Henryetta, Oklahoma and Warner Robins, Georgia
facilities completed earlier in 2003. These productivity improvements
and cost reductions contributed $6.0 million to
operating results during the fourth quarter as compared to the same period of 2003. Interest expense increased $0.5 million in the fourth quarter of 2004 compared to the fourth
quarter 2003 as a result of higher average advances outstanding under the Revolving Credit Facility
during 2004 as compared to 2003. Other income (expense), net declined $3.1 million. The Company
recorded a mark to market loss on certain energy related derivatives of $1.7 million in the 2004
fourth quarter as compared to a mark to market gain of $1.2 million in the comparable period of
2003. Year Ended December 31, 2004 Compared to the Year Ended December 31, 2003 Net sales.Net sales for 2004 were $746.9 million compared to $709.9 million for 2003, an
increase of $37.0 million, or 5.2%. The change in net sales was principally the result of an
increase in unit shipments of 6.4% in the year ended December 31, 2004 as compared with the same
period of 2003. In the first half of 2004, unit shipments increased 19.0% as compared with the same periods of
2003, reflecting strong sales gains from new business in the beverage and liquor categories as well
as core beer category sales increases. Unit shipments declined by 5.5% in the second half of 2004
as compared with the comparable period of 2003, reflecting the effect on normal seasonal patterns
of severe weather in the southeastern U.S. and reflecting the softer beer and consumer products
volumes as several of the Companys customers focused on optimizing year-end inventory levels and a
weaker-than-expected performance 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 for 2004 was $712.3 million (or
95.4% of net sales), while the cost of products sold for 2003 was $660.8 million (or 93.1% of net
sales). The impact to production from the previously announced downtime for furnace maintenance
and selected curtailment negatively impacted operating results by approximately $9.0 million.
Included in the 2004 results were higher energy costs, consisting primarily of natural gas, the
principal fuel for manufacturing glass containers, that could not be passed through to customers of
$16.2 million, which includes higher natural gas costs, higher transportation and raw material
costs due to rising fuel prices, and higher cost for electricity. Higher freight costs, in
addition to the energy impact on freight, negatively impacted results by $12.2 million. Costs
related to inventory write-downs (other than for the Restructuring) and customer settlements
totaled $3.6 million. Unfavorable warehousing costs of $1.6 million resulted from higher average
inventory levels in 2004 as compared to 2003. Depreciation and amortization declined $5.2 million,
due to the change in estimated depreciation lives as discussed below (reducing depreciation by
$15.3 million), offset by the increased depreciation associated with the significant capital
improvement projects in 2003 and 2004. Anchor has continued to realize productivity improvements
at its manufacturing facilities, including improvements from the furnace rebuilds at the Henryetta,
Oklahoma and Warner Robins, Georgia facilities 15




---



##### Table of Contents



completed earlier in 2003. These productivity improvements contributed approximately $14.0
million to operating results during 2004. Increase in volume and
price/mix changes favorably impacted income from operations by $4.7
million as compared to 2003. In the fourth quarter of 2003, the Company engaged the same appraisal firm, utilized in the
August 2002 fresh start reporting appraisal, to review the lives assigned to its property, plant
and equipment existing at August 31, 2002, considering the then prevailing business conditions and
outlook of the Company. Effective January 1, 2004, the Company applied the results of this
independent appraisal to update the depreciable lives of its property, plant and equipment, and
accordingly, calculated depreciation expense effective January 1, 2004 using the updated lives,
resulting in a reduction in the amount of depreciation that would have been otherwise expensed. No
change was made to the appraised value of the assets in the updating of depreciable lives
implemented January 1, 2004. At the time of the original fresh start reporting appraisal recorded
in August 2002, the Company was emerging from Chapter 11 proceedings. Because of the Companys
financial circumstances, the appraisers took into consideration, in their determination of useful
lives for the property, plant and equipment in 2002, the Companys then inability to adequately
fund and upgrade existing equipment. In 2003, the Company refinanced its existing debt, increased
its borrowings under long-term debt obligations and completed and received the funding under its
Equity Offering. The Company devoted a substantial amount of resources from the proceeds of its
financings to improve its existing property, plant and equipment. Based on the updated lives, depreciation and amortization expense recorded in the year ended
December 31, 2004 was $65.3 million. On a pro forma basis, without the update to depreciable
lives, depreciation and amortization expense in the year ended December 31, 2004 would have been
$15.3 million greater, or $0.62 per share. Depreciation and amortization expense for the year
ended 2004 is $5.2 million less overall than for the year ended 2003 as a result of the combination
of lower expense from the update of depreciable lives offset by the higher expense from the
significant capital improvement projects in 2003 and 2004. As a result of this update of depreciable lives, the average annual depreciation life of
buildings changed from 12 years in 2003 to 23 years in 2004. The range of lives for machinery and
equipment changed from 5 to 16 years in 2003 to 5 to 20 years in 2004. The average annual
depreciation life of land improvements changed from 8 years in 2003 to 12 years in 2004. The
weighted average life of all depreciable property, plant and equipment for the years ended December
31, 2004 and 2003 was 9.1 years and 7.0 years, respectively. 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
an environmental reserve of $1.0 million as a result of the sale. There were no comparable gains
in 2003. Selling and administrative expenses.Selling and administrative expenses for the year ended
December 31, 2004 were $27.1 million, or 3.6% of net sales, while selling and administrative
expenses for the year ended December 31, 2003 were $26.9 million, or 3.8% of net sales. The net
increase in selling and administrative expenses resulted from higher professional fees,
particularly for Sarbanes-Oxley compliance and higher legal fees and higher stock option
compensation expense. These increases in expenses were partially offset by lower benefit costs
(primarily due to no accrual for a management incentive bonus in 2004) and by the benefits of the
renegotiated corporate headquarters lease. Restructuring, impairment and other charges, net and inventory loss.In November 2004, the
Board approved the Companys plan to close the Connellsville, Pennsylvania manufacturing facility.
Production at the facility was terminated effective as of the close of business on November 4,
2004. The Company expects to complete plant closure activities by December 2005. 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. 16




---



##### Table of Contents



During the Restructuring Period, the Company will record restructuring expenses and other
related charges that will, in total, approximate $50.5 million to $53.5 million, of which $39.7
million was recorded in the 2004 fourth quarter for asset impairment, employee termination
benefits, inventory related write downs and other facility exit costs and $9.0 million was recorded
for inventory write downs. 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. The major types of costs incurred and to be incurred are: Expense Recorded in theFourth Quarter of 2004Total Amount Expected to
    
    
    and Cumulativebe Incurred
    
    
    through 2004Employee termination benefits
    
    $
    12.8
    
    
    to
    
    $
    12.8
    
    
    $
    12.8Other facility exit costs
    
    
    2.9
    
    
    to
    
    
    5.9
    
    
    
    1.1Charges resulting in cash
expenditures
    
    
    15.7
    
    
    to
    
    
    18.7
    
    
    
    13.9Asset impairment of property and equipment
    
    
    25.8
    
    
    to
    
    
    25.8
    
    
    
    25.8Restructuring, impairment and other charges
    
    
    41.5
    
    
    to
    
    
    44.5
    
    
    
    39.7Noncash write down of inventories
    
    
    9.0
    
    
    to
    
    
    9.0
    
    
    
    9.0Total plant closure related charges
    
    $
    50.5
    
    
    to
    
    $
    53.5
    
    
    $
    48.7
 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 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 for an inventory write-down in the fourth quarter of 2004 of
$9.0 million, of which $1.1 pertains to unusable supplies and raw materials and $7.9 million
pertains to finished goods. 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 remaining cash requirements to approximate: Remaining AmountsExpected to be Paid2005 first quarter
    
    $
    7.3
    
    
    to
    
    $
    8.42005 second quarter
    
    
    3.0
    
    
    to
    
    
    3.8Thereafter
    
    
    2.9
    
    
    to
    
    
    4.0
 Benefits of 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. There were no comparable expenses incurred in 2003. Other
income (expense), net.Other expense, net of $0.3 million in the year ended December
31, 2004 primarily results from the mark to market loss of $1.5 million for certain natural gas
derivatives offset by the gain on extinguishment of a $1.2 million predecessor Series A preferred
stock liability. Other income, net of $0.2 million in the year ended December 31, 2003 primarily
results from the mark to market loss for certain natural gas derivatives. Interest expense.Interest expense for 2004 was $48.4 million compared to $48.5 million for
2003, a decrease of $0.1 million. Interest expense in 2003 included a charge of $4.3 million for
the noncash write-off of 17




---



##### Table of Contents



deferred financing fees of $3.6 million and payments of $0.7 million, related to debt repaid
with the proceeds from the issuance of the Senior Secured Notes. Cash interest expense increased
$4.2 million in 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 $86.1 million for the year ended
December 31, 2004 as compared to a net loss of $26.1 million in 2003. The Restructuring costs in
2004 were $48.7 million, leaving a loss of $37.4 million attributable to all other operations. The
decline in earnings year over year of $11.3 million for all other
operations was primarily due to:  
    higher energy costs  $16.2 million;
    higher freight costs  $12.2 million; and
    unabsorbed overhead during curtailment 
$9.0 million. The foregoing decline in earnings was partially offset by the positive effects of:  
    productivity improvements  $14.0 million;
    lower noncash depreciation and amortization expense  $5.2 million (net of $15.3
million savings on depreciable asset change in estimated lives and $10.1 million
increased costs for recent significant improvement projects);
    improved sales price and mix  $4.7 million; and
    gain on sale of nonoperating properties  $3.8
million. Year Ended December 31, 2003 Compared to the Four Months Ended December 31, 2002 and Eight
Months Ended August 31, 2002 Net sales.Net sales for 2003 were $709.9 million compared to net sales for the four months
ended December 31, 2002 of $211.4 million and net sales for the eight months August 31, 2002 of
$504.2 million, a decrease in net sales of $5.7 million, or less than one percent. Unit shipments
declined slightly by 1.3%, year over year, as compared to the decline of 2.9% in glass container
industry shipments. The strength of Anchors volume shipments in the second half of 2003 was not
enough to fully offset the decline experienced in the first half of 2003. The Company believes
that the negative impact on sales in the early months of 2003 was due to the softness in the
economy, the effect of the military action against Iraq and the harsh weather conditions
experienced during the winter and spring in certain parts of the United States. Cost
of products sold.The Companys cost of products sold for 2003 was $660.8 million, or
93.1% of net sales, while the cost of products sold in the four months ended December 31, 2002 was
$192.4 million, or 91.0% of net sales, and cost of products sold in the eight months ended August
31, 2002 was $451.7 million, or 89.6% of net sales. This decline in margin in 2003 principally was
due to the increase in the cost of natural gas, the principal fuel for manufacturing glass, of
$18.0 million (2.5% of net sales), as compared with the periods comprising the year ended 2002. In
addition, margin was negatively impacted by noncash cost increases in 2003 for depreciation and
amortization of $16.8 million (2.4% of net sales). The Company also incurred costs associated with
downtime during the capital improvement projects at four of the Companys facilities during 2003.
These costs were partially offset by additional manufacturing efficiencies due to the Companys
cost reduction efforts and due to the completed improvement projects at Elmira, New York,
Henryetta, Oklahoma and Warner Robins, Georgia, and by reduced operating lease expense of $9.9
million in 2003 as a result of the buyout of certain equipment leases. Selling and administrative expenses.Selling and administrative expenses for the year ended
December 31, 2003 were $26.9 million, or 3.8% of net sales, while selling and administrative
expenses for the four months ended December 31, 2002 were $9.7 million, or 4.6% of net sales and
selling and administrative expenses for the eight months ended August 31, 2002 were $19.3 million,
or 3.8% of net sales. The year to date decline in selling and administrative expenses resulted
from lower personnel and benefit costs incurred and lower professional fees in 2003 as compared to
2002. Restructuring, net and Reorganization items, net.On August 30, 2002, the effective date of
the Plan, the Company adopted fresh start reporting pursuant to the American Institute of Certified
Public Accountants Statement of Position 90-7 Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code. The adoption of 18




---



##### Table of Contents



fresh start reporting results in the Company revaluing its balance sheet to fair value based
on the reorganization value of the Company. Reorganization costs for the eight months ended August
31, 2002 consisted of a net gain for fresh start adjustments of $49.9 million and expenses incurred
in the Chapter 11 proceedings of $2.5 million. On August 30, 2002, the Company recorded a net gain for restructuring of $0.4 million during
the eight months ended August 31, 2002. The significant components of this net gain include:
professional fees$10.1 million; direct costs of the restructuring$7.9 million; First Mortgage
Note holder consent fee$5.6 million; monetization of assets$4.5 million; other fees$3.9 million;
net cost of derivative settlement$0.2 million; retiree benefit plan modification($24.4 million);
and adjustment to pension liabilities($8.2 million). No comparable expenses were incurred in 2003. Approximately $1.0 million of legal fees,
related to the Reorganization, were recorded against restructuring related reserves in 2003. Interest expense.Interest expense for 2003 was $48.5 million compared to interest expense
for the four months ended December 31, 2002 of $10.4 million and interest expense for the eight
months ended August 31, 2002 of $17.9 million, an increase of $20.2 million. Interest expense
related to the Senior Secured Notes (principal amount of $350.0 million) in 2003 was $16.4 million
more than interest expense related to the First Mortgage Notes (principal amount of $150.0 million)
in 2002. A noncash write-off of $3.6 million, for deferred fees related to debt repaid with the
proceeds from the issuance of the Senior Secured Notes, together with payments of $0.3 million for
the Term Loan prepayment penalty and $0.4 million for the consent fee paid to the First Mortgage
Note holders, were included in interest expense in 2003, totaling $4.3 million. Under the PBGC
Agreement, interest incurred in 2003 was $3.6 million greater than in 2002, during which interest
was incurred for only the four months following the Reorganization. Interest expense in 2002, not
recurring in 2003, included a $1.6 million accrual of interest on the Senior Notes, which were
repaid on August 30, 2002, and the related unpaid interest was reversed through a credit to
reorganization items, net in August 2002. The overall increase in interest expense was also
partially offset by lower average interest rates and lower average borrowings outstanding under the
Companys Revolving Credit Facility in 2003. Net income (loss).The Company recorded a net loss of $26.1 million for 2003 compared to a
net loss of $0.6 million and net income of $63.8 million in the four months ended December 31, 2002
and the eight months ended August 31, 2002, respectively. The restructuring and reorganization
items in the periods comprising 2002 were $47.8 million, leaving income of $15.4 million
attributable to all other operations. The decline in earnings year over year of $41.5 million for all other operations was primarily due to:  
    higher cost of natural gas  $18.0 million;
    higher interest expense  $20.2 million (including $3.6 million of noncash
write-off of deferred fees);
    higher noncash depreciation and amortization expense  $16.8 million;
    other net factors, higher expense  $0.8 million; and offset by the positive effects of:  
    lower operating lease expenses  $9.9 million; and
    improved sales price and mix  $4.4 million. 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 than anticipated 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 to $21.8 million at December 31, 2004,
and it was unable to meet its fixed charge coverage ratio covenant for the quarter ended December
31, 2004. 19




---



##### Table of Contents



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 the remainder of 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. January
    
    
    .14:1.0
    
    
    April
    
    
    .40:1.0
    
    
    July
    
    
    .66:1.0
    
    
    October
    
    
    .79:1.0February
    
    
    .19:1.0
    
    
    May
    
    
    .50:1.0
    
    
    August
    
    
    .71:1.0
    
    
    November
    
    
    .80:1.0March
    
    
    .29:1.0
    
    
    June
    
    
    .58:1.0
    
    
    September
    
    
    .76:1.0
    
    
    December
    
    
    .75:1.0
 The
actual fixed charge coverage ratio for January 2005 was .25:1.0 and for February 2005 was .30:1.0. 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 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, Restructuring payments, and other
liquidity needs for the next twelve months, 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. 20




---



##### Table of Contents



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;
    continuing the suspension of dividend payments on it common stock;
    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. The Revolving B Loan and the master lease agreement contain the same fixed charge coverage
ratio covenant. Cash Flows Operating
Activities.Operating activities provided $6.6 million in cash in 2004 compared to
$20.8 million in cash in 2003. Operating cash flows have
declined from $53.8 million in 2002 to
$20.8 million in 2003 to $6.6 million in 2004. This overall decline in cash provided from
operations reflects the decline in earnings and the changes in working capital items, reconciled as
follows: 2004 compared to 2003
    
    
    2003 compared to 2002Change in net income (loss)
    
    $
    (60.0
    )
    
    $
    (89.3
    )Change in noncash charges
    
    
    40.2
    
    
    
    66.9Net change in earnings
    
    
    (19.8
    )
    
    
    (22.4
    )Change in working capital components:Accounts receivable
    
    
    1.1
    
    
    
    5.4Inventories (after noncash charges)
    
    
    1.8
    
    
    
    (34.6
    )Liabilities (other than current
and long-term debt)
    
    
    1.0
    
    
    
    1.1Principal
payments under PBGC agreement
    
    
    (0.4
    )
    
    
    17.4Other changes
    
    
    2.1
    
    
    
    0.1Decline in operating cash flows
    
    $
    (14.2
    )
    
    $
    (33.0
    )
 2004 compared to 2003.See   Results of Operations for a discussion of the decline in
earnings. Accounts receivable declined $1.1 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. The
Company has not experienced significant collection issues with respect to accounts receivable.
Accounts receivable has declined from the end of third quarter of 2004 as a result of lower sales
in the fourth quarter due to lower seasonal sales and the overall softness in volumes in the
quarter. Inventory levels, net of the inventory loss recorded in the fourth quarter of 2004,
declined $1.8 million. Historically, the Company has built inventory in the fourth quarter in
anticipation of seasonal demands. However, 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, resulting in inventory levels at December 31, 2004 being $10.8 million
lower than at the 2003 year end. Principal payments under the
PBGC Agreement were $4.8 million and $4.4 million, respectively, in
the years ended December 31, 2004 and 2003. 2003 compared to 2002.See   Results of Operations for a discussion of the decline in
earnings. Accounts receivable declined $5.4 million. The decline from the 2002 balance to the
2003 balance is due to higher collections as of the 2003 year end as compared with the comparable
period of 2002. The Company has not experienced significant collection issues with respect to
accounts receivable. Inventory levels rose $34.6 million. For both Anchor and the glass container
industry in general, inventory levels in 2002 were at historic lows. The Company built inventories
in 2003 to return to more normal levels of inventory and in anticipation of the need to 21




---



##### Table of Contents



meet customer demand during the first half of 2004, while undertaking the planned upgrades
during this period at the three facilities described in
Investing Activities below. Principal payments made under the PBGC Agreement in the year ended December 31, 2003 were $4.4
million as compared to payments in the four months ended December 31, 2002 of $1.0 million and in
the eight months ended August 31, 2002 of $20.75 million, representing the initial payment under
the PBGC Agreement. Investing Activities.Cash consumed in investing activities was $71.3 million in 2004, as
compared to $147.0 million in 2003. 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 leased equipment (of which $39.2 million was
included in investing activities and $5.5 million was included in financing activities). Capital
expenditures were $72.7 million and $119.1 million, respectively in 2004 and 2003. Capital
expenditures in 2004 included approximately $30.0 million for routine maintenance and molds to
support production. Additionally, 2004 included fewer significant improvement projects as compared
to 2003. Significant improvement projects in 2004 included:  
    in the fourth quarter of 2004, a $6.3 million project at the Winchester, Indiana
facility, including the renovation of one furnace;
    in the first and fourth quarters of 2004, $9.4 million for projects at the Jacksonville,
Florida facility, including the renovation of two furnaces;
    in the first quarter of 2004, a $8.0 million project at the Shakopee, Minnesota facility; and
    in the second quarter of 2004, a $12.2 million project at the Salem, New Jersey facility. Cash consumed in investing activities was $147.0 million in 2003, as compared to $67.6 million
in the periods comprising 2002. Capital expenditures were $119.1 million and $71.3 million,
respectively in 2003 and 2002. In addition, the Company financed $10.0 million of equipment under
its master lease agreement. Significant projects in 2003 included:  
    in the fourth quarter of 2003, a $10.0 million project at the Salem, New Jersey
facility, including the renovation of two furnaces;
    in the fourth quarter of 2003, a $8.0 million project at the Lawrenceburg, Indiana facility;
    in the third quarter of 2003, a $27.5 million project at the Warner Robins, Georgia facility; and
    in the first quarter of 2003, a $28.0 million project at the Henryetta, Oklahoma facility. Financing
Activities.Net cash provided in financing activities was $41.7 million in 2004, as
compared to cash provided of $148.9 million in 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 in 2004. The net financing activities in 2003
principally reflect the net proceeds of the Equity Offering of $127.7 million and the use of a
portion of such proceeds for the cash redemption of the Series C Preferred Stock of $85.3 million,
the proceeds of the offering of the Additional Notes of $53.4 million and 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 the First Mortgage Notes and the Term Loan. The initial cash dividend payment
on the Companys common stock was approximately $1.0 million, paid in the fourth quarter of 2003. Net
cash provided in financing activities was $148.9 million in
2003, as compared to cash provided
of $13.8 million in the periods comprising 2002. The net financing activities in 2003 principally
reflect the net proceeds of the Equity Offering and 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. On August 30, 2002, pursuant to the PBGC Agreement, Anchor granted the PBGC a warrant for the
purchase of 711,000 shares of its common stock. In June 2003, the Company repurchased all of the
outstanding warrants held by the PBGC for a negotiated price of $1.5 million. Summary of Significant Financing Transactions Indebtedness under the Revolving B Loan Agreement.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. 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. 22




---



##### Table of Contents



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%, payable
quarterly. Interest on the new facility is payable in kind through June 30, 2005 and thereafter if
availability under the Companys 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. Amendment to Revolving Credit Facility and Master Lease Agreement.On February 14, 2005, the
Company entered into an amendment with its lenders under the Revolving Credit Facility to modify
the fixed charge coverage ratio covenant under the facility for the remainder of 2005. In
addition, the lenders waived the Companys failure to comply with its fixed charge coverage ratio
covenant as of December 31, 2004 that resulted from the Companys weaker than anticipated cash
flows and operating results during the fourth quarter. See Results of Operations  Fourth Quarter
2004 Compared to Fourth Quarter 2003. The required minimum fixed charge coverage ratios for 2005,
based on a 2005 cumulative year to date calculation, range from 0.14:1.0 for January 2005 to
0.80:1.0 for November 2005 to 0.75:1.0 for December 2005, and 1.0:1.0 for 2006 and thereafter. The
actual fixed charge coverage ratio for January 2005 and February 2005 is .25:1.0 and .30:1.0,
respectively, and the Company is in compliance with this covenant as of February 28, 2005. The
Company also entered into a similar agreement and waiver with its lender under its capital lease
arrangements, which had an outstanding balance of $11.7 million at February 28, 2005. Initial Public Offering.On September 30, 2003, the Company consummated the Equity Offering
of 7,500,000 shares of its common stock, par value $.10 per share, at the initial public offering
price of $16.00 per share. On October 8, 2003, the underwriters for the Equity Offering exercised
an option to purchase 1,125,000 additional shares of common stock to cover over-allotment of shares
in connection with the Equity Offering. The Company received net proceeds from the Equity Offering
of $127.7 million (including proceeds of $16.8 million from the exercise of the over-allotment
option). $85.3 million of the net proceeds of the Equity Offering were used to redeem all of the
Series C Preferred Stock. The remaining the net proceeds were used to fund working capital and for
general corporate purposes. Senior Secured Notes Offering.On February 7, 2003, the Company completed an offering of
$300.0 million aggregate principal amount of 11% Senior Secured Notes due 2013, issued under the
Indenture. The Senior Secured Notes are senior secured obligations of the Company, ranking equal
in right of payment with all existing and future unsubordinated indebtedness of the Company and
senior in right of payment to all future subordinated indebtedness of the Company. The Senior
Secured Notes are secured by a first priority lien, subject to certain permitted encumbrances, on
substantially all of Anchors existing real property, equipment and other fixed assets relating to
Anchors eight operating glass container manufacturing facilities. The collateral does not include
inventory, accounts receivable or intangible assets. Proceeds from the issuance of the Senior Secured Notes, net of fees, were $289.0 million and
were used to repay the principal amount outstanding under the First Mortgage Notes plus accrued
interest thereon ($156.3 million in total), the principal amount outstanding under the $20.0
million term loan facility from Ableco Finance LLC (the Term Loan) plus accrued interest thereon
and a prepayment fee ($20.4 million in total) and advances then outstanding under the Revolving
Credit Facility ($66.9 million in total), which included funds for certain of the Companys capital
improvement projects. During the first quarter of 2003, the remaining proceeds of $45.0 million
were used to terminate certain equipment leases by purchasing from the respective lessors the
equipment leased thereunder. On August 5, 2003, the Company completed an exchange offer with
respect to $298.8 million of Senior Secured Notes tendered in the exchange offer, for a like
principal amount of new Senior Secured Notes, identical in all material respects to the Senior
Secured Notes, except that the new Senior Secured Notes do not bear legends restricting the
transfer thereof. On August 5, 2003, the Company completed an additional offering of the Additional Notes.
Proceeds from the issuance of the Additional Notes, net of fees, were $53.4 million. The
Additional Notes were issued at an issue price of 107.5% of their principal amount. The Additional
Notes were issued under the same Indenture as the Senior Secured Notes, as supplemented by a first
supplemental indenture, dated August 5, 2003, and their terms are identical in all material
respects to the Senior Secured Notes. 100% of the net proceeds from the issuance of the Additional
Notes were used to finance improvements to the collateral securing the Senior Secured Notes and the 23




---



##### Table of Contents



Additional Notes in compliance with the Indenture. On January 29, 2004, the Company completed
an exchange offer with respect to $50.0 million of Additional Notes tendered in the exchange offer,
for a like principal amount of new Additional Notes, identical in all material respects to the
Additional Notes, except that the new Additional Notes do not bear legends restricting the transfer
thereof. Reorganization.On August 30, 2002, Anchor consummated a significant restructuring of its
existing debt and equity securities through a Chapter 11 Reorganization. As part of this
Reorganization, Cerberus, through certain Cerberus-affiliated funds and managed accounts, invested
$80.0 million of new equity capital into Anchor, acquiring 100% of Anchors Series C Preferred
Stock for $75.0 million and 100% of Anchors common stock for $5.0 million. In addition, Anchor
arranged for a $20.0 million Term Loan from Ableco Finance LLC. Anchor also entered into the PBGC
Agreement. The Term Loan was subsequently repaid with a portion of the proceeds from the offering
of the Senior Secured Notes. The Series C Preferred Stock was redeemed in full with a portion of
the proceeds of the Equity Offering. Debt and Other Contractual Obligations The Company has aggregate indebtedness of $350.0 million under its Senior Secured Notes. As of December 31, 2004, advances outstanding under the Revolving Credit Facility were $50.9
million, borrowing availability was $21.8 million and outstanding letters of credit on this
facility were $10.0 million. As of March 1, 2005, advances outstanding under the Revolving Credit
Facility and the Revolving B Loan were $72.3 million and $5.0 million, respectively, and combined
availability under the both facilities was $23.4 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. At December 31, 2004, the Company was required to maintain a fixed charge coverage ratio of
        .95:1.0. The actual fixed charge coverage ratio for the four quarters ended December 31, 2004 was
        .87.0:1.0, resulting from the Companys weaker than anticipated cash flows and operating expenses
during the fourth quarter. 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 remainder of 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. On
November 4, 2004, the Company entered into an amendment with its lenders under the Revolving Credit
Facility which expanded the maximum borrowing availability under the facility to $115 million from
$100 million, increased the borrowing base and extended the term to August 30, 2007. 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 December 31, 2004, $12.3 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%, 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 24




---



##### Table of Contents



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 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. The Revolving Credit Facility, the master lease agreement and the Revolving B Loan require
that the Company meet the same monthly fixed charge coverage test. The required minimum fixed
charge coverage ratios for 2005, based on a 2005 cumulative year to date calculation, range from
0.14:1.0 for January 2005 to 0.80:1.0 for November 2005 to 0.75:1.0 for December 2005 and 1.0:1.0
for 2006 and thereafter. The actual fixed charge coverage ratio for January 2005 and February 2005
is .25:1.0 and .30:1.0, respectively, and the Company is in compliance with this covenant as of
February 28, 2005. 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
$55.8 million at December 31, 2004. Commitments for the principal payments and interest required on long-term debt, including
capital leases and certain other contractual obligations, are as follows: Less than 1
    
    
    1  3
    
    
    3  5
    
    
    More than 5year
    
    
    years
    
    
    years
    
    
    years
    
    
    Total(dollars in thousands)Long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    350,000
    
    
    $
    350,000Capital leases
    
    
    4,098
    
    
    
    8,228
    
    
    
    451
    
    
    
    
    
    
    
    12,777Interest on above obligations
    
    
    39,329
    
    
    
    77,704
    
    
    
    77,007
    
    
    
    134,750
    
    
    
    328,790Payments under the PBGC Agreement
    
    
    10,000
    
    
    
    20,000
    
    
    
    20,000
    
    
    
    27,500
    
    
    
    77,500Operating leases
    
    
    5,520
    
    
    
    7,870
    
    
    
    4,720
    
    
    
    6,380
    
    
    
    24,490$
    58,947
    
    
    $
    113,802
    
    
    $
    102,178
    
    
    $
    518,630
    
    
    $
    793,557
 The above table excludes obligations outstanding at December 31, 2004 under the Revolving
Credit Facility and the Revolving B Loan of $50.9 million and $0, respectively, and related
interest expense thereon. In
addition to the restructuring cash requirements noted above of approximately $13.2 to $16.2
million, the Company anticipates payments in 2005 for capital expenditures of approximately $30 to
$35 million (see below). In addition to the commitments included in the table above, the Company is obligated to pay
approximately $4.0 million annually related to its post-retirement benefit plan and approximately
$6.2 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 an effort to
improve the Companys cash flow. Capital Expenditures Capital expenditures were $23.8 million in the fourth quarter of 2004 including capital
spending for maintenance repairs on temporarily idled furnaces that had previously been planned to
occur in 2005 (of approximately $9.0 million) and for maintenance and molds to support production.
These projects included furnace rebuild projects at the Winchester, Indiana and Jacksonville,
Florida facilities. Capital expenditures were $72.7 million in the year ended December 31, 2004,
including a major reconstruction on a furnace at the Companys Shakopee, Minnesota facility,
completed in the first quarter of 2004. During 2003, Anchor completed five significant renovation
projects, including two furnaces at its Salem, New Jersey facility, one furnace at its
Lawrenceburg, Indiana facility and projects at its Henryetta, Oklahoma and Warner Robins, Georgia
facilities. 25




---



##### Table of Contents



Capital spending in 2005 is planned to be approximately $30 to $35 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 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. The Company believes that cash flows from operating activities, combined with available
borrowings under the Revolving Credit Facility and Revolving B Loan, will be sufficient to support
its operations, including capital expenditures, restructuring charge payments and other liquidity
requirements, for the next twelve months, 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. 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, 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 March 2005
closed at $6.304 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 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.
Inventory levels were impacted by the softer than normal seasonal pattern in the latter part of
2004 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. Critical Accounting Policies and Estimates The Companys significant accounting policies are disclosed in Note 1 and other notes to the
annual financial statements included herein. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from estimates. The most
significant accounting estimates inherent in the preparation of the Companys financial statements
form the basis for costs and reserves with respect to areas such as property, plant and equipment,
post-retirement benefits, environmental reserves, insurance reserves and valuation allowances to
reduce deferred tax assets. Estimates and 26




---



##### Table of Contents



judgments are based on historical experience and other factors believed to be reasonable in
the circumstances. Management continually reviews its accounting policies for application and
disclosure in the financial statements. Property, plant and equipment Property, plant and equipment expenditures are capitalized and
recorded at cost. For financial statement purposes, these assets are depreciated generally using
the straight-line method over the estimated useful lives of the assets. Maintenance and repairs
are charged directly to expense as incurred. The Company makes estimates regarding the useful
lives of these assets and any changes in the actual lives could result in material changes in the
net book value of these assets. The Company evaluates the recoverability of its long-lived assets
whenever adverse events or changes in business climate indicate that the expected undiscounted
future cash flows from the related asset may be less than previously anticipated. If the net book
value of the related asset exceeds the undiscounted future cash flows of the asset, the carrying
amount would be reduced to the present value of its expected future cash flows and an impairment
loss would be recognized. This analysis requires the Company to make significant estimates and
assumptions, and changes in facts and circumstances could result in material changes in the
carrying value of the assets and the related depreciation expense. The Companys depreciation expense in 2003 and the four months ended December 31, 2002 was
based on the Companys fresh start appraisal from August 2002, and resulted in higher depreciation
expense than normal maintenance capital expenditure levels and industry comparables. As a result
of a change in the business conditions and outlook of Anchor, the Company engaged the same
independent appraisal firm to evaluate and update the depreciable lives of its property, plant and
equipment. The Company implemented the results of this independent appraisal effective January 1,
2004, resulting in a reduction of depreciation expense in 2004 and future periods. Post-retirement benefits Post-retirement benefit obligations are based on various
assumptions, including discount rate, health care cost trend rates, retirement and mortality rates
and other factors. Actual results that differ from the assumptions affect future expenses and
obligations. A one percentage point increase in the assumed healthcare cost trend rate would
increase the accumulated post-retirement benefit obligation as of December 31, 2004 by
approximately $3.8 million and the net post-retirement healthcare cost for the year ended December
31, 2004 by approximately $0.3 million. A one percentage point decrease in the assumed healthcare
cost trend rate would decrease the accumulated post-retirement benefit obligation as of December
31, 2004 by approximately $3.5 million and the net post-retirement healthcare cost for the year
ended December 31, 2004 by approximately $0.3 million. 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 (the FASB) issued FSP No. SFAS 106-2  Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization
Act of 2003 (FSP SFAS 106-2). FSP SFAS 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. The Company adopted the provisions of FSP SFAS 106-2 effective July 1,
2004. As a result of the adoption of FSP SFAS 106-2, the accumulated post-retirement benefit
obligation was reduced by $9.9 million and the net periodic benefit cost was reduced by $1.5
million as follows: service cost  $0.1 million, interest cost  $0.6 million and amortization of
actuarial losses  $0.8 million. Environmental reserves Reserves have been established for potential environmental
liabilities, including known or projected remediation projects and projected exposure at
third-party sites. These reserves are based on the Companys estimates. Changes in facts and
circumstances, with respect to particular projects and/or sites, from those upon which the
Companys estimates are based, could result in material changes to the Companys environmental
liabilities as reported. Insurance reserves These reserves, for workers compensation claims, medical insurance claims
and general and product liability claims, are determined based upon reported claims in process and
actuarial estimates for losses incurred but not reported, based upon the Companys claims history.
The Company is self-insured, up to a deductible limit under its workers compensation and general
and product liability programs. A material change in actual reported claims would likely result in
material changes to the reserves as reported. 27




---



##### Table of Contents



Deferred tax assets The Company uses the liability method of accounting for income taxes.
If, on the basis of available evidence, it is more likely than not that all or a portion of the
deferred tax asset will not be realized, an assessment is made as to whether or not a valuation
allowance is required to offset deferred tax assets. Since realization is not assured as of
December 31, 2004, the Company has deemed it appropriate to establish a valuation allowance against
the net deferred tax assets. This assessment includes anticipating future taxable income and the
Companys tax planning strategies and is made on an ongoing basis. Consequently, future material
changes in the valuation allowance are possible. 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 herein, which could cause actual results to differ
from those projected. The Company disclaims any obligation to update any forward-looking
statements. Factors Affecting Future Results and Financial Condition The following are certain factors that could affect the future results and the financial
condition of the Company. They should be considered in connection with evaluating forward-looking
statements contained in the Annual Report on Form 10-K because these factors could cause actual
results and conditions to differ materially from those projected in forward-looking statements. Anheuser-Busch is Anchors largest customer; the loss of Anheuser-Busch as a customer would
adversely impact Anchors operating performance. The Companys largest customer, Anheuser-Busch, accounted for 48.1% of its net sales for the
year ended December 31, 2004. The Company has two facilities in Florida and Georgia that are
dedicated to providing two Anheuser-Busch breweries with glass containers. The contract covering
these facilities extends through 2009. The loss of Anheuser-Busch as a customer or a material
reduction in Anheuser-Buschs bottle requirements or a modification in pricing terms would
adversely impact the Companys operating performance, results of operations and cash flows. 28




---



##### Table of Contents



In addition to Anheuser-Busch, Anchors customers are concentrated; the failure to maintain its
relationships with its largest customers would adversely affect its operating performance. The Companys ten largest customers accounted for approximately 79.7% of its net sales for the
year ended December 31, 2004. The Company did not have any written agreements with five of its
twenty-five largest customers for 2004 (comprising 5.0% of net sales for 2004). In addition,
agreements with three of its twenty-five largest customers for 2004 (comprising 8.0% of net sales
for 2004) will expire during 2005. The Company has additional customer contracts expiring in 2006
(comprising 28.0% of net sales for 2004). The loss of a number of these customers, a significant
reduction in sales to these customers or a significant change in the commercial terms of the
Companys relationship with these customers could have a material adverse effect on the Companys
business, financial condition and results of operations. Anchor may face an industry supply / demand imbalance or loss of customer requirements as a result
of expected new capacity in the industry, which could adversely impact operating performance. Excess or additional supply capacity in the glass container manufacturing industry, including
through the addition of new competitor capacity, may absorb production previously allocated to
Anchor. The loss of production and the related customer shipments, unless replaced, could have a
material adverse effect on the Companys business, financial condition and results of operations. Anchor faces significant competition from other glass container producers, as well as from makers
of alternative forms of packaging, and its products are subject to consumer taste. The Companys principal competitors are Owens-Illinois and Saint-Gobain. These competitors
are larger and have greater financial and other resources than the Company. If the Company is
unable to continue to compete successfully with these competitors, its operating performance could
be adversely affected. In
addition to competing directly with Owens-Illinois and Saint-Gobain in the glass container
segment of the rigid packaging industry, the Company also competes indirectly with manufacturers of
other forms of rigid packaging, such as aluminum cans and plastic containers. These other forms of
rigid packaging compete with glass containers principally on the basis of quality, price,
availability and consumer preference. The Company believes that the use of glass containers for
alcoholic and non-alcoholic beverages is subject to consumer taste. The Companys products may not
continue to be preferred by its customers end-users and consumer preference may shift from glass
containers to non-glass containers. Certain industry categories, specifically the food product
line has, and is expected to continue to experience a conversion to plastics. While these
conversions do not directly effect Anchor, the Company is indirectly affected by the excess
industry capacity that may result. A material shift in consumer preference away from glass
containers, or competitive pressures from the Companys direct and indirect competitors, could
result in a decline in sales volume or pricing pressure and, as a result, its operating performance
could be adversely affected. Increases in the prices of raw material have adversely affected Anchors operating results and if
Anchor is unable to obtain its raw materials at favorable prices, operating performance could be
adversely impacted. Sand, soda ash, limestone, cullet, corrugated packaging materials and energy, primarily
natural gas, are the principal raw materials that are used in the Companys manufacturing
operations. The price of these materials increased substantially during 2004, including the costs
of energy, cullet, sand and limestone. The Company has not been able to pass many of these
increases on to its customers. Costs for certain other raw materials, primarily soda ash, are
rising significantly in 2005. If there are further material increases in the cost of these items
during 2005, it could have an additional material adverse effect on the Companys business,
financial condition and results of operations if it is unable to pass these cost increases along to
its customers. The Company believes that adequate quantities of these materials are, and will continue to be,
available from various suppliers. However, if temporary shortages due to disruptions in supply
caused by weather, transportation, production delays or other factors require the Company to secure
its raw materials from sources other than its current suppliers, the Company cannot be assured that
it will be able to do so on terms as favorable as its current terms or at all. 29




---



##### Table of Contents



Natural gas, the principal fuel used to manufacture Anchors products, has historically been
subject to widely fluctuating prices and has recently been at very high levels. In addition, the
increasing prices for oil may have a material affect on costs and results of operations. 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 Company incurred higher costs for
energy of $16.2 million in 2004 as compared to 2003 and incurred higher costs of $18.0 million in
2003 as compared to 2002. The natural gas price for March 2005 closed at $6.304 per MMBTU. During
2004, the Company was able to pass through only a portion of natural gas increases to customers and
although certain of the Companys contracts with its customers incorporate price adjustments based
on changes in the cost of natural gas, the change in pricing may lag behind the cost incurred to
obtain natural gas. The Company has no way of predicting to what extent natural gas prices will
further rise in the future. The increased price of oil would continue to impact operating costs
and would continue to impact Anchors cost of freight. Any significant increase, or the continued
inability to pass on those costs, could adversely impact the Companys margins and operating
performance and would have a material adverse effect on the Companys results of operations and
financial condition. Anchor is involved in a continuous manufacturing process with a high degree of fixed costs. Any
interruption in the operations of its manufacturing facilities may impact its operating
performance. Due to the extreme operating conditions inherent in some of the Companys manufacturing
processes, it may, from time to time, incur unplanned business interruptions and such interruptions
may adversely impact its operating performance and, as a result, the Company may not generate
sufficient cash flow to satisfy its obligations. To the extent that the Company experiences any
furnace breakdowns or similar manufacturing problems, it will be required to make capital
expenditures and its liquidity may be impaired as a result of these expenditures. Anchor is subject to various lawsuits that could impose substantial costs upon the Company and may
adversely impact its operating performance. Anchor and certain of its officers and directors are party to various legal proceedings.
Defense of these proceedings may consume substantial amounts of managements time and consume
substantial financial resources and could have a material adverse effect on the Companys results
of operations and financial condition. Anchor is subject to various regulations that could impose substantial costs upon the Company and
may adversely impact its operating performance. The Companys operations are subject to Federal, state and local laws and regulations that are
designed to protect the environment, as well as the safety and health of workers. See Item 1.
BusinessEnvironmental and Other Governmental Regulations for a discussion of certain of these
laws and regulations. Such laws and regulations frequently change and state and local laws are
different in every jurisdiction. The Companys operations and properties must comply with these
legal requirements. In addition, the Company is required to obtain and maintain permits in
connection with the Companys glass-making operations. The Company has incurred, and expects to
continue to incur, costs for the Companys operations to comply with such legal requirements, and
these costs could increase in the future. Many such legal requirements provide for substantial
fines, orders (including orders to cease operations) and criminal sanctions for violations.
Certain environmental legal requirements provide for strict, and under certain circumstances, joint
and several liability for, investigation and remediation of releases of hazardous substances into
the environment and liability for related damages to natural resources. They may also impose
liability for personal injury or property damage due to the presence of, or exposure to, hazardous
substances. It is difficult to predict the future development of such laws and regulations or
their impact on the Companys business or results of operations. Anchor anticipates that standards
under these types of laws and regulations will continue to tighten and that compliance will require
increased capital and other expenditures. A significant order or judgment against Anchor, the loss
of a significant permit or license or the imposition of a significant fine or any other liability
in excess of, or not covered by, the Companys reserves and/or the Companys insurance, could
adversely impact the Companys operating performance. 30




---



##### Table of Contents



Over the years, legislation has been introduced at the Federal, state and local levels
requiring a deposit or tax, or imposing other restrictions, on the sale or use of certain
containers, particularly beer and carbonated soft drink containers. Several states have enacted
some form of deposit legislation, and others may in the future. The enactment of additional
deposit laws or laws, such as mandatory recycling rate requirements, that affect the cost structure
of a particular segment or all of the packaging industry could have a material adverse effect on
the Companys business, results of operations and financial condition. Organized strikes or work stoppages by unionized employees may have an adverse effect on the
Companys operating performance. The Companys two labor contracts with the GMP and its two labor contracts with the USWA
expire on March 31, 2005 and August 31, 2005, respectively. Negotiations with the GMP for a
successor labor agreement commenced on March 14, 2005. The Company expects to begin
negotiations with the USWA later in 2005. If the Companys unionized employees were to engage in a
strike or other work stoppage prior to such contract expiration, or if the Company would be unable
to negotiate acceptable extensions of those agreements with labor unions resulting in a strike or
other work stoppage by the affected workers, the Company could experience a significant disruption
of operations and increased operating costs as a result of higher wages or benefits paid to union
members, which could have an adverse impact on the Companys operating performance. Anchor may be unable to purchase the Senior Secured Notes upon a change of control. Upon the occurrence of specified change of control events, Anchor will be required to offer
to purchase the Senior Secured Notes. Anchor may not have sufficient financial resources to
purchase all of the Senior Secured Notes that holders tender upon a change of control offer. The
Revolving Credit Facility and Revolving B Loan prohibit, and future credit agreements or other
agreements relating to the Companys senior indebtedness to which Anchor becomes a party may
prohibit it from purchasing any of the Senior Secured Notes, as a result of a change of control. Anchors operating results and operating cash flows have declined; Anchors business could be
adversely impacted if its operating results and operating cash flows continue to decline. Anchors operations have been negatively impacted by the continuing high costs of energy,
reflected not only as higher direct costs of natural gas, but in higher related costs of freight
and other raw materials, softer sales volumes than anticipated in the second half of 2004 and the
effect of fourth quarter curtailments (furnace downtime) and the acceleration of certain capital
projects into 2004 from 2005. Anchor has not been able to fully pass through these higher costs to
its customers. As a result of this and other factors, Anchors operating results and its operating
cash flows have declined. Should operating results and operating cash flows continue to decline,
Anchor may be forced to reduce or delay capital expenditures, sell material assets or operations,
obtain additional capital or restructure its debt. Under its existing debt agreements, Anchor
would not be able to incur additional indebtedness without consent of certain of its current debt
holders. There can be no assurance that Anchor would be successful in these alternatives,
including, within limitations, refinancing its existing indebtedness on favorable economic terms,
if at all. 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. Anchors business may suffer if it does not attract or retain senior management. The Company depends on its ability to attract and retain talented senior management. The
Company has announced that Darrin Campbell will resign as its chief executive officer on March 31,
2005 and that the Board has retained a search firm to assist it in identifying a new chief
executive officer. In addition, the Company is seeking to hire a permanent chief financial
officer. The Companys ability to attract a new chief executive officer and a new chief financial
officer, or the loss of services of any of the remaining members of its senior management team
could 31




---



##### Table of Contents



adversely affect its business. There may be a limited number of persons with the requisite
skills to serve in these positions and the Company may be unable to locate or employ such qualified
personnel on acceptable terms. Anchors substantial debt could limit its flexibility, adversely affecting its financial condition Anchor has a substantial amount of debt that could:  
    make it difficult for it to satisfy its debt obligations;
    make it vulnerable to general adverse economic and industry conditions;
    limit its ability to obtain additional financing for working capital, capital
expenditures, raw materials, natural gas hedging, product development efforts and other
general corporate requirements;
    require it to dedicate a substantial portion of its cash flow from operations to
payments on its debt, thereby reducing the availability of cash flow for operations and
other purposes;
    limit its flexibility in planning for, or reacting to, changes in its business and
the industry in which it operates; and
    place it at a competitive disadvantage compared to competitors that may have
proportionately less debt. In addition, the Companys ability to make scheduled payments or refinance its obligations
depends on its successful financial and operating performance. Operating performance may not be
able to generate sufficient cash flow, or capital resources may not be sufficient to permit payment
of debt obligations in the future. The Companys financial and operating performance, cash flow
and capital resources depend upon prevailing economic conditions and certain financial, business
and other factors, many of which are beyond its control. If the Companys cash flow and capital resources are insufficient to fund its debt service
obligations, it may be forced to reduce or delay capital expenditures, sell material assets or
operations, obtain additional capital or restructure its debt. Failure to comply with the fixed charge coverage ratio covenant under the Revolving Credit
Facility, Revolving B Loan and the master lease agreement is a default and, may cause those and
other debt agreements to become currently due, as a result of cross default provisions. The Revolving Credit Facility requires the Company to achieve minimum monthly targeted levels
under a fixed charge coverage ratio covenant. Failure to comply with this financial covenant is a
default and would permit the lenders to require the Company to repay its loans if the
default is not remedied. This may have a material adverse effect on the Companys business,
operating results and financial condition. Anchors controlling stockholders may take actions that conflict with the interests of other
security holders. In excess of a majority of the voting power of Anchors capital stock is held by affiliates of
Cerberus, referred to herein as the majority stockholders. Accordingly, Cerberus controls the
power to elect the Companys directors, to appoint members of management and to approve all actions
requiring the approval of the holders of the Companys common stock, including adopting amendments
to its certificate of incorporation and approving mergers, certain acquisitions or sales of all or
substantially all of its assets. The interests of the majority stockholders could conflict with
interests of other security holders. New Accounting Standards In December 2004, the 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) that is effective for the first interim
or annual reporting period that begins after June 15, 2005. The Company adopted the requirements
of SFAS 123 effective January 1, 2003. The adoption of SFAS 123R will not 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. 32




---



##### Table of Contents



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 FASB issued FSP No. SFAS 106-2, that provides guidance on accounting for the
effects of the Medicare Act for employers that sponsor postretirement health care plans that
provide prescription drug benefits. The Company adopted the provisions of FSP SFAS 106-2 effective
July 1, 2004. As a result of the adoption of FSP SFAS 106-2, the accumulated post-retirement
benefit obligation was reduced by $9.9 million and the net periodic benefit cost was reduced by
$1.5 million as follows: service cost  $0.1 million, interest cost  $0.6 million and
amortization of actuarial losses  $0.8 million. 
 ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk. The Revolving Credit Facility is subject to interest rates based on a floating benchmark rate
(the prime rate or eurodollar rate), plus an applicable margin 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
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. See Managements
Discussion and Analysis of Financial Condition and Results of Operations  Impact of Inflation. 33




---



##### Table of Contents



ITEM 8. Financial Statements and Supplementary Data. PageReports of Independent Registered Certified Public Accounting Firm
    
    F-2Statements of Operations and Comprehensive Income (Loss) Years Ended December 31, 2004 and 2003,Four Months Ended December 31, 2002 (Reorganized Company), andEight Months Ended August 31, 2002 (Predecessor Company)
    
    F-4Balance Sheets December 31, 2004 and 2003 (Reorganized Company)
    
    F-5Statements of Cash Flows Years Ended
December 31, 2004 and 2003,Four Months
Ended December 31, 2002 (Reorganized Company), andEight Months
Ended August 31, 2002 (Predecessor Company)
    
    F-6Statements of Stockholders Equity (Deficit) Years Ended December 31, 2004 and 2003,Four Months Ended December 31, 2002 (Reorganized Company), andEight Months Ended August 31, 2002 (Predecessor Company)
    
    F-8Notes to Financial Statements
    
    F-10
 34




---



##### Table of Contents



ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. 
 ITEM 9A. Controls and Procedures. Disclosure Controls and Procedures An evaluation was carried out, as of the end of the period covered by this report on Form
10-K, 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-15(b) of the Exchange Act. Based on that evaluation, Anchors chief
executive officer and chief financial officer have concluded that the Companys disclosure controls
and procedures were effective. There were no changes in the Companys internal controls over financial reporting
during the fourth quarter of 2004 that materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial reporting. Managements Report on Internal Control over Financial Reporting Management of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange
Act Rule 13a-15(f). The Companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements.
Management conducted an evaluation of
the effectiveness of the Companys internal control over
financial reporting based on the criteria set forth in
Internal Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation under the Internal Control  Integrated Framework,
management concluded that the internal control over financial reporting was effective as of
December 31, 2004. Managements assessment of the effectiveness of the Companys internal control over financial
reporting as of December 31, 2004 has been audited by PricewaterhouseCoopers LLP, an independent
registered certified public accounting firm, as stated in their report which is included herein. 
 ITEM 9B. Other Information. None. 35




---



##### Table of Contents



PART III 
 ITEM 10. Directors and Executive Officers of the Registrant. Directors and Executive Officers of the Company Additional information regarding the directors of the Company is incorporated by reference
from the definitive Proxy Statement under the heading Proposal 1. Election of Directors. Executive Officers and Directors.The following table sets forth certain information
regarding each of the Companys executive officers. Name
    
    Age
    
    PositionDarrin J. Campbell
    
    
    40
    
    
    Chief Executive Officer and DirectorRoger L. Erb
    
    
    62
    
    
    Executive Vice President  Operations and
EngineeringPeter T. Reno
    
    
    40
    
    
    Vice President and Interim Chief Financial
OfficerRichard A. Kabaker
    
    
    61
    
    
    Vice President, General Counsel and SecretaryRichard M. Deneau
    
    
    58
    
    
    Chief Executive Officer until November 2004James N. Chapman
    
    
    42
    
    
    DirectorCarlton Donaway
    
    
    53
    
    
    Director and Chairman of the Board of DirectorsJonathan Gallen
    
    
    45
    
    
    DirectorTimothy F. Price
    
    
    50
    
    
    DirectorAlan H. Schumacher
    
    
    58
    
    
    DirectorLenard B. Tessler
    
    
    52
    
    
    DirectorAlexander Wolf
    
    
    30
    
    
    Director
 Executive Officers Terms of Office.Each officer serves at the discretion of the Board and
until such officers successor is chosen and qualified. Darrin J. Campbellbecame the Companys Chief Executive Officer and a director in November
2004. Mr. Campbell joined the Company as Vice President, Pricing and Business Development in
September 2000, became Executive Vice PresidentSales and Asset Management in September 2001 and
became the Companys Chief Financial Officer in November 2002. Mr. Campbell was Chief Operating
Officer of Pabst Brewing from May 1999 to August 2000 and Chief Financial Officer from September
1996 to April 1999. Mr. Campbell has stated his intention to resign as Chief Executive Officer and
as a director effective March 31, 2005. Roger L. Erbbecame the Companys Senior Vice President-Operations in October 1997 and
Executive Vice PresidentOperations and Engineering in September 2001. From September 1995 to June
1997, Mr. Erb was Senior Vice President of Technical Services at Ball-Foster Glass Container Co.
Prior thereto, he was employed at American National Can Companys Foster-Forbes Glass Company
Division, serving as Senior Vice President of Technical Services from June 1994 to September 1995,
Senior Vice President of Operations from January 1993 to June 1994 and, prior to this time, as Vice
President of Technical Services. Peter T. Renojoined the Company in December 2002 as Vice President, Finance and became the
Vice President and Interim Chief Financial Officer in August 2004. From December 1998 to December
2002, Mr. Reno 36




---



##### Table of Contents



was Vice President of Corporate Operations at Takata Seat Belts Inc., a division of privately
held TK Holdings. From 1993 to 1998, Mr. Reno was Corporate Controller of Takata Seat Belts Inc.
Prior thereto, he held various positions at TK Holdings and Federal-Mogul Corporation. Richard A. Kabakerbecame the Companys Vice President and General Counsel in December 2002
and became the Companys Secretary in January 2003. From August 2001 to November 2002, Mr. Kabaker
was in private practice. From September 2000 to August 2001, he was Vice President, Legal Affairs
and General Counsel of Rexam Beverage Can Company, the successor company to American National Can
Company. From 1996 to 2000, he served as Vice President, Legal Affairs of American National Can
Company. Prior thereto, he held various positions in the law department of American National Can
Company and its predecessor companies. Richard M. Deneauretired from his position as the Companys President and Chief Executive
Officer in November 2004. He assumed his duties as the Companys President and Chief Operating
Officer in July 1997 and as a director in June 1998. In August 2002, he became the Companys Chief
Executive Officer. From January 1996 to June 1997, Mr. Deneau was Senior Vice President and Chief
Operating Officer of Ball-Foster Glass Container Co. From October 1992 to January 1996, he was
Senior Vice President and General Manager of Beverage Can Operations at American National Can
Company. Prior to October 1992, Mr. Deneau was Senior Vice President of Sales at American National
Can Companys Foster-Forbes Glass Company Division, a predecessor of Ball-Foster Glass Container
Co. Certain officers and directors of the Company were named as defendants in a derivative action
brought by a shareholder of the Company and in lawsuits seeking to have the court determine
recognition of a class action. See Part I Item 3.  Legal Proceedings. Code of Ethics The Company has adopted a code of ethics that applies to its principal executive, financial
and accounting officers, and people performing similar functions, as well as to other employees of
the Company. A copy of the code of ethics has been previously filed as an exhibit to the Annual
Report on Form 10-K. A copy of Anchors code of ethics may be obtained by shareholders, without
charge, upon written request to the Secretary at the Companys corporate office. 
 ITEM 11. Executive Compensation. Information required by Item 11 is incorporated by reference from the definitive Proxy
Statement under the heading Executive Compensation. 
  ITEM 12.
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Information required by Item 12 is incorporated by reference from the definitive Proxy
Statement under the heading Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters. 
 ITEM 13. Certain Relationships and Related Transactions. Information required by Item 13 is incorporated by reference from the definitive Proxy
Statement under the heading Certain Relationships and Related Transactions. 
 ITEM 14. Principal Accountant Fees and Services. Information required by Item 14 is incorporated by reference from the definitive Proxy
Statement under the heading Audit Fees. 37




---



##### Table of Contents



PART IV 
 ITEM 15. Exhibits and Financial Statement Schedules.  (a)
    Financial Statements, Schedules and Exhibits  1.
    Financial Statements.The Financial Statements of Anchor Glass Container
Corporation and the Reports of Independent Registered Certified Public Accounting Firm
are included beginning at page F-1 of this Annual Report on Form 10-K. See the index
included on page 35.2.
    Financial Statement Schedules.The following Financial Statement Schedule is
filed as part of this Annual Report on Form 10-K and should be read in conjunction with
the Financial Statements of Anchor Glass Container Corporation. SCHEDULE II ANCHOR GLASS CONTAINER CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2004 AND 2003,
FOUR MONTHS ENDED DECEMBER 31, 2002 AND
EIGHT MONTHS ENDED AUGUST 31, 2002
(dollars in thousands) AdditionsBalance at
    
    
    Charged to
    
    
    Charged
    
    
    
    
    
    
    Balance atbeginning
    
    
    costs and
    
    
    to other
    
    
    
    
    
    
    end ofDescription
    
    of period
    
    
    expenses
    
    
    accounts
    
    
    Deductions
    
    
    periodYear ended December
31, 2004 Allowance
for doubtful
accounts
    
    $
    250
    
    
    $
    
    
    
    $
    
    
    
    $
    (66
    )(A)
    
    $
    316Year ended December
31, 2003 Allowance
for doubtful
accounts
    
    
    561
    
    
    
    (373
    )
    
    
    
    
    
    
    (62
    )(A)
    
    
    250Four months ended
December 31, 2002
Allowance for
doubtful accounts
    
    
    645
    
    
    
    
    
    
    
    
    
    
    
    84
    (A)
    
    
    561Eight months ended
August 31, 2002
Allowance for
doubtful accounts
    
    
    1,000
    
    
    
    (75
    )
    
    
    (285
    )
    
    
    (5
    )(A)
    
    
    645
   (A)
    
    Accounts written off, net of collections. 38




---



##### Table of Contents



3. Exhibits. ExhibitNumber
    
    Item3.1
    
    Amended and Restated Certificate of Incorporation of Anchor
    
    (A)3.2
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation of Anchor
    
    (A)3.3
    
    Amended and Restated By-Laws of Anchor
    
    (A)3.4
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation of Anchor
    
    (A)3.5
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation of Anchor
    
    (B)3.6
    
    Certificate of Elimination of the Series C Participating Preferred Stock of Anchor
    
    (B)4.1
    
    Stockholders Agreement, dated August 30, 2002, by and among Anchor, the Investors and
the Other Stockholders
    
    (A)4.2
    
    Indenture dated as of February 7, 2003 among Anchor, as Issuer and The Bank of New
York, as Trustee
    
    (C)4.3
    
    First Supplemental Indenture dated as of August 5, 2003, between Anchor, as Issuer,
and the Bank of New York, as Trustee
    
    (D)4.4
    
    Collateral Access and Intercreditor Agreement, dated February 7, 2003, by and among
Congress Financial Corporation (Central), in its capacity as collateral agent, and The
Bank of New York, in its capacity as trustee and collateral agent
    
    (C)4.5
    
    Registration Rights Agreement, dated August 5, 2003, among Anchor and the Initial
Purchasers
    
    (D)4.6
    
    Anchor Glass Container Corporation Equity Incentive Plan
    
    (E)10.1
    
    Southeast Glass Bottle Supply Agreement between Anheuser-Busch, Incorporated and
Anchor
    
    (F)10.2
    
    Glass Bottle Agreement between Anheuser-Busch, Incorporated and Anchor
    
    (G)10.3
    
    Limited License Agreement, dated March 8, 2002 between Owens Brockway Glass Container
Inc. and Anchor
    
    (A)10.4
    
    Loan and Security Agreement by and among Anchor, as Borrower, and Congress Financial
Corporation (Central), as Administrative and Collateral Agent, Bank of America, N.A.,
as Documentation Agent, and the Financial Institutions Named Therein, as Lenders,
dated August 30, 2002
    
    (A)10.8
    
    Amendment No. 1 to Loan and Security Agreement by and among Anchor, as Borrower, the
financial institutions from time to time parties to the Loan Agreement, as Lenders,
and Congress Financial Corporation (Central), as Agent, dated December 31, 2002
    
    (C)10.9
    
    Amendment No. 2 to Loan and Security Agreement by and among Anchor, as Borrower, and
Congress Financial Corporation (Central), as Agent for the financial institutions from
time to time parties to the Loan Agreement, as Lenders, dated February 7, 2003
    
    (C)10.10
    
    Amendment No. 3 to Loan and Security Agreement by and among Anchor, as Borrower, and
Congress Financial Corporation (Central), as Agent for the financial institutions from
time to time parties to the Loan Agreement, as Lenders, dated July 25, 2003
    
    (D)10.11
    
    Amendment No. 4 to Loan and Security Agreement by and among Anchor, as Borrower, and
Congress Financial Corporation (Central), as Agent for the financial institutions from
time to time parties to the Loan Agreement, as Lenders, dated November 4, 2004
    
    (H)10.12
    
    Amendment No. 5 to Loan and Security Agreement by and among Anchor, as Borrower, and
Congress Financial Corporation (Central), as Agent for the financial institutions from
time to time parties to the Loan Agreement, as Lenders, dated February 14, 2005
    
    (I)10.13
    
    Agreement for the Supply of Goods by and among Motts Inc., Snapple Beverage Group,
Inc. and Anchor, effective January 1, 2004
    
    (J)10.14
    
    Amended and Restated Southeast Glass Bottle Supply Agreement between Anheuser-Busch,
Incorporated and Anchor Glass Container Corporation, signed on July 26, 2004 and is
deemed effective January 1, 2004
    
    (K)
 39




---



##### Table of Contents



ExhibitNumber
    
    Item10.15
    
    Employment Agreement between Anchor Glass Container Corporation and Richard M. Deneau,
dated August 30, 2002
    
    (K)10.16
    
    Employment Agreement between Anchor Glass Container Corporation and Darrin J.
Campbell, dated August 30, 2002
    
    (K)10.17
    
    Employment Agreement between Anchor Glass Container Corporation and Roger L. Erb,
dated August 30, 2002
    
    (K)10.18
    
    Termination Agreement between Anchor Glass Container Corporation and Richard Deneau
dated November 4, 2004
    
    (H)10.19
    
    Loan and Security Agreement by and among Anchor Glass Container Corporation and
Madeleine L.L.C., as collateral and administrative agent, and the financial
institutions named therein, dated February 14, 2005
    
    (I)10.20
    
    Master Lease Agreement between General Electric Capital Corporation, for itself and as
Agent, and Anchor Glass Container Corporation, dated December 26, 2002
    
    *10.21
    
    Third Agreement of Amendment of Amended And Restated Equipment Schedule No. 1 and
Second Amendment to Master Lease Agreement, by and Between General Electric Capital
Corporation, for itself and as Agent, and Anchor Glass Container Corporation, dated
February 14, 2005
    
    *10.22
    
    Intercreditor Agreement by and between Congress Financial Corporation (Central), in
its capacity as collateral agent and administrative agent, pursuant to the Senior Lien
Loan Agreement acting for and on behalf of the financial institutions which are
parties thereto as lenders and Madeleine L.L.C., in its capacity as collateral agent
and administrative agent, dated February 14, 2005
    
    *10.23
    
    Form of Director and Officer Indemnification Agreement
    
    (D)10.24
    
    Indemnification Agreement between Anchor Glass Container Corporation and Alexander
Wolf, dated March 24, 2005
    
    *10.25
    
    Indemnification Agreement between Anchor Glass Container Corporation and Carlton
Donaway, dated March 24, 2005
    
    *10.26
    
    Employment Agreement between Anchor Glass Container Corporation and Peter T. Reno,
dated March 9, 2005
    
    (L)10.27
    
    Letter Agreement between Anchor Glass Container Corporation and Richard A. Kabaker,
Esq., dated March 9, 2005
    
    (L)10.28
    
    Agreement to Amend the Employment Agreement between Anchor Glass Container Corporation
and Roger L. Erb, dated March 9, 2005
    
    (L)10.29
    
    Consulting Services Agreement and General Release between Anchor Glass Container
Corporation and Darrin J. Campbell, dated March 9, 2005
    
    (L)14.1
    
    Code of Ethics
    
    (M)21.1
    
    List of subsidiaries of the Company
    
    (N)31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
    
    *31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
    
    *32
    
    Section 1350 Certifications
    
    *
   *
    
    Filed herewith.
    
    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.(A)
    
    Previously filed as an exhibit to the Companys Quarterly Report on Form 10-Q for the quarter
ended September 30, 2002 and incorporated herein by reference. 40




---



##### Table of Contents



(B)
    
    Previously filed on November 3, 2003 as an exhibit to the Companys Registration Statement on
Form S-4 (Reg. No. 333-110205) originally filed with the Securities and Exchange Commission on
November 3, 2003 and incorporated herein by reference.(C)
    
    Previously filed as an exhibit to the Companys Annual Report on Form 10-K for the year ended
December 31, 2002 and incorporated herein by reference.(D)
    
    Previously filed on September 5, 2003 as an exhibit to the Companys Registration Statement
on Form S-1 (Reg. No. 333-108209) originally filed with the Securities and Exchange Commission
on August 26, 2003 and incorporated herein by reference.(E)
    
    Previously filed as an exhibit to the Companys Registration Statement on Form S-8 filed with
the Securities and Exchange Commission on April 7, 2004 and incorporated herein by reference.(F)
    
    Previously filed as an exhibit to the Companys Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999 and incorporated herein by reference.(G)
    
    Previously filed as an exhibit to the Companys Annual Report on Form 10-K/A Amendment No. 1
for the year ended December 31, 2002, filed on June 20, 2003 and incorporated herein by
reference.(H)
    
    Previously filed as an exhibit to a Current Report on Form 8-K dated November 9, 2004 and
incorporated herein by reference.(I)
    
    Previously filed as an exhibit to a Current Report on Form 8-K dated February 15, 2005 and
incorporated herein by reference.(J)
    
    Previously filed as an exhibit to the Companys Registration Statement on Form S-4 Amendment
No. 1 (Reg. No. 333-110205) filed with the Securities and Exchange Commission on December 19,
2003 and incorporated herein by reference.(K)
    
    Previously filed as an exhibit to the Companys Quarterly Report on Form 10-Q for the quarter
ended September 30, 2004 and incorporated herein by reference.(L)
    
    Previously filed as an exhibit to a Current Report on Form 8-K dated March 11, 2005 and
incorporated herein by reference.(M)
    
    Previously filed as an exhibit to the Companys Annual Report on Form 10-K for the year ended
December 31, 2003 and incorporated herein by reference.(N)
    
    Previously filed as an exhibit to the Companys Registration Statement on Form S-4 (Reg. No.
333-31363) originally filed with the Securities and Exchange Commission on July 16, 1997 and
incorporated herein by reference. 41




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION INDEX TO FINANCIAL STATEMENTS PageReports of Independent Registered Certified Public Accounting Firm
    
    F-2Statements of Operations and Comprehensive Income (Loss) Years Ended December 31, 2004 and 2003,Four Months Ended December 31, 2002 (Reorganized Company), andEight Months Ended August 31, 2002 (Predecessor Company)
    
    F-4Balance Sheets December 31, 2004 and 2003 (Reorganized Company)
    
    F-5Statements of Cash Flows Years Ended
December 31, 2004 and 2003,Four Months
Ended December 31, 2002 (Reorganized Company), andEight Months
Ended August 31, 2002 (Predecessor Company)
    
    F-6Statements of Stockholders Equity (Deficit) Years Ended December 31, 2004 and 2003,Four Months Ended December 31, 2002 (Reorganized Company), andEight Months Ended August 31, 2002 (Predecessor Company)
    
    F-8Notes to Financial Statements
    
    F-10
 F-1




---



##### Table of Contents



Report of Independent Registered Certified Public Accounting Firm To the Board of Directors and Stockholders of Anchor Glass Container Corporation: In our opinion, the financial statements listed in the accompanying index present fairly, in all
material respects, the results of operations and cash flows of Anchor Glass Container Corporation
for the eight-month period ended August 31, 2002 in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the financial statement
schedule for the eight-month period ended August 31, 2002 listed in the index appearing under Item
15(a) (2) presents fairly, in all material respects, the information set forth therein when read in
conjunction with the related financial statements. These financial statements and financial
statement schedule are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements and financial statement schedule based on our
audits. We conducted our audits of these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit of financial statements includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion. The Companys plan of reorganization became effective on August 30, 2002. As discussed in Notes 3
and 4 to the financial statements, the Company adopted Fresh-Start Reporting principles in
accordance with the American Institute of Certified Public Accountants Statement of Position 90-7,
Financial Reporting by Entities in Reorganization under the Bankruptcy Code. PricewaterhouseCoopers LLP
Tampa, Florida
November 22, 2002, except for the Revision footnote presented in Note 1, for which
the date is March 28, 2005 Report of Independent Registered Certified Public Accounting Firm To the Board of Directors and Stockholders of Anchor Glass Container Corporation: We have completed an integrated audit of Anchor Glass Container Corporations 2004 financial
statements and of its internal control over financial reporting as of December 31, 2004 and audits
of its 2003 and 2002 financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Our opinions, based on our audits, are presented
below. Financial statements and financial statement schedule In our opinion, the financial statements listed in the accompanying index, present fairly, in all
material respects, the financial position of Anchor Glass Container Corporation at December 31,
2004 and 2003, and the results of its operations and its cash flows for each of the two years in
the period ended December 31, 2004 and for the four months ended December 31, 2002 in conformity
with accounting principles generally accepted in the United States of America. In addition, in our
opinion, the financial statement schedule listed in the index appearing under Item 15(a) (2)
presents fairly, in all material respects, the information set forth therein when read in
conjunction with the related financial statements. These financial statements and financial
statement schedule are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements and financial statement schedule based on our
audits. We conducted our audits of these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit of financial statements includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made F-2




---



##### Table of Contents



by management, and evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. The Companys plan of reorganization became effective on August 30, 2002. As discussed in Notes 3
and 4 to the financial statements, the Company adopted Fresh-Start Reporting principles in
accordance with the American Institute of Certified Public Accountants Statement of Position 90-7,
Financial Reporting by Entities in Reorganization under the Bankruptcy Code. Internal control over financial reporting Also, in our opinion, managements assessment, included in Managements Report on Internal
Control over Financial Reporting appearing under Item 9A, that the Company maintained effective
internal control over financial reporting as of December 31, 2004 based on criteria established
in Internal Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO), is fairly stated, in all material respects, based on those
criteria. Furthermore, in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2004, based on criteria
established in Internal Control  Integrated Frameworkissued by the COSO. The Companys
management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting. Our
responsibility is to express opinions on managements assessment and on the effectiveness of the
Companys internal control over financial reporting based on our audit. We conducted our audit
of internal control over financial reporting in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. An audit of internal control over
financial reporting includes obtaining an understanding of internal control over financial
reporting, evaluating managements assessment, testing and evaluating the design and operating
effectiveness of internal control, and performing such other procedures as we consider necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinions. A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. PricewaterhouseCoopers LLP
Tampa, Florida
March 28, 2005 F-3




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(dollars in thousands, except per share data) PredecessorReorganized Company
    
    
    
    CompanyYear
    
    
    Year
    
    
    Four Months
    
    
    
    Eight MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    
    August 31,2004
    
    
    2003
    
    
    2002
    
    
    
    2002Net sales
    
    $
    746,858
    
    
    $
    709,943
    
    
    $
    211,379
    
    
    
    $
    504,195Costs and expenses:Cost of products sold
    
    
    712,271
    
    
    
    660,781
    
    
    
    192,427
    
    
    
    
    451,709Inventory loss  cost of products sold
    
    
    8,963
    
    
    
    
    
    
    
    
    
    
    
    
    Restructuring, impairment and other
charges, net
    
    
    39,735
    
    
    
    
    
    
    
    
    
    
    
    
    (395
    )Selling and administrative expenses
    
    
    27,121
    
    
    
    26,963
    
    
    
    9,683
    
    
    
    
    19,262Gain on sale of non-operating properties
    
    
    (3,823
    )
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) from operations
    
    
    (37,409
    )
    
    
    22,199
    
    
    
    9,269
    
    
    
    
    33,619Reorganization items, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,389Other income (expense), net
    
    
    (310
    )
    
    
    223
    
    
    
    443
    
    
    
    
    763Interest expense (eight months ended
August 31, 2002 contractual interest of
$19,800)
    
    
    (48,429
    )
    
    
    (48,549
    )
    
    
    (10,381
    )
    
    
    
    (17,948
    )Net income (loss)
    
    $
    (86,148
    )
    
    $
    (26,127
    )
    
    $
    (669
    )
    
    
    $
    63,823Series C preferred stock dividends
    
    $
    
    
    
    $
    (7,263
    )
    
    $
    (3,022
    )Excess fair value of consideration
transferred over carrying value of Series C
preferred stock upon redemption
    
    $
    
    
    
    $
    (38,118
    )
    
    $
    Series A and B preferred stock dividends
(eight months ended August 31, 2002
contractual dividends of $9,371)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (4,100
    )Income (loss) applicable to common stock
    
    $
    (86,148
    )
    
    $
    (71,508
    )
    
    $
    (3,691
    )
    
    
    $
    59,723Basic net income (loss) per share
applicable to common stock
    
    $
    (3.50
    )
    
    $
    (4.37
    )
    
    $
    (0.27
    )
    
    
    $
    11.37Basic weighted average number of common
shares outstanding
    
    
    24,581,617
    
    
    
    16,364,196
    
    
    
    13,499,995
    
    
    
    
    5,251,356Diluted net income (loss) per share
applicable to common stock
    
    $
    (3.50
    )
    
    $
    (4.37
    )
    
    $
    (0.27
    )
    
    
    $
    1.89Diluted weighted average number of common
shares outstanding
    
    
    24,581,617
    
    
    
    16,364,196
    
    
    
    13,449,995
    
    
    
    
    33,805,651Comprehensive income (loss):Net income (loss)
    
    $
    (86,148
    )
    
    $
    (26,127
    )
    
    $
    (669
    )
    
    
    $
    63,823Other comprehensive income (loss):Derivative income (loss)
    
    
    (3,209
    )
    
    
    1,954
    
    
    
    190
    
    
    
    
    531Comprehensive income (loss)
    
    $
    (89,357
    )
    
    $
    (24,173
    )
    
    $
    (479
    )
    
    
    $
    64,354
  F-4




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
BALANCE SHEETS
(dollars in thousands, except per share data) Reorganized CompanyDecember 31,2004
    
    
    2003AssetsCurrent assets:Cash and cash equivalents
    
    $
    111
    
    
    $
    23,083Accounts receivable, less allowance for doubtful accounts of
$316 and $250, respectively
    
    
    35,601
    
    
    
    36,674Inventories
    
    
    126,010
    
    
    
    136,784Other current assets
    
    
    11,993
    
    
    
    11,230Total current assets
    
    
    173,715
    
    
    
    207,771Property, plant and equipment:Land and land improvements
    
    
    11,135
    
    
    
    11,760Buildings
    
    
    66,164
    
    
    
    69,474Machinery, equipment and molds
    
    
    528,211
    
    
    
    479,850Less accumulated depreciation and amortization
    
    
    (141,828
    )
    
    
    (83,831
    )463,682
    
    
    
    477,253Other assets
    
    
    13,742
    
    
    
    14,674Intangible assets
    
    
    6,056
    
    
    
    6,846$
    657,195
    
    
    $
    706,544Liabilities and Stockholders EquityCurrent liabilities:Borrowings under revolving credit facility
    
    $
    50,880
    
    
    $
    Current maturities of long-term debt
    
    
    9,338
    
    
    
    8,895Accounts payable
    
    
    49,091
    
    
    
    55,000Accrued expenses
    
    
    30,884
    
    
    
    17,004Accrued interest
    
    
    15,079
    
    
    
    14,900Accrued compensation and employee benefits
    
    
    25,604
    
    
    
    31,271Total current liabilities
    
    
    180,876
    
    
    
    127,070Long-term debt
    
    
    412,475
    
    
    
    422,881Long-term post-retirement liabilities
    
    
    41,145
    
    
    
    40,197Other long-term liabilities
    
    
    18,409
    
    
    
    20,833472,029
    
    
    
    483,911Commitments and contingenciesStockholders equity:Common stock, $.10 par value; 60,000,000 shares
authorized; shares issued and outstanding 24,658,3432004
and 24,507,343-2003
    
    
    2,466
    
    
    
    2,451Capital in excess of par value
    
    
    127,618
    
    
    
    129,549Accumulated deficit
    
    
    (124,729
    )
    
    
    (38,581
    )Accumulated other comprehensive income (loss)- Derivatives
    
    
    (1,065
    )
    
    
    2,1444,290
    
    
    
    95,563$
    657,195
    
    
    $
    706,544
  F-5




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
STATEMENTS OF CASH FLOWS
(dollars in thousands) PredecessorReorganized Company
    
    
    
    CompanyYear
    
    
    Year
    
    
    Four Months
    
    
    
    Eight MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    
    August 31,2004
    
    
    2003
    
    
    2002
    
    
    
    2002Cash flows from operating activities:Net income (loss)
    
    $
    (86,148
    )
    
    $
    (26,127
    )
    
    $
    (669
    )
    
    
    $
    63,823Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation and amortization of property and
equipment
    
    
    60,944
    
    
    
    66,632
    
    
    
    17,003
    
    
    
    
    33,952Other amortization
    
    
    4,363
    
    
    
    3,880
    
    
    
    1,008
    
    
    
    
    1,769Write-off and amortization of financing fees
    
    
    1,757
    
    
    
    5,273
    
    
    
    623
    
    
    
    
    1,609Restructuring, impairment and other charges, net
    
    
    39,735
    
    
    
    
    
    
    
    
    
    
    
    
    (395
    )Inventory
loss - cost of products sold
    
    
    8,963
    
    
    
    
    
    
    
    
    
    
    
    
    Restructuring and reorganization payments
    
    
    (3,914
    )
    
    
    
    
    
    
    (3,644
    )
    
    
    
    (4,835
    )Principal
payments under the PBGC Agreement
    
    
    (4,795
    )
    
    
    (4,388
    )
    
    
    (1,038
    )
    
    
    
    (20,750
    )Reorganization items, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47,389
    )Gain on sale of non-operating properties
    
    
    (3,823
    )
    
    
    
    
    
    
    
    
    
    
    
    Loss (gain) on sale of property and equipment
    
    
    258
    
    
    
    379
    
    
    
    (7
    )
    
    
    
    90Other
    
    
    (939
    )
    
    
    (1,207
    )
    
    
    (125
    )
    
    
    
    (329
    )Increase (decrease) in cash resulting from changes
in assets and liabilities
    
    
    (9,792
    )
    
    
    (23,657
    )
    
    
    6,792
    
    
    
    
    6,2806,609
    
    
    
    20,785
    
    
    
    19,943
    
    
    
    
    33,825Cash flows from investing activities:Expenditures for property, plant and equipment
    
    
    (72,681
    )
    
    
    (119,115
    )
    
    
    (28,666
    )
    
    
    
    (42,654
    )Proceeds from sale of property and equipment
    
    
    5,716
    
    
    
    10,747
    
    
    
    10,026
    
    
    
    
    47Purchase of equipment under leases
    
    
    
    
    
    
    (39,217
    )
    
    
    
    
    
    
    
    Change in restricted cash
    
    
    
    
    
    
    4,387
    
    
    
    1,548
    
    
    
    
    (5,935
    )Payments for strategic alliances with customers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,266
    )Other
    
    
    (4,330
    )
    
    
    (3,748
    )
    
    
    (996
    )
    
    
    
    265(71,295
    )
    
    
    (146,946
    )
    
    
    (18,088
    )
    
    
    
    (49,543
    )Cash flows from financing activities:Principal payments of long-term debt
    
    
    (4,773
    )
    
    
    (174,105
    )
    
    
    (736
    )
    
    
    
    (51,416
    )Net draws (repayments) on Revolving Credit Facility
    
    
    50,880
    
    
    
    (47,413
    )
    
    
    15,817
    
    
    
    
    31,596Net repayments on prior revolving credit facilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,981
    )Dividends paid on common stock
    
    
    (2,948
    )
    
    
    (980
    )
    
    
    
    
    
    
    
    Proceeds from issuance of long-term debt
    
    
    
    
    
    
    353,750
    
    
    
    
    
    
    
    
    20,000Proceeds from issuance of common stock
    
    
    
    
    
    
    127,726
    
    
    
    
    
    
    
    
    5,000Proceeds from issuance of preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,000Redemption of Series C preferred stock, including
dividends
    
    
    
    
    
    
    (85,285
    )
    
    
    
    
    
    
    
    Payment of capital lease obligations for assets
purchased
    
    
    
    
    
    
    (5,539
    )
    
    
    
    
    
    
    
    Repurchase of warrants
    
    
    
    
    
    
    (1,500
    )
    
    
    
    
    
    
    
    Plan distributions to Series A preferred stock
    
    
    (36
    )
    
    
    (3,705
    )
    
    
    (17,409
    )
    
    
    
    Restructuring and reorganization payments
    
    
    
    
    
    
    
    
    
    
    (1,056
    )
    
    
    
    (10,727
    )Other, primarily financing fees
    
    
    (1,409
    )
    
    
    (14,056
    )
    
    
    1,571
    
    
    
    
    (2,861
    )41,714
    
    
    
    148,893
    
    
    
    (1,813
    )
    
    
    
    15,611Cash and cash equivalents:Increase (decrease) in cash and cash equivalents
    
    
    (22,972
    )
    
    
    22,732
    
    
    
    42
    
    
    
    
    (107
    )Balance, beginning of period
    
    
    23,083
    
    
    
    351
    
    
    
    309
    
    
    
    
    416Balance, end of period
    
    $
    111
    
    
    $
    23,083
    
    
    $
    351
    
    
    
    $
    309
  F-6




---



##### Table of Contents



ANCHOR GLASS CONTAINER
CORPORATION STATEMENTS OF CASH FLOWS
 PredecessorReorganized Company
    
    
    
    CompanyYear
    
    
    Year
    
    
    Four Months
    
    
    
    Eight MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    
    August 31,2004
    
    
    2003
    
    
    2002
    
    
    
    2002Supplemental disclosure of cash flow
information:Cash paid during the period for:Interest
    
    $
    46,887
    
    
    $
    33,708
    
    
    $
    11,638
    
    
    
    $
    12,081Increase (decrease) in cash resulting
from changes in assets and
liabilities:Accounts receivable
    
    $
    (2,194
    )
    
    $
    8,003
    
    
    $
    5,976
    
    
    
    $
    (2,342
    )Inventories
    
    
    220
    
    
    
    (34,635
    )
    
    
    (14,914
    )
    
    
    
    18,338Other current assets
    
    
    1,795
    
    
    
    (1,616
    )
    
    
    1,230
    
    
    
    
    533Accounts payable, accrued expenses
and other current liabilities
    
    
    (10,602
    )
    
    
    2,745
    
    
    
    9,215
    
    
    
    
    (5,495
    )Other, net
    
    
    989
    
    
    
    1,846
    
    
    
    5,285
    
    
    
    
    (4,754
    )$
    (9,792
    )
    
    $
    (23,657
    )
    
    $
    6,792
    
    
    
    $
    6,280Supplemental noncash activities:Redemption of Series C preferred stock
    
    $
    
    
    
    $
    38,118
    
    
    $
    
    
    
    
    $
    Equipment financing
    
    $
    
    
    
    $
    10,000
    
    
    $
    10,000
    
    
    
    $
    
  F-7




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
(dollars in thousands, except per share data) Capital
    
    
    
    
    
    
    Accumulated
    
    
    TotalSeries B
    
    
    Issuable
    
    
    
    
    
    
    
    
    
    
    in excess
    
    
    
    
    
    
    other
    
    
    stockholderspreferred
    
    
    preferred
    
    
    Common
    
    
    
    
    
    
    of par
    
    
    Accumulated
    
    
    comprehensive
    
    
    equitystock
    
    
    stock
    
    
    stock
    
    
    Warrants
    
    
    value
    
    
    deficit
    
    
    loss
    
    
    (deficit)Predecessor CompanyBalance, January 1, 2002
    
    $
    34
    
    
    $
    21,731
    
    
    $
    336
    
    
    $
    9,446
    
    
    $
    104,520
    
    
    $
    (184,109
    )
    
    $
    (75,999
    )
    
    $
    (124,041
    )Dividends accrued on
Series A
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,633
    )
    
    
    
    
    
    
    (1,633
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,823
    
    
    
    
    
    
    
    63,823Derivative income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    531
    
    
    
    531Reorganization
adjustments, net
    
    
    (34
    )
    
    
    (21,731
    )
    
    
    (336
    )
    
    
    (9,446
    )
    
    
    (104,520
    )
    
    
    121,919
    
    
    
    75,468
    
    
    
    61,320Issuance of 13,499,995
shares of common stock
    
    
    
    
    
    
    
    
    
    
    1,350
    
    
    
    
    
    
    
    3,650
    
    
    
    
    
    
    
    
    
    
    
    5,000Reorganized CompanyBalance, August 31, 2002
    
    $
    
    
    
    $
    
    
    
    $
    1,350
    
    
    $
    
    
    
    $
    3,650
    
    
    $
    
    
    
    $
    
    
    
    $
    5,000
  F-8




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
(dollars in thousands, except per share data) Capital
    
    
    
    
    
    
    Accumulatedin excess
    
    
    
    
    
    
    otherShares of
    
    
    Common
    
    
    of par
    
    
    Accumulated
    
    
    comprehensive
    
    
    Total stockholderscommon stock
    
    
    stock
    
    
    value
    
    
    deficit
    
    
    income (loss)
    
    
    equityReorganized CompanyBalance, August 31, 2002
    
    
    13,499,995
    
    
    $
    1,350
    
    
    $
    3,650
    
    
    $
    
    
    
    $
    
    
    
    $
    5,000Dividends accrued on Series C
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,022
    )
    
    
    
    
    
    
    (3,022
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (669
    )
    
    
    
    
    
    
    (669
    )Derivative income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190
    
    
    
    190Balance, December 31, 2002
    
    
    13,499,995
    
    
    
    1,350
    
    
    
    3,650
    
    
    
    (3,691
    )
    
    
    190
    
    
    
    1,499Repurchase of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,500
    )
    
    
    
    
    
    
    (1,500
    )Dividends accrued on Series C
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,263
    )
    
    
    
    
    
    
    (7,263
    )Issuance of 8,625,000 shares
of common stock in the initial
public offering
    
    
    8,625,000
    
    
    
    863
    
    
    
    126,863
    
    
    
    
    
    
    
    
    
    
    
    127,726Redemption of 75,000 shares of
Series C preferred stock
    
    
    
    
    
    
    
    
    
    
    (38,118
    )
    
    
    
    
    
    
    
    
    
    
    (38,118
    )Issuance of 2,382,348 shares of
common stock in redemption of
Series C preferred stock
    
    
    2,382,348
    
    
    
    238
    
    
    
    37,880
    
    
    
    
    
    
    
    
    
    
    
    38,118Dividends declared on common
stock of $.04 per share
    
    
    
    
    
    
    
    
    
    
    (980
    )
    
    
    
    
    
    
    
    
    
    
    (980
    )Equity incentive plan 
compensation expense
    
    
    
    
    
    
    
    
    
    
    254
    
    
    
    
    
    
    
    
    
    
    
    254Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,127
    )
    
    
    
    
    
    
    (26,127
    )Derivative income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,954
    
    
    
    1,954Balance, December 31, 2003
    
    
    24,507,343
    
    
    
    2,451
    
    
    
    129,549
    
    
    
    (38,581
    )
    
    
    2,144
    
    
    
    95,563Dividends declared on common
stock of $.12 per share
    
    
    
    
    
    
    
    
    
    
    (2,948
    )
    
    
    
    
    
    
    
    
    
    
    (2,948
    )Issuance of 151,000 shares of
common stock upon stock option
exercise
    
    
    151,000
    
    
    
    15
    
    
    
    337
    
    
    
    
    
    
    
    
    
    
    
    352Equity incentive plan 
compensation expense
    
    
    
    
    
    
    
    
    
    
    680
    
    
    
    
    
    
    
    
    
    
    
    680Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86,148
    )
    
    
    
    
    
    
    (86,148
    )Derivative loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,209
    )
    
    
    (3,209
    )Balance, December 31, 2004
    
    
    24,658,343
    
    
    $
    2,466
    
    
    $
    127,618
    
    
    $
    (124,729
    )
    
    $
    (1,065
    )
    
    $
    4,290
  F-9




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) NOTE 1  Basis of Presentation and Significant Accounting Policies Organization of the Company On August 30, 2002, Anchor Glass Container Corporation (the Company or Anchor), a Delaware
corporation, completed a restructuring of its existing debt and equity securities pursuant to a
plan of reorganization (the Plan) under Chapter 11 of the United States Bankruptcy Code. Certain
investment funds and managed accounts affiliated with Cerberus Capital Management, L.P.
(Cerberus), acquired all of the outstanding capital stock of Anchor through their investment in
Anchor Glass Container Holding LLC (AGC Holding), a Delaware limited liability company formed in
August 2002 and the former parent company of Anchor. On September 18, 2003, AGC Holding was
dissolved and the Anchor securities held by AGC Holding were distributed to its members. On September 30, 2003, the Company consummated an initial public offering of 7,500,000 shares
of its common stock, par value $.10 per share, at the initial public offering price of $16.00 per
share (the Equity Offering). On October 8, 2003, the underwriters for the Equity Offering
exercised an option to purchase 1,125,000 additional shares of common stock to cover over-allotment
of shares in connection with the Equity Offering. The Company received net proceeds from the
Equity Offering of $127,726 (including proceeds of $16,830 from the exercise of the over-allotment
option). Approximately $85,285 of the net proceeds of the Equity Offering were used to redeem all
of the Series C Participating Preferred Stock, par value $.01 (the Series C Preferred Stock).
The redemption price of the Series C Preferred Stock was equal to the sum of (i) $1,000 per share
($75,000) plus all accrued and unpaid dividends computed to the date of redemption ($10,285) and
(ii) 15% of the fair market value of all of the outstanding shares of common stock. The portion of
the redemption price specified in clause (ii) of the preceding sentence was paid through the
issuance of 2,382,348 shares of common stock (valued at $38,118 based on the initial public
offering price of $16.00 per share). The remaining net proceeds of the Equity Offering were used
to fund working capital and for general corporate purposes. The financial statements of the Company as of and for periods subsequent to August 31, 2002
are referred to as the Reorganized Company statements. All financial statements prior to that
date are referred to as the Predecessor Company statements. The financial statements for the
eight months ended August 31, 2002 give effect to the restructuring and reorganization adjustments
and the implementation of fresh start accounting. The effective date of the Plan was August 30,
2002 (the Effective Date); however, for accounting purposes, the Company has accounted for the
reorganization and fresh start adjustments as of August 31, 2002. Business Segment The Company operates as one reportable segment and is engaged in the manufacture and sale of a
diverse line of clear, amber, green and other color glass containers of various types, designs and
sizes to customers principally in the beer, beverage, food and liquor industries. The Company
markets its products throughout the United States. The Companys international and export sales
are not significant. Sales to Anheuser-Busch Companies, Inc. (Anheuser-Busch) represented 48.1%,
53.3%, 46.1% and 42.5%, respectively, of net sales for the years ended December 31, 2004 and 2003,
the four months ended December 31, 2002 and the eight months ended August 31, 2002. Sales to
Cadbury Schweppes plc (Cadbury) represented 12.9% of net sales for the year ended December 31,
2004. The loss of Anheuser-Busch, Cadbury or another significant customer, unless replaced, could
have a material adverse effect on the Companys business.
Accounts receivable from Anheuser-Busch and Cadbury represented 25.4%
and 12.7%, respectively, of the Companys accounts receivable as
of December 31, 2004. Revenue Recognition Revenues are recognized as product is shipped to customers, net of applicable rebates and
discounts. The Company may invoice customers to recover certain cost increases, recognizing these
amounts as revenue in net sales. The Company has, and continues to, operate in an environment that includes high-energy
costs that impact the costs of manufacturing and inbound and outbound freight, among other things.
Certain customer contracts include provisions for the pass through to the customer of certain of
these higher costs. Where the customer contract does not contain a provision for reimbursement to
the Company for these costs through contract pricing, additional invoicing to these customers to
recover certain of these costs may occur outside the terms of the contract with the F-10




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) customer.
Before recording revenue on the transaction, an agreement as to the billings exists between the
Company and the customer, the service to which the billing relates has been rendered by the
Company, the amount of the billing has been agreed to by the customer
and the collectibility of the billing is reasonably assured. Substantially all of the Companys glass containers are made to customer specifications. For
new products or modifications to existing products, the Company works closely with its customers in
developing and testing these products prior to the initiation of shipments to customers for their
use in production. The Companys customer contracts allow for the right of return only for quality
issues, in which case the Company reverses the recognition of revenue. These returns for quality
issues represent less than 0.1% of the Companys gross sales for all periods presented. 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 2), the continuing high costs of energy
and its direct and indirect effect on other costs and manufacturing expenses, softer sales volumes
than anticipated in the second half of 2004, 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 to $21,800
at December 31, 2004, and it was unable to meet its fixed charge coverage ratio covenant for the
quarter ended December 31, 2004. As further described in Note 14 of the Companys financial statements, on February 14, 2005,
the Company entered into a $20 million revolving credit facility (the 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 the remainder of 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 $12.3 million at December 31, 2004. (See Note 5.) 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. January
    
    
    .14:1.0
    
    
    April
    
    
    .40:1.0
    
    
    July
    
    
    .66:1.0
    
    
    October
    
    
    .79:1.0February
    
    
    .19:1.0
    
    
    May
    
    
    .50:1.0
    
    
    August
    
    
    .71:1.0
    
    
    November
    
    
    .80:1.0March
    
    
    .29:1.0
    
    
    June
    
    
    .58:1.0
    
    
    September
    
    
    .76:1.0
    
    
    December
    
    
    .75:1.0
 The actual fixed charge coverage ratio for January 2005 was .25:1.0 and for February 2005 was
        .30:1.0. 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 F-11




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) under the agreement with the PBGC (see Note 10), 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 1, 2005 combined availability under these
facilities was $23,400. The Company believes that cash flows from operating activities, combined
with available borrowings under the its two revolving credit facilities, will be sufficient to
support its operations and fund its capital expenditure requirements, restructuring payments and
other liquidity needs for the next twelve months, 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;
    continuing the suspension of dividend payments on it common stock;
    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. Cash and Cash Equivalents The Company considers short-term investments with original maturities of ninety days or less
at the date of purchase to be cash equivalents. Allowance for doubtful accounts Based on a review of outstanding accounts receivable, the Company provides for specific
reserves as may be required and a general reserve based upon historical write-offs of accounts
receivable. F-12




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) Inventories Inventories are stated at the lower of cost or market. The cost of substantially all
inventories of raw materials and finished products is determined on the first-in, first-out method.
Manufacturing supplies and certain other inventories are valued at weighted average costs.
Freight costs for the delivery of inventories to customers are included in cost of products sold on
the statement of operations. (See Note 2 for a discussion of the plant closure related inventory
loss.) Inventories are comprised of: December 31,2004
    
    
    2003Raw materials and manufacturing supplies
    
    $
    25,747
    
    
    $
    28,144Finished products
    
    
    100,263
    
    
    
    108,640$
    126,010
    
    
    $
    136,784
 Property, Plant and Equipment Property, plant and equipment expenditures, including furnace rebuilds which extend useful
lives and expenditures for glass forming machine molds, are capitalized and recorded at cost. For
financial statement purposes, these assets are depreciated using the straight-line method over the
estimated useful lives of the assets, except for molds which are depreciated on a unit of
production method based on units of glass produced, supplemented by a net realizable formula to
cover technical obsolescence. Furnace and machine rebuilds, which are recurring in nature and
which extend the lives of the related assets, are capitalized and depreciated over the period of
extension, based on the type and extent of these rebuilds. Depreciation of leased property
recorded as capital assets is computed on a straight-line basis over the estimated useful lives of
the assets or the life of the lease. In the fourth quarter of 2003 the Company engaged the same appraisal firm utilized in the
August 2002 fresh start reporting appraisal, to review the lives assigned to its property, plant
and equipment existing at August 31, 2002, considering the then prevailing business conditions and
outlook of the Company. Effective January 1, 2004, the Company applied the results of this
independent appraisal to update the depreciable lives of its property, plant and equipment and,
accordingly, calculated depreciation expense for the year ended December 31, 2004 using the updated
lives, resulting in a reduction in the amount of depreciation that would have been otherwise
expensed. No change was made to the appraised value of the assets in the updating of depreciable
lives implemented January 1, 2004. At the time of the original appraisal in August 2002 (see Note
4), the Company was emerging from Chapter 11 proceedings. Because of the Companys financial
circumstances, the appraisers took into consideration, in their determination of useful lives for
the property, plant and equipment in 2002, the Companys then inability to adequately fund and
upgrade existing equipment. In 2003, the Company refinanced its existing debt, increased its
borrowings under long-term debt obligations and completed and received the funding under its Equity
Offering. The Company devoted a substantial amount of resources from the proceeds of its
financings to improve its existing property, plant and equipment. Based on the updated lives, depreciation and amortization recorded in the year ended December
31, 2004 was $65,307. On a pro forma basis, without the update to depreciable lives, depreciation
and amortization expense in the year ended December 31, 2004 would have been $15,338 greater, or
$0.62 per share. As a result of this update of depreciable lives, the average annual depreciation life of
buildings changed from 12 years in 2003 to 23 years in 2004. The range of lives for machinery and
equipment changed from 5 to 16 years in 2003 to 5 to 20 years in 2004. The average annual
depreciation life of land improvements changed from 8 years in 2003 to 12 years in 2004. The
weighted average life of all depreciable property, plant and equipment for the years ended December
31, 2004 and 2003 was 9.1 years and 7.0 years, respectively. F-13




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) Maintenance and repairs costs, which are charged directly to expense as incurred, were $19.0
million, $19.5 million, $6.4 million and $12.3 million, for the years ended December 31, 2004 and
2003, the four months ended December 31, 2002 and the eight months ended August 31, 2002,
respectively. Construction in progress, included in machinery and equipment, was approximately
$18,783 and $25,056, respectively, at December 31, 2004 and 2003. Interest costs on construction
projects are not capitalized due to the short duration and recurring nature of the projects. The Company has historically scheduled temporary 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 the Companys labor union contracts. Costs related to the shutdown
activities are expensed as incurred. In order to enter 2005 with lower inventory levels and to
better align production with customer requirements, the Company curtailed production selectively
during the fourth quarter of 2004. The impact to production from this downtime for furnace
maintenance and selected curtailment, while effective in reducing overall inventory levels that
would have otherwise been built in the fourth quarter negatively impacted operating results in the
fourth quarter by approximately $9.0 million. 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 statement of operations for the
year ended December 31, 2004 is a gain of $2,848 and the associated release of an environmental
reserve of $975 as a result of these sales. Intangible Assets and Goodwill The Company applies Statement of Financial Accounting Standards No. 142  Goodwill and Other
Intangible Assets (SFAS 142), addressing financial accounting and reporting for intangible assets
acquired individually or with a group of other assets at acquisition. SFAS 142 also addresses
financial accounting and reporting for goodwill and other intangible assets subsequent to their
acquisition. SFAS 142 provides that goodwill and intangible assets that have indefinite useful
lives will not be amortized but rather will be tested at least annually for impairment. It also
provides that intangible assets that have finite useful lives will continue to be amortized over
their useful lives, but those lives will no longer be limited to forty years. Intangible assets were valued by independent appraisers and initially were recorded at their
fair market value of $7,900 at August 31, 2002. These assets are attributable to long-term
customer relationships and are being amortized on a straight-line basis over a period of ten years,
which represents the estimated economic useful lives of these relationships. Amortization expense
for the two years ended December 31, 2004 and 2003 and the four months ended December 31, 2002 was
$790, $790 and $264, respectively. The Company estimates annual amortization expense of $790 in
each of the next five years. Accumulated amortization at December 31, 2004 and 2003 was $1,844 and
$1,054, respectively. Goodwill, written off pursuant to fresh start reporting (see Note 4), represented the excess
of the 1997 purchase price over the estimated fair value of net assets then acquired and was
amortized on a straight-line basis over a twenty-year period. Impairment of Long-Lived Assets The Company applies Statement of Financial Accounting Standards No. 144  Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS 144), addressing financial reporting for the
impairment or disposal of long-lived assets. The Company evaluates the recoverability of its
long-lived assets whenever adverse events or changes in business climate indicate that the expected
undiscounted future cash flows from the related asset may be less than previously anticipated. If
the net book value of the related asset exceeds the undiscounted future cash flows of the asset,
the carrying amount would be reduced to the present value of its expected future cash flows and an
impairment loss would be recognized. See Note 2 for a discussion of the assets impaired in the
restructuring. The Company concluded that no other impairment exists as of December 31, 2004.
Assets previously held for sale have been reclassified as operating property, plant and equipment
because they had been held for sale for greater F-14




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) than one year. The net book values of these assets, and including
the Connellsville property (see Note 2) (approximately $5,184), are equivalent to their estimated
salvage values; therefore, no future depreciation expense will be recorded. Accounts Payable Accounts payable includes checks issued and outstanding of $11,279 and $12,795, respectively,
at December 31, 2004 and 2003. Fair Value of Financial Instruments Statement of Financial Accounting Standards No. 107  Disclosures about Fair Value of
Financial Instruments requires disclosure of the estimated fair values of certain financial
instruments. The estimated fair value amounts have been determined using available market
information or other appropriate valuation methodologies that require considerable judgment in
interpreting market data and developing estimates. Accordingly, the estimates presented herein are
not necessarily indicative of the amounts that the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts. Long-term debt is estimated to have a fair
value of approximately $445,000 at December 31, 2004 based on the then available market
information. Long-term debt was estimated to have a fair value of approximately $484,000 at
December 31, 2003. The carrying amount of other financial instruments, except for the natural gas
future and option contracts discussed in Note 7, approximate their estimated fair values. The fair value information presented herein is based on information available to management as
of December 31, 2004. Although management is not aware of any factors that would significantly
affect the estimated value amounts, such amounts have not been comprehensively revalued for
purposes of these financial statements since that date and, therefore, the current estimates of
fair value may differ significantly from the amounts presented herein. Debt Issue Costs The Company capitalizes financing fees related to obtaining its debt commitments and amortizes
these costs over the term of the related debt. Accounting for Derivative Instruments and Hedging Activities The Company applies Statement of Financial Accounting Standards No. 133  Accounting for
Derivative Instruments and Hedging Activities, as amended by SFAS 137, SFAS 138 and SFAS 149 (SFAS
133). SFAS 133 establishes accounting and reporting standards requiring every derivative
instrument (including certain derivative instruments embedded in other contracts) to be recorded in
the balance sheet as either an asset or liability measured at its fair value. SFAS 133 requires
that changes in the derivative fair values that are designated effective and qualify as cash flow
hedges will be deferred and recorded as a component of accumulated other comprehensive income until
the hedged transactions occur and are recognized in earnings. The ineffective portion of a hedging
derivatives change in fair value will be immediately recognized in earnings. For derivative
instruments that do not qualify as cash flow hedges, SFAS 133 requires that changes in the
derivative fair values be recognized in earnings in the period of change. F-15




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) Equity Incentive Plans Effective January 1, 2003, the Company adopted the fair value based method of accounting for
stock-based employee compensation under Statement of Financial Accounting Standards No. 123 
Accounting for Stock-Based Compensation (SFAS 123) by applying the prospective method of
accounting under Statement of Financial Accounting Standards No. 148  Accounting for Stock-Based
Compensation  Transition and Disclosure, an amendment of Statement No. 123 (SFAS 148) which
provides alternative methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. The Company applies these recognition provisions
to all employee awards granted after the beginning of 2003. The following table illustrates the effect on net income (loss) and income (loss) per share as
if the fair value based method had been applied to all outstanding awards in each period: Year
    
    
    Year
    
    
    Four Months
    
    
    Eight MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    August 31,2004
    
    
    2003
    
    
    2002
    
    
    2002Reported net income (loss)
    
    $
    (86,148
    )
    
    $
    (26,127
    )
    
    $
    (669
    )
    
    $
    63,823Add: Stock-based
employee compensation
expense included in
reported net income
(loss)
    
    
    680
    
    
    
    254
    
    
    
    
    
    
    
    Deduct: Total
stock-based employee
compensation expense
under fair value based
method for all awards
    
    
    (680
    )
    
    
    (254
    )
    
    
    
    
    
    
    (56
    )Pro forma net income (loss)
    
    $
    (86,148
    )
    
    $
    (26,127
    )
    
    $
    (669
    )
    
    $
    63,767Basic net income (loss)
per share applicable to
common stock:As reported
    
    $
    (3.50
    )
    
    $
    (4.37
    )
    
    $
    (0.27
    )
    
    $
    11.37Pro forma
    
    $
    (3.50
    )
    
    $
    (4.37
    )
    
    $
    (0.27
    )
    
    $
    11.36Diluted net income (loss)
per share applicable to
common stockAs reported
    
    $
    (3.50
    )
    
    $
    (4.37
    )
    
    $
    (0.27
    )
    
    $
    1.89Pro forma
    
    $
    (3.50
    )
    
    $
    (4.37
    )
    
    $
    (0.27
    )
    
    $
    1.89
 Salaried employees of the Company participated in an incentive stock option plan of Anchors
former indirect parent. These options, which were cancelled, generally had a life of 10 years and
vested ratably over three years. The Company elected to follow Accounting Principles Board Opinion
No. 25  Accounting for Stock Issued to Employees, in accounting for these options in the eight
months ended August 31, 2002. Income Taxes The Company applies Statement of Financial Accounting Standards No. 109  Accounting for
Income Taxes (SFAS 109) which establishes financial accounting and reporting standards for the
effects of income taxes that result from a companys activities during the current and preceding
years. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial statement carrying amounts of assets
and liabilities and their respective tax bases. Deferred tax assets also are recognized for credit
carryforwards. Deferred tax assets and liabilities are measured using the enacted rates applicable
to taxable income in the years in which the temporary differences are expected to reverse and the
credits are expected to be used. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment date. An assessment is
made as to whether or not it is more likely than not that deferred tax assets are recoverable.
This assessment includes anticipating future taxable income and the Companys tax F-16




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) planning strategies and is made on an ongoing basis. Consequently, future
material changes in the valuation allowance are possible. Income (Loss) per Share Basic and diluted net income (loss) per common share was computed by dividing income (loss)
applicable to common stock by the weighted-average number of common shares and contingently
issuable shares outstanding during the period. The computation of basic and diluted net income
(loss) per share follows: Year
    
    
    Year
    
    
    Four Months
    
    
    Eight MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    August 31,2004
    
    
    2003
    
    
    2002
    
    
    2002Basic net income (loss) per share:Net income (loss)
    
    $
    (86,148
    )
    
    $
    (26,127
    )
    
    $
    (669
    )
    
    $
    63,823Series C preferred stock dividends
    
    
    
    
    
    
    (7,263
    )
    
    
    (3,022
    )
    
    
    Series A and B preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,100
    )Excess fair value of consideration transferred
over carrying value of Series C preferred
stock upon redemption
    
    
    
    
    
    
    (38,118
    )
    
    
    
    
    
    
    Income (loss) applicable to common stock
    
    $
    (86,148
    )
    
    $
    (71,508
    )
    
    $
    (3,691
    )
    
    $
    59,723Divided by the sum of:Weighted average shares outstanding
    
    
    24,581,617
    
    
    
    16,364,196
    
    
    
    13,499,995
    
    
    
    3,357,825Weighted average warrants outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,893,53124,581,617
    
    
    
    16,364,196
    
    
    
    13,499,995
    
    
    
    5,251,356Basic net income (loss) per share applicable
to common stock
    
    $
    (3.50
    )
    
    $
    (4.37
    )
    
    $
    (0.27
    )
    
    $
    11.37Diluted net income (loss) per share:Income (loss) applicable to common stock
    
    $
    (86,148
    )
    
    $
    (71,508
    )
    
    $
    (3,691
    )
    
    $
    59,723Effect of dilutive securities  Dividends
on Series A and B preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,100$
    (86,148
    )
    
    $
    (71,508
    )
    
    $
    (3,691
    )
    
    $
    63,823Divided by the sum of:Weighted average shares outstanding
    
    
    24,581,617
    
    
    
    16,364,196
    
    
    
    13,499,995
    
    
    
    3,357,825Weighted average warrants outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,893,531Dilutive potential common shares 
Series A and B preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,554,29524,581,617
    
    
    
    16,364,196
    
    
    
    13,499,995
    
    
    
    33,805,651Diluted net income (loss) per share applicable
to common stock
    
    $
    (3.50
    )
    
    $
    (4.37
    )
    
    $
    (0.27
    )
    
    $
    1.89
 Outstanding
stock options of 921,259 and 810,003, respectively, were not included in the
calculation of diluted net income (loss) per share for the years ended December 31, 2004 and 2003,
as the effect of including such options is antidilutive. Warrants outstanding in the eight months
ended August 31, 2002 were contingently issuable shares as the stock underlying the warrants were
issuable for no additional consideration and the conditions necessary for share exercise had been
met. In a redemption of preferred stock, the excess of the fair value of the consideration
transferred to the holders of preferred stock over the carrying amount of the preferred stock
represents a return to the preferred stockholders. Upon the redemption of the Series C Preferred
Stock, the excess consideration (2,382,348 shares of common stock valued at $16.00 per share, or
$38,118) was deducted in the calculation of income (loss) applicable to F-17




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) common stock in the computation of basic and diluted net income (loss) per share,
representing $(2.33) per share for the year ended December 31, 2003. Related Party Transactions As of December 31, 2004, certain investment funds and managed accounts affiliated with
Cerberus own approximately 59.5% of the outstanding common stock of Anchor. During 2004, certain consultants to Cerberus provided consulting services to Anchor, valued at
approximately $300, in connection with Anchors operational review. In 2002, Ableco Finance LLC, an affiliate of Cerberus, provided Anchor with a new $20,000 term
loan (the Term Loan) (see Note 3). The Term Loan was repaid with a portion of the proceeds of a
note offering (see Note 6). The Company had employee receivables of $45 outstanding as of December 31, 2003. There were
no employee receivables outstanding as of December 31, 2004. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting
principles, requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates. New Accounting Standards In December 2004, the Financial Accounting Standards Board (the FASB) issued Statement of
Financial Accounting Standard No. 123R  Share-Based Payments (SFAS 123R), a revision of SFAS 123
that is effective for the first interim or annual reporting period that begins after June 15, 2005.
The Company adopted the requirements of SFAS 123 effective January 1, 2003. The adoption of SFAS
123R will not 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. 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
FASB issued FSP No. SFAS 106-2  Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (FSP SFAS 106-2). FSP SFAS 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. The Company adopted the
provisions of FSP SFAS 106-2 effective July 1, 2004. As a result of the adoption of FSP SFAS
106-2, the accumulated post-retirement benefit obligation was reduced by $9,893 and the net
periodic benefit cost was reduced by $1,538 as follows: service cost  $120, interest cost  $618
and amortization of actuarial losses  $800. Reclassifications Certain reclassifications have been made to the statements of operations for the periods prior
to the year ended December 31, 2004. Revision The
Company revised its statements of cash flows by $4,388, $1,038 and $20,750, respectively,
for the year ended December 31, 2003, the four months ended December 31, 2002 and the eight months
ended August 31, 2002 to reflect the principal payments under its agreement with the Pension
Benefit Guaranty Corporation (PBGC) as cash out flows from
operating activities instead of cash out flows
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 $25,173,
$20,981 and $54,575 to $20,785, $19,943 and $33,825 for the year ended December 31, 2003, the four
months ended December 31, 2002 and the eight months ended
August 31, 2002. The revision also had
the impact of increasing cash flows from financing activities from $144,505, $(2,851) and $(5,139)
to $148,893, $(1,813) and $15,611 for the year ended December 31, 2003, the four months ended
December 31, 2002 and the eight months ended August 31, 2002. F-18




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) NOTE 2 
Restructuring, impairment and other charges and inventory loss In November 2004, the Board of Directors of Anchor (the Board) approved the Companys plan
to close the 624,000 square foot Connellsville, Pennsylvania manufacturing facility (the
Restructuring). Production at the facility was terminated effective as of the close of business
on November 4, 2004. The Company expects to complete the Connellsville facility closure activities
by December 2005 (the Restructuring Period). Approximately 300 employees were affected. 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 $50,500 to $53,500. 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: Expense Recorded in theFourth Quarter of 2004Total Amount Expected to
    
    and Cumulative throughbe Incurred
    
    2004Employee termination benefits
    
    $
    12,800
    
    
    to
    
    $
    12,800
    
    
    $
    12,799Other facility exit costs
    
    
    2,900
    
    
    to
    
    
    5,900
    
    
    
    1,178Charges resulting in cash
expenditures
    
    
    15,700
    
    
    to
    
    
    18,700
    
    
    
    13,977Asset impairment of property and equipment
    
    
    25,800
    
    
    to
    
    
    25,800
    
    
    
    25,758Restructuring, impairment and other
charges
    
    
    41,500
    
    
    to
    
    
    44,500
    
    
    
    39,735Noncash write down of inventories
    
    
    9,000
    
    
    to
    
    
    9,000
    
    
    
    8,963Total plant closure related charges
    
    $
    50,500
    
    
    to
    
    $
    53,500
    
    
    $
    48,698
 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 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 for an inventory write-down in the fourth quarter of 2004, of
which $1,100 pertains to unusable supplies and raw materials and $7,900 pertains 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 employee termination benefits, other facility exit costs and the write down of property,
plant and equipment are included in Restructuring, impairment and other charges, net on the
accompanying statement of operations. The noncash write down of inventories is recorded in a
separate caption on the statement of operations. F-19




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) A reconciliation of the Restructuring liability, recorded in accrued expenses on the
accompanying balance sheet, is as follows: RestructuringLiabilityBalance, November 1, 2004
    
    $
    Costs incurred and charged to expense
    
    
    13,977Previously recorded fringe benefit accrual related to severed employees
    
    
    1,446Costs paid in the 2004 fourth quarter
    
    
    (3,914
    )Balance, December 31, 2004
    
    $
    11,509
 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 AmountsExpected to be Paid2005 first quarter
    
    $
    7,300
    
    
    to
    
    $
    8,4002005 second quarter
    
    
    3,000
    
    
    to
    
    
    3,800Thereafter
    
    
    2,900
    
    
    to
    
    
    4,000
 NOTE 3  Plan of Reorganization and Liquidity On August 30, 2002, Anchor consummated a significant restructuring of its existing debt and
equity securities pursuant to the Plan under Chapter 11 of the United States Bankruptcy Code (the
Reorganization). A voluntary bankruptcy petition was filed on April 15, 2002 (the Petition
Date). As part of the Reorganization, AGC Holding acquired 75,000 shares of newly authorized
Series C Preferred Stock for $75,000 and 13,499,995 shares of newly authorized common stock for
$5,000 (see Note 8). Ableco Finance LLC provided Anchor with a new $20,000 Term Loan (see Note 6).
In connection with the Reorganization, Anchor entered into a new $100,000 credit facility (the
Revolving Credit Facility) (see Note 5). The Series C Preferred Stock was redeemed with a
portion of the proceeds of the Equity Offering. The Term Loan was repaid with a portion of the
proceeds of a note offering (see Note 6). Under the terms of the Plan, the holders of Anchors 11.25% First Mortgage Notes due 2005,
aggregate principal amount of $150,000 (the First Mortgage Notes), retained their outstanding
$150,000 of First Mortgage Notes and received a consent fee of $5,625 for the waiver of the
change-in-control provisions, the elimination of the pre-payment provisions and other non-financial
changes to the terms of the First Mortgage Notes (including the release of Consumers U.S., Inc.
(Consumers U.S.) as a guarantor). Consumers U.S. was the former parent company of Anchor. The
holders of Anchors 9.875% Senior Notes due 2008, aggregate principal amount of $50,000 (the
Senior Notes), were repaid in cash at 100% of their principal amount. Holders of Anchors
mandatorily redeemable 10% cumulative convertible preferred stock (Series A Preferred Stock)
(having an accrued liquidation value of approximately $83,600) were entitled to receive a cash
distribution of $22,500 in exchange for their shares and the Series A Preferred Stock was
cancelled. Of this amount, $21,275 had been paid through August 30, 2004. Under the terms of the
Plan of Reorganization, holders of Series A Preferred Stock certificates, who failed to surrender
their certificates prior to August 30, 2004, forfeited all rights and claims or interests of the
certificate and would not participate in any redemption. The expiration of the redemption period
occurred August 30, 2004 and the remaining unredeemed balance was recorded as a gain in Other
income (expense), net on the accompanying statement of operations. Anchors redeemable 8%
cumulative convertible preferred stock (the Series B Preferred Stock) (having an accrued
liquidation value of approximately $105,700) and common stock and warrants were cancelled and the
holders received no distribution under the Plan. As a result of the Chapter 11 proceedings, there was no accrual of interest on the unsecured
Senior Notes after the Petition Date. If accrued through the Effective Date, interest expense
would have increased by $1,852 F-20




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) during the eight months ended August 31, 2002. In addition,
effective as of the Petition Date, Anchor ceased accruing dividends on the Series A and Series B
Preferred Stock. In connection with the Reorganization, Anchor settled a shareholder derivative action that had
been pending in Delaware Chancery Court. The litigation was settled for total consideration to the
Company of approximately $9,000, of which approximately $6,300 was in cash, with the balance of the
consideration to Anchor being an assignment to Anchor by Consumers U.S. of the funds it would
otherwise have been entitled to receive under the Plan. The settlement also included the exchange
of mutual releases by the parties and payment by Anchor of certain legal fees. The settlement of
the shareholder derivative action was approved by the Delaware Chancery Court and was recorded in
August 2002 as a component of restructuring, net, in the accompanying financial statements.
Implementation of the settlement was completed in the fourth quarter of 2002 with Anchor receiving
approximately $6,300 in cash. Anchor
also entered into an agreement with the PBGC.
At the Effective Date, Anchor paid $20,750 to the PBGC and entered into a ten-year payment
obligation (see Note 10). All of Anchors other unaffiliated creditors, including trade creditors, were unimpaired and
have been or will be paid in the ordinary course of business. During the course of the bankruptcy proceeding, including the events leading up to the
preparation and execution of the prearranged plan, the Company incurred several costs that directly
resulted from the Companys restructuring through the Plan. Reorganization items were items that
met the definition of reorganization items per the provisions of American Institute of Certified
Public Accountants Statement of Position 90-7  Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code (SOP 90-7), which included costs and gains that were incurred after the
Chapter 11 filing and were a direct result of the bankruptcy proceeding and gains and losses
resulting from the application of fresh-start reporting (see Note 4). Restructuring items included
costs and gains that directly related to the restructuring of the Company through the Plan and were
either incurred prior to the filing of Chapter 11 or were not incurred as a direct result of the
bankruptcy itself. Restructuring and reorganization payments included as financing activities in the statements
of cash flows were comprised of consent fees paid to First Mortgage Note holders, financial
institution fees incurred in obtaining debtor-in-possession secured financing and attorneys and
professional fees, related to the financing. All other restructuring and reorganization payments
were classified as operating activities. F-21




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) The costs and gains are summarized as follows: Reorganization items, net:Fresh start adjustments to reflect the impact of
fresh-start reporting in accordance with the provisions
of SOP90-7, which included increasing property, plant
and equipment ($86,860), recognizing identifiable
intangible assets for customer relationships ($7,900) and
writing off goodwill ($44,852)
    
    $
    (49,908
    )Debtor-in-possession secured financing facility fees
charged by the bank to execute the Companys
debtor-in-possession financing arrangement during the
course of the bankruptcy proceeding
    
    
    2,450Attorneys fees incurred for legal services performed,
claims processor fees and printing fees incurred for the
bankruptcy proceeding
    
    
    1,687Write-off of the unamortized balance of deferred
financing costs related to Senior Notes. The Senior Notes
were repaid with proceeds obtained when the Plan became
effective
    
    
    1,276Write-off of interest accrued on the Senior Notes prior
to the filing of Chapter 11. Interest ceased to accrue
under the bankruptcy proceedings and accrued interest was
forgiven when the plan became effective
    
    
    (2,894
    )2,519$
    (47,389
    )
 F-22




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) Restructuring, net:Consulting fees and attorneys fees incurred with respect
to the preparation of the Plan. These costs were not
considered reorganization expenses because certain costs
were incurred prior to the filing for bankruptcy and such
costs were not directly related to the bankruptcy
proceeding
    
    $
    10,068Direct costs of the restructuring, which include an
accrual for claims under the Plan ($2,400), the cost of
employee restructuring bonuses paid upon the successful
implementation of the Plan ($2,110), purchase of certain
director/officer liability and environmental liability
insurance policies mandated by the Plan ($1,550), the
write-off of deferred financing fees of the revolving
credit facility upon entering into the
debtor-in-possession secured financing facility ($1,165)
and severance charges ($728 for 12 employees). At
December 31, 2004, remaining liabilities were $164 for
the accrual for claims
    
    
    7,953Consent fee paid to the holders of the First Mortgage
Notes under the terms of the Plan, which was negotiated
prior to the Chapter 11 filing and was directly
stipulated by the Plan
    
    
    5,625Write-down of a customer notes receivable of $10,000, due
to a negotiated early collection of the balance. The
notes were originally entered into in 1999 in
satisfaction of accounts receivable and a strategic
alliance commitment and were scheduled to mature in 2004.
Cerberus, through certain Cerberus-affiliated funds and
managed accounts invested $80.0 million of new equity
capital into the Company, directed the settlement of the
notes, as part of the restructuring, in order to fund
other costs incurred with respect to the restructuring
    
    
    4,473Other fees, which include a consent fee of $2,500 paid
for settlement of change-in-control issues related to the
Plan and reimbursement of professional fees of $1,400
incurred by Cerberus
    
    
    3,900Gain on cash settlement of a shareholders derivative
action offset by legal fees related to the settlement
    
    
    251Modifications to the Companys post-retirement benefits
program, implemented as part of the Reorganization,
resulting in a reduction of long-term post retirement
liabilities
    
    
    (24,432
    )Adjustment of previously recorded pension liabilities to
reflect amounts agreed upon under the PBGC Agreement (see
Note 10)
    
    
    (8,233
    )$
    (395
    )
 F-23




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) NOTE 4  Fresh Start Reporting Upon the Effective Date, Anchor adopted fresh start reporting pursuant to SOP 90-7. The
adoption of fresh start reporting results in Anchor revaluing its balance sheet to fair value based
on the reorganization value of the Company. The reorganization value of an entity approximates the
fair value of the entity before considering liabilities and approximates the amount a willing buyer
would pay for the assets immediately after restructuring. The reorganization value was determined
by the negotiated total enterprise value for Anchor reflected in the Plan and the Reorganization,
which was the product of a six month solicitation of proposals conducted by the prior Board of
Directors and a nationally recognized investment banking firm. The reorganization value of the
entity was allocated to assets based on the relative fair values of the assets. Liabilities at the
Plan consummation date are stated at the present value of amounts to be paid. The fair values of
substantially all of the property, plant and equipment, identifiable intangible assets and
outstanding debt and equity securities of the Company were determined by independent appraisers. The Reorganization and adoption of fresh start reporting resulted in the following adjustments
to the condensed balance sheet of Anchor as of August 31, 2002: Predecessor
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ReorganizedCompany at
    
    
    Reorganization
    
    
    
    
    Fresh Start
    
    
    
    
    Company atAugust 31, 2002
    
    
    Adjustments
    
    
    
    
    Adjustments
    
    
    
    
    August 31, 2002Current assets
    
    $
    118,438
    
    
    $
    34,810
    
    
    (a),(b),(c)
    
    $
    
    
    
    
    
    $
    153,248Property, plant and equipment
    
    
    285,630
    
    
    
    
    
    
    
    
    
    86,860
    
    
    (e)
    
    
    372,490Other asset
    
    
    11,189
    
    
    
    1,408
    
    
    (a),(c)
    
    
    
    
    
    
    
    
    12,597Goodwill and intangible assets
    
    
    44,852
    
    
    
    
    
    
    
    
    
    (36,952
    )
    
    (e)
    
    
    7,900$
    460,109
    
    
    $
    36,218
    
    
    
    
    $
    49,908
    
    
    
    
    $
    546,235Current liabilities
    
    $
    155,656
    
    
    $
    8,718
    
    
    (b),(c)
    
    $
    93
    
    
    (d)
    
    $
    164,467Long-term debt
    
    
    266,886
    
    
    
    (30,000
    )
    
    (a),(b)
    
    
    
    
    
    
    
    
    236,886Long-term post-retirement
liabilities
    
    
    39,910
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,910Other long-term liabilities
    
    
    24,972
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,972487,424
    
    
    
    (21,282
    )
    
    
    
    
    93
    
    
    
    
    
    466,235Redeemable preferred stock
    
    
    83,659
    
    
    
    75,000
    
    
    (a)
    
    
    (61,159
    )
    
    (d)
    
    
    75,000(22,500
    )
    
    (b)Stockholders equity (deficit)
    
    
    (110,974
    )
    
    
    5,000
    
    
    (a),(b)
    
    
    110,974
    
    
    (d)
    
    
    5,000$
    460,109
    
    
    $
    36,218
    
    
    
    
    $
    49,908
    
    
    
    
    $
    546,235
   (a)
    Reflects the proceeds from the issuance of 75,000 shares of Series C Preferred Stock
($75,000), 13,499,995 shares of Common Stock ($5,000), proceeds from the issuance of the
Term Loan ($20,000) and payment of financing fees.(b)
    Reflects the distributions under the Plan to repay the Senior Notes ($50,000) and the
accrual of the final distribution to the holders of the Series A Preferred Stock ($22,500).(c)
    Reflects the payoff of the debtor-in-possession secured financing facility, the
proceeds under the Revolving Credit Facility and the payment of financing fees. (See Note
3.)(d)
    Reflects the cancellation of the remaining value of the Series A Preferred Stock
($61,159), the cancellation of the Series B Preferred Stock ($105,731), the cancellation of
the common stock ($20,890) and warrants ($9,446) and other accumulated deficit items
($247,041) of the Predecessor Company.(e)
    Reflects the write off of goodwill ($44,852) and the revaluation of Companys property,
plant and equipment ($86,860) and identifiable intangible assets ($7,900) based upon an
independent appraisal. F-24




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) NOTE 5  Revolving Credit Facility On August 30, 2002, Anchor entered into a loan and security agreement with various financial
institutions as lenders, Congress Financial Corporation (Central), as administrative agent and
collateral agent for the lenders, and Bank of America, N.A., as documentation agent, to provide the
Revolving Credit Facility. The Revolving Credit Facility includes a $15,000 subfacility for
letters of credit. On November 4, 2004, Anchor entered into an
amendment with its primary lender to
modify the terms of the Revolving Credit Facility. This modification expanded the maximum
borrowing availability under the facility to permit drawings of up to $115,000 in the aggregate,
from $100,000, increased the borrowing base and extended the term to August 30, 2007. Availability under the Revolving Credit Facility is restricted to the lesser of (i) $115,000
and (ii) the borrowing base amount. The borrowing base amount is defined as the amount equal to
(A) the lesser of (i) the amount equal to (a) eighty-five (85%) percent of the net amount of
eligible accounts plus (b) the lesser of (1) $75,000 or (2) sixty (60%) percent multiplied by the
value of the eligible inventory or (ii) $115,000; minus (B) reserves in such amounts as the agent
may from time to time establish. Advances under the Revolving Credit Facility may be made as prime
rate loans or eurodollar rate loans at the Companys election. Interest rates payable upon such
advances are based upon the prime rate or eurodollar rate depending on the type of loan, plus an
applicable margin. The applicable margin varies with availability and ranges from 0.50% to 1.00%
for prime rate loans, 2.25% to 2.75% for eurodollar rate loans and 2.00% to 2.50% for letters of
credit. The loan and security agreement contains certain fees, including servicing fees, unused
line fees and early termination fees. Loans made pursuant to the Revolving Credit Facility are secured by a first priority security
interest in, a lien upon, and a right of set off against all of the Companys inventories,
receivables, general intangibles and proceeds therefrom. All cash collections are accounted for as
reductions of advances outstanding under the Revolving Credit Facility. The Revolving Credit Facility contains customary negative covenants and restrictions for
transactions, including among other restrictions and without limitation, restrictions on
indebtedness, liens, investments, fundamental business changes, asset dispositions outside of the
ordinary course of business, restricted junior payments, transactions with affiliates, change of
control and changes relating to indebtedness. The Revolving Credit Facility contains customary
events of default, including, without limitation, non-payment of principal, interest or fees,
violation of certain covenants, inaccuracy of representations and warranties in any material
respect, and cross defaults with certain other indebtedness and agreements, including, without
limitation, the Senior Secured Note indenture (see Note 6) and the PBGC settlement agreement. At December 31, 2004, the Company was required to maintain a fixed charge coverage ratio of
        .95:1.0. The actual fixed charge coverage ratio for the four quarters ended December 31, 2004 was
        .87.0:1.0, resulting from the Companys weaker than anticipated cash flows and operating expenses
during the fourth quarter. On February 14, 2005, the lenders waived the Companys failure to
comply with its fixed charge coverage ratio covenant as of December 31, 2004. In addition, the
Company reached an agreement with the lenders to amend the minimum fixed charge coverage ratios for
2005 and require the Company to meet a monthly fixed charge coverage test. The required minimum
fixed charge coverage ratios for 2005, based on a 2005 cumulative year to date calculation, range
from 0.14:1.0 for January 2005 to 0.8:1.0 for November 2005 to 0.75:1.0 for December 2005 and
1.0:1.0 for 2006 and thereafter. The Company is in compliance with this covenant under the
Revolving Credit Facility as of February 28, 2005. At December 31, 2004, advances outstanding under the Revolving Credit Facility were $50,880,
borrowing availability was $21,799, outstanding letters of credit on this facility were $10,033 and
the interest rate on borrowings outstanding at year end was 5.04%. During the year ended December
31, 2004, average advances outstanding were approximately $34,548, the average interest rate was
4.76% and the highest month-end advance was $50,880. At December 31, 2003, there were no advances outstanding under the Revolving Credit Facility,
borrowing availability was $73,789 and outstanding letters of credit on this facility were $7,627.
During the year ended F-25




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) December 31, 2003, average advances outstanding were approximately $25,503,
the average interest rate was 5.88% and the highest month-end advance was $68,488. During the four months ended December 31, 2002, average advances outstanding were
approximately $53,486, the average interest rate was 5.04% and the highest month-end advance was
$56,939. During the eight months ended August 31, 2002, average advances outstanding were
approximately $57,554, the average interest rate was 6.01% and the highest month-end advance was
$62,108. NOTE 6  Long-Term Debt Long-term debt consists of the following: December 31,2004
    
    
    2003$350,000 Senior Secured Notes, interest at 11% due 2013
    
    $
    350,000
    
    
    $
    350,000Unamortized premium on Senior Secured Notes
    
    
    3,191
    
    
    
    3,586Capital lease obligations
    
    
    12,777
    
    
    
    17,550365,968
    
    
    
    371,136PBGC obligation
    
    
    55,845
    
    
    
    60,640421,813
    
    
    
    431,776Less current maturities of long-term debt
    
    
    (9,338
    )
    
    
    (8,895
    )$
    412,475
    
    
    $
    422,881
 On February 7, 2003, the Company completed an offering of 11% Senior Secured Notes due 2013,
aggregate principal amount of $300,000 (the Senior Secured Notes), issued under an indenture
dated as of February 7, 2003, among the Company and The Bank of New York, as Trustee (the
Indenture). The Senior Secured Notes are senior secured obligations of the Company, ranking
equal in right of payment with all existing and future unsubordinated indebtedness of the Company
and senior in right of payment to all future subordinated indebtedness of the Company. The Senior
Secured Notes are secured by a first priority lien, subject to certain permitted encumbrances, on
substantially all of Anchors existing real property, equipment and other fixed assets relating to
Anchors eight operating glass container manufacturing facilities. The collateral does not include
inventory, accounts receivable or intangible assets. Proceeds from the issuance of the Senior Secured Notes, net of fees, were approximately
$289,000 and were used to repay the principal amount outstanding under the First Mortgage Notes
plus accrued interest thereon ($156,256 in total), the principal amount outstanding under the Term
Loan plus accrued interest thereon and a prepayment fee ($20,354 in total) and advances then
outstanding under the Revolving Credit Facility ($66,886 in total), representing funds for certain
of the Companys capital improvement projects. The remaining proceeds of approximately $45,000
were used to terminate certain equipment leases by purchasing from the respective lessors the
equipment leased thereunder. In the year ended December 31, 2003, the Company wrote off and
recorded as interest expense, $3,642 of deferred financing fees related to the transactions
described above. The Company entered into a Registration Rights Agreement on February 7, 2003, under which the
Company registered with the Securities and Exchange Commission (SEC) new Senior Secured Notes,
having substantially identical terms as the Senior Secured Notes. On August 5, 2003, the Company
completed an exchange offer with respect to $298,800 of Senior Secured Notes tendered in the
exchange offer, for a like principal amount of new Senior Secured Notes, identical in all material
respects to the Senior Secured Notes, except that the new Senior Secured Notes do not bear legends
restricting the transfer thereof. On August 5, 2003, the Company completed an additional offering of 11% Senior Secured Notes
due 2013, aggregate principal amount of $50,000 (the Additional Notes). Proceeds from the
issuance of the Additional Notes, net of fees, were approximately $53,400. The Additional Notes
were issued at an issue price of 107.5% of F-26




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) their principal amount. The Additional Notes were issued under the same Indenture as the Senior
Secured Notes, as supplemented by a first supplemental indenture, dated August 5, 2003, and their
terms are identical in all material respects to the Senior Secured Notes, except that the
Additional Notes were then subject to certain restrictions on transfer. 100% of the net proceeds
from the issuance of the Additional Notes were used to finance improvements to the collateral
securing the Senior Secured Notes and the Additional Notes in compliance with the Indenture. The Company entered into a Registration Rights Agreement on August 5, 2003 with respect to the
Additional Notes under which the Company registered with the SEC new Additional Notes, having
substantially identical terms as the Additional Notes. On January 29, 2004, the Company completed
an exchange offer with respect to $50,000 of Additional Notes tendered in the exchange offer, for a
like principal amount of new Additional Notes, identical in all material respects to the Additional
Notes, except that the new Additional Notes do not bear legends restricting the transfer thereof.
Hereafter, the Senior Secured Notes and the Additional Notes are referred to as the Senior Secured
Notes. Interest on the $350,000 aggregate principal amount of Senior Secured Notes accrues at 11% per
annum and is payable semiannually on each February 15 and August 15 to registered holders of the
Senior Secured Notes at the close of business on the February 1 and August 1 immediately preceding
the applicable interest payment date. The net book value of the collateral for the Senior Secured Notes was $404,113 at December 31,
2004. The Senior Secured Notes are redeemable, in whole or in part, at the Companys option on or
after February 15, 2008, at redemption prices listed in the Indenture. At any time (which may be
more than once) before February 15, 2006, the Company at its option may redeem up to 35% of the
initial outstanding notes with money raised in one or more public equity offerings, at redemption
prices listed in the Indenture. The Indenture provides that upon the occurrence of a change of
control, the Company will be required to offer to purchase all of the Senior Secured Notes at a
purchase price equal to 101% of the principal amount thereof plus accrued interest to the date of
purchase. The Indenture, subject to certain exceptions, restricts the Company from taking various
actions including, but not limited to, subject to specified exceptions, the incurrence of
additional indebtedness, the payment of dividends in excess of defined amounts and other restricted
payments, the granting of additional liens, mergers, consolidations and sales of assets and
transactions with affiliates. On December 26, 2002, the Company entered in a master lease agreement with a major lessor.
The master lease agreement is structured as a capital lease. Under this agreement, the Company
financed
approximately $20,000 of equipment. Equipment leases pursuant to the master lease are secured
by a first priority lien on such assets. The lease agreement has a term of five years and
contains, among other things, a fixed charge coverage test, identical to the fixed charge coverage
test under the Revolving Credit Facility. On February 14, 2005, the Company and the lessor entered
into a 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 August 30, 2002, the Company entered into the Term Loan with Ableco Finance LLC, as agent
for the lenders, to provide for a senior secured term loan in the amount of $20,000. The full
amount of the loan was drawn down on August 30, 2002, and bore interest at 14% per annum, payable
monthly in arrears. The Term Loan was repaid with proceeds from the offering of the Senior Secured
Notes. Effective April 17, 1997, the Company completed an offering of the First Mortgage Notes,
issued under an indenture dated as of April 17, 1997, among the Company, Consumers U.S. and The
Bank of New York, as Trustee. Effective August 30, 2002, Anchor entered into a supplemental
indenture with the holders of the First Mortgage Notes to provide for the waiver of the
change-in-control provisions, the elimination of pre-payment provisions and other non-financial
changes to the terms of the First Mortgage Notes. Additionally, Consumers U.S. was released as a
guarantor of the First Mortgage Notes. The First Mortgage Notes were repaid with proceeds from the
offering of the Senior Secured Notes. F-27




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) All of the Companys debt agreements contain cross-default provisions. Principal payments required on long-term debt, including payments made under the PBGC
obligation (see Note 10), are $9,338 in 2005, $9,834 in 2006, $10,377 in 2007, $7,288 in 2008 and
$7,471 in 2009. Payments to be made in 2010 and thereafter are $374,314. Other long-term debt includes capital leases, which have imputed interest rates ranging from
6.0% to 9.0%. Imputed interest on capital leases for the two years ended December 31, 2004 and
2003 was $1,539 and $2,553, respectively. Property, plant and equipment under capital lease
obligations were: December 31,2004
    
    
    2003Land
    
    $
    190
    
    
    $
    190Buildings
    
    
    1,712
    
    
    
    1,712Machinery and equipment
    
    
    29,120
    
    
    
    29,533Less accumulated amortization
    
    
    (7,754
    )
    
    
    (4,935
    )$
    23,268
    
    
    $
    26,500
 NOTE 7  Accounting for Derivative Instruments and Hedging Activities The Company hedges certain of its estimated natural gas purchases through the purchase of
natural gas futures, which qualify for cash flow hedge treatment under SFAS 133. These contracts
typically cover a maximum period of six to twelve months, although at December 31, 2003, the
Company had hedges in place extending into 2005. At December 31, 2004, the Company acquired
futures to hedge gas purchases from January 2005 through December 2005. At August 31, 2002, the
Company acquired futures to hedge gas purchases from September 2002
through December 2002 and at December 31, 2001 acquired futures to hedge gas purchases from
January 2002 through March 2002. Amounts recognized (gain/(loss)) in cost of products sold related to gas futures during the
years ended December 31, 2004 and 2003, the four months ended December 31, 2002 and the eight
months ended August 31, 2002 were $5,410, $3,456, $617 and $(2,159), respectively. The Company recorded the fair market value of the outstanding futures, $1,065, in current
liabilities and accumulated comprehensive income on the balance sheet as of December 31, 2004. The
Company recorded the fair market value of the outstanding futures, $2,144, in other current assets
and accumulated comprehensive income on the balance sheet as of December 31, 2003. In the years ended December 31, 2004 and 2003, the four months ended December 31, 2002 and the
eight months ended August 31, 2002, the Company entered into put and call options for purchases of
natural gas. These options do not qualify as an effective cash flow hedge for natural gas
purchases. Mark to market gains and losses on such derivatives are included in other income
(expense), net. The fair value of these options at December 31, 2004 was $807 and is recorded in current
liabilities. The Company recognized derivative loss of $80 in the year ended December 31, 2004.
The mark to market loss recorded on these instruments was $1,550 in the year ended December 31,
2004. The fair value of these options at December 31, 2003 was $826 and is recorded in other current
assets. The Company recognized derivative loss of $413 in the year ended December 31, 2003. The
Company recognized derivative income of $71 and $562, respectively, in the four months ended
December 31, 2002 and the eight months ended August 31, 2002. The mark to market gain recorded on
these instruments was $177 in the year ended December 31, 2003. F-28




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) NOTE 8  Capital Stock In connection with the Equity Offering, the Company executed a three for two split on
September 23, 2003, with no change in par value, of its common stock issued and outstanding as of,
and subsequent to, August 31, 2002. All share and per share amounts in the accompanying financial
statements have been restated to give effect to this stock split. Effective September 23, 2003, the authorized capital stock of Anchor consists of 60,000,000
shares of common stock, par value $.10 per share, of which 24,658,343 shares are issued and
outstanding as of December 31, 2004, and 20,000,000 shares of preferred stock, par value $.01 per
share, with no shares outstanding. Redeemable Preferred Stock The Board has the authority, by adopting resolutions, to issue shares of preferred stock in
one or more series, with the designations and preferences for each series set forth in the adopting
resolutions. The certificate of incorporation authorizes the Board to determine, among other
things, the rights, preferences and limitations pertaining to each series of preferred stock. All of the Series C Preferred Stock was redeemed with a portion of the net proceeds of the
Equity Offering of approximately $85,285. The redemption price of the Series C Preferred Stock was
equal to the sum of (i) $1,000 per share ($75,000) plus all accrued and unpaid dividends computed
to the date of redemption ($10,285) and (ii) 15% of the fair market value of all of the outstanding
shares of common stock. The portion of the redemption price specified in clause (ii) of the
preceding sentence was paid through the issuance of 2,382,348 shares of common stock (valued at
$38,118 based on the initial public offering price of $16.00 per share). The holders of the Series C Preferred Stock were entitled to vote as a single class on all
actions to be taken by Anchor stockholders, together with all other classes and series of Anchors
stock. The holders of the Series C Preferred Stock had full voting rights and powers equal to the
voting rights and powers of the holders of Anchors common stock. The votes of the holders of
Series C Preferred Stock, in the aggregate, would have constituted 15% of the total aggregate votes
entitled to vote on any such action. The Series C Preferred Stock was entitled to receive dividends, at a rate per annum equal to
12%, prior to and in preference to any declaration or payment of any dividend on any junior
securities. Dividends were payable quarterly in cash, if and when declared by the Board and, to
the extent not paid currently with respect to any quarterly period, were accrued and compounded
quarterly. In addition, the Series C Preferred Stock was entitled to receive dividends and
distributions equal to 15% of the amount of dividends paid on the outstanding shares of common
stock. Capital Stock of the Predecessor Company Prior to the Reorganization, the Company had designated 2,239,320 shares as Series A Preferred
Stock and 5,000,000 shares as Series B Preferred Stock. The holders of Series A Preferred Stock
were entitled to receive, when and as declared by the former Board of Directors of the Company
cumulative dividends, payable quarterly in cash, at an annual rate of 10%. Shares of Series A
Preferred Stock were convertible into shares of common stock, at the option of the holder, at a
ratio determined by dividing the liquidation value of the Series A Preferred Stock of $25.00 by
$6.00 and such ratio was subject to adjustment from time to time. The holders of Series B
Preferred Stock were entitled to receive cumulative dividends, payable quarterly at an annual rate
of 8%. Shares of Series B
Preferred Stock were not subject to mandatory redemption. Shares of Series B Preferred Stock
were convertible into shares of common stock, at the option of the holder, at a ratio determined by
dividing the liquidation value of the Series B Preferred Stock of $25.00 by $5.50 and such ratio
was subject to adjustment from time to time. Under the terms of the Plan, Series A Preferred Stock, the Series B Preferred Stock, common
stock and warrants of Anchor outstanding at August 30, 2002 were cancelled. F-29




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) NOTE 9  Equity Incentive Plan In 2002, the Board approved an Equity Incentive Plan, designed to motivate and retain
individuals who are responsible for the attainment of the Companys primary long-term performance
goals, covering employees, directors and consultants. The plan provides for the grant of
non-qualified stock options and incentive stock options for shares of Anchor common stock and
restricted stock to participants of the plan selected by the Board or a committee of the Board (the
Administrator). Effective January 9, 2003, the Administrator granted a total of 337,500
non-qualified stock options to selected participants. On September 30, 2003, all unvested awards
under the January 9, 2003 grant became immediately exercisable upon the consummation of the Equity
Offering, a Liquidity Event under the plan, as discussed below. All compensation charges of $135
related to these options were expensed in 2003. Effective September 30, 2003, the Administrator granted a total of 472,503 non-qualified stock
options to selected participants. The terms and conditions of awards, as determined by the
Administrator, were as follows: 50.0% of an option grant vests 1/3 on the first anniversary of the
grant date, 1/3 on the second anniversary of the grant date and 1/3 on the third anniversary of the
grant date; and the remaining 50.0% of the option grant vests in three tranches of equal amounts on
the first, second and third anniversary of the grant date if the Company attains certain
performance targets established by the Board. On January 14, 2004, these options were modified to
vest 1/3 on the first anniversary of the grant date, 1/3 on the second anniversary of the grant
date and 1/3 on the third anniversary of the grant date. No additional compensation expense was
recognized as a result of this modification. 1.5 million
shares of common stock have been reserved under the plan, of which
427,741 shares
of common stock are available for future issuance under the plan. Upon a Liquidity Event, all unvested awards will become immediately exercisable and the
Administrator may determine the treatment of all vested awards at the time of the Liquidity Event.
A Liquidity Event is defined as an event in which (1) any person who is not an affiliate becomes
the beneficial owner, directly or indirectly, of 50% or more of the combined voting power of
Anchors then outstanding securities, (2) the sale, transfer or other disposition of all or
substantially all of Anchors business and, whether by sale of assets, merger or otherwise to a
person other than Cerberus, (3) if specified by the Board in an award at the time of grant, the
consummation of an initial public offering of common equity securities or (4) dissolution and
liquidation of the Company. Activity for the stock option plan for the two years ended December 31, 2004 and 2003 is as
follows: Weighted
    
    
    WeightedNumber
    
    
    Average
    
    
    Averageof
    
    
    Exercise
    
    
    FairShares
    
    
    Price
    
    
    ValueOptions outstanding, January 1, 2003
    
    
    Granted
    
    
    337,500
    
    
    $
    2.33
    
    
    $
    0.40Granted
    
    
    472,503
    
    
    $
    16.00
    
    
    $
    3.10Exercised
    
    
    Forfeited
    
    
    Options outstanding, December 31, 2003
    
    
    810,003
    
    
    $
    10.30Granted
    
    
    395,500
    
    
    $
    16.00
    
    
    $
    2.54Exercised
    
    
    151,000
    
    
    $
    2.33
    
    
    $
    0.40Forfeited
    
    
    133,244
    
    
    $
    16.00
    
    
    $
    2.84Options outstanding, December 31, 2004
    
    
    921,259
    
    
    $
    13.23Options exercisable at December 31, 2003
    
    
    337,500
    
    
    $
    2.33Options exercisable at December 31, 2004
    
    
    341,000
    
    
    $
    8.52
 F-30




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) In accordance with SFAS 123, the fair values of the option grants were estimated on the date
of each grant using the Black-Scholes option pricing model. The assumptions for the 2003 grants
were: (i) risk-free interest rate of 2.35% to 3.80%, (ii) expected option life of 4 to 5 years,
(iii) volatility of nil to 20.7% and (iv) expected dividend yield of nil to 1.0%. The assumptions
for the 2004 grants were: (i) risk-free interest rate of 2.50% to 3.53%, (ii) expected option life
of 4 years, (iii) volatility of 20.7% and (iv) expected dividend yield of 1.0%. The options to purchase common stock were generally granted at a price equal to the estimated
market price of the stock on the date of grant and will expire no later than ten years after the
date of grant. The Company recorded stock option compensation expense, for options other than
those granted on January 9, 2003 which have been fully expensed, on a straight-line basis over the
three-year vesting period, of $680 and $254 in the years ended December 31, 2004 and 2003,
respectively. The following table summarizes information about options outstanding at December 31, 2004: Exercise Prices$ 2.33
    
    
    $ 16.00Outstanding:Shares
    
    
    186,500
    
    
    
    734,759Average remaining life (in years)
    
    
    8.0
    
    
    
    8.9Average exercise price
    
    $
    2.33
    
    
    $
    16.00Exercisable:Shares
    
    
    186,500
    
    
    
    154,500Average exercise price
    
    $
    2.33
    
    
    $
    16.00
 NOTE 10  Other Post-retirement Benefits and Pension Plans 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 measurement date for the plan is December 31, 2004. The
components of the net periodic benefit costs are as follows: Year
    
    
    Year
    
    
    Four Months
    
    
    Eight  MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    August 31,2004
    
    
    2003
    
    
    2002
    
    
    2002Service cost-benefits
earned during the period
    
    $
    314
    
    
    $
    463
    
    
    $
    134
    
    
    $
    671Interest cost on projected
benefit obligation
    
    
    3,137
    
    
    
    3,607
    
    
    
    1,002
    
    
    
    2,700Amortization of:Actuarial losses (gains)
    
    
    206
    
    
    
    529
    
    
    
    
    
    
    
    (511
    )Prior service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    292Total periodic benefit cost
    
    $
    3,657
    
    
    $
    4,599
    
    
    $
    1,136
    
    
    $
    3,152
 Significant assumptions used in determining net periodic benefit cost and related obligations
for the plan are as follows: Year
    
    
    Year
    
    
    Four Months
    
    
    Eight MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    August 31,2004
    
    
    2003
    
    
    2002
    
    
    2002Discount rate, net periodic
benefit cost
    
    
    6.25
    %
    
    
    6.75
    %
    
    
    7.00
    %
    
    
    7.25
    %Discount rate, benefit obligations
    
    
    5.75
    %
    
    
    6.25
    %
    
    
    6.75
    %
    
    
    7.00
    %
 F-31




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) The funded status of the Companys post-retirement plan is as follows: December 31,
    
    
    December 31,
    
    
    December 31,
    
    
    August 31,2004
    
    
    2003
    
    
    2002
    
    
    2002Change in benefit obligation:Benefit obligation at beginning of
period
    
    $
    57,798
    
    
    $
    44,363
    
    
    $
    43,510
    
    
    $
    61,449Service cost
    
    
    314
    
    
    
    463
    
    
    
    134
    
    
    
    671Interest cost
    
    
    3,137
    
    
    
    3,607
    
    
    
    1,002
    
    
    
    2,700Plan modifications
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,432
    )Plan participant contributions
    
    
    991
    
    
    
    1,006
    
    
    
    140
    
    
    
    334Actuarial (gain) loss
    
    
    (3,973
    )
    
    
    12,956
    
    
    
    621
    
    
    
    5,188Benefits paid
    
    
    (4,427
    )
    
    
    (4,597
    )
    
    
    (1,044
    )
    
    
    (2,400
    )Benefit obligation at end of period
    
    
    53,840
    
    
    
    57,798
    
    
    
    44,363
    
    
    
    43,510Change in plan assets:Fair value of plan assets at
beginning of period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Employer contributions
    
    
    3,436
    
    
    
    3,591
    
    
    
    904
    
    
    
    2,066Plan participant contributions
    
    
    991
    
    
    
    1,006
    
    
    
    140
    
    
    
    334Benefits and expenses paid
    
    
    (4,427
    )
    
    
    (4,597
    )
    
    
    (1,044
    )
    
    
    (2,400
    )Fair value of plan assets at end
of period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Funded status
    
    
    (53,840
    )
    
    
    (57,798
    )
    
    
    (44,363
    )
    
    
    (43,510
    )Unrecognized actuarial (gain) loss
    
    
    8,869
    
    
    
    13,051
    
    
    
    621
    
    
    
    Net amount recognized
    
    
    (44,971
    )
    
    
    (44,747
    )
    
    
    (43,742
    )
    
    
    (43,510
    )Accrued benefit liability
    
    
    (44,971
    )
    
    
    (44,747
    )
    
    
    (43,742
    )
    
    
    (43,510
    )Net amount recognized
    
    $
    (44,971
    )
    
    $
    (44,747
    )
    
    $
    (43,742
    )
    
    $
    (43,510
    )
 In 2004, the Company adopted the provisions of FSP SFAS 106-2. The Company has calculated the
plan will be actuarially equivalent to Medicare Part D. Actuarially equivalence is assumed to mean
that in aggregate Medicare eligible retirees who utilize the plan will pay, for prescription drugs,
an amount equal to or less than similarly situated retirees who utilize Medicare Part D considering
the contributions/premiums paid by retirees for access to the plan. As a result of the adoption of
FSP SFAS 106-2, the accumulated post-retirement benefit obligation was reduced by $9,893 and the
net periodic benefit cost was reduced by $1,538 as follows: service cost  $120, interest cost -
$618 and amortization of actuarial losses  $800. Employer and employee contributions expected for the fiscal year ending December 31, 2005 are
$4,742 and $1,120, respectively. The postretirement benefits expected to be paid in each of the
next five years, and in the aggregate for the five fiscal years thereafter, are as follows: 2005
    
    $
    5,8622006
    
    
    5,3412007
    
    
    5,6822008
    
    
    5,9022009
    
    
    6,175Aggregate for 2010 through 2014
    
    
    33,017
 The assumed healthcare cost trend used in measuring the accumulated post-retirement benefit
obligation as of December 31, 2004 was 11.0% declining gradually to 4.5% by the year 2015, after
which it remains constant. A F-32




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) one percentage point increase in the assumed healthcare cost trend rate for each year would
increase the accumulated post-retirement benefit obligation as of December 31, 2004 by $3,783 and
the net post-retirement healthcare cost for the year ended December 31, 2004 by $258. A one
percentage point decrease in the assumed healthcare cost trend rate for each year would decrease
the accumulated post-retirement benefit obligation as of December 31, 2004 by a $3,505 and the net
post-retirement healthcare cost for the year ended December 31, 2004 by $250. As part of the Reorganization, the Company implemented modifications to its current
post-retirement benefits program, resulting in a reduction of long-term post retirement liabilities
of $24,432 in the eight months ended August 31, 2002. The Company also contributes to a multi-employer trust that provides certain other
post-retirement benefits to retired hourly employees. Expenses under this program for the years
ended December 31, 2004 and 2003, the four months ended December 31, 2002 and the eight months
ended August 31, 2002 were $3,929, $3,940, $1,283 and $2,631, respectively. The Company continues to maintain a separate non-qualified benefit plan covering certain
former salaried employees of the former Anchor Glass. The benefit obligation at December 31, 2004
was $4,021 and is recorded in other long-term liabilities. The periodic benefit cost for the years
ended December 31, 2004 and 2003, the four months ended December 31, 2002 and the eight months
ended August 31, 2002 was $300, $300, $100 and $200, respectively. The Company also sponsors two defined contribution plans covering substantially all salaried
and hourly employees. The Company matches 100% of employee contributions, not to exceed 6% of
participant eligible compensation or 35% of employee contributions, not to exceed 10% of
participant eligible compensation. Expenses under the savings programs for the years ended
December 31, 2004 and 2003, the four months ended December 31, 2002 and the eight months ended
August 31, 2002 were $3,152, $3,057, $874 and $1,759, respectively. In the 1987 acquisition of Diamond-Bathurst, Inc., Anchor assumed the liabilities under a
deferred compensation arrangement with certain employees of the acquired company. Under this plan,
Anchor funds certain benefits to the participants and will be reimbursed through proceeds received
on life insurance policies carried on all participants. At December 31, 2004 and 2003, plan assets
of $1,818 and $1,625, respectively, are included in other assets and plan liabilities of $1,866 and
$2,068, respectively, are included in liabilities. Effective December 31, 2001, Anchor entered the Glass Companies Multiemployer Pension Plan
(the MEPP), created from the merger of the Anchor defined benefit pension plan and the GGC L.L.C.
(GGC) defined benefit plan for hourly employees. Anchor, GGC, the Board of Trustees of the MEPP
and the unions representing certain employees at Anchor and GGC considered the MEPP to be a
multiemployer pension plan although Anchor continued to treat its
obligations as a defined benefit pension plan for accounting
purposes.  In
July 2002, the United States Department of Labor notified Anchor that it determined that the
MEPP did not meet the definition of a multiemployer plan under the Employee Retirement Income
Security Act of 1974, as amended (ERISA). Effective July 31, 2002, Anchor and the PBGC entered into an agreement to govern the
dissolution of the Anchor portion of the MEPP (the PBGC Agreement). Pursuant to the PBGC
Agreement and collective bargaining agreements with the unions representing participants under the
MEPP, Anchor withdrew from the MEPP on July 31, 2002. The PBGC has proceeded in accordance with
procedures under ERISA to partition the assets and liabilities of the MEPP into two parts, one part
attributable to Anchor employees and former employees and one part attributable to GGC employees
and former employees and terminate the Anchor portion. The termination was effective as of July
31, 2002. Anchor renegotiated its labor union contracts and, effective August 1, 2002, began
contributing to other multiemployer plans for the future service benefits of its hourly employees.
These contributions are expensed monthly. During the years ended December 31, 2004 and 2003 and the four months ended December 31, 2002,
the Company contributed $5,171, $5,179 and $1,615, respectively, to the multiemployer pension plans
in which it participates. These amounts are expensed as incurred. During the eight months ended
August 31, 2002, the Company contributed $6,001 to the MEPP and the other multiemployer pension
plans. F-33




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) In accordance with the PBGC Agreement, on the Effective Date, Anchor paid $20,750 to the PBGC
(with proceeds from the Reorganization). Additionally, Anchor granted the PBGC a warrant for the
purchase of common stock of Anchor, which was subsequently repurchased in 2003. Also, under the
PBGC Agreement, Anchor makes monthly payments to the PBGC of $833 through 2012. The present value
of this obligation at December 31, 2004, $55,845 recorded as long-term debt (less current
maturities), was determined by applying a discount rate of 8.9%. The rate was determined by
management and reviewed by independent appraisers. The Company adjusted previously recorded
pension liabilities to amounts required under the PBGC Agreement, resulting in a gain of $8,233,
included as a reduction of the cost of the restructuring in the eight months ended August 31, 2002. The Anchor defined benefit plan covered salaried and hourly-paid employees. Benefits were
calculated on a service-based formula for hourly participants. Benefits were calculated on a
salary-based formula for salaried participants and were frozen in 1994. NOTE 11  Leases The Company leases distribution and office facilities (including its headquarters facility),
machinery, transportation, data processing and office equipment under non-cancelable leases that
expire at various dates through 2014. These leases generally provide for fixed rental payments and
include renewal and purchase options at amounts that are generally based on fair market value at
expiration of the lease. The Company includes capital leases in other long-term debt (see Note 6). Future minimum lease payments under non-cancelable operating leases are as follows: 2005
    
    $
    5,5202006
    
    
    4,4902007
    
    
    3,3802008
    
    
    2,6702009
    
    
    2,050After 2009
    
    
    6,380$
    24,490
 Rental expenses for all operating leases for the years ended December 31, 2004 and 2003, the
four months ended December 31, 2002 and the eight months ended August 31, 2002 were $5,420, $6,998,
$5,429 and $11,060, respectively. F-34




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) NOTE 12  Income Taxes The Company applies SFAS 109 under which the liability method is used in accounting for income
taxes. Under SFAS 109, if on the basis of available evidence, it is more likely than not that all
or a portion of the deferred tax asset will not be realized, the asset must be reduced by a
valuation allowance. Since realization is not assured as of December 31, 2004 and 2003, management
has deemed it appropriate to establish a valuation allowance against the net deferred tax assets. For tax reporting purposes, the consummation of the Companys Plan did not create a new tax
reporting entity. However, as a result of the consummation of the Plan, the Company has undergone
a change in ownership. Due to this change in ownership, Section 382 of the Internal Revenue Code
will significantly limit the Companys net operating loss carryforwards. In accordance with SOP
90-7, these net operating loss carryforwards and related valuation allowances have been revalued.
Any tax benefit derived from the release of the valuation allowances related to fresh start
reporting will be accounted for as a credit to intangible assets, and then additional paid in
capital. The Company has approximately $286,000 of unused net operating loss carryforwards expiring at
various dates between 2012 through 2024. These carryforwards have been adjusted to reflect the
projected maximum utilization under Section 382. The significant components of the deferred tax assets and liabilities are as follows: December 31,2004
    
    
    2003Deferred tax assets:Reserves and allowances
    
    $
    24,200
    
    
    $
    10,600Pension and post-retirement liabilities
    
    
    41,000
    
    
    
    42,900Inventory uniform capitalization
    
    
    3,600
    
    
    
    3,200Tax loss carryforwards
    
    
    112,600
    
    
    
    88,100181,400
    
    
    
    144,800Deferred tax liabilities:Accumulated depreciation and amortization
    
    
    54,300
    
    
    
    51,500Other current assets
    
    
    2,600
    
    
    
    2,00056,900
    
    
    
    53,500Net deferred tax assets
    
    
    124,500
    
    
    
    91,300Valuation allowance
    
    
    (124,500
    )
    
    
    (91,300
    )Net deferred tax assets after valuation allowance
    
    $
    
    
    
    $
    
 The effective tax rate reconciliation is as follows: Year
    
    
    Year
    
    
    Four Months
    
    
    Eight MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    August 31,2004
    
    
    2003
    
    
    2002
    
    
    2002Federal rate
    
    
    (34
    )%
    
    
    (34
    )%
    
    
    (34
    )%
    
    
    34
    %State rate
    
    
    (5
    )
    
    
    (5
    )
    
    
    (5
    )
    
    
    5Non-deductible goodwill write-off
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27Non-deductible professional fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6Other permanent differences
    
    
    
    
    
    
    1
    
    
    
    15
    
    
    
    1(39
    )
    
    
    (38
    )
    
    
    (24
    )
    
    
    73Valuation allowance
    
    
    39
    
    
    
    38
    
    
    
    24
    
    
    
    (73
    )Effective rate
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
 F-35




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) NOTE 13  Commitments and Contingencies 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.
Richard M. Deneau was the Companys former Chief Executive Officer and a former member of the
Board. Darrin J. Campbell is the Companys Chief Executive Officer and a member of the Board.
Peter T. Reno is the Companys Vice President and Interim Chief Financial Officer. Alan H.
Schumacher, James N. Chapman, Jonathan Gallen, Timothy F. Price and Alexander Wolf are members of
the Board. Joel A. Asen and George Hamilton are former members of the Board. 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. On January 6, 2005, a complaint was filed in the United States District Court for the Middle
District of Florida, Tampa Division, entitled Todd Fener, individually and on behalf of all others
similarly situated v. Anchor Glass Container Corporation, Richard M. Deneau, Darrin J. Campbell,
Alan H. Schumacher and Peter T. Reno. 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. The complaint seeks an unspecified amount of damages. On December 21, 2004, a complaint was filed in the United States District Court for the Middle
District of Florida, Tampa Division, entitled Robert Conte individually and on behalf of all others
similarly situated v. Anchor Glass Container Corporation, Darrin Campbell, Richard M. Deneau, 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. and Lehman Brothers. Lenard B.
Tessler is a member of the Board. Credit Suisse First Boston, Merrill Lynch & Co. and Lehman
Brothers were underwriters of the Companys initial public offering of common stock. 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 and Sections 10(b) and
20(a) of the Exchange Act and Rule 10b-5 thereunder. The complaint seeks an unspecified amount of
damages. On December 13, 2004, a complaint was filed in the United States District Court for the Middle
District of Florida, Tampa Division entitled Matthew Bellefeuille individually and on behalf of all
others similarly situated v. Anchor Glass Container Corporation, Darrin Campbell, Richard M.
Deneau, 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. and Lehman Brothers. 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 and Sections 10(b) and
20(a) of the Exchange Act and Rule 10b-5 thereunder. F-36




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) On December 7, 2004, Anchor was served with a complaint 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 and Richard M. Deneau. 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 10(b) and 20(a) of the Exchange Act and Rule 10b-5
thereunder. Although the ultimate outcome of these 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. Certain environmental laws, such as CERCLA or Superfund and analogous state laws, provide for
strict, and under certain circumstances, joint and several liability for investigation and
remediation of releases of hazardous substances into the environment. Such laws may apply to
properties presently or formerly owned or operated by an entity or its predecessors, as well as to
conditions at properties at which wastes attributable to an entity or its predecessors were
disposed. The Company is engaged in investigation and remediation projects at plants currently
being operated and at closed facilities. In addition, Anchor has been identified as a potentially
responsible party (a PRP) under CERCLA with respect to two non-owned sites. While the Company
may be jointly and severally liable for costs related to these sites, it is only one of a number of
PRPs who also may be jointly and severally liable. The Company has established reserves for
environmental costs, which it believes, are adequate to address the anticipated costs of
remediation of these operating and closed facilities and non-owned sites and its liability as a PRP
under CERCLA. The timing and magnitude of such costs cannot always be determined with certainty
due to, among other things, incomplete information with respect to environmental conditions at
certain sites, new and amended environmental laws and regulations, and uncertainties regarding the
timing of remedial expenditures. The Companys operations are subject to federal, state and local requirements that are
designed to protect the environment. Such requirements have resulted in the Company being involved
in related legal proceedings, claims and remediation obligations. Based on the Companys current
understanding of the relevant facts, the Company does not believe that its environmental exposure
is in excess of the reserves reflected on the balance sheet, although there can be no assurance
that this will be the case. The Company maintains environmental
reserves of approximately $7,600
and $9,200, respectively at December 31, 2004 and 2003. In 2004, the Company incurred $600 in
spending chargeable to the Companys environmental reserve and reduced the reserve in the amount of
$975 related to the sale of three non-operating facilities in the second quarter of 2004. In
addition to the environmental reserves, the Company carries an environmental impairment liability
insurance policy (expiring August 30, 2007) to address certain potential future environmental
liabilities at identified operating and non-operating sites. There can be no assurance, however,
that insurance will be available or adequate to cover future liabilities. The above noted reserves
are not net of any potential insurance proceeds. Average annual spending on remediation issues in
recent years approximated $500 per year. In addition, the Company is, and from time to time may be, a party to routine legal
proceedings incidental to the operation of its business. The outcome of any pending or threatened
proceedings is not expected to have a material adverse effect on the financial condition, operating
results or cash flows of the Company. Legal expenses incurred related to these contingencies are
generally expensed as incurred. In a specific one-time situation, in 2002, the Company set up an
accrual for claims under its Plan of Reorganization, including legal fees to defend and settle such
claims. All other legal expenses are expensed as incurred. F-37




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) NOTE 14  Subsequent Event On February 14, 2005, the Company entered into a $20 million revolving credit facility (the
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. 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%, 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. 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. F-38




---



##### Table of Contents



ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands, except per share data) Quarterly Financial Information  Unaudited 2004 Quarters EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Net sales
    
    $
    189,561
    
    
    $
    214,051
    
    
    $
    186,224
    
    
    $
    157,022Cost of products sold
    
    
    174,995
    
    
    
    194,263
    
    
    
    174,367
    
    
    
    168,646Inventory
loss - cost of products
sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,963Restructuring, impairment and
other charges, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,735Selling and administrative expenses
    
    
    7,091
    
    
    
    6,218
    
    
    
    6,832
    
    
    
    6,980Gain on sale of non-operating
properties
    
    
    
    
    
    
    (3,823
    )
    
    
    
    
    
    
    Income (loss) from operations
    
    
    7,475
    
    
    
    17,393
    
    
    
    5,025
    
    
    
    (67,302
    )Other income (expense), net
    
    
    396
    
    
    
    3
    
    
    
    1,143
    
    
    
    (1,852
    )Interest expense
    
    
    (12,141
    )
    
    
    (12,020
    )
    
    
    (12,049
    )
    
    
    (12,219
    )Net income (loss)
    
    $
    (4,270
    )
    
    $
    5,376
    
    
    $
    (5,881
    )
    
    $
    (81,373
    )Income (loss) applicable to
common stock
    
    $
    (4,270
    )
    
    $
    5,376
    
    
    $
    (5,881
    )
    
    $
    (81,373
    )Basic and diluted net income
(loss) per share applicable to
common stock
    
    $
    (0.17
    )
    
    $
    0.22
    
    
    $
    (0.24
    )
    
    $
    (3.30
    )
 2003 Quarters EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Net sales
    
    $
    162,403
    
    
    $
    186,822
    
    
    $
    193,546
    
    
    $
    167,172Cost of products sold
    
    
    152,998
    
    
    
    168,283
    
    
    
    178,407
    
    
    
    161,093Selling and administrative expenses
    
    
    6,646
    
    
    
    6,820
    
    
    
    6,627
    
    
    
    6,870Income (loss) from operations
    
    
    2,759
    
    
    
    11,719
    
    
    
    8,512
    
    
    
    (791
    )Other income (expense), net
    
    
    (517
    )
    
    
    585
    
    
    
    (1,097
    )
    
    
    1,252Interest expense
    
    
    (14,131
    )
    
    
    (11,007
    )
    
    
    (11,667
    )
    
    
    (11,744
    )Net income (loss)
    
    $
    (11,889
    )
    
    $
    1,297
    
    
    $
    (4,252
    )
    
    $
    (11,283
    )Series C preferred stock
dividends
    
    
    (2,341
    )
    
    
    (2,410
    )
    
    
    (2,512
    )
    
    
    Excess fair value of
consideration transferred
over carrying value upon
redemption
    
    
    
    
    
    
    
    
    
      $
    (38,118
    )
    
    
    Income (loss) applicable to
common stock
    
    $
    (14,230
    )
    
    $
    (1,113
    )
    
    $
    (44,882
    )
    
    $
    (11,283
    )Basic and diluted net income
(loss) per share applicable to
common stock
    
    $
    (1.05
    )
    
    $
    (0.08
    )
    
    $
    (3.20
    )
    
    $
    (0.46
    )
 As discussed in Note 1, the Company revised its statements of cash flows to reflect the
principle payments under its agreement with the PBGC as cash out flows from operating activities instead of cash out flows from
financing actvities. 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 and,
accordingly, increased cash flows from financing activities by $1,159, $1,185 and $1,212, respectively in the first, second and
third quarters of 2004. This revision had the impact of reducing cash flows from operating activities and, accordingly, increased
cash flows from financing activities by $1,061, $1,084, $1,109, and $1,134, respectively in the first, second, third and fourth
quarters of 2003. F-39




---



##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. ANCHOR GLASS CONTAINER CORPORATIONDate:
March 29, 2005
    
    
    
    By: /s/ Peter T. RenoPeter T. RenoVice President andInterim Chief Financial Officer
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated. /s/ Darrin J. CampbellDarrin J. CampbellChief Executive Officer and Director
    
    March 29, 2005/s/ James N. ChapmanJames N. ChapmanDirector
    
    March 29, 2005/s/ Carlton DonawayCarlton DonawayDirectorChairman of the Board
    
    March 29, 2005/s/ Jonathan GallenJonathan GallenDirector
    
    March 29, 2005/s/ Timothy F. PriceTimothy F. PriceDirector
    
    March 29, 2005/s/ Peter T. RenoPeter T. RenoInterim Chief Financial Officer and Principal Financial Officer
    
    March 29, 2005/s/ Alan H. SchumacherAlan H. SchumacherDirector
    
    March 29, 2005/s/ Lenard B. TesslerLenard B. TesslerDirector
    
    March 29, 2005/s/ Alexander WolfAlexander WolfDirector
    
    March 29, 2005