<PAGE> 1
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 333-31363-01
------------------------------------
CONSUMERS U.S., INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2874087
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3140 William Flinn Highway, Allison Park, Pennsylvania 15101
------------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
412-486-9100
------------
(Registrant's telephone number, including area code)
None
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
All voting and non-voting stock of the
registrant is held by an affiliate of the registrant.
Number of shares outstanding of each
class of common stock at November 12, 1999:
Common Stock, $.01 par value, 17,000,100 shares
1 of 13
<PAGE> 2
CONSUMERS U.S., INC.
FORM 10-Q
For the Quarterly Period Ended September 30, 1999
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Statements of Operations
and Comprehensive Income -
Three and Nine Months Ended September 30, 1999 and 1998 3
Condensed Consolidated Balance Sheets -
September 30, 1999 and December 31, 1998 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 11
PART II - OTHER INFORMATION 12
SIGNATURES 13
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSUMERS U.S., INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------- ------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 486,687 $ 493,613 $ 170,105 $ 169,211
Costs and expenses:
Cost of products sold 448,465 456,270 156,782 154,467
Selling and administrative expenses 20,820 22,197 6,939 7,763
Restructuring charges -- 4,000 -- 4,000
Income from operations 17,402 11,146 6,384 2,981
Other income (expense), net 1,323 155 740 (5)
Interest expense (21,658) (19,947) (7,029) (6,867)
--------- --------- --------- ---------
Income (loss) before preferred stock
dividends of subsidiary and
minority interest (2,933) (8,646) 95 (3,891)
Preferred stock dividends of subsidiary (4,187) (4,187) (1,411) (1,411)
--------- --------- --------- ---------
Loss before minority interest (7,120) (12,833) (1,316) (5,302)
Minority interest 3,533 2,533 3,533 2,533
--------- --------- --------- ---------
Net income (loss) $ (3,587) $ (10,300) $ 2,217 $ (2,769)
========= ========= ========= =========
Comprehensive income (loss) $ (3,587) $ (10,300) $ 2,217 $ (2,769)
========= ========= ========= =========
</TABLE>
- ---------------
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
CONSUMERS U.S., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
(unaudited)
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,507 $ 4,106
Accounts receivable 68,717 86,846
Advance to affiliate 17,477 17,866
Inventories:
Raw materials and manufacturing supplies 23,907 23,099
Finished products 75,189 81,230
Other current assets 6,948 8,304
--------- ---------
Total current assets 195,745 221,451
Property, plant and equipment, net 309,383 316,705
Other assets 29,295 22,839
Strategic alliances with customers 11,545 26,187
Goodwill 50,840 53,072
--------- ---------
$ 596,808 $ 640,254
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Revolving credit facility $ 41,507 $ 50,162
Current maturities of long-term debt 1,038 840
Accounts payable 46,942 51,838
Accrued expenses 25,424 39,971
Accrued interest 8,945 5,970
Accrued compensation and employee benefits 21,622 27,249
--------- ---------
Total current liabilities 145,478 176,030
Long-term debt 203,288 202,920
Long-term pension liabilities 23,691 33,855
Long-term post-retirement liabilities 59,340 59,853
Other long-term liabilities 52,431 47,896
--------- ---------
338,750 344,524
Commitments and contingencies
Redeemable preferred stock of subsidiary 55,983 55,983
--------- ---------
Minority interest 6,460 9,993
--------- ---------
Stockholder's equity:
Common stock 170 170
Capital in excess of par value 87,430 87,430
Accumulated deficit (37,305) (33,718)
Amount related to minimum pension liability (158) (158)
--------- ---------
50,137 53,724
--------- ---------
$ 596,808 $ 640,254
========= =========
</TABLE>
- ---------------
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
CONSUMERS U.S., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,587) $(10,300)
Adjustments to reconcile net loss to cash provided
by (used in) operating activities:
Depreciation and amortization 42,108 40,849
Other 16 (43)
Restructuring charges -- 4,000
Dividends accrued on preferred stock of subsidiary 4,187 4,187
Minority interest (3,533) (2,533)
Decrease in cash resulting from changes in
assets and liabilities (2,888) (68,569)
-------- --------
36,303 (32,409)
- ---------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Expenditures for property, plant and equipment (32,920) (23,300)
Stock in Parent, held for Anchor Pension Fund
pending Government approval (3,000) --
Payments of strategic alliances with customers (2,000) (2,000)
Proceeds from the sale of property, plant and
equipment 193 743
Acquisition related contribution to defined benefit
pension plans -- (745)
Other (912) (974)
-------- --------
(38,639) (26,276)
- ---------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt -- 50,000
Principal payments of long-term debt (671) (346)
Net draws (repayments) on revolving credit facility (8,655) 33,170
Sale of note receivable 11,200 --
Advance to affiliate -- (17,330)
Other, primarily financing fees (137) (3,377)
-------- --------
1,737 62,117
- ---------------------------------------------------------------------------------------------------
Cash and equivalents:
Increase (decrease) in cash and cash equivalents (599) 3,432
Balance, beginning of period 4,106 1,060
-------- --------
Balance, end of period $ 3,507 $ 4,492
======== ========
- ---------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Interest payments, net $ 17,117 $ 14,492
======== ========
Income tax payments (refunds), net $ -- $ --
======== ========
</TABLE>
- ---------------
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
CONSUMERS U.S., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 1 - MANAGEMENT'S RESPONSIBILITY
In the opinion of Management, the accompanying condensed consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position as of
September 30, 1999 and the results of operations for the three and nine months
ended September 30, 1999 and 1998 and cash flows for the nine months ended
September 30, 1999 and 1998.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the Financial
Statements of Consumers U.S., Inc., consolidated with its majority-owned
subsidiary, Anchor Glass Container Corporation ("Anchor"), (together, the
"Company") included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998. The results of operations for the interim periods are
not necessarily indicative of the results of the full fiscal year.
NOTE 2 - STRATEGIC ALLIANCES WITH CUSTOMERS
On April 30, 1999, Stroh Brewing Company ("Stroh's") closed on an
agreement to sell its assets to a consortium made up of Pabst Brewing Company
("Pabst") and Miller Brewing Company ("Miller"). Under the terms of this
agreement, Anchor received $5,000 in cash and a non-interest bearing note of
$14,000 from Miller in satisfaction of the unamortized balance of the Stroh's
strategic alliance agreement. The note receivable was sold to a third party in
the second quarter of 1999. In satisfaction of a portion of the Stroh's
outstanding trade accounts receivable, Anchor received from Pabst, a five year
note for $5,000 and an additional 68 month note for $5,000 representing a
strategic alliance with Pabst. Pabst is committed to take a specified quantity
of production during the note period or repay the strategic alliance note
receivable.
NOTE 3 - PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of Consumers U.S., Inc., which has no independent operations, and its
majority-owned subsidiary, Anchor. All material intercompany accounts and
transactions have been eliminated in consolidation. Consumers U.S., Inc. holds
45.5% of the total outstanding voting common shares of Anchor and holds the
majority of Anchor board of directors positions, and accordingly, the results
of Anchor's operations have been consolidated in these financial statements.
Through the third quarter of 1999, certain warrant holders exercised
warrants for common stock, increasing the minority interest ownership
percentage to 58.2% from 44.7% at December 31, 1998. As a result of the
exercise of warrants in 1999 and 1998, the Company recorded a dilution gain of
approximately $3,533 and $2,533, respectively, for the nine months ended
September 30, 1999 and 1998.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company was formed in January 1997 to consummate the Anchor
Acquisition. The Company is a holding company whose only asset is the ownership
of 59.1% of its sole subsidiary, Anchor Glass Container Corporation ("Anchor").
On February 5, 1997, pursuant to an Asset Purchase Agreement, Anchor acquired
substantially all of the assets and assumed certain liabilities, of the former
Anchor Glass Container Corporation ("Old Anchor"), now being liquidated in a
proceeding under Chapter 11 of the U.S. Bankruptcy Code of 1978, as amended.
Anchor purchased eleven operating glass container manufacturing facilities and
other related assets (the "Anchor Acquisition"). Prior to the Anchor
Acquisition, neither Anchor nor the Company had any operations.
RESULTS OF OPERATIONS
Net Sales. Net sales for the 1999 third quarter were $170.1 million
compared to $169.2 million for the third quarter of 1998. Net sales for the
first nine months of 1999 were $486.7 million and $493.6 million for the
comparable period of 1998. This year to year decline of $6.9 million, or 1.4%
in net sales, on slightly higher unit shipments, reflects a shift from higher
margin product lines such as liquor to higher volume, lower margin products,
including beer and teas and the sale of the consumers products line inventory
to a customer. While the Company continues to supply to the customer all the
glass relating to this consumers products line, we no longer include lids and
cartons in either sales or cost of sales.
Cost of Products Sold. The Company's cost of products sold in the
third quarter and first nine months of 1999 were $156.7 million and $448.4
million, respectively (or 92.2% and 92.1% of net sales), while the cost of
products sold for the third quarter of 1998 and first nine months of 1998 were
$154.5 million and $456.3 million, respectively (or 91.3% and 92.4% of net
sales). The decrease in the percentage of cost of products sold for the first
nine months of 1999 as compared with 1998 principally reflects the benefits of
productivity improvements that have resulted from the cost savings strategies
which the Company began to implement during 1998. This improvement is partially
offset by increases in labor and benefit costs, as compared to the same period
of 1998, as a result of scheduled increases under a labor contract with hourly
employees that became effective in April 1999, as well as increases in the cost
of cartons and natural gas.
Selling and Administrative Expenses. Selling and administrative
expenses for the nine months ended September 30, 1999 were approximately $20.9
million (or 4.3% of net sales), while selling and administrative expenses for
the comparable period of 1998 were $22.2 million (or 4.5% of net sales). This
decrease in selling and administrative expenses principally reflects increased
allocations of overhead expenses to affiliated companies resulting from the
integration of corporate functions, partially offset by costs associated with
Year 2000 upgrades incurred in the first nine months of 1999.
Interest Expense. Interest expense for the third quarter of 1999 was
approximately $7.1 million compared to $6.8 million in the third quarter of
1998, an increase of 2.4%. Interest expense for the first nine months of 1999
was approximately $21.7 million compared to $19.9 million in the first nine
months of 1998, an increase of 8.6%. On March 16, 1998, Anchor completed an
offering of $50.0 million aggregate principal amount of its 9 7/8% Senior Notes
due 2008 (the "Senior Notes") issued under an Indenture dated as of March 16,
1998, among Anchor, Consumers U.S., Inc. and The Bank of New York, as Trustee.
Annual interest expense on the Senior Notes approximates $4.9 million.
Additionally, interest expense has increased based upon higher average
outstanding borrowings under Anchor's $110.0 million Revolving Credit Facility
during 1999, as compared to 1998.
Net Income (Loss). As a result of the foregoing, the Company had net
income of $2.2 million in the third quarter of 1999 as compared to a net loss
of approximately $2.8 million in the same period of 1998 and a year to date net
loss of approximately $3.6 million compared to a net loss of $10.3 million in
the comparable period of 1998. The results of the third quarter and nine months
of 1998 included a restructuring charge of $4.0 million as a result of the
removal from service of one furnace and one machine at the Jacksonville,
Florida manufacturing facility.
7
<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
In the first nine months of 1999, operating activities provided $36.3
million in cash as compared to $32.4 million of cash used in the same period of
1998. This increase in cash provided reflects our lower net loss adjusted for
changes in working capital items. Accounts receivable decreased approximately
$18.1 million from year end 1998 reflecting the receipt of $20.0 million of
intercompany receivable balances. Cash consumed in investing activities for the
first nine months of 1999 and 1998 were $38.6 million and $26.3 million,
respectively, principally reflecting capital expenditures. Capital expenditures
in the first nine months of 1999 were $32.9 million compared to $23.3 million
in the same period of 1998. Net cash of $1.7 million was provided by financing
activities in the first nine months of 1999, principally reflecting the sale of
a note receivable, but partially offset by net repayments under Anchor's
Revolving Credit Facility.
In conjunction with the Anchor Acquisition, Anchor entered into a
$110.0 million Revolving Credit Facility. At November 1, 1999, under Anchor's
Revolving Credit Facility, advances outstanding were $47.2 million, borrowing
availability was $7.0 million and total outstanding letters of credit under
this facility were $11.3 million.
In September 1998, G&G (acting on behalf of Consumers) entered into an
agreement to purchase a controlling interest in a European glass manufacturer
and had advanced $17.3 million toward that end. This amount was funded by G&G
through a loan from Anchor of approximately $17.3 million in September 1998.
The loan is evidenced by a promissory note which originally matured in January
1999. This loan was permitted through an amendment to the Intercompany
Agreement, which was approved by Anchor's Board of Directors. The repayment
date of the promissory note has been extended to December 31, 2000, consistent
with a recent amendment to Anchor's Revolving Credit Facility. The funds were
obtained through borrowings under Anchor's Revolving Credit Facility. The
Company has pledged the promissory note to the lenders under the Revolving
Credit Facility and G&G has provided security against the promissory note to
the lenders. Interest on the note is payable at the interest rate payable by
Anchor on its revolving credit advances plus 1/2 %. A number of issues have
arisen and the transaction has not closed. Should the transaction not close,
the sellers are obligated to return the advance to G&G. G&G has demanded the
return of the advance plus interest accrued to date, and will upon receipt,
repay the loan from Anchor. Discussions are continuing, but as of this date
outstanding issues have not been resolved. Failing a resolution of the issues
or a repayment of the advance, G&G intends to begin an arbitration proceeding
in accordance with the terms of the agreement to secure a return of the
advance.
The indentures governing Anchor's $150,000 aggregate principal amount
of 11 1/4 % First Mortgage Notes due 2005 (the "First Mortgage Notes") and the
Senior Notes contain certain covenants that restrict Anchor from taking various
actions, including, subject to specified exceptions, the incurrence of
additional indebtedness, the granting of additional liens, the making of
investments, the payment of dividends and other restricted payments, mergers,
acquisitions and other fundamental corporate changes, capital expenditures,
operating lease payments and transactions with affiliates. These indentures
also limit the ability of the Company to issue guarantees, incur indebtedness
pr liens, merge, consolidate or enter into other lines of business. Anchor's
Revolving Credit Facility also contains certain financial covenants that
require Anchor to meet and maintain certain financial tests and minimum ratios,
including a minimum working capital ratio, a minimum consolidated net worth
test and a minimum interest coverage ratio. Anchor is currently in compliance
with these covenants.
The level of the Company's and Anchor's indebtedness could have
important consequences, including:
o a substantial portion of Anchor's cash flow from operations must be
dedicated to debt service;
o the Company's and Anchor's ability to obtain additional future debt
financing may be limited; and
o the level of indebtedness could limit the Company's and Anchor's
flexibility in reacting to changes in the industry and economic
conditions in general.
The Company expects significant expenditures in the remainder of 1999,
including interest expense on the First Mortgage Notes, the Senior Notes and
advances under the Revolving Credit Facility and capital expenditures in the
range of $15.0 million to $19.0 million (a portion of which may be acquired
through
8
<PAGE> 9
capital leases). Anchor has announced that it has signed an agreement with
Anheuser-Busch, Inc. to provide all the bottles for the brewer's Jacksonville,
Fla. and Cartersville, Ga. breweries beginning in 2001. To meet the expanded
demand from the supply contract, Anchor will invest approximately $45 million
in new equipment for its Jacksonville, Fla. and Warner Robins, Ga. plants over
the next 18 months to increase production efficiency. Anchor expects to
complete its funding arrangements for this project by December 31, 1999. In
addition, effective April 1, 1999, Anchor finalized its labor contract with
approximately 90% of its hourly personnel. As a result, Anchor expects that
hourly labor costs and pension expense will increase in the remainder of 1999
and in subsequent years. On October 27, 1999, Consumers Packaging Inc., the
Company's parent, announced that it had reached a preliminary agreement with
the Anheuser-Busch Packaging Group to create a joint venture that would re-open
the previously closed Houston, Texas glass manufacturing facility, currently
owned by Anchor. It is anticipated that a Consumers Packaging affiliate will
purchase the Houston facility and certain related operating rights. Anchor
expects to realize proceeds of approximately $12 million from this sale.
Peak needs are in spring and fall at which time working capital
borrowings are estimated to be $20.0 million higher than at other times of the
year. The Company's principal sources of liquidity through the end of the year
are expected to be funds derived from operations, borrowings under Anchor's
Revolving Credit Facility and proceeds from sales of discontinued manufacturing
facilities.
Management believes that the cash flows discussed above, will provide
adequate funds for the Company's working capital needs and capital
expenditures. However, cash flows from operations depend on future operating
performance which is subject to prevailing conditions and to financial,
business and other factors, many of which are beyond the Company's control.
IMPACT OF INFLATION
The impact of inflation on the costs of the Company, and the ability
to pass on cost increases in the form of increased sales prices, is dependent
upon market conditions. While the general level of inflation in the domestic
economy has been relatively low, the Company has experienced pricing pressures
in the current market and has not been fully able to pass on inflationary cost
increases to its customers.
SEASONALITY
Due principally to the seasonal nature of the brewing, iced tea and
other beverage industries, in which demand is stronger during the summer
months, the Company's shipment volume is typically higher in the second and
third quarters. Consequently, the Company will build inventory during the first
quarter in anticipation of seasonal demands during the second and third
quarters. In addition, the Company generally schedules shutdowns of its plants
for furnace rebuilds and machine repairs in the first and fourth quarters of
the year to coincide with scheduled holiday and vacation time under its labor
union contracts. These shutdowns and seasonal sales patterns adversely affect
profitability during the first and fourth quarters. The Company has in the past
and expects to continue in the future to implement alternatives to reduce
downtime during these periods in order to minimize disruption to the production
process and its negative effect on profitability.
YEAR 2000
General. The Year 2000 issue arises because many computer systems, as
well as equipment with embedded date-sensitive technology, use only the last
two digits of a date to refer to a year and may recognize "00" as the year 1900
rather than 2000. If not corrected, many computer applications could fail or
provide erroneous results. If the Company, or a third party with whom it has a
material relationship, such as a customer, supplier or utility do not correct a
material Year 2000 issue, its operations and financial results could be
adversely impacted due to:
o the inability to receive raw materials,
o the malfunctioning of our manufacturing or service processes,
o the inability to properly bill and collect payments from our
customers, and/or
o errors or omissions in accounting and financial data.
9
<PAGE> 10
Compliance Plan and State of Readiness. The Company's plan for
mitigating the impact of Year 2000 on company operations covers three phases.
The implementation of this plan has not resulted in the deferral of any
information technology projects.
Phase One. The first phase includes an inventory and assessment of
Year 2000 issues, including the prioritizing of these issues. The plan requires
an assessment of the scope and extent of Year 2000 issues in the following
three areas:
o information technology systems known as IT systems;
o manufacturing operations and process controls known as non-IT systems;
and
o impact on our operations and business of non-compliant third parties
with whom we have a material relationship.
The Company's information technology systems cover a broad spectrum of
software applications and hardware custom designed for our manufacturing
processes. After an extensive study of the general technology needs, the
Company had decided on its plan to achieve Year 2000 compliance by upgrading
both the packaged and custom-designed software currently in place, along with
certain hardware upgrades.
In addition to software and hardware considerations, the Company has
completed reviewing the impact of the Year 2000 on the manufacturing operations
and process controls. The Company has prepared an inventory of control and
embedded chip technology and reviewed each for required actions. The Company
continues to identify components requiring modification or replacement.
Phase Two. The second phase of the Year 2000 plan is remediation in
which the Company takes the actions necessary to upgrade or replace the systems
that are not Year 2000 compliant. The upgrade of certain hardware, including
the personal computer-based environment, was completed in December 1998. The
primary accounting software applications were upgraded to a Year 2000 compliant
release in February 1999. The upgrade of other custom-designed software, which
represents a small percentage of the total applications, was completed in
August 1999. Management believes this timetable provides sufficient time to
resolve any unexpected issues. The Company continues to test control and
embedded chip technology, as well as non-IT critical control technology and
non-IT non-critical control and reporting systems.
The Company relies on numerous third-party suppliers for a wide
variety of goods and services, including raw materials, transportation and
utilities such as electricity and natural gas. The Company has initiated formal
communications with all of its significant suppliers to determine the extent to
which we are vulnerable to the failure of such suppliers to remediate their own
Year 2000 problems. The Company is currently in the process of grading the
responses from low to high risk. In addition, although many of the Company's
customers have been communicating with it regarding Year 2000 issues, the
Company has not made any formal assessment of the effect which the failure of
its larger customers to remediate their own Year 2000 problems could have on
the Company's operations. Despite these efforts, there can be no assurance that
the information technology systems of other companies on which the Company
relies, such as utilities, will be timely converted, or that a failure to
remediate by one or more customers, suppliers or utilities would not have a
material adverse effect on the Company's business.
Phase Three. The third phase of the Year 2000 plan is system testing
and implementation. Many financial information technology systems have
completed the testing phase and are operational. The Company continues to test
manufacturing operations and process controls.
Costs. The Company anticipates that aggregate expenditures for Year
2000 compliance and system upgrades will approximate $2.5 million in 1998 and
1999, of which, as of September 30, 1999, approximately $2.3 million has been
incurred. However, no assurance can be given that the Company's actual
expenditures for Year 2000 compliance will not be higher. All of these
expenditures have been funded through cash flows from operations.
10
<PAGE> 11
Contingency Plan and Risks. The Company's continuing analysis of the
nature and extent of operational problems that would be reasonably likely to
result will provide the information necessary to develop a contingency plan for
dealing with the most likely worst case scenario. The Company has begun
contingency planning and will develop and revise plans as additional
information becomes available. These plans are expected to include increasing
inventory levels of raw materials and finished products and documenting manual
contingencies. The Company is continuing to analyze its potential liability to
third parties if its systems are not Year 2000 compliant, but currently has not
made any assessment of its potential exposure.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
With the exception of the historical information contained in this
report, the matters described herein contain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
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, statements
concerning:
o the Company's liquidity and capital resources,
o the Company's debt levels and ability to obtain financing and service
debt,
o competitive pressures and trends in the glass container industry,
o prevailing interest rates,
o legal proceedings and regulatory matters, and
o general economic conditions.
Forward-looking statements involve risks and uncertainties (including,
but not limited to, economic, competitive, governmental and technological
factors outside the control of the Company) which may cause actual results to
differ materially from the forward-looking statements. These risks and
uncertainties may include the ability of management to implement its business
strategy in view of the Company's limited operating history; the highly
competitive nature of the glass container market and the intense competition
from makers of alternative forms of packaging; the Company's focus on the beer
industry and its dependence on certain key customers; the seasonal nature of
brewing, iced tea and other beverage industries; the Company's dependence on
certain executive officers; and changes in environmental and other government
regulations. The Company operates in a very competitive environment in which
new risk factors can emerge from time to time. It is not possible for
management to predict all such risk factors, nor can it assess the impact of
all such risk factors on the Company's business or 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. Given these
risks and uncertainties, readers are cautioned not to place undue reliance on
forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's 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 debt
instruments. Less than 1% of the Company's sales are denominated in currencies
other than the U.S. dollar, and the Company does not believe its total exposure
to be significant.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not party to, and none of its assets are
subject to any pending legal proceedings, other than ordinary
routine litigation incidental to its business and against
which the Company is adequately insured and indemnified or
which is not material, including various
environmental-related cases. The Company believes that the
ultimate outcome of these cases will not materially affect
future operations.
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K
None
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSUMERS U.S., INC.
Date: November 12, 1999 /s/ M. William Lightner, Jr.
----------------------------------------
M. William Lightner, Jr.
Vice President - Finance and
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
FINANCIAL STATEMENTS OF CONSUMERS U.S., INC. INCLUDED IN FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-01-1999
<EXCHANGE-RATE> 1
<CASH> 3,507
<SECURITIES> 0
<RECEIVABLES> 86,194
<ALLOWANCES> 1,034
<INVENTORY> 99,096
<CURRENT-ASSETS> 195,745
<PP&E> 434,398
<DEPRECIATION> 125,015
<TOTAL-ASSETS> 596,808
<CURRENT-LIABILITIES> 145,478
<BONDS> 203,288
0
0
<COMMON> 170
<OTHER-SE> 49,967
<TOTAL-LIABILITY-AND-EQUITY> 596,808
<SALES> 486,687
<TOTAL-REVENUES> 486,687
<CGS> 448,465
<TOTAL-COSTS> 448,465
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 31
<INTEREST-EXPENSE> 21,658
<INCOME-PRETAX> (3,587)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,587)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,587)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
