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 March 31, 1996
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)
314-577-2000
(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-251,324,648 shares as of March 31, 1996
<PAGE>
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Anheuser-Busch Companies, Inc., and Subsidiaries (Unaudited)
(In millions, except per share data)
Three months ended March 31, 1996 1995
- ---------------------------- ---- ----
Sales........................................... $2,767.4 $2,705.2
Less federal and state excise taxes........... (395.6) (387.0)
-------- --------
Net sales....................................... 2,371.8 2,318.2
Cost of products and services................. (1,538.1) (1,541.4)
-------- --------
Gross profit.................................... 833.7 776.8
Gain on sale of St. Louis National Baseball
Club (Cardinals)........................... 54.7 --
Marketing, distribution and administrative
expenses................................... (388.0) (363.7)
-------- --------
Operating income................................ 500.4 413.1
Other income and expenses:
Interest expense.............................. (58.2) (56.7)
Interest capitalized.......................... 8.4 5.4
Interest income............................... 1.9 1.3
Other income, net............................. .4 1.6
-------- --------
Income before income taxes...................... 452.9 364.7
Provision for income taxes...................... (177.4) (143.0)
-------- --------
Income from continuing operations............... 275.5 221.7
(Loss) from discontinued operations............. -- (5.6)
-------- --------
Net income...................................... 275.5 216.1
Retained earnings, beginning of period.......... 6,869.6 6,656.7
Common stock dividends (per share: 1996--$.44;
1995--$.40)................................... (111.6) (102.7)
Spin-off of The Earthgrains Company............. (680.0) --
-------- --------
Retained earnings, end of period................ $6,353.5 $6,770.1
======== ========
Primary earnings (loss) per share:
Continuing operations......................... $ 1.08 $ .86
Discontinued operations....................... -- (.03)
-------- --------
Net income.................................... 1.08 .83
======== ========
Fully diluted earnings (loss) per share:
Continuing operations......................... $ 1.07 $ .85
Discontinued operations....................... -- (.02)
-------- --------
Net income.................................... $ 1.07 $ .83
======== ========
See accompanying Notes to Consolidated Financial Statements on Page 3.
2
<PAGE>
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. 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. These statements 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, 1995.
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 convertible
debentures and the elimination of related after-tax interest expense.
3. Sale of St. Louis National Baseball Club (Cardinals): During the
first quarter 1996, the company completed its previously announced
sale of the St. Louis National Baseball Club (Cardinals), Busch
Memorial Stadium and several nearby parking garages and properties in
downtown St. Louis. The sale resulted in a $54.7 million pretax
gain, or $.13 per share, which is reported as a separate line item in
the Consolidated Statement of Income.
4. Discontinued Operations: Through the tax-free spin-off of The
Earthgrains Company and the sale of Eagle Snacks, Anheuser-Busch has
divested its food products segment. Accordingly, all Earthgrains and
Eagle Snacks related financial results are reported in the company's
Consolidated Financial Statements as discontinued operations.
3
<PAGE>
CONSOLIDATED BALANCE SHEET
Anheuser-Busch Companies, Inc., and Subsidiaries (Unaudited)
(In millions)
MARCH 31,
-------------------
ASSETS 1996 1995
---- ----
CURRENT ASSETS:
Cash and marketable securities........... $ 219.4 $ 129.0
Receivables, less allowance for
doubtful accounts...................... 607.9 639.3
Inventories--
Raw materials and supplies............. 358.9 402.0
Work in progress....................... 99.1 99.4
Finished goods......................... 173.9 154.1
Total inventories.................... 631.9 655.5
Other current assets..................... 232.9 275.1
--------- ---------
Total current assets................... 1,692.1 1,698.9
INVESTMENTS AND OTHER ASSETS............. 1,703.9 1,519.7
INVESTMENTS IN DISCONTINUED OPERATIONS... -- 990.2
PLANT AND EQUIPMENT, NET................. 6,816.5 6,555.6
--------- ---------
TOTAL ASSETS........................... $10,212.5 $10,764.4
========= =========
4
<PAGE>
LIABILITIES AND SHAREHOLDERS EQUITY
(In millions)
MARCH 31,
-------------------
1996 1995
---- ----
CURRENT LIABILITIES:
Short-term debt........................ $ -- $ 95.0
Accounts payable....................... 562.9 600.4
Accrued salaries, wages and benefits... 213.3 222.6
Accrued taxes, other than
income taxes......................... 120.0 128.4
Estimated income taxes................. 151.6 103.6
Other current liabilities.............. 279.8 377.8
--------- ---------
Total current liabilities............ 1,327.6 1,527.8
--------- ---------
POSTRETIREMENT BENEFITS.................. 527.3 503.3
--------- ---------
LONG-TERM DEBT........................... 3,451.7 3,036.0
--------- ---------
DEFERRED INCOME TAXES.................... 1,168.1 1,179.5
--------- ---------
SHAREHOLDERS EQUITY:
Common stock........................... 348.6 344.4
Capital in excess of par value......... 1,073.6 880.1
Retained earnings...................... 6,353.5 6,770.1
Foreign currency translation adjustment (8.3) (13.7)
--------- --------
7,767.4 7,980.9
Treasury stock, at cost................ (3,714.2) (3,116.0)
ESOP debt guarantee offset............. (315.4) (347.1)
--------- ---------
3,737.8 4,517.8
--------- ---------
COMMITMENTS AND CONTINGENCIES............ -- --
TOTAL LIABILITIES AND SHAREHOLDERS
EQUITY................................. $10,212.5 $10,764.4
========= =========
5
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Anheuser-Busch Companies, Inc., and Subsidiaries (Unaudited)
(In millions)
Three months ended March 31, 1996 1995
- ---------------------------- ---- ----
CASH FLOW FROM OPERATING ACTIVITIES:
Net income........................................ $ 275.5 $ 216.1
Discontinued operations........................... -- 5.6
------- --------
Income from continuing operations................. 275.5 221.7
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 143.9 135.9
Increase in deferred income taxes............. 35.3 98.0
After-tax gain on sale of St. Louis National
Baseball Club (Cardinals)................... (33.4) --
Decrease(increase)in non-cash working capital. 29.9 (129.2)
Other, net.................................... (47.6) 49.0
------- -------
Cash provided by operating activities............. 403.6 375.4
Net cash (provided to) provided by
discontinued operations......................... (21.3) 1.5
------- -------
Total cash provided by operating activities....... 382.3 376.9
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of St. Louis National
Baseball Club (Cardinals)....................... 116.6 --
Capital expenditures.............................. (259.3) (187.0)
New business acquisitions......................... -- (52.4)
-------- -------
Cash (used for) investing activities.............. (142.7) (239.4)
------- ------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase in long-term debt........................ 228.0 --
Decrease in long-term debt........................ (14.7) (.1)
Dividends paid to stockholders.................... (111.6) (102.8)
Acquisition of treasury stock..................... (278.2) (73.4)
Shares issued under stock plans and
conversion of convertible debentures............ 62.7 23.8
------- ------
Cash (used for) financing activities.............. (113.8) (152.5)
------- ------
Net increase (decrease) in cash and marketable
securities during the period.................... 125.8 (15.0)
Cash and marketable securities, beginning of
period.......................................... 93.6 144.0
------- ------
Cash and marketable securities, end of period..... $ 219.4 $129.0
======= ======
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, 1995.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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 first quarter ended March
31, 1996 compared to the first quarter ended March 31, 1995 and the year
ended December 31, 1995. 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,
1995. Additional information concerning the company's consolidated
financial and operating results for the first quarter is contained in the
Letter to Shareholders section of the first quarter 1996 Shareholders
Report.
During the first quarter 1996, the company completed its previously
announced sale of the St. Louis National Baseball Club (Cardinals), Busch
Memorial Stadium and several nearby parking garages and other properties in
downtown St. Louis. The sale price was $150 million resulting in a $54.7
million pretax gain, or $.13 per share ("Cardinal gain"), which is shown as
a separate line item in the Consolidated Statement of Income. Due to the
nonrecurring nature of this gain, financial comparisons are shown both
including and excluding the gain in order to facilitate a more complete
- --------- ---------
understanding of company operating results.
Also during the first quarter 1996, the company completed the 100%
spin-off of The Earthgrains Company (formerly known as Campbell Taggart,
Inc.) to shareholders. Earthgrains common stock began trading on the New
7
<PAGE>
York Stock Exchange as a separate company on March 27, 1996. And in
February 1996, Anheuser-Busch reached an agreement to sell most of its
Eagle Snacks production facilities to Frito Lay. The Department of
Justice has formally indicated that it will not oppose the transaction.
As a result of the spin-off of Earthgrains and sale of Eagle Snacks
assets, Anheuser-Busch has divested its food products segment. In
accordance with generally accepted accounting principles, Anheuser-Busch
has restated all prior period financial information to remove the
historical combined financial results of Earthgrains and Eagle Snacks from
detailed financial statement components. All Earthgrains and Eagle Snacks
related financial results and financial information are reported as
Discontinued Operations.
CONTINUING OPERATIONS
- ---------------------
Anheuser-Busch Companies, Inc. achieved record gross sales of $2.8
billion during the first quarter 1996, an increase of 2.3% over 1995 first
quarter gross sales of $2.7 billion. Anheuser-Busch also achieved record
net sales of $2.4 billion during the first quarter 1996, an increase of
2.3% over the same period in 1995. The increase in gross and net sales
during the quarter is primarily attributable to higher beer volume sales
and net revenue-per-barrel gains in excess of 2% due to nationwide price
increases implemented in seven states in Fall 1995 and in the remainder of
the country in February 1996. However, reported sales growth for the first
quarter 1996 was dampened by lower sales from the company's recycling
operations due to lower volume and significantly lower scrap aluminum
prices. If the recycling operations first quarter 1996 sales levels had
been at 1995 sales levels, consolidated net sales for the first quarter
1996 would have grown by more than 4%.
8
<PAGE>
Anheuser-Busch, Inc., the company's brewing subsidiary, reported
record sales volume of 20.8 million barrels of beer during the first
quarter 1996. This sales volume level represents an increase of 405,000
barrels --- or 2.0% --- over first quarter 1995 beer volume sales of 20.4
million barrels. Anheuser-Busch, Inc. market share increased during the
first quarter 1996 to 44.8% of total brewing industry shipments (including
imports, exports, non-alcohol brews and other malt beverages), as estimated
based on information provided by The Beer Institute. This represents
an increase of .5 percentage points as compared to first quarter 1995
market share. Anheuser-Busch has led the brewing industry in sales volume
and market share each quarter since 1957.
Sales-to-retailers, a more accurate measure of underlying consumer
demand, were even stronger, increasing over 3% compared to first quarter
1995 levels. This increase was led by Bud Light which continues to grow at
a double-digit pace on an annualized basis. Importantly, Budweiser sales
continued to reflect a more modest rate of decline as compared to the first
quarter 1995.
As a result of the fourth quarter 1995 beer inventory reduction
program, wholesaler inventory levels were over 30% lower in the first
quarter 1996 as compared to the prior year. Anheuser-Busch continues to
have the freshest beer of any major brewer in the marketplace, which is a
significant competitive advantage.
Cost of products and services for the first quarter 1996 was $1.54
billion, a $3.3 million, or .2%, decrease compared to the first quarter
--------
1995. The decrease in cost of products and services is primarily
attributable to lower costs in the company's recycling operations
9
<PAGE>
due to significantly lower scrap aluminum costs, partially offset by
increased costs associated with higher beer sales volume.
Gross profit as a percentage of net sales was 35.2% for the first
quarter 1996, an increase of 1.7 percentage points compared to the first
quarter 1995.
Marketing, Distribution and Administration expenses for the first
quarter 1996 were $388.0 million compared with $363.7 million for the first
quarter 1995, an increase of 6.7%. The increase is primarily related to
increased marketing and distribution costs associated with the company's
domestic and international beer operations, including sponsorship of the
1996 Summer Olympic Games in Atlanta.
Operating income (excluding the Cardinal gain) was $445.8 million for
the first quarter 1996, an increase of $32.7 million, or 7.9%, compared to
the first quarter 1995. Operating income was favorably impacted by higher
beer sales volume, higher beer margins and improved performance by the
company's theme park operations. Including the Cardinal gain, operating
income for the first quarter of 1996 was $500.4 million, an increase of
21.2% over the first quarter 1995.
Net interest cost (interest expense less interest income) was $56.3
million for the first quarter 1996, an increase of $1.0 million, or 1.8%,
compared to the first quarter 1995. This increase is primarily due to an
increase in debt during the period. The net change in debt is summarized
in the Financial Condition section of this Discussion.
10
<PAGE>
Interest capitalized increased $3.0 million, or 56.1%, for the first
quarter 1996 as compared to the corresponding period in 1995. The increase
in interest capitalized in 1996 is primarily related to higher
construction-in-progress balances due to ongoing modernization projects at
the company's breweries.
The effective income tax rate was 39.2% of pretax earnings for the
first quarter 1996, the same as the first quarter 1995. Income from
continuing operations (excluding the Cardinal gain) for the first quarter
1996 was $242.1 million, an increase of 9.2% over the comparable period in
1995. Including the Cardinal gain, income from continuing operations
increased 24.2% in the first quarter 1996 compared to the first quarter
1995.
Fully diluted earnings per share from continuing operations (excluding
the Cardinal gain) for the first quarter 1996 were $.94, an increase of
10.6% as compared to the first quarter 1995. Fully diluted earnings per
share assume the conversion of the company's convertible debentures 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 weighted average shares
outstanding as a result of the company's continuing share repurchase
program.
Fully diluted earnings per share from continuing operations including
the Cardinal gain increased 25.9% in the first quarter 1996 as compared to
the first quarter 1995.
11
<PAGE>
FINANCIAL CONDITION
- -------------------
Cash and marketable securities at March 31, 1996 were $219.4 million,
an increase of $90.4 million from the March 31, 1995 level and an increase
of $125.8 million from the December 31, 1995 level. The increase in cash
and marketable securities at March 31, 1996 compared to the March 31, 1995
level is primarily related to cash flow from operations, cash generated
from the sale of the Cardinals and the spin-off of Earthgrains, and the
increased debt level, offset partially by cash used for the company's
capital expenditure and share repurchase programs.
Total long-term debt increased $415.7 million during the twelve month
period ended March 31, 1996. The net increase in debt during this period
is due to the following:
Debt Issuances ... $734.0 million, comprised of the following:
--------------
- $700.1 million of long-term notes and debentures (interest
rates ranging from 5.5% to 7.3%)
- $33.9 million of net incremental commercial paper.
Debt Reduction ... $318.3 million, comprised of the following:
--------------
- $286.6 million of long-term notes and debentures (interest
rates ranging from 5.0% to 9.0%)
- $31.7 million reduction of the ESOP debt guarantee.
At March 31, 1996, $797.3 million of commercial paper borrowings were
outstanding. Such commercial paper is classified as long-term since it is
intended to be maintained on a long-term basis. Commercial paper
borrowings are supported by the company's $1 billion credit agreement.
12
<PAGE>
Capital expenditures during the first quarter 1996 were $259.3 million
compared to $187.0 million for the first quarter 1995. The company
continues to expect that capital expenditures in 1996 will approximate $1.0
billion.
ENVIRONMENTAL MATTERS
- ---------------------
The company is subject to federal, state and local environmental
protection laws and regulations and is operating within such laws or is
taking action aimed at assuring compliance with such laws and regulations.
Compliance with these laws and regulations is not expected to materially
affect the company's competitive position. None of the Environmental
Protection Agency (EPA) designated clean-up sites for which Anheuser-Busch
has been identified as a Potentially Responsible Party (PRP) would have a
material impact on the company's consolidated financial statements.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of the company held April 24,
1996, the following matters were voted upon:
1. Election of John E. Jacob, Charles F. Knight, Sybil C. Mobley,
James B. Orthwein and William H. Webster to serve as Directors of
the company for a term of three years.
For Withheld Non-Votes
--- -------- ---------
John E. Jacob 221,149,293 2,649,527 0
Charles F. Knight 219,995,350 3,803,469 0
Sybil C. Mobley 220,853,858 2,944,961 0
James B. Orthwein 221,146,264 2,652,555 0
William H. Webster 220,981,718 2,817,102 0
13
<PAGE>
2. Approve the employment of Price Waterhouse LLP, as independent
accountants, to audit the books and accounts of the company for
1996.
For 222,501,901
Against 720,646
Abstain 576,272
Non-Votes 0
3. Shareholder proposal to require preparation of a beer marketing
report.
For 9,937,184
Against 180,825,119
Abstain 16,643,405
Non-Votes 16,393,112
Item 5. Other Information
On April 23, 1996, Anheuser-Busch International, Inc. announced the
consummation of an equity investment in a strategic partnership with
Companhia Antarctica Paulista (Antarctica), Brazil's largest beverage maker
and second-largest brewer.
Anheuser-Busch has purchased a 5% equity stake in a new subsidiary of
Antarctica for $52.5 million, with options to increase its stake to 30% in
the future. The new Antarctica subsidiary, called Antarctica
Empreendimentos E Participacoes Ltda., consolidates all of Antarctica's
holdings in affiliated companies and controls approximately 75% of
Antarctica's operations.
A second agreement establishes a joint venture to market Budweiser in
Brazil which will be called Budweiser Brasil Ltda. (51% owned by
Anheuser-Busch and 49% by Antarctica). Budweiser will be produced under
contract for the joint venture by Antarctica. The Brazilian beer market is
the largest in South America and the fifth-largest in the world.
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
4 - No instruments defining the right of holders of long-term
debt are filed since the total amount of securities
authorized under any such instrument does not exceed 10% of
the assets of the Company on a consolidated basis. The
Company agrees to furnish copies of such instruments to the
Securities and Exchange Commission upon request.
12 - Ratio of Earnings to Fixed Charges
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the three month
period ending March 31, 1996.
15
<PAGE>
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)
/s/Jerry E. Ritter
------------------------------------------
Jerry E. Ritter
Executive Vice President -
Chief Financial and Administrative Officer
(Chief Financial Officer)
May 13, 1996
/s/Gerald C. Thayer
------------------------------------------
Gerald C. Thayer
Vice President and Controller
(Chief Accounting Officer)
May 13, 1996
16
EXHIBIT 12
RATIO OF EARNINGS TO FIXED CHARGES
(CONTINUING OPERATIONS)
The following table sets forth the ratio of the Company's earnings
to fixed charges, on a consolidated basis, for the periods
indicated:
Three Months
Ended
March 31, Year Ended December 31,
-------------- ----------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
7.8X 1/ 6.7X 7.6X 7.7X 5.8X 2/ 7.7X 6.3X
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 expense of that portion of rental expense deemed
to represent interest.
1/ The ratio for 1996 includes the gain from the sale of the
Cardinals which increased income before income taxes by $54.7
million. Excluding this gain, the ratio would have been 7.0X.
2/ The ratio for 1993 includes the impact of the Company's
restructuring charge which decreased 1993 income before income
taxes by $401 million. Excluding this charge, the ratio would have
been 7.5X.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
the Form 10-Q for the quarter ended March 31, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 219,351
<SECURITIES> 0
<RECEIVABLES> 609,720
<ALLOWANCES> 1,869
<INVENTORY> 631,944
<CURRENT-ASSETS> 232,949
<PP&E> 11,446,911
<DEPRECIATION> 4,630,414
<TOTAL-ASSETS> 10,212,482
<CURRENT-LIABILITIES> 1,327,572
<BONDS> 3,451,725
0
0
<COMMON> 348,594
<OTHER-SE> 3,389,230
<TOTAL-LIABILITY-AND-EQUITY> 10,212,482
<SALES> 2,371,832
<TOTAL-REVENUES> 2,767,434
<CGS> 1,538,066
<TOTAL-COSTS> 1,871,399
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,512
<INCOME-PRETAX> 452,921
<INCOME-TAX> 177,436
<INCOME-CONTINUING> 275,485
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 275,485
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.07
</TABLE>
