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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 June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 333-31363-01
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CONSUMERS U.S., INC.
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(Exact name of registrant as specified in its charter)
Delaware 23-2874087
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3140 William Flinn Highway, Allison Park, Pennsylvania 15101
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(Address of principal executive offices) (Zip Code)
412-486-9100
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(Registrant's telephone number, including area code)
None
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(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 August 11, 2000:
Common Stock, $.01 par value, 17,000,100 shares
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CONSUMERS U.S., INC.
FORM 10-Q
For the Quarterly Period Ended June 30, 2000
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Statements of Operations and Comprehensive Income -
Three and Six Months Ended June 30, 2000 and 1999 3
Condensed Consolidated Balance Sheets -
June 30, 2000 and December 31, 1999 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2000 and 1999 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 10
PART II - OTHER INFORMATION 11
SIGNATURES 13
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSUMERS U.S., INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
----------------------- -----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 328,983 $ 316,582 $ 175,099 $ 169,655
Costs and expenses:
Cost of products sold 302,852 291,683 159,246 153,746
Selling and administrative expenses 15,577 13,881 8,073 5,837
Income from operations 10,554 11,018 7,780 10,072
Other income, net 7,177 583 535 334
Interest expense (15,281) (14,629) (7,695) (7,317)
--------- --------- --------- ---------
Income (loss) before preferred stock
dividends of subsidiary 2,450 (3,028) 620 3,089
Preferred stock dividends of subsidiary (2,776) (2,776) (1,396) (1,396)
--------- --------- --------- ---------
Net income (loss) $ (326) $ (5,804) $ (776) $ 1,693
========= ========= ========= =========
Comprehensive income (loss) $ (326) $ (5,804) $ (776) $ 1,693
========= ========= ========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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CONSUMERS U.S., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 866 $ 5,278
Accounts receivable 71,475 53,556
Advance to affiliate 17,588 17,571
Inventories:
Raw materials and manufacturing supplies 23,666 24,415
Finished products 89,139 82,562
Other current assets 9,848 7,603
--------- ---------
Total current assets 212,582 190,985
Property, plant and equipment, net 308,144 320,001
Other assets 29,772 29,545
Strategic alliances with customers 8,444 11,089
Goodwill 48,608 50,096
--------- ---------
$ 607,550 $ 601,716
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit facility $ 48,349 $ 40,895
Current maturities of long-term debt 1,980 2,029
Accounts payable 48,095 48,729
Accrued expenses 35,053 38,058
Accrued interest 5,998 5,953
Accrued compensation and employee benefits 23,747 23,895
--------- ---------
Total current liabilities 163,222 159,559
Long-term debt 209,336 210,208
Long-term pension liabilities 26,813 24,569
Long-term post-retirement liabilities 59,194 59,464
Other long-term liabilities 33,739 35,120
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329,082 329,361
Commitments and contingencies
Redeemable preferred stock 73,606 70,830
--------- ---------
Minority interest 6,460 6,460
--------- ---------
Stockholder's equity:
Common stock 170 170
Capital in excess of par value 88,630 88,630
Accumulated deficit (53,620) (53,294)
--------- ---------
35,180 35,506
--------- ---------
$ 607,550 $ 601,716
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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CONSUMERS U.S., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (326) $ (5,804)
Adjustments to reconcile net loss to cash provided
by operating activities:
Depreciation and amortization 28,179 28,074
Gain on sale of property, plant and equipment (4,139) --
Dividends accrued on preferred stock of subsidiary 2,776 2,776
Other (32) 149
Increase (decrease) in cash resulting from changes in
assets and liabilities (24,727) 4,463
-------- --------
1,731 29,658
----------------------------------------------------------------------------------------------
Cash flows from investing activities:
Expenditures for property, plant and equipment (24,805) (26,781)
Deposit of sale proceeds into escrow account (10,000) --
Withdrawal of funds from escrow account 18,267 --
Proceeds from the sale of property, plant and
equipment 8,066 193
Stock in Parent, held for Pension Fund, pending
government approval -- (3,000)
Payments of strategic alliances with customers (1,775) (2,000)
Other (1,758) (798)
-------- --------
(12,005) (32,386)
----------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments of long-term debt (1,022) (481)
Net draws (repayments) on revolving credit facility 7,454 (5,783)
Sale of note receivable -- 11,200
Other, primarily financing fees (570) (137)
-------- --------
5,862 4,799
----------------------------------------------------------------------------------------------
Cash and equivalents:
Increase (decrease) in cash and cash equivalents (4,412) 2,071
Balance, beginning of period 5,278 4,106
-------- --------
Balance, end of period $ 866 $ 6,177
======== ========
----------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Interest payments, net $ 14,132 $ 13,554
======== ========
Income tax payments (refunds), net $ -- $ --
======== ========
----------------------------------------------------------------------------------------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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CONSUMERS U.S., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - MANAGEMENT'S RESPONSIBILITY
In the opinion of Management, the accompanying condensed financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of June 30,
2000 and the results of operations and cash flows for the three and six months
ended June 30, 2000 and 1999 and cash flows for the six months ended June 30,
2000 and 1999.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these condensed
financial statements be read in conjunction with the Financial Statements of
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, 1999.
The results of operations for the interim periods are not necessarily
indicative of the results of the full fiscal year.
NOTE 2 - SALE OF CLOSED MANUFACTURING FACILITY
In March 2000, Anheuser-Busch Companies, Inc. ("Anheuser-Busch")
purchased Anchor's previously closed Houston, Texas glass container
manufacturing facility and certain related operating rights. Anchor received
proceeds of $10.0 million from the sale. Concurrently, Consumers Packaging Inc.
("Consumers"), the Company's indirect parent, for an aggregate consideration of
$15.0 million, entered into a contract with Anheuser-Busch to manage the
renovation and provide the technical expertise in the re-opening of the Houston
facility, while simultaneously agreeing to give up all rights under a proposed
joint venture agreement with Anheuser-Busch to own and operate the Houston
facility. Anchor expects to negotiate a contract with Anheuser-Busch to provide
management assistance in the operations of the facility upon its refurbishment.
NOTE 3- REDEEMABLE PREFERRED STOCK
Anchor has designated 2,239,320 shares as Series A Preferred Stock.
The Series A Preferred Stock ranks, as to dividends and redemption and upon
liquidation, prior to all other classes and series of capital stock of Anchor.
The holders of Series A Preferred Stock are entitled to receive, when and as
declared by the Board of Directors of Anchor, cumulative dividends, payable
quarterly in cash, at an annual rate of 10%. Unpaid dividends have been accrued
and included with the value of the related preferred stock on the condensed
balance sheets.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Consumers U.S., Inc. was formed in January 1997 to consummate the
Anchor Acquisition. Consumers U.S., Inc. is a holding company whose only asset
is the ownership of 59.5% of its sole subsidiary, Anchor Glass Container
Corporation ("Anchor") (together, the "Company"). 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 2000 second quarter were $175.1 million
compared to $169.7 million for the second quarter of 1999, an increase of $5.4
million, or 3.2%. Net sales for the first half of 2000 were $329.0 million and
$316.6 million for the comparable period of 1999. This increase in net sales
dollars was principally as a result of the increase in shipment volume,
particularly in the beer and tea product lines. Also, this improvement reflects
some minor increases in pricing.
Cost of Products Sold. The Company's cost of products sold in the
second quarter and first half of 2000 were $159.3 million and $302.9 million,
respectively (or 90.9% and 92.0% of net sales), while the cost of products sold
for the second quarter of 1999 and first half of 1999 were $153.8 million and
$291.7 million, respectively (or 90.6% and 92.1% of net sales). This level
percentage of cost of products sold principally reflects the benefits of the
cost savings strategies that the Company began to implement in prior years and
improved margins in the beer and tea product lines. These cost decreases have
been offset by increases in other manufacturing costs. The Company experienced
increases in the cost of natural gas and corrugated as compared to the same
periods of the preceding year. Effective April 1, 1999, the Company finalized
its labor contract with approximately 90% of its hourly personnel. As a result,
the Company experienced an increase in hourly labor costs and pension expense
beginning in the second quarter of 1999.
Selling and Administrative Expenses. Selling and administrative
expenses for the six months ended June 30, 2000 were approximately $15.5
million (or 4.7% of net sales), while selling and administrative expenses for
the comparable period of 1999 were $13.9 million (or 4.4% of net sales). This
increase in selling and administrative expenses, in total dollars and as a
percentage of net sales, reflects increased legal costs as a result of the
legal proceedings discussed in Part II - Item 1 and higher overall employee
related costs. The quarter to quarter comparison also reflects the spending in
1999 associated with Year 2000 compliance, which is non-recurring in the
current year.
Net Income (Loss). As a result of the foregoing, the Company had a net
loss in the second quarter of 2000 of approximately $0.8 million as compared to
net income of approximately $1.7 million in the same period of 1999 and a year
to date net loss of approximately $0.3 million compared to a net loss of $5.8
million in the comparable period of 1999. The results of the 2000 first quarter
included a gain on sale of the previously closed Houston, Texas glass container
manufacturing facility of approximately $4.1 million and a gain of
approximately $2.0 million on the sale of certain operating rights related to
the Texas facility, both included in Other income, net. Excluding the gains on
these sales transactions, the Company would have reported a loss of
approximately $6.4 million for the six months ended June 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
In the first six months of 2000, operating activities provided $1.7
million in cash as compared to $29.7 million in the same period of 1999. This
decrease in cash provided reflects the improvement in earnings adjusted for
changes in working capital items. Accounts receivable increased approximately
$17.9 million as compared with the December 1999 year end, primarily reflecting
the increased sales and the impact of
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providing extended credit terms, to certain customers whose sales were greater
in the first half of 2000 than in the latter months of 1999. Accounts
receivable at June 1999 decreased by approximately $24.9 million from year end
1998 reflecting the receipt of $20.0 million of intercompany receivable
balances.
Cash consumed in investing activities for the first half of 2000 and
1999 were $12.0 million and $32.4 million, respectively. Capital expenditures
in the six months ended June 30, 2000 were $24.8 million compared to $26.8
million in the comparable period of 1999. In the first six months of 2000, the
Company applied cash that had been deposited into escrow, as provided for under
the terms of the indentures, to fund capital expenditures. These escrowed funds
resulted from the proceeds of asset sales in the fourth quarter of 1999 and the
first quarter of 2000.
In conjunction with the Anchor Acquisition, Anchor entered into a
credit agreement providing for a $110.0 million Revolving Credit Facility (the
"Anchor Revolving Credit Facility"). At July 31, 2000, advances outstanding
under the Anchor Revolving Credit Facility were $47.8 million, borrowing
availability was $6.2 million and total outstanding letters of credit on this
facility were $11.3 million. Net cash of $5.9 million was provided by financing
activities in the first half of 2000, principally reflecting borrowings under
the Anchor Revolving Credit Facility.
In September 1998, G&G Investments, Inc. ("G&G) (acting on behalf of
Consumers) entered into an agreement to purchase a controlling interest in a
European glass manufacturer and 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 the Anchor Revolving
Credit Facility. The funds were obtained through borrowings under the Anchor
Revolving Credit Facility. Anchor has pledged the promissory note to the
lenders under the Anchor 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 % and has been paid through June 2000. A number of issues have arisen
and the transaction has not closed. Should the transaction not close, the
seller is obligated to return the advance to G&G. G&G has demanded the return
of the advance plus interest accrued to date and related costs including costs
related to the devaluation of the Deutschemark, and will upon receipt, repay
the loan from the Company. Discussions have been held, but as of this date
outstanding issues have not been resolved. In March 2000, G&G commenced an
arbitration proceeding in accordance with the terms of the agreement to secure
a return of the advance.
The indentures covering Anchor's $150.0 million aggregate principal
amount of 11 1/4 % First Mortgage Notes due 2005 (the "First Mortgage Notes")
and $50.0 million aggregate principal amount of 9 7/8% Senior Notes due 2008
(the "Senior Notes") contain certain covenants that restrict Anchor from taking
various actions, including, subject to specified exceptions and limits, 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. The
Anchor 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 fixed charge ratio.
The level of the Company's indebtedness could have important
consequences, including:
o a substantial portion of the Company'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.
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The Company expects significant expenditures in 2000, including
interest expense on the First Mortgage Notes, the Senior Notes and advances
under the Anchor Revolving Credit Facility and capital expenditures in the
range of $28.0 million to $31.0 million, any additional capital expenditures
beyond this level will be financed from sources outside the Company. Anchor
announced that it signed an agreement with Anheuser-Busch to provide all the
bottles for the Anheuser-Busch's Jacksonville, Florida and Cartersville,
Georgia breweries beginning in 2001. To meet the expanded demand from the
supply contract, Anchor will invest approximately $30.0 million in new
equipment for its Jacksonville plant over the next 18 months to increase
production efficiency. The funding for this project will be provided through
certain leasing transactions, the proceeds from the sale of the Houston plant
(see below) and internal cash flows. In December 1999, Anchor entered into a
firm agreement with a major lessor for $30.0 million of lease transactions.
Under this agreement, Anchor sold, in December 1999, and leased back under a
capital lease, equipment located at the Warner Robins facility, for a net
selling price of approximately $8.2 million. No further funding has been
provided under this agreement pending resolution of certain arbitration (see
Part II - Item 1. - Legal Proceedings). However, certain co-lessors identified
as part of the $30.0 million transaction may proceed to fund.
In March 2000, Anheuser-Busch purchased Anchor's previously closed
Houston, Texas glass container manufacturing facility and certain related
operating rights. Anchor received proceeds of $10.0 million from the sale.
Concurrently, Consumers, for an aggregate consideration of $15.0 million,
entered into a contract with Anheuser-Busch to manage the renovation and
provide the technical expertise in the re-opening of the Houston facility,
while simultaneously agreeing to give up all rights under a proposed joint
venture agreement with Anheuser-Busch to own and operate the Houston facility.
Anchor expects to negotiate a contract with Anheuser-Busch to provide
management assistance in the operations of the facility upon its refurbishment.
In addition, effective April 1, 1999, Anchor finalized its labor
contract with approximately 90% of its hourly personnel. As a result, the
Company experienced an increase in hourly labor costs and pension expense in
1999 and will incur increased costs in subsequent years.
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 the
Revolving Credit Facility, proceeds from the sale/leaseback transactions noted
above and proceeds from sales of discontinued manufacturing facilities.
Without taking into account the litigation and arbitration with
Owens-Brockway Glass Container Inc. ("Owens"), (see Part II - Item 1 - Legal
Proceedings), 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 while it has not been fully able to pass on
inflationary cost increases to its customers, it did realize some price relief
in 2000.
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
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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
adversely affect profitability during the first and fourth quarters. The
Company has in the past and will 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.
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 industry 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 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 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.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On February 16, 2000, Owens commenced an action against the Company
and certain of its affiliates, including Consumers and GGC, L.L.C., in the
United States District Court for the Southern District of New York. Owens
alleges violations of the Technical Assistance and License Agreement ("TALA")
and its resulting termination. Owens is seeking various forms of relief
including (1) a permanent injunction restraining the Company and its affiliates
from infringing Owens' patents and using or disclosing Owens' trade secrets and
(2) damages for breaches of the TALA.
The Company and its affiliates filed a demand for arbitration with the
American Arbitration Association on February 24, 2000. On March 15, 2000, the
Court ruled that the dispute as to whether there was a valid termination of the
TALA is subject to arbitration. On March 31, 2000, Owens submitted its answer
and counterclaims in the arbitration. Owens has asserted the position that (i)
the Court referred to arbitration only the question whether there was a valid
termination of the TALA and (ii) certain of Owens' claims are not arbitrable.
On May 1, 2000, the Company and its affiliates submitted Claimants' Reply to
the counterclaim in the arbitration. The hearing on the merits in the
arbitration is scheduled to begin on October 24, 2000.
On April 14, 2000, Owens and the Company and certain of its affiliates
consented to the entry of an order by the Court which requires compliance with
the TALA until further order of the Court. In addition, the order requires the
Company and its affiliates to inventory all equipment, other technology and
documents subject to the TALA and certify to the Court periodically that all
royalties have been paid and no unauthorized technology transfer has occurred.
In compliance with the order, Consumers' Italian subsidiary ceased using the
disputed technology.
The Company believes that it has meritorious defenses to the claims in
the action and counterclaim in the arbitration and intends to conduct a
vigorous defense. An unfavorable outcome in this matter could have a material
and adverse effect on the Company's business prospects and financial condition.
In addition, even if the ultimate outcome of the matter were resolved in favor
of the Company, the litigation and arbitration may involve considerable cost,
which could be material, and could divert the efforts of management.
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
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Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
27 Financial Data Schedule
b. Reports on Form 8-K
Current Report on Form 8-K dated February 17, 2000
(filed April 4, 2000) reporting an action commenced
against the Company and certain of its affiliates by
Owens alleging violations of the TALA.
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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: August 14, 2000 By /s/ C. Kent May
---------------------------------
C. Kent May
Secretary
