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|MANAGEMENT'S DISCUSSION & ANALYSIS | EX-13
|OF OPERATIONS AND FINANCIAL CONDITION |
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INTRODUCTION
This discussion summarizes the significant factors
affecting the consolidated operating results, financial
condition and liquidity/cash flows of Anheuser-Busch
Companies, Inc. for the three-year period ended December
31, 1996. This discussion should be read in conjunction
with the Letter to Shareholders, Consolidated Financial
Statements and Notes to Consolidated Financial Statements
included in this annual report.
Financial results from continuing operations for 1996
and 1995 were impacted by certain significant one-time,
nonrecurring transactions and events which make meaningful
comparisons to prior years more difficult. The specific
transactions and events are summarized below.
1996 TRANSACTION:
1. SALE OF THE ST. LOUIS CARDINALS NATIONAL BASEBALL CLUB
During the first quarter 1996, the company completed
the sale of the St. Louis Cardinals Baseball Club. The sale
included Busch Memorial Stadium and several nearby parking
garages and other properties in downtown St. Louis. The sale
price was $150 million resulting in a $54.7 million pretax
gain ($.06 per share) which is shown as a separate line item
in the Consolidated Statement of Income.
1995 TRANSACTIONS:
In 1995, Anheuser-Busch announced a series of strategic
initiatives designed to focus maximum attention on the
company's core businesses, improve future profitability and
enhance shareholder value, as follows:
1. DIVESTITURE OF FOOD PRODUCTS SEGMENT
In 1995, Anheuser-Busch announced its intention to divest
its food products segment through the tax-free 100% spin-off
to shareholders of The Earthgrains Company (formerly known as
Campbell Taggart) and the divestiture of the assets of Eagle
Snacks, Inc. As such, in accordance with generally accepted
accounting principles, in 1995 Anheuser-Busch restated all
prior period financial statements and financial information
to exclude the historical combined financial results of
Earthgrains and Eagle Snacks from detailed financial
components. All Earthgrains and Eagle Snacks related
financial results and financial information are reported in
the Anheuser-Busch consolidated financial statements as
"Discontinued Operations," and have no impact on continuing
operations.
There was no reported gain or loss on the Earthgrains
spin-off. However, Anheuser-Busch recognized $19.8 million
in after-tax spin-off related costs and taxes ($.04 per share)
in the fourth quarter 1995. Pursuant to the decision to
divest Eagle Snacks, Anheuser-Busch recognized a $205.7
million after-tax charge ($.39 per share) in the fourth
quarter 1995. The spin-off related costs and taxes and the
Eagle Snacks write-off are reported as part of Discontinued
Operations.
In connection with the Earthgrains spin-off, each
Anheuser-Busch shareholder received one share of Earthgrains
voting common stock for every 25 shares of Anheuser-Busch
stock owned (25:1 ratio, reflected on a pre-split basis) in
a special dividend distributed March 26, 1996. Earthgrains
common stock began trading on the New York Stock Exchange as
a separate company on March 27, 1996.
Additional information concerning the divestiture of the
food products segment is included in Note 3 to the Consolidated
Financial Statements.
2. CONSOLIDATION OF BREWING CAPACITY RESULTING IN THE CLOSURE
OF THE TAMPA BREWERY
By utilizing the full production capacity of its new
Cartersville, Ga., brewery, plus ongoing modernization
programs at its other 11 breweries, Anheuser-Busch has
added a significant amount of efficient, lower-cost capacity
in recent years. The Tampa brewery was the company's highest
cost-per-barrel brewery and, accordingly, was closed in 1995
resulting in a $160 million pretax write-off ($.19 per share)
in the fourth quarter 1995.
34
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|MANAGEMENT'S DISCUSSION & ANALYSIS |
|OF OPERATIONS AND FINANCIAL CONDITION |
----------------------------------------------
This write-off is shown as a separate line item
on the company's Consolidated Statement of Income.
Closing the Tampa brewery generated approximately $33
million of pretax operational cost savings in 1996.
3. REDUCTION OF BEER WHOLESALER INVENTORIES
In a move designed to provide the freshest
possible beer to the marketplace,achieve greater
systemwide distribution efficiencies and reduce costs,
Anheuser-Busch reduced wholesaler inventories by about
one-third during the fourth quarter 1995.
The decision to reduce wholesaler inventories
resulted in Anheuser-Busch shipping approximately 1.1
million fewer barrels in the fourth quarter 1995. This
reduced net sales by approximately $107 million and
reduced operating profits by approximately $74.5
million. This financial impact is not separately
identified in the company's Consolidated Statement of
Income.
The company maintained relatively low inventory
levels throughout 1996 and enters 1997 with inventory
levels that continue to be the lowest of all major
brewers. The ability to have the freshest beer
available provides Anheuser-Busch a significant
competitive advantage. The company has communicated
its freshness advantage to consumers through a
comprehensive marketing campaign, which includes the
"Born On" freshness dating on beer packages.
The lower inventory levels have resulted in
approximately $12 million in annual systemwide cost
savings for Anheuser-Busch's network of beer
wholesalers through improved scheduling, lower
transportation costs and reduced working capital
requirements.
CONCLUSION
The above-noted actions have made Anheuser-Busch a
more focused and competitive company. By capitalizing
on its competitive advantages in its core businesses,
Anheuser-Busch plans to achieve three major objectives
in coming years in order to generate the highest
returns for shareholders:
1. The company will continue to gain an increased
share of the brewing industry in the United States
(both market share and margin share). Anheuser-Busch
was the only major brewer to increase market share and
sales volume in 1996. The company will continue to
apply its marketing expertise and substantial cash flow
to achieve these goals.
2. Anheuser-Busch will continue to globalize its
beer operations by building Budweiser brand equity
worldwide and making selected investments in brewers
with leading brands in key international beer growth
markets. International beer volume has averaged
double-digit annual growth over the last 15 years and
the company made significant marketing investments to
build Budweiser brand recognition outside the U.S.
In December 1996, the company announced its intention
to purchase an additional 25% equity investment in
Mexico's largest brewer, Grupo Modelo. Due diligence
is complete and the companies are currently working to
resolve differences of opinion concerning certain
purchase price adjustments. When finalized, the
company expects its total investment to approximate $1
billion. This additional investment reflects the
company's commitment to international expansion.
Additional information regarding the company's
investment in Grupo Modelo can be found in the
International Investments section of this discussion
and in Note 2 to the Consolidated Financial Statements.
3. The company will support the growth of its
packaging and entertainment subsidiaries. Metal
Container Corporation (MCC), the company's can
manufacturing subsidiary, provides significant
efficiencies and cost savings in tandem with brewing
operations, and the company will continue to invest in
technology and capacity improvements as necessary to
support MCC and beer volume growth. The company's Busch
Entertainment theme park subsidiary is a significant
contributor to corporate earnings and provides
Anheuser-Busch with a unique opportunity to showcase
the company to approximately 20 million visitors
annually.
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|MANAGEMENT'S DISCUSSION & ANALYSIS |
|OF OPERATIONS AND FINANCIAL CONDITION |
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CONTINUING OPERATIONS
As previously noted, the significant nonrecurring
transactions in 1996 and 1995 make it difficult to
directly compare 1996 vs. 1995, and 1995 vs. 1994
financial results from continuing operations. Therefore,
key financial comparisons are presented in the following
summaries on both a "Normalized Operations" basis
(excluding the nonrecurring items) and an "As Reported"
basis (including the nonrecurring items) in order to
facilitate a more complete understanding of underlying
company operating results.
During the second quarter 1996, Anheuser-Busch
completed the sale of the majority of the assets of Eagle
Snacks, Inc. to Frito-Lay, a subsidiary of PepsiCo.
Accordingly, Anheuser-Busch adjusted its previously
estimated loss provision for the disposition of the food
products segment and recognized a $33.8 million after-tax
gain ($.07 per share) during the second quarter. This gain
is reported entirely in Discontinued Operations and has no
impact on financial results from Continuing Operations.
[SALES GRAPH]
Key financial comparisons from continuing operations
(which exclude the financial results of The Earthgrains
Company and Eagle Snacks, Inc.) are summarized below:
- -----------------------------------------------------------------------------------
FULL YEAR 1996 VS. 1995 ($ IN MILLIONS, EXCEPT PER SHARE)
- -----------------------------------------------------------------------------------
1996 | 1995 | 1996 VS. 1995
--------------------|-----------------------|----------------------
NORMALIZED AS | NORMALIZED AS | NORMALIZED AS
OPERATIONS REPORTED| OPERATIONS REPORTED| OPERATIONS REPORTED
--------------------|-----------------------|----------------------
| |
Gross Sales $12,622 $12,622 | $12,131 $12,004 | Up 4.0% Up 5.1%
Net Sales 10,884 10,884 | 10,448 10,340 | Up 4.2% Up 5.3%
Operating Income 2,029 2,084 | 1,867 1,633 | Up 8.7% Up 27.6%
Income from |
Cont. Oper. 1,123 1,156 | 1,032 887 | Up 8.8% Up 30.4%
Fully Diluted | |
Earnings per Share 2.21 2.27 | 1.99 1.71 | Up 11.1% Up 32.7%
- -------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Full Year 1995 vs. 1994 ($ in millions, except per share)
- -----------------------------------------------------------------------------
1995 Normalized Change vs. | 1995 As Change vs.
Operations 1994 | Reported 1994
-------------------------------|------------------------------
|
Gross Sales $12,131 Up 3.6% | $12,004 Up 2.6%
Net Sales 10,448 Up 4.2% | 10,340 Up 3.1%
Operating Income 1,867 Up .8% | 1,633 Dn 11.9%
Income from |
Cont. Oper. 1,032 Up 1.8% | 887 Dn 12.6%
Fully Diluted |
Earnings per Share 1.99 Up 4.5% | 1.71 Dn 10.2%
- -----------------------------------------------------------------------------
DETAILED FINANCIAL STATEMENT ANALYSIS IN THE REMAINDER
OF THIS DISCUSSION FOCUSES ON CONTINUING OPERATIONS ON
A NORMALIZED OPERATIONS BASIS.
---------------------------
SALES -- 1996 VS. 1995
Anheuser-Busch achieved record gross sales during
1996 of $12.6 billion, an increase of $491 million or 4.0%
over 1995 gross sales of $12.1 billion. Gross sales include
$1.74 billion in federal and state beer excise taxes for
1996. Net sales for 1996 were also a record, $10.9 billion,
an increase of $436 million or 4.2% over 1995 ne sales of
$10.4 billion.
The increase in gross and net sales in 1996 was driven
primarily by increased beer sales volume, higher net revenue
per barrel sold and higher theme park revenues. Consolidated
sales growth for 1996 would have been even higher if not for
lower sales by the company's recycling operations due to lower
aluminum prices and lower revenues due to the sale of the St.
Louis Cardinals during the first quarter 1996.
36
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|MANAGEMENT'S DISCUSSION & ANALYSIS |
|OF OPERATIONS AND FINANCIAL CONDITION |
--------------------------------------------
Anheuser-Busch, Inc., the company's brewing
subsidiary and largest contributor to consolidated
sales, reported record 1996 sales volume of 91.1
million barrels, an increase of 3.6 million barrels, or
4.1%, vs. the 87.5 million barrels sold during 1995.
As previously noted, however, reported 1995 volume
amounts were negatively impacted by the beer wholesaler
inventory reduction. Excluding the inventory
reduction, 1996 beer volume would have increased 2.5
million barrels, or 2.8%, over 1995.
Reported market share for 1996 was 45.2% of industry
shipments, an increase of 1.1 share points when
compared to 1995 reported market share of 44.1%.
Excluding the impact of the wholesaler inventory
reduction, Anheuser-Busch's 1995 market share would
have been 44.4%. Market share is determined based on
industry sales estimates provided by the Beer Institute
and includes exports, imports, nonalcohol brews and
other malt beverages.
During 1996, Anheuser-Busch's core premium and
super-premium brands (the Bud and Michelob Families)
continued to gain momentum, with Bud Light growing at
an annualized double-digit pace. Overall, Bud Family
sales were up almost 2%.
The company's core brands are complemented by a
broad portfolio of specialty brands, appealing to all
tastes and styles, including Michelob Amber Bock,
Michelob HefeWeizen, Red Wolf, the American Originals
line and imported Carlsberg and Carlsberg Light.
The company's international beer volume performance
was strong during 1996, led by continuing sales
expansion in the United Kingdom, Ireland and Japan.
SALES -- 1995 VS. 1994 AND 1994 VS. 1993
Gross sales during 1995 of $12.1 billion were 3.6%
higher than 1994. Gross sales for 1994 were $11.7
billion, an increase of 5.0% over 1993. Net sales for
1995 of $10.4 billion were 4.2% higher than 1994. Net
sales during 1994 were $10.0 billion, an increase of
5.9% over 1993. Gross sales include approximately $1.7
billion in federal and state beer excise taxes for both
1995 and 1994.
Anheuser-Busch, Inc. sold 87.5 million barrels of
beer in 1995, including the impact of the beer
wholesaler inventory reduction. Excluding the 1995
beer wholesaler inventory reduction, Anheuser-Busch,
Inc. would have reported 1995 sales volume of 88.6
million barrels, an increase of 100,000 barrels, or
.1%, vs. the 88.5 million barrels sold during 1994.
Sales-to-retailers were up slightly in 1995 as
compared to 1994. In 1995, Anheuser-Busch's core
premium brands (the Bud and Michelob Families) gained
momentum, with Bud Light increasing at a double-digit
rate and Michelob Light increasing 9%. Bud Ice sales
trends improved throughout 1995. Overall, the company
introduced seven new beer brands in 1995.
Anheuser-Busch, Inc. beer sales for 1994 were 88.5
million barrels, an increase of 1.2 million barrels,
or 1.4% higher than the 87.3 million barrels sold
during 1993. 1994 market share was 44.4%, an increase
of .1 of a point, compared to 1993 market share.
The Bud Family was a significant contributor to
increased sales volume for 1994 and also contributed
to an approximate 1% increase in revenue per barrel
for the year. Bud Family sales-to-retailers increased
3.5% for the year, led by Bud Light, which grew at a
double-digit rate. In the third quarter 1994, Bud
Light became the largest-selling light beer in the
country and the second-largest beer brand overall,
behind Budweiser.
COST OF PRODUCTS AND SERVICES
Cost of products and services for 1996 was $7.0
billion, a 2.1% increase over the $6.8 billion reported
for 1995. This increase follows 4.6% and 5.3% increases
in 1995 and 1994, respectively. The increase in the
cost of products and services in 1996 is attributable
to increased beer sales volume and increased raw
material costs, particularly brewing materials,
partially offset by production efficiency savings and
lower scrap aluminum prices related to recycling
operations.
37
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|MANAGEMENT'S DISCUSSION & ANALYSIS |
|OF OPERATIONS AND FINANCIAL CONDITION |
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Gross profit as a percentage of net sales was
36.0% for 1996 compared to 34.7% for 1995, an increase
of 1.3 percentage points, reflecting higher net revenue
per barrel sold and productivity improvements.
During 1995, beer packaging costs increased
substantially as a result of higher aluminum costs.
However, such increases were mitigated by the company's
having protected pricing on more than half of its 1995
aluminum sheet requirements at prices below market level.
As a percent of net sales, gross profit for 1995 decreased
.5 of a percentage point compared to 35.2% for 1994.
[TOTAL
Cost of products and services for 1994 increased EMPLOYEE-RELATED
primarily due to higher production costs for the company's COSTS GRAPH]
brewing subsidiary and other beer-related operations and
higher attendance at the company's entertainment operations.
MARKETING, DISTRIBUTION AND ADMINISTRATIVE EXPENSES
Marketing, distribution and administrative expenses
for 1996 were $1.89 billion, an increase of 7.6% compared
to 1995. These expenses increased in 1996 primarily due to
sponsorship of the Centennial Olympic Games in Atlanta,
increased spending to support accelerated volume growth for
premium brands, global Budweiser brand building initiatives
and promotional spending in support of "Born On" freshness dating.
Marketing, distribution and administrative expenses
for 1995 were $1.76 billion, an increase of 4.6% compared to
1994. These expenses increased in 1995 primarily due to the
addition of marketing and distribution expenses for new beer
brands and higher international beer marketing expenses.
Marketing, distribution and administrative costs for 1994
were $1.68 billion, an increase of 4.2% over 1993. The increased
expense level for 1994 was primarily the result of the company's
new joint venture in Japan which began operations in September
1993.
Areas of cost increase incurred by the company since 1993
include media advertising, point-of-sale materials and
developmental expenses associated with new advertising and
marketing programs for both established and new products,
payroll and related costs, business taxes, supplies and
general operating expenses.
EMPLOYEE-RELATED COSTS
Employee-related costs during 1996 totaled $1.80
billion, an increase of $61 million, or 3.5%, vs. 1995
costs of $1.74 billion, and reflect normal increases in
salaries, wages and benefit levels. Employee-related
costs during 1995 increased $30 million, or 1.8%, vs.
1994 costs of $1.71 billion and again reflect normal
increases in salaries, wages and benefit levels. Employee-
related costs decreased .5% in 1994, reflecting 10% fewer
salaried employees due to the enhanced retirement program
offered in 1993.
Salaries and wages paid during 1996 totaled $1.45
billion, an increase of 5.0% vs. 1995. Pension, life
insurance and health care benefits amounted to $235.8
million while payroll taxes were $110.1 million, reflecting
a decrease of 4.1% and an increase of 1.0%, respectively,
compared to 1995. Full-time employees for continuing
operations at December 31, 1996 numbered 25,123, compared
to 25,181 at December 31, 1995.
During the second quarter of 1994, a four-year labor
contract covering the majority of the company's beer production
employees was ratified. The contract, which expires February 28,
1998, enhanced a wage and benefits package which was already the
most attractive in the industry and established an improved
framework for the company to achieve necessary operating
productivity increases over time.
38
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|MANAGEMENT'S DISCUSSION & ANALYSIS |
|OF OPERATIONS AND FINANCIAL CONDITION |
--------------------------------------------
TAXES
The company is significantly impacted by federal,
state and local taxes, including beer excise taxes.
Taxes applicable to 1996 operations (not including the
many indirect taxes included in materials and services
purchased) totaled $2.68 billion and highlight the
burden of taxation on the company and the brewing
industry in general. Total taxes for 1996 increased
$241 million or 9.9% vs. 1995 taxes of $2.44 billion.
This follows a decrease of 4.0% in 1995 and an increase
of 7.8% in 1994. Total taxes are presented on an as
reported basis.
[OPERATING INCOME
(CONTINUING The increase in total taxes for 1996 compared to
OPERATIONS BASIS) 1995 is primarily due to higher beer excise taxes from
GRAPH] increased beer volume and higher income taxes on the
company's higher pretax earnings level in 1996. The
significant decrease in total taxes for 1995 compared
to 1994 is primarily due to reduced income taxes on
lower taxable income, resulting from the costs
associated with closing the Tampa brewery and the
impact of the beer wholesaler inventory reduction. The
beer wholesaler inventory reduction also contributed to
slightly lower beer excise taxes in 1995 vs. 1994.
The significant increase in total taxes for 1994
compared to 1993 is due to higher income taxes
resulting from the company's substantially higher
earnings level compared to 1993. Earnings for 1993 were
negatively impacted by a nonrecurring pretax
restructuring charge of $401.3 million.
OPERATING INCOME, NORMALIZED BASIS
Operating income represents the measure of the
company's financial performance before interest costs
and other nonoperating items.
Operating income for 1996 was $2.03 billion, an
increase of $162 million, or 8.7%, as compared to 1995.
The increase in 1996 operating income is due
primarily to higher beer sales volume and significantly
higher beer margins due to improved pricing and
continued productivity improvements. Productivity
improvements in 1996 generated nearly $100 million in
cost savings vs. 1995.
As anticipated, international brewing's profit
contribution was down somewhat in 1996 compared to 1995
due to substantially higher investment spending on
marketing for global Budweiser brand building and
having a full year of operating results for the joint
venture in China included in 1996 vs. only partial year
results in 1995.
Metal Container Corporation, the company's can
manufacturing subsidiary, reported essentially flat
profits during 1996 vs. 1995 primarily due to weaker
can pricing.
The company's Busch Entertainment theme park
subsidiary was a significant contributor to corporate
performance through its fifth consecutive year of
record attendance and profitability in 1996. Busch
Entertainment's year-round theme parks were largely
responsible for this record performance which was
achieved despite an unusually active hurricane season
and a disruption in normal attendance patterns due to
the Centennial Olympic Games in Atlanta. The Busch
Entertainment facilities achieved aggregate record
attendance of approximately 20 million guests in 1996,
slightly exceeding the levels achieved in 1995.
Operating income for 1995 was $1.87 billion, an
increase of $14 million, or .8%, as compared to 1994.
Operating income for 1994 increased 9.8% over 1993
operating income of $1.69 billion. The increase in
operating income for 1995 was primarily due to the
performance of the company's international beer,
packaging and theme park operations.
The increase in operating income for 1994 was
primarily the result of positive domestic and
international beer performance, offset by lower
earnings at the St. Louis Cardinals Baseball Club
(attributable primarily to the baseball players
strike).
39
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|MANAGEMENT'S DISCUSSION & ANALYSIS |
|OF OPERATIONS AND FINANCIAL CONDITION |
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NET INTEREST COST/INTEREST CAPITALIZED
Net interest cost (interest expense less interest
income) for 1996 was $223.4 million, an increase of $7.4
million, or 3.4%, compared to 1995. The increase in net
interest cost in 1996 was due to higher average debt
balances outstanding during the period, primarily as a
result of financing capital expenditures and share
repurchases, largely offset by lower average interest rates.
Net interest cost for 1995 was $216.0 million, a decrease
of $.7 million compared to 1994. The decrease in net interest
cost in 1995 was primarily the result of higher average [INCOME FROM
interest rates during the year offset by lower average debt CONTINUING
balances and higher interest income. Net interest cost for OPERATIONS*/
1994 was $216.7 million, an increase of $15.0 million, or 7.4%, DIVIDENDS
over 1993. The increase in net interest cost in 1994 was due ON COMMON
to higher average debt balances outstanding during the period, STOCK GRAPH]
primarily as a result of financing capital expenditures, share
repurchases and international brewing investments.
Specific information regarding company financing activity,
including long-term debt activity, capital expenditures, share
repurchases and dividends, is presented in the Liquidity and
Capital Resources section of this discussion.
Interest capitalized increased $11.2 million, to $35.5
million in 1996, after increasing $2.5 million in 1995. The
increases in 1996 and 1995 were due primarily to higher
construction-in-progress balances relating to ongoing
modernization projects at the company's breweries. Interest
capitalized decreased $13.4 million in 1994 as compared to 1993.
The decline in 1994 was related to the spring 1993 start-up of
the company's brewery in Cartersville, Ga., which resulted in
the cessation of interest capitalization for completed areas of
this facility.
OTHER INCOME/(EXPENSE), NET
Other income/(expense), net includes numerous items of
a nonoperating nature which do not have a material impact on
the company's consolidated results of operations, either
individually or in the aggregate.
Other (expense), net was $3.0 million in 1996 compared
to $20.5 million of other income, net in 1995. The change is
primarily due to the reclassification of certain purchase
discounts from other income/(expense), net to cost of products
and services in 1996. Other income, net was $20.5 million and
$17.6 million, respectively, for 1995 and 1994, primarily
reflecting dividend income from the Grupo Modelo investment
and purchase discounts, offset by numerous miscellaneous items.
INCOME FROM CONTINUING OPERATIONS, NORMALIZED BASIS
Income from continuing operations for 1996 was $1.12
billion, an increase of 8.8% compared to 1995 income from
continuing operations of $1.03 billion. 1995 income from
continuing operations increased 1.8% compared to 1994.
Income from continuing operations for 1994 was $1.01 billion,
an increase of 8.5%, over 1993.
The company's effective income tax rate was 38.9% for
1996 compared to 39.1% for 1995. The decrease in the effective
rate in 1996 is due to lower state taxes and lower nondeductible
costs. The effective tax rate was 39.1% for 1995 vs. 39.5% for
1994. The effective rate for 1994 was 39.5% vs. an effective
rate of 42.4% in 1993.
Comparisons with the 1993 effective rate are not meaningful
due to the impact of the deferred tax revaluation adjustment (in
accordance with FAS 109) to reflect the retroactive impact of the
1% federal tax rate increase signed into law during 1993. Excluding
this nonrecurring item, the effective tax rate for 1993 was 39.7%.
40
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|MANAGEMENT'S DISCUSSION & ANALYSIS |
|OF OPERATIONS AND FINANCIAL CONDITION |
------------------------------------------
FULLY DILUTED EARNINGS PER SHARE FROM CONTINUING
OPERATIONS, NORMALIZED BASIS
Fully Diluted Earnings Per Share from Continuing
Operations, Normalized Basis Fully diluted earnings per
share from continuing operations for 1996 were $2.21,
an increase of $.22, or 11.1%, compared to 1995. Fully
diluted earnings per share from continuing operations
for 1995 were $1.99, an increase of 4.5% compared to
[FULLY DILUTED 1994 earnings per share of $1.90. Earnings per share
EARNINGS PER for 1994 increased 12.4% compared to 1993.
SHARE FROM
CONTINUING Fully diluted earnings per share continue to benefit
OPERATIONS* from the company's ongoing share repurchase program.
GRAPH] The company repurchased approximately 22 million shares
in 1996, or approximately 4% of outstanding shares.
Fully diluted earnings per share reflect the full
conversion of the company's 8% Convertible Debentures
Due 1996 as of September 30, 1996, and the elimination
of related after-tax interest expense through that
date.
FINANCIAL POSITION
Anheuser-Busch's strong financial profile allows it
to pursue profitable growth while providing substantial
direct returns to shareholders. Accordingly, the
company has established well-defined priorities for its
operating cash flow:
1. REINVESTING IN CORE BUSINESSES TO ACHIEVE
PROFITABLE GROWTH. The company will continue to make
significant investments in its capital asset base to
ensure the highest efficiency and lowest cost in its
operations.
2. CONTINUING DIVIDEND PAYMENTS TO SHAREHOLDERS AND
REPURCHASING SHARES OF COMMON STOCK. The company has
paid dividends in each of the last 63 years. During
that time, Anheuser-Busch stock has split on eight
different occasions and stock dividends were paid three
times. Recognizing the preference of many investors,
Anheuser-Busch will continue to repurchase shares of
its common stock in the marketplace to provide direct
returns to shareholders. The company's current
intention is to repurchase 3% to 4% of outstanding
common shares each year.
LIQUIDITY AND CAPITAL RESOURCES
The company's primary sources of liquidity are cash
provided from operating activities and certain
financing activities. Information on the company's
consolidated cash flows (categorized by operating
activities, financing activities and investing
activities) for the years 1996, 1995 and 1994 is
presented in the Consolidated Statement of Cash Flows
in this annual report.
The principal source of the company's cash flow is
cash generated by operations. Additional sources of
cash in 1996 included proceeds from the sale of the
Cardinals and the sale of the assets of Eagle Snacks.
Principal uses of cash are capital expenditures, share
repurchases, dividends and new business acquisitions.
Cash flow from operations for 1995 was adversely
impacted by the reduction in wholesaler inventories.
Working capital at December 31, 1996 was $34.9
million as compared to working capital of $268.6
million at December 31, 1995 and $57.0 million at
December 31, 1994. Cash and marketable securities were
$93.6 million at December 31, 1996 and 1995.
Total long-term debt was $.8 million higher at
December 31, 1996 vs. the balance at December 31, 1995
and was $203.7 million higher at December 31, 1995 vs.
December 31, 1994. The change in debt during these
periods is detailed on the next page, by key
components. Included in the gross reduction in
long-term debt for 1996 is the noncash conversion of
the company's 8% Convertible Debentures Due 1996.
41
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|MANAGEMENT'S DISCUSSION & ANALYSIS |
|OF OPERATIONS AND FINANCIAL CONDITION |
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DEBT ISSUANCES
$773.6 million in debt was issued in 1996, vs.
$597.6 million in 1995, as follows:
- --------------------------------------------------------
YEAR DESCRIPTION AMOUNT INTEREST RATE
(MILLIONS)
- --------------------------------------------------------
1996 Long-Term Notes $450.0 6.75%
Dual-Currency Notes 262.4 Floating
Industrial Revenue Bonds 50.7 Various
Other, Net 10.5 Various
- --------------------------------------------------------
1995 Debentures $350.0 Various
Long-Term Notes, Net 200.0 6.75%
Industrial Revenue Bonds 24.4 Various
Other, Net 23.2 Various
- --------------------------------------------------------
DEBT REDUCTIONS
Gross debt reduction was $772.8 million in 1996, vs.
$393.9 million in 1995, as follows:
- --------------------------------------------------------
YEAR DESCRIPTION AMOUNT INTEREST RATE
(MILLIONS)
- --------------------------------------------------------
1996 Sinking Fund Debentures $110.6 Various
Convertible Debentures 166.0 8%
Medium-Term Notes 13.0 7.43%
Industrial Revenue Bonds 30.0 Various
Commercial Paper, Net 417.0 Various
ESOP Guarantee 31.7 8.3%
Other, Net 4.5 Various
- --------------------------------------------------------
1995 Convertible Debentures $67.2 8%
Medium-Term Notes, Net 117.0 Various
Commercial Paper, Net 176.8 Various
ESOP Guarantee 30.3 8.3%
Other, Net 2.6 Various
- --------------------------------------------------------
Gains/losses on debt reduction activities were not
material, either individually or in the aggregate, to
the company's consolidated financial statements during
1996, 1995 or 1994.
42
------------------------------------------
|MANAGEMENT'S DISCUSSION & ANALYSIS |
|OF OPERATIONS AND FINANCIAL CONDITION |
------------------------------------------
At December 31, 1996 and 1995, there were $155.5
million and $572.5 million,respectively, of outstanding
commercial paper borrowings classified as long-term
debt. The commercial paper is intended to be
maintained on a long-term basis, with ongoing credit
support provided by the company's $1 billion revolving
credit agreement. Commercial paper can be refinanced
with long-term notes or debentures at the company's
discretion.
In 1989, the company registered $300 million of
seven-year convertible debentures with the Securities
and Exchange Commission (SEC) as part of its Wholesaler
[CASH FLOW FROM Investment Program and a total of $241.7 million were
CONTINUING issued. The debentures were convertible into preferred
OPERATIONS GRAPH] stock at a price of $47.60 per share, with each share
of preferred stock convertible into one share of common
stock. The effective conversion price was adjusted to
$23.39 in 1996 to reflect the impact of the spin-off of
Earthgrains and the two-for-one stock split.
The debentures matured October 1, 1996 and full
conversion to common stock was completed in the third
quarter 1996. The company issued 7.5 million and 2.8
million shares, respectively, in 1996 and 1995 in
conjunction with conversions. No preferred shares are
outstanding as a result of any conversion of the
debentures. A total of $166 million of these
debentures was outstanding at December 31, 1995.
The company utilizes SEC shelf registration
statements to provide financing flexibility. At
December 31, 1996, a total of $550 million was
available for debt issuance under existing shelf
registration statements.
In addition to its long-term debt financing, the
company has access to the short-term capital market
through its utilization of commercial paper which is
supported by its revolving credit facility. During
1994, the company terminated its previous $800 million
credit agreements and established a single $1 billion
credit agreement which expires August 2001. This
agreement provides the company with immediate and
continuing sources of liquidity. Further information
on the credit agreement can be found in Note 9 to the
Consolidated Financial Statements.
The company's ratio of total debt to total
capitalization was 44.8% and 47.1% at December 31, 1996
and 1995, respectively. The company's fixed charge
coverage ratio was 7.9x for the year ended December 31,
1996 and 7.6x for the year ended December 31, 1995.
A discussion of the company's risk management
activities is included in Note 20 to the Consolidated
Financial Statements.
43
- ------------------------------------------
|MANAGEMENT'S DISCUSSION & ANALYSIS |
|OF OPERATIONS AND FINANCIAL CONDITION |
- ------------------------------------------
CAPITAL EXPENDITURES
During the next five years, the company plans
to continue capital expenditure programs designed to
take advantage of growth and productivity improvement
opportunities for its beer/beer-related and entertainment
segments. Cash flow from operating activities will provide
the principal support for these capital investments.
However, a capital expenditure program of this magnitude,
in combination with share repurchases and possible additional
international beer-related investments, may require external
financing from time to time. The nature, extent and timing
of external financing will vary depending upon the company's
evaluation of existing market conditions and other economic
factors.
The company has a formal and intensive review procedure
for the authorization of capital expenditures. The most
important measure of capital project acceptability is its
projected discounted cash flow return on investment (DCFROI).
Total capital expenditures in 1996 amounted to $1.1 billion
as compared with $952.5 million in 1995, an increase of 13.9%.
Capital expenditures over the past five years totaled $4.0
billion.
Capital expenditures for 1996 for the company's beer/ [CAPITAL
beer-related operations were $902.5 million, including $90.2 EXPENDITURES/
million related to packaging operations. Major expenditures DEPRECIATION
by Anheuser-Busch, Inc. included numerous modernization AND
projects designed to improve productivity and reduce costs AMORTIZATION
at all the company's breweries. GRAPH]
Capital expenditures totaling $151.6 million were made
by the company's entertainment operations. Major entertainment
expenditures included new Busch Entertainment theme park
attractions.
The company expects its capital expenditures in 1997 to
approximate $1 billion. Capital expenditures during the
five-year period 1997-2001 are expected to approximate $4.5
billion.
SHARE REPURCHASE
The Board of Directors has approved various resolutions
in recent years authorizing the company to repurchase shares
of its common stock for investment purposes and to meet the
requirements of the company's various stock purchase and
incentive plans. The most recent resolution was approved
by the Board in July 1996 authorizing the repurchase of an
additional 50 million shares.
The company acquired 22.2 million, 13.6 million and
21.9 million shares (split-adjusted) of common stock in 1996,
1995 and 1994 for $770.2 million, $393.4 million and $563.0
million, representing approximately 4.4%, 2.6% and 4.1% of
common shares outstanding, respectively. At December 31, 1996,
approximately 2.6 million shares were available for repurchase
under the 1994 authorization and 50 million shares were
available under the July 1996 authorization.
DIVIDENDS
Cash dividends paid to common shareholders were $458.9
million in 1996 and $429.5 million in 1995. Dividends on
common stock are paid in the months of March, June, September
and December of each year. In the third quarter 1996,
effective with the September dividend, the Board of Directors
increased the quarterly dividend rate by 9.1% from $.22 to
$.24 per share. This increased annual dividends per common
share by 9.5%, to $.92 in 1996, compared with $.84 per
common share in 1995. In 1995, dividends were $.20 per
share for the first two quarters and $.22 per share for
the last two quarters.
44
------------------------------------------
|MANAGEMENT'S DISCUSSION & ANALYSIS |
|OF OPERATIONS AND FINANCIAL CONDITION |
------------------------------------------
ACQUISITIONS AND INVESTMENTS
As more fully described in Notes 2 and 6 to the
Consolidated Financial Statements, Anheuser-Busch made
several major acquisitions and business investments in
1996, 1995 and 1994. A summary of these acquisitions
and business investments follows.
1996 TRANSACTIONS
1. In 1993, the company purchased a 17.7% direct
and indirect interest in Diblo, the operating
subsidiary of Grupo Modelo, Mexico's largest brewer,
for $477 million. The purchase agreement gave
Anheuser-Busch options to increase its direct
investment in Grupo Modelo to approximately 35% and to
acquire an additional direct interest in Diblo. In
December 1996, Anheuser-Busch announced its intention
to purchase an additional 25% interest in Grupo Modelo.
Due diligence is complete and the companies are
currently working to resolve differences of opinion
concerning certain purchase price adjustments.
When finalized, the company expects its total
investment to approximate $1 billion and Anheuser-Busch
will directly and indirectly own 37% of Diblo.
The company will have remaining options, which
expire on December 31, 1997, to increase its direct
interest in Diblo to approximately 23%. A complete
exercise of these options would increase the company's
direct and indirect ownership in Diblo to 50.2%. The
company has not made a decision as to if, when, or to
what extent, it will exercise the remaining Diblo
options.
The company accounted for its Modelo investment on
the cost basis in 1996, 1995 and 1994. Due to the
nature of Anheuser-Busch's initial investment, the
company was not required to adjust its Modelo
investment to fair market value. In addition, the
initial investment was configured such that the
company's return was largely protected against
devaluation of the Mexican peso. Therefore, the 1994
peso devaluation and subsequent depreciation relative
to the U. S. dollar did not have a significant effect
on earnings in 1996, 1995 or 1994.
Commensurate with the additional purchase,
Anheuser-Busch will begin accounting for its investment
in Grupo Modelo on the equity basis and will therefore
recognize its pro rata share of Modelo's net earnings
as a separate line-item in the Consolidated Statement
of Income beginning in 1997. The difference between
income recognized on the cost basis in 1996, 1995 and
1994 and what would have been recognized had the
company applied equity accounting in those years is not
material.
Effective January 1, 1997, Mexico's economy is
considered hyperinflationary in accordance with
Financial Accounting Standard No. 52 (FAS 52), "Foreign
Currency Translation." Under FAS 52, the U.S. dollar
becomes the functional currency for entities operating
in hyperinflationary environments. As such, the impact
of financial statement translation adjustments for
monetary assets and liabilities is recognized in
earnings in the current period. Accordingly, all
translation gains and losses relating to the Modelo
investment will be recognized in earnings while the
Mexican economy is considered hyperinflationary.
Depending on certain circumstances, primarily the
ongoing value of the peso relative to the dollar,
hyperinflationary accounting may expose the company to
earnings volatility it would not otherwise normally
experience. It is anticipated the Mexican economy will
cease to be classified as hyperinflationary sometime in
late 1998.
2. In April 1996, the company invested $52.5
million to purchase a 5% equity stake in Antarctica
Empreendimentos e Participacoes (ANEP), a subsidiary
representing approximately 75% of the operations of
Companhia Antarctica Paulista (Antarctica), one of
Brazil's leading brewers. The investment agreement
also provided the company with options to increase its
investment to approximately 30% of ANEP beginning April
22, 1996 and generally expiring on April 21, 2002.
Concurrent with the investment in ANEP, the company
entered into a joint venture with Antarctica called
Budweiser Brasil Ltda. which is owned 51% by
Anheuser-Busch and 49% by Antarctica. Under the joint
venture agreement, ANEP will contract brew Budweiser on
behalf of the joint venture while the joint venture
will concentrate on the sales, marketing and
distribution of Budweiser in Brazil. The investment in
Budweiser Brasil Ltda. is accounted for on a
consolidated basis.
45
- ------------------------------------------
|MANAGEMENT'S DISCUSSION & ANALYSIS |
|OF OPERATIONS AND FINANCIAL CONDITION |
- ------------------------------------------
As a result of holding certain minority rights
under the investment agreement and having gained
representation on ANEP's Board of Directors in late
1996, the company will change its method of accounting
for the investment in ANEP from the cost to the equity
method effective January 1, 1997. The difference between
income recognized on the cost basis in 1996 and what would
have been recognized had the company applied equity
accounting is not material
3. In February 1996, the company entered into an
alliance with Companhia Cervecerias Unidas S.A. (CCU) and
Buenos Aires Embotelladora S.A. (BAESA). Under the agreement,
the company invested cash and donated equipment with a
market value of approximately $4 million to CCU-Argentina,
a brewing subsidiary of CCU, in exchange for a 4.4% equity
interest in CCU-Argentina. The investment agreement also
provided the company with options to increase its investment
to 20% of CCU-Argentina beginning October 1, 1998 and generally
expiring no later than December 31, 2002. The investment in
CCU-Argentina is accounted for on a cost basis.
1995 TRANSACTIONS
1. In April 1995, the company entered into a 50%
owned joint venture with Scottish Courage Ltd. which
consolidated the brewing and packaging of Budweiser in
the Stag Brewery at Mortlake in London, England. The joint
venture is accounted for on an equity basis.
2. In February 1995, the company finalized the purchase
of an 80% interest in a joint venture that owns the Wuhan
Brewery, in the fifth-largest city in the People's Republic
of China. The brewery has been modified to brew Budweiser for
distribution in the northern, central and eastern regions of
China. In 1996, the company purchased an additional 5.3%
interest in the joint venture pursuant to certain contract
provisions. The investment in the Wuhan joint venture is
accounted for on a consolidated basis.
1994 TRANSACTION
In the fourth quarter 1994, the company purchased
a 25% equity interest in Redhook Ale Brewery, Inc. of
Seattle, Wash., for $18 million. During 1995, in
conjunction with Redhook's initial public offering,
Anheuser-Busch invested an additional $12 million to
maintain its 25% equity ownership level. The equity
investment in Redhook is accounted for on an equity basis.
COMMON STOCK
A discussion of share repurchases and dividends
paid on common stock can be found in the Liquidity and
Capital Resources section of this discussion.
At December 31, 1996, common stock shareholders of
record numbered 65,079 compared with 64,118 at the end
of 1995. Total shares outstanding were 497.4 million at
December 31, 1996 compared to 508.0 million at December 31, 1995.
PRICE RANGE OF COMMON STOCK
The company's common stock is listed on the New York
Stock Exchange (NYSE) under the symbol "BUD." The table
below summarizes BUD high and low closing prices on the NYSE.
- ------------------------------------------------
PRICE RANGE OF ANHEUSER-BUSCH COMMON STOCK (BUD)
- ------------------------------------------------
1996 1995
---------------- ----------------
QUARTER HIGH LOW HIGH LOW
First....35 5/8 32 5/8 29 1/2 25 3/8
Second...38 1/4 32 1/2 29 7/8 27 5/8
Third....39 7/8 35 3/4 32 1/4 27 3/8
Fourth...42 7/8 37 3/8 34 31
- --------------------------------------------
46
------------------------------------------
|MANAGEMENT'S DISCUSSION & ANALYSIS |
|OF OPERATIONS AND FINANCIAL CONDITION |
------------------------------------------
The closing price of the company's common stock at
December 31, 1996 and 1995 was $40 and $33 3/8,
respectively.
The book value of each share of common stock at
December 31, 1996 was $8.10, as compared to $7.22 at
December 31, 1995.
SHAREHOLDERS EQUITY
Shareholders equity was $4.03 billion at December
31, 1996, as compared with $4.43 billion at December
31, 1995. The decrease in shareholders equity during
the year is attributable to the spin-off of
Earthgrains, share repurchases and dividends, offset by
net income on an as reported basis and the reduction of
the ESOP debt guarantee.
In July 1996, the Board of Directors authorized a
two-for-one stock split, effective for shareholders of
record August 15, 1996. Certificates for one
additional share of Anheuser-Busch common stock for
each share held at the record date were distributed to
shareholders on September 12, 1996. All share and per
share information has been adjusted to reflect the
impact of the split.
[SHAREHOLDERS
EQUITY/LONG-TERM EMPLOYEE STOCK OWNERSHIP PLAN
DEBT GRAPH]
As more fully described in Note 11 to the
Consolidated Financial Statements, the company added an
employee stock ownership plan (ESOP) feature to its
existing Deferred Income Stock Purchase and Savings
Plans in 1989. At that time, the ESOP borrowed $500
million, guaranteed by the company, and used the
proceeds to buy approximately 22.7 million shares of
common stock from the company. The ESOP shares are
being allocated to participants over 15 years as
contributions are made to the plan. Through the
various company stock ownership plans, employees of
Anheuser-Busch control approximately 10% of the
company's outstanding common stock.
ENVIRONMENTAL MATTERS
The company is subject to federal, state and local
environmental protection laws and regulations and is
operating within such laws or is taking action aimed at
assuring compliance with such laws and regulations.
Compliance with these laws and regulations is not
expected to materially affect the company's competitive
position. None of the Environmental Protection Agency
(EPA) designated clean-up sites for which Anheuser-
Busch has been identified as a Potentially Responsible
Party (PRP) would have a material impact on the
company's consolidated financial statements.
The company has traditionally provided a strong
commitment to environmental protection. This
commitment is manifested through the Environmental
Policy Committee, a committee of senior corporate
executives which reports to the Board of Directors.
Under the direction of the Environmental Policy
Committee, the company is implementing a corporatewide
environmental management system based on the Business
Charter for Sustainable Development. This system is
designed to help ensure compliance with applicable
laws, while simultaneously reducing costs.
The company's Environmental Policy, the foundation
of the environmental management system, integrates good
business practices with sound environmental practices.
The policy provides specific guidance for how the
environment must be factored into business judgments
and mandates special consideration of environmental
issues in conjunction with other business issues when
any of the company's facilities or business units plan
capital projects or changes in processes. In addition,
the company is piloting systems to ensure that its
standards are met by outside contractors and by
suppliers.
INFLATION
General inflation has not had a significant impact
on the company over the past three years and is not
expected to have a significant impact in the
foreseeable future.
47
- ------------------------------
|Consolidated Balance Sheet |
- ------------------------------
Anheuser-Busch Companies, Inc., and Subsidiaries
(In millions)
- --------------------------------------------------------------------------
DECEMBER 31, 1996 1995
- --------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and marketable securities.......................$ 93.6 $ 93.6
Accounts and notes receivable, less allowance for
doubtful accounts of $3.1 and $1.9 in 1996 and 1995 632.7 544.3
Inventories
Raw materials and supplies......................... 319.5 382.2
Work in process.................................... 80.6 58.6
Finished goods..................................... 131.0 141.9
Total inventories................................ 531.1 582.7
Other current assets................................. 208.4 290.0
-------------------
Total current assets............................... 1,465.8 1,510.6
INVESTMENTS AND OTHER ASSETS........................... 1,789.6 1,553.3
INVESTMENT IN DISCONTINUED OPERATIONS.................. -- 764.0
PLANT AND EQUIPMENT, NET............................... 7,208.2 6,763.0
-------------------
Total Assets.......................................$10,463.6 $10,590.9
===================
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Accounts payable.....................................$ 726.8 $ 682.8
Accrued salaries, wages and benefits................. 227.6 247.0
Accrued taxes........................................ 233.0 86.3
Other current liabilities............................ 243.5 225.9
-------------------
Total current liabilities.......................... 1,430.9 1,242.0
-------------------
POSTRETIREMENT BENEFITS................................ 524.6 512.1
-------------------
LONG-TERM DEBT......................................... 3,270.9 3,270.1
-------------------
DEFERRED INCOME TAXES.................................. 1,208.1 1,132.8
-------------------
COMMON STOCK AND OTHER SHAREHOLDERS EQUITY:
Common stock, $1.00 par value, authorized
800,000,000 shares................................. 705.8 347.3
Capital in excess of par value....................... 929.2 1,012.2
Retained earnings.................................... 6,924.5 6,869.6
Foreign currency translation adjustment.............. (8.8) (12.1)
-------------------
8,550.7 8,217.0
Treasury stock, at cost.............................. (4,206.2) (3,436.0)
ESOP debt guarantee offset........................... (315.4) (347.1)
-------------------
4,029.1 4,433.9
-------------------
COMMITMENTS AND CONTINGENCIES.......................... -- --
Total Liabilities and Equity.......................$10,463.6 $10,590.9
===================
- --------------------------------------------------------------------------
The accompanying statements should be read in conjunction with the Notes to
Consolidated Financial Statements appearing on pages 52-71 of this report.
48
-------------------------------------
|Consolidated Statement of Income |
-------------------------------------
Anheuser-Busch Companies, Inc., and Subsidiaries
(In millions, except per share)
- ---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- ---------------------------------------------------------------------------
Sales........................................$12,621.5 $12,004.5 $11,705.0
Less federal and state excise taxes........ 1,737.8 1,664.0 1,679.7
------------------------------
Net sales.................................... 10,883.7 10,340.5 10,025.3
Cost of products and services.............. 6,964.6 6,791.0 6,492.1
------------------------------
Gross profit................................. 3,919.1 3,549.5 3,533.2
Marketing, distribution and administrative
expenses................................. 1,890.0 1,756.6 1,679.9
Gain on sale of St. Louis Cardinals........ 54.7 -- --
Shutdown of Tampa brewery.................. -- (160.0) --
------------------------------
Operating income............................. 2,083.8 1,632.9 1,853.3
Interest expense........................... (232.8) (225.9) (219.3)
Interest capitalized....................... 35.5 24.3 21.8
Interest income............................ 9.4 9.9 2.6
Other income/(expense), net................ (3.0) 20.5 17.6
------------------------------
Income before income taxes................... 1,892.9 1,461.7 1,676.0
------------------------------
Provision for income taxes:
Current.................................... 643.0 523.8 597.5
Deferred................................... 93.8 51.3 64.0
------------------------------
736.8 575.1 661.5
------------------------------
Income from continuing operations............ 1,156.1 886.6 1,014.5
Income/(loss) from discontinued operations... 33.8 (244.3) 17.6
------------------------------
NET INCOME...................................$ 1,189.9 $ 642.3 $ 1,032.1
==============================
PRIMARY EARNINGS PER SHARE:
Continuing operations......................$ 2.28 $ 1.72 $ 1.92
Discontinued operations.................... .07 (.48) .04
------------------------------
Net income.................................$ 2.35 $ 1.24 $ 1.96
==============================
FULLY DILUTED EARNINGS PER SHARE:
Continuing operations......................$ 2.27 $ 1.71 $ 1.90
Discontinued operations.................... .07 (.47) .04
------------------------------
Net income.................................$ 2.34 $ 1.24 $ 1.94
==============================
- ---------------------------------------------------------------------------
The accompanying statements should be read in conjunction with the Notes to
Consolidated Financial Statements appearing on pages 52-71 of this report.
49
- --------------------------------------
|Consolidated Statement of |
|Changes in Shareholders Equity |
- --------------------------------------
Anheuser-Busch Companies, Inc., and Subsidiaries
(In millions, except per share)
- --------------------------------------------------------------------------------------------------------------------------
ESOP FOREIGN
CAPITAL IN DEBT CURRENCY
COMMONEXCESS OFRETAINEDTREASURYGUARANTEETRANSLATION
STOCKPAR VALUEEARNINGSSTOCK OFFSETADJUSTMENT
--------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993 $342.5 $ 808.7 $6,023.4 $(2,479.6) $(406.5) $(33.0)
Net income................... 1,032.1
Common dividends paid
($0.76 per share).......... (398.8)
Shares issued under stock
plans and conversions
of convertible debentures.. 1.3 48.1
Reduction of ESOP debt
guarantee.................. 29.1
Treasury stock acquired...... (563.0)
Foreign currency translation
adjustment................. 11.2
----------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 343.8 856.8 6,656.7 (3,042.6) (377.4) (21.8)
Net income................... 642.3
Common dividends paid
($0.84 per share).......... (429.5)
Shares issued under stock
plans and conversions
of convertible debentures.. 3.5 155.4 .1
Reduction of ESOP debt
guarantee.................. 30.3
Treasury stock acquired...... (393.4)
Foreign currency translation
adjustment................. 9.7
----------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 347.3 1,012.2 6,869.6 (3,436.0) (347.1) (12.1)
Net income................... 1,189.9
Common dividends paid
($0.92 per share).......... (458.9)
Shares issued under stock
plans and conversions
of convertible debentures.. 9.0 266.5 3.9
Two-for-one stock split...... 349.5 (349.5)
Reduction of ESOP debt
guarantee.................. 31.7
Treasury stock acquired...... (770.2)
Foreign currency translation
adjustment................. 3.3
Spin-off of
The Earthgrains Company.... (680.0)
----------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996. $705.8 $ 929.2 $6,924.5 $(4,206.2) $(315.4) $ (8.8)
==============================================================================================
- ----------------------------------------------------------------------------------------------------------------------------
The accompanying statements should be read in conjunction with the Notes to
Consolidated Financial Statements appearing on pages 52-71 of this report.
50
-----------------------------------
|Consolidated Statement |
|of Cash Flows |
-----------------------------------
Anheuser-Busch Companies, Inc., and Subsidiaries
(In millions)
- --------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- --------------------------------------------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income........................................$1,189.9 $ 642.3 $1,032.1
Discontinued operations........................... (33.8) 244.3 (17.6)
-----------------------------------
Income from continuing operations................. 1,156.1 886.6 1,014.5
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................. 593.9 565.6 517.0
Deferred income taxes......................... 93.8 51.3 68.5
After-tax gain on sale of St. Louis Cardinals. (33.4) -- --
Shutdown of Tampa brewery..................... -- 112.3 --
Decrease/(increase) in noncash
working capital............................. 233.7 (262.0) (57.0)
Other, net.................................... (75.2) 72.1 120.0
-----------------------------------
Cash provided by continuing operations............ 1,968.9 1,425.9 1,663.0
Net cash provided by/(provided to)
discontinued operations..................... 52.0 (11.0) (93.5)
-----------------------------------
Total cash provided by operating activities....... 2,020.9 1,414.9 1,569.5
-----------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of St. Louis Cardinals......... 116.6 -- --
Capital expenditures..............................(1,084.6) (952.5) (662.8)
New business acquisitions......................... (135.7) (82.9) (28.8)
-----------------------------------
Cash used for investing activities................(1,103.7) (1,035.4) (691.6)
-----------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase in long-term debt........................ 773.6 597.6 182.2
Decrease in long-term debt........................ (575.1) (296.4) (102.5)
Dividends paid to shareholders.................... (458.9) (429.5) (398.8)
Acquisition of treasury stock..................... (770.2) (393.4) (563.0)
Shares issued under stock plans................... 113.4 91.8 45.5
----------------------------------
Cash used for financing activities................ (917.2) (429.9) (836.6)
----------------------------------
Net increase/(decrease) in cash and
marketable securities during the year............. -- (50.4) 41.3
Cash and marketable securities, beginning of year... 93.6 144.0 102.7
-----------------------------------
Cash and marketable securities, end of year.........$ 93.6 $ 93.6 $ 144.0
===================================
- ---------------------------------------------------------------------------------------
The accompanying statements should be read in conjunction with the
Notes to Consolidated Financial Statements appearing on pages 52-71
of this report.
51
- -----------------------------------------------
| Notes to Consolidated Financial Statements |
- -----------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES
This summary of the significant accounting principles and
policies of Anheuser-Busch Companies, Inc. and its subsidiaries
is presented to assist in evaluating the company's financial
statements included in this report. These principles and policies
conform to generally accepted accounting principles. The
preparation of financial statements in conformity with generally
accepted accounting principles requires that management make
estimates and assumptions which impact the reported amounts of
assets and iabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates and assumptions.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of
the company and all its subsidiaries. All significant intercompany
transactions have been eliminated.
FOREIGN CURRENCY TRANSLATION
Financial statements of foreign operations where the local
currency is the functional currency are translated using exchange
rates in effect at period-end for assets and liabilities, and
weighted average exchange rates during the period for the results
of operations. Related translation adjustments are reported as a
separate component of shareholders equity. (Translation practice
differs for foreign operations in hyperinflationary economies.
See Note 2 for additional discussion).
Adjustments related to foreign currency transactions are
recognized in income.
CASH AND MARKETABLE SECURITIES
Cash and marketable securities include cash on hand, demand
deposits and short-term investments with original maturities of
90 days or less.
EXCESS OF COST OVER NET ASSETS OF ACQUIRED BUSINESSES (GOODWILL)
The excess of the cost over the net assets of acquired businesses,
which is included in Investments and Other Assets on the Consolidated
Balance Sheet, is amortized on a straight-line basis over a period of
40 years. Accumulated amortization at December 31, 1996 and 1995 was
$93.7 million and $79.7 million, respectively.
INVENTORIES AND PRODUCTION COSTS
Inventories are valued at the lower of cost or market. Cost is
determined under the last-in, first-out method (LIFO) for a majority
of the company's inventories. See Note 7 for additional discussion.
PLANT AND EQUIPMENT
Plant and equipment is carried at cost and includes expenditures
for new facilities and expenditures which substantially increase the
useful lives of existing facilities. Maintenance, repairs and minor
renewals are expensed as incurred. When plant and equipment are retired
or otherwise disposed, the related cost and accumulated depreciation
are eliminated and any gain or loss on disposition is reflected in the
income statement.
Depreciation is provided on the straight-line method over the
estimated useful lives of the assets, resulting in depreciation rates
on buildings ranging from 2% to 10% and on machinery and equipment
ranging from 4% to 25%.
CAPITALIZATION OF INTEREST
Interest relating to the cost of acquiring certain fixed assets
is capitalized. The capitalized interest is included as part of the
cost of the related asset and is amortized over its estimated useful
life.
52
-----------------------------------------------
| Notes to Consolidated Financial Statements |
-----------------------------------------------
INCOME TAXES
The provision for income taxes is based on the
income and expense amounts as reported in the Consolidated
Statement of Income. The company has elected to utilize
certain provisions of federal income tax laws and
regulations to reduce current taxes payable. Deferred income
taxes are recognized for the effect of temporary differences
between financial and tax reporting in accordance with the
requirements of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes."
DERIVATIVE FINANCIAL INSTRUMENTS
The company utilizes certain derivative financial
instruments, including forward exchange contracts, futures
contracts, options and swaps to manage its exposures to
foreign currency exchange, commodity price and interest rate
risk incurred in the normal course of business.
Anheuser-Busch has well-established policies and procedures
governing the use of derivatives. The company hedges only
actual or anticipated transactions and company policy
prohibits the use of derivatives for speculation, including
the sale (writing) of freestanding options. The company
neither holds nor issues financial instruments for trading
purposes.
Under current uses, all derivative instruments are
accounted for on the deferral basis. Changes in fair value
over the life of the derivatives are recorded in the same
category as the underlying asset or liability. Gains or
losses upon settlement of derivative positions when the
underlying transaction occurs are recognized in the income
statement or recorded as part of the underlying asset or
liability, as appropriate depending on the circumstances.
Option premiums paid are recorded as assets and amortized
over the life of the option. Purchased options, foreign
exchange contracts and futures contracts generally have
initial terms of less than two years.
Derivatives are either regulated exchange instruments
which are highly liquid or over-the-counter instruments
transacted with highly rated financial institutions. No
credit loss is anticipated as the counterparties to
nonexchange-traded instruments are major financial
institutions having long-term debt ratings from Standard and
Poor's or Moody's no lower than A+ or A1, respectively. The
fair value of derivative financial instruments is monitored
based on the estimated amounts the company would receive or
have to pay to terminate the contracts.
See Note 20 for additional discussion.
RESEARCH AND DEVELOPMENT, ADVERTISING AND PROMOTIONAL COSTS,
AND INITIAL PLANT COSTS
Research and development, advertising and promotional
costs, and certain initial plant costs are expensed in the
year in which these costs are incurred. Advertising expenses
were $701.3 million, $683.0 million and $672.6 million in
1996, 1995 and 1994, respectively.
COMMON STOCK SPLIT
All share and per share amounts have been adjusted to
reflect the two-for-one common stock split distributed on
September 12, 1996.
EARNINGS PER SHARE
Earnings per share are based on the weighted average
number of shares of common stock and common stock
equivalents outstanding during the respective years as shown
below (in millions):
-----------------------------------------------------------------
1996 1995 1994
--------------------------
Primary weighted average shares........ 505.8 515.7 528.2
Fully diluted weighted average shares.. 510.6 524.4 538.0
-----------------------------------------------------------------
Fully diluted earnings per share of common stock reflect
the full conversion of the company's convertible debentures in
1996 and the elimination of related after-tax interest expense.
Fully diluted earnings per share for 1995 and 1994 assume the
conversion of the convertible debentures and the elimination of
the related after-tax interest expense.
53
- -----------------------------------------------
| Notes to Consolidated Financial Statements |
- -----------------------------------------------
IMPAIRMENT OF LONG-LIVED ASSETS, IDENTIFIABLE INTANGIBLE
ASSETS AND GOODWILL
The company reviews long-lived assets, identifiable
intangibles and goodwill for impairment whenever events or
changes in business circumstances indicate the carrying
amount of the assets may not be fully recoverable. The company
performs nondiscounted cash flow analysis to determine if an
impairment exists. If impairment is determined to exist, any
related impairment loss is calculated based on the present
value of cash flows using discount rates which reflect the
inherent risk of the underlying business. Impairment losses
on assets to be disposed (if any) are based on the estimated
proceeds to be received less costs of disposal.
SYSTEMS DEVELOPMENT COSTS
The company defers systems development costs which meet
established criteria. Amounts deferred are amortized to expense
over a five-year period. Deferred systems development costs were
$83.0 million and $43.7 million in 1996 and 1995, respectively.
STOCK-BASED COMPENSATION
The company accounts for employee stock options in accordance
with Accounting Principles Board No. 25 (APB 25), "Accounting for
Stock Issued to Employees." Under APB 25, the company applies the
intrinsic value method of accounting and therefore does not recognize
compensation expense for options granted, because options are only
granted at a price equal to market value on the day of grant.
During 1996, Statement of Financial Accounting Standards No.
123 (FAS 123), "Accounting for Stock Based Compensation," became
effective for the company. FAS 123 prescribes the recognition of
compensation expense based on the fair value of options determined
on the grant date. However, FAS 123 allows companies currently
applying APB 25 to continue using that method. The company has
therefore elected to continue applying the intrinsic value method
under APB 25. For companies that choose to continue applying the
intrinsic value method, FAS 123 mandates certain pro forma
disclosures as if the fair value method had been utilized. See
Note 10 for additional discussion.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
The company has certain investments in debt and equity
securities which are classified as held-to-maturity in accordance
with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
Unrealized gains or losses on these investments were not material
for 1996, 1995 or 1994.
- --------------------------------------------------------------------
2. EXERCISE OF GRUPO MODELO OPTION
In June 1993, the company purchased a 10% interest in Grupo
Modelo (Modelo), Mexico's largest brewer, and a 10% interest in
Diblo, its operating subsidiary, for a combined $477 million.
Modelo holds 76.75% of the stock of Diblo. Accordingly, the initial
investment resulted in an effective Anheuser-Busch ownership (direct
and indirect) in Diblo of 17.7%. The original purchase agreement gave
the company options to increase its direct investment in Modelo to
approximately 35%, plus options to increase its direct investment in
Diblo to approximately 23%.
On December 18, 1996, the company announced its intention to
exercise its option to purchase the additional 25% stake in Modelo
which will result in an effective ownership (direct and indirect)
in Diblo of approximately 37%. Due diligence is complete and the
companies are currently working to resolve differences of opinion
concerning certain purchase price adjustments. When finalized,
the company expects its total investment to approximate $1 billion.
The company's remaining options on additional Diblo shares expire
on December 31, 1997. The company has not made a decision as to if,
when, or to what extent, it will exercise the remaining Diblo options.
The company currently accounts for its investments in Modelo
and Diblo on the cost basis. Concurrent with finalization of the
additional investment in Modelo, the company will adopt the equity
method of accounting for both investments. The difference between
income recognized on the cost basis in 1996, 1995 and 1994 and what
would have been recognized had the company applied equity accounting
in those years is not material.
The purchase price will be financed through a combination of
operating cash flow and debt issuance.
54
-----------------------------------------------
| Notes to Consolidated Financial Statements |
-----------------------------------------------
For foreign operations in countries whose economies are
considered highly inflationary (and the U.S. dollar is therefore
deemed the functional currency), currency translation practice in
accordance with Statement of Financial Accounting Standard No. 52
(FAS 52), "Foreign Currency Translation," requires that property,
other long-lived assets, long-term liabilities and related profit
and loss accounts be translated at historical rates of exchange.
Under FAS 52, net monetary asset and liability related
translation adjustments are included in earnings for operations
in highly inflationary economies. Effective January 1, 1997,
Mexico's economy will be considered highly inflationary for
accounting purposes under FAS 52 and, accordingly, all monetary
translation gains and losses related to the Modelo and Diblo
investments will be recognized in earnings.
----------------------------------------------------------------
3. DIVESTITURE OF FOOD PRODUCTS SEGMENT
In the fourth quarter 1995, the Board of Directors approved
management's plan to divest the company's food products segment,
which included The Earthgrains Company (formerly known as
Campbell Taggart) and Eagle Snacks, Inc. Earthgrains was divested
in a tax-free 100% spin-off to shareholders on March 26, 1996. In
the second quarter 1996, the company sold most of its Eagle
Snacks production facilities. Accordingly, the company revised
its estimated loss provision for the disposition of the food
products segment and recorded a $33.8 million after-tax gain
($.07 per share) in the second quarter which is reported as
income from discontinued operations. Because the food products
segment is discontinued, amounts in the Consolidated Financial
Statements and related Notes for all periods shown have been
restated to reflect discontinued operations accounting.
The net assets of the food products segment are reflected as
Investment in Discontinued Operations in the Consolidated Balance
Sheet at December 31, 1995, and are comprised of the following
(in millions):
----------------------------------------------------------------
1995
--------------------
Current assets.............................. $292.7
Plant and equipment, net.................... 756.3
Other assets................................ 264.6
Current liabilities......................... (253.2)
Deferred income taxes....................... (166.6)
Other noncurrent liabilities................ (129.8)
--------
Net assets.................................. $764.0
====================
----------------------------------------------------------------
Sales, income/(loss) before income taxes, and related income
tax provision/(benefit) of the food products segment
(discontinued operations) were as follows:
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
-----------------------------
Sales.............................. $ -- $1,985.0 $2,028.5
-----------------------------
Pretax income/(loss)............... $ -- $ (29.2) $ 31.1
Tax (provision)/benefit............ -- 10.4 (13.5)
-----------------------------
Net income/(loss).................. $ -- $ (18.8) $ 17.6
-----------------------------
Gain/(Loss) on divestiture:
Gain/(Loss) on divestiture....... $ 53.8 $ (318.0) $ --
Direct costs of disposal......... -- (5.0) --
Estimated operating losses during
phase-out period............... -- (12.0) --
----------------------------
53.8 (335.0) --
Income tax (provision)/benefit... (20.0) 109.5 --
----------------------------
Gain/(Loss) on divestiture of the
food products segment.......... $ 33.8 $ (225.5) $ --
----------------------------
Total income/(loss) from
discontinued operations.......... $ 33.8 $ (244.3) $ 17.6
============================
----------------------------------------------------------------
55
- -----------------------------------------------
| Notes to Consolidated Financial Statements |
- -----------------------------------------------
4. CLOSURE OF THE TAMPA BREWERY
- -----------------------------------------------------------------
During the fourth quarter 1995, the company closed its
brewery located in Tampa, Fla., resulting in a nonrecurring,
pretax charge of $160 million ($.19 per share). The charge is
comprised of the write-down of the carrying value of plant assets
of $113.7 million, employee severance costs of $19.4 million and
other disposal costs of $26.9 million. The majority of the
brewery's plant and equipment was either sold or disposed during
1996.
- ------------------------------------------------------------------
5. SALE OF THE CARDINALS
During the first quarter 1996, the company completed the
sale of its Major League Baseball team, the St. Louis Cardinals.
The sale included Busch Memorial Stadium, nearby parking garages
and other properties in downtown St. Louis. The sale price was
$150 million and resulted in a pretax gain of $54.7 million ($.06
per share), which is presented as a separate line item in the
Consolidated Statement of Income.
- -------------------------------------------------------------------
6. ACQUISITIONS AND BUSINESS INVESTMENTS
In April 1996, the company invested $52.5 million to
purchase a 5% equity stake in Antarctica Empreendimentos e
Participacoes (ANEP), a subsidiary representing approximately
75% of the operations of Companhia Antarctica Paulista
(Antarctica), one of Brazil's leading brewers. The investment
agreement also provided the company with options to increase
its investment to approximately 30% of ANEP beginning April 22,
1996 and expiring, subject to certain conditions, on April 21,
2002.
Concurrent with the investment in ANEP, the company entered
into a joint venture with Antarctica called Budweiser Brasil Ltda.
which is owned 51% by Anheuser-Busch and 49% by Antarctica. Under
the joint venture agreement, ANEP will contract brew Budweiser on
behalf of the joint venture while the joint venture will concentrate
on the sales, marketing and distribution of Budweiser in Brazil.
As a result of holding certain minority rights and having
gained representation on the ANEP Board of Directors in late 1996,
the company will change its accounting method for the investment
in ANEP from the cost to the equity method effective January 1,
1997. The difference between income recognized on the cost basis
in 1996 and what would have been recognized had the company applied
equity accounting is not material. The investment in Budweiser
Brasil Ltda. is accounted for on a consolidated basis.
In February 1996, the company entered into an alliance with
Companhia Cervecerias Unidas S.A. (CCU) and Buenos Aires Embotelladora
S.A. (BAESA). The agreement called for the company to invest cash and
donate equipment with a market value of approximately $4 million to
CCU-Argentina, a brewing subsidiary of CCU operating in Argentina, in
exchange for a 4.4% stake in CCU-Argentina. The investment agreement
also provided the company with options to increase its investment to
20% of CCU-Argentina beginning on October 1, 1998 and generally
expiring no later than December 31, 2002. The investment in CCU-
Argentina is accounted for on a cost basis.
In February 1995, the company invested $52.8 million for an 80%
interest in a joint venture which owns the Wuhan brewery located in
the People's Republic of China (China). Under the original investment
agreement, certain minority shareholders retained the right to put
their investments to Anheuser-Busch in accordance with the terms of
the investment agreement. Effective September 1996, certain minority
shareholders exercised their put options, resulting in the company
investing an additional $3.5 million in exchange for an additional
5.3% interest in the joint venture.
The joint venture brews and distributes Budweiser and certain
local brands primarily in the northern, eastern and central regions
of China. An approximate $70-80 million expansion of the Wuhan
brewery, which is anticipated to double capacity, is expected to be
completed in 1998. The investment is accounted for on a consolidated
basis.
In April 1995, the company entered into a joint venture with
Scottish Courage Ltd., with each partner owning 50%. The joint
venture consolidated the brewing and packaging of Budweiser in
the Stag Brewery at Mortlake in London, England. Scottish Courage
owns and leases the Stag Brewery site to the joint venture. The
investment is accounted for under the equity method.
56
-----------------------------------------------
| Notes to Consolidated Financial Statements |
-----------------------------------------------
In the fourth quarter 1994, the company purchased a 25% equity
interest in Redhook Ale Brewery, Inc. (Redhook) of Seattle,
Wash., for $18 million. In conjunction with Redhook's initial
public offering of shares in August 1995, the company invested an
additional $12 million to maintain its 25% equity position. Under
a distribution alliance agreement, Redhook products are
distributed exclusively through Anheuser-Busch wholesalers in
substantially all major U.S. markets. The company accounts for
the investment under the equity method.
----------------------------------------------------------------
7. INVENTORY VALUATION
Approximately 76% of total inventories at both December 31,
1996 and 1995, are stated on the last-in, first-out (LIFO)
inventory valuation method. Had the average-cost method (which
approximates replacement cost) been used with respect to such
inventories at December 31, 1996 and 1995, total inventories
would have been $124.3 million and $101.5 million higher,
respectively.
----------------------------------------------------------------
8. CREDIT AGREEMENT
The company's revolving credit agreements totaling $800 million
were terminated in December 1994. These agreements were replaced
by a single committed revolving credit agreement, totaling $1
billion, which expires in August 2001. The agreement provides
that under certain circumstances the company may select among
various loan arrangements with differing maturities and among a
variety of interest rates, including a negotiated rate. At
December 31, 1996 and 1995, the company had no outstanding
borrowings under the agreement. Fees under the agreements were
$.7 million, $.8 million and $.8 million in 1996, 1995 and 1994,
respectively.
----------------------------------------------------------------
9. LONG-TERM DEBT
Long-term debt at December 31 consisted of the following (in
millions):
-----------------------------------------------------------------
1996 1995
---------------------
Commercial paper (weighted average interest
rates of 5.3% in 1996 and 5.9% in 1995)... $ 155.5 $ 572.5
Medium-term Notes Due 1997 to 2001 (interest
rates from 5.5% to 8.0%).................. 95.0 108.0
8% Convertible Debentures Due 1996.......... -- 166.0
8.75% Notes Due 1999........................ 250.0 250.0
5.1% Dual-currency Notes Due 1999........... 262.4 --
6.9% Notes Due 2002......................... 200.0 200.0
6.75% Notes Due 2003........................ 200.0 --
6.75% Notes Due 2005........................ 200.0 200.0
7% Notes Due 2005........................... 100.0 100.0
6.75% Notes Due 2006........................ 250.0 --
9% Debentures Due 2009...................... 350.0 350.0
7.25% Debentures Due 2015................... 150.0 150.0
7.375% Debentures Due 2023.................. 200.0 200.0
7% Debentures Due 2025...................... 200.0 200.0
Sinking Fund Debentures..................... 151.3 261.9
Industrial Revenue Bonds.................... 157.4 136.7
ESOP Debt Guarantee......................... 315.4 347.1
Other Long-term Debt........................ 33.9 27.9
---------------------
$3,270.9 $3,270.1
=====================
-----------------------------------------------------------------
57
- -----------------------------------------------
| Notes to Consolidated Financial Statements |
- -----------------------------------------------
The company's sinking fund debentures at December 31 are as
follows (in millions):
- --------------------------------------------------------------------
1996 1995
-------------------
8.625% Debentures maturing 1997 to 2016.......... $105.8 $150.0
8.5% Debentures maturing 1998 to 2017............ 45.5 150.0
10% Debentures maturing 1999 to 2018............. -- 68.0
Less: Debentures held in treasury................ -- (106.1)
-------------------
$151.3 $261.9
===================
- --------------------------------------------------------------------
The company's dual currency notes at December 31 are as
follows:
- --------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------
5.1% Japanese Yen/Australian Dollar Notes Due 1999... $255.3 $ --
Effect of U.S. Dollar/Australian Dollar exchange
agreement ....................................... 7.1 --
----------------
$262.4 $ --
================
- ---------------------------------------------------------------------
The company utilizes SEC shelf registration statements to
provide financing flexibility. In 1996, the company registered
$700 million of debt securities for future issuance and, at
December 31, 1996, total debt of $550 million was available for
issuance.
In 1996, the company cancelled all sinking fund debentures
it held in treasury. Gains/losses on debt redemptions (either
individually or in the aggregate) were not material to the
company's Consolidated Financial Statements for any year presented.
At December 31, 1996 and 1995, there were $155.5 million and
$572.5 million, respectively, of outstanding commercial paper
borrowings classified as long-term debt. The commercial paper is
intended to be maintained on a long-term basis with ongoing credit
support provided by the company's revolving credit agreement. The
company may also choose to refinance some or all of its commercial
paper debt with long-term notes or debentures.
In December 1996, the company issued $262.4 million (30
billion yen) of 5.1% Japanese yen/Australian dollar notes. Simultaneous
with issuance, the company entered into a $262.4 million notional
value interest rate swap and currency exchange agreement. Under the
agreement, the counterparty will fund the semi-annual fixed-rate
yen-denominated coupon payments and Anheuser-Busch will make
quarterly LIBOR-based U.S. dollar-denominated floating-rate payments
to the counterparty. The agreement also requires Anheuser-Busch to
pay the counterparty $262.4 million at maturity in exchange for the
counterparty funding the Australian dollar redemption liability.
Due to the terms of the agreement, the U.S. dollar floating-rate
interest payments and the $262.4 million redemption obligation are
the only obligations the company has relating to the dual-currency
notes. All currency exchange risk among the U.S. dollar, the
Australian dollar and the Japanese yen is borne by the counterparty.
Only in the event of counterparty default would Anheuser-Busch be
exposed to any interest rate or currency exchange risk. The company
considers the risk of counterparty failure to be remote.
During 1992, the company entered into an interest rate swap
agreement on a notional amount of $200 million. The company is
obligated to pay a fixed rate of 6.54% per year for the four-year
period ending December 31, 1997. In return, the company receives
floating rate interest payments based on commercial paper rates.
The swap agreement does not have a material impact on the company's
weighted-average interest rate.
In 1989, the company issued $241.7 million of 8% convertible
debentures to certain Qualified Holders, primarily independently
owned beer wholesalers and related parties. At issue, the debentures
were convertible into 5% convertible preferred stock, par value $1.00,
at a conversion price of $47.60 per share, with each share of preferred
stock convertible into one share of the company's common stock. Due to
the spin-off of The Earthgrains Company and the two-for-one stock split,
the effective conversion price was adjusted to $23.39 in 1996. The
debentures matured October 1, 1996 with optional redemption at the
holder's discretion available since 1992. In 1996, the company completed
the conversion of all outstanding convertible debentures. In 1996 and
1995, the company issued 7.5 and 2.8 million common shares, respectively,
in conjunction with conversions. No preferred shares are outstanding as
a result of any conversions.
58
-----------------------------------------------
| Notes to Consolidated Financial Statements |
-----------------------------------------------
The fair value of long-term debt, based on future cash flows
discounted at interest rates currently available to the company
for debt with similar maturities and characteristics, was $3.4
billion and $3.6 billion, respectively, at December 31, 1996 and
1995.
The aggregate maturities on all long-term debt are $41 million,
$40 million, $555 million, $55 million and $23 million,
respectively, for each of the years ending December 31, 1997
through 2001. These aggregate maturities do not include the
future maturities of the ESOP debt guarantee or commercial paper.
----------------------------------------------------------------
10. STOCK OPTION PLANS
Under terms of the company's incentive stock option plans,
officers and key employees may be granted options to purchase the
company's common stock at no less than 100% of the market price
on the date the option is granted. Options generally vest over
three years and have a maximum term of 10 years. At December 31,
1996, 1995 and 1994, a total of 31.0 million, 36.1 million and
41.1 million shares, respectively, were reserved for future
issuance under the plans. Certain of the plans also provide for
the granting of stock appreciation rights (SARs) in tandem with
stock options. The exercise of an SAR cancels the related option
and the exercise of an option cancels the related SAR. There were
no SARs outstanding under the plans at December 31, 1996.
The company applies APB 25 in accounting for its stock option
plans. Accordingly, because the grant price equals the market
price on the date of grant, no compensation expense is recognized
for stock options issued. Had compensation cost for the company's
stock options been recognized based upon the fair value on the
grant date under the methodology prescribed by FAS 123, the
company's income from continuing operations and earnings per
share for the year ended December 31, 1996 would have been
impacted as indicated in the following table (in millions, except
per share). The pro forma results shown below reflect only the
impact of options granted in 1995 and 1996. Because options are
granted at the end of the year, there is no pro forma impact for
1995. Also, since option vesting occurs over three years, the pro
forma impact shown for 1996 is not representative of what the
impact will be in future years. The pro forma impact is expected
to increase for the next two years and then remain relatively
constant thereafter, absent significant changes to valuation
assumptions or option grant patterns.
----------------------------------------------------------------
1996
---------------
Reported income from continuing operations....... $1,156.1
Pro forma income from continuing operations...... $1,149.0
Reported fully diluted earnings per share from
continuing operations........................ $2.27
Pro forma fully diluted earnings per share from
continuing operations........................ $2.26
----------------------------------------------------------------
The fair value of options granted (which is amortized to
expense over the option vesting period in determining the pro
forma impact), is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted
average assumptions:
-----------------------------------------------------------------
1996 1995
--------------
Expected life of option............................ 5 yrs. 5 yrs.
Risk-free interest rate............................ 6.2% 5.5%
Expected volatility of Anheuser-Busch stock........ 15% 15%
Expected dividend yield on Anheuser-Busch stock.... 2.3% 2.5%
-----------------------------------------------------------------
The weighted average fair value of options granted during 1996
and 1995 is as follows:
-----------------------------------------------------------------
1996 1995
------------
Fair value of each option granted....................$ 8.30 $5.98
Total number of options granted (in millions)........ 4.1 5.8
------------
Total fair value of all options granted (in millions)$34.0 $34.7
============
-----------------------------------------------------------------
59
- -----------------------------------------------
| Notes to Consolidated Financial Statements |
- -----------------------------------------------
In accordance with FAS 123, the weighted average fair
value of stock options granted is required to be based on a
theoretical statistical model using the preceding Black-Scholes
assumptions. In actuality, because the company's incentive stock
options do not trade on a secondary exchange, employees can
receive no value nor derive any benefit from holding stock options
under these plans without an increase in the market price of
Anheuser-Busch stock. Such an increase in stock price would
benefit all stockholders commensurately.
Presented below is a summary of stock option plans activity
for the years shown:
- ---------------------------------------------------------------------------------------------
Wtd. Avg. Wtd. Avg.
Options Exercise Price Options Exercisable Exercise Price
------- -------------- ------------------- --------------
Balance, December 31, 1993 23,095,868 $21.34
Granted 4,759,556 24.90
Exercised (2,520,224) 16.89
Cancelled (464,020) 26.62
-----------
Balance, December 31,1994 24,871,180 $22.37 16,273,595 $20.90
Granted 5,779,850 32.33
Exercised (5,051,464) 18.59
Cancelled (306,688) 25.79
-----------
Balance, December 31, 1995 25,292,878 $25.36 15,259,418 $22.93
Granted 4,149,588 40.59
Exercised (4,945,152) 22.37
Cancelled (175,973) 28.22
-----------
Balance, December 31, 1996 24,321,341 $28.55 15,234,258 $24.67
=================================================================
- ---------------------------------------------------------------------------------------------
The following table summarizes information for options
currently outstanding and exercisable at December 31, 1996:
- ----------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
--------------------------------------------- -------------------------
Range of Wtd. Avg. Wtd. Avg. Wtd. Avg.
Prices Number Remaining Life Exercise Price Number Exercise Price
------ ------ -------------- -------------- ------ --------------
$15-26 11,070,753 6 yrs $22.10 9,798,046 $21.74
27-37 9,164,286 8 yrs 30.93 5,436,212 29.95
38-43 4,086,302 10 yrs 40.69 -- --
---------- ----------
$15-43 24,321,341 7 yrs $28.55 15,234,258 $24.67
========================================================================================
- ----------------------------------------------------------------------------------------
Option quantities and prices in the preceding tables have
been adjusted for the effect of the spin-off of Earthgrains
effective March 26, 1996 and the two-for-one stock split
distributed September 12, 1996, for all years shown.
60
-----------------------------------------------
| Notes to Consolidated Financial Statements |
-----------------------------------------------
The plans provide for acceleration of exercisability of the
options upon the occurrence of certain events relating to a
change of control, merger, sale of assets or liquidation of the
company (Acceleration Events). Certain of the plans also provide
that optionees may be granted Limited Stock Appreciation Rights
(LSARs). LSARs become exercisable, in lieu of the option or SAR,
upon the occurrence, six months following the date of grant, of
an Acceleration Event. These LSARs entitle the holder to a cash
payment per share equivalent to the excess of the share value
(under terms of the LSAR) over the grant price. As of December
31, 1996 and 1995, there were 1.0 million and 1.7 million,
respectively, of LSARs outstanding.
----------------------------------------------------------------
11. EMPLOYEE STOCK OWNERSHIP PLAN
In 1989, the company added an Employee Stock Ownership Plan
(ESOP) to its existing Deferred Income Stock Purchase and Savings
Plans. Substantially all regular salaried and hourly employees
are eligible for participation in the ESOP. The ESOP borrowed
$500 million for a term of 15 years at an interest rate of 8.3%
and used the proceeds to buy approximately 22.7 million shares of
common stock from the company. The ESOP debt is guaranteed by the
company, and ESOP shares are being allocated to participants over
15 years as contributions are made to the plans.
ESOP cash contributions and ESOP expense accrued during the
calendar year are determined by several factors, including the
market price and number of shares allocated to participants, ESOP
debt service, dividends on unallocated shares and the company's
matching contribution. Over the 15-year life of the ESOP, total
expense recognized will equal the total cash contributions made
by the company.
ESOP cash contributions are made in March and September, based
on the plan year which ends March 31. A summary of ESOP cash
contributions and dividends on unallocated ESOP shares for the
three years ended December 31 is presented below (in millions):
-----------------------------------------------------------------
1996 1995 1994
-------------------------------------
Cash contributions.......... $21.8 $45.8 $41.8
=====================================
Dividends................... $10.4 $10.8 $10.9
=====================================
-----------------------------------------------------------------
Total ESOP expense is allocated to operating expense and
interest expense based upon the ratio of principal and interest
payments on the debt. Total ESOP expense for the three years
ended December 31 is presented below (in millions):
-----------------------------------------------------------------
1996 1995 1994
------------------------------------
Operating expense............ $14.3 $19.6 $23.3
Interest expense............. 11.6 18.0 24.0
------------------------------------
Total expense................ $25.9 $37.6 $47.3
====================================
-----------------------------------------------------------------
61
- -----------------------------------------------
| Notes to Consolidated Financial Statements |
- -----------------------------------------------
12. RETIREMENT BENEFITS
PENSION PLANS
The company has pension plans covering substantially
all of its regular employees. Total pension expense for the
three years ended December 31 is presented below (in millions):
- ------------------------------------------------------------------------
1996 1995 1994
------------------------------
Single-employer defined benefit plans..... $18.6 $29.6 $27.1
Multi-employer plans...................... 20.2 26.1 25.5
Defined contribution plans................ 18.3 15.0 15.1
------------------------------
$57.1 $70.7 $67.7
==============================
- ------------------------------------------------------------------------
Net pension expense for single-employer defined benefit plans was
comprised of the following for the three years ended December 31 (in
millions):
- --------------------------------------------------------------------------
1996 1995 1994
------------------------
Service cost (benefits earned during the year).... $49.3 $41.0 $42.3
Interest cost on projected benefit obligation..... 76.3 64.4 60.2
Assumed return on assets.......................... (107.9) (80.6) (68.9)
Amortization of prior service cost, actuarial
gains/losses and the excess of market value of
plan assets over projected benefit obligation
at January 1, 1986.............................. .9 4.8 (6.5)
-------------------------
Net pension expense.............................. $18.6 $29.6 $27.1
=========================
- ---------------------------------------------------------------------------
The key actuarial assumptions used in determining annual pension
expense for single-employer defined benefit plans were as follows for the
years ended December 31:
- ---------------------------------------------------------------------------
1996 1995 1994
--------------------------
Discount rate.................................... 7.5% 8.0% 7.5%
Long-term rate of return on plan assets.......... 10.0% 10.0% 10.0%
Weighted-average rate of compensation increase... 5.5% 5.5% 5.5%
- ---------------------------------------------------------------------------
The actual dollar return on pension assets was $142.3 million, $140.9
million and $12.5 million in 1996, 1995 and 1994, respectively.
The following tables set forth the funded status of all company
single-employer defined benefit plans at December 31 (in millions):
- ---------------------------------------------------------------------------
1996 1995
--------------------
Plan assets at fair market value primarily corporate
equity securities and publicly traded bonds.......... $1,237.4 $935.8
--------------------
Accumulated benefit obligation:
Vested benefits...................................... (846.7) (724.5)
Nonvested benefits................................... (84.1) (61.7)
-------------------
Accumulated benefit obligation......................... (930.8) (786.2)
Effect of projected compensation increases............. (180.5) (138.6)
-------------------
Projected benefit obligation........................... (1,111.3) (924.8)
-------------------
Plan assets in excess of projected benefit obligation.. $ 126.1 $ 11.0
===================
- ---------------------------------------------------------------------------
62
-----------------------------------------------
| Notes to Consolidated Financial Statements |
-----------------------------------------------
Plan assets in excess of projected benefit obligation consist
of the following at December 31:
-----------------------------------------------------------------
1996 1995
----------------
Unamortized excess of market value of plan assets
over projected benefit obligation at January 1,
1986 being amortized over 15 years............ $ 40.5 $33.6
Unrecognized net actuarial (losses)............. (7.8) (21.9)
Prior service costs............................. (73.9) (81.4)
Prepaid pension................................. 167.3 80.7
---------------
$126.1 $11.0
===============
-----------------------------------------------------------------
The assumptions used in determining the funded status of the
plans as of December 31 were as follows:
-----------------------------------------------------------------
1996 1995
-----------------
Discount rate................................... 7.75% 7.5%
Weighted-average rate of compensation increase.. 5.5% 5.5%
-----------------------------------------------------------------
Contributions to multi-employer plans in which the company and
its subsidiaries participate are determined in accordance with
the provisions of negotiated labor contracts and are based on
employee hours worked.
POSTRETIREMENT BENEFITS
The company provides certain health care and life insurance
benefits to eligible retired employees. Salaried participants
generally become eligible for retiree health care benefits after
reaching age 55 with 10 years of service, or after reaching age
65. Bargaining unit employees generally become eligible for
retiree health care benefits after reaching age 55 with from 10
to 15 years of service, or after reaching age 65.
The following table sets forth the accumulated postretirement
benefit obligation (APBO) and the total postretirement benefit
liability for all single-employer defined benefit plans at
December 31 (in millions):
-----------------------------------------------------------------
1996 1995
-------------
Retirees............................................$125.4 $141.1
Fully eligible active plan participants............. 77.0 135.1
Other active plan participants...................... 94.2 74.0
-------------
Accumulated postretirement benefit obligation (APBO) 296.6 350.2
Unrecognized prior service benefits................. 111.2 125.5
Unrecognized net actuarial gains.................... 128.8 51.8
-------------
Total postretirement benefit liability..............$536.6 $527.5
=============
-----------------------------------------------------------------
As of December 31, 1996 and 1995, $12.0 million and $15.4
million of this obligation were classified as current liabilities
and $524.6 million and $512.1 million were classified as
long-term liabilities, respectively.
Net periodic postretirement benefits expense for
single-employer defined benefit plans was comprised of the
following for the three years ended December 31 (in millions):
------------------------------------------------------------------------------------------
1996 1995 1994
------------------------
Service cost (benefits attributed to service during the year)..... $17.1 $20.8 $16.4
Interest cost on accumulated postretirement benefit obligation.... 22.9 23.9 25.8
Amortization of prior service (benefit)........................... (11.7) (11.8) (11.5)
Amortization of actuarial (gain)/loss............................. (7.4) -- .3
-------------------------
Net periodic postretirement benefits expense...................... $20.9 $32.9 $31.0
=========================
-------------------------------------------------------------------------------------------
63
- -----------------------------------------------
| Notes to Consolidated Financial Statements |
- -----------------------------------------------
In measuring the APBO, annual trend rates for health
care costs of 9.0%, 12.5% and 12.5% were assumed for 1996,
1995 and 1994, respectively. These rates were assumed to
decline ratably over the subsequent 9-12 years to 6.5% and
remain at that level thereafter. The weighted average discount
rate used in determining the APBO was 8.25% and 8.0%, respectively,
at December 31, 1996 and 1995.
If the assumed health care cost trend rate changed by 1%,
the APBO as of December 31, 1996 would change by 15.3%. The effect
of a 1% change in the cost trend rate on the service and interest
cost components of net periodic postretirement benefits expense
would be a change of 19.4%.
- ------------------------------------------------------------------
13. INCOME TAXES
The provision for income taxes consists of the following for
the three years ended December 31 (in millions):
- ------------------------------------------------------------------
1996 1995 1994
------------------------------
Current tax provision:
Federal........................... $490.9 $435.4 $480.2
State and foreign................. 106.8 106.4 108.4
------------------------------
597.7 541.8 588.6
------------------------------
Deferred tax provision:
Federal........................... 139.2 (76.6) 74.1
State and foreign................. 19.9 (10.0) 12.3
------------------------------
159.1 (86.6) 86.4
------------------------------
Total tax provision................. $756.8 $455.2 $675.0
==============================
- ------------------------------------------------------------------
The provision for income taxes included in the Consolidated
Statement of Income is as follows (in millions):
- ------------------------------------------------------------------
1996 1995 1994
-----------------------------
Continuing operations................ $736.8 $575.1 $661.5
Discontinued operations.............. 20.0 (119.9) 13.5
-----------------------------
Total tax provision.................. $756.8 $455.2 $675.0
=============================
- ------------------------------------------------------------------
The deferred tax provision results from differences in the
recognition of income and expense for tax and financial reporting
purposes. The primary differences for continuing operations are
related to fixed assets (tax effect of $56.9 million in
1996, $45.4 million in 1995 and $63.3 million in 1994) and the
Tampa brewery closure benefit ($52.2 million) in 1995.
At December 31, 1996 the company had deferred tax liabilities
of $1,741.0 million and deferred tax assets of $532.9 million. The
temporary differences included in deferred tax liabilities are
primarily related to fixed assets ($1,481.8 million). The temporary
differences included in deferred tax assets are related to accrued
postretirement benefits ($203.4 million), closure of the Tampa
brewery ($54.4 million) and other accruals and temporary differences
($275.1 million) which are not deductible for tax purposes until
paid or utilized.
The company's effective tax rate for continuing operations was
38.9% in 1996, 39.3% in 1995 and 39.5% in 1994. A reconciliation
between the statutory tax rate and the effective tax rate for
continuing operations is presented below:
- ----------------------------------------------------------------------
1996 1995 1994
----------------------
Federal statutory tax rate...................... 35.0% 35.0% 35.0%
State income taxes, net of federal benefit...... 3.6 4.0 4.0
Other........................................... .3 .3 .5
----------------------
Effective tax rate.............................. 38.9% 39.3% 39.5%
======================
- ----------------------------------------------------------------------
64
-----------------------------------------------
| Notes to Consolidated Financial Statements |
-----------------------------------------------
-----------------------------------------------------------------
14. CASH FLOWS
For purposes of the Statement of Cash Flows, all short-term
investments, generally with original maturities of 90 days or
less, are considered cash equivalents. The effect of currency
exchange rate fluctuations was not material for 1996, 1995 and
1994. Accounts payable include $92.8 million and $86.9 million,
respectively, of outstanding checks at December 31, 1996 and
1995.
Supplemental information with respect to the Statement of Cash
Flows for the three years ended December 31 is presented below
(in millions):
-------------------------------------------------------------------------------
CASH PAID DURING THE YEAR: 1996 1995 1994
-------------------------------
Interest, net of interest capitalized........... $ 208.0 $ 198.0 $ 200.8
Income taxes.................................... 533.6 546.6 575.8
Excise taxes.................................... 1,720.1 1,680.6 1,692.0
NONCASH FINANCING ACTIVITIES:
Conversions of 8% convertible debentures........ $ 166.0 $ 67.2 $ 3.9
CHANGES IN NONCASH WORKING CAPITAL:
Decrease/(increase) in noncash current assets:
Accounts receivable........................... $ (88.4) $ 54.2 $ (47.2)
Inventories................................... 51.6 (51.9) 5.0
Other current assets.......................... 81.6 (17.2) 1.7
Increase/(decrease) in current liabilities:
Accounts payable.............................. 44.0 (73.8) 54.2
Accrued salaries, wages and benefits.......... (19.4) 8.1 44.3
Accrued taxes................................. 146.7 (10.3) (14.6)
Restructuring accrual......................... -- (50.2) (87.3)
Other current liabilities..................... 17.6 (120.9) (13.1)
-------------------------------
Decrease/(increase) in noncash working capital.. $ 233.7 $(262.0) $ (57.0)
==============================
-------------------------------------------------------------------------------
-----------------------------------------------------------------
15. PREFERRED AND COMMON STOCK
STOCK ACTIVITY
Activity for the company's common stock for the three years
ended December 31 is summarized below:
-----------------------------------------------------------------
COMMON STOCK COMMON STOCK
ISSUED IN TREASURY
----------------------------
BALANCE, DECEMBER 31, 1993........... 685,164,878 (151,091,528)
Shares issued under stock plans...... 2,266,326 --
Conversion of convertible debentures. 163,854 --
Net treasury stock acquired.......... -- (21,922,816)
----------------------------
BALANCE, DECEMBER 31, 1994........... 687,595,058 (173,014,344)
Shares issued under stock plans...... 4,123,070 --
Conversion of convertible debentures. 2,812,120 --
Net treasury stock acquired.......... -- (13,562,980)
----------------------------
BALANCE, DECEMBER 31, 1995........... 694,530,248 (186,577,324)
Shares issued under stock plans...... 3,726,242 --
Conversion of convertible debentures. 7,535,902 --
Net treasury stock acquired.......... -- (21,857,871)
----------------------------
BALANCE, DECEMBER 31, 1996........... 705,792,392 (208,435,195)
============================
-----------------------------------------------------------------
At December 31, 1996 and 1995, 40,000,000 shares of $1.00 par
value preferred stock were authorized and unissued.
65
- -----------------------------------------------
| Notes to Consolidated Financial Statements |
- -----------------------------------------------
STOCK REPURCHASE PROGRAMS
The Board of Directors has approved various resolutions
authorizing the company to purchase shares of its common stock
for investment purposes and to meet the requirements of the
company's various stock purchase and incentive plans. The most
recent resolution was approved by the Board in July 1996 and
authorized the repurchase of 50 million shares. The company has
acquired 22.2 million, 13.6 million and 21.9 million shares of
common stock in 1996, 1995 and 1994 for $770.2 million, $393.4
million and $563.0 million, respectively. At December 31, 1996,
approximately 2.6 million shares were available for repurchase
under the 1994 authorization and 50 million shares remained
available under the July 1996 authorization.
STOCKHOLDER RIGHTS PLAN
The Board of Directors adopted a Stockholder Rights Plan
in 1985 (extended in 1994) which in certain circumstances would
permit shareholders to purchase common stock at prices which
would be substantially below market value.
- ----------------------------------------------------------------
16. COMMITMENTS AND CONTINGENCIES
In connection with plant expansion and improvement
programs, the company had commitments for capital expenditures
of approximately $388.7 million at December 31, 1996. Obligations
under capital and operating leases are not material.
The company and certain of its subsidiaries are involved
in certain claims and legal proceedings in which monetary damages
and other relief are sought. The company is vigorously contesting
these claims. However, resolution of these claims is not expected
to occur quickly, and their ultimate outcome cannot presently be
predicted. It is the opinion of management that the ultimate
resolution of all existing claims, legal proceedings and other
contingencies, either individually or in the aggregate, will not
materially affect either the company's financial position, liquidity
or results of operations.
- -------------------------------------------------------------------
17. BUSINESS SEGMENTS
The company's principal business segments are beer/beer-
related and entertainment. The beer/beer-related segment produces
and sells the company's beer products. Included in this segment
are the company's raw material acquisition, malting, can
manufacturing, recycling, communications and transportation
operations.
The entertainment segment consists of the company's Sea
World, Busch Gardens and other theme parks and real estate
development operations.
Sales between segments, export sales and non-U.S. sales
are not material. The company's equity in earnings of affiliated
companies is included in other income and expense. No single customer
accounted for more than 10% of sales.
66
-----------------------------------------------
| Notes to Consolidated Financial Statements |
-----------------------------------------------
Summarized below is the company's business segment information
for 1996, 1995 and 1994 (in millions). Intersegment sales have
been eliminated from each segment's reported net sales.
-----------------------------------------------------------------------------------
NET SALES (1) | OPERATING INCOME (2) (3) (4)
1996 1995 1994 | 1996 1995 1994
--------------------------------|------------------------------
Beer/beer-related.. $10,143.9 $ 9,585.9 $ 9,283.8| $1,934.2 $1,557.7 $1,784.5
Entertainment...... 739.8 754.6 741.5| 149.6 75.2 68.8
---------------------------------|------------------------------
Consolidated....... $10,883.7 $10,340.5 $10,025.3| $2,083.8 $1,632.9 $1,853.3
=================================|==============================
-----------------------------------------------------------------------------------
(1) Net sales for 1995 include the adverse impact of the beer
wholesaler inventory reduction.
(2) Operating income excludes other expense, net, which is not
allocated among segments. For 1996, 1995 and 1994, other
expense, net of $190.9 million, $171.2 million and $177.3
million, includes net interest expense, other income and
expense, and equity in earnings of affiliated companies.
(3) Operating income for 1996 includes the $54.7 million pretax
gain on the sale of the Cardinals.
(4) Operating income for 1995 includes the impact of the
one-time, pretax charge of $160.0 million for the closure of
the Tampa brewery, and the adverse impact of the beer
wholesaler inventory reduction.
DEPRECIATION AND
IDENTIFIABLE ASSETS (5) AMORTIZATION EXPENSE
-------------------------------------------------------------
1996 1995 1994 | 1996 1995 1994
-------------------------------------------------------------
Beer/beer-related........ $ 8,458.6 $ 7,915.4 $ 7,719.0 | $493.9 $469.2 $427.5
Entertainment............ 1,484.3 1,463.1 1,426.7 | 78.5 77.6 72.5
Corporate................ 520.7 448.4 404.4 | 21.5 18.8 17.0
Discontinued operations.. -- 764.0 997.3 | -- -- --
----------------------------------|--------------------------
Consolidated............. $10,463.6 $10,590.9 $10,547.4 | $593.9 $565.6 $517.0
=============================================================
(5) Corporate assets principally include cash, marketable
securities and certain fixed assets.
-----------------------------------------------------------------
CAPITAL EXPENDITURES
-------------------------------------
1996 1995 1994
-------------------------------------
Beer/beer-related........... $ 902.5 $808.8 $539.3
Entertainment............... 151.6 101.9 96.2
Corporate................... 30.5 41.8 27.3
-------------------------------------
Consolidated................ $1,084.6 $952.5 $662.8
=====================================
-----------------------------------------------------------------
67
- ------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
- ------------------------------------------------
- ---------------------------------------------------------------------
18. SUPPLEMENTAL INFORMATION
The components of plant and equipment, net, are summarized
below (in millions):
- ---------------------------------------------------------------------
1996 1995
---------------------------
Land.................................... $ 237.9 $ 248.4
Buildings............................... 3,172.2 3,081.7
Machinery and equipment................. 8,148.8 7,333.3
Construction in progress................ 655.8 656.3
---------------------------
12,214.7 11,319.7
Accumulated depreciation................ (5,006.5) (4,556.7)
---------------------------
$ 7,208.2 $ 6,763.0
===========================
- ---------------------------------------------------------------------
The components of investments and other assets are summarized
below (in millions):
- -------------------------------------------------------------------------
1996 1995
-------------------
Investments in and advances to affiliated companies... $ 741.2 $ 671.6
Investment properties................................. 129.3 125.2
Deferred charges...................................... 483.3 312.7
Goodwill.............................................. 435.8 443.8
-------------------
$1,789.6 $1,553.3
===================
- --------------------------------------------------------------------------
Summarized below is selected financial information for Anheuser-Busch,
Inc. (a wholly owned subsidiary of Anheuser-Busch Companies, Inc.) for the
years ended December 31 (in millions):
- ---------------------------------------------------------------------------
1996 (3) 1995 (3) 1994 (3)
--------------------------------
Income Statement Information:
Net sales................................$ 8,100.3 $ 7,594.9 $7,797.3
Gross profit............................. 3,172.4 2,889.6 2,937.7
Income from continuing operations (1) (2) 907.1 713.7 854.1
Balance Sheet Information:
Current assets...........................$ 526.9 $ 550.1
Noncurrent assets........................ 13,772.8 13,004.6
Current liabilities...................... 671.0 670.4
Noncurrent liabilities (1)............... 3,569.7 3,725.2
- ---------------------------------------------------------------------------
(1) Anheuser-Busch, Inc. is co-obligor for substantially all outstanding
Anheuser-Busch Companies, Inc. indebtedness. Accordingly, all such
guaranteed debt is included as an element of noncurrent liabilities,
with interest thereon included in the determination of income from
continuing operations.
(2) Income from continuing operations for 1995 reflects the after-tax
charge of $99.2 million relating to the closure of the Tampa brewery,
and the after-tax impact of the beer wholesaler inventory reduction.
(3) Net sales for 1994 include export sales. In 1995, the company changed
its sales reporting to exclude export sales from Anheuser-Busch, Inc.
results.
68
-------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
-------------------------------------------------
-----------------------------------------------------------------
19. QUARTERLY FINANCIAL DATA (UNAUDITED)
-------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER| ANNUAL
------------------------------------------------------------------------------------|------------
Net Sales....................... $2,371.8 $2,961.1 $3,063.5 $2,487.3 | $10,883.7
Gross Profit.................... 833.7 1,114.8 1,177.8 792.8 | 3,919.1
Income from |
continuing operations......... 275.5 353.4 377.2 150.0 | 1,156.1
Income from operations of |
discontinued segment.......... -- 33.8 -- -- | 33.8
------------------------------------------------------------------------------------|------------
Net Income...................... $ 275.5 $ 387.2 $ 377.2 $ 150.0 | $ 1,189.9
------------------------------------------------------------------------------------|------------
Fully diluted earnings per share: |
Income from |
continuing operations....... $ .53 $ .70 $ .74 $ .30 | $ 2.27
Income from operations |
of discontinued segment..... -- .07 -- -- | .07
------------------------------------------------------------------------------------|------------
Net Income...................... $ .53 $ .77 $ .74 $ .30 | $ 2.34
-------------------------------------------------------------------------------------------------
First quarter 1996 income from continuing operations includes
the nonrecurring after-tax gain of $33.4 million related to the
sale of the St. Louis Cardinals.
------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER ANNUAL
------------------------------------------------------------------------------------------------
Net Sales......................... $2,318.2 $2,823.2 $2,966.5 $2,232.6 | $10,340.5
Gross Profit...................... 776.8 1,027.8 1,088.0 656.9 | 3,549.5
Income/(Loss) from |
continuing operations......... 221.7 329.9 343.9 (8.9) | 886.6
(Loss) from operations of |
discontinued segment.......... (5.6) (0.8) (4.2) (8.2) | (18.8)
(Loss) on disposal of |
discontinued segment.......... -- -- -- (225.5) | (225.5)
------------------------------------------------------------------------------------|-----------
Net Income/(Loss) $ 216.1 $ 329.1 $ 339.7 $ (242.6) | $ 642.3
------------------------------------------------------------------------------------|-----------
Fully diluted earnings per share: |
Income/(Loss) from |
continuing operations......... $ .43 $ .63 $ .66 $ (.01) | $ 1.71
(Loss) from operations |
of discontinued segment...... (.01) -- (.01) (.02) | (.03)
(Loss) on disposal of |
discontinued segment......... -- -- -- (.44) | (.44)
-----------------------------------------------------------------------------------|------------
Net Income/(Loss)............... $ .42 $ .63 $ .65 $ (.47) | $ 1.24
------------------------------------------------------------------------------------------------
Fourth quarter 1995 income from continuing operations includes
the nonrecurring after-tax charge of $99.2 million ($.19 per
share) related to the closure of the Tampa brewery, and the
after-tax impact of the beer wholesaler inventory reduction.
69
- -----------------------------------------------
| Notes to Consolidated Financial Statements |
- -----------------------------------------------
- ----------------------------------------------------------------
20. RISK MANAGEMENT
In the ordinary course of business, Anheuser-Busch is
exposed to foreign currency exchange, interest rate and
commodity price risks. These exposures primarily relate to
the sale of product to foreign customers, purchases from
foreign suppliers, acquisition of raw materials from both
domestic and foreign suppliers, and changes in interest rates.
The company attempts to mitigate these exposures with
derivative financial instruments, primarily through purchased
options and forward contracts for foreign exchange risk; swaps
for interest rate risk; and futures, swaps and purchased options
for commodity price risk. Specific hedging strategies depend on
several factors, including the magnitude of the exposure, natural
offset through contract terms, cost and availability of appropriate
instruments, the anticipated time horizon and the nature of the
item being hedged. The company's overall risk management objective
is to obtain the most favorable transaction costs possible while
minimizing Anheuser-Busch's exposure to market volatility. To
achieve this goal the company is willing to forego certain
opportunities to participate in favorable market movements.
The following table summarizes the notional value for
outstanding derivatives, by risk category and instrument type,
at December 31 (in millions):
- ------------------------------------------------------------------------
NOTIONAL VALUE
---------------------
1996 1995
---------------------
Foreign Currency:
Forwards......................................... $ 35.3 $108.5
Options.......................................... 209.2 208.1
---------------------
244.5 316.6
---------------------
Interest Rate:
Swaps............................................ 487.4 238.0
---------------------
Commodity:
Options.......................................... 68.3 109.9
Swaps............................................ 105.2 89.4
Futures.......................................... 37.1 25.1
---------------------
210.6 224.4
---------------------
Total notional value of outstanding derivatives.... $942.5 $779.0
=====================
- ------------------------------------------------------------------------
The interest rate swap and currency exchange agreement
related to the dual currency notes discussed in Note 9 is
included as an interest rate swap in the preceding table.
70
-----------------------------------------------
| Notes to Consolidated Financial Statements |
-----------------------------------------------
The following table summarizes the notional value of
outstanding foreign currency forward and purchased option
contracts, by currency, with a designation of "long" or "short"
with respect to the underlying exposure, at December 31 (in
millions):
-----------------------------------------------------------------
NET UNDERLYING EXPOSURE NOTIONAL VALUE
---------------------------------------------
1996 1995 1996 1995
---------------------------------------------
Japanese yen....... Long Long $117.9 $191.8
German mark........ Short Short 32.9 37.1
British pound...... Long Long 76.5 43.9
Other currencies... Long and Short Long and Short 17.2 43.8
---------------
$244.5 $316.6
===============
-----------------------------------------------------------------
"Long" indicates the company has foreign currency in excess of
its needs. "Short" indicates the company requires additional
foreign currency to meet its needs. For commodity derivatives, as
a net user of raw materials the company's underlying exposure is
naturally short, indicating additional quantities must be
obtained to meet anticipated production requirements.
OFF-BALANCE-SHEET RISK AND CONCENTRATION OF CREDIT RISK
Anheuser-Busch's derivative hedging instruments are primarily
carried off-balance-sheet. The company executes these instruments
with major financial institutions having high debt ratings and
considers the risk of counterparty nonperformance to be remote.
The company does not have a material concentration of accounts
receivable or other credit risk.
NONDERIVATIVE FINANCIAL INSTRUMENTS
Nonderivative financial instruments included in the
Consolidated Balance Sheet are cash, commercial paper and
long-term debt. Long-term debt is the only significant financial
instrument of the company with a fair value different from its
carrying value. See Note 9 for a discussion of the fair value of
long-term debt at December 31, 1996 and 1995.
71
- ---------------------------------------
|FINANCIAL SUMMARY -- OPERATIONS | Anheuser-Busch Companies, Inc.
- --------------------------------------- and Subsidiaries
(In millions, except per share data)
-----------------------------------------------------------------------------------------------
1996 1995 1994
------------------------------------
CONSOLIDATED SUMMARY OF OPERATIONS
Barrels of beer sold....................................... 91.1 87.5 88.5
===================================
Sales...................................................... $ 12,621.5 $12,004.5 $11,705.0
Federal and state excise taxes........................... 1,737.8 1,664.0 1,679.7
-----------------------------------
Net sales.................................................. 10,883.7 10,340.5 10,025.3
Cost of products and services............................ 6,964.6 6,791.0 6,492.1
-----------------------------------
Gross profit............................................... 3,919.1 3,549.5 3,533.2
Marketing, distribution and administrative expenses...... 1,890.0 1,756.6 1,679.9
Gain on sale of St. Louis Cardinals...................... 54.7 -- --
Shutdown of Tampa brewery................................ -- 160.0 --
Restructuring charge..................................... -- -- --
------------------------------------
Operating income........................................... 2,083.8(1) 1,632.9(2) 1,853.3
Interest expense......................................... (232.8) (225.9) (219.3)
Interest capitalized..................................... 35.5 24.3 21.8
Interest income.......................................... 9.4 9.9 2.6
Other income/(expense), net.............................. (3.0) 20.5 17.6
------------------------------------
Income before income taxes................................. 1,892.9(1) 1,461.7(2) 1,676.0
Income taxes (current and deferred)...................... 736.8 575.1 661.5
Revaluation of deferred tax liability.................... -- -- --
------------------------------------
Income from continuing operations.......................... 1,156.1(1) 886.6(2) 1,014.5
Income/(loss) from discontinued operations................. 33.8 (244.3) 17.6
------------------------------------
Income before cumulative effect of accounting changes...... 1,189.9 642.3 1,032.1
Cumulative effect of changes in the method of accounting
for postretirement benefits (FAS 106) and income taxes
(FAS 109), net of tax benefit of $186.4 million.......... -- -- --
------------------------------------
NET INCOME................................................. $ 1,189.9 $ 642.3 $ 1,032.1
=====================================
PRIMARY EARNINGS PER SHARE:
Continuing operations.................................... $ 2.28 $ 1.72 $ 1.92
Discontinued operations.................................. .07 (.48) .04
-------------------------------------
Income before cumulative effect.......................... 2.35 1.24 1.96
Cumulative effect of accounting changes.................. -- -- --
--------------------------------------
Net income............................................... $ 2.35 $ 1.24 $ 1.96
======================================
FULLY DILUTED EARNINGS PER SHARE:
Continuing operations.................................... $ 2.27(1) $ 1.71(2) $ 1.90
Discontinued operations.................................. .07 (.47) .04
--------------------------------------
Income before cumulative effect.......................... 2.34 1.24 1.94
Cumulative effect of accounting changes.................. -- -- --
--------------------------------------
Net income............................................... $ 2.34 $ 1.24 $ 1.94
======================================
Cash dividends paid:
Common stock............................................. 458.9 429.5 398.8
Per share.............................................. .92 .84 .76
Preferred stock.......................................... -- -- --
Per share.............................................. -- -- --
Weighted average number of common shares:
Primary.................................................. 505.8 515.7 528.2
Fully diluted............................................ 510.6 524.4 538.0
- -------------------------------------------------------------------------------------------------
NOTE: All per share information and average number of common shares data
reflect the September 12, 1996 two-for-one stock split and the September
12, 1986 two-for-one stock split. All financial information has been
restated to recognize the 1995 divestiture of the food products segment.
All amounts include the acquisition of Sea World as of December 1, 1989.
Financial information prior to 1988 has been restated to reflect the 1988
adoption of Financial Accounting Standards No. 94, "Consolidation of
Majority-Owned Subsidiaries."
(1) 1996 results include the impact of the gain on the sale of the St.
Louis Cardinals. Excluding the Cardinal gain, operating income, pretax
income, income from continuing operations and fully diluted earnings
per share would have been $2,029.1 million, $1,838.3 million, $1,122.7
million and $2.21, respectively.
(2) 1995 results include the impact of the one-time pretax charge of $160
million for the closure of the Tampa brewery, and the $74.5 million
pretax impact of the beer wholesaler inventory reduction. Excluding
these nonrecurring special items, operating income, pretax income,
income from continuing operations and fully diluted earnings per share
would have been $1,867.3 million, $1,696.2 million, $1,032.3 million
and $1.99, respectively.
72
Anheuser-Busch Companies, Inc., and Subsidiaries
-----------------------------------
|FINANCIAL SUMMARY -- OPERATIONS |
-----------------------------------
- -----------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986
- -----------------------------------------------------------------------------------------
87.3 86.8 86.0 86.5 80.7 78.5 76.1 72.3
=========================================================================================
$11,147.3 $11,008.6 $10,631.9 $9,716.1 $8,553.7 $8,120.5 $7,605.0 $7,001.5
1,679.8 1,668.6 1,637.9 868.1 802.3 781.0 760.7 724.5
- -----------------------------------------------------------------------------------------
9,467.5 9,340.0 8,994.0 8,848.0 7,751.4 7,339.5 6,844.3 6,277.0
6,167.6 6,051.8 5,953.5 5,963.4 5,226.5 4,878.1 4,467.1 4,122.7
- -----------------------------------------------------------------------------------------
3,299.9 3,288.2 3,040.5 2,884.6 2,524.9 2,461.4 2,377.2 2,154.3
1,612.1 1,583.7 1,409.5 1,364.9 1,244.3 1,245.2 1,274.4 1,179.9
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
401.3 -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------
1,286.5 (3) 1,704.5 1,631.0 1,519.7 1,280.6 1,216.2 1,102.8 974.4
(205.1) (194.6) (234.0) (277.2) (172.9) (134.6) (114.1) (85.5)
35.2 46.9 45.6 52.5 49.8 42.9 38.9 31.0
3.4 4.4 6.6 4.3 7.9 9.8 12.8 9.6
21.0 (2.5) 1.3 (16.5) 17.7 (15.5) 3.9 (1.2)
- ------------------------------------------------------------------------------------------
1,141.0(3) 1,558.7 1,450.5 1,282.8 1,183.1 1,118.8 1,044.3 928.3 (4)
452.6 594.6 549.6 481.4 438.2 422.0 439.1 419.0
31.2 -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------
657.2 (3) 964.1 900.9 801.4 744.9 696.8 605.2 509.3 (4)
(62.7) 30.1 38.9 41.0 22.3 19.1 9.5 8.7
- ------------------------------------------------------------------------------------------
594.5 994.2 939.8 842.4 767.2 715.9 614.7 518.0
-- (76.7) -- -- -- -- -- --
- -------------------------------------------------------------------------------------------
$ 594.5 $ 917.5 $ 939.8 $ 842.4 $ 767.2 $ 715.9 $ 614.7 $ 518.0
===========================================================================================
$ 1.20 $ 1.69 $ 1.56 $ 1.41 $ 1.30 1.19 $ 1.00 $ .83
(.11) .05 .07 .07 .04 .04 .02 .02
- -------------------------------------------------------------------------------------------
1.09 1.74 1.63 1.48 1.34 1.23 1.02 .85
-- (.13) -- -- -- -- -- --
- -------------------------------------------------------------------------------------------
$ 1.09 $ 1.61 $ 1.63 $ 1.48 $ 1.34 $ 1.23 $ 1.02 $ .85
============================================================================================
$ 1.20(3)$ 1.68 $ 1.56 $ 1.40 $ 1.30 $ 1.19 $ 1.00 $ .83 (4)
(.11) .05 .06 .07 .04 .04 .02 .02
- --------------------------------------------------------------------------------------------
1.09 1.73 1.62 1.47 1.34 1.23 1.02 .85
-- (.13) -- -- -- -- -- --
- --------------------------------------------------------------------------------------------
$ 1.09 $ 1.60 $ 1.62 $ 1.47 $ 1.34 $ 1.23 $ 1.02 $ .85
============================================================================================
370.0 338.3 301.1 265.0 226.2 188.6 148.4 120.2
.68 .60 .53 .47 .40 .33 .27 .22
-- -- -- -- -- -- 20.1 26.9
-- -- -- -- -- -- 3.23 3.60
548.6 571.6 575.8 569.2 572.4 584.4 603.0 613.2
558.6 581.6 585.8 579.4 572.4 584.4 603.0 613.2
- ------------------------------------------------------------------------
(3) 1993 results include the impact of two nonrecurring special charges.
These charges are (1) a restructuring charge ($401.3 million pretax)
and (2) a revaluation of the deferred tax liability due to the 1%
increase in federal tax rates ($31.2 million after-tax). Excluding
these nonrecurring special charges, operating income, pretax income,
income from continuing operations and fully diluted earnings per share
would have been $1,687.8 million, $1,542.3 million, $935.2 million and
$1.69, respectively.
(4) Effective January 1, 1986, the company adopted the provisions of
Financial Accounting Standards No. 87 (FAS 87), "Employers' Accounting
For Pensions." The financial effect of FAS 87 adoption was to increase
1986 income before income taxes $33.9 million, income from continuing
operations $18 million and earnings per share $.03.
73
- ------------------------------------
| Financial Summary -- Balance |
| Sheet and Other Information |
- ------------------------------------
Anheuser-Busch Companies, Inc., and Subsidiaries
(In millions, except per share and statistical data)
- ---------------------------------------------------------------------------
1996 1995 1994
------------------------------
BALANCE SHEET INFORMATION:
Working capital (deficit)................$ 34.9 $ 268.6 $ 57.0
Current ratio............................ 1.0 1.2 1.0
Plant and equipment, net................. 7,208.2 6,763.0 6,494.6
Long-term debt........................... 3,270.9 3,270.1 3,066.4
Total debt to total capitalization ratio. 44.8% 47.1% 47.3%
Deferred income taxes.................... 1,208.1 1,132.8 1,081.5
Convertible redeemable preferred stock... -- -- --
Shareholders equity...................... 4,029.1 4,433.9 4,415.5
Return on shareholders equity............ 30.0%(1) 25.0%(2) 29.9%
Book value per share..................... 8.10 7.22 6.64
Total assets............................. 10,463.6 10,590.9 10,547.4
OTHER INFORMATION:
Capital expenditures.....................$ 1,084.6 $ 952.5 $ 662.8
Depreciation and amortization............ 593.9 565.6 517.0
Effective tax rate....................... 38.9% 39.3% 39.5%
Price/earnings ratio..................... 17.6(1) 19.6(2) 13.1
Percent of pretax profit on net sales.... 17.4% 14.1% 16.7%
Market price range of common stock
(high-low)............................. 42 7/8- 34- 27 5/8-
32 1/2 25 3/8 23 1/2
- ---------------------------------------------------------------------------
NOTE: All share and per share information reflects the September 12, 1996
two-for-one stock split and the September 12, 1986 two-for-one stock split.
All financial information has been restated to recognize the 1995
divestiture of the food products segment. All amounts include the
acquisition of Sea World as of December 1, 1989. Financial information
prior to 1988 has been restated to reflect the adoption in 1988 of
Financial Accounting Standards No. 94, "Consolidation of Majority-Owned
Subsidiaries."
(1) These ratios have been calculated based on reported income from
continuing operations, which includes the $54.7 million pretax gain on
the sale of the St. Louis Cardinals. Excluding the Cardinal gain,
return on shareholders equity would have been 29.2% and the
price/earnings ratio would have been 18.1.
(2) These ratios have been calculated based on reported income from
continuing operations. Excluding the two nonrecurring 1995 items ($160
million pretax charge for closure of the Tampa brewery and $74.5
million impact of the beer wholesaler inventory reduction), return on
shareholders equity would have been 29.1% and the price/earnings ratio
would have been 16.8.
(3) These ratios have been calculated based on reported income from
continuing operations. Excluding the two nonrecurring 1993 charges
($401.3 million pretax restructuring charge and $31.2 million after-tax
FAS 109 charge), return on shareholders equity would have been 26.7%
and the price/earnings ratio would have been 13.8.
(4) These ratios have been calculated based on income from continuing
operations before the cumulative effect of accounting changes.
(5) This percentage has been calculated by including convertible redeemable
preferred stock as part of equity, as it was convertible into common
stock and traded primarily on its equity characteristics.
74
------------------------------------
|FINANCIAL SUMMARY -- BALANCE |
|SHEET AND OTHER INFORMATION |
------------------------------------
Anheuser-Busch Companies, Inc., and Subsidiaries
- --------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986
- --------------------------------------------------------------------------------------------------------------
$ (41.3) $ 247.8 $ 107.9 $ (62.8) $ (82.8) $ (23.7) $ 42.5 $ 9.3
1.0 1.2 1.1 0.9 0.9 1.0 1.0 1.0
6,454.7 6,424.7 6,260.6 6,102.2 5,768.0 4,624.2 4,177.4 3,478.5
3,019.7 2,630.3 2,627.9 3,115.8 3,268.9 1,570.0 1,366.4 1,097.8
47.3% 42.0% 43.9% 54.5% 60.7% 41.7% 40.6% 37.7%(5)
1,013.1 1,065.5 1,401.0 1,309.3 1,241.9 1,155.8 1,123.7 1,075.8
-- -- -- -- -- -- -- 286.9
4,255.5 4,620.4 4,438.1 3,679.1 3,099.9 3,102.9 2,892.2 2,313.7
18.8%(3) 27.6%(4) 30.2% 34.0% 34.6% 33.3% 31.8% 28.7%(5)
6.31 6.51 5.90 4.60 3.74 3.87 3.40 2.83
10,267.7 9,954.9 9,642.5 9,274.2 8,690.1 6,788.9 6,260.3 5,605.0
$ 656.3 $ 628.8 $ 625.5 $ 805.3 $ 979.0 $ 858.1 $ 716.9 $ 661.1
492.7 453.3 437.0 404.3 333.1 306.5 267.9 232.0
42.4% 38.1% 37.9% 37.5% 37.0% 37.7% 42.0% 45.1%
22.6(3) 16.9(4) 18.9 14.6 14.4 12.9 16.4 15.5
12.1% 16.7% 16.1% 14.5% 15.3% 15.2% 15.3% 14.8%
30-22 301/4-26 303/4-193/4 221/2-171/8 227/8-151/4 17-141/2 197/8-131/4 141/4-10
- --------------------------------------------------------------------------------------------------------------
- -------------------------------------------
|RESPONSIBILITY FOR FINANCIAL STATEMENTS |
- -------------------------------------------
The management of Anheuser-Busch Companies, Inc. is
responsible for the financial statements and other information
included in this annual report. Management has selected those
generally accepted accounting principles it considers appropriate
to prepare the financial statements and other data contained herein.
The company maintains accounting and reporting systems,
supported by a system of internal accounting control, which
management believes are adequate to provide reasonable assurances
that assets are safeguarded against loss from unauthorized use or
disposition and financial records are reliable for preparing
financial statements. During 1996, the company's internal auditors,
in conjunction with Price Waterhouse LLP, the company's independent
accountants, performed a comprehensive review of the adequacy of
the company's internal accounting control system. Based on that
comprehensive review, it is management's opinion that the company
has an effective system of internal accounting control.
The Audit Committee of the Board of Directors, which consists
of eight nonmanagement directors, oversees the company's financial
reporting and internal control systems, recommends selection of the
company's public accountants and meets with the public accountants
and internal auditors to review the overall scope and specific plans
for their respective audits. The Committee held five meetings during
1996. A more complete description of the functions performed by the
Audit Committee can be found in the company's proxy statement.
The report of Price Waterhouse LLP on its examinations of the
Consolidated Financial Statements of the company appears on the
next page.
76
-----------------------------------------
| Report of Independent Accountants |
-----------------------------------------
800 Market Street
St. Louis, MO 63101
PRICE WATERHOUSE LLP [LOGO]
February 3, 1997
To the Shareholders and Board of Directors
of Anheuser-Busch Companies, Inc.
We have audited the accompanying Consolidated Balance Sheet of
Anheuser-Busch Companies, Inc. and its subsidiaries as of
December 31, 1996 and 1995, and the related Consolidated
Statements of Income, Changes in Shareholders Equity and Cash
Flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of
the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements audited
by us present fairly, in all material respects, the financial
position of Anheuser-Busch Companies, Inc. and its subsidiaries
at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
PRICE WATERHOUSE LLP
77
APPENDIX
In Exhibit 13 to the printed Form 10-K, the following bar graphs
appear, all depicting data for 1992, 1993, 1994, 1995 and 1996: on page
36, "SALES" depicting gross sales and net sales in billions of dollars; on
page 38, "TOTAL EMPLOYEE-RELATED COSTS" depicting total employee-related
costs in millions of dollars; on page 39, "OPERATING INCOME (CONTINUING
OPERATIONS BASIS)" depicting operating income in millions of dollars; on
page 40, "INCOME FROM CONTINUING OPERATIONS*/DIVIDENDS ON COMMON STOCK"
depicting income from continuing operations and dividends in millions of
dollars; on page 41, "FULLY DILUTED EARNINGS PER SHARE FROM CONTINUING
OPERATIONS*" depicting fully diluted earnings per share data; on page 43,
"CASH FLOW FROM CONTINUING OPERATIONS" depicting cash flow from continuing
operations in millions of dollars; on page 44, "CAPITAL
EXPENDITURES/DEPRECIATION AND AMORTIZATION" depicting capital expenditures
and depreciation and amortization in millions of dollars; and, on page 47,
"SHAREHOLDERS EQUITY/LONG-TERM DEBT" depicting shareholders equity and
long-term debt in millions of dollars.