1
EXHIBIT 13
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 Dec. 31,
2001. This discussion should be read in conjunction with the Consolidated
Financial Statements and Notes to the Consolidated Financial Statements
included in this annual report.
This discussion contains forward-looking statements regarding the
company's expectations concerning its future operations, earnings and
prospects. On the date the forward-looking statements are made, the
statements represent the company's expectations, but such expectations may
change. These expectations involve risks and uncertainties (both favorable
and unfavorable) and are based on 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. Accordingly, there can be no assurances
that the company's expectations and forward-looking statements will be
correct. 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 U.S. 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. Anheuser-Busch 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 its three major objectives to enhance
shareholder value:
* Increasing domestic per barrel profitability which, when combined with
continued market share growth, will provide the base for solid long-term
earnings per share growth.
* Profitable expansion of the international beer segment 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 operates breweries in China and the
United Kingdom.
The company also has a 50% equity position in Grupo Modelo, Mexico's
largest brewer and producer of the Corona brand, as well as a 20% equity
position in Compania Cervecerias Unidas (CCU), the leading brewer
in Chile.
* Continued growth in profit and free cash flow 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, commitment to
quality and social responsibility to approximately 21 million visitors
annually.
34 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
2
OPERATING RESULTS
In a difficult economic environment, Anheuser-Busch continues to realize
consistent and dependable earnings growth, and has now achieved thirteen
consecutive quarters of strong double-digit earnings per share growth.
Anheuser-Busch is a simple, straightforward consumer products company with
significant competitive strengths which enable it to achieve these
consistently strong results. Strong growth in domestic revenue per barrel has
driven significantly enhanced profit margins, increasing return on capital
employed another 70 basis points in 2001.
In addition, the international beer segment once again made a
considerable contribution to earnings per share growth in 2001 (20% plus)
through the strong performance of the company's equity partner Grupo Modelo,
and significant increases in volume and profits on the sale of Anheuser-Busch
products overseas.
Comparisons of key operating results for the last three years are
summarized in the following tables.
- -------------------------------------------------------------------------------------------
COMPARISON OF OPERATING RESULTS ($ IN MILLIONS, EXCEPT PER SHARE)
- -------------------------------------------------------------------------------------------
2001 2000 2001 VS. 2000
Gross sales $14,973 $14,534 $439 3.0%
Net sales $12,911 $12,499 $412 3.3%
Operating income $2,723 $2,495 $228 9.2%
Equity income, net of tax $240 $200 $40 20.1%
Net income $1,705 $1,552 $153 9.9%
Diluted earnings per share $1.89 $1.69 $.20 11.8%
- -------------------------------------------------------------------------------------------
2000 1999 2000 VS. 1999
Gross sales $14,534 $13,915 $619 4.5%
Net sales $12,499 $11,895 $604 5.1%
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%
- -------------------------------------------------------------------------------------------
1999 1998 1999 VS. 1998
Gross sales $13,915 $13,343 $572 4.3%
Net sales $11,895 $11,380 $515 4.5%
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%
- -------------------------------------------------------------------------------------------
BEER VOLUME SALES
Total worldwide beer sales volume results for the last three years are
summarized in the following table:
- -------------------------------------------------------------------------------------------
WORLDWIDE BEER SALES VOLUME (MILLIONS OF BARRELS)
- -------------------------------------------------------------------------------------------
2001 2000 CHANGE
Domestic 99.5 98.3 1.2%
International 7.7 7.3 6.1%
---------------------------------------
Worldwide A-B brands 107.2 105.6 1.5%
International equity partner brands 17.2 15.7 9.7% (1)
---------------------------------------
Total brands 124.4 121.3 2.6% (1)
=======================================
<FN>
(1) Normalized to exclude incremental volume contributed by the 2001 acquisition of CCU,
Equity Partner Brands volume increased 4.9%, and Total Brands volume increased 2.0%,
for 2001 vs. 2000.
</FN>
- -------------------------------------------------------------------------------------------
2000 1999 CHANGE
Domestic 98.3 95.7 2.7%
International 7.3 7.2 1.3%
---------------------------------------
Worldwide A-B brands 105.6 102.9 2.6%
International equity partner brands 15.7 15.1 3.9% (2)
---------------------------------------
Total brands 121.3 118.0 2.8% (2)
=======================================
<FN>
(2) Normalized to exclude 1999 volume related to Anheuser-Busch's previously held equity
stake in Antarctica, Equity Partner Brands volume increased 6.2%, and Total Brands
volume increased 3.1%, for 2000 vs. 1999.
</FN>
- -------------------------------------------------------------------------------------------
1999 1998 CHANGE
Domestic 95.7 92.7 3.2%
International 7.2 7.1 1.2%
---------------------------------------
Worldwide A-B brands 102.9 99.8 3.1%
International equity partner brands 15.1 11.2 34.7%
---------------------------------------
Total brands 118.0 111.0 6.3%
=======================================
- -------------------------------------------------------------------------------------------
Worldwide Anheuser-Busch brands volume is comprised of domestic volume
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 breweries in
China and the United Kingdom and under various license and contract brewing
agreements. Budweiser and other Anheuser-Busch beer brands are sold in more
than 80 countries worldwide. Total Brands sales volume combines worldwide
Anheuser-Busch brand volume with the company's pro rata share of volume in
international equity partners Grupo Modelo and CCU. Total Brands also
includes Anheuser-Busch's equity share of former Brazilian brewer
Antarctica's beer volume through July 1999. The company sold its equity
investment back to Antarctica in July 1999.
ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT 35
3
MANAGEMENT'S DISCUSSION & ANALYSIS OF
OPERATIONS & FINANCIAL CONDITION
SALES
In the fourth quarter of 2001, the company changed its presentation of
pass-through finished product delivery costs reimbursed by customers. These
items were previously offset for zero impact within Cost of Products and
Services. The company now presents these items separately as Sales and Cost
of Products and Services.
This change has a minor impact on revenue and profit margins growth, and
has no impact on cash flow, operating income, net income and earnings per
share. For comparability, prior year information has been recast to conform
to the 2001 presentation.
[SALES* (1997-2001 -- COMPARES GROSS SALES AND NET SALES) -- GRAPH]
<FN>
* THE DIFFERENCE BETWEEN GROSS SALES AND NET SALES
REPRESENTS BEER EXCISE TAXES.
</FN>
SALES -- 2001 VS. 2000
Anheuser-Busch achieved record gross sales of $15.0 billion and record
net sales of $12.9 billion in 2001, representing increases of 3.0%, and 3.3%,
respectively, compared to 2000. These increases were principally due to
increased domestic revenue per barrel and higher domestic beer sales volume,
plus sales increases from the international beer and entertainment segments.
Gross and net sales include pass-through finished goods delivery costs
reimbursed by customers of $266.8 million. The difference between gross and
net sales represents beer excise taxes of $2.1 billion.
Domestic revenue per barrel growth exceeded expectations throughout 2001,
growing 3.0% for the full year. This growth reflects the continued favorable
pricing environment and Anheuser-Busch's successful strategy of balancing
pricing increases and market share gains. Revenue per barrel has now
increased by 2% or more for 13 consecutive quarters, including increases of
over 2.5% for the last six quarters. The consistent increases in revenue per
barrel over the past three years reflect the company's sharp focus on beer
profit margin growth and earnings. For 2002, the outlook for continued
increases in revenue per barrel remains favorable.
Consistent with the company's practice of implementing annual revenue
enhancement initiatives in two phases, the company successfully implemented
the first stage of planned 2002 revenue enhancements at the beginning of
October 2001 in markets representing just over 40% of domestic volume. The
company implemented the second stage of pricing actions on another 25% of
domestic volume in February 2002. These revenue initiatives have again been
tailored to specific markets, brands and packages and consist primarily of
front-line price increases, but also include discount reductions in some
markets. Initial results are encouraging, consistent with results seen in
recent years.
Domestic beer sales-to-wholesalers volume increased 1.2% for full year
2001, to 99.5 million barrels, compared to prior year. Wholesaler
sales-to-retailers grew 1.8% for the full year 2001. The Bud Family led the
increases in sales to wholesalers and to retailers. Bud Light continued its
strong sales performance in 2001 and is now the No. 1 selling beer brand in
the United States, followed by Budweiser, which continues to be the No. 1
beer brand in the world.
Anheuser-Busch's 2001 success was made possible by the company's ability
to capitalize on continued favorable domestic industry fundamentals and the
ongoing strong performance by our international beer segment. Gross and
operating profit margins increased 100 and 110 basis points for the year,
respectively, compared to 2000. The company has the highest quality products
in the industry, which, in conjunction with brand strength and successful
pricing strategies, provides a solid foundation for future growth. The
company expects to again accomplish its double-digit earnings per share
growth objective in 2002, with a current target of 10% to 12% growth.
Longer-term, the company remains confident in its ability to consistently
achieve double-digit earnings per share growth.
Worldwide Anheuser-Busch brand sales volume for 2001 grew 1.5%, to 107.2
million barrels, compared to full year 2000. Total Brands sales volume was
124.4 million barrels for the year, up 2.6%.
International beer volume, excluding Modelo and CCU, grew 6.1% for the
full year, to 7.7 million barrels, due primarily to solid volume growth in
Canada and China.
The company's domestic market share (excluding exports) for 2001 was
48.8%, an increase of 0.3 percentage points over 2000 market share of 48.5%.
Domestic market share is determined based on industry sales estimates
provided by the Beer Institute and the U.S. Department of Commerce. The
company has led the U.S. brewing industry in sales volume and market share
since 1957.
36 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
4
SALES -- 2000 VS. 1999
Anheuser-Busch achieved gross sales of $14.5 billion and net sales of
$12.5 billion in 2000, representing increases of 4.5% and 5.1%, respectively,
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 resulting from the
conversion of the company's 90%-owned Japan joint venture into an exclusive
licensing arrangement. Gross and net sales include pass-through finished
goods delivery costs reimbursed by customers of $237.6 million. 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 full year 2000 compared
to 1999.
Domestic beer sales-to-wholesalers increased 2.7%, to 98.3 million
barrels, for full year 2000. Domestic volume growth was led by the Bud
Family, with Bud Light registering double-digit growth. Domestic
sales-to-retailers were up 2.5% for 2000 compared to 1999.
Worldwide Anheuser-Busch brand sales volume grew to 105.6 million
barrels, up 2.6% for 2000 compared to 1999. Total Brands sales 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
Brands sales volume increased 3.1%.
The company's reported domestic market share (excluding exports) for
2000 was 48.5%, an increase of 1.0 share points over 1999 market share of
47.5%. Industry estimates provided by the Beer Institute for market share
calculations were not adjusted for the impact of a wholesaler inventory
reduction initiated by Miller Brewing Company in the fourth quarter of 2000.
International beer volume (excluding foreign equity investment volume)
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 $13.9 billion and net sales
of $11.9 billion in 1999, increasing over 1998 amounts by 4.3% and 4.5%,
respectively. These increases are primarily due to higher domestic beer
volume and higher revenue per barrel. Gross and net sales include
pass-through finished goods delivery costs reimbursed by customers of
$191.2 million. 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.
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.
Wholesaler sales-to-retailers grew 3.3% for full year 1999.
Worldwide Anheuser-Busch beer brands shipments grew to 102.9 million
barrels for 1999, up 3.1% compared to 1998, the first time in history a
company has sold over 100 million barrels of its beer brands in a single
year. Total Brands sales 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 percentage points over 1998 market share of 46.8%.
International beer volume (excluding foreign equity investment volume)
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.
ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT 37
5
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & 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 and package preferences. The
company also works to reduce distribution costs through better systemwide
coordination with its network of independent wholesalers. Cost of products
and services includes pass-through finished goods delivery costs reimbursed
by customers of $266.8 million in 2001, $237.6 million in 2000 and
$191.2 million in 1999.
Cost of products and services was $7.95 billion for 2001, an increase
of 1.5%, compared to 2000. The increase in cost of products and services is
principally due to higher domestic beer volume, higher energy costs and
increased packaging material costs, including the impact of start-up costs
related to the company's bottle manufacturing operation in Houston, Texas.
Gross profit as a percentage of net sales was 38.4% for 2001, an increase of
100 basis points compared to 2000, principally reflecting higher domestic
beer margins.
Cost of products and services was $7.83 billion for 2000, an increase of
5.2%, 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 37.4% for 2000,
even compared to 1999.
Cost of products and services was $7.45 billion in 1999, an increase
of 2.0%, 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 37.4%, an increase of 150 basis points vs. 1998.
MARKETING, DISTRIBUTION AND ADMINISTRATIVE EXPENSES
Marketing, distribution and administrative expenses for 2001 were
$2.26 billion, an increase of 3.7% vs. 2000. The increase in these expenses
in 2001 is principally due to higher domestic beer marketing costs, higher
distribution costs related to the acquisition of a wholesaler in California,
and higher administrative costs.
Marketing, distribution and administrative expenses for 2000 were
$2.17 billion, an increase of 1.3% vs. 1999. The increase 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, significantly offset
by lower international beer marketing expenses in Japan due to converting the
company's joint venture to an exclusive licensing agreement.
Marketing, distribution and administrative expenses for 1999 were
$2.15 billion, an increase of 9.7% compared with 1998. 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.
OPERATING INCOME
Operating income represents the measure of the company's financial
performance before net interest cost, other non-operating items and equity
income.
Operating income increased 9.2% vs. 2000, reflecting higher revenue per
barrel and increased domestic beer sales volume, along with improved results
for international beer, packaging and entertainment operations.
Operating profit for international beer increased 76% for 2001 due to
continued strong volume gains in China and Canada. The company's operations
in the United Kingdom and Ireland also contributed to the profit increase.
[OPERATING INCOME (1997-2001) -- GRAPH]
38 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
6
Operating profits for the packaging segment were up 6% for the year,
reflecting reduced manufacturing costs partially offset by lower soft drink
can pricing and the impact of start-up costs related to the company's bottle
manufacturing operation in Houston, Texas. This comparison excludes an
unfavorable adjustment related to the company's label manufacturing business
in 2000. Reported operating profits for the packaging segment increased 22%
in 2001.
Entertainment segment operating profits for the year increased 14% vs.
the prior year primarily due to increased attendance, increased in-park
spending and a full year of Discovery Cove operations in 2001 vs. a partial
year in 2000. These results exclude the impact of SeaWorld Cleveland
operating results and related gain on the sale of the park. Reported
operating profits for the entertainment segment (including SeaWorld
Cleveland) increased 29%.
Operating income in 2000 was $2.49 billion, an increase of 8.4% compared
to 1999, primarily due to the domestic beer company's strong revenue per
barrel and volume performance as well as improved results from international
beer operations.
The international beer segment's net income in 2000 increased 52%
compared to 1999, due to a 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, due to the conversion of the company's joint venture into a licensing
agreement, lower operating costs in Japan.
Packaging segment operating profits were down 41% 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, Tenn.
Excluding the label manufacturing adjustment, operating profits for the
packaging segment were down 32% for the year.
Entertainment segment operating results, excluding start-up costs
associated with Discovery Cove, which began operations in July 2000, were
up 7.6% for 2000 due primarily to strong attendance in the Florida market.
Reported operating profits for the entertainment segment increased 2.3%
for the year.
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.
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 resulting from 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 a
production joint venture in Brazil, the impact of a bottle recall in Europe
and the conversion of the joint venture in Japan into a license agreement.
Performance of the company's packaging operations in 1999 was level with
1998.
Theme park operating results for 1999 were up slightly from the prior
year, excluding start-up costs for Discovery Cove. Including Discovery Cove,
reported operating results for the entertainment segment declined 4% vs.
prior year.
NET INTEREST COST
Net interest cost (interest expense less interest income) was $360.1
million for 2001, $347.1 million for 2000 and $303.5 million for 1999,
representing increases of 3.7%, 14.4%, and 6.2%, respectively, compared to
prior years. These increases primarily result from higher average outstanding
debt balances compared to prior years. The impact of a higher debt balance
was partially offset by lower interest rates throughout 2001 and 1999.
Average interest rates increased in 2000. See the Liquidity and Cash Flows
section of this discussion for additional information.
INTEREST CAPITALIZED
Interest capitalized was $26.9 million in 2001, $33.3 million in 2000
and $18.2 million in 1999. The amount of interest capitalized fluctuates
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 earnings from the company's limited
partner basis investments in beer wholesalers, in addition to other 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 $12.2 million in 2001, $1.0 million in 2000
and $9.4 million in 1999.
ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT 39
7
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
EQUITY INCOME, NET OF TAX
Equity income, net of tax, increased 20%, to $240.1 million for 2001,
compared with 2000 equity income of $200 million. Equity income in 2000
represents a 27% increase compared to 1999 equity income of $157.5 million,
which increased 85% compared to 1998.
These increases are primarily based on Grupo Modelo's strong underlying
pricing and volume performance. The increase in equity income in 1999 vs.
1998 was favorably impacted by Anheuser-Busch's increased ownership level
throughout 1999 and the adverse impact of hyperinflation accounting for the
Mexican peso in 1998.
NET INCOME
The company earned net income of $1.7 billion in 2001, an increase of
9.9% over $1.55 billion in 2000. Net income for 2000 increased $149.4
million, or 10.7%, vs. 1999 net income of $1.40 billion, which increased
13.7%, vs. 1998.
The company's effective tax rate was 38.4% in 2001 compared to 38.0% in
2000 and 1999. The increase in 2001 is primarily due to the write-off of
goodwill associated with the sale of SeaWorld Cleveland.
DILUTED EARNINGS PER SHARE
Diluted earnings per share were $1.89 for 2001, an increase of 11.8% vs.
2000 earnings per share of $1.69. Diluted earnings per share for 2000
represent an increase of 15% over 1999 earnings per share of $1.47, which had
increased $.20, or 16.2%, compared to 1998. Diluted earnings per share
benefit from the company's ongoing share repurchase program. The company
repurchased 28.2 million common shares in both 2001 and 2000, and 37.8
million in 1999.
See Note 7 for a complete summary of common stock activity.
[DILUTED EARNINGS PER SHARE (1997-2001) -- GRAPH]
<FN>
1 BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE.
</FN>
EMPLOYEE-RELATED COSTS
Employee-related costs totaled $1.98 billion in 2001, an increase of
3.6%, vs. 2000 costs of $1.92 billion. Employee-related costs for 2000
increased 2.0%, vs. 1999 costs of $1.88 billion, which increased 2.2%
compared to 1998. The changes in employee-related costs reflect normal
increases in salaries, wages and benefit levels.
Salaries and wages comprise the majority of employee-related costs and
totaled $1.61 billion in 2001, an increase of 1.8% vs. 2000. Salaries and
wages totaled $1.58 billion in 2000, an increase of 2.6%, compared to 1999
costs of $1.54 billion, which increased 1.4% vs. 1998. The remainder of
employee-related costs consists of pension, life insurance, health care
benefits and payroll taxes.
The company had 23,432 full-time employees in 2001. Full-time employees
numbered 23,725 and 23,645 in 2000 and 1999, respectively.
[EMPLOYEE-RELATED COSTS (1997-2001) -- GRAPH]
TAXES
In addition to income taxes, the company is significantly impacted by
other federal, state and local taxes, including beer excise taxes. Taxes
applicable to 2001 operations (not including the many indirect taxes included
in materials and services purchased) totaled $3.2 billion, an increase of
3.9% vs. total taxes in 2000 of $3.1 billion, and highlight the burden of
taxation on the company and the brewing industry in general. Taxes in 2000
increased 2.7% compared to 1999 total taxes of $3.0 billion, which increased
3.9% compared to 1998.
40 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
8
LIQUIDITY AND CAPITAL RESOURCES
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 intends
to make selected equity investments in leading 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 in each of the last 68 years, and has
repurchased approximately 3% of outstanding shares annually for over
10 years.
Anheuser-Busch manages its cash flow to total debt ratio to maintain its
strong Single A credit ratings of A1 and A+, from Moody's and Standard and
Poor's, respectively. The company considers its ratio of cash flow to total
debt to be a key measure of ongoing liquidity, and targets a ratio in the
30% to 40% range. The company uses its share repurchase program to manage
its leverage position. The cash flow to total debt ratio was 38.5% in 2001,
41.6% in 2000 and 41.8% in 1999.
[OPERATING CASH FLOW (1997-2001 -- BEFORE CHANGE IN WORKING CAPITAL) -- GRAPH]
SOURCES AND USES OF CASH
The company's primary sources of liquidity are cash provided from
operations and financing activities. Principal uses of cash are capital
expenditures, share repurchases, dividends and business investments. The
company uses debt financing to lower its overall cost of capital, thereby
increasing the company's return on equity. Information on the company's
consolidated cash flows (categorized by operating activities, financing
activities and investing activities) for the years 2001, 2000 and 1999 is
presented in the Consolidated Statement of Cash Flows and Note 11.
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, are likely to
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.
[RATIO OF CASH FLOW TO TOTAL DEBT (1997-2001) -- GRAPH]
The company typically operates at a working capital deficit as it manages
its cash flows. The company had working capital deficits of $181.9 million,
$127.8 million and $350.4 million at Dec. 31, 2001, 2000 and 1999,
respectively.
The company's fixed charge coverage ratio was 7.0X, 6.7X and 6.9X for the
years ended Dec. 31, 2001, 2000 and 1999, respectively.
The company's 9% debentures due 2009 and the ESOP debt guarantee that
ends in 2004 (both of which are included in debt on the consolidated balance
sheet) contain repayment acceleration clauses that are triggered by a decline
in credit rating below investment grade. In the case of the 9% debentures,
the downgrade must coincide with certain other events. The total outstanding
balance at Dec. 31, 2001 for this debt is $482.2 million. Anheuser-Busch
considers the likelihood of a credit rating downgrade below investment grade
to be low.
ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT 41
9
MANAGEMENT'S DISCUSSION & ANALYSIS OF
OPERATIONS & FINANCIAL CONDITION
Certain equity accounting method beer wholesalers have long-term debt
obligations totaling $23.6 million as of Dec. 31, 2001 that are not reflected
on Anheuser-Busch's balance sheet. The debt is non-recourse to, and is not
guaranteed by, the company.
The company occasionally provides small-scale loan guarantees for beer
wholesalers to assist them in obtaining long-term bank financing. The
duration of these guarantees varies. At Dec. 31, 2001, total outstanding
guarantees were $2 million.
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 financial measure of acceptability
of a discretionary capital project is its projected discounted cash flow
return on investment exceeding the company's cost of capital.
Total capital expenditures amounted to $1.0 billion in 2001 and
$1.1 billion in 2000. Capital expenditures over the past five years totaled
$5.0 billion. The company expects capital expenditures in 2002 of $900 to
$950 million and is projecting capital spending during the five-year period
2002 -- 2006 of approximately $4.5 billion.
[CAPITAL EXPENDITURES/DEPRECIATION & AMORTIZATION (1997-2001) -- GRAPH]
SHARE REPURCHASE
See Note 7 for a discussion of share repurchase activity.
DIVIDENDS
Cash dividends paid to shareholders were $614.1 million in 2001 and
$571.0 million in 2000. Dividends are paid in the months of March, June,
September and December of each year. In the third quarter 2001, effective
with the September dividend, the Board of Directors increased the quarterly
dividend rate by 9.1%, from $.165 to $.18 per share. This increased annual
dividends per share to $.69 in 2001, a 9.5% increase compared with $.63 per
share in 2000. In 2000, dividends were $.15 per share for the first two
quarters and $.165 per share for the last two quarters.
[NET INCOME/DIVIDENDS (1997-2001) -- GRAPH]
<FN>
1 BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE.
</FN>
FINANCING ACTIVITIES
The company utilizes Securities and Exchange Commission "shelf"
registration statements to provide flexibility and efficiency when obtaining
long-term financing. At Dec. 31, 2001, a total of $550 million of debt was
available for issuance under an existing registration.
The company's net debt balance increased a total of $621.2 million in
2001, compared to a total increase of $239.8 million in 2000.
Debt issuances were $1.24 billion and $803.9 million in 2001 and 2000,
respectively. Issued debt consisted primarily of fixed interest rate
debentures, long-term notes and medium-term notes.
42 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
10
Debt reductions were $616.1 million and $564.1 million in 2001 and 2000,
respectively. Reductions in both years included commercial paper, medium-term
notes and the ESOP debt guarantee. Also, long-term notes and dollar/yen
dual-currency notes matured in 2001.
In addition to long-term debt financing, the company has access to
the short-term capital market through the issuance of commercial paper and
potential utilization of a $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.
See Note 4 for additional information regarding the company's debt
portfolio.
COMMON STOCK
At Dec. 31, 2001, registered common stock shareholders numbered 57,347
compared with 58,614 at the end of 2000. 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 2001 and 2000 quarterly high
and low closing prices for BUD.
The closing price of the company's common stock at Dec. 31, 2001 and 2000
was $45.21 and $45.50, respectively. The book value of each common share of
stock at Dec. 31, 2001 was $4.62, compared to $4.57 at Dec. 31, 2000.
- ------------------------------------------------------------------------------
PRICE RANGE OF ANHEUSER-BUSCH COMMON STOCK (BUD)
- ------------------------------------------------------------------------------
2001 2000
QUARTER HIGH LOW HIGH LOW
First 46.46 38.50 38.06 27.47
Second 46.45 38.88 40.66 32.69
Third 44.49 39.75 44.31 38.13
Fourth 46.51 39.70 49.81 39.63
- ------------------------------------------------------------------------------
KEY ACCOUNTING POLICIES
Outlined below are accounting polices Anheuser-Busch believes are key to
a full understanding of the company's operations and financial results. All
the company's accounting policies are in compliance with U.S. generally
accepted accounting principles (GAAP).
Revenue Recognition -- Revenue is recognized when title transfers or
-------------------
services are rendered to unaffiliated customers. The company's primary
revenue source is domestic beer operations. For malt beverage products
shipped to independent wholesalers, title transfers when product is shipped
from the company's breweries. The company does not recognize any revenue when
independent wholesalers sell products to retail customers. For company-owned
wholesalers, title transfers when products are delivered to retail customers.
For aluminum cans, title transfers on receipt of cans. For theme parks,
revenue is recognized when a customer visits a park location.
Equity Method Accounting -- Anheuser-Busch generally applies the equity
------------------------
method of accounting to 20% - 50%-owned investments. Equity accounting
involves recognizing the company's pro rata share of the earnings of investee
companies in the Income Statement when reported by those companies. Cash is
received and recognized only when distributed by the investee company. As an
equity investor, Anheuser-Busch does not control the amount and timing of
cash distributions by investees. In 2001, Anheuser-Busch recognized equity
income of $240.1 million and received cash distributions from investees of
$25.8 million.
Derivatives -- The company's use of derivative financial instruments is
-----------
limited to hedges of either firm commitments or anticipated transactions that
expose Anheuser-Busch to price fluctuations in the ordinary course of
business. Company policy expressly prohibits trading or speculating with
derivatives. Accordingly, all the company's derivative holdings are
designated as hedges and qualify for hedge accounting under FAS 133,
"Accounting for Derivatives and Related Hedging Activity."
Advertising and Promotional Costs -- Advertising and promotional
---------------------------------
activities are important elements of Anheuser-Busch's strategy and represent
significant annual expenditures by the company. The company either expenses
these costs as incurred, or accumulates and expenses them the first time the
advertisement is shown. The company recognized $722 million in advertising
and promotional expenses in 2001.
ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT 43
11
MANAGEMENT'S DISCUSSION & ANALYSIS OF
OPERATIONS & FINANCIAL CONDITION
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 purchased options and collars 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 freestanding 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 and availability of
appropriate hedging instruments, the anticipated time horizon, commodity
basis exposure, opportunity cost, and the nature of the underlying hedged
item. The company's overall risk management goal is to strike a balance
between managing its exposure to market volatility while obtaining the most
favorable transaction costs possible.
Derivatives are either exchange-traded instruments that 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 credit ratings from
Moody's or Standard & Poor's no lower than A1 or A+, 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 Dec. 31, 2001, the
company held zero counterparty collateral and had none outstanding. No
collateral was received or provided during the year.
The company 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 fair value of the derivative, or by ongoing
correlation between the price of the underlying hedged exposure and the
pricing upon which the derivative is based. The fair value of derivatives is
the amount the company would pay or receive when terminating any contracts.
Following is a sensitivity analysis indicating potential unfavorable
changes in the fair value of the company's derivative holdings under certain
market movements discussed below. The company uses value-at-risk (VAR)
analysis for foreign currency and interest rate exposures, and sensitivity
analysis for commodity price exposures.
VAR forecasts fair value changes using a statistical model (Monte Carlo
simulation method) that 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 the company could experience on each portfolio 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
underlying commodities.
- ------------------------------------------------------------------------------
ESTIMATED FAIR VALUE VOLATILITY AT DEC. 31, 2001 (IN MILLIONS)
- ------------------------------------------------------------------------------
Foreign Currency Risk (VAR):
Forwards, Options $1.8
Interest Rate Risk (VAR):
Swaps $1.2
Commodity Price Risk (Sensitivity):
Futures, Swaps, Options $41.4
- ------------------------------------------------------------------------------
44 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
12
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. Additionally, the preceding derivatives 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 changes in derivative values and changes
in the pricing of the underlying hedged transactions.
The company adopted FAS 133, "Accounting for Derivative Instruments and
Hedging Activity" on Jan. 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.
See Notes 1 and 3 for information regarding derivatives accounting
policies and the company's derivatives portfolio.
SIGNIFICANT NON-U.S. EQUITY INVESTMENTS
GRUPO MODELO
From 1993 to 1998, the company accumulated a 50.2% direct and indirect
equity interest in Diblo, S.A. de C.V., the operating subsidiary of Grupo
Modelo, S.A. de C.V., Mexico's largest brewer and producer of the Corona
brand. Anheuser-Busch's total initial investment in Modelo was $1.6 billion.
Anheuser-Busch does not have 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 has applied the equity method of
accounting since its ownership first exceeded 20% 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 cost. The
excess of fair value over the company's cost, based on Grupo Modelo's closing
stock price on the Mexican stock exchange at Dec. 31, 2001, was $3.1 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.
CCU
During the first quarter of 2001, the company purchased a 20% equity
interest in Compania Cervecerias Unidas S.A. (CCU), the largest brewer in
Chile, for $321 million. Anheuser-Busch has partnered with CCU in Argentina
for six years through the company's equity ownership in CCU-Argentina, a CCU
subsidiary that is licensed to brew Budweiser for Argentina, Chile, Brazil
and other Latin American markets. The investment in CCU is consistent with
Anheuser-Busch's strategy to expand the company's presence in Latin America.
Also see Note 2.
OTHER MATTERS
RELATED PARTY TRANSACTIONS
The company does not engage in any material transactions with its
officers, directors, or companies affiliated with its directors. All related
party transactions are conducted on an arm's length basis, with terms and
conditions equivalent to those that would be available in transactions with
unrelated parties. Also see the Anheuser-Busch Proxy Statement for a
discussion of certain related party transactions.
STATUS OF TEAMSTERS LABOR CONTRACT
In May 2001, the company and the Teamsters reached agreement on a new
labor agreement covering Teamster-represented employees at all of the
company's domestic U.S. breweries through February 2004. The terms of the
agreement are essentially the same as those unilaterally implemented by the
company in September 1998 upon reaching impasse in negotiations, except an
additional year was added to the term of the contract.
The 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 to keep all 12 of its U.S. breweries open during the life of the
contract, barring an unforseen event, providing its employees with
unprecedented job security.
ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT 45
13
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
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
$17.8 million in the first quarter 2001. The sale did not include killer
whales, dolphins or any rights to the SeaWorld name. The sale had only an
insignificant ($.005 per share after-tax) impact on earnings per share growth
in 2001. Anheuser-Busch continues to operate and support its remaining U.S.
theme parks.
STOCK SPLIT
The company distributed a two-for-one stock split on Sept. 18, 2000.
All historical share and per share information in the Annual Report has
been restated to reflect the impact of the stock split.
ENVIRONMENTAL ISSUES
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 plan capital
projects or changes in processes. Anheuser-Busch also encourages its
suppliers to adopt similar environmental management practices and policies.
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. It is the opinion of management
that potential costs, either individually or in the aggregate, related to
any Environmental Protection Agency designated cleanup sites for which
Anheuser-Busch has been identified as a Potentially Responsible Party will
not materially affect the company's financial position, results of
operations, or liquidity.
46 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
14
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 United States.
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 2001, 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 2001.
The Audit Committee report for 2001 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 United States, 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 ACCOUNTANTS
800 Market Street
St. Louis, MO 63101
[PRICEWATERHOUSECOOPERS LOGO]
February 5, 2002
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 Dec. 31, 2001
and 2000, and the related Consolidated Statements of Income, Changes in
Shareholders Equity and Cash Flows for each of the three years in the period
ended Dec. 31, 2001. 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 Dec. 31, 2001 and
2000, and the results of their operations and their cash flows for each of
the three years in the period ended Dec. 31, 2001, in conformity with
accounting principles generally accepted in the United States of America.
/s/PricewaterhouseCoopers LLP
ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT 47
15
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 DEC. 31 (IN MILLIONS) 2001 2000
- ------------------------------------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash $ 162.6 $ 159.9
Accounts and notes receivable 620.9 600.4
Inventories:
Raw materials and supplies 352.4 347.3
Work in process 79.8 82.9
Finished goods 159.6 178.1
Total inventories 591.8 608.3
Other current assets 175.1 179.3
-----------------------------------
Total current assets 1,550.4 1,547.9
Investments in affiliated companies 2,772.1 2,207.4
Other assets 1,149.5 1,073.6
Plant and equipment, net 8,390.0 8,243.8
-----------------------------------
TOTAL ASSETS $13,862.0 $13,072.7
===================================
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities:
Accounts payable $ 945.0 $ 940.8
Accrued salaries, wages and benefits 255.8 276.4
Accrued taxes 156.8 127.4
Other current liabilities 374.7 331.1
-----------------------------------
Total current liabilities 1,732.3 1,675.7
-----------------------------------
Postretirement benefits 482.9 492.7
-----------------------------------
Debt 5,983.9 5,362.7
-----------------------------------
Deferred income taxes 1,288.6 1,372.9
-----------------------------------
Other long-term liabilities 312.8 39.8
-----------------------------------
Shareholders Equity:
Common stock, $1.00 par value, authorized 1.6 billion shares 1,445.2 1,441.5
Capital in excess of par value 810.2 725.3
Retained earnings 11,258.2 10,164.4
Treasury stock, at cost (8,981.6) (7,817.8)
Accumulated other comprehensive income (338.3) (212.3)
ESOP debt guarantee (132.2) (172.2)
-----------------------------------
Total Shareholders Equity 4,061.5 4,128.9
-----------------------------------
Commitments and contingencies -- --
-----------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $13,862.0 $13,072.7
===================================
The Notes on pages 52-63 of this report are an integral component of the
company's Consolidated Financial Statements.
48 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
16
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 DEC. 31 (IN MILLIONS, EXCEPT PER SHARE) 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------
Sales $14,973.0 $14,534.2 $13,914.5
Excise taxes (2,061.5) (2,034.8) (2,019.6)
----------------------------------------------
Net sales 12,911.5 12,499.4 11,894.9
Cost of products and services (7,950.4) (7,829.9) (7,445.6)
----------------------------------------------
Gross profit 4,961.1 4,669.5 4,449.3
Marketing, distribution and administrative expenses (2,255.9) (2,174.8) (2,147.0)
Gain on sale of SeaWorld Cleveland 17.8 -- --
----------------------------------------------
Operating income 2,723.0 2,494.7 2,302.3
Interest expense (361.2) (348.2) (307.8)
Interest capitalized 26.9 33.3 18.2
Interest income 1.1 1.1 4.3
Other expense, net (12.2) (1.0) (9.4)
----------------------------------------------
Income before income taxes 2,377.6 2,179.9 2,007.6
Provision for income taxes (913.2) (828.3) (762.9)
Equity income, net of tax 240.1 200.0 157.5
----------------------------------------------
Net income $ 1,704.5 $ 1,551.6 $ 1,402.2
==============================================
Earnings per share:
Basic $ 1.91 $ 1.71 $ 1.49
==============================================
Diluted $ 1.89 $ 1.69 $ 1.47
==============================================
The Notes on pages 52-63 of this report are an integral component of the
company's Consolidated Financial Statements.
ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT 49
17
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 DEC. 31 (IN MILLIONS, EXCEPT PER SHARE) 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCK
Balance, beginning of period $ 1,441.5 $ 716.1 $ 712.7
Shares issued under stock plans 3.7 6.4 3.4
Two-for-one stock split -- 719.0 --
----------------------------------------------
Balance, end of period $ 1,445.2 $ 1,441.5 $ 716.1
==============================================
CAPITAL IN EXCESS OF PAR VALUE
Balance, beginning of period $725.3 $ 1,241.0 $ 1,117.5
Shares issued under stock plans 84.9 203.3 123.5
Two-for-one stock split -- (719.0) --
----------------------------------------------
Balance, end of period $810.2 $ 725.3 $ 1,241.0
==============================================
RETAINED EARNINGS
Balance, beginning of period $10,164.4 $ 9,181.2 $ 8,320.7
Net income 1,704.5 1,551.6 1,402.2
Common dividends paid (per share: 2001 -- $.69;
2000 - $.63; 1999 - $.58) (614.1) (571.0) (544.7)
Shares issued under stock plans 3.4 2.6 3.0
----------------------------------------------
Balance, end of period $11,258.2 $10,164.4 $ 9,181.2
==============================================
TREASURY STOCK
Balance, beginning of period $(7,817.8) $(6,831.3) $(5,482.1)
Treasury stock acquired (1,163.8) (986.5) (1,349.2)
----------------------------------------------
Balance, end of period $(8,981.6) $(7,817.8) $(6,831.3)
==============================================
ESOP DEBT GUARANTEE
Balance, beginning of period $ (172.2) $ (210.5) $ (247.2)
Annual debt service 40.0 38.3 36.7
----------------------------------------------
Balance, end of period $ (132.2) $ (172.2) $ (210.5)
==============================================
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of period $ (212.3) $ (175.0) $ (205.6)
Foreign currency translation gains/(losses) 44.5 (37.3) 30.6
Deferred hedging gains/(losses) (38.9) -- --
Minimum pension obligation (131.6) -- --
----------------------------------------------
Balance, end of period $ (338.3) $ (212.3) $ (175.0)
==============================================
TOTAL SHAREHOLDERS EQUITY $ 4,061.5 $ 4,128.9 $ 3,921.5
==============================================
COMPREHENSIVE INCOME
Net income $ 1,704.5 $ 1,551.6 $ 1,402.2
Foreign currency translation gains/(losses) 44.5 (37.3) 30.6
Deferred hedging gains/(losses) (38.9) -- --
Minimum pension obligation adjustment (131.6) -- --
----------------------------------------------
TOTAL COMPREHENSIVE INCOME $ 1,578.5 $ 1,514.3 $ 1,432.8
==============================================
The Notes on pages 52-63 of this report are an integral component of the
company's Consolidated Financial Statements.
50 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
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 A S H F L O W S
Anheuser-Busch Companies and Subsidiaries
- -----------------------------------------------------------------------------------------------------------------
YEAR ENDED DEC. 31 (IN MILLIONS) 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 1,704.5 $ 1,551.6 $ 1,402.2
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 834.5 803.5 777.0
Deferred income taxes (18.9) 28.7 40.3
Gain on sale of SeaWorld Cleveland (17.8) -- --
Undistributed earnings of affiliated companies (223.5) (185.2) (155.5)
Other, net 25.0 31.4 77.6
----------------------------------------------
Operating cash flow before change in working capital 2,303.8 2,230.0 2,141.6
Decrease/(increase) in working capital 56.8 27.5 (5.8)
----------------------------------------------
Cash provided by operating activities 2,360.6 2,257.5 2,135.8
----------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (1,022.0) (1,074.5) (865.3)
New business acquisitions (370.4) (42.9) (7.0)
Proceeds from sale of business 110.0 -- 59.6
----------------------------------------------
Cash used for investing activities (1,282.4) (1,117.4) (812.7)
----------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase in debt 1,213.4 803.9 973.4
Decrease in debt (572.8) (514.0) (553.7)
Dividends paid to shareholders (614.1) (571.0) (544.7)
Acquisition of treasury stock (1,163.8) (986.5) (1,349.2)
Shares issued under stock plans 61.8 135.3 78.4
----------------------------------------------
Cash used for financing activities (1,075.5) (1,132.3) (1,395.8)
----------------------------------------------
Net increase/(decrease) in cash during the year 2.7 7.8 (72.7)
Cash, beginning of year 159.9 152.1 224.8
----------------------------------------------
Cash, end of year $ 162.6 $ 159.9 $ 152.1
==============================================
The Notes on pages 52-63 of this report are an integral component of the
company's Consolidated Financial Statements.
ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT 51
19
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. These principles
and policies conform to U.S. generally accepted accounting principles. The
company makes certain estimates during the preparation of financial
statements which impact the reported amounts of some assets and liabilities
at the date of the financial statements and the reported amounts of some
expenses during the period. All estimates are made in conformity with U.S.
generally accepted accounting principles. Actual results could differ from
those estimates.
REVENUE RECOGNITION
The company's revenue recognition practices are in compliance with SEC
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements." The company recognizes revenue only when title transfers or
services have been rendered to unaffiliated customers. For malt beverages
shipped to independent wholesalers, title transfers on shipment of product
from the company's breweries. For company-owned wholesalers, title transfers
when products are delivered to retail customers. 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
when customers actually visit a park location.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the company and all its
subsidiaries. The company 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.
CASH
Cash includes cash in banks, demand deposits and investments in
short-term marketable securities with initial maturities of 90 days or less.
G00DWILL
The company amortizes goodwill on a straight-line basis for a period of
40 years. Effective Jan. 1, 2002, the company adopted FAS No. 142, "Goodwill
and Other Intangible Assets," and ceased the amortization of existing
goodwill. Additionally, goodwill generated by future acquisitions will be
recognized as an asset and will not be amortized. See Note 14 for additional
information.
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 results of operations. Translation adjustments are reported as a separate
component of other comprehensive income within shareholders equity.
Exchange rate adjustments related to foreign currency transactions are
recognized in income as incurred.
INVENTORIES AND PRODUCTION COSTS
Inventories are valued at the lower of cost or market. Cost was
determined under the last-in, first-out method (LIFO) for approximately 75%
of total inventories at Dec. 31, 2001 and 2000. Average cost valuation is
used for the remainder. Had average cost (which approximates replacement
cost) been used for all inventories at Dec. 31, 2001 and 2000, total
inventories would have been $83.1 million and $89.9 million higher,
respectively.
DELIVERY COSTS
Pass-through finished goods delivery costs reimbursed by customers
are reported in sales, while the cost is included as an expense in cost of
products and services. Delivery costs for company-owned beer wholesalers are
included in marketing, distribution and administrative expenses.
FIXED ASSETS
Fixed assets are carried at cost less accumulated depreciation and
include expenditures for new facilities as well as those that increase the
useful lives of existing facilities. The cost of routine maintenance, repairs
and minor renewals is expensed as incurred. When fixed assets are retired or
otherwise disposed, the net carrying amount is eliminated, with any gain or
loss on disposition recognized in earnings at that time.
Depreciation is recognized 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.
ADVERTISING AND PROMOTIONAL COSTS
Advertising and promotional costs are either expensed as incurred,
or accumulated and expensed the first time the advertisement is shown.
Advertising and promotional expenses were $722.3 million, $728.3 million
and $721.8 million in 2001, 2000 and 1999, respectively.
52 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
20
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 elements 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
reporting and tax filing in accordance with the requirements of FAS No. 109,
"Accounting for Income Taxes." See Note 10 for additional information.
DERIVATIVES
Anheuser-Busch uses derivative instruments to mitigate the company's
exposure to volatility in commodity prices, interest rates and foreign
currency exchange rates. Company policy prohibits holding or trading
derivatives strictly for profit. All derivatives held by the company are
therefore designated as hedges with an expectation they will be highly
effective in offsetting underlying exposures.
Derivative positions are liquidated whenever an underlying transaction
is no longer expected to occur, with related gains or losses recognized in
earnings on liquidation.
Option premiums paid are initially recorded as assets and subsequently
adjusted to fair value in equity each period. The effective portion of
changes in fair value is deferred in equity (accumulated other comprehensive
income) until the underlying transaction occurs.
With the exception of interest rate swaps, derivatives generally have
initial terms of less than three years, and all currently hedged transactions
are expected to occur within the next three years.
On Jan. 1, 2001, the company adopted FAS No. 133, "Accounting for
Derivative Instruments and Hedging Activity." Under FAS 133, all derivatives
are recorded 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 a price movement in the underlying exposure. Amounts receivable
from, or owed to, derivatives counterparties are included in current assets
and current liabilities, respectively.
Gains and losses from changes in derivatives fair values that are
effective in offsetting underlying exposures are either deferred in
shareholders equity until the underlying transaction occurs, or recognized
in earnings concurrently with the change in value of the underlying exposure.
Gains and losses that are not effective at offsetting price movements are
recognized in earnings immediately, and are not material.
All of the company's derivative positions qualified for hedge accounting
on adoption of FAS 133, therefore the impact of adoption was not material.
Foreign currency and interest rate hedges are classified primarily as fair
value hedges, while commodity price hedges are principally cash flow hedges.
The company made no substantive changes to its risk management approach as
a result of adopting FAS 133. See Note 3 for additional information.
RESEARCH AND DEVELOPMENT COSTS
AND START-UP COSTS
Research and development costs and plant start-up costs are expensed as
incurred, and are not material for any year presented.
COMPUTER SYSTEMS DEVELOPMENT COSTS
The company capitalizes computer systems development costs that meet
established criteria, and amortizes those costs to expense on a straight-line
basis over five years. Systems development costs not meeting the proper
criteria for capitalization, including systems reengineering costs, 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 Sept. 18, 2000.
2. INTERNATIONAL EQUITY 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 cost of $1.6 billion. The company holds 10 of
21 positions on Modelo's Board of Directors, with the Controlling
Shareholders holding the other 11 positions. Anheuser-Busch therefore does
not have voting or other effective control of either Diblo or Modelo and
therefore accounts for its investments using the equity method.
Included in the carrying amount of the Modelo investment is goodwill of
$622.4 million and $586.7 million, respectively, at Dec. 31, 2001 and 2000
which was being amortized over 40 years. Effective with the adoption of FAS
142 on Jan. 1, 2002, the company ceased amortization of Modelo-related
goodwill.
Dividends received from Grupo Modelo in 2001 totaled $13.5 million,
compared to $23.9 million in 2000 and $2.9 million in 1999.
ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT 53
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary financial information for Grupo Modelo as of, and for the two
years ended Dec. 31, is presented in the following table (in millions). The
amounts shown represent 100% of Grupo Modelo's consolidated operating results
and financial position based on U.S. generally accepted accounting
principles, and include the impact of Anheuser-Busch's purchase accounting
adjustments.
2001 2000
Cash $ 865.4 $ 705.2
Other current assets 771.7 670.0
Noncurrent assets 4,104.7 3,610.5
Current liabilities 341.7 310.7
Noncurrent liabilities 641.2 557.3
Gross sales 3,571.5 3,129.9
Net sales 3,334.2 2,919.1
Gross profit 1,787.5 1,577.4
Minority interest 32.0 46.3
Net income 486.8 405.0
- ---------------------------------------------------------------------
OTHER INTERNATIONAL EQUITY INVESTMENTS
During 2001, the company purchased a 20% equity interest in Compania
Cervecerias Unidas S.A. (CCU), the largest brewer in Chile, for $321 million.
CCU imports and distributes Budweiser in Chile. Anheuser-Busch has Board of
Directors' representation (including the Audit Committee) and the ability to
exercise significant influence. As such, the company accounts for the CCU
investment using the equity method.
From 1996 to 1999, Anheuser-Busch accumulated a 10.8% direct equity
interest in the Argentine subsidiary of CCU (CCU-Argentina) for a total cost
of $23.9 million, with options expiring in December 2002 to increase its
direct investment to 20%. CCU-Argentina brews Budweiser under license for
sale in Argentina, Chile, Brazil and other Latin American markets.
The CCU-Argentina investment was accounted for on the cost basis through
2000. The 20% acquisition of CCU in 2001 increased Anheuser-Busch's direct
and indirect interest in CCU-Argentina to 28.6%, and the company therefore
began using the equity method of accounting 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
immaterial. The company received dividends of $12.3 million from CCU in 2001.
Included in the carrying amount of the CCU investments is goodwill of
$115.8 million. The company ceased amortization of CCU-related goodwill on
adoption of FAS 142 in January 2002.
The earnings impact due to the unpegging of the Argentine peso from its
1:1 exchange position relative to the U.S. dollar was recorded in 2001 and
had an immaterial impact on equity income.
From April 1996 to July 1999, the company owned a 5% equity stake
in the principal operating subsidiary of the Brazilian brewer Antarctica.
Anheuser-Busch exercised its rights under the investment agreement and sold
its ownership position back to Antarctica at original cost in 1999 with no
earnings impact on the company. Simultaneously, the company discontinued a
production and distribution joint venture with Antarctica, and now exports
Budweiser to Brazil.
Effective January 2000, the company converted its joint venture operation
in Japan 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.
3. DERIVATIVES AND OTHER
FINANCIAL INSTRUMENTS
DERIVATIVES
The following table summarizes the notional transaction amounts and
fair values for the company's outstanding derivatives, by risk category and
instrument type, at Dec. 31, 2001 and 2000 (in millions). 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 are expected to largely offset. Bracketed figures indicate current
settlement of the derivatives contract would result in a net loss to
Anheuser-Busch, but do not reflect the impact of the underlying hedged
transaction.
2001 2000
NOTIONAL FAIR Notional Fair
AMOUNT VALUE Amount Value
---------------------------------------------------------
Foreign Currency:
Forwards $ 66.5 $ 0.2 $ 71.0 $(2.8)
Options 116.5 2.0 96.7 2.1
---------------------------------------------------------
183.0 2.2 167.7 (0.7)
---------------------------------------------------------
Interest Rate:
Swaps 601.0 11.1 762.8 13.0
---------------------------------------------------------
Commodity Price:
Swaps 154.4 (1.5) 216.0 1.7
Futures/forwards 61.8 (8.4) 53.6 4.0
Options 352.4 12.1 489.8 35.8
---------------------------------------------------------
568.6 2.2 759.4 41.5
---------------------------------------------------------
Total outstanding
derivatives $1,352.6 $15.5 $1,689.9 $53.8
=========================================================
- -----------------------------------------------------------------------------------------
54 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
22
Derivatives gains or losses recognized in earnings in 2001 due to
hedge ineffectiveness were not material. During 2001, the company recognized
$12.2 million in gains and $29.2 million in losses previously recorded in
accumulated other comprehensive income into earnings when the underlying
hedged transactions occurred. Included in accumulated other comprehensive
income at Dec. 31, 2001 are deferred gains of $0.3 million and deferred
losses of $39.2 million. Deferred losses include $18.4 million of
unrecognized option premium expense. The company expects the majority of
deferred gains and losses to be recognized in earnings in 2002 because the
majority of the related underlying transactions are expected to occur in
2002. However the amounts eventually recognized may differ from those as of
Dec. 31, 2001, as many of the company's derivative positions are not yet
settled, and therefore remain subject to ongoing market price fluctuations.
Anheuser-Busch's primary foreign currency exposures are to transactions
and investments denominated in British pounds sterling, euros, Mexican,
Chilean and Argentine pesos, Canadian dollars, and Chinese renminbi. For
commodity derivatives, the company is a net user of raw materials indicating
additional quantities must be purchased to meet production requirements.
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, accounts payable and long-term debt.
Accounts and notes receivable include allowances for doubtful accounts of
$7.7 million and $8.2 million, at Dec. 31, 2001 and 2000, respectively. The
fair value of long-term debt, estimated based on future cash flows discounted
at interest rates currently available to the company for debt with similar
maturities and characteristics, was $6.3 billion and $5.5 billion at Dec. 31,
2001 and 2000, respectively.
4. DEBT
The company uses Securities and Exchange Commission shelf registrations
to maintain debt issuance flexibility and currently has $550 million in
registered debt available for issuance.
Gains or losses on debt redemptions (either individually or in the
aggregate) were not material for any year presented.
The fixed interest rates on the company's EuroNotes, 4.1% yen/dollar
notes and 5.6% U.S. dollar notes (total notional value of $401 million in
2001 and $362.8 million in 2000), were swapped to LIBOR-based floating rates
when issued. The weighted average effective interest rates for this debt were
4.15% and 6.29% in 2001 and 2000, respectively. Year-end rates were 2.06% and
6.55%, respectively.
The weighted average interest rates on commercial paper during 2001 and
2000 were 4.39% and 6.2%, respectively.
In October 1999, the company lowered the effective interest rate on its
$200 million 6.9% notes to 6.44% via a dual-swap arrangement. In January
2001, the swap counterparty exercised its option to terminate the
fixed-to-floating portion of the swap structure, and the company in turn
called the 6.9% Notes. There was no earnings impact to the company from
either the counterparty action or calling the Notes. The floating-to-fixed
portion of the swap, at 6.44%, remains as a hedge of commercial paper
interest rates.
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 Dec. 31, 2001 and 2000, the company had no
outstanding borrowings under the agreement. Annual fees under the agreement
were $1.2 million in 2001, $0.9 million in 2000 and $0.6 million in 1999.
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 would be classified as short-term.
The expected aggregate maturities on long-term debt are $17 million, $200
million, $251 million, $300 million and $420 million, respectively, for each
of the years ending Dec. 31, 2002 through 2006. These maturities do not
include future maturities of the ESOP debt guaranteed by the company or
commercial paper.
Debt at Dec. 31, consisted of the following (in millions):
2001 2000
U.S. dollar notes due 2002 to 2012,
interest rates from 5.125%
to 7.5% $2,100.0 $2,000.0
U.S. dollar debentures due 2009
to 2041, interest rates from 6.0%
to 9.0% 2,300.0 1,750.0
EuroNotes due 2004 to 2006,
interest rates from 4.51% to 6.5% 351.0 200.0
Medium-term notes:
Due 2010, interest rate 5.625% 200.0 --
Due 2001, interest rate 7.44% -- 7.5
Commercial paper, interest
rates of 2.30% and 6.72%,
respectively, at year-end 600.2 767.2
Industrial revenue bonds, weighted
average interest rates of 6.03%
and 6.28%, respectively 261.3 252.3
ESOP note guarantee due 2004,
interest rate 8.25% 132.2 172.2
Japanese yen/U.S. dollar notes,
due 2001, interest rate 4.1% -- 162.8
Miscellaneous items 53.1 62.5
Unamortized debt discounts (13.9) (11.8)
-------------------------------
Total debt $5,983.9 $5,362.7
===============================
ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT 55
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 Dec. 31, 2001, 2000 and 1999, a total of 97 million,
70 million and 80 million shares, respectively, were designated for future
issuance of common stock under existing stock option plans.
The company's stock option plans provide for accelerated exercisability
on the occurrence of certain events relating to a change in control, merger,
sale of substantially all company assets or complete liquidation of the
company.
The income tax benefit related to the exercise of employee stock options
(a reduction of current taxes payable) was $26.7 million, $74.4 million and
$48.5 million for the years ended Dec. 31, 2001, 2000 and 1999, respectively.
Presented below is a summary of stock option activity for the years
shown:
Options Wtd. Avg. Options Wtd. Avg.
Outstanding Exercise Price Exercisable Exercise Price
- -----------------------------------------------------------------------------------
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
Granted 13,895,238 42.95
Exercised (3,986,476) 18.29
Cancelled (180,803) 44.39
------------
BALANCE,
DEC. 31, 2001 68,899,033 $33.63 44,100,568 $27.71
- -----------------------------------------------------------------------------------
The following table provides additional information for options
outstanding and exercisable at Dec. 31, 2001:
OPTIONS OUTSTANDING
- ------------------------------------------------------------------------------
Range of Wtd. Avg. Wtd. Avg.
Prices Number Remaining Life Exercise Price
------ ------ -------------- --------------
$10-19 8,186,343 3 yrs $14.76
20-29 23,646,766 6 yrs 24.63
30-39 10,454,319 8 yrs 37.83
40-49 26,611,605 9 yrs 45.77
----------
$10-49 68,899,033 $33.63
- ------------------------------------------------------------------------------
OPTIONS EXERCISABLE
- ----------------------------------------------------------------------
Range of Wtd. Avg.
Prices Number Exercise Price
------ ------ --------------
$10-19 8,186,343 $14.76
20-29 23,646,766 24.63
30-39 7,280,197 37.85
40-49 4,987,262 48.74
----------
$10-49 44,100,568 $27.71
- ----------------------------------------------------------------------
PRO FORMA FAIR VALUE DISCLOSURES
Had employee compensation expense been recognized based on the fair value
of the stock options 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 Dec. 31, would have been impacted as shown in the following
table (in millions, except per share).
2001 2000 1999
Reported net income $1,704.5 $1,551.6 $1,402.2
Pro forma net income 1,635.9 1,508.8 1,373.3
Reported diluted earnings
per share 1.89 1.69 1.47
Pro forma diluted earnings
per share 1.81 1.64 1.44
- ------------------------------------------------------------------------------
The fair value of stock options granted, which is hypothetically
amortized to compensation expense over the 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:
2001 2000 1999
Expected life of option 7 yrs. 5 yrs. 5 yrs.
Risk-free interest rate 4.9% 5.7% 6.2%
Expected volatility of
Anheuser-Busch stock 24% 22% 18%
Expected dividend yield
on Anheuser-Busch stock 1.7% 1.4% 1.6%
- -----------------------------------------------------------------------------
56 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
24
The weighted average fair value of options granted during 2001, 2000 and
1999 determined using the Black-Scholes model is as follows (in millions,
except per option):
2001 2000 1999
Fair value of each
option granted $12.76 $13.14 $9.38
Total number of options
granted 13.9 13.0 10.6
----------------------------------------
Total fair value of all options
granted $177.4 $170.8 $99.4
========================================
- -----------------------------------------------------------------------------
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
such as the Black-Scholes method. 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 benefits all stockholders commensurately.
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, 39.4 million shares have been allocated to plan participants
through Dec. 31, 2001.
ESOP cash contributions and income or expense recorded during the
year are determined by several factors, including the market price of
Anheuser-Busch common stock, number of shares allocated to participants,
debt service requirements, 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
underlying ESOP debt. Total ESOP income or expense for the three years
ended Dec. 31, is presented below (in millions):
2001 2000 1999
Operating (income)/expense $5.2 $(1.2) $1.7
Interest (income)/expense 1.0 (.9) .9
--------------------------------------
Total ESOP (income)/expense $6.2 $(2.1) $2.6
======================================
- ---------------------------------------------------------------------------
Cash contributions are made to the ESOPs 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 Dec. 31,
is presented below (in millions):
2001 2000 1999
Cash contributions $1.3 $ -- $2.5
Dividends 5.2 6.5 7.8
- ---------------------------------------------------------------------------
7. PREFERRED AND COMMON STOCK
COMMON STOCK ACTIVITY
Common stock activity for the three years ended Dec. 31, is summarized
below (in millions of shares):
2001 2000 1999
Common Stock:
Beginning common stock 1,441.5 1,432.2 1,425.4
Shares issued under
stock plans 3.7 9.3 6.8
------------------------------------------
Common stock 1,445.2 1,441.5 1,432.2
------------------------------------------
Treasury Stock:
Beginning treasury stock (537.9) (510.0) (472.2)
Treasury stock acquired (28.2) (28.2) (37.8)
Treasury stock issued -- .3 --
------------------------------------------
Cumulative treasury stock (566.1) (537.9) (510.0)
------------------------------------------
Net Common Stock
Outstanding 879.1 903.6 922.2
==========================================
- -----------------------------------------------------------------------------
STOCK REPURCHASE PROGRAMS
The Board of Directors has approved various resolutions authorizing the
company to purchase shares of its common stock, in order to return cash to
shareholders and to meet the requirements of the company's various stock
purchase and incentive plans. At Dec. 31, 2001, approximately 57 million
shares remained available for repurchase under a February 2000 authorization
totaling 100 million total shares.
The company repurchased 28.2 million shares of common stock in 2001 and
2000, and 37.8 million common shares in 1999, for $1,163.8 million, $986.5
million and $1,349.2 million, respectively.
ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT 57
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STOCKHOLDER RIGHTS PLAN
The Board of Directors adopted in 1985, and extended in 1994, a
Stockholder Rights Plan that would permit shareholders to purchase
common stock at prices substantially below market value under certain change-
in-control scenarios.
PREFERRED STOCK
At Dec. 31, 2001 and 2000, 40 million shares of $1.00 par value preferred
stock were authorized and unissued.
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 Dec. 31, is
presented below (in millions). 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.
Pension expense recognized for multi-employer and defined contribution
plans equals cash contributions for all years shown.
2001 2000 1999
Single-employer
defined benefit plans $12.1 $ 7.3 $21.1
Multi-employer plans 16.2 15.5 15.7
Defined contribution plans 20.2 18.5 18.3
-----------------------------------------
Total pension expense $48.5 $41.3 $55.1
=========================================
- -----------------------------------------------------------------------------
Net annual pension expense for single-employer defined benefit plans was
comprised of the following for the three years ended Dec. 31, (in millions):
2001 2000 1999
Service cost (benefits earned
during the year) $ 59.8 $ 59.2 $ 63.2
Interest cost on projected
benefit obligation 136.7 125.6 116.7
Assumed return on plan assets (201.6) (185.2) (169.2)
Amortization of prior service cost
and net actuarial losses 17.2 7.7 10.4
---------------------------------------
Net annual pension expense $ 12.1 $ 7.3 $ 21.1
=======================================
- -----------------------------------------------------------------------------
The key actuarial assumptions used in determining annual pension expense
for single-employer defined benefit plans for the three years ended Dec. 31,
follow:
2001 2000 1999
Discount rate 7.5% 7.5% 7.0%
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%
- -----------------------------------------------------------------------------
The following table provides a reconciliation between the funded status
of single-employer defined benefit plans and prepaid pension cost for the two
years ended Dec. 31 (in millions):
2001 2000
Funded status -- plan assets (less than)/in
excess of projected benefit obligation $(216.9) $ 397.1
Unrecognized net actuarial loss/(gain) 313.4 (318.3)
Unamortized prior service cost 135.9 145.7
---------------------------
Prepaid pension cost $ 232.4 $ 224.5
===========================
- -----------------------------------------------------------------------------
The following assumptions were used in determining the funded status of
the single-employer defined benefit plans as of Dec. 31:
2001 2000
Discount rate 7.25% 7.5%
Weighted average rate of
compensation increase 4.75% 4.75%
- -----------------------------------------------------------------------------
The following tables summarize the changes in projected benefit
obligation and the fair value of plan assets for single-employer defined
benefit plans during the two years ended Dec. 31 (in millions):
2001 2000
Projected benefit obligation,
beginning of year $1,880.0 $1,746.1
Service cost 59.8 59.2
Interest cost 136.7 125.6
Plan amendments (0.2) 10.5
Actuarial loss 101.1 72.8
Benefits paid (126.1) (134.2)
---------------------------
Projected benefit obligation,
end of year $2,051.3 $1,880.0
===========================
2001 2000
Fair market value of plan assets,
beginning of year $2,277.1 $2,066.5
Actual return on plan assets (339.9) 317.4
Employer contributions 23.3 27.4
Benefits paid (126.1) (134.2)
---------------------------
Fair market value of plan assets,
end of year $1,834.4 $2,277.1
===========================
- -----------------------------------------------------------------------------
58 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
26
Pension plan assets consist primarily of corporate equity securities and
publicly traded bonds. A minimum pension liability adjustment is necessary
whenever the actuarial present value of accumulated pension benefits exceeds
plan assets. Recording a minimum pension liability adjustment has no impact
on the results of operations or cash flow.
At December 31, 2001, the company recognized minimum pension obligations
of $230.7 million for its domestic pension plans and $36.7 million related to
its equity subsidiaries, by recording an intangible asset for unrecognized
prior service costs of $56.9 million and a charge to equity (net of deferred
taxes of $78.9 million) of $131.6 million.
POSTRETIREMENT HEALTH CARE AND INSURANCE BENEFITS
The company provides certain health care and life insurance benefits to
eligible retired employees. Participants must have 10 years of continuous
service after reaching age 45 to become eligible for partial retiree health
care benefits. Employees become eligible for full retiree health care
benefits after achieving specific age and total years of service
requirements.
Net periodic postretirement benefits expense for company health care and
life insurance plans was comprised of the following for the three years ended
Dec. 31 (in millions):
2001 2000 1999
Service cost $ 18.9 $ 16.8 $ 16.8
Interest cost on accumulated
postretirement benefits
obligation 30.4 27.7 24.0
Amortization of prior
service benefit (11.6) (11.6) (11.6)
Amortization of actuarial (gains) (5.4) (8.6) (13.0)
--------------------------------------
Net periodic postretirement
benefits expense $ 32.3 $ 24.3 $ 16.2
======================================
- -----------------------------------------------------------------------------
The following tables summarize the changes in the accumulated and total
postretirement benefit obligations for all company single-employer defined
benefit health care and life insurance plans for the two years ended Dec. 31
(in millions):
2001 2000
Accumulated postretirement benefits
obligation, beginning of year $400.0 $369.9
Service cost 18.9 16.8
Interest cost 30.4 27.7
Actuarial loss 53.3 17.0
Benefits paid (36.1) (31.4)
--------------------------
Accumulated postretirement benefits
obligation, end of year $466.5 $400.0
==========================
2001 2000
Accumulated postretirement
benefits obligation $466.5 $400.0
Unrecognized prior service benefits 52.9 64.6
Unrecognized net actuarial gains/(losses) (5.1) 53.6
--------------------------
Total postretirement benefits liability $514.3 $518.2
==========================
- -----------------------------------------------------------------------------
As of Dec. 31, 2001 and 2000, $31.4 million and $25.5 million of the
total postretirement benefits liability was classified as current and
$482.9 million and $492.7 million was classified as long-term, respectively.
Postretirement benefit obligations are not prefunded and there are no assets
associated with the plans.
The key actuarial assumptions used in determining the accumulated
postretirement benefit obligation for the three years ended Dec. 31 are
provided in the table below. For actuarial purposes, 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 accumulated
postretirement benefit obligation as of Dec. 31, 2001 would change by 11.3%,
with a corresponding change of 15.5% in net periodic postretirement benefits
expense.
2001 2000 1999
Initial health care inflation rate 10.6% 9.1% 9.6%
Future health care inflation rate 5.3% 5.4% 5.4%
Discount rate 7.75% 8.0% 8.0%
- -----------------------------------------------------------------------------
ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT 59
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. EARNINGS PER SHARE OF COMMON STOCK
Earnings per share are computed by dividing net income by weighted
average common shares outstanding during the period. Basic earnings per share
are computed using an unadjusted weighted average number of shares of common
stock. Diluted earnings per share are computed using the weighted average
number of shares of common stock, plus an adjustment for in-the-money stock
options.
A reconciliation between basic and diluted weighted average shares
outstanding for the three years ended Dec. 31, follows (millions of shares).
There were no adjustments to income available to common shareholders for any
year shown.
2001 2000 1999
Basic weighted average
shares outstanding 890.1 906.1 939.0
Stock option shares 11.5 13.6 14.7
------------------------------------
Diluted weighted average
shares outstanding 901.6 919.7 953.7
====================================
- -----------------------------------------------------------------------------
10. INCOME TAXES
Following are the components of the provision for income taxes for the
three years ended Dec. 31 (in millions):
2001 2000 1999
Current tax provision:
Federal $805.3 $698.1 $615.9
State 124.2 102.0 106.3
Foreign 2.6 (.5) .4
------------------------------------
932.1 799.6 722.6
------------------------------------
Deferred tax provision:
Federal (15.9) 25.4 32.3
State (2.3) 3.2 4.7
Foreign (.7) .1 3.3
------------------------------------
(18.9) 28.7 40.3
------------------------------------
Total tax provision $913.2 $828.3 $762.9
====================================
- -----------------------------------------------------------------------------
The deferred tax provision results from temporary differences between
financial reporting and income tax filing for the basis of assets and
liabilities, and in the recognition of income and expense items. The primary
temporary differences relate to fixed assets with a tax effect of ($21.3)
million in 2001, $14.4 million in 2000 and $19.1 million in 1999. The 2001
deferred tax provision includes the impact of reversing a deferred tax
liability due to the sale of SeaWorld Cleveland.
The company's deferred tax liabilities and deferred tax assets are
summarized below. Deferred tax liabilities result primarily from tax
deductions received prior to expense recognition for financial reporting
purposes. Deferred tax assets relate primarily to expenses recognized for
financial reporting purposes that are not yet deductible for tax purposes.
2001 2000
Deferred tax liabilities:
Fixed assets $1,648.3 $1,669.6
Other 264.9 234.1
---------------------------
Total deferred tax liabilities 1,913.2 1,903.7
---------------------------
Deferred tax assets:
Postretirement benefits 194.3 195.8
Minimum pension obligation 66.0 --
Spare parts & production supplies 64.0 66.5
Compensation-related obligations 56.3 45.7
Accrued liabilities and other 244.0 222.8
---------------------------
Total deferred tax assets 624.6 530.8
---------------------------
Net deferred tax liabilities $1,288.6 $1,372.9
===========================
- -----------------------------------------------------------------------------
A reconciliation between the U.S. federal statutory tax rate and
Anheuser-Busch's effective tax rate for the three years ended Dec. 31
is presented below:
2001 2000 1999
Federal statutory tax rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 3.3 3.2 3.6
Impact of foreign operations .1 .1 .2
Other items, net -- (.3) (.8)
------------------------------------
Effective tax rate 38.4% 38.0% 38.0%
====================================
- -----------------------------------------------------------------------------
60 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
28
11. SUPPLEMENTAL INFORMATION
Accounts payable include $92.3 million and $104.2 million, respectively,
of outstanding checks at Dec. 31, 2001 and 2000.
Supplemental cash flow information for the three years ended Dec. 31 is
presented below (in millions):
Cash paid during the year: 2001 2000 1999
Interest, net of
interest capitalized $ 313.1 $ 304.7 $ 286.9
Income taxes 889.8 770.8 706.2
Excise taxes 2,052.6 2,042.9 2,016.6
Changes in working capital:
(Increase)/decrease
in current assets:
Accounts receivable $(20.5) $28.6 $(18.9)
Inventories 16.5 15.5 (0.4)
Other current assets 4.2 16.4 (13.6)
Increase/(decrease) in
current liabilities:
Accounts payable 4.2 8.2 26.9
Accrued salaries, wages
and benefits (20.6) 28.0 15.2
Accrued taxes 29.4 (36.8) (29.4)
Other current liabilities 43.6 (32.4) 14.4
----------------------------------------
Net decrease/(increase)
in working capital $ 56.8 $ 27.5 $ (5.8)
========================================
- -----------------------------------------------------------------------------
The components of plant and equipment as of Dec. 31 are summarized below
(in millions):
2001 2000
Land $ 272.4 $ 260.5
Buildings 4,033.9 3,863.0
Machinery and equipment 10,770.9 10,386.2
Construction in progress 401.1 642.1
-----------------------------
15,478.3 15,151.8
Accumulated depreciation (7,088.3) (6,908.0)
-----------------------------
Net plant and equipment $ 8,390.0 $ 8,243.8
=============================
- -----------------------------------------------------------------------------
The components of other assets as of Dec. 31 are summarized below (in
millions):
2001 2000
Investment properties $ 115.0 $ 120.1
Goodwill 411.3 413.9
Deferred charges 623.2 539.6
---------------------------
Total other assets $1,149.5 $1,073.6
===========================
- -----------------------------------------------------------------------------
12. COMMITMENTS AND CONTINGENCIES
The company had commitments for capital expenditures of approximately
$115 million at Dec. 31, 2001. Obligations under capital and operating leases
and inventory purchase contracts are not material.
In January 1997, Maris Distributing Company, Inc., a former
Anheuser-Busch wholesaler in Florida, initiated litigation against the
company alleging breach of contract and 12 other claims. Anheuser-Busch
terminated its distribution agreement with Maris Distributing in March 1997.
During the course of litigation, nine claims were resolved in favor of
Anheuser-Busch. In August 2001, a jury rendered a verdict against the company
in the amount of $50 million on two remaining claims. The Court subsequently
awarded plaintiffs an additional $22.6 million in accumulated pre-judgment
interest on the jury award which continues to accrue.
Anheuser-Busch continues to believe it acted appropriately in terminating
the distribution agreement of Maris Distributing. Both Maris and the company
have appealed. Anheuser-Busch is vigorously contesting the judgment and the
ultimate outcome cannot presently be predicted. The company's results for
2001 do not include any expense related to the Maris Distributing judgment or
interest.
The company and certain of its subsidiaries are involved in additional
claims and legal proceedings in which monetary damages and other relief is
sought. The company is vigorously contesting these claims, however resolution
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
these 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.
ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT 61
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
Net Gross Net Diluted Earnings
Sales Profit Income Per Share
- -----------------------------------------------------------------------------
YEAR ENDED
DEC. 31, 2001
1st Quarter $ 3,044.2 $1,117.3 $ 394.4 $ .43
2nd Quarter 3,452.0 1,371.4 523.7 .58
3rd Quarter 3,522.2 1,462.0 558.6 .62
4th Quarter 2,893.1 1,010.4 227.8 .26
-----------------------------------------------------------
Annual $12,911.5 $4,961.1 $1,704.5 $1.89
===========================================================
- -----------------------------------------------------------------------------
Net Gross Net Diluted Earnings
Sales Profit Income Per Share
- -----------------------------------------------------------------------------
YEAR ENDED
DEC. 31, 2000
1st Quarter $ 2,866.1 $1,032.2 $ 350.3 $ .38
2nd Quarter 3,327.9 1,291.6 477.7 .52
3rd Quarter 3,461.8 1,388.1 514.5 .56
4th Quarter 2,843.6 957.6 209.1 .23
-----------------------------------------------------------
Annual $12,499.4 $4,669.5 $1,551.6 $1.69
===========================================================
- -----------------------------------------------------------------------------
In the fourth quarter of 2001, the company changed its presentation of
pass-through finished product delivery costs reimbursed by customers. For
comparability, information from prior periods has been recast to conform to
the current presentation.
14. GOODWILL AND OTHER INTANGIBLE ASSETS
Effective Jan. 1, 2002, Anheuser-Busch adopted FAS 142, "Goodwill and
Other Intangible Assets." Under FAS 142, goodwill existing as of the adoption
date is no longer subject to periodic amortization. The company had
unamortized goodwill of $1.3 billion at Jan. 1, 2002 related to its
consolidated and equity subsidiaries. The impact of goodwill amortization
expense on net income in 2001 was $35.8 million, or $.04 per share.
The company has completed the required transitional goodwill impairment
analysis for FAS 142 adoption purposes and found no impaired goodwill.
Prospectively, goodwill will be reviewed for impairment at least annually,
with its ongoing recoverability monitored based on applicable operating unit
performance and consideration of significant events or changes in the overall
business environment.
At Jan. 1, 2002, the company moved $70.5 million of intangible assets
from goodwill into distinct intangible asset categories, primarily indefinite
lived product distribution rights. Distribution rights reflect amounts paid
to third parties to obtain exclusive beer wholesaler territories. The company
holds these rights in perpetuity and has demonstrated an ability to exchange
them for cash or other assets.
Distribution rights comprise the majority of Anheuser-Busch's
non-goodwill intangible assets.
15. 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 in China and the United Kingdom, administration of
contract and license brewing arrangements and equity investments. The company
sells beer in more than 80 countries, with principal markets in 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 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 the first quarter of 2001,
the company sold its SeaWorld Cleveland theme park to Six Flags, Inc. for
$110 million, and recognized a $17.8 million pretax gain ($.005 per share,
after-tax) which is shown as a separate line item in the consolidated
statement of income. The company did not sell or grant license to the
SeaWorld name.
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 2001, 2000 and 1999 (in millions). Intersegment sales are
fully eliminated in consolidation. No single customer accounted for more than
10% of sales. General corporate expenses, including net interest expense, are
not allocated to the operating segments.
62 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
30
- -----------------------------------------------------------------------------------------------------------------------
Domestic Int'l Corp. &
2001 Beer Beer Pkg. Enter. Other Elims (1) Consol.
- -----------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT INFORMATION:
Gross sales $11,935.0 669.8 1,999.8 847.6 108.0 (587.2) $14,973.0
Net sales - intersegment $ -- -- 829.0 -- 25.0 (854.0) $ --
Net sales - external $ 9,988.2 555.1 1,170.8 847.6 83.0 266.8 $12,911.5
Depreciation & amortization $ 585.7 22.2 85.7 93.5 5.4 42.0 $ 834.5
Income before income taxes $ 2,676.4 58.3 107.5 147.4 7.3 (619.3) $ 2,377.6
Equity income, net of tax $ -- 240.1 -- -- -- -- $ 240.1
Net income $ 1,654.6 276.1 66.5 85.6 4.5 (382.8) $ 1,704.5
BALANCE SHEET INFORMATION:
Total assets $ 7,607.5 3,026.1 904.6 1,307.3 210.2 806.3 $13,862.0
Equity method investments $ -- 2,540.5 -- -- -- -- $ 2,540.5
Foreign-located fixed assets $ -- 209.6 -- -- -- -- $ 209.6
Capital expenditures $ 710.0 21.5 108.4 88.8 23.2 70.1 $ 1,022.0
- -----------------------------------------------------------------------------------------------------------------------
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 (577.0) $14,534.2
Net sales - intersegment $ -- -- 788.4 -- 26.2 (814.6) $ --
Net sales - external $ 9,559.5 544.0 1,223.8 837.9 96.6 237.6 $12,499.4
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 1,387.3 206.1 643.5 $13,072.7
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 (628.2) $13,914.5
Net sales - intersegment $ -- -- 790.7 -- 28.7 (819.4) $ --
Net sales - external $ 9,088.2 622.3 1,151.2 750.5 91.5 191.2 $11,894.9
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
- -----------------------------------------------------------------------------------------------------------------------
<FN>
Note 1: Corporate assets principally include cash, marketable securities,
deferred charges and certain fixed assets. Eliminations impact only
gross and intersegment sales. External net sales reflects the
reporting of pass-through delivery costs reimbursed by customers
of $266.8 million, $237.6 million and $191.2 million in 2001, 2000
and 1999, respectively.
</FN>
ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT 63
31
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) 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------
Barrels of A-B beer brands sold worldwide 107.2 105.6 102.9
==================================================
Gross sales $14,973.0 $14,534.2 $13,914.5
Excise taxes (2,061.5) (2,034.8) (2,019.6)
--------------------------------------------------
Net sales 12,911.5 12,499.4 11,894.9
Cost of products and services (7,950.4) (7,829.9) (7,445.6)
--------------------------------------------------
Gross profit 4,961.1 4,669.5 4,449.3
Marketing, distribution and administrative
expenses (2,255.9) (2,174.8) (2,147.0)
Gain on sale of business (1) 17.8 -- --
Shutdown of Tampa brewery -- -- --
Restructuring charge -- -- --
--------------------------------------------------
Operating income 2,723.0 2,494.7 2,302.3
Interest expense (361.2) (348.2) (307.8)
Interest capitalized 26.9 33.3 18.2
Interest income 1.1 1.1 4.3
Other income/(expense), net (12.2) (1.0) (9.4)
--------------------------------------------------
Income before income taxes 2,377.6 2,179.9 2,007.6
Provision for income taxes (current
and deferred) (913.2) (828.3) (762.9)
Revaluation of deferred tax liability under
FAS 109 -- -- --
Equity income, net of tax 240.1 200.0 157.5
--------------------------------------------------
Income from continuing operations 1,704.5 1,551.6 1,402.2
Income/(loss) from discontinued operations -- -- --
--------------------------------------------------
Income before accounting changes 1,704.5 1,551.6 1,402.2
Cumulative effect of accounting changes -- -- --
--------------------------------------------------
Net income $ 1,704.5 $ 1,551.6 $ 1,402.2
==================================================
Basic Earnings Per Share:
Income from continuing operations $ 1.91 $ 1.71 $ 1.49
Income/(loss) from discontinued operations -- -- --
--------------------------------------------------
Income before accounting changes 1.91 1.71 1.49
Cumulative effect of accounting changes -- -- --
--------------------------------------------------
Net income $ 1.91 $ 1.71 $ 1.49
==================================================
Diluted Earnings Per Share:
Income from continuing operations $ 1.89 $ 1.69 $ 1.47
Income/(loss) from discontinued operations -- -- --
--------------------------------------------------
Income before accounting changes 1.89 1.69 1.47
Cumulative effect of accounting changes -- -- --
--------------------------------------------------
Net income $ 1.89 $ 1.69 $ 1.47
==================================================
Cash dividends paid on common stock $ 614.1 $ 571.0 $ 544.7
Per share .69 .63 .58
Weighted average number of common shares:
Basic 890.1 906.1 939.0
Diluted 901.6 919.7 953.7
- ---------------------------------------------------------------------------------------------------------
All share and per share information reflects the two-for-one stock splits
effective Sept. 18, 2000 and Sept. 12, 1996 and the 1997 adoption of FAS 128,
"Earnings per Share." Gross sales, net sales and cost of products and
services for all years reflect the change made in 2001 for the presentation
of pass-through finished product delivery costs reimbursed by customers. This
change had a minor impact on revenue and profit margin growth, and had no
impact on cash flow, operating income, net income and earnings per share. All
information has been restated to recognize the 1995 divestiture of the Food
Products segment.
<FN>
Note 1: Sale of SeaWorld Cleveland in 2001; Sale of the St. Louis Cardinals
in 1996.
Note 2: 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.
</FN>
64 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
32
- -----------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
99.8 96.6 95.1 90.9 91.3 89.7 88.9 87.9
=======================================================================================================================
$13,342.5 $12,936.0 $12,721.8 $12,100.1 $11,793.9 $11,232.5 $11,089.7 $10,708.2
(1,962.1) (1,766.2) (1,737.8) (1,664.0) (1,679.7) (1,679.8) (1,668.6) (1,637.9)
- -----------------------------------------------------------------------------------------------------------------------
11,380.4 11,169.8 10,984.0 10,436.1 10,114.2 9,552.7 9,421.1 9,070.3
(7,297.1) (7,200.5) (7,064.9) (6,886.6) (6,581.0) (6,252.8) (6,132.9) (6,029.8)
- -----------------------------------------------------------------------------------------------------------------------
4,083.3 3,969.3 3,919.1 3,549.5 3,533.2 3,299.9 3,288.2 3,040.5
(1,958.0) (1,916.3) (1,890.0) (1,756.6) (1,679.9) (1,612.1) (1,583.7) (1,409.5)
-- -- 54.7 -- -- -- -- --
-- -- -- (160.0) -- -- -- --
-- -- -- -- -- (401.3) -- --
- -----------------------------------------------------------------------------------------------------------------------
2,125.3 2,053.0 2,083.8 (3) 1,632.9 (4) 1,853.3 1,286.5 (5) 1,704.5 1,631.0
(291.5) (261.2) (232.8) (225.9) (219.3) (205.1) (194.6) (234.0)
26.0 42.1 35.5 24.3 21.8 35.2 46.9 45.6
5.8 7.9 9.4 9.9 2.6 3.4 4.4 6.6
(13.0) (9.3) (3.0) 20.5 17.6 21.0 (2.5) 1.3
- -----------------------------------------------------------------------------------------------------------------------
1,852.6 1,832.5 1,892.9 (3) 1,461.7 (4) 1,676.0 1,141.0 (5) 1,558.7 1,450.5
(704.3) (703.6) (736.8) (575.1) (661.5) (452.6) (594.6) (549.6)
-- -- -- -- -- (31.2) -- --
85.0 50.3 -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
1,233.3 1,179.2 1,156.1 (3) 886.6 (4) 1,014.5 657.2 (5) 964.1 900.9
-- -- 33.8 (244.3) 17.6 (62.7) 30.1 38.9
- -----------------------------------------------------------------------------------------------------------------------
1,233.3 1,179.2 1,189.9 642.3 1,032.1 594.5 994.2 939.8
-- (10.0)(2) -- -- -- -- (76.7)(2) --
- -----------------------------------------------------------------------------------------------------------------------
$ 1,233.3 $ 1,169.2 $ 1,189.9 $ 642.3 $ 1,032.1 $ 594.5 $ 917.5 $ 939.8
=======================================================================================================================
$ 1.28 $ 1.19 $ 1.16 $ .86 $ .96 $ .60 $ .85 $ .79
-- -- .03 (.23) .02 (.05) .02 .03
- -----------------------------------------------------------------------------------------------------------------------
1.28 1.19 1.19 .63 .98 .55 .87 .82
-- (.01)(2) -- -- -- -- (.06)(2) --
- -----------------------------------------------------------------------------------------------------------------------
$ 1.28 $ 1.18 $ 1.19 $ .63 $ .98 $ .55 $ .81 $ .82
=======================================================================================================================
$ 1.27 $ 1.18 $ 1.14 (3) $ .85 (4) $ .95 $ .60 (5) $ .84 $ .78
-- -- .03 (.23) .02 (.05) .02 .03
- -----------------------------------------------------------------------------------------------------------------------
1.27 1.18 1.17 .62 .97 .55 .86 .81
-- (.01)(2) -- -- -- -- (.06)(2) --
- -----------------------------------------------------------------------------------------------------------------------
$ 1.27 $ 1.17 $ 1.17 $ .62 $ .97 $ .55 $ .80 $ .81
=======================================================================================================================
$ 521.0 $ 492.6 $ 458.9 $ 429.5 $ 398.8 $ 370.0 $ 338.3 $ 301.1
.54 .50 .46 .42 .38 .34 .30 .26
964.2 985.3 998.2 1,021.7 1,049.2 1,088.7 1,127.3 1,136.0
975.0 999.4 1,021.2 1,048.8 1,076.1 1,117.2 1,163.3 1,171.6
=======================================================================================================================
<FN>
Note 3: 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.
Note 4: 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 5: 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 / 2001 ANNUAL REPORT 65
33
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) 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------
Balance Sheet Information:
Working capital (deficit) $ (181.9) $ (127.8) $ (350.4)
Current ratio 0.9 0.9 0.8
Debt 5,983.9 5,362.7 5,122.9
Shareholders equity 4,061.5 4,128.9 3,921.5
Return on shareholders equity 41.6% 38.5% 34.5%
Debt to total capitalization ratio 59.6% 56.5% 56.6%
Book value per share 4.62 4.57 4.25
Total assets 13,862.0 13,072.7 12,640.4
Other Information:
Capital expenditures $ 1,022.0 $ 1,074.5 $ 865.3
Price/earnings ratio 23.9 26.9 24.1
Market price range of common stock
(high and low closing) 46.51-38.50 49.81-27.47 40.81-32.59
=========================================================================================================
All share and per share information reflects the two-for-one stock splits
effective Sept.18, 2000 and Sept. 12, 1996. All information has been restated
to recognize the 1995 divestiture of the Food Products segment.
66 ANHEUSER-BUSCH COMPANIES / 2001 ANNUAL REPORT
34
- -----------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
$ (89.9) $ 83.2 $ 34.9 $ 268.6 $ 57.0 $ (41.3) $ 247.8 $ 107.9
0.9 1.1 1.0 1.2 1.0 1.0 1.2 1.1
4,718.6 4,365.6 3,270.9 3,270.1 3,066.4 3,019.7 2,630.3 2,627.9
4,216.0 4,041.8 4,029.1 4,433.9 4,415.5 4,255.5 4,620.4 4,438.1
29.9% 29.2%(1) 30.0%(2) 25.0%(3) 29.9% 18.8%(4) 27.6%(1) 30.2%
52.8% 51.9% 44.8% 47.1% 47.3% 47.3% 42.0% 43.9%
4.42 4.15 4.05 3.61 3.32 3.35 3.25 2.95
12,484.3 11,727.1 10,463.6 10,590.9 10,547.4 10,267.7 9,954.9 9,642.5
$ 817.5 $ 1,199.3 $ 1,084.6 $ 952.5 $ 662.8 $ 656.3 $ 628.8 $ 625.5
25.9 18.6 (1) 17.6 (2) 19.6 (3) 13.1 22.6 (4) 16.9 (1) 18.9
34.13-21.72 23.94-19.75 21.44-16.25 17-12.69 13.81-11.75 15-11 15.13-13 15.38-9.88
=======================================================================================================================
<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 / 2001 ANNUAL REPORT 67