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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1994
Commission file number 1-7823
ANHEUSER-BUSCH COMPANIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 43-1162835
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Busch Place, St. Louis, Missouri 63118
(Address of principal executive offices) (Zip Code)
314-577-3314
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
$1 Par Value Common Stock - 260,837,819 shares as of July 31, 1994
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<TABLE>
CONSOLIDATED STATEMENT OF INCOME
AND RETAINED EARNINGS
Anheuser-Busch Companies, Inc., and Subsidiaries (Unaudited)
(In millions, except per share data)
<CAPTION>
2nd Quarter Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales........................................... $3,608.7 $3,426.1 $6,623.9 $6,303.4
Less federal and state excise taxes........... 439.6 435.3 (827.2) 809.2
-------- -------- -------- --------
Net sales....................................... 3,169.1 2,990.8 5,796.7 5,494.2
Cost of products and services................. 2,012.5 1,897.9 3,746.4 3,551.0
-------- -------- -------- --------
Gross profit.................................... 1,156.6 1,092.9 2,050.3 1,943.2
Marketing, distribution and administrative
expenses...................................... 580.0 556.5 1,088.8 1,058.3
-------- -------- -------- --------
Operating income................................ 576.6 536.4 961.5 884.9
Other income and expenses:
Interest expense.............................. (56.0) (51.4) (110.8) (100.1)
Interest capitalized.......................... 5.2 12.8 9.6 25.7
Interest income............................... .7 1.6 1.4 3.1
Other income/(expense), net................... 4.1 5.7 6.8 6.7
-------- -------- -------- --------
Income before income taxes...................... 530.6 505.1 868.5 820.3
Provision for income taxes...................... 208.1 196.5 341.5 317.6
-------- -------- -------- --------
Net income...................................... 322.5 308.6 527.0 502.7
Retained earnings, January 1.................... 6,132.1 5,900.0 6,023.4 5,794.8
Common stock dividends (per share: 2nd quarter,
1994--$.36; 1993--$.32; six months, 1994--
$.72; 1993--$.64)............................. (95.2) (87.1) (191.0) (176.0)
-------- -------- -------- --------
Retained earnings, June 30...................... $6,359.4 $6,121.5 $6,359.4 $6,121.5
======== ======== ======== ========
Primary earnings per share...................... $ 1.21 $ 1.12 $ 1.97 $ 1.81
======== ======== ======== ========
Fully diluted earnings per share................ $ 1.20 $ 1.11 $ 1.96 $ 1.80
======== ======== ======== ========
<FN>
See accompanying Notes to Consolidated Financial Statements on Page 3.
</TABLE>
2
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Notes to Consolidated Financial Statements
1. Unaudited Financial Statements: The accompanying unaudited financial
statements have been prepared in accordance with generally accepted
accounting principles and applicable SEC guidelines pertaining to
interim financial information. These statements should be read in
conjunction with the financial statements and notes thereto included in
the company's Annual Report to Shareholders for the year ended December
31, 1993. In the opinion of the company's management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair
presentation of the financial statements have been included therein.
2. Earnings Per Share: Primary earnings per share of common stock are
based on the weighted average number of shares of common stock
outstanding during the period. Fully diluted earnings per share of
common stock assume the conversion of the company's 8% Convertible
Debentures due 1996 and the elimination of related after-tax interest
expense.
3
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<TABLE>
CONSOLIDATED BALANCE SHEET
Anheuser-Busch Companies, Inc., and Subsidiaries (Unaudited)
(In millions)
<CAPTION>
June 30,
--------------------
ASSETS 1994 1993
---- ----
CURRENT ASSETS:
<S> <C> <C>
Cash and marketable securities................. $161.5 $ 144.7
Receivables, less allowance for
doubtful accounts............................ 961.8 769.9
Inventories--
Raw materials and supplies................... 319.7 373.9
Work in progress............................. 129.5 110.7
Finished goods............................... 151.6 170.8
Total inventories.......................... 600.8 655.4
Other current assets........................... 351.1 331.4
--------- ---------
Total current assets......................... 2,075.2 1,901.4
INVESTMENTS AND OTHER ASSETS.................... 1,588.5 1,638.5
PLANT AND EQUIPMENT, NET........................ 7,490.7 7,617.6
--------- ---------
$11,154.4 $11,157.5
========= =========
</TABLE>
4
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<TABLE>
LIABILITIES AND SHAREHOLDER'S EQUITY
(In millions)
<CAPTION>
June 30,
--------------------
1994 1993
---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable............................... $ 718.6 $ 705.8
Accrued salaries, wages and benefits........... 301.7 281.9
Accrued taxes, other than income taxes......... 157.7 147.7
Restructuring accrual.......................... 116.6 --
Other current liabilities...................... 430.7 426.8
--------- ---------
Total current liabilities.................... 1,725.3 1,562.2
--------- ---------
POSTRETIREMENT BENEFITS.......................... 630.0 556.5
--------- ---------
LONG-TERM DEBT................................... 3,195.0 3,154.2
--------- ---------
DEFERRED INCOME TAXES............................ 1,230.1 1,305.8
--------- ---------
SHAREHOLDERS EQUITY:
Common stock................................... 343.5 341.8
Capital in excess of par value................. 847.4 779.8
Retained earnings.............................. 6,359.4 6,121.5
Foreign currency translation adjustment........ (31.6) (13.9)
--------- --------
7,518.7 7,229.2
Treasury stock, at cost........................ (2,767.3) (2,243.9)
ESOP debt guarantee offset..................... (377.4) (406.5)
--------- ---------
4,374.0 4,578.8
--------- ---------
COMMITMENTS AND CONTINGENCIES.................... --
$11,154.4 $11,157.5
========= =========
</TABLE>
5
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<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Anheuser-Busch Companies, Inc., and Subsidiaries (Unaudited)
(In millions, except per share data)
<CAPTION>
Six Months Ended June 30,
------------------------
1994 1993
---- ----
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income...................................... $ 527.0 $ 502.7
Adjustments to net income to arrive at net cash
provided by operations:
Depreciation and amortization............... 312.3 296.3
Increase in deferred income taxes........... 59.7 28.8
Increase in non-cash working capital........ (336.2) (53.5)
Other, net.................................. 94.0 51.1
--------- ---------
Cash provided by operating activities........... 656.8 825.4
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures............................ (361.1) (390.0)
New business acquisitions....................... (15.1) (485.7)
--------- --------
Cash used for investing activities.............. (376.2) (875.7)
--------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of long-term debt...................... 229.8 566.1
Decrease in long-term debt...................... (37.4) (26.5)
Acquisition of treasury stock................... (287.7) (401.0)
Dividends paid to stockholders.................. (191.0) (176.0)
Shares issued under stock plans................. 39.8 17.4
-------- --------
Cash used for financing activities.............. (246.5) (20.0)
-------- --------
Net (decrease) in cash and marketable
securities during the period.................. 34.1 (70.3)
Cash and marketable securities at beginning of
period........................................ 127.4 215.0
-------- --------
Cash and marketable securities at end of period. $ 161.5 $ 144.7
======== ========
<FN>
A more adequate understanding of the company's financial position and business
can be gained by reference to the Anheuser-Busch Companies, Inc. Annual Report
on Form 10-K for the fiscal year ended December 31, 1993.
</TABLE>
6
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This discussion summarizes the significant factors affecting the
consolidated operating results, financial condition and liquidity (cash flow)
of Anheuser-Busch Companies, Inc. for the second quarter and six months ended
June 30, 1994 compared to the second quarter and six months ended June 30,
1993 and the year ended December 31, 1993. This discussion should be read in
conjunction with the consolidated financial statements and notes thereto
included in the company's Annual Report to Shareholders for the year ended
December 31, 1993. Additional information concerning the company's
consolidated financial and operating results is contained in the Letter to
Shareholders section of the Second Quarter 1994 Shareholders Report.
OPERATIONS
- - ----------
Gross sales for the second quarter of 1994 were $3.61 billion, an increase
of $183 million, or 5.3%, over gross sales of $3.43 billion for the second
quarter of 1993. Gross sales for the first half of 1994 were $6.62 billion
compared to $6.30 billion for the first half of 1993, an increase of $321
million, or 5.1%.
Net sales for the second quarter of 1994 were $3.17 billion, an increase
of $178 million, or 6.0%, over net sales of $2.99 billion for the second
quarter of 1993. Net sales for the first six months of 1994 were $5.80
billion, an increase of $303 million or 5.5% compared to net sales of $5.49
billion for the first six months of 1993. The difference between gross sales
and net sales represents federal and state excise taxes paid by the company on
beer sales.
The increase in gross and net sales during the period primarily reflects
the record increase in beer volume sales resulting from strong underlying
trends for established Anheuser-Busch premium beer brands, the January 1994
rollout of Ice Draft from Budweiser, and international beer sales.
7
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Anheuser-Busch, Inc., the company's brewing subsidiary and largest
contributor to consolidated sales, reported record second quarter sales-to-
wholesalers of 23.4 million barrels, an increase of 739,000 barrels, or 3.3%,
over the 22.7 million barrels sold during the second quarter of 1993. Sales-
to-wholesalers for the first six months of 1994 were also a record 43.6
million barrels compared to 42.1 million barrels during the first six months
of 1993, an increase of 3.8%.
Sales-to-retailers, considered a more accurate measure of underlying
consumer demand, increased more than 4% during the first half of 1994. The
company's Budweiser family of brands, including Ice Draft, grew by more than
5%, continuing the favorable mix trends established in the first quarter.
Anheuser-Busch, Inc. beer sales for the second quarter and first six
months of 1994 include about 200,000 barrels related to a previously announced
contract-brewing arrangement for the production of Kirin Ice for sale by the
Kirin Brewery in Japan.
Ice Draft from Budweiser continues to perform well since its national
rollout in January. Its success has led to the recent introduction of Ice
Draft Light, which is scheduled for full national distribution in the third
quarter.
Anheuser-Busch, Inc. increased its market share during the first six
months of 1994 compared to the first six months of 1993 by 1.2 share points,
with sales volume representing 43.7% of total brewing industry sales in the
U.S. (including imports and non-alcohol brews), according to estimates based
on information provided by the Beer Institute. Anheuser-Busch has led the
brewing industry in sales volume and market share each quarter since 1957.
Cost of products and services for the second quarter of 1994 was $2.01
billion, an increase of 6.0% compared to the second quarter of 1993. Cost of
products and services increased $195.4 million, or 5.5% for the first six
months of 1994 compared to the prior year. The increase in cost of products
8
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and services is primarily attributable to the increase in beer sales volume,
and higher ingredient and manufacturing costs at Campbell Taggart.
Gross profit as a percentage of net sales was 36.5% for both the second
quarter of 1994 and the second quarter of 1993. Gross profit as a percentage
of net sales was 35.4% for both the first six months of 1994 and 1993. These
statistics reflect increased margins in the company's domestic beer operations
offset by lower margins for Campbell Taggart.
Marketing, distribution and administrative expenses for the second quarter
of 1994 were $580.0 million compared with $556.5 million for the second
quarter of 1993, an increase of 4.2%. Marketing, distribution and
administrative expenses during the first six months of 1994 were $1.09
billion, compared to $1.06 billion during the first six months of 1993, an
increase of $30.5 million or 2.9%. These expenses, which grew at a rate
consistent with inflation, increased primarily due to the higher beer sales
volume and higher marketing and distribution expenses associated with the
company's new joint venture in Japan.
Operating income was $576.6 million for the second quarter of 1994, an
increase of $40.2 million, or 7.5%, compared to $536.4 million for the second
quarter of 1993. Operating income was $961.5 million for the first six months
of 1994, an increase of $76.6 million, or 8.7%, compared to $884.9 million for
the first six months of 1993. Operating income increased during the period
primarily as a result of domestic beer performance.
Campbell Taggart, Inc., the company's baking subsidiary, reported
substantially lower profits during the period primarily as a result of lower
margins due to increased price competition and higher ingredient costs. It is
expected that Campbell Taggart will continue to experience lower margins for
the rest of 1994 and will report substantially lower profits for the entire
year.
9
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Net interest cost (interest expense less interest income) was $55.3
million for the second quarter of 1994, an increase of $5.5 million, or 11%,
compared to net interest cost of $49.8 million for the second quarter of 1994.
Net interest cost for the first six months of 1994 was $109.4 million, an
increase of $12.4 million, or 12.8%, over net interest cost of $97 million for
the corresponding period in 1993.
The significant increase in net interest cost is due to higher average
debt balances outstanding during the period, primarily as a result of
financing international brewing investments (mid-1993) and share repurchases.
The net change in debt during the twelve month period ended June 30, 1994 is
summarized in the Financial Condition Section of this Discussion.
Interest capitalized decreased $7.6 million and $16.1 million for the
second quarter and first six months of 1994, respectively, as compared to the
corresponding periods of 1993. The significant change in interest capitalized
in 1994 is related to the Spring 1993 start-up of the company's new brewery in
Cartersville, GA, which resulted in the cessation of interest capitalization
on this major capital investment.
The effective income tax rate was 39.2% of pre-tax earnings for the second
quarter and 39.3% of pre-tax earnings for the first six months of 1994 as
compared to 38.9% for the second quarter and 38.7% for the first six months of
1993. The increase in the effective tax rate is due primarily to the Revenue
Reconciliation Act of 1993, implemented last August, which increased the
federal income tax rate from 34% to 35%.
Net income for the second quarter of 1994 was $322.5 million, an increase
of $13.9 million, or 4.5%, compared to $308.6 million for the second quarter
of 1993. Net income was $527.0 million for the first six months of 1994, an
increase of $24.3 million, or 4.8%, compared with $502.7 million for the first
six months of 1993. Net income reflects the unfavorable impact of higher
interest expense and lower interest capitalized resulting from the factors
previously identified.
10
<PAGE>11
Fully diluted earnings per share for the second quarter of 1994 were
$1.20, an increase of 8.1% as compared to the second quarter of 1993. Fully
diluted earnings per share for the first six months of 1994 were $1.96, an
8.9% increase over the prior year.
Net income and earnings per share for the second quarter and first six
months of 1994 include the unfavorable impact of last August's increase in the
federal income tax rate from 34% to 35%.
Excluding this tax rate increase, net income and earnings per share for
the second quarter and first six months of 1994 would have been as follows:
Percent Increase - 1994 vs. 1993
--------------------------------------------------------
Second Quarter Six Months
-------------- ----------
As Excluding Tax As Excluding Tax
Reported Rate Increase Reported Rate Increase
-------- ------------- -------- -------------
Net Income 4.5% 6.3% 4.8% 6.6%
Fully Diluted 8.1% 9.9% 8.9% 10.5%
Earnings Per Share
Fully diluted earnings per share assume the conversion of the company's 8%
Convertible Debentures due 1996 and the elimination of related after-tax
interest expense. The difference between the percentage change in net income
and the percentage change in earnings per share was due to the reduction in
the number of shares outstanding as a result of the company's continuing share
repurchase program.
FINANCIAL CONDITION
- - -------------------
Cash and marketable securities at June 30, 1994 were $161.5 million, an
increase of $16.8 million from the June 30, 1993 level and an increase of
$34.1 million from the December 31, 1993 level.
11
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Total short-term and long-term debt increased $40.8 million during the
twelve month period ended June 30, 1994. The net increase in debt during this
period is due to the following:
Debt Issuances ...... $352.8 million
--------------
- 7.375% notes due 2023 ... $200 million
- Commercial paper ... $152.8 million
Debt Reduction ......$312.0 million
--------------
- Redemption of $244.5 million debt including: $100.0 million, 8% notes;
$53.9 million, 8% dual currency notes; $86.0 million, various
debentures; $6.9 million, 8.625% debentures; $1.4 million, 8%
convertible debentures; and $4.6 million long-term notes at varying
interest.
- Redemption of Industrial Revenue Bonds ... $3.4 million
- Maturity of Medium-term Notes at varying interest rates ... $35 million
- ESOP debt repayment (guarantee) ... $29.1 million
At June 30, 1994, there were $797.9 million of commercial paper borrowings
outstanding classified as long-term debt. This debt is expected to be
maintained on a long-term basis with ongoing credit support provided by the
company's revolving credit agreements.
Capital expenditures during the second quarter and first six months of
1994 were $190.5 million and $361.1 million, respectively, as compared to
$213.0 million and $390.0 million for the comparable periods of 1993. The
company anticipates that capital expenditures for 1994 will approximate $700
million.
ENVIRONMENTAL MATTERS
- - ---------------------
The company is subject to federal, state and local environmental
protection laws and regulations and is operating within such laws or is taking
action aimed at assuring compliance with such laws and regulations.
12
<PAGE>13
Compliance with these laws and regulations is not expected to materially
affect the company's competitive position. None of the Environmental
Protective Agency (EPA) designated clean-up sites for which Anheuser-Busch has
been identified as a Potentially Responsible Party (PRP) could have a material
impact on the company's consolidated financial statements.
PART II - OTHER INFORMATION
Item 5. Other Information
During the second quarter, a four-year labor contract with the
International Brotherhood of Teamsters affecting the majority of the company's
beer production employees was ratified. The new contract (which expires
February 28, 1998) enhances a wage and benefits package which is already the
most attractive in the industry. The agreement also establishes an improved
framework for the company to increase operating productivity over time.
During the second quarter, Anheuser-Busch, Inc. signed a letter of intent
with Redhook Ale Brewery, Inc. of Seattle, WA on an equity investment and
distribution alliance. This strategic alliance will provide Anheuser-Busch
and its wholesalers with the opportunity to efficiently and effectively
participate in the small, but growing, micro-brewery segment of the beer
market.
Under the letter of intent, Redhook products will be distributed
exclusively through Anheuser-Busch wholesalers in all new U.S. markets entered
by Redhook. Also, subject to regulatory and other required approvals, the
parties intend that Anheuser-Busch will make an equity investment in Redhook.
Redhook will remain an independent company and will retain complete control of
its production and marketing.
In June, the company announced that it had signed a letter of intent to
acquire an 80 percent ownership interest in the Zhongde Brewery in the
People's Republic of China. This would provide Anheuser-Busch its second
stake in the fast-growing Chinese beer market. Last year, the company
13
<PAGE>14
purchased a 5 percent interest in Tsingtao, the largest brewer in China. The
Zhongde Brewery is located in Wuhan, China's fifth largest city, and ranks
among the leading brewers in China with 500,000 hectoliters (425,000 barrels)
of annual production. The brewery, which currently produces the Steinbrau
brand, would also be modified to brew Budweiser for distribution in China.
Completion of the transaction, expected by the end of the year, is subject to
final negotiations and receipt of necessary Chinese government and other
required approvals.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
12 - Ratio of Earnings to Fixed Charges
No instruments defining the rights of holders of long-term debt are
filed since the total amount of securities authorized under any such
instruments does not exceed 10% of the total assets of the Company on a
consolidated basis. The Company agrees to furnish a copy of such instruments
to the Securities and Exchange Commission upon request.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the three month period
ending June 30, 1994.
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANHEUSER-BUSCH COMPANIES, INC.
(Registrant)
Jerry E. Ritter
Jerry E. Ritter
Executive Vice President -
Chief Financial and Administrative
Officer
(Chief Financial Officer)
August 11, 1994
Gerald C. Thayer
Gerald C. Thayer
Vice President and Controller
(Chief Accounting Officer)
August 11, 1994
15
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EXHIBIT 12
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of the Company's earnings
to fixed charges, on a consolidated basis, for the periods
indicated:
Six Months
Ended
June 30, Year Ended December 31
------------- ------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
7.7X 7.9X 5.2X 1/ 7.8X 6.4X 5.1X 6.6X
For purposes of this ratio, earnings have been calculated by adding
to income before income taxes the amount of fixed charges. Fixed
charges consist of interest on all indebtedness, amortization of
debt discount and that portion of rental expense deemed to
represent interest.
1/ Includes the impact of the one-time, pretax restructuring charge
of $565 million as a result of the company's Profitability
Enhancement Program. Excluding the non-recurring special charge,
the ratio would have been 7.6X.
