Consumers US Inc – ‘10-Q’ for 9/30/01

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Quarterly Report   —   Form 10-Q
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Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Consumer U.S., Inc.                                   22    110K 

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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 September 30, 2001

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
 SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-233-59

CONSUMERS U.S., INC.
(Exact name of registrant as specified in its charter)

     Delaware                           23-2874087
-------------------------------          -------------------  
(State or other jurisdiction of           (I.R.S. Employer    
incorporation or organization)           Identification No.)  

777 Kipling Ave. Toronto, Ontario, M8Z 5Z4
(Address of principal executive offices)          (Zip Code)          

416-232-3150
(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 1, 2001:
 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 September 30, 2001

 INDEX

                                                                [Download Table]

                                                                           Page No.
                                                                           --------
                                                                                   
PART I - FINANCIAL INFORMATION                                                     

         Item 1.  Financial Statements:                                            

              Condensed Consolidated Statements of Operations                      
                  and Comprehensive Income (Loss) -                                
                  Nine and Three Months Ended September 30, 2001 and 2000      3   

              Condensed Balance Sheet - September 30, 2001                         
              Condensed Consolidated Balance Sheet - December 31, 2000         4   

              Condensed Consolidated Statements of Cash Flows -                    
                  Nine Months Ended September 30, 2001 and 2000                5   

              Notes to Condensed Consolidated Financial Statements             6   

         Item 2.   Management's Discussion and Analysis of Financial               
                      Condition and Results of Operations                     12   

         Item 3.   Quantitative and Qualitative Disclosures About                  
                      Market Risk                                             19   

PART II - OTHER INFORMATION                                                   19   

SIGNATURES                                                                    22   

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PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS                                                   

CONSUMERS U.S., INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 AND COMPREHENSIVE INCOME (LOSS)
 (UNAUDITED)
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

---------------------------------------------------------------------------------------------------------------------------  
                                                                  Nine Months Ended                   Three Months Ended     
                                                                    September 30,                        September 30,       
                                                            -----------------------------           -----------------------  
                                                              2001                2000              2001             2000    
---------------------------------------------------------------------------------------------------------------------------  
                                                                                                                             
Net sales                                                   $ 349,340           $ 492,712           $ --          $ 163,729  

Costs and expenses:                                                                                                          
     Cost of products sold                                    328,737             453,487             --            150,635  
     Selling and administrative expenses                       14,094              22,806             --              7,229  
     Provision for related party accounts                      19,500                  --             --                 --  
     Litigation settlement                                         --               2,300             --              2,300  

Income (loss) from operations                                 (12,991)             14,119             --              3,565  

Equity loss in Anchor Common Stock                               (127)                 --            (127)               --  

Other income, net                                                 353               6,293             --                 11  

Interest expense                                              (14,926)            (22,169)            --             (7,783) 
                                                            ---------           ---------           ----          ---------  

Loss before preferred stock                                                                                                  
     dividends of subsidiary                                  (27,691)             (1,757)           (127)           (4,207) 

Preferred stock dividends of subsidiary                        (2,799)             (4,188)            --             (1,412) 
                                                            ---------           ---------           ----          ---------  

Loss before minority interest                                 (30,490)             (5,945)           (127)           (5,619) 

Minority interest                                               2,998                  --             --                 --  
                                                            ---------           ---------           ----          ---------  

Net loss                                                    $ (27,492)          $  (5,945)           (127)         $  (5,619)
                                                            =========           =========           ====          =========  

Other comprehensive income (loss):                                                                                           
     Net loss                                               $ (27,492)          $  (5,945)           (127)         $  (5,619)
     Other comprehensive loss:                                                                                               
       Derivative loss                                         (1,155)                 --             --                 --  
                                                                                ---------           ----          ---------  
Comprehensive loss                                          $ (28,647)          $  (5,945)           (127)         $  (5,619)
                                                            =========           =========           ====          =========  

---------------                                                                 
See Notes to Condensed Consolidated Financial Statements.                       

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CONSUMERS U.S., INC.
CONDENSED BALANCE SHEET AND CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

----------------------------------------------------------------------------------------------------------------------
                                                                              September 30, 2001     December 31, 2000
                                                                                  (unaudited)                         
----------------------------------------------------------------------------------------------------------------------
                                                                                                                      
ASSETS                                                                                                                
Current assets:                                                                                                       
      Cash and cash equivalents                                                     $      --             $   4,532   
      Accounts receivable                                                                  --                60,372   
      Inventories:                                                                                                    
          Raw materials and manufacturing supplies                                         --                22,408   
          Finished products                                                                --               103,113   
      Other current assets                                                                 --                 9,765   
                                                                                    ---------             ---------   
               Total current assets                                                        --               200,190   

Property, plant and equipment, net                                                         --               293,724   
Other assets                                                                               --                28,016   
Intangible pension asset                                                                   --                25,822   
Advance to affiliate                                                                       --                17,330   
Strategic alliances with customers                                                         --                12,451   
Goodwill                                                                                   --                47,120   
                                                                                    ---------             ---------   
                                                                                    $      --             $ 624,653   
                                                                                    =========             =========   

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)                                                                        
  Current liabilities:                                                                                                
      Revolving credit facility                                                     $      --             $  58,957   
      Current maturities of long-term debt                                                 --                 1,937   
      Accounts payable                                                                     --                55,285   
      Accrued expenses                                                                  3,513                45,848   
      Accrued interest                                                                     --                 5,686   
      Accrued compensation and employee benefits                                           --                27,104   
                                                                                    ---------             ---------   
               Total current liabilities                                                3,513               194,817   

Deficit in                                                                                                            
Anchor                                                                                 26,286                   --    
Long-term debt --                                                                                           208,385   
Long-term pension liabilities                                                              --                65,033   
Long-term post-retirement liabilities                                                      --                60,107   
Other long-term liabilities                                                                --                28,730   
                                                                                    ---------             ---------   
                                                                                       26,286               362,255   
Commitments and contingencies                                                                                         

Redeemable preferred stock of subsidiary                                                   --                76,428   
                                                                                    ---------             ---------   

Minority interest                                                                          --                 6,460   

Stockholder's equity (deficit):                                                                                       
      Common stock                                                                        170                   170   
      Capital in excess of par value                                                   88,681                88,681   
      Accumulated deficit                                                            (118,650)              (91,158)  
      Accumulated other comprehensive loss                                                 --               (13,000)  
                                                                                    ---------             ---------   
                                                                                      (29,799)              (15,307)  
                                                                                    ---------             ---------   
                                                                                    $      --             $ 624,653   
                                                                                    =========             =========   

---------------                                                                 
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)

                                                        [Enlarge/Download Table]

------------------------------------------------------------------------------------------------------------------- 
                                                                                    Nine Months Ended September 30, 
                                                                                       2001                  2000   
------------------------------------------------------------------------------------------------------------------- 
                                                                                                                    
Cash flows from operating activities:                                                                               
    Net loss                                                                        $ (27,492)            $  (5,945)
    Adjustments to reconcile net loss to                                                                            
       cash provided (used in) by operating activities:                                                             
           Equity loss in Anchor common stock                                             127                    -- 
           Depreciation and amortization                                               30,084                42,474 
           Provision for related party accounts                                        19,500                    -- 
           Gain on sale of property, plant and equipment                                 (270)               (4,138)
           Litigation settlement                                                           --                 2,300 
           Dividends accrued on preferred stock of subsidiary                           2,799                 4,188 
           Minority interest                                                           (2,998)                   -- 
           Other                                                                         (332)                 (222)
    Decrease in cash resulting from changes in                                                                      
       assets and liabilities                                                         (28,421)              (20,201)
                                                                                    ---------             --------- 
                                                                                       (7,003)               18,456 

------------------------------------------------------------------------------------------------------------------- 
Cash flows from investing activities:                                                                               
    Expenditures for property, plant and equipment                                    (17,882)              (28,372)
    Deposit of sale proceeds into escrow account                                      (13,348)              (10,000)
    Withdrawal of funds from escrow account                                            13,348)               18,267 
    Proceeds from sale of property, plant and equipment                                13,512                 8,069 
    Payments for strategic alliances with customers                                    (1,136)               (2,750)
    Other                                                                              (1,074)               (2,164)
                                                                                    ---------             --------- 
                                                                                       (6,580)              (16,950)

------------------------------------------------------------------------------------------------------------------- 
Cash flows from financing activities:                                                                               
    Principal payments of long-term debt                                                 (946)               (1,488)
    Net repayments on revolving credit facility                                        10,734                (3,290)
    Other, primarily financing fees                                                      (737)                 (778)
                                                                                    ---------             --------- 
                                                                                        9,051                (5,556)

------------------------------------------------------------------------------------------------------------------- 
Cash and equivalents:                                                                                               
    Decrease in cash and cash equivalents                                              (4,532)               (4,050)
    Balance, beginning of period                                                        4,532                 5,278 
                                                                                    ---------             --------- 
    Balance, end of period                                                          $      --             $   1,228 
                                                                                    =========             ========= 

------------------------------------------------------------------------------------------------------------------- 
Supplemental disclosure of cash flow information:                                                                   
    Interest payments, net                                                          $  13,754             $  17,361 
                                                                                    =========             ========= 

---------------                                                                 
See Notes to Condensed Consolidated Financial Statements.                       

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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 financial
statements contain all adjustments (consisting of only normal recurring         
adjustments) necessary to present fairly the financial position as of September 
30, 2001 and the results of operations for the three and nine months ended      
September 30, 2001 and 2000 and cash flows for the nine months ended September  
30, 2001 and 2000.                                                              

   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. ("Consumers U.S."), consolidated with its subsidiary       
(majority-owned on a fully-diluted basis), 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, 2000. The results of operations for   
the interim periods are not necessarily indicative of the results of the full   
fiscal year.                                                                    

  Certain reclassifications have been made to prior year financial
statements to be consistent with the current year presentation.                 

NOTE 2 - ORGANIZATION OF THE COMPANY AND PRINCIPLES OF CONSOLIDATION            

         Consumers U.S., a wholly-owned subsidiary Consumers International Inc.,
which is a wholly-owned subsidiary of Consumers Packaging Inc. ("Consumers"),   
was formed in January 1997 to hold an investment in Anchor.                     

  Consumer U.S. is a holding company and has no direct operations.

      During the second and third quarters of 2001, certain Anchor warrant
holders exercised 1,195,178 warrants to purchase common stock of Anchor. At     
September 30, 2001, based on outstanding common stock, Consumers U.S. owns      
26.9% of Anchor as compared to 41.8% at the beginning of the year. Prior to the 
restructuring of Consumers and other factors taking place in the third quarter  
of 2001, Consumers U.S., by taking into account the investment held in Anchor   
by G&G Investments, Inc. ("G&G"), the majority owner of Consumers, was deemed   
to have control of Anchor for financial reporting purposes, and, therefore,     
consolidated Anchor. As a result of Consumers' restructuring and other factors  
that took place during the third quarter of 2001, Consumers U.S. is no longer   
deemed to control Anchor for financial reporting purposes, and accordingly,     
effective July 1, 2001, began accounting for Anchor on an equity basis. See     
Note 5 - Liquidity. Consumers U.S. is a guarantor of Anchor's First Mortgage    
Notes, as defined, and obligations under Anchor's credit facility. This         
guarantee is secured by a pledge of the stock of Anchor owned by Consumers U.S. 
As a result of this guarantee, Consumers U.S. continues to accrue the losses of 
Anchor in excess of the carrying amount of its investment in Anchor.            

        Consumers U.S. continues to own approximately 59.5% of Anchor's equity
on a fully diluted basis, giving effect to the exercise of all warrants and the 
conversion of Anchor's convertible preferred stock. See Note 4 - Anchor's       
Stockholders Rights Plan and Note 5 - Liquidity.                                

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         Summarized financial information of Anchor as of September 30, 2001 and
for the three months ended September 30, 2001 follows (dollars in thousands):   

                                                                [Download Table]

                                              As of September 30, 2001
                                              ------------------------
                                                                      
Current assets                                        $175,469        
Total assets                                           569,019        
Current liabilities                                    167,312        
Long-term debt                                         206,925        
Redeemable preferred stock                              80,627        
Total stockholders' deficit                            (36,888)       

                                                                [Download Table]

                                         Three months ended September 30, 2001
                                         -------------------------------------
                                                                              
Net sales                                             $190,124                
Income from operations                                   8,329                
Net income                                                 968                
Loss applicable to common stock                         (2,547)               

    On February 5, 1997, pursuant to an Asset Purchase Agreement dated
December 18, 1996, as amended, among Consumers, Owens-Brockway Glass Container  
Inc. ("Owens") and the former Anchor Glass Container Corporation ("Old Anchor"),
the Company (the rights and obligations of Consumers having been assigned to the
Company) and Owens acquired substantially all of the assets, and assumed certain
liabilities, of Old Anchor (the "Anchor Acquisition"). Old Anchor was           
subsequently liquidated in a proceeding under Chapter 11 of the United States   
Bankruptcy Code of 1978, as amended.                                            

   Anchor has historically engaged in a variety of transactions with
Consumers and GGC, L.L.C. ("GGC"). These transactions included bulk purchasing  
of raw and packaging materials, provision of technical and engineering services,
joint utilization of Anchor's mold and repair shops and the consolidation of    
certain functions such as sales, engineering and management information         
services. On October 1, 2001, Consumers announced that it had completed the sale
of its Canadian glass producing assets to a subsidiary of Owens-Illinois, Inc.  
("O-I"). With the sale of Consumers' Canadian glass producing assets, Anchor and
Consumers have separated activities related to these functions as of October 1, 
2001. See Note 5 - Liquidity.                                                   

NOTE 3 - RELATED PARTY INFORMATION                                              

     As a result of Consumers' announcement of its intention to sell its
Canadian glass producing assets to O-I, see Note 5 - Liquidity - Consumers, and 
Consumers' filing under the Canadian Companies' Creditors Arrangement Act       
("CCAA"), Anchor recorded a charge to earnings during the second quarter of 2001
of $19,500 ($26,258 receivables and $1,842 investment in common shares of       
Consumers, net of $8,600 payables). This amount is recorded as a provision for  
related party accounts on the condensed statement of operations of Anchor.      
Although Anchor has recorded this reserve, it is actively pursuing collection of
its receivables and, accordingly, has filed a proof of claim against Consumers  
in its filing under the CCAA. Anchor has continued and will continue to bill and
collect for services, sales of assets and costs incurred on behalf of Consumers 
and its affiliates and has appropriately reserved for potentially uncollectible 
amounts.                                                                        

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In September 1998, G&G entered into an agreement to purchase a
controlling interest in a European glass manufacturer and advanced approximately
$17,300 toward that end. This amount was funded by G&G through a loan from      
Anchor to G&G of approximately $17,300 in September 1998 (the "G&G Loan"). The  
funds for the G&G Loan were obtained through a borrowing under the Anchor $110.0
million revolving credit facility entered into in conjunction with the Anchor   
Acquisition (the "Original Credit Facility"). The G&G Loan was evidenced by a   
promissory note that originally matured in January 1999. There is a disagreement
among the Anchor directors as to the propriety of the extension of the original 
maturity date for the G&G Loan beyond January 1999. See Part II - Item 1. Legal 
Proceedings. The transaction to purchase a controlling interest in the European 
glass manufacturer 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 the           
devaluation of the Deutschemark. Discussions have been held, but as of this date
outstanding issues have not been resolved. In March 2000, G&G commenced an      
arbitration proceeding against the seller of the European glass manufacturer in 
accordance with the terms of the agreement to secure a return of the advance. A 
hearing was held in June 2001, with a follow-up hearing held in August 2001. No 
decision has been rendered and the outcome of this proceeding is uncertain. In  
connection with the pledge by Anchor of the note issued pursuant to the G&G Loan
to Bank of America, National Association, as agent under the Loan and Security  
Agreement dated as of October 16, 2000, with Bank of America, National          
Association, as agent (the "Loan and Security Agreement"), the original         
promissory note issued pursuant to the G&G Loan was replaced by a new promissory
note (the "Replacement Note"). G&G has provided security against the Replacement
Note to Bank of America, National Association, as agent under the Loan and      
Security Agreement. The maturity date of the Replacement Note is October 31,    
2003. Interest on the Replacement Note is payable at the interest rate payable  
by Anchor on advances under the Loan and Security Agreement plus 0.5% and has   
been paid through September 2000. Unpaid interest of $1,710 is due for the      
period October 1, 2000 through September 30, 2001. Various rights, including the
right to enforce the obligations under the Replacement Note were assigned by    
Anchor to Bank of America, National Association. Any property received by G&G in
respect of the arbitration proceeding has been pledged by G&G to Bank of        
America, National Association, and will be used to repay outstanding borrowings 
under the Loan and Security Agreement. There is a disagreement among the Anchor 
directors as to the propriety of the assignment of those rights, the pledge of  
those proceeds and the replacement of the original promissory note with the     
Replacement Note. See Part II - Item 1. Legal Proceedings.                      

NOTE 4 - ANCHOR'S STOCKHOLDERS RIGHTS PLAN                                      

   On September 26, 2001, the Board of Directors of Anchor adopted a
Stockholder Rights Plan (the "Rights Plan"). Under the Rights Plan, stock       
purchase rights ("Rights") will be distributed as a dividend to all Anchor      
stockholders at the rate of one Right for each share of Anchor common stock held
of record as of the close of business on September 26, 2001. Each Right entitles
the registered holder, upon the occurrence of certain events, to purchase from  
Anchor one one-thousandth of a share of Series C Junior Participating Preferred 
Stock (the "Preferred Stock"), at a price of $0.01 per one one-thousandth of a  
share (the "Purchase Price"), subject to adjustment. The Rights are not         
exercisable until the distribution date, as defined. The Rights will expire at  
the close of business on September 26, 2003, unless earlier redeemed or         
exchanged by Anchor in accordance with the Rights Plan. The description and     
terms of the Rights are set forth in a Rights Agreement between Anchor and      
Continental Stock Transfer & Trust Company, as Rights Agent. On September 27,   
2001, the Rights Plan was purported to be amended for a clarification. On       
October 31, 2001, the Rights Plan was amended to extend the Rights to the       
holders of Anchor's Series A Preferred Stock and Series B Preferred Stock. The  

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Board of Directors of Anchor, prior to the distribution date of the Rights, may 
amend any of the provisions of the Rights Agreement.                            

   On October 5, 2001 an action was filed by Consumers U.S., against
Anchor and certain members of its Board of Directors. The action alleges, among 
other things, that the Rights Plan adopted by the Anchor Board of Directors is  
unlawful and seeks to declare the Rights Plan invalid in the whole. On October  
11, 2001 O-I filed a similar action, alleging, among other things, that the     
Rights Plan adopted by the Anchor Board of Directors is unlawful. See Part II - 
Item 1. Legal Proceedings.                                                      

         The acquisition of the stock of Consumers U.S. (and the equity interest
in Anchor) by either O-I or Mr. Ghaznavi may result in the Rights becoming      
exercisable. See Note 5 - Liquidity - Consumers.                                

NOTE 5 - LIQUIDITY                                                              

Anchor                                                                          

      Certain events described below may result in Anchor having to make a
purchase offer for approximately $200 million of indebtedness, which Anchor may 
not be able to fund. In such event, Anchor may be in default under such debt    
obligations and other obligations would be cross-defaulted. Consumers U.S. is a 
guarantor of certain of this indebtedness. This guarantee is secured by a pledge
of the stock of Anchor owned by Consumers U.S. See "Consumers" below.           

        Anchor's results of operations were significantly impacted by the cost
of natural gas in 2000 and 2001. This is a variable cost over which Anchor has  
little control. Significant increases in natural gas or energy costs could      
materially impact Anchor's results of operations or liquidity plans; however,   
energy costs have softened considerably in recent months and are currently      
having a favorable impact on Anchor's costs. There can be no assurance that this
trend will continue.                                                            

     Anchor's principal sources of liquidity through the end of 2001 are
expected to continue to be funds derived from operations, borrowings under its  
Replacement Credit Facility and proceeds from sales its of discontinued         
manufacturing facilities. Anchor's plans to increase liquidity include          
continuation of its cost reduction efforts, continuation of its natural gas cost
recovery program, as well as increased sales from its supply agreements with    
major customers. While the initial positive effects of the implementation of    
these plans are currently being realized, there can be no assurance that these  
efforts will continue to be successful or if successful, that they will provide 
sufficient liquidity to meet Anchor's needs.                                    

         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 Anchor's control. Should Anchor suffer        
material adverse conditions from the issues discussed in this Note 5, additional
measures may be required. This may include sales of assets and/or consideration 
of other strategic alternatives. No assurance can be given that Anchor will have
sufficient liquidity either from internally generated sources or external       
borrowings to continue its operations and to meet its obligations as they come  
due. If future operations result in noncompliance with the fixed charge coverage
ratio test under Anchor's $100.0 million credit facility provided by Bank of    
America (the "Replacement Credit Facility") or various equipment leases, Anchor 
would seek a waiver; however, there can be no assurance that such a waiver would
be granted.                                                                     

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Consumers                                                                       

   On February 2, 2001, Consumers, the majority owner of Anchor on a
fully-diluted basis through an indirect, wholly-owned subsidiary, Consumers     
U.S., announced a suspension of interest payments on its senior notes maturing  
in 2007 and the senior secured notes of Consumers International Inc. maturing in
2005, until it has reached agreement on the restructuring of Consumers. In March
2001, Consumers appointed Brent Ballantyne as its chief restructuring officer   
and chief executive officer, reporting to a committee of the Consumers Board of 
Directors comprised of independent directors and also appointed Graeme Eadie as 
chief financial officer.                                                        

    On May 23, 2001, Consumers filed for protection under the Canadian
CCAA, with the Ontario Superior Court of Justice, in order to provide an orderly
process and time to complete its restructuring.                                 

         On August 3, 2001, Consumers and O-I announced an agreement whereby O-I
would acquire Consumers' Canadian glass producing assets as well as the stock of
Consumers U.S. Anchor was informed by its former chairman and chief executive   
officer, John J. Ghaznavi, that he entered into a non-binding letter of intent  
with O-I to purchase, individually or through an entity controlled by him, the  
shares of Consumers U.S. that O-I agreed to purchase from Consumers. The Company
understands that this arrangement has been recinded by O-I. The Ontario Court of
Justice approved the sale of Consumers' Canadian glass producing assets and     
stock of Consumers U.S. to O-I on August 31, 2001, subject to any needed        
regulatory approval. The asset sale was completed on October 1, 2001. O-I has   
not received regulatory approval to purchase the stock of Consumers U.S.        

         Management of Anchor believes, upon the advice of its counsel, that the
sale of the Canadian glass producing assets by Consumers to O-I does not        
constitute a "change in control" as defined in the indentures governing Anchor's
11.25% First Mortgage Notes due 2005, aggregate principal amount of $150.0      
million (the "First Mortgage Notes") and Anchor's 9.875% Senior Notes due 2008, 
aggregate principal amount of $50.0 million (the "Senior Notes") (the           
"Indentures"). Management of Anchor believes, upon the advice of its counsel,   
that the acquisition of the stock of Consumers U.S. by O-I or Mr. Ghaznavi will 
trigger a "change in control" as defined in the Indentures. Upon a "change in   
control" as defined in the Indentures, Anchor would be required to make an offer
to repurchase all of the First Mortgage Notes and the Senior Notes at 101% of   
the outstanding principal amount plus accrued and unpaid interest. Anchor does  
not have the cash available to make this repurchase offer. The failure to make  
the offer would result in an event of default under the Indentures that would   
give the noteholders the right to accelerate the debt and is also a default     
under the Replacement Credit Facility and would create an event of default under
various equipment leases. Consumers U.S. is a guarantor of the First Mortgage   
Notes. This guarantee is secured by a pledge of the stock of Anchor owned by    
Consumers U.S.                                                                  

       In addition, G&G and one of its affiliates have pledged common shares
of Consumers that they own as collateral for certain indebtedness guaranteed by 
G&G. This indebtedness, together with the common shares of Consumers pledged as 
collateral, has been assigned to Fevisa Industrial, S.A. de C.V. ("Fevisa"), a  
Mexican company in which G&G has a 25% ownership interest. Certain defaults on  
the indebtedness have occurred which give Fevisa the right to foreclose on those
common shares. Such a foreclosure would also trigger a "change in control" as   
defined in the Indentures. Fevisa has agreed to forbear on a day-to-day basis   
from the exercise of its foreclosure rights. If Fevisa exercises its foreclosure
rights, such event would also                                                   

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constitute a "change in control" and require Anchor to make a repurchase offer  
for the First Mortgage Notes and the Senior Notes, which as described above,    
Anchor would be unable to do.                                                   

On August 13, 2001, the Board of Directors of Anchor formed an
independent committee to review, among other things, (i) the proposed sale of   
Consumers' assets, including the Consumers U.S. stock, to O-I, (ii) the         
subsequent proposed sale of the Consumers U.S. stock to Mr. Ghaznavi, (iii) the 
settlement documents with Owens related to the patent litigation and (iv) the   
refinancing or restructuring of the First Mortgage Notes and the Senior Notes   
and what action, if any, to take in connection therewith.                       

      On September 26, 2001, Anchor filed a complaint in the United States
Federal District Court in Tampa, Florida against O-I seeking an injunction      
against O-I from acquiring indirectly the majority equity interest in Anchor    
from Consumers or statutory treble damages in lieu thereof. In its complaint,   
Anchor alleges that the proposed acquisition by O-I would violate U.S. and      
Florida antitrust laws as well as tortiously interfere with Anchor's Indentures.
On October 2, 2001, O-I agreed with Anchor that it would not acquire the stock  
of Consumers U.S. until 60 days from the time O-I gives Anchor notice that it   
has made a filing with the Federal Trade Commission (the "FTC"). To date, Anchor
has not received notice from O-I that a filing with the FTC has been made.      

Subsequent Events                                                               

        On October 5, 2001 an action was filed by Consumers U.S., in the Court
of Chancery of the State of Delaware in and for New Castle County against Anchor
and certain members of its Board of Directors. The action alleges, among other  
things, that the Rights Plan (see Note 4) adopted by the Anchor Board of        
Directors on September 26, 2001, and the amendment dated September 27, 2001, is 
unlawful and that certain members of the Board of Directors breached their      
fiduciary duties of loyalty, good faith and care and have acted unlawfully in   
adopting the Rights Plan. Through this action in the Delaware court, Consumers  
U.S. seeks injunctive relief to, among other things, prevent the application of 
the Rights Plan to the proposed sale of the stock of Consumers U.S. to O-I. The 
complaint also seeks declaratory relief and damages with respect to the actions 
associated with the adoption of the Rights Plan by Anchor. The scope of the     
rights and the holders of the rights may be affected by any final judgment      
entered in such action. Anchor intends to vigorously defend the claims alleged  
in the action. On October 11, 2001 O-I filed a similar action, alleging, among  
other things, that the Rights Plan adopted by the Anchor Board of Directors is  
unlawful.                                                                       

     The foregoing represents significant uncertainties as to the future
financial position of Anchor and the Company. As a result of the uncertainties  
surrounding the Consumers restructuring and its impact on Anchor, the Company's 
outside auditors rendered a qualified opinion on the Company's and Anchor's     
financial statements for the year ended December 31, 2000. The failure by Anchor
to obtain an unqualified opinion on its financial statements was an event of    
default under the Loan and Security Agreement dated as of October 16, 2000, with
Bank of America, National Association, as agent, for which Anchor received a    
waiver.                                                                         

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS                                                                   

OVERVIEW                                                                        

      During the second and third quarters of 2001, certain Anchor warrant
holders exercised 1,195,178 warrants to purchase common stock of Anchor. At     
September 30, 2001, based on outstanding common stock, Consumers U.S. owns 26.9%
of Anchor as compared to 41.8% at the beginning of the year. Prior to the       
restructuring of Consumers and other factors taking place in the third quarter  
of 2001, Consumers U.S., by taking into account the investment held in Anchor by
G&G, the majority owner of Consumers, was deemed to have control of Anchor for  
financial reporting purposes, and, therefore, consolidated Anchor. As a result  
of Consumers' restructuring and other factors that took place during the third  
quarter ended September 30, 2001, Consumers U.S. is no longer deemed to control 
Anchor for financial reporting purposes, and accordingly, effective July 1,     
2001, began accounting for Anchor on an equity basis. Consumers U.S. is a       
guarantor of certain of indebtedness of Anchor. This guarantee is secured by a  
pledge of the stock of Anchor owned by Consumers U.S. As a result of this       
guarantee, Consumers U.S. continues to accrue the losses of Anchor in excess of 
the carrying amount of its investment in Anchor.                                

      Consumer U.S. is a holding company and has no direct operations. Its
results are based upon the results of operations of Anchor as discussed below.  

ANCHOR RESULTS OF OPERATIONS                                                    

        Net Sales. Net sales for the third quarter of 2001 were $190.1 million
compared to $163.7 million for the third quarter of 2000, an increase of $26.4  
million, or 16.1%. Net sales for the nine months ended September 30, 2001 were  
$539.5 million and $492.7 million for the comparable period of 2000. This $46.8 
million, or 9.5%, increase in net sales was principally a result of the increase
in shipment volume (10%), particularly in the beer product line, primarily      
associated with the Southeast Agreement (see "Liquidity and Capital Resources"  
below), the natural gas related price recovery program discussed below and      
general price increases. These increases were offset by a reduction in sales,   
occurring in the first six months of 2001, due to a change in the way certain   
packaging materials are sold to a certain customer. This change resulted in a   
comparable reduction in cost of products sold in 2001. Net sales for the nine   
months ended September 30, 2001, adjusted for the packaging change, would have  
increased by $70.6 million or 13%.                                              

    Cost of Products Sold. Anchor's cost of products sold in the third
quarter and first nine months of 2001 were $174.7 million and $503.5 million,   
respectively (or 91.9% and 93.3% of net sales), while the cost of products sold 
for the third quarter of 2000 and first nine months of 2000 were $150.6 million 
and $453.5 million, respectively (or 92.0% and 92.0% of net sales). This slight 
increase in the cost of products sold for the nine months ended September 30,   
2001 as compared with the comparable period of 2000, principally reflects the   
increases in net sales noted above. In addition, Anchor has continued to        
experience significant increases in the cost of natural gas as compared to the  
same period of the preceding year. These increased prices for natural gas, the  
principal fuel for manufacturing glass, increased costs by approximately $18.2  
million compared to the comparable period of 2000. In addition, the high costs  
of natural gas in December 2000 contributed to Anchor's decision to reduce      
manufacturing production in that month. The carryover effect of this decision   
resulted in approximately $1.0 million of unabsorbed overhead costs, negatively 
impacting results of operations in early 2001. In the second half of 2000,      
Anchor initiated a price recovery program for the escalating natural gas costs  
incurred. Approximately                                                         

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$16.5 million was recovered through this program in the first nine months of    
2001 and is included in net sales.                                              

 Selling and Administrative Expenses. Selling and administrative
expenses for the nine months ended September 30, 2001 were approximately $21.1  
million (or 3.9% of net sales), while selling and administrative expenses for   
the comparable period of 2000 were $22.8 million (or 4.6% of net sales). This   
decrease is attributable to a focus on overall cost reduction, including        
reducing personnel related costs, data processing costs and support costs of    
related parties.                                                                

 Provision for related party accounts. As a result of Consumers'
announcement of its intention to sell its Canadian glass producing assets to    
O-I, see Note 6 - Liquidity - Consumers, and Consumers' filing under the CCAA,  
Anchor recorded a charge to earnings during the quarter ended June 30, 2001, of 
$19.5 million ($26.3 million receivables and $1.8 million investment in common  
shares of Consumers, net of $8.6 million payables). This amount is recorded as a
provision for related party accounts on the condensed statement of operations.  
Although Anchor has recorded this reserve, it is actively pursuing collection of
its receivables and, accordingly, has filed a proof of claim against Consumers  
in its CCAA filing.                                                             

    Other Income (Expense), net. Other expense, net for the first nine
months of 2001 was $0.2 million compared to other income, net of $6.3 million   
for the comparable period of 2000, which included the gain on sale of           
approximately $6.1 million of Anchor's previously closed Houston, Texas glass   
container manufacturing facility and certain related operating rights to        
Anheuser-Busch, Inc. ("Anheuser-Busch").                                        

        Interest Expense. Interest expense for the nine months ended September
30, 2001 decreased approximately $0.2 million compared to the same period of    
2000, due primarily to lower interest rates offset by higher average outstanding
borrowings under the Replacement Credit Facility and less interest incurred on  
related party liabilities.                                                      

        Net Income (Loss). Anchor recorded income in the third quarter of 2001
of approximately $1.0 million as compared to a net loss of $4.2 million in the  
third quarter of 2000. This improvement in earnings results from increased      
sales volume, general price increases and reduced selling, general and          
administrative costs. Anchor had a year to date loss of $26.6 million compared  
to a net loss of $1.8 million in the prior year. Excluding the provision for    
related party accounts of $19.5 million, Anchor would have recorded a net loss  
of approximately $7.4 million in the first nine months of 2001. The results of  
the first nine months of 2000 included a gain on the sale of Anchor's           
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 Houston, Texas facility, both        
included in Other income, net and a $2.3 million charge for settlement of       
litigation with Owens. Excluding these sales transactions, Anchor would have    
reported a loss of approximately $4.3 million in the nine months ended          
September 30, 2000. Taking all adjustments discussed above into account, the    
$1.5 million increase in earnings over the first nine months of the prior year  
can be attributed to the high cost of natural gas as discussed under "Costs     
of Products Sold".                                                              

ANCHOR LIQUIDITY AND CAPITAL RESOURCES                                

 On August 3, 2001, Consumers, the majority owner of Anchor on a
fully-diluted basis through Consumers U.S., and O-I announced an agreement      
whereby O-I would acquire Consumers' Canadian glass producing assets as well as 
the stock of Consumers U.S. Anchor was informed by its former chairman and chief
executive officer, John J. Ghaznavi, that he entered into a non-binding letter  
of intent with O-I to purchase, individually or through an entity               

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controlled by him, the shares of Consumers U.S. that O-I has agreed to purchase 
from Consumers. The Company understands that this arrangement has been recinded 
by O-I. The Ontario Superior Court of Justice approved the sale of Consumers'   
Canadian glass producing assets and the stock of Consumers U.S. to O-I on August
31, 2001. The asset sale was completed on October 1, 2001. O-I has not received 
regulatory approval to purchase the stock of Consumers U.S.                     

         Management of Anchor believes, upon the advice of its counsel, that the
sale of the Canadian glass producing assets by Consumers to O-I does not        
constitute a "change in control" as defined in the Indentures governing Anchor's
First Mortgage Notes and Senior Notes. Management of Anchor believes, upon the  
advice of its counsel, that the acquisition of the stock of Consumers U.S. by   
O-I or Mr. Ghaznavi will trigger a "change in control" as defined in the        
Indentures. Upon a "change in control" as defined in the Indentures, Anchor     
would be required to make an offer to repurchase all of the First Mortgage Notes
and the Senior Notes at 101% of the outstanding principal amount plus accrued   
and unpaid interest. Anchor does not have the cash available to make this       
repurchase offer. The failure to make the offer would result in an event of     
default under the Indentures that would give the noteholders the right to       
accelerate the debt and is also a default under Anchor's Replacement Credit     
Facility and would create an event of default under various equipment leases.   
Consumers U.S. is a guarantor of the First Mortgage Notes. This guarantee is    
secured by a pledge of the stock of Anchor owned by Consumers U.S.              

       In addition, G&G and one of its affiliates have pledged common shares
of Consumers that they own as collateral for certain indebtedness guaranteed by 
G&G. This indebtedness, together with the common shares of Consumers pledged as 
collateral, has been assigned to Fevisa, a Mexican company in which G&G has a   
25% ownership interest. Certain defaults on the indebtedness have occurred which
give Fevisa the right to foreclose on those common shares. Such a foreclosure   
would also trigger a "change in control" as defined in the Indentures. Fevisa   
has agreed to forbear on a day-to-day basis from the exercise of its foreclosure
rights. If Fevisa exercises its foreclosure rights, such event would also       
constitute a "change in control" and require Anchor to make a repurchase offer  
for the First Mortgage Notes and the Senior Notes, which as described in the    
foregoing paragraph, Anchor would be unable to do.                              

On August 13, 2001, the Board of Directors of Anchor formed an
independent committee to review, among other things, (i) the proposed sale of   
Consumers' assets, including the Consumers U.S. stock, to O-I, (ii) the         
subsequent proposed sale of the Consumers U.S. stock to Mr. Ghaznavi, (iii) the 
settlement documents with Owens related to the patent litigation and (iv) the   
refinancing or restructuring of the First Mortgage Notes and the Senior Notes   
and what action, if any, to take in connection therewith.                       

      On September 26, 2001, Anchor filed a complaint in the United States
Federal District Court in Tampa, Florida against O-I seeking an injunction      
against O-I from acquiring indirectly the majority equity interest in Anchor    
from Consumers or statutory treble damages in lieu thereof. In its complaint,   
Anchor alleges that the proposed acquisition by O-I would violate U.S. and      
Florida antitrust laws as well as tortiously interfere with Anchor's Indentures.
On October 2, 2001, O-I agreed with Anchor that it would not acquire the stock  
of Consumers U.S. until 60 days from the time O-I gives Anchor notice that it   
has made a filing with the FTC. To date, Anchor has not received notice from O-I
that a filing with the FTC has been made.                                       

     The foregoing represents significant uncertainties as to the future
financial position of Anchor. As a result of the uncertainties surrounding the  
Consumers restructuring and its impact on Anchor, the Company's outside auditors
have rendered a qualified opinion on the Company's and Anchor's financial       
statements for the year ended December 31, 2000. The failure by Anchor          

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to obtain an unqualified opinion on its financial statements was an event of    
default under the Loan and Security Agreement, for which Anchor received a      
waiver.                                                                         

    As a result of Consumers announcement of its intention to sell its
Canadian glass producing assets to O-I, and Consumers' filing under the CCAA,   
Anchor recorded a charge to earnings in the second quarter of 2001, of $19.5    
million ($26.3 million receivables and $1.8 million investment in common shares 
of Consumers, net of $8.6 million payables). This amount is recorded as a       
provision for related party accounts on the condensed statement of operations.  
Although Anchor has recorded this reserve, it is actively pursuing collection of
its receivables and, accordingly, has filed a proof of claim against Consumers  
in its CCAA filing.                                                             

       In the first nine months of 2001, operating activities provided $19.7
million in cash as compared to $18.5 million of cash provided in the same period
of 2000. This increase in cash provided reflects the slight decline in earnings 
(before unusual charges/income) and changes in working capital items. Accounts  
receivable at September 30, 2001 increased approximately $25.2 million          
(notwithstanding the provision for related party receivables) as compared with  
the 2000 year end, consistent with the increase in net sales. Inventory levels  
decreased approximately $19.0 million in 2001. Anchor has reduced accounts      
payable approximately $5.5 million since December 31, 2000 and contributed      
approximately $7.4 million to its defined benefit pension plan. Cash outlays for
natural gas purchases in the nine months ended September 30, 2001 increased     
approximately $18.2 million over the 2000 levels for the comparable periods, as 
a result of the increased prices for natural gas. In the second half of 2000,   
Anchor initiated a price recovery program for the escalating natural gas costs  
incurred. Approximately $16.5 million was recovered through this program in     
2001.                                                                           

         Cash consumed in investing activities for the first nine months of 2001
and 2000 were $14.9 million and $17.0 million, respectively. Capital            
expenditures in the nine months ended September 30, 2001 were $26.2 million     
compared to $28.4 million in the same period of 2000. To fund capital           
expenditures as provided for under the terms of the Indentures, Anchor applied  
cash deposited into escrow, of $13.3 million and $18.3 million, respectively, in
the first nine months of 2001 and 2000. These escrowed funds were the proceeds  
of sale and sale-leaseback transactions in 1999, 2000 and 2001.                 

   In conjunction with the Anchor Acquisition, Anchor entered into a
credit agreement providing for the $110.0 million Original Credit Facility. In  
October 2000, Anchor replaced the Original Credit Facility with a credit        
facility under a Loan and Security Agreement dated as of October 16, 2000, with 
Bank of America, National Association, as agent, to provide the $100.0 million  
Replacement Credit Facility. The Replacement Credit Facility enables Anchor to  
obtain revolving credit loans for working capital purposes and the issuance of  
letters of credit for its account in an aggregate amount not to exceed $100.0   
million. Advances outstanding at any one time cannot exceed an amount equal to  
the borrowing base as defined in the Loan and Security Agreement.               

        At October 15, 2001, advances outstanding under the Replacement Credit
Facility were $58.2 million, borrowing availability was $16.0 million and total 
outstanding letters of credit on this facility were $7.2 million. Net cash of   
$5.4 million was used in financing activities in the first nine months of 2001, 
principally reflecting borrowings under the Replacement Credit Facility.        

        Anchor's obligations under the Replacement Credit Facility are secured
by a first priority lien on all of Anchor's inventories and accounts receivable 
and related collateral and a second priority pledge of all of the issued and    
issuable Series B Preferred Stock of Anchor and 902,615 shares of Anchor's      
Common Stock. In addition, Anchor's obligations under the Loan                  

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and Security Agreement are guaranteed by Consumers U.S., the holder of the      
outstanding Series B Preferred Stock of Anchor and 902,615 shares of Anchor's   
Common Stock.                                                                   

 The Loan and Security Agreement contains certain covenants that
restrict Anchor's ability to take 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, sales of assets and other           
fundamental corporate changes, capital expenditures, operating lease payments   
and transactions with affiliates. The Loan and Security Agreement also contains 
a financial covenant that requires Anchor to maintain a fixed charge coverage   
ratio.                                                                          

        In 2000, Anchor signed an agreement with Anheuser-Busch to provide all
the bottles for the Anheuser-Busch Jacksonville, Florida and Cartersville,      
Georgia breweries, beginning in 2001 (the "Southeast Agreement"). To meet the   
expanded demand from the supply contract and increase production efficiency,    
Anchor invested approximately $18.0 million in new equipment in 2000 for its    
Jacksonville plant, funded through the proceeds from the sale of the Houston    
plant, certain leasing transactions and internal cash flows. In December 1999,  
Anchor entered into an agreement with a major lessor for $30.0 million of lease 
transactions. Under this agreement, in December 1999, December 2000, March 2001 
and April 2001, Anchor financed approximately $8.2 million, $4.2 million, $7.8  
million and $5.4 million, respectively, of the expansion through sale leaseback 
arrangements.                                                                   

In September 1998, G&G entered into an agreement to purchase a
controlling interest in a European glass manufacturer and advanced              
approximately $17.3 million toward that end. The G&G Loan was funded by G&G     
through a loan from Anchor to G&G of approximately $17.3 million in September   
1998. The funds for the G&G Loan were obtained through a borrowing under the    
Original Credit Facility. The G&G Loan was evidenced by a promissory note that  
originally matured in January 1999. There is a disagreement among the Anchor    
directors as to the propriety of the extension of the original maturity date    
for the G&G Loan beyond January 1999. See Part II - Item 1. Legal Proceedings.  
The transaction to purchase a controlling interest in the European glass        
manufacturer 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 the           
devaluation of the Deutschemark. Discussions have been held, but as of this     
date outstanding issues have not been resolved. In March 2000, G&G commenced an 
arbitration proceeding against the seller of the European glass manufacturer in 
accordance with the terms of the agreement to secure a return of the advance. A 
hearing was held in June 2001, with a follow-up hearing held in August 2001. No 
decision has been rendered and the outcome of this proceeding is uncertain. In  
connection with the pledge by Anchor of the note issued pursuant to the G&G     
Loan to Bank of America, National Association, as agent under the Loan and      
Security Agreement, the original promissory note issued pursuant to the G&G     
Loan was replaced by the Replacement Note. G&G has provided security against    
the Replacement Note to Bank of America, National Association, as agent under   
the Loan and Security Agreement. The maturity date of the Replacement Note is   
October 31, 2003. Interest on the Replacement Note is payable at the interest   
rate payable by Anchor on advances under the Loan and Security Agreement plus   
0.5% and has been paid through September 2000. Unpaid interest of $1.7 million  
is due for the period October 1, 2000 through September 30, 2001. Various       
rights, including the right to enforce the obligations under the Replacement    
Note were assigned by Anchor to Bank of America, National Association. Any      
property received by G&G in respect of the arbitration proceeding has been      
pledged by G&G to Bank of America, National Association, and will be used to    
repay outstanding borrowings under the Loan and Security Agreement. There is a  
disagreement among the Anchor directors as to the propriety of the assignment   
of                                                                              

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those rights, the pledge of those proceeds and the replacement of the original  
promissory note with the Replacement Note. See Part II - Item 1. Legal          
Proceedings.                                                                    

    The Indentures 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, asset sales and transactions with affiliates.                     

 The level of the Company's and Anchor's indebtedness could have
important consequences, including:                                              

-   a substantial portion of Anchor's cash flow from operations       
must be dedicated to debt service,                            
-   the Company's and Anchor's ability to obtain additional future    
debt financing may be limited, and                            
-   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.                           

   Anchor expects significant expenditures in the remainder of 2001,
including interest expense on the First Mortgage Notes (approximately $8.4      
million paid October 1, 2001), the Senior Notes (approximately $2.5 million paid
September 15, 2001) and advances under the Replacement Credit Facility, capital 
expenditures of approximately $14.0 million and payment of the $2.9 million     
litigation settlement as discussed in Part II - Item 1. Legal Proceedings. As a 
result of the higher gas prices in 2001, Anchor estimates that its cash outlays 
for purchases of natural gas, based on current natural gas prices, will increase
by approximately $14 million over 2000 levels. Anchor has significantly offset  
this impact through the cost recovery program implemented in 2000. Natural gas  
costs, however, have softened considerably in recent months, but there is no    
assurance that this trend will continue. 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.                                                

         There are currently a number of litigations pending which may consume a
portion of Anchor's liquidity. See Part II - Item 1. Legal Proceedings.         

        Anchor's results of operations were significantly impacted by the cost
of natural gas in 2000 and in the first nine months of 2001. This is a variable 
cost over which Anchor has little control. Significant increases in natural gas 
or energy costs could materially impact Anchor's results of operations or       
liquidity plans in 2001.                                                        

      Anchor's principal sources of liquidity through 2001 are expected to
continue to be funds derived from operations, borrowings under the Replacement  
Credit Facility and proceeds from sales of discontinued manufacturing           
facilities. Because of the change in control that would occur upon consummation 
of the sale of Consumers U.S. stock from Consumers to O-I, Anchor may not have  
the ability to borrow additional funds. Substantially all of its assets have    
been pledged and Anchor may be unable to raise needed cash from the sale of     
discontinued manufacturing facilities or other assets. Anchor's plans to        
increase liquidity include continuation of its cost reduction efforts,          
continuation of its natural gas cost recovery program, as well as increased     
sales from its supply agreements with major customers. No assurance can be given
that Anchor can accomplish these plans.                                         

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         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 Anchor's control. Should Anchor suffer        
material adverse conditions from the issues discussed above, additional measures
may be required. This may include sales of assets and/or consideration of other 
strategic alternatives. No assurance can be given that Anchor will have         
sufficient liquidity either from internally generated sources or external       
borrowings to continue its operations and to meet its obligation as they come   
due. If future operations result in noncompliance with the fixed charge coverage
ratio test under the Replacement Credit Facility or various equipment leases,   
Anchor would seek a waiver; however, there can be no assurance that such a      
waiver would be granted.                                                        

IMPACT OF INFLATION                                                   

         The impact of inflation on the costs of Anchor, 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, Anchor has experienced significant cost increases in   
specific materials and energy, primarily due to the abnormally high energy costs
experienced during the year, and has not been fully able to pass on inflationary
cost increases to its customers for several years, although it did realize some 
price relief in 2001.                                                           

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, Anchor's shipment volume is typically higher in the second and third  
 quarters. Consequently, Anchor will build inventory during the first quarter in
anticipation of seasonal demands during the second and third quarters. In     
 addition, Anchor has historically scheduled 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 normally adversely affect profitability during the 
first and fourth quarters, however Anchor 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:                                                                     

  -    the Company's and Anchor's liquidity and capital resources,

   -    the Company's and Anchor's debt levels and ability to obtain
financing and service debt,                         

        -    competitive pressures and trends in the glass container industry,

-    prevailing interest rates,                               

-    legal proceedings and regulatory matters, and            

-    general economic conditions.                             

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        Forward-looking statements involve risks and uncertainties (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 restructuring of Consumers and the proposed sale  
of Consumers U.S. stock to O-I; the highly competitive nature of the glass      
container industry and the intense competition from makers of alternative forms 
of packaging; the fluctuation in the price of natural gas; Anchor's focus on the
beer industry and its dependence on certain key customers; the seasonal nature  
of brewing, iced tea and other beverage industries; Anchor's dependence on      
certain executive officers; and changes in environmental and other government   
regulations. Anchor 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             

      Anchor's Replacement Credit Facility is subject to variable interest
rates. A change in interest rates could have an impact on results of operations.
Anchor'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, Anchor is not subject to market risk from its long-term debt         
instruments. Less than 1% of Anchor's sales are denominated in currencies other 
than the U.S. dollar, and Anchor does not believe its total exposure to be      
significant. Anchor hedges certain of its estimated natural gas purchases,      
typically over a maximum of six to twelve months, through the purchase of       
natural gas futures. Also, Anchor may enter into put options for purchases of   
natural gas. Accounting for these derivatives may increase volatility in        
earnings.                                                                       

 PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.                                                     

        On October 5, 2001 an action was filed by Consumers U.S., in the Court
of Chancery of the State of Delaware in and for New Castle County against Anchor
and certain members of its Board of Directors. The action alleges, among other  
things, that the Rights Plan adopted by the Anchor Board of Directors on        
September 26, 2001, and the amendment dated September 27, 2001, is unlawful and 
that certain members of the board breached their fiduciary duties of loyalty,   
good faith and care and have acted unlawfully in adopting the rights plan.      
Through this action in the Delaware court, Consumers U.S. seeks injunctive      
relief to, among other things, prevent the application of the Rights Plan to a  
proposed sale of the stock of Consumers U.S. to O-I. The complaint also seeks   
declaratory relief and damages with respect to the actions associated with the  
adoption of the Rights Plan by Anchor. The scope of the rights and the holders  
of the rights may be affected by any final judgment entered in such action.     
Anchor intends to vigorously defend the claims alleged in the action. On October
11, 2001 O-I filed a similar action, alleging, among other things, that the     
Rights Plan adopted by the Anchor Board of Directors is unlawful.               

      On September 26, 2001, Anchor filed a complaint in the United States
Federal District Court in Tampa, Florida against O-I seeking an injunction      
against O-I from acquiring                                                      

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the majority equity interest in Anchor from Consumers or statutory treble       
damages in lieu thereof. In its complaint, Anchor alleges that the proposed     
acquisition by O-I would violate Federal and Florida antitrust laws as well as  
tortiously interfere with Anchor's Indentures. On October 2, 2001, O-I agreed   
with Anchor that it would not acquire the stock of Consumers U.S. until 60 days 
from the time O-I gives Anchor notice that it has made a filing with the FTC. To
date, Anchor has not received notice from O-I that a filing with the FTC has    
been made.                                                                      

         On October 13, 2000, certain stockholders of Anchor, specifically CoMac
Partners, L.P., CoMac Endowment Fund, L.P., CoMac Opportunities Fund, L.P.,     
CoMac International, N.V., Carl Marks Strategic Investments, LP, Carl Marks     
Strategic Investments II, LP, Varde Partners, L.P., Varde Fund (Cayman) Ltd.,   
Pequod Investments, L.P., Pequod International Ltd., Cerberus Partner L.P. and  
Cerberus International Ltd. (collectively, the "Plaintiffs"), commenced a       
shareholder derivative action against certain of Anchor's directors, officers   
and certain related entities in The Court of Chancery of the State of Delaware  
in and for New Castle County. The action seeks recovery to Anchor, which is     
named as a party to the action in the capacity of a nominal defendant, for      
damages Plaintiffs allege Anchor suffered through breach of fiduciary duties    
(including extension of the G&G promissory note without proper authority and    
approval of an allocation of write off of certain software costs from Consumers 
to Anchor), unjust enrichment and usurpation of corporate opportunity of Anchor 
(including the receipt of $15.0 million by Consumers in connection with an      
agreement to manage the renovation of the Houston facility). Anchor is named as 
a party to the case for procedural purposes but no recovery is sought from      
Anchor. Anchor has been advised by the other defendants that they will          
vigorously defend the action and that they believe they have meritorious        
defenses.                                                                       

On June 22, 2001, the stockholders of Anchor identified in the
preceding paragraph of this Item 1 commenced an action against Anchor in the    
Court of Chancery of the State of Delaware in and for New Castle County. The    
plaintiffs are seeking an order directing that Anchor hold an annual meeting for
the election of directors and setting the time and place for the meeting, and   
directing that the entire board of directors stand for election at that meeting.
On October 25, 2001, the court ruled that the fifteen classified directors of   
Anchor should stand for re-election. If a majority of the continuing directors, 
as defined in the Indentures, are not re-elected, it may result in a "change in 
control" as defined in the Indentures.                                          

    On February 16, 2000, Owens commenced an action against Anchor and
certain of its affiliates, including Consumers and GGC, in the United States    
District Court for the Southern District of New York. Owens alleged violations  
of the Technical Assistance and License Agreement ("TALA") and its resulting    
termination. Owens sought various forms of relief including (1) a permanent     
injunction restraining Anchor and its affiliates from infringing Owens' patents 
and using or disclosing Owens' trade secrets and (2) damages for breaches of the
TALA.                                                                           

      On November 6, 2000, Anchor and its affiliates, including Consumers,
reached a settlement concerning all aspects of the Owens dispute. As part of the
settlement, Owens will grant Anchor and its affiliates a limited license through
2005. The limited license will cover technology in place during the term of the 
TALA, at the same royalty rate as in the TALA. Upon expiration of the limited   
license, Anchor and its affiliates, including Consumers, will receive a paid-up 
license for that technology. Documentation for the settlement (including mutual 
releases) and the limited license agreement is being negotiated. Anchor believes
that it has reached agreement with Owens on all of the terms of the definitive  
documentation of the settlement. Under the settlement, Anchor, Consumers and GGC
will pay an aggregate of $5.0 million to Owens. Anchor estimated its allocation 
of this settlement to be $2.9 million, based on sales and machine installations.
Consumers, GGC and another affiliate will receive a refund of $1.2 million, in  
the aggregate, of royalties paid previously under protest. Consummation of the  

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settlement will terminate all litigation over the matter, including the federal 
court suit and an overseas lawsuit, as well as arbitration proceedings. The     
special committee of the Board has been directed by the Board to review the     
terms of this settlement and the terms of the sale by Consumers to O-I.         

       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 these proceedings is not expected to have a material adverse effect  
on the financial condition or operating results of the Company, based on the    
Company's current understanding of the relevant facts and law.                  

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                                                 

None                                        

b.   Reports on Form 8-K                                      

None                                        

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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:  November 14, 2001                     /s/ Graeme Eadie                   
                                 -----------------------
                      Graeme Eadie
                                 Duly Authorized Officer

22

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-Q’ Filing		Date		First		Last			Other Filings
		10/31/03		8		16
		9/26/03		8
Filed on:		11/14/01		22
		11/1/01		1
		10/31/01		8
		10/25/01		20
		10/15/01		15
		10/11/01		9		19
		10/5/01		9		19
		10/2/01		11		20
		10/1/01		7		17
For Period End:		9/30/01		1		16
		9/27/01		8		19
		9/26/01		8		19
		9/15/01		17
		8/31/01		10		14
		8/13/01		11		14
		8/3/01		10		13
		7/1/01		6		12
		6/30/01		13					10-Q,  NT 10-Q
		6/22/01		20
		5/23/01		10					8-K
		2/2/01		10
		12/31/00		4		15			10-K405,  NT 10-K
		11/6/00		20
		10/16/00		8		15
		10/13/00		20					8-K
		10/1/00		8		16
		9/30/00		2		13			10-Q
		2/16/00		20
		2/5/97		7
		12/18/96		7
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