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ANHEUSER[LOGO]BUSCH
Companies
D E L I V E R I N G
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S H A R E H O L D E R V A L U E
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F I N A N C I A L R E V I E W
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C O N T E N T S
Management's Discussion and Analysis
of Operations and Financial Condition 26
Management's Responsibility for Financial
Statements 39
Report of Independent Accountants 39
Consolidated Balance Sheet 40
Consolidated Statement of Income 41
Consolidated Statement of Changes
in Shareholders Equity 42
Consolidated Statement of Cash Flows 43
Notes To Consolidated
Financial Statements 44
Financial Summary -- Operations 56
Financial Summary -- Balance Sheet
and Other Information 58
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 25
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ANHEUSER[LOGO]BUSCH
Companies
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF OPERATIONS AND FINANCIAL CONDITION
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, 2000. This discussion should be read in conjunction with the Letter to
Shareholders, Consolidated Financial Statements and Notes to the Consolidated
Financial Statements included in this annual report.
This discussion contains statements regarding the company's expectations
concerning its operations, earnings and future outlook. These statements are
forward-looking statements that involve significant risks and uncertainties,
and accordingly, no assurances can be given that such expectations will be
correct. These expectations are based upon many assumptions that the company
believes to be reasonable, but such assumptions may ultimately prove to be
inaccurate or incomplete, in whole or in part. Important factors that could
cause actual results to differ (favorably or unfavorably) from the
expectations stated in this discussion include, among others, changes in the
pricing environment for the company's products; changes in domestic demand
for malt beverage products; changes in consumer preference for the company's
malt beverage products; regulatory or legislative changes; changes in raw
materials prices; changes in interest rates; changes in foreign currency
exchange rates; changes in attendance and consumer spending patterns for the
company's theme park operations; changes in demand for aluminum beverage
containers; changes in the company's international beer business or in the
beer business of the company's international equity partners; and the effect
of stock market conditions on the company's share repurchase program. The
company disclaims any obligation to update any of these forward-looking
statements. If the company determines to update any forward-looking
statement, it will do so publicly. No private statements by the company or
its personnel should be interpreted as updating forward-looking statements.
OBJECTIVES
Anheuser-Busch remains focused on three major objectives to enhance
shareholder value:
* Increasing domestic per barrel profitability which, when combined
with continued market share growth, will provide solid long-term earnings
per share growth.
* Profitable expansion of international beer operations by making selected
investments in leading brewers in key international beer growth markets
and building the Budweiser brand worldwide. The company has made
significant marketing investments to build Budweiser brand recognition
outside the United States and owns overseas breweries in China and the
United Kingdom. The company has a significant equity position in Grupo
Modelo, Mexico's largest brewer and producer of the Corona brand, and
recently purchased an equity position in Compania Cervecerias Unidas,
the leading brewer in Chile.
26 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
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* Continued support of profit and free cash flow growth in packaging and
entertainment operations. Packaging operations provide significant
efficiencies, cost savings and quality assurance for domestic beer
operations. Entertainment operations enhance the company's corporate
image by showcasing Anheuser-Busch's heritage, values and commitment to
quality and social responsibility to approximately 21 million visitors
annually.
COMPARISON OF OPERATING RESULTS
The company distributed a two-for-one stock split on September 18, 2000.
All share and per share information in this discussion has been restated to
reflect the impact of the stock split.
Comparisons of key operating results for the last three years are
summarized in the following tables.
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COMPARISON OF OPERATING RESULTS ($ IN MILLIONS, EXCEPT PER SHARE)
- ----------------------------------------------------------------------------------
2000 1999 2000 VS. 1999
Gross sales $14,297 $13,723 $574 4.2%
Net sales $12,262 $11,704 $558 4.8%
Operating income $2,495 $2,302 $193 8.4%
Equity income, net of tax $200 $158 $42 27.0%
Net income $1,552 $1,402 $150 10.7%
Diluted earnings per share $1.69 $1.47 $.22 15.0%
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1999 1998 1999 VS. 1998
Gross sales $13,723 $13,208 $515 3.9%
Net sales $11,704 $11,246 $458 4.1%
Operating income $2,302 $2,125 $177 8.3%
Equity income, net of tax $158 $85 $73 85.2%
Net income $1,402 $1,233 $169 13.7%
Diluted earnings per share $1.47 $1.27 $.20 16.2%
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1998 1997 (1) 1998 VS. 1997
Gross sales $13,208 $12,832 $376 2.9%
Net sales $11,246 $11,066 $180 1.6%
Operating income $2,125 $2,053 $72 3.5%
Equity income, net of tax $85 $50 $35 68.7%
Net income $1,233 $1,179 $54 4.6%
Diluted earnings per share $1.27 $1.18 $.09 7.2%
- ----------------------------------------------------------------------------------
<FN>
(1) Net income and diluted earnings per share exclude the impact of the cumulative
accounting adjustment for systems reengineering costs per EITF No. 97-13.
Including this adjustment, net income for 1997 would have been $1,169 and
diluted earnings per share would have been $1.17.
</FN>
BEER VOLUME SALES
Total worldwide beer sales volume results are summarized in the following
table:
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WORLDWIDE BEER SALES VOLUME (MILLIONS OF BARRELS)
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2000 1999 CHANGE
Domestic 98.3 95.7 2.7%
International 7.3 7.2 1.3%
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Worldwide A-B brands 105.6 102.9 2.6%
International equity partner brands 15.7 15.1 3.9% (1)
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Total brands 121.3 118.0 2.8% (1)
======================================
<FN>
(1) Normalized to exclude 1999 volume related to Anheuser-Busch's previously held
equity stake in Antarctica, Equity Partner volume increased 6.2%, and Total
Brands volume increased 3.1%, for 2000 vs. 1999.
</FN>
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1999 1998 CHANGE
Domestic 95.7 92.7 3.2%
International 7.2 7.1 1.2%
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Worldwide A-B brands 102.9 99.8 3.1%
International equity partner brands 15.1 11.2 34.7%
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Total brands 118.0 111.0 6.3%
======================================
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1998 1997 CHANGE
Domestic 92.7 89.6 3.5%
International 7.1 7.0 0.6%
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Worldwide A-B brands 99.8 96.6 3.3%
International equity partner brands 11.2 6.8 64.9%
--------------------------------------
Total brands 111.0 103.4 7.3%
======================================
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Worldwide beer volume is comprised of domestic and international volume.
Domestic volume represents Anheuser-Busch brands produced and shipped within
the United States. International volume represents exports from the company's
U.S. breweries to markets around the world, plus Anheuser-Busch brands
produced overseas by company-owned breweries in China and the United Kingdom
and under license and contract brewing agreements. Budweiser and other
Anheuser-Busch beer brands are sold in more than 80 countries worldwide.
Total volume combines worldwide Anheuser-Busch brand volume with the
company's pro rata share of volume in international equity partner Grupo
Modelo. Total brands also includes Anheuser-Busch's equity share of
Antarctica beer volume through July 1999. The company sold its equity
investment back to Antarctica in July 1999.
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 27
4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
SALES -- 2000 VS. 1999
Anheuser-Busch achieved record gross sales of $14.3 billion and record
net sales of $12.3 billion in 2000. Gross sales increased vs. 1999 by $574
million, or 4.2%, and net sales increased $558 million, or 4.8%, compared to
1999. The primary factors responsible for these increases were increased
domestic revenue per barrel and higher domestic beer sales volume, partially
offset by lower international beer sales due primarily to the conversion of
the company's 90% owned Japan joint venture into an exclusive licensing
arrangement. The difference between gross and net sales in 2000 is beer
excise taxes of $2.03 billion.
Domestic revenue per barrel grew 2.5% for the year 2000 compared to 1999,
reflecting the company's continuing focus on beer profit margin growth. The
domestic beer industry environment continues to support price increases and
additional discount reductions. In October 2000, the company successfully
implemented the first stage of its planned revenue enhancement strategy for
2001 in markets representing 40% of its domestic volume. In February 2001,
the company implemented its second stage of price increases and discount
reductions on another 35% of the company's
[SALES* -- GRAPH]
[FN]
* THE DIFFERENCE BETWEEN GROSS SALES AND NET SALES
REPRESENTS BEER EXCISE TAXES.
</FN>
domestic volume. These revenue initiatives have again been tailored to
specific markets, brands and packages.
Domestic beer sales-to-wholesalers increased 2.7% for the year 2000, to
98.3 million barrels. Domestic volume growth was led by the Bud Family, with
Bud Light registering its ninth consecutive year of double-digit growth due
to strong underlying retail demand. Domestic sales-to-retailers were up 2.5%
for the year compared to 1999.
Anheuser-Busch believes its success in 2000 provides a solid foundation
for future growth, given the company's ability to capitalize on favorable
domestic industry fundamentals and the continued strong earnings growth by
the international beer segment. Profit margins were significantly enhanced
and return on capital employed increased 100 basis points in 2000. The
company remains confident in its ability to consistently achieve its
long-term double-digit earnings per share growth objectives, with an earnings
per share growth target of 12% for 2001.
Worldwide Anheuser-Busch beer sales volume grew to 105.6 million barrels,
up 2.6% for 2000 compared to 1999. Total volume was 121.3 million barrels, up
2.8% for the year. Normalized to exclude 1999 volume related to Anheuser-
Busch's previously held equity stake in Antarctica, equity partner volume
increased 6.2% for the year, and total volume increased 3.1%.
The company's reported domestic market share (excluding exports) for 2000
was 48.4%, an increase of 0.9 share points over 1999 market share of 47.5%.
Including exports, the company's share of U.S. shipments was 48.3% vs. 47.4%
for 1999. Domestic market share and share of U.S. shipments are determined
based on industry sales estimates provided by the Beer Institute, which have
not been adjusted for the impact of the wholesaler inventory reduction
initiated by Miller in the fourth quarter. The company has led the U.S.
brewing industry in sales volume and market share since 1957.
International beer volume (excluding Modelo) grew 1.3% in 2000, due
primarily to growth in Canada and China, partially offset by lower volume in
the United Kingdom.
SALES -- 1999 VS. 1998
Anheuser-Busch achieved gross sales of $13.7 billion and net sales of
$11.7 billion in 1999. Gross sales increased over 1998 by $515 million, or
3.9% and net sales increased over 1998 by $458 million, or 4.1%. The sales
increases are primarily due to higher domestic beer volume and higher revenue
per barrel. The difference between gross and net sales for 1999 is beer
excise taxes of $2.02 billion.
Domestic revenue per barrel grew nearly 3% in 1999 compared to 1998,
reflecting the company's focus on enhancing domestic beer profitability. In
the fourth quarter 1999, the company implemented price increases in 72% of
the country on selected brands and packages representing 43% of its volume.
Domestic beer shipments to wholesalers grew to 95.7 million barrels in
1999, an increase of 3.0 million barrels or 3.2% over 1998. Each of the
company's core brand families contributed to domestic volume growth. Bud
Light recorded its eighth consecutive year of double-digit growth. Overall,
wholesaler sales-to-retailers grew 3.3% for full year 1999.
28 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
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Worldwide Anheuser-Busch beer brands shipments grew to 102.9 million
barrels for the year 1999, up 3.1% compared to 1998. This marked the first
time in brewing industry history a company has sold over 100 million barrels
of its beer in a single year. Total beer volume in 1999 was 118.0 million
barrels, up 6.3% over 1998.
The company's domestic market share (excluding exports) for 1999 was
47.5%, an increase of 0.7 share points over 1998 market share of 46.8%.
Including exports, the company's share of U.S. Shipments was 47.4% for the
year vs. 46.6% for 1998.
International beer volume (excluding Modelo) was up 1.2% for the year
1999 compared to 1998, to 7.2 million barrels. The increase was due primarily
to gains in the Americas, Ireland and Continental Europe, partially offset by
weakness in Asia, principally in Japan, and lower sales in the United
Kingdom.
In August 1999, the company recalled twist-off bottles in several
European countries as a quality assurance measure. The recall stemmed from
problems with the bottle manufacturing process. There were no quality issues
with the beer itself. The company incurred total pretax costs of
approximately $6 million in 1999 for the bottle recall.
In July 1999, Anheuser-Busch sold its equity interest in Antarctica back
to Antarctica. There was no impact on earnings associated with the
divestiture. In September 1999, Anheuser-Busch and Antarctica announced a
joint decision not to apply to CADE, Brazil's antitrust commission, for
continued production of Budweiser by Antarctica. Instead, the company entered
into a distribution agreement with Expand Group in December 1999 for the
exporting of Budweiser to Brazil beginning in January 2000. The pretax cost
of discontinuing Budweiser production in Brazil was approximately $6 million.
Effective January 1, 2000, the company converted its 90%-owned Japan
joint venture operation into an exclusive license agreement with its local
partner Kirin, for the production and selling of Budweiser in Japan. The new
agreement with Kirin is designed to create new opportunities for Budweiser's
growth and to improve profitability by giving the brand full access to
Kirin's national wholesaler distribution and integrated selling systems and
reducing the company's overhead costs in Japan. The cost of converting to the
license agreement was approximately $9 million and is included in 1999
results.
SALES -- 1998 VS. 1997
Anheuser-Busch achieved gross sales of $13.2 billion and net sales of
$11.2 billion in 1998. These results represent a gross sales increase over
1997 of $376 million, or 2.9%, and a net sales increase over 1997 of $180
million, or 1.6%. The increases were primarily due to higher domestic beer
volume. For 1998, sales and excise taxes include the impact of accounting for
the Stag Brewery operations in the United Kingdom on a consolidated basis vs.
equity accounting in 1997. Beer excise taxes for 1998 totaled $1.96 billion.
Worldwide volume for Anheuser-Busch beer brands was up 3.3% for 1998,
compared to the prior year. Total volume was up 7.6 million barrels, or 7.3%,
for the year. International equity partner brands reflects the company's 37%
ownership interest in Grupo Modelo brands for the first nine months of 1998
and 50.2% for the fourth quarter, compared to a combination of 17.7%
ownership interest for the first five months of 1997 and 37% thereafter.
Anheuser-Busch's strategy to reduce domestic price discounting initiated
at the beginning of 1998 was successful. This strategy was designed to
increase revenues, reduce the spread between front-line and discounted prices
to consumers, and protect the company's brand equities. In October 1998, the
company initiated a revenue enhancement strategy of selective price increases
and discount reductions. As a result of these and other actions, domestic
revenue per barrel was up nearly 3% in the fourth quarter 1998 compared to
the same period in 1997, and was level for the full year compared to full
year 1997.
Anheuser-Busch domestic beer shipments grew 3.5% during 1998, reflecting
strong retail demand. Overall, sales-to-retailers were up 4% for 1998.
Combined Bud and Bud Light sales-to-retailers increased 3.4% for 1998
compared to 1997. This growth was led by Bud Light, which had its seventh
consecutive double-digit growth year.
The company's domestic market share (excluding exports) for 1998 was
46.8%, an increase of 1.0 share points over 1997 market share of 45.8%.
Including exports, the company's share of U.S. Shipments was 46.6%, vs. 45.5%
for 1997.
International Anheuser-Busch brand volume (excluding Modelo) was up 0.6%
in 1998 compared to 1997. Strong Budweiser sales performances in the United
Kingdom, Ireland, Continental Europe and Canada were mostly offset by sales
declines in Asia.
In Japan, Anheuser-Busch performance was impacted by lower industry sales
due to an economic recession and the introduction of a tax-advantaged
"happoshu" beer category. Accordingly, Anheuser-Busch significantly
restructured its sales force. The restructuring resulted in a pretax charge
of $9 million in the fourth quarter 1998.
In June 1998, the company restructured its alliance granting Labatt
Brewing Company perpetual rights to brew and sell the Budweiser and Bud Light
brands in Canada. In return, Labatt significantly increased marketing support
behind the two brands and Anheuser-Busch received a higher royalty percentage
on Budweiser and Bud Light sales in Canada.
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 29
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
COST OF PRODUCTS AND SERVICES
The company continuously strives to drive costs out of its system.
Brewery modernizations have yielded long-term savings through reduced beer
packaging and shipping costs and reduced maintenance and equipment
replacement costs. The company's focused production methods and wholesaler
support centers concentrate small-volume brand and package production at
three breweries to create production efficiencies, reduce costs and enhance
responsiveness to changing consumer brand/package preferences. Also, the
company works with its network of wholesalers to reduce distribution costs
through better systemwide coordination.
Cost of products and services was $7.59 billion for 2000, an increase of
$338 million, or 4.7%, compared to 1999. The increase in cost of products and
services is principally due to higher domestic beer volume and increased
costs at the company's entertainment, can manufacturing and commodity
aluminum recycling businesses. Gross profit as a percentage of net sales was
38.1% for 2000, an increase of 10 basis points compared to 1999, primarily
reflecting increased domestic revenue per barrel, partially offset by lower
packaging segment gross profit.
Cost of products and services was $7.25 billion in 1999, an increase of
$92 million, or 1.3%, vs. 1998. The increase in the cost of products and
services in 1999 is primarily due to higher domestic beer volume and higher
costs at the company's packaging operations. Gross profit as a percentage of
net sales for 1999 was 38.0%, an increase of 170 basis points vs. 1998.
Cost of products and services was $7.16 billion in 1998, an increase of
$66 million, or 0.9%, compared to 1997. The change in the cost of products
and services in 1998 is primarily due to increased beer volume, the change
in the method of accounting for the Stag Brewery operation (consolidation in
1998 vs. Equity accounting in 1997) and improved brewery operating
efficiencies. In 1998, under full consolidation accounting for Stag, excise
taxes are shown as a deduction from gross sales, while under the equity
method in 1997, excise taxes were included in the cost of beer purchased
from Stag.
Gross profit as a percentage of net sales was 36.3% for 1998, an increase
of 40 basis points vs. 1997, primarily reflecting productivity improvements.
MARKETING, DISTRIBUTION AND ADMINISTRATIVE EXPENSES
Marketing, distribution and administrative expenses for 2000 were $2.17
billion, an increase of $28 million, or 1.3% vs. 1999. The increase in these
expenses in 2000 is due to higher marketing expenses for the domestic beer
segment, higher one-time marketing costs for the entertainment segment
related to the opening of the Discovery Cove park and higher general and
administrative costs, partially offset by lower international beer marketing
expenses in Japan due to the conversion of the company's joint venture.
Marketing, distribution and administrative expenses for 1999 were $2.15
billion compared with $1.96 billion for 1998, an increase of $189 million, or
9.7%. The increase is primarily attributable to higher domestic marketing and
sales promotion spending in support of the Bud Family, increased spending on
consumer awareness and education programs and higher general and
administrative costs.
Marketing, distribution and administrative expenses for 1998 increased
$42 million, or 2.2%, compared to 1997 expenses of $1.92 billion. The
increase is primarily due to higher domestic and international marketing
expense in support of premium brands, primarily the Bud Family.
OPERATING INCOME
Operating income represents the measure of the company's financial
performance before net interest cost, other nonoperating items and equity
income.
Operating income in 2000 grew $192.4 million, or 8.4% compared to 1999,
primarily due to the domestic beer company's strong revenue per barrel and
volume performance as well as good results from international beer
operations.
The international beer segment's net income in 2000 increased 51.7%
compared to 1999, due to the strong performance by Grupo Modelo and improved
international operating results. International beer operating profits in
2000, excluding Modelo, improved compared to 1999 on volume gains in China
and lower costs in Japan due to the conversion of the company's joint venture
into an exclusive licensing agreement.
[OPERATING INCOME -- GRAPH]
[FN]
* NORMALIZED RESULTS, EXCLUDING ONE-
TIME GAIN FROM THE SALE OF THE ST. LOUIS
CARDINALS. REPORTED OPERATING INCOME
FOR 1996, WHICH INCLUDES THE GAIN ON
THE CARDINALS SALE, WAS $2,083.8.
</FN>
30 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
7
Packaging segment operating profits were down $62 million, or 41.4% for
2000 compared to 1999, reflecting lower conversion pricing on Metal
Container's beer and soft drink can sales and a $14 million adjustment
related to prior year accounting errors at the company's label manufacturing
business in Clarksville, Tennessee. Entertainment segment operating results,
excluding start-up costs associated with Discovery Cove, were up 7.6% for the
year due primarily to strong attendance in the Florida market. Discovery Cove
successfully began operations in July 2000.
Operating income for 1999 was $2.30 billion, an increase of $177 million,
or 8.3%, compared to 1998. The increase in operating income for the year is
primarily due to strong domestic beer performance driven by higher domestic
beer sales volume and revenue per barrel.
Theme park operating results for 1999 were up slightly from the prior
year, excluding start-up costs for the Discovery Cove park.
Performance of the company's packaging operations in 1999 was level with
1998.
Net income for Anheuser-Busch's international beer segment was up 59% in
1999 due to Modelo's strong performance and Anheuser-Busch's increased
ownership level in Modelo due to the purchase of an additional 13.25% equity
interest in September 1998. However, international beer operating results,
which exclude Modelo, declined for the year to a loss of $19.5 million,
including one-time costs associated with the termination of the Budweiser
production joint venture in Brazil, the impact of a bottle recall in Europe
and the conversion of the company's Japan joint venture operation into an
exclusive license agreement.
Operating income for 1998 was $2.13 billion, an increase of $72 million,
or 3.5%, over 1997. The increase in operating income for 1998 was primarily
due to higher domestic beer sales volume and higher operating results from
can manufacturing and entertainment, partially offset by weaker results from
international beer operations.
Packaging operating income improved in 1998 vs. 1997, due to higher soft
drink can volume and reduced costs.
Despite weakness in Florida tourism, entertainment operations had a
slight improvement in operating income compared to 1997, due to higher
in-park spending.
International beer operating income declined vs. 1997 primarily due to
weakness in Japan.
NET INTEREST COST
Net interest cost (interest expense less interest income) was $347.1
million for 2000, $303.5 million for 1999 and $285.7 million for 1998,
representing increases of 14.4%, 6.2% and 12.8%, respectively, compared to
prior years. These increases primarily result from higher average outstanding
debt balances compared to prior years, with a lesser impact from higher
average interest rates. See the Liquidity and Cash Flows section of this
discussion for additional information.
INTEREST CAPITALIZED
Interest capitalized increased $15.1 million, to $33.3 million in 2000
compared to 1999. Interest capitalized decreased $7.8 million, to $18.2
million for 1999 compared to 1998, and declined $16.1 million in 1998, to
$26.0 million compared to 1997. The changes in capitalized interest amounts
fluctuate depending on construction-in-progress balances, which are impacted
by the timing of capital spending and project completion dates.
OTHER INCOME/EXPENSE, NET
Other income/expense, net includes numerous items of a nonoperating
nature that do not have a material impact on the company's consolidated
results of operations, either individually or in total. The company had net
other expense of $1.0 million in 2000, $9.4 million in 1999 and $13.0 million
in 1998.
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 31
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
EQUITY INCOME, NET
Equity income, net of tax, increased 27%, to $200 million for 2000
compared to 1999, based on Grupo Modelo's strong underlying pricing and
volume performance.
Equity income for 1999 increased $72.5 million compared to 1998, to
$157.5, due to Modelo's underlying performance and Anheuser-Busch's increased
ownership level in Modelo. The company held a 50.2% equity stake in Modelo
throughout 1999. This compares to 37% ownership for the first nine months and
50.2% for the last quarter 1998. Additionally, equity income for 1998 was
adversely impacted by Mexican peso depreciation and hyperinflation
accounting. Hyperinflation accounting ceased January 1, 1999.
The company recognized equity income, net of tax, of $85.0 million during
1998, compared to $50.3 million in 1997. The increase in equity income in
1998 was due to a larger equity share in Modelo and the strong underlying
sales volume and operating results for Modelo, partially offset by the impact
of hyperinflation accounting. For 1998, equity income percentages compare
with 17.7% ownership for the first five months of 1997 and a 37% ownership
interest thereafter.
NET INCOME
The company earned net income of $1.55 billion in 2000, an increase of
$149.4 million, or 10.7%, vs. 1999 net income of $1.40 billion. Net income
for 1999 increased $169 million, or 13.7%, vs. the 1998 total of $1.23
billion, an increase of $54 million, or 4.6%, compared to 1997.
The company's effective tax rate was 38.0% in 2000, 1999 and 1998. The
1998 effective rate declined 0.4% vs. 1997, principally due to lower state
and foreign taxes and lower nondeductible costs.
DILUTED EARNINGS PER SHARE
Diluted earnings per share were $1.69 for 2000, an increase of 15.0% vs.
1999 diluted earnings per share. Diluted earnings per share for 1999 were
$1.47, an increase of $.20, or 16.2%, compared to 1998 diluted earnings per
share of $1.27, which had increased 7.2% compared to 1997. Diluted earnings
per share benefit from the company's ongoing share repurchase program. The
company repurchased 28.2 million, 37.8 million and 27.8 million common shares
in 2000, 1999 and 1998, respectively.
See Note 7 for additional information regarding share repurchases.
[DILUTED EARNINGS PER SHARE -- GRAPH]
[FN]
* NORMALIZED RESULTS, EXCLUDING ONE-
TIME GAIN FROM THE SALE OF THE ST.
LOUIS CARDINALS. REPORTED DILUTED
EARNINGS PER SHARE FOR 1996, WHICH
INCLUDE THE GAIN ON THE CARDINALS
SALE, WERE $1.14.
1 BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE.
</FN>
32 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
9
EMPLOYEE-RELATED COSTS
Employee-related costs totaled $1.92 billion in 2000, an increase of $38
million, or 2.0%, vs. 1999 costs of $1.88 billion. Employee-related costs for
1999 increased $40 million, or 2.2%, vs. 1998 costs of $1.84 billion, which
increased 2.6% vs. 1997. The changes in employee-related costs reflect normal
increases in salaries, wages and benefit levels.
[EMPLOYEE-RELATED COSTS -- GRAPH]
Salaries and wages comprise the majority of employee-related costs and
totaled $1.58 billion in 2000, an increase of $40 million, or 2.6% vs. 1999.
Salaries and wages totaled $1.54 billion in 1999, an increase of $22 million,
or 1.4%, compared to $1.52 billion in 1998. Salaries and wages for 1998
increased 2.7% vs. 1997. The remainder of employee-related costs consists of
pension, life insurance, and health care benefits and payroll taxes.
Full-time employees numbered 23,725, 23,645 and 24,344 at December 31,
2000, 1999 and 1998, respectively.
TAXES
The company is significantly impacted by federal, state and local taxes,
including beer excise taxes. Taxes applicable to 2000 operations (not
including the many indirect taxes included in materials and services
purchased) totaled $3.1 billion, an increase of $81.4 million, or 2.7%, vs.
1999 total taxes of $3.0 billion, and highlight the burden of taxation on the
company and the brewing industry in general. Taxes in 1999 increased 3.9%
compared to 1998 total taxes of $2.89 billion, which increased 8.1% compared
to 1997.
The increases in taxes in 2000, 1999 and 1998 are primarily due to higher
income taxes and beer excise taxes. Taxes for 1998 also reflect consolidation
accounting of Stag operations compared to equity accounting in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The company's primary sources of liquidity are cash provided from
operations and financing activities. Principal uses of cash are capital
expenditures, business investments, share repurchases and dividends.
Information on the company's consolidated cash flows (categorized by
operating activities, financing activities and investing activities) for the
years 2000, 1999 and 1998 is presented in the Consolidated Statement of Cash
Flows and Note 11.
OPERATING CASH FLOW
Anheuser-Busch's strong financial profile allows it to pursue its growth
strategies while providing substantial direct returns to shareholders.
Accordingly, the company has established well-defined priorities for its
operating cash flow:
* Reinvest in core businesses to achieve profitable growth. To enhance
shareholder value, the company will continue to make investments to
improve efficiency and capacity in its existing operations, and make
selected equity investments in international brewers in higher growth
markets.
* Make substantial cash payments directly to shareholders through
consistent dividend growth and the repurchase of common shares.
The company has paid cash dividends each of the last 67 years, and
has repurchased approximately 3% of outstanding shares annually for
the last 10 years.
At December 31, 2000, the company had a working capital deficit of
$(127.8), compared to working capital deficits of $(350.4) million at
December 31, 1999 and $(89.9) million at December 31, 1998. The company
typically operates at a working capital deficit.
[OPERATING CASH FLOW -- GRAPH]
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 33
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
CAPITAL EXPENDITURES
During the next five years, the company will continue capital expenditure
programs designed to take advantage of growth and productivity improvement
opportunities for its beer, packaging and entertainment operations. The
company has a formal and intensive review procedure for the authorization of
capital expenditures. The most important measure of acceptability of a
capital project is its projected discounted cash flow return on investment
exceeding the company's cost of capital.
[CAPITAL EXPENDITURES/DEPRECIATION & AMORTIZATION -- GRAPH]
Cash flow from operating activities is projected to exceed the company's
funding requirements for anticipated capital expenditures. However, the
combination of capital spending, dividend payments and share repurchases,
plus possible additional investments in international brewers, may require
external financing. The nature, extent and timing of external financing will
vary depending upon the company's evaluation of existing market conditions
and other economic factors.
Total capital expenditures in 2000 amounted to $1.1 billion, an increase
of $209 million, or 24.2%, compared to 1999 capital spending of $865 million.
Capital expenditures over the past five years totaled $5.0 billion. The
company expects capital expenditures in 2001 of approximately $950 million
and anticipates capital expenditures during the five-year period 2001 - 2005
of approximately $4.5 billion.
SHARE REPURCHASE
See Note 7 for a discussion of share repurchase activity.
DIVIDENDS
Cash dividends paid to common shareholders were $571.0 million in 2000
and $544.7 million in 1999. Dividends on common stock are paid in the months
of March, June, September and December of each year. In the third quarter
2000, effective with the September dividend, the Board of Directors increased
the quarterly dividend rate by 10%, from $.15 to $.165 per share of common
stock. This increased annual dividends per common share 8.6%, to $.63 in
2000, compared with $.58 per common share in 1999. In 1999 dividends were
$.14 per share for the first two quarters and $.15 per share for the last
two quarters.
[NET INCOME/DIVIDENDS -- GRAPH]
[FN]
* NORMALIZED RESULTS, EXCLUDING ONE-TIME GAIN FROM THE
SALE OF THE ST. LOUIS CARDINALS. REPORTED NET INCOME
FOR 1996, WHICH INCLUDES THE GAIN ON THE CARDINALS
SALE, WAS $1,156.1.
1 BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE.
</FN>
34 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
11
FINANCING ACTIVITIES
The company utilizes Securities and Exchange Commission "shelf"
registration statements to provide flexibility and efficiency when obtaining
long-term financing. At December 31, 2000, a total of $600 million of debt
was available for issuance under existing registrations.
Total debt increased a net $251.6 million in 2000, compared to an
increase of $404.3 million in 1999. The change in debt during these years is
detailed below, by key component.
INCREASES IN DEBT -- $803.9 million in 2000 and $994.7 million in 1999, as
follows:
YEAR DESCRIPTION AMOUNT INTEREST RATE
(MILLIONS)
2000 DEBENTURES $400.0 $200.0 EACH AT 6.8%
AND 7.55%, FIXED
LONG-TERM NOTES $400.0 $200.0 EACH AT 6.5%
AND 7.5%, FIXED
INDUSTRIAL REVENUE
BONDS $3.9 VARIOUS FIXED RATES
- ------------------------------------------------------------------------------
1999 Long-term notes $300.0 5.75%, fixed
Commercial paper $627.1 5.1%, weighted average
floating
Industrial revenue
bonds $36.1 Various fixed rates
Miscellaneous $31.5 Various fixed rates
- ------------------------------------------------------------------------------
DECREASES IN DEBT -- $552.3 million in 2000 and $590.4 million in 1999,
as follows:
YEAR DESCRIPTION AMOUNT INTEREST RATE
(MILLIONS)
2000 COMMERCIAL PAPER $475.1 6.2%, WEIGHTED
AVERAGE FLOATING
ESOP DEBT
GUARANTEE $38.3 8.25%, FIXED
MEDIUM-TERM NOTES $25.0 6.75%, WEIGHTED
AVERAGE FIXED
MISCELLANEOUS $13.9 VARIOUS FIXED RATES
- ------------------------------------------------------------------------------
1999 Dual currency notes $262.4 Quarterly floating rate
Long-term notes $250.0 8.75%, fixed
Debentures $23.0 8.5%, fixed
Medium-term notes $15.0 7.7%, weighted average
fixed
ESOP debt guarantee $36.7 8.25%, fixed
Miscellaneous $3.3 Various fixed rates
- ------------------------------------------------------------------------------
In addition to long-term debt financing, the company has access to the
short-term capital market through the utilization of commercial paper and its
$2 billion revolving bank credit agreement that expires June 2005. The credit
agreement provides the company with an immediate and continuing source of
liquidity. No borrowings have been made under the credit agreement since its
inception. Also see Note 4.
The company's cash flow to total debt ratio was 41.5% in 2000, 41.8% in
1999 and 41.9% in 1998. The ratio of debt to total capitalization was 56.6%
at both December 31, 2000 and 1999. The company's fixed charge coverage ratio
was 6.7X, 6.9X, and 6.8X for the years ended December 31, 2000, 1999 and
1998, respectively.
Historically, Anheuser-Busch, Inc. (ABI), the company's domestic beer
subsidiary, has been co-obligor on substantially all of the company's senior
debt. The co-obligation was originated in connection with the formation of
the company as a holding company in 1979, in order to assure that the senior
debt issued by the company would not be structurally subordinated to the debt
issued by ABI prior to the formation of the holding company. The debt issued
by ABI has been retired, making the ABI co-obligations unnecessary.
Therefore, effective December 31, 2000, ABI's co-obligations were terminated.
Removal of the guarantees had no impact on the company's credit ratings or
cost of borrowing.
[SHAREHOLDERS EQUITY/DEBT -- GRAPH]
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 35
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
COMMON STOCK
At December 31, 2000, registered common shareholders numbered
58,614 compared with 60,100 at the end of 1999. See Note 7 for a
summary of common stock activity.
PRICE RANGE OF COMMON STOCK
The company's common stock is listed on the New York Stock Exchange under
the symbol "BUD." The following table summarizes 2000 and 1999 quarterly high
and low closing prices for BUD.
- ------------------------------------------------------------------------------
PRICE RANGE OF ANHEUSER-BUSCH COMMON STOCK (BUD)
- ------------------------------------------------------------------------------
2000 1999
QUARTER HIGH LOW HIGH LOW
First 38.06 27.47 39.22 32.59
Second 40.66 32.69 39.44 34.47
Third 44.31 38.13 40.81 34.84
Fourth 49.81 39.63 38.19 33.34
- ------------------------------------------------------------------------------
The closing price of the company's common stock at December 31, 2000 and
1999 was $45.50 and $35.44, respectively. The book value of each common share
of stock at December 31, 2000 was $4.57, compared to $4.25 at December 31,
1999.
SYSTEMS-RELATED YEAR 2000 COSTS
The company experienced no operating interruptions or other disturbances
due to Year 2000 events. The company resolved its Year 2000 date recognition
issues through either the replacement of existing systems with Year
2000-ready-systems or by reprogramming existing systems.
RISK MANAGEMENT
Anheuser-Busch is exposed to foreign currency exchange, interest rate and
commodity price risks. These exposures primarily relate to beer sales to
foreign customers, purchases from foreign suppliers, royalty receipts from
foreign license and contract brewers, acquisition of raw materials from both
domestic and foreign suppliers, and changes in interest rates. The company
utilizes derivative financial instruments, including forward exchange
contracts, futures contracts, swaps and options to manage certain of these
exposures. Anheuser-Busch has well-established policies and procedures
governing the use of derivatives. The company hedges only firm commitments or
anticipated transactions in the ordinary course of business and corporate
policy prohibits the use of derivatives for speculation, including the sale
of free-standing instruments. The company neither holds nor issues financial
instruments for trading purposes.
Specific hedging strategies depend on several factors, including the
magnitude and volatility of the exposure, cost of the hedge and availability
of appropriate hedging instruments, the anticipated time horizon, commodity
basis, opportunity cost and the nature of the item being hedged. The
company's overall risk management goal is to strike a balance between
managing its exposure to market volatility and obtaining the most favorable
transaction costs possible.
Derivatives are either exchange-traded 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 over-the-counter instruments generally have long-term ratings from
Standard & Poor's or Moody's no lower than A+ or A1, respectively.
Additionally, counterparty fair value positions favorable to Anheuser-Busch
and in excess of certain thresholds are collateralized with cash, U.S.
Treasury securities or letters of credit. Anheuser-Busch has reciprocal
collateralization responsibilities for fair value positions unfavorable to
the company and in excess of certain thresholds. At December 31, 2000, the
company held zero counterparty collateral and had none outstanding.
The fair value of derivative financial instruments is the estimated
amount the company would receive or have to pay when terminating any
contracts. The company also monitors the effectiveness of its hedging
structures, based either on cash offset between changes in the value of the
underlying hedged exposure and changes in the value of the derivative, or by
the correlation between the price of the underlying hedged exposure and the
pricing upon which the derivative is based.
36 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
13
Following is a summary indicating potential unfavorable changes in the
fair value of the company's derivative holdings under certain market
movements. The company applies sensitivity analysis for commodity price
exposures and value-at-risk (VAR) analysis for foreign currency and interest
rate exposures. It is important to note the volatility analysis ignores
changes in the value of the underlying hedged transactions. Because the
company does not hold or trade derivatives for speculation or profit, it
seeks to establish only highly effective hedging relationships and therefore
expects offsetting impacts between derivatives and the underlying hedged
transactions.
- ------------------------------------------------------------------------------
ESTIMATED FAIR VALUE VOLATILITY AT DEC. 31, 2000 (IN MILLIONS)
- ------------------------------------------------------------------------------
Foreign Currency Risk (VAR):
Forwards, Options $1.5
Interest Rate Risk (VAR):
Swaps $0.3
Commodity Price Risk (Sensitivity):
Futures, Swaps, Options $24.2
- ------------------------------------------------------------------------------
VAR forecasts fair value changes using a statistical model (Monte Carlo
simulation method) which incorporates historical correlations among various
currencies and interest rates. The VAR model assumes the company could
liquidate its currency and interest rate positions in a single day (one-day
holding period). The volatility figures provided represent the maximum
one-day loss each portfolio could experience for 19 out of every 20 trading
days (95% confidence level), based on history.
The sensitivity analysis for commodities reflects the impact of a
hypothetical 10% adverse change in the market price for the company's
principal commodities.
The volatility of foreign currencies, interest rates and commodity prices
is dependent on many factors that cannot be forecasted with accuracy.
Therefore, changes in fair value over time could differ substantially from
the illustration.
The company adopted FAS 133, "Accounting for Derivative Instruments and
Hedging Activity" on January 1, 2001. FAS 133 requires all derivatives to be
reported on the balance sheet at fair value, with changes in fair value
recognized either in earnings or equity, depending on the nature of the
underlying transaction and how effective the derivative is at offsetting
price movements in the underlying exposure. All of the company's existing
derivative positions qualified for hedge accounting under FAS 133, and the
impact of adoption was not material. The company made no substantive changes
to its risk management strategy as a result of adopting FAS 133. Derivatives
documentation policies were revised as necessary to comply with FAS 133
requirements.
See Notes 1 and 3 for information regarding the company's derivatives
portfolio and the related accounting.
INTRODUCTION OF THE EURO
The three-year phase-in of the new common currency of the European
Economic and Monetary Union, the "euro," began on January 1, 1999. Prior to
introduction, the company made appropriate arrangements with key financial
institutions to ensure smooth handling of euro receipts and disbursements.
The company's financial systems accommodated the initial euro introduction.
Full systems euro readiness is anticipated to be achieved by December 2001
through normal systems maintenance and upgrades.
SIGNIFICANT NON-U.S. EQUITY INVESTMENTS
GRUPO MODELO
In September 1998, the company completed the purchase of an additional
13.25% of Diblo, S.A. de C.V., the operating subsidiary of Grupo Modelo, S.A.
de C.V., Mexico's largest brewer and leading exporter of beer. The purchase
price was $556.5 million, which brought Anheuser-Busch's total investment in
Modelo to $1.6 billion. The additional investment increased Anheuser-Busch's
total direct and indirect holdings in Diblo to 50.2%. The increase in
ownership did not give Anheuser-Busch voting or other effective control of
either Grupo Modelo or Diblo and, accordingly, the company accounts for its
investment on the equity basis. The company first adopted the equity method
of accounting when ownership was increased from 17.7% to 37% in May 1997.
The economic benefit of the company's Modelo investment can be measured
in two ways -- Anheuser-Busch's share in the earnings of Modelo (equity
income) and the excess of the fair value of the investment over its carrying
value. The excess of fair value over carrying value, based on Grupo Modelo's
closing stock price on the Mexican stock exchange at December 31, 2000, was
$4.0 billion. Although this amount is appropriately not reflected in the
company's income statement or balance sheet, it represents economic value to
Anheuser-Busch and its shareholders.
Throughout 1998, Mexico was considered hyperinflationary for U.S.
accounting purposes. Under hyperinflation accounting, the company effectively
recognized in earnings the impact of Mexican peso depreciation on its
investment during 1998, which was unfavorable. The Mexican economy ceased to
be hyperinflationary for U.S. accounting purposes on January 1, 1999.
Translation adjustments are now appropriately reflected in other
comprehensive income (equity) rather than earnings.
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 37
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
CCU
In January 2001, the company purchased a 17% equity interest in Compania
Cervecerias Unidas S.A. (CCU), the largest brewer in Chile, for approximately
$270 million. Anheuser-Busch has partnered with CCU in Argentina for five
years through the company's equity ownership in CCU-Argentina, a CCU
subsidiary that contract brews and distributes Budweiser in Buenos Aires and
other markets.
The investment in CCU is consistent with Anheuser-Busch's strategy to
expand the company's presence in Latin America. The South American beer
market is 117 million barrels and has experienced strong growth as economic
fundamentals improve and disposable income increases. Also see Note 2.
ANTARCTICA
In April 1996, the company purchased a 5% equity stake in a subsidiary,
ANEP, controlling 75% of the operations of Companhia Antarctica Paulista
(Antarctica), one of Brazil's leading brewers. The investment agreement
provided the company with options allowing it to increase its investment to
approximately 30% of ANEP. The first of the options was set to expire in
September 1999, but was determined to be no longer economically attractive
for Anheuser-Busch. Accordingly, the company exercised its right to end its
equity partnership with Antarctica in July 1999. Also see Note 2.
CORPORATE MATTERS
STATUS OF LABOR NEGOTIATIONS
On August 7, 1999, Teamsters-represented employees at the company's 12
U.S. breweries approved a new five-year national contract offer by a margin
of 59% to 41%. The proposed agreement had been endorsed by the Director of
the Teamsters Brewery and Soft Drink Workers Conference and by its terms will
expire February 28, 2004. Certain local issues remained unresolved in August
1999, and both the company and the Teamsters had previously stated that there
could be no final agreement, and the approved national contract could not go
into effect, until agreement was reached on all national and local issues.
In October 2000, the company was notified by Teamsters officials that the
remaining local issues had been ratified. However, the offer stipulates the
final contract cannot be signed until all National Labor Relations Board
(NLRB) charges and other pending court cases are resolved. As a result, the
company continues to operate its breweries under the terms of the offer
implemented in September 1998. Anheuser-Busch and Teamsters officials have
met to discuss the NLRB and other cases.
The approved national contract includes wage and benefit increases, as
well as provisions to support productivity improvement, promote workplace
flexibility, reduce absenteeism, improve the grievance procedure and
institute a more effective drug-testing program. Additionally, Anheuser-Busch
has reaffirmed its commitment, contingent with the approved contract going
into effect, to keep all 12 of its U.S. breweries open during the life of the
contract, barring an unforeseen event, providing its Teamsters-represented
employees with unprecedented job security.
SEAWORLD CLEVELAND
In February 2001, the company sold its SeaWorld Cleveland adventure park
to Six Flags, Inc. for $110 million in cash, and recognized a pretax gain of
approximately $18 million in the first quarter 2001. The sale did not include
killer whales or dolphins or any rights to the SeaWorld name. Anheuser-Busch
will continue to operate and support its remaining U.S. theme parks.
ENVIRONMENTAL ISSUES
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 cleanup 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 is strongly committed to environmental protection. Its
Environmental Management System provides specific guidance for how the
environment must be factored into business decisions and mandates special
consideration of environmental issues in conjunction with other business
issues when any of the company's facilities or business units plans capital
projects or changes in processes. Anheuser-Busch also encourages its
suppliers to adopt similar environmental management practices and policies.
38 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
15
MANAGEMENT'S RESPONSIBILITY FOR
FINANCIAL STATEMENTS
The management of Anheuser-Busch Companies is responsible for the
preparation and presentation of the financial statements and other financial
information included in this annual report. Management is also responsible
for the reasonableness of estimates and judgments inherent in the preparation
of the financial statements. These statements are prepared in accordance with
accounting principles generally accepted in the U.S.
It is management's responsibility to ensure the company maintains
accounting and reporting systems, supported by a system of internal
accounting controls, designed to provide reasonable assurance as to the
integrity of the underlying financial records and the protection of assets.
These systems include written policies and procedures, selection and training
of qualified personnel, organizational segregation of duties and a program of
internal reviews and appropriate follow-up.
Management believes the company's systems 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 2000, the company's internal auditors,
in conjunction with PricewaterhouseCoopers 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 Board of Directors is responsible for ensuring the independence and
qualifications of Audit Committee members under applicable New York Stock
Exchange guidelines. The Audit Committee of the Board of Directors, which
consists of five non-management directors, oversees the company's financial
reporting and internal control systems, recommends selection of the company's
independent accountants to the Board of Directors and meets with management,
the independent accountants and internal auditors to review auditing and
financial reporting matters. The Committee held five meetings during 2000.
The Audit Committee charter can be found in the company's Proxy
Statement.
PricewaterhouseCoopers LLP is responsible for conducting an independent
examination of the company's financial statements in accordance with auditing
standards generally accepted in the U.S., and expressing an opinion as to
whether the financial statements fairly present the company's financial
position, operating results, cash flows and changes in shareholders equity.
REPORT OF INDEPENDENT ACCOUNTS
800 Market Street
St. Louis, MO 63101
[PRICEWATERHOUSECOOPERS LOGO]
February 6, 2001
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, 2000
and 1999, 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, 2000. 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 auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audits 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, 2000 and
1999, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.
/s/PricewaterhouseCoopers LLP
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 39
16
C O N S O L I D A T E D B A L A N C E S H E E T
Anheuser-Busch Companies and Subsidiaries
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31 (IN MILLIONS) 2000 1999
- -------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and marketable securities $ 159.9 $ 152.1
Accounts and notes receivable 600.4 629.0
Inventories:
Raw materials and supplies 347.3 378.2
Work in process 82.9 84.7
Finished goods 178.1 160.9
Total inventories 608.3 623.8
Other current assets 179.3 195.7
-------------------------------
Total current assets 1,547.9 1,600.6
Investments in affiliated companies 2,207.4 2,012.5
Other assets 1,085.4 1,062.7
Plant and equipment, net 8,243.8 7,964.6
-------------------------------
TOTAL ASSETS $13,084.5 $12,640.4
===============================
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities:
Accounts payable $ 940.8 $ 932.6
Short-term debt -- 242.3
Accrued salaries, wages and benefits 276.4 248.4
Accrued taxes 127.4 164.2
Other current liabilities 331.1 363.5
------------------------------
Total current liabilities 1,675.7 1,951.0
------------------------------
Postretirement benefits 492.7 506.4
------------------------------
Long-term debt 5,374.5 4,880.6
------------------------------
Deferred income taxes 1,372.9 1,344.7
------------------------------
Other long-term liabilities 39.8 36.2
------------------------------
Common Stock and Other Shareholders Equity:
Common stock, $1.00 par value,
authorized 1.6 billion shares 1,441.5 716.1
Capital in excess of par value 725.3 1,241.0
Retained earnings 10,164.4 9,181.2
Accumulated other comprehensive income:
Foreign currency translation adjustment (212.3) (175.0)
------------------------------
12,118.9 10,963.3
Treasury stock, at cost (7,817.8) (6,831.3)
ESOP debt guarantee (172.2) (210.5)
------------------------------
4,128.9 3,921.5
------------------------------
Commitments and contingencies -- --
------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $13,084.5 $12,640.4
==============================
The Notes on pages 44-55 of this report are an integral component of the
company's consolidated financial statements.
40 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
17
C O N S O L I D A T E D S T A T E M E N T O F I N C O M E
Anheuser-Busch Companies and Subsidiaries
- --------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31 (IN MILLIONS, EXCEPT PER SHARE) 2000 1999 1998
- --------------------------------------------------------------------------------------------------
Sales $14,296.6 $13,723.3 $13,207.9
Excise taxes (2,034.8) (2,019.6) (1,962.1)
--------------------------------------------
Net sales 12,261.8 11,703.7 11,245.8
Cost of products and services (7,592.3) (7,254.4) (7,162.5)
--------------------------------------------
Gross profit 4,669.5 4,449.3 4,083.3
Marketing, distribution and administrative
expenses (2,174.8) (2,147.0) (1,958.0)
--------------------------------------------
Operating income 2,494.7 2,302.3 2,125.3
Interest expense (348.2) (307.8) (291.5)
Interest capitalized 33.3 18.2 26.0
Interest income 1.1 4.3 5.8
Other expense, net (1.0) (9.4) (13.0)
--------------------------------------------
Income before income taxes 2,179.9 2,007.6 1,852.6
Provision for income taxes (828.3) (762.9) (704.3)
Equity income, net of tax 200.0 157.5 85.0
--------------------------------------------
Net income $ 1,551.6 $ 1,402.2 $ 1,233.3
============================================
Earnings per share:
Basic $ 1.71 $ 1.49 $ 1.28
============================================
Diluted $ 1.69 $ 1.47 $ 1.27
============================================
The Notes on pages 44-55 of this report are an integral component of the
company's consolidated financial statements.
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 41
18
C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N
S H A R E H O L D E R S E Q U I T Y
Anheuser-Busch Companies and Subsidiaries
- --------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31 (IN MILLIONS, EXCEPT PER SHARE) 2000 1999 1998
- --------------------------------------------------------------------------------------------------
COMMON STOCK
Balance, beginning of period $ 716.1 $ 712.7 $ 709.3
Shares issued under stock plans 6.4 3.4 3.4
Two-for-one stock split 719.0 -- --
---------------------------------------------
Balance, end of period $ 1,441.5 $ 716.1 $ 712.7
=============================================
CAPITAL IN EXCESS OF PAR VALUE
Balance, beginning of period $ 1,241.0 $ 1,117.5 $ 1,017.0
Shares issued under stock plans 203.3 123.5 100.5
Two-for-one stock split (719.0) -- --
---------------------------------------------
Balance, end of period $ 725.3 $ 1,241.0 $ 1,117.5
=============================================
RETAINED EARNINGS
Balance, beginning of period $ 9,181.2 $ 8,320.7 $ 7,604.9
Net income 1,551.6 1,402.2 1,233.3
Common dividends paid (per share: 2000 - $.63;
1999 - $.58; 1998 - $.54) (571.0) (544.7) (521.0)
Shares issued under stock plans 2.6 3.0 3.5
---------------------------------------------
Balance, end of period $10,164.4 $ 9,181.2 $ 8,320.7
=============================================
TREASURY STOCK
Balance, beginning of period $(6,831.3) $(5,482.1) $(4,793.3)
Treasury stock acquired (986.5) (1,349.2) (688.8)
---------------------------------------------
Balance, end of period $(7,817.8) $(6,831.3) $(5,482.1)
=============================================
ESOP DEBT GUARANTEE
Balance, beginning of period $ (210.5) $ (247.2) $ (282.1)
Annual debt service 38.3 36.7 34.9
---------------------------------------------
Balance, end of period $ (172.2) $ (210.5) $ (247.2)
=============================================
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of period $ (175.0) $ (205.6) $ (214.0)
Foreign currency translation adjustment (37.3) 30.6 8.4
---------------------------------------------
Balance, end of period $ (212.3) $ (175.0) $ (205.6)
=============================================
TOTAL SHAREHOLDERS EQUITY $ 4,128.9 $ 3,921.5 $ 4,216.0
=============================================
COMPREHENSIVE INCOME
Net income $ 1,551.6 $ 1,402.2 $ 1,233.3
Foreign currency translation adjustment (37.3) 30.6 8.4
---------------------------------------------
TOTAL COMPREHENSIVE INCOME $ 1,514.3 $ 1,432.8 $ 1,241.7
=============================================
The Notes on pages 44-55 of this report are an integral component of the
company's consolidated financial statements.
42 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
19
C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S
Anheuser-Busch Companies and Subsidiaries
- ---------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31 (IN MILLIONS) 2000 1999 1998
- ---------------------------------------------------------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 1,551.6 $ 1,402.2 $ 1,233.3
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 803.5 777.0 738.4
Deferred income taxes 28.7 40.3 34.5
Undistributed earnings of affiliated companies (185.2) (155.5) (53.7)
Other, net 31.4 77.6 24.7
--------------------------------------------
Operating cash flow before change in working
capital 2,230.0 2,141.6 1,977.2
Decrease/(increase) in working capital 27.5 (5.8) 236.2
--------------------------------------------
Cash provided by operating activities 2,257.5 2,135.8 2,213.4
--------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (1,074.5) (865.3) (817.5)
New business acquisitions (42.9) (7.0) (566.5)
Proceeds from sale of business -- 59.6 --
--------------------------------------------
Cash used for investing activities (1,117.4) (812.7) (1,384.0)
--------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase in debt 803.9 973.4 451.5
Decrease in debt (514.0) (553.7) (63.6)
Dividends paid to shareholders (571.0) (544.7) (521.0)
Acquisition of treasury stock (986.5) (1,349.2) (688.8)
Shares issued under stock plans 135.3 78.4 70.0
--------------------------------------------
Cash used for financing activities (1,132.3) (1,395.8) (751.9)
--------------------------------------------
Net increase/(decrease) in cash during the year 7.8 (72.7) 77.5
Cash, beginning of year 152.1 224.8 147.3
--------------------------------------------
Cash, end of year $ 159.9 $ 152.1 $ 224.8
============================================
The Notes on pages 44-55 of this report are an integral component of the
company's consolidated financial statements.
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 43
20
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 Consolidated Financial Statements included in this
annual report. These principles and policies conform to U.S. generally
accepted accounting principles. The preparation of financial statements in
conformity with U.S. generally accepted accounting principles requires that
management make certain estimates and assumptions about the future which
impact the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the period. Actual results could differ from those estimates and assumptions.
REVENUE RECOGNITION
The company recognizes revenue only when title transfers, or services have
been rendered to unaffiliated customers. For beer, title transfers on
shipment. For cans and lids, title transfers on customer receipt. The
company's beer and packaging operations do not engage in consignment sales.
Entertainment operations recognize revenue related to advance ticket sales
when customers actually visit a park location. The company's revenue
recognition practices are in compliance with SEC Staff Accounting Bulletin
No. 101, "Revenue Recognition in Financial Statements."
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the company and all its
subsidiaries. The company generally consolidates all majority-owned and
controlled subsidiaries, accounts for investments below the 20% level under
the cost method, and applies the equity method of accounting for investments
between 20% and 50%. All significant intercompany transactions have been
eliminated. Minority interests in consolidated subsidiaries are not material.
FOREIGN CURRENCY TRANSLATION
Financial statements of foreign operations where the local currency is the
functional currency are translated using period-end exchange rates for assets
and liabilities, and weighted average exchange rates during the period for
the results of operations. Translation adjustments are reported as a separate
component of other comprehensive income within shareholders equity.
Translation practice differs for foreign operations in hyperinflationary
economies. See Note 2 for additional discussion.
Exchange rate adjustments related to foreign currency transactions are
recognized in income as incurred.
CASH AND MARKETABLE SECURITIES
Cash and marketable securities include cash, demand deposits and
short-term investments with initial maturities generally 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 other assets on the balance sheet, is amortized on a
straight-line basis over a period of 40 years. Accumulated goodwill
amortization at December 31, 2000 and 1999 was $145.8 million and $131.7
million, respectively. The ongoing recoverability of goodwill is monitored
based on applicable operating unit performance and consideration of
significant events or changes in the overall business environment. See Note 11
for additional information.
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 approximately 75% of total
inventories at December 31, 2000 and 1999. Average cost valuation is used for
the remainder. Had average cost (which approximates replacement cost) been
used for all inventories at December 31, 2000 and 1999, total inventories
would have been $89.9 million and $83.3 million higher, respectively.
FIXED ASSETS
Fixed assets are carried at cost and include expenditures for new
facilities and expenditures which substantially increase the useful lives of
existing facilities. The cost of maintenance, repairs and minor renewals is
expensed as incurred. When fixed assets are retired or otherwise disposed,
the cost and related accumulated depreciation are eliminated, and any gain or
loss on disposition is recognized in earnings.
Depreciation is provided using the straight-line method based on the
following weighted average useful lives: buildings, 25 years; production
machinery and equipment, 15 years; furniture and fixtures, 10 years; computer
equipment, 3 years.
INCOME TAXES
The provision for income taxes is based on income and expense amounts as
reported in the Consolidated Statement of Income. The company utilizes
certain provisions of federal, state and foreign 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 FAS No. 109, "Accounting for
Income Taxes."
44 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
21
DERIVATIVE FINANCIAL INSTRUMENTS
All derivative instruments held by the company are designated as hedges,
have high correlation with the underlying exposure and are highly effective
in offsetting underlying price movements. Accordingly, gains and losses from
changes in derivative fair values are deferred until the underlying
transaction occurs. Gains or losses are then recognized in the income
statement or recorded as part of the underlying asset or liability, depending
on the circumstances. Derivative positions are settled if the underlying
transaction is no longer expected to occur, with related gains and losses
recognized in earnings in the period settlement occurs. Option premiums paid
are recorded as assets and expensed over the life of the option. Derivatives
generally have initial terms of less than three years, and all currently
hedged transactions are expected to occur within the next three years.
See Note 3 for additional information regarding the company's derivative
holdings.
RESEARCH AND DEVELOPMENT COSTS, ADVERTISING AND PROMOTIONAL COSTS, AND
INITIAL PLANT COSTS
Research and development costs, advertising and promotional costs, and
initial plant costs are expensed as incurred. Advertising and promotional
expenses were $728.3 million, $721.8 million and $642.1 million in 2000, 1999
and 1998, respectively. Research and development and initial plant costs were
not material for any year presented.
START-UP COSTS
Effective January 1, 1999, the company adopted SOP 98-5, "Reporting on
the Costs of Start-Up Activities," which requires the costs of start-up
activities to be expensed as incurred. Initial adoption of SOP 98-5 required
no significant changes to the company's accounting policies and had no impact
on the results of operations.
SYSTEMS DEVELOPMENT COSTS
The company capitalizes certain systems development costs that meet
established criteria, in accordance with SOP 98-1, "Accounting for the Costs
of Computer Systems Developed or Obtained for Internal Use." Amounts
capitalized are amortized to expense on a straight-line basis over five
years. Systems development costs not meeting the criteria in SOP 98-1,
including systems reengineering, are expensed as incurred.
STOCK-BASED COMPENSATION
The company accounts for employee stock options in accordance with
APB 25, "Accounting for Stock Issued to Employees." Under APB 25, the company
recognizes no compensation expense related to employee stock options, since
options are always granted at a price equal to the market price on the day of
grant. See Note 5 for additional information on the company's stock options
plus pro forma disclosures required by FAS 123, "Accounting for Stock-Based
Compensation."
COMMON STOCK SPLIT
All share and per share amounts have been adjusted to reflect the
two-for-one stock split distributed September 18, 2000.
2. INTERNATIONAL INVESTMENTS
GRUPO MODELO
From 1993 to 1998, Anheuser-Busch accumulated a 50.2% direct and indirect
equity interest in Diblo, S.A. de C.V. (Diblo), the operating subsidiary of
Grupo Modelo, S.A. de C.V. (Modelo), Mexico's largest brewer and producer of
the Corona brand, for a total of $1.6 billion. The company holds 10 of 21
positions on Modelo's Board of Directors. Anheuser-Busch does not have voting
or other effective control of either Diblo or Modelo and therefore accounts
for its investment using the equity method.
Included in the carrying amount of the Modelo investment is goodwill of
$586.7 million and $541.4 million, respectively, at December 31, 2000 and
1999 which is being amortized over 40 years. Accumulated amortization was
$44.0 million and $29.2 million, respectively, at December 31, 2000 and 1999.
Dividends received from Grupo Modelo in 2000 totaled $23.9 million,
compared to $2.9 million in 1999 and $50.3 million in 1998.
For foreign operations in countries whose economies are considered highly
inflationary, foreign currency translation practice under FAS No. 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. Additionally, net monetary asset
and liability related translation adjustments must be included in earnings in
the current period. Mexico's economy was considered highly inflationary for
accounting purposes for all of 1998. Accordingly, all monetary translation
gains and losses related to the Modelo investment were recognized in equity
income that year.
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 45
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary financial information for Grupo Modelo as of, and for the two
years ended December 31, is presented in the following table (in millions).
The amounts shown represent consolidated Grupo Modelo operating results and
financial position based on U.S. generally accepted accounting principles,
and include the impact of Anheuser-Busch's purchase accounting adjustments.
2000 1999
Current assets $1,375.2 $1,156.3
Noncurrent assets 3,610.5 3,322.3
Current liabilities 310.7 262.3
Noncurrent liabilities 557.3 328.0
Gross sales 3,129.9 2,576.3
Net sales 2,919.1 2,405.4
Gross profit 1,543.8 1,209.8
Minority interest 46.3 48.7
Net income 405.0 333.5
- -------------------------------------------------
OTHER INTERNATIONAL INVESTMENTS
From April 1996 to July 1999, the company owned a 5% equity stake in a
subsidiary controlling approximately 75% of the operations of the Brazilian
brewer Antarctica. Because Anheuser-Busch had the ability to exercise
significant influence as a result of Board of Directors representation and
other minority rights acquired in its investment agreement, the company
applied the equity method of accounting for the investment in Antarctica
beginning in 1997. The company exercised its rights under the investment
agreement and ended its equity partnership with Antarctica in July 1999 by
selling its ownership position back to Antarctica at original cost. There was
no earnings impact associated with the divestiture.
Simultaneous with the divestiture, Anheuser-Busch discontinued its joint
venture with Antarctica for the production, sale and distribution of
Budweiser in Brazil. The pretax cost of discontinuing Budweiser production in
Brazil was approximately $6 million and is included in 1999 operating
results. The company now exports Budweiser to Brazil.
In January 2001, the company purchased a 17% equity interest in Compania
Cervecerias Unidas S.A. (CCU), the largest brewer in Chile, for approximately
$270 million. CCU imports and distributes Budweiser in Chile. Anheuser-Busch
will have Board of Directors representation and the ability to exercise
significant influence. As such, the company will account for the investment
using the equity method.
In 1996, Anheuser-Busch purchased a 4.5% interest in the Argentine
subsidiary of CCU, CCU-Argentina, with options to increase its investment to
20%. In both December 1998 and December 1999, the company exercised a portion
of its options and purchased an additional 3.8% and 2.5%, for $10 million and
$7 million, respectively, bringing the company's total ownership to 10.8%.
The company's remaining options expire in December 2002. CCU-Argentina brews
Budweiser under license and sells the brand in Buenos Aires and other major
Argentine markets, Chile and Paraguay.
The CCU-Argentina investment was accounted for on the cost basis through
2000. As a result of the 17% acquisition of CCU, Anheuser-Busch now owns a
26% direct and indirect interest in CCU- Argentina. The company will use the
equity method of accounting beginning in 2001. The difference between income
recognized on the cost basis for CCU-Argentina and what would have been
recognized had equity accounting been applied in prior years is not material.
In the fourth quarter 1998, the company restructured the sales force and
made other organizational changes at its 90%-owned Japanese joint venture
subsidiary. Total pretax cost of the restructuring was almost $9 million,
primarily for severance benefits for workforce reductions, and is included in
1998 operating results. Effective January 2000, the company converted its
joint venture operation into an exclusive license agreement with Kirin
Brewing Company, Ltd. for the production and sale of Budweiser in Japan. The
pretax cost of converting to the license agreement was approximately $9
million, primarily for severance benefits, and is included in 1999 operating
results.
The company owns and consolidates the operating results of the Wuhan
brewery in the People's Republic of China and the Stag brewery in Mortlake,
England.
3. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
The company currently uses the following derivative financial instruments:
purchased options and forward contracts for foreign currency risk; swaps for
interest rate risk; and futures, swaps and purchased options for commodity
price risk. At December 31, 2000, derivatives other than option premiums were
off-balance-sheet and therefore had no recorded carrying value. Because the
company hedges only with derivatives that have high correlation with the
underlying transaction pricing, changes in derivatives fair values and the
underlying pricing largely offset.
46 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
23
The following table summarizes the notional transaction amounts and fair
values for outstanding derivatives, by risk category and instrument type, at
December 31, (in millions). Bracketed figures indicate settlement of the
derivatives contract without concluding the underlying hedged transaction
would be unfavorable to Anheuser-Busch. In practice, this rarely occurs.
2000 1999
Notional Fair Notional Fair
Amount Value Amount Value
---------------------------------------------------------
Foreign Currency:
Forwards $ 71.0 $(2.8) $ 150.9 $ 4.0
Options 96.7 2.1 94.1 (.7)
---------------------------------------------------------
167.7 (0.7) 245.0 3.3
---------------------------------------------------------
Interest Rate:
Swaps 762.8 13.0 562.8 6.5
---------------------------------------------------------
Commodity Price:
Swaps 216.0 1.7 92.4 4.5
Futures 53.6 4.0 40.1 (3.0)
Options 489.8 35.8 559.6 64.5
---------------------------------------------------------
759.4 41.5 692.1 66.0
---------------------------------------------------------
Total outstanding
derivatives $1,689.9 $53.8 $1,499.9 $75.8
=========================================================
- ------------------------------------------------------------------------------------
The interest rate swap and currency exchange agreement related to the
dual-currency notes described in Note 4 is included as an interest rate swap
in the preceding table. This agreement is an integral part of a dual-currency
note structure which provides the company with floating-rate financing at
below-market rates.
The company has long exposure to the British pound sterling, Irish punt,
Mexican peso and Canadian dollar. The company's exposures to other currencies
are essentially short, primarily for German mark-denominated purchases of
hops. Long exposure indicates the company has foreign currency in excess of
its needs, while a short exposure 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 price exposure is short, indicating additional quantities must be
obtained to meet anticipated production requirements.
Not all of the company's foreign exchange, interest rate or commodity
price exposures have been hedged with derivatives.
CONCENTRATION OF CREDIT RISK
The company does not have a material concentration of credit risk.
NONDERIVATIVE FINANCIAL INSTRUMENTS
Nonderivative financial instruments included in the balance sheet are
cash, accounts and notes receivable and short- and long-term debt. Accounts
and notes receivable include allowances for doubtful accounts of $8.2 million
in 2000 and $6.4 million in 1999. 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 $5.5
billion and $4.8 billion at December 31, 2000 and 1999, respectively.
NEW ACCOUNTING STANDARD FOR DERIVATIVES AND HEDGING ACTIVITIES
FAS No. 133, "Accounting for Derivative Instruments and Hedging Activity,"
was issued in June 1998. The Standard was amended in June 1999 to delay its
required adoption date for the company until January 1, 2001. FAS 133
requires all derivative financial instruments to be reported on the balance
sheet at fair value. Changes in fair value are recognized either in earnings
or equity, depending on the nature of the underlying exposure being hedged
and how effective the derivative is at offsetting price movements in the
underlying exposure.
As required, the company adopted FAS 133 on January 1, 2001. All of the
company's existing derivative positions qualified for hedge accounting under
FAS 133 and the impact of adoption was not material. Foreign currency and
interest rate hedges are primarily classified as fair value hedges while
commodity price hedges are principally cash flow hedges. The company made no
substantive changes to its risk management strategy as a result of adopting
FAS 133. Derivatives documentation policies were revised as necessary to
comply with FAS 133 requirements.
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 47
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. DEBT
Debt at December 31, consisted of the following (in millions):
2000 1999
Commercial paper (weighted average
interest rates of 6.2% in 2000
and 5.1% in 1999) $ 767.2 $1,242.3
Medium-term Notes Due 2001
(interest rates from 5.1% to 8.0%) 7.5 32.5
4.1% Japanese yen/U.S.
dollar Notes Due 2001 162.8 162.8
6.9% Notes Due 2002 200.0 200.0
6.75% Notes Due 2003 200.0 200.0
6.5% EuroNotes Due 2004 200.0 --
6.75% Notes Due 2005 200.0 200.0
7% Notes Due 2005 100.0 100.0
6.75% Notes Due 2006 250.0 250.0
7.1% Notes Due 2007 250.0 250.0
5.125% Notes Due 2008 100.0 100.0
5.375% Notes Due 2008 100.0 100.0
5.65% Notes Due 2008 100.0 100.0
9% Debentures Due 2009 350.0 350.0
5.75% Notes Due 2010 150.0 150.0
5.75% Notes Due 2011 150.0 150.0
7.5% Notes Due 2012 200.0 --
7.25% Debentures Due 2015 150.0 150.0
7.125% Debentures Due 2017 250.0 250.0
7.375% Debentures Due 2023 200.0 200.0
7% Debentures Due 2025 200.0 200.0
6.75% Debentures Due 2027 100.0 100.0
6.5% Debentures Due 2028 100.0 100.0
7.55% Debentures Due 2030 200.0 --
6.80% Debentures Due 2031 200.0 --
Industrial Revenue Bonds
(interest rates from 5.6% to 7.4%) 252.3 248.3
8.25% ESOP Debt Guarantee 172.2 210.5
Other long-term debt 62.5 76.5
----------------------------
Total debt $5,374.5 $5,122.9
============================
- -------------------------------------------------------------------------
The company uses Securities and Exchange Commission shelf registrations to
maintain debt issuance flexibility and currently has $600 million in
registered debt available for issuance.
Gains/losses on debt redemptions (either individually or in the aggregate)
are not material for any year presented.
Currency and interest rate exposures related to the 4.1% Japanese yen/U.S.
dollar Notes have been transferred to a third party through swap agreements.
The notes are redeemable in U.S. dollars.
The effective interest rate on the company's $200 million 6.9% Notes was
lowered via a dual-swap structure in October 1999. In January 2001, the
company's counterparty exercised its option to redeem the fixed-to-floating
portion of the swap structure. The company in turn called the 6.9% Notes in
January 2001. There was no earnings impact to the company. The
floating-to-fixed portion of the swap will remain as a hedge of commercial
paper.
The company has in place a single, committed revolving credit agreement
totaling $2 billion, expiring in June 2005, which supports the company's
commercial paper program. At December 31, 2000 and 1999, the company had no
outstanding borrowings under the agreement. Annual fees under the agreement
were $900,000 in 2000 and $600,000 for 1999 and 1998.
Commercial paper borrowings classified as long-term are supported on a
long-term basis by the $2 billion revolving credit agreement. Commercial
paper borrowings in excess of $2 billion are classified as short-term. The
credit agreement borrowing limit was $1 billion at December 31, 1999,
resulting in short-term classification for $242.3 million of commercial paper
with an interest rate of 6.0% at that date.
The aggregate maturities on long-term debt are $424 million, $4 million,
$204 million, $200 million and $300 million, respectively, for each of the
years ending December 31, 2001 through 2005. These maturities do not include
future maturities of the ESOP debt guarantee or commercial paper. Maturities
for 2001 include the $200 million 6.9% Notes discussed above.
5. STOCK OPTION PLANS
Under terms of the company's stock option plans, officers, certain other
employees and nonemployee directors may be granted options to purchase the
company's common stock at a price equal to 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, 2000, 1999 and 1998, a total of 70 million,
80 million and 88 million shares, respectively, were designated for future
issuance of common stock under stock option plans.
Certain of the plans also provide for the granting of stock appreciation
rights (SARs) in tandem with, or in lieu of, stock options. When SARs and
options are issued in tandem, the exercise of an SAR cancels the related
option and the exercise of an option cancels the related SAR. There were
8,000 and 4,000 SARs outstanding at December 31, 2000 and 1999, respectively.
The income tax benefit related to the exercise of employee stock options
(reduction of current taxes payable) was $74.4 million, $48.5 million and
$33.9 million for the years ended December 31, 2000, 1999 and 1998,
respectively.
48 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
25
Presented below is a summary of stock option plans activity for the years
shown:
Wtd. Avg. Wtd. Avg.
Options Exercise Options Exercise
Outstanding Price Exercisable Price
- -------------------------------------------------------------------------------------------
BALANCE, DEC. 31, 1997 51,443,952 $16.32 31,816,372 $13.84
Granted 10,087,810 29.91
Exercised (8,168,738) 12.35
Cancelled (279,382) 20.40
------------
BALANCE, DEC. 31, 1998 53,083,642 $19.49 33,424,410 $15.89
Granted 10,591,292 37.88
Exercised (7,016,416) 13.55
Cancelled (87,968) 26.60
------------
BALANCE, DEC. 31, 1999 56,570,550 $23.66 36,166,954 $18.69
Granted 13,005,810 48.68
Exercised (10,153,146) 15.99
Cancelled (252,140) 32.32
------------
BALANCE, DEC. 31, 2000 59,171,074 $30.44 36,151,446 $22.53
- -------------------------------------------------------------------------------------------
The following table provides additional information for options
outstanding and exercisable at December 31, 2000:
OPTIONS OUTSTANDING
- ------------------------------------------------------------------------
Range of Wtd. Avg. Wtd. Avg.
Prices Number Remaining Life Exercise Price
-------- ------ -------------- --------------
$10-19 10,448,026 4 yrs $14.68
20-29 25,284,003 7 yrs 24.50
30-39 10,607,295 9 yrs 37.83
40-49 12,831,750 10 yrs 48.87
----------
$10-49 59,171,074 7 yrs $30.44
- ------------------------------------------------------------------------
OPTIONS EXERCISABLE
- ------------------------------------------------------
Range of Wtd. Avg.
Prices Number Exercise Price
-------- ------ --------------
$10-19 10,448,026 $14.68
20-29 22,093,051 23.72
30-39 3,577,719 37.86
40-49 32,650 48.88
----------
$10-49 36,151,446 $22.53
- ------------------------------------------------------
The company's stock option plans provide for acceleration of
exercisability of the options upon the occurrence of certain events relating
to a change in control, merger, sale of assets or liquidation of the company.
PRO FORMA FAIR VALUE DISCLOSURES
Had compensation expense for the company's stock options been recognized
based on the fair value on the grant date under the methodology prescribed by
FAS 123, the company's net income and diluted earnings per share for the
three years ended December 31, would have been impacted as shown in the
following table (in millions, except per share).
2000 1999 1998
Reported net income $1,551.6 $1,402.2 $1,233.3
Pro forma net income 1,508.8 1,373.3 1,209.3
Reported diluted earnings
per share 1.69 1.47 1.27
Pro forma diluted earnings
per share 1.64 1.44 1.24
- -------------------------------------------------------------------------
The fair value of options granted, which is hypothetically amortized to
expense over the option vesting period in determining the pro forma impact
noted above, has been estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions:
2000 1999 1998
Expected life of option 5 yrs. 5 yrs. 5 yrs.
Risk-free interest rate 5.7% 6.2% 4.7%
Expected volatility of
Anheuser-Busch stock 22% 18% 16%
Expected dividend yield on
Anheuser-Busch stock 1.4% 1.6% 1.7%
- -------------------------------------------------------------------------
The weighted average fair value of options granted during 2000, 1999 and
1998 determined using the Black-Scholes model is as follows (in millions,
except per option):
2000 1999 1998
Fair value of each option
granted $13.14 $9.38 $5.86
Total number of options
granted 13.0 10.6 10.1
----------------------------------------
Total fair value of all
options granted $170.8 $99.4 $59.2
========================================
- -------------------------------------------------------------------------
For FAS 123 disclosure purposes, the weighted average fair value of stock
options granted is required to be based on a theoretical option pricing model.
In actuality, because the company's employee stock options are not traded on
an 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.
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 49
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. EMPLOYEE STOCK OWNERSHIP PLANS
In 1989, the company added Employee Stock Ownership Plans (ESOPs) to its
existing Deferred Income Stock Purchase and Savings Plans (401(k) plans).
Most regular employees are eligible for participation in the ESOPs. The ESOPs
initially borrowed $500 million for a term of 15 years at an interest rate of
8.25% and used the proceeds to buy approximately 45.4 million shares of
common stock from the company at market price. The ESOP debt is guaranteed by
the company and the shares are being allocated to participants over the
15-year period as contributions are made to the plans. The ESOPs purchased an
additional .4 million shares from the company using proceeds from the sale of
spin-off-related Earthgrains shares in 1996. Of the 45.8 million total shares
purchased, 36.8 million shares have been allocated to plan participants.
ESOP cash contributions and income or expense recorded during the calendar
year are determined by several factors, including the market price of
Anheuser-Busch common stock, number of shares allocated to participants, debt
service, dividends on unallocated shares and the company's matching
contribution. Over the 15-year life of the ESOPs, total expense recognized
will equal total cash contributions made by the company for ESOP debt
service.
ESOP income or expense is allocated to operating expense and interest
expense based on the ratio of principal and interest payments on the debt.
Total ESOP income or expense for the three years ended December 31, is
presented below (in millions):
2000 1999 1998
Operating (income)/expense $(1.2) $1.7 $ 7.4
Interest (income)/expense ( .9) .9 4.5
----------------------------------------
Total ESOP (income)/expense $(2.1) $2.6 $11.9
========================================
- -------------------------------------------------------------------------
ESOP cash contributions are made in March and September to correspond with
debt service requirements. A summary of cash contributions and dividends on
unallocated ESOP shares for the three years ended December 31, is presented
below (in millions):
2000 1999 1998
Cash contributions $ -- $2.5 $14.2
======================================
Dividends $6.5 $7.8 $ 8.9
======================================
- -------------------------------------------------------------------------
7. PREFERRED AND COMMON STOCK
COMMON STOCK ACTIVITY
Activity for the company's common stock for the three years ended December
31, is summarized below (in millions of shares):
2000 1999 1998
COMMON STOCK
Beginning common stock 1,432.2 1,425.4 1,418.6
Shares issued under stock plans 9.3 6.8 6.8
-----------------------------------------
Common stock 1,441.5 1,432.2 1,425.4
-----------------------------------------
TREASURY STOCK
Beginning treasury stock (510.0) (472.2) (444.4)
Net treasury stock acquired (27.9) (37.8) (27.8)
-----------------------------------------
Cumulative treasury stock (537.9) (510.0) (472.2)
-----------------------------------------
NET COMMON STOCK OUTSTANDING 903.6 922.2 953.2
=========================================
- ----------------------------------------------------------------------------
STOCK REPURCHASE PROGRAMS
The Board of Directors has approved various resolutions authorizing the
company to purchase shares of its common stock to return cash to shareholders
and to meet the requirements of the company's various stock purchase and
incentive plans. At December 31, 2000, approximately 85 million shares were
available for repurchase under a February 2000 repurchase authorization of
100 million shares.
The company repurchased 28.2 million, 37.8 million and 27.8 million shares
of common stock in 2000, 1999 and 1998 for $986.5 million, $1,349.2 million
and $688.8 million, respectively.
STOCKHOLDER RIGHTS PLAN
The Board of Directors adopted a Stockholder Rights Plan in 1985, which
was extended in 1994, that would permit shareholders to purchase common stock
at prices substantially below market value under certain change-in-control
scenarios.
PREFERRED STOCK
At December 31, 2000 and 1999, 40,000,000 shares of $1.00 par value
preferred stock were authorized and unissued.
50 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
27
8. 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):
2000 1999 1998
Single-employer
defined benefit plans $ 7.3 $21.1 $ 3.3
Multi-employer plans 15.5 15.7 14.4
Defined contribution plans 18.5 18.3 18.2
---------------------------------------
Total pension expense $41.3 $55.1 $35.9
=======================================
- ---------------------------------------------------------------------------
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 or weeks worked.
Expense recognized for multi-employer and defined contribution plans equals
cash contributions for all years shown.
Net annual pension expense for single-employer defined benefit plans was
comprised of the following for the three years ended December 31, (in
millions):
2000 1999 1998
Service cost (benefits earned
during the year) $ 59.2 $ 63.2 $ 53.4
Interest cost on projected
benefit obligation 125.6 116.7 106.4
Assumed return on plan assets (185.2) (169.2) (156.8)
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 7.7 10.4 .3
-----------------------------------------
Net annual pension expense $ 7.3 $ 21.1 $ 3.3
=========================================
- ------------------------------------------------------------------------------
The key actuarial assumptions used in determining annual pension expense
for single-employer defined benefit plans for the three years ended December
31, follow:
<TABLE
[CAPTION]
2000 1999 1998
[S] [C] [C] [C]
Discount rate 7.5% 7.0% 7.5%
Long-term rate of
return on plan assets 10.0% 10.0% 10.0%
Weighted average rate
of compensation increase 4.75% 4.75% 4.75%
- ---------------------------------------------------------------------------
[/TABLE]
The following table provides a reconciliation of the funded status of
single-employer defined benefit plans to prepaid pension cost for the two
years ended December 31, (in millions):
2000 1999
Funded status _ plan assets in excess of
projected benefit obligation (PBO) $ 397.1 $ 320.4
Unamortized excess of market value of
plan assets over PBO at January 1, 1986,
being amortized over 15 years -- (12.7)
Unrecognized net actuarial (gain) (318.3) (258.8)
Unamortized prior service cost 145.7 155.8
--------------------------
Prepaid pension cost $ 224.5 $ 204.7
==========================
- ---------------------------------------------------------------------------
The assumptions used in determining the funded status of the plans as of
December 31, were as follows:
2000 1999
Discount rate 7.5% 7.5%
Weighted average rate of
compensation increase 4.75% 4.75%
- ---------------------------------------------------------------------------
The following tables summarize the changes in the projected benefit
obligation and the fair market value of plan assets (consisting primarily of
corporate equity securities and publicly traded bonds) for all company
single-employer defined benefit pension plans for the two years ended
December 31, (in millions):
2000 1999
Projected benefit obligation,
beginning of year $1,746.1 $1,704.0
Service cost 59.2 63.2
Interest cost 125.6 116.7
Plan amendments 10.5 7.2
Actuarial loss/(gain) 72.8 (36.0)
Benefits paid (134.2) (109.0)
----------------------------
Projected benefit obligation,
end of year $1,880.0 $1,746.1
============================
- ---------------------------------------------------------------------------
2000 1999
Fair market value of plan assets,
beginning of year $2,066.5 $1,824.2
Actual return on plan assets 317.4 328.5
Employer contributions 27.4 22.8
Benefits paid (134.2) (109.0)
----------------------------
Fair market value of plan assets,
end of year $2,277.1 $2,066.5
============================
- ---------------------------------------------------------------------------
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 51
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
POSTRETIREMENT HEALTH CARE AND INSURANCE BENEFITS
The company provides certain health care and life insurance benefits to
eligible retired employees. Generally, participants must have 10 years of
continuous service after reaching age 45 to become eligible for retiree
health care benefits.
The following table sets forth the accumulated postretirement benefit
obligation (APBO) and the total postretirement benefit liability for all
company single-employer defined benefit health care and life insurance plans
at December 31, (in millions). Postretirement benefit obligations are not
prefunded and there are no assets associated with the plans.
2000 1999
Accumulated postretirement
benefit obligation (APBO) $400.0 $369.9
Unrecognized prior service benefits 64.6 76.3
Unrecognized net actuarial gains 53.6 79.2
-------------------------
Total postretirement benefit liability $518.2 $525.4
=========================
- ---------------------------------------------------------------------------
As of December 31, 2000 and 1999, $25.5 million and $19.0 million of these
obligations were classified as current liabilities and $492.7 million and
$506.4 million were classified as long-term liabilities, respectively.
Net periodic postretirement benefits expense for company single-employer
defined benefit health care and life insurance plans was comprised of the
following for each of the three years ended December 31, (in millions):
2000 1999 1998
Service cost (benefits earned
during the year) $ 16.8 $ 16.8 $ 13.6
Interest cost on APBO 27.7 24.0 23.3
Amortization of prior
service benefit (11.6) (11.6) (11.7)
Amortization of actuarial (gains) (8.6) (13.0) (8.9)
--------------------------------------
Net periodic postretirement
benefits expense $ 24.3 $ 16.2 $ 16.3
======================================
- ---------------------------------------------------------------------------
The following table summarizes the change in the APBO for the two years
ended December 31, (in millions):
2000 1999
APBO, beginning of year $369.9 $348.1
Service cost 16.8 16.8
Interest cost 27.7 24.0
Actuarial loss 17.0 6.5
Benefits paid (31.4) (25.5)
--------------------------
APBO, end of year $400.0 $369.9
==========================
- ---------------------------------------------------------------------------
The key actuarial assumptions used in determining the APBO for the three
years ended December 31, follow:
2000 1999 1998
Initial health care inflation rate 9.1% 9.6% 8.7%
Future health care inflation rate 5.4% 5.4% 6.0%
Discount rate 8.0% 8.0% 7.5%
- ---------------------------------------------------------------------------
The initial health care inflation rate is assumed to decline ratably to
the future rate over a four-year period beginning in year nine, and then
remain stable thereafter.
If the assumed health care cost trend rate changed by 1%, the APBO as of
December 31, 2000 would change by 11%, with a corresponding change of 15% in
net periodic postretirement benefits expense.
9. EARNINGS PER SHARE OF COMMON STOCK
Basic earnings per share are based on the weighted average number of
shares of common stock outstanding during the year. Diluted earnings per share
are based on the weighted average number of shares of common stock plus common
stock equivalents outstanding during the year.
A reconciliation of weighted average shares outstanding between basic and
diluted earnings per share for the three years ended December 31, follows (in
millions of shares). There were no adjustments to income available to common
shareholders for any year shown.
2000 1999 1998
Basic weighted average
shares outstanding 906.1 939.0 964.2
Stock option shares 13.6 14.7 10.8
---------------------------------------
Diluted weighted average
shares outstanding 919.7 953.7 975.0
=======================================
- -----------------------------------------------------------------------------
52 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
29
10. INCOME TAXES
The provision for income taxes consists of the following for the three
years ended December 31, (in millions):
2000 1999 1998
Current tax provision:
Federal $698.1 $615.9 $564.3
State 102.0 106.3 93.3
Foreign (.5) .4 12.2
-----------------------------------------
799.6 722.6 669.8
-----------------------------------------
Deferred tax provision:
Federal 25.4 32.3 31.6
State 3.2 4.7 2.9
Foreign .1 3.3 --
-----------------------------------------
28.7 40.3 34.5
-----------------------------------------
Total tax provision $828.3 $762.9 $704.3
=========================================
- -----------------------------------------------------------------------------
The deferred tax provision results from temporary differences in the
recognition of income and expense for tax and financial reporting purposes.
The primary differences relate to accelerated depreciation on fixed assets
(tax effect of $14.4 million in 2000, $19.1 million in 1999 and $58.0 million
in 1998).
At December 31, 2000 and 1999, the company had deferred tax liabilities
of $1,946.0 million and $1,903.5 million, respectively, primarily related to
accelerated depreciation on fixed assets of $1,711.9 billion and $1,688.9
million, respectively.
At December 31, 2000 and 1999, the company had deferred tax assets of
$573.1 million and $558.8 million, respectively, primarily related to accrued
postretirement benefits ($195.8 million and $198.5 million, respectively) and
other accruals and temporary differences ($377.3 million and $360.3 million,
respectively) which are not deductible for tax purposes until paid or
utilized.
- -----------------------------------------------------------------------------
A reconciliation between the U.S. federal statutory tax rate and the
effective tax rate for the three years ended December 31, is presented below:
2000 1999 1998
Federal statutory tax rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 3.2 3.6 3.4
Impact of foreign operations .1 .2 .1
Other items (.3) (.8) (.5)
---------------------------------------
Effective tax rate 38.0% 38.0% 38.0%
=======================================
- -----------------------------------------------------------------------------
11. SUPPLEMENTAL INFORMATION
Accounts payable include $104.2 million and $124.0 million, respectively,
of outstanding checks at December 31, 2000 and 1999.
Supplemental cash flow information for the three years ended December 31,
is presented below (in millions):
CASH PAID DURING THE YEAR: 2000 1999 1998
Interest, net of
interest capitalized $ 304.7 $ 286.9 $ 263.3
Income taxes 770.8 706.2 644.3
Excise taxes 2,042.9 2,016.6 1,966.6
CHANGES IN WORKING CAPITAL:
(Increase)/decrease
in current assets:
Accounts receivable $ 28.6 $ (18.9) $ 103.3
Inventories 15.5 (0.4) (73.2)
Other current assets 16.4 (13.6) (9.1)
Increase/(decrease) in
current liabilities:
Accounts payable 8.2 26.9 113.9
Accrued salaries, wages
and benefits 28.0 15.2 36.6
Accrued taxes (36.8) (29.4) 9.7
Other current liabilities (32.4) 14.4 55.0
-------------------------------------------
Net (increase)/decrease
in working capital $ 27.5 $ (5.8) $ 236.2
===========================================
- -----------------------------------------------------------------------------
The components of plant and equipment, net, at December 31, are
summarized below (in millions):
2000 1999
Land $ 260.5 $ 260.8
Buildings 3,863.0 3,684.7
Machinery and equipment 10,386.2 9,921.8
Construction in progress 642.1 512.3
----------------------------
15,151.8 14,379.6
Accumulated depreciation (6,908.0) (6,415.0)
----------------------------
Total plant and equipment, net $ 8,243.8 $ 7,964.6
============================
- -----------------------------------------------------------------------------
The components of other assets at December 31, are summarized below (in
millions):
2000 1999
Investment properties $ 120.1 $ 119.0
Goodwill 413.9 425.0
Deferred charges 551.4 518.7
----------------------------
Total other assets $1,085.4 $1,062.7
============================
- -----------------------------------------------------------------------------
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 53
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. COMMITMENTS AND CONTINGENCIES
The company had commitments for capital expenditures of approximately $263
million at December 31, 2000. Obligations under capital and operating leases
are not material.
The company and certain of its subsidiaries are involved in 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 the
company's financial position, results of operations, or liquidity.
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
Diluted
Net Gross Net Earnings
Sales Profit Income Per Share
- ----------------------------------------------------------------------------------------
YEAR ENDED DEC. 31, 2000
1st Quarter $ 2,811.9 $1,032.2 $ 350.3 $ .38
2nd Quarter 3,265.5 1,291.6 477.7 .52
3rd Quarter 3,397.8 1,388.1 514.5 .56
4th Quarter 2,786.6 957.6 209.1 .23
----------------------------------------------------------
Annual $12,261.8 $4,669.5 $1,551.6 $1.69
==========================================================
- ----------------------------------------------------------------------------------------
Diluted
Net Gross Net Earnings
Sales Profit Income Per Share
- ----------------------------------------------------------------------------------------
YEAR ENDED DEC. 31, 1999
1st Quarter $ 2,685.2 $ 973.1 $ 319.1 $ .33
2nd Quarter 3,080.7 1,216.2 431.0 .45
3rd Quarter 3,222.3 1,316.8 461.5 .49
4th Quarter 2,715.5 943.2 190.6 .20
----------------------------------------------------------
Annual $11,703.7 $4,449.3 $1,402.2 $1.47
==========================================================
- ----------------------------------------------------------------------------------------
14. BUSINESS SEGMENTS
The company categorizes its operations into five business segments:
Domestic Beer, International Beer, Packaging, Entertainment and Other.
The Domestic Beer segment consists of the company's U.S. beer operations
including vertically integrated rice, barley and hops operations.
The International Beer segment consists of the company's export sales and
overseas beer production and marketing operations, which include
company-owned operations, administration of contract and license brewing
arrangements and equity investments. The company sells beer in more than 80
countries, with principal markets in Mexico, Canada, the United Kingdom,
Ireland and China.
The Packaging segment is comprised of the company's aluminum beverage can
and lid manufacturing, aluminum recycling, label printing, beer crown and
closure liner making and glass manufacturing operations. Cans and lids are
produced for both the company's domestic beer operations and U.S. soft drink
industry customers.
The Entertainment segment consists of the company's SeaWorld, Busch
Gardens and other adventure park operations. In February 2001, the company
sold its SeaWorld Cleveland adventure park to Six Flags, Inc. for $110
million. The company did not sell or grant license to the SeaWorld name. The
sale will be recorded in the first quarter 2001.
The Other segment is comprised of the company's real estate development,
transportation and communications businesses.
Summarized on the following page is the company's business segment
information for 2000, 1999 and 1998 (in millions). Intersegment sales are
fully eliminated in consolidation. No single customer accounted for more than
10% of sales. Corporate expenses, including net interest expense, are not
allocated to operating segments.
54 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
31
- ----------------------------------------------------------------------------------------------------------
Domestic Int'l Corp. &
2000 Beer Beer Pkg. Enter. Other Elims(1) Consol.
- ----------------------------------------------------------------------------------------------------------
INCOME STATEMENT INFORMATION:
Gross sales $11,490.5 647.8 2,012.2 837.9 122.8 (814.6) $14,296.6
Net sales - external $ 9,559.5 544.0 1,223.8 837.9 96.6 -- $12,261.8
Net sales - intersegment $ -- -- 788.4 -- 26.2 (814.6) $ --
Depreciation &
amortization $ 555.0 19.7 87.9 94.3 5.6 41.0 $ 803.5
Income before income
taxes $ 2,490.3 33.2 87.8 114.5 15.5 (561.4) $ 2,179.9
Equity income, net of tax $ -- 200.0 -- -- -- -- $ 200.0
Net income $ 1,544.0 220.6 54.4 71.0 9.6 (348.0) $ 1,551.6
BALANCE SHEET INFORMATION:
Total assets $ 7,474.3 2,492.3 869.2 1,387.3 206.1 655.3 $13,084.5
Equity method investments $ -- 1,949.3 -- -- -- -- $ 1,949.3
Foreign-located fixed
assets $ -- 213.1 -- -- -- -- $ 213.1
Capital expenditures $ 744.7 21.2 125.9 128.6 17.1 37.0 $ 1,074.5
- ----------------------------------------------------------------------------------------------------------
Domestic Int'l Corp. &
1999 Beer Beer Pkg. Enter. Other Elims(1) Consol.
- ----------------------------------------------------------------------------------------------------------
INCOME STATEMENT INFORMATION:
Gross sales $10,966.8 763.3 1,941.9 750.5 120.2 (819.4) $13,723.3
Net sales - external $ 9,088.2 622.3 1,151.2 750.5 91.5 -- $11,703.7
Net sales - intersegment $ -- -- 790.7 -- 28.7 (819.4) $ --
Depreciation &
amortization $ 535.5 20.2 94.6 89.7 6.1 30.9 $ 777.0
Income before income
taxes $ 2,268.8 (19.5) 149.8 111.9 12.4 (515.8) $ 2,007.6
Equity income, net of tax $ -- 157.5 -- -- -- -- $ 157.5
Net income $ 1,406.7 145.4 92.9 69.4 7.7 (319.9) $ 1,402.2
BALANCE SHEET INFORMATION:
Total assets $ 7,183.9 2,439.6 843.6 1,360.4 197.0 615.9 $12,640.4
Equity method investments $ -- 1,787.9 -- -- -- -- $ 1,787.9
Foreign-located fixed
assets $ -- 221.4 -- -- -- -- $ 221.4
Capital expenditures $ 563.2 45.3 49.7 162.6 13.5 31.0 $ 865.3
- ----------------------------------------------------------------------------------------------------------
Domestic Int'l Corp. &
1998 Beer Beer Pkg. Enter. Other Elims(1) Consol.
- ----------------------------------------------------------------------------------------------------------
INCOME STATEMENT INFORMATION:
Gross sales $10,391.6 809.1 1,842.0 760.8 147.0 (742.6) $13,207.9
Net sales - external $ 8,569.9 668.7 1,127.4 760.8 119.0 -- $11,245.8
Net sales - intersegment $ -- -- 714.6 -- 28.0 (742.6) $ --
Depreciation &
amortization $ 498.9 14.6 102.6 90.3 6.1 25.9 $ 738.4
Income before income
taxes $ 2,018.0 10.1 148.2 116.6 9.9 (450.2) $ 1,852.6
Equity income, net of tax $ -- 85.0 -- -- -- -- $ 85.0
Net income $ 1,251.2 91.3 91.9 72.3 6.1 (279.5) $ 1,233.3
BALANCE SHEET INFORMATION:
Total assets $ 7,078.5 2,340.9 874.1 1,283.1 211.0 696.7 $12,484.3
Equity method investments $ -- 1,662.6 -- -- -- -- $ 1,662.6
Foreign-located fixed
assets $ -- 202.1 -- -- -- -- $ 202.1
Capital expenditures $ 514.1 82.9 81.4 97.2 9.9 32.0 $ 817.5
- ----------------------------------------------------------------------------------------------------------
<FN>
Note 1: Corporate assets principally include cash, marketable securities,
deferred charges and certain fixed assets. Eliminations impact only
gross and intersegment sales.
</FN>
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 55
32
F I N A N C I A L S U M M A R Y -- O P E R A T I O N S
Anheuser-Busch Companies and Subsidiaries
- ----------------------------------------------------------------------------------------------------
(IN MILLIONS, EXCEPT PER SHARE DATA) 2000 1999 1998
- ----------------------------------------------------------------------------------------------------
Barrels of A-B beer brands sold worldwide 105.6 102.9 99.8
=================================================
Gross sales $14,296.6 $13,723.3 $13,207.9
Excise taxes (2,034.8) (2,019.6) (1,962.1)
-------------------------------------------------
Net sales 12,261.8 11,703.7 11,245.8
Cost of products and services (7,592.3) (7,254.4) (7,162.5)
-------------------------------------------------
Gross profit 4,669.5 4,449.3 4,083.3
Marketing, distribution and administrative
expenses (2,174.8) (2,147.0) (1,958.0)
Gain on sale of St. Louis Cardinals -- -- --
Shutdown of Tampa brewery -- -- --
Restructuring charge -- -- --
-------------------------------------------------
Operating income 2,494.7 2,302.3 2,125.3
Interest expense (348.2) (307.8) (291.5)
Interest capitalized 33.3 18.2 26.0
Interest income 1.1 4.3 5.8
Other income/(expense), net (1.0) (9.4) (13.0)
-------------------------------------------------
Income before income taxes 2,179.9 2,007.6 1,852.6
Provision for income taxes (current
and deferred) (828.3) (762.9) (704.3)
Revaluation of deferred tax liability under
FAS 109 -- -- --
Equity income, net of tax 200.0 157.5 85.0
-------------------------------------------------
Income from continuing operations 1,551.6 1,402.2 1,233.3
Income/(loss) from discontinued operations -- -- --
-------------------------------------------------
Income before accounting changes 1,551.6 1,402.2 1,233.3
Cumulative effect of accounting changes -- -- --
-------------------------------------------------
Net income $ 1,551.6 $ 1,402.2 $ 1,233.3
=================================================
Basic Earnings Per Share:
Income from continuing
operations $ 1.71 $1.49 $ 1.28
Income/(loss) from discontinued operations -- -- --
-------------------------------------------------
Income before accounting changes 1.71 1.49 1.28
Cumulative effect of accounting changes -- -- --
-------------------------------------------------
Net income $ 1.71 $ 1.49 $ 1.28
=================================================
Diluted Earnings Per Share:
Income from continuing
operations $ 1.69 $ 1.47 $ 1.27
Income/(loss) from discontinued operations -- -- --
-------------------------------------------------
Income before accounting changes 1.69 1.47 1.27
Cumulative effect of accounting changes -- -- --
-------------------------------------------------
Net income $ 1.69 $ 1.47 $ 1.27
=================================================
Cash dividends paid on common stock $ 571.0 $ 544.7 $ 521.0
Per share .63 .58 .54
Weighted average number of common shares:
Basic 906.1 939.0 964.2
Diluted 919.7 953.7 975.0
- ----------------------------------------------------------------------------------------------------------
All share and per share information reflects the two-for-one stock splits
effective September 18, 2000 and September 12, 1996 and the 1997 adoption of
FAS 128, "Earnings per Share." All information has been restated to recognize
the 1995 divestiture of the Food Products segment.
<FN>
Note 1: 1997 change in accounting for deferred systems reengineering costs,
net of tax benefit of $6.2 million. 1992 change in accounting for
income taxes and other postretirement benefits, net of tax benefit of
$186.4 million.
Note 2: 1996 results include the impact of the gain on the sale of the St.
Louis Cardinals. Excluding the Cardinals gain, operating income,
pretax income, income from continuing operations and diluted earnings
per share would have been $2,029.1 million, $1,838.2 million,
$1,122.7 million and $1.10, respectively.
</FN>
56 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
33
- --------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------
96.6 95.1 90.9 91.3 89.7 88.9 87.9 88.1
==============================================================================================================
$12,832.4 $12,621.5 $12,004.5 $11,705.0 $11,147.3 $11,008.6 $10,631.9 $9,716.1
(1,766.2) (1,737.8) (1,664.0) (1,679.7) (1,679.8) (1,668.6) (1,637.9) (868.1)
- --------------------------------------------------------------------------------------------------------------
11,066.2 10,883.7 10,340.5 10,025.3 9,467.5 9,340.0 8,994.0 8,848.0
(7,096.9) (6,964.6) (6,791.0) (6,492.1) (6,167.6) (6,051.8) (5,953.5) (5,963.4)
- --------------------------------------------------------------------------------------------------------------
3,969.3 3,919.1 3,549.5 3,533.2 3,299.9 3,288.2 3,040.5 2,884.6
(1,916.3) (1,890.0) (1,756.6) (1,679.9) (1,612.1) (1,583.7) (1,409.5) (1,364.9)
-- 54.7 -- -- -- -- -- --
-- -- (160.0) -- -- -- -- --
-- -- -- -- (401.3) -- -- --
- --------------------------------------------------------------------------------------------------------------
2,053.0 2,083.8 (2) 1,632.9 (3) 1,853.3 1,286.5 (4) 1,704.5 1,631.0 1,519.7
(261.2) (232.8) (225.9) (219.3) (205.1) (194.6) (234.0) (277.2)
42.1 35.5 24.3 21.8 35.2 46.9 45.6 52.5
7.9 9.4 9.9 2.6 3.4 4.4 6.6 4.3
(9.3) (3.0) 20.5 17.6 21.0 (2.5) 1.3 (16.5)
- --------------------------------------------------------------------------------------------------------------
1,832.5 1,892.9 (2) 1,461.7 (3) 1,676.0 1,141.0 (4) 1,558.7 1,450.5 1,282.8
(703.6) (736.8) (575.1) (661.5) (452.6) (594.6) (549.6) (481.4)
-- -- -- -- (31.2) -- -- --
50.3 -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------
1,179.2 1,156.1 (2) 886.6 (3) 1,014.5 657.2 (4) 964.1 900.9 801.4
-- 33.8 (244.3) 17.6 (62.7) 30.1 38.9 41.0
- --------------------------------------------------------------------------------------------------------------
1,179.2 1,189.9 642.3 1,032.1 594.5 994.2 939.8 842.4
(10.0) (1) -- -- -- -- (76.7) (1) -- --
- -------------------------------------------------- ------------------------------------------------------------
$ 1,169.2 $ 1,189.9 $ 642.3 $ 1,032.1 $ 594.5 $ 917.5 $ 939.8 $ 842.4
==============================================================================================================
$ 1.19 $ 1.16 $ .86 $ .96 $ .60 $ .85 $ .79 $ .71
-- .03 (.23) .02 (.05) .02 .03 .03
- --------------------------------------------------------------------------------------------------------------
1.19 1.19 .63 .98 .55 .87 .82 .74
(.01) (1) -- -- -- -- (.06) (1) -- --
- --------------------------------------------------------------------------------------------------------------
$ 1.18 $ 1.19 $ .63 $ .98 $ .55 $ .81 $ .82 $ .74
==============================================================================================================
$ 1.18 $ 1.14 (2) $ .85 (3) $ .95 $ .60 (4) $ .84 $ .78 $ .70
-- .03 (.23) .02 (.05) .02 .03 .03
- --------------------------------------------------------------------------------------------------------------
1.18 1.17 .62 .97 .55 .86 .81 .73
(.01) (1) -- -- -- -- (.06) (1) -- --
- --------------------------------------------------------------------------------------------------------------
$ 1.17 $ 1.17 $ .62 $ .97 $ .55 $ .80 $ .81 $ .73
==============================================================================================================
$ 492.6 $ 458.9 $ 429.5 $ 398.8 $ 370.0 $ 338.3 $ 301.1 $ 265.0
.50 .46 .42 .38 .34 .30 .26 .23
985.3 998.2 1,021.7 1,049.2 1,088.7 1,127.3 1,136.0 1,127.5
999.4 1,021.2 1,048.8 1,076.1 1,117.2 1,163.3 1,171.6 1,158.8
- --------------------------------------------------------------------------------------------------------------
<FN>
Note 3: 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 diluted earnings per share
would have been $1,867.4 million, $1,696.2 million, $1,032.3 million
and $.99, respectively.
Note 4: 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 diluted earnings per share
would have been $1,687.8 million, $1,542.3 million, $935.2 million
and $.84, respectively.
</FN>
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 57
34
F I N A N C I A L S U M M A R Y -- B A L A N C E S H E E T A N D
O T H E R I N F O R M A T I O N
Anheuser-Busch Companies and Subsidiaries
- -----------------------------------------------------------------------------------------------------
(IN MILLIONS, EXCEPT PER SHARE AND STATISTICAL DATA) 2000 1999 1998
- -----------------------------------------------------------------------------------------------------
Balance Sheet Information:
Working capital (deficit) $ (127.8) $ (350.4) $ (89.9)
Current ratio 0.9 0.8 0.9
Debt 5,374.5 5,122.9 4,718.6
Shareholders equity 4,128.9 3,921.5 4,216.0
Return on shareholders equity 38.5% 34.5% 29.9%
Debt to total capitalization ratio 56.6% 56.6% 52.8%
Book value per share 4.57 4.25 4.42
Total assets 13,084.5 12,640.4 12,484.3
Other Information:
Capital expenditures $ 1,074.5 $ 865.3 $ 817.5
Price/earnings ratio 26.9 24.1 25.9
Market price range of common stock
(high and low closing) 49.81-27.47 40.81-32.59 34.13-21.72
- -----------------------------------------------------------------------------------------------------
All share and per share information reflects the two-for-one stock splits
effective September 18, 2000 and September 12, 1996. All information has been
restated to recognize the 1995 divestiture of the Food Products segment.
58 ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT
35
- ---------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------
$ 83.2 $ 34.9 $ 268.6 $ 57.0 $ (41.3) $ 247.8 $ 107.9 $ (62.8)
1.1 1.0 1.2 1.0 1.0 1.2 1.1 0.9
4,365.6 3,270.9 3,270.1 3,066.4 3,019.7 2,630.3 2,627.9 3,115.8
4,041.8 4,029.1 4,433.9 4,415.5 4,255.5 4,620.4 4,438.1 3,679.1
29.2%(1) 30.0%(2) 25.0%(3) 29.9% 18.8%(4) 27.6%(1) 30.2% 34.0%
51.9% 44.8% 47.1% 47.3% 47.3% 42.0% 43.9% 54.5%
4.15 4.05 3.61 3.32 3.35 3.25 2.95 2.30
11,727.1 10,463.6 10,590.9 10,547.4 10,267.7 9,954.9 9,642.5 9,274.2
$ 1,199.3 $ 1,084.6 $ 952.5 $ 662.8 $ 656.3 $ 628.8 $ 625.5 $ 805.3
18.6 (1) 17.6 (2) 19.6 (3) 13.1 22.6 (4) 16.9 (1) 18.9 14.6
23.94-19.75 21.44-16.25 17-12.69 13.81-11.75 15-11 15.13-13 15.38-9.88 11.25-8.56
- ---------------------------------------------------------------------------------------------------------------
<FN>
Note 1: Ratios calculated based on income from continuing operations before
the cumulative effect of accounting changes.
Note 2: Ratios 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 Cardinals gain, return on
shareholders equity would have been 29.2% and the price/earnings
ratio would have been 18.1.
Note 3: Ratios 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.
Note 4: Ratios 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.
</FN>
ANHEUSER-BUSCH COMPANIES 2000 ANNUAL REPORT 59