Byp14-3 Anchor Glass

Anchor Glass Container Corporation, the third largest manufacturer of glass containers in the United States, supplies beverage and food producers and consumer products manufacturers nationwide. Parent company Consumers Packaging Inc. (Toronto Stock Exchange: CGC) is a leading international designer and manufacturer of glass containers.

The following management discussion appeared in a recent annual report of Anchor Glass.

ANCHOR GLASS CONTAINER CORPORATION

Management Discussion

Cost of Products Sold Cost of products sold as a percentage of net sales was 89.3% in the current year compared to 87.6% in the prior year. The increase in cost of products sold as a percentage of net sales principally reflected the impact of operational problems during the second quarter of the current year at a major furnace at one of the Company’s plants, higher downtime, and costs and expenses associated with an increased number of scheduled capital improvement projects, increases in labor, and certain other manufacturing costs (with no corresponding selling price increases in the current year). Reduced fixed costs from the closing of the Streator, Illinois, plant in June of the current year and productivity and efficiency gains partially offset these costs increases.

Instructions

What factors affect the costs of products sold at Anchor Glass Container Corporation?

Answer:

The factors in this analysis will be split into positive/negative categories:

:: Negative ::

1 - Operational Problems at a Major Furnace at one of the company’s plants:

For the glass container company, problems at a furnace could mean, manufacturing problems such as glass containers not been able to be produced and therefore not having produced the final product at a timely fashion, it could also imply costs of labor increases and repairs and services to the furnace. Products not been able to be produced at the plant, produces higher costs at other locations that have to make...