Anchor Glass Container Corporation Reports 2005 First Quarter Results; Inventory Reduced in Q1; Additional Reductions Taken in Corporate Headcount.TAMPA, Fla. -- Anchor Glass Container Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :AGCC) today reported unaudited financial results for its first quarter ended March 31, 2005. First quarter 2005 net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight decreased to $179.3 million from $189.6 million in the prior year. First quarter 2005 net loss was $12.7 million, or $(0.52) per common share compared to a loss of $4.3 million in the prior year, or $(0.17) per common share. The current quarter figure includes continuing charges related to restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). activities of $1.4 million, or $(0.06) per share. The net loss was offset in part by a gain of $3.1 million, or $0.13 per share, related to the sale of a non-operating property. Shares outstanding used to calculate per share amounts increased to 24,673,838 in the first quarter 2005 from 24,516,244 a year ago. Peter Reno Reno (rē`nō), city (1990 pop. 133,850), seat of Washoe co., W Nev., on the Truckee River; inc. 1903. Tourism has been the major industry since gambling was legalized in Nevada in 1931. , Anchor Glass' interim Operating Committee chairman, stated, "Anchor's first quarter results were impacted by lower volumes and higher costs for raw materials and energy. Glass demand in the beer category, which represents the majority of our business portfolio, continues to be impacted by consumer demand softness. We were able to offset some of this lost revenue, however, with higher shipments in the liquor liquor /li·quor/ (lik´er) (li´kwor) pl. liquors, liquo´res [L.] 1. a liquid, especially an aqueous solution containing a medicinal substance. 2. category where we saw year-over-year gains. On the cost side, energy and raw material expenses remain volatile and significantly above prior year levels. We were able to mitigate mit·i·gate v. To moderate in force or intensity. mit  i·ga tion n. some of this impact, however, as recent contract changes that
took effect in 2005 allowed us to pass on a portion of our higher
natural gas costs to certain customers."Mr. Reno continued, "The capacity adjustments we made in the fourth quarter of 2004 enabled us to reduce finished goods inventories in the first quarter, contrary to the typical build experienced in this time period. We also continue to implement cost reduction and efficiency programs developed through our comprehensive operational review to improve our operating results in this challenging period of rising costs and softer sales. These programs included a further reduction in force at our corporate office in April, a difficult but necessary action. We are adhering ADHERING. Cleaving to, or joining; as, adhering to the enemies of the United States. 2. The constitution of the United States, art. 3, s 3, defines treason against the United States, to consist only in levying war against them or in adhering to their enemies, to our 2005 capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. budget of $30-35 million, and are focused on reducing working capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. to improve cash generation. Lastly, we are developing sales opportunities in higher-margin specialty glass products, leveraging Anchor Glass' differentiating capabilities in these product areas." Early in the second quarter, as indicated above, the company implemented a reduction in force of its corporate and support personnel. As a result of this action, Anchor Glass will record a charge of approximately $0.8 million in the second quarter. In aggregate, corporate and support headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. reductions since the fourth quarter of 2004 total approximately 20%. Anchor Glass anticipates that total restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. associated with its operational review will approximate $52.6 to $54.0 million, of which $50.1 million has already been recorded through the first quarter of 2005. The company expects to record $1.7 million of this charge during the second quarter, including the $0.8 million figure mentioned above. First Quarter 2005 Financial Review Sales decreases in the first quarter 2005 versus last year's first quarter reflect lower beer and ready-to-drink volumes, offset by increases in the liquor category. Decline in beer shipments reflect continuing reduced market place demand; the ready-to-drink decrease is a result of the absence of last year's non-contracted volume shipments. Liquor sales showed strong year-over-year improvements as new business shipments have ramped to full rate levels. All other product category shipments were, in total, comparable to prior year levels. Total volume decreased 5.0% in the quarter from the first quarter of last year. First quarter 2005 loss from operations of $1.9 million compares to an operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. of $7.5 million in the prior year. Excluding first quarter restructuring charges and the gain on the sale of a non-operating property, loss from operations on a non-GAAP basis was $3.6 million. Higher year-over-year energy costs that could not be fully passed through to customers totaled $6.6 million, or $(0.27) per share, which includes higher natural gas costs, higher transportation and raw material costs due to rising fuel prices, and higher cost for electricity. A portion of these costs, primarily the portion related to natural gas, will be partially recovered in second quarter 2005 based upon the contracted pricing formulas in place with certain customers. The $9.4 million decrease in income from operations in the first quarter versus last year mainly reflects: --Unfavorable margin impact of $5.5 million primarily due to lower volumes and higher freight --Higher energy costs as described above totaling $6.6 million --Increased costs of raw materials, primarily soda ash soda ash: see sodium carbonate. , totaling $1.0 million --Charges of $1.4 million for on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" restructuring charges associated with the operational review --Gain on sale of non-operating property and other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. totaling $3.3 million --Favorable productivity improvements and efficiencies totaling $1.7 million, before giving effect to unplanned downtime The time during which a computer is not functioning due to hardware, operating system or application program failure. at a facility due to a weather-related power loss --One-time gain of $0.8 million from a legal settlement related to vendor pricing --Lower depreciation expense totaling $0.5 million Capital spending in the quarter totaled $8.9 million compared to $20.9 million last year. Most of the spending was for maintenance and molds to support production. There are no major capital projects planned for 2005 and the company continues to plan capital expenditures in the range of $30-$35 million for 2005. Operational Review The company continues to employ and implement initiatives developed through its review of operations to increase asset productivity, improve working capital efficiency, reduce capital spending and boost cash flow generation. Initiatives implemented in the first quarter included lowering freight expenses In accounting, the concept of a freight expense account can be generalized as a payment for sending out a product to a customer. It falls under the umbrella category of Expenses and is treated like other expense accounts in relation to the accounting equation. by increasing load utilization and reducing effective costs on certain materials and supplies through negotiated vendor rebates. In the second quarter, the company is targeting cost reductions through the above-mentioned A`bove´-men`tioned a. 1. Mentioned or named before; aforesaid; mentioned or named earlier in the same text (in written documents). Adj. 1. reduction in force, plant process improvements, and warehouse consolidation and further logistical lo·gis·tic also lo·gis·ti·cal adj. 1. Of or relating to symbolic logic. 2. Of or relating to logistics. [Medieval Latin logisticus, of calculation enhancements. Liquidity On February February: see month. 14, 2005, Anchor entered into an amendment with its lenders under its existing revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility to modify the fixed charge coverage ratio under the facility for the remainder of 2005 as the company seeks to reduce costs and improve cash flow generation. In addition, the lenders waived the company's failure to comply with its fixed charge coverage ratio covenant as of December December: see month. 31, 2004. The required minimum fixed charge coverage ratios for the balance of 2005, determined on cumulative year to date results through the measurement date, are as follows: March .29:1.0 June .58:1.0 September .76:1.0 December .75:1.0 April .40:1.0 July .66:1.0 October .79:1.0 May .50:1.0 August .71:1.0 November .80:1.0 Our actual fixed charge coverage ratio for March 2005 was .44:1.0 and the Company is currently in compliance with this covenant. Anchor has also entered into a similar agreement and waiver The voluntary surrender of a known right; conduct supporting an inference that a particular right has been relinquished. The term waiver is used in many legal contexts. with its lender under its capital lease arrangements, which had an outstanding balance of $11.3 million at March 31, 2005. Also on February 14, 2005, Anchor entered into a $20 million revolving credit facility with Madeleine Madeleine (măd`əlĭn, Fr. mädlĕn`) [Fr.,=Magdalen, i.e., Mary Magdalen], large church of Paris, in the Place de la Madeleine. It was originally planned by J. A. L.L.C., an affiliate of its largest stockholders, funds and accounts managed by Cerberus Cerberus (sûr`bərəs), in Greek mythology, many-headed dog with a mane and a tail of snakes; offspring of Typhon and Echidna. He guarded the entrance of Hades. One of the 12 labors of Hercules was to capture him. Capital Management L.P. and its affiliates. As availability under the new facility 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 its $115 million primary lending facility. At the end of April, combined availability under both facilities was approximately $20 million. The new revolving credit facility matures on August 30, 2007, contemporaneously con·tem·po·ra·ne·ous adj. Originating, existing, or happening during the same period of time: the contemporaneous reigns of two monarchs. See Synonyms at contemporary. with the maturity of the company's existing revolving credit facility, and bears interest on drawn portions thereof at LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). plus 8%. Interest on the new facility is payable in kind through June June: see month. 30, 2005 and if availability under the company's existing revolving credit facility is less than an agreed upon Adj. 1. agreed upon - constituted or contracted by stipulation or agreement; "stipulatory obligations" stipulatory noncontroversial, uncontroversial - not likely to arouse controversy threshold. The new revolving credit facility is secured by a second lien A Second lien financing is a form of financing secured on a second ranking basis by (more or less) the same security, which secures the first ranking financing. The first lien lenders and the second lien lenders agree that, in the event of a security enforcement or bankruptcy, the on the company's inventory, receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed and general intangibles. First Quarter Conference Call Anchor Glass will discuss first quarter 2005 results during a conference call today, Friday, May 6, 2005 at 9:00 a.m. Eastern Time. Interested parties may listen to the call at www.shareholder.com/anchor/medialist.cfm or via the conference call line at (877) 502-9276. A replay of the conference call will be available until May 13, 2005 at www.shareholder.com/anchor/medialist.cfm or by phone at (888) 203-1112 or at (719) 457-0820, confirmation number 9840977. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release includes forward-looking statements. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements. 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 Glass containers are common parts of everyday life - we enjoy beverages such as water, soft drink, juice, beer, wine, spirit from bottles - jams and spreads from jars. The glass container's manufacture often involves a far greater level of complexity, automation and involvement and the intense competition from makers of alternative forms of packaging; fluctuations in the prices for energy, particularly natural gas, and other raw materials and freight; the company's focus on the beer industry and its dependence on certain key customers; the seasonal nature of brewing brewing: see beer. and other beverage industries; volatility in demand from emerging new markets; the company's dependence on certain executive officers; and changes in environmental and other government regulations. The company operates in a changing environment in which new risk factors can emerge from time to time. It is not possible for management to predict all of these risks, nor can it assess the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in forward-looking statements. All forward-looking statements are subject to risks and uncertainties, including without limitation those identified in the company's annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , which could cause actual results to differ from those projected. The company disclaims any obligation to update any forward-looking statements. About Anchor Anchor Glass Container Corporation is the third largest manufacturer of glass containers in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . It has eight strategically located facilities where it produces a diverse line of flint flint, mineral flint, variety of quartz that commonly occurs in rounded nodules and whose crystal structure is not visible to the naked eye. Flint is dark gray, smoky brown, or black in color; pale gray flint is called chert. (clear), amber, green and other colored glass containers for the beer, beverage, food, liquor and flavored alcoholic beverage alcoholic beverage Any fermented liquor, such as wine, beer, or distilled liquor, that contains ethyl alcohol, or ethanol, as an intoxicating agent. When an alcoholic beverage is ingested, the alcohol is rapidly absorbed in the stomach and intestines because it does not markets.
Anchor Glass Container Corporation
Financial Summary
Dollars in thousands. Unaudited.
Statement of operations data
First quarter ended March 31,
2005 2004
----------- -----------
Net sales $ 179,322 $ 189,561
Cost of products sold 175,906 174,995
Restructuring charges 1,413 --
Selling and administrative expenses 7,055 7,091
Gain on sale of non-operating property (3,117) --
----------- -----------
Income (loss) from operations (1,935) 7,475
Other income, net 1,841 396
Interest expense (12,661) (12,141)
----------- -----------
Net loss $ (12,755) $ (4,270)
=========== ===========
Basic and diluted net loss per share $ (0.52) $ (0.17)
=========== ===========
Basic and diluted weighted average number of
common shares outstanding 24,673,838 24,516,244
=========== ===========
Balance sheet data
March 31, December 31,
2005 2004
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 127 $ 111
Accounts receivable 49,539 35,601
Inventories 125,564 126,010
Other current assets 12,255 11,993
----------- -----------
Total current assets 187,485 173,715
Property, plant and equipment, net 453,971 463,682
Other assets 14,226 13,742
Intangible assets 5,858 6,056
----------- -----------
$ 661,540 $ 657,195
=========== ===========
Liabilities and Stockholders' Equity
(Deficit)
Current liabilities:
Borrowings under revolving credit
facilities $ 71,242 $ 50,880
Current maturities of long-term debt 9,458 9,338
Other current liabilities 116,826 120,658
----------- -----------
Total current liabilities 197,526 180,876
Long-term debt 409,966 412,475
Long-term post-retirement liabilities 40,942 41,145
Other long-term liabilities 18,128 18,409
----------- -----------
469,036 472,029
Commitments and contingencies
Stockholders' equity (deficit) (5,022) 4,290
----------- -----------
$ 661,540 $ 657,195
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Cash flow data
First Quarter ended March 31,
2005 2004
-------- --------
Cash flows from operating activities:
Net loss $(12,755) $ (4,270)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation 15,988 16,627
Amortization 1,068 969
Amortization of financing fees 464 435
Restructuring charges 1,413 --
Gain on sale of property and equipment (3,308) --
Other (46) 70
Restructuring payments (7,104) --
Principal payments under the PBGC Agreement (1,268) (1,159)
Decrease in cash resulting from changes in assets
and liabilities (7,767) (40,292)
-------- --------
(13,315) (27,620)
Cash flows from investing activities:
Expenditures for property, plant and equipment (8,893) (20,912)
Proceeds from sale of property and equipment 6,472 --
Other (1,037) (1,844)
-------- --------
(3,458) (22,756)
Cash flows from financing activities:
Principal payments of long-term debt (1,023) (1,706)
Dividends paid on common stock -- (981)
Net draws on revolving credit facility 10,276 27,965
Net draws on Revolving B Loan 10,000 --
Other (2,464) 2,115
-------- --------
16,789 27,393
Cash and cash equivalents:
Increase (decrease) in cash and cash equivalents 16 (22,983)
Balance, beginning of period 111 23,083
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Balance, end of period $ 127 $ 100
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